The Business Trip

Currently I’m sitting in a hotel room in a small, college town in Ohio. I’m here for a week with the purpose of working with a collaborator for a week doing some research and planning and starting to write a research grant. I’m pretty excited about this trip as it will be my first visit to another University since becoming a professor. I’m really looking forward to spending some time in the lab with one of my favorite collaborators.

The problem? I have to put all of my expenses on to a credit card. So that’s about $200 worth of gas and about $800 worth of hotel costs. I don’t exactly have $1,000 just hanging around to pay for things like travel expenses, which was always a big problem when I was in graduate school as well.

The typical story goes something like this: Have to go to a conference or meeting. Have to pay for everything up front and then get reimbursed. Pull out the credit card because I don’t have $800-$2,000 in cash on hand to pay for these things. Use the credit card. Get used to the credit card. Keep spending on the credit card even after the conference is finished. Walk away with about $3,000 worth of debt and only around $2,000 is reimbursable.

An added problem is that my work has a spending freeze until July 1st. So even though I will get reimbursed for up to $800 of it (that is all the money we have in the budget for travel, everything over that will come from my personal income, which I knew ahead of time and was fine with) – I won’t get reimbursed for at least 2 months. Which is… all the more frustrating since I’ll be earning interest on my credit card.

All of this comes down to one conclusion: I need a larger emergency fund so that I can handle a $1,000 trip without issue. Unfortunately, I’ll have to wait until I’m not receiving furlough pay (again, July 1st), to start increasing my savings contributions. However, I’ll likely just use my extra money from my community college teaching gig to bulk up my savings (I’ll get ~$900 per paycheck for 4 paychecks over my normal salary starting June 15th).

What if the Recession never happened?

Two and a half years ago I was a mess. I had no savings account. I had no emergency fund. I spent every dollar I had and then some. My credit card was maxed. I “got by” on fortuitous gifts of money from family. Every dollar I got I spent just as soon as it hit the checking account. Mostly because I had gotten myself so deep in to debt that each dollar went to debt payment before my paycheck could even clear.

I had to open up a new line of credit for every emergency, simply because I didn’t have any cash to pay for any of these things.

My only back up in case of hard times was about $25,000 in stocks and mutual funds that I hesitated to touch.

A great thing happened to me about the point where I had maxed my credit card, taken out 4 other lines of credit, and would finish up the last two weeks of each month with maybe $20 for the entire two week period because of my debt: The Recession.

I know that most people probably think of the down turn of the economy as a terrible thing to happen. But for me, financially, the recession was in fact the single best thing that could have happened. My stocks and mutual funds took a huge dip and suddenly I didn’t have enough money in them to pay off my debt anymore. My $25,000 in investments were now only worth $13,000 (and dropping).

Realizing I was worth less than I owed scared the crap out me. And I began to reconsider how I viewed money.

Anyone reading this blog for a while knows that this journey hasn’t been easy and it hasn’t been quick. But I’ve been able to save large sums of money for my emergency fund, to move, for a wonderful vacation with my grandmother. And best of all I’ve started to actually turn myself around.

When I started this blog I was “worth” a negative $18,779 – and went another $2,000 lower in the 3-6 months that followed because of the economy. Two and a half years later I’m approaching the $0 mark (I’m currently at -$2,932). This is a huge amount of change on my part.

I know that recessions are supposed to be bad things. I know that I’m supposed to hope for economic growth and recovery. But this recession has been the best thing that ever happened to me. I was forced to take control of my finances. I was forced to face my debt. I was forced to change my lifestyle. And I’m so glad that I did.

What if the recession had never happened? I wonder how long it would have taken me to figure all of this out… if I ever did. How much more debt would I have gotten before I finally caved? A lot more I’d imagine. A lot.

Thoughts on Debt

I’ve been putting together a new budget for my new job and new salary and I can’t help but notice how long it is going to take me to pay off my debt. At my current position I get 10% of my salary to retirement with a 0% matching contribution on my part. This has been nice and in the past 2 years I’ve gotten about $10,000 in retirement benefits.

At my new position I will be given 3% retirement without a contribution, but they’ll match up to 6%. And since I’m not one to throw away free money I will make sure that I put in my 6% to get my matching.

I also know that my car is pushing 8 years now and realistically I need to start saving up money now for repairs and eventually a replacement car. I’m looking for my car to last another 5 years, but there will definitely be repairs that need to be done to make that happen.

