Still Working The Plan

Well, I got a nice comment on an old post from a new reader. He asked me a little about my story and how we got out of debt. I told him a bit and suggested he look back through my blog by category (such as "debt", "earn money", etc.) - so I actually did this myself.

It was actually really fun and inspiring to read many of my old posts and to see how far we really have come.

We started on our journey in February 2008. We became debt free (except for the house) in April 2009. As of today, we are a little more than 2/3 of the way in saving our Fully Funded Emergency Fund of $30,000 (we have $22,500 so far).

My husband is expecting a very large commission at the end of the month, maybe close to $10,000 - so there is a chance we could finish the FFEF then! (This will only be the second commission check my husband has received in the last 6 months, and the last one was much much smaller.) So, I'm hopeful but trying not to count my chickens before they hatch.

The other problem I will be facing is - my husband.

Every week he talks about something else that we need to do around the house. He wants new windows, a new heating system, finish the basement, we'll both need new cars soon, etc. The list goes on and on.

I fear that when the big commission check comes in he'll want to spend it instead of save it.

In some ways this has been an ongoing problem. He isn't completely on board with the whole "get/stay out of debt" thing. He is happy that we are out of debt but I think he is skeptical about weather or not we'll be able to stay out of debt. (I am determined!)

Most likely, I will need to give in a little and spend a bit on some household upgrades that we do need (want) and are important to him. I'm just hoping that there will be enough money to finish the FFEF and do something he wants. :)

Debt Free Except For The House!!!!

Well, it's official. We are debt free except for the home mortgage!

We closed on the refinance and everything went well. The out of pocket expenses were less than I had expected ($950) and we won't have a mortgage payment due in May. The first one will be due June 1st. So that is pretty sweet!

And, my husband is expecting a large commission check on May 1st, plus our nice big tax refund should be coming soon. I'm feeling really good!!

So, we were officially in Baby Step 2 for 26 months and we paid off $23,000 during that time.

What's really exciting is that I firmly believe that we have finally figured out how to stop living from paycheck to paycheck. We have finally figured out how to do our budget with an irregular income. It feels so good to know that we are moving in the right direction and things should get better and better.

I have been married for 18 years and during that time we have always struggled with debt. We did not live below our means. Several times we would "pay off" our debts (by adding our debt to a refinance, or when we took out a 401K loan, etc.) but we never changed our ways and eventually got right back into debt. Most years I found that we spent about $10,000 more than we earned - no matter our income.

Things are different now. We forecast our expected income and our expected expenses. We follow a budget. We spend with cash.

Even our mortgage broker complimented us on our finances and said we are doing much better than most people our age that he works with. I know we still have a long way to go, but it did make me feel good. I finally feel like a grown up. I know how to delay gratification. And the more I delay, the more I realize how little I need to feel satisfied. :)

Debt Payoff Progress

As I recently posted, we are down to about $23,000 in debt.

In my Yearly Budget, I have budgeted that we will snowflake $2,500 each month towards debt. At this rate we would be debt free in 10 months!

There are only 5 months left in 2008 so I would need to double our monthy payments to be debt free by the end of the year. This might be difficult - but not impossible.

So, I am reaffirming my goal to become debt free by the end of 2008!

Estimated Date For Debt Freedom

I had a remote hope that we might be able to pay off all our debts by the end of 2008, but that's looking like a long shot right now.

The good news is that we will be getting a tax refund of $10,000. This will help with our debt payoff progress obviously. And my husband will be changing our tax withholding so that we won't be lending the government our money tax free again this year. This will put another $800 or so more in our monthly paycheck, which will also help with our debt payoff progress.

But, even with these two great developments, no matter how much I play with the numbers it looks like we will still owe about $9,000 at the end of the year.

I know that it will only take us a few months longer, but it is still disappointing.

But I guess you never know what could happen between now and then. I was able to earn an extra $1,000 a month during some months last year - so, you never know . . .

We Are Credit Card Debt Free!!!!!

Yeay!!!!

I just paid off our last credit card!!! $1,889 to our Visa card and it is completely paid!

Only one debt left - our home equity loan ($27,000).

I can't wait to be debt free!!!!

Our 2008 Debt Snowball

(photo courtesy of www.stockxpert.com)

Here is what are plan of attack for our debts looks like for 2008. I have listed the amount we plan to pay towards our debts for each month. (We currently owe $3,000 on a credit card and $27,000 on our Home Equity Loan.)

