November 2007 Financial Recap…

My net worth didn’t decline as much as I thought. The hit on my 401k definitely didn’t help things because in order for my net worth to improve, my contributions actually need to increase my asset base. This is because my 401k contributions are my only form on savings and my student loan interest is staggering. As you can see from the chart, a total of $1,089 in interest capitalized onto my student loan balance. Next year will really be the year for improvement.

Despite the market decline this month, my net worth remained relatively stable and only took a minor $302 drop. Not bad at all. By April 2008, I will have my credit card balance paid off which was really just my 20% mortgage from my home purchase. Once the credit card is paid off, I will officially have over $60,000 in equity in my home and I am very happy about that.

November credit check was good and clean. My credit scores are as follows:
Transunion: 750
Experian: 775
Equifax: 729

I want to send a special THANKS to all my readers for hanging in there with me. I know it can be mind numbing to come here and hear me say that my net worth declined again and again. When I started this PF blog, I knew that my net worth wouldn’t improve until I started paying on my student loans. I thought about waiting until then but the blog has actually helped me keep my spending in check which has consequently kept my net worth from dipping even further. Next year, I have a goal of increasing my net worth by at least $15,000.

This Month was a fantastic month for me personally. I finally got sworn in and I am finally an attorney licensed to practice law in Illinois. Despite the chart, I know I am on the right path. Now that I am a lawyer, I have significant income potential and a bright future ahead. Soon enough, I will be saying goodbye to my $55,000 salary and hello to six figures. Hopefully, with the same organization.

Petty Cash and Change…

I deposited petty cash and change into the bank along with the legal fees I earned last week at a closing. The total deposit amounted to ~ $1,170. I ran into a cash crunch this month and I had to use my credit card. I am going to use a portion of these funds to pay off the balance in full in December. Below is a breakdown of the deposit.

Every night, I remove all single dollar bills out of my wallet as a form of savings. I started doing this a couple of months ago and I accumulated $300 which is awesome and relatively painless. I also had over $100 in change that I also empty out of my wallet on a daily basis. I’ve been holding on to my graduation money so that was also included in the deposit. It didn’t make any sense to have the cash lying around when it should be in the bank earning interest.

Legal fees: $400
Change: $120
Graduation Money: $350
Singles: $300

Everyone is on the same page regarding Christmas so I should be able to pay for the gifts I need to buy with regular cash flow. The market decline this month took a toll on my 401 balance so we’ll see how that affects my overall net worth this month. The most maddening thing is that over $1,000 capitalized on my student loans again this month. I am looking forward to working out a payment plan so that my assets increase every month and my liabilities finally start to decrease.

Neighbor’s Condo Sold…

My neighbor finally sold her condo this month. I’ve been watching closely because she had a unit similar to my own with 3 bedrooms and 2 baths. I was delighted to see that she received 100% of the asking price of $165,000 after 2 buyers fell through. It is rare for a 3 bedroom unit in my condo development to go on sale. For that matter, 2 bedroom units rarely go on sale also but you can find them in other parts of the suburban area.

Not only is my development affordable for a Chicago suburb but it is also well maintained. For the most part, it consists of older homeowners who have occupied their units for years. The woman who sold her unit this month was elderly and I purchased my condo in an estate sale after the elderly owner passed away. My unit offers stair free living which is a feature many older homeowners find attractive and I am hoping that one day I will find a good buyer for it when I am ready to sell.

I currently value my condo at $160k on my balance sheet.

No Desire to Christmas Shop…

I have absolutely no desire to go Christmas shopping. It’s weird but all I want to do is sit around, visit with family and watch the beautiful lights on my Christmas tree. I am so very relieved that my family is on the same page with me regarding gifts this year. We all decided that it was a very expensive year with my law school graduation, my sister’s wedding in Cancun and my mom’s retirement that we are just going to enjoy each other in the true spirit of Christmas. It feels so much better to not feel the pressure of finding money to buy gifts. All I want for the New Year is a $15,000 improvement in my net worth and of course…love.

