How to Properly Apply Bonus Payments to Loans

In this post I would like to focus on the trivial little steps that you need to take to ensure that your bonus payments on your loans are being applied properly. Depending on who the lender is, they may have different policies on this procedure, but I will point out a few of the tips I have learned from our lenders.

Sallie Mae & Sallie Mae Serviced Loans

Jason and I have most of our student loans through Sallie Mae. We also have a few loans through the Department of Education, but they are serviced by the Sallie Mae website, meaning that the Sallie Mae servicing procedures apply to them. 

Sallie Mae is in a constant state of revamping their website, which means that some days it just doesn't work, and other days it works but will be completely different from the site you saw the day before when you logged in. It is frustrating, but a few factors have actually improved over the course of their revamps, and their rules have remained the same. 

1) Loans are due on the 1st of the month, but they aren't assessed a late fee until the 5th. Submitting a payment online can take up to 4 days unless you pay extra to have the payment rushed (Rushed service online? This is a nonsense charge that they take advantage of for people who have to wait until the last second. The reality is that if they weren't in the business of taking your money, they could do all payments on the "rush" schedule for free.). 

2) Just because you send them extra money, doesn't mean they will apply it. Sallie Mae's policy is that even if you send an extra $100 in with your regular payment they will hold onto the $100 and apply it to the next month's interest. They will not apply it to principal unless you specifically write them a letter or email indicating which loan it needs to be applied to, and when it should be applied. The Sallie Mae site is set up to charge you a set monthly amount based on your loan amounts, and it splits up the payment automatically. Therefore, if you make the bonus payment with your monthly payment it will not have a set destination unless you tell them where to put it.

My letter usually says something like this: "In reference to account number XXXXXXX,  loan number XX-XX (Sallie Mae or Dept of Edu), please apply all extra funds from the payment made on mm/dd/yyyy to the principal amount on the loan immediately." Since you already made your regular monthly payment you shouldn't have any extra interest to worry about, and the entire amount can be applied to principal. The word 'immediately' is very important in making sure that the money isn't just set aside for that loan at a later date. Both our Sallie Mae loans and our Dept of Edu loans share the same account number, but are serviced separately, so they actually have over-lapping loan numbers (ie We have two loans that go by 01-01, but one is SM, the other is DoE), so make sure you specify which of the two you are applying the money to.  Check back over the next week to make sure that it was applied correctly, and get in touch with them ASAP if there is an issue. I use only their service email address, and they tend to respond within 24-48 hours.

3) If you have already made your regular monthly payment and you decide to go back and make an additional payment later in the month, the Sallie Mae website now allows you to choose which loan to apply the payment too. Instead of going to the default setup that splits your payment evenly, the website will actually allow you to choose which loan or loans to apply the extra payment to, and how much of the payment to apply to each one! This is a huge improvement over their previous system, but just to be sure I still send them an email to make sure that the payment is applied immediately. Why risk it? 

Private Lenders

Our largest loan ($27k) is through a private lender. Each lender has their own website and their own rules. It is important for you to get in touch with them and research how to apply extra payments to your loans. AES is nice enough to have a button that will allow you to pay extra on your loan instantly. They don't hold the money for the next month or anything else that would prolong your payments. This is very convenient, but I can't say that all private lenders give you this option, so it is definitely worth looking into. There are still a few of them out there that have very primitive websites, and actually require a signed letter and a check when making extra payments because those payments are handled by a specific department, instead of the automated system for regular monthly payments. Stay informed, make sure your money is getting to the right place every single time. Nobody can afford to have their money disappear, or to have it put on hold to go towards the next month's interest. That would defeat the whole purpose of sending the bonus payment. 

New Goals

Hello everyone! I hope you all had a wonderful Memorial Day weekend!

Today I have decided to set another set of goals for us. Primarily, I need to put at least $350 into savings for the month of June in order to reach our savings goal. I also need to determine how much extra I want to pay towards student loans each month. The graph above shows the tiny bit of progress we made already just by making our regular June payment. Only $15 of that payment was applied to the principal, but we will definitely see more progress by the end of the month as soon as we figure out our bonus payment.

As far as savings goes, Jason and I are working on increasing our monthly income so that the $350 savings won't have to come out of our regular monthly budget. I know many people, us included, don't just have that money lying around.

The first step in this process was looking at our budget and determining places where we could be saving more, which I did last week. Eating out is our biggest weakness, and we have taken steps to reduce that portion of our budget drastically. I will admit right now that we don't plan on giving up all of our eating out budget, just cutting it back. I think of sticking to a budget a lot like sticking to a diet, cutting all of the foods you enjoy out of your diet leads to a very low success rate. We need to give ourselves a little bit of a treat once in a while to reduce the stress that extreme dieting and/or budgeting puts on us. As long as you can keep yourself on track 99% of the time, it's okay to make an exception once in a while. In fact, it can help you keep things in perspective and stay motivated.

