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Inside Look: Samantha’s Money (Is She Crazy?)

by J. Money on Wednesday, August 29, 2012

samantha's money

Back by popular demand, I present to you another “Inside Look” at a reader’s finances!  Woohoo!  Ever since posting George’s budget up the other week, I’ve been getting handfuls of emails for us to review and I think it’s all just fabulous. Looking at others’ finances is what got me hooked on blogging in the first place! And the reason I keep blogging about my net worth updates too :)  I was addicted to Jonathan’s posts over at My Money Blog and figured I’d carry on the tradition when I started mine 4+ years ago… So I’m glad y’all like this stuff!

(A quick note to everyone who’s submitted their numbers to me so far – it’ll take me a while, but I plan on using each and every one of them so thanks for sending them in!  I’ll do my best to feature them as soon as I can, but it may take a while :))

But today belongs to our new friends, Samantha and Chad.  Who says all her friends think they’re crazy for the way they’re handling their finances right now ;)  Here are their stats down below, what do YOU think?

Me (age 29), Him (age 30); no children or plans for any.
Assets:
Emergency Fund: $10,000
Other Savings: $8,000
ROTH IRA (his): $8,000
ROTH IRA (hers): $7,000
TRADITIONAL IRA (hers – rolled over from a previous 401(k)): $16,000
Liabilities:
Just the mortgage yay! (Home value  ~$150,000)
$89,000  - we are 1 year into a 30 year loan/ 5 year ARM, so only 4 years remaining of fixed interest at 2.55%
Income:
Our Gross income: ~$6,900 (fluctuates a bit with overtime, but this is the base)
Health & Dental Insurance: $135.
Taxes: $1,218
Net Monthly Income: $5,547
Expenses:
ROTH IRA (hers): $416
ROTH IRA (his): $416
401(k) (no employer match): $268
Escrow: $300
Mortgage: $486
House Utilities: $385
       Details: Electric: $100
                   Water/trash: $35
                   Natural Gas: $90
                   Cell phones: $75
                   Internet: $45
Food: $240
Gasoline: $250
Car Insurance: $50
Life Insurance: $35
Dog: $90
Entertainment: $50
Sponsor a Child: $50
Gifts: $50
Clothes/Misc: $40
Blow Money: $200 ($100 for each of us)
Car Replacement Fund: $200
Home Repair Fund: $80
Monthly Expenses: $3,606
Amount Leftover: $1,941/month

And this is their main goal:

Our main goal right now is investing for retirement, while aggressively paying off the mortgage. We are saving 15% of gross income between the three IRAs, and the leftover amount each month is applied toward the mortgage ~$2,000. We are shooting for a payoff date of December 2014, but this is dependent on many factors, such as overtime hours and the possibility of getting a roommate to rent out our 2nd bedroom.  We have wills and Term Life Insurance for each of us at $400k.  We have many other areas where we could be spending and aren’t, such as vacationing and tithing, which we have chosen to pause until the mortgage is gone.

I guess I am looking for objective feedback here…  Are we crazy? (All of our friends think so.)

J. Money Thoughts:

First, it depends on your definition of “crazy” ;) Many people who go against the crowds are considered geniuses! And in my professional opinion, you guys are def. amongst them ;) Although it does look like it took you a while to get on a good game plan there with your retirement accounts, yeah? At least with your husband? Did something happen to get you guys to honker down and start killing it, or did you just start making a bit more money now? Overall I’m pretty impressed though.

Here are my thoughts:

  • The obvious one first: Your mortgage plan – It’s not that shocking that I think your plan here is simply fantastic :) I’ve been a HUGE fan of getting all debts down to $0.00 for almost a year now, and it looks like you guy are doing a much better job than myself considering my motivation is slowly waning in recent months… even though I KNOW it’s such an incredible feat!!  Not many people can pull this off even if they wanted to (esp. in YOUR timeline here) so you guys are on a damn good path of making this happen. You already have over $60,000 in equity!
  • Your Assets:  A little low for your ages as I pointed out, but from the looks of your budget you’re done playing around and ready to amp things up :) Your future IRA plans look dope, and you’ve got a ton of savings between your emergency fund and your “other savings” account – giving you a solid 9 months of padding in the even you both lost your jobs or something equally tragic (excluding “extra” investments/savings) And luckily you have a lot left over every month too in the event you want to feel even MORE secure later down the road! Well done.
  • Liabilities:  AWESOME!!  Wow, just your mortgage?  Good for you guys.  Mortgage arms usually scare me too much, but since your plan is to nix it out entirely over the next two+ years it really doesn’t matter by then now does it?  You’ll be home-free quite literally by then!  Loving this!
  • Income: I’d say that looks pretty decent for your ages, though not sure where you live or what you do :) But numbers wise, nothing looks glaring to me. As long as it rises over the years steadily…
  • Expenses: MAN you guys are frugal! Haha… $200ish on food every month? $50 on entertainment? Y’all blow me out of the water like woah here, nicely done :)  Even with Internet – we subscribe to all sorts of services that total around $150 a mo! Digging the “Car Replacement Fund” too – very smart.  As well as with your monthly IRA contributions – looks like you’ve divided it all up so that at the end of the year you both will max them each out, congrats :)  As I mentioned yesterday, maxing out is one of my favorite and most important goals! And since you don’t get any matching with your 401(k), it makes sense to keep that category lower.
  • Your leftover money each month: Incredible. That’s almost 35% of your NET take home pay – you can do some serious damage with that! (And already are). It’s great to have options, isn’t it?

