February Debt Update

As you know, life went topsy-turvy and I was a horrible blogger and an even worse budgeter towards the end of last year. As I’ve probably written 25 times, I want to get better. I want to get out of debt. I want to blog more consistently. Here is my attempt, if a little late.

I’m a little bummed because this update, though good, is going to shed some light on our horrible back-sliding from the month of December. We are still picking up the pieces from Christmas and probably will be for about 4 more months. (No, it wasn’t worth it. Yes, I regret it. Yes, I made it a goal to do better this year!)

This debt update is based on our current totals from our last credit card statement. I’m just being real and trying to be transparent. 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 and I don’t have to take into account when our debt cycle closes!

Although we are not paying off our debt as fast as I would like, I am happy to say that for the first time in 3 months, 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:

            $17,570.60      Credit Card at 16.74% interest

            $295.00           Car Loan at 0% interest    

      

Our total debt stands at: $17,865.60 YIKES! It’s a lot of debt. 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. (As an aside, ironically, our overall debt didn’t grow too much from our last update, but it is still above our last total. Our credit card debt increased but with our continued monthly payments for the car loan, they almost cancelled each other out.)

Plus side: we started actively tracking our debt again! Our debt decreased! We paid off $2613.16 of credit card debt and another $350 towards our car loan for a total of $2963.16 paid towards debt, which amounted to 14.2% of our total debt. The fact that we haven’t borrowed any more money from The Kids is still a plus to me. We continue to make progress towards our retirement and to contribute $50 a month to our kids’ bank accounts. We only have 1 car payment left at the end of this month and The Husband’s car is all paid off!!!

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! 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 $17,000 (☹) 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! I am also looking forward to getting our total debt below $17,000. I know I said this earlier, but I’m really excited to only have one car payment left!

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!

Retirement Planning and Saving

We have massive credit card debt! We also have a 401K loan. We also have a solar loan. We also have (an almost paid off) car loan. We owe nearly $20,000 in credit card debt, about $6500 more to our 401K loan, and about $22,000 for our solar loan, not to mention our mortgage. But, despite all this debt, we still contribute to our retirements.

Why?

Because we still have to plan for our future. We don’t want to be a burden to our kids, or financially beholden to anybody in our “golden years” like we are now.

As a teacher in California, 10+% of my pay is automatically deducted from my paycheck before I ever see it. I have also set up a 403b where another $900 a month, or about 12% of my paycheck, comes out automatically. (One of my 2020 goals is actually to raise this to $1000.) $900 is nowhere near the maximum $19,500 per year allowed by law, but it is a start. Eventually, I would like to max out my contributions.

Looking at the numbers, I contribute over 20% of my pre-tax income to retirement. My district contributes some monies on my behalf also.

The Husband has no pension, or automatic deductions, like I do. However, his work does offer a 401K and a small match. When he started this job, we set up a 401K. Currently, he contributes 13% of his pre-tax pay to retirement, or about $13,600. His company offers s a 3% match, so another $3100. His company also gives 6% profit sharing at the beginning of every year, which is another $6300.

Technically speaking and including employer contributions, The Husband contributes 22% of his income to retirement. Generally, in March, The Husband has his review and receives a raise. Of course, raises are not guaranteed. Should he receive a raise this year, it will all go towards retirement, eventually. Assuming he gets a 3% raise (which is typical), we would immediately increase his 401K contribution by 2%, bringing it up to 15%. Then in August, on his work-aversary, it would automatically increase by an additional 1%. His total contributions would be 16%, or $16,800. The hope then would be that he would earn another raise next year of 3% and would then be maxed out for his contributions. We would then start working on increasing my contributions to eventually get them maxed out.

Experts suggest contributing 15%. Combined, we are looking at about 21% of our income going towards retirement. Of course, retirement income is all speculation for us at this point, but we are hopeful that we will reach retirement age and we hope to be comfortable in our declining years.

Obviously, our future numbers are all speculation, but if we are able to meet those goals, we would be setting our future selves up for financial independence and success.

Even though we are in massive debt, we need to plan for our future. It would be so easy to not contribute to our future and put that money, over $2000 pre-tax, towards debt.  In theory we would get out of debt a lot faster. But we tried that, and our debt didn’t decrease any faster. We just stopped digging our hole deeper. This way forces us to save.

For the last several years, any raises we have earned have gone towards our retirement. We have tried to avoid lifestyle inflation. In some ways I think we are successful, but then I look at our debt and I think we aren’t.

