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2015 Financial Goal Update

January 4th, 2016 at 08:14 am

About a year ago I set a financial goal for the 2015 year. My goal was to gave a 250K net worth by the end of the year. I missed that. By a long shot.

My net worth a year ago was $227,074. My net worth today is $227,948. An $874 increase.

Of course the stock market is tanking, that's a big factor.

I've also taken on more debt - to renovate that barn that I was talking about last time I was actively blogging, and braces for DD1, that I blogged about in April/May.

Also, when we were lining up the barn loan, our house was appraised. It wasn't fully appraised. We got what is called a BPO - Broker's Price Opinion. That's a drive-by appraisal.

I had our house listed on my balance sheet at 85K, and the BPO came back at 80K. Who knows, if the broker had walked through the house, he might have been closer to an 85K number, but to "official" number was 80K, so I changed my balance sheet to match that, so that's a 5K difference.

I wish I had recorded and saved what my retirement fund balance was a year ago. I have no idea, but I know it is less than it was a few months ago.

I suppose it only makes sense to set my 2016 goal back at 250K for 2016. We'll see how I do this year.

I paid off my truck

October 2nd, 2015 at 06:34 am

I paid off my truck with my October 1 payment. The final payment was due Jan. 1, so I'm three months early - a 36 mo. loan paid back in 33 mos.

I'm happy to have my truck paid off. I really am. But, I've discovered, or maybe re-discovered something about myself.

When the payment went through, I thought to myself about how it will be another almost 2 1/2 years before my wife's mini van is paid off. And that my truck will need to last AT LEAST that long before we can replace it. And what if it doesn't. What if it breaks down tomorrow. We're screwed.

OK, maybe all of those thoughts didn't come into my head that rapidly. But still, that's the basic flavor of what was running through my head. Instead of being completely happy about having my truck paid off, I was worrying about having this van paid off in time that we wouldn't have two $300+ payments at the same time.

I need to be worrying about something at all times. My grandma P.'s contribution to my psyche, I guess.

Truly, I am happy about having the truck paid off, and no, I'm not really all that worried about my truck taking a crap.

But, that thought was still there, and that says something about my approach to life.

Response to my request

February 26th, 2015 at 01:37 pm

After my post yesterday about the negative entries on my credit report, doingitallwrong suggested I send a letter to my creditors asking for a goodwill removal of the negatives from my credit history.

I have an ongoing relationship with one of the creditors, our credit union, where we have taken out two car loans over the past three years. I logged on to the CU site, and sent an e-message asking if they would remove the negatives. I based my letter on a template found on a link provided by doingitallwrong. Here's the response I received:

Thank you for contacting Credit Union via eMessage. We appreciate you taking the time to message us with your request. We greatly appreciate your membership with Credit Union and are happy to hear you have had such a positive experience with us. Although I am able to confirm you have had a very positive payment history with us in the recent past we are not able to reverse or remove late payments reported to the credit agencies unless they were reported in error. If the payments were reported late and it was not the result of an error on our part we are obligated to report them and are not able to remove them. Although we are not able to accommodate your request and remove late payments from your payment history, I would like to assure you that your credit history only reflects the last two years of your payment history. As the payments referenced in your previous message were between the years 2008 and 2011 they should no longer be reporting on your credit. If you have any additional questions or if we can assist you with anything else you are always welcome to contact us …

I struck out.

There is one other CC that has reported negatives. I cancelled that card a long time ago. I have no idea what my account number was. I do have a mailing address that appeared on my credit report, but the above mentioned credit union at least has the incentive of keeping my happy because of my continued business. The other company (Bank of America) really has no incentive to make or keep me happy. So, I doubt that I'll send a request to them.

There was really no harm nor foul in sending the request to the credit union.

Credit Maintenance

February 25th, 2015 at 07:23 am

I pulled my credit report yesterday. I don't pull my report often enough. I know that you can get a free report form each of the three companies once per year. So the best strategy is to pull each of the three every four months. I just don't do it often enough. It's probably been 12-18 months since I last pulled it.

What I've done is recorded the date and reporting company in the same spread sheet where I keep my budget, balance sheet, and amortization schedules. That way I can keep better track of when and where I pulled my last report, and keep on a better schedule.

