M is for Money

Tracking my net worth is becoming depressing, despite saving and investing as much as possible my net worth went down once again. Investing is not for the faint of heart or weak of stomach. The investment portion of my savings declined around 10% for the month. The news from Wall St says this is the worst start for stocks ever, down nearly 20% since the New Year. I keep repeating to myself, I don’t need this money for decades. It’s not really making me feel better. Hey at least we can commiserate together. Here is the breakdown.

Savings – I added $500 to my FNBO savings account. I need to save at least that much a month to meet my $7000 goal. Unfortunately savings rates are dropping, ING is down to 1.85% and FNBO dropped to 2.4%. I moved the ING savings to I-Bonds. The only money I keep at ING is for spending, but I save the interest that it earns me.
Bonds – I added to my snowflake bonds this month, I took the accumulated interest from the ING account along with my $50 ebates check.
Sharebuilder – No trades, just market declines
T Rowe Price – I invest $300 per month and still I have a lower balance than last month!
Fidelity 401k – from a former job, I no longer contribute
Wells Fargo 401k – I save 8% of my salary, then promptly lose it
Savings Accounts – this is where I set aside money for future expenses. Since I know I will spend this money eventually I do not include it in my net worth
Property Taxes – I set aside $460 per month
Dog Fund – D had an ear infection last week, $110 vet visit
Misc Fund – used to cover non recurring expenses, I’m also using it to save up for a laptop. My home computer is hurting
Care Credit Arbitrage – the care credit balance is 0% till the end of the year, see here for my arbitrage plan
ROTH IRA – I am finally starting a Roth this year, but I have no idea where. For now I’m setting aside the money I plan to invest until I figure out what to do
House Fund – I added $200 and then spent $210 at Expo design center. I’ve been dreaming of a bath remodel, since they are going out of business I bought the granite vanity counter that I’ve been coveting. I got it for $100 off, it was the last one left
Student Loan – I got my $60 back from the Treasury. I’ll close out this line next month
Care Credit – yes it went up, I can’t even go one month without a vet visit.



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Ask any pet owner and they’ll tell you the love and companionship of a pet is priceless. Unfortunately, caring for a pet can get pretty expensive. If you are looking to bring a new animal companion into your life or already have a few furry friends, here are 50 ways to keep both them and your wallet happy.

Finding Your New Friend

1) Avoid pet stores like the plague, their pets are overpriced and come from disreputable sources.
2) Adopt from a shelter or rescue, you can even find specific breeds for adoption. Check out Petfinder for pets near you. B came into my life courtesy of Petfinder.
3) Adopt an adult cat or dog. Puppies and kittens require a series of vaccinations, spaying or neutering and housebreaking.
4) If you insist on a purebred puppy or kitten, only buy from a reputable breeder. Reputable breeders are ones who are active in the dog or cat community, do health testing on their breeding stock and offspring, do not advertise in the newspaper or craigslist, offer lifetime support and have a welcome home policy if you cannot keep your pet.
5) In general, smaller is cheaper. The price for medications and veterinary care often depends on your pet’s size. A smaller dog eats less, costs less to board etc.
6) Fish require more money and time than you might imagine. The start up costs are high and you have to pay close attention to your fishes environment or they will perish.

Around the Home

7) Check craigslist for used dog crates, unwanted kitty condos, aquariums or bird cages.
8) Protect your house, destructive dogs need to be crated when you’re not home. This will save damage to your stuff and keep Fido from needing emergency surgery after eating the couch.
9) Protect your dog or cat, just as you would baby proof your home look for in home dangers to your pet like cleaners and poisons. Certain houseplants are poisonous too, check out the SPCA’s list of toxic and non toxic plants.
10) Fence your yard, this will keep Fido safe and not out running in the street.
11) Buy a crate sized for when your puppy reaches adulthood, use a box or divider to make it smaller for housebreaking.
12) Keep your kitty indoors, outdoor cats are more likely to get injured or sick and require additional vaccinations.
13) Make your own dog or cat bed, there are patterns online to guide you.
14) Dog beds are nice but your pooch will be just as happy with an old towel or blanket. Old pillows are also good.

Toys and Supplies

15) Go to a tennis court and collect abandoned tennis balls.
16) Tie a knot in an old sock. One of my dogs has a huge sock fetish.
17) Buy stuffed animals from the dollar store or thrift store, make sure there are no plastic eyes or other pieces that could be chewed off and swallowed.
18) Make a fleece tug toy - buy fleece fabric remnants and cut into strips. Using 3 strips knot one end together, braid and then knot the other end.
19) Strips of fabric and empty water bottles make great toys.
20) Rolled up bits of newspaper and aluminum foil will keep kitty entertained.
21) Dog.com has good prices on toys. Wait for one of their free shipping offers and load up, dole out new toys over the year. They also have inexpensive pet tags.
22) Don’t spend a lot on stuff puppies and kittens will outgrow like collars, harnesses or clothes.
23) Use dishes you have on hand for food and water bowls. No need for overpriced bowls from the pet store. Ceramic or stoneware are best, they are durable and don’t cause irritation like some plastic bowls.
24) Buy kitty litter in bulk, it doesn’t go bad.
25) Get a scratching post for your kitty to save your furniture, you can make your own with some wood and carpet or rope.
26) Petedge online has great prices on pet supplies. They mainly sell wholesale so orders less than $60 are hit with a $7 fee, wait till you need a bunch of items or band together with some friends.

Food and Treats

27) Buy food in bulk, store in an airtight container.
28) Costco’s Kirkland pet food is both good quality and affordable.
29) Don’t buy cheap kibble to save money, it has poor nutritional value and is loaded with fillers. Read the label, dogs and cats have a limited ability to digest grains, real meat should be the primary ingredient. Costco's dog food has chicken and chicken meal as the first two ingredients, that's a good sign.
30) Dry kibble is cheaper than canned wet food.
31) Grow your own catnip. Tie a little in the end of an old sock for a kitty toy.
32) Bake your own dog biscuits, you can find recipes online.
33) Don’t overfeed your pet, cats and dogs will quickly become obese. Obesity leads to expensive health problems later.

