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.
Thursday, December 23, 2010
Thursday, November 25, 2010
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.
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.
Thursday, October 14, 2010
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!
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!
Saturday, October 2, 2010
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.
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.
Tuesday, September 21, 2010
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.
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.
Sunday, September 12, 2010
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.
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.
Monday, September 6, 2010
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.
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.
Saturday, August 28, 2010
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.
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.
Saturday, August 21, 2010
What do we do with our extra car?
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.
Saturday, August 7, 2010
Yeah Toast!
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
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!
Wednesday, August 4, 2010
Farewell Land Line
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!
Saturday, July 24, 2010
Travel Frugality
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.
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.
Monday, July 5, 2010
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.
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.
Sunday, June 20, 2010
Small Moves
It's summer, three weeks past the end of the school year, and our debt repayment has slowed drastically. Since I get no money from school when I'm not working there (unlike my wife, where they prorate her money and pay her every two weeks for the whole year, not just during the school year), our income -- at least for the time being -- has dropped by a fair bit. It hasn't dropped enough to put us in the poor house or anything quite so awful, but it has made a difference in how much extra we're able to put against our loans.
It's at times like this I'm reminded of the movie Contact, where the young Ellie (the old Ellie is played by Jodie Foster, but heaven and IMDB only know who played the young Ellie) is playing with her ham radio and is having trouble finding anyone on the other end. Her father comes in and tells her the secret to ham radio success: "Small moves, Ellie. Small moves."
Even at times like this where I can't put $300 or $500 at a time toward a loan, I can still put $15 or $25 toward them. True, it doesn't drop the balance as much as I might wish, but it does drop it nonetheless. If I stop to think about the whole life of the loan, even $300 is a "small move" toward paying it off, but as I'm not likely to get $80,000 or so to toss at the loan at a time, small moves is the only way to get it paid off.
No matter what the goal -- financial, physical, career, or whatever -- small moves are the best way to get it done. Small moves + persistence = success. Anyone else succeeded with a goal using small moves? Let us know in the comment section.
It's at times like this I'm reminded of the movie Contact, where the young Ellie (the old Ellie is played by Jodie Foster, but heaven and IMDB only know who played the young Ellie) is playing with her ham radio and is having trouble finding anyone on the other end. Her father comes in and tells her the secret to ham radio success: "Small moves, Ellie. Small moves."
Even at times like this where I can't put $300 or $500 at a time toward a loan, I can still put $15 or $25 toward them. True, it doesn't drop the balance as much as I might wish, but it does drop it nonetheless. If I stop to think about the whole life of the loan, even $300 is a "small move" toward paying it off, but as I'm not likely to get $80,000 or so to toss at the loan at a time, small moves is the only way to get it paid off.
No matter what the goal -- financial, physical, career, or whatever -- small moves are the best way to get it done. Small moves + persistence = success. Anyone else succeeded with a goal using small moves? Let us know in the comment section.
Monday, May 24, 2010
Good-bye $110,000
Thanks to the power of putting small yet continuous sums of money against our two loans, we just crossed beneath the $110,000 owed threshold. In just under 6 months, we've paid off over $14,000 in debt. Now, to be fair, that's a little behind where we need to be if we want to be paid off in that 40 month time period. But bear in mind two things:
1. In that time we've gone in to "crisis mode" and socked extra money away in a rainy day account, as well as refinanced our mortgage. Unless something truly insane happens, we won't have to do either of those again in the near future.
2. The later it gets and the more principal we pay down, the less of our regular monthly payment will go toward interest. A regular monthly payment toward a $90,000 mortgage won't lower the principal balance as much as it will if the loan's balance is $20,000. The closer to 40 months we get, the faster the principal reduction starts happening, like snow in an avalanche.
Things will be slowing up in the next few months -- summer means no income from school for me and less piano lesson income -- but we still hope to make great strides in our program. Our next big hurdle (hopefully in the next week or two) is to get the mortgage down below $90,000. Small goals, to be sure, but they help us stay on track and stay focused when we'd rather go out and splurge needlessly.
1. In that time we've gone in to "crisis mode" and socked extra money away in a rainy day account, as well as refinanced our mortgage. Unless something truly insane happens, we won't have to do either of those again in the near future.
2. The later it gets and the more principal we pay down, the less of our regular monthly payment will go toward interest. A regular monthly payment toward a $90,000 mortgage won't lower the principal balance as much as it will if the loan's balance is $20,000. The closer to 40 months we get, the faster the principal reduction starts happening, like snow in an avalanche.
