January 2018 – Mortgage Payoff Update

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At the end of January, our remaining payoff balance is at 23.39% of our original mortgage that we took out in 2007. That’s a reduction of 3.01%.

How much longer until the mortgage payoff?

Once all of January’s payments are applied, we’ll have reduced our mortgage balance by about $4086 this month. That brings our balance just below $32k. According to our schedule, we have 8 payments left. That means our mortgage will be paid off on October 1, 2018.

We’ve been plugging away pretty steadily this month at the mortgage. We were given an unexpected gift that we applied. It helped to get us back on track and give us a bit of buffer room.

Any extra money that we’re finding is going towards the debt. Now that Christmas is behind us, the number of unexpected expenses has dropped a bit and should make it easier for us to stick to the budget.

On a positive note, several things are happening with my software consulting business, Adro Solutions. As different projects are added to the pipeline, completed, invoiced and paid, we may be paying it off sometime this summer!

Also, Julie has started a new business. I’ll hopefully have more information on that soon as well! Exciting times in our house.

Budget Series

The next category I’ll be covering in the budget series is about gifts. Do we budget enough?

Photo by brad.coy

Is your bank or credit union for or against you?

Back around Christmas time I wrote a post about the holiday loan offered by our local credit union. I gave plenty of reasons at that time why you shouldn’t get one of these loans.

But then they came back to surprise me with a vacation loan advertised on their digital sign. Seriously? A loan to go on vacation? They advertise it by showing a beach and saying “it’s only a vacation loan away.” This is accompanied by a “spring into a home equity loan” ad. I’ve also seen one advertising their great rates on car loans.

You know what I haven’t seen? Anything about savings rates, investing, or getting into better financial shape. I had them advertise Financial Peace University once on their digital sign and it worked out great. That was until I got a call telling me they had to take it down because it was a conflict of interest because they wanted their members coming to them to discuss financial problems. Hmmm, maybe for consolidation loan?

All of this begs the question, is your bank or credit union for or against you? Do they have your best interest in mind when they offer you a product or service or are they just trying to maximize their shareholder value, pad their pockets, or make a quick buck?

Banks and credit unions make money when you borrow money and not so much you save it. They can be extremely giving when they’ve got incentive.

Keep this in mind the next time you’re bank or credit union has something new to offer you. Consider how they’ll end up coming out ahead in the end before accepting anything.

What crazy debt products have you seen offered? Do you have any stories about your bank or credit union where they helped you get ahead? Leave them in the comments below.

Photo by 401(K) 2013

When is it time to slow down or take a break?

If you’ve been paying off debt or on a savings spree, at some point you’ll probably get tired and just wish you were done. You will just want to take a break or slow down a bit.

But when is it okay to slow down and spend some of the money you’ve set aside?

There are a couple things to consider.

  1. If paying off debt is more important than whatever you want to spend money on, then you probably shouldn’t break your stride.
  2. If whatever you want to spend money on is important to you, then check whether it will delay your other financial goals. Are you willing to accept that delay in accomplishing your goal?

Ultimately, the choice is yours. Just remember that every time you decide to take a break or slow down you lose some momentum.

If it were me, I wouldn’t take many breaks until my consumer debt is paid off, unless it’s going to be several years before the debt is gone. In that case, I might schedule in some breaks along the way (a weekend away for the year or a night out every couple of months).

After the consumer debt is paid, then I’d slow down a bit more and schedule breaks more often. It’s easier to weigh whether a savings goal is more important than taking a break at this point.

Build in your breaks. Plan them if you can. And be honest about how taking a break or slowing down will affect your financial goals.

What are some things you want to take a break or slow down for? Let me know in the comments below.

Life without credit cards

Credit Card

Can it be done? Can someone really live without credit cards? I mean, you need one to build credit right? What about when you’re in an emergency?

Let me start by telling you that credit cards are not your friend. Even though we ALWAYS paid them off on time and never paid interest, we decided not to keep them around. When I was in high school I got a credit card with a small limit to pay for gas and other stuff. It was to “build credit”. Then before my wife and I got married, we got another credit card to earn cash back on all of our big purchases we were going to have for the wedding. I remember that we used it to buy our rings.

So in 2007, our eyes were opened and we learned that we could live life without credit cards. We decided that we were going to pay off all of our debt and there really was no reason to have the plastic there as a temptation. So we ended up calling up the credit card companies and cancelled both of the cards that we had. They really turned on the charm with the cash back card. “Why do you want to cancel when you’re making money off of us since you always pay it off on time?” The truth is, you tend to spend a bit more when you use a credit card, and we had occasionally fell into the we can pay it off with our next paycheck routine. Yeah, well what if an emergency pops up that we need to use that next paycheck for.

I guess it’s probably a good idea to dispel some of the rumors that fly around about why you NEED a credit card.

