the paper trail

Today I am the proud owner of a mortgage I've already been paying for a condo I don't want that's more than $70,000 upside down.




Winner.

We closed on our refinance today for our Minnesota condo (Shea bought pre-Sarah), locking in a super low rate (thank you, recession) for a 15-year loan. We haven't been able to do this previously because the condo is the victim of the housing crash, and we didn't qualify for the special programs because it's not our primary residence. But, the programs got less ridiculous, and we got a HARP loan. It only cost us $6,000 in fees and $600 for an appraisal. A steal, people...

The good part is this fits into our master financial plan, which we are quite proud of.  Even though our mortgage payment will almost triple once the closing is processed.

The even better news is we don't  have to deal with processors, underwriters or really anyone at a bank except the teller at the drive thru for another couple of years.

Seriously. We had to provide more documentation than I even knew we had including a written statement that the $1,000 check deposit on our bank statement was not a gift. Because that matters when you owe six figures. In case you're wondering, it's not a gift but ironically, our renter's payment.

We also learned that some of my parents' credit shows up on my report including a Bergner's credit card that was opened in the 1970s. Before my birth and my social security number even existed. Also their home equity loan for remodeling which fortunately they have paid off. It only helps my score until you have an underwriter asking questions about why I am remodeling a house I don't own. Fixing that hot mess is on my summer projects list.

I'm a first-time homeowner! I don't know whether to cry or celebrate.

that's a lot of zeros

This is my go to FREEEDOM picture. Circa 2009.

I will never be one of those crazies on the Dave Ramsey radio show who call in for the sole purpose of screaming at the top of their lungs about paying off debt. But, I am constantly amazed how sticking to a budget and debt payoff plan works.

In April, we paid off our second mortgage. We'd already been living without my entire paycheck so we decided to keep on living without it. Surprise, surprise it paid off.

Today we'll pay off the hubs' $28,000 student loan, something we accomplished in 10 months. And for kicks, we paid off another $7,000 student loan by pulling from our savings.

Add the $28,000 second mortgage, a $8,500 car loan and a $2,000 credit card (I made $25K after college. A girl has to eat.) paid off since 2010.

That's a lot of money, yo.

But all that allows me to work part time without having to contract for other jobs and actually spend time building trains and swinging at the park. It means we can refinance the condo to lock in a low interest rate and pay that sucker off in 15 years. Or sell it before then, which is now my candle-blowing-out wish.

We can start funding Shea's retirement and save for a house.

Plus, I finally got my MacBook. So I think it's all worth it.

another one bites the dust

We don't buy on credit unless it's zero interest for many months. We used a Best Buy card to get our awesome camera, an even more awesome lens and then reluctantly, a new oven for the condo. There is nothing worse than buying a new appliance you don't actually get to use.

On second thought, it was more awful to pay for a cleaning lady that cleaned a space I do not get to live in.

But to the news of the day! We paid off our Best Buy account. Which is less awesome than the second mortgage, but still awesome.

more budget

I've gotten a couple questions regarding our budgeting process since we've paid of some major debt. Here's what has worked for us.

1. Write it down.
We are not perfect with tracking this but we have our budget spelled out to the dollar using this document. Ideally I would be then adding everything to the sheet instead of keeping vague running totals in my head. Knowing the parameters though of what we have left after fixed payments works of us. I am not so strict though that I go through my Target receipts to separate out personal supplies and groceries.

2. Get friendly with the bank.
Twice a month money is automatically taken out of our checking account (where paychecks are deposited) and   distributed to our other three accounts. The most goes into our money market account which we use as our future house down payment savings and grad school tuition payments. We never pull money out of this account.

Next is our emergency fund. We use this for things like car repairs, medical expenses or other unexpected bills. It makes it easier to pay them knowing "that's what the emergency fund is for."

Last is our travel fund. If we had all our money together, we'd never spend it on travel because it'd take away from our house down payment or set us back in other savings. But travel is something we've determined is a priority for our family so we have our fund. It gets about $200/month which really does add up fast. Knowing it's designated for travel makes it easier to use. Dave Ramsey would tell me I shouldn't travel while we still have student loan debt. I would tell him to zip it.

3. Be ready to sacrifice.
Initially budgeting was hard. It was all this money we were putting off limits. But now that we've been doing it almost three years, I forget we even have that money. Because we made the sacrifice initially, it was easier to just take the money we used to pay off our second mortgage and put it toward the highest interest student loan. We didn't allow ourselves to experience a month with a couple thousand extra dollars.

