I’ve Paid For This Twice Already…

Archive for the ‘goals’ Category

Now that we’ve settled on my spouse’s student loan as the next serious debt reduction target, it is time to set some goals related to how we want to accomplish that. The student loan is our highest interest rate debt left, at 9%, so for us we feel it makes sense to attack it next with intensity.

First - the basics on how much money is budgeted available. Our debt snowball is $810.41, and that includes the minimum payments on both student loans plus the car loan, as well as another $200 that previously went to the credit card. Now that the credit card is paid off, that $200 gets moved automatically towards paying off the student loan. Added to the minimum payment on the student loan ($237.59) that makes at the very least, $437.59 available every month to reduce the student loan.

Of course, I look to the snowflakes to help me here. I think, based on past performance, it is reasonable to shoot for an extra $300 per month added to that total through snowflakes, be it through selling things, tutoring, blog revenue, surveys, or a combination of those. That brings the total target per month to the student loan debt to $737.59. According to the snowball calculator, if that is obtained from March to December, in December we should have a bit over $5000 left on the student loan, and the remainder would be paid off by June 2009. This forms the basis of my goal. I am aiming to have the student loan be under $5000 by the end of 2008.

I could set the bar a little higher, but because I need to also save for my wisdom teeth removal, I want to play it a little bit conservatively. If I could manage to earn enough snowflakes to consistently pay $700 more than the budgeted paydown amount (so $1137.59 total per month) then I could actually pay off the entire student loan this year. I don’t think that likely, but it is of course possible. I’ll keep that as a sort of “dream goal”, but it is a little too far out of reach to even label a stretch goal.

But June 2009 for elimination, if we can reach that, would be a great thing regardless. On with the debt paydown!

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On Tuesday Glblguy at Gather Little By Little checked in with his 2008 goals and then asked three other bloggers to do the same, me being one of them. He asked specifically about my #1 priority goal: No More Credit Card Debt.

So, how am I doing? Well, the good news is that I am certain that before the end of 2008, I will have eliminated all my current credit card debt. In fact, I am pretty sure that will happen before the end of February. Between the time I posted my #1 goal at the end of November and today, I have reduced my credit card debt from $3144.20 to $955.17, which is amazing progress. Over $2000 down in just two months! Looking at that really inspires me to keep going and get the job done.

The flip side to that is I didn’t accomplish much of that goal in 2008. After I wrote that post, my family had a number of positive and unexpected financial gifts or occurances fall into our lap - from my spouse’s father related to an inheritance he got, a property tax refund, and cash gifts at Christmas time. At the end of 2007, our credit card debt stood at $175.17, and I was sure that we would make short work of that.

But, as is bound to happen, what goes up must come down. We committed the vast majority of our resources to debt reduction, and then, on January 2nd, 2008, my spouse called me from the side of the road because my car, which he was driving that day, had completely stopped working. An engine replacement later, and not only had we increased our credit card debt by $800 (through a 0% for 3 months financing offer) but we had also spent about $2700 out of our pockets, all the emergency and other funds we could come up with. Just barely into 2008 and we were already farther away from our goal than when 2008 had started.

By the way Saturn, I’m still not impressed that a car with less than 88,000 miles needed a complete engine replacement, and I’ll be discussing that further in the future as you continue to deny any responsibility for your faulty part. But, that’s your perogative to not stand behind your products. Don’t think I haven’t noticed.

But back to the topic at hand, we will still accomplish our no credit card debt goal in 2008. I won’t count chickens before their hatched, so I can’t guarantee that it will happen next week or next month. But I am planning for us to be out of credit card debt in February. Since my original goal was August - I think that we are still doing pretty well for ourselves. Especially if we can hit that goal, do a victory dance, and then start aggressively building back up our emergency funds before the next little speed bump comes along.

Thanks Glblguy, for interjecting some perspective in my life by making me look back at that goal post. I needed that!

