MM’s Money

September 12, 2008

Small Victories!

Filed under: Family Financial Makeover,Lil One,Planning,Saving — mmsmoney @ 12:00 pm
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So based on the FFM (Family Financial Makeover -I’m gonna copyright/trademark that if I can) I went to the credit union and set up three new savings accounts, in addition to the one I already had:

Share Savings 01:  Primary savings – for holding the buffer. Balance: $230 (it was $260, but I transferred $10 to each of the new accounts). It’s still pitiful and sad though!

Share Savings 02: Major Emergency Fund – for building up 6 mos of expenses – which is at this point (including our slash & burn of the budget) roughly $18,000. This would cover us in terms of that major disaster deductible on DH’s business insurance or in the event of my losing my job. Not both – so we’ll have to re-address this goal as money starts piling up. Balance: $10

Share Savings 03: Car Replacement Fund – for the eventual replacement of my vehicle. My 13-year-old rattletrap which I love and cherish and whisper sweet “do not die on me” nothings to every single day. Balance: $10

Share Savings 04: Baby College Fund. With a grand total of $20 in it. Wait! What’s that you say? My numbers don’t add up? You’re right! My branch manager, who knows my name you know!, let me know that for college savings accounts, the credit union puts in their own $10. So free $10 for Lil One! Woot!

Now I know some of you would say, why local Credit Union with its measly 1.5% interest on savings accounts? Why not ING or HSBC or some other bank? Well, I plan on converting each of the values in these accounts to other accounts when they get built-up. A combo of 3, 6, 9, 12 mo. CDs (see below) and for baby-girl, an educational investment instrument of some sort that I haven’t yet researched. So for now, until we’re dough-rolling, I’m happy to have these monies socked away closer to home.

Oh, and I opened another account too – the credit union version of a Certificate of Deposite is a Share Certificate. Normally, the minimum initial deposit is $1000 and earns 4.1% (12 month – I think the 6 month ones earn slightly less). But right now, they are running a promotion to attract members who might not be able to affort the minimum deposit. SO I bought a share certificate that can be augmented with additional funds throughout the term for $10. And it earns 6%!!! Upon thinking about it, I should have put baby’s CF amount in that, but they wouldn’t have matched it. And I can always earmark the Share Cert for Baby Girl when we are wealthy and almost debt free next September. I just can’t exceed the 1000 or the entire thing becomes a normal Share Cert – which is weird. What if it had 990 and earned interest to top 1000? Would the whole thing then lose the special rate? I am so uneducated and Sometimes don’t ask enough questions!

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September 11, 2008

Conflicting Goals, Maybe?

Filed under: Debt,Planning,Uncategorized — mmsmoney @ 12:00 pm
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So part of my family financial makeover is to start saving. Family Financial Makeover has a nice ring to it…Googling…No, it doesn’t appear that I am using someone else’s trademark/copyright (I get those confused). OK. It’s MINE. My Catch Phrase. Hands Off! Now how do I trademark/copyright it? Can I get people to pay me for usage?

 Ok- back to topic: Yes, I am trying to build the buffer between me & disaster (that YNAB Rule#1 one-month’s expenses discussed in the previous post – listed as Goal 1 below), but at the same time, I have equally important and compelling goals:

  1. Goal: Generate Buffer. Execution – slash & burn expenses and allocate avoided dollars to buffer.
  2. Goal: Pay down debt. Execution – begin snowballing personal loan (at the YIKES! interest rate of  18.6% !) to free up cashflow in the budget ($201.50 per month). Current Snowball Amount: $100/month
  3. Goal: Start saving for Major Emergency Fund/Baby College/Car Fund. Execution: start slowly at $10 per payperiod in 3 accounts (total per month: roughly $60).

Now why would I try to accomplish all three goals at once? Am I setting myself up for failure?

