2013 year end review

2013 brought some incredible changes to my life that impacted my finances and debt reduction mission.  I went through a complicated pregnancy that reduced how much I could work but brought home two healthy, adorable (and expensive) additions to our family.  I combined finances with S and worked towards having a unified financial outlook with him (not an easy task and will probably be an ongoing battle for years to come).  I totaled my car which turned out to financially be a good thing even though I don't recommend it as a way to get out from under a hefty loan.  Became a responsible, mature adult (ie. got life insurance, which I think counts as a milestone towards being a responsible, mature adult!).

Through all the financial challenges I only had one goal for the year- no net increase in debt.  I knew there would be some trade-offs such as paying down the credit card debt while racking up the medical debt.  I hadn't foreseen that S and I would finally decide to look at our finances as one big picture.  In order to compare apples to apples I've gone back and added in S' end of 2012 numbers to mine to see if we really did accomplish my one financial goal for 2013...

End of 2012:

Student Loan 1 (My fed loan): $36,284
Student Loan 2 (S' state loan): $21,719
Student Loan 3 (S' fed loan): $5,454

Car Loan: $8,605

Credit Card 1: $0

Credit Card 2: $4,261

Credit Card 3: $117
Misc. small debts (S' small debts in collections): $5,443

Parents: $0

2012 Total: $76,883

And here's were we are today:
Student Loan 1: $35,230

Student Loan 2: $20,800
Student Loan 3: $5,197

Car Loan: $0

Credit Card 1: $0

Credit Card 2: $3,825

Credit Card 3: $3,253
Misc. small debts: $4,284
Medical expenses: $700

Parents: $0

2013 Total: $73,289

Which means we exceed my goal by roughly $3,600!!

And to think we started in Oct 2011 with $101,123 in debt!

Which all boils down to $27,834 paid off!  We've also been building our emergency savings back up and have $100 in savings plus another $200 put away in a savings account for the boys' education/ braces/ band camps/ tattoo removal or whatever other expenses the future holds for them :)

The last hospital bill

Since we're nearing the end of 2013 and I would like to have a complete financial picture heading into the new year, I decided to try and tackle the babies $4,200 hospital bill one more time.  After bouncing between the hospital billing department and the babies insurance company I finally had a breakthrough!  Someone at the babies' insurance finally took enough time to really look into the claim denial.  Apparently my insurance should have covered it due to some state law.

So I called my own insurance back and again lucked into a person who was willing to look a little deeper into why the original claim was denied.  Turns out my insurance WILL cover 100% charges!  All they need are the babies names from the hospital billing department because right now the claims look like duplicates!

This is fantastic news for our finances and I'm relieved to be close to the end of the hospital bills.  Even though the hospital bills are not accruing interest, I think I'm going to pay off the balance with our tax return just to be done with the headache!

The twins are 6 months old...

Do you know what that means?  That's right, it means that the hospital and the insurance company have now had six months to haggle over who is paying for what and how much for the birth of our twin boys!  I passed the point of irritation a couple months ago after spending countless hours on the phone with the hospital going over the insurance information and the insurance company going over the boys' information.  Now I just find it sadly comical that this is how our health care system functions.

Anyways, I had really hoped I could end the year knowing how much I owed for their birth.  Is it $500 or is it the full $5000 we've been billed?  For now it doesn't really matter what the number is, the medical debt is not our first pay-off priority and we won't be itemizing so there's no tax advantage to paying it off this year.  But still, I've developed a certain level of comfort in knowing exactly what my financial picture is over these years of debt reduction... ah well, guess I'll have ring in the New Year with more phone calls to the hospital and insurance company!

Looking back on two years of debt reduction

Monday was officially the two year anniversary of my decision to start this debt reduction journey and blog.  I've been taking a little walk down memory lane today, reading some of the very first posts I wrote back in 2011.  It's kind of strange looking back and seeing the details of the little steps I have taken and as well as the big events that have thrown curve balls at my debt plan.  When I started all I had to think about was me- my money, my spending, my debt.  In two short years, I've added S and the babies to the mix and have to think about finances in a whole different way.  And even with all the ups and downs along the way, I was able to get rid of over 25k (40%) of the debt that I had been dragging around for years!

In my first post I talked about the shame and guilt I felt about my financial situation.  It's funny but I can't even remember the last time I felt either of those negative feelings.  I actually feel quite proud of my accomplishments financially and can openly discuss my situation with my loved ones without feeling embarrassed.  And my journey is no longer just about the road to debt freedom.  I am learning a tremendous amount about all aspects of financial planning from taxes, insurance, savings and investment options to living a less wasteful and simpler life.

