You Can’t Drive Your House, but You Can Live in Your Car, and at Least Then You Won’t Have to Deal with a Property Appraisal
The final week of The $1,000 Challenge came the week of Christmas, thus introducing a new, short-lived holiday tradition. Besides the decking of the halls and the caroling of the choirs, I had the hassling of the mortgage. If that’s not part of your holiday observance, count yourself lucky. If it is, then you added the rare Christmas Eve tradition of listening not for the prancing and pawing of reindeer on the roof but for the call of the real estate appraiser.
That decidedly nonjoyous strain echoed as though on high because the last column in my cost-cutting series covered trying to refinance my mortgage. To make the project’s $1,000 goal, I was looking to slice nearly $170 out of the house payment, including insurance, taxes, and maintenance. Refinancing the mortgage seemed the best bet to save the kind of dough I needed to find. After all, housing costs are the top budget category for most families, soaking up more than a quarter of all gross income. If there was anywhere to save, I thought it ought to be here.
Maybe it was, but there was no way I was going to find out anytime soon.
Thanks to the mortgage mania that put us in the recession, all kinds of rules have been added to a simple home refinancing, especially the appraisal. My first step was to gather recommendations for local mortgage brokers. I found one that didn’t charge an application fee until an appraisal had been conducted, so that I wouldn’t waste $400 or $500 in nonrefundable application fees on top of a $300 appraisal bill if my home’s value didn’t qualify for a new loan.
I calculated that refinancing my 5.5 percent mortgage to 4.875 percent, and rolling the balance of a small variable rate home equity line, would have cut $113 from my monthly housing cost.
I badly need to score the savings, which would put me within 60 bucks of my $1,000 goal. So I got the mortgage broker to tell her manager to tell the independent third-party appraisal management firm to tell the independent real estate appraiser that I needed the appraisal before Christmas. They all put a big “rush” on the job—which was then scheduled to be delivered on January 4, weeks after my final column. That meant I needed to look elsewhere for the week’s savings.
My other housing costs didn’t offer much hope either. My insurance and taxes were already low, but I did cut the maid service to once a month, which saved $60. If I trained the dust bunnies to march in formation, I thought, maybe Mrs. Funny Money and I could charge admission, or even take the show on the road. That still left me with more than $100 to cut from my budget. I was going to have to keep looking—but where?
Freeing up cash
Since my budget-cutting experiment, interest rates have only gone down, thanks to our sucktastic economy and the weak “recovery” that continues to be hobbled, in large part, by the ongoing crisis of foreclosures and drastically lowered home values, which even in early 2013 remain off their peak by more than 30 percent in much of the country. That means anyone who bought a house after fall of 2003 probably owes more on their mortgage than their home is worth. (As of March, anyone in Metro Detroit who bought after the summer of 1996 has likely lost money.)
If you can swing a refinancing and rates haven’t risen too high, it can be worth it. With mortgage rates hovering around 3.60 percent during the first quarter of 2013, that left homeowners paying just slightly above the average annual 3 percent rate of inflation to borrow money for three decades. In other words, even at low inflation rates, in just a few years you’ll be paying back the loan with money that’s cheaper than it is today. The savings on a $100,000, 5.5 percent loan refinanced to 3.6 percent is more than $110 off your monthly payment, or more than $40,000 in saved interest during the life of the loan. Another reason to refinance is if you have an adjustable-rate loan. The rate may be less than the going rates on fixed-term loans now, but you’d be wise to refi and lock in a permanently low rate before your loan adjusts above the current low rates. Some adjustable loans will let you lock in a fixed rate at some point during your loan, so check that option first, since you’ll avoid the costs of refinancing. It’ll probably be quicker, too.
Before you refinance, you have to deal with two questions: Can you afford it? And, if so, can you qualify for a new loan?
Whether you can afford a refinance comes down to how much you’ll save and how long it will take for the savings to cover your new loan costs. The rules to keep in mind for a modern-day refinancing are simple: it should not lengthen the term of the loan; it should pay for itself in twenty-four months or less; and, other than loan fees, it should not raise your loan balance. Personally, I try to pay cash for the cost of refinancing rather than roll the costs into the new loan because I don’t want to add more debt and end up paying interest—no matter how low—on the refinancing charges for the next ten or twenty years.
