Let's Play Catch Up

I bet you're ready for an update, yes?  I don't think there's been any question that the last half of 2012 has been a blur on the Morton-Wood crazy train.  

Mike's Homecoming

The cats were absolutely thrilled when Mike swapped the 100-degree temperatures of the Middle East for the balmy weather of Iowa.  Several weeks of sleeping in, eating food that isn't reconstituted, and an influx of relaxation time has acclimated this wacky vet to our time zone.  

Mike's next plan is to recommence classes in January and obtain a job, both to keep his time occupied and our finances in good shape.
 
Teaching Demands

Right as Mike got home, I started two classes back in Waterloo.  Now I've done two classes at a time before, but I split them between Cedar Rapids and Waterloo.  I can't say that I regret driving 60 miles away two nights a week, but I have learned that I should avoid such an arrangement in the future.  There's something about that extra two-hour roundtrip that throws off my schedule.

Right now I'm teaching my standard film class and the new-to-me public speaking.  It's only the second time I've taught oral communications and my class is 3x larger than the first round (ok, increase of 6 to 22 students, but still ...).  I'm starting to get a real feel for the class and have gained considerable confidence since this summer.  But it's nonetheless a huge amount of work because it's still experimental for me.  And, much like a writing course, public speaking is a heavy work load between activities and grading. 

I also got offered a temporary editing gig with my university.  All students have to write a 15+ page paper to graduate. Beyond their subject area teacher, another faculty member offers feedback and edits - that's me.  I only had a handful of papers to edit, but they were drafts by students, not finished articles from my magazine colleagues, and accordingly took a lot of time to comb through.  A fantastic challenge for my editing skills though!  

Sometimes I wonder why I teach so much though.  This year I've taught 5 courses (one more than I usually have) and 2 were for the first time.  I suppose it's a teacher sin to say you do it for the money, but let's be honest about adjuncting - like any job, it's to pay the bills.  I love teaching; believe me, I'm very passionate about exposing my students to new ideas.  I just so happen to need an income boost that adjuncting can support - I don't think admitting that devalues what I do in the classroom.

Finances
Mike's deployment income has finally wound up.  With some vigilance, we were able to accomplish the following with our windfall: 

• I can proudly say that we have ZERO credit card debt!  Not a penny is owed to any financial institutional (beyond loans, of course).  That's $7,000 that is no longer hanging over our heads or collecting interest.
• We paid off our family debt. 'Nuff said. 
• Our Jamaica vacation of $4,700 was paid for out of pocket.
• Using my teaching income, we have rent secured through April 2013.
• Our savings account is the healthiest it's ever been 

I always do a double take when I log into online banking.  Originally we were going to pay off a $9,000 car loan.  But we got to talking about the future and how we're now back to a single-income family.  We agreed we would feel more comfortable stashing that money away while Mike looked for jobs.  Financial advice recommends that you have 3-6 months of expenses available for emergency savings - we're more than covered now.   

I have never had that much money in savings in my life and it frankly scares me.  At least we're both good about keeping money locked up - no crazy plans to buy gizmos and gadget we don't need.  We do know that our 1998 truck will likely need to be replaced in the next 12 months.  Good motivation to leave those funds where they are.  

Salary Increases
Part of that drive comes from our 2013 financial outlook.  I recently earned a cost-of-living pay raise at work amounting to 2%.  While appreciated, an extra $80 a month is nothing to sneeze at.  Sure, that represents two tanks of gas or a workable amount of groceries, but nothing more.

Instead, I'm going to finally open a 401k.  I won't miss that money and it will at least be a start to retirement savings.  Would love to contribute more, but we just aren't there yet.  Can't be taking away from the utility bill to fund the future.  Just need to keep working on reducing our other expenses so I can eventually put in more. 

What's going on with you?
  

Plans for Deployment Income

Relatively soon, our entire income situation is going to drastically change.  With Mike off in another time zone for the rest of the year, he'll be earning deployment money.  All of sudden, our monthly budget will increase by about $3,000.

Before you go ape crazy with jealousy, this money comes with a price tag.  For Mike, a 100+ degree location, camel spiders, limited communication, living out of tents, and John Wayne toilet paper (rough, tough, and doesn't take crap from no one).  For Jennie, complete responsibility for our finances, dateless weddings and family events, full management of condo and catbox cleaning, and the general suckiness of not having a spouse around.

