Financial Embarrassment

I bounced a freakin’ check.  Really.  It’s embarrassing.  We make too much money for crap like this. 

What?

The “bouncing” actually occurred a little over a week ago, but I was too mortified to write about it.  Thankfully it was our water bill and not a check to someone we actually knew.  That would have been so much more embarrassing. 

When I logged into our bank account a day before pay day and saw RED in the balance column.  I didn’t believe it at first.  I somehow miscalculated $176 and some change in our checkbook.  Don’t ask me how it happened, because I really don’t know.  Additionally, being a terrible forensic accountant, I was unwilling to go through more than 4 months of bank statements to try to find the error. I never did find the error, so I still don’t know where I went wrong.

What makes me upset is that we have money.  I mean, not “we’re ridiculously rich” money, but we have some stashed away in several places. I have almost $1,500 in cash at home, Henry has almost $1,000 in what he calls his “crusty cash” stash.  We have almost $9,000 in Online Savings, and at that time we had approximately $1,200 in local savings.  There were no excuses for bouncing a check.

How Did This Happen?

The answer to that answer is multi-fold.  1. We have a lot more expenses now that we pay $560+ every month for child care, not to mention the extra expenses of a baby.  2. Sometimes I really push the envelope in bill repayment.  I tell myself “If I pay X amount on the student loan, we won’t spend this money.”  It’s true, with us, out of sight, out of mind works with money.  That payoff strategy would probably work IF the CFO of the house (me) could count (I cannot). 

The Solution

To prevent this from ever happening again, I decided to create an “invisible buffer” in our checking account. I took $500 out of our local savings account and put it in the checking account.  Then, I drew a line in the check register both adding, and then “hiding” this money.  That way, if I make another screw up, we will not have to pay a $30 insufficient funds fee.  There’s probably a better way to prevent bouncing a check, but this was the best solution I could muster.

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The State of Our Finances (part 4 of 4)

I have laid out the other 3 areas of our finances:  income, debt, and assets.  Now, we move to the part I struggle with the most–The Budget.

The Budget

The Early Years:  Henry and I are terrible, terrible, terrible at sticking to a budget.  We’ve tried the envelope system.  Didn’t work for us.  It seemed like we spent MORE money not less when we used envelopes.  We would look in our coupon folder (our version of using envelopes) and see all this money and think, “yeah, let’s go eat out tonight.”  Or, we would forget our envelopes at home and have to use our debit or credit cards.  Kind of defeated the whole purpose. 

The Not-As-Early Years:  After I graduated from law school, our income doubled and budgeting kind of went out the window.  We were flush with cash and it seemed like we didn’t need to budget.  Then, we decided we wanted to buy a house.  That meant saving money.  We tightened our belts and just saved what we could after we had paid our bills and set aside some money for fun.  If we didn’t have money in our checking account to go to the movies, we just didn’t go.  There wasn’t a lot of rhyme or reason to it, but it was sort of working.  We saved enough money, put the downpayment on the house, and did some “fixin’ up.”  At that point, we realized, we owed a lot of people a LOT of money.  Neither of us like that feeling of owing poeple.

The Nasty Now & Now:  We want freedom.  Not freedom to the point of where we can quit our jobs and live on the beach (although that doesn’t sound too bad right now).  No, we just want freedom to not have to pay so many freaking bills every month.  We want to invest and earn interest instead of paying interest.  So, we have come up with a quasi-budget.  It’s not overly restrictive, yet it allows us to throw all our “leftover” money at debt every month.  This is what it looks like:

Paycheck 1 $1,300
Car Payment $355
SallieMae #2 $265
Groceries $125
Eating out $75
Gas $175
Child Care $160
Total $1,155
Paycheck 2 $1,381
MOHELA $64
auto insurance $150
electric (avg.) $150
water (avg.) $60
Child Care $160
Groceries $125
Savings $200
Savings (automatic) $345
Total $1,254
Paycheck 3 $1,300
Mortgage $940
Groceries $75
Gas $125
Child Care $160
   
Total $1,300
Paycheck 4 $1,381
Trash $30
Citi student loan $117
Phone $144
Internet $51
Child Care $160
Miscellaneous $50
Savings (automatic) $345
Groceries $125
Total $1,022
Total Income $5,362
Total Costs $4,731
extra payment fund $631

