Tuesday, March 11, 2008

Debtors Anonymous

Whether good or bad, planned or unplanned, I can confidently say there are very few amongst us who do not have a relationship with debt. We've got it, our parents have it, and before you know our kids will too. Debt and discussions of debt are everywhere... on Oprah, and NPR, in the newspapers, and on the news. People are making good money and yet they just aren't making it. They are losing their homes at record rates. It's a scary world out there... financially speaking.

We've got our own debt story but ours is maybe a bit unusual, as it was completely preventable, had pride and wishful thinking not gotten in the way. Mr F has a good heart but poor time management and possibly even worse financial management skills. We learned this the hard way. Had there been an open dialogue about money in our relationship it would never have needed to get to the point it did. Three years later we are (outside of our mortgage) completely debt free. That's saying something.

While we aren't sinking in a pool of debt we aren't exactly saving any money either. In fact with the housing market the way it is here in Michigan what should have been our biggest asset has lost over $100,000 in value in the last few years. If the market doesn't change soon we may find ourselves owing more on our house than it is worth! And until we start spending less than we earn... or earning more than we spend... we can't ensure that we'll stay debt free for long.

I'm going to be spending the next few months trying to reorganize our spending and find ways to take more control over our finances. Like many of you I feel very overwhelmed and completely uninformed about money. I'm hoping to post weekly about our progress and what I've been learning along the way. Please feel free to share your debt story (post anonymously if you'd like) and tips... your triumphs and your short comings in the comments as we go along. You are surely not alone and we can all learn from one another's mistakes and successes.

63 comments:

Feener said...

both husband and i have been lucky to have never been in any serious debt. i managed to live paycheck to paycheck in NYC and eventually start a tiny savings and ALWAYS did a 401k. hubby never did a 401k and that KILLS me. he had his own savings....but still how anyone could NOT utilize their company's 401k is beyond me. That is my tip. For any person, young or old, single or married. Put money into your 401k, if you think you can't afford it, trust me you can. put as little as they let you. if circumstances allow you, put the max they let you. that is my tip. the housing thing is depressing. to think you paid x for a house and it is worth less than that. UGH. we bought at the height and i hate to think we will break even but i guess i should be happy if that is the case. sorry so long.

moi.bloggirl said...

Thankfully both me and husband never had any debt. I completely agree with Feener. I always put money into my 401K. You have to put $$ that is equivalent company match. What gets deposited into my account = Paycheck-401K-monthly $$ savings. I automatically transfer 10% of my paycheck amount into separate saving account. This might give me less money to spend but hey the way I look at it..thats what I earn.

I spend according to what gets deposited..less eating out, maybe no movies but 10% savings is great!

Marie said...

I agree with the 401k. We put in the max that the company will match at dh's work. That way we get all the "free" money they offer for it. What dh also did is open a christmas club and vacation club account at the credit union where he works. He started off with $10 each week going into each account. (its direct deposited from his paycheck, so its like it never really existed, kwim?). After a few months we were used to not having that money, and he would up it another $10. Right now we have $50/week going into EACH account...so christmas and vacations are pretty much paid for! (if something serious happened, like both our cars were totaled, we could pull the $ out).

We also started savings accounts for each of our daughters. Each week I put in $20 into each of their accounts. Thats $1000/year each. AND I roll that money out of the passbook accounts (about 0.5% interest) and into a money market or such account for 18 months or so (I choose whichever has the highest interest rate at the time...after all, the moneys for college so I have time). Right now they are making about 5%, and my 4y.o. has about $7000 saved. (we also put half of bday and xmas money into the account...they are so young and really, we have every toy ever invented already!).

I also saved all my grocery reciepts for a month (including those "extra" trips for "just a gallon of milk" that end up costing $40 cause you leave with ice cream, that cool new cereal, etc..). I added it all up and divided by 4. I figured this was our "average" spending for food each week (boy was that a bad number!). So for the next month I took out that much cash each week and used it for groceries. Any extra went into an envelope for those extra runs. Then the next month I took out $10 less for each week and used only cash. Once you actually SEE that there is only $20 left for the week, you find that you really don't need 3 bags of chips, that gourmet coffee, AND a bag of m&m's to go with your gallon of milk. Plus by only going down $10 at a time, you really didn't notice a huge difference. Was able to lower our bill by about $40 a week without changing how we ate or buying a lower quality. Just by paying attention and cutting out some of those impulse buys.

