Debt is the albatross for young people these days. Often, we're leaving college or grad school with more than 100k in debt. http://www.forbes.com/2009/03/10/college-graduate-school-loans-personal-finance-retirement-grad-school-debt.htmlWhile this is daunting, this debt is an investment in future earnings and options. However, there are a number of excellent options in debt repayment which could help you to greater financial flexibility faster.
First, get rid of all of your private and personal debt. That means credit card debt, car debt, and any private loans. Credit card debt and car debt can be avoided with effective budgeting, restraint in shopping, and avoiding overspending. Private loans are a different story. Often, these loans will carry a higher interest rate, and thus, be more costly than government subsidized loans. There are two ways to manage this money. One, try to avoid it by working while you're in school, and thus avoiding the need for private loans. A second option is the immediate termination of the private loan through no-interest methods. One way which can work is by asking for a salary advance from your job. Your employer will dock your pay to cover it, but you're not paying out over 13%. http://www.thefreemortgagecalculator.com/interest_rates/Personal_Loan.html
If a salary advance is not available, perhaps a no interest loan from family or a close friend may be an alternative. But getting rid of that high interest rate is crucial.
In terms of federally subsidzed loans, look into consolidating your amounts and getting the lowest interest rate possible. http://studentaid.ed.gov/PORTALSWebApp/students/english/consolidation.jsp?tab=repaying The goal is to ensure you get the lowest interest rate possible. Also, at the same time, don't just pay the minimum. Find out how much you can afford to pay off monthly, and do your best to devote a lot of cash to that. The money you are paying in interest is for the privilege of having enhanced earning power, and you should do everything in your power to make that cost as small as possible.
If you have a very low interest rate (some Stafford loans are around 2.4%), don't concern yourself with paying that off on a rushed schedule. You may be able to get a better return for your money in other investments, and so, it would be a prohibitive opportunity cost to pay off the debt rather than get that return.
Also, remember that there are potential loan forgiveness programs and loan repayment options offered from employers. Ask your HR about whether or not your job can help you out. Further, mortgage interest and interest on education loans may be tax deductible, depending on your income. Research this to see if you qualify, and if so, take advantage of these deductions.
Do your best to remove the bad debt (debt with high interest, no tax benefits) as soon as you can, as long as you are not sacrificing more lucrative opportunities. You can find yourself debt free much sooner, allowing you greater financial freedom.
Showing posts with label Spending. Show all posts
Showing posts with label Spending. Show all posts
Friday, March 9, 2012
Thursday, March 1, 2012
Practical vs. Beautiful in Baby Purchases
I have a son who is 16 months old, and I have spent a ton of money on him. We've been through a mountain of bottles, toys, clothes, and all sorts of accessories. I have learned one simple lesson. Never buy anything which does not seem incredibly practical.
A good anecdote is the crib. We have a very nice crib made by some french company, whose instructions are in french. When it came time to lower the crib, it took approximately four hours to loosen bolts, re-align the frame, and then re-tighten bolts with an Allen wrench. Some other cribs can be lowered with very simple latches. But we chose beauty over practicality. Additionally, we have bumpers in our crib, which are nice, but impossible to wash. They need to be washed from time to time, due to vomit, or stains or who even knows. But they are super bulky. I wanted to buy wonder bumpers http://www.gomamagodesigns.com/wonder-bumpers, which prevent suffocation and if they need to be cleaned, can be washed very easily. But our crib could not accommodate wonder bumpers. Take note, that the baby bargain book http://www.amazon.com/Baby-Bargains-Secrets-furniture-maternity/dp/1889392405 will recommend a 99 dollar ikea crib, which you can dress up however you want. But no, we have wasted money and time.
Another place to be super practical is clothes. My kid has a large head, so any kind of clothes with a tight head opening can be a real pain in the butt to put on. But anything which buttons or fastens up the middle is a dream. If your child is in the top 50% for head size, this may be an important factor for you. Remember, with most baby clothes, there is a yelling, screaming, human doing their very best to avoid putting on whatever you want him or her to wear. So, if you want to save yourself tons of headaches, buy clothes with fasteners and not with an army of buttons. But the goal is to get the child dressed, and if you are too exhausted from trying to dress the child, then you don't want to go show them off anyway. Also, whatever you buy is going to have to stand up to a ton of washing, with extra rinsing. Don't buy anything frilly or delicate, because it'll get torn to shreds.