So, get out your calculator and a scratch pad and . . .
Do the math: First, figure out how much you’ll be able to save, maybe using the mortgage and refi calculators at Bankrate.com.1 If you’re five years into a $150,000 thirty-year loan, the monthly savings on switching from a rate of 5.5 percent to 4 percent for the remaining twenty-five years comes to $93 a month.
Do some more math: Total up the fees and other refinancing costs and figure out your break-even point. If, using the example above, it costs $1,800 to refinance, you’d make your money back in less than twenty months. If it will take too long to recoup your outlay, look for a loan with no points and no costs. Your lowest-cost bet will often be to refinance with your current lender, especially if you haven’t had the loan for a long time. If the property surveys and other paperwork aren’t too old, some lenders won’t require new documents, which makes the refinancing process faster and cheaper.
Fix your rate: For most people, there’s no reason to monkey around with adjustable-rate or interest-only loans. Lower fixed rates virtually erase the “savings” from those kinds of gimmicky loans. The savings on a fixed-rate loan at 3.6 percent versus an adjustable mortgage at 2.68 percent where the rate is fixed for five years and then adjusts annually (a 5/1 adjustable-rate mortgage, or ARM) comes out to $72 a month. If that’s the sole difference in being able to afford a refi, then you might want to skip it. Even if you do recoup the costs in the first few years, you’ll certainly be paying higher rates when the loan starts adjusting after the initial fixed period. If, however, the increase is capped and you won’t stay in the house all that long (most of us move about every ten years, on average), then an ARM can work for you. Just be sure that you understand exactly how high your loan can adjust in any one year and during the life of the loan, and make sure it will be affordable at those levels.
Think long-term: Shop for a mortgage banker or broker the same way you shop for a mechanic: you need someone you trust who’s been in business for many years and will be there for more years to come. As I suggested earlier, try to find someone who will arrange to have your home appraised before charging a loan application fee. That way if the home’s value doesn’t qualify, you won’t lose the application fee.
An important step in refinancing is to avoid lengthening the term of your loan. If you’re already several years into a thirty-year mortgage, going back to start over with another thirty-year loan will add all those years of interest back onto your new mortgage. Even if your monthly payment is lower, your total cost is going to be higher. And because mortgages are front-loaded to pay mostly interest at the beginning of the loan, you’ll owe more on the balance of your refinanced loan after five years than you did on the original, higher-rate mortgage.
Assuming a refinance makes sense, the next step is to find out if you’ll qualify for a new loan. Lenders have drastically tightened up their underwriting standards since the bursting of the mortgage bubble, even insisting on radical notions like finding out how much money you make and whether you’ll actually be able to repay the loan.
The first step is your credit score. Anything around 720 (out of 850 points) or higher will get you the best rates, while anything below 620 means you’re unlikely to obtain a new mortgage at even the worst rates. You aren’t entitled to a free copy of your credit score, but you can get a free estimate on the Web. Bankrate.com has a good estimator,2 or buy your score from Fair Isaac Corporation, the folks who invented the credit score.3 Don’t go anywhere else, and don’t sign up for “free” credit monitoring or other services because there is no such thing, no matter what the singing pirates told you in that TV ad.
Your mortgage broker will, in all likelihood, run a credit score on you, too, and you should be wary of anyone who quotes you a set rate before at least asking about your credit history. If your score is marginal there are steps you can take to boost your score in just a few months. The biggest one is to make every single credit payment on time, since that counts for the biggest single portion of your credit score. You also can move around your credit card balances, raise your credit limits, and take other steps that will help improve this mystical, magical credit talisman. For more information, head back to the discussion of credit scores under “Insurance” in chapter 2 or get a copy of Your Credit Score, Your Money & What’s at Stake, by Liz Weston.4
The next step is determining whether you owe more on your home than its current appraised value. If the ratio of the loan amount to the value of the home is 80 percent or less, you’re a good candidate for a refi with lots of lenders, so go shop around. (Here’s the math: LOAN AMOUNT divided by HOME VALUE = your loan-to-value ratio.) If the loan-to-value ratio (or LTV, in mortgage-speak) is 97 percent or less, you may find refinancing available, but you’ll likely have to pay for additional private mortgage insurance. If you’re north of 100 percent and are current on your payments, your options are to see if your lender will refinance the home, or look to refinance under the Home Affordable Refinance Program (HARP). HARP, which started in 2009, got off to a shaky start, but it has been reworked to become HARP 2.0, which eliminated any limit on the loan-to-value amount. New legislation means more adjustments came to HARP in 2013.
