Debt Status, as of 12/20/09

STUDENT LOANS ($49,742):

#1 - $ 0

#2 - $ 995

#3 - $ 24,160

#4 - $ 24,587

AUTO LOANS ($14,003):

#1 - $ 4,334

#2 - $ 9,669

CREDIT CARDS ($20,270):

#1 - $ 0 (I pay this card in full each month)

#2 - $ 755 (Planning to pay $150 at end of month)

#2b - $1021

#3 - $ 5,000 (Planning to pay $2500 at end of month)

#4 - $ 13,494

Loan Strategy

My first priority is paying off our credit card debt. It's the biggest monthly burden, drags down our credit scores, is viewed negatively by insurance companies and lenders, and causes the most angst (especially when the credit card companies change the repayment terms by adjusting interest rates and hiking minimum payments!).

But when the credit cards are gone, we'll have to decide what to tackle next. Aside from car loans, the major debts would be student loans and the mortgages. We have two student loans, each with about $25k owed, our second mortgage at around $27k, and our first mortgage at approximately $138k. I'm not going to even think twice about the primary mortgage, but the other three are all on my list of things to pay off quickly and ahead of schedule.

The student loans are on a 20-year repayment plan, with nearly 16 years left. The interest rates are pretty low, around 3.5% (fixed). They're through the federal government, and Hubby & I each have our own. If we are tight on money, we can easily put either or both into hardship deferral without any negative consequences. Student loan interest is tax-deductible for both state and federal income taxes. And if one of us dies, that person's loan is forgiven - I wouldn't be stuck paying off his, or vice versa. The down side is that if we were ever to declare bankruptcy, the student loans cannot be discharged.

The second mortgage is a 15-year balloon at just under 10% (fixed). We have 11.5 years left of payments, at which point we'd either have to pay a lump-sum (I think of approximately $20k), or we'd have to refinance and roll in the remainder. The mortgage interest we pay is tax deductible for federal income tax, but only if we itemize (which is highly likely for at least the next 5 years, and quite possibly longer). We would be able to eliminate this debt if we declare bankruptcy or gave the house back to the bank, and could get away paying pennies on the dollar if we did a short-sale.

Although this is one of those situations where Dave Ramsey recommends paying the student loans first, because the outstanding balance on each loan is smaller, I really can't convince myself of the wisdom in that. Pretty much every way I see it, paying off the second mortgage before the student loans makes infinitely more sense.

Great News from Work

Not only was my bonus slightly larger than I'd hoped for ($1200 after taxes), but I also received a 1.9% raise. In this economy, I thought that was pretty darn good!

My boss also just told me that I will be able to get at least partially reimbursed for a review course that I'll be taking in the spring. It's something I wanted to take, it's entirely optional, and most of the other people at our company who have taken it have paid for it out of pocket, so I was not expecting to get any reimbursement for it. But I figured I didn't have anything to lose by asking, and I ended up being pleasantly surprised!

The course is $600 for non-members, or $525 for members (including the first year's membership fee).

I signed up for the latter, figuring it was worth it to save $75 and then I just won't renew my membership after it expires. Because of company policy, I won't be able to get the $55 membership fee reimbursed, but I will likely get either half or all of the $470 balance back.

Christmas Gifts

We are buying gifts for a short list of immediate family members only - six people in all.  My original goal was to spend less than $100 on Christmas gifts this year. Hubby & I hadn't planned to buy anything for each other. 

I decided to splurge on something that I know he's been wanting, and spent $300. I think he'll be pleasantly surprised, but it is rather pricey. 

We'd purchased a gift for Hubby's father a few months ago, but his sister suggested going in on a gift for his parents. We can use the gift we purchased for another occasion, perhaps Father's Day, but it'll mean more money right now. We're still waiting on the final dollar amount, but it'll be somewhere in the $30-50 range. 

I found several items for my mom and sister, and was able to match up some coupons with sales. I ended up buying a few extra things (some of which I'll put away for a later date), but it cost $60. 

I still need to find something for my dad and for my brother-in-law. I can get something fairly inexpensive for BIL, but it'll be a bit harder for my dad. I want to get something that he'll enjoy, and it'll mean spending more than budgeted (but would at least be consistent with what we've spent on other family). 

Raises & Bonuses

We recently had a staff meeting where it was announced that end-of-year raises and bonuses will be given out within the next few weeks. 

Raises will be small, most being around 1%, and with a maximum of 2% being awarded to "exceptional" employees. But with most of my friends and family (including my husband) receiving pay cuts or a pay freeze, even a slight increase is quite welcome! 

And the best news is that the company has decided to still give out bonuses. Optimistically, I'm hoping for $1000 in after-tax money, which would be more than I've received in years past... but hey, I'll take whatever I can get :) 

A new credit card

Hubby recently went on vacation, charging $750 to his credit card. He covered someone else's expenses for part of the trip, and bought a few things beforehand that he didn't end up using, so the total cost will come out to about $500 after returns & reimbursements. 

And since he was spending money, I decided that I should too. I went shopping at Kohl's and picked out some new clothes for myself. The in-store radio kept playing ads trying to convince people to take out a store charge card to save 10%... and I normally don't cave. In fact, until then, I had never taken out or even applied for a store card.

But Kohl's sends out monthly discount coupons to its cardholders, good on full-price AND sale items, and I want some. The card doesn't have any monthly fees, and I plan to pay in full every month anyway, so it's sort of a win-win for me. I also don't anticipate taking out any new credit lines anytime even remotely soon, and I only have one card with a balance (and that'll be paid off in the next 4 months), so I should be able to handle any minor credit score ding caused by opening a new card.

They gave me a 15% discount, and a $1000 credit limit. Woohoo! 

Health Insurance Costs

Both of us are fortunate enough to be able to get group health insurance through our employers, and we've been able to pick from a variety of options each year. 

We just found out that, for the upcoming year, the cost will be increasing yet again while benefits will decrease. If we want to stay with the same carrier, we will need to pay $750/year more for the two of us, and $1000/year more if we need to upgrade to a "family" plan. 

We can switch insurance companies and our out-of-pocket cost won't change, but I'm hesitant to chance because the new company is one that I've never really heard of. I looked online and it appears to be a national company, and a pretty big one, but it's not that commonplace in this area. 

We have a HMO plan, where we have to see our primary care physician and get referrals for everything, and it seems to work well enough for us. Both of our doctors can get us in for appointments in a reasonable amount of time, and they accept several different insurances. 

New furnace?

I've been thinking about replacing our furnace & air conditioning unit next year, in 2010.  Although ours aren't that old (they are currently 11 years old), they are low-efficiency and result in much higher gas & electric bills than we should have for such a small house. 

The federal energy efficiency tax credits will reimburse us 30% of the cost, up to $1500, for a high-efficiency replacement furnace & AC unit.  I'm not sure how much a new unit will cost, but I would imagine it would be in the $5000 range.

Trying to Make More Money

I've been tossing around a few ideas to earn some extra money. While working overtime at my job is the easiest (and probably the most profitable & least risky) way, it's rather unreliable. My bosses generally dictate whether I'm allowed to work overtime or not, and that's based on company workload. 

A few retail stores around here are actually starting to post for seasonal jobs, for the upcoming holiday season, but it really doesn't seem worthwhile. If I can even find somewhere to hire me (which is a big if, since I already have a full-time job with set hours), I'd have to give up my nights and/or weekends for probably $8/hour. My overtime pay is more than triple that! 

So I'd really like something more flexible, that I can just pick up and work on whenever I feel like it - so that if overtime is available, I won't have to turn it down to "get to my other job" (and when overtime is mandatory, I won't have to worry about getting fired from my other job!). 

I have a few hobbies that I'd like to take to the next level, and perhaps start turning them into a small Etsy shop. I enjoy working with textiles (yarn, thread, fabric) - but I'd have to put more effort into making things that would have more mass-appeal (more neutral colors & patterns). I also love photography, and have some ideas to start selling some specialized/custom items. 

