Still Paying For It

Craziest Two Weeks Ever

noreply@blogger.com (MB) — Thu, 28 Feb 2008 01:48:00 +0000

The last two weeks went something like this:

-Announcement from megacorp headquarters that they are selling the division I support.
-Blind panic as my direct management has no comment.
-Frantic updating of resume and application for other area jobs.
-Fervent thanks for the year end bonus which allowed me to fund a mini-emergency fund.
-Announcement from my management that I was being reassigned to a team that was NOT being eliminated.
-Sweet, sweet relief.
-My boss asks me to head to megacorp HQ for a two-week long meeting (meetings can be two weeks long???) ... leaving this Sunday (this is Monday).
-Frantically rearrange schedule and take care of personal stuff so that I can be gone for two weeks.
-HQ Management decides to push meeting back for 3-5 weeks or so.

So, I've had two weeks of crazy stress...and in the end, pretty much nothing actually changed. My job is once again secure, or at least as secure as a megacorp job can be. I'm still sitting at the same cube doing essentially the same work. And, I don't have to jet out of town last minute.

My reaction to this stress was truly disturbing. I broke my budget wide open and spent money on random things - mostly lunches out with co-workers and junk food. Because, when you're worried about losing your job and how you are going to make ends meet, spending money on things that aren't in the budget and aren't necessities is definitely the way to go. Once things have calmed down a little, I need to run a full postmortem. If I can understand why I reacted so illogically and self-destructively, perhaps I can do a better job dealing with stress next time.

Net Worth Update - Month 1

noreply@blogger.com (MB) — Thu, 21 Feb 2008 01:54:00 +0000

Drumroll, please.

As of 2/15/08, one month into my debt reduction program, my net worth is -$40,406.27. This is an increase of $3,563.89. Which is simply fantastic progress.

My total credit card debt was $23,099.97. I whittled away $1,907.66 in credit card debt over the first month! Woo-hoo!

Now several one-time events that happened this month that really gave me a boost:
~I received a year-end bonus of approx $1,000 after taxes that I used to create a baby emergency fund.
~I received a 383.00 credit back to a credit card for a refundable flight that I never took.
~I sold off several old textbooks on Amazon.com that brought in about $350.00.

I expect that going forward, my progress will be slower and steadier. I'm beginning to seriously kick around the idea of taking a second job to create extra income. So far I've been too lazy to pound the pavement, but I'm trying to psych myself up for it.

Prioritizing My Debts

noreply@blogger.com (MB) — Tue, 12 Feb 2008 04:08:00 +0000

I'm working hard on reducing my debt and building my net worth. Now that I'm firmly on a budget and actively paying down my debt, it's time to refine my debt reduction strategy. I'm concentrating on my consumer credit debt. Whether to prioritize paying off the student loan debt above increasing retirement savings is a debate for another day. If you're interested, check back in two years when I get to that bridge. There are a couple of different ways to prioritize debts and decide which debt to pay down first.

The Dave Ramsey Snowball Method
Dave Ramsey says that debts should be ordered based on amount owed from lowest to highest. The debt with the lowest balance is paid first, then the debt with the second lowest balance, and on (or and on, and on, and on, and on - as the case may be). This method allows for early victories which build psychological momentum.

The Highest Interest Rate First Method
The Snowball method makes a lot of psychological sense, but as fivecentnickel points out, Dave Ramsey is bad at math. From an overall plan cost perspective, it is more efficient (and thus cheaper) to order debts from highest interest rate to lowest interest rate and then attack those with the highest interest rates first. From a purely mathematical standpoint, this is the best method for getting out of debt.

The Spread the Love Method
Add up all the money that you can put towards debt then account for making minimum monthly payments towards each debt. Any amount above and beyond these minimum payments is divided evenly amongst all. Using this method, you'll be making incremental progress on all debts.

The Snowflaking Addendum
This isn't a method per se, but a mindset. Snowflaking, popularized by PaidTwice, is putting small amounts of money towards your debt throughout the month as it comes in. This money can come from any source: savings in your budget, alternative income, or gifts. I plan on snowflaking regardless of the overarching method I choose.

I'm still weighing the pros and cons of the methods. For me it keeps coming back to the psychological benefits of the Snowball method versus the financial benefits of the highest interest rate method.

What method are you using/did you use?