2008 Planned Debt Payments
March - $1,100
April - $1,425
May - $1,425
June - $1,425
July - $1,425
Aug - $1,425
Sept - $6,125
Oct - $2,125
Nov - $2,125
Dec - $2,125

If all goes according to this plan, this will leave us with $10,000 left in debt at the end of 2008.

This plan includes an anticipated tax refund of $6,500. I actually expect the refund to be a lot higher (I know, I need to change our withholding, and I will after I see what our exact refund will be). The refund could be as much as $4,000 more - in which case we would apply that to the debt, and lower the end of the year debt balance to $6,000.

I am hoping that by snowflaking all the money I can and starting once again to try to earn some extra income by selling things on ebay, etc., I am really hoping that somehow we might possibly be able to become debt free by the end of 2008!

Today's Snowflakes

(photo courtesy of www.stockexpert.com)

Just "snowflaked" a little more money towards the debt we are currently "attacking". (We are paying off our debts using the debt snowball method. We are paying our debts in order by balance, from smallest to largest. We are down to our last two debts. A credit card on which we owe $3,000 (which is the one currently under "attack") and our HELOC (home equity line of credit) on which we owe $27,000.

So, today I received a couple of paypal payments that amounted to a total of $159.51. So, I transferred the money from paypal to my bank account and then made an on line payment of $159.51 to our credit card. Our on line bank account even popped up a warning that we just sent this account $22 yesterday and asked if we were sure we wanted to send another payment. Yes! we are sure!

I really like this "snowflaking" method!

Read more about snowflaking at I've Paid For This Twice Already and The Snowflake Revolution.

The Ultimate Credit Card Cut Up Contest

The Penny Saved is holding a Cut Up Your Credit Cards Contest and is giving away several prizes, including two iPod nanos!

This was just the inspiration I needed to take the plunge! Seven cards gone, one to go! (I am holding on to the last card until we have funded our Fully Funded Emergency Fund with the money to cover six months of living expenses.)

We are down to owing just $3,000 on our last credit card (still owe $27,000 on the HELOQ), and expect that card will be paid of in the next couple of months.

I encourage everyone to get out your scissors and join in the contest!

The Snowflake Revolution

I have joined The Snowflake Revolution!

This is a great idea that goes along with the Debt Snowball.

Today I paid our Electric bill. I had budgeted to $187 and the actual due was $165, so I "snowflaked" the $22 difference. In other words, I took the left over $22 and applied it to the debt that I am currently attacking (our last credit card). This is in addition to our normal debt snowball amount (of $1,100).

Little by little, in this way, our debt will get paid off faster!

Why not give it a try?

Braces Update

(photo courtesy of www.stockxpert.com)

Thanks to everyone who commented on my Braces dilemma.

I decided to not pay in full up front for the 5% discount. The reason I decided this isn't really financial. After I thought about it for a while, I started to wonder what would happen if we were unhappy with the services we were receiving or what if we needed to relocate for my husband's job (unlikely, but anything's possible). If I had paid in full it might be difficult to get a refund of any funds. If I pay as I go I feel I have more flexibility. And, there is no finance charge of any kind, so that makes me feel like this is not a new debt.

Could We Be Debt Free in 3 Months?

With mortgage interest rates going down, we have been considering refinancing. We currently owe $240,000 on our house. We are 5 years into a 20 year mortgage with an interest rate of 5.25%.

We are thinking about refinancing to a 15 year mortgage. Currently we could get a rate of 4.99%. This would not extend the term of our mortgage and would save us money every month.

What I hadn't thought about until last night is this - I think we need to "pay off" our HELOQ before we can refinance. Since we don't have $27,000 (amount of the HELOQ) sitting around, we would need to include this amount in our refinance. So instead of refinancing for $240,000, we would need to refinance for $267,000.

I ran the numbers and it seems that we would still save a significant amount of money each month:

"If you refinance your current 5.25% mortgage and your current 8.25% mortgage into a single 4.99% mortgage, your monthly payment will decrease by $279.97 and you will save $51,688.20 in interest charges over the life of the mortgage."

(Am I figuring this right?)

And I can't help but get excited about the fact that this would have us completing Baby Step 2 in the next 3 months! I know that this isn't really paying off the HELOQ, but just rolling that debt into our mortgage and extending the payments over 15 years. But it seems like this option will save us a good amount of money. And I would be soooooo happy to move on to the next step of saving our Fully Funded Emergency Fund. And then on to saving for college (which I have been worrying about since DD1 will start in just 7 years and nothing saved yet!).

