Friday, September 28, 2007
If the interest rate falls, then I will have to consider depleting my savings for sure to pay down debt since I am not earning much on the balance and the interest rates on my student loans are still much higher.
Always feel free to leave me a comment or ask me a question. I am certain that I am not the only gal that’s in a financial mess. Let’s take this journey together towards financial freedom. In return, I will do my very best to continue to post my progress or interesting tidbits of information that I come across. Take this journey with me. I am going to get my financial house in order and say goodbye to my debt!
Now…who wants to be my new friend?
Thursday, September 27, 2007
This is the first month I stopped using my credit cards and moved to an all cash/debit system. I had to draw a little from my savings accounts but overall, I would say that the switch helped me control my spending considerably. I am going to continue this practice going forward. I need all the help that I can get right about now.
The value of my car is holding steady. I am about 18,000 miles less than the average mileage on my car which is excellent since I need to drive it for some time to come. The best thing about working downtown and riding the train now is that I drive less than 10 minutes a day. So, other than the crazy Chicago winters, I won’t personally do any more damage to my car and should be able to preserve it as long as possible.
The tough pill to swallow is the interest that is accumulating on my student loans. This month alone, $951 in interest capitalized to my loan balance. I am going to have to figure out how I am going to tackle my student loan debt quick, fast and in a hurry. At the very least, I need to find out a way to pay the interest on a monthly basis.
Hopefully October will be another good month. I am going to put $500-$600 towards my credit card debt until I figure out what I am going to do about my student loans. I am still scared of being without savings because I don’t currently make enough money to pay interest only on my student loans. Push come to shove, if I don’t find a better paying job soon, I may need the savings to float me until I do land a new job. Right now I have about $700-$800 in discretionary money after bills. Estimated interest on my student loans will be $1,350 per month (Ouch I Know!!!). Something good will happen for me soon. It has to. In the meantime, I need to chip away at whatever I can and control my spending.
For those that read my blog, you know that I use pocket quicken on a daily basis to keep track of my on-the-go expenses. I have always been “that” person who never knows where the cash goes. So, pocket quicken is working out quite well for me because I no longer use credit cards and I have all my checking account and cash balances at my fingertips. I use a pocket pc so downloading pocket quicken was quite easy. They also have a 14-day trial.
As for Yodlee, I use it everyday. It is a great aggregation service. With my busy lifestyle, it is going to be nice also having it on hand at all times. Lastly, I know there are some folks out there that are not happy with Bank of America due to their higher ATM charges but they also offer mobile service which I use for my Keep the Change checking account. Since I use my BoA checking account for my personal debit expenses, the mobile service comes in handy if I need to transfer money from savings to checking.
Wednesday, September 26, 2007
Now that law school is over and I will no longer incur additional education debt, I am finally on the road to financial freedom. Therefore, I need to strategize to figure out the right moves to make. I put it off for a while due to the uncertainty in my job situation with finishing law school and trying to find a new position. While I may not have a law position yet, I am still working as a financial analyst making a decent salary. Therefore, until things change on the job front, I have to proceed in the best fashion with my current $55k salary.
I am not going to make excuses for myself. I am in poor financial condition because I made bad financial and spending choices. Period! Four years ago, I bought a condo that I could barely afford with no reserves, 80/20 (100%) financing, $10k in credit card debt, and $25k in auto debt. During the last four years, I used debt to support a lifestyle that I could not truly afford and it slowly mounted.
So, here I am. I have a negative net worth of approximately (-$91,000), $207,000 in student loans to repay and $16,100 remaining on a credit card that I refinanced the 20% mortgage financing over to. With Christmas around the corner and repayment on my student loans looming, I have to figure things out. So…What now?
Current Financial Condition:
Current Action Plan:
Future Liquidity Events:
Scenario #1: Deplete Savings, payoff ccard, snowball student loans
Scenario #2: Deplete Savings, Min on CCard, payoff 2 student loans, snowball remaining student loans
I am leaning towards scenario #2. For one, my student loans have a higher interest rate than my credit card at 3.99% fixed. The downfall to scenario #1 is that my credit card still has a pretty high monthly payment which if eliminated, can go towards repayment of my student loans. While both plans are tough, they can be done. I may have to tweak credit card payments here and there due to irregular expenses like the occasional birthday gift (cheaper now of course), the quarterly water bill or license plate renewals. The tough part is the psychological part of not having savings at my fingertips. On the other hand, that may not be a bad thing because with a cash/debit only system, I will be less tempted to spend and spend big. I may even be forced to make a few lunches.
