Get a closer look at this t-shirt

…and then you get declined. ;-)

Although I would love to put all my money at my debt, and I know my savings would grow faster if I didn’t have that debt, for the moment, we are putting money into savings every month. I am still managing to pay extra toward my Amex card, but the economy has made me realize just how important savings are to a comprehensive personal money management plan.

If we don’t have money to save, we are clearly not living within our means, so we have taken steps to correct that.

I try not to worry too much about my finances, because at the moment, I am doing all that I can reasonably do to improve them. I am working extra to earn enough to be able to both save and pay extra money monthly toward debts. I am spending less, which I achieved by cutting my satellite TV service in favor of the more economical Netflix subscription and an antenna. I am working to build up a side business to bring in even more money to help me pay off debts. Finally, I have not incurred any new debt since June of last year and my current plan doesn’t allow for any new debt ever.

Paying off debt is my most important financial goal, but I’m not going to do it to the detriment of my financial safety net. I do worry that if something unfortunate happens with our finances, we could see ourselves losing all the progress we’ve gained.

Money is tight right now and I want to have some money put back in case things take a turn for the worse. Hope for the best, be prepared for the worst is a saying that seems to be resonating with me right now. So that’s what I’m doing.

http://thehill.com/blogs/congress-blog/economy-a-budget/25427-pay-off-your-mortgage-early-for-a-fee-rep-marcia-fudge (I even left a comment back when it was freshly posted.)

I know I ranted already once on the blog, but I read this the other day and it hit me wrong. I already worry that there’s too much government interference in my life, but to know that they’re trying to take away all my responsibilities doesn’t sit well with me. I have the right to be stupid sometimes. In their effort to save people from lenders who might be trying to take advantage of others’ refusal to take responsibility for their own mistakes (such as not reading or understanding the fine print on a loan), they’re taking away my rights, little by little.

I do believe it’s unethical to offer loans to people and then encourage them to skim over the documents so they can be signed faster. However, I also believe this is where we have to be assertive and stand up for our rights to fully read and understand every contract we sign.

Yes, you’re likely to get a few evil-eyes when you take an extra half-hour to read the documents the lender wants to summarize to you in 30 seconds of chatter. That’s not your problem.

You have to be willing to walk away if that lender is behaving in a way that makes you feel uncomfortable. I’ve done it before, when I was negotiating the price on a car purchase, and it was a very trying experience. The salesman/lender (who was the same person in this instance) kept trying to question my offer because if I could make a certain monthly payment, then how could I not afford the car if they stretched out the loan term so that the payment stayed the same. He was pushy and his backhanded questioning of my financial know-how made me angry.

But I’ll tell you this: When I walked away, I had never felt more powerful. It was a heady experience. And before I left, the manager of the dealership tried to get me to take the car at MY original offer of $4,000 less than the asking price. I refused. No deal is good enough for me to put up with less than ethical and courteous service from the get-go.

The point is, we should all be willing to walk away when we don’t understand what we’re being asked to sign. We can’t expect others to pass laws to protect us from our own laziness and fear of messing up a good deal by balking at something in a contract. Once you put your name on that contract, you’ve ethically obligated yourself to the terms even if those terms suck as nothing has ever sucked before. Seriously.

And allowing government legislation to continue to pick up the slack where personal responsibility is concerned is dangerous in the extreme.

What do you think?

After having my husband’s car die a horrible death a couple of weeks ago and having to buy another one (because my husband is/was positive this car could not be fixed for less than it would cost to buy another car) it occurred to me that I might just be going about my debt snowball all wrong.

First, let me say that we replaced the dead car with a more expensive car, at $8,990 plus tax, title, etc. The loan ended up at $10,589. However, we got a 2008 automobile that still has warranty, and we’ve agreed that our goal is to make this car last 10 years, so we can get it paid off in 5 years (if it takes that long, and it might) and have 5 more years to save for another car.

Several things about this purchase bothered me though, and the main one was my husband’s inability to separate out the fact that affording payments does not mean you can afford the loan.

The thing is, when you have a spouse who believes you’re able to afford something just because you can make the payment, you really have to watch out when you start paying off debt.

As one payment falls to the debt snowball, I worry that my husband will want to buy something else to take its place. (History shows a track record for this and I’m not one to argue with history.)

I’m sure I’m not the only person trying to deal with a somewhat uncooperative spouse who just doesn’t seem to get it.

I’ve discovered that there might be a way around the fighting and worrying. It’s less like a row of falling dominoes and more like the collapse of a house of cards, but it just might work.

Don’t pay off your smallest debt first. Pay off the debt with the longest term first (with the possible exception of your home loan, depending on how much benefit you see from the tax-deductible interest).

By choosing to pay off the debt with the longest term, you eliminate the worry that freed up cash will be diverted from your debt snowball and used to make another payment for something your spouse wants to buy.

Without true cooperation from your spouse, it’s unlikely you’ll ever be truly debt free, but that doesn’t mean you can’t try. I certainly intend to do my best at it!

In the future, I will be able to spend less time worrying about what will happen when we get some of our debts paid off and we have cash available to make bigger extra payments.

