With mortgage interest rates at amazing lows, I (Ed) figured now is the time for 15 year fixed rate refinance:

I have a 30 year fixed rate mortgage with about 23 years and ~$156,000 left. With the 15 year fixed rate mortgages at about 3.7%, I have started to look into a refinance.

By refinancing, I stopped paying PMI, and shaved about 8 years off of the loan by paying down the principle in an with an astonishingly low rate and almost identical monthly payments.  If you are in a similar situation and value getting your house paid off as fast as possible like we do, it may pay to look into getting into a 15 year mortgage now.

Going To A 15 Year Fixed Mortgage

• Stockpile in case of job loss
• Stockpile in case of sharp food inflation
• Stockpile in case of rise in gas price
• Stockpile for peace of mind

• Obtain multiple subscripts to local major newspaper with coupon circulars.
• Buy coupons online(ebay, among others)
• Pay attention to Catalina.  Catalina is the small gray box that prints out coupons after you grocery store purchase.
• Coupon websites

• Double coupons
• “Perfect storm: Sale price + Promo + coupon”
• Instructions on how to get things for free and/or make money.

Crazy Saving with Coupons – “Pick Another Check-out Lane, Honey” Book Review

The training is 9 weeks for about 20 minutes a session every other day.

While, preparing this post I realized how popular this program is. There are facebook groups, fan sites, pod casts, even a iphone and Android app dedicated to Josh Clark’s program.

The Program:

My personal experience

I’ve come to the realization that everything I learned in public school, I need to relearn.  Running is no exception.  I developed a hate for running in high school.  In HS gym class running was primarily about running as fast as you can for as far as you can.  I felt terrible after each session.

Today, I am into my second week of this program an I am enjoying each run.  It is hard work, and my first week I had to work through two quarter sized blisters on my heels (due to lousy running shoes).  I feel good for the entire day though.  Running in the morning gets the blood pumping and energizes me for the day.

Anyone else care to join in on the fun?

Couch To 5k – Free Running Exercise Program For Couch Potatoes

Use cash to plug up the holes

I assume every family budget has holes in it.  Ours did.  The holes were mostly unaccounted spending or personal spending…a trip to a retail store, a lunch out, snacks, etc.  These “little”spending events can destroy a budget or even derail your debt reduction if they are not kept in check.

The way we handle this issue is by allowing ourselves weekly spending cash. The rest of the income is for bills & savings.  All significant purchases are planned and discussed.  Once the personal cash is gone, the spending stops.  With the change to cash I’ve found that I pay more attention to the cost of things I’m buying.  If I want to buy something, then I need to save for it. It really is as simple as it sounds and it works.

I’m sure you are familiar with the statistics regarding credit cards specifically that we are likely to spend up to 15% more when shopping with plastic.  Dave Ramsey says that a McDonald’s study showed a 47% increase with plastic.  Cash is finite, credit (and debit) have overdrafts and outrageous credit limits, which entice you to be less concerned about price.  The minimum payment is only a small fraction of the debt amount.

We do use debit cards but have stopped all spending on credit.  When we use debit, it is subtracted from weekly cash allowance.

Its much more enjoyable to manage money, than manage debt.

Plugging the Holes in Your Budget

The First Step Into Chains

When my wife and I got married, we were debt free with money in the bank (minus my student loans…which I wasn’t even thinking about). When she got pregnant, we decided it was time to buy a house. The year was 2001. The Housing bubble in NJ was already ballooning. We had difficulty finding anything that wasn’t a “fixer-upper”x2. Mistake #1: the mortgage loan officer realized that I didn’t want to borrow all the money I was qualified for, so his advice was: “When you buy your first house, you want to borrow to the point that the payments are difficult to make because over time it will get easier”. I believed it. And so, our first house was a challenge. Our savings were wiped out because there was no extra money. In 2003, we moved to our current house. It too was a stretch. Over the course of years our debt was slowly becoming unmanageable.

Journey into the Red

To be honest, I tried to create a budget, but there was no room for savings. If something unplanned occurred, we had to put it on a credit card. We used an ATM card for our purchases, not cash. We would set an amount to spend, but would easily go over the small amount when tallying receipts. So, when I would “do the bills” I would have to juggle things to make it work. I would have to estimate the days it would take for a check to get delivered/processed so it wouldn’t bounce. We were living without a budget and the credit card debt was beginning to get stressful. 2005 brought pregnancy with child #3, the harsh reality of a needed minivan became apparent. Mistake #2: I reasoned in my mind that I could make the loan payments on a used vehicle if I took advantage of just 4 hours of OT a week. The vehicle was purchased in 2006, a month before the child was born.