I have a total of 17 negatives, from two credit companies on my report. The first has a string of 11 negatives ranging from May 2009 - March 2010, where I was 30 - 120 days past due. The other has a string from August 2008 - November 2008 where I was 30 - 90 days past due, plus March 2010, and October 2010 where I was 30 days past due. Note that I started becoming active on the SA forums around October 2010.

If negatives stay on a report for seven years, my first string of four will start dropping August through November this year. May of next year through March 2017 will see the end of the entire string from the other card, and the last negative will drop off October 2017. But, that's a long time from now.

According to my current Discover card statements, my credit score hovers between 720 and 725 any given month. It will be interesting to see how my score comes in as these negatives drop.

I also did something I should have done a long, long time ago. There were three open accounts listed that I don't use. One was a credit card I no longer use, one was a store card I opened when I bought a suit at a department store, and the third was an Amazon card I opened two Christmases ago. I called today, and had each of those accounts closed. We'll see what that does to my score.

This credit report monitoring is something I think I can and will keep up on from now on.

New Year Financial Goal

January 5th, 2015 at 09:52 am

Happy New Year! It's Jan. 5, so maybe I'm a bit late.

I'm not sure if I've ever set a New Year goal in this blog. After I post, I'll check the archives to see for sure, but I don't think I have.

My financial goal for this 2015 year is to end the year with a $250,000 net worth - a quarter of a million dollars.

My current family net worth is $227,000 - 23K short of 250K. To reach the goal, we'll have to increase net worth by about 2K per month - or $1,916.67 per month to be a bit more precise.

We currently have three debts - house, mini van, and pickup. We'll be making average principal payments of about $1,080 on the house, $300 on the van, and $140 on the truck. That's $1,520 average monthly decrease in debt. The rest will have to come from growth in retirement investments. Between my employer and personal contributions, I invest about $780 per month into retirement.

Between investment and debt reduction - that's about $2,300 per month increase in net worth. As long as the stock market doesn't tank, I should reach my goal. We'll see.

Some of you my disagree with how I calculate net worth. I include home equity as well as vehicle equity, and even include $3,700 for household items. Basically, if we were to sell each and every item my family owns, how much would be left.

I do estimate home and vehicle equity low.

A Fresh Start

December 4th, 2014 at 09:28 am

I'm going to kind of start this blog over, right where I started it in April 2011. At or near the beginning of each month, I would list my debts. I set different debt reduction goals for myself along the way, and I tried to use this blog to keep myself accountable. My situation isn't nearly as dire as it was four years ago, but that formula seemed to work well.

Last time I reported in the blog, about a month and a half ago, Oct. 24, my credit card balance was $4,361. The current (not really current, I just now made the payment on-line, and it won't post til 5:00, but I'm going with it as current) balance is $4,149. My total debts are (debt, interest rate, balance)

Mortgage 2.25% $40,037
Truck 3.99% $4,568
Credit Card 19.99% $4,149
Total Debt $48,754

My only goal at this point is that I owe less on each account than I did the previous month.

I'm still toying with the idea of transferring that CC debt to a 0.00% intro rate card, but I'm not really sure I want to play that game again.

Last time I blogged, I mentioned a freelance job my DW had. For the first time in about 12 years of serious freelance work, DW has been stiffed for payment - about $2,000. The worst part of it is that she had recruited her sister, and a friend of ours from college to work with her, and they got stiffed too. Live and learn, but really after 12 years, it seems like a pretty good record.

Another Way Too in Depth Financial Calculation

May 21st, 2014 at 08:39 am

The only non-mortgage debt we have right now is the loan on my pickup. I bought the (used) pickup a year ago December, and borrowed $12,750. I took out a 36 month loan. The current balance on the loan is $5,784.59. Most months I've made extra principal payments, especially after our CC debt was retired last August.

According to KBB.com, the value of the pickup is just slightly more than $10,000 ($10,018 to be exact). The L/V ratio is 0.577. Because I am prone to wondering such things, I calculated what I would owe, and what the L/V ratio would be if I hadn't made the extra principal payments, or if I had taken out a longer (48 month) loan.

If I had just made required minimum payments on the 36 month schedule, the current balance on the loan would be $7,271.03, and the L/V ratio would be 0.726.