Any comments on why this approach may or may not be good would be much appreciated!

(Somehow it seems too good to be true - and that makes me suspicious!)

Update On Debts

Well, we have been plugging along for just about one year now since we found Dave Ramsey and began our journey in February of 2007.

When we started we had $44,000 in debt, not including our home mortgage.

Currently our total debt is $29,992, not including our home mortgage. So, a little over $14,000 paid off in one year. Even though if you include the interest we paid it was more than $14,000 - it still seems like we should have been able to pay more (since my husband is lucky enough to earn a six figure salary). I listen to the Dave Ramsey radio show and some of the stories from the callers are just amazing. People with significantly smaller salaries have been able to pay off significantly more money in one year. I think we need to get more "gazelle"!

Our last two debts are:
Credit Card: $3,575
HELOQ: $26,417

The credit card should be paid off by May. Then we'll just have the HELOQ to worry about.

If we continue with our current snowball amount of $1,100 it will take us until August 2010 to pay off the HELOQ. We should really be able to do it much faster.

If we could raise our snowball amount to $2,100 (which is what I had originally planned when my husband got a big raise a few months ago) we could have it paid off by March 2009.

The problem is that we have some expenses that will need to be dealt with along the way, and it seems these are in effect lowering the snowball amount from the $2,100 back down to $1,100. Here are the upcoming expenses:

- Braces for DD1, estimate: $3,000+ (out of pocket)
- Sister possibly having a destination (Caribbean) wedding this year, estimate: $3,500+
- New furnace/heating system to buy this summer, estimate: $4,200+

We need to complete our tax return and see how much we'll be getting back. And I guess we'll be getting the tax stimulus money, so these things could help.

I would really like to be debt free within the next year. And I think we can do it if we really put our minds to it!

One other possibility is that we might refinance our home mortgage. We currently have 15 years left on our 20 year mortgage. If we refinance we'll go with a 15 year mortgage so the term will be the same. We'll see what interest rate do over the next few weeks.

Oh, just thought of this - if we refinance the mortgage I think we'll need to pay off the HELOQ or roll that debt into the refinanced mortgage. Even though this is really just transferring the debt and spreading the payments out over 15 years, this might be a way that we could move forward to saving up our Fully Funded Emergency Fund of six months of living expenses. This is very appealing to me as I definitely feel a lack of security in not having significant savings. And we need to get started seriously saving for the girls for college. The oldest will start in just 7 years!

Refinancing is sounding better and better. Am I looking at this the right way?

The Big Raise Pays Off!

Well, several weeks ago I posted about my husband's great promotion and raise. Well, we just found out that he's getting a $22,000 bump in his base pay! This is sooo great! The major portion of his salary is still commission, but now we can count on an extra $1,000 in his monthly take home pay! (Now there is the chance that the commissions could plummet and we'll end up taking home less than before, but that is unlikely.)

So, I have already done a revised Debt Snowball where we throw $2,100 per month at the debts (instead of the current $1,100) and if we really can keep up with that kind of a snowball - we'll be debt free in March 2009!! (This is sooo much better than the original debt payoff date of August 2010!)

Obviously, I am happy about the possibility of us getting out of debt sooner rather than later. But there are two specific reasons that this is making me sooo happy!

The first is our car situation. In the near future, we are going to need to replace our minivan. It is very old and is starting to have problems. I am willing to drive it as long as possible (eventhough it has a big rust spot on the front of the hood of the car!), but chances are we will need to replace it sometime over the next 3 years. This has always been in the back of my mind, nagging at me, because if we took 3 years to pay off all of our debts, how could we possibly save up to buy another car? (This is a point my husband would point out to me every time I mentioned how well we have been doing paying off our debts!)

Now, if we can become debt free in 17 months, that should give us enough time to save up and pay cash for our next car. And now that we'll have $2,100 instead of $1,100 each month, we'll be able to save up enough that much faster!

The second reason that I am very happy is - at the beginning of the summer, I spent some time plotting out the probable dates of some future large expenses. (I didn't even put new cars into these equations.) I plotted out start of college for Daughter #1, Daughter #2, and Daughter #3, as well as possible wedding dates (age 28?) for each of my 3 Daughters. Then the possible retirement date for my husband (age 64?). Next to each expense, I put an estimate of the amount of money that would be needed.

