Climbing Out of Debt

Fancy New Page

2009-08-08T18:17:00.001-05:00

Hey everyone - if you haven't already been redirected to my new site, you hopefully will be soon. I've transferred my blog to a new server and format where I'll hopefully have more control.

Thanks and see you on the blog!

KC

Saving money is a good thing...right?

2009-08-04T20:19:00.004-05:00

In today's Wall Street Journal, there was an article about how the increase in personal savings rates may end up slowing the economic recovery.

Economists are expecting a combination of falling income and higher spending (due to increased costs of gas, etc) to drop savings in the current month, however the overall trend is an increase in personal savings rates.

The general drop in net worth, currently the lowest since 1992, is pushing up the savings rates. Currently, the net worth numbers align with savings rates somewhere between 6% and 10%.

Just how does this impact the economy?

Well a 6% savings rate equates to about $700 billion that doesn't go into the economy. 10% would exclude $1.2 trillion.

Funny how things change, huh? I remember a time, not too long ago, when the topic used to be how pathetic the savings rates were.

Net Worth - August 2009

2009-08-02T11:36:00.004-05:00

A nice little bump in overall net worth this month, again helped by a pretty nice increase in the assets column as well as a decent amount of debt payoff. Within the past few weeks, I was able to completely payoff the remainder of my Bank of America debt - which felt really good. And may a pretty large payment to another credit card account. Now that Bank of America payment will be rolled into the next card which will hopefully will speed up that pay down. I realize I still have a way to go, but I can start to see the finish line from here and it's adding much needed motivation.

The debate going on in my head right now is whether to close my zero'd out credit card accounts or just leave them open. My fear is that if I close them my debt ratio increases and my rates could go up even further. The plus side to closing them now is that any damage to my credit score that comes from closing an account would not really effect me much and I'd be able to wait it out while I pay down my debt. I'll have to do some more thinking and research about this since I definitely want to end up only having two cards once I'm debt free - the ones that have treated me the best during this entire time.

Net Worth - July 2009

2009-07-18T10:41:00.003-05:00

So, I haven't blogged in a while - sorry about that. It's been pretty busy at work and I've been traveling a bit - both for work and for personal reasons. But regardless, I haven't given up on the blog and have a few updates to give, which I'll space out into a few posts.

In the meantime, let's see where I currently stand. Keep in mind, I didn't update my net worth for June so this update shows two months worth of financial data.

In the assets column, everything is going fairly well. I needed to dip back into the savings to cover new brake pads and routers for my car, but other than that my retirement and stock accounts are moving along nicely.

I'm still purchasing a set amount of stock automatically, but only at about $30 a month, looking for long positions and undervalued opportunities within today's market. It's been going pretty well for me so far as I've gained about $400 in the past month in that area.

As for the liabilities, I'm still chipping away at the student loan debt - realizing that more will be piled on once I complete my MBA. The credit card debt is something that I need to re-evaluate and re-focus myself on in the next few days/weeks. With the new credit card regulations coming this February, I've noticed my credit limit go down pretty much across the board and some interest rates rise - both due to the falling limits and the ending of low rate promotions.

All together though, in the past two months I've been able to get a little closer to having a positive net worth and that is really the end goal - so until then - I'll just keep moving forward.

Net Worth - May 2009

2009-05-04T21:33:00.007-05:00

Well I got my first paycheck, but I entered the new job in the middle of their pay period, so my paycheck isn't a "full" paycheck. That's fine and I'll make due, but I was really looking forward to putting a little of the added money from my new pay towards my debt.

In other news, stocks have started going up and some of the “bargains” that I mentioned earlier have been doing very well for me. Again, I’ve only been investing very small amounts each month – so all and all it’s not much, but I’m glad I did it.

And so it my net worth, ‘cause it’s gotten a little bit better. Once the checks even out and I start aggressively paying down the debt again it should get back to zero even faster.

But I really just have to keep telling myself that it’s not a net worth race at this point. That’s just a good way to track progress. The goal is still the erasing of all my credit card debt – and I haven’t been doing as much as I would like to lately. Still, I’m encouraged by the overall progress. If you would have asked me before I ran the numbers, I wouldn’t have thought I had made any progress this past month.

Still here...

2009-04-27T18:14:00.002-05:00

Hey everyone. Sorry I haven't posted in a while. I'll try to regain some momentum with a new net worth update soon.

In the meantime, I can only say that a lot has happened. Another prediction/goal has been crossed off the list. I went and found myself a new job. I don't have to tell you guys how hard the job market is, so it was definitely a confidence booster. Anyway, it's still early, but so far it's a big change and all for the better. I'm going to be paid a little bit more and I feel a lot more comfortable and happier in the new environment.

As for my finances, I'm still pushing on. I'm encouraged by my last net worth update showing that I've broken past the 20K mark. However, I know that had a lot to do with a bump in assets and not a big decrease in debt. So I just have to keep pushing forward.

Net Worth - April 2009

2009-04-05T18:56:00.002-05:00

Needed to dip into the emergency fund and cut back on this months debt pay down due to some school costs that cropped up. However, due to some gains in my stocks and my companies profit sharing deposit into my 401(k) I was able to gain over $6,500 which raised (or lowered depending on how you look at it) my net worth to just under $19,000.

I'm, of course, hoping to make up some ground in the next month or so to put me back on track to have $1,600 by June - but overall I'm happy with the progress. And thankful that I had the emergency account to dip into.

401k Employer Contribution Received

2009-03-08T14:54:00.002-05:00

I've been checking for a little over a month now, but it's finally here. Over $4,000 has been put into my 401k account from my employer. The contribution is based upon profit-sharing and not upon my contribution amount, which is great because in one day that deposit exceeded what I had put in there for the entire year.

Even better (for me at least) is that stocks are really down right now, so my $4,000+ infusion went directly to cheaper stocks with a big (hopefully) growth potential!

Obviously, this has really made my week!

Net Worth - March 2009

2009-03-04T00:43:00.002-05:00

Wow. That's pretty much all I can say about it. More than a $1,000 drop in the assets column. That is a pretty swift kick to you know where. But on the plus side - I erased almost $1,400 from my liabilities by continuing to pay off my debt. Also, as mentioned in my last post, my savings has passed the $1,000 mark - which makes me a tiny bit happy. But I'm not easing off the gas just yet. I need to keep working on both ends to get to a place where I feel comfortable.

The main thing I get when I look at this month's report is how nice it feels to see the debt start to peel away, month-by-month. Besides my emergency fund, I'm not concerned about the assets column at all. Again, as a 28 year old, I'm just seeing this as a great time to spend a little money buying some stocks (through 401k, Roth IRA, brokerage) which will hopefully return and surpass the levels there were at about a year ago. I'm in no rush to sell, so I'm in no rush to panic.

...but that doesn't mean I don't see what's going on...again...wow.

Savings (mini) goal accomplished

2009-03-02T12:03:00.003-05:00

At the end of 2008 I posted about a few predictions/goals that I had for 2009. Well I just wanted to give a quick update that I have reached my goal of saving $1000 in an emergency fund before June of this year.

As mentioned in the title of this post, I'm seeing this as a mini goal because a $1000 emergency fund in this economy/job market is still pretty pathetic. So I'm going to continue my savings pace and by June I should reach the $1600 mark.

Nice to have a tiny bit of breathing room though...even if it's just a tiny bit.

Not the best voice, but...

2009-03-01T10:40:00.000-05:00

Escaping Your Comfort Zone

2009-02-23T01:06:00.003-05:00

Just read a pretty good post over at BoingBoing.net and wanted to share it with all of you since it ties into my last few posts. It's a post by Danny Choo and it's titled, "Something for those who hate Mondays" - which (especially lately) would include me.

It's a pretty good post about answering the "what ifs" that pop up when you're in a bad situation and refuse to do something about it. There's a lot of fear out there lately, but the post makes you consider that maybe life is too short and random to be afraid.

Addicted to Success

2009-02-18T10:37:00.002-05:00

I'm a little delayed on this post, but I liked this WSJ article enough that I still want to write about it.

With all of the economic news, reports of job losses and my own personal struggles at work it's tough not to closely align yourself with your job. Personally, I put a lot into my work and so when it doesn't go over as well as I would like or if I were to fail/lose my job - it hurts.

In the personal journal section of last Tuesday's Wall Street Journal there was an article by Kevin Helliker titled, "You Might as Well Face It: You're Addicted to Success". In the article he explains the increased level of personal identity that many feel comes from the job and how dangerous that becomes during a recession with increasing job loss numbers.

"It's like having your entire investment in one stock, and that stock is your job...You're going to be extramely anxous about losing that job, and depressed if you do."

The article offers some of ways to counter this:

Broaden your circle of friends and colleagues
Disassociate your identity from professional status by taking pride in characteristics that can't be stripped away, such as virtue, integreity, honesty, and generosity.
Invest more time and pride in relationships with family, friends and community.

Life is too short to worry about work. You can work all day and night to get ahead, but at the end of the day - or rather at the end of your life - if you feel regret, what was it all for? I need to constantly remind myself that the idea is to work to live, not live to work.

No time like the present, no planning for the future...

2009-02-09T12:12:00.001-05:00

I was reading an article by Pat Regnier on CNN.com, called "Why saving for your future is so hard". In the article, he writes that planning for your retirement is difficult because you can't predict your future situation or how to plan for it.

He backs this up with a lot of science - which I like:

Psychologists, economists and legal scholars often speak of people as having multiple selves. This odd idea helps to explain a lot of our mistakes - we just don't always know what will make our future selves happy. In fact, we make predictable errors, says Carnegie Mellon University economist George Loewenstein, thanks in part to a mental habit called projection bias. We put too much weight on our current tastes when thinking about our future ones.

This article got me thinking about some aspect of my own life that I have a tendency to try and plan.

I read a lot and some of the books I lately I've been reading a few books on Zen and how your mindset shapes your reality. I just started reading a book titled, "Zen and the Art of Happiness" and right off the bat there was a concept that I wanted to share:

"Every event that befalls me is absolutely the best possible event that could occur."

By this, the author is basically asking you to understand that you cannot plan your life. Things happen, some things you will consider to be "good", some you will consider to be "bad". But really, you don't know what the future holds and how it will shape your life, your beliefs and your opinions of "good" and "bad".

For instance, I have been writing recently that I expect to lose my job soon. The economy is bad and I feel that my boss - whether deserved or not - is not happy with how I do my job.

Here's the thing though, I don't like my job. I don't like where I'm working or what I am doing. It's causes stress in my life and relationship. It doesn't interest me or fulfill me as a person. Why am I still doing it? 'Cause I make a living from it, I have bills to pay and it's tough to find other jobs right now. But I would be forced to re-evaluate my career, life, goals if I were to get fired, right? So maybe...

"Every event that befalls me is absolutely the best possible event that could occur."

Just a thought. With that said, I want to share a few other quotes that I feel are related to this subject (I'm a big quote guy). I wrote these down in my planner a long time ago and randomly came across them today - maybe someone's trying to tell me something?

"Whosoever desires constant success must change his conduct with the times."
-Niccolo Machiavelli (don't be scared...it's still a good quote)

"It's never too late to be who you might have been"
- George Eliot

Net Worth - February 2009

2009-02-08T13:33:00.005-05:00

Another month down and I'm pleased that the numbers show that I'm making some progress chipping away at my debt. The credit card pay down combined with a decent increase my emergency fund due to the renewed focus have my net worth being a thousand dollars better than last month. Still a negative number - but I'm starting to see light at the end of the tunnel and hopefully am picking up some momentum. At least that's what it feels like - which is good.

