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New month

February 3rd, 2019 at 11:19 am

Thank goodness for last month's market recovery--for as long as it lasts. As of 1/31, my retirement funds recovered by about 13k, and, compared to year-end, my debts were down by 7k due to the application of bonus and some of my inherited RMD to debt reduction, for a net increase in net worth of about 20k.

As far as 2019 goals: I did ok at work with 12 meeting preps and getting started again on the CFP coursework, which I last tackled in August. Currently 22% done with the current course, hoping to get to 25% done by the end of today, and hoping to finish it by the end of March. So I'm behind (should really be at 33% done by end of January, but I've made progress nonetheless, and the next two weeks are fairly quiet at work, so hopefully I can catch up to where I should be to finish the class by the end of March.

Exercise has been sporadic due to the cold, but I am currently going thru a short course of PT for a recurrent shoulder issue and found a free Saturday morning Qi Gong class at the library to take, so that at least keeps me mobile. I'll get more active as the weather warms!

Meditation practice has been good, and I signed up for a program funded through my health insurance that provides a health and weight loss coach (kind of like Noom, whose ads seem to be frequent on MSNBC) which also provides me a digital scale. The program I'm using is called Lark. It is supposed to be able to connect with your 23andme data and use that for guidance, but that's the part I still have to figure out. I learned of the program because I have a 23andme account, but so far, I don't see any evidence that the program is making any use of my genetic data in its guidance.

15 Responses to “New month”

  1. AnotherReader Says:

    I find granular accountability to be motivating. What gets measured and all that. How much debt did you pay off in each category? How much do you have left in each category? Did any debt increase in January?

  2. rob62521 Says:

    I hope our January was good too. We are waiting for the monthly report.

  3. Dido Says:

    AR:
    12/31/18: Debt total: 91,282, comprised of
    Mortgage: 55,975
    HELOC: 4,000
    403b loan: 5,221
    CCs: 26,087 (23k on 0% expiring 9/30/19)

    1/31/19: Debt total: 84,373 (decrease of 6,909), comprised of
    Mortgage: 55,500 (475 decrease)
    HELOC: 4,000 (4k decrease, used bonus to pay off)
    403b loan: 5,050 (171 decrease)
    CCs: 23,824 (2,263 decrease)

    No debt increased, all categories, even CCs, decreased.

  4. Dido Says:

    What motivates me is seeing the non-mortgage debt balance decrease (from 38.7% to 34.4% of total debt between January & February). I should be able to get that to 25k by mid-year and to about 32% of the total. It won't get below that during the second half of the year since that is when I have some big bills due. We'll see if I have any better luck this year getting some professional expenses covered ahead of time rather than waiting for reimbursements. That will help a lot.

    The other thing that motivates me is seeing a nice round number on my mortgage, so that I always know exactly what the balance is. I pay a bit extra each month to get to the next hundreds figure down--currently paying 400 in principal each month, so the mortgage will be at 55,100 the end of February. I have a credit card whose rewards are tied to the mortgage as well, so for every $2,500 spent on that card, I get a $25 credit towards my mortgage. Then I run most of my expenses through that CC. It might not be the "best" debt to pay down, but the extra principal is less than 100, and it is the most motivating debt to pay down in that it is a sign of a positive (financial independence) rather than getting rid of a burden. Negative motivators are strongest in the short term, but we need those positive motivators to motivate long-term oriented behavior!

  5. Dido Says:

    Can’t edit the response but the HELOC is at zero

  6. AnotherReader Says:

    I think you might mean $0 for the HELOC as it's paid off? The rest adds up to your number.

    What are the interest rates on your credit cards? How is your credit score? Could you reduce your interest costs significantly and pay more to principal with some zero percent balance transfers? Are there some small balances you could pay off quickly to motivate you (a la Dave Ramsey)?

    It's comforting to pay extra on the mortgage, but it makes no sense. An extra $100 to those cards is going to get you out from under the credit card burden faster.

    I really think making oneself publicly accountable helps you move forward. CeeJay and Amber benefited greatly from putting their numbers up on their blogs and I'll bet you will too.

  7. Dido Says:

    Yes, 0 for the HELOC.

    Interest rates are at 0% for 23k and I think 14.99% or so for the other cards, BUT I pay the minimum balance due every month one way or another on the cards, so I paid a total of $0 in CC interest last year--and every year for years. I always get that prior balance paid off. That's where the HELOC comes in--if monthly expenses are higher than monthly cash flow and available reserves, then I'll temporarily borrow from the HELOC, but get it down to zero in January when I have the big cash infusion from bonus and beneficiary RMD.


