5/26/2004 - 9/18/2013 R.I.P. ... and Good Riddance!

I have a confession to make ... I am a killer.  I have killed without remorse, without regret, and -- to tell you the God's honest truth -- I kinda enjoyed it.

To make matters worse, my victim was barely nine years old, not even through a third of its expected life cycle.

And to top it all off, I celebrated this death.  My wife celebrated it with me.  We went out and had a nice dinner ... on gift cards, of course. 

To be fair ... this thing I killed was trying to kill me, too, so I only consider its death a matter of self defense. 

My friends, our mortgage ... is dead.  And I, for one, am pretty darned happy about it.

3,402 days.  That's how long we lived with that mortgage.  Nine years, three months, 23 days.  That's a long time to live with something that's trying to kill you an inch at a time.  And yet, I consider my wife and I fortunate that we slew this beast as quickly as we did -- we know full well there are countless millions of others out there who will have this beast on their backs for 30 years or more throughout their lives.

How did we kill this fell beast?

• We threw every spare cent towards the principal balance.  By my calculations, we've brought in $37,000 more this year than we've spent.  Guess where nearly every bit of that went?  To help make that amount as large as possible ...
• We continued to live frugally.  We don't live a life of deprivation, and even have managed to raise a happy and healthy toddler ... but we kept our costs low as best we were able.
• We depleted our rainy day account.  This one is not recommended by most financial types, but it was a calculated risk -- and desperate times call for desperate measures.  In the event we do need some sudden influx of emergency money, we have various sources we can tap ... not ideal, but possible.

And so, Wednesday morning I called up, got our payoff amount ... and made the payment.  When my wife and I woke up Thursday morning, it was the first time we had ever done so debt free in the entirety of our marriage.  Let me tell you, it was a truly great feeling.

So where does that leave us now?  We still have many financial goals for the future, and we get to start working toward them immediately.  Some of them are

• Replenish the accounts we raided to pay off the mortgage. We all but depleted our Rainy Day fund, and knocked both of our checking accounts pretty low, as well.  
• Resume contributions to our IRAs.  We've laid off contributions to our IRAs for the past several years to help make our debt-free dreams come true. 
• Set up savings accounts for various other goals.  Repairing and replacing appliances and vehicles, taking vacations, and funding future opportunities for our son.  Just a few of the things we'll be saving up for.

Here's hoping you all are having great success on your own financial journeys!

And the Results are In

Back near the end of November 2009, my wife and I set a goal -- an audacious goal, to be sure, but a goal nonetheless.  At the time, we had a mortgage, a second mortgage, student loans, and at least one car loan.  In total, we had just over $124,000 in debt.  We decided that we wanted to wipe it out, and fast.  Choosing it more for its alliteration than its feasibility, we chose forty months as our time frame.

At the time, there was really nothing going on in our lives to indicate we would get anywhere close.  We were both working.  We were living below our means.  We had no plans to rack up any new debt along the way.  Our incomes were nice, but between us, we certainly weren't approaching six figures, though we were in the upper half of five-figure incomes.

Along the way, life happened.  We bought a new car.  When that one got totaled (not our fault, I might add), we bought another one (which insurance covered the lion's share of).  We decided to start a family, and welcomed into the world our son Daniel, as well as several thousand dollars of payments to various doctors.  We bought a second car.  I quit my job at school so I could stay at home with our son.

Back in 2009 when we made this goal, I had dreams of being debt free in forty months ... but no real certainty that it would happen.  I had hoped we would get close, but, to be honest, I figured that, at best, we might whittle away half of that amount.

So here we are, forty months later, and what is the result?  Well, we're not debt free, but over the course of those forty months, we knocked nearly $95,000 off of our total debt.  We still owe just over $29,000 on our primary mortgage, but my estimates are that we will have that paid off by the end of the year.  Call it "Debt Free in 48."

Despite not making our goal, we achieved some remarkable results.  We paid off an average of just over $2,300 each month -- that's straight principal, not counting interest.  We've managed to increase our incomes substantially, and stand to make more in 2013 than ever before, despite me no longer working for the public school system (the joy of being a self-employed composer is I can do my work from home while the little one naps).

So, was the experiment a failure?  Hardly.  The true power in setting audacious goals lies not in whether or not you achieve them, but in the changes the pursuit of them causes in your life.  We are a little less frugal now that we've been at points in the past, but when we spend money on something, it comes from a place of consciousness about how that spending will impact our lives.  We have put ourselves in a far more stable financial position, such that if one of us should lose a job, it will be that much easier for us to stay financially sound.

As the months go by and we get closer to that $0 balance on our mortgage, we can feel a sense of hope and freedom that has been growing bit by bit over the months.  We've been in debt of one sort or another ever since we got married in 2000.  If my calculations hold, by the end of October -- or when we'll have been married just a few months over 13 years -- we will be debt free, a condition we plan to stay in for the remainder of our days.  At that point, the work we do, the money we make, moves from paying off what we owe to other people, and it starts working for us, paving the way to a smoother future and, hopefully before we get too old to enjoy it, financial independence.

So even though the "Debt Free in 40" part of things didn't pan out, the goals don't stop.  The time frames get rejigged, the goals change -- but the goals are still there.  And, for any of you who care to read about them, they'll be talked about here ... as sporadic as ever, but talked about nonetheless.

An Update and a Confession

I have to say, I'm impressed even with myself -- not a single post in all of 2012.  I knew my wife and I were writing sporadically on this blog, but the last we wrote, my wife was barely pregnant with our son.

Fast-forward from October 2011 to January 2013, and things are much different.  There are now three humans living in the house, one of them just over nine months old.  Our son is crawling, standing, almost walking, gibbering, and generally being a source of joy and happiness in our lives.  We're spending a small fortune on diapers every week, but thanks to a ton of gifts from friends, as well as some other friends with boys about a year older than our son, we've spent virtually nothing on clothes for him.

We've also been blessed with numerous toys from friends and family.  We've bought precious few toys with any money out-of-pocket, and despite the modest number of toys he has, our son still seems happy, content ... and tends to gravitate to the same three or four toys no matter what we lay out for him to play with.

We also have a sizable library of books for him, and again, we've bought very few of them ourselves.  Friends know our affinity for reading to our son and so will get us a book here or there, and thanks to our public library's summer reading program, we added several books we received as prizes for reading to our son.  Of course, we've also made numerous trips to the library, so we have a virtually endless supply of reading material for him, all for almost no money.