Maybe this afternoon I'll have to put some time into business-development, and see if any of these ideas could actually be feasible (and profitable!)

Debt Status, as of 10/23/09

STUDENT LOANS ($50,048):  

#1 -  $ 0 

#2 - $ 1106

#3 -  $ 24,355

#4 - $ 24,587

AUTO LOANS ($15,464): 

#1 - $ 5,195

#2 -  $ 10,269

 

CREDIT CARDS ($21,733): 

#1 -  $ 47 (I pay this card in full each month)

#2 -  $ 870

#3 -  $ 6,000

#4 -  $ 14,816

Some Extra Income

I've had a busy few weeks at work, so my next couple paychecks should be a bit higher than usual. Because I've been working longer hours to finish up on some projects, I've also been getting home rather late... leaving less time to shop for sales on groceries, to pack my lunch, and to cook dinner. We've been eating meals out a bit more than usual - I've gone out for coffee every morning and lunch everyday this week! 

Even so, I should definitely come out ahead. I'm expecting Friday's paycheck to be about $250 more than usual, and the following paycheck (in another two weeks) will be about the same. I will also have a mileage reimbursement check coming in a month or so, and that'll be about $250 (with about $100 of that being actual out-of-pocket expenses for extra fuel). 

It's perfect timing and will help take the bite out of the auto insurance and quarterly sewer bills... 

Employer Education Assistance

We received a notice today that additional taxes will be withheld for the next three months, approximately $300/mo. 

My husband's employer has provided a great deal of education assistance this year, but the amount they've contributed has exceeded the federal tax-free limit of $5250. Any amount over that is subject to tax, and so they are going to estimate the tax and then split it equally between the remaining 2009 paychecks. 

We're already pretty tight financially right now, especially since we're having the $275/mo extra withheld to cover self-employment taxes, the $500/mo increase in minimum credit card payments (effective since August), and the auto insurance renewals ($500 in Oct & another $400 in Nov)... losing an extra $300 would be really tough! 

We'd possibly have to dig in to the emergency fund to cover the shortage for the time being. We'll have to adjust our withholdings, perhaps by stopping the extra withholdings on the self-employment money, and then just take care of it when we go to file our taxes in the spring. 

It's a juggling act. We need money to pay our bills now, and we should be in a better financial position in the spring, but the economy is still rather precarious - so who knows if we'll even still have our jobs then. But at the same time, I don't want to withhold too little now and end up having to pay penalty & interest when we file our taxes.  

I think we'll be able to get most of it back when we do our tax returns, so I really need to find out more information on the tax implications of employer-provided education assistance. I'm hoping that we can claim a tax deduction for some of the tuition and fees that the employer paid (only the amount in excess of $5250, so just what we're getting taxed on). 

Income vs. Net Worth

Yesterday afternoon, while my sister was visiting, the subject of debt/net worth came up. I mentioned that we had a negative net worth, and she couldn't figure out why- by her reasoning, I make far more than her and her boyfriend combined, plus we have a second full income... so Hubby & I make about 4X what they do.

Not counting the money we've sunk into repairs and improvements (about $30k over the past 3 years), we've lost quite a bit on the house due to fallen property values... around 20-25% from what the purchase price. The house has dropped over $40k in value, and we're currently upside-down on the mortgage by $25k. Our monthly mortgage & utility payments are roughly four times greater than their monthly rent & utilities... so having a higher income hasn't really helped to give us a greater net worth in that area.

We owe over $50k in student loans currently, all locked in at low interest rates. Since we have so much other debt, it's not worth paying this off quickly - but it's a huge hit on our net worth. By comparison, they have less than $10k in loans... though they're still in school, and that balance is rapidly growing (while ours is slowly decreasing). We are paying on three out of four of our student loans, whereas theirs are all deferred right now.

We have two newer vehicles that we're making monthly car payments on, costing us nearly $800/mo. Since we have loans on both vehicles, we also are required to carry full coverage auto insurance, which adds about $100/mo in expense (solely for collision & comprehensive) - we'd still have to pay at least for basic liability if the cars were paid off. They own both of their vehicles outright, saving them on monthly payments and on insurance, but their cars are high-mileage and have numerous mechanical problems. They both function reasonably well, but I certainly wouldn't feel comfortable relying on either vehicle to get me to/from work daily, at least not without several thousand in repairs and maintenance.

And finally, we have far more consumer debt. It's down quite a bit from it's all-time high, but we still owe over $24k. Our minimum monthly payments are currently over $900/mo. By contrast, they owe less than $5k in credit card debt, and are seriously delinquent on it. They're planning to save up some money and offer the credit card companies a settlement for about 50% of the original balance (before all the late-fees, over-limit fees, and interest were tacked on). If they can convince the card companies to take it, they'll pay less than $1500... but in the meantime, they aren't paying a dime.

Google Ad-Sense

When I started this blog, I debated whether to put ads on the site or not. This is meant to be my personal-finance/money-stuff blog, and not a "business", but I've always been curious about how much money I'd be able to make off ads. 

With just the side-bar of ads, through the Google Ad-Sense program, I've earned $16.84 so far. I've had 800 page impressions on this site, and only 8 "clicks" on the ads (so a 1% conversion rate).  While I'd love to start earning a decent amount from ads each month, to provide a small but steady stream of extra income, it certainly isn't going to happen from this blog! 

I earned absolutely nothing during the entire month of September, and I haven't earned anything so far for October either. It seems like the amount they pay for page views is nothing (or practically nothing), but that the amount they pay for "clicks" on ads is pretty decent. 

Most of my ads appear to be related to debt-elimination (not a big surprise, since most of my blog entries discuss credit cards and debt), and it seems like most people who would read this blog are smart enough to avoid most debt-counseling or debt-consolidation services. Based on other articles I've read, it seems like websites with very specific uncommon subject matters earn much more revenue (especially hobby sites and adult-type sites). 

I guess if I really want to earn money from ads, I should set up some weird fetish website or something...  (kidding!) 

Unmotivated to Save

I haven't been feeling very motivated to write lately. Money is still a bit tighter than I would like, and we've continued to splurge on (small) items. 

The car insurance bill for our second vehicle arrived today. Six months ago, it was $320. This time around, it's just shy of $400. That's a HUGE increase, percentage-wise. A state-mandated increase accounted for a small portion of it, but the rest was just due to the insurance company hiking premiums (our credit scores haven't changed, we haven't had any tickets or accidents, etc.). Between both vehicles, we've had to pay $150 extra this month... and that's going to be a recurring charge, every six months. For now, we're just going to pay the bill - but Hubby is going to shop around to a few other places and see if we can bring the bill back down to something more reasonable. 

We went out for a nice dinner last night, $52. Then we stopped for dessert afterwards, $15. 

Today we went bowling and then out for pizza, $30. We also picked up a new pair of bowling shoes on clearance for me, $22. Hubby is still deciding which pair of shoes he likes best, but his will likely be around $50, since they didn't have any of his size on clearance. Even so, at $3 to rent bowling shoes, it definitely makes sense to own rather then rent (and if you ask me, the concept of renting shoes is just rather gross). 

Feeling broke

For quite awhile, it seemed like I was able to put nearly $1000 towards paying down the principal on my credit cards. But lately I just haven't been able to get much traction. 

With my husband's credit card payment nearly tripling in August, and our monthly take-home decreasing by $275/mo in July, we haven't had nearly as much wiggle room in our budget. Our income is down due to surgery and minor illnesses. And we've also spent quite a bit on home repairs & improvements. 

Last month I was only able to make the minimum payment on my credit card, a measly $98... it was no fun to update my tracking spreadsheet and see the balance only decrease by $60, when it usually drops several hundred dollars. 

This month it'll be more of the same. With some upcoming & recent social events, we're spending quite a bit on gifts for others. Auto insurance renewal will eat an extra $500. Next month we have insurance renewal for our other vehicle, quarterly water/sewer bill, and the start of our holiday gift shopping. 