My tax refund should be in my account by the end of this month. If all goes to plan, this should materialize as a reached (initial) goal of $1000 in my emergency fund by June and the milestone of getting my credit card debt below $20K. Not bad for the 2nd month of the year.

I know there's still a long road ahead, but I am really starting to feel good about my finances and my debt plan. Some scary things still loom on the horizon - job insecurity, economic uncertainty, etc. - but I'm trying to plan for the unexpected now so that it doesn't set me back if anything were to happen. Something I should have done right from the start of my career - or sooner. Oh well, lesson for my future kids - if they'll listen.

Last note, I mentioned the economic uncertainty as being something that I need to watch out for in the future. However, I have to say that I am really proud of myself for buckling down and improving my finances little by little during the current economy. Each time I read a story about consumers buying less and saving more, I feel like I'm reading a story about me. It's nice to be part of a statistic that I can be proud of - instead of the usual statistics associated with my type of finances.

Anyway...onward.

Taxes - done and done

2009-02-06T10:57:00.003-05:00

So I went to bed late last night - partly because I was too stressed from work to sleep (yet again) and partly because I wanted to finish off my tax return so I could get that sweet, sweet refund I love so much.

The money is now as good as spent. In my head, I've already separated it between building my emergency fund, paying off some credit card debt and adding a small amount to my vacation fund.

As I type this, I can hear some people come to a screeching halt at the "vacation fund" reference. Here are my thoughts:

Yes, I know that in the current economy I probably shouldn't be thinking of spending money on vacations.

Yes, I realize that money may serve me better by being added to my emergency fund or debt payment - especially since I recognize that my job may be on the chopping block.

But, I need something to look forward to and when vacation does roll around, I want to make sure that it's something I'm prepared for. And, honestly, if I need the money it's just in another savings account growing and waiting for a use.

I love taxes (for now at least).

Appreciation of life

2009-01-13T07:33:00.001-05:00

Just read this post on Tim Ferriss' blog and I couldn't help but post the video here as well and say a little something about it. If you're crunched for time or just impatient forward the video to the 2 minute mark...

It's amazing how easy it is to forget how fortunate some of us are. Sadly, I'm guilty of it on a daily basis. I stress about my job, my financial situation, my future, lately I've been stressed about most everything. I worry too much about my life and spend way too much time dwelling on work and what people think of me. This type of behavior is what allows life to go by unnoticed. I should instead realize that I really I have a lot going for me.

I think this is pretty much the story for everyone, but when I was 13 or 14 years old I used to think about how I couldn't wait to be in high school 'cause it would be better then.

I got into high school and immediately started looking forward to college and moving out of the house 'cause it would be better then.

When I was in college I worked hard and looked forward to graduating so that I could make some real money and start my career and become "successful" 'cause it would be better then.

I graduated with no credit card debt, took a low-paying entry level job, applied for my first credit card and used that (and then others) to fill the gaps in my life and buy myself things that I couldn't afford 'cause I figured I could easily pay it off down the road when I become "successful".

Now I'm in that career I wanted, over $25,000 in credit card debt , and questioning what "success", in fact, even means to me and I often regret how fast high school and college went by.

And while I can't go back, I can at least try to teach myself to reflect upon why I'm looking back at all and realize that my attention should be on what I have right now - at this moment - just as it should have been at those times in my past.

Sorry for the rant - but I saw this video and this is what I thought about.

Net Worth - January 2009

2009-01-12T19:08:00.002-05:00

Near $4,000.00 increase in my net worth - not a bad start to 2009 if I do say so myself. Well don't get used to this type of monthly report. This was a direct benefit of my end of the year bonus. Now this is where you would naturally say, "Hey, wait a minute, KC...what's this bonus talk?! Just a post or two ago you were talking about getting fired. What gives?

Yeah, I lucked out. Our year-end bonus is based upon that year's profitability in terms of a percentage of our annual pay and we did okay in 2008. Now the job insecurity is based a little bit on the 2009 outlook and some other issues I'm going through - namely the perception of my performance from my superiors. Can't please everyone, I guess. Anyway, that's a whole other post.

Now in terms of my bonus and just how it affected this months' net worth update. More than 70% of my bonus went directly to paying off credit card debt. The rest helped me buy some last minute Christmas gifts for my family.

You'll notice that my retirement account went up by a little more than $1,000. I assure you I did not contribute anything extra to that account. That is soley the benefit of a small and unexpected rebound. However, that being said there are a few expected (knock on wood) things that I can look forward to in the next few months such as a tax refund and the closing of at least one more credit card account which will help me speed up my snowball. So far, so good for '09...and yes I know it's only been 12 days.

2009 Predictions

2008-12-31T11:46:00.006-05:00

Happy New Year's Eve everyone!

I wanted to spend a little time looking ahead to 2009 and outline a goal, resolution, and two predictions for the upcoming year. Some of these are not pleasant, but I want to be realistic so that I can prepare.

Prediction: I will be fired

Call it what you would like - laid off, let go, downsized - whatever you call it I believe I will be asked to leave my current job early in the new year. This belief is based on the fact that lately things at work have not been going well. I've been pretty overwhelmed and have let my supervisors know as much. And while the economy hasn't hurt our company that much in terms of billing, it has prevented us from hiring employees to help out with the workload. Things have been falling through the cracks, clients have been noticing and speaking up about it and I can't help but think that my head will be the first to roll in order to keep them calm.

I work at a very small place and I guess this just comes with the territory. I'm pretty prone to stress lately and maybe I'm over-reacting about this whole thing. Either they will be getting rid of me or I will be moving on. Time will tell which happens first.

Prediction: I will move to a different part of the country

My girlfriend hates Boston. She's been wanting to move for as long as I've known her. But she has stayed because I am here. Well I'm now reaching the point where I am feeling burnt out and may be in need of a change. I'm from New England and from what I hear from those I've met along the way - other parts of the country are a little bit slower and a lot more friendly. The only thing really standing in the way is the fact that I would have to re-apply to grad school. Which kind of goes against my 'just put your head down and get through it' attitude after being accepted to my current school not that long ago.

Goal: I will payoff more credit card debt this year than last year

Last year I paid off $7,733.70 in credit cards debt alone. I put a lot more money towards my credit cards throughout the year, however interest took my efforts down more than a few notches.

I'm moving forward with my debt snowball method and expect to be paying off a few cards early in the year. The more cards I pay off the less interest I have to worry about and the more money I can throw at what remains.

I know some people - maybe even some of those that read this blog - have paid off huge amounts in one year or less. But I'm trying to be realistic about it - and realistically - I won't be able to do that. But I will be able to make progress.

Resolution: I will save $1000 in my emergency fund by June of this year.

Now since my number 1 prediction is that I will be losing my job - it would have been ideal if I had my emergency fund already established. It would have been even more ideal if I had 3 - 6 months of living expenses saved up in order to be fully prepared for the job market and maybe even a little selective when searching for the next job. But that didn't happen and now all I can do it learn from it.

So, to start the new year, I'm going to focus on putting some money away to cover expenses should any "situation" occur. More importantly, I am going to define exactly what a "situation" is. I don't believe that I'm alone when I say that I have struggled with this in the past two years or so. I put money aside each month - and then after a few months I find some reason to dip into that fund. Sometimes the reason is something legitimate like

a car repair or hospital bill. But often times it ends up being a gift or trip that I didn't fully prepare for or worse still a whoops transfer to my checking account to cover an overdraft and the associated fee.

To be honest, in hindsight, I have made a lot of progress in my debt reduction. I shredded and haven't used credit cards since 10/14/2007. I have been making steady payments to my debt snowball and have had the pleasure of reaching a zero balance on more than one of my many credit cards. But my journey out of debt is far from over and I don't see this year being any easier than the last. In fact, it could be my toughest year yet.

Net Worth - December 2008

2008-12-06T12:47:00.001-05:00

I know, I know - I've been a delinquent blogger. Work has been ridiculously busy which is good in a bad economy (especially for what I do), but it's definitely taking a toll on my personal life (the girlfriend is not happy with the long hours) and my mental state. I've been so stressed the past few months I can't even begin to go into it.

Anyway...the worst part about being so busy is that I completely missed a net worth update. But here is my December vs. October update - so keep in mind we're looking at two months worth of information here.

Basically everything went down. Stocks were expected, the dip in savings was unfortunately necessary due to an unanticipated hospital bill (no worries - I'm fine) and credit cards are slowly being reduced to nothing.

I haven't moved begun my test with the envelope system just yet - to be honest I'm kind of avoiding it because I don't know how user-friendly it would be. But then again it was the user-friendliness of credit cards that got me into this mess in the first way, so maybe the harder road is the better road after all.

Currently, I'm trying to track all of my spending in a google spreadsheet so I can access and update it from anywhere. I'm tracking it by pay period to ensure that I budget my cash correctly and also to be able to look back on what I'm spending my money on. We'll see how it goes.

Why I'm still investing

2008-10-24T22:03:00.008-05:00

***DISCLAIMER: I AM NOT AN INVESTMENT PROFESSIONAL.

ANY AND ALL TOPICS IN THIS POST ARE MERELY MY OPINION.***

I wanted to take some time to respond to Scott, who left a comment on this month's net worth post asking why I was still buying stocks rather than paying down debt.

First I want to be upfront that I know that I go against most - if not all - get out of debt plans on this, but I believe that now is the time for someone like me to be purchasing stocks. Don't get me wrong, I'm still aggressively paying down debt. The stock purchases that I make are minor. But the fact that I'm investing at all flies in the face of most debt advice.

I believe, if your patient and smart about it, stocks are the most important savings tool you have. If something happened in 5 years and I needed to stop saving through stocks, I'll be glad that I purchased what I could now, knowing that I had a solid base to watch grow over time.

There are two reasons that I had the confidence to re-start my stock purchase plan during the early phase of the current crisis. The first reason is fear and the herd mentality.

Don't get me wrong, some really bad stuff happened. People who thought they were a lot smarter than they were decided to light both ends of a candle and hope that it would last forever (my analogy for extending credit while selling the debt in the equity market - is it working? I just thought it up). The real problem is that this bad move was compounded by the herd mentality of investors - especially 80 or so million baby boomers nearing retirement. Think about it. When something spooks you that close to the finish line, you don't take any chances. You take your money out and - again - the market reacts. Now this isn't just boomers, this is everyone really. It seems the #1 rule of investing, "buy low, sell high", is rarely actually followed.

But please don't take my word for it. Mr. Buffet is more credible than I:

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." - Warren Buffet, nytimes.com

I myself believe in this, however am still a passive investor. I don't day trade or buy hunches. I research for a while, pick a stock I'd like to purchase over time and then use dollar cost averaging. Basically, I spend the same on stocks each month through an automatic plan. This, in theory, spreads out the cost of the total stock over time and protects against market changes. So when stocks are low, my purchase power is increased.

The second reason that I restarted my stock re-purchasing plan is one of the results of the fear discussed earlier. With the market shifting so drastically, many solid stocks are now undervalued. I'm not talking about the random, never-heard-of-'em stocks that investing sites try to sell you as tips. I'm talking about big name companies that you have heard of. There are many ways to look at how valuable a stock is. And there's much debate over which of those ways actually tell you what you want to know. But, really, I was taught (in an accounting class actually) that there are three things you really need to look at - found within the cash flow statement.

