Bob B.'s Debt Reduction Blog

I called our renter yesterday. She (of course) didn't pick up. We want to give them all the chances in the worl to make payment, or at least contact us about a plan before beginning the eviction process. But I did stop by the courthouse yesterday to pick up the needed paper to begin the eviction process.

It's amazing how quickly my outlook has changed. For those of you who have been following my blog lately, you have probably noticed how much more upbeat I have been about my financial outlook. That has quickly changed. Now I'm wondering how we're going to keep up on bills with the loss of rental income.

We haven't received our rent check yet. It's due on the first of the month.

I've been out of town for a couple of days. When I left, I told myself that if the check wasn't here by time I got back, I would have to do something.

I guess I'll start with a phone call.

I hope this doesn't get nasty.

Our previous renters were chronically late with rent, but they always ended up paying. These renters have been so good.

Until now.

Ugh, I really hope this doesn't end up going bad.

It probably won't.

But it might.

Mort 1 $103,373
Mort 2 $69,580
CC1 $3,317
CC2 $2,190
CC3 $1,340
CC4 $2,606
Van Loan $5,794

Difference as compared to last month: $3,739

BAM!

I transferred a big chunk of money ($1,290) from CC 1 to the now interest free CC4. The rest of the reduction is due to our tax refund.

It's flowing ---- out. Tomorrow is pay day, so more will flow in.

Our window guy started yesterday, should finish today. We also called to have a plumber stop by. Long story, but with the new basement windows we needed to change the configuration of the sump pump, and needed a plumber.

Also, I ordered heating fuel again.

We have the cash set aside for all these bills, but it will nearly wipe out our savings. But, it's nice to be able to pay bills.

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.

It snowed here last night. Actually, it's still snowing. The window guy was supposed to start today, but he cancelled. I'm not sure if he plows snow, and that was the primary reason for the cancellation. But given that they're basement windows, and the windows are at ground level, it seams reasonable to put the job off until Monday.

We got a bid for replacement windows for our basement. Acually, I called three other people for bids, and only one of them returned my call. He's booked through August.

So I contacted a friend of a friend (actually a friend of my sister) who works for a contractor, and does some jobs on the side. He put in a bid of $800. We had $1,200 set aside for the job.

They're not actually windows per se, but glass block. We have 5 windows, and are having him put glass block in 4 of them and a vinyl window in one of them.

So, that's 2/3 of what we had set aside. Great news! Too bad we didn't get any other bids for comparison. We could wait for another bid, orjust get it done. The price sounds right to us, actually better than alright.

I've been hearing that quote or some related derivative a lot lately.

Congress passed this or that tax cut - because it's an election year.

Congress passed this or that spending bill - becuase it's an election year.

Let's be perfectly clear about one thing - every second year since the costitution was ratifoed has been an election year. Sure, it's a presidential election year only every fourth year. But, the entire house of representatives, 1/3 of the sentate, a bunch of state governors and state level representives/senators are up for re-election every other year.

I'm sick of hearing that our tax money is being wasted, or elected officials are too timid to make tough decisions because it's an election year, or next year will be an election year. It's a perennial election cycle.

In my state of Michigan, state level elected officials were term limited about 20 years ago. That seems to have made things worse. State representatives and senators seem to have the feeling that they are in the legislature for a limited amount of time anyway, so they do anything but make tough decisions to insure their re-election.

Throw the bums out! But not my guy, because he's good! (Sarcasm intended)

I applied for and was approved for a new credit card about a month ago. The money I had transferred over is transfered now. It's at a 0.0% APR through Jan. 2013. All is well.

I received notification via email that my new Feb. bill was posted. To my mild surprise, they have charged me approximately 3.5% of my balance - $94 on a $2,700 balance.

I'll pay it - no problem there at all. It's just a bit surprising to have an actual legitimate amount to pay on a brand new credit card. I was expecting $30, or $50 or $60 max.

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.

It seems as if when I run out of financial things to blog about, I list a bunch of my personal financial calculations. I've run out of things to blog about, so here goes...

