Critical anonymous commenters

I could say that anonymous comments are cowardly, but then I have wanted to make some myself. However it would be nice to know who the person is so I could see their blog and try to see where they are coming from. The first response to a critical post is to feel angry and defensive. Especially with an anonymous comment, the temptation is to dismiss the commenter as some jerk not worth thinking about.

Here is what someone said to me about my last post:

One reason your house lost value is because other irresponsible people stopped making their payments. And you would do the same to others? Ironic.

And this deliberation comes right after complaining about your sister spending money on her wedding. Forgive me, but you sound very hypocritical and self-righteous; her error is minor at best and foreclosing on your house would destructive to many, many others.

Instead of dismissing this comment I decided to think about it and if any of the criticism was on target. Am I hypocritical and self-righteous? Sometimes I am, and the person who denies ever being a hypocrite is 99.9% likely a liar. Sometimes my actions and my desires clash with my principles and ideals. Sometimes I talk about eating healthy and have doughnuts for dinner. Sometimes I talk about the environmental benefits of public transportation from behind the wheel of my car. Part of the journey of life and tracking it in a blog is to be more aware. Life is a learning process and if I already had everything perfect and made post after post charting my perfection it would annoying, kind of like the female protagonist in a romance novel.

Has any frustrated mother fantasized, even for a moment, about walking away from her children? Has anyone in a relationship been tempted to split with his/her partner when things were rough? Ever wanted to just walk away and start over in month five of a home remodel? Of course! It's natural to contemplate what it would be like if your problems just went away. I am in a rough patch with my house now and I do fantasize about mailing in the keys. Will I do it? Not likely.

As for irresponsible people making the values of their neighbors homes drop, that seems bad to people like me who are left behind but not to others . For investors and other buyers just coming into the market this is a time of opportunity. Economists, pundits and the like who complained about the "insanity" of the market at its peak are of the opinion that this "reset" was necessary and ultimately good. For some of you out there those irresponsible people did you a favor.

Keeping to the contract I signed if I am able is expected of me by society, part of the ethical behavior expected of an individual. Of course, if I was a giant corporation and bailed out of a contract because it became unprofitable then it would be "just business". I think some of my frustration comes from the different ethical standards applied to individuals vs business, especially with all the current hardships being endured by responsible individuals when irresponsible corporations and local governments are getting federal bailouts.

As for my sister's wedding, now that the shock has worn off I am fine with the idea of her spending all that money on her wedding. It's her money and her judgement call to make; I would choose differently. I will reserve future complaints for expenses I incur personally. I also reserve the right to comment on following along with some of the more ridiculous expectations of society such as dream weddings.

Loan modification denied; now what?

Today I received a letter from my bank denying my request for a loan modification. The reason given:

"This request would be outside of your investor guidelines."

When I called to ask who actually owns my loan, who is this investor with guidelines I didn't meet, they couldn't tell me but gave me an address to write to and inquire. I was also connected to the Loss Mitigation department, and they said they could look at my information to see if there was anything they can do. I have to resubmit the exact same information that I already sent to the loan modification people.

I am a good risk, I guess. Although my house is deeply underwater ($150,000 or so) I am making the payments, including extra principal payments, and I have steady income and no other debt (40% of my gross income for shelter is all the debt I can handle!). Maybe they figure that they shouldn't lower my rate since I'll keep making payments at the current rate. The conversion date of my mortgage from interest only to principal and interest is too far away for their short term thinking.

What do I do? Wait for my home value to stop sinking and return to its original value plus the 6% realtor's fee (don't forget, you don't break even on selling a house if you don't sell it for it's purchase price plus realtor fees)? Do I send my mortgage servicer jingle mail? I'm not sure what I want to do. I need to learn more about the system so I can figure out how to work it. Mortgage companies are in business to take care of themselves, not me, and I need to figure out how to get them to believe that taking care of me is taking care of themselves.

In the meantime, I am planning to send the requested information to Loss Mitigation. When I make phone calls to the bank, I write down the date of every contact and what the call covered. I stopped the automatic payments for my mortgage. This means I will have to remember to make the payments every month but I think I can handle that. I also decided to stop making extra principal payments for now. I'll set the money aside so I can continue if I change my mind. I'm glad I decided to hold on to my income tax refund instead of using it to pay principal!

