Inspired by Careful Cent’s post Pay Down Debt Faster-Pausing Saving and Investing, I decided to take a good look at my goals and figure out how to balance them better. I sometimes feel like I should be spending all my money on my student loans, but I know that the key to long-term financial stability and wealth requires saving and investing. Unless I win the lottery, my student loan pay off is going to be a long road, and ignoring means to long-term wealth to focus solely on them seems short-sighted. The volatility in the stock market makes me nervous, so I decided to research other methods of investing such as microfinanace and peer-to-peer lending.

I had been keeping an eye on Lending Club for awhile, because it offers good returns, low fees, and has been growing rapidly. I also really liked that it enabled people to consolidate their debt and take out personal loans for business, moving, and career changes that are rarely offered from banks in these credit-crunched times. After Forbes deemed them one of the most promising companies, I decided to take the plunge and invest some of the money I got for Christmas.

This is kind of a scary move for me, since I’m always concerned about having my assets unavailable in case of a large emergency, but I know that investing is a good choice for my long-term financial future. Plus, I still have substantial savings that I can fall back on, and I would never invest my emergency fund.

My investment thus far is pretty small, since I’m reticent to make too much of my assets non-liquid, but at a 16.84% weighted return, my money is working much harder than it would in my high-yield savings account. In fact, if I put $1,000 in my investment account I will get a $160/year return on my investment, vs. the $8.40 I would get from my savings account.

I’m hoping to invest at least $1,000 this year, maybe a bit more, and I couldn’t be happier with my decision.

I am so thrilled that I am finally out of credit card debt! I got my first credit card in 2007 and have been carrying balances of various amounts ever since. Making my last credit card payment was a huge relief and it is great to know that I will be saving money on interest and not have the anxiety of credit card debt hanging over me.

However, as I’ve stated in previous posts, most of my debt is in the form of student loans. Thankfully, it is all low-interest federal Stafford loans (the majority subsidized) with generous repayment options. Currently, I have not made a single payment on my loans due to working less than full time since graduation in Spring 2009. This has been very helpful for my budget, but with capitalized interest my loans have increased from the original $33,000 that I borrowed to nearly $37,000 that I currently owe. I am trying to continue to defer my loans since I am still not working full time, but I know that I have to tackle them very soon and have been imagining possible repayment plans for the past several weeks.

Despite feeling confident about handling my student loans and really proud about paying off credit card debt, I feel as if I am constantly stuck in an eternal battle to pay off debt and save. Not necessarily save as in put money in my emergency fund, since that is pretty well stocked, but save for other goals.

Beautiful! Love those round zeros!

For example, I’m hoping to start pre-recs for a second master’s degree in 2012, and I would also really like to learn a language and travel more. Therefore, I have been looking at language schools in Central and South America, since they tend to be much cheaper than taking classes state-side and I would also learn through immersion. Plus, I’ve always wanted to go to Guatemala which is a country that is not only cheap, but highly recommended for Spanish language learners. I estimated that my trip would cost around $1500, which isn’t much and totally doable if I start saving very soon. However, I feel like I shouldn’t be spending money on something “frivolous” like traveling and learning when I could be putting money into my student debt. On the flip side, I feel like I should take advantage of having the time to travel since I know that won’t last for the rest of my life, while paying off my debt will take years if not decades. 

How do you balance paying off debt vs. spending money to enjoy your life and reach other goals? Is there are way to do both bit by bit?

Recalibration in the New American Economy

Check out my guest post on Careful Cents about surviving and thriving during the recession.

I am honored to have a guest post from Carrie who blogs at Careful Cents. She tells us about her financial journey and why hope is always the most important thing in all aspects of life, even money.

On my blog Careful Cents I talk about my money, personal finances and my life in general. Even though I’m in my twenties, I’ve learned and experienced a lot. Through it all I’ve found that it’s important not lose hope.
 
I lost my mom to breast cancer when I was 15 and with it a lot of hope and security about my life and future. It’s one of other major events that defines who I am today, and my outlook on everything. Many people encounter devastating life events like mine, whether they are financial or relational.
 
But it’s important to understand what I had to learn, that your situation can always change and you’re the only one with the power to overcome it. As long as you don’t give up and have confidence within yourself you can do anything. I’m a very inquisitive person and when I feel I need help or am struggling I go searching till I find it.
 