How much money comes in?
How much money goes out?
What do they do with what's left over?

However, again, please don't take my word for it:

"I should emphasize that we do not measure the progress of our investments by what their market prices do during any given year. Rather, we evaluate their performance by the two methods we apply to the businesses we own. The first test is improvement in earnings, with our making due allowance for industry conditions. The second test, more subjective, is whether their “moats” – a metaphor for the superiorities they possess that make life difficult for their competitors – have widened during the year." - Again, Mr. Buffet in the '07 Berkshire Hathaway Shareholder Letter

If you couldn't tell by now, I have a lot of respect for Warren Buffet. The bottom line is that I'm 28 years old. I am paying down debt without incurring new debt (student loans aside) and I have over 30 years to watch these stocks grow. Right now I'm just learning what I can and planting some seeds - I just try to by my seeds on sale, that's all.

Net Worth - October 2008

2008-10-21T22:32:00.007-05:00

So, like I said, ouch. This may be the largest single month loss in net worth that I've experienced since beginning this blog. But oddly enough I'm not phased really or discouraged. I'm still paying down the credit card balances, however I haven't been able to throw as much money at my debt as I would have liked.

The reason for the trip back to -$30K land is due to stocks. But like I said before - both on here and on twitter - I can't realistically abstain from buying stock in this market. It's a fire sale and it's only going to get better from here...right?

Ouch!

2008-10-19T12:24:00.003-05:00

I'll be posting a net worth update for October soon. It was delayed due to a much needed vacation. Honestly, each year at this time I take a vacation and I know the argument that when you're in debt you shouldn't be spending money on vacation - but for health reasons mental and otherwise, I feel that it is important to get away for a little bit.

Anyway - I returned home to a good surprise and a bad surprise. The good surprise was a drop in gas prices in the Boston area. Currently, some prices around here have dropped a little more than 30 cents.

The bad news, which will be outlined in my upcoming net worth post, is that my 401k took a solid punch to the nose in the past month, dropping by over 20% in value.

I saw it coming, but seeing it has a different feeling than experiencing it. In the end though, I know that I'm still just building that account and that stock value dropping is just code for "buy, buy, buy".

It helps to have a little motivational article from the Oracle too...

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now."

So, with that said, onward we go.

Budget Percentages

2008-09-12T14:27:00.002-05:00

So I was visiting a few of the blogs listed on my blog roll and came across this post over at Get Rich Slowly.

I've been working on my budget lately and trying to develop one that works for me - a lot tougher than you think. I've debated moving to a cash only or envelope system, but I don't know if I would be able to do it. Maybe I'm just afraid to commit to a set amount - but it seems like you can't really make solid progress unless you are willing to make a commitment and just stop when there's no more money in that envelope. Sure it seems to be common sense when written, but I can't help thinking that it's a lot harder than it sounds.

Anyway, in his post he mentions the book, The Only Investment Guide You'll Ever Need and the percentage breakdown that the author lists.

So I started to wonder what my current savings and debt payment percentages are:

Savings: 7.7% of monthly salary (including 401(k) it rises to 11.68%)
Debt: 39.6% of monthly salary

The debt makes sense since I'm trying to pay it down and therefore I guess the savings being so low makes sense too. I think it would be counter-productive if my savings % was anywhere near my debt %.

Has anyone else taken a similar look at their budgets?

Net Worth - September 2008

2008-09-05T17:25:00.002-05:00

More than doubled last months net worth increase!! ...you have to keep your sense of humor about these things, right?

Anyway, slight set back as I had to dip into my savings to cover some books, etc for grad school.
Honestly, it's a shame how much textbooks cost and what schools make you do to ensure they get as much money from you as possible. In lieu of a text book for one class I had to purchase a handout packet from the school bookstore (only place it's produced and carried). That photocopied packet cost $200! So much for googling for used textbooks. It's a shame how higher education is a business. Another example, book versions/editions. Next time you get a chance to look at two consecutive editions of a textbook try to find a reason they needed the new edition.

I'm able to make some higher credit card payments now and one of my student loans has been deferred. Sure I'll have more loans to payoff once school is done, but 1. I'll worry about that when I get there and 2. they'll be lower interest than credit cards and the interest that is there will be a tax deduction. So I don't mind deferring for now.

More posts to come soon - I was pretty lame last month. But I have a few things I would like to research/discuss in the next week or so...

Net Worth - August 2008

2008-08-03T17:05:00.001-05:00

Only a $7 increase in net worth this month, but overall I'm still happy. The car is officially paid off, the 401k is rolled-over (though lost some money due to a rollover fee and I wasn't fully vested) and the savings account is climbing back up to mini-emergency level.

Now that I don't have to worry about a $250 car payment each month it'll be interesting to see how much that effects my debt pay down.

New 401k

2008-07-11T15:21:00.002-05:00

So, I signed up for my company's 401k plan this week. I planned to contribute only to the match, since I am still working to pay down my debt. However, I learned that my company does a year end profit sharing contribution instead of a match and it is based on your salary and not affected by your contribution percentage.

I am new to the profit sharing concept, so I asked about 15 what-if questions just to be sure I wouldn't miss out on any free money. Just to be safe and because it really wouldn't hurt that much, I decided to contribute 5% per pay period anyway.

It's a little under $80 a paycheck and I'll forget it's even being removed in about a month or two.

I know it's kind of breaking the common debt reduction rule, but on the other hand I have a lot of years for that $80/week to grow into something before I need it.

My next step is rolling over my $8,000+ 401k from my previous job. Having never done that before, I'm sure I'll be asking my HR person another 15 questions about that within the next week or so.

Lastly, yes I know the argument that the growth on my 401k account pales in comparison to the money I am bleeding by paying credit card interest rates. But I feel good about contributing right now - even if just a little - and once I pay off my debt, I plan to put savings and retirement savings into overdrive to catch up slightly. That's the plan at least.

Net Worth - July 2008

2008-07-09T18:09:00.002-05:00

Okay - I'm back under 30K for my net worth. Or is it 'above 30K'? Whichever one means I'm doing better - 'cause that is what's happening.

Though it's just barely, so maybe I jinxed myself and next month will swing back the other way slightly (not due to CC spending of course, but due to stock losses, etc...). Either way, I'm continuing a path of overall improvement. I boosted my savings/emergency fund - which is still a continual work in progress - have paid down some credit card debt and am looking at my last car payment for what is hopefully a long time.

You'll note my pre-tax brokerage (401k) hasn't changed - I don't know if that's accurate or not. It turns out my former company, which still holds my 401k, is in the process of changing the company which manages the accounts - so I don't have new login information yet. But it's fine, because my open enrollment period for my current company is this month anyway.

I plan to roll it over and am considering contributing again. Now, yes, I realize I haven't paid off my debt and that I should focus on that, but I feel that I'm leaving free money (company match - which is in the form of profit sharing) on the table by not contributing.

What are your thoughts?

My 100th Post: Stimulus Payment Received

2008-07-01T13:08:00.003-05:00

Not a long post for my 100th, but I wanted to give a quick update that my stimulus payment came in the mail today and I've already deposited it in my account. As soon as it clears it's going towards credit card debt.

Woo Hoo!

The Blog of Tim Ferriss

2008-06-18T16:18:00.006-05:00

I've just started reading The Blog of Tim Ferriss and think that I'm going to pick up his book, The 4 hour work week soon. I'm just starting to read up on him, but so far he seems like a really interesting guy with a lot of good thoughts/ideas/rules to live by.

I especially liked his Not-To-Do List (bullets below are my thoughts):

1. Do not answer calls from unrecognized phone numbers
I currently follow this rule - I'm not a big fan of telemarketers and if I haven't taken the time to load your info into my phone, chances are I don't want to pick up the call...sorry.

2. Do not e-mail first thing in the morning or last thing at night
I try not to do this, but I have e-mail on my phone now - so sometimes I respond to e-mails on my ride into work. But I have programed the phone to not retrieve e-mails during the night - so I get points for that at least, right?

3. Do not agree to meetings or calls with no clear agenda or end time
I want to do this. Sometimes it's difficult since I'm still at a fairly low level and don't really have a choice in how some meetings are put together. But that being said, I do run my fair share of meetings - so this is a goal that I should incorporate and work on moving forward.

4. Do not let people ramble
Sometimes you can't help this one - but for those people that I know which have a tendency to ramble I know that I approach them a different way than others.

5. Do not check e-mail constantly — “batch” and check at set times only
Like I said, I now have e-mail on my phone. And although there's a clear and definite argument against what I'm about to say, I'll say it anyway. I believe it makes my slightly less stressful. I never liked walking into work and seeing e-mails which were waiting for me like bombs on my desk. Now when I get them on my phone I have time to think about them and figure out what approach is needed. Now, some might say that having time to think about it is bad but this works for me so far.

6. Do not over-communicate with low-profit, high-maintenance customers
I like this rule and am starting to work on it - at least as much as my company will allow.

7. Do not work more to fix overwhelm — prioritize
I am definitely working on this one right now as well. My department just saw 2 people walk out the door to join other companies within the past 3 weeks - and since we're not a very big company to begin with - my workload has just tripled. I'm trying to organize, prioritize, and delegate - this has not been a strong point of mind in the past.
8. Do not carry a cellphone or Crackberry 24/7
Most times I carry it - sometimes I do not.

9. Do not expect work to fill a void that non-work relationships and activities should
I have no problem with this rule. I understand - maybe now more than I did when I first started out - that a job is just a job and life is too short for it to be more. The problem always comes out of you need things in order to have a good life. And yes - people will disagree with this. But at a very basic level you do need to do well at your job to afford a "good life" and sometimes that includes extra effort. Now I don't want to have a mansion or a private jet - but I do want to earn enough where I don't have to worry and can provide for my current and future family if needed and when called upon. And currently, I need to do well to earn as much money as I can in order to climb back to zero.

He goes into the details of those steps in more depth on his blog, but I think they make sense if you're trying to figure out how to get the most out of your workday and your personal life.

Though I can't imagine only checking my e-mail twice a day would get me into some trouble at work...but I guess that's the point of the site (not to get people in trouble, but that the steps are unconventional and scare you a little bit).

Response to Comment

2008-06-17T14:23:00.003-05:00

"After you pay your car off, don't you think you should build a small emergency fund up first then start snowballing the cc debt?--your savings seems a little small --shouldn't it be it least 500? just a thought."

- Donna (6/16)

So I got this comment from Donna on my last net worth post and although I'd like to have a smart reason to disagree with what she says - the fact is she's right.

To be honest, I had never saved up an emergency fund. My last $1000+ fund was due to a nice tax refund. This year, through a mistake of my own, I did not have a refund to distribute.

My weakness is that I'm in such a rush to pay down this debt and be done with it that I'm not being realistic in terms of how much I can afford to put towards it at one time. I'm setting myself up for a fall and, in some ways, I have been falling. I have stretched myself so thin a few times that I have been hit with overdraft fees at my bank. Those fees are $30 a hit.

I need to be smarter about my pay-down and I do need an emergency fund - so I'm going to dedicate a little more money to building that fund up.

Thanks for keeping me in line, Donna. This is exactly why I have this blog.

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Net Worth - June 2008

2008-06-04T12:32:00.001-05:00

Quick update to go along with the chart - I'm done with my insurance payments for my car, at least until the policy renews in September. So that's about $65 - $70 each month that I can now (starting next month) put towards credit cards. Also, as I've been pointing out for the past few months or so, I am now just two payments/months away from owning my car. And equally - if not more - important is that I'll be able to put that $250 a month towards my credit cards. Woo Hoo!

