Money-Free Mondays?

This phrase popped into my head the other day--probably as a result of misreading something, but it got me thinking.  Is this something that anyone has ever attempted?  I've heard of meat-free Mondays, which I think is pretty excellent, but Money-Free seems a bit trickier.  I mean, what if you're running out of gas?  I'd probably skip spending on Monday and then overspend on Tuesday, but that's just me.

Anyone try this?  I think I'm just hung up on alliteration, but maybe this is a real thing?

I want to live in The Cube!

My father's father was a "collector."  That's the nice way to put it.  The other way is pack rat--not quite a hoarder, but maybe that's just because they had a lot of space.  When I was a kid, I loved going to his farm because there were buildings and buildings full of treasures; but I always wondered why we could never spend the night there, or why we could never go upstairs in their house (it was full).

I can see traces of the collector in myself at times, but as I get older, I want to live more and more unfettered.  When I moved east to Rhode Island, 1,800 miles, I sold or donated pretty much everything I owned, and brought with me only what fit in my Chevy Malibu.  At first, the purging was incredibly difficult and I do still miss some items that I had had for a long time, but now I don't regret it at all.  It was incredibly freeing to leave my trappings behind and set out on a new life in a new place with new people.

Perhaps that's the reason I'm having such a reaction to The Cube Project: "The Cube Project is an initiative of Dr Mike Page at the University of Hertfordshire who set out to build a compact home, no bigger than 3x3x3 metres on the inside, in which one person could live a comfortable, modern existence with a minimum impact on the environment."

It's a whole house that is not only carbon neutral, but over the course of a year, it makes you money!  "The Cube is designed to generate at least as much energy as it uses, averaged over the year. It does this by using solar photovoltaic panels that are integral to the building itself. If registered with the UK Government’s Feed-In Tariff (FiT – an incentive for producing energy from renewable sources), the Cube will raise around £1000 per year in FiT income."  Maybe that's why I'm so excited.  I think what I like about this house is the fact that everything in it is so deliberately designed to maximize the limited space and make it its most efficient.  I love it when things just work, and I love anything that does double-duty, so I find this small space just fascinating.

There's also a video tour which explains how it all works and gives you the layout: http://vimeo.com/22832755

I love my current apartment, but my building is circa 1750 and was designed to be something rather different--we think it was a boarding house.  It's beautiful and spacious, but what we've done with that space is fill it with stuff, and a lot of the space seems to have been retrofitted somewhere along the line, and doesn't quite work as well as it could--like my narrow but deep closet..  Likewise my last apartment, the one I moved to with only a carload of stuff, was 1100 square feet and it only took me a year after my wonderful purge to fill up that space.  I really, really wonder what would happen to your buying habits if you just knew that you didn't have room for anything else in your house; or if to bring in something new, you had to get rid of something.

I've always said that living in a city like New York would be wasted on me because I really, really like being at home and there you have to pay so much money for such a small space, that you go out for everything.  I like going out occasionally, but don't do it regularly and sometimes find it exhausting, especially since my job requires me to be around people all day, and many of those people are crazy.  The Cube has everything you need so you could stay in, but would it make you want to go out just to get out?  I'm picturing myself planting a garden, having meals outside, getting a long leash for the cat so he could get out too (he'd love it--maybe).

Now I'm obsessed with living in The Cube.  If anyone associated with The Cube would like me to live there for a year and write a book about it--let me know: findmefrugal [at] gmail.com.

Decisions, Decisions

I postulated a while ago that, sometimes, it seems easier to be broke than to have money coming in on a regular basis.  When you don't have money, you know you can't spend; when you do have money, you have to decide the right way to spend/save.  If you're a committed frugalista with student loan debt, you also know that you should have emergency savings in case anything goes wrong.  But it feels weird to be slotting away money in a savings account when there's that big scary number out there that you OWE.

In my mind, my student loan number is like a flashing neon sign circa 1985.  It makes that buzzing sound, and sometimes a few of the numbers go dark, but I know they're going to flash back on the second I let my guard down.  Problem is, I will most likely never be able to pay all that money back--it's just too much money.  I've done the math, and even if I paid twice what I'm sending in now, it would take about fifteen years to pay off.  If I sent in twice what I'm sending now (this is all theoretical cause I don't actually have the extra money), I wouldn't be able to save anything for retirement, emergencies, or buy a house.  That doesn't seem like a very smart trade-off.

