Bob B.'s Financial Soundingboard

Six months ago, the ineterest rate on one of my CCs dropped from 12.9% to 8.9%. I calculated an estimate of what the current balance would be if the interest rate had not dropped.

Balance in June: $8,775

Avereage monthly payment since June: $204.17

Current balance if $204.17 payments had been made at 12.9% int.: $8,098

Actual current balance: $7,931

Diiference: $167

Monthly difference: $27.83

The $27 per month difference is not life changing. My balance would still be rounded to $8,000 with or without the 4 percentage point drop. But, the rate drop is helping, and I'll take all the help I can get!

I disposed of my roof waste last Friday. To start the story at the beginning, we called around for dumpster rental quotes, and found out that the minimum that we would have to pay was $250. That was more than we wanted to spend, so we decided to borrow my dad's trailer, and we had the roofers pile the waste onto it.

I hauled the trailer to the land fill, about 12 miles away, and the disposal fee was $19. I made two trips to the salvage yard, about 4 miles away. One trip was the scrap steel, and the second trp was the scrap aluminum. The steel brought $32, and the aluminum brought $20. Probably twenty percent plus or so of the scrap steel was other scrap we had laying around, so we'll say that the scrap steel from the roof was worth $25.

So: Cost for trash disposal - $19
Proceeds from steel - $25
Proceeds from aluminum - $20
Cost for travel (40 miles @ $.50 per mile) - $20

Net for waste disposal - $6.

Sure beats $250 for dumpster rental.

But, if we had rented the dumpster, there is some other trash laying around the place that we would have disposed of. I guess I need to make another $19 trip to the landfill!

It's been a while since I updated this blog. I've been busy with work.

So, our roof project is complete. We hired an Amish crew of four for the job. They began Nov. 1 and finished Nov. 4. It actually took three days of work, but Thursday was rainy. Thankfully, a tear-off wasn't necessary, so the rain was no problem.

The best news is that labor was over-estimated by about $1,500, and materials were over-estimated by almost $500, so the whole project was about $1,500 less expensive than our budget.

The results are great - a new shiny steel roof!

Well, I guess you do anyway. I paid $3.229 this morning. It's heading in the right direction, as it usually does this time of year.

I remember when gas first hit the $2.00 mark. My wife, and not-quite 1 year old infant and I were heading to my cousin's high school graduation party. If my daughter was not quite one, then that was June 2003. $2.00 seemed like the most extremely exorbitant price imaginable. Now that would seem like peanuts.

Around the time my wife and I graduated college, and were just starting out (1997 or 1998 timeframe) gas was around $1.20. I knew that was extremely cheap and wouldn't last, because I also remember when I was a young kid in the '70s that gas was around $1.15. But I never imagined that gas would triple or more over the course of the next dozen years.

It just seems like gas is volatile with wide and dramatic swings. I know that there are a lot of geo-political factors in effect (Arab Spring, demand from China and India, and world-wide markets all playing a part), but it sure would be nice if we could reach some sort of stable price point.

We turned our furnace on Friday. That's Firday, September 30. I usually like to wait until Oct. 1, but, it was cold Friday.

It would have been turned on Thursday, but our two young boys had thrown a number of toys, sippy cups, bottles, and other assorted items down into our duct system. I reached down and grabbed out everything I could from the ducts, and my wife screwed the register covers down on Thursday, solving half the problem. There were still some items that had to be recovered from the far end of the ducts in the basement.

So, on Friday, I bought some of the very large zip strips that attach the flexible ducts to the main. When I got home from work on Friday, I went down to the basement, and cut the existing zip strips, removed the various debris from three different ducts, reattached them with the zip strips, and turned on the heat.

Hopefully we have enough fuel oil to last through the end of December. We'll probably need another two $750+ fill-ups before heating season is over.

...not really. Well, I am. A 1.5% raise, in fact. But, my contribution to my health insurance plan is increasing, too. Both will go into affect Oct. 1.

My health insurance contribution increase is greater than my raise. I've known that for a while, but I've not calculated the actual monthly net until today.

The difference is $40 per month less in my net paycheck than before the raise and increase in contribution.

What it comes down to is that I'm thankful to not only have a job, but to also have health insurance. Health care is ungodly expensive, and my employer is covering the majority of the cost.

