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Archive for March, 2008

This money story is of Beachgirl, a long-time pf blogger who is “living the American Dream” and “paying off some debts in order to do it.” Here she tells us how she did it.

I’m 27, live in the DC-metro area, and work as a consultant. I was lucky in that my mom taught me starting from a young age about money and how to be responsible with it. When I went to college and got my first credit card, I was smart and only charged what I could pay off. I’ve never had a balance on my credit card, except when it was a 0% interest rate. Even then, I make sure to pay it off fully before any interest would kick in.

When I graduated from undergrad, I only had about $9,000 in student loans. However, I didn’t really know what I wanted to do after I graduated, so I went to grad school. While I don’t regret my decision to go to grad school (it helped me get where I am today), I amassed a total of $45,000 in school loans.

Most of the debt ($40,000) was federal loans and I able to consolidate them at 2.625% for 30 years. The last $5,000 was a private loan with a variable interest rate. When I started paying on it in November 2004, the rate was about 4%. When I paid it off in March 2007, it was over 8%.

My parents are having some financial difficulties due to my dad’s illness. He lost his job and is now applying for disability. Having rarely worked for anyone that provided retirement benefits, they have very little saved for retirement. They are also without medical insurance, which is too expensive for them to pay for themselves. They have borrowed money from me, which I am more than willing to do. I know they would do the same for me if the roles were reversed.

My goals are to pay off my debt and continue to save money so that I can provide a better future for myself and my parents.

Even though financial experts may advise caution in helping out family members financially, like Beachgirl, I can’t imagine NOT helping my parents if they really needed it. Beachgirl is facing what many Americans may face in the coming years as Baby Boomers become older… I guess all we can do is save & pray.

Please check out her blog at beachgirlsbudgetblog.blogspot.com for more!

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Is it just me, or can retirement experts really be downers?

So this book tells me that a million is not enough. This calculator ups it a notch and tells me what is enough: $4 million. Okay, well, I can save and save and count on the stock market to get me there, right? Not so fast!, this expert says. According to his (very sound analysis), stock returns will mostly likely be lower in the future than it has in the past. The real return of equity may hover around 3.5%.

It’s enough to make a girl want to throw up her spreadsheets and go buy shoes instead. But I can’t. Time is on my side – now. It won’t be forever.*

So if I save save save – with a hope and a prayer -and a cooperative market (down when I’m in the accumulation phase (i.e. now) and high-flying during my withdrawal phase), I’ll get there.

*Doesn’t that sound like the tagline for an appropriately depressing personal finance tome?
Your Financial Clock is Ticking: How to Save for Retirement Before It’s Too Late and You Wind Up On The Streets Eating Government Cheese

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It’s now the middle of March, and I still haven’t bought any clothing, shoes, or accessories since the end of December 2007.

Which means I made it through after-Christmas sales, New Year’s Day sales, Holiday Clearance sales, and now am in the process of resisting Spring sales.

Which means, I really, really want to buy something!!

I stopped by Target this weekend and was instantly assailed by lovely print frocks and jersey dresses and cute ballet flats, all under $20.

Me walking out of the store with only cookies & cereal = willpower!

P.S. A big thank-you to everyone who commented and delurked. It’s awesome to know a little bit more about my readers. 🙂

P.P.S. The Save-O-Meters have been updated. It’s a slow & steady journey but I will get to the finish line.

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Who ARE you guys?

I’ve been writing this blog for 2 years now. I’ve never really paid close attention to the stats, and even though this blog is way more popular than it has been in the past, it’s always been small enough that I’m still really, really, excited every time I get a comment or an email.

I guess the point of this post is – I just want to know who you all are. (Lurkers, please delurk now!) Tell me what you like about the blog, suggestions to make it better, why you read it, where you’re from, where did you find out about it, etc. etc.

Oh, and what is one website/book/factoid that I MUST know about?

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I know what I want

This is what I am going to get tomorrow night.

There will be no rest until this mission has been accomplished.

P.S. Check out hulu. GO! Delay not one second… you will thank me for it. Promise.

(Can you say… Doogie Howser?! and Remington Steele?!)

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Follow-up to Marie

So in my previous post I had some questions for Marie, the 20something who is coming to grips with her family’s influence on her finances and her choices… and Marie was nice enough to answer back!

What did you think while your father was indulging you with the cars & such?
Partly because of the fact that I was still a child/adolescent and my thinking processes weren’t fully developed, I didn’t think about what it took to buy things and whether my parents were being financially responsible. The other part is that I just didn’t know any other way of life: I went to school and was friends with upper middle class children, and my extended family is financially comfortable, so I thought material possesions were the norm.

Do you think that watching his behavior made you assume that having credit card debt is okay? Growing up and when I was in undergrad, I thought credit cards could be used to buy whatever made you wanted. Now, however, I definitely do not think that carrying credit card debt is ok. 

Has money affected your relationship with your father now?
Absolutely! Although my dad loves myself and my siblings immensely, because of the way he was raised he tries to use material items to show his love. And his lack of and mismanagement of money is an issue that permeates every aspect of my life. Regardless, I love him and I’ve already come to terms with the fact that I will probably be supporting him in his older age.

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Very long (but extremely interesting!) story about “Marie”, who lives in Texas. She writes of family (in particular her father’s) influence on her view and management of money.

I am 24 years old, currently live in Houston, Tx, and work at a higher education institution. I have to examine my grandparents and parents finances to lead up to my own financial situation as a 20-something. Both of my parents were born and raised in Latin American countries, and their respective families were well-to-do/wealthy in Latin American standards, translating to maids, large houses, private schooling, and attending college ‘abroad,’ either in the US or Europe.

