Still on track!

So the job change has cased a little bit of a hiccup in my financial plans, which I had planned for and am happy to say I am now done with. It’s not a big deal – it basically comes down to my new job having a slightly different payroll schedule, and of course the fact that there’s a certain lag between when I start and my first paycheck. In order to be prepared, I basically held off on Baby Step 2 until my first paycheck from my new job. At that time I figured everything would be okay, and I could use the accumulated amount towards Baby Step 2.

It worked – but I have to say that psychologically, I felt very much off-track during that time. I had almost forgotten how much I loved putting money on my car loan and seeing the balance drop. So when I finally put another principal payment on my car loan, which was an amount equal to what had accumulated while between jobs, well, it felt pretty good.

I’m happy to say that I feel like I’m on track again – not that I was really ever off track – but I feel good that I’m able to see progress again.

I like my new job, although, I have to admit I miss my old job. A lot. It’s strange how you miss the things you took for granted. At my old job my lead was able to teach me a LOT. I like being on the learning side of things. At my new job – I hesitate to say this, but it’s true – I’m smarter than my lead, and it bothers me. I continually have to explain things to him, and sometimes he doesn’t get it. I think he’s just inexperienced, and maybe a little over his head in his position. He also likes to argue, especially when he feels defensive (I sense just a little bit of male machismo in his defensiveness/argumentativeness). Now I know that all this sounds pompous, but I’m not sure how else to explain it.

I really miss my old job. I miss being able to ask my lead questions and learn from him.

After my first week at my new job I had made the decision to work this all out as a challenge – in other words, see if I can learn from the experience rather than run from it. I was in a very similar situation a long time ago, and I found another job as quickly as I could. This time I’m going to see if I can work through this, and learn from it.

At any rate, I’m on-track, or back on the Baby Step 2 express.

My last day at my old job is tomorrow. :(

So it’s probably obvious I did in fact take the new job.  It was such a difficult decision, but ultimately it matched up with what I want to be doing – and it seems like a more secure job in terms of layoffs.

So aside from leaving people I’ve worked with for the past few years, I am looking forward to the challenges of the new job.  It comes with access to a gym, so I’ll be able to continue working out – and moving forward with both my health and financial goals.

I’m STILL in Baby Step 2.  My last car payment is inching closer every single day.  It feels great that I’ll finally be free of that albatross – and of course I’ll be focusing on paying off the last of my debt:  my student loan.

I’ve somewhat settled into the routine by now.  My biggest struggle has been that I can’t make it happen in hours or days instead of months.  I’m okay with that now.  I know it’s going to take some time – but I can stay the course and implement my plan.  It’s actually, well, no big deal.  That’s how it’s supposed to be I suppose.

I probably wrote this before – but I’ll write it again:  Having the plan and implementing the plan is just about as good as having achieved the goal itself.  It is the best I can do right now.

I have been looking forward to Baby Step 6.  You see, Baby Step 3 will take me a couple more months, and Baby Step 4 is a flip of a switch.  I don’t have children, so Baby Step 5 is a non-issue for me right now.  Baby Step 6 is the one I’m really looking forward to.  Baby Step 6 is to pay off your home early.  For me, this means actually saving up for, and buying a home.  I’m still going to have to get a mortgage, but I’ll pay 20% down first and get a 15 year fixed rate, which I’ll probably pay off in about 7 years if I stay on track.    I’ve already set up the spread sheets.

So it’s basically same ol’ same ol’ for me right now.

Looking Forward

So if you’ve read my previous posts, you know that I’ve been mulling over a new opportunity for several weeks now.  This has been one of the most difficult decisions I’ve had to make because I really like my job, but there’s been several layoffs since I started, and the future isn’t quite as certain.

As I mentioned in a previous post, I was approached by another company, fairly soon after our last round of layoffs.  I interviewed with them, and then heard nothing back – for several weeks.  I had thought I was off the hook, and almost put them out of my mind assuming they had decided not to hire me.  And then yesterday the recruiter called to tell me that they wanted to move forward with an offer.  So I figured I had one more night to think/sleep on it.

I received the offer tonight and faxed my signature to them accepting it.  I believe it will be good for me, both personally and professionally.

So…  I’m still on Baby Step 2 – but still making really great progress.  If you listen to Dave Ramsey’s radio show you hear him say that when you start the debt reduction process it’s like you get a raise – because you address both the income and spending areas of your life – you learn to live on less than you make, and therefore spend less, and you find ways to make more money.  The new job helps – it’s not a BIG raise, but definitely significant.  But more importantly, I’m living on quite a bit less than I used to.  So ultimately I’ll be able to pay off that student loan just a little bit faster. 

