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.

Refinancing

We received our application and paperwork to refinance our home this weekend. The news was even better than I had expected as they are dropping our PMI from nearly $60 per month to less than $18.

By time all is said and done, with the lower interest rate, lower PMI, and lower taxes, as well as a longer mortgage term, we will be saving about $225 a month, which will initially be applied directly to our credit cards and later will be either saved or applied towards principle. It all depends what is going on with the housing market when that time comes. If we're staying put, we'll need to pay five years off our loan. If we're leaving, we'll be saving towards a 20% downpayment to prevent PMI on the next home.

A Little Early

I may have celebrated a little too early last week. As it turns out, if you include my 401k loan, I am still over $200,000 in debt. However, I did pay off more than $700 in debt this month, and that includes what we charged for our vacation.

Yay, right!? Okay, so I know we shouldn’t have charged our vacation, but I know that my husband is getting a bonus this month and another in three months, so we’ll be able to pay it off by summer. I know we would be further ahead if we had just not taken a vacation, but we enjoyed ourselves and it was really good for us to get away as a family.

But we have gotten some good news and some “good” news in the past couple of days that may bode well for our financial future as it relates to our house. I called my current mortgage lender about refinancing and found out that I can refinance to 4.5%, as opposed to the current 6.0%. There are about $2400 in fees, including appraisal, credit report, closing costs, etc. This will lower our monthly mortgage payment about $140 a month. Because I currently have PMI on my home, they will not let me reduce my mortgage term from 30 years to 15 or 20 years. I’m not sure of the logic of this, aside from the fact that it keeps me paying PMI longer. It doesn’t matter though, because I’m going to continue paying the same amount towards my mortgage to pay my principle off quicker and ultimately get out of PMI quicker.

The other “good” news, that I put in parenthesis because it’s not really good news, but it’s better than the alternative, is that we received word on our appeal of our property value. They decreased our property value 25% for 2010, and 5% for 2011, so we should be receiving a refund of overpaid property taxes and will be paying less going forward.

The combination of these two items means we will likely see a nearly $200 decrease in our monthly mortgage payment. While we’re still stuck in a home that we hate, the extra money means that we can pay off our debt faster.

And finally, here is our current debt picture.

Milestone!

I input all of the payments we've made this month, as I do after every pay day. I put all of our new balances in, taking into account what we spent on vacation. The only outstanding payment we have for April is my car, but I can estimate the balance based on interest rates and fixed payment amounts.

And then I came to a shocking and exciting realization.

For the first time since I started my debt payoff journey, we owe less than $200,000 in debt!

This months debt total is $199,564.32!

Slow and steady wins the race, right?

In other news, I'm trying to refinance our house. Supposedly, HARP 2.0 eliminated a cap on LTV and appraisals on your home. As I am learning, this is not necessarily so. Since financial institutions have a choice in whether they want to offer HARP refinancing or not, most of them are not willing to provide refinancing through this program. Why should they, I guess, when they're making a profit off of those of us that are locked into high interest rates and haven't walked away from our homes yet.

I tried to refinance through my credit union yesterday, but they enforce a 125% LTV cap on their HARP loans. We're looking at closer to 148% based on Zillow's values. Even if we used the higher assessment we received from the auditors office for tax purposes, we're still at 133% LTV.

I hate that we live in a society where I'm being punished for being responsible and paying my mortgage, unlike the majority of my neighbors. I don't know if our situation would be more bearable if we were paying less on our home, but it would certainly lessen the sting. Every day I ask myself why we're still paying our mortgage when all of our neighbors have walked away and the current owners paid 1/3 of what we did for our home. We're gluttons for punishment, I guess.

We have to make a pretty big repair to our home, to the tune of over $8000, but I don't know where we're going to find the money. In better times, we might have been able to take out a home equity line of credit, but since our equity is negative, there is nothing to take out. It's our sewer line, and it's a ticking time bomb. The walls are cracked and it has started to shift in about 1/4-1/2 of an inch. I know we need to fix it, but I don't know where we'll find the money.

Roto Rooter was pretty shady about the whole thing; they told us in our home that it would be a max $4000 to have the work done, so I took a $4000 loan out of my 401k, only for them to give us a proposal of $8175. When I told him he had quoted us $4000 at our home, he said there was no way he would have quoted that because it was impossible and told me to take out a loan for the other $4000. I told him I took out a loan for the first $4000 and it wasn't even in the ballpark of what we were willing to do for our home at this time.