Our second big weakness is the amount of things that we charge to our credit card every month. Generally this card is only used for Jason's lunches or if he stops to get a drink during his work day. He is on the road much of the day and in a small van, so he doesn't have a convenient way of keeping fresh food or cold drinks with him. Unfortunately, since we haven't paid the card off in several months, the payments we have made have just kept us even, they haven't done anything to reduce our balance. In order to combat this spending, we have put the card away and Jason now has a cash allowance for these sorts of purchases. Now instead of having a $300 budget to spent at will, he now has $20 a week in cash. There are a couple of ways to handle this. 1) I just give Jason a $20 every Wednesday because that is the beginning of his work week. 2) In the past we resorted to using envelopes with each day of the week written on them, and a $5 bill in each one. Once again, this seems a little elementary, but it can go a long way towards monitoring your spending and preventing you from going over budget. Once the cash is gone, you can't keep spending it.

When it comes to increasing our monthly income, we started with me going back to work. This was actually a huge ordeal for us because childcare is so expensive, I had to really work to find a job that paid a minimum amount per hour that would pay for daycare and still have enough left over to make it worth my time. The other half of the equation was finding a babysitter who is in our immediate vicinity so that there isn't any extra travel to and from her house, plus she only charges us $20 a day to watch Logan. There are a TON of stay-at-home-mom's who are up for making an extra $60 a week or so to watch your kid since they will be home anyways. They typically charge less than a daycare center, and tend to be much more flexible with weekends and early mornings (which is a requirement for my job). At the end of it all, I will really only be making about $200-300 a month after paying for the babysitter, but that can go a long way towards our monthly savings goal, and won't cut into our original budget from Jason's paychecks. (The only issue is that I was forced to use one of those stupid ADP pay cards until my direct deposit goes into effect, and their system can't validate my identity for some reason, so it is acting as a savings account temporarily until I figure out how to get my money off of the card. *sigh*)

The second half of our plan to increase income is renting out the basement of the house we are moving into. We had planned on setting up our computers in the basement where it's cool, and using the larger open portion of the basement for Logan's toys. However, we have several friends looking for a place to live for a while, and in general people are paying up to $600 to rent a basement with a private bathroom. I don't expect to collect $600 a month since the basement is only partially finished, but anything above $300 is a significant dent in our rent and utilities. Having roommates is a pain sometimes, and some people just don't have the ability to house someone else, but we made the decision to give it a shot for a while and see how it goes. Even if it only lasts for a few months we can apply that extra money to loans and come close to paying off the smallest ones.

I would like to apply at least $100 extra per month to our student loans on a permanent basis. This will cut 5 years off of our current payment plan. If I could manage to put $250/month extra toward the loans we could cut an additional 3 years off of our payments. I don't think we can commit to $250/month until we reach our savings goal though, so I will settle for $100 in the short term. The thing is that even if you can't commit $100 extra per month to your loans, any amount makes a difference. In the past I have resorted to rounding our loans up to the next $5 increment just to be putting a little something extra in. The fact is, that extra $3-4 was going to be spent on junk food or something irrelevant, so putting it towards the loans does help. If you haven't already looked at the snowball spreadsheet and played around with it, there is a link in my previous post: Week 1 Goals: Update & Helpful Links. This will give you a month to month update on all of your loans and their balances along with calculating interest.

Following this post I am going to make another post about the specific methods of applying your bonus payments to your loans. There are many little details and secrets about this process that could keep you from paying down your loans effectively.

Week 1 Goals: Completion

My 3 goals for this week were as follows:

1) To prioritize our loans and find a way of graphically tracking our progress.

2) To set a savings goal for us to apply to the purchase of our house.

3) To audit our bank statements for the last few months and see where all of our extra money is going and how we can fix the problem.

Prioritizing

The first goal was fairly simple. I decided to work from smallest to biggest loan using the snowball method. While many people say that you will save more money by working from biggest to smallest, the success rate of that method is significantly lower than smallest to biggest. There is, of course, a human factor here, and just like anything else, we want to see that our hard work is making a difference. If I were to start by paying of our largest loan ($27k), it would take 4-5 years by itself. That would mean that we would have to keep ourselves on track for that long to see the first bit of difference in our budget. Rather, by starting with the smallest loans first we can knock some of them out pretty quickly, cross them off and see a short term difference, even if it is a small difference. This is reassuring and motivating because you start to see results much faster. Plus, by paying off the small loans first I can apply their payments to the larger loans as we go along. If I did things the other way around I would be making the smallest payment to the biggest loan and the biggest payments to the smallest loans, which seems like it would slow us down.

