July Update

I haven't gotten back to write like I keep telling myself that I'm going to. This month has been kind of crazy with everything that has been going on.

I did consolidate my student loans, and when I got the new loan amount, it looks like they did not apply my June payment. I contacted Mohela about it several weeks ago and did not get a response, so I have asked for a copy of my payment history in hopes that I can see actual amounts of my loans at the time of consolidation. I did not expect that Mohela would delete my loan history from their website as soon as the loan was consolidated, so I foolishly did not print off my summary sheet before the consolidation occurred. Direct Loan Servicing is no help because they weren't servicing the loan at that time and Mohela has been no help because they are unresponsive.

I ended up changing the repayment plan to the graduated repayment plan because it reduced my payments $60 a month and only added about $500 extra interest to the total cost of my loan. I plan to put the difference towards higher interest credit cards, which we are still on target to pay off next year. My husband also got a bonus in this paycheck, so that will help.

We are still waiting on our refund from the county auditor, from where they lowered the value of our house for 2010 and 2011. Based on approximate taxes for our value, we should be receiving about $500 or $600 back. The county said it would be approximately 60 days, but did not clarify whether it would be 60 days from the decision, or 60 days from the date they responded. Either way, I still have not seen the updated value reflected on their website and it's been about 90 days since the decision was made. I guess it's time to harrass them again. You know they would not be as understanding if I were late on my tax payments.

We're also still wrapped up in the nightmare that is refinancing our home with US Bank.

We applied for the refinance in April and were told that we would be under a 90 day ratelock, but that generally the refinances were processed within about 60 days. I received the application paperwork and returned it, along with all supplemental documents requested. A week or so later, I was told that, although I had submitted the signed paperwork to request a transcript of my previous two years tax returns and my previous two years W-2's, they now needed a copy of my actual tax return. I was angry. ANGRY. Because they hadn't requested these documents at the time we were applying, so I felt they were just delaying the refinance process, and because they already received the information from our tax transcripts, so I felt like they were... I don't know, trying to catch us in a lie? I'm not sure. I returned the tax returns anyway and they responded back that they needed all of the supporting pages. Um, why?? Like most normal individuals in the 21st century, I filed electronically, with documents that were provided to me electronically. I had already printed off the electronic copies of my tax returns and signed them, backdating them more than a year, and now I was trying to gather other supporting documents. US Bank seriously, SERIOUSLY needs to update their processes for modern technology.

Anyway, all of the documents were finally received by US Bank, it went through underwriting and was in scheduling when our area was hit by strong storms, bringing strong winds, hail, power outages, etc. A few days later, we got a call from US Bank that our refinance had been pulled back from scheduling because we were now being subjected to a driveby inspection to ensure that our home was still standing and had not been damaged. I was annoyed, but understood.

Last week, we got a phone call from an appraisal company wanting to schedule an appraisal. I was taken by surprise because we had been told two months ago that we would not need an appraisal because they were using automated values. I went ballistic. I called US Bank and our loan processor was out of the office for the week, I complained on their facebook page, I got ahold of a supervisor who told me it was their direction that everybody within the affected area had to have a full appraisal. The more I thought about it, the more angry I got, so I complained further about how we'd been jerked around with all of the additional paperwork after we started the application process and now, because of their incompetence we were going to be subjected to an appraisal that was going to cost us an additional $400 because they dragged the process out so long. I got another phone call from the supervisor indicating that the appraisal was required by Fannie Mae, who backs our mortgage. The thing is, I have a coworker who is refinancing with her loan held by Fannie Mae and she is not being subjected to an appraisal, so I think US Bank is full of it.

Anyway, the appraiser came out on Wednesday and was there for less than 10 minutes. The US Bank supervisor told me we needed to be at $88,000 for the value of our home. It came back at $85,000. She indicated that the difference in value did not impact our refinance, so we will be moving forward and closing next week. I will be glad to see the drop in payment, even though I know the majority of the drop is because we're going back to a 30 year loan. My hope is, with the way property values have been increasing in our neighborhood, we will get close to breaking even by next year. I don't mind taking a small loss, as long as it doesn't break us. We're hoping with the opening of a casino a few miles down the road, that our property will see a dramatic increase in value late this year and early next.

We're going to use the reduction in mortgage payment to pay down credit card debt, and then probably put half towards paying down principle on this loan and half towards saving for a down payment on a new home. We're getting closer to being on level footing and getting ourselves out from under the mountain of debt we have accumulated.

