Finance Gets Personal

My sister had her first Financial Peace University class on Thursday, and there were over 30 people there!

Her husband went with her, and is apparently on board. They are already halfway through baby step 1 ($1,000 emergency fund).

She says that there was only one or two other young couples there, but the other older couples praised them for coming to their senses so soon!

So, I’m quite optimistic about the whole thing.

Got an email from my sister today, and she signed up for Financial Peace University.

Actually, she said “we signed up,” so I’m hoping that means her husband is going to go too.

She found a church closer to their apartment that’s offering the class, so they signed up for that one instead of the one at my parents’ church - probably a good idea, and maybe one that helped get her husband to play along.

She did mention that she needs some help paying for it, so I’m thinking about offering $50 (half the cost). If my dad pays the whole amount for some reason, I’ll just tell her to use the extra $50 to help get caught up on the bills.

I hope FPU works for them!

I can’t believe I am becoming the person that calls my sister at 9:30 on a Monday night to bug her about signing up for Financial Peace University. I’ve always been a pretty hands-off type of person. I figure, if someone wants my advice, they’ll ask for it.

But that’s getting harder and harder for me.

A few weeks ago, I found out my 24-year-old, recently married sister has $30,000 in credit card debt. About $10,000 is hers, and $20,000 is her husband’s. She also has a deferred student loan payment of about $150/month, and her husband’s deferred student loan payment is over $500/month (WTF? I went to a more expensive school and my payments were only $122/month!).

Apparently, my brother-in-law hasn’t been paying his bills and gets collection calls daily. My sister wasn’t even aware he had any credit card debt until after they got married (”Well, did you ask him?” “Well, no.”). Apparently, my dad (remember, the guy with lots of debt himself and an untreated termite problem?) has been paying my sister’s $200-$300/month credit card payment, cell phone bill and who knows what else.

Needless to say, I’m worried. And I told her so last week, after I saw that my parents’ church was going to be offering Dave Ramsey’s Financial Peace University classes. I asked if she was going, and she said she might, but that she didn’t think her husband would be able to go because of his work schedule.

Apparently, they’ve met with the minister before about their financial problems, and he’s referred them to a financial advisor. I told her there’s no way I would pay a financial advisor to help me get out of debt, and she said that she’s looking into free options for people with low incomes and a lot of debt. “Those are credit counselors,” I said, “and you don’t want to go to one of those either - they’ll ruin your credit score.”

Then she mentioned she’d also been considering getting some paperwork together and seeing a lawyer about the possibility of bankruptcy. Needless to say, this nearly made my head explode.

“You are not bankrupt!”

I told her she really, really needed to go to Financial Peace University.

Then tonight, I called her to see if she had signed up yet. And to tell her that what I really wanted them to go - as my birthday present. That I would even help pay for it (apparently my dad has already offered to pay as well).

But her husband doesn’t want to go to any “classes” or “seminars.” Oh, he’ll go to credit counseling or file for bankruptcy, but he doesn’t want to give up one of his nights off work to attend some class at church.

“So go by yourself,” I told her. “Or tell him to come with you to the first class, and if he doesn’t like it, he doesn’t have to come back.”

I think I convinced her to sign up. But I’m sure it’s probably going to lead to a fight with her husband.

But you know what? I’m also becoming the type of person that doesn’t care.

Well, fate has decided which vacuum we’re going to get.

Thanks to my husband’s employer’s plans to lay off 20% of its workforce, it looks like we’ll be buying a cheap vacuum with our American Express card (for the additional one year warranty) and paying it off immediately.

That’s right - my husband thinks he’s going to get laid off.

And this time, I actually believe him.

Even if he doesn’t, things aren’t looking too sunny. All 401(k) matching has been stopped, raise freezes have been extended by another year and tuition reimbursement has been stopped. And get this - although his company no longer gives matching 401(k) contributions, any profit sharing (which occurs only if they meet specific goals) will be based on the amount of money employees put into their 401(k). What a crock of…

Needless to say, we’re preparing for the worst.

Thankfully, we’d already begun directing our extra debt payments to savings, so counting our emergency fund, European vacation fund, new computer fund and basement finishing fund, we have over $7,000 saved up. And with no debt besides our first and second mortgage, we should be able to live off of my salary if necessary (with mortgage payments at 49% of my monthly take home income, it will be tight, but do-able).

Of course, that will mean no more Netflix, no more newspaper subscription, no more landline, no more clothes, no more gifts, no more cable, etc.

So we’re going to go ahead and start cutting back a little.

I’ll cut our weekend newspaper subscription down to just Sunday (for the coupons), we’ll cancel Netflix, stop our 401(k) contributions and look into getting a cheaper Internet/cable package (or maybe just a slower Internet service with no cable). We’ll also be looking into other ways to cut the budget, like ditching our landline and reducing our discretionary spending to the bare minimum.

