Category Archives: Debt

A belated day 5. Get a budget. Now! No, Really.

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My apologies for the delayed posts. I took a few days to enjoy the Easter Holiday with the family, and I’m back to writing feeling refreshed, renewed and most of all, saved.

Today’s topic (well, Friday’s actually) is budgeting. We all know we should budget. Most of us even have a rough mental budget. But how many people truly account for every dollar in and out. You must stop and ask each dollar “who are you, and where do you think you’re going?”

It is my theory that once someone has done this for a month–they’ll never go back to winging it again.

Implementing a household budget and reviewing our progress weekly has saved our family $1,500 per month, and we consider ourselves pretty thrifty people.

How to go about making a budget? We began by using Mint.com which we found through the Motley Fool. I’ll tell you about some more budgeting options as the week goes on.

We linked all of our accounts and classified our expenses in Mint. It’s an aggregator, so you only have to link it once, and not a lot of downloading. From that, we could see our past 90 days of spending, and we created a budget from there.

Each month since then we’ve been able to further trim our budget, whacking quite a substantial amount out and paying down our debt at a faster rate than ever before.

I’ve converted a few other folks to using Mint.com and since I tout mint so frequently here, I thought it might be beneficial to hear the praises sung from someone else.

April Stensgard of MomJobSeeker.com says “Mint.com is a very useful site. I love the daily reminders about the status of our budget. Mint.com also pointed out that our bank was charging us $10 for certain online transfers. I didn’t even know about this bank fee until Mint.com discovered it. We brought it up with our banker and have resolved the charges.”

April also offers a few ideas for improvements to Mint: she’d like to print out reports on the budget. I totally agree. I take screen shots and print those, but a printout we could post on the fridge or something would be super.

Kelly Mainard also converted to Mint. She says “Mint.com is a great asset to controlling my finances. I can see where every dollar is going and I can plan in the future. For the first time in my life, I feel as though I have real control of my finances! It’s empowering.”

If those aren’t good enough recommendations to try this yourself, I don’t know what is. Grab your bank statements, put in a movie and sit down with the computer and start working out your budget with Mint.com. An initial investment of 2-3 hours is just about perfect to get mint.com rocking and rolling for you, and beyond that, weekly maintenance of just a few minutes to classify any expenditures. You won’t regret it. I promise.

Just my $.02 for last Friday. More to come later today to catch up for the weekend.

Day 3 of 21: Debt is Dumb!

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I’ve been a personal finance “hobbyist” since I first saw Suze Orman on TV a few years ago, and discovered that you don’t have to have money to be involved in your finances.

Seriously though, I got involved in my retirement planning, and household budgeting. We paid off our cars early and “burned the candle at both ends” to pay down our home mortgage (something we’re grateful now as most of our neighbors are upside down in their mortgages).

In my research of personal finance, I’ve studied the PF theories of two “gurus” of personal finance; Dave Ramsey and Suze Orman.

Dave Ramsey’s philosophy is a bit more stringent. He doesn’t believe in debt. He says never take more than a 15 year mortgage, and never, EVER use a credit card. I especially like his book “The Total Money Makeover,” which I downloaded as an ebook from Audible.com.

Suze Orman’s philosophy is a little more relaxed in that student loan debt is “acceptable” debt, and that a credit card used for job search expenses is OK. I found her philosophy and strategy very helpful in my first few years on my own. I especially like her book “Money For the Young, Fabulous and Broke!”

I find my own personal finance philosophy right in-between these two–shunning credit cards, but accepting mortgages and student loan debts. Mr. Ramsey encourages parents to pay for their children’s college, I’m of the opinion that they appreciate it more when they put themselves through.

I encourage you to check out the library or iTunes and their Web sites for some good ideas and information. Dave Ramsey has a daily podcast available for free from iTunes. I especially enjoy the Friday shows where he invites callers to call and scream “I’m Debt Free!” with him on the air when they’ve paid off their last debt.

Happy learning!

This is part 3 of 21 of “21 days of financial literacy” for April, which is Financial Literacy Month.

Surprise Cash Infusion!

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This isn’t the kind of “making money online” that I had envisioned, but it’s making money and isn’t any work at all, so I’ll take it!

One of my Lending Club borrowers is especially ambitious and paid a large chunk of principal back yesterday. This means I’ve just gotten an infusion of cash that I’m getting ready to re-invest. If you’ve got a Lending Club loan, please tell me about it, I’d love to invest in yours.