More on Student Loans

I have been writing (and I use that term loosely) in this blog for about two years now. In that time, our debt has actually increased substantially. To be fair, we had to buy a new car when my old one died a week before Christmas 2010, and we've been hit by flooding in our basement not once, but twice, but mostly we're just irresponsible and spend money that we don't have.


We lack self control. We can't tell ourselves no. Vacations? Sure. Dinner out? Why not! Buy the kids a toy? Absolutely!

The thing is, although we have a ton of debt and make massive payments every month, we don't struggle financially for the most part, so it doesn't seem like it's that big of an issue. Until now. Well, it's still not that big of an issue, but my husband has told me that we can not have another baby (which I want badly) until we move out of this house and pay off our credit card debt. He said if our credit cards were paid off by next year, we could try to get pregnant again next year.

Challenge accepted!

I previously wrote that we were working towards refinancing our mortgage. It will save us $225 a month, once all is said and done. Well, I also decided to consolidate my student loans, as interest rates on my variable loans will be increasing on July 1 and I wanted to lock in my lower interest rates.

I've noticed that MOST random readers come by my blog searching for information on grandfathered repayment plans on student loans, so I thought I'd take this opportunity to write a little more about it.

I'm not sure when the repayment plans updated, however when I attempted to change my repayment plan a few years ago, I received notice that my student loans were in the grandfathered graduated repayment plan and that changing my repayment plan meant I couldn't go back. I wasn't really sure what the difference was between the two repayment plans, so I didn't change anything. Even looking at the two repayment plans now, I do not see a significant difference, except that if I were to choose the new grandfathered repayment plans, my initial payments would be about $40 less a month than what I'm paying now and would eventually reach a dollar more than my highest payment at the end of the repayment period. The payments start at a lower amount and have a higher increase at each step. I've included an image below of what my payments look like under each scenario.

Points to Remember:
1) When I initially consolidated my loans, I was able to consolidate while still in school and maintain my grace period after graduation. I do not believe this is the case anymore.
2) Also, at the time that I took out my loans, all loans were variable rates. I believe they're now fixed rate only. Since I haven't taken out any student loans in the past seven years, I can't guarantee this is the case, but that is my understanding.
3) The only reason I am able to consolidate now is because my first consolidation loan was disbursed in June of 2005. My final quarter of college was summer 2005, and my loans for that quarter were not disbursed until July 2005, so they were not included in my original consolidation loan. If I were to take out more loans to go back to school in the future, I would be able to consolidate again, assuming they were federal loans.

Ultimately, I decided to go with the Standard repayment plan after this consolidation. The loan payment will be a whopping $15 dollars more a month and it will be a fixed payment for the duration of my loan. As you can see from my chart, payments are being stretched out to 20 years again, so my loans are currently scheduled to be paid off a year later than what is currently slated, but once I've paid off my credit cards, I will be able to pay off the student loans faster and hopefully not pay on these loans till 2032 (at which time my daughter will be 26 and my son will be 24).
 

On a side note, I was reading this article about Private Student Loans. I find it disturbing that so many people are struggling with student loans, and there really isn't anything that can be done about the private loans. But that is a story for another day.

More Thinking

Tonight I've started thinking that maybe I'll take a loan out of my 401(k) to pay off the consolidation loan and one of my student loans. I'm trying to think through the tax ramifications of paying off a student loan early, and really, all of the ramifications of a 401(k) loan. The loan would not be that much, as I have not saved much for retirement, but it would be enough combined with my savings account and tax return to pay off my consolidation loan (10.49% interest rate) and my student loan (5%). By paying off the two and paying back the 401(k), I would save $70 a month, or $630 between next month and the end of the year. Again, this is money that I could put directly towards other debt. So I'd miss out on about $100 worth of tax deduction, but I'd pay $630 less in interest, so I think it's worth it. I just want to make sure I have my numbers right before I request the 401(k) loan because I'd hate to take out the loan to pay off these debts only to not have enough to pay off the two debts I'm planning to pay off and still be making the same number of loan payments.

I can not believe how much time I spend thinking about money. It is 1:30 on a Saturday morning, and I'm sitting here thinking about how best to pay off my credit card debt. I can not imagine how much of my life I'm going to get back once these debts are paid off. Maybe then I'll start spending all of my spare time thinking about how to save money instead.