I've blogged on and off about a new roof we need. Well, we've decided to bite the bullet, and get it done sooner rather than later.

We met with the roofer on Friday. He can get to it the first or second week of November. It's a metal roof, so we don't need the heat of summer to make the tar shingles stick better (or at least that't what I've heard you need with tar shingles.)

This mis not the best of moves financially. We will dry our saving almost completely up, with a very small EF. We did decide to peel $1,400 off the estimate by choosing against the standing seam roof, and for a barn-type metal.

My wife has been pushing for a new roof for a year now. I've been trying to hold off - we would have plenty saved if we waited until next March. But, alas, I've come to accept that it would be better to not endure another Michigan freeze-thaw cycle on this 25+ year roof.

So, November 2011 is a comprimise between October 2010 and March 2012. I'll still have two paydays (Sept. 30 and Oct. 31) to put some money away, but I'm afraid the well will be dry once we've paid for the roof.

I've bought a lottery ticket exactly once in my life - just after I turned 18 in 1990 - because I could. I spent a dollar, didn't win, and have never bought a ticket since.

I've come to believe that the state lottery system is simply a regressive tax on people who largely cannot afford to play. And, I also get annoyed at people who stand in front of me at gas stations and convenience stores and laboriously choose their scratch-off selections, or numbers to play that night.

A couple of days ago, I was in line at a store, and an older well-dressed gentleman, probably about 75, dropped $80 on ten and twenty dollar scratch-offs. We walked out of the store at the same time, and he drove off in a newish Cadillac.

Obviously, I don't know if the car is paid for, or any other single thing about his financial standing, but he didn't really fit the profile of a typical lottery ticket purchaser.

I started getting (more) serious about paying down debt last October. So, I was curious how much I had paid in interest on non-mortgage debt the year prior to getting serious compared to how much I've paid the year since. Here are my approximations. I think they're pretty close.

Nov. 2009 - Oct. 2010: $3,480 spent on interest.
Nov 2010 - Oct. 2011: $2,090 spent on interst. Of course, Oct. is a projection.

I then projected an estimate for the next year, based on current balances and payments. My total projection for the next year is: $1,240 spent on non-mortgage interest.

Each year, according to my estimates, I'll have spent about 60% of the previous year's total.

One thing my previous year's estimate does not include is late fees and bank over-draw charges. So my 2009-2010 estimate is probably even greater than $3,480.

We cleaned our carpets last night. Our girls are at their aunt's house for a couple days, and we arranged to have my mom watch the boys for a few hours, so we took advantage of the situation.

We've been in the house for two years now, and haven't steam cleaned them since we moved in. We rented the steam cleaner for $39. $10 of that is a deposit that will be returned when we bring the cleaner back. The detergent cost $23, and it was nearly used up, so good thing I bought the big bottle. So, for $52, and some elbow grease, we have bright shiny carpets and upholtery again. Oh, yeah, that big stain in the living room is gone, too!

I've blogged before about a house we have for sale. It's about 135 miles from where we currently live. It's been for sale for going on 4 years in a very sluggish rural Michigan housing market.

Well, our former neighbors are leaving town. Mr. neighbor works for General Mills, and he has been transferred to their headquarters in Minneapolis. GM will buy their house for its appraised value if it doesn't sell in 45 days.

Our houses have some similarities. Same street, similar sizes, similar ages. In fact, when we moved to town in 2002, they were both on the market, listed at the same price. This house was one of the three we had narrowed down to before we made the offer on our house.

About a month later, our neighbors bought the house they are now moving from. I'm not sure what they ended up paying for it, but I assume a similar amount that we paid.

Anyway in the next 45 days, something will happen. Either a), the house will sell, and we will have a new data point to help us determine a selling price, or b), they will get 2 or 3 appraisals (three if the first two are not within 95% of each other). Mrs. neighbor will share the appraised values with us.

So, this is good news. Great news would be that our house actually sold!

(Opps! Accidentally published with no text)

Here's my new month debt update.

