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.

Hello 2012

I have told my husband repeatedly, 2012 is the year we pay off our credit card debt. We might not be able to pay off the student loans, cars, house, or signature loan, but in 2012, we are going to pay off our credit cards.

I have started taking some steps to pay them off. I opened a Discover Card and transferred some of my balances to it at 0% interest for 18 months. They each came with a 3% balance transfer fee, but the balance transfer fee on each equals one months interest, so I'm still not going to end up paying as much on the debt. After transferring as much of the balances as I could (I was not able to transfer them all because the credit line was not high enough), I drained our savings accounts so I can pay off the remaining balances on a couple of the cards. We will still have a pretty significant amount of debt accruing interest, but I'm trying to position us so that we can pay it off this year.

I was not 100% what the balances were on the credit cards as I set up the balance transfers so what I did was this:

Estimated that our Target card had a balance of about $3500, but was not sure of the exact amount, so I transferred $3000 to the Discover card and used a portion of our savings to pay the remaining balance.
One of our Credit Union cards had a balance of about $2100, but I wasn't sure of the exact amount, so I transferred $2100 and used savings to pay the remaining balance.
I used savings to pay off our Kohl's card and my Victoria's Secret credit card.

My husband's paycheck should be pretty big next week, since he worked the full week, plus got paid for an extra day for Christmas and for New Years, so 20 hours extra on top of the full two weeks worth of work, plus he'll be receiving a bonus (possibly two, depending how long it takes for them to pay the second). My bonus will come in February and it is pretty sizable this year.

I think between the two, we should be able to pay off all of our credit card debt that is currently accruing interest. We will have a Discover Card and two Best Buy cards that have debt that are accruing 0% interest, which we should be able too pay off throughout the year and should be, hopefully, credit card debt free by the end of 2012.

The biggest challenge for us is that we don't want to stop spending. We have real issues controlling our spending. Even as we've had the conversations as they've related to what we need to do to pay off the debt, we're still talking about taking a Disney vacation, which would have to be charged, and we still make random trips to the store whenever we're bored and just buy whatever. We still can't exhibit the will power we need to be successful in this resolution, so that may take a lot more time and effort than even I expect.

I have to accept that we will have slip ups and we will probably make mistakes along the way and we may even fail as the calendar flips to 2013, but if we can make strides this year, then it will go a long way in improving our financial position and getting us to the point where we are eventually debt free.

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 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 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 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.