I’m too technologically illiterate to know how to import my Excel spreadsheet, but in Excel is where I keep the budget.  I have it divided according to paycheck because the makes the most sense to me.  Child care is a pretty expensive category, but that is because we have someone come to our home to watch Baby Girl.  Starting in 2 weeks, Henry is taking a position where he will only work 3 days per week.  This should chop our child care bill down to $120 per week and free up $160 more per month to throw at debt.  There are areas where we could trim, but we are pretty happy with our categories as they are right now.  They are loose enough that we don’t have to micromanage every penny, thus ensuring that we actually will stick to our “budget.”  Also, any extra money we get, Henry’s overtime, tax refunds, bonuses, etc. go towards debt. 

How do you budget?  Do you manage down to the penny or are you like us, prefer it a little more loosey-goosey?

The State of Our Finances (Part 2 of 4)

Yesterday I talked about the income side of things.  After all, one must have first things first.  Today, “Let’s talk about [debt] Baby, let’s talk about you and me.” (Salt ‘n’ Pepa throwback 😉 )

The DEBT

We have quite a bit of debt, in my opinion.  I totally get that whether our debts are HUGE or small is completely based on perspective.  Some people may be struggling with $5,000 in credit card debt and feel utterly swamped, while others may have $50,000 in debt and feel that it is manageable.  I think our debt is manageable, provided we don’t become unemployed, but it still makes me angry/scared/upset/frustrated. 

I lump our debt into 2 separate categories:  1. Life happens debt, 2. House debt. 

1.  “Life Happens Debt”

Our “Life Happens Debt” includes two things:  Student loans (puke) and a Car payment. 

Student Loans:  A Necessary Evil?  Neither Henry nor I took out very many student loans during our undergrad days.  In fact, we both graduated with about $5,000 each in undergrad student loans.  We also both worked part-time throughout most of our college careers.  However, we still have student loan debt, thanks to my law degree.  I racked up approximately $35,000 in student loans and interest in 3 years.  Notice I say “approximately.”  Honestly, I’m not 100% sure how much the debt was at the start.  I know the ball park figure.  When I started paying it off, I was scared of the number and I did not take a long, hard look at it.

What I do know is, today, my law school student loans look like this:

Sallie Mae $17,822.76
Citibank SL $630.72

We also still have our two, small undergraduate loans hanging around because the interest rates are so low that it made more sense to pay off my law school loans with a whopping 6.8% interest!  Those two undergrad loans started out at approximately $5,000 each and now look like this:

MOHELA $1,547.21
Great Lakes $2,334.77

When I first started keeping track of my student loan payoffs in February 2011, this is what our numbers looked like:

Sallie Mae $20,932.20
Citibank $8,965.53
MOHELA $2,561.06
Great Lakes $2,347.03

As you can see, the Great Lakes loan hasn’t changed much.  I paid ahead on it a long time ago and I don’t owe another payment until summer 2013.  So, I am not currently paying on it and will not do so until I pay off the higher interest SL’s or the bill comes due–whichever happens sooner.

Car Payment:  Yep, this one was absolutely necessary.  I will blow money like it’s going out of style on food, travel, and fun, but I am stingy to a fault when it comes to buying new “stuff.”  We found out last September that we were going to become parents.  At that point, Henry had caved and purchased a new-to-him truck to replace his that literally died in our front yard.  Like, manual transmission grease/fluid (whatever, I’m not a car expert) pouring, gushing out of it and into the street drain (we didn’t mean to be environmentally unfriendly).  I, however, refused to get rid of my hooptie.  That car deserves a post dedicated entirely to it’s existence, so I’ll save the story.  It was unsafe for me to be driving that car and I certainly was not going to drive our little bundle of joy around in that death trap.  Enter the 2008  Honda Accord.  Asking price was $16,000.  I got $1,000 trade in on the piece o’ junk, and paid $3,000 down.  Financed $12,000 at 3.7% interest in December 2011.  Today we owe:

Chase auto loan $9,452.10

2.  “House Debt”

We rented a little duplex for our first 5 years of marriage. In fact, we rented the same little duplex for those 5 years.  It was close to Henry’s work and it was close to work, then school for me.  It was fairly cheap for the area, although the rent seemed to go up almost every year. 

