Dreaming

Dreaming…

With our unexpected refinance, comes a little unexpected money. Or at least that’s what we’ve been told. Due to the refinance, we should have one skipped mortgage payment. That means we have about a $3000 windfall coming our way, potentially.

$3000… what could we do with that money? Pay off debt. Go on a small family vacation. Buy a nice piece of jewelry. Use it towards Christmas. Honestly, the possibilities are endless. And I have been thinking about what we should do with that money.

First of all, we need to bump our emergency fund back up to $10,000. It has slowly been eroded away and right now only has about $7900. (With The Husband’s extra paycheck in November we are taking $1000 of that paycheck and putting it into savings, still leaving us about $1000 short of $10,000.) So, right off the bat, if we do get to skip one mortgage payment and have that extra money to spend, the first thing we will do is put $1000 in savings. This will bring our emergency fund up to *$10,000, which is where we like it to hover while we are paying off debt.

*Side note: $10,000 is not a 3 – 6 month emergency fund like all the experts say we should have. We just can’t afford that while we are getting out of debt. However, $10,000 will pay all of our bills for 2 months. Of course, we are talking bare bones expenses, but we could last 2 months with absolutely zero income on this emergency fund. $10,000 would also cover most other emergencies: new washing machine, new air conditioning unit, something for our pool, a medical emergency for one of The Kids. You get the point. It will be nice to have, what we consider, a fully funded mini-emergency fund again.

Assuming this all falls out the way we expect it to, that would leave us with $2000 to decided what to do with. After funding our emergency fund, the remainder of the money will most likely go towards our credit card debt. $2000 is a huge chunk of money and, coupled with our normal monthly payments, will make a bid difference on our credit card balance.

We are trying to build a financially stable house; like we’ve never had before. Getting out of debt is one major way to do that. But, so is having a financial safety net. We do not want to have to charge every little emergency that comes our way. Paying off debt and saving for an emergency are two ways we are actually helping ourselves.

At this point, it is just dreaming. We don’t have the money and don’t know for sure if we are going to get it. Our refinance closes at a weird time so we might actually be paying our mortgage every month with no “skipped” months. But, it’s fun to dream and fun to think about how we could use extra money.

Debt and savings, that’s how I want to spend any windfall we might get. Debt and savings. Pretty boring I know, but that is where our hearts are and where our goals are.

"Unexpected" Refinance

We are refinancing our house… sort of unexpectedly but sort of not. I know that probably doesn’t make sense to anyone, so let me explain.

The Husband and I have been talking about refinancing for probably close to 6 months now, however we haven’t really done anything about it. When we bought our house, we only had 10% to put down so we took out 2 loans: one at 80% and one at 10%. I am sick of paying 2 loans! We paid two loans the entire time we were in our old house… 13 years! And have been paying two loans since we moved into this house 2 and a half years ago.

Our house has appreciated enough, that we now have over 20% equity and we have been saying “we need to refinance, we need to refinance” but we haven’t made any concrete moves towards doing so. Enter a random form letter in the mail from our main loan servicer. It was about lowering our interest rate.

After opening it, I left it on the counter for The Husband to see. He took it and called the next day. The loan officer took down some of our information and ran our credit to see what we qualified for. (*Just an aside, my credit is pretty good at 808 and for once it’s higher than The Husband’s whose was 793.) We qualified for a zero-cost refinance that would lower our interest rate by .5%. I know that doesn’t sound like much, but that .5% would have lowered our total monthly payment by about $170. And the best thing of all, is that our loan would not start over. It would amortize over 27.75 years, which is what we have left to pay on our current loan.

After talking about it, we decided to look into our bank’s rates as well as finding out the rates with our mortgage lender for a traditional loan with fees. Our mortgage lender was able to be competitive with the banks rates and still amortize the loan over <28 years. They offered a mortgage rate 1% lower than what we are paying now, that would amortize at the same time as our current loan, and bring us to only having one loan to pay instead of two. And all of this for $300 less than we are paying right now!

It will actually save us more than $300 per month because we pay $375 per month on our HELOC, plus a little extra on our first. Going forward, we will still continue to pay the extra on our first and round up to the nearest hundred but won’t have to pay our HELOC. That is $375 more each month to go towards our credit card debt!

