February Financial Month in Review

End of a longer then usual February, and pretty good progress this month. Not too many Ninja Bills, out side of taxes but still OK there. We got our high yield E*Trade Savings Account (currently 4.1%) going and we have now funded half of our 2008 Property Taxes already!

Here are some highlights:

• Net Worth Increased $5019 - Huge Increase! $3000 was from Tax Return, rest from debt reduction. Take that out and still a good month!
• Debt Reduction of $1692! - Included over $500 off of Credit Card Debt!
• Tax Return - Direct to our E*Trade Complete Savings Account. Not one Dime spent. This is a big deal here as we always "talked" ourselves into a little here a little there.

Went to dinner and a movie to celebrate last night (used our allowance! Not Breaking any rules! Semi-Pro!) and we both commented how far we have come over the last few months. We are really trying to move forward on these goals and look forward to completing Baby Step #2 - The Elimination of Consumer debt.

Points to work on:

• Focusing on the Negative - Let the whole Tax Refund debacle get us under for awhile. Bounced back after refocus on progress
• Time Management - Not allocating enough time to certain areas. Work is very heavy right now with a launch of a major project. Lots of late nights...Need to remember to breathe sometimes!

Goals:

• Pay Off StateFarm CC - $2836.22 - Down to $2369 or $470 Less! Will be close to under $2K this month!
• Pay Off Car - $4594.87 - Down to $4033, $561 less than the beginning of the year!
• Pay Off CC CitiBank Platinum - $8989.16 - Now $8806, $183 less than the beginning of the year. Not the snowball debt, yet still making progress.
• Pay off all CC Debt - Getting closer everyday!
• Save 100% 2008 Property Taxes - $5000 - $3000 Saved in E*Trade Account. Saving $225 per month toward goal moving forward.
• Keep Snowball 100% Intact - Still growing! $308.43 Is the Current. Once StateFarm is paid off, it will be $654.72!
• No CC Use - For the Fifth month! Getting close to the 1/2 year mark!
• Increase Average FICO-Score to 720- No real change this month. Equifax moved from 716 to 715. Average over all three is 698.7.
• Stick to Cash Budget System - Gas is the only issue as the cheapest gas station makes it a pain to pay with cash. Paid with debit twice, but then removed cash from envelope.
• Net Worth increased by $20,000 - $5019 movement means $6156 movement for the first 1/6th of the year...Real Progress!

Baby Step Progress:

• Baby Step #2 - Paid $16,143 so far, or 23.43% done! Lot of progress!

Overall great month. Still no word on my review, but I do know that I will be retro-ed for any amount back to my due date. It is all going to the snowball, but it would be great to push the accelerator even more.

That's It! 2 down, 10 to go!

(Photo from Calendar available from Amazon)

No Emergency Fund = Limited Options

It is all well and good to talk about Baby Step #1, getting an Emergency Fund, but things can and do happen as you are building that fund. We all know the drill, you get that first $75 in the Fund, start thinking about, “How you are really gonna do it this time”…and then your car acts up; $200.

What are you going to do?

We were in the exact boat five years ago. It was winter; we weren’t controlling our spending and living paycheck to paycheck. And as Murphy’s Law works, we had a series of those Ninja Bills that I always talk about. Also, we had written too many checks and were going to overdraft our checking account.

The stupid part is that these were due to not tracking our debit card purchases. She and I were spending without seeing what the other was doing by only checking what the ATM had showing!

So these five overdrafts were about $100, but the penalties at Wells Fargo were going to be $25 per item or an additional $125…$25 more than the checks. Regardless, we didn’t have $100 much less $225!

We looked at the following Options:

• Credit Card Transfer – We didn’t even have enough credit to do this.
• Direct Deposit Advance – My check was (and is) Direct Deposited and Wells Fargo offers an Advance on the amount, but it costs $20 per $100 borrowed! For two weeks that 520% Interest!
• Payday Loan – The horror stories you see on the news scared us off.
• Borrow from Friends – Too new to the area. A bit, awkward asking a new co-worker for money!
• Sell Something – This is what we decided on. We sold some used video games and DVD as well as old jewelry my wife had.

