332.0 - 332.999

I've been reading personal finance books off and on since starting the blog. I get through a few chapters, then put the book down for a week or so before coming back to it. I have David Bach's "Debt Free for Life" by my bed, Carl Richards' "The Behavior Gap" at my desk, and Ben Stein's "What Would Ben Stein Do?"

I haven't picked up Mr. Bach's book in weeks and I'll probably just return it to the library. Like Dave Ramsey and other financial advisors out there, Mr. Bach focuses on paying off all your debt in the fastest amount of time by sacrificing just about everything else. While this approach may work for some, it's just not for me. Full on deprivation just leads me to overdo it later. Plus, I'm not getting another job to help pay off the debt faster. Fact: I'm lazy. I did toy with the idea for a few weeks, but right now, the hubs and I have something going on just about every weekend until June. I'm hopeful I might be able to pick up a nights & weekends gig during the summer when the hubs is off and we don't have to worry about Molly Monster, but we'll see.

I'd rather work with I've got and learn subtle tips and tricks to save more, but still being able to feel like I'm enjoying life. I know, I know, you don't need money to enjoy life, but it sure does help!

Mr. Richards book is more my style. While it's primarily about investing, there are some snippets of wisdom that have stuck with me. Plus, there's pictures! (Diagrams, really.) One phrase I've been carrying around:

"'Personal finance... is more personal than financial.' It's true. Planning for your financial future is personal. It has to be. A good plan will be unique to your situation, and what is right for your situation may be a disaster for your neighbor. So ponder how the advice you encounter applies to you before you make important decisions about your money."

Last month, I embarked on trying to pay down my debt myself. As we saw at the end of the challenge, it didn't work out for me as well as I'd hoped. My overall debt total only went down a smidge and I was a bit dicouraged. And I had barely anything left over at the end of the month to put in our savings account, which frankly, was stressing me out. I decided to go back to another option I had previously shurgged off: getting a personal loan to pay off my credit cards and starting fresh. PNC offered loans with a starting rate of 8.25% if payments were deducted from my checking account. I applied... and was rejected.

Remember back when I reviewed all the componants of my credit report/score on Credit Karma? One of the biggest black marks on my record was my high debt to income ratio (43%). This was the main reason why I was rejected for the personal loan. Fresh off our anniversary conversation, the hubs told me to re-apply, but to to add him on the loan as well, thereby increasing our incomes while keeping the debts relatively the same. I did and this time we were accepted.

On Saturday, we took a trip to the bank to sign all the paperwork. Our rate ended up being 8.99% which is still half of what the lowest interest rate is on one of my credit cards. I took out a $9,000 loan for four years at $225 per month. There is no penalty for pre-payment, either, which means anytime I have some extra money, I can throw it towards the principal and pay it off faster. Plus, now I know I'll be able to contribute more to our savings account (I already increased the automatic transfer to $100 per paycheck, instead of the previous $50). All in all, this feels like a much better fit for my life than the previous attempt.

And for the credit cards? They're still tucked away. I opted not to cancel any of the cards, since another black mark on my credit report was the "length of time accounts have been opened." Instead, I'll just let them hang out for awhile. Maybe in a few months, when I feel like I have more control over my spending, I'll break them out for one necessary purchase per month, like gas or groceries. But until then, I'll recognize my weaknesses and keep temptation out of my grasp.

I already feel like a burden has been lifted. Even though I know the debt is still there, being able to see zero balances on the cards AND being able to save for any unexpected expenses, instead of having to whip out a card to pay for them, makes a world of difference. And if I ever get tempted to buy something unnecessary on credit, all I have to do is read my own blog.

Anyone else have any similar experiences lately - either with money or something else?

writing with a broken pencil

...is pointless. Hah!

I'm sure I'm not the only child of a baby boomer who was told college was non-negotiable. I'm sure I'm not the only person who didn't know what they wanted to study in college but who wanted to "get as far away from home" as possible. I'm also sure I'm not the only person who left only to come back and study at a state school. And I'm 100% sure I'm not the only person with significant student loan debt.

We've talked a lot about credit cards, "bad" debt, and even worse habits. Like many people, I don't think about my student loans as bad, since I got something out of it (although, with a B.A. in Sociology/Anthropology, whether I got the better deal is up for debate). Yesterday, I read an article in my hometown paper about Stockton students having some of the highest student loan debt in the state (read it here). Approximately $30,000 for a state school. Granted, this is about a quarter of the debt you would have if you went to an out of state, private college, but, still, I find that number shockingly high. Let's run & compare my numbers as a Stockton alumnae, shall we?