Many times reading other people’s stories and experiences help inspire and motivate.There are many things that Broke Gal in NYC has helped me learn and understand. Plus just knowing that there’s someone like me out there with some of the same problems and goals, is encouraging. That’s my goal in life, to share the my mistakes (and successes) and hopefully help others who are experiencing similar issues. 
No matter what you’re going through with your financial journey or life in general, if you remember to be hopeful you can accomplish anything. You are not alone in your struggles, and no handles their money perfectly. It’s okay to fail or wish you had done something different. But that’s what the future is for, to correct past mistakes and learn from them.
 
Failure is not a sign of personal weakness but in my opinion if you don’t ask for help when you need it, you have failed. Remembering hope while on your financial journey is a vital part of setting and reaching your goals. Hope is the anchor of the soul and without it, we would all be lost, floating around in life.


Carrie is a Certified Bookkeeper, Tax Professional, and personal finance writer. She’s a self-proclaimed nerd and food lover that enjoys traveling. Her overall goal is to make cents of life and money. Find her on Careful Cents and Twitter

Teriyaki sesame spinach with clams and herbed butter with sourdough toast points. Cost: $8/person.

My favorite way to save money is cooking. In previous years I never cooked, and instead overspent on take out, convenience foods, and eating out. Nowadays, I rarely eat out and instead enjoy trying out new recipes at home and cooking for friends. I also start making a point of shopping sales and only buying certain items when they’re on sale, or buying in bulk when favorite staples are on sale.

My tips for making delicious, healthy, and cheap meals are:

• Focus on filling bases, such as pasta, legumes, and cereals. I prefer to buy whole wheat pasta which lasts for awhile and can be cooked in any number of ways. I also buy frozen fruit in bulk for smoothies and other such snacks. 
• Have a well-stocked spice and oil cupboard so that you can change up the taste of basics. Balsamic vinegar is a personal favorite and is delicious with pasta, pizza, and veggies.
• Make sure you know how to cook something and have the proper tools to do so. I once bought oysters on super-sale and had to let them go bad in the fridge because I didn’t have the instruments to open them.
• Follow coupons and sales. I personally do our grocery shopping online via Food Emporium, which allows me to automatically load coupons both in store and manufacturer’s coupons. We saved over 40 bucks a week by using Food Emporium and not the other grocery delivery that doesn’t take coupons.
• Learn and have fun! Through various food bloggers, youtube, and google I have learned how to cut any number of things at home, including curing my own salmon and making my own jam.

Doing this, I estimated that I cut my food budget in 1/3rd since my only-take out days. Additionally, eating and cooking at home is much better for my health and the environment. Plus, now I have an awesome new hobby!

What is your favorite way to save on food?

One of the most important things I’ve learned in the past year is that substantial savings are essential for financial well-being, especially if you’re trying to get and stay out of credit card debt.

My current debt to savings ratio

The first issue people bring up when approaching how to save, I’ve noticed, is that they’re concerned that they’ll never be able to find the money to save or they’ll have to live completely barren lifestyles to have an emergency fund. Not true, although I have definitely had to cut back on spending since I got serious about paying down credit card debt. My favorite ways to save are the following:

• Cook at home if at all possible and DIY things. Maybe arrange a clothing swap with like-sized friends or doing such home improvements such as painting and decorating on the cheap. I made it a point to cook at home as much as possible instead of eating out or getting delivery/takeout. Thus far I’ve saved my partner and I hundreds of dollars by cooking often and bargain hunting for our groceries. I also DIY my own favorite treats like cured salmon and small batch jams and preserves.

• Make sure you are not overpaying on services such as cell phones or rent and think about canceling services such as cable television. Also make sure that you have a realistic budget and are sticking to it best as possible. Rent in particular can be really hard to keep under control in an area such as NYC, but the metric that rent should be no more than 30% is a good rule of thumb when figuring out how much apartment you can afford. Moving from an apartment that was 800/month to a place that was 500/month made a big, big difference in my budget. Another good budget hack is the 50/30/20 budget, which I know many people use and love.

• Make a savings plan and stick to it. Set a goal and touchstones to fill it, no matter how small. For example, I set a goal of having an emergency fund of $1,000 within a year. I broke this down into a Minimum Weekly Savings the same way I did with my credit card. I now treat savings as I would any other bill and make sure it is “paid” on time. In this vein, make sure you are not trying to be too aggressive and set yourself up for failure. Make sure your savings goals and amounts are realistic

• Put any extra money you get into your savings. I put at least half of any unexpected income into savings. Find a percentage of how much of unexpected funds you could put into savings that works for you, depending on your needs, wants and debt load. This can really help you reach your emergency fund goals faster.

