:::: MENU ::::
Browsing posts in: Money Tips

Paying Down Principal

by

Can I admit something that may make me sound like a real dummy? (It’s okay, I’m secure enough with my own intelligence in other domains that I’m okay with admitting when I’m totally out of my depth in something.) Plus, it’s something that I’m hoping many of the readers here will be able to educate me on and help me with. Here goes…..

You know how I’ve been making larger-than-minimum payments on my car for several months now (since last August to be precise)? Well, I logged in to check on the status of my balance for my last debt update and realized that it said my next due date isn’t until January of 2016!!!

In other words, instead of applying any additional money toward the principal balance, they were simply pre-paying future payments. I had thought (and was wrong), that they only pre-paid for up to 3 payments, and then extra money went straight to principal. So after discovering this error I called customer service and explained the situation, asking for my extra payments to go toward the principal instead of future payments.

I was assured this would be done, but it would take a few days (so my online account hasn’t been updated yet), and I was told that it wouldn’t actually change my balance at all.

I started thinking about it after we hung up and have thoroughly confused myself.

Aren’t most loans (cars, mortgage, etc.) arranged so you pay mostly interest up front? Toward the end of the loan terms you end up paying more principal, but initially almost the entire payment goes to interest, right? So basically I’d just be pre-paying mostly interest. Sooo, if that money gets reallocated toward the principal, then there’s a lower balance for the interest to be compounded on (or capitalized on? I’m so confused!). Right? Soooo, shouldn’t my balance go down then??? No?? Why not? I don’t understand!

Also, I was thinking about it more and trying to figure out what the actual benefit is of paying more toward principal versus simply pre-paying payments (particularly if there’s no difference in the balance). I’ve always heard that if I make extra payments (for car loan or student loans) that I should request for the extra to go toward the principal. But why? I was so off-put by the fact that I don’t know the answer to this that I started googling…..without much luck. When I googled “why should I put extra money toward principal instead of prepaying a loan?” I received a ton of results related to mortgages and student loans. I’m specifically interested in my car loan, but figured the numbers would be the same so I read some of the articles. From what I could gather, it seems like if you pay the principal first, it basically just shortens your loan term (so if you had a 60 month term, like my car, it may end up getting shortened down to a 48 month term). But wouldn’t this also inherently decrease the amount interest being paid? I mean, you’re paying it off sooner, so you have a lower balance for the interest to be compounded/capitalized on (again – no idea the difference between capitalized vs. compound interest), and then eventually you pay it off and it all just goes away. Right? And it’d be the same thing with pre-paying a loan too, right? You pay it off sooner, meaning less interest gets paid in the end because there are fewer months for which to have interest accumulate. Am I totally off on this?

I almost shudder, knowing that so many of you are probably bonking your heads against the computer screen, shouting at my ignorance.

But, yeah. I really don’t know. And I don’t get it, either.

Please enlighten me! I really want and need to understand this difference, particularly with my huge amount of debt!!

And, relatedly, I’m going to start paying extra on my student loans. My plan is still to focus on other debts first, but I need to at least pay the interest on my student loans so the balances don’t keep growing (remember, my minimum payments are so low that they don’t even cover the interest). In reference to this….when I make an extra payment, my intention is really just for it to cover the interest. So I can just make the payment online and leave it alone, right? Or do I need to call and ask that the extra payment be applied to principal? This whole issue with prinicipal balance, interest payment, and loan pre-payment has really thrown me for a loop! Help me sort it out!!!

Seriously, sorry for my ignorance on this matter! Clearly I do not have a background in finance! But to really take charge of my debt I feel like I need to get my mind wrapped around this better. Do you suggest any good personal finance books? Or any good websites or other resources that have been informative for you?


Getting Organized – Finance Style

by

When I was married, I managed the books for both of our businesses, did all his payroll, paid all the bills both business and personal, filed all our taxes and was obsessive about keeping my Quickbooks and Quicken files in balance.  I knew where every dime was, when every bill was due, everything.  It was a daily task for me, and by daily, I mean daily.  Fast forward six years almost seven years…

I’ve not maintained a Quicken/Quickbooks file at all.  Yes, on a couple of occasions, I would get it set up, do all the set up to synch my accounts and then promptly and completely forget about it or just plain ignore it.  I have lived by the seat of my pants since then.  Borrowing from Peter to pay Paul, forgetting that I paid Paul and then having to borrow from Jane…and so forth.  I’ve been the queen of knowing exactly how long payments took to come out of my account and then rolling the dice on whether a pay check would come in before then, or using my card and banking on it not hitting the bank until a few days later to buy just that much more time.  It got so bad that I have refused to use paper checks at all, since I couldn’t predict when they would get cashed and frankly, wasn’t really monitoring my accounts that closely.  It was bad, super bad.

