Monday, August 29, 2011

Day 319 - How I Paid Off $60,000 in Ten Months

WE DID IT! We clicked the submit button and paid our last debt payment to Sallie Mae for The $60K Project! While we transition into a new emphasis on saving, I thought it might be time to explore the reasons why we were successful at paying off a large amount of debt in such a short amount of time. 

Paying off a large amount of debt requires much more than just making a budget and sticking to it. There is a distinct psychological aspect that must be present to be successful.Without the belief that you can alter your habits and are in control of your future, I don't believe you will be very successful with your debt payoff goal. Below are seven actions/thoughts that positively impacted my ability and belief that paying off $60,000 in one year was doable.

Obtain 100% Buy In. To successfully pay off debt quickly, you must be 100% committed to
the process before you even begin. Paying off debt will have a severe impact to your lifestyle - especially if you have been spending more than you make in recent years. You need to be mentally prepared to cut back significantly and live well below your means. When your friends call and want to go out on a Friday night, you need to be mentally prepared to say no. If you're not ready to do that then it may not be the time to take on an extreme debt payoff program.

Preparation is Key. Before you embark on this project, you should know exactly how much you bring home each month as well as your fixed expenses (e.g. rent, food, utilities). Once you know this information, you should be able to determine what expenses you can cut and how much money can go towards debt each month. There should be no question how much money you have to live on each month. Also, when coming up with a debt payoff goal for the year, be sure to factor in future expenses such as travel, Christmas, birthdays or family events you don't feel comfortable missing.

Establish Routine. Schedule your family budget meetings and bill paying days so that they are considered an appointment on your calendar rather than an afterthought. Creating a routine where you consistently review your budget increases accountability to meet your goal. 

Track Your Progress. Part of staying motivated to meet your payoff goal is to know exactly how much progress you have made at any given time. So go crazy with your spreadsheets, or buy a giant whiteboard and draw a giant thermometer to keep track!

Spend with Excellence. Stop spending money just because you are tired or there is no food in the house. Make sure that you have planned for these kinds of evenings with easy to prep meals (frozen, microwave, sandwiches). Using an excuse to justify eating out during the week is a common pitfall that needs to overcome with preparation.

Check Your Attitude at the Door. This, I believe, is the most important advice I could give. So you're going to be cutting back and not going out as much as you are used to. You could be really upset about this and make this a particularly miserable time period for your family. Or you could take on the challenge with a positive attitude and try to make the best of it. What will you do?

"People are as happy as they make up their minds to be" ~Abraham Lincoln

Reward Your Successes. If you reach a milestone in your payoff plan, be sure you acknowledge and celebrate it! But that doesn't mean you got out and spend a bunch of money on more stuff. Take this time to practice rewarding yourself in ways that do not require spending money and obtaining more stuff.

Stay tuned,


Friday, August 26, 2011

Day 316: Yakezie Summer Group Roundup

Another Yakezie Summer Group Roundup. Enjoy some great reading this weekend!

The $60K Project was featured in the Best of Money Carnival #116. Check it out!

Nickel By Nickel gives the final results of the NBN Fitness Challenge.

My Personal Finance Journey reminds us that summer will quickly come to a close by providing Tips on Saving Money This Winter.

The College Investor gives advice to students on how to balance a job with the all important study sessions.

My Multiple Incomes gives some great advice to fellow bloggers on how to get more pageviews from your visitors.

So Over Debt features a guest post from a UK finance expert about 5 way to stay out of debt.

Fat Guy Skinny Wallet talks about how to have some summer fun without breaking the bank.

For all of you football fans out there, The Penny Hoarder shows you how to make some extra money playing fantasy football.

Spruce Up Your Finances has a great post on 7 spending mistakes people make just to get a tax refund.

Want to know why you should get out of debt? Head on over to The Debt Myth.

Cash Flow Mantra has been chosen to participate in the Seven Links Project.

Many of us are mourning the resignation of Apple's Steve Jobs so Investorz' Blog helps us get through the tough times with a resignation linkfest.

The Saved Quarter discusses life insurance that works for any budget.

University of Money has a very comprehensive post on saving money and investing.

Prairie Eco Thrifter discusses five career killer moves.

Money Talks talks about the housing market and the resulting increase in accidental landlords.

Wednesday, August 24, 2011

Day 314 - Best Go Green Method to Save Money


bulldogza / FreeDigitalPhotos.net
Hello and welcome to the 10th Yakezie Blog Swap. This time around my fellow bloggers and I were to share our Best Go Green Method To Save Money. As always, I was amazed at what people came up with and shared. Please check out the different tips below on how you too can save money and be green:

Nickel by Nickel tells us how they read green using ebooks over at Beating Broke.

Everything Finance shares with us his success in growing his own veggies at Retire by 40.

Narrow Bridge Finance tells us how going green has saved him some green at Mom's plans.

The 60K Project shares 8 ways she has made her kitchen green at Stock Market Basics.

One Cent at a Time shares 23 ways reusing household items can save you money at Sustainable Life Blog.

Prairie Eco-Thrifter (me) shares numerous recipes for making your own cleaning products at Financial Success for Young Adults.

Debt Eye tells us how to eliminate the paper trail at Little House in the Valley.