I get paid once a month. Here is what I am going to do for October.
For Christmas, I generally budget the most for my boyfriend and my parents. My sister and I have a pact and since we both have birthdays in December, we just give each other $25 gift cards to our place of choice and just a card for our birthdays. I may see if she would like to forgo the entire gift giving this year especially since I have a new brother-in-law this year to add to the Christmas list. I think she/they will be just fine with that since they had a very nice wedding to pay for just 2 months ago and I’m sure that building back up their savings is priority for them right now.
As I get older, it is much more fun to sit back and watch the kids tear through all the wrapping paper. I am amazed that as I get older, I am less enthused about getting gifts as I am about giving them. I love seeing the smile on someone’s face when they get my gift. But, on the other hand, my bank account is screaming, “don’t you want me to be happy too?”
I haven’t saved at all this year for Christmas and judging by what I spent last year, I would need at the very least approximately $1,300 for gifts. I sure wish I would have put aside $100/month into an ING or HSBC account to pay for gifts. Hindsight is well….hindsight.
My current budget includes $500 for my boyfriend. I am going to talk with him to see if he would like to spend less on Christmas this year. We’ve been together for years and he also had an expensive year with my graduation, buying his first place, and buying a car. He may be inclined to reduce the amount we spend this year too. Hmm….sounds like dinner conversation to me.
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Tuesday, September 25, 2007
I also added a few blogs to my blogroll that I’ve been reading lately. I am still holding on to the hope that some of my favorite bloggers will come back and update us on what’s been going on in their lives. Since my life has been so interesting and busy this year, I know what it’s like to need a break. While I was away, I am sure I lost a few of my readers but I still have some of my loyal friends. =)
So, what do you think?
Right now, I am looking at a slight improvement in my net worth. I will post final results for the month on Thursday or Friday. =)
Monday, September 24, 2007
Best wishes on your journey to financial freedom!!!
Friday, September 21, 2007
I should get my bar results in less than two weeks. I am nervous and excited. The feeling of being done with law school after 4 long years in a part-time program is like floating on a cloud.
Have a great weekend!
Thursday, September 20, 2007
Cash flow improvements. Now that I am finished with law school, I am able to commute to work by train. Driving into downtown Chicago and parking is very expensive. The savings by taking the train is tremendous plus I don’t have to deal with traffic and crazy drivers. I live less than 2 miles from the train station so it takes less than 5 minutes to get there. The monthly train pass has increased over the last 4 years but it is still much more reasonable at $117 plus another $20 to park in the parking lot. I don’t drive as much so now I find that I only have to fill up every other week to the tune of approximately $80-90 a month.
Parking - $12/day at 4 times a week = $192 per month
Gas - $45/week = $180 per month
Taxi - $10/day at 4 times a week = $160 per month
Grand Total = $532
Train Pass - $117 per month
Parking - $20 per month
Gas - $90 per month
Grand Total = $227
Difference = $305
**** In addition, now that I get home at a reasonable time, my mother includes me in their dinner plans so I usually don’t have to make or buy dinner. This is also savings me a lot of money because when I was in school, I usually bought breakfast, lunch and dinner.
Wednesday, September 19, 2007
When I get another job in the next few months, I am toying with the idea of opening and funding a Roth IRA and maybe paying off my lowest student loan with a $5,000 balance. That would leave just $1k left but hopefully my salary will be strong and I should get roughly $2-3k back in a tax return to help beef up my savings. If anything else, I am still thinking that I should at least open the Roth and fund it for the year.
At age 29, I estimate that my pension is worth approximately $15-16k and my 401k has a $27k balance for a total of $43k. I know that it could be better but it’s not bad for my age and my $55k salary. I believe that when I leave, I should be able to take my vested pension with me and roll it over. Here is the language on my employer’s website and below is a chart that I used to estimate the current value:
If you are vested when you retire or leave the Bank’s employment, you can take your benefit with you regardless of your age. You may take a lump-sum distribution (mandatory for benefits valued at $1,000 or less). If your benefit is more than $1,000, you may elect a single lump-sum payment, elect one of the annuity or cash refund payment options, or defer payment until age 65.
Benefits are taxable in the year received. You may defer income taxes on a lump-sum distribution by electing a direct rollover to an Individual Retirement Account (IRA) or another qualified plan including a 403(a), 403(b) or 457 plan.
