Debt timeline

I’ve re-done some math and have determined that, even with buying our ‘new’ used car, we can get out of debt by the end of 2013, not February of 2014 as previously posted. This is less than 2 years from now, fewer than 24 months. We actually recently discussed cutting everything unless it was absolutely necessary, to see how much of an impact that could make on our debt snowball. We determined we could shorted up our debt timeline by a couple months, but it wasn’t a significant enough dent to forego some of the things we love–our lunch dates out, for instance–so we decided we’ll just try to stick to the spending plan as closely as possible so our timeline doesn’t get longer. I’ve set up one of those annoying tickers to track our debt:

The end is in sight!

Student loan saga continues

I logged into my student loan servicer account last week to check on an extra payment I made that hadn’t gone through yet, and discovered my loan balance was listed as $0. I immediately wondered where in the world my loans went this time… if you haven’t been following the story of my student loans, suffice it to say that I’ve dealt with so many servicers, I’ve lost count. I’m guessing this is somewhat normal, but it seems my loans do a heck of a lot more traveling than I do.

I called the customer service number and quickly learned where my loans had been moved, and promptly signed up for a new online account. Honestly, I think the best part of being debt free will be never having to think about where my loans are at any given moment.

I e-mailed the new servicer because my account is not fully active yet, and I’m unable to make payments. They responded within 24 hours that it will take 1-2 weeks for all of my files to be transferred. My main concern is that I’m going to miss a payment date, and that interest is still accruing at an unknown rate (because I qualified for an interest rate deduction for having auto payments set up with my previous servicer).

I’m just glad that, even having bought a replacement vehicle, these loans can still be completely gone by February of 2014, give or take a month or two. That’s less than 24 months from now, so the end really is in sight.

Grilled cheese sandwiches

I am eating a grilled cheese sandwich for lunch today, as I have for many lunches in the past couple months. I had this bad habit of not bringing anything to work to eat for lunch, and then I’d run to Wendy’s, which is the nearest quick lunch location from where I work. And if you go to Wendy’s, you can get chili, or a salad, but I always have to get the fries… they are so darn good. This habit was not helping me in two ways: my health and the spending plan (aka budget).

So I decided I needed to come up with something that I can just toss in my purse each morning, and I came up with grilled cheese. I keep a stick of butter in some tupperware in my office so all I need is bread and cheese. It’s a surprisingly awesome lunch (and better if I can grab a piece of fruit to go with it). It sticks with me and brings me back to childhood. It’s fast. And anyone who sees me making one in the breakroom is immediately jealous. Seriously, I’ve had so many people comment on my lunch. Cheap, easy, delicious, healthier than fried potatoes (I use whole wheat bread and American cheese).

I know that for most people, bringing dinner leftovers is probably the easiest/cheapest lunch around, but I’ll admit that I don’t really cook dinner. I mean, I do eat dinner, in that I eat food sometime after I get home from work, but it might be 3 olives, a piece of toast, a banana, and a glass of orange juice. Because my husband works many evenings, and eats work-provided food, we don’t cook unless we’re both home. This usually means Tuesdays, Fridays, and every other weekend. One area we both know we need to work on is grocery shopping, both in terms of what we buy and how much we spend. We have food in our fridge and cupboards, but we are bad at ‘meals.’ It usually ends up being pasta, easy soups, stir fry, chili, enchilladas, or ‘breakfast for dinner.’ I generally don’t do #2 on this list:

What do you do when you’re lazy and you only need to cook for one? Any ideas for easy meals with minimal prep and 7 or fewer ingredients?

One for you, nineteen for me

Since I did a taxes post last year, I thought I should also do one this year, and admit that I am fallible. Yes, I made a mistake on our taxes.

In my excitement to get everything done, I filed on Feb. 3 and within less than a week, we had paid our federal taxes and gotten our state refund. Then, we stopped by my husband’s former residence to visit family, and discovered a 1099-B which I’d forgotten about.

We cashed out an old mutual fund in the beginning of 2011 and put it into an IRA and claimed that deduction on our 2010 taxes. However, I forgot that because we cashed it out instead of rolling it over, we’d have that darn 1099-B. It worked out, though, because re-filing the amended forms will result in refunds from both federal and state, since there was a loss on the mutual fund, an investment made by my husband’s father on his behalf. Because we have to re-file by mail, though, we won’t see that money for 8-20 weeks. I think the 20 weeks estimate is a little extreme, but if you’re going to pad a number, might as well make it 5 months, right?

Otherwise, the taxes worked out fairly well. We owed $327 federal but got back $197 from the state, so in all, only ‘owed’ $130. This is even closer than last year’s numbers, in which we got refunds for both, so I’m pleased. Other things:

1) We saved 8% of our adjusted gross income in our emergency fund in 2011.
2) We paid nearly 18% of our adjusted gross income toward debt in 2011, while only 6% of that was required payments, meaning nearly 12% was debt snowball payments.
3) Total, we saved/put toward debt over 25% of our adjusted gross income.