Year 1: About $15,000 for room & board at Simmons College in Boston, MA after grants & scholarships (half the total price). That's a hefty price tag for the "college experience". My major? Being ridiculous.
Year 2- Fall: I'm only coming up with about $2,000 in loans, which doesn't seem right, but I did obtain some grants, scholarships, and continued in the work-study program. I transferred to the Catholic University of America for fall semester because I decided I wanted to be a theater major.
Year 2- Spring: I leave CUA two weeks into spring semester because I realized I wasn't crazy enough to be a theater major. It's too late for me to transfer into Stockton, so I work & party pretty much everyday. Summer 2006 is still one of the best memories of my life (so far).
Year 3: I start classes at Richard Stockton College. I live at home, since my mom's house is less than five miles from campus. I decide to go for a Sociology degree because it would be the fastest track to graduation. Mom helps me out financially with school and pays for one semester a year. Loan amount: $4,170.77
Year 4: Stockton needs to fund it's expansion projects and tuition is slowly creeping up. Loan amount: $5,440.31
Year 5: Mom has to take a pay freeze, so she can't help me with school this last year. Stockton ups their tuition significantly. I took loans to pay for the whole year to the tune of $12,761.13.

When I graduated in May 2009, my total loan debt was approximately $28,000 and it hasn't decreased much at all. I should also note that unlike Years 1 & 2, I did not receive any scholarships/grants/work-study at Stockton, which definitely contributed to the overall total.

Once I started working, between my low wage (thanks to that Sociology degree) and my bill payments, I couldn't manage the $400 a month Sallie Mae wanted and I signed up for a 5 year interest-only plan. I'm almost into year three of the plan and I still couldn't fathom finding an extra $200 a month to pay for my loans (I pay about $200 per month right now). While it's not something I stress about now, in a year or so, I'm going to have to figure something out!

Do you feel like you got your money's worth out of your degree? If I could do it all again, I would've gone to community college for the first two years, then transferred to a state school. Although I met some great people and got to experience life on my own, I'm not sure it was worth $15,000 (and then some, when you include the other bed debt I got myself into!).

pay it downward

Since the "challenge" portion of the blog has officially ended, I thought I should check into my various cards and see where my balances are at and if I've made any progress. Plus I had to schedule my online payments for the month anyway. Two birds, one stone kind of deal.

Card 1: $2,752.02 (+ $32.51)
Card 2: $2,047.82 (+ $104.85)
Card 3: $409.29 (-123.50)
Card 4: $3,579.61 (-$300.00)

Total debt: $8,788.74

For a difference of $288.14 less than when we started. Blah. That's kind of depressing. But at least I'm under the $9,000 mark.

We get paid this Friday, so I'll be able to throw my credit cards back in their "hiding place", hopefully for a lot longer this time, barring any home or car emergencies (like this one).

A quick check on Credit Karma revealed no changes to my estimated score from the last time. Not surprising, given it's been less than a month since I last checked.

I'm reading a new money management book which gives yet another way to manage your payments, so this week we'll analyze the sixth (or so) debt payoff strategy.

Do you become frustrated by how slow some things take? Even though I know I've only been making two months of credit card payments I feel like there should be a much bigger dent in the debt - probably because I blog about it so much!

Monday Spent: $1.45 coffee
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Monday Saved: $0.00

the secret life of mees.

I have to be honest with ya'll: I used my credit card twice recently. After the check for the bat removal clears and my student loans are taken out on Monday, I'll have a whopping $33.41 to last until Friday's paycheck. Have I mentioned how high gas prices are right now? $3.75 a gallon on my way to work today. Yikes. It's going to be a close call.

But I digress. On March 29th, I paid $32.10 for a full day of doggie day care at Camp Bow Wow. The hubs and I were supposed to go out that night for a friend's 30th birthday celebration, so I didn't need Molly destroying the house all day and night. I ended up having a migrane and staying in, so if my future-vision was working properly that day, I could've avoided that expense. This was also prior to finding out just how much it would cost to have bats removed from the premises. Damn future-vision.

Yesterday, I paid $25 to the NJ Civil Service Commission, but I can't tell you why just yet.

There's another secret I've been keeping from you and it's a doozy. It'll probably help you understand me better, but you'll probably also be a bit surprised and/or disgusted.

This is not my first go around on the credt wheel. I've been here before, albeit not with this much money. When I was a sophomore in college, I had three open credit cards. I don't remember what the combined balance now, but it was more than I was comfortable with only working 3 or 4 days a week on campus. I called Consumer Credit and was set up on a payment plan. While in the plan, you had to sign off that you wouldn't use credit cards and you had to complete their online education program. Having taken a personal finance class the year before, I blew through the online test without actually attempting to learn something. About 6 months before I completed the program, I signed up for Card #1.

After the hubs and I got married, we took about half of the monetary gifts we received and each paid off one card. Now, most of the items charged on my card were wedding-related items, but I still feel this guilt that the money was essentially wasted, since the card has a balance on it again after only a year. Clearly, I had learned nothing from my past mistakes.

