Weather Report

I had mentioned a couple of months ago that things were going topsy-turvy in the school district where my wife and I work, and that because we weren't even sure we'd have jobs next year, we were going in to duck-and-cover mode.  We refinanced our mortgage, bolstered our rainy day account, and held off on debt payments for a while.

I'm happy to say that it looks like those storm clouds on the horizon blew past us, and we're in the clear, at least for now.  There are a few things still up in the air, but they're just details and don't change the fact that my wife and I should both be gainfully employed, at least for another year.

That being said, here's where our financial picture stands, and what our plans for the coming months are:

• Our Rainy Day account stands at just under $6,000.  When our next CD matures in a few weeks, we'll be over $6,000, which is between two and three months of living expenses for us.  The only reason we're not going to increase it is that our income comes from so many sources, the odds of all of our income disappearing is slim.
• Our mortgage is refinanced at 3.75%, and we've already paid off $500 in principal, even though our first payment on this new loan isn't due until May 5.
• Our student loan has become our top priority, not because its interest rate is higher, but because it's significantly smaller, so much so that we can have it paid off -- with a little luck -- in December of this year.  Expect to see that number dropping rapidly.  

Thanks to the miracle of online payments, I expect that we'll have money pretty much constantly flying through cyberspace en route to some account or other, or to pay down some loan or other.  We just paid off almost $700 in principal on the student loan earlier this week, and I just made another payment for about $160.  Turn-around time on payments there is about 2 to 3 days.  The mortgage is even faster -- if I make a payment from one of our accounts at ING Direct, the payment appears to apply instantaneously.  Compared to the wait with our former mortgage company (where it could take a week or more for them to get the money and then apply it correctly), it's a God-send.

For those of you who have been patiently waiting to see our loan numbers drop, I share your pain.  I can only say that those numbers should be dropping frequently in the coming weeks, so check back often.  As always, leave your comments and questions in the section below -- they're always appreciated!

Sign here ... and here ... and here

I'm a couple days late in posting this, but I did want to let you all know that my wife and I closed on our refinance with ING Direct last Thursday. They haven't paid off the old loan yet, and there's nothing about the new loan up in our account at ING Direct, but the whole shebang's a done deal.

What this means now is that it will be easier than ever for us to pay extra against this loan, since most of the money for doing that will come from our checking account at ING -- no more mucking about with and waiting for electronic payments to go from one company to the next. It also means that we have that much extra every month (if you ignore escrow, about $200) that we don't need to have to make our regular mortgage payments. It's like having an extra rainy day account of a sort -- the less we need to be able to pay every month, the longer before we get into real financial trouble if the unforeseen happens (which, by its very definition, we can't know about until it's happened).

Speaking of the unforeseen, we should find out this week if our jobs are secure for next year, of if the proverbial apple cart will be upset. That will have a huge bearing on whether our extra monies go toward our rainy day account, our mortgage, or our student loans. We'll keep you posted on that.

In the meantime, if you haven't checked out the excerpt of my novel in the Amazon Breakthrough Novel Award contest, I invite you to go here to check it out. A little light reading to pass the time until our debt numbers at the right start dropping once more....

And now, for something completely different...

Before I get to the main part of the post, an update -- everything is done on the refinancing through ING Direct except the closing, which hopefully will take place in the next week.  So far it all looks good, so now it's just a matter of finishing up the fiddling paperwork. Fun.

Now, to the main thrust of this post ...

At least on the surface, what I have to talk about today doesn't appear to have much to do with finances, but watch my literary legerdemain and see how I tie it all back in....

Every year, Amazon.com runs the Amazon Breakthrough Novel Contest (ABNA). I have a young adult novel -- "The Coming of the Heroes" -- I've been working on for the better part of eight or nine years, so I submitted it to the contest back in January. From an initial pool of 5,000 young adult entries, my novel is now one of the top 250.

