mskills' Broke Blog

The inevitable has happened: today I owe more than my house is worth. The fact that it took this long for the down housing market to affect my neighborhood is the only thing that surprises me. Guess I'm fortunate that I don't plan on selling anytime soon.

Like many others, I'm kicking myself for not purchasing my home with at least 20% down. I know that it wouldn't have changed the drop in value, but I'd still be ahead in equity. More importantly, I wouldn't be trapped if I had (or wanted) to move tomorrow.

In spite of the bad mortgage news, my plan is to continue paying down consumer debt. Once completed, I will need to decide what is more important: begin paying down the second mortgage (fixed at 8%) or save up cash to put down for our dream home whenever we are in a better position to do so.

Looking over my blog, I just realized that I've neglected to do a net worth calculation. Uh, yeah ... scratch "neglected", I've been absolutely mortified to punch out a number. Guess I'd better get this over with.

While I'm not sure what the accepted practice for figuring out my net worth is, I'll follow my hunch for now and wait for feedback. Here we go:

Today's net worth

Assets
Cash (checking & savings): $2,806.04
Investments: $46,232.44
Property (home & autos): $177,500.00

Liabilities
Consumer debt: $26,462.05
Mortgage debt: $161,227.68

Net worth: $38,848.75

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I'm surprised. I seriously thought that the value would be negative. On the other hand, I'm a little bit disappointed that even if my consumer debt was eliminated today, my net worth would barely surpass one year's income. Time to get more motivated.

New month, new budget ... new expenses. After a banner debt reduction last month (to the tune of $2,000), I knew April would be a hard month to beat. And I was right: May is already looking to hammer me with some snowflake-hungry expenditures.

The worst offender is the last minute spending that I failed to account for in last month's budget. So I'm already down nearly $200! Some of it was necessary (or so I keep telling myself), but it looks like we're going to have to majorly rein in the dining out.

May, on the other hand, is staring me down with the lament of broken necessities in its eyes. The laptop battery is near death. The kitchen faucet's handle is hanging on by the proverbial thread. Worst of all (to my DW, at least) is the inoperable ice maker. So much for making progress on debt this month.

Switching to a different topic, I applied to write for

The Content Authority yesterday. Assuming my writing sample passes review, I will have the opportunity to get paid as a ghost writer. Does anyone have any experience writing online for them or other content mills like Textbroker or ecopywriters?

Or, to be precise, frustrated at the lack of financial communication with family and friends. I'm sure everyone here can guess what this will be about.

For the record, I haven't had many (... if any) role models of good financial standing among my friends and family. So, I'm not surprised that I've managed to keep the flame of uncontrolled spending burning brightly since I've reached adulthood. It would have been very hypocritical of me to point fingers.

But I really thought that I would've received a little more support from everyone when my wife and I decided to change gears. Well, okay ... maybe not a ton of support at first (we weren't entirely sure ourselves that anything would change). But it has been almost exactly a year now of paying down debt while adding absolutely nothing to it. And guess what? Still no support.

Perhaps the ridiculous taboo of not discussing personal finance with others is to blame. Maybe it is just pure embarrassment. But to get nothing but blank stares when bringing up the progress we've made is disappointing. Mostly because I know my family and friends are in similar circumstances and could really change things around if they'd only try.

Oh well ... /shrug

What really changes when you are out of debt? Since I'm a few years away from being free of non-mortgage debt, I haven't really given much thought to how life will change. But now I am thinking of it: will life be any different?

I mean, I'll still have the bills to pay. Food and gasoline to consume. Insurance, utilities, and I'd better not forget taxes. Plus, there will be a large chunk that goes to retirement. Perhaps even some cash will be diverted to my kids' college fund. Last but certainly not least, the mortgage company will still want its hefty share.

So, how exactly will life be any different? I know, I won't technically be debt free until I kick BB&T out of the house. But still, shouldn't I feel something once I'm no longer throwing money at stuff that I purchased ages ago?

Sorry for the downer post. Probably should have known better than to blog while exhausted.

Whether I'm looking at credit card balances or next month's budget, my eye is always drawn to the big numbers. Who cares about a few pennies here or there when I've got thousands of dollars to worry about?

