Real World Finance$

Christmas is the time of year when it’s easy to go overboard and get further in debt. I know I’ve had my years where I did well paying down debt for the year, only to get it right back thanks to Christmas. There are many reasons not to go overboard this season. One of the many reasons is waste.

Please take a few moments this year to think about all you may be wasting this holiday season. Here are some suggestions below to help reduce your level of waste this season:

• Oil - Do you have an artificial Christmas tree? If not, why not avoid that purchase and go get a real tree? The fake trees are loaded with plastics that are made from the same oil we need to make gasoline for our cars. Conserve oil in one place and it will be cheaper in others. If you already have the artificial type, maintain it well, there is no good way to dispose of them. On the other hand, many cities will collect real trees and chip them up into mulch for use in parks or as something free for residents. Check your local government for more information.
• Electricity - If you need new lights for Christmas this year, avoid the old twinklers and get some of the new fangled LED lights. They are just as bright, but use less energy and last longer. Take care of them well and they can last a lifetime. Oh, and turn off those outdoor lights overnight. Your neighbors and your electric bill will thank you. Better yet, put them on a timer so you don’t have to remember!
• Food - We always end up cooking way too much food at Christmas. Think about cutting back this year. Do you really need that 12 lb turkey for the 4 of you? If it’s still around a week later and you have to throw it out, it’s too much! Try a small ham or even a turkey breast instead. Keep leftovers to a minimum and make sure they are completely cool before you put them in the fridge. That will help save electricity as well as the fridge won’t have to work so hard.
• Packaging - With so many presents at Christmas, unwanted wrapping paper and packaging are inevitable. Avoid plastic ribbons and bows unless you plan to save and re-use them next year. And please, take the time to collect the used paper and cardboard boxes to take them to a local recycling center. Or, forgo a typical gift for that special someone and give them the gift of giving by donating to a local charity they support in their name.
• Money - Some of these tips might not be the easiest thing on your budget, but they will make you feel better about Christmas in the long run. In exchange, why not forgo a present or two to make up the difference.

For some more thoughts on Christmas check out these articles:

Have an eco-Friendly Christmas

World Vision

I mentioned a while back that we will be looking at purchasing a new car in the near future. I outlined some of that process and had it accepted as a guest post over at Mrs. Micah. Check out the article here.

Preparing to Buy a “New” Car

As I posted a couple days ago in Should I Renegotiate My Mortgage, I was going to see about consolidating our first mortgage with CitiMortgage and our CitiFinancial credit card that financed the central air install a few months ago. So, I called CitiMortgage (C) yesterday to see if they would be willing to handle this. While they can’t simply roll in the amount to our balance and update the payments, he did offer me a refinance deal.

Because of our standing as good clients (yep, we actually pay our mortgage on time every month, or, this month twice!), the offered us first a streamline refinance with no closing costs or fees. Basically, they just reduce our rate from 7.125% down to 6.25%. A pretty sweet deal I must say. However, we need to roll the central air money into the mortgage before the end of May in order to avoid finance charges (it was 1 year no payments no interest). For that, we will have to do a full refinance with closing costs and all that good stuff.

The total refinance would bring our 2 mortgage up to about 95% loan to value. That’s a big no-no in today’s market no matter your credit. But, since CitiMortgage is the first lien holder, they are mainly concerned about not having more than 80% of the value on their mortgage, which this refinance will still do for them. They plugged in my estimated home value and new income and we were approved in about 4 hours. It’s just a matter of paperwork and they will finish everything up, including paying off the CitiFinancial card for us. This refinance comes with the 6.25% they offered before and no points.

There will be a $445 application fee to move forward, which kind of stinks. They also estimate about $4k in closing costs and pre-paids which they will roll into the balance. That’s good, because we can’t afford to pay those at the moment. It’s strange though because they will make me fund a new escrow account and then we will get our current escrow account refunded to us later. What a scam.

All in all though, I think it will be a good deal for us. We will be rolling in 16k of debt plus the 4k in closing and pre-paids. With the drop in the interest rate on the mortgage, our monthly payment will be increasing by $27! That’s nothing. I had budgeted for it to go up over $100 when we did all this, so that’s really good news. It will take a big headache off of us going into the new year having it done. The skipped payment that comes with a refinance will also give us the cash to pay sales tax when we buy a new car next year.

I thought I would share with you a list of interesting blog topics I’ve read over the past week or so. Hopefully you’ll find some good reading in these as well!