Last time Mike deployed (four years ago), we were far less savvy with our finances.  We used our income boost to pay double rent, make double student loan payments, eliminate one student loan altogether, and treat ourselves to a week-long vacation in Jamaica.  It wasn't irresponsible, but we were living in the financial present with little thought to when Mike came back.

Not this time, no sir and ma'am.  I am going to squeeze every penny out of this windfall and create a good foundation we can capitalize on once our income goes back to normal.  After many discussions, we've come up with a game plan, of which I will be the sole keeper to perpetuate and maximize.

Honor Family Debt. This debt originated years ago when Mike was stationed in England and some lousy bank decided to wrongfully repossess his car.  Talk about taking advantage of our military.  A parental unit kindly handled the situation in Mike's absence but was forced to tell off the evil financial institution with their checkbook. Said gracious giver of genetics assures us this debt is not a priority, but it certainly is for us.  It holds the #1 spot on our to-do list and the payoff will be accompanied by a good bottle of wine.  Amount unspecified for internet eyes.

Exterminate ALL Credit Card Debt.  I am waiting for the day when I can say that all of our credit cards are at zero.  The price for the feat is around $7,000 between all of our cards.  Not a number I'm proud of, but $5,000 is all on one card that we weren't working on in 2011 (as if that's any comfort or excuse, but there it is).

Polish Off the Car Loan. We owe the bank just under $9,000 for the Mazda.  Not only would it be awesome to own the car free and clear, but it will free up $200 a month to be rerouted elsewhere.

Save Up for a Vacation.  After the last deployment, Mike and I took a memorable vacation to Jamaica.  We booked right after the economy crashed and made off like bandits, but inflation is a lot like karma.  We've been going back and forth with a travel agency over a couple of options, but current estimates put us at around $4,000 for airfare and a week at an all-inclusive Caribbean resort.   Fuller post to come!

St. Lucia, one of our top picks

Now, you may be adding up these numbers and wondering how exactly we're going to meet these goals.  Keep in mind that I still get my usual salary (and likely summer teaching income), but there's one less person to feed, use electricity, take showers, or go out to eat with. 

I can create savings by taking advantage of these small decreases in our regular bills.  For example, our water bill is around $80 every two months.  If it drops down to $60, I can move $20 in savings.  That doesn't look like much on it's own, but if I do that for 8+ months, that's $80 that I didn't break a sweat to set aside and that's just with one bill!           

I also intend to create a food pantry for us out of our lowered grocery bills.  This is something we've never been able to get off of the ground and it hurts us in the long run.  So every time I go to the store, I'll be on the hunt for non-perishables like rice, pasta, canned beans and tomatoes, baking supplies, juice, and cereal.  Same will go with household supplies like laundry and dish detergent.  

  
Realistically, we may not be able to meet all of these goals.  In the span that Mike is gone, there is still $785 a month for rent, medical bills, routine doctor appointments, regular car maintenance, and summer activities/trips that still need to be accounted for.

It will also be tempting for me to increase our standard of living since there won't be as much pressure to count pennies.  I'll have to resist upgrading food products or going on shopping trips.  Those little splurges could add up and compromize one of our goals.  I will need to be ever mindful to focus on maximizing our savings, but I think it's completely doable with a little mental elbow grease. 

2011: The Year of Slow Financial Progress

To be honest, I don't think we made many gains in 2011. 

Fluctuating income was our biggest stumbling block.  We often knew what the government owed us from the GI Bill and drill pay, but it was a matter of when it would come in.  You simply can't plan well for an ever-moving paydate, especially when it could be a 2-week window overlapping into the next month.  Problematic, I tell you.    

The Successes

The initiation of Meatless Mondays was a grand success.  After we found a revolving staple of vegetarian recipes, it was easy to include them on a weekly basis.  We actually look forward to these dishes. 

• Being more mindful of our meat consumption has also affected our other recipes.  I now routinely halve the amount of meat, particularly in soups or pasta dishes. It's also easier to stick to the 4-6oz of meat per person rule.  I wouldn't say this has lowered our grocery bill, but it has freed up money to buy better quality ingredients (more organics + free-range meats).

We paid off our furniture store credit card, just over a $1,000 balance.  This permanently eliminates a monthly payment as we have no other furniture needs at this time. 

While it had a roving balance, we consistently paid off our Firestone credit card in full.  Over $2,000 went on it in 2011 (all for the truck, sigh), but we ended up at $0 several months before the year ended.

The Not-So-Sures

We bought a car.  We made a purchase we haven't regretted and our lovely little Mazda 6 will last for another 10 years.  The downside is that we're paying $200 a month on a $10,000 loan.  We needed the car, no doubts about it, I just don't like having to take on so much debt to ensure transportation.  But it is what it is and I love that car!