I also put the date when we would possibly have the mortgage paid off, and added the monthly mortgage payment towards our available income. I assumed that our money was invested with a return of 8% (actually 12% adjusted for 4% inflation).

I tried and tried but couldn't get close to having the appropriate amounts by the appropriate dates. Even when I assumed that we started saving $1,500 per month immediately (which was quite a stretch given that we only had $1,100 and it was earmarked for debts for 3 more years, and the fact that this didn't take into consideration the need for car replacement, home repairs, or other sinking fund type expenses) - and even with these stretches we still came up a little short for each of the expenses.

I haven't redone all of the math, but I think we are a lot closer to being able to achieve our goals with $2,100 a month!

I really can't wait to tell my husband "I told you so" when we pay cash for our next car! :)

The Four Laws of Debt Free Prosperity (Book Review)

The Four Laws of Debt Free Prosperity by Blaine Harris and Charles Coonradt with Lee Nelson is an excellent book that explains the principles of financial control necessary for enjoying a well-balanced life. I liked it so much that I added to "Books I Recommend" that are available for purchase through Amazon.com.

The book is entertaining and easy to read as it explains the laws through the story of a man named Paul Smith and his neighbor Mary Sessions (based on a true story). Paul is a man deeply in debt and on the brink of financial disaster. Mary is his elderly neighbor who befriends him and teaches him The Four Laws of Debt Free Prosperity.

Though the book was written in 1996, its financial principles are timeless and in accord with the teachings of many of today's financial gurus, such as Dave Ramsey.


Tracking - The First Law of Debt Free Prosperity

The book asserts that, "Tracking daily expenses is the first necessary step toward any kind of financial success." It goes on to explain that without record keeping, you have no way of telling how well you are doing. It suggests that you keep a record of every single expense. I started to think about this and came to the conclusion that recording only my daily earnings and savings is not giving an accurate financial picture. I think I could use some improvement in this area, so beginning in August, I am going to add a record of my expenses to my Daily Progress Report.


Targeting - The Second Law of Debt Free Prosperity

The book claims that setting targets, or goals, is necessary for financial success. It presents some guidelines on setting and achieving goals from the book The Game of Work by Chuck Coonradt. (I have added that book to my list of books to read.) He asserts that goals must be written ("goals not written down are wishes"), they must be your own, they must be measurable and specific, they must be stated in the most visible terms available, and they must contain a deadline. I figure that I've pretty much got this one covered with my clearly defined goal of paying off $44,000 by 10/01/10. And I figure that it doesn't get much more visible than on a blog!


Trimming - The Third Law of Debt Free Prosperity

"The third law is: live on less than you earn so you can have a surplus to get you out of debt and invest in assets that appreciate." Also described as trimming, as in trimming your expenses. They suggest that you pay yourself first, by using 10% of your income to pay off debts or invest, and living on the 90% that is left. In this way you will automatically adjust your spending, whereas if you try to wait and see what's left at the end of the month, there will be nothing left. (I can attest to that!)


Training - The Fourth Law of Debt Free Prosperity

The book asserts that "The people who understand money spend it on assets that generate wealth. Those who don't understand money, spend it on things that consume wealth, and thus the rich get richer and the poor get poorer." So, financial education is necessary for financial success. I think this makes sense. When I am finally out of debt, I will need to brush up on what to do with my money. (I got a good start with this from another book that I will be reviewing soon.)


So, that is a summary of the four laws. The book also explains how to pay off your debts from smallest to largest, using the "debt eliminator" strategy, which is exactly the same thing as a Debt Snowball.

It also contains several investment tables that are very encouraging. One shows how in just 6 years you could pay off $31,131 of debt AND save $51,467 by paying/saving $1,120 a month (which happens to be very close to my current debt and the amount I am currently snowballing!).

Another is titled "Save to Become a Millionaire" and shows how much money you would need to save monthly to have $1 million, $2 million, and $3 million by age 65 (invested at 15%). For someone 40 years old (I'm 39 1/2), I could have $1 million by saving $300 a month, $2 million by saving $600 a month, and $3 million by saving $900 a month. It is even more encouraging if you are younger. If you are 25 years old you could have $1 million by saving just $30 a month, $2 million by saving just $60 a month, or $3 million by saving just $90 a month!

Yes, 15% interest might be a stretch, but I find the figures very inspiring. I have two sisters who are 27 and 29. I so want the to start now!

