Mapgirl’s Fiscal Challenge

First off, I don’t give out financial advice because I’m not an advisor. If you need that, ask someone who is certified and pledges to do business ethically. I’m not that person. I’m here to *entertain* you.

That being said, someone asked this question:

I did recently check my credit report and found that I have five credit cards open that I have not or never used in several years. Does keeping them open, albeit unused, help or hurt my credit score? Would you suggest that I close the accounts if I never intend to use them?

I think you’re best off reading about FICO or Vantage credit scoring models. There is some benefit to having revolving credit accounts open for a long time. Now the question is do you have too many open that hurts your score in another way? That’s up to you to decide. I mean you could go ahead and close them but that could also lower your score in the short-term, but in the long-term that could be beneficial if someone is looking at your ability to get in revolving debt overnight and evaluating you as a credit risk in 2 years down the road.

Does monitoring these unused accounts put an undue burden on you? Closing them could ease your mind.

A strategy you might want to try is to get a credit score report and then close one account and get your credit score again afterwards. Because so much goes into scoring though, so you’ll have to control the experiment by making sure your payments are on time during that time period and watch to see if your balances cross the 35% of available credit on that account. (Up or down. Either one will trigger a score change.)

The biggest score impacting item is on-time payment. Just make sure that you vigilantly pay on-time for a minimum of 24 months. Small open accounts may represent only annoyance and possible security risk without a lot of other score downsides, so it’s up to you if you want to keep them open.

N.B. I forgot to post this last Friday.

I’ve successfully been able to budget all monthly fixed expenses into one semi-monthly paycheck. That includes more-than-minimum payments on two credit cards.

Because of my stimulus package payment and some squirreled away savings, I’m able to take almost one entire paycheck and put it towards credit card repayment.

I still can’t nudge the Debt-O-Meter, but at least I’m moving forward on the credit card debt after the set back of a $5K BT for the bathroom remodel/ceiling replacement.

The bathroom is looking pretty sharp though. Almost done. Almost.

It’s a mess because of my bathroom remodel. But I soldier onward. Expect a net worth write up later this week.

Goal #1
Specific - Contribute to my 401k plan

While I am tempted to cut my contributions, I am holding steady. It’s kind of hard though. I really, really would like the extra cash right now to throw at the construction project.

Grade: Pass!

Goal #2
Specific - Reduce my credit card debt
Measurable - By 50% or $9,137 (rounded up to $10K)
Achievable - Monthly payments of $762

In April I cashed out a CD that was expiring and putting it towards this goal. But since I have a construction project going on, it’s making this difficult. What I have done is to shift around the interest rate on some of my debt, but in the process I’ve also taken on $5000 more. I am considering moving that to ‘Other Liabilities’ on my balance sheet/net worth like I did with my medical expenses so I can remain focused on my original goal. Not sure yet.

Grade: Fail. Miserable failure.

Goal #3
Specific - Reduce my credit card debt on my highest balance card ~$10K
Measurable - By 50%
Achievable - ~$450 a month

I did end up making a $800 payment in April. I also made an extra $250 payment to try and snowflake my debt. And then the bathroom disaster struck. I took out a $5K BT on this card, so I am no where near achieving this goal. However, I think it’s fair to say this goal needs a mid-year revision.

New Goal #3:
Specific - Reduce my credit card debt on my highest balance card ~$13K
Measurable - By 50%
Achievable - ~$825 a month

Grade: Fair - Neither a Pass, nor a Fail as the goal has to be altered.

Wow. The economy must be doing some funky things because my credit card interest rates are going DOWN. Meanwhile, my limits are going UP.

I reported that I have 11.99% APR debt right now, but the statement came in the mail recently and it’s actually at 11.24% APR. I’m thinking I can call them up and try to leverage it down to single digits.

If you haven’t called your companies yet to lower your rate, you might want to do that now since rates are dropping.

Since the ceiling needs repair, I figure I should do the entire bathroom. I thought maybe it would cost $5K, but after talking with a few people, I need to budget closer to $7K. I suppose this is a very salient lesson that everyone needs an emergency fund. Say 3-6 months of take home pay, which of course would cover the repairs. Unfortunately, my emergency fund has only about $1.5K in it.

In desperation for cash, I looked at all my options here. I have credit available on my HELOC and on my credit cards. I have a few CD’s expiring, which I was going to liquidate anyway to pay down debt. But since there is an emergency here and now, I’m going to use them to fund the repair.

With construction, you usually have to pay a deposit of some sort to get the work started. In my case, the earliest construction can start is in another week. The work will take approximately 10 days, taking me to early May.

In looking at my cash flow and available credit, I decided, rather sadly that I cannot attend my friend’s wedding in Boston this month. There’s just no way I can find a hotel room under $200 a night anywhere near the festivities or near the hotel where my best friend and her husband are staying. I’m looking at $1000 for just hotel and rental car alone at a time where I need the $1000 for something else.

I have balance transfer checks coming to my house all the time for a promotional rate less than 2% APR. Unfortunately, these BT’s have a fee. A friend asked me if that fee was capped out but reading the fine print, I couldn’t find any mention of a cap. I called the customer service line and asked about a cap. However the representative said he couldn’t change the BT fee. Instead he offered to change the rate from 1.9% to 1% APR after looking at my sterling payment record. It’s the best he could do, but I’ll take it.