Current Debt
Mort 1 - $104,555 $738/mo. 6.25%
Mort 2 - $70,000 $0/mo. 0.00%
CC 1 - $8,239 $170/mo. 8.90%
CC2 - Balance transferred to CC6 @ 3% balance transfer fee.
CC3 - $2,964 $140/mo. 5.25%
CC4 - Paid in Full
CC5 - $2,456 $195/mo. 5.32%
CC6 - $2,060 $60/mo. 0.00% through January 2012
Van Loan - $6,925 $210/mo. 4.02%

That's $923 principal paid this month. We've slowed down debt repayment due to saving for the roof. Payments made this month are only about $125 more than minimum due. Next month, we might pay nothing more than minimum due because we would like to get the roof done this fall, before the snow flies. Not sure the roof can take another freeze/thaw cycle.

I get paid once a month, on the last day of the month. So, today is pay day! Indeed, my favorite day of the month. The direct deposit happens at 12:00 midnight, so I wake up on the morning of the last day of the month with a nice surprise in my checking account.

I've blogged before about how we've been saving for a roof. The strategy I've taken for roof savings is to take whatever is left at the end of the month, and transfer that into our savings account. Just moments ago, I transferred $429.84 into savings. We now have $4,620.26 in our roof savings account. "Just" $2,879.74 left to go.

I was clicking around on the website for one of my credit cards - the big one with the $8,500+ balance. I found a page that listed the amount of interest I paid last year - $1283.46.

The page also listed the amount of interest I've paid year-to-date - $714.40. That prompted me to project the amount I'll pay for the remainder of the year. I project another $251 in interest - if I only pay the minimum due. Totalled together that's $965.40.

Or $318.06 less than last year on that card.

Or 75.2% of what I paid last year on that card.

Two things have happened with this card: 1) of course, I've been paying down the balance, and 2) the interest rate dropped from 12.9% to 8.9% in June.

Of course - reality is that I'll still have paid a thousand bucks in interest on this card by the end of the year. That sucks, but things are moving in the right direction.

Here are a couple more financial ratios that I've calculated.

The first is the minimum payments for all non-mortgage debt (credit cars plus van loan) that we owe divided by monthly (after tax) income. So, it's not necessarily what I pay, because I've been paying more than minimum, but I's what a bank would calculate if I went in for a new loan. My non-mortgage debt payment to after tax income ratio is: 13.7%.

The second is the same calculation, but I include my mortgage debt. That ratio is: 33.4%.

I would feel a lot better if that first calculation was less than 9%, and the second calculation was less than 30%. Actually, I would feel a LOT better if the first calculation were 0. There are, of course, two ways to improve those calculations - boost income or reduce debt (or stretch out payments, but I don't want to go there).

I've read that mortgage companies will approve loans that make your total debt to income ratio up to (and even beyond) 40%. That's scary. Things would be pretty tight if 40% of our income were going to debt repayment.

I did some thinking today about what I'll to have saved before I retire. Part of that equation is life expectancy. The on-line tool I used calculated my life expectancy at 84 years. Don't ask me what site I used. I just googled "life expectancy calculator" and used one that looked good.

The 84 years result sounded OK. My maternal grandfather lived to 71, maternal grandmother, 79 and both paternal grandparents lived until they were 89. Actually Grandma was within a week of her 90th birthday. So, good genes on Dad's side and not as good on Mom's. Actually, it was probably lifestyle choices as much as anything, and I'm probably a blend of both.

I'm still not sure what I'll need to have saved to retire. It's still 20+ years away. I've heard 25 times salary. If I figure modest pay raises, that comes to about $1.9 million. Not sure that's going to happen. I've also heard that you'll need funds enough to cover 70-80% of your pre-retirement income. But, I'm not sure what kind of withdrawal that figures.

Like I said, I'm still looking at a horizon of 20+ years, so this is something to consider, but not obsess over. For now, I'll concentrate on reducing then eliminating debt.

I bought fuel oil for home heating. Over the past couple of years, we have struggled to keep payments up for our heating fuel. We generally begin heating the house in October (we live in Michigan, where it cam get cold!). It seems like we usually wait until the tank is nearly completely empty, call to have it filled, and have the bill paid off just in time to get it filled again. We need to fill it three times per heating season.

Well, since we had some extra money in our account, I decided to have it filled in August, and I paid the bill right away. It felt good to be able to do that. I figure we have enough fuel to last through December.

I'm hoping that the fuel will be a bit cheaper than if I had waited until late September, when everyone else will be filling up, but that may be a pipe dream. Regardless, we have a tank full of paid for fuel oil!