The Search for Stimulation Continues

2008-06-03T08:32:00.004-05:00

Just a quick update on my stimulus payment (or lack thereof) - I still have not received it. Though, my girlfriend, who about a week ago received a letter (which I have not received) saying that her payment would be sent out on 5/30, got her stimulus check yesterday in the mail.

So even though she filed electronically, she received a check in the mail. I'm not sure why - no letter came with it giving an explanation, but regardless, she got her payment. Where the heck is mine?! (by the way, I filed about a month before her)

Blame Credit Cards For High Gas

2008-05-14T15:24:00.000-05:00

...well a little at least.

According to this article on CNN.com:

Buying gasoline with a credit card could be hurting your local independent gas station owner - and you may have to pay for it.
That's because credit cards charge merchant fees in the form of a percentage of sales - and those fees eat into the fixed per-gallon sum that gas retailers tack onto pump prices.
Some stations raise prices in order to keep profit steady.

It makes sense. All I know is that I'm glad that I now have shredded all my credit cards and have taking public transportation to work for a full year now. The timing seems to have worked out in my favor.

...still not stimulated

2008-05-14T10:48:00.002-05:00

Still no sign of my economic stimulus check. No answers from the IRS' "Where's My Stimulus?" online tool either.

I think I will be receiving it electronically, but maybe not.

Congress vs. Credit Cards

2008-05-07T13:43:00.003-05:00

Interesting article about the credit card regulation on LAtimes.com today.

Among other things, the regulation asks for:

Bills to be mailed out 21-days prior to due date
An end to the practice of applying payments only to balances with the lowest interest rates (leaving the higher rate debt in full)

But what I found to be one of the best excerpts from the story was:

Just ask Victoria Ramirez. The San Jose elementary school teacher once had as much as $45,000 in debt on six different cards.

Now she and her husband have whittled that down to a balance of about $10,000 on a single card.

Ramirez, 37, said card issuers make it all too easy to get into trouble.

"They loan you a big amount of money that you can't take care of," she said.

This isn't so different from what's happening in the housing market. One reason so many people are in danger of losing their homes right now is because banks handed out high-risk loans to folks who had no business getting deep into debt.

To be sure, many such loan recipients deserve a share of the blame for being so reckless with their personal finances. But they wouldn't have gotten into trouble without the willing complicity of lenders, which encouraged virtually all home buyers to take the plunge, regardless of their ability to repay loans.

While I agree with that - I'm most impressed by her debt reduction. They don't say how she did it or what the time frame was, but debt reduction is debt reduction and I can't wait to join the club.

Also, I just want to call out that I don't think that the debt crisis is the credit companies fault. And I don't think that they are to blame for my situation either. I think we should all be responsible. But drug dealers that don't do drugs still go to jail, know what I mean? Sure people have to be responsible for their actions, but they should not be enabled to ruin their lives.

I can't wait to stimulate my debt

2008-05-07T13:00:00.003-05:00

I used the IRS' online stimulus calculator and it looks like I'll be getting the full $600 soon. And I know it's supposed to come this week by using their online "when's it coming" form.

How twisted is it that I can't wait to get this money so I can pay off some debt and not buy myself something new and shiny!

Net Worth - May 2008

2008-05-07T12:40:00.002-05:00

I'm plodding along - that's for sure. For the most part, debt is being reduced and assets are being increased. I did have to dip into savings a little bit in order to pay for some bank fees and budgeting mistakes, but all and all I'm slowly making progress.

Karma

2008-04-21T16:02:00.001-05:00

http://www.guardian.co.uk/feedarticle?id=7476762

Financial Aid Package Received

2008-04-18T07:44:00.002-05:00

I received my financial aid offer yesterday for my MBA - it's going to take me a day or two for me to do some research and figure out what's what, but it seems like a pretty solid package.

The part time program will cost just under $20K a year and my loans - split between subsidized and unsubsidized - came in at just above $20K a year. So, while I know the plan is to borrow less money, it's nice to know that's it's there. Now I just have to figure out how to use it and what the best way to use it is. Either way, it's a big relief knowing that I have some help from Uncle Sam (regardless what some might say about him or his programs).

Also, thank you for all of the e-mails, comments and support that came with the news of my acceptance. It was nice to read and I really appreciate it.

...really?

2008-04-16T20:54:00.004-05:00

So I don't know if you've seen this commercial or not, but I had to see it a few times until the tagline actually sunk into my head - "Chase what matters".

I'm not really going to go deep into this post, but I just thought it was a funny thing for a credit card company to say. Can't believe I didn't catch it sooner.

My Absolute Hatred of Bank of America

2008-04-16T15:06:00.003-05:00

I closed my Bank of America account this week after being hit with yet another round of fees. You know the kind they dish out...overdraft fee due to an inter-bank scheduled transfer, then another fee for there not being enough to cover the overdraft, and another one for the fee that is added to the other fee...and what the heck...give us $20 for looking at our website...

(I try to keep my blog G-rated - even though in person, I may not be - so please view these links with caution as, depending on your personal sensibilities, one or two of them may be offensive either in text or graphics)

Anyway, I'm not when it comes to my feelings for Bank of America.

In fact, they even have T-shirts for the feeling...

Money Management Software

2008-04-15T09:56:00.002-05:00

A few years ago I bought Quicken in an effort to better track my spending and create a budget to save some money. I barely used it once I updated my account information. It was just too much and to be honest I didn't really find it too user friendly.

Years - and thousands of dollars deeper in debt - later I again decided to try some money management software. This time it was Microsoft Money Deluxe. I've been giving it some tries, but again I'm not finding it the easiest thing to work with.

I think I would like and really benefit from a program like this - you can only do so much from a spreadsheet. Am I just not getting it? Has anyone else experienced headaches with these programs?

I think I'm most interested in the debt reduction plan, cash flow analyzer and seeing my spending in a birds-eye view so I can see what I can cut back on and what I need to re-assess.

Net Worth - April 2008

2008-04-12T11:45:00.003-05:00

The slow and (hopefully) steady climb continues. Again the most exciting thing from my net worth report is that my car is almost paid off. I can't help but keep thinking how great adding that money to my debt payments is going to feel.

Within the next month or so, I should learn what my financial aid package will be for grad school - I'd be lying if I said I wasn't nervous. Even though I live on my own, I bring in a fairly good salary and personal debt isn't taken into account when deciding how much support a student will need. I've already begun to look at my budget to see how I can make it work harder for both my debt payments and in preparation for school in the fall.

I can't believe I forgot to tell you guys this...

2008-03-19T13:56:00.004-05:00

I got into grad school!

After taking the GMAT twice and laboring over more essays than I would care to write about myself I have been accepted to an MBA program here in Boston.

I'll be starting in the fall and will be going part-time and have applied for financial aid, but haven't heard back on how that will turn out. I make about $49K, so my thought is that they won't be too kind to me - it's a shame that debt isn't taken into account on those applications. Yes I make $49/yr, but I owe over $30K - so really that means I make about $29K/yr. I just made that up - but those of you that have or are experiencing credit card debt know exactly what I mean.

Anyway - this throws a little wrench into the whole life/finances/debt paydown, doesn't it? But really that's fine. First of all, I'm excited to go back to school and learn. Second, it will (hopefully) increase my earning potential. In fact, I see this as the best time to be in school. During the recession (and yes, let's be honest, it's a recession) I will work towards my MBA and hopefully in 2-3 years the recession will be over just in time for graduation.

Well that's the plan at least...so in the future, my posts will have a new aspect. The in-debt, overworked blogger looking for a way out. Sounds exciting, no?

Net Worth - March 2008

2008-03-15T11:23:00.002-05:00

I'm in the middle of transferring my stocks from one brokerage to another because I'm frustrated with the customer service at Etrade. I'm not even an active trader so either their customer service is really lousy or I just don't trade enough for them to care. Either way, I'm out and my account is in limbo until the other brokerage confirms everything.

As for everything else, slow and steady I guess. I'm most excited about the car payments. I'm almost done and the car still runs (knock on wood). I can barely wait to put that monthly payment of $250 toward something else - whether it's credit cards (most likely) or quickly building back up the emergency fund.

Reason #18927 To Get Out Of Debt Fast

2008-03-05T09:45:00.003-05:00

So, I often listen to NPR whenever I'm in the car - and now that I take public transportation most everyday I download their podcast and listen to it while I'm on the T. Last Friday's podcast contained a story by John Dimsdale titled, Foreign investors pulling out of U.S. Basically, foreign investment in US stocks is down 12% from last year - and that 12% is the most significant downward movement in recent history. While that may come across as not very important to someone that doesn't have heavy investment in the stock market or a publicly traded company - it ends up being very important to someone that had a lot of credit debt and little savings.

Not all foreign investment is leaving. Foreign companies and sovereign wealth funds are taking stakes in private equity firms and other U.S. companies, but Global Insight economist Nigel Gault says the foreign flight from U.S. securities means in the future credit will be more expensive and Americans will have to rely increasingly on their savings.

Ouch - as if I needed more reason.

Net Worth - February 2008

2008-02-10T20:13:00.001-05:00

Well - apparently I became too aggressive in my debt reduction plan, which became costly due to my lack of an emergency fund. So going forward I am cutting my larger credit card payments slightly and placing the difference into a debt elimination account. That account will act as my mini-emergency fund account for now.

Also, speaking of emergency funds, (or the lack thereof) it turns out that I made a mistake in filling out my W4 when I started my new job this summer (figures - since I hadn't filled out that form in in over 3 years). Anyway - according to me I messed up and ended up owing money on my federal taxes and barely getting anything back on my state taxes. So that means no quick emergency fund builder or large debt payment to start off the year. Disappointing, but c'est la vie.

My Need A Tax Professional This Year

2008-02-02T08:43:00.001-05:00

So, I received both of my W2 forms within the past week or so - and needless to say - was very excited to fill out my taxes and claim my refund. I input the first W2 and it shows that so far my refund is $1,600 (NICE!). I input the 2nd W2 and, all of a sudden, I know owe $193! What gives?!

Just to check, I delete the first W2 - letting the 2nd stand alone - and then it says that I'm owed a refund of $673.

I am so confused. Separately, my W2s show that I'm getting refunds - combined I owe almost $200 to the government.

This has to be a mistake, right?

----
UPDATE: So I scheduled a meeting with a CPA to review my tax situation. Hopefully, everything works out. He said it may just be that I've entered a different tax bracket, but I don't think that's the case since I still make under $77,100 a year. At the very least, maybe he can show me a few areas where I can make some additional deductions or help me plan for 2008.

Time To Buy?

2008-01-24T12:03:00.000-05:00

So with all of the recent excitement that came from the Federal Reserves decision to cut the interest rate by 3/4 of a percent I, of course, started debating whether I should consider taking advantage of some favorable mortgage offers.

But after spending some time thinking things through - I have decided that now is not the time for me - even though it may be more doable rate-wise. Here are my reasons for passing - in no particular order:

I have little to no savings

I'm in the middle of my big credit card paydown plan, so I haven't really been worried about building my savings at all. I'm planning to use some tax refund money to bring my emergency fund back up to $1000, however the rest will go to debt and I plan to keep my focus there for the near future.

