I think I just got pole-axed.

I’ve never been much into politics, although I’ve voted every major election and most minor elections since I turned 18. I’ve called myself an independent all this time, but in every presidential election I’ve voted for a democrat, and in most of the local elections, I’ve voted democrat.

Ouch. I hadn’t realized what I was doing, setting myself up for this.

I do not like the new healthcare law—not at all. Sure, there are parts I think are good ideas overall for regulating an insurance industry that’s held all the power against the individual over the last so-many years, but overall, those kinds of fixes shouldn’t have been part of an overreaching bill that is going to fundamentally change the way I think of federal government.

And it’s totally amazing to me that EVERY SINGLE PERSON I’ve asked has been unhappy that the bill passed into law. I must live in the wrong part of the country, because obviously we’re in the minority here or Congress would never have passed this bill.

And, yes, I know talking politics isn’t always the smartest way to start a conversation with family, friends, and strangers, but I had to do it. "So, are you happy about the new healthcare bill?"

Uh, "no" being the answer EVERY time.

My daughter’s 5th grade teacher was obviously not able to hold herself back when she told my daughter’s class, "We’re all doomed."

Of course, I’m not going to tattle on this poor teacher, not when I feel pretty much the same.

So, I’m in the middle of a political crisis, as I try to regroup and discover exactly what I’ve been supporting all these years and who and how I go about finding the right people to support in the future.

‘Cause you see, I believe in personal responsibility, and I believe my debt is my problem, as is my healthcare insurance, and that to have integrity, I have to own up to this and do what I can to get myself out of this mess.

But wait, maybe the federal government will make the credit card issuers forgive some of my debt, because you know, I didn’t really know what I was doing when I racked up thousands of dollars in debt to pay for personal junk.

Hmm, who should I lobby? Oh, wait, I’ll just get a list of democrats who can be bought with sob stories and get them on my side…

Check out: Repeal the Healthcare Reform Bill

The impact to my budget and debt-payoff goals would be severe.

The company I work for is going through some financial difficulties related to financing. If I lose my job, I’ll probably have to take on something much less lucrative, at least for a while that could mean a doubling of my work hours for about the same pay.

Since that can’t happen, I’ve been working madly to try to trim our expenses in case I end up out of work. I don’t work enough hours to qualify for unemployment, as far as I know, and staying home with the kids is my number 1 priority. I take them to school and I pick them up, and I won’t give up the time I have with them, because in about 8 years it will all be gone as they reach college age.

The thing is, I don’t want to sell anything, but if that’s what it takes, I’ll do it. However, my husband seems to be taking the future possible joblessness seriously, and he’s started to mention ways he can bring in some extra cash.

I’m spending my days when I’m home and the kids are at school working on some side income jobs.  Mostly working on a few websites I’ve got going to try to bring them up to snuff and pull in a few dollars.

I would love to use this money to get out of debt, because right now, my websites are bringing me about $100 a month. If I can increase this by 10, I will be able to quit worrying about my job income. If I can increase this by 20, I would be able to re-implement my serious get-out-of-debt plan where I was on the road to being completely debt free.

I would also be able to stay home permanently. I really don’t like driving to the office, even though I only do it once or twice a week these days.

I am trying to decide if I want to track this other income activity here on this site, or if I’m going to stick to strictly talking about my debt payoff journey here. I’m not sure, but the site is A Financial Journey and I think it would fit in with the theme. Still, it’s a decision I haven’t made.

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.

Why aren’t interest rates and amounts owed the most important factors?

First, interest rates and amounts owed do exclusively determine the amount of money you’ll ultimately be paying back. Time is a factor, but not in the same sense that interest rates and money owed are.

If you want to payoff your debt in a way that saves you the most money over the long term, based on your current situation, you need to choose to pay off your debts with the highest interest rates first. A higher interest rate means you pay back more dollar for dollar on a debt. If you owe $1,000 at a 10% interest rate, your monthly interest payment (using simple interest) is about $8.33. If you owe $1,000 at an 18% interest rate, your monthly interest payment is about $15. This is a simple way to decide what comes first in your debt payoff.

If you’re more interested in the motivational aspects of paying off debts quickly, you can start with the smaller amounts first and work your way up to the larger debts. This gives you a boost every time you pay something off, inspiring you to keep at it.

However, sometimes other issues come into play when you start working on your debt payoff plan. In fact, you should always consider other factors in your decision-making.

My problem

I have several smaller debts with low interest rates. I also have a few with larger balances that have higher interest rates.

My ideal plan would have been to pay off debt in a way that saves me the most money. I like money and I especially like it when I can keep as much of it as possible in my pockets.

My debts

The thing is, I would like to pay off the camper before the American Express bill because the interest rate is so much more favorable. However, with the current state of the economy and the ever-changing nature of credit card agreements, I worry that my American Express credit card terms will change drastically and unexpectedly and I’ll lose that lovely 3.99% interest rate until the balance is paid off. Then, depending on how high the rate jumps, any savings I could have accumulated by paying on the 8% debt first would be lost in a matter of months.

I have friends who are dealing with unscrupulous credit card companies right now and I have little faith in them myself these days. My biggest fear is that before the new credit card agreement rules go into effect later in the year, many credit card companies might try to take advantage of as many loopholes in the credit card agreements as possible to keep from having customers locked in with very favorable terms long-term.

Maybe I’m overly cynical, but I don’t think so. Do you?

