November Update

First, I updated my sidebar with my current cc debt totals- this month I paid down $284.84 – and the debt is now 11% paid off!

I am getting married in one month and two days to the man I have been living with for over two years. As a result, you will see a lot more “we” used in this blog regarding our financial decisions. Generally, consider “I” and “we” to be interchangeable in this context because we discuss financial decisions and strategies thoroughly, but I am the only one blogging about them. Since his parents are paying for our modest wedding, I will not be discussing it here.

In looking over our expenses for November, I noticed that we actually went over budget on our groceries this month, coming in at $453.33 (our budget is $400). I thought about this for a second and realized that this is the result of the time of year. At this time of year, our cooking shifts away from CSA produce (which ended this month) and more towards pantry foods and I start baking like a maniac. As a results, we had to make a big supermarket trip to stock up on staples like canned tomatoes, vegetable stock and baking supplies. We also spent quite a bit for our thanksgiving dinner, which we celebrated at home, just the two of us. I am a vegetarian, so pre-DH (I do not like the term fiancé) bought a pheasant, a much more appropriately sized bird for one than the traditional turkey. This and a bunch of fresh local vegetables came to $80. We had a great meal and a nice holiday, so I say it was worth it.

In avoidable expenses on my end, I spent $8.25 on library fines. Better than spending hundreds on books every year, I suppose, but still. I also spent $40 on drinks (in one night), $30.25 on coffee, and $200 in cash total over the month. In my defense, it is peppermint latte season, and although I have been successfully avoiding coffee since June, I cannot resist the peppermint lattes! I have been charging them all on my debit card though so that I can better track how much I am spending on them and hopefully stop before it gets out of hand. The cash expenditures are way down since last month, I think because I have been much more aware of them.

I also bought $120 worth of clothes early this month for some reason. I bought two dresses that I need for my honeymoon, though I have since realized that I could have left one at the store – but cannot find the receipt.  Silly me. The remainder of the clothes was two sweaters and a skirt, each of which was deeply discounted. The amount of money is not the end of the world, and I like the items I bought, so I cannot censure myself for buying them. Yet.

I need to be much more mindful of my spending. Yet I know that I am making improvements, because there is more money in my checking account at the end of the pay period than there used to be. Baby steps!

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Approaches

This guest post about lifestyle inflation on Get Rich Slowly inspired me to address some of my own attitudes here.

I think the poster is very insightful in addressing a possible mechanism for lifestyle inflation. However, I think the overall approach is flawed. The poster above is approaching his finances from the point of view of spending. I like to approach my finances from the point of view of saving.

I budget for necessary expenses, then pick a realistic level of saving and debt repayment to meet my goals. I plan each of these on a paycheck or monthly basis. The money that is left over is “free” money that can be spent on anything I want.

I think this is the better approach because it prevents me from feeling deprived. If I put every penny of my money towards paying off my debt until it was gone, I would pay it off faster. But afterward, I would feel so deprived after having bought nothing and had no spending money for a month or three, that I would go on a charging spree and end up with even higher bills. This is what happened to me throughout college. It is like yo-yo dieting, but for your finances.

With my new approach, I get to buy whatever I want, but within limits. So I have to pick what I want “the most.” Everything else has to either wait or (usually) gets forgotten. For example, in one month I might be deciding between a pair of shoes or seeing a play and decide on the play. In the next month, I had forgotten about the shoes and am now considering a sweater or a night out with cab money. Each month, I don’t get everything that I want, but I get whatever I want the most. And I’m still making strong progress towards my financial goals.

I can, of course, decide to use my “free” money to pay off debt or save. But the point is that I don’t have to and I will not feel guilty if I do not.

Binge saving and binge debt pay off will inevitably result in binge shopping, at least for me. Slow and steady wins the race.

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I got a raise!

I found out today that I got a 4% raise! This raise is retroactive from March 2008. In this economy, I was expecting a whole lot of nothing, so this came as a pleasant surprise.

The raise will add about $60 after taxes to each of my paychecks. I get paid bi-weekly. I got a major promotion and raise in May of 2008, so the retroactive sum for those first few months will be smaller. Still, I hope to get an extra $1,000 in income before the end of the year. And take a wild guess where it is going to go!

But not so fast. I think it is important to keep in mind that as important as paying my debt off is, I have a few other goals as well.

First, I have about $950 total between my savings and checking accounts right now. Some of that will inevitably be spent between now and the next paycheck. I’d like to get to the point that at the end of a pay period, my checking and savings accounts add up to $1,000, not including spending earmarks. This mini-emergency fund should be more than enough cushion for right now. I don’t have a car and therefore don’t have to worry about emergency repairs. But I also don’t want to have to run to a credit card if something comes up.

Second, I have two major expenses coming up. I am applying to law school and have to pay application fees. That will run a bit under $500. Christmas is coming up, and I expect to spend about $200 on presents. I also earmark $150 per paycheck for these expenses.

I think it is important to pay myself first. This means funding my mini emergency fund and paying for the applications before paying off the debt. And I couldn’t bear to cancel Christmas!

