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Converting to Cash

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Going back to my recent post on The Cost of Convenience – Snack Time, I am finding the temptation to overspend or spend in situations where I don’t need to has become more of an issue as my debt load and monthly obligations continue to drop.  I have more available income and carrying plastic around…well, I have found myself making some bad decisions.  So effective immediately, I am converting to an all cash system.  I’ve cut up two of my cards and put the others away.

I will still pay my monthly bills online using either my debit cards or bank bill pay.  But for any “spending money” I will be withdrawing the money at the beginning of the month and sticking to it.  This money will be my grocery money and the money I would pay the kids for work (since they no longer get an allowance.)  And I’m debating the car money.  Obviously I have to get gas at least twice a month, and paying with a plastic is most convenient.  Not to mention maintenance, etc. that is not always predictable.  I’m considering opening a car only account (checking, that is, not credit) and using that card only for card related expenses.  Thoughts?  But since on most months there are monies left over for that budget item, I really want it in an interest bearing account.  So I’m still figuring that one out.

But essentially I am taking away all possibility of over-spending on a whim or giving into the temptation of convenience or acquiescing to the kids’ “mom, can I have this?”  And when the money is gone for the month…it’s gone.  The kids are used to this on a smaller scale as I’ve been trying it out on a weekly basis…and I’ll just tell them, we are out of  spending money for the week, we have to make due with what we have.  And they are getting that.

Teaser: New monthly budget coming soon as we have cut back on some other expenses to keep us on target for our 6 month credit payoff goal!


Income Analysis

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The average household income in the U.S. in 2014 is somewhere between $50,000 and $55,000, depending which source you look at (median = $52,000 here, but nearly $54,000 here). Given these numbers, our household is doing really well!

Remember when I first introduced myself and my debt situation?

I said at that time that our income averaged about $5,500 per month (after taxes). Only….as soon as I’d hit “publish” our income went sky-high. In the following months, things shot up and we were able to make some seriously hefty debt payments as a result. I created a little table below.

Month Month Income Debt Payment % of Income
April 2014 $8290 $3819 (1622 regular + 2197 surplus) 46%
May 2014 $10965 $7451 (5453 regular + 1998 surplus) 68%
June 2014 $9406 $5659 (1959 regular + 3700 surplus) 60%
July 2014 $10420 $1939 (surplus money was saved for transition to living on last month’s income) 19%
August 2014 $8322 $2610 (surplus money saved for transition to living on last month’s income) 31%
September 2014 $6317* start of living on last month’s income $1779 28%
October 2014 $6410 $1752 27%

Table Note:  This is a little confusing so  here’s some explanation. When I first started blogging I would make a debt payment at the beginning of the month (called my “regular” payment), then make an additional payment at the end of the month with leftover money (called my “surplus” payment), so April through June all had 2 debt payments. In July and August I saved the surplus money as I tried to transition to living on last month’s income. September was my first full month living on last month’s income, so the surplus payment disappears since I knew exactly how much money we’d have for the month and, therefore, did a zero-based budget where we weren’t left with any surplus funds at the end of the month.

This month (November) I told you that our income was $5855. This is almost half of what we made in May-July! What’s happened? And, more importantly, how do we get back to those super high-income months so we can continue smashing our debt?

I’ve been studying my budgeting excel spreadsheets to try to determine what is causing such a huge variation in income. And, like most things in life, it seems to be the confluence of many factors.

A lot of it was my pay.

  • I received a large check for a project I’d been working on (unrelated to either of my current job situations).
  • Over the summer semester I received my teaching pay in two lump sums (in June and July), whereas in Fall and Spring semesters the money is spread over four months.
  • Due to various issues I won’t delve into (mentioned here), I haven’t received a check from my research job for work completed in August, September, or October. The check(s) is/are forthcoming, but for those months my pay was slightly lower than usual since I wasn’t getting paid from this job.

And the rest of it was due to my husband.

