• Like a bad penny, debt always turns up…

    unless we change how we interact with money, of course!

    The Bad Penny is dedicated to two pursuits: getting out of debt and staying out of debt! It recognizes that frugality and caring for our planet go hand in hand, and that our unsatiated need for stuff is hurting us in so many ways.

    Easier said than done!


    I am not a finance professional. I write about the world as I know it, and my advice may not be the best course of action for you! Please seek qualified advice for your particular situation.

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Victory! CitiBank Personal Credit Card Paid Off!

Woohoo!  This is our first real debt removal victory.  Yesterday I put the final $114 towards this credit card with my husband watching.  It feels good!

Our December bill listed our balance at $2261.81.  We’ve been putting everything we can towards this debt.  I am simply amazed that in 4 months worth of payments, we eliminated over two thousand dollars! It really makes me think we can continue to do this.

So what we have left as far as credit cards is around $10,500 on the other Citibank and $6000 on the Chase card.  I’m unsure which one to work on next.  The Citibank has far more and a higher interest rate.  Plus our shipping costs for our ebay liquidation are still being charged on this card, so I want to make sure we don’t get too close to the limit (we have about $2000 left on our limit.)  But the Chase card would be eliminated much faster, and I think our low interest rate expires in November.

It feels wonderful to have one fewer bill each month.  With recession looming in the future, I don’t want any debt hanging over my head – it’s just one more thing that could really ruin a person!


Maxed Out!

I just finished watching Maxed Out – a documentary about predatory credit card lending. Or, as Jay Antani from stated on the review site I linked to: ” a Dante-esque descent into a distinctly American form of Hell.”

If you haven’t seen it, I’d recommend you check it out from your local library. It was interesting, although I think I enjoyed “Super Size Me” a bit more, at least from an entertainment standpoint.

As with any documentary, I’m careful to keep in mind that the film is not an unbiased source. And there were portions of the movie that were obviously edited to provide the greatest emotional and logical response. But I think the importance of a film like this lies deeper.

“Maxed Out” really focused on the credit card companies and how the government has failed to protect the consumers adequately from irreputable lending practices.

But what they only hinted at was the other half of the problem – we have become accustomed to getting what we want when we want it. We don’t want to wait, and we don’t want to consider whether or not it’s a smart purchase. It’s so easy to just drive down to the local Walmart and get whatever we want. If it’s not at Walmart, it’s on the internet. And if we don’t have cash? No problem. Just charge it!

When we get to the root of consumerism, it’s this exact mentality that destroys our financial freedom – not the credit card companies. They are definitely a problem, and there is no doubt in my mind that predatory lending practices take advantage of consumers. But when we start to look at our own behavior, it’s easy to see that the desire to have things – to store up for ourselves – is what very often puts people in a position to start thinking of credit as an acceptable means to acquire. Obviously, there are also people who had no choice but to finance necessities – medical care, car repairs, etc. But what I really want to concentrate on is the “Acquisition Mentality” so many of us have. What can we do to combat it?

I don’t know when I started thinking as if I deserved and should have every little thing. That if I am bored, an acceptable way to pass the time is to go to the mall and shop. I don’t think it was my childhood, because we simply couldn’t live like that. But somewhere between my teen years and today, I started to believe that it wasn’t a big deal to use credit for every little thing I didn’t have cash for – and that’s exactly what the credit card companies want you to think.

It’s been hard to change that mentality. I can finally say that shopping for entertainment, especially at the mall – holds little allure for me. And I believe that change came when I started really thinking about my wants and needs. Do I need it? Or do I want it?

When it comes right down to it, I need very little. I need food. I need water. Shelter, and clothing. Heat during the winter. If I have these things, I’ll survive. There are other things that are needs, but just barely – I’ll survive without them, but they really do make life more pleasant – toilet paper, shampoo, hot water. A computer with internet access. These are my priorities if I have to make a choice.

And there are lots of things I want – junk food, or a new outfit. A new car, or curtains for the dining room. Those come last.

But the funny thing is that when I start to think about each item I want to get and try to decide whether it’s a want or a need, more and more I find myself deciding I don’t even want to buy the things we don’t need – for the most part anyway. I want to wait until we have more money in the savings, or we pay off a credit card. I’d rather make do with what I have. I don’t want to buy on credit anymore. I want to own it free and clear. I don’t want to be “Maxed Out” because I’ve bought things I think I need when really I need to get out from under the thumb of other, richer people and corporations.

To close, I wanted to share something that happened in a conversation between me and a new friend of mine. I really respect her and her husband – they don’t do things conventionally, and their choices often go back to a poem I quoted in my very first post:

Use it up,
Wear it out,
Make it do,
Or do without.