This particularly ambitious borrower combined two car loans into one shorter-term loan so he could get pay off his car loans faster and more conveniently.

Thanks!

Try it Now! Join Lending Club.

Day 1 of 21 Days of Financial Literacy: DebtGoal.com

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This weeks’ featured topic will be Debt.

The first free Web resource that I’d like to feature is DebtGoal.com.

DebtGoal is an online debt calculator system that helps you to beat your debt. It calculates payoff times and a goal and “debt repayment budget” from the debt information you provide. I initially set up my account to include my mortgage, but took it out because I found the information discouraging. Leaving just my revolving debt accounts in there is a much better way for me to go.

DebtGoal’s calculator solution is to pay from the highest interest rate debt first, while paying minimums only on the rest. I personally adhere to the “snowball method” of paying the smallest balance first, closing the account and then moving on to the others.

I’m an alpha-tester with DebtGoal and have requested that the allow users to choose “high interest first” or “snowball method” perhaps even with a calculator for the difference between the methods.

There’s pros and cons to this system. First, it is not (presently) an aggregator, though they are working on adding this functionality. What this means is that each time you get a statement in the mail, or write a check, you have to manually log in and type the info.

One feature that I really like, and haven’t seen other places, is that it shows new spending separately, by basically showing you that you have to pay A: your regular debt-busting budget amount and B: your new spending to keep up on your goal.

It’s very graphical and visual. I was surprised to learn that my debts (they are mostly remaining travel debts from my adoption trip last year) would take 91 years to pay off if I paid only minimum balances. I’ve basically thrown at them everything I can each time a bill is due, but I can take a look at DebtGoal’s suggested payments and plan ahead to make payments to each respective account.

I’ll attach a screenshot here, but for my pride’s sake, I’ve removed my account balances. Rest assured, this will be paid off by year’s end. I’m on track!

If you have debt and you’d like a nice graphical way to tackle that, I’d encourage you to give DebtGoal.com a try!

Living great, despite the layoff

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Try it Now! Join Lending Club.We’ve now reached the point (just a few months in) where I’ve completely replaced my previous work-outside-the-home income with my mobile notary business and my freelance writing. By implementing the tips I’ve been outlining here–even post-layoff our family is coming out ahead of where we were six months ago financially, as well as in peace of mind.

Here’s a brief list of what we’ve done so far, and where it’s getting us. Remember, my layoff was December 7th, and today is April 2nd.

  • Called all lenders and negotiated lower interest rates. Followed up by shredding all credit cards. Value: Priceless!
  • Learned to cost-cut around the house: home-made laundry detergent. Saves $7/mo.
  • Budget and track all expenses with Mint.com.
  • Renegotiated and repriced insurance, dropped the gap coverage on our paid-off/high-mileage cars. Saves $4/mo.
  • Used the library more. Estimated savings $20/mo
  • Developed passive income streams (adding advertising on this web site and others, as well as Lending Club interest). Earns $1.10/mo.
  • Rolled-over my fee-intensive 401K into a more affordable IRA Savings TBD
  • Found tax advantages to starting my mobile-notary and freelance writing business.
  • “Re bundled” our cable-TV package to the same service and same company at a lower introductory price. Saves $25/mo.
  • Received our tax refund and paid off an adoption loan ($150/mo, a credit card $100/mo and a student loan $110/mo). We have just one credit card left. Saves $360/mo in debt payments.
  • Refinanced our 30-year fixed mortgage, and rolled in our home equity loan ($329/mo). We put both into a 15-year fixed mortgage and will be paying just $89 more than we were paying on our old mortgage payment. (We used Smarthippo.com to find a better rate). Saves $240 per month and 15 years off the life of our mortgage.
  • Testing out some meat-free recipes for dinner. Last night the kids loved eggplant parmesan (they thought it was pizza!). Saves $24/mo.
  • Renegotiated cell-phone plan (due to new business). Saves $100/mo.
  • The layoff reduced our household’s commuting cost. Saves $200/mo in fuel.

    These tricks save us $981.10 per month, but we’ve noticed that now that all expenses are tracked, our household expenses have been reduced by about $1300 per month.

Here’s a few things that we’re not doing.