My overall score: A

I should probably give you an A+ here, but I’ve been told I’m too easy on people with this stuff ;) And I would like to see a bit more in your retirement accounts than what the current levels are showing, although your future plans WILL show a nice increase as the months truck by. So I can’t really fault you for that from this point forward, now can I?

All in all I REALLY think you’re on a great path here, Sam. And at any point you can always divert some of that $2k another direction if you guys want to change routes down the road – it’s a huge padding to have every month and you guys should def. be proud! Congrats! :)

So that’s my humble opinion anyways.  What do YOU ALL think?  Pros? Cons?  Would you do anything differently?  Spill the beans and help Samantha and Chad get better!  Thanks guys… freakin’ awesome community we’ve got brewing here :) We’re one lucky family…

————-
PS: Like this series? Check out the first one we did a few weeks ago!
PPS: Want to shoot us over YOUR finances? Submit them here. It’ll take me a while to get to them all, but I promise to do my best to get ‘em up :) Just copy the format you see above when sending it over as we don’t have a good form in the works yet, thanks…

(Photo by John “Pathfinder” Lester)


{ 38 comments… read them below or add one }

1 Lance @ Money Life and More August 29, 2012 at 7:14 am

Looks like you are doing awesome especially if you consistently hit the budgets amounts or less per month. However, if you find yourself going over some of these amounts like food it wouldn’t hurt to adjust them up a bit. Make sure you’re eating healthy and taking care of yourself because if you aren’t it can cost you even more money down the road! Overall great job. You aren’t crazy and if more people use money the way you guys do we likely wouldn’t have people getting to retirement with little to no money.

What are your plans for after the mortgage is paid off? Increasing retirement? A nice vacation?

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2 Walnut August 29, 2012 at 8:01 am

This looks AWESOME. I love hearing from other people who are trying to kill their mortgage. My only thought is to watch out for debt payoff fatigue. Routinely disallowing yourself any “fun” can lead to impulsive purchases on those days that you just hate the debt payoff. Make sure to allow for a couple of low priced splurges when you hit certain payoff levels on your mortgage.

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3 Brian August 29, 2012 at 8:15 am

You are doing very well. Personally I would put more money into retirement accounts (or at the very least a taxable account in case you felt you were going to need access to the money) instead of paying of my mortgage quicker. J$ hit the nail on the head, you are a little behind on retirement savings but keep up the good work!

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4 Aaron Hung August 29, 2012 at 8:46 am

I think you’re doing the right thing with the mortgage. Go agressive with it and worry about the rest later.

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5 Samantha August 29, 2012 at 8:54 am

@ Lance: The food budget I would say is the only one we ever have trouble with, so you hit the nail on the head there. We eat a ton of fruits and vegetables though, you’d be surprised how cheap you can eat with little to no meat or junk food. Our plans after the mortgage is paid off…A VERY nice vacation, and then throwing a lot of that money towards maxing out retirement accounts and bulking up savings.

@Walnut: thanks so much! You are totally right about frugal fatigue, haha. We’ve built in mini-celebrations when we hit mortgage milestones, like we had a small party at $100k. This is huge beast and there are no small successes like when we were paying off our other debts.

@Brian: I would say thats the advice we get most often, to max out retirement now and let the mortgage worry about itself. I think it comes down more to a psychological hurdle rather than trying to beat the numbers.

@Aaron thank you!

