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A place for Get Rich Slowly readers to ask questions
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 Post subject: Sandi's Plan for Increasing Savings & Paid-Off Debt
PostPosted: Wed Aug 06, 2008 11:41 am 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
OK, so my DH and I are doing reasonably well, but we still have some room for improvement. We both make decent money, we're saving more than 10% of our gross income in retirement, our individual CCd's are paid off, we have a house, I work for a company that still offers a pension, and our joint credit card is almost paid off.

That leaves two car loans, and a mortgage.

I want to make sure we set aside more money for an emergency fund (we've raided it this year to finish some much-needed home repairs), and increase our liquidity.

I like Sam's fiscal format, because it makes her goals explicit. Mine have always been "pay off debt", which has not always gone as smoothly as I preferred. Now that the debt is almost paid off, I want to have a plan for SAVINGS, since people seem to flounder when they no longer have the Debt Whack-a-Mole game to play.

Updates soon.


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 Post subject:
PostPosted: Wed Aug 06, 2008 11:59 am 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
OK, here are the goals we set for 2008:

SAVINGS

S-1) 2007 SEP-IRA for DH - fully funded at $7900 - DONE

S-2) 2008 403(b) contributions for me - Contribute $1000/month - DONE Increase in October with raise

S-3) Establish Emergency account of $10,000 - Currently have $8000

DEBT REDUCTION


DR-1) Pay off joint credit card (current balance $12,535, Interest rate of 6.12%)

DR-2) Pay of individual credit car (current balance $1600, interest rate of 4.99%)

DR-3) Pay off car loan (current balance $14,369, Interest rate of 5.3%)

My plan is to have the individual credit card paid off in two months (beginning of October) and that the joint CCd will be paid off by the end of the year.

I plan to have that extra $2K in the emergency fund by the end of the year - that's $500 per month.

In October, I should get a raise, and I want to put another $291/month into the 403(b) - that will max me out.

In March 2009, we'll know the max of DH's SEP-IRA contribution, and we'll make that deposit.

Then it's on to the car loan and individual savings for me (currently, I have ~ $1400 in my individual savings account). I plan to take the funds I've been pushing on the credit card to the "emergency savings account" which will double as my car savings account.

I need to establish an ING Direct account.

OK, so those are the goals for now - a little rambling, but with some clear action items. Wish me luck!

Sandi


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 Post subject:
PostPosted: Wed Aug 06, 2008 12:23 pm 

Joined: Sun Jun 10, 2007 3:19 pm
Posts: 620
Is there a reason to fully fund your emergency account before paying off the car loan? Emergency accounts are important, but you already have $8K, which is plenty for most people. Unless the interest rate on the car loan is really, really low, you might consider paying it sooner.

Also, when you do ING, make sure you have a referral. The money for referrals isn't much in absolute terms, but it does make your effective interest rate seem a lot higher. ING tells you how much interest and referral bonus you've earned since you started with them, and it's fun to watch that number grow. (And yes, I have referrals, but I'm not trying to get you to use them, at least not mostly. I really have found the interest numbers useful.)


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 Post subject: Net Worth
PostPosted: Wed Aug 06, 2008 12:24 pm 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
Daedala has a Net Worth stat, which seems like a good idea. I'll split the joint debt and asset (the house!):

House Net Worth: $550,000 /2 = $275K
House mortgage: $200K / 2 = -$100K
Savings: $1400
Credit Card Debt -$1400 (ind) & -6K (1/2 joint)
Car Debt $14,369
Car Value: $18K
Retirement Savings: $155,125 / 2 = $77562

Net worth, August 2008: $250,193


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 Post subject:
PostPosted: Wed Aug 06, 2008 12:27 pm 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
Daedala wrote:
Is there a reason to fully fund your emergency account before paying off the car loan? Emergency accounts are important, but you already have $8K, which is plenty for most people. Unless the interest rate on the car loan is really, really low, you might consider paying it sooner.