Glacial progress on my loan modification

I mailed the loan modification application in late May, in late June I received a notice saying my application was received. Today I called to find out the status. According to the bank, they received the appraisal on my home last Friday and that was the last piece of information they needed to work on my application. I should be hearing from them in one to three months. When I asked why such a long time, the operator said that they have applications from December that they are still working on and that one to three months is pretty fast. Frustrating!!

My plan is to call again in another two or three weeks.

I am starting to fantasize again about just walking away from this mortgage, especially if I can't get a modification. Mr. K-M's name isn't on the loan so we could buy a place in his name instead. At current prices he'd qualify for a loan on his lower salary. I doubt I'd actually do that, most likely I am just expressing my frustration with my current situation.

Once I binged, now I purge

Several years ago I had a shopping problem which led to the accumulation of a large debt and a large pile of stuff. The debt is long gone but I still have a lot of the stuff. Unfortunately (although at the time I thought it was fortunate) when I was shopping I lived overseas where there was lots of great stuff for dirt cheap. The money I spent got me a much larger pile of stuff than a similar amount of money would have purchased in the States.

Every so often I comb through the stuff and find more to toss. This time was especially productive and I filled my car for Goodwill. It is hard to think of all the use I could get out of that stuff but more important is the truth that I have too much to ever use and it doesn't offset the burden of having all that stuff lying around. Yes, I could have sold a lot of it because it was nice stuff in new condition, but it would have taken so much energy to do that, energy better used to move me forward.

I feel so much better, I have less clutter, and I can better organize what I want to keep because I can actually find it. Hurrah!

Loan modification

I received a letter from my lender that my application for loan modification was received and is in the process of being reviewed. I am annoyed, because I know that I am a good credit risk (sheesh, I'm a better risk than most people I know. dammit!). If I wasn't underwater on my mortgage I wouldn't have any trouble with a refi, instead I have to do this humiliating loan modification thing. However, if a little humiliation saves me a couple hundred a month in interest, I'm willing to do it.

Just a reminder...

When was the last time you checked your credit report? You can get a free report every 12 months from each of the big three companies. Go to www.annualcreditreport.com to get your report. If you get one report at a time you can check your report three times a year for free.

Checking your credit report is one of those things everyone should do periodically, like checking the air in their tires (you check the air in your tires, right?).

Contemplating a Fixed Income

I am on vacation this week (but staying home and relaxing) so my paycheck will be just for straight hours. Usually my paychecks are bolstered by shift differential and taking call and such so there is some flexibility in how much I make. I was thinking about what life would be like if my income was fixed, as it will be when I retire. It was a scary thought. The result of this contemplation is that I feel more committed to making sure I have a really good retirement savings.

Blowing the budget

I am totally blowing my budget this month, and I came at the damage from both directions.

On the income side, I decreased my income by not taking any call in the last pay period - an accidental oversight. I wasn't going to have any this pay period either, luckily someone was willing to give a shift away. Next, I went home several hours early one day when things were slow and elected to take the time off without pay because I have a vacation coming up and didn't want to burn any extra PTO.

On the expenditure side, I neglected to realize that because the bank changed one of my accounts due to a data compromise, that my cell phone bill stopped getting paid automatically. I don't open those statements in a timely manner since they are automatic and I ended up having to pay for three months at once. Then I signed up for a class in cartoneria (Mexican paper mache) which I wasn't planning on because I didn't know it existed. This year's Halloween theme (we go all out with Halloween decorating) is Dia De Los Muertos and I was going to try to figure out how to do the paper mache on my own but now I don't have to and this is (for me) a justified expense that I am willing to pay for (and if you knew how excited I get about Halloween you would agree).

Ultimately, there has to be some flexibility in any budget for inevitable ups and downs. I keep some slush money for budget overruns and fortunately have the ability to increase my income by picking up extra call shifts on occasion. I have a system and I know it works for me. If I couldn't make extra money I'd have to come up with a different system.

This has also been a lesson in diligence. I shouldn't be waiting over three months to check on bill payment.

Underwater loan modification

Today I sent in my application for a loan modification. My lender has a program in place for screening applicants to see if they qualify for any government loan modification programs (I don't - my loan is too far underwater, among other things). Then they see if the applicant qualifies for their in-house programs (they wouldn't talk to me about what I need to qualify for those until they screened me for the gov't programs). Current backlog is about three weeks so if I haven't heard anything in four weeks I'll start being a pest.