We still go out to eat, but we budgeted for that. I still can buy a new dress, but it's budgeted. We no longer spend in excess on clothes we don't need or updates on our stuff that really could wait. We don't have extra luxuries like cable or gym memberships but I can honestly say our marriage has benefited.

4. Snowball effect
It works. You pay off one bill, transfer that money to another bill and so on. Because we are comfortable with the level we're living at, as we have made more money it goes toward debt. It also allowed us to start a college fund for Henry and set up two life insurance funds as soon as we became parents without any real extra sacrifice in our monthly budget.

5. Attitude
Sometimes I get really jealous when other people are buying huge houses at our age, buying new cars or going to concerts every weekend. (that's a lie, I hate concerts) But, if Dave Ramsey taught me anything it's "Live like no one else so later you can live like no one else." There will be a day in the not too distant future, where we will be living debt free. But we'll know how to live within our means and maintain a budget no matter what our bottom line.

the big one

We've had some strict financial goals the last two years. Ones that at times have made me cry. Other times made me happy for how far we've come.

Shea bought a condo before we were married, which was a great decision when the market was awesome, and he thought he'd live there for a long time. Then he got married, the market tanked, we moved to Kansas City and had the choice between selling and losing $40,000 or becoming landlords. We chose the latter.

If you want to be bored with the details: The mortgage is 80/20 with the 20 percent borrowed from a private group and the 80 percent from a major  bank. For the last two years, we've been paying more than five to seven times the minimum on the 20 percent loan. It's a significant chunk of change each month (actually, it's almost my entire paycheck. I find this moderately demoralizing.), and the rent we charge covers the 80 percent part of the loan plus condo association fees only.

So we sacrificed. A lot.

But today...

...we made the last payment.

Yay, budgeting!

a budget finish line

I frequently have thought our budget goals were much like my half marathon training. Slow and steady rewards, occasional vomit-inducing long runs and absolute joy when crossing the finish line. When it came to budgeting, my initial reaction was a dramatic fit of tears (you want me to do what?!). Then we created a viable plan that wouldn't make us crazy but still kept us on track. And then we suffered the challenge of sticking to it.

Tomorrow we'll reach a milestone, which calls for a celebratory update.

- We've paid off almost $10,000 on our second mortgage by paying five times the monthly minimum payment.

- We took a babymoon trip to Belize using only funds from our travel savings account and not dipping into other accounts. And we have money left over to start saving for the many "meet the baby" trips to come this fall and spring.

- We still managed to put a significant amount in our three savings accounts (travel, money market, emergency) each month. We had a detailed budget plan to stick to until we reached the milestone a pretty lofty goal for the balance in our main savings account. And tomorrow we will hit that amount thanks to some hard work by the hubs and a lot of budget dedication.

At the end of the month we're moving into a rental house that is $65 more in rent per month plus a bit higher utility bills ($27 is hard to beat). Plus we have to budget for daycare, continued graduate school tuition bills, a high-efficiency, cloth-diapering friendly washer and dryer and you know, stuff babies need. (Facts I am totally NOT obsessing about...)

So now it's time for a new training plan, this one probably at the marathon level (and a new running goal, too?). We'll have new goals, a new budget and then new rewards. But for now, yay! We done good!

frugality strikes again!

Dave Ramsey has once again foiled my plans.

We got in our heads that we wanted a house. BAD. Our apartment is fabulously large and cheap. Plus we pay one utility - electric - which averages at $40 during the winter. Friends, we have it good.

But the hard parts are the complete lack of storage. The inability to have people over. No where to grill or let Mac the dog run at least without a visit to the dog park. No bedroom door which means no separation between us and our needy animals. So in our frustration and the fact our lease ends next week, we started to look at houses. They were cute and financially possible unless you factor in utilities for a house that has gas heat. Then we found the PERFECT house and the woman was willing to negotiate.

We redid our budget for hours. And hours. We thought about giving up the iPhone, not paying so much extra on our mortgage or not putting ALL that money in savings. I started to get weepy because that's what budgeting, especially Dave Ramsey style, does to me. I hate him and his stupid money theories sometimes. Especially when I am looking at a fenced in yard and fire pit. But he is stuck in my head and no matter how much I try, it's like a nagging little voice that just won't shut up.