Because we are staying with the same loan servicer, our mortgage will not start over. (Which I am so thankful for because we are already behind the 8-ball on our mortgage and didn’t want to start all over again in our 40s!) It has also made the entire loan process pretty painless. We haven’t needed to provide any bank statements, retirement accounts, proof of work or residency. There are a few things we do need to provide, however. We needed to give them a copy of our contract with solar to prove there isn’t a lien on the house and a few more, relatively minor documents.  As our mortgage is currently with them it has been so easy! We started the loan process last week and have been able to, and will be able to, sign everything electronically.

We have never refinanced a loan before so we don’t know what the “normal” process is, but this process has been so simple. And worth it. We are going to save over $300 every month, over $72,000 over the life of the loan (more if we pay extra each month), and still pay it off in the same timeline as our original loan through them.

For us, that form letter couldn’t have come at a better time.

Our Money Journey - Part Three

Age 38 – 40

Here is the last installment of my series detailing our financial journey. Parts one and two can be found here and here, respectively.

We put our house on the market on a Thursday, had an open house the following Saturday, 4 offers by Monday evening, accepted an offer on Tuesday, and on Wednesday morning we were on a plane to Washington D.C. for 10 days. It was a whirlwind for sure!

Our house sold very quickly and for over the asking price. Now, we had to find a new place to live, which was beyond stressful. We were very picky and wanted to buy our forever home the second time around. We didn’t want to buy a house that didn’t fit our needs and that we would have to leave in a few years.

We had several MUST HAVES and many WOULD LIKES on our new home wish list.

MUST HAVES

One story

Quiet street

2 Bathrooms

Decent sized Yard

Fireplace

Soaking bathtub in the Master

Attached Garage

Space for computer in the common area

WOULD LIKES

Christmas Tree window

Open Concept Living

Pool

Updated Electrical and Plumbing

Pantry

Bookshelf in the kitchen for cookbooks

Eat-in kitchen

Surprisingly, after months of searching, we finally found the perfect home for us. It ticked every box in every category we had, and then some! But it came at a price.

In the purchase of our second home, again we did not buy above our means, but it was expensive. Now we had to pay our new and increased mortgage and pay increased bills to go along with our shiny new house. All this was on top of the $13,000 worth of credit card debt we had racked up during our kitchen remodel for the old house. Even with all these new bills, we never changed our lifestyle. We continued to buy whatever we wanted and put it on the credit card.

During this time, our credit card ballooned to $21,600. We just kept charging and burying our heads in the sand.

Although we were in heavy debt, we weren’t exactly living paycheck to paycheck during this time. We do (and did) have some money in the bank and we are contributing to our retirement. We don’t have nearly as large as an emergency fund as we would like, but we have about 2 months’ worth of expenses in the bank if something were to happen. Additionally, we are diligently adding to our retirement. As a teacher, I have a mandatory 10% of my paycheck taken out for retirement and I contribute another 6% above that to a 403b (however, starting next month, I plan to up my percentage an additional 5% so I will be putting 11% into my 403b on top of the 10% put into my CALSTRS account). The Husband is contributing 13% a month to his retirement and he has a 3% match from his employer. On top of that, his employer gives 6% profit sharing every year. Next year we are hoping to max out The Husband’s retirement and then will work to max out mine. We are not quite there yet as we have credit card debt we need to get rid of.

You know most of our current stats. We are trying to get out of debt. In the past, we relied on 401Ks or pensions we cashed out to pay off debt. Now, we are digging ourselves out of debt one spoonful at a time. Currently we have about $18,000 of consumer debt, of which, $16,000 is on our credit card.

Over the past year, that’s a decrease of over $5000. It’s not as much as we’d like, but it’s progress. And it’s progress that we’ve made by paying down our debt and budgeting and by working hard.

That’s it. That’s where we are and where we’ve been financially. Hopefully we are heading to debt freedom!

This was a great post to write because it has been so reflective. It made me revisit our mistakes and celebrate our successes. It made me take stock of where we are and helped me to focus on where we want to go.

