My Mortgage is Smaller Than My Credit Card Balance

It’s been one heck of a spring summer for my family, financially speaking, and it turned out to be a bit more than we had budgeted for.

English: Victor Fung and Anna Mikhed dancing a...

English: Victor Fung and Anna Mikhed dancing a ballroom tango. The couple, dancing for the USA, came third in the World Professional Standard Championship 2009. Photo taken in 2006 by Porfirio Landeros, Kwixite Media, in San Diego, California. (Photo credit: Wikipedia)

Here’s what we’ve done on top of our regular spending, so far:

  • Remodeled both of our bathrooms(at the same time!) ($6000-ish)
  • Summer camp for two kids ($500)
  • Swimming lessons for three kids ($350)
  • Replaced the entire air conditioning system in my car ($1600)
  • Finished paying for our current round of ballroom dancing lessons($400)
  • New mattress on our bed($1200)
  • My wife is off work for the summer.   Part time and sporadic hours when it’s not the school year.

Taken in reverse order…

Mattress

The wire frame on our mattress broke.   I wish that was a complement to my prowess, but nothing was happening when it snapped.   Sleeping with a jagged piece of steel poking you sucks, to say the least.

Dancing

Ballroom dancing is something my wife and I both enjoy, and it’s good exercise, so we decided to keep it up.  We are officially in training for competition-level dancing, but now that our favorite place to dance is closed, we may not continue.  The lessons are paid for through next spring, though.

Air conditioner

My A/C system “grenaded”.  Basically, the insides decided to disintegrate and go flowing through the rest of the system, mucking it all up.   And making the car undriveable.    On the plus side, this hard-to-find leak I’ve been ignoring in favor of annual $75 A/C recharges is fixed, now.

Swimming, not dying

My youngest kids have never had swimming lessons and my oldest isn’t a strong swimmer.   Helping my kids not drown is a good thing.

Camp

We put the down payment on camp back in February, then promptly forgot about paying for the rest of it until the deadline hit.   I paused while typing this to add it to my budget so I don’t forget for next year.

The remodel

We had, at one point, $9500 set aside for the remodel, but I raided that account a few times if we went over on our monthly spending.   Then, when we got the estimate, we neglected to include one of the subtotals together when we agreed to it, so the job cost more than I was expecting from the start.  We still got a great price, though.

Until the tub surround didn’t come in a color we liked and could get in less than 6 weeks.  So, we upgraded to porcelain tile.

And the ceiling started peeling.

And we decided to get nice fixtures, so it would be a bathroom we loved enough to demonstrate physically, for years to come.

And we noticed the basement bathroom floor tiles were loose.

So much money just poured out of my credit card.

At the moment, we have approximately $8,000 on our credit cards.   That’s the highest balance we’ve carried in years.   This month was the first time I’ve paid interest on a credit card since August 2012.

What’s our plan for the credit cards?

  • I get a $500 bonus every month.   Getting this bonus is almost entirely under my control.
  • We gave our renters(two of our closest friends) a good introductory rent until their current lease expires.   Their rent triples at the end of the month.
  • I stopped paying double mortgage payments.
  • We have some money in our emergency fund.
  • We should have about $1000 left in the remodel account when the job is finished.

That’s $1500 as an immediate payment, plus about $2300 per month on top of our normal spending to pay off the cards.

That means we’ll be down to about $4300 in two weeks.   When my wife gets her first full paycheck at the end of September, we’ll have the cards paid off.

Then comes the challenge of catching back up on the mortgage.   Until yesterday, we were projected to pay off our house on December 1.   Our current balance is $4660, with a mandatory monthly payment of $470.58.  That’s about 10 months of payments.   We were making an extra $520 interest payment each month, which brought it down to the December payoff date.   For the next 3 months, we’re only going to be paying roughly the minimum, which means we’ll have to pay a bit over triple for November and December to be done with it this year.

I think we can do it.

How do we avoid this in the future?

With our renters paying full rent now, our goal is to pretend Linda isn’t getting paid when her work picks up again in September.  We want to save or invest everything she makes, on top of the current savings.    Not all of that will be long-term, and not all of it will be spendable.  That saving will include things like braces for the younger kids, vacations that are more than just long weekends, and maxing out both of our retirement accounts.

That should still let us pad out our emergency fund to 4 months of expenses by spring, which is a pretty good cushion for us.

I hope.  I haven’t done the math.

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My Financial Life

My financial life right now is boooring.

And that’s a good thing.

When I started this site I was $90,000 in debt, and considering bankruptcy.  I’d just started on the Dave Ramsey plan and was looking for every possible way to scrape up any extra money  I could.

Now, the debt is nearly gone.

US interest payments on debt by sector as a fr...

US interest payments on debt by sector as a fraction of GDP 1960-2008 (Photo credit: Wikipedia)

  • I’m looking at the last $8000 on my mortgage.  I have enough in savings to pay it off today, without draining my savings completely dry.
  • My IRA gets maxed out every year, and this year, my wife’s will be, too.
  • We save or invest about 30% of our income.
  • My credit score according to CreditKarma.com is 826.

Our credit card is almost paid off every month.  There’s occasionally some overlap between our auto-payment and our charges.  And sometimes the budgeted auto-payment doesn’t match the reality of our spending and I don’t notice for a week or two.  Except for the end of last year, but that’s a post for another day.

The short version is: We’re doing well, and we’re nearing the end of our financial problems.

Our scheduled mortgage over-payments will have it completely paid off in October.  Then we are debt-free and can hopefully manage to live the rest of our lives without paying interest on money that isn’t earning us more than we are paying.   For example, I’m willing to take out a mortgage to buy another rental property, but I’m going to wait to do that until our current mortgage is paid and we have a substantial down payment ready.

No debt.

I’m not kidding when I say it’s been a long 6 years of fighting our debt.  Counting a car loan we got and paid early, we’ve paid more than $110,000 of debt in six years.

I’ve run side businesses, aggressively negotiated raises, and left companies(voluntarily and otherwise) for better pay & benefits.

I’ve watched friends and family take vacations around the world.

I’ve turned my kids down for so many things that I would love to buy them, but couldn’t because being financially secure is a much higher priority than spoiling children.  Try explaining that to a 6 year old.

And now, the debt-ridden part of our financial journey is almost over.   Finally.

So what’s next?

I have no idea.  I’d like to travel more.  Linda and the girls want us to move to a hobby farm and get horses.  We want more rental properties.

Whatever “next” is, it will be done from a position of strength that won’t destroy our financial world or put out futures at risk.

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