In the past 8 weeks we have been hustling; hard. I’ve picked up two new side jobs — one tending bar and one doing freelance visual effects while The Wife has worked diligently turning last year’s October debacle into a pillar of savings.

In the last two months we have added four grand to our emergency fund and paid the bare minimum on our remaining debt.

By this time tomorrow we’ll know if we will need it to live on while I look for my new career or if we get to drop it on the last credit card.

Thanks for hanging with us. You’ll be the first to know.

the Dad

Update: No: 135, Yes: 87. Sigh of relief and tomorrow morning $4,000 goes right on to our last debt!!

© the Dad, Climbing Out, 2010. | 9 comments

My cheese has been moved.

Last week things at work took a huge shift; a majority of my colleagues signed union cards and filed their intent to vote on organized representation with the National Labor Board.

I’m not going to debate the idea of union vs. non-union work here, but as a jack-of-all-trades whose position is impossible to classify, organizing is not in my favor at all. The two most likely outcomes I see are either a strict narrowing of my duties and a pay decrease of about 50% or an elimination of my position.

The entire union process, as I understand it, can take 6 weeks to several months or even years to complete should it be voted in. This means for us an undefined period of uncertainty followed by a potential large cut in pay.

The Wife and I sat and talked several times since the announcement and have decided to shift into emergency mode. Our current, and final, debt stands at $13,000 and we were on-track to pay it off by the end of the year. Instead, this month I sent in the minimum payment and put the rest (what would have been our “snowball” payment) into our savings or emergency fund.

Readers know we have a small, $1,000, emergency fund that has saved us and kept us going for nearly 18 months of this journey to become debt free. With the potential elimination of my position or reduction in pay we are going to boost that emergency fund up as high as we can until my employment is stable again.

But what is stable? And how high is high?

If the vote fails and things settle back to “normal” at work we will immediately pull everything but $1,000 out of savings again and throw it at the debt. We will have lost barely any time and will pay just a couple hundred more dollars in interest.

If, on the other hand, my career ends up changing either by taking on a new role, changing companies or starting up an entirely new venture, then “stable” may be defined as simply regular and reliable paychecks we can count on again.

The Wife is willing to take less risk than I am so she leans toward 6 months of living expenses while I am okay with 3 months. So, of course, we will compromise and do 6 months [sic]. We are in complete agreement on what to do if we hit that number and we still find ourselves in job-limbo: we will start throwing extra money at the debt again until either the debt is gone or work is stable.

I am amazed how clear it becomes when working together with your spouse with both of your priorities in-sync. It does not remove all fear from an uncertain situation, but it gives you control over the part of your world directly in front of you. “The power to change the things I can.” That alone puts the fear of change into perspective and puts logic and reason in charge instead of emotion.

What this financial plan has really created for us is a fantastic set of tools for communicating with each other and understanding each other’s needs. By focusing on our finances regularly we were able to see an on-coming train and prepare for the safety and security of our family with enough time to get through just fine.

Plus I have tremendous faith in The Wife as a woman, wife and mother, and she reciprocates that faith in me. There is no doubt at our house that something will be killed and dragged home every day.

Time to go find my cheese.

the Dad

© the Dad, Climbing Out, 2010. | 8 comments

I believe our perceptions of money, debt and even contentment (i.e.: happiness) have become so healthy as The Wife and I sear the lessons of becoming debt-free into our psyches.

All of our family and friends support our goal and some have even dug in and are applying the same principles that bring us such peace. But a recent offer from very kind, loving family members highlights one of the red flags we have come to watch for.

I’m not sure I ever mentioned interest rates when I first tallied up our debts for you, but they are high. The cards run from 14% – 32%. I suppose I should write “ran” as all but the last big one are paid off.

Why I Don’t Care About Credit Card Interest Rates

There was a time when I really cared about those big interest rates, but I haven’t in a long time. When you crush your lifestyle and pay debt down interest rates just don’t matter.

Here’s a real example. One of our cards had a balance of almost $7,000 and an APR of 32%. We could have spent a lot of time worrying about such a malicious interest rate, yelling at people, surfing balances all over the place, but you know what we did instead? We paid the freaking thing off! And we did that in 12 months in our debt snowball.