Sustainable Personal Finance tells us why air sealing your home is a good idea at Financially Consumed.

Stock Market Basics shares 5 ways to go green and save natural resources at Free Money Wisdom.

Financially Consumed tells how you can go green at home incrementally at Sustainable Personal Finance.

Little House in the Valley shares how going car-lite can save money at Debt Eye.

Financial Success for Young Adults shares how you can go green on a budget at Prairie Eco-Thrifter.

Sustainable Life Blog tells us to watch out for a leaky window at One Cent at a Time.

Free Money Wisdom shares why we should avoid country funds at 60K Project.

Mom's Plans tells how we can eat green at Narrow Bridge Finance.

Retire by 40 shares how living in smaller home is green at Everything Finance.

Beating Broke tells how cycling makes you green at Nickel by Nickel.

Well, there you have it; the 10th Yakezie Blog Swap. I hope you have enjoyed the different posts and have learned some new things you can try in your effort to live a greener life.

Stay tuned,



Friday, August 19, 2011

Day 307 - Why You Should Avoid Country Funds (Guest Post)

jannoon028 / FreeDigitalPhotos.net
Guest post via Jon at Free Money Wisdom. It's great to introduce some investing perspective into The $60K Project mix. 

Many investors are familiar with country funds, even if the term isn't one that is used very frequently. Country funds, simply put, are those portfolios which consist of stocks and other securities from a foreign country. For example, in the United States a country fund might consist of stocks exclusively from China. While these funds are certainly capable of fast growth, the risk certainly outweighs the reward.

Typically, the smartest portfolios are those which are diversified. Educated investors know that even if an industry is booming, it isn't smart to invest all in that one industry. The market rewards risk, but it also punishes risk - especially if there is too much risk. It's easy to look at the recent statistics for a country's financial markets and think that investing there is the path to financial success. Keep in mind, though, that the markets are unknowable. A gain today doesn't necessarily promise a gain tomorrow. Stability is a major factor to look at. Developing nations are especially susceptible to a rapid boom and bust cycle.

Don’t take things for granted

To understand this, it's critical to not think of every other country in the same sense that you do about American and European investments. The markets in America are very developed and also very stable. While there has been turmoil in American markets recently, they still will not crash and disappear overnight. This is something that's easy to take for granted when investing in American securities, because most investors have never had to consider it. It's just a trait of our markets and one of the benefits from having such a well-regulated financial market. The same cannot be said for other countries.

Government influence

One reason that the markets in other countries aren't as stable is their governments. A nation currently experiencing a boom cycle that looks attractive on paper might be experiencing the benefits of a new government. It's easy for companies to make huge percentage gains in underdeveloped nations where the economies are still fledgling. However, the same turmoil that makes these massive gains possible also means an equal if not greater chance of massive losses.

Corruption

Corruption is another reason to stay away from country funds. As previously mentioned, the American stock market has a strong amount of regulation. There is built-in incentive for company executives to act in an honest manner. This prevents instances similar to Enron from occurring, and generally helps to keep the stock market both honest and stable. In other countries, however, this may not be the case. Poor regulations in countries with developing financial markets means more corruption, and more chance for the bottom to fall out from under that nation's economy. This is especially true in countries such as China where governments control news outlets. In these instances, information may be obscured. And that brings us to the final reason to steer clear of country funds.

Uninformed!

An inability to remain current and informed on the happenings in a country's financial sector is also a reason to avoid country funds. This is another one of those aspects of the American financial markets that we tend to take for granted. At any time, a person can get online and obtain live news and quotes regarding the stock market in America. This becomes considerably difficult for nations with less developed infrastructures. Wise investors keep up on the news for the sectors they've invested in, and can adjust their portfolios accordingly. This just isn't possible with some country funds.

Stay far, far away

In the end, avoiding country funds comes down to a matter of common sense. It's a show of poor financial acumen to put all of your eggs in one basket. Even for the most risk-seeking of investors, country funds are a poor option. With all of the options that investors have domestically, there's no need to add in the unnecessary risk provided by a country fund. Investors should avoid the potential nightmares of country funds and instead hang on to their diversified, domestic portfolios.

Tuesday, August 16, 2011

Day 306 - Easy Living Expense Cuts: #2 Eating Out

For everyone out there trying to figure out what expenses can easily  be cut out of your budget, this series is dedicated to you. Each week, I will explore a different type of living expense and attempt to convince you that you can live without it - or at least cut back significantly. So let's get rid of......

Eating Out
This is probably one of the most obvious things to include in an expense cutting list, yet from my personal experience, also one of the most difficult to actually follow through with. So rather than explain to you why you should not be eating out (duh, it's expensive!), I would rather spend the time discussing the benefits received from eating out less (or not at all) and also some tips on helping you achieve this goal.

I went into the Wayback Machine and pulled some bank statements from the time before I started The $60K Project and also before I started using Dave Ramsey's envelope system to pay cash for everything (circa 2008). I added up the total amount of money spent on food - including both groceries and eating out and here are the results. 