I'm inviting anyone and everyone to check out my excerpt (the prologue and first chapter) and, if the mood takes you, to rate it and leave me a review. The more reviews I can get, the better the novel will look overall, which is always a good thing.

So, how do you rate it, you ask? Simple...

1. Click here.

2. If you have a Kindle device, skip to step 3. If you don't, look at the right side of the screen, and there you'll see some options to download a free Kindle reader to your device -- PC, MAC, iPhone, Blackberry, etc. Click the one you want, and then install the software.

3. Now, go back to the page you went to in step 1.  Over at the right side of the screen, click on the "Buy now with 1-click" button. Don't worry, it's free.

4. Read it. Then, down at the bottom of the page, click on "Create your own review" to rate and review the excerpt. This won't help me through to the next level of the contest, but if I progress far enough, these reviews will effect the hearts and minds of people who could potentially put me on even further.

So what does this all have to do with finances, you ask?  I could take the easy route and say, "Well, if I win the contest, there's a publishing contract on the line, with a $15,000 advance against royalties."  You see, there's a dollar sign in that sentence, so it must have to do with money, right?

But I won't take the easy route.  Instead, I'll get philosophical for a moment...

Why do we want money?  The simple answer is that we want money so we can do what we want to do, what we love to do, what we were born to do (or, if you're a Lost fan, what we're destined to do).  Now, I don't claim any sort of divinely-given purpose, but I do know that I love to create things.  I'm already a composer and arranger with many pieces in print, and no matter how many pieces I write, I'm always excited to get to the next piece.

The same is true of writing.  I haven't had the success yet with writing that I've had with composing, but I love to do it just as much.  Progressing in this contest just gets me closer to my dream, which is to live my life doing nothing but creating.  More than the creating, though, is being able to share what I create with others, not out of a selfish "look at me!" purpose, but because I hope that what I've made will touch peoples' lives, and perhaps make those lives just a bit better.  Even if I don't win the contest, the farther I progress, the more marketable my work becomes, and the more likely I'll be able to get my book out there where I'll have a real chance to share it with others.

So, a big thank you in advance for taking the time and effort to look at my excerpt, and if you feel called to rate and review it, so much the better.  With spring break starting tomorrow, hopefully it'll be easier to find the time to write here more.  In the meantime, enjoy the weather spring has to offer.

Answers to Reader Questions

A couple of our readers have asked some questions about our ongoing refinancing, so I thought I'd address them here:

"You make it sound so easy! I am seriously considering refinancing. But every time I learn that I need to find some document that isn't immediately within my reach, I think, ugh, this can certainly wait until a later time..."

Honestly, the only documents which aren't "within our reach" are all forms they sent for us to fill out and return (which we've got and are easy to fill out).  All they needed form-wise were recent pay stubs (most recent for each of us), last 2 years of W-2s (fairly easy as it's tax time), and the declaration page from our homeowner's insurance (not sure exactly what they want, but I think I've got something close).  Yeah, if we needed the number of items most mortgages require, we might balk, as well.

"Based on the information I learned on your blog, my husband and I looked into refinancing with ING. Their 3.75% rate is great, but the adjustable factor scared us a bit. Thoughts?"

As for the adjustable rate, the mortgage we've got doesn't adjust at all during the 5 years we have it, and as our plan and goal is to be rid of the blasted thing before the 5 years are up, we're considering that we've got a 3.75% rate for the effective remaining life of the loan.  If we weren't planning on killing the thing off before the 5 years were up, we'd never refi.

If we don't make it and still have some balance left at the end of 5 years, even if that remaining balance is at a higher rate, we still win.  If we only pay the minimum payment (about $225 every two weeks), we'll have somewhere over $80,000 left after 5 years.  Even paying twice that monthly payment takes a huge bite out of the remaining balance.  With the amounts we'll be putting toward it, if we do have to roll over for another 5 years, we should have a nice manageable balance left, so even at a higher rate, it won't break the bank.