Daily interest for the month of February:

First a couple of caveats -

I was comparing my Nov. daily interest to my Jan. daily interest. I was patting myself on the back for reducing daily interest by what seemed quite a bit. Then I realized that Nov. is a 30 day month and Jan. is a 31 day month. That extra day makes quite a difference. A month like Feb., even with the leap day would be even more over stated. So, I'' make my calculation using 30.4 days, the average number of days in a month. Makes for a better month-to-month comparison.

Also, I've transferred the balance of CC4 to a 0.0% card, but the transfer didn't happen fast enough, and I was charged interest in Feb. So my totals will reflect that.

Drum roll, please.

For the month of February I will spend each day:

$2.99 on credit card interest
$3.67 on above plus auto loan interest
$21.45 on above plus mortgage interest

Another calculation. In August I calculated my credit card balance to retirement savings ratio. At that time it was 20%. That is for every dollar I had saved toward retirement, I had $0.20 in credit card debt. My current ratio is 10.47%. It's been cut almost in half since August! Of course, I heard on the radio that Jan. 2012 was the best month the stock market has had since 1997.

That's it for no. If you've made it this far, thanks for reading.

I had a chance to cash in coins again. Today's total: $16.84

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.

Our Federal income tax refund was direct deposited into our checking account last night. What a great surprise today!

The refund was $3,434. I held back $600 for our basement windows project, and $750 for our final heating fuel fill up. The $2,084 balance was transferred to CC1.

Wow is that great!

I paid off twice our monthly debt retirement amount in one fell swoop.

Our small rural electric co-op now accepts on-line payments.

If you're familiar with the Rural Electrification Administration, under FDR's New Deal in the 1930's, that's how our electric co-op started. In fact, my dad has told me a story about how my grandpa was paid $0.50 per hole that he dug for the electrical poles when electricity first came to our area.

To this day, we as cooperative members write down on our bill (or now submit via the web) our monthly electric meter reading. Or, pay $5 if we forget, and someone has to come out and check it.

Anyway, now that they accept on-line payments, we are taking advantage. That will save us one more written check and stamp per month. No wonder the post office is going broke!

I feel as if I'm in a financial holding pattern.

DW checked the status of our federal refund last night. It's estimated that we will receive our refund on February 14. Plenty of time to pay our bills before the end of the month, but I want it NOW nonetheless.

Also, as I've mentioned previously, I opened a new CC for balance transfers. I transferred all of CC4 and part of CC 1. The transactions still haven't shown up. The new card stated that it could take up to two weeks for the tranfers to complete. This Friday will be two weeks for the transfer of CC4, and next Monday (I think) will be two weeks for the partial transfer of CC1.

Total credit line on new CC is $9K. I transferred $2,700 total from the two cards. That way I'm utilizing 30% of the new CC, which I've heard helps your utilization ratio for your credit rating.

Also on hold is the total state and federal refund because of someone else claiming DS1, and the adoption credit.

So, we wait. Good things will happen.

We're finally (I think) at a position financially that we can set up a new account to save for non- monthly occuring expenses. Things like property taxes, heating fuel, garbage pick up, and even Christmas spending.

We've been scrambling each time most of these expenes occur to figure out how to pay for them. So, here are the annual totals:

Property taxes (summer and winter) - $540
Heating fuel (three fill ups per season) - $2,238
Garbage pick up (paid quarterly) - $200
Christmas - $700

All totaled - $3,678
Montly expense - $306.50

So, I'm going to start allocating that amount to a new savings account each month.

Assets
House 1 $80,000
House 2 $73,000
Retirement $94,051
Autos (2) $7,440
Cecking $2,368
Total Assets $256,859

Liabilities
House 1 $103,572
House 2 $69,790
CCs $12,594
Auto $5,984
Total Liabilities $191,940

Current Net Worth $64,919

Net Worth last month $56,404

Change compared to last month $8,515

$5,941 (70%) of that change came from the increase in retirement fund.

Something tells me that the situation in Greece, or heaven only knows what other factor will send that crashing down in no time.

We didn't do anything more than what we should have done. We continued to pay our mortgage.

But thousands (tens or hundreds of thousands? I really have no idea what the number is) did (or are) walking away from the mortgage. We didn't.