I would guesstimate that in my worst years I spent several hundred dollars are year on overdraft fees.  I knew it was wrong, I knew it was dumb, but between the marriage fail, the housing debacle (this is not the recent one, but the two rental homes I have written about previously,) being the sole provider for then two children, well I was a mess.

Now, in the last maybe, year and a half, I have started to get myself in order.  Keeping lists of bills and due dates, monitoring my bank accounts more closely and trying my best to avoid that stupid bank fees.  But I’ve still not returned to my obsessive nature that was we marriage fail.  And now it’s time…

Okay, not necessarily for the obsessive, daily financial craziness, but for a more organized, traditional book-keeping methodology.  So as of this month, I have updated my version (previous 2012) of Quicken Home & Business, begun the set up with my existing budget and categories, etc.  And I am determined to get back into at least a weekly habit of checks and balances as far as budget, planning and business review.

These last seven years have been a long, hard road.  I would like to say that I never signed up to be a single parent, but the fact of the matter is that I would have become a foster parent whether I got married/had biological kids or not.  So I can’t say I didn’t sign up for that part.  I certainly didn’t sign up for it the way it happened.  It wasn’t my plan.  But you know what, I/we are in a really good place right now.  There is a light, not just a light, but a BRIGHT light at the end of this tunnel and we are plugging away for full steam ahead despite setbacks and hardships this past year.

So for your Quicken users, specifically those who may be entrepreneurs/business owners, got any suggestions or tips and tricks to share with me?


Christmas Time is Here

by

Disclaimer: This post does contain a couple of affiliate links.  I wanted to share these ideas with you and decided there was no harm if I let you know up front that they were affiliate links.

Having a frugal Christmas is not hard for me.  Okay, I take that back because of course I want to see the look of complete and utter joy and shock on my kiddos faces when they open presents.  But let’s face it…One, we really don’t NEED a single thing; Two, there are so many other things I NEED to do with my money right now (ie debt;) Three, we don’t have ANY free space.

Therefore, my temptation to “shop til you drop” is extremely limited and my desires for my kids Christmas gifts are pretty limited as well.  Over the last few years, I have really steered clear of “stuff” and focused instead on making sure that each child got one thing from each of these categories:

  • Something to wear – this is one that kids would normally frown at, at least in my mind, but since my twins buy their own clothes, they love when mom kicks in and helps them out.  We are not a name brand kind of family but this gift is either something they really need or something they really want, so sometimes socks and underwear and sometimes a new pair of tennis shoes.
  • Something that makes them happy – my kids submit lists to me every year and over the years they know that mom is not going to be trendy toys or anything she would consider “junk.”  (I stopped buying video games, system two years ago so they don’t put those on their list at all.) I encourage them to put things on their list that they will really enjoy having and calling their own.  So to give you an example of this years lists, here are a couple of things that they listed: Loot Crate subscription, a $50 bill, a bottle of grape juice all to myself, art supplies and the best one in my book “a baby duck that I can imprint on.”  Go figure!
  • Something they need – let’s face it, we can always find things our kids need, and in our case, with homeschooling there are always things that are needs that can be made a bit special by making them a gift.  Most years they twins get a box full of personal hygiene stuff.  At first it was because they lost it so often and now it’s because I know they would rather spend their money on other things, so if they are responsible and keep up with the stuff, it frees up their personal money for other things throughout the year.  Sometimes it’s art supplies, gift card to a specific place for an upcoming event, etc.
  • An experience – my kids have never been “toy” players.  Anything they got, when the novelty wore off 5 minutes later, the toy was literally just a waste, so we stopped toys probably 4-5 years ago.  Instead they get experiences…camp money (summer camp,) classes or something associated with that (sewing machine and patterns,) girls day out (hand written gift certificate for lunch out, window shopping and pedicures.)  Whatever it is, this is typically their favorite gift.  And I’ve found, especially with summer camps that if you register at this time of year, you typically get a “double discount.”  My dad is paying the deposit for each child to attend a week of summer camp this year as a Christmas gift for them so not only do I get the double discount, but I don’t have to pay the registration fee which is applied to their tuition and gives me months to pay for camp (line item Kids Activities.)

Because we are so limited in space this year which has really affected our crafting and science space I was struggling to find that “wow” gift for the little ones, and then after hearing from my oldest that he would like the Loot Crate subscription (second year he’s asked for that) I began thinking there might be something like this for the littles.  Here’s what I came up with:

  • Tinker subscriptions – they describe it as a “Laboratory for Hands-on experiments delivered every month.”  How cool is that!  This is our first year trying it, but since Little Gymnast LOVES science I though this was the perfect way to surprise him and it’s the gift that keeps on giving since he will get one every month.  (We started with a three month subscription to try it out.)
  • Doodle subscriptions – they describe it as “Ready, Set, Make – fresh new DIY projects to make stuff that you’ll love.”  What a perfect gift for the budding DIY’er or artist.  Princess is getting a 3 month subscription to this which I hope will complement her current obsession with nail art and marker drawings.

