The past 3 years have been a great adventure at saying goodbye to our debts. We learned a lot about spending less than we earn, increasing our income, settling debts and starting to save.
We haven't gotten rid of all of our debts (we are still carrying our student loans and mortgage), but we are at the point in our life where the debt is under control and not keeping us up at night.
Because of this, we are going to say goodbye to this phase of our life as we proceed into the next. The next 3 years will consist of us building up an urban farm business, investing some and saving all that we can so that I can leave my 8 to 5 day job. We're already ahead on the payments for our debts and by summer we will be putting 20% of our income to our IRA's and 20% towards the business. We'll still be updating our NetWorthIQ.com account as shown to the right as we reach our next goal.
We also have been building our children education funds so that IF they decide to go to college they will not have to carry as many debts as we have. College opened many doors for me that I wouldn't have had access to otherwise, but I don't know if the same will be true in 20 years. I hope though that we may be able to teach them well enough so that they do not have to spend 3 years getting back to square 1 as we have.
Tuesday, December 22, 2009
Wednesday, September 23, 2009
I Fought the Tax Man & Won
Back in July I received a letter in the mail that nobody likes to receive...An audit letter from the IRS. They had looked at our 2007 tax return and found some differences than what was reported to them, so they asked us to clarify them. Here is the details:
1. There was a large amount on a 1099-C from forgiven debt that they did not see within the income portions of 1040.
2. There was $1 of interest received on a bank account that we had not received a statement on. The $1 of interest did not affect our amount of tax owed.
Because we were insolvent at the time, we had filled out the proper form electronically to inform the IRS that the forgiven debt should not be considered as income due to our insolvent situation. It appears though that the information did not transmit to them properly. What we did to fix the problem was we provided a copy of the form that was submitted electronically, provided a net worth statement based upon the date the amount was forgiven, a letter explaining the situation, and a form they included with the audit letter filled out. We were able to provide the net worth statement due to my thorough tracking through NetWorthIQ.com.
A couple weeks after we had mailed in the information we received a letter informing us they had received our information and were reviewing it. Last week in the mail a letter stated that they had reviewed the information and that they corrected their information and we owed nothing. We're saving that letter with our 2007 taxes as a precaution. In addition, our 2009 taxes will be mailed in on paper so that we can make sure the information is transmitted correctly to them for the forgiven debt.
1. There was a large amount on a 1099-C from forgiven debt that they did not see within the income portions of 1040.
2. There was $1 of interest received on a bank account that we had not received a statement on. The $1 of interest did not affect our amount of tax owed.
Because we were insolvent at the time, we had filled out the proper form electronically to inform the IRS that the forgiven debt should not be considered as income due to our insolvent situation. It appears though that the information did not transmit to them properly. What we did to fix the problem was we provided a copy of the form that was submitted electronically, provided a net worth statement based upon the date the amount was forgiven, a letter explaining the situation, and a form they included with the audit letter filled out. We were able to provide the net worth statement due to my thorough tracking through NetWorthIQ.com.
A couple weeks after we had mailed in the information we received a letter informing us they had received our information and were reviewing it. Last week in the mail a letter stated that they had reviewed the information and that they corrected their information and we owed nothing. We're saving that letter with our 2007 taxes as a precaution. In addition, our 2009 taxes will be mailed in on paper so that we can make sure the information is transmitted correctly to them for the forgiven debt.
Sunday, September 13, 2009
Why File for Bankruptcy?
I spoke to my father just a few minutes ago and he has been toying for years to file for bankruptcy. His credit was trashed back in 2002 when my step-mom passed away and he hasn't had credit cards since at least 2005. He is going out of the country for 6 months this winter and was considering filing for bankruptcy next summer. The question I asked him is "Why File for Bankruptcy?"
Personally, I seek to pay off all my creditors, but for him he does not want to. He also does not plan to buy a house in the coming years, he is on social security disability payments and does not own anything of value. He also does not have any retirement money put aside. Due to his health, all he wants to do is rent a place to live, have a basic car to drive places, and spend time with friends and family.
His concerns was that people were telling him that they can potentially pull money out of his bank account or take his social security benefits. I let him know at least in Illinois that they are not able to do so since he does not receive wages and all of his income is from social security. At the end of the call, he agreed with me and is considering not filing.