32% of $7k is $2,240/year if we left the whole balance there. But we snowballed it aggressively so realistically we’re talking about 32% on an average of 50% of $7k for a total of about $1,120 in interest paid on our highest APR.

Why Borrowing Money from Family is Stupid

Now back to the well-meaning offer from family. With kind hearts we were offered a loan to pay off all our remaining debt at an interest rate of 7%. At first glance this is wonderful, right? 32% vs. 7% ? C’mon, no brainer, right?!

Wrong.

Here are the reasons we would never accept this loan (I mean, beside the fact that we will never borrow money again):

• we have learned that debt changes the relationship to the creditor
• if an income-crisis were to occur, the debt gets paid last after the necessities
• 32% is a lot more motivating that 7%
• 7% of $7k is $490. Since we paid $1,120 in interest we are only talking about $630 and that’s hardly worth our relationship with anyone let alone a dear family member

Loaning Money to Family Could Have One Benefit

I would also never consider loaning money to anyone again (that includes co-signing on a loan).

Can you imagine putting a loved-one in the position of having to choose buying food and paying their water bill over paying you? No, thank you.

What about sitting down to a holiday dinner at your debtor’s and noticing the new drapes, computer, or silverware? How would that make you feel about your loan?

The only real benefit to loaning money to anyone is to drive them away completely. I guess if there were someone I never wanted to see again I would loan them $50. That might be a cheap price to pay in some cases!

How to Get Zero Interest On All Credit Cards

The real way to no interest is to get out. Get out of debt! Run like a crazy person from those sharks.

• Decide you are done and never borrow money again.
• Live on a budget beneath your means for the rest of your life.
• Keep an emergency fund.
• Work like crazy, sell all you can, and pay everything off.

Boom. Zero interest. Every time.

We are So Grateful for the Love of our Family

It is with huge gratitude that we declined the loan. We know it came from a position of love and a desire to help, but when you break down what can happen the risk far out weighs any minor APR benefit.

Don’t ever borrow from family, guys. It just isn’t worth it. Really. And I recommend you never loan anyone you care about money either…

Unless, you know… you never want to see them again.

the Dad

© the Dad, Climbing Out, 2010. | 4 comments

Okay, there’s really nothing fun about buckling down and getting out of debt. Or is there?

No, there can’t be; it’s a barren, joyless trek through sacrifice with nothing but denial and self-discipline.

Ha! Haven’t you guys seen Mary Poppins? Spoonful of sugar, baby. Our family has had loads of fun while working this debt snowball. In fact it’s forced us to find free & low-cost things to do together that we wouldn’t have sought out back when we were brain-damaged.

But this post isn’t about cheap things to do while getting out of debt. I’ve written about some of those already. It’s about one little thing that I’ve held onto and refuse to budge on until we’re debt-free.

I think The Wife is about to strangle me, but I am holding on to my broken, crippled and ugly technology until we are through this thing. In fact, I’m framing them like badges of honor.

A five year-old first generation ipod nano that was given to me for free holds the Dave Ramsey podcasts I listen to on the commute. Its face is so scratched you cannot even read the screen when the sun hits it.

A microwave with its guts hanging out, seriously. The push-buttons stopped making contact with the electronic keypad below them a year ago. I tried to repair it several times and finally realized that simply yanking the keypad out and letting it hang there was easier.

A cellphone in pieces. My poor phone was crunched a year ago and its flip-open hinges began coming apart. Over time its performance got worse and worse. The front keypad and screen failed first. Now the inner screen works one out of ten times I open it. The Wife hollers at me while watching me trying to get the thing to work, “Just budget a new phone already!”

No way.

You know why? Every time I can’t read that ipod screen, every time I grab that dangling microwave keypad, every time I want to text someone with that crap phone I am reminded of our goals.

It’s hard to forget you are deeply in debt when you can’t update your Facebook status (insert ironic, wry smile here).

I’m keeping all these busted things. They’re reminders of what we’re doing and why. They’re my iBadges of debt and I love them.

the Dad

UPDATE: A dear friend gave me an old phone from the same cell phone provider to use. The screens and keys work, but it’s old and awful… so I accept it.