Also, when you do ING, make sure you have a referral. The money for referrals isn't much in absolute terms, but it does make your effective interest rate seem a lot higher. ING tells you how much interest and referral bonus you've earned since you started with them, and it's fun to watch that number grow. (And yes, I have referrals, but I'm not trying to get you to use them, at least not mostly. I really have found the interest numbers useful.)


For me, it's an issue of liquidity. I am looking at surgery sometime in the next year, and if my income takes a hit, I need the liquidity. At the moment, I have enough VL/SL for more than 2 months off the job, but if the surgery goes awry, I could have to go on Temp Disability. So yeah, until I'm done with the surgery issue, I really prefer to have the cash on hand.

And thanks re: the ING account - I am more than happy to ask for a referral, and I didn't know that referrals were so useful.

Yay! A plan is a Good Thing.

Sandi


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 Post subject:
PostPosted: Wed Aug 06, 2008 12:47 pm 

Joined: Sun Jun 10, 2007 3:19 pm
Posts: 620
sandi_k wrote:
For me, it's an issue of liquidity. I am looking at surgery sometime in the next year, and if my income takes a hit, I need the liquidity. At the moment, I have enough VL/SL for more than 2 months off the job, but if the surgery goes awry, I could have to go on Temp Disability. So yeah, until I'm done with the surgery issue, I really prefer to have the cash on hand.


Oh, ok, it's a known future expense, or at least a likely one, which is rather different than a "just in case" account. Definitely more important than a car loan.

Goals are very helpful. Sometimes it almost doesn't matter what they are, as long as you have them.


Last edited by Daedala on Thu Aug 07, 2008 10:03 am, edited 1 time in total.

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 Post subject:
PostPosted: Thu Aug 07, 2008 6:25 am 

Joined: Sun Apr 29, 2007 8:11 am
Posts: 1088
Location: Sunny Florida
sandi_k wrote:
OK, here are the goals we set for 2008:

SAVINGS

S-1) 2007 SEP-IRA for DH - fully funded at $7900 - DONE

S-2) 2008 403(b) contributions for me - Contribute $1000/month - DONE Increase in October with raise

S-3) Establish Emergency account of $10,000 - Currently have $8000

DEBT REDUCTION


DR-1) Pay off joint credit card (current balance $12,535, Interest rate of 6.12%)

DR-2) Pay of individual credit car (current balance $1600, interest rate of 4.99%)

DR-3) Pay off car loan (current balance $14,369, Interest rate of 5.3%)

My plan is to have the individual credit card paid off in two months (beginning of October) and that the joint CCd will be paid off by the end of the year.

I plan to have that extra $2K in the emergency fund by the end of the year - that's $500 per month.

In October, I should get a raise, and I want to put another $291/month into the 403(b) - that will max me out.

In March 2009, we'll know the max of DH's SEP-IRA contribution, and we'll make that deposit.

Then it's on to the car loan and individual savings for me (currently, I have ~ $1400 in my individual savings account). I plan to take the funds I've been pushing on the credit card to the "emergency savings account" which will double as my car savings account.

I need to establish an ING Direct account.

OK, so those are the goals for now - a little rambling, but with some clear action items. Wish me luck!

Sandi


Looks like a great plan, good luck Sandy!

_________________
Sam

http://adventures-of-sam.blogspot.com
(Follow Sam's financial and real estate adventures.)


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 Post subject:
PostPosted: Wed Aug 13, 2008 9:42 am 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
OK, so I just returned from my annual "girly weekend" with my mom and sister. I think I spent ~ $60 on used books, we went to a matinee, and I bought dinner out for us all. I also made
a "goody bag" for them, which includes some expensive hair products they don't/won't buy themselves. Total for 4 days is ~ $500, including gas there and back.

