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?

This past week has been not so great financially.

First, I went out celebrating with a friend and spent too much money on drinks and dinner. I had set a budget for the night but I let myself justify it by saying that I rarely go out (true) and we were celebrating my friend’s graduation (also true), so being cheap would be lame and damper the fun. When I was out, I also bummed several cigarettes off people around me despite having quit several months ago. Quitting smoking was really central to beginning my financial journey, since it freed up money to put into debt and savings. Sneaking a few drunken cigarettes sparked me buying a pack this week, which was money that I should have been spending on necessities like subway fare.

All and all, my night out and smoking again cost me nearly $100 bucks, money that would have been best spent on my credit card debt or put into my savings. Obviously one off-budget night won’t completely derail my financial goals, but I still feel anxious and somewhat embarrassed (which I know is just the manifestation of fear). I am trying to refocus on my financial and personal goals but I’m still upset at myself for not being more in control, both with money and with smoking.

How do you refocus when you backtrack on your financial or personal goals?

My current student loan debt

Despite being almost out of credit card debt, I still get overwhelmed and anxious by my debt load, most of which is in student loans above. I know, rationally, that there is no reason to be so scared since they are federal loans and I can easily postpone or reduce payments. However, I feel like if I can’t pay it all right now that my financial life will somehow come falling apart somehow. Combined with the anxiety of my debt itself comes the shame that I’m not making significantly more than I am and therefore paying off my student loans quickly, and the guilt that I borrowed some much in the first place.

The root of all of this, I’ve realized, is fear.

I know that I shouldn’t be so afraid, since I have a good emergency fund, am working on diversifying my income streams, and learning more and more about personal finance and money management. I am currently underemployed but I’m hoping that will change very soon. Plus, I’m about to pay off my credit cards, which I’m very excited about. Past that, I’m immensely privileged on not only a global but national level, especially since the poverty rates have been rising steadily since the financial crisis began. I’ve been trying hard to focus on the “big picture,” which I believe is a bright one for me financially, professionally, and personally, but with my days of radically decreasing my debt (not to mention being debt free!) so far off, it is easy to get frustrated. I keep mapping out student loan repayment plans I can’t currently swing, hoping that I will somehow figure out a way to pay it all off super quickly (I know that won’t happen).

How do you stay focused on your big picture financial goals, especially when they seem so distant? What techniques do you use when you are feeling stressed financially?

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

Until the age of around 23 I didn’t think of my credit at all. I had co-signers on my first apartment because I was 18 and had no credit history, but by 23 I had around $35,000 in student loans at $2,000 in credit card debt.

In December 2009 I decided I was going to move from my long-rented (and overpriced) apartment in the East Village to elsewhere for more space and cheaper rent. I realized that if I wanted to be able to rent an apartment I would need a credit score of at least 660, or maybe significantly higher due to the recession.

I checked my credit score on CreditKarma.com and found it to be just slightly over 600, which was not that great and DEFINITELY not-rent-an- apartment-in-NYC worthy. I was pleased that I didn’t have any derogatory marks, but I had maxed out my credit card utilization, had a minimal credit history, and had a small line of credit (around $2,000, most of which was used).

I decided to focus on raising my credit by paying off my credit cards and spreading my debt among more cards, thus decreasing my per-card and overall credit utilization. I also started making more purchases with my PayPal Credit Line instead of my credit cards and paying it off at the end of the month. I really like PayPal’s line of credit because it’s small ($100) so I can’t overspread and it reports to all three credit bureaus monthly. If you’re trying to to build or rebuild your credit I highly recommend finding something similar, like a Secured Credit Card.

In April 2010 my future landlord pulled my credit, which showed at 685. He said that was more than adequate to rent an apartment with him, and in fact one of the higher credit scores he had seen recently. Success!

However, I was broke last summer, so my credit card utilization rate sprang up and my credit score took a hit.

When I started paying down my credit cards I made a point to:

1) stick to the 30% rule,

2) minimize hard inquiries by not applying for credit all at once, and

3) stay informed and on top of your credit. Sadly, I did find two delinquent accounts (both I am disputing). Since they are from 2006, they will only to continue to report until August 2012 anyway. CreditKarma.com’s really good at explaining how to raise your credit and what factors impact it.

Using these rules my credit score is went up nearly 100 points last year. As of today, it reports as 730 (CreditKarma), 766 (FICO), and 754 (Quizzle). I don’t think I’ll have any issues renting my next apartment or in the future, getting a mortgage. 

My goal is to have a score of 800 by 30, which seems totally doable now.

What steps have you taken to fix, maintain, or build your credit score?

I just learned about Quizzle scores, which based off of Equifax and are free to consumers.

What have you recently learned about credit scores?

theoriginalchingy:

Infographic Of The Day: Who Created This Debt Nightmare? - “To judge only by cable news, the debt problem that the United States is facing threatens to destroy the entire universe RIGHT AFTER THE COMMERCIAL BREAK. But how bad is it, in historical context? And, more importantly, what’s driving the debt?

The talented folks at Elefint Designs sent us a rather detailed chart that attempts to tease some of these questions apart. And perhaps the most surprising thing is that we’re actually starting to bend the curve of debt growth.”

via Fast Company.

Nothing makes me happier than a good chart.

(Source: theoriginalchingy)

How We Paid Off $25,000 In Debt In 1 Year (by Kat on Aug 15, 2011 in frugal & simple)

hopingtohomestead:

Here are a few things we did to make our goal a reality.

1. Make It An Adventure
2. Focus On Purpose Over Prestige
3. If Your Income Increases, Don’t Adjust Your Budget
4. Redefine What A Need Is

(full post at link)

Amazing! I hope to pay off the almost $40,000 I owe in student loans quickly, and stories like this give me hope.

Is college debt worth it? Do you worry about your student loans or the rising cost of education?

(Source: keeboch)

Creative way to pay off College?

simonedionne:

Issa Rae, a Stanford Alum and creater of the Misadventures of an Awkward Black Girl, used this site to gain enough funds to complete her first season.

As a rising senior at Stanford University, my loans are starting to become more and more real.  Especially with grad school and the real world around the corner.  Realistically speaking, the loan outlook for current students isn’t looking too good, but I have faith that I will find a job that pays well, my future husband will be successful, and my loans won’t be that much of a burden.

Praying for financial stability in my future.  I wonder how many people would donate for to my future.  Hmmmmmmmm

I’m looking for creative ways to pay back my student loans too, including working multiple jobs and starting this blog. Student loans can be scary stuff, indeed.

USA's biggest creditors - Washington Post

Who do you owe the most money to?

Has money or the recession changed your relationship in any way?

(Source: itmademethink)

One really important factor in being debt-free long term is to build up your savings. Then when you have an unexpected expense you are not turning to your credit cards.

A good target for your saving is $1,000. If needed, don’t set any time limit to save this but instead put a bit away every week.

I personally use Ally Bank which has great tools for setting up automatic savings transfers based on savings goals. They also have one of the highest interest rates AND rarely charge fees. My savings is also semi-easy to access but I couldn’t get it immediately, which keeps it out of sight, out of mind.

Even if you keep your savings in a shoebox under your bed, it doesn’t matter. The point is to keep it. Without savings you run the risk of always reaching for your credit card when something unexpectedly expensive happens.