I changed jobs over a year and a half ago and I still have not developed a frugal lunch routine. There are certain characteristics of my job that force me to eat out more than I like.  At my last job, I always bagged my lunch or ran home for lunch every day. My former workplace was more structured and the people that I worked with had a high level of frugality. Much of that rubbed off on me. Since our move, I have not yet developed the discipline to make sure that I pack a lunch everyday.

Several changes have contributed to my “falling off the wagon” when it comes to lunch:

• When I first arrived, I was the new guy and everyone was always inviting me out to lunch with them and buying said lunch. Since then the “buying” has fallen off, but the “going” continued.
• I have found that lunch at my new job is an extension of work. Policy and procedures are discussed and formal work decisions are made. I think this is bad business, but I am not in a position to change this fact.
• My schedule at my new job is very haphazard. I seldom eat at the same time every day and I never quite know what is happening around lunch time.
• When we were struggling to sell our house, I quit keeping track of our budget, the news was too painful. Not knowing exactly where the money was going made it easier for me to just throw another five bucks on the pile.
• I am on the road more often at my new job and that Wendy’s Spicy Chicken sandwich is soooo good and quick and easy . . .
• The bottom line is that I broke my frugal habit and never reformed that habit in a new venue.

On Monday, I wrote about how often I waste one and two and three dollars on junk food and fast food. This is a habit that I am going to break. Over the past year, I started to purchase lunch three or even four times a week. I probably spent $80 to $100 on lunch every month. One day a week is pretty much a mandatory office event ($12), the other three ($5 apiece) are the result of sheer laziness and the fact that I love fast food. Not proud of that, but there you have it.

I rationalized this several ways. The primary being that I spend far less than my office coworkers on lunch during the week. They typically go to lunch four or five times a week and spend at least $10 per day. I don’t spend nearly that much and I make basically the same money . . . so I should be ahead, right? Not really. As I consider those that I work with, most are two income families and I am certain that most are carrying high levels of consumer debt.

I know better.

Over the past few months, I have slowly moved away from going out to lunch simply because I cannot afford the $10 lunches As a result, my coworkers no longer pressure me to go to lunch with them. I have successfully set the precedent that “Stew does not go to lunch” without offending. However, I still go out to lunch on my own and because I’m just a little cheaper – McDonalds instead of Chili’s, Wendy’s instead of Atlanta Bread, etc.  But I’m still spending $5 per day.

I decided that I have worked here long enough that if my boss needs me at lunch, he can ask me specifically. In which case, I will ask “If this is a job requirement, who is buying?” So far no one has asked – they probably like making decisions without me. I know that I miss some things, but not enough to spend $10 to $12 of my own money every day.

Here are my lunch resolutions for the rest of the year:

• I can go out to eat once a week with a budget of $12. I have learned that I have to go out to eat on Tuesdays or risk significant ill will.
• I have a refrigerator in my office, I need to make sure it is always stocked with good food.
• Other than Tuesdays, I need to bring a bag lunch.
• For half of the money that I am currently spending, I can purchase the fixings for a really good sack lunch
• The money I save will be used for debt reduction.
• My health should see a significant improvement.

Part of the reason that I am posting these resolutions here is so Mrs. Stew can read them and help keep me accountable. Furthermore, I need to buckle down and practice frugality in every part of my life again. I have done it in the past, but I need to continue that habit.

I should also mention that everyone of my coworkers were over budget in their respective departments last year. I was able to successfully balance the part of the company budget for which I am responsible. If I start bringing a sack lunch, maybe I can start to exert some positive peer pressure on those around me . . . while saving money . . . and losing a little weight.

Photo byVirtualErn

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I believe that God orders all events and this belief is a comfort, not a threat. Romans 8:28 says, “And we know that for those who love God all things work together for good for those who are called according to His purpose”.

So how does this affect my attitude toward money? There are hundreds of ways – we talk about the influence of faith on money all the time. But once in a while, we get a little comfortable and need a reminder that to trust in a high salary, a beefy 401K, or even in debt freedom for security is foolish. Those things are great, they are smart, but our ultimate trust must be in the One “who owns the cattle on thousand hills”.

Here is what happened last night:

We had just put the children to bed and Mrs. Stew and I sat down to review and revise our budget for the rest of the year. We had a lot of things to adjust since we recently sold our home (yay! more on that later) and Mrs. Stew is planning to work full-time beginning this fall. Ironically, we were looking at a great deal of good news – no more mortgage payment, no more home owner’s insurance, no more utility bills and hopefully more income. Easy budget to balance, eh? We were actually trying to see if we could make our budget work if my wife did not work outside the home.

It was almost like God needed to make sure that we were keeping Him in the picture because just then it started to rain softly, then a little harder. A couple of minutes and it really started to blow. Mrs. Stew looked out the window and remarked about the violence that was starting to build up. The weather forecast had barely mentioned rain, to say nothing of gale force winds. The lights flickered and I set down the laptop in order to peer outside when the noise made it obvious that this storm was growing. The weather seemed to be coming from the north; only our kid’s room and the front door face that direction. I did not want to wake my daughters so I opened the front door out of curiosity. I was slammed in the face with wind, twigs, leaves and hail – big hail, right through our front door. Even though the door is sheltered on three sides and covered, I felt like I was standing in the bow of a ship during a hurricane. The electrical power went out and I called to my wife to help me grab our kids out of bed and head for the basement. The noise of the hail on our roof, siding, windows and minivan was deafening.

