The Great Debt Payoff

We’ve got a LIFE group (midweek Bible study, home group-type thing) that meets at our house once a week. We’re going through the book of James and last night we happened to be in Chapter 2. We got on the subject of giving money to the poor which led into a specific discussion about people who ask for money on the street.

Personally, I’m always conflicted when I’m at a red light and there’s someone standing outside my car window holding a sign asking for money. I generally don’t give any, not because I’m against the notion of giving money to someone who needs it, but because I wonder what my money will actually be spent on. If I was certain it would be spent on essentials like food or clothing, for example, I’d feel fine about it. But I’m not cool with it being used on cigarettes, alcohol or something else of that nature.

So, what’s my solution? I think I’m going to pick up some gift certificates at McDonald’s or some other popular fast-food restaurant(s) in our area and keep them in my glove compartment. Then, the next time I encounter someone asking for cash, I’ll hand over enough gift certificates for a few hot meals instead.

Not that I intend to die soon, but I think the following article, How to Plan an $800 Funeral (MSN Money) is extremely informative.

It provides some great money-saving tips for that oh so uncomfortable subject of death—a subject none of us should ignore.

It also offers a bit of levity. My favorite line: "Skip the caskets with special seals that can raise a casket’s price by several hundred dollars; no seal will preserve the dead."

So, I just spent the last I-don't-know-how-long typing this post about allocating extra funds. I laid out all my plans and my reasons for those plans. As I was reviewing it (before publishing), it totally disappeared. Just like that. And no matter what I've done, I cannot find it anywhere. I have no idea what happened to it. So, after a loud gasp (because posting always takes me forever and a day and it's highly frustrating that I lost all of it), my husband asks, "What's wrong?" The words out of my mouth were, "It's all gone! I wonder if God is trying to tell me something."

Well, if God was trying to tell me something, it'd be nice if He would email me, but alas, that has never occurred. So, I'm just going with it and I'm choosing to believe it wasn't just "coincidence" that I lost that entire post, but that God was in fact trying to get my attention.

Maybe you think I'm looney. I'm OK with that because things have happened in our financial life that are just plain crazy and all I can say is that God HAD to be pulling some strings—it certainly wasn't our financial acumen. I could give you a boatload of examples. Here are just a few:

• It was several years ago. We were in a particularly tight spot and had bills due for which we did not have the money. At the eleventh hour we get a check in the mail from friends of ours who said they felt led by God to give us some money. This was a couple that had really struggled financially in the past. The check was for almost $2000.


• When we were first married, my husband was interning and going to seminary, I was working part-time as a church secretary making $5.15 an hour and we were SCRAPING by. I avoided working out a budget because I figured, "What's the point?" After about 9 months, I felt convicted that I should take an honest and realistic look at the finances. So I took out a sheet of paper and listed our expenses and our income. I was shocked to see that our BASIC expenses (not including things like clothing, etc.) exceeded our income by at least $100. And yet I had not one time, ever, written a check for which we did not have money in the bank and we were not incurring credit card debt. What I realized was that every single month, God provided the difference—we used to get anonymous cash in envelopes, checks in the mail and all kinds of other unexpected funds from various people.


• Several years later, I was in grad school. Prior to me going, we had vowed not to take out any more student loans. We had enough to cover the first quarter of my schooling but nothing more. Nevertheless, it still seemed as though God was encouraging me to start the program. So I did. Registration for the second quarter came around and as was school policy, I was unable to register because we were still making payments on my first quarter's expenses. I was devastated because I LOVED the program. I wrestled. I felt like God had put a piece of scrumptious cake in front of me only to let me have one tiny bite and then whisked it away. I toyed with the idea of taking out more student loans even though we had said we wouldn't. We both prayed. We had other people pray. My husband, in fact, told a group of his friends that we needed $6000 to cover the cost. One of his friends said, "I have faith to believe for $6000." My husband said, "Great, well, then you pray because I don't have faith to believe for it." His friend prayed for $6000.
  
  In the end, I got to a point where I said, "OK God, I trust you. I'll let it go." Within a week or two, my husband got a phone call from someone we know who said, "Hey, do you know anyone who needs money?" Literally. At first my husband said no, but the person kept pushing, "No really, do you know anyone?"
  
