Happy New Year!

I'm happy because I paid off one of my two family debts today!  It was the one that I had earlier planned to pay off in June 2011, but I decided to cash out my Roth 2011 fund (I am fully funded for 2010) to pay it off now, then use what I was paying toward the debt to refill the Roth kitty.  I'm comfortable with this - I have 15.5 months to come up with 10K in Roth money, and there's an incredible sense of relief in just getting this debt paid off as it's been hanging over my head since 2003.

Now I have one family debt and one school debt remaining.  Combined, they come to about 2/3 of our take-home income.

If our income stays reasonably steady, and we keep on track, we can pay it off in three years.  However, I have no reason to anticipate a steady stream of income; that's not how it works in the computer industry.  We've had steady income for a bit less than three years at this point, which is not quite a record, but getting close.  I figure things will change sometime in the next year, so I'm about to start socking away all extra money in savings in preparation for whatever comes next.

2010 wasn't the most efficient year ever for me due to heath issues.  I'm hoping this year will hold more accomplishments and fewer doctor visits.

Heading into the new month and the new year, I still have $7 in my toy budget.  I can't think of a better way to ring in the new year than ordering Silent Blade and snuggling down in bed with my iPhone.

Closets ... still ...

I'm still working on step 7, cleaning out my closets and liquidating.  But I'm having some real issues letting any of my clothing go.

I can't find anything in this!

 Does anyone else have this problem?  My closet full of stuff that I never wear, but can't bear to get rid of because I am sentimentally attached to it.  Several years ago, in an effort to break myself of this habit, I gave away (1) the outfit I wore to my wedding reception (4 sizes too big), (2) the outfit I wore to senior prom (I was a 34 B then, I'm a 36D now), and (3) every other thing in my closet that I had not worn for at least a year.  I vowed that never again would I get so attached to my clothing that I kept it beyond all reason and usefulness.

Today, the front third of my closet is full of clothing that I wear all the time and enjoy.  The back two thirds, and my off-season storage closet, are so crammed full of stuff that I have no opportunity to even try to wear any of it.  There are two categories of clothing (1) things that I happily remember the occasion that I purchased/received them every time I look at them, and (2) things that I purchased and have barely ever worn (sometimes never) but which are nonetheless quite cute and still fit, and which I am convinced that I will wear someday, as soon as I have something that coordinates with it.  Anything that is the wrong size or was worn out got purged in my last closet clean. 

So now I am stymied.  In general, I am ready to get rid of things.  I must pare my closet down, so that I can actually get to wearing some of this stuff.  But, in the specific,  I can't seem to let any individual item go.

Does anyone else have this problem?  How do you decide what to let go and/or make yourself do it?

There isn't anything to say ...

A good friend's son shot himself last week and died on Christmas Eve. His family opted to donate his organs, showing incredible fortitude and class in the midst of tragedy.  Please offer a prayer for his family, especially for his four remaining brothers and sisters, of whom he was the oldest.

Homemade Christmas Presents - Fingerless Gloves

This year, I got my homemade Christmas presents done on time.  I think it's a record.

I made the gloves, using this pattern, for my sister-in-law.

I found the pattern to be a bit large around the fingers, so I decreased from the thumb from rounds 22-25, one sc on each side.  I used 100% cotton yarn.

I wanted something a bit more feminine for my aunt, so I replaced the sc with lacy shells, and sized the pattern a bit smaller (she and I both have skinny hands).  I used a bamboo/acrylic yarn for these, so they are fuzzy like wool, but super-soft.  I'm pretty proud of the results.

I already had the yarn for my sister-in-law's present (it matches a scarf that I did for her last year).  I had to re-buy the crochet hook, because I always lose them in between projects, and I bought one skein of yarn for my aunt's gloves, for a total cost of $8.  It would have been about twice that if I'd had to buy the cotton yarn, but I still think I'd have come out ahead versus buying equivalently nice gloves at the store, plus there's the "I thought of you" bonus from homemade presents.   I'm definitely doing these again next year!

Hope you and yours are having a Merry Christmas!

Closet Mess > Willpower

I have been trying to work on step 7 of out with the old, in with the new, clean out your closets and liquidate.   But between having out-of-town guests and the lure of holiday parties, I haven't made much progress.  Tomorrow I need to mail our Christmas cards; I have zero done so far, and last year I sent eighty-three.  This year I'm going to have to pare the list down a bit I think, but if I can get them to the post office by 4pm tomorrow, most of them will arrive before Christmas.  I also need to finish two homemade Christmas presents before Saturday.  So, basically, I don't have much time for anything else, so my goal is to finish step 7 this week and worry about step 8, rethink your retirement plan, next week after Christmas. Wish me luck!

