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Ch-Ch-Ch-Changes!!!!

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There are a couple of big financial changes happening over here. I’ve been hinting at these, but I wanted to wait until things were official before sharing with you guys.

Let’s start with the first financial change….

  1. I’m starting to pay on my student loans now. This is actually something that was brought to my attention when Liz from Great Lakes posted on my very first debt update (nitty gritty debt details. Side note: some of you thought we should declare bankruptcy when you first saw those numbers! My, how things change in 4 short months!). I don’t even have Great Lakes as a carrier of my loans, and I know Adam had mentioned issues with them (and I’ve seen other commenters complain about payment problems), but I am very grateful for that post.

Liz mentioned that I may qualify for Income Based Repayment (IBR) to get a lower monthly payment. The real “cincher” though, in me deciding to sign up for IBR, is this: the total cost of my student loans continue to rise every month due to accumulating interest. Under IBR, “the government will pay your unpaid accrued interest on your subsidized loans for up to three consecutive years from the date you begin repaying your loans.” (see here: http://askheatherjarvis.com/blog/pay-as-you-earn-hotter-than-IBR). That means I can continue focusing on paying down my car debt without my student loans continuing to gain interest.

There is some controversy about IBR plans. Under this plan, any remaining student loan balance is forgiven after 20 years of qualifying payment. Obviously people have a lot of strong feelings about this. Let me be perfectly clear: I fully intend to have my loans paid off well before the “20 year” period. This means I intend to pay my loans in full without relying on the government for any forgiveness (big exception = forgiveness of some unpaid interest, but none of the principal). Additionally, I will actually pay for most of the interest because, after the car is gone, we will start attacking the student loan debt more seriously and will be paying above the minimum IBR payments. But in the meantime, I really appreciate that my loans won’t continue racking up interest.

What does this mean for my budget? Overall, the amount we pay toward my student loans is going to go up (since most are currently in deferment). The monthly payment is going to be in the $500ish range (about $250 each toward Sallie Mae and ACS). But that’s a far cry from $1100 (which is what it would be otherwise after deferment ends), so it’s a fair trade. Instead of waiting until February when my loans come out of deferment, I’m starting repayment with IBR now. (side note: see current budget here)

  1. We are starting a new childcare situation. This is the change I really didn’t feel comfortable talking about until it was “done.” And, because of this whole situation, I also really don’t feel comfortable explaining my reasoning and rationale for this. We’ll simply have to file it under the “personal” label of “personal finance” and roll from here, knowing that this is what is best for our family right now.

Unfortunately, our childcare changes have come at a cost. A BIG cost. Instead of paying $50/day, we’ll be paying $125/day. Yep. A BIG increase. To try to offset these costs a bit, we’ve reduced our child care to two days a week (instead of 3). This means we’ll be paying more, but for less care. Instead of $150/week (for 3 days of care), we’ll be paying $250/week (for 2 days of care). Just to continue with the math for you, this means our monthly cost will be roughly $1000 (for a 4 week month), instead of only $600.

My hope is that this will not be the situation forever. Once the girls (who just turned 2) are potty-trained, a bunch of additional and more cost-effective options open up. My goal is to try to get them potty trained by about 2.5, so we’ll be able to switch to a different place in about 6 months and pay significantly less. We shall see.

So I hope this explains some of the vagueness of my posts the past couple weeks while I’ve been trying to sort the whole childcare situation out. I am not going to lie – going down to 2 days a week has already been tough work-wise. I’m having to work a lot more late evenings when the girls are in bed and just generally trying to be more efficient. If this were a “forever” situation, I don’t know that it would be viable given my work-load. However, I keep reminding myself that this is a temporary, relatively short-term solution (for hopefully only about 6 months). Also, my work-load is extra heavy right now as it is summer session for the courses I teach, which is much more condensed than the regular semester. When the Fall semester starts, my grading will be spread out further, meaning the courses won’t be quite as demanding as they currently are.

In the meantime, I apologize for some of the babbling and otherwise hasty posts you may be seeing from me! I used to have the luxury of spending much more time writing and editing posts and now I feel more of a need to get them thrown up quickly so I can move onto my next task.

