Miss Money

Miss Money is my anonymous personal finance blog. I will divulge my career opportunities, income, expenditures, savings, and debt. My goals include moving my net worth from "negative" -$45,500 to -$33,000 in one year, get out of credit card debt and improve my FICO credit score from 656 to 750.

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Location: South Carolina, United States

Friday, March 17, 2006

10 Things Progress Update

NEW ITEMs FOR 10 THINGS

**I can sell my old graduate school textbooks on HALF.COM and liquidate those into some cash which can be added to credit card regular payments. - PROGRESS: 40 ITEMS ONLINE FOR SALE AND I HAVE HAD 4 SALES SO FAR FOR ABOUT $28, SHIPPING ITEMS TOMORROW.

***I can call the bank of my largest credit card balance and get the interest rate reduced significantly by threatening to transfer my balance to a 0% rate card. - DONE, CALLED BANK AND THEY REDUCED THE INTEREST RATE FROM 22% VARIABLE TO 10.99% FIXED RATE. SINCE THIS CARD WILL BE PAID OFF IN ABOUT 3 MONTHS - THIS SHOULD SAVE ME A FEW HUNDRED DOLLARS.

ORIGINAL ITEMS UPDATES

1. I can reduce my Netflix plan from 6 films at a time for $36 to 3 films at a time for $18. This will give me more flexibility in my entertainment budget line. --- DONE

2. Cut up all credit cards, so that it is impossible to charge them back up once they are paid off. --DONE

3. Stop eating out and ordering takeout! Brown bag it every day. - THIS ONE IS REALLY HARD. I STOPPED ORDERING OUT WHILE AT WORK BUT WHEN I COME HOME LATE, PIZZA or MCDONALD'S SURE SOUNDS EASY.

4. Use my tax refund(s) to pay off credit cards more quickly. -- DONE

5. Remove the "cable" part of the "cable internet" bill. Watch movies instead of TV! This saves $60 per month! - NEED TO TAKE CABLE BOX BACK TO CABLE OFFICE. PENDING.

6. Keep a close eye on lights and heating to help reduce the out of control electric/gas bill. - WHETHER IS CHANGING AND WE HAVEN'T REALLY HAD THE HEAT OR AIR ON THIS WEEK

7. Lay off iTunes for a minimum of 3 months. Small sacrifice for a short period of time. - GOOD SO FAR

8. Use Bank of America's Keep the Change program to save up small amounts of cash. When it gets to $25 or $50, transfer it back to the checking account and immediately pay it on a credit card. -- I DID THIS UNTIL I WAS UP TO $11.00, THEN I WAS MAKING A BIG PAYMENT SO I ROLLED THAT $11 INTO IT. I AM NOW BACK UP TO $2.40.

9. Scour receipts and send in all reimbursement requests and expense reports. Get Health Savings Account OTC costs reimbursed. - DONE, PENDING RECEIPT OF HSA FUNDS IN DIRECT DEPOSIT - PROCESSING TAKES A WHILE.

10. Save spare change around the house and collect a minimum of $10 to put on a credit card. - $10 NEEDS TOBE DEPOSITED NEXT TIME AND THEN ADDED TO NEXT BULK PAYMENT.

TO DO:
- SHIP ITEMS AND WATCH PRICING ON HALF.COM ITEMS
- COME UP WITH A FEASIBLE SOLUTION TO STOP SPENDING SO MUCH ON EATING OUT. PERHAPS ENVELOPE SYSTEM FOR FOOD WILL HELP THIS. STARTING ENVELOPE SYSTEM THIS WEEKEND.
- TAKE CABLE BOX BACK TO REDUCE BILL.
- CONTINUE POSITIVE PROGRESS IN OTHER AREAS

Debt Snowball

In the last couple of weeks I have paid off one credit card with a balance of $655 on it and I have almost paid off my second credit card. That card began with a balance of over $1200 and it now stands at $317.

I have one other credit card with a balance of $3650 on it. So I have reduced my CC debt from $5,705 to $3,967 in about two weeks. That's gazelle intense.

How did I do it? I had several reimbursements pending from my job, so I pushed to get those fulfilled. A few came through, which I applied to my balances. I studiously applied my tax refunds to my CC debts as they hit my bank account. I also am getting three paychecks this month, so I have paid extra on the debt with that "found" money outside of my regular budget.

I still have a couple of reimbursements and such pending and I am selling old textbooks on Half.com, so that should push it right over the edge and I should be out of CC debt by the end of the summer at least!!

Then it is on to the car and student loan debt! WOW life without payments will be great!

Tuesday, March 07, 2006

Fueling the Fire..Planting the Seed

It is general personal finance wisdom that in order to get your finances truly in order, you must also give some of your money away to charitable causes. I have balked at this suggestion for quite some time, even though I work in the non-profit fundraising arena.

But after some serious thoughts on the topic, I realized it was both hypocritical and counterproductive for me not to give. How can I train people to raise money over the phone, emphasizing the importance of giving when I do not practice it in my own life? Also, I have become progressively more resigned to the process of revamping my finances. I must give up and trust the wisdom of others who are older and richer than me. I cannot hold onto $25 now when it might cost me everything I want financially later. Resisting the parts of the process that are uncomfortable for me is a recipe for failure. I resolved to find a non-profit and give $25 this month.

I scour my past to think of an organization that I felt comfortable giving back to. I wanted to choose an organization that spent most of its budget on programs instead of administrative and fundraising costs. I wanted an organization that had helped me in the past, in order to complete the circle of benefit. Lastly, I wanted an organization with a clear mission -- not a generic United Way Campaign or something.

I settled on the Institute for Humane Studies in Arlington, VA. I met this organization at a internship fair when I was a sophomore in college. I followed up with them my junior year and attended one of their many summer seminars. They are a libertarian, free market organization that seeks to educate young people as to the benefits of a truly free society. The seminar reaffirmed and refined my libertarian beliefs. Then later, I got my second real job out of college through their job bank. I worked in the libertarian movement and I know that IHS has a reputation as a powerhouse organization that is changing the course of our country one young mind at a time. I checked out their files on Guidestar and saw that only about 20% of their budget is administrative in nature. I gave them $25 online via my debit card. For those who are interested, their site is www.theihs.org.

Next month, I may give them another $25 or I may find another organization or cause to support. Either way, $25 per month will depart my checking account and go out into the world to see what it can accomplish. Whether it comes back to me or not materially, at least I know that I am now living in accordance with what I preach in my job. I also now know that my stubbornness is not going to keep me from financial success this time.

10 Things Update

1. I can reduce my Netflix plan from 6 films at a time for $36 to 3 films at a time for $18. This will give me more flexibility in my entertainment budget line. --- DONE

2. Cut up all credit cards, so that it is impossible to charge them back up once they are paid off. --DONE

3. Stop eating out and ordering takeout! Brown bag it every day. - HAVING A HARD TIME WITH THIS FROM A TIME PERSPECTIVE

4. Use my tax refund to pay off credit cards more quickly. -- PENDING RECEIPT OF RETURN

5. Remove the "cable" part of the "cable internet" bill. Watch movies instead of TV! This saves $60 per month! - WAITING UNTIL THURSDAY AFTER THE PROJECT RUNWAY FINALE!

6. Keep a close eye on lights and heating to help reduce the out of control electric/gas bill. - NO ACTION YET ON THIS

7. Lay off iTunes for a minimum of 3 months. Small sacrifice for a short period of time. - GOOD SO FAR

8. Use Bank of America's Keep the Change program to save up small amounts of cash. When it gets to $25 or $50, transfer it back to the checking account and immediately pay it on a credit card. -- CURRENTLY AT $8.00

9. Scour receipts and send in all reimbursement requests and expense reports. Get Health Savings Account OTC costs reimbursed. - PARTLY DONE - SENT IN EXPENSE REPORT FOR $159 TODAY, TOMORROW I WILL WORK ON THE HSA ACCOUNT.