First, for psychological reasons. I have been so beaten down by financial trauma, stress and discontent that I need to start on that debt ASAP. And I feel that with the help of YNAB, I can get to my one-month’s goal within the same timeframe as paying of that personal loan. And I do buy into the Dave Ramsey small-victories build momentum approach…I need to change my behaviors and I need to get positive reinforcement through accomplishing a goal. I should note I have not read any of Dave Ramsey’s books – I’ve heard his radio show two or three times, but I have read A LOT of blog posts and comments-debates on his theory and alternative approaches! I guess I am luck that my smallest debt and the highest interest rate are the same debt so I don’t have to be “stupid” according to varying groups of blog-commenters (and I’m pretty sure they are roughly divided in half in each of these camps).

Second, it’s kinda six-of-one, 1/2 dozen of the other to me. I’ve screwed up and screwed up badly in the past and have not done the requisite learning from my mistakes (yet – I need another disaster to prove/execute on what I’ve learned). Building the buffer will implement the YNAB approach, but only if no emergencies happen in the near term (til I get that loan cleared). My credit union really takes care of its members and in conversation with my branch manager, who yes – does know me by name, she indicated that the credit union is very willing to help members get out of trouble when they proven themselves dedicated to fixing their issues which (in context that I shan’t go into) to me sounded like my clearing my loan successfully (never been late, never asked for more funds, paid extra upon occassion and more regularly lately) would be beneficial if that near-term disaster were to appear. I really think my car is going to die soon – I really do. And being eligible for a car loan from them in 6 months is more likely than my being able to save $7000 for a good used vehicle. So as awful as it sounds, I’m almost resigned to needing another loan! and need to clear the current one to ensure this future one becomes available.

Last, the savings issue – I’m oh-so optomistic here. We have to have the major emergency fund – DH’s insurance (liability) has a $10K deductible. Where we would get that money should a project he’s working on go up in flames and we’re liable…Oh I could lose sleep over that. $10 at a time sounds miserly, but babysteps, right? Next – the baby. She will get college tuition paid for and I need to let the power of compounding interest begin to work its mojo. Simple as that – it is as important as any other goal in my personal view. And last – yes that car will die sometime. Maybe its death is 6 months from now, maybe 18 months. In any case, some money will be set aside for that eventuality and to avert the total need for another loan!

So tackling them concurrently, although with differing amounts budgeted against each per month, seems like a reasonable approach to deconflict the goals. Ultimately, it’s my job to make sure we don’t screw up again and this is the plan for now. Subject to revision, subject to God’s Will!

September 10, 2008

BIG News And a Hurricane!

Filed under: DH,Lifestyle,Planning,Relationships — mmsmoney @ 5:49 am
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Big news – DH reconsidering his work situation + a chance conversation at a social event = NEW JOB. Having just started this blogging thing last week, I didn’t post anything about his resume-writing, interviewing, etc – especially since this all came together since Labor Day, but OMGoodness! And I didn’t want to get my hopes up, either.

He was talking to an old friend at a cookout, and she mentioned being overwhelmed at work – she had an empty job that no one had applied for in the 6 weeks the posting/requisition had been open. She works for a non-profit community agency that manages social support grant money from the Federal and State governments – including a brand new program area that supports green-building efforts in the lower income housing field. DH was/is fascinated by this burgeoning industry – green-construction – and they spoke for a long time about the new program and the job itself – serving as project manager/inspector for this new program. That was MONDAY 8 days ago (9/1/08)!

Tuesday (9/2/08) I fixed up his resume to highlight the associated work skills/qualifications and he emailed it to his contact. Wednesday (9/3/08) she called to set up the interview. Thursday (9/4/08) he interviewed. Friday (9/5/08) they checked his references and ran background checks. Monday…nothing. Yesterday (9/9/08) – HE GOT THE JOB. It’s definitely nowhere near the money he had been pulling in a few years ago, but it is a JOB. 8 to 5, Monday through Friday, they want him to start this upcoming Tuesday – the 16th. After consciously trying NOT to get excited/hopeful, this is an awesome and amazing change for our family.