Things will be slowing up in the next few months -- summer means no income from school for me and less piano lesson income -- but we still hope to make great strides in our program. Our next big hurdle (hopefully in the next week or two) is to get the mortgage down below $90,000. Small goals, to be sure, but they help us stay on track and stay focused when we'd rather go out and splurge needlessly.
Thursday, May 20, 2010
Tough Choices
The scene went something like this ...
End of the day, both our heads throbbing, I ask my wife, "Why don't we just grab something to eat on the way home."
She agrees, if only because we're both still shell-shocked from teaching a bunch of 10- and 11-year-olds just a week from summer vacation.
We head to the parking lot, pull out, and head for home. Along the way begins the inevitable discussion.
"We pass right by Subway. You want that?"
She frowns. "We had a coupon for it, but it's at home."
"It's fine," I say. "We've only got $99 charged on the credit card so far this cycle."
"Yeah, but it's so expensive."
We fall into silence for a couple of minutes before she says, "We could do Little Caesars. It's not too far out of the way."
Well, she's right, but it's also right near the interstate, and by the time we get there it'll be the start of rush hour. Heavy traffic and beginnings of a migraine don't go well together, so I hem and haw and finally say, "What about Arby's? That's always good when we've got a headache."
She's quiet for another moment, then drops the bomb.
"We could just eat something at home."
When it comes right down to it, she's the one who more often than not has to reign in our spending. I'm not a spendthrift by any stretch of the imagination, but I don't mind spending five or ten bucks here or there, especially if it's for something for both of us. Part of me enjoys eating out as long as it's simple, so suggesting something at home causes a wrench in my gut, but in the interests of marital harmony (not to mention I just want to get home to take some Excedrin), I agree.
And you know what? The meal we ate at home (frozen pizza, about $2 from Meijer with some green pepper thrown on top) was every bit as easy as eating out would have been. It may not have been terribly healthy, and not as tasty as eating out (if only because there wasn't as much dripping fat and lard), but between the pizza and a few pain pills, the headache is gone, and I feel like I can get back to my life.
In the heat of the moment (especially when we're tired and don't feel our best) making decisions that are better for our finances can be hard, but like most things, I've found we have less "buyers remorse" if we go the frugal route, and we usually don't suffer on the fun side of things. Anybody have a similar situation they want to share? Comment section's below -- comment away!
End of the day, both our heads throbbing, I ask my wife, "Why don't we just grab something to eat on the way home."
She agrees, if only because we're both still shell-shocked from teaching a bunch of 10- and 11-year-olds just a week from summer vacation.
We head to the parking lot, pull out, and head for home. Along the way begins the inevitable discussion.
"We pass right by Subway. You want that?"
She frowns. "We had a coupon for it, but it's at home."
"It's fine," I say. "We've only got $99 charged on the credit card so far this cycle."
"Yeah, but it's so expensive."
We fall into silence for a couple of minutes before she says, "We could do Little Caesars. It's not too far out of the way."
Well, she's right, but it's also right near the interstate, and by the time we get there it'll be the start of rush hour. Heavy traffic and beginnings of a migraine don't go well together, so I hem and haw and finally say, "What about Arby's? That's always good when we've got a headache."
She's quiet for another moment, then drops the bomb.
"We could just eat something at home."
When it comes right down to it, she's the one who more often than not has to reign in our spending. I'm not a spendthrift by any stretch of the imagination, but I don't mind spending five or ten bucks here or there, especially if it's for something for both of us. Part of me enjoys eating out as long as it's simple, so suggesting something at home causes a wrench in my gut, but in the interests of marital harmony (not to mention I just want to get home to take some Excedrin), I agree.
And you know what? The meal we ate at home (frozen pizza, about $2 from Meijer with some green pepper thrown on top) was every bit as easy as eating out would have been. It may not have been terribly healthy, and not as tasty as eating out (if only because there wasn't as much dripping fat and lard), but between the pizza and a few pain pills, the headache is gone, and I feel like I can get back to my life.
In the heat of the moment (especially when we're tired and don't feel our best) making decisions that are better for our finances can be hard, but like most things, I've found we have less "buyers remorse" if we go the frugal route, and we usually don't suffer on the fun side of things. Anybody have a similar situation they want to share? Comment section's below -- comment away!