He's eating solid foods now, but we're spending less than many folks because my wife is making nearly all his baby food herself.  Apples, pears, green beans, even squash -- all of it is fresh before she cooks the living daylights out of it and then pulverizes it into oblivion before freezing it in ice cube trays for ready-made quantities of baby food.  No worrying about little glass jars and going to the store -- we just open the freezer, take out a ziploc bag, toss a couple of cubes in the microwave to defrost, and voila! -- instant butternut squash.

Thankfully, our son has been a source of joy, and not a huge source of financial drain.  That's not to say he hasn't had financial consequences on our lives, or been the source of many hard financial decisions.  Perhaps the biggest is that I quit my job as an elementary school librarian at the end of May 2012 so that I could stay home with him during the day.  This was a loss of about $10,000 a year before taxes, but considering the amount of money we would save on daycare -- not to mention the fact that he's being raised at home by his father and not some stranger with ten other kids to worry about -- it was absolutely the right choice.

As part of having our son, we also had many other financial decisions and events crop up.  There were doctor and hospital bills, of course, which, even after insurance, still cost us several thousand out of pocket.  There was the second car we bought -- a new 2012 Honda Fit -- which, like the Civic we already have, will be driven until the tires fall off.  (Yes, we know most places advocate only buying used cars, but we appreciate having the warranty for the first several years, and the Hondas are so reliable that they scarcely depreciate for the first several years -- we could save maybe a thousand dollars on a year old Civic or Fit, but that's not enough savings to also inherit a year's worth of someone else's problems.)

So what it all comes down to is this -- a confession.  As you can tell by looking at the numbers at the right (as of this writing over $47,000 left on the mortgage and 84 days to pay it off), we won't make our goal to be debt free in 40 months.  Unless one of us wins the lottery (a long shot since we don't actually play the lottery), or some rich relative dies and leaves us a large inheritance (again, quite unlikely), it's just not going to happen.

That's not to say that paying off this debt is no longer a goal for us -- on the contrary, for the past six months and more, ever since our son arrived, virtually every extra dollar we've received has gone toward paying down the mortgage, so much so that we paid off nearly $29,000 in principal in 2012 alone.  As it stands right now, if all goes well and according to calculations, we ought to have the mortgage paid off, at latest, by about March 2014 ... and it's entirely possible that we'll have it paid off before the end of 2013.  Yes, that will put us at "Debt Free in About 49" instead of "Debt Free in 40", but we're fine with those extra few months.

Does that mean this blog and the goal behind it have been a failure?  Well, yes, let's be honest, this blog has been pretty much of a failure -- when we can go for 14 months without writing anything, I'm not sure you can call that a success.  But the goal -- to be debt free in 40 months -- has that been a failure?  Absolutely not!

When my wife and I made the goal to be debt free, and when we made the arbitrary 40-month goal, we had no idea if we could do it or not.  It was really a very pie-in-the-sky sort of dream.  Based on our income and debt load, it wasn't impossible, but with my wife a public school teacher, and with me an elementary school librarian with a couple of piano lessons on the side, it sure didn't seem likely.  Still, we committed to the goal anyway -- saving money, being frugal in how we spent money and consumed resources, searching for new streams of income.

I firmly believe that, because of this goal -- even though we won't hit it -- my wife and son and I are in the financial position we are now, and will be free of debt before any of us turns 36 years of age.  If we had never set the goal of being debt free in 40 months, we wouldn't now be sitting here with the possibility of being debt free in 49. 

So, that's where things stand now.  I can't guarantee we'll post any more frequently, though I CAN guarantee you'll here all about it here when I make that last payment. 

What could be so distracting?

What could be so distracting that we haven't posted a new post in months?  Why haven't we at least updated the savings/debt totals?  As of yesterday, I am 16 week pregnant!  We've been very busy getting our physical, emotional, and financial selves ready for our expanding family.  This includes a two-pronged approach to getting our finances in order: savings and free stuff.

Free Stuff

Thanks to some very generous ladies I know from school and church, I don't think I'll need to purchase a single maternity item for my apparel.  The shirts, pants, and even pajamas lent to me totaled an astounding 55 items for me to choose from.  My "maternity" wardrobe is now bigger than my regular wardrobe.

In addition, I've been on the hunt for as many free samples and free programs as I can find.  My OB educator gave me several samples at my first appointment, and I have signed up for free diapers from several companies.  In addition, most department stores that allow you to sign up for a baby registry will give you a free gift bag of goodies for simply registering. 

Caution - Just because it's "free" does not mean it is a good deal.  My husband and I went to a major retailer offering gift cards for purchasing items such as diapers and batteries.  However, the difference in price between the items we were asked to purchase and their equivalent generics were more than the price of the offered gift cards.  It doesn't matter how much you save, only the value you get for the money you spend.

Saving

This is where my husband shines.  Although you will see the amount we owe on the house going down, it will be at a slower rate than usual.  Instead, our rainy day account will soon be soaring.  As first-time parents, we don't really know every expense coming around the corner.  So, we're going to build a nice healthy account called the rainy/baby account.  Hopefully we can transfer a nice bulk of that to our debt at some point, but for now we're playing it safe.

Sorry for the delay in posts!  Feel free to share any of your thoughts in the comments below.

How Much Rain Am I Expecting?

I made a decision last week, one that has the potential to shape our financial future for years to come.  It was a hard decision, and I made it while drinking coffee and staring at an Excel spreadsheet.

I decided to stop adding money to our Rainy Day Account.

We all know what the Rainy Day Account is supposed to do -- when you get a time in your life where all heck breaks loose, the Rainy Day Account lets you keep going with your life without going into massive debt or curling into a ball and dying.  Most of us also know that Conventional Wisdom (always a bad idea to blindly trust something with capital letters) says you should have three to six months worth of regular expenses in your Rainy Day Account, though some experts say as much as a year's worth.

I stopped contributing to our Rainy Day Account with just over $7,000 in it.  Not quite three months.

Instead, I turned and started throwing every available cent back toward our mortgage.  Our principal balance has dropped almost $1,000 in the past week.  Some Financial Experts (see, there are those capital letters again -- watch out!) would call this foolish, because once I've socked money into our mortgage, it's terribly hard to get it back out.  It's not liquid.  Now, a Rainy Day Account -- that's liquid.