A final thought is toys. There are tons of toys out there, and kids go through them super fast. Instead of buying toys outright, without knowing whether or not your baby will be interested in them, look into subscribing to http://babyplays.com/. If your child loves the toy, go buy it. But if he or she seems to ignore it and not be interested, then you may have saved yourself a fair bit of money. You could waste hundreds or thousands of dollars on toys, and have maybe a 50% success rate. This is an option to try before you buy.
Think about the goals behind these purchases. Envision the whole picture. It is very easy to waste money in this realm, but by asking a ton of questions, and finding the products which fit your individual needs, not just whimsical excitements, can save you a lot of cash, frustration, and energy.
P.S.: If you would like to know the questions my wife and I have learned through the process, contact me privately.
A good anecdote is the crib. We have a very nice crib made by some french company, whose instructions are in french. When it came time to lower the crib, it took approximately four hours to loosen bolts, re-align the frame, and then re-tighten bolts with an Allen wrench. Some other cribs can be lowered with very simple latches. But we chose beauty over practicality. Additionally, we have bumpers in our crib, which are nice, but impossible to wash. They need to be washed from time to time, due to vomit, or stains or who even knows. But they are super bulky. I wanted to buy wonder bumpers http://www.gomamagodesigns.com/wonder-bumpers, which prevent suffocation and if they need to be cleaned, can be washed very easily. But our crib could not accommodate wonder bumpers. Take note, that the baby bargain book http://www.amazon.com/Baby-Bargains-Secrets-furniture-maternity/dp/1889392405 will recommend a 99 dollar ikea crib, which you can dress up however you want. But no, we have wasted money and time.
Another place to be super practical is clothes. My kid has a large head, so any kind of clothes with a tight head opening can be a real pain in the butt to put on. But anything which buttons or fastens up the middle is a dream. If your child is in the top 50% for head size, this may be an important factor for you. Remember, with most baby clothes, there is a yelling, screaming, human doing their very best to avoid putting on whatever you want him or her to wear. So, if you want to save yourself tons of headaches, buy clothes with fasteners and not with an army of buttons. But the goal is to get the child dressed, and if you are too exhausted from trying to dress the child, then you don't want to go show them off anyway. Also, whatever you buy is going to have to stand up to a ton of washing, with extra rinsing. Don't buy anything frilly or delicate, because it'll get torn to shreds.
A final thought is toys. There are tons of toys out there, and kids go through them super fast. Instead of buying toys outright, without knowing whether or not your baby will be interested in them, look into subscribing to http://babyplays.com/. If your child loves the toy, go buy it. But if he or she seems to ignore it and not be interested, then you may have saved yourself a fair bit of money. You could waste hundreds or thousands of dollars on toys, and have maybe a 50% success rate. This is an option to try before you buy.
Think about the goals behind these purchases. Envision the whole picture. It is very easy to waste money in this realm, but by asking a ton of questions, and finding the products which fit your individual needs, not just whimsical excitements, can save you a lot of cash, frustration, and energy.
P.S.: If you would like to know the questions my wife and I have learned through the process, contact me privately.
Thursday, February 23, 2012
Credit Card Management
There are a myriad of credit card offers in the marketplace, and it is important to choose which credit card is right for you. It goes without saying that you should never carry any kind of balance, and you should treat your credit cards like charge cards or debit cards, where the full balance is paid off every month. If you budget effectively and exercise some discipline, this should not be too hard. Also, I find very little reason to pay an annual fee. It's a cost benefit analysis, and I have found that the costs generally lose out. Which means that credit card choice often comes down to the rewards and incentives.
Many of my friends in the past few years have focused on getting credits cards with very particular rewards programs. The Starwood American Express is particularly popular, as is the Amtrak Guest Rewards Visa. Other friends have focused on particular airlines, and their linked credit cards. I generally think these are the wrong way to go.