Money. He’ll bring home roughly $2400 per month. $800 will go to daycare, right off the top. Now we have to budget the rest responsibly. We haven’t had the conversation, but certainly a large chunk of that will hopefully be going to pay down our debt at a rate I will be HAPPY to report month after month!

 So since this will be the first office environment in 8 years, he’s gonna have to buy some clothes.  That will be an investment not accounted for in this month’s budget, but it has to be done. This is a slacks and shirt office, no jeans/t’s/golf shirts – so I figure he can get by with khaki’s (3 or 4 pairs – NOT dry-clean-only) and roughly 5 to 8 shirts. He really does not have anything that will do – his previous jobs/contracts had been construction sites – where a t-shirt without holes/stains was fancy! We’re hitting Kohl’s Department Store (maybe one-step up from TJ Maxx and one-step down from Dillards) first for the basics…I’m thinking $250 for the slacks/shirts and a pair of shoes. Does that seem reasonable? If necessary, he can get by with his ‘nice’ boots if we can’t find any office shoes this weekend.

Then there’s Hurricane Ike swinging through the Gulf at us – projected to hit Corpus Christi Friday afternoon – putting storms at our door Friday night/Saturday morning. So maybe shopping should be done tomorrow evening, instead. Our landscaping sure could use the rain – but I hate to hear of damage/destruction from storms, so we’ll be praying it lands gently.

Daycare & Working

Filed under: DH,Lil One,Planning — mmsmoney @ 12:00 am
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We made a hard choice last month – facing my DH’s difficult work situation, we decided we would cut back our daycare to two days per week. This saves us $100 per week and major bucks in cost avoidance. It’s a double-edged sword. Yes, we have to increase our income and figure out our path out of debt, but he’s been bidding jobs all summer and not having a lot of success. Paying for daycare while he’s at home trying to drum up business put a lot of strain on our finances and on our emotions…

Factor 1: He won’t bid jobs that require him to finance significant materials/parts/equipment. We’ve gotten into trouble with this in the past and we can’t do it. Not above a certain threshhold – which we determined together to be $500. That’s the max. So that limits the jobs he can go after. Some jobs/customers will buy the materials (to avoid the contractor’s mark-up which can be 50% plus), so he focuses on these kinds of jobs which are few and far between.

Factor 2: He won’t hire illegals as helpers. It’s not fair to some, but from a legal perspective, and from his personal liability, he can’t do it. Helpers are covered under his umbrella policy and his bonding, but only if they are registered apprentices with the state. So there you go – he can’t get help for $8/hour. He has to pay a living wage to his helpers – and that’s $13/hr and up depending on the skills of the people he needs. So that too limits the size of the jobs he can bid. If he can’t get good help for the amount the customer is willing to pay for the job, the job goes to another bidder. Again – finding the niche that will pay the labor costs for this work is difficult – so jobs are few and far between.

Factor 3: Our babysitter is awesome and flexible with us. Lil One has been with her since she was 3 mos. old and is a favorite at the sitters. So keeping her at all, even if only 2 days a week, was something the sitter was willing to do. She would have been within her rights/and I would have understood, if she needed to kick us out to get a full-time child in that spot. But she didn’t and that’s such a blessing.

So DH has 2 days in the week and the weekend to schedule jobs. Most of the time, he can do that, unless the General Contractor’s schedule requires Monday through Friday. If we run into that, our sitter will accept Lil One for the additional days – as a drop in at a slightly higher rate – but otherwise, we’re only accountable for paying her for the two scheduled days. 

DH is reconsidering his business model – and the ‘industry’ he’s in. It has been so difficult these last few years to make it at all (even without all the bad choices and financial missteps), that it’s time for a significant change for him. And hopefully, getting this figured out will be good for him and good for us, too.