Crisis

In May 2006, I suffered two strokes a week apart. I am thankful that I have made a full recovery, but I was on disability for several months….needless to say, no OT was happening. Debt was piling up, and for the first time in our marriage my wife begun managing the bill. I was mentally “checked-out” due to recovery. She realized the financial house of cards, I built for us was crumbling. When I returned to work, either OT was not available or I was still too mentally “checked-out”, either way, I wasn’t doing any. Between my medical costs, car loan, student loan, new baby we found ourselves 40k in debt with increased monthly expenses. Failure was imminent.

Hope and Change

Because I have the best wife in the world and because of several positive influences in my life, we realized that managing our debt was not the way we wanted to live the rest of our lives. Two main positive influences: 1. The Happy Rock, because I know him personally I was challenged and inspired to embark on this journey toward debt freedom. 2. Duggars, as corny as you may think the show is, it has made a resounding positive influence on my family. For those who don’t know, the Duggar family contains 19 children and boasts that they live debt free. If they can do it in AR with 19 kids, why can’t I do it in NJ with 3? These influences allowed me to see that not only is debt freedom possible, but it is essential to a successful family.

Resolved

I began to see debt as the enemy of our success and dreams. In addition, because of my faith, I began seeking Scriptural verses to confirm this avenue I felt God was directing me. “Owe no man anything but love” Romans….”the debtor is a slave to the lender” Proverbs…. Seeing debt as slavery brought more clarity and resolve. Large sums of debt keep us from enjoying things like much needed vacations, car repairs & maintenance, and proper heath care among other things. With debt, we are not free to pursue our dreams because we are tethered to a lender. I want freedom, don’t you?

Roll Call

Credit card  = $10,000

Auto Loan = $4,000

Student Loan #1 = $5,000

Student Loan #2 = $6,000

The First Steps Out of Debt

After expressing my intentions to the HappyRock, he gave me a copy of Total Money Makeover – D.Ramsey.  We began by creating a budget.  We started using Ramsey’s Debt Snowball method. Mistake #3: we wanted to get started immediately, we didn’t start with a $1,000 security fund first. I recommend the security fund.  Basically, we stopped adding to our debt using a good budget.  We started making minimum payments on all loans except for the one with the lowest balance. Finally, we began living on cash.  My wife and I each divided a modest amount for  each other for each week.  When that money was gone, the spending stopped.

The Journey is almost Over

After two years of intense debt reduction, we have paid off all non-mortgage debt, except for Credit card #2.  My father felt bad about not helping me out with college and started sending me money to pay the Student loans.  With his help, we wiped them out.  When you get to the point where we are at now, it is amazing to see how much money we could be keeping instead of sending to creditors.  Never did I dream about so much available money.

Our goal to reach debt freedom (minus the mortgage) this September.

Into Debt And Out Again – Overcoming $40,000 Of Debt

The basic premise is that the same rules apply to your life as they do to stories.  The stuff that makes a good story makes a good life.  If your life feels boring then the story that you are telling is probably boring. Nobody sets out to tell a boring story, they often just happen because we aren’t intentionally trying to tell a good one. The idea is to live a page turner.

A simple question that really helped me gauge where I am at in my story is “what would the back cover of the ‘Your Life, the DVD’ say?

This is what I came up with for mine:

From food stamps and a young but devoted mother, Frank “The Happy Rock” successfully navigates a turbulent childhood into college where he meets his wonderful wife.  Together they conquer $70,000 in debt, get good jobs, and create a beautiful life for their two children.  You never know what kind of action his days will bring as he attempts to have patience with his children and tries not make his wife mad at him. Tune in to watch as he earns money and buys stuff.  Will he make it? Will he survive?

I know that doesn’t speak to how blessed my life is right now(it really is), but it is true to how I feel and yet still accurate at the same time.  As I look back at my life as though it were a story it was a real page turner.   Being born to a young mother and addict father, escaping poverty into the middle class, moving from isolation into marriage, and journeying from selfishness into parenthood is the stuff of good stories.  It didn’t feel like it at the time, but somehow that part of the story now reads like best seller.