I don't know if I'm here for the long-term

I was born and raised near Boston, went to school in Boston and have worked and lived in Boston since. Part of me likes it - and wants to remain close to my family, but another part of me knows that the longer I wait to move somewhere and try something different - the more difficult it will become. Sure I could buy a house, live in it for a few years and try to sell - but I'm not going to pretend that I know what I'm doing and that it would be that easy. I could rent it out from out of state - but that too would most likely proof to be difficult.

Less than desirable credit score

I pulled my annual free credit report this week and can't say I was surprised. I have a lot of debt - we all know that. I'm currently paying it off and not opening new accounts, so I know my score will only go up in the future*. But for now, my score is a 705 and that makes the rates that I would be able to get on my own less than desirable.

Property taxes, etc...

As a current renter, I have no idea really what to expect with home ownership. Sure I can read and ask people questions, but each situation is different and I want to be sure that some minor (or major) setback won't absolutely kill me or my finances.

So, it looks like no home purchase for me. Don't get me wrong - I may still look and even go to an open house or two, but I won't be buying anything soon.

* I say that I know that my credit score will only go up in the future, but that may not necessarily be true. Only because I have a strong desire to cancel a lot of my credit card accounts. Especially the most recent ones - that way I still have the long-standing credit history that comes with some of my first accounts and I limit my risk to identity theft (a.k.a. absolute disaster). I know a lot of people will say that closing accounts is a bad idea - but, my thought is that if you don't use your credit cards - already have a fixed mortgage and can afford a 7-10 year wait for credit score improvement - why not?

Net Worth - January 2008

2008-01-11T13:35:00.000-05:00

Well, here we are, 2008. I've updated my monthly budget to reflect an all out attack at my credit card debt. Those of you that have been reading my posts, know that I have decided to focus most all of my money at knocking off my debts one-by-one. I have knocked off one credit card so far (7 credit card in total - 5 to go) and am now focusing as much money as can be spared toward the card with the lowest balance.

I'm using the debt snowball method now. So, I've adapted my 2008 Budget/Spending Outlook to reflect increased payments due to paid-off loans as I go. This (hopefully) will help me not only keep on track, but see this plan in a realistic light. I will not be debt free in 2009 - barring any new-found luck in the lottery (and yes I know the lottery odds and how it's bad and so on...), but I will be closer. And as that's a very good thing.

My decrease in savings is due to a car repair and a debt payment. I'm hoping to use some of my tax refund to replenish my emergency fund to $1000. Whatever is left I will put towards my large debt payment.

Net Worth - December 2007

2007-12-10T15:47:00.000-05:00

Barack Obama: The Credit Card Candidate?

2007-12-04T13:09:00.000-05:00

Presidential Candidate, Barack Obama, has spoken out against credit card companies:

‘‘The truth is, our middle-class families are not going to be secure so long as they can’t get out of debt,’’ Obama said Monday, sharpening the populist rhetoric of his presidential campaign. ‘‘If we’re serious about stopping Americans from falling deeper in debt, we’ve got to crack down on predatory credit card companies that are pushing them over the edge.’’
Obama pointed to studies showing that consumers have an average personal debt of more than $8,000, a load driven higher by credit cards. He said soaring credit card debt could turn into a crisis as big as the one in the subprime mortgage industry.

Now I am not saying that my debt isn't my fault. The debt that I have accrued is 100% mine. But it's good to know that a presidential candidate is interested in looking out for people like me to make sure that no one (and no credit card company) kicks me while I'm down.

I haven't been close attention to the candidates just yet, but this has definitely piqued my interest.

Avoiding Holiday Overspending

2007-11-29T00:07:00.001-05:00

So, towards the beginning of the year I had actually made a smart decision. The decision was to wise up and follow through on something. This particular idea was one that I usually think about after I've completed my Christmas shopping and analyze just how much more debt I have piled on. Begin saving for Christmas by setting up small automatic deposits to a separate account and then when it comes time to buy gifts there is money waiting.

So, again, I actually did it and so now the goal is to stick to the budget. Now, interestingly enough today I read an article on CNN/Money that was about just that...

It was titled, "Top Tips: Debt-proofing Your Holiday" and it lists 4 tips. Now it's a Gerri Willis article, so it's already pretty short, however I'll quickly sum it up (and toss in some of my own thoughts) anyways.

Tip #1: Get Organized
Two-thirds of Americans didn't bother with a holiday budget last year
Almost three in five don't plan one this year (both from Consumer Reports)
Some financial planners recommend you don't spend more than 1.5% of your annual income on gifts.

Again, proud to say that I'm already doing this and only by coincidence am I almost close to that 1.5% mark. I saved about $600 for gifts by putting aside a little each paycheck. 1.5% of my net annual income is slightly over $700. Personally, I would like to sock away about $1000 just in case anything and anything left over would be rolled into an additional credit card payment.

Tip #2: Think outside the box

You don't always need to spend a ton of dough on presents. Think about curbing all those last minute gift impulses by giving a donation to charity in the name of your friend or relative.

Don't get me wrong - I'm all for charity - but there is something that just doesn't sit right with me when I think of sitting down to exchange gifts with someone and giving them a card saying money has been given to a charity of my own choosing in lieu of a gift. That option just isn't for me - sorry if I seem shallow or insensitive. I gave to my church and to St. Jude's Hospital regularly in past years (reduced/ended contributions to focus on debt), I just wouldn't do it as a gift.

I've also tried spending to set spending limitations with people - didn't go over well, so that ended that. It's not that they didn't understand that I didn't have money to 'go crazy', it's that they didn't want to be limited in what they could do/give me. Again - it's more 'keeping up with the Jones'' , but it's embarrassing to be given such gracious and sometimes expensive gifts when you don't have something in kind to offer.

Tip #3: Compare Prices

You can save time and money by shopping online. Plus, you won't be tempted by all those "Impulse" purchases at the store.

To do some comparison shopping, go to shopping.com and bizrate.com. These sites let you compare products and deals. Plus, if you do decide to shop online, you can often get free shipping.

I'm doing most of my Christmas shopping online - it's easier to keep track of my spending and compare prices. However, I definitely don't think it saves you from impulse buying. The impulses are still there and in some cases stronger.

Tip #4: Get the best reward card

If you don't carry a credit-card balance from month-to-month and you have a good credit score, getting a rewards card that pays YOU back is a nice way to get something back from your holiday shopping.

...yeah, no comment. ; )

The Great Credit Card Paydown

2007-11-27T23:21:00.000-05:00

So, as I've always mentioned, I'm not claiming to know the answers to getting out of debt - this is evidenced by my attempts at climbing out of debt and the failure I encountered.

In fact, as I type that I see how debt is like the Greek myth of Sisyphus who's punishment from Zeus (for trying to be on the same level as the gods - Sisyphus was mortal) was that he roll a huge rock up a steep hill, but before he reached the top of the hill, the rock always escaped him and he had to begin again.

Not that money makes gods of people, but you can't deny that having money - true money, not available credit - is a powerful thing. And they say that to err is human and what is now more human (or a bigger error) than credit card debt. As 'humans' we pretend to be on the same level as those with money - spending borrowed money in an effort to keep up or show 'purchasing power'. However, we are then only punished with having to fight a seemingly endless battle with that debt. Pushing the rock up the mountain only to lose our grip and watch it roll all the way down again.

...too deep? Eh - it's late, whatever.

Anyway, so I was reading a few bankrate articles on improving your credit score and I seemed to either have lost site of the fact that an important factor is keeping the cards around 30% spent in order to not lose any points on my credit score (some articles say around 50% is okay). After doing the math this evening, the 6 remaining credit card balances that I am dealing with are 97%, 93%, 89%, 83%, 78%, and 34%.

Not good.

A while ago I read Dave Ramsey's Total Money Makeover (on sale now for $10 on his site...wink.) and, honestly, I wasn't overly impressed. It seemed like 200 or so pages which could basically be summed up with the sentence "Just pay it off". However, maybe I read it wrong since Mr. Ramsey seems to be doing fine (yes...he does accept credit cards...another wink) and has a fairly large fan base. I don't know - I just feel that debt is more a mental thing than anything. If paying it off were that easy - everyone would do it and no one would need advice, support or...ahem...a blog. But it's not easy, it's really hard and I think most books don't address that. Anyhow...

Mr. Ramsey says to pay down your debt with the lowest balance first - and the term he uses to describe how to approach this debt pay-down is "gazelle intensity". While, being from Boston, the metaphor to me is a little odd - I do understand what he's saying and have decided to give it a try.

Those of you that have been reading a long know that I'm not a great budgeter and prefer to set up automatic systems as a way to dummy-proof things. So I'm going to refer to a basic budget that I had been piecing together and max out payments to the lowest percentage debt and work my way up to the top. With the help of an expected (knock on wood) Christmas bonus from the new job - I plan to have the first debt (34%) gone by the end of December. The next debt, with the help of another small and expected windfall in the form of a tax refund should help me eliminate yet another debt by February depending on when I receive my W2.

It's exciting to think of this new plan and to actually watch chunks of debt go away - but I know that regardless of the plan, the amount that I have to work with (my paycheck) doesn't change and that it will take time, perseverance and some of that mental toughness that no one writes about...well...except for a blogger or two.

Britney Spears Doesn't Save Money

2007-11-02T09:30:00.000-05:00

I may not make as much as Britney Spears does in a month - reportedly $737,000 - but by the time we're both old and gray, I may be in better financial shape than my former, repeat former dream girl.

Net Worth - November 2007

2007-11-01T09:38:00.000-05:00

It's strange - I feel good now that I'm back tracking my net worth and beginning to write blog entries again, but I also feel frustrated to be almost starting out again. At least that's what I feel like in terms of the credit card debt - but at least now I have the beginnings of an emergency fund.

Some of the numbers between this month and last are slightly inaccurate since my October update was created a little late - so this month's update doesn't count some payments that will go through soon. But those will be reflected in next month's review.

Net Worth - October 2007

2007-10-17T17:25:00.001-05:00

Response to Anonymous & Jay...

2007-10-14T08:33:00.000-05:00

During my September Hiatus I received a few comments from some readers of the blog and though I read, consider and appreciate all comments, I felt that these two deserved some form of formal thought/response. They also helped me to shape some recent adjustments to my debt elimination plan.

Anonymous said...

KC I am ashamed of you, look at all your debt!!! pay some of it down, Kenny Chesney will be there next year... for now pay your bills.. and do you really have to go to the wedding ? come on ! its just a wedding... 4 hours of food and drinks and boring traditions.. just stay home and have them send you a copy of the video.

Yes, I realize that in order to achieve any goal - especially one as important and daunting as escaping major debt - you have to make sacrifices. Maybe I shouldn't have gone to the concert, maybe I shouldn't have gone to the wedding. But really, I can't go about this goal by punishing myself, my friends and my family. Yes, I have to do a MUCH better job of living within my means, but going to that concert was the highlight of my girlfriend's year so I don't regret it. And getting married is a monumental event in someone's life and I feel honored to have been made a part of it.

Jay said...

You want to get out of debt and you still have a credit card you are using? HA! You aren't serious about this yet.

CUT IT UP and close the account.

You'll never get out of debt while you still have one and keep charging to it.

I agree. As of this morning I shredded my remaining credit cards - all eight of them (3 mastercards, 2 visas, 2 amex, and a discover). It's clear to me that I have an impulse buying problem. So here's my plan:

Now without credit I will have to seriously consider whether I what I want to spend my $200 per pay check spending allocation on in order to make the money last. I have an emergency fund of about $1,200 - not even one paycheck, but it's still growing and hopefully I won't have to tap into it anytime soon. As for Christmas spending, I've been putting some money aside every month to prepare. If I ever feel that I need to use a credit card for something I can contact the company saying that I need a replacement card. This will give me 7-10 days, while I wait for it to be delivered, to decide whether I really need to use it and if there is another - better - way to get it done.