These graphs are posted full size in my previous post as well.

Saving

The second goal for the week was to set a reasonable savings goal for us. We are moving into the house as of July 1st, but we will be renting it from my mother to begin with. Once we have enough for closing costs, we will purchase the house from her. The price for the house is agreed at $140,000 which we were already pre-approved for last year. However, due to complications with Jason's job, we were unable to purchase last year. We plan to give it another shot, and this time we are going in with fewer loans, more savings and extra income. Another thing to keep in mind for us is that I just went back to work this month, so if we try to buy the house in the next 6 months my income will not be counted since my length of employment is not long enough to show a stable source of income. Therefore, it benefits us to wait until Dec/Jan anyways, and since the only remaining derogatory account on Jason's credit report will reach it's Statute of Limitations in January of 2013 it will also be removed at that time. Once we hit the end of January 2013 we will have all of our tax info (Jason's job and all of our loans post their tax forms online by Jan 31st of every year. The only thing we will be waiting for is my W-2 this year) so we should be able to do our taxes early in the year, which will either give us a boost to our savings or can be applied to student loans, or both! So we have several reasons to wait until the beginning of next year to pursue the actual purchase of the house. 

I decided to set our savings goal at $6000 for now. We have gotten several estimates on the closing costs and they have ranged from $4300 all the way up to $5600. Last year our closing costs would have been roughly $4400. I think these are fair estimates, and by going to $6000 we can have a little extra cash just in case. As far as dates go, I would like to be in the mortgage process by March of next year, which gives us 10 months. $6000 in 10 months would be $600 a month put into savings, and I am pretty sure we do not have that much extra cash in our budget to set aside. Instead I am figuring that we can put $2500 from our tax return into savings, which leaves us with $3500 over the next 10 months. $350 a month isn't so bad. For the last 4 years our tax return has been between $4-5000 every year, so only putting $2500 into savings should leave us plenty of wiggle room if our tax return comes back much less than expected. I don't foresee that happening though, since our situation has not changed at all. 

As you can see, we already have about $750 in savings at the moment as well, but I think that money is going to go toward the penalty for breaking our lease early next month. If that's the case then we will be working from zero here too, and I will adjust the graph accordingly.

Tracking

The third and final goal for the week was to track our spending over the last several months to see where we can really rein in. I was a little disappointed to find that A) our biggest weakness is eating out and B) that it was extremely difficult to track certain portions of our budget. Tax season just finished up and because of that we see a huge increase in savings during March, and then an even bigger decrease in savings in April. The issue is that we did our taxes early on and they were auto deposited into our savings account, but we had already budgeted our tax return to pay off 2 loans and to get the car fixed. We did pay off the two smallest loans we had, which saves us about $63 dollars a month on our student loan payments. The other huge chunk of money went to car repairs (new water pump, oil change, stabilizer bar links, alignment, tires). I also had trouble tracking gas purchases separate from grocery purchases because we generally buy gas at the Safeway gas station, which is also where we get our groceries. So when trying to organize this information I found that some of our gas purchases may be included with groceries, while others may be in the "Other" category, artificially making our grocery budget look outrageous. 

May is the first month in a while that had us back on our regular budget, but it doesn't account for money spent on babysitting or laundry, and I somehow managed to leave out our other utilities for all three months. We pay them with our rent and they have been about $160/month altogether. Even May had some erroneous spending with Mother's Day gifts and whatnot. It is also notable that we reached the end of our 6 month promo period for internet, so our rate went from $36/month to about $72/month.

What I have found is that we do have a weakness for fast food that generally means we eat out once a week. I would like to cut back on this because it isn't helping anything at all. The key to cutting back on this expense is to have food that is quick and easy in the house. We go out to eat when we don't feel like cooking, so having meals that don't require much effort could be a huge help on this front. I would also like to make an effort to pay off our little credit card so that we are not making multiple $100+ payments and still carrying a balance. It has been put away so we won't be adding anything to the balance of that card for a while, but it is important for us to carry a small balance on the card and continually make payments for Jason's credit score to continue rising. I would like to keep this under $100 for the entire month. Lastly, I would like to put money into savings and keep it there. My savings totals reflect that we have been putting money into savings, only to transfer it back out for one reason or another. This needs to stop. I'm sure I can find a solution in our "other" category by cutting out extra trips to the store for soda or miscellaneous shopping.