Estate Planning…

I cancelled an appointment last week for my parents to meet with an estate planning attorney because my mom said she was too busy with the holidays and wasn’t sure about the cost factor. So I called the attorney and cancelled citing their concerns about legal fees. Well the attorney called me back today and my parents are well within their right to be concerned about the fee. The base rate was $4,500 for a couple, including tax planning. I am assuming that the $4,500 includes their wills, power of attorney’s, affidavit of trust, etc. I am sure that the attorney is very good at estate planning, etc. but my parent’s are not in a place right now to spend $4,500 on getting their affairs in order.

I am going to network and see if I can partner up with an estate planning attorney and draft all the requisite documents for my parents. I didn’t want to be involved at all because I am an interested party but the documents will be witnessed by disinterested parties and my parents’ have a relatively unsophisticated profile.

I was hoping that this could get taken care of quickly and be one less thing for my parents to have to worry about but I will see to it that things work out as smoothly and quickly as possible.

Decision on 401k…

I decided to continue my 401k contributions at this time. I contribute 5% which my employer matches. Instead of paying off my credit card balance in February, I will pay it off in March 2008. I will be in good shape so long as I get the balance paid off by April 2008. I don’t want to get out of the habit of saving for retirement. I am almost 30 and I have approximately $28k in my 401k and $16k vested in my pension for a total of $44k in retirement which isn’t that bad for a 30 year old. Sometimes my retirement savings is the only thing I feel good about when it comes to my finances.

Turning 30…

I turn 30-years old on Sunday. Sometimes I can’t believe it or bring myself to say the words. The last four years of my life are a blur. With working full-time and going to law school part-time, I didn’t have much of a life to say the least. I have this nagging feeling that I missed out on the last 4 years of my twenties which coincidentally were also the years where I accumulated massive amounts of student loan debt. I am also sort of newly single for the first time in my life. My boyfriend and I dated for over sixteen years (junior high) but since I finished school, we haven’t been able to reconnect as I had hoped. That being said, I guess I should look at the future as a fresh start in so many ways.

Should I Stop My 401k Contributions…

For the next two months, I am thinking about stopping my 401k contributions so that I can pay off my credit card balance sooner. Come March, I will resume my 5% contributions. By stopping my contributions, I can increase my cash flow and pay off the credit card balance in Full by March. At the end of February, I will receive my regular paycheck as well as my bonus which should be in the high $3k range. Coupled together with regular payments and depletion of my e-fund, I should be able to completely pay off my credit card.

I know what everyone might think, bad move depleting the e-fund but I will be able to replenish it within weeks with my tax return which should exceed $2k. Come April, my private loans enter repayment. If I do not find another position by that time, I will ask to forbear for a 6-month period.

So, what do you think?

Real Estate Closing...

So my outing on Wednesday was very informative. I learned a lot and would like to continue working with the attorney if/when possible. I don’t think he needs the help right this minute because he can handle the volume but in the coming months, he anticipates that his workload will improve significantly. I learned a lot and I am hoping to get the opportunity to go out to closings with him again. I still have a flex schedule which I am trying to keep. If so, I should be able to go along with him at least once a week every so often.

On a side note, I thought I was just going to be shadowing him but I actually got to participate. I got paid $400 for the day which was a complete but welcome surprise. I am going to put that money towards reducing my credit card debt.

It was an awesome day!

Happy Thanksgiving...

Wishing you and your family a very Happy Thanksgiving!

Legal Experience…

I am really excited. I am going to get the opportunity to attend three real estate closings tomorrow. How awesome is that! I am taking the day off from work on Wednesday so that means I will be at work on Friday. I think that’s a good thing because then it means I can’t be in the stores!

Automatic Millionaire by David Bach…

I am almost halfway through David Bach’s Automatic Millionaire. It’s an easy read and easily convinces you to sock away money for retirement. The charts and tables that show the effects of compound interest make you feel like an idiot for not doing something sooner.

