This is part three of my series showing how we’ll pay off our second mortgage in the next year. Part one is here.

We live on our credit card.

Everything we purchase goes on it – even our utility bills — and we pay it off in full when we receive the bill each month. We’ve done this for years, and will all travel for free to Ft. Myers this winter as a result of the miles we’ve racked up.

But over the years, the monthly credit card bill has continued to grow. Just like everything in our budget, gradual increases have sneaked up on us – partly because of the cost of living and our growing family, but partly because we’ve gotten lax about our budget. I’m embarrassed to say that the monthly statement that would never reach $1500 per month with our young family rarely stayed under $2500 per month in the past few years.

I dissected the past year’s statements to figure out where the money was really going, and found that gas took up a large chunk (my husband commutes a distance to work) and utilities and groceries were another large chunk. The rest seemed to be a scattered array of whatever we decided to buy that month. Vacation and summer months were especially heavy on “whatever”. While there wasn’t much we could do about the gas and utilities, we developed a plan for the rest.

SHOP AT ALDI AND TRADER JOE’S
While I’ve always been a frugal shopper and created a weekly menu based on what’s on sale that week, nothing could prepare me for the incredible savings offered by Aldi. I easily save 25% off my groceries every time I shop there. If I do this even twice per month (the nearest Aldi is about 20 minutes from home) I figure I save about $60 per month -$720 per year.

My sister-in-law told me about Trader Joe’s too, which offers a more interesting variety, and discount prices on high quality food with no preservatives – often organic. I probably pay the same as I would at my local store, but I feel good about the product I’m buying, and I save at least 50% on wine if I buy any Three-Buck-Chuck:) I still buy meat at our local grocer, and fill in all the blanks at Aldi and Trader Joe’s.

EAT ALL OUR FOOD
Perhaps this goal became easier once our kids were older and regularly emptying the fridge, but I know now we make a point of using up our food before buying more. There were years when we never ate leftovers – the containers would grow mold behind the pickles until somebody threw them out. Now we consider leftovers a luxury – a freebie meal that we didn’t have to pay for or prepare. We also skip the weekly grocery run about once every two months, to force ourselves to eat what we have. This is rarely difficult – in an emergency we’ll stop at the gas station for milk.

Approximate savings – $100 every-other month ($600 per year).

SHOP LESS
I know it sounds ridiculously over-simplified, but the mere fact we’ve stayed home a lot has saved us untold hundreds. We don’t go to a store unless there’s something specific we need – and we try to put off that purchase until there are a few things on our list. We combine that with other errand-running we’ve postponed for a few weeks and voila – three shopping trips avoided. I figure we easily save $25 each time we don’t go into a store. Lets say $50 per month – $600 per year.

POSTPONE THE PURCHASE
Depression-era folks will say, “Duh!” But those of us who’ve raised families on credit have moved away from the notion of putting off a purchase until you have the cash. We’ve convinced ourselves that since we pay off the credit card bill every month, it’s like having the cash to buy the things we want. But it really isn’t the same. What we’ve discovered is that putting off a purchase until we have the cash gives us time to realize whether or not we truly still want it.

This is a critical lesson for our kids. My daughter made an impulse-buy of a Nintendo DS (she had the cash) because her friends had them. Now she doesn’t use it at all and knows it was a waste of money. How many times have we done this?

Another phenomenon I’ve noticed is that sometimes the item we crave will miraculously land in our lap and cost next-to-nothing, because we’ve mentioned we’re looking for one. This happens a LOT. I wonder how many times I bought something I wouldn’t have needed to buy – just because I was in a hurry?

Last month I was thinking we should take advantage of fall sales on patio chairs. But I decided to wait. And guess what? A neighbor put a set of six out next to the road for free.

Likewise, I didn’t rush out to buy a laptop after mine started to fail. It turned out my awesome computer tech guys fixed it by replacing a missing screw. (I am not making this up!!)

And the hotel room we didn’t book on Lake Superior we didn’t have to book, when my in-laws discovered they had an extra pull-out couch in their suite. We pitched in with steaks on the grill.

Hmmm. Makes you wonder, doesn’t it?

I would say this is easily a $50-100 savings per month in our household – $1000 per year.