When I look at where the story is heading now, the picture is much less engaging.   We ‘made it’, but the irony is that’s the problem. My wife and I have pretty much the freedom, money, and skills to do most anything we want, yet our life consists of Target, Netflix, Gardening, and going to the park.   Don’t get me wrong, it is a good life, but it isn’t one that keeps you on the edge of your seat.   There is virtually no conflict, no plot twists, and no chance of failure.  It isn’t a page turner and it certainly isn’t sending the message I want to my boys.

One motivating part about framing your life as a story, is that you are the author.  You get to change the storyline. In life you can’t change what happened, but you get full control over where the story is going.  The question is: What are the new story lines that you want to tell?

I would love to hear what everyone else thinks about their story lines?

Your Life Is A Story, So What Does The Back Of Your DVD Say?

The New Red Huffy

Picture a 4 year tearing the wrapping paper from a brand new bike on Christmas morning.  He jumps for joy and hugs anyone in sight.  He rushes out  and spends some time learning how to ride.  He is grateful for the training wheels as he totters around for the first few months.  He spends the next year riding his bike everywhere.  He can’t walk out the door without trying to convince his parents to let him go for a little ride.  It is even cute watching him try and convince people who have no interest in biking how great it is.

Gradually though the circumstances begin to change.  He gets older and bigger.   The bike starts to get a little rusty and just doesn’t fit as well as before.  New toys, friends, hobbies, and responsibilities enter into the picture and in a few years the bike just sits around and collects rust.  He occasionally watches kids on their bikes zoom down the street laughing, doing cool tricks, and getting air of sweet jumps, but it only moves him to lament rather than to action.

Eventually one spring Thursday his dad puts the bike out to the curb for donation pickup.  The son sees the bike in its sad shape and all the memories come rushing back.   He argues with his dad to keep the bike, but his father knows that it will just be right back in the shed.  Dad lovingly suggests three options.  They could take the next few weekends and work on a special father and son project together where they would clean the rust off the bike, replace some parts, and take off the training wheels. The bike would then be ready to be useful for the next few years.  The other options are to give the bike to someone who would love it like he used too or let it rust away in a landfill in Topeka.

That is where I am at.  A lot has changed since I started this blog. I have become 100% debt, adopted two children, sold a house and moved, finished my MBA and grown quit a bit.    Things look much different than they did three years ago and I am asking much different questions in my life:

• Three years ago we were fanatic about getting out of debt and were a few months away from kicking $70,000 of debt to the curb.   Early on I was eager to write about debt reduction and those type of thoughts swirled around in my head constantly.  After the debt was gone and I had an emergency fund, I had a hard time writing about that stuff with a fresh perspective.  Now, money isn’t an issue.  It is amazing how much things looks different with absolutely no debt, 1.5 salaries, and safety cash.  You are free to move wherever you want or take whatever job regardless of pay.  You can start asking the Why questions of life rather than being stuck on the How questions like how to I make more money or get out of debt.  It is an awesome yet uncomfortable place to be.

• Before I was asking how do I create a successful blog and make some money off of it, but now my question is what purpose is the blog serving in my life and in yours. I was more focused on gaining readers, not losing readers, making money, and trying to “figure out blogging”.    I don’t feel that is authentic enough anymore.  It doesn’t really connect with where I am in my journey and it doesn’t connect me to people on similar journey’s.  Before I was around motivated folks in my MBA program and other debt destroyers that helped encourage me to stick with it.  Once they were gone and I moved on but I didn’t forge any relationships for the next stage in my journey.

• My Christian faith is the thing I think about most and I barely ever mentioned it.   The blog was meant to help people out of debt, but it really only ended up being something I wanted to succeed at. Fear of alienating people and losing readers kept me from including it in the discussion in any meaningful way.  I was probably scared, who knows, but I often wanted to connect with people on that level.  This blog was my primary means of expression and pouring my energy and heart into money and life hacks just to create a semi-successful blog is not an authentic experience.  Articles weren’t designed to connect with people they are created to be ‘successful’.  That is passion draining rather than inspiring for me.
• I haven’t posted anything meaningful in months and I don’t think I haven’t gotten a single email asking about why.    I don’t say that to make you feel guilty or conger up pity, but the sad fact is that I wrote OK articles but I wasn’t connecting with anyone.   Now I feel a drawn towards forming deeper and more meaningful relationships.   I want people to matter.  Not in a distant 3rd person way that let’s me execute my plan to be comfortable and safe without ever having to really get involved.    Detached, very comfortable, and debt free isn’t enough.  It is time to figure out how to get my hands dirty and face some fears.

