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  • The Effects of Becoming a Work-At-Home Mom: Refinancing Our Mortgage Again

    Early last year, we refinanced our mortgage because rates had gone down enough that we were able to get a rate that was 7/8% lower. This time, we will get a rate that’s another 2/3% lower, so we’ll be at 4.125% (I’m hoping that it will be even lower by the time we close, though I don’t think that’s going to happen).

    The last time we refinanced, I was all about saving money and lowering our overall payments. But back then, I didn’t foresee myself no longer working at this point in our lives.

    This time, I am all about the lower monthly payment. After all, I’ve quit my job and make a miniscule fraction of what I used to make.

    We can certainly continue to make our monthly payment now, but I like the wiggle room that a lower monthly payment will give us. And we’ll continue to pay extra on the mortgage, just not as much as we used to. We may, in the long run, end up paying more for the house than we would have if we hadn’t refinanced. But we’re confident it will be worth it – I am so much happier now than I was when I was working full-time, and I think that as the kids get older, I’ll be even happier that I am around a lot. I’ve always wanted to have the house that the kids hang out at after school, so I know what my kids are doing.

    I have to admit though, that I’d forgotten how much paperwork is involved in a refi. And, I’m waiting for the appraiser to arrive right now!

    Is a law degree worth the cost and risk?

    As a lawyer, I follow the legal industry, and my favorite legal blog, Above the Law, actually bills itself as a “legal tabloid.” One constant theme is how much it sucks to be a lawyer right now, especially an unemployed one. And another recurring theme is how much it sucks to be a law student right now, with worse employment prospects than the fourth-year associate who just got laid off. Here’s a recent example: UCLA School of Law (arguably the most prestigious law school in LA) recently sent around a job listing to students that was for the position of chauffeur to an entertainment lawyer, the pitch being that you could talk to him about his job while you were driving him around to his various appointments. At least when I was a student, the law school tried to help students get hired as law clerks or externs doing real legal work.

    Last week, Above the Law discussed whether a student entering his second year should quit before incurring more loans. (The gender of the student isn’t disclosed so for simplicity, I’m going to assume he’s male.) The student in question goes to a top eight school, has decent but not stellar grades, thinks he would enjoy public interest law, already has $70,000 in student loans, and is convinced he would graduate with $170,000 in debt. The editors gave the pros and cons of staying in school, but I thought what was really interesting was what was missing from the discussion: deciding whether you really want to be a lawyer and if so, how to make it happen.

    For example, if the student really wants to be a prosecutor or legal legislative work, then continuing with law school is the only way to make that happen. Or maybe he really wants to be an entertainment lawyer – he’s still going to need that law degree. The fact that he is at a top law school indicates that he is bright and is likely to pass the bar exam, be considered for interviews, etc. Especially if the student is willing to relocate for his dream job, then I think someone bright enough to go to a top law school would be able to get the position. At the very least, he will be able to get some position in his chosen field.

    That leaves the money question. Crystal at Money Saving Mom often writes about how her husband was able to make it through law school without incurring any debt, but I don’t think that’s realistic for most people. Tuition and fees at the law schools in Los Angeles is about $40,000 per year. I don’t know if it’s even possible to come out completely debt-free if you go to a relatively respectable school and don’t have a whole lot of money coming from somewhere other than loans, such as savings, a spouse, or a job.

    Speaking of a job . . . that’s something most law students don’t have, and understandably so. I didn’t, for the first two years of law school. First year grades in particular are so important that most students don’t want to have distractions from studying. But the student we were discussing is already a second-year, and could conceivably hold down a job if he was serious about limiting the amount of debt he graduates with. Even ten hours a week would bring in some income.

    And of course, there’s the big one – lifestyle. To be honest, back when I was in law school, I didn’t have a full grasp of what it means to live within one’s means. And most of my peers seemed to be the same. But a frugal lifestyle could significantly reduce the total amount of loans at graduation.

    Just as important, a frugal lifestyle after graduation will ensure those loans are paid off relatively quickly. Most loan programs allow for 20 to 25 years to pay off your student loans. But if you follow the proven debt-reduction techniques like the debt snowball, you can cut that time by half or more. These are all things that should be taken into consideration when deciding on a future career path, whether it’s the law or something else.

    Midday Coffee: All that loan interest adds up

    All Financial Matters crunches the numbers on a car loan and shows how you can end up paying $7,000 in interest on a $17,000 loan (yikes!). Stories like this make me very happy that we’ve paid off both of our cars and are setting aside money each month so we can pay cash for our next car. Of course, the loan that AFM works with has a 12% interest rate, while the interest rate on our two most recent car loans were under 3%. So even if you can’t save enough to pay cash, just having an excellent credit rating can save a few thousand dollars.

    Become a Facebook fan of Libby’s and get a free can of Libby’s Vegetables. Offer expires 5/15.

    If you live in Ada County, Idaho, A Thrifty Mom explains how you can get free insert coupons.