We paid the debt, but it was really humiliating. It taught us though that you have to have something, and if you don’t, you have to be prepared to make some sacrifices.

(This post was paid for by National Payday)

Dealing With Budget Windfalls

Some of us have irregular pay involving bonuses. These are often based on cryptic calculations that involve the Mayan Calendar and a jar of Mustard...In other words you can't count on them. Sure you might have a pretty good idea, but it is hard when you are expecting one amount and another comes in.

Many with this sort of Bonus don't budget it even though it can be up to 30%+ of our pay or we budget at the lowest imaginable payout. The reason is the last thing you want is when you finally get the check to be disappointed. I have been there. One time I was sure my bonus was going to be $10,000 based on the previous year. When I got the check it was less then $5000, still a great amount...unless you wrote checks or planned out more!

This post came up because I was reading a favorite Blog "Paid It Down and Moving Forward" by Sharon. She and Hubby received his Yearly bonus and she is now Consumer Debt Free (Way to go Sharon!) and well better funded in their Emergency Funds. They also bought one thing; A Dell laptop. A very nice purchase to help her with her Blogging and other needs. While she didn't get beat up her readers, I have seen others that have been, with statements like, "You aren't Serious about getting out of debt!"

Here is what I suggest about these, windfalls be responsible...to a point! Remember, these aren't gift, this is part of your pay. You basically have had it held until the end of the year. You haven't been able to spend or invest it or pay for any little extras. I like to look at every bonus in three buckets; Near-term, Medium-Term and Long-Term. I try to get about 1/3 to each bucket as well.

So this process begins when you are doing your yearly budget. What are you expecting to get? Not the best case but not $0 either. Then I look at what yearly bills I have. Will the bonus cover that? What is it doesn't? In our case, Property Taxes and Christmas. My bonus should cover those, but in case it won't I plan out how much per month I need to put into achieving that amount and pay towards it. When/If the Bonus arrives I fully fund it.

When the money arrives I fund those yearly bills first, then I look at my near-term needs. Any Bills that is would help to either catch up or get ahead on? If so I do that. Next-up, I start working, or reviewing my Baby Steps. Is my initial Emergency Fund fully funded? Do I need to catch up on any bills that aren't urgent, but are important, like car repair, new tires, etc..

After that I jump into the big pool of Baby Step #2, paying off consumer (non-mortgage) debt. If, and only if, that is all done, I suggest getting something that is in your "Would be nice stack." I would put a limit of no more than 5% of the total, it can even just be part of a uber-vacation fund you are saving for! The reason is that If we don't treat our selves every once in a while we will blow it big time at some point! Like a good diet that Ice Cream Sandwich won't kill you once a month or so...every night though...

Beyond that I would suggest you work the rest of the Baby Steps!

So Here is that Order Again:

• Yearly Bills
• Near-term needs
• Emergency Fund Baby Step #1 - Initial Emergency Fund
• Important, but not urgent bills - Tune-up, Car Repair, Piano, etc
• Baby Step #2 - Pay off as much consumer debt as possible
• Get something that is in your would be nice list - Not to exceed 5% of bonus Total
• Baby Step #3 and Beyond...

I am not a financial council. I am just someone who has had a lumpy income for the last eight years and made all of the mistakes you can! Windfalls don't happen everyday! Go get advice if you want it. Just get out your Success Map, Budget and work your Money Management!

Congrats again Sharon, I loved this line from her Blog, "while it's WONDERFUL to be cc and car loan free, we will not lose focus and will continue to SAVE. We will NEVER, and I mean NEVER have credit card debt again."

Don't forget to sign up for my email RSS feed for a chance to win some great software from FruitfulTime, a $50 Value!

The Power of Financial Perseverance

Last night was a big night in American politics and growing up in a family that enjoys politics (you call it arguing) I was mesmerized. In watching, my two hobbies started to merge in my mind a bit and I thought about how important perseverance is to life and your finances.

Each one of the four remaining Candidates to be President has a "first," something where earlier in our history it would of held them back. McCain, would be the oldest person to take the seat first term at 71 and was a POW in Vietnam for five and a half years; Romney, would be the first member of the LDS Church to be President; Obama, would be the first bi-racial President; Clinton would be the first Woman.