As far as the hypothetical 48 month loan goes, I'm not sure what the interest rate would have been if I had asked for one. My 36 month rate was 3.99%. Maybe they would have charged more, maybe not. I'll stick with a 3.99% 48 month loan. In that scenario, making only minimum payments, I'd owe $8,723.56, and the L/V would be 0.871.

I've gone this far, I might as well figure the 60 month loan while I'm at it. I'll use the same interest rate, and assume minimum payments. At 60 months, the current loan would be $9,594.32, with an L/V of 0.958. That's not quite underwater, but close. If I hadn't have made a down payment, it would be underwater!

That's pretty convincing evidence for me to shorten the loan period, to make a down payment, and to pay ahead if and when you can.

Update on truck loan

November 20th, 2013 at 09:25 am

Besides our mortgage, my truck loan is the only debt we currently carry.

I bought the truck last December. I borrowed $12,750. The term on the loan is 36 months. It's a 2004 Dodge Ram half-ton.

The current balance on the loan is $7,777.67. Minimum payment is $378. Of the 10 months I've made payments (the first payment wasn't due until Feb. 1), I've made the $378 minimum payment four times, and I've paid something greater than the minimum payment the other six months.

If I make $425 payments each of the next 18 months, and a projected $387.20 payment in June 2015, I'll have the truck paid off six months early.

My hope is to have the truck paid off before we need a new family van. My goal is to have only one vehicle loan at any given time.

If there is more life in the van after June 2015, we'll save the truck payment toward a down payment for the new family vehicle.

I really don't see us saving enough money to buy a replacement family vehicle out right, but all things are possible.

October Financial Reflections

October 1st, 2013 at 07:31 am

For the past couple of years I've done some extra financial reflection in the month of October. It was three years ago this month that we finally woke up, and started to pay serious attention to our finances.

A couple things happened that month. DW received a freelance check (that was in the days before four kids, and she did some freelance work). I think it was a couple thousand dollars. We also had our second of three sets of renters move into the our for sale house. I think the house had been vacant since July or August - a couple months anyway. We were also about $450 past due on one of our CCs. That CC had a whopping 32.99% APR.

Within the same week that we received DW's freelance check, we received a letter from the above mentioned CC. The CC company (Advanta) was offering us a deal - if we paid the $450 that we were past due, they would cut our interest rate to 16.99%. We jumped on the deal, and sent the check that day. Advanta kept their end of the bargain, and cut our interest rate. Most of the rest of DW's freelance check went to various other debts.

That bit of momentum got the ball rolling for us. I dug in, and totaled all our CC balances, compared the balances to each card's interest rate, and realized that (after the $450 payment, and interest rate cut on the one CC), we would still be paying very nearly $200 per month in CC interest alone.

The first step I opted to take was to find a 0% APR transfer to a new CC. My credit score was in a shambles, and I didn't qualify for a new card at that time. Another thought I had was to borrow against my retirement fund. I actually went to a bank, and picked up the forms to apply for the loan. I think they were offering an 8.99% APR on the loan. I don't remember for sure, but I may have filled out the paperwork, but I never did submit it.

That previous August, I had stumbled upon the SA forums when my mom and dad had a question for me about retirement savings. I had asked the question for them, and passed on the answers, and never did return to SA until I was faced with the question - should I borrow against my retirement fund to pay off CC debt (or, shift unsecured debt to a lower APR with my retirement fund as collateral, to be more precise). Thankfully I asked the question, and thankfully the forum regulars steered me away from that choice.

DW did qualify for a 0% APR 3% balance fee card that next January. The limit was $750. We transferred that, minus the 3% fee, and ended up doing two more balance transfers until the Advanta debt was paid off this past January.

It would be another six months before I found the Blog side of this site, and those of you who have been following my blog for most of the pat 2 1/2 years know the rest of the story in gory detail.

You also know that we've stumbled at times, and have had help along the way. But, as I remember that seemingly unbearable, rocky mountain that we faced three years ago, I can't believe that we've turned it around.

September Financial Snapshot

September 3rd, 2013 at 05:53 am

Mortgage $55,921
Truck Loan $8,555
Lawn Mower $103
CC1 $0
CC2 $0

Total Debt - $64,579

Retirement Fund $127,771
DD1 Savings $5,442
DD2 Savings $339
DS1 Savings $1,000
DS2 Savings $1000
Emergency Fund $800

Total Savings - $136,292

Debt reduced by $6,392
Savings increased by $3,657

About $1,700 of that increase in savings is because DD1 received her check for selling hogs at the fair. It's her money, but is earmarked for college savings, so I'll include it as a family asset.

