Not So Mighty Merch

I was thinking about Dave Ramsey and specifically his investment advice. He recommends investing in good quality mutual funds (5+ year track record). He also talks about A shares and paying the front end load.

The reason I believe he deals with front end loads is because he advises using a mutual fund broker to help comb through your investments and use as a teacher when questions arise.

By talking about good quality mutual funds, he is talking about actively managed funds as opposed to index or passively managed funds. In the actively managed case, the manager will look at the S&P 500 (or some other index) and make bets (this will be a good year for consumer products but not banks). The passively managed fun will just buy all the stocks in the S&P 500 and keep the same weight of the securities in the S&P 500.

There are pros and cons of each. People say a good manager should be able to out perform their benchmarks but yet only 25% seem to do that in any one year. But there are some who do seem to do it year over year. There is also reason to believe that good manager leave firms to start their own hedge funds or investment firms.

But Dave's basic advice seems to be actively managed portfolios with experienced managers outperforming the market and using a good mutual fund broker to help navigate and educate you on the market and what you are buying.

He goes on to talk about 4 types of funds: growth, growth and income, aggressive growth and international. He says all should be equally weighted. He also mentions on his web site that if this is too risky, you can substitute a balanced fund for part or all of the aggressive growth fund.

So he is recommending a 75/25 US/foreign portfolio that has small, large and medium sized companies. Seems like a pretty well diversified portfolio from the stock side, but you will notice he doesn't have a fixed income piece.

I believe the second part of his investment strategy takes care of that. The second part of his strategy that he talks about is buying paid for investment real estate. You buy the investment property for cash and you have an income stream that should be fairly well adjusted for inflation. As inflation goes up, the rent you charge should also go up.

I will agree that there is probably more risk then in a government bond fund or investment grade bond fund. However, I believe that by investing in the real estate you can have a third party manage it and set up a nice inflation adjusted stable cash stream, and the cash stream would be more stable then a mutual fund's cash stream.

On the surface, everything Dave Ramsey talks about seems to be rather simplistic and overly simplified. When I start peeling back the layers, I generally feel that the advice he gives is pretty solid and well thought out.

I could argue in getting an annuity instead of real estate or dividing international investing into international and emerging markets. I could also argue that passive index is the way to go. You could also argue that his allocation is aggressive, and I would tend to agree, but replacing the fixed income portion with a real estate portfolio is an interesting spin.

But if you feel uncomfortable about investing or don't know where to start, I believe his advice at the end of the day is pretty solid and a good place to start. As you become more educated and confident, you can then tweak as you want.

I was thinking about an incidence that occurred a few years back. I was at a kind of holiday type party at one of my wife's friend's house. We are both about the same age and same stage in life. At the time, our finances were interchangeable. Be both had credit card debt, mortgage, car payments, school payments, etc.

We were both probably had the same stresses. The balance between work, friends, and family. Never enough money to pay for everything. Always wondering how the neighbors paid for that.

Up until this point, I was always able to out earn my bills but that was coming to an end fast and I didn't even know it as circumstances outside my control would force my hand.

In any case, at that party, we were talking and he said to me "Welcome to the crunch years." What he meant by this was for the next 15-20 years, the job was to survive. There was no way to get ahead. Just survive and then after college expenses, we could prosper. Then, there wouldn't be mortgage and school expenses, just the car loan.

And at the time, I agreed completely. It summed up how I felt to a T – just survive.

Fast forward today. At one point in my life, I thought him and I would be good friends with our families hanging out together on the weekends. In the few years, he has continued down the path that he was on. Mine has taken a different turn.

I may have been forced to alter my path, and in hindsight, I do find it to be a blessing.

In December, it will be a year since I paid off my last consumer debt. Looking back, I am in a place were I see a bright future as oppose to "just surviving". I am no longer waiting for that next promotion or raise.

It’s an interesting place to be.

By the by, don't forget to get your holiday budgets together. Christmas is less then 2 months away.

I thought I would follow up on a point I made yesterday concerning rebalancing. Everyone understands the reason for diversification and dollar cost averaging. Basically, don't put all your eggs in one basket and no one can market time.

Think of it this way. Over the past 2 years you had a top and bottom. The top occurred in October 2007 and the bottom occurred in March 2009. If you were out of the market from March 2009 to September 2009, you missed about a 37% return. If you had dollar averaged you would been buying all along the way. At the top, you would have been buying less shares in your mutual funds and the bottom you would have been buying more.

Now, I rebalance my portfolio twice a year – March and September. I could have picked once a year or and other 2 months in the year that are 6 months apart. I just like March and September.

With rebalancing, you need to have an allocation in mind. Let's say simply that you are 60% stock and 40% bond. In the above example as we approach September 2007, my allocations might be approaching 70% stocks and 30% bonds. The first thing to note is that my portfolio is riskier then my original allocation. In this case, I would sell my stock and buy bonds to get the allocation back to the original 60/40.

The second thing I am doing here is taking some profit and investing into my other asset classes. I am doing the opposite of chasing performance. I am buying into asset classes underperforming and selling the hot classes.

So, in March 2009, my portfolio might be 60% bonds and 40% stock. This portfolio is a lot more conservative then my original allocation. So, I sold the stock and bought bonds to get back to the 60/40 split. Last month, I rebalance where I sold so stocks and bought bonds because of the run up from March to September.

To illustrate my point about asset classes, I have attached the picture below. Noticed in 2002, the best performer was Lehman Agg (bond index) and the worst was Russell 2000 growth. And in 2003, Lehman Agg was the worst performer and the Russell 2000 was the best. By rebalancing in 2002, you would have been selling your Lehman Agg (your hot mutual fund) and purchasing Russell 2000.

The other great thing, much like dollar cost averaging, rebalancing on set dates takes the emotion out of your investments. It just something you do.



Source: http://www.swapmeetdave.com/Bible/Callan.htm

It's been awhile since I last updated in August. I am still updating my sidebar. I have maxed my 401 (k) contributions for the year.

I also rebalanced by portfolio. I do this twice a year (March and September). The theory is that I sell my winning sectors and asset class and purchase my under performing sectors. So in March, I reweighted my portfolio where I sold some bond funds and bought stock funds. In September, I sold some of the stock funds and bought some bond funds.

The easy way to achieve this is to buy a target fund that is close to the allocation you want.

I now used to my higher mortgage payments. It's nice to see over $1,300 going to mortgage as oppose to less then $500. I can see the balance going down and can envision it being paid off.

In February, I was asked (as well as all the consultants) to reduce my billable hours. It was a 20% decrease and I opted to take Mondays off. I was still living below my paycheck, but I knew that the larger financial goals were not going to be tackled. So, I have been generally in a holding pattern, taking a break, and enjoying the family.

Two weeks ago, we received word that we could go back to charging our normal hours. I actually increase my hours by 37%. So that coupled with the 401 (k) deductions being maxed, I have received a little boost in income.

Needless to say, it will all be going to furniture this month. But no new debt.

Also with this, I have found a new fire to start reviewing my other financial goals and start attacking them.