© the Dad, Climbing Out, 2010. | 4 comments

We are getting debt-free and there are no ifs, ands, or buts. It makes decisions easy when you either have the money or don’t.

I go to the grocery store with cash. I let the cashier know what I have and I get her/him to buy in with me from the beginning so when the total gets close I have help making decisions about what goes back. Just today, I sold my first piece of jewelry to a local coin shop. I only got $5.50, but that went straight into my gas tank.

This summer feels rough, though. Maybe it’s like weight loss, it’s those last 5 pounds that’s the hardest right? It’s the last credit card that’s the hardest. I want what I want when I want it! I am tired of the scraping and scrimping and waiting. I want new shoes, I want to buy some new make-up, I want to send the girls to summer camp…

But, I will continue to be good. I will stay focused. I will stay in control. Because I am a big girl and I know that I will love the results. I know this is temporary. We will (hopefully) be debt-free by the end of the year and there will be some breathing room in our budget. We will fully fund our emergency fund in about 6-8 months and then, again, we will have more room.

Dear Daughter says, “When we are debt-free we can do whatever we want. Right?” Not exactly. I have learned my lesson. I am looking forward to having a slightly larger number next to “Blow Money” on the budget, but I am not gaining the weight back. I mean, going back in to debt. But, I am going to buy those shoes!

~ The Wife

© The Wife, Climbing Out, 2010. | 7 comments

This post is an example of what happens when companies put customer service last and the customer realizes there are other choices after all. Everyone who engages with customers (which pretty much means everyone) should be reading Seth Godin’s blog. That really is the sidebar to this post, but I think it’s so important I’m putting it right at the top.

I am consistently amazed by businesses that seem to go out of their way to make things more difficult for their clients. Not just slow, awkward or boring but down right more difficult.

The folks at Intuit, makers of finance software Quicken, seemed to do just that this Spring.
“We see you’ve been a longtime customer, but don’t upgrade to every new version we release; that just won’t do!”

A couple of months ago we got a notice from Quicken, the software we keep track of our finances with, that Quicken 2007 would no longer be supported. They release a new version every year or so with a $50 price tag, but we rarely see the need for new features. The version we are using works great.

In addition Quicken directly connects with our bank, Wells Fargo (we pay Wells AND Intuit a small monthly fee for this ability). Accounts are magically updated, transactions downloaded, and checks can be cut right from the software. It all works quite well and I am quite entrenched in that method of paying bills and balancing accounts.

Until now. The notice from Intuit says that although we will still be able to manually enter transactions, all online activity will be disabled until we buy Quicken 2010. There is probably a good reason, like they have undated a security encryption protocol and Quicken 2007 can’t read it, but the end result is the same: “If you want to keep the functionality you originally paid for you are going to have to pay us again.”

That was just the push we needed to bail on our big bank and its big bank fees.

So we made the plunge; one I had been putting off because it seemed too much hassle. We closed all accounts at our mega bank and opened a checking and savings account at our local credit union.

You know, it was easier than I thought.

It’s now been two pay-periods since making the switch and I love it. The credit union’s website is not as flashy and polished as the mega bank’s, but with their free bill pay service we can do everything we were able to out of Quicken.

We still have all the functionality, but none of the fees or advertisements.

Updating the check register in Quicken is now a two-step process (download the data, import into Quicken), but one I can live with. Especially considering we now aren’t paying a monthly fee to both the bank and the software maker! It probably takes an additional minute to balance the account… I can handle that.

Online bill paying is just as easy as shooting a check out of Quicken. In fact, it may be easier. I wasn’t sure I was going to like the online bill pay thing, but once I bought into the concept and really tried it for a billing cycle, I found I love it. The credit union sends emails letting me know a new bill has arrived. Then I check the budget to see when we are scheduled to make that payment and with one click I can pay it. Very nice.

One last account at the Mega-bank.

All that’s left at Wells is a Visa card. It’s our largest debt (currently about $15k) and will be the last one to be paid off. Here is where our debts stand as of this month.

So if you too are thinking about ditching your big bank and finding a local bank with a soul, I encourage you to give it a try! Get on their website and test drive their service. Go into their branch and do the same.