I intended to pay the lawn mower loan in full last month. I went into the website to pay it off, and it's not easy to navigate. I entered the wrong amount to pay. When I went back in to see if the payment had posted, I saw that there was still a balance. I was unable to set the payment date for any sooner than 9 days before it's due. So, it will be paid in full on the 18th of this month.

I have another milestone to report. Our total family debt is now less than our annual household income! That sounds pretty good to me. Also, our total family savings is twice as much as our debt. Also good!

One last thing on the EF. We intend to beef that up. Right now the money sits in checking, which I've not listed here. Basically, we keep our EF in a bank in DW's home town. That way it's inconvenient for us to access. It's also inconvenient for us to add money. Our goal will be to get that money transferred over to the savings account before the end of this month.

Updated DTI Ratio

August 27th, 2013 at 07:19 am

We've retired some debt this month. All credit cards completely paid off. Truck loan - took a big chunk out of the loan. Lawn mower loan - almost completely retired (balance will be paid next month).

So, I decided to re-figure our debt to income ratio. It's now 24.5% - that is a wee bit less than 1/4 of our before tax income is required to meet monthly minimum required debt obligations.

That being said, we'll plan to send more than the required minimum to the truck loan per month from here on out. Not quite a double payment, but I'm thinking a payment that would amount to 10% of gross monthly income. That will bring our effective DTI to about 30%, and retire the loan about 14 months early. I think we can live comfortably with that.

The Truck Payment

August 19th, 2013 at 05:28 am

I bought a truck last December. I financed it through our credit union. We hadn't ever financed a vehicle through this credit union. We had carried a credit card, house re-fi, and home equity loan (back in the bad old days when we did home equity loans) through this credit union, but never a vehicle loan. The dealers always beat their rates, typically by 0.1% point. So, I wasn't really sure how the CU worked the loan if paid ahead.

Some months, I've been rounding the $378 minimum payment up to $400. I had been wondering if the minimum due would gradually ratchet down - like $1 less due per month for every $36 that I was paid ahead on the loan (it's a 36 month loan). But, the payment has never been adjusted down at all, which is fine. I wanted to pay AT LEAST $378 per month, and have the truck paid off earlier. I just figured that the CU would make some adjustment to keep me paying on the loan for the full 36 months - more interest income for them.

Last week, I made a substantial payment ahead. I decided to pay 10% of the remaining balance. The remaining balance was $10,220, so I paid $1,022 (About $16 of that payment went toward accumulated interest. Had I been thinking more clearly, I would have increased the payment so that the principal balance had gone down 10%). I went to the CU website this morning just to check if the payment went through. It did. And, yep, the amount due with the next payment remains $378. What changed is the date the payment is due! I don't owe anything on this truck until December 1!

Of course, I plan to make my Sep., Oct., and Nov. payments. We also still haven't decided if we're going to pay this off entirely with the gift money.

Either way, we're hopefully getting ourselves well positioned to pay this truck off, and start saving cash to buy a replacement family van in a few years. I'm not saying we won't finance it, but we will hopefully at least make a substantial down payment.

Our credit score and short sale finally met

July 1st, 2013 at 05:54 am

They shared a firm handshake, exchanged a fine "How are ya?", and our credit score promptly fell on its back.

It's not as if we weren't expecting it.

DW home schools our girls. The company that she buys curriculum from was offering 0% financing for six months, so we decided to take advantage of the offer. The rejection message stated that our scores were less than 620. So, that means that they fell by a minimum of 85 points.

In October 2010, my score was at 580. I had built it back up to 705 by August 2012. So, we'll keep doing the right things, and hopefully in a couple of years, we'll see daylight again.

Is there something smaller than a snow flake?

May 30th, 2013 at 08:18 am

Like maybe a single crystal? Or maybe a water molecule?

The reason I ask is that I stopped by the bank to cash in some coins yesterday. The total came to $22.57. We have an auto loan with this bank (actually, a credit union), and we used to have a credit card.

What I normally do when I cash in the coins is take the bills ($22), and put them into my wallet, and take the change ($.57), and put it toward my credit card, or now my auto loan.