The moral of the story is that this debt is holding me back significantly.

With the budget that I’m looking at, I’ll be paying $750/month towards my credit card debt. This will be another year and 8 months to get this debt gone. This is just unacceptable. 100% unacceptable.

For those of you who follow my net worth, I have about $7,000 in investments that aren’t retirement. Around $1,300 in stocks and $5,900 in mutual funds. One reason I haven’t sold these investments is because I got them as insurance benefits from my mom and my brother passing away. In some way I feel that when these are gone, so will some part of them will be too.

However, this is money that I could use to pay down my debt. The $7,000 in these investments would reduce my credit card balance from $11,000 to $4,000. Then paying $750/month it will only take 6 months to get rid of the debt.

I have a few fears about this:

  1. I’m afraid of these stocks and mutual funds being gone because they serve as a mental safety net
  2. I’m scared of losing the memory of my relatives that exist in these funds
  3. I’m concerned that now isn’t the best time to sell my investments as the market isn’t strong
  4. I’m frightened about taking this money out to pay down my debt and then racking up more debt in the future and being stuck with debt and no “safety net” of these mutual funds and stocks – though – based on how much I’ve grown financially in the past 2 years, this seems unlikely

However, the benefits of being able to be gone with this debt, start building an adequate savings, know that I’ll be able to pay for a new car outright when I need to, to get an emergency fund to an acceptable level and be able to start saving for IRAs would be nice. All of these are things I can’t do as long as this debt lingers on.

Another idea is to pay down my debt until these funds equal my debt and then use it to pay it off. This may not be the best in terms of interest, but it could give the market time to rebound and in 6 months from now I’ll have the debt paid down to ~$8,000 using my current budget.

We’ll see… these are the thoughts I’m mulling over right now… It is a scary idea, but the freedom in my budget by getting rid of my credit card debt is exceptionally tempting. I hate this debt. I hate it so much.

E-fund vs Debt

Thinking about my possible future of maybe getting a faculty position and having to move across country in the end of July/beginning of August I’m reconsidering my contributions to debt vs E-fund.

Currently I’m putting away at least $1500/month onto my debt and only $33/month towards my emergency fund since it is at a level I feel reasonable comfortable with.

However, if I get this position in San Diego I’m going to have quite a few new expenses:

  • Moving my stuff ($1,000)
  • Moving me ($500-ish)
  • First month/last month/deposit on an apartment in San Diego ($3,500)

I don’t expect to get much of my deposit back from my apartment here, because landlords in this town are notoriously sneaky.

Now, I don’t have the job, nor do I even have an interview. But if I do get this job I’ll be moving across the country with debt. Something I didn’t want to do, but isn’t the worst thing in the world.

I’m beginning to think that it might be better for me to hold off on the debt repayment for a little while and save up my E-fund to $5,000. If I don’t get the job then I put the money straight onto the debt. Yes, I will lose money on the interest side of it. But I can also keep myself from using the credit card when I’m in the moving process – something that will help prevent debt.

So I’m thinking of starting this with my April paycheck, putting $1,000/month into my E-fund and $500/month on my debt (still $150 above my minimum payment). This will put me at $5,000 by July, however, I’ll know most likely by May whether or not I’ll be moving.

I really hate to slow down my debt repayment, however, I think that this is the smartest move for me to make right now and in the long run doesn’t cost me *too* much money in interest on the credit card if I don’t get the job.

Uncertainty

Those of you who subscribe to me via an RSS reader saw my post on PART of what happened. Actually, what I talked about in that post was what happened on Friday. On Monday shit really hit the fan. However, I’m going to refrain from talking about it here. Period. Suffice to say, it is surprising that today I actually had a really great day at work.

While I’m not in danger of losing my job in the next 3-4 months, or potentially even longer than that. I feel this uncertainty within me that I’m not sure what is going to happen in July when my funding will be half up. It isn’t unreasonable to break it at this point, to be perfectly honest. Though my boss and I both had intentions of using the entire time on the funding. However, circumstances have changed – for both of us. I’m no longer sure how much longer I want to be working here and I’m pretty sure that if I didn’t have an outside funding source I would be on a much more severe probation than I’m on.

All of this to say,  I’m starting to rethink my strategy and goals for the next few months.

I still want to be credit card debt free by December 31st, 2010. However, I have to weigh this against my happiness and my general life well-being.

