Finance Gets Personal

I know I’ve already mentioned this once, but I just have to point out Antishay’s great series on Building a Snowflake Business.

This is really helpful for me since I don’t have the hours for a part-time job, haven’t been getting large bonuses/raises at work lately and have cut the budget as much as I plan to (for now).

I’m planning to post some things for sale on Craigslist tonight, then get started on implementing Shanti’s ideas for snowflake businesses.  There are a lot of areas I have training and expertise in (writing, graphic design, piano, etc.), but always seem to lack the confidence to get out there and try to make money with them.  But I think getting out of debt is worth it!

Photo Credit: Dog Day Morning by DWinton, used under Creative Commons licensing

Snowflaking, the popular concept of throwing all your extra little bits of money toward your debts, has quickly snowballed into its own website and carnival. Check out the first edition of the Carnival of Snowflakes, hosted by paidtwice, snowflaker extraordinaire!

The submissions include lots of practical advice and suggestions for coming up with extra snowflakes (even pennies!)

As for me, I’m trying to come up with a more systematic way to handle snowflaking. I currently snowflake all my bonus income and other “surprise” checks, but tend to re-absorb other savings back into my checking account. After reading all these submissions, I’m ready to go sell some more stuff on Craigslist, hawk off my old gold jewelry and teach Italian (not that I speak Italian, but that’s beside the point!).

Photo Credit: snowflake by Pesky Library, used under Creative Commons licensing

Snowflaking your debts can sometimes seem like a never-ending fool’s game of pennies and nickels, but stop for a minute and consider how you acquired your debt in the first place.

Chances are, you employed reverse snowflaking.

That’s right - reverse snowflaking. Many people with credit card debt (myself included) can’t really recall what they spent all that money on. Unlike a mortgage, student loan or car loan, there’s often nothing to show for your oversize credit card statement. That’s because you acquired the debt slowly…little by little.

Take my current credit card balance: $2,300. The last thing I remember was being in college and…I forget the rest. What did I spend the money on? I don’t know - probably a restaurant meal here, a trip to the mall there - maybe a few months’ rent.

It’s not really important. I’ve stopped the problem behavior (using credit) and started paying the money back little by little - the same way I spent it.

Don’t be frustrated if you’re not seeing your balances go down a thousand dollars at a time. Just know that someday, you’ll be out of debt and unable to remember all the little things you sacrificed along the way.

(This post was included in the Carnival of Snowflakes, hosted by paidtwice.)

Photo Credit: Blue Snowflake, Post-Print by Blue Sky, used under Creative Commons licensing

I’ve mentioned before that my husband’s friend makes extra money donating plasma. Well, he was over Friday night for the NCAA tournament, and the topic somehow came up again (could be that $20 referral bonus).

There’s a donation center near our house that pays $20 per donation, or $40 if it’s your second donation that week. So, if my husband and I were each to donate twice per week, that would be $480 per month. Sweet!

However, I’m still not convinced I’m going to try it. I’ve never even given blood because I have a severe phobia of needles (just typing that made me shudder). I’ve nearly passed out from vaccinations, and my ambitions of becoming a veterinarian ended when I shadowed a vet for a day in eighth grade.

Am I being a total wuss? Has anyone else donated plasma before?

Photo Credit: 515 Grams of My Plasma by reinvented, used under Creative Commons licensing

Our current debt snowball (the monthly payment we’re sending to our smallest debt) is $1,439.08. Once we’ve paid off our credit card, student loans and the second mortgage, we’ll be sending a monthly payment of $3,000.29 to the first mortgage.

Our monthly take-home income (after taxes, 401k contributions, insurance and FSA) is $5,422.22, assuming it’s a two pay-period month. So, our debt snowball is currently 27% of our monthly take-home income (or, 19% of our monthly gross income).

Now, this does not include payments toward other debts. If you include all our debts, 55% of our monthly take-home income goes toward debt payments (well, I guess some of it goes toward escrow). Plus, 100% of our bonus income (approx. $10,000 in 2007) goes toward our debt.

Wow, my brain hurts now.

If you’re paying off debt, what percentage of your monthly take-home income is going toward your debt snowball?

