Tags Posts tagged with "Savings"

Savings

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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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Step 1. Halt savings and eliminate credit card debt.

Okay, that’s the only step so far…

For years now, I’ve but making auto-tranfers to an online savings account four times per week. Overkill, right?

Well, two of the days are to cover for my property tax bill and homeowners insurance premimum (both of which I pay out-of-pocket instead of from an escrow account attached to my mortgage).

I’m not halting that as I’d hate to come up short when those rather large bills come due. It’d be financially crippling…

But I am halting the other two days worth of weekly tranfers which add up to $250. Each week. Or over $1000 per month.

Yeah — it was a pretty aggressive savings plan and it worked great until I started pulling cash out the other end…

So now I’ll have an “extra” $250 per week to throw at the credit card debt which should have a real noticable effect.

Current balance is: $4887.53

Game on.

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When it became apparent that a new car purchase was imminent, my wife and I initiated a bunch of transfers from savings to checking in anticipation of, well, emptying the coffers to make a down payment.

It’s crazy how we can come up with money fast when we need it — I mean, we practically live paycheck-to-paycheck it seems and each subsequent daycare payment drops us even lower but, when push comes to shove, we were able to scramble together nearly $7k in cash in the span of 36 hours.

Weird how that happens.

Anyway, upon inspection of the Land Rover, we were given the dire news that we were already completely aware of — it’s a 4500 pound paperweight with an original sticker price of $50k.

Trade-in value…$1500.

Ouch.

Not what I’d hoped for but what are you going to do, right? It was just a month ago that we finally trimmed our automotive fleet down to 3 vehicles — I wasn’t about to jump back up to four.

Fifteen hundred bucks to take it off of our hands was a deal I was willing to make.

Following that, they asked if we were going to write a check as an additional down payment — as if they didn’t think we’d intended to.

Now, we’ve been in this situation before. The most recent occurance that I can remember was our big interior renovation project. We’d saved up a bunch of money and paid it *all* out at the onset only to find ourselves cash strapped for what seemed like forever.

Sure, it gave us a huge jump on paying for the whole thing but…well, it wasn’t a great idea.

It sucked actually.

Being a lot wiser now, I realized that writing a $7000 check right then and there would only alter my monthly payment by maybe $100.

A hundred bucks is nothing compared to $7k in the bank.

In my eyes, anyway.

My wife and I looked at each other, shrugged, and decided, “Yeah, okay, we’ll toss another $1000 in towards the down payment.”

So I wrote a check for $1000. No rhyme or reason to that sum.

But that’s it — a $1500 trade-in and a $1000 check for the car and the rest went right back into savings.

So, along with a $444/month payment, we still have money to fall back on *and* a new car.

Yeah, while that payment kinda sucks, it’s still a much more comfortable setting than a new car, a $344/month payment, and an empty piggy bank…for months.

Always a better move to use other people’s money — especially when they’re practically giving it away for free…

If only construction loans could be had as easily as auto loans…

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PIAC LogoI read an article somewhere that said something to the effect of “Saving is for Suckers” — I wish I could find it. It was just a few days ago…

Anyway, it wasn’t a broad stroke sort of thing — obviously saving isn’t for suckers — but, right now, with rates hovering just over one percent, well, it’d probably be a wiser strategy to put the money to use elsewhere.

As things currently stand, I’m saving like crazy so much so that I’m genuinely excited to post my net worth update.

Unfortunately, that also means that I’m a sucker.

I know it’s stupid — I should be paying down my mortgage at 6-something percent instead. Though I’m nearly 10 years into my mortgage, big payments now still make a much larger dent than payments of the same size 5 years down the road.

It’d be in my best interest to hit the mortgage hard right now while my savings are earning so little.

But on the other hand, there’s a lot of comfort that comes with a big number in the savings account. And I’m really trying to save up to get that much needed renovation (started and) paid for. Right now, I’m guessing I’m about 25% of the way there.

Now I know what you’re thinking, here he goes again… I’m not flip-flopping again — just re-evaluating my options.

Again.

I just want it all

Maybe I’ll go 50/50 in the new year? You know, throw half towards savings and half towards the mortgage…

I can’t believe I even said that — my own personal history in debt reduction clearly indicates that financial moves like that get you nowhere fast…

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LadderWow — it’s been awhile since we last talked shop… I mean, this place really is turning into a Mommy Blog.

Recapping financially, I’ve pretty much been on autopilot since the start of the summer…not really focusing on one thing over another, just kinda going with the flow.

It’s all good — debts are falling, assets are growing — but I’m sure I could make better use of the money that I fortunately have at my disposal.

So after a long conversation with my wife over the weekend, I think I’m going to try something new regarding the way I pay my mortgage.

Truth by told, the conversation only lasted around 15 seconds, but I’ve been thinking about it ever since.

See, I find myself with an entire year’s worth of minimum mortgage payments saved up. I call that piece of mind.

I know how I got there — but I still can’t believe I actually did it.