  "No, I can't think of anyone," my husband says.
  
  "Well, do you & Amy need any money?" At this point, my husband thought about my grad school, but because it was so costly, he was embarrassed to mention it. But the person pushed even more until my husband finally said, "Well, Amy would like to continue with grad school."
  
  "OK, I'll take care of it."
  
  "But it's a lot of money...like $6000."
  
  "The check's in the mail...you don't understand. I made more money in the stock market yesterday than I did in all of last year. I was about to call one of my investing friends and gloat, but God woke me up in the middle of the night and said, 'Do you think you were the one who got that money? It wasn't you, it was Me.' I immediately knew I had to give it away. And I never called my friend to gloat either."


• We were able to buy a townhouse in San Diego, CA in 2001. (That in itself is a miracle, given our income and the housing market in San Diego at the time.) The townhouse we bought was zoned as "low income" despite it being brand spanking new and smack dab in the middle of one of the fastest growing and highly desirable communities in the area at the time. Because it was "low income" we bought it FAR below market value. A year later, my husband got a new job and we had to move to a different state. We sold the townhouse (a little over a year after purchasing it), at fair market value, and walked away with a 100% return.

I could go on and on. Suffice it to say, God is real and wants to be actively involved in every aspect of our lives. HE. BLOWS. MY. MIND.

So, why am I telling you all this? Well, because my last post was lost and I think God wanted me to give credit where credit is due (i.e. to Him) and not to put faith in my own anal-retentive "plan." It's not about me, it's about Him. I'm supposed to be faithful in the little—it's called tithing. He's faithful in the HUGE. Malachi 3:10 says, "Bring the full tithes into the storehouse, that there may be food in my house. And thereby put me to the test, says the Lord of hosts, if I will not open the windows of heaven for you and pour down for you a blessing until there is no more need." (By the way, there's a great article about tithing at Free Money Finance.)

It's also about prayer—specifically asking God for help.

Now. Do I expect God to magically drop $25,047.93 out of the sky to get us out of this latest predicament? Absolutely not. Do I think it's possible. Definitely. But there is value in diligence. And planning is a good thing (however anal-retentive I might be). It's right to pay off our debt...and we will. But I tend toward taking control of my life and then forgetting that my life is not my own in the first place.

As I said at the beginning, in my first edition of this post, I laid out a nicely detailed plan about how I would allocate extra funds. I explained how I had consulted the experts and had decided to follow Dave Ramsey's Baby Steps.

Well, now I think I've changed my mind. I think I'll switch it up a bit. Maybe I'll just turn Mr. Ramsey's steps upside down and start with his Step 7b. Who knows. But if there's one thing I know for sure, it's that with God, sometimes the thing that makes the most sense is not always the thing that makes the most cents.

I'll keep you posted...

Occasionally I think they make lame choices, but check out Forbes.com's Best of the Web for their picks on top websites for various areas of Personal Finance & Careers. From 401(k) Advice to Time Management, you might find some websites you like.

Before I buy something online, I try to find any coupons that might apply to my purchase. I do this by going to Google and searching for a coupon code for the online store I'm about to buy from.

Here's an example:

Let's say I want to buy a pair of jeans at Gap.com. Before I place the order, I do a Google search using the terms "gap coupon code" or "gap coupon." If I find a coupon code that applies to my order, I input it in the appropriate field during the checkout process at Gap.com.

Even if all I get is free shipping, it's worth the 2 minutes it took to do the search.

This blog is my attempt to keep myself on track as I work toward getting our family debt free. But it's not just about that. My hope is that you will also benefit from the process by gleaning useful information along the way which can be applied to your own situation.

I am no expert. I have no degrees in finance, accounting or anything of the sort. I do, however, enjoy researching things, particularly on the internet, and have already wasted spent a whole lotta time compiling a lot of helpful information regarding personal finance.

But again, I am no expert. I hope you'll be able to pick up helpful hints here, but I do not claim that all of the information on this site will be free from error. Also, what may be right for me, might not be right for you. But you're smart. I'm sure you'll be able to figure it out. Just don't sue me.