More About Balance Transfers

Balance Transfers are a good way to reduce debt faster
As I said yesterday, a large part of my success in paying down my debt was using balance transfer offers.  I can't stress enough how much faster you pay off your debt when you transfer a high interest balance to a low interest one, as long as the transfer fees don't eat up your savings.

Moving from a higher fixed interest rate to a lower fixed interest rate is generally a good deal
For example, if you have $15000 on a 22% card and the transfer fee is 5% to change the rate to 10%, at $300 a month paid toward that card it would take you 136 months to pay it off at 22% and 70 months at 10%, including the $750 you will pay in transfer fees.  

Teaser rates can also help pay down your debt faster
I realize that most offers nowadays aren't a fixed rate forever, they're usually a teaser rate, then a higher rate later.  For instance, today Discover is offering 0% for 18 months, with a 4% transfer fee, then a rate that ranges from 12% to 23%, variable.  If you can pay off your balances in 18 months, then it's a savings on any rate 6% or higher.*

If you can't pay off your balance, then it's a bigger savings at rates of 6% or greater until the rate resets.  Therefore it is a good deal if (a) you can pay it off rapidly after the 18 months or (b) you can transfer the balance again before the higher rate kicks in.  You can calculate (a) by taking the current balance of the loan, subtracting out the payments you will make over the next 18 months, then running that number through a balance calculator that shows you total interest paid, using the number of months after the 18 month period is up that it will take you to pay off the loan as the number in the debt free deadline.  (b) is pretty much a matter of looking at your credit score and guessing.

If you can pay off your balance in less than 18 months, it may or may not be a savings.  You can calculate whether it is a savings by running it through a credit card calculator like this one, using your current interest rate and the time it will take you to pay off the loan.  Then compare the total interest paid to the cost of the balance transfer fee.

It's no fun, but it helps in the long run
As I said, I did this pretty much constantly for the first two years that I was paying down debt, until I got a 3% for the life of the loan offer from Amex and could transfer all of my credit card debt there.  It got really tiring; I can't tell you how happy I was to pay off my last revolving debt on that Amex .  But it saved me a ton of money over trying to pay down the cards at the original rate.

* Because the balance transfer fee comes out of the original total, and credit card rates are compounded daily or monthly based on the debt at the time of calculation, you don't pay more in interest until you reach a 6% interest rate.  (It's actually a number greater than 5.5 and less than 6, so I rounded up).

Debt Organization

The Next Steps to "Out with the Old, in With the New" are to clean up your debts and to create a debt repayment plan.  I've been working at this debt repayment thing since 2005, so my debts are pretty consolidated at this point.  I've got three left - 2 interest-free loans from family members, and my student loan consolidation at 1.65%.  So there's not much cleaning left to be done.

As far as repayment goes, I've decided to throw everything at the family loans first, because it bothers me way more to owe money to my family than it does to owe money to a big bank.  Basically, I'm putting aside enough each month to pay family debt #1 in full in June 2011.  Then I will start paying down family debt #2, but I don't anticipate being able to pay it off until July 2012.

In August 2012,  I will start on my student loan, although my plan for it is a bit different.  Since the interest is only 1.65%, I anticipate being able to make more than that, risk free, on a savings account when I can start throwing money at it.  So I plan to save extra money until I have enough in a savings account to pay it off in full, then make that my account for automatic withdrawals and leave it be for the next twenty years or so.

But the reason that my debt is so manageable now is that 5 years ago I did everything on the Simple Dollar clean up list, multiple times.  I played the card transfer game all the time.  Basically, I would find a card that would give me 6 months or more interest free, transfer my debt there, and then pay it  down as much as I could before it was time to transfer it to the next 0% offer.  Eventually, I got a 3% for the life of the loan offer from Amex, transferred all my balances there, and then didn't use the Amex card for years until I had the loan paid back (this was back in the bad old days when credit card companies were allowed to pay off your lower interest rate loans first).  I was always careful not to pay more in fees than I was saving in interest when I did balance transfers.  And it worked: I paid those loans back far faster than if I'd continued to pay off my original balances at the original rates.  So, if you have credit card or other high rate debt, I encourage you to spend some time on bankrate or a similar site and see if you can do any better than you are now.