My Debt Blog

I feel financially defeated this month already and the month has barely started. My wife’s friend had a birthday party this past Saturday and invited us downtown to celebrate with her. Since according to my wife that we never do anything fun, we had to go do this. I got my paycheck two days early so there was some money available now.

The weekend started with Friday going to the mall (I HATE MALLS!) and eating out at Subway ($13). Then we had to go shopping because I guess I needed a shirt. I got two shirts at the GAP ($62) I hope she won’t mind me wearing for at least two years. At least we went home after that.

Saturday brought the bulk of the expense. I got a haircut at a place down the street ($16) and my wife got her nails done ($40) at a salon she frequents, to her credit this is semi budgeted. Had to fill up the car with gas ($32) and got cash out of the ATM ($100) to bring with us. Drove to downtown Chicago, north side and searched for public parking for 45 minutes so we could stay with a friend (FREE!). Got some drinks ($15 from $100 cash leaving $85) and ate pizza (my friend covered it) and got ready to go out. We decided to take a cab to the lounge ($10 from cash, $75 left). This is where the fun part came in. For $35 a person, cover, drinks, included, to get into the place ($70 gone from cash, $5 bucks left). My wife and I made sure to get our money’s worth out of that though and after about 10 drinks I was good, my wife could still hold her own at 6. By now it’s roughly 2:30 in the morning downtown and we leave the bar and go to her friend’s new apartment. We decided to get some greasy food to go with our booze and I ended up using some random ATM and paid the fee ($20 cash plus $3 fee, whatever the food cost). We had to take a cab back to our friend’s apartment at 4 in the morning (used the last of cash).

Sunday my wife and I were probably slightly hung over from exercising a barely used drinking muscle but were able to function, just not very efficiently. We rolled out of my friends place around 1 in the afternoon and at lunch ($15) and then headed home. I didn’t do much of anything yesterday so I will have to do more today to make up for the loss of a weekend.

We still have bills to pay and need to keep on top of other things and now I feel down $300 starting out. I have a feeling we’re going to be eating at home all month and really watching the money situation for this month now. It is difficult for some reason for me to convey to my wife bills and expenses should be considered before other stuff, but that isn’t always the case. She still wants to move downtown but there is no way we could do this kind of thing every weekend. This month our cell phone plan is also up so that means we will be getting new phones as soon as possible. I just wish I knew how we were going to pay for them without causing a fight, but more on that later.

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I can’t put it simple than that. The realtor sent me a PDF with a projected sales price and a breakdown of all the fees, which there are over 10k in fees alone, of what it will cost me. One thing I forgot to consider was the property taxes in the state of Illinois are paid in the rear. So this year I am paying 2006 taxes and my escrow is building up for 2007 taxes. That part hit me off guard a little bit.

Even if the house were to sell for more than what the realtor suggested, it still doesn’t reduce it a whole lot. Either way I have to come up with some money to get rid of the house, or just hold out on it until things change. There’s a reason for why the area I am in is losing value: renters. Every other house in my neighborhood is rented! Having so many in this area lowers the value of the units that are lived in by the owners. The renters have really made themselves known over the past few months. Lots of noise, increased parking on the streets, dogs (and what they do), and worst of all is spray paint on the sidewalks. It is beyond me how so much can change in an area within a year. At the same time I am concerned it may cost me more if I were to sell next year. There have also been two foreclosures in the neighborhood that push things way under market value.

So why would it cost me 8k to sell the house? The equity in the house isn’t very high because I had very little down payment and have an 80/20 mortgage setup to avoid PMI. After everything is settled with the first mortgage, the difference between the balance on my HELOC and what is left is 8k. If I don’t use a realtor I could save half of the 5% commission and do for sale by owner. That would probably reduce the amount I would need to come up with at close.

Just so everyone knows, I can afford my house. I am not in any way in the position of facing foreclosure if it were not to sell. Everything is current and I can hang onto the house just fine. The area has just changed to something my wife and I are not happy with and moving closer to the city is more appealing. We’re going to improve some areas the realtor pointed out to us and do a real extensive cleaning this weekend.

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Along with the accomplishments I have made in my life, graduating college, getting married, buying a house, one of them may have been a mistake. Last year we made the choice to get out of renting an apartment and buy a house. This decision was proposed by my wife at the time and I was reluctant to make such a major move because of the cost increase. I think a warning flag should have gone off here.

We went to the bank to get pre-qualified so we could figure out what we could afford. I knew nothing about mortgages or how the process worked and basically learned as much as I could so I knew what was going on. Somewhere I heard that you should buy the most house for the money, so we used the upper limit of what the bank said we could afford. Being first time home buyers, what we wanted and what was available did not always match. Eventually we found the right house, got a pre-approval for a loan, and went into contract on it.

From that point there were issues with getting all the details together and problems with the underwriting process. I had to make some moves, like paying down the loan of my car so the bank no longer considered it as a monthly payment. Eventually all the financing was cleared and we closed April last year.

We are debating selling the house because it is costing us around the 40-45% mark of our current monthly take home income. That is all the cost for our two mortgages, property taxes, and insurance. Everything is current and that is not the issue, but the payment is about twice what our rent used to be. The idea was this might be high right now but would balance out once she has an actual salary job starting her career once she’s done with school. A majority of the money is going to interest anyways because the mortgages are so fresh, so very little progress is being made to actually afford the house. This is where selling the house and renting in the downtown Chicago area comes in.

The other side of this question is my wife is not happy with where we live because she feels lonely, no social life or friends. Simply put, she refuses to live where we currently live because she is unhappy where we live. I think she feels that if we sold the house and moved into the city, she’ll be happy, have friends, and plenty of stuff to do. I’m very bittersweet about selling the house and moving downtown because it feels like we’re starting over. The benefits of being downtown though would be lower house payment (just rent and insurance) would save money to put towards debt, I could sell my car (which I love but would not be necessary) and we would save on insurance and gas cost, and that extra money could go towards debt.