Whenever I begin feeling overwhelmed from focusing on the "big picture", I find it encouraging to take a breather and appreciate the seemingly insignificant contributions that we've made to bolster our income.

Credit card cashback - $100 since starting in February
Swipe the rewards credit card on everything that I would have previously used my debit card for, pay it off at the end of the month, and get a check in the mail. Better yet, use it for recurring expenses (like utilities and insurance) and get even more back.

I realize that I probably look foolish to some for using a credit card while digging myself out of debt. I'm confident that I can treat it like cash and not regress to my pre-budget days, but I acknowledge that this option is not ideal for everyone.

Rebates - $10 year-to-date
The most common form of rebate is the type you mail in after purchasing certain products. However, websites like

Ebates also count (just substitute the physical rebate form for an electronic version).

In the past, I could not be bothered to look for rebates. In fact, most of the time I wouldn't even mail in the ones that I had. A darn shame, really, since we received over $200 in rebate money last year alone. Now, I always make a point to look for rebates when purchasing items that cost more than a few bucks.

Swag Bucks - $60 year-to-date
The easiest one to forget about (because it is so simple to do!), Swag Bucks rewards you for using their search engine. Rack up enough "Swag Bucks" and you can choose items from their store.

For me, the Amazon $5 gift cards make the most sense (and also seem to convert better than just about any other choice). In a typical month, my wife and I earn enough for 2-3 cards. If we're feeling ambitious, we'll participate in the swag code hunts and surveys to finish the push towards another card.

Envaulted - $29 since starting in March
Similar to receiving cashback for using a rewards credit card, Envaulted is an online service that pays 1% for every dollar you spend using your credit card (even if it isn't a rewards card) in exchange for having access to your spending data.

First, the good. Once you authorize your credit card with Envaulted (up to 3), you just use your card as usual to receive the 1% cashback. No extra work is required. Plus, each week Envaulted will select several vendors (department stores, fast food, gas stations, etc.) that will give you additional cashback (up to 100%!) if you purchase from them during that period.

Now, the bad. In exchange for the cashback, Envaulted wants access to your purchasing behavior. This data, I believe, is used to target the weekly offers to you. But it might also be sold to 3rd parties, so keep that in mind if you decide to give Envaulted a try. For more information, check out my complete review.

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I'm probably forgetting some of the other sources of non-work income, but this is a good start for now. I purposely chose options that anyone can do, instead of side-work that might require certain skills or talent. What is everyone else doing to supplement their income?

Okay, I woke up this morning to an epiphany of minute proportions! Apparently, my last post failed to touch upon some rather odd part-time work that I've been muddling through for the past two weeks:

Key For Cash.

The premise is this:

1. You sign up as a 1099 independent contractor
2. Once you're "hired", you log in whenever you want
3. You choose your work as it becomes available
4. You key in the scanned text that is displayed
5. ????
6. Profit!!!!

Continued here...

Funny thing about having a game plan for paying down debt: the closer I come to approximating the final payoff date, the slower time seems to pass. In other words, the better my wife and I become at finessing the budget and avoiding the days of "please God, let our paychecks clear before the next check bounces", the more the process has become ... well, boring.

Since boredom breeds all sorts of bad behavior, I've committed my spare time to generating extra income. My long-term plan is to head back to college to obtain a B.S. in accounting (I currently hold a B.S. in business management). Until the consumer debt is gone and my kids are old enough to be in school, however, my education will have to wait.

This leaves me with two immediate options. First, I can obtain a part-time job. Since my wife and I both work full-time, this would mean tilting the childcare balance her way. Thankfully, she is on board with the idea. The second option, to my knowledge, would be to create some passive income streams.

The part-time job challenge is an easy one to solve. With the accounting career in mind, I plan on becoming a tax preparer for H&R Block next year. The way I see it, the hours aren't bad, the pay is decent, and the whole experience wouldn't look too embarrassing on my resume. Plus, training starts in the fall and shouldn't cost me anything (supposedly they waive the fee if you commit to doing some work for them).

On the other hand, the passive income stream option is a bit of a mystery to me. I understand that the basic concept is to implement programs and/or investments that don't require a ton of maintenance while slowing feeding you much-needed cashola. The common example would be that of the affiliate, where you are compensated for generating traffic for a vendor. Having absolutely zero experience with doing this, I'm hoping y'all have some suggestions.