But the worse news: it looks like the surgery will be NOVEMBER. I just worked out my income on disability (which will be close to what I make now, because I've paid for supplemental disability
insurance for years). My income will be ~ 70% of my regular income, but disability income is NOT taxed (which is good). The bad news - I'm also not allowed to contribute to the 403(b) account
while I'm on disability. So my contributions will be halted for at least two months. Grrrr.

The worst news: I'm a CA state employee. I may get a Sept. 1 paycheck at minimum wage. Our payroll reps say not, but I have to plan for it just in case they're wrong.

So it looks like I will have to wait until February to fully fund the 403(b).

I also forgot in my early enthusiasm - I have the 30K service due on my car, which runs around $800. I think I'll pay for it in cash, and drain the savings down, rather than put it on the credit
card. So my savings and retirement is taking a hit, but I *will* have that card paid off by the time I go in for surgery.

Sandi, keeping it honest...


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 Post subject:
PostPosted: Wed Aug 27, 2008 5:14 pm 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
OK, so my first month was a bust. :)

Between Girly Weekend (once every two years) and my brother's family visiting (he lives in CT, and he hasn't been here since November 2007), I spent more this month than I should have. I haven't done the bills yet, but I just checked all balances, and the CCd is definitely up. If I don't add another single thing to it, I will have it paid off December 1. And that's unlikely, as we are taking our anniversary trip in November (booked in March, already pre-paid except for food and hotel in Florida for 4 of the 11 days).

The good news: we kept all the $$ in the joint savings account, and we didn't spend as much as usual on "joint purchases." So I should be able to take a big fat whack at that bill this month. Finally, I've been told I will be paid at my regular rate this month, regardless of the state budget fiasco.

So, I've delayed the payoff of the CCd, but I feel like I'm making good progress in my organizational world. I have spreadsheets set up for individual and joint accounts, and I am checking the CCd statements regularly (rather than once a month). I think this will be key in reminding me that I *have* already spent my allotment for the month.

Sandi


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 Post subject:
PostPosted: Fri Sep 19, 2008 2:29 pm 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
OK, time for an update and some accountability. Which means it's not as good as it should be. :)

As of Sept. 19

SAVINGS


S-1) 2007 SEP-IRA for DH - fully funded at $7900 - DONE

S-2) 2008 403(b) contributions for me - Contribute $1000/month - DONE

S-3) Establish Emergency account of $10,000 - Currently have $8000


No change - I forgot about September estimated taxes, so no new deposits.

S-4) Max out 403(b) contribution with October raise - additional $291 per month

To be done, I hope (assuming we get raises this year - the economy is starting to look bleak, so merits may be canceled).

S-5) I need to establish an ING Direct account.

I got an email with a link (which I just checked, and it's now expired), but haven't done it yet. They want $250 to start the account. I will deposit $150 in birthday checks to my credit union savings account next week, and then transfer the $250 to ING for that new account.

DEBT REDUCTION

DR-1) Pay off joint credit card (current balance $12,535, Interest rate of 6.12%)


OK, not good. We bought two big-ticket items in August/September. Current balance - $16,906. And that's with a September payment of $3K. I don't regret the purchases, but maybe we should have paid cash? Actually, we couldn't have for one - we were out of town, and the funds were inaccessible.

The only silver lining - DH says the business can finally afford to pay back the $10K he "borrowed" from our personal account in February.

My intent is to pay off as much as possible, while getting the Emergency Fund to the $10K level. This will mean $2K to savings, and $8K paid against the CCd. In addition to the budgeted $3K payment. So that should bring the balance down to more like $6K.

DR-2) Pay of individual credit card (current balance $1600, interest rate of 4.99%)

Again, as posted in an earlier note, Girly Weekend and my brother's first visit in-state in 10 months meant we spent more in gas than intended. I also splurged on gifts for others, including sending my SIL to a massage (she has 3 kids, and needed the break). I also had the 30K service on my car - which was $750.

Current balance: $3127. Ouch.