I am still getting use to the new mortgage. I am not use to seeing the large principal amounts that are being paid. This month, $1,382 went to principal. That's about 3 times the principal I was paying before.

Since I am paying more in interest then principal, it feels like I jumped to the back nine of a golf course. I can more easily see the end. It's still in the distance, but I am halfway there.

Next month, I'll top of the 401(k). I'll have some extra money to go towards some of my other goals. But, truthfully, all of it will probably be going to the new furniture and house stuff. But it does mean no new debt.

Not much of an update. Still on the straight and narrow. I have a few things to play catch up on like the 529s and maybe add a few more months to the emergency fund. Other then that, I'll me looking forward to 2010 where 529s and 401(k) investing will be on cruise control, I'll probably start putting money aside for a nice vacation, and start adding more principal to my mortgage payment. When I do that, I will probably add pay off date to my sidebar. I think it might be fund to see the date moving closer and closer.

What a month. We have started buying new furniture for the house and some small renovations (crown molding, lights, paint, etc.). It has been pricier then I thought, but we are not going into credit card debt or taking out a home equity loan. We are basically just cash flowing it. All the spare money in the budget that went to car payments, credit cards, and medical bills is going towards the house.

Hopefully in January of next year, I'll be back up to a full work week. This will allow me to have some extra money to pay down the mortgage or invest. So I think I'll just write out my thought process.

From a mathematical side, my payments are set in stone for the next 15 years and I am being charged 4.5% interest. There is no risk of my payments going up. If I were to invest in a risk free invest like cds or money markets, I might get 2% now.

Why am I only looking at cds and money markets? I am basically looking at riskless investments that are highly liquid. Why? My reasoning is that the mortgage is riskless liability. There is no risk of FNMA or the bank calling the loan and the payments are set in the contract, so I am attempting to compare apples to apples.

So, right now I believe I would be better off taking the extra money come January and paying off the mortgage. Now, if I look at the mass amount of debt the Fed is incurring and the monetizing of the debt, I do believe that the future inflation will be higher and the fed will need to raise rates.

If cds rise above 4.5%, I would be better off putting money in cds. Yes, I am not looking at taxes. I believe at the end of the day that taxes would negate themselves. I would save taxes on the mortgage interest but pay of the CD interest.

So, if interest rates on cds climbed to over 4.5%, I would probably switch to investing in cds.

With that said, there is another element of this. Not having a house payment will free up a large amount of cash flow on a monthly basis. And just getting rid of that nut is rather appealing.

So I would probably add a premium to my above statement. In other words, I would probably invest in cds if the interest rate was 5% or higher. Logically, it may not make sense, but I believe that I would have to earn a higher return to justify the higher financial stress I would feel with the mortgage.

Those are my thoughts at this time.

So I made my first payment on my new mortgage. I was used to putting $480 to principle a month. This month I put $1,376 towards principle. It was actually $50 more then the interest payment. Just think that I am now paying more principle then interest. What a great feeling.

I estimate that 9/2010 I will have caught up with my old amortization schedule, where the principal on the mortgage would be about $330k. So under the old 30 year, I would pay about $9k off the mortgage over 14 months. In the new mortgage, I will be paying off over $21k.

It just nice to see this pay down accelerating, feeling that I am making progress.

As for my other goals. I plan on completing my 401(k) contributions in August. I have about $4,000 in contributions left.

I am getting a little anxious to finally start contributing and setting up 529 plans for my sons. Granted, they are young (4 and 1), but these really need to get started. $18k may be a little too much to bite off this year. But, it's good to have goals that you need to stretch for.

So, if you are following the Dave Ramsey plan, I would be on step 4 planning on attacking step 5.

As for step 6, paying off the mortgage, I keep going back and forth. If I had a 6% 30 year mortgage, I would probably try paying that off quicker. But a 15 year at 4.5%.... I'll have the house paid off by the time the kids hit college, and 4.5% is really more like a 3% loan because the tax write off with the interest. It is getting to the point where you could argue that you could outperform the mortgage for very little risk.

On the other hand, getting rid of that monthly nut does reduce a lot of stress (not that I have a lot of financial stress) and frees up a lot of cash flow. It would allow me to start looking into opportunities that really interest me without regard to income.

Right now, I am kind of stuck where I may not be in my dream job but it does pay some hefty bills. So, when I look for jobs, income is first enjoyment is second.

But for that reason, I am leaning towards paying off the house early. Of course, I still have time. I don't plan on coming to a decision until the 529s are fully funded. Just mulling it over in the old mind.

Don't forget, we are half way through the year. Are you still on top of your goals for 2009? What are you planning to accomplish in the next 6 months?

July 1st is the first payment to my new mortgage. And for once, I am excited. It seems kind of weird. Some of you may be dreading pay your bills because you don't have a budget (or one that works) or you and your spouse aren't functioning as a team.

I like getting my paycheck every week and allocating my pay to expenses and other savings. I like tracking the spending and making sure the budget is working.

But most of all, I like updating progress towards my goals. I like updating my 401(k) savings and trying to determine when that will be maxed; and most of all, I like updating the principal on the mortgage and watching that go down.

Sure I like having a plan and executing on that plan. But even more, I like watching goals being achieved, perhaps even more then the achievement itself.

As for my goals, I'm moving forward. The 401(k) will be finished around the end of August, then I'll be able to achieve more of my goals. One of the big goals I am looking to start is to start saving for college for my kids. I have a lot of time (14 years before the oldest hits college), but why wait and make excuses.

What a month!! The big thing I accomplished this month was the refi. The net of the refi is that I will pay it off 11 years early, I will be putting $1,000 more towards principal a month, and it costs me less then $700. If you have a good credit score, equity in the house, and a job; I would look at refinancing.

I also noticed that I have contributed $10,600 to the 401(k) already his year. Looks like I'll max the 401(k) in August or September. Just in time for preschool bills and holidays. Maybe I can also start paying down the principal on the mortgage. We'll have to see how the year shapes up.

Speaking of that, I'm still only working 4 days a week. We haven't had any more layoffs since March and we have had a new hire. I think in a quarter or two I'll be able to work 5 days a week. But, it's just a feeling. In the meantime, I'll work 4 days a week and enjoy the family.

This brings me to another interesting thing I noticed over the past month. I have become more content. It wasn't like a switch, I think it was more a gradual thing. It's kind of like that story about the grasshopper and the ant. The ant works all summer and has food to last the winter and the grasshopper just wastes the summer away.

Last year, I had the nose to the grindstone reducing debt. This year I saved a 3 month emergency fund. I still budget and live below my means. I am just sitting on my pile of dirt enjoying the sunset while everyone around me is feeling all this financial stress and uncertainty. It really is surreal.

I think what has really started to click is that it's not what you make but what you save. I can't stress that enough.

And remember, get you will done and get life insurance, if you haven't already.

Wow!!! What a month so far. Things are finally calming down. I had a few interviews in New York and California. At the end of the day, I like where I am currently and where I am heading at the moment.

