My Debt Blog

I’ve been debating for a few months of switching things up with how to handle the finances. Right now my wife and I only have one joint checking account where everything goes in, and everything comes out. While this has worked for quite awhile, it does create a challenge when one of us needs something or wants to do something, yet the bills have to be considered too. I know some people who do a yours and mine account and pay for half the bills. While it may seem to work for them, it feels very separated instead of working together.

The idea I had was to have three accounts, a sort of yours, mine, and ours type of thing. Paychecks would be deposited into separate accounts and then a percentage of the monthly costs would be transferred to the one in the middle. The only question is when it comes to personal debt we both have, should those be considered a joint expense? I make quite a bit more than my wife is currently and if this were the case, I think she would have trouble keeping up with her payments. That would be the point where I feel she would begin to think that this is unfair to her and wanting to go back to the old way.

If we combined all our bills and household expenses as they are so we have no individual payments, roughly 70% of each of our income would take care of this. This would leave us each with the remaining left over. I would have several hundred per month and my wife only a few hundred left over. Since I naturally don’t live in the moment, but rather the future the bulk of ‘my’ money would go directly towards getting us out of debt.

Sometimes the best thing is to do nothing at all and leave it the way it is. Joint account just means we need to both work together to manage the money and meet our wants and needs. The basics just always have to come first like food, shelter, utilities, clothes, and transportation. Beyond this basic structure are luxuries that we choose to have: HDTV, cell phones, Internet, and the like. We also have the credit card debt we’re working on, and the student loans that have to be paid back. I’m just weighing the options here openly on the blog as thinking out loud. Feel free to leave a comment on the subject.

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Is it a bad thing to live paycheck to paycheck? I think it’s quite common that most people have a fixed income with variable expenses and debt. Lifestyle also needs to be a variable expense to balance out when expenses go up, plus income could feel tight for a bit. If there is a case where the expenses exceed the income after lifestyle has been cut down to nothing, I would consider that an emergency. An emergency fund can help get through the problem instead of doing what many people do, run it up on a credit card.

There are some priorities when it comes to what to do with the income. Our income at the beginning of the month handles the mortgage payment, which takes out half of it. The rest is allocated between fixed expenses like regular bills due before the 15th and the rest is for variable expenses. The mid-month paycheck goes towards the bulk of our monthly bills like utilities and payments towards debt. When the money comes in it is a good idea to have a plan of where it is going instead of wondering where it went.

I’ve also pondered what things will be like without having to pay for a single debt. If our income remained the same and we had absolutely no debt, outside of the mortgage, one pay period would cover expenses for the entire month. We would be able to save the entire second pay period in full. If there was no mortgage, we could save or invest the mortgage payment on top of the second pay period. There are people who live like this, and someday I want to be one of them. If we hit that point we would no longer be living from paycheck to paycheck, but rather focusing on living without worrying too much about the paycheck.

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My birthday was about two weeks ago and something I have wanted to try out was Quicken 2008. I had looked at this software for a few months and considered buying it near the tax time because of the rebates and such. When my birthday came around, and I don’t want or desire much, I received a copy of Quicken 2008 Deluxe. Installed it, got our primary accounts setup, and wondering where to go from there.

This weekend we went to Borders bookstore and I bought a guide on how to use Quicken. Going through this book I have made a lot of progress in the program now. I have entered all the transactions for May and up to the weekend for June, and am tempted to go back and manually enter stuff for January to April to track things on a YTD basis. What I really like about this program is the ability to easly see cash flow for the month. It has the income and the outgo boxes showing what income to expect and an idea of the bills and such, then it shows what is left over we could save (or use to pay off debt).

There is a budget feature in the program, but with only one month in there I’m not sure how it will calculate things. Plus a budget should not be a template that is going to be the same month to month. We haven’t had much luck with a budget, but things were easier to lay out when I put the bills in a list. This makes things rather clear when the bills come in, how much we have to spend to pay them, and then what is left over. One thing I think that Quicken will help us with is the ability to at least track how much is being spent on clothing and eating out.

Doing some quick math on what my wife will make from her summer job, it will be slightly more than what she currently earns at her current job. The flipside though is it will cost more in gas to get to the new job, so this will have to be tracked to see if there is any increase. If there is an increase it will help us pay debt and save more, as long as we keep things relatively the same as they are today. I’ll see if I can get a pie graph or something with where we are spending our money.

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A two days ago my wife and I hit the two year mark on our marriage. She is essentially working a job and a half this week, school in the morning and training for her summer job after that. With that being said, we decided it would be better to celebrate this time on the weekend. I think we’re going to go downtown Chicago and visit the Museum of Science and Industry which we haven’t been to in years. Best of all is she can get us in for free, along with some other places, as a perk of her new job. That evening we’re going out to dinner at the Olive Garden.

I remember last year the first anniversary was a huge stressful deal. We had to buy each other gifts, got a suite in a hotel, and ate at a very pricey restaurant. Last year the grand total of everything was probably over $500 and it just totally busted the month along with the car insurance bill. This year though we agreed that our home entertainment upgrade to HDTV was our gift to each other. So this weekend I’m estimating it will run at most $100, which still allows breathing room to deal with the car insurance bill this month.

When we started dating in college, every time we hit a year we would go out to a nice dinner. Six and a half years we’ve been together (two married) later I don’t see why it should be any different. I do think that when we hit a milestone, our ten year anniversary, we will take a vacation somewhere nice. What would be even better is to be debt free before that day comes. Most likely other things will happen along the way but it’s good to have a long term goal. We’ll stay DINKs for now though because neither of us desire family expansion right now. Two years married though and I think we have grown stronger than we were last year.