So far, there is nothing about how to deal with debt coupled with investing for your future. I’ve been enrolled in my company’s 401k plan since 2002. For the most part, I have always contributed 5% which is the maximum amount that my employer will match. I know that I have a lot of student loan debt but I am thinking about upping my contributions just a little over the next 6 months to take advantage of the down market. Then, all of my student loans go into repayment and I may have to scale back. My hope is that I will get the attorney position in the bank and I will be able to contribute 10 percent which will result in a 15% overall contribution with the employer match. Over time, I would like to eventually save at least 20% of my gross income.

Potential Opportunity…

A friend of the family is involved in real estate and the entertainment industry. We reunited after many years about a month ago. My sister mentioned to him that I recently graduated from law school and that I’m looking for a job. On Friday, he put me in contact with his attorney who is looking to move away from practicing law. The attorney is willing to teach me everything I need to know about real estate closings. If and when all goes well, the attorney and my friend will eventually steer some business my way.

How awesome is my friend? He is dealing with the toughest loss of his entire life and yet he still took the time to think about someone else. He has such a big heart and I am very grateful. I am going to attend one, maybe two, real estate closings on Wednesday. Once I am up and running, this could definitely increase my cash flow over the long haul and help me pay off my student loans. No matter what, getting the legal experience and honing my skills in any area of the law is a plus.

I Want a New Couch…

I really want a new couch for my place but I can’t afford one. Right now, I am using my futon that my mom bought for me 8 years ago for my college apartment. Don’t get me wrong, it’s a really nice futon…very sturdy, made of wood, and it has an expensive spring mattress. It’s just not the most comfortable to sit on for long periods of time because it is angled and it’s not convenient and ample enough for entertaining. It’s expensive to always go out. Sometimes I just want to invite people over but I feel like I don’t have enough sitting space.

My 30th birthday is quickly approaching and I would like to host my birthday party but I am a tad bit embarrassed about how minimal everything is in my place. My best friend offered to allow me to have my party at her home but I don’t want to impose. Of course, I can’t just want any couch. Like Nate Berkus says, a couch is a long-term investment and you should really search and find the right one for you. Well, I have and I want the Manhattan Leather Couch from Pottery Barn that would cost me my arm, leg and first born child. My goodness everything is so expensive. Once I get my law position, I will consider the couch purchase. Until then, my futon will have to do.

I keep thinking, NO CREDIT CARD DEBT, NO CREDIT CARD DEBT, NO CREDIT CARD DEBT!

November 2007 Credit Report/Scores…

While I was visiting my parents on Sunday, my sister called the house and said she was reviewing her credit report and noticed a new account on there with an outstanding balance that she didn’t open. I am happy that my sister is staying on top of her finances and reviewing her credit report regularly.

This phone call prompted me to check on my credit report and scores. I was putting it off until December or next year but I had this nagging feeling so I just pulled it just in case. I am happy to say that everything looks good, all accounts have been handled in a satisfactory manner and my credit scores have improved.

Scores:

Transunion: 749
Experian: 775
Equifax: 729

Room for improvement:

Transunion and Experian:
Installment account balances are too high in comparison with my credit limits.
Too many inquiries on my credit report.

Experian:
Not enough mortgage accounts on my credit report. (I have a first mortgage and second mortgage and it is reported)

Equifax:
Not enough revolving debt experience. (I have 8 open credit cards)
Balances on my bankcard accounts are too high in comparison with my credit limits.
Too many personal finance accounts on my credit report. (I have a lot of student loans)

*** Citibank and Citi/Universal are both shown as closed by the credit grantor/closed due to inactivty. My AMEX rewards card is also shown as closed.

Sharing Financial Information…

For some people, finances can be a very personal subject. Until recently, my mother has been very secretive about her finances, particularly the amount of debt my parents have. I think in some way, she is embarrassed about how much debt they have and I estimate that it is probably in the $25M range in addition to car loans. My father is probably more in the dark than I am. He is very hands off to say the least.