Now the trick here is that I’m sitting on $5K borrowed for 1% APR. Do I pay off my 11.99% APR credit card balance of $4K only to ring them up further as the construction work progresses, or do I hold onto this wad of cash and wait to pay it out to the contractor? (It’s going into an account that doesn’t bear interest so there’s no arbitrage going on here and there isn’t enough time to move it around and take advantage of that sort of thing unless I’m paying off the credit card.)

The last $2K I need, I figure can come from liquidating all of my savings accounts and my next two paychecks. The problem now is that I’ve shot my 2008 debt reduction goals to pieces.

I’ve been sighing a lot this week. Life. It’s what happens to you. Dealing with it can suck, but I look forward to having a shiny new bathroom with better lighting in the shower and for the mirror when I put on make up.

Luckily for you, this week, several PF bloggers have Emergency Fund posts.
Five Cent Nickel: On building an emergency fund
Get Rich Slowly: Learning to love his emergency fund
Plonkee: On why they’re no fun

Goal #1
Specific - Contribute to my 401k plan

Slow and steady definitely wins the race here. The regular contributions are doing well and it adds to my overall retirement accounts growing or staying relatively flat even though the bulk of my holdings are down nearly 9% for Q1 2008.

Grade: Pass!

Goal #2
Specific - Reduce my credit card debt
Measurable - By 50% or $9,137 (rounded up to $10K)
Achievable - Monthly payments of $762

I am making payments, but if you click through on my Networth IQ graph, you’ll see that I’m basically back to where I started. I am holding $18K in credit card debt and I have 9 months now to chop that in half. I really thought I would be making a lot more progress on this goal in March since my medical FSA reimbursement came through. However, I had some unexpected car repairs this month for ~$550 which I put on my credit card. In April I am going to cash out a CD that is expiring and putting it towards this goal.

Grade: Fail because at Q1 checkpoint, I should be 25% complete on this goal. Tsk tsk.

Goal #3
Specific - Reduce my credit card debt on my highest balance card ~$10K
Measurable - By 50%
Achievable - ~$450 a month

Last month I gave myself a Pass rating for this goal because I am consistently making payments of $500 a month on this card, and my finance charges on its balance are about $60 a month. I think I still get a pass rating since I successfully made those payments all quarter. However, I am going to make a $800 payment in April to ensure I hit this target by year end.

Grade: Pass

Even though I got a pass on two out of three goals, I still don’t think I’m doing so great at the end of the first quarter of 2008. I think I have figured out why my big payments aren’t making a big dent.

A long time ago, I used my HELOC for a balance transfer on some of my credit card debt. That was July 2007. Since then, I haven’t really increased my payments to my HELOC to pay it down faster. However, I still classify that debt as credit card debt since that’s what it really is. I just wanted a lower interest rate on it.

What does this really mean? It means that I think I’m going to have to bump up my HELOC payments every month or else hold a bare bones amount in cash and throw every spare dime to my credit cards. I’m not really sure. I think I could easily increase my HELOC payment by $200 each month without much pain but I am uneasy holding my cash balances close to zero. I’ll have to think about it some more.

I’m up quite a bit because I was able to get my Medical FSA reimbursement earlier this month. It’s up 14.2% month over month and up about 15% from March of last year.

The main thing I noticed is that my main retirement account holdings is down 8.88% since the year began. That’s a lot and it’s kind of disturbing since that’s an old 401k plan to which I cannot add new funds to dollar cost average out that low dip. I’m now safely past the 60-day holding period for selling off my funds without penalty so I can roll it over and out of the plan holder’s firm. But I think I’ll wait another quarter anyway just to see if the S&P improves any before selling it off and moving the money. Someone told me I can have the fund shares transferred without being hit with penalties for moving money in and out of a fund to quickly, but honestly, nothing in that account really thrills me. I’d rather sell everything in it and reallocate it all.

I took a close look at my abnormally high cash holdings. Since I get paid on the last day of the month with my new job, I expect that I will continue to have artificially high cash holdings unless I start doing some planned liabilities to offset that amount. It disturbs me because usually I have a mortgage payment waiting to go out of that money right after the new month starts.

At any rate, I think I can almost double my usual credit card payments in April. I have been hoarding cash a little due to my friend possibly needing to borrow money and wanting to buy a replacement laptop. But I think I am going to buy neither right now. I am going to another wedding in Boston in April and I plan on using a credit card to pay for that trip. It’s mostly just a hotel, gift, and a possible car rental. I hope to use cash for all other expenses that weekend since I can look at it as a self-indulgent spending weekend at home in DC. Costs for meals should be comparable.

Since I’m not posting a lot of new stuff, at least I can put up the monthly ‘maintenance’ post on my goals and net worth.

Goal #1
Specific - Contribute to my 401k plan

I got squared away with contributions in February. I did have to bump up my contributions, to 10% for the last 11 months of 2008. That’s more than I need to get the full match over the course of the year, but just barely. Because I also have a Roth 401k available, I decided to kick in a little money into that account just to get it started. Frankly, it’s kind of dumb for me to have one until I can get my credit card debt squared away.