Thanks for the comments! Whether it's support or critique it shows that people care and I really appreciate it.

September Hiatus

2007-10-13T13:01:00.000-05:00

To everyone that has checked in to find out where I've been - I'm sorry I left the blog unattended for so long.

I have been extremely busy with the new job and as a result my blogging had dropped off. Unfortunately, along with the blogging went the tracking of my progress or lack thereof.

I'm going to try to re-commit myself to my goal. Re-focus my approach and establish milestones as I have been thinking that erasing all debt is a very intimidating thought when you are starting from scratch and it's easy to feel overwhelmed and discouraged. But hopefully, by setting short-term goals and milestones I will be able to attack this debt little by little and move on with my life.

I hope I haven't lost everybody - as I will need the help.
Thanks for caring.

Please let me know if you have any recent news or tips to help me re-start.

Sincerely,
KC

Net Worth - August 2007

2007-08-07T21:27:00.000-05:00

Sorry for the delay - due to the new pay check schedule most bills of mine are now getting paid during the first month of the week. So I wanted to wait for some of the checks to cash before tallying up this month's net worth.

Like I said in my last post, July/August hasn't been the best of times. But, I never expected this stuff to be easy, nor did I truly expect my net worth line (located on the right hand column) to skyrocket straight up month-after-month. It would have been nice, but not realistic.

The main thing is that these past few months have served as a wakeup call and reinvigorated my desire to pay down this debt. I want to have the freedom to buy a home - maybe some rental properties. I don't know really - but basically the key word/phrase is that I want freedom.

I can't get to August fast enough

2007-07-23T12:09:00.000-05:00

July has been hot, humid and steamy which has made it uncomfortable. But this July has also made my finances uncomfortable. (...stretch?).

First the missed Citi Payment. Then the 2nd half payment for Kenny Chesney tickets (yes, it's out...I'm a country music convert - I will either gain or lose an audience for this. Ha!). And to top it all off, I still haven't found an "affordable" flight to the west coast for my friend's wedding in late August. Flights have been in the $400 area for about a week or so now and I'm beginning to think that's where it will stay until after the wedding.

Oh well. I think the lesson learned this month is that sometimes you just have to say, 'okay - minor setback' and then just push forward. August is not only another month with 2 more paychecks, but I'll be receiving my security deposit from my soon-to-be-former landlord.

...Whoops.

2007-07-12T14:56:00.000-05:00

I don't know how it happened since I have my bills sent directly to my bank, but somehow I let a payment to Citibank slip. And man, did they let me know it. I kept getting calls to my cell phone from a random number (816-420-1002). Since it was random, I don't pick up and they wouldn't leave a message. So I do what I normally do when I get "a random" - I googled it.

Turns out - this was a popular number. It was Citibank calling to collect PAST DUE money!
WHAT?! I couldn't believe it - so I raced to Citibank's website to look at my account. My monthly payment has skyrocketed and my APR went from 0% to 34.99%!

I immediately issued a payment to remove the entire balance (transferred to the card linked to my checking - so it would be fast).

I then went to check out Citibank's stance on universal default...luckily they opted out of the universal default practice before this happened, but still. 34.99%?! Really?

All I keep thinking about is the line I read in the story I linked to before that said, "Citi said the changes were part of its ongoing efforts to "put our customers first."'

Again...34.99%?!

Oh well - I guess at the end of the day it's clearly my fault, but luckily I had the flexibility to do something about it right away. I'm sure there are many people that would be in much worse shape had they been completely maxed out and had this happen to them. I don't even know how you would begin to dig out of an APR that big in combination to other debt.

Oh well...lesson learned...onward.

My Dog Hates Credit Cards

2007-07-12T09:21:00.001-05:00

Last night, my dog tried to help me in my fight against credit cards and debt. Though, she took a few "innocents" along with him. I fell asleep on the couch last night, before I put her in her crate and she ate my wallet - or at least a quarter of it.

She ate my emergency credit card and my debit card. As well as a few other things, but thankfully no money or checks.

Oh well, I needed a new wallet anyway.

(by the way, I'm about 1/2 way through reading the Dog Whisperer's book, "Cesar's Way" - so hopefully the eating of wallets will soon be a thing of the past)

Star Spangled Sweepstakes Blues

2007-07-09T21:26:00.000-05:00

So in May I bought one (and only one) of the Massachusetts State Lottery's $20 Star Spangled Sweepstakes tickets.

And last Saturday, I had it scanned at a convenience store because I'm paranoid about stuff like that and don't trust myself - so I like to have my tickets checked.

The guy behind the counter scanned it, checked the ticket, called his brother (I'm assuming) over, they checked a number sheet hanging behind the register and handed me a "File Claim" ticket.

So I've been planning to bring it to Lottery Headquarters to see what - if anything - I won.

Well tonight on the news they ran a story about how people have been getting claim tickets accidentally and it doesn't really mean your ticket is a winner.

I will probably still bring it in, but it's most likely worthless.

Figures huh? I know the horrible odds of winning but, for a few days it was nice to think that getting out of debt and into significant wealth would be that easy.

Guess I have to keep plugging away. ; )

Haircut Guinea Pig

2007-07-05T11:41:00.000-05:00

So, I signed up as a "Haircut Model" for this salon nearby where I work - and they gave me a call and would like me to come in tomorrow.

It's going to cost me $15, but I'm hoping I come out with a $50 haircut. I have to honestly say I'm a little nervous though - I hope they don't say something like, "KC, thanks for being a Haircut Guinea Pig...today we're practicing the buzzcut".

I'll let you know how it turns out tomorrow. But in the meantime, it's nice to know that I just saved about $30 or so on what I usually pay for a haircut (yes, a lot I know, but seriously worth it considering the kind of cut I used to get prior - world of difference).

----------
UPDATE: Haircut came out great!

Net worth - July 2007

2007-07-05T08:05:00.000-05:00

A near $2000 increase in net worth! That feels really good, however I think I'd be even happier had the majority of the increase come in the form of credit card payments, but either way - the increase was a good thing.

Though it's nice that during the same time that I decide suspend retirement contributions my "lame duck" 401(k) has a near 12% jump.

So, to sum up, my success in the past month seems to be from good luck in my 401(k) and an increased paycheck.

It's simple stuff, but as I'm learning it's patience and discipline that whittles away debt.

It's The Debt, Stupid!

2007-07-01T11:19:00.000-05:00

In my previous post I was trying to figure out what is best to do with the 10% of my paycheck that should be reserved for my 401(k), but can't be for one full year.

The obvious solution was to begin contributions to my Roth IRA that I hadn't been contributing to in the past year or so. However, I have been thinking about this situation in the back of my mind since making my last post and then it occurred to me. What would be the best use for this "extra" money? Right then it jumped at me: It's the Debt, Stupid!

How many articles have I read about whether it's better to contribute to a retirement plan (i.e. 401(k), Roth, others) or pay down debt.

The rule is to follow the percentages.

If you're gaining 8% - 12% on your plan and your massive amount of debt is at an 8%+ interest rate then you have a leak that will prevent you from really making any sort of progress. Thinking back, I think it's the reason that I stopped Roth IRA contributions in the first place. The 401(k) was at least supplying me with a company match - which made it worth adding to.

So, my plan for the next year is to increase my debt payments even more - that way by the time my 401(k) actually does kick in maybe I'll be in a position where I can contribute even more than my 10% goal in an effort to play catch up on a year lost.

So the question now is, how much is enough? My "contribution" will be post-tax so I wonder if I can still make the 10% or not. We'll have to see. I'll try forwarding 10% of my pay to debt on my next paycheck and we'll see if that effects my budget at all.

The Price You Pay

2007-06-27T06:26:00.000-05:00

Well - the new job is going really well. There's a lot of stuff to learn, but everyone is really nice and I feel that it's a great fit for me.

The only thing that is bad so far is that it's a one year wait for enrollment in the 401(k). Ouch!
I must have misunderstood during the interview process because I had thought that the one year referred only to when I'd be eligible for the profit sharing program (which is pretty sweet by itself).

Oh well - it's too bad I can't keep contributing to my old 401(k) which is still at the former job. But there are some positives (I guess):

Bigger overall paycheck now that my 10% 401(k) deposit isn't being taken out
Opportunity to begin investing in my ROTH IRA again.

I haven't received a paycheck yet from the new job so I'm honestly not really sure what the bi-weekly number will be, but I'm obviously looking forward to the raise being tangible.

I'm still around

2007-06-22T12:06:00.000-05:00

Sorry for the lack of posts again - the new job is keeping me fairly busy.
I'll try to make some updates this weekend!

Wesabe.com?

2007-06-14T14:45:00.002-05:00

Has anyone used Wesabe.com? I'd be interested to hear your feedback/thoughts. I was just reading an article in the WSJ titled, Managing Your Money in Public View and am interested in using the service.

The initial concerns are always security, but the article and their site seems to claim that security isn't an issue. So, the only thing that matters now is - is it useful?

More Money, More Savings - Less Problems?

2007-06-14T10:03:00.001-05:00

I was just thinking, besides the increased salary from my new job there are a few "opportunities" that will come with my job change.

No more driving to work
I'll be taking Boston's finest in public transportation - the T. My new company will pay for a large portion of cost of a monthly pass and with Gas prices continuing to rise - this will surely save me some money.
Daily Brown Bag Specials
In my current job, I buy lunch every day. That's about 7 dollars a day (conservatively), which equals out to $35 a week (almost $2,000 a year). I'm planning on bringing my lunch when I start my new job - sure they'll be a few days here and there when I buy lunch downtown, but for the most part, I see this as a pretty significant savings.

Random Thoughts

2007-06-13T08:48:00.000-05:00

First of all, sorry for my recent lack of posts. There's really no excuse since I'm fully in the 'lame duck' period of the job transition. My last day is Friday and so far I've just been making sure I have a pass for the train and know enough about rolling over my 401(k) to ensure that it happens smoothly and I don't lose any of the money I've saved to fees.

Lately, I've been having to really fight my desire to spend money. I don't know if it's because I'm bored during this little, extremely quiet, two-week job transition or if it's because I'm just excited about the new job and the bump in pay I'd be getting. I've been having to constantly remind myself that this "extra" money has already been spent in the form of additional debt payments. I'd be lying if I said it wasn't tough to resist though. Plus, there are the 'going away' lunches and drinks that come with leaving a job - those costs are okay though, right?

Also, I've been reading a lot about the Blackstone Group's announced IPO and their CEO, Steve Schwarzman's, interesting...but slightly frightening...outlook on his business.

"I want war -- not a series of skirmishes," he said of his philosophy. "I always think about what will kill off the other bidder."

Seriously, he seems a little (5'6" - sorry, couldn't resist) scary with all the war/fighting/killing analogies he makes when talking about mergers and acquisitions.

Crazy CEO aside, I feel like it's something I would be interested in investing in, but it depends on a few things...how much the IPO is being sold for and after a little more research, if it's really worth it right now.

I don't even mind that he'd remain in complete control - it hasn't hurt them yet, right?

Anyway - it's something to think about.

[Serious] Job Search Ended Last Week

2007-06-04T12:56:00.000-05:00

A little while ago, I posted that I was entering an active job search.
It went VERY well - I went through a recruiter for the first time in my life. And although I wasn't sure what to expect, the entire process was fairly easy, very quick and extremely successful.

