My Debt Blog

I never like getting to January in that the damage from Christmas is actually felt this month. It has been a difficult month to get through on one income on top of that. With no EF or additional income, it is getting increasingly difficult to keep focus. As the pressure or weight of carrying everything gets to me, it gets harder to keep going. I’m to that paycheck to paycheck point and there is nothing to show for it.

So if January was bad, how does February get better? We need to pay close attention how much is coming in, and what needs to go out. My wife will also be setup to help with our household income, even though it won’t be permanent yet. Spending is the single most important issue that needs to be watched very closely.

Getting through February is important because I’m patiently waiting on my bonus. The bonus does not necessarily fix problems, but it will help turn things in a much more positive direction. I can’t post details yet because it isn’t in hand yet. Priority before paying down debt is to get that EF back to 1k though.

Expect my regular monthly plastic pinch update and my net worth update. I might as well point out that debt is going up and net worth is going way down, partly due to the huge hit I’m taking on my retirement savings. Even though it is only Monday, I cannot wait until Friday comes around.

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With all the panic and recession talk going on, the markets really dropped. Yesterday and today there were massive sell offs and then a surge this afternoon not only balanced but the DOW actually closed positive to the tune of almost 300 points. I don’t think I have ever seen a roughly 600 point swing in a single day.

I was looking at some of the articles online, believe it or not some companies are still reporting profit. With the massive sell off, I think we will see people with money try to find deals out there to help keep the ball rolling. I would like to see the market return back in the 13k area so it will take some time. Slow growth is one thing but a failed economy is another.

Today feels good though and I can only hope that it continues like this. I’m waiting on some more Q4 earnings to come out yet to see where I personally stand. At the same time I am waiting to hear what, if any, kind of bonus I might be able to get half of after the IRS takes half of it. I wonder if that tax rebate will still be on the table now. Only time will tell what happens.

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President Bush Friday spoke about an economic stimulus package that would be about 1% of GDP, it just needs to be approved now. It is funny how both sides work together when money and votes are involved. The problem we’re seeing with the recent up and down ride on Wall Street may not necessarily be a recession.

Recession by definition is when we actually lose economic growth and GDP recedes backwards. Unemployment usually goes up and people work harder to hang on to their jobs. No matter how you look at it, we’re going to be in for a long up and down ride. They can cut rates and give us back our money, it may not make a bit of difference in the overall trend. So if we’re not in a recession, what has happened?

Slower growth in our economy is causing things to start to balance themselves out. People were riding everything so high, in their house, companies setting record profits, and raising the bar another notch always means higher expectations. Welcome back down to reality. Without a doubt the housing market has taken a hit because appreciation went up so fast, anyone could get a mortgage, and the bubble could not get any bigger. Now the individual making $50k is feeling what was once a $300k house on an interest only mortgage is really like. Panic always creates emotion and emotions can put us into a bad situation.

Monday the US markets were closed but the International markets were freaking out. Indexes in major markets were showing crashes, losing 2-7% in a single day! Then this morning when NYSE opened the DOW dropped like a rock 465 points but later came back up. This month alone I have literally watched my 401k drain away to the tune of hundreds of dollars. What goes up must come down, and the band played on. Why should I be concerned so much about my retirement savings right now? The stock market has a level of risk we accept when our money is involved with it. I’m keeping things just as they are because the sun will shine again and it will gain strength.

One positive thing I seem to be hearing about the tax rebate we could get is people want to pay down their debt with it. Getting out of debt somehow became more important than rushing out to spend. I think our economy would be stronger if we didn’t have to use credit as much or at all. In all due time though we will see what is going to happen with our economy.

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The stock market is all over the place lately, way down from the levels it was at last October. We have the media screaming recession, which may be true. I don’t think we will truly know if we are currently in a recession until months after it actually happens. The economy could be in trouble if something doesn’t happen.

Today President Bush plans to announce an economic stimulus package to help boost the economy. What would be part of this program is a tax rebate of $800 for individuals and $1600 for married, as long as you at or below the household income threat hold of $85k individual and $110k married. So what would you do with the money?

The government wants you to jump for joy like you won the lottery and go out and spend it. Sure, spending it will be a positive thing for the economy, but is that the best thing to do? You could instead put it in the bank and save it for when you really could use it. While it doesn’t stimulate the economy as much as spending, many people have no savings anyway. It could be used to help pay off some debt and help increase the net worth. I don’t think there is anything necessarily wrong you could do with this money.

I think the real thing we have to look at is will this package really help our economy come out of a recession, if that is what we are in. Nobody likes to pay taxes and an auto magic refund of $800 to $1600 is icing on the cake. Like all good things that come, birthdays, bonuses, tax refunds, we just have to be patient and see what will happen when the time comes. As far as what I think we’ll do with this money if we do get it, probably a bit of spending, saving, and paying debt.

