"A dilemma"….follow up

About two weeks ago I posted about a dilemma I was having. For those unfamiliar, I was unsure of the amount of my disposable income I wanted to allocate to my “future house fund” and how much I wanted to throw at my student loan. That article has been my most read post and by far the most responded to. After mulling it over, running numbers, and deciding what I wanted my goals to be, I have reached a conclusion. I am committing to throw $1,000 each month towards that bad boy. That was the overwhelming recommendation from each reader that responded! I think in my head I was justifying the necessity to hoard my cash and put it all in my savings, when this clearly opposes mathematical reasoning.

Although I still believe personal finance needs to remain personal, I agree the numbers need to be strongly considered. I became focused on the desire to purchase a house (taking on more debt) when I should have been concerting my efforts towards breaking up with Sallie Mae.

This decision couldn’t have come at a better time! With a little over $12K in the bank, my Emergency Fund is fully funded (6 months pay) and allows me the freedom to throw as little or as much money as I’d like at my future house fund, or even better, towards my school loan.

So on this day, April 3rd 2009, I commit to putting a minimum of $1,000 to my school loans each month. Thank you fellow bloggers for whispering wisdom in my ear and opening my eyes… hey its like that Ace of Base Song… “I saw the sign, and it opened up my eyes, I saw the sign!Booya for Ace of Base, Booya for sweet advice from bloggers, and double Booya for paying down debt!

I am punching Sallie Mae in the face!

This is the way I live…

So if you are poking around this page that means you’re like me and you like knowing other people’s financial situations. I guess I really have no problem letting people ask questions about my money. Call me crazy, but if you are looking at this article than you have at least SOME interest also.

So here is how this little gem work…

  • INCOME pretty self explanatory. This is my monthly pay from my current job. If you have read my other posts, than you know I also tutor to make some spare change. I decided I didn’t want to include this in the income section of my budget as that income fluctuates each month and I did not want to build my spending habits around inconsistent income. I include the tutoring income at the bottom of the spreadsheet and I underestimate it for each month. I’ve been averaging $1,000 a month, but I still don’t want to change it’s current $500 value…I know that makes my budget less accurate, but less accurate in a good way right 🙂

  • INVESTMENTS, TAXES, and EXPENSES. Again, pretty straightforward so no real need to elaborate. I will mention, however, that I DO have health insurance, but since I am 23 I was able to stay on my parents plan (you know I’m gonna ride that out till I’m 25 and get kicked off their policy). I included a 5% increase section on my expenses because sometimes ‘ish happens (consider it like a mini-monthly emergency fund).

  • GOALS, BILLS, and PRIORITIES. The top right section is where I set out my financial goals on January 1 of each year. It starts with what I had in my accounts on 12/31/08 and I make assumptions as to what my accounts will look like come 12/31/09. The section below this is where I keep a list of my fixed monthly expenses…otherwise I’d be forgetting to pay that darn cable bill. And lastly, below that is where I list of the priority of all of my expenses. I did this so if I’m ever in a situation where a ninja stole all my money and I was fired from my job, I would know exactly how to spend each precious dollar that I had. Basically I put the most important bills at the top.

So that’s my life in a spreadsheet form. Hopefully it makes sense to you all, but if it doesn’t feel free to shoot an email or comment and I’ll let you know how it works.

Enjoy,

Obsession


I have found myself becoming more and more obsessed with the financial world over the last year. It started with a simple conversation with one of my friends who is a financial analyst for a big bank. We were having a slumber party in his living room (yeah we may be in our 20’s, but we will never be too old for slumber parties!) when he started telling me about the Roth IRA and how it could greatly benefit me. We talked for a good hour or two about other investment strategies (actually he talked, I listened). This conversation kickstarted my quasi-stalkerish obsession with finances. I love reading helpful strategies to make my money work harder. I don’t mess with the convoluted financial gameplans, I like it to keep it simple. Here is what I am doing to secure financial freedom over the next few decades.

Investing 8% in to my TSP (government equivalent of a 401K)
Maxing contributions to my ROTH IRA each year
Putting $2k in the bank each month for my future house fund
Doubling my school loan repayments every month
Selling cocaine to little kids that think it is powdered sugar

One of the above may or may not be a “white” lie…haha no pun intended. But seriously, I’m 23 and I feel like I’ve got a good jump start to the rest of my life. Fortunately I have a steady job with a cool title , make okay money $60k/yr, and live dirt cheap. Every dollar I earn I make sure that it is working it’s @$$ off and finding some friends to come back and play in my online savings account.

Peace up, A-town down,
D Ninja

Bad Acne = Credit Card Debt

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I was watching tv the other night when I saw a commercial for an acne product. I don’t know why, but I thought to myself “Self…pimples and credit card debt are pretty darn similar. They both suck, no one wants it, and it’s hard to get rid of.”

I think of acne in three different phases.

Phase I: Everyone gets a little bit of acne when they begin puberty. I put little pimples on my credit card almost every day. I use it for all my purchases and each time I do, I increase the amount owed to the CC company. BUT, I pay off this debt each month. Its equivalent to the tiny pimple you get on late Friday night and it’s gone by the time you wake up Saturday morning. Sure you had a pimple, but no one knew it! Phase I is were you want to be.