How many others out there in the foreclosure fiasco will be like my dad in 5 years and realize that all they really want out of life is a place to lay their head, a car to take them places, the ability to spend time with friends/family, and a tv to entertain themselves when no one is around?
Personally, I seek to pay off all my creditors, but for him he does not want to. He also does not plan to buy a house in the coming years, he is on social security disability payments and does not own anything of value. He also does not have any retirement money put aside. Due to his health, all he wants to do is rent a place to live, have a basic car to drive places, and spend time with friends and family.
His concerns was that people were telling him that they can potentially pull money out of his bank account or take his social security benefits. I let him know at least in Illinois that they are not able to do so since he does not receive wages and all of his income is from social security. At the end of the call, he agreed with me and is considering not filing.
How many others out there in the foreclosure fiasco will be like my dad in 5 years and realize that all they really want out of life is a place to lay their head, a car to take them places, the ability to spend time with friends/family, and a tv to entertain themselves when no one is around?
Friday, September 11, 2009
Why Am I Focused on My Finances?
Yesterday was a rough day at work, I got reminded about how I really can't take much of a vacation due to no one else there to take up my slack and I had a disagreement with a co-worker over e-mail that my boss ended up being on my side (I was focused on our lack of customer service for a client, my co-worker was upset I spoke up on his project). It got so bad that I called my wife in the afternoon saying "I'm about ready to just leave this place!"
She as the sensible woman she is calmly reminded me of why I am there and the reason we've been working on our finances the past couple of years. She said "This job is a means to end right now so that in the future we can reach our goals." and then reminded me of some of them. I have probably listed them in past posts, but here they are:
Retire at 42: I don't want my kids to grow up with the concept that Dad goes to work for 12 hours a day, comes home, eats dinner, then goes to bed. There are things beyond work that I want to do with my wife and kids that "retirement" will make happen. My definition of "retirement" is more along the lines of financial independence, where I will probably still be involved in money-making projects, but it won't be me worrying if we'll have enough for the next month or even next year.
Trip Around the World: Once my kids are high-school age, I want to take them on a trip around the world with my wife. We would spend at least a year visiting a variety of locations, both the standard touristy locals and the places in the world with need. I believe this will help them understand different cultures better and give them an appreciation for everything they have. I also pray that they may come to Christ during that trip if they have not done so yet.
Missions Work: I want to be able to take 3 months and go help with Habitat for Humanity, building homes for those in need. I have a heart for meeting the basic needs of others (food, shelter, water) that is hard to listen to when my own family has troubles with those basic needs. I want to build water pumps where people are walking miles right now to get fresh water. I know I can currently send small amounts of money to organizations involved in such programs, but I want to be the hands and feet of God and involved in the work myself.
Create Companies to Create Jobs: We officially started this process on my birthday this week, incorporating our urban farm business. We will be hiring at least 1 person next year with the possibility of 2 or some temp labor. My feeling on unemployment is that people have forgotten that jobs are created, not found on a "hunt". For example, instead of complaining about not having a job, one can look at their skill set and say "How can I use these to create a business that meets people's needs or wants?". One person sees a 1/2 acre back yard as something they have to spend money to upkeep in mowing and watering, while I see a gold mine just waiting to be utilized to grow local vegetables.
What would be on your list of reasons why you are focused on your finances?
She as the sensible woman she is calmly reminded me of why I am there and the reason we've been working on our finances the past couple of years. She said "This job is a means to end right now so that in the future we can reach our goals." and then reminded me of some of them. I have probably listed them in past posts, but here they are:
Retire at 42: I don't want my kids to grow up with the concept that Dad goes to work for 12 hours a day, comes home, eats dinner, then goes to bed. There are things beyond work that I want to do with my wife and kids that "retirement" will make happen. My definition of "retirement" is more along the lines of financial independence, where I will probably still be involved in money-making projects, but it won't be me worrying if we'll have enough for the next month or even next year.
Trip Around the World: Once my kids are high-school age, I want to take them on a trip around the world with my wife. We would spend at least a year visiting a variety of locations, both the standard touristy locals and the places in the world with need. I believe this will help them understand different cultures better and give them an appreciation for everything they have. I also pray that they may come to Christ during that trip if they have not done so yet.
