Monday, November 19, 2012

Anyone up for a Treat?

Sooo...hopefully none of you are getting tired of my review type posts here, since this one has a special goodie for you all. :D is a relatively new card-printing site that offers a huge variety of top-quality, designs for all occasions. Each can be personalized in a number of ways, creating a one-of-a-kind card sure to make your recipient smile. I've been really impressed with the quality of the designs (a rare compliment from me, as a picky designer myself!), and the printing is top-notch, too. Even the prices are very reasonable, especially when compared to retail prices on ordinary cards at Walmart or elsewhere.

Okay, enough preamble. ;) The best part is that Treat has given me permission to share a special code for a FREE card. Yay! There's no better way to actually get a feel for just how nice their cards are. This code is valid only on Monday and Tuesday (Nov. 19 and 20), so go check out their site right away and select a design from any of their many categories (choosing will be the hardest part!). Shipping is also free, unless you choose to have the card sent directly to your recipient - then you just pay the cost of a first-class stamp ($0.45). Can't beat that!

Here's the code to use to claim your free card: TREATBLOGR

Remember, this code is good only on Nov. 19 and 20, so hurry!

As the folks at Treat say, "Real friends send real cards." Who do you know who could use a cheery note in the mail today?

Saturday, November 10, 2012

Stupidity knows no boundaries

I've been stupid more times and in more ways in my life than I care to admit. There was the time over Christmas break in 5th grade when I ran around on the pigpen roof at my grandparents' farm when I tripped over my feet and fell about six feet and landed on the top of my head on the concrete. There was the time in the winter of 1997 when I stomped on the gas pulling out of the church parking lot after it had sleeted for a couple of hours, hopped the curb, and hit a fire hydrant at 20-25 mph (I even managed to move the hydrant about two feet and didn't rupture the pipe). There was the time in January of 2003 when I was late going to work in the morning and pulled into the snow-filled left lane to pass someone. Long story short, I ended up in the ditch on the other side of the highway, did about $2,000 worth of damage to the underside of my car, dropped out of college after only 6 days into the semester because I was sure I couldn't work enough to pay for the repairs, and then found out three weeks later that because of my insurance I only owed about $500 (and my dad gracefully paid half of it); at that point it was too late to re-enroll in school.

But by far, I think the stupidest thing I've done is to get myself into debt. Not just into debt, but really into debt. It wasn't a one-time occurrence: I spent years building up the mountain of money I owed. During my freshman year of college, 2000-2001, I got my first credit card through Capital One. I had a limit of $500, and it wasn't long at all before I had it maxed out. I was working enough hours that I could have had it all paid off within a month or two, but I foolishly paid little more than the minimum due and then charged the remaining balance. Even with such a low limit, I shudder to think of how much extra money I spent in interest.

I moved home after that first year of college and worked full-time at various jobs before deciding to return to school in September of 2003. In October of 2001, I traded in the 1991 Hyundai Excel I'd been driving and got a 1997 Saturn L-series. I think I picked it up for about $6,500 after trade. At that point, I was working full-time, making a dollar or two an hour over minimum wage, but I was also living at home and had no expenses. I could have easily paid the car off in a year. Instead, I spent three months out of that year going out of town every weekend, which usually resulted in at least $60 in spending between gas and eating out, and I picked up plenty of unnecessary junk throughout the entire year, much of it via my credit card, which by now had a limit of at least $5,000.

By the time I started college in September of 2003, my credit card had a limit of $8,500. For making a maximum annual salary of $25,000, this seems incredibly ridiculous. By the way, this is a factor in how our national economy got so messed up. The majority of this country seems to be living outside their means (or at least doing all they can to live outside their means). Even after the economic troubles we've faced as a nation, this habit is alive and well. Anyway, back to my story. Throughout my college years, I used my credit card a lot and for stupid purchases. Looking around my apartment now, I have almost nothing to show for my rampant credit card spending. At least twice I took out a private student loan to pay off my maxed out credit card, which had a limit of $11,500 by the time I graduated. Before my tuition deduction on my taxes, the last two years I was on-campus for college I was only making about $15,000 a year. It's my own fault for carrying a card with such a high limit (I really should have cancelled the card after I got it paid off the first time and saved myself the additional temptation), but again, there is a distinct issue with our financial institutions if a person with such a low income can so easily maintain a credit card with such a high limit.