I wrote a couple of weeks ago about getting a new credit card. The main reason for the new card was to transfer my very high (16.99% APR) rate card to take advantage of the 6 mo. introductory 0% rate.

I've started using the card. Thin ice - I know. But, I'm resticting purchases to gas, groceries, and work items for which I will get reimbursed. I will pay off all purchases each month plus the predetermined amount to pay off the transferred amount over the time-frame I've set up.

The reason I'm using the card is so that it will remain active, and help boost my credit score for credit utilization.

So, I'm using a credit card again, after a three-year fast. We'll see if I can discipline myself this time. I think the chances are pretty good.

We have a black walnut tree behind our house. It drops walnuts on our house, and they tend to be very loud. Also, the tree has grown enough that the branches are now scraping against the roof, and that is annoying. My wife has let me know that it is time to take action.

So, I borrowed my dad's chain saw yesterday, and brought it home. With chain saw in hand I looked at the tree, and I looked at the house. I looked at the tree, and then the house again, and quiclky came to the realization that the likelihood that I would damage the house if i cut even a branch off the tree was probably 80%.

It would probably cost at least $300 to hire a professional tree company to take care of the problem. So I opted for an interim solution - hire the Amish guy who lives down the road. Yes, I have an amish guy that lives down the road. Actually there are three Amish families that live within a mile of my house. This particular Amish guy cuts down trees, and cuts lumber for a living.

The problem is ... he will most likely refuse payment. Which would be fine if I had an in-kind service to return to him. Amish tend to be fairly self sufficient. I'll try to offer him $75 or something like that, but if (when) he refuses, I'll be indebted to him. I'll try to come up with something in return, but I don't know what it will be.

I keep looking at my retiremt fund balance. Once per day. As you know, it's like looking at a yo-yo, that doesn't seem to return back to the hand each time it's dropped.

I know that there are crazy weird things happening right now, and today's balance will have little in common with the balance 6 months or 6 years from now. But, it's kind of interesting to see what I hear on the news translated directly into my own retirement fund.

After yesterday's post, I found myself fixated with my debt to retirement fund calculation. I ran a projection. I assumed my monthly contributions to my retirement fund plus modest gains (thanks again, congress) plus my projected decrease in CC debt.

I project that by March 2012, my ratio should be 14.6%. Of the three factors I mentioned, (contributions, fund growth and CC reduction), I have control over two of them. My contributions are pretty much fixed at 15% of salary. I could increase contributions, but I probably will not. I have absolutely no control over the market. The one factor I can really work on is CC reduction.

Let's see if I can continue to whittle down on CC debt, and meet my short-range goal of a 14.6% CC debt to retirement fund ratio.

This isn't a real financial benchmark ratio, as far as I know. But, 5 years ago, it was about 100%. In other words, I owed about as much on credit cards as I had saved toward my retirement - $30,000.

I calculated this ratio again, and it is now 20%, even with the pathetic performance of my retirement fund over the past several weeks (thanks, congress). Or, for every dollar I have saved towards retirement, I owe twenty cents in credit card debt.

Of course, my goal is to have that ratio down to zero.

We had a night out. We took the girls to see Harry Potter. My mom stayed home with the boys. The tickets cost $21 for the four of us (I live in a rural area, and ticket prices are cheaper). DW bought popcorn and drinks, not sure what she spent. Plus I got a 50 cent refill on the popcorn.

We rarely go out to the movies. It was fun, we all really enjoyed it, plus the break from the younger children.

If you look at my info bar, you’ll notice that I have two kids plus two foster kids. Our oldest is 9. We used disposable diapers with her until she was about two. Then we switched to cloth diapers. The switch was for a myriad of reasons, including cost. We found cloth diapering to be cheaper, chiefly because my wife is a seamstress, and she made them.

When DD#2 was born, she was nearly exclusively cloth diapered. The only disposables we used with her were given to us as baby gifts. We used them for some nighttime diapering and when we were on long trips.

Enter foster child #1. He came into our care, March 2010, when he was 19 days old. We continued the tradition of cloth diapering. Because he was a foster child, and had twice weekly visit his birth mother, we did need to have a supply of disposables around.

