Monday, December 27, 2010

Update, 2011 Framework & Experiment...

I hope everyone is having a Happy Holiday Season!!!

I am really enjoying my two weeks of vacation. I don't go back until after the new year and it's been totally awesome. I even got the chance to meet my blog buddy Aaren last week at Navy Pier. Fun!!! I am so glad that we finally got to meet and she is such a sweetie. Come to find out, we even know some of the same people here in the Chi. Go figure!!! I will have to fill you in on that funny story later this week. =)

I have updates!!!

Christmas: I did ALL of my Christmas shopping for $335 this year!!! This has never happened before. Last year I spent $680. Go Chitown!!!

Bonus and Raise: I got a 19% bonus and a 5% raise!!! My salary will increase to $79,400 and my bonus will be approximately $8,500 after taxes.

Snowball: I am still stuck on paying down my credit card first which I know is against Dave Ramsey's plan. Someone talk me off the ledge!!!! This is my reasoning....

First, I am on a graduated repayment plan with my student loans which means that some of my loans are on interest only and eventually will move to principal and interest. I really need to pay off off the credit card balance to free up that cash flow so that I can handle any increases in payment, including increases in the interest rates on the private loans.

Second, I think if I am able to pay off the credit card debt, that will feel like a really BIG no HUGE win for me in Dave Ramsey's meaning. The way that I am feeling about credit of any kind let alone credit card debt is enough to make sure I won't go back into it ever again.

Third, if I don't pay off the credit card debt within the next 14 months, I will have to pay yet another balance transfer fee once the promotional rate on my BofA card runs out. This will be another increase in debt and that feels so upstream.

Fourth and Final point, the balance is currently at $19,240 thanks to the $740 in balance transfer fees added to the balance. If I put the entire $8,500 towards the balance, then I would be left with $10,740. Assuming that I at least pay $2,400 towards the balance in 2011, then the remaining balance at year end would be $8,340. I have been with the bank since 2000 and I have always received a bonus and and increase. Assuming I receive the same thing next year, then I can pay off the balance in full and begin a complete snowball of my student loans.

I would love to know your thoughts!!! Thanks in advance!!!

2011 Framework: The budget and debt repayment framework is coming along. I have my ING checking account and savings accounts set up. I did that last week and I am just waiting on the new debit card to arrive.

The sub-accounts for savings that I set up are as follows:

Auto Fund - For annual state and city registration.
Christmas Fund - For Christmas 2011.
Clothing Fund - For purchases and dry cleaning.
Gift Fund - For regular monthly gifting for birthdays, showers, etc.
Home Fund - For regular furnace and air conditioning maintenace.
Home Insurance - Annual premium is due in mid 2011.
Vacation Fund - I decided to build this into the budget -- nothing major.
Water Bill - This is for my quarterly water bill.

I know it may seem like a lot of sub accounts but these irregular expenses almost always bust the budget. Therefore, I am going to try to build them into my zero based budget monthly so that I can accrue for them ahead of time. Am I missing anything? Do you think this is overkill?

I am going to continue using my Bank Account for my bills and I will used my Bank of America Keep the Change Checking Account for personal spending for dining out, groceries, entertainment and any personal care.

Experiment: I've been doing this fun little experiment with the envelope system this month where I have $800/month or $200 per week for spending. What I've been doing this last month is withdrawing $200 in cash on Friday and using the envelope system with my Dave Ramsey wallet. The wallet which I purchased for $10 and absolutely LOVE is currently replacing my $100+ Coach wallet and has six envelope slots for gas, restaurants, food/groceries, entertainment, miscellaneous and receipts.

Since I pay for my gas and fuel expense with my debit card, I divide the $200 as follows: $100 for restaurants/dining out, $20 for groceries, $40 for entertainment, $20 for miscellaneous and $20 for personal care. This has actually worked out pretty well because I find that I do the majority of my spending on the weekend. So, I withdraw the money on Friday and then I have to make it on whatever is left the rest of the week until Friday rolls around again. No trips to the ATM!!!

At the end of the week, I have allowed myself to allot any remaining cash towards whatever category I want the next week. Then, when Friday rolls around again, I start the process all over again with a $200 cash withdrawal and divide it among the categories. It's actually been pretty fun!!! I am still working on it but it looks like the way my actual 2011 budget will work, is that I won't have $800/month or $200/week but rather $640 or $160/week. This experiment is still a nice way to get my spending under wraps before February rolls around and I am in the true thick of things with my zero based budget.

Okay...this was long. I guess I am making up for my lack of posting. Bless you if you made it this far. =)

Tuesday, December 14, 2010

Checking In...

Hi Everyone!!!

I am just checking in. I've been budgeting my butt off but there are still too many variables to lock down on a secure plan yet. Zero budgeting is tougher than I thought but putting in the framework is also difficult. I believe I will be able to fully implement the plan by February 1st.