10. Save spare change around the house and collect a minimum of $10 to put on a credit card. - CURRENTLY AT $5.24 in my desk drawer at work.

Monday, March 06, 2006

10 Immediate and Practical Thing I Can Do...

1. I can reduce my Netflix plan from 6 films at a time for $36 to 3 films at a time for $18. This will give me more flexibility in my entertainment budget line. --- DONE

2. Cut up all credit cards, so that it is impossible to charge them back up once they are paid off. --DONE

3. Stop eating out and ordering takeout! Brown bag it every day.

4. Use my tax refund to pay off credit cards more quickly.

5. Remove the "cable" part of the "cable internet" bill. Watch movies instead of TV! This saves $60 per month!

6. Keep a close eye on lights and heating to help reduce the out of control electric/gas bill.

7. Lay off iTunes for a minumum of 3 months. Small sacrifice for a short period of time.

8. Use Bank of America's Keep the Change program to save up small amounts of cash. When it gets to $25 or $50, transfer it back to the checking account and immediately pay it on a credit card.

9. Scour receipts and send in all reimbursement requests and expense reports. Get Health Savings Account OTC costs reimbursed.

10. Save spare change around the house and collect a minimum of $10 to put on a credit card.

I'm Back!!!

The last time you heard from me was right after I made my move to South Carolina from DC. It's been a crazy 4-5 months getting settled in, adjusting to a new job and getting my finances in order.

Once the dust settled after my move and reimbursement checks were cut, I began paying off my credit cards again. My smallest balance credit card has been paid off and charged back up 3 times now -- once before Christmas, once after Christmas and once since then.

I am taking the Dave Ramsey approach. I have my $1,000 in savings and have proven to myself that I can use that in crisis situations and replace it quickly. Now, I have to focus on the 2nd baby step - the Debt Snowball!

Like I mentioned, I have paid off my smallest credit card now 3 times. This means of course that I am charging it back up the minute the balance is $0. It had to stop or I would never make progress on the other two cards. Dave says, "You can't climb out of a hole if you are digging out the bottom."

I went this weekend to a Dave Ramsey Live event in Tennessee. I just cut up my 3 credit cards. A "plastecomy" as he calls it. I have removed all the non-debit plastic from my life. Now, I have no barrier if I need to front company costs, but I also now have to rely on myself only to make it work. I am also protecting my finances from myself. Now, I don't have the chance to run those balances back up once I pay them off. I must idiot-proof this system so that I can succeed!

By my calculations, I can still be out of credit card debt by June of this year. Then I will focus on my car and my student loans! I found out I am getting a tax refund and that will help me to pay it off even faster!

I have 10 immediate strategies to roll the snowball faster. Check in later to see my progress!

Saturday, September 10, 2005

Savings on track...other items

I have managed to keep my savings relatively stable in this maelstrom of expenses I have been involved in. I am proud to say that I am one a half weeks away from moving over 500 miles away and my savings is at $525. I have put back almost everything I borrowed from it to purchase my car and I still have a laptop and some books and CD's to liquidate to pump it back up to its "pre-newjobhavetomove" levels.

After listening to Dave Ramsey's Total Money Makeover on my ipod recently, I see the logic in having at least $1,000 in savings when starting a debt reduction plan or "snowball" as he calls it.
I was always a big fan of emergency savings but realizing how this could throw my get-out-of-debt plans could be throw off track by unexpected expenses has convinced me.

I also feel that I must have $1,000 minimum because with my new car insurance I chose $1,000 deductibles. That means, I have to come up with that if anything happens -- in cash or else resort to putting it on a newly paid down credit card. No way!

So, while I am putting back my original amounts ($625 before moving and car purchase expenses infringed on it) I am going to go ahead an beef it up to $1,000 ASAP.

Debt Reduction Plan Still on Track

Even with all of the unexpected expenses involved with moving for my new job (including buying a car), I crunched some numbers to see how my debt reduction plan will pan out with my new increased income and lower living costs.

I will be out of credit card debt by April 2006 at the latest. This is earlier than my last estimate of October 2006. This will be due in part to putting as much of my reimbursements onto my cards as possible and using my higher income as leverage to pay it down quicker.

I will be able to up my credit card budget line from $450 to $700 per month in my new position!

Once I am out of credit card debt, I am going to shift my focus onto paying off my car. That should be paid off in November 2007 at the latest. This is great because I plan to drive it for 5 to 7 years so I won't have payments after that. It was my goal when buying a car to get a longer loan term (5 years) with lower payments, so that I could focus on my credit card debt first and still pay off the car early! I didn't want to new necessity of having a car to throw off my financial goals. I got a car that I could more than afford on my new salary and I am committed to paying it off early.

After that, it is all student loans from there. The bulk of them will not be paid off until 2011-12 but that's still a hell of a lot earlier than the 25 year term estimated!

Friday, September 02, 2005

Signing Bonus and Simplification

I recieved my signing bonus in the mail yesterday. I was really excited and relieved with moving expenses looming on the horizon. However two things quickly killed my buzz: a) my $2500 bonus turned out to be only a little over $1650 after taxes, and b) the bank is holding the check and the bulk of the money ($1500) will not be available for 5 business days.

Anyway, it should still work out fine and I should certainly expect a refund come next tax season. Cash flow is picking up otherwise though because I have gotten in the selling mood!

I decided that I would rather sell or give away any stuff I don't want before I move. Preferably, I want to sell stuff because it helps cash flow and will help me ultimately get out of debt.

1) My wedding china was sold on eBay. I set my reserve at $200 and someone bought it for $202.50 with a shipping charge of $25. That's $227.50 is pending in Paypal but will be in my account soon.

2) I am selling off CDs. I have sold about 10-15 so far for a total of $22.00. I have about 20-25 more to take to the stores next week. That's a little more cash and since my partner is doing the same and saying up the funds he makes for a iPod we are making progress. (He has brought in over $160 from CD sales so far and still has about 50 more to sell. His music is more voluminous and more in demand than my Britney Spears collection!) :)

3) I am going to sell some (very few -- like 40) books from my collection. Most are duplicate books that both me and my fella' have in common and some are ones I will never read for sure - precalculus anyone? I hope to get at least $10-$20 this way. We will see.

4) I put an ad for my old 2000 laptop on craigslist.com and I got about 15 inquiries on it, but no one is actually following up by showing up to purchase it. I am asking for $100, but I have had offers ranging from $20 (yuck!) to $250.

5) I packed up two boxes worth of clothing and took it to Goodwill. Two more boxes I don't have to move!

Total dollars so far: $249.50

More dollars possible: $110

Tuesday, August 30, 2005

Rental Housing

I am planning to rent a house instead of an apartment, something that is virtually impossible to do without several roommates in Washington. I will traveling there this weekend in order to view some properties and hopefully -- put a deposit down on one.

We are currently paying $900 per month for a simple one bedroom in DC. We are looking only at 2-3 bedroom homes (and one townhouse) in SC. They run between $510 and $895. I doubt we are going to go with the $895 one because we are interested in taking advantage of the lower cost of living and that would save us anything.

The catch is that we have to have a 2 bedroom house because my partner will be setting up a home office in SC. We are hoping to get a second bathroom so that he can set up a darkroom as well for his photography.

If we can secure one of the 4 or so that are in the $600-700 range that would be great! I hope the ones we have scheduled a visit with are adequate. That would save each of us between $100 and $150 per month. That month can be siphoned off into debt reduction and savings. Mine will probably help to offset the cost of my new vehicle, but my extra income will still leave plenty of room for paying mass quantities on my credit cards.

I will post a complete description of the place we choose as well as a breakdown of the cost and impact on my budget after this weekend.

The best thing is that -- though the housing reduction is the largest savings of SC -- there are other budgetary areas that will experience relief by moving down South. Groceries are cheaper (much cheaper) and there are more discount and salvage stores (where you can find great deals on items to furnish your home and sometimes - though less often - on clothing).