Upcoming Parties

The next few weeks are filled with social events. We've got a housewarming party tomorrow, and a small birthday gathering on Sunday. Later in the month, I've got a bachelorette party to attend, and then a wedding later that same weekend. 

I've purchased a small item for the wedding, and I'll probably end up buying the rest off their registry. I'm leaning towards not bringing a gift for the bachelorette party, since it's just a small group of people going out drinking. 

I have no clue what to buy for a housewarming gift that's nice yet inexpensive - we never had a housewarming party when we moved in, and none of our friends (or extended family) brought us any gifts. I know there's always a bottle of wine or houseplants, but I wanted something other than those. 

Good news!

Last fall, when we were going through open enrollment for insurance (through work) for the 2009 calendar year, we decided to put about $500 of pre-tax income into a medical flex spending account (FSA). We estimated it based on the cost of our regular (recurring) monthly prescription co-pays and over-the-counter medicines, doctor/dentist/optometrist co-pays, plus a little bit extra to cover any additional expenses. 

We haven't had any visits to urgent care or the emergency room this year, but we did get stuck with almost $400 worth of physical therapy co-pays that we weren't expecting at the time we signed up for insurance & the FSA. 

It turns out that the information we initially received about the various insurance plans had indicated that physical therapy was supposed to be completely covered - with no copay. When we inquired about it, they found out pretty quickly that it was an error on the employer's informational packets. After months of back & forth on what could be done, they finally told us that they would deposit an extra $375 into our FSA to cover the error.  

We still owe $270 (it hasn't been billed yet, but we know it's coming), so this will cover that and also reimburse us for what we've already paid. 

Since FSA's are a "use it or lose it" account, we'll have to pay careful attention to the balance to make sure that we maximize every cent! We still have several prescriptions and over-the-counter medications to buy to cover us for the next few months, but I think we'll end up with $50-100 left... so I think one of us will be able to get a new set of glasses at Christmas!  :)  

Car Insurance

Car insurance in Michigan tends to be rather expensive, in large part because it's a no-fault state. 

The "Catastrophic Claims Premium" (a mandatory state-wide fee on all auto insurance policies), which covers unlimited lifetime medical benefits for those seriously injured in car crashes, was increased by $20/vehicle/year.  

And general rates increased as well, for a plethora of unknown reasons (insurance risk score, credit score, regional score, etc). My 6-month premium, which had been about $450, increased to just shy of $500. 

I've also been thinking about adding underinsured motorist coverage to our policy, so that if we're injured by someone else who just carries the minimum, we would be entitled to recoup damages from our own policy. I'm not sure how much that will cost, but since so many people in the area have cut back the liability limits on their policies to save money (or cancelled insurance altogether, albeit illegally), it worries me that we could get into a serious accident and then only be able to recoup the equivalent of a few months' salary... 

Homes are Expensive

We had to pick up a few items at Home Depot to continue working on some home repairs. A new circular saw blade, a pair of sawhorses, an extra-long drill bit, can of spray-primer & spray-paint, and a few sheets of OSB. We got to checkout and the total was $99 plus change. 

I don't think twice about dropping $100 at the hardware store, but I almost always cringe at the idea of spending $20 for a pair of pants or top. It's truly unbelievable the amount of money that we've put into repairs & renovations, and the amount of money that we're "hoping" to put in over the next year or so. 

As much as I'd like to renovate and redecorate everything to my taste, it's temping to just stop putting money into any non-essential repairs, and instead use all of it for fun stuff. Clothes, hobbies, vacations. 

Threw out the budget

I only had to work a half day last Friday, which started the weekend on an expensive note. Not only did I have to give up a few extra hours of pay to leave early, but then Hubby & I headed out to my favorite restaurant for a late-lunch ($29). We also ventured to Home Depot to pick up a few necessary supplies ($44). 

Then a friend came over to visit, and we treated her to dinner ($25). We went shopping on Saturday, and I bought some crafting supplies ($21). I'd hoped to spend about $25 total for dinner & shopping, but wasn't too bad. 

The trouble really started on Sunday though, after she left. Hubby & I decided to spend the day relaxing, and went out for lunch downtown ($18). We bought some new window treatments ($65), and we decided to buy something else ($800). 

The damage, $1002. It'll take a month or two to pay that credit card off, and I'll only be able to make minimum payments on my other credit card for the interim. I don't think it'll be possible to pay off my cards by the end of the calendar year... 

Planning Ahead

I try to create a rough budget ahead about a year out for non-ordinary expenses, and about two years out for other major interruptions to cash-flow. 

Right now I'm hoping to completely remodel the kitchen next summer, and hopefully take care another big outdoor project. We'd also like to take a weeklong vacation, where we can stay at decent hotels and eat at nice restaurants and not worry about sticking to a meager budget. And of course there are a couple weddings that I'm in, which will require me to host or help host bridal showers and bachelorette parties. 

Initially I figured that we could afford to tackle both renovation projects, saving and paying cash as we go. With the vacation, the weddings, and a few other expenditures in the works, I don't think we'll be able to save enough to cash-flow it. 

I can't believe I'm writing this, but I'm already thinking about going ahead with both projects anyways and just putting it on the credit card. My card will be paid off completely by then, and Husband's card will probably be in the $6-8k range. We'd probably be able to save enough to pay off whatever was charged by early 2011 (six months or so later), so the interest accrued wouldn't be too bad. 

I want these projects to be complete, and I hate to delay them until the following summer (two years from now). We've talked about changing jobs and moving elsewhere, and having these projects complete would make it much easier to sell the house. We've also talked about starting a family, and I would want these things to be done before then. 

A Raise - or Not

As I'd mentioned previously, my husband won't be getting a raise for the upcoming year. We were originally hoping that the salary freeze was temporary, perhaps only a few months - but we found out that it will stay in place for an entire year. 

Unfortunately, we also just received notice that only a nominal raise is anticipated for next year, probably around 1%. I guess I shouldn't complain much, since it's better than nothing, but 1% seems like such a tiny amount. Increases in the cost of living due to inflation are surely going to outpace that! 

Unless we can free up more money by paying off debt, we're going to have to make some big decisions about our budget. Best case scenario, it'll take us at least 4 years to pay off the credit cards, auto loans, and student loans. But we'd like to buy a bigger home, and start a family - both things that will divert a significant amount of money from our debt snowball. 

Sometimes it feels like all this debt is never going to be gone.

Falling Short for Sept

Although I paid off one of the student loans this month, I'm going to be at least a couple hundred dollars short by the end of the month.

My checking account, after tomorrow's paycheck gets deposited, will have $1725.

BUT:

• I still need to pay my car payment, $350.
• My revolving balance credit card (the one I use for groceries/gas/etc, then PIF each month) is currently at $401.
• I'll need $100-150 for groceries & gas to last the rest of the month.

Assuming that I don't eat out, or buy anything else, that leaves only ~$850 to apply towards outstanding credit card balances this month. Realistically, I'll spend at least another $100 on random purchases for the house and for entertainment, leaving only $750.

I had hoped to pay at least $1000!

Student Loan: 1 gone, 3 to go...

I submitted an e-payment for $1339.35 today, which is the outstanding balance on one of my student loans. It'll be a few days before the payment clears, but it feels GREAT to be done with that loan. 

I took it out to help pay for my summer classes during my last year of school. I had maxed out the "regular" federal student loans, most of my scholarships wouldn't cover summer classes, but I wanted to get my degree done as soon as possible. 

The original loan amount was $2500, at 5% interest rate. 

The minimum payments were due quarterly, and were $120 every 3 months. 

And now they're gone!  :) 

Wedding Bells

For those in the mid-20s age range, it seems like every year is filled with weddings and baby showers. It looks like 2010 is going to be the year of weddings... another person just called tonight to announce their new engagement. 

I'd planned on being able to set aside some money next year towards major home repairs & renovations, to the tune of about $15,000. 