There are a lot of personal finance blogs on the internet (just look at the "Blogs I Read" in the sidebar). I'm amazed at how creative people are when it comes to saving and making money. As with all blogs, this one will have it's own unique slant. When it comes to personal finance, these are the things I will focus on:

• We will comfortably survive & pay off debt with one income. I have absolutely nothing against dual-income families, but I value the flexibility that comes from not being dependent on a second income to make ends meet.


• We will comfortably survive & pay off debt with one modest income. I realize The Great Debt Payoff will take longer to complete if we're not bringing in 6 figures (or anything more than we're making now), but I'm convinced that once we get the debt paid off, we will have nothing to lose but everything to gain by being in the habit of living on a modest amount of money. Currently, it's my husband who's the main breadwinner. He happens to be a pastor. I won't reveal exactly how much he makes, but I will refer you to this article at CNN Money.com which lists annual earnings for clergy at $39,900. I will tell you that his annual income is somewhere around there.


• I will find ways to save money as well as ways to make our money work harder. You know what they say: A penny saved is a penny earned. I think we already operate on a pretty lean budget, but I'm sure there are ways to shave off even more...without making drastic lifestyle changes.


• I will explore and employ creative ways to make supplemental income online in order to pay off debt faster. Another priority of mine is to be home with my family as much as possible. And I don't want to have to leave my house to make extra money. Lots of people make money online, so why can't I? I'll share what I learn.

Speaking of making money online, I feel compelled to tell you that this blog itself is one of my sources of supplemental income. Some of the links on this site are affiliate links. If you click on an affiliate link, you'll be taken to a separate website selling a particular product or service. Depending on what kind of affiliate link it is, there is a possibility that I might be paid a little something by that particular company as a thank you for referring a customer or potential customer to them. I ONLY PARTICIPATE IN AFFILIATE PROGRAMS SELLING PRODUCTS/SERVICES I HAVE USED MYSELF OR FOR WHICH I HAVE SUBSTANTIAL EVIDENCE ARE HIGH QUALITY. And of course, I will also explain how you too can make money as an affiliate.

As I said before, I am no expert in the area of personal finance. I know that a lot of you are very wise and insightful when it comes to money. I am eager to learn and eager to hear various viewpoints on the subject. Therefore, I welcome any and all input you might have to help me and others make better financial decisions. Please make good use of the comments feature on this blog! I will not be able to respond to each comment or email individually, but know that your comments are not made in vain as I read them and as others read them too.

To being debt free!

The next thing on my list after checking our credit reports and FICO scores was to set up a basic budget.

Here's what I did:

1. Figured out where our money went last year.
   I ran a basic report on our trusty Quicken software to find out how much and where we spent last year. I divided the annual amounts in each category by 12 to figure out the average monthly amounts.
   
   If you're starting from scratch, I would recommend the Budget Guide at Crown.org which allows you to input your gross income as well as amounts for tithe and taxes (if you choose) and then calculates suggested monthly amounts for each spending category.
   
   (We've kept track of our finances with Quicken software for several years now. I would highly recommend it. Quicken is not your only option, of course, but it's the only one I've used. This article, Top Picks: Personal Finance Software Programs at About.com, also recommends Microsoft Money and Moneydance. In addition, TopTenREVIEWS provides a helpful comparison chart with ratings of available personal finance software.)
   
   
2. Listed all expenses & other outputs.
   Next, I set up a spreadsheet (although a paper and pencil would work too) on which I listed all our expenses and the average monthly amounts for each. I also broke the amounts down further into weekly amounts (by multiplying the monthly amounts by 12 and then dividing the yearly amount by 52). I wanted weekly amounts because my husband gets paid weekly and this allows me to divide each of his paychecks accordingly.
   
   (Sidenote: As I was listing expenses in this step, I included only the minimum payments for each of our credit cards and our student loans.)


3. Subtracted our weekly expense amounts from my husband's weekly paycheck amount.
   This step is pretty self-explanatory—just simple math.
   