My friend came up to me after church on Sunday and showed me a rash on her hand. She was wondering if I knew what it was from. I didn’t, but I asked her if it itched, and if she had tried hydrocortizone cream for the itching. She said, yes, it did itch, and she had tried using a baby wipe on it to see if the alcohol would kill the itch. She didn’t want to have to buy a tube of hydrocortizone.

What would I have done? I would have driven to Walmart just to pick up a little tube of cream! What a difference! And yet, she found a solution that worked just as well (even if it did dry out her hands a bit) and didn’t have to pay a bit extra or make an extra trip.

Now, if I could just always think more creatively!

And how does it relate to the movie I watched tonight? Well, it really doesn’t. But it does have a lot to do with my thoughts after finishing the movie. Our debts inevitably come down to our own decisions about what we want and need. Sometimes it’s absolutely necessary. But so much of it is from buying things we don’t need! What gets me most when I think about this, is that often we think we do need those things!

It was a reminder to me that I need to think more and buy less!

January Progress Post (5 days late!)

Let’s see how we did in January:

Personal Credit Cards:

Citibank: Was: $1787.71
Now: $1212.73

We paid off $615.00 on this card this month – $165 of that was snowflaking, mostly from selling our product on Ebay. We also charged $40.02 on the card – all but $6.99 were interest charges.  $6.79 of that were for February’s interest charges, so that number has been inflated a tad.

Business Credit Cards:

Transferred to our Business Citibank for a better interest rate and a much better bank.

Chase: Was: $6236.37
Now: $6138.80 (I paid $125, finance charges of $27.43 )

Citibank: Was: $4927.42
Now: $10,130.14 (This reflects the old Suntrust balance.  I was able to transfer my balance and go from a 14.29% interest rate to a 4.99% interest rate.  I made a payment of $100 to this card, and finance charges were $27.47 – reflecting the old balance.)

Total Credit Card Debt:
Original Debt:                 $18, 954.86
Last Month:                     $18,326.75
Current:                            $17,481.67
Monthly Difference:   $845.08
Total Paid Off:               $1473.19

Accessible Savings Account:
Current: $212.46

(We also have a saving account at our bank in North Carolina that has about $3000 in it.  That’s our current emergency fund – it came from a Certificate of Deposit that finally came due.)

I’m pleased!  This certainly offsets the heartache of the upside-down house loan!  I feel like we’ve been making progress, and it helps that we’ve been able to put extra towards our debt from liquidating our products on Ebay.  We’ve had to pay a lot of the fees and put money in our Stamps.com account for shipping, but we won’t have as many of those costs in the future.  I have another $120 in the process of transferring to our bank account to be put toward the personal Citibank, and another $80 already accumulated in our Paypal!

So all in all, I finally feel like we’re making progress on our credit card debt, if nothing else!  It feels wonderful!

Unhappy about Necessary Debts

I admit it.  It’s been over a week since I’ve posted.

This past week has been frustrating – and disheartening.

On the positive side – we close on our house in NC on Friday!  That’s nearly $180,000 of debt gone!

However…we have to bring $10,677.82 to closing.  Ouch.  (I did an estimate before and I was way off.  I didn’t include the 2o08 taxes we would owe, the final mortgage interest payment, or the deed and register stamp fees.  All told, that was about another $2000 we have to bring to the table.)

We struggled a lot with how to deal with this.  The closing attorney didn’t get the exact numbers to us until this morning (we knew it’d be between $8000 and $12,000.)  We had already talked to our bank about doing a short term loan until we refinance in a couple weeks (more about that later) but there was no way they’d be able to process the money in time.  After hearing about our situation, both lenders we spoke to though that we should consider doing  a cash advance or using a balance transfer check on our credit cards – because it was the only way we were going to get the money wired to the closing attorney on time to close.

Thankfully, my husband talked to a businessman in our church about our situation and he and his wife offered to lend us the money for the next two weeks.  We’re hoping to have it directly wired from his account to the attorney.  We will be paying all fees, of course, and we want to offer them the interest we would have otherwise paid.  I also told my husband that although there is no way I’d let the debt go unpaid, I wanted to write out a promissory note.  It would make me feel better knowing that they have legal recourse against us if we didn’t pay.  I absolutely hate the thought of borrowing from a friend!

But there’s more:

We not only owe this amount, but by law, all homes sold in our county now have to comply with new septic laws, which means that most people will have to install new septic systems.  We knew this when we purchased the house, and we got quite a bit off the price because of it.  We were expecting our old house to sell with cash to spare, which we would use to pay for the septic.  Unfortunately, the market being what it is, we had to sell for nearly $50,000 less than what we originally asked, so we don’t have the funds we expected to have.  Oh, well!   It’s truly a case of “You win some, you lose some.”