When I started this blog, I promised that I’d give monthly updates of my financial progress, so here it goes.

Net worth as of February 15:  Approx. $54,000
Net worth as of April 1:  Approx. $63,415 (does not include market fluctuation between now and then, but everything else is accounted for)

I’ve put a NetWorth IQ badge in my sidebar so you can track my progress in detail.

Here are this month’s highlights:

• My husband received a year-end bonus of $433 after taxes that we put toward our car loan
• I received my 2007 401k employer contributions (3% guaranteed, plus approx. 10% for profit sharing)
• We paid off our car last Friday with our bi-weekly $690 debt snowball payment
• My husband and I both learned that there are no raises in our immediate future, and that he won’t be getting quarterly bonuses this year
• Almost two years after joining Upromise, we finally reached the $25 minimum for transfers, and $29.08 was transferred to my stepson’s 529 plan

We’ve revised our goals slightly as well.  Instead of aiming to pay off our credit card and half the second mortgage by the end of the year, we are now going to pay off our credit card and both our student loans, saving the $35,000 second mortgage for next year.  Although the credit card and student loans have extremely low interest rates, we think this will give us the momentum to keep going through the long second mortgage payoff process.  Stay tuned!  

This is my mattress, and I can’t take it any more.

My husband got it seven years ago when some co-workers donated used furniture to his post-divorce “bachelor pad.” While we’ve I’ve gotten rid of most of his hand-me-downs, we are still sleeping on this thing, which has to be pushing 20 years (my stepson is sleeping on the full-sized mattress I purchased in college).

Besides the fact that sleeping on someone else’s used mattress is gross, it’s stained, it sags and it’s uncomfortable. We’ve been talking about replacing it for six years, but there’s always been something else that seemed more financially pressing (lately, getting out of debt).

Our get-out-of-debt schedule, $1000 IRS payment and house painting expenses don’t leave any money in the budget for it any time soon. I guess we could buy one for ourselves for Christmas, but I don’t know if I can wait that long (and what a bummer gift)!

I’m not sure if I’m being a spoiled brat, but I just can’t help thinking, “We’re making over $100,000 a year, and I’m sleeping on THIS!?!”

But, I think I have an idea that won’t interfere with our other plans…Garage Sale!

Now, I’m not expecting Sleep Number-type proceeds, but anything we make can go to the mattress fund. I’ve never had a garage sale, so I’m not sure what to expect. But I think we have enough stuff to make at least a couple hundred bucks.

Anyone want to buy a used mattress?

After I’d hit rock bottom emotionally and financially, I knew we had to get out of credit card debt if we had any chance of living our dreams without blowing up our whole lives in the process.

I made a plan for paying off our $13,500 of credit card debt, but was unsure of what the next step would be. Would one of us be able to take a lower-paying job just by paying off the cards? Which one of us? What if the new career continued to be low-paying after several years? Would the other person be stuck with their job?

Then, the miraculous, mathematical epiphany (courtesy of the debt pay down advisor at Bankrate.com): We could have all our debt, including the house, paid off in 5-6 years if we stayed at our current jobs.

It was so unbelievable, I ran the calculator three different times with slightly different variables. I even worked it out by hand to see if I came up with similar numbers.

Just imagine what life would be like with no debt…I could be a copywriter, open a photography studio with my sister, become the next Diablo Cody…My husband could live out his Indiana Jones fantasy by going back to school for an archeology degree…Sure, we’d still have taxes, insurance and utility bills, but just imagine! We’d only need an income of about $30,000 to live our current lifestyle and still save for retirement.

Around the same time, I started listening to that crazy Dave Ramsey bastard on my iPod, and I really started to believe it was possible.

Though I tend to only write in my journal when I’m depressed, I went through a brief Oprah-recommended phase where I kept a happiness journal:

From Finance Girl’s Journal
10/9/07

[Finance Girl's husband] and I had a talk about keeping focused on paying off our debt. He is so on fire about it, even thinking we’ll be done in less than 5 years (3 years!?!)

When I tell people about our plan, they laugh.

But it is quite possibly the best idea I’ve ever had.