Sunday, May 16, 2010
A Stroke of Good Fortune
How does this relate to becoming debt free in 40? I recently received excellent news. In helping my mother explore the veterans benefits available to her since my father passed away, I discovered something amazing called "Remission of Fees." While in the service, my father had cancer. Because of this, he received disability benefits for the rest of his life. What I didn't realize? I was entitled to 124 college credit hours of tuition because of my father's disability.
This means I will only pay a small fee of my graduate fees per credit hour rather than the full-tuition. This saves us close to $10,000 for my masters degree, and I will still have 88 credit hours available to me.
Needless to say, we're overjoyed at our good luck. Are there benefits in your financial life that you are not taking advantage of? What wonderful surprises have you experienced? Tell us about it in the comment section below.
Sunday, May 9, 2010
$10,000!
Just crossed the $10,000 paid off threshold! Less than 6 months ago, we started this quest to get our debt gone, and in that time, we've paid off over $10,000 in principal on the loans. There's still a long way to go, and we're still a bit behind the pace we'd like to set, but with a goal this big -- whether it be paying off debt, learning a new skill, or losing weight -- you have to celebrate the milestones along the way. Each little victory, even one as small as getting rid of just over 8% of our total debt in five and a half months, is that added psychological boost which will help us get to the next milestone.
Are any of the rest of you out there trying to eradicate your debt? If so, drop us a note in the comments section and let us know how it's going.
Also, I realize we have been bad (okay, really bad) about posting on a regular basis. I'm hopeful we'll be able to post more routinely here in the near future, including a couple of posts about how we're tackling our debt now and how we're allocating our money. For those of you who have stayed with us and kept tabs on our progress, I thank you for being here, and we'll try to once more provide you (horrid split infinitive ... sorry!) with good financial advice and suggestions to help you get to where we're going. Thanks for being along for the ride.
Are any of the rest of you out there trying to eradicate your debt? If so, drop us a note in the comments section and let us know how it's going.
Also, I realize we have been bad (okay, really bad) about posting on a regular basis. I'm hopeful we'll be able to post more routinely here in the near future, including a couple of posts about how we're tackling our debt now and how we're allocating our money. For those of you who have stayed with us and kept tabs on our progress, I thank you for being here, and we'll try to once more provide you (horrid split infinitive ... sorry!) with good financial advice and suggestions to help you get to where we're going. Thanks for being along for the ride.
Thursday, April 15, 2010
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:
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!
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.
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!
Monday, April 5, 2010
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....
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....
Thursday, March 25, 2010
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.
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.
Monday, March 8, 2010
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:
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.
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!
"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!
Monday, March 1, 2010
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.
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.
Tuesday, February 23, 2010
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!
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!
Monday, February 15, 2010
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!
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!
Saturday, February 6, 2010
Unexpected Rewards
Unexpectedly, I have been having a blast making meals from what we already had in our pantry and freezer. Today, I noticed we had some frozen blueberries that probably wouldn't be good for much longer. So, I took two cups of it and made homemade blueberry jam in our bread machine. Then, I took the last cup and made blueberry scones. I used the leftover blueberry juice from making the jam to flavor the tea we had with the scones. Would I have made these if we weren't trying to clear out the freezer? No way!
Because I can't just jot something on the grocery list every time I think of a meal idea for the week, I have to turn a critical eye toward what I already have. It's brought out the creative side of my cooking that's been dormant for quite some time.
Want to see what I mean? If you're not ready to try a month-long experiment like Jason and I, try a one night experiment. Look in your pantry and grab something at random. Then, see if you can't figure out something to mix with the item that you wouldn't normally try. You might be surprised how good the final product will be! Let us know how it goes in the comment section below.
Sunday, January 31, 2010
Pantry Update and Dark Clouds
First, a hundred apologies for the lack of posts recently. In addition to the usual Lack of Time, there was the fun 48-hour period earlier this week where our DSL went belly-up.
Second, you can see from the numbers on the right that our mortgage has gone down some more (YAY!). Just how much it's gone down depends on when the last time was you looked at it.
Third, the past two weeks' worth of grocery updates. Here's what we bought:
January 22:
Meijer -- $3.18 (including an "illegal" bottle of store-brand diet soda. So sue me.)
Aldi -- $11.48 (including canned corn, milk, salad, green pepper, tortilla chips for all of our Mexican meals, and granola bars for Ellen's Wednesday-morning-rush breakfasts)
January 29:
Meijer -- $5.34 (bread, bananas, yogurt)
Aldi -- $7.44 (green pepper, milk, two types of crackers for all the soup we've been having)
Grand total: $27.44 for two weeks' worth of food.