After about ten minutes, the storm subsided and even though there was a prodigious amount of lightning, we thought it was safe to go upstairs and dig out our flashlights and light a few candles. Meanwhile, the rain continued outside accompanied by emergency vehicle sirens and beeping car alarms. I opened the door once again (some people never learn) to see almost six inches of hail covering the ground. It looked like a snow storm in July. Leaves, twigs and branches were everywhere – almost all vegetation in our yard was destroyed and there was a strong smell of evergreen in the air. The kids were pretty upset and took a long time going to sleep. My wife and I got up almost every hour to deal with a child or to check on the power.

Turns out that we got off relatively easily – no damage to our car (still can’t believe that). We were the only ones in our neighborhood who did not suffer a broken window. The roof seems to be okay. The only damage is the mess and a couple of kids toys in the yard that were pulverized.

Okay, so what does this have to do with personal finance?

During the entire episode, my mind kept going to the fact that we are so dependent on so many things that we cannot control. Just think about electricity for a moment – our society cannot live without it. We need it to cook, to preserve food, for the radio, television, internet, hot water, light, fans, air conditioning and more! It did not matter how much money we had to throw at the power company, we had no power over how long we would be without electric power.

How about shelter? Yes, we are fortunate to have a roof over our heads, but if that tornado had come through our living room instead of a couple blocks away, no amount of rent money in the world could have protected us.

What about health? If a health emergency had struck our family just at that moment, that best health insurance that money could buy would not have been enough.

Here is the point, we trust in money. We think it will bring us happiness, health, protection, security, but the truth is, money can not really do that. I know that not every person who reads this blog is a believer in God. No one here would ever compel you to do so, but I think it might be a good exercise for all of us – rich, poor, middle class, believer, non-believer – to spend a moment to consider “In what do I really trust?”

I’m not saying money is not important. It is and we must do all we can to handle this powerful tool with wisdom and discipline. But consider the words of King Solomon, the wisest and possibly the richest man who ever lived: “Trust in the LORD with all your heart, and do not lean on your own understanding. In all your ways acknowledge him, and he will make straight your paths.”

Are you trusting Him to straighten your path?

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Many of you are well aware of my travails regarding the home that we own in another state. If you missed those posts, you can read them here and here. Many of GLBL readers have been very helpful with your suggestions and if you happen to be struggling with decisions regarding your house, I encourage you to read through the comment sections on the aforementioned posts. They are a great resource.

I have been working diligently in order to figure out the best plan for me and my family. Over the past fourteen months, we have spent close to $12,000 in order to stay even with our payments, insurance, taxes, utilities and repairs.  Our savings is gone, our emergency fund is nil and I have cashed in about half of what little retirement we had put away. I am earning as much side income as I have time for and my wife babysits anywhere from one to five children (beside our own) everyday in order to make ends meet. At the moment, our credit is good and God has provided for our needs, but we are at the point where we are starting to incur major debt on behalf of this house.

Two weeks ago, I called the company who was holding our second mortgage to see if they would release the lien on our home and make the debt a personal loan. This would allow us to lower the price of the house to the amount of our first mortgage. I was surprised when they were unwilling to work with me – and the reason? Because they have insurance on the loan that does not payout unless I do a shortsale, default or foreclose! It is in the best interest of the company holding the note that a something bad happens to me and my family. Dead end.

So, three or four days later, I had made up my mind that there was nothing we could do other than just quit making payments on everything. We have no cash left. The only money in our savings account is from a 0% balance transfer that I did in March. Taking out balance transfer is not a strategy that I or glblguy recommend, but it was an emergency.

And then my realtor called.

Finally an offer

After fourteen months and fewer than six showings, a couple was about to make an offer on our home. As of today, we have an accepted offer on our house! The offer does not cover all that we owe, but the offer is greater than we ever thought possible even a month ago. Talk about the eleventh hour . . . The contract with my realtor was within a week of expiration, I had made the last payment that I intended to make, and there seemed to be no hope of avoiding a major financial calamity.

Now, there are still a lot of moving pieces that still have to fit together. The second mortgage company still has to approve the sale. If they do not accept our buyout offer, we are back to square one. The ironic thing is that if I was two or three months behind in our payments, it would be a cinch that the offer would be accepted. The fact that our loan is current means that the company believes there is more money to be squeezed out of us.

The buyer is not yet locked in, they are holding the earnest money until we find out what the second mortgage company will do. Furthermore, I am not sure of the state of their financing – it is possible that the bank can still refuse to fund their purchase. The buyer could still just cut and run at this point . . . stranger things have happened. This is not yet a sure bet.

Today, I am considering taking out a personal loan that will allow me to pay off the second mortgage on the date of the closing, this way the purchase will not be dependent on the accountants or actuaries employed by the lender. This strategy would also move up the closing date almost a month, which also reduces the risk that something might go wrong. We would be another $10,000 in debt, but at least we would no longer be home owners.

After the year that we have just finished, my faith in God is stronger than ever before and even without this offer to purchase, I do not think that I will ever doubt his hand of Providence.