I don’t like to count my chickens before they hatch, so I will hold off on making any final allocations until the money is in the bank. But it sure feels good to think about it!

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Made a payment!

This is my first credit card payment since starting this blog. I paid $300 towards my two cards, $240 to the one with the heigher interest rate and $60 to the one with the lower rate, just over its minimum payment. I paid off more than 5% of my debt! It makes me feel great to see that number down, if only by a little bit.

Previously, when I made a payment on the cards, it kind of just went into a black hole. The balance was still high, and since I was not keeping careful track of it, the payments just got lost in the shuffle. So I never knew if the balances were going up or going down, because they never changed much in a single month.

In a comment on my previous post, Jess, whom I know in real life, pointed out two expenditures that I had forgotten about. This just emphasizes the fact that I need to start keeping track of those cash expenditures!

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Where did my money go in October?

I just asked Quicken the very same question.

Good Decisions:

We paid a $100 deposit for next year’s CSA share. CSA stands for community supported agriculture. We prepay about $300 for a weekly share of a season’s worth of vegetables from a particular farm. We pick up the share every week in the summer and fall. It works out to well under $20 a week for all the vegetables we can eat (there are only two of us after all). I consider it both a good financial investment as well as an investment in our health and planet. So, good decision, good expense.

We paid $66.35 for a dinner out with my sister. I also spent $27.84 for two dinners out with friends. My sister was visiting from college so we took her out to a fun Thai place near our house. Here in NYC, when my friends live over an hour away by subway and we are terribly busy, having dinner out is one of the easiest and cheapest ways to hang out. And I’ll admit it, I love eating out! I consider these to be good expenditures, as long as there are not too many of them!

I paid $130 for a new winter coat. I needed one. And Macy’s was having a 40% off sale, plus I got an additional 10% off because a friend charged it to her card (I wrote her a check and she paid off the charge immediately). So I got a very good deal. Again, good decision.

Bad Decisions:

I spent $9.00 on ATM fees. At $3 a pop, this means that I used “foreign” ATMs only three times – but it adds up so quickly! Now that my bank, WaMu, is part of Chase, I have more ATMs available to me so these expenditures will hopefully vanish.

I took out (and spent!) $420 in cash. On what?! I paid about $20 for dry cleaning. I also went out for drinks with coworkers a couple of times, but since I do not drink much, even at NYC prices that accounts for only about $20, at most. I did not take any cabs or buy any expensive coffee or anything. But I did not bring my lunch to work at all in October. Spending $5-10 a day on lunch, snacks, and sometimes breakfast adds up. And it still leaves $100-200 unaccounted for. This is the spending category I have to work on the most.

I spent $53.38 on books. Of this, $34 was spent on books that I could have easily taken out of the library. I read a LOT, and before I started using the library religiously, I regularly spent $100 or more a month on books. So this is not bad compared to the bad old days, but still. The rest was for magazines that I bought because I had nothing to read on the train home. Impulse purchases.

I spent $41.84 at Target. I am not sure what I bought, which should make this a bad purchase automatically, but I am willing to give myself credit and reserve judgment until I find the receipt.

Overall, I think I could have saved at least $100-200 if I was more careful with my spending. While I do not intend to cut out all fun until that debt is paid off, I hope that I can save some cash by being more mindful of my spending.

My goal for November to keep track of cash expenditures. And bring lunch to work!

In October, I paid $300 towards my credit card debt!  This was, however, before I posted the current totals on this blog, so no updates to that yet.

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What did I spend all that money on?

I was having dinner with a friend tonight and we were discussing the fact that I have no idea where this credit card debt came from. She made the brilliant suggestion that I look in my quicken – I have been itemizing all of my spending there since the beginning of 2007. To the right is the screenshot of the result. I only looked at the two credit cards with current balances. I also have a store credit card, for example, that does not have a balance, and another card that I rarely use.

I’ll elaborate more on specific purchases in a later post.

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I will learn to live within my means.

I am in debt. It makes me feel like I owe people, which, I guess, is a realistic way of looking at it.

Lets tabulate the damage.

Private Student Loan: $27,509.52 at 10.25%
Federal Student Loan: $19,877.88 at 4.875%

Credit Card #1: $3,598.30 at about 6%
Credit Card #2: $1,351.04 at about 11%

I do not know the exact rates on the cards off the top of my head. I will update this when I get the next statement in the mail.

The total damage is $52,336.74. The credit card subtotal is $4,949.34.

This puts my debt at about $2,000 higher than it was when I graduated college two years ago.  This scares me, in part because I assumed that I would be very responsible when I finished college. Clearly, I have not lived up to that expectation.

I have long known that the debt is a problem. But it was mostly student loan debt, and when I accumulated credit card debt, I was able to pay it off within a few months. But this past year or two, despite my faithful reading of personal finance blogs, I have managed to accumulate more and more credit card debt.

This blog will be about where this debt came from, why, how, and how I’m getting rid of it. I will be focusing on the credit cards. Because this debt is a symptom of many larger issues that I have, a lot of other topics will be addressed.

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