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Archive for November, 2008

Mid November Update

November 17th, 2008 at 09:58 pm

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.

Is that an elephant in the corner?

November 14th, 2008 at 03:02 pm

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%.

Veteran's Day

November 11th, 2008 at 02:05 pm

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.

2009 Goals

November 10th, 2008 at 07:54 pm

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.

Goals Review - October

November 3rd, 2008 at 03:47 pm

So 2 of my goals were moved to next year (529s and savings $15k), and I have shorten the 4th quarter goals to 3 (max 401k, pay of all debt (except mortgage), and not add new debt with the holidays).

My 401k is now maxed so no more money going to that.

I have one debt left - my son's medical bill. I entered October owing $12,898. I paid off $6,989 leaving $5,909. How did I do this? I don't even know. I was just really focused this month, my 401k contributions stopped, and there was an extra paycheck. I was so happy earlier this month when I broke $10,000. Now, it seems to be just melting away at a staggering pace.

I'll need to finalize the holiday budget with the wife. We will need to finalize our gift budget for Christmas, wine budget for Thanksgiving and Christmas, decide if we will be hosting a happy hour at our house, and decoration budget (tree, wreaths, etc.).

I can't help but to think where I was last year and my feelings of desperation. Financially, I was just holding things together. How did I get from where I was to where I am now?

I looked at my life with my wife and we said where do we want to be? We wanted to be in a place to not worry about bills and not having enough money at the end of the month.

That's a great goal but what does that mean? How do you achieve that? And that's were the yearly goals come in. What do I need to do this year to get me to that point or closer to that point?

Then I took these goals and broke them down further into manageable pieces. What do I have to do this month or even this week to set me up for success? Each decision brings you closer or further away from your goals.

You have to prioritize your goals too. Most of us don't have enough resources to attack all the goals at the same time. We need to focus and concentrate on one or two at a time and then move on from there. That is why I have had to move two goals to 2009.

Did we fall? Yes. Did we stay down and give up? No. But, we had a shared vision of the future.

Now, you hear people saying that getting on a budget and focusing on what is important frees up money you didn't know you had. Truthfully, at first, I didn't believe this. I got nothing how could I be wasting money?

Well, that's exactly what happened. By budgeting, money was prioritized and went to achieve very focused small goals. Once goals were achieved, more money started freeing up. It started to snowball.

Which brings me to where I am now. My snowball is attacking my last debt with a vengeance. My old car payments, credit card payments, wife's braces, and 401(k) deductions are all focused on the last debt. Really, the debt doesn't have much of a chance and that's what I saw this month.

Some of you are probably struggling right now and just can't see a way out. Basically, where I was last year.

So imagine if you could take all those monthly payments and focus them on whatever financial goal you have. What would you do with that money? How much better off would your family be? How much less stress and anger would you have in your life.

The budget just keeps you in line and the goals just focuses that snowball.