• First, I was featured over at Stock Trading to Go in the recent Carnival of Personal Finance #128. There are tons of great articles over there, definitely check this out.
• JD over at Get Rich Slowly is almost out of debt (except for the house) and is planning what to do next in Setting and Achieving Financial Goals.
• Jim at Blueprint for Financial Prosperity shares some inflation numbers showing the 12 Days of Christmas Index Up 4% This Year.
• Tricia over at Blogging Away Debt is excited because Our Emergency Fund is Fully Funded.
• JLP at All Financial Matters shares a story about a women that is in way over her head on How the Heck Did This Woman Get a Mortgage?
• Free Money Finance also has a list of The 10 Most-Hated Money Saving Tips. All good ideas, but I’m sure there are a few of them you’ll just hate!

So, today has been busy. After I got to work this morning I checked my e-mail. I had a note from my bank about a completed transaction. I currently have items set up to send me notification of any deposits over $10 or any withdraws over $200. To my shock, it was letting me know my $1200 mortgage payment just cleared the bank!

Umm… okay, that must be a mistake, that’s not supposed to come out for 2 more weeks! I hopped online to find that it did indeed come out today. I just set that up to pay for next month on Monday evening. I thought I had changed the default date to 12/14, did I forget? I’m not sure at this point. I’m trying to get in touch with the bank to see if it can be canceled, but I already see at the mortgage holder they have the payment cleared there as well.

This is NOT a good month for me to screw up like that. We were finally on the easy path after my last paycheck. The one before that was missing 6 days of pay from our vacation AND it was also the check that had the $700 health insurance payment taken out of it. Now, I’m down another $1200 and don’t get paid again until the 6th!

Well, I’ll at least get some on Friday from my teaching job, but I’m not sure that will cover the bills until then. Especially since it will hit the E*Trade savings account. Not to mention I just made the payment last night for the switch of my auto insurance and paid 6 months worth. I was just hoping to almost break even this month with our net worth. We’ve done extremely well on our spending this month, even though we are down on our income.

Any advice from the readers out there on how to have a do-over with my mortgage payment for December?

We are planning to refinance our mortgage by the end of May this coming year in order to roll in some debt related to adding central air to the house. When we bought the house last June, we financed with an 80/20 loan program and paid just a small amount down along with all closing costs.

The first mortgage is with CitiMortgage (C) and our second is with Countrywide (CFC). The original purchase price was 183,000 and we have done substantial work to the house, including slate roof repairs, electrical service upgrades and the central air install. The central air was a high efficiency Unico System because of the need to preserve our old home. The cost for the system was just over 16,000. It is currently financed with CitiFinancial (C) with a 1 year no interest plan (we had planned from the start to refi and roll this balance in).

By the time we refinance, we will have less that 180k left to pay on the two mortgages plus the 16k from the central air. That means we will be needing to finance 196k or so. Back in the day, that wouldn’t have been a problem. Now, it’s much harder to find a “cash out” refinance for anything more than 90% of the appraised value. We won’t have any problem getting an appraisal to come in at 210k or so, but with 90% that would mean we would need an appraisal of nearly 218k. That might be a stretch.

Then, a thought came to me. Since both the first and the central air on with divisions of Citigroup, do you think I would have a shot just getting them to roll that other balance into our current mortgage? I mean, they would still have less than 80% of a newly appraised value and we are very good customers with great credit. It would allow them to keep some good money rather than losing it if we refi and go elsewhere.

This shows that I could save about $500 a year by going with the FSA. There are some other details of this as well.

1. My employer reimburses $500 of the $1,000 deductible for the PPO plan. So, that means the savings disappears. But wait, they deposit $500 in the HSA account for you. That money belongs to you no matter what. You don’t have to spend it first to be reimbursed!
2. We could pay more or less towards deductibles. Either one of those deductible numbers could double for the family amount and we’d have to come up with the extra money.
3. If I go with the PPO plan, and don’t spend my $2,600 from my FSA account next year, that money disappears. I don’t think that will be an issue as glasses, contacts and my braces alone will be $2,000 this next year. However, I can pay for those same expenses from the HSA account (though they won’t qualify for the deductible) and if I don’t spend all $2,600 the money is still mine to keep. I can even roll that over to another HSA plan if I choose to leave and I am on another plan later.
4. One other benefit of the HSA is that once the account has a minimum of $2,000 (the amount of the individual deductible) I can choose to invest the remainder in mutual funds and the capital gains can be used for medical expenses at a future date.

The base HSA checking account does earn some minimal interest as well. There are also some tax implications if I choose to withdrawal money from the account or use it for non-approved expenses (10% penalty similar to withdraw from a 401(k).

