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Author: xxannxx Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308232  
Subject: Lurker no more! (very long) Date: 11/21/2002 10:04 PM
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I've been lurking on this board for about a month now, and I want to thank you all in advance for everything I've learned so far. What an amazing group of people you are!

I figured, however, that it was time to go public. It may be the only way I continue to force myself to stay on track. And I look forward to any and all suggestions/comments you may have.

Deep breath.

Here's the current picture:
Debt                                                                              
balance interest notes min/month limit
Citibank 13,733.86 2.90% (until 4/1/03) 293.00 25,020.00
MBNA 0.00 18,800.00
AmexOptima 0.00 18,700.00
USAA 0.00 11,908.00
Student Loan1 788.61 5% 30.00
Student Loan2 7,513.91 7.50% 107.45
Student Loan3 17,435.58 4.61% 150.16
Car Loan 6,757.03 6% 369.12
TOTAL 45,225.58 950.00

Savings/Investments
efund $ 3,063.29 target $10K
401k $ 2,821.55 6% (matched by employer)
529 $ 1,265.22 $200/mo

And here's the story.

I know the $45K in debt is scary, but that figure was over $120K a year ago, so I feel pretty good about the progress I've made so far. My job-life history is a bit eclectic, but suffice it to say that I used to work in an industry where I was doing what I loved every day, fulfilling my childhood dream, really, but I just wasn't making “enough” money (topped out at about $21K/year). This was partly because I was living way beyond my means, and had been for a long time (that part is probably pretty clear from the debt figure :) on top of the fact that I was digging out of huge undergrad student loans.

So what did I do? I went to grad school, got even deeper into debt (see Student Loan1-3), got my Masters in a year, worked in that profession for a year, increased my yearly income (to about $60K), but I still wasn't making “enough” money.

A friend called and offered me a position in the industry I'm in now, where I make a very nice living (started matching my old salary, and now I'm up to about $130K/year). Unfortunately, the industry is not very stable, and while I've been lucky enough to have steady work for 3 years now, I'm trying to prepare for potentially being unemployed when my current project ends (sometime around next September/October). I have some time, but it just doesn't feel like enough.

When I took a really hard stab at paying off primarily credit card debt last year (although I also managed to put my undergrad loans to bed), I paid no attention to an emergency fund, nor to my son's college fund (he's 8). And I had no investments (the 401k at work is new).

A couple of other things. Son's dad and I live together but have never married. We've always rented, because we've 1. never had any money; 2. never felt like we were going to stay in one place very long. In my son's first 4 years of life, we moved 4 times…always to a “nicer” place (that we couldn't really afford). We have completely separate finances. Because I make the most money, I pay all the big bills (rent, clothing, groceries, summer camp, gifts, etc.); he pays utilities, child care, some groceries, and all of his personal stuff. The trade-off is that he has a very flexible work schedule so he can coach soccer and baseball, be a classroom-parent, etc. He's primary care-giver; I “make the money.”

We live in the Bay Area and I pay $2095/m in rent for a very modest house in a decent, but not amazing neighborhood (SO's truck got stolen out in front of our house a few months ago with all of his tools in it – he does carpentry and such. I was very thankful that I had added renters insurance to my plans last year when I was feeling flush. But so much for the secure feeling of living in the suburbs. We never even locked our house before!). We're talking about moving, but there isn't a hell of a lot out there that's much cheaper that's in a district with decent public schools (CA schools really stink). I'd love to go private, but it's just not in the numbers right now. Anyway, that's our biggest monthly expense (besides debt).

Oh, and I have a really good credit history (I check my reports every year; the newest ones are on their way). I may have been in debt, but these are all cards I've had since undergrad years, mostly (not a lot of new inquiries into my acct) and I've always managed to pay on time. I know the huge credit limits I have are bad. I know I need to get rid of some cards (and the temptation to use them). The only reason I'm even hanging on to them is so that I can continue to play the BT dance until they're paid off.

One more thing…I also have an Amex green card that I use to pay for nearly everything. I haven't had to pay for a plane ticket (family is back east) in years because of their Membership Rewards program. It also really helps me to keep track of my expenses (I live in Quicken). I've read a lot about paying cash for everything, but I actually hardly ever use cash or write checks. I love that my life is mostly paperless.

Now, for my plan.

1. Get efund funded to $10K. I won't sleep well until this is in place. I've played around with a bunch of different scenarios, but I just want to have it there in case I find myself suddenly without a job (which is a possibility every day). And I want it there now; I don't want to build it between now and September (which is sort of my “drop-dead” date). I'm afraid that if something happens, I'll just pile up the cc's again and I'm trying so hard to stay in the frame of mind that THAT IS NOT AN OPTION.

2. Once efund is at $10K (I'm aiming for end of March; hopefully sooner), start snowballing the debt. I can't figure out a way to have it all gone by September, but at least I'll have made a dent.

3. Assuming I still have a job in September (and want to stay doing what I'm doing), the next step will be to look at my investments.

My questions:
Is this all totally misguided?