With these upcoming weddings, I think we might have to scale that back and only tackle one of the planned projects. Of the weddings that I'm aware of, I'm expecting that I'll be in the bridal party for at least two of them... and costing us a significant chunk of change for each! 

Bridesmaid's dress ($150). Bridesmaid shoes & accessories ($75). Dress alterations ($150). Up-do hairstyle ($50-75). Possibly nails (?). Bridal shower. Bridal shower gift. Bachelorette party. Wedding gift. Hotel accommodations for wedding night. 

Based on previous weddings that I've been in, the cost has been about $1000 *PLUS* the wedding gift. Yikes! 

Pay cuts?

One of the union's at my husband's employer is currently under contract negotiations. They're arguing over a variety of issues, with insurance and salaries being some of the major items. The employer wants to freeze wages, and the unions of course are protesting.

It's very frustrating because my husband isn't a union employee, and has already had his wages frozen indefinitely. And right now, I'm grateful that we both still have jobs, and that we haven't been forced to take any pay cuts... but if the union is able to secure a raise for its members, it sort of makes me want our jobs to become unionized. I don't really like most labor unions nowadays, but it sucks if union members get a raise and nobody else does.

The worst part is that if they get a raise, then the employer will likely be forced to lay off other non-union employees, and/or to enact pay cuts for non-union employees, just to meet their operating budget. And THAT would really suck.

I think, at least given his current position, a layoff is pretty unlikely. I'm not sure whether we should be anticipating a paycut, when it would happen, or how much it would be... which makes it rather tough to plan and budget for!

Student Loans

Last night I spoke to my sister, who recently enrolled as a full-time undergrad student. She was able to secure a very small grant to help cover expenses, but also had to take out additional student loans. She debated for awhile how much to take out - enough to cover tuition & fees only, all education-related expenses (textbooks, etc.), or enough to cover some of her living expenses as well (she's off-campus, so it would include rent, utilities, food, and vehicle expenses). She ended up taking out the maximum allowable loan, to make sure that she'll be able to cover her bills.

I'm sort of conflicted on this. I don't have a problem with student loans, so long as the amount is reasonable and you anticipate being able to pay it off. I took out about $29,000 in loans for my undergraduate degree. On a 20-year repayment plan, my monthly payments are $200/mo right now, and will drop to $160/mo in three more years (if I paid according to the schedule). I was pretty lucky in that the interest rates on federal loans was significantly lower than they are now (about half!). It doesn't seem like much, but when the total loan amount is more than a new car, and it's over 10 or 20 years, that's huge!

I looked up the maximum amounts in federal student loans that she'll be eligible to take over the next few years, and based on those numbers I'm guessing that she'll end up taking out about $35,000 to $40,000 by the time she graduates. Based on a loan amount of $35k, on a 20-year repayment plan, she'll owe $250/mo in minimum monthly payments... and on a 10-yr plan, it'll be $382/mo.

If she graduates, gets a job in the field, and continues to work for several years, it's totally worth while... she'll make up that amount in higher wages within a few years. But if she can't find a job, or decides to do something else instead, that's a lot of money to owe.

It sucks to have to take out loans that are almost double the tuition bill, just to cover living expenses and basic necessities, but it's almost a requirement. You can't really make it through school as a full-time student when you have to work full-time in addition... and you need a place to live & food to eat. I don't want to encourage her to take out more in loans than she truly needs, because it's so easy to break into the piggy bank and use it for "fun" stuff (been there, done that!) - but I definitely understand what it's like to have to project out 5 mo's worth of expenses & anticipated income and then guess at how much in loans you'll need to cover the deficit.

Baby Step #2

I don't adhere to the Dave Ramsey plan, as I've mentioned before. I'm too much of a numbers girl, and the thought of paying off smaller debts without taking into consideration interest rates just bothers me too much. For many of the credit card debts, the lowest balances were the highest interest rates (due to several sizable balance transfers with low fixed rate offers). I understand his rationale, that it's more a psychological thing, and that if you're paying off debt quickly the difference in interest is nominal... but if you have a lot of debt, even a nominal difference in interest can make a big difference. 

So far I've really only focused on paying off credit card debt. In July 2008, we hit our highest outstanding balance - a total of $48,749.15.   Today, a little over a year later, we're down to owing $22,926.12.

But Dave Ramsey's Baby Steps program calls for paying off more than just credit cards. He recommends in Baby Step #2, which comes after building a small $1000 emergency fund, listing and paying off debts smallest to largest (except for the mortgage). While I'm not following this plan, I'd ultimately like to get to the same end point and be debt-free. Here's what we would have to pay to get there: 

1. Student Loan #1: $   1,101
2. Student Loan #2: $  1,328
3. Car Loan #1:  $  6,054
   
4. Credit Card #1: $  6,500
5. Car Loan #2:  $10,852
   
6. Credit Card #2:   $16,288
7. Student Loan #4: $24,548
8. Student Loan #3: $24,587
   
9. 2nd Mortgage:  $26,428  (DR says to include it if it's less than 1/2 your annual income)

TOTAL, not counting 1st Mortgage:  $117,686

That's a big number, and makes the amount we've paid off so far seem so measly. I guess, to be fair, we've also paid off quite a bit on each of those other items that isn't included in the total (on the two vehicles we're paying off about $8500/yr in principal, and we're paying about $3000/year in principal on the student loans). 

Home Repairs & Improvements

It seems like quite a few PF bloggers put a halt on all home renovation & maintenance projects while they try to pay off debt. But not me. 

Maybe it's because I like to have several things going all at once, or because I know it'll be several years before we're debt-free and it's not worth it to me to wait that long, but I want to tackle home repairs just as aggressively as I tackle debt. Which, at times, means sort of a bumpy road, with months of absolutely no progress whatsoever.  ;)

I've got several projects in various stages of completion right now, and many that I'm hoping to finish before winter hits. And although I've purchased a significant portion of the necessary supplies, there will still be some expenses.

• Deck:  $200 in materials (estimated)
• Misc. Tool Rentals/Purchases:  $150 (estimated)
• New Gutters: $800 (estimated total cost)
• Landfill Disposal Fee (hazardous waste & construction debris): $150 
• Replace exterior door: $150 in materials (estimated)
• Re-caulk exterior: $100 in materials (estimated)

Right now I've got $1000 set aside in the home-repair fund, and $1550 in estimated upcoming expenses. If we are successful in completing everything before winter hits, it might delay being able to pay off "my" credit card by the end of the year. It would only push it back by a month or so, which is a tradeoff I'll happily make. 

2009 Debt Tracking

Here's an updated chart showing our progress on credit card debt for 2009, from January 1st through September 1st: 

Starting debts, as of 1/1/09: 

His (blue) - $22,227

Hers (pink) - $12,917

Business debt (not shown) - $4,202

TOTAL (green) - $39,346

Current debts, estimated as of 9/1/09: 

His (blue) - $16,426

Hers (pink) - $6,500

TOTAL (green) - $22,926

Extra Expenses

Husband had surgery earlier this week, so we've incurred quite a few extra expenses this week. It was an outpatient procedure, and had been planned for some time now. 

We had some out of town visitors come for the surgery, to offer support, so we bought dinner on the night of surgery. I ate at the hospital for lunch, and had planned to just grab a snack for dinner at home, but our guests were hungry and in a hurry. 

We had a few copays for prescription drugs, and Husband requested some personal care items and over-the-counter drugs to help him after surgery. He also asked for several "comfort" foods from the grocery store. 

I normally wouldn't have bought most of these items, or at the very least would have only bought them on sale and/or with coupons, but it was unusual circumstances and I wanted to do whatever possible to help him be more comfortable. I ended up spending nearly $100, between the groceries, prescriptions, and meals. 

Later in the week we went to the grocery store for more food, and spend another $50. We also ordered pizza ($25), and saw a movie ($20). 

We both took most of the week off, him for surgery and me to help him. This means that I haven't been able to work any overtime, so my pay will be less on the next paycheck. 