I applied for a new job too. I'm not sure if I am ready to leave where I am, but the job I applied for pays significantly more, and it's more in line with the career path I'm following. We'll see if I even get an interview, and then I will start making decisions if it's necessary.

Alas, I must get back to work, but I wanted to share my good news.

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 277: To Vacation or Not to Vacation

I haven't really had much to write regarding our debt pay off journey lately. Since making a large, lump sum payment on my rewards card and doing a balance transfer from my high interest cards to the rewards card, we've pretty much been on auto pilot. I will see a raise on my first pay in April, and my husband's employer recently told him that they are actually planning on issuing raises this year, after stagnant wages for the past three years. My husband is also receiving a bonus on his second paycheck of every month, based on performance, so we actually have more money coming in.

However, for every positive movement in our finances, there is a negative. We received notice from our insurance company that they are nearly tripling our deductible and they are increasing our annual premium between 20-25%. I am currently shopping our insurance to other companies to see if we can get better coverage or better rates, or possibly both. I'm hoping, since I work for an insurance company, that my employer will be able to provide me a better rate than what I've got now.

Also on the home front, I am submitting a request to our county tax auditor for them to re-evaluate our taxes for 2010, so I can hopefully reduce our annual payment on that. If our home value is going to decrease over 20%, I would like to see a similar change in our taxes. I need to take the paperwork and have it notarized today so I can put it in the mail this afternoon It has to be postmarked by 3/31.

The biggest possible hindrance to our financial goals is our desire to go on vacation this year. We're discussing a week long vacation at the end of May, which will likely cost us in the ball park of $1500-$2000 for the week. We hadn't really been planning on it up to this point, however I think that my husband and I are both at the point that we feel like we need a vacation. We probably don't need a $2000 vacation, but we do need to get away from here for a little bit and take a break from work. I am trying to plan ahead for the added expense and pay off as much of our credit cards as possible before we go, so I don't feel like it's as much of a setback.

Anyway, we are just chugging along. I will update later this month with our revised debt standing.

Day 129: Rambling about the Past and the Future

I read this article on Yahoo yesterday, regarding 401(k) matching. As I wrote about a month or so ago, I discontinued my 401(k) contributions temporarily because we needed the additional income to help pay our bills and I was facing a consistent negative rate of return on my investment.

Reading the comments on this article (which is no small feat, given the numerous server errors that plague Yahoo articles), made me really think about my investment philosophy and planning for our future retirement.

I don’t know if I’ve spilled any personal information about myself, but I am 29 years old and my husband is in his mid-30s. I make approximately $42,000 a year plus bonuses (which have ranged anywhere from $500 up to an anticipated bonus this year of closer to $1500). My husband is on an hourly wage and generally has a gross income between $21,000-$25,000 and has not seen a raise in three years. Given our yearly salaries, I find it very sad that we have no savings accounts to speak of.

I put $25 per paycheck into each of our children’s savings accounts and then transfer those funds into small, short term CD’s whenever the savings account balances reach $500. I keep the CD’s small, and occasionally have multiple CD’s with different maturity dates, usually only buying 3 month CD’s due to the low savings rate. If the savings rate ever increases (which I anticipate it will in the future), I may buy more long term CD’s. My children know these bank accounts exist, even if they don’t fully understand them. In addition to my automatic contributions every two weeks, we also put any change and cash they receive into their piggy banks, and when the piggy banks get full, we take the piggy’s to the bank, dump the change into the change machine, and deposit that money into their savings accounts as well. When they get older, I will teach them how money is used to buy things, and we will maybe put half of their change into savings, and the rest of it will be used to buy things they want. I will also give them an allowance for doing chores around the house; something I never received growing up.