The good thing is, I think the third time is finally the charm. I get it now. I can look you in the eye and tell you I have a shopping problem. I was in the jail at work the other day and my co-worker was interviewing a guy who had an extensive shoplifting history. He said when he didn't have money for drugs, he would shoplift. He said he would get the same high clearing a metal detector as he could hitting the pipe. I think almost everyone has the capacity to become addicted to something. I certainly could have. But no more. I'm done. I have to be.

Day Thirty Seven Spent: $0.00
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Day Thirty Seven Saved: $0.00

Debt Tsunami

The next time you have a few minutes google debt + natural disaster of your choice. It's kind of fun. But not right now, you're busy reading my blog.

The final installment of our debt elimination journey has us riding the waves of the Debt Tsunami. Adam Baker claims it's the "ultimate method to pay off debt" by tapping into our emotional connection with our credit cards. This sounds like it's about to journey into "My Strange Addiction" territory. The Debt Tsunami is "about paying off your credit cards in order of their emotional impact" regardless of their balance or interest rate.

Mr. Baker contends that the snowball and avalanche methods won't work if they don't correlate with your specific personality type. For example, "logical" people usually prefer the avalanche method because it makes sense to pay off high interest cards first. The method assumes you are a mathematical person who can detach yourself from the emotional side of debt. The snowball method works if you're someone who's motivated by little victories. But what happens if you're neither (or both) of those people?

In the argument for the tsunami, Mr. Baker references two scenarios which both involve money lent by a friend or family member. This scenario doesn't apply to me at all, so I have some trouble identifying with the "emotional side" of my debt. But I'll try. Let's go through his step-by-step strategy:

1. Create the initial burst of energy. Oh, look, "start a blog" is one of the options. (double check!)
2. List your debts from smallest to largest including interest rate



can i put "creates awesome tables in paint" on my resume?

     3. Focus on the emotional connection with each debt. Apparently I should be closing my eyes and imagining what it'll feel like to pay off each debt, but I'm at my desk, so that's not going to happen. Other questions to focus on:     
      a. How long will it take to pay off?
      b. On what did you spend the money? .
      c. How much of a burden is this particular debt in your financial life?
      d. Is it secured or unsecured?

   4. Reorder your list based on potential emotional impact - Mine would be in order: 1, 2, 3, 4. There is a caveat here - "order the debts by how awesome it'll feel to eliminate them combined with how easily you can actually get that result." Eliminating Card #1's debt is not going to be easy, so there's a wrench thrown into my list.
   5. Head immediately towards shallower water: "The only way to build momentum is to go as fast as you can towards shallow water." Here is where we reduce spending & budget better in order to apply more money towards the debt payments.

While I appreciate the ideas behind the Debt Tsunami, I don't think it's right for me in its entirety. Instead, I'll combine it with parts of the Avalanche & Snowball theories to create my own Debt Meteor program (kudos to my co-worker for that one). I'll tackle the balance on Card 3 first, since it has both the lowest balance and the highest interest rate, but one of the lower emotional connections. Then we'll move onto Card 1, which has the higher balance, interest rate, and emotional impact. From there we'll go to Cards 2 & 4. I'll tweak the plan if and when it's needed, since I need to set myself up for successes, not failures.

Which program works best for you? Anyone else inspired to create their own debt program this weekend?

Day Eighteen Spent:
$28.56 gas
$5.00 lunch
$32.10 daycare for Molly
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Day Eighteen Saved: $0.00

Debt Earthquake & Aftershocks

Two other ways frequently mentioned in eliminating debt are balance transfers and loans. Neither of these choices are optimal for my personal situation, but maybe they will help you out.

The first option, balance transfers, is pretty simple- Apply for a 0% interest card (and be approved) then transfer your high-interest balances over. Assuming you pay off the balances before the promotional rate expires, you'll have saved a good chunk of change in interest. One cavat to look out for is the fee associated with transferring the balance, usually a flat fee or a percentage of the transfer.

MyMoneyBlog.com lists the following as the Best No-Fee, 0% APR Offers for 2012:

1. Citi Platinum Select Mastercard - 0% APR for 18 months on transfers and purchases. Transfer fee is 3% of the balance
2. Slate from Chase - 0% APR for 15 months on transfers & purchases. Slate is one of the only cards with no transfer fee
3. Discover More - 0% APR for 18 months on transfers and 6 months on purchases. More cards are also part of cash-back program
4. Capitol One Platinum Prestige Mastercard - 0% APR until June 2013. Balance transfer fee is 3% of total with no minimum to transfer over. The annual APR's are also lower (depending on your credit score, of course)

You can read the full list here. I just opened a balance transfer card in August 2011 (Card 4 on my list) so obviously, opening another line of credit is going to hurt me more than paying off the existing cards . Card #2  just sent me a letter in the mail offering 0% on balance transfers; However, that would take up most, if not all of my credit line on that card which isn't a good idea either. If you only have one or two cards with high balances, can sock extra money into payments, and won't be tempted to use the new card, then this might be an option for you.

