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

You know how every so often you back out of the dream world you live in and face facts? Yeah, me neither, but still… Don’t get me wrong, dream worlds can be hilarious.

For example, last night. I dreamed I pulled out my Google Credit Card and… actually… used it.

Like I said, hilarious.

What I realized last week with a bolt of spine-tingling clarity is that we were a stop sign, a break pedal, a mongoose-crossing-the-road away from debt. Last year we bought The Wife a $4,000 car with cash and gleefully insured it with liability coverage. Not comprehensive.

Not a big deal?

Really.

Well, let me tally what we have in the ole savings account… hmm… $1,000. Right. Baby step 1. How much is that car worth again?

So as of today we have comprehensive coverage on both cars and you know what? It cost us $192 more per year.

Our cars probably have three to four years of life left in them so for $600 – $800 we completely defer thousands of dollars of risk.

This makes sense. Maybe someday when we have enough in savings to write a check for a car when we total ours we can drop that full coverage, but to pretend that we can today is sheer folly.

I feel so friggin grown up I’m gonna puke.

So does Google even make a credit card? What was THAT all about?

Love,
the Dad

© the Dad, Climbing Out, 2009. | 5 comments

Oh I did NOT just do that. You are kidding me. There is no way I just plowed into the car in front of me, right? I guess every plan needs a good testing now and then. This is apparently time to test ours.

On the way home from work last week I was stopped behind a minivan, second in line at a light in my little Civic. The light changed, we all accelerated and I allowed my attention to be distracted for a moment. Half a second, I’m sure, but nonetheless… I glanced away from the minivan then back to find it completely stopped again.

Crunch. Arg!

What proved interesting about the events that unfolded after said crunching was the calm and peace that I felt once it was clear everyone was okay. “I have a baby emergency fund, I have a baby emergency fund. This will be okay.” kept going through my head. Followed immediately by, “Dang it! No debt snowball payment this month!”

It was a fairly slow fender-bender that did minor cosmetic damage to the van’s bumper and our emergency fund covered it easily. In fact, I’ll bet the quote they gave me will never be filled and they just pocketed the cash I handed them. I have a receipt for the payment, so enjoy the money either way, folks.

My car, on the other hand, is a different story. It’s “stupid tax” time again and I sure deserve it for my momentary inattention. The steam that puffed from the front of my car right after the accident? That was my freon. The air system in my little car is no more. No blower. No air; hot or cold.

We live in the high desert of Southern California. Winter nights go down to the teens and Summer days up to 120F. The quote to replace the broken parts is $900. Back-in-the-day I would have put it on a credit card without thinking twice. I suppose I could make an insurance claim, but we have a high deductable and it really wouldn’t be worth it. Thus the Dad is going back to 255 AC for a while — remember that on your first car? 2 windows down, 55 mph — while we save up.

The wonderful thing was the calmness and peace-of-mind our little emergency fund of $1,000 gave me. Standing there on the side of the road I knew that whatever needed to happen with either car or our insurance, we could handle it and we would not borrow money to do so. I am amazed how a few months on a written budget can bring such clarity.

So we put the debt snowball on hold this month and go back to paying the minimums on our debts. Instead the snowball payment will bring our emergency fund back up to $1,000 with a bit more saved toward the future repair. I expect it will take three full months to save the entire amount. Right to the middle of August.

The middle of August. In the high desert. Oh God. I did NOT just do that.

Yep. But it’s going to be okay.

the Dad

© the Dad, Climbing Out, 2009. | 5 comments