Finance

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July 2015 Net WorthAnother month, another net worth update.

So, I dropped $1196 overall but that’s almost entirely due to the situation in Greece and the inexplicable reaction to it in the North American markets earlier this week.

If you’re not following, the decline in the value of my 401k is because the markets dropped a little over 2% in reaction to the most recent round financial woes in Greece.

How a country like Greece can effect the markets over here is a discussion for another day…

Aside from that, though, I was pleasantly surprised with what transpired during the month.

See, while I’ve been focusing nearly all of my attention towards paying down the auto loan, I’ve been using my credit cards with, what feels like, reckless abandon and not really paying much back towards them.

Or so I thought…

I expected my credit card balance to be far more than $441 deeper in debt.

Truthfully, I was prepared to be $1k more in the hole.

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End in SightJust ten weeks ago, when I embarked on a very aggressive payment plan, I still owed $11099 on the Swagger Wagon loan.

Today, my balance is $5410, putting me just a little beyond the half way point.

I’m ecstatic.

It certainly hasn’t been as cut and dry as I’d originally thought it would be as I’ve run out of money a couple of times and gotten dinged with maintenance fees for dipping below the minimum balance threshold on my checking account.

I’m also a little surprised that I’ve only been able to make a handful of extra payments so far (on top of the already scheduled “extra” payments).

I guess my debt paying skills have grown rusty. Hmph.

But that said, I’m just now coming upon a remaining balance where I can apply my “red zone finances” method of ridding debt.

Now, with the end in sight, I’m sure I’ll be able to “scrounge” up a few bucks here and there to get me to the end point sooner.

Can’t wait to rid myself of the $444.15 monthly payment, freeing that up for use elsewhere in my unwritten budget, and, once again, own all of my cars free and clear again.

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Piggy BankI have a regular checking account with Bank of America and that’s where I deposit all of my income before spreading it all around.

Maybe not the best idea but it works for me.

The one thing I’m not real fond of with BoA’s regular checking accounts is that if your balance dips below $1500 at any point during the month, they’ll hit you with a $14 maintenance fee.

I hate that.

Didn’t hate it when their limit was $750 but definately hate it now as much as I did when they first raised the threshhold (and I first got dinged by the fee.)

This morning I find myself with a balance of $1507.31.

Yep, less than $10 away from getting fee’d.

Sure, things could be a lot worse — I know there are a lot people out there that don’t have a $1500 cushion to rest on and end up paying the maintenance fee every month.

I’m thankful that I’m not really close to zero. Very thankful.

So here’s my dilemma…

I can avoid dipping into fee territory if I postpone (or just skip) my next automatic car payment that I have scheduled in my aggressive pay down plan.

That would save me from the $14 maintenance and only cost me maybe $3 or so in added interest on the loan.

No brainer, right?

Skip the payment.

But here’s the thing… if I skip this payment, what happens next week when I get low on cash?

Do I skip that one too?

I mean, my car loan statement currently says my next payment due date is September of 2016 — OVER a year away.

I could totally skip it.

But I’m not going to.

I want this loan to go away.

I came up with a plan to make that happen quickly, and I’m going to stick with it — even if I pay a few fees along the way.

Financially, by the numbers, I mean, it’s clearly the wrong way to do things but, for me, paying a $14 fee is worth it to rid myself of a $444.15 monthy payment before the summer is over.

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Years ago while paying down my mortgage in a fruitless attempt to eliminate PMI, I posted a graph showing how much of an effect additional payments have when it comes to paying down debt.

Back then, it was just an extra $25 per week and, boy, did it ever make a difference!

Of late, my target has been my $24750 auto loan taken out in April of 2013 and will you look at that slope change since I started up’ing my payment schedule! Wow!

Auto Loan Amortization Chart

Visuals are great motivators, I find.

So the blue part is the amortization schedule, you know, how it’d all go if I made the minimum monthly payment for the duration of the loan.

The green part is what my actual balance is currently — and will be as I extrapolated the data out a few months until the balance is paid in full.

As you can see, for the first year or so, I was just making the minimum monthly payment of $444.15, you know, just getting acclimated to having a car payment after so many years of owning my cars free and clear.

At around the 1-year mark, I started tossing an additional $102.50 each WEEK towards the loan in a effort to speed things up.

Granted, that’s a lot of money to have lying around on a weekly basis but you’d be amazed at what you can make do without — especially when you have it set-up to be taken out automatically.

Honestly, I’m at my best when I’m cash poor. I’ve said it over and over — I’m amazing at paying down debt but horrendous at saving money.

The key for me is to not have any money to spend. Can’t spend what I don’t have. And the reason I don’t have any is because I’m sending most of it towards my debts — on auto-pilot.

Now, within the past month or so, I’ve stepped it up a notch with crazy with $452 payments (WEEKLY!) that essentially line the entire balance to be paid in full this August.

Yep, before the mid-point of the original amortization schedule — even with just paying the minimum payment for the first year!

— — — — —

For the record, I never was able to get Countrywide Home Loans to stop billing me for PMI (Private Mortgage Insurance) even though I was far beyond the threshhold that it should have been dropped (automatically, I might add) even after numerous phone calls and letters.

To solve the problem and rid myself of an expense I no longer should have had to pay, I ended up re-financing with another bank and cut my mortgage bill by nearly 60%.

Their loss.

