FHA loans — you know, those loans that, when push comes to shove, we as citizens get to insure — have risen to almost a quarter of all home loans from 3% just a few years ago. Why? Because apparently they don’t care who they loan to:

FHA also has tightened lending standards, requiring a 10% down payment for those with credit scores below 500.

When 10% down payment for a credit score below 500 is an indication of tightened standards, you just have to laugh. Or cry.

Someone with a score in that range has shown an obvious lack of financial acumen, and has no business with a credit card with a $1,000 limit much less a home loan of potential $100s of thousands. Until one has shown at least the modicum of restraint — and a sub-500 credit score is just about the exact opposite — the dream of home ownership should remain precisely that: a dream.

photo credit: frankie_3011

When did we develop the memory abilities of a goldfish? Correct me if I’m wrong, but isn’t this type of stupidity what got us into a pretty serious mess in the first place?

I’m beginning to think it’s time to start saving in some other currencies, because Americans apparently remain too short-sighted to avoid a serious financial spanking.

photo credit: fotograf1v2

Glancing at the calendar, I notice that almost half of the month has disappeared in a pile of other people’s tax documents. The brain is just a little crispy right now…

Which is not to say that little has gotten done with our debt destruction progress. Actually, all of a sudden our future debt reports have gotten incredible simple. Not that they were all that complicated to begin with, but by the end of this month, the report would consist of a single line containing our mortgage balance.

That’s right. As of sometime next week, when our medical bill shows up and we write out one more check, we could call up Dave and shout WE’RE DEBT FREE! Well, except for the mortgage, which Dave seems OK with. Which always felt a bit disingenuous to me, when most people’s biggest debt is an oversized mortgage, but that’s a whole ‘nother post.

So, how did we kill off $27k+ in a single month? More awesome side job income? Nah. I didn’t tap those funds at all. Just letting those stockpile up for the time being for next year’s tax bill. Instead, we finally got rid of my father’s gift, which covered the loans taken out against it along with leaving a few thousand extra to work with. We plan to kill off the last of our medical and use the rest as an initial boost to a real emergency fund. OK, and we may blow just a bit of it celebrating.

Anyway, enough prattling on. Let’s take a peak at what is probably the final State of the Debt report:

So what’s ahead?

The State of the Debt reports are probably done. Seems a bit boring to report something like ‘Yep, made another mortgage payment.’ I fully intend to accelerate paying that mortgage off as quickly as possible, but a monthly report on that progress? Eh. Maybe in passing I’ll mention milestones, but really, I’ll have to see if I can come up with something a little funner to point out…

Like I alluded to, a real emergency fund, in the neighborhood of six to twelve months of expenses. Haven’t sat down to ponder the exact level, but somewhere in there. Our miniature one has come in handy when stumbling blocks appeared along this path, but having something substantial in place should a more extreme emergency make an appearance definitely would be a good idea. Plus, having that to fall back on gives you freedom to take advantage of opportunities you’d otherwise be hesitant to consider otherwise.

More life simplification. In my free time (in other words, not in the last six weeks or so) I’ve been reading quite a bit on life hacking. Think along the lines of books such as:

• Margin by Swenson
• Your Money or Your Life By Dominguez & Robin
• The 80/20 Principle by Koch
• The Myth of Multitasking by Crenshaw

Like too many people anymore, I spend far too much time doing things that add far too little to my life, and far too little on the things that actually do.

I will be correcting that imbalance.

photo credit: Civisi

Hope everyone had a joyous Christmas as well as a safe and wonderful New Years! Most of my free time this month was spent doing as much family stuff as can be squeezed into the ridiculously cold weather December decided to throw at us. But since we live in the Midwest, it’s not as if winter is a surprise or anything…

As I mentioned last time, my efforts at earning a little extra are paying off in a fairly major way. December took November’s successes and handily passed even that success up in a way that boggles my mind. The earnings have slowed down in the last ten days or so, as I expected. But now that I’ve got a taste of the potential out there, I’m hooked, and am excited to get cracking in ‘09!

When my assorted commissions started coming in in mid-December, I must be entirely honest: we blew some of it going ever so slightly overboard with our gift giving. We budget a bit every month for Christmas gifts throughout the year (’cause Christmas isn’t a surprise, you know!), but decided to add a chunk to that total when I saw how things were going. Even though we had it to spare, it still felt a little odd going off budget.

But most of the excess went to doing some heavy damage to our debt. Which was a lot more fun than it sounds like! I decided to check this month’s running total a few days before the end of December, and saw I was a couple hundred dollars short of a big number. So Chase got paid twice this time around. Because when I realized how close we were, I just had to see five figures disappear in a month!