  • My husband is a small business owner (he does hard wood floor installation). He has two crews of people doing install work. In September, he had to let his second crew go. This was a very tough decision and, obviously, negatively impacts our income. I won’t go into details for privacy sake, but I will say that this was not entered into lightly and there was a LOT of talk and negotiation before the decision was made that he would have to part ways from his second crew-leader.
  • Some unfortunate business expenses came up:  a costly repair that had to be done, some pricey equipment that had to be bought, and payroll for jobs that were net negative (i.e., for the repair work). He has business savings that were able to compensate for some of the expenses, but some of the expenses had to come from his current earnings (meaning, less money for income during those months).

So, how do we get our income back up into that super-high range where we can be putting 60+ % of our income toward debt? Those months where I was paying $5,000+ toward debt payments made such a HUGE boost psychologically. I want to get back to that place! If we do, then we could eradicate our debt so much more quickly; its so encouraging to really see those debt numbers fall so rapidly!

The first target is to increase my income.

I asked my teaching university boss if I could take on an additional class in the Spring (to be honest, I asked if I could have TWO extra classes, but I was told there wouldn’t be enough to go around). Although I haven’t signed the paperwork guaranteeing me the extra class in Spring yet, let’s just say that I’m cautiously optimistic (knock on wood!) I was supposed to have an extra class this semester, too, but it was cancelled due to low enrollment, so this is a “wait and see” type thing.

In terms of my research job, I expect that I should be paid for my time (for work from August-October) sometime this month. I don’t feel comfortable divulging too many details, but this job and relationship is a bit tenuous. Rather than trying to look for another way to supplement my income (finding another part time job or something similar), I’ve decided to devote any extra time right now to applying for full time positions. If nothing turns up this hiring season (meaning, if I don’t land an academic job starting in August 2015), then I will move my attention to longer-term alternative solutions to earn income. Right now I don’t want to distract myself with something short-term just to make a little extra money at the expense of a potentially very lucrative long-term career. I need to keep my eye on the long-term prize.

The second target is to increase husband’s income.

In reference to his second crew, husband took his time and found someone who has just started working as a crew boss for a second crew. This is still brand new but so far things are going well (though turnover tends to be high in the first few months, so fingers crossed that things work out). This will help boost income a bit.

Then, here’s where things get really hairy.

Husband’s only other real way of boosting income is to continue growing his business. He has several big retailers that he does contract work through and would like to get to a point where he sits in the showroom making sales and doing customer bids all day (leaving the install work for his crews to complete). To make that financially possible he needs at least 3 crews running at all times. He has 2 crews currently, but that includes himself and a helper as one crew so he really needs 2 additional crews to be able to quit doing install work himself.

Enter:  dilemma.

This is the hard part of having such an unpredictable future. Husband could bust his butt to try to build things up and then we find out I’ve landed an academic position and we’re moving in July. We have no way of knowing what the future holds. Regardless, Winter is not a great time to build up crews of people since business traditionally slows down around the holidays. But come Spring (right when I’ll hopefully be interviewing), husband has the choice to start advertising and trying to hire more people. I’m not sure what we’ll do at this point. I want his business to be as lucrative and rewarding as possible. But I’d also hate for him to work so hard to try to get to right where he wants it….and then we find out we’re moving.

Anyway, when I started off writing this post I wasn’t intending for this to take such a philosophical turn. I just wanted to do a little analysis of our income and to try to analyze how we can get it back to such a super high range. I guess the answer, to some extent, is simply time. Hopefully I’ll be making more money come Spring. Maybe I’ll land a job and make even more the following Fall. Husband’s job could really get booming in the Spring. He could hire more people, get more crews running, and transition to office-only by Summer.

I guess only time will tell.

 


Capital One update

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Hey! I realized I have one more quick update to share with you guys!

Remember this situation? To jog your memory – someone from Capital One called and said there was an attempted fraudulent charge on my account, asked me to verify some info, then said they’d send a new card. I asked if this was a tactic designed to try to get customers to use their credit card (since mine has been laying dormant for months).

You guys (many, many readers) scared the crap out of me when you said I’d been scammed! I called Capital One and they couldn’t verify whether the attempted fraud call had come from them or not. They said they’d change the account number and send me a new card (with new account number). They said someone from the fraud department would follow up with me.

