I got another bill from the oral surgeon’s office. My insurance company did pay out a little bit for the surgery in March. They paid a whopping $259.00 of a $3032.50 bill. CRAP. I am so out of FSA money to cover that, it’s not even funny. It’s sad and makes me want to cry.

However, I had Wednesday afternoon off from work and I used my time to make some phone calls about this situation. I didn’t want to take HC’s advice and appeal because of the time and headache that would cost me. I mean, I can’t even stop at work to make a phone call in the first place, how would I have time for an appeal and endless hold times on the phone? I kind of knew in the back of my head that it would be denied because the insurance has a lifetime maximum on implants, which was met last year with the first one.

Did take Dean’s advice and ask if I could pay them $500 a month till the debt is discharged, and they said ok. I mean, ok. That’s it. She said there was no problem with that and didn’t ask me to sign anything else or talk to anyone else. So all I have to do is mail out those checks for the next 6 months.

Easy as pie. I can swing that, but I definitely will be stopping the 401k contributions beyond the company match. I am going to add this bill to my net worth in the liability column. It’s worth doing since it’s like any other outstanding liability I would have to book at work for the balance sheet.

I was really worried that my ad revenue and getting a bonus from work would bump me up a bracket this year and put me out of the program for real estate tax relief. However, I just ran some figures and it looks like I will actually end up safely under the wire for the 28% bracket.

Since my ad revenue has fallen off, I don’t have anything to worry about anymore. That’s good.

I’m doing this because I’m contemplating some changes to my 401k contribution and I wanted a better understanding of the tax implications of cutting off my contributions in favor of debt repayment at the suggestion of NCN in an online, off-blog conversation.

It’s not too early to start thinking of your taxes before the end of the year rolls around.

I know these posts seem kind of mundane. But this is the reality of my finances on a very micro level.

Finishing up the rotisserie chicken, I ate all the meat I picked off the carcass. I ended up having a dinner of three eggs, meat from two drumsticks, and some leftover focaccia from the fancy Italian take out on Tuesday night. I also dumped out one huge portion of chicken soup. Yes, I could have frozen it, but I wasn’t in the mood that evening.

The last of the unfrozen chicken stock is about to transform into an excellent white bean soup. I soaked a 1/3 cup of white beans last night. I threw it into the crock pot with a quart of chicken stock, two sprigs of thyme, two cloves of garlic, a few sun-dried tomatoes and one limp carrot. The carrot is gross, but added for flavor and it probably will be more appetizing to eat once fully cooked. When this soup ready, I’ll add some cooked chicken, salt and pepper. I might also toss in some rice or mini-farfalle pasta to round it out.

On Friday, I ended up finishing up all the sandwich fixings I had at work. It was utterly perfect. One slice of cheese, two large slices of ham, two slices of bread were left! I split it with co-worker as an afternoon snack, as I stepped out for lunch that day. BUT IT WAS FREE. I know there is no such thing as free-lunch, but my co-worker’s boyfriend gave her some coupons to dine at his restaurant. Since she doesn’t really fancy the place, I might be the recipient of a few more coupons. woo hoo!

As for the upcoming week, it’s kind of a toss-up. I have a lot of social events as well as some work-related events where meals provided. (I get to eat at posh restaurant on the water this week. Very nice!) I’m tempted not to bring sandwich stuff to work, but I think if I keep the purchase small, I’ll be able to make it work for me and not have any spoilage. I hate being the one with the leftovers rotting in the communal fridge. It’s so embarrassing.

ps- I did lose a crock pot of white bean stew due to my late night gallavanting. That was a shame, but I didn’t really like the recipe in the in end.

This weekend was full of a lot of poor decisions. This is a really long blow-by-blow so skip it if quotidian stuff is boring to you. I wrote to remind myself that one bad decision often leads to another in an effort to try to recoup the loss from the first mistake. And then sometimes fate just intervenes and you have to accept the loss in the name of fun and safety.

I feel bad for the commenter who says that their mom had bad things happen to them. That’s regretful. But an anecdote of one person doesn’t make for a national statistic of people who bit off more than they could chew with their mortgage. It’s shared blame, no doubt, but the first finger points directly to the person in the mirror.

Starting with Friday:
Friday was actually a very good day for financial decisions. I got a free lunch. I ate all my lunch food for the week. I went clubbing for free. I wasn’t on a guest list, but the email the DJ sent out said free before midnight. The bouncer tried to charge me $10. I told him no way. The email said free before midnight. He asked if I was on the guest list, I could get in for half. I said wasn’t on the guest list because the email said free before midnight. I stood my ground and didn’t pay a cover. A nonchalant attitude helps in psyching out the bouncer. I spent $7+tip on a cocktail, got two free sodas for tipping the bartender a dollar on one of them, and tipped the bathroom attendant $1, because it’s de rigeur (And I really hate doing this, but I hate even more the dirty look she gives when you don’t.) I spent $10 for the night. Sounds pretty good, huh?