Phase II: Phase II represents the kid that was born with naturally oily skin and unfortunately has a pretty bad acne problem. This person has a choice. He can choose to see a professional, get acne medication, and be disciplined enough to battle his greasy genetics everyday….or he can choose to ignore the problem and let his acne turn in to Phase III boils. Maybe you have more debt than you would like? Maybe it’s not even your fault you have debt! But you have to face the reality that you have bad debt acne. The only ways to clear up your financial blemishes are to seek professional advice, obtain the proper tools, and commit to fighting the debt battle with all you heart! Pop your financial pimples so they don’t ever want to come back! The kid with oily skin has a choice to make. Do you want a face full of pimples? Or would you rather, have flawless skin that everyone is jealous of?

Phase III: Phase III individuals not only were born with a predisposition to terrible acne, but they actually massage their face with butter, pizza grease, and fried chicken and don’t care. They eat greasy finger food, don’t wash their hands, and smear their hands on their skin…all the while they complain that they wish their skin could be like Jessica Alba’s. I have no sympathy for these people. They abuse their credit cards. They spend more money than they make. When all is said and done they have poor financial hygiene! They look in the mirror and stare at their oversized pimples and sigh “oh well” as they walk out the front door. Phase III individuals are seldom able to change their ways and their “acne” problems will only end upon death.

Go pop a white head,

This article can was featured in the carnival of personal finance #159 found here.

This article was a featured article at this weeks festival of frugality found here

The best way to save over $200 a year!


I think for the first time in my life I was convinced by a door to door sales person to purchase their product. What were they selling? Cable…as in tv and internet. A man working for AT&T knocked on my door one afternoon and began his sales pitch. I was tempted to interrupt him and tell him I was not interested (as I do with most other salesmen).

He handed me a pamphlet of information that included all the different package options and pricing AT&T was offering. I saw their basic cable and internet package was $89 per month. I was paying $91 for my COX cable package. I told the man I wasn’t interested in making the switch because I wouldn’t be saving any money. He asked me about my current COX package (internet speed, how many channels I get, etc.). With COX I was only getting basic cable (channels 2 through 60) and medium internet speed. With AT&T’s basic package I would get over 200 channels and slightly faster internet. It sounded too good to be true so I asked the man how much the instillation fee was. Turns out, there is no instillation fee and we also get a cable box that can record four shows at one time and a high power wireless modem and router. With COX we don’t get a cable box and they charge a rental fee for the modem. The man said these aren’t promotional rates that are going to go up in one month. He explained AT&T is just trying to be competitive against the San Diego Mega-Cable companies like Cox and Time Warner.

Convinced that AT&T would be more bang for my buck I asked the guy for his card and told him I would give him a call later. I went back to my computer did a little more research and was sold that AT&T was a great value. I scheduled my appointment. The cable folks came out last weekend and installed our new cable and let me tell you…IT IS WONDERFUL! The cable box is amazing. I don’t need to record four shows at once, but its still a neat feature. The internet is WAAAAY faster than our old internet. Paranoid that there was going to be hidden fees or an upgrade that I wasn’t aware of I called AT&T and asked what my bill would be at the end of the month ….$99 the lady told me, but since we had cable and internet we got a $10 discount to bring out total bill to $89…just what the salesman quoted me. This is when things got really good. I asked the lady if she knew of any other deals that would be worth my while. This is when she told me that for $40 extra a month we could upgrade our cable to get a total of 400 channels. I politely declined. Then she said… “Oh wait I can get you the 400 channels and a $40 discount for 6 months making your bill total $89 a month.” I don’t need 400 channels, but if they’re free I’ll take them. I wrote myself a note to cancel the extra package in Dec. so I don’t get stuck with a higher bill. Oh yeah, and did I mention we get our fist month of service at no charge and a $100 check for signing up. All-in-all I will end up saving about $250 this year and will have a way better cable package.

My advice to you…. Check with other cable companies and see if you can get them to beat your current cable costs. They will almost always try and work a deal out because they want your business. If there are no competitors or you don’t want to go through the hassle of changing your cable company, at least call your current cable company and tell them you are going to cancel your service because you want to take your business elsewhere. They will offer you some type of benefit, maybe a cheaper bill or maybe just more channels and faster internet for no cost. Try it out. See if you can make your dollar work harder for you!

Take care,

Instant Gratification Hates Discipline

This article was featured in the canrival of personal finance edition #157 found here


I went to visit my Aunt and Grandmother this weekend and found myself drooling over my Aunt’s new toy, a 14.2 megapixel SLR digital camera. I played around with the camera a bit this weekend and found myself justifying my need for 14 mp of pure greatness. Plus I have enough cash in the bank that I could pick it up. Reality check…I don’t need the camera but I REALLY REALLY want it.