They have all overcome tremendous odds to be in the position that they are in whether you like any of the candidates or not, they all have a lesson to teach. But to me nothing illustrates this better than this list of things that Abraham Lincoln overcame to be President:

• 1832 - Lost Job Defeated for State Legislature
• 1833 - Business Failed
• 1835 - Sweetheart Dies
• 1838 - Defeated for Speaker in Illinois House
• 1843 - Defeated Running for Congress
• 1848 - Lost Re-nomination
• 1849 - Rejected for Land Officer
• 1854 - Defeated for Senate
• 1856 - Defeated for Nomination as Vice President
• 1858 - Defeated again for US Senate
• 1860 - Elected President!

If any one of those happened to any of us, many would make a pretty good case to fold up tent and go home and quit.

Finances are the same way. If you don't persevere you cannot succeed. Very few people get born into the DNA lottery. You have to take create your own luck. You can do it but it takes planning, determination, and perseverance. It will not happen overnight, it will mean Baby Steps and following your Success Map daily.

However, If you will grasp the reins of those horses, you can do anything!

180 Degrees in Less than 180 Days

Simplicity in Kansas suggested in a comment yesterday, taking a look at a post about how my family has changed since we began our journey together in October. A reflection on five changes I have noticed as we work our Success Map and through the Dave Ramsey Baby Steps.

It hit me immediately as a great idea, since a lot has changed in less than 6 months. In fact, regarding finance, nearly a 180 degree turn-around. It might be easiest to explain by listing some positive advances, and contrasting them to how they were being done before.

Change #1 Bill Paying:

• Then: We haven't had a 30-day late pay in a long time, but it was very close. Basically we paid them as they came in without a plan. This led to silly $20, $30 late charges from the cards. It also lead at times charging a payment to a credit card, or having wave after wave of Ninja Bills.
• Now: We track every bill in MS Money including yearly ones and know exactly when we are going to pay them to maximize cash flow and eliminate late-fees.

Change #2 Spending Habits:

• Then: It kind of used to be first come first served! If I wanted to go Golf, I checked to see which credit card had some credit and I was off. The kids would hit up their Mom for everything with little thought of earning or saving for what they wanted.
• Now: Everyone in the house know where a bill is allocated, down to getting a Tea on the way to work. All of us are on allowances, we can spend it on what we want, but when it is gone, its gone! We try to pay with cash anything that we can...oh yeah, the Credit Cards are chopped and haven't been used in four months!

Change 3# Success Plan:

• Then: Don't worry, we'll always make more money...It will work out. Hey, there is the sand, I am going to be over there with my head in it!
• Now: Each person, including the kids, has a good idea to where the money is going. They know we didn't handle our finances well and we are now cleaning them up. They now know that a budget is a lifestyle, not a prison sentence to be paroled from. We all know that whatever we want...we have to save for it. A great example is with the tax return that we are getting. While questions came up about vacations, etc., when I explained that we were putting it away for taxes, everyone understood why. My oldest daughter told me to find the best interest rate, so there would be more for Christmas! (Both Girls are budding CFOs)

Change #4 Attitude Towards Money:

• Then: When my 10 year old daughter was four, she asked for a credit card for Christmas...so she could shop whenever she wanted.
• Now: Just last weekend she said she never wanted one because it was silly to pay extra just to get it now! Today I was with my 7-year old son at the bank getting the cash for our envelope system and he asked if we could go to McDonald's for lunch...just us two. I said sure, but reminded him that since the family wasn't all there, we each have to use our allowances to pay for our meal, because that was fair. He turned to me and said, well, how about I save this for a Bionicle instead...Good choice Son!

Change #5 Stress:

• Then: Never knowing what would turn up next, always waiting for our next check. Everyday felt like a rainy day.
• Now: Never is everything perfect. But the stress level around money is 10% of what it was. What stress there is really due to our understanding of what opportunities we blew by not having our stuff together...

So looking back we really have turned 180 degrees in less than 180 days. We are not perfect by a long shot but we got a budget, planned out our Success Map, are working our baby steps, built our snowball, and the light at the end of the tunnel isn't a train anymore!

If you haven't started, start. If you stopped, restart. If you are doing well, look for improvement! You can do it!