Letters of Explanation

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This topic contains 4 replies, has 3 voices, and was last updated by  TTrumble 3 years, 8 months ago.

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  • #30746

    anewguy03
    Member

    Tim,

    Is it possible to write a letter of explanation for each month instead of each incident? For instance, if my wife & I use the envelope system for certain items (car maintenance, groceries, hair stylist, etc), could we write one letter describing each withdrawal or deposit for the entire month of December? Or do we have to write a separate letter for each withdrawal or deposit each month?

    Thanks!

    #30752

    rashad3000
    Participant

    I’m a HUGE Dave Ramsey fan and did the envelopes, prior to using NACA. The first thing my MC told me was to “cut out that Dave Ramsey crap”. LOL. Moving forward, just use a debit card and it will be that much easier! Good luck!

    #30764

    TTrumble
    Member

    Hello anewguy03,

    As far as LOE’s are concerned, there must be a separate one for each incident. It’s too easy to miss an explanation for something when it’s in the same letter as other explanations.

    The envelope system is the only real major incompatibility between the Dave Ramsey program and ours. If you continue to use that system, you must make sure to get receipts for EVERYTHING and be ready to document them with those individual LOE’s.

    Remember the main purpose of the envelope system is to help you recongize exactly where your money is going and help you develop discipline where your expenditures are concerned. That being the case, using a debit card will be fine as long as you have learned the lessons of the envelope system and will make it much easier to track those expenditures.

    Using the envelope system can also potentially cause confusion and delays where saving your Payment Shock is concerned.

    Bottom line, simplifying things as much as possible is definitely to your advantage at this point.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #30783

    anewguy03
    Member

    Crap, I’ve been doing this for the past two months with the intention of presenting LOEs. I don’t have any receipts from the withdrawals. Does this mean the past two months are invalid? Even though we’ve saved more than our Payment Shock each month?

    See, the biggest things are car maintenance and my wife’s hair stylist. For the car maintenance, I withdraw it each month so that it doesn’t affect the Payment Shock. If I suddenly pay for car maintenance that costs $300 (after it’s been in a savings account for 2 months), wouldn’t this negatively impact my Payment Shock since my monthly savings decreased?! Urgh!

    Will writing checks to my wife’s hair stylist work? Instead of withdrawing the cash? And when the time comes to pay for maintenance on both vehicles, will the underwriters REALLY accept a LOE explaining the maintenance, despite the decrease in funds?

    #30791

    TTrumble
    Member

    Hello anewguy03,

    Leave the funds in the bank. Nowhere is it written that the sum total of your accounts must increase by exactly the Payment Shock amount each month. There’s nothing wrong with it being more.

    As far as the car repairs are concerned, the receipt with the LOE will absolutely work, especially since we will be able to see that you saved more than your Payment Shock each month in anticipation of the repairs.

    Regarding the hair stylist, you’re on the right track. Have her write checks.

    As for the cash withdrawals, your counselor is going to have to make the determination whether the past two months are acceptable. Again, write a letter of Explanation that also states that you are changing your process for the sake of simplification.

    At worst, this will be a small setback. At best, you’ll have shown improvement on documenting where each and every dollar is going, which will always be in your best interest.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

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