TAKE A HIATUS ON IMPROVEMENTS
During the “upgrade years” it made sense that we spend a good chunk of cash on nicer things than we had. The now-threadbare couch we bought as newlyweds wasn’t high quality when we bought it, so you can imagine what it looked like after 10 years. And the 1970’s bathroom was, well, gross. Now, however we don’t really have that excuse. We have a comfortable home, newer cars and decent furniture. Could we find nicer? Of course. Is it necessary? Not at all.

Sometimes projects have to be done. But sometimes they don’t. Our current project hiatus includes putting off landscaping our house. The cedar bark around the perimeter will have to do for now – although we may plant a few bushes. Expense postponed – $3000.

SAY “NO” TO CRAIGSLIST
My husband’s favorite site offers a wealth of goodies. But just because the thing’s a great deal, doesn’t mean we should buy it. There are lots of them these days, and we can’t possibly pay for all the great stuff people are dumping. He loves to look, so that’s what he does. I’ve discovered my role is to just say, “No.” Unnecessary purchases avoided – $1000 per year.

SKIP A TRIP
I consider this a major sacrifice – far more than the material items – because I love traveling with my family. But since we are very focused on paying off this second mortgage, I know it’s just a short-term sacrifice. We’ve committed to continue with our annual winter pilgrimage to Florida, but have tightened the vacation budget, cut weeks to short weekends and skipped summer travel completely. Our school won’t have a scheduled spring break next spring, so that helps to focus our goal too. After we pay off this loan we can reconsider the travel budget.

Annual savings – $3,000.

The value of setting a credit card budget and living within it? about $10,000 per year.

What’s your secret to cutting the credit card bill?

MORTGAGE PAYOFF 101 SERIES:
Getting Started
Monthly Charges
The Credit Card
Sell Your Stuff
Lessons Learned

John Carter Cash’s book, Momma Loves Her Little Son, is a darling fantasy re-telling of a small but beautiful tradition between June Carter Cash and her son, John. Like the terms of endearment we use with our own children, this rhyming story tells the loving expression John heard every day of his childhood, “Momma love her little son.”

I personally love books that rhyme and this one does so in a musical way – which is not surprising with the musical talent behind the author’s lineage. Reminiscent of the story of th little nutbrown hare, the reader finds herself thinking about the depth and breadth of her love for her children.

Marc Burckhardt’s beautiful paintings illustrate each verse, realistically depicting the magical adventures of this mother and son. It will strike a cord with any reader who has or longs for a loving relationship with his parent.

From the publisher:
John Carter Cash, the only son of music legends Johnny Cash and June Carter Cash, shares a lyrical story inspired by the intimate words his mother shared with him as a child. In Momma Loves Her Little Son, the first children’s book from this author and five-time Grammy Award-winning music producer, little ones are swept away on a magical adventure over mountains and skyscrapers and through forests and streams in a tender and joyful celebration of the enduring bond between mother and child. Illustrated in Americana art style by Marc Burckhardt, the picture book is an expression of love between a mother and her son, which comes to life in vibrant simplicity.

In Part One of Mortgage Payoff 101, I explained our family’s goal of paying off our second mortgage within the next 12 months.

In this second part of the series, I’d like to address one of the principles that has helped us to make this goal a very real possibility – evaluating monthly charges.

I discovered we needed to look at every monthly expense. When I did so, I found easy cuts. Although $20-30 doesn’t seem like much, calculating the cumulative expense over twelve months gives a more honest account. A double-digit expense in a month easily turns into triple digits in a year.

Cable/satellite TV
We had pay-TV at two places (house and cabin). When we quit both, it was a nice bump in the budget, even after purchasing roof antennas. Although I was nervous about this change- expecting Disney withdrawal — our family never missed it. Here’s the article I wrote last year, as we learned to quit cable. Easily a savings of $50 per month ($600 per year).

Unused cell phone minutes
Every family has different needs, but if you research your statements, you’ll be able to determine how many minutes your family actually uses. Although nobody wants to accidentally go over on minutes, paying an extra $10-20 per month for minutes you don’t need is foolish – and adds up to hundreds over the course of a year.

We’re also considering canceling our second line after the AT&T contract is up the end of October. My husband’s reception is poor on the way to work, anyway. That additional line costs us $30 per month – $360 per year. And we may try to negotiate with our current provider or another one – who knows what kind of a deal I could get if I play my cards right.

Similarly, our savings was in not purchasing a third phone contract. We decided that at whatever point our children “need” a phone, they’ll pay the extra charge themselves, out of their own allowance. Even inexpensive add-on contracts that cost only an extra $10 per month turn into an additional $120 on your annual budget.

