Debt Happenings

This morning when I opened up our online banking, we had a deposit of $15000. Our 401K loan has been processed, approved, and deposited into our account. I am both happy and sad about this. Happy because we had a 401K loan to borrow from; happy because we now have some money in the bank to work on home repairs, happy because we are one step closer to putting our house on the market and buying a new home. I’m sad because it’s more debt; sad because we didn’t have any savings to work with in the first place; sad because, even nearing middle age, we can’t get our finances together.

This money does give me something to work with, though. This money is being used for home repairs to help make our house ready to sell and as possible good faith/down payment money. I was able to go into our accounts this morning and transfer back the money into savings that I had to use the other day because of The Husband’s time card snafu. That will all get corrected when he receives his check next week and we deposit into our checking account.

Like I said, this money gave me something to work with. It made me sit down and revisit my February and March numbers. There wasn’t much change as far as February goes because the month is nearly over. But I did add a line item for paying my friend back that wasn’t there before. I will be paying her back with the last paycheck of the month. Then I will be one debt down and 37 or so to go.

As I was going over my budget for March, our debt repayment was looking pretty lean. Then I really studied the numbers and I saw that we were paying back a lot of debt… just not a lot towards the credit card. We will pay back our friend who booked a hotel for us. We will be paying back our entire plumbing bill, at almost $2000, $1800 towards our credit card, and $345 towards our car payment. I wish I could allocate all the money towards our credit card bill, but realistically, I have other bills to take care of and by paying the plumbing bill next month, that’s one more creditor I will be able to knock off the list.

Next month should be a pretty good month for debt payoff. Of course, until the debt is gone, it will never be enough, but after any purchases and interest, we should still knock out about $2000 worth of debt. At least that’s how much I’m hoping we can eliminate.

It’s so funny, that 401K loan is burning a hole in my pocket. I see that money sitting in my account and think, “that’s enough to wipe out our credit card debt and start paying the kids back”. Then I have to take a step back and remember that then we won’t have the money to do any home repairs or good faith money to put an offer on a home. We also want to pay that money back as soon as possible. Whatever we don’t use for its intended purposes, we plan to put a lump sum payment back towards the 401K. Patience, Prudence.

I know slow and steady wins the race, but sometimes I sure wish there was a magic fix for our stupidity!

New Series

I’m going to start writing a new series on the blog. (That makes me laugh, no one reads this but me, so who is this series really for?) At the beginning of each month I’m going to write a post detailing all the “unexpected” expenses we have each month. I’ll call it Unusual Expenses for ___________________ (fill in the month).

Each month, we all have “unexpected” expenses, but are they really unexpected? No, they are just unplanned for. I know that we need to come up with money for car registrations from January to April. I know we need haircuts. I know The Kids need new clothes and shoes. These things pop up occasionally and I need to start planning for them and making sure to include them in my budget for each month.

Some upcoming expenses we need to plan for in March are: car registrations (X2), a haircut for The Boy, family birthday parties we are hosting, The Husband’s birthday, and new baseball equipment (cleats, bag, uniform, bat) for The Boy.

The car registrations are already taken care of. The money for those will come from our planned annual expenses account. (Side note: if we buy a new home, we might need to reallocate how much money that we put into that account, depending on how we do taxes and insurance.)

In our March budget, I allocated money towards “haircare”. This will easily take care of The Boy’s haircut, leaving plenty of money to put towards The Girl’s hair care needs in May. On average, we need to include money towards haircuts for The Boy every month. He keeps his hair relatively short so he gets it cut every 5 weeks or so.

In March, we are hosting the family birthdays for my family. We have about 35-40 people coming over for dinner, cake, and ice cream. I will need to plan accordingly. We will do something relatively inexpensive for food… like spaghetti. We will need spaghetti, meatballs, sauce, salad, and bread. That will probably be about $125. We will also need to buy ice cream and soda. This will probably run us another $75. On my next two trips to Costco, I will start to buy the things we need for the party, thus spreading out the cost. I will still spend $200, but my plan is not to spend it all at once. (Our last trip to Costco was very expensive; we went well over budget. I don’t foresee super expensive trips in the near future so we should be able to add the food needed to the party without incurring too much hardship.) I also padded out grocery budget by $100 for the month. I put an extra $50 towards groceries for each of our budgeting periods. We are putting slightly less towards debt, but we aren’t accruing any more debt. And, with any leftover grocery money, it can go towards debt payment at the end of the month.