In this spirit, I need to get going.

I hope you all have a Happy Friday and a safe and happy weekend! See you on Monday!!!


Guess what I just did…..

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Happy Friday, all!

Guess what I just did!!!

car(source)

I just refinanced our auto loan for a MUCH better rate!! Eeeek!!!!!!

I was originally going to wait longer in hopes that my credit score would improve (I’d had a terrible debt-to-credit ratio so I thought my recent additional payments would help my score go up), but then I logged into Credit Karma and discovered that my score has already gone up a great deal and it turns out I have already attained an “A” rating in my debt-to-credit ratio! Wahoo!!

It feels like just yesterday I was barely dipping below the 50% debt-to-credit ratio, and now I’m below 20%!!

And – thanks, Reader (I can’t remember who – tell me in the comments!) for recommending PenFed! I went online, applied for an auto refinance and the whole process was absolutely easy and seamless. I thought it would be a long, drawn out thing and I was picturing myself having to go into an actual branch somewhere, wait around to talk to a banker, sign a billion documents, etc etc etc. But not so with PenFed! The entire thing was done online very quickly (maybe 15 minutes?) and at the end I walked away with a shiny new interest rate of 2.49% APR (compared to the 7.75% APR I have been paying to CarMax Auto Finance).

So my check went out in the mail today and should be here next week. At that point I’ll pay CarMax in full and have a new lien holder for the Explorer.

I’m kicking myself a little because my loan amount is the exact (to the penny) amount of my 10-day payoff at Carmax. I’m kind of wishing I’d applied for a bit extra to knock out some of my higher interest debts (although I know others “poo poo” this type of balance transfer). For better or worse its done now.

This also means my monthly payments are going to lower (by about $100!). As tempted as I am to keep paying the same amount, I’m going to put that extra money toward higher interest debt and try to get it gone! Only about $2200 between me and being credit card debt-free (of course, I have other debts….but the CCs are what prompted me to begin blogging here in the first place).

Very exciting stuff! Wahoo!!!


A Change in Debt Payoff Strategy – Hope

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As you may remember from my original debt pay off table, after I paid off Retail Card #1 and my Property Tax bill, I was going to focus on repaying my dad.

Here’s the original table posted on March 26th, 2014

 

Creditors Amt Owed Total Interest Pymts Left Payoff Date Interest Rate
Retail Card #1 413.00 1 Apr-14 0%
Property Tax 700.00 2 May-14 0%
Loan from Dad 3,830.00 6 Sep-14 0%
Credit Card 4,974.00 440.68 10 Jan-15 13.9%
Retail Card #2 2,264.80 499.76 12 Mar-15 25.99%
Car Payment 31,138.00 2,800.77 25 Apr-16 6.79%
Line of Credit 1,248.00 58.25 6 Sep-14 15.95%
Student Loan 31,687.00 2,622.91 42 Sep-17 2.88%

 

So I was successful at paying off Retail Card #1 in April and the Property Tax bill is on the chopping block for this month (stay tuned to next week’s debt update post to see what happens with that,) but I’ve really been taking to heart your comments on my next move…paying my dad back. I am unimaginably grateful for his assistance in getting into my home and having a stable place for my kids, and then add to that his help last fall when I floundered a bit after losing a large client (which led to this debt.) UNIMAGINABLY GRATEFUL! That must be put out there first and foremost.

But I am also really starting to look at the long haul here. The pressure is on to get the house in my name. My dad is not getting any younger or healthier and with four siblings, things could get pretty messed up if I don’t get that done. Unfortunately, I am nowhere near where I need to be to do that. With my marriage failure, my finances got turned upside down, I haven’t made the smartest decisions with the money I do have, and I am really evaluating what I want my life and my kids lives to look like for the next 3 years (twins go to college) and 8 years (younger two will be off to college.) In addition, I have to keep in mind my desire to foster/adopt other children as the need arises. So there’s a lot going on in my head these days.