You may be blown away like we were and get reminded that banking and customer service can still go hand-in-hand after all.

the Dad

© the Dad, Climbing Out, 2010. | 11 comments

Not long ago I was becoming frustrated with our progress on Baby Step 2. I am painfully impatient to get out of debt. Just ask The Wife.

Yet it’s a long road. Most people who follow the plan we are doing need 18 – 24 months to become debt-free. I’m afraid we’re going to need more.

What does ole Ramsey say? “Children want it now, adults devise a plan and stick to it.”

>sigh<

Last year we gained real traction for the first time when we got our tax return. It was around $6,000 and suddenly we felt like we were really moving. Cards were cut up, accounts were closed; we were doing a total money makeover for real.

We buckled down and embraced our plan. I changed my W4 withholdings to increase our take-home pay by ( $6,000/12 ) $500 per month and we put that to use for our debt snowball.

Let me tell you: THAT IS SCARY. Well, it’s not scary in March when you do it, but it’s deathly frightening the year after; when you’re walking from your car to the CPA’s office to find out whether you owe or not.

How close did we get to having the right amount withheld for 2009?

What do you think our accountant said when the 1099s, W2s, statements, and deductions were all mashed into this year’s new and improved tax tables?

A seven thousand dollar refund. Seriously.

WHAT THE HECK IS GOING ON? I asked her to double check the numbers — twice. Nope. It was real and the return was right.

I headed off to HR the next day and upped our exemptions again. Maybe this time we’ll get closer to our goal of +/- $1,000. That’s most interest-free money I’m willing to loan the government and the most I’m willing to cough up on short notice.

In the mean time, this year we get to throw $9,000 at our debt! (NINE THOUSAND? Oh yeah, I got the first $2k from that freelance work I told you about). That takes us from 38% paid off up to 58%.

TALK ABOUT TRACTION!

You certainly cannot call it planned, but it sure is nice to have an unexpected boost. Don’t ask me how to get your exemptions right. The tax tables are obviously some kind of weird voodoo.

The real story is that we never thought about using the money for something else. Two years ago we would have bought stuff, taken a vacation, or frittered it away. Today we have no question about what to do with found money. We have our steps. We know which one we’re on.

Save Strong,
the Dad

© the Dad, Climbing Out, 2010. | 13 comments

Wow — already?!

I can hardly believe it has been a year since we started on the road to financial peace. First, a thank you to all of you who follow our journey and offer encouragement. To those of you doing it with us, HIGH FIVE!

So how are we doing? It’s been 12 months since we started this journey and this blog.

For 12 months we have

• Lived on less than we make
• Maintained a small emergency fund
• Operated our finances on a budget
• Borrowed NOTHING
• Paid down our debt

Looking at our debt chart we have paid down about 38% of our total debt or around $18,000. If you’ve been following us for a while you know that’s around 20% shy of where I wanted us to be. Nonetheless, we are on our way to debt freedom.

I have some observations after a year of following Dave Ramsey’s advice; some surprise me.

• Making a budget every month has become easy, but still takes about the same amount of time.
  I mean, it’s downright SIMPLE now. The mechanics of filling out the line items, adding in the unusual things for the month, chatting about it, and printing the final budget to hang on the fridge are second nature. Still, it takes about an hour each month.
• Emergency budget committee meetings still happen almost every month.
  This one surprises me and maybe it’s because we’re getting complacent, but nearly every month we have to get together at least once to cover a screw-up or unexpected event.
• Homemade bread is awesome.
  The Wife is out of control in the kitchen. Homemade meals every day. Homemade bread, yogurt and granola. She even made our own almond milk.
• Kids’ commissions need their own line item and can really add up.
  Okay, listen to me. Don’t underestimate this one. It’s all great teaching the kids to be Dave Ramsey fanatics like us, but those commission payments can get pricey! Budget them in.
• It gets BORING.
  Seriously. The months when we can send two thousand dollars to our debt are awesome, but when it’s only three or four hundred for a couple months in a row I start to lose interest (pun not intended).

This year I am down right antsy. Antsy, I say! I want out and I want out now. The freelance work I picked up recently is in high gear and should be done in about two weeks. The pizza delivery work is surprisingly hard to come by, but applications are in. The kids start full-time school in the Fall and The Wife should be able to double her hours.

