Money Moves

The Tsunami Situation – December 2019 Debt Report

January 7, 2020 by tanya

Each month, I record the balances on my debt obligations. The amounts shown in my debt report reflect balances as of the end of the previous month. First you’ll see the Table of Debt Slayed. Further below you’ll see my active debts in the Debt Report Table.

“How long should you try? Until.”
~ Jim Rohn

A few notes on the Table of Debts Slayed:

(1) The Debt Journey Balance column reflects the balance on the debt as of the date that I started to get serious about my debt-free journey – July, 2019.

(2) I’ve included in the Table of Debts Slayed, the balances I paid off for my 2018 Federal ($3,238) and State ($2,819) taxes, even though I paid them off the month after I learned about the obligation and the debts became due. I’m including them the list because they were significant amounts and were, technically, debts; I just paid them off quickly. I previously had not listed them in my but am do so now.

(3) In November, I applied for and obtained a debt consolidation loan, which allowed for the payoff of all of my credit card debt. The credit cards listed, except for the Chase card, were paid off through the debt consolidation. Effectively, the debt was re-classified (which you’ll see in the table below) and not actually paid off.

See the Debt Report Table below for the figures as of the end of December, 2019. It shows the updated order of debts to be repaid.

The difference between my November and December personal debt balance is $1,620.

The difference between my November and December business credit card debt balance is $390.

A few notes about the Debt Report Table:

The Debt Being Attacked

The debt that is highlighted in green is the debt that I’m currently attacking. All additional funds I have available for debt repayment go toward extra payments on this highlighted debt.

Estimates

Any amount that ends in a “0” or “50” is an estimate. Often times, the IRS website does not show updated figures. It will say that “information is not available,” so I make a guess, based on the typical monthly reduction amount.

Two Payments That (Unfortunately) Go Up Every Month

(1) Internal Revenue Service (2017)

This payment goes up every month because the IRS system will not allow to make payments on both the 2016 balance and the 2017 balance at the same time. It requires that all payments be applied to the oldest balance due. I wanted to make small payments on the 2017 balance so that it wouldn’t go up every month. When I spoke with the IRS, they explained that they don’t allow for that. That is why the 2016 balance goes down, while the 2017 balance goes up by about $64 per month.

(2) Navient Student Loans (Yes, Both!)

The Navient payments for both the Debt Journey Balance and the November balance go up every month because I’m on an income-based repayment plan. The minimum payments under the program aren’t enough to reduce the monthly balance. Once I take down the two IRS debts, I’ll start making payments on the student loan big enough to, at least, cover the interest.

Business Credit Card

I’ve included the business credit card balance, even though I don’t pay that bill out of my personal income. Though the money that pays it comes from the business, I am the personal guarantor of it. So, technically, it’s my debt. Despite the fact that I make a $1,000 payment on it every month, you see that the balance only goes down by just under $400. The APR on it is 22.74%. This month, I plan to do with it what I did with my credit cards and find a low interest business loan or credit card so that I can transfer the balance. I’d like my $1,000 payments to go much further than they are.

In December, the first payment on the Lending Club loan was due. I made additional payments on the loan in November, before the initial payment was due, to honor debt snowball amounts that were allocated for credit card payments for November. In other words, I had additional funds that were supposed to be paid on my debt snowball toward credit cards (because a credit card was the lowest balance and, therefore, was the debt that was supposed to receive the debt snowball extra payment). I didn’t want those funds to get lost in the transition to the consolidated loan. I also made sure to make a payment sufficient to cover the origination fee (the fee was $260).

2019 Recap – What Went Down

December 31, 2019 by tanya

It wouldn’t be right to move into 2020 without a brief recap of what went down in 2019.

Debt-Free Decision

I decided to commit to getting debt free and taking the steps – the baby steps – toward accomplishing that. With the amount of debt that I have, it may be a long road, but I took the first step. I came to terms with the severity of my situation and decided to do something about it. With this decision, I took a position of control. As an example of how out of control things were, earlier in the year, I was so disorganized that I paid $957 in overdraft fees during the period of January through June. That’s insane – $957! But, I turned over a new leaf.

New Awareness

In addition to acknowledging my tsunami situation, I also became aware that I have an “operating system” (this is what my coach calls it) that is keeping me from earning and building wealth at the level at which I’d like. This means that I have some mindset/limiting beliefs issues that need to be addressed. Since mindset is everything when it comes to success in any endeavor, I will be focused intently on fixing this in 2020.

This means that I have some mindset/limiting beliefs issues that need to be addressed.
~ Single Girl

Romance of a Different Kind

In 2019, I dated in a way that I hadn’t before. Dating Mr. Nice For Now offered consistent companionship and fun dating, without the requirements that I would typically impose on myself if I had the title of “Girlfriend.” That suited me in 2019, but won’t suit me, moving forward.