Instead of explaining why I'm Right and They're Wrong, I'll simply say this -- general advice only works for general people.  If you are exactly like every other person in the world, it will work perfectly for you.  If, however, like my wife and I, you are a unique and personalized individual, you should take any of that general advice and see how and if it applies to you.

Here's why I stopped adding to our Rainy Day Account (your reasons may vary):

• We've got nearly 3 months worth of expenses in there.  Not a ton of money, but a good sum, should something awful happen.
• We've got financial buffers set up in other places.  We have almost $2,000 in a savings account that is supposed to be used just to pay income taxes, property taxes on the house, and homeowners insurance.  If we had an emergency, we could tap into that.
• Our income is diversified.  Most people get their money from one source and one source only, so if they lose that job, they're sunk, and need to fall back on that Rainy Day Account.  My wife and I have income coming from about five general places (a school corporation, a church, a group of piano students, a group of music publishers, and a university), and many more different specific locations within those (we each get income from the school corp for very different jobs, I've got about a dozen different piano students and a half dozen different publishers who pay me royalties, etc.)
• I can always add more to Rainy Day if I think I need to.  Upping the amount in that account is as simple as diverting the next extra mortgage payment into the Rainy Day Account instead.  Since they're both at ING Direct, it's not a hard thing to do.
• Eliminating the mortgage gives our Rainy Day Account more worth.  Right now, $7,000 is less than 3 months worth of expenses.  As soon as we don't have to pay $500 a month in mortgage principal and interest, that $7,000 goes even farther.  Owning our home outright, to us, is the greatest hedge against a financial catastrophe we can imagine.

Reading a lot of Financial Pundits is great, as is reading any sort of Financial Advice column.  But before you buy anything they tell you, think it through in terms of you and your life.  It may be they're right, but it may also be they're trying to give you Sound Financial Advice in capital letters (and we all know what that means...)

Ask, and Ye Shall Receive

As Independence Day lurks just around the corner, I've been taking some time to consider the great American spirit of self-reliance.  As Americans, we are masters of our destinies.  We need not seek the help of others to reach our goals.  We are ... invincible...  [said with whispered awe]

Of course, that's crazy.  Whatever you may think of what it means to be an American, there is nothing wrong in asking for a little bit of help.  At the very least, it is a good idea to let people know what your goals are.  You never know who might be able to help you.  It might just be that helping you is exactly what that other person has been looking for.

For instance, I am a little over 70% finished with my masters degree program.  Come December, I will have a masters degree in curriculum with a focus on technology integration.  (Impressive, right?  I'm thinking of having a superhero costume made of textbook pages, chalk dust, and the logo "CM" emblazoned in sticky tack on the front standing for CURRICULUM MASTER!  Don't worry - no spandex).  During the previous spring semester, I sent an email to one of my professors to say how much I liked her job, and I asked her how I could take it.   So, when a position as grader came up this summer, I was lucky enough to get that position.  Last night, she wrote me an email asking if I'd be interested in teaching a section for IUPUI in January.  I think by taking 30 seconds to write a quick email back in March, I got on her radar, which put me in a position to really go somewhere potentially amazing with my career.  All I did was ask.

The little bit of extra income from this will go toward debt-reduction, which is why this is showing up as a post here.  Plus, I think it's a lesson that applies to many parts of our lives.  If there is something you want, something you need, or something that means a lot to you, share it.  Ask it.  Post it.  Get it out into the universe where it can do some good.  The world is generally a good place to be, and it wants to help you.  Let it.  Just ask.

Yes, We're Still Here

I know it's been about half a year since either my wife or I have posted on Debt Free in 40, but we are still out here, though busy with the rest of our lives.  I'll try to get here soon for a proper update, but in the meantime, you can enjoy the new debt numbers over at the right.  Our mortgage has gone down (though not a great amount), mainly because we've been socking cash away into our Rainy Day fund, as well as using some emergency funds for some nice emergencies ... like replacing our car when it got totaled. 

I hope to post something more later this week, but for now, know we're still out here, we're still alive, and we're still hammering away at the debt.

2010 Wrap-up

I know it's been a while since either my wife or I have blogged here -- chalk it up to being a musician during the Christmas season.  Oddly enough, it seems as we get closer to the actual day of Christmas, the less pressure there is on us as musicians, as if the whole of the world got so much Christmas spirit from the 1st to the 20th of December that they're just ready to have a Silent Night for a change. 

At some point I'm hoping either my wife or I can post something meaningful or useful here, but for now, I thought I'd give you a bit of a wrap-up for the year 2010 and let you know where things stand with us.

First of all, as you can see at the right, as of this writing, we've paid off over $36,000 of our original $124,000 of debt.  That's a great feeling, but there's still a long way to go.

Even more important, we've got our student loan whittled down to just under $1,600 -- payments I have scheduled for the next couple of days will drop it below $1,000 before the year's out, and it ought to be gone before we celebrate Martin Luther King, Jr.'s birthday.  That's been our main goal the past six months or so, and it's paying off.

Sadly, to get the loan to that place, I made the decision to decimate our Rainy Day account, at least temporarily.  I know that most financial experts will tell you this isn't a smart move at all, but for us, it made sense.  We still have enough money coming in from several sources, so a financial crisis would have to be pretty major to wipe us out.  We're both still relatively young and fit, so a medical crisis is unlikely, at least before we get the Rainy Day funded back to where it was.

Replenishing and bolstering the Rainy Day fund is our next goal immediately following the payment of the student loan.  Thankfully, to help that out, I should be getting royalty checks from some of my music publishers in the first couple months of the year.  I'm really not worried about having less than $700 in our Rainy Day account, because in an absolute rock-bottom, worst-case scenario, we do have just over $50,000 combined in our IRAs.  Yes, there would be penalties there, but if it was between taking the financial penalty and being destitute and out on the street, we'd take the penalties.