It wasn’t until my mother was approaching retirement and had questions, that she began to open up. I know how much they have in savings, how much income they generate through pension plans, and I know about their insurance policies. I also know where everything is should something happen to my parents. Since I am the attorney in the family and my sister is a teacher, I will more than likely handle a lot of issues going forward. Thankfully, my sister and I have a very good relationship, she trusts me and she is also fully aware and informed about my parents’ affairs. Everything that is shared with me is shared with her.

Unfortunately, the last few weeks have been tough for my parents. Within 10 days, they attended three funerals and my mother attended another funeral on Saturday. All of this has weighed heavily on my mom and she and my dad would like to make sure their affairs are in order should something happen to them. My sister and I are on their bank accounts and insurance policies as beneficiaries but the main thing they are concerned about is their home. I know that their insurance policies are set up to pay off the mortgage on the house first and then whatever is left goes to the surviving spouse or me and my sister.

I called today to make an appointment for my parents to see an attorney so they can get their affairs in order. As you know, life can throw you a curveball at any moment and tomorrow is not promised. I know my parents were hoping that I would be able to take care of setting everything up but to tell you the truth, I know very little about Estates & Trusts although I know a lot more than a simple layperson. What I am excited about is that my parents are completely open to me being present at the meeting so I will be able to learn through this process and gain some additional legal skills. Secondly, it will also allow me the benefit of finding out a little more about my parents’ finances.

I am an open book when it comes to my finances. I talk to my mother all the time about how much debt I have, how much I make, and what my plans are. We are actually a very close family so it’s good that I am able to share this information. It also makes it easier for them to share with me.

Law Ceremony…

Today I officially became a lawyer. I have my license in hand and I am officially armed with the tools to make a difference. I am so excited. The Admittance Ceremony was short and sweet. It was nice to be surrounded by other students who worked very hard and all of the proud family and friends. My mom, dad and grandmother sat by my side while I stood and swore to uphold the Constitution. It was a feeling that I will never forget.

As a side note, my grandmother, bless her heart, surprised me today with yet another graduation gift. She gave me $150. I tried to respectfully give it back but she said “No, this is what I am going to do. I am so very proud of you and you deserve it.” Trying to tell an independent 84-year old woman what to do is very hard. So, she gave me $150 which I immediately put into my petty cash fund. She will celebrate her 85th birthday in just 3 short weeks so I am going to use some of the funds to get her a nice birthday present since we agreed not to do gifts for Christmas.

Today was a totally amazing day! I finally feel free as a bird!

Big Day Tomorrow…

Tomorrow is a big day for me. I finally get sworn in and officially become an attorney. My license will actually be in my hands. To say that I am excited is an understatement. I am overjoyed and relieved to reach this milestone. I received three tickets for guests to attend the ceremony and my mother, father and grandmother will all be in attendance. The decision was pretty easy. These are the people who have guided my way and provided me with the opportunities that put me right where I am today.

My 84-year old grandmother could never have dreamed of accomplishing my goal of becoming an attorney. The opportunities simply weren’t available. Being an African American woman has always shaped who I am and guided me in important life decisions. I recall having a conversation with my mother when I was in high school. She asked me what I wanted to do with my life and if I had any idea where I wanted to attend college. After telling her that I had no idea, she paused and told me something that I will always remember and take with me for the rest of my life. She said, “When I was growing up we basically had two choices, to be a teacher or a secretary. You have more opportunities than we did. Always make sure you have options.” My mother was a teacher and the very first person in our family to graduate from college.

I have a responsibility to make something of myself, to give back and to do better. I also have a responsibility to help others and to do my party to prepare the next generation to do even better.

Dream Job…

I am going to put it out there. My dream job right out of law school would be to join the Bank’s legal department as an attorney and my dream starting salary would be $90,000. Then, I will get to remain with an organization that I like working for, I would get the opportunity to work on a vast number of issues and I would finally get the loads of experience that I am so thirsty for.

