The Other Half of the Story

http://www.starfm.com/files/secret_salary.jpgSo a few days ago I revealed just how much debt we have, but that’s only half of the story. For that number to mean anything to you as a reader, you need to know how much income we have as well.

If we have $119,000 in debt and make $2,000,000 per year, that’s not such a big deal. This blog would last about two days, and as soon as the check cleared, I’d have nothing else to write about. On the other hand, if we have $119,000 in debt and only make $20,000 per year, it doesn’t matter what we do to try to pay down debt; we’ll never win, and this blog will be extremely sad and repetitive.

So here goes…

Our annual household income (take-home pay, because that’s the number that matters) is $41,640.

So there’s some context. Our debt-to-income ratio is 2.86.

For household income, I’m in the twenty-third percent.

Hopefully, that number will increase over time, and when it does, I’ll post a little update here since new income means a different debt snowball. We should see a bump in take-home pay since we stopped all contributions to retirement and our HSA. I would elaborate on the reasoning behind why we did that, but instead I’ll just mine that for a good two or three posts in the future (blogger win-win!).

Roadblock

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So just as we’re getting all geeked up over here about starting to pay down our ridiculous amount of debt, our car needs repairs to the tune of $830.

These are frustrating times. Times like these usually result in my sweet little wife using words reserved for special occasions.

No biggy, we’ll just work the system.

What system? Well, after much back-and-forth, Rachel and I have decided that, whatever our misgivings about Mr. Ramsey (loaded mutual funds anybody? No thanks.), his advice is pretty much aces in terms of getting out of debt.

His first two steps (which we’ll be focusing on for 5 years or more) are:

  1. Save up a $1,000 emergency fund.
  2. Throw every extra penny towards paying off debt, smallest balance to largest balance. He calls this the Debt Snowball.

If an emergency comes along and the $1,000 is depleted, press pause on the snowball and build the emergency fund back up.

There are other approaches to getting out of debt bondage, but just like there are many diet and exercise programs, it’s important to pick one that resonates with you. Plus, wasting time debating over which system is best does not pay any debt off. Pick one. GO!

So instead of being SO CLOSE to knocking our first debt off the list (we were able to pay $299.31 extra on it this month), now we’ll be spending the next month or two building our emergency fund back up to $1,000. It seems worse than it is, in the grand scheme of things, two months is not a lot of time, but it just feels like if we don’t get started then we’ll never get started.

Does anybody have any good ideas on keeping bad luck away? Voodoo perhaps?

 

I Am The One Percent

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I have over $100,000 in student loans. This means that I accumulated more student loan debt than 99% of everybody.

How did I do this? By being stupid, of course. Is there really another possible explanation? Nope. Irony of ironies, I made this idiotic mathematical mistake while pursuing a math degree.

But that’s the past, this is the present and I have a wife and a little boy who deserve a better future.

So we’re getting out of debt. Pronto.

Just so you know exactly where we’re starting from, I made a little table of the damage.

Loan Balance
CMG Women’s Center $         713.07
Nelnet Group A $     1,118.45
G.E. Capital Retail Bank $     1,545.68
Federal Stafford Loan $     2,961.80
Federal Unsub Stafford Loan $     3,902.60
Alpln 1/25/2005 $     4,095.17
Sallie Mae $     4,229.15
Nelnet Group C $     6,070.75
Nelnet Group D $     6,473.68
Wells Fargo $     7,400.00
Alpln 7/15/2004 $   16,185.78
Alpln 7/12/2007 $   18,632.81
Alpln 6/12/2006 $   22,747.60
Alpln 6/3/2005 $   23,712.88
Total $ 119,789.42

We’re attacking this pretty much Dave-Ramsey-debt-snowball style with a couple of modifications. The G.E. Capital card and the Wells Fargo card are 0% interest for now, but when they adjust up it’s outrageous, so we’ll be paying those off as soon as Hank’s birthday bill is taken care of.

A big part of this blog will just be chronicling the struggles to pay off this monstrosity. That alone should be some good reading. As soon as a debt is paid off, I’ll post an updated schedule and we’ll have a celebration. Drinks all around.

Frugal Tip: Split Meals

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While we don’t eat out often, splitting meals is something Rachel and I do religiously when life happens and it’s apparent that dinner is not going to. It’s a great way to save some cash and still be able to enjoy a meal out every once in a while. It’s become like a game for us; how little can we spend and still be full?

It’s surprisingly easy. The portions at most restaurants are HUGE!

For sit-down establishments, most entrees come with two sides, one for me, one for her. Someone always orders water, we’ll share a sweet tea or a Coke, absolutely no need to pay for two when there are free refills. Most of the time we can leave a generous tip and still walk out for under $20 (that’s our target anyway).

Fast food is where you can really clean up. The portions are outrageous at fast food joints. We’ll order one combo at the smallest size available, and then MAYBE get an extra burger. Sometimes we just cut the burger in half. That’s two people for $7 or $8. Or, if we’re just picking up to eat at the house, we just order sandwiches from the dollar menu or value menu or whatever it’s called depending on where you are. We eat chips at the house and drink whatever we have in the fridge. That’s when it’s only $3 to feed both of us.

Since food is the favorite budget buster for most people, what are some things you do to keep it in check when dinner at home doesn’t pan out?

Paradigm Shift

The blog is going through yet another iteration. From now on this will be a personal finance blog. http://www.mosta2bal.com/vb/imgcache/3/22782wall.jpgActually not a personal finance blog, but my personal finance blog. However, since I made a solemn promise to Rachel, I am not removing any of my old posts even though many of them don’t fit with the “theme” of the site now. There’s some good stuff back there that will make you say, “Awwwww!!!”

So let this short little announcement serve as a way point of sorts. Anything written prior to this date (20 May 2014) shall not be held liable for being off-topic. Actually, I can’t outright guarantee that I’ll never write anything off-topic, but I’m going to try.

Like Taking Back Sunday says, “Tell All Your Friends.”

Year One

I’ve been semi-steady with this thing for one year. So I thought I’d celebrate a little bit. Here are some stats:

Number of Posts — 68

That’s a nice rate of 1.31 posts per week. I hope to get that somewhere between two and three posts per week going forward. Baby steps.

Here is the first post I wrote on March 20, 2013.

Number of Visits — 2406

That’s just over six visitors per day. The goal is somewhere between six and ten visitors per day then. Challenge accepted.

Here’s my two most popular posts of the past year (it was a tie).

A Letter To My Unborn Child

Regarding Henry

Thanks for hanging out with me for one year. Be sure to follow me on Twitter and like the Facebook Page to follow my goings-on.

Like A Boy To His Dad

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If I want to know what kind of man Hank will grow up to be, the first place to look is in the mirror. He will, for better or worse, be a lot like me.

He’ll watch how I treat Rachel and learn how to treat women.

He’ll watch how I act when things don’t go my way and learn how to handle disappointment.

He’ll watch me in church and learn how to worship.

He will learn how to be lazy, or how to be productive.

He will learn how to be angry, or how to have self-control.

He will learn how to hate, or how to love.

Fathers, the stakes are high.

My prayer is that Rachel would look at me and be filled with hope rather than worry that Henry would follow in my footsteps.