P.S. Hope everyone had a happy Easter.

P.S.S. I think I've appeased this website's appetite today after feeding it three freshly-typed variations of this post

Funny thing about having a game plan for paying down debt: the closer I get to approximating the final payoff date, the slower time seems to pass. In other words, now that my wife and I have finessed our budget and eliminated the days of "please God, I hope our paychecks clear before the check bounces", I'm finding things to be a little ... well, boring.

Since boredom breeds all sorts of bad behavior, I've been searching for ways to generate extra income to pass the time. My long term plan is to eventually head back to college to get my B.S. in accounting (I currently have a B.S. in business management). Until the consumer debt is gone and my kids are old enough to be in school, however, my education will have to wait.

For the short term, I believe this leaves me two options. First, I can get a part-time job. Since we both work full-time, that would mean I'd have to tilt the childcare balance her way. Thankfully, my wife is on board with the idea. The second option, to my knowledge, would be to create some passive income streams.

The part-time job challenge is easy to solve. With the accounting career in mind, I plan on becoming an H&R Block tax preparer beginning next year. The way I figure it, the pay isn't bad for part-time, the hours are flexible, and I don't think it would look too embarrassing to add to my resume. Training begins in the fall, and should be free (or mostly free) as long as I commit to doing some work for them.

The income stream option, on the other hand, is a bit of a mystery to me. I understand that the basic concept is to set up programs or investments that require little maintenance to operate. The most common income stream is playing the part of an affiliate, where you are compensated generating traffic. I have no experience doing any of this, however, so I'm completely open to any suggestions.

When I first got married (just days after both of us graduated from college), my initial reaction to anything debt-related was "no big deal, we'll pay it all off once our incomes increase". Naturally, with our fancy new diplomas in hand, the money would soon start flowing in and wash away any of the spending that occurred in the meantime ... except, it never did.

In fact, income had been stagnant for most of the past decade. Sure, it was enough to cover 2002-era expenses, but the free-wheeling spending never stopped climbing upward. Thinking that the only answer to our problems was to make more money (and not being able to deliver), I became increasingly frustrated thinking about the future.

Dave Ramsey was my cure. The stories of people paying off debts greater than their annual incomes seemed unbelievable to me, yet I couldn't get enough of his radio program. Though highly skeptical at first, I finally bought his book

The Total Money Makeover. My wife and I read it, discussed it, and decided to act upon it May of last year.

So here I am, nearly a year later, and our financial life is much improved. In particular, budgeting has been a godsend for us. Acknowledging our expenses, working the snowball, and finding snowflakes is now an obsession. I can now see an exit.

Unfortunately, I'm finding that I don't need Dave so much anymore. Sure, I don't technically owe him anything since I forked over the cash for the book and have listened to the sponsors that fund his show. But I'm discovering that the more I educate myself on personal finance, the more I find Dave Ramsey's advice to be basic and even, dare I say, inefficient.

The most obvious example is Dave's insistence on paying down debts starting with the lowest balance and working on up. The psychological aspect might make sense when the balances range from very small to very large. Each of my debts started very close in size (and many over $10,000), so it is hard for me to wrap my mind around the amount of the balance when the interest rates vary so much.

But I'm also finding myself disagreeing with some of Mr. Ramsey's core beliefs. My biggest offense: I don't think credit cards are evil. I type this even as I glance over at my $12,000 Capital One balance. True, I haven't accumulated a single dollar of new debt since last year. But I've been educating myself on using credit for profit through leveraging and cashback programs and believe that I can handle the responsibility.

So my dilemma is this: am I hypocrite for loving Dave Ramsey for opening up my eyes to basic personal finance, even while outwardly admitting that I can do better following my own plan?

Don't look now, but

stocks are up. In fact, this week, which started out as quite the roller coaster ride, has been awesome for investors.

First, there was the downer S&P news about the U.S. and its deficit issues (though I'm not sure where the S&P folks have been hanging out for the past decade). And then, the surge on tech stocks such as Apple and Intel quickly erased the sour mood hovering around Monday.

Sadly, a look at my retirement balances today has stripped away any euphoria resulting from the strong market. Since my last two posts detailed my debt and budget standings, I figured it was time to finish the trilogy with a post on my nest egg.

