Bob B.'s Financial Soundingboard

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.

We took the boys to the University of Michigan hospital in Ann Arbor on Thursday. Ann Arbor is a 2 1/2 hour drive from our remote, rural home. The appointment was at the U of M Fetal Alcohol clinic, and it took us 7 months to get in.

We arrived at 7:40 AM. The appointment started promptly at 8:00, as scheduled. We left at 2:10. In between, we consulted with six medical professionals, including a genetics team, fetal alcohol diagnosticians, and a child psychologist. The boys also had blood drawn for genetic testing.

While we won't have the complete reports for another couple of weeks, we did learn that DS2 indeed does have Fetal Alcohol Syndrome Disorder, and DS1 does not have FASD, but he is in the Autism Spectrum.

Sad, yes. Actually, I was (am) angry at DS2's biological mother, and DS1's biological parents' neglect almost certainly, in my mind, any way, caused the autism. But, we've known something is different about each of them for a long time.

So, we take the information that we've learned, and will learn, and use it to provide as close to a normal life as we can for these boys.

The seven months was worth the wait. The staff at U of M was exceptional, and the entire process, while there, was carried out with amazing efficiency.

Assets
House 1 $80,000
House 2 $73,000
Retiement $88,110
Autos (2) $7,580
Checking $1,721
Total Assets $250,411

Liabilities
House 1 $103,771
House 2 $70,000
CCs $13,316
Auto $6,174
Accounts payable - $746
Total Liabilities $194,007

Current net worth - $56,404
Net worth last month - $54,224
Change compared to last month $2,180 to the positive.

A bit less than half of that change came from decrease in debt obligations. Checking is up a bit. Retirement is up a bit.

I just found out that for 2012, the currently refundable adoption credit decreses from the 2011 value of $13,360 to $12,650 (I already knew that), and it it reverts back to a nonrefundable credit (I didn't know that).

Of course, congress can change any of the above facts any time between now and the end of the year. And it's an election year, so we'll see.

I'm just glad that one of our two adoptions was made final in 2011. Because, as it stands right now, that's a $710 difference.

I paid my winter property taxes. I think the bill was $328, but I don't remember exactly. Somewhere between $320 and $330, anyway.

We live in a very rural area, and taxes are cheap. I think the summer taxes were just around $200.

Our taxes for the other house we own run about $1,400 per year.

I also ordered fuel oil today for the house. Last time we filled up it cost $750. That lasted October, November and December. January and February will be colder, so we'll see how far this fill-up lasts.

The bill won't be due until after I get paid again (I get paid monthly, at the end of the month). So, I should be able to float the fuel oil bill (or most of it, anyway) with my next pay check.

But, it's likely we'll need another fill-up before March. Hope for warm days!

Here's my beginning of the year debt update:

Mort 1 - $103,771
Mort 2 - $70,000
CC 1 - $7,731
CC2 - $2,453
CC3 - $1,716
CC4 - $1,416
Van Loan - $6,174

Total principal paid as compared to one month ago: $936

That's short of my $1,000 monthly goal. Well, $64 short to be exact. But, I've already written about our holiday spending, so not too bad.

I will continue to concentrate on CC4. That's the one that was transferred to a 0.0% for 6 months card. February will be the final interest free month. Then it shhots up to 20.99%. We'll pay it off when we get our tax refund, but until then, interest will accumulate mightily.

DW and I became licensed foster care providers in Feb. 2010. We received our first placement in March 2010. We picked the three week old infant up at the NICU. He never spent a night with his bio parents. His bio dad is a convicted child abuser and a sexual deviant. It turns out that he beat the hell out of bio mom late in the pregnancy - thus the need for the stay in the NICU and the subsequent Cerebral Palsy diagnosis.

One year later - after twice weekly visits with bio mom - both bio parents signed off on their parental rights. You see, bio dad was facing fresh criminal sexual conduct charges, and he felt it was in his best interest to sign off. He convinced mom to do the same. The CSC charges were against her children from a previous relationship.