So between the new septic system and the money we need to pay off our old loan, we are going to need about $25,000.  There’s no way around it, and we can’t wait on either.

But here’s where “we won some” – mortgage interest rates are low right now.  We just locked in at 5.65% for a 30 year fixed, which is quite a bit lower than our current 6.875% 7 year ARM.  It will take less than 2 years to break even after the closing costs.

So we plan to refinance, but we will actually be refinancing for more than we owe. We’ll refinance for around $122,000 and take the extra $25,000 to pay for the septic and to pay back our friend.  This will happen as soon as we get the appraisal and the settlement statement for the closing on Friday.  That day we’ll wire the money we owe back to our friend and stick the rest in savings until the septic company bills us.

Not the ideal.  I hate adding more debt, but I knew this was coming.  Still, it’s disheartening.  It’s just more debt.   It will also raise our mortgage payment to about $900 a month, which will make things a little tighter.  Thankfully, we are close to getting another card paid off, which I’ll post about soon in my January Progress Post – 5 days late!

We Have an Offer on Our House!

We received our first offer on our house in NC today, and after much thought and negotiation, we accepted it.  I’m happy, and I’m not. 

Why not?  Well, the initial offer was for $175,000 on an asking price of $199,900.  By the time we finished negotiating, the agreed upon price had risen to $185,500.

Because of the market right now and the fact that our house in NC will need some fairly substantial routine maintenance in the next year or two (a new roof, new air conditioning unit) my husband and I felt like it was a fair amount to ask, but with one problem:  in order to pay off our mortgage on that house (which is actually a bridge loan of $180,000) and pay the realtors ($11,130 at 6% commission,) we really needed to get about $5,630 more than what we agreed upon. 

We were praying hard about it! 

Then I realized how narrow-minded we were being about this – we were only looking at the fact we would still owe $5630 on the house.  And that it was “more” debt.  But it wasn’t.  In reality, we were selling something that had become a liability – between the sinking market and our $953 a month payments (which start February 1st.)

We weren’t looking at it properly.  We should have looked at the bigger picture.  We are $317,344.57 in debt, including both mortgages.  After commission, we’ll have $174,370 to put towards our debts – actually, just this one, massive debt.  It  will be a major blow to the debt monster, bringing our total down to $142,974.57.

 Now, I’ll admit some of this number crunching is purely to make me feel better.  I still feel like we are adding to our debt by having to come up with this $5630, most likely by taking out a home equity loan on our current house or by charging it on a credit card.  I hate both options, although we are leaning toward the home equity loan for obvious reasons. 

We do have some money from a CD that just came due; about $3000.  We’ll have to pay for the mortgage for the first 12 days of February out of that, and then we were hoping to put the rest in our emergency fund.  While I still believe we will use it for our emergency fund, it’s always an option to use it to pay down the money we’ll be short when we go to closing.

I’d really like to hear other people’s opinions about this money. 

What would you do with the $3000 in this situation?  Emergency fund (which contains $100 right now)?  Pay down debt?  Bring it to closing? Something else?

What’s the Cost?

If you are wondering where or how to start snowballing your debts, it can be really intimidating to try to figure out which order to pay your cards in. Will you save more money if you pay off the Visa or the Discover first? Highest interest rate or smallest balance? What do you do when your balances are all about the same?

What’s The Cost’s Snowball Debt Calculator will help you answer these questions. I used this tool to calculate that if we put $1000 a month towards our debts every month we will have our debts paid off in 20 months and pay about $1150 in interest. If we continue to put $1150 towards our debts each month, as we did in December, we will pay off our debts in 17 months and pay $950 in interest.

These numbers were calculated as if I were to pay the cards with the highest interest rate first.  You can also calculate your numbers as if you were to pay the smallest balance first. For us, the highest interest cards are, for the most part, the ones that have the smallest balances, which works in our favor. When I calculated our future if we paid the smallest balances first, it came out about the same!

The calculator even gives you a nifty chart showing a month-by-month plan for paying off each of your cards. I’d love to see an interactive chart, where if I paid more, I could input the number and it would adjust the future payments on the chart – without having to redo the whole thing.

Hopefully we’ll be able to pay $1000 a month. We are really trying to be aggressive with this debt.  More realistically, we probably will not be able to do that much each month. Particularly in January, when we have to pay for an unexpectedly higher electric bill (we’ll be finding ways to cut that back immediately.) However, when summer comes about, with longer days, no need for oil or firewood, and the ability to line dry our clothes among other things, we’ll find our bills will be much lower, and we’ll be able to put more toward debt!

One last business post

Okay, I’ve talked the debt over with my husband. He and I both feel like getting this mess down on paper changes the way we feel about the debt – instead of being afraid to know and avoiding the issue, we are much more confident in our ability to pay down the debts. “There’s a light at the end of the tunnel” is how Brian described it.