Missions Work: I want to be able to take 3 months and go help with Habitat for Humanity, building homes for those in need. I have a heart for meeting the basic needs of others (food, shelter, water) that is hard to listen to when my own family has troubles with those basic needs. I want to build water pumps where people are walking miles right now to get fresh water. I know I can currently send small amounts of money to organizations involved in such programs, but I want to be the hands and feet of God and involved in the work myself.
Create Companies to Create Jobs: We officially started this process on my birthday this week, incorporating our urban farm business. We will be hiring at least 1 person next year with the possibility of 2 or some temp labor. My feeling on unemployment is that people have forgotten that jobs are created, not found on a "hunt". For example, instead of complaining about not having a job, one can look at their skill set and say "How can I use these to create a business that meets people's needs or wants?". One person sees a 1/2 acre back yard as something they have to spend money to upkeep in mowing and watering, while I see a gold mine just waiting to be utilized to grow local vegetables.
What would be on your list of reasons why you are focused on your finances?
Thursday, August 27, 2009
Surprise at Work
Things have been rough at work this past month with 2 very large projects and I have been putting in a lot of extra hours. My boss, the owner, earlier in the week had invited all of the "production" team out for lunch to have some pizza. He's also been wanting our largest project completed this month and I'm the only one working on it. The pressure from him has been too rough for me to handle and the way I deal with it is just work as hard as I can.
After a meeting this morning, I let him know I wouldn't be able to go to lunch with them as I needed to spend time working on the project. I was so wanting to get away and join them for lunch, but I had stayed at work until 8 PM the night before and did not want to do that again. While they were at lunch, our sales manager asked why I hadn't gone and I broke into tears. I explained the pressure I've been feeling, working as hard as I can and ending up not seeing my daughter yesterday due to getting home after she was in bed.
My boss brought me pizza when they got back and then sent me an e-mail a couple minutes later letting me know that he very much appreciates my work ethic and is going to give me a 10% raise. I was very surprised to say the least. We've been having pay raise freeze for the past 6 months. I'm very certain the sales manager did not speak to him, so I don't think it was because of my conversation with her.
It took me a little bit of time to get the courage to go talk to him in person, but when I did I thanked him for the raise and it's nice and everything, but the thing I need is more support through asking me such questions as "How can I or we help you get the project done?" Even if there is no answer to the question, just the act of asking the question would help me very much.
After a meeting this morning, I let him know I wouldn't be able to go to lunch with them as I needed to spend time working on the project. I was so wanting to get away and join them for lunch, but I had stayed at work until 8 PM the night before and did not want to do that again. While they were at lunch, our sales manager asked why I hadn't gone and I broke into tears. I explained the pressure I've been feeling, working as hard as I can and ending up not seeing my daughter yesterday due to getting home after she was in bed.
My boss brought me pizza when they got back and then sent me an e-mail a couple minutes later letting me know that he very much appreciates my work ethic and is going to give me a 10% raise. I was very surprised to say the least. We've been having pay raise freeze for the past 6 months. I'm very certain the sales manager did not speak to him, so I don't think it was because of my conversation with her.
It took me a little bit of time to get the courage to go talk to him in person, but when I did I thanked him for the raise and it's nice and everything, but the thing I need is more support through asking me such questions as "How can I or we help you get the project done?" Even if there is no answer to the question, just the act of asking the question would help me very much.
Wednesday, August 26, 2009
Looking to Refinance
I recently called my home mortgage lender (Bank of America) to see what options we have to refinance our mortgage. We bought the house almost 4 years ago and with interest rates as low as they are, I figured it couldn't hurt to ask. My credit as I suspected is not too hot and they were not able to help me directly with a Bank of America loan, but they did say they could refinance me with a FHA loan.
Here's the pro's for going with the FHA loan:
There is also a very tempting option for us to look at, the HUD 203(k) loan. From my brief reading, it would allow us to pay for some improvements on the house (total must be at least $5K) and that will be added upon the refinanced loan. There are items we would like to do on our home (fix first floor flooring and put in hardwood, put tiles in the kitchen, fix the driveway, replace our fences) but are holding off so that we can build our business. I know when I started this blog I wanted to say goodbye to our debt, but this is something that I am struggling with.