When we do turn our attention to Rainy Day, we're likely going to sock away as much as we possibly can.  The economic climate still doesn't feel all that great, and our public schools -- at least the part we know well here in central Indiana -- are taking a huge hit.  I'm an hourly employee, and relatively cheap for what I do and what they pay me, so I think my odds of having a job with the school for next year are still pretty good.  My wife, on the other hand, is a certified music teacher, earns half our household income from her one job (as opposed to me who needs three or four smaller jobs to make my half), and music, tragically, seems one of the things likely to get cut in such a time.  We know there's a very real chance her income will fall next school year, so we're not just going to get our Rainy Day back around $6,000, but are going to take it as high as we can, hopefully around $17,000 or so by the time her contract -- and her regular paychecks from this school year -- run out in early August.  That $17,000 isn't enough to fully cover our expenses for a year, but in a worst case scenario, that would keep us afloat for a good six months or so.

After that?  Well, it's still too early to tell.  I'm still hopeful we can pay off our mortgage by the end of our 40 months, but like all good dreams, that outcome isn't certain.  What I do know is that at the end of our 40-month experiment, we will have less debt than we do now, and far less debt that we would have had if we had never undertaken this experiment in the first place. 

With the new year just around the corner, it's time to start thinking of what you want your 2011 to look like.  If you want to improve your financial situation and get yourself out of debt, then I invite you to join us and share your success stories.  There's never a better time to start than right now. 

Ellen and I wish you all a very Merry Christmas and a joyous New Year, and we hope that peace and prosperity will follow you all the days of the coming year.

Giving Thanks

For those of us here in the United States, it's Thanksgiving Day, and while my wife and I are thankful for a great many things, one of the things we're most thankful for right now is how well our financial life is going.  In an economy that's still in the tank, where countless people are without jobs and are having to make some terrible financial choices, we're not just surviving, but are actually managing to dig ourselves out of the debt hole we've been in ever since we got married.  In a good economy, this would be cause for thanks; in today's economy, we are grateful beyond words that we're able to do so much to help our future selves live a financially-free life.

Wherever you are today, whoever you're spending your Thanksgiving with, my wife and I wish you the biggest of blessings in your life, and extend to you our hopes that you'll be able to improve your financial life in the months and years to come.

Happy Thanksgiving.

Breaking the Barrier

October 14, 2010.  A date which will live in infamy.  Okay, so maybe it's not as grandiose as all that, but today was the day we officially broke below $100,000 in terms of debt owed.  We haven't owed this little money since we bought our house back in 2004.  We also have about another $1,500 poised to go toward the loans in the coming days, so that will drop us even further.

Something about this feels like a birthday -- on my birthday, I'm really only a day older than I was the day before, but psychologically, it feels like I'm really a full year older.  Same thing here -- in reality, we're only a few hundred dollars less in debt than we were yesterday, but breaking through that $100,000 barrier -- from six digits to the left of the decimal to five -- is a huge feeling, the sort that is likely to accelerate our efforts even more.

We're still on track to have the student loan paid off by Christmas (with a little temporary help from our Rainy Day fund in mid-December), and only a little behind on where we need to be to have the mortgage gone at the end of the forty months.  Things keep looking up for me in the music and composing department, so I'm hopeful that will mean extra income that we can throw straight at the mortgage to get ourselves back on track.

Speaking of music and composing, I'm trying to get my other blog, The Creative, off the ground.  I've finally gotten serious about it, I'm posting on a regular schedule, and now all I need are people reading it and sharing in the dialog.  If you're so inclined, head over, take a look at it, spend some time there, and drop me a comment or two if you wish.  Also feel free to subscribe to get the posts delivered to your RSS feed, blog reader, or email.  If nothing else, head back daily to check out the Daily Haiku.

Anyone else have any sort of debt-reduction or other financial success story they want to share?  The comment section is below, so share away!

Bi-weekly Mortgage Payments

I had an email from Jen last week about a deal her bank was offering where, for a small set-up fee, they would switch her mortgage payments from monthly payment to bi-weekly payments, or payments every two weeks, of half the current monthly amount. She suggested I expound on this phenomenon and whether or not it's a good idea.

I'll start with the answer -- yes and no.

First the no: Paying anybody extra, for any reason, to take your money is just foolishness.  They're already taking your money; why would you pay them more to take it?  It's for this reason I have my water bill deducted from my checking account and not paid with credit card -- the water company would charge me a monthly convenience fee to use the card, but not the checking account.  I also pay my auto insurance in semi-annual installments, because if I paid monthly, they'd charge me an extra couple bucks a month. 

I also adamantly refuse to pay my federal taxes by credit card because they charge some extortionate rate to do so.  I send them a check -- they still get the money they're owed, and not a penny more.

Now, the yes: Paying half your regular payment every two weeks is a great way to get yourself debt free faster, but it's simply a trick.  Like all good tricks, however, it works, and here's why:

Say my monthly payment is $1,000.  In a year, I'll pay $12,000.

Now, if I pay half that amount every two weeks, I'll pay $500, but I won't pay that 24 times, because there aren't 48 weeks in a year -- there are 52.  I'll pay that $500 a total of 26 times, so I'll pay $13,000 for the year.

Big whoop, you say.  So what.  Well, here's the "whoop" -- on a regular 30-year loan, the bi-weekly payments (that extra $1000 a year) will have it paid off about 4 years early, and will save you 15%-20% in interest over the life of the loan. 

Bi-weekly payments are also nice because most of us get paid bi-weekly, which means it's easy for us to just assume a set part of every paycheck is our mortgage payment.  This actually makes budgeting easier in the long run, though it can take a little bit to get used to it.

But the answer, my friends, isn't bi-weekly payments; as I said, that's just a trick.  The real answer is Extra Principal Payments (EPP).  The beauty of EPP is you can make them in any amount, at any time.  Check with your mortgage company to see how they need to be notified of extra principal payments (including making bi-weekly payments on your own without their help), but for most of them, simply putting "apply extra payment to principal" is enough to have them do so, instead of taking the money and holding it back as part of your next regular monthly payment.  Others may have different requirements, so check with your lender.

The reason this works is your interest -- the part of the money you pay for the privilege of using the bank's money -- is calculated directly on your principal.  The less principal you have, the less interest you pay.  Since your regular monthly payment pays off all the interest you owe before it ever gets rid of a cent of your principal, the only way to get rid of the loan faster is by making EPP.

 "But Jason," I hear you saying, "don't I need to put Large Gargantuan Amounts toward the principal to make a difference?"

And you hear me saying, "No."  Let's assume a $150,000, 30-year mortgage at 4.5% interest (not hard to get these days).  Just $10 extra in principal a month pays the loan off 9 months early  -- give up the Adult Beverage of your choice one dinner out a month and you're almost there. 