The big drawback to HARP is that it covers only loans owned by the government-backed mortgage insurers Fannie Mae and Freddie Mac before June 1, 2009. (You can check your loan online at fanniemae.com5 or by calling 800-732-6643, or at freddiemac.com6 or by calling 800-373-3343.) A separate refinance program, called the FHA Streamline, is available for homeowners with FHA loans. If you don’t have a loan through Fannie Mae, Freddie Mac, or the FHA, still try local mortgage brokers and your own lender and servicer, since the policies and guidelines seem to shift every few months. You also should check with a HUD-certified housing counselor. You can find the list at HUD.gov7 or by calling 888-995-4673.
If you have a second mortgage, home equity line of credit, or home equity loan, that can complicate a refinance, since that lender will also have to sign off on the new mortgage. This is less of a problem if you have the equity loan with the same lender as the mortgage or if you have enough equity to refinance both loans under the new mortgage. Another option is to see if you can do the refi through the lender who owns the equity loan or second mortgage.
A final option for some homeowners who owe more than their property is worth is what’s called a “cash-in” refi. Instead of taking cash out of the home, you bring cash to the closing to pay the mortgage balance down to an acceptable loan-to-value ratio. This isn’t going to be the right approach unless you’ve got your finances in good shape, with no other major debt and a solid emergency fund. It can make sense if you’re on the bubble and just shy of getting down to a qualifying loan-to-value rate or if you’ve got a lot of cash sitting around that you’re sick of seeing earn practically nothing in a bank account. Cashing in is also an option to wipe out a home equity loan so that you can refinance the first mortgage.
Two final caveats: So-called no-cost refis aren’t free; they just charge a slightly higher rate to cover the closing costs. Also, a refinance that lowers your interest will also lower the amount of interest you’ll be able to deduct on your taxes next year. Don’t assume your deductions will be the same; check the interest using any online loan amortization calculator and see how that might change your tax withholding using the very nifty withholding calculator at IRS.gov.8
Making ends meet
First, look over all the elements of your house payment and see if you can lower or eliminate any of them. Typically, house payments include principal and interest on the loan, but also taxes and insurance, which you pay into an escrow fund. Even if you pay them yourself, insurance and taxes are still part of your overall housing cost. Start with your homeowners insurance. You can lower the deductible, eliminate some optional riders, and shop the policy around to see if you can save on the premium. Check to see if you got something like mortgage life insurance, which pays off the mortgage if you die. This is usually more limited and more expensive than buying good basic term insurance, as discussed in chapter 9.
The next step is looking at your tax bill. In the very likely event that the value of your house has dropped in the past several years, your municipality’s assessment of the value of your property should have been lowered, too, resulting in a smaller tax bill for you. But especially in hard times, local assessors may take a conservative view toward lowering assessments in order to keep tax revenue coming in. Procedures to challenge your assessment vary by state.
In Michigan, I go to a board in my town, and if I want to appeal their decision, I have a limited window to take it to a state panel. Some local tax specialists have made a practice out of handling these appeals, and I could hire one starting at $100. You’ll have to check with your local assessor and perhaps the state treasurer’s office to see how things work where you live. For the most part, it’s an investment of time, researching recent comparable sales in your area, and doing a little homework to submit an appeal based on what your property is really worth. Your final tax bill is based on a certain charge per each $1,000 of taxable value on your house, so you can calculate any potential savings with some simple multiplication. If you shave $20,000 off your taxable value and your tax rate (“mileage”) is $5 per $1,000, you’ll trim your tax bill by $100 a year (20,000 divided by 1,000, times $5).