The entire process went about 3 days (I know - I was shocked too).

Why is it relevant to this blog?
Well, there's some more money coming my way and that means I can pay off my debts faster.

Very exciting. In fact, I'm not sure what I'm more excited about? The new job or the bigger debt payments. Either way, it's close.

Thanks to everyone that wished me luck on the job search - either through a comment or an e-mail - it worked!

Net worth - June 2007

2007-06-04T09:10:00.001-05:00

Like I said before, it feels good to see the good numbers increase and the bad numbers decrease each month. God, is it slow though. Oh well...I should get a nice little bump up in the amount I can contribute soon - details in next post.

As for the bankrate.com experiment - You'll notice I only made it to day 5. Why is that? 'Cause weekdays are easy to keep track of - it's the weekends when you're out and about that are difficult. Let's face it - I've said it before - I need to make whatever I do painless and automatic or else eventually I just won't do it anymore.

The first step in victory is learning where it is you're most likely to lose.

...is that a quote? 'Cause I think it sounds good...and I'm pretty sure I just made that up.

Day 5 of Bankrate.com: 7-day Spending Challange

2007-05-25T23:26:00.000-05:00

Iced Coffee & Cinnamon Roll - $3.79
Iced Coffee & Bagel w/ Plain Cream Cheese - $3.15
Whole Foods Salad - $5.00
Dinner Trip to Shaws - $14.00

Friday's total - $25.94

Day 4 of Bankrate.com: 7-day Spending Challange

2007-05-24T21:24:00.000-05:00

Coffee - $1.79
Lunch - $7.00
Coke Zero - $1.00
- no dinner -

Thursday's total - $9.79

401(k) Confusion

2007-05-24T10:33:00.000-05:00

A 401(k) is a scary thing when you really think about it.
At least for me. I'm trying to learn all I can about how best to manage my money.

Some things are easy:

Join
Invest 10% of my pay (pre-tax)

Take advantage of the company match (a.k.a. free money)

Diversify your holdings

Some things are not:

Out of the limited funds I have to pick from, which funds are the right fund
How much should I be paying (expense ratios)

Recently, my 401(k) fund swapped out some "under-performing funds" for some that matched their criteria. This, in turn, replaced two of my funds.

Now I'm doing some research into what's available and what I should be in, but honestly it's very confusing and I'm not exactly sure what to do.

Yes, I have time before I retire.
But I realize that the better I manage my money now, the harder it will work for me in the time allowed.

So, what do you think about expense ratios and p/e ratios? Any tips out there or solid guidelines?

Day 3 of Bankrate.com: 7-day Spending Challange

2007-05-23T22:08:00.000-05:00

Coffee & Croissant - $3.54
Coke Zero - $1.00
Coke - $1.00
Dinner Out - $35.00

Wednesday's total - $40.54

Day 2 of Bankrate.com: 7-day Spending Challange

2007-05-22T23:24:00.000-05:00

Coffee - $1.79
Ben & Jerry's Ice Cream - $5.24
Dinner Groceries @ Star Market - $10.00

My lunch was free today courtesy of a "work-thing".

Tuesday's total - $17.03

Day 1 of Bankrate.com: 7-day Spending Challange

2007-05-21T23:50:00.000-05:00

Coffee & Croissant - $3.54
WholeFoods Garden Salad - $5.00
20oz. Coke Zero - $1.00
Dinner Groceries @ Star Market - $18.00

Monday's total: $27.54

Bankrate.com: 7-day Spending Challange

2007-05-21T09:39:00.000-05:00

Today, when reading the introduction to the 7-day spending challenge on Bankrate.com, I began to think I was reading a story written about me...

"I was trying to go from Monday to Monday," says Vitale. "I carried a little notebook and would write it down if I stopped for coffee or went to the drugstore. Wednesday night I went to buy gas and I didn't have enough cash. I had to resort to my credit card to get me through the rest of the week. I was shocked and a little disappointed."

So, I'm going to subject myself to the 7-day challenge and document it on COD (that's Climbing Out of Debt by the way).

[Serious] Job Search Starts This Week

2007-05-17T07:53:00.000-05:00

For the past month or so, I've been passively looking at online job posts and updating my resume on monster (which has only seemed to garner more spam). But, it's becoming very clear that things are not going to be getting better not only for me within my company - but for my company as a whole.

I don't know a lot about management as of yet. Nor will I pretend to know all of the 'behind-the-scenes' decisions that the executives in my company are making. But being involved on the ground-level you definitely hear things.

A small sample of some of the warning signs:

Bills don't seem to be getting paid

For a while now, vendors and clients have called asking why such-and-such bill, person or company hasn't received payment yet. Sometimes these calls come even after the company has been told (in some form of company meeting) that 'things are going really well financially'. - maybe 'cause we have all that extra money we're not paying people with, huh?

Massive Turnover

Since December of 2006, 16 people have left. If it were a big company, that number may not be significant. But in my company, 16 people equaled 33% - yes 1/3rd of the employees.
Have we added people? Yes, but only in a defensive way - and definitely not enough to replace whom we've lost.

Going after new business that's WAY out of our league

As mentioned previously, I work at a small company. Employees are leaving left and right, management has basically said they don't care. And rather than try to attack the problems in manageable chunks, they're trying to hit home runs by going pitching to massive multi-million dollar companies. Honestly, even if we somehow were able to fool them into thinking that we had the bandwidth to handle their budget/workload - they would soon realize that we did not and would take their business elsewhere. This would leave us in the whole - since you can't bill people for pitching for their business. A waste of time, resources and money all for the chance of a quick, large, payout.

I could go on, but there's really no use. I have to leave.

So, this week and weekend, I'm focusing on updating my resume. Currently, I don't think it speaks well to the type of job and responsibilities I'd be applying for. So I need to update it, add some more accomplishments and remove a lot of the college items.

I've already identified a few contacts to pass along my resume to - now I just have to create it.

I'll keep you posted...

Company Expense Reports Are A Pain

2007-05-07T09:03:00.000-05:00

I think one of the most frustrating things about my job is the amount of money I have to churn through the expense report process on a monthly basis.

In my job I'm constantly traveling to meetings, edit sessions and photo shoots (not really as glamorous as you would assume) and each time I do something like that it's about $20-$30 bucks for parking, etc...

The expense report turnaround where I work is painfully slow and since I don't want it to dent my monthly cash availability I use a credit card.

This is just a rant and there's really no point other than to say I hate being forced to use my credit card - it just makes paying down the debt seem that much tougher.

Oh well...

Net worth - May 2007

2007-05-01T07:36:00.000-05:00

So - the lapse in paying down my credit cards is due to my impulse Red Sox ticket purchase - but again, seeing "Dice-K" complete the sweep of the Yankees on ESPN Sunday Night Baseball was well worth it...I think.

Oh well. A couple percentage points at a time and soon enough I'll get there. Slow and steady wins the race and blah, blah, blah... :)

Honestly though, it does feel really good each month to see my progress or even areas where I need to work harder/better at. It makes debt reduction tangible and allows me to focus on areas that are important to my overall goal.

Joint or Seperate Finances

2007-04-25T09:07:00.000-05:00

There's a post over on Get Rich Slowly discussing whether it's better to have a joint account or separate accounts when you get married.

I'm not married, though I can't say that I haven't thought about this question myself.

I think when I get married I would prefer to have both. I think it would be easier to pay bills and any other joint needs (groceries, home stuff, etc...) out of a joint account and still have small separate accounts in order to limit any "surprises" at the checkout counter or uneven spending.

I basically do that now - and it's just me.

I have the majority of my money deposited into my credit union account and a small spending portion placed into my Bank of America account. I think it works - it basically keeps me on budget and I can see how it would alleviates headaches once another person is added to the mix.

Anyone else have thoughts about this?

Impulse Buy...Worth Every Penny

2007-04-24T13:01:00.000-05:00

Okay...so yes, I paid 3x face value for the tickets, but c'mon...Daisuke vs. Yankees, a chance to sweep on ESPN and the pleasure of witnessing Papelbon strike out Jeter:

I think it was worth it.

Best Personal Finance Advice Ever

2007-04-17T12:54:00.000-05:00

Courtesy of SNL and The Consumerist...

Don't Buy Stuff You Can't Afford

Back from Bachelor party - and trip from hell.

2007-04-17T09:45:00.000-05:00

Let's just say Sunday's Nor'easter didn't get along very well with my flight schedule.

I need to re-group and clean out some e-mails, then I'll be back to posting. Thanks.

Latest Retirement Survey...wow.

2007-04-11T08:17:00.000-05:00

According to a survey conducted by the Employee Benefit Research Institute, "Nearly half of all workers saving for retirement have savings that fall short of the $25,000 mark".

...wow.

This is why I don't necessarily agree with Dave Ramsey's idea of postponing contributing to your retirement fund.

First of all, in most cases, there' s an employee match (read: free money).
Secondly, The good ol' power of compounding interest will always work in your favor.
And lastly, saving for your future becomes a habit, if not unnoticeable after a while.

It may not be nice to say this but this story actually makes me feel good. I'm only 26 and in pretty good shape with about $10K and growing in my retirement accounts. According to the "Rule of 72", if I were to stop contributing now I would have $25K in less than 14 years - making me 40 and putting me in the "bad average" in this survey. So basically, I like my chances that I'll be doing much better than that if I keep going as I am now.

Auto Insurance - Part II

2007-04-10T09:30:00.000-05:00

In Massachusetts, auto insurance policies are made up of 12 parts.

Four parts, referred to as compulsory insurance, are mandatory by law. The other 8 parts are Optional Insurance, and are not required by law.

Compulsory:

Bodily Injury to Others

Covers injuries to someone else resulting from a Massachusetts accident.

Personal Injury Protection

The benefits under this part are commonly known as "PIP" or "No-Fault" benefits. PIP benefits include medical expenses, lost wages, and replacement cost services.

Bodily Injury Caused by an Uninsured Auto

This coverage pays damages for bodily injury resulting from certain accidents caused by uninsured or hit-and-run autos.

Damage to Someone Else's Property

This coverage pays for damages to someone else whose auto or other property is damaged in an accident.

Optional Insurance:

Optional Bodily Injury to Others

This coverage pays for damages to people injured or killed in accidents if you or a household member is legally responsible for the accident. Unlike the Compulsory part, this coverage does provide coverage for injuries to guest occupants and for accidents occurring outside of Massachusetts.

Medical Payments

This coverage pays for reasonable expenses for necessary medical and funeral services to yourself and your passengers incurred as the result of an accident.

Collision

This coverage pays for any direct and accidental damage to your auto caused by a collision.

Limited Collision

This coverage will pay in some situations for direct and accidental damage to your auto caused by a collision. Coverage is only provided for multiple car accidents in which the driver of the auto we are covering was no more than 50% at fault.

Comprehensive

Under this coverage we will pay for direct and accidental damage to, or loss of your auto, other than damage caused by a collision.

Substitute Transportation

This coverage reimburses you, up to the limits shown on the declaration page, in certain situations if your auto was in a collision and is being repaired or replaced.

Towing and Labor

This coverage pays for towing and labor costs, up to the limit shown on the declaration page, incurred each time your auto is disabled.

Bodily Injury Caused By An Underinsured Auto

This coverage pays for damages for bodily injury as the result of certain accidents caused by someone who does not have enough insurance.