$50 extra a month pays it off 3 years and 7 months early.  $100 extra, and it's 6 years and 3 months.  For the example above, that means you're paying $860 a month instead of $760.  Not a small thing, but not the end of the world, either.

If you want the bi-weekly payment effect without the hassle, take your monthly payment amount (don't include the escrow amount in this unless you want to -- escrow's a whole different ball of wax ... gross) and divide it by 12.  Make that your monthly EPP, and you'll get close to the same effect as making bi-weekly payments.

Whether you switch to bi-weekly payments (being darned sure not to pay anyone for the privilege of taking your money) or just make extra principal payments in any amount, you're cutting the life of your loan, and saving yourself hundreds or thousands in interest you won't pay. 

If you want to run your own calculations, check out the Mortgage Calculator and the Biweekly Mortgage Calculator from Bankrate.com. 

Goodbye, Old Friend

Yesterday, we finally did it.  Our beloved Chevy Cavalier that I've had since March of 2000 is finally gone from our lives. 

Okay, well, that's not entirely true -- we gave it to my wife's uncle, so I'm sure we'll hear about it from time to time, see it every so often, and know of its whereabouts for another few years, but at least for us directly, it's gone from our lives and our garage.  In fact, I've already taken my bike off the hooks and set it right-side-up on the far side of the garage, inflated the tires -- all I need now is motivation to get going on it.

Even though we got no money for it, we're going to save in many other ways:

Insurance -- I'm going to call this morning as soon as the insurance office opens and cancel our policy on the car.  No need to insure a car that we don't have any more, is there?  That right there ought to save us about $300 a year.

Registration -- We spent probably around $40 or $50 a year to register the car, and that's now money we won't have to spend.  (My wife's uncle says we can take the plates and registration back in to the license branch and get a refund on part of what we spent, but I'm going to just wait and see on that.  Not that I don't believe him, but I don't trust the government to give back a single cent of money they're already got.)

Maintenance -- Even though we drove that car about 30 miles in the last year we had it (most of those were to the service station), we still got the oil changed every six months or so.  If we'd kept the car, we likely would have kept getting oil changes, and as things wore out from old age and disuse, we would have paid to replace them. 

Clutter and Peace of Mind -- I once read somewhere that you spend a certain amount of time (which, when you come right down to it, is almost equivalent to money) every year on every possession that you own.  The less you own, the less time (or money) you spend.  We spent quite a lot of time worrying over the car, fretting over the car, thinking we ought to do something about the car, and occasionally actually doing something with or to it.  On top of that, add up all the random seconds here and there the car caused us -- it took up a lot of space in the garage, so getting to tools on the far side was a slow, painful balancing act of trying to get the tool and not get killed.  If the car hadn't been there, those seconds -- probably adding up to at least a good three or four minutes over the year -- wouldn't have been spent.  Small beans, I know, but beans is beans.


In the end, the parting wasn't nearly as bittersweet as I thought it was going to be.  Yes, we had good times in that car.  It was the car we drove away from the church in after we were married, and the one we drove on our honeymoon.  It took us to Florida, and to Boston, and back and forth to school hundreds of times.  It was a good little car for a couple just starting out their life together, and for that, we'll be forever thankful. 

But time has moved on, as it always does, and it was time for the car to go on its way.  I hope it will be as good to my wife's uncle as it was to us, and just knowing that someone is somewhere getting some good from it makes it all worth it.


In non-car-related news, as you can see from the numbers on the right, our student loan is now south of $15,000!  If my calculations are correct, we've paid off just shy of $3000 on that loan in the past month.  We're still a little behind where we want to be in terms of the total debt payoff, but we're making some serious headway.  Our current goal is to have the student loan kissed goodbye by Christmas. 

Anyone else making strides on their debt payoff, or getting rid of possessions that are cluttering up their lives and costing them money?  Feel free to post in the comments section and share for all to see.

Money Down the Drain

While cleaning out the old car yesterday in a prelude to giving it away, I came across a compartment full of disgusting, fused-together coins.  I had no clue what had fused them together, and even less desire to find out.  What I did know (or hope) was that water, The Universal Solvent, would separate them and render them once more individual coins.

So, I put them in a cup of water and let them sit by the bathroom sink.  After a while, I went in (leaving the light off because the light from the hallway was sufficient, and why waste the electricity if you don't have to, right?), upended the cup over my hand, and let the water drain out.  What followed was a long series of drips ... and two clangs as two coins hit the sink.

Not wanting to lose what I had given so much effort to separate, I turned on the light and fished out the nickel that sat half-way in the drain.  Of the other coin, I saw no sign.  I had heard of figuratively losing money down the drain, but this, my friends, was the first time I had ever literally lost money down a drain.

Now, knowing the value of my time, I was heck-bent if I was going to go fishing in the drain for what was, in all likelihood, a penny, but the whole experience did get me thinking about how we figuratively throw our money down an equally figurative drain.  What are some of the money-drains in our lives?

Interest on Debts  This is a biggie, especially for my wife and I (heck, just look at the name of the blog!).  Every dollar you pay in interest on a debt -- especially things like credit card debt and payday loans -- is money that is just being frittered away.  Sure, there are tax advantages to some sorts of interest, and the money you borrowed in the first place served some use, but now that the only thing remaining is the debt, it's just nickels and dimes and dollars down the tube.

Stupid and Pointless Fees  At one point, my parents asked me to look at their finances to try to help them work some of the monetary magic my wife and I seem able to work in our own lives.  I noticed one credit card my dad had that socked him some huge fee every year, just for the joy and privilege of carrying the card.  With the hundreds of different credit cards out there (even after the economy's problems and several rounds of credit card reform), paying an annual fee to have a credit card is setting fire to the bills in your wallet and watching them burn.

Not Comparing Prices or Not Waiting For Sales  Every week, there's a fun mystery in our house.  I call it, "Where will we buy our groceries this week?"  My wife and I don't eat a lot in the way of food, and our tastes in groceries aren't all that exotic, so we can really buy our food about anywhere.  There are some items we'll only buy certain places (milk and green pepper nearly always come from Aldi), but beyond that, one store's generic is as good as another's.

So, we get the circulars on Thursday, and while I teach piano lessons on Friday, my wife decides which store has the best deals, the most things we can stock up on, and that's where we go.  We may only save four or five bucks each week by doing this, but over a year, that adds up.