I finally filed my tax return, so that's a step in the right direction as far as actually accumulating the money that is needed to pay this debt off. I have got to remember what I feel right now next time I want to take out a boatload of debt. Yeah.

C'mon Get Happy

I am in such a great mood this morning. I would be in a better mood if I hadn't acted without thinking, as far as spending my bonus money, but I am in a pretty good mood.

My original plan was to apply my entire bonus and our entire tax return to our two Best Buy cards so that I would eliminate those two payments. I paid off the smaller of the two cards, and I paid off the two purchases on the other card whose promotional interest rates were about to expire. Even though none of the purchases were accumulating interest, I thought that it would be good to eliminate those two payments so I could apply them to other debt.

I have a credit union credit card that we use for our day to day purchases because it offers cash back, so I didn't want to apply it to that card because we're likely to run it back up next month and the benefit is short lived.

I have a Discover card that I transferred balances to in December, but I didn't want to put the bonus towards that because it pretty much would have defeated the balance transfers for the 0% interest for 15 months.

Our Target credit card was already paid off, our credit card with our other credit union was already paid off, and we're on a fixed payment for my consolidation loan.

Doh! My consolidation loan, the loan with the highest interest rate (10.49%). I should have put my bonus towards the consolidation loan. While the thought of eliminating two credit card balances was appealing, the majority of the purchases did not start accruing interest until 2013. The minimum payments were very minimum ($25 and $31), and they were accruing $0 in interest. Applying my bonus to the consolidation loan would have decreased the balance, decreasing the interest that is accruing on the loan, and would have put me in the position to pay the loan off at some point this year. The money that is currently going towards the loan could have then been applied to the Best Buy balances, and they still would have been paid off before they began accruing interest.

Lesson learned.

I can't get the money back that I've already paid out, however the balance of my bonus, plus our tax return that we will hopefully receive in March, will instead be applied to the consolidation loan. Paying off just over 30% of the balance of the loan will greatly decrease the interest that is accruing and in December, I will use our savings accounts to pay off the balance of the loan. And just like that, we will get $177.68 a month back in our pockets every month. Or more accurately, we will get $177.68 to apply towards the Discover Card. Depending on how my bonus looks in December, I will either use the remainder of our savings account to pay off the Discover Card, or if my bonus is looking amazing, I will pay off the balance of the Discover Card next February when I receive my bonus.

The money that I am currently putting towards the consolidation loan ($177.68) and the Discover Card ($244) each month, will pay off the balance of the Best Buy card before any of the remaining purchases begin accruing interest next year. By next July, all of our credit cards will be paid off, except one, and our consolidation loan will be gone.

And, I am going to resume contributing to my Roth 401(k) next month when my raise goes into effect. I will not be contributing at the level that I wanted to (6%) because realistically, we can't afford to right now, but I will be contributing at 3%, which is something, and when I pay off the bulk of my debt by this time next year, I will be able to increase my contributions.

None of this takes into account any raise or bonus that my husband will receive in the coming year. He receives monthly bonuses based on production and quarterly bonuses based on job safety, as well as an annual bonus based on a combination of both. It has been hit or miss whether he has gotten raises from year to year, because he works for a small company, so I never count on his paycheck going up.

I think we have decided to forgo the expensive vacation this year, in favor of saving for a Disney trip next year. If we go on vacation, it will be significantly less expensive than previous years, an less expensive than we had planned with the Disney vacation.

So yeah, right now I'm feeling pretty okay with where our finances are headed, as long as I can reign in my husband's spending. I've been making strides not to go to the store unless I need something so that I do not spend impulsively. My next goal is to create grocery shopping lists so that I do not wonder the aisles aimlessly looking for something to cook and end up coming home with a car full of snack foods and no real meals to speak of.

To close, here is the picture of our current debt distribution, after paying all bills for February. As you can see, the overall percentage of debt that is attributable to credit cards has increased, as has the overall credit card total. This is as a result of my husband buying video games, etc on an impulse.

Day 374: More than a year, and no closer to being paid off

I have read a lot of doom and gloom articles online lately. How can you not, though, given the current economic situation. But more important than the articles themselves are the comments that follow them. They truly paint a picture of the American psychie, or do they?