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My current monetary assets
401k balance (wife and I): $45,457.79
Savings (emergency/sinking funds): $1,182.77

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I suppose, considering my debts, that I should feel proud about having put something away while spending like a fool in my 20's. But the variety of articles I've found online discussing the recommended investment amounts per age group would beg to differ. It seems that I'm short somewhere between $25,000-50,000 for a 30-35 year old!

Right now, I am contributing 2% of my income to my 401k while my wife contributes 4%. Yep, those are the cutoffs for what our employers will match 100%. I'd love to kick in more, but my debts throw me the shifty eyes whenever I start to consider it. Almost wish I could fast-forward the next two years ... almost.

Certainly, the monthly budget has been my game changer in tackling debt. I've tweaked and revised it many times in the last year, but I'm hoping that exposing it to more eyeballs might spotlight areas to improve.

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Monthly budget

Income (after tax, 401k, and disability ins.)

Paycheck: $3500-4720 (depending on # of Fridays)
Bonuses and other income: $150-500

Expenses

Sinking funds
Christmas gifts: $25
Home/auto repair: $50
Irregular bills: $85

Debts (minimum payments)
1st mortgage (includes PITI): $944
2nd mortgage: $245
Auto loan: $273
Credit card: $175
Student loan: $128

Bills (all on equal payment plans)
Electric: $89
Natural gas: $61
Internet/phone: $35
Water/sewer: $40
Irregular: covered by sinking fund account

Insurance
Health: $312 (covers myself and both kids)
Life: $29 ($300,000 coverage each for my wife and I)
Auto: $84 (for 2 vehicles)

Spending
Groceries: $250-300
Fuel: $275-300
Dining out: $100-150
Clothing: Variable (generally $0)
Miscellaneous (gifts and "blow" money): $25-50

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This is a typical monthly budget for our family, though several line item amounts vary depending on the month. Any excess cash goes straight towards paying down the highest interest debt (which currently happens to be the auto loan).

For the most part, I'm satisfied with the numbers. However, that health insurance amount just kills me every time I pull up the budget. Unfortunately, I have yet to figure out a solution (my wife is covered 100% by her employer, but my employer plan is awful and neither one covers the kids cheaper than private insurance).

So, any thoughts or suggestions on what could/should be improved upon?

Since I already introduced myself in my previous post (thank you to those who read it), I'm going to jump right into my current financial situation. I know a lot of people here are familiar with Dave Ramsey's baby steps, so I'll format our progress with them in mind.

Baby step 1: $1,000 emergency fund

We completed this step in May 2010. In addition, we started some sinking fund savings accounts for gifts, irregular bills, and auto/home repairs.

Baby step 2: Pay off debt by snowballing

We originally began paying down debt by starting with the lowest balance. However, I found my motivation level increased by arranging them by interest rate instead (excluding mortgage debt for now).

Current debt: balance -- min. payment -- interest rate

Auto loan: $4,477.22 -- $272.99 -- 6.29%
Credit card: $12,358.42 -- $175.00 -- 3.86%
Student loan: $7,719.61 -- $128.00 -- 3.25%
2nd mortgage: $31,783.48 -- $245.08 -- 8.00%
1st mortgage: $129,638.37 -- $944.59 -- 5.50%

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Since we started paying down our debts last May, we have paid off $16,047.98 (including a credit card and medical bill that are now paid in full). If our income does not change (for better or worse) in the near future, our projected consumer debt-free date should be March or April of 2013.

So there it is. My plan is to tackle the monthly budget in my next post. I'll feel ecstatic for any tips or suggestions on how to accelerate this whole process and start building our net worth.

Stuck. Until recently, that is what would come to mind anytime I would think about my family's future. With monthly expenses outpacing cash flow, I just couldn't see how my wife and I would be able to get off of the debt treadmill.

Fast forward to today. We have a budget, we're paying down debt, and most importantly: we have hope for a much brighter future.

The only regret I've had since we started turning things around is that I haven't recorded our financial accomplishments and mishaps. I've been lurking around these blogs and the forums for months, but now I'm ready to crawl out from my comfy rock and start blogging!

Should the stars align tomorrow, my next post will provide a snapshot of where our finances stand today, as well as what we've managed to pay off since May of last year.