For me, I find it easiest to calculate my savings needs and then automate a weekly transfer to my Ally Online Savings Account. However, make sure you have money in your account to cover the transfer or you run the risk of overdrawing and incurring fees.

Currently, I am on track to save $5,000 by January, after having less than $100 in my savings as of this time last year. I hope I can find more ways to cut back and make more money since my current goal is to save $10,000 total in the next 24 months.

What are your favorite ways to save?

Thank you Mint.com for featuring my credit card post on their twitter and facebook. I hope to partner with other financial website, software and institutions in the future :).

To my new followers: you can find me on facebook and twitter via the links above using the name BrokeGalNYC. If you want to help me be a little less broke, feel free to donate via Paypal button on your right, or ask your financial questions in the ask box. I’m hoping my readers can benefit from my story as much as I enjoy sharing it with them

Thank you so much for reading! Tomorrow I will have a post about savings :).

-Broke Gal in NYC

In August 2010, I had nearly $3,000 in credit card debt spread out over three cards. My spread was:

Capital One Mastercard: $400 (my limit is $500), 23% APR

Capital One Visa: $1,400 (my limit is $1,500), 15.15% APR

Chase Visa: $800 (my limit is $1,000), 22% APR

I also have a $100 line of credit with PayPal Credit that I use for purchases through PayPal and eBay. 

I was making minimum payments and racking up interest quickly. In addition, I had also gotten upsold on some pointless “payment protection” plan with CaptialOne, which was costing me $15-20 bucks a month. When I ran the numbers, I realized that I would be paying on my cards for years on end and paying hundreds of dollars in interest if I continued to only make minimum payments. Having such a high credit utilization rate was also lowering my credit score, and therefore making it hard for me to get the best interest rates.

In September 2010 I promised myself that I would put all of my extra money towards my credit cards and look into ways to decreased my credit utilization rate so that I could balance transfer to a lower interest rate or consolidate through a P2P lending network.

In doing this, I took the Debt Avalanche method and went for my highest-rate cards first. While putting as much money as possible towards my highest-rate debt I made minimum payments on all my other cards. Since my income varies weekly, I found it helpful to make weekly payments on my credit cards, which also helps save on interest! I would calculate how much monthly I wanted or was able to put towards my credit cards and broke that into a self-imposed Minimum Weekly Payment. I would also automate my payments as much as possible, but only do this if you know that you will have money in your account on the necessary day or you can really hurt yourself by overdrawing your checking account.

By December 2010, I had paid off my Capital One Mastercard, which was really helpful for my credit because it was also my oldest card and longest-carried balance.

My next target was my Chase Card, which I had maxed out a year and a half before that to get my eyes checked and buy new glasses. I did the same approach, paying as much as I could into that credit card while making minimum payments on my Visa card. I put half of the money I got from Christmas into that card (the rest went into my savings) and cashed out some paid time off I had accurred from my part-time job. I had to keep Christmas 2010 fairly cheap but it was worth it.

I quit smoking in January 2011, and decided to put my savings from smoking towards my credit card debt and savings. This proved to be a turning point because besides the health and financial benefits of not smoking, I was replacing a bad, negative habit with a positive one.

In February 2011 my credit card debt increased again due to moving expenses, but I moved into a significantly cheaper apartment and immediately put $200 bucks, 1/3rd of the money I got back from my security deposit into my debt (again, rest went into my savings). With my instant $300 dollar a month savings from moving I started aggressively applying that to my abovementioned Chase Card and Visa Card. I also put any money I got from my birthday in March towards my credit cards.

In late April 2011 I had my Chase Card paid off and my credit score had increased significantly. My current balance was only on my Visa Card, and stood at about $1100. I received a credit offer from Orchard Bank for a MasterCard with a $1,000 limit, which I took to increase my lines of credit and thus improve my credit score by decreasing credit utilization. This card also had 0% APR for a year, after which it would be 11% APR.

My partner and I used the Orchard Card to book a vacation and he paid me back in July 2011. With the money he paid back I put part of it towards the Orchard Card and the rest into my higher-interest Visa Card, which brought the balance on that down to $900, with $300 in my Orchard Card.

