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Monday, April 23, 2018
Finance

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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.

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May 2015 Net WorthWould’ve been neat to see my progress during the past couple of years when I was essentially “ignoring” my finances.

‘Ignoring’ is too strong of a word. Let’s just say…I didn’t have any direction. Now, hopefully, I’m back at it.

So, unlike when I previously did this, I’m going to ignore assets like the house and the cars.

Mostly because it was such a hassle to calculate their values but also because the values I came up with could so easily be questioned.

I mean, that Land Rover valued at $4500 only really got me $1500 as a trade-in. Kelley Blue Book – you’re dead to me.

Honestly, though, I’m also leaving them off because I know I’m currently in the black without them… No need to “pad” the numbers.

Hooray for getting older and wiser, err, wealthy!

(pretty sure everyone gets wealthier as they get older… if only I could’ve been where I am now when I started this place 8+ years ago…)

Here’s the breakdown:

Checking
My day-to-day cash lives here. It’s also where I deposit my paychecks. Basically, I just try to keep this above $1500 at all times since that’s the threshhold where BoA will start charging me maintenance fees. Most months, I come within a couple hundred bucks of getting charged.

Savings
This looks awesome, doesn’t it? Well, truth be told, a vast majority of it is money I owe on a home equity loan so it kinda cancels itself out on the liability side of things. The plan is to use all of this (and then some) to finance building a HUGE addition on our home.

401k
Considering I barely contribute to this (as there hasn’t been a match for years now), I sure am glad that I got as much in there as I did when I was still in my 20’s. Really, this is a testament to starting early on a nest egg. Not necessarily continuing (as I have not), but starting early.

Stock
Not sure why I still have this paltry amount sitting in a Sharebuilder account. While I’d love to brag about how much money I made selling my Tesla, Chipotle, Lululemon, and SolarCity stock, well, those earnings may as well be ancient history at this point…

Auto Loan
Primary target here — this thing is dropping fast. While I’m barely a week into my aggressive payment plan, this 5-figure sum will be reduced to nothing before the summer is over.

BoA Credit Card
This is a business card that I use as a business owner mostly to make tracking my business expenses super simple since they’re all on one statement. Thankfully, I’ve gotten to a place where I pay this one in full each month — that is, if my clients pay their invoices promptly.

Chase Credit Card
My card of choice lately which is why it’s carrying a balance. It doesn’t have the lowest rate or the best rewards program but they sure do make it easy to pay them back and, often times, they have the best “transer your balance” offers. As a result, I’ve had this account open since I was 21 years old. For those counting, that’s 17 years ago.

Citi Credit Card
This is my other go-to card. It has a pretty sweet rewards program but the interest rate is ludicrous compared to my other accounts. As such, since I’ll be carrying a balance for a few months, this card doesn’t venture out of my wallet much these days.

Mortgage 1
My primary mortgage, the one that, post-refi, has a $498/month payment. Staying the course on this one as I’m sure that in 10 more years, a trip to the grocery store will be comparable in price. *So* thankful I refinanced when I did.

Mortgage 2
This is what’s left to payback on the Home Equity loan we secured back in December of 2013. We still haven’t used the money so, in theory, I could pay it back tomorrow.

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In the past, I’ve documented how making WEEKLY payments instead of monthly payments can really drum up some extra motivation when it comes to paying your debts.

Yeah, I know that’s stating the obvious, I mean, of course paying weekly pays debts faster than monthly. Hello?

But it’s more about the mental side of things — and “solving” that side of things can really pad your wallet in the future.

Instead of being saddled with this car loan for what feels like an eternity — I can eliminate it completely in… 20 weeks.

Twenty weeks versus three more years. Yeah, that gets me pumped to get started.

Here’s the week-by-week plan:

Weekly Payment Plan

Okay, so that’s a bit longer than the original 3 month window that I proclaimed I’d wipe it out within but 20 weeks will be my baseline.

I still think I can squeak this one sooner than that with a few more extra payments here or there. My red zone mentality will take it up a notch as I near the finish line.

Now, don’t get me wrong and don’t think I’m just super wealthy or something… The ability to pay $452.50 per WEEK to an autoloan blows my mind too. That’s A LOT of money.

Based on my perceived comprehension of my biweekly paycheck and my monthly expenses — I certainly don’t have an “extra” $452.50 each week to toss around.

Or do I?

See? There’s the catch.

While you may not think you have much “extra” money available to attempt an aggressive pay down like this, chances are — if you follow a rigid plan — you’ll find that you actually do.

Apparently, while I’ve been financially in cloud cuckoo land for the past few years, I’ve probably been blowing the near equivalent of $452.50 per WEEK on incredibly stupid stiff like gummi bears and dirty polyester.

Okay, that’s not entirely true (most of the time) but you get the point.

Even $25 extra per week makes a HUGE difference on something more long term like a mortgage — the key is that you need to do it weekly. WEEKLY! And stick with it.

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Okay, so it’s been a bit…and for that I apologize but I’m getting excited about paying down debt again.

Seems that once I reached my goal of being debt free, well, the excitement my finances brought kinda waned.

Hey, I’ve never wavered from the fact that I’m a lot more skilled at paying down debt than growing savings…

Anyway, as you may have already guessed, I’m carrying a considerable amount of debt again so it’s time to put my head down and eliminate it…again.

Let’s get down to business.

Briefly, a rundown of my current debt situation is this:

  • $3k in credit card debt at 12.9%
  • $11k in an auto loan debt at 2.9%
  • $154k across two mortgages both below 5.5%

And here’s the plan…

Though the credit card has the lowest balance (which would take almost no time to eliminate) and the highest rate (which means it’s costing me the most to carry), it’s not my primary target.