Now don’t read this wrong, I am very grateful for the paths that have led to this point.  I thank the readers for stopping by and being a part of things. The experience I gained is invaluable and it is was a blast most of time.   The question is…now what?    Do I clean off the rust and change things so that they can meet the demands of the next stage of life’s journey or do I take all the growth and knowledge and pure it into bigger and better things?   I leaning towards tailoring the blog’s direction to be more authentic and true to my journey and away from being aimed to please Sitemeter and Google.  I just don’t know exactly what that looks like…

What’s Happened To The Happy Rock?

I’m guessing a lot of you have since it has earned over $700,000,000 at the domestic box office which makes it the number one movie of all time.  It’s also nominated for 9 academy awards, if you’re into that sort of thing. Personally I think it will win quite a few (Best Picture, and all the techie ones).

But when adjusted for inflation Avatar is only the 15th highest earning movie of all time (I say “only” like it’s a bad thing or something).  According to those figures, Gone With The Wind is the number one money maker of all time.

Which makes total sense since everything was much cheaper back in the day. I remember my grandparents filling me with stories of how they were able to spend all Saturday at the movies for only a nickel.  Now we’re lucky to get out of there without spending $20 – 30 (with popcorn).

This is basically the extent of my knowledge of inflation.  :)

But this example illustrates the point well.  I went to a 3-D showing of Avatar and had to pay $13 each for Mrs DD & I to take in the show.  When my Grandpa took my Grandma to Gone with the Wind he probably only had to spend a couple bucks.  Lucky guy!

In other Gone With The Wind news—A theater in my hometown was the first theater to screen Gone with the Wind in the whole state of South Dakota. They make a pretty big deal about it.  This same theater has been restored to a playhouse which shows movies in the winter.

It’s a pretty cool theater.

So cool in fact that they host the showings of a local short film competition that I have partaken in for the past few years.  You get a weekend to make a movie with a randomly drawn genre and certain other requirements: Line of dialog, a prop, and a character.

This year the genre was Hollywood mash-up which is like “Movie A meets Movie B”.  Our team ended up with having to make a film based on the idea of “Monty Python and the Holy Grail” meets “The Bourne Identity“.  The other requirements were: Line = “I swear…”  Prop = a newspaper, Character = JT, a former child star.

Below is what we came up with.  It’s no box office champ, but it was the “runner-up” in the Best Technical category:

Frankly DD, I don’t give a damn!

OK, so this post wasn’t really about inflation, I just wanted an excuse to show my film.  To make it up to you I’ll also offer up 10 Oscar picks that are sure to be wrong:

• Best Picture – Avatar
• Best Directer - Kathryn Bigelow (The Hurt Locker)
• Best Actor – Jeff Bridges (Crazy Heart)
• Best Actress – Sandra Bullock (The Blind Side)
• Supporting Actor – Christoph Waltz (Inglourious Basterds)
• Supporting Actress – Mo’Nique (Precious)
• Animated film – Up
• Adapted Screenplay –  Jason Reitman and Sheldon Turner (Up in the Air)
• Original Screenplay - Quentin Tarantino (Inglourious Basterds)
• Foreign Film – The White Ribbon

Until next time,

-DD

P.S. My favorite film of the year was “A Serious Man” by the Coen Brothers, but I don’t think it’ll win anything.

When is #1 not #1? When inflation says so.

Below is my family’s expenses for January:

• $840.39 – Mortgage
• $759.20 – health Insurance
• $507.48 – Groceries
• $450.00 – Preschool
• $382.55 – Electricity
• $305.88 – Contacts
• $168.36 – Clothing
• $134.07 – Household Misc
• $120.00 – Student Loan
• $111.22 – Dining Out
• $108.65 – Phone & Internet
• $85.00 – Tennis
• $65.00 – Donations
• $63.43 – Water, Sewer, & Garbage
• $61.91 – Bedding
• $42.94 – Gas
• $41.34 – Hair Care
• $40.00 – Pearl Jam
• $39.12 - Medical
• $34.08 – Gifts
• $30.53 – Yoga
• $23.50 – Kids care
• $22.26 – Dance Class
• $22.01 – B-Day Party
• $14.06 – Movies & Videos
• $14.00 – Babysitting

For a grand total of $4,486.98!

Even though we missed our $4200 goal that I just set last month, I’m not too disappointed.  You see, the $300+ spent for contacts was actually spent on Dec 31st. So if it wasn’t for that we would’ve made our goal, barely.

