Poohstixx's Personal Finance Blog

I recently began this blog on October 27th. and set goals through the end of the year. This is an update on the progress toward those goals.

OCTOBER/NOVEMBER/DECEMBER 2009 GOALS:

1. DEBT: Bring all payments current by the end of December 2009.

UPDATE: WE HAVE BROUGHT ALL PAYMENTS CURRENT EXCEPT THE MORTGAGE, BUT WE ARE IN THE PROCESS OF APPLYING FOR A SHORT SALE ON OUR HOME.

2. BUDGETING: Look into ALL options to reduce monthly payments on debts and other expenses (refinancing, selling vehicles, closing storage, etc.).

UPDATE: WE REFINANCED BOTH VEHICLE LOANS THROUGH OUR LOCAL CREDIT UNION AT A LOWER INTEREST RATE AND LOWER MONTHLY PAYMENTS. WE ARE STILL USING OUR STORAGE, NOW THAT WE ARE TRYING TO SELL THE HOUSE WE ARE USING IT TO HOLD EXTRA FURNITURE, ETC. SO OUR HOME IS STAGED BETTER. WE DO PLAN TO HAVE A LARGE RUMMAGE SALE IN THE SPRING TO GET RID OF UNNECESSARY ITEMS AND CLOSE THE UNIT. WE HAVE CUT OUR DIRECT TV SERVICE AND LANDLINE PHONE.

3. BUDGETING: Have all spending documented for November and December and after bills are paid use only cash for all other expenses.

UPDATE: THIS ONE WE HAVE NOT DONE SO WELL ON. WE HAVE MADE ATTEMPTS, BUT HAVE FALLEN SHORT. OUR PAY DAY FALLS ON JANUARY 1ST, SO WHAT BETTER TIME TO IMPLEMENT A BUDGET AND CASH ONLY SPENDING?? I'VE DONE MY HOMEWORK, NOW JUST NEED TO REALLY COMMITT TO STICKING TO IT! WE'LL ROLL OUT OUR BUDGET FOR THE FIRST OF THE YEAR, TRACK OUR SPENDING AND IMPLEMENT THE ENVELOPE SYSTEM. OF ALL THE GOALS, THIS IS THE BIGGEST. I KNOW WE WON'T MAKE ANY LONG-TERM PROGRESS UNTIL THIS SYSTEM IS IN PLACE AND WE ARE UTILIZING IT EFFECTIVELY!!!

4. SAVINGS: Begin putting money (all extra income from photography business and all money from selling unneeded items in house) toward Emergency Fund Savings to establish a minimum of $1,000 in the bank within 6 months.

UPDATE: WE HAVE GOT A GOOD START ON THIS AND HAVE $500 TOWARDS OUR $1,000.


Overall, although we haven't met each goal 100% we have certainly made some significant changes and are moving in the right direction. I am sure once our budget, tracking and cash spending are in full force, we will really be well on our way! We've built some momentum and I am pleased with what we have accomplished in two months time. I am looking forward to making 2010 the year that we turn everything around and establish a solid path towards financial peace!

Here is an update on our short sale process:

We currently have our home on the market. We had four showings the Tuesday before Thanksgiving, but no offers resulted and no showings since. We plan to have an open house after the holidays.

I received a voice mail message from Wells Fargo last week. When I called it back they informed us we are behind in our payments, which we were aware. I explained that we were in the process of applying for a short sale. The guy told us the short sale option had been denied. We had not received a letter regarding this yet and he told us when it was mailed out and asked if we wanted to reapply for the short sale again. I told him I would wait and see what the letter says. We were extremely disappointed and pretty much settled on the fact that we will have to stay put.

The letter arrived over the weekend and said exactly the opposite of what the guy on the phone told us! It said that we have not been approved for mortgage payment assistance because they were unable to get us to a revised payment amount that we could afford per the investor guidelines on our mortgage. Then it went on to say, "At this point, we recommend the following options: Short sale or deed in lieu of foreclosure." So, I guess we are still in the game!

We have the paperwork into the credit union to consolidate the vehicle loans and get a lower interest rate and lower monthly payment. I hope to hear it will all be finalized next week.

We've also decided to make a big leap. We put our house on the market today. Over the past few years we've decided we want to move to Maryville (outside Knoxville), TN to be closer to some family. We do owe more on our house with or mortgage and home equity loan that what we will probably be able to sell it for, so we will end up with a short sale. However, it will be a relief to be out from underneath at $1250 mortgage payment and $465 home equity loan payment. We will probably be around $10-20,000 short.

