Weekly Round-Up – Snowed In (AGAIN!) Edition

I can’t believe it’s snowing again.  This is the 5th snow day so far this winter for my two preschoolers.  They only go twice a week for 2 1/2 hours as is!  While I am all about safety first, my own mental sanity has been compromised from being cooped up with 3 little ones this winter.  Not to mention, we are paying tuition for school that does not get made up like it does for”real” school….C’mon Spring!

Some good posts to read if your stuck in your house for the 500th time this season…

Credit Card Chaser asks: Will The new CARD Act turn credit card users into PAYDAY loan users?  What are the unintended consequences of the CARD ACT? One consequence for my family is.  We carry over $11,000 on our credit cards that we are actively paying down, and not adding to – but can’t PAY OFF in full right now.  The credit card companies used the time before the CARD act went into effect to raise the rates on our existing balances.  I can’t wait to be free of this racket!!!

Rainy Day Saver wants to know: What projects are on YOUR to do list? Something is wrong with our fridge light switch.  It stays stuck on.  I’ve taped it so it stays off for now but we were wasting electricity and buying new bulbs at a crazy rate.   Need to find a permanent fix for that.

Ultimate Money Blog: Where Have all the Housewives Gone? I’m right here!  But I call myself  the real fancy sounding STAY AT HOME CFO.  I’ve even heard that there has been a big rise in STAY AT HOME DADS because of the recession.   I think whatever works best for YOUR family be it, financially, logistically, circumstantially and/or emotionally, THAT is the ONLY choice.

Monevator writes: Get out of Debt to Unleash your Inner Money Maker. Sure, it makes logical financial sense to get out debt.  But giving away your money to credit card companies and other debt is not all you give up nor it is all you will gain when you are finally free of your burden….

And after my recent WHINE FEST, I just have to give props to Jeff @Deliver Away Debt for this inspiring post!!!!!

ONE LAST THING

Check out these great Personal Finance Blogs well known and not, they are all members of the YAKEZIE ALEXA CHALLENGE!  Keep up the great work guys.

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Where is the Personal Finance Blogger who FAILS?

I have a confession to make:

Sometimes I feel VERY jealous when I read or hear somebody’s “I PAID OFF ALL MY DEBT AND YOU CAN TOO” story.

I make comments like, “Way to go!” or “That is AWESOME!”.   Deep down though, I’m a little resentful.  I want it to be me.  I can’t help it but I read their story and pick apart the ways it was so much easier for them and how it is so much harder for me.

“OOOH, I see they don’t have kids.  No wonder they could put so much towards their debt.  They don’t have 5 mouths to feed.”

“Yep.  Just as I thought, they make double a year what we make.   Of course they could pay off their debt so quickly.”

I wish the stories were inspirational but at times I am a little stuck in the “whining phase” as opposed to “accepting personal responsibility phase”.   Most days I can visualize the finish line, when all the debt is paid off, those are the days I search out the “I Paid off my Debt” posts.   But some days, it feels like it will never happen and that is when I whine.  Or maybe it is better to say, “I get discouraged.”

I’ve never heard those who got themselves out debt say it was easy, but I can never get a good handle on how hard it was for them either.

Their story always ends the same.  They write the “final post”.  They are out of debt.

Where is the “Personal Finance” blogger who starts the journey, makes the commitment, posts everyday about how they are saving money on this or that, shows how their debt is going down with graphs and spreadsheets and fails in the end, never gets to write the final post?  Does that happen?   Will it happen to me?

(OK, now I got Stuart Smalley going in my head.   “You’re good enough, you’re smart enough and gosh darn it, people like you.”)

So I get discouraged.   This is not a good enough reason to quit.  We push on.  So right now we pay 24.5% interest on our credit card while others are making double mortgage payments.

They all started somewhere too…

I’ve stopped playing the world’s smallest violin for myself.

And when my time comes for “THE POST”, I’ll try to remember I was once like this.

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Getting a BIG Tax Refund was keeping us in debt

The “great debate” that centers around whether it makes financial sense to get a tax refund or not usually entails one of two perspectives:

The “No Refund” crowd loathes the fact that you are loaning the government your money for free.  Your monthly overpayment in federal taxes could be put in a high-yield savings account and earn you interest throughout the year.

The “Pro-Refund” people usually argue that getting the big refund allows them a forced way to save money that they wouldn’t otherwise save.  The refund can be used to pay down debt or put away for a rainy day.

I’m a reformed “Pro-Refund”.  We used to get the big refund and pay down the credit card.  The same credit card that we were forced to use throughout the year for necessities.  There was no end in sight, the credit cards would never get paid-off because the take-home pay was not enough to cover our lifestyle. What a crazy cycle, we were giving our own money away(letting the government hold it), and then we would have to use credit cards (at about 18% interest over the year) to borrow our own money, pay off the credit card with the refund and start it all over again!

Last week I asked my husband to bring an updated W4 to HR so we can avoid a refund.  Not so we can put this extra money per paycheck in a savings account or use it to pay off debt.  We will use it to avoid using credit cards. We are a paycheck-to-paycheck family.  We are fed up with that lifestyle.  For us, not getting a refund will result in an extra $200-$250 a month.

The majority of our credit card purchases were made because there was not enough wiggle-room in the budget to pay for our monthly expenses.  Even with our cost cutting measures, we were still one small hiccup away from using a credit card to get us through. Maybe down the road, when we have better control of our finances, this money can be used for a “Vacation Fund” or the like.  For now, I’m looking forward to NOT putting groceries or gas on a credit card.

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The cool kids are calling them “Sinking Funds”

I recently posted about my ingenious “mini-escrows” (in my case bi-monthly budgeting for yearly expenses) and how they are the number one reason we haven’t (and hopefully won’t have to) resort back to credit card use.  If you are REALLY serious about getting out of debt, next to having $500 in the bank, I believe this method is THE most important way to get out of the credit-card-crutch cycle.