The same is even more true of big-ticket items.  Patience -- in the form of waiting for sales -- is not just a virtue, it's fiscally smart.  Waiting for not just an okay price but an outstanding price can be hard, but it can also be rewarding when you get that TV or computer you wanted for half of what it normally costs.  Also with big ticket items, if you don't ask for at least some money off, something extra thrown in, or a free service plan, you're feeding dollar bills to your dog just to see what comes out the other end ... okay, that analogy was gross and not completely apt, but you get the idea.  The number of times I've asked for a freebie or a few bucks off isn't that many (not many big-ticket purchases), but it's resulted in about a hundred bucks off our kitchen appliances, two years of free oil changes on our Honda, and $65 back when we got rid of our home phone line and went straight DSL. 


This list is far from exhaustive, but it's a start.  What other times and in what other ways do you throw money down the drain?  Let us know in the comments section.

Focused Intensity

Goals are a great thing.  Having a place you want to get to or something you want to accomplish is a tremendous thing to have.  The problem is so often, we feel like we're meandering toward our goals.  It can feel not like we're a horse streaking to the barn after a long journey, but rather like we're a dog crossing a field, stopping to sniff every tree and rock while marking our territory along the way.

Then there is the joy of Focused Intensity.

Right now, my wife and I are in the throes of Focused Intensity.  We have our Big Goal -- being debt free -- and we have our smaller goals.  In this case, our current smaller goal is being rid of our student loan, which as of this writing sits at about $17,840.  We are doing everything in our power to eradicate this loan, focusing every ounce of our will and every dollar of our making toward it's non-existence. 

We've wanted this loan gone for a while, but now, we really want it gone.  We want it gone so badly, we're willing to put off pretty much every other expense in our lives (not our bills and mortgage, of course, but every expense outside of that) to make it happen.  We want every available dollar to be going toward that loan, and we do mean every dollar:

Extra Income: We can pay our bills and mortgage on the money my wife makes teaching.  That means that any of my income -- school income, church music director income, piano lesson income, composing income -- goes toward the debt.  $60 for a day's worth of piano lessons?  Put it toward the loan.  $500 royalty check for composing?  Put it toward the loan.  $400 from two weeks' work at school?  Put it toward the loan.

Snowflaking: This is a twist on Dave Ramsey's "Snowball" method of paying off a loan (I think I heard about this on The Simple Dollar, but I'm not sure).  You take every small, tiny amount of money you can, and you apply it toward the loan.  With the student loan, I can make one payment every day.  That means that every day I get any income, I put that income toward the loan.  In the past two weeks, I've made five payments.  Financially, this pays off the interest I've accrued since the last payment (sometimes as little as $1.72) and drops the principal, meaning the next time I pay, there will be a smaller principal balance accruing interest.  Psychologically, it means every time I look at that principal number, it will likely be smaller.

Snowflakes are anything, from the $5.72 refund from Verizon after I canceled my cell plan and got on board my father's, to the fact our Visa bill for the month was $100 less than budgeted.  No amount is too big or too small to snowflake it.

Frugal-ing: Anything we can do to reduce our expenses is extra money I can throw at the loan.  Even though the temperature today is going to get to 85, the breeze is nice and strong, so we've got the windows thrown wide.  Total cost to climate-control the house for the day?  $0.  Sure it's just a couple of cents, but it adds up.  Driving the car to school with the windows down has made a difference, too, as I've noticed an increase in our gas mileage, meaning I have to spend that much less at each fill-up.  As I write this, I've got a crock pot of chili cooking, which for about $7.00 in materials and electricity will provide about 4 meals for each of us, saving us a ton of money over what we could spend to eat out or on prepackaged "convenience foods."  The journey of a thousand miles begins with a single step, and the eradication of a student loan begins with a single cent.

Selling the umbrella:  I sat down with my Spreadsheet today and looked at our finances over the next few months.  In my spreadsheet, I've got not only our anticipated income and expenses, but also an interactive amortization table of both our mortgage and student loan.  I can see how putting various amounts of money toward a loan will change its life just by moving some numbers around.

I made the realization this morning that if we continue to put all our available money toward the student loan, the balance on it will be under $4000 by Christmas.  If we dip into our Rainy Day fund (i.e. Sell part of our financial "umbrella") we can give ourselves a nice Christmas gift of paying off the loan.  We make 1.1% on the Rainy day account and pay 3.25% on the student loan, so the math works in our favor; and since my wife is guaranteed a job until at least August, and my income streams are trustworthy, we can then take a month or two to repay the rainy day fund to its previous level once the loan is gone.  I know this goes against "conventional" advice for a rainy day fund, but for us, it works.


What other ways could we be focusing our intensity to make this student loan no more than a foggy memory?  Let us know in the comments section.

Own Your Home Faster and Cheaper

I was just over on the ING Direct site looking at a table of interest rates while lamenting the pathetically-low return we're getting on our savings and checking accounts over there, when I scrolled down the screen and did a double take.

Currently (as of August 28, 2010), on their Easy Orange 5 year loan, ING Direct is offering a rate of 3.125%, and on their new Easy Orange 10 year loan, the rate is 4%.

Let me say up front that neither my wife nor I own any stock in ING or have any affiliation with them beyond having our accounts there -- we get nothing from new customers or new loans.

We signed up for our Easy Orange 5 year loan back in April and haven't looked back.  The closing costs were comparable to other closing costs on the refinance, perhaps even a bit lower that what I would have expected.  You make a payment every two weeks, and you have to do it electronically through their web site -- if you send a paper check, they sock you with a fee ($15, I believe).  Your payment amount is based on a 30-year repayment schedule (they figure out what you would pay per month over 30 years, and then divide it by two, giving you your every-two-week payment), though the loan is only for 5 or 10 years.

Your rate is locked in for the term of the loan, and at that time, you either owe the remainder of your balance, or else -- for a fee equal to two of your monthly payments -- you can lock your rate in for another term at whatever the going rate at the time is. 

The best part (and part of why I love ING Direct so much), is that they encourage prepayment of your loan and paying your mortgage off sooner rather than later.  Their only prepayment penalty occurs if you pay the loan off within the first year you have it -- after that you're home free. 