Ate Some Stuff I Wanted to Eat

I’ve written about being on a very restricted diet. I wrote about how being on a restricted diet and a restricted budget were quite challenging. In late November, I started researching some different eating plans and started experimenting in early December. By the middle of December, I decided that I was going to eat the stuff that I had cut out of my diet for the prior 3 years. I hadn’t had chicken, dairy or regular (i.e. non-gluten-free) bread in over 3 years. I was over it! I’ll write more about this in a later post, but, suffice it to say, I went HAM on the food and had a great time doing it.

The Budgeting Habit

For years, budgeting has been that thing that I wanted to do (and knew I should do), but didn’t actually end up doing consistently. Dave Ramsey says that it takes about 3 months to get the swing of things with budgeting. I’ve now been doing it consistently (albeit with errors and oversights) for 6 months. I can now say that I’ve developed the budgeting habit. Taking the time to prepare a budget and allocate how funds will be spent throughout the month is such a helpful process – one that I’ve come to really value and consider a critical part of my financial life.

Debt Payoff

Despite not being intentional or focused during the first half of the year, I reduced my total debt by $22,959 in 2019. If I include the Federal and state taxes I owed for 2018 (which didn’t make my debt snowball because I paid them off the month after they were due) and the loan I got from my mom for our family trip, I reduced my debt by a total of $28,610.

Despite not being intentional or focused during the first half of the year, I reduced my total debt by $22,959 in 2019.
~ Single Girl

What makes me most proud about last year is that it is the year in which I started along the road of what I know will be a hugely transformational journey. A life-altering journey. That’s not to sound dramatic; I really believe it to be true.

Goodbye, 2019.

Making Sense of Auto (and Other) Insurance

December 9, 2019 by tanya

It’s that time of year. Decisions need to be made. In my last post, I wrote about health insurance (particularly for a self-employed person). Open enrollment is in full effect, so health insurance policy decisions need to be made quickly – before December 15, 2019.

I have other insurance policies that are up for renewal at the beginning of the year. Since I’m being particularly diligent about my finances, I think it important to re-evaluate each of these policies before they renew for 2020. If you’re doing the same thing that I’m doing, maybe this will be worthwhile information as you consider your options. Maybe not. In any case, I thought I’d share.

In addition to my health insurance, I have 6 other types of insurance:

Auto Insurance Coverage
Homeowners Insurance
Umbrella Insurance
Professional Liability Insurance
Disability Insurance
Life Insurance

My Insurance Philosophy

Given my financial situation, I think this is a lot of policies. Between me, personally, and the business, this presents a significant amount of money being spent on premiums.

Of course, I don’t want to spend any more money than I need to, but I want to make sure that I’m adequately covered in the event that something unexpected happens. As Chris Rock says, I need coverage “in case shit.” In other words, I feel like it would be imprudent of me to not have these coverages. For example, in my state an attorney doesn’t have to have professional liability insurance. But, like with any profession, mistakes happen. Do I really want to get slammed with some hefty payment unexpectedly? Not really. Though I’ve never had a claim (or even a complaint) filed against me, I don’t want to take the risk of not having any protection in the event that something goes wrong.

A foundational concern for me is undue surprise. I’m already dealing with random expenses that come up with respect to my home and business. I also only have a “baby” emergency fund of $1,000 in the bank. This means that I don’t have a bunch of money around to address some kind of big bill that needed to be paid quickly, were to come up. It is important for me to not increase the number of additional expenses that are likely to pop up on me. What I really don’t need are more high dollar unexpected expenses causing major speed bumps in my debt free journey. My insurance policies need to help protect me from liability, but also reduce the stress of me wondering if I would end up severely jammed up . . . in case shit.

Moscow, Russia- June 12, 2017: lexus on the street toned with glare of the sun

Auto, Homeowners and Umbrella Insurance

I have a few insurance policies with Allstate – auto, homeowners and umbrella coverage. Out of all of the policies I listed above, these are the ones that are up for renewal at the beginning of 2020.

Auto Insurance

I pay my insurance on a monthly basis, but my total 6 month premium is $1,216.95. Here are my policy details:

Automobile Liability Insurance
- Deductible: $0
- Bodily Injury: $250,000 each person; $500,000 each occurrence
- Property Damage: $100,000 each occurrence

Uninsured Motorists
- Property Damage: $100,000 each accident
- Deductible: $250
- Auto Collision Insurance
- Limit: Actual cash value
- Deductible: $1,000

Uninsured Motorist (added on to at fault liability limits bodily injury)
- Limit: $250,000 each person; $500,000 each accident
- Deductible: Not applicable

Auto Comprehensive Insurance
- Limit: actual cash value
- Deductible: $1,000

Automobile Medical Payments
- Limit: $2,000 each person
- Deductible: $0
- Rental Reimbursement: up to $40 per day for a 30-day maximum
- Towing and Labor Costs: $100 each disablement
- Deductible: $0

Because I really wanted to understand my coverage, I met with my insurance agent to discuss what I’ve got and why. Auto accidents happen all of the time. With the amount of accidents that happen “just because,” along with the number of drivers that are out here driving distracted, it is important to me to have strong coverage. Plus, working for myself is stressful enough; I don’t need any additional stress when I’m driving around. I’ve got the minimum coverage limits that are allowed in order for someone to have an umbrella coverage policy. More on that below.