In April 2011 we had a 2 1/2 year old placed with us. His parents are drug dealers. He was found in the van with them when they were busted selling drugs. He was also criminally neglected. This is the child we just adopted.

We receive an approximate $1,200 stipend each month from the state of Michigan to care for these children. We receive more for the (now) three year old because his needs are greater. In addition we receive WIC benefits to purchase food. The value of those benefits are about $60 per month. Cost for diapers, clothing, car seats, visits with bio parents, etc. come from the $1,200 payment.

DW has been generating about $10K per year in freelance income since the birth of our first child. She no longer has time for that.

Payments for children are based on the complexity of their level of care. Level 1 children are your run of the mill children in the foster system. Our youngest child is currently a Level 1. Level 2 children require enough counseling or other types of specialists appointments and specialized care in the home to increase payments by $5 per day. Level 3 children may have explosive behaviors, or require increased counseling to receive yet another $5 per day. Our three year old is classified as a Level 3. The final classification is "Medically Fragile". These children require constant or near constant medical attention. I've heard that payments for these children can be around $50 per day.

We (mainly DW) are working to get our 21 month old re-classified as a Level 2. Level 2, 3, and Medically Fragile adopted children retain payments until they are 18. Level 1 children retain no payments post-adoption. We feel the CP diagnosis is enough. The State of Michigan disagrees. Fortunately the Judge agrees with us, and he is being re-evaluated. Hopefully adoption around his second birthday.

The final financial benefit is the $13,000 per child refundable tax credit.

I understand that not everyone is cut out for foster care. But there is a tremendous need. Heck, we're not cut out for fostering adolescents, at least not right now. We've heard horror stories about foster parents having their car stolen, or being threatened with knives, or darn near having their house burnt down. The bottom line for us is the safety of our young children, so we won't be fostering teens for a good many years.

We've fostered three other children during the past two years - each of them short-term placements.

If you have any interest at all in learning more about foster care, feel free to reach me at my personal email address - bob@stuever.us.

We adopted a three year old little boy through foster care this last Friday. He's been living with us since April 2011. He had a REALLY tough past - almost as tough as you could imagine from a neglect stand point.

He will likely be mentally and emotionally scarred for the rest of his life.

The adoption of a special needs child through foster care includes a $13K refundable federal tax credit (see my related post in the SA forums).

The tax refund is meant as an incentive to get these children into safe and loving homes. We would have adopted without the tax credit, but it sure is nice.

If anyone is interested in learning more about foster care or adoption through fostering, feel free to PM me through my SA account.

It's tough, hard, work through a bureaucratic maze. But there are 20,000 children in Michigan alone who need safe, loving, nurturing homes, or just plain a chance in this world.

We had a great Christmas. We even celebrated an adoption yesterday, but more on that in a future post.

We treated ourselves a bit more this year than the past couple of years. We bought a new family computer, and bought some towels. Our old towels were given to us as wedding gifts, 15 1/2 year ago. It was time.

We also bought gifts for the kids, but trust me, we didn't go overboard.

As I read what others have to say about getting yourself out a a financial mess, usually there is something about treating yourself once in a while. That, I think is what this Christmas was about. Sure, that money could have gone toward further debt repayment, but you have to treat yourself once in a while.

Oh, yeah, all of this was cash flowed, we didn't go into debt on our little treat for ourselves!

Happy New Year to all.

My wife and I met while we were undergraduates at Michigan State University. We would, as would be expected, like for our children to follow in our footsteps. The following was copied directly from the msu.edu admissions website:

In-State Freshmen
•Tuition and fees (15 credits/semester): $12,822
•Housing (double room/Silver Meal Plan): $8,204

Total for two semesters: $21,026

How are we going to afford that?

That's just an estimate for one child for one year. For the 2011/2012 year. Our oldest won't be ready for college for another 10 years.

My oh my. One financial crisis just follows another.

I stopped by the bank to cash in my accumulated coins again. The total was $18.19. The last time I cashed in my coins was early October, so let's say 10 weeks. That's an average of about two bucks per week of accumulated coins.