Another mortgage option you can afford to dump, if you use it, is a biweekly mortgage program. These are programs that, for a fee, take half your mortgage payment every two weeks so that, by the end of the year, you’ve made twenty-six half-payments, resulting in an extra thirteenth full payment on your mortgage each year. This prepaying can knock several years off a thirty-year mortgage. But you can do it yourself for free, and you don’t need to tie up a big wad of your money every two weeks. Instead, put one-twelfth of your monthly payment aside in a savings account each month, and then send in the extra payment yourself when you’ve got a thirteenth payment built up. That way, you have the money available if you need it. Which, at this point, you do. If you were saving separately this way you could easily take the money out and stop paying into it each month. If you’re in a biweekly payment program and you cancel it, you’ll get more control over your monthly cash flow as well as cut out any fees you pay for the privilege of prepaying your own home loan.
In fact, you shouldn’t be prepaying your mortgage at all if you are barely getting by, have debt, have no emergency savings, or aren’t saving adequately for retirement. Prepaying your tax-deductible, usually low-rate mortgage is pretty much the last thing you should do if you have any other financial concerns. Partly this is because you lose the opportunity to compound investments for retirement. If you’re sending extra money to your mortgage that could go into your workplace 401(k) or similar plan and be matched by your employer, you could be losing out on free money from your employer match that will also compound over time. (Even if you don’t receive a match, you’re still missing the gains from compounding over time.) Worst of all, whatever money you prepay on your mortgage is tied up in your house, making it very hard to get at it if you run into financial problems, or impossible if you don’t have any equity.
You may be offered or decide to pursue a mortgage modification, which is where your mortgage servicer reduces your interest rate or, in rare cases, even the amount of the principal. While some servicers have their own programs, the big one is the U.S. Treasury–backed Home Affordable Modification Program (HAMP). However, if you apply, you need to be very, very careful. In my reporting, I’ve found many homeowners who ended up worse off because of HAMP, and many were pushed into foreclosure and ruined because of servicer greed and incompetence and pathetically poor government oversight. HAMP has recently been subjected to more rules, and the new Consumer Finance Protection Bureau has jumped in to rein in the worst mortgage-servicing abuses, but you should still proceed with great caution in pursuing a modification.
You can wind up with two problems, which occur during the “trial” phase of a modification, where your monthly payments are temporarily lowered. If you make them successfully, you are supposed to get your modification made permanent, but many homeowners get turned down, often because the servicer will make more money on a bad trial modification and a foreclosure. According to the Obama administration’s own statistics, more homeowners have been kicked out of “trial” modifications than have received permanent ones. (Housing experts estimate another 800,000 homeowners were improperly turned down completely, a lucky break for many of them who avoided the horrors of a busted “trial” modification.)
The problem is that during your “trial” payment period, your servicer is likely to report your payments as late to the credit bureaus, which is going to ruin your credit, especially when a “trial” stretches beyond three months to six months or even a year or more. The other thing is that when the modification is denied, the servicer can demand the balance of all your temporarily lowered payments, along with added fees and late charges. If you don’t cough up all that cash right away, the servicer can (and often will) initiate foreclosure proceedings. In some cases, the additional balance gets added onto the end of the existing loan term, still leaving you worse off than when you started.
The added insult is that applying for a HAMP modification isn’t easy. Servicers frequently lose paperwork, misdirect phone calls, fail to respond, give out incorrect information, and require multiple submissions of pay stubs, tax returns, and other documents. Much of it is handled by fax, phone, and express mail, since e-mail is unheard-of during the process. In some cases servicers “dual track” a loan in modification, meaning that they are seeking to foreclose or may have already started foreclosure even while “trial” modification payments are being made.
Some people, though, have gotten significant modifications, especially if they had high-rate mortgages to begin with. If you have the wherewithal to churn through the paperwork and red tape required for a modification, keep good written records and write down the full name of anyone you deal with and the date on which you talked. Send any documents by certified mail, and whenever you’re given new information or told to make a change, send a letter spelling out your understanding of what’s happening and what is being told to you by whom. Keep copies. As the process drags on, expect to send in new documents such as pay stubs and tax statements. If the ones previously submitted become outdated (usually more than ninety days old), the servicer may use that as an excuse to deny your modification, often without requesting newer ones.