Last week, I read an article about how the personal savings rate should be 16-20%. Although it did not state whether that was 16-20% of gross or net pay, I don't think it was really relavent. My initial thought was "How on earth is anybody supposed to save 16-20% of their pay??" And then, I looked at my own personal finances. I currently throw $200 a paycheck into my savings account, and another $25 per pay into each of my children's savings accounts. There is very little return on investment right now, but I am not confident enough in our economy to save money any other way. After combining mine and my husband's salaries, I discovered that I am currently saving about 15% of my gross income and about 9% of our combined gross income. That doesn't sound like much, in comparison to the recommended 16% savings rate but, there are weeks that we have extra money after paying bills. I leave $100 in our checking account to spend for the week and throw the rest into a savings account. I do this on two different bank accounts. By the end of the year, I will have saved approximately 11% of our gross income, based on current projections and IF we face no emergencies that require withdrawal from those accounts.

Based on last years tax return and my current withholdings, I estimate we will receive a $2000-$2500 tax return this year. It is considerably less than the $4000 we received last year, but that's because the other half of that money is already being put into savings. This is the first year I have claimed more than zero exemptions, but I kept reading about how I should get that money now and not let the federal government have it for free, so I did what was suggested. Next year, I'll bump it up and hopefully break even.

Once we pay off some of our credit cards, loans, etc, we will have eliminated about $500 in expenditures, half of which can go into savings as well.

In taking steps to consolidate our debt, I applied for a consolidation loan. I didn't originally plan to, I just contacted my credit union to find out the terms of the consolidation loan, but when they gave me a call to discuss the terms of the loan, they pulled up my account and filled out the application. I was approved immediately, and within two hours, had the money deposited into my account for me to distribute as needed. I paid off one credit card, a loan, and the majority of a second credit card. That second credit card will be paid off this month as well.

I went back and forth on the consolidation loan, because there is an early pre-payment fee that if it is paid off in less than 2.5 years, I am charged a $50 fee. I did a quick look at how much I was paying in interest on these cards and loans, and determined that it was well worth it, even with a $50 prepayment fee. We will likely pay a chunk of the loan off with my bonus next year, and continue to make monthly payments before and after that time. If I ever get the raise that I am expecting (hoping for), it will help significantly.

I also decided on the consolidation loan because I have learned that if we have a zero balance on a credit card, we are a lot less likely to use it. Something about putting a balance on a card that was previously paid off just bothers me psychologically, but if there is a balance, I know I'm making a payment on that card anyway, so I am more inclined to use it for random spending. At least with the consolidation loan, I will not be able to amass any more debt on it. There is a fixed amount that I will be paying on for a predetermined amount of time and once it's paid off, it's paid off.

Another fun thing that I learned, that has bolstered my confidence a little, is that we have finally reached a point financially where we're not spending more than we're making. I know it seems a little backwards to be putting money into savings when we were using credit cards to meet basic financial needs, but I felt like (and still do) that if either of us were to lose our jobs, I would rather have money in the bank than a paid off credit card. I can negotiate with a lender, but if I have a $0 balance credit card and no income, it won't be long before access to my card is shut off. So I have been using my lowest interest credit card to pay for basic necessities, like gas and groceries, and then making the same $250 payment every month.

That said, here is a picture of my current debt totals for June.

Day 354: May Totals and Random Updates

I believe when we last left off, I had recently had an interview and was waiting for word as to whether I would get a promotion to a new position, or whether my job audit would net me a promotion in my current role.

I'm sad to say that neither happened. The job I had interviewed for decided that I did not have enough experience, which I guess I can see since everybody else they interviewed was a business analyst and I am just in sales support. It doesn't make it any less disappointing though. HR responded to my job audit by stating that, although I'm doing more work than required for my position, the extra work that I'm doing is not required for my current position and is simply an added benefit that I bring to the job, so they told my manager that my job could not be reclassified.

So I got no more money. However, after three years, my husband finally got a $0.75 an hour raise. I personally feel it should have been more, given that they haven't given raises in three years, but I'm glad he got something. His company has now started offering a retirement plan too, so we will be filling out the paperwork to start contributions to that as well. It will be a hit to our take home pay, but I'll be glad that he's saving something for retirement. I will likely start contributing again after the first of the year, possibly with my merit raise next year.

While it's disappointing that my current department gave me nothing for my efforts, my manager did say that she could give me a merit raise at my midyear review, and another one next spring. I'm anxious to see what kind of increase I get at midyear.