Websites such as kayak.com have democratized the travel industry, and locking in loyalty at one hotel brand (Starwood), or one airline, provides a psychological block to other alternatives. It may make sense if you live in a place where there is only one real airline serving your metropolitan area, but in a place like Washington DC, where there is excellent service from Southwest, USAir, American, and United, it makes very little sense to be wed to just one of those. There are similar situations in most metropolitan areas, which are served well by larger carriers and smaller carriers. Additionally, focusing on airlines leaves you at the whim of black out dates, which at times seem arbitrary, and increasing levels of miles necessary for rewards. It can now require 60,000 for a round trip ticket on Delta, meaning you need 120,000 miles if you are not traveling alone. http://dmn.delta.com/skymiles/direct/charts/us49/. When was the last time you had 120,000 miles?
Instead, I focus primarily on getting cash back rewards, because I can then use the cash for whatever I want. To look at miles vs. cash, check out: http://www.creditcards.com/credit-card-news/cathleen-mccarthy-6-questions-cash-back-miles-1433.php. I like having the options. I personally carry the Chase Freedom Card, because I can get up to $300 in bonus cash back in any given year. https://creditcards.chase.com/credit-cards/chase-freedom.aspx The opt-in for the bonus categories is simple and easy, and most of the categories are in things I buy anyway, like gas and groceries. I also carry Blue Cash Everyday from American Express, because I get three percent back on groceries. http://www304.americanexpress.com/getthecard/side-by-side/bluecashever-bluecashpref/12006. If I drove a car regularly, I would probably carry the Bank of America Cash Back card because it offers 3% back on gas. https://www.bankofamerica.com/credit-cards/marketinglist.action?context_id=marketing_list&category_id=2012
The point here is that you want the ultimate flexibility in your rewards, and you want rewards which give you the most for what you spend the most. We only use the Amex for groceries because of its specialized benefit. We focus on using the Chase card on its bonus categories to maximize our cash back. At the end of the year, I have a few hundred extra dollars in my pocket to use at my discretion.
Disagree? Got a credit card you love that I should be using? Let me know. Thanks.
Many of my friends in the past few years have focused on getting credits cards with very particular rewards programs. The Starwood American Express is particularly popular, as is the Amtrak Guest Rewards Visa. Other friends have focused on particular airlines, and their linked credit cards. I generally think these are the wrong way to go.
Websites such as kayak.com have democratized the travel industry, and locking in loyalty at one hotel brand (Starwood), or one airline, provides a psychological block to other alternatives. It may make sense if you live in a place where there is only one real airline serving your metropolitan area, but in a place like Washington DC, where there is excellent service from Southwest, USAir, American, and United, it makes very little sense to be wed to just one of those. There are similar situations in most metropolitan areas, which are served well by larger carriers and smaller carriers. Additionally, focusing on airlines leaves you at the whim of black out dates, which at times seem arbitrary, and increasing levels of miles necessary for rewards. It can now require 60,000 for a round trip ticket on Delta, meaning you need 120,000 miles if you are not traveling alone. http://dmn.delta.com/skymiles/direct/charts/us49/. When was the last time you had 120,000 miles?
Instead, I focus primarily on getting cash back rewards, because I can then use the cash for whatever I want. To look at miles vs. cash, check out: http://www.creditcards.com/credit-card-news/cathleen-mccarthy-6-questions-cash-back-miles-1433.php. I like having the options. I personally carry the Chase Freedom Card, because I can get up to $300 in bonus cash back in any given year. https://creditcards.chase.com/credit-cards/chase-freedom.aspx The opt-in for the bonus categories is simple and easy, and most of the categories are in things I buy anyway, like gas and groceries. I also carry Blue Cash Everyday from American Express, because I get three percent back on groceries. http://www304.americanexpress.com/getthecard/side-by-side/bluecashever-bluecashpref/12006. If I drove a car regularly, I would probably carry the Bank of America Cash Back card because it offers 3% back on gas. https://www.bankofamerica.com/credit-cards/marketinglist.action?context_id=marketing_list&category_id=2012
The point here is that you want the ultimate flexibility in your rewards, and you want rewards which give you the most for what you spend the most. We only use the Amex for groceries because of its specialized benefit. We focus on using the Chase card on its bonus categories to maximize our cash back. At the end of the year, I have a few hundred extra dollars in my pocket to use at my discretion.