  1. It will help you build credit. Credit is only necessary if you plan on going into debt for things. You can get a mortgage without every having a credit score.
  2. What about refinancing my home to get a better rate? We refinanced our house twice since canceling both cards. I think the bank liked the fact that we had money in the bank, jobs, and no late payments on our credit report more than anything.
  3. The discounts are just too good to pass up. Seriously? I already told you that you’ll spend more on a credit card because you don’t feel it the same way when it doesn’t affect you at that moment. When the cashier checks you out next time and asks you if you’d like to save more money by signing up with a credit card, try telling them that you don’t believe in credit cards but you’d like to know if you could still get the discount anyhow. It may not always work, but their reaction is sometimes priceless.
  4. Some bills like car insurance give me a better deal because of my good credit. Hmmm, we pay about $650 a year for our car insurance for two cars. Yep, I said for the whole year. If a place you do business with does check credit to get you a better deal, chances are they are looking for late payments more than anything.
  5. Yeah, but your credit score was already high from having a credit card. True, because we did the responsible thing and always paid our bills on time. However, our credit score has dropped from being in the 700’s to being somewhere in the 600’s since we’ve closed the cards, and honestly, we don’t care.
  6. How will I pay for stuff? If you decide not to use a credit card, then you’ll know that anything you buy, you can afford. If you don’t have the money for it, you can’t buy it. It’s pretty simple. I know there are some people who are in a cycle of using credit cards and then paying them off and they may not have the money at the beginning of the month to make the transition. If that’s you, you may have to make the transition over the course of a few months. As you can, try to purchase less so you’ve got some extra cash at the end of the month and can put even less on the card the next month.
  7. What if I have an emergency? Using a credit card in an emergency is like chopping your finger off to take care of a paper cut. You solve the immediate problem and exchange it for another one later on down the road. If you didn’t have the money for the emergency in the first place, when you’re bill comes you probably won’t have the money then either. Then you’re paying interest on it for who knows how long. Getting rid of your credit cards causes two things to happen. First, you save money for emergencies. Second, if you don’t have the money, you come up with creative solutions you wouldn’t have thought of if you had the credit card as a crutch.

Let’s say that you do want to try life without credit cards, but you’re not ready to chop them up yet. I’ve got just the plan for you. Take a plastic cup, fill it with water, drop the cards in, and then put it in the freezer overnight. Your credit cards will not longer be available for easy access. When you see that “gotta have” item at the store, you’ll have to run home, and thaw the cards. Hopefully, in the time it takes for them to thaw, even under hot water, you can really think the purchase over before you buy something you don’t need or can’t afford.

Have we regretted getting rid of our credit cards? Not in the least.

Finally, I want to leave you with this classic Saturday Night Live video. It’s always been a favorite of mine.

I have to wonder how many people watched this on a TV they were making monthly payments on, while sitting on their 90 days same as cash couch.

Featured Image courtesy of sixninepixels / FreeDigitalPhotos.net

Dave Ramsey’s Financial Peace University – Week 4

Debt

Dumping debt. Not only is that the name of the lesson for week 4 of Financial Peace University, but I think it’s something many Americans wish they could do (or convince Congress to do). In order to do it though, many need to be convinced that living in debt doesn’t have to be a way of life. Dave starts with a bit of history about debt in our culture. Living with debt is actually a relatively new frame of mind that wouldn’t have been considered by many in the first half of the century. However, we’ve been so trained and marketed to that we now accept it as a way of life.

In order to change our way of thinking, Dave debunks several debt myths. I’ll cover some of my favorites here.

  • If I pay it off my credit card every month, what’s the harm? The truth is that people spend more when they use a credit card (and even a debit card) than they do with cash. Why do you think almost every fast food restaurant accepts them now.
  • Car payments are a way of life. I can speak from experience that this isn’t the truth. We haven’t had a car payment in probably 5 years. The wise thing to do is to purchase a reliable used car. You can find a reliable used car in just about every budget range. If you need help finding one, post in the comments and I’ll do my best to help you out. If you want to find out one way to have free cars for life, check out this page.
  • Cosigning is a great way to help out a friend of family member. The reason that the bank requires a cosigner is because they don’t think the person can pay the bill on their own. They want to have an extra person to go after when the friend or family member defaults on the loan.
  • You’ve got to build up your credit score. You only need a good credit score if you plan to borrow more money and go into debt.
  • Debt is a financial tool. To make your money work for you, you’ve got to have some, and you won’t have much if you’re paying it all to the bank. Sure, you may have stumbled across a circumstance where it worked out to your benefit to borrow money in the past, but increased debt means increased risk in your life. They can’t take your car if you don’t have a loan on it. They can’t take your house without a mortgage. They can’t garnish your paycheck if you don’t have any credit cards or student loans.