What a wild ride it's been so far... exciting to see what the next two years brings me!

tax thoughts

A random thought occurred to me today: neither S or I have adjusted our tax withholding since the babies were born which means a bigger tax refund next spring.  The thing is... I don't want a big tax return in 6 months, I want a bigger paycheck now!  I know some people like getting a fat tax return but for me the idea of loaning the government money, interest free, seems unfair given that the government isn't about to extend me any interest free loans.  However, I don't know enough about taxes when it comes to having dependents to know whether I should adjust my withholding or S should adjust his.  I do know that the extra cash each paycheck would help us pay off our debt that much faster so it seems like this should be investigated quickly.

Other questions that flooded my mind once I started down the tax rabbit hole:

• Since I was on maternity leave this year, S stands to make more... should he file as head of household with the babies?
• Would I qualify for the EIC since I didn't make as much this year if I filed with the babies?
• Is it possible to split the babies since we aren't married?  Is that the best bang for our buck?
• What other kinds of credits are out there for people with kids?
• What difference would being married make?  Is it significant enough to consider going ahead and getting married this year? 

I'm adding tax research to my to do list for this week but I have a feeling this may be complicated enough to warrant visiting a tax pro.  

Debt pay off priority list

Now that I have a clear picture of where we stand as a family, it's time to figure out how to pay everything off in an equitable way.  What I mean by equitable is that since S and I are not legally tied together we need to make careful decisions about how we handle finances jointly should something happen that leave us as single parents (like death or splitting up).  This may sound pessimistic but I think it's necessary to use a better safe than sorry approach, similar to getting life insurance, I obviously don't want either of us to die but we need our family to be protected should that happen.  

Our basic plan is to pay off joint debts first with the other debts receiving minimum payments only, from there we'll split the money we have to pay towards debt each month so that 50% go to each of our debts.  

Here's what I've come up with so far (arranged in order of priority and pay off time frame):

1. Credit Card 3: $2,657- This is a joint debt in my name.  We used my card to cover the household expenses accrued during the maternity leave and the budget shortfall we had.  It has a relatively high interest rate of 8.9% so we need to hit it hard and get rid of it as fast as possible. 

2. Medical expenses: $2,565- Also a joint expense from the birth of our twins, and also primarily in my name.  Even though this one has no interest we have set monthly payments for the larger bills and owe the smaller bills upon receipt meaning this one will get paid off fast regardless of whether we would rather be putting our efforts elsewhere.  Besides, it will be nice to just have all these little medical bills out of the way so we can move on to bigger debt chunks.

3. Student Loan 3: $5,628- This is one of S' student loans we refinanced it together to get it out of default.  We have a set monthly payment for the next 3 years to pay it off but can throw extra money at it whenever possible to pay it off faster.

4. Credit Card 2: $3,975- This is a debt in my name and although it currently sits at 0% interest thanks to a balance transfer it will eventually start accruing interest at a ridiculous 15.4%!  We're going to try to pay this off fast but may need to do another balance transfer to get it done.

5.  Misc. small debts: $4,284- This is a bunch of small debts of S', currently none of them are showing up on his credit reports and they are not accruing interest so they have become a lower priority.

6. Student Loan 2: $21,100 and Student Loan 1: $35,230- Loan 2 is S' and Loan 1 is mine.  

New numbers: combined family debt

As I mentioned in my last post I am revising the debt numbers on this blog to add S' debts to the mix.  As we continue to take baby steps towards marriage and a combined financial outlook it was obvious that I can't just focus on my debt and ignore S' mountain anymore.  So drum roll please (and you might want to sit down for this)....

Here's what the debt load would have looked like two years ago if I had included S' debts from the beginning plus I added in the medical debt we just accrued from the birth of our twins:

Student Loan 1 (My fed loan): $38,339
Student Loan 2 (S' state loan): $21,719
Student Loan 3 (S' fed loan): $5,454

Car Loan: $11,684

Credit Card 1: $10,577

Credit Card 2: $3,635

Credit Card 3: $0
Misc. small debts (S' small debts in collections): $5,443
Medical expenses (This number may change since there's still a couple bills that the insurance hasn't processed): $3,672

Parents: $600

Total: $101,123

And here's were we are today:

Student Loan 1: $35,230
Student Loan 2: $21,100
Student Loan 3: $5,628

Car Loan: $0

Credit Card 1: $0

Credit Card 2: $3,975

Credit Card 3: $1,858
Misc. small debts: $4,284
Medical expenses: $2,565

Parents: $0

Total: $74,640

Paid off to date: $26,483 paid off + $108 in savings

So we have a long way to go but have already paid off 25% of the debt in the last two years!  Next steps are to come up with a debt pay off plan that equitably takes care of both of our debt loads.