All I really want is a lower interest rate that I could get if my home hadn't lost so much value. It's frustrating that I can't refi when interest rates are so good.

Current interest rates would save me at least the $300 a month extra I need to pay my second mortgage off in 8 years or less.

We'll see what happens...

Anyone else trying to get a loan modification?

Cost of housing, then and now. Also loan modification and the underwater loan

Housing costs where I live are very high, and I think this example illustrates it pretty well:

The parents of a friend live a couple blocks from me and paid $18,000 for their house in the 60s. At the time it was twice her dad’s annual salary. In the late 70s my parents bought their house in an equivalent neighborhood in the same city for four times my dad’s annual salary. Two years ago I bought my house (which is a lot smaller than my parent’s house and somewhat smaller that my friend’s childhood home) for almost six times my annual salary. My friend’s dad, my dad and I are all in the same salary bracket for our times so it is a good comparison.

What would it be like to have a house that only cost twice my annual salary? Or even four times?! OMG I would think I was rich! The entire mortgage would probably be paid off in ten years! Wishful thinking....

In a related story, I recently called my bank to ask about loan modification. They are going to send me paperwork to fill out and return (along with my last tax return and proof of current income) to see if I qualify for government programs for loan modification. If I don't they will then see if I qualify for their in-house program. I already know I don't qualify for government programs based on what I have read about them (too far underwater, loan too big, income too high) but the bank is going to make me go that route anyway. I don't know if I'll be successful but I figure "nothing ventured, nothing gained".

Being underwater makes me unable to do a traditional refi, otherwise I would and take advantage of today's better rates. Even half a point off my current 6.25% would save me a bundle. It irks me to no end that I am otherwise a great risk for the bank and all I would do with the money I save would be to pay more towards the principal of my second mortgage so they'd be getting the money anyway. In order to do a refi I need 20% equity and in order to get 20% equity in my home based on its current (Zillow) value I would need $245,000. If I had that much money I would pay off my second and 20% of my first and I wouldn't need a refi or modification!!!!!

Eating at home, Part II

After spending a pile of money on groceries last week and worrying that eating in wasn't going to save that much money, it was a welcome realization that the food I bought last week will last me all of this week as well. I forgot to take into account that I bought a lot of staples and stocked up on frozen fruit chunks (for my now almost daily breakfast smoothie). All I bought this week was milk, cornbread mix and some fresh shrimp. Some of what I bought will last me through next week, too, so I will only have to make a smallish purchase this weekend.

Another side benefit to better eating habits has been more energy. All that junk was really dulling my senses.

Experiments in eating at home

I started cooking at home this week. Maybe you don't think that's a big deal, but in the two years I have lived in my house I have cooked maybe three or four family meals that weren't for a holiday. Everything else was snack food or eating out, with the occasional partial dinner for one. This is going to get expensive if I keep cooking for everyone. At the moment eating in is costing almost as much as eating out for just me would cost. I think that once I get the hang of it eating in will be cheaper and after our guest leaves I'll go back to making food for just me - Mr. K isn't too excited about my cooking since I don't like tomatoes or cheese.

I'm going to have to pay more attention to all the posts out there about cooking at home and budgeting for food now that I'm eating at home. It is a very weird experience. I'm also running the dishwasher more often, twice in a week now instead of once every ten days; I am also washing more kitchen towels and napkins (we use cloth napkins). Also if I keep this up the lack of counter space in my kitchen may drive me to a remodel sooner than expected. Given all that, maybe it would be cheaper to eat out all the time.

Unexpected windfall

Sometimes I feel great about my financial skills. Other times, I am embarrassed. A while back I posted about how I stopped my whole life insurance policy. I don't really need all that insurance and it freed up an extra $90 a month in my budget. What is embarrassing to me is that I had that policy and never really understood that much about it. I was young and foolish when I signed up for it over a decade ago but that shouldn't still be an excuse. If I had understood it I would have expected what came in the mail.

What did I get in the mail? A check for the cash value of the policy when I ended it. It's just over $5000. In the post before this I was whining about going over budget and this money will not help me there. I do not put unexpected windfalls towards bills I racked up by shopping too much. Nope, this money is going straight to the bank to sit there until I decide what to do with it. Principal on my mortgage? Home improvement? Expanding my EF fund to five months of income instead of four? I don't know, yet.