My thinking is that the $22 in cash puts me $22 further ahead until I need to visit the ATM again. And, I cashed in the coins, so why would I want to leave with any? So I use them to pay a very small amount against my loan. Not really a snow flake, but something smaller. I'll call it an H2O molecule.

Sure, I could put the whole amount against my auto loan, and maybe I should. Again, assuming I don't spend it foolishly, I'd rather have the cash in my pocket, and the change not in my pocket. So, that's what I do.

Three Year Debt Comparison

April 8th, 2013 at 12:19 pm

April 1, 2011 Total Debt - $202,374
April 1, 2012 Total Debt - $187,077
April 1, 2013 Total Debt - $178, 952

$ Change - 2011 to 2012 = $15,297
$ Change - 2012 to 2013 = $8,125
$ Change - 2011 to 2013 = $23,422

I borrowed money for a pickup purchase in December; that's the major reason total debt didn't go down as much 2012 -2013.

April 1, 2011 CC Debt - $18,980
April 1, 2012 CC Debt - $8,931
April 1, 2013 CC Debt - $914

$ Change - 2011 to 2012 = $10,049
$ Change - 2012 to 2013 = $8,017
$ Change - 2011 to 2013 = $18,066!

This shows that we moved a lot faster when there was a gun to our heads.

In the next year, we're scheduled to pay off:
$914 CC Debt
$11,947 Mortgage Debt
$3,790 Truck Debt
$16,651 Total Projected Debt Payoff

I'll take a look in a year to see how actual compares. We're not planning on any new borrowing this year.
It might not be any different than whats projected. After CC debt is all taken care of, my big question will be whether we should accelerate truck payoff, or beef up savings. I'll address that later.

Temptation

April 5th, 2013 at 05:43 am

I got an offer from Discover yesterday.

I picked up a Discover card a year ago January. It's one of the cards I used for a 0.0% balance transfer. I transferred (I think) $2,700, and had it paid off by time the promo period was up. I've also used the card along the way, mainly for gasoline purchases, but also groceries and an occasional dinner out. I've paid each new purchase off every month, and haven't paid any interest on this card. And, it's a rewards card.

So, the offer yesterday was for a "personal loan" of up to 25K at 7.99% APR. They even had a set of nifty tables that detailed my expected monthly payment at varying loan amounts and payoff periods.

There was that fleeting moment when I thought about how we could borrow "just" 4K, and get that porch built this month or next, and my payment would be "just" $125 per month for three years. That sure would be nice. And easy.

Thankfully that thought lasted just a moment, and it passed as quickly as it came. And, I threw the letter away!

Update on our "for sale" house

October 31st, 2012 at 10:18 am

We've had a house for sale for five years. We haven't lived in the house for all but one month that it's been on the market.

This past August, we began the paperwork to get approved for a short sale. The mortgage company has made the process as slow as they can. We send in paperwork, and they wait three or four weeks to get back to us only to tell us that we need to send in more paperwork. We didn't have an offer when we began this process. Our hope was to get ahead on the process, so that when there was an offer, it the short sale approval could be expedited.

We decided we should get an attorney involved in the process. Our thinking was that the attorney could help speed the process, and help with negotiations down the line. The first attorney we spoke with said he doesn't handle cases like these. It cost us $45 to hear that. We set up an appointment with another attorney. I tried to better explain our situation as I was setting up that appointment.

We talked with the attorney last Thursday. That was a very good meeting. The attorney is about our age, he's a bit arrogant, and kind of feisty. But he also came across as nice, and someone we can work with. The kind of guy we would like in our corner. He also assured us that he would attempt to negotiate no 1099 for any forgiven debt. That's about a $9,000 savings if it happens.

Less than 24 hours after our meeting, we got a viable offer on our house. $7,000 less than we're asking. I sent the offer to the attorney. We're scheduled to have a call with him this evening. We'll see where it goes. Regardless, things are looking much better for us than they were a week ago.

Time for a new, make that different, vehicle?

September 19th, 2012 at 09:59 am

I thinking about a new pickup. Something compact, like a Dakota, S-10, or Ranger. I'm not particular to makes.

This purchase wouldn't be until after December, when that one credit card that will shoot up to 23% APR is paid off. Then we'll be in the midst of winter heating, and post-Christmas financial trauma, so maybe not til next spring. We'll see.