The last year of my college experience was an unpaid internship. I took out a private student loan to cover living expenses during that year, so perhaps that loan is more excusable, though I wish I'd been working part-time to offset the loan and my expenses. I didn't have enough taken out, however, to cover unexpected expenses such as a $600 repair job on my car. My dad once again very graciously covered my expenses there, as did my mom and step-dad.

I was quite blessed to get a job at Mayo Clinic in Rochester, MN, before I even graduated (I did my internship at Mayo). My starting salary there was somewhere around $45,000, so that first paycheck was quite a sight for me! I didn't start paying on my student loans right away because I wasn't required to do so until six months after graduating (and who does stuff before they're supposed to?), and I didn't do much extra for my credit card, but it was certainly nice to have an income again. Once my student loans came due, I did pay extra each month, but I wasn't very focused in my efforts. I'm not sure how much debt I had when I started making payments, but I know it was a lot.

Sometime in September or October of 2009, I started working with my friend Tabitha on making a quilt out of a bunch of T-shirts I had on hand. It was a fun learning experience for me, but one of the biggest things to come out of it was hearing more fully about Dave Ramsey's plan for getting out of debt (I had heard info about his program before from other friends, but I wasn't ready to hear the message, it seems). She recommended his book, The Total Money Makeover, and after I left her house one evening in November I stopped at Barnes & Noble and picked up a copy. I'd say it was the best book purchase I've ever made outside of John MacArthur's study Bible. Ramsey's plan is simple and full of common sense, two factors I needed to make a payoff plan successful.

I had further incentive to get out of debt because at the end of September in 2009 Abi and I started e-mailing. I knew if things were going to work out between us, being serious about getting out of debt was going to be a key factor.

On December 22nd, 2009, I totaled up my debts and laid them out in order to be paid off. Ramsey suggests that you line up all of your debts from smallest to largest amount and ignore the interest rates. In my case, my debts could be broken down into twelve individual loans. My objective was to pay the minimum payments on the eleven most expensive loans and put every penny I could spare on the smallest loan. Once that loan was paid off, everything I had been paying on it would go into the next loan and so on, creating what he calls a "debt snowball." He understands that you'll pay a little more in the long run if you're ignoring interest rates and paying off a loan with a smaller rate first, but he's going for psychological victories. My highest value loan of $20,000 or more was also the one with the highest interest rate, yet paying that one off first could have led to discouragement as it would have taken a very long time to pay it off and would have left me paying on all twelve loans for a lot longer. If you don't like this approach, I wouldn't fault you for doing something different...the key is putting everything you can into a single loan to get it paid off and out of the way.

Anyway, when I started on this program, I owed a total of $125,427.79 and my total monthly payments were in the neighborhood of $1,500. At the time of this writing, it has been 2 years, 10 months, and 20 days. The debt total is now $51,064.44 and the monthly payments are $577.42. Abi and I have changed our game plan a little bit. I still have the loan that was the highest value when I started the program, though it is now less than $13,500. It's monthly payment is $258.09, which is more than twice the monthly payment of any other individual loan, and while the interest rate isn't that much higher than any other loan, it's accruing enough interest over the other loans that it would be great to save that money and put it to use elsewhere. I was blessed to find out about and qualify for a program through work that will put some money towards my student loans in exchange for a three-year service agreement. I can apply for funds again the next two years at least. Not everyone has this opportunity, but if you are in a position to take such an offer, I would highly recommend doing so.