I think a lot of my financial immaturity can be traced back to my parents and how I was raised. I don’t want to blame my parents, because they did the best they could, given their financial position. They were both teenagers when I was born and my mom dropped out of school at 16. My dad graduated, but always worked hard, manual labor jobs just to make ends meet. They had five kids, and then divorced, and spent the next 14 years arguing over money, child support, medical bills, and everything else. I remember my dad, over and over again, telling me and my siblings how my mom was being unreasonable, expecting him to pay half of the medical and dental bills when he already paid child support, even though that was what the court order stated. I remember him showing me his paychecks and telling me, “This is how much I bring home, and this is how much I pay your mom, and how much does that leave me with? Do you think that it’s fair that I should have to pay her more for doctors and dentist bills?” Similarly, I remember copying every check that my dad sent my mom for child support so she would have proof for the courts that he wasn’t paying his fair share, and knowing how much she was bringing in, and how much the mortgage was, and really having no clue on utilities or car payments. Based on what I know now, as an adult, it’s no wonder our home was foreclosed on when I was 17 years old.

When we bought our house, we made an effort to determine how much home we could afford. I never wanted my children to feel the sense of loss that I did when we lost our home. It was as if I went off to college, and never had a home to go back to. Apartments never felt like home, and I moved every year so I didn’t really accumulate much from year to year. My first apartment was furnished, but my second was not, and the only furniture I owned was a queen sized bed and a 19” tv. I sat the tv on a box and didn’t have cable. My living room was empty. Same with my second apartment, until my (now) husband bought me a tv stand to set my tv on for my birthday. It wasn’t until I moved in with my husband that I actually had furniture in my living room, and even then we had a broken down couch that he’d gotten from friends, or family, or somewhere, and a dresser that had broken handles. We got a free washer and dryer when we signed a 15 month lease with the apartment complex, which worked great for us at the time. We got an old desk from a friend that was moving and furniture from friends and family when they replaced theirs.

So as we were saving to buy a house, we calculated how much we were spending on rent, and we put whatever we could into savings every month. We kept track of what we were able to save, what we were spending on extraneous items, and where we could save more. When we met with a mortgage broker, we told him we could afford no more than $950 a month for our mortgage, interest, and insurance; knowing that we could afford closer to $1000, but not wanting to push our budget. He told us that with the amount we were looking to spend, we could only afford a $100,000 house, but that with our income, we qualified for $160,000 home. We disagreed, telling him that $1000 would be pushing our budget and he told us that we would see raises and be able to afford more in the future. I am glad we didn’t listen to him.

We looked at homes between $99,000 and $113,000, and ultimately bought the most expensive one that we looked at, but it had four bedrooms and one and a half baths, and did not need near the work that the others we saw needed. It was, for all intents and purposes, move in ready.

When we bought our home is when finances started going downhill for us. We bought a new couch, new bed, new tv, new tv stands. It was almost as if when we were told we could afford more house, we thought we could afford more stuff to go in it. Of course, we had no more cash, and since our mortgage payment was at the top of our limit, everything went on credit. At a time when many people were losing their job and defaulting on debt payments, we were a great asset to companies looking to make a profit, like banks. We bought and bought and made the minimum payments and finally, at Christmas last year, hit a point where we were questioning how we were going to buy gifts for everybody that we were supposed to buy for. We had been buying with the assumption that our tax return would bail us out, that bonuses would hold us over, that all of the spending that we did throughout the year would be wiped out with the influx of cash in the spring.

The problem was that with the credit card reform that went into effect earlier this year, some of our creditors, especially the ones with the biggest balances, decided to change their fixed rate cards into variable rates, and increased the interest rates to the point that 90%+ of our minimum payment was going towards interest. This led to higher minimum payments to cover the interest plus a minimum payment towards the balance, and without the tax return, we didn’t have the money to pay the balances down.

Then we were hit by problem after problem financially. Our air conditioner broke, twice. Our basement flooded with sewage. Our air conditioner broke again. The bottom of our car was rusted out and it would have cost more to repair than it was worth to keep it.

Through it all, though, we’ve managed to keep our heads above water. Our 2010 tax return went towards paying off the credit cards we used to fix our basement. Our 2011 tax return will go towards the other problems we’ve had crop up throughout the year.

Once we’ve made a sizable dent in our debt, I will start putting a percentage of our pay into savings for a rainy day fund, instead of throwing so much money towards the debt, that way we will have a cushion. We’re less stressed with an emergency fund.