By paying off all my consumer debt and medical and having an emergency fund, I have this sense of content in my life. I no longer feel like a hamster on a wheel, trying to out earn my spending. For those of you where I was, it is worth the struggle and sacrifice to be debt free.

The way I would explain it is you are at the bottom of a hill and there is a path going up the hill. It is heavily wooded, sometimes you can get a glimpse of the sky but the view is obscured. Its buggy at times and dark, sometimes you slip on the loose gravel. When you get to end, you see this spectacular scenic view and for that moment you feel in awe of what you have accomplished. That's what getting out of debt felt like to me.

Now, I am back at the bottom of that hill and looking at a much steeper longer journey – paying off the mortgage. At first like the last hill, it looks daunting. I can't even see the top. I am standing at the bottom in the shadows and am in awe, is it too high, am I ready for this, maybe I can just rest a little more?

Then my inner voice speaks up, "What are you waiting for? There aren't any escalators here."

And with that I continue my journey.

(My refinance went through. My mortgage will be 353,000 at 4.5% for 15 years. I have shaved off 11 years and around $267,000 in interest.)

It has been a busy first third of the year.

So, basically, I have completed my emergency fund for the moment. It is currently 4-5 months in size. My wife had competing goals furniture and an emergency fund of eight months. The compromise was that we would bring it up to 4-5 months and if I were to lose my job, she could work full time and we would be able to stretch the EF to probably at least a year.

My retirement savings is just chugging along. I am at 50% of my 401(k) being funded. I'll probably have this finished at end of September. After this and the furniture, we will probably start move to college savings and reevaluating if we want more money in the EF.

Next week, I will close on my refinance for my mortgage - 4.5% for 15 years. I know there is disagreement on the best type. Maybe I should have gotten a 30 year and paid it off like a 15 year. This would have given me more flexibility and I could have bought points to have the same interest rate as my 15 year.

I think the real reason is that I got a taste of being out of debt and I like it. I dream of my life without a house payment and think of all the things I could do with that extra money. I also think of how much freedom I can have. I would no longer need a job to pay the mortgage. I could pursue my interests and be less worried about compensation.

Also, I really do want to get into real estate and charity without a risk to my family. And I really believe that pursuing some of these endeavors really means having no house payments.

Just the risk to family of having a house payment plus some mortgage payments on investments properties seems more of a risk them I am willing to take. I do fully understand leverage and good versus bad debt. I also believe you don't get involved with something unless you're in for the long haul

If you didn't have any debt or a house payment, how would that change your life? Your family's?

It's just become a very powerful idea from me.

Well, it's been a long time since I wrote on this blog. At work, I am still at 80% of the hours I was working last year. I am currently debt free except for the house and am still tracking and updating my goals.

For those of you struggling with debt trying to get out, remember the best things in life are never easy. We all lose hope and focus. It's what you do after you lose focus and get knocked down. Remember perseverance is the secret to success. As Yoda said “Do or do not... there is no try.”

I have been debt free now for 3 months. During this time, I have replenished my emergency fund and have continued to increase my retirement. For those following Dave Ramsey's baby steps, that puts me on step 4. I am also in the process of refinancing my mortgage to 4.5% from 5.5% and from 30 years to 15 years.

But how does it feel to be where I am? Out of debt with and emergency fund, saving for the future?

I think the biggest thing is my attitude is more positive and losing those negative emotions. When I was living paycheck to paycheck with CC debt, 2 car payments, medical debt, etc.; I was jealous of what people had and I didn't. I was angry I wasn't making more money. I doubted myself and it wore on my relationship with my wife.

The process of getting out of debt caused my wife and I to have truly honest communication and set goals. Sure, at the beginning, I was embarrassed trying to keep up the illusion of a successful life. We had to look beyond the material things and during the journey the jealousy, anger, and doubt melted away to be truly successful. The journey of getting out of debt really caused me to focus on what I do have and prioritize what was really important to me (sounds so cliché).

Now getting back to the biggest change I see in my life over the past year and a half. I have started noticing that differences in a lot of aspects of my life and there seems to be a snowball affect. The positive attitude has led to a better relationship with my family, it has allowed me to operate with more integrity at work (I don't fear losing my job), and able to take criticisms a lot better which causes me to continually think about what I need to do better.

So for those of you in the middle of the process and doubt is starting to creep in because Murphy came for a visit, just remember this is part of the process. Look back to where you were and look forward to where you are going. Persistence is the only way to achieve your goals and the struggles and fight WILL make you a better person.

Wow. I have been away form the site for the last few weeks. My hours have been cut here at work so I have been putting the resume and cover letter together. I have also been doing a lot of networking.

More just setting myself up for Q3 or Q4. I have a non-compete that ends June 1st so I can compete directly with my old employer. So now is the time to just start reaching out and networking with some recruiting firms.

There is an old saying "Never burn your bridges." At one time, I had over 35 people reporting into me and most were consultants. I would often deal with recruiters via hiring and firing people. I always tried to be fair and honest with all parties involved.

Now that I am on the other side of the fence, a lot of the firms see my resume and remember how I treated them (even if I don't know who they are). My advice to people especially just starting their careers is to remember always treat people fairly and honestly and you will be remembered. You will stand out from other people.

Anyway back to the update.

My hours have been cut by over 25% and logically my paycheck too. The good news is that I am still living below my means,. I am still on track to max the 401(k). I am also able to save a little.

None of this would have been possible if I wasn't out of debt.

My current goals are to max the 401 (k) and put an additional $30k in my EF. So far I have $3,600 in the 401 (k) which is a great start. I also have almost $6,000 of the $30,000 for the EF saved.

I have also been looking at refinancing my mortgage. I currently have a 30 year at 5.5%. This weekend I just received paperwork for a 15 year at 4.5% with 0 points. My mortgage broker wants to wait because the market is going in our favor. So, I wait.

So at work, they brought all of the consultants into a room. I was thinking "this ain't going to be good." I hear from my friends who got laid off from State Street, Lehman, Fidelity, etc. So I figured they were going to prep us with the first round of layoffs.

I actually wasn't too worried. I had figured I could last through at least 3 rounds. They decided to do a more socialist move that results in my billable hours being cut by 20%. So in essence, I am done to a 4 day work week.

Surprisingly, I was quite calm. I mean I had to tell my wife that it may mean we have to cut new furniture out of the budget. But since I have been on a budget and paying off debt, we can cover all the expenses and still max my 401(k) and save a little. All and all, not bad in my industry.

I think the real thing that since I paid of all my debt, right now, this is an inconvenience and not a disaster. I think this just further demonstrates the risk that debt can have in your life.

As for my goals, I am pretty happy that I have saved $4,204 in January for the emergency fund. I am 14% towards my goal of adding $30,000.

I have also socked away $2,529 towards my 401(k). Or about 15% done with that goal.

So all and all – things could me worse. But if this is as worse as 2009 gets, it won't be that bad.

I want to thank everyone for the kind words the other day. The purpose of the blog entry was for me to just kind of look back in the road and revisit where I was and where I am going. The second part was maybe to offer people who are traveling down the same path the opportunity to catch a glimpse of what’s ahead and maybe just reaffirm the decisions they made.

