Big Brood

According to this article on Yahoo Finance, MasterCard is finding quite a bit of profit from other countries even as it gets more business in the U.S. from consumers desperate to cover their bills in a down economy.

As much as Goose and I have found credit cards to be useful, I’ll be glad when we are out from under them. We have spent years shifting some floating debt around on 0% interest cards, rather than paying it off like we should. While this has helped us to live a little “faster” than we could have, we now regret this.

The truth is, we came to a point where our monthly bills nearly exceeded our monthly income. Our credit card debt was increasing due to sloppy buy habits and this was making it hard for us to meet our other obligations.

We were working for Mastercard and Visa rather than for ourselves.

Now, we are on a road to recovery and we are looking forward to keeping our money out of the hands of credit card companies.  So far during our recovery we have had a fairly rigid “no credit” policy.  So far, we have slipped a couple of times but paid off the new balance at the end of the month.    I’ll post later on how we are doing and what our plans and techniques are.

Have you had problems with your credit cards?  What have you done to avoid using your cards?

This post by CNNMoney entitled Top Tips: Reasons for Optimism is a nice dose of sunshine in an otherwise dreary news stream. In this article they talk about 3 good reasons to be optimistic.

1. Low mortgage rates, which can help those of just considering refinancing as well as those that may be stuck in some of those nasty sub-prime loans.
2. Consumer Incentives: Look for deals on larger cars, furniture and electronics as retailers and dealers look to clear out slow moving inventory. Bad news: Compact cars are less likely to have incentives. Good news: We need a LARGE van.
3. Now is a good time to buy in the stock market. For those of you with the extra cash, it’s time to go nuts!

These things are good news for us, but I hope that this tumble ends soon.

How do you feel about the economy right now? Do you think we’ve hit the bottom?

I was wandering around wondering about my grocery bills and I ran across this great piece from the UIUC Farm Gate. The summary:

“The relationship between corn, ethanol, and gasoline prices has resulted from the federal ethanol production mandates, and they will have an impact on corn prices particularly if a short corn crop results from weather issues. The reduction in production will raise corn prices to levels that ethanol refineries cannot afford to operate, and either the ethanol production mandates will have to be relaxed or refineries will have to be heavily subsidized to be able to buy corn at nearly $8 projected prices.”

This article really hits home with us because, of course, we worry about fuel prices, food prices and our environment. It appears as if La Niña is likely to cause some drought conditions in the U.S. this year, leading to higher corn prices. NOAA’s drought monitor seems to back this up.

Corn prices are also higher this year because of government mandates around ethanol and a generally “greener” focus on ethanol in our country. All of this comes together to push commodity prices up. That is, farmers who want a better crop to sell, will sell corn because of its higher price. That leaves less land available for wheat and soy beans, which also pushes their prices higher.

In the end, the combination of government mandated use of ethanol, our focus on corn-based ethanol and looming drought conditions mean higher prices for our groceries based on these commodities. Also, don’t forget that much of our corn goes to feed our beef.

Have you seen the effect in your grocery bill yet? Do you see any counter-trends?

I found this great post on Yahoo Finance today about David Bach’s Go Green, Live Rich: 50 Simple Ways to Save the Earth and Get Rich Trying. I’m really looking forward to this book as it fits right down our alley of trying to work better with our money and also decrease our impact on the environment.

If the summary is any indication, we may be doing most of these things anyway but it’ll be interestig to see if we can pick up some tidbits. David Bach’s The Automatic Millionaire : A Powerful One-Step Plan to Live and Finish Rich was one of the first books I read after I had my “epiphany”. I really enjoyed it and will probably do a book review on it at some point.

It’s also interesting to read the negative comments about this article. Most of them attack global warming theory. The odd thing about this is that David Bach is not advocating some sort of “socialist” method for reducing greenhouse gases. He’s merely helping some people to think about their own personal impact. Whether it effects greenhouse gas or not is a secondary issue to me. I want to reduce MY impact because I believe it is the most respectful thing to do with the environment, which is a gift that we’ve been given. My consumerism is just another manifestation of the sins of greed and envy and when I waste what I could save that comes from pride.

What do you think about Going Green, Live Rich? Is it just another focus on greed or is it really trying to solve a problem?

Over at The Sun’s Financial Diary, Sun has a post about the anniversary promotion from myFICO that allows you to get your FICO score at a 25% discount. Look toward the end of the post. This is a really great deal.

Also, if you’re wondering what determines your FICO score and what it is all about, I found this great guide on myFICO.

In summary:

• Credit scores are used to determine your ability to pay for your loan.
• The FICO score is based on:
  • 35% payment history
  • 10% Types of Credit in Use
  • 10% New Credit
  • 15% Length of Credit History
  • 30% Amounts Owed
• This guide gives great tips on how to keep your score in good shape such as:
  • Keep balances low on credit cards
  • Pay off debt rather than moving it around (whoops, we have done this one too often!)
  • Do rate shopping within a short period of time. This helps the FICO system to determine whether you are really shopping for rates or desperately casting about for new lines of credit.

