Search Results for: debt free ride

Our Debt Free ride

April 11, 2014 by Shelley

In 2007, I decided to focus on paying off our home. That goal became a reality in June 2009! We enjoyed the debt free thing for 6 months…when we decided to purchase a cabin in Decemeber 2009. I had a hard time committing and jumping into another mortgage, but ultimately we decided we couldn’t pass up a once in a life time price ($65,000).

Our cabin

I then spent the next 2 years and 3 months paying off the cabin, and we became debt free again in March of 2012. Which at this point my husbands car had 230,000 miles on it with the hood zip tied shut, cracked windshield, and no shocks left.

Heber’s new car

At this point we knew we were living on borrowed time, and started stocking away $ to pay cash for a new car. In 6 months we saved up $15,000 and added that to the $7,000 we had saved in a car account over the past several years and Heber flew to Jackson Hole, WY in October 2012 to purchase a 2012 subaru imprezza with 3,000 miles on it.

Yay! We made it, we paid cash for the car and were still debt free… for 2 months that is–until I got my best idea ever! I had been watching “Love it or List it”, which is a design show on TV, where they remodel houses to fit the families growing needs. My wheels started turning, and I called Heber at work and told him all about it. “Sounds good, lets do it!” was his reply. I couldn’t wait till my morning run to tell my running partners.

My new “Work Studio”

My idea was to convert our garage to my new “work studio“–I called it my “work studio” instead of “work room”, because it was going to be amazing with 10 ft ceilings, bold curtains, a chandelier hanging over my cutting table, and french doors that opened to the driveway for easy loading of furniture. With this fabulous idea, we would need to build a new garage to replace the old one. Our new garage ($15,000) went up about a month later in December 2012 and we started the garage conversion process ($10,000) in the dead of winter. We got a loan for the new garage and paid for the conversion as we went.

My goal to pay off the new garage was 6 months. My plan was to pay it off by June 2013. At this point my car was struggling, it had $180,000 miles on it and we’d replaced the transmission at 160,000 miles (we broke down driving home from Thanksgiving at 2am in Wendover) and we kept dumping $ into it trying to make it last one more year, so we could save up and pay cash for a new car. Needless to say my car died the end of May 2013–it was going to need $3,000 of transmission work! At this point we decided to call it quits and purchase a new car.

We were almost home free, I was a little bummed, we had one more payment to make to pay off the garage. I went ahead and made my final payment and the next month without skipping a beat started paying off my new car.

We bought a new Honda Pilot for $35,000 in June 2013 and got .89% financing through the dealer which worked out to about $20/ month interest. So I know it wasn’t the worst thing in the world to get a loan. It had just felt like a long ride. When we first paid off the house, I thought “Oh my gosh this is it, we’ve done it! We are debt free, how awesome is this?!” Then we bought the cabin, Heber’s car, built a new garage and converted my work studio, and then bought me a new car…in a 5 yr period! WHEW!

With that being said, my pretend goal to pay off the Pilot was 18 months…because I didn’t want to be neurotic about it. I didn’t want to think about it all the time running numbers in my head–by my deep down goal was 12 months. Well here I am 4 months out from my neurotic goal, and it’s feasible! I can make it happen!

After I pay off the Pilot and we are debt free again, I promise we are just going to enjoy it and maybe stash some extra away for retirement. We first became debt free 5 years ago and have come full circle again. I think being debt free is like losing weight, you have to consciously make an effort to keep your needs and wants in check. Just because you make your goal weight, doesn’t mean it’s over…you have to maintain! My famous last words, “So I was thinking….” Heber knows to hold his breath when those words come out of my mouth–usually it means a remodel, a project, or something crazy!

I feel truly blessed that Heavenly Father has blessed me with my talents and skills. I LOVE fabric and decorating! I love what I do! I am amazed at what my business has turned into over the past 14 yrs. I always remember opportunity looks like hard work. Don’t be afraid to work hard for what you want and love. I thrive on feeling productive and creating something out of nothing. I don’t like wasting things and try to reuse and repurpose as much as possible…my sister calls me scrappy. I also like to be efficient, I like to make the most out of my gas, money, time, etc.