So folks, I’m off to watch some free movies online with Netflix…while I still can!

Yesterday, my husband sent me the following email:
Despite not getting raises last year, it appears I made more money than the year before. That going to ruin our taxes?

I replied:
I don’t really know. I think I might have made a little more too. Last year I think we about broke even on the refund from federal and amount owed to state. I donated a lot more stuff this year too.

Given that I didn’t actually know how much money I made last year, I decided to finally open the envelope with my pay stub in it.

$55,816.

Hmm, I think that’s better than last year.

So, when I get home, I ask, “How much did you make last year?”

$65,000.

Wow, that’s like $120,000!

I think we made about $105,000 in 2007. My husband didn’t get a raise last year, and I didn’t get a raise until July, but I guess our bonuses were bigger than the previous year?

However it happened, I guess it’s a good thing. But now I’m a little worried about what our taxes are going to look like. Despite both of us claiming zero exemptions, somehow our state taxes are always a mess and we usually owe $600-$800 to the state we work in. Last year was only $180 or so, but now I’m scared!

I realize that probably doesn’t make a lot of sense since the more you make, the more you pay in taxes, so everything should work itself out. But I’m sure it’s still screwed up somehow.

At least the next tax bracket doesn’t occur until $131,450.

I’m also feeling a little lame now in “only” having paid off $26,951 in debt last year given that our income went up by $15,000. I’ve got to sit on this one for a while to try to figure out why we didn’t pay off more, since we’ve been living basically the same lifestyle as before.

Photo Credit: My Bling by nicora, used under Creative Commons licensing.

As 2008 comes to a close, I’d like to share the progress we’ve made on our goals to get out of debt and change careers.

We started the year with $3,479 in low-interest credit card debt, $6,623 in car loans, $14,401 in student loans, $35,179 on our second mortgage and $139,604 on our first mortgage. Our goal was to pay off everything but the first and second mortgages, and we did! In total, we paid off $26,951 in debt this year with an income of approximately $105,000 before taxes. In 2007, we paid off $22,100 in debt, so that’s a slight increase.

I feel we could have done even better had we not had a multitude of home repairs throughout the year (sump pump replacement: $172, heat pump replacement: $3,467, hot water heater replacement: $647, exterior house painting: $2,992, termite treatment: $650).

Our goal for 2009 is to pay off our second mortgage, which currently has a balance of $34,806. We’re already $1,812 closer to that goal due to the remainder of my $5,000 Christmas bonus that is currently sitting in our emergency fund. Since there’s a possibility my husband will be laid off in the first quarter, we’ll be directing our extra debt payments into savings until the layoffs occur, then transfer that money to our second mortgage once we’re (hopefully) in the clear. While my husband would like a new career, we’d prefer to wait until after our debt is paid off (note to husband’s company: could you please pencil in some fat voluntary separation packages for 2012?)!

We’re also trying to get pregnant this year and limit our baby expenses to what’s available in our current budget. Additionally, my husband has the goal of finishing our basement himself for $3,000-$4,000, which we are budgeting $150 per paycheck toward beginning in January.

On a personal note, I’d like to thank everyone for reading this blog. When I started writing in February, I wasn’t sure anyone would be interested in the thoughts of an anonymous office drone with big dreams, but I’ve been pleasantly surprised.

Happy New Year.

Tonight was my turn to host the monthly Girls’ Dinner Club.

I served:
Italian Tomato & Cheese Bread
Spinach Salad with Warm Balsamic Walnut Dressing
Ricotta Manicotti with Tomato Sauce
Tiramisu

Like last time, my total cost was around $35 (well, $55 if you count the $20 bottle of amaretto I needed two tablespoons of).

And while I’ve always felt the amount of money I spend on hosting the dinner parties is more than I can afford, I now realize it’s an even larger problem for my friends.

In the course of two hours, I found out that one friend has $19K in credit card debt in addition to her growing mountain of medical school loans, and the other has $30K in credit card debt and two cars that are in danger of being repossessed. The second friend is probably filing for bankruptcy in January.

But what shocked me most is that they both are fairly nonchalant about their situations. Like that it comes with the territory when you want to become a doctor, or is completely beyond your control when you’re fighting to collect disability payments. And I sympathize. And almost understand.

But believe me, if I had that much credit card debt and it was my turn to host the dinner party, I’d be serving this.