The second method would be to take out a personal loan to consolidate the debt into one monthly payment. Generally speaking, the loan rates at the bank tend to be lower than credit card rates. They dip even lower if you have a credit union nearby.

I decided to call up PNC and find out what kind of terms they were offering for a $10,000 unsecured loan. Since I'm already a customer with the bank, they offered me an APR of 8.99% if I have the payments automatically deducted from my checking account. The base APR is 9.24% - still not too shabby. There are no pre-payment penalties associated with the loan, which is good. A three year plan would cost me $318.00 per month and a four year plan would be about $250.00 per month. This would almost seem like a great option if I didn't already have that one card with 0% interest. Plus, another unsecured debt would not look good on my credit report right now.

Some websites even suggest taking a loan out from family members or friends, but I'm of the mindset not to mix business with pleasure. Has anyone ever loaned money to a family member and actually had it all paid back? I know if it's not going to affect my credit score negatively, I would be lax in my re-payment efforts. No need to create unneccessary family drama - we do that well enough on our own.

Just in case the past three days didnt't have enough natural disaster analogies for you (spoiler alert), tomorrow, we'll look at the Debt Tsunami! Hold onto your surfboards.

Day Seventeen Spent:
$5.00 Sally Beauty Membership Renewal
$1.07 Dollar Tree (makeup remover cloths)
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Day Seventeen Saved:
$5.79

Debt Avalanche

It seems that the majority of debt reduction plans all have some kind of destructive nature theme going on - like the "debt snowball" is really a snowball packed with ice that's going to impale your credit card debt and the "debt avalanche" is going to bury your debt in a pile of who-knows-what.
The second program I'm going to look at,"Debt Avalanche", focuses on paying off high interest rate cards first instead of paying off the cards in low-high order. The premise behind this program is by paying off the higher interest cards first, you'll save money since the interest charges won't be as large.

Sounds promising. Here's my table (click to make it larger):

According to a Snowball vs. Avalanche calculator, paying down the debt in this fashion will save me $55.00 in interest. Meh. Pretty unimpressive, in my book, but I guess any savings is good savings when it all boils down, right?

In both scenarios, I'd be paying off Card 3 first, which fits in nicely with how I planned to do it anyway. So you don't have to go back to Friday's post, the plan for Card 3 is: First payment comes out on March 14 for $134.79 and I'll be paying $100.00 towards that card each month while paying the minimums on the other cards. Barring any emergencies, I'll make a double payment on the card this month and have the whole thing paid off in the next three months.

These two programs seem to encapsulate the most popular ways to pay off debts. Tomorrow, I'll look at two other options that I'm fairly certain I won't use, but we'll discuss because I like to hear myself type.

Day Sixteen Spent: $0.00

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Day Sixteen Saved: $0.00

Debt Snowball

The premise behind Dave Ramsey's "Debt Snowball" is a fairly simple one: pay off your debts from smallest to largest. According to Mr. Ramsey, "Paying the little debts off first shows you quick feedback, and you are more likely to stay with the plan." The idea is to apply each debt's minimum payment to the next as you work down the list in order to eliminate the debt faster. "Payments Remaining" is the number of payments remaining on the debt when you get to that item. "Cumulative Payments" is the total number of payments made (aka a running total).

As a side note - Mr. Ramsey encourages each participant to have $1,000 in savings before starting any kind of debt repayment. Although throughout the blog, I keep my spending/saving separate from the hubs, I did count our joint savings as my safety net in this exercise. Since one of the goals of this journey is to save more money, I will work on a separate personal savings of $1,000 as well.

Here is my debt snowball (click on it to make it bigger):

First impression: Wow. Almost six years to pay it all off.

You'll probably note that there is only a month & a half payment left on Card 4 by the time I get down to it. I currently pay $150 per month towards the balance because it is a 0% interest rate card. If need be, I may adjust that number in the future once I'm being charged interest, depending on how far along I am on the other balances.

Mr. Ramsey also encourages you to list all debts, including student loans and mortgages on the debt snowball, but since revolving debt is my immediate focus, that's all I've chosen to include on here. I accepted long ago that I wasn't paying my student loans off until my 40's and the mortgage... well, that's 30 years for a reason.

Overall, I think the Debt Snowball is one of the easiest plans out there and I'm partial to it; However, tomorrow we'll look at another option and compare. I know my sister-in-law, Stephanie, has used this plan with success. Anyone else out there have a plan you recommend?

Day Fifteen Spent:

$22.00 Lunch (treated co-worker for birthday)

Day Fifteen Saved:

$5.00