My student loan payment is going to go up $10 a month after my August payment, as part of my graduated repayment plan.

I have noticed that several readers have ended up on my blog for searching the term "What is a grandfathered repayment plan." From what I understand, there was a revision in the student loan terms, both pertaining to interest rates and payment terms for student loans. I believe this was in 2006, but don't hold me to it. At the time, it seemed like a great idea, because it made all student loans fixed rate, instead of variable, and was locked in at the "low" interest rate of 6.some-odd percent. As we all know, when the economy tanked, this "low rate" was no longer a low rate, but I guess that's how things work. From comparing my payments on my current (grandfathered) repayment plan and the new repayment plans, it appears that the new plans have smaller incremental increases on the graduated plan, but the loan is stretched out for a longer period of time. I believe when I signed my loan paperwork, the longest a loan could be repaid on was 20 years. Now it is 25. Similarly, extended repayment plans can last for 25 years, instead of 20.

I think this is kind of a catch 22 for consumers. When I began repayment on my loans about five years ago, I only had 20 years to pay them off. Yes, my payments are going to increase every two years so I will be paying larger payments towards the end of my repayment period, but I only have 15 more years of paying on them. I have been considering consolidating my loans that were not included in the initial consolidation so all of my loans will be locked in at the same rate, however I believe that this resets my payments to another 25 years (unless I make additional payments on the principal) and I end up paying more interest in the long run. Do I consolidate an lock in the 2.something interest rates on my currently variable loans, or do I leave the two separate and pay them off in 15 years?

If I were making any headway on our debt payment plan, I would leave them as is. My student loans would be paid off in less than 10 years, and if my interest rate on the variable loan skyrocketed, it is legitimately small enough that I could pay it off with a tax return or bonus. But I also know that we always have those returns and bonus's spent before they're even deposited. I hate making grown up decisions.

I actually think I'm becoming a little too obsessive about money, bills, debt and the like. I already have a whole payment plan mapped out for our bills for 2012, and we're not even half way through 2011 yet. I mapped out all of the bills we have to pay, based payments on our current salaries (assuming no increase in salary), assuming no decrease in our mortgage (which we should see because of our decreased homeowners insurance premium), and assuming we continue paying the same monthly payments on credit cards, even as the balances and minimum payments decrease.

And you know what? We have a lot of extra money left after paying bills. Now, it doesn't take into account groceries or gas or any other necessities, but I know approximately how much we spend on these items in a given week or month, and they can fluctuate based on what disposable income we have left after paying bills, but I have to say that unless something catastrophic happens (*knock on wood*), 2012 should be a great year for us financially.

We have 22 weeks where we will have more than $150 after paying bills, 7 of which we will have more than $200, 4 of which we'll have more than $300, and 2 of which we'll have more than $400.

I hope that it actually comes to fruition. That is a lot of extra money to pay towards credit cards. On my spreadsheet, I assumed $200 in spending money (for gas, groceries, and miscellaneous spending) and for weeks with more than $200, I will put everything over $200 in our savings account.

Like I said, I'm a little obsessed about it, and a little crazy for devoting so much time for it, but I think seeing it in black and white helps keep me on track for paying things off in a timely fashion. If I can see where the progress is being made, I'm more likely to stick with it.

Ok, so that's enough rambling I guess. Now I will leave you with pictures of our May debt. This does NOT take into account the money we spent on vacation, as it was not accumulated until June.

As you can see, there wasn't much change in the overall composition of the debt, or the amount of debt paid off.

Day 311: April Debt Totals and Just Waiting

I'm at a loss. I don't know how to decrease our debt level when we're having a hard time meeting our monthly obligations. We pay down credit cards, or pay them off by the end of the month, but then the next month we don't have enough money to pay for gas, or food, and it has to go on our credit cards. One of the credit cards I paid off last month with our tax return now has an almost $800 balance. I was going to pay it off before the payment due date, but then realized that I did not account for our water bill in my budget this month, so there goes that plan. As gas prices continue to increase, our ability to pay off our debt is going to be dramatically impacted. They are predicting that $4.00 a gallon gas will come to our town this weekend based on the $111 a barrel oil. It's very disheartening that the harder we try to get ahead, the more it seems like something is trying to keep us down. We've already seen our grocery bill nearly double in the past year, and that's buying the same items we were buying before.