Changes. . .Including a car

My budget and debt reduction plan has been put on temporary hold. I must front the moving costs of moving to South Carolina for my new job, but I will be getting reimbursed up to $2,700 for expenses. I also have to pay in advance for a house-hunting trip to SC and then get reimbursed later. All of this requires using my credit cards for the time being and going back down to the minimum payment for a month.

The other news is that I purchased a car. I did this for the long-term reason that in the South, you don’t have public transportation and you need a car to get around. The second reason is more short term: I want the mileage reimbursement for moving rather than them just paying for a rental car. The mileage reimbursement will be a lot more value and it will be cash in hand.

I could afford to put $1,000 down on the car ($500 cash and $500 on my credit card to be paid off with part of my $2,500 signing bonus when it comes in). The car I chose was a 2000 Honda Civic with a little over 51,000 miles on it. I think I can drive this car until it is 150,000 miles with good maintenance. The price was $9,900 and with $1,000 down I financed $8,900 for 5 years (60 months). My payments will be $198 per month.

I am committed to paying this off early, within two years. I figured out that if I pay it off in 24 months I will save over $1,100 in interest! That’s a big motivator along with not having a car payment and having something good to drive. I financed it for five years only to get the payment low for the next few months while I am paying down my credit cards.

I’ll admit money is tight right now, and I still have to pay for utility deposits, gas to SC for a house-hunting trip, food while I am there, the actual shipment of my stuff to SC, and buying out of my lease. It’s a little scary but my partner has some open credit that we will use and I will pay him back with the reimbursement. I am also expecting my $2,500 signing bonus any day now and that will be the key point in making this move work! Once I get that, we should be fine.

Other items: Car insurance – Got my insurance through GEICO. $410 for six months sounded pricey to me but it was the lowest quote. I paid $107 on it to start the policy and $83 for the next four months. I chose more than the minimum limits but $1,000 deductibles in order to get the best rate.

401K – At my new company there is a 90 day waiting period before you can join the 401K program. I will use this extra take-home income for the next three months to rebuild my $1,000 emergency fund, which is even more important with a car and a $1,000 deductible. When I can, I will join the 401K full force.

Health insurance – My new health insurance plan will begin November 1, 2005. Luckily, my old employer has arranged to let me stay on with my current insurance until Nov. 1 as long as I agree to consult and make myself available to answer questions for them during that time.

China – I put my china set on Ebay. I paid around $16 to post the listing and I set a reserve of $200. Currently, I have had 8 bids for a high bid of $81.00. But there are about 15 people “watching” the item and hopefully near the end of the auction someone will bid up to the reserve. That extra income would be great right now and --- it is one less thing to move! I will let you know how the auction turns out!

Once everything shakes out with all of this stuff, I will update my budget to consider my new income and ramp up my debt reduction plan to be paid off faster. Keep reading!

Wednesday, August 24, 2005

New Job Offer!!!

I was offered another position today. This was the position I have been wanting with the fundraising software consulting company. I had taken the university position here in DC because I didn't think they would have a contract set up in the immediate future, opening up a position for me at one of their client universities.

Turns out they do. A university in South Carolina has signed up and needs an experienced program manager. They need to hire, relocate, and train someone in the position to be ready to go in 4-6 weeks. They called me today to see if I was interested.

I told them I had already accepted another position, but called them back later to discuss the opportunity in more detail. (I figure its better to cancel on a job before you start rather than begin work and be trained and then quit 4-6 months into it.)

They offered the slot to me on the spot and they made a very lucrative offer. I would make $45,500 with a $2,500 signing bonus. Relocation expenses (up to $2,700) are also part of the package. They have great corporate benefits - 401K with match, all health insurances (dental and vision included), etc. They also are willing to pay for me to visit the city and university where I will be stationed before I move. They get me the $2,500 check more quickly than usual too, so I would have cash on hand to pay for my move.

My partner is discussing opportunities with his current job for moving his job to a contract basis where he can work from anywhere. He is a writer, photographer, and editor for a political newspaper. If this works out (which is highly likely as it has been discussed for a while), it would be ideal.

I think it will be a great opportunity and they really seem to like my experience. The incentive structure at this company is stellar. I would be eligible for a raise in December, pending a performance review. (I would be eligible for one quarter of the normal raise, since I was there for one quarter of this year.) And if I meet my performance goals and statistics for the program, I would be eligible for a trip to Cancun or somewhere every year and a $2,000 year end bonus.

This certainly pumps up my debt reduction program, but I will have to get a car for this city. I will keep Miss Money readers updated as to the financial developments associated with the move! Also, the median real estate cost for a single family home in this area is only $87,000!! That means I will probably be able to purchase a home in about a year, and rents are lower as well. (That's the great thing about DC - it makes you realize how cheap you have it everywhere else!)

I feel lucky and grateful! Sometimes things just work out!

Monday, August 22, 2005

Expenses until Payday

Pay day is Wednesday and I am skating by just barely until then. I am going to begin reporting my daily expenses after I log them into Quicken every evening.

My tight checking account today is a sign of how much I need to be disciplined about my budget. I have a little over $57 now, after buying groceries and cleaning supplies and adding money to my public transport card.

Checking account began at $115
Today I spent:
Safeway - $48.56 (groceries for work, home, vitamins, and cleaning supplies to tide us over)
Metro - $9 for fare to get to an from work since I was in the negative on my card

I have been unusually generous to my savings this month and probably paid more than I expected to my credit cards, but I also spent more that I needed to. That will cease this month.

My goal is to spend nothing tomorrow. Wednesday will be payday. Then I will have money in order to even begin trying to stay within my budget.

Quicken was easy to use and is working very well so far. Although I doubt it will be so breezy if I have a day with more reciepts or I ever let it pile up.

Sunday, August 21, 2005

Renter's Insurance

A question for everyone:

Should I get renter's insurance? I do not own a home but I do have an extensive library and a few valuables not to mention clothes, computers, etc.

Renter's insurance has been quoted to me at $150 per year, but I have also heard that it takes a lot of trouble to set up (taking pictures of your belongings and itemizing everything). Is it time consuming? Does it matter?

Should I buy it? Is it worth the time and money?

Suze Orman's New Book

I just finished Suze Orman's newest book, The Money Book for the Young, Fabulous and Broke, and I learned a great deal and clarified a lot in order to plan my next moves.

Some of the highlights for me:
  • I really learned what a Roth IRA is and why is it such a great option. Her explanation and analysis has cemented my decision to start one ASAP.
  • I learned what "dollar cost averaging" means and how it can make you more money. I will invest on a monthly basis as soon I get to that point and I am committed to getting there as quickly as possible.
  • I used some of her YFB website tools to look at mortgages and down payments. I learned I can probably buy a home with as little as 3% down, although I am going to strive for at least 10% down.
  • I heard the statistics again about the monthly 25 year old investor who puts in $100 monthly in a mutual fund until they are 65 who will have 1 million dollars. If you wait until 35, you will only have $300,000. I cannot afford to wait!
  • I also learned about why not to bother paying off student loans that are at a great rate. (See my Debt Reduction - Student Loan post.)
  • I was reminded that I need to set up a durable power of attorney and a will. As soon as my divorce is final, I am going to set all that up with a software kit. And recommendations?

I plan on giving brief bullet point listings of what I find interesting and useful in finance books, videos and magazines here on Miss Money. I hope it helps you out at least helps you decided whether or not to consult the book.

Future books I plan to cover: Jack Welch's Winning and Jean Chatsky's You Don't Have to be Rich.

Debt Reduction Plan - Student Loans

I have been debating the details of this plan with myself for the past couple of days and have thus been putting it off until now.

My current student loan debt totals $45,500.

