September 17, 2013

• The Debt Trap (or how a high credit score will nab you!)

  I signed up for “Financial Peace University” after talking with Roger about wanting to get control of our spending so we can retire someday. Tonight is our first class. I’ve already done a few things to prepare. I’m following Dave Ramsey’s “Baby Steps” – step one is to put aside a $1,000 emergency fund. Done. Step 2 is to begin the debt snowball. I’ve already paid off our smallest debts and will start the real “snowball” in October. I have a couple of high balance credit cards (over $10K) plus the Durango and Dart (both new this year) and the new travel trailer to pay off. I’m thinking this will take about 2 1/2 to 3 years. Then I’ll start paying down the mortgage. Wherever that may be.

  Because…

  I listed our house for sale, as the housing market is improving a lot in this area. My house is now worth quite a bit more than I paid for it. We are going to downsize – we’ve found a few houses we like.

  One is about 2500 sq ft. 4 br with 2.5 bathrooms, full finished basement, nice double deck, pool, patio, 3 acres, house built in 1995 (my favorite of the two)
  The other is 1700 sq ft 3 br with 3.5 bathrooms, full finshed basement, nice deck, patio, just over 1/2 acre built in 2001

  We had made an offer on one before we saw these two. Fortunately, the bank came back with a counter offer, so we could withdraw our offer and not lose our deposit.

  When I say downsize – my current home is 3300 sq ft with a 1500 sq ft finished basement, 4 br, 3 full and 2 half baths, deck, just under 1/2 acre. Taxes are ~$5,000/year The other two houses taxes are MUCH less. We’re talking about a savings of about $500/month with a new lower mortgage and lower taxes. Even with a 15-year mortgage.

  I spoke to a financial adviser yesterday who is very familiar with Dave’s program and said because of our age we should also continue saving for retirement. I stopped contributing to my 401(k) but am considering contributing this year to a Roth IRA. That’s if our combined income isn’t too high. Our base income falls under the limit, but if Roger works a lot of overtime, we’re over the limit. Anyway the financial adviser is going to do some calculations and tell us how realistic our retirement dreams are (based on how much they say we need to put aside!)

  Amazing to think that three years ago I didn’t have a bit of debt.

  • 12:16 pm
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