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.