It breaks out like this:
- a small private loan which I took out for study abroad in undergraduate (could not be consolidated = $3500
- consolidated Federal Stafford loan (my undergrad, my spouse's undergrad, and my graduate) = $42,000

Of that $42,000, approximately $7,000 is my spouse's which I have agreed to pay off in exchange for him taking over debt acquired during our marriage (about $5,500).

For me the most important pieces of this puzzle to eliminate is the $3,500 private loan and the $7,000 which represents my spouse's debt. The $3,500 is an extra $56 to pay every month and I would rather just put it off the books as quickly as possible for simplicity's sake. The $7,000 which is my spouse's is an emotional closure kind of issue. Even though he is still connected to me until the entire amount is paid off, it would mean alot to me to say that I had already paid "his portion" off.

The remaining $35,000 I don't mind paying off on time and slowly because I have a great interest rate. (I am paying 2.75% now and after 36 consecutive payments it will drop to 1.75%.)

That means I would do better to put the extra cash which could pay it off into a Roth IRA or a mutual fund and make a better return. However, I might feel differently later on as I am on a graduated payment plan with a 25 year payoff and in 10 years my monthly payments on the loan ($117) might be more less manageable if my income doesn't rise to accomodate this increase.

But for now, here is my plan:

1. Continue making the basic payments ($56 and $117) monthly until my credit card debt is paid off (max 12 months probably sooner)

2. At that time, combine my credit card payoff budget line and my savings budget line (for a total of $550)

3. Distribute that $550 to three areas: a) $150 monthly to a Roth IRA, b) $150 monthly to a no-load mutual fund account, and c) $250 extra for student loan payoff.

I will use that extra $250 in this manner:

1. I will tack it on to the private loan payment for a rough monthly payment of $300 until it is paid off. (Assuming I make regular payments for one year and then begin this, I can expect payoff about 8-10 months after I begin the $300 payments.)

2. Then I can move that $300 to my consolidated student loans and pay $420 monthly on them until at least $7,000 is paid off. (Again, assuming that I make the regular payments until I pay off both the CC debt and the private loan -- I will have already paid off $2500 on this loan. So I can just mentally focus on getting to $10,000 total paid off. Which I can expect to pay off roughly 17 months.)

This might sound confusing but basically I will be stacking the $250 extra from my credit card payoff budget line first on the private loan and then on the consolidated loan in order to eliminate the private loan first and then reduce the total balance on the consolidated loan by $10,000 total dollars. This can be accomplished in about two years. It will not kick in until my credit card debt is paid off though, so the quicker that happens the better.

Once I have accomplished the above, I will reallocate that $250 back into investments, adding it to my mutual funds or Roth IRA and return to paying my minimum on my consolidated student loan. It is good debt and at a great rate! And I have auto-deduct set up so I rarely even have to thinking about it!

Doing this and getting out of credit card debt will remove over $18,000 of debt from my net worth in 2-3 year alone!! With the extra I will be saving in this plan, I will add $8,400 in assets to my net worth. That's $26,400 of improvement in 2-3 years and that doesn't count pre-tax 401K contributions and matches which will move it even further. If I follow these two debt reduction (credit cards and student loans) and savings plans, I could be very close to a positive net worth in 3-4 years!

Almost $5,000 debt in only 3 months, how?

I began wondering the other day: "How did I get myself into almost $5,000 of credit card debt in only 3 months?" and I thought you might want to know to.

I was watched a Suze Orman lecture where she discussed not making major financial decisions in the aftermath of a major life change (divorce, death, etc.). Well, as you may know from reading my other posts, I separated from my husband of just under two years in May 2005.

At that time, I had no credit of my own. I needed it to get by -- yes, but I didn't need a $5,000 cushion...where did it go? How did it happen?

Later in the documentary, Suze Orman talked with a woman who had also been through a divorce, during the separation this lady had gotten into over $21,000 in credit card debt. Suze said this was a manifestion of a self destructive tendency and a desire to find solace in things in order to cover up the chaos and pain that is going on with our lives.

I have to agree. Some of my purchases were highly justified. I am looking at a statement for my largest credit card from June. I purchased my laptop ($1,100) and a killer basic black suit for job interviews ($312 + shoes = $392).

I needed a computer that worked (my spouse kept our desktop) and I wanted a new job in order to get a new start. These purchases and others like pet supplies for my cat who was adjusting to a new home -- were justified and good uses of my new-found credit.

But, being honest with myself, I am staring at the statements and I am having trouble finding other justified purchases. Even if I consider that I need a basic extension of my checking account because I was floating the rent on my old apartment and expenses in a new one -- I can only count the little things - like my copy of the new Harry Potter book ($30 with shipping) and a haircut ($80).

The rest of these purchases were totally emotional!!! I remember thinking when I made many of these purchases "My soon-to-be-ex spouse would never have let me buy this!" I felt powerful and indepedent -- when I know now I was anything but at that point in my life.

Here are some of the other purchases as examples of my emotional spree:

$105 at a used book store
$54 for tea and French country patterned tablecloths at a tea shop
$36 for bubble bath at Lush
$70 at Origins for more bath products and lipstick
over $250 at Victoria's Secret

That's $515 right there and I made those purchases over the span of a few days. Frightening!

Did I need to go through this binge and purge process in order to start over? Did I emotionally require a spending spree at that moment in my financial life? I don't know, but it scares me to think I could rack up debt at that rate. I am going to take a truly empowering lesson from this experience and work to prevent it from ever hamstringing me in the future.

My Net Worth

Set up Quicken manually today and intend to put in all my transactions in it from today forward for at least 30 days to see if it is more useful than the combination of my online banking and an Excel spreadsheet.

Most interesting, since I just setting up my accounts and my budget categories (I am sure it will get more interesting as transactions pile up), was the calculation of my net worth.

I have never thought of my financial self in these terms before; I was happy if I could pay the bills and buy the things I needed to get buy. I called that a success! For that time in my life -- it certainly was!

But more income and bigger goals necessitate a more sophisticated view of things. I will begin keeping careful track of my net worth. This calculation includes all of my money - my checking, savings, credit card debt, student loan debt, and my 401K (although the 401k is only up-to-date as of the end of June.)

My current net worth is -$45,428.64. You didn't read it wrong. It is a negative number.

The biggest ticket item here is the $42,000 in consolidated student loans. I will outline my strategy for reducing this in an upcoming post, which will round out my financial background section.

I plan to give all my Miss Money readers a monthly net worth update! Check back often!

If I get out of credit card debt, continue paying regularly on my student loans, continue one year more of investment in the 401K at my new job and saving $100 per month at least in my emergency fund, I can put $4,400 of positive savings and assets onto my net worth and remove $6,776 in liabilities.

That means I can move that number towards the positive by more than $11,000.

Thus -- to make it a stretch goal: I project that my net worth in one year will be -$32,000.

By my conservative calculations alone, just doing my basic plan I will reach -$34,252.64 in 12 months.

Let's see if I can come up with some extra cash to sock away in savings or put towards that student loan debt to beat my net worth goal!!!

(Hmmm...tax returns, contract pay, etc. etc. If I am out of credit card debt more quickly than expected, that's money I am planning to put into a Roth IRA and dollar cost averaging, no-load mutual funds monthly!! This might be easier than it looks!)

Saturday, August 20, 2005

Budget Update

As I discussed in my debt reduction post, I have made a decision to alter my budget in order to pay off my credit card debt more quickly. I have also taken some other actions in preparation for September 1, 2005, when I will begin my weekly budget audits and disclosures here at Miss Money. I want to make it easier for me to succeed.

I have . . .
  • changed my iTunes account to be connected to my debit card instead of credit card, forcing me to consider the bottom line before I hit "Buy Now."
  • put all three of my credit cards in a safe drawer in my home. (I had previously only put 2 of them away.)
  • reduced my 5-at-a-time Netflix rental plan to a 3-at-a-time rental plan, saving me $10 per month.
  • began making a list of items I can sell on E-bay (wedding china, old laptop, etc.)