Having used the Easy Orange for several months now, I can honestly say this is the nicest loan I've ever tried to exterminate from the face of the Earth.  If I make a payment from another ING Direct account (usually my checking), the payment applies immediately, as in two seconds (literally) after I make it.  I can make extra principal payments at any time (I once made three in one day, just to test the theory).  If you're not a crazy debt-reduction-ninja like my wife and I, you can also set up recurring payments to happen every two weeks so you can just forget about it and let it go on its merry way.

So, as someone who has used the Easy Orange, I think it's a great way to try to obliterate your mortgage.  Go to the ING Direct site, click on "Learn More," then click on Easy Orange, and you'll find some calculators to help you estimate your closing costs and monthly payment.  Compare it to your current loan and rate and see if it's worth it, then start kissing that mortgage goodbye!

If you have any questions or comments, just post them below.

What do we do with our extra car?

When was the last time we drove our old car?  That's a very good question.  We think it might have been back in May, but we're not quite sure.  We do know the check engine light came on last time we drove it, and we've not done anything about it since.

Jason and I go to many of the same places each day, so carpooling only makes sense.  It saves money on gas, and it gives us time together during our hectic schedule.  It's a great time and place for us to talk about our day, our future, or just about anything else we need to talk through without the distractions that await us at home.

We've kept our little red car that served us faithfully for years even after we purchased a second car (a new Honda) in case our new car ever broke down or there might be a time when carpooling would be impractical.  However, the carpooling is just about always practical for us. 

However, the cost of insurance and license fees over the course of the year add up to more than we might spend on a car rental if an emergency arose.  So, why are we keeping it?  We don't know.  What are your thoughts?  Please let us know in the comment section below.

Yeah Toast!

I hope Bob and Tom don't mind me stealing their song title for this posting, but I just really love toast.  It's cheap, easy to prepare, and goes with just about everything.  This summer, Jason and I enjoyed a lot of easy, frugal, and delicious meals because of this crunchy treat.

The first thing to consider?  Every time you throw away food, you throw away money.  This includes the moldy leftovers, the residue on the inside of a condiment jar, and those heels of bread that no one seems to want to eat.  It is a very rare occasion that Jason and I put food into the trash can.  I can't put food into the trash without visualizing the money that it represents.

For example, you can add milk to an "empty" chocolate (or any other flavor) syrup bottle, shake it up, and have a fabulous drink right out of the bottle.  (It feels so wrong, but it tastes so right).  You can add a little olive oil and vinegar to an "empty" mustard container to make a tasty salad dressing.  Actually, most condiments can be turned into salad dressings under the right conditions.  It's fun to get creative with it!

But this posting isn't about salad dressing.  It's about toast!  (Did I mention I love toast?)  Bread kept in the fridge tends to stay good for a crazy long amount of time.  I don't think I've seen mold on my refrigerated bread in the ten years of our marriage.  I'm also not fond of my PB&J served on the heels of the loaf, so we tend to get a collection of them in the fridge.  Here are a few uses for our doughy friend:

• French Toast
• Cut them into cubes and make croutons
• Toast them until completely dry, roll them with a pastry roller, and have bread crumbs for recipes
• Use to keep baked goods fresh at home or when shipping a care package
• Bread Pudding (Yum!)
• Fancy Meals

What I mean by fancy meals is cutting my toast diagonally so I get four triangles.  I place them in my toaster oven so they get nice and crispy.  While it's toasting, I wander around the kitchen looking for things to go with my fancy toast points.  Just about any left overs work.  I also like beans (Beans on toast is great British Recipe.  Look it up and try them).  We also like to use hummus, guacamole, sliced avocado, melted cheese, cold cuts, etc.  You get the idea.  The point is to get a delicious, healthy, fun meal without buying anything special.  It's best to just use what you already have around the house.  I place a priority on any leftovers that might spoil soon.

It's super simple, but you have to be in the mindset that you will not tolerate waste.  It isn't just about saving money.  It's about being responsible with the resources we have available to us.

What other fun uses do you have for the heels of bread, or any other item that might normally get thrown away?  Let us know in the comment section below!

Farewell Land Line

For a while, we've wondered if we really needed our land line.  Jason carries a cell phone, and that seems to be how we do most of our telecommunicating.  We had two obstacles.  1. We got a better deal on our DSL because of the land line.  2. If one of us was at home and the other was out with the cell phone, we'd have no way to call 911 if the house caught fire, became burglarized, or was invaded by insane aardvarks.

Our Crazy Cell Phone Scheme

We looked at some other options.  First of all, Jason's dad already had a plan through Verizon that would allow him to add a line for 9.99.  He had made us an offer to do that in the past, but we declined on principle.  On what principle, we can't remember, but it seemed like a good idea at the time.  We decided to compare what taking him up on his offer would do for our bottom line to what we were currently paying.  Here is how much we paid for DSL, phone line, and a cell phone:

Phone (Including taxes and fees) - $33.55
DSL High Speed Internet - $28.00
Verizon Wireless (one phone, including taxes and fees) - $46.13
Total Cost - $107.68/Month

To lower this cost, we went with Jason's family to Verizon and added two lines to their account.  The first one was Jason's current account, and the second went on one of our old cell phones we'd never gotten around to donating.  This second phone will replace our land line for emergencies, but has features our land line does not have such as voice mail and the ability to leave the house, city, state, etc.  Jason also upgraded on his phone the number of texts he can send/receive.  With the upgrade, the second line, taxes, and fees, we expect to be sending Jason's dad about $40/month (less that what we're currently paying for one phone with a less comprehensive plan).

This morning, we called ATT to cancel our land line, knowing our internet would likely go up $7/month.  After we got that set up, Jason asked the representative if they could give us a little "something extra" for being such loyal customers.  The result?  We get the first 3 months of service for $14.95 instead of $35.00.  That price includes everything, so there are no added fees or taxes to consider.  Here are our new totals:

DSL High Speed Internet - $14.95 for three months, $35.00 after that
Verizon Wireless Cells for Home and Away - $40.00
Total - $54.95/First Three Months - $75.00/Thereafter

Just those two action will save us $30-$50 per month, and will add up to $427.31 over the next 12 months.