With that being said, I KNOW the debt to my dad will get paid with the house situation, it’s all tied in together.  And in paying off the other debt more quickly, I will be in a better place financially to deal with the house. So…I’ve decided to remove the Personal Loan from this debt payoff journey at this time, focus my highest interest debt next.  From what I’ve read in the comments, this is the consensus of this knowledgeable community…so the next target with be Retail Card #2.

Agree, disagree, have some advice for me…I would LOVE to hear it!

I used college as a milestone, I am fully aware that they might not go to college, but I am anticipating they will have a life change around that time that will hopefully take some financial pressure off me…at least that’s the goal: college, trade school, job…I’m open and supportive, just used college as the mile marker indicating they are done with high school/homeschool.

Just thought I'd share a picture of my youngest at his first day of FlipFest in Crossville, TN on Monday.

Just thought I’d share a picture of my youngest at his first day of FlipFest in Crossville, TN on Monday. This was posted on their Facebook page this morning and I was thrilled to see him, it was hard to leave my 8 year old yesterday no matter how ready he was – I wasn’t!


Ashley’s New Plan of Action

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In case you’re a new reader – welcome! Thanks for stopping by!

To catch you up….

I first started blogging here in March (Intro post here).

At that time, my #1 goal = eradicate credit card debt IMMEDIATELY!

And, not to toot my own horn, but I’ve done a pretty good job (and thanks to YOU for all the invaluable advice along the way! I’ve learned so much already!)

So as a follow-up to this conversation and trying to decide the next course of action for my debt-reduction plan, I wanted to give you a quick follow-up, along with my new goals:

Order of Debt Repayment (now that WF is paid in full, woot woot!):

  1. Bank of America credit card (goal date = paid by July 2014)
  2. Sallie Mae 8.5% student loan (goal date = paid by September 2014)
  3. Sallie Mae 8.25% student loan (goal date = paid by November 2014)
  4. License fees (goal date = paid by January 2015)
  5. Carmax (goal date = paid by January 2016)
  6. Remaining student loans (no goal date yet because I want to reassess in January 2015)
  7. Medical bills (no goal date yet, see above)

I was originally going to pay the higher interest student debts first, but I can’t do it. I’ve GOT to pay off the credit card debt for my own personal satisfaction and sense of accomplishment.

Next, I will try to get rid of the two high-interest student loans. Getting rid of debts #1-3 will free up $218 in minimum monthly payments (which will be invaluable when my deferment ends on the student loans in February). I’m still a little undecided regarding #4 and #5. I feel like I’d get more personal satisfaction from paying more toward the Carmax loan, but the license has a balance of about $5,500 versus $23,000 for the car, so its a huge difference. We could feasibly pay off the license fees before my student loan deferment ends (in February), but in contrast, there’s NO CHANCE I’ll have the car paid off before deferment ends. Again – I’m trying to free up those minimum monthly payments so they can be applied to the student loans and other remaining debt.

Notice my new “goal dates” for paying off these debts. I have to say as a disclaimer that these are really optimistic dates. Keeping those dates will have us paying about $3,500 toward debt each month (as opposed to the $1500/month we have budgeted). This means we HAVE to keep pulling these big income months like we have the past couple months. This may be possible….I mentioned how “I’m getting a raise” (by teaching additional classes….which started this week so its already “in effect”). Additionally, my husband has hired a new crew of workers so his income will also receive a bump from the work this new crew is able to complete. But at the risk of sounding like a hypocrite (given this morning’s post)…I don’t want to count our chickens before the eggs hatch. I think it will take a few months of my new income + my husband’s new income for us to really know what what we’ll be bringing home each month (in terms of pay). I hope it stays steady with what its been the past couple months, but there’s no guarantee. Only time will tell.

So, yup. Just an update on my new plan of action and goal dates for debt-eradication. I really appreciate all the suggestions and feedback! For example, I had NO IDEA that student loans can’t be consolidated for a lower APR. No point in consolidating then! So those will all be staying separate. I do still plan on trying to refinance the car loan, but I want to wait until my recent huge Wells Fargo payment gets updated with the credit reporting agencies (as I believe it should help give my credit score a little bump).