*** With the year almost over, I estimate my pension balance is closer to $15-16k. The chart uses a 6% interest rate which is what my employer recommends we use to estimate our balance.
Tuesday, September 18, 2007
I called my own mother just to tell her “I love you.” Those of you who are blessed to have a parent in your life may want to take the time and do the same.
Monday, September 17, 2007
I am getting the hang of pocket quicken and I am really pleased with the software. While it took a little time to figure it out, it extremely helpful to have my account balances at my fingertips since I transitioned from credit cards to only cash and debit. No more credit cards for me. Since I have money in different accounts, I am able to decipher which account I can use for a particular transaction. Also, now that I have the hang of using the software, the quicken sync process with my desktop takes no more than 5 minutes. Huge time savings!
Just today, I needed cash but I am running low on it before I get paid again. To avoid ATM fees, I used BoA’s mobile service and transferred funds from my short-term savings to my checking account. Then, I went to the grocery store, did some much needed grocery shopping for cleaning products and also got some cash. I was able to check my Quicken account balances, see which account I could transfer funds from, use my pocket pc to transfer the funds and I was able to one stop shop for groceries and cash. Excellent!
I applied for 2 positions at work today. Both positions are for the same job in the same area of the bank. While it isn’t an attorney associate position, it would give me more transferable skills in the short-term until I am able to land a law job. Plus, it is a higher job grade which means more money than I currently make. I will keep you posted on how that goes. As for the bar results, we are closing in on the October 15th date. I think results will be posted in a couple of weeks online. I am nervous but I am excited as well.
Thursday, September 13, 2007
I am trying to figure it out but it's tough. I am trying to use it to make my charts smaller in my post but allow viewers to click on the image and enlarge it in a seperate window.
I figured out how to get the link to finally open in a new window but I don't understand how to get the image to enlarge and still be a good picture.
I hope I am making sense. =)
A reader by the name of Bill (Thanks Bill) provided me with some good insight on my student loan payments. Bill was also an Access Group borrower and informed me that I may be able to pay interest only on my larger loans and apply as much principal as possible to my smaller loans, thereby snowballing the amount. Excellent! I am going to call Access Group today to get better clarification. But this is great news because I may be able to make more progress towards eliminating my debts.
Below is a chart that I threw together that details what my student loan repayment will look like next year. Repayment begins in stages: 1/2008, 4/2008 and 6/2008. The chart below shows what the payment on the capitalized amount will be based on interest that accumulates over the next few months, the interest rate and various terms. The chart does not take into account the payment incentives that I intend to take advantage of which will reduce the various interest rates over time. I will detail those incentives later. The amounts have been rounded for simplicity (not overly so) and I took a conservative approach and increased the interest rate to 9.2% on my private loans which currently rage from 8.9 – 9.1%. The remaining loans have a fixed rate.
This chart makes my eyes pop out! Since starting school, I have accumulated $18k in interest on my loans. If I don’t pay anything over the next few months, I will accumulate another $11k in interest making that a grand total of $29k in capitalized interest. I am seriously considering how I can make interest payments over the next few months to keep the loan amounts as low as possible. I wonder if I can pay the accumulated interest off before it capitalizes on the loans when they enter repayment. Hmm…I have a lot more questions to which I need answers.
*** Edited Chart. Accidentally switched principal and interest columns. Wishful thinking. =)
Wednesday, September 12, 2007
I called Access Group, my student loan provider, yesterday to ask them a few questions on loan repayment. Currently, my loan repayment status/schedule is as follows but these numbers are on the low end. I just called again to find out that the estimated payment on the website does not include the interest that’s been capitalizing. Crap!!!
- Total loans: ~ $206,000
- $250 monthly beginning 1/2008 – federal unconsolidated
- $875 monthly beginning 4/2008 – private loans
- $500 monthly beginning 6/2008 – federal consolidated and federal grad plus loan
Good news for federal loans:
- I was told that my federal loans can be extended for 25 years because I have more than $30k in aggregate federal loans. This is called the extended repayment option.
- Monthly payment for my federal unconsolidated and fed grad plus loan will decrease slightly.
- Consolidated loans are already on a 30-year repayment plan at 3.5% fixed.