I can also say that our freezers are looking barren, and all of our pizza-related foods (pizza rolls, frozen pizzas, etc.) are gone. I can see the back wall of the pantry in places where I couldn't before. We've had soup as a meal for at least 50% of our dinners the past three weeks, but Ellen comes up with such wonderful variations, that it doesn't get old. Not sure what she'll cook up this week, but surely it'll be warm, filling, and unexpected.
Fourth, the bad news ...
You all know what a rainy day account is, right? It's that money you have set aside so when you get that proverbial "rainy day" in your life (transmission dies, need a new furnace, or, God forbid, you lose your job), you've got some money to live on until the storm passes and the sun shines again in your life ... metaphorically speaking.
Well, at least for Ellen and I, we're starting to see storm clouds on the horizon. If you live in Indiana, you know our government has drastically cut funding to schools in what is quite possibly an attempt to just plain get them to fail. In the district where we both work, they're already facing a $1.4 million deficit, and it's only going to get worse. We know there are cuts coming, and that they'll be announced in the next couple of weeks. What we don't know is where those cuts will come, or how deep they'll be. There's a very real chance that one or the other of us (or both) will lose our jobs. My wife, at least, is guaranteed employment until August because of her contract. With me being non-certified, they can cut me at, literally, a moment's notice.
It doesn't help that I'm the librarian and my wife is the music teacher, some of the first things to go when times are tight.
For that reason, I've temporarily stopped putting all our extra money toward the mortgage, and am now throwing it all toward our Rainy Day account, which is, thankfully, just over $5,700. It's not a ton of money, but as we continue socking the money away, it will provide a greater and greater cushion. Plus, if we've judged wrong and this storm blows right on past us, the money is still sitting there, just waiting to take a hefty knock out of one of our debts.
Therein lies the problem with our plan (or a problem, however you want to look at it) -- if we put our extra money toward our debts, it's locked; we can't get it out again. If we put it into a savings account, it's accessible, but we're still paying on our debts month in and month out. Quite the catch-22.
So for now, our posts will change somewhat. We'll still post about frugality. We'll still talk about our money-saving tips. We'll still let you know what color the back wall of our pantry is (there's a rumor it's white, but once I can see it clearly, I'll let you know for sure). But we'll also let you know how our rainy day account is going, and how any potential change in employment will impact our plan to be debt free within the next 38 months. Because, while the road to being debt-free may have taken an unexpected turn, we know that the road we're on still leads inexorably to that destination, and that we will get there if we stay on the road. It may take an extra ten or twenty months, or even longer, but our goal is the same; only the circumstances have changed.
As always, we are thrilled to have all of you along for the ride with us. If you have any comments (or know where our school district can raise an immediate $1.4 million), please leave them below.
Second, you can see from the numbers on the right that our mortgage has gone down some more (YAY!). Just how much it's gone down depends on when the last time was you looked at it.
Third, the past two weeks' worth of grocery updates. Here's what we bought:
January 22:
Meijer -- $3.18 (including an "illegal" bottle of store-brand diet soda. So sue me.)
Aldi -- $11.48 (including canned corn, milk, salad, green pepper, tortilla chips for all of our Mexican meals, and granola bars for Ellen's Wednesday-morning-rush breakfasts)
January 29:
Meijer -- $5.34 (bread, bananas, yogurt)
Aldi -- $7.44 (green pepper, milk, two types of crackers for all the soup we've been having)
Grand total: $27.44 for two weeks' worth of food.
I can also say that our freezers are looking barren, and all of our pizza-related foods (pizza rolls, frozen pizzas, etc.) are gone. I can see the back wall of the pantry in places where I couldn't before. We've had soup as a meal for at least 50% of our dinners the past three weeks, but Ellen comes up with such wonderful variations, that it doesn't get old. Not sure what she'll cook up this week, but surely it'll be warm, filling, and unexpected.
Fourth, the bad news ...
You all know what a rainy day account is, right? It's that money you have set aside so when you get that proverbial "rainy day" in your life (transmission dies, need a new furnace, or, God forbid, you lose your job), you've got some money to live on until the storm passes and the sun shines again in your life ... metaphorically speaking.