Well, no one from fraud ever called.

But about a week after that incident, I got 2 letters from Capital One. The first had a new credit card (same number as the old card). The second had another new card (with new account number). Sooooo, I think that solves the mystery. The call alerting me about the attempted fraud was definitely from them (since they did, in fact, send me a new card). I think the fraud department still should have contacted me, but since I’d explained my concerns to the call center employee, I’m sure there were notes in the system and the fraud person would have easily been able to see that there was no actual fraud that took place (only a misunderstanding when I thought I might have been getting phished, but actually got a phone call from them).

This brings me back around to my original point though….. I still think this might have been a tactic to try to get me to use my card by bringing it to my attention and sending me out a new card so its right at my fingertips (instead of locked away in my safe). It didn’t work. I’ve actually never even called to activate the new card (though I guess I should? Is there any disadvantage not to? I don’t want to actually close the account since it would impact the length of my credit history).

That’s all – one last update for today. Now I think we’re all caught up for the most part. I do have a bit of a secret to divulge (which directly impacts our finances), but that’s going to have to wait for probably another week. Like that little teaser? I’m keeping you on the seat of your pants! haha! Really though, after this whole incident (when I lost a bit of my anonymity), I feel the need to be more cautious about what I say and when. I’ll spill the beans eventually, but I need a little more time. NO – I AM NOT PREGNANT! hahahaha!!!

Have a good weekend guys!!!

 


Going, going, GONE!!!!!!!

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We’re lining up our credit cards and knocking them out one at a time!

First up – Capital One

Next – Wells Fargo

And finally, I present to you….my Bank of America credit card account:

IMG_3422

 

Current balance = ZERO, Baby!!!! Wooo!!!!

We are officially credit card debt-free!!! MWHAHAHAHAHAHA!!!!!!

Cue the Pharrell song, Happy, along with a little “raising the roof” dance! I’m cool that way. Feel free to join in ; )

 

 

 

 

 

 


Did I just get lied to?

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The other day I got a phone call about 9am from my Capital One credit card company. It was the fraud department asking if I’d tried to make a $200-some-odd dollar transaction that morning.

  • Me: What? No! I haven’t used the card in months!!
  • Representative: Well I’m glad we got in touch with you then! Yes, our records indicate no activity in over 6 months, so this transaction was flagged as fraudulent and was declined. No need to worry, but we will be issuing and sending you a new card.

The conversation goes on for a bit with them verifying information and me worrying about how my credit card information was “leaked.” FYI – I checked and I still have the card in my possession (I never use it, but keep it locked in a safe in our house).

Then after the call I started thinking……is this a new tactic credit card companies are using to try to get you to use your card? They come up with some excuse (e.g., fraudulent activity) to send you a new card so its fresh in your mind and right at your fingertips for the using (as opposed to being locked away in a safe)?

Am I being overly paranoid or skeptical? Or did I totally just get lied to about a fake fraudulent attempt at using my credit?

For the record, I checked online and there are no recent or pending charges. Of course, the woman said the attempted-fraud charge had been declined so I suppose it wouldn’t show up, but now I’m suspicious. If I never use my card (never even log into my account – I had to do the “forgot my password” option because its been so long!), and still have the card in my possession, then how on Earth would someone get the card information in order to attempt a charge?

I’ve been known to be a bit on the skeptical side….but I’m calling BS on this one.

Anyone else have this experience before???


Monthly Income

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Remember when I first “auditioned” to start blogging, and I said our monthly take-home pay averaged $5,000/month?

Then, aside from that first month, our income has been WELL over the $5,000 mark and every month I talk about how this is very atypical and much higher than average. I have stressed this because I don’t want readers to think I was lying in my original post. I certainly was not. I track all of our income and expenses (even before starting to be strict about a budget), so here’s a little snippet of our (net) income for 2013 versus 2014 comparing the months since I started blogging here about our debt.