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June 2015 Net WorthSo the good news is that I’m still on the up-and-up when it comes to the bottom line.

Clearly, my all out assault on the auto loan is making a HUGE difference with just shy of $3k falling off of the balance during the month of May.

On the other hand, it’s apparent that I’m not paying down my credit cards very much at all and, to my surprise, actually, I’m using them more frequently than I thought I was.

This is due largely in part to expenses incurred during a last minute mini-vacation we took during the Memorial Day weekend, a tablet purchase for my son’s 6th birthday, and some rather expensive license renewals for my side business.

Thankfully, if they’re not annual expenses, they’re really infrequent ones so the month of June should look a lot more attractive.

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I’m now four weeks into to my 20-week auto loan payback plan and, while I stumbled out of the gate and ran out of money early on, things are feeling pretty good right now.

Just knowing that I’m 20% of the way there, already, has me motivated to keep going and I think I’ve managed to settle in to this new budget.

To date, I haven’t been able to send in an extra dime over what I’m already aggressively paying down on a weekly basis but I’m sure that as the balance remaining falls within a striking distance, I’ll be able to scrounge additional funds somewhere to rid myself of my largest monthly non-mortgage expense.

At worst, just 16 weeks to go.

My gut tells me it’ll be gone 12 weeks from now — week 16 below.

Weekly Payment Plan

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Wow, just a couple of weeks in and I’m already feeling really, really, really cash-strapped.

It’s sunk in now how far “out-of-game” I’d allowed myself to get over the past couple of years of not posting on here.

I unveiled that really aggressive plan to pay down my auto loan just, what, like two weeks ago and, ALREADY, I’ve had to dip into my savings account to cover my regular bills.

It wasn’t supposed to happen this way.

I mean, I’m an expert at this sort of thing, right?

I used to be.

So my stumbling out of the gate is clearly a result of my finances going nearly unchecked for the past couple of years. If I wanted something — and I could justify the costs — I bought it. It’s pretty simple, really.

In my head, two weeks or so ago, I though, eh, I’ll just move some automatic payments around to knock out the auto loan, you know, and things will be just like they’ve been for what feels like forever. No big deal.

But then I see something I’ve gotta have on eBay. I spend a couple hundred bucks on my business. The auto insurance bill comes in. I buy a new tablet for my son’s birthday. You know, stuff.

Add all of that up and, well, hmmmmm…that was all of the extra money I’d had slated in my plan to go towards the auto loan.

Crap.

I can’t have it all.

Even still, I haven’t stopped the payment plan.

I didn’t even hit pause.

To get me through this rough patch, I brought over $500 from my savings account to get me by until my next paycheck.

And, hopefully, from here on out, I can curb my spending back to where it needs to be to make this all work…

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I’m often asked why I’ve repeatedly chosen to pay down my some of my lowest interest debt ahead of all of my other “higher cost” balances.

Actually, that’s not true at all.

I’m almost never asked about money since most people are afraid to talk about it. But, I’m going to pretend people ask me that all the time anyway…

It’s about options — and having more of them to choose from.

For most people with pretty decent credit, the debt with the lowest interest rate attached is pretty universally a car loan.

I mean, I could go out and finance an $80k Range Rover Sport this afternoon at a crazy low rate. Probably even drive it home tonight…

It’s cheap money that’s readily available.

Sounds great, right? Well… it sort of is and sort of isn’t.

Nearly everyone can afford a sweet ride. Not everyone can afford to keep it.

Anyway, in my “real-life” case, I’ve got an 2.9% auto loan with a little over $10k remaining on it. And I also have an outstanding $3500 balance on my credit cards with an APR over 10%.

Suze Orman, Dave Ramsey, Clark Howard, any televised money guru, really, would recommend that I pay off the lowest balance or the highest rate first.

In my case, the credit card wins on both terms — it has a low balance and a high rate.

I understand the methods — Ramsey wants people to gain momentum and accomplish things quickly. Basically, wipe one balance out quickly to get yourself going.

Totally get that.

The mathmatically sensible thing to do, though, would be to pay the highest rate balance first since it’s “costing” you more each month than the lower rate balances.

And, clearly, that makes sense too. There isn’t any grey area when it comes to math.

But what those two ideologies are overlooking is — insert menacing fanfare here — the minimum monthly payment.

Say that again in a monster truck commercial voice.

MINIMUM. MONTHLY. PAYMENT.

So, back to my real-life example…

Credit cards, by design, have insanely low minimum monthly payments. I mean, their whole business relies on you not ever paying them back in full — that’s why there is no term.

They don’t want you to default…but they want you just short of defaulting…forever. That’s how they make money.

In my case, the minimum payment on my $3500 balance is $55. Hardly budget busting.

In contrast, the minimum monthly payment on my auto loan is $444.

That’s the equivalent of 8 months worth of credit card payments…in the span of two biweekly pay periods.

Financial freedom is all about having options — you know, money available to spend on what you choose to spend it on.

With that in mind, wouldn’t freeing up a mandatory $444 monthly expense be the faster path to financial freedom?

I mean, once that’s gone, I’ll be able to make double minimum payments to the credit card and still have an “extra” $400 to use in my budget where ever I choose.

That’s freedom.

Eliminate the big (non-mortgage) bills first — regardless of the balance or the rate.

It’ll make everything that follows so much more manageable.

Can You Dig It?

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