Pet Care

34) Spay or neuter your pet, birthing babies is expensive and it will reduce the risk for certain cancer like mammary tumors.
35) Ask your local animal shelter about low cost spay and neuter options.
36) Look for low cost vaccination clinics. Often the shelter or pet supply stores like Petsmart and Petco will sponsor these clinics.
37) Check out the prices online for medications, flea preventative and heartworm protection. Compare to your vets prices.
38) Don’t skip vaccinating to save money, parvo in particular is very deadly to puppies. Saving a sick puppy or kitten can cost thousands.
39) Don’t skip heartworm preventative. Heart worms are deadly and expensive to treat.
40) Get your pet its annual checkup. Diseases or problems caught early will be cheaper to treat.
41) Ask your vet about any discounts they can offer, they are often willing to work with you if money is tight or may have a special plan for routine care.
42) Be nice to your vet, good customers will receive better care and better discounts. I’ve been given many items for free because we have a good relationship with our vet. Or it might be the loads of money we’ve dropped there already!
43) Look for a vet school in your area, they often have cheaper services since they are vets in training. They may also be able to provide more specialized services than your local vet.
44) Learn pet first aid so you don’t have to run to the vet for minor injuries. The Red Cross offers a Pet First Aid course (which I’ve taken).
45) If you have multiple pets try buying medications or flea treatments meant for a larger sized animal and break it up. For example a heartworm pill meant for a 60 pound dog could be broken in half for 2, 30 pound dogs.
46) Do your own bathing and grooming. Buy a hand held sprayer for your shower. You can buy clippers to do an all-around trim. Or get a pet that needs minimal grooming!
47) Do your own nail trims. I’ve started using the Pedi-Paw, no worrying that I’ll cut the quick. I found mine at CVS.
48) Look into health insurance for your pet, get it while your pet is young before medical issues appear.
49) Try a petsitter or dog walker while you are away, it’s generally cheaper than boarding.
50) Brush your pet’s teeth regularly to avoid expensive dental cleanings later.

Feel free to add to my list, how else can you save on pet expenses?


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Professional female in search of suitable house husband. Must take care of cooking, cleaning and child rearing responsibilities. Baking ability a definite plus! Care and upkeep of the home will be the primary duty, along with producing, caring for and chauffeuring of children. Driver’s license and a good driving record are required. In exchange you will receive room, board, a car and spending money. All interested parties please respond to….

I don’t really care that my other half has a horrible income. I’d be happy with a house husband, domesticity has never been my strong suit. Unfortunately Mr. M isn’t interested in the job. I don’t resent his under-employment. I do want him to figure out what to do with his life.

He has been stuck in mid-life crisis mode for two years now. Every time he works on set he swears he is through with Hollywood and the BS. But, Hollywood is hard to quit. He earns $400-$500 a day on set, he’ll be lucky to make a $100 a day in another job. I understand his reluctance to quit, his earning potential dwarfs mine. Even if I rise through the corporate ranks the ceiling is around $200k. Production designers can make a million a year. So he sits in limbo, unable to commit to his career and unwilling to walk away.

I could never do his job, the uncertainty would kill me. I think any resentment that seeps from me is due to the instability of his work. Back in July we were on top of the world, he made $10,000 that month. Then there are the months where he makes nothing. I want him to succeed in Hollyweird, I’ve supported his career for years because I believe in him. It’s frustrating to watch years of work and devotion lead nowhere.

Traditional roles mean little to me, I’m happy being the breadwinner. I’m surprised I’m still clinging to the notion that a man has to buy an engagement ring. Several commenters made the point that saving for and buying a ring shows a man’s commitment and willingness to sacrifice. I think then there should be an equal statement or gesture women have to make! Ultimately it’s a partnership I’m after, the idea that we should save up the money together is a wonderful one. I’ll suggest it to Mr. M tonight, along with ways he can raise some cash.

The issue of role reversal in relationships is one I will continue to explore. Women are going to college in greater numbers than men, my situation will become increasingly common. I know a large part of our society still clings to a traditional family, dad earns the bread while mom stays home with the kids. What happens when mom starts earning more than dad? In our parents generation women worked in greater numbers, but they had little earning power. Now we are able to earn as much or more than our male partners, but we have no role models to follow. It’s up to us to help craft the modern woman, for ourselves and our daughters.

Edited to Add:

I must be giving an awful impression of Mr M. He does help around the house, he just doesn't want to make a career of it. He does laundry and dishes, he feeds the boys every day and takes them to their many vet visits. He does watch a lot of youtube, but it's not all he does. He has been working a lot the last two weeks, he started at 6am this morning and is still not home at 9pm. This isn't even a long day on set. This is how it goes, feast or famine. NPR had a wonderful piece a few weeks ago about how the demise of the studio system led to today's hollywood carnie. People like Mr M used to be employed by the studio, they showed up every day to the same place to work on whatever was the show du jour. Now they are itinerant, moving from job to job, hustling for their next paycheck. No stability, no security. It meant the demise of the hollywood middle class. Anyway, whatever career he has, I'll earn more. It's something we have to work through as a couple.

Girls – Would you Buy Your Own Engagement Ring?


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I consider myself a modern woman. I am highly educated and highly compensated. I work in a field traditionally populated by men. I own a house and can wield a wrench or a whisk. I don’t need a man to take care of me, I’m pretty darn good at doing it myself. But like a lot of women, sometimes the modern and the traditional collide.

I’ve waited a long time to get married, I’m the last one left of my friends and family. In fact Mr. M was married before. He vowed to never walk down the aisle again, until he met me. After 6 years together the only thing keeping us apart is money.

I haven’t opened Mr. M’s wallet to the world, what you see here are my finances. He has been underemployed since the day we met, the difference in our incomes is staggering. I pay the bulk of our expenses, he has trouble keeping up with his small portion. If I wait till he can afford a ring, I may be waiting forever.

I’m tired of suggestions to go without a ring or to get something cheap, what I want is quite modest. I feel like I’ve waited too long to settle for something that doesn’t make me happy. I know it’s not original, that it’s all the result of marketing by De Beers. I don’t really care, I know what I want.

All of this has led me to my latest thought – if this ring is so important to me, then why don’t I buy it for myself? Why should I burden Mr. M’s finances with something he can’t afford? Mr. M is not enthused by the idea, perhaps he is worried what his friends will think. For the most part he is proud that I earn more than him, but old stereotypes die hard. I think he would prefer to be the breadwinner.

In an era where women outnumber men in the workforce, are antiquated notions of courtship gone? I admit I’m not entirely comfortable with the idea of buying my own ring. Part of me still longs for a more traditional life. Am I modern and liberated or still shackled to roles more suited to the middle ages? Some days, I don’t know.

I’d love to hear from you, boys and girls. Should a woman of better means than her partner buy her own engagement ring?

See Follow-Up: The Engagement Ring Update

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Eligibility for the various stimulus packages cooked up by our government depend on your income. Just to make it confusing, it’s not based on your total income or your taxable income. Instead they use a figure known as your Adjusted Gross Income or AGI. This always leaves me scratching my head, I have no idea what my AGI is!

What is AGI?

Adjustable gross income is your total income minus certain allowable adjustments. Adjustments are different than deductions or credits. These adjustments include:

- Educator Expenses
- Health Savings Accounts (HSAs)
- Moving Expenses
- Alimony Paid
- IRA
- Student Loan Interest

It also includes adjustments that were made before you received your paycheck, your health insurance and 401k investments for example. It does not include exemptions, like you claim for yourself and your kids. Nor does it factor in deductions like mortgage interest or charitable donations. Instead exemptions and deductions factor into how much income you are taxed on.

