Monthly Archives: July 2009

Park it! Your Money, That Is.

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Many Americans are feeling the recession pinch—especially those of you who landed here the way I did—via the layoff express.

It is possible that you have had to cut back, or even eliminate your charitable giving as a result. Our charitable gifts certainly landed on the chopping block for examination, but ultimately, we decided to keep them up. There will always be others worse off than us.

If you feel like you need to cut back your giving, but you don’t want to stop helping the needy entirely, you might consider “parking” some money with a microfinance organization like Kiva.org, Wokai or Ebay’s Microplace.

These microfinance organizations lend to the poorest of the poor, and put your money to work. Overtime the borrowers pay you back (without interest, except in the case of Microplace, which has some interest-paying loans).

These microloans are a nice way of setting money aside for a rainy day, but they aren’t perfect.

Microloans, internationally are at risk of currency devaluation, also, like all loans, they run the risk of default. It is important to read the Web site of the microfinance organization you’re using for details and their repayment history. I’ve never had any difficulty with my microloans being repaid, but I’m sure that if I did more lending, sooner or later, someone would default. I put my money in loans just $25 at a time.

Another thing to consider, is that usually your money is locked up for a determined amount of time—the term of the loan. Month-to-month, only the repaid amount is available to you, so make sure you’re choosing a loan term that fits when you think you’ll need access to your money again.

All of that aside, Microfinance isn’t new. Large-scale microfinance was really championed by Muhammad Yunyus, of Bangladesh decades ago. His book “Banker to the Poor” illustrates how these tiny loans (usually under $100 USD) are lifting people out of poverty worldwide.

If you’re not able to give in the economic climate right now, I encourage you to research lending to see if it might be right for you. I’m a lender at Kiva, and would be happy to answer specific questions about my experiences. Also, I lend at Lending Club, which is an interest-earning loan, but it doesn’t usually support charitable activities, as it focuses on domestic borrowers with specific needs (i.e. medical bills, new business startup, etc).

How A Bucket Is Saving Our Budget

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That might just be the most outrageous title I’ve ever written for a blog post. The more outrageous thing is that it’s completly true.

This is a trick we learned from our oldest daughter’s Girl Scouts Camp this summer.

The kids were asked to bring a five-gallon-bucket with a lid to camp each day–with their lunchbox, their coat, spare shoes, sunscreen and all their essentials. Then, they carried their buckets around with them all day and sat on them as chairs.

I originally dissed our daughter’s bucket (purchased for $5 or $6 at a Kroger hardware store) as an extraneous purchase we could live without and I was mad that it was being required of the camp.

That said, it’s been an essential piece of our summer routine–and saving us a fortune in fast-food and eating out that stemmed from my lack of planning the summer routine.

Now when we head out to the park or for a summertime adventure, the soccerball and lunchboxes and jackets all get tossed in. Then the kids go out to play–and I get to sit on the bucket and read or write. Kids get to play–my cell phone is safe and sound in the bucket away from sand, saltwater, soccer cleats and all the rest. Lunchboxes and water bottles are ready when the kids are.

The kids are also getting used to packing the bucket. They know from camp what belongs–so water bottles, lunches and sunscreen aren’t being forgotten–we can even write the checklist inside the lid!

I highly recommend this program for other busy families. You can get the white buckets at bakeries (often free), or pink at Fred Meyer, Orange at Home Depot, Black, White and Green at the garden centers. Have a fun summer!

The Economy Ate Your College Fund Kids, So We’re Going To The Park

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This weekend we got our share of the bailout. It was “free admission” day at all of the National Parks. We elected to go see the new visitor’s center at Mt. Rainier National Park. Our bailout amounted to a grand total of a whopping $15. (We then bailed out our local economy by spending $20 on gas and $44 on dinner (yes, we broke the rules).

We did break our new covenant of not eating out until the end of the year, but we were careful to keep the bill minimal. We’ll get ourselves back on track this week.

We took a four hour hike, and visited the park, enjoyed the views and the far-cooler weather than we have at home.