This year I will round out the gifts with a magazine subscription for each child, cheap and educational – woohoo and probably a gift card to some entertainment…movie theatre or trampoline playground.  Great for winter entertainment when we just need a break from the apartment.

In the meantime, we have put up a six foot plastic crafting table in our living room and Santa’s Workshop is in full affect.  They have purchased supplies with their own money and are sculpting and painting, screwing together and hiding as they make their gifts for each other and our extended family.  Little Gymnast even bought a gingerbread house kit and has finally mastered putting them together…well, until he ran out of frosting from licking it off his fingers.

It truly is a wonderful time of the year!  Do you have any frugal gift ideas to share or a way you kept your family Christmas reasonable?


Barter Win – Homeschool Tuition

by

Sorry, I was MIA last week.  I woke up last Wednesday just simply overwhelmed at the amount of work I/we still had to get done and facing working both jobs plus approximately 3 hours in the car with kid chauffeuring duties.  I made an executive decision and called in to my part time job and then got all the kids up super early and got down to business.  That day turned the corner for me in terms of this move and now I’m in a much better place mentally!  There is definitely something to be said for “mental health” days, that’s for sure.

So moving past that I wanted to tell about a recent financial win.  As I have mentioned I barter for almost all of my kids activities.  But one thing I’ve never been able to to barter for was our homeschool co op tuition, and this year with four kids going it was over $2000.  Ugh!  This is the first year that I’ve had all four homeschooling year round so the first time for this large of a bill.  Not to mention the older two are taking more advanced, thus more expensive courses.

Typically my little one’s dad comes up with at least 1/2 of theirs, but this year he is in a transition phase and is short on money.  He did help but nearly so much as he normally does.  (Note: We do not have a formal financial arrangement of any kind.  I tell him when the kids need things and if he can, and most of the time he can, he helps out.  I have no complaints at all about his contribution and while it is not viewed as the traditional child support arrangement it works for us and takes the financial stress out of an already stressful relationship.)

So I was facing a really large bill at an already stressful time.  (This tuition is lumped into the monthly line item of my budget of Kid’s Activities in case you were wondering.)  Ok, so what to do.  Well, as you know, we are minimizing like no body’s business over here.  Our garage sale was an overwhelming success and I have been advertising on Facebook and Craigslist, etc.  So my win…

One of the teachers who teaches three of my children year long just so happened to need a couple of pieces of furniture that I had…and voila, like that a barter deal was worked out, my furniture for a full years tuition for 3 children, 1 class each…SCORE!  For those who want numbers this equates to about $600 in tuition.  SCORE!


Our Trash May be Someone’s Treasure!

by

Won’t have a ton of posts today, this past week we have been working crazily to continue the purge.  The deadline is Friday morning when our garage sale opens!

I never considered myself a hoarder until last night when we started getting to the last nooks and crannies of places in the house.  OMG…I have not 1, not 2, not 3, but 7 sets of oil pastels.  And no, I am not an art teacher nor trained as an artist and we rarely use those types of art supplies in school  Why in the world do I have 7 almost never touched sets.  And that’s just one of the many things like that!

I was telling someone that if I received tax deductions on the WEIGHT of what I donate, I would be rolling in it, wouldn’t need to pay taxes for decades probably.  And despite all the donating, trashing and garage stuffed with things for the sale, our house is still full.  Just shows me how much more I have to go and truly how much “stuff” we have.  I’ve really enjoyed the blogs people have recommended regarding the minimalist lifestyle.  My daughter and I are going to try the Project333 route with our clothing.

So just a brief money update…want guess how much we’ve made thus far with selling stuff?  Okay, I won’t make you wait.

$735

And that’s without the garage sale monies that we will hopefully earn this weekend.  Woohoo!  Just a reminder, these monies are being split between debt pay off and savings for replacement items that will happen once we find a new permanent living space, estimated at a year plus down the road.

I am so grateful for the all the garage sale hints.  Just by starting the advertising with pictures this week on our local Craigslist, Facebook groups and my personal page, we’ve got people picking things up tonight and shopping early tomorrow evening as we set up.  I am so excited for this stuff to be gone as we move closer to this new phase of our lives….T-Minus 3 weeks to move day.


Found a Cheat!

by

As of yesterday we are a book free house…at least temporarily.  We gathered every single book in the house and sorted them into four piles…

  1. Goes to the apartment – mostly schoolbooks but a few personal books
  2. Goes to donation
  3. Schoolbooks to sell – homeschoolers have lots of sites they sell/trade used curriculum so I’ll try that route with my old stuff before just giving it away
  4. Book Exchange (this is a link to their Facebook page in case you wanted to check them out and maybe find one near you.  It is NOT an affiliate link of any kind.)