Disagree? Got a credit card you love that I should be using? Let me know. Thanks.
Tuesday, January 31, 2012
Amazon (Subscribe and Save & Prime)
I'm a big fan of finding ways to remove reminders and responsibilities from my life. If I can set up automatic payments or automatic billing, I try to do it just so I don't forget and find myself in a pickle. This is why I am a big fan of Amazon Subscribe and Save, and Amazon Prime.
If you are not familiar with Prime, it is a service where you pay 79 dollars a year for free two day shipping, a free kindle book from the lending library once a month, free streaming video from Amazon, and other discounts. http://www.amazon.com/gp/prime/ref=amb_link_84306931_4?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=auto-sparkle&pf_rd_r=8216E17D34CF41998504&pf_rd_t=301&pf_rd_p=1294973662&pf_rd_i=amazon%20prime
Subscribe and Save is a program where Amazon will send you things you need on a regular basis, without you proactively sending an order. You set up a recurring order, and it shows up at your door. http://www.amazon.com/Subscribe/b/ref=gro_SnS_sparkle_shop?ie=UTF8&node=979895011&pf_rd_m=ATVPDKIKX0DER&pf_rd_s=auto-sparkle&pf_rd_r=D4DD67B5027A4BBFA003&pf_rd_t=301&pf_rd_p=1345024122&pf_rd_i=subscribe%20and%20save
Subscribe and Save saves you 5-15% on every order. Prime has additional discounts on some orders. One thing I get through Subscribe and Save and Prime is Diapers. The diapers I buy go for 47 bucks on Amazon, but I save about ten dollars per order using Subscribe and Save, and Prime. Also, it's a plus that my son then never runs out of diapers.
Now, I'm aware that one of the chief concerns is that 79 dollars a year sounds like a lot to not have the patience for free super saver shipping at amazon. But looking at the diaper transaction alone justifies Prime. 7 out of those ten dollars saved is from the additional discount through Prime (as part of the Amazon Mom Program). So, based on my membership in Prime, I save 84 dollars on diapers per year. I need to outfit my son in diapers, and this is the most efficient, most cost-effective way to do it. Consequently, the expedited shipping and other benefits of prime are free when you consider the cost savings of diapers alone.
Think about what you need and use on a recurring basis and find out if Subscribe and Save, and Prime can save you significant amounts of money. We have used it for baby food, vitamins, and a host of other items. Think about it for coffee, packaged foods, supplements or whatever else comes to mind. You'll save money, remove additional stress of remembering to buy things you know you need, and avoid being caught in an unprepared situation.
If you are not familiar with Prime, it is a service where you pay 79 dollars a year for free two day shipping, a free kindle book from the lending library once a month, free streaming video from Amazon, and other discounts. http://www.amazon.com/gp/prime/ref=amb_link_84306931_4?pf_rd_m=ATVPDKIKX0DER&pf_rd_s=auto-sparkle&pf_rd_r=8216E17D34CF41998504&pf_rd_t=301&pf_rd_p=1294973662&pf_rd_i=amazon%20prime
Subscribe and Save is a program where Amazon will send you things you need on a regular basis, without you proactively sending an order. You set up a recurring order, and it shows up at your door. http://www.amazon.com/Subscribe/b/ref=gro_SnS_sparkle_shop?ie=UTF8&node=979895011&pf_rd_m=ATVPDKIKX0DER&pf_rd_s=auto-sparkle&pf_rd_r=D4DD67B5027A4BBFA003&pf_rd_t=301&pf_rd_p=1345024122&pf_rd_i=subscribe%20and%20save
Subscribe and Save saves you 5-15% on every order. Prime has additional discounts on some orders. One thing I get through Subscribe and Save and Prime is Diapers. The diapers I buy go for 47 bucks on Amazon, but I save about ten dollars per order using Subscribe and Save, and Prime. Also, it's a plus that my son then never runs out of diapers.
Now, I'm aware that one of the chief concerns is that 79 dollars a year sounds like a lot to not have the patience for free super saver shipping at amazon. But looking at the diaper transaction alone justifies Prime. 7 out of those ten dollars saved is from the additional discount through Prime (as part of the Amazon Mom Program). So, based on my membership in Prime, I save 84 dollars on diapers per year. I need to outfit my son in diapers, and this is the most efficient, most cost-effective way to do it. Consequently, the expedited shipping and other benefits of prime are free when you consider the cost savings of diapers alone.