All the reasons I mention above are reasons in favor of taking your entire financial picture into account when you start laying out your debt repayment plan or your debt snowball.

Arrange your payoffs to suit you and your needs and don’t worry so much about following any particular person’s specific method for deciding on a debt payoff order. As long as you’re paying something down with the intention of paying it off, you’re making progress!

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.

If you want to see my Net Worth just look to the right hand column for the NetworthIQ box. It sums up all my debt and assets.

What is net worth?

Net worth is the difference between what you have and what you owe. Doesn’t matter if it’s money or some other thing. I’ll admit, I’m simplifying enormously here, but for the purposes of this blog, that simplification is more than adequate. If you want to get technical, net worth is your total assets minus your total liabilities, and it’s a value determined at a specific point in time. Today’s net worth isn’t likely to be the same as tomorrow’s net worth or next week’s.

Real progress is in the details

Net worth isn’t my preferred way to keep an eye on my financial health. It might be okay for someone who needs to be heavily leveraged to generate income, but with my goal of becoming debt free and living on cash, my net worth isn’t going to be the best way to gauge my progress. I have to keep an eyes on the details.

If I were to have $400,000 in assets and owe $300,000 at the end of November, my net worth would be better than it is today. However, I think I would be farther from my goal than ever because right now, I’m only $183,393 from being debt free but in November I would be $300,000 from being debt free.

How important do you think net worth is and why? I would love to know your opinion.

The real world would have us believe that every holiday is a reason for gift giving, that every part of our lives should be insured, that credit cards are a necessity, that consuming is the only way to save our economy… The list goes on.

I want to take exception to the latter item I mentioned. Doesn’t the real world realize that consuming is what got us to this point?

I consumed my way through a car, a camper, a house, a vacation, a lot of gifts, and plenty of insurance, and I did a lot of that consuming with credit cards. Not so much lately, but a few years ago, I wasn’t working while my kids were still too young to be in school and sometimes I even paid the bills with credit. I mean, why not? I had always planned to go back to work and pay for it all then.

Bad, bad, bad idea.

My husband became self-employed somewhere in there and we had to pay for our own health insurance. I set it to an automatic payment, and ended up using a credit card for that too.

In those days, credit cards were a necessity in my household.

I went back to work, but only part time. So we sold our house and built a new one. The new one cost 2.25 times more than we planned, so the equity we cashed out of the old house went to pay off credit card debt and pay down only a small portion of the new house. We ended up with a mortgage 1.8 times larger than we’d had, which I admit is still better than the 2.25 times it would have been without that equity.

Lucky for us that I had gone back to work.

We have health insurance, dental insurance, prescription drug insurance, auto insurance, disability insurance, homeowner’s insurance, camper insurance, and life insurance. The amount of money we’ve spent on insurance this year to date is over 11.2% of our income to date. Insurance takes some of the risk out of life and has its purpose, but that 11.2% hurts.

I’m done consuming. My husband thinks he isn’t, but these days I hold the purse strings and I’ve put us on a cash diet. When he runs out of money, he’s done consuming. He’s really doesn’t cause me that much trouble these days when it comes to money. He just wants to know where he stands—but our day will come, because he and I have a few very different opinions on the feasibility of living a cash-based existence. I believe it’s very possible, and he thinks I’m crazy.

He thinks:

• if you can afford the payment, you can afford the item
• he’ll be too old to enjoy the things he wants if he waits until he can afford them with cash

I think:

• if we don’t have the cash to pay for it, we can’t afford it
• if we haven’t met every other financial goal we have that could possibly be considered a need, we can’t afford it
• a person doesn’t deserve to enjoy something he hasn’t earned

Our cash-based budget that we’ve been following for the past few months has made a world of difference to our relationship issues related to money. I love my husband. But our money fights became our bone spur.

Next week, let me tell you about our cash budget and how it’s helped us live within our means without adding stress to our lives, and how easy it has turned out to be. It’s even saved me hours, quite literally, in front of the computer doing my checkbook and bills.

You know, I said I was done consuming, but I should rephrase that. I’m done consuming what I can’t afford.

I’ve got my own ideas of how the real world should work, and I’m not going to let anyone else’s ideas of when I should give gifts, what parts of my life should be insured, whether or not I should have credit cards, or if I should do my part to save the economy by consuming even more stuff get in my way.

I’m afraid the answer is no. And it might already be too late.

Neither me or my husband seems in imminent danger of losing our jobs, but already he’s been told there isn’t going to be any overtime for a while. That overtime wasn’t paying for extras around the house. No, it was paying (or going to pay) for essentials like our upcoming 2008 property taxes, which we’d been meaning to save for but just hadn’t gotten around to doing it, and our homeowner’s insurance policy, which I would certainly go into debt to pay, but I certainly don’t want to have to do that if I can help it.

Oh, and our Christmas money. No overtime might possibly mean a very, very lean Christmas season this year. Not that we ever spend that much, but it always seems like too much when the bills come.

This overtime crunch is the first wave of economic hardships I expect to see over the next few years. And my new goal is to get rid of as much debt as I can as quickly as possible so I can free up our cash flow.

My plan is to post each Tuesday with news of how my debt reduction strategy is going (or not). I think doing this will motivate me to stay on track even when my husband isn’t on my side.

It’s a new world out there these days, and I’m worried that I might not be ready to face it.

What about you?