One thing I noticed is that by charging everything to Amex, I'm actually living a month beyond my means! I always have enough to pay off the Amex in full when it's due, but I realized that because I'm shovelling as much money as I can to savings/debt, I'm not actually leaving enough to pay for my weekly expenses when I have them. Does this make sense? It came as quite a shock to me. I don't know what to do about it. Except for shelving the Amex for a couple of months and seeing what happens.

This is way too long already; sorry. I'll stop now.

Thanks so much for reading. Even if no one were to respond, just having this out in public feels like a good step for me.

xxannxx
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Author: mlk58 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145732 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/21/2002 11:41 PM
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Welcome to the board!!

It sounds like you have a basically good plan. I do have a couple of comments:

1. Do you have a Freedom Account -- i.e. money set aside for normal but irregular expenses like insurance premiums, car repairs, health co-payments, clothing, etc? (Here's a great thread about Freedom Accounts: http://boards.fool.com/Message.asp?mid=17784153, and here's another: http://boards.fool.com/Message.asp?mid=18003548.) For me, the Freedom Account has been the number one tool in reducing our debt by $118,000 in the past 3 years.

2. I think it would be a good idea to bite the bullet and let your expenses catch up with your Amex bill. I use my Amex a lot, too, but I keep track and I deduct each expenditure from my checking account as I charge it, then send a check for the full amount at the end of the month. That way I don't get a month in arrears. To get you over the hump, you may have to skip a month of putting a bundle in your e-fund, but it will be worth it.

Good luck, and keep posting!

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Author: daisy4125 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145754 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/22/2002 1:33 PM
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Congratulations on "going public" to the Board. I find that the more I eat, sleep, breathe and post about my debt the more motivated I am to have it be gone and stay gone. I have just a few comments:

Is all of the CC debt in your name? Although the bottom line for me right now is interest rates, I also worry off and on about one individual carrying all the debt in the horrible case of death, separation, or divorce...

I can sure relate to this: but I realized that because I'm shovelling as much money as I can to savings/debt, I'm not actually leaving enough to pay for my weekly expenses when I have them. Does this make sense? It came as quite a shock to me. I don't know what to do about it.

I'm guilty of this too. You get so wound up in your snowball that you leave yourself short. Of course, the answer is easy, you can reduce expenses or reduce your debt payments. This is obviously just my opinion, but I would reduce the 529 contribution down to $50/month at least until you establish the emergency fund level that you're comfortable.

I would also make funding your retirement a priority over funding your son's college fund. It sounds like you're contributing enough to get the match, and you haven't said your age, but it seems that you might being starting a bit late. With 6% of 130K you're setting aside a nice "base chunk," but I would see if you couldn't up that a bit.

One last thing, somewhat aside, don't forget to try determine whether you can deduct any of your student loan interest on your federal taxes. Your income is just at the higher end of the limit, but you're lowering by the amount of your retirement contribution and filing singly, so you could squeeze by with a bit of a deduction.

Good luck and keep us posted on your progess.

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Author: tconi Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145932 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/25/2002 4:39 PM
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My questions:
Is this all totally misguided?.......
I'm not actually leaving enough to pay for my weekly expenses when I have them. Does this make sense?


First - welcome.
Second- no - not misguided, you seem right on with your attitude. Just putting it out there is a HUGE step.
Third - How comfortable are you with putting your "monthly expenses" out here for everyone to see? You already mentioned your rent (which is my net pay for a month- wow!) But if you post ALL of your expenses- start with a budget for what you actually spend each month and on what, many of the board members will give you places to cut back a bit and grow the snowball and savings, just by making a few changes....

peace & questions
t

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Author: xxannxx Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145935 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/25/2002 5:13 PM
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Thanks for the welcome! It's sort of scary to be "out", but I figure it's the only thing that's going to keep me on track.

1. Do you have a Freedom Account --

I have an outline of a Freedom Account set up; I'm just struggling now with figuring out how to fund it. I spent a good part of the weekend looking at my monthly expenses and trying to figure out a plan. I'm going to post hopefully later this week with some details...

2. I think it would be a good idea to bite the bullet and let your expenses catch up with your Amex bill.

Great advice; that's just what I'm going to do.

I just have to turn off that voice in my head that tells me "Let's just wait until after the holidays..." It seems to me like this is the *perfect* time to put this in place; I just have to keep running the mantra, and not get too depressed about it all :)


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Author: xxannxx Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145937 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/25/2002 5:25 PM
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Congratulations on "going public" to the Board. I find that the more I eat, sleep, breathe and post about my debt the more motivated I am to have it be gone and stay gone.

That's exactly what I'm hoping for...I will admit it certainly helped me stay "in control" this weekend when I had an extra hour on my hands in SF and way too many cute pairs of pants calling out to me.

Is all of the CC debt in your name? Although the bottom line for me right now is interest rates, I also worry off and on about one individual carrying all the debt in the horrible case of death, separation, or divorce...