(more…)

As I reflect more and more on what happened to the guy in Maryland who can barely afford his housing costs as taxes and insurance costs rise, I am wondering how he got into this mess.

I’m a big proponent of radical personal responsibility. As much as I whine on this blog, I know that my spending is MY problem. It’s not something I can blame upon anyone else as I make my choices. S.A.D.D. used to stand for “Students Against Drunk Driving”, but now it stands for “Students Against Destructive Decisions” because it applies to all areas of life. I think financial literacy is a life skill that should be taught at home and at school since destructive financial decisions can have just as much long-term impact as taking drugs or drunk driving. Unlike chronic alcoholism, where your liver could be permanently destroyed, usually poor credit can be repaired in two-three years.

CNN had an article about who to blame for the current mortgage crisis (which unfortunately I can’t find right now). Of course they said borrowers were to blame, but then they went into a litany of other parties like mortgage bankers, appraisers, and the Fed, etc. It was cutting a wide swath, but really, it boils down to the people who sign all the freakin’ papers at settlement. I admit, the Truth-in-Lending sheet you get is still pretty damned confusing. Even for someone with a higher level of education, I sure was still confused. However, the first people and the people who MUST acknowledge their part in the a mortgage debacle are the buyers themselves.

The American Dream of owning your own home is powerful and strong. The government encourages it with a huge tax incentive on mortgage interest. The notions of ‘Home Sweet Home’ and carving out a space of your own are psychologically extremely potent. No wonder it’s easy to get sucked into buying a home when everyone else is doing it and seems really gosh darned happy about fulfilling their dreams of owning a home.

In 2004, when I bought my home, I think 7 of crowd had purchased properties in the same year. Planning housewarming parties was a b*tch, let me tell ya. All of us were in our late 20’s-early 30’s and starting to slow down and cocoon, etc. I watched my friends buy places that were way bigger than mine. I was envious. But I didn’t let my house envy show by buying something comparable or better. I bought a place I could afford. I still have the smallest place of all. When it looked it I was having a hard time affording it, I got off my duff and pursued more income, which ultimately was a great long-term career move. But it was me. All me. I am the one who asked my parents for financial help and its attendant cultural burdens. I am the one who pays the bills monthly. I am the one who knows what the cash flow is for making the payments. I alone signed the condo documents. I am the one who pays the insurance. I am the one who lives in it. I am the one who decorates it. I am the one who loves living within its walls. I clean it up. I make it a mess.

I return though to the notion that our financial decisions are about our egos, psychology, vanity, black box of issues, whatever you want to call it, whether it’s an aspiration to a lifestyle, an acknowledgment that of our means, or disregarding our means. Buying my place was a bit of fantasy fulfillment for me. I felt that I would be more at peace if I could live without roommates. I felt that I could stand more own my own if I was the solely responsible for everything, rather than splitting costs. It’s been scary and somewhat trying. I was sleepless knowing that I was entering adulthood so completely by signing at settlement. I really don’t know what all these people were thinking when they signed huge mortgages. It had to be more than the money that drove them to these decisions.

I admit freely to being irrational about my financial decisions. Part of why I blog is delve a little into why I do what I do. But when it came to purchasing a home, I tried to be as coldly rational as possible. I ran a LOT of spreadsheets, doing the math. Cutting different scenarios for down payment amounts, interest rates, ARM terms, etc. I couldn’t afford to eff things up. My parents could help with the down payment, but sure as sh*t they couldn’t bail me out if I couldn’t make a payment. I vowed I’d never take another dime from my parents because it was now my turn to give back.

Maybe I am a pessimist and all these people are optimists. I don’t know. All I know is that sometimes I can be really good getting off my lazy butt and taking action when I think things are going badly. It doesn’t happen overnight (well, maybe if you are laid off). A foreclosure proceeding starts happening after 2 missed payments.

A commenter wrote to me that I’m really defensive about comments that aren’t full of praise. Well, whatever. I didn’t write this because I wanted people to tell me how great I am. I wrote this because I really don’t get it. Taking care of business is important and forecasting your future ability to pay is part of getting it done. The numbers don’t lie. I cut a long list of figures trying to assess how much money the man in the article made, and realistically what kind of mortgages could be written on a presumed salary and I couldn’t do it without getting creative and using really unusual loan products. It was really difficult and that’s when it dawned on me that he was really in trouble and he and his mortgage provider brought the situation on themselves. From ten different ways, I just couldn’t get the numbers to add up.