Yet He keeps on giving.

Photo by goldberg

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I often read The Wallet at the Wall Street Journal. A recent article asked the question, What was your biggest financial blunder? I started to think through that question and I could not come up with the answer right away. But I thought through several possibilities:

Purchasing our house

My housing struggles are well-documented on this blog, but I don’t think that was our biggest financial blunder. We purchased the house for a competitive price, we spent some money fixing it up and if we still lived in it, I don’t think we would be having any problems keeping up with the mortgage. A bigger financial blunder might have been when we moved three states away . . .

School loans

This is a common answer to a question about the “worst financial decision” for many people. I earned my way through college and have very few loans  – less that $2,000 remaining. My wife, however, graduated with around $20,000 in school debt . . . so maybe my worst financial decision was in marrying her. Maybe, I said maybe!

I sure hope she does not read Gather Little by Little.

Using credit cards

Credit card debt has not been a problem for us. We use credit cards often, but we always pay off the balance every month. Our rewards credit cards have really been a boost to our budget. There are also certain budget categories where we do not allow ourselves to use plastic. So far, we have been able to stay out of trouble.

Purchasing Whole Life Insurance

I was once talked into a “whole life” type insurance policy, but I cancelled it after paying the $120 premium for three months. I lost my initial $360 investment and that was unfortunate. Whole Life Insurance was a luxury that I could not afford, but boy, some of those prospectus projections looked really good . . .

Not pressing for a bargain

This is a mistake I have made on several occasions, the most notably was when we purchased windows for our home. We badly need thermal windows for our house after we moved in. Our part of the country regularly saw temperatures in the -20’s F and the existing windows had been installed in the 1930’s. Our mistake was that we only heard a pitch from one salesman and then we purchased the windows for his first offer. Dumb, dumb, dumb! I often think about that day with regret, I really believe that I could have talked him down another $1,000 at least.

I learned my lesson when it came time to replace our roof, the winning bid on our roof was 38% of the highest bid! I believe that you can talk down almost any price, especially in this economy. Vendors are so desperate to make a sale that the last thing they want you to do is walk out the door.

Purchasing a minivan

Purchasing a minivan was not a mistake in the long run, but when our first child was born, we immediately ran out and purchased a minivan without stopping to think about whether or not we really needed one. In hindsight, the four-door compact car that we were using at the time would have been perfectly adequate for at least another four years – until our third child was born. A minivan was not necessary to haul around two car seats, but we bought into the cultural pressure that told us “parents need a minivan”. Furthermore, the car was just about paid off and we took on a loan for the minivan. Aaargh!

Hey, at least we did not purchase an Sports Utility Vehicle. But I know what some of you are thinking: Three kids in four years?! THAT was your worst financial mistake!

Photo by thomas pix

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Last week, I posted about our housing situation and a large number of you took the time to respond with your thoughts and advice. I enjoyed reading through the thread and many of your comments challenged my thinking.

We are good stewards for the most part

On the outset, I think it is important to state that I do not believe that the current financial pinch in which we find ourselves was the result of reckless spending or living above our means. It is true that my wife and I made some unwise decisions early in our marriage that have increased the pressure – for instance, I hope to never again take out a loan in order to purchase a car. But I think that the fact that we have stayed financially solvent for 14 months under these conditions speaks to our hard work, strategic planning, and the resourcefulness of my wife, especially as she tries to feed, clothe and otherwise care for three children on my below-average yearly salary. However, we are down to the bone right now; there are no good options left.

A debt is a moral obligation

As I read through the comments, I especially keyed in on the idea that one or more of my housing options might be wrong. Not financially wrong, but ethically wrong. Several commentators expressed the sentiment that a short sale, foreclosure or bankruptcy might have a moral component. Marsha said:

Personally, I have a moral issue with doing a short sale, default, or bankruptcy where it is not 100% necessary. I could be misguided on this point however – and it may be that the current economy will ultimately have an effect of recalibrating our financial morals.

The more I think about it, the more I agree with Marsha. I took out these loans, I signed the papers, I assumed the risk, therefore it is my obligation to do my best to repay the money that I owe. Otherwise, I become a thief.

Now, our culture (including me) have been softened to the idea of defaulting on financial obligations. Our country does not throw debtors into prison. I sometimes watch poker on television and if you dig a little, you will find that most professional poker players have declared bankruptcy – it is simply a part of their profession. In our country, there is a sense in which it is too easy to simply default on loans.

There is certainly a price to pay for defaulting in the form of a poor credit score and the inability to get credit, but that is a small comfort to the institutions that loaned the money in the first place. Every year, our government seems to make life easier and easier for those who are poor stewards of their finances – while individuals who practice frugality, industry, good planning and financial restraint are squeezed harder and harder because they are seen as being “lucky in life’s lottery”.

But just because our culture might not value one’s word, does not make it right for me to take the easy way out of my quandary. I am going to let biblical ethics guide my decision about my house. That does not mean that I might not still be forced to foreclose or declare bankruptcy, however I am going to resolve to fight harder, to be more creative and to do everything within my power to repay the money that I owe.

So here is my next step:

A short sale means that at least one of our creditors simply does not get paid, I hope to avoid that possibility, even if it costs me more money. Foreclosure and bankruptcy are also similarly problematic and even if we have to foreclose, I hope to still repay what I owe.