 

  2013 2014
February $3795 $5465
March $882 $7595
April $5232 $8290
May $4883 $10965

 

We had several months with abysmal income in 2013. I was still a graduate student so I made very little, and Chris’ income could fluctuate wildly. In March 2013 he actually had a net negative income for the month due to a myriad of business expenses, so our income was tiny. There were also a handful of months with income only in the $2,000ish range. By comparison, you can see that our 2014 income has been steadily rising every month. One reader asked a great question – “how will you keep your income up?” I want to address that here.

There are a couple important changes that have taken place that will hopefully provide a big positive impact on our income. First, I’ve already mentioned how I have taken on additional work. This is great because it has helped balance out some of the “ups” and “downs” of our unsteady income. Just as an aside, I did not get paid this month from either University A or University B (my two contract-based jobs). I’ve continued doing work but this is just a timing thing with the schedule of payments. But, instead of making nothing, I was able to bring home that giant paycheck I mentioned. So our income had a bit of a “buffer” even though I didn’t get my two regular paychecks. I have also continued to take on little side-ventures to earn a hundred dollars extra here or there. Everything adds up over time. So I have taken great strides to increase my income.

In addition to the pay I generate, my husband has also taken some strides toward increasing his income. Remember that he owns a small wood-flooring business. Until recently, it has only been him and one other employee and he has done everything himself (e.g., placing bids, doing scheduling, and completing the actual work). But at the end of March he hired two additional workers. Now he has 2 “crews” of people to complete jobs. Instead of only being able to do a single job at a time, he can be on a job with his “helper” (it’s called a “helper” in his field, but you could also call the person an apprentice or simply an employee), while another crew (“boss” and “helper”) works simultaneously on a different job. By being able to work on multiple jobs at a time, my husband has increased his business profits and has started bringing home additional money.

Nothing is guaranteed and things can certainly change. For instance, all of the research I do for University B is grant-funded by large government grants. When the funds are gone, they have no way to pay me. So far, they have excelled at obtaining grants so my work has been steady, but there is no guarantee of future work

And my husband’s job has even more potential volatility. The second crew he has working for him currently have been great. They do good quality work in a timely manner and my husband has been pleased with their progress. But, without going into too much detail, my husband had tried to expand his business once before (about two years ago), with disastrous consequences. He hired too many people too quickly and was unable to oversee everyone properly. People did poor work and it ended up costing my husband thousands of dollars to replace entire floors (since he warrantees his company’s work). This was a painful lesson to learn. He had to let everyone go (except his one “helper”) and go back to a small 2-person business. He’s trying not to repeat mistakes and this time around he took great time and care to select a skilled and highly qualified person to run the second crew. So far there haven’t been any problems, but there are still no guarantees (and, of course, even good employees can always quit or leave, so even if the crew does good work the income generated from them is still not guaranteed).

Where does this leave us in terms of our income?

Well, we’re not really sure what our new monthly “average” income is. The plan is to continue operating based on our standard budget, which assumed we made only $5,000/month (although, note, we have increased money allocated toward debt and savings so our total budgeted expenses actually amount to $5272/month). The hope is that if we can keep our spending down and continue bringing home a larger-than-usual income then we can keep funneling extra money toward debt every month.

For reference:  Our new budget (reflecting some of the changes mentioned this morning)

Place Funds Budgeted
Rent 1055
Electricity 150
Water 75
Natural gas 25
Sprint (2 lines) 115
Cable/Internet 85
Car Insurance 90
Health Insurance 350
Trash 35
Debt 1697
Miscellaneous 250
Groceries 380
Baby Purchases 600
Gasoline 100
Saving for Irregular Expenses 265
Total Budgeted 5272

What does all this mean for the month of May?