Repayment options for my private loans:
- Private loans have a 20 year repayment schedule
- Easy Pay 2 – interest only for 2 years and then straight-line amortization for remaining 18 years
- Easy Pay 3 – interest only for 2 years, interest and part principal for 3 years and then straight-line amortization for the remaining 15 years
- Modified (MGRS – One time option) – 6 months of 50% payment, 6 months of 75% payment, 1 year interest and then straight-line amortization for the remaining 18 years
- Forbearance options are limited to a one-time, 12-month period that you can use in 6 month increments.
- Repayment Plan: I think I am going to go with the Easy Pay 3 option and hope that I will not have to switch to the MGRS option since you can only use it once. I may need to exhaust that option down the line.
- Student loan interest: I am looking forward to paying on my student loans. I know some people may think that’s weird but the sooner they enter repayment, the sooner my net worth really starts to improve. Right now, approximately $800/month in interest capitalizes on my loans. I try to offset this increase by paying $300 in principal on my heloc/cc, $100 on my mortgage, $400 towards retirement, and $100 towards investments. But with the large expenses I’ve been incurring and market fluctuations, my net worth has remained pretty stagnant with slight declines every month. Once the loans enter repayment, even if it’s just interest, my net worth will begin to make some strides towards improvement.
- Upcoming months/expenses: For the time being, I am trying to be patient and wait for my bar results, network to find a new job and control expenses as much as possible. Potential major expenses: Christmas of course and I may have to pay back my tuition reimbursement from my employer should I take a position outside the bank. I only have to pay back the last 2 years which would amount to approximately $11k. So, my savings would be depleted. One option is to try to get my new employer to pay the bank back in lieu of a signing bonus.
That’s where I am right now. I really put myself in a bind but I am trying not to get down about it. Push come to shove, I may have to sell my condo and downsize to an apartment or move home for a while, take the equity and pay off some of the private loans. My parents have already offered but I love my freedom and independence and it would just kill my spirit for that to happen after all of my hard work. I need to find a better paying job soon no matter what.
Check it out!!!
Monday, September 10, 2007
Here is a breakdown:
Personal Care: $165
General Merchandise: $72
Auto: Fuel: $52
Petty Cash: $29
Office Supplies $6
Friday, September 07, 2007
Already today I made a million stops on my day off and money was flying out the door, a few bucks here and a few bucks there. I was able to easily and quickly make note of them on my handheld. When I got home, I linked my computer with my pocket pc and everything went through smoothly and my desktop and handheld are all matched up. This is going to save me a lot of time trying to figure out how much that cab ride cost or that cup of coffee that I shouldn’t have bought in the first place.
Since I am no longer using my credit cards, the pocket quicken program also gives me a quick balance on the front of my phone for my cash account and my checking accounts so I can use my debit without the worry of whether I have the funds available.
I will keep you posted on how things go.
Thursday, September 06, 2007
Some of the blogs I added are blogs that I came across this week. If you would like for me to add your blog, please leave a comment. Thank you.
The bill is for $150 so I will soon see if I have to pay it. I have the money but I work hard for my income and my benefits and it makes me a little peeved that I may have to pay when the Dr.’s office made the mistake. On the other hand, I don’t want anything sent to collections.
Wednesday, September 05, 2007
Also, I am going to start posting more frequently now that the dust is settling a little. I am so excited about the future and about becoming financially free!!!
While my posts will have a little more content to them, my blog will still continue to focus on my financial journey. Therefore, there will be more posts on how I measured up to my monthly budget, my constant fights with Quicken, etc. =)
Tuesday, September 04, 2007
My sister’s wedding stuff is finally over as of Labor Day weekend. I gave her and my new brother-in-law a nice monetary wedding gift which is reflected in the asset decline. Should I have? Probably not from a financial standpoint but she is my only sibling and it felt right. Besides, of all the weddings I have been in, she took care of a lot of the expenses that the wedding party would have traditionally taken care of. Since I was the only attendant, I was spared a lot but prepared to do more.
I do not have a credit card balance so that is another good thing. The credit card balance was paid off in full so that is also reflected in my financial performance. All of my bar exam/ law school expenses and vacation expenses are now paid for. *** For the last month, I have completely stopped the use of my credit card. I just couldn’t handle it so I took it out of my wallet. I will miss out on some rewards but for the time being, that’s just what I have to do until I get things under control with my spending.
Interest that is being capitalized on my student loans continues to make progress tough. Once they enter repayment in January – April, my net worth will really begin to improve.
For the time being, I am going to try to sock away some savings so Christmas doesn’t hit me too bad. I have a few leads on job positions so I am going to pursue those as hard as possible. Once I get “favorable” bar results, I will be able to make moves.