Therefore, my next step is to call my home equity loan company and request that they adjust my HELOC so that it is a personal loan without my house as collateral and ask them to lift the lien on the house – could be tricky. If that happens, I plan to call my first mortgage and ask them to accept the house itself as payment – otherwise know as deed in lieu. If my first mortgage refuses to accept the house as payment, we will attempt to find a renter – a strategy that will probably cost us more money in the long run but, a renter will buy us a little more time for the market to change or our financial situation to improve.

I will let you know how it goes.

Picture by woodleywonderworks.

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Adam and Dave were the best of friends.  They met sometime during middle school.  They lived in the same neighborhood, road the same bus, and had the same interests.  Both came from well off middle class families.   Their fathers even worked for the same company.

When they became of working age, they both obtained jobs and that is where one key difference emerged between the two of them.  See, Adam was a spender and Dave was a saver.  Turns out this small difference became a huge difference as they grew older.

Adam and Dave both worked hard, but Adam’s philosophy was: “I work hard for my money and I’m not going to watch it sit in some bank account.  I’m going to spend it and enjoy it.“  Adam measured his success by the items he owned.  Adam also enjoyed purchasing the very best.  A few years later Adam discovered credit cards, then he began purchasing more than he could afford and more than he had.  Adam had three different cars by the time he was 20, and purchased his first new car at the same age, a stripped Ford Escort.  A frugal purchase one might say, but not really.  See, by this time Adam was accumulating a large amount of debt, spending money on eating out, and on lots of things he really didn’t need.  Even the car payment on a Ford Escort was more than he could afford.

Dave on the other hand seldom ever spent money, and measured his success by the balance in his bank account.  Dave drove the same car all the way through to college until his senior year when he finally bought a new Honda Accord.  Dave paid cash.  Dave bought a really nice car, but one that would last and one that held its value.  Not so much a frugal purchase, but a smart one.  Dave drove that car for years.

Different Financial Blueprints

The Millionaire Mind discusses the concept of a financial blueprint.  A financial blueprint is what defines a persons financial pattern such as spending, saving, investing, and level of frugality.  This blueprint is often developed for you as a child through the influence of your parents, grandparents, and other adults.  Later in life, it’s influenced by your friends, classmates and co-workers.

As you can clearly see, Adam and Dave had very different financial blueprints and Dave’s obviously far better than Adam’s.

Many financial experts, web sites, and personal finance blogs focus on strategies for saving money through financial tips, budgeting, software packages, and many other strategies for improving your financial situation.  The fact is though, unless your financial blueprint is drafted well, you’re doomed for financial failure.

Think about it this way, if you were going to build a home and the blueprint for the home was incorrectly drafted or flawed in some major way, how would the house turn out?  Most likely, not well.  Your financial life is no different.

What is your financial blueprint?

While saving money, reducing debt, budgeting, being frugal, and increasing your income are all wonderful strategies for directing yourself towards financial prosperity, the fact remains that if you don’t change your blueprint you will never be fully financial successful.

A key step is to recognize your current financial blueprint:

• Analyze your spending patterns – Look back over the past few months or years and look at purchases you’ve made and items you’ve bought.  If you can, place dollar amount next to them and add them up.  I think you’ll be amazed at how much you’ve spent.
• Look at your role models – Think about the role models you had as a child and your current role models.  What were their spending and financial habits like?  How did their habits influence your current blueprint?  How is their financial situation now?

Recognition of your current blueprint is a key step to changing your blueprint going forward.  I might even suggest writing down what you want your financial blueprint to look like.  Place it somewhere where you can review it often and remind yourself of how you want to be.  Doing so will help keep you on course.

Back to Adam and Dave’s

As a result of their different financial blueprints, Adam and Dave’s financial situations turned out very differently as they became older, got married and had children.  Adam was constantly getting in more and more debt.  Dave continued to save money, live a frugal life, and pay cash for things.  Adam seldom paid cash for anything and used debt like it was going out of style.

Dave’s financial life, and as a result personal life turned out well.  Adam on the other hand was forced into have a major financial epiphany in his 30’s and is still digging himself out of his dumb financial situations and most likely will be for some time.

Who are you?

Are you Adam or Dave?  If you’re Adam, have you had your financial epiphany yet?  If not, now is the time.  If you’re Dave, good for you.  In either case, do you know what your financial blueprint is?  Is your blueprint building a strong financial situation, or one that will blow over with the smallest storm?

Luke 6: 47-49 -Therefore, everyone who listens to these messages of mine and puts them into practice is like a wise man who built his house on a rock. The rain fell, the floods came, and the winds blew and beat against that house, but it did not collapse because its foundation was on the rock. Everyone who keeps on hearing these messages f mine and never puts them into practice is like a foolish man who built his house on sand. The rain fell, the floods came, and the winds blew and battered that house, and it collapsed, and its collapse was total.

What is your financial blueprint?  How is your financial house built and on what foundation?  Don’t let the “rain, floods, and wind” blow and matter your financial house.  What are your thoughts?  Add a comment!