Now I'm re-training myself to realize two things:

1. If I get a full-time position, it will be at a qualified non-profit that would allow me to have my loans forgiven after 120 payments.  It makes no sense to send in all my money if the bulk of the loans are going to be forgiven.  Yes, that feels like reneging on paying back money I borrowed in good faith, but it's a program designed to help people like me.  I help the economy more overall by having some disposable income, and by potentially buying property someday.
2. It makes more sense to take care of myself in the long term.  If I'm making the minimum payments required by my lender, my credit score is still good, which should help me out if I ever want to buy property, and this way I have a retirement nest egg and won't have to spend my twilight years living in a cardboard box.

It's really, really hard to retrain myself to look at that number as something that will just always be with me.  It's a situation I've never been in before.  Even when I had a significant amount of credit card debt, I paid it all off.  It seemed insurmountable, but I did it. Now having this other massive amount of debt that I won't pay off feels a bit like failure, but I would be in a much worse situation if I didn't plan for the future in other ways.

I need to keep remembering that.

Food Waste Friday: A Sad Mango

I do not know how to cut a mango.  Sure this is something I could probably learn if I went online and read up on it, but I haven't ever done that because my bf knows how to cut mangoes and I'd rather let him do it.  Trouble is, he doesn't take the initiative, but rather, waits for me to tell him to cut the mango, and then says something like "I don't think it's good anymore."

I also don't know when mangoes are officially spoiled.  Do they get soft? They don't seem to change colors...

I'm rather upset about this food waste, not just because I wasted food, but because I wanted to eat a delicious mango!

Bah!

Women and Work

One of my best friends from grad school graduated a semester before me, and spent six months flying around the country for job interviews.  Finally, she accepted a position a cummutable distance from home and I was just thrilled that she didn't have to move. Then she said something that I found very strange, "They offered me $xx, so I'm going to call them back within a week and ask for about $xx more plus train fare."

"You can do that?" I asked.

"The amount of money I make it this job will determine my salary for the rest of my career," she told me, "Every job I have after this one will look at how much I was paid here as a starting off point.  I have to negotiate.  Of course they're going to start out with a lower figure, but I'm worth more."

This completely threw me for a loop, and I chalked it up to the fact that she's a law librarian and lawyers are used to negotiating.  I honestly felt like the whole negotiating for a salary thing was a bit rude.  You should be thrilled that such a good job wants you and take what they offer or they might rescind the offer, was my thinking.  Certainly other people don't have the option of negotiating salary.  That's something that people on Wall Street do, or people who have an impressive resume that are being wooed by a competitor.

I work in a profession that is about 90% women, but probably 70% of the people in positions of power are men (rough estimates based on observation).  My friends and I complain about male librarians and how pushy and self-promoting they are, but maybe that's why they always seem to get ahead.  On the other side of that argument, most of the female librarians I've spoken to don't want to be library directors, and the men do.  So can we really get indignant that the men are taking jobs we'd rather not have?

I was reading an article the other day about Mika Brzezinski, who was a co-host on MSNBC's Morning Joe.  She recounted that when she started working at that show, she had been hired as a contract worker making a menial salary and paying for her own hair, make-up and wardrobe.  Her salary was also only seven percent of what her co-host was making, and she just accepted it for years.  Finally, when it came time to actually negotiate, she alternated between playing the victim, and playing hardball by swearing and acting macho.  Neither worked, people thought she was crazy, and she finally threatened to quit and got a contract negotiation.

It really shouldn't be like that, but the only times I've ever negotiated for raises, I've had to threaten to quit as well.  In high school I worked at a gas station, and started a rumor that I was unhappy and looking for a new job.  When my boss approached me about it, I told him that I was looking around, and he offered me $.85 more per hour.  When I quit working at the television station, I was first offered a raise, which I refused (they gave it to me anyway), then offered a producer position.  I had been there five years, and it wasn't until I threatened to leave that they realized my value.

This is a dangerous game though.  I actually did leave my television job because I was moving across country for grad school, but if I had had a clue that they would move me into the newsroom if I threatened to quit, I would have done it two years earlier.  But maybe two years earlier I wouldn't have been as valuable, and threatening to quit would have left me either looking like an alarmist flake, or out of a job.  I really don't know how to play the game, but I think it's something that we all need to start thinking about.