I like to share about financial stuff, because it’s always so hush, hush and no one really shares openly. I wish more people would’ve talked to me about it when I was growing up and first married. I had no idea a 12% interest rate on a car wasn’t a good deal. Once I realized $900 of our $1035 house payment went to interest, I couldn’t understand how that was legal! Then I became motivated to pay it off in 10 yrs instead of 30yrs. How is 30 yrs standard?? You pay 2 1/2 times what your house is worth if you stick to the 30 yr plan! How is that an investment??? IF you make an extra payment a year on your house you cut 7 yrs off the loan! Finding out we had a credit card with 28% interest rate when we were first married, because of a few accidental late payments was INSANE! I have learned a lot over the past 16 years and have made many goals, written many lists, and scratched numbers on lots of scrap papers all over the house.

We always pay off our cards every month and have different saving accounts set up for the house, cars, vacations, kids, etc. that way when repairs come up the $ is there and we don’t have to put emergencies on the credit cards. We know we are going to take trips, we know things are going to break, we know the kids want to go to college…so we plan for those things.

We try to talk openly with our kids about what things cost and what we are paying off and what our financial goals are. They love shopping at second hand stores. Just the other day I took my son to the thrift store because he needed new jeans (he grew 5″ this past year), I got him 4 pairs of “cool” jeans, 2 belts, a jacket, and a fleece liner for $26! How can you beat that? He loves what he got, and was just as excited as me about the price. They know they can get a lot more for their money if they buy second hand.

What I want my kids to know about finances.

April 15, 2016 by Shelley

This is a list of what I want my kids to know about finances before they move out on their own. I wish I would’ve had a list from someone who’d made a bunch of financial mistakes and learned from them. Here’s to hoping my kids learn something from me. A mom can dream right?

1. Make a budget and spend less than you make! Know how much it costs for you to “live” each month. What’s that number?

I was helping a friend a few weeks ago, with some financial stuff. This was one of my questions (How much does it cost for you to live each month). Then I realized, I didn’t know the answer for my own household! I came home and figured it out. It makes a difference when you know that number and know how much extra you have left over. It keeps your daily spending in check.

2. Save at least 10% of your income.

3. Don’t buy a timeshare from the company. Buy second hand and save 50-75%. Timeshares will ALWAYS cost you $ even after they are paid off. There’s a thing called maintenance dues, that you get billed quarterly whether you use your weeks or not. Then if you’ve used up your few cleaning tokens for the year, you have to pay $90 cleaning fee on top of using your credits.

Usually it’s a better deal to rent the week you want from another owner and skip the dues. We pay over $1200/ year in dues. But since my husband is a fireman with lots of days off, we actually use our timeshare and it’s worth it to us in the end.

4. Don’t roll your debt (car, credit card debt, etc.) into your home loan. You lose your freedom to leave, sell, refinance, etc. Plus who wants to pay more for something than you have to. There’s a reason car loans are 5-6 years vs. a 30 yr loan. Cars don’t last that long, you don’t want to still be paying for it long after it’s gone.

5. Never let a bank tell you how much you can afford to spend on a house. You should be spending WAY less than what they qualify you for. Housing should be about 25% of your income.

6. ALWAYS pay attention to the price NOT the payment. Everyone thinks they can afford another $140/month payment, and that gets to be a slippery slope.

When I was 6 months pregnant with our first baby, we went to a timeshare presentation for the “free trip to Vegas”, We had no intention of buying…but guess what? $140/month we can do that! ok lets buy and make memories with our new little family! What were we thinking? $11,000 of debt! I was going back to work only part time after the baby, and we were already tight with my full time income.

7. Never get a 30 yr mortgage! Ideally get a 15 yr, 20 yr max. If you get a 30 yr mortgage, you will pay 2.5 times what your house is worth. How is that an investment?

We got a 30 year mortgage when we built our first house in the middle of nowhere when we were just kids back in 1999. We didn’t know any different. That was the standard. No one gave us a different option. I didn’t know enough to ask for anything different. Play with mortgage calculators online and see what the difference would be to get a 20 yr instead. You would be shocked by the small amount.

