Student loan insanity

My head is spinning a little bit from trying to predict how my loans will be paid off. I recently went into repayment (yeah! 1 payment down, 287 to go...or something) on the Income Contingent Plan, which basically gives you lower payments based on your income and forgives the leftover loan after 25 years.  To give you an idea of how good this repayment plan could be for a low income borrower, here's how the numbers work out with regard to my loan:

Standard Repayment (10 years) - Total repaid: $31,703 ($5,779 in interest)

Graduated Repayment (10 years) - Total repaid: $32,758 ($6,834 in interest)

ICR (my current plan, 25 years) - Total repaid: $21,765 ($4,000 LESS than my current principal)

Of course, this is assuming I never make more than $21,000 per year. There's also an interest capitalization cap, which I finally interpreted to mean that the interest accruing will not compound upon itself once it has compounded to 10% of the original loan (I'm assuming size of the loan when I entered repayment, not the original disbursed amount). Not sure how this would work if I switched plans at some point. 

See how I still really don't understand that? 

It gets trickier, too. At some point I should hopefully be making enough money that the ICR plan will become more expensive in total than traditional repayment. But then again, maybe I won't. Also, there's a public service forgiveness after 10 years making payments in a qualifying job. And public librarians count (so do librarians at public universities). I'm also planning on taking out more loans in order to go to grad school (to get the higher paying job) and I don't know how the extra loan will affect repayment of my current loan, or if the same repayment options will be available for the new debt. They're also enacting a new Income Based Repayment plan in July that differs slightly from my current repayment that I may want to assess when it's available. There's also the question of if I should be making extra payments now if I can afford them. If I'm looking at getting the remainder of the loan forgiven after 25 (or 10) years of repayment, it doesn't make sense. But if I will eventually be switching over to a standard repayment plan, the small payments I'm making now aren't really significantly reducing my principal. 

See how I still really really don't understand?

I do know one thing: the government is the best lender ever. I'm glad now that I was lazy and uninformed for several years and didn't consolidate into a private lender account. They give me a .25% interest rate reduction because I set up automatic EFT payments. There's also a rebate  of .25% of my interest accrued over this year if I make 12 consecutive on-time payments (which is impossible to mess up with automatic payment). That basically means they take .25% of my interest from this year and apply it back to the principal (I hope that's a yearly plan, and not just for the first year). By the time I consolidate with them in May or June I think my interest rate could be near (or under) 3%. And that's good news since I let an extra 25% of my original disbursed principal accrue in interst over the last 5 years of forbearance. I really should have been paying the damn interest, but c'est la vie. Can't go back and change that now...

ow. headache. 

Are you reading Get Rich Slowly? No? Start.

Empowerment

I think this blog was the best idea I ever had. It has really made me focus on the one area of my life that has been the biggest challenge as an adult, and it's made me feel so much more in control. I didn't really think a blog could do that. I feel proactive, I feel like I've got my shit together. I'm awesome. Seriously. 

But enough of that. 

I do want to share a couple of things that this has taught me in a general sense, though. The first being, this stuff isn't so hard. Even if you don't have any money. What is very hard is not being afraid of doing something with your funds. It's easy to feel like you've got it covered living paycheck to paycheck as long as collectors aren't calling you day after day. It's easy to just let it slide and not build up any savings or make a long term plan when you're in a temporary job and not really sure what your other long term plans are. It's really really easy to just not think about the road ahead of you when you're 26 and pretty healthy and aren't married and don't have kids. But once you decide to think about it, knowing what the plan should be and mapping out how to get there is a whole lot easier than it seems. And the younger you are when you decide, the easier that part is. With time on your side, money is secondary. I don't care what snobby Cantabrigians say about Suze Orman, she taught me that. Time is way more important, and I'm  miles ahead figuring this out in my 20's than if I waited a whole lot longer. 

Another thing I learned. Feeling in control of my financial life has spilled over into the rest of my life, and I think that this would probably true for most people. I mean, if I can be in control of my credit, my debt, my savings, and my investing, then I can also be in control of my career, my education, and my long term (non-financial) plans. And I don't have to be afraid of looking at my future. Because even though I don't have everything in place, I have a plan for how to get everything there. This sounds really motivational-speaker-y, but I don't care. I know I'm not really in control in a lot of areas in my life (or I'd be paying myself more), but I'm planning for emergencies and contingencies, so I feel like I can be ready for things. 

Third. The "tough choices" I'm having to make because of my income really aren't all that tough now that I have clear long term goal. And it's a goal that I made and formulated, so I feel really good about reaching the milestones I've set up. I feel worse now about not putting money into my savings than I do about not buying a new pair of shoes. Because me in the present can keep wearing the 25 pairs that are in my closet, but future me is really going to appreciate the contribution to her standard of living. 

did you read this far? wow. I figured all that rah-rah would have made you throw up by now. 

the last week

Man, this is a busy time for me. I had cousins visiting, a crazy time at work, and I'm gearing up to visit Florida next week. So, like I said. busy.

On Monday I officially dipped into my emergency fund for the first time. Which felt terrible. At least at first. I'm a little glad I waited to blog about it because it upset me so much.