Not to sound like a commercial, but the reason I read the article about Mika (not typing out her last name again) is because she wrote a book about negotiating, which I'm certainly going to read.  This is something that I truly never really thought about.  The times I actually did negotiate successfully, were times I really did plan to quit, not because I'm particularly savvy.  In this economy, where those of us with jobs should be glad to have them, is there room for negotiation?

Healthy or Unhealthy?

I've mentioned before that despite working steadily since age 15, I've never actually had a full-time job.  After finishing with my second masters, and with the economy squarely in the toilet, one of my friends was panicking and applying for ten jobs a day while working temporarily in an office.  I was sitting at home, wallowing, clipping coupons and looking for the job that I really wanted.  Eventually, she landed a full-time job, and I got a part-time one.

A year and a half later, she hates her job, and I'm pretty content with mine, which brings me to my point.  When the two of us were looking for work, she only wanted full time, she applied for everything that she was remotely qualified for, while I was a bit pickier in that I was looking for the right job--full-time or part-time.  I honestly can't decide if that makes me smart or dumb when it comes to job hunting.  Since I've never had a full-time job, I'm a bit intimidated at the notion.  I'm afraid to put all my eggs in one basket, to commit to 40 hours a week somewhere without really knowing what I'm getting into, especially if taking a full-time job means settling for something I'm less enthusiastic about.  

What if I hate it?  What if my co-workers are deranged?  What if it's just a miserable place to work?  At least if I have two part-time jobs, I can leave one and still have some income.  Of course, my friend has been making more money than me all along, so she could leave her job and have a healthier savings account than me.  And she has health insurance, so she's not running the risk of some kind of medical emergency that wipes out her savings.

I honestly go back and forth about this and whether my attitude of wanting to find a job where I first like the people that I work with is more important than the actual job is a healthy one or not.  The problem with my profession, librarianship, is that some libraries are just miserable places to work.  Librarians can be catty, deceptive, lazy, miserable and mean and I would rather not get stuck with a situation like that.  On the flip side, librarians can also be hilarious, brilliant, generous and just wonderful overall--clearly those are the people I'd like to work with.

So which comes first, the good job, or the benefits?  What makes a job good in the first place?  Maybe working full-time at a job that's only ok is just part of being a grownup--the part that escapes me so far.  I honestly don't know, but I would love some feedback on this.

Student Loans: Repayment Options

Even if you've examined your student loan repayment options in the past, it's a good idea to take another look because things have changed.  Recently, in order to encourage people to go into lower-paying jobs and work for non-profits, the Obama administration rolled out a new repayment option and a loan forgiveness program.  There's also a new repayment option that I've mentioned before, because it's the option I'm taking, but the loan forgiveness program is certainly worth looking into.

Because of the tremendous amount of debt that students take on, nevermind the extra money for grad school, many graduates were opting for the highest-paying job they could find, regardless of whether or not it was fulfilling in any way or what they actually wanted to do.  The problem is, we still need teachers and non-profit workers and people who will never make the tons of money necessary to eradicate their debt--hence the Public Service Loan Forgiveness Program.  There are a lot of ins and outs to this program, so go to the link and read through the pdf that explains it, but the gist is that if you work in a public service profession, your student loans are not in default, and you make 120 payments while employed full time by a public service organization, you may qualify to have the rest of your loans forgiven after the 120 payments are made.

There are numerous other loan forgiveness programs as well like Peace Corps and Americorps, military service, forgiveness for law school loans, etc.

For those who do not qualify for loan forgiveness, or even for those who do but need to make the payments until the time when the loan can be forgiven, there are a number of different options to choose from.

Standard Repayment Plan--This is what happens to your loans unless you call your lender and ask for a different repayment plan.   Your lender calculates how much you would have to pay on a monthly basis to pay off your loan in full in ten years.  If your loan debt is low, then this plan will work for you, but I've never met anyone who has stuck with standard repayment.

Extended Repayment Plan-- This extends the period of repayment from ten years to 25.  It's good in that in that it reduces your monthly payment amount; it's bad in that it the longer it takes to pay your loans, the more you pay in interest.

Graduated Repayment Plan-- The graduated plan assumes that you'll start out poor right after graduation and then earn more money over time.  This one starts with a low payment, and then that amount gradually increases.