8. Quickest way to get ahead if you have a dual income household, is to live off one income and either save the other or apply the other to your debt until it’s gone. That’s what we did, and by the time I turned 34 our house, cars, and basement were paid for.

9. Pay off your credit card EVERY month. NEVER pay interest.

When we first got married, we kept our accounts separate and one time I happened to open Heber’s credit card bill, 28% interest!!! He had no idea it was that high. There wasn’t a huge balance on the card, but there was a balance, and I don’t like to throw money away.

10. Don’t get sucked into the idea that paying off your house isn’t a good idea because you need a write off. Way more $ stays in your pocket after your house is paid off than any write off you’d get.

11. If you pay an extra payment on your mortgage every year, you will cut 7 years off the life of the loan.

12. When you get your mortgage statement each month. LOOK at it. Realize how much is going to interest. On our first mortgage our payment was $1,035. $900 of that went to interest. HOLY CRAP! Once I understood what a crappy deal that was, I started putting any extra $ I had to pay it off faster. In the end we paid off our primary residence in 10 years. I was 34 years old.

13. Whole life insurance isn’t an investment/retirement strategy. Buy term instead. We just cashed out a policy we had been paying into for 9 years ($675/month). Guess how much we earned in 9 years…$0. Actually we lost about $4,500 once it was all said and done. Granted some of that paid our premiums for life insurance ($110/month premium). Which is great if our intent was to have coverage, but our goal was retirement. We already had some other term insurance through Heber’s work, so this was wasting our $.

I decided to take the $65,000 and pay it toward our investment condo. Which means I’ll only have $12,000 left till it’s paid for! Once it’s paid for we will cashflow about $700/month after expenses EACH month. That’s $8,400/yr profit compared to $0. I didn’t feel bad cashing it out. Yes, we had to pay a $1,500 surrender charge–but with saving $200/month on the interest on the condo it made sense not to hold out another year for $0 surrender charge. These policies always have a HUGE surrender charges which can be $7- $10,000 in the early years.

14. If your car isn’t paid for, that’s debt. If your house isn’t paid for, that’s debt. You aren’t debt free if you owe on your car or house. Those are the only things that you should go into debt for.

15. Don’t finance your toys. These are wants, not needs. If you want these things, then save up and pay cash. If you choose to afford these things, pay for them outright. The more you finance, the less freedom you have to make choices later.

16. Don’t finance trips. IF you can’t afford a trip, then get creative. Use reward cards for sky miles, car rentals, hotels, etc. but be disciplined enough to make sure you don’t pay interest on these cards.

17. Don’t eat out regularly. This gets expensive. If you are leaving the house and know you’ll be gone for 3-4 hours, pack a lunch, pack some snacks. No reason to waste all your hard earned money on something that is consumable.

Every time I do appointments out for work, I pack a lunch. It saves time and $. I don’t have to drive around for 10-15 min in some neighborhood I’m not familiar with trying to find something to eat.

18. When you refinance a house, you are starting over and adding $3-$5,000 to the principal for closing costs. So unless rates have dropped a significant amount at least 1.5%, it’s not worth it. Never get an ARM (adjustable rate mortgage), always get a fixed rate. If you do refinance to a lower rate keep paying your old payment to pay the house off quicker.

The first time we refinanced, we did so because we were told we’d save $100/month. Great! Then we went to closing to sign all the documents after the appraisal was already paid for ($500), and I noticed the balance we owed was about $3,500 more and we were at 30 years again instead of 29 years. I didn’t know there were such huge fees associated with a refi.

19. Use mint.com. It’s a free online service were you can upload all your accounts. Banking, investments, credit cards, retirement accounts, etc. You can create budgets for different categories (gas, groceries, shopping, home), and you can see how much you’ve spent through out the month at any point in time with a simple few clicks of the mouse. This way both spouses can login at any time and be in the know.

Ignorance isn’t bliss forever. It’s your responsibility to know what’s going on with your money.

Making correct choices with your finances is like making correct choices in life. I know it feels more restricting, but in the end you actually have more freedom. The freedom to take a trip last minute, the freedom to switch jobs, the freedom to buy a second property, the freedom to become an entrepreneur, the freedom to choose to work less hours. You’ll have less stress when your car breaks down, less stress when you are waiting 3 weeks for a client to mail a check. It frees up your headspace to think about life instead of $.