  • Working more than 45-50 hours per week.
  • Missing out on time with our kids.
  • Cutting our daughter’s preschool (we may do this to ‘snowball’ an extra $660 per month, but she’s having so much fun, we’re having her stay for now).
  • Clipping coupons.
  • Stuffing envelopes or participating in “get rich quick schemes” and “pyramid sales.”

Today’s Activities

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Today Rob and I checked out SmartHippo.com again and decided how to approach our refinancing project. We had our first mortgage, as well as a home equity loan of $15,000. Our first mortgage was at something like 5.5% and the HELOC at 8%. We were able to refinance both into 4.5% with our regular bank, paying one point into a 15 year loan and keep our payment very close to our existing fixed 30 year loan. We’re also going to enroll in the mortgage accelerator to pay it off faster. This is exciting! We’ll be making real headway with every payment towards being debt-free. We spoke to a number of banks today about the subject and all were shocked that we were OK with a higher payment, and that we wanted a 15 year fixed, instead of rolling our 30 year loan (now in year 5) into another 30–and extending our term by another 5 idiotic years. (Dave Ramsey calls this the “stupid tax,” meaning the premium one pays for making dumb financial choices).

Our house won’t be underwater, and we’ll still have plenty of equity. Also, we’ll be building equity like crazy, with more than half of our monthly payment landing in equity–not interest.

One surprise in this process was that so many of the companies we talked to wouldn’t recommend their mortgage accelerator program–because it was administered by another company and you had to pay a fee to enroll, essentialy the other company works like a payday lender and loans the mortgage the difference between the two payments. We searched out the right accelerator program with the same zeal that we searched out interest rates.

Another interesting surprise was that because of our recent debt-busting efforts (two credit cards and two vehicles and an adoption loan paid off) we were able to qualify for our refinance based ONLY on my husabnd’s income. This we’re told was because of our excellent credit scores and our low debt-to-income ratio. The mortgage consultant said adding the verification process of my self-employment income wouldn’t get us a lower rate as we already qualified for the lowest available rate. Saves us a lot of headache, and provides a lot of peace of mind.

Fun Free Podcast

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I’m not a big fan of talk radio (I find it too stressful). But I do like to listen on certian subjects, especially when the host is positive. I’ve found Dave Ramsey for free on iTunes and I’ve subscribed. It’s just one hour of his three-hour show, but it’s very educational and informative. My favorite part of the Dave Ramsey show is when people call up to scream “I’m Debt Free” when they pay off their debts (including their mortgage). It makes my day to hear people do their debt free scream. He also has some really funny expressions like “as long as you’re on this cabbbage truck, you might as well ride it” and “it’s time to paint or get off the ladder.”

Also, I’m subscribing to the Daily Audio Bible on iTunes, which is a “read the Bible in a year” kind of program. I’ve found them both great to listen to as I wash the dishes and do fold the wash in the evening.

All Ad Money Gets Snowballed!

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I’m an investor at Lending Club. I started out putting in just $100 because a friend suggested I try it. Now I think I’ll be contributing more frequently. You see, despite my broker’s best efforts (I am not loosing money in the market right now), my lending club is earning 10.98% while my IRA is falling substantially short. (Though not negative–a special thank you shout-out to Dean S. at Edward Jones!).

Lending Club is a peer to peer lending platform, where investors like me can put out little loans to others (lots of little loans from investors makes one large loan to a borrower). I’ve bought four loans at $25 each, and they’re doing quite well. I earn interest on them every day and it’s fun to take a look at the interest accruing. I’m just one month in to my investment and I’ve already earned $1.18. More principal payments are due in the next week or two, so I should be getting a little more income this way. I’m helping someone else out (I think all of the loans I purchased are debt-consolidation loans), and I’m making a little residual income.

It’s fun to browse through the borrowers and choose the person you’re willing to fund (you can ask questions if you want to know exactly how they’re planning to pay you back!). Remember, these are loans, just like if you were to spot me a $20 for lunch. There’s always the risk that the borrower won’t repay, but unlike loaning a friend a few bucks for lunch, Lending Club has an excellent debt-collection team, so you can be assured they’ll track your borrowers down for you. Also, they’re invested in their loans too–so A: they think it’s a good investment and B: They’re on the hook as much as you if the loan goes sour.


Try it Now! Join Lending Club.

In a further vote of confidence, Lending Club announced this morning that they’ve just received their 2nd round of VC funding, which is great news! They’ve just received another $12million in capital to keep up their growth.