The program at work will go a long way to helping us get out of debt by the end of 2014 (which is 2 years, 1 month, and 22 days from now), and that's our current goal. I will, thankfully, be eligible for a raise the next two Octobers, which will also help us reach this goal. And I will hopefully have a few more books written and published to add to the income (I haven't even taken into consideration Abi's income since, with a baby due in less than a month, we're not sure how much she'll be able to contribute to the bottom line).

Anyway, as I've said in a recent post regarding a house purchase, getting out of debt is our top financial priority. We have a tremendous amount of breathing room now compared to two years ago, for which we are grateful, but there's a good bit yet to go (you can mail your contributions to the cause to...ha, just kidding!). If you are in debt yourself, I urge you to take whatever measures you can manage to free yourself from that burden.

Friday, November 9, 2012

Remembering priorities...

Abi and I were recently reminded of priorities we shouldn't be neglecting.

A little back story  We found out she was pregnant in March. Then, in May, as I was looking at house listings out of curiosity, I found a property that seemed like a phenomenal find. It was a four-bedroom, two-bathroom, 2100 square foot house on 1.79 acres just inside Des Moines city limits, a good 10 minutes closer to work for me and at least fifteen minutes closer to her family. The best part, it was listed at $121,500, a price I was sure we could handle.

After looking at the place a couple of times and going back and forth with the seller, we settled on $117,000. At this point I thought we'd better find out what our monthly cost was going to be. Turns out we were looking at about $950/month for the mortgage, which is $255/month more than our current rent. Utilities would also go up from our $50ish/month to between $200 and $250/month. So, in frustration, we had to back away from the table.

Our agent e-mailed us on July 4th to let us know that the house was going to short sale on July 5th. Out of curiosity, I looked, but the price had only dropped to $117,500. Not good enough for us. Then we kinda forgot about the house for a few weeks.

I don't fully know why, but I looked at the listing again on August 13th to find that the price had dropped on August 10th to $101,700. Hey now, we could be in business here! I talked it over with Abi, and we got in touch with our agent. We started the ball rolling, borrowing $5,000 from my dad to help with the down payment, getting an idea of how much we could borrow and at what rate, and making an initial offer. Then the waiting began, and finally on October 23rd we heard that the seller's bank had accepted our offer of $96,000. Yay!

We were originally looking at an FHA mortgage, so we were going to wait for the FHA appraisal before getting our own inspection. However, our mortgage banker said we had enough assets available to do a conventional mortgage, which meant the process could be sped up a bit. We signed paperwork on Friday, October 26th for the mortgage to get processed.

Then, the weirdest thing happened. I got an e-mail from our agent saying an agent from another agency had an interested client. Since we had not put down any earnest money, the listing was still active. I decided I should get a check to our agent to rectify the situation and got to her office 5 minutes before closing. The check wouldn't be cashed until Monday, October 29th, but all of our legal bases were covered.

Friday I also needed to get some inspections set up. Abi's uncle, who used to own a concrete business and does foundation inspections in his area, had said he'd be willing to look at houses for us, so we got him down to check out the foundation (he said that it was okay, even though cosmetically it didn't look the prettiest). We also got a friend of ours who does roofing to come out. His thoughts were that the roof would need redoing within 3 years, and at dinner after we'd looked at the house together he said flat out that he wouldn't buy it (coming from a man involved in construction who is doing work on his own house, this was a pretty good indicator as to the course of action we should take). So we e-mailed our agent Sunday night and said we just couldn't see taking the responsibility for such a house--we wouldn't have the time, money, or expertise to fix it ourselves, nor could we afford to pay someone else to do it for us. Since Abi especially wasn't overly thrilled with the layout and several features of the house, it wasn't too difficult to make the decision.