Here are some other financial posts I’ve written in the past.

Christmas isn’t an excuse for a free for all

BYU Womens Condo Rental

March 26, 2015 by Shelley

Last week we purchased a BYU Womens Condo Rental! It was an idea that we talked about last month in Belize. It felt like the perfect investment for us. Many of you know we paid off our house in June 2009 and six months later purchased a fixer upper Cabin for $65,000 in Midway, Ut—which we paid off in March of 2012. This is our third property, which I have plans to pay off in 3-5 years. I know! I’m kind of CRAZY! I am 39 years old–my husband is a fireman and I sew slipcovers for a living and we have 3 boys. We live within our means and have always lived off my husbands income and have used my income to pay off debt, save for a house, invest for retirement etc. That was the only way we felt we could get ahead. Basically we are a two income household living off one income.

We’d been interested in the past on picking up a rental and had actually been under contract twice–but my fear and timing got the better of me and we backed out of both. I’ve had the last 9 months to save up since we became debt free again, so this time I wasn’t scared. It’s a better time for us, our kids are older (10,12,14 yrs old now) and I was feeling ready for my next goal/project. I wanted our money to be working for us instead of sitting in a savings account. I know most rentals are break even or maybe cash flow a few hundred dollars a month–so going into this, my plan is to cash flow once it’s paid off. In the mean time, I’ll apply all rents and my income to this property until it’s paid for. Once it’s paid for we will cash flow about $750-$800/month after expenses (HOA, Management, property taxes, insurance). I know it’s a different way of looking at it, but I don’t want to pay $60,000 in interest over a 30 year loan, and I don’t want to wait 30 years to get a decent cash flow. I’d rather dump everything I’ve got into it now and pay $5,000 in interest over a 3-4 year period–that sounds more like an investment to me! I like to look at it like a nest egg–I am dumping $ into this property which will start giving back in 3-4 years, but I’ll still own the nest egg. It’s guaranteed returns.

Here are the specifics–we did a cash out refi on our primary residence to purchase the condo. This entailed us to get a better rate and no PMI (since we were only borrowing 60% of our appraised value). We closed with 3.25% rate on a 10 year loan (cheaper closing costs on a 10 yr instead of 15 yr by $400—I can buy a lot of furnishings for $400!) Since I have plans to pay it off fast I went for it against my loan officers advice. We took a slightly higher rate to get rebate on closing costs. We received $2400 off our closing costs. We paid $100 in closing costs!

We closed last Thursday on the condo. Friday we furnished it, Saturday I showed it to renters. Monday and Tuesday we cleaned and did small handy man projects–replaced faucet, smoke detectors, patched holes, replaced screens, etc. Then we had renters move in on Wednesday! HOLY SMOKES!! 6 days and we are up and running! I’m still on a high!

We are going to let a management company manage it for us. They charge $75/month to collect rent, fill vacancies, advertise, deal with small maintenance issues. I’m assuming this will be fully worth it!

It’s a 3 bedroom condo and rents to 3 single girls. All private rooms. Here are some pics of the decorating I got to do! All on a budget of course!

Here is what the 2nd and 3rd bedroom look like! Picked up dark grey curtains, dressers, and office chairs from IKEA. White bedding with pop of color on the pillow.
This is the master with a full size bed. I got the antique headboard/ footboard for $55 off a local FB yardsale page. I got the desk from the thrift store for $17 (they had 5 identical desks!–I snatched up 3 of them). I purchased the turquoise corded light for $5 from the thrift store and attached it to an old plant stand I stole from my sisters dumpster pile. Topped it off with fresh white bedding, pillows, and foot warmer!

Family room has vaulted ceilings. Camille helped me hang curtains, I slipcovered a $30 Ethan Allen couch I got off local FB yardsale page and decided to bring my bronze antique chair into the mix. The coffee table was given to me last summer from a neighbor. Picked up lamp for $8 at thrift store, and mirror for $3! I made the pillows from a remnant at the fabric store.

It’s a new adventure, we will see how it goes!