And after we’ve made payments towards these credit cards and I feel that we have sufficiently gotten our heads above water, I will resume contributions to my company 401(k). My company matches 50 cents on the dollar up to 6% of my salary. I contribute to a Roth 401(k) because I’d like to think that I will be making more money when I retire than I do now, pushing me into a higher tax bracket. Even if I’m not making anymore, I will still probably be in a higher tax bracket due to inflation. After contributing to the maximum that my employer will match, I plan to contribute to a Roth IRA, eventually up to the maximum that I am allowed. I would eventually like to put some amount into the market for long term investing, not to play the market. I want to learn more about buying stock and diversifying my investments. My company also offers a pension, in addition to the 401(k), which I am well aware makes me very fortunate.

Anyway, this discussion about planning for retirement has gotten very long winded and off track, but I guess I just needed a brain dump today. To sum it up, I want to diversify. I know that 401(k)’s aren’t guaranteed, so I’d like to also contribute to a Roth IRA and savings and CD’s, but I’d also like to try some long term investing in the stock market, and hopefully by time we retire, we’ll have paid off our mortgage and won’t be carrying debt, and we’ll be able to live comfortably without worrying where our next meal is coming from.

Day 97: Plugging Along

I haven’t had a lot to write about our debt payoff journey lately. As it stands, things are stagnant, but not, if that makes any sense.

I don’t have any big plans up my sleeve to eliminate half my debt overnight. I think we’ve made all of the big moves that we can, and now comes the time to follow through with our debt payoff plan. We just have to hammer away at it.

Effective my next paycheck, I will not be contributing to my 401(k). This is only a temporary bump, and I intend to start investing again in March when we receive our tax return. When we receive our tax return, we will be paying off three of our credit cards, eliminating nearly $300 a month in credit card payments. Once those three credit cards are paid off, our financial picture will look a lot brighter. I keep telling myself, “Six more months until we have some breathing room.” Not to say we’re going to go crazy with that breathing room, just that it will be a welcome change from our financial state for the past six months.

My husband is still a nonsmoker, for a month as of Wednesday, but he’s discouraged because we’re not seeing immediate financial returns on his quitting. I’ve tried explaining that we have benefited financially from it, because if it weren’t for him quitting, we’d be even further underwater with our bills than we are right now, but he wants to see positive growth in our savings account, not elimination of credit card spending.

I read financial articles every day, and see people complain that the economy isn’t getting any better and people are still broke. They blame the president, the banks, the realtors, but never seem to point the finger at themselves. It’s a bitter pill to swallow, knowing that we’ve lost $20,000 on our house in three years, knowing that we’re locked into a 6% interest rate, and we can’t get out of our home because we’ll never make back what we owe on it. But I don’t blame anybody else for our financial position except for myself. I don’t even blame my husband, because he told me three years ago that we should stay in an apartment and save money for a down payment, instead of putting nothing down on a house that we were only lukewarm on. Instead, I wanted out of an apartment, and here we sit.

I could blame the credit card companies for our outstanding financial debt load. They did, after all, increase our interest rates to 24%+ and convert our fixed cards to variable cards, but if we hadn’t used them irresponsibly in the first place, we wouldn’t have had as much debt for them to profit off of.

I could blame the student loan companies for not reigning in the amount of loans they were allowing me to take out, giving me more than three times tuition costs. I could blame the car company for selling us a lemon, or giving us a high interest loan…

You get the point.

But, it’s nobodies fault except ours. We’re the ones that got dollar signs in our eyes and thought we were made of money. The funny thing is, we’re not making anymore money than we were before. Our utilities are going up monthly. Our mortgage bill went up substantially, because of escrow. We’ve got a new, higher car payment, and a new higher insurance bill. And yet, we’re paying credit cards off. Funny how that can work, when you prioritize your spending, cut out fast food and cook at home, eliminate unnecessary shopping trips that you were only making for the sake of boredom. Looking at our financial picture, I am amazed how much money we were hemorrhaging.

Six months. It will only be six months until we have breathing room; until our credit cards aren’t maxed out, until we’re not scraping pennies just to make ends meet, until I can start sleeping at night without having nightmares of losing our home. Six months seems a long way off, but soon it will be Halloween, then Thanksgiving, and then Christmas.

Until then, I’ll just keep swimming.