Week 1 Goals: Update & Helpful Links

First of all, I managed to get a friend to help me with creating graphics for this blog! At the top is a table that shows all of our loans, balances, interest rates and minimum monthly payments. The loan names are just the descriptors put on them by the lenders so that I can easily identify them. Next is a graph of our current savings goal, which I have tentatively set at $6000 to be applied toward the closing costs on the house. Since I assigned priority numbers to each loan in the table, I decided to do a visual representation of how close we are to paying off the current priority goal. At this time, we are on #1, but I plan on creating a new graph for each loan as we pay them off. Lastly, I made a graph to track the progress of paying off our total debt load. As I said in a previous post, these graphs are my gold star. Filling in portions of the graphs as we progress is a nice visual reminder and reward! 

I would also like to take the chance to share this awesome Excel Worksheet:  Debt Snowball Worksheet

When I first began exploring the best method of paying off student loans I managed to find this worksheet. Page 1 asks you to put in all of your loans and debts along with your current monthly payments. It also gives you the ability to put in a start date, and any additional payment you plan on putting towards your debt. After you insert all of this information, Page 2 of the worksheet gives you a complete month-to-month breakdown of the balance and interest on all of your loans. As you scroll to the right you can see how your balance will be affected, and as soon as you pay off one loan, the payment from that loan is automatically added to the next loan's payment (the process known as snowballing). Page 2 also gives you the opportunity to add in 1 time bonus payments to the appropriate month (i.e. I add in a bonus payment in April since we apply most of our tax return to the loans).  I LOVE this worksheet. Being able to see the numbers and project when each of our loans will be paid off and see the balance dropping keeps me motivated and makes me want to stay on track!!!

Quick Update and an Explanation

I have made progress on my three weekly goals already, and will post them later on but for right now I wanted to give a quick explanation of our housing situation and how it is about to change. Currently my mother owns a total of 7 houses, and 6 of them are here in CO. We have been wanting to buy a house since last year, and she has decided to try to sell a couple of her houses. It just so happened that the house we want to buy was to become vacant at the same time that our lease on this apartment would end. The plan was for us to move into the house and take over paying rent (which I have already explained will be exactly the same as what we pay for our current apartment). This way we would have more time to save up for closing costs and have some extra cash to actually purchase the house from her. She is willing to sell us the house for exactly what she owes on it, which puts it at the high end of our budget, but we were pre-approved for more than that last year, and now we have higher income, so we don't predict any issues there.

Anyways, in a rapid turn of event, her tenants decided to vacate the premises at the end of this month. So we were suddenly left with a decision of staying in the apartment til September, either forcing her to eat the mortgage payment on the house for the next 4 months, or try and rent the house and have it not be available to us when our lease ends, OR to just break our lease now and move into the house early. Ultimately we decided to go ahead and break our lease because moving into the house will be a huge transition and renting it out or leaving it vacant would leave us with a month-to-month lease or moving to another apartment until the house became vacant again. There is a penalty for breaking our lease, so we will basically be paying a full month's rent extra. We are going to have to make this payment out of our savings, but I think we can make up for it pretty quickly. Our deposit here was relatively small ($250) so they said they would just bill our last month's utilities and carpet cleaning to the deposit and that would be it. We didn't expect to get any of that money back anyways.

So at the end of this month we will be going into the house to clean it and prepare for move-in. Over the course of June we will be moving whatever small bits of our stuff that we can. Luckily since my mom owns the house we aren't going to be locked out until exactly July 1st which will make our moving process much easier. Then at the end of the month we will get a trailer and move all of the furniture in 1 trip (hopefully).

The end result is that instead of paying $750/month for a 2 bedroom/1bath apartment, we will be paying the same amount for a 4-5 bed/4 bath house with a backyard. We will have our own washer and dryer, we will have our own utilities, which I expect to go up from what we are paying in the apartment, but we will have ways to combat the costs. There is a fireplace, and Jason's parents live up in the mountains, so we can take as much firewood as we can get our hands on from their property for the winter. The house is already equipped with energy efficient windows and siding, and I even think the last time the roof was replaced, they put the lighter, more-reflective shingles on the house.

The other upside to this is that the basement is only partially finished but it does have 1 room and 1 full bathroom. We have a friend who is looking for a place to live temporarily, and we have talked to him about renting the basement from us. We stand to make $2-300/month on this, which will easily make up for the increase in utilities costs or drop our portion of the rent even further. Even if he decides not to take it, the option will still be open for us to rent out that portion of the house.

So this is where we stand today. We've taken a hit to our savings but long-term stability is what we are aiming for, and we will be one step closer. This will officially be an end to constantly moving, sometimes twice a year. I added it all up the other day, and this will be the 8th time in the last 4-ish years that we've had to get a trailer and move. It is a PAIN, and it has cost us much more than just deposits and truck rentals. Much of our furniture that was in good shape is battered and falling apart after this many moves. We will ultimately have to replace some of it, but we are trying to hold off until the house is actually in our name before we start spending all of our money on furniture and decorations.