There will be another post shortly about owning up to your actions and making choices.

Hat tip to Boston Gal for pointing out an article in USA Today about homeowners who can barely afford their homes.

The person in question is Sydney Lasry of Severn, MD. After doing a public records search and checking Google Maps, I know where this guy lives and I can guess who his employer is. It’s not that hard since the US Government is one of the largest employers in the state of Maryland. (Apologies to Mr. Lasry for using him as an example. I don’t mean this as an attack on him. It’s more to further my understanding of the math surrounding mortgages and the mortgage crisis in America.)

With that in mind and some of the statistics in the article let us do a quick analysis.

1) He’s paying 70% of his gross pay towards housing.
2) His property tax bill is $3,200.00.
3) His insurance bill is $1,100.00
4) His home is $400K.
5) Guess: He works for the Federal government.
6) He is a ’systems engineer’. N.B. I put #5 before #6 for a reason to be explained.
7) The tax rate in his county is 89.1 cents per $100 of assessed value.

Alrighty. I have confirmed, his home’s sale price was $400K. His tax bill is actually closer to $3300, so I will adjust for that. Given 20% down and standard 30-year mortgage at 6.25%, per Bankrate.com’s calculator, his mortgage payment is principal and interest at $1969.80. His monthly escrow and insurance is 274.30 and 91.67 respectively. The total is $2335.77 per month in housing.

If that is 70% of his gross income. He’s making $40,041.80 a year.

Now here’s what does not add up about this at all.

That salary would make him a GS-6 or a GS-7. Now this is where it’s very weird that his title is ’systems engineer’. I am considered a systems engineer, but basically I write Oracle reports, making a very decent salary. My pay grade is more like a GS-11 and higher. But when I search USAJOBS for ’systems engineer’ at GS-6 to GS-12 in his neighborhood, I actually found a listing for an electronics engineer that is GS-5-GS-14, i.e. $33K to $104K a year. What kind of range is that?

So yes, it’s really crazy, but he could be making $40K a year in the DC Metro area as a systems engineer. It’s shocking to me, but I guess that’s what happens when you work as a civil employee.

Moving along, there was an assertion in the comments that even before the rise in his property taxes and insurance, he was paying 60% of his gross income to housing. My analysis shows that a mortgage payment of $1969.80 a month, by itself is 59% of his gross salary.

A lot of this analysis is contingent on the mortgage payment. I played it really conservatively and wrote that his mortgage was as traditional as possible, 20% down, 30 year fixed, reasonable rate. But I think that assumption was wrong. He’s paying PMI. So he probably put down less than 20%. What if he had really crappy credit? I ran the numbers again with a 30-year fixed at 9% and his gross salary is then $50K. Hm. I don’t know that I would have bought a $400K home while making only $50K a year. I mean, I was making about $45K a year when I bought my condo for under $200K. I just didn’t think I could afford a bigger home than that. And the bank didn’t think I could either. They pre-approved me for a mortgage around $190K.

So with that further information, I started running numbers at 5% down payment, same terms and rates as before (30-year fixed at 5%, 6.25%, 7.5% and 9%). The highest salary range I get is almost $60K. Now taking that number and punching into the mortgage affordability calculator, with $40K downpayment, and 5% rate, I see that he can afford a mortgage of $300,794.26. Now I’m starting to think this guy has a creative mortgage. I think he might have an interest-only ARM because I don’t know how he can afford to have this home whatsoever.

Ok. I’m done thinking here. But very fascinating stuff. This guy has a mortgage that he can barely afford right now. If he’s lucky, the assessment will fall and his tax bill is reduced. However, then he’ll be holding the bag on his place because the mortgage might be more than the home is worth. If he really does have an ARM, he’s toast.

I hope he has some roommates, because someone is going to have to pay for the electricity and cable bills around that place. (From what I can tell, his home is quite spacious and could handle a few extra people living there.)

Hat tip to Rob for pointing this article out. It’s been a work-focused week for me and I’m not generating enough story ideas on my own.

The Wall Street Journal Online has a short story about American Home Mortgage Investment Corp. and Freddie Mac.

In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company’s Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24….In an interview last week, Ginnie Mae’s senior vice president, Theodore B. Foster, said Ginnie Mae had seized from American Home some of the insurance and tax payments collected from homeowners. “What’s occurred is that we have the money, but AHM hasn’t been able to or willing to pay the taxes and insurance, and they have the loan records,” Mr. Foster said. “Therefore, we don’t know who to pay, and we don’t know how much.”

This is very bad.