Here is my updated budget. As stated, I will begin posting budget updates and audits weekly beginning September 1, 2005. Every penny will be accounted for and disclosed.

Income from Paychecks: $1,980

Fixed Expenses
Rent (my part): $450
Electricity (my part): $25
Student Loan #1: $118
Student Loan #2: $56
Cable and Internet: $50
Netflix: $20

Total: $719

Variable Expenses
Credit Cards: $450 (distributed between the 3 cards)
Savings: $100
Food/Groceries: $325

Total: $875

Discretionary Expenses
Clothing: $100
Entertainment: $80
Miscellaneous: $200

Total: $380

Final Expense Total: $1,974
Income: $1,980
Difference: $6

Debt Reduction Plan - Credit Cards

So, here’s the ugly truth, the lowdown, the reality. In May 2005, I had a small amount of credit card debt with my spouse. When I left, part of the arrangement was that I would pay off all consolidated student loans including his part (about $7,000) of that and he would take over that debt. At that point, I had no credit card debt!

The bad news was that I also had no credit! And starting a new life I needed it. I still had an obligation to my old apartment and I had agreed to pay $1,000 toward the rent of that apartment until the end of the current lease (August 2005). That hasty agreement definitely strapped me for cash for the past few months.

I needed a credit card to tide me over yes but also to begin building a credit history of my own (not one associated with my mother or my spouse.) I wanted to take on the responsibility and the risk for myself.

I now have three credit cards. I have a total debt on those cards of $4750. The total limit on all three cards together is $6200. That means I have utilized and carry a balance of 76% of my total limit.

My plan is simple: I had budgeted in my earlier post $400 monthly for credit card payments. I have re-evaluated and determined that if I can find another $50 to put towards them in addition to the $400, I can get it done in one year instead of two years.

I found the extra $50 in the budget pretty easily. I rolled my laundry expenses ($20) into the groceries line item. I lowered my Netflix account back to 3 films at a time (I was at 5 movies at a time.) This will save me roughly $10 per month. Then I lowered my food budget from $350 to $330, saving me the final $20 necessary to make this work.

Once a card is paid off, I plan to roll the amount onto the next credit card until that one is paid off and so on, until debt free. This process will take about one year.

Now, I do plan to use any extra cash from my potential contract pay, selling items I no longer use or need, and my tax refund should I get one to assist in speeding up this effort. So the goal of one year is the outside goal and I think with chipping away extra on these cards I could possibly do it even sooner, perhaps April or May 2006.

Here are the details of each card and my plan for each one:

CC #1
$158.63 Current Balance
$600 Credit Limit
20.9% Interest Rate
I plan to pay this card off in full next month. This use to be my iTunes music credit card, but I found I didn’t consider this to be “real money” (see Weaknesses entry). Thus, I have changed my iTunes card to be my debit card, forcing my to consider the bottom line, each time I hit the “Buy Now” button for some music.

CC #2
$1285.10 Current Balance
$1500 Credit Limit
24.4% Interest Rate
I will pay $170 on this card in September and then $330 thereafter until paid off, which will be approximately February or March 2006. This is great because this card has the highest interest rate of all my cards.

CC #3
$3278.50 Current Balance
$4100 Credit Limit
0% Introductory Interest Rate until November 2005
Roughly 22% thereafter
I plan to pay $120 monthly on this card, through automatic weekly transfers via my online banking ($30 per week). I will maintain this arrangement until both of the other cards are paid off (expected February or March 2006). At that point, I plan to bump my payments on this card up to $450 per month. This will take about another 6 months to eliminate the balance. If all goes well, I will be free of credit card debt by August or September 2006.

The question then becomes: What I am going to do with that extra $450 per month once I am out of debt? The first to-do on my list will be setting up a Roth IRA and contributing about $150 per month into it. That way I would almost max out my yearly allowable contribute to it. I could on occasion drop a few more bucks in to supplement.

That leaves me with $300 monthly to use in other ways. Since by next year, I will have met my personal goals for an emergency liquid savings account, I will add to that $300 my $100 savings budget. If my $1500+ in savings isn’t enough in a dire situation, I will make use of the credit on my paid-off cards to handle the emergency.

Thus, I would have $400 total a month to play with for other purposes. I plan on taking another $200 monthly and set up an automatic monthly deduction to siphon it off into a mutual fund account. This account will become my home down payment savings account. The last $200 per month, I want to divide between my two student loan accounts, helping to pay them down more quickly. I will outline that in an upcoming post.

Update on Credit Scores

Curiousity got the better of me today and I decided to go to www.myfico.com and purchase my updated FICO scores and reports. The cost was only $40 or so and it was a great wake-up call.

I knew what to expect: I have acquired two new revolving, unsecured credit accounts and reactivated another revolving account. I also was removed from a high limit credit card which shared with my husband. I have charged my 3 current accounts to an average of 76% of their limits. My score was going to have gone down since June 2, 2005.

In less than 3 months, my credit scores have dropped an average of 41 points. Here's the breakdown:

TransUnion
6/2: 707
8/20: 688
Change: -19

Equifax
6/2: 700
8/20: 643
Change: -57

Experian
6/2: 683
8/20: 636
Change: -47

Average
6/2: 697
8/20: 656
Change: -41

So, the next question is: What am I going to do about it? I have a plan to get out of credit card debt in one year. I am going to outline it in my post to Miss Money. Check back soon....

The implication of this 40 point change are dramatic. Where examples of mortage rates with my previous scores were 6.1 to 6.5%, they are now a full percentage point higher 7.25 to 7.5%!

But there is hope! Using the FICO simulator on the site (a perk of the service), I simulated how my score would change if I merely made the minimum payments for my credit cards on time for the next 12 months. This alone could take my score to 718 in one year.

If I made the payments on time and paid all of the balances down to zero, my score could rise to 758 in one year. This is my goal and my plan will get my to it by August 2006. I hope you will watch and help me stay on track on this journey.

Friday, August 19, 2005

Tour of Miss Money

Welcome to Miss Money,
my anonymous personal finance blog.
I am using this space to relate my progress towards achieving my financial goals, including:

1. Getting out of credit card debt
2. Getting rid of student loan debt
3. Increasing my liquid personal savings
4. Increasing my retirement fund - 401(k)
5. Building up a nest egg in order to purchase a home

Reading about my progress and expenditures will not make much sense without my background information, thus I am putting together this post so you can learn about me and my situation.

My income and career developments are essential information for understanding my goals, as is my current budget. I have a plan for increasing my income, some of which is already proving productive.

I even divulge my credit score, and how it changes. And I discuss how my upcoming divorce affects my finances. Marriage and money may be a recurring theme.

As background, I outline my financial strengths, weaknesses, and values, as well the people who I think give stellar financial advice (coming soon). I also give random confessions when I do something that was a financially stupid move. If I come upon an interesting financial fact or article that applies to my situation, I will often discuss it. I will sometimes solicit advice from my readers to take advantage of all the great financial information out there.

Very soon, I will give the specific of my credit card debt and student loan situation, as well as my plan for paying them off. Budgetary updates and check-ups will be regular features.

My financial values

Money is a measurement of value. – You receive money when you provide services, products or knowledge that others value. You spend your money on services, products, or knowledge that others provide for you.

Money is for living. – I have known people who hoard money for the sake of hoarding it. I do not subscribe to this view of money. I believe in savings and investments, but only to the end that they allow you security and peace of mind in order to live happily.

If you have lots of money pocketed everywhere, but won’t go places because you’d rather not spend gas money, what good is that money? Or you eat Ramen noodles every night rather than spend the cash, I say – why bother? Having money and wealth is only good for building a comfortable, secure, and happy life.

If you are in debt, someone else owns a piece of you. -- Thus, in the interest of being independent financially and philosophically, I believe in getting out of debt as soon as possible. Not to mention that if you are debt free, you have more money to save and spend on good and services that if you are paying off debts and loans.