Now I’ve often complained of late that the monthly mortgage bill is a budget buster. I mean, a four-figure bill can’t help but get in the way…

So, what I’m thinking of doing is automating my monthly mortgage payment to be paid from my savings account — the one that has 12 months worth in it already.

My checking account will then be absent of the peaks and valleys that come each time a paycheck comes in and a subsequent mortgage payment clears.

All the while, though I’ll have that comfortable buffer of 12 months, I’ll continue to top-up the savings account on a weekly basis so as not to deplete things too drastically.

Make sense?

Basically, I’m taking my monthly mortgage payment from the forefront to the background and, over time, I’m hoping that it starts to feel like I’m not making mortgage payments at all.

That’s the plan anyway…

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What?! Huh? Did I miss something?

I just noticed this this morning… ING Direct lowered their interest rate to 1.391%.

The last time that they changed (and lowered) their rate was back on March 21.

At the time, if you remember, it was pretty much expected and it was their third or fourth rate reduction of the year. Every few weeks, they’d lower it a bit.

Things just seemed gloomy all around.

But it’s been quiet since then, the stock market has roared back up, there are media reports of people saving instead of spending, and, honestly, I was actually expecting them to raise the rate sometime over the summer.

You know, to maybe attract all of these reported *new* savers out there???

Now this?

Well, it’s disappointing…

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So this morning I was doing the nerdy spreadsheet thing and, while fiddling around, I came across an old macro that I’d set up right when I first became an ING Direct Orange Saver to calculate the interest that I’d earn.

A poor man’s interest calculator of sorts…

I plugged in my current ING balance and was thrilled to see that I should be earning over $50 per month in interest…

…using today’s balance and January 2007’s interest rate…

Of course, well documented here on PIAC, ING’s interest rate has dropped over 300% since then.

When I started way back in January 2007, with dollar signs in my eyes I might add, I was targeting a balance of around $8k so that I’d be earning around one dollar per day in interest.

That just seemed exciting for some reason.

So here I am currently around the $13k mark, well in excess of that $8k target, and I’m only bringing in around 50-cents each day.

Boooooooooooo!

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DOMO Attack!I’m not really certain what prompted it but I’ve already committed to spending over $3300 this month… and we’re only one week in.

Ouch!

So much for the budget!?

Last month, I *so* wanted to increase my savings by $1000, decrease my mortgage balance by $1000, and somehow manage to pad my checking account with another $1000 too…

Doing the math (while keeping regular monthly expenses in mind), technically, that doesn’t even seem to be possible. But, man, I came darn close in May.

So far, the new baby isn’t costing us anything more than we expected or could handle.

Of course, with child care looming in the future, I’m well aware that that’s going to change in a hurry so I’m going to do my best to put the biggest dent in the mortgage that I can while I can still afford to.

So, this past week (I’m already one payment in!), I increased my weekly additional mortgage principle payment from $75 all the way up to $230.

Wow, Brainy! How can you afford $230 per week extra?

That’s a great question, and really, if you asked me if I could afford to send between $920 and $1150 extra towards my mortgage each month, I’d immediately say “No freakin’ way…

That’s why weekly payments are the only way to go.

You can afford to deprive yourself of more than you think you can.

Doesn’t Suze Orman say something like that?

I’m pretty sure it’s her.

She’s right.

Though I’ll just be scraping by, I somehow can afford to send $230 each week to CountryWide, or Bank of America, or whatever they’re called this month…

While making this budgetary change, which all but ensures that my mortgage balance will fall by over $1000 each month, I decided to make sure my savings account balance would grow by at least $1000 per month too.

It just seemed like a good time to go all out.

Five minutes on the computer and another modification of weekly auto-transfers — an increase from $165/per week all the way up to $250 per week.

There are always at least 4-weeks per month, so I’m guaranteed to increase my balance by $1000 plus interest.

That wasn’t so painful…

So, putting it all together, I essentially increased my weekly outflow by $240.

Considering that I was totally accustomed to my previous outflow, this almost feels like I’m eliminating $1k worth of debt and amassing $1k in savings for just $240 per week.

That’s a pretty good return.

I know it’s not as simple as that — it’s actually costing me double — but it certainly feels like I’m getting a great deal.

The only spot that I’ll tank each month will be in my checking account. I can live with that.

Now I know what some are saying, “Must be nice to have a 14-figure salary… I could do that too if I made as much as you…

I’ll be the first to admit that $240 per week is not a small number. And it’s certainly not an amount that everyone can afford — and that’s okay.

I started with a $25/week auto payment to Countrywide back in June of 2007.

Twenty five bucks.

At minimum wage, that’s just a half day’s worth of work. You smokers out there probably spend more than that on cigarettes each week. Think about it.

Point is, $25 is do-able.

And it makes a difference. A HUGE difference — see for yourself.

Whether it’s for debt repayment, savings, or even investments. Automatic weekly (not monthly) payments and transfers are the way to go.

– – – – – – –
PIAC Factoid: Setting the record straight, I don’t make a 14-figure salary.

I may be a multi-thousandaire but I got there on a 5-figure salary…

Can You Dig It?

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