Thursday, January 31, 2008

February Budget & January Net Worth +$2,996

January Net Worth:

We had another great month on the net-worth side. We negotiated a reduction on one of our credit cards, started paying on my wife's student loans and cash kept rolling in this month. Our other assets went down due to using part of the natural gas deposit as well as them sending us some of it back since we had such a large deposit. The one item this past month that busted our budget was a car repair that went $100 over what we budgeted. Otherwise, our cash would have gone up more.

February Budget:

February is looking like will be our best month on the cash coming in side. Here's the low-down:


Mystery Shopping: $25
Rent: $1300
Day Job: $2916
Computer Repair Job: $100
Programming Job: $1600


$200 Student Loans
$200 Car Gas
$30 Mrs. Fun Money
$30 Mr. Fun Money
$30 Dining Out
$190 Groceries & Toiletries
$10 Babysitting
$300 Mrs. Car Repair
$77 Natural Gas
$48 Cell Phone
$1130 Mortgage
$65 Water
$100 Capital One
$1180 Home Depot
$95 Life Insurance
$105 ComEd
$2821 Savings for settlement

Some changes have happened from last month. We brought down the car gas since I'm not driving for the computer repair job this coming month. Our dining out is back to the normal $30. Groceries & toiletries is now 1 line item. Water has gone up, I suspect due to humidifiers running full blast 24/7. Electric went up as well due to roommates running space heater 24/7. We're rounding the mortgage up a few bucks as well.

The Home Depot amount is $1180 a month for 3 months. We could have done it as one lump sum of $1180 x 3, but I figured I'd stretch it out and tackle other creditors at the same time.

The savings for settlement is for us to take care of our Capital One bill hopefully in March. They are tossing around $5K as a settlement amount, I'm going to see if I can get them a bit lower in March. We'll have around $4600 in the bank by the end of February.

Monday, January 28, 2008

What we are not frugal/willing to change on

My wife and I were talking last night about cooking and food, here's a list so far of what we are not willing to change in our house:

- Maple Syrup: I've tasted the corn syrup versions and I've tasted the real thing, there is no comparison. Yes, it's more expensive for the real thing, but how many times a year do I use it? I go through maybe a bottle a year.

- Mushrooms: For a while, we have been going the route of canned mushrooms. On Friday night we had real mushrooms on our monthly date and we've decided we're not going back to canned mushrooms. They don't have the same flavor, the same texture, what's the point?

- Detergent: Our daughter is allergic to many types of detergents except for the Aldi brand. No matter how much cheaper somewhere else might be, we're not going to change on this. We also use cut-up t-shirts and water as wipes because she is allergic to the wipes for sensitive skin.

- Car Filters: My wife won't buy any Fram filter, even if it's cheaper. I trust her to take care of our cars, so we go that route.

- Windshield wipers: I tried to go the cheap route of just replacing the rubber portion of the wipers, it was too much work for the amount of money it saves.

- Razor: I use an electric razor 99% of the time. I have to shave daily otherwise it looks like it has been a week since I shaved. Due to a nerve disorder I have, using a basic razor is like asking for blood.

- Bedsheets: It's a simple thing, but we've tasted high thread count sheets and now won't buy anything less. When you spend 1/3 of your life in a place, it's worth it to spend a few extra $$$ on comfortable sheets. Once we're out of debt, I'll be looking into replacing our bed as well (current one is hand-me-down from 3 years ago).

- Orthotics: Both my wife and I have orthotics for our shoes. We've experienced times without them and our feet just start hurting big time.

- Pacemaker: My wife has one and needs it, no question about it.

Anything your not willing to change on?

Tuesday, January 22, 2008

Forming 2 Companies on Friday

I've been thinking about this for a while and with us having a bit of breathing rooming coming up, here's what I'm planning to reduce our taxes in the future and protect us legally:

LLC to Manage Home:

Right now, if one of our roommates or one of their guests took us to court they could in theory sue us and collect everything we have. I'm planning for us to create a LLC to limit our liability to just the home and not the retirement nest egg we'll be seeing in the coming years. The reason I'm going with that form of a company is our total personal income for the year has not hit more than $63K (so far), it is a simpler company to form and the rental net profits (which the way it operates it does not make any profits) would be taxed at our personal rate.