Anyway, we will continue to prioritize retirement savings because we need to plan for our future and we want to be comfortable. Some sacrifices now, like debt, will be worth in 20 years when we want to retire. We will get out of debt, it will just take us a little more time this way.

How Did We Get Here?

Sometimes, I look at our debt totals and I wonder “how in the world did we get here?”

I mean, not really. I know how we got ourselves in this situation: living beyond our means.

But, how, or more importantly, why, and most importantly, why didn’t we ever do anything about it?

We live in the Central Valley of California, near the Bay Area. The cost of living here is no joke. We make good salaries, but we drive old cars and don’t live extravagant lives. Yet here we are, mired in debt.

The Kids do participate in extra-curriculars. The Daughter dances and that is super expensive! (Like pay for her college when she stops dancing expensive!) The Boy plays a sport each season of high school: football, soccer, and baseball. We also like to do fun things as a family. We like to have the occasional meal out; we like nice things, but weirdly, we can never afford them!

We do budget “small” (I know that word is relative) amounts to our different budget categories each month, but there’s always too much month for the money to last. Each month, we designate as much money as we can to debt payment. And as it is, we only end up decreasing our balance by $500-700 per month.

I can’t wait to be out of this vicious cycle! Then we can allot more money to each envelope and put a little chunk towards savings each and every month.

I think the craziest thing about our debt is that we don’t live 1% lives. We don’t drive fancy cars. We don’t take expensive vacations. We don’t wear designer clothes. We live a “normal” upper-middle class life… which we couldn’t always afford.

When we sold our first house and moved into our current house, our mortgage nearly doubled. Not to mention that our electric/gas bill doubled too. We didn’t adjust our budget to meet those obligations, and we charged every shortfall on credit. Now, almost three years later, we are still paying for it. And will be for the foreseeable future. That’s how we got here. We were the Jones’s. We didn’t set out to be the Jones’s, but here we are nonetheless.

Now, we are digging our way out of debt. We owe thousands of dollars of debt because we financed a life we couldn’t afford. We didn’t live extravagantly, but we didn’t live within our means. We bought things we didn’t need with money we didn’t have. And now we are paying for it. Our situation is nobody’s fault but our own.

And we are working on it.

S.L.O.W.L.Y. Ever so slowly.

Our debt is going in the right direction: down. Our emergency fund is going in the right direction: up. And we are taking responsibility for the mess we made.

Wish us luck!

Refinancing - The Gift That Keeps on Giving

We have one of those community mail boxes, where there are like 10 mailboxes in one. They are locked so we don’t always get our mail every day. One day last week, when I went to get the mail, I realized there were a couple days worth of mail in there.

We had several tax documents from our church. I’m very happy to say that we gave $1600 to our church last year. That is the most we have every given and we are hoping to more than double that this year! There were a couple of coupons for The Husband to a store he frequents. But, most unexpectedly, there was another refund check from our refinance.

The whole reason we refinanced our mortgage was because we had a first and a second mortgage and did for 15+ years. We had finally paid enough towards our principle and gained enough equity, that we owe less than 80% of the value of our house. A couple of weeks ago we received a refund check from our firstmortgage to the tune of $2800. We did not expect to get anything back from our second, but apparently it, too, was overpaid.

We got a check for $340+; I’m so excited.

This is more windfall money so I am going to split it 50/50. Half will go to savings and the other half towards our credit card debt. That works out to $170+ for both debt and savings.

This small and unexpected windfall will work towards two of my biggest goals for 2020: decreasing debt and increasing savings.

In the first 6 weeks of 2020 alone, we have deposited $2780 into our savings account, most of which is a direct result of our refinance, but that puts us over half way to our goal for the year! That also does not include the couple hundred dollars we have deposited into The Kids’ accounts! (In order to meet our goal of $5000 into savings, I found a challenge on Pinterest that tells you how much money to deposit each week. I also used the “extra” money from the refinance and my normal deposits. I should have no problem meeting this goal!)

Anyway, this was just supposed to be a quick post about getting some more unexpected money and what we planned to do with it! Hopefully we will put it to good use.

This and That

Warning: this post is going to be all over the place.

I’m feeling thwarted in my debt pay-off progress. And I know I have no one to blame but myself! I don’t think it is anybody else’s fault. I am just feeling like we aren’t making much progress and are living in a two steps forward, one step back universe right now.

Unexpectedly, we received about $2800 back from our refinance. I wrote about it here.We decided what to do with it. Some of it, about $100 covered a shortfall in our budget for that budgeting period, which was nice so we didn’t have to transfer money over from our savings. Another almost $100 covered a dinner out with my mom that I wasn’t planning on or expecting. (Since my dad died, I’m trying to go out to see my mom once a week. This week we ran errands and then grabbed dinner.) The remaining $2600 was split between savings and debt. We put $1300 into our savings, which was great because it topped us back up over $7000 (slowly trying to make our way back to $10,000 in our emergency fund). The other $1300 was sent towards the credit card.