We knew we had to say no. In a last ditch effort to not make the hard decision, we offered her a ridiculously low rent with the assumption that in a year we could pay more. She considered it. But then another guy ponied up and is signing her lease.

Sometimes it's easier when God closes a door.

In a year, our second mortgage will be paid off. That's $28,000 paid off in two years plus a much better opportunity to sell the condo in the nearer future. In addition, this strict budget has allowed us to pay off a credit card ($2,000),  pay off a car ($8,500) and create an emergency fund.

So we'll live cheap for 365 more days. And will live so far below our means that our debt will get smaller. We'll be able to stay on track. That'll be good. I just don't always like it.

"You don't get to say "yes" until you've said "no" for  a while."

coveting prayers

We are landlords. Not by choice but by circumstance. Circumstances of the housing market sucks, we moved away and owe much more on a property than it's currently worth. Thank you banking industry.

Someday I will blog about the interesting situation we are in right now, when it's all in the past. And you will laugh, I guarantee it. But until this one moves into the laughing category, we would love your prayers.

Financially we are prepared for months without renters, but every month we have to cover rent is a month we're set back slightly in our other lofty debt reduction goals. Plus now we're in Kansas City, not Minnesota, so we have to rely on the help of others to handle the details if we do have to find new tenants. So far we've been very lucky, thanks to a super father-in-law. But it's a burden and the whole situation has probably raised our collective blood pressure to unhealthy levels.

When we moved to Kansas City a little less than a year ago, everything fell into place. Every worry we had financially, emotionally and otherwise was alleviated. We both found jobs. We found tenants. We found a cheap apartment. It taught us in a very real way that God provides. And I know He will again.

While you're at it though, do you think you could pray for my bum knee and the impending half marathon, and our ability to just rest? I'd throw in the Twins and K-State in there because they need some divine intervention but I won't press my luck.

love, sacrifice and cough drops

{They were happier than they look. Promise.}

One of my favorite stories my mom tells is about sacrifice and cough drops.

They both moved away from their families in Illinois, where they met in college, to pursue a new life together. They earned master's degrees at University of Kentucky. My mom then worked to put my dad through the rest of his degree and eventually a PhD. There was no extra money, and sometimes not enough. They did their grocery shopping at different stores, referring to a master list of food prices and sales to maximize their grocery budget. She made cookies for a special treat but crackers, chips and pop never made it on the list.

One time they were running to catch the bus, and my dad dropped a handful of cough drops. Realizing later the drops were gone, they went back that night in the dark to pick them out of the snow. Because buying more cough drops would be expensive and unnecessary.

When my mom got pregnant, she worked up until the day she started having contractions. In fact while in labor she was shopping for new glasses for my dad. She nursed as long as she could and used cloth diapers. Soon they moved to Michigan and lived in a rented house my mom hated. (Considering you could lay on my closet floor and look through a hole into the basement, who can blame her?)

My dad continued in his post-doc, and my mom worked in the soils lab. It wasn't until they moved to Kansas before the start of my kindergarten year that my dad got his first professor job, and my mom eventually went back to teaching. This was also the first time they bought a house - more than 10 years after they were married.

Sometimes I think my generation - Shea and I included - didn't learn about sacrifice. So many people we know have fallen into this pattern of graduating from college, getting married, buying a house, buying a bigger house, getting a new car every couple of years, and it goes on and on. We'd rather be comfortable and impressive but consequently, in debt.

One of my very best friends is giving up her career dream, at least for now, to support her husband's. It's not always easy, and lately never easy. There isn't enough money, and the days of waiting for a job, a real estate miracle and new baby are full of worry. Shea and I aren't picking up cough drops in the snow, and we lead a very rich life compared to many. However we are trying to sacrifice so that our money goes toward paying down student loans rather than payments for a house we don't need. I don't love our apartment but I do love the stories we'll have about our crazy neighbors. (Seriously. Crazy.) We know someday we'll be debt-free and comfortable but only if we sacrifice and live a little uncomfortably now.

As for my parents, after years of sacrifice and discipline? They have more than enough money to buy extra cough drops.

A budget without misery

We've adhered to a pretty strict, yet flexible budget since we moved to Kansas City. It was a chance to start new with big goals and financial commitments. Plus, we didn't have a whole lot of offers for dinners and happy hours meaning we could spend a lot less on entertainment.


