I'm not much of a writer but I'll try to keep it at least a little bit interesting as we dive into our financial madness one small step at a time. Here is the skinny on the situation (a family of 4):
HH income: $140k/yr (we net $7k/mo after deductions)
Mortgage: We have an 80/20 that will have to be refi'd in March of 2008. So one of our goals is to improve our credit enough to get into the 700 club and save us a bunch of money a month on mortgage payments. Currently we pay $2500 and $700 on the two mortgages (I round up and add the difference to additional principal.) We just recently had an adjustment to the 80 that saved us $300 a month. I took that $300 and added it to my 401k. I never saw it so I will not miss it!
Credit Scores (these were pulled a few days ago at MyFico): 662/665/627. Wife: 692/697/684. I have one negative left and she has none. Our biggest killer? Utilization! Which I will get into in a sec.
Retirement: We have about $60k combined in our retirement accounts and we only have 401k's currently. I currently contribute 10 percent and she currently contributes 6 percent (she has an outstanding 401k loan that she has taken from her paycheck every month at a fixed rate.) The contribution amounts will increase over time because our employer provides a 25 percent match with no cap (so if we max fund the 401k at $15k they will add $3750.) We are both 100 percent vested in all accounts and our funds are American Funds. I am currently 50 percent into the World Growth and Income Fund, 30 percent into the Growth Fund and 20 percent into the New Economy Fund. I want to be aggressive in my retirement savings and these three funds seem to be the most aggressive. I only have 6 funds to choose from and of the other 3 two are bond funds and one is an Investors fund which hasn't exactly shown great movement. We will be increasing our retirement funds a lot once we get our next category under control.
Revolving debt: This is the ugly part of our financial picture. The harsh reality is we have about $80k in revolving debt and we're working feverishly to knock it down. I really spend more time staring at the numbers than anything else just to come up with as many possible scenarios as possible to pay it off and pay it off fast. I know the APR's and the balances like the back of my hand so I've probably had more ideas on how to attack it than anything else but never actually a real implementation where I've seen results. If I break it down by card, APR, balance and limit you see this:
AMEX 1: 14.23%/$15.9k/$20k
Wach 2: 12.24%/$8300/$12.5k
BofA 3: 13.99%/$6200/$8k
BofA 4: 18.24%/$6200/$9k
AMEX 5: *4.99%/$6100/$10k (B/T rate)
BofA 6: 18.24%/$6200/$9k
Chas 7: 17.23%/$5900/$7.3k
HSBC 8: 0%/$3800/10k (Teaser rate)
PETA 9: 16.99%/$3400/$4.4k
BofA 10: 13.99%/$2900/$3.9k
AMEX 11: 12.24%/$14k/$31k
Ok so when you add it up you're talking just under 79k in CC debt! As you can see by the APR's they're not very pretty but I have a plan to get out from under this rock in around 2 and a half years. I will say this for now. Most of the larger debt was money put into our new house (landscaping, builder upgrades, etc.) rather than on something we're not getting a return on in the long run so I feel somewhat comfortable about the debt BUT obviously this is our #1 red flag issue. I'm in the middle of asking everyone for APR rate reductions and B/T offers just to see what we can do to get the debt consolidated so we can start making larger dents at a faster rate. I came across some software that you can input the above info and it gives you a plan to pay off the debt while at the same time keeping your FICO score in mind and getting your utilization down and that's really where I'm at right now since we're heading into a refi in a year. I'll be going over and revisiting this debt reduction plan ad nauseum in my blog to let everyone know where we stand as we go along.
Software: I am always playing with new computer software to try to come up with somewhere to store all of my financial information. I have been using MS Money for about 7 years and I have everything and anything in there. I also use a basic excel spreadsheet that I input the names of the cards, current balances, dates due, minimum due, actual paid and date paid so that I have a quick snapshot of what I did that month to impact the debt reduction. I have a debt snowball spreadsheet that I can input the same info and it calculates the cards to pay off first and how much to pay on each card. It's not fool proof but it works well for me. Lastly I use the above mentioned software that allows me to input the card info to come up with a financial plan of attack with keeping my credit scores in mind when it figures out payment plans. So there is a small arsenal of weapons to go at the debt we currently have.
Budget: It currently doesn't really exist in any true form. This is going to be another critical step for my family as I will be revisiting all of the data in MS Money and coming up with what we spend per month in every category I can (we have all the data already categorized, now it's just a case of crunching the numbers to fit us.)
Savings/Emergency Fund: Doesn't exist...the sad thing is we have savings accounts with Bank of America, Wachovia, ING Direct and M&T Bank and in all of those accounts we maybe have $500. That will have to change sooner rather than later!
Oh one more thing...I had forgotten about $114.27 I had in a Sharebuilder account that I had basically neglected. I did a little research on cheap stocks (under $5/share) and decided on buying 25 shares of Crown Media Holdings (CRWN) at $3.90 a share on Tuesday morning (when the markets opened.) It's not a really serious investment but I figured this way I have 25 shares in a stock that has some potential rather than the money just sitting there lifeless. If it does well great and if not the most I stand to lose is the $114.27 (assuming the stock totally tanks out!) I could've just put it into a fund or even an ETF but I thought why not try a stock and see how it plays out? It's more of a fun thing to do right now.
So there you have it...that's the baseline of the family's financial plan and now I can begin to really attack our problems and have fun while I'm doing it. Hooray for blogs!
Welcome to my blog!
February 22nd, 2007 at 07:48 pm
February 22nd, 2007 at 08:07 pm 1172174877
based on the info you've given thus far, i'd say a spending log is probably in order either before or while you're putting together a spending plan (aka budget). knowing what has to be paid and when ( mortgage, groceries, monthly debt minimums, utilities, taxes, insurance), what's nice to have (eating out, cell phones, cable, specialty foods, frequent clothing purchases, etc), and where money is 'leaking' (i spend HOW MUCH on dry cleaning a month?!?) can do wonders. remember, every little bit helps and snipping costs here and there can generate a couple extra hundred per month to snowball towards your debt. good luck!
February 22nd, 2007 at 08:14 pm 1172175265
February 22nd, 2007 at 08:14 pm 1172175298
February 22nd, 2007 at 08:21 pm 1172175716
February 22nd, 2007 at 08:30 pm 1172176237
February 23rd, 2007 at 03:13 am 1172200402
Sounds like your offense is good (score points, make money) but you need defense (keep from being scored on, keep the money that you have coming in). And we all know that defense is not nearly as exciting as offense.
The first thing is write down *all* your spending for a couple of months. You can do it here (or not), but its important that you do.
Probably want to combine your savings accounts together and in a high interest savings account. Your strong safeties are all in different positions - need to get them all in play.
Please be careful of stocks lower than $5. I got burned a little bit (lost $60 for buying fruit of the loom at $2). First rule of investing - don't lose money!
February 23rd, 2007 at 05:26 am 1172208387
P.S. You miss Tiki yet?
February 23rd, 2007 at 09:24 pm 1172265867
February 24th, 2007 at 12:13 am 1172276011