OK, thats all I got right now. Mind you, our house is worth ONLY what we bought it for 4 years ago..absolutely NO equity thanks to that lovely housing market. And we are still paying off a car loan (26 more months!) AND dh and I both have school loans that will be paid off in 2011 and 2014. BUT no credit card debt!

(I know some people think we should take the $ we put into the 401k and kids college funds and pay down our debt, then go back to putting money into them, but I think the 401k is important because I don't want to depend on them when I'm older, and the college thing is just a big priority for us!!)

Marie said...

OK. Sorry...that was kinda a novel!

katieo said...

"And until we start spending less than we earn..."

That was key for me when I read the debt-proof book. We have always lived pretty frugally, but until we stopped the dinky credit card usage, or saving it for when we had an emergency (instead of hello, savings), the cycle can literally be impossible to break.

For us, it meant putting a screeching halt on the credit cards. We don't use them anymore. period. (That's not to say that that might not change in the future...but we've been living cash only since November and it's changed everything. That's just us though, everyone's got a different history)

Money is too easily mismanaged, or not managed at all. And no matter what you do , if you're not consciously spending and saving it will disappear.

katieo said...

What? Am I the ONLY one to have a shred of debt?

Daniela said...

I hate being in debt. Hate it. That said, I've only been in debt for for a year. Prior to that, I was debt-free, save the mortgage. Enter in the fact that I was sidelined into leaving my job due kid 4 being born with a heart defect (which has since been corrected) and we were suddenly without my income. I am about $7K into credit card debt, which is the worst; but we're climbing out of the hole slowly, putting everything on hold until those badboys are paid off.

I'm a big fan of Larry Winget's philosophy that you don't spend what you don't have (now.) I fully plan on being out of debt by next summer, at the latest, and I also plan on having my mortgage paid in full within the next 8 years. I'm going back to school this fall full-time and will hopefully incur minimal student-related debt, but in the long run, that will be worth it.

I'd recommend "All You're Worth" by Elizabeth Warren and Amelia Warren Tyagi for a great primer on a money plan. I also highly recommend "Shut Up, Stop Whining, and Get a Life" by Larry Winget (and his new book, "You're Broke because You Want To Be"), which are more motivational (in a drill-seargant sort of way). I always always read MP Dunleavy's articles on MSNMoney, especially the Women In Red articles for tips on how other people have climbed out of debt.

No matter what, I always ALWAYS pay myself first. My savings aren't the dredges that are left over at the end of bill paying and grocery shopping. I set aside 15% of my gross pay into an online savings account (that yields 4.5% interest). Another $10 each pay check gets put into my Sharebuilder account, where it is automatically invested once a month into my stock portfolio.

For the kids, I've registered them with UPromise.com, registered my credit cards and debit cards, and I use their site to shop online at stores I'd normally shop at, like llbean.com. That money gets rolled into a 529 account for their education. It's essentially free money.

Feel free to pop me an email if you want more specific information about anything I've mentioned. I'm all for growing the egg. And when it comes to your retirement over your kids' college money; there will always be student loans that they can take out. I don't know of any retirement loan programs out there. Your kids will make their own money eventually (working summers and whatnot) and I plan on having my kids save half of every paycheck for school.

Lastly, this month's Family Fun magazine has some great articles about teaching kids about saving. I'm currently shopping for an online savings account for each of them.

Mrs. Furious said...

Katieo,
LOL. I was wondering that too but I suspect people with debt have less ideas to share than the people without ;)

Ok I gotta make dinner. I'll be back.

Nutmeg said...

I graduated college, after scholarships, grants, and working as an RA for 3 years with no debt.

I went to grad school (unfunded) for one year and accumulated almost 20K in student loans and accumulated some credit card debt of a few thousand dollars. I started teaching at a private school and made 20K a year for two years and managed to pay off all the credit card debt and make payments on my student loans in those two years. Those were the very lean years. I wore gloves and a coat in my apartment in the winter.

Then there were the single with a decent job times where there was no debt again.

Then we advance to two years ago or so. I had been in graduate school for 2 years or so. While they pay me, it's really more of an inside joke than a wage. Mark and I get married and we buy a house and accumulate some credit card debt because we aren't really making enough money to live on, and we aren't living high on the hog or going out and my grocery bill really has almost no snacks or processed foods on it and I use coupons and follow sales to get the best deals.

Then a small raise on both our parts means we can start paying off the debt! And simply by not USING the credit cards and paying double the minimum payment (with several larger payments when we had accumulated some money) we paid it off in two years.