We did well! Best month on record for our pay! We earned $10965. Subtract $8967 (for our expenses…note this is a hugely inflated number due to massive debt payments, plus going over on our monthly envelopes), and we are left with $1998 surplus for the month of May. Two things to note:

  1. This means I don’t have to dip into June money in order to “pay myself back” for the huge payment I sent to Wells Fargo in May (recall that I had sent a huge check and thought that if our May surplus wasn’t enough to justify it, that I would use funds from June to “pay myself back.” Since our income was high enough in May, I won’t have to dip into June funds to cover this money).
  2. Even after paying a HUGE quantity toward debt, we still have some excess to the tune of $1998. Guess what guys….this means BoA is 100% for sure GONE this month! I currently owe $2154. I have the $1005 regular payment + I can use $1149 from the May surplus to pay off Bank of America in full. I’ll still be left with an extra $849 that I believe will be sent to savings (though it may also be allocated toward debt. Need to have a budget meeting with the hubs).

I cannot believe I am so close to being credit-card debt free!!! This is a huge accomplishment and one that deserves a bit of celebration. I talked to my husband about it and although definitive plans have not been set yet, I think we’re going to take a mini-trip to visit family in Utah for 4th of July. My Dad has been asking us to come and graciously offered to cover gas money (plus allow us to stay with him, instead of getting a hotel). With gas covered the costs would be relatively minimal. The largest cost would be in missed work for the husband (although, he does have that second crew now, so he will continue bringing in at least some income). We’ll discuss the details, but I think we may plan that as a celebration of being out of credit card debt. We still have a LONG way to go until we can say we’re totally debt free, but this is a big milestone and I want to celebrate it in some way. A short family trip to Utah seems like a good way to do it without breaking the bank.

Whew! That was a long one! If you stuck around the whole time you deserve a gold star!

Give me your thoughts!

Our variable income has been on the rise. How/when would you conclude what your new “normal” is? If we can say “we now make an average of $6,000 or $7,000 per month” (or whatever) then we can allocate more funds directly toward debt (rather than waiting until the end of the month to make snowflake payments). How would you handle this? How long does it take to determine our new normal?


Ashley’s May Budget Update

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Ashley’s May Budget Update

I recently gave a debt update so I won’t rehash those details here. Instead, let’s talk about how we did on our budget for the month of May.

Item Budgeted Actual
Rent $1055 $1055
Electricity $100 $79
Water bill $75 $57
Gas bill $75 $18
Sprint (2 lines) $150 $115
Cable/Internet $85 $85
Car Insurance $90 $90
Health Insurance $350 $350
Waste Management $35 $35
Debt $1500  $5453
Miscellaneous $250  $425
Groceries $380 $406
Baby Purchases $600 $500
Gasoline $100 $109
Savings for Irregular Purchases $190 $190
Total: $5035  $8967

 

So let’s talk about this stuff…..

Rent is “set.”

Our electric bill was within budget, but I already got the bill for this month and its over $100. It surprised me how much it jumped, but I think its only going to continue to rise across the summer months. I’m going to alter the budget for the summer months, increasing the amount allocated toward electricity to $150, and decreasing the amount allocated toward gas to $25 (same dollar amount, overall, but redistributing the funds away from gas and toward electric).

Water budget stays as-is.

Gas budget decreases to $25/month (see above).

Sprint budget will decrease to $115. I’m a little disappointed because I jumped through some hoops to lower this bill and was told it was lowered to $100….but then taxes and fees get added on and the final amount was actually $115. Still lower than the old bill, but not by as much as I’d hoped.

Cable/internet stays as-is.

Car insurance stays as-is.

Health insurance stays as-is.

Waste management (trash) stays as-is.

Debt. Can we get a moment of silence in appreciation of the DISGUSTING amount of money applied toward debt during the month of May? I mean….seriously. I looked at our monthly income for the past year, and the amount we paid toward debt was more than our TOTAL MONTHLY INCOME for the following months: January 2013, March – April 2013, June – July 2013, and Sept 2013 through Feb 2014. Insane.

In terms of miscellaneous and groceries, I went “over budget” in both of these areas (mostly because of my one day falling off the wagon). I’m going to give it one more month trying to stay within these budgeted amounts. If I fail again (what will be the third month in a row), then I may bump my grocery budget back up to $400. I’m really trying to stick to $380 or below!

This is the first month in a long time I went over on gasoline (but not by much). I don’t do a lot of driving so this doesn’t concern me too much, and the amount budgeted ($100) will stay the same.