Corporation for Software Development/Other:

I'm planning on developing software myself to sell or continue doing consulting. Right now with my consulting job they are paying me directly, which I then have to pay all the fun taxes of being self-employed without the benefits of business deductions. I would much rather have a corporation that I own keep the profits from the programming I do and it would take care of my business expenses of computer equipment. Yes, I would get double-taxation (taxed as corporation, taxed as personal income) for any profits I take out of the corporation and put in my bank account, but for this I plan on plowing the profits back in anyways to grow the company into something great.

What do you think?

PS - I'm taking a break tonight from working since I'm a bit sick. Hopefully tomorrow I'll be OK.

H&R Block Big Mistakes

My roommate and I were talking about taxes this evening for over an hour and found out that H&R Block messed up on his taxes for 2006 and we suspect other years in the past as well. He is looking through his paperwork right now to locate the other ones and to double-check. His situation is similar to mine in regards to rental income, so here it is without further ado (I'll call my roommate John so you understand the flow):

- The past 3 years John has had a house in his hometown that someone has been renting from John while John bounces around job to job away from his hometown.
- The amount the renter pays is pretty much equal to the mortgage, taxes, and insurance, with John taking care of repair expenses.
- H&R Block (at least for John's 2006 return) had him use the 1040A, which does not have a spot for rental income and expenses.
- Rental income and expenses go on the 1040 line 17, utilizing Schedule E to document the numbers.
- They actually stuck the interest he paid to the mortgage company as interest income (as if John had $100K in the bank making 4% interest).
- He therefore paid taxes on interest he indirectly paid on!

I reminded who will work the hardest for him...himself. He assumed that they will do the job right since they have no reason to intentionally mess up his taxes. He'll probably be sitting down in the coming weeks and be making himself $200/hr in fixing the mistakes made on the 2006 (and probably ones before that as well).

For those of you in the same boat as me with rental income and expenses, I recommend reading 1040 Schedule E and understand it fully. I am still bouncing back and forth whether to have an accountant (not H&R Block type place) do ours or not. Here's our special circumstances:

- Foreclosure
- Cancellation of Debt (need to document that we were insolvent at the time of cancellation)
- Rental income within our home (need to calculate percentage of house that is ours vs. rented out)
- Daughter born (easiest of them all to add to form)

Next year I am certain we'll be going to an accountant, but this year I'm uncertain. What do you think?

Sunday, January 20, 2008

$6K Income Next Month

I'm going to be very busy the next 3-4 weeks, so I probably will only be posting our budget/net-worth at the end of the month and you won't see me until mid-February.

I just met with the client I am doing programming for and we're doing a total overhaul of their application with 75 hours of work in 3 week time frame, meaning I'll be doing 25/week with them and 40/week with my day job. My on-call computer support job I e-mailed this evening and let them know that I can only do service calls 5 miles from my home. Any farther than that and it is not worth my time, which I value my time at $20/hour right now. (More on that later, one business man I know from church feels I am valuing myself low at $20/hr, we talked over lunch today about it).

Here's a rough draft of our income for next month:

$1300 - Rental Income
$2900 - Day Job
$1700 - Night Job
$100 - On-Call Computer Support

Keep me in your prayers, caffeine and good night's of sleep will be what keeps me going.

Friday, January 18, 2008

Streamlining Our Finances

I just did a bit of streamlining to our finances. One of our goals for this year was to have all housing income/expenses in one account, so we can track better for tax purposes. The account is now setup with all utility bills being visible through the account and they are set to pay themselves (as long as there is money in the account). The ones that cannot be electronic we have just a large amount scheduled to be sent out every month and we can adjust it as needed.

We're planning on injecting $300 into the account of our funds to cover the $100/month shortfall between the rental income and our expenses (though $100 for our housing is not too bad). We're considering raising the rent for one of our roommates due to increasing expenses on their part and they pay a smaller amount than our other roommates. More on that in the future...

Another Card Settlement - Home Depot

Things have been busy for me working a lot between my 3 jobs and taking care of house-related items while my wife has been out of town. Our last scheduled monthly payment for our Home Depot debt was coming up soon, so I called them up and negotiated a settlement stretched over 3 months (yeah, I know it's best to do it in 1 lump sum, but I've been dragging them as long as I can to get the lump sum together).