1) If you are a borrower of AHM, you may be delinquent on your property taxes because they aren’t paying them through your escrow account. Try to find out what you owe the county by going directly to your Tax Assessor’s office and paying the bill. Same goes for your home insurance or PMI. (I couldn’t figure out what kind of ‘insurance’ was meant by the article.)

2) If you don’t, your local government may seize your property and auction it off at a tax foreclosure sale, even if you are paying your mortgage on time. It’s better here to actually over pay your taxes because at least the county can’t come and get you.

When Rob first sent me this, all I could think was that this doesn’t effect me directly. I don’t have AHM. I don’t own stock in Freddie Mac. (I digress for a deep irony, my friend works for Freddie and he lives out of his van! He’s literally homeless! LOL! By choice. “Strictly by choice.” - Say Anything)

However, the greater implications really frighten me. County governments could have short falls in revenue. It could be a sign of a recession coming. Rising homelessness. Not fun. I have vague memories of the recession of the early ’80’s and I don’t relish the thought of tough times ahead.

Apologies to my readers and blogpals. I just haven’t been able to focus lately on blogging and reading. I feel as though I am pulled in many directions at the moment, both with my time and my money. I promise to do better on both, because that is why I blog, for some accountability. If I can’t do it for me, I’ll have to try and do it for you.

First and foremost, a blog contest/giveaway!

Grad Money Matters has a book giveaway for The Quiet Millionaire by Brett Wilder. To enter, all you have to do is leave a comment with your plans on how to become a millionaire.

An old post by Ugly Debty, but a good one, about her newest addiction. And it ain’t shoes!

Ms. MiniDucky on pride and finances. I wish, in my youth, I had been brave enough to say “I can’t afford that.” or “It’s not in the budget.” I guess I only really learned it last year when I went to all those weddings.

JD of Get Rich Slowly has to fire somebody. It’s not pretty, but it’s the honest truth. Hopefully the kid will figure it out. He really is young enough to recover and have a very happy life.

Well, I bought that lovely chicken on Sunday. I have proceeded to eat one meal of it and the rest will go to waste if I don’t eat it for dinner tonight and figure out what to do with it ASAP. (This was drafted for posting on Wednesday day, but never got around to posting. I DID end up eating dinner at home last night.)

The weather is still really hot to start making soups, but I have about 6-8 cups of stock ready to go. I ran out of tupperware for freezing it.

Monday night I got hijacked because my friend was feeling lonely. That was a painfully expensive dinner since she wanted to eat Asian food and the only place nearby was a Japanese restaurant.

Tuesday night I could have had a ham sandwich at work if my friend from OH had told me she was going to be late. This was planned, but after Monday night’s budget fiasco, I really didn’t need to dine out expensively again. (It’s either expensive Italian or a pastry from Starbucks and I don’t like sweets for dinner)

Lunch? Well, I needed to catch up on some work gossip on Tuesday, but I managed to have a sandwich at work on Monday. I hope to have sandwiches the rest of the week.

This is how I end up wasting food a long time ago. I always bought groceries I never ate. I am not interested in wasting food again.

What sucks about dining in is the lack of flexibility on what I get to do socially during the week. I mean honestly, if a friend calls you last minute to have dinner (as was the situation on Monday) do you value your leftovers more than friendship? Ugh. I hate that notion. Of course I don’t! But what was I going to do? Say no, I have to go home to eat when she was obviously hinting that she wanted to tell me she was pregnant and I am the first person besides her spouse she was going to tell?

I do not resent going on Monday one bit. I am just telling you the situation because it’s this is the position my friends put me in, variously going through job crises, emotional trainwrecks, etc. I can’t always invite them home to eat since usually that puts them out because there isn’t enough for two, my apartment isn’t presentable, or they live far enough away that they it’s asking them to drive a fair distance.

The things we do for love and money or love of money?

I got invited to go to the movies with this new group of people I met last week. I had a great time with them that I definitely wanted to hang out. To do it cheaply, I wanted to eat at home first and then meet them at the theater.

Well, I never got to go. I got stuck in traffic all for some stupid rubberneckers on the highway. Really, people. Come now. The cop is pulled over with lights flashing. WHO CARES WHO HE’S STOPPED? Don’t you want to get home and eat?

Admittedly, I was too kind to cut off the co-worker droning on about their problems, hence my late departure from work. But you’d think that my turning around to code something would be a sign that she should cut it short.

Either way, instead of paying $9 bucks for a film, I spent nothing tonight. I would have had a no-spend day today, but I tanked up on gas and bought a Coke out of the vending machine.

Gotta love traffic. It wastes your time, and yet it can save you money. HARUMPH.