We’ve done a great job otherwise of keeping up on the new budget and spending program. For the first time since implementing our written budget last December, we’re actually UNDER budget in the food category. Our budget is $25 per person per week, which still works out to be plenty generous provided that we aren’t eating out.

This month I’ll be paying off all of the remaining debts other than our one credit card balance (and no, we didn’t pay them off with the credit card). This should really get the snowball rolling, now that we can put all of those resources into our one big debt and hopefully deflate it fast.

In more good news, I’ve picked up more freelance work (which is one of the reasons this blog has been quieter lately). All freelance work income goes directly towards our debt repayment.

Many people have emailed to ask how I’ve found freelance projects and jobs to fill in the gaps. I’m using the Hire My Mom service that is advertised in the right-hand column as “Every Mom’s Best Friend.” I pick up projects here as piece work to come up with a little extra money (need summer camp money?) but I’ve also met several long-term clients through Hire My Mom. I highly recommend it if you have a freelance skill to offer. (Accounting, bookkeeping, tax perparation, web design, graphic design and many others). It’s a quarterly subscription service, but it’s always worked out to be worth it to me (about $30 a quarter).

If you’d like to see some more of my work, I’m doing a regular debt-busting column at www.debtkid.com and I also write about peer to peer lending (a hobby of mine) at www.prosperlending.blogspot.com.

Some "pennywise" investing with my mad money

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Back in January I took $100 and invested it in something new and different–peer to peer loans. I made my loans with Lending Club and divided my “investment” into four different loans of $25.

All are still current and one is even paying back aggressively. I’ll have another $25 back to reinvest around the end of the month.

So far, my net annualized return is 10.22%. My mom also used their IRA product and is experiencing an even better return (so jealous!).

I might invest more this way later after debt-freedom. It ties money up for a while (about 2-3 years) but you slowly get it back. I might use it like a CD ladder. I’m very excited to see how well P2P lending will fare after the traditional credit markets free up, but I certianly like this process a lot more than traditional banking.

Ward Family Pact 7/8/09

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We choose this auspicious date not because it’s fun to say 7-8-9, but because it’s pretty much the middle of the year, and it’s easy to remember.

We made a pact today to stop eating out until the end of the year. Yep, 12/31/09. No more doughnut runs on Sunday mornings, or Friday pizza deliveries or stops at the Mc’D's just because we’re too lazy to cook or pack a picnic.

This will boost our budget by the balance needed to get out of debt by 12/31/09. Everything but the mortgage. After that, we estimate we can pay off the mortgage (if we keep this house) within five years.

Cheer us on as we take on this adventure. We discovered that eating out was like “death by 1,000 cuts” when it came to our budget. What is $5 for a pastry and a coffee on the road? It’s really not much until you multiply it by the course of the year and the interest we’re paying on our debts.

No more!

IMAGE CREDIT: THE VINTAGE MOTH

Saving Money on Mortgage Insurance (PMI)

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A few years ago my husband and I purchased our first house–the little condominium that we still live in. When we purchased it in March of 2004, it felt like a palace. Now it’s feeling more like a dollhouse, but we still love it.

We purchased this place when real estate values were quite depressed, and interest rates were low, enabling us to purchase when it otherwise may have taken us years.

We purchased our house on a zero-down loan, and then real estate took off. Our little condo doubled its value in two years, so we went into cost-cutting action!

I wrote a letter to our mortgage company and told them since the value of the house has increased, they should adjust the loan to value calculation accordingly.

(I even included a couple of real estate fliers for similar places in the neighborhood showing the increased value).

Two months later I received a letter back saying that after researching comparable properties, they do believe that the property’s loan-to-value ratio can be adjusted giving us the needed “instant equity” to drop our PMI payment of $157 per month.

If you’re still paying PMI, here’s how to try to get the amount eliminated:

1. Write even if you haven’t experienced appreciation but you’ve paid on time every month for two years from the origination of the most recent loan).
2. Write if you have experienced equity appreciation (property values have risen).
3. Write if you have at least 20% equity in your loan.
4. If you’ve made substantial property improvements that might increase the property’s value in an appraisal.

If you are able to have your PMI cancelled, you may also get a refund of PMI from your escrow account. Good luck, and happy saving!