Here's what I've got so far for the framework:
  • Open a money market Efund account here at the Bank with $2,000.
  • Continue direct deposit and auto bill pay for all monthly bills here from my Bank checking.
  • Reestablish ING saving escrow accounts for known irregular expenses: home insurance, quarterly water bill, car registration and licenses, etc.
  • Open an ING Electric Orange Checking Account to help facilitate payment of irregular expenses.
  • Use BofA Keep the Change Account for personal spending.

Variables in the air:

  • Whether I will need to help with my grandmother's funeral arrangements. We are doing a simple direct cremation so the cost will max out at $2,500.
  • Christmas shopping. I am doing very small gifts this year and my family is on board.
  • Annual bonus and increase figures. I should get this information this week and it goes into effect at the end of January to begin the 2011 plan.

What I hope for:

  • Minimum 4% increase which is what I got last year.
  • Minimum bonus of 15% of my salary. I received 14.8% last year for $10,773 and ~ $6,900 after taxes.
  • Pay off $800 Capital One Business Card in February.
  • Pay off $1,200 Capital One Credit Card in February.
  • Pay off $2,300 Perkins Loan in February.
  • Begin tacking the debt snowball with Private Loan - Group T - Pay off 1/2 of the $5,300.
How is everyone doing? How are you planning your Holiday Shopping? What are you budgeting this year?

Wednesday, December 08, 2010

Financial Software...

Dave Ramsey's financial software arrived last night and...OMG this budget stuff is hard. I brought my laptop to work so I could start on it during lunch and I am like...WOWZA!!! Okay Chitown...get it together!!!

It's going to take me a little while to get the plan in order but I am working on it. I finished Total Money Makeover last night while sitting with my grandmother in the hospital. I thought about her life and how she wanted more for me and my sister. We both have to do better.

Since I do have $5,000 remaining in savings. After I put aside $2,000 for an eFund and before I start debt repayment, I have a few irregular expenses below that need to be paid and I am also thinking about pre-funding seperate ING accounts for my home insurance due in June and a small $500 fund for car repairs.

  • $120 Annual Vehicle Sticker
  • $300 Annual Attorney Registration

* Scratch that $500 for car repairs. That's the purpose of the eFund right?!?!?!

Tuesday, December 07, 2010

Budgeting Software...

Dave Ramsey has a $10 sale going on over at his website on his books, cd's and software. I purchased the financial planning software because I have a really hard time with budgeting and his plan calls for a zero based budget. He says it usually takes a few months to get used to budgeting.

It is probably going to take me a while to get the handle on it, but knowing that I can't use my credit cards and I only have $1,000 in emergency funds should help.

Monday, December 06, 2010

Unemployment Information...

At a salary of $75,600, gross monthly income of $6,300 and take home pay of $4,575. Do you guys know how much my unemployment might be should I get laid off or where I can go to look for information on how to calculate?

A $1,000 eFund is clearly not going to cover a month of expenses so I am just trying to get a handle on everything before I implement my "plan" in January.

Sunday, December 05, 2010

Total Money Makeover...

Hi Readers!!!

So I just finished reading Baby Step #2 in Dave Ramsey's Total Money Makeover.

Step #1: Save $1,000 Emergency Fund
  • I can do this with the money I have in savings. I like the idea of of framing the $1,000 in a cheap glass frame and writing on the front, "In Case of Emergency, Break Glass."

Step #2: The Debt Snowball

  • I've been up in the air about Dave's plan because of my Credit Card and the desire to pay if off sooner rather than later. The problem with "my desire" is that I don't have the cash to pay off the entire balance so I don't get the momentum that the snowball plan offers. So...
  • The rate on my credit card with a $18,500 balance is Prime + 6.99% or 10.24% today. The promotional rate on some of the balance has already expired. The remaining promotional rates expire in 1/2011 and 3/2011 and then the entire balance will be at Prime + 6.99%.
  • I called around and the balance transfer offers weren't great. I transferred the balance from Chase to Bank of America at 1.99% through my statement cycle ending in 1/2012. Unfortunately, I could not get the 4% transfer fee waived or lowered. Trust me...I really tried. In the end, I am still saving with the balance transfer at 1.99% for 14 billing cycles.
  • So, the issue with whether to use my savings and bonus to pay down my credit card is null at this point. If I use Ramsey's plan which I am betting 100% I will, I will be paying off the balances smallest to largest. That means, I will be knocking out a couple of student loans in full in January.
  • The pain of having the credit card debt is probably still good for me. I know when it's paid off, it will be paid off for good.

On a side note, my grandmother has a severe case of alzheimers and we moved her into hospice care on Thursday. So, I will be coordinating with my Mom to get her services and arrangements in order. I will post more on that experience later but for now, we are just spending as much time with her as we can. Tell someone close to you today that you love them. =)

Thursday, December 02, 2010

It's My Birthday!!!

Today is my 33rd Birthday!!! I am so blessed!!!

My co-worker took me to lunch, my team lead took me to coffee and another co-worker bought me a lemon bar from Corner Bakery since I love them so much!!! Abundance flows.

I am on page 87/210 of Dave Ramsey's book and it's good so far. I am looking forward to pizza, cake and ice cream at my parent's house tonight. You're never too old for that. =)