Until now, my strategy has been to pay off some relatively short-term debts that should be paid off within the next year or so. However, I’m already hearing rumblings from my husband about that boat he wants to upgrade to—and how wonderful it would be if we had just a little extra money so he could make the payments.

Since I have no intention of letting this happen (if he really wants it, he’ll have to find a way to start saving for it!), I have begun to rethink my debt payoff strategy.

My camper has a higher interest rate than many of my other debts and a relatively low payment (about 1.1% of the principal). I intend to start putting any extra payments I can make toward it, instead of the other shorter-term, higher payment credit card (about 2% of the balance).

This way, I stop the “we have enough for a new payment” problem before it even becomes a problem.

Unlike with a traditional debt snowball, where you use freed up cash to pay extra on other debts in a rollover fashion, where your debts begin to fall like dominoes, this method will pay off your debts with the shortest terms on their regular schedule. This means that you’ll see more debts fall at about the same time.

Basically, I can put off the obvious freeing up of cash by saving on future interest, reducing the term of the debt by paying more principal each month, and having several debts paid off at around the same time frame. Paying extra on the camper loan should allow me to knock down 4 loans at about the same time.

I also believe this will give my husband the encouragement to save that he needs when we finally have free cash, because he will be able to “see” how possible it will be to save for a large purchase when we have so much cash freed up.

That’s the plan, anyway.

This might reduce the motivational boost I would get from paying off smaller debts faster, but it just might get me significantly closer to my goal of paying off as much debt as possible without having to worry about my husband eyeing the extra cash!

Many of us have realized the necessity of paying down our debt, cutting out excessive spending–some of us are even trimming unnecessary spending (voluntarily or otherwise). We’re doing this because reality has caught up with us.

They want to save us, and that’s a nice sentiment—but we’re in a burning building and they’re drowning us in debt in their effort to put out the fire with spending!

Why can’t they see that they’re not helping us? I don’t believe we’ll ever get to a stable economy or reach any kind of equilibrium as long as the government is trying to take over the role of individuals as consumer, spending money we don’t have.

The problem I see is that we, as citizen’s of the United States, haven’t forced the government to make the kinds of cuts businesses and individuals are being forced to make. Layoff? Pay reductions? Not the federal government!

I’m an independent voter, but I tend to like more democrats than republicans. I’ve voted democratic in every presidential election so far, but I always mix it up when it comes to state and local politics. But–I’m not a fan of big government no matter who’s in charge.

Just the other day I was watching a news program and heard that most federal employees are being paid more than double that of someone working in the private sector for the same job. I wish I could find a link to an article about this, but I couldn’t dig one up.  Regardless of the truth of that statement, I think government needs to shrink, and shrink big!

Stupidity multiplied is doom to the nth power.

Here are some of what I believe are fundamental problems with current society and government:

• Too many laws
• Too many loopholes in those laws
• Too many lines in the tax code
• Too many federal employees who make too much money versus comparable non-government jobs
• Too many frivolous lawsuits are allowed into the judicial system
• Too much influence for lobbyists and special interest groups
• Too many elected officials run for office only to get their own agendas passed (whether or not it’s in the best interest of the voting public)
• Too many people think debt shouldn’t have to be paid back just because “lender’s are evil” (Signed contract despite iffy terms–stupid individual. I’ve fallen into this category enough times to be embarrassed to admit it. When you want something bad enough, you’re willing to sell your soul to get it, but later “the lender did it to me.” I’m not always as hard-line about this as it sounds. When a lender verbally promises one thing and a contract says another, they should be held responsible and the debtee should be given the best deal of the two–verbal agreements should be as binding as paper agreements–but this is from someone who actually thinks meaning what you say is fundamental to your honor and integrity.)
• Too few people mean what they say
• Too few people honor their agreements if it hurts them to do so
• Too few people value honor and integrity
• Too few people think of anyone else before themselves

I could go on and on, but I’m afraid I’m boring you. This is one of those posts I just felt I had to write, and I hope it’s given you something to think about. Feel free to leave comments or questions.

We traded in my car for $6,500 (which we had the cash to pay off (about $4400)). We got that trade-in credit against a $12,500 used truck that has about 39,000 miles and is in excellent condition. The reason I’m not all up in arms about the truck with my husband is because I can easily see it as something we can keep longer term, not to mention that we traded in my car for it instead of his. We’re now down to two vehicles. Since my actual gas costs for commuting to my job are reimbursed, I won’t be spending any additional money on gas even though I now drive a vehicle that gets significantly less efficient gas mileage than my previous car.

Money-wise, we ended up with an auto loan of $6,500 or so at 4.79%. There’s no prepayment penalty so we let them make the loan for the standard term they wanted to make it at which was 4 years. I don’t really care, since I’m going to pay it off early anyway, but I like that I still have the option if I want to take it, to pay off a higher interest debt first, because this payment of $148 each month is much less than what my car payment was.

I have to sit down and rework my plans for paying off my debt now, but with the lower payment related to the lower interest rate on my home and the lower auto payment (but still a payment), I will have cash available to put towards other debts.

When I do that, I’ll be sure to post here.