Will definitely be updating with my weekly goals soon! :)

Setting Financial Goals: Week 1

“Aim for the moon, that way if you miss you’ll still be amongst the stars!” – W. Clement Stone

*Ahem!* Don’t listen to that guy. He’s wrong. The closest star is light years away from the moon. If you miss the moon you’ll just be floundering in dead space, which I can only assume is very similar to floundering in a never-ending sea of debt!

The thing about financial goals is that they are a little bit different from ordinary goals and dreams. When I say that someday I want to be an astronaut there is not numerical value to this goal. Surely there will be an investment of time and energy and a cost of education involved, but there is no sure way to place a unit of value on accomplishing this goal.

When it comes to setting financial goals to pay off debt or save up a certain amount of money there is an exact value. You can add up every penny you are spending. You can calculate how much money you will save on interest, and you can clearly see how every single cent is applied or not applied to that goal. Then you can take those same units of value ($$) and apply them to your other goals (ie. Going on a vacation, buying a new car, etc).

What I’m really trying to say here is that most goals you set have an emotional or sentimental value, but financial goals have a monetary value, and that is universal. Instead of shooting for the stars with your dollars and cents, how about shooting for something closer to home? One step in front of you, and then two steps and three steps? This way if you miss, you’ll have a chance to land in the vicinity of your goal, and make up the difference at the next earliest opportunity. It doesn’t sound nearly as glamorous as that quote, but when you are budgeting every penny, it doesn’t make sense to me that you would throw caution to the wind and hope that it all comes out okay. If it doesn’t work out you’re going to be missing not only your goal, but potentially putting yourself in financial peril. Thanks, but no thanks.

Personally, I used to set wildly unrealistic goals for us. We pretty much never reached them. Instead, we would wait until the very last second and then cut every piece of fat out of our budget to make it happen, and when that failed, we would just extend our goal by a month or two at a time. This is frustrating and obviously a bad habit, not to mention the fact that it has an EXTREMELY low success rate. Every time we miss our goal I feel like a complete idiot and spend a couple days berating myself for setting such arbitrarily lofty goals. I still struggle with this. It all looks good on paper, but then real life happens and it all falls apart.

While I would love to pay off all of our student loans in 6 months, it’s not going to happen, and I know that. I don’t think it will happen in a year or even two years. If I could dedicate an additional $250/month to our debt and use the snowball method, it would still take 5-7 years. But every year saved is saving us a ton in interest payments. Most of our loans are on a 15 year repayment plan, so I think paying them off in 1/3 the time or ½ the time is a reasonable goal. Besides, I have no way of predicting any raises or new income that could bolster this effort as the years go by. Nor can I predict any disasters or emergencies that could totally derail this plan. The good news is that extra money is always positive, and even if something comes up that throws you off of your original plan, you still have the plan in its basic form and you can set goals to get back on track. Baby steps.

There is also a huge difference between setting long term and short term goals. The ultimate long-term goal is to pay off our debt. The short-term goals are what help us do that. The short-term goals go into effect immediately and put us closer to our long term goal a day at a time. When you are in first grade and are told that you are doing something so that one day you will get into a good college, your 7 year old brain is saying “So what?” Instead of counting on that to get you through the next 12 years of school, you are given a gold star for the days that you are good and get your work done. Good job! For every short-term goal you achieve, give yourself a gold star. It helps. Without it, you will be cutting way back on things that you would normally enjoy, and will be left with a shell of your former life in some cases. It gets depressing when you don’t see anything but the long-term. Humans need some form of near future gratification to keep them motivated because the long-term is just too far away to keep our interest.

This is also a good place to note that setting financial goals for a family is different from setting goals for yourself. When you’re by yourself you can make sacrifices that you won’t make with a family. I am not going to sacrifice Logan’s well-being to save a dollar. I’m not going to force Jason to give up going out with friends once in a while. He works all week to pay our bills, so he deserves a break sometimes. It also involves the commitment of all of the adults who are contributing to the goals you are setting. In our case, Jason thinks I’m a lunatic and has yet to give his approval of this plan. On the plus side, I have always paid the bills and taken care of the finances, so he won’t really know what’s going on anyways. Okay, this is actually extremely irritating to me because I think that if he understood the depth of our hole and the sheer amount of money we spend on this debt he would be more motivated to help. This is going to be a constant struggle for us and I know that ahead of time.