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The month of May had some rough patches with having to deal with a car repair. On the bright side we got the stimulus payment to help us roll through the month. After looking at the numbers our debt went down by $600 for May. My retirement contributions are finally picking back up which does help us offset the asset and liability factor when it comes to net worth.

I have debated the idea of stopping my 401k contributions to take that money and pay it directly towards debt. Even though I don’t save a large chunk of my income for retirement yet, it seems like I could get out of debt faster if I stopped this for a year or two, at least until the credit card debt is gone. The credit card debt bugs me because since I’ve paid off all the smaller balances, having the larger ones left makes it feel like I’m not making progress.

Now that we’re in the month of June we have to really watch the spending. I received the dreaded car insurance bill this weekend and we’re going to roll this along with the budget. On top of that I had a dentist appointment this weekend to have a root canal done. Both of these things are about $1500 extra that we have to squeeze into June. Depending on how things go I may need help from the EF to slide into July. It would be much easier to just handle one or the other in a given month, but life doesn’t always happen that way. I’ll see where things stand regarding this later in the month.

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Buying a new car or even a new used vehicle is at some point necessary, as long as you can afford it. Instead of dumping your current ride for something different, regular maintenance can provide a much longer life for the car. The seasons are changing and for those of us in cooler climate are feeling a transition from bitter freezing to hot. Here are 10 things you can keep in mind when it comes to your car:

1. Oil Change Most cars today have a sensor in them that does help remind us when to have the oil changed. Best rule of thumb is every 3-5k miles or 3 months. Keep in mind that the oil doesn’t get old, it gets dirty which will cause a problem if you keep putting it off.
2. Air Filter Most people who at least have the first maintenance tip down, but what about helping the car breathe easier? The air filter sits in front of the engines air intake and prevents dirt and particles from getting in the engine. If it gets clogged it can reduce the air flow which hurts the engine and fuel economy.
3. Other fluids The cooling system also needs to have the proper amount of coolant and the hoses should be inspected for wear and fit. Making sure the car stays cool will keep the engine from melting.
4. Under Pressure Those tires that the car sits on have air in them, but the pressure they contain is very important. Many people neglect to check or pay attention to make sure they’re properly inflated. Low pressure isn’t good for the car, tires, fuel economy, or your personal safety if there’s a blowout. If you have never done this in your life, go buy a tire pressure gauge and then a gas station where it says “AIR”, it costs very little to do this for your car.
5. Lights Out It is a fact that light bulbs eventually will burn out. Take a moment to check that all your lights are in working order. Ask a friend to help you check your break lights, reverse, and turn signals and in exchange do the same for them. The cost to replace a burned out bulb is much cheaper than a ticket from a cop. Check the owner’s manual for the bulb and how to go about replacing them.
6. Regular Maintenance Some problems might be beyond the average driver’s ability. Find an automotive shop that can do an inspection on your car based on your maintenance schedule in your owner’s manual. I personally trust the smaller self owned shops rather than large retail chains, they are honest with you because they need your business and want you to come back.
7. Look and Listen Take time to pop the hood and look at the engine of your car. If something looks like it is out of place or a fluid looks low, do something about it. If you are driving and hear some ambient noise coming from the car, find the source of it or have it checked out. A small problem can turn into a larger expensive one sooner than later.
8. Cleaning It is important to wash and wax the exterior of the vehicle on a regular basis for vanity and longevity of the value. An overlooked area is the interior. Keep the inside clean by vacuuming the carpet on a regular basis and find the source of a smell rather than hiding it. Spills in a car need to be cleaned up immediately otherwise they can stain and become difficult to remove. Car air fresheners create an illusion of a clean car.
9. Drive Better With gas prices being the way they are, the way you drive does have an effect on the life of your car. Accelerating quickly and coming to a hard stop is really bad on a car, reduce fuel economy, the engine, tires, and breaks. Come to a stop by sneaking up on it to minimize the wear on your tires and breaks.
10. Park Smart Keeping the car out of direct sunlight, bird droppings, or tree sap will help the exterior stay nice. Also keep in mind of the vehicles around you to avoid things like dings and dents in your car.

The maintenance of your car makes it last longer and avoid having to pay for another car. If the car stays clean and working it makes it nicer to drive and want to take care of it. The condition of a car is directly related to the value of the vehicle. Keeping everything in presentable working condition will maximize the value of the car if you do choose to sell it some day. It is also a fact that a car drives better when you don’t have to make payments on it.

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Today is my birthday and normally I am excited because another year has gone by and I’m that much closer to something happening. What is supposed to happen at 26 though? Last year I was excited about my birthday because I saved money on my car insurance (not by switching to Geico). It is kind of a down feeling that I am getting older and closer to 30 and still have so much debt hanging around. It would be nice to have all this debt paid off before I am 30, but I don’t think my wife would be up for it.

Just for fun though here’s the math on how much dedication it would take to pay off $151k worth of debt. We would have to pay somewhere in the vicinity of $3200 a month towards debt alone for 4 years. Instead, a more realistic goal would be to get down to 5 figures in the 4 years. That would average around $1000 a month in payments on debt, which we could do with focus. I am not figuring in salary increase, bonus, tax refunds, or anything extra so at some point we could increase 1k to 3k along the way.

Debt freedom is a distant dream right now for us. These credit cards and student loans got us right where we are, deep in debt. It is very nice to pay off a credit card and know it will never impact my life again. Avoiding the use of credit and having no debt will allow us to live much better than we can now.

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