The Next Step

You'd think I'd be satisfied with that result, but I'm not quite done.  When these three months are up, I'm going to call ATT back to see if they will continue us at the promotional rate.  If they won't, I'm going to ask if we can sign up for a 2-year "term."  Oftentimes, there is a better rate available if you ask for this, although they tend not to advertise it.  This is not like a cell phone's 2-year contract.  Instead, it just shows you intend to stay with them, so they guarantee you a better price for two years.  However, you can cancel at anytime with no penalty.  Be sure you check the terms before you agree to any add-ons or special rates.  It might be good in the short term, but there can be a nasty surprise later down the line.

If you know and trust someone who has the kind of wireless plan that lets them add someone new for cheap, it's worth looking into.  If nothing else, you could each get the same plan together, split the cost, and probably both of you would benefit from a lower bill.  It should go without saying, however, that your relationship needs to be the kind where you can deal with money together without it hurting your friendship.  

In short, there are a lot of creative ways to save money.  Jason told me at lunch that this latest action made him feel we were really serious about eliminating this debt.  I have to agree.

How else can we all save money on a month-to-month basis?  Let us know in the comment section below!

Travel Frugality

Jason and I just returned from a trip to Nashville, TN.  It wasn’t a trip we were originally planning or budgeting to take.  However, Jason won a handbell contest in May, which paid for about half of the expenses to experience Pinnacle (a national handbell convention).  Given that his career as a handbell  composer/arranger is still in the developing stages, we saw this trip as more of an investment than an expense.  Still, we wanted to keep costs as low as possible.

Food on the Cheap

For those of you who follow the blog, you know Jason makes our money work for us, and I try to find as many ways to save as possible.  To save money on this trip, we tried to spend as little as possible on food.  First, I called the hotel and found out the “full-service” hotels supposedly do not offer refrigerators or microwaves in the room.  Nor do they offer free continental breakfasts.  (They also don’t offer free wireless access in the rooms, but that’s beside the point).  However, they would provide a microwave and refrigerator upon request, if there were enough available.  We requested.

Because we weren’t certain that there would be appliances for us, we tried to pack food that would work for us regardless of what was available in the room.  We packed grapes, bananas, sandwiches, pretzels, granola bars, and nuts.  Those foods worked well for the drive down (no stopping for lunch) and would work with our cooler if no refrigerator arrived.

When we got there, we requested the refrigerator and microwave three times.  After the fridge came with no microwave, we figured that was good enough.  We headed to Kroger to buy:

1 Loaf of Fresh Italian Bread - $1.00
4 Packs of Deli Meats - $1.96
1 Pack Provolone Cheese $3.99
1 Container Hummus $2.00
1 Box Cereal $3.99
1 Container Mini-Donuts $1.00
1 Quart Non-Fat Milk $1.39
Tax - $1.22 (apparently groceries are taxed in TN)

Total - $16.95

These groceries were enough for us to have 5 breakfasts, 2 lunches, and a dinner for each of us.  This comes out to about $1.06 per person per meal.  That's even with fancier items like hummus and provolone cheese.  If we tried, we could have gotten this even cheaper, but we figured we were on vacation and deserved a few fun items. 

If we had spent just $4 dollars in each of those meals, we would have spent an extra $47 on the trip.  While that doesn't seem like a lot, if you saved $47 on one trip each year, invested into an account earning just 4% interest, in 30 years, you would have $2,883.16!

What other money-saving travel suggestions do you have?  Tell us about them in the comment section below.

Up In Smoke

Driving home last night from my folks' house, I quickly lost count of how many fireworks exploded within my field of vision, or how many cracking reports I heard from behind me.  After a minute or two of this, my mind invariably turned to money, and I realized something truly mystifying -- I wasn't seeing and hearing fireworks; I was seeing and hearing money going up in smoke.

Now I'm not a huge fan of fireworks so that does prejudice me just a bit.  I haven't set foot in a fireworks store or looked at a fireworks display in the local supermarket in years.  But it still occurred to me that what I was seeing was a tremendous waste of money and resources.

Math time -- Even with some of these outlets offering buy-one-get-six-free deals, you have to figure that for the sort of up-in-the-air cloud-burst fireworks I was seeing, we're talking minimum $.50 to $1.00, probably more.  Again, I'm making assumptions here because I have no idea, but I think that's a conservative estimate.  For each firework, figure that to light the fuse, run like mad to get out of the way, watch it fly in the air, then explode, we're talking ten seconds.  That means that, for an hour's worth of continuous firework excitement, we're talking ten seconds a shell, six shells a minute, 360 shells for an hour, at a cost of somewhere around $180 to $360 an hour.

Again, this is hideously rough math: if the shells are more expensive, the cost goes up.  If you take longer to fire a shell, the cost goes down.  I also realize that nobody is going to fire off these shells one after another after another for an hour straight -- the number is just a per-hour cost, nothing more.

Now, let's look at some other per-hour costs:

Dinner - Meal for two, nice restaurant, figure an hour's worth of time and, with drinks and dessert, perhaps $60 or so.  That makes the hourly cost about $30 a person.

Movie - Ah yes, that cheapest of pleasures (he said sarcastically).  Figure $9 for a ticket and another $12 for a vat o' popcorn with drink, you're talking $21 for a two-hour movie, or just over $10 an hour.  Your costs may go down if you share the popcorn, up if you go for a 3-D movie.

Video Games - This is one I'm gravitating to more and more.  My wife just bought me a Nintendo DSiXL for my birthday (a few months early, but who's complaining?), at a cost of about $190.  In that time, we've bought a handful of games, at a cost of maybe another $130 or so.  Total of $320 on a new video game system.  However, the longer we play it, the less our per-hour cost runs.  Even if we only used the system for an hour, we're still only near the high end of our fireworks example.  In the month we've had it, however, we've probably spent, between us, a good forty or fifty hours playing it, at a per-hour cost around $7.  The key is to get a system you'll actually use, and then buy games with lasting play and re-play value.  Our most frequently-played games?  Mario Kart DS (even after you've competed the Grand Prix mode, you can still play online for free with people from around the world), and the EA Sudoku game (which we downloaded for $2.00 from the DS online store).  Even factoring in recharging costs, it won't be long before playing this gets as low as a buck or two an hour.

There are so many more examples I don't have time to go into here, but you get the drift: fireworks may be fun, but the per-hour cost is a killer.  My family and I stood in their driveway for ten minutes and just watched the shells exploding in the sky all around us.  Cost to us?  Nothing.  When it comes to celebrating independence, seems to me that getting that much bang for your buck is right on the road to financial independence.