July 2008:

Credit card debt $31,000. Before I could start repaying the student loan debt, with its rather modest 7.25% interest, I needed to tackle the $31,000 in personal debt I had. One of the toughest steps was actually determining how much debt I had, what my expenses were each month, and what my income was likely to be. For the longest time I was like many others, people I still run into now, who not only have no idea what the make or how much they spend, they don’t want to know. Let that sink in. There are people in a great amount of debt who actively avoid learning how much they owe to others and how much they spend each month. That’s like taking a road trip and not knowing where your starting point is.

So I created a budget with excel and a budgeting program (it was a free version of Quicken that has now become Mint). I also used a debt pay-down calculator from the web and the debt snowball technique that Dave Ramsey and others advocate for. Below is a screen shot of the budget. I figured I could pay 2504.14 each month towards personal debt and still have a little left over each month.

One method of using the debt snowball is to pay the smallest credit card off first. This gives you a sense of accomplishment and success. To me, it seemed more important to pay off the credit card with the highest interest rate first, so I used this approach to the debt snowball. Each month I would pay $2504.14 to credit cards, and as each one was paid off I would then roll the amount from the paid off card to the next highest credit card. So after one month and Macy’s was done, I added that to Amex. I would then hide the card so I wouldn’t use it.

2008 budget

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I presented a short version of how I paid off my student loans at the Arizona State Bar today.

Here it is:

I am currently losing money on my retirement accounts. Not because the portfolio itself is losing value on the market. No, I am losing money because of fees.

Since I work as a contract employee and adjunct instructor, I have four different 401k accounts as well as a Roth IRA.

Account 1, which is from my current employer, has cost me $39 since March. The return on my investment over this period is $36. Part of the issue is I get paid weekly, and thus my contributions are made on a weekly basis. Each week costs money. In addition, the employer charges $7.33/month in fees to provide the plan. So even though I chose Index Mutual Funds with low fees, a low rate of return and multiple fees eats into my retirement.

Account 2,which is from a previous employer, has no fees from the employer. Crappy employer, better plan.

 

When I placed all my things on eBay for the auction, there were a lot of items I considered to be family heirlooms. My family also considered them to be heirlooms. I was the custodian for future generations, keeping these “priceless” items for the next generation.

When my parents expressed dismay at the auction, I told them they could bid on the items if they wanted them. No one did.

I was reminded of this experience when I read two posts later. One was an article in the Washington Post about millennials not wanting their baby boomer parents’ things. The other was in the Minimalism Facebook group for Phoenix where a woman posted the same thing: her parents had given her china that she didn’t want or have room for.

Generational differences are important to keep in mind when gifting items and deciding whether to accept gifts from parents, grandparents, or other older family members.

 

 

Currently, I have $2478 in various retirement accounts. Two factors have contributed to my having saved virtually nothing for retirement: an accelerated pay off of student loans (about $190,000 in 7 years) and temp jobs that either have no retirement or retirement contributions that start after the project ends.

At 54 years old, assuming I keep my physical and mental health, I have 15-20 years to prepare my finances for 30 years of retirement. Talk about anxiety! How can I save enough in 15 years to live off of for 30?

As in most cases, however, I found that looking at some data relieves my anxiety somewhat. The Social Security Administration actuarial table from 2011 says I will likely live for another 29.54 years. That is less than the standard time advised by financial planners, who generally say to plan for a 30 year retirement. If I work until 70, I will likely live another 16.33 years. It’s still a little unbalanced–work for 15 to live on for 16.33–but more doable than 15/30. My family tends to be long-lived, and advances in medicine may allow for a longer life, so I probably should plan on 20+ years, not 16.

In addition to life expectancy, there is the magic of compounding. The more I can front-load my retirement contributions, the better. That money will continue to grow. And if the market is bad, then my contributions have more value when the funds I purchase into then increase. Bankrate’s retirement planning calculator says I am on track if I work until 70, live til 90, keep my current income level and retirement contributions, and have a 7% annual growth in retirement accounts. Most important, I need to live on less than 55% of my current income in retirement. Tough, but conceivable. If I live off 80% of my current income, which Wells Fargo recommends, then my money runs out in 5 years.