The Husband’s birthday is in March. I will need to get him a gift. We will also go out to dinner for his birthday. On his actual birthday, we are going to an NBA game. We will need money for this too. We are driving, but we will buy a quick dinner that night and maybe some snacks at the game. (I have no idea what I’m going to get my husband for his birthday… He is so hard to shop for!!! Any ideas? J)

Lastly, for March, baseball season is starting up. I know The Boy needs new cleats. He wore his last pair for two seasons and now they are too small. Along those lines, as he has grown, his bat is now too small for him, so he needs a new bat. He may or may not need a new uniform, we aren’t sure, it depends on what team he is and what color pants, socks, and belt they choose. We already bought him a new baseball bag. They were on sale on some website for $7 plus tax and shipping. We paid about $15. Not too bad. It’s actually the first new bag he’s ever had. His first season of baseball he used a hand-me down bag of his cousin’s and then his second year he used his dad’s bag from 30 years ago. I didn’t mind this purchase. And I was very happy to find baseball bags on sale for such a cheap price.

I’m sure during the course of the month, more unexpected expenses will pop up, and I will deal with them to the best of my ability. At least this way, I have a plan. I know each month brings non-normal expenses, and I’m hoping this series will help me remember to put them in my budget

Tidbits

You know our paycheck drama so imagine my surprise when I checked our bank account this morning and The Husband’s paycheck was deposited like normal. All our maneuvering and fudging of money was really for naught. But I’m still so happy that we had an emergency fund that we could move around as needed!

Not only was his paycheck deposited like normal, but it was also a little high; not much, only by about $70. That was a pleasant surprise. When I mentioned this to him, he told me he had a little overtime on his check. I didn’t know about it, but it was nice to finally have a little more money when we usually have less than we expected.

I’m also very thankful for that extra $70 because in order to pay back my friend this week, I was actually $160 short. This “extra” money brings us to only $90 that I need to come up with. I’m so happy that I will be able to strike one more debt off the list!

I also had to pay for a field trip for The Girl. The cost is $30 per person and as I am going, we had to pay $60. First of all, as I was gathering the money to pay yesterday, The Girl asked me if I had an envelope for “school” like I do for gas, food, etc. I showed her, that yes I do, but I told her it was currently empty. As I went to show her it was empty, I opened the envelope and found $20. I was so excited! I only had to come up with $40 instead of $60! I took money from the petty cash jar we had at home, but it is very low and there was only $20. I made up the difference with the left over money in my gas envelope for the week.  Which brings me to my next tidbit.

Due to various and sundry reasons, I had no money left over in any of my envelopes this week. We had to drive over an hour for soccer games two weekends in a row, we far exceeded our grocery budget (bought lunch snacks and meat which = $), and we met with realtors many nights making dinner a busy affair. Originally, my plan was to use extra envelope money to make up the deficit for what I owe my friend. That didn’t pan out, so the $70 extra work dollars will make a big difference.

I also got a great email from one of The Girl’s teachers today. I sent in her field trip money, $60 for the two of us, and her teacher told me they aren’t charging parents. She said she sent $30 home with my daughter. This helps to make up the deficit even more. Now, I’m only $60 short. I am going to completely pay my friend back and will use $60 from the 401K loan to make up the difference. Every little bit helps and once I write the check for this, that’s one more debt completely wiped away!

These are all random thoughts that weren’t enough, individually, to write a blog post about. Maybe I’ll make it a semi-regular occurrence to write about my tidbits… we’ll see.

Depressing Debt Totals

Now that I've put the depressing news out there... let's dissect it.

First of all, over $30000, that makes me want to be sick! And remember, we live in super-expensive-California, so that's not even including our mortgage.

Secondly, a couple of those small debts will be paid off relatively quickly so that's a bonus.

Thirdly, at least we are close enough to dropping our first digit down from a 3 to a 2 so that will show me some quick results and give me a quick psychological boost, sort of. That's if you don't count the 401k loan we just took out to pay for house-selling-costs.

Like I explained in my last post, we are getting ready to put our house on the market. It's been a little costly, to say the least. And, I'm afraid it's going to get even more costly.

We went to Home Depot the other day and spend $689 on house related "things". We bought all the trim we need to finish the kitchen: baseboards, window sills, door jambs, and crown molding. We also bought a cabinet to put in our laundry room to make it look more finished. Lastly, we bought blinds for every room in the house.