Best of the Blogosphere - 1/10/08

noreply@blogger.com (MB) — Sun, 10 Feb 2008 19:20:00 +0000

My favorite post of the week is from Paul Michael at WiseBread. His post outlines the nine ways that Star Wars can inspire you to save money. The post appealed to my inner-geek! The rebels were definitely fighting a war on the cheap. And anything that allows me to think of myself as a Jedi makes MB very, very happy! Jedi MB -- I love the way that sounds. Where can I pick up my lightsaber?

Other great posts from around the blogosphere this week:

Early Retirement Extreme discusses investing for Financial Independence.
Get Rich Slowly shares a fantastic free language learning resource.
WiseBread shares ways to volunteer abroad for free.
Canadian Dream sees a new trend of young mercenaries.
PaidTwice wishes she learned earlier about inflation.
TheSimpleDollar presents 100 tips for those of us just getting started.
Blueprint for Financial Prosperity explains bar stool economics.
BripBlap says that it isn't about the money.

I Don't Do Sadness

noreply@blogger.com (MB) — Sat, 09 Feb 2008 23:11:00 +0000

CNN is running a story on how emotions influence shopping habits. It's no surprise to any of us that emotions are deeply intertwined with finances. That's what makes personal finance personal. But, the study showed that watching a video (either neutral or sad) had a huge effect on purchasing decisions.

Study participants who watched a sadness-inducing video clip offered to pay nearly four times as much money to buy a water bottle than a group that watched an emotionally neutral clip.

If just watching a sad video can have such a pronounced effect, imagine how strongly the emotions tied to our personal lives can influence us. Even more disturbing, the study participants had no idea that their emotions were playing a role in their purchasing decision.

Despite the big difference, participants in the sad group typically insisted that the video's emotional content didn't affect their willingness to spend more -- an incorrect assumption, said one of the study's co-authors.

I find it hard to believe that emotion plays so big a part in my purchasing decisions. I guess I like to pretend that I'm totally rational. However, a rational person doesn't run up $25,000 in credit card debt and end up with nothing to show for it. If rationality can't explain it, perhaps emotions can.

Declaring War on Clutter

noreply@blogger.com (MB) — Thu, 07 Feb 2008 01:15:00 +0000

I'm a member of the FLYLady mailing list. I find much of her writing to be overly histrionic and patronizing, but she has some great ideas under all the fluff. Each month she sets a monthly habit that she encourages her members to develop. This month, it's performing 15 minutes of decluttering daily.

Decluttering has been a topic in a lot of blogs lately:

Savvy Frugality says Clutter Costs Money
Free Money Finance asks Is Clutter Costing You Your Career
Adam at Queercents is Reducing His Clutter
ZenHabits tells us how to Fight Clutter Entropy

Clutter has real costs, both in terms of money and peace of mind. A chaotic apartment or overflowing house is not the type of safe haven a true home should be. And while not everyone is ready to be as extreme as Stuck in Stuff each of us could benefit from looking critically at what we own and pruning away the unnecessary.

I've Got My Ticket

noreply@blogger.com (MB) — Tue, 05 Feb 2008 17:02:00 +0000

My article on frugal entertainment is up at the Festival of Frugality over at BeingFrugal. Lynnae did a great job of putting together Team Frugal for the Personal Finance Bowl.

I'm pleased to be included in my first Carnival/Festival, and even more excited that it is the Festival of Frugality which I've been reading religiously for months. (Sure, they pretty much have to publish anything that's submitted, but that doesn't seem to matter much to me.) It's a big step in the right direction for me in getting this blog up and running.

On the personal side of finance, I sent an extra $112 towards my AmEx card today! This is the amount of my of overage (money that isn't earmarked for bills) from my first semi-monthly paycheck. In past months, I would have found ways to blow that money without even thinking about it. So. . .a successful day all around!

Informed, Honest, Focused

noreply@blogger.com (MB) — Mon, 04 Feb 2008 02:23:00 +0000

No Credit Needed, the mastermind of the NCN Network, posted that he got himself out of debt by Getting Informed, Getting Honest, and Getting Focused. A deceptively simple method for getting out of debt, but how am I measuring up?

Get Informed - Check
I've sat down with my paychecks, bills, and receipts and figured out where the money comes from and where it is going.

Get Honest - Work in Progress
I'm still working on evaluating my discretionary spending habits. I'm having a hard time seperating my wants from my needs. And doing WAY too much jusitification of purchases. I have expensive habits - opera, theater, travel, fine dining. I'm willing to cut back on spending, but not to give them up completely. I'm still working on finding that balance between profligacy and cheapness. I have accepted that I need to make changes to my spending and take control of my finances. To do that, I must learn more about personal finance.