All of the debt is "mine," so all of it's in my name. My SO has always thought that I was living too far and too fast, so anything I wanted/needed/pined for went on my cards. I guess he had the "pleasure" of using my nice stuff, eating the nice meals out, looking at my nice clothes :), but he'd be happy living in a cardboard box, I think, so I can't really pawn any of it off on him.

I'm going to move ahead with reducing my contribs to my son's 529. Should I completely eliminate it (for now), or reduce it (as you suggest)? Any pros and cons? I'm realizing more and more that I need to get my debt and retirement in line (I'm 36, btw, and it feels way too late to be starting. But I figure better late than never). I think I read somewhere on TMF something about there being no scholarships for retirement. That one really struck home.

I had never thought of this:
don't forget to try determine whether you can deduct any of your student loan interest on your federal taxes

One of things about increasing my salary so much over the past few years was watching my deductions also go by the wayside (renters credit, student loan interest, etc.) The irs website says:

Taxpayers with modified adjusted gross income above $55,000 ($75,000 for married taxpayers filing jointly) may not claim the student loan interest deduction.

And I'm way above that. Am I missing some fine print somewhere?

Thanks for your support!


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Author: xxannxx Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145938 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/25/2002 5:27 PM
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Third - How comfortable are you with putting your "monthly expenses" out here for everyone to see?

I was afraid someone was going to suggest this :)
I was working on the whole picture this weekend, and I think you're right. I'm going to try to get it out there this week.

Why is this really good thing, mastering my finances that is, so SCARY?

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Author: CassWoman Big gold star, 5000 posts 10+ Year Anniversary! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145941 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/25/2002 5:39 PM
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I was afraid someone was going to suggest this :)
I was working on the whole picture this weekend, and I think you're right. I'm going to try to get it out there this week.

Why is this really good thing, mastering my finances that is, so SCARY?


xxannxx,

I've posted my debt numbers, but not my entire budget. Posting the debt numbers keeps me more honest since I know that I'm going to have to be accountable to this board at the end of the month. I've also posted my progress (or lack thereof) with my e-fund and freedom fund, which for me is the 'feel good' part of posting information. I love knowing that my savings is increasing and that I am getting more and more in control of my finances ($840 car repair bills not withstanding).

I'm considering posting my entire budget, but at this point I feel that I've pretty much mastered THAT part of my finances, so I don't feel compelled to do that at this point. I've been tweaking it and tweaking it for months and months, and it seems to be working beautifully for me.

Mastering one's finances IS scary -- it's unknown territory for many of us, and the skills are often skills that we were not taught as a child. I still find it scary, but am learning more and more about money and my relationship to it every day. I've been reading some great books, too, that talk about why moving from what is comfortable, even if it isn't in our best interests, is harder than moving towards what IS in our best interests. "The Energy of Money" and "Seven Stages of Money Maturity" are both good, and both talk about this kind of thing.

Also, in general don't post anything that you don't feel comfortable posting, okay?

:)

Cassandra
long-time Fool




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Author: tconi Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 145949 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/25/2002 7:25 PM
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<i.Why is this really good thing, mastering my finances that is, so SCARY?

It is scary but also liberating.
The secret is OUT!!!!
You are not the only one, although it feels this way..
You no longer are bearing this burden alone - at least 19 (recs at this count) others are sharing the burden with you and are willing to help and offer encouragement with anything you wish to post and say "I know that feeling. I have been there and done that- it's not impossible"
and then once you free- well then - goodness - you have to be responsible and see how far you can send that money into the future.

you might also want to check out the budgeting board http://boards.fool.com/Messages.asp?bid=100163&mid=18053897
for some ideas

peace & apprehension
t

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Author: daisy4125 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 146036 of 308232
Subject: Re: Lurker no more! (very long) Date: 11/26/2002 2:16 PM
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On the student loan interest deduction, income limits for 2002 are up to $65K for singles and $130K marrieds. The maximum amount to be deducted is $2500; that's for single or married.

http://www.fool.com/taxes/2002/taxes020719.htm

On the 529 contribution, I would at least reduce it to $50 (the minimum for automatic withdrawals in my 529 plan). I'm one of those people that believes that "there is no scholarship for retirement" line.

It's a tough situation in that you would like to be able to provide a little bit for your child's education, but is that feasible when you're trying to get out of debt and fund your retirement? But, on the other hand, if you can't provide any financial support at all, aren't you potentially setting your child up to be in the same situation as you someday? It drives me nuts thinking about it!

I would try to figure out the size of your snowball amount and then prioritize what goes where something like this:

1) retirement contributions that are employer-matched
2) debt minimum payments
3) additional debt payments
4) additional retirement contributions (play with some calculators that will scare you into how much you need to save monthly in order to retire)
5) $50/monthly 529 plan contribution

Deciding between items 3 and 4 can be hard. Your interest rates are pretty low, but so is your job security, if I recall correctly. That makes me lean towards paying down the debt first. That way if you do lose your job the minimum payments on the debt will be that much smaller and easier to come up with. Disclaimer - by "the debt" I mean the CC debt. You may want to revisit the order above (#3 and #4) once the CC is paid off.

I hope this is helpful; good luck and keep posting!

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