The American Dollar OUR FAMILY. OUR MONEY. ONE PERSONAL FINANCE BLOG.
One industrious American family's focus on a financial goal of freedom. Through worldly personal finance education, here is our story.
Our Story: Both my wife and I are 27 years old and have gone through financial hell and back. Now we are on track to financial freedom, however we are not financial advisors or professionals, just everyday people. Share our journey from a negative networth and email us if you have questions or comments! :)
Tuesday, January 05, 2010
Confession time. I'll be the first to admit that I have fallen off the financial wagon. If you've read any of my earlier posts, you know just a few years ago, I managed to get out of debt, invest a lot and learn some valuable lessons in my early twenties. I never considered myself as a blogger just an ordinary guy with a wife and daughter getting out of debt. As my late 20s are closing in and I approach 30, I have ridden back to the top of the debt roller coaster. Let me paint a brief picture of my financial reality. Our sub-prime 10 year interest only mortgage was our biggest mistake. We bought more house than we could afford and hindsight not to carry such a large debt burden. On the naive side I also thought the housing market in my area was still in an upswing and eventually we would sell in 10-20 years for a profit, which still could happen but who knows. We signed the debt note to the tune of $365,000 in 2007. At 26 and 27, we were living large and making bad financial choices. 2 years later we have amassed all kinds of debt. 3 credit cards that were just for emergencies are at a total of $45,000. I have taken a 2nd mortgage out on our rental home for $75,000 and now have little or no equity in either home we own. Also we dumped all our retirement accounts except one at her job which has about $2k.
Now let me get something straight too. Last year I quit my stressful job and went into a business partnership. The 75K equity was used towards the business and I also gained an additional partnership debt of 100k that I have about 3 1/2 years left to pay on.
Ok so that's my family finances in a nutshell. Right now we have personally about -50k net worth. We have the game plan in place because our take home is roughly 9-10k. Restarting the journey in 2010 will be a challenge but it isn't something we haven't conquered before. I'm going to dive in depth of each of our debts and elaborate in the next blog posts. Buckle up because its going to be a bumpy lifestyle change ahead.
Im ashamed at the way we've been handling our money. This past year was great in terms of us living it up. Mrs. Dollar stayed at home with our 15 month old. We purchased a house and I got a promotion at work. However we have been very very lazy with the finances and even worse we got too comfortable with our lifestyle. First off the budget, we stopped using the envelope system which worked wonders with our debt before we had our daughter. We are now on a manual allocation each month finding ourselves overusing the debit card and even worse starting to RELY on our credit card. We'll fix that problem in a minute...
But lets go to an issue i want to unload.We bought too much house. There... i said it! We are two 27 year olds with a 15 month old and we live in a $365,000 house. Sadly it took us about 8 months to realize this and at the time we were wrapped up in the emotions of having the best because we DESERVED it.Today our mortgage payment is $2400 which includes escrow. We make ends meet every month and have just enough to enjoy some luxuries or extra toys for our daughter. More importantly we have lost the core values and basics of personal finance and we are paying the price.
Mrs. Dollar not working has taken a hit to our income and savings obviously, however she plans on returning to work in August. Ok first things first, get off exempt at work. Ive been claiming exempt to get through a financial rough patch. That has been adjusted to 3. Second, we are going back to what we know best, envelope system and sticking to the budget. No frivilous spending and we are lowering eating out at a restaurant to once a week. Secondly, lifestyle. We either need to sell the stuff we have or take care of it. I am a huge proponent of being appreciative of what we have accumulated, not getting more. We also have to make time to organize and inventory. Im sad to say that we have high consumption tastes with a low income to support this habit. We are officially living paycheck to paycheck. Its time to start cleaning up the mess and get our mindset back in the right financial gear.
Apparently when you turn 1 year old, you get alot of stuff! I mean alot of stuff! My daughter turned one this past weekend and we threw a party and included both my wifes family and my family as well as our friends. Needless to say we went all out with 10 pizzas, 8 soda bottles, streamers, lots of balloons, more decorations, 2 cakes, birthday hat, birthday dress, and of course gifts. She is one spoiled little munchkin.
Today is presidents day so I thought rather than mope around in the gloomy wet yucky weather outside I would come in and grab some double overtime and a half. Being its not too busy today (actually have alot of work to do shhhhh), I have time to write this blog. I really need the extra cash too this month... We have been so lacking in the savings arena its about time to play catch up. Its back to work i go...
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My wife went out today to get some items for our daughters first birthday. Since we believe in the philosophy that your first birthday is a once in a lifetime special occasion, we are going all out with our friends and family on this one. Pretty much everything we purchased had the 1st birthday logo plastered it; everything from plates, napkins, cups, her birthday sippy cup, streamers, tablecloths, balloons, etc. you get the idea. We are going tomorrow to select and order the cake we want and of course any other munchies for our guests. Since we are having our friends and family over, we decided pizza would be a nice neutral selection for an evening meal, not to mention too expensive. The good part about buying all these things for her party is that my grandmother called me this evening to let me know that she wanted to pay for everything. Since this is her first and only great grandchild and also the fact that she wouldnt be able to travel, we were more than happy to accept this gift. Thanks Grandma! The 15th is right around the corner, so much to do, so little time :)
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I hate it probably more than anything in the world. Its a huge hump in my life that I need to get over and probably the worst part about it is that we are living within our means and even below. For at least the past 5 months (since we bought our second home), everytime I calculate the budget the income equals exactly the out go. Sometimes it gives me a few sheckles extra a month which I blow off because you never know what the increase in gas prices.