I bought my current car from my aunt and uncle for a dollar last May. It runs OK. It's a 1997 Mazda 626. It has about 200K miles, so I can't ask for much from it. Of course we also have the family mini van that we recently paid off with adoption subsidy money. That's seven years old, and had 110K miles. It should last another 3-5 or more years, but we'll see.

So I started with the rule that I learned in the SA forums - monthly payment of no more than 10% of your monthly pay, financed for no more than 3 years. I cut the monthly payment in half, because it is possible that we would need to replace the mini van in that time frame. What I came up with is between 9 and 10K for a pick up.

A really quick look at KBB told me that I could buy a 2007 or so model with somewhere north of 120K miles. Not great, but a step up. And, having a pickup, especially in the country is nice.

So, I'm at least four months away from the purchase. Gives me time to possibly save some money, which will either get me a better pickup, or reduce my monthly payment. I can also spend that time becoming familiar with what's out there in my price range.

Yes, this does mean more debt. But, using the 10%, three year rule, I'm at least entering it with some reasonable restraints.

My Retirement Fund

August 17th, 2012 at 09:50 am

My retirement fund is at six digits. Today. And, just barely. I was close the last time the markets boomed, but didn't quite get there.

A year ago, I reported on this blog that for every dollar I had invested in retirement, I owed 20 cents in credit card debt. Today, for every dollar I have invested in retirement, I owe 6 cents in credit card debt. Six years ago, that was a one to one ratio.

On the personal side, my youngest daughter sprained her ankle a couple of days ago. I took her to a playground while DW was at an appointment. It isn't a very nice playground, and the traffic compacted track around the merry-go-round has tree roots growing in it. She tripped on one of the tree roots. So, it just goes to show that there is a reason for the extreme and expensive safety measures at the modern play grounds.

August Debt Update

August 10th, 2012 at 06:07 am

August 2012 Debt
Mort 1 $102,359
Mort 2 $66,080
CC1 $2,384
CC2 $1,522
CC3 $387
CC4 $1,508
Van Loan $0

Difference from June = $10,139. Thank you Adoption Credit!

My current focus is to retire CC4 before December 31, when it shoots up to 22.99% APR. I'll have to make average monthly payments of $377 to make that happen.

TV?

August 6th, 2012 at 06:45 am

We cancelled our TV satellite service about two years ago. We cancelled it because we could no longer afford to pay a monthly TV bill and reduce debt.

We're in a much better financial state than we were two years ago. We can now afford to pay a monthly TV bill, and continue to make substantial steps toward reducing debt. The question is - should we?

We have found life without TV to be not only acceptable, but in many ways preferable. The kids no longer fight about what's on the TV. The TV is not constantly on, rotting our brains. We have an extra $60 per month to allocate somewhere else. Most of what's on TV is crap anyway.

We are missing the Olympics. And I miss the Big 10 network and NCAA tournament coverage most of all (Go MSU!). And sometimes, if used properly, it can give you a parenting break. (The same old DVDs get tiring after a while).

So, we're considering whether or not we should re-up with our satellite TV service. And, getting the cheapest, most basic service is not appealing to me Like I said, the Big 10 network is part of the deal.

What do you all think?

Adoption Credit

August 2nd, 2012 at 10:53 am

Hey,

I've been inactive for quite some time, but I wanted to let you all know that our 13K federal adoption tax credit arrived in the mail this week, with interest. We deposited it, and the check cleared yesterday. Today we paid bills! $2,500 went to pay off our new front porch, $2,000 went to one of the credit cards, $5,000 paid off our van, $2,200 went to family members for Mort 2, and the rest went to our EF. Sure feels good!

Some of you may be tempted to critique how the money was spent. Please don't. (ie, more should have gone toward high interest credit cards) This was a balance of my wishes, DW's wishes, and sending money to family members with whom we have loans. Trust me, I know that paying off higher interest accounts makes more purely financial sense, but we feel an obligation to accelerate progress on family loans.