Get Focused - Work in Progress
So far, I've got all kinds of great plans about how I'm going to dig myself out of debt. But until some time has passed and I've put my money where my mouth is, it's all just hypothetical. I've constructed a basic budget. I've decided on an order in which to snowball my debts. I've already made some changes to my spending and am considering more. I'm making debt reduction my top priority for 2008.

My Net Worth

noreply@blogger.com (MB) — Sun, 03 Feb 2008 23:48:00 +0000

On 01/15/2008, I finally sat down determined to figure out exactly how much I owed and how much I owned. The results were not pretty, but they also weren't as terrible as I'd feared.

First, my debts. I have quite a bit of consumer debt - four credit cards worth and more that I had transferred to a Prosper loan.

3,525.44 American Express Card
1,779.40 Mastercard
6,007.08 Mastercard
10,482.42 Visa
3,213.29 Prosper Loan
14,832.68 Student Loan #1
16,952.85 Student Loan #2

TOTAL DEBT: $56,793.16

Then a look at my assets. I have no emergency fund (something I'm changing this month) and a bit of money socked away in my retirement accounts.

11,001.41 401(k)
1,624.62 Roth IRA
196.97 Pension Plan

TOTAL ASSETS: $12,823.00

This brought my net worth to -$43,970.16. That's right, approximately NEGATIVE $44,000. Clearly I have a long way to go.

Five Ways to Save on Entertainment

noreply@blogger.com (MB) — Sun, 03 Feb 2008 03:24:00 +0000

1. Develop Cheap Hobbies
Some of my hobbies are expensive. I'm a skiier, a golfer, and an opera fan. None of these is particularly frugal. However, some of my favorite hobbies are free or cheap: reading, writing, walking, and watching seasons of old TV shows on DVD. Take the time to develop a free habit of your own. I am a huge advocate of developing a daily reading habit. Reading, of all types, expands the mind and enriches the soul. And given the abundance of free books to be had at the local library and online (http://www.gutenberg.org/ is a great place to start), all of that knowledge can be yours for free.

2. Utilize Free Days/Hours
Many museums and attractions have special hours or days on a weekly, monthly or yearly basis when they open their doors to the public for free. And, some of the greatest museums in the world are free every day. I could spend months lost in the Smithsonian in Washington D.C. or the British Museum in London, and it wouldn't cost me a dime. Here in Chicago, I often make the short walk to the Art Institute from my office to take advantage of free admission on Thursday evenings. Call the attraction or check its website - many of them offer free admission.

3. Ask About Discounts
In my old hometown, baseball games were a favored way to spend a summer evening. On Monday evenings, hot dogs, beers, and tickets were $1 each. My friends and I were always there - for $5 we could get a bleacher seat, a hot dog, and three beers. It was an awesome evening, every time. I go to New York City a few times a year to wander lovingly around Times Square and check out the new shows on Broadway. Seats can run up to $180 a ticket, but those seats can often be had for $20. Many shows sells $20 tickets either to those willing to get up early and stand in line or through a raffle. Some discounts are limited to students, but many are available to all and sundry.

4. Volunteer
I'm a theater nut. If I don't see two or three new shows each week, I'm not happy. This gets to be a VERY expensive habit. In exchange for acting as an usher, most of the theaters in my town will allow a volunteer to see the show. I do this often and have had great experiences. The house managers are generally pleased to have a volunteer and the duties are light. And as an added bonus, most of the time I end up being given a great seat that is better than the cheaper seat I would have bought myself. If you have a pricey hobby, look for ways to volunteer in the industry to offset your costs, or take it one step further and:

5. Get a Part-Time Job
A part-time job that is related to your hobby can be a great way to offset cost or even put extra money in your pocket. Being a ski instructor has long been one of my dream jobs - free passes, an excuse to spend all of my time on the slopes, and the joy of passing on something I love to others. In college, I worked part-time at an arena that hosted concerts and basketball games. It was great because I got to pick my own hours, hear the concerts for free, and gave me some great stories (remind me to you about that time I played basketball with Britney Spears). Working at a store dedicated to your hobby or at a venue for it can be a great way to earn a little extra money, defray your costs, and work in a field about which you are passionate.

