I Know What I Know

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Lately

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For the past few weeks I have been working pretty hard to get our financial lives in order. Things haven’t been too bad, really. Our finances have just not been where I want them to be. Over the past couple of years, I had snowballed us out of some serious credit card debt and was making good progress on the remainder of it. All of our vehicles are paid off (Shelley’s Jeep, my truck and my scooter). We just refinanced the house, moving it from a 5%, 30-year mortgage to a 3.5%, 15-year mortgage that we’ll likely pay off in 12 or 13 years because we make an extra payment a year. We were getting Shelley’s trust (long, long story) managed a little better, and as a part of that I have been meeting with a financial advisor to get the trust’s money under better management (basically, it just sits there and makes a tiny bit of money that is less than the horrible tax bill we have on it every year).

And then the plumbing happened.

We knew it was coming. We knew it the moment we bought the house. We knew it the first time a plumber sent a camera down our line and told us that we were going to have to fix this at some point.

What I hadn’t planned on, however, was how the plumbing bill financing would shake out. As we applied for the financing, I figured it would work like a credit card and we’d be picking up a bill of about $250 a month or so. That would have been manageable.

When I got the first bill from Wells Fargo, my jaw hit the floor. Our first payment, which was the minimum plus a little bit extra, was $450. FOUR HUNDRED AND FIFTY DOLLARS. The interest rate on the card was 0% for 6 months, and then—wait for it—27.99% afterwards.

I might as well have bought a BMW and buried it in my yard.

I called Wells Fargo and begged them to do something about this. They wouldn’t lower the payment. They wouldn’t change the interest rate. I even told the customer service girl that if they didn’t change this, I was going to pay this off in one payment and they wouldn’t make any money off of me. I said that if they would work with me, I would pay it off over time, and they’d make a nice little profit.

Nope.

Shelley and I talked a lot of about what to do. There were a bunch of options: we could sell off half our AAPL stock (this was the Friday before Jobs’s announcement over the holiday) and pay off all our debt; we could dip into the trust and do the same; we could apply for a HELOC and take equity out of the house.

I asked the finance guy what he thought, and he said that the HELOC was the best option, since we would get a little tax break on it, while with the other options we would be whacked on taxes. I called our mortgage guy (our finance guy is our back yard neighbor; our lawyer is our next door neighbor; our mortgage guy is two houses down), who ran the numbers and determined that a HELOC through him wouldn’t get us enough money.

So here’s what we did: we went in to our local bank and got a lien against Shelley’s Jeep. 3.5% interest on a 4-year loan. That paid for the plumbing. The monthly bill? $285, but paid bi-monthly, so it’s actually two payments a month of around $150. Much better than $450.

We then opened up a new credit card through the bank at 2.9% interest for 6 months (then 9% thereafter) and rolled all of our remaining debt into it. I don’t know what the minimum payment will be, but it will certainly be less than what we were paying, combined, on the cards we rolled into it.

Basically, on Friday, we completely remade our financial landscape. We traded a bunch of payments that had us chasing our tails for two modest payments that we will have no trouble paying off fairly quickly simply because of how much money all of this has freed up.

Now, I hate the credit card industry as much as the next guy. I think they’re awful. So I was happy to be paying off a bunch of debt. As we sat there in the loan agent’s office letting all of this sink in, Shelley started reading the Wells Fargo statement for the plumbing bill. She noticed something. She pointed to a chart on the back side of the statement.

It was an articulation of how much the interest charge would be if we failed to pay off the entirety of the bill in 6 months. This, I remind you, is the deferred interest on a $12,200 bill. Are you ready? Are you sitting down? You’d better be, because the deferred interest charge on $12,200 at the end of 6 months was going to be…

$6,107.

I mailed the payment for the plumbing yesterday. Once I get confirmation that the payment has been received, I’m going to take that Wells Fargo credit card bill out to the mound of dirt in the front yard that the plumbers left us with and I’m going to dig a little hole. Then I’m going to burn that Wells Fargo statement and bury it.

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Written by srogers

January 23, 2011 at 1:47 pm

Posted in Uncategorized

One Response

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  1. You should pee on it a little, too.

    tomorrow

    January 23, 2011 at 2:01 pm


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