As a whole, I don't think my story is very different then a lot of people. I do think that today's society values the individual so much that the concept of marriage, sacrifice, and true teamwork are left by the wayside.

By forming a team with our spouse and treating them as equals with valid ideas and working through compromises, I believe that a marriage is truly greater then the sum of there parts. My wife balances my risk taking and offers me strength in times of weakness.

Did this happen overnight? No, trust is something that has to be earned through constant action. And I do trust that my wife has the family's interest at heart.

So I went back and starting reading some of my old entries. I like to think of where I was and how I got to where I am now. That got me to thinking about how my attitude and general outlook has changed on things.

October 2007 – The breaking point.

Prior to October of 2007, I was keeping my head above water, living paycheck to paycheck. I had some credit card debt, 2 car loans, and a mortgage. I was spending more then I made but was making payments on everything. We were going out to dinner a lot and blowing money on who knows what.

In August, my second son was born. A few days after we took him home, he started to have seizures. We took him to the emergency room and he spent the next 10 days in the NICU. They ran every test (blood, chromosome, ekg, etc.) and had specialist from Boston drive out. I turned out be a gland issue that corrected itself in the following few weeks.

I had insurance so I was thinking maybe a small bill but nothing too bad. Well August comes, the charges start coming in – over $30,000. I fight with the insurance company, I fight with the wife. The wife says we need the Cadillac of insurance. Cost - $1,250 a month. The hospital says I need to start paying them at least $1,500 a month. Christmas is around the corner.

Feelings of despair start to creep in. I'm in a hole and I don't know if I can get out. Every time I hit bottom, there seems further to go.

December 2007 – Starting to gain control

Late November, I created my first budget for December with the wife. It was a chore. There was bickering back and forth. We both made sacrifices and agreed to lifestyle changes.

The furnace broke in December, but I had money in the budget for it.

Over the next few months, unexpected expenses popped up but the budget was starting to get easier. I also paid off a big chunk of the medical and had a payment plan of $500 a month for the rest of the balance.

I was feeling control. Something that hadn't happened in a long time. I knew what was coming in and where it was going. Also, the bickering with my wife became less. I was still standing in a big hole, but I was now confident I was at the bottom or very close.

March 2008 – All pistons firing

When March rolled a round, the budget was easy. I had kept tightening it up. I actually trusted the budget and my funding plan. My two big expenses were health insurance and mortgage. They combined to $4,000 a month. If I could put $1,000 a week away, I would have all the money I would need for these. The funding plan was really the key. What part of which paycheck funded which expense.

I was also able to start looking at my goals and start projecting what I could get accomplished in 2008. I revamped my goals going from getting rid of one or two debts to getting rid of all my debt (but the mortgage).

I hadn't really noticed, but the hole was starting to fill up. Not a lot, but very slowly. I started to feel hope. In six months, I went from despair to hope.

June 2008 – Sucker punch.

By June, things were going so well I started planning a big birthday party for the wife. We had been sacrificing for 8 months and it was time let loose just a little and then buckle down and finish off the debt.

Well , no journey is smooth sailing. In June out of the blue, I received a medical bill from August of 2007 for $4,400. It was like someone sucker punched me. All my momentum form the previous months was gone. This threw off all my goals!!!

Sometimes you just have to look at yourself in the mirror and push through. That's what I did. It wasn't fun. I had goals that needed to be re-projected.

December 2008 – Big sigh of relief

In December, I paid off the last of my debt (except the mortgage), fully funded my 401 (k), got a will, and got term life insurance. Not only did I breathe a huge sigh of relief but I felt all this stress just disappear.

There is still a long way for me to go in my journey, but the turnaround in my attitude and outlook is remarkable. For those of you out there, I have been there when there is no hope and no control in your financial life. I have been just holding on. You can get through this. You will be tested and Murphy will show up. It's not easy and requires honesty, communication, and extreme sacrifices to your lifestyle.

The only thing I can tell you is that it's worth it.

First mid month update for 2009.

I have a lot of goals on the left and there are 2 basic approaches I could take – the shot gun approach or the laser approach. Most of us don't have enough financial leeway to accomplish all of our goals at the same time. The shotgun approach is trying to hit all the goals at the same time with little progress being made on any. I don't know about you, but I get a little frustrated seeing my goals progress at a snail's pace.

I prefer the laser approach. I like the idea of focusing my resources, hit the goal, and saying "what's next".

Last year, when I was setting up the goals, I was inclined to but a little money on each. But now I decided to hit a few and try to quickly progress through them.

Why the change? Well, it really worked well for my wife and me in 2008. Also, my contract has been extended to end of March, so prioritizing the EF seems like a great idea.

So right now, I am focusing my resources on the EF and maxing the 401 (k). All other ones are secondary at this point.

So far, I have saved $3,319 out of a total of $30,000 to top of the EF. I divided in to smaller increments so that the wife and I can feel we are accomplishing things. Most of the $3,300 was saved in December. I was debt free in mid December and started throwing everything extra at the EF.

The second thing I am currently funding is the 401 (k). I currently have $769 saved out of $16,500. Seems like so little, almost not worth mentioning. LOL.

The last thing I am working on is refinancing my mortgage. I currently have a 30 year at 5.5%. I am looking at switching to a 15 year at 4.75%. Will see how that goes. Rates spiked up a little at the end of last week, so I am just waiting for them to go down.

Since I am hourly paid, my paycheck has been less over the holidays due to less hours. I am bringing home about 70% of what I normally do. Also with FICA and 401 (k) contributions coming out of the paycheck again, I have had to redo the budget a few times. By end of February, the budget should once be stable again and I should be able to project better when goals will be hit.

And for those keeping score at home, I am starting to budget for new furniture and rugs and stuff. So, yes the wife won.

I was thinking about this the other day. And I was thinking "is this really true?" So, I started going through my old budgets.

My big fixed costs were the same from month to month (mortgage and health insurance). Even my variable costs were similar (like food).

But the biggest difference was seasonal costs: Paying for preschool for Sept – May, paying for swimming lessons and camp in the summer, birthday presents in late spring, holidays in November and December., utility costs (I don't use heat in the summer), etc.

Also since I am hourly paid, my paychecks fluctuate in the number of hours I work. Over the last 2 weeks I have worked 70% of the hours I normally work. Also, the last paycheck included FICA, 401 (k) contributions, and deductions for health insurance (last year I paid my own from month to month).

In April, I'll get money back for taxes or pay more. This will also have an affect on my income along with any vacations or holidays.

The answer for me is pretty obvious. Since expenses and income can change from month to month, the budget is in constant flux. Sure, there are parameters. I mean my budget isn't moving $10k a month but it could move a couple of thousand, especially a month with an extra paycheck.

I usually budget on a weekly basis. It's easier for me because I get paid weekly and divide my pay into envelopes. I used to have to put 33% of my take home into the mortgage and healthcare envelopes, 33% into debt reduction, and use the other 33% for household expenses. This was pretty much set for the last quarter.