Shopping for Good Deals

For once I actually got up early and hit the stores to find some good deals. Our local Kmart was participating in the Super Double coupon promotion, where coupons for up to $2 will double. I picked up some lotion, cat treats, candles, oral hygiene products, and band-aids/gauze (about $30 worth in total) for $1.50

I hit up CVS for this week's freebies, more school supplies, some headphones, and mini first-aid kits. I also stopped off at the local grocery store to get some almost free air freshener (the sort that spray every so many minutes, for only $.29/ea - normally $12.99). I also picked up a few essentials, namely kitty litter and some stuff for the dog. 

Including the scoop of ice-cream that I stopped off for on the way, today's total was around $25. Not bad, and that leaves me with $25 left for other groceries for the rest of the week (and the pantry & fridge are pretty well-stocked right now). 

Of course, that says nothing about the $65 spent eating out this weekend. Or the $100+ at the home improvement superstore... 

Little things -

I had plans to go out to dinner with a friend tonight, and had made plans to have lunch out with a coworker tomorrow. I figured that it would be $15 for dinner, with tip, and another $7 for lunch tomorrow. 

My friend ended up picking up tonight's dinner tab, and my coworker asked if we could just bring lunch from home and eat together at the office instead. So that's $22 saved! 

I probably should have saved the $22, but instead I swung by the store to pick up a few items. Bottled water (we refill jugs at the store, so it's pretty cheap!), air freshener for my car (still trying to mask the spoiled milk odor!), and some containers for organizing shelves. 

I also found some jersey sheets on clearance for only $7, and picked up a set. I normally pay around $20-25, and had actually just bought some on sale a few weeks ago, but I couldn't resist such a great deal. My total ended up being $31, which I thought wasn't too bad... 

Pay off a student loan?

Both Husband and I each have multiple student loans, and we each have to pay two separate student loan payments. The biggest loans are federal Direct student loans, through the government. They're on 20-year repayment plans, so the monthly payments are fairly manageable. 

I only owe $1329 on my other loan (I think it was originally $2500). If I kept paying according to the schedule, I'd have almost three years left. My plan was to pay off my credit card first (currently $7400), and then pay off the smaller student loan - both by January 1st. 

I was thinking about taking either this or next month's credit card payment and instead just using it to pay off that loan instead. I'd still pay the minimum credit card payment, of course, but I could use the extra and pretty much get rid of that loan altogether. I don't think it'll make much difference overall (the credit card has a slightly higher interest rate, but in terms of actual interest paid it would be only $3 or so "extra" to pay off the loan vs. pay down the credit card). It might affect my credit score, but I would guess that would be ever so slight if at all. 

Are there any other considerations I'm missing? 

Electric Bill

August is shaping up to be a very hot month! So far we've had a few days in the 90s (with high humidity!), and the weather forecast is calling for temperatures in the 80s for at least the next week. 

We try to keep the A/C set around 75 during the summer, but with the humidity even 75 feels too hot... so we dialed it back to 73, which means the condenser is running practically nonstop for most of the day (and a good part of the night, to "catch up"). Makes me wonder how much our August electric bill will be. Our electric bill in June was only $47, and $115 in July. 

I had only budgeted $110 for August, so hopefully the weather will cool down some... 

College Costs

I've decided to quit grad school, for a variety of personal reasons. I feel a bit disappointed, but I think it's the best decision overall. Financially, not having to worry about two of us in college at the same time will be a huge relief. 

I had set aside $2000 for fall tuition, which would have been due mid-August. I've already paid $1100 of that straight to one of the credit cards, and plan to add the remaining $900 to this month's payment. 

For some reason, I hadn't thought about budgeting for tuition hikes (the fiscal year for most public universities changes on July 1st, with tuition increases being finalized at some point during the summer). The actual percent increase was just announced, and would have amounted to $120 extra for the upcoming term. Mid-year tuition increases are also possible, so the December tuition bill may have been even more. 

I knew I'd have to buy books, but I didn't budget that in either. Afterall, it's a nominal amount (at least, compared to the cost of tuition!)... and I figured I could pick up a used book online. Turns out that textbooks and course materials would have been about $150. 

I'd also have to increase the amount that I budget for gas, to cover the additional expense for commuting to class. At current gas prices (about $2.50/gal), that would be an increase of $60/mo. Plus the "cost" of wear & tear on my vehicle, of additional maintenance (oil changes, tires, etc). And our food budget would have to increase, because I won't have time to shop for all the best deals, and we'll undoubtedly end up buying more convenience foods or eating out. 

August - blown already!

Although it hasn't even been twelve hours since I posted our projected budget, we're already way over on miscellaneous spending. 

We spent most of the day working around the house, and so we ended up eating out for lunch ($20, Coney Island) and dinner ($10, Taco Bell). We went to Home Depot to pick up some replacement work gloves ($11), and also decided to browse around Lowe's. We did swing by the grocery store for a few other items ($21), but I'm considering that part of our regular grocery budget. 

I had a 10% off coupon for Lowe's, and we found a ton of stuff for around the house. Some lighting fixtures, bathroom exhaust fan, flowers/shrubbery, landscaping supplies. They had a great deal on some of the perennial flowers that I couldn't pass up, and we also decided to pick up some lights that we've been needing to replace for quite awhile. After the coupon, we spent $133. 

So in all, we spent almost $200 today... with only $21 having been budgeted. Oops! 

August Budget

Projected Income: 

Salary: $5971

Projected Expenses:

Mortgage: $1450

Electric: $150

Gas: $40

Cable/Web: $155

Cell Phones: $200

Groceries: $250

Car Payments: $792

Gas (for cars): $300

Student Loans: $281

Credit Cards: $2350

TOTAL: $5968

This will leave us only $3 of "wiggle" room for the month, so it's essentially a zero-based budget. I think we should be able to come in pretty close to the budget for August. I've included some assumed overtime pay in the income, but I think we might be able to scrounge up some extra (by selling items online). The minimum credit card payments are much less (around $1000/mo), so if we need extra money we can always reduce the amount we pay. 

Potential budget busters this month: we will probably go out to eat a few times, which isn't really accounted for, and I will need to pick up some miscellaneous items (clothing, school supplies, etc.). Home improvements/repairs are a constant item, though nothing (I hope!) is critical for this month. 

July Recap

July was a good month overall, because we had so much extra income coming in, but we also fell way short of our goals. 

I had hoped to finish out the month with $8000 in savings ($2000 for tuition, and $1000 for the upcoming home repair). The actual amount is only $7,615.75. 

We owe about $400 more on the credit cards than I'd planned on, pretty much all from the last-minute vacation. I had projected that the outstanding balance would be $25,600 and the actual amount is $26,028.49. 

Selling stuff

I listed some old textbooks (from last semester) for sale online several months ago, and only one sold right away. The other two listings actually expired after 60 days, and I had to relist them for sale. Both books sold this week, probably students trying to get good deals on textbooks for the upcoming fall term. One was $35, the other was only $15 - but hey, after shipping that's still an extra $40! 

I have a few other books laying around, and a few household items that we no longer need, so I think I'm going to spend a couple of hours this weekend listing those items on Amazon and Craigslist... hopefully I'll be able to make another $60 or so! 

Anniversary Gifts

I've been pondering over anniversary gift ideas for awhile now, and debating whether I should buy anything at all. We did just take a short trip, and we bought a few souvenirs for my husband (and I think he'd be happy counting those as an anniversary gift). 

But I do want him to do something special for me, and I'd feel too selfish if I expected that of him but didn't do something in return. He's hinted at a few things he'd like, but they're all in the $100-400 range, which is way more than I want to spend. I'd love to buy him the things that he really wants, but I'd much rather be that much closer to having the credit card debts paid off.

One of the items he's mentioned is a new wedding band. The one he wants retails for around $300 at the local jewelry stores, and is online for $100. I searched on eBay and found one that looks identical for only $25. Now that's definitely in my price range! 