    Get a printable coupon (pdf) for $1/1 Nexcare bandages. MoneySaving Mom explains that this coupon is legitimate despite being a pdf because it’s hosted on the manufacturer’s website.

    Get $10 off a $10 purchase at Crabtree & Evelyn with code MOM210. Go through a cash back portal to get some of your money back. Big Crumbs is giving 8% back, Shop At Home (affiliate link) is giving 7% back, Upromise is giving 4%, and Mr. Rebates (affilate link) is giving 3%.

    Going Concern offers some suggestions for polishing your resume. Their tips are specifically geared toward accountants, but are generally applicable to almost everyone.

    I Heart Wags has coupon match ups for this month’s “suggestive sell” items at Walgreens – cashiers/stores that sell a lot of these get some kind of recognition, so if you like your cashier and/or store, buying these can help them out.

    Moms Need to Know reports that the General Mills manufacturer’s coupons on the Target web site print without the dreaded “Do Not Double” instructions at the top.


    Banner via Escalate Media Affiliate Network

    Medical Bills & Personal Finance

    I just re-read an old post from October 2008 about the impact of medical debt on some families. Back then, I didn’t have any experience with huge, and most importantly, continuing, medical bills. The biggest medical bill I’d ever paid was for giving birth.

    But then we had our family medical crisis earlier this year, which involved multiple emergency visits, a hospitalization, and then numerous follow-up visits and tests. As the bills rolled in and added up, it was overwhelming at first, even for me – and I had money in the bank to pay all of the bills! It was just difficult to accept that we suddenly owed so much money to a handful of medical providers. (Fortunately, the big bills have been paid and it’s just the bills from the follow-up visits that are trickling in – and those are for perfectly sane amounts.)

    The experience gave me some insight into how scary it must be for people who don’t have an emergency fund. The medical bills add up incredibly quickly – I now understand how people who were living within (but not necessarily below) their means can so quickly end up deep in debt. I can now see how, if you don’t have much savings or insurance coverage, you can blow through the savings you do have, find yourself having to choose between paying the bills you’ve always had or the newly arrived medical bills, and eventually end up without a home.

    The lesson here, of course, is that your best shot at weathering the storm is preparation. Get health insurance. Do the research to find the most affordable plan with the greatest amount of coverage. And live below your means and build up your savings. Have enough to cover your annual deductible and maximum copay. And most of all, do your best to take care of your health because man, those medical bills are expensive!


    Banner via MySavings.com

    Re-thinking the Mortgage Payoff Plan

    On a day-to-day basis, I tend to focus on the small picture: save a few dollars on milk and cereal, buy the boys’ clothes a year ahead on clearance, pay insurance bills in full to avoid the installment plan “convenience” fee, etc.

    But lately I’ve been thinking more about the big picture: our long term goals, what’s likely to happen in the next five to ten to twenty years, and especially, how do we balance liquidity with paying off the mortgage?

    While both Marc’s and my jobs seem secure for the moment, we are definitely not immune to the economic crisis that our country – and particularly, our home state of California – is weathering right now. We could be hit by pay cuts or layoffs, a steep decline in the quality of our local public school, or even a medical crisis or something unpredictable.

    Pay cuts or layoffs are unlikely but not impossible or even improbable. One of my best friends and her husband were both laid off earlier this year and just found jobs after months of searching. It was stressful, to say the least, but they survived as well as anyone could due in large part to their conservative spending habits and savings. We want to be in the same position, just in case.

    Additionally, you may recall that I’ve spent much of the last two years researching public and private schools in an effort to determine where to send Alex next year. I was pleased to discover that our local public school is at least as good as any private school that we could afford. But of course, whether the public school is able to maintain its high standards in the midst of this recession remains to be seen. Class sizes are increasing this coming year. The school board has approved a three-year plan to eliminate full-day kindergartens and all arts and music programs, cut salaries by five percent in 2011-2012, and require furlough days. Governor Schwarzenegger wants to “suspend” mandatory school funding. I’m cautiously optimistic that because our public school seems to have a committed administration and an active PTA, it will be able to adjust to these restrictions without a loss in quality. The PTA, if it is able to raise enough money, can provide funding for supplemental arts and music programs, for instance.

    But, who knows what the situation will be in a year or two? It would be nice to have the option of sending the boys to private school should that become preferable.

    It would also be nice to pay off the mortgage in six years, as we’d originally planned. But sometimes it’s necessary to strike a balance.

    For the time being, we are splitting our debt snowball and directing half to our mortgage and the other half into savings. I created yet another subaccount at ING to keep this money separate. My thinking is that we will re-evaluate every six months or so, and if things look good, we can make a large principal payment on the mortgage that will keep us on the path to full repayment in six years. On the other hand, if we feel like hoarding cash, we can do that too.

    This plan worked well for us when it came to paying off my student loans – and in fact, we did that a few months earlier than I’d anticipated. So hopefully things will work out that well when it comes to the mortgage too.

    Previously: How I’m paying off my student loans

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