If you get a “trial” modification, bank the difference in a separate account so that you have the money on hand if your “trial” mod is denied. Also, before accepting a modification, find out exactly how the lowered payments will be reported to credit bureaus and weigh the risk to your credit. Try to work with a HUD-certified housing counselor, and don’t listen to anyone who says that you must be delinquent on your loan to qualify, which isn’t true for owner-occupied homes. Starting out sixty days late when you request the modification is very likely to trigger the foreclosure process.
Pinching pennies so hard that Lincoln gets a headache
As discussed earlier, refinancing into a new thirty-year mortgage, even if you are already several years into your current loan, costs more in the long run and sets you back in building equity in your home. But, if you’re really pressed and a refi will significantly lower your monthly payment, it’s worth considering to get the short-term relief now. Later, when your financial situation improves, you can consider prepaying your mortgage principal to lower your overall interest cost and catch up on equity, if that’s appropriate. But first consider other options, even if it means leaving the home. If staying and refinancing does make sense, you’ll likely want to roll as much of the refi cost into the new loan as possible, but you’ll also need to come up with a certain amount of cash. Make sure you’ve got enough cash available before you start laying out money for application fees and other refi expenses.
Less expensive options for lowering your cost of housing include renting out a room, ideally to someone you know, such as a friend or the child of a relative attending school nearby or a summer intern from work. Just how and with whom you want to share your home is a very personal choice, but make sure you arrange this as a business deal first and foremost. Spell out all the terms beforehand and in writing and use a state-approved lease. Also try a short-term rental at first to see whether this kind of thing is going to be comfortable for you. You may also want to run a background and credit check on your potential tenants.
If you want to be strictly legal about things, income you get from renting your home is taxable, but you can also deduct a share of your mortgage, interest, and other housing expenses to offset the tax. You also need to check your local laws on renting, or at least gauge whether your neighbors will complain when you suddenly take a family of four into your spare bedroom. You should check with your insurance agent to make sure you’re covered and, if possible, have any long-term renters take out their own rental insurance to cover their own personal property and liability.
A more drastic option is to rent out your entire house while you move somewhere less expensive, such as in with a relative. This is going to be more complicated, and you may want to consult with a property manager who can handle the details, unless you really want to be a landlord, which you probably don’t. Depending on the circumstances, there can be significant risks and hassles involved in renting your home, not the least of which is that the rent you charge might not cover your entire monthly payment for mortgage, insurance, and taxes. But it is one way to hang on to a home that you can’t refinance until your financial situation improves or until the market value increases and you can sell or refinance the home.
Selling the home and moving to something cheaper is another possibility, but it also comes with its own set of costs and hassles, including cleaning up your home to make it marketable, finding a listing agent, and bearing the cost of finding and moving to a new place. You can try a short sale if you just want to get out from under a home you can no longer afford, which is where your lender agrees to let you sell the home for less than what you owe. This involves all the cost and hassle of a regular sale, plus more, which I’m sure is just what’s missing from your life.
It can take up to six months or longer to get your lender’s approval for a short sale when you finally get an offer. Also be aware that a short sale will significantly lower your credit score, so line up any new loans and living arrangements beforehand, since landlords will check your score before renting. A short sale is also likely to make it difficult to qualify for a new mortgage for the next several years, with a three-year wait after a short sale required to qualify for an FHA loan. Finally, a short sale doesn’t necessarily mean you don’t still owe the full amount to your lender. Unless you get a specific release for the deficiency between what was owed and the price for which the property sold, your lender may be able to pursue you for the balance for years to come, with interest added. In some cases, lenders have required sellers to take out a personal loan for the unpaid balance. Banks have become much more willing to consider short sales in the last few years, however, because it is better for them than having you default and let the house go into foreclosure. Before starting the process consult a real estate agent with considerable short-sale experience, as well as a real estate attorney experienced with short sales, to protect yourself against a really big claim later.