I’m debating for the next 6 months, paying $500/month of my credit card (rather than the $1,512 I was planning on paying) and instead put that extra $1,000/month into my E-fund. Essentially, I’d be bulking up my savings in case I need to be unemployed for a period of time or need to relocate for a new job. If things seem fine in June/July region, I can then take that extra money and put a large lump sum payment on the credit card. I’ll be able to save up probably around $5-6,000 into an E-fund. Which would subside me for a few months of job searching and living expenses (especially when combined with potential Tutor.com money, community college teaching, ect).

The other option is to continue paying off the card at my current rate and just live off the credit card if situations become dire. I don’t like this option as much – as I’m afraid if my CC balance goes up again I’ll never have the motivation to bring it back down again, but if I don’t end up leaving then I’ll save money on interest because I’ll still be diligent at paying off the balance.

I have to clarify that, there is a 80% chance that this will blow over and I’ll finish out my post here with flying colors. However, that isn’t a certainty. I’m just not sure what the correct financial move is to make here without costing myself too much money and without knowing the future.

I’d really, really, really appreciate your opinions on the two options. (Or any other options you might have for me!)

What made me happy today: A very kind DM on Twitter from eemusings. Thanks!

December Summary

Since I’ve reset my sidebars, I wanted to have a post to archive how close I got to achieving my 2009 goals.

Here is how my side bars ended up as of December 31st, 2009:

My 2009 Goals:

1) Reduce debt from $16,000 to $12,000.

2) Grow emergency fund to $1,200.

3) Eliminate all other personal debt.

_

Credit Card Debt

Initial Debt: $16,000

Current Debt: $12,631

Goal for 2009: $12,000

84%

_

Emergency Fund

Goal: $1,200

Starting Amount: $13

Current Amount: $998

Met as of 11/30/2009

Unmet 12/15/2009

83%

_

Student Loan

Initial Debt: $17,000

Current Debt: $15,157

Goal for 2009: $15,000

92%

_

Other Debt

Initial Debt: $2,285

Current Debt: $0

Paid off as of 08/01/2009

100%

_

Extra December Income

Initial Amount: $0

Goal: $1,000

Current Amount: $1,316

131%

_

I ended up the year completing only 1 of my 3 goals. I eliminated all of my miscellaneous consumer debt (my balance on my Sony credit card, my Express card and my Limited card). I did get my E-fund up to $1,200 – but had to use it for my car repairs in December. I got very close to my credit card debt goal. I missed it only because I kinda just made up a number when I made the goal. I didn’t do any planning and just picked a number that seemed good. This year I’ve given it much more thought and really believe that I’ll get down to $0 debt by December 31st, 2010.

I did make $1,316 in extra income in December – which is INCREDIBLE – and $300 over my $1,000 extra income goal for the month.

Today is Day 1 of my 2010 Challenge of not eating out for a year. Thinking about getting a Starbucks this morning made me realize how long this year may really be. I am excited and scared for this challenge. I’m excited about the change that it might make, but scared that I might not be able to make it.

Thing that made me happy today: a fixed vacuum. Grossed out, but exceptionally happy.

Debt Free in 2010?

I’ve been planning around with the CNN debt calculator, and it turns out that if I were to raise my monthly contributions to my debt by $200/month I’d be able to have no credit card debt by January 2011 (December 31st, 2010 to be exact).

The idea of being debt free in a year sounds incredible. Certainly it would be a great way to start 2011 with no debt. Now, I don’t know if I’d be able to put an extra $200 towards my debt every month. But here is what I think I’ll be able to pull off in the next 13 months:

December 2009: $1,060 (normal $1000 payment + $2/day towards debt)

January 2010-April 2010: $1,512 (normal $1000 payment + $2/day + $452 from extra class I’ll be teaching)

May 2010-August 2010: $500 (won’t be teaching classes most likely, so will have to make a reduced summer budget to account for $500 less money/month)

September 2010-December 2010: $1060 (assuming I’ll be teaching 1 class, hard to predict this far in advance)

Using the pay scheme above here is how much I’ll have remaining at each point:

December 2009: $12,978

April 2010: $7,790

August 2010: $6,400

December 2010: $2,511

If however I was able to get myself a class in EITHER in the summer or a second class next fall, I will be able to pay off my credit card no problem in 2010. OR if I was able to bump up my contributions each month by $140 (+the $2/day) – I’ll get the card paid off by the beginning of 2011. Absolutely incredible.

