Financial Freedom Means You Can Do Crazy Stuff!!

November 12, 2010 by Leave a Comment

So in November 2007 we did IT. We paid off our mortgage!! Making that last electronic payment caused great excitement.

A couple weeks later we received a letter from Wells Fargo. Honestly, I was a little disappointed. I felt like it should have been accompanied by a gold-leafed certificate or have made a kazoo noise and showered confetti on me when I opened the envelope. Just a letter on Wells Fargo letterhead.

Oh well. I still stuck it up on our refrigerator for a couple weeks.

Suddenly there was this influx of “extra” cash. Woohoo!! Mark and I went on a cruise to celebrate.

Alone.

Without the kids.

(Mark wanted me to be sure to tell you that we hadn’t completely lost our minds. We got a heck of a deal on a 7-day Mexican Riviera cruise that cost us about $1,000 total include flight to LA, shuttle, etc.)

Guess what I brought on the cruise?

Stacks of adoption agency brochures :-)

So we had all this extra cash that we could use to finance the adoption. Right?

Well behind the scenes, and for some time before even, Mark had been wrestling with his ministry job. Was it really where God wanted him? Was this the best use of his spiritual gifts? etc. etc. He prayed, and waited, and prayed and waited. Kind of a “Okay God, I will go but WHAT do you want me to do.”

But he just kept hearing “Go”.

Um, who voluntarily quits their job without a new one lined up? Or at least a general direction? Crazy people right?

Or….people who have options.

People who have no house payment, no car payments, no credit card bill.

Of course I like to assume that we would have been obedient even IF we still had that house payment. But it was sure a lot easier this way.

Yet one question remained.

How would we pay for the adoption?

To be continued…

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Taking Advantage of The Housing Boom

October 8, 2010 by 2 Comments

The next huge step in our financial journey really came in 2004 when the housing market in Phoenix went absolutely crazy.

The house that we bought for $199,900 over a year earlier was suddenly worth about $350,000. Crazy right? So of course Mark starts talking about selling and I start rolling my eyes at him.

At this point we’ve been married 11 years and moved 7 times. I was tired of moving. Plus I loved our house and our neighborhood.

And, as I was quick to point out, what was the point of moving when everything was hugely over inflated.

So we did some research and began to look at new housing developments that were a little further west (the city of Phoenix just keeps spreading out) and had not yet peaked like the rest of the city.

And I learned something. I shouldn’t look at model homes unless I want to move. Because of course once you look you find something you love.

It didn’t take us too long to decide to make the leap and we signed on the dotted line for the construction of a new home. We downsized a bit (going from 3300 sq ft to 2700 sq ft) and after our construction options I think our final sticker price was $215,000.

They told us construction would take 6-8 months.

It took about 12.

Of course all that time we were praying that the market would hold because we weren’t going to put our current house on the market until we were closer to the move time. The market had been so crazy that houses were literally being bought within hours and I was NOT going to have to deal with a whole temporary move thing.

When it finally came time to sell we listed the house and sold it within a few days for $385,000.

From the proceeds we held back money for movers (my stipulation although we packed all the boxes ourselves), paint, landscaping, window treatments, etc.

But everything else was spent on the down payment which left us with a $65,000 mortgage.

And then we started to do some math. By this time we were making more money and we had continued to keep our budget pretty simple so we moved money around and figured out that by dumping everything extra at it, we could pay off the mortgage in 2 1/2 years.

And so we cheated. We totally skipped baby steps 4 & 5 and went straight to paying off the mortgage. We were so motivated because we could see the light at the end of the tunnel and could almost grasp total financial freedom.

Only later would we realize how important that freedom would be.

…to be continued

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The “B” Word: B-U-D-G-E-T

August 6, 2010 by 5 Comments

Part 5 of our Debt-Free Story

So Dave Ramsey lays out these 7 baby steps ($500-1000 in an emergency fund; pay off debt except house; 3-6 months expense in emergency fund; invest15%; college funding; pay off mortgage; build wealth – MORE DETAIL). (We’ve kind of adapted our baby steps/financial plan but that’s a different post.)

Well to get to any of those places there’s one thing that needs to be in place and that is a budget.

Preferably one that works. Our previous attempts had not.

We quickly realized that we were going about it all wrong. We were trying to come up some perfect one-size-fits-all budget in our nice yearly spreadsheet. Sure we accounted for things like Christmas but other than that life was supposed to be the same every month. Right?

Yeah, not so much. When we finally realized that the budget had to be a monthly thing it was like the light bulb went on. Sure, a lot of the expenses stay the same but there are always things to take into consideration.

