I am not a financial advisor, but… Issue 1

Man. Money is a bitch. Seriously. But there is a certain sort of pride one gets from being on top of things which can’t really be gotten any other way.
As some of my readers may know, I have a lot of debt. When I graduated college, I owed $80k and change to various financial institutions for paying my way. Goddamn private schools.
Well, I have recently lined all my debts up (car loan, credit cards, remaining student debt) and I am now only $70k and change in the hole. Not bad, considering that I finished school only 6 years ago and for all but the last year or so was living paycheck to paycheck.
I attribute this to a number of strategies, largely developed through long discussions with Antwon (who has hella financial acumen. Seriously. He was making wise money decisions when he was like six or something).

  1. Pay off higher interest things first.
    I have been doing this faithfully and it’s working.
  2. Credit cards are the devil.
    I knew this but let them run away with me a little. It’s easy when you first start getting fat paychecks to live beyond your means without realizing it, especially if you’re trying to rack up points on a credit card that has a deal like frequent flier miles or (like me) free money for books.
  3. Whenever possible, get your debt shifted around so it’s at a lower interest rate.
    Antwon is helping me with this – I’m shuffling my credit card debt so it’s all at 4% or less, and not using my cards until that’s paid off entirely.
  4. Learn as much as you can about this stuff.
    I’ve been reading a blog with great writing and info, but a kind of scammy title: IWillTeachYouToBeRich.com. I am a huge fan of its author, Ramit. He has good info and writes clearly without being a condescending asshat.
  5. Track your spending.
    Antwon and I are currently trying out Wesabe, which is sort of like the love child of Quicken and Flickr. It is really amazing how much money one can spend without realizing it. I mean, seriously. I am spending a surprising amount on subscriptions, for example. I am determined to get that down. I gotta make a few calls and make sure that my auto-renews get turned off and that my subscriptions to things like, say, Writer’s DIgest get cancelled. Seriously. After however many years it’s been reading that ‘zine, there is almost nothing new they have to tell me.

I think that’s everything. If I think of more stuff, I’ll add it to this post and post an update so y’all know to come back and read it. Anybody got other tips?

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10 Responses to I am not a financial advisor, but… Issue 1

  1. Mike says:

    I’ve seen some people suggesting that, as a psychologically-effective alternative to strictly paying off highest-interest-rate debt first, is to, at least for relatively similar interest rate stuff pay off smaller balances first — this gives you the psychological boost of “wow, I paid off one whole account” early and gets you going.
    Otherwise, I’d pretty much agree. It’s interesting how it took making a (relative to when I was making in student jobs) nice fat salary to make me go through getting into credit card debt once and scare me off of careless use of them.
    I also like to keep some more randomly structured plans in a spreadsheet. Easier to think about a month-by-month budget for the whole year, at least approximately, that way.

  2. Keith says:

    My student loans are crazy, but I have been really lucky to use my credit card for everything, from cell phone bills to groceries and pay it off every month. which is awsome cuz I get crazy points towards amazon.com when i do this. I’m averaging about a 25 dollar gift card every two months.

  3. fling93 says:

    The best two pieces of advice I’ve heard:
    – Pay yourself first. People have a tendency to spend whatever money they have available. To thwart this tendency, set up some sort of automatic transfer every paycheck or every month so that a portion of your money goes to savings (or paying off debt) before you are tempted to spend it.
    – When you get a raise, do not increase your lifestyle, but increase your savings rate instead. It’s a lot easier to maintain a relatively low standard of living than to lower it from something higher.
    One of the best posts I’ve seen on the subject is by Megan McArdle (aka Jane Galt). She’s a writer for The Economist, but even their writers don’t make very much money. :)

  4. Heather says:

    Hi…funny that you are posting about this because I just spent the last week realizing what I’ve got myself into and how I’m going to get out (student loan + credit cards + unanticipated car issue).
    I sought out a personal loan to pay off credit cards which, had I been accepted, would have cut my monthly payments in half and enabled me to get through stuff v. quickly.
    So my question: what have you found enables you to get to 4% interest? I’m interested in knowing about programs or something – i am searching for another loan avenue but am not finding a lot of luck. Hell, at this point I’d be beyond excited to find something for 15% interest. Can you please email me (whirly at the yahoo address) your findings? I will continue to share my tips…

  5. Antwon says:

    The vast bulk of my debt is at a similarly low sub-5% rate thanks in large part to credit card access checks. You know – the hokey “use the above check and we’ll lock you in at [low rate] through such-and-such date!” sent along with your statement and the like. Some of the rates offered are fantastically low – “0.99% for the next eight months”, that sort of thing.
    This is, of course, playing with fire to some degree. Be a single day late with so much as one payment and the rate balloons up to normal, prohibitively large percentages. There are also fees associated with writing the credit card access check in the first place, potentially making the whole endeavor less than worthwhile, depending on the quantity of the debt involved. (Which is saying nothing of the whole “you only get superb debt offers if you have superb credit to begin with… so those most in need of a financial break have the fewest low-interest avenues available to them” song and dance.)
    Depending on the specifics of your credit history and the like, you may get some value out of prosper.com. It’s a microlending site, essentially connecting random-ass folks who are looking for non-usurious loans with random-ass folks looking to get a better return on their investments than they might get elsewhere. (I’m on there as a lender, not a borrower, but it’s entirely possible that it’d be one avenue to at least consider.)

  6. Ealasaid says:

    Hey, thanks for the tips, everybody! Heather, I’ll email you this too, but what I’m currently doing is shuffling my balances using credit card access checks. Twon does this too.

  7. Alex Summers says:

    [Note from Ealasaid: I managed to delete Alex’s comment by accident, but was able to retreive the text. I’ve reprinted it below. Sorry Alex!!]
    Good for you!
    One thing I found having gone through a similar period is that the less you need them, the better the credit card balance transfer offers you get. I started off with over $30K in credit card debt (I know, I know) at 9% and up. By the time I was down to one card and under $5K, I was getting offers for zero percent balance transfers.
    But yeah, the shifting helps. When you zero out a card, they might make a lower interest offer to get your balance back. I also had some success just calling and saying hey, Card X is offering me Y percent, can you lower my interest rate to meet that?

  8. Belgian Tim says:

    Well over here in Belgium, there’s not really such a thing as student loans – college is largely subsidized by the government, making it affordable for most families – certainly nothing like $80k (I think it was around $3k/year tuition, but not sure).
    On top of that, until recently cards like VISA did not offer real credit cards, but sort of like debet cards – you get one monthly bill with what you spent the month before. This rocks, as I can spend next month’s paycheck NOW, without having to worry about interest etc. A year or two ago they’ve started marketing “real” credit cards – but they’ll pry my non-credit hard from my cold dead hands :-)
    These two things combined mean that I don’t have any debt except for my mortgage. Yay me.

  9. elkit says:

    Thanks for the Wesabe tip! I signed up, and really like it.

  10. Ealasaid says:

    Yay! Glad you like it, Elke! :D