Oh, I know that many people didn't have a choice. But it seems that a great many did, and chose to walk away. We didn't.

We thought about it. Very hard. In fact August and September 2010, we were very darn close. In fact, the subject came up again between my wife and me just six weeks ago.

A little back story - I took a new job four years ago this month. Yes, February 2008. Just as the bubble was bursting. The job allowed us to be much closer to family, so our kids could grow up knowing their grand parents. We lived in a beautiful gorgeous Victorian house in a small village in north west Michgan. We put the house on the market in Jan. 2008. And we still own it.

I'm still glad we moved. The improvement in quality of life is priceless.

But, we were short on cash maintaining two houses. From February of 2008 to October 2010, we had choices to make - namely which bills to pay. We always paid the mortgage on time and in full. We fell behind on credit card payments. I know, we shouldn't have credit card debt, but we did and we do.

Then something happened in Oct. 2010. DW had done a massive free lance project, and se was paid $10,000. Also, we had renters move in to our for-sale house. These events allowed us to become current on all past due bills, and allowed us to remain current, and
we have ever since. And of course now we have foster care payments to help out. Trust me, we take care of the kids first and ourselves second with theses foster care payments.

The bottom can fall out again. All it would take is to have our renters move out or stop paying or trash the house or have the furnace go kaput. We are still walking a thin line. But, we continue to make our mortgage payment.

And that is satisfying.

Our state of Michigan income tax refund was direct deposited into our account today. $603.

DW and I have different opinions as to what to do with it. I, of course, want to put it all toward debt immediately. She wants new basement windows. We do, of course, need new basement windows. They'll keep water (and cats) out of the basement, and help to some extent keep the house warmer.

My sense is to wait, her sense is to fix them now.

We'll be getting our federal refund shortly, and the money will be enough to get new windows, and take a sizeable chunk out of the debt balance.

Mort 1 - $103,572
Mort 2 - $69,790
CC 1 - $7,335
CC2 - $2,322
CC3 - $1,526
CC4 - $1,410
Van Loan - $5,984

Difference as compared to a month ago: $1,322!

Some changes to note: we finally began making some progress in paying family members on Mort 2. $210 per month. Not an incredible whole lot, but one drip at a time.

Also, I transferred the balance of CC4 to a brand new credit card. 0.0% introductory APR for 12 months, and no balance transfer fees. I don't really like that I'm playing the balance transfer game. Obviously, at some point I'm going to have to buck up and pay it off. But, I do like the idea of concentrating efforts on the behemouth CC 1, which has an APR of 8.9%.

Back to the real highlight of this post - we have $1,322 less in debt that we did a month ago. That's about 10% of our total credit card debt. Gone!

Still lots and lots of progress to be made, but things are getting better - a lot better than they were fifteen months ago.

Woot!

I sent the final payment for our heating fuel in the mail this morning. It was all paid in 30 days. The fuel company charges 2% per month for anything over 30 days, so that was avoided by 4 days.

It's nice to see our bank account at such a high level, even if it is only for a couple of days. We have several payments scheduled on the first day of the month, including mortgage, insurance, and most of our CC payments.

So, on Thursday, the amount of money in checking will be much less, but it's nice to live a fantasy for a couple days.

Well, I'm not makingthe trip. DW is. The office is about 45 miles away, and she's packing up all four kids, so she can get a new SSN for DS1.

We got his ne birth certificate in the mail on Friday. That's the last piece we needed for a new SSN.

As I mentionedin a prvious blog, we can account for at least five adults who may have had access to his existing SSN before he came into our care.

The new SSN will allow us to protect him against future identity theft, and also allow us to claim him as a dependent on our tax return in future years, without fear that someone else will claim him.

We got a wonderful surprise in the mail on Friday. A refund on overpayment to our mortgage escrow account. $368!

That will sure come in handy.

Of course, we've had to pay into that account because of underpayments in the past.

We ended up filing our taxes as if DS 1 didn't exist. We'll now wait for the refund checks and the new birth certificate before we pursue the rest of our refund/adoption credit with IRS.