The reason why I say this is because we are kinda in an income financial rut right now. I mentioned before we can't really dig any deeper into our expenses and kick back our income into high gear until early March for me and late August for my wife. Although, it is nice to have a break from work and to do really the bare minimum at the office. But psychologically it pains me to see the networth like this. Maybe I'm just being big whiner. (Hey gotta vent somewhere!)
Today has been another grueling day at the office staring blankly at a screen while beautiful sunshine weather is behind me. After work I plan to take a walk with my family to soak up the last remaning sunrays. It will keep my mind off finances at least for today.
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Being out of touch with our finances for so long, we're getting back to the barebone basics. First finding out where we stand overall. Honestly, we are about the point of living paycheck to paycheck before my actual raise kicks into high gear. My wonderful wife is doing a beautiful job at home with our little one who will be turning 1 soon! Our baby has come a long way since she was first born. Obviously the finances are strained a little bit with another mouth to feed but seeing as shes going to be done with formula (the biggest cost) and going to milk, that will definately help. But not everything is her, her stuff is cheap compared to what we've got.
Here is the breakdown of where our money is going every month-
68% - Primary Mortgage/ Rental Mortgage/ Insurance/ Taxes/ HOA
13% - Groceries/ Household
10% - Electric/ Gas/ Water
8% - Cellphone/ Internet/ TV
1% - Home Security
Needless to say, because I've been strapped having a lower paying job these past few months and her being at home, the percentages may look high in some catagories; primarily the "Home" catagory. This will eventually be lowered once my pay increases and she returns to work later this year. Notice that also we have not allocated anything in the budget for our savings. In months in '05 and '06, almost 60% or more went towards reducing debt and savings. Seeing this as a VITAL part of our financial plan and future, I'm determined to add Savings back into our budgeting routine.
In the upcoming days, I would like to go over in detail each of the aforementioned catagories to see how we are using that money and "trim the fat" from each. Overall, there is a sense of frustration that we haven't really moved anywhere networth wise, however we are still surviving and absolutely determined to get back on the board.**
Yeah I'll be the first to admit that I'm stressed about my age. A certain coworker always seems to remind me of how the corporate grind stresses him out and how he can't wait to do this or that if and when he has the money. He's 49 and in my opinion he's still very young. This is a bit of a paradox because I don't feel the same about me. I feel there are alot more things that I should have done or should be doing with my life. Moneywise, I should have definately gotten an earlier start.
Take a trip with me for a second.
At 21, I was living with my parents working nights for a local rental car company. I brought home roughly $200 a week, which barely covered my car payment and insurance. I was a lost, financially scared child and seriously considering bankruptcy on $31,000 of debt.
Fast forward to today, 27, married, child, no student or consumer debt, 2 paid for cars, rental property with positive cash and a good chunk of equity, mortgage, and a recent promotion. And yes I'm still stressed... perhaps even more than before. Maybe its because I have more responsibilities, you know what they say mo money, mo problems. Or maybe its the fact that I want more and I'm never satisfied. I'll admit I'm a humble guy with simple values and a small town upbringing but there's always been a sense of urgency with me. A fire if you will that lit under me around age 22. I guess it was to ensure I have enough security to never lead myself or my family down that destructive financial path again.
So yes I'm stressed to the core to 'do it right the first time'. Now granted some of my greatest accomplishments have come from my mistakes, but we are plowing forward. So today I'll get up and face another long work day, work week, and work month and maybe by the time I'm 28, I can relax a little.¤
Wow what a interesting ride it has been for the past 6 months not really engaging in the blogging world and letting all our personal finances air out. At the time I left, I thought I needed to focus more on my family and my work. Our baby girl was born last February, so my priorities shifted a bit; and dare I say, even my personal finances took a back seat. She is now a happy bouncing almost 12 month old bundle of joy (and craziness!) ; and after sleepless nights, I can finally get back to a somewhat normal routine (at least with my blog and money :) Parenting has definately changed the game up a bit.
Ok so whats been going on? Well if you check my networth, you will find that staggeringly enough, we have maintained our networth having neither decreased or increased too much. However we did purchase a home in early September that we were eyeballing for quite some time. We turned our first home into a rental and had a tenant move in almost instantly. (More on that later...)
I would say our new home is the single biggest purchase of our LIFE so far and though it was such a lengthy process with the stupid idiotic mortgage company (meaning I had to dot their 'i's and cross their 't's), it was worth it. I'll get into more detail later but real quick and dirty, we got a $383k appraised home for roughly $365k including closing costs, but it was really the home of our dreams. So here we are back to financial basics again seeing what we are going to do and how we are going to get there.
Also wanted to mention I got promoted! Working my way up the corporate ladder isnt easy and at 27, I should be grateful. However with my raise and me making the big buckeroos with a crazy amount of responsibility, the flip side is I have to sacrifice my hours at home and be chained to the corporate wheel. Needless to say, I didnt like working long hours even before I got promoted :P
Finally... at least for today... I have to say, Im glad to be back. I cant wait to free my brain again of all the money/ work/ life/ family bumps along this road and actually have an OUTLET for it!~