Grade: Pass!

Goal #2
Specific - Reduce my credit card debt
Measurable - By 50% or $9,137 (rounded up to $10K)
Achievable - Monthly payments of $762

I had to put my Lasik surgery on a credit card, but I sent in the paper work for my Medical/Health Care Spending Account (HCSA) reimbursement. Hopefully that won’t be too delayed.

I’m still stagnating on this goal however since I don’t seem to be able to stop charging onto my cards. I usually leave them at home, but I’m slowly ballooning in weight and planning wedding travel so that any progress I made was negated by new charges. Even if I leave them at home, inevitably, I need them to make a purchase online later. Reviewing my charges again, I forgot, I gave lots of baby gifts too.

Grade: Fail. I need to do some more thinking about this and how to make it happen. More than anything, I’ve tried moving to carrying a lot more cash and that does seem to help a little.

Goal #3
Specific - Reduce my credit card debt on my highest balance card ~$10K
Measurable - By 50%
Achievable - ~$450 a month

Grade: Pass. I’m paying $500 a month which meets the goal. But honestly, this still feels like a pyrrhic victory.

As for Lent, I am getting accustomed to diet soda, and yet, I’m getting quite fat. I’m not sure where the correlation is, but I think some of it is from my altered dining habits. I tend to eat heavier meals with my new boyfriend. Usually I will skip dinner or just have a light snack, but lately I’ve been eating a lot more food. Not just with my boyfriend, but also at the office. This new job is making me quite fat. I am looking for a used treadmill. Hopefully, I can find one on Freecycle soon so I don’t have to join a gym.

Don’t get me wrong. I’m not perfect here when it comes to Lent. I did have a few sugar sodas last month. There are days when the stress gets so bad at work that I need a kick of sugar to get through the day. I’m not really sorry though.

Also, I decided to eat less red meat during Lent this year. I’ve been eating more tofu and chicken. But I did have bison (making a market for an alternative meat!), a few burgers and a grilled steak taco, or three. But given my penchant to make roast beef in the winter, I’m doing a lot better. I’ve gone a whole week without red meat this Lent. (Crap. I just realized that I have a wedding rehearsal dinner/party for a wedding on Good Friday. Merde. I might as well hide in my hotel room that night or else wait till midnight to drink. Oy vey.)

I am dreaming of my paycheck. I have a huge surplus of cash right now, which I am saving for the bachelorette party this weekend. I also need to have a surplus going into the next pay cycle when I send off a huge payment to one of my credit card companies. Without reserving a little from the current paycheck, I will be short on the next paycheck. I hate not having a little something in my checking account.

Also, I cannot, for the life of me, find my Lasik receipt. Since I couldn’t see a damned thing for a few days, I put it on my table with a lot of other crap. I thought I had filed it away with some other things, but I cleaned that up over the weekend to prepare my taxes and get organized, but it did not turn up. I’m going to have to call for a copy of the receipt. At least I found the reimbursement forms at work now. (HR with my new company can be a pain in the neck.)

Once that’s done and I get reimbursed, I will be able to cut my credit card balance down by about 25-30%. Woe unto me for my bureaucratic apathy! I’m paying finance charges and interest! That my children, is the cost of laziness.

SMART: Specific, Measurable, Achievable, Relevant, Time-Bound

Goal #1
Specific - Contribute to my 401k plan
Measurable - X% of my total salary
Achievable - With each paycheck
Relevant - Yes. Because it will help my retirement funds grow
Time-Bound - All of 2008

I will not get a corporate match for my first 12 months, but my new company will match 100% of the first Y% of my salary, so there are some extra benefits to doing this, but I won’t see them till 2009. That’s fine. Because of other goals, X=Y, i.e. I’m only putting in the minimum to get the match.

Goal #2
Specific - Reduce my credit card debt
Measurable - By 50% or $9,137 (rounded up to $10K)
Achievable - Monthly payments of $762
Relevant - Yes. Because it will help my net worth grow faster
Time-Bound - December 31, 2008

My NCN Network chart/Save-O-Meter number is $18,273 and I have not made much progress at all. In fact, I’m probably going over that when I finish tallying my December net worth numbers. What really burns me is that Tricia has paid off more debt that I have. I’m really proud of her, but dammit. I gotta get moving!

Goal #3
Specific - Reduce my credit card debt on my highest balance card ~$10K
Measurable - By 50%
Achievable - ~$450 a month
Relevant - Yes. Because it’s killing my credit score
Time-Bound - December 31, 2008

This leaves about $312 per month for my other credit cards. Though they have higher interest rates, the balance to available credit ratios are so low they aren’t detrimental to my credit score. I’m not buying anything any time soon, bu I would like to push my score higher for the heck of it. There is an implied goal here of breaking a FICO score of 720.

2008 is going to be very simple. Three goals and three goals only. I am focused on saving for retirement and reducing my credit card debt. That is all. Once I get going on these three things, I feel my larger goal of having nothing but my mortgage will come to me more easily in 2009.