A Frugal Step?

noreply@blogger.com (MB) — Sat, 02 Feb 2008 23:12:00 +0000

Last night, while lying on my futon, aimlessly reading webpages, and watching old episodes of Highlander on DVD (a very exciting Friday night, I know) the lightbulb in my lamp burned out. No problem, I get up and go over to my hall cupboard to get a replacement. Alas, someone has taken the last lightbulb out of the four pack and put THE EMPTY BOX back in. I am angry for about fifteen seconds before I realize that I live alone so I must be the culprit. I resign myself to a night in darkness - I'll go to the store tomorrow.

Flash-forward to today, in Walgreens. I've considered buying CFLs instead of regular bulbs before, but the extra cost of buying a CFL versus a regular bulb seemed large compared to my electric bill every month. The four-packs of CFLs seemed reasonably priced at $2.75 a bulb, but I don't need four. I only have two regular lightbulbs in my apartment, one in my lamp in one in my coat closet. The rest of the lights in my apartment are fancy-schmancy round bulbs (luckily none of these has burned out during my year in the apartment, because I'm not even sure where to find replacements). Today, I'm pleasantly suprised to see that the single CFL 60 watt bulbs are Buy One, Get One Free. At $5.99 for two, it's time to take the plunge. I'm now the proud, and environmentally responsible, owner of two CFL bulbs. I'm anxious to see if this small change, exchanging a single regular bulb for a CFL, will make any appreciable difference in my electric bill.

My electric bill averages about $32 per month during months that I don't run my air conditioning. I've never been good about saving electricity before. I leave my computer on pretty much constantly, I leave lights on when I leave the apartment, I'm infamous for having every light in the place on while I'm home. I'll be trying to alter these wasteful habits over the next month, saving both the environment and a chunk of change.

February Goals

noreply@blogger.com (MB) — Fri, 01 Feb 2008 01:55:00 +0000

I've set myself four financial goals for the month of February.

1. Use my year-end bonus to build an emergency fund.
I'm recently found out that I'm getting a $1,500.00 year-end bonus at work. (Surprising given the state of the current economy, but perhaps more satisfying given how few people were offered bonuses this year.) I was planning on using this to pay down debt, but a current scare about the stability of my job (I'll be posting about this soon) drove home how important it is to have an emergency fund. So, I'll be taking this opportunity to create one. I'm not sure how much of the $1,500 will actually get to me in the form of take-home pay. I intend to put $1,000.00 into an emergency fund using my bonus.

2. Set aside $200.00 into savings for an upcoming NYC trip.
I'm going to New York City in April. One of my best friends is going to be appearing in a Broadway show! A huge group of her family and friends are all going to New York to see her perform. It's something that I am absolutely not willing to miss. I'll be setting aside $200 from my pay this month to be used for

3. Stick to my budgeted discretionary spending.
I have established a discretionary spending budget of $100 per pay period (approximately $50 per week). This money is withdrawn from every paycheck and used to cover all food, entertainment, and household expenses that aren't fixed monthly expenses. I think this may be too low and need to be raised, but for February I am going to try to abide by this spending limit.

4. Snowflake $500 towards my American Express card
My American Express card with just over $3,000 on it is the first debt that I am attacking. My goal for February is to pay $500 from alternative income sources towards this debt. This is the amount above and beyond the minimum payment ($101) and the overage in my budget for the month ($161.85) that are already earmarked towards the debt. I anticipate receiving approxiately $300 from Amazon.com (decluttering can pay!) and $200 in revenue from my mystery shopping side-business. I'll continue to do surveys (I'm currently loving PineCone Research) and look for additional money making opportunities throughout the month. I'll snowflake the money into my AmEx account as it trickles into me throughout the month.

Ignorance Is Not Bliss

noreply@blogger.com (MB) — Wed, 30 Jan 2008 04:07:00 +0000

Hello. My name is MB. And I'm deep in debt. **Cue: Hello MB!**

I've been putzing around with getting my financial house in order for several months - reading PF blogs, reading PF books, and otherwise generally burying my head in the sand. Really smart, huh! I finally forced myself to sit down and figure out where I am. On 1/15/08, I sat down and got together all of my current debts.

The number was high, very high, and yet not as horrifyingly unmanageable as I was afraid. I've found that knowing is infinitely better than not knowing. It allowed me to work out a rough budget and begin to understand where my money is going, where I can cut back, and even where spending a little more could greatly improve my quality of life.

Over the coming week I plan to post my current debts, goals, and progress. Stay tuned.