Then I got to thinking about some other things. Like how easily the prospect of owning a house had swayed me from my plan to be debt-free within the next 3 years with the justification that we would only be paying $200-$300/month more in housing costs than what we pay now. Our current debt load is between $50,000 and $52,000, and it's conceivable we'll have it paid off in 26 months (by the end of December 2014). Yet if we bought a house now, we would extend the time it would take to pay our current debts and basically triple overall what we owe. I understand the argument for building equity and how much of a buyer's market it is right now, but I'm not convinced it's the biblical approach to go into debt even for what sounds like such good reasons.

The Bible has a few things to say about debt, and the basic message is don't go into debt and do everything you can to get out if you are in debt. I don't know as this is said anywhere as an explicit command (I will have to look into that and get back to you all if I find anything...feel free to let me know if you know of anything regarding this), but it comes up several times in Proverbs, a book filled with much good advice. Debt is not a good thing (and why people think debt is a good thing for the nation but not for individuals is something I've never been able to figure out). So our plan for a future house purchase, should the Lord tarry so long in His return that such a purchase is even possible, looks quite a bit different from what we've just gone through. We'll be out of debt before we even look to buy a house. On top of that, if it really comes down to taking out a mortgage, we will have 20% saved for a down payment and we'll shoot for a 15-year mortgage instead of the traditional 30.

Ideally, though, I'd much rather save the entire amount for a house purchase and pay cash up front, just as much for the shock value of doing something that most people have never heard of doing as for not being in debt to anyone again. Let me crunch a few numbers for you. As I said, we had an accepted purchase price of $96,000, which meant we were going to be financing about $92,000. If we were to pay just the minimum payment every month, we would pay about $147,000 for the house at the end of 30 years. That's a difference of $55,000. We currently pay $695 in rent each month. If we stayed right where we are, it would take us just over 6 1/2 years to pay $55,000 in rent. My current net income is about $2800/month, and that will continue to go up with raises (assuming the VA system doesn't go broke under what I see as an inevitable economic meltdown). Not factoring in what I need to pay on my current debt load, I can safely set aside a minimum of $1500/month, which in 6 1/2 years is $118,500 before interest is added. Also, I'm taking into consideration that all houses require upkeep, and any money that goes towards repairs and improvements is money that can't go towards paying off a mortgage. In our current rental, we are not responsible for repairs or utilities other than electric, and should we move to another rental, having some or all of the repairs and utilities covered by the landlord will be our goal to help us save money.

Is that going to buy us a palace? No. But will it buy us a decent house? I'm quite confident it will as I don't see the housing market rebounding enough in the next 6-10 years to make house prices go up significantly. And since Abi and I would like a little bit of land, and taking into consideration that without other debt payments we could afford to live further from the city and thus deal with lower property taxes, we could end up with a very nice place with such an amount. And that amount doesn't factor in what Abi makes in a year, which currently goes almost entirely to help our debt payoff and could later be applied to saving for a house and would easily cover many unexpected situations.

Would such an approach require sacrifice? Absolutely, depending on what you consider a sacrifice. I haven't had TV service since before we got married, and we do just fine without it. We share a cell phone plan with three of Abi's siblings, so our cost there is lower than when it was just the two of us (and we're getting a bit higher of a package). Abi does a lot of couponing, and while she isn't going to make it on an episode of "Extreme Couponing," her work in this area allows us to generally spend less than $120/month on food, and we still get to treat ourselves more frequently than you would expect. But some luxuries will have to be done without. And of course, waiting to buy a house could very well mean that many houses we could afford and would even like will come and go, though if we're saving for a house and not actively looking, it's not like we'd be totally aware of this. We would, however, see friends and family buying houses and we'd feel the pull to have one of our own.

But will there be a reward? Absolutely! Home-ownership without the debt. A close-knit family from living in tighter quarters. The satisfaction of knowing we did something that most are unwilling to do. And, I firmly believe, the blessing of God for being wise with the money He has given to us in not putting ourselves into debt for something that isn't going to last forever anyway.

Wednesday, November 7, 2012

Post-election Thoughts

For those of you who don't follow Joe's other blog, he's over there sharing some thoughts about the election results. Check it out!