A couple of years ago, when cash was really really tight, we would literally paw through the coins to pay for gas and grocery items at the end of the month. We never had extra coins just sitting around.

Obviously, we still have a considerable debt load. But, from a family cash flow stand point, things have begun to turn around, and I think that the coin accumulation situation is a signal of that.

I listen to a lot of radio. In this political season, you hear a lot about tax rates for "wealthy" Americans. "Wealthy" Americans seems to be defined as couples who make more than 200K per year.

My pet peeve is that yearly income isn't the same as wealth. Wealth is your net worth. I'm sure there's a strong correlation between income and net worth, but they're NOT the same thing.

If one family's yearly income is 100K. And a family down the road makes 50K per year, and another family down the road makes 200K per year, which one is wealthiest? It's impossible to know. The wealthiest family is the one with the greatest net worth.

It may very well be that the 65 year old couple who earned 50K per year, and saved every penny that they could are wealthier than the 30 somethings that gross 200K per year, and spend nearly all of it.

My point has nothing to do with tax policy, and which household should pay a greater marginal rate. It's the mis-use of the term "wealth" when discussing marginal rates on the news.

A summary of some of my personal finacial calculations that I've talked about in previous entries.

Credit card debt to retirement savings ratio: 16.1%

Non mortgage debt to income ratio: 13.1%
Total Debt to Income ratio: 32.6%

Daily Interest Expense (December 2011):
Credit Cards: $2.60
CC + Auto: $3.23
CC + Auto + Mortgage: $21.09

As of this month, to remain current on our credit card payments, the minimum payment is $549. What we will probably end up paying is about $630, or about $80 over minumum. Note that I've slowed down payback a bit this month, mainly because of extra Christmas spending and keeping some cash in reserve for the home heating bill. We also need to pay property taxes in February. (Never a lack of places for cash to go).

If we paid only minimum payments on CCs, it would take an estimated 28 months to pay off CCs. It's hard to estimate that because minimum payments can change (hopefully down) month-to-month.

If we paid the $630 that we'll be paying this month, it would take 24 months to retire the CC debt.

If we bumped that up by $100 to $730 per month, every month, it would take 21 months to pay off. Not a huge change in terms of months to pay off, but a difference in $160 in accumulated interest, as compared to a $630 payment.

I think we can manage an average payment of $730 per month over the next 12 months. Hopefully some months substantially over $730, no months less than $630, and definitely no months less than $549!

DW bought a new lap top computer yesterday. A Christmas present for the whole family.

The total was right around $475. No new borrowing, we had the money in checking. But I always get edgy when big purchases are made, especially with so much month left.

But, as I've mentioned in prevoius posts, debt repayment has been slowed a bit to brace for Christmas spending.

We needed a new computer. The old one began crashing and slowing down, and all in all has been becoming annoying. We switched to a lap top to facilitate the use by our daughters (ages 9 and 5). Our old desk top was housed in the office, not exactly a kid friendly environment.

Will be interesting having a "family" computer now. Especially have to think more about parental controls - if anyone has any advice, let me know.

I guess it's time to blog about net worth. I don't think I have so far. I've spent a lot of time on the liabilities side, and not so much on the assets side.

Assets
House 1 $80,000
House 2 $73,000
Retiement $86,274
Autos (2) $7,850
Checking $1,308
Tot. Assets $248,432

Liabilities
House 1 $103,968
House 2 $70,000
CCs $13,867
Auto $6,373
Tot. Liab. $194,208

Net Worth $54,224

The BIG question is value of House 1. We'll not know that for sure until it sells.

Retirement savings has increased about 16K over a year ago.

But now I have it logged in cyberspace, our December 2011 net worth is $54,224. Hopefully it goes up from here.

The tank that holds the fuel oil that heats our house sits in the corner of our unfinished basement. Not exactly a place that i find myself going a lot. Well, yesterday I thought I better check the level in the tank. When I had it filled this summer, I expected that the fuel would last through December.

