Wednesday, January 2, 2008

My Debt Quest is Moving!

My Debt Quest is now hosted at http://mydebtquest.wordpress.com - the interface is easier and the templates more versatile. If things go well for the blog, I'd like to consider my own domain eventually, but for now -- http://mydebtquest.wordpress.com

Jonathan


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Tuesday, January 1, 2008

2008: Starting off on the Right Foot

One of the best pieces of advice I've pulled from many PF Bloggers is to set concrete goals, and keep them reasonable. As a PF Newbie, I am still very unsure about my goals, torn between my desire to sweep away the debt, save for the future, and still concerned about having enough money for the here-and-now - our "fun" money.

The key to improve any process is to understand what is wrong in the first place. I am starting off 2008 by taking a harder look at 2007 - what worked well and what could be done better.

In our case, savings, or lack thereof, has always been a fault. Even though we sent any extra money towards our debt, we had to resort to credit cards for every little crisis. We were working against ourselves. In the last few weeks of 2007, we established and started funding two short-term savings accounts, one linked to each of our checking accounts, so we can absorb any little shortages without running up the credit cards. In addition, we established a long-term savings account which will be the foundation of our emergency fund.

Another huge downfall of our personal finances to date has been the absence of retirement plans. I finally enrolled in my company's 401(k) plan, which will match $1000 at 50%, and I will be maximizing their contribution by contributing $2000 each year, for a total of $3000 annually after the company's match. This contribution is far short of what we will ultimately need for retirement, but at least we will take full advantage of the matching funds. I also started a Traditional IRA account, which will start with a $50 monthly contribution. Again, far short of what we should contribute at this stage, but a start nonetheless.

Debt Reduction takes center stage in our PF planning for 2008. In December, I managed to reduce our $48,000 to just over $40,000, and I want to continue that progress through the New Year. Although $8,000 in one month is very unusual, and in this case was fueled by several gifts and my year-end bonus, $1,200 per month in debt payments is attainable. Our strategy for allocating payments in the past has fallen short of idea, too, as I tackled the lowest balances rather than the highest interest rates. Our tendency to use the credit cards for unexpected expenses and impulse buys repeatedly set us back as well.

I am very excited rolling into 2008 about the possibilities that exist with our personal finances. I have never been as motivated as I am now to tackle our debt problems and start saving our money. In order for us to stay motivated, though, our plans will have to include some room for fun. One of our savings accounts is our Vacation Fund, and we will have enough saved by the fall for a 7-day cruise - paid with cash, up front, with no credit involved - for the first time in my life. Such an indulgence may seem irresponsible with so much debt, but the power of such a reward may be the motivation that my wife and I need to stay on track for the year.

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Monday, December 31, 2007

Happy New Year!!!

2007 is in its last hours, and we are preparing to enter a New Year, full of challenges, excitement, ups, and downs.

To everyone, I wish a safe and happy New Year to you and yours.


God Bless,
Jonathan


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Debt and Savings Update 2007 #3 - 12/31/2007

This is my last financial "snapshot" of 2007.

For me, 2007 is the year I finally got my act together and started my financial makeover. After years of carrying credit card and other consumer debt, I am tired of living paycheck to paycheck, floating through on credit cards, and paying out a full month's worth of expenses annually in finance charges alone.

I am looking forward to 2008, a year to continue my progress towards a brighter picture of personal finance - turn the occasional crisis into a mere inconvenience with emergency savings, lay a better framework for the years to come through investing, and most importantly, reduce the consumer debt so we can stop throwing our money away on interest payments.

So, here is the our Debt and Savings Update for 12/31/2007:

Savings - $890.53

Goal Savings (ING) - $190.53
Short-Term Emergency (Key) - $200.00 (Target: $500.00)
Short-Term Emergency (USAA) - $500.00
Long-Term Emergency (UFB) - $0

The Short-Term Emergency accounts are linked to each of our checking accounts and are there to help in a pinch if we fall short between paychecks. The challenge with these accounts will be their accessibility and the temptation to use them for impulse purchases. The target for the short-term emergency accounts is $500 each, enough to cover most of the little emergencies without putting too much money in a low-yield account.

The Long-Term Emergency account is my priority for the beginning of 2008. The initial goal for the account is $1,000, to cover any minor unexpected expenses, with the ultimate goal being 3-6 months of living expenses. I just opened an account at UFB with 5.10% APY, and plan to start automatic contributions with my next paycheck.

Investments - $2,195.12

Edward Jones - $1,870.12
Prosper - $175.00*
Lending Club - $150.00*

The EJ account will eventually be our house downpayment, and is growing slowly but surely. I opened the two P2P accounts more out of curiosity and boredom, but mathematically the returns seem to be worth the increased risk. I want to see how these first few loans work out. I am going to report the total value of the account, as remaining loan principle plus current account balance, for lack of any better idea how to report the value of the investment.

Debt - $43,545.67

Universal - $8,250.00 (1.99%)
Capital One - $0.00 (15.4%)
Citi - $2,970.00 (10.24%)
USAA - $10,231.07 (11.65%)
Student Loan - $4,424.39 (6.97%)
Toyota Loan - $15,622.64 (7.4%)
Medical Loan - $192.44 (0%)
Medical Debt - $1,855.13 (0%)

I made substantial progress on the medical loan, thanks to my christmas bonus and some other gifts. I will have the full medical loan paid off on February 1. The USAA Credit Card should be the next debt target, but I am contemplating hitting Citi first, since the interest rates are so close and the Citi balance is so much lower - it will be a psychological boost to pay the balance in full, and I think I can do it in a couple of months.

Total Net Worth - $40,460.02 (-)

Comparison:
12/15/2007: $44,616.04 (-)
12/3/2007: $46,230.24 (-)

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