But I married Mark.

I married 100,000 dollars in student loans.

We start having to pay those loans next year. Of course, Mark will also make twice his current salary next year, but we all know that after our tax rate increases that will mean a lot less than twice as much money. Because of the generally tenuous financial situation we were always in when I was a kid, having debt hanging over my head is very stressful for me. And sometimes I feel the weight of that big number crushing me and I want to pay it off all as soon as possible to be debt free again.

Other times I think we'll just take the advice of the people Mark went to medical school with and just pay it off slowly over time.

I'm just not sure.

We will make retirement the first priority and then college for E, because as someone else said, and I have read other places, there are loans for college, not for retirement (although who will give E. loans, I don't know.)

Cara said...

No one told me while in college that it would be smarter to take out more low interest, good debt, student loans, instead of using credit cards to pay for things like books, rent and food. BOO. haha ;-) Oh well. It could be worse.

Sucks about how much your house is worth right now, but real estate is such a cyclical cycle that I am sure that it will be worth more in a few years!

Mrs. Furious said...

Like Daniela I also have Upromise cards but recently switched to Futuretrust which is the same deal but actually let me use my existing 529 accounts (Upromise didn't link to Michigan and I had to set up an out of state account which doesn't give me the same tax benefits).

We charge EVERYTHING which works for me since we don't carry a balance and then we maximize the rewards aspect which since our reward is at least 1% placed in the 529 it is both free money that grows. I'm actually more likely to blow through cash than charging (Mr F is the opposite and his card use is HIGHLY controlled now).

Unlike a lot of you I don't work and Mr F was mostly self employed (expect last 3 years) so we SERIOUSLY lack in retirement accounts. He actually only signed up for his full retirement benefits last year (shakes head) mostly because we needed his full income to cover the stretch between freelance checks. Last year I just demanded he sign up for the full amount they would match like Marie said because how can you walk away from free money?!

I love the idea of doing the vacation and christmas accounts. It is so true that you really don't notice $10 or $50. We have automatic charity contributions and we don't see and don't miss it.

Katieo what I'm loving about the book is changing our mentality from yearly salary to monthly. This takes a lot more work for us to figure out than someone with reliable income but I think it will help me start to see how we could spend it more wisely.

Also I'm going to save my grocery and Target receipts and highlight the impulse buys so I can really SEE how much money is really going to stupid things like the 3 dollar bin wire baskets I had to buy last week, etc. I mean I definitely have a Target impulse buying issue. This week I just didn't go and knew I saved myself at least $50 but just not walking in the doors!

Okay okay I'm going to return the "Fragrant Herb Seed Kit" I bought last week!

Mrs. Furious said...

Cara,
"No one told me while in college that it would be smarter to take out more low interest, good debt, student loans, instead of using credit cards to pay for things like books, rent and food."
Oh No :(

Yeah the house totally blows. It's value is a little less than we paid for it but of course we bought it right before it peaked and we thought it was practically an investment property... Nope. Although we'd love for Mr F to get a job and to move knowing we'll take a lose on the house and have less to invest in a new home is super disappointing. Hey, at least we have a house.



Nutmeg,
100K is definitely an overwhelming figure.

As for the retirement vs college that seems to be the general consensus. Although on the crazy debt show she said the reverse and that was the first time I had ever heard that.

I know I wouldn't have qualified for loans so I hear where you are coming from and I worry about that for my kids too... fortunately I only needed to pay for my grad school and like you I don't have any debt left. College does stress me out. My tuition when I went to undergrad was 30K a year and I can't imagine what it will be when they are ready. Let's hope they get into Harvard 10% of our income is a pretty good deal!

Nutmeg said...

Mrs. F... please don't let me think about tuition. I mean Mark has a really good paying profession and I STILL can not IMAGINE how we will ever save enough money to pay retirement and college, which could be 50K a year by then.

We bought our house at the height, and we won't be selling for at least 4 years I'm sure, but still I"m sure we would never make back what we paid (plus the money we sank into it the first year we lived here).

RE Target: That was actually one of the ways we paid off our credit card debt. I was limited to Target only once a month.

It totally worked.

Chris Howard said...