January is a new year. I am still doing the weekly budget and of course change in the budget is constant. It might take me a little time to adjust to the budget again and then it will stabilize for a few months. But in the end, the goal is to live below what I take home and not have any of my envelopes in the red.

So far, so good.

This may be a little early but I just got my last paycheck for 2008. It's been a little over a year that I have been on this site. The thing I find most interesting about this site is the helpful comments, the encouragement, and thoughtful alternative. Even if you disagree with people, their views, etc, this site continues to offers disagreement in a respectful way.

You also have a community here where people try to elevate themselves above petty jealousy and try to be truly happy for you and what you accomplished.

Enough of that and on to the review.

My original goals for 2008 were:

1) Pay of $6,000 in CC by May 1st
2) Pay of one car by August 1st (currently $5,700 is owed and last payment is 2/09)
3) Invest $10,000 by year end in Taxable assets
4) Invest $15,500 in 401(k)
5) Review and reallocate (if necessary) retirement funds by end of Q1

They quickly mushroomed to these:

1) Pay off debt (except mortgage) by October 1st
. a) Pay off CC
. b) Pay off Car
. c) Pay off Car 2
. d) Pay off wife's braces
. e) Pay off son's medical
3) Invest $15,500 in 401(k)
4) Review and reallocate retirement funds by end of Q1
5) Will by end of Q2
6) Life Insurance by end of Q2

MOVED TO 2009
2) Invest $15,000 by year end
7) Save $4,000 for college

Could I have done more in 2008? Probably. But as people here point out, you have to find a balance in your life with your family.

All and all, I experienced huge changes this year. I am out of debt (except for the mortgage), living below my income, living on a budget, have great communication with my wife, and truly feel as a team.

For people starting this journey, I think the biggest two things to start is to be honest and non-judgmental. What does this mean? You have to be honest with yourself and spouse about how much debt, expenses, and income you have. That second thing is not to blame each other for the problem. The truth is the both of you are to blame and you both have to work together to get out of this mess.

If you can do those 2 steps, the rest are easy.

The next step for me and my wife were setting up goals and the budget. We also set up some ground rules for the budget. Any changes to the budget after it was set, we would both have to agree. If one of us didn't agree, the budget didn't get changed. The first few months were tough on the budget. We forgot this expense or another. I actually had a line item called "Things I forgot to put on the budget" and I would fund this with a couple hundred bucks.

Once the budget started settling down, we could really start tracking our goals and looking at the progress. At this time, our relationship started to really change from the universe revolves around me to us. We were both making sacrifices for our common goals.

We still have a couple of common goals left, but soon we will be prioritizing are own goals into the mix. She wants new furniture and I want a riding lawn mower and shed. 2009 should be interesting as our individual goals come into the mix.

And thanks again everyone for your encouragement, thoughts, and advice. The journey hasn't ended. It's just starting.

Mirror: People walkin' around everyday
Playin' games and takin' scores
Tryin' to make other people lose their minds
Well be careful you don't lose yours!

Me: Huh?!?

Mirror: Oh freedom (freedom)
freedom (freedom)
Oh freedom
Yeah freedom (yeah)

Oh freedom (freedom)
freedom (freedom) freedom
Oh freedom
Yeah freedom (yeah) freedom!!
Hey - think about it
You! think about it

Me: One more time!!!!!

Mirror: Oh freedom (freedom)
freedom (freedom)
Oh freedom
Yeah freedom (yeah)

Oh freedom (freedom)
freedom (freedom) freedom
Oh freedom
Yeah freedom (yeah) freedom!!
Hey - think about it
You! think about it


And with that, I am debt free except for my mortgage.

Source: http://uk.youtube.com/watch?v=qE41YPdPuis or

http://uk.youtube.com/watch?v=J0y2dDlFmLg&feature=related

With the government on the brink of rescuing the U.S. auto industry, we have learned that the Treasury Department is drawing up plans to bail out Christmas. "We have reason to believe," said a person close to the matter, "that without an immediate capital injection, Santa Claus will fail before December 24." Mr. Claus could not be reached for comment.

Government officials are said to be concerned at the risk that the collapse of Santa Claus could pose to the nation's intricately related system of holiday happiness. Though a failure by Santa Claus poses the largest systemic risk, the government is also prepared to step in to bail out Christmas trees, caroling parties and mistletoe producers.

President-elect Barack Obama has been briefed on the initiative, and through a spokesman was quoted as saying, "I'm OK with bailing out Christmas."

Inside Treasury, some officials privately worry that such a precedent could result in the nationalization of Santa Claus, leading to similar calls for help next year from the Easter Bunny and even Valentine's Day. Treasury Secretary Henry Paulson personally concluded, however, that "Santa Claus is too big to fail."

Indeed, the situation was considered sufficiently dire that Mr. Paulson agreed to travel to the North Pole to speak to Mr. Claus. A Treasury official with knowledge of the situation agreed to provide this reporter with an account of the meeting. "Secretary Paulson," this person said, "has had a lifetime belief in Santa Claus and firmly supports what he represents."

Last Saturday morning, Mr. Paulson flew by government plane to meet with Santa, though a spokesman would not disclose the exact location of the famed toymaker's North Pole workshop. Mr. Paulson's plane landed on the polar ice cap, and then the Secretary was taken the final 300 miles in a sleigh pulled by Santa's fleet of reindeer. In deference to Mr. Paulson's unfamiliarity with sleigh-riding at altitude, Mr. Claus ordered his assistants to bring the Treasury department party overland.

The picture of Christmas painted for Mr. Paulson by his rosy-cheeked host was bleak.

Apparently Santa's difficulties in "producing product," as Mr. Paulson described it, originated in a poorly understood aspect of the jolly elf's current operations known as "Christmas list swaps," or CLIPS.

Mr. Claus said that going back as far as anyone can remember, Christmas lists had been handled in the traditional manner. Children would draw up lists, which were left out in the evening with a glass of milk for collection by Santa's elves; other lists would be exchanged with siblings, cousins and loved ones.

Several years ago, according to a participant who requested anonymity, some of Santa's elves were contacted by representatives from Bear Stearns and Lehman Brothers, who persuaded the elves of the benefits of an elaborate scheme of Christmas-list securitization.

As outlined to the elves, the idea worked like this. Brokers would break each item on the Christmas lists into separate pieces and repackage the requests as securities, using a formula known as a "benevolence diffusion algorithm." This would guarantee happiness for everybody in the world on Christmas morning. No one would lose.

At first Santa was doubtful of the plan. Mrs. Claus was especially skeptical, pointing out that in her experience with baking Christmas cookies, a seemingly foolproof enterprise, a failure rate of 5% was not uncommon. "There is simply no historical data to suggest the whole world can be long Christmas," Mrs. Claus said. "No scheme will ever rid the world of bad little girls and boys."

According to a person with knowledge of the North Pole couple's affairs, Santa received a call from a Franklin Raines, who identified himself as the president of a "government sponsored enterprise" known as Happie Mac. Santa apparently became convinced that Happie Mac sounded similar to his own business of free giving, and so agreed to the proposed system of Christmas list swaps.