Financial goals 2010


1. Find cheap rent without risk of getting shot every weekend.  Less than $600/month and no shootings yet!


2. Pay off all credit cards, and don't use again.  Done. See here.


3. Live below our means without being miserable. 
Continue to work on this everyday, and doing pretty good. We commit to free days as much as possible. We utilize Groupon for entertainment/restaurant discounts often and then bargain with ourselves. Example: We are going to Cirque de Soleil on Thursday with awesome tickets from GrouponKC (want to join? Let me refer you and then I get $10!) for a deep discount but in exchange we've promised to reduce our "eating out" budget for the month.


4. Continue to put significant amount of income toward debt.
Doing well! Exciting news on this goal coming shortly. Stay tuned, my friends.


5. Make budgeting easier.
We did this by creating multiple bank accounts with a bunch of automatic transfers accompanied by the help of mint.com and an Excel spreadsheet.

• We have a checking account for life.
• A money market fund which depending on the phase is a house fund/baby fund/can't find renters for the condo fund/buy a used car with cash fund/graduate school tuition. This fund gets two large automatic transfers from checking each month.
• A savings account for fun/travel and other things we love spending money on. *This account requires a deposit each month and only five withdrawals per year. Then the bank gives us $50.
• A savings account for little emergencies like car repairs, condo repairs and other things we really hate spending money on.

6. Cut out the fat. 

We looked at our financial picture - where our money was going and how that matched up with our values. We cut out the fancy gym ($105/mo) and went for a low-cost one. This allowed us to pay upfront for 15 months and save hundreds in monthly fees. We cut out cable TV ($100/mo) and instead use instant Netflix ($11/mo) and a HD antenna ($17 once). We stopped buying clothes except for special occasions. I don't know how much this saved but it's significant. 

We also budgeted $150/mo for restaurants which includes happy hours, Sonic or Starbucks runs and dinners out. This seemed to be the biggest denial, and now we aim to be very conscious in this area. It gets tough though when we take frequent weekend trips.

7. Follow Dave Ramsey's advice, "If you live like no one else, later you can live like no one else." 

Despite his tendency to make me cry, Ramsey's main principle is one we quote often and not just when it comes to money. We quote it when we see for sale signs in the yards of our dream houses. Or when we're stacking up crates underneath the bed or in the corners because we have no storage. Or when we are tempted to spend $50 to alleviate the annoyance of cooking. Or when we spend less on birthday presents or wedding gifts than we'd like to. Or when friends or family members continually has newer and better cars, houses, clothes or weekend entertainment.

And now living cheap and watching our debt subtract has become like training for a marathon - the daily challenges get easier, the weekend long runs still stink but the feeling when we finally cross the finish line will be fantastic. Plus, I think in both instances I will need a banana.

ZERO credit card debt

Yay! Living cheap pays off. Next up: Mazda car loan. Don't hold your breath.

Total Money Makeover of Tears

Our first reading of Dave Ramsey's Total Money Makeover ended in tears.

Because: Dave says we can't do things like go on vacation if we have debt. But I want to go on vacation in the next two years. And our debt won't be paid off by then. But what if we waste our whole lives paying off debt and look back and realize we never went anywhere or ate anything good or saw anything awesome because we were so focused on having zero debt. But what if we regret spending money on that stuff after we do it? BUT, I need a vacation before my tummy becomes not flat because there is a baby in there. And that seems like a really reasonable and totally not superficial reason to go on a vacation.What about a house, though? We want a house, but that darn Minnesota condo and the bad real estate market. And oh my, the student loans! Which comes first though, the baby or the house? Can you have a baby in a medium-sized apartment with one bedroom that doesn't have a real door? Probably. So, say we have the baby in the small apartment before we buy a house, what about my grad school? Can I go to grad school, have a baby, buy organic food AND save for a house? What about daycare? That's expensive, I hear, and what if I am not done with grad school? I'll be like one of those young mothers who brought their newborn to class, which although more interesting, did not help make a lecture on macroeconomics any more understandable. So maybe we compromise. Give up Costa Rica and settle for a cheap road trip. Then we have the baby in a medium-sized apartment with no bedroom door. And we'll only buy half of our food from Whole Foods and settle on Super Wal-Mart for the rest. And we won't get cable, and we won't eat out. But we will pay for a gym membership. Because how else am I supposed to keep my tummy flat?