One thing we've been doing that's been really helpful is a monthly budget. We've been doing that for about 6 or 7 years now. I think the key to making a budget work right is actually updating it monthly. Each month has the normal bills but I also update each month with unique expenses like birthdays, summer camp, vacations etc... That way I know exactly how much we have to pay and that I have enough to cover everything. Every time one of us gets paid, I sit down with the budget, pay the bills, and balance the checkbook. As you say, it is easier when you have a regularly scheduled income.

We've been pretty good about saving for retirement so far - we both do 401k, Roth IRAs and we also have a few other accounts.

All that said, we still have a sizable debt. But doing the budget means that I know exactly how we got that debt, even though a lot of it is stuff we could have done without.

Feener said...

i have a question. when folks say that they are in debt, do you consider having a mortgage - debt ? or does the word debt to you mean credit card bills ???

Nutmeg said...

I don't consider mortgage debt.

I don't consider 14,000 dollars in student loans debt either. but I do consider 100,000 dollars in student loans debt.

I also consider our one car payment debt, though it is small and fixed, and paying it off early has no benefit since the (very low) interest for the full term was factored at the start, paying it off early doesn't actually make us pay any less.

I guess "high-interest debt" might be a good way to describe the really stressful debt of credit cards and certain types of credit lines.

Mrs. Furious said...

Feener,
well technically a mortgage is debt (and car loans too). Our mortgage is... at this time... our only debt but it isn't unreasonable (as in we don't have 2nd mortgages etc). I assume in general people are referring to consumer debt... but I guess everyone's definition might be different. We aren't in a position to eliminate or mortgage for quite sometime!

katieo said...

This takes a lot more work for us to figure out than someone with reliable income

tell me about it. We don't have any access to a 401K plan...yet.

Mrs. Furious said...

Well obviously it should also be said that what type of mortgage you have makes a difference. There is a nationwide mortgage foreclosure crisis and for a lot of people their mortgages are in fact bad debt.



Katieo,
I did get a Roth IRA for myself but of course there is no "matching" when you are just contributing to yourself... ah well.... that and we've only had enough to invest in it two years out of the last five! ;)

I need a financial advisor that makes sense! That is my goal for this year.

Mrs. Furious said...

Nutmeg,
yes monthly Target. Our credit card bills were half of what they are now this time last year since I was home w/ a newborn and didn't go shopping very much. Well that and my mom did some shopping for me ;)
I try to only go once every two weeks (it's our pharmacy and so I need to go that often). When the seasons change I tend to sucked into little extras (Easter candy, decorations, candles, Thank You notes, toys, etc) If I just ban that stuff it would probably cut it in half.

Julie said...

Hmmm...I need to look into more ways to save and put a stop on the things I buy.

I am a SAHM and my husband has a great job, but we really live paycheck to paycheck. He contributes to his 401k, but we really have no savings and any money we ever save for the kids' school ends up being spent on other necessary things (like oil burners, not fun stuff.)

Now I don't know what is the norm out there for housing costs, but we pay about $2,200 for our monthly mortgage (this includes a home equity loan we took out for some updates, plumbing, etc.) We both have car loans (about $775/month total). We pay a little over $200 a month for telephone, internet, cable and cell phones. Between that all and food expenses (we almost never eat out, weekly $10 pizza, sometimes something else, too), electric, HOME HEATING OIL is freaking KILLING us (that is an average of a couple of hundred dollars a month AND we don't even run the heat often and run a wood pellet stove this year to save money. This equals a cold house.)There is not much left over and that gets spent on things for the kids mainly...the regular kind of stuff, not frills for the most part. We don't have any credit card debt...well, that is because we paid with a loan out of the 401k so we are paying ourselves back the money with interest.

I mean how do others do it or our bills really high? I have heard that Massachusetts is an expensive place to live, but is it that much more?

I will have to go back to work when both of the kids are in school full time. Mainly to save for their college.

There is no extra money for the big vacations that I see others around here take. Plus, everyone around here puts their kids in different camps in the summer.

I feel like we are always trying to play catch-up. Do others feel this way or are we doing something really wrong here??

I do look at our monthly expenses and know if we had to we could cut cable for a savings. I don't feel comfortable without a cell phone since we live in a semi-rural suburb and everything is like 30 minutes away. My husband needs to have the high speed internet for work (he is always accessible for work.)

I have started to put $50 a paycheck (so 2x a month) into a savings account so that's a start. I love what Maria does for the kids with the $20...but I just don't see how we could put $80 a month per a child into an account. Love the vacation and Christmas accounts, too. I feel like any money I save right now should go into kids' college funds rather than a vacation.