Photo by: hermzz

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The following is a guest from Shawna who writes at Two Working Parents.  I’ve been reading Shawna’s site for a few months now and enjoy reading her blog and invited her to write a guest post for me.  She graciously accepted.  If you enjoy the article, make sure you head over and subscribe to Two Working Parents.

For all of our lives, my husband, children, and I had lived in Michigan.  For the last 6 years, we lived in the Detroit Metro area.  If you’ve ever been to this area, you know that there is nothing to do, housing is relatively inexpensive, and winters are brutal.  Despite the fact that we grew up dealing with winter, my husband and I both hate snow and cold.  So, last year, we decided to do something about it.  We vowed that 2008 would be the last winter we would spend in the frozen tundra.  Then, I was blessed with a job transfer, and we moved to sunny California.

We now live in a suburb of Los Angeles.  We love where we live.  We are close enough to the city and ocean to go on a whim, and far enough away to feel safe and comfortable.  We are also within a few hours of snow, so if we got nostalgic or something, we could see that too.

Shock to the Pocketbook

Of course, the problem is that California is EXPENSIVE!  While my salary is higher than it was in Michigan, it barely covers the cost of living increase.  There are obviously some changes that we had to make to our budget, and some were more unpleasant than others.  The biggest, longest lasting, and least painful thing we did, though, was dropping our cable service.

Now, we have two kids and we are all big TV watchers, so this was a tough decision to make.  It took us about 3 months before we finally came to terms with the fact that we needed to do it, and another few weeks before it actually happened.  We cut cable in November, and honestly, rarely miss it.

Hallelujah Hulu!

We went out and purchased an expensive, top of the line antenna for the TV so that we could get the basic channels.  Turns out, because we are in a valley, we can’t get reception on an antenna or with the digital convertor box.  This was a bit of a disappointment, but we were determined.

I had read about Hulu.com on various PF blogs, and so I looked it up.  We can watch all of our favorite shows (with the exception of American Idol and So You Think You Can Dance….anyone know where I can get these???) online!  We did not cut our internet service because we both use it extensively, so this seemed like a perfect solution…except no one wants to watch TV on their computer.

Since we had to return the antenna anyway, we decided to do some research and see if we could hook our TV up to the computer so that we didn’t have to squint at the computer monitor from across the room.  Turns out, all we needed was a $15 S-Video cable.  My husband hooked the TV up as a second monitor, we use our computer speakers, and now we watch almost all of our favorite shows on Hulu.  The ones we can’t watch on Hulu, we can usually get on the network websites.  It is not any different than having a DVR.

What About The Kids?

A lot of the shows that the kids watch are not on Hulu.  We started using Nickelodeon.com to watch Spongebob Squarepants and iCarly, but that was a hassle.  The website is not as user friendly as Hulu.  So, for Christmas, we bought a ton of DVDs for the kids (did anyone notice how cheap DVDs were last Christmas?).  But, there is one more thing that really helps us with kids shows.

My husband started working at a video store!  He started working there part-time, but is now an Assistant Manager and is full-time.  The best perk of this job is that he is able to rent up to 5 movies per week…for FREE!  We get a few movies for ourselves and a few for the kids.  It works out great.  Of course, not everyone has the free time to get a second job, but if you are trying to cut your entertainment budget, this is an idea.

Can’t Wait For Summer

As happy as we are with all of our entertainment options, we are still looking forward to summer.  We really enjoy taking walks as a family, going for hikes, and going to the pool.  Being in Southern California, we could do this now, but because our daughter is in school, it’s tough to fit it in during the week, and our weekends are full with errands and whatnot.  I’m really looking forward to other free entertainment…the kind that doesn’t involve a big bowl of popcorn.

Photo by: Marshall Astor

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Last week we had a pretty major wind storm here in the NC mountains.  Wind storms aren’t unusual, but this one was much stronger than usual.  We awoke the next morning to find some of our outdoor furniture blown around, but everything else appeared fine.  My two older boys and I climbed into the SUV to head to the bus stop.  At the bottom of our street we found our metal street sign laying in the road.  We then proceeded on down the mountain.  As we came around a turn, we found a large tree laying across the road, no way to get around.

I love a good analogy and my wife and I were talking about bills and expenses the other night and I mentioned that it seemed like just when we got things straightened out, heading in the right direction or making good progress on our financial goals, something unexpected always seems to happen.  In other words, a tree blows down and blocks the road.

I am sure many of you can relate.  You realize your finances are out of control and decide to do something about it.  You read personal finance books, read personal finance blogs, and maybe even get some assistance from a counselor or coach.  You start your journey out great and make significant progress for the first two or three months and then…something unexpected happens.  Your car breaks down, the heating and AC unit on your home goes out, or worse you lose your job.

All of the sudden, you’re in a similar situation I was in.  You’re sitting in the middle of the road wanting to get where you need to go, but have this huge tree blocking your path.  I cannot even begin to tell you how many times this has happened to us since we started our journey to live within our means and get out of debt.  But what can you do?

What can you do?

The worst thing you can do is to not panic and not give up.  The best thing that you can do is know that these kinds of things are going to happen.  I don’t care how well you plan, how detailed you track your budget, how careful you are at managing your money and planning your life, life is going to through curve balls at you.  Expect them.