However, neither of my parents’ family was flashy or flagrant- my mother had 5 siblings, and she emphasizes to myself and my brothers how hard both her parents and my father’s parents worked to be able to provide the lifestyle they lived.

My father was a ‘surprise’ baby- born when my grandmother was in her late 30s, he was 10 and 12 years younger than my two uncles. This large age difference coupled with the fact that my grandparents were older and couldn’t deal with a young child, led to my father being spoiled as he grew up, and eventually sent away to boarding school. Constant indulgence meant my father never learned self-denial and has acted on his impulses all his life. To this day he live paycheck to paycheck, doesn’t have health insurance, life insurance, retirement savings, pays all his bills late, his credit score is in the garbage, and to top it all off owes the IRS money and my mother back child support, leading to his bank accounts being frozen and assets seized multiple times. Ironically, my mother is the epitome of self denial- she currently lives on $500 a month from Social Security.

So how did these opposites get together? My mother became pregnant while in college, and they got married. This was the start of many bad decisions, as my parents continued to have children and my mom never finished her college degree. This meant she was limited in the jobs she was eligible for and the maximum pay she could receive. I think she was happier than I was on my college graduation day, because simply having a degree opens so many more doors for you.

My father, although obtaining a degree in architecture and working as an architect for a few years, decided that he did not like having an ‘office job,’ and coinciding with my birth he quit the relatively lucrative field of healthcare architecture for his passion, photography. For the majority of my childhood he was the sole breadwinner for our family of 5 with a maximum income of around $50,000. That income was supplemented by my paternal grandparents (still indulging my dad!) and my mother eventually working full time prior to my parents divorce.

Growing up, however, I wasn’t fully aware of our financial situation- my parents (with my grandparents help) bought a large, slightly run down house in a good neighborhood, and we attended good schools. Summer vacations were funded by my grandparents, and we did have brand name luxury items due to my father’s self-indulgence and desire to indulge his children as well.

I have a vivid memory, however, of being around 10 years old and my next door neighbor, a girl a year or two younger than me, asking ‘what it felt like to be poor.’ I also remember my father always making the joke after Christmas about ‘Santa being broke.’ And we never had health insurance until my mother started working full time.

So fast forward past my parent’s divorce, my mother suffered a stroke which left her partially paralyzed. She could no longer work, and my younger brother and I (still dependants) were eligible for Medicare and other governmental assistance. I was actually glad because this meant I could go to the doctor if sick, get new eyeglasses, etc. I had also entered high school, and started working to pay for my clothes, discretionary spending, etc.

My father, continuing to indulge his children, bought me a brand new car when I was 16- which took him 6 years to pay for. I applied to college, and lucky for me was accepted to a large public institution with a full financial aid package, including about $5k in loans a year.

In college, I was the model of living above your means- large apartments, opening credit cards to pay for living expenses (including a bed, mattress, computer, lots of clothes and eating out) and basically maxing out everything available to me. I studied abroad my junior year, living in France for a total cost of $30k, about $25k of which was funded by loans. My mother constantly asked me about my credit cards since all my mail went to her house, saying that she was worried about how much I owed.

By the time I graduated college, I had about $53k in loans and $15k in credit card debt, with no one besides my mother knowing the full extent of my finances. My father’s car was repossessed at this time, so when I moved back home he started using my car and after finding a job I bought a used luxury car for the sweet deal (not) of $17k, bringing my total debt to a little over $85k.

That was about a year ago, and I had a wake up call about 6 months ago. My entire life I had been surrounded by irresponsible financial decisions, and had never learned how to manage finances successfully. My debt was consuming me- I worried about money all the time, and I couldn’t do anything that I wanted to do because all of my take home pay was used to pay credit cards, my car loan, and my school loans. I had no idea where my money was going or what it would take to pay off my debt. I couldn’t move out of my dad’s house because I couldn’t afford an apartment.

My boyfriend kept nagging me to take a vacation together, but I couldn’t tell him the real reason why this wasn’t possible- my massive debt. I finally cracked in December and told him how much I owed, which makes 2 people who know the full extent now. 🙂

I try to be open and honest with my family and my boyfriend now about my finances and money in general, especially with my younger brother who is a sophomore in college, paying for it the same was I did- primarily loans. I also lecture my boyfriend, who doesn’t budget and doesn’t have any retirement savings. I have a pretty strict budget, but it’s hard to constantly battle the urge to shop, eat out, etc. I read lots of PF blogs for budgeting/saving ideas and bolster my resolve to pay off all my debt.

My total debt now stands at $72k, and I’m also funding a 403b through work and building an emergency fund. In terms of the future, I’m considering getting a second job to help pay off debt faster, and help defray the costs I will incur when I move out of my dad’s house next month.

Did I mention I will also be applying to medical school this year? So although I know my financial situation will get waaaaaaaay worse in the next few years because of med school loans, I think I am at least better educated now to not fall into the same traps I did growing up and in undergrad- including using credit cards endlessly, not budgeting, not facing my financial problems, etc. Also, I hope to have all my consumer debt (around $19k) paid off by the time I enter med school in the fall of 2009. Then I will only have student loans left, which the interest can be deferred while I am in school.

Whew! If you got through all that, congrats! I’m glad that Marie is now on track with her finances, and on her way to a fairly lucrative career as a doctor (although, the loans!). Marie – what did you think while your father was indulging you with the cars & such? Do you think that watching his behavior made you assume that having credit card debt is okay? Has money affected your relationship with your father now?

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Email me if you want to share yours.

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