I think we’re viewing the extra money that would come into play with selling the house and renting again in different directions. The way I see it is we could really make some progress in paying off our debt while my wife would feel the extra money is no longer dedicated to something and can improve our lifestyle. The house does not have much equity in it so after all the fees and such are said and done, I don’t think we would make anything off it which sucks. We have moved every single year since 2001 and I thought we were done moving for awhile. At the time we bought the house, I never intended to just turn around and sell it a year later, but it looks like it has come to that.

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Sunday June 3 marks the one year point that my wife and I have been married. I thought getting married things would just stay as they were and it was just an official status we got to. We probably did not do everything in the traditional ways of doing them. In college we got our first apartment together and split the bills, but other than that to each their own. Then it comes around to getting married and nothing changed. Bills would come first and I would take care of our finances. After doing this for about a year and a half now it gets to the point where it doesn’t work for me.

I don’t like to bring up marital issues that are pretty involved, instead more the financial picture. What I am starting to conclude is that it’s not her income and bills, and my income and bills, but our income and bills. From recent comments on past matters I think readers would agree with this. One of my favorite quotes from the movie Fight Club is, “The things you own end up owning you. It’s only after you lose everything that you’re free to do anything.” I’m not waiting to hit the bottom before I find freedom, and I think my wife understands what we need to accomplish.

We’re going to try to create a rough budget together to manage the money before it goes somewhere. When I would do things my priorities were to handle the bills and such first and then what was left over got used for stuff. Savings seems to always be neglected unless a lump sum of money came into the picture that I would stash away before it could be spent. Then months come by where the income didn’t line up with expenses, and savings would pick up the rest to zero out the month. I think a good, planned out budget will help us drastically because our current system doesn’t work.

Here’s to one interesting year and the best is yet to come.

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Today I have finally turned 25 and am glad I am at the point where I am with my life. I remember back when I was 15 what high school was going to be like, and then at 20 dealing with the challenges of college. Now at 25 it seems like what was once so complex is now much simpler than it used to seem. Sure I have made mistakes, made good choices and bad ones, got into some debt, but I’m finally working on moving towards a more positive direction.

So for the past few weeks I have been listening to The Dave Ramsey Show and am starting to understand why people become motivated by him to handle their debt and take control of their money. It isn’t completely him that makes this happen, it’s the callers who have real life situations probably much similar to some of our own, and people almost help other people through the show. At any rate my wife got me his Total Money Makeover book for me to read about his system. I also went on his website and found his software for only $10 along with another book I want to read, The Millionaire Next Door. I am cautious to consider his system because he does not believe in credit period.

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Answer is typically looking back in the mirror. I keep track record of my statements and I looked back, way back to some in 2003. Why in the world I bought some of this crap with a credit card is beyond me, but I’m paying for it today. Some of the things on the statement can be half justified, like books or supplies for school. I had a part time job in college making $8 an hour, but living like I was making $18 an hour. Moving forward though and getting this mess cleaned up will help though. Live always throws different things at us though.

Now I get to the interesting part. My wife and I are approaching our one year anniversary and it sort of falls into my hands on figuring out what we should do and how to finance it. She likes ’shiny things’ and we have talked about for a few months about an anniversary band. I can probably pay for about half of this but the other half would have to go on a credit card otherwise I can’t buy it. When she’s not happy, I’m not happy, yet at the same time I’m not happy about debt. My birthday is coming up here at the end of the month, she asks me what I want for my birthday, I tell her I don’t want anything, she laughs. I’d rather be debt free than pretend to own things.

Now so far this year I have made some great personal accomplishments paying for stuff. I own my stove, the furniture package for my living room, and this month her earrings. It is getting to the point where I simply don’t want anything unless I can pay for it. Back in March I got stuck in Best Buy playing Guitar Hero 2 for Xbox 360 and thought it was great. Waited until April to decide to actually buy it because I figured out that I had enough money in gift cards (I hate gift cards!) and finally a reason to use them. I love this thing too.

Maybe I am being selfish trying to budget our first anniversary. I always seem to make sure everything stays on track in the end though. It just halts paying off debt as quickly as I would like. Gears are always spinning here, trying to figure out what to do.

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Getting to the bare all point here, I wanted to find out just how much I am worth? Turns out my own personal net worth is not bad. I’ll make it clear that this is my personal net worth and does not include the debt my wife has. For the sake of this blog, as I have always stated, I am focusing on my credit card debt.

Ordering of how I would like to do things:

1. Credit card debt - This debt pile has been sitting on me since college. I want to try to put as much focus into getting rid of credit card debt over the next year or two until it’s gone!
2. Offsetting student loan debt by investing - As much as paying off student loan debt faster, I think it would be wiser to offset it through investing in stocks or mutual funds. I do not see student loan debt as bad debt because the interest is tax deductible.
3. Saving emergency fund - Having a pool of money built up just incase something were to happen (i.e. job loss, disability, etc) it would be nice to have a few months living expenses available to use if needed.
4. 529 college savings plans - I will estimate by the time I get near this point in my life, I’ll be a father. College today is extremely important in order to have access to more jobs, more income, and more out of life.

This may not all necessarily happen in this order as life is never a straight road with no bumps, potholes, or speed limit. I would love to run my own business because I have that entrepreneurial spirit and dream of doing this some day. Doing the 9-5 regular W2 job gives me stability though in the sense that I know what I have coming in each month. I am trying to work out the details to get a business going on the side though, more on that later.

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