I’ve kind of summarized my own answers to the myths, but you get the point. There are a lot more covered in the lesson.

So how can you get out of debt? It’s a lot easier than you think for most people. First, stop getting into more debt, find ways to get more money, like work more or sell stuff, and of course use the debt snowball. The debt snowball simply means paying off your debts smallest to largest, and taking what you were paying on the ones you pay off and put it against the next debt. Sure, you may think going after the one with the biggest interest rate would be best, but as Dave would say “if you were good at math, you wouldn’t be in debt in the first place.” Check out Dave’s answer to paying off the higher interest rate debt myth here.

Featured Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Recovering From Unemployment – Part 1: Getting Into Debt

IOU Piggybank

Unemployment: One of the most counter-productive methods of saving money out there.  And yet, it’s not uncommon to have periods of unemployment in our adult lives.  Unless you’re leaving one job for another, chances are good you’ll have at least a week or two of unemployment, right?  It can be a scary experience, especially if you have few safety nets in place!

In 2010, our sole breadwinner lost his job.  We knew it was coming, fortunately.  He was a pharmaceutical rep for a small company that was bought out by a foreign company.  It had been undergoing some major changes for years, and there was always the threat of impending job cuts.  About 6 months before the actual cut, there was a rumor that the end was near, and soon the company confirmed this.  Fortunately, we were not in debt aside from our mortgage and my student loan.  We had already been dabbling with moving out to the country, and this news sealed the deal for us.  Our house was a major drain on our finances, and while it was my starry-eyed-newly-married-House o’ Dreams, we both knew that faced with any season of unemployment we would quickly run out of money with our giant mortgage.  It was time to say goodbye to the home we’d loved for the last six years!

Despite a treacherous selling market, despite trying to sell a very unique home for far more than the neighborhood’s worth, and despite selling by owner, our home sold in 4 months.  We fell in love with a beautiful home in the country with a much smaller square footage, and happily, a much smaller mortgage.

By then, Ty had been unemployed for two months.  At the time, we viewed this as a “vacation”.  With all the flurry of selling and buying homes, it was just nice to focus simply on moving.  Our daughter had just turned two, and Ty was enjoying getting a taste of experiencing MY job – the life of a stay-at-home mom!  Once we settled in though, Ty started getting serious about his job hunt.

Little did we know how brutal this would be!  At first, we thought this was the perfect opportunity for Ty to switch careers, but while he applied to plenty of non-sales opportunities he was more than qualified for, he never even got an interview.  So eventually he decided even a job he didn’t love was better than no job, and in the meantime our severance package was dwindling.  He started applying for pharmaceutical jobs again, and began to feel the true sting of rejection.

Let’s fast-forward one year.  Ty had a few unsuccessful interviews, but mostly he felt frustrated over the interviews he didn’t even get.  This was new territory for him, in the past he would apply for a job, quickly receive an interview, and usually walk out of the interview with a job.  He had never not even gotten an interview before!  It was a humbling year, to say the least.

By January, he scored a 6-month contract with a pharmaceutical company and we were able to breathe a little easier for awhile.  We also welcomed our second daughter into the family at the end of March!  We tried to replenish our savings account, and he kept searching for permanent work.  Unfortunately, once the contract ended, Ty would go on over 20 interviews over the next year and a half – all fruitless, frustrating ventures.  We both took whatever odd cash-paying jobs came our way, but it certainly wasn’t enough to sustain us.  By the end of 2012 this no longer felt like a vacation, but rather a very scary nightmare.  Unemployment benefits were up, our savings account was dry, and there was little hope in sight.

Finally, finally…a miracle!  My parents expanded their catering business and needed a manager… score!  Not only did Ty get the career change he longed for, but also an environment that built up his crumbling self-esteem, and perhaps best of all:  A Paycheck.  It’s really amazing what a paycheck can do to your psyche, isn’t it?

Now that we have a regular paycheck, we have some work to do.  Although we had tried to budget, cut corners and be wise during our period of unemployment, we still ended up falling back on a credit card.  Most of the debt came from legitimate budget-breakers like a major dentist bill, replacing a few leaking windows, and several auto repair bills, but honestly, some of that debt came from unwise purchases as well.   So now it is time to completely revise the budget:  we certainly don’t have enough money to live extravagantly by any means, but we DO have enough to LIVE and get out of debt, albeit slowly.

The first step is to make an oath to retire the credit cards.  Those things are the DEVIL.  They are too easy to use, and they make a new pair of shoes seem so much more affordable in the moment!  We decided to take this very, very seriously.  This is a time for delayed gratification.  This is a time for continuing to cut corners.   This is a time for hope!

Stay tuned for Part 2: Delayed Gratification!

Featured Image courtesy of Stuart Miles / FreeDigitalPhotos.net