Good Bye Bank Of America

Some may call it the "Golden Ticket" and others will call it stupidity, but I am happy and relieved to have dropped off my final payments to Bank of America. Now before you get all excited for me, all I did was transfer the balances to another card. The good news is I went from 27% to 3.99% which will save an incredible amount of money. Essentially, I will be paying less than $40 per month in finance charges compared to ever $300. The bad news is this is not my credit card that I transferred it to; it's my mothers and I have 23 months to pay it off.

I'm not worried about paying it off in time. The payments equal what I'm currently paying every month. Any follower of Dave Ramsey knows that you should never lend money to family unless you're prepared to gift it or accept that you won't see it again. I took over a month to accept my mother's offer because of my concern on how it would affect her credit rating and the fine print her bank would put into such an offer. To guarantee that my actions will to adversely affect my mom's good credit, I am giving her an extra payment up front to act as a cushion. I will also roll over the payments I've been making towards my LASIK surgery as soon as that's paid off in October.

Announcing My Newest Goal!

Dave Ramsey has coined a term the "Idiot Tax." Basically, the Idiot Tax is the true cost of an item after all of the interest you've paid is added into the original cost. One example is a$400 sweater that was originally on sale for $14. Another example is the $70 dinner that ends up being $568. All of this because many people do not pay off their credit cards every month.

While I don't follow Dave Ramsey's program and I disagree with him on some of the advice he provides to his audience, I do tune into his radio program in the evenings when I'm driving and you can't argue with the numbers. Families following his program are successfully getting out of debt and learning about fiscal responsibility.

So how does this all tie into announcing my newest goal? First, most articles you read on setting goals say that you are more likely to succeed if you let people know what your goals are. Telling people what you are working towards holds you accountable. If you let your support network know, they will even help you work towards those goals, cheering you on in victory or supporting you in getting back on the horse.

My personal Idiot Tax has not occurred yet... but the deadline is coming quickly. I had LASIK surgery done a little over a year ago. I signed up for my flexible spending medical savings account through work, but could not pay it all in one year. I was offered financing at 0% interest if I paid it within 18 months. After 18 months, all of the interest will be tacked onto the bill. Unfortunately, things always come up when your emergency fund isn't adequately funded. I have been making payments faithfully every month, but I'm coming up short by about $1,600. Essentially, I have to earn an extra $400 per month for the next four months in order to avoid $1,200 in interest. It's not as difficult to do as it sounds. During the summer I have a delivery job that brought in an extra $2,300 last year. My challenge is, thanks to the recession, this year is slower. I will be working on my creativity in order to meet the challenge, but I'm determined to do it. I'll be posting updates regularly and feel free to post any challenges you may be working on.

Did I Make A Mistake?

A month ago I took a good hard look at my credit cards. (Okay, it was actually the bills since I cut up the cards almost a year ago.) I realized that due to a couple of stupid mistakes over the holidays, I've been spending close to $300 a month on interest alone. Fed up I went into my credit union and inquired about options for a consolidation loan. The customer service person told me they don't do consolidation loans, but I could either apply for a new credit card at a low introductory rate of 3.99% or I could apply for an increase in my line of credit at 14%.

Honestly, I didn't think I would get approved because my debt to income ratio is high, but I thought "What the heck?" Its not going to be any worse than paying 26% on the credit card I have now and its cut up so I won't be tempted to use it. Amazingly enough, I was accepted for an amount that was almost enough to cover it.

When I got the card, I was still a bit unsure if I was making the right choice. After all, I've transferred balances before and I'm still struggling with debt. After much debate and a month later, I made the call. Sure enough, it couldn't be that easy. The woman I spoke with today said the interest would be 11%. I asked her about the introductory rate and she said it ended March 15th. Funny, that was about 5 days after I received it. I decided to do it anyway. After all, that is 15% less than what I am currently paying.

So, have I learned from my past? I hope so. To help guarantee my success I've arranged for automatic payments from my account to make sure I don't miss a pay date. I'm closing the other account as soon as its paid off.

Debt Repayment Update

After struggling for some time with my repayment plan, I've been pushing forward with efforts to increase my income. My first step was to call a bakery I used to work for. Knowing June is a huge wedding season, I asked if they needed help with delivery. I've now completed two weekends and earned $250. Helping a friend rent her apartment I've scored another $100. Best of all, my $600 kicker check should be here by the end of the week.

All of this will ensure I reach my goal of paying off a 401k loan.