What is AGI Used For?

Your adjusted gross income is used in many calculations and determines whether you qualify for various deductions and credits. The stimulus checks mailed out by the Bush administration last year and the current government’s plan to reduce taxes depend on your AGI. If you make too much according to your AGI, then you are not receiving any of these tax breaks (me for example).

Many tax credits and deductions are subject to an income test, if your AGI is above the limit your credit or deduction is reduced. For example AGI is used to determine how much personal exemption you can claim, whether you can even deduct your student loan interest and whether you can claim certain education credits. It is also used to calculate how much medical and business expenses you can deduct. Your ability to deduct IRA investments or contribute to a ROTH IRA are dependent on your income. The Earned Income Tax Credit (EIC) is based on AGI as well. For all of these reasons, you want your AGI to be as low as possible.

How to Determine your AGI

It’s tax season, perfect time for figuring out your adjusted gross income. Rather than trying to calculate your AGI, grab your latest tax return. Your AGI is listed on:

1) 1040 EZ – Line 4
2) 1040A – Line 21
3) 1040 – Line 37


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Deliverance from Debt was my first series here at M is for Money. Many of the blogs I enjoy reading center on the writer’s struggle with debt. While I can’t share my own journey out of debt with you, I can share what I learned along the way. I feel a kinship with those in debt, I want to see each of you succeed. For anyone thinking today is the day the debt stops, I want this series to serve as a guide. From my own experience I believe planning gives you the roadmap to success. For those already on the road, I hope this series gives you additional tools to help with the battle. It took years and a lot of trial and error for me to find my way, I wish I had started sooner. I wish you luck on your journey out of debt.

1 – The Breaking Point
2 – Tally up the Damage
3 – Where did my Money Go?
4 – Budget Basics
5 – A Plan of Attack
6 – Speeding up the Payoff
7 – Keeping Focused
8 – A.D. After Debt


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I’ve been so busy lately that I haven’t been responding to comments as much. I appreciate the feedback I get from you the readers and there are many comments that I’ve been meaning to address. Since it’s Sunday and I have some time, a follow-up post in order.

What Happened to the Neighbors?

Our houses are only a few feet apart so from my fence I can see inside their home. I went over to look in the light of day. It is definitely empty, no one lives there anymore. I never saw a moving van, but I am gone almost every day. At this point I don’t know if it’s due to foreclosure or something else. I’ll find out eventually.

Adjust Your Tax Withholding

For the record, this post was not inspired by any one person. Stories of oversized refunds are common this time of year. I want everyone to be aware that they can adjust their withholding rather than waiting for a large refund. I guess it’s a financial pet peeve of mine.

Kickbacks and Corruption

I had many uncomfortable moments this week at work after hearing the latest tale of corruption in the office. Every time my boss wants to talk to me, I cringe. The co-worker who was paying the kickbacks wants me to join his firm, he invited me to lunch next week. I’ve told him no before for other reasons, now I definitely won’t be working for him! I’d love to find a new line of work, but I can’t afford to. My plan was to eventually work for myself, now I worry that I’m too honest to be successful.

How Important is a College Degree?

Just after I wrote that post Mr. M picked up more work on set. Hollywood is a hard habit to quit, he makes really good money – when he works that is. I think college is out right now. He has no clue what he wants to do, it would be a waste of time. I hope eventually he completes a degree, but I’m not going to push it.

Was My Education Stolen?

This post sent me back to those awkward teenage years, not a time I want to relive. I hadn’t thought of this story in a long time, though it was prominent in my mind back in my early 20’s. I guess I found new reasons to hate my parents. Many commenters suggested I donate money for scholarships at my university to help a current student with their tuition. I think this is a great idea. I can’t pay it back, but I can pay it forward.

Weekly Carnivals

This week I was part of the Carnival of Debt Reduction at Green Panda Treehouse – Deliverance from Debt: Speeding up the Payoff. I also had a post up at the Money Hacks Carnival hosted by One Million Bucks – Deliverance from Debt: A Plan of Attack. I hope everyone had a great weekend and is ready for the week to come.

This is the final post in Deliverance from Debt. For the rest of the series: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6 and Part 7

There is life after debt, imagine that. The last few months and years your singular focus was that debt - now it’s time to prepare for the next phase. Without a plan for the future it is easy to fall back into old ways and habits. The final part of this journey is about breaking the cycle and keeping your debt in check.

But first - congratulations on reaching this step. Debt is often hidden away, it’s not shared openly. There is no one there to greet you at the finish line. There’s no ticker tape parade, no hero’s welcome. You have to find your own reward. For me, I found it in new goals. Debt limited my possibilities, now I could dream of retiring, of security, of savings.

You have climbed out of debt, now you have to stay that way.

You Have the Tools

You are already equipped with all the tools you need to stay out of debt. Tracking your spending is one of the most powerful ways to take control of your finances. Continue this habit and you’ll notice when your spending starts to get out of control. Oblivion is the path to debt.

Continue to budget, in place of debt you can start saving for what’s important. You should save for emergencies and retirement. More importantly, you can start spending more. Within your budget you can prioritize whatever you want. What did you cut to eliminate debt? Was it eating out or new clothes every season? Getting out of debt means having more money to save and spend, but you still need a budget to keep you honest.

Watch out for Traps

Getting into debt is easy. It can come on slowly, like the extra pounds you put on over the years. Or it can come back quickly in a moment of irrational exuberance. Lifestyle inflation is a common cause, your sense of needs growing faster than your income. Not having enough savings is another trap. When the inevitable emergency arises, will you have to pay for it with debt? You need financial awareness to avoid the dangers.

The journey out of debt showed me how my life and my finances were intertwined. 10 years ago I had zero interest in money, savings or investing. My lack of concern or understanding was part of the problem. Like it or not money is a big part of our lives, everyone needs basic financial literacy.

Set Goals for the Future

It’s hard to fall into debt when you’re busy saving for the future. New goals are a great way to stay motivated and moving forward. At first my goal was to get out of debt, now I’m saving up an emergency fund, investing and adding to my retirement accounts. I’m proud of my savings, I’m not going to give them up to debt.

Break the Cycle

Like yo-yo dieting, debt has a tendency to repeat itself. Staying out of debt is just as important as the act of getting out debt. This final step is crucial to your long-term success. It’s easy to fear the future, but with a plan it’s possible to break the cycle.

It’s eerily quiet tonight. I noticed the stillness a few nights ago too. But as with many absences, you don’t always comprehend it at first. Suddenly I realized, what happened to our next door neighbors?