We voluntarily raised our rent from $750 to $785 so we could add a garage.  This is much cheaper than renting a storage unit, but that's also over $400 we're paying extra annually.  

We also added to Mike's student debt as he was a student for most of the year ($10k +).  He didn't qualify for Guard tuition assistance because we missed the application cutoff by the time we made the decision late in 2010.  This is a necessary investment given employers' relunctance to hire non-degreed veterans, but it's one I hope we'll get a return on and, more importantly, can pay off.

We started using our savings account this year.  We never got to a place where we had a true emergency fund (3+ months of your bills), but it was an ok start.  On the upshot, once money is moved to savings, we are VERY relunctant to take it out.  That's a good mindset we can capitalize on.

The Not-So-Goods

We still have credit card debt.  $6,500 in fact.  $5,000 of that is all on one card, which we had excluded from our goals last year.  Unfortunately, the two bank cards that were our primary targets frequently were paid off but shortly had balances again.  They currently have $700 a piece.  Not pleased.

Slooooowww progress was made on our student loan debt.  I lowered two of mine by 6% and 4%.  Unfortunately, I'm on an interest-only payment for my federal loans and I quite depressingly only lowered the total by 1%.  On a $25,000+ loan, that's pennies. 

We didn't do a good job tracking what when in and what went out.  I can tell you from our bills how much we paid in total for water, rent, or internet, but I wasn't tracking groceries, gas, restaurants, or supplies.   

2012 and Beyond

This year will be highly unusual with Mike gone for half of the year overseas.  That also translates to a huge influx in income as he'll make in 6 months what I do in a year.  We're still evaluating our goals for 2012, but debt reduction will continue to be at the top of the list.

How did you fair last year?  What were your successes?

How Osama bin Laden Saved My Finances

Kapow!  Kablam!  Splat!

(source)

Those are the sounds of our debt being slashed, cut down, and eliminated.

And I have Osama bin Laden to thank for it. 

Let me explain.

The original reason Mike was called up on orders is because base security was raised after the bin Laden incident – just a precautionary move. The base couldn’t staff this required manning solely with area Guard members, hence a phone call to Mike.

So Mike has been on full orders for the military the last two months, all because we finally caught International Terrorist Numero Uno. 

That’s a full-time job that just landed in his lap. Which translates to a windfall in monthly income. All of a sudden, we had a surplus of several thousand dollars.

We resolved from the get-go to take that money and B-E AGGRESSIVE with our debt. No crazy purchases or shopping sprees here.

So far, we’ve paid off these accounts IN FULL:

·        KAPOW!  Leftover personal loan from February - $500     

·        BAM!  Credit union credit card - $400                           

·        KABLOOIE!  Bank credit card - $850

·        THAWP!  Firestone account - $1300

It makes me giddy to know we have eliminated 4 monthly payments - over $3,000 of debt that’s gone.  That’s huge!  That frees up around $200 in payments each month.   

(source)

We’re also taking out sizable chunks of our Furniture Row account. Even though there’s no interest and the monthly payment is $45, it’s still another obligation. We now have the balance under $1000 thanks to a recent $400 payment.

One of my other goals with our surplus was to close some of these accounts once they were paid off – you know, remove the temptation. I learned, however, that closing a credit line can actually HURT your credit score.

Believe it or not, your credit score can take a ding if you close out your oldest lines of credit. For example, I have a card leftover from a bank we’re no longer with. I thought because it's orphaned and has a high interest rate (14%+), that it would be good to cut it up.

Wrong!  Because that account has been open for over 8 years, it’s actually my oldest line of credit. I don’t fully understand the logic of it all, but it would be detrimental to close it. So it’s been designated the “god-forbid-we-have-a-$2,000-emergency” or “Jennie’s-traveling-for-work” card and is safely residing in the lock box.

We also added Mike to our credit union card. Without trying to embarrass the poor guy, I have a credit score 100 points higher than his, mostly because all of our bills are in my name. So we’re trying to bump his up by getting his name on a few more well-managed accounts.

This is the same reason we’re not closing out the Firestone card, as it’s solely in his name. It’s also very good for emergency repairs, which we all know how disastrous those can be on a budget.

As successful as this round of debt slashing has been, we only eliminated 40% of our credit card debt.  Mike has a card with 4 grand on it that needs some serious attention. That’s not comfortable at all to have hanging over our heads, but we knew this would be the year we cleaned up our credit card act. 