The Wells Fargo calculator is more pessimistic (or maybe more accurate), so I ran some numbers through it, too. Bad news at my current income and contribution level.

wf retirement

Luckily, my options are still open. I can increase my income and/or decrease my spending and increase my contributions to an IRA or other retirement account. Doing both is beneficial because I will be increasing my Social Security amount, increasing the amount to “save”, as well as getting accustomed to living off less so retirement will be an easier adjustment. Alternatively (and more likely), I work until I die so I don’t need to worry about money for retirement at all.

 

 

 

9 years ago, in April of 2007, I created an auction on eBay to sell all my belongings. The reasons why are detailed in my blog I wrote during the process: http://lisasbigauction.blogspot.com

I feel overall positive about the anniversary, in that I have kept my possessions fewer than before. Still, I purged things I would like to have now, for example some family heirlooms that were functional, small decorative items that were gifts, and serving dishes. I threw the baby out with the diaper pail. In retrospect it is easy to say I should have been more discriminating in what I got rid of, however maybe it was the process that has led me to evaluate what I have and what I need.

One thing that I am much less likely to keep around is paper. Scanners and electronic copies of most records means I can keep thousands of pages of paper and photos on my hard drive and external drive. Unfortunately that means that, instead of papers that I keep filed, I have electronic data that is not organized and keeps accumulating.

How have you dealt with organizing and archiving of electronic data?

Today I spent 3 hours on my Boddhacitta practice.

On my way back from yoga I passed a small group of religious protesters shouting the usual “God hates fags.” On the way to yoga, I engaged in argument. I got agitated, took the insults personally, felt separate from them, and saw how the argument was exactly what they were hoping for.

On the way back, I thought I would try something different. Perhaps the presence of one quiet person could change the energy. At the very least, it would change my energy and how I interact with others. The protesters were in a free speech barricade on the corner of Indian School and 3rd. I locked up my bike and spread my yoga mat on the grass in front of the protesters. I sat down, crossed my legs, put my hands on my thighs, and started meditating.

“May I be free of suffering and the root of suffering. May my friends be free of suffering and the root of suffering.” I opened my eyes and looked at the children that were exposed to the hate-filled language their elders were shouting. “May you be free of suffering and the root of suffering.” My eyes moved to the next child. “May you be free of suffering and the root of suffering.” I looked at the adult male closest to me. Mid-20s, white, shouting at the occasional passer-by until he saw I was looking at him. Then he looked at me and focused on me. Interestingly, I did not even hear him. What he was saying was either true, which required no refutation. Or it was false, in which case it was irrelevant. And there was no desire for dialogue. I looked at him, trying to soften my eyes. “May you be free of suffering and the root of suffering.”

As the parade approached our corner the anger and energy increased. I closed my eyes and focused on breathing. “Breathe in hate and breathe out love. Breathe in anger and breathe out peace. Breathe in fear and breathe out peace.” Someone walked up and touched my shoulder “Namaste,” she said and passed on. Someone else grabbed my hand and said “God bless you.”

Masses of people walked by and I remained sitting in between religious protesters and gay pride celebrants. The screams and insults were too difficult for me to ignore, however I remained in my spot, hands on thighs, breathing in negativity and breathing out positivity. I noticed a number of things. The police did a great job of letting things play out and de-escalating the anger of the gay pride participants. The protesters knew exactly what to say to get a response. In fact it almost seemed like a scripted performance by both the protesters shouting the celebrants’ parents were ashamed of them and the participants screaming back that their parents love them.

It reminded me of most interactions that people have. Frequently, we talk to people to get our needs met. We provoke people to get a reaction. Then emotional agitation increases. If we don’t interact–don’t respond to comments designed to anger–then there is nothing for the anger to feed off of. The protesters would be nothing without an audience. No responses, no shouting even words of peace, then their purpose is gone.