We had 35% taken off the existing balance with payments of $1180/month for 3 months starting next month. We will have the money for the entire payoff by the end of next month, but with the games they've been playing, I'm wanting to hold onto the cash a bit longer. It will also give us ammo in case any of the other 2 CC try to bring us to court.

Our largest one, Capital One, I'll be sending them a letter this weekend with a $100 payment to keep them satisfied for the month and do that every month until April/May when we can settle with them all at once. The past year we've been doing that and it has been working well. Our smallest one, Menards, I won't be waking up until the Capital One is out of our lives.

I can taste freedom just around the corner. It's a great feeling to have $600 around the house and not having to rush it to a bank to cover a check just written or a bill needing to be paid.

Saturday, January 12, 2008

Working my way out of this mess

Well, my wife is now out of town for two weeks visiting her parents, leaving me at home with the roommates. The programming job I have a fair amount of work left for them (15-20 hours), paying me $20/hour. I'm meeting with them today to go over what I've done for them so far, put the new version on and review the work they want done to make sure I implement it right.

I'm also taking up a few extra hours at my day job laying ethernet cables at our new office. I figure it will be a learning experience with a crimper and bring in a few extra dollars.

This will help with us needing to take my wife's car into the shop as well. Mine came back after $500 (had another minor annoyance of a rusted exhaust pipe sealed for $50 more). Hers was starting to have a new problem, I suspect one of the belts may be wearing down since we were smelling rubber. We'll have that and the hub assembly replaced.

Working towards a goal of $3100 by 2/20 to settle with Home Depot...Currently at $500 with the majority of the rest of the months income going towards it.

Thursday, January 3, 2008

$450 Car Repair

My little hatchback has a bad transmission line, leaking fluid. We took it into the shop and the bill for the leak with parts and labor is $300. While they were under there, 2 more items needed to be done, so that will be $150 as well. We spent about $450 for the car at the beginning of May. Here's to hoping the vehicle will last us another 8 months.

This will blow our budget by $50 so far for repairs, which will come out of our debt snowball amount. We really need to get my wife's car looked at as well. If they do a good job with mine, we'll see about taking hers in as well and slow down on the debt a little bit.

Wednesday, January 2, 2008

My Father's Recent Bad Financial Choice

At Thanksgiving my father said he had a van for us, I told him I didn't want a van (we have 2 cars) and I knew he wasn't doing well financially. Also the gas mileage on a van is worse than my 4 cylinder hatchback any day and I'm all for the environment and saving money. He left the discussion at that, but I figured it wasn't totally dead.

At Christmas my father spent a couple of days at our house and we talked quite a bit. He mentioned the van again, but got into more details on it. For some background information, he has had several DUI, which caused him to have his license revoked until this spring coming up. He lives in a small apartment with my brother (not paying rent) and I found out he got a roommate like me to help cover the rent. He lost his job in December and is looking a bit but not much.

Well, the problem is that he doesn't have the money to get new license plate stickers for the vehicle and he had it parked in the apartment complex lot, but it got towed due to the expired sticker. He had until the end of the month to get the stickers or have it towed again. He asked if I could at least put it on my driveway so that he could sell it or save up for the stickers. I agreed and it's now sitting on my driveway with the stipulation that it has to leave within the next 6 months.

Your probably wondering with all that, what was his bad financial decision. It is several things:

- He bought this van with all of his savings.
- The transmission is bad on it and needs some major work done on it. His friend that had it was worried about putting more money into it and she having future problems.
- It has 170K miles on it right now and from 1997.
- He can't even drive right now, the state won't even let him register the vehicle since he isn't supposed to be operating one as it is.

I'm working at seeing if I can get it traded or sold for more than he paid to help him offset his towing and hopefully put a little in our pockets for our debts. I have one potential mechanic interested in coming on Friday to see it and if he doesn't pan out, it's going on Craigslist.

The only reason I'm willing to help is because the only thing it's costing me right now is a little driveway space and a couple hours of my time. Part of the reason I'm in the financial pickle I'm in right now is due to helping him out of another bad financial choice.