  • Is it back to school time (school supplies, clothes)?
  • How many birthdays will you be celebrating that month?
  • School pictures?
  • Company coming (bigger food budget)?
  • Car registration?

The bottom line is this: You MUST tell every penny of your income where to go.  Add up your income, list your expenses. If you have extra put it toward your baby emergency fund or your debt. If you don’t have enough? Well, now we’ve got an issue don’t we. (We’ll come back to that.)

I will be the first to tell you that some of our first monthly “budget meetings” were not pretty. Not that they were screaming matches but there was much we disagreed on (why did I need a “misc” category; should golfing come out of his fun money or the general budget). But, we learned to compromise and we knew that if it didn’t work that month we would revisit the issue the next month. And the biggest thing is that we had an agreed upon goal that we were both excited about working toward – paying off our debt.

Dave has some great forms to get you started on his web site.

You might really be struggling to figure out what to put in some of those categories. If you’ve never tracked your spending before you may have no idea what you spend on groceries every month. Take your best guess (maybe look at old debit/credit card transactions) and then save EVERY receipt for the next month to track what you spend.

What if there’s not enough money? If you run out of money before you run out of expenses then there are two things to be done. ONE – cut your spending and TWO – pay the most necessary expenses first (in drastic situations).

The second one is a bit complicated to get into here but I will address the first one briefly. Sometime I’ll do a more detailed post on ways to trim the budget.

There are 3 main areas that seemed to be the first to go to when it comes to trimming the budget (not counting selling cars, etc that have HUGE payments).

1) Eating Out/Entertainment – The average American family spends $225 a month eating out. That’s incredible isn’t it. It adds up quick – a family meal out, some stops at Starbucks, run through the drive thru on the way to/from the kids activities, order a pizza in, lunch for the working spouse(s). One word for you: STOP. Brown bag your lunch, store some frozen pizzas in the freezer, keep a bag of snacks in the car to stave off hunger until you can get home. Budget a modest amount and stick to it. In our strictest budget days we allotted $30 to this category.

2) Groceries – $700. That’s the amount the Jonses (family of four) spend on groceries each month. We knew one couple (w/ no kids) that was spending $900 a month and had no idea that it could be done on so much less. I know families of four who spend $70/wk ($280 a month). I feed our family of six for about $400 a month. I do some coupon clipping but it’s mostly shopping the sales, stocking up when I can and cooking wisely.

3) Cable/Internet/Cell Phones – We’ve come to expect these things. We deserve these things. We need these things. Yes, some are necessary. We need high speed internet at home for our job. Can you downgrade or eliminate your cable package? Can you shop for a new cell plan that’s cheaper? Get rid of your home phone?

Ah, I digress – sorry I get excited about this stuff.

So once we figured out our budget the next problem was figuring out how to stick to it.

Dave Ramsey has a plan for that too. It’s called The Envelope System which I will introduce you to next week.

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Free Cars for Life

July 24, 2010 by 2 Comments

Got your attention now didn’t I?

Did you know that the average American family owes approximately $900 a month in car payments?

Kind of crazy isn’t it. And it’s not $900/month toward an “investment”. That money will never be recaptured. Rather we pay $900 a month for the privilege of driving a newer car every month.

We’ve been programmed to think that it’s expected. A car payment is a fact of life.

Right?

That’s what Mark and I thought for years while we traded up and traded in cars over the first six years of marriage.

Want to know a better way? How about free cars for life? Watch this video, but then finish reading for a few final thoughts.

So what’d ya think? Totally makes sense doesn’t it.

But here’s what we found. In the midst of redoing our budget, cutting unnecessary expenses and driving debt-free cars we realized we don’t need a $26k car. We don’t even need an $11k car.

You can find good, reliable, low-mileage (60-8ok) cars for anywhere from $3,500 – 7,500.

And the difference?

Save it, invest it, give it away.

It’s up to you!

If you’re really dedicated, maybe you can join the Junky Car Club :-)

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Driving our Debt Around

July 23, 2010 by 6 Comments

Part 3 of our Debt-Free Story

As I’ve mentioned, I come from a family who drove cars until they died. In the entire time I grew up I only remember my parents buying 4 cars including the one they had before I was born. One was a 1970 Ford. Then a Pontiac hatchback and two Honda Accords.

The Ford lasted about 17 years before my brother totaled it. One Honda met the same fate (different brother) and the other two were driven until it no longer made sense to repair them. The 3 kids never had their own vehicle but we managed schedules and shared the vehicles w/ our family of 5. There was lots of carpooling and ride sharing going on.