A house across the street has been vacant for a year or more, good riddance. I nicknamed the owner creepy Tom. One time LAPD Swat Officers used our yard as staging grounds for a drug raid on the house. I don’t miss Tom.

The house next door to it may become vacant. The couple living there were our friends, they have two young kids. J, the husband, was a stay at home dad. He was the one who wanted kids, his wife obliged. His wife G went to work every day to support them. Two months ago J decided, what about me? So he took off, abandoning his wife and kids! She is going to move back in with her parents.

That takes us to the house next door. The little house next door houses a lot of people. I’m not even sure how many, it keeps changing. Needless to say, there is always someone coming or going, food being cooked or dishes being washed. Our houses are very close together, it was hard to escape the sounds of their everyday life. But last night I realized, the house had been quiet for a few days. With a lot of people come a lot of cars, finding a place to park was always a problem. But today I realized that I’ve been able to park in front of my house all week long. Where have they gone?

I’ll have to poke around in the light of day to see if they’re simply on vacation. It’s funny, I didn’t notice any curtains in the windows. The house seems empty.

If I see one more financially savvy person expecting a huge tax refund, I’m going to scream. I don’t get it, why don’t you like your money? I like my money warm and safe in my bank account. I don’t lend my family money, why would I lend it to the government? You don’t need to wait till tax time to get your money back. It’s easy to adjust your withholding and get your money now, not later.

But I Like my Refund

I’ve yet to see a single good argument in support of large refunds. There is no benefit to it, you’re simply getting back money that is yours. Even worse the government doesn’t bother paying interest on that loan. Meanwhile you’ve had unexpected bills or emergencies come up, you’ve had to dig out the credit card or dip into savings to cover them. You’ve put off large purchases or neglected your emergency fund, all in anticipation of a refund. Some call it a forced savings plan but the fact is - most people spend that refund.

How Taxes are Withheld

The government doesn’t trust you to pay all of your taxes at once nor do they like waiting for their money, so they make your employer withhold it from each paycheck. The amount depends on your salary, your family and the current tax codes. Your employer has you fill out a W-4 form so they can estimate your withholding.

The basic W-4 form takes into account your filing status and family situation. You can claim an allowance for yourself, your spouse and your kids. There are also certain allowances for childcare costs. Most people are due a refund because either their family situation changed or they have a large number of deductible expenses. The second page of the W-4 form includes a worksheet to help you translate your deductions into allowances. The more allowances you claim, the less tax will be withheld.

How to Calculate

The IRS provides a worksheet to help you calculate your allowances for deductions. There are also websites like Paycheck City that will guide you through the process. The basic equation is:

(Estimated Itemized Deductions – Standard Deduction)/$3500 = Allowances on W-4

I happen to claim 8 allowances on my W-4 even though I’m single with no kids. A LA sized mortgage and California’s tax rate will do that to you. This year I will be getting a $400 refund from the federal government, close enough to my goal of $0.

Each state with income tax will have its own version of this form. The calculation will be different so follow the directions. Paycheck City has state calculators available, but you must register to access them (free).

Adjust your W-4 Form

Now you know that too much tax is being withheld. This is easy to fix, you can download the necessary forms online or ask for them at work. Reduce your withholding and have more money in your paycheck all year long. Use it to get out of debt, build up your savings and for life’s everyday needs.

After 30 plus years on this planet I’m still a bit naïve. I know corruption is common, more so in certain businesses and cultures. I never knew it was common in my line of work.

I chose an unlikely path for a woman and now realize I’ll never achieve my full potential in this career. Too many deals are made on the golf course, around the poker table or at the strip club. It’s still a man’s world I play in. I could try to join their game, but I have no desire to. Career suicide and all, I’d rather be me.

One frequent guest at the poker table is a city official who controls our project’s fate. He is regularly wined, dined and entertained. I believe it goes much further than that, I believe he is being bribed. This came to me from another co-worker, an occasional guest at the poker games and one-time confidant of the man making the payments. City worker’s salaries were exposed by the Daily News last year, this person makes less than I do and yet lives in one of the most exclusive communities in Los Angeles. My neighborhood would be affectionately referred to as, the barrio. I know this man is corrupt and yet I must treat him with respect and deference. Some days I hate my job.

Two other members of the poker club had a falling out recently. I didn’t know the cause until an outside source told me the other day. The first guy, we’ll call him A, is a co-worker who started his own firm several years ago. He is good at networking, likes to golf and has done very well for himself. He lives in Beverly Hills and drives a top of the line Mercedes. He has a portion of the work on my current project. The other person is my boss, whom I’ve never held in high regard. We’ll call him B. Apparently A got the job because he agreed in secret to kickback money to B. A few months ago, he cutoff those payments. As the boss, B has in turn removed most of A’s staff from the project and cut him out of work. They used to be buddies, though I never understood why. Now I know it was a mutual love of money that drove this indecent affair.

All of these actions are unethical if not illegal. This is your tax dollars at work, all of this money is public money. I’m saddened and discouraged. How does a person with a conscience get ahead in this world? Now I see - they don’t.

This is Part 7 of Deliverance from Debt: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6

Keeping focused is the hardest part of getting out of debt. Many people never finish the journey because they get discouraged or distracted along the way. Knowing that, how can you keep today’s commitment going strong into tomorrow? This is where the real work begins. This is where you use all of the tools that you’ve learned - track your spending, use your budget and follow your plan of attack. You need to keep this focus all the way to the end.

It’s easy to get distracted, new shoes are calling your name, there is the big screen TV for dad and the kids are always wanting more. It’s easy to toss in the towel, getting out of debt is a war of attrition. You need to be prepared, your resolve will be tested at some point. You must keep focused on your goal and avoid the temptation to quit.

Track Your Progress

Track and record how much debt you’ve paid off by updating your debt tally once a month. Note how much debt you paid off the preceding month and how much you’ve paid off since the start. Month to month the changes seem small, but over time your progress becomes apparent. Make it a game, how much can you pay off this month. Try to beat your score from last month.

Speed up the Progress

Motivation is difficult to keep going forever, try to get across the finish line faster. In addition to the tips I shared last week, consider using a 0% balance transfer for your credit card debts, refinancing loans to a lower interest rate or consolidate your debts using a personal loan or equity line of credit. Look for ways to lower your interest rates and pay every penny you can to debt.

Reward Yourself

Set up a reward system to celebrate important milestones on your journey out of debt. You should treat yourself when you pay off an account or a large part of your debt. If the whole family has been sacrificing for the cause, choose something that will make everyone happy. Don’t go crazy of course, many people have restarted the debt cycle by rewarding themselves too much.

Remind Yourself

Why do you want to be debt free? What is your motivation? What will it feel like when you’ve paid off your debt? Make a list of the reasons why you are doing this and place it in a prominent place where you will see it every day.