Here's the pro's for going with the FHA loan:
- My monthly payments will go down about $75/month.
- We'll lock a lower interest loan while rates are low
- There are no closing costs or points required to get the rate I am qualified for
- Stuck with PMI even if I have a less than 80% loan to value balance remaining. The only way out of it would be to refinance again in the future when my credit is better.
- Bank of America requires a $400 deposit in case the appraiser does not value the house high enough. If they value it high enough that I can do the loan, I'll get the $400 back at closing.
There is also a very tempting option for us to look at, the HUD 203(k) loan. From my brief reading, it would allow us to pay for some improvements on the house (total must be at least $5K) and that will be added upon the refinanced loan. There are items we would like to do on our home (fix first floor flooring and put in hardwood, put tiles in the kitchen, fix the driveway, replace our fences) but are holding off so that we can build our business. I know when I started this blog I wanted to say goodbye to our debt, but this is something that I am struggling with.
Tuesday, August 25, 2009
Everyman Sleep Schedule
With my son born and us having feedings at random times in the night, last week I figured I needed to adjust my sleep schedule some. I did some research on different sleep schedules and decided to go on the "Everyman" sleep schedule. For those that don't know what it is, it consists of a 3 hour core sleep time (12-3 AM for me) and then 3 naps for 20 minutes each during the day (7:40 AM, 1 PM, 7:40 PM for me). I used to be able to sleep 6 hours a night with no problem and this schedule brings me down to 4 hours a day. Before I started this sleep schedule, I was sleeping 8-9 hours a night because that is what my wife sleeps.
So far, the new sleep schedule has worked very well. My second night on the schedule I slept too much due to taking my evening nap too early and then not having activities scheduled to do. I'm able to fall asleep faster every day when I nap and I have been able to function pretty much like normal. From what I have read, it will take some time for my body to adjust to this schedule. I am willing to go through the adjustment period if it provides me with more time to reach the goals that God has given me.
With my extra time from a couple of days I have scrubbed down the inside of the stove, done some canning of vegetables from our garden, laundry, and painted one of our bathrooms. I'm planning on trying to do more of my blog posts, write up and research for our new business, work on other house maintenance projects and continue to help my wife with the cleaning and our son's feedings. It feels good to be able to work on these items.
Besides the physical adjustments to the schedule, there is a feeling of loneliness since I am pretty much by myself from 10 PM-12 AM and 3 AM-7 AM. I am combating it by putting music on, keeping myself busy, and spending time with people when they are awake. Another negative is the potential "sleep debt" I may be building up over time. My plan to handle that is to take 1 night a week (probably Friday nights) where I don't set any alarms and sleep as much as my body wants to. I won't be starting that until my body has become accustomed to the new schedule (which it is getting closer every day).
In the end the new sleep schedule is like have an extra day and a half each week or almost an extra week every month. That extra time will help me get out of this debt and reach my goals.
So far, the new sleep schedule has worked very well. My second night on the schedule I slept too much due to taking my evening nap too early and then not having activities scheduled to do. I'm able to fall asleep faster every day when I nap and I have been able to function pretty much like normal. From what I have read, it will take some time for my body to adjust to this schedule. I am willing to go through the adjustment period if it provides me with more time to reach the goals that God has given me.
With my extra time from a couple of days I have scrubbed down the inside of the stove, done some canning of vegetables from our garden, laundry, and painted one of our bathrooms. I'm planning on trying to do more of my blog posts, write up and research for our new business, work on other house maintenance projects and continue to help my wife with the cleaning and our son's feedings. It feels good to be able to work on these items.
Besides the physical adjustments to the schedule, there is a feeling of loneliness since I am pretty much by myself from 10 PM-12 AM and 3 AM-7 AM. I am combating it by putting music on, keeping myself busy, and spending time with people when they are awake. Another negative is the potential "sleep debt" I may be building up over time. My plan to handle that is to take 1 night a week (probably Friday nights) where I don't set any alarms and sleep as much as my body wants to. I won't be starting that until my body has become accustomed to the new schedule (which it is getting closer every day).
In the end the new sleep schedule is like have an extra day and a half each week or almost an extra week every month. That extra time will help me get out of this debt and reach my goals.
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