At some point in the future, we’d like to be as “off grid” as possible with credit cards. We learned some hard lessons in our early days and still  worry about our dependence on them when our income situation gets fouled up. But it’s an ongoing process to live  responsibly within your means.

There’s no one way of driving down debt. The best advice I can give is to just tackle it with as much force as you can muster, even if that’s $25. Make peace with your debt and own it before it owns you.

Student Loan Debt

 

Warning, this post is filled with big, scary numbers. 

Let's be honest.  Mike and I have over $73,600 in student loans.  And it's still rising.

Given how we arrived at this point and that this represents 2 people's education, I'd say that's actually not a bad number.  Four specific factors contributed to this total amount.

1) We did not have the luxury of parents contributing to our college education (which is simply a factual statement).  Taking out loans was and is the only way we can afford it.  Complete reliance on loans is a surefire way to racket up your debt.   

2) While I worked 2-3 jobs at a time as a student, it was never enough to pay for college.  I also took high class loads and was in a ton of extra curricular activities that didn't leave much time for working.  So in addition to tuition + room (or later rent), we always took out extra for books and living expenses.  Treating a refund check like income is not advised.

3) I went to graduate school.  Even though I went to the same college as my undergrad, those two years cost the same as my 4 undergrad years.  And by that time, we weren't taking out extra for expenses.   

4) Mike is currently a student at a private college.  So our loan total isn't static.  We are continuing to take out loans as we speak.  

So how do we feel about our debt?  It was necessary.  There's no way we would have gone to college otherwise.  Did we make some mistakes?  Yes.  Did we learn from them and now I'm advising my sister on how to avoid them?  Sure thing.  Is it uncomfortable to know that debt will be around for some time and hence our educations will end up costing thousands of dollars more than their actual price tag?  Absolutely. 


In the end though, it was worth it.  I was employed right out of grad school.  Both of the jobs I've held are related to my degree, which is an absolutely luxury.  Mike got a AAA that granted him junior status at his current college.  In a tough economy, he absolutely needs a BA since no one wants to count his military experience.  Higher education was our path to upward mobility, or at least to not have to work at McDonald's.

I could go into a long discussion about the true price of higher education and whether college is worth it for everyone and yada yada, but the fact is, this is our reality.  We made these decisions and that number is all on us.  For better or worse.  Until death or payoff do we part.   

So in preparation for taxes, I became curious about how well our student loan debt reduction is going.  We've been paying on these suckers for about 3 years now.  That's 4 payments every month, over $500 in total.  I keep tabs on the overall balance and how much interest accrues every month, but I'd never crunched the numbers to see how much we were actually paying the total down.

I almost cried when I saw how little progress we're actually make.  Here's our loan profiles for the last year.

  Jennie's federal loan
December 2010 balance: $24,216.33
Total 2010 payments: $2,405
Interest paid: $1481.22
Balance paid: $923.78
Loan lowered by 3.6%

Jennie's Iowa student loan
Balance: $22,444.19
Total payments: $1977
Interest paid: $1076.62
Balance paid: $900.38
Lowered by 3.8%

Jennie's Citibank loan
Balance: $13,3888
Total payments: $1420
Interest paid: $509.14
Balance paid: $910.86
Lowered by 6.3%

Mike's federal loan (prior to starting Upper Iowa)
Balance: $5,301.27
Total payments: $960.00
Interest paid: $420.62
Balance paid: $539.38 
Lowered by 9.2%

Yearly Totals:
Total payments: $6,762
Interest paid: $3,486.98
Balance paid: $3,274.40

Talk about a wake up call.  We paid more interest than we did on the balances.  We only reduced our total loan debt by 4.7%!

Part of this is because our interest rates are high, between 5-7% for each loan.  Second, my federal loan payment is an interest-only payment.  We can't afford to do the standard $325 a month, so I'm on the lowest payment because of our income.

So what's a couple on a limited income supposed to do?  Well, that sad news is nothing.  Not for this year at least.  We have so little wiggle room that this cannot be an issue or goal for us as long as we only have my income.  This makes me a little sad, because we really want to make better progress than a measly 4%.  But again, you can only do what you can only do.


They say student loan debt is good debt.  I say that's hogwash.  No debt is good debt, especially when it prevents you from doing other productive things with your money.  Like having a savings account, funding your retirement, purchasing a car, or fulfilling a down payment for a house.  All of which I feel our loans are preventing us from doing.  Just because student loan debt is less detrimental than credit card debt doesn't mean it's good.  Only less worse.