The Tax Man Cameth

I know it was my money already, but that doesn't make the day I receive my tax refund check any less exciting. Due to decent planning, my check was only a few hundred dollars. You may ask why that's a good thing, but it means that I didn't loan the government much interest free money.

My first stop was to make a 2nd payment on a Visa card. The second stop was to a department store to pay off a card. Yes, I agree that store cards are high interest, but this one is a rewards card and I pay it off quickly if not monthly. Felt good!

I did the shift this weekend, but didn't work as many hours as I hoped. At least I was able to put $5 towards my emergency fund and fill up the tank of my car. Tomorrow I have a taste test that will bring in another $20 for my emergency fund.

Lastly, I received an email from a local college asking me if I was still interested in participating in a mock jury. If I fit the criteria I will earn $100 for 5 hours of work. That will be a nice addition to the pot.

Do Over!

Paying off debt is a lot like weight loss. It takes years to put it on and its going to take time to get rid of it. Knowing that fact doesn't make it any easier. Instead, I tend to get frustrated, do something really stupid, beat myself up about it, and then get back on the wagon. Its a vicious cycle, but when I'm done, I know I'm good for awhile.

To readjust my thinking, I officially published my full debt load and replaced my previous pie chart from No Credit Needed. (For the record, I really appreciate NCN for everything he does, but I felt I needed to be brutally honest with myself.) I pulled all of my hidden cash and made an extra payment on a credit card to get a jump start. The hidden cash came in the form of:

• $5.50 from returning pop cans for their deposit - I also return the cans from work
• $28.67 from my loose change jar - I save all of my loose change in a glass which I turn in when it reaches a certain point
• $20.00 from my dollar coin stash - When I have a few extra dollars and find myself making a deposit at the bank, I swap them for dollar coins and save them as an emergency fund for end of the month gas in the tank or other surprise expense

The next step in my "recovery" is to look for ways to make extra money. This week I am putting up Easter orders at a bakery I used to work at. That will be an extra $50 for the evening. Next week, I'm participating in a taste test which will earn me an $20. Its a start for the snowflakes.

Finally, I get to have an honest look at my spending habits. I was lucky enough to have a very nice gentleman buy me lunch today, which was a complete shock because I didn't know him. He apparently won on Keno and appreciated the fact that I talked to him. I still feel guilty about it. My kitchen is not set up for cooking right now. I somehow have lost my can opener. Don't ask me how. I have NO idea. The fridge is looking like a bad bachelor commercial. Its time to get real and time to put the plan together.

Improving Personal Finance Management

Over at No Credit Needed, NCN has posted questions for the Personal Finance Community to answer. If you could improve one area of your personal finance management, what would it be?Personally, my biggest challenge is to keep to my budget. I tend to get a bit overeager to pay off debt and don't always budget enough for daily expenses. When this happens I find that my snowflakes make their way to supplement my budget instead of going towards debt. It’s not a good cycle.

To help counter this problem, I save one dollar bills and change from purchases. The dollar bills get stashed in an envelope for the last few days before the next paycheck. The change gets saved in a glass jar. When I reach a certain level in the jar, I take it to the bank, cash it in, and put it towards credit card debt.

Debt to Income Ratio - A Calculation Important in Debt Reduction

Ever wonder how much debt is considered by banks and financial institutions to be too much debt? If you don't know where you stand, its time to take a moment and figure out your debt to income ratio.

First, take a moment to figure out your bad debts. This includes credit card balances, store charge cards, car loans, and any debt that is depreciating in value. Don't worry about including good debt like student loans, mortgages, investements, etc. Now you need to figure out your after-tax annual income. Finally, divide your after tax income by the total bad debt (after tax income / total bad debt = debt to income ratio.)

Obviously, the personal finance and frugal communities don't believe in carrying any bad debt, but if you do carry debt you shouldn't carry more than 15%. If you meet a company who is trying to convince you otherwise, RUN! They obviously are only concerned about their bottom line.

Fair Isaac Is At It Again! Are you Ready?

Liz Pulliam Weston at Money Central has written a new post and its a must read! Fair Isaac has revamped their FICO score for 2008. Check out "Build A Killer Credit Score In 2008." There are changes and if you aren't privy to those changes you could be hurting your score without even knowing it. According to the article, some changes include:

• "Applying for new credit accounts may hurt your score less.
• Having high balances on your credit cards could hurt more.
• Actively using the credit accounts you have may be more important.
• Having both revolving and installment accounts on your report could help you more, as the new formula is more sensitive to your ability to handle different types of credit."

