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 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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Credit Card Glossary

As evil as credit cards are, most adults have one.   Have you ever wondered what percentage of those people know the details of[caption id="" align="alignright" width="196" caption=" "] [/caption] their credit card agreement, or even what all of the terms mean?

Here’s a quick list of the terms and their definitions.

  • Average daily balance – This is the balance most card companies use to calculate your interest.   They add the balance each day and divide it by the number of days in the billing cycle.  This number times the interest rate is (roughly) the interest you have to pay.
  • Annual Percentage Rate(APR) – This is the interest rate expressed as the interest accrued in one year.  The actual calculation is much more complicated.
  • Balance transfer – If you’ve ever paid your VISA with your Mastercard, you’ve done a balance transfer.  These often have a great introductory rate and a lousy permanent rate.
  • Cardholder agreement – This is the contract that defines all of the terms of your card: interest, default consequences, payment terms, and everything else.  You should never sign for a card without reading and understanding this document.
  • Charge-back – If you dispute a charge on your card, the issuer may issue a charge-back, and take the money back from the merchant to return to you.
  • Credit line – This is the amount you are able to charge.  You should fear this number and stay as far away from it as possible.
  • Default – When you stop paying your card, you become delinquent.  If it goes on too long, you will be in default.  Read: screwed.   This is when they crank your interest rate to the sky and cut your limit to match your balance.  It’s also the point that affects your credit rating.
  • Due date – This is the day which, if you miss it, will cause you to acquire an extra $15-39 fee for the privilege of misreading your calendar.  Always pay your bill before this date.
  • Finance charge – This is the actual interest accrued for the billing period.  This is money you are paying for the privilege of borrowing the rest of the money.  Next month, you’ll pay a finance charge on this money, too.  Yay!
  • Grace period – For most cards worth owning, you get 20-25 days before the issuer starts charging interest.   The best way to manage your card is to pay it off completely twice a month.   That way, you’ll never use up your grace period and never pay a cent of interest.
  • Introductory rate – Many cards will offer a crazy-low interest rate for six months to lure you in…like crack.  They’ll get you hooked, then raise the rate and force you to charge new toys at the higher rate.   Ideally, you’ll never carry a balance, so you’ll never have to worry about the introductory rate.
  • Minimum payment – If debt has an evil heart, this is it.   If you pay nothing but the minimum required payment, you will be in debt for the rest of your life.  Always pay more, even if it’s just an extra $20.
  • Over-the-limit fee – If you ignore your credit limit and keep spending, you’ll get hit with another $15-39 fee for the privilege of not controlling your irresponsible impulses.
  • Periodic rate – This is your APR expressed in relation to a specific time frame, usually as a daily periodic rate.  For example, if your interest rate is 18%, your daily periodic rate is 18/365 or 0.0493%
  • Pre-approved – When you get a pre-approved card, you are actually just getting a notice that you have been pre-screened as not being too much of a deadbeat for that particular card.  You will still have a full credit check before the card is issued.
  • Secured card – If you’ve got lousy credit, sometimes your only choice to repair it is to get a prepaid card.   You give the company $200 and they will let you charge $200.   They are almost always loaded with fees and are usually a very bad deal, but if it’s the only game in town…?
  • Universal default – Sometimes, if you default on one card, every other card you have decides to gang up on you, because your “risk profile” has changed.   Yet more proof of the evil that is credit-card debt.
  • Variable interest rate – Some card tie your rate to the Prime interest rate, so when that changes, your rate does, too.

Did I miss any terms?

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