My mom just got a modular home set up and was actually living in a mobile home I previously owned (bought new when I went off to college). Our plan is to sell our house, move into the mobile home (and save/pay off debt as much as possible), my husband will apply for a job and once he has an offer we will make the move down.

It quite a step, but we think it's the best decision for our family and may actually provide us with an opportunity to have several months without a mortgage/rent payment that we can really make a big dent in our debt.

I am totally coupon illiterate. I'd love to use them, but using a couple here and there...I don't. And, shame on me, sometimes I use a coupon and buy an item I don't really need, just because I have the coupon. I'm looking for some suggestions on how to learn to find good coupons (good websites and other resources), organize them, take advantage of good deals (double coupons, etc.) and not have to spend forever doing it. Lay it on me, folks!

Today we eliminated our satellite and land line phone! We went from paying about $130 for all three down to $35 for Internet alone. That's another $95 savings per month. This in combination with reducing our interest rate and payment on our vehicles by $180 makes a GRAND TOTAL of (drum roll please!) $275 a month!!!

Our next pay day is Friday and we plan to implement our envelope system!

Well, I've learned two bad things today. #1, Wells Fargo stinks. #2, the number of inquiries made on your credit report lowers your credit score (I'm kicking myself, because I probably should have done my research and known this!).

#1, Wells Fargo stinks: WF Bank came back and said they could not do a refinance on our vehicle loans. They are also the ones who over appraised our home's value which helped (of course our signing the dotted line on a home equity loan was a big part too!) get us in the situation of being upside down in our home and now we can't even do a refinance on the home. Ugh. So unfortunately we're stuck with our current mortgage rates and payments.

#2, I learned today that when you authorize a bank to view your credit score, you lower your credit score...even if you don't borrow any money. So, our scores are now in the mid-600's, yikes! I had no idea! Well, lesson learned.

Ready for the ONE good thing that came of today?? Our credit union approved us to refinance our vehicles through them which will lower our monthly payment by $180!!!! I am so thrilled!

We are still however, going to see what a vehicle dealership would offer if we traded in both vehicles for two vehicles $3,000 or less. This does however make me very nervous with winter coming...I am quite concerned about the cost of potential vehicle repairs I will admit I would feel a bit more secure just refinancing, but we'll see what the dealership offers for financing.

WHEN I FINALLY REALIZED WE WERE IN TROUBLE, I POSTED THIS ON SEVERAL PERSONAL FINANCE FORUMS FOR HELP:

I need some advice on what to do! We have a ton of money going out which leaves us with little for food, gas, etc. and we're quckly falling behind! Not to mention we often get slapped with overdraft fees in our account, because we struggle to keep track of what's going out, timing with bills, etc.

At the beginning of this year we had two credit cards with high interest and high minimum payments, so we contacted Take Charge America and are using them to help pay that debt off. The good news about this is we have not used ANY credit since that time.

We also had our student loans deferred for one-year, but that time is now up and will have to start paying on them again.

We are way upside down on our vehicle loans, we could maybe get $8,000-$9,000 for each of them, but that leaves close to $10,000 left over.

We have also debated selling our home and renting or buying something for a lower monthly cost, but with the poor market (and our home equity loan) we are also upside down on this and would have about a $20,000 difference if we could sell for top dollar.

Our Debt:
Debt Total Owed Min Pmt Interest
Mortgage $144,714.97 $1,246.97 5.875%
Home Equity Loan $38,766.17 $463.25 10.66%
Car #1 $14,054.99 $415.00 8.84%
Car #2 $11,300.30 $265.00 8.39%
Student Loan #1 $38,192.57 $230.00 3.62%
Student Loan #2 $16,649.01 $131.00 3.62%
TCA $20,100.00 $515.82 2%
TOTAL DEBT $283,778.01 $3267.04

Our Monthly Expenses:
Item Monthly Cost
Utilities $185
Water $65
Phone/Internet $80
Mobile Phone $100
Direct TV $54
Insurance (all) $225
Storage $45
Child Care $600
TOTAL $1354

TOTAL MONTLHY INCOME (TAKE-HOME) = $5,200
TOTAL MONTHLY EXPENSES (not incl. food, gas, etc.) = $4621.04
LEFT OVER AMOUNT EACH MONTH FOR food, house items, misc. = $578.96

I have tried to set up a budget, but get extremely frustrated when I know I need to budget for food, household items, clothing, car/home repairs, gifts, pet expenses, school expenses, etc. and have a very small amount of money per month to do that with. I don't know how to prioritize these things. AND, if I'm supposed to set money aside for clothing, repairs, etc. and can't, what do I do when those expenses come up and it's either use money for that or to cover all the bills??