Baby Step 2 is a long process for me – but I’m finding ways to speed it up. 

Every $12.99 counts!

So I decided that I didn’t need high definition cable TV service from Comcast while doing baby step 2, so I called and attempted to terminate my account. I have both cable Internet and cable TV service through Comcast, and truth be known, I only watch a couple of shows on a regular basis – “LOST” and “The Office” to be specific. If you go to http://www.abc.com, you can watch “LOST” on the Internet for free. You can also go to http://www.nbc.com and watch full episodes of “The Office” for free. Why do I need cable TV again?

So nothing else holding me back, I called Comcast to terminate my cable TV service. In good salesmanship fashion, Comcast convinced me to stay with “limited cable TV” because if I went down to only a single service (Internet) they would increase the cost of Internet access by about $13, and “limited cable TV” is also about $13. In other words, it’s a wash. It stinks of a game that I don’t want to play, but I fell for it. I suppose I was a little upset that by selecting only one of their services, they would charge me an additional $13/month. Still, I had more than cut my bill in half, and I need Internet access. This seemed to be reasonable, although I mentioned to the Comcast representative that I would be looking for less expensive Internet access in the coming months. (She mentioned that I would certainly find less expensive Internet access, but that she wanted me to know that Comcast is superior.)

Okay so sales pitch aside, I proceeded to return my cable box the following day. As I was returning the cable box, the representative behind the desk mentioned that I would be charged $12.99 for the technician to install a filter on their line. At first I didn’t pay much attention, but when I got back into my car and started driving I got to thinking about it. I’m not actually getting anything for that $12.99. What exactly IS it I’m paying for again?

So I called Comcast. They said that they charge their customers for installing a filter of some sort, which prevents me from getting channels I’m not paying for. It smelled fishy, and considering I felt a little upset at being told my Internet cost would increase if that was the only service I had with Comcast, I told them to just forget the whole thing – to just cancel my entire account, Internet and cable TV, and I would look for Internet access elsewhere.

Well, the customer service representative immediately waived the $12.99 fee, and reduced the cost of my Internet access to half what it would be – for 6 months.

It was enough to convince me to stay with them, but I’m going to use the next 6 months to find another Internet service provider – one that doesn’t play games like this with me.

Now Comcast has been good to me – I’m not aware of any billing problems I’ve had with them in the past, and their service has always been at least decent. I have had no complaints about them as a company in the past.

At this point, I do wish they would compete for customers on the basis of service, rather than this stupid game of charging more, the fewer services a customer decides to sign up for. It’s a game – period. If their service is a good value, they shouldn’t have to play such a game. Mobile phone carriers do the same thing – and it hurts consumers. First, it locks consumers into 2+ year contracts, and second it creates an environment that does not require companies to compete on the basis of service. If consumers weren’t stuck with a company, and had more ability to move between companies for competing services, then those companies would have more incentive to provide a better service for the cost.

So I’m now looking for Internet access – with a company that won’t play games, and who will provide me with a quality service that is worth the cost. No games, no hidden fees, just a fair trade of money for a service.

Where oh where should I put my emergency fund?

So baby step 1 is to establish $1000 for an emergency fund and put it into a savings or money market account. Eventually, in baby step 3, the idea is to build the emergency fund up to 3-6 months of expenses, but while getting out of debt, doing baby step 2, $1000 is enough for minor emergencies.

Last year I put my $1000 into my savings account, which is attached to my checking account. Being the person I am, it was too easy to dip into it for non-emergency spending. I needed to make it difficult enough to access that it takes effort to get to it. So I put my $1000 into an Internet savings account – not a money market, but with similar interest rates. I realized quickly that it takes nearly a week to transfer money into, and out of this account. Unfortunately emergencies normally require a little quicker access to money.

So the bank, where I started my emergency fund savings account also offers free checking with a MasterCard ATM card. I decided to open a checking account with them in order to have easier access to my emergency fund when necessary.

I don’t carry my emergency fund debit card with me – instead, I’ve tucked it away in a safe in my home. This way if/when I need it, I have access to it within a reasonable amount of time. It is still inconvenient enough to get to it that I won’t be inclined to use it carelessly.

I’ve also been thinking about baby step 3 a little bit. I once visited a financial advisor, who recommended a kind of tiered approach to saving. Basically if memory serves me, she wanted me to keep 1 month of expenses in my checking account. The next tier was to keep 2-3 months of expenses in the attached savings account. She then recommended keeping 6+ months of expenses in rotating CDs. So each month for several months, open a new CD – and keep renewing it at the end of each term. This way you have 4 months of expenses/emergency fund always immediately available, and new monthly CDs coming to the end of a term each month. It seemed overly complicated to me – and CDs don’t offer rates that are really all that great, considering you have to keep them tied up for a set amount of time.