We were very selective in our home buying.   Even after I graduated in 2009 and got a job I loved before I even took the bar exam, we still did not jump immediately into home ownership.  We looked and waited for almost a year before purchasing our current home.  It was a short sale and we got the home for a bargain.  It was originally on the market for $195,000 and we got it for $145,000.  It has 3 acres, 2,000 square feet, and a pool.  Virtually no neighbors, yet it is 10 min. from downtown where I work.  Henry is not quite so lucky, he has a 25 minute commute, but since he’s a nurse working 3-4 days per week, it’s not as rough on him to drive to work as it would be for me working 5 days per week.

We paid $7,500 down and took out a mortgage for $137,500 at 5.25% interest.  It would have been more like 4.75% interest if Henry had a decent credit history. He is a cash or debit cardman and at that time had never had a credit card…EVER.  He had the one tiny student loan, but it wasn’t enough to give him a very good credit rating.  I, on the other hand, with my poor spending habits, had great credit!  Today, our mortgage is approximately $131,000 (the interest makes this number change daily).  Seems like an incredibly paltry amount considering we have paid on it for 2 years.  Makes me wish we had saved longer and made a bigger down payment.  Oh well, we love the house, so no regrets yet.

Total debt?  A LOT!!!

Total debt I am keeping tabs on?  $31,787.56.  That is the number I want to get to $0.  The house, in due time, in due time.

The State of Our Finances (part 1 of 4)

One of the purposes of my blogging is to motivate myself to pay off our debts.  However, I have no intentions of making this solely a “get out of debt” blog.  I do not feel that I am in any position to offer advice to anyone.  Sure, I’m frugal in some ways, but I can be quite profligate in others.  I fully believe in enjoying life here and now, but I also strongly believe in making a better future for me and my family by making wise financial decisions.

Over the next several posts, I will lay out our income, debts, assets, and budget so that you get the “lay of the land” as we continue our climb out of our debt bog.

Income

The husband and I both have fairly good incomes.  Together we make around $100k per year, sometimes a little more, sometimes a little less.  I am a salaried employee and my 2012 salary is exactly $50,033.  Henry is an hourly worker with the option of getting over time, so his income varies.  His yearly take-home pay over our 7 years of marriage has fluctuted from $42,000 to $76,000 depending on the job/positions he has held.  Currently, he is on track to make about $48-50,000 this year.

My take-home pay is a little higher than his because health, life, and dental insurance are all provided through his job and come out of his paycheck.  Makes sense that since he is in the health care profession, that he should have great insurance.   We both contribute to retirement at a rate of 13% of our pre-tax income.  Our savings all come out of my paychecks at a rate of 25% of my post-tax income, with an additional $200 per month auto-drafted from our checking account.

You Want me to Do What?

Since our marriage in 2005, we have always had joint finances.  For the first several months after we married, I struggled to find a job.  During that time, Henry was the bread winner and I was a very bored housewife!  I was horrible at finances and was in debt when we married, yet because of my free time, Henry wanted me to take over the family finances.  Of the two of us, I was the most irresponsible with money, and yet, my taking over the bill paying turned out to be the best thing that could have happened to our finances. Because I was not contributing to the income at all, I was painfully conscious of the fact that Henry worked hard to support us.  He never, ever made me feel that way, it was a self-imposed burden. However, it made me conscious of how every penny was spent.  We struggled on one income, and I did my best to make it work, all while trying to pay off the credit card I had stupidly almost maxed out prior to our marriage. 

Good Intentions Really Do Pave the Way to Hell

That was the start of our desire to be debt free, but it didn’t last.  I had been thinking about law school for several years, and finally in the Spring of 2006 I applied.  I was accepted and that fall I took out my first $10,000 in student loans.  I was convinced I would be making bucket loads of cash after graduation, so taking our student loans seemed totally feasible to me.  Little did I know that in my state (note:  we live in the mid-south), the average income for a lawyer was $41,000 per year.  Yeah, I was uniformed and naive.

In my next post, I will discuss our debts and how we incurred them.