    I just went back and checked: last year I paid $759.86 in HELOC interest, which increased from 7.375% to 8.375% over the course of the year. Since I've had the HELOC (opened in 2015, I've paid an average of $543.81 in interest--plus an annual $75 fee. I also paid $274.75 in interest last year on the 403b loan. In 2018, I paid a total of $1,109.61 in interest and fees last year on non-mortgage interest that averaged $30,232.75 over the course of 2018, which is debt service of 3.43% on my non-mortage debt, and interest on my home mortgage is at 4%. If you consider the way I manage my debt, it's just as rational to pay extra on the mortgage as on the non-mortgage debt.

    Plus it's "psycho-logical" as opposed to logical--taking into account human motivations to which I and everyone are prey. Even David Ramsey, I believe, tries to leverage psychology by having people pay off the lowest balance rather than the highest rate debt first.

    The HELOC offers a fixed rate for a year if I take 10k (currently at 3.35%); I very well may do that when the 0% balance transfers expire, since that would be a low rate and I should be able to pay that down to 0 in January 2020 based on next year's bonus (and possibly part of my inherited RMD, depending on the size of the bonus).

  8. AnotherReader Says:

    In your shoes, I would shop that HELOC. The bank that services my mortgage offers 3.115 percent for one year fixed and in the 5.5 to 6 six percent range for 3 to 10 year fixed for new draws. The variable rate was 5.625 last month when I checked.

    I would also really, really want that $23k gone. It's a huge risk should the economy turn south and you lose your job. Your mortgage is supportable on a fairly small income. That $23k albatross is not.

  9. Dido Says:

    AR, yes, shopping the HELOC is a good idea--something to tackle after tax season. I agree, the 23k needs to go. But it will take a couple of years given my cash flow.

    Thanks, as ever, for your thoughts.

  10. LivingAlmostLarge Says:

    How much do you think you'll pay off on the CC before the 0% rate expires?

  11. Dido Says:

    3k or so, but depends on my ability to get work to cover professional expenses and whether there are any car, house, or pet issues beyond the amount allocated for them in my reserve fund.

  12. AnotherReader Says:

    From what you describe, I do not think you are well positioned for the inevitable economic downturn. We can't predict when the next recession will occur, but we know one is coming. In your shoes, I would be all about getting the debt paid off and some cash reserves in place.

    By my admittedly conservative standards, you are at great risk when the economy tanks.
    In the past, you have used the HELOC to get through difficult times. HELOC's often get closed by the banks when property values drop and defaults increase. With no HELOC back stop, you need the emergency fund to avoid losing the house. I would start building up the emergency fund to six months of expenses by cutting out all unnecessary expenses now.

    In addition, I would would work on the debt. There may be no zero percent transfer offers available when you need one. Borrowing from the HELOC to make minimum payments on $23k at exorbitant interest rates is not something I would want to be forced to do, even if I had access. Cashing out the inherited IRA to make payments is also not a good option. Without the HELOC, you could end up defaulting in that scenario.

  13. Dido Says:

    AR, agreed, cutting spending and increasing emergency fund/decreasing debt is all to the good.

    While I agree that a downturn at some point in the not-too-distant future is likely, I'm willing to be aware of the worst-case scenario while keeping in mind that it is just one alternative among many, and the timing of the downturn is as yet unknown.

    Reasonable cost-cutting and debt reduction is wise, but I will balance the possible future with the definite present in my decision making, and cut my expenses, but not to the bare bone. There needs to be something worth living FOR, after all, and one can't lose sight of the fact that one's own future might never come. The present as well as the future deserves its due.

  14. LivingAlmostLarge Says:

    Well if you lose your job in recession there is unemployment? So you have some time. And last time unemployment was like 36 months. That would likely cover a big chunk of the mortgage and HELOC. Maybe also at that time working still. I think as long as you are paying off debt you come out ahead. Right now probably maximizing the 0% CC offers is best.

  15. Dido Says:

    Thanks, LAL. Hopefully in another big recession, they would extend unemployment again; the baseline is 6 months worth of unemployment benefit. They cut it off based on a dollar amount rather than based on time. In the case of unemployment, I'm at the very least a valuable commodity in the seasonal tax prep market--the last time I was on unemployment back in 2014, I had something like 8 job interviews and 5 job offers for a seasonal tax position, and that was even *before* I'd finished the CPA. So I know I'm employable for at least a quarter of the year at the very least. My company is currently in expansion mode and even during the last recession, they didn't lay people off--because in downturns is when more people actually *want* financial advice. My boss jokes about his hair turning white during the last recession, but still, the business thrived. I hate the idea of being unemployed again, but, having held 10 different jobs during the decade running 2009-2019 (my career change decade), I am better than ever prepared to face another transition.

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