I love the comprehensive insurance portion of my policy. It covers me if the car is stolen, vandalized, if I hit a deer, or if I hit something because I swerved to avoid hitting something or someone else. It also covers the windshield. I like that the deductible for this is $100. I also like that when my windshield gets chipped, and the chip is smaller than the size of a quarter, they’ll come and fix it for free, without me paying any deductible. I’ve utilized this service twice in less than 15 months.

I learned that my uninsured motorist insurance is really important because, without it, I’d be relying on the insurance (or lack thereof) of someone else. My liability coverage protects others (or their property) that I might injure or damage. The uninsured motorist portion protects me if I’m hit or damaged by someone else and they don’t have adequate coverage. My agent noted that it doesn’t make sense for me to have less coverage to protect myself than I would have to protect someone else.

Reducing Insurance Costs

I’m going to reduce my insurance expense by taking a defensive driving course online. By taking the course, I’ll get a discount. Another way I’ve been reducing my auto insurance cost is through the use of the Allstate Drivewise app. When I consistently keep my driving speed under 80 mph (not so easy for me) and refrain from hard braking, I end up receiving a little check. The most recent one I received was in the amount of $72.41, so . . . it counts.

Condominium (Homeowners) Insurance

A condominium is usually covered by 2 types of insurance – the master policy of the condominium association and a personal policy held by the condo owner. Generally, the master policy covers the building structure and common areas. The condo owner’s policy covers everything inside of the condo. Some master policies only cover up to and including the walls of an individual condo. Others cover not only up to the walls, but also the floors, countertops and built-in appliances within the condo unit.

My association’s policy is of the former type, but my coverages are still fairly low for my condominium insurance. I also do not have a lot of expensive belongings like high-end furniture, fur coats, diamonds and designer handbags and shoes. So, I just wouldn’t need as much money to replace my belongings as would others.

Here’s a detail of my coverage:

Building Property Protection: $36,000 (for the replacement of fixtures, built-in appliances, flooring, etc.)
Personal Property Protection: $40,000 (for the replacement of my clothing, computers, jewelry, etc.)
Additional Living Expense: $8,000 (coverage in the event of temporary displacement)

(As I write this, I’m wondering if my amounts are a bit too low. I’ve reached out to my agent so that we can discuss this.)

Like my auto insurance, my condo insurance gets paid on a monthly basis. My premium for the year is $301.77.

Personal Liability Umbrella Insurance

An umbrella policy covers a person, as a whole, providing extra liability coverage beyond what is provided through their other policies (e.g., homeowner’s and auto insurance). This is coverage that protects your personal assets to the extent that your assets cannot be protected by the coverage provided through your other policies.

Let’s say, for example, you were to get into a car accident and injure someone. You have automobile liability coverage in the amount of $250,000 (like me). If the damages to that person go beyond the $250,000 available through your coverage (imagine if you were to injure a high-paid professional like a professional athlete or brain surgeon and that person couldn’t work for months), that person would be looking to you to cover any of their additional damages beyond the $250,000. If you had an umbrella policy, the additional coverage could come from there, instead of from your personal bank account or from your future wages (a state might garnish between 20% and 25% of your wages for your working life until the damages are covered).

That’s why I have an umbrella policy. Though I have a negative net worth today, I don’t intend to stay that way for too much longer. My aim is to increase my income in quantum leap fashion over the next few years and . . . in case shit . . . happens, and my main policies don’t provide adequate coverage, I don’t want my future income to be affected. In other words, I have an umbrella policy so that the money I earn in years to come won’t be garnished or my property liened against. As I previously mentioned, the limits I have for my other policies are the minimums required in order to have an umbrella policy.

Fun Fact: A little more than $475,000 of the $850,000 settlement that President Bill Clinton paid to Paula Jones in connection with the sexual misconduct lawsuit against him in the late 90s was covered by President Clinton’s personal umbrella policy.

What kind of insurance do you have? Did you cut out any insurance policies for the purpose of increasing your payments on your debt? Have you discovered any insurance solutions that have worked well for you?

Money Move – A Debt Consolidation

November 22, 2019 by tanya

Audio version of this post, read by the author.