Well, at least for Ellen and I, we're starting to see storm clouds on the horizon. If you live in Indiana, you know our government has drastically cut funding to schools in what is quite possibly an attempt to just plain get them to fail. In the district where we both work, they're already facing a $1.4 million deficit, and it's only going to get worse. We know there are cuts coming, and that they'll be announced in the next couple of weeks. What we don't know is where those cuts will come, or how deep they'll be. There's a very real chance that one or the other of us (or both) will lose our jobs. My wife, at least, is guaranteed employment until August because of her contract. With me being non-certified, they can cut me at, literally, a moment's notice.
It doesn't help that I'm the librarian and my wife is the music teacher, some of the first things to go when times are tight.
For that reason, I've temporarily stopped putting all our extra money toward the mortgage, and am now throwing it all toward our Rainy Day account, which is, thankfully, just over $5,700. It's not a ton of money, but as we continue socking the money away, it will provide a greater and greater cushion. Plus, if we've judged wrong and this storm blows right on past us, the money is still sitting there, just waiting to take a hefty knock out of one of our debts.
Therein lies the problem with our plan (or a problem, however you want to look at it) -- if we put our extra money toward our debts, it's locked; we can't get it out again. If we put it into a savings account, it's accessible, but we're still paying on our debts month in and month out. Quite the catch-22.
So for now, our posts will change somewhat. We'll still post about frugality. We'll still talk about our money-saving tips. We'll still let you know what color the back wall of our pantry is (there's a rumor it's white, but once I can see it clearly, I'll let you know for sure). But we'll also let you know how our rainy day account is going, and how any potential change in employment will impact our plan to be debt free within the next 38 months. Because, while the road to being debt-free may have taken an unexpected turn, we know that the road we're on still leads inexorably to that destination, and that we will get there if we stay on the road. It may take an extra ten or twenty months, or even longer, but our goal is the same; only the circumstances have changed.
As always, we are thrilled to have all of you along for the ride with us. If you have any comments (or know where our school district can raise an immediate $1.4 million), please leave them below.
Friday, January 22, 2010
Memberships: Are they worth it?
Costco/Sam's Club - When Jason and I first got married, one of the first things we did (after the honeymoon) was borrow a guest card from his mom and check out our local Sam's club. We actually did this as we checked out just about every local grocery store we thought we might be visiting. We kept a notebook of items we'd probably purchase regularly, and wrote down the prices for each. We discovered that most of what we would buy we could get much cheaper at Aldi, and Aldi doesn't charge a membership fee. If we had 8 children, the bulk pricing might make sense for us. Until the octuplets arrive, however, we won't be spending money on membership fees for groceries.
Netflix - If you borrow movies from your local movie rental store regularly, Netflix might make sense to you. We're great friends with a family of five who live in a very small house. Finding room to store DVD's doesn't make a lot of sense for them, and Netflix is a very cost-effective entertainment source. For us, we get movies from the lbirary. If we really love a movie, we'll ask for it on our amazon wish list, and we'll probably get it for Christmas or our birthday.
Store Discount - Our favorite bookstore charges $25/year for their discount card. The card saves you at least 10% on most purchases, and more when they have a special going. However, we never spend that $250/year it would take to make it worth it for us. Again, we get most of our books at the library. If we really want something, we can usually get it at amazon for a cheaper price, with free shipping, and we don't even have to leave the house (or pay the membership fee).
AAA - A few years ago, our little old red car (which we still have) started having trouble. It would sometimes decide it was too cold or too tired to actually start when we needed to get somewhere. After that happened more than once, we decided it was time to get AAA. Between the towing service, the discounts, and the travel packages, we have definitely come out ahead on our membership fees. Like any insurance, part of what you pay for is the ability to not worry if something goes wrong. For us, this fee is definitely worth it.
Library - Okay, so the library isn't exactly a place you expect to pay money. However, it is well worth it to take advantage of this membership. If I see or hear about a book or film I'd like to know more about, I go to my library website, find it, put it on hold, and have it delivered to my local library. It's difficult for me to look around at the life I have now and try to find some aspect of it that hasn't been enriched by our library system in one way or another. This is not a request. It's a demand. If you haven't gone in a while, GO TO THE LIBRARY. You'll be glad you did.
To summarize, look at what you spend (or don't spend) in membership costs carefully. Don't just consider if it "might" save you money. Ask yourself, "Will this definitely save you money?"
Did a forget I membership worth considering? Let us know in the comment section below.
Monday, January 18, 2010
A Quick Experiment to Try On Your Own
Sitting here and thinking about our debt (as I often do), I got to wondering about a very basic question -- how much in interest do we pay every month?