I’ll definitely be checking in with the 2012 withholding calculator to see if we can’t get our withholding even closer this year, but I think it would be tough.

Title and registration

My husband suggested that I blog about our recent experience with purchasing a used car. This is still kind of a sore spot with me, because I’m not totally at peace with how everything happened, but maybe this will be cathartic.

It started when we learned my 1999 Saturn SL2 was dying. It failed a compression test pretty badly, though it still starts fine thanks to a new-ish battery my father put in some months ago and some new platinum spark plugs (everything’s better in precious metal!). It even managed to start when we had a few days of -30 wind chills, and has been parked outside for the last month straight since we got our ‘new’ car. She’s a trooper.

We bought a 2005 Ford Focus in 2010 to replace my husband’s 1986 Buick Somerset Custom which had so many issues I won’t even begin to catalog them. The Focus quickly became my husband’s car, because I felt much safer with him driving it than the Buick, it sits a little higher and has more head room than the Saturn for my 6’1″ husband, and I felt he deserved to drive something nice and relatively new for the first time in his life. The only drawback we discovered with the Focus is that it does not have a key feature that my Saturn has: traction control.

Now, traction control is apparently controversial as an option. Some people say ‘Just let me DRIVE my own car!’ but both my husband and I really like traction control. It’s basically the reverse of anti-lock brakes and can help you get going in wet, heavy snow while you see a dude in a huge truck/SUV who spins out with his 4-wheel drive. It’s also saved my life on a few occasions in rain while speeding down the highway; it kicks in when you start to hydroplane. I don’t recommend hydroplaning, as a general rule.

So, we decided that at least one of our vehicles needed to have traction control, and with the Saturn on it’s exit stage left, the ‘new’ car needed to have it. I did some research and learned that vehicles in our price range (under $7k) that had traction control standard included 2000-2003 Lexuses and Acuras, older luxury vehicles with many safety options. I honed in on the Acura brand since it’s the ‘luxury’ version of Honda, and Hondas have a great reputation. I knew that an Acura with more than 100k miles on it could easily go another 100k, and we’d probably only own it for a few years before replacing it, anyway.

Long story short, I found a 2001 Acura TL in incredibly clean condition, and it checked out with a mechanic, had clean CarFax history, good rating from Consumer Reports, etc. The problem? The day we wrote the check and I drove it home, I realized that I don’t like the car. I don’t like the drive feel since there’s a tiny ‘flare’ between 2nd and 3rd gears (it’s a shiftable automatic, which I’ve never had before) even though mechanically it’s fine according to multiple experts. It feels very ‘fancy’ to me. It’s the antithesis to my Saturn, covered in bumper stickers of all the bands I saw when all my income was expendable and tickets were my main purchase. Also, having a car that takes premium fuel, even though it’s usually only 25 cents more per gallon than regular and therefore only $3 more per 12-gallon fill, feels wrong to me.

We can definitely afford this car (I even got an insurance quote on it before we bought it) and with the little amount of gas we buy since we live so close to where we work, the premium fuel really is a negligible issue. The savings account took a hit when we bought it, but it will be back to normal by my birthday in April and our debt snowball is only mildly delayed, and we still have a sizable emergency fund cushion (yet another reason we keep more than Dave Ramsey’s recommended $1k in the bank).

Part of me just wants to hold onto the Saturn for sentimental reasons, but I realize that this is not an option and that it’s time to move her on. For now, my husband is driving the Acura (and enjoying it immensely) and I’m driving the Focus, which is a fine compromise. My husband did agree that the car that replaced the Saturn was to be ‘my’ car, an upgrade after driving the Saturn for 9 years, but the Focus is a great little car and I like it a lot (for one, it has a premium sound system, so my Vampire Weekend and Death Cab For Cutie sounds awesome in it compared to the Saturn’s 4 blown-out speakers). We’re just going to wait until the weather is a bit warmer before we list the Saturn for sale, and the insurance on it is a minimal expense until then.

Have you ever bought something you later regretted? How did you come to terms with it? Any advice or commiseration over my middle class problems is welcome.

An experiment

We got some bad news this week, in the form of our mechanic telling us that my ’99 Saturn is still running, against all odds. He actually said, “I don’t know how it’s still going.” So I started looking at Consumer Reports car buying guide online and searching used car sites.

We’ll just be getting our emergency fund fully stocked again at the end of this month, so having to tap it for a new vehicle was not going to be fun, but would be do-able. Then my husband and I talked last night and decided we would try an experiment: only use one car.

We live within easy walking distance of my workplace, and biking distance to his workplace. He said he would commit to biking if I could walk to work. This way, we can park the Saturn in our garage, and leave our newer car (a 2005 Ford Focus purchased in 2010 with cash) at home. Since we work opposite shifts, this could work, and attempting it in December/January will show us whether or not we could stick with it in warmer weather.