It came in the form of very necessary dental work that cost more than I usually have on hand. I just felt so angry and disappointed at having to spend out of that fund almost immediately after I really got a measurable amount set up. But after I settled down (the drill in my head really shook me up too much to look at this reasonably) I realized that I should try to be a little more positive. The good thing about dipping into an emergency fund is that you aren't dipping into your daily bread. And I don't feel any financial strain, even after spending a bunch of money on two stupid teeth. I just have to put that money back now. Eesh.

In the "more progress" part of this post, I did two things this week to get a little further down the road to recovery. First, I opened my high-yield savings account with FNBO. It was really easy, and the regulations on the account are even better than my bank's account. No minimum, no monthly fees, and the same amount of transfers to my checking account. I'm really happy with the decision.

The second thing doesn't make me as happy, but it's still good. I applied for a new credit card and was approved. I went to the card offers page on mint.com and applied for one of their suggested cards for my credit rating. They were a little optimistic in the case of that card, it turned out, but I was approved for an HSBC backed Discover card. It has a medium-high interest rate and an annual fee or $59, but frankly I'm shocked I was approved at all. And I've come to terms with the fact that until I build my credit back I'm going to have a to pay a little more than some. When I've kept on top of this card for a year or so, I can apply for one with a lower interest rate and no fees or finance charges.

Looking forward!

a grocery dilemma

I went grocery shopping on Wednesday (the first day on my new budget). This is the first time in a very long time I was consciously trying to squeeze the most food out of my dollars and not get the fanciest local organic stuff available. I imagined trying to shop like my mom did when me and my brothers were little. Sale jelly, sale peanut butter, sale yogurt, sale bread, bulk cream of wheat, etc. Just the staples. And I did good; I got breakfast and lunch supplies for a couple weeks for $17.

But when I got home I looked a little closer at what I had gotten and was really frustrated. Everything I bought except for the cream of wheat has high fructose corn syrup as the second or third ingredient. This makes me even more angry at those creepy corn lobby sponsored HFCS commercials. They talk about "consumed in moderation" as if it's not used as filler in every single food thing you eat in one day if you can't afford the types of things that don't include it. I bet I would have easily spent closer to $30 on the same things if I had gotten the Stonybrook organic yogurt, the local traditionally produced jelly, and so on (not the natural peanut butter though, that stuff is gross). It's maddening.

I'm just glad I'm not raising kids on a budget like this. I would hate for my choices to be feed them crap or not at all. As for me, I think I'll just spend a little more next time.

The Budget Post

Okay, so remember at the beginning when I was all huffy about limiting my spending? Well as I've done more and more research into various savings and investing options, I've had to look at my income honestly. I mean very honestly. And honestly, I don't have the income for indiscriminate spending. I mean, I knew that. Of course I knew that. But now that my savings goals are very real and I've begun to understand the long term benefits of what I can put away now, it's become important to take a closer look at my spending. And to make a budget.

So, "budget" is such a crappy word. Trying to estimate how much I spend on food, clothes, books, coffee in any given month is basically impossible. And then trying to reduce those to have savings leftover is another level of impossible. So I'm going about it backwards this time. Now I don't know if this will work, but I think I owe it to myself to give it a real chance.

What I've done is basically this:

1) Estimate monthly bills - rent, utilities, cable, phone, student loan payment, savings (see how I called 'savings' a bill? that means I don't get to not pay it)

2) Divide that average monthly expense over 4 weeks (My friend Geoff is eager to point out that a month is actually 4.3 weeks, but this particular estimate works in my favor in the form of extra than budgeted income)

3) Subtract my bill amount from my after-tax paycheck.

4)Voila! I have my weekly allotted spending limit.

I'm not sure why I decided that this arrangement will be easier for me to follow, but I think that having a general budget allotment that is sort of all inclusive of many kinds of purchases (food, books, yarn, etc) I have less occasion for spending related guilt and budget screw ups.

Today is the first day of this budget, and I'm already kind of sucking. Oh well, if there's one thing I'll always have it's room for improvement.

Well, people, help me out! What strategies do you use to keep your spending under control?

older brothers

My brother pointed me to possibly the most awesome thing I've seen since I've started paying attention to my credit.

Credit Karma!

It's an ad supported website that gives you unlimited access to your TransUnion credit score! I've always been amazed and appalled that any company who wants to cough up a few bucks can get all your credit info but you have to either pay out the nose for it or only check it once a year. It's insane. Thankfully, somebody agreed with me and put together a service for it. Thanks credit karma.

A quick word about savings accounts and CD's and whatnot and interest rates. All of the accounts I posted a couple weeks ago are slipping in interest rate every month. So if you've been thinking of opening a new account, whether it's a money market, savings or CD, it seems prudent to do it sooner rather than later. I can only imagine that as the market continues to tank what banks are willing to give you as return will keep shrinking. And if the rates bounce back in the next year or so, you can always move your money to something better....then again all these shits are variable anyway, so screw it. we're all goin' to hell in a big fat hand basket YEAH! hhahahahha.

just kidding. sorta.