Small Financial Victories

As of today I have paid off all debt with the exception of my college loans. I paid off a lump sum of about $3,000. in debt to Capital One (who contrary to what they claimed in their ads a couple of years ago) are a huge hassle. I also paid off about $700. in debt to Mastercard. While I was on track with Capital One and would have been finished paying off my debt by next year had I continued to pay $200./month at 9% interest, it is my Mastercard that stressed me out. This is a revolving account, my first credit card which I signed up for in front of the dining hall in college. Though I paid on time and always paid at least 5X more than the minimum, I had not seen a zero balance on this card in almost 4 years. The highest it ever reached was around $2300. in 2005 and finally last summer it was looking like it would be paid off by August. But low and behold I charged a couple more things on it and I could not get out of the $500. balance range for the last several months. Finally about 3 weeks ago I decided to pay them everything I owed which was $694.86. I am not a homeowner so I have no idea what having 6 figure debt feels like but this was stressful enough. My biggest challenge now is should I shred the Mastercard or not because I still feel like I may feel like I "need" to use it during my next trip to the gas station. When I called Mastercard today and heard the automated service say the words I have been longing to hear for so long "your balance is zero dollars" I also noticed they added $1,000. to my line of credit. Thanks for the temptation.

And in one last final financial victory, though I normally do not pay coupons any mind, I received one in the mail last week for a free sandwich at Potbelly and I put it to use today. One veggie sandwich on the house. I feel so liberated.

Recent articles on 20-somethings

These recently published articles on young people trying to make it in these times makes life look not so fun.
Starting Salaries but New York Tastes
Checking out Roommates
Toughest Summer Job This Year is Finding One

Downsizing

I have always admired people who have been able to get rid of all of their belongings and live somewhat stuff-free. I guess I am too attached to certain possessions to get rid of them though I have tried. I always regret letting go of those items later, whether it be clothing or books. Since I have realized that I am not strong enough to let go of my possessions I have pretty much stopped buying new stuff. At least I'm trying. I just gave away 6 pairs of jeans this weekend which were all in great shape and went to the mall on Monday and wanted to buy a new pair of jeans. While in the fitting room I realized I would just be keeping myself in the cycle of buying stuff which I barely use and then have a difficult time parting with, so I left the mall empty-handed. Keep in mind I still have about 10 more pairs of jeans to give away. Unless the item of clothing is a necessity ie: work clothes ( I barely even buy that) I try not to buy it. I have only purchased about 4 books this year (all used). I do not buy electronics (I just use other peoples'), CD's, gadgets, candles, and all the other stuff people spend on regularly. My biggest weakness is by far toiletries (make-up, hair care, lotions) however I justify this by saying that at least once I finish these products they will not take up space, of course the empty bottles will most likey end up in a landfill. Believe it or not I have not adopted this lifestyle to save money but rather because I am sick and tired of clutter. Anyone who has moved lately knows how shocked you become when packing by the amount of stuff you can acquire in a short period of time. I have no attic or garage to store my stuff so it is more obvious that I have too much stuff in my home since storage space is at a minimum. While I do not ever think I can take on the somewhat hippie-like minimalism of the couple mentioned in this article I do understand where they are coming from. Like the sociologist quoted in the article says "You have to care for it, store it. It becomes an appendage, I think. If it enhances your life and helps you do the things you want to do, great. If you are burdened by these things and they become the center of what you have to do to live, is that really positive?” If you do not believe me ask go ask someone who has recently moved. So if you know me and I will be buying you a present soon it will probably be something like dinner or a drink because I care about you and I want you to avoid clutter as well.

Carnival of Personal Finance #147

Thanks to MoneyNing.com for including me on the Carnival of Personal Finance #147. I'm honored.

Foreclosure

This year I decided to learn more about the foreclosure process and see if I can strike gold with a house that is in foreclosure. The problem is nobody could really teach me about the foreclosure process and people in the real estate industry did not want me to learn about it because that meant no money for them. A couple of people in the mortgage loan industry finally told me that my best bet would be to go down to the courthouse and look at the foreclosure records. Though this is free it is very time consuming and will require more than one trip to the central files room in your local courthouse. Upon finding a house you are interested in you have to go back to the court with the case docket number and ask to look at the file so that you can see exactly what the owner owes on the house and any other liens. Once the home goes to auction there is also the issue of securing a cash deposit for the day of auction just to be eligible to bid.

There was a house I was interested in and it was on the market for $435,000. though the house was assessed at closer to $390,000. The owners refinanced with an ARM loan in Jan. 2006 and now owe $455,000. (Yes I saw all this info in their files at the courthouse.) Nobody bought the house which is very small though in a convenient location. The starting bid at the auction on Wednesday was $400,000.!!? Did the bank (HSBC in case you were wondering) think anyone would really bid that high? The house is worth less than that!! Anyway I am curious to see how low this house will go because banks are not in the business of holding properties and they will not get it off their hands for $400K.

According to The Motley Fool, there is a magical age where you can invest for one year and be a millionaire at retirement...26!!! According to the article if a 26 year old maxes out their 401K with $15,500. and their IRA with $5,000 and leave it there for 41 years they will be a millionaire at retirement, that is assuming they will get 10% annual returns.

So what's the catch? Most 26 year olds today do not have $20,500. to invest in one year. That is a significant portion of your income when you are 26 but it's worth trying. In order for most 26-year-olds to save $20,500 in a single year, they'd either need to find a fabulously high-paying job or a rent-free room in their parents' basement. Either way, they'd probably be living on a strict diet of ramen noodles.

The point is compounding really does pay off if you start saving and investing young. This does not mean that everyone beyond their 20's should give up it just means that even young people should start investing for their retirement aggressively and not place it on the back burner.

So maybe you cannot max out your 401K with $15,500. this year but at least try to max out that IRA, it's only $5,000. Read more...

Who me??

Ok so I have had this blog for over a month now and really have not shared much about myself. So let me just tell you something I am not very proud of, it is March 31st and I still have not done my taxes. Yeah I know...

Anyway what I really would like to share with you is an experience I had with a financial advisor about a month ago which was disheartning to say the least. After asking around for quite some I finally got a good reference to someone from a colleague of mine who was referred by her husband's Business professor. The financial advisor is with a big, reputable company and my colleague seemed happy with her. My colleague even told me how much money they've invested with her which is less than what I would be starting out with.

The woman was very accessible and I went to her nice corner office in a nice part of town to meet with her. After commenting on how young I look and how smart I am to be concerned about saving for retirement she stunned me by whipping out a legal pad and asking for my address, income, and social security number!! Keep in mind she has told me nothing about herself, the funds she wanted me to invest in or anything else for that matter. I guess she figured my colleague already told me everything I need to know about her. WRONG! The rest of the meeting continued to go downhill with her telling me that "I clearly know a lot" implying she did not have to go over a lot of material. She never mentioned her fees, the fees of some of the products and failed to answer a lot of other questions I asked her. Now I am sure that this woman earned her nice office and I would have just figured that she was not bothering herself with answering my questions because I was young or was not investing as much as her other more wealthy clients. Thing is, my colleague invested way less than what I wanted to start with. So what could it be? I have more money to invest than my colleague, I am well read on investing, it seems like I would be a decent client. This made me think about it for a few days thereafter and the only thing I could think of is that my colleague who is a few years older than I am is a married woman and I am not. Do married people seem like more stable clients than single people? I don't know, but finding a good financial advisor sure is hard.