Hope you all have a great Memorial Day weekend!

 

 


Simple Interest Loan

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Today I have been on the phone with the company in charge of my car loan.  This month was the first month that I made a payment on the van, after looking online I couldn’t find what my principal balance was.  No where on my statement or online did it state.  Not only that, this company didn’t have what amount was going to principal and what was going to interest.

So I called the company up.  And it turns out we are on a simple interest loan, meaning that interest is calculated daily.  This might have been the case with the car as well, but I was pretty illiterate when it comes to loans back then.  Still am if I am being honest with myself.  

I always thought all loans were like the standard loan where interest was calculated monthly.  Now that I look back at things, I bet almost all my loans ever were on a simple interest loan.  Makes sense the loaners want to make all the money they are owed, right?  

So after researching how exactly a simple interest loan works, this is what I came up with.  You divide by 365.  This converts it into a daily rate, you then multiple that by principal amount to obtain the interest due for each day.  

This amount is recorded in a special accrual account, which increases everyday.  No interest accrues on this account.  When your payment is received, this account gets paid off first and what is left over is used to reduce the balance.  

Where borrowers start hurting is if they make a late payment.  A standard loan has a grace period within which borrowers can pay without penalty.  On a standard interest loan, borrowers pay interest for every day they are late.

People who make extra payments actually do better with a standard loan as well.  Most lenders will credit extra payments received within the first 20-25 days of the statement period against the balance at the end of the preceding month.  So for instance, someone pays $1,000 extra on day 20, will save the interest on that $1,000 for 20 days.  With this kind of loan the interest still accrues for those 20 days.

So I am basically at a lost what to do.  I was thinking of using this coming month’s snowball to make an extra half payment in the middle of the month, then paying the other half on the due date.  And afterwards work on a bi-monthly schedule.  This will give me an extra payment a year.  But from what I am reading this will not really help.  The only thing that works better for me is if I make my monthly payments early.  I really don’t know how I can do this, since the majority of our household income comes in the beginning of the month and this loan is due at the 7th of every month.  

I could really use everyone’s help in understanding this.  I am not even sure if what I just wrote up is 100% accurate, since it is just my interpretation of what I read.  Remember I am loan illiterate.  What would you all do?


Frustrated with Great Lakes!

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I mentioned several months ago that my Stafford Loans were transferred to Great Lakes for servicing.  Pay close attention, because this will be one of the only times you’ll ever hear me saying the government did something better.

I have 2 categories of Stafford Loans, subsidized and unsubsidized.  Under each category, I took 2 individual loans during school, for a total of 4 loans.  With me so far?

When the loans were serviced directly by the Department of Education, they were arranged into “groups,” and payments were calculated and applied to each group.  You could pay extra on any group you wanted, right online, point and click.  I could also rearrange the loans into groups in whatever fashion I desired.  This was helpful, because I could break out one individual loan into its own group and snowball that loan with extra payments.  You could always see the balance, principal, and interest on each loan or loan group, payments were applied within a day or two.  It was very easy.

Since my loans were transferred to Great Lakes, the online experience has been decidedly lacking.  The online portal only shows the total balance off all loans.  You can see that there are subsidized and unsubsidized loans rolling up but you can’t do anything with those “sub-loans” online.  Furthermore, the individual loans that made up the 2 groups are now completely gone online.  If I want to apply a payment to one of the four individual loans, I have to call in to customer service.  The automated phone attendant makes me enter in about 6 pieces of information and then wait on hold for a rep.