The Obstacle Course

Getting out of debt isn’t easy, there will be obstacles along the way. You might lose your income and cars always break down when you can least afford it. It’s your reaction to these obstacles that will determine whether or not you’ll succeed. You have to rise to the challenge and continue on.

Plan for the Future

Focus on your life after debt, what goals have you put off because you are in debt? What dreams can you fulfill once your financial life is in balance? Plan for the future and use it as motivation.

Commitment

Back in the very first post of this series I talked about the importance of commitment. It may take you 6 months or 6 years to get out of debt, that’s a long time for things to happen. I carried a credit card balance for 11 years, I would pay it down only to run it back up again. Saying you are committed is easy, now you have to follow through.

Part 8: A.D. - After Debt

Poor frugality, misunderstood and maligned. Often mistaken and mixed up with miserly or cheap, it’s got a bad reputation. If someone calls you frugal, is it a compliment or an insult? I’m not really sure. So how did the concept of rational and responsible consumption become so derided? Is it because consumption without consequence is part of the American fairy tale? I think it’s too late to save frugality, the damage is done. It’s time to come up with a new term to takeover the frugal fight.

What is Frugality?

Frugality is difficult to define, it’s a relative term. There is no master list of frugal choices to guide you, instead it depends on your personal needs and available resources. How can you most efficiently use one limited resource - money? Price is only part of the equation, sometimes the most expensive choice is also the frugal one. I learned the hard way with a toilet seat. Items that break too easily are merely cheap, not frugal. Ultimately it’s a value judgment you have to make, you weigh the benefit you get from a purchase against its cost. One person’s frugal is another’s frivolous, everyone has their own definition.

Who is a Frugal Person?

We can’t all be Bill Gates, our bank accounts are more limited. We may not be able to fulfill all our needs and desires, given what we have. A frugal person uses their money wisely, balancing their wants and needs versus the funds available. A frugal person is conscious of what is important to them.

A frugal person:

1) Does not spend money mindlessly
2) Does not buy things they don’t need
3) Does not overpay for items they do need

A frugal person will often choose less over more, realizing that more stuff does not lead to a richer life.

What is a CoCo?

We are all consumers of resources in varying degrees, be it food, housing, clothing or whatever else. Frugality is about the choices we make, do we consume a lot or a little? Do we have the resources to support our consumption? A frugal person is a conscious consumer, aware of each purchase and how it fits with their lifestyle and goals.

CoCo = Conscious Consumer
CoCo = Conscious Consumption

I’m a CoCo, I weigh the cost and benefit of purchases. I ask myself whether I can afford the things I want. I am aware of how my spending affects my long term goals for a family and the future.

The CoCo Revolution

For the first time in a generation, consumers are awakening to the choice before them. The CoCo Revolution is one of awareness, self-awareness. It’s about taking control of your finances. It’s not anti-consumption, it’s opening your eyes and doing the math. It’s about financial honesty, living within your means. It’s consciousness.

It’s been another busy week for me, if only I didn’t need a day job. I’m excited by the move to my own domain, so far I haven’t noticed any problems with links but somehow my template went haywire. I’m trying to get that fixed today. This week I participated in four carnivals around the web:

1) Carnival of Money Stories (Editors Pick!) at Funny About Money: Even Your Friends Can Screw You
2) Carnival of Money Hacks at Your Money Relationship - Deliverance from Debt: Budget Basics
3) Carnival of Personal Finance at Dollar Frugal – Debt to Income Ratio
4) Carnival of Debt Reduction at Simply Forties – Deliverance from Debt: Where Did My Money Go?

The time has come. M is for Money will be moving to its new home on the net sometime this weekend. When I started this blog I had absolutely no clue what I was doing. I had already chosen my blog name, but I couldn't get the matching blogspot address. This has caused confusion ever since. I'm staying with blogger for hosting so all old links should automatically redirect, fingers crossed. Only the name will change, look for me at my new home:

http://www.misformoney.net/

Miss M

This is Part 6 of Deliverance from Debt: Part 1, Part 2, Part 3, Part 4 and Part 5

I knew I had a debt problem long before I did anything about it. Based on my balance and how much I could pay each month, it was going to take a decade to be debt free. That was simply too long, so I stuck my head in the sand and kept spending. It’s a common reaction, many people never start down this road because the journey is a long one.

Everyone wants to get out of debt the quick and easy way. Unfortunately, that method doesn’t exist. You can’t get out of debt overnight, there is no quick fix to years of overspending. But there are ways to speed up the process, wiping months or even years off of the schedule.

Getting out of debt takes money. If you want to dig out faster then you need to find more money to put towards it. There are several ways to do this:

1) Earn more
2) Spend less
3) Do both of the above

Earning More Money

Earning more money is in some ways easier than trying to cut expenses, most of us aren’t very good at cutting back. It’s also effective, if you stick to your budget this extra money can go straight to debt repayment. Regardless of your current commitments, there are ways to bring in a few extra bucks.

Second Job – give up your free time for a year and take a second job. Pulling double shifts is tough, really tough, but think of the payoff. You could be debt free in no time if you’re willing to work your tail off.

Side Income – there are lots of ways to earn side income without taking on another job. You can earn dough from doing online surveys, selling your handmade crafts at fairs, or being a mystery shopper. See this post on Side Income for more ideas on making money.

Raise – go ask your boss for a raise, but don’t go in cold. Prepare an argument for why you deserve more money - have you brought in new clients, saved the company money or been an exemplary employee? Are you underpaid compared to the average for your field? Be bold not bashful, you need the money. Put every dime of that raise towards debt.

Snowflake – snowflaking is the act of putting extra bits of money to work, in this case by paying off your debt. This extra money could be a refund or rebate, money you found on the street or leftover money in your budget. Instead of frittering away these funds, use them to speed up your debt payoff.

Sell Stuff – have a garage sale or use ebay and craigslist to clear the clutter and bring in extra cash. Look at your life, what do you have and not use. Chances are you paid for some of that stuff with debt, now do the reverse.

Spending Less Money

If you can’t earn more then you’ll have to spend less. Look at your budget again, especially your variable or discretionary expenses. Where can you cut, what can you live without? These don’t have to be permanent changes, unless you want them to be. But until you are out of debt, luxuries are something you cannot afford.

Frugality – frugality is about being a conscious consumer and user of resources. You can cut back on things that are of little value to you while not impacting your lifestyle. It’s a mindset more than a to-do list, weigh the value you will receive against the cost of an item. Use coupons, wait for sales and ask yourself, do I really need this? Here are some more ideas on Frugality.

Cut Your Fixed Expenses – frugality will only get you so far, so where else can you cut. If you want to get out of debt as fast as possible, move to a cheaper place, take in roommates, sell your car, drop your monthly subscriptions. Get creative, rent out your garage or extra room as storage to offset your housing costs. Check craigslist for people exchanging housing for help, there often people looking for childcare or domestic type help in exchange for a room.