Biggest Budget Busters:

1. $507.48 – Groceries – Over a year ago I started paying cash at the grocery store. The last three months I’ve been charging my groceries to take advantage of credit card rewards. Sure enough we started spending more on groceries.  But as I mentioned before, I can’t blame it on the plastic. Instead the blame falls on Tony Gonzalez  and his all-pro diet. Hemp Milk Smoothies are expensive!
2. $382.55 – Electricity – Not only is this a high electric bill, it also means that we didn’t pay very much down on the student loan.   While it is a high bill, it this is way better than last year.
3. $168.36 – Clothing – Things really got our of control in this category.  It started out simple enough with taking unwanted Christmas items back and picking up a few other items.  Then a clearance sale was hit, then another.

Biggest Budget Breakthroughs:

1. $65.00 – Donations – Yes I know this is a little higher than it normally is, but like many of you probably did, we gave a little extra to help Haiti out.  If you’re looking for a quick ay to help out a little more here’s my recommendation on how to help.
2. $40.00 – Pearl Jam – Last January I was raked over the coals for spending $180 on my favorite band.  S0 clearly this is a huge improvement.   It helps that there is not a special edition album coming out.
3. $0.00 – Dog.  Timing has been biting us in this category the last couple of months.  But with no medication and no food needed to be bought in January, we finally catch a break.

~Let’s do the Time Warp~

As I’ve already mentioned, last January I received plenty of feedback on my Pearl Jam spending.  In addition to that, it was also the first month that we started paying our health insurance.  So now at least  these month-to-month time warps will be fair.  And in the first “fair” comparison, we spent $4205.68 last year vs. $4486.98 this year.

Darn contacts!

Until next time,

-DD

DD’s Monthly Expenses – January 2010

I figured it being January and all that it was time I gave a look to see how we are sitting debt-wise.  Last January when I did this we still had $99,625 in debt. This was comprised of:

• $94,274 – Mortgage
• $5,350  - Student Loan

As of today we now owe……..drumroll……$96,055, which is comprised of:

• $92,534 – Mortgage
• $3,521 – Student Loan

So in the last 12 months we paid down $3,500+ of debt.

Pathetic!

Even though I’m going back to school and barely working, I still thought we’d do better than that.  But looking back, I don’t see why I should be disappointed.  You have to make payments to actually pay the debt!

When our mortgage increased, I started only paying the minimum (I use to pay a couple of bucks extra before to make it a round number).  Which meant that our only hope of seeing any improvement was in paying down the student loan.

We started out in good shape in 2009.  I routinely paid an extra $75-100 a month.  But then for some reason in the summer I stopped this and went down to only paying $20-$50 extra.  And that is how we ended up only taking a $3,500 bite out of our debt.

What’s sad is that by this time next year I’ll have my own student loan to pay back.  I really wanted to be done with Mrs DD’s loan before mine kicked in.   That definitely won’t happen with my willy nilly payback plan.

So I came up with a new one.

Starting this month I’m going use a system where I designate $500 a month for our electric bill and our student loan payment combined.  For example in January the electric bill is $380, so I paid $120 on the student loan to come up with the $500.

Last year we spent a combined $4620 on these two categories ($2575 on electricity and $2045 on the student loan). So committing to increase this total to $6000 next year is a pretty big jump.  But I think it will be worth it.

Admittedly there is a slight problem with my plan.  What happens when I get socked with super high electric bills?  If that happens (which I’m pretty sure it will next month) I plan on paying the minimum on the loan and then make up the spending difference in future months when our electric bills are lowered.  So while a few month’s total might be over $500, the total spent on the year for these two categories will be $6000.

If I stick to this plan, it would be smart to utilize the budget option that my energy company offers so my payments would be stable and I’d know what they’d be in advance.  But where is the fun in that?

So, what do you think?  Am I crazy? Or crazy like a fox?

Do any of you have any irregular debt payment/saving plans that you feel like sharing with the rest of us?  Do you think that the “goofy” nature of  a plan helps or hinders the results?

I can see it both ways.

1. By making an individual plan it could provide extra motivation by giving a feeling of ownership over the idea, instead of just using a tried and true method such as the debt snowball.
2. But I also think strange plans could be a sign of a lack of focus and discipline, so a person could find themselves getting off track easily.

Hopefully #1 will be the case for us.

Until next time,

-DD

DD’s Annual Debt Checkup