As for the truck, I like it. I’ve never been the primary driver for a truck before and it’s an interesting experience. 

The car I owned before was the only vehicle I had ever bought new. I wouldn’t recommend that to anyone, but I have to say, I did like the car and the whole newness of it when I got it. Buying a new car doesn’t make a lot of financial sense though. I’ve also never done a trade in for a vehicle either, because usually you can get $1000+ more for it by selling it yourself than you can by trading it in. In our case this time, we got lucky. The dealer where we got this truck was going out of business because he was having too much trouble getting loans for people wanting to buy automobiles from him. That’s something to keep in mind. Right now is a great time to buy an automobile, if you can get the money you need for it.

Here are the highlights

1. Spent too much at Christmas and used my Discover card which I intended to pay off in full. I’ll still be able to do that, but it took some serious finagling and a stroke to luck.
2. Intended to refinance my home loan to take advantage of lower interest rates and get 10,000 cash out to pay for a truck we need.
3. Refinanced home loan but got no cash out.
4. Put the family truck up for sale because it can’t haul my RV camper long distances.
5. Prepared tax return so I would know what, if any, cash I could expect to get refunded.
6. Looking for a truck and a way to pay for it that won’t put me back in debt up to my eyeballs.

Christmas spending

I knew going into the holidays that I didn’t have enough money saved up for Christmas. I intended to cut way back on my spending this year, but when the numbers came in on my Discover card, it was clear that my spending hadn’t decreased at all. If anything, it went up. Take that on top of the $389+ I had just put on there for my refrigerator repair and my bill seemed overwhelming.

When I paid the first statement, I paid it in increments throughout the month until the full statement amount had been paid. I took the $389 from savings and the rest from my bonus and some overtime my husband worked. The dates crossed over onto two statements thank goodness, splitting the amount owed into two payments that wouldn’t cost me any interest since I wouldn’t be carrying a balance from one statement to the next. That left the next statement, which still came in at $1,118. Eeik!

So, lesson learned? Cash, cash, cash. I should have carried cash and stopped spending when I hit zero.

I’ve already talked to my husband and he agrees that this is what we’re going to do next year. We’ve also added $50 a month to our savings so we have the money when the time comes. That’s approximately $11.60 per week and we think we can handle that okay.

Refinanced home loan to save money

Our original plans when we started talking about the refinancing of our home loan was a simple re-fi to cut our interest rate. Then my husband started talking truck. Now, I understand the need for the truck. The truck we have won’t pull the camper more than a twenty or thirty miles before it starts acting up. It’s a 1994 model and it doesn’t have the power needed to handle the weight of the camper. I want to take some trips this year to some campgrounds that are farther from home. I mean, we bought the camper; we’re paying for it, and I want to use it.

But the numbers didn’t make sense and we had to sacrifice the dream of having a few extra dollars on our house payment and no other payments and a newer used truck.

The refinance of the principal only incurred no fees (at our local small-town bank) and our interest rate went from 7% to 5.75%. Before you mention that I could have gotten a better rate somewhere else, you might be right, but we’ve never had to have an appraisal and we paid $0 in fees.  This is just a 2 year balloon based on our original construction loan. We won’t qualify to get a traditional mortgage with all the associated fees and hassles until we finish our master bathroom’s shower and some additional work on our staircase. I like having my loan at my local small-town bank and will probably keep it there for as long as possible.

The refinance to get cash back, however, was a different story. The rocky economy has made even my small-town bank nervous. To get the $10,000 cash out, we would have had to get an appraisal and pay fees and it would have cost about $1,500 total. Not worth it in any universe. I want to reduce my debt not add to it, if that’s at all possible!

Finally, my lender asked if I wanted my first payment due in January or February. I said February. And just like that, I had the money to pay my Discover card. :-)

Buying a truck

Okay, so I’m not sure how this fits with my determination to get debt free forever, but here you have it. We need a truck. We’re going to buy used, and since my husband is handy with the autos, we’re hoping to get the best deal possible. But that still means $6,000 to $8,000 we need to come up with.

$500  – Tax refund

$1,000 – Bonus (fingers crossed for more!)

$2,400 – Truck we’re selling (if we get within a few hundred of our asking price)

$145 – Difference in old house payment and new house payment

Finally, we’re going to get rid of our third car. At the moment we have two small cars. One, my husband drives to work (80 mile commute, 5 days, 34 mpg) and one, I drive (112 mile commute, 2 days, 34 mpg — BUT I get reimbursed for gas based on actual cost). Two days a week, I’ll drive the truck to work. My husband will start driving my car, since we’re going to sell his. We should come out with no changes to our gas budget, since my car is the family car and will remain the vehicle of choice for weekend and evening driving.

So, that gives me the last bit of money we need to pay for the truck.

$2,000 – Car we’re selling

Closer than ever to living debt-free

Despite all that’s happened in the last few months, I feel closer than ever to living debt-free.

Going forward, that $145 difference in our house payment is going to go toward one of my current debts (see my NetworthIQ for details of my debts). I’m excited. Once we have this truck, we’ll have everything in place to start moving forward, and barring any emergencies that we aren’t yet financially prepared for, we’ll have time to start saving now for future purchases.