Expect the unexpected

Know that bad things are going to happen: Your car will break, your house will leak, things will fail and need to be replaced, and people do get sick.  Know and understand that through your financial journey, there will be some great times when you make more progress than you expected, and know that there will be other times when things go completely opposite.  I believe that God intentionally throws curve balls our way to test our faith and how we handle things and to make us grow stronger.  James 1: 2-3 says: “My brethren, count it all joy when you fall into various trials, knowing that the testing of your faith produces patience.”

Rather than viewing the “fallen trees” in your life in a bad way, view them as tests from God.  View them as challenges that you must pass, knowing that when you do your progress on the other side will be better and faster with the new knowledge and appreciation you’ve gained.

Have an emergency fund

Emergency funds get discussed over and over again on personal finance blogs.  Why?  Because they are the critical foundation of your financial journey.  Without one, handling those unexpected fallen trees in your life is difficult.  An emergency fund is the tool that allows you to handle the unexpected.

If you are starting off your financial journey, next to facing the person in the mirror, the most important thing you can do is establish an emergency fund.

Remember it’s a journey

Getting control of your finances and achieving those financial goals you’ve set out for yourself and your family isn’t a sprint.  It isn’t something that you will accomplish in a month 6-months, 12-months or even  a few years in most situations.  It’s a long journey, that honestly will continue throughout your life.  How many journey’s have you read about where the main character reached the end of their journey without a single hardship?  I’ll bet none.

Third Day, one of my favorite Christian bands says the following in their song Mountain of God:

Even though the journey’s long,
and I know the road is hard.
Well the one who’s gone before me,
He will help me carry on.
And after all that I’ve been through,
now I realize the truth
that I must go through the valley
to stand upon the Mountain of God.

So the next time a tree falls in the way of your financial journey, don’t lose hope, don’t give up, and don’t fall back into old habits.  Just remind yourself that I told this would happen.  The tree isn’t a bad thing, but just part of the journey.  Right now it’s a pain and is blocking your way, but with some hard work you can get it out of the way and continue your journey.  Once you get there, not only will you have made the journey, but you’ll have learned more due to the hardships you encountered along the way.

What trees have fallen in your personal finance life?  What stories from your life about unexpected events and hardships that you overcame can you share to give others reading this hope and understanding?  Add a comment!

Photo by: nick farnhill

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This is not a picture of the accident.  This one is actually far better than the one I witnessed.

Yesterday I had to drive to Charlotte, NC to run a few errands and pickup a couple of Christmas presents for our kids that we had stashed at my in-laws place.

About 10 minutes from home, I was heading east bound on I-40.  In front of me riding in the left lane, a car and in front of the car a Mercury Mountaineer  (SUV) pulling a medium sized camper (a 24 foot or so travel trailer).  A dump truck was in the right lane just ahead of the SUV.  As the SUV pulling the camper passed the dump truck, he began to sway.

If you aren’t sure what sway is, it’s the movement of a trailer in a right to left motion towards the back of the camper.  It’s very common with larger trailers or in trailers that aren’t being pulling by a large enough pull vehicle or that aren’t equipped with sway control.

The wind was already blowing across the freeway and that combined with the air coming off the dump truck caused the rear of his trailer to sway.  I watched as the small amount of sway slowly became worse and worse.  Being an experienced RVer, I knew the guy was in trouble.  I backed off quick, as did the guy in front of me and the man driving the dump truck.  We all watched as if in slow motion as the sway became worse and worse to the point of the trailer tires actually lifting up off the ground as it moved back and forth.

All of the sudden, the trailer swayed really hard to the left and landed almost perpendicular to the small SUV.  As the tires hit the ground, the trailer rolled over on it’s side.  The roll was followed by an immediate POP! which I knew right away as the hitch mechanism breaking.  The force of the trailer rolling flung the rear of the SUV around so much that I could see both of the headlights.  The tires then caught the freeway with a hard bite, and the SUV began to roll.  It rolled twice finally landing on it’s side.  The last roll dealt a crushing blow to the roof of the SUV, causing it to collapse down on the occupants.  I prayed nobody was injured, but felt sure with that impact at the speed they were going, we were going to find someone seriously injured or even dead.  I prayed still that there were no children in the car.

The two men in the car in front of me, myself and the dump truck immediately pulled to the side of the road.  I dialed 911 as I ran towards the vehicle.  The two men in front of me were already pulling the driver out.  As I waited for 911 to answer, I yelled “Are there any children??”  The one man replied “No, just a driver and passenger”.  I quietly thanked God.  I asked if they were ok, and he replied he thought so.

My attention went immediately to the travel trailer as they generally have two propane tanks.  All we needed on top of the accident was exploding propane tanks injuring more people.  The 911 operator came on.  I described the scene, location and told her to get fire, medic and police out there.  I hung up and removed the cover of the propane tanks.  The smell of gas hit me right away and I saw that one of the hoses into the camper was broke.  I quickly shutoff the gas. The battery lay in a heap just below the tanks.  I thought about moving it, but was concerned I would cause a spark, so I waited for the gas to disperse.

I returned back to the couple who was in the SUV.  Both were sitting on the hillside, obviously shook up but in really good condition.  The male drivers arm had gone through the side window and he had a pretty deep cut on his arm.  The female passenger had hit her head on the side window.  She had quite the “goose egg” on her head, but was talking and under the circumstances pretty calm.  I began talking to them, while one if the gentleman that had been in front of me wrapped the man’s cut with a bandage from a first aid kit.