Here’s a cute video about how it works:

Time to Refinance?

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Back in January I blogged here after reading a magazine article that explained how to know if you should refinance. It’s a tricky question for many of us. I’m personally on the fence about refinancing the condo we’ve had for five years. We’re *this* close to listing it for sale, but at the same time, if we hang out for another year or two we think we’ll gain back the $30,000 in value that the market in our area lost in the past couple of years. Decisions, decisions.

I’m working on an article for the Prosper Lending Review, which profiles a financial startup called SmartHippo Don’t confuse this with SmartyPig, another brilliant-banking-mammal.

SmartHippo.com does for mortgage shopping what Travelocity does for vacation planning. This clever Web site allows banks to post their mortgage rates, but also crawls the web for rates. Finally, it lets users add the rates that they got–and also invites feedback and comments on lenders. Talk about transparency!

I took it for a test drive this week and it helped me come to some decisions regarding if we refinance our condo or not. Here’s what I found helpful:
First, it allowed me to “window shop” mortgages anonymously. This means your FICO score won’t be pinged by a prospective lender.

Second, once I entered my info (Refi, what the property is worth, what amount to refi and what loan term I want) it spat back dozens of very attractive options. In order to sort them I had two handy little slider tools that allowed me to narrow my closing costs range and my interest rate range to what looked attractive to me.

In my mental calculations of if I should refinance or not, I’d underestimated closing costs by a lot. Until I can get a rate .25% lower than what I was seeing this week, I’m going to stay put. However, SmartHippo saved me the FICO inquiry for later–when I decide if I want to sell my condo or refinance it into a shorter-term-loan.

I’m making a note on my calendar to visit SmartHippo once a month for a while and keep an eye out for that slightly-better rate. I hope you’ll give it a try.

If you want to follow SmartHippo news, they’re on Twitter as @SmartHippo.
If you want my latest info and updates, I’m on Twitter as @Jessc098.

On the subject of washing and saving money…

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Yesterday’s post was on the subject of saving money on laundry detergent. Today that got me thinking about an older, smarter choice we made on the subject of wash that has saved (and cost) our family a lot.

When we first bought our home five years ago, it had a five-year-old washer and dryer. Within a few months of moving in we discovered a wood rot problem that meant we had to replace an entire bathroom–right down to the studs in our 2nd floor condominium. It was heartbreaking, costly, and not covered by insurance.

Just a few months later, as we were leaving on vacation, the washing machine made a terrible noise. We called in a repairman and he gave us the news. “It’s dead.”

That is really the short story of what started our debt journey. An unexpected/unplanned bathroom repair after sinking EVERYTHING into the purchase of our home and an unexpected failure of a major appliance.

We had to replace the appliance. A busy family of three working all the time–and the nearest laundrymat is quite far. We bought a washer on a credit card, and delivery of the new one, and disposal of the old one.

One year later, as we sit down to dinner, black smoke rolled out of our laundryroom. Fire in the washer–of all places. The motor burned out.

We called a repairman who has a one-hour minimum charge of $150. Within minutes he’d told us that the machine had been damaged beyond repair.

My husband was especially resourcful in how he tackled this news.

“You’ve got to charge me for an hour right?” he asked the repairman.
“Yep.”

Rob made him a cup of coffee, pulled out the laptop at the kitchen table and had the repairman buy third washing machine. Without regards to price, but finding us something that we will never have to fix again.

This wonderful repairman navigated us to the best vendor, the best machine and told us what to look for if we didn’t choose that machine. We “comp shopped” around to other vendors, and he was right. (Who would know a washer better than he?).

We’ve now had the “new” machine two years and we love it. It runs smoothly, cleans well, and saves us a fortune on detergent and water because it’s a front-loader. Our energy bills are smaller too.

That’s not all–the repairman took a look at our dryer and told us what parts would wear out next and told us how much they would cost to fix. It turns out the main belt in the dryer was just about to go (hence the squeaking). The cost of another service call and the belt would have been the same as “adding on” a dryer to our planned order for the replacement washer.

Rob also got opinions on the dishwasher we knew was on borrowed time. We saved up another year and bought the recommended Bosch dishwasher and couldn’t be happier.

Three new appliances, and one consultation with a professional.

By the way–none of the three new appliances have ever required repairs. All came with excellent warantees, and all are kid-friendly.