Let the blood letting begin!

photo credit: PhotoA.nl

Despite the ominous sounding headline I threw up there, the financial front of our little family ended the month making decent forward progress. Oh, sure, I would have loved to knock another few thousand a month off that total. And with our little stimulus payment (my apologies future generations!) coming in, I thought we might just have the chance to bite of a bigger chunk.

Some more good news: My little sis did manage to get herself hitched. To a guy I really like. And looked absolutely ecstatic the whole time. And while our gift spending was out of the ordinary monthly range, the wedding was no surprise and we had budgeted for that spending. So it made almost no dent finance-wise. And hey, it’s my little sister. I’m absolutely thrilled that she’s thrilled.

Looking good at knocking off that chunk so far! But alas, Murphy had other ideas. At least he had the good graces to wait to show up until we had a bit of extra coin around.

We’ve been working on growing our little family for several months without luck, until early last month when my wife shared a little good news with me one evening. Several visits to our wonderful doc later, and alas, it was not meant to be this time around. Whether at seven weeks or seven months, irregardless of how great anything else went, this type of loss makes for a rotten month.

Here’s to a better June!

“Communism doesn’t work because people like to own stuff.”
– Frank Zappa

$1,350 and change is another decent bump down on the ol’ debt meter. Yet the hole remains ridiculously deep to me. I know there are plenty out there that are perfectly comfortable with much greater total debt, simply because it’s primarily on their home. But it annoys me to no end to see how we’re paying well over half a thousand a month, solely on interest. Interest. In other words, a wonderful little fee just for the honor of being in debt. I can think of an almost infinite number of things I’d rather do with $500+ than send it to the bank coffers.

Looking at the totals right now, I’m thinking it’s time to really get extremely aggressive about unloading our other property to get our total down. I’m really itching for some serious progress…

Personal finance is really a pretty basic topic. For most people, money and what to do with it is just not that complicated:

• Spend less than you make.
• Put aside 10/15%+ for retirement.
• Don’t use a credit card, or if you do, at least don’t keep a balance on it.
• Pay off your debts as quickly as possible.

Well, unless you bought a house in an area where the market is now melting down. The luster is off that house with a rapidly adjusting ARM worth 70% of what you paid 2 years ago. Likewise that $100,000+ masters degree in philosophy that allows you to eek out a living on $30,000 a year.

Still, there seems to be two groups who argue that paying extra on their mortgage or student loans debts is not for them, even if they can afford it:

“I’m Saving a Ton On My Taxes”

But wait… isn’t there a tax benefit with those two types of debt?

Oh, sure, if you think sending the bank $10,000 in mortgage interest to save $2,500 is a smart move. That’s assuming you would itemize without the mortgage anyway. If you are like most, and the only reason you qualify to itemize is because of mortgage interest, the ’savings’ is likely much less. Personally, we don’t see any advantage at all because we won’t itemize either way.

At least with a student loan interest, there is a tax benefit (but with the same trade-my-dollar-for-your-quarter nonsense) irregardless of whether you itemize or not. Unless, that is, you are single and make more than $50,000 ($100,000 if married) when you begin to get rapidly phased out of the deduction. But the real problem to me is: are you really fine paying on money, albeit borrowed at an ultra cheap rate of 2-4%, for a degree you earned 30 years ago, in a field you might not have worked in for 15 of those years? Long after which, the tax benefit becomes almost nil, as the deduction based on student loan interest paid, not on student loan payment?

“I Earn More by Not Paying My Debt”

With the low interest rate on those debts, isn’t the money I have better spent increasing my investments than decreasing those debts? And won’t paying the debt off with the earnings from those investments be quicker than directly paying them down?

Possibly.

The ultra-cheap student loan is a bit easier: a investment returning 5.34% pre-tax beats a 4% loan (by all of .005% , but it does beat it). Short-term investments are still a little iffy (but certainly not out of the question), but long-term should really be a no-brainer.

So at least over the long-term, financially it may make a sense to invest what you would otherwise prepay.

Not In Either Camp

Neither argument works for me.

The tax dodge route is, I’m sorry, just stupid. Paying a buck to get a quarter back makes you a moron. I don’t care if it brings your cost to borrow down to 1%; it’s still debt that you can do something about but you chose not to.

Using available funds for investing rather than debt repayment at least makes a bit of financial logic, though I think most who follow this route overestimate the potential returns and, more importantly, underestimate potential risks. Of course, the argument assumes one actually invests what would otherwise go to prepaying rather than just ratcheting up consumption. Or that one would use that future money to pay off that debt rather than, oh, buying a nice shiny new Lexus. There are some out there that are that disciplined, and god bless ya’… but I have a sneaky suspicion that most are not.

Nevertheless, we won’t be following the ‘logical’ route either. Probably because I don’t see debt the same way proponents of either method see it. To me, there is no distinction between good and bad debt. Debt is debt – an obligation to pay something to someone. What the debt was taken on for initially is really immaterial, and the quicker I can get it out of my life, the better.