It's all over the board. Clearly I didn't care how much I spent on food. In the good months, I would spend about $250 but many months approached north of $500. Keep in mind that Mike and I split everything 50/50 at the time so double the amount I spent to get a more accurate monthly budget.
I bought lots of coffee and smoothies in 2008. Apparently I love to spend a significant amount of money on beverages. More specifically, I tend to purchase some sort of breakfast paraphernalia as part of my morning routine at the office.
Eating out at lunch. Another frequent expense included eating out during my office lunch break a few times a week.
Dinners out were no holds barred. Mike and I love to eat out so when we went out we didn't hold back. Most of our dinners out approached $75 - $100 for just the two of us. 

What Do Your Bank Statements Say About You?
Take the time to perform this same exercise using your old bank statements and see if you can detect any spending patterns when it comes to your eating habits. Make sure to pick a time period prior to when you became aware of the need to cut back. And don't overanalyze - I only spent about 10 minutes looking at six months worth of statements (many banks will allow you to access them online). Once you are done with your analysis, write down your thoughts just like I did above. No seriously - stop reading and go do some writing. I'll wait.... 

Are there any potential money saving ideas that pop out at you? For me, I clearly spent too much money eating out during work hours so I need to get off my lazy butt and prepare breakfast and lunch during the week. In addition, Mike and I ate out way too much for dinner given our financial situation - and at high falutin' restaurants (my Okie tends to come out when I feel passionate about something....that or I've had too many margaritas). Spend some time jotting down your money saving ideas. 

Life Is Too Crazy To Cook Dinner Every Night
For those of us juggling work, kids, social responsibilities and a general attempt to stay at least a stone's throw from insanity, the end of the day comes way too soon. Preparing dinner becomes an overwhelming thought. Here are some tips to help combat that anxiety.

Plan your menu for the week. At a minimum, you should head to the grocery store on the weekend knowing exactly what you will be eating for dinner for the next five or six days. Base the complexity of your meals on your evening schedule. For example, if Mike has soccer one night, we usually end up eating sandwiches or pasta - quick and easy. By planning for the week, you remove the stress that begins around 3pm everyday when you say to yourself, "OMG, what are we going to have for dinner?"
Introduce variety. I'm pretty sure Mike and I have eaten pasta for dinner at least once a week for the past year. It's easy to make, inexpensive and usually results in leftovers for lunch the next day. Since we eat it so often, we make an effort to mix it up. One week we have whole wheat capellini with tomato sauce; the next it's fusilli with basil pesto sauce, sundried tomatoes and spinach; the next week it could be baked ziti. The possibilities are endless. Keep it interesting so you aren't tempted to make a run to Wendy's instead.
Don't cut corners. Many people head to the store and buy the blandest and cheapest food options so they can save some money. How are you going to quit eating out when your alternative at home is a subpar version of the sandwich you can buy at the deli for $9? Rather than slapping a few pieces of turkey between some Wonder Bread and calling it a day, look for some better quality ingredients. Buy freshly sliced meat from the grocer's deli (our favorite right now is Dietz & Watson Buffalo Chicken - yummmmm). Look for some freshly baked ciabatta or 9-grain bread. Explore some great tasting spreads: hummus, dijon mustard, oil & vinegar. And don't forget to load up on veggies to get a satisfying crunch factor: cucumbers, lettuce/spinach, tomato, sprouts. Finally, stick that sandwich under the broiler and you will achieve toasty perfection. Yes, your grocery bill may slightly increase, but creating great tasting food at home is one of the best ways to reduce your eating out bill in the long run.

Stay tuned,





So are you convinced you can stop eating out, or at least significantly reduce this spending habit? What other tips can you share when it comes to saving money in this tricky area?

Monday, August 15, 2011

Day 305 - Mid-Month Report

The first and fifteenth of each month I will update you on the status towards our goal of paying off $60K in one year.

** Check out the Real Time Debt Tracker!!! Keep up to the minute tabs on our debt balance and whether we can pay it off in 365 days! ** 

To date, we have paid off $58,442 of our debt in 305 days.  We have about two months left in our year so in order to pay our debt off on time, we will need to pay approximately $789  each month for the remaining two months.  But! Right now we are just waiting on Mike's paycheck to hit his bank account before we pay off the remaining balance. We will be wrapping up the debt payoff portion of The $60K Project in less than a week! 

What now? Even though we do have one student loan remaining, we have decided to switch gears from paying down debt to stockpiling cash. Emergency funds will be created and 401(k)s will be maxed out - fun stuff!

What about The $60K Project blog? You will definitely see some changes around the blog in terms of the content I discuss (e.g., Debt Trackers will now be Savings Trackers).  I will continue to write about debt payoff strategies but would also like to expand my blog topics to include more information on savings options and eventually tackle investments to some degree. But my overall mission statement, which is what I use to determine the best content for my readers, will not change:

Debt Free Life, Financial Liberty and the Pursuit of Frugal Happiness

I definitely still have a lot to learn and Im hoping my readers still want to put in the effort to learn along with me. If I can do this, you can too! Stick with me so we can keep each other on track with our financial goals.

Sarah and Mike, now that you've paid off $60,000 in debt, what are you going to do next?
We're going to Disneyland!!!!!!