Now some people would say that $90,000 is a low salary for an attorney in Chicago but not to me. For one, everyone who is already in the working world knows that it is hard to make a huge salary jump within the same organization. Usually, you need to jump ship to another organization and come back to make the salary that you desire. My current base salary with bonus is $60k. Plus there are other incentives that bring my total compensation package to ~ $75,830. Therefore, a $30,000 increase in my base salary is within reason with my new law degree, the tenure I have with the company (8 years) and my current and future potential. With a base salary of $90,000 and the inclusion of all the extra incentives, my total compensation package would total approximately $120,255.

Other incentives include:
Retirement – 5% match
Employee Share purchase plan
Vacation – 22 days
Bank Holidays – 10 federal holidays
Medical
Dental

Not included is the pension plan that the bank also offers. Currently, I have over $16,000 vested in the pension plan. So in the end, while I may not go and work for a mid/large firm making between $125-160k in my first year, I will still have a good compensation plan, probably have better working hours and I will be with an organization that I like working for. I really like the people here at the bank and I have a good reputation and good relationships with the people here. The only downside to staying is the lower salary but there is a lot more upside to staying with the bank.

So there you have it, I am putting it out there and claiming it. I am heavily exploring opportunities right now. It is my goal to exhaust all of my connections here before I have to make an exit. No matter what, I have six months before I really feel the financial strain. That should be plenty of time for me to make my transition into the legal department if it’s meant to be.

Christmas Spending/Fund…

Since my family AND boyfriend are amenable to a giftless Christmas, I think that I may be able to pay for the remaining presents with my paycheck. I have one more paycheck before the student loans officially start to kick-in. This means I have $400 free to buy gifts for my little cousins, co-workers, neighbors, etc.

If I am able to do this, that means that I can take the $500 I have saved for Christmas and add that to my regular $300 payment and put $800 towards my credit card debt in December. This would bring the balance down to $7,800 or 69.7% to goal. I plan to put my entire bonus which was $3,400 after taxes last year towards the balance at the beginning of February and my tax return which should be between $2,500 and $3,000. So, I am well on my way to paying off my credit card balance by April 2008.

Excellent! I hope this works out.

Another Credit Card Cancelled…

Citibank closed my Diamond Preferred Card. The letter said:

In recent review of your account, we noticed that it has been a long period of time since you last used your Citi Diamond Preferred Rewards credit card. To help better manage you credit accounts, we have closed your account.

Yeah right. Tell the truth…The cost of capital is too high to have open revolving credit to someone who doesn’t use it. So when I pay off my final credit card bill in April, will all of my credit card companies follow suit and cancel my credit cards? All I can say is we’ll see because credit card debt is the Devil and I have no plans to accumulate anymore in the future.

Private Loan Consolidation…

I am thinking about private loan consolidation. My private loans are all variable and the highest interest rate is 9.37%. I may be able to qualify for a lower fixed rate and extend my repayment term from 20 years to 30 years. It’s worth exploring.

Citibank looks like they have the most attractive offer right now. The rate on the loan will of course depend on my FICO score and I haven’t pulled my credit report in almost a year. I think that I am going to pull it through AnnualCreditReport.com and just pay the extra fee to get my scores. Before, all of my scores were over 700 but not over 760. All my credit commitments have been handled as agreed and with paying down the balance on my credit card, my balance is now only 45% of the credit limit. That should help my credit score.

I am not sure how my credit score will get impacted by cancelling my AMEX rewards card but it did not have a set limit so I don’t think it will harm me too much. I am also unsure how AT&T Universal/Citibank cancelling my card will affect my score. I hope that it doesn’t harm it because it’s not like I didn’t pay on time. I just didn’t use the card for 4 years. We’ll see.

I am going to wait until later this month or December to check my credit report/score just to ensure that the cancellations are reflected and to allow time for my paydown on my credit card to be accurately reflected.