The lady said she felt the camper start to sway, but the more her husband tried to get it under control, the worse it got.  She knew after the first 10 seconds that they were going to wreck.  She said when he hit the brakes is when everything went completely south.  He tried to slow them down for impact, but caused them to roll instead.  In my opinion, rolling was inevitable given their situation.  I found out they were husband and wife heading out on a trip to visit friends and family for Christmas.

The husband got up and walked over to what was the SUV, then to the camper.  He was very upset that they were all tore up,  I would suspect both were totaled.  I just told him that he should feel very fortunate they both walked out like they did and that as I watched, I honestly didn’t expect them to just walk out.  I expected them to be seriously injured or dead.  He said their seat belts saved their lives.  I agreed 100%.

At that point we were looking at the camper.  He had a load distributing hitch, but no sway control at all.  Load distributing hitches level the weight of the camper across the whole pull vehicle.  It avoids the problem of the vehicle looking like it’s climbing a hill when it’s really not.  Anti-sway while not fully removing the issue of sway, makes a considerable difference in preventing it.

While I certainly can’t say that had he had the hitch equipped with an anti-sway device the accident wouldn’t have happened, I can say that I’ve been in a very similar situation with the 34 foot camper we had and the sway control along with me being educated on how to handle a sway condition saved me.

Soon after the first responding officer arrived, and minutes later an ambulance, 3 firetrucks and at least 5 NC State police.  Myself an the other two men were asked to hang around for a bit to sign statements.  The couple was whisked off in the Ambulance a few minutes later to be checked out at the hospital.  I completed my statement, thanked all of the officers and fireman for their service and continued my trip to Charlotte.

I thought about the accident all the way home.  The whole incident was a reminder of how much more important your life is than your stuff.  While the man was upset about his SUV and trailer, I really don’t think he realized how bad the accident really was.   Him and his wife were very fortunate that day.  His trailer and SUV will be replaced, but their lives couldn’t have been.  It reminded me of how important my family and friends are to me along with reminding me of how quickly our lives can be taken away from.

Avoiding sway

Given my experience with RVs, I thought I would share a few tips on avoiding a sway condition if you pull a trailer:

1. Have anti-sway control - I don’t care how big your trailer is or how stable you claim your tow rig is, if you don’t have anti-sway control on your hitch set-up, you are risking your life and the lives of others.  Anti-sway control systems are inexpensive and just might save your life.  The accident I witnessed is proof of this.  Sway does happen and it can cause a serious accident.
2. Use an appropriate tow vehicle – I see far too many instances of people pulling large campers with too small of a tow vehicle.  Do your homework, understand the the specifications on your tow vehicle and buy the horse BEFORE you buy the cart.  DO NOT believe the RV sales people that say “No problem, your Yugo will pull that 26 foot trailer no problem”.
3. Give way when passing a large truck or vehicle – Large trucks disperse a great deal of  wind and air.  If you are pulling a trailer and need to pass a truck or large vehicle, give extra room between you and the truck.  Do not slow down as you passing either, instead accelerate.  Accelerating and pulling the trailer will minimize the chance of sway.  Anticipate the normal push/pull of the truck as you go by it.  Expect it and be ready for it.

Dealing with sway

Even the best camper set-ups can sway.  What may keep you out of an accident is knowing how to deal with it.  Let’s say you are pulling your camper along and begin to feel the rear of the trailer sway, here’s what you need to do:

1. Accelerate - I know this goes against reasonable judgment, but accelerating will pull the trailer in line.  In many cases this will cause the sway to go away.  Do NOT brake or slow down, it will make the sway worse.
2. Use your trailer brakes – Any somewhat large camper is required to have trailer brakes that are controlled from a brake controller in the pull vehicle’s cabin.  These controllers have manual brake buttons that will allow you to engage your trailer brake without engaging the tow vehicle’s brakes.  Accelerating and pressing the manual trailer brake button will even further reduce the sway.  Most of the time the combination of accelerating and hitting the trailer brakes will eliminate the sway.

If neither of these work and you are still swaying, than hold the manual trailer brake hard and begin slowing the vehicle down slowly.  At this point you are most likely in trouble anyway, so you want to try to keep the trailer from coming around on you.  Manually applying the trailer brakes will help to avoid this.  Slowly your vehicle down will minimize your speed in the event you are going to wreck.  If you need to steer, steer in the direction of the sway, not against it.  Going against it will just magnify the problem.

If you have an RV camper or a large trailer, I hope you never have a sway problem, but if you do, I sure hope my tips will help.  They would have helped the man and women that almost lost their lives yesterday.

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My wife and I just finished signing the contingency contract waiver on the new house we’re trying to buy. Oh wait, I’m getting ahead of myself. I haven’t updated you on the latest news.

On Sunday afternoon we received the call we had hoped we wouldn’t receive. The sellers of the house we a trying to buy in the mountains received another offer and accepted it. They now had a back-up contract and invoked the 72 hour kick-out clause in our contract. The seller’s seem like great folks and conveyed that they felt bad and really wanted us to have the house, but needed to sell it. I could understand that and appreciated their thoughts.