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My medical insurance costs are about to go up. Plan A costs me $1250 and Plan B cost me $2100 for the remainder of the year. First off though, the type of plan does matter too. Plan A is a POS and Plan B is a PPO, so they each have pros and cons.

Plan A requires a PCP and has a specific network of doctors and specialists. Instead of meeting a deductible, I would only have to pay a co pay. Depending on how many times we would go to the doctor or see a specialist, those co pay costs could add up. There are some other strict rules on requiring pre-approval for certain things first. I don’t know much about these plans since I have never used one. For the most part, it sounds like an HMO.

Plan B doesn’t need a PCP and has a huge network. There is a $300 deductible that has to be met before 80/20 payment kicks in. It depends on whether or not the 20% out of pocket costs are worth it for this plan. My parents always used these types of plans since you have a lot more freedom over where you can go. I got injured in college and went to the ER, this type of plan picked up most of the cost. Is the extra expense worth being able to go to the doctor or any specialist I want?

Both the plans have good prescription coverage, $5 generic, $15 formulary, and $35 for specialty. I always try to get generics since they’re cheaper and work just as well as the fancy ones with the name printed on the pill. This part of the change is even better than what I currently have, so I’m happy in that regard. My dental coverage changed a little but not enough to be an issue. Vision insurance isn’t an issue right now since my wife maxed out what we have when she got her glasses. She is good for at least 2 years now.

This increased cost will affect the take home pay a little bit, in either case. When my wife gets a permeate job we will have to re-evaluate the options because her insurance could be better than mine. Right now these figures are for both me and my wife, so they would be greatly reduced if it was only me. No matter how you spin the issue of medical insurance, it is better to have something than go with nothing.

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I’m actually glad it’s a Monday for a change. Friday is payday and we have no money until then. Right now I’m the sole breadwinner between my wife and me. The student teaching she did for no money was rough and we had to get through that. I never really liked or understood why they cannot pay student teachers since they’re still doing a job. Now she’s done with that and graduated.

We’re half way through the month and I am a little concerned that nothing has happened yet. She puts in applications into places and then has to go get tests done, background check, and a lot of run around. Why wasn’t she informed about the process before now I have no idea? At the same time, no job and no income either.

I’m frustrated about how we’re going about spending money now. There’s only so much money for the month, and the normal household expenses usually stay consistent. Last month we spent way more than what came in, along with the car insurance bill. Now is the time to really assess what we’re spending money on. When we were in the grocery store the other day, I was adding in my head what we were getting. My wife doesn’t always think about the cost of things, so when I reminded her we only have so much in the account, she got upset. I’m doing my best here trying to keep things together, but at times I feel like she could be doing more.

There have been plenty of comments in the past that we’re never going to get anywhere unless we’re on the same page. I agree with that, which is why I’ve stopped trying to pay off debt for now. There is no point in my efforts unless my wife also believes in the cause. I just want to focus on the necessary expenses right now. When the bills come in I track their balances and payments due. It will take a long time to clear the balances when we only pay the minimum required monthly payment. This is where those DMP and credit counseling programs catch her attention. I don’t like resorting to something like that, but the idea of those is you pay one monthly payment and they distribute it between the creditors involved. There’s a specific chart and a roadmap of how long it will take to be debt free. It would be great to get rid of credit cards, but I don’t think we need a program to do this.

I also brought up the sour subject of student loan debt. These loans can’t go anywhere quickly when we are still working on our credit card debt. Getting rid of credit card debt is more important than paying off student loans. It just takes time and sacrifice to dedicate the income towards the cause. I only have so much control over money, and that’s not saying much.

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A lot of students, not all students, graduate college with student loan debt, and I knew my wife took out a lot of loans to pay for her school. Since she is done with college, those student loans are going to require regular payments starting in July. When I started my career it was nice to have a decent income, until I realized I had to pay all my own bills with it leaving not so much money. I started making payments on my student loans in December of 2005 and have made some progress from their original principle balances since. Now we have to consider my wife’s student loans.

Rather than sugar coat it and give the run around, I’ll use numbers because it is a lot. Check out this table:

From what I calculated out, her monthly payment will be around $700 and mine is only $175 so it wasn’t a huge impact. I want to get my credit cards paid off so I can focus the roughly $300 I pay on them per month to help destroy my student loans with larger payments.

I realize that there is no way she will quickly (less than 30 years) pay off these loans on her income alone. The big issue I have is she needs to at least cover her minimum payment and contribute to our household income to pay those normal bills the mortgage and utilities. Teachers do not make a whole lot of money either, so the road is going to take some time. It’s going to take additional income and bigger payments to get rid of these loans.

Student loans cannot be bankrupt no matter what happens, the principle must be paid. Sometimes lenders can reduce the fees and interest on them, but the original principle must be satisfied. Credit cards have to get paid off too while we’re at it because those balances are lower and the APR is higher. It feels like we have two houses, one in debt and the one we live in.

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