We live in a fairly affluent community so I compare myself to my friends who live in HUGE homes, go on fancy vacations, eat out, have regular babysitters, travel and all that nice stuff. I think I gotta find some new friends:)

Dinah Soar said...

Here's' some good advice we've lived by for years:

Use it up,
Wear it out,
Make it do,
Do without!

You might get some good information from Dave Ramsey too...he has several good books and a website....

Amy said...

Had I knew then what I know now...


I was very foolish just out of college. I took a traveling job, which paid all traveling expenses, my housing/furniture, and a good salary. You would think that I could have put that money into good use! I was like a kid in a candy store...earning my "grown up" money for the first time. Too much spending, and even with credit cards!

I should have saved, spent only with cash, traveled more around the areas I was living in.

Now we are virtually debt free. Thanks to hubby's job, but then the sacrifice for his pay is time spent with me and the toddler. I was also fortunate to marry into family owned land, which we built our house, so we will always make money on the full property.

That doesn't go to say there's not stressors. Business money issues can flux season to season. Also, what if he were to get hurt and couldn't drive his tractor? He can't get s/t disability being self-employed. Hence the savings buffer we have, but that would only last so long.

I am a firm believer in the more you make the more you spend. Sadly. What I have started doing is that when I make a cost of living increase in my pay, I up my transfer to savings or I increase my 401 contribution. So I basically don't see that money. I also take advantage of my work's pre-tax saving programs for medical expenses, ie.

I guess every little bit helps. Hopefully!

Mrs. Furious said...

Julie,
Our situation is very similar to yours.
Our mortgage is $1859.15/month I pay $2059.15/month though to pay it down faster. We still owe just over 200K but our property taxes are escrowed so those are included (thank god or we couldn't cover them when they came due). It would be less but when the rates dropped a few years back we refinanced and took out 35K for home repairs (damn old house!) since we could do that and keep our payments the same as before. We put in a new heating/cooling system last year which was 10K but our heating bills have been around 350/month vs the old 500/month. Our food budget I think is the same as yours. Our cars are paid off now. I've got 400/month for preschool. I might do a detailed list in a post... this could be interesting to see regional differences. We do take a big vacation every year usually about $3000... well I guess I shouldn't say EVERY year... we've done that and had to paid for it for 2 years.
Maybe we should be investing that extra $200 I put in the mortgage but Mr F is 40 and we still have over 20 years on our mortgage!
oh yeah cell phones $65, internet & house phones $90, DirecTV $60. Obviously we also have car insurance, home owners insurance, life insurance but those are paid once a year so I don't know the monthly figure off hand. We couldn't do camps and a vacation we'd have to choose.
I think that covers it.

Mrs. Furious said...

Amy,
"What I have started doing is that when I make a cost of living increase in my pay, I up my transfer to savings or I increase my 401 contribution. So I basically don't see that money. "
Smart. If Mr F ever gets a raise he'll have to do that!

Smoochiefrog said...

Have you been reading my blog? I just started a new feature on Monday called Money Monday. You can pop over to check it out, but it's on this very topic!

Dave Ramsey is the guy! Check him out!

Mrs. Furious said...

Tina,
seriously?! No I haven't seen it... somedays I have a hard time just keeping up with the comments and can't make my rounds. Okay I'm off to check it out! I've been trying to work a "Topical Tuesday" approach ;)

Mr Furious said...

Actually, the good news is the fact that we pay extra towards our mortgage every month (more than an extra month's payment per year when you add it up) really makes a difference in the long run...I'd be surprised if we haven't shaved several years off and are well below twenty years left...

Feener said...

Julie
those numbers are about the same as ours. although your cars seem high but that is b/c you have 2 payments. we have 2 cars but bought a used car for hubby, so that is paid off. my car will be paid off in may, of course we want a bigger car due to car pooling etc. but the thought of having an extra 200 a month is tempting !!!

i too live in an area where most folks live in mansions. i am talking 1mill plus houses. beachclubs, nannies, it is mostly wall street guys who have probably made enough money for their kids kids. it is such an aberration to the rest of the world. my neighborhood is more on my income level, so i have meet friends in the same boat and that makes a huge difference. but i get scared for when sass n frass encounter all that wealth in high school.
we have 529 for both girls and take some of mats bonus each year for them. i also have savings for them and put a little in with extra change around thehouse, then i transfer to a cd.
what are some of the high savings % on line that any of you have gotteng ? ING ? i am thinking of using them.