Income Contingent Repayment-- Income contingent is designed to make repayment easier as well, and works for people with variable income. Each year, this repayment plan looks at the previous years' income, and recalculates your amount owed.  This could work out very well if you have a lean year and then a good year, but be a bit brutal if it's the other way around.  If that's the case, consider switching to...

Income-Based Repayment-- This is another new repayment option, and one that I'm currently taking advantage of.  Income-Based Repayment (IBR) is a repayment plan for the major types of federal student loans that caps your required monthly payment at an amount intended to be affordable based on your income and family size.  Rather than basing your monthly payment on the amount you owe, IBR bases it on the amount you make, which makes a hell of a lot more sense to me.

You can take advantage of IBR for three years, and then you have to call and renegotiate with the lender.  Under IBR, the government also helps you with your interest payments on your subsidized loans meaning that if you take advantage of this program and pay more than then minimum, you can significantly reduce the principle balance on your loans.  There's a handy calculator online that will tell you if you qualify.

Again, and I sound like a broken record, but the most important thing when dealing with you student loans is that you actually deal with them.  You borrowed the money, you're responsible, so you have to step up.  They make it as easy as possible (still sucks, I know) for you to repay your loans and try to maintain a quality of life.  You are not locked into a repayment plan, either, if you run into a situation where you encounter a financial hardship, you can certainly change plans, or defer or forbear your loans.  Whatever you do, do not stop making payments without making arrangements with you lender.

Student Loans: The Basics

I get asked a tons of questions about student loans, and it has started to occur to me that a lot of people who are swimming in student loan debt just get their monthly bill and pay it without really thinking about their other options.  Unfortunately for me, but fortunately for you, gentle reader, I've had to learn all the ins and outs of student loan management.  It's confusing stuff, but I think I can break it down into manageable chunks.  I do want to stress though that you shouldn't take anything I say as law, call your student loan servicing company and talk to them. I've called half a dozen times, and these people are really nice and want to figure out the best solution for your specific situation.  Also, I'm talking about student loans through the federal government, or Direct Loans.  If you loan has been sold to a company like Sallie Mae, your circumstances will be different.  To find out what's going on with your loans, go to the National Student Loan Data System.

The most important thing to remember, and I can't stress this enough, is that you cannot ignore your student loans. I don't want to repay mine either, but if you ignore them, you will ruin your credit score and your life.  By defaulting on student loans, you will end up paying more for every dollar you want to borrow in the future--house, car, whatever.  And whoever owns your loans will come after you to the point of garnishing your wages if necessary.  Student loans are the only debt that cannot be discharged by filing bankruptcy, so as distasteful and daunting as it is to look at that giant number, you have got to deal with it.

Consolidation--Consolidation is something that a lot of people do after graduation to make repaying their loans more manageable.  Basically, what happens for many people is that over the course of their college career, they end up taking out more than one loan.  If you are ever out of school for at least six months, you get a new loan when you re-enroll.  By consolidating those loans, you're telling your borrower that you want to merge them together into one loan with one interest rate.  This may make it easier in that you won't have to make more than one payment per month, but it could lock you into an interest rate that isn't very good. If you consolidate with only one loan, it's usually to secure an unchangeable interest rate for the duration of your repayment.

I haven't consolidated my loans because when I spoke to a loan counselor, she told me that I would be locked into a higher interest rate that would most likely go down.  My interest rate is variable, and I may consolidate in the future if interest rates go way down, but be cautious because you can only consolidate once. Interest loan rates are re-evaluated every year in July, but do talk to a loan counselor and see what he/she recommends before making your decision.

Deferment-- Deferment is a way of postponing making payments on your loans.  If you need to postpone payment, deferment is the most attractive option since your subsidized loans will not accrue interest while you are in deferment--typically, when you take out a loan, half the money you get is subsidized, the other half is unsubsidized.  As deferment is a rather attractive option, you need to qualify to get it.  Typically people qualify for deferment based on unemployment, disability or military service, but there is a big list of who is eligible.

Forbearance-- Forbearance is similar to deferment in that it's a request to stop making loan payments temporarily, but when you put your loans in forbearance, you are responsible for all the interest that accrues.  You can opt for forbearance at any time, and typically extend it as well, but while you are in forbearance your loan debt keeps building on itself and growing, so this should be only a last resort.  I've used forbearance in the past when I needed to save money for moving, but please be sensible about it if you take this option.