I just checked my checking account balance. It's +$900. Not bad for the end of the month. Actually, it's pretty darn great. We still have our van payment to make before the end of the month, and we still owe $300 on our heating fuel. So, we'll end the month about $400 to the positive. That cash will go toward CC4.

If we get our reduced income tax refunds (state and fed) in the next two or three weeks, the opressive CC4 balance will be history.

That, my friends will be cause for a (no cost) celebration! Then I will start with much vim and vigor to tackle CC1.

DW e-filed our taxes late yesterday morning. Then she checked the status of our e-file at around 9:00 last evening. She found out that our filing had been rejected. The reason for the rejection was that someone else had used DS1's name and SSN as a dependent. DS1 is our son whom we adopted last month.

Before DS1 came to us as a foster child last April, at least five different adult people probably had access to his SSN.

We provided care for him for 8 1/2 months in 2011. We meet all qualifications to claim him as a dependent.

I guess the bottom line is that this will slow our tax refund down substantially. We will need to now file the old fashioned way, and prove our case. While I was really counting on the money, it will eventually work its way out.

I got my W-2 in the mail last Friday. So, we bought Turbo Tax, and got started. DW did the data entry. We couldn't complete them because we still need to know what we spent on mortgage interest last year. We don't itemize, but we do use the mortgage interest as an expense against our rental.

DW plugged in an estimate, and we'll have about $4,800 in federal refund and $900 in state. Plus, of course, the adoption credit.

I did some figuring on the credit card balance that I transferred today. That would be CC4 with the $1416 balance. As long as I pay the balance off by this April, I will be about $60 ahead, compared to not doing the balance transfer.

One way to look at that is - sixty bucks is sixty bucks - the balance transfer was a good thing. Another way to look at it is - Was the hassle worth it to save sixty bucks, or about $6.66 per month over the nine months? My final verdict is that the hassle was worth it. It wasn't really much of a hassle anyway.

Sixty dollars of avoided interest is sixty dollars that went somewhere else. Ultimately it has decreased our total debt load. But, I would feel more victorious if the number were a bit bigger.

The only factor I'm not totally sure about is affect on credit score. I've heard that the credit inquiry associated with opening a new CC dings your FICO score about five points. I also know that having a credit card with a low utilization ratio improves your score. This is a $5,000 limit card, and less than 30% of it is utilized. I hope that the utilization factor has improved my score by more than the 5 point ding. I'll go with that assumption, anyway. So, that coupled with the $60 savings (again, as long as I get it paid off by April), it was a good decision.

For the month of January I will spend each day -

$2.48 on credit card interest

$3.16 on credit card plus auto payment interest

$20.65 on credit card plus auto payment plus mortgage interest.

I've been calculating these values for, I beleive three months now. My jaw still drops each time I calculate them.

In one of my very early blog posts (last April)I described different "personalities" that I envisioned each of my credit cards having.

I described CC4 as a sort of an imp or a gremlin. He is green with a sinister smile and razor sharp teeth. He jumps around a lot and chews stuff up and just plain creates a mess of things.

Since that original post, I have transferred the balance to a new credit card. It has had a 0.0% interest rate, that will baloon to 20.99% in February. The balance is now 50% of what it was in April. So, now I envision the same little gremlin, only I've knocked out about half its teeth. But, it's regaining strength, and is becoming ready to reign more terror on my finances.

I described CC2 as a slow moving giant with a big club. He kind of swings that club around a lot and crushes my finances.

Something signifiant has happened to that card since April - the interest rate dropped from 12.9 to 8.9%. The balance is 87% of what it was in April. So the "giant" (principal potion) is nearly as big as it was 9 months ago, but the club (interest portion) has decreased in size and damage causing potential quite a bit. But, it's still a pretty big club!

In April I wrote that CC's 2 and 3 have lower interest rates - in the 5% range, They are like two overgrown, clumsy kids, kind of tripping on things an knocking stuff over, but creating spills that I can tend to. I'd just rather be doing other things with my time (or money) so to speak.

Nothing has changed on the interest side. CC 3 demands a higher monthly payment, so the principal has dropped accordingly by 49%. So it's more of a toddler now, rather than a clumsy overgrown kid.