This is our financial journey. It doesn’t end here, we have a long way to go, but it has been an interesting trip down memory lane.

October Debt Update

This is only my second debt update since March! EEEEKKKK! I’m really trying to get back into blogging about my progress, keeping myself accountable, and getting out of debt! We actually did pretty well last month, decreasing our debt by 11.5%! I wish every month was that great! You can find our last debt update here.

I’m a little bummed because this update isn’t going to be as good as I had originally hoped. We did make progress on our debt, but we were derailed by some other things. My mom owes us several hundred dollars for different things we’ve purchased for her online or at stores (all for Christmas), and my sister owes us $200 for show tickets that I thought she would have paid us back by now. I’m not worried, I know we will be paid back everything we are owed, but that just means we charged some stuff on our credit card that wasn’t paid off like we thought it would be, and because of that, we didn’t make some of the goals I had planned for us. I just need to remember that our debt went in the right direction and we still decreased our total debt.

This debt update is based on our current totals from our last update. I do these mid-month because our credit card closes on the 15^th. I can’t wait for the day when we are consumer debt free and I can do our financial savings updates at the beginning of each month!

For various and sundry reasons, we still have a ton of credit card debt. We are going to keep decreasing our credit card balance until it reaches $0! Even though we are mired in debt, at least our car loan has continued to decrease. We have a 0% loan so it’s nice to see the payment actually affect the bottom line; to that end, I don’t really focus on paying extra towards our car payment because it’s at 0% interest. I know that goes against what Dave Ramsey teaches, but I can’t see paying more interest on my credit card balance just to get an interest free loan paid off quicker.

Although we are not paying off our debt as fast as I would like, I am happy to say that for the second month in a row, our overall debt decreased! Usually we are not making giant leaps and bounds in our debt repayment, but believe that slow and steady wins the race, but last month was actually pretty good as far as debt progress goes. I’m hoping this month’s progress looks pretty good too. Let’s get to the numbers!

Here are our current debt totals:

            $15,395.43      Credit Card at 16.74% interest

            $1645.00         Car Loan at 0% interest    

      

Our total debt stands at: $17,040.43 YIKES! It’s still a lot of debt, but I love seeing that we are making progress! I wish I had known how close we were to getting under $17,000 in debt, I would have tried to schedule another payment to get there, but I can only do what I can do. All we can do is just keep plugging away. We dug our hole one shopping trip at a time and all we can do is pay it back one month at a time.

Plus side: we started actively tracking our debt again! Our debt decreased! We paid off almost $1000 of debt, $969.85 exactly, which amounted to about 5.4% of our total debt. The fact that we haven’t borrowed any more money from The Kids is a plus. We continue to make progress towards our retirement and to contribute $50 a month to our kids’ bank accounts.  This debt update has our lowest credit card balance and debt totals since our September 2017 debt update. For 2 years, our debt was a roller coaster, down and up and around. No more. This update shows we are making progress. Actually, compared to September 2017, our credit card debt is higher, but our overall debt is less. We are making progress, albeit slow. Hopefully we can ramp up our progress and NOT increase our debt again!

Down side: No matter how much debt we pay off, it’s never enough. We also had a few months of backsliding and not keeping track of where we were that we are still trying to recover from. L Also, we did still charge on our credit card. Of course I also hate that several hundreds of dollars went towards interest on our credit instead of towards the principal. Because we are owed some money, we didn’t decrease our balance on our credit card as much as I would have liked. It’s actually a little depressing to see how long we have been on this roller coaster called debt freedom. We made some poor choices and have been living in a debt cycle for too long!

Looking forward to: getting our credit card debt below $15,000 and keeping it that way, also making continued progress on our car loan. I’m also looking forward to staying on the debt pay-off and blogging band wagon! I was off of it for too long and it feels good to be making progress again! If we have an exceptionally good month of debt payoff, we should be able to get down into the $13Ks with our credit card debt. (It’s so crazy to say that I would be excited to be in the $13K range!) Hopefully, we will be paid back by the people who owe us money and we will be able to send that money right to the credit card. I am also looking forward to getting our total debt below $17,000 and maybe falling somewhere in the $15K range for our total debt if we have another good month of payoff. The most difficult part of this plan is the timing. We are inching nearer and nearer to Christmas: the most expensive time of the year. I have a little “Christmas nest egg” but I don’t know how far it’s going to carry us. I still have a lot of presents to buy, a party to plan for, and traditions to keep. We’ll see how we do.