Think about what you need and use on a recurring basis and find out if Subscribe and Save, and Prime can save you significant amounts of money. We have used it for baby food, vitamins, and a host of other items. Think about it for coffee, packaged foods, supplements or whatever else comes to mind. You'll save money, remove additional stress of remembering to buy things you know you need, and avoid being caught in an unprepared situation.
Monday, January 23, 2012
Automatic Withdrawal Budgeting
Idle hands may be the devil's plaything, but idle funds are what gets us into trouble. Unappropriated money is what leads to splurges, debt, and purchases which are later regretted. I have generally found that creating a budget which allowed for the least amount of idle funds is the best way to ensure that your money is going to where it belongs. But how can you properly appropriate funds. Automatic Withdrawals and payroll deductions.
There are some general payroll deductions which many employers offer which are smart for almost everyone. These include health insurance, 401(k), and a flexible spending account for medical expenses. All of these are deducted from your adjusted gross income, and should be utilized to some extent by everyone.
Then there are some personal initiatives you should take in order to secure yourself financially. Automatically paying off 100% of your credit cards, utility bills, mortgage, and insurance each month. Don't put yourself in a position where you need to think about it. Not only do most banks have online bill pay, but some provide incentives for signing up for it. http://online.wsj.com/article/SB110246841042693926.html Think about it. All of your bills get paid, you don't need to think about it, and you get an incentive.
Lastly, you can create ongoing disbursements for your personal priorities. Automatic withdrawals for your IRA http://helpcenter.ingdirect.com/ingd/Topic.aspx?category=DIST1, 529 Account http://www.529.com/content/how_aippayroll.html, Debt Payments http://www.moneyunder30.com/debt-payments, or just moving 10% of your take home salary to a high interest savings account on a monthly basis. http://www.gobankingrates.com/savings-account/easy-ways-to-build-your-savings-account-automatically/ This will keep your checking account pretty lean, and you will not be tempted by higher balances to purchase things you don't need.
We all have far too many things to think about, and setting up automatic withdrawal budgeting priorities from your checking account takes away the burden of remembering what needs to be done. It allows you to prioritize with a clear head and ensure that your money goes where it needs to be, and not where you may want it merely in the short term. Moving idle funds to your established personal priorities by setting up automatic payments and withdrawals will help you build the financial foundation you want without the revolving burden of keeping your priorities at the top of your to do list.
There are some general payroll deductions which many employers offer which are smart for almost everyone. These include health insurance, 401(k), and a flexible spending account for medical expenses. All of these are deducted from your adjusted gross income, and should be utilized to some extent by everyone.
Then there are some personal initiatives you should take in order to secure yourself financially. Automatically paying off 100% of your credit cards, utility bills, mortgage, and insurance each month. Don't put yourself in a position where you need to think about it. Not only do most banks have online bill pay, but some provide incentives for signing up for it. http://online.wsj.com/article/SB110246841042693926.html Think about it. All of your bills get paid, you don't need to think about it, and you get an incentive.
Lastly, you can create ongoing disbursements for your personal priorities. Automatic withdrawals for your IRA http://helpcenter.ingdirect.com/ingd/Topic.aspx?category=DIST1, 529 Account http://www.529.com/content/how_aippayroll.html, Debt Payments http://www.moneyunder30.com/debt-payments, or just moving 10% of your take home salary to a high interest savings account on a monthly basis. http://www.gobankingrates.com/savings-account/easy-ways-to-build-your-savings-account-automatically/ This will keep your checking account pretty lean, and you will not be tempted by higher balances to purchase things you don't need.
We all have far too many things to think about, and setting up automatic withdrawal budgeting priorities from your checking account takes away the burden of remembering what needs to be done. It allows you to prioritize with a clear head and ensure that your money goes where it needs to be, and not where you may want it merely in the short term. Moving idle funds to your established personal priorities by setting up automatic payments and withdrawals will help you build the financial foundation you want without the revolving burden of keeping your priorities at the top of your to do list.
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