Seriously - we're really going to Disneyland and we're going to do it in style! Ever heard of Club 33? It's the private club in the New Orleans Square section of Disneyland AND the only place in the park where you can buy alcohol (aka Mecca). Next time you exit Pirates of the Caribbean, look up. You'll see shadows of people through the window shutter slats. Pretty cool. My company has a coveted membership and can get me reservations so I'm going to take advantage. Plus you get free admission to the park with a reservation. So even though dinner won't be cheap, it evens out since we won't have to buy park passes. Plus we have earned a nice dinner - paid for with cash, of course!

Stay tuned,


Friday, August 12, 2011

Day 302 - Giveaway! How About Some Free Letterhead?

This contest is closed to new entries. Congratulations to Daniel at Sweating The Big Stuff for winning!!! And thanks to UPrinting!




I am trying to figure out a new logo for The $60K Project in time to be able to hand out some swag at the Financial Blogger Conference in October. "Figure out" meaning I doodle a lot and fantasize about some very impressive looking business cards, magnets and letterhead to use when I'm writing very important to letters to very important people. Once I finally figure out my new design, I will be using the "Create Your Own Design" option and taking advantage of UPrinting.com and the quick turnaround time. I have a feeling there may be a few of you out there in the same boat so I have decided to host a giveaway from UPrinting for those of you looking for easy and quick printing options for your business.

Uprinting is offering one very lucky person
500 pcs. Letterhead
5.5" x 8.5"
70lb Offset
Front Only Printing
4 Business Days Print Turnaround Time
*Free Shipping

How To Enter
Mandatory: Leave a comment below stating the first person you would send a handwritten letter to on your new letterhead and why!

Additional Entries:
- Tweet about this Giveaway using the phrase "Win free Letterhead from @UPrinting & @60kproject" and link to this post. (+3 entries). Up to two entries per day no less than an hour apart.

For the following, you must list each separate entry as a separate comment (I will confirm each entry).
- Follow @UPrinting on Twitter (+1 entry)
- Follow @60kproject on Twitter (+1 entry)
- Like UPrinting on Facebook (+1 entry)
- Like The $60K Project on Facebook (+1 entry)

The Legal Stuff
This giveaway is limited to *US residents 18 years old and above. If you have won a Uprinting giveaway in the last six months, you are not eligible to win. Giveaway ends on Wednesday, 8/17 at 11:59pm PST. Winner will be chosen via the random.org Sequence Generator. Winner will be notified by me and will have 24 hours to respond before another winner is chosen.


This giveaway is sponsored by Uprinting, no monetary compensation was given and I will receive letterhead printing service by hosting. Letterhead design inspiration and envelope printing is also available. Please visit UPrinting.com for more details.

Thursday, August 11, 2011

Day 301 - Giving Thanks

Felixco, Inc. / FreeDigitalPhotos.net
With our final debt payment just a few days away, I am allowing myself to believe this is actually going to happen!! While I would love to take all the credit for my debt payoff success this past year, I feel like I need to acknowledge a certain group of people who have helped me achieve my goal of paying off $60,000 in less than a year. So without further ado, and in no particular order, shout outs go to......

My brother, Josh. Two and a half years ago, my brother handed me Dave Ramsey's book The Total Money Makeover and told me he and his wife had started the program with great success. I took the book to bed with me with the intention of reading a few pages before I went to sleep. A few hours later, I had read the entire book!! It was 3am and I was already planning out my envelope system and emergency fund.

I changed that night. I had hope that maybe someday I could actually become debt free - something I never thought could happen. I am happy to report that since the night I finished that book, I have paid off almost $85,000 in debt. I want to thank my brother for not only introducing me to that book, but also being an inspiration for me to keep going. Even though he is extremely busy with his own family, he is always available when I really need him. He helps keep me focused on what is important in life while at the same time reminding me not to take myself so seriously. And for that I am very thankful.

Mike aka Mr. $60K Project. Mike is the yin to my yang. Although there are some philosophies of life where we differ, we always somehow seem to complement each other. Mike has always been responsible with his money to the point where he probably missed out on some incredible life experiences just so he could maintain a sense of fiscal responsibility. He is relatively risk averse yet somehow great at scamming a deal. I, on the other hand, tended to put life experience before affordability in the past. My parents thankfully instilled in me the idea that if there was something I really wanted, I had the ability to figure out a way to get it no matter what. This idea has taken me all over the US, Europe and Russia and provided me a couple of great degrees from amazing schools. Unfortunately, I sometimes took it a little too far and ended up with a mountain of debt.

Mike and I became partners in crime this past year and successfully paid off a boatload of debt. I want to thank him for his brilliant mind, his patience with me through tough times this year and his willingness to be open to understanding and learning about life from a different perspective (mine). Now if he would just propose - I think I've earned it! :-P

My dog, Duke - aka The Beauty.  Duke has been in my life for almost ten years through good and bad. He has taught me to love unconditionally, to be loyal to your family and to make some noise when you really need something. If you aren't a dog lover, you may not understand my tremendous attachment to this animal. He represents all that is good in the world and is the most devoted friend I could ever have. Thanks for always greeting me at the door as if it was the most exciting thing in the world (even if you just saw me ten minutes ago). It feels so nice to be loved with so much passion. I would consider myself lucky if I am able to give the important people in my life at least half the love you have showed me over the years.