The listing said that it's brand new, and that the metals are genuine. I'm a little dubious, because it seems too good to be true, but I know jewelry tends to be marked up quite heavily, so I guess it's possible. I'm just hoping that it arrives soon, and that it is what the listing claimed. I don't think I'll tell hubby how much I paid for it though! 

Grocery Shopping

I recently discovered that a few Kroger stores in the area double coupons up to $1 (most other Kroger's only double coupons up to 50 cents!), so I went there yesterday to see how well I could do. I don't usually like doing my "full" shopping at Kroger, because they do tend to be more expensive than several other local grocery stores, but I had a ton of $.75 and $1 coupons...  

Thanks to a large stack of coupons, many of which were going to expire soon anyways, I scored tons of free & really cheap stuff. The freebies included yogurt, toothpaste, air freshener, deodorant, pet snacks, and candy. I think I'm going to have to make a more conscious effort to set aside those $1 coupons, and then head up to Kroger every week or two!  

Vacation

I had optimistically budgeted only $300 for our mini-vacation. $100 for travel, $150 for food, and $50 for souvenirs and miscellaneous expenses. We definitely went over-budget, and ended up spending $450. 

A significant portion of the driving was on toll roads, at a cost of $25 each way. I had realized that there would be some tolls, but I definitely underestimated how much it would be. Pennsylvania is really expensive! 

We also ended up spending far more on souvenirs & miscellaneous things than originally planned. We spent $40 on books for the trip before we even left, and we spent about $120 while there. 

The only thing that we stayed on or under budget was food, and that's mostly because someone else picked up dinner one night, and we skipped lunch another day. 

Gas Bill

I logged in to check my email this morning, and found the monthly email from our gas company saying that our bill is now available (most of our bills & utilities have online accounts/e-pay, so we use that to cut down on paper waste and to save on postage). Our summer gas bill runs around $50/mo, with the absolute lowest being around $35 if we're really cutting back on showers & laundry.

July's gas bill: $16.86

At first I thought that perhaps they had estimated our usage for the month and managed to screw something up (we've had several problems with both the electric and gas companies doing that in the past, and then we end up with a bill that is $100-200 more than usual when the actual vs. estimated readings catch up). Turns out that they had estimated our bill last month, and they must have over-estimated our usage - so I'm thrilled.

It's only $35 saved, but after yesterday's realization that we're somehow $850 behind for the month, every little bit helps!

Property Values

We bought our current house at near the peak of housing prices. We settled on a purchase price around $180k, and felt that we had an ok deal. We made the mistake of getting too attached (and desperate to settle, after being unable to find something that met all our criteria but was still in our price range!), so we felt that we had overpaid slightly, but we made that tradeoff when we placed our final offer. 

Three years later, our house is valued somewhere around $145k, a drop of $35k (almost -20%). It means that we're upside-down on our mortgage, and we're pretty much locked in to a house that we can't afford to sell. We'd love to "move up" into a bigger nicer home, but we wouldn't be able to come up with the difference on what we owe, much less a down payment on the new house. So we're stuck where we are, and we're trying to make the best of it. 

Although the entire state has suffered some pretty significant drops in property values, I knew that where we live hasn't been hit as badly as others. For curiosity's sake, I decided to check and see how it's affected property values of some of our friends and family who live nearby. 

One couple we know paid $140k in 2003, and their house is now worth $120k (-14%).  Another couple paid $95k in 2004, and their house is now worth $45k (-47%). And yet another paid $265k in 2005, and their house is now worth $215k (-19%). 

It definitely sucks that values have dropped so much, but it's oddly reassuring to know that so many people we know are in the same situation. We've lost a lot of money on this house (if we were to sell it now), and especially if we include the money that we've put into repairs & improvements (not even talking about mortgage interest and property taxes!), but it could be worse. I'm sure that we'll end up taking a loss when we move (because we don't plan to stay put for more than a few years), but hopefully we will get enough to at least pay off our mortgage when we do finally sell. 

Mid-Month Budget Status: $850 short

I had projected that we would pay down the credit cards down by about $6200, and beef up the savings to $8000 (adding roughly $3000 to cover upcoming short-term expenses, while keeping the rest for an emergency fund). 

According to my current projects, the actual debt repaid during the month of July will be $5575, over $600 less than originally expected. I also won't be able to reach my goal of $3000 extra in savings, it'll end up being closer to $2750. 

With the extra paycheck and self-employment money, July is still a great month financially, and we'll make a huge dent. It's just frustrating that, only two weeks into the month, we're already $850 short of where I thought we would be. And I can't account for it all...!  

Auto expenses, $60. 

Textbooks, $80. 

Medical copays, $60.

Entertainment (4th of July), $75. 

Lunches at work, $40. 

Home Repairs, $65

TOTAL, $380. 

Since I never wrote down the July budget, because it was such a crazy month, I can't figure out how I set the debt/savings goals in the first place. I'm guessing that I perhaps overestimated the income coming in (we've been working fewer hours than anticipated, which means no overtime pay), and didn't include the items listed above. 

On a different page

It can be really tough when spouses aren't on the same page when it comes to money. I know we've had more than our share of arguments about money, and feelings of anger and resentment due to it. 

I'm the more frugal one in my relationship, and my husband is the spender. I'd be lying if I said that I didn't blame every last cent of our credit card debt on him. When I'm in a nice mood, I'll say that most of it was from him, because we have put some home improvement and travel expenses on plastic - but if we didn't have to pay off all his debt, we would have had more than enough to pay for those items in cash. 

I hate being one of those households that runs paycheck to paycheck. We make more than double the average income (in fact, we just barely break the 100k threshold), and we should have plenty of money. It makes me feel insecure to not have a 3-6 mo's emergency fund to fall back on, and to have monthly payments so high that we would be unable to absorb any sort of major life event (losing a job, having to move, having a child) or serious medical problem. And I'm resentful that so much of what I make goes towards paying off his debts, that he buys all sorts of expensive things and I have to be the responsible one that scrimps & saves or else there wouldn't be enough money to pay back what he spent. 

And he's resentful of me, that I'm constantly nagging and disapproving of his spending. He feels that I'm more like a parent, and that I'm not any fun. 

We're arguing about our upcoming trip. I only marginally wanted to go in the first place, and would rather have done something else. And he wants to make the trip longer, and spend significantly more money (about 3x as much as we had originally agreed on) to be able to see/do more. 

Budget Categories

A Good Mom just posted an entry showing a pie chart with a suggested family budget (provided by the U.S. government), and asking how it compares... so I plugged in our numbers into a quick spreadsheet to take a look. Ours actually looks pretty reasonable, at least in the pie-chart. 

When we bought our house, it was very important to me to find something within a pretty tight budget - so that we would be able to someday make it on one income (if one of us decided to stay home full-time once we have kids). Our house was more expensive than most "starter" homes, but given our income level it's significantly less house than most of our friends and coworkers bought. The house category includes only our mortgages (so principal, interest, taxes, and homeowners insurance).

Our auto expenses are pretty high. We have two car payments totaling about $792/mo. I also included auto insurance and gasoline in this category. On the plus side, our cars are in decent shape overall, since they are relatively new, and we don't incur much in terms of repairs. 

The savings category only includes after-tax savings, so money going into our emergency fund & savings account. We use this money primarily to pay for tuition, vacations, and home repairs. Now that the emergency account is funded to nearly $5000, we will cut back on this and only put aside what we need for upcoming major expenses. Any extra money will be shifted to debt repayment. 

I know we spend a lot in utilities. We have a family-plan for our cell phones, and we each have a full data plan with texting added on. We have high-speed internet and cable TV at home. And we always seem to spend more on the normal utilities than most other families. Our electric bill runs about $100 during the winter months, and up to $175 in the summer. Our gas bill varies between $50 in the summer and upwards of $300 in the winter. Our water/sewer bill is about the only thing that doesn't seem ridiculous.

 

Expensive Month

Perhaps it's a good thing I decided not to make a written budget for the month of July. I knew it was going to be an unusual month, but we've already encountered a few expenses that I hadn't foreseen. 