It’s a marathon, you say? Not a sprint? Well, staying the course for the long haul is really… long! Nonetheless, it’s the only option. Getting out of debt ain’t easy. It’s just worth it.

Or so I hear.

Thanks again for sticking with us, everyone.
the Dad

© the Dad, Climbing Out, 2010. | 11 comments

This whole get-out-of-debt nonsense has really screwed me up, you know that? I mean, really. When was the last time someone handed you $2,000 and you said, “no, thanks”?

Not long ago I mentioned some freelance work coming up. It’s a fun, challenging project, but one for which there has been little time lately.

It is for a dear friend and is not on a strict deadline. Nonetheless, I want to get it done sooner rather than later. I am shooting for the end of February. It should net around $3,000 toward our debt and I look forward to making that payment.

But the bulk of the work remains to be done. Like, 90% of it. So, although I have been keeping track of my hours we are in Happy Meal land on the balance sheet, you know what I’m saying?

Imagine my surprise when my friend hands me $2,000 a couple weeks ago.

“I need the expenses for 2009.”

Whoa. But, dude, I don’t borrow money.

“You’re not borrowing money, it’s for the project.”

Yeah, but it kinda feels like a loan, you know? So we put it aside it its own account where it sits untouched until the job is done. In fact, it will be the start of moving our finances to a new bank, but that’s another post that has nothing to do with this loan / pre-payment / friendship-risker.

I am trying to decide if it has taken on a weird connotation now; a strange specter of debt. I understand that it was business money that does not affect my friend in anyway, but my emotional connection to money, loans, debt and the interplay with relationships has changed so drastically that I feel a certain discomfort with the situation.

That is leading to lots of clear communication with my friend that, in the worst case, will end in me simply handing his cash back. I’m not sure I’m handling it right, but that will just make me get the project done even quicker. I wonder what you all think of it.

Plus the hole in my pocket is starting to stink.

the Dad

© the Dad, Climbing Out, 2010. | 11 comments

If it were tangible, is this what momentum would feel like? In my soul 2010 already tastes like a great year.

It’s hard to put my finger on why, but after starting 2009 at the bottom and watching our lives turn around, 2010 seems to stretch ahead of us full of promise and I’m excited.

This year I want to connect with The Wife even more, be a better friend and colleague, and pay off debt. Those are quite general goals, but the specifics are posts unto themselves. Instead of elaborating, I want to pass on some of my inspiration.

Today I share with you three blog posts that helped get me in the mood to embrace this year.

Don’t be an intolerant doofus

First, from One Writer’s World: A New Year, A New Goal.

This really hit home with me as I found myself becoming less and less tolerant of others instead of more accepting. Less tolerant of stupidity which really is just another way of saying less tolerant of people who do not think and act the way I believe is right — or, don’t think and act like me.

I have made a conscious effort to allow myself to enjoy people’s views, statements and differences. It has already made me not only happier, but a better friend, colleague and, perhaps, person.

Go to bed with your wife even if it’s ridiculously early

Rachel at Small Notebook hit home with something I’ve been struggling with since getting married: How a Night Owl Became an Early Bird and Liked It.

That is SO me. The Wife has, more than once, berated me for not coming to bed with her for days or weeks while I stay up late working or, more often than not, working until 9:30 then needing to “wind down” with a 2-hour long movie.

Most recently she told me she wanted a husband, not a roommate. Needless to say, I took Rachel’s post to heart. It will be a tough (and some weeks, impossible) change, but I’ve had roommates before and never really liked ‘em. Plus, The Wife is really hot.

Debt is dumber than ever

Lastly I thoroughly enjoyed How Debt Fools People from Phillip Brewer.

I love his excellent succinct treatise which, at its core, speaks to the opportunity cost of taking on debt and the danger of not calculating risk when lured by a low monthly payment.

So today I am energized and excited. I feel like we spent 2009 pushing back on a huge boulder that is now rolling in earnest. It is moving with a force that is bumping into other aspects of our lives and its momentum is infectious.

Cheers, 2010, you don’t scare me. In fact I couldn’t be happier to meet you.

the Dad

© the Dad, Climbing Out, 2010. | 7 comments