Day 80: A Pretty Big Setback

Our debt headed the wrong direction in a big way last night. We bought a new car. A brand new car. Ultimately, it was the right decision. I need to keep telling myself that, because the new car payment makes me want to scream and throw myself off of a building, but it was a necessity.

A little over a month ago, we were told that our car had a rusted out cross member. We were quoted between $5-6k to fix it. We owed $8000 on the car. And it was only worth $5500 in trade. We looked at the numbers, tried to figure out what our best option was, and ultimately decided that we needed to get a new car. We wanted to keep the payments as close to our existing payments as possible, which meant $288 a month. After walking into several dealerships and being told that it was an impossibility for a new car, we started revising our numbers. After looking at our actual payment (we were paying on a biweekly basis) and realizing we were actually paying $313 a month, and seeing that our gas mileage would be cut in half with the new car, saving us about $50 a month (maybe more) in gas, I set our ceiling at $350 a month.

We were still being quoted in the $360-$370 range though, so I told my husband that we should wait until next month and see if there were any other incentives, lower interest rates, or Labor Day sales. I thought, when I left work yesterday, that we were waiting to buy a new car. However, one of the guys that we had been talking to called and told my husband that he could get us into the car we wanted for $350 a month, so we went up tot he dealership. Of course, we got there, and he told us the lowest he could go was $367. So, my husband decided to play hard ball and called the other dealership that we had visited and they said they could beat that. So the dealership we were at said they could go to $365, taking a loss on the car, and they would throw in the free Homelink mirror and oil changes for a month. The other dealership said they could beat that, and the men at the dealer we were standing in were irritating me anyway.

My husband decided that $2 was worth driving to the other dealership. I told him there was no way we were going back to the first dealership if we left. We got tot he second dealership and they quoted us $367 with no Homelink and no free oil changes. After buying Gap insurance because of the negative equity we were rolling into our loan, we ended up with a $378 a month car payment (nearly $30 more than my ceiling) for less of a car. I was, and still am, pretty irritated.

Ultimately, I know that we were lucky to get a new car for less than $400 a month. We are lucky to be out of the money pit that was our old car and we're lucky we got $5500 on it, given everything that was falling apart. I'm just angry that we could have got the car we really wanted, for less, at the first dealership, but my husband wanted to haggle over $2 and we ended up paying even more. I can tell you, when I buy my car (not the family car), I'm doing all of the talking and I'm deciding which car we buy.

I plugged the numbers into my debt snowball calculator and discovered that it will take a year longer to pay off this car than it would have taken to pay off our old car. With a 3.9% interest rate, by paying it off early, we'll be saving quite a bit of interest. Our old car loan was at 6.75%, so I don't feel so bad about the 3.9%. It's better than what either of our credit unions could have given us.

I'm just sucking hard on that $378 a month car payment.

Looking at the numbers, I hope it works out the way it looks on paper and we are only paying about $15 a month more for car ownership than we were, but that only works if the car gets the mileage they say it does.

I also made a decision that a lot of people will probably disagree with this morning. I stopped deductions from my paycheck for my 401(k). As I see it right now, I'm looking at negative return on investment consistently. I felt like I was throwing good money after bad, and feel like, after about six months of applying my 401(k) deductions to credit cards, we'll be in a better place financially so I can start contributing again. Right now, I just really want to get out of this debt that is plaguing us so I can stop worrying about making our monthly bills all of the time.

I put in a call to our mortgage company last week and they haven't called me back, so I'll have to follow up with them today. I also contacted my credit union to see if they happen to refinance upside down loans. I'm trying to streamline our finances as much as possible. It will relieve a lot of stress in the long run.

Day 72: Small Changes

I can not believe we are 72 days into trying to dig our way out of this mess. The days just blend together, and it feels like we're making no progress. I know we're making progress, because the numbers are obviously going down, but it's such small progress that it almost feels pointless.

I got our monthly statement for the Target card, which we transferred half the balance from. It was kind of disheartening to see that the minimum payment was still over $100 and we still paid $88+ in interest. I know they use an average daily balance method for computing interest, so we still paid interest on the huge balance for a third of the month, but it was a little discouraging. The fact that the minimum payment only went down $28 was kind of discouraging too. Hopefully September's statements give us a much better picture of what our new monthly payments will look like.

