Losing motivation in BS3 ... Arg

**Denvergirlie** · 12-05-2008, 08:49 AM

I am having some issues with losing motivation and gazelle intense on BS3.

I am halfway done with step 3 and will have a step 3.5 (house downpayment) as well so it's hard to stay focused when those numbers are so high. It's like starting over with BS2, but without the sense of urgency.

Debt free in September, then deceided to "go home" for thanksgiving... I messed up on buying the plane tickets, so actually had to buy another set of tickets, basically tossed $500 out the window by not checking the dates carefully before purchasing.

Then we made a $700 large purchase that we have always wanted but felt our hands were tipped to make the purchase sooner than later.

Now here it is December and we really want a flat screen TV before the digital transistion in February, our current TV is old and the volume is going out. I'm trying to be the voice of reason, but it is difficult and I feel like I "deserve" a treat... blah.

Of course my company just had two rounds of layoffs, I'm somewhat insulated as I am now the only person in my department, but nothing is ever 100% safe. Technically if things get really bad, I could get the axe and they could outsource my duties and honestly save money but it would not set them up for success in the long run, but it *could* happen.

Right now I am still planning on making my payment into my FFEF with the next check but temptation is looming. When I look at the $45K I need to save to be able to move onto BS4, it's becomes a bit overwhelming and I want to splurge just a little bit because it's going to take 2-3+ years no matter what. Argg...

Of course on top of all that we are going to be TTC in the next 2 years as well and my partner doesn't make a lot of money right now as he's actively trying to build a small business but ends up working it so much, there isn't much time left over to try and actually build the business.

Must refocus but it just feels even more overwhelming than BS2 felt.

**Greebo** · 12-05-2008, 08:52 AM

Does the $45k really represent 3-6 months worth of expenses? Because that means your mandatory spending - the stuff you HAVE to pay for each month - rent/mortgage, food, lights, transportation, etc., amounts to somewhere between $7,500 and $15,000 a month.

If you're spending that much each month, maybe you should reduce your lifestyle.

**Denvergirlie** · 12-05-2008, 08:58 AM

Originally Posted by Greebo

Does the $45k really represent 3-6 months worth of expenses? Because that means your mandatory spending - the stuff you HAVE to pay for each month - rent/mortgage, food, lights, transportation, etc., amounts to somewhere between $7,500 and $15,000 a month.

If you're spending that much each month, maybe you should reduce your lifestyle.

No, $5K would top off the FFEF and then be an additional $40K in step BS3.5 for a house/ land downpayment as we are renters.

**Greebo** · 12-05-2008, 09:09 AM

Originally Posted by Denvergirlie

No, $5K would top off the FFEF and then be an additional $40K in step BS3.5 for a house/ land downpayment as we are renters.

Ahhh - hmm. I'll have to check on that. I think "house downpayment" is actually part of BS 6, disconnected from the FFEF.

Nope - you're right (except in my reference its 3.2).
3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI.

Well - I can see it being discouraging - but my suggestion would be to save the FFEF first, then adjust your budget for "fun" items, so you can lighten up a little bit, and make a fixed contribution to the house fund as a slightly lower priority.

Now here it is December and we really want a flat screen TV before the digital transistion in February, our current TV is old and the volume is going out. I'm trying to be the voice of reason, but it is difficult and I feel like I "deserve" a treat... blah.

This is unnecessary, btw - you just need a $20 cable converter box.

**Denvergirlie** · 12-05-2008, 09:24 AM

Originally Posted by Greebo

This is unnecessary, btw - you just need a $20 cable converter box.

I know, but this TV literally isn't going to last that much longer. Is a new flat screen TV a need? Heck NO! Can we get by with a used TV that people are unloading on Craigslist, sure thing.

Is it a want? You bet.

I'm doing fairly well with not listening to this nagging voice in my head, but it is a bit more vocal these days now that we are debt free.

**Greebo** · 12-05-2008, 09:38 AM

Then put it in the budget!

You *are* debt free, after all. If TV.Priority > House.Priority, by all means, buy the freaking TV. But fund your retirement first, please!

**Denvergirlie** · 12-05-2008, 09:45 AM

Originally Posted by Greebo

But fund your retirement first, please!

Have already jumped ahead abit on that step.... 6% into 401K for 3% match... of course currently it's "lost" about 40+% on paper, but it is somewhat in place.
If I stopped it all together, take home would only be another $200 or so a month. $200 more a month ins't going to make a huge difference on our savings rate, would it make a difference in the long run, sure, but I got of of BS2 in 18 months without stopping it and stocks are "on sale" right now, thus it stays. (wow major run on sentance..)
I know it's not DR gospel, but this is personal finance we are talking about so I am okay with tweaking a bit since I literally only have like $10K now in that account and am closer to 40 years old, than 30 years old now.

Alas, TV is not more important than future house, but my inner child dosen't like that answer... it's being bratty, but I am the adult, I will prevail!

Just wondering how others that find themselves in this sense of stagnation have handled the temptation.

**Greebo** · 12-05-2008, 09:58 AM

I'd strongly urge you to up that retirement to 15% and then work on saving for the house.

This isn't anything I can remember Dave talking about one way or the other but my thinking is, houses can come and go, but retirement is gonna happen as long as you live long enough.

So I'd get retirement funded before working on buying the house. I think house purchase should be in BS6 anyway.