In late July 2011 I got another credit card offer from Discover Card. I wasn’t really in the market for another credit card, since too many hard credit inquires negatively impact your credit score. However, I was concerned that the credit markets would freeze up again because of the debt ceiling negotiations and I was impressed by Discover Card’s 0% APR on balance transfers for 6 months. They also have really good travel protections, which none of my cards had. I applied and was offered a $2500 credit limit at 0% APR on purchases for a year and 0% on balance transfers until February 2012. This did impact my credit score for a brief moment, decreasing it by 3 points for a few weeks.

I transferred $700 from my Visa Card to Discover. They charged me a balance transfer fee of $28, but it was worth it because of the interest I’ll be saving and the positive impact on my credit. I paid off my Visa Card in August 2011, and am now making headway on my Discover Card. I am on track to pay it off February 2012.

My current credit card debt and credit lines now stand as follows:

Orchard Card: $399, 0% APR until April 2012 (11% APR afterwards)

Discover Card: $595, 0% APR until February 2010 (20% APR afterwards)

My total credit lines are at $6100, although my Discover Card is not showing up on my credit report yet. This brings my total credit utilization down to around 14% overall and under 30% of each card.

I also continue to use my $100 PayPal line of credit for online purchases and pay it off every month in full. I want to be credit card debt free by April 2012, which is when I might have to start making payments on my student loans (more about those later).

My debt to savings ratio as of 8/22/2011

 All photos from Mint.com

As of this time last year, I was making no money, owing nearly $3,000 in credit card debt, and had no savings. I felt hopeless, helpless, and worthless. A year later, I have almost $4,000 in my savings, my credit card debt is at under $1,000 (and consolidated to 0% APR until next year!).

I did this on less than $22,000 in NYC, one of the most expensive cities in the world. Even better, in learning how to take control of my own financial future I have found a new passion in personal financial management and advising.

How did I do it?

Cut back: I moved from an 800/month (plus 60+ in utilities) apartment to a 500/month apartment (no utilities). I realize that I got really lucky being able to move in with my partner and his roommate and often times housing in major urban areas can only be cut so far. I also stopped eating out or getting convenience foods such as coffee and canceled cable. In addition, I make an effort to walk everywhere I possibly can to save on commuting expenses.

Learn: I educated myself on how to maximize your credit score, how to defer student loans and qualify for income-based repayments, and made a point of heavily researching any purchase over $30 dollars. I also took up couponing and make a point of actively asking all stores to match their competition’s prices. It usually works. I also became incredibly fastidious about documenting my financial well-being and learning about economics, credit, debt, and personal financial management. I also got really into my credit score (using CreditKarma.com) and figuring out ways to get the best interest rates and balance transfer offers for my credit card debt.

Systemize: Find a system that works; I personally find Mint.com to be very helpful. I also usually carry very little cash and automate all my payments, which includes savings and credit cards. I’m not saying that this is the best system, but it is what works for me. Other people prefer the envelope method and going cash-only. It doesn’t matter the process, just that there is one. In addition, set aside time each week to go over your budgets. I check my financial profile on Mint.com every day. For budgeting, I usually don’t specify everything down to the penny, but create “groupings” of budgets. For example, if I would like to eat out one week but would prefer to buy makeup the next, that would all come out of the “non-essentials” money.

Hustle: I have done everything from office work to babysitting since finishing graduate school in June 2009. Due to the bad economy I haven’t found stable employment but have been lucky enough to find relatively well paying temporary gigs (paying 15-20 an hour) and gotten unemployment in between. I also work part-time for a local university doing research from home on human rights issues. Currently I am looking into starting my own Virtual Assistant/consulting business, going to business school and volunteering with various social causes that I find fulfilling. I am living on approximately $1600/month total which I expect to remain stable until January 2012. If you are broke, find new and unique ways of making cash by any means necessary through all kinds of skills such as childcare, catering, bartending, etc.

Despite not reaching all my goals, I am proud of how far I’ve come. By January 2012 (which is when I expect my income to change) I hope to have my credit cards nearly paid off, have saved another $1,000, and find other jobs or more freelance clients. My long-term financial goals include paying off my student loans and opening investment accounts.

This is one woman’s story about being broke in NYC and not only surviving, but thriving.