So for today I will lay out some of our current financial goals:

    1)      Prioritize our loans to be paid off and find a way to organize this information visually. (This also helps. It sounds cheesy, but coloring in sections of a meter as you complete portions of your goal will give you a comprehensive way to see your progress at a glance without having to look at actual numbers. It’s my gold star.).

    2)      Set a reasonable savings goal to be applied toward the purchase of a house. I will explain this situation in more detail later, and why it is important for us now.

   3)      Where is all the money going?! I am going to dedicate time this week to scouring my bank statements for the last 6 months to discover what is happening to all of the extra money we have on paper, but not in our bank account. It’s going somewhere and since I just transferred money out of savings (again), it isn’t going to the right place. I need to fix it.

Long term:

1)      Pay off all the student loans and family debt! 

To the Haters

I don't really want to do this, but in an effort to be on the offensive rather than being on the defensive later, I am making the following two points now:

So here's the deal. Some percentage of the people reading this are going to say "You were just stupid and now you're in a hole. Who cares?"  To them I say: this is common. Not everyone gets educated in basic finances before they move out on their own. I was lucky to be one of them, but Jason either didn't get it or didn't care at the time (I'm leaning toward the latter too... ha ha). On top of that, things don't always turn out the way we planned, and a lot of students find themselves in over their heads with student loans just because they changed their major or experienced some life event that threw them off course. It happens. Making the assumption that every person out there should just "know better" and get it all right from the second they turn 18 is just stupid. It doesn't work like that. There are too many factors that can throw a normally well prepared individual into a tail-spin. The thing is, if they have read this far, they are obviously looking for a way out, and trying to learn about the things they missed the first time around. Good for them.

I'm also sure there are a number of people thinking "You make more than minimum wage, you don't get it." Not entirely true. As of today we have reached a level of livability. We're surviving but we aren't saving anything, and we have actually chipped away at the little bit of savings that we did have. In case of emergency: call our parents and beg because that's our only backup right now, and judging by the debt that we owe Jason's parents you can see that that life boat is starting to sink. Plus it's just embarrassing to have to do that. Seriously. Back in the day though, Jason worked at Walmart and I worked at JCPenneys and neither one of us was working 40 hours a week. We were lucky to be able to pay rent and buy groceries in the same week. Then I went on maternity leave with our son for 6 weeks, and it was just Jason's Walmart paycheck getting us through. We fell WAY behind on bills. A while before that Jason wasn't working and I was on a 3 month work/study grant making $8/hr but I couldn't work more than 20 hours a week. That was our only income (which is why a huge amount of those student loans went to paying for living expenses instead of actual schooling), and there were several weeks where we each ate 2 pieces of toast for breakfast and dinner and that was it. One time we scrounged up $3 to buy a jar of peanut butter to go with our toast. It was magnificent. So, by those standards, we have come a long way, but we still have a really long way to go. I will put some time into detailing how we got to this point, and hopefully it helps anyone that really is stuck at minimum wage and just not getting anywhere. That's the best I can do.

Our Current Financial Situation

I am going to try to give an overview of our family's current financial situation as of 5/19. I am going to break down the loans we currently have, and our income as best as possible, plus explain a few of the oddities about our budget at the moment. This post is somewhat long and I apologize for the rambling, but I'm trying to paint a whole picture, and I'm not much of an artist, so things get a little bit out of control sometimes.

Debt

The vast majority of our debt is student loans. We have 2 credit cards, one for general use and emergencies ($300 limit) and one to the jewelry store where we bought my wedding ring ($1800 limit). The jewelry store card is paid off already, but the account remains open because closing it after less than a year would be a major hit to Jason's credit score.

Sallie Mae
     Signature Unsubsidized...................................................................................... $9680.62     6.25%
     Signature Subsidized........................................................................................... $2003.74    6.80%
     Signature Unsubsidized....................................................................................... $9105.17    6.25%


Department of Education
     Stafford Unsubsidized......................................................................................... $1782.11    6.80%
     Stafford Subsidized............................................................................................. $4367.01    6.80%
     Stafford Unsubsidized......................................................................................... $4298.28    6.80%


AES
     ALPLN Unsubsidized......................................................................................... $27020.85   6.74%


Jason's Parents........................................................................................................ ~$12500.00  6%


Jes's New Loans..................................................................................................... $2900      4.5% 
(? Still in my grace period so I haven't looked into them very much yet. I know the amount, just not the interest rate, but I do know the rate is significantly lower than our old loans, perhaps as low as 3.65%. I'm estimating higher here.) 


Credit Card................................................................................................................ $172       23.0% (Yikes!)


Total:  $73,829.78 (WOWZA!) 