--------------
So in my situation, I have the mandatory - of course - but I have also been paying for 5 of 8 optional items. Seems like a lot - but I'm nervous about removing them and then needing them.

The good thing though (i guess) is that I have learned that I have until the end of August to make a switch due to penalties that I would incur if I were to cancel or switch my policy before it expires in September.

Though I'm fairly certain I'll be switching. I get an 8% alumni discount that I wasn't aware of if I join Liberty Mutual. Sorry Commerce - think of all the money I'm saving just by taking a quick look around.

Auto Insurance - Part I

2007-04-06T11:05:00.002-05:00

Currently, my auto insurance provider is Commerce Insurance.

The reason they are my provider is because my parents had them for car insurance and then when I received my license, I was placed under their insurance. After I graduated college (didn't have a car in college), I just decided to stick with Commerce. That's it - no research really, not much thought went into it.

Now that, as I said before, my monthly insurance payment has surpassed my monthly car payment - I think it's time to look into it.

But first, some quick facts about, my state, the Commonwealth of Massachusetts.

There are an estimated 4 million drivers in Massachusetts.
There are only 19 insurers which are allowed to do business within the state, due to "consumer protection laws".

The "consumer protection" leads to a very low level of competition between these companies which enables the auto insurance industry in Massachusetts to be the 11th largest in the U.S. with estimated premiums totaling $3.9 Billion.

Insurance is mandatory (MA has 2nd lowest rate of uninsured vehicles in nation)
What can be considered when deciding your rate:

Years of driving experience
Number and severity of at-fault accidents
Traffic Violations
Territory (where I live now is a high-risk territory - mostly why I'm paying through the nose)

What can't be considered when deciding your rate:

Credit Scores
Homeownership
Level of education
Occupation

Next I'll take a look at what type of coverage I currently have, what I may be able to do without and what discounts are available to me.

Can Insurance Insanity

2007-04-04T12:59:00.000-05:00

Ahh Massachusetts...home to the Red Sox, Boston Cream Donuts and 'wicked good Lobstahs'...not to mention ridiculous car insurance laws.

Apparently there are only 6 or so companies that Massachusetts allows its residents to "do business" with. Seems somewhat unfair, no?

Well due to my monthly insurance payment now officially having surpassed my monthly car payment (doesn't seem right to you either, does it?) - I will begin my search for a better way to insure my car in Massachusetts and possibly a better company to do it with.

Stay tuned during the next week or so for some - what I'm sure will be - fascinating research on the subject.

Yep. Insurance = fun.

Net worth - April 2007

2007-04-03T10:24:00.000-05:00

Well, as I mentioned last month, my debt reduction plan is currently a victim to my friends' lives. Multiple weddings and bachelor parties popped up and I'm frantically trying to pay my way without reaching for the plastic. However, I did pay for my plane ticket using a card - I have already that purchase off - pretty impressive when you consider I used to be the guy that would let that linger on there and be happy paying the minimum while thinking that it would work itself out down the road.

Furthermore, I think I can make a few moves and increase my monthly debt payment. While it would still be far from "gazelle-like", it would be a step in the right direction.

In fact, one move that I'm going to make involves a slight change in my original "5 Account Plan". While the "quarterly debt dump" was a good idea and definitely helps psychologically (seeing those negative numbers race back to zero in large chunks is always nice), it still leaves too much up to me - and as I've said before, I obviously can't be trusted.

So rather than have $51.75 go into that account every time I get paid, I have set up an automatic payment for it to immediately go to paying off the credit card. All while still making the regular payments I was making before and throwing whatever else I can get my hands on at it.

And, as always - I'll keep you posted.

Bankrate.com: Mortgage ignorance rampant

2007-03-26T10:43:00.000-05:00

According to a report on Bankrate.com, 34% of people asked had no idea what type of mortgage they had on their homes. ...What? ...Really? How is that possible?

I know there is an alarming amount of people that don't really care about personal finance and that's fine, I can understand that - but 34% of people went through the process of "purchasing" a home and just didn't pay attention to what they were doing or being sold? I can't imagine that.

What's more believable is that:

"9 percent have some variety of an adjustable-rate mortgage. Homeowners in the poll who knew they had an adjustable-rate mortgage (ARM) were asked what they planned to do when the interest rate adjusts, 34 percent said they didn't know what they'd do."

It's one thing to not think about the future or pose a 'what if' to yourself - but to just not know and pay anyway is amazing to me.

The article blames the lack of personal knowledge exhibited by this 34% on the over-abundance of product choice leading to consumer confusion. However, all interest in personal finance aside - or lack thereof, I still don't buy it. We live in (sorry to be cliche) the information age. With all of the books, sites, calculators, and advice available to anyone that can use Google I just don't see how that many people can not know what they're paying for every month.

Heck - I'm a renter and even I know what I'll be doing once the time comes for me to buy a house (it will be through a fixed-rate mortgage - unless the rates are so high it makes sense to get an ARM in hopes they fall again).

I don't think it was a matter of too much choice or confusion. I think that - like most everything that is a 'major purchase' - these people were bullied or talked into whatever they currently have by being told by an "expert" that it was a good deal or the only way to do it. Oh well - I guess it's more motivation to learn as much as you can about whatever you're getting yourself into.

"You can always spot a well-informed man - his views are the same as yours"
- H. Jackson Brown, Jr.

Traditional or ROTH IRA

2007-03-20T08:52:00.000-05:00

It seems like a long time ago - and it probably was - when I decided to suspend my ROTH IRA contributions in order to focus on eliminating my debt.

But lately, while looking forward to the future, I've been thinking of the difference between a traditional and Roth IRA. More specifically, I've been wondering if when I re-start my contributions, will I still be in the right vehicle for me.

So in order to answer this question, I took a look at the difference between the two.

In a traditional IRA...

The money you deposit is not taxed

Besides the initial deposit - which is taxed - you minimize your taxable income through using a traditional IRA

Earnings on your contributions are not taxed until withdrawn
Any withdrawals before you turn 59 1/2 are subject to a 10% early withdrawal penalty

Unless used for qualified exceptions

You are taxed upon withdrawal

In a Roth IRA...

Contributions are not deductible
Earnings on your contributions are NEVER taxed

Roth IRA offers tax-exempt earnings, not just taxed-deferred

A traditional IRA taxes you on your gains once you make the withdrawal. The Roth never taxes you again post-contribution

Any withdrawals before you turn 59 1/2 are subject to a 10% early withdrawal penalty

Unless used for qualified exceptions

So, it basically comes down to tax me now or tax me later. This is where some information about tax brackets might come in handy...

Courtesy of 360financialliteracy.org

Generally, a tax bracket is the income tax rate at which you are taxed for a certain range of income. The income ranges vary, depending on your filing status: single, married filing jointly (or qualifying widow(er)), married filing separately, or head of household. Brackets are expressed by their marginal tax rate, which refers to the rate at which your next dollar of income will be taxed. There are six marginal tax rates: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent.
Year 2004 federal income tax rates for single taxpayers are as follows:
If Taxable Income Is:
Your Tax Is:
Not over $7,150
10% of taxable income
Over $7,150, but not over $29,050
$715 + 15% of excess over $7,150
Over $29,050, but not over $70,350
$4,000 + 25% of excess over $29,050
Over $70,350, but not over $146,750
$14,325 + 28% of excess over $70,350
Over $146,750, but not over $319,100
$35,717 + 33% of excess over $146,750
Over $319,100
$92,592.50 + 35% of excess over $319,100

So...to me (and again I could be wrong - please comment and correct me if I am) it seems that the more money you have, the more you can be taxed.

Therefore, wouldn't it make sense to have your money grow tax-exempt so that your taxes are taken out at a bracket used for a person of lessor income, rather then later in life when you may actually be worth something...you know...in the financial sense?

Bottom line, I'm happy with my Roth.

Relevant Link: Kiplinger.com - Ride a Roth to Riches

Networth Comparison Tool on CNN.com

2007-03-19T13:05:00.000-05:00

CNN has a new tool on their site that is fairly interesting (and motivating - depending on where you net out):

Networth: How do you stack up?

Bachelor Parties, Weddings and Budgets. Oh My.

2007-03-16T09:06:00.000-05:00

What would you like first? The good news or the bad news?

The good news: I think the fact that I'm planning for April and August events in late February and Early March is a huge step on my path to being financially intelligent. Before, I was always more of the "eh...I'll throw it on my card and worry about it later" type of guy.

The bad news: By looking forward to some major events in my friends' lives, I'm seeing just how much it's going to cost me.

Two good friends of mine are getting married (separately) in August. One of those friends is having a bachelor party in April. I live in Boston. The bachelor party is in Florida. The first wedding is in New Jersey. The second wedding is in Seattle. Yikes.

So that's two plane trips, two wedding gifts (which I've never had to deal with before) and possibly three stretches of hotel stays. Again...yikes.

By using Kayak.com, I was able to get a decent price on a flight down to Florida. Mind you, when I say "decent", I mean compared to the other fares I found for the same trip - not decent price wise. In fact, I think the airline US Airways should have at least bought me a glass of wine before "having me their way" like they did.

Anyway...

I'm planning on paying that trip off using my state tax refund, which I have not received yet.

The issue now comes with how to pay for the hotels, gifts and additional airfare. I need to start working on a budget that will be able to pay for all of these things. If I don't - it could severely set back my debt reduction plan.

Net worth - March 2007

2007-03-08T11:15:00.000-05:00

I'm late, I know...but the 8th is better than the 9th, right?

The backwards movement on the credit cards is due to two things:

Not being financially prepared for Valentine's Day (not really excusable)
Signed up for a GMAT course and bought the study book (I think this is one is excusable)

The weird thing about my stocks is the fact that on the morning of the "market correction", I had decided to take a closer look at my 401(k) due to the recent introduction of some new fund options. I reallocated everything - cut out the losers and increased my exposure to some more aggressive funds including some international options.

It may have saved me from some significant losses - though, honestly, I'm just speculating.

As a former coach of mine used to always say, "sometimes - even a blind squirrel finds a nut".

Milestone Reached!

2007-03-07T17:53:00.000-05:00

Thanks to my trusty overpayment to Uncle Sam. I received my Federal Tax Refund yesterday.

Most of it went to paying off a credit card - my snowball plan has changed drastically since transferring a lot of my debt to recently opened 0% cards. That's for the next post though.

But the rest of it went to bumping my "Income Security Account" (a.k.a. Emergency Fund) to $1000 status. I will still make my small monthly contributions, since I figure it can't hurt and I barely notice the money is being taken out of my account anyway. Frankly, I'm just relieved that my Emergency Fund is up to a decent/recommended amount. Especially considering the alarming number of people out there that don't have any money saved up "just in case".

For my state return, which will be around $400, I'm planning to put about half of that towards my Christmas Gift account and the rest will help me get down to Florida for my buddy's bachelor party in a few months.

And yes...again...I know it's probably better to not get as many refunds or as much of a refund back at the end of the year. But there's something therapeutic about these lump sum allocations that is worth the time missed. Maybe I'm alone on that.

If Taxable Income Is:	Your Tax Is:
Not over $7,150	10% of taxable income
Over $7,150, but not over $29,050	$715 + 15% of excess over $7,150
Over $29,050, but not over $70,350	$4,000 + 25% of excess over $29,050
Over $70,350, but not over $146,750	$14,325 + 28% of excess over $70,350
Over $146,750, but not over $319,100	$35,717 + 33% of excess over $146,750
Over $319,100	$92,592.50 + 35% of excess over $319,100