I got some advice about our mortgage, so I'm going to have to contact our lender this week to discuss some refinance or modification options with regards to our loans and the governmental programs that are in place. It looks like our mortgage is held by Fannie Mae, which opens up some new options for us. It looks like one of the options allows up to a 125% LTV refinance option, but it only makes sense if there aren't astronomical fees associated with it.

And one of the biggest things that has happened to help our financial picture? My husband quit smoking. He's going on day five without a cigarette. Eliminating that expense will make a pretty substantial ($350-$400) difference to our budget, not to mention he will be healthier and the kids won't see him smoking. He's angry with me right now, because of the way he quit smoking, but hopefully in the future he will realize that I only did it because I love him, and the good reasons (health, kids) weren't working, so fighting about money did. If he's healthier in the long run, I think I can deal with him resenting me for now.

Day 66: This Month's Picture

Here is our debt picture today, August 17.

Overall, we've paid our debt down $340.52 in the past month, and $1288.25 since I started keeping track in June. The bad news is that our credit card debt has actually gone up $142.25 in the past month.

My husband and I had a not so pleasant discussion on the state of our financial affairs tonight. I'm extremely unhappy with his $400 a month cigarette habit.

We were denied the refinance. We would need to refinance 112% LTV and the refinance plan only allows up to a 110% LTV, so we have to pay another $4000 off of our principal, or our house value needs to increase (which it won't) in order to be eligible for a refinance. That means that now, we're going to have to find a way to come up with an additional $85 a month for our mortgage payment, which is going to be hard to do when we're already running a $1000 a month shortfall. I know that can't be entirely accurate, because our credit cards only went up less than $150 this past month, and I don't see any week where we can't meet our bills over the coming month, there's just no extra money.

I think I'm going to look into a second job this week, see if I can pick up something in retail through the holidays, if anybody is even hiring. At least knowing that it's temporary will help me get through the days/nights. If we can get one credit card paid off, it will help our financial position immensely.

Day 55: Just Waiting for Answers

The past five days have been filled with activity.

Yesterday, we met with the mortgage broker to discuss refinancing our house. We were going over the numbers, he discussed a FHA refinance program, and the noticed that our loan was actually conventional. I had thought it was FHA too, but apparently not. He also thought that the sellers had paid our down payment, when in reality, there had been no down payment.

We talked numbers, he asked what houses were selling for in our area, I told him I wasn't sure but that Zillow had our house valued at about $95,000. Its weird, because the house right next to ours is built exactly the same, except that they added a bonus room to the back, and it's at $105,000 on Zillow. The bonus room only added an addtional 100 square feet. Anyway, I told him that we've had at least four foreclosures on our house, and that if he'd called us two months ago, our value was sitting at closer to $105,000, but in the past two months we've lost about $10k on the value of our house because three of those foreclosures sold at less than $40,000 each. That's been since the first of June.

He gave us two different possibilities and is looking into which one will work for us. If he's able to refinance our conventional loan under the FHA program, we won't need an appraisal and we'll need to show up to closing with $1500 to start our escrow account. We'd close the end of September and not have an October mortgage payment, so it's completely feasible. If we can't do the FHA refinance, then we'll have to do the Fannie Mae refi, which involves an appraisal. I'm not sure if our house will appraise high enough to refinance that way or not. It may, because our house is the second highest valued on the street, according to the auditors office and Zillow, but it may appraise lower because of cosmetic things that we simply haven't had time to fix, like the fence our neighbors ran through, the hole in the wall behind our front door where my son slammed the door handle into it, and the crack in the ceiling above our shower. I do know that if we have to have an appraisal, I will probably be painting the bathroom sooner, rather than later, to get rid of the peeling paint and border.

He should be giving us a call back in the next two days. Regardless, both options make our monthly payment about $50 less than what we're paying now, and $138 less than our new payment that will go into effect on October 1, so we'll be better off financially. I figure that if we are able to refinance, I will continue to pay that additional $50 towards our principal, so our payment will stay the same.

I forgot to mention, the mortgage lender will also be paying all closing costs for either option, including the appraisal fee if we need one. We only have to come up with the escrow amount. It won't actually cost us anything additional.

The other thing that I have been looking in to, and am waiting on a response regarding, is a credit limit increase and balance transfer. I already struck out with my husband's credit union, but my credit union has always been a lot more likely to work with us.