Now, we all know about interest -- it's what gets paid for someone using someone else's money. The bank pays you interest (though not very much) for you leaving your money with them. But flip the interest coin over, and there's you, paying someone else (the mortgage company, the government, the credit card company) to use their money. Odds are you're paying much more out in interest than you're ever receiving.
But how much in interest, exactly, are you paying out every month? We all look at our "minimum monthly payment" or the total amount we pay, but rarely do we take the time to compute how much of that total amount is being paid just for the privilege of having borrowed someone else's money.
So, I decided to figure it out for us, looking at how much we've paid here in January 2010 because we were too impatient to save for some large expenses (because, let's face it, if we have the ability to pay off these debts, then instead, we could have waited and saved the money to pay cash in the first place -- we just didn't want to take the time to do so).
First is the mortgage. Going to the website (a great thing to do on a regular basis, just to keep tabs on things), I see that for our last regular mortgage payment on January 1, we paid $487.65 in interest. Now, if you consider that, as I write this, the balance is still somewhere north of $98,000, that's not a great amount, but if you look at that in every-day run-of-the-mill numbers, that's kind of scary. (What would your significant other/parent/sibling/friend say if they knew you went out and dropped almost $500 on something which vanished as soon as you paid for it?)
Now, the student loan. Thankfully, since the balance is lower (just a hair over $22,000), and the rate is lower, the interest paid is much less -- only $66.55. Still not great, but the amount of a really nice (at least for us) restaurant meal and movie ... but without the full stomach and feeling of satisfaction.
So, grand total we're paying in interest every month? $554.20.
Your turn. Go on and figure this out, exactly -- no guessing or assuming. Be honest with yourself -- you deserve that much. Go on, do your calculations. I'll wait ...
Good. Now that you've done that, it's time for the painful step -- put it into terms you can understand.
I just got my paycheck from church for being music director, and after taxes (and all those fun government fees) and other deductions, I got $557.55. What does that mean? It means that for the first two weeks of this year, I kept our church's music ministries alive, attended meetings, worked with soloists and groups, networked, tried to recruit people to the choir, selected music, practiced, performed -- and ended up with only $3.35. Nearly one whole paycheck went just to interest! It's even worse if I had chosen to use my paycheck from being a school librarian -- the interest would have swallowed one of those checks whole and still been hungry!
This then, my friends, is why my wife and I are so very anxious to get out of debt. Right now, I'm spending twenty-four weeks of the year working one of my jobs, just to pay the interest on our loans; I have to work even longer to pay the actual required payment with principal and interest (just over 34 weeks). This journey then is not just about money -- it's about freedom: the loans disappear, and so does this form of monetary bondage.
I urge you to try this for yourself, and then if you're so inclined, share your results with us in the comments section.
Now, we all know about interest -- it's what gets paid for someone using someone else's money. The bank pays you interest (though not very much) for you leaving your money with them. But flip the interest coin over, and there's you, paying someone else (the mortgage company, the government, the credit card company) to use their money. Odds are you're paying much more out in interest than you're ever receiving.But how much in interest, exactly, are you paying out every month? We all look at our "minimum monthly payment" or the total amount we pay, but rarely do we take the time to compute how much of that total amount is being paid just for the privilege of having borrowed someone else's money.
So, I decided to figure it out for us, looking at how much we've paid here in January 2010 because we were too impatient to save for some large expenses (because, let's face it, if we have the ability to pay off these debts, then instead, we could have waited and saved the money to pay cash in the first place -- we just didn't want to take the time to do so).
First is the mortgage. Going to the website (a great thing to do on a regular basis, just to keep tabs on things), I see that for our last regular mortgage payment on January 1, we paid $487.65 in interest. Now, if you consider that, as I write this, the balance is still somewhere north of $98,000, that's not a great amount, but if you look at that in every-day run-of-the-mill numbers, that's kind of scary. (What would your significant other/parent/sibling/friend say if they knew you went out and dropped almost $500 on something which vanished as soon as you paid for it?)
Now, the student loan. Thankfully, since the balance is lower (just a hair over $22,000), and the rate is lower, the interest paid is much less -- only $66.55. Still not great, but the amount of a really nice (at least for us) restaurant meal and movie ... but without the full stomach and feeling of satisfaction.
So, grand total we're paying in interest every month? $554.20.
Your turn. Go on and figure this out, exactly -- no guessing or assuming. Be honest with yourself -- you deserve that much. Go on, do your calculations. I'll wait ...