Heather said...

Oy. Money. I have proven, through years and years of practice, that I cannot be trusted with credit cards. Some part of me just puts it into the Not Really Money category, despite having high balances in the past and paying them off completely. We just found out we're getting a HUGE tax return, and it's paying down the last of it, and that's the end of my run with credit cards. The money I was spending on paying down the balances will now be automatically transferred to my ING savings, which is hard to get to and earns interest. If we need to buy something big in the future, we'll have the cash to do it. I'm tired of the roller coaster and am excited to pay it off! I also just got my 12% salary bonus for the year, which will go straight into savings for Baby Hansen and to cover my maternity leave (not 100% compensation for all 12 weeks, astonishingly).

The challenge for me is I'm making more than enough money; my husband is scraping by with PT work for now.

Suggested reading:
Money, A Memoir -- about a woman who's husband leaves her and she basically has no clue about finances. She talks about how women often maintain this deliberate ignorance when it comes to money. Fascinating.

Julie said...

I love this conversation...I went to bed early last night and now have to run off to take the kids to school. I will definitely be back.

Mrs F and Feener, it makes me feel better knowing that my numbers aren't that different than yours. I know our car payments take a huge bite out of our money. We plan on driving these cars forever, too. So I look forward to that extra money. I know I have to tighten up on some of my spending (especially food shopping.) A little adds up down the road.

Oh, Feener, that's tough it's the Wall Street types with the money...at least here it is more of the Computer/Software types and they are way more mellow in general.

And I know we are extremely fortunate...I know I sound like a baby with the wah, wah, no vacations for us. Plus, we do like to ski and that is WICKED expensive.

I do "cubby" money out of each paycheck and transfer to another checking account for the bigger bills that come in (like water bills, excise tax, life insurance, and the like). I then have the money when those bills comes.

Again, it's those damn car payments!! Can you imagine $800 a month and we are not driving fancy cars!

Plus, the gas for the cars is like $250 a month since we have to drive everywhere. Everything is far away...even my kids' friends are like a 20 minute drive in the SAME town!

Well, got to get these home fries to school and off to exercise (thank God for that!!)

Shirls said...

wooo hooo, glad to hear the running stuff helped!

Jennifer said...

Have you ever heard that song .. "I want it all, I want it now" .. Yeh, that is me. And I have the credit card bills to prove it! lol. All right, here goes.

$1508 in mortgage (15 year 4.75% interest, about 10 years left on it, about $100,000 left to pay)
$480 for vehicle, $67 insurance, $90 for internet/phone. $60 DTV, $445 in 2nd mtg for finishing up home repairs,deck,shed etc. Then come the credit cards.
Am Ex. $5,000
Provid $3,000
BOA $3,200
BUT! With the BOA, I earn points to buy really cool NFL stuff. So totally worth it. Those are obviously balances.
And how could I forget, plowing the freaking snow, $300 per month, propane $450 a month. Oh yes. YEAR ROUND. Electric bill is $120 a month.

Tell me that I am not going to drown when all is said and done after my divorce! BAH!

I ignore it all and it makes me feel better.

Mrs. Furious said...

Feener,
I've got one with Schwab because I have other investments being held with them. BUT I wish I had done ING and my Dad & brother have accounts with them and it is so much easier. That said I guess if it was easier to access we probably would have spent it ;)

Mrs. Furious said...

Julie,
gas is a HUGE expense for us. I've got a 2003 Honda Odyssey (leather, DVD the whole 9 yards) so up until I paid it off my payments were $656 for just that car. Until that we both had our 10+ old beaters and we do also drive them into the ground. Mr f has a used 2001 Volvo we bought with cash. The problem is that we both only do city driving and gas is starting to kill us. I want Mr F to sell his car for something more fuel efficient. We had wanted him to have the safest used car we could afford... but the kids never ride with him. With gas going to be up over $4/gallon he really needs something with better efficiency. Having said that right now our cars a free....

Mrs. Furious said...

Jennifer,
On the upside you have a super low mortgage rate and a short time left on it. We're double that.

Mr Furious said...

Mr f has a used 2001 Volvo we bought with cash. The problem is that we both only do city driving and gas is starting to kill us. I want Mr F to sell his car for something more fuel efficient.

Once the snow melts, I'm back on the bike! IT made a big difference...I still drove to work sometimes, but it would be weeks between fill-ups.

Mr Furious said...