   
4. Figured out where to spend what's left over.
   So after our expenses were subtracted from our weekly income, I determined where the remaining funds would go—such as debt payoff, emergency fund, retirement, savings, play money, etc.
   
   Update: I thought I had this figured out but after a little more research, I am now rethinking my original plan. What I've learned is that everyone's situation is different, including ours. It seems like all the experts have their own opinions about where any extra money should be allocated. I'm basically going to combine the advice of several different experts into a solution that seems right for us. I'll be writing about this more in an upcoming post.

Related Resources
Article: Questions About Tithing (at Free Money Finance).

So, my first order of business was to check our credit reports. I wanted to make sure they were accurate and up-to-date. If there were any mistakes, it could really wreak havoc should we decide to make any big changes to our financial situation this year (like refinancing our mortgage for example).

I took the advice of this article at MSN Money to figure out how to go about it. Lucky for us (and you), there's a new law, The Fair and Accurate Credit Transactions Act, which allows anyone to get a free look at their credit reports once a year. The only catch is that you have to request the reports through this website: AnnualCreditReport.com. Easy enough. I did it myself and it was pretty straightforward. Other than having to dodge some of the ads they throw at you to get an enhanced version of your report (for which you must pay money of course), it wasn't a big deal. One tip I would offer is to have your financial info handy (like account numbers and other info about your loans, mortgages, etc.) because you might be asked for it so they can confirm your identity.

So I got one report from each of the 3 agencies (Equifax, Experian and TransUnion) for both my husband and I for a total of 6 reports. With the exception of a few minor address issues, it looks like everything's in order.

I also put a note on my calendar to do the same thing next January. I plan to make a yearly habit of it.

Next I went to Bankrate.com and breezed through their FICO Score Estimator. (If you're not familiar with FICO scores and why they're important, click on the link on the estimator home page that says "About FICO Scores".)

The FICO Score Estimator provides just an estimate (duh) of your scores, but it works for me for two reasons.

1. The estimator is free. Gotta love that.


2. I already checked our actual credit reports and they are accurate. FICO Scores are based on the info the credit bureaus (Equifax, Experian & TransUnion) have on us. Perhaps it's circular thinking, but it seems reasonable for me to assume that if the credit reports themselves were accurate (and that's the info being used to determine our FICO scores) well then, the estimator should also be pretty accurate...as long as I'm totally honest while completing the questions for the estimator.

So now I have a good idea of where we stand according to the powers that be. I'm also confident all our ducks are in a row—as much as I can tell anyway. So now I gotta figure out what to do next...

Related Items:
The Budgeting Babe points out this boatload of info about credit scores from Frontline at pbs.org.

We're $25,000 in debt. I've psychoanalyzed myself about how this all happened and what it all means, blah, blah, blah. Enough of that. Now I'm ready to move on to the bigger and more practical question of how to get out of this mess. In other words, how in tarnation will we pay off this debt?

To start, allow me to give you the numbers. As of this day, here's what we're dealing with:

My student loan: $7735.91
My husband's student loan: $9514.75
Credit Card #1: $5510.27 (currently at 0% interest although that deal will be up within a month)
Credit Card #2: $2287.00 (currently at 1.99% interest through October 2006)
Grand Total: $25,047.93

So, my basic plan is this: Pay off all our non-mortgage debt as soon as possible (and not to exceed 4 years) using any legal, ethical and moral means necessary. Money to do this will come from my husband's modest salary as well as from any other creative way I can come up with to get more cash. Because working outside the home is not something I want to do (not that working outside the home is a bad thing), I will spend a great deal of time exploring ways to make money online and from home.

Here's where you come in...

I'm an internet junkie and spend way too much time researching things on the internet. I've already gathered quite a bit of information on the subject of making money online and will continue to do so. I will post the information I've already gathered and the information I have yet to gather on this blog as I go. So, I hope you'll visit often. Who knows, maybe we'll learn something.

Update: My original intent of this blog was to find ways to make money online. But blogs evolve. And as this blog has evolved and my research for it expands, I've come across lots of ways to save money online as well. So, in addition to ways to make money online, I've also starting posting about ways to save money too.

...there was a whole lotta debt. Someday I'll reach the end.