Reason being, its minimum monthly payment is tiny so it has almost zero effect on my budget.

Yeah, it sucks paying finance charges each month but I can totally handle an extra $26 or so tacked on to my balance each month.

Sure beats the old days when I was dropping over $400/month in finance charges across multiple cards…

The mortgages are what they are.

Did you remember that my primary mortgage payment comes in at under $500 per month? Yep — my housing payment is amazingly low for a four bedroom house.

So low, in fact, that during my blogging hiatus, I took out a home equity loan to help finance that garage I’ve been talking about for so many years.

It’s not built yet…but most of the money to get it done is already in place.

So, as I’ve repeatedly stated in the past, there is ZERO benefit for me in paying down the primary mortgage at an advanced pace and the second mortgage balance doesn’t cause me sleepless nights either though that’s likely due to the fact that I still have the entire balance sitting in a savings account (so it really doesn’t feel like debt…yet).

So that leaves the auto loan…

Remaining balance on the loan is $11099 and the monthly payment is $444.15. Interest rate is 2.9% which, unfortunately, is the highest interest rate I’ve ever had on an auto loan.

This loan originated back in April of 2013 when we bought the Swagger Wagon to replace my beloved (in a nostalgic sort of way) Land Rover Discovery. Original balance was $24k.

Having never lost my love for paying down debt quickly, I’m so far ahead on this loan that I don’t actually have to make another payment on it until April 2016. Yeah, an entire year.

That said, it’s minimum payment (not that I need to pay it or anything) is pretty chunky in my opinion.

Sorry — paying almost $450 per month for a $12k balance just rubs me the wrong way…so I want it GONE.

Ready for this? My plan is to have it PAID OFF in four months.

The method of attack is tried and true for me — every last dollar goes to paying this off.

EVERY. LAST. DOLLAR.

Extra payments to the mortgage(s) are halted. Credit card payments are just covering my current purchase expenses plus the minimum payment — essentially keeping the current balance relatively level.

And that’s okay because once the auto loan is paid in full, the credit cards are next and within striking distance of a full payoff the following month leaving just the mortgages.

Let’s do this.

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And then the corporate incompetence rears its ugly head.

So, after receiving a letter from TD Bank to fax a couple documents — w-2s from the last two years, two tax returns, and our most recent pay stub — to a fax number that wasn’t listed anywhere, on Friday morning I received an email where they’re now asking for 30 days worth of paystubs.

So, to recap… Earlier this week they asked me for, among other things, my most recent paystub.

Today, they asked me for 30 days worth of paystubs.

Couldn’t they have asked for that in the first place?

I swear, the number of pieces of mail we’ve received since initiating this process is borderline obscene.

This is the list of documents we need.

Oh wait, this too. And this.

Oh, and we forgot to mention this — send us that too.

And to expedite things, fax it to the number we never gave to you.

If it were my company, I’d have a standard letter to send out requesting everything I needed in ONE envelope. Not 15 envelopes over the span of 10 days.

I’d list a fax number too. Just sayin’.

My first impressions of the simplicity of working with TD were wrong.

So, while gathering older paystubs isn’t that big a deal — I have them handy — it’s certainly not convenient. TD’s slogan is, afterall, America’s Most Convenient Bank.

Further, I assume they’ve already confirmed my employment but a simple calculation on the paystub they originally requested would show that my last paycheck was the same as the one I provided to them.

Yep, just divide those Year-To-Date totals on the right by 22 and you’ll see that I get the same amount every two weeks and that it lines up exactly with the number I provided on the original application.

I don’t look at pay stubs all day long like I’m sure someone over there does but even I could figure that out. If it were an hourly wage listed on the stub, well, sure, I’d give them the benefit of the doubt. My stub clearly says “SALARY”.

In other news, the email also mentioned that there was a $99 application fee, which I have no qualms with, and that the entire process would take between 30 and 45 days.

Merry Christmas.

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So, even before we’ve got all of our ducks in a row, TD Bank has revised their offer from the original offer.

I know this would happen as even the hard copy printed estimate numbers are just barely more that the teaser offers they openly advertise.

I remember when I leased a VW Jetta back in 1997. I was in the dealership with my dad and I was getting ready to sign the lease when we looked at the bottom line. My payment would be $251 per month.

Confused, we pointed to the poster on the wall — with numbers 3 feet tall — that said that VW Jetta’s were $199/month. I still see car ads that hawk numbers like that… No clue how they get away with it — it’s never true.

Anyway, back then, we met half way between their advertised number and their offered number.

Today, for the home equity loan, they said the appraisal on my house came in lower than what I said it would. I kinda figured that would happen but no harm in aiming high, right?

Now I didn’t go all out and lie about what I think my home is worth. In fact, I used the Zillow zestimate which generously lists my house as the most expensive on my street. And this is BEFORE the garage is built!!!

In reality, as far as I can tell, Zillow is boosting the value of my home (in comparison to the others on the street) based on square footage and lot size.

My house isn’t the biggest — maybe 3rd largest — but it’s on the biggest lot. To them, that’s worth as much as a renovated kitchen — which I don’t have but most of the other homes on the street probably do.

No worries — the garage addition will still not price my home outside the rest of the neighborhood. Sure, my house will take the crown, officially, as the best on the street but it certainly will NOT look grossly out of place compared to the others.

So the amount I’m borrowing ($70k) is the same, the term (15 years) is the same, but they jacked the interest rate by about a half percent.

If I take all 15 years to pay it down, which I won’t, this’ll “cost” me an additional $3k.

No big deal.

It’s still a go.

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