So now it’s time to get a plan on paper. I’m writing it out for my own benefit, but also in the hope that it will help some of my readers (few as they are at the moment, I know that in the future others will look back at this post.)

First we need to look at our bills. Most of these are unchangeable, though we are considering switching from broadband internet to high speed, which would save about $25 a month. However, with as much work as I do on the internet, it would probably end up costing more in productivity, so we need to assess that before we actually do anything. We can’t get rid of our cell phones, since we’ve already gotten rid of our land line. And finally, if we give up our $9/month basic cable, we won’t get one single station without buying an antenna for our roof.

And one thing to note is that summer will be much less expensive than winter – right now we are paying more for electric heat, oil heat and firewood (yes, our house is very complicated. 🙂 ) and we have to pay someone to plow our long driveway, especially since we live in the snow belt of the snow belt. In summer, we’ll open windows for our air conditioning, the clothes are hung up outside, fresh veggies and fruits will be growing so we don’t have to buy them, and the driveway will remain clear – all for free!

What we have to pay monthly (some of these are semi-annual bills, so I’ve cost-averaged them for each month):

Mortgage: $750
Electricity: $120-$200 (these are winter costs. Summer bills are about half this, if not less.)
Cell Phones: $65
Internet/Basic Cable: $55
Firewood: $90 or so for 1/3 cord (this is based on our last experience with poorly seasoned wood. The next $90 batch may burn much longer and hotter, so we don’t have to use as much as fast.)
Trash pickup: $25
North Carolina trash and water services: $10
North Carolina Electricity: $10-$20 (the house is vacant.)
Plowing: $100/month from December to April.

Total (based on the highest amounts): $1215 a month.

Our guaranteed monthly income is $2068, plus any additional income I make from my side jobs or selling things online, and income from the business we own, which usually generates no less than $200. So I can probably guesstimate a monthly income of about $2400, to be on the safe side.

So we have $2400-$1215= $1185 a month to pay for seven categories of budgeted money: food, gas, home repair/improvement, savings, tithe/giving, allowances, and debt. We also generally give ourselves a monthly allowance of $40 a person, although it will be going down to $20 each for a while. It’s not much, but it’s enough for us to each have some cash to use for whatever we want (usually the coffee shop in town!) without having to justify it to anyone else. It really is a measure taken for our sanity!

Based on yesterday’s debt calculations, we will have to come up with $615 a month just to pay the minimums on our cards – at least right this instant. As we pay off or pay down cards, this number will change. This leaves us with ($1185-$615) = $570 for food, home repair/improvement, savings and tithe/giving. Here’s how I’ve sorted it out:

Tithe: $200 (approximately 10%)
Food: $100 (we’ll have to get creative, but this is good for right now since we have a well-stocked pantry.)
Gas: $100 (thank goodness we don’t drive very far or much!)
Allowances: $40
Home repair fund: $50 (this is to cover necessary repairs and improvements, like new blinds for our son’s room.)
Savings: $0 (this will go up in the future, and when we have extra money, part of it will go in here, but there’s no room in the budget for it right now.)
Total: $490
Left over: $80 – this will be put toward paying credit cards as well.

So that’s it – our rudimentary, but suitable, budget. I’m glad we threw away our credit cards when we did, because our budget would have become tighter and tighter. I’m already disappointed that we only have approximately $80 to put towards our debt above and beyond the minimum payments.

So what do we do now?
Obviously if we could eliminate some debt, we’ll have more flexibility with our budget in case of an emergency. Plus there’s always the added benefit of having less debt quickly! 🙂

We need to sell off some of the items we have laying around that we don’t use and planned to sell but never got around to it (we have an antique electric stove in our basement and a sailboat in our garage from the previous owners of our house, among other things.) We’ll put that money toward a credit card to pay it down quickly.

We will snowball our debts, which I will talk about in a future post. We also plan on snowflaking any small amounts of money we get into the debt, which is something I want to explore further in another near-future post. Until then, you can read the article I linked to – the woman who writes that blog is very much in the same situation as us.

We will also continue to try to save money through thrift, stewardship, and thoughtful living. This is why we tithe. It is hard to explain to someone who doesn’t tithe, but we do believe in supporting God’s workers in the world, so we won’t give up our dear child we’re sponsoring or giving money to our church, who uses it to support missionaries who build wells and schools. Time and time again we find we always have enough when we’re dedicated to giving 10% of our income to those who are less fortunate. You may not agree with me, and that’s fine. My point is that what we consider priorities when it comes to our money may be different from the people around us.

There’s so much I have to say! I’m having a hard time not typing it all out here! You’ll just have to keep reading. 🙂