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6 Samantha August 29, 2012 at 9:07 am

@J$: Yes, I would say a lot of things happened at once to make us decide we needed to actually make a plan for our finances! We were drowning in debt, with no savings. A colleague mentioned Dave Ramsey and we were hooked. Our net worth has done a 180 in the last four years: we paid off over $40k in debt, saved up the emergency fund, and THEN began saving for retirement and paying off the house. Over the past four years we have really cut down the budget and also gotten raises, so I’d say its a combination of discipline and being blessed.

I know the retirement numbers are low, but considering we had zero in 2008, I’m pretty proud of them. :) And I feel like we can really start rocking it once we have no payments to the man! haha.

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7 K @ Get Worth August 29, 2012 at 9:36 am

Crazy awesome I would say. The only suggestions would be to increase the emergency fund a little bit and maybe increase the 401(k) contribution a tad, unless the plan is particularly awful. Assuming it isn’t you could try an auto-increase approach to slowly ramp up the 401(k) as the mortgage is disappearing.

Very impressive job!

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8 AverageJoe August 29, 2012 at 9:39 am

I’ll agree: they’re doing awesome with their debt and budget. Now to put all of that free cash flow to work and grow the 401k and IRAs! Those are way too low. But a really nice job getting to this point.

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9 SavvyFinancialLatina August 29, 2012 at 10:34 am

That’s a super fast mortgage repayment!!! :) Very good example! :)
How much did you put down on the house?

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10 Samantha August 29, 2012 at 10:49 am

@K: thanks for the input! I love the auto-increase idea for the 401k.

@Joe: thanks!

@Savvy: We made the worst home buying decision ever. Just like J$, we put zero down on our house, but on top of that they let us roll the closing costs ($2,000!) into the loan! Seriously. Of course that was in 2007, before the meltdown. However, we did buy a fixer-upper, so we only paid $137,000 and the home value keeps rising with each improvement to match the neighborhood. Last year, we refinanced $122,000.

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11 Jen @ Master the Art of Saving August 29, 2012 at 10:51 am

You guys are doing AWESOME! I’m really impressed with this budget, it’s like you’re preparing for everything. I did start to freak out a bit when I saw the ARM, but since you’re aggressively paying it off, I guess it’s not a big deal.

I hope you guys still are able to have a little fun while paying down the mortgage, so you don’t get burned out. I know you have money budgeted for fun, but don’t forget to have some kind of treat or whatnot. :-)

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12 Lazy Man and Money August 29, 2012 at 11:06 am

I would put more in the emergency fund before paying off the mortgage. Less than 3 months isn’t bad, but they have the ability to do better.

A 2.5% mortgage (even if an ARM) is an extremely low interest rate. The money saved paying it off quickly is nice, but a hardship before that time could set them back a bit. By funneling the mortgage payoff money to the emergency fund they would create a large safety net.

The key here is that the emergency fund doesn’t necessarily have to stay an emergency fund forever. It is cash that could be used to pay off the mortgage. I view it as cheap insurance while you are pursuing the goal of paying off your mortgage.

I’m also a fan of investing money (especially in 401Ks and Roth IRAs) before paying off a mortgage with these low rates, but I can respect the personal decision to pay off debt first.

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13 Joe @ Retire By 40 August 29, 2012 at 11:27 am

Great job getting your expense down. I think it’s a good idea to attack your mortgage aggressively. We are paying down our mortgage as well, but it will be around long after 2014. :(
Keep working on your net worth. Good luck!

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14 Ornella @ Moneylicious August 29, 2012 at 11:47 am

You could always pay biweekly toward your mortgage, but that point of leveraging is to use the excess cash flow for investing. I would consider opening a taxable account and an account for other goals like vacationing or a fancy purchase, or whatever your heart desires. Also, you could always add more to the emergency fund and increase your IRA contributions and 401(k) contributions, too.

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15 Samantha August 29, 2012 at 12:05 pm

@Jen: thanks so much! We do a budget a bit for fun, we go to the second run dollar movie theatre and have a membership the local museum. Most of the things we do are free, like walking the dog. I can’t wait to have more expensive date nights though!

@Lazy: I see what you mean about less than three months, but in my mind we have 4 months of expenses saved, because we would stop the retirement contributions if one of us lost our job, in all likelihood. But how much do you think would be appropriate in our EF?

@Joe: thanks!!!

@Ornella: We actually do pay the mortgage biweekly. We have the great rate set up through ING, and so we don’t have a choice to pay biweekly and manage our own escrow. It was part of the “Easy Orange” package.