For example, my husband's credit card through his credit union has a $3500 credit limit and a 14.99% interest rate. It's been the same credit limit for years and years and years. When we applied for the credit limit increase, instead of giving us a reduced amount, they offered us a fixed term personal loan.

My credit card through my credit union started with a $5000 limit and a 13.99% fixed interest rate. I called this past January for a credit limit increase. They increased my limit to $7500 and asked if I would be interested in moving the balance to an 8.99% variable rate card and told me that, if at any point in the future, it looked like interest rates were moving so high that the variable rate card was no longer a good option, we could always move it back to the fixed rate card. I called them on Monday and asked how long it would be before I could apply for a credit limit increase for the sole purpose of a balance transfer.

The loan officer told me, "Usually, it is between six months to a year, however you have a very extensive history with us and an excellent payment history, so we may be able to reconsider you now. Let me get this to one of our underwriters and I will give you a call back". I love, LOVE that they look at my entire history with them and not just how much total debt I have. Even if they can't give me an increase, which I kind of expect, I'll still be singing their praises because they looked at more than just our astronomical debt when I told them that we're trying to transfer a balance from a 24% interest card.

So today, I just get to sit and wait, and see if I get good news from either company. If we were able to refinance and do the balance transfer, we'd probably be saving close to $100 a month in interest, maybe more. That's money that would be going directly towards paying off the principal amounts.

On a side note, our mortgage broker mentioned the fact that they're building a casino near our house. He said that he expects to see property values increase once it's built and they start to improve the area around it and suggested that in the next two to three years, we check our property values and consider moving, if it's feasible. We had already told him that we wanted to move in probably five years, so it was nice to get that bit of info from him. Of course, by then interest rates will probably be sky high, but we'll see.

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 4: Working on Our Game Plan

Today, I started looking at ways that we could more quickly pay off our debt.

We're trying to increase our credit limit on one of our lower interest cards so we can transfer the balance from our high-interest Target card to something lower. Even our lower interest rate cards aren't that low, but 14.25% is better than the 24.24% that Target charges. It would be even better if we could transfer it to the 8.99% card that I carry, but we maxed it out and they already increased our credit limit for an emergency in January, so we're kind of out of luck on that one. Because I am carrying such a high limit on my credit card, I don't think my credit union would approve us for a consolidation loan, otherwise I'd consolidate all of our higher interest debt into a personal consolidation loan at 10.99%.

I also looked into consolidating my student loans. My interest rates actually aren't too bad on my loans. They're exceptionally low, and I'd like to lock that in. I was looking at filing the consolidation application yesterday and read that the interest rate on my variable rate loans is actually supposed to go down on July 1, so I'm holding off on consolidating. I'm not 100% sure that I want to consolidate them anyway, if it means changing my payment plan and term of the loan.

I was also looking into refinancing our house, but after looking at the interest rates, closing costs, and the amount of time we anticipate staying in our house, I don't know that it would save us any money in the long run. Part of me wants to just stay in this house and pay it off so we don't have a mortgage anymore, but the other part of me wants something bigger and more convenient. I mean, if we're paying this much for a home, shouldn't it be a home we like? Once we get our credit cards paid off and start saving the amount of money we're paying every month, we can evaluate it a little more.

Speaking of credit cards, I have never really paid attention to what our monthly interest charges are on these cards. It kind of made me sick to really look at our statements and see $100+ in interest per month. Credit card companies really are out to keep people in debt, and people like me keep buying into it. I sometimes wonder how much people look at their statements and wonder if everybody else is perfectly content to remain oblivious to how much money they're giving the big, bad banks every month without batting an eye.

My husband and I had a heart to heart conversation about money tonight. It's sometimes difficult for us to discuss because we both feel attacked, like the other person is blaming us for the financial mess we're in. The fact is, we both have our vices and we both see no problem with spending money on our vice, but hold the other person responsible for spending money on theirs. During our discussion, I told him that we needed to be on the same page to improve our financial position, and he said that we were on the same page. Only time will tell.

Day 3: Analyzing How It Went Wrong

As I've been writing the past few days, I've been trying to figure out where it all went wrong.