Good. Now that you've done that, it's time for the painful step -- put it into terms you can understand.
I just got my paycheck from church for being music director, and after taxes (and all those fun government fees) and other deductions, I got $557.55. What does that mean? It means that for the first two weeks of this year, I kept our church's music ministries alive, attended meetings, worked with soloists and groups, networked, tried to recruit people to the choir, selected music, practiced, performed -- and ended up with only $3.35. Nearly one whole paycheck went just to interest! It's even worse if I had chosen to use my paycheck from being a school librarian -- the interest would have swallowed one of those checks whole and still been hungry!
This then, my friends, is why my wife and I are so very anxious to get out of debt. Right now, I'm spending twenty-four weeks of the year working one of my jobs, just to pay the interest on our loans; I have to work even longer to pay the actual required payment with principal and interest (just over 34 weeks). This journey then is not just about money -- it's about freedom: the loans disappear, and so does this form of monetary bondage.
I urge you to try this for yourself, and then if you're so inclined, share your results with us in the comments section.
Friday, January 15, 2010
The Great Pantry Experiment, day 15
Fifteen days in, and we just finished off our second of three meals of pumpkin pancakes. This experiment has given us some very interesting new meals, and there's still plenty of food in the pantry and freezer. We made another stop at the grocery tonight and got the following:
4 avocados -- $4.00
1 bag of carrots -- $1.00
2 bags of salad -- $2.00
1 bag of potatoes -- $1.00
2 loaves of bread -- $2.00
1 bag of flour -- $1.74
1 bag of soup crackers -- $0.00
Total -- $11.74
Experiment total -- $22.57
Well, they were having a special -- 10 items for $10, and get the 11th item free, so we took the crackers free since we've got some soup meals coming up. We also got a few other non-grocery items (trash bags, deodorant, face lotion, and wet wipes for wiping down the cats' litter box). With the purchase tonight, we won't have to buy fruit, yogurt, or bread until February. It would have been nice to have that total be a little lower, but it still is far less than we usually would have spent on groceries in this same amount of time.
Also on the good news front, you can see that our debt amount dropped by around $500 or so between both the mortgage and student loans. There's another $210 which is wending its way through cyberspace to attack the mortgage, and another $556 or so will be following first thing next week. Chipping away at these loans in these small couple-hundred-dollar increments can sometimes make it feel like the loans will never go away completely, but deep down I know that this is the right way to get it done. I'm just anticipating the day when I can triumphantly announce here that we've payed off our first $5,000, our first $10,000.
So, for now, we'll celebrate passing the $3,300-paid-off mark, and look forward to more milestones in the near future. Anyone out there have some milestone, some accomplishment they want to share? By all means, post it in the comments section below and let us all share in your happiness!
4 avocados -- $4.00
1 bag of carrots -- $1.00
2 bags of salad -- $2.00
1 bag of potatoes -- $1.00
2 loaves of bread -- $2.00
1 bag of flour -- $1.74
1 bag of soup crackers -- $0.00
Total -- $11.74
Experiment total -- $22.57
Well, they were having a special -- 10 items for $10, and get the 11th item free, so we took the crackers free since we've got some soup meals coming up. We also got a few other non-grocery items (trash bags, deodorant, face lotion, and wet wipes for wiping down the cats' litter box). With the purchase tonight, we won't have to buy fruit, yogurt, or bread until February. It would have been nice to have that total be a little lower, but it still is far less than we usually would have spent on groceries in this same amount of time.
Also on the good news front, you can see that our debt amount dropped by around $500 or so between both the mortgage and student loans. There's another $210 which is wending its way through cyberspace to attack the mortgage, and another $556 or so will be following first thing next week. Chipping away at these loans in these small couple-hundred-dollar increments can sometimes make it feel like the loans will never go away completely, but deep down I know that this is the right way to get it done. I'm just anticipating the day when I can triumphantly announce here that we've payed off our first $5,000, our first $10,000.
So, for now, we'll celebrate passing the $3,300-paid-off mark, and look forward to more milestones in the near future. Anyone out there have some milestone, some accomplishment they want to share? By all means, post it in the comments section below and let us all share in your happiness!
Wednesday, January 13, 2010
How to Pay Off $125,000
One of our friends who follows the blog asked us a question today:
First, let me address the questions a little bit. First, we're not quite two months into our little (large) "experiment" -- we're actually 47 days, so if, as you say, we ought to be paying off $3100 each month to do it evenly, we should only have about $4900 paid off. Granted, we're still behind by that reckoning, but not as bad as we could be.