Clearly, I’m not in an ideal situation. But if I have to get out of debt one baby step at a time, I can do that.

I hope your debt freedom journey is smooth, uneventful, and beyond successful

Our Money Journey - Part Two

Here is part two of our financial journey. If you are at all interested, you can find part one here.

Age 27 - 32

At this point, I went to work full-time as a teacher. We didn’t have to pay for day care as my mom watched our kids. But the kids were also getting older and getting involved in more activities.

By now, we pretty much stopped adding to our debt, as I was making more money, but we didn’t make much progress on it either.

We were able to pay cash for almost everything we needed or bought, but our payments towards debt were minimal. We made payments and, in fact, even made small dents in the debt, but we never really made much progress. We were treading water and still living paycheck to paycheck. We didn’t put any money into savings and were not actively contributing to our retirement, other than what was involuntarily taken out of my paycheck. The Husband was still working for the same large company and they did offer a pension plan that he was fully vested in.

Age 32 – 37

At this point, The Husband switched jobs. Leaving a stable company in the middle of the Great Recession was crazy in my book, but we prayed about it and really felt like it was the best option for our family.

He got a huge pay raise but took a cut in his vacation time. It was a trade-off we were willing to make.

Because he was fully vested in his pension at his old job, we decided to cash that out to pay off our credit card debt and be able to start fresh.

During this time, we also bought a new car for The Husband. Nothing fancy, but something to get him reliably to work every day. We put a minimal amount of money down and took out an interest free loan for about $20,000. Another debt to add to the pile.

With the pay raise, we were able to travel more and start doing major home renovations. We were able to pay for these all with cash. We charged a lot on our credit card each month but had no problem paying the balance in full every month.

Although we were living within our means, we were JUST living within our means. We did contribute to our retirements, but we didn’t put anything in savings. We didn’t save for a rainy day and were still living paycheck to paycheck. This would eventually come back to bite us when we decided to remodel the kitchen at our old house.

Up to this point, all of the remodeling we had done was paid for in full by the end of the project. We were able to cash flow everything. We didn’t understand how expensive a kitchen remodel would really be. We charged everything, just as we had done in years past, but everything was so expensive, that we couldn’t pay it off each month. And the balance started to grow.

It grew to over $13000. (Small aside here. We also had a balance on another credit card that we were paying off slow and steady. The balance had gotten down to a little over $4000 so I took money that should have gone towards our kitchen remodel and put it towards paying off the other card. It didn’t change our debt total, just the way our debt was structured.)

For us, this really became a period of two steps forward and one step back.

At the end of our kitchen remodel, we decided to sell our house. (There were many factors that played into this decision, I swear! For many reasons it really was the right decision for us to sell when we did.)

Stay tuned for the last installment of our money journey. For me, it was an interesting walk down memory lane.

Debt Payoff Chart

A blog I follow, Medium Sized Family, created a “money saving chart” years ago. I liked it. I like it so much, in fact, that I’ve tried to complete it… more than once. And I’ve never completed it. I start one each year with the best of intentions and then three or four months into the year I forget about it. Then I feel so far behind that I can’t catch up, and I let it completely fall by the wayside. I think that happens for a couple of reasons: one, I don’t have enough left over money each week to cross off a square and so I get discouraged, and two, I have so much debt that I want to put all my “extra” money towards debt.

So that got me thinking, what would motivate me? I decided to make my own chart, but instead of a money saving chart, I made a “debt payoff chart”.

Each chart is equal to paying off $2000 in debt. Since I started using them with about $18,000 in debt, I figure I will need to fill in about 10 charts in all (after stupid tax, aka interest is factored in) until I’m debt free. This is also assuming that my debt continues to go in the right direction and that I don’t add any more debt to our already high debt totals.

Since I just got back on the paying-off-debt wagon, I started to fill a chart based on my current totals. It was pretty cool to fill in an entire chart and then some on my first month back.  On our last debt update we paid off over $2200 in debt! In one month! I’m super proud and super excited that we are one chart down with “only” nine to go!