On a more positive note, I switched insurance companies. I have been with State Farm since I first started driving 15 years ago. I've always had auto insurance with them, and then renters insurance when I had my own place, and more recently, homeowners insurance. They've usually been pretty good to us, so I never had a reason to shop elsewhere. Well, last January we had to file a claim because the county flooded our basement. Six months prior to that, we had filed a claim on a busted ac/furnace unit, thinking the whole thing would have to be replaced to the tune of $5000. They repaired it, instead of replacing it, so our claim was for a measly $800, so it wasn't even worth it. Anyway, last year, on renewal, State Farm raised our homeowners premium nearly $100 because of our claims history. Two months ago, we received notice that they were increasing our deductible from $500 to 1% of our replacement value, which was nearly triple the deductible we already had on record. I called our agents office, furious, asking how much the deductible was going to be and advising that we would be shopping our insurance elsewhere. They told me they would see if they could decrease our deductible to $1000 and that the reduced coverage would mean lower premium. Wrong. When we received our renewal invoice, our premium went up nearly 25%. So, I started shopping my insurance.

In the interest of full disclosure, I work for Nationwide insurance. I have worked here for nearly 5.5 years, but never switched from State Farm because I liked the way I had been treated by them and the last time I was quoted with Nationwide, they were nearly double State Farms rates. Upon receiving our renewal notice, I called Nationwide. The result? Our homeowners premium is down $105 over 2010 premium (down nearly $250 from what we would have been paying with State Farm). Our auto insurance? Down about $20 a month, so almost $250 for the year. By switching to Nationwide, we saved almost $500 in premium this year. I guess the commercials don't lie.

They will reassess our mortgage payments in July. Hopefully by then, the County Auditor will have reassessed our property value for tax purposes as well, and we should definitely see a decrease in property taxes due to the reduced value of our home. I sent in the paperwork this year to have them reassess, after seeing a more than 30% decrease in property value. The house next door to ours is currently on the market for $35,000 (foreclosure) and has been for several months with no sale. I've finally just stopped looking at house values in our neighborhood because it's too depressing. I'm pretty convinced we're never going to be able to move.

We did decide to take a vacation this year. I booked the room a few weeks ago and got it for 15% off the lowest advertised price, plus they waived the resort fee and parking fees. After dividing the cost with my sister and mom, who are going along and sharing the condo with us, it worked out to less than $1000 for the week for the hotel room. We should have the entire cost of the room paid off before we leave for vacation. We're trying to have a garage sale before we go, but it got rained out last time.

I interviewed earlier this week for a higher paying job. Upon learning that I was interviewing, my supervisor at my current job approached me and told me that she knew I was doing more than required by my job description, so she wanted to perform a job audit to try and get me a promotion and a raise. I should know if I get a second interview by the end of the week (or possibly Monday), and I don't know how long it's going to take to hear back on the job audit, so right now I'm on pins and needles waiting to see if I will get another raise, this time in the way of a promotion.

Anyway, I promised our current debt totals, so here they are. As you can see, we did increase in credit card debt. Our credit cards now compose 9% of our overall debt load, as opposed to 8% in both February and March. I'm hoping that interest rates stay low until they determine the new student loan interest rates next month (I think it's next month), that way I can reconsolidate and reduce my payments further.

Day 213: Optimistic

I’m beginning to feel genuinely positive about our finances for the first time in a long time. It’s too soon to be throwing a party or declaring victory, but I am finally seeing the potential for improvement over the next six months. The first step I’ll be making is paying $600 towards my Best Buy card this week. That will pay off one of our purchases that was no interest for 18 months before any interest accrues. In February, I will be receiving my bonus, which after taxes will give me about $1100 to go towards credit cards. I will probably put the entire thing towards our Target card, since it has the 24% interest rate.


Our tax return will likely be delayed, because of the changes to the tax laws at the end of last year, since we may itemize. As long as the Best Buy purchase is paid off though, I don’t mind waiting a few extra weeks to get my refund. Our refund will pay off the remainder of the Target card, and will also pay off the balance of my Best Buy card. I also sold my broken down old car for $300, so that will be put towards debt too.

By April, we should have two credit cards completely paid off.