So that is pretty much where we stand today. At this point in time, we are paying $231/month to Sallie Mae, $133/month to Dept of Edu, $155 to AES (going up to $230/month starting June 1st), and $25/month on the credit card (but we actually try to pay it off whenever we can so that's usually closer to $150-200/month). My new loans are still in their grace period since I am still in school, so those are not an immediate cost, and even though we were paying $200/month to Jason's parents, those payments stopped after I got laid off. The good side of family debt is that it's much easier to put on deferment in case of emergencies, but still not recommended. And yes, they do actually have a contract written up with interest rates and monthly payments scheduled to start as of Jan 1st 2013.

Other Bills

Here's a quick breakdown of the rest of our expenses by month, unless stated otherwise:

Rent: $750

Phones: $99

Electric: $40

All Other Utilities: $115

Internet: $72

Car Insurance: $472 per 6 month period

Auto Gas: $200

Babysitting: $20/day

Groceries: $400

Laundry: $40

Rent is set until September, no way around it, but luckily it won't be changing when we move. Phones are under contract for another year. We don't have data, we don't have smart phones. Our phones are at least 2 generations old, and not in very good condition. We have 750 minutes a month and unlimited texts. That's it. It really only goes up from there, and we are up for an upgrade right now, but we haven't taken it because it will cost us an extra $30+ a month and lock us into another 2 year contract. Yuck!

As far as utilities go, electric is the only thing we are individually billed for, and we try to keep this bill as low as possible. It is usually in the $32 range, but has gone up a little as the weather has gotten warmer, but hopefully with both of us working and me not being home all day and needing to cool the house, we will end up saving more here. All of our other utilities are (in)conveniently bundled for us by the apartment managers. Basically they take the total bill for the building and split it between the number of apartments that are occupied at the time. This sucks. A lot. It has effectively doubled our bills from our last apartment for utilities because we  have absolutely no recourse or say in keeping these bills down, plus they actually charge us a convenience fee for doing this. I hate it. This system has completely nullified our ability to save money on utilities by monitoring our water usage and things of that sort. 

We have found a reasonably priced babysitter who is willing to watch Logan for $20/day that we need her, which is important since our schedules both change from week to week and a traditional daycare is too expensive, and doesn't meet our needs. Sometimes this comes out to $40 for the whole week, other times it can be $100/week. This is a pretty big range that we have to keep in mind at all times.

Our grocery bill may seem a bit excessive. It's only the 3 of us, and Logan is happy to eat nothing but Goldfish and hot dogs if we would let him. But I don't actually budget for any other shopping that we have to do because it's a pain, so included with groceries is things like diapers and bathroom products. If either one of us needs clothing of any sort, it will most likely come out of the grocery budget, and we definitely come in under this budget more often than not. Our actual food expenses only amount to about $130 every 2 weeks. 

Lastly, laundry. Not having our own machines or any way to hook them up even if we did, we have to use the laundry facility onsite. This amounts to $3 to wash and dry one small load of laundry. Our work clothes are always the first priority to get washed, and everything else gets stuffed in wherever it fits. The only way to combat the backed up pile of dirty laundry is for me to wash it in the bathtub and hang it out to dry on the balcony. It is a HUGE pain in the ass, but it does save a little bit of money, and eventually its gets easier (like when your arms stop feeling like they're on fire, and you get good at wringing the water out effectively). 

Income

At this point in time it is really difficult to give an accurate picture of our income. There are several factors at work here. First of all, Jason works piece-rate, he is not guaranteed any hours or any amount on his paycheck. Summer is the busy season, so he is starting to pick up a little more now, but our monthly income from his job can vary from $1200/month to almost $3500. For the most part I plan for about $2000/month from his job. Sadly, he is working outside of his field, and if he were to go back into his field of study he would actually take a pretty big pay cut. Keep that in mind too. If you are struggling to find work in your chosen field, find work elsewhere and find a way to incorporate the two. Both of our previous education is in aircraft maintenance. Alas, this means we have a mechanical background that can be carried over to any number of other fields. You just have to convince the guy interviewing you that you can relate the two.

As of today, I have just completed my first week being back at work. I was home for 18 months with our son, and was finally able to get a job that pays enough for me to actually bring in a little extra money after daycare. Not much though. Unless I get a sudden influx of hours, I am only expecting to bring home about $300/month from my job. $9/hr is a little over minimum wage, but when you're only working a couple 2-4 hours shifts a week it doesn't amount to much.