I told Mark early on in our marriage that if it wasn’t a convertible (my dream car) then I didn’t much care what I drove.

When we graduated college I was driving our 92 Nissan Sentra. About three months after we’d moved to San Antonio I got into a fairly minor accident, rear ending someone when my brakes locked up on a wet road. It did a pretty good number on the front of the car despite being pretty low speed.

Suddenly Mark was determined that I needed a “bigger, safer car”. I’d seen the cars Mark had driven in high school. “Bigger” meant “grandma” car. No thank you! We compromised on a Dodge Intrepid which we purchased, trading in the repaired Sentra.

Of course that meant trading in my $156 car payment for a $267 car payment.

A couple years later Mark decided to downgrade the debt he had on his truck. We sold it to his parents and he bought an older used Mazda 626. This seemed like a turning point in our car buying patterns. Our car debt was going down, not up!

Oh wait…

About a year later, Mark got an itch to buy an SUV. We only had about a year of payments left on the Mazda 626 so I pleaded that we not get rid of it. So that meant it became mine and we sold the Intrepid (again to his parents) and bought an  ’97 Ford Explorer.

It was during this time that Dave Ramsey implanted himself into our lives and our car buying habits would soon change forever.

By the way – if you’re counting, that’s 4 years of marriage; 6 vehicles.

Archives

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Joining Financial Baggage

July 16, 2010 by 6 Comments

Part 2 of Financial Freedom Friday (Read Part 1)

One of the hardest things about marriage is arguably meshing two different money styles and two different financial backgrounds.

I came from a very rigid financial family – my dad is a spreadsheet guy (well back then he was a green ledger sheet guy) who tracked every penny. There was never a lot of extra money but we had what we needed and my parents put all of us kids through Christian schools and through college.

We drove cars until they died (one was 17 years old when my brother finally totaled it), rarely ate out and never got really expensive gifts.

Despite this upbringing I will be the first to admit that I am more of a spender than a saver. I got my first job at 15 working at Burger King, and held down a job consistently on into adulthood. My jobs only served to support my shopping and social habits. Sure, my senior year I saved up some money for college but I didn’t really have a savings goal or any big motivation.

Mark grew up in similar financial circumstances but from a much less structured system. So he had even less experience with living on a budget.

All of this contributed to our disjointed system – well it wasn’t even really a system. We could make a budget, sure, but had trouble sticking to it and soon found it wasn’t working and would give up for awhile.

We’d have what we call “The Visa War”. I would get the Visa bill, open it, keel over in shock from the balance and then begin to vehemently highlight everything on the bill that Mark had charged. I would total it all up and march into the office and declare something like “Did you know you charged $457 this month?!”

Yeah, it wasn’t pretty. I am not proud.

Because usually the unhighlighted expenses (mine) were nearly that if not more J

It took us nearly 7 years of marriage before we finally got our act together.

Next Week: Driving Our Debt Around

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The Early Years: In Love and In Debt

July 9, 2010 by 9 Comments

Part 1 of Financial Freedom Friday

As high school sweethearts, Mark and I had dated for four years by the time we got married in 1993. We still had a year and a half of college left at the time but had a budget and a plan to live off of our scholarships, ROTC money and part time jobs.

Our housing was paid for with scholarships and we had about $450 a month to cover food, utilities, gas, insurance, etc. We ate a lot of Mac N Cheese and Hamburger Helper in those months but it was a pretty carefree life.

Not long after we’d been married we decided we “needed” a newer car. We put together some wedding money and crunched numbers and decided we could afford the $156 car payment. I think we actually covered part of the down payment with student loan money (ugh!).

As we finished up college there were of course “unexpected” expenses and by the time we graduated we had a couple thousand dollars worth of credit card debt, and the car debt.

Shortly before graduation the Army offered ROTC graduates a “wonderful” deal on a new car – 6 months of no payments and a low interest rate loan. Since we’d need two vehicles Mark went out and found a truck. Because if you’re going to live in Texas you need a truck, right?

It was a nice feeling to leave for Texas with at least one guaranteed job and a known salary. For a couple used to living on $450 a month we were looking forward to having a real income.

Unfortunately we didn’t really take the time to make a plan for what to do with that money.

The first six months of our new life seemed to include plenty of disagreements about the money, surprise $175 long distance phone bills (long before the days of free cellular long distance), and disorganized bill payment system.