September 8, 2008

What We’re Doing

Filed under: Planning — mmsmoney @ 12:00 am
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So we had a budget for many months and unsuccessfully tried to spend only what we made only when the money was available in our checking account. But that really wasn’t working for us…timing of bills, the variability of DH’s income, fixed expenses were just piling up at the wrong times. So we have been struggling, even with the help we’ve received this year. Recently – like 6 weeks ago, and I wish I could remember how I found the link/referral, I found the  http://www.youneedabudget.com/blog/ And I read a lot without even realizing the blog was in support of or accompanied a product! Duh! So I was reading about these “Rules” and thinking, yeah – that makes sense. How simplistic (and not necessarily in a good way) – I could have come up with that!

When I finally looked to the top of the page and saw the links to success stories and the history of the blog, the light came on – OH This is Selling Something! And that something is You Need A Budget software – YNAB.  The creator of the software is an accountant who started his homegrown spreadsheet budgeting solution when he and his now wife were still in school – trying to live on pennies a day and struggling to forecast what monies they would have to spend in the future. Well, we’re there, DH and I. We needed a tool and a system that allowed us to budget without knowing the variables that would impact the upcoming month. So here it was – the tool and the system – and for the bargain basement price of $39.95!

Funny the timing – August was a good month, since I actually caught up on the electricity bills for the summer ($300 June $450 July $360 August) and had about $150 to live on after the month’s first paycheck. So I spent that $39.95 and downloaded the software, the bonus excel worksheets and the YNAB way ‘book’ which is the detail of how The Rules work and how to begin integrating the budgeting and The Rules into your life.

I read the book at the gym that next day (I run on the elliptical machine for an hour every other day) and installed the software that afternoon. And we’re on our way! In a nutshell, YNAB advocates the following Rules:

1) Spend last month’s income to pay for this month’s expenses. Since you know at the end of the last month what you’ve made, you can allocate that amount and only that amount for this month’s budget.  To live under this rule, you have to save up the amount of a typical month’s expenses (including plug numbers to accumulate annual expenses across a budget item) before you can truly be worry free! So far we are $200 towards our one-month’s buffer.

2) Give every dollar a job – allocate all monies to specific budget line items to balance to zero each month. This concept is not new (see my simplistic comment above), but the execution approach is – sock any extra income into that buffer category instead of letting it be ‘unassigned’ in a savings account. That way, you know what each dollar is doing for you and this removes temptation to reallocate if things get tight in the month!

3) Prepare for circumstances – like annual bills – that you can expect, but sometimes don’t know the numbers! Setting aside money in categories within the budget to prepare for these amounts seems simple, but again, something about the methodology and software allows me (or will allow me to try) to resist the temptation to raid a category to fund a minor budget gaff.

4) Roll with the punches. Once you’ve funded the buffer and aren’t living paycheck to paycheck you can proact for #3 events and react as necessary for the stuff you can’t foresee.

So we’re 3 weeks in…and ended August with $200 ‘in the black’ on our buffer.  And we’re budgeted into the middle of September without ‘raiding’ savings. Maybe by the end of September we’ll be a week ahead in earning vs. spending!

September 6, 2008

Family

Filed under: Debt,History,Planning,Relationships — mmsmoney @ 3:36 pm
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So my mom & my sister are AWESOME. I knew that but didn’t take advantage of several points of their awesomeness until I took advantage of letting Mom lend me money to keep from being homeless as noted above.

Big Sis is a financial genius. Seriously – she had her debt years in college where she racked up debts, but after graduation with a finance/business degree, she got on it and paid it all off. But they were ED LOANS not CC debt like me – even then she was smarter! Since then, she and her DH have built a very strong financial house and I really admire that. While I knew they were doing well and had some ‘mad skilz’ in the PF world, it was too embarrassing (i thought at the time) to solicit her advice/help on getting our junk in order. If I had talked to her in 2002/2003 about our amazing ability to spend 8K per month with nothing to show for it but parties on the lake and hangovers (ahem, I am all growed up now and we don’t do that with our baby in tow!), how today could be different!! But I didn’t get over my reluctance to show my knickers till it was too late. Then mom & sis stepped in & bailed me out.