Instant gratification, the conscious expenditure of effort to make the time interval between wanting something and getting it as short as possible, lives in all of us. We must control how much reign we allow this beast to have in our day-to-day spending. Do you have credit card debt? If so there is a good chance that the beast within has control of your spending habits. Maturity is often defined by the willingness to delay gratification. Look at your bank statements. Do they reflect mature spending? Where is your money going? Or more importantly, where is your money NOT going…investments, savings, retirement? As I began the justification process for why I should reward myself with 14.2 megapixels of pure heaven the voice of reason whispered in my ear “You already have a camera that you don’t use, do you really need another one?” This my friends is the process of delay of gratification. After a short internal debate, I convinced myself the camera was unnecessary and would delay my “future house” fund.

Discipline is what separates the strong from the weak, the rich from the poor, the smart from the stupid. Are your spending habits disciplined? If you impulse buy when you see a great deal or you spend too much shopping, odds are you haven’t conquered the art of frugality. Here’s some advice to help cure your impulse buying.

1) Just because it’s “on-sale” DOES NOT mean you have to buy it. If it’s on sale at store “A” now it will be on sale at store “B” tomorrow. Be patient.

2) If you are considering using credit to make your purchase, don’t. Force yourself to save. This has many advantages. First, you don’t owe anyone money! Second, it may get cheaper during the time it takes you to save for it. Lastly, once you save up all that cash you might not want it any more because you realized just how hard it is to accumulate that much money.

3) If it’s not essential, don’t buy it. Plain and simple, the key to frugality is only buying the essentials and saving the rest.

There’s plenty of information on the web offering up advice on how to be more disciplined. My advice…get it together. No excuses, no credit, no financing, no spending when you don’t have the money. No big purchases without talking it out with yourself and loved ones. Don’t be stupid. Make the choice to live your life differently.

Be the solution not the problem,

Total Money Makeover


So I bought Dave Ramsey’s book “The Total Money Makeover” and just recently finished it. If you haven’t read it and you have little knowledge of the financial world I highly recommend picking up a copy. For those that are more finance savvy, you have probably heard everything this book brings to attention. As I continue on my journey to financial freedom I can’t help but disagree with two pieces of advice Ramsey gives.

While I understand why he discourages the use of credit cards, it just seemed too radical for me. If you have read through my earlier posts here then you know I am a big fan of using my credit card for any and all purchases I make. Throughout the whole book, Ramsey instructs everyone to cut up their credit card. Broke like a joke or Rollin’ in the dough, Ramsey says cut up the card and pay cash for everything. I will definitely be ignoring this recommendation. My credit card is free cash for one month and airline miles in my pocket. I’m pretty sure if I went to the grocery store and wrote them a 30 day I.O.U. and requested frequent flier miles in exchange for my groceries the clerk would kindly ask me to leave the store. With my credit card I can do just that. Ramsey and I are both advocates of discipline. He advocates discipline in debt repayment, spending habits, giving, etc. I just don’t get why he doesn’t mention that, with discipline, credit cards are a valuable asset. I wish he acknowledged the fact that credit cards are not a bad thing, it’s the people that use the credit cards that cause problems.

Second beef, paying off all debt (except mortgage) as fast as humanely possible. Again, I understand where Ramsey is coming from, but I completely disagree with this stance. I currently have one, and only one debt to my name. I have a consolidated student loan for $28K at 7% interest. I decided to stretch the student loan out for 20 years to lower my obligated minimum monthly payment in case I ever find myself in a financial bind. With payments of approximately $220 a month my loan will be payed off in 2027…I know pretty crappy. With interest, over 20 years, I will be paying approximately $54k for my education, that’s $26K in interest!!! My education is not worth $54K to me so there is no way I am making minimum payments. I ran some numbers through my calculator to decide exactly how much extra I want to be paying on my loan. I decided I would pay an additional $110 monthly to shorten my loan term and take a huge chunk out of $26k in interest. Making monthly payments of $330 I am able to pay my loan off in half the time and save over $16K in interest.

I’m sure with “gazelle intensity” I could pay off my student loan much faster, but at what expense? Ramsey recommends putting retirement investing on hold until all debts are paid off. If I take this advice and I postpone my Roth IRA funding for two years, while I focused on solely on paying off my student debt, my Roth IRA at 65 would have approximately $2,044,000 in it. If I ignore Ramsey’s advice and contribute to my Roth IRA from now until 65 I would have $2,434,000 in my account. That’s a difference of $390K!!! You better believe I will sacrifice paying an extra $10K on my student loans over the next ten years if it means I will have an extra $390K in my retirement account. Now one could argue that Ramsey’s advice is warranted in that the sooner I pay off my student loan the sooner I will be able to contribute additional income to my retirement accounts and can therefore make up for lost time. Need I remind you though, that Ramsey advises only putting 15% of income in to investments. I currently contribute 18% of my income. I guess this is advice that I NEED to ignore.

Overall I enjoyed my read and thought there was plenty of valuable information, but I wish Ramsey acknowledged that, with great discipline, there are alternative ways to acheive a “Total Money Makeover.” Have you read the book? What do you think? Is there something I’m missing or not picking up on?

Making money,