We had to purchase a school textbook, for $80. I knew that the class had a textbook, but in the past we've been able to get away with just checking a book out of the university's library, or sometimes not buying the book at all. And when we do need to buy books, I've almost always been able to find them online (at Amazon or Half.com) for way less than the campus bookstore. It's usually under $50 per class, and then I've had great success reselling it at the end of the semester for the same price I paid. 

Unfortunately, two of last semester's books have not sold, and I wasn't able to find this semester's book for less than $75 (many were selling for upwards of $125!). 

I had my car professionally cleaned, which was an extra $60. 

And then there's our upcoming "last minute" trip, which will probably cost $250-300 (travel, parking, and food)... plus we'll have to take a few days off work, which means less money on the following paycheck.  

Wake-Up Call

Over the past year, we've had a few major wake-up calls. I know that the vast majority has been a result of the economy spiraling downward, but it has had a very real impact on our finances. Here's an overview of what we've been hit with over the past 8 months: 

• 1st credit card slashed limit by $12,900 (no reason given)
• 2nd credit card slashed limit by $10,000 (citing high utilization, likely due to 1st card slashing available credit)
• 2nd credit card issuer closed account (citing high utilization & decreased credit score, likely due to both credit cards eliminating all available credit)
• Several cards increased interest rates & switched from fixed to variable APR
• Tried to refinance mortgage, but couldn't because we owe way more than it's worth (and we would have had to pay a significant penalty due to poor credit score, which plummeted when credit cards #1 & #2 slashed limits)
• 3rd credit card hiked minimum payments from 2% to 5%

I really hate being at the mercy of the credit card companies. We've NEVER missed a payment, or even been late, but they're still able to change the rules on us whenever they want. We have to juggle our budget around to accommodate increased monthly payments (some of them pretty significant!) whenever we get a "Change of Terms" letter in the mail, both from increased interest rates and from increased monthly minimum payments. 

But the worst part is how all their changes have impacted our credit scores, which in turn has impacted us financially. We're paying more in insurance premiums, which are partially based on credit scores. Had we refinanced, we would have had to pay an extra $3000 in up-front closing costs, due to a less than ideal credit score. 

I'm so ready to be free from credit cards. It's still a ways off, but I'm feeling motivated! 

Mini-Vacation

It's been awhile since we've taken a real vacation. We've had a few short trips (mostly to visit family, or a few extra days tacked on to an out-of-town wedding or a business trip), but it's been a couple of years since we really splurged on a nice vacation. We've got a lengthy list of potential destinations, but until the credit cards are fully paid off it's too hard to justify spending the money. 

We recently decided that we're going to take another mini-vacation, to the nation's capital. It'll only be for a few days, and we're going to do it as cheaply as possible. 

We can drive there for about $100 in fuel (not counting wear & tear on the vehicle), and I haven't been able to find plane or train tickets for anywhere near that low. Low-end hotels in the DC-area are running about $75/night, which would add a pretty significant cost to the trip. Instead, we've decided to hit up a few friends/family members who live nearby and see if any of them are willing to give up their couch to us. I think we'll offer to buy dinner in exchange, but it should still be FAR cheaper than a hotel would. We'll need to pay for parking while we're there, and we'll likely also buy some transit passes to get around town. 

Fortunately, it looks like a lot of the attractions are free, so the only real expense while we're there will be food.

I definitely want to check out the White House and some of the national museums, anyone know of other free places around DC to visit? 

Spilled Milk

Accidents happen. Sometimes I just wish they would happen to someone else... 

Like the spilled milk in my car - all over the seat and floor - on a nearly 90-degree summer day. The lid must have popped off, and sudden braking sent it flying. Ooops!  I tried to soak it up with paper towel, and then I used soapy water to blot it up. I used a carpet cleaning solution (with an odor neutralizer!) and a wet/dry vacuum to suck it up. 

But my car still smells, like spoiled milk.

And although we're trying to pay debt off as quickly as possible, I'm not going to drive around in a smelly car for the next six months. I could rent a commercial upholstery cleaner and see if that'll take care of it, but sometimes it's worth it to pay a professional. 

I called our local automotive detailing store to get prices. They want $60 to shampoo the interior carpets/seats, or $100 to detail the interior. I had my old car detailed there (right before I sold it!), and I remember thinking that it was the best $100 I'd ever spent - and wondering why I hadn't done it before then. 

I think the $60 will be well worth it. 

Estimating Taxes on Self-Employment Income

I had previously mentioned that we have some self-employment income coming in soon, and that we would either have to pay estimated quarterly income tax on it or we would have to adjust our withholdings from our "day jobs" to cover the additional income tax. 

While I love getting extra money from little side jobs, it really sucks to crunch the numbers and see how little is left over. On a $4500 check, we will end up paying close to 40% in taxes! 

We're in the 25% marginal tax bracket, so there's an instant $1125 to the IRS.  It's self-employment income, which means we have to pay an additional 15.3% (12.4% is to Social Security, and 2.9% is for Medicare). And of course we also have to pay state income tax of 4.35%  - so 44.65% in taxes, right off the top! 

There are a few small deductions (when we go to file our federal tax return, the self-employment tax deduction allows us to subtract 1/2 of the 15.3%) and multipliers used in the forms (you only pay the 15.3% on 92.35% of the net income), so the actual taxes paid ends up being slightly less.  

So out of the $4500 check, we pay: 

- Federal Income Tax:  $1125

- Social Security: $515

- Medicare: $121

- State Income Tax: $196

Subtotal, Taxes: $1957

Minus 1/2 SE deduction @ 25% tax rate: $80 [0.25*(0.5*($515+$121))]

Total, Taxes: $1877

We've sometimes been able to take the home office deduction as well, and that would allow us to save an additional $150 if we can take it this year. Even so, we would end up paying $1727! It's frustrating to see so much of our hard-earned money just disappear! 

Anyways, I used the $1877 to calculate how much extra we should have withheld from our normal paychecks for the rest of the year. I ran through the math a few weeks ago, knowing that it would be effective June-December (so seven months).  $1877 / 7 = $268/mo.  We set up an additional $25/mo to go to the State, and the remainder to go to the Feds. 

Debt Tracking

I've been actively tracking progress on our credit card debt for over two years, since February 2007. At that time, we had $41,755 in personal credit card debt, plus an additional $4738 in business debt (that business has since "failed", and we have assumed that debt).

Two years and three months later, the total credit card debt is down to $33,203. In over two years of this, we've only paid off about $13k! But I guess, to be fair, we've also charged a LOT during that same time frame (as evidenced by several distinct spikes in the chart!).

• The first spike was when we assumed the bad business debt, in January 2008.
• The big spike, in July 2008, was when we spent roughly $7000 for some electronics.
• There are a few smaller spikes, for the purchase of new computers and for a couple of vacations.

During the first seven months of tracking, the total debt didn't really change - despite making monthly minimum payments of nearly $1000/mo! We were paying off only about $200/mo in principal, a rate that would have taken us almost 20 years to pay the credit cards off.

June Grocery Budget

Aside from restaurants, groceries have been the biggest source of unnecessary spending. For just the two of us, our typical weekly grocery bill was $100-125, depending on how many personal care items (shampoo, toothpaste, etc.) we threw in the cart. 

We'd have a good mix of food, from healthy produce to convenience items and everything in between. We tended to buy name brands for many items - soda, cake mix, lunch meat, chips, cereal, cleaning products. We had a few things that we would only buy the premium brand - ice cream, hot dogs. And then we'd buy store-brand for other things - frozen vegetables, flour & sugar, bread. 

I noticed that certain grocery stores (especially the local chains or smaller box stores, like Kroger) tended to be more expensive. If I did a full week's worth of shopping, the bill at the checkout would be $25-50 more. Many of their items, even with a sale price, were more expensive than the everyday price at some of the other (bigger) grocery stores in the area.