Throughout the article, Liz Pulliam Weston stresses the importance of keeping credit balances well below the limit suggesting not to exceed 30%. This is because FICO uses this percentage as the largest factor in your score. Unsure of your FICO? While you can get a free annual report yearly at AnnualCreditReport.com, it's not as easy to find out your FICO score without applying for a loan. Having said that, they will for a price, include your FICO score with your credit report. Each of the three reporting companies will have a different score. To play it safe, use the lowest score.

Baby Its Cold Outside! And I just want to hibernate.

Well, I went to the first night of my auction and while I saw a few really good deals, I restrained myself. The items I was going to bid on went for more than I was willing to pay. (And that's sad to say considering I was buying for someone else with their money.) Tonight was the last night and the night of the final two lots I was considering, but I have to confess that I couldn't bring myself leave the warmth of my apartment or the comfort of my couch.

This is a good night, however, to catch up on year end projects. I received a $60 check for my Flexible Spending Account and an update that there is still $18.56 to be reimbursed. I need to find those final receipts for over the counter medication I've been holding onto.

I'm also pulling together tax information so I can sit down and finish it by this weekend. I know I'm getting a refund and I'd like to get it sooner rather than later to bring down my debt load and possible take advantage of January mattress sales. (Most likely the mattress will be put off for another year, but its always fun to have a wish list.)

Finally, when I'm done with this post I need to plan my menu for this week and next. I've been working off the cuff, but if I keep this up I will eventually rely on dining out. So far, I've spent $5 total this week including a meal at Taco Bell and two bags of chips for a snack at work.

Nights like this are a great time to take care of those to-do items we prefer to ignore. Keep a list of items for just such a night, pop in a DVD, curl up and feel the satisfaction of a job well done. What things are on your list?

Debt Repayment Progress - $60 towards debt from FSA reimbursement.

November Goals in Review

The Reduce A Bill Challenge at Working for Financial Freedom comes to a close for a second month. I committed to 10 No Spend Days and upped the anti by limiting days I dine out to no more than 3 a week that I pay for. I made it for 11 no spend days but I only made the paying for meals out no more than 3 days a week for half the month. So I will chalk this goal up to successful, but at an 80% success rate. We will have to see if Working for Financial Freedom is up for another month of the Reduce A Bill Challenge. I think I will try a different bill if she does.

My personal goals included adding another $100 to the emergency fund. I paid off my Personal Line of Credit so I would check that one as a success and as soon as I receive payment for house sitting, I will be able to deposit that.

My second goal was to pay off the first of three credit cards. It was really close, but I did it and I can't tell you how happy I am for that. Now I get to switch focus to a more difficult card.

Finally, I sent off another $50 to my Roth IRA. Its a slow process, but I know that everyone is going to be selling off some stocks at the end of the year to take profits or losses for their taxes and I want to be in a position to buy some bargains if they are available.

Big Yeah! Two More Debts Down The Drain

I wrote the checks to pay off two debts today.

First, I paid off a Visa card that I've been working on since 1998. This was a bad case of paying a very small amount and watching the majority go towards interest. Somehow this card was a low priority because it was a low interest rate. The problem is that it never got paid off because there was always something of a higher priority. So I'm happy to announce I now have $50 per month to snowball towards another bill.

The other debt that I paid off also satisfies one of my November goals. I have paid off my step father which is a huge weight off of my shoulders. It wasn't a large debt, but I never feel good borrowing money from family.

The Weakening Dollar - How Will It Affect You?

I love reading about personal finance and investing, but I'm not always good at sharing information. Don't get me wrong, I'm not one to tell you the next big investment. Nobody really owns that crystal ball unless they can spot the trendy investments and grab onto the coat tails. I also believe in taking everything with a grain of salt. One of the "investment gurus" that everyone is familiar with is Jim Cramer, the loud and obnoxious advisor seen nightly on MSNBC. Well he also hosts a website called thestreet.com. While checking out Yahoo!Finance, I found this fascinating article featured on TheStreet by Jeffrey Strain, 5 Ways To Survive The Dollar's Dive.
The article outlines 5 areas that the decreased value of the dollar will affect our lives and offers some helpful advice on how to prepare for it, including paying off as much variable interest rate debts as possible because banks will increase interest rates to appeal to foreign investors.

Check out the full article at http://www.thestreet.com/s/5-ways-to-survive-the-dollars-dive/funds/the-financial-advisor/10389112.html