Foster child #2 came into our lives this past April. He was nearly 3. Because of the situation he was in prior to foster care, potty training is not even yet on the radar screen. Four kids is a lot. Did I mention that the two foster kids have special needs? Anyway, we have found it nearly impossible (actually strictly impossible) to keep up with the three or four times a week laundering schedule that cloth diapers demand. We live in rural Michigan, so a diapering service is not an option. We have switched back to disposables for both boys.

As far as cost goes, my wife orders them on line for less than a quarter apiece. We also receive a foster care stipend that makes covering the cost less of an issue. Cloth diapers are better for the skin, more comfortable and better for the environment. But right now, they are not an option. But, boy do the disposables stink!

Beginning of the month update on my debts.

Mort 1 - $104,748 $738/mo. 6.25%
Mort 2 - $70,000 $0.00/mo. 0.00%
CC 1 - $8,553 $176/mo. 8.90%
CC2 - Balance transferred to CC6 @ 4% balance transfer fee.
CC3 - $3,092 $140/mo. 5.25%
CC4 - Paid in Full
CC5 - $2,639 $195/mo. 5.32%
CC6 - $2,172 $60/mo. 0.00% through January 2012
Van Loan - $7,111 $210/mo. 4.02%

Difference from last month - $997.

There's a plumbing problem at our rental house. First estimate is $1,450. I've called two other plumbers for estimates. Hopefully tomorrow or Monday, we can get better news.

The line that goes from the upstairs toilet to the basement has a leak. I'm no plumber, and I'm 136 miles away.

Maybe some of you read my question in the forums yesterday. I'm starting an EF. We've gone almost three years without using credit cards. And, we've managed to operate without an EF. But, it's time to change that. So...We'll establish a $1,000 EF, and begin beefing it up when the cards are paid off.

We actually have some money saved up right now - $4,200. That's new roof savings. We figure the new roof at $7,500. Plus, we need to have $800 in reserve to pay back the security deposit to our renters if/when they move out. So, the savings goal will need to be $9,300 before we can buy the new roof - "just" $5,100 to go!

Last October, my credit score was a fiasco. It was 580. I asked on the forums how long it would take to raise my score up to a respectable level. No one could really answer the question.

Well, I applied for a new credit card for a balance transfer. Apparently part of the new credit card reform law is that credit companies need to provide you with your credit score. Mine is now 667.

So, over the course of 9 months of faithfully paying bills on time, and whittling down debt, my credit score has improved by 87 points. That's close to 10 points per month. Maybe by the end of the year, I'll be looking at a 700 credit score.

I've posted the same question in the forums, but I thought I'd also post the same question here:

I've posted in the forums previously about a house that we own that we no longer live in. My family moved 3 1/2 years ago, and the house has been on the market and unsold ever since. We owe about $105,000, and my best guess is (with input from our Realtor) that it's worth somewhere between $95,000 and $105,000 at this time. The house is located in a small villge in the northern part of Michigan. The list price on the house is $109,900, which when Realtor commissions and closing costs are added in, puts us about $4,500 in the hole.

One week ago, we had new renters move in. They are interested in buying the house, but are not in a financial position to do so right now. We struck a deal with them to remove the house from the market for 12 months. They are paying $100 per month above what we asked for rent in exchange for us removing the house from the market (we had been asking for $800 in rent, and they are paying $900 per month.) Also, when the 12 months is up, the (presumed) $1,200 they've paid in addition to the rent will be put toward a down payment.

So ... on to my question. Would it be a good idea for us to refinance our loan while we wait? We are paying $6.25% interest. The original amount borrowed was $120,000, and we are paying $738/mo. Int + Prin.

There is of course no guarantee that our renters will buy the house in July 2012, but I'd like to use 12 months as my planning horizon.

Over the next 12 months, I will pay $6,500 in interest on the loan as it currently is.

If I were able to refinance for 5.25% (one point lower than current), I would save $158/mo. in mortgage payments and $1,000 in total interest payments, assuming a 30 year refi.

Or we could refi at a 20 year payoff, keep our payments approximately the same, and bite off more principal each month.

What are mortgage rates these days? What can I expect for closing costs? Clearly, I don't have 20% Loan to Value.

Any thoughts would be appreciated.

Thanks

I took all of our household coins to the bank today. We had $24.12. I do this about four times a year, and it seems like there's always between $20 and $25 worth of change.