See, we signed a contract to purchase the mountain home that was contingent on the sale of current home. In order to get the sellers to accept a contingency, they wanted a kick out clause. A kick-out clause allows the seller to accept another offer if they receive one BUT we get 72 hours to respond and go into a non-contingency contract if we so desire. We had until Wednesday at 1:00pm to reply or the house would go to the other buyers.

Needless to say we were stressed. We had tons of questions floating through our heads: What if our house doesn’t sell soon? Can we afford 2 mortgage payments, and if so for how long? Even if we could, we don’t have enough savings to make the 5% down payment let alone the 20% we had planned to make with the equity from the sale of our home.

Options

We began to look at options. We had taken out a home equity line to pay for our house repairs. I was hoping the remaining balance coupled with the savings we had would cover the down payment. Nope, $3000.00 short and that didn’t include closing costs or moving expenses.

I then considered a bridge loan, but after doing some research decided not only would a bridge loan be hard to get right now, I just wasn’t comfortable. I really didn’t want to borrow money for a down payment nor to pay for closing costs.

I called the mortgage company that pre-approved me and asked if they had any options. They simply said no.  With the current foreclosure crisis they wouldn’t loan out more than 95% of the homes value.

We were becoming hopeless at this point. See, most people say to look at a home as a financial transaction, but this home we want is so much more than that. We looked at more than 20 homes in the area and didn’t really like any of them. The moment we drove up on this home, we knew it was what we had been looking for. It’s the right size, the right amount of land, far enough out of the city, but not too far, it even had a dedicated office area in the basement where I could work from home with no distractions, and the the price was right. This house is the beginning of our new life, me working remote, us living in the place we’ve always wanted to live and away from the rat race of the city.

In the past weeks while waiting on our home to sell, this mountain home had begun to feel like home. Our kids made plans for which rooms would be theirs, my wife and I discussed where we would place our furniture. I had figured out the ideal place to put my desk and computer in the office so I could see the beautiful mountain view while I worked and watch the kids playing in the front yard at the same time. My wife and I had even begun to look forward to warm cups of coffee in the morning while sitting on the front deck looking at the morning mist surrounding the mountains as the sun slowly rose from behind them.

401k loan

There had to be a way to make this work…then it hit me. My 401k. I could borrow on my 401k, which in all but a few scenarios I wouldn’t recommend, but in this case it solved the problem. I had enough in my 401k that I could borrow for a down payment, pay the closing costs and even pay to move us. I would have enough left over to even make a good year’s worth of house payments on our other home if I absolutely needed to (don’t worry, I’d rent it before I’d do that). I also felt better in using my 401k money as at least it’s my money. Sure it will hurt my investments and slow the growth, but honestly it hasn’t been growing a whole lot lately anyway. I’m also convinced we’ve got a incredible deal on this house and will walk into it with more than 70,000 in equity from day 1.

Given my real estate agent’s expectation that my house will sell very soon, the 401k loan would only be short term, as I could pay it off with the equity remaining in my current home. Problem solved.

Opps, have to get approved again

I called the mortgage company back and they agreed that it a good option and one many people used. I asked him why he didn’t suggest that, and he said they weren’t allowed to make suggestions like that. Down payments and how they were obtained were up to the borrower. He then explained that since I would be keeping my current mortgage, that I would have to be re-approved, since he approved me the first time assuming I would sell my house first. Okay, a bit of a surprise, but a reasonable one…

They called me back the next morning with good news, we were all approved! My wife and I having learned a long time back to not rush into decisions decided to wait until tomorrow morning before faxing in the contingency contract waiver. We wanted to make sure we weren’t making a stupid decision or one that may put our dream at risk.

Shopping around a bit

Using our 401k is of course a bit risky, but when talking to a friend this morning, she informed me of something that made me feel better about it. Bank of America has a mortgage program that allows a borrower to put down 5% with not requirement for PMI. They also pay all closing costs and have a rate less than my current lender. Within minutes I was on the phone making the application. I’m awaiting a call back from them. I don’t expect any problems, but it’s always so stressful when you’re waiting for a reply on an approval. Going this route would allow me to borrow far less from my 401k (5% down and save $2000 on closing costs) and not have to suffer the penalty of PMI which would be close to $200.00 a month.

I called Bank of America and spoke with them about the offer, turns out due to the recent mortgage meltdown, they now require 15% down and the interest rate is now higher on this plan due to the risk.  I ran the numbers, and looks like my original finance plan is the better overall offer.  Oh well, it was worth looking into.

We’ll be saving our money like crazy until we close on the new house, doing everything we can to minimize the amount we need to borrow from our 401k, but if the math proves out it just won’t be enough. But hey, I am willing to try. If God feed thousands with one loaf and 2 fishes, maybe he can turn my small savings into enough.

A leap of faith

For many reasons, some of which I can’t share, this move is incredibly important to my family. I think the risk is worth it.  My wife and I have prayed about this whole decision from the beginning. We’ve believed from the start that God was leading us to the mountains and would provide the means for us to get there. Now, that doesn’t mean this an excuse to do something stupid. I feel confident in this situation where I normally wouldn’t feel confident. For me, that’s usual a sign that God is leading the way. After you Father…

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