**frugalbabe** · 12-05-2008, 04:25 PM

Do you really need 20% saved? Yes I know that DR says yes however think about this reasoning for a second. We are currently buying our second home our first was purchased with a 30 year conventional. We have never had any late payments and we have great credit. So when we went to speak to our lender we weren't concerned about our credit but we did not have 20% to put down on a new home so I was expecting that to be a problem. However, we were informed that how the lending the process is now working is people are going through FHA loans that currenlty requires you to have 3% down in 2009 that will jump to 3.5%. You have to have excellent credit and solid employment and income verification for at least two years. Right now real estate is on sale and rates are dropping drastically the rates are sitting right around the mid fives right now. This may be the best time of all to buy a home, especially if you are debt free and if you are a first time home buyer there is a $7,500 tax credit incentive. Maybe just temporarily stop contributing to your 401K (don't cash it out just put it on hold) and put those dollars toward a home. My thinking is in 5 years our first home has gained $65,000 in equity my 401K has lost over 40%. Your home like your 401K is still an investment -- just another way to look at it!

**Greebo** · 12-05-2008, 04:29 PM

20% down means the lender won't require lending insurance (PMI or called something else in Canada) which in turn can save you something like $50 per $100,000 on your monthly payments, and can also help you negotiate better rates in some cases.

The $7,500 "tax credit" isn't. It's a LOAN. You BORROW $7,500 from the IRS as a tax credit and pay it back $500/year each year thereafter for 15 years. 0% interest, sure but its still a loan.

**Denvergirlie** · 12-05-2008, 05:21 PM

Originally Posted by frugalbabe

Do you really need 20% saved?

Yes, I really feel that we do need at least 20% down for several reasons:

1.) We don't want to pay PMI insurance
2.) We want to get the lowest interest rates possible and 20% down will help with that.
3.) We don't want to be one of those people that are in house trouble now because they really couldn't afford a house and went with non stable forms or too much financing or too high of interest rates
4.) We want to keep our mortage payments "reasonable" and financing more than 80% of a house would either increase our mortage payment out of that range or in order to get a payment in the range we are comfortable with put us in a less than desireable home.

There is a possibility that my partner might sell his business, that would net out with about a $30K walk away, but then he would be unemployed. As for being unemployed, it's not like he brings home a lot now as he's trying to build the business, but this scenerio is not something we are planning on. It is not the fall back plan, even if it does exsist on some level as a possibility.

**fixer** · 12-05-2008, 05:39 PM

I think that the cause of the mortgage mess is not requiring twenty percent down. I agree with what has been said before regarding the benefits. It also gives you equity in you home. If you should have to move shortly after buying, you will be able to sell the house and get out from under the loan. It also gives people an incentive from walking away. The have a skin in the game and have something to lose. These no down payment, interest only loans are a joke. You might as when be renting. With twenty percent down, you should never be upside down in your mortgage.

Regarding motivation, think of it as pulling a heavy load uphill. The first part is easy because you are not tired. As you get close to the top, it feels like it will never end. Then, you reach the top and suddenly everything is worth the effort.

**ladykemma2** · 12-05-2008, 06:59 PM

Originally Posted by Denvergirlie

I know, but this TV literally isn't going to last that much longer. Is a new flat screen TV a need? Heck NO! Can we get by with a used TV that people are unloading on Craigslist, sure thing.

Is it a want? You bet.

I'm doing fairly well with not listening to this nagging voice in my head, but it is a bit more vocal these days now that we are debt free.

i say go get the TV.

**frugalbabe** · 12-05-2008, 10:58 PM

Yep all good points, however if you live in an area where the houses are on sale than the PMI can go away in 12 months, that's what we will do. The house we bought was purchased at $260,000 but has been appraised at $315,000 so after 12 months that equity works for you. After 5 years of owning this home we have acquired $65,000 equity -- best investment we ever made way way better than our 401K that has been losing an average of $11,000 every 3 months. But like I said your credit and income have to be stellar and yes you have to be really disciplined...but there are deals to be had out there. And the Real estate world is upside down right now in that having 20% actually really doesn't affect your interest rate and with rates flirting with the 4% range it might be worth it. We would need over $50,000 for our home purchase we will have closer to $12,000 and we are looking at being locked in at 5.3. I commend you for doing so responsibly though if more people did that we wouldn't be in the mess we are in!

**mateosbaby** · 12-06-2008, 12:19 AM

I must add, if you wait 2-3 years before you have the 20% down, the housing market may have picked up by then, and that 20% down may only be worth 10% or possibly less for the exact same home. Yes, it's not fun paying PMI, but with these rates right now, it's almost dumb NOT to take advantage of them. However, if you're partner's business is in limbo right now, that's another thing to consider. How will you save money for anything (not to mention food/rent/etc) if he is suddenly unemployed? A lender is going to look at that, as well, so be careful with that.

Also consider that your first home oftentimes is not the one you will stay in permanently. Most first-time home buyers are looking for that cheaper house so they can start building equity. Some like to put work into it, some don't, but still it's usually a "starter house," not the "dream house." My husband and I bought our house in 2004 with 1 1/2 kids

thinking we would move in maybe 5 years or so. I am now pregnant with #4, and it's too small. It's been on the market since mid-summer, and no offers yet. The market is so saturated with houses, it's very easy to get a very good deal right now. My advice would be to save what you can, get his business stuff settled (and him a job, if need be), and see where you are in a few months. The market should pick up at least a little bit in the spring anyway, but the rates will undoubtedly still be nice and low and deals still to be had.

I'd get a cheap TV, btw, and skip the fancy-schmancy stuff. It's way overpriced still. I'll be looking at them in another 5 years when the prices drop down to "normal" TV prices.

My 2 cents.