Now, in the meantime, I am building savings. I am putting the difference between last year’s insurance premiums and this year’s insurance premium into a separate savings account. I also increased my exemptions for tax purposes and am putting that difference into savings for the next year. I am also putting money into our regular savings account by over-contributing towards our mortgage payment. By the end of December, we will have about $8500 in savings. I’m going to use that to pay off our remaining Best Buy card and our CU 1 card. That will leave us with one credit card balance going into 2012. That makes me really, really excited. And seeing step by step how we’re paying off these balances makes me very confident that we can follow through with it.

Also, I will likely consolidate all of my student loans in June this year. I anticipate that loan rates will increase this year and I would like to have all three student loans into one single payment. My other option is to not consolidate them, but to instead wait until spring of 2012 and pay the two smaller loans off with savings and our tax return. I have six months to think that over, and see what the interest rate will be for next year.

So long as everything goes according to plan, by this time next year, we will have paid off over $26,000 in debt. And, we will still have money in savings. That, my dear readers, makes me very, very happy. And more than that, it makes me very motivated and determined.

Day 55 Continued: A little good news

I got a call from my credit union. They were not able to give us the full amount we were requesting for the credit limit increase, however they were able to to raise the limit to $10,000 and we transferred $2000 of the balance from the Target card, leaving us with $2733.75 on the Target card, and a $9,420 balance on the credit union card. They're also lowering my interest rate to 7.99%, so I lost a percentage point. My credit score was 740, so I am feeling pretty good right now.

We're trying to decide if we try again for a personal loan for the other $2700 so we're not paying anything to Target. If not, we'll just throw the rest of our money at that outstanding balance and get it paid off. Transferring a little more than 42% of the balance will help decrease the amount of interest we're paying on the Target card, so it will give a little extra to go towards principal.

Now, we just need the mortgage company to give us a call back. Fingers crossed.

Day 50: The Downs and The Ups

Yesterday was not a good day. We got a notice from our mortgage company that, after rebalancing our escrow account, we're running $595.06 short for the year. We also had an increase in property taxes due to a school levy, and an increase in homeowners insurance premium due to a sewage back up in our basement that resulted in a nearly $10,000 claim. So, after adding the increased taxes, premium, and shortage and dividing it over the next twelve months, our mortgage payment was going up $85 a month. That might not seem like a lot to some, but it's enough to put us over our heads and ultimately result in us falling behind on our mortgage.

If it weren't for the massive minimum payments on our maxed out credit cards, we wouldn't have a problem with paying our mortgage, even with this increase. We have got to find a way to get out from under our Target credit card and it's 24% interest rate. For ever $135.00 minimum payment, $96+ is going towards interest. We tried applying for a credit limit increase with my husbands credit union last month, so we could do a balance transfer. They countered with an offer for a private loan with a 10.74% interest rates, but the monthly payments would have been over $400 a month. We're trying to reduce our payments, not triple them.

Yesterday, the mortgage broker that we went through to buy our house called my husband. He left him a voicemail about reducing our interest rate on our house, and subsequently reducing our minimum payments. I've been looking at refinancing for several months, because right now we're in a 6% fixed interest rate on a 30 year mortgage, which almost seems criminal with the historic low interest rates we're seeing at the moment. But here's the thing; we owe over $108,000 on our house. According to Zillow, our house is only worth $95,000. Every refinance offer I've looked at has required a down payment of 5% minimum. We don't have any money for a down payment, we don't have money for closing costs or fees associated with refinancing, and we're not sure how long we're staying in the house anyway. The refinance offer I was looking at last night required a 5% down payment to refi, and would have taken 14.5 months to recoup the costs associated with the refinance.

However, the notice from our mortgage lender yesterday was enough to push us into action. My husband called the mortgage broker back last night and left a message for him to give us a call. The worst that can happen is he can offer us nothing, right? I contacted our insurance company to see what impact raising our deductible to $1000 will have on the premium for our car, and for our house. I don't think we can change the deductible for the house mid-term, but I want to see what the different rates are with our current provider because I'm going to shop around. I hate to, because I've been a customer for 13 years, but we just can't afford to pay any more than necessary. I work for an insurance company and would get a 15% employee discount if I switched, but I still don't know if it will be low enough to replace our current company. I'm going to give my credit union a call this morning to see about a credit limit increase/balance transfer from our high interest card. I've gotten a pretty decent raise since our last credit limit increase. And if we can transfer the balance, we're going to have to cut up our Target card. just get rid of it. It's a toxic card.