Whatever you do, don’t fall for one of the many schemes and scams that prey on desperate homeowners, where middlemen promise they can help you “save” your house. The legitimate ones are of dubious value at best, and many are outright scams. You should be especially wary of anyone who wants to take your payment instead of having you send it to the lender, as well as anyone who wants to be paid up front. Various schemes that promise to “wipe out” your debts are a fraud, and offers to buy your house and lease it back to you are very risky at best, and most are cons designed to take both your house and your money. Do not, under any conditions, sign over your deed or a quitclaim deed without talking to your own attorney first. For a list of home-saving scams, check out the warnings from the Office of the Comptroller of the Currency at OCC.gov.9
If your finances are really in turmoil, none of this may help, and you need to consider, rationally and dispassionately, whether you can realistically afford your house. If your income has taken a huge hit, you have no significant assets other than retirement accounts, and you’ve been unemployed for a long time, the prospects of being able to keep making your house payment are dim. If you are already behind on your payments, they’re even worse. But as bad as things are, you can get yourself into even more trouble by trying to keep your home.
Many homeowners, hoping that a miracle—or at least a job—will come through, drain their family resources to try and keep a home or struggle through a trial modification. That includes taking money out of retirement accounts or borrowing from relatives, often using up assets that can be protected in bankruptcy. The upshot is that struggling homeowners deplete all their resources and still lose their homes, leaving them with no money to find a new place to live and putting their retirement and future finances at risk.
If you cannot make your home payment, start with a certified debt counselor and/or HUD-approved housing counselor from the list at HUD.gov. Also contact an experienced consumer bankruptcy attorney, preferably one with foreclosure experience. You want someone who has been handling bankruptcies for years, not just a lawyer who switched over to bankruptcies when the economy turned sour. I’ve seen some terrible advice handed out by otherwise good attorneys who were inexperienced with personal bankruptcy and foreclosure. If your attorney thinks it’s okay, contact the mortgage lender or servicer, who may offer you “cash for keys,” paying you a few thousand to move out quickly and leave the home in good condition.
As difficult a step as this is to consider, make sure you weigh all your options before spending every last dime trying to hang on to what is, despite your understandable attachment to it, just a piece of property. Your long-term responsibility is to provide for yourself and your family. In Michigan, for example, foreclosed homeowners have a six-month redemption period after the sheriff’s sale of the property during which they can redeem the property if they raise the money. It’s also six months to stay in the home, save up as much cash as possible, sell off your appliances, and find another place to live. During this time, keep paying the insurance (to protect yourself) and the minimum to keep the lights, water, and heat on, save your money, and make your plans to move forward in life. It will be unpleasant, to say the least, but take comfort in doing the right thing for you and your family and that you certainly aren’t alone.
Boat and miscellaneous
The shortfall from my delayed refinancing meant I had to expand into some more budget categories. I scanned down to the eleventh-largest category of our family spending, which was the Funny Money family fleet. This amateur armada consisted of a thirty-year-old deck boat that was paid for but needed repairs all the time, often sinking the monthly budget. We had also been hanging onto its slightly older twin, which had died a year before but which, on the advice of our mechanic, Big Tom, we kept for parts.
You may not have a boat, in which case, good for you, because you don’t have to spend the last weekend in October sloshing around in borrowed chest waders pulling your dock out of forty-degree water because you’re too cheap to pay for a dock service and your wife insists on getting every last Indian summer weekend of use out of your vessel.
But certainly you will have expenses beyond your ten largest spending categories, so if you can’t hit your savings goal by cutting the biggest things, start looking through the less-big things in your budget. Maybe it’s a snowmobile, a recreational vehicle, or an expensive hobby (such as competing in extreme dog grooming) that involves equipment that regularly breaks down, blows up, or otherwise creates unexpected maintenance issues. Whatever it is, cutting out unnecessary expenditures and setting up a budgeted monthly amount for maintenance, improvements, and supplies can smooth out the unexpected expenses that will show up to sink your budget without warning
The first boating expense I could cut was paying to store the old boat, which had to go. The storage bill was paid until spring, and after that Big Tom and I would pull off the parts we wanted, scrap the rest, and sell the trailer.