In regard to savings for irregular purchases, I’m going to increase this a little. After our discussions about dental health, I think I need to start setting aside a little more money for upcoming dental visits for the husband. As a reminder, we have been saving $190/month:

  • $40 for semi-annual fees (car title/registration fees)
  • $50 for car maintenance (oil changes, saving extra for any necessary repairs and for potential new-to-us used truck fund for husband….probably won’t be needed until winter).
  • $50 for dental/vision….will increase to $125/month
  • $25 for travel and Christmas
  • $25 for 3-6 month expenses

My plan is to increase this amount from $190/mont to $265/month (an extra $75/month for dental).

 

Finally,  let’s break apart the “debt” figure to see why this is so high!

First, let me give an update on the snowflake payments I made from our April surplus (note, these funds are NOT included in the May figures because this money is from April surplus funds).

At the end of the month, we had $3197 leftover.

After talking to the husband we allocated the funds as such:

  • $1,000 toward our 3-6 month savings (I know readers have disliked this in the past, but husband is really pro-savings so this was a compromise, rather than allocating all toward debt).
  • $1560 toward Wells Fargo
  • $181 toward Mattress Firm (paid off account)
  • $460 toward back taxes. I never mentioned it, but similar to Steph, we pay estimated quarterly taxes. Key word being “estimated.” We weren’t too far off, but we did owe a little money, so we paid toward taxes out of the surplus.

Note…I realize this actually totals to $3201 (not $3197), and I never accounted for this $4 overage anywhere in our budget. Soooo, yeah. I wasn’t worried about it since its only $4. Not a big deal.

Here are our May debt payments:

  • Wells Fargo = $4140 (that’s an $800 “regular” payment + a $3340 “I cant take it anymore, must pay this off” payment).
  • Sallie Mae Federal (8.25% APR) student loan = 62
  • Carmax car loan = $470
  • Bank of America = $35
  • ACS Student loan = $25
  • License Fees = $55
  • Medical Debt = $666 (<yikes!)

A little update on the medical debt drama. I have now established payment plans for 3 separate entities at $25, $50, and $75 respectively (amounting to $150/month).

Do you remember all the drama I was having with our insurance company and the Mayo Clinic? Well finally I received a response…..the insurance agent we had spoken with (who said a flat rate of $100 would be applied toward the bill) was wrong. That’s only for out-of-network hospital stays. Ours was an out-of-network consultation. No money is granted for that. So after literally 5 months of back-and-forth, we were left empty handed. I called Mayo Clinic and asked if they would give me a reduced bill if I paid in full. They could do 10% (I pressed for more, but no luck), so I whipped out my debit card and paid off the entirety of the $516 bill. This was certainly rash and probably not in our best financial interest since this debt is interest-free and I could have applied that money toward our Bank of America credit card. But I was so exasperated and irritated with all the time and energy I’ve spent on this bill that I just couldn’t take it and I wanted it out of my life forever. Would I do it again? I don’t know….I’d probably put the money toward BoA. Did it feel good in the moment? You betcha!

So there’s that.

Future debt payments will be as follows:

  • Sallie Mae Federal Loans (8.25%) = 62
  • Carmax = 470….PenFed = 400 (after just refinancing we have a new lienholder and a lower monthly payment)
  • Bank of America =  1005 (snowballing payments: $800 from WF, $100 from Mattress Firm, $35 from BoA, and 70 from the car refinance since our payments are now lower)
  • ACS Student Loan = 25
  • License fees = 55
  • Medial Debt = 150

Total debt payments = $1697/month

And any surplus will be allocated toward BoA. My goal is to eradicate it THIS MONTH (June) so I’m hoping for some leftover funds at the end of the month to do so. You can see all my revised financial goals here.

This has turned out to be incredibly long so I’ll cut myself off here. Back this afternoon with an update on our income for the month of May.

Hope you all have a great Monday!!!

Any suggestions or advice for my current debt-reduction plans? Any areas where you see room for improvement?


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