Thanks so much to SlyGly and RLOusley for the comments and questions -- keep them coming!

Brief refinancing update: we got the paperwork from ING Direct -- a bunch of papers to sign, no real surprise there.  I'm going to wait until this weekend to get our most recent pay stubs (since it's pay week -- yeah!) and send those in along with everything else, probably electronically (I can scan and email all the documents in -- I love the digital age).  As part of the packet, they also gave us a copy of our credit scores -- mine is 809, and Ellen's is 799 (probably because I have a credit card I've had since college, giving me a longer credit history than her).  I've used calculators and other things online to guestimate our scores, but seeing exactly what they are is really good to see.

I'll be sure to let you all know how refinancing is going.  In the meantime, keep the questions coming!

Starting "The Ball" Rolling

And just what is "the ball"?  Why, the big orange ball of ING Direct (www.ingdirect.com).  I went online yesterday, filled out all the necessary screens, and clicked "submit" to start our application to refinance our mortgage.

Nothing happened.

So I clicked "submit" again.  Again nothing, save a nice error message telling me to wait and try again, and if the problem persisted, I should call ING Direct.

Now, I hate talking to people on the phone -- always have, likely always will.  I prefer to think in words and text instead of speech.  But we'd put the process off for too long, so I called.  God bless a bank which has customer service people in on a Sunday (even if they're in Los Angeles and likely have far nicer weather than we do here). 

I worked with the gentleman (sadly, I don't remember his name) and in about a half hour we had everything approved, rolling, and moving along.  Our rate is locked in at 3.75% (it dropped since our last post here), and now we just need to get some documents from them, sign them, and send them copies of some of our information (homeowners insurance declaration page, two years' worth of W-2s, and recent paystubs -- very normal-type things).  After that, they process the whole thing, then someone from a title company comes to our house, we sign things, and badda-bing, badda-boom (yeah, I can't believe I used words like "badda-bing" either) we're refinanced.  Our payment will be $225.77 every two weeks, which we'll electronically debit from our Electric Orange checking account at ING Direct.  Couldn't be any simpler.

Not only does this drastically reduce the interest we'll be paying every month, but the amount we absolutely need to have on hand every month to pay the regular bills drops by about $650.  I'm not a big fan of bureaucracy, and I'll be a much happier camper once the whole closing process is done, but I'm just a little giddy that we're just that much closer to our financial goals.

Anyone else refinanced lately, or thinking of refinancing?  Feel free to share in the comments section.  And, as always, if you've got any questions, don't hesitate to ask.

The Taxman ... Yeah, The Taxman ...

With all apologies to the Beatles, it's starting to be that time of year when we all look at our W-2s and fill out our form 1040s.  I've used TurboTax for the past several years, and it makes life so much simpler.  I won't say it makes the task of doing taxes fun, but it does take some of the sting out of it.

One thing that does sting -- at least on the surface -- is that number that pops out when it's done.  Now, the whole thing is just preliminary right now, since I need to go back and verify a few things before I send it off to Uncle Sam, but the numbers are only going to change a few dollars either way. 

The results?  I owe Uncle Sam about $1,566, and Indiana owes me about $140. 

Ouch.

This has happened ever since I started working for myself teaching piano lessons and composing music.  That number gets a little bigger every year, and as it does so does the smile on my face. 

Huh?

That $1,566 I owe Uncle Sam is money which has been in my hands, in my bank account, working for me, lowering my debts, saving me or making me interest, instead of helping out the government.  Oh, they'll still get their portion -- give to Caesar what is Caesar's and all that -- but not before it's due them, and in the meantime, it'll be doing me all manner of good.

When you do get finished with your taxes this year, take a critical look.  If you got a refund -- especially of the "whopping" variety -- have your withholding changed so that money is yours all year long, not just when April rolls around.  If you're worried you won't have the money to pay when the time comes, put it aside in an interest-bearing account until you need it. 