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16 Nicole C. August 29, 2012 at 12:33 pm

Hi, Sam. I’d like to give a shout-out to you. I am at the same age as you are. And, my finance looks very similar to yours: Retirement- I have saved 27k in my 401(k) & IRA. It is a little bit low, but I started contributing in April 2009, after paid off my student loans & credit cards debt. Since you don’t have employer match, I think your number is quite acceptable. If I were you, I will definitely boost up your 401k contribution. It is not as much as you think, because part of the 401k contribution is coming from your tax bills. Emergency Fund- I have 10k too, but I haven’t combined finance with my significant other. If I assume the other savings is assigned just for car replacement, your emergency fund is low. It is barely cover 3 months of expenses.
Overall, I think you do a pretty good job.

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17 Lazy Man and Money August 29, 2012 at 12:39 pm

Good point about being able to stop the retirement deposits. I don’t typically view them as expenses so I missed them. The car replacement and home repair funds could also be temporarily stopped.

Sometimes I create a list of “necessary expenses”, which covers the bare minimum of what you’d need in a hardship. These expenses would be lower making your emergency possibly stretch more.

I think I value having the extra cash around because it can be a safety net and it can give you the freedom to explore other opportunities that may pop up. Once you’ve sent in the payment on the mortgage, it’s out of your control. That can be a great thing if you have a constant hankering for Christian Louboutin shoes. On the other hand, if stocks go on a near 50% sale again as they did in 2008, you might find yourself saying, “Wish that we had $10,000 in an ‘opportunity fund’ to take advantage of this.”

(I think I might have coined the phrase ‘opportunity fund’ there and I’m going to roll with that in the future.)

Either way, you are still doing great and its nitpicking. It’s like complaining that Tom Brady doesn’t have have Michael Vick’s scrambling ability.

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18 J. Money August 29, 2012 at 12:44 pm

Haha…. Good one Lazy Man ;)

@Samantha – Now that I know more of your history with all that debt you guys had, I would have TOTALLY given you that A+!!! JEEZ talk about being a rock star! Well done again over there, you guys should be proud :) That’s no small feat… I bet you have less mortgage debt than both Tom Brady and Michael Vick too! Haha… Right Lazy Man?

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19 Lazy Man and Money August 29, 2012 at 12:57 pm

Have you seen Tom Brady’s $20 million house? http://www.huffingtonpost.com/2012/01/20/gisele-tom-brady-house_n_1219317.html

The couple could pay it off in a year. Who knows if they actually did?

As a certified dog lover, I won’t go into Vick’s house. I don’t want to think about it.

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20 Devan August 29, 2012 at 1:48 pm

I think what you’re doing is great. Only problem I have is you are putting yourself above your tithing. Some time we fall quick to think about us oppose to how we get blessed. My wife and I have a combined income of 155k. We have 2 mortgages (primary and rental property) and about 32k in student loans, we are aggressively paying them however we pay 1200 a month in tithes. Now we could apply this 1200 even to our student loans to accelerate even more but we have been blessed so I would encourage you to think about getting back to paying your tithes first and foremost and you will get to paying your house off soon. You’re on a good track record.

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21 Samantha August 29, 2012 at 2:00 pm

@Nicole: thank you!

@Lazy: lol at opportunity fund! But how much is too much? I’m afraid if we worked on building that up at the same time as the mortgage, we would lose steam and momentum. Its hard enough to stay motivated with another two years left!

@J$: haha, thank you!!! I’m happy with the A!!!

@Devan: I don’t actually attend church, but in the past we have donated to charity, my alma mater, and my husband’s church. This will definitely be implemented once we are debt-free.

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22 Sara August 29, 2012 at 2:52 pm

You guys are doing great. I would bump up the emergency fund though, especially since that’s for two people. I would probably funnel more to the EF until it was more like 20 – 25K, or somewhere in the neighborhood of six months of expenses. Your interest rate on your mortgage is super low so it’s not making a huge difference to pay every month — so you could do something like save $50K in cash, then make a 25K payment on the mortgage. Rinse and repeat every six months (since that’s about how long it will take you to save 25K). That way if you had a catastrophe, you’d have more cash on hand, but in the meantime you’re still working towards your goal of a paid-off mortgage.

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23 Jenna, Adaptu Community Manager August 29, 2012 at 5:05 pm

How are you going to celebrate after you pay off your mortgage?

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24 Jacob @ iheartbudgets August 29, 2012 at 6:51 pm

Gah! That mortgage makes me sick! You guys are obviously killin’ it and frugal to the max. Owning a home outright in your early 30′s is nothing to sneeze at! You guys are crazy in an awesomely good way :) Well done.