I do kind of like the tiered idea – and I have to be honest I’m not sure that 6 months is enough in our economy, and especially for a web developer who watches layoffs happen as often as I do. I’m thinking about keeping 1 month of expenses in my checking account as padding. Maybe another 3 months of expenses in my attached savings account, and then my fully-funded emergency fund of 6 months of expenses in my Internet savings account – which pays like a money market. That’s 10 months total, and well, I might even decide to make it a full year and put an extra 2 months of expenses somewhere.

Anyway I’m not yet in baby step 3 – and for now I’m very much inclined to keep it simple and just follow Dave’s advice. After all, his advice seems to work well.

What’s the biggest threat to my carefully laid plans?

Well, I’m not sure it’s the number 1 threat, but it ranks pretty high: boredom. When I’m bored I tend to take trips to the mall and window shop, or eat out, or browse great sites like engadget or gizmodo to see what the latest and greatest technology has to offer. (I’m a gadget geek at heart.)

So Friday night and Saturday morning I came down with a 24 hour flu which kept me from going anywhere or doing anything. But Saturday evening, and today, Sunday, I was bored. Aside from preparing for tonight’s budget committee meeting, I decided that I would go wash my car and get the oil changed.

It’s interesting to me that I really like my car so much better when I’m washing it or taking care of it. This is the only thing that is probably not on Dave Ramsey’s plan – it’s a 2007 Ford Mustang Convertible. I LOVE my car. I know that Dave Ramsey would probably suggest selling it and purchasing a used, dependable car. I’m open to the possibility, but for the time being I’m enjoying paying it off and washing it and of course, driving it. Especially as the weather gets nice enough that I can take the top down.

So why would Dave suggest selling the car? It’s not upside down – I owe less on it than it is currently worth, and I am making great progress towards paying it off. He suggests purchasing a reliable used car from a private seller because cars drop in value FAST. It is losing value so quickly that the cost of owning a new car is tremendously more than the cost of owning a used car – even with the more frequent maintenance demands.

I really like my Mustang. A lot. I’ve given up credit cards, and am well on track to be debt free in about a year from now. Sooner if I can sell more stuff. So while I understand that I’m paying a high price to own this car, I’m willing to absorb the cost. For now. My mind could be changed, and honestly it wouldn’t take much. I took it to the car wash today and spent some time on it, cleaning it inside and out – and just that act alone makes me appreciate it so much more.

BUT just for sake of running some numbers, what would happen if I did sell the car? First, with the extra money (equity) in the car, I could easily buy a dependable used car – which would be absolutely fine for the next few years. Without this payment, I could eliminate the car payments, and focus on the last of my debt – my student loan. I could easily have it paid off before 2009. So I would probably be cutting baby step 2 down to about 6-8 months.

I’m ALMOST convinced. I bought the car before I started doing the Dave Ramsey baby steps.

So today is the budget committee meeting with my accountability partners. I’m excited about the progress I’ve made – and am excited to relay that to them. A couple of other things I’ve discovered, which will help to reduce expenses are:

• I can get reimbursed for Internet access at home by the company I work for.
• I’m going to cancel Comcast cable TV, as I don’t really watch it very much, if at all.
• My rent is being reduced with the introduction of a new roommate. yeaa!
• I’m setting aside things for the upcoming spring garage sale.

So things are going well. It helps so much to hear from others doing Dave Ramsey’s plans! Thank you to those who left encouraging comments!

You never know…

So I discovered something interesting yesterday. One of my coworkers returned from lunch with a small group talking about the FICO score, and saying something along the lines of, “if you don’t use debt, you simply don’t care what your FICO score is.”

As I am right in the middle of working through Dave Ramsey’s baby steps, I piped up with “Yea! The FICO score is an ‘I love debt’ score.” My coworker responds, “That souns like Dave Ramsey.” It is. I have heard him say that so many times on his radio show. So my coworker revealed to me that he and his wife are working through Financial Peace University.  We talked and shared and compared notes – and gosh it felt great!

Wow. You just never know who in your life is working through stuff like this. Another coworker mentioned in the elevator that he wanted to find out more, because he had heard us talking during the day about FPU.

Money – and personal finance is such a private thing. We all want to put our best image out there – that we have no worries, that things are going well financially, but statistics say that most Americans are up to their eyeballs in debt. And more important, being in FPU does not necessarily mean that things aren’t going well financially – in fact, I would argue that somebody in an FPU class is showing incentive and a desire to do better in life, and with their money.