I’m not the only one.  I just found the other term used for this method is a “SINKING FUND”.  Everybody’s doing it!     These are some great posts about how other Personal Finance bloggers are using the same strategy:

Deliver Away Debt:  How to Create Sinking Funds

Fiscal Geek:  Sinking Funds:  taking Budgeting to the Next Level

Frugal Dad: Sinking Fund Eases Strain of Annual Expenses

Call it a “Personal Escrow Account”, “mini-Escrows” or “Sinking Fund”, by any name you are prepared for the bills you know are coming!

 

Budget FAIL! Not accounting for Non-Monthly Expenses

Today our credit card debt alone totals over $11,000, but for the first time in a long time I fall asleep at night with hope rather than despair.   I’ve tried for over 2 years to get out debt but truth is we never made a dent in it.  It seems so obvious to me now why I’ve failed at getting our family debt.

One of the big reasons – I was unprepared and underfunded for the yearly bill/irregular bills when they came.   The fact that I never properly budgeted for the sewer bill or the car registration/inspection meant using credit cards or spending any “emergency savings” we had built up.   Basically back to square one.

Then I had an awesome idea that would revolutionize the personal finance world!    I would take all the irregular yearly bills, add them up, divide by 24 (my husband is paid bi-monthly) and make that part of my monthly budget.  I would call it our “Personal Escrow Account.”  GENIUS!

Of course this idea is old news.   In fact Charlotte, the subject of  an article at “Get Rich Slowly”, even calls her method a “Personal Escrow Account.”

While I won’t win any points for originality, this method has saved my budget and my sanity.  Breaking down big irregular bills into smaller semi-monthly payments not only makes me feel prepared but provides breathing room in the budget.

EXPENSES         YEARLY BILL         NEED TO SAVE per PAYCHECK

Sewer bill                        $204                                       $8.50

PreSchool                        $2430                                    $101.25

Cars(approx)                  $400                                      $16.70

Propane                            $1400                                    $58.35

These “mini-escrows”(I’m patenting that) have helped alleviate the pressure that would come any time a non-recurring bill would come due.  I round up the numbers to the nearest $5 and put them in designated ING accounts.  To build up the proper amounts I needed to borrow from the “Emergency Fund”.   I know, I know, YOU NEVER TOUCH the emergency fund but I would have had to either used the emergency fund to pay these bills or a credit card so what’s the difference?

I also add bi-monthly in sub ING accounts to the “Emergency Fund”, a “Christmas Fund” and a “Whatever Fund”.

When you NEED credit cards to pay bills you know you are in trouble.  That is where we were.  Hopefully, no more!  Over $11,000 in credit card debt is no joke, and while the amount we owe is still there I feel the crutch they provided may be gone.

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Living Paycheck to Paycheck? – Start saving NOW for Christmas.

It’s snowing AGAIN right now and I have major winter fatigue!  Over 75 inches of snow this winter ALREADY in the Philly suburbs and it is only mid-February.  Visions of daffodils are dancing in my head.  I can’t wait to leave this winter behind and never see a another snowflake.  But when money is tight you really need to plan ahead.  Way ahead.

When living paycheck to paycheck any deviation in your bills can send you scrambling back to using credit cards.  For us, Christmas is one of those cases.  We don’t go crazy at Christmas buying gifts for our three kids and family members, but the cost is definitely greater than our monthly discretionary income at this point.   It would be the perfect set-up for a another failed attempt to get out of debt.

To avoid the squeeze I know is coming this December I decided to start a “Christmas Fund”.   My husband gets paid bi-monthly and we are putting $20 a paycheck away now -  so come Christmas we will not have to resort to credit cards to pay for it.

I’m putting this money in a sub-account at ING Direct .  I have enough faith in my budget for the first time ever that I know I will not need to raid this account.  But if you don’t trust yourself yet, many Credit Unions offer “Holiday Accounts” or “Christmas Club” accounts where they offer “bonus rates” with no penalties on withdrawals IF you don’t touch the money until November.   Even Kmart and Sears got in on the act last year with 3% BONUS rates on gift cards.

I’m hoping this plan will mean a less stressful holiday season.  The alternative is to pretend Christmas isn’t coming this year and AGAIN be faced credit card bills in January.

NOT "brought to you by Chase" this year!

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My Family aka “The Trashy McTrashertons”

I found a new leak in the budget boat that we have ultimate control over and have neglected to do anything about.   Trash pick-up in our township is done on a pay-per-bag basis.  If you participate in the per-bag program single-stream recycling is free.

The cost per bag is $2.  You buy the “township bags” at local supermarkets, convenience stores or the township office.  They are just big lawn and leaf type bags with the township seal spray-painted on.

We average THREE to FOUR bags per week for a family of five!  OK, well $6 or $8 doesn’t  seem like a big deal in my weekly stop at the store but it adds up.  People often speak of the “latte factor“, our family “latte factor” appears to be an addiction to TRASH.  I mean you’re talking about at least $350 a year in garbage.  Is that what most people are paying for their trash pick-up?  How much is your bill?

I like the program.  I think it’s a great motivator for people to control waste and encourages greener ways to dispose of trash. We just never got never got on board with it until now.  It’s also fair, my older neighbor and his wife use about one bag every two weeks.  If our township had a monthly trash bill, my family would be making out like bandits and he would be paying a crazy amount for his TWO bags per month.

While I considered buying big black trash bags, some spray paint and making my own bags I think we are going to do the right thing here.  Our family is going to attempt to reign in the trash.  I mean it’s a win-win, save money and become “greener”.  I have no idea how to compost but were going to give it try.

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