Default-- Default is when you stop paying your loans without arranging for a deferment or forbearance.  Letting your loans go into default disqualifies you for any type of loan forgiveness option that may present itself, and ruins your credit.  Considering that all you need to do to arrange a forbearance is to make a phone call and fill out a form, there is absolutely no excuse for going into default.  If you can't make payments for any reason, you have to be up front with your lender, and it will work out.  Going into default is not an option.

Up next: Repayment Options

Retirement

Should I really be thinking about retirement even though I've yet to actually get a full-time job? Yup. I finally realized that if I wait until someone actually gives me a full-time job to start saving for retirement, I may never actually be able to retire. Plus, when (if) I ever retire, I'd rather not spend my every day pinching pennies and hoping I die before the cash runs out.

I read The Money Book for the Young Fabulous and Broke by Suze Orman a couple years ago, and actually really enjoyed it. Most of her books kind of bug me because they're a bit obvious: "If you stop buying your daily latte, you'll save money!" but this one had some truly practical advice and I would recommend it to anyone of any age. I noticed that the audio book was on the shelf at work (library) the other day, and decided to give it a listen on my commute.

That's another tip (from me), listening to books about personal finance while driving makes me spend less. Think about it, when you leave the house to go to work or whatever, it's awfully easy to just pop by Target and pick up one (twelve) thing(s), if you're thinking about money issues and how you should be saving for retirement, it makes it easier to skip that trip and go back to Target with a list of practical items. Likewise, when I was listening to the Confessions of a Shopaholic series in the car, I spent like a maniac. Perhaps my readers have more self-control, but it's worth trying anyway.

Suze stresses the importance of starting saving for retirement early even though you feel like you have no money and can't possibly sock any away. The logic is, the longer your money sits and earns interest, the less you actually need to invest. For example: if you invest $300 per month from age 25 to 40, you will have invested $54,000 of your money, but your total investment will be worth $104,504... by the time you turn 70, that investment is worth $1.05 million even if you stop adding to the investment at age 40.  If you start investing at age 30, at the same rate, and keep investing for more than the 15 years previously mentioned, your investment is only worth $450, 089 even if you have the same interest rate (YF&B 180).  Man, that's depressing.

Of course before I decided to start saving for retirement, I read up a bit about the different types of retirement accounts.

401(k):  This is typically set up through your employer.  How the 401(k) works is that you select a plan and have the money that you contribute to the plan deducted from your paycheck.  Often your employer will also offer to match the amount of money you elect to invest.  Basically, that's free money so you should always take it.  The important thing to know is that 401(k) money is taken out pre-tax, so before you can spend it, you will have to pay taxes on it.  Never withdraw early from a 401(k) because you can either end up paying tax on the money that you take out more than once.

IRA: Stands for Individual Retirement Account--can also be called Traditional IRA, and that's exactly what this is.  It's an account that you start as an individual, and contribute to on your own.  This is also typically the account that you cal roll your 401(k) into if you leave one job for another.  The upside of the IRA is that you can contribute up to $4000 per year if you are an individual under age 50.  The downside of the Traditional IRA is that when you withdraw your money from the fund, you have to pay tax on it.

Roth IRA:  The Roth IRA is similar to the Traditional IRA except for one huge difference.  With a Roth, you pay taxes on the money before it's invested, so when you withdraw it 40 years later--it's kind of like free money.  You may invest up to $5000 per year in a Roth IRA (if you're below age 49), and you're eligible to withdraw that money at age 59 1/2.

I started a Roth IRA a little while ago, but to be honest, I'm still figuring out how it works--stay tuned!

Technical Difficulties

Yesterday, blogger was down all day--damn you, Friday the 13th!  I assure you, I was mentally writing blogs all day long (I'm not kidding!), but I'm just going to call the day a wash, and make up for it later.

In place of a regular post, here's a list of my favorites from the past week:

Kitchen Porn
Freebie Friday
The Year of Shopping Detox teaches me that I kind of love Lauren Conrad.

And a brief note on the Food Waste Friday front--spinach, 1/2 a bag, it smelled funny.  It's buried in the trash, so no picture (even I'm not to shameless as to take a picture of my garbage and post it online).  Blech.