So, if I don’t want to count on the “chance” of getting a class in the summer or an extra class in the fall, what can I do to get the extra $140/month?

Well, I could cut my contributions to my emergency fund. Or at least lower it. If I were to reduce my contributions to my E-fund to $25/month rather than $100, I could put an extra $75 on my credit card. And if the E-fund dips below $1000, I could go back up to $100/month.

If I were to just add that extra $75/month to the payment plan I have listed above I could end December 2010 with a balance of only $533 on my credit card. I have to figure out if the debt repayment is better than the E-fund.

It is pretty exciting to think that I could be debt free in 2010. I’ll need to spend some time thinking about what is better: no debt or a $2400 E-fund at the end of 2010.

$5 a Day?

J.D. over at Get Rich Slowly linked his readers to a very thought provoking experiment two days ago. No Credit Needed set up automatic transfer of $5/day onto his credit card for a month. Having this small daily transaction, much like any other transaction he might have made, allowed him to realize that he could put $150 more ($5 x 30 days) onto his credit card then he had previously been doing.

And of course, this got ME thinking.

I feel like I would definitely notice if $150 were gone from my allowed spending money. However, if $1/day disappeared I probably would notice. Wait… wait… back up… (I thought to myself)… If you wouldn’t NOTICE $1/day leaving your bank account why don’t you DO that?

And holy crap my synapses were flying – sure it was only $30 more per month I would be putting on my credit card. Only $30, right?

No!

Every dollar adds up. And little payments reduce my daily balance and the amount of interest I have to pay!

Then I realized… well… would I feel $2/day? Maybe not… I could easily find ways of cutting back $2/day out of my budget I think. That is $60/month!

So I put some numbers into CNN.com’s debt reduction calculator (a FANTASTIC tool, btw).

With $1,000 per month payment (what my base payment currently is) I’ll be debt free in 1 year and 4 month and pay $2,363 in interest.

With $1,030 per month ($1/day) I’ll be debt free in 1 year and 4 months and pay $2,273 in interest.

With $1,060 per month ($2/day) I’ll be debt free in 1 year and 3 months and pay $2,186 in interest.

That’s right – by STEALING $2/day from my daily habits I’d be out of debt a month sooner AND save myself almost $200 in interest.

And what if I COULD manage to squeeze $150 from my budget by taking $5/day? Well, I’d be paying $1,150/month and end up debt free in 1 year and 2 months (WOW! – that means I could be debt free before 2011!) and manage to only pay $1,964 in interest.

The bottom line is that every dollar counts. And if you think that you could shave $1/day off your budget and not notice – THEN YOU SHOULD!

So rather than set up a daily $2 transfer, I’m taking $14 out per week. If $14 a week can save me $200 AND get me out of debt a month sooner – well – that is $14 well spent! If I don’t notice the $14/week gone then I’ll raise it to $3/day the next month ($21/week). Essentially, I’m going to keep raising the amount I pull out of my expense account per day until it starts to become noticeable – and then I’ll pull back. That may be $1/day – it may be $6 (or $10?!) – either way I’m getting out of debt faster and saving myself money in the long run!

Wow – Extra, Unexpected Money!

Since my first payday at the community college I’m teaching at is tomorrow, I wanted to see how much money I could be expecting every two weeks.

When I looked at the paystub, I noticed that it was a little different than I was expecting.

I had two different pay amounts:

1) Adjunct Faculty – $256.00

2) Substitute Faculty – $145.00

For a total of $354.17 after personal deductions and employer contributions and all that fun stuff.

ANYWAY – It took me about 10 minutes to looking at the pay stub to understand what was going on with #2 the “Substitute Faculty” pay of $145.  Remember back in June? Remember how I got this job in the first place? I substitute lectured for the Chemistry prof in exchange for getting an adjunct position! I just ASSUMED that I wouldn’t get any money from that since I was benefitting by getting a job, but it turns out I AM getting paid for 4 hours of work! (I only did 2, but I’m okay with getting paid for more).

I also found out, that the community college PAYS my federal taxes and my medicare, so I only have to pay state and local taxes – which is only around $15. So every other week I should get around $240 – or nearly $500 extra per month – that is a pretty sweet deal in my opinion.

As for the extra $145 – that is going straight onto my credit card, of COURSE! =D

Since it is “found” money – I’m also counting towards my “Earn More September” fund.