But that didn’t deter us from making the leap to homeowners. The housing market in San Antonio was such that we quickly realized we could buy a house with a mortgage payment about the same as our rent. So we quickly added a $69,000 VHA (no money down) loan to our debt portfolio.

And of course a house needs furniture right? Where do you think the money came for that? Yep, good old Visa.

In the midst of all this it’s not like we were living in denial. Neither one of us liked the debt and we did try to shop wisely but the cycle just perpetuated every month.

Next Week: The Early Years: Joining Financial Baggage

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Our Financial Story Starts Tomorrow

July 8, 2010 by 1 Comment

For some time I’ve been promising myself that I would document our Debt Free Journey on this blog. But wow, it’s a LONG story. So I’ve decided to make it a weekly feature and tell it in parts.

So tomorrow starts “Financial Freedom Friday” and each week I’ll share a part of our journey.Not sure how long it will take to tell it, but my intent is after the story is done I’ll continue to share tips and resources each Friday.

I might even dig out some old photos to share along the journey.

I hope you’ll come back tomorrow and be inspired by what we’ve learned.

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“No New Clothing Challenge”

March 29, 2010 by 12 Comments

So a few days ago I wrote this post about purging the kids summer clothes to 10 shirts and 10 shorts each.

And then Mark went on the record and said “I’m game for the 10 item challenge if you are?”

I said “Hang on!”

From there we launched into a pretty interesting conversation. But I need to backtrack a little here and give you a bit more info…for clarity sake.

My dear husband is a bit of a, ahem, “collector”. But he is a frugal collector – other than maybe a pair of jeans I don’t think I’ve seen him buy clothes anywhere but a thrift store in the last 5 years. He gets excited about the hunt for the bargain and the deal and before you know it he had 77 polo-style shirts.

Yes, I counted them. I harassed him about that fact, mostly in loving fun, for…well a long time. From time to time he weeds out some clothes here and there but I would venture to say that he has more individual pieces of clothing than I do.

So the other night when we were talking about excess and need and the issue of the kids clothes came up and I was trying to explain to him why I was hesitant to accept the 10 item challenge.

You see it’s not just excess that bugs me, it’s “waste”. The kids had tons of clothes that they never wore. Why am I packing and unpacking them every season if they never wear them? They just take up room in the drawers which are never organized anyways. The kids complain that they can’t find room for their clean clothes and blah, blah, blah.

Of Mark’s 77 polo shirts there were probably 15 that he wore on a regular basis.

The fact that there is stuff we don’t use taking up space is what makes me CRAZY!

My clothing collection, on the other hand is regularly culled for clothes that are faded, no longer fit well or that I just no longer wear. When I shop for new clothes I shop the thrift stores, the discount chains like Ross and the clearance racks of places like Old Navy.

So in the midst of our discussion Mark pointed out that he hasn’t bought any new clothes in a LONG time. And he’s right – it’s been months since he picked up any clothing in the thrift store.

Then he challenged me on my new clothing purchases and how much I spend. I stopped and thought and told him that honestly I don’t think (besides birthday gift cards) that I have spent more than $350 in the last year on clothes.

“SEE, you could buy an iphone with the money you saved,” he said.

“But you won’t LET me buy an iphone because you won’t pay AT&T’s plan prices.”

Then he laid down the gauntlet.

“If you go a whole year without buying any new clothes I will buy you an iphone.”

He’s up for the same challenge. I think he thinks I can’t do it.

(Now, later he went back and added a caveat, lest Dave Ramsey disapprove, that it will be a used iphone that he’ll unlock for me to use w/ T-mobile. Although I heard a rumor that iphone might be offered through Verizon in June.)

I asked if I had to wait the whole year for the phone and he hasn’t decided yet. I say that if I go 3 months (which would put us at June) I should get the phone then.

So we’re still working out the rules, thanks to some Facebook friends but here’s what we’ve got so far.

  • Buying clothes for the kids does not count, it is only clothes for us.
  • Shoes count too.
  • Not sure about purses but I’m guessing he’ll say yes.
  • We may purchase ABSOLUTELY necessary items – socks, underwear, etc. w/ agreement from the other party that they are necessary.

We still have a few rules to work out. Like are alterations acceptable (cutting pants into shorts, etc.). I think they should be as long as I’m altering with items already on hand.

So we’re going to iron out the details but here’s what I’m going to do. I’m going to invite you to join me! Maybe you’ll want to take the money you would normally spend on clothes and donate it to a worthy organization like World Orphans, Charity Water, World Vision, Compassion, etc. I’ll even make up cute little blog badges for us and we can blog about our ups and downs.

What do you say? Will anybody join me?

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