Difficulties emerged when a CLIPS salesman from AIG called a senior elf to say that a large number of the Christmas list swaps had ended up in the hands of Russian billionaires with links to former Russian president Vladimir Putin. "These plutocrats don't even believe in me," Santa was heard to say as Mr. Paulson's sleigh rode out of sight.

On returning to Washington, Mr. Paulson's plan to bail out Christmas immediately ran into problems. Fed Chairman Ben Bernanke, whose great-great uncle is rumored to have been an elf, pointed out that Santa Claus might not qualify for a TARP loan. According the Fed's analysis: "Santa Claus belongs to the people. Any bailout must pass through the appropriate committees of the House."

House Speaker Nancy Pelosi, notwithstanding that she is the mother of five children, has reportedly told Mr. Paulson that Congress will bail out Christmas only in return for a promise from Santa Claus to "go green." Speaker Pelosi said the Environmental Defense Fund has long complained about Santa's eight tiny reindeer and that Mr. Claus would be asked to appear this Tuesday before Rep. Barney Frank's committee with a plan to reduce the sleigh's carbon footprint.

With only 13 days remaining for a Santa rescue, Mr. Paulson and Speaker Pelosi are said to be discussing the appointment of a Christmas czar. The leading candidate is Oprah Winfrey

Source: http://online.wsj.com/article/SB122895773035096657.html

Just a couple weeks left before we close out 2008. So this quarter was to concentrate on three things: 401(k) maxed – DONE, Pay off all consumer debt – almost done, and no new holiday debt – so far so good.

The medical debt keeps shrinking. I have $768 left to fund before I send in the check to Amex. I'll probably have it all funded this Friday and will send the check this weekend.

The closer we get to the end of the debt, the more excited my wife gets. For most of this journey this year, she was happy to just review the monthly summary reports, ask for slight adjustments, and manage a few of the categories (groceries, household items, and clothes).

Now, she wants to know what day everything is going to be paid off. She is telling all her friends and family. She's ready to really start attacking other goals next year like the EF and college accounts.

The real part of the journey I enjoyed this year is the honest and open communication with my wife. When we started last year, our marriage was very strained. I would yell at her about how much she spent on groceries and she would yell at me about how much I spent for lunch and breakfast every day.

Once we came together about the budget and started to respect each other and really listen to what is important to each other, the financial sacrifices didn't seem like a big deal.

So right now I am looking at the close of 2008 meeting most of my goals. I have our goals for 2009 set and approved by my wife. I am looking forward to spending the holidays with by family (not worrying about if I have enough money in January to pay for this month) and continuing this journey next year (getting closer to my wife and accomplishing more of our goals together).

As an aside, I blogged about having long term 5 year goals and all my short term goals move towards these goals. With that in mind, I have added two other goals. These goals are really to start preparing me for 2010. In 2010, I would like to start saving up to invest in real estate and start a foundation.

So, 2 new 2009 goals are to educate myself and start preparing for this. I would like to put 10% of my salary (right now, I don't know gross or net) into a foundation for charitable giving.

This really came about in a couple of places. Having two sons, I want to instill onto them an idea of charity. I also want it to be something they can be a part of – contribute to, chose the charity, and help with the investments.

At this point, I don't know enough about foundations to know if it is even feasible to start a foundation with less then $10,000.

In any case, I'll probably be asking for some thoughts on this in 2009 as I prepare for 2010.