And in the spirit of giving, I’ll ask three more bloggers who set goals in that same carnival to check in with their progress (and feel free to leave a comment of your own with your goal progress!) :

• Good Fountain: How’s the eating out? What about the spending?
• BeThisWay: Budgeting, Accounting, Paying Oneself First, Oh My! How’s it going?
• Remodeling This Life: Snowflaking to an emergency fund! What’s the status?

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The deed is done. The car is fixed, it is currently sitting in our garage, and a extremely large portion of what we had available in cash funds only a few days ago has been electronically zapped over to our local Saturn dealer.

We paid the dealer $2781.94. We put $800.00 on the 90 days same as cash credit offer from the dealership. Saturn Corporation has declined to accept any responsibility for the poor craftsmanship of their vehicle, so they paid nothing.

On the one hand, I’m fine. More than fine. We did it! We managed a crisis in a responsible manner and we will be more than okay. It feels accomplished. We had an emergency fund, and it did what it was supposed to do.

On the other hand, I’m overwhelmed. We just spent more than I could imagine spending on anything, in cash, on this car repair, and took on more debt besides. In a way, it feels like we just wiped out our progress. I know that we did not - we have made much more progress than this in the past year - but this is still sending shockwaves through me. I’ll adjust eventually. Maybe tomorrow.

We used to have a safety net, and we do still, but it is very very small. Since the car wasn’t ready until my spouse got paid after all, I left $300 in our emergency savings account and took that amount out of my spouse’s paycheck instead to get to $2781.94 paid. If all goes well for the next two weeks, we should be okay with that, but we still have that $300 if we need it, because I am cutting that *extremely* close to the wire. This avoids us having to pay a low balance fee on our savings account this month unless we end up using it. I wouldn’t have been comfortable sending that last $300 from the paycheck to Saturn anyhow, because if *anything* unexpected happened, and I mean anything, even a sick visit for a kid to the doctor or gas prices going up $0.10 a gallon, we’d be in trouble for the next two weeks, and with no emergency fund, we can’t afford trouble. This way, we have a little bit of wiggle room, it is just working for us a wee bit instead of sitting in our checking account, and hopefully ends up the seed money for our new emergency fund.

As for emergency funds - I have a lot of thoughts about that, but they are still forming in my brain. Until we’re back to $1000, there isn’t pressure to formally decide if we’ll save more than $1000 at this time, so I have some space to think about it. But it is percolating.

Out priorities? Leave the $300 in the emergency fund. Pay off the $800 that remains of the repair bill. Pay the last $175.17 of the credit card. Get the emergency fund back to $1000. Then consider possible next steps, and move forward. On to debt freedom.

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Something I’ve learned over the course of the last year is that you can’t always predict triumphs, and you can’t predict setbacks. Since I started this blog, we’ve had several minor setbacks and a few major ones, and in each case, I’ve (eventually) looked toward the future and felt that we’d be able to get back on track for the long term, even if the short term wasn’t looking quite so good. However, when we had some small or not-so-small triumphs in the form of unexpected income that could be applied to debt, I immediately started thinking about readjusting our goals and speeding up our debt reduction plan.

Which, in reality, is setting myself up to not be able to meet my goals. Just as we have had unexpected things happen monetarily in a positive direction, we’ve also had things happen in a negative direction we couldn’t have predicted. And if I shift up my goals in response to every positive occurrence, I’ll have to shift them back downward every time something negative happens. And I really do not like to shift things backwards. Goals aren’t effective when they are constantly moving targets.

This is not to say that I don’t want to get out of debt ahead of our original December 2010 goal. I would be more than thrilled if we do manage to get out of debt in 2009, and I am still hopeful that we can make that happen. I will continue my focus on snowflaking and generating new sources of alternative income and dedicating every penny we have to debt reduction. But reasonable long-term goals help keep things in perspective. Just because December 2010 is my goal doesn’t mean I can’t come in ahead of it. But I don’t necessarily need to constantly adjust my long-term goals to reflect that.