I still drive a 1994 Saturn that was probably paid off before I even got my first drivers license. My dad gave me his old car when I graduated from college. Before that, I had an old Grand Am, and before that a Dodge Dynasty. We bought a 2004 Chrysler Pacifica in 2007, which we are still paying off, and will be for the next three years. We pay every two weeks and refinanced last year to decrease our interest rate on the loan.

We bought a house that fell within our price range, based on our salaries three years ago. I've received raises since then, including a promotion. Our home owners insurance went up as the result of a claim for a flooded basement, and our property taxes went up because a school levy passed. Our monthly mortgage payment is still hovering around the same level as it was when we bought the house, but will go up when they reevaluate it this year.

I consolidated my student loans in 2005 to lock in a low interest rate. I took an additional disbursement after the consolidation though, so it has a variable interest rate, and I have a Perkins loan that I didn't include in the consolidation because I hoped to teach high school in an economically depressed area and hoped to have the loan amount forgiven. My career has gone a different route since that time and I don't believe it will go back that way. I found out today that the interest rate on my variable rate loan is supposed to go down again on July 1. I will probably consolidate again at that time, because I don't believe interest rates can go down much lower.

We do not use our credit cards wisely, obviously. We started out using them like you're supposed to; buying things and paying them off monthly before they could accrue any interest. Somehow though, they started spiraling out of control. We used them for a new couch and paid it off before any interest accrued, we did the same with some of our electronics on our Best Buy card, but then we used interest bearing credit cards to buy Christmas gifts, and a bed, and a vacation, and before we knew it, they were maxed out. We planned to use tax returns to pay these items off, but then the ac blew up, the basement flooded, our car got a flat tire and all of the tires needed to be replaced. It was sort of the "when it rains, it pours" phenomenon.

We're pretty much waiting for my car to blow up, and you can be sure that it will happen at the most inconvenient time. We spend a lot of money on things we don't "need"; premium cable package, cell phones, clothes for the kids, toys for the kids. We've already addressed that though, haven't we?

I have been trying to find ways to budget, but it seems like everything is a "need" to us these days. I went to pick up a few things tonight, just stuff for the week, and walked out with $50 of junk.

I just keep telling myself to keep swimming. One of these days, when we're debt free, I want to be able to go back to my husband and tell him, "Look what we did. Look how much we've paid off." Two nights ago, after writing my first entry that added up our all of our debt, I told him how much we currently owe. He said, "You can't do that. You can't include student loans, mortgage, and the car loan. Those don't count as debt."

It's all debt. And it all has to go.

Day 1: Where we are now- $179,727.57

I've recently embarked on a plan to pay off our family debt. Not so long ago, we were in a good place financially with very little debt, aside from my student loans.



In 2007, we bought a house, in a way that we considered to be financially responsible. We calculated what we were paying in rent, how much we were able to save over a six month period, and determined what we were willing to pay for a house. It was just before the housing bust began and when we visited a mortgage broker with our real estate agent, we told them what we were willing to pay. They told us that, given the interest rate we qualified for, we could afford $100,000 house.



The mortgage broker then used our income at the time, put it into a calculator, and told us that we could afford a $170,000 house based on our gross income at the time and pre-approved us for a $170,000 mortgage. My husband and I were pretty steadfast in not wanting our total mortgage payment, including payments, interest, PMI, taxes, and insurance to go over $1,000, so we rejected the $170,000 house our realtor showed us. We rejected the $140,000 house that we were shown.



In the end, we ended up with a house that cost us $112,900; higher than the amount we wanted to pay, but with payments still under $1,000. We came away from the home-buying process feeling pretty proud of ourselves.



I don't know when we stopped thinking logically about money, maybe it was the day we got the keys to our house and went to buy a couch for our living room, but now we find ourselves deeply in debt and I'm struggling to get us out.



We are fortunate in the fact that both of us still have full-time jobs. I am on salary and have actually been promoted and received raises in a time that many have not been so fortunate. My husband is an hourly employee, his wages have not increased in two years, and he's receiving less hours than he was before. We have two young children, and I have a shopping addiction.



Currently we have the following debt:














For those playing at home, that is $20,156.96 in credit card debt, $42,568.15 in student loan debt, a $8724.95 car loan, and a $108,277.51 mortgage, for a total debt of $179,727.57.

It's very depressing to see real numbers.

And so the journey begins.