My ex-friend Susan. Susan and I met my freshman year of college and quickly became best friends. She came from a wealthy family but seemed to be fairly down to earth about things with a few hiccups of flashiness now and again. As we grew older together, I saw her changing into a person obsessed with money - and I mean in a bad way. She eventually moved to the OC, money-grubbing central IMHO, and married a guy who admitted out loud that he thought driving a BMW made him better than most people (yes, he really did say that). It turned out he wasn't making any money while driving this BMW and they were taking out equity loans on their home to live on (which, by the way, they had received $500,000 as a down payment from her parents). In two years, they went through the half million and ended up in a nasty divorce. Then Susan decided to cut me and other friends out of her life for reasons we are still unsure about. After she changed her phone number and quit returning my emails, I gave up. A year later she resurfaced on Gchat one day asking me how I was doing as if nothing ever happened. Then she finally sent a nasty email telling me how I wasn't there for her, that she had met the man of her dreams and was SO happy, and that she was leaving Orange County to get away from all the superficial people. Oh yeah, and also by the way her new husband had bought her a ferrari and a 5,000 square foot house in Atlanta.

Despite all of the drama and blame game going on in Susan's life, I feel sorry for her. I think she hides a lot of her unhappiness and lack of self confidence behind a curtain of possessions. Yes, I think about money a lot and I would like to have a little more of it (I admit I would probably take a Ferrari if it fell in my lap), but I think I maintain a healthy perspective most days. I want to thank Susan for showing me the type of person I do not want to become. Ever.

My loyal blog readers - you know who you are!! The consistent feedback and support I have gotten from my readers has been instrumental in helping me stay on track with The $60K Project. I truly believe that my accountability to you all was a key factor in keeping me on track the last ten months. It's difficult to go out and spend a bunch of money when you know you are going to report out your financial situation on your blog in the next few days. Thanks for following my adventure and also telling others about it.

The Yakezie. I stumbled upon the Yakezie during one of my mad Googling sessions where I was trying to educate myself about the ins and outs of SEO, website design and blogging tips and tricks. The Yakezie is a group of personal finance and lifestyle bloggers who are dedicated to selflessly helping others succeed. I definitely try to be a "pay it forward" kind of person so this group intrigued me immediately. I skulked around the message boards for quite a while before I got up enough nerve to actually join the Yakezie Challenge. All I can say is wow! There is a forum post where you can announce you have joined the Challenge. I can't even tell you how many welcoming and supportive messages I received in that forum from people who had never heard of me. This sense of community and support is amazing and I feel very lucky to be a part of it. Although I've got some work to do, I hope I can make other new members feel as welcome as I did.

To all of you who I didn't include in this post, please know that I do appreciate all your help. But the Oscar music is starting to play and I'm being ushered off the stage before the commercial break.

Stay tuned,




Who has been influential to you and your personal finance progress? Take the opportunity to thank them right here, right now!

Wednesday, August 10, 2011

Day 300 - $60K Project: Year 2


renjith krishnan / FreeDigitalPhotos.net
Mike and I have been discussing next steps after we meet our goal of paying off $60,000 in debt - which should happen in the next few weeks! We initially thought about next steps on our own so that we could each bring ideas to the table independent of each other's influence. Next, we had a few informal conversations where we bounced ideas off each other and attempted to play devil's advocate. Finally, we set a deadline to make our final decision. On decision day, we splurged and went out for a working lunch vowing to not leave the restaurant until we had figured out what we wanted to do with our extra money. I, as usual, came prepared with my laptop and some awesome Excel spreadsheet. Mike, whose mind works like an Excel spreadsheet, brought his good looks, charm and crazy analytic mind.

Let me just say that it feels really good to start a conversation with the phrase "soooooo, what do you want to do with that extra $4,000 dollars a month?"

$60K Project - Year 2 Goals
1. Max out both 401(k)s. Taxpayers can contribute up to $16,500 to their 401(k)'s in 2011 with pre-tax income. Mike and I had both been contributing enough to earn the company match up to this point. My attempt at trying to figure out the perfect amount to save for retirement didn't produce any results so we decided the more we contribute the better at this point. Why? Since we are already in our early 30's, we are losing compound interest power with each year that passes. Plus, I would rather save more now in case a situation occurs in the future where we can't afford retirement contributions. I think of it as saving ahead of time. Finally, I'm pretty sure I've never heard anyone say they wish they had saved less for retirement. Estimated monthly cost of increased contribution: $1,290

2. Increase Lifestyle Budget. We have been living on bare minimum expenses for the past ten months and are ready to loosen the belt a little bit. But we also don't want to go absolutely crazy and fall back into our old, reckless spending habits. Therefore, we have decided to add $500 into our monthly expense budget beginning in September. The exact expense categories we will increase aren't set in stone yet, but this money will go towards extracurricular activities we previously delayed while paying off our debt (karate classes, eating out, pottery class, going out with friends). Monthly cost of lifestyle increase: $500 max

3. Emergency Fund. The remaining amount of money every month will go towards building an emergency fund for 3-6 months of expenses. Based on the way the world is working at the moment, both of us would feel a lot better if we had a little extra money laying around in case one of us involuntarily quits our job or we have to go live off the grid in the Rockies to survive armageddon. After the first two goals are taken care of, we plan to put the remaining amount of extra money into some sort of savings vehicle (to be determined - any ideas?). Estimated monthly contribution to emergency fund: $2,210.