All the blinds are up (except one that had to be returned) and the house is looking pretty good.

Another house related cost is a storage unit. We had to rent a storage unit to put all of our stuff in so our house will be more "stageable".

Debt is never ending. I'm super sad that our debt totals continue to rise while never actually falling. I know that's not actually true, but it is how I feel today.

We will get there. We will get debt free. I truly believe that slow and steady wins the race, but right now I wish I had a get-rick-quick scheme that could get me out of this mess. However, the reality is, we got ourselves into this mess (again) and we need to get ourselves out of it. No magic wand, no money tree, just good old fashioned hard work and discipline.

Selling Our House Blues

As the numbers show, we only paid off a small amount of debt last month. From our January statement to our February statement, on our credit card, we paid off only $516.48 after stupid tax, er… interest was added. Combined with our car payment, our total debt payoff for the month was $861.48. Barely a drop in the bucket, only 2.8% of our debt total.

And more sadly, in the months going forward, we aren’t going to do much better. We are in the very beginning stages of selling our home. We live in a small 2 bed room home and we have two kids: a boy and a girl. Because of this, it was time to either buy a larger home or add-on. After weighing the pros and cons of each option, we decided that even though we love our home, the things we didn’t like about it out-weighed the things we did, mostly location and neighbors, two things we can’t change.

Because we are now looking to put our home on the market in the near future (<6 weeks), we need to start saving every penny to go towards some last minute home repairs and for good faith money when we are ready to put an offer in on another home.

In order to make our home sale ready we need to finish up a few things. Since the kitchen remodel, we haven’t yet finished the trim. We need baseboards and window sills in the kitchen, baseboards in the living area, window coverings in the whole house, and some small cosmetic issues in the front yard need to be taken care of.

The baseboards and window sills will probably take the longest. They need to be painted, measured, and installed. Then, after installation, they will need to be touched up. For the window coverings, we are going to go to Home Depot and buy the 2-inch faux wood blinds, in white, and put them throughout the house. Lastly, for the exterior, we need to take down a dilapidated fence, patch some siding, possibly paint, and add some landscaping: flowers, mulch, etc.  The only other thing we will probably do before we sell is rototill and put sod in the backyard.

In order to finance these home improvements, and in order to give us some money in the bank, we are taking out a loan against The Husband’s 401K. We are trying to take out $15000 over 5 years with the intent to pay it back, at least mostly, with the sale of our current home.  We are planning to spend about $5000 to get our house ready for sale and then the remainder will be money in the bank that we can use as good faith money or just as an emergency fund. Again, we plan to pay the 401K loan back pretty quickly.

We met with three realtors in the last week. Each of them had some pros and cons. Interestingly, each of them will only charge us 5% commission (as opposed to the industry norm of 6%). There was one lady who was very kind, but she failed to tell us how she would market our house. That left us with two options. We are still debating them both, but are leaning one way.

Due to the size of our house, namely the fact that is only has 2 bedrooms, we have to sell and buy something larger. In addition to being in the early stages of starting to get ready to list our home, we are starting to look, very casually, at homes.

We have a wish list. We have to have a minimum of a 3 bedroom, 2 bathrooms. We want a fireplace. It has to be on a pretty quiet street. It has to have a 2 car attached garage. Overall, we aren’t too picky. It just has to meet our current needs.

We are hoping to make enough money of the sale of our current home, to put 10% on whatever we choose to buy. We need to sell our home for a minimum of $310,000 in order to be able to do that. Looking at current market conditions, we should be able to make right around that, and with any luck, more.

We are very casually looking at homes online. It is giving us a barometer for what we want and need.

This crazy time is making debt payments nearly impossible. I will still pay all my normal monthly bills, but I won’t be throwing everything extra at my debt. I do want to pay the small debt to my friend, and the bill to my brother, but after that, I will only be making minimum payments. All extra money will be funneled into our savings account for the short term. Once we are pre-approved for a house and put an offer in, we will get back to paying off our debt.

Emergency Fund to the Rescue

Thank you, Dave Ramsey!

Today, The Husband emailed me and told me he made a mistake filing his time sheet last week and he wasn’t going to get paid on Friday like he normally would. He said his check won’t be direct deposited this week and they will cut him a paper check by Monday or Tuesday… of next week. We have bills due this week that can’t wait.

We have four bills due this week that can’t wait until a paper check can be deposited next week. We have to pay our electric bill, our home phone and internet bill, our cell phone bill, and our car payment.