Second, the past couple of weeks have been a low time for our income. Most of the extra money we're putting toward the mortgage comes from my income -- private lessons, hours working in the school library, and being music director at church. For the weeks before and after Christmas, I taught no lessons, so there was no money coming in. Ditto my hours at school.
Third (actually part of "second", but I'll put it separately), our income is not consistent, and therefore, we won't be paying off the loans "evenly". Parts of our income are very consistent -- my wife's paycheck from school, my paycheck from church. Those monies primarily take care of our regular monthly expenses. It's the inconsistent monies -- my private lessons, hours at school, royalty checks from my compositions, and other random monies which always seem to just appear when we least expect them -- which will be doing the lion's share of paying off the debt. The timing of these monies determines when and how much gets paid off. For example, I'm expecting a royalty check before the end of the month, which will (hopefully) let us take another thousand or so off the loans.
Fourth, as we pay down more of the principal on both loans, more of the regular monthly payment will go toward paying off even more principal instead of paying more interest. That means that as we near the finish line, the principal should be decreasing ever faster.
Fifth -- and this is the biggie -- a large part of this is going on faith. The numbers all look good in my spreadsheets, but spreadsheets aren't real life. I can attempt to account for any unforeseen expenses which might arrive, but life has a way of throwing a wrench into things. By the same token, I can't account for any unforeseen income which may appear out of nowhere. I wouldn't put much faith in such things if I hadn't seen them happen to us over and over. The very nice income I get for being music director at church appeared completely out of nowhere just over a year ago. New piano students come on board all the time. My royalty checks for my composing usually manage to exceed my expectations. In short -- while the spreadsheets say it will all happen, that's no guarantee, so we're still going on faith that it all will work out.
Now, I'm always looking for ways to improve my plan, so if you see any gaping holes or potential problems -- or even things you agree with wholeheartedly -- please let me know in the comments section.
I divided the amount of debt you have by 40 months, and figure you have to retire about $3100 each month if you were to do it evenly. You're almost two months into your project, so I thought you'd have almost $6000 gone by now, but you have a different approach. How exactly is your plan working, like I wonder if you're going to be getting rid of huge chunks of debt in a couple of months?Excellent question. I'll do the best I can to answer, and hope it will satisfy.
First, let me address the questions a little bit. First, we're not quite two months into our little (large) "experiment" -- we're actually 47 days, so if, as you say, we ought to be paying off $3100 each month to do it evenly, we should only have about $4900 paid off. Granted, we're still behind by that reckoning, but not as bad as we could be.
Second, the past couple of weeks have been a low time for our income. Most of the extra money we're putting toward the mortgage comes from my income -- private lessons, hours working in the school library, and being music director at church. For the weeks before and after Christmas, I taught no lessons, so there was no money coming in. Ditto my hours at school.
Third (actually part of "second", but I'll put it separately), our income is not consistent, and therefore, we won't be paying off the loans "evenly". Parts of our income are very consistent -- my wife's paycheck from school, my paycheck from church. Those monies primarily take care of our regular monthly expenses. It's the inconsistent monies -- my private lessons, hours at school, royalty checks from my compositions, and other random monies which always seem to just appear when we least expect them -- which will be doing the lion's share of paying off the debt. The timing of these monies determines when and how much gets paid off. For example, I'm expecting a royalty check before the end of the month, which will (hopefully) let us take another thousand or so off the loans.
Fourth, as we pay down more of the principal on both loans, more of the regular monthly payment will go toward paying off even more principal instead of paying more interest. That means that as we near the finish line, the principal should be decreasing ever faster.
Fifth -- and this is the biggie -- a large part of this is going on faith. The numbers all look good in my spreadsheets, but spreadsheets aren't real life. I can attempt to account for any unforeseen expenses which might arrive, but life has a way of throwing a wrench into things. By the same token, I can't account for any unforeseen income which may appear out of nowhere. I wouldn't put much faith in such things if I hadn't seen them happen to us over and over. The very nice income I get for being music director at church appeared completely out of nowhere just over a year ago. New piano students come on board all the time. My royalty checks for my composing usually manage to exceed my expectations. In short -- while the spreadsheets say it will all happen, that's no guarantee, so we're still going on faith that it all will work out.
Now, I'm always looking for ways to improve my plan, so if you see any gaping holes or potential problems -- or even things you agree with wholeheartedly -- please let me know in the comments section.
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