I’ve Paid For This Twice Already…

Archive for the ‘33 days’ Category

is me!

I have a guest post today at No Credit Needed as part of the 33 Days and 33 Ways to save Money and Reduce Debt project he started in September. The topic it is filed under is motivation, and it is about how finding No Credit Needed, for me, was instrumental in starting my serious debt reduction plan and inspired me to start my own blog. Hop on over and read another piece of my story!

If you’re visiting here for the first time from No Credit Needed, you can learn more about me on my About page, find out the double meaning behind “paid twice”, and get caught up on what progress I’ve made. Some of the more popular reaction posts I’ve written to the 33 Days project are about multiple mini payments, lunch-overs, and money organization.

Thanks for visiting! There’s a list of some more of my most popular posts in the right sidebar. To follow me on my journey and not miss a thing, subscribe to my RSS Feed or subscribe by email to have my latest posts delivered to you once a day (no spam!!). And enjoy the ride!

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My goal is to pay off about $36,500 of debt (plus interest) in a little less than 3 years. That might seem like a lot and a very large number. Some days to me it seems huge, and some days it seems manageable. On Day 21 of NCN’s 33 Days challenge, he talks about micro goals. To meet the challenge of paying off my debt in this amount of time, I need to pay about $1000-$1050 per month consistently. And that, my friends, is only $35 a day!

To tell you the truth though, $35 a day scares me to death. Although my spouse and I earn money on a daily basis, I don’t really think about it that way. The idea of coming up with $35 a day, every day, day in and day out… it is kind of exhausting. Which actually helps motivate me to get out of debt that much faster. The more debt we pay off, the closer we are to ridding ourselves of the $35 per day anchor on our lives.

But I am still a fan of micro goals. I just have them on a slightly larger scale. A few weeks ago I wrote out my goals for 2007, 2008, and 2009 and I am working hard to meet the 2007 ones now. When I break my debt into small chunks and think about meeting certain milestones by certain dates (like paying off all the credit card debt by next August, for example), it makes it feel more possible. My brain has always worked better with big numbers vs small repetitive ones, and I like aiming towards crossing things off my list completely vs paying off portions of them.

But I do like when portions are paid off…

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I have what can only be termed as an obsession with lists. I have lists for everything. In fact I am starting to think I need a list to keep track of my lists. Since I have a number of them on the computer and the sidebar is a list of all the lists I have there…. I kind of do already. NCN asks in Day 18 of 33 Days and 33 Ways to Reduce Debt and Save Money - how do you keep track of due dates? And I say… with a list of course!

I have several recurring expenses that always happen on the same day every month. My mortgage is always due on the 1st. My car loan payment is always due on the 20th. But I also have many payments that the due date is always in the same part of the month, but the actual date varies a bit month to month. I have a single standard list that I keep month to month to keep track of all these various due dates and make sure I pay them in a timely manner. Here’s how.

I have one standard list that simply gets replicated every month in a spreadsheet form. The list has all of my standard monthly expenses in one column, the amount due in the next column, the amount actually paid in the third column, the due date in the fourth column, and a place for a checkmark in the fifth column for if it has cleared from my bank account. There is room at the bottom to add any bills that do not reoccur and just need to be paid in a particular month.

This is my method: When I get a bill in my email inbox or by mail, I immediately fill in the due date and the amount owed on my sheet. Then when I pay a bill, I enter the actual amount paid (usually the same as amount due except my credit card which I snowflake extra to) and use strikethrough font on the entire line to show I paid it. Then, when I see the debit in my online banking, I place a checkmark in the last column, and that item is done until the next month.

That’s it! I have used this system for a very long time, and I haven’t paid anything late with it yet. I look forward to when I can simply sit down once a month and pay all the bills at once, but since we are nowhere near out of debt, our money is still being managed much more closely than that would allow. Someday we’ll be paying this month’s bills with last month’s income, not this month’s, but until then I go with my system. And it seems to work.

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Day 15 of No Credit Needed’s 33 Days Series asks you to look at the big picture in your finances and talk about dealing with the complex relationships within. When looking at the big picture in personal finance management, there are a lot of complex interactions that I could choose as the most difficult to deal with. There are taxes, retirement, debt management… but honestly, what has been most complex for me is dealing with irregular payments within the framework of a budget.

How to budget and pay for irregular payments has not been too difficult. The hardest part of that was trying to remember all the different irregular or annual payments that come up and make a list of them so I could accurately figure out how much money was needed. Once that was done, I simply added 10% (I am bound to forget something), divided the number by 12, and assigned that number to my budget each month. The struggle, challenge, and simply hair-pulling-out part of this has been keeping track of that money on a monthly basis and figuring out how to account for the carryover in my budget each month.