We also have an “extra” $3000 on February 1^st because we get to “skip” a payment due to the refinance.  We also split that money, though not 50/50. We are putting $1300 in savings, which, along with our regular savings will put us at about $8500 in that account. Though we won’t yet be at our goal, we will be much closer than we were when we started the year. The remaining $1700 will all go towards our credit card.

The two “extra” credit card payments, coupled with our regularly scheduled payments, should make about a $4000 dent in our credit card debt.

As part of a frugal challenge that I participated in, I tracked all of our January expenses… and it wasn’t pretty. We spent a ton of money. A lot of which went on our credit card. WAH…WAH…WAHHHH…. Because of this, for the month of February, I am going to take my credit card out of my wallet and see if that makes any sort of difference in our spending. Some of the things we charged, I even had cash for in my wallet, but “charging” has become such a habit. A bad habit!

I am really trying to fill my envelopes with the amount of money that we actually need. It has been difficult. I am increasing the amount of money that goes into our envelopes, but that decreases the amount of money that can go towards debt. But, I guess if we don’t need to charge more because we have the cash to pay for things, then the overall decrease would be more, right?

Kids are expensive. I can’t fill our “school”, “kids’ activities”, or “clothes” envelopes fast enough. Or with enough money. I have increased both the school and kids’ activities envelope from $100 to $200. I’m still not sure that’s enough. I increased the clothes envelope from $200 to $400, however, to be fair, that starts in February and The Husband and I both use money from that envelope, it’s not just The Kids. Ugh!

With my 20 for 2020 goals, I’m hoping to see some real financial progress by this time next year! But in truth, I’m hoping to see some financial progress even before that! I want to see meal planning paying off in fewer trips to the grocery store and lowered food spending.

2020 February Goal Review - Part 2

Welcome back to installment 2 of February’s 20 for 2020 update. In my last post I reviewed the first 10 goals of our 20 for 2020. Here’s how we are doing on the last 10…

1.  Open, and use, a Health Savings Account for The Husband’s braces.

Pass: This is done! The Husband’s company loads all the money at once, even though it is only taken from his paycheck each pay period. The braces are paid for in full (we got a 5% discount for paying all at once) and The Husband loaded a little extra money to pay for doctors appointments throughout the year!

2.      Increase my 403b contributions by $100 sometime during the year.

No progress here: No progress here. Hopefully sometime in the next 11 months.

3.      Increase The Husband’s 401k contributions by 3% by the end of the year.

No progress here: Hoping to accomplish this through a raise… The Husband’s review is usually around March so we will know then if this will be easily feasible or not. He generally receives a 3+% raise that we designate to retirement.

4.      Have one billing period where I don’t charge ANYTHING (except autopays) on my credit card.

Fail: Charged way more than I even wanted to last month and already have several charges on the statement for February.

5.      Have a successful “No-Spend” September.

No progress here: It’s not September…

6.      I want to drink the loose leaf tea I already have and not buy anymore until I am only down to 3 flavors.

Pass-ish: I did buy tea, but I used a gift certificate, so not my own money. I bought 2 flavors I love and was out of and one more that sounded good. I’m calling it a pass because I did not spend my own money. I’m also calling it a pass because I have finished 2 flavors of loose tea since I wrote this goal!

7     7.  Add all our “subscriptions” to our monthly budget.

On-track: No specific progress on this front yet. Working on this for our March budget… hopefully.

8.      Don’t spend any money, out of pocket, on supplies for my classroom. (This does not include lessons I might choose to purchase.)

On-track-ish: This one is really difficult. I have bought treats for my kids. Does that count? I also bought toner for the printer on my desk; but that is my personal printer that the district does not upkeep. I did order (through my site secretary) toner for my district supplied printer, so that is a win.

9.      Keep current (monthly) with what I owe The Kids.

Fail: I still owe them for old hours and haven’t paid them. This is just sheer laziness! I need to do the math and gather the money. Must do better here! Should be caught up by March!!!

       10. Check in on my financial goals monthly.

Pass: So far so good. It’s so easy to be vigilant at the beginning of the year. The real test will be if we are checking in on our goals next October!

Overall, I’d give myself a B-. I am “passing” on 9 of 20 goals, on track with 4 more, “failing” with only 3 of our goals, and “on hold” or “not yet started” another 4. I’m feeling pretty good about our start. We still have a long way to go but are making pretty good progress.