It was actually a big deal for me to start a blog to talk about my personal finances. I resisted at first – but wanted to share because this is such an important thing. About the only thing I regret about my education is that I never learned anything about personal finance – except how to take out a student loan. I feel strongly that a class like FPU should be made available in high school. Nobody should graduate from college not knowing what a 401(k) is.

We need to share this stuff – to tell our stories and share what works and what doesn’t.

Baby Steps, or, Rome wasn’t built in a day.

So I have read Dave Ramsey’s book “Total Money Makeover.” I really like his suggestions, which include several baby steps along the path to financial success. They are simple enough, and honestly, none of his Baby Steps are a surprise. It comes down to common sense: establish an emergency fund, pay off (and never again use) debt, invest wisely, and give. What I really like however, is that he breaks it down into something that’s both easy to understand, and easy to implement. I highly suggest purchasing his book. He also offers a course, called “Financial Peace University” which sounds very interesting. Ironically, I purchased that class for some friends as a Christmas present, but have not (yet) decided to take the course myself.

The thing is, his book makes it really simple. I’m not sure that the course itself could add anything substantial; except, of course, sharing your experiences with others in the class, and gaining some insight from their experiences. Kind of like financial group therapy. I could be completely wrong, and in fact I have talked to my friends for whom I purchased the class, and am beginning to think I should take it myself.

Dave Ramsey’s Baby Steps (You can download a poster here):

1. $1000 in an emergency fund
2. Pay off all debt with the Debt Snowball
3. 3-6 months expenses in savings
4. Invest 15% of income into Roth IRAs and pre-tax retirement plans
5. College funding
6. Pay off your home early
7. Build wealth and give!

On Dave Ramsey’s website (here) you can download a PDF document showing his Baby Steps; I printed this out and put it on my wall next to my desk as inspiration.    I also listen to Dave Ramsey’s podcast, for additional insight, and most importantly to be inspired by people who call in to yell “I’M DEBT FREE!“  It’s very inspirational; one day soon I’m going to be calling him myself. 

So after working diligently on my own spreadsheets, I have determined that I am on Dave’s Baby Step #2. I already have more than $1000 in my emergency fund, because I had set up my paychecks so that a portion of each paycheck is deposited directly into that savings account. Now I believe that, according to Dave Ramsey’s strict advice, I should keep only $1000 in my emergency fund and use the rest to pay off debt, only moving on to Baby Step #3 and adding to my emergency fund once my debt is paid off.

This may be a mistake, but I am going to continue to deposit into my emergency fund until I have 6 months of expenses saved, while simultaneously working on Baby Step #2. I expect to have a fully-funded emergency fund by about March 2009 if I can keep this up.

In the meantime I’ll be doing Dave’s Baby Step #2. So because I am continuing to fund my emergency fund while paying off debt, I’ll actually have Baby Step #3 completed before Baby Step #2 is completed. I know, I probably shouldn’t attempt to do things different, but here’s the thing – I’m a web developer, and the job market hasn’t always been as stable as I’ve wanted it to be. For most of this decade (2001 – present) I’ve never honestly believed I would stay at my current job for more than a few years. Psychologically, I want to feel like I have my bases covered. Paying off debt is important; however, I want to at least have something in the bank should my fears ever come true.  Admittedly, I may decide that my way isn’t as smart as I think it is right now.  Stay tuned. 

For me, Baby Step 2 comes down to paying off almost $60,000, which is more than I want to admit. Most of my debt is my car loan and student loan. Still, it’s uncomfortable.

So, in accordance with Dave Ramsey’s Baby Steps, I’ll be attacking this systematically. He suggests using the “Debt Snowball” and paying off the debts from smallest to largest, rolling previous payments into new payments as I pay off each of the smaller ones.

My goal for completing Baby Step #2: January 2010. It feels like a long time, but 2 years? 2 years ago for me seems like only yesterday.  Already I’m paying off two of my smallest debts before February 2008!And since Baby Step #3 will already be completed, I’ll be moving on to Baby Step #4, which is to invest 15% of income into pre-tax savings. That’s not so much of a process as it seems like a one-time setup.

Baby Step #5 is to save for your children’s college; however, I don’t have children.  Yet.

Baby Step #6 is to pay off your mortgage as quickly as possible. Currently I am renting, so this will be the time when I begin the process of saving for a down payment on a home.

Baby Step #7 is to build wealth and give.

So there it is. The good, the bad, and the ugly. Stay tuned to see how it all works out!