Yes, it’s already November 10! I suppose my procrastination has something to do with the fact that my net worth is continuing to fall despite my extra debt payments…

Net Worth as of October 3: $67,364
Net Worth as of November 1: $64,030

Here are October’s highlights:

• At the beginning of the month, I discovered the concept of the anti-charity. With that in mind, I decided that I would contribute $25 to the National Rifle Association if I did not maintain a calorie intake of 1679 each day for the month of October (which would put me on track to lose one pound a week). Well, I did very well for the first half of the month, but then I started sliding. And once I knew I’d gone over my limit for two days, I figured there was no point continuing (stomach’s logic, not brain’s). So, did I donate $25 to the NRA? No, I couldn’t bring myself to do it. Yes, I know - I’m a bastard. In the future, I think daily rewards/punishment might be more effective (i.e., $5 for every day I go over). Along with greater accountability.
• Fourth grade tackle football turned out to be a big expense, especially since my stepson broke his finger at practice. Luckily, we managed to finish the season without too much more financial damage - other than the pizza party where we got screwed by the whole “split the check” thing and *probably* ended up paying the coaches’ and other parents’ bar tab (never actually got to see the bill because there were so many people - and we drank Coke, people!).
• I was incredibly excited when gas fell below $3 a gallon on October 2, but now it’s down to $1.65. That has definitely helped with the budget!
• October was a three paycheck month, which means that I was able to get a head start on Christmas shopping. However, I’ll be transferring prescriptions for gift cards like crazy for the next two months to supplement our Christmas budget, which has run into a little snag - I forgot about our $588 personal property tax bill that’s due by the end of the year (how do I always forget about that when it happens every year?!?).
• Oh, and there is one other possible reason why our Christmas budget is tight. After spending a lot of money on clothes and home organization, I’m now operating on a cash envelope system again.
• One other reason for the budget shortfall: I think I got ripped off when I had my brakes done. At least, that’s the only logical explanation I can come up with for why it ended up costing nearly three times what my coupon was for.
• Despite all that, my student loan balance is down to $4,280 and will be paid off by the end of the year.

Our retirement accounts are bringing down our net worth, so I’m now going to take this opportunity to remind myself that we paid off $2,754 in debt last month. Yea!

Photo Credit: Good Wine, Bad Economy by MotherPie, used under Creative Commons licensing.

Although I listen to the Dave Ramsey podcast through my headphones nearly every day at work, it’s not something I tend to talk about with my co-workers.

Want to know if your co-workers or friends are also closet Dave listeners? It’s easy! Just listen for the following clues:

• When you ask how they’re doing, they reply, “Better than I deserve!”
• They talk frequently about having beans and rice for dinner, or mention something about “beans and rice, rice and beans” while declining your invitation to go out for lunch.
• During tax season, they make joking references to the IRS: “Well, the KGB…I mean, the IRS…”
• When they mention their upcoming garage sale or their eBay listings, they say they’re going to sell so much stuff “the kids will think they’re next.”
• Possible listener: They refer to their car as a “beater.” Definite listener: They refer to their car as a “little paid-for beater.”
• They carry around envelopes with cash in them and cite statistics about how studies show people spend 30% more when they use plastic. Oh yeah, they also call credit and debit cards “plastic.”
• You once mistakenly thought there was an actual person named Murphy living in their spare bedroom. Alternatively, you thought they had an aunt “Sallie” or “Mae” staying with them, and that they finally had to “kick her to the curb.”
• When trying to make a derogatory remark about lawyers/elected officials/Joe from accounting, an insult of choice is, “You can tell ______ is lying when his lips are moving.”
• When something great happens, they don’t do a “happy dance.” They do a “Snoopy dance.”
• When you mess up on a project, they reassure you with, “Please. I’ve done stupid with zeros on the end of it!”
• They believe that when other people make fun of their ideas, they must be doing something right!

Try an Anti-Charity.

I read about this in The Oprah Magazine, and it’s a great idea!

Whether you’re trying to get out of debt, lose weight or be on time to work, it helps to have some sort of punishment and reward system. For example, I have a rewards system for getting out of debt: Every time we pay off a debt, our family goes to eat dinner at Buffalo Wild Wings (yes, that’s really all it takes for me).

However, I’ve had very little success with weight loss and punctuality, so perhaps it’s time to raise the stakes. I’ve previously considered charging myself money when I fail to reach my goals, but I’d probably just end up snowflaking that into debt repayment (Which I love, remember? Mmm…chicken tender wrap with teriyaki sauce!).

I could donate it to charity, but it’s hard to feel too bad about that.

Unless…It’s an Anti-Charity!

Goal-setting website stickk.com defines an anti-charity as any organization you strongly oppose or which promotes values which are most contrary to your own. For example, if you have a “She’s a baby, not a choice” bumper sticker on your car, you’d probably work pretty damn hard to not donate to Planned Parenthood.

How fantastic!