I can’t stress enough the fact that if we are successful with these goals, we will definitely be creating a firmer financial foundation!

2020 February Goal Review - Part 1

2020 Financial Goals

One of my intentions for this year is to check in on my 2020 financial goals monthly! Although I am horrible at finances, one thing I have learned over our last 10 years of debt, is that when I pay better attention to our finances, our finances do better...

I still believe that if these 20 financial goals are met we will drastically improve our financial situation by the end of the year! In all honesty, even if only some of these goals are met, we will be in a better place than we were when this year started. Please wish us luck as we try to do better and be better!

1.  Get credit card debt below $10000. This has been a monkey on my back for way too long!

Pass-ish: We are making progress. We had two unexpected windfalls and put half of each towards debt plus made our regularly scheduled payments. So, again, I would say on-track-ish.

2.Track our family spending every other month of the year.

Pass: We tracked January and it wasn’t pretty. I’m hopeful for March.

3. Increase contributions to envelopes and go “cash only”.

Fail: We have actually met 50% of this goal, but because 50% is an F, I’m giving us a failing grade overall. We did increase envelope contributions, but we did not go cash only. For February, I’m taking the credit card out of my wallet so this should help our goal.

4

n4. Increase Christmas savings.

Pass: We increased from $200 per month to $300 per month. I still don’t know if it’s enough, but it is an increase of 50%. I have already spend then ENTIRE first month’s contribution, but at least it was there to use.

 5. Church Tithing. My goal is to donate $300 EVERY. SINGLE. MONTH.

Pass: So far so good. We donated $300 in January and have budgeted the money for February.

6.      Pay off car!

On-track: We haven’t done this yet, but we did make our January payment and have one payment left in February until we own the car outright!

7.      Once The Husband’s car is paid off, put $345 payment into savings each month towards a new car fund.

On hold: We are in a holding pattern on this one until the car is actually paid off, but we did budget the money in March to go into savings.

8.      Save $5000 above and beyond my “normal savings” or any car savings.

On-track: I have deposited the first 9 weeks into savings and budgeted for the next 5 after that. Additionally, we received to unexpected windfalls that we split between debt and savings so we deposited an unexpected $2600 into our savings, so over half of our total goal. Feeling confident about this one!

9      9.Meal plan 8 months out of the year.

Pass-ish: I did meal plan for January and I plan to do February too… We will see.

1     10. Assuming I can meet all of the above goals, my last goal would be to increase my savings rate.

Pass: I would actually give us a pass on this because we are putting our regular amount in savings plus working on completing a $5000 challenge, plus we put almost half of our unexpected money towards savings. Thinking good thoughts on this one!

As I think these posts are only going to get longer as the year progresses, I have decided to split them up into two posts. I will publish them during the same week but even half of them are a lot to get through!

No Charging!

I charge too much on my credit card. I always have the intention of paying off whatever I charge, plus extra, and it never happens like I want it to.  For that reason, I am going to take my credit card out of my wallet. Out of sight, out of mind. Hopefully.

It’s like a little mini-goal for February, not to charge anything, but subscriptions, that are signed up for autopay.

I have done this a couple of times in the past and somehow the card always made it back into my wallet. I have no self-control and I need to recognize that.

Right now I need to focus on buying what we need, not everything we want.

I have made a very conscious effort to fund our envelopes with how much money we really need, but I have not made the effort to use that cash or even stay within budget. Even when I had some cash, even if it wasn’t enough to cover the whole purchase, I pulled out my credit card and put the purchase on that. That stops now. I’m going to take my credit card out of my wallet so it will no longer be a crutch for me to lean on.

We make great salaries, even for where we live, but we have been living above our means. I’m hoping that by taking the card out of my wallet it will make me rethink my purchases. If I don’t have enough cash I will either have to wait and buy the items when I do or I will have to use my debit card, which means I will have to have the money to pay for said items. Or be willing to transfer the money out of savings to cover the cost. This will at least ensure that the items are paid for outright, not a loan from the credit card company.

This was all prompted because this morning I ran our numbers through a debt free calculator and the numbers weren’t good. In fact, they were abysmal. According to the calculator, at my current rate of payment, about $650 per month, we will be in credit card debt for the next three years. 33 months to be exact. That is NOT. OKAY. And that is assuming nothing else gets charged during that time… Ugh!

I hope by taking the card out of my wallet it will help me to pay attention to what I’m buying. I hope it will make me more aware of where my money is going. I hope it will make an impact on my debt.