We lost my dad in several years ago – when he and mom were way too young to think they would ever not be there for each other. They had a relatively stable financial world prior to his illness and death, but he was seriously UNDERINSURED for the responsibilities my mom was left to handle alone. She was/is a teacher, making a lot less money than she deserves, and at the time, my brothers were still young. So she had to figure out how to keep them all afloat on her income. Dad’s insurance after the payment of medical bills and other debts was less than 100K – she put money into her house & into her retirement. She then put chunks into college funds for brothers 1 & 2 and $7500 into a wedding account for me (Big Sis had gotten married the year before dad died and $7500 was how much they had spent on her big affair – seems inexpensive in todays Wedding-Industrial-Complex terms!).

By the way, Our family doesn’t PAY for kid’s college – mom & dad paid the tuition bill, but both sis and I paid for all else – room, board, books, spending money, transportation, etc. So both brothers had a good amount after the power of compounding interest for 6 years and got themselves educated at State U. So some future planning was performed. My sis and Brother In Law (BIL) then stepped in to help her budget and plan for the future. She received payments from Social Security for each of my brothers til they turned 18 – but mom lived on her salary alone, putting that money aside in savings, investments and retirement. she amassed a fair amount in a relatively short time so she was in a position to help us out.

Since my sister is a savvy PF/Investment sort – oh, and BIL too – she and mom and DH and I sat down and figured out my financial world and what it would take to not be homeless, not default on the HEL and other collections. Did I say how awesome they are?

While mom didn’t set an interest rate on the 10K, I plan to get from my sister the rate of return on average investments so when I do get to pay her back, I will match the rate of return on her portfolio (of the period til I do start to pay her back).  Some might quibble with this, but both DH and I insist on not shorting HER retirement because we are stupid stupid people.

So that’s the family background – – and hindsight is 20/20 I can honestly say I am very very very sorry I didn’t take note of the talent in my own family while we were sinking in big debt and bad choices.

How Did We Get Here? Part 2

Filed under: Debt,History,Planning — mmsmoney @ 3:34 pm
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My family’s debt. Is. Ugly. So in the interests of full disclosure – especially since my first post makes it sound like I put all our issues on hubbies shoulders (these are real numbers as of last week):

Personal Loan (Credit Union – 18.65% interest): $ 1,983.15
401K #1 loan – (9.5% interest):                           $ 2,933.92
401K #2 loan – (9.5% interest):                           $ 4,434.83
Mom Loan:                                                         $10,000.00
Home Equity Loan (6%):                                      $16,650.00
                                                                          $36,001.90

Ahem. Yuck – so I can trace the origins of the Personal Loan to consolidating my college debts – and I am 34! 13 years OUT of college! I was so disfunctional in the excesses and bad spending of 2004 – 2006, I used 401k loans to makeup household expenses. Seriously bad bad bad. at that point, I guess I thought it was better to mortgage the future than to fess up to the issue of the day and get DH and I on the same page financially. Seriously – we could have buckled down then and averted the 2007/2008 disasters.

Mom loan I addressed above – the strings & terms: family counselling (done – and VERY BENEFICIAL) and repayment when she retires…which is in 5 or so years. She didn’t define an interest rate, but I am going to pay her back (at minimum) at the rate of return she earns on her other retirement accounts – see my next post about how I know what she earns on her retirement accounts. It’ll tell you what an idiot I am/was re: not taking advantages of the resources available to me…

Home Equity Loan: Yeah, this one’s bad – we consolidated some of my CC debt and DH’s business debt into an equity loan on our HOUSE. WHich we almost LOST because we couldn’t pay our FIRST MORTGAGE. Which, though not included in the list above since we’ll deal with all these first, is at $133K owed. Purchase value was $142K, current market value is $210K, but you and I can’t count on that and why oh why did Citi give us that loan?! This one has a 5 year repayment plan. Anyhow. moving on.