Next month (about 13 days from now, per our credit card billing cycle) won’t be as good, but we are still making progress. I’m already doing calculations in my head to see if I will be able to complete our second chart this month. (Spoiler alert – I don’t think we are quite going to be able to swing it this month, but that’s just more motivation for next month.)

I’m hoping having this little chart to color in each month will be motivation for me to work on getting out of debt! It’s a small thing, but it’s a visual representation of our progress. I’m sick of sending $1500 - $2000 towards debt every month and I can’t wait for the day that we can put that money in the bank. Or buy a new mattress. Or take The Kids clothes and shoes shopping without having to scrimp and save or wonder where the money is going to come from.

The last couple months we have made huge strides! I hope we can keep doing that and that this little chart will help to spur me on! I’m also really excited for the day this “debt payoff chart” can become a “money saving chart”!

As always, wish us luck; as I wish you the best of luck in your debt freedom journey!

Our Money Journey - Part One

I was reading another blog, The 76K Project, and she and I are of a similar age.  Months ago she took a walk down memory lane, she wrote about life and financial journey; I thought I’d do the same for my 40^th year.

She only wrote about her last decade, I think I’ll write about my last two decades, as I feel that’s really when our financial story begins.

When I started this entry, I thought it would be short and sweet, but as I wrote it, the post got longer and longer. Because of how long this post became I decided to break it up into three posts. This post was a long time coming. I started it nearly a year ago and there it languished in my “drafts”, mostly done, but waiting for the last couple of years to be filled in. I don’t know why but I put off writing it. When I opened it and decided to finish it today, I really enjoyed going back and reading what I wrote and finishing it up. But, honestly, our financial journey is still in progress.

Like I said, I never imagined this would grow into a three part series, but once I got started, I just kept writing! This is part one of our financial journey. Parts two and three will be coming in future weeks. Part one details our journey from age 20 to 28. Part two will be about our finances from age 28 to 38 and part three will be about our finances over the last couple of years.

At age 20, I was living at home and attending community college. My parents couldn’t afford to help me financially so I was on the hook for all college expenses myself. (*Note, I was able to live at home, rent-free and that in itself is a form of major help!) I played soccer and my coach there really liked me and helped me to get a full-ride athletic scholarship.  I lived at school from ages 21 – 22 and left college debt free. At the same time, The Husband lived at home and worked at a crummy job that paid tuition reimbursement, so he also left college debt free.

Age 22 – 25

I moved home when my athletic eligibility ran out, not because I couldn’t have finished my education, but because I was so homesick I was ready to be home. By this time, my dad had retired and ironically made more money retired than he made working so he was able to help me financially with the rest of my school.

While I was away at school, The Husband graduated college and got a job working in IT for a large, Bay Area-based company. It was close to home and the most money he had ever made.

Also, 5 months after moving back home, The Husband and I got married. We got married on the cheap… before it was trendy to do so. We spent $7500 on our entire wedding: dress/tux, venue, DJ, flowers, food, photographer, everything. However we didn’t have the money to do that at the time. We cashed out a small 401K The Husband had had to pay for the wedding.

We moved in with my parents while I finished college and got my credential.

We also had our first child.

Age 25 – 27

We lived with my parents for just over two years.

Then we bought our first house. We had no money in savings and no down payment. No problem, right?

We borrowed $6000 from my sister and her husband to “have in the bank” as savings when we bought our house.

At this time mortgage companies were doing lots of shady things and because we had good credit, we qualified for a 0% down, interest only loan, with a variable rate. In fact, we had two loans: one at 80% and one at 20%, both interest only.

When we bought our home, we didn’t buy more than we could afford, however, we had all these new bills we’d never had to pay before and I was only working retail 50%. I worked two days one week and three days the next. Any money we needed over and above our earnings was put on the credit card.

Our credit cards were nearly maxed out and we were living paycheck to paycheck. We had to pay my sister and brother-in-law back and money was tight. We were never late on any bills and never went over the limit on our credit card, but our financial situation was rough!

Tune in next week to read the next step in our journey!