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Archive for January, 2009

Thank Everyone

January 20th, 2009 at 06:57 pm

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.

My Tale Over the Last Year

January 16th, 2009 at 07:17 pm

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.

Mid January Update

January 12th, 2009 at 03:28 pm

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.

A budget is different every month

January 5th, 2009 at 08:32 pm

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.