1 Million Dollars

Friday, November 28, 2014

Pay for living expenses with your 529

I just discovered something very exciting.  Did you know that you don't have to live on campus to use your 529 money toward living expenses?  Me either.  You can't claim more than the school says should be spent for living expenses and some vary that based on where you live, but my school does not.  They allow for $12,000 per year or $1000/month to be used towards living expenses.  Now, the only reason to use this is if you live in a state where there tax deduction for 529s or if the only other option is saving in a taxable account.  Always max out your Roth IRA before this.  Luckily I do live in such a state.  NY allows $5000 to be deducted from your taxes per person.  So a couple can deduct $10,000.

So, I am putting $833.33 every month into my 529 come January and pulling out $1000 every month until it is gone or I hit $12,000.  Since I did not know about this until now, I am putting $1000 in both November and December. Since at my top tax bracket in NY state I pay 5.25%, each $1000 will save me $52.50 in taxes.  How crazy is that.  So I'll save $105 this year and $525 in 2015.  Just for opening a 529 account and funneling money through.  The money sits the equivalent of money money market account so I won't make much but I won't risk the money