(On a more personal note, now that the taxes are done, I think it's about time to get that mortgage refinancing underway.  Rates dropped an eighth of a point in the past couple of weeks, so if we act fast, we can knock over two percent off our mortgage, and quite a bit off our monthly payment.)

Anyone else want to share your thoughts about taxes?  Comment section is below -- share away!

The End of the Great Pantry Experiment

Yes, our posts are getting less and less frequent.  In my wife's defense, she's also taking grad school classes online which are taking up much of her time.  In my defense, I have none.

Well, like all good things, the Great Pantry Experiment has come to a close with the end of our credit card statement on February 10.  (Yes, I know it's the 15th.  Tough.)  Here is our final grocery break-down:

Bananas -- $1.73
Yogurt -- $2.40
Green Pepper -- $.90
Taco Saure -- $2.12
Milk -- $2.29
Potatoes -- $2.79
Bread -- $2.99 (but it was buy one get two free, so we got three loaves of really good bread for that price)
Ice Cream -- $2.99 (more on this later)
Pasta Sauce -- $2.06 (ditto)
Salad -- $2.00
Avocados -- $2.00

Total:  $24.27
Experiment total: $74.28

We had a couple of my piano students over for the day and sort of splurged on ice cream and pasta sauce for a dinner to celebrate their successes at contest.  Totally worth the extra few bucks.

So, was the Great Pantry Experiment a success?  I would say so.  We spent about $75 on a month and a half's worth of food (longer with some things like the extra two loaves of bread thrown in).  Our credit card statement for January 10 through February 10 was right at $1900.  Sounds like a lot, but when you take into account the following:

Grad School payment for my wife:  $1275
Grad School books for my wife:  $58
Oil change:  $42

it's not so much, especially knowing that out of that credit card bill comes our home and cell phone bills, plus about $100 in gas every month.  Is it perfect?  No.  Is it better than it would have been otherwise?  Well, since there were no restaurant meals on there at all, I'd say that in and of itself makes it a success.

In other news ...

Well, there really isn't any "other news", except for the fact that the latest rumors we're hearing around the school district make it seem like both my wife and I will still be gainfully employed next year, which is a huge burden off our shoulders.  What does that mean for our finances?

1) We're still going to keep adding to our Rainy Day account instead of paying off debt, at least until we have written confirmation that all will be well for the 2010-2011 school year.

2) We will probably go ahead and refinance our mortgage.  We're paying 5.875% interest right now, and we can refinance through ING Direct (where we have many of our accounts) at about 3.875%.  Not only that, but it drops our monthly payment from $1079 to about $500 (although we have to pay insurance and taxes ourselves, but that money may as well be earning interest for us instead of the mortgage company).  The upshot of this is that, if our financial picture does drastically change, the amount per-month we need to pay out of pocket drops drastically, too, which will let that Rainy Day fund last us just that much longer.

3) Once we feel like we're in the clear job-wise, we will begin accelerating debt payments again, although our current thinking is that we'll put that extra money toward the student loan instead of the mortgage.  Why?  The difference in interest rates (after we refinance) will be minimal (3.25% vs. 3.875%), and we can pay off the student loans in much less time than we can pay off the mortgage.  Once that loan is gone, that's $128 less we need to have on hand every month to make ends meet.

Regardless of the final outcome of this job "scare", we are being a little less cavalier about our finances.  We're making sure we have our safety nets in order, and doing what we can to make sure that the amount we have to pay out every month is as low as possible, so that should the unforeseen happen, we're just that much more likely to be able to stay out of the poorhouse.

We still haven't given up on our goal of being debt free in 40 months; we're just taking a different path to get there.  Same destination; different route.

I'll close with this ... I'm curious -- is anyone else out there doing anything different based on what they've read here?  I've already heard of one of our readers who forewent (is that the past tense of forego?) buying a piano because of what we're trying to do here.  Anyone else joining the debt-free bandwagon?  If so, let us know!