So, I've decided to start watching the expenses. I thought I had them under control, but I see that the past two months, I've been spending more than usual. The good news: I'm starting some new habits.

1) I'm tracking my daily expenditures, and have created a "daily expense spreadsheet." I've discovered, in going back through the past couple of months' of expenses, that I'm spending waaaaayyyy more on gas, gifts, beauty products, books and my car than I expected.

2) I've decided to get back to basics with spending. I've gone to the bank, and withdrawn cash. I have $82 to get me through the end of the month ($7 per day on weekdays, and $10 Sat/Sun). I will carry only that day's money with me.

3) I'm also categorizing any and all credit card and ATM charges. I'm considering going to cash-only for everything on that list, including restaurants, entertainment, car repair, books, gas, lunches and gifts.

DR-3) Pay off car loan (current balance $14,369, Interest rate of 5.3%)

Later on the list...

So, while I've taken a couple of steps back, I feel that I'm scrutinizing my habits and unconscious behaviors more aggressively than I have in awhile.

One other note: I reduced my over-withholding for Federal taxes today. My take-home will be an extra $300 per month, which means that CCd WILL BE PAID OFF by the end of the year.

Whew.

Sandi


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PostPosted: Fri Sep 19, 2008 8:20 pm 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
OK, so that was a good end to the week. When I got home I found:

1) Two rebate checks from Apple (for one of our recent big-ticket purchases) totalling $310.

2) DH came home with the $10K check from the business.

I also still have $150 in checks for the bday. I am going to take the bday checks and $100 of the rebates to start my ING Direct savings account next week.

Wha-hoo!

Sandi


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 Post subject: Thanks for the tip
PostPosted: Sat Sep 20, 2008 9:23 am 

Joined: Sun Jun 01, 2008 10:13 am
Posts: 148
Liked your idea of carrying around only that day's $ as a beginning step to carrying cash. thanks.


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 Post subject: Re: Thanks for the tip
PostPosted: Sat Sep 20, 2008 10:07 am 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
ellie377 wrote:
Liked your idea of carrying around only that day's $ as a beginning step to carrying cash. thanks.


I did this quite successfully when I was squirreling away spending money for a trip to Europe in 1997. I carried $6 M-F, and $10 Sat/Sun, totalling $50 per week. Out of that fund, I paid for coffee, lunch, drinks with friends, library late fees, books, and other incidentals. I still used the debit card for groceries and gas.

At the end of the day, any $$ I hadn't spent was put in the "Europe" cash fund. It was easy to end up with an extra dollar or so each day - I'd ask myself "Do you really want a mocha right now, or would you rather have gelato in Venice?" It was a *really* *powerful* motivator.

In 9 months' time, I had nearly $900 set aside.

I want to have that focus again. It brought home the notion of tradeoffs in a really effective way. I could eat out for lunch, but not lunch AND dinner. I could have a mocha, but that meant I had to bring my lunch....

Hope it's useful.

Sandi


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 Post subject: Re: Thanks for the tip
PostPosted: Sat Sep 20, 2008 1:27 pm 

Joined: Sun Feb 17, 2008 4:39 am
Posts: 322
Location: Woodstock, CT
sandi_k wrote:
gelato in Venice

this should be a "Saving" mantra
along with
Roller blading at the Champs Elysee
counting the steps of the Great Wall
[Fun activity] in [Fun Destination]

_________________
When you're good to others, you're best to yourself - B. Franklin


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 Post subject:
PostPosted: Sat Sep 20, 2008 4:45 pm 

Joined: Tue Aug 05, 2008 3:22 pm
Posts: 548
Location: Northern CA
OK, thanks to Daedala, I've now opened my ING Orange Savings account. Yay!

I also showed DH the categorized spreadsheets for our CCd spending of Aug/Sept. Yikes! He agreed that we were not being responsible, and it was time to tighten up.

Baby steps...

Sandi


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