I’m so grateful that I was able to quickly transfer the money from our savings account to our checking account to cover the upcoming bills. I don’t know if other people would consider this a true emergency that warranted using their emergency fund, but to me, it did. By transferring this money, we saved over $50 in late fees.

In my mind, this is what emergency funds are for. Currently, we only have a baby emergency fund of $1000, but that was enough to cover us for the week. I transferred $800 to my checking account, leaving us only $200 in our emergency fund. However, as soon as we receive the paper check, we will deposit it and transfer the money back into our savings account, right away. Additionally, this account, and the accounts of The Kids, will continue to grow by $50 a month.

Because of my emergency fund, as long as something catastrophic doesn’t happen in the next week, we should be fine.

I enjoy the feeling of peace I get from having even that small amount of protection. The whole point of that $1000 sitting in the bank is to cover us in the event of an emergency and to give us peace of mind. Today, it’s totally doing its job! That is why Dave Ramsey’s baby steps work. Each step builds on the other.

Step 1, save for a baby emergency fund, is there so you don’t have to rely on your credit card in an emergency. In the case of today, I couldn’t have used credit cards. I would have been unable to pay my bills and forced to pay late fees. In essence, my emergency fund helped me to keep more of my money in my pocket and take care of all the obligations I had to take care of.

My emergency fund saved me; and I’m so glad!

New Debt

Let’s talk for a minute about where our new debts came from, shall we? Basically, it was a whole lot of this, a little of that, and some more of this all rolled together to make our big mess even bigger!

We went to Universal Studios in December. Our friend booked the hotel room and hasn’t told me yet how much it cost. I think it was around $500. She booked and paid for both rooms to make sure we would be able to be at the same hotel. I’m anxious to get that debt paid off so I can start working on the rest. In addition to the $500 we owe her, we charged our whole trip: tickets, food, souvenirs, etc. The trip probably cost us about $2000, including our hotel room, and it all went on the credit card.

We also have an outstanding bill for our kitchen. December was a killer; between Christmas and paying the final bills for our kitchen, we struggled. The outstanding bill is for plumbing supplies and fixtures.  We got a hot water dispenser, garbage disposal, sink, faucet, and various plumbing supplies. Obviously, those need to be paid for. And the sooner, the better. Like I said, the fewer bills I have to pay, the more I can throw towards each bill.

The credit card bill has no excuse other than we charged more than we could afford; part Christmas, part kitchen, part stupidity. No excuses. We charged our trip to Universal Studios. We charged our granite counter tops. We charged all our new appliances. We charged the remainder of our Christmas presents. Push came to shove and we couldn’t afford to pay it off. We were able to pay about $6000 towards our debt, total. That would have been half of our credit card bill, but I decided to pay off our other credit card in full.

The loans from our kids went towards paying off a different credit card. The amount of our debt would have been the same if we paid $4600 towards our monster December credit card or if we paid off the smaller credit card that we had been working on for a few years. I chose to pay off the credit card I did, even though it had a better interest rate, because I couldn’t pay that bill online. I had to physically go to the bank by the 26^th of each month and pay the bill. It was a pain. I also never sent extra small payments to this bill because I had to go there and write a check. By choosing to pay this bill off in full, we also have one fewer creditor that we need to make payments to. Again, it didn’t change the total of our debt, just the way it was allocated. The bonus of this approach is that I can pay small extra amounts without having to go to the bank; I’m able to schedule payments online which is easier. It also enables me to make more frequent, smaller payments that can eat away at the daily interest rate.

We are choosing to pay our kids back nearly last because we can. It would be great to pay them back in order, but then I would have $3000 sitting in the bank earning nearly 0% interest and I would still have outstanding credit card debt. It just doesn’t make sense to me to do it that way. They will be paid back. Hopefully, we will be able to pay them back by the end of the year, too, but I know that is a stretch.

However, if I meet my financial goal of having $10000 in the bank by the end of the year, we will have paid them back. We’ll have to wait and see!

Anyway, this is where all our added debt came from. It was mostly stupid and avoidable but we chose to spend. Now we have to pay it all back. Sadly, it takes much longer to pay back than it does to accrue. But pay it back we will. Slow and steady wins the race. All the extra bits we can throw at our debt are great, but it’s what we do on a daily basis that makes the most difference. Things like saying no, saving for purchases instead of swiping plastic, planning ahead. Those are the strategies that will get us out of this mess!