I also need to budget more consistently for repairs. In the previous year, my boat-related expenditures averaged a surprising $244.38 a month, a number that included the dock fee and several trips to the mechanic that left me digging deep into my next paycheck. Instead of coming up with money each time the boat breaks down, it would work better to budget for repairs and annual fees, then set that money aside each month in a separate savings account. With a boat built in 1979, unused repair money won’t go unused for long. Any excess cash can build up from year to year to provide a cushion for occasions like last summer, when several fixes were needed. That way we can keep the aging SS Money Pit on the water without floating a credit card balance or sinking the family budget.
Making ongoing payments to a reserve fund for any kind of big annual expense, or to cover maintenance or repairs, is really a form of self-insuring for when the bilge pump breaks or when the boat prop and I manage to find that low spot in the channel with all the rocks (again). I averaged out the last three years of boat repairs, plus annual fees for docking and registration, and found that I could keep an adequate boat reserve fund going for $145 a month. (I guess I could call it a sinking fund, but that would just be tempting fate.) This produced savings of $99.38 and got me tantalizingly close to my final $1,000 savings goal—less than $9 short. So where else could I save?
Home maintenance
Back to the home front, it turned out that our monthly home maintenance and repair budget had also become inflated because, like the boat, there were a few big one-time expenses the previous year. Instead of the $100 per month we average in most years, the previous year worked out to more than $250 a month, boosting the repair and maintenance average over the past few years to $135 a month. Trimming that to $125 and accruing the difference in the annual expense/repairs account meant I could cut another $10 a month and still build an adequate reserve fund to cover big things.
The Bottom Line
Goal: $1,000
Week 1—Transportation . . . $41.61
Week 2—Miscellaneous . . . $132.89
Week 3—Utilities . . . $139.39
Week 4—Kid Costs . . . $114.50
Week 5—Work Expenses . . . $90
Week 6—Personal Spending . . . $104
Week 7—Entertainment . . . $108
Week 8—Life Insurance . . . $64.40
Week 9—Groceries . . . $37.23
Week 10—Housing . . . $169.38
Total monthly savings . . . $1,001.40
Wait—was I done? I’d made it—just barely—past the project’s $1,000 goal, but only by cutting into an eleventh category, including $60 cut from maid service, $99.38 from boat maintenance, and $10 from home maintenance. It brought the final week’s savings to $169.38, just enough to put me an entire $1.40 over The $1,000 Challenge goal. And I may have saved even more. Mrs. Funny Money and I still were waiting to see bigger savings on life insurance premiums, the new grocery shopping plan, and, if the appraisal ever got done, the eventual home refinancing.
I waited for the heavens to open and a choir of angels to beam down in a shaft of sunlight above my paper-strewn desk, strumming the “Ode to Joy” on their golden harps. Nothing. Not even the Tooth Fairy playing “Pennies from Heaven” on a plastic kazoo. Nonetheless, I breathed a sigh of relief. My editors breathed a sigh of relief. And Mrs. Funny Money—who had been oh, so terribly thrilled to have the details of our family finances spread all over the hometown paper each week—breathed a very big sigh of relief.
In a few months, all that extra breathing room in the Funny Money family budget was a lifesaver—and not just for me. The credit card balances shrank, the speech specialists got paid, and a weekend anniversary trip wasn’t out of the question. When a woodchuck burrowed under the foundation of the house, we could even afford to hire a “wildlife relocation specialist.” He set his trap, then returned the next day to find it occupied—by a raccoon.
“What do you want me to do with him?” the trapper asked.
I looked over the raccoon’s fat, furry haunches and tried to channel the spirit of Glemie Dean Beasley, Motown’s favorite raccoon roaster.
I called back to the kitchen, “Honey, what’s for dinner?”
“I’m getting a roast out of the freezer,” Mrs. Funny Money answered.
So I let the furry little bandit loose. As I watched him scamper off toward the lake at least one of us, I knew, felt like the luckiest critter in Detroit.