Starting July 1st I will also be helping my mother take care of her properties here in CO. This will amount to $250 a month extra income for us. BUT we are also about to reach the end of our lease in this apartment, and are going to be moving into one of her houses, so instead of actually having $250/month extra, she will just be giving us a discount on rent. The end result is that instead of paying $750 a month for an apartment that we HATE, we will be paying the EXACT same amount to live in this house, and have a backyard plus our own utilities, and our own washer and dryer! So I will not call this money income in the traditional sense, but it is a sort of buffer that will improve our living situation drastically.

Total Income: $2000+300+($250)

About Us

This one will be short, I promise. As I said earlier, my name is Jes. My husband's name is Jason. We both went to school in 2007-2008 for our Associate's degrees, which is where we met. 3 1/2 years later we got married, and as of today we have been married about 9 months. We have an 1 1/2 year old son named Logan.

The reason I feel these details are important is because I want everyone to know that unlike some of the most recent sensationalized writings, I can relate to the cost of formula and diapers. I am in a position where I went from being relatively debt-free to suddenly owing a lot of money to a lot of people just by being married. We have lived in deplorable conditions without hot water, without food, and among cockroaches at various times over the last 4 years. We have gone from having 2 cars to just 1 so that we could afford to live, and then going from 1 car to no cars when my old Buick broke down repeatedly and we couldn't afford to fix it.


As I am writing this, I am laughing to myself. At the time all of those things were horrible. I can't begin to describe my anxiety and frustration at being stuck in a continual loop of paying off one small debt only to have to take out another loan because my car broke down again. Working in places that were nothing short of humiliating. I can't tell you how many times those things left me in tears, ready to just move back in with my mom and give up on the whole growing-up thing. It's rough. It could have gone a hell of a lot better, but it didn't. And now, looking back on some of the things we did just to survive, I laugh. It's a good thing I can laugh about them now, even though I still feel a twinge of anger and resentment when I think of those times. I'm not sure I'll ever fully recover, but it is getting easier, and here's to looking forward. :)

I suppose this is a good place to note that I am not a financial adviser of any kind. I have no formal education relating to finances. I am an aircraft mechanic by trade, in school for electrical engineering. My only qualifications for writing this blog are a little bit of common sense, and a whole bunch of experience trying to sort out the mess that is student loans. I have also written 100+ articles for various websites concerning credit scores and how to improve them. This is not meant to be a professional advice column of any kind, but a journey through the world of paying off debt in sub-standard conditions. I have every intention of putting our family on a strict budget that is transparent for the purposes of keeping this blog accurate. I look forward to feedback of the constructive sort, and hopefully can spur some imaginative solutions in my readers so that they can accomplish their own financial goals.

My Personal Mission Statement

Hello everyone! My name is Jes. I am 22, married and have a 1 1/2 year old son. I will go further into detail about us in a later post, but for now on to the real purpose of this thing!

At this point in time, the very first post on this new blog, my mission statement is:

To set a realistic financial goal and use precise tracking of our family's spending as well as alternative means of income and strict budgeting to reach those goals, all while providing a written commentary so that readers can learn and share ideas on the best way to accomplish their own financial goals. 

There are a lot of reasons that I want to write this blog.

1) I am tired of seeing article after article on Yahoo about how so-and-so paid off an exorbitant amount of debt in a very small amount of time, only to find out that person had thousands of dollars in savings just sitting around and they used that to pay off their debt, or that the person earns a salary that is 3 times the norm. Now, currently Jason does make enough money that right now I consider us "thriving" as compared to our situation 2 years ago. However, I feel like our budget is much more on track with the average family than the people that Yahoo continually chooses to feature. Plus, we have been in situations where we were both  making just above minimum wage and still had to pay the bills, so I do have a bit of experience in that boat too.

2) I am tired of seeing debt solutions that don't account for the cost of raising a child, dealing with a car that continually breaks down, getting laid off, or instances where you graduate college and wind up making minimum wage instead of a college-educated worthy salary. (Those people exist. I am one of them, and my solutions to paying off debt don't include selling my 3rd car or my yacht or my timeshare in some exotic country.)

3) I believe that writing this blog will force me to write down specific financial goals and give me the motivation to really stick to them. Furthermore, it will force me to examine every single dime and dollar that is spent, probably allowing us to save even more money and reach our goals in a more timely manner. You're in on this too! You get to see how we're spending our money and chastise us for breaking our budget! Sounds fun, huh? However I will also note here that our financial goals are not solely related to paying off student loans. We also plan on purchasing a house in the next 12 months, and will be saving money for that venture as well, which will require more creative saving, and less paying off of debts in the immediate future, but will serve a long term purpose.

4) I know a lot of people that are in the same boat as us. Lots of student loans and not a lot of income. I think some of them may benefit from setting goals with me and following our story, as well as brain-storming and sharing ideas through comments that will potentially help all of us.

So it begins.