Conversely, I will not pay off debt at the dramatic expenses of having some moderate savings. -- I do not think it beneficial to use all of my savings to get out of debt because without a financial cushion, I could end up needing more money and thus end up back in debt again. Therefore, I keep a $500 to $1,000 cushion and continue my $100 monthly savings while I am trying to pay off debts.

There is something essentially good and right about honoring your financial commitments. --This includes: keeping your checking account from going into overdraft, never writing a bad check, never going over the limit on your credit cards, never missing payments, always paying your bills and rent and paying everything on time. If I was a landlord, I would ask for nothing less.

More broadly, this value includes never running away from debt. I don’t believe in bankruptcy except in extreme cases of circumstantial hardship. I also don’t believe in ignoring debt until they cannot legally collect anymore or defaulting on student loans. You got the benefit of the value that these companies loaned to you and you owe them (philosophically and financially) their value back with interest.

Pay yourself first, invest young and be risky early. -- I believe in a financial cushion and a strong “pay yourself first” savings plan, even while you are paying off debt. I also believe in always maxing out enough to get the full company 401K match, investing risky and early in order to stay in for the long haul and take advantage of compound interest.

Lower your taxable income as much as possible and keep as much as is legally possible -- I earned my money and I want to keep it. Thus, I believe in lowering my taxable income as much as possible. Using pre-tax money to contribute to 401K accounts, using pre-tax money to purchase transportation dollars, making tax-deductible charitable contributions, and once I am financially stable enough to do it, keep more of my money each month by claiming more exemptions each paycheck.

Thursday, August 18, 2005

Renting not so bad??

I came across an interesting article today that put an interesting supply-and-demand spin on renting instead of owning. Basically, the thesis is that when the housing market booms, demand for rental housing decreases, lowering the pricing. Interesting and demonstrably true no doubt.

Does it make me want to give up on owning a home so that my money goes into equity and not down the drain??? Not really.

The entire article, from the Philadephia Inquirer is linked to the title, but you'll have to register with that newspaper's site to read it.

Here's the pertinent quote:
Over a lifetime, owning almost certainly pays off. With a fixed-rate mortgage, principal and interest payments stay flat for 30 years, while the owner's income and the home's value probably grow.

A homeowner will eventually own the home, eliminating those principal and interest payments. The property can be sold or remortgaged to raise money for retirement, or it can be a valuable asset left to heirs.

Rent for a lifetime and your housing cost will continue to grow as rent increases with inflation. And you'll never build that equity.

Renting isn't so bad
But renting for a while isn't all that bad, especially now. Low mortgage rates have driven housing prices up and led many people to buy second and third homes as investments. At the same time, many former renters have been able to buy.

Result: An increase in rental-home supply and a decrease in demand. That causes rents to stay flat, or even to drop. In the Philadelphia region, the median home price has gone up 60 percent since 2000, but rents have increased just 12 percent, according to Torto Wheaton Research of Boston.

Stay Tuned . . .

I have made a mental committment to myself to check my complete credit reports and all three FICO scores every quarter.

Since my last check was 6/2/2005 and a lot has happened on the credit horizon since then -- I am eager for my next check which is scheduled for somewhere around 9/1/2005.

I feel sure that the scores have gone down but I did fix a lot of problems.

We will see. Just felt like giving Miss Money readers a heads-up. Check back soon to see if I went up or down and what my next steps are for the Fall quarter!

Rebate Confession

I want to admit this financial sin to the cosmos! I purchased a laptop computer in June and filed away the rebate forms and have not yet filled them out.

These were worth over $300 total, which would have made the computer only $700 or so. To make matters worse, I paid for the computer on my credit card and haven't paid off the balance yet. Thus, I threw away the opportunity to get $300 closer to my debt reduction goals.

All but one of the rebate forms are out of date now. I will fill out the last one for around $50 and see what happens. I am angry with myself, but I have learned my lesson. Shame on me! :)

Contract Pay

I am negotiating with my current employer about a monthly contract fee for me to serve in an advisory capacity for the next few months. I would be training the existing employees on the core tasks that I handle and reviewing projects for mistakes. I would also help to find and train my replacement.

I am asking for between $750 and $1,000 pre-tax monthly. I want them to be able to give this to me as if I was a part-time employee and thus, they could take the taxes out for me. I do not have to go through the rigamarole to pay the taxes on that income myself. Yuck!

Anyhow, if this arrangments is approved, I will have some extra work (a few on-site visits, several phone calls and probably lots of emails) for the next 2-3 months. But -- when that's done I could be $1,050 to $2,100 richer! That would be great!

I am committing to myself that I will put one-half of whatever I make through this gig into savings (as a cushion) and the other half onto my highest interest credit card. Since I already have a plan to reduce my credit card debt to $0 in two years -- this extra cash would speed up the process by a significant bit. It should also put me at least over $1,000 in my emergency savings account.

Make yourself invaluable and the money will follow!

**(However, I must warn against hoarding knowledge. I never do that. I believe in transparency and training manuals. Documentation gives you more job security -- not less. I watched a colleague who thought sharing knowledge would lose her her job. She went down in flames for being so protective of what should be common knowledge.)

Rule about Finances and Marriage

I was just doing a quick revision and proofreading my former posts and I realized the most important thing about divorce and finances. I added it to the original post, but I feel so strongly about it I thought I would add it separately. I wish someone had told me this, but I am not sure I would have listened anyway.

The overarching rule is -- Do not make financial decisions with your spouse while assuming you will always be together! I had the "perfect" marriage -- really perfect and I made poor choices assuming we would always be together. Look out for yourself first!

My Financial Strengths

  1. I love to learn about personal finance. I subscribe to Money Magazine (I am going to get Kiplinger's) and enjoy reading books about savings, credit cards, budgeting etc. More on this when I get to my section on financial mentors.
  2. I love to plan strategies for my finances. I enjoy setting goals and plan actions in order to achieve them. This is particularly gratifying in the financial realm because you can clearly see a credit card balance dropping or a 401(k) account building up month-to-month.
  3. I enjoy the feeling of having padding for "a rainy day." Because having something in savings gives me personal peace of mind and induces tranquility on my part, I am highly likely to actually save! My soon-to-be-former spouse actually would get angry with me for saving TOO much!
  4. I emotionally break down if I miss a payment or get overdrawn. I literally beat myself up about it. I cannot handle FAILING to be a responsible, contributing member of society. This is a strength because my reaction to failing is so violent and extreme that I NEVER miss payment and my checking account is NEVER overdrawn!
  5. I fear and respect credit cards. Again, similar to the point above, I have NEVER been turned down at the counter and told my credit card was over-the-limit. But I have been shopping with my mother when it has happened to her. She shrugged it off – unembarrassed – but I was mortified. Again, this neurosis on my part is actually a strength: my fear of being close to or over-the-limit serves me well.
  6. I am a bit obsessed with real estate. I want to buy a house so bad I can taste it. I understand deeply the financial benefits owning a home as opposed to renting and I am prepared to do what it takes to get myself into the Home Owner’s Club.
  7. I believe that hard work will be compensated. Thus, I work hard and I am professional. I understand that I am not owed anything by society. I understand that if I do not make myself valuable that I will not be earn any value for myself. This – I believe – is a healthy attitude towards work and why I should work.

Wednesday, August 17, 2005

Quicken or MS Money???

I need some advice. My computer, which I recently purchased, came equipped with Quicken, but I have had trouble getting it to integrate with my online banking account. Being able to download my expenditures and credits is the most important feature but for some reason, it will not do this for me. Is it Quicken's fault, my fault or Bank of America's?

If Quicken will not do this for me, what features does Microsoft Money have? I do not currently own this software, but I would shell out the cash for it if it was easy to use and useful.