Then, the kicker – the customer service has been so frustrating!  Since my subsidized loans had smaller balances, I wanted to attack those first.  Every time I tried to do this, the rep would argue with me – “Most people want to pay down their unsubsidized balance first.”  I understand why they say this, but I have to tell them 4 times that I am paying off the smallest balance first.  (Truthfully, the unsubsidized vs. subsidized decision doesn’t make a difference for me anymore – only if I lose my job and qualify for a deferral).  Then, they take the payment over the phone, and it takes about a week to apply to the balance, but it spreads the payment across all the loans.  At this point, a human has to intervene and re-apply the payment to the individual loan I requested.  That results in another 4 day wait and sometimes another follow up phone call.  Lately, they want to argue with me, “Why do you want to apply to a single loan – they are all the same interest rate!”  2 reasons: because it’s more motivating to attack a $9000 balance than a big hairy $20k balance.  And because each loan I eliminate lowers the monthly payment required in case we get in a situation where we are only able to make minimum payments (but only if I call in and ask them to recalculate the payment).

So – if you have any choice in the matter, avoid Great Lakes as a loan servicer!  I will be stuck with them for a while since they have both my Stafford and my Discover loans.  Ugh.  Can’t wait to get rid of these guys.

 


And Now It’s Time for a Breakdown (Part 1)

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Name that tune.

Now that we’ve done the formal introductions, it’s time to get you acquainted with our debt situation.  We’ve been working on our mountain of debt for 3 years so far, and our goal is to make our last payment on my 35th birthday in July, 2017.

At this point in the journey, we’ve paid off all of our cars, some credit cards, and our undergraduate loans.  Still to go, we have 2 credit cards that are a testament to our ongoing financial lack of discipline, and my remaining graduate school loans.  Here are  the debts we’ve paid off so far.

Emily Credit Line $180
Orchard Bank Card $250
Short-term Loan $500
Prudential Insurance $1,000
Citi Private Student Loan $3,070
Ford Focus $9,365
Emily Dept. of Ed. $7,000
Emily Sallie Mae $6,350
Citi Credit Card $2,400
Lexus RX300 $5,000
Adam Sallie Mae $15,200
Total Paid – July 2013 $50,315

Emily’s credit line was a revolving loan she took on with her bank after college. Thankfully we knocked that out right away, along with the dreaded Orchard Bank card.

Short-term loan: During my first year of graduate school, my loans for the entire semester were disbursed at the beginning, and it was my job to budget my living expenses until the next disbursement in January.  As I approached Christmas my first year, I realized I wasn’t going to make it! This was one of the most stressful times of my entire life. I was worried I might not be able to go home for Christmas, get anyone any gifts, or anything else.  For the first time in my adult life, my bank account approached $0. I’m grateful that my school offered a $500 bridge loan that got me through the holidays, but it was on our snowball list when I graduated.  I definitely knew at that point that I didn’t want to be in that position ever again, to the extent that I could control it.

Prudential Insurance:  Chalk this up to the stupid tax.  My parents bought me a whole life policy when I was a baby. They paid the premiums and the policy was worth about $5000 when I was in high school. I wrecked my car during high school and had to get some repairs, and my mom suggested I borrow against this policy.  She paid the interest on the debt every year (about $30) until I was 26. I finally said I wanted to get that weight off my shoulders and paid that stupid debt back, cashed out the remaining policy amount and paid off some of our other debts. I’m glad to be rid of it.

Citi Private Loan: The hits keep coming. My junior year of college, I had the opportunity to study at Oxford University for 4 weeks during the summer. Of course my family couldn’t pay for this, so Uncle Citibank came to the rescue. It was a great study abroad program, but every month making that payment for several years so I could do a cool extracurricular was just maddening.  Thankfully we got that one eliminated.

Cars: These stories are worth a post of their own. We currently have a 2009 Ford Focus with 60k miles and a 2002 Lexus RX300 with 174k miles. We hope these cars last us until we are out of debt so we can buy our future cars in cash.

Credit card:  stupid stuff that I thought couldn’t wait, like school expenses, interview suits, a plane ticket for the holidays here and there, and suddenly we have a big credit card balance.  We’ll talk more about this as we go.

Student Loans:  Both Emily and I attended small private liberal arts schools.  She had more help from her family than I did, but we both ended up with about $15k in loans.  This May, 9 years after I graduated, I finally paid off that bachelor’s degree.

That’s the story on what we’ve paid so far! Next time we’ll get into the tsunami wall of remaining debt we have to tackle!