NO vehicle debt, NO cc debt (other than that which is rolled into the loans above). True confession – but not a surprise: I am a bad bad risk, since I would regularly not pay the dang bills, so we have none (no credit cards) other than DH’s contractor credit accounts with Lowes/Home Depot/and the electrical supply house. Sometime soon, after full buffering, I plan to apply for and fund a secured card to get my credit scores back on track.

So there it is. The Debt. Here are the minimum payments:
Personal Loan: $93 per payperiod, so I’ve budgeted the monthly average amount $201.50 per month
401K 1 & 2: $44.65 and $124.99 per payperiod, so $367.55 per month – auto deducted from paycheck, so not appearing in budget (I think that’s what I read as advice in another forum)
Mom: None – yet.
HEL (so apropos!): $370 per month

So out of my net income, we pay $944.05 per month. God GAWD. That’s just $200 less than our mortgage. Maxed Out (that canadian tv show) would beat us over the head & shoulders with DH’s 2 by 4’s! I used this AWESOME spreadsheet (http://www.vertex42.com/Calculators/debt-reduction-calculator.html) – found through http://consumerist.com/ to establish our plan.

Our plan for debt snowballing is to take care of the high-interest loans first, then tackle Mom (heh! that’s funny sounding) & Citi. By adding $50 per payment on the personal loan, I’ll pay it off 4 months early – in March of 2009. The ‘issue’ with the 401K loans is that they can’t be paid incrementally – they need to be cleared in full. So once the personal loan is clear, I will budget the min payment on that plus the extra $50 per pay period to an account to accumulate the payoff amounts. This will clear the first in October 2009, and the second gets cleared in December 2009. That frees up A LOT OF CASH. By January 2010, we’ll be throwing $1039 at the Home Equity Loan!! Clearing it (if all goes to plan) at the start of 2011. Yes – three years from now we will be getting there!

So Mom – she’s at the end of the list by her choice, wanting us to get the rest of our debts settled before addressing our loan. What a gal! She’s widowed (we lost my dad 9 years ago) and she is a teacher – and SO UNDERPAID it’s ridiculous. That she was able to lend us this money is amazing on several fronts. More on her later! We’ll start repaying her as soon as the HEL is paid off, March 2011 and will repay at a slightly lower than the snowball rate at that point – $1000 per month to include interest, so total to be paid will be slightly more than $14K. Only fair to have her money working for her while it is in our possession!

other notes: part of my total compensation at my job is participation in the annual bonus program – 10% of my salary is available as a bonus to be paid in March/April based on the company’s success (or not) the prior year. I have NOT included any bonus payments in our debt repayment plan at this point – because that money is at risk and could vary significantly. This year we weren’t paid a penny, and I had COUNTED on that money, which coincided with that disaster of the above post!! But the year before, we got 120% of our pool – which helped settle the baby debt and lil one was not repossessed by the hospital OR the anesthesiologist (who knew pain-free childbirth could be so financially painful)! So that year, the bonus I banked (well, I didn’t bank it) was (pre-!@#$) $9K!** So potentially (and I can’t start counting on it), I could clear the personal loan, Fidelity 1 & 2 by June of 2009! And that would accelerate everything. Again, chickens/hatching blah blah, but that’s in my hip pocket and DH and I are both firmly on board with applying that money (if I get it) to debt repayment.

** another bad choice in a world of bad choices – medical debt is much ‘better’ on the Credit Report than collections! I should have done a payment plan with those creditors and got current with the CCs & other bills. But hindsight is 20/20 and I didn’t know that factor till Big Sis (more on her next post) stepped in to educate me.**

So this was the ‘show your knickers’ post (my dad’s term for sharing dirty laundry/full confession). Hope I can meet these goals! Will keep y’all posted…

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