Every month, some of that money gets spent. Sometimes more than I budgeted for in a particular month, sometimes much less. That’s why it is irregular, after all. At the end of each month, I figure out how much money is left in each irregular category and carry that money forward to the next month, adding it to whatever is budgeted already for that next month. On paper. In reality it just stays in my checking account. But on my next month’s budget sheet, do I put that carryover in as income so that I have an accurate picture month to month of what is left over to pay down debt? I didn’t last month and I ended up having my bank account and budget sheet not match. So I am trying it this month - everything agreed at the beginning of the month once I tinkered and calculated and tinkered and added irregular expense money carried over as income from last month into the this month so I’ll need to see if everything agrees two months from now (where I messed it up before was at the end of month 2 by not accounting anywhere on the “inflow” part of my budget for the irregular expenses money from month 1). But I don’t like this solution very much, because it basically keeps counting some income twice - we didn’t re-earn that money, after all.

I think the simple solution might be to have a completely separate account that holds all the irregular payment money, and transfer money from my checking account there every month, and transfer it back in to pay things as needed. I could do that, but it adds yet another level of complexity from a bank perspective as well as a tracking perspective. And if I keep it in a savings account, I have a limited number of transfers I can make out every month. Ugh! I don’t know. This irregular money thing really makes my head hurt.

So for me, that is the most challenging financial aspect to track and deal with. Irregular payments. I have a knack for making seemingly simple things complex.

~J

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So the transfer is done. I’ve moved a little over $5100 from Capital One to a Citicard through a promotional 0% interest for 12 months no transfer fee offer. It’s there, I’ve even made my first snowflake payment to it, and my Capital One balance stands at $0.00. That will change when my next statement posts because I will have some residual interest to pay, but that will be done quickly and the Capital One card will be done for good.

So, what have I done? Did I make the right decision? Would I do it differently if I did it again? And do I have any lasting concerns about making the move? NCN asks all that and more in Day 17 of 33 Days and 33 Ways to Reduce Debt and Increase Savings: Carefully Consider Surfing Credit Card Balances.

First off, I definitely made the right decision overall in surfing my balance to a new place. I was paying first 10.9%, then 9.9% in interest every month and there was no need for me to do that. I had called Capital One to get a rate reduction, which is how it went from 10.9% to 9.9%, but I had much better options at my disposal than that. Moving the debt to lower interest was definitely the right long-term move. I wish I had had the initiative to move it sooner.

There are a few things I would do differently if I did it again. This new card we got with the promotional transfer had an initial promotion that if you bought something with the card in the first 90 days, you’d get Thank You points equaling a $50 gift card. So I did, and I shouldn’t have. Not that anything bad happened, but by the time my payment cleared and a new billing cycle started (there was no way I was locking some little purchase accruing interest behind a huge balance transfer) I’d probably paid close to $50 in interest to Capital One. So basically, I wasted that time and money. I should have foregone the gift card and just transferred my balance right away. The other thing I would have done differently is that I would have done this a while ago. Even if I couldn’t pay it all before the promotional period ran out and I had to pay a balance transfer fee on a much smaller balance to transfer it somewhere else for a better rate (the non-promotional rate on this card is not great), it still would have saved me a *lot* of interest in the long run. But I didn’t. At least I have now.

I do have a few lingering concerns. I am convinced this was a positive move, but I wonder if there was another option that made better long-term financial sense. I had an offer from my Bank of America credit card of a 2.99% interest fixed for life of the balance with a 3% (no cap) transfer fee. Even with the fee, this would have worked out to less money spent overall when looking at all of my debts together, because I could have started just paying the minimum on the credit card debt and focused on paying off my 9% and 7% interest student loan debts. Should I have gone to 2.99% fixed and started aggressively paying off student loan debt instead? It would have worked out to some savings in the long term, but I decided it was more important to me to rid myself of credit card debt first. This 0% offer was the most expedient way to accomplish that. But I still wonder if by making the choice to do it this way, I’m revealing that I still don’t have the best financial sense. I mean, it should be all about the numbers and emotions should stay out of it. But I’m still human.

The other thing I still ponder is if this whole balance transfer move is another case of me counting on future income to solve past problems. If we don’t pay off the card by the date the 0% interest expires, then we revert to a higher interest rate (a variable rate right now at about 13%) than we were at with the Capital One card. I’m counting on our income to stay steady or rise, and our expenses to stay steady or fall, to do that, and it is a risky gamble. However, I’m going into this with my eyes wide open, versus the last time I counted on the future to pay for the present, and I know I have a few options if it doesn’t work out as I’ve planned. At the end of the year, if the balance is low enough, I can just pay the interest until it is paid off, which since the balance will be lower than now, will result in less interest being paid overall. Or if I have a good transfer offer with a minimal fee, I can move the remainder of the balance to one of my other two cards (back to Capital One or over to Bank of America), both of which send me balance transfer offers regularly for very low rates. I also now have an emergency fund to fall back on - not to pay off my credit card, but to cope with life’s little emergencies that may come up to try and derail our progress. So I am feeling much better about this situation than I have in the past. But still I do wonder…. am I becoming smarter about my money or just coming up with more creative ways to mess it up?

Only time will tell. But I think I’m on a good path with this whole balance-surfing thing. I think.

~J

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