The plan is that I would walk to work in the morning, and the car would be at home during the day for him to run errands and go to appointments. Then he would leave for work in the late afternoon, and I would walk home and have the car for evening errands, and to visit my parents on the other end of town, and then he’d be home after I’ve gone to bed. If the weather is really too bad to walk/bike, we can work out other options (dropping each other off, rides from friends, etc.).

We’ll drop back the debt snowball for a few more months to save a bit more, in case we decide that we really do need two vehicles. And I’m going to buy some new mittens.

Are you ready for your 2012 pay cut?

Unless the Super Committee can agree in time, everyone paying payroll taxes will see a 2% increase in their payroll taxes on their paychecks come 2012. Payroll taxes were cut from 6.2% to 4.2% at the beginning of 2011 to help stem the tide of recession. This put a little bit more into our pockets each month in 2011, but, in my opinion, this is unlikely to continue.

We got a letter from my spouse’s employer informing us that the organization is increasing salaries by 2% in 2012, which will offset the taxes, so his paychecks will stay the same. My employer is increasing salaries by 1%, so I’ll actually see a decrease come January. We will budget with this in mind, which is all we can do. Better to know this now than after our first paychecks of the year and the budget being short.

Tools

I’ve added some links to some helpful tools and calculators. These are tools I’ve used and found helpful, everything from ING’s Retire My Way site, to Michael Bluejay’s Rent vs. Buy calculator, and Baby Center’s cost of raising a child calculator.

I also really appreciate the IRS’s withholding calculator, and Dinkytown’s Section 125 calculator, mainly because I like knowing what my paycheck will be after a raise, and knowing that I’m paying the right amount of federal income taxes helps me sleep at night.

There’s pretty much a calculator for anything, so knowledge of spreadsheets and formulas isn’t necessary to determine all kinds of fun financial stuff.

Debt #2 is gone

At the end of September, we were able to pay off the second to the last student loan. I think the beginning total was something like $9k. I’ll just go ahead and overshare with actual rough totals:

Debt #1 – $6k, paid off in August 2010
Debt #2 – $9k, pad off in September 2011
Debt #3 – $38k, to be paid off in 2013

It doesn’t seem all that long ago that I wrote that we’d paid off Debt #1, and it really wasn’t. How did we pay off $15k in less than 2 years? And how will we pay off $32k by 2014? By being very lucky with our jobs and living well below our means. We’re fairly average according to Dave Ramsey, with being able to get through the Debt Snowball in three years–$53k in three years doesn’t sound too shabby.

I recently heard that students shouldn’t borrow more than they will make in their first year working. After I thought, “that’s impossible,” I realized that this holds true for both my spouse and I. He made more than $15k his first year after he finished with school, and I made more than $38k. And, with not changing our lifestyles from being students to part of the full-time workforce, quickly paying off the debt and saving over $25k in interest payments has been marvelous.

Weekly paychecks

My sister recently got a contract position in a school, which introduced both of us to a whole different kind of budgeting. Since she’s contracted, she won’t get paid on all of those lovely days off that the students have (3 days at Thanksgiving, 10 days at Christmas, etc.) nor will she be paid in the summer. So she asked for my help in figuring out how much she needs to save out of each check in order to have enough money during those breaks.

And then she told me she gets paid every week.

I used to get weekly paychecks when I worked retail, and it was pretty handy, since I could really only spend what I made in the last week. If I had a bigger surplus at the end of the month, I would transfer that to savings. It was easy, even though I wasn’t making much.

I sat down with my trusty Google Docs spreadsheets and figured out the breakdown. First, I had to figure out exactly how much she would make (net/take home) for the entire year. I used one of those handy paycheck calculators to get a close estimate, then rounded down to be safe. Then I took that and divided it by 9 months and then 12 months. The difference is what she needs to save in order to live comfortably the other 3 months she’s not working (she could get a summer contract position, but we’re assuming she won’t, but if she did, then the savings can go toward debt/a replacement vehicle). Then, I figured out her budget. She decided on five very simple categories which she mainly keeps track of mentally:

-rent (includes all utilities)
-debt (student loan payment)
-savings (for breaks/summer)
-mom (who pays for car insurance and cell phone family plan)
-everything else (food/gas/fun stuff)

So I figured out how much she can put toward each of those categories each week, which makes it really easy for her to know if she’s on track. As soon as the deposit hits her account, she can transfer some to savings, some to her student loan, and mentally set aside a bit for rent and mom, and the rest is her grocery, gas, clothes, and eating out budget for the week.

This was actually a pretty interesting exercise, and I hope that it gets her excited about having a real income again (she worked through college) and about paying off debt. She already wants to pay extra on her loans, since I’ve talked up Dave Ramsey so much, and she could save a bundle in interest even paying an extra $20/month toward her loans.

I was pretty proud when she graduated, but I think I’m almost more proud of her for wanting a budget and to pay off debt.