Sarah, What About Your Remaining Debt?
Even after paying off $60,000 this past year (yay!), we will still have $50,000 remaining (boo!) from my undergraduate student loans.  We have decided not to continue with our debt snowball at this time because the interest rate and monthly payment are both extremely low on this last loan.

Did We Make The Right Decision?
Who knows? We may freak out in three weeks and decide we need to completely change our game plan. But you know what? That's all right. We are making progress. We have a plan. Our lives, both personally and financially, have vastly improved based on our achievements.

Stay tuned,




What do you think about our goals for the next year? Do you have any advice as we switch gears from the debt snowball to a savings extravaganza?

Monday, August 8, 2011

Day 298 - Easy Living Expense Cuts: #1 Cable

Ambro / FreeDigitalPhotos.net
For everyone out there trying to figure out what expenses can easily  be cut out of your budget, this series is dedicated to you. Each week, I will explore a different type of living expense and attempt to convince you that you can live without it - or at least cut back significantly. So let's get rid of......

The Beloved Cable Television
For those of you who are still reading - congratulations!! You have made it through the toughest part of this exercise which is to actually consider that cable just might not be a necessity. Food, shelter, clothing........and cable? I think not!

The Cost of Cable
First, let 's take a look at the cost of cable. I priced a typical cable package through AT&T including HD, DVR, and premium channels (HBO, Cinemax, Movie Channel, etc). Total cost per month (all prices are excluding tax): $117. I also priced a cheaper package that included less channels and also only included HBO and Cinemax: $105. Finally, I priced the cheapest package which only includes local channels: $19 + $199 installation fee. You can easily spend $1,500 a year on television! That's a lot of money, especially when you may be struggling to keep up with your bills.

The Promotion
But wait, Sarah! When you sign up for cable service, you usually get some type of promotion deal so you don't pay full price. While this may be true, that promotion doesn't last forever and you shouldn't be budgeting based on the promotion price. There is really no difference, in my opinion, between a cable service promotion and a credit card promotion. In both cases, you are reeled in with the promise of a temporary deal - a free airline ticket or reduced interest rate. By dangling the carrot, you give in and sign up only to realize that you don't earn your reward until you actually use the card. In order to use the card it must be in your wallet. If it's in your wallet, then there is a high likelihood that you will continue to use it. Once you continually use it, you have created a habit - a bad one at that. In the end, the interest paid to the credit card company could buy you 50 plane tickets.

The cable company also believes that creating a TV-watching habit will allow you to give in to the price increase after six months. In addition, the cable company so "conveniently" sets it up so that once your promotion period is over, it automatically continues your service without interruption with the updated price. How thoughtful!!

How To Watch Television Without Cable
Most, if not all, network shows can be watched on the Internet. Plus Netflix and Hulu are a great supplement with a bunch of movies and television shows to choose from instantly or by DVD. Since most laptops can easily hook up to your television if you have the right cable connector, you can play your shows through the Internet and still watch them on the television. I can't think of one show that we aren't able to watch although sometimes we may be a season behind. The only difficulty we have is when it comes to watching sports. Most of what we want to watch is either on ESPN360 or on network television, but when we live in San Diego and want to watch the Carolina Tarheel basketball games, sometimes it proves difficult. Although somehow Mike seems to find a way.

Sarah, I Just Can't Go Cold Turkey!
I'll be honest and say that the first couple of months without cable were difficult. Out of habit, I would come home and immediately think about turning on the television. There were also many nights in the beginning where Mike and I pretty much sat and stared at each other because we hadn't quite figured out what to do with our time. We eventually got over it. We were discussing today whether we wanted to reinstate cable after our debt is paid off and we both (surprisingly) are leaning towards no.

But if the thought of no television makes you feel faint, there may be a few other strategies you can implement if you still want to try to save a little money.
1. Call your cable company before the promotion ends. If your promotion deal is coming to an end, you might want to call your cable company and hint to them that you are thinking about switching providers. Most of the time they will "find" another promotion that will allow you to continue to your deal.
2. Downgrade your package. Do you really need 450 channels plus HBO? Or DVR/HD? If you absolutely must keep cable then at least consider skipping all the bells and whistles to keep your cost down.

My advice: just get rid of it! I promise you will find that you don't really need it. Plus since there is nothing ever really on anyway, you won't find yourself filling up your time with Kardashian marathons instead of doing something (anything!) else more worth your time. I truly believe you can be completely satisfied with your television viewing habits without paying for cable.

Stay tuned,
 



Have you successfully cut the cable cord? Do you have any advice for readers who are hesitant about taking the plunge?
 


Saturday, August 6, 2011

Day 296 - Weekly Roundup Because I Said So Edition


Take some time this weekend to enjoy some of my favorite reads of the week.

Accountant By Day. An up and coming blogger with topics ranging from personal finance and accounting to just plain funny.
Most Recent Post: The 7 Links

August Love Drop: Can You Spare 5 Bucks? LoveDrop is a micro-giving network community that unites to help one person or family a month. This organization really has a great idea going and this month's recipient - Lucy - could use your help. via @sooverdebt
Most Recent Post: 100th Post Giveaway!