The good is, my husband got his bonus this morning. I wasn't expecting it until next month. The bad? It's 8:30 am and the bonus is gone. I paid our past due cable and electric bills and the Target bill that's due next week. At least we're current though. As long as we can keep current, we'll be ok. I see a garage sale in the near future. If I'd known my neighbors were having a garage sale today, I would have probably taken the time off work to have one myself. Oh well, hindsight is 20/20.

I think my husband is finally seeing how much we're struggling. Not enough to quit smoking, but enough that he's planning to start rolling his own cigarettes as a cost saving measure. Hopefully that will transition to quitting altogether in the near future.

Day 14: Student Loans

My student loan payments right now are not that unmanageable. I have low interest rates on two of them, and a 5% rate on my Perkins loan, which is not really that high when you look at the fixed interest rates being issued now on all loans across the boards.

In my endeavor to reduce our debt, I was looking at consolidating my three loans and possibly getting an Income Contingent Repayment plan, assuming that it would decrease my payments and interest overall. Apparently, based on our income and family size, an ICR would put me on the hook for nearly $925 a month, or approximately 16.5% of our monthly pre-tax income. I'm sorry, but that's almost my mortgage payment! What am I supposed to use to pay, I don't know, my utilities? My car payment? My groceries? Who in the government determined a formula to figure out how much the average person could afford to repay?

I'm sure this is a low end estimate because I used my base salary, not any bonus's that we might receive throughout the year, and my husband is paid hourly. And if you assume that we're paying approximately 25% of our paychecks in taxes, the $925 per month payment becomes 22% of our take home pay. That's just unreasonable.

I was still considering consolidating my student loans, but while investigating repayment options, I saw a statement, in red, that told me that I'm on the grandfathered Graduated payment plan. If I change my payment plan, I can not go back to this plan. My problem is, I don't know if this grandfathered repayment plan is better than the ones that are now offered.

A few years ago, I paid off one of my loans early. My plan was to continue applying that payment amount to the existing Perkins loan, therefore paying it off early. Instead, I applied that payment elsewhere and have continued making the minimum payments. I believe I selected my current repayment plan while looking at the amortization schedule and realizing that overall, my payments would never get higher than I was paying when I first graduated from college.

Now I'm looking towards going back to school and working on a Master's degree. A new degree will mean new loans with higher interest rates and a longer repayment period. In case I haven't mentioned this previously, although my debt payoff mission is primarily to improve our overall financial position, it is also geared towards ensuring that I am able to go to school full time without worrying that I'll need to get a second job to pay the bills, or that one of us will lose our job and our whole family will be underwater.

In my mind, if I can get our credit cards paid off quickly, I will feel a lot more comfortable enrolling full-time in college in September of 2011. Based on our current debt snowball plan, all credit cards will be paid off in November of 2012. That doesn't take into account bonuses, tax returns, any windfall we may receive. Unfortunately, that's just not soon enough.

I keep trying to remind myself that this is a process. It took us five years to accumulate all of this debt, it might very well take us five years to eliminate it. Today, I'm just chipping away.

Day 12: Denied

We applied for a credit limit increase on one of our lower interest credit cards last week. I included a coversheet with the application, stating that we were looking to increase our credit limit specifically so that we could request a balance transfer for one of our higher interest cards.

They called my husband on Friday and told him that based on the information they had in hand, they could not approve us because of our high amount of unsecured debt. They asked him to send copies of both of our last pay stubs, but he wasn't clear on whether these paystubs were to try and approve us for a credit limit increase, or if they were trying to put the debt into a personal loan with a fixed term.

We discussed our options and decided that we did not want a personal loan. Although the payments would be lower, because there would be a lower interest rate, we don't like the idea of a required monthly payment that is higher than our required payment now. The interest savings would not be so great that it would be a good option for us, especially since we're trying to stick to a somewhat self designed debt payoff program anyway.

The biggest roadblock we have in paying off our debt is our desire for instant gratification. Last year we went on a great vacation on the Gulf coast of Florida. We stayed in a resort right on the beach and had a great time. We also racked up over $2000 in debt. Some of my family is going to Florida in August and they've been asking if we're going with them. It's hard because we both want to go, but also both know that it's not financially responsible or feasible for us to go. We're just not used to being this broke, and it's hard to reign in our spending.