Move in with Mom and Dad – the bane of 20-somethings everywhere, move back in with mom and dad to cut costs. You should still pay rent and help with bills, you’re an adult now. But they usually give you the family discount (and your mom is secretly thrilled to have you back in her clutches). Don’t let pride get in the way of getting out of debt, in many cultures kids remain at home well into adulthood.

Go Homeless – you wouldn’t be the first person to give up the comfort and cost of a home to pay off debt. Some people live in cars because the have no choice, others do it as an extreme way to cut cost and get out of debt. Put your stuff in storage and get a gym membership so you have a place to shower and get ready each morning.

Do a Little of Both

The more money you have to throw at your debt, the faster it will be gone. I erased over $20,000 in credit card debt in one year by taking on a higher paying job and drastically cutting my spending. If you are discouraged by your debt payoff timeline, do what you can to speed it up. The fastest way across that finish line is to earn more and spend less.

Part 7: Keeping Focused

This is Part 5 of Deliverance from Debt: Part 1, Part 2, Part 3, Part 4

It’s time to attack that debt. You’ve laid the groundwork by tallying up how much debt you have, tracking your spending and developing a budget. Now it is time for strategy and tactics. Everyone has an opinion on how you should get out of debt. I say choose the method that works for you, critics be dammed. Getting out of debt is a numbers game, but it’s not that easy. Let’s get planning.

Step 1 – It Never Hurts to Ask

Call your credit cards and ask them to lower your rate, it won’t hurt to ask. If you’ve been a good customer, they might consider it. Tell them you are mulling a better card from another bank, they don’t want to lose your business. If you have a history of late payments and overdrafts, you won’t have much luck at first. Pay your bill consistently and on time for several months and then try again. Late payments have a big effect on your credit score, as your credit improves you can negotiate better rates.

Prioritizing Your Debts

There is a minimum amount you have to pay each month to each creditor. At first I had you lay out a budget using only those minimum payments. In my example budget there was $70 left over at the end, hopefully you have a little left as well. If you don’t have extra, look at those discretionary expenses again. Didn’t you make a commitment to getting out debt? But - don’t stress if you can only make the minimum, celebrate all progress.

You probably have several debts you want to erase. It could be fixed installment loans like student and car loans or revolving debt (where the balance can go up and down) like credit cards. Each has different interest rates, rules and minimum payments. Which debt to focus on is your choice. The goal is to get out of debt, no one says you have to do it a certain way. But there are some logical plans of attack you should consider.

The Snowball

This is the Dave Ramsey classic, list your debts in order from smallest balance to largest balance. Any extra money should be put towards the debt at the top of the list, the one with the smallest balance. You can pay that one off more quickly – a psychological boost. Once debt 1 is destroyed, you take that entire payment and add it to the payment for debt 2. You continue this cycle on down your list, applying the former payment to the next debt. This is the snowball, you keep making the same total payments but the amount applied to each debt grows successively larger. The problem with this method is that it ignores interest rates, meaning you may be paying more in interest.

The snowball concept can be applied to any debt strategy as a way to speed up your payoff. You might be inclined to slack off after closing out one account, to use the money for something more fun. You can do that, but it will take you longer to get out of debt.

The Interest Minimizer

List your debts in order from highest interest rate to lowest. In order to pay the lowest total interest, focus on the highest rate account first. Apply any extra money towards that top debt until you have paid it off, you are only making minimum payments to your other debts. Once the top debt is gone you apply its payment to the next debt on your list, the snowball. The problem with this method comes when your high interest account also has a high balance. It can be discouraging to spend years chipping away at that large balance feeling like you are not making progress. You might also be ignoring a debt with a similar interest rate but smaller balance, one you can tackle more easily. For the mathematic in you, this is the method to choose.

A Single Focus

s there one debt on that list that gets under your skin more than the rest? Is there one debt you can’t stand to look at? Guilt, anger or sadness are valid reasons for choosing one debt over another. Feel free to focus on that debt, you’ll feel great once it’s gone. It may not make logical sense, but getting into debt didn’t either. You can insert the snowball for maximum effect, focusing on your next most annoying debt.

Spread the Love

Want to tackle everything, then split up your extra money between your debts. This way you are accelerating the payoff, and making progress, on all of them. If you have multiple debts with similar interest rates and balances, this may be the way to go. There are a few drawbacks to this method, it may take a long time to erase any one debt from your balance sheet. Staying motivated is a big hurdle you’ll have to overcome and slow progress can be discouraging.

The Most Important Method

The road out of debt will be filled with obstacles and setbacks. Emergencies will happen at the worst times, your balance may start creeping back up. You need to persevere, keep at it even when nothing works as you planned. No matter what method you choose, keep putting one foot in front of the other. Keep working to pay off your debts and eventually you will reach that goal.

Part 6: Speeding up the Payoff

I don’t know how to help Mr. M, he has been unemployed for months. He spent the last 6 years working freelance on Hollywood movie sets. The work is sporadic at best and even in good years he only made $30,000. At 34 he still doesn’t know what to do with his life. He’s worked various jobs, attended college off and on and has no real plan for the future. The lack of work and lack of progress with the job hunt is starting to take a toll on both of us.

I know he has been applying for jobs without success. Yesterday I asked him what sort of jobs he has been applying for – middle management he said. Today I broke it to him that without a college degree, he’s very unlikely to land that sort of position. He said but I’m more qualified and have more experience, doesn’t that count. Sadly, I don’t think it does.

When we were growing up the news, our parents and teachers, basically everyone said you won’t go far without a degree. I took that to heart, went to college and got a degree in engineering. It’s served me well, I earn good money. Every study that is done says that college graduates earn way more than people who only have a high school diploma. Mr. M is smart and creative, he was salutatorian of his high school - but never finished college. Does he have a shot?

I don’t know what advice to give, whether he should bite the bullet and finish college, choose a career that doesn’t need a degree or find a non-traditional way through this world. I’m the problem solver in the relationship, I think he expects me to solve this one as well. I only know what worked for me – an education. Maybe you, my more world-wise readers have some ideas.

Would you report a friend or family member who has been unethical? What if it were your parents? Many years ago my parents did something that I’m still uncomfortable with today. Maybe it was nothing, I was angry with them at the time. But I’ve never looked at them the same way since

When I was 17 my parents separated. My dad lived in an apartment in another neighborhood while my mom and I stayed in the house. Since she had worked for my dad, she was also unemployed. I was applying to colleges at the time, the only ones I applied to were 3000 miles away in California. I had waited my whole life to get away from my parents - far, far away.