Looks like you can stop searching for change and still outpace treasuries

~~~~~~~~~~~~~~~

Dec. 9 (Bloomberg) -- Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.

The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.

“It’s the year-end factor,” said Chris Ahrens, an interest-rate strategist in Greenwich, Connecticut, at UBS Securities LLC, one of the 17 primary dealers that trade directly with the Federal Reserve. “Everyone wants to be in bills going into year-end. Buy now while the opportunity is still there.”

The benchmark 10-year note’s yield dropped seven basis points, or 0.07 percentage point, to 2.67 percent at 3:10 p.m. in New York, according to BGCantor Market Data. The 3.75 percent security due in November 2018 gained 21/32, or $6.56 per $1,000 face amount, to 109 12/32. The yield touched 2.505 percent on Dec. 5, the lowest level since at least 1962, when the Fed’s daily records began.

The two-year note’s yield fell nine basis points to 0.85 percent. It dropped to a record low of 0.77 percent on Dec. 5.

If you invested $1,000 in three-month bills today at a negative discount rate of 0.01 percent, for a price of 100.002556. At maturity you would receive the par value for a loss of $25.56.

‘Horrible Year’

Indirect bidders, a group that includes foreign central banks, bought 47.2 percent of the four-week bills, compared with 31.7 percent in the prior auction. Primary dealers bought 52.1 percent, while direct bidders such as individual investors purchased 0.7 percent.

“It’s been such a horrible year people want to show they have the good stuff on their balance sheets, not the bad stuff, but with yields already so low it pushes these even lower,” said Theodore Ake, the head of Treasury trading in New York at Mizuho Securities USA Inc., another primary dealer.

The rate on four-week bills peaked at 5.175 percent on Jan. 29, 2007. The government began issuing the four-week bills in July 2001, according to Stephen Meyerhardt, a spokesman for the Bureau of Public Debt in Washington. The bills are intended to reduce the government’s reliance on irregularly issued cash management bills.

Meyerhardt wasn’t aware of the three-month bill ever trading at a negative rate before.

Housing Slump

Treasuries of all maturities have returned 11.4 percent this year, the best gains since all of 2000, according to Merrill Lynch & Co.’s U.S. Treasury Master Index. That compares with a 39 percent loss in the Standard & Poor’s 500 index, including reinvested dividends.

Bonds have surged as the U.S. housing slump pushed up the cost of credit globally, causing equity markets to tumble. The world’s biggest financial companies incurred almost $1 trillion in writedowns and losses since the start of last year, helping push the major economies into recession.

The National Association of Realtors’ index of signed purchase agreements, or pending home resales, fell a less-than- forecast 0.7 percent to 88.9 from a revised 89.5 in September, according to a report from the group today in Washington. The median forecast in a Bloomberg News survey of 35 economists was for a 3 percent decline.

Futures contracts on the Chicago Board of Trade show odds of 98 percent the Fed will lower its 1 percent target rate on overnight loans between banks to 0.25 percent on Dec. 16. The probability was 38 percent a week ago. Rate predictions based on the futures are not considered as accurate as once were because the Fed hasn’t sought to bring the daily effect rate to the level of its target.

Mutual Funds

Money-market mutual funds that buy mostly Treasuries are starting to turn away new investors as the record low yields pull down returns for shareholders and squeeze managers’ fees.

At least three Treasury money-market funds run by JPMorgan Chase & Co., Evergreen Investments and Allegiant Asset Management recently stopped taking outside cash, according to Web site notices and regulatory filings. Barring new customers protects returns for investors already in the funds because managers don’t have to buy as many new Treasuries with yields lower than current holdings. Higher fund yields also prop up management fees.

The record low borrowing costs for the Treasury may turn out to benefit President-elect Barack Obama as he faces a widening budget deficit while pledging to embark on the biggest U.S. public works plan since the 1950s to stimulate the economy.

The U.S. is headed toward $1.5 trillion in debt sales as the budget deficit approaches $1 trillion in the 2009 fiscal year according to Bank of America Corp. The deficit this year was $455 billion.

The Treasury will sell $28 billion of three-year notes tomorrow and $16 billion of 10-year notes the following day. The $44 billion total is about $3 billion more than expected by Wrightson ICAP LLC.

To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net; Cordell Eddings in New York at ceddings@bloomberg.net

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aOGXsWKEI6F4&refer=worldwide

I thought I would just comment on debt in general and then Dave Ramsey and his steps.

Debt is neither inherently evil nor good. It is just a financial tool, but it is a double edged sword and can cut both ways. Many people view a student loan as good debt.

In some cases, it is not. If I borrow $60k for college and come out making $30k a year was it worth it? This is the risk aspect. In essence, when you are taking on student loan debt, you are betting that your future earnings will greatly exceed the debt.

If you were laid off or unemployed, you would still need to service your debt. This is where the risk really becomes evident. You took a loan that must be repaid for a better job that you are unable to get. (With hardship deferrals, this might not be the greatest example but I think you get my general point.)

With debt, you also need a larger emergency fund. You need enough to pay the minimums and your other expenses. In my case, last year, I was paying about $1,700 a month to service debt on medical, cars, and braces. For a six month emergency fund, I would need to have an additional $10k just to stay current on the debt. If I were to add in my mortgage of $2,042, the emergency fund goes up another $12,252. So, my example, over $22k of my 6 month emergency fund is just to service debt.

What do I truly need to survive? Food, utilities, transportation, insurance (health at least) – total cost might be $2,500. Or a $15,000 emergency fund. Or about 60% of my emergency fund is used towards servicing debt.

The interest on the above debt ranged from 0% - 4%. In fact, the highest interest rate I paid this year was 5.5% on my mortgage. Some people would say well you could invest that and beat what you are paying on the interest.

Also, this year might be a good example where it would have been hard to beat 4%. Sure, this year might be an anomaly, but my point is that you can't guarantee that you can beat the interest on your debt.

More importantly, I didn't have the money at that time. And that is the real reason for the debt, and I suspect this is the reason that most people go into debt in the first place. In my opinion, the whole investing and taking out debt argument is a way for most people to rationalize the debt.

Switching gears and looking at Dave Ramsey. I believe his true goal is to free up your cash flow as quickly as possible and use that towards wealth building. With that in mind, the issue I have with Dave Ramsey is that he is short on investment advice. His goal, I believe, is to bring you to a spot where you can start building wealth.

If you look at his first three goals, they are really to set up an emergency fund and pay off all your "small debts" (everything but the big mortgage or big second mortgage). His argument is that in the long run, it doesn't matter if you miss a year or 2 of saving for retirement or college for the kids.

His other point is that when we are first starting this journey, most of us don't have enough extra at the end of the month to do everything – save for an EF, pay of debt, save for retirement, save for college, invest. So, his method is a path that helps people focus their resources and quickly move to free up cash flow.

Personally, I have been paying debt and maxing my 401(k) contribution. In retrospect, I would have been debt free at the end of September and had an additional 3 month of EF saved. In hindsight, I probably would have been better off following Dave Ramsey's advice. I definitely would have had less stress.

And next year, I will be attacking 3 goals at the same time – EF, 15% to retirement, and college funding. I will be doing these all at the same time as well. By the end of 2009, I'll be in the same please regardless of which way I went, but I do think following Dave Ramsey's plan would have reduced my stress further.

Dave Ramsey also makes some exceptions to his rules that I think are good. If you are in danger of being laid off or your wife is expecting, stop paying off debt and start saving everything. Once these events past, throw everything saved at debt and then proceed.

So to sum up this rambling, debt is neither bad nor good. It is merely a tool. The real issue is how we use it. In the example of student loans, is it a way to increase our earnings at a reasonable cost?

Do we really do an analysis on how we use debt? Do we look at risk and added stress, opportunity costs, and the future payoffs of our decisions now?

For most of us, we use debt to fund a want we want now. We buy cars by looking at the monthly payment without thinking about what we are giving up by making this choice. We fund things on credit cards and carry balances month to month, wasting money on fees and high interest rates.

As for houses and student loans, the issue is that you don't want these debts to be a burden and you need to look carefully at these debts.

As for Dave Ramsey, I think that his steps of budgeting, eliminating debt, and savings for college and retirement are pretty solid. He gives you a step by step approach on how to focus and gives you tool that help you see quick progress.

Some people say to pay off the highest interest rate first. Mathematically, it does make sense. In truth though, you might save a few months. If you look at your credit cards which probably have the smallest balances and the highest rates, you might have a difference of 5% per card which is about 0.4% monthly difference. If you have zero percent and 30%, the interest difference per month would be 2.5%, which I think would be the most extreme case.

But you need to also take into account what your goals are. Are you welling to give up your life in the short term to pay off debt or would you rather slowly pay off your debt and enjoy more of your life?