That being said, I try not to worry about this a lot.  2011 is the year to reduce our credit card debt.  2012 will be another year.  Even though we're having to increase the loan totals for Mike's schooling, we're only taking out what's needed for tuition.  And that loan payment is now in deferment, which we're taking advantage of.  That's a $75 commitment that can now be rerouted to credit cards.

The one thing we're certain of is that we don't want this debt to hang around into our 40s and 50s.  We're both resolved, when finances allow, to go after the loans aggressively.  For example, if Mike were able to get a $45,000 job, we could live on that and use my $24,000 to go directly to loans.  Seriously.  Doing that could eliminate that debt within 4-5 years.  That's comforting to know.

Funding education can be tricky.  All I can say is that there are smart ways to use loans.  Co-signers can significantly lower your interest rate, take only what you need for tuition/boarding, and always see who has the lowest interest rate.  

Lastly, open your mail!  Because I knew I was taking out large amounts, I literally did not open any loan mail for 4 years.  I kept it in a box and opened it at graduation.  Talk about sticker shock.  I wonder if I could have shaved off a few thousands dollars off my total if I had been more aware of my actions.

The best way to keep tabs on how much you owe is to actually keep tabs on how much you owe. 

2011 Financial Goals (pt. 1)

I know some people think New Year's resolutions are hokey, and to some extend, I agree.

However, my life revolves around a calendar.  If you go to my work, there are three calendars that sit in front of me: the current month, the next month, and the editorial calendar.  My life runs on deadlines and a set work schedule.  I am hyper-aware of time passing.

So I'm going to take advantage of this and apply it to our finances.  They, too, run on a very specific schedule.  We have 12 months to work on financial stability.

Mike and I have determined it will be the credit cards.

Not our actual cards - thanks Google!

We took the time to add up our exact debt.  I thought we had a good ballpark figure, but let me tell you, ballpark and finances aren't a great combination.  Things can take you by surprise.

Here's the rundown of our debt:
$3,680 owed
4 cards (one for each, one joint, one department store)
76% owed out of total credit card limits

These are hard numbers to admit.  Are we as in bad of shape as other people?  No.  Is the total owed bad compared to how much we make?  Yes.  

That amount represents 15% of Jennie's total salary, or 23% after taxes/heath insurance.  That's $10 a day!  

That is WAAY too much for two people at our income level.

Frustration is tied to this figure in three ways:
1) I should have been better.  My parents, to my knowledge, have always carried tremendous credit card debt my whole life, reaching into the 5 digits.  I vowed to never go down this path.  I'm over a 1/3 of the way there.
2) In the past six months since moving, we've had to use the credit cards as supplemental income.  It's not like we've been blowing them on useless items, trips, or shopping sprees.  Nope; groceries, gas, and supplies. 
3) The above habit, of course, is what leads people into 5 digit debt.  Thank goodness our total limit wouldn't allow us to, but it's the habits that count.

There's a lot of different perspectives out there about debt.  The ol' some-debt-is-good-some-is-bad advice.  At the end of the day, I say debt is debt.  

We have thousands of dollars tied up with banks who are collecting interest off it.  We have four separate credit card payments each month.  This is a limiting situation that needs to be remedied before we become one of those dismal couples on the Today Show lamenting about our debt.

So Mike and I have resolved to get rid of our credit card debt.  All of it.  In 12 months.

This is going to be daunting task.  To do this, we need to get around $300 a month onto the cards.  This is impossible with just my salary.  Luckily, Mike is going to be getting his GI bill for going to school, which is going to double our monthly income.  We won't see that until mid-January, so we're proceeding cautiously for this first pay cycle.

The overall approach we're taking is a sliding scale.  We're tackling the cards with the lowest balance, giving them an extra large payment, and putting minimums + $5 on the rest.  

For us personally, spreading equal payments across the cards hasn't been helpful.  You never feel like you're getting anywhere.  So the goal is to feel better by knocking out whole cards swiftly.

First card up is the department store.  I just slashed the balance in half by putting $100 on it.  Hopefully we will get it to zero either by the end of the month or start of next one. 

And to really emphasize our commitment to this plan, we're also locking up the credit cards.  Literally.  All four reside in our lockbox.  There's no point in having them in our wallets when we're trying to eliminate them.

 

I do know people who have literally frozen their cards.  We get in our freezer too much for this to be practical :)

We'll let you know how we do as the months go on!

Question of the Day: Out of your total credit card limit, what percentage do you owe?  Are you comfortable with this number?