The college I ended up going to offered me a scholarship, merit based but the amount was variable according to need. As the child of an unemployed single mother, I qualified to have all of my tuition covered. My parents were in the process of reconciling by that point, but they saw the value in claiming to still be separated. Every year my parents claimed to be separated when they were not, and my scholarship paid for full tuition. I don’t remember when I found out, I know I was angry with them for being dishonest. I also didn’t do anything about it. Am I guilty as well?

I tell myself that I’ve paid the debt, I stayed in the state that educated me (I went to a public university). My career involves public works projects and I pay a lot in taxes. I know I won’t do the same to my children, I plan to help them with their education. I would never lie to get them additional financial aid. Still at times I wonder if someone else is paying for my free education with their own student loans. Was my education stolen from them?

Unless this is your first visit, you may have noticed the new look around here. Out with the old, in with the new. I’ve noticed a few bugs in the template which I’ll try to fix. I don’t expect a template downloaded for free to work perfectly. Let me know if you notice any problems. Unfortunately I was too busy this weekend to do my usual link love and carnival round up. I enjoy discovering new blogs and reading interesting points of view, too bad there aren’t more hours in the day. I had the chance to participate in 5 carnivals this week so I give my thanks to all of the hosts.

• Festival of Frugality at My Journey to Millions – (Editors Pick!) Frugal Convert
• Carnival of Money Stories at Dividend Tree – Family Ties
• Money Hacks Carnival at Curious Cat Investing – Finding New Mountains to Climb
• Carnival of Debt Reduction at Rocket Finance – Deliverance from Debt: The Breaking Point
• Carnival of Personal Finance at Funny about Money – Deliverance from Debt: Tally up the Damage

I read a comment today that really pissed me off. This was on another blog and the post was, do you choose to earn more or spend less? Here is one person’s response:

"I don’t think people should live below their means, keep the lifestyle you have and increase your income. Why should you live below your means? There is so much prosperity on this earth that it’s insane."

I don’t know what planet this person is living on, it’s certainly not planet earth. Most people do not enjoy our standard of living, in fact many lack the most basic needs like food and water. Here are a few poverty statistics from the website Global Issues:

• 1.1 billion people in developing countries have inadequate access to water
• 2.6 billion lack basic sanitation
• Approximately 790 million people in the developing world are still chronically undernourished
• 1.6 billion people — a quarter of humanity — live without electricity
• In 2005, the wealthiest 20% of the world accounted for 76.6% of total private consumption. The poorest fifth just 1.5%

If everyone on earth were to have an equal level of prosperity, ours would have to decline from what it is now. We consume a far larger portion of the earth’s resources compared to our numbers. Those resources would quickly be depleted if everyone on earth were to live like we do. It’s unsustainable.

I think anyone living in the US or other ‘first world’ nation should be acutely aware how our relative prosperity is balanced on the back of billions of poor people around the globe. Cheap labor and the exploitation of other country’s natural resources fuel our growth. We benefit from their lax environmental standards - their people pay in cancer and cities choked with pollution. I don’t understand how people can ignore these realities.

It brings to mind an argument I had with an ex-boyfriend many years ago. He thought the earth was capable of supporting an infinite number of people. My head almost exploded from the absurdity, how could a finite space contain an infinite number of anything. He stuck fast to his belief even though it made no logical sense.

I know I’m well off in this world, just by virtue of birth anyone reading this right now is better off than the average human. I’ve certainly had my woe is me moments, but then I realize that most people would kill to have my problems. I know that consuming as much as I can, simply because I can, is irresponsible. I’m not saying ditch your stuff, move to the third world and live like a monk. Simply realize that your consumption has consequences.

Your debt to income ratio is one tool creditors use to determine your credit-worthiness. If you are currently paying a high percentage of your salary to debt, then your ability to take on new debt is limited. I’ve seen some confusion on how to calculate a debt to income ratio, but it is really quite easy.

The ratio is based on the monthly payments for your debt, not your debt total. Let’s say you have a $20,000 car loan with a $350 monthly payment, a $10,000 student loan with a $175 monthly payment and a credit card with a minimum monthly payment of $75. Your total monthly debt obligation is $600. How does $600 compare to your gross monthly salary (before taxes and deductions)? For our example your gross salary is $2500 per month:

$600/$2500 = 0.24 or 24%

In this case the ratio is 24%, that is the percentage of your salary you have to pay towards debt each month. If you tried this calculation as the ratio of total debt to total income, you would get an impossible 110%. It is always calculated using the minimum required payment for your debt, even if you pay more each month.

Your debt to income ratio is often used for mortgage affordability calculations. A mortgage is a large debt that will be with you for years, so your ability to pay it back is a big concern to lenders. A high ratio means there is very little left over for basic expenses, making you a riskier investment. Home lenders typically look at two numbers, the front end and back end ratios. The front end ratio is the percentage of the mortgage payment (including taxes and insurance) compared to your salary. The back end ratio is the percentage of your total debt - the mortgage, the car, etc - to your salary. Let’s add a $50,000 mortgage with a total payment of $700 to our example:

Front End Ratio - $700/$2500 = 0.28 or 28%
Back End Ratio - $1300/$2500 = .52 or 52%

There are general guidelines that say your front end debt ratio should not exceed 28% and your back end ratio should be below 36%. In our example, you meet the required front end ratio but your other debts are way too high. After paying for the mortgage, the car, the student loans and the credit card, you have very little left over to pay for food, gas and utilities. You would be at high risk for defaulting on your home and most lenders would not give you a mortgage with these numbers.

Go calculate your own debt to income ratio. If you don’t have a mortgage now, use these guidelines to figure out how much payment you can handle with your salary and current debts. You can see how paying off your debt will allow you to borrow more for a house. I’ve had a debt to income ratio as high as 56% (great credit and lenient lender) but now I’m down to a far more comfortable 28%. What is your current percentage?

This is Part 4 of Deliverance from Debt: Part 1, Part 2 and Part 3

Use the information you’ve gathered (tally of debts and money tracking) to create your spending categories. List how much you typically spend on each category, don’t assume you’ll suddenly become more frugal. Start with listing the minimum payments to your debts, you can increase it later as you adjust your budget. Add up all your monthly expenses and subtract them from your monthly income. Is the number positive or negative? If it’s negative, then your regular spending is driving you into debt and you must find ways to cut back. I’ve prepared a simple sample budget to share, with some typical expenses. Use whatever categories you like, families with kids will have different expenses than a young single person.

We have two cars, three if you count the rusty pickup taking up space in the driveway. For years my Subaru has been our main mode of transportation. Last year I bought my parents used Durango off of them for $2000. It broke down over the summer so it hasn’t seen much use, but now that it is up and running I’ve been driving it more often. Mr. M doesn’t go to work every day, so I have my choice of cars. That is my dilemma.