50 Things You Need to Give Up Today Need some motivation? Head on over to Marc and Angel Hack Life and get some. I have the 50 things to give up post bookmarked - I need a reminder sometimes. via @marcandangel
Most Recent Post: 54 Life Lessons 14 Years of World Travel Taught Me

Cordelia Calls It Quits. When I need a good laugh and a great read, I just check in on Kelly, aka Cordelia, and see what she's up to. Trust me, she never disappoints! via @cordeliacallsit
Most Recent Post: Fun (And Sometimes Disturbing) Ways That People Have Found My Blog

How to Retire By 40. Brought to you by none other than Retire By 40, a plan to actually retire by 40! Think I can say that one more time? I'm currently working on my retirement plan and contributions so thought this might be helpful for all of you out there doing the same. via @retirebyforty
Most Recent Post: July 2011 Cash Flow

The Story That Made Me Save For Retirement.  Since I'm obsessed with thinking about my own retirement right now, I figured I should add someone else's thoughts into the mix. via @1stGenAmerican
Most Recent Post: My Uncle's Story: Love During War

Have a great weekend!

Stay tuned,








Friday, August 5, 2011

Day 295 - Retirement Calculator Comparisons

photostock / FreeDigitalPhotos.net
How much should I save for retirement? I would bet the farm that this is a very common question. I've been seriously thinking about upping my retirement contribution once we finish paying off the $60K Project, but figuring out an estimate of how much money I will need at retirement is proving more difficult than I expected. How much money will I need for expenses during retirement? More or less than when I was working? I guess it depends on what I intend to do in my golden years - maybe skydiving as the couple in the photo appears to be doing (although I'm beginning to wonder. I'll leave the conclusion up to your own devices).

I decided to Google "retirement calculator" and see what types of options are out there to help me with this task. But how do I know how reliable an online retirement calculator can be? Considering there are so many variables that go into the calculation, I'm not really even sure what I should consider a "good" calculator.

So I decided to do a test - put the exact same information into multiple online retirement calculators and see how similar (or different) the results are. I am hoping that somehow comparing the results of multiple calculators will help me assess which ones are actually good enough to rely on when it comes to figuring out how much I need to be saving for retirement. Note that the inputs I use are as close as possible to my (including Mike) real life financial situation but some amounts I decided on are completely arbitrary. I also tried to be relatively conservative with returns in an attempt not to overestimate. And what the heck, why not retire at age 60???

In order to be consistent, I attempted to use the following inputs in all of the calculators:
Retirement Age: 60
Life span: 85 years
Current retirement savings: $95,000 401(k), $5,000 Roth IRA
Annual 401(k) contribution (today's $$$): $20,000
Annual Roth contribution: 5,000
Annual inflation: 3%
Average annual raise: 4%
Average annual investment return: 7%
Include Social Security benefits? Yes Benefits starting at age 65
Annual retirement spending estimate: 75% of current year income adjusted for inflation
Tax rates (if asked): Federal 25%, State 6%
Post-retirement investment return: 4%
Annual savings increase: 1%

I tested five different calculators which produced the following results. The columns below show 1) the company that offers the calculator, 2) total amount of money saved at age 60, 3) total amount of money required to retire without a shortfall, and 4) shortfall or overage. 


Calculator Amount Saved at 60 Total Amount Required (Shortfall)/Overage
Schwab*  $3,371,600  $5,985,700  $(2,614,100)
CNN Money*  70% chance  $4,926,231  ???
T. Rowe Price*  $8,354  $10,375  $(2,021)
MSN Money**  $2,665,411  ????  ???
AARP**  $3,751,925  $3,537,592  $214,333














* Amounts account for time value of money and are stated in future dollars
** Amounts are stated in current year dollars (I think??)

My conclusion
WHAT THE HELL? Of the two calculators that actually gave me an amount needed vs. actual amount saved at age 60, one says I am short $2.6 million and the other says I am over by $214K. MSN Money, from what I could tell, didn't tell me the total amount required - only the amount I would have at age 60. CNN Money tells me I have a 70% chance of actually acquiring $4.9 million. And T. Rowe Price only speaks in terms of what I need on a monthly basis.

Problems? I've Got Some
1. Assumptions not provided. Many of these calculators do not provide their assumptions. So you have no idea how they decided you need a bazillion dollars by the time you are retiring.
2. What is a dollar worth? Let's talk more about the value of a dollar in the future. Some calculators account for this, but many don't even mention the idea that a dollar will only buy you an already chewed piece of Bazooka bubble gum in 2039. Even worse, sometimes there is no mention of whether the dollar amount given to you reflects the idea that a dollar will buy way less in the future or whether it reflects today's purchasing power.
3. Huh? What? The varying degrees of answers I got just makes me realize that nobody seems to really know how to answer you in terms of providing advice on saving for retirement.

So now that I have thoroughly confused myself and my readers, I have decided to revisit this idea of calculating retirement nest eggs on a more in depth basis in future blog posts. Hopefully we can put our heads together and come up with a sensible solution for calculating a reasonable answer to the question 'How much should I save for retirement?'