No joke. Still lots o’ debt…

BUT, at least a decent little chunk got knocked off the top. I doubt most months will see that unless the new side business takes off more substantially, but I’ll take it when I can!

It’s only been 18 days since the last update, so just doing a little end-o’-the-month cap off. And as an FYI, no, I’m not charging anything on Chase — just tacking on a bit of interest since my statement just came in.

Seventeen more days, and I get to stop dreaming in numbers… Maybe I should think about doing our taxes sometime as well!

You know, I really appreciated the simplicity of paying the bank that took over serving our mortgage via their simple online form. No need to write out a check or make a call or, well, anything other than enter any additional principal I’d like to include with this payment, click ‘Pay Bill’, and then ‘Confirm Payment’.

I generally pay the mortgage the same day as I receive the bill. I like not having to think about it and the emailed receipt allows me to not worry about whether a check actually made it or not. Plus, it’s one of our must-pays anyway, so why wait.

So this morning, I receive my bill and, like the good customer I am, hit U.S. Bank’s payment center to pay it. And what do I see at the bottom of my ‘Confirm Payment’ screen but a new line item: ‘Fees’. Just ‘Fees’. No explanation of what kind of ‘Fee’ it is; what it’s for; why I’m getting charged them now; nothing but ‘Fees’. Apparently they now want to charge me $2.50 just for the simple pleasure of paying my bill. Which, considering the the little mortgage we’ve got through them, is ridiculous – it ends up amounting to a 1+% premium on our bill. Well f&@k you very much.

They do have an automatic payment option that I can sign up for, no fees attached. But I like having the ability to easily tweak my payment if I’d want to pay an extra few bucks in principal in any given month. Fully automatic payments have always bugged me. I like the extra step, even just to remind myself that money is going out and that the payment is in the amount that I’m expecting.

So I’m stuck either having to pay to pay, via their little convenience fee or with a stamp when I mail in my payment (yes, I know, it’s just 39¢ a payment; it’s the principal of the thing damnit! ). Or I have to sign up for an automatic payment system that I don’t want.

Just one additional tiny but aggravating motivation to pay off everything as soon as I possibly can.

[tags]mortgage,customer service,bank fees,US Bank,annoyances,nickel and dime,death by a thousand cuts[/tags]

I’ve had a fairly decent mind funk going on – probably thanks to all those out of town visitors bringing their foreign germs to invade my poor immune system – so my end of the month quasi-balance sheet ended up a few days late.

I know, I know… your week just couldn’t go on, and you were feeling lost without it.

I’m sorry. I’ll due my darnedest not to let it happen too often in the future!

So, here we go, a bunch of raw numbers to throw at you:

And of course, a note or ten:

• Our HSBC savings took a little hit. No emergency occurred; just taking out the money set aside for buying our Xmas gifts along with another scheduled bill or two. It was fun watching that slowly creep up, but I see more non-monthly bills coming up on the calendar. So I imagine we’ll see some more retreat on that front. But then, that’s precisely what that fund is for…
• Early in December, I decided to take my chances and, in order to save a little interest expense, rolled that used portion of the line of credit over into a 4.99% interest for the life of the transfer to the Chase card. Yes, I know, it will only save a few hundred a year, but a hundred here, a hundred there, and pretty soon you’re talking about some real money. It was as painless as writing out a balance transfer check, and if Chase starts messing around with the terms, I’ll just transfer it back out.
• Received two bills from the grand renovation for just under $4,000 and, in almost the same breath (ok, not really, unless you take incredibly slow breaths… but not separated by more than a couple days), received a $5,000 bonus. People really light up when you slap down a wad of hundreds. I’m going to call it debt repayment because, well, I can and really, that’s what it was… So, four days into the year, and I’m a fifth of the way to my debt repayment goal. Good progress so far! Now if I could somehow just convince the boss to give me a big bonus every month, I’d really be cranking away at this debt!
• Yeah, that was a pretty big jump up in total liabilities, wasn’t it? Especially considering I just got through telling you I used up most of my bonus on debt repayment (or that jump would be even bigger). I warned you there were bills coming up, and right I was. C’est la vie. I’m not thrilled with the increase by any means, but I knew they were coming. And I’m expecting a few more…
• Just as a note to myself, I’m going to have to set up an alternate way to track debt repayment for that goal I made a couple days ago rather than Debt Balance on 1/1/07 less Debt Balance on 12/31/07. That way won’t quite be accurate, because the 1/1/07 Balance is missing several outstanding amounts that presumably will be arriving soon. I’m thinking I’ll just adjust that beginning one as the bills come in for anything done pre-January 1, 2007. (Thinking aloud, excuse me… )

[tags]debt, report card, credit cards, mortgage, investments, assets, liabilities[/tags]