For the first, Dave Ramsey's plan works. For the later, you are better off saving a little for retirement and building an EF.

The real issue and the end of the day is: What are your goals?

A few days I posted that my wife was going to call the hospital and just put the balance on the credit card. The hosipital told my wife it would take a couple of days for the charge to go through.

Before we charged the amount I knew 2 things would go through our minds– a) we have charged more then we currently have saved (I am currently about $1,800 short) b) we have $10,600 sitting in a bank account that's will soon be gone.

The little bit of fear was just our subconscious self saying "are you sure you want to do this?" In other words, a gut check. So I took my wife aside, we looked at each other and asked "do we really want to do this?"

Well, the charge hit today. $12,398.26!!! Wow!!! I have a little anxiety over this, but I know that this should be paid off with my pay check on 12/19. Until then, I got a big charge out there and am $1,800 short.

At this point my emotions are out weighing my logic, slightly. I am using this to intensify my focus on the budget and get this last debt paid off.

Much like the end of a marathon, I can see the finish line and I got nothing left. This journey has been both draining and joyous; but at this point, I am not concentrating on that. All I hear is the man in the mirror. "Let's go!!! One foot in front of the other!!! FOCUS ON THE TASK AT HAND!!!"

And that's what I am doing. Blinders on.

I hope everyone had a great turkey day. Since I only worked 3 days last week, I will only get paid 60% of what I usually make this week. Oh well, such is life as a consultant.

So I have been talking about 3 goals this quarter: Max 401(k) – done, pay off all medical bills, and not take on new debt – so far so good.

With the medical bill, I entered November with $5,909 and leave owing only $1,853. I paid off another $4,056. When I say I have paid off $4,056, I mean I have it in account to be shipped out. .So I told my wife to call the hospital this week and charge the balance on a credit card (somewhere around $12k).

Why am I charging before I have only the money set aside? It really has to do with taxes. After a certain amount, I can write off a certain amount or something like that. My CPA knows. In any case I want to maximize that deductable if I can. Other wise, I would have probably sent the check after Christmas. In any case, I'll have the money before the credit card statement comes. More of a timing with when the cash will be available and when I can cut a check, just want to make sure everything clears in 2008.

Sometimes I wonder how excited my wife is to the fact that we are almost out of debt. Now, my wife is a low key person and plays things very close to the vest about everything. So imagine my surprise when she started to tell her parents that all of our debt but the house was going to be paid off in December. She also retold this to her sister.

She is also really into our goals for next year and when they will be accomplished. I even brought up investing in real estate and she didn't even dismiss it. She just asked a couple of questions. She was neutral about the concept which was far better then where she was when I last brought up the topic.

So, next goal on the horizon is to top of the emergency fund. My wife wants 8 months, my wife will get 8 months. I look at the emergency fund as security and whoever has the most months wins.

As for no new debt – one holiday down and one to go.

We are half way through the forth quarter. I have 2 goals left for the year. No new debt for the holidays and pay off the last of my non-mortgage debt.

On the debt, $2,028 down $3,881 left. Yep, my snowball is really starting to tear into this debt. It's just amazing to me at this point. True most of this is from cars, credit cards, and braces being paid off. Also, a nice chunk from the IRS. But, some of this came from a mindset change. Me and my wife look at things and go do we really need that? Is that really important to us? And that's what really keeps our spending in check.

The weird thing is everyone talking about how crappy 2008 is. People ask me and I say "I'm having a great year."

Them "Your net worth up?"

Me, "Nope."

Them "Big raise, new job, went to all cash last November?"

Me, "Nope, nope, and definitely no, but I did drink the kool-aid."

That's usually when they step back.

After Thanksgiving, we'll really need to mind the budget. As for the debt, I am looking at another $2,000 by the end of this month and then I'll be left with less then $2,000 for December.

One last thing, for your 2009 goals, I would urge everyone to get a will and term life insurance, especially if you have children. It is the responsible thing to do. So quit whining about your mortality or the cost (I got $1.5 million 20 year for $900 a year and the will cost $650, included health stuff and power of attorneys), just get it done in the first half of 2009 and stop your whining. If you were to die, do you want to be a burden on your family? Your spouse trying to come up with enough to bury you, pay the mortgage, fight with people over your wishes. Really, just get it done.

Enough said.

So yesterday, I had that feeling I had last year. You know the one where you look at your outstanding debt and have that moment – how am I ever going to pay that off?

The day started innocent enough. I was taking a look at how much consumer debt I had left to pay off, rerunning numbers to make sure I could pay it all off this year. I was feeling pretty good.

Then I decided to take a look over at my 2009 spreadsheets and my goals. I basically follow Dave Ramsey's baby steps. 2008 was the first 2 steps. And 2009 are steps 3-5. I do max my 401(k) contributions every year. I know I could be using that towards other goals. But we each have our quirks.

My last goal of 2009 is to start nibbling on the elephant in the corner that no one wants to talk about. Yes, the mortgage.

So, yesterday I sent my mortgage payment in and I decided to take a look at how it's broken down and the balance. And, I got that feeling I had last year when I started this journey - a sense of hopelessness. I mean this mountain is too hard to climb. I am paying $472 in principal on a balance of $341,900. Are you kidding me? I'll never get to the end of this tunnel. It would take you 60 years to pay off $472 in principal every month and I only have a 30 year mortgage. (You can throw up your hands if you want for dramatical effect.)

Then I looked back at how much principal I paid last month - $470. A $2 increase in the principal. Not a big increase that's for sure, but an increase nonetheless. I remember first starting that snowball last year. It was sure small. But then it got pretty big pretty quick.

I am not saying that there is much to snowball. I pretty much at the end of building that snowball. But any new money (raises, bonuses, tax returns, etc.) can go directly towards this. And I remember what I kept telling myself in those early snow ball days – how do you eat an elephant? One bite at a time.

Right now, I'm not sure how I will balance life and paying down the mortgage. But right now, I don't have to worry about that. I have to finish pay of my current debt, top off the emergency fund, save for retirement, and top of the kids college funds. A lot of work to do before I get to the mortgage.

Interesting aside, during this whole journey, my mortgage has/had the highest interest rate at 5.5%.

To all the vets, thank you for your service. Not only those who made it back but also those that gave the ultimate sacrifice for this country.

Also, a thank you for military families whose sacrifices sometimes go unnoticed.

I was thinking to myself why do I call them 2009 goals? I mean, these goals are just a naturally progression in my financial evolution. Does continuation of goals give it any less weight?

The truth being it is important to me to have concrete goals and ways to measure them. One year is long enough to establish real substantial goals without feeling to far away. For instance, paying of my mortgage is years if not decades away. It would be hard to keep my focus on that goal month in and month out. So I will break it down into a more manageable goal. If I could but $X towards principal this year, it puts me on a path to pay off my mortgage by 20XX.

Also with yearly time frames, it seems natural for us to all take stock of our lives around the holiday seasons. Christmas and Thanksgiving are times to remember the past with family and New Years gives a clean slate, so to speak.

I can look at my financial journey as building a house. In 2008, my objective was to clear the site - remove the boulders and trees, get approval from the wife about the house and where it would be situated, and start putting together a vision of what this house will look like at the end.

In financial terms, 2008 was spent getting on a budget and eliminating all non-mortgage debt. I started the year with over $49k in debt. I also had Murphy visit. In June, I received a medical bill for $4,500. I had to put my debt snowball on hold to attack this which caused some frustration.

Right now, I have less then $5,000 in debt. This is a very strange place to be. From last year to this year, my journey has been the difference between night and day. Last year, I was living (if you can call it that) paycheck to paycheck. This year, I am budgeting paycheck to paycheck. I have also budgeted enough to pay of 90% of my debt year to date.

2009 goals are really to set the foundation that the house will be built on. This has to be done right or else the whole house will eventually fall apart.

With that in mind, my major goals are to fully fund the emergency fund. The wife wants more then 6 months, so it will take me $30k to finish the emergency fund. Since $30k is a big number, I broke it down into months.

My other large goal is to play catch up on the college funds. $18k between my 2 sons will be as if I put $2k away for each, since they were born. I'll automatically contribute something to each 529 a month - $1,000 a month for the oldest and $500 a month for the youngest.

My last new goal is to start paying down the house.

My complete list of goals for 2009 are:
1. Invest $15,500 in 401(k)
2. EF Fully Funded
. a. 1st Month - $5,000
. b. 2nd Month - $5,000
. c. 3rd Month - $5,000
. d. 4th Month - $5,000
. e. 5th Month - $5,000
. f. 6th Month - $5,000
3. Contribute $12,000 to Son 1 529
4. Contribute $6,000 to Son 2 529
5. Extra $36,000 to mortgage
6. Rebalance portfolio

Will I accomplish every goal? Probably not. But by keeping some goals out of reach, it keeps me focused for the year.