Stay tuned,




Do you have any helpful tools you have used to help you figure out how much to set aside for retirement? More importantly, WHAT are those old people doing in that photo???

Tuesday, August 2, 2011

Day 292 - A Letter To My 18-Year-Old Self

jscreationzs / FreeDigitalPhotos.net
Dear 18-year-old Sarah,

Thia is a letter from your future self attempting to knock some financial sense into you as you prepare to head off to college. I know you think you are pretty hot stuff right now, but trust me there are some a lot of things you need to learn when it comes to debt and personal finance. I wish I could send my 12 Steps to Debt Freedom back in time, but you probably wouldn't read it anyway.

Reconsider going to school in-state. I know you are stubborn and have set your mind to leaving Oklahoma as soon after graduation as possible to go to that highly ranked private school in California. But guess what? I'm still paying off that big undergrad loan you signed for. At least apply at the state schools and see what financial aid they offer you. With your grades and resume, I have a feeling you will get a full ride or something very close to it. Trust me - student loans suck. Debt sucks.

Don't apply for that credit card your freshman year. I know it's important to you not to miss out on any fun college events, but "making money" by paying for people's food/tasty beverages in exchange for cash is not smart. I know you are working hard every summer and also during the school year to make money, but your spending habits are a little out of control. Yes, one of your best friends at school is loaded. Yes, it's fun to buy stuff and believe that you will get that high paying job after college and just pay everything off. And you will make good money eventually (after that first year you took off to be a ski bum and travel to Alaska - which I, by the way, totally approve). But all I ask is that you try to cut back so that you don't struggle as much with all the credit card payments looming in your future.

Don't lease a brand new car right after graduate school. Just because you can afford the monthly payments doesn't mean you need to lease a brand new car. You don't have a garage and you will get hail damage while parked at the airport on a business trip just a few months after buying it. You will also work a long-term assignment in New York City for over two years (awesome, by the way!!), and you will be paying on a car you don't drive because it's a lease and you can't return it. Although your Subaru turns out to be a great car, consider buying and looking at used. Or just keep that Saturn coupe for a few years longer until your debt is under control.

Tricking yourself into thinking you deserve something doesn't mean you should buy it. I can't fault you for this because I'm pretty sure this attitude runs in the family. Just think twice before you shell out cash for something just because you think it will make you feel better for a period of time. The stress of the credit card bill will wipe out that buyer's high faster than you know it.

Rather than following a career path because you should, spend more time thinking about your passions and less time drinking and partying. Allowing other people to tell you the best direction for your future is a lot easier than figuring it out for yourself. Unfortunately, you will end up in a job you don't like with your priorities completely mixed up. Don't doubt your gut instincts - your family has instilled in you many positive values. Follow your heart.

Make as much time for family as you can. Someone very special to you will be taken away way too soon and it's going to be a life changing event. Know that every moment will be a precious memory eventually. Call your parents and siblings often. Tell them you love them. Then tell them again. People need to be told they are loved - you won't regret it.

Stay tuned,

(From Your Financially Responsible Future)


Knowing what you know now, what advice would you give to your 18-year-old self?


Monday, August 1, 2011

Day 291 - August Update

The first and fifteenth of each month I will update you on the status towards our goal of paying off $60K in one year.

** Check out the Real Time Debt Tracker!!! Keep up to the minute tabs on our debt balance and whether we can pay it off in 365 days!

To date, we have paid off $56,152 of our debt in 291 days! That's about $193 bucks a day since we started. Note that the $56K number only includes principal paid. In order to pay off $56,000 in debt principal, we have paid $64,000 cash in total since October when you include interest. That is a lot of moolah!

Loan Balances
7/15/2011
8/1/2011
Student Loan #1
 -  
 -  
Student Loan #2
 -  
 -  
Student Loan #3
  5,631
  3,848
Sarah Mortgage
 -_____  
 -_____  
TOTAL OWED
 $5,631
 $3,848 

If we make our regularly scheduled debt payments, we should be making our last debt payment right around the first week of September - about 45 days ahead of our goal!

What's Next? Mike and I have been throwing ideas out for our next steps but not really discussing anything too seriously. I am considering continuing to pay off our debt by adding our last student loan of $50,000 to the Debt Tracker. Mike has proposed maxing out our retirement contributions. This should be a very interesting argument conversation!

Upcoming Challenges. The 2-for-1 deal: Mike and I both need surgery this year. I expect we will both be hitting our deductibles and maximum out-of-pocket expenses pretty quickly. It would be wise to save up for the portion we owe so trying to figure out how to best fit this into the financial equation.

Random Thoughts. I am currently reading Walden by Henry David Thoreau. I believe Thoreau is not much different than those of us trying to get our personal finances in order and realize the truly important aspects of life. Early on in the book, he discusses how aggravating it is that people throw away their money on renting nice places in town when you could build your own place for a small cost (circa 19th century, wish it was still like that!). He even includes a table with a breakdown of exactly how much he spent to build his cabin! Thoreau may be one of the first personal finance/lifestyle "bloggers" in America. I highly suggest reading Walden - not only because it is a classic but because I think you will get some satisfaction out of it.

"Our truest life is when we are in dreams awake."
Henry David Thoreau

 Stay tuned,




Related Posts Plugin for WordPress, Blogger...