If anyone has any advice on this issue, let me know. I think having a good money management software is important and could be helpful to this project. Right now I am using a manual calculator, my online banking, and an Excel spreadsheet to keep track of my budget. I would rather hit a button, download my transactions and see how I am doing in total. So, Quicken or MS Money -- or is there another good program I might be overlooking?

Financial Weaknesses

My biggest financial weakness is probably one everyone has: I tend to spend too much. More specifically, I think I tend to make many small purchases, telling myself, “It’s just five dollars,” or “Well, one pizza this week won’t break the budget, and go ahead and add breadsticks!”

So, I’ll sketch them out and explain my strategies for overcoming them:

1. I don’t “watch my pennies” well. – As stated above, I tend to be fine avoiding large purchases, but drug stores and grocery stores are my enemy. I can drop $20 every time I enter a CVS.

2. I believe in rewards and celebrations, sometimes too much – When good thing happens in my life, I reward myself or celebrate. This is healthy, in my opinion, but too much of this can break the bank. One day a few weeks ago, I bought a fabulous dinner out for myself and my roommate/unofficial spouse/significant other. That totaled $120 with the tip. I don’t even remember what I was celebrating.

3. I don’t see credit cards as “real money” – I fear credit cards and respect them. They are necessary sometimes and fabulous tools, used wisely. However, even given as much as I know about them and their proper use, I still cannot be truthful and say that I feel the same way about spending on a credit card as a debit card. It still never feels like “real” money because it doesn’t lower my checking account balance.

Solutions
Penny-Watching - I need to use my budget to help me watch the pennies. I need to ask myself what purpose a purchase serves and define which budget category a purchase falls into before I swipe the debit card.

Celebration Crazy - I need to truly only celebrate when it is warranted and the celebrations need to fall into my budget or be compensated for in the budget by cutting back in other areas.

Unreal Money - I need to cease use of the credit cards in total by focusing on paying them off. I have already put two of them in a drawer at home and I may put the third one away as well. I need to focus on what I have in the checking account as my money for purchases and not just for bills.

That seems to be an honest assessment of my financial weaknesses. I will keep the topic on my mind for the next few days and if I locate any more of them I will post them in the spirit of full disclosure.

Letter of Resignation

I have decided to take the new job offered to me yesterday. I took the day off and confirmed my acceptance with the new job and composed my letter of resignation for my current position.

Although this job is for the same salary, the benefits are actually better. They have a 401K program, which I can join immediately -- with a better employer match. That's great news. They also have a law assistance program which can assist with uncontested divorce filings and name changes at little or no charge, two services I will need in upcoming months. This will certainly save me some cash.

Here's a copy of my letter of resignation. Even though I am completely burnt-out and have my doubts as to the long-term viability of the organization given its direction and management, I tried to keep it positive and grateful.
Dear Boss:

Please accept this as my formal notice of resignation from the Organization, effective September 1, 2005. I have learned a great deal and developed many skills while working for the Organization and for that I am truly grateful.

I hope a two-week notice is sufficient time for you to find a replacement for me. If I can help to train my replacement or tie up any loose ends, please let me know. I am open to working out an arrangement by which to pass along my knowledge so that core tasks do not suffer and institutional knowledge is passed along.

I wish the Organization much success in the future. I hope I have helped to lay the groundwork for that future success during my time here. Thank you very much for the opportunity to work here and contribute to the fight.

Sincerely,
Miss Money

Tuesday, August 16, 2005

Update on Job Offering

The organization that offered me a job earlier today came back with a revised offer.

They can -- pending final approval from Human Resources -- offer me exactly what I am making now! So, it would be a lateral move for me.

This is good because of my concerns about the instability of my current organization and my serious issues with the governance of the group. This new position will also be a more focused position with fewer areas of responsibility. It will be an opportunity for me to build a specific skill area instead of dabbling in many areas -- which is what my current position is.

Anyway, I am going to review very closely their Human Resources website, to make sure I have all of my questions answered about benefits, salary, etc. And -- I will want a more solid guarantee of the salary, but pending that final review -- I think I am going to accept this position. I would say I am 90-95% certain at this moment. The new organization wants an answer tomorrow.

This may still be an opportunity for increased income though, because I am so valuable to the operations of my current job, I may be able to negtioate a contract or consultancy rate in order to finish up current projects and train my successors on my job tasks. That could certainly get me out of debt more quickly.

The best thing about it is the consultancy (program management) job I really want may take up to 6-12 months to work out. They would have to sign a new contract in order to hire me, which can take a while and I would have to want to move to where the contract was. This position pays more and has a great bonus and incentive structure.

6-12 months though will give me time to honor my current lease agreement, give my significant other time to locate another position in whatever city we might choose to move to, and honor my new job with at least half a year of service.

Who knows? I may be composing a letter of resignation 24 hours from now? And looking into a Roth IRA to roll my 401K into?

Job Offering

I was offered a new job today, but the salary was under what I am currently making. I could meet my basic expenses with it, but it would impact my financial goals, with respect to credit cards and savings.

I threw out a few other numbers to the company and they are trying to see what they can come up with, per their budget. I will post any updates here.

Incidentally, I have an interview tomorrow with another organization. We will see how that turns out.

And the consulting company I applied with has been reviewing my resume as well. Things are looking up!

Divorce and Its Financial Impact

I will write more on this later, but since my situation is still in progress I will save the details for now. I will spew forth a few random bits of advice given my recent experiences concerning marriage, divorces, and finances.

The overarching rule is -- Do not make financial decisions with your spouse while assuming you will always be together! I had the "perfect" marriage -- really perfect and I made poor choices assuming we would always be together. Look out for yourself first!

1) Keep and develop your own credit, especially if you are young and just establishing credit.
2) Do not consolidate your student loans together, as it is completely irreversible and will link you financially with your former spouse until the loan is paid off. (And you can only consolidate them once, ever.)
3) Do not completely integrate your finances. Maintain some money that is strictly yours.
4) With the end of th marriage, attempt to remain amicable. Working things out without getting lawyers involved is not only less emotionally damaging, but cheaper too.
5) Keep tedious records and copies of everything that transpires during the separation process. For any transaction, get confirmation of reciept and keep meticulous track of everything.


As I said, more later (probably a few months from now) on the financial specifics of my marriage/divorce situation and its impact.

My Credit Score(s)

If you are like me, you hate bureaucratic red tape. I tried to use the Free Credit Report sites to get my credit reports and had so much trouble that I finally broke down and paid $50 to get the Suze Orman's My Fico Platinum Kit from www.myfico.com. It was one of the best decisions I have made.

After separating from my husband, I had virtually no disposable credit of my own. I was an authorized user on his accounts, which I had taken the lead in paying down, assuming we would continue to be together. I had one credit card from my college days with a limit of only $400 dollars and it was out-of-date.

I reactivated that card and proceeded to build up my own credit by acquiring my own credit and learning as much as I could about it. I applied for two more credit cards and got them both. This was lucky because, as I will explain in my later post on divorce, I have definitely needed the cushion these past few months.

Since my early days in college, I was determined not to get into credit card debt. My mom had a real problem with it and I was resolved not to repeat such mistakes. However, I found that my admirable position got me into trouble, such that when I was a senior in college and wanted to get credit – I couldn’t because I had not established a history.

Thus – despite my beliefs in the equality of women and my strong feelings about credit and financial health – when I left my husband I had no credit to call my own.

My need for information was satisfied with Suze Orman’s kit. The My Fico Kit served as an easy gateway to get all three credit reports and all three FICO scores. My FICO scores averaged 697. (TransUnion – 707, Equifax – 700, and Experian – 683) These scores were better than I had expected (given my lack of credit and some unfortunate credit cards I had co-signed on with my mother, who had made some late payments in the past), but they were merely average.

My goal is to have great credit. One thing I did with My FICO was to compose letters to all three agencies automatically informing them of my updated address, employment history, salary information, etc. (They did not show a full time job and I was two years out of college. They still had my address from college as well.)