We have a 6-year old, 3-year old. My mother stays with us during the week and takes care of our kids (she goes home on the weekends), so basically we have a 5-person household (keep in mind grocery expenses, household items).

We have $0 in savings. My husband has started a small photography business and we're starting to gain some small income from this (I would like to put this toward a $1,000 emergency fund for the time being).

We have made EXTREMELY poor choices with our money from the beginning...that is even an understatement! We want to turn this around, but we are so overwhelmed, we don't even know how/where to start! I am open to/desperate for any feedback or suggestions! Please, be kind!


I GOT A HUGE AMOUNT OF RESPONSES THAT WERE VERY HELPFUL AND DEVELOPED THIS PLAN:

I would like to thank everyone for taking the time to respond to my post and give me some much needed financial advice! Two things I was able to get out of this experience: 1- A huge amount of great suggestions and 2-Hope that we can get out of this hole we have dug. I appreciate all of the positive and helpful feedback. I posted on several sites to get the most information I could.

I thought that I would share our plan developed from all of the wonderful suggestions I received:

Storage:
- Move everything out of storage and into the house, asap.
- Begin selling all unused/unneeded items in the house.

Phone/TV/Internet:
- We need to continue our internet service as we need this for my husbands photography.
- We will be dropping our landline phone and Direct TV.

Mortgage and HEL:
- I have looked into refinancing with our current lender and have been told that there is not enough of a difference in current rates (home is at 5.25% and HEL is at 11.25%) for it to be beneficial. Note: our current HEL rate is 10.66%.
- We may still consider a short sale down the road, but only after we have made other adjustments...I think this can be avoided and we can hold out until the market improves.

Cars:
- We have inquired with our lender about refinancing, however the lowest rate they offer is 7.696%, so it is unlikely we will be successful with this.
- We will inquire about rates/refi options with other lenders.
- We plan to either trade them in for cars less than $2,500
or
- sell the cars and buy cars less than $2,500 (however, I am not sure if we can get an unsecured loan to cover the difference).

Insurance:
- We currently have our life, home and vehicle insurance through State Farm.
- We plan to talk with them to inquire about a lower rate for our vehicles.
- We also plan to call around to other insurance companies to check rates.
- We will also add a gap policy on the home and vehicles because we are upside down on those loans. I understand this is a small cost (only a few $'s per month).

Student Loans:
- We will request another deferral.

Tax Withholding:
- We have adjusted this in the past and currently get a small amount back and I don't feel comfortable cutting this anymore to avoid the possibility of having to pay in.

Groceries:
- We plan to utilize Angel Ministries (there is a location nearby) where we can purchase groceries for $30/week.
- I also plan to utilize coupons more and shop for cleaning supplies, etc. at our local dollar store. It is an extra trip, but will save money.

Day Care:
In our area having two children in day care would cost WELL over $200 a week. We live in a smaller town in Wisconsin, I'm sure day care costs are much more in other areas and I'm surprised at the criticism I've received about the costs we pay for day care. I would challenge anyone to beat it. We are paying my mom $150 per week (or $30 a day) for one full-time and one part-time child. We are already saving a large amount of money on our day care. I can talk with her about lowering this, however we recently lowered what we paid her by $100 a month (we were paying her $35 a day, but since my son is in kindergarten, we reduced this) and she partially relies on this income as she retired early to do us a favor and watch our kids. There are many benefits to her watching our children: she is their grandma, she takes care of light cooking, laundry, etc. while she is home, we don't have to take the kids out to a day care center, we don't have to miss work if the kids are sick, we don't have to stress or rush home if we're running late at work to avoid late fees, and the list goes on and on.

Second Jobs:
My husband receives regular business doing photography, mostly through friends and co-workers. This comes at little to no cost to us, except his time which is by no means a lot. I received some criticism about this, but so far there have been very few negatives and financial cost to us as his business is becoming well established and he has several repeat customers.

Pets:
We have two dogs (one is 12 yrs old) and one cat. Our pet expenses are food, litter and yearly exams (we rarely have to pay above standard yearly exam fees...our pets have been very healthy). Our children are very attached to our pets and we are not willing to find other homes for them.


THEN SOMEONE SUGGESTED I START A BLOG, SO HERE I AM! I AM ALSO MAKING IT A GOAL TO REGULARLY BLOG ABOUT OUR FINANCIAL JOURNEY OUT OF DEBT AND INTO FINANCIAL FREEDOM. I LOOK FORWARD TO HAVING THIS OPPORTUNITY AND THE FEEDBACK AND SUPPORT FROM OTHERS!