Network connection on my Blackberry
In the past, I considered the ability to access email on my phone an absolute necessity, but after I started bringing my laptop (with wireless Internet) on trips, I discovered I didn’t need that access on my phone. I cut the network access and discovered I appreciate the fact I’m no longer distracted by the constant buzzing on my cell phone. Savings – $30 per month ($360 per year).

Voicemail and other hard-line extras
Sometimes the bundled services are a better deal, but often they’re not. I chose to skip the $7 additional package on our phone service, required in order to have Voicemail. Although it seems like a miniscule savings, it does add up to $84 in a year. Most people call my cell anyway, and this way I don’t have so many phone calls to return. If we feel the need to record messages in the future, we’ll get an answering machine.

Scrutinize your credit card statements
I discovered (and canceled) a recurring $15.99 charge on our business credit card, six months after it started. Apparently I’d signed up for a free one-month trial at stamps.com, and they’d begun charging me thereafter, even though I’d decided to never use the service.

Refinance Your Mortgage
When the rates were really low last winter, we refinanced at a cool 4.5%. I don’t know that we’ll ever see those rates again, but if you do the math and you can recoup the refinance charges within a year (because of the lower payments), it can be worth it. We also took a leap and went to a 15 year mortgage, when we’d amortized at 30 years previously. Although our monthly charge went up by $400, we thought our budget could handle it. Over the course of the mortgage, we could save $75,000.

Direct Deposit into Savings
I also started to automatically direct $300 from my paycheck into savings. Initially this was just an arbitrary amount that I hoped we could save – knowing I would still have access to it if necessary. As it turns out, it was reasonable if I treated it like just another monthly expense. And it kept us from re-spending what we’d just saved in the cuts mentioned above.

Just these considerations alone save us more than $1,500 per year. Small monthly savings seem much more significant when you add them up over the course of 12 months. This savings alone was the equivalent to more than 2 second-mortgage payments.

See you next week for part three in this series – the credit card bill.

MORTGAGE PAYOFF 101 SERIES:
Getting Started
Monthly Charges
The Credit Card
Sell Your Stuff
Lessons Learned

When we moved to our current school district two years ago, we bought a house there, without selling the previous one. This meant we ended up with two mortgages – one humongous and the other on a 10-year track to payoff. This necessitated the serious need for a budget.

We’ve always considered ourselves pretty frugal – almost always eating at home and buying our school clothes at high-end garage sales. We never carry credit-card debt – unless it’s a short-term, zero-percent offer at Menards. We’re big on getting a great deal – and usually that means buying pre-owned. But over the years expenses got away from us. When when we had low monthly expenses and almost no mortgage, our budget could handle the kind of discretionary purchases and travel we’d become accustomed to. But that’s all different now.

MAKING THE PLAN
A year ago, I started taking a careful look at our budget. I set up an Excel document and added the real charges we paid throughout the prior 12 months. This gave me a realistic look at utilities, seasonal expenses, gas, groceries, travel costs, and our sneaky credit card bill. The Excel program allowed me to create columns that automatically add themselves, so as I replace budgeted amounts with “real” figures, it recalculates it for me to see if we’re still on track.

It feels strange to talk about our family’s finances, and many of our “numbers” I won’t share, but I think it’s important to explain the areas in our life we’ve identified as “belts that could tighten.” If you’re from a similar middle-class life, you might find that cutting down on these areas in the budget could help you as well. I will add the disclaimer that we’re fortunate in that beyond the two mortgages, we don’t have any debt.

BELIEVING IT
Before setting these budget changes, our family had no idea we could pay the second mortgage down quickly. The act of making the pay-down a priority is what made the difference. Now 12 months after implementing our new monthly money goals, the progress we’ve made shows we could possibly pay off our second mortgage a year from now. It would take continued focus, but I truly believe it is possible.

In this series of articles, I’ll address the ways we changed our budget – and with any luck, in one year we’ll be celebrating the payoff of our second mortgage. Please read on in the weeks to come – I hope our efforts help others as well!

MORTGAGE PAYOFF 101 SERIES:
Getting Started
Monthly Charges
The Credit Card
Sell Your Stuff
Lessons Learned

This month’s Positively Speaking column has been published, and I discuss the issue of bullying. Parents can have more impact than they think.

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