We have approximately 14 years left on our mortgage at the current pace. I checked with an online calculator.

We shaved off 8 years by paying extra every month. It also saves almost $60,000 in interest. Which is just fucking crazy—everyone should do at least a little bit of this if they can afford it...even an extra $50/month would still save almost three years and over $20K over a 30-year mortgage...

Mr Furious said...

Link for the mortgage calulator

michelline said...

From reading the comments here, it looks like our debt problems are very similar. Our mortgage is about $2100/month. After school care for the kids $300. Cell phones, internet, satellite = approx $400. Like Chris said, a pretty good amount goes to savings every month, but that's more long term savings than short term savings. What is killing our monthly budget is GAS!! I drive a Navigator (bought when the gas was much, much cheaper and that we just paid off with our income tax refund) and it only gets 14.3 miles per gallon. I drive 30 miles one way to work. At $3.25/gallon and a 28 gallon tank... You do the math :( We have been thinking about getting a small car for me to drive, but that's easily another couple of thousand $$ and it seems it would take a while to recoup the cost. Driving together just isn't an option, so what can we do?

And of course, there's the credit card debt. Luckily, tonight is the Lottery drawing. I think it's up to $10 million :)

michelline said...

And of course, we do have another car, so another payment. And insurance... Debt. It's the American way.

Mrs. Furious said...

Mr F,
we weren't paying the extra the whole time though.

I'll go use the calculator.

Julie said...

Jennifer, you will get through it. Believe me, we have had times where we had high balances on our credit cards (and then we would try to pay off with tax returns) because stuff would come up and we just did not have any actual cash to pay for it. And I mean regular stuff, not luxuries.

sounds like a lot of us have some high expenses.

Mrs F, holy crap on your car payment of $650ish.

Michelline, I'd trade that car in for something that gets you even just a bit better mileage. Just think, you will need to start paying for maintenance for the Navigator. Filling up that tank must cost a fortune!

Mr F, great info on the mortgage stuff. My husband and I have been talking about doing that for years, but never seemed to have any extra money to put to it. We are going to start with the next payment for sure.

Mrs. Furious said...

Julie,
scratch that it was $575 for the car (I think) I'm getting myself all confused. Either way that was even for a 5 year loan. But it was not a cheap car and at the time we drove on long car trips and planned on more than 2 kids. Now I could get by with less... but its paid for and really nice. Highway gas milage isn't so bad but the city driving isn't great and that is all I do during the year. Hey if I homeschool I'll be saving big bucks on gas!

Yes the debt book Katieo sent me also HIGHLY recommends doing what we are doing with the mortgage. My Dad told me a long time ago that if you could make one extra payment a year you'd reduce your payment years by nearly half. It seems like that might actually be true.

Feener said...

question about the extra mortgage payment. we did this for a few years, however hubby read that if you plan on selling in 2 years it is not a good idea. has anyone else read this ? we are hoping to upgrade in the next few years and need to put money into the house.

i am laughing at all the gas - b/c there are freaking idoits here who drive hummers ?? i mean really, explain why you need a hummer

Julie said...

Mrs F, what is this book that Katieo sent you? Should I own this? I am really inspired by Katieo and the cutting the costs down.

Robin said...

Very interesting discussion. We have quite a bit of credit card debt, mostly due to my dental bills. Thankfully, I won a settlement which will pay for the rest of it, so we won't incur any more cc debt because of that.

We also contribute to a 401K, but don't save much more than that. These comments have inspired me to get on that!

Re: regional differences. We're in Texas, and we pay $1400 a month for our mortgage/property taxes/homeowners insurance. The taxes and insurance are escrowed. That is for a 2500 square foot house. Texas has one of the lowest costs of living from what I understand. Most of the people we know make/spend much more than we do. It doesn't bother me except for the two girls whom I have been friends with forever live pretty affluent lifestyles (again, I could care less) except they talk about money constantly. How much their husbands make, what they are buying, their cars, their houses, etc. I feel like asking, "seriously, is there nothing more interesting than money going on in your lives?"

Mrs. Furious said...

Robin,
yeah that is a good deal. 1859 is our mortgage/taxes and our house is only 1600 sq feet. Although we did buy high and in a more expensive area for the relative size... we could also have bought a new home in a subdivision at the same time and gotten a lot more for our money.

Mrs. Furious said...

Hey Feener I don't know. Our extra is just applied to the principal so I don't know why you wouldn't do that. But we've been in the house for 7 years already. I'll see if i can look it up.