Monthly Spending

June 25th, 2012 at 06:24 am

I went through monthly spending and categorized the totals. I came up with the following:

Amount spent on:

Housing - 22%
Other Needs - 35%
Wants - 12%
Savings - 10%
Debt Repayment (or largely past wants) - 20%

According to Disney Steve in the forums the benchmark is 50% Needs, 30% Wants, and 20% Savings. In those terms my breakdown would be:

57% Needs
32% Wants
10% Savings

My predicament

June 11th, 2012 at 02:02 pm

I've copied below something I just posted in the forums for those of you who don't frequent them.

I've posted about my situation from time to time, but I'll start with a brief refresher.

I took a job closer to where I grew up 4 1/2 years ago. We put our house on the market as we were moving. The value of the house has done nothing but drop since we moved. About a year after we moved we had an opportunity to move into my family's original farmstead home. We borrowed 70K from family members (30K from my aunt/uncle and 40K from DW's parents) to renovate the house. The original agreement was to pay back family after we sold our other home. Just during the last 4 months we have begun to pay them back slowly. $90/mo. to aunt/uncle and $120/mo. to in-laws. These are interest-free loans.

During this time we have had three different families rent our original house. At no time has rent matched our $1,026 monthly mortgage payment. The current renters expressed interest in buying the house when they moved in last July. We were going to rent the house for $800/mo., but we reached an agreement where we collected $900/mo., and the extra $100/mo. was their cost for us to take the house off the market for a year, to give them time to save/line up financing.

To no one's surprise, the renters are not in a position to buy the house. So, we reduced rent back to $800, and put the house on the market. We listed it for $69.9K, or 1/2 of what we bought it for in 2005. As far as I can tell, this price is reasonably close to market value. It's hard to tell because the market is so slow, There aren't really any comps. We owe $103K on the house. This will leave us in a short sale situation.

Here are my 4 options as I see them:

1. Continue renting the house at a loss until the market turns around, and we can sell the house for what we owe on it (that was our strategy up until now).

2. Continue paying the mortgage. Go the short sale route.

3. Quit paying the mortgage. See what happens first - foreclosure or the house sells as a short sale.

4. Get a commercial loan against the house we're living in. Set aside $30 - $35K to make up the difference between what we owe and what the house will sell for.

I'm honestly leaning very heavily toward option 3. Be done with it, and let the chips fall where they may. As I understand it, our credit will be trashed whether we go option 2 or 3.

My aunt has expressed her interest in helping us out. So, option 4 is possible. We would owe her a lot of money for a long time. I hate the idea of that, and hate the idea of not meeting our mortgage obligations.

We are working on getting a commercial mortgage on the house we're living in. The question will really be - should that money go to family, or be put on hold to shore up the difference when house 1 sells.

I've posted very recently about my other debts, but in case you are interested:

We owe about $7.4K in credit cards
We owe about $5.2K in a vehicle loan
Monthly net income is about $5.4K
Small $1.1K emergency fund

Signing the House Listing Today

June 6th, 2012 at 06:41 am

We're going to sign the house paperwork to get our house back on the market today. Our Realtor will FAX the pages to my office. They're not here yet, so I'm waiting.

We asked the Realtor to suggest a price that would hopefully lead to a sale by around September 1. As I mentioned yesterday, that's $20K less than our previous listing. We'll see where that goes. If we don't have a few serious lookers this month, we'll drop the price again.

If it's sold at list price, we'll have to go the short sale route. So, we'll probably end up getting Mort 2 financed through a bank prior to selling this house. In case you haven't been following my blog, or don't remember, Mort 2 is money we borrowed from family to renovate the house we're currently living in. The original agreement was that we would pay them back when house #1 sold. With the reality of a short sale, that changes things dramatically.

Revised debt repayment goal

April 3rd, 2012 at 06:16 am

Yesterday when I updated my monthly debt progress, I upped my monthly debt retirement goal from $1,000 to $1,050.

I was thinking about how that $1,050 number was pretty much pulled out of thin air. I didn't base it on anything other than my gut feeling that it was an amount I thought I could handle without stretching myself too much. I thought I should base that figure on something real. Like, my average monthly debt retirement over the past year. I've already confessed to over-analyzing things.

So, I went through my monthly debt retirement figures over the past year. I omitted the month where I got my tax refund, and I averaged the remaining months. And it turns out I came up with $1,052. Darn close to what my gut feeling was yesterday.

Is it really a good goal to match last years debt retirement? Probably not. So, I will set a new goal. My new goal is to pay off debt at a rate of 5% more than last year's average - or $1,105 per month principal payment.