The Subaru is a great car and gets better gas mileage than the Durango. But it is a manual transmission – not fun in gridlock – and the maintenance and repairs are expensive. It’s also a turbo, so it doesn’t get that great of mileage for a sedan. I finally paid it off last year and want to drive it for many years to come. Since it’s been our primary vehicle, it has a fair number of miles on it. Lately I’ve been driving the Durango to work to give the Subie a break. The Durango gets worse gas mileage and I do look a bit silly driving solo in this huge vehicle. So what do you think:

Subaru – 21 mpg, more expensive repairs, want it to last forever
Durango – 15 mpg, cheaper repairs, don’t care how long it lasts

Which car would choose to drive?

This is Part 3 of Deliverance from Debt: Part 1, Part 2

I have no idea what I bought with $20,000 worth of debt. I could list some of the bigger purchases, but much of it was spent at the grocery store, the gas station, maybe for a night out. The cause was simple, I lived beyond my means. Money slipped through my hands like water from a leaking faucet, a slow trickle I barely noticed. Understanding your money - where it is coming from, where it is going to - is a big part of getting a handle on your debt.

Track Your Spending

Like tallying up your debt total, this step is about gaining knowledge. You need to get smart to get out of debt. Don’t change your shopping habits for this exercise, be honest about your current spending.

EXCEPT: The Debt Stops Here – please don’t dig a deeper hole

If you always buy a latte three days a week, keep doing it - but record the expense. Carry a small notebook or journal and a pen (PDA for techies) to note any time you spend money. Parking, shopping, gas for the car or bills at home, every time you spend money it needs to be noted. This includes payments you are making to your debt and money you put into savings. If you have combined finances with a significant other, they need to participate in this step. Getting out of debt is a joint venture.

I confess I don’t track my spending, but I started my own list to share this step with you. For the last week I have noted day, amount and where/what for in a small planner I carry. Today I put this into a spreadsheet to post – I have the handwriting of a third grader...

Payday!

Just as you are keeping track of your expenses, keep track of incoming money either from a paycheck, spousal support, tips, unemployment or even the $5 bill you found on the sidewalk. This is a lot easier than tracking your spending, most of us spend more often than we deposit (and we wonder why we’re in debt). I included my paycheck and Mr. M’s contribution to the bills in my list.

Show your Commitment

No one likes this step, not even engineers like me. It can be tedious, boring, and easy to forget. More importantly - it’s enlightening. Most of us don’t know exactly where our money goes. This will give you important insight into your debt. At this point you must realize there is only so much money to go around. Now that you are committed to digging out of debt, you have some hard choices to make. First, where does your money go?

Track your money for the next month. We will use that information to prioritize your spending and to determine how much you can commit to debt. If you would like some company, Finance for a Freelance Life is challenging her readers to a Where is My Money Going month. She has tips and advice on ways to track spending all month long. As tedious as this step may seem, it’s a vital piece of the debt freedom puzzle and an easy way to show you are committed to getting out of debt.

The Debt Stops Here


Part 4: Budget Basics

When it comes to your money, don’t trust anyone. I learned the hard way that people who are both financial professionals and personal friends, will still screw you. This happened four years ago when I was buying my house. Southern California is a hub of home-buying related businesses, from subprime lenders to mortgage brokers. It’s no surprise then that I know many people who made a living off of the housing bubble. When it was my turn to buy a home, I felt confident my knowledgeable friends would help me through.

K was a mortgage broker who helped several other friends through purchases and refinancings. I had known him for years and everyone he worked with gave him glowing reviews. I didn’t even shop around, when it was time for a mortgage I trusted K. He set me up in an 80-20 loan with a 5% downpayment, 6.25% on the 1st and 7.75% on the 2nd. The good faith estimate for closing costs was $4,000. The rates seemed a little high, but K assured me that it was the best I could do.

The nightmare that followed was not entirely K’s fault. His brother died suddenly, unexpectedly and very young one week before my scheduled closing. K said his boss would handle my loan, not to worry, everything would be fine. My first sign of trouble came a few days later, when my realtor asked if I had signed my loan documents yet. I hadn’t. She said then there is no way we can close on time. K’s boss and assistant were not the least bit helpful, they had dropped the ball on sending in the paperwork. My closing was delayed, I had already given notice on my apartment and my blood pressure was through the roof. When the lady from escrow called with the final closing costs, I had a breakdown. Instead of $4,000 the closing costs were $10,000! After getting a detailed cost list, striking out all the bogus charges and making the mortgage broker and my agent eat some of their fees, I got it down to $8,000. K’s estimate was off 100% and I was left scrambling for another $4,000 to close. They sent a notary public to my apartment with the loan documents, frustrated by the delays and this strange woman in my apartment I quickly signed the paperwork – 6.375% first loan from Countrywide and a 7.875% second from Chase.

I took a cash advance from my credit card to get the money for closing. We settled in to the house and soon had other headaches to deal with. I discovered that K had not sold me the best possible loan, when I called him on it, he played dumb. I broke off our friendship. It wasn’t till months later I realized, the bastards had slipped a higher rate into the loan documents I signed! The final paperwork was 0.125% higher than the rate I was supposed to get. By that time I was shopping for a better loan to refinance, the housing bubble was in full swing and I had 20% equity. I refinanced to one loan and moved on. But I’ll never forget that time a friend decided profit was more important than our personal relationship.

I’m sure I’m not alone, how has a friend screwed you?

Another year, another lousy month for the stock market. Is anyone else getting nauseous from the roller coaster ride, cause I am? I had another expensive month of vet bills. B’s nail is still not healed, he goes back for another follow up visit tomorrow. Our favorite vet works at another clinic on Fridays, we’ll transfer over there once B has his stitches out. I paid off my student loan this month, goal number one on my list. Now I need to tackle the Care Credit balance. I finally received my employer’s 2008 401k match, they only contribute once a year. Because of that, my net worth creeped up. Yay!
Savings – I put $200 into my online savings at FNBO
Bonds – I’ve started snowflaking extra money into I-bonds.
Sharebuilder – No trades, just market fluctuation
T Rowe Price – My automatic investments total $300
Fidelity 401k – from a former job, I no longer contribute
Wells Fargo 401k – I save 8% of my salary, my employer finally contributed 2008’s match (2%)
Savings Accounts – this is where I set aside money for future expenses. Since I know I will spend this money eventually I do not include it in my net worth
Property Taxes – I set aside $460 per month for taxes and insurance
Dog Fund – I used some of the money for B’s nail
Misc Fund – used to cover non recurring expenses
Care Credit Arbitrage – the care credit balance is 0% till the end of the year, see here for my arbitrage plan.
House Fund – no change
Student Loan – paid in full, then they deducted my automatic payment a week later! So now they owe me $60, supposedly it will take 4-6 weeks for the treasury to cut me a check.
Care Credit – C’s palate surgery and B’s nail surgeries are now included. I’ve budgeted to payoff the balance by the beginning of December.