Budget off the rails

This month I have a credit card balance that I cannot pay with my paycheck. My car needs its 30,000 mile servicing and I am going to have to charge it, adding to the balance. The charges on my card were a convergence of my decision to spend a couple hundred on new clothes (so that no one would mistake me for a bum) and some rare expenses, such as new toner for my laser printer (hasn't needed any for 2 1/2 years) and signing up for a class I take three times a year, among other things. I will be able to pay my current balance with my next paycheck provided I stop spending.

This whole situation points out to me how close to the margin I really live. I give myself a discretionary spending allowance which generally meets my needs so I don't usually feel like money is tight, but it is. Every dollar I make is already earmarked for bills or savings and only a teeny bit left over for extra expenses. Of course, in a real emergency spending situation I have plenty of resources - my emergency fund, the money I keep in stocks, the money I pay towards my loan principal each month. But that money is for emergencies, not new clothes or a lawn chair. I miss the days before I owned a home when I could go off the rails with my budget and it was no problem because I was bringing in way more than I needed to live on.

This is not the end of the world; I'll rein in my spending, go back to my usual thrifty ways, pick up an extra call shift, and everything will be fine. Then I'll be back in my pretend world where I have plenty of money for everything I need because I don't need much. I just have to remember that all this tightness now will pay big dividends when my second mortgage is paid off, then first mortgage is paid off, then retire early or only work part time by my late 50s. And I do have a wonderful (already saved up the money so no worries) vacation coming up in a few weeks.

Customer service vs the cheapest price

Wal Mart, Home Depot and big box stores of that ilk tend to have the lowest prices for some of the things I buy, but what about quality of life? By the time I have spent 30 minutes roaming the aisles of Home Depot looking for someone who can help me find a particular gizmo I want to scream. Then I go to the register and find that I have to pay at one of those damned self-pay stations where the computer talks to me like I ride the short bus and is always complaining about items placed in the baggage area. Good thing I don't carry around a machine gun in my purse, because by the time I leave Big Box Hell I am always wishing for one and that would only lead to trouble.

I'd much rather pay a bit more at Orchard Supply Hardware, a smaller chain local to my area. The stores are smaller and the prices are higher but friendly and helpful salespeople roam the aisles asking people if they need help finding anything. I never have to spend forever looking unless I want to. It is nice to interact with actual human beings and every time someone asks if I need help I feel better about the human race in general. I spend the extra money gladly because my quality of life is so much better when I shop there.

Just a reminder that the lowest price is not the be-all, end-all of everything even in a frugal life.

Not going to make it at this rate

Yesterday I wrote about the joy of reducing the power of compounding interest by making extra payments. While what I am doing is great, it is unfortunately not enough to meet my goals.

My goal is to have my second mortgage paid off before I have to start paying principal on my first mortgage. That starts in 2017, a long way off but all too short a time to get $125,000 paid off for my second mortgage. I'd also love to have a year or two of breathing room without any second mortgage payments before starting principal payments on my first.

I like to play around at Bankrate.com and use their mortgage calculators to figure out how long it will take me to pay off the mortgage if I pay more in monthly principal payments or if I make a one time payment. It is fun to see how much time I am taking off my loan repayment schedule by paying extra, but also scary because it makes me realize I am not paying fast enough.

In order to meet my intermediate goal of paying off my second mortgage in six or seven years I really need to do more than pay off the $10,000 in principal I set as my goal for this year. I still have $11,000 of my tax refund left, and I am thinking about what to do with it. In order to meet my goal I not only have to put the tax refund towards the mortgage, I also have to increase my principal payments to about $800 a month. Yikes. I just increased from $300 to $500 a month last fall, and increased my monthly car savings from $100 to $200 a month. Where will I find another $300 a month?!

Paying down principal pays off

Today I made the monthly extra principal payment on my second mortgage and while I was online I looked at my account.

I paid $10,400 in interest last year. I paid $3310 so far in interest this year. Yes, that is a lot of money in interest. But consider that even if I did not pay another dollar in principal this year I will still pay about $500 less in interest this year because I paid down some of the principal. Since my monthly payment is about $1000 that means my loan will be paid an extra half month early even if I do nothing else.

I am taking away the power of compounding interest! Hooray for extra payments!

Progress on my 2009 Mortgage Paydown Challenge

As you can see in the box on the right I am making steady progress towards my goal of paying down $10,000 in principal on my second mortgage. The $164.75 listed for April is the amount of my regular payment that went to principal. This is pretty exciting because almost two years ago when I first bought the house my payments only paid off $80-90 in principal. It's almost doubled!