I tried several months ago to reduce the weekly grocery budget to $50, and I failed miserably. I could make it for two weeks or so spending only $50 a week on groceries, but then we'd have run out of all the useful food in the house, and I would have to stock up on essentials (noodles, baking stuff, canned foods and sauces), produce, and/or meats - so we'd end up with a $150 or $200 grocery bill, and it would all even out to around $100/wk. 

It took some practice, but I've gotten better about balancing out the grocery bill. I peruse the weekly sales circulars looking for good deals, I buy a newspaper (or two) on Sundays for coupons, and I've cut out many of the convenience foods (prepackaged portions of chips & cookies, baby carrots, etc). I've also had to get creative with some dinner meals.... 

For the month of June we're actually going to come in under the grocery budget. I'm still shooting for an average of $50/week, so $200/mo. As of today, we're at $146.70.  I'll probably go pick up a few things this weekend (maybe $30 worth?), but it'll definitely be less than $200! 

Budget for July: FAIL

I had every intention of posting my full budget for July on here, and then tracking how it compares to what we actually spent. 

The only problem, the July budget is completely screwed up.  It's a 3-paycheck month, so we have extra income. We're also expecting a substantial $4500 check for self-employment, but we don't know if we'll receive it in a few days or a few weeks. Together, this will amount to nearly $5900 in extra income for the upcoming month (that is, above and beyond what we normally take home).

But we're also planning to pay down a huge chunk of credit card debt, just over $6200, in preparation for the looming 150% increase in minimum payments on Chase. And I'd like to maintain a $5000 balance in our emergency fund, which means we need to set aside an extra $3000 by mid-August, to cover fall tuition and the upcoming house repair. 

 And because we decided to use the entire $4500 check now, instead of setting aside some for income taxes,  we had to modify our income tax withholdings at work so that they're taking out extra. If we didn't, we would end up owing nearly $2000 next April, which would kick us into the category where we'd also have to pay interest and penalties for underpayment!  Instead, I estimated what we should pay in estimated quarterlies, and just divided that by the number of months left in the year. The end result will be the same, come tax time, but for the rest of the year our take-home pay will be $275-300/mo less. 

July is going to be an unusual month for budgeting. Lots of extra money coming in, huge extra payments towards debt/savings, and a reduction in normal income. Dollar-wise, I think it all works out. In terms of cash-flow, I have no clue how it will shake out. There's plenty to take care of all the essential bills and minimum payments this month, I'm just not sure when all the extra payments will actually be made. 

So instead of posting an itemized budget, I'm just going to post the targets for the month of the July:

• Reduce credit card balance from $32,747 (as of 6/24) to $25,780
• Pay off completely all but two largest credit cards
• Increase emergency fund to $8000 ($3000 of which will be short-term savings)

Redoing Budgets

In order to come up with enough money to cover the extra $525/mo in increased minimum credit card payments to Chase, we sat down and reviewed our finances. We evaluated monthly expenditures, paring things back where possible. Overall, we didn't find much that we were willing to eliminate, so the majority will come from deferring money that would have gone to the emergency fund or other credit cards and instead paying it to Chase. 

We decided to cancel an insurance policy, which will save us $356/year. The policy was up for renewal anyway, so we are going to just let it lapse. Otherwise, we would have had to pay half of it by the end of next week. 

We also decided to put a 90-day hold on our NetFlix account. It's only $9.53/mo, but every little bit helps. I thought about canceling it altogether, but I love being able to stream movies at home - and it's far cheaper than going out for a date. I'm hoping that 90-days will give us enough time to get a grip on the bills, and then decide whether we want to keep it or cancel it. In the interim, we don't have to pay the monthly fee, and all the movies we've added to the queue won't be deleted! 

The biggest decision was to pay off several credit cards with smaller balances (and higher interest rates, ranging from 13-20%). In total, we have decided to pay off three credit cards with a combined total of $6204. The money to do this is going to come from a few different sources: 

• $4500, from some self employment work ($2000 of this was supposed to go to the IRS in September for estimated quarterly income taxes, but we have instead modified our withholdings for the rest of the year, so that take-home pay will be around $300/mo less than normal)
• $1150 in reimbursement checks (from a medical flex spending account, the overage on the mortgage escrow account, and for some items we purchased for someone else) that should be coming any day
• $150, for selling some older electronic items that we no longer need
• $400, from the emergency fund

Once these are paid off (by the end of July), we'll be left with only two credit cards - both with a large outstanding balance but with low fixed interest rates. Paying these smaller cards off won't have much impact on monthly payments (roughly $150/mo, which will be going right back to Chase now), but I'm hoping it'll give us extra momentum to keep going with the debt payoff.  

Bad news from Chase

Waiting in today's mail was an "Important Change in Terms" notice from Chase Bank, addressed to my husband. The contents: 

We're sending you this notice to advise you of some changes to your credit card account. These changes will take place automatically and will be effective with your August 2009 statement.

Your minimum payment due will increase from 2% to 5% of the ending balance on your monthly statement but will not be less than $30 unless your total balance is below $30. The principal factors we considered in increasing the minimum payment due include the current APRs and revolving balances associated with your account. 

There was nothing on there about being able to "opt out", and the Chase customer service representatives are saying that affected cardholders do not have the option to reject the change in terms. Either pay it off now, close the card and have the 5% minimum payment, or keep the card open and have a 5% minimum payment. 

We have several accounts with Chase, and the particular credit card affected by this change currently has a balance of $17,543 at 5.3% APR. The current minimum monthly payment on this card alone is $358 - the new monthly payment will be $877, an increase of $525 each month! 

Thanks to the emergency fund, and some serious budgeting over the past year, we should be able to absorb the increased payment and stay current on everything as well. Unfortunately, it means that some of our other credit cards, with much higher APRs, will be paid off at a significantly slower rate. We also may need to re-evaluate some planned expenditures (including school) to decide what makes the most sense. 

Financial Goals for 2009

I like to project out estimated expenses & income, and figure out where we'll be at various points in the future. I usually just do the rough calculations on a sheet of scratch paper, or on the back of a napkin, and don't often keep 'em or track how that compares to reality. 

The last time that I set written financial goals was in October 2008, and that's when I established the following list of "goals" that I hoped to achieve by the end of 2009: 

1. Contribute $200/month to emergency fund 
2. Achieve balance of $5000 in emergency fund by end of 2009 (current balance = $1900) 
3. Eliminate credit card debt by end of 2009 (current balance = $12590)
4. Pay off Perkins student loan (current balance = $1626)
5. Pay down Stafford student loan to <$25k (current balance = $25502)

Right now it's hard to say whether I'll be able to accomplish all of them. I still think it's possible, but it's going to be a bit tougher than I'd originally anticipated. We had a critical home repair in January that cost $1700, and was paid for using the emergency fund. My decision to go back to school (made after I wrote those goals) will also set us back by about $2500 this year (for tuition, textbooks & fees). 

Because of the economic climate, I've been contributing far more than $200/mo into the emergency fund, so that the current balance is already over $5000. I've also already taken care of #5 (just barely!). 

I'll definitely be able to pay off the credit card debt referenced in #3, but I'll possibly have to make a decision whether to wipe out the emergency fund to do so. Hopefully I'll be able to earn some extra money working overtime, and my company will give a holiday bonus at the end of the year. 

Salary Freeze

My husband's employer just sent out a company-wide email announcing
that they would be enacting a pay freeze, effective immediately.

He usually gets a 3-4% raise every year (which covers cost-of-living
increase and a small merit raise), which would have amounted to about
$100/month after taxes. We had expected that the raise would be
smaller than usual, perhaps only 2%, but we hadn't expected the freeze.

In the past we both typically find out what our raises are around
Thanksgiving, and we see the increased checks after the first of the
year.

Although we don't usually re-do our budget until the end of December,
we had already incorporated the anticipated increase into plans for
next year. We know that we'll have some major out-of-pocket expenses
for an elective medical procedure (LASIK vision correction), so now we
will need to re-evaluate whether to delay that surgery or make other
changes to our budget to compensate.

I wonder what my company will do about raises this year...