Mrs. Furious said...

Mr F,
dude what kind of calculating were you doing? I just got us at 18 years left. Did you forget the taxes are escrowed? Our mortgage payment is 1359 and then 500 or so is taxes and then the 200 on top of that.

Mrs. Furious said...

Okay we refinanced in 2003. We have a 30 year fixed rate mortgage. With paying an extra $200 toward the principal each month (it appears that we have missed maybe 3 months total) we are now looking at having it paid off in 2025 instead of 2033. If we up it to 400 a month we could have it paid off in 2022. But as is we owe 10K less today on our mortgage than we would have if we had just been paying according to schedule.

Mrs. Furious said...

Oh and with just the additional 200/month we will have saved 73K in interest payment. So it is absolutely worth doing.

Heather said...

I'm so jealous of your mortgage payments. We pay $1800 for a 996 sf apt. The SF Bay area is RIDICULOUS, and generally $1,000 per square foot to buy. I mean, it's CRAZY.

Mrs. Furious said...

Heather,
Actually that rent doesn't sound that outrageous. But of course we rented in NY. Interestingly rent here isn't that much cheaper. Buying is cheaper obviously... we could never buy in SF but we have been happy to see what we could rent.

Julie said...

mrs f, what's the debt book that Katieo sent to you?

Mrs. Furious said...

Julie,
sorry I got side tracked :)

Mary Hunt "Debt-Proof Your Marriage"

I've just finished reading it and am about to follow her plans. I found this book to be a lot more accessible than some other books I've read. Although I haven't read the other books suggested in this post so I can't give a comparison to those.

katieo said...

Julie, I don't know if you'll see this, but get the book! (If you're on the fence about it, I'll even buy it for you! It changed our lives.)

Liz said...

Hi Mrs F! Just wanted to post that I think it is so awesome that you are talking about this - some financial writer recommends that people get comfortable talking about their finances, especially their debts so that it becomes less of a taboo, point of shame or embarrassment, and something we can all support each other on. I think it would contribute to people feeling less like they need to "keep up".

So basically my response is, "me too." I am in a low cost of living area where housing is affordable but thankfully continues to appreciate. Right now our expenses are relatively low, and I make a decent salary. But every month, we barely make ends meet.

Honestly, I have to confess that about every other month, we overspend, and our account is overdrawn onto a credit card. I manage to pay it off most months with diverting what's in our savings but still, it's stressful. And we don't have a crazy standard of living. We live in a smaller house than most people I know, drive a saturn and a corolla, have less than even basic cable. Our big extravagance - husband's psychoanalysis and my pilates training!!

I am so lucky that my company invests 10% on top of my salary for retirement - no matching funds required, so at least I've got something put away. But it is so much less than I'd like to be saving.

I'm going to read all the posts later when I have a bit more time tonight. Looks like a lot of good stuff here. (Did not mean to go on this long!)

Mrs. Furious said...

Liz,
"husband's psychoanalysis and my pilates training"
LOL... we know all about that. That was us 3 years ago. Getting my own reformer/half trap was totally worth it. And thankfully Mr F's job he has now covers our therapy in full unlimited... and we take serious advantage of that!!

Julie said...

And thankfully Mr F's job he has now covers our therapy in full unlimited
Mrs F, you are so lucky. So no copayment, too? I really should get back into therapy, but I have not wanted to spend the money on the copayment (which is either $20 or $35 I can't remember...but enough that I thought it was too much money for now.)

Julie said...

Katieo, you are adorable saying that you'd buy me the book. That cracks me up:) I will definitely check it out. I want to be leaner in all ways these days...I know my grocery bill is a huge one I can cut down on. I also know my Peets coffee beans that I get shipped twice a month is a lot of money, but it's my only vice and we can afford it...there was a time not too long ago that we could certainly not spend as much as I do on my fancy coffee beans.

Ok, my husband just walked by and said "so are you going to do this all night again?" (meaning blogs)...I have actually been going to bed earlier so I have not been commenting as much. I guess I'll go spend some time with my husband:)

Mrs. Furious said...

Julie,
yes no co-pay. They reimburse us... I they cover mine 100% Mr F's guy is a bit more expensive and I think we pay like $1 out of pocket per session. It is fantastic!

Julie said...

wow, i'd be going every week if i had that deal with the insurance.

it's cheaper than current version of "therapy", which is to do errands at target and have a coffee in the car on the way home:)

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