Original loan, May 2007: $138,000.

Amount paid off as of today: $12,780.69. Of the $12K, $7344 was in the last 12 months.

Current balance: $125,219.31.

Find a way to do what you love

This post is not about personal finance or frugality per se, but I believe it is relevant because the benefits of sound personal finance and being frugal are related to living a joyful life and not a life tied only to money or material things.

Is there something you enjoy doing and have a passion for? What are you doing to follow your passion? Years ago I was really interested in crafts but never really did anything with them. After a family tragedy I took stock of my life and thought about all the things I wanted to do and wished I had done. I decided that I did not want to get to the end of my life and regret that I had not used my time well. Here's what happened:

I started doing crafts again. I found several crafts I really liked and eventually narrowed my focus to a few things on which I could focus my energy. Then I discovered the internet, including craft websites and blogs. I was inspired to develop a comprehensive body of work worthy of a website. I developed a narrow field of focus and put my efforts into doing just a few things but doing them well. I searched for people with similar interests and contacted them. Like minded individuals (not a lot, but more than I expected) from countries all over the world discovered my work and appreciated it. When I couldn't find needlework patterns I liked I started designing my own. I found an opportunity to teach a class in my specialty (not for money, but it will be practice and exposure) in a few weeks and having that deadline is forcing me to get my patterns fully developed and ready for publication as handouts. I am also making kits so beginners can make my patterns and end up with a useful item. One of the contacts I made is the editor of an obscure online needlework journal and as she is going to feature the type of work I do in an issue she is going to feature my work in the issue. The proprietor of my local needlework store also admires my work and has offered herself as a resource if and when I decide to publish patterns professionally. I am now at the point where I can see potential income from my hobby. Probably not much, especially because my field of interest is pretty obscure and limited. But I'll enjoy doing what I do regardless of wether I make money or not so that's OK. All of this has taken uncounted hundreds of hours of work on my part. But because I enjoy what I do so much it doesn't seem like work at all. Even the small recognition I have received so far is deeply fulfilling and only serves to motivate me to do more, and better. I don't know where this is going but I am enjoying the process and the journey, and I now understand how those who succeed are driven by passion for what they do rather than having making money as an end goal.

Lessons I've learned so far:

1) It is easy to work hard at something you love.
2) It is important to be good in a field where you want to succeed.
3) It is really important to communicate in order to get noticed. Put yourself out there!
4) Contact people who share your interests. People who enjoy what they do also enjoy talking about what they do and can be really helpful not to mention good sources of information.
5) It is really amazing how one thing will naturally lead to another. Each little step is the building block to reach the next step.
6) Success is a lot of little steps, not one giant leap.
7) Success is as much about the journey as reaching the goal.

California refund and shopping

After stating it would hand out IOUs to taxpayers due refunds, the state of California is finally paying out the money it owes. I received my tax refund last week after filing at the end of January. It was about time!

I already adjusted my withholding so that hopefully I will be due little if any refund next year. I used to like getting a Federal refund because I always used the money for something constructive like paying down loans but I believe I am now financially disciplined enough to put that money mind game away and put my money to good use as soon as I earn it.

Speaking of putting money to good use, I actually went out and spent some money. My wardrobe was looking pretty raggedy; not a single outfit fit for being seen in except by supermarket clerks and people who already know and love me! $150 at Old Navy bought me enough clothing to make several nice outfits. I bought the clothes in colors which match accessories I already own so I didn't have to buy any accessories. Two good things came out of this experience besides refreshing my wardrobe and having clothes I am not embarrassed to be seen in: 1) Spending the money was stress free because I have a savings fund for clothing and 2) I was reassured that I have not become such a tightwad that even sensible, planned, justified spending feels wrong. The whole point of being careful with money is to enhance my quality of life, not just to have more and more money. I don't want to end up one of those wacko bag ladies who live like beggars but have millions in the bank when they die.

My frugality goal is to be logical, not pathological.

The title of this post seems to imply that I spent my tax refund on shopping. Not so. The refund is a few thousand (my first full year with mortgage deduction plus changing jobs plus fear of not withholding enough = way overestimating my withholding) and I'm not sure what to do with it. Pay down mortgage? Home improvement? Savings? For now it is going to be parked in a savings account. I'll decide what to do with it later.