A commenter named Jane said this as part of her comment on one of my recent posts about the car repairs:

This doesn’t put you behind, just less ahead than you’d hoped.

And it really resonated with me. Keeping my eye on the long-term goal of being out of debt in 2010, this recent setback is just a (somewhat large) blip on the screen of my entire financial horizon. December 2010 is still firmly in reach. And I can’t forget that.

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The dust has settled, we’ve (kind of) wrapped our heads around our new reality, and we’re ready to take the next step forward to get back to where we were a week ago. Which will probably take months, but what is progress without a setback or two? Once we get back to where we were, we’ll discuss how to get further than there. I’ve still got my eye firmly on the no credit card debt plan. It will just take a few more months than I thought.

We’ve decided to repair the car, and repair it at the Saturn dealer it is at. My spouse called just about every single repair shop in the phonebook, large and small, and the prices ranged anywhere from $3600 to $8800. Yes, $8800. Not going there. The price the Saturn dealer quoted my spouse did not include tax (which he knew but forgot to tell me, heh), so it originally was in total around $3900 (we have 6% sales tax). So my spouse, at my suggestion, used the $3600 quote from another place (which did include tax) as leverage, and asked for a 10% discount. The service rep discussed it with his manager and called my spouse back almost immediately agreeing to the 10% discount. Yay for my spouse!  He saved us $370 just by being assertive and I am very proud of him.  So our final total with tax is around $3600. Plus $45 for the tow to the shop in the first place. The final deal includes a 12 month warranty on the parts and labor, which gives me a little bit of peace of mind. In 12 months the car will be two payments away from being paid off, instead of 14 payments away.

We thought about selling the car in the condition it is in (or using it as a trade in) and buying a new to us car. We did do some preliminary research on availability and prices, and for us right now it just didn’t make sense. If I am going to get a different car I’d want to feel reasonably sure it was more reliable than the one I’ve got, and that comes with a price. Still owing $3300 on this car that would have to be rolled into the next loan just didn’t make sense for us long term. I know that there will be disagreement on this point, but we all do the best we can with what we have.

So, repairing the car. We don’t have to pay for it for another week (which is how long it is going to take to fix) so we can still ponder exactly how we want to do that. But my spouse got approved for the 90 days same as cash yesterday to give us that option. I’ve transferred $700 of our $1000 emergency fund into checking (I can transfer the last $300 with a few mouse clicks and will when we get to that point, but I pay a monthly fee when my balance is under $300 so I am putting it off) and initiated the transfers from our ING accounts of the $150 long term savings and $150 playstation fund. That puts around $1700 in our checking account by sometime next week minus whatever we spend on gasoline and groceries between now and then. I’ve also initiated the transfer to empty out the blog account and will transfer the remaining $300 from the emergency fund when we are going to pay the car bill.

My current plan is to pay $2500 directly on the car bill (by the time it is fixed next Friday, my spouse will have been paid again, so we will be able to use some of that too) and put the remaining $1100 on the 90 days same as cash plan.  And add it to my debt total… sigh. I may come up with some more money between now and then, we’ll see, I’m still thinking through things and seeing if I can come up with any other ideas. My goal is for the 90 days amount to be the absolute minimum possible that still lets me sleep at night. I just can’t take money out of the kids college accounts. Yes, the majority of the money in them is “our” money we chose to deposit (some of it was cash gifts to the kids from relatives) but for now, I can’t make myself touch it.

I may change my mind by the end of the 90 days period if I haven’t managed to knock out the entire balance. But I think that $1100 is doable in 90 days, or less, and then on to rebuilding the savings accounts. We’ll see. A bridge I will think about crossing in a little while.

Progress not perfection. I sincerely hope this car does not become more of a money pit. I had great plans to pay for the next car in cash… but that necessitated this car lasting a few more years. We’ll see.

In positive news my background check to begin tutoring is finally complete and my first tutoring hours are tomorrow. That additional income will definitely help with knocking out this debt. One door closes and another door opens.

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