 

In 2008, when I was in the process of paying of my student loans I questioned the decision and the process. Paying $858/month when I was living in Silicon Valley, working at temporary jobs that could end at any time and having a high deductible health insurance plan, it seemed easier to pay the minimum and start saving for health emergencies or retirement. Then I sat down with a calculator and realized how much I can save by accelerating payments.
According to money.com calculator, paying the minimum in student loans (about $858) will take 26 yrs, 9 mo and I would pay— $153,057 in interest (WTF!!!)
If I continued to pay $1358/mo (min plus 500 addtl) the loan would be repaid in 9 yrs 1 month and $453,112 will be paid in interest.
If I doubled the minimum, 7 yrs 9 mo and $36,802 will be paid in interest
To pay off in 5 years, I would need to pay $2420.36/mo and interest will be $22,979.

Like anyone who achieves a goal, once I achieved my student loan payoff I felt like I lacked purpose. For the past 5, almost 6 years, I had been working 50+ hour weeks, two or three jobs at a time, to pay off the loans. Once that was done I was so used to working those hours I couldn’t cut back. Even after 5 months I am still getting to the office at 6 am, putting in a 9-11 hour day at the firm and then teaching for 2-3 hours in the evening at a community college.

What has this got me? An out-of shape body and an emergency fund that will last for 10 months. The fund is good. The body is not. So now I have a new goal!

In the spring of 2008 I found it very easy to refuse to accept where I was with finances. I kept thinking that I was better off in the past–when I was a homeowner and professor in Minnesota–than the present–renting a room, working temporary jobs as document review attorney in the San Francisco area. I would email and call a friend lamenting my life and having a grand pity party. Funny thing was, I was wrong.

In Buddhism and therapeutic approaches (DBT and ACT) there is a concept called Acceptance. The idea is that suffering is alleviated and healing happens when we have a realistic understanding of what is happening and accept this. In Buddhist practice and therapy, understanding can be achieved through mindfulness and meditation (or mindfulness meditation). Once you or I sit in meditation, not judging or evaluating, simply paying attention, we have a clearer picture of ourselves.

A similar principle exists in weight loss and financial responsibility. In weight loss, keeping track of your eating in a food diary allows you to really see what you eat over the course of a day. It is also an incredibly effective (if time consuming) technique. A WebMD article, citing research, states that “people keeping a food diary six days a week lost about twice as much weight as those who kept food records one day a week or less.” Our memories are faulty and we want to protect our ego so we “forget” the 3 samples of banana bread we had while waiting for our Salted Caramel Machiatto. In gaining control of finances and getting out of debt, we need to know what we have, what we make, and what we spend.

We are not mindful and we are attached to our ego so we do not have an accurate picture of our caloric intake or money outflow and we do not accept our starting point.

If we don’t know where we are, we cannot develop a path to where we want to be.

Even as I started to pay down debt, I still thought I my net worth was greater in 2001 than it was in 2008 and 2009, So, at the strong insistence of my friend and financial adviser, I figured out what my net worth was in 2001 versus 2010. Here is what I found:

Taxable Income Jan 1-June 30, 2010: $62,609.11
Highest annual income as professor: $53,403 (2001)
Highest annual income at Barnes and Noble: $15,270 (2005)

In 6 months made 4 times what I did in NC and 17% more than I did as a professor over 12 months.

In fact, using an amortization schedule and an approximate value of $90,000 of my house in 2001, I was wealthier after 6 months in 2010 than I was after 12 as a homeowner and professor in 2001.

Dec 30, 2001:
Equity in House  $      8,149.00
Ford Focus equity  $         500.00
Income  $    53,403.00
Total assets and income:  $    62,502.00
Owed on house  $   (81,851.00)
Credit Card debt  $     (2,000.00)
Student loan balance  $ (108,383.00)
Total liabilities  $ (190,234.00)
2001 Net Worth  $ (127,732.00)
June 30, 2010:
6 months income  $    62,609.11
VW Blue Book  $      4,965.00
Total assets/income:  $    67,574.11
Credit cards (paid off monthly, average monthly total)  $     (1,000.00)
Student loans  $ (112,711.62)
Total liabilities:  $ (113,711.62)
2010 Net Worth  $   (46,137.51)
Difference  $   (81,594.49)

I was better of financially by more than eighty thousand dollars..

Numbers don’t lie–I am better off now than I was during the “hayday” I obsess about.

Once I knew where I really was,and accepted it, I could start planning my finances to get out and stay out of debt..

And I can’t sleep as the numbers are like–kitten bellies.