The fourth one is my new cheat…I knew there were used bookstores, but I’m such a fan of the library that I rarely buy books.  But over the years we have amassed quite a collection between gifts, etc.  So a few weeks ago as we headed into this transition I drove by this place and thought to give them a call.  They will take our books and based on their inventory and the condition of the book, will give us store credit for the books.  That way, down the road and as a treat, we can go in and “shop” without actually spending any money. (When I dropped them off, they even offered to donate the books they didn’t want to keep for me so I didn’t have to do that…score!)

We dropped off four huge boxes of books to them yesterday…dropped two more at the local thrift store and put four more boxes into storage so it’s ready for the apartment without being in the way.  Our house is now book free. (Ok, the schoolbooks to sell are still here, but they will be gone soon and are neatly stacked out of the way.)

It would have been great if they actually gave us cash for our books, but I think this is a great alternative to that and will be a neat treat down the road when we have the “shopping” itch!

As the principal, administrator and only teacher in our homeschool, I made the executive decision that we will delay starting our new school routine until after the move.  Since we school year round and I believe that the kids will learn many lessons from this move, I am certain it will not affect the overall scheme of things and it takes a lot of pressure off both me and the kids as we have daily tasks pertaining to the move.  It also made putting all our books in storage for this last month a possibility.

 


The house is in chaos…

by

…but the kids are all joyful and full engaged.  We have all settled down around the idea of our impending move and jumped on board the “get ready” train.   I don’t want this blog to turn into the “Hope’s Moving” blog for the next month, but perhaps small updates on the financial impact of the move and moving frugally would be alright?  Let me know your thoughts.

Over the past week, since the bombshell of our move was dropped…we have gotten busy!  I have been in constant purging mode for four years now, but now we are in Get Rid of Everything that is Not a Necessity mode.  Going from 1800 sq ft to 900 sq ft, I know it’s going to be tight, and while the kids can’t visualize it, I am trying to make them aware of the reality of how having less “stuff” will make apartment living that much better for us.  So with that being said, here’s what I/we have done:

  1. I took inventory of every room in our home including furniture, stand alone technology, storage tubs, etc. including the garage and outdoor space.
  2. I sat down with each child and we worked through their room list asking them what was imperative that they have at the end of this move (meaning when we get into a new permanent home, not just the apartment.)  I thought it was important that I get their feedback so they would feel fully involved in this move.
  3. I then went through everything else and marked it’s importance in three categories…A = Needed in Apartment, B = Needed in Permanent Home and P = Take a Picture of it and sell it!
  4. Based on that list, we moving furniture/items marked P to the garage, cleaning them out and off and taking pictures of them.
  5. And now they are all listed for sale and some going like hot cakes, and some are not.

In addition, I got a small storage unit and moved all our bikes and some of the items we must keep but don’t need for this month.  Let me explain that as I know you’d say, if you don’t need them this month why keep them… 1) there are just a few pieces that are solely being kept for sentimental value and really are not usable.  While I am very proud of how brutal I have been in this purge, there are somethings I just can’t get rid of.  2) Some items are smaller and currently not used, but after I purge the larger items that are serving their purpose, they will be used in the apartment.  Make sense?  My end goal is to purge so much that I don’t need the storage unit, but that will require two things happening 1) my van will have to sell as they extra seats/custom bed must be stored when not in use and 2) I have to figure out where we can store our bikes at our apartment and that probably won’t happen until after the move.

Now as I was going over my progress with my dad he asked if some of this would need to be replaced when we move to a new permanent home.  Yes, it will.  We’ve sold our only dining room/kitchen table, we’re selling 3 of the kids bed frames (their choice,) etc.  However, two things 1) we simply cannot fit all our stuff into our apartment and 2) the cost to store our stuff vs replacing much of it through freecycle/garage sales and even some new balances out.

Last point on this….the money!  We are making a decent amount on many of the items especially since much of it is either handmade, refurbished or we got free.  I have decided to save 1/2 the money towards new furniture when that time comes and put 1/2 toward debt.  Knowing that we have at least a year before any replacements would be needed I am comfortable with pushing forward with debt pay off first before thinking about new furniture.

Side note: many readers noted that I would be ready for a garage sale soon…you are so right!  However, I must get approval of my HOA Board (full disclosure I’m on the board, but certainly cannot give myself approval.)  Tonight is the Board meeting where I will 1) request permission and hope that we will have a community yard sale and 2) have to resign from the Board on when I’ve served for over 3 years.  This move is affecting a lot more then just the place we live and it’s sad and hard, but I just know, and the kids are realizing as well, that there will be lots of new joys and adventures in our new place.


Pages:123