I also included some disputes for random credit cards that were listed on my record as dating back to the early to mid-1990s. I was 12-14 years old then and never applied for a credit card. I trust and believe my family and they maintain they never signed me up either.

I received responses from all of the agencies. All of the demographic and employment information changes were accepted. Some of the disputes were corrected. This was good news.

I ran these three reports, though on 6/2/2005. I have since that time acquired new lines of credit and charged about $5,000 in credit card debt. I am certain my scores have been negatively impacted by this, but my life circumstance at this time has necessitated it.

I am now much more stable, having made the transition to having independent finances and I have a plan for paying down the debt, to be outlined in a future post. I plan to bring the score up to its June levels and then exceed those scores. This will not only help improve my net worth, but also make it easier to purchase a car, get future credit, and buy a home later on.

I will continue to use www.myfico.com, which keeps my account open so that I can get updated scores anytime for another fee. It is a small price to pay for such powerful knowledge delivered through such a useful, user-friendly, and powerful product. I would recommend it to anyone.

Monday, August 15, 2005

Increasing Income

The most obvious ways to increase income include a) asking for a raise and b) getting a new, higher pay job. With the governing board of our company recently rescinding a salary freeze (which they used as coercive, "motivational tool") and my understandable burn-out, I think the second option is my most likely choice.

I am searching for a variety of jobs, from administrative to consulting. Hopefully, the best one will pay more than my current salary. Some of the possibilities could involve a move to an area that has a lower standard of living and thus would be less expensive to live in. However, often cities such as this usually necessitate the purchase of a vehicle which would bring along additional expenses (payment, insurance, gas, repairs, etc.) Hopefully, moving into the private sector -- which is primarily where my current options are sprouting up -- will increase my income to be attendant with any changes in lifestyle a move would bring.

Also, as small change to get a little more cash flow, I have joined a baby sitting match website for my area. I hope to maybe babysit a couple of time a month for a few extra dollars ($50-$100 per month.) We will see how it turns out. That money would probably be either savings or extra "mad money" for me, helping to ensure that I don't bust my budget with impromptu purchases.

I am also considering putting my wedding china on Ebay. It has never come out of its moving box and since my marriage itself is ending, I have no nostalgic need to keep it. I could probably generate $200-$300 for the 10 place settings, serving pieces, and a couple of goblets. I would then put that money into savings hopefully getting myself close my goal of $1,000 in emergency funds.

Lastly, I will be getting back $150 for my half of the apartment deposit from my old place which I shared with my soon-to-be-former spouse. This will go either directly on a credit card to pay down the balance extra or into savings. I have a couple of weeks to decide.

If anyone has any other ideas that don't involve getting a part time job, please let me know.

Savings

I currently have $625 in my personal savings account. I also have an automatic $25 that transfers from my checking account to my savings account weekly. I love this feature! Next to my pre-tax, pre-direct deposit 401K contribution, it is the easiest way to save that I have found.

I plan to continue this pattern until I reach $2,500 in liquid savings, when I will roll $1,000-$1,500 to a mutual fund or money market, not sure which at the moment. This will begin my long term nest egg, hopefully for a down payment on a home.

I do hope to reach a critical level of $1,000-$1,500 in my liquid savings for unexpected expenses and emergencies. Once I reach this level, I intend not to drop below it except in the case of a real and dire need for cash which would otherwise through off my other financial plans. In that case, I would endeavor to replace the emergency fund money within 3 months of using it if possible.

As for that 401K, as of my last statement (dated 6/30/2005) I had $4,028 in it. I began contributing to it immediately upon being hired at my current job. I contributed only 4% for about 9 months, but when I recieved a raise I increased it to 6% in order to get the full employer match benefit.

As stated in my income post, I currently contribute $87 per paycheck with an employer match of $44 per pay period. This totals $262 per month. Since I am so young, I have my investments in the most risky sectors but still not "all in one pot." I contribute 40% in international/global, and 20% each in large cap core, small-mid cap value and small-mid cap growth funds. This arrangement returned 2.45%, representing $86 in investment income last quarter. Although the quarter-to-quarter change is less important to me that the change over the long-term (like 5-10 years) which is usually positive growth.

If I leave my current position, I plan to roll this money into a Roth IRA but continue my approx. $175 monthly contribution to it. If my income increases, I would also like to assume the dollars represented by the employer match as well, attempting to maintain the current level of contribution to the retirement fund, perhaps increasing it if possible.

Expense Budget

I view my expenses as falling into one of three categories: fixed, variable, and discretionary. Fixed expenses can be mandatory (like rent) or nonessential (like my Netflix account), but share the quality that they are exactly the same from month to month. Variable expenses are not the same from month to month but are essential (such as food and electricity.) Discretionary expenses include variable, nonessential expenditures.

Fixed expenses
Rent - $450 per month (my half of a $900 rental apartment)
Consolidated Student Loans - $118 per month
Independent Student Loans - $56 per month
Netflix Account - $30 per month
Cable and Internet - $48 per month

$702 per month total

Variable Expenses
Electricity - Roughly $25 (I pay the cable/internet. My roommate pays the electricity and I pay the difference.)
Food - $350 per month
Laundry - $20 per month
Credit Cards - $400 per month total (I have 3 of them with balances.)
Savings - $100 per month ($25 automatically transferred to savings account.)

$895 per month

Discretionary Expenses
Clothing - $100 per month
Entertainment - $80 per month
Other/Miscellaneous Checking Accoutn Padding - $200

$380 per month.

For a total of $1,977. Since I noted in an earlier post that my monthly income was $1,980, I think I have drawn up a pretty good budget. I am attempting to stick to it as closely as possible for the month of August, but plan on sticking to it with a Puritan thriftness in September.

Future Posts

Having divulged my personal income, I intend to make these posts within the next week. This is in order to provide sufficient background information for the daily updates of my progress towards my goals which will be the meat of my blog, along with tidbits and information that I learn from my financial reading and research.

1. Expense Budget (Variable, Fixed, and Discretionary)
2. Savings (short-term emergency and long-term)
3. Increasing Income
4. My Credit Score and Improving It
5. Divorce and its financial affect
6. My fiancial weaknesses
7. My financial strengths
8. Debt Reduction Plan
9. My financial values
10. My financial mentors

With all of this background, I think blogs readers will have a solid understanding of my financial situation and where I am coming from when I make my financial choices. Going through this process will also help me to clarify my goals, values, and circumstances.

Income

As of this moment, my money consist of my salary. My annual salary is $38,000. I contribute 6% of my salary to my company's 401K, and they match 3%. I also get pre-taxed public transportation dollars, which lower my bring-home income.

My contributions to my 401K total $87 per pay period (and $44 from my employer). I also roughly use $20 per paycheck in Metro tickets pre-tax. I also claim zero deductions or exemptions on my taxes, therefore taking out the maximum each month, so that I can be close to assured that I will not be hit with a big bill come tax time. (Although long-term, I do not want to make this kind of "interest-free" loan to the government. I will have to wait until I have plenty of savings in order to handle a bill every April.)

Thus, each paycheck totals roughly $990 per paycheck. Or $1980 per month. For a 24 year old, only two years out of college with a liberal arts degree working in the non-profit sector -- it's not bad at all, I think! But, as you will see in my future posts, I live in an expensive metropolitan region. I also have a strategy for increasing income which will be included in another post.

Welcome to Miss Money!

Welcome to Miss Money - my personal finance blog.

I hope to use this space to relate my progress towards achieving my financial goals.

Those include:
1. Getting out of credit card debt
2. Getting rid of student loan debt
3. Increasing my liquid personal savings
4. Increasing my retirement fund - 401(k)
5. Building up a nest egg in order to purchase a home

I plan to post more of my details later and relate my plan of action for each of these items. I hope you will start reading this and help me to stay on track. I hope we can give each other good advice. I know I have a lot to learn!

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