I'm a Green. What color are you?

March 22nd, 2012 at 07:05 am

Have any of you done the True Colors/Real Colors personality sorter? It's a new twist one the Keirsey-Bates temperment sorter.

I'm a Green - the analytical type. We analyze things to death, and usually need a yellow (my DW, for instance) to take action, and actually get things finished.

My pesonality shows through on this blog, how I am always posting different personal financial calculations. Well, to ring true with my Green personality, I compared my current daily interest cost with my daily interest cost last April.

Current daily interest cost - $19.95
Daily interest cost last April - $24.46

Or, each day I'm paying 82% of the interest that I was last April. I'm such a Green.

A new course?

February 27th, 2012 at 07:50 am

This is an interesting time for me financially. We were able to pay down quite a bit of debt with our tax refund. Now that we have our CC debt somewhat tamed, I've been using more of my mental energy on our mortgage debt, unsold house, etc.

I'm guessing most of you watched M*A*S*H. When the choppers came in with wounded soldiers, Hawkeye and Margaret would triage the patients. They took the terribly worst off ones first, and the really bad ones second. That's what my finances feel like. I concentrated on the high interest credit card debt first because it was killing us, and left the really bad mortgage debt for later. I feel as if it's later now, and we need to start addressing the mortgage debt, even ahead of the CC debt now.

I'm sure I've mentioned it before, but we have renters living in our house #1 now. They are interested in buying the house, so we agreed to rent to them for one year, take the houde off the market, and revisit in July.

Wheter or not they are the purchasers, we have to unload that house this summer.

So, I'm going to start hoarding cash ahead of paying off CC debt, so we can be in a better position to close on the house when the time comes. I'll still pay more than minimum payments, but not as much as the past 16 months.

I hope this is the right decision. If not, I'm sure someone will let me know.

I visited a mortgage originator

February 16th, 2012 at 06:19 am

DW and I will probably be looking in to getting a new mortgage on the house we're currently living in to pay family member toward Mort 2. We're looking at an April time frame to apply for the mortgage.

I thought it would be a good idea to get some pre-approval information. I made a spread sheet detailing our current net worth, our montly obligations, and projections of what our front end and back end DTI ratio would be after the new mortgage.

I took a print out of that spread sheet to a morgage originator yesterday. And boy was that interesting. I consider my situation to be "struggling financially". But it turns out that, as long as I can verify the information I submitted, and both our credit scores are considered good enough, that we will qualify with no problems. In fact the mortgage originator said that anyone with a DTI ratio (with the new mortgage payments calculated in) of any where at or below 45% - yes 45% - would qualify for a new mortgage. I couldn't believe what I was hearing. I wanted to scream "YOU HAVE GOT TO BE KIDDING ME! THAT'S WHAT GOT US INTO THIS TOXIC MORTGAGE BUSINESS TO BEGIN WITH!"

But, she did ask for verification of employment, W-2's and two years of tax returns. So, I guess it's better than the NINJA loan days of the recent past.

BTW, our DTI ratio, with the new loan would be 34%, which I consider to be plenty high.

Mortgage Settlement

February 13th, 2012 at 05:43 am

I had a chance to listen to Clark Howard a few nights ago. I'm pretty sure it was Thursday. I don't get a chance to listen to hime very often, because I have to be a bit west of my house for the station that carries his show to come in clearly.

Anyway, he was talking about the settlement between the 5 big motgage holders and 49 states (all but Oklahoma) so, this is my interpretation of his explanaition, from informstion I heard 4 days ago.

Apparently the 5 big mortgage holders that were part of the settlement represent 60% of the home mortgages in the country (no, our morgage holder is not one of them). And they have 12 months to work with their mortgagees.

The banks need to make one of two offers to their mortgaees - either write down their principal balance or allow them to refinance even if their house is underwater. Oh, and they need to supply mortgagees with one point of contact at their bank.

And, I guess the settlement may be expanded to include other banks in the next several weeks.

This settlenment may never include my bank. I'm holding onto the hope that this settlement wil ultimately break the log jam that is the housing market, and after some time our house will sell for something that resembles what we owe. That's my hope anyway.

I'll be taking some time to follow this settlement, and learn more about the specifics.


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