Technically, I’m out of credit card debt. Last weekend, I applied for a debt consolidation loan for $26,000 to cover all of my credit card debt . . . and I actually got the loan. I was kind of surprised because, just this summer, I applied for a debt consolidation and got neither the amount I needed nor a rate that made any sense.

This time, I got a loan covering what I needed, as well as an interest rate much lower than what I’ve been paying on my credit cards. I used Lending Club and they’ve already wired the funds to pay off 2 of my 3 remaining credit cards. I’m waiting on the last payoff to hit my 3rd credit card account.

I hadn’t planned on applying for a consolidation this weekend. I was going through my mail and saw that Discover offered me a personal loan that I could use for consolidation. I was curious. What would they offer me? How much could I get?

They offered me the $26,000 to cover the balances on my credit cards, but at a rate of 17.99% for 5 years. The monthly payment on that would have been $660.09. The terms for $23,000 over 7 years would have been at 19.99%, with a monthly payment of $510.60.

A loan at that interest rate wouldn’t be helpful to me.

Since I was already in the consolidation mindset, I decided to see if I could get a loan with another company. Lending Club came through with the following terms:

New Loan: $26,000
Origination Fee: $260
Interest Rate: 5.89%; 6.57% APR
Monthly Payment: $790

Here’s a summary of what I was paying and the approximate interest I would have paid:

American Express: 15.99%
Discover: 5.99% on $3,020.13 of the balance; 22.74% on $10,000
Credit Union Credit Card: 14.40%

Considering the interest rates that I had on my credit cards, I think the consolidation is a good move. If I had less debt and was looking at a shorter payoff window (i.e., if I expected to pay off all of my debt within a year or less), doing a consolidation wouldn’t be as helpful. Given that I was paying between 14.40% and 22.74% on the majority of my credit card debt, there is a clear savings for me, as someone who has a fairly long debt repayment journey.

My overall goal with the debt consolidation was to get more bang for my debt payment buck. I wanted to end up with a monthly payment that was equivalent to what I’ve been paying separately to my different credit card creditors, with a substantially lower interest rate. That way, each payment would make a more substantial dent in the balance.

With the debt consolidation, I will make a total of 36 payments (3 years) of $790. I love that there’s a finite date. I don’t know why that’s significant to me, but it makes me feel good. If makes me feel that, at the very latest, I will have all of this credit card debt knocked out within 3 years.

With the debt consolidation, I’ll be saving about $3,800 in interest – at least.
~ Single Girl

Total interest on the $26,000 debt consolidation loan over 3 years is $2,394.53. If I pay it off in 2 years, the interest would be $2,118.27 – about a third of the amount of interest that I would have paid if I didn’t do the consolidation and left things status quo. Based on a 2 year calculation, with the other credit cards – as is – I would have paid about $6,225.25 in interest. With the debt consolidation, I’ll be saving about $3,800 in interest – at least.

The debt consolidation will require a rework of my debt snowball plan. Since all of the credit cards are now wrapped into one loan, my lowest balance is now my 2016 IRS tax balance. The next one is my 2017 tax balance. Here’s what the order of attack is now.

Under the new order of my debt snowball debts, this loan is going to be the 4th debt that I attack. I’ve first got to address the 2016 IRS bill, the 2017 IRS bill, then my car. While I’d love to say that I’ll pay this off next year or the year after, I recognize that I have to pay off almost $40,000 before I even get to this loan.

This is a very appropriate payoff order. Since the IRS charges significant fees and interest, and has the power to freeze my accounts, I’m glad that I’ll now be focused on getting them paid off as quickly as possible.

While the $790 monthly payment might seem high, it’s around the total of what I’ve been paying on the credit cards independently.

Chase Monthly Payment: $182 (recently paid off)
Credit Union Card Monthly Payment: $181
American Express Monthly Payment: $252
Discover Monthly Payment: $265

What I was paying prior to paying off the Chase card was $880 per month in total on credit cards.

A Note on Celebrations

I’m not going to forego my debt payoff celebrations even though the credit cards are consolidated into one loan. I will not wait until the full $26,000 is paid. Instead, I’ll do the celebrations in milestones. Every time I pay off an amount equal to what a particular credit card balance was, I’ll get to celebrate. For example, if the balance on my credit union credit card was $6,992 as of July, 2019 (when I fully committed to my debt-free journey), once I’ve paid off that amount on the consolidated loan, I’ll get to do a little celebration. My personal policy for celebrations is that I am allowed to celebrate the payoff of the debt with an amount equal to 1% of what the balance of that debt was as of July, 2019. So, when I’ve paid off $6,992, I’ll get to celebrate using up to $70 (i.e., 1% of $6,992, rounded up to the nearest dollar).