We have not checked our FICO yet as we didn’t want to spend the money and we didn’t really think we’d be in the market for new loans. Our mortgage shopping has gone without a hitch so far so I’m not too worried (not to mention that Goosey has always been very good at paying bills on time.) However we did use a FICO estimator just to get an idea of where we stand.

Since mid-October or so, Goosey and I have been maintaining a price book. We have found that the price book has been one of our most effective tools in fighting food costs. As our brood grows in age and numbers our food costs are beginning to increase. To keep on top of it, we have used a price book. Here’s what it has done for us.

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We’ve been thinking about refinancing our home to take advantage of lower interest rates. We missed the bottom which seemed hit at around 5.48% national average for a 30-year fixed-interest mortgage near the end of January. Today’s rate of 6.04% would still be OK for us as we’re currently at 6.8% (on one loan, we have another loan which was a dumb mistake that I’ll explain later.) The question, is: Is this the right time? The answer for us appears to be a definite “probably” (how’s that for hedging!)

With fed discount rate cuts, our first thought was to refi now! But, if you’ve been watching the trends you see that mortgage rates actually went up after the last Fed rate cut. So, I dug in a little deeper and found more information.

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They’re here!

Our Seed Savers Exchange seeds are here! It’s all a part of our insidious plot to save money (we’ll see..), save the earth, use heirloom vegetables and enjoy a garden.

Well, my Goosey mentioned our 10 year old car for which we still have a loan. She didn’t want to go into an explanation, but I will. This car was our first foray into mini vans. It served well enough for its time but is starting to really give out on us at an accelerating rate. Here’s how we did. Don’t try this at home.

1. Buy new Jeep Cherokee that you love and you think will grow with you well. When you do buy it, pay too much and don’t negotiate with the dealer.
2. Have a second child and discover that it is getting really packed inside the backseat. Discover that you can’t haul nearly as much stuff as you’d like.
3. Trade in your nice Jeep Cherokee for a 2 year old fancy minivan. Again, don’t really negotiate except to ask for slightly lower monthly payments. Make sure to get the 5 year loan. Oh yea, since you’re a little upside down on the Jeep, just add that amount on top of the loan. Boy, that dealer sure is helpful!
4. Run the minivan for a couple of years, then decide you’d like even lower monthly payments. Refinance it at a much lower monthly payment, fully intending to make extra payments. Oh yea, get another 5 year loan. Then your required payments are REALLY low.
5. Don’t make the extra payments.
6. Fast-forward 4 more years. You’re still paying for that car. You hate that car. That car is falling apart, but you’re so upside down on that car that you can’t get rid of it without losing your shirt. Hate car. Hate it! We hates it! It burns! It burns……!

Then….

1. Get tired of paying for the car and finally accelerate payments.
2. Save a whopping $0.03 in interest by paying it off early.

Many of these decisions we made thinking that we were doing the right thing. We really DID need to lower our payments because of lower income. But, I’m still in that car!

Here are some things that someone who doesn’t love servitude to rust buckets might do:

1. Buy used! Most of the depreciation for a car happens in the first year or two (think 20-40% of the original value).
2. Negotiate! I plan to post on this more later, but negotiation is great to save you money.
3. Pay cash! Yes, it can be done. We’ll discuss that in later posts.
4. Make your extra payments automatic. Some companies will make this difficult but you should be able to do it in some way. Call them up and ask. Also be sure to ask if there are any prepayment penalties.

Back in early November gander and I took a look at our finances and decided we were at best going no where fast and more likely on a sinking ship. Together we headed down the debt reduction road once again. I say once again because we have done this several times before. We have taken tax returns, bonuses, etc and paid down credit card debt to zero (or nearly zero) only to be lured back into our consumer world thinking we should spend money on things we didn’t need and certainly couldn’t afford.

We are trying something a little different this time. We are communicating. It seems obvious but we have lacked this in the past. It is much easier to slip back into bad habits when you don’t talk about spending, purchases, etc with your spouse. It has taken us almost 12 years of marriage but I think we are starting to figure a few things out! I did say starting!

We also decided we would keep ourselves motivated by taking a special trip or buy something special to reward/motivate ourselves whenever we get a large bill paid off. Since our current endeavour began in November we have paid off 2 big bills and are chopping away at a third, Gander’s 10 year old rusting minivan (don’t ask why we still have an outstanding loan on this, sigh). Gander and I took a much needed overnight date night last night. We had the youngest gosling with us, but other than that it was just us. We had several “quiet” meals together and got a lot of chatting done. It was very refreshing and really helps us to keep our perspective.

So the other goslings don’t feel too burdened by our debt reduction plan (and the sacrifices they have been making like very few trips to the “big M”) we will treat them also, we will be going to an indoor water park next month. That will get us up to date until the next debt has been eliminated!