Anyway, I found this to be a really good book. None of the Laws are really anything new. But financial success is like dieting success. We all know what to do, but we may need some encouragement to do it. I found this book to be great encouragement!

No Credit Needed Network

Well, it's been a big day here at Finding Financial Peace. First I got listed on Paula Neal Mooney's List of Blogger Salaries. Now I have become a member of the No Credit Needed Network.

This is a fun site that anyone can join. And you can have a pie chart created for you that shows your total debt and how much of it you have paid off so far. You can visit periodically and make updates to your chart as you make progress. You can also watch the progress of the other members.

And if you are lucky enough to be currently working on building your savings, you can also have a pie chart created for that.

Check it out!

Debt Snowball Calculator at WhatsTheCost.com

If you are working towards getting out of debt, you have probably heard of a Debt Snowball. If you want to see how long it will take you to pay off all of your debts using this method, check out this great on line Debt Snowball Calculator at whatsthecost.com.

I really love this debt snowball calculator as it charts out all of your payments, including interest, and shows you exactly when you will have your debts paid off. It is fun to play with the payment amounts and see how a little extra money can move your pay off date up by quite a bit.

There are also several other financial calculators on this site that could be helpful.

If you are fortunate enough (or smart enough!) to not be in debt, or you just haven't heard of a Debt Snowball, this is what it is. It is when you make a list of all of your debts and their minimum payments in order from the smallest debt to the largest debt. Add up all of the minimum payments. You will pay at least this amount towards your debts even as some get paid off. So, you pay the minimum on all of your debts except the smallest one. This one you pay the minimum amount plus any extra money you can get your hands on. You continue in this manner until this debt is paid off. Then you take focus on the next smallest debt taking the amount you were paying on the last debt and adding it to the minimum payment for this debt, along with any other money you can get your hands on. As each debt is paid off and you add the payment you were paying on that one to the next one, your snowball grows. After a while you are hitting your largest debts with very large payments and thus paying them off very quickly.

Why I Started This Blog - My Story

I started this blog because I am on a quest for financial peace and want to share what I have learned with others so they may also work towards financial peace and benefit from what I have learned.

As I have been a stay-at-home Mom for the past ten years, my family has learned how to live on one income. We had always planned that I would stay home with the kids and therefore even when we were DINKS (double income no kids) we resisted buying an expensive house that would require two incomes to support. Instead we bought a modest two family house. We lived downstairs and rented out upstairs. Even though this was a wise financial decision, instead of saving bundles of income during this lucrative time when our expenses were low and our income was high, we saved almost nothing at all. In fact, we even managed to spend a little more than we made. In other words, like most Americans, we accrued debt. Nothing outrageous, or so we thought. Just some furniture and a few vacations put on the credit card.

Once I had my first daughter and stopped working, we cut back our spending and managed to live on my husbands ample salary. Well, almost. We basically continued to spend just a little more than we made, or live just a little above our means. After we had two more children and moved to a larger house and my husband's income continued to increase, so did our spending. Then when my husband changed jobs and no longer got a company car, we went into more debt to buy a $22,000 SUV. As our income went up, so did our spending.

Finally, a couple of years ago I got serious about saving money. The grocery bill became my number one target. I realized that food was our second largest monthly expense, exceeded only by our home mortgage. I was on a quest to get the grocery bill as low as possible. (Read my article The Secret To Saving Money On Groceries to learn how keeping a price book drastically reduced my grocery bill.) The problem was we didn't have an overall plan. Saving money on groceries is great but it needs to be in the context of an overall family financial plan.

Then in February 2007 I stumbled upon Dave Ramsey. I read Financial Peace and The Total Money Makeover. I found his website and signed up for the Financial Peace University class. I listened to his daily talk radio show. I learned that his six Baby Steps to financial peace make a lot of sense! (Read Dave Ramsey Knows The Way To Financial Peace to see an outline of the Baby Steps.)

So, now my family has a plan. We are on Baby Step 2 - Pay off all debts except for the home mortgage. This includes car loans, home equity loans, credit cards, student loans - any type of debt at all (except for the home mortgage, that comes later). We started in February 2007 with $42,000 in debt. As of May 2007 we have paid down $4,000. Not bad on a tight one income budget with a large mortgage payment, but at this rate it will take us about 5 years to be debt free. Too long. So, I recently started my quest to earn an income from home. It has been going very well and I will be posting my progress along with opportunities for earning money that you may consider taking advantage of yourself.