The level was between 3/8 and 1/2 full! We'll get at least through December.

I started to actively log my family's debt progress last Novemebr in the SA forums. I thought it was time to check progress made over the past 12 months.

Mortgage debt on for sale house decreased by $2,600.

CC debt decreased by $8,684.

Automobile debt increased by $6,362.

Mortgage debt on house we currently live in unchanged (this is family borrowing, and we plan to start moving on it during the next 12 months).

Total debt decreased by $4,954.

Average interest rate (all debts) Nov. 2010: 7.02%
Average interest rate (all debts) current: 6.19%
Average interest rate (CC) Nov. 2010: 10.66%
Average interest rate (CC + auto) current: 5.88%

So, it's an improvement, a step in the right direction, blah blah blah. Obviously, we would be in much better shape without the auto loan. But, I still stand by our decision. It made sense at the time.

What I'm happiest with is the decrease in average interest rate over the past 12 months. A function of attacking high interest debt, and of course the credit card company with the big balance dropped the rate by 4 points in June.

$5,036

That's what I came up with when I ran a tax estimate on the Turbo Tax web site.

I even adjusted my withholdings last February, so I kept more of my money, and my refund wouldn't be so big.

That's based on my income, my tax withholdings, also I estimated a $3,000 loss on our rental. The big kicker is four child tax credits.

We'll be getting another tax credit that wasn't part of the estimate, because we used energy efficient materials when we had the roof put on. That might be $500.

A 5K tax refund will help a lot.

It won't be used for a cruise.
It won't be used for a new plasma TV.
It won't be used as a down payment for a 25K car.

It will be used, in one form or another, to reduce debt (or toward an EF).

Now to begin planning on how best to place that money for financial security.

I've blogged about our rental house before. We are reluctant land lords, because this is not an investment property. This is the house we used to live in, and put up for sale when we moved almost four years ago.

We've had three different renters in the house. The first was an interim pastor, who didn't pay very much for rent. My thoughts in renting the house to him for well below market value was that it was some income, plus he would maintain the house (which he did), and pay the electric, water, and heat bill (which he did), and keep the snow shoveled out of the driveway (which he did very well). He also paid his rent a day or two before it was due. But, (I thought) the best reason to rent to him well below market value was that if the house did sell, we could ask him to leave, no questions asked. Well, the house didn't sell, and he left when his interim period was over.

October 2010, new renters moved in. They paid substantially more than the previous renter. They were OK renters. They always paid their rent, just not on time. It was always paid three or four days after it was due. They made a few complaints along the way, and we always felt that they did things to undermine our efforts to sell the house. They moved out last June.

In July, our new renters moved in. They are paying a bit more than renters #2, and they pay on time. We don't hear much in the way of complaints from them. We still wish we weren't land lords, but if we have to be, this is better than a couple of other alternatives.

Dec 2011 Debt
Mort 1 - $103,968
Mort 2 - $70,000
CC 1 - $7,832
CC2 - $2,577
CC3 - $1,902
CC4 - $1,556
Van Loan - $6,362

These are my updated numbers. $1,013 of debt paid off, as compared to November numbers!

Credit card debt is $628 less than November.

I could have paid off an approximate additional $300 in debt, but the reality of Christmas season, and winter heating has set in. We also got our property tax bill yesterday. Due in February.

I bought a new battery for my beater 1994 Chevy Lumina today. It was a hundred bucks. Hopefully it will outlive my car, because it is such a big pain in the rear to get out. It's even almost impossible to jump start my car because of how it's positioned in there.

I replaced it three years ago. I bought a cheapie back then, because I thought my car didn't have much life in it. I should have gritted my teeth and bought the expensive one then!

My daily interest expense (for the month of Novemeber 2011):

Credit cards - $2.73
Credit cards plus van - $3.50
Credit cards plus van plus mortgaqge - $21.63

After the six month introductory 0.0% rate is over on my transferred balance on CC 5, that will increase by aother $0.86.