If you want some more detail of what is and is not allowed as expenses (for this or an FSA) or for the tax implications, check out IRS Publications 502 and 969 respectively.

I think this is going to be the best option for us at this point. I like the idea of a higher deductible and using the extra savings to pay the deductible should I need to. I also like that the money stays separate so I don’t have to manage it myself. It can all come out pre-tax, so I will also reduce my taxable income for the year as well. Plus, I don’t feel like I’m throwing money away with my insurance. I still have a portion of it if we don’t need it. Should I roll some over to the next year I can reduce how much I am taking out that year and stock that away, or continue at the current rate and invest it within the plan.

While it may not appear to be as large a savings as going with a private plan, it also reduces my risk of large out of pocket expenses and it helps me take full advantage of tax benefits for now.

Along the lines of my last post of going green, CF (or Compact Florescent) lighbulbs are a great way to save money. I have been hesitant to use these for years as I never really liked florescent light. However, I bought my first set of these this past weekend and will try them out soon as lights start to go out.

I bought 2 four packs at my local Home Depot. One was on sale for $3.97 (soft white) and the other was at regular price of $7.97 (daylight). I like real light so I wanted to see the difference.

Yes, these are much more expensive than the $.98 4 pack you can buy at Wal-Mart these days. However, I find that I’m replacing those lights every 2-3 months. These CF’s are guaranteed to last for 9 years! Even if the others lasted 6 months, that’s $.50 per year for that light bulb. Over 9 years that’s $4.50, where the CF is only $.99 for the one’s that were on sale. In addition, the CF uses only 14 watts of energy compared to the 60 watts of a comparable bulb. So, that is saving 75% of energy use on your lights. Of course, lights don’t typically account for a huge portion of your light bill, but if you are talking about less than a dollar a year for light bulbs, a few extra cents of savings on your electric bill adds up on a per bulb basis.

Of big concern still is disposal of the CF bulbs. These should be properly disposed of just like regular florescent lights and not thrown into the regular trash. Luckily, with a 9 year life, there might be some more options for local disposal by the time the first one of these go bad.

Anyone else out there use these kind of bulbs? What’s your take on the light?

Madame X over at My Open Wallet has a list of rules when it comes to Personal Finance. My favorite is Rule #17 - Do the Math. Such a simple and honest premise. One can hardly imagine that it wouldn’t be part of any financial decision.

The problem? Have you looked around your office lately? Do you know very many people who understand basic math very well? I know I don’t. It’s no surprise to me that there are so many people who are in financial crisis with debt or mortgage problems. They surely just don’t understand the consequences. Not only can they not understand what the banker or lender is telling them, they don’t even have the know how to “Do the Math” themselves.

Even reading personal finance blogs, I’ve been amazed at the number of posts regarding how to figure your taxes or how to calculate interest or payments, that sort of thing. Granted, much of that is coming from reader questions, but it still goes to show we have massively failed generations of people in teaching them how to do math and manage their money.

If you’d like some help learning and/or would like to help your kids learn, check out my previous post on the subject.

Starting Young

I wanted to pass along a money saving tip for your phone bill. When we moved into our house 18 months ago, I looked at a ton of different options for phone and Internet. I found the cheapest solution for us was to get a DSL line and use VoIP (voice over Internet).

By getting the very bare bones incoming phone line (no free local service or line maintenance) and a upgraded speed DSL (comparable to most cable Internet) we only pay about $35 a month for the 2 services. Our local cable Internet provider was more than that per month for just the Internet service.

We then added VoIP from ViaTalk (affiliate link). At the time, I bought 2 years of service up front ( a bit of a risk), but that worked out to a cost of about $15 a month on average. We’ve had very little trouble and been quite pleased with the service. Our renewal time is coming up and we will probably go with a new contract.

In addition to unlimited calling in the US, Canada, and Mexico, we also have a TON of options for voicemail (sent to e-mail), ringing (auto off at night, network down forwarding, simultaneously ring a cell phone) and much more. They now offer a free 2nd line with the service. That’s not a second number, just allows you to make or receive 2 calls at the same phone number at once. The device is free.

If you have high speed Internet already you might consider it. They currently have a special that is $199 per year with one additional year free. That works out to only $8.30 per month for tons more service than you can imagine from a regular phone company.

In full disclosure though, I did not get paid for writing this plug, but I do earn commission if you happen to sign up through my link. I’m doing this of my own free will. As I said, we have been a satisfied customer of 18 months as of this point and have had almost no trouble whatsoever.