Just report back when your mortgage is paid off so we can pop some bubbly in celebration!

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25 Samantha August 30, 2012 at 8:11 am

@Sara: six months of our basic expenses would be less than $15,000, when you remove the retirement savings and home and car repair funds. (Thanks for the suggestion Lazy Man!!!) We are actually talking about beefing this up a bit and draining it when its enough to pay the loan off.

@Jenna: celebration… I don’t know. I’m on the fence as to whether a “mortgage burning party” is tacky or not. I think we may go on an extended vacation to Thailand or India.

@Jacob: thanks so much! I will definitely be sticking around this awesome community and we’ll see if J$ wants to post my follow up story!!! Thanks for the suggestion.

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26 J. Money August 30, 2012 at 9:03 am

You should TOTALLY have a mortgage burning party! Haha… and make everyone dress up in Mad Men Style and go all out ;) That would be awesome… I’d attend too and then blog all about it!

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27 Stephanie August 30, 2012 at 10:37 am

Samantha, you are totally not crazy. Or at least that’s my opinion, but some of my friends, and even occasionally my husband, think I am crazy, so perhaps that’s not saying much. ;-)

I totally agree that it’s possible to eat well on ~$250/month. That’s about what our budget is. Sometimes it ends up closer to $300, particularly if we have a big dinner party or something, but we hardly buy any processed foods and cook most stuff from scratch. It tastes better AND it’s cheaper!

I’m WAY jealous of your mortgage and car insurance expenses though. I’m not sure where you live, but I live in NJ. Our cars are on the older side and even without collision coverage anymore, our car insurance runs around $120/month for 2 cars, and our mortgage payments (including escrow) are about $1190. Ick. But it’s do-able, we’re still able to save for retirement, maintain a decent emergency fund, and set aside short-term savings for stuff like home repairs and car downpayments (ugh, going to have to do one of those soon!), which is more than a lot of people can do, so I guess I shouldn’t complain. ;-)

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28 Erin S August 30, 2012 at 9:57 pm

Ah the life of DINKs, I should have embraced it more when I had the opportunity! :)

If you’re doing what works for you, then you’re not crazy! Even if you keep blitzing the mortgage instead of adding to retirement funds, then in a little over two years you’ll have and extra $2500 a month to put into retirement funds, emergency funds, money market accounts… whatever floats your boat. I wouldn’t overly stress about the emergency fund right now, especially if you are comfortable with it. When I lost my job a whole bunch of monthly expenses went away besides 401k, commuting gas, work clothes, blow money (man, I haven’t had blow money in like three years! LOL).

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29 J. Money August 31, 2012 at 5:23 pm

And you’ve got killer new house too! I swear I’m gonna come and see it one day ;)

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30 Erin S September 1, 2012 at 12:01 am

Are you talking about my house? Haha. Come see it anytime, we are only an hour and a half outside of DC! Then you can be amazed by the difference if and when we ever get it done. :)

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31 J. Money September 1, 2012 at 3:37 pm

Oh that’s right!! Yes, could I really? I’ll show you my new pretty baby?? :)

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32 Erin S September 2, 2012 at 1:20 am

Only if you bring the baby. :)

@Samantha – I would totally come to your mortgage burning party because it would probably be the only time I ever got to go to one! :)

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33 Samantha September 4, 2012 at 11:33 am

haha. You guys don’t think a mortgage burning party is too “Look at me, I have lots of money”? I’ve heard from a few people (jealous people?) that have said it would be tacky, and just showing off, and do we expect gifts, etc. (Of course not!) But I just wanted to celebrate this huge accomplishment with those we love. I think we will have to be very careful who we invite!!! But you guys are on the list, haha.

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34 Erin S September 4, 2012 at 11:55 pm

People have college graduation parties and people don’t think it’s too “Look at how smart I am!” Maybe just do a little creative renaming, after all it is a huge accomplishment and deserves to be celebrated! :)

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35 Lazy Man and Money September 5, 2012 at 12:11 am

People don’t typically throw their own graduation parties though, do they?

I’m all for a mortgage burning party.

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36 J. Money September 5, 2012 at 8:24 pm

Okay, I’ll officially name myself the Party Thrower then :) We’ll call it the “Mortgages Aren’t Sexy” Party, cool?

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37 Annalisa September 6, 2012 at 4:36 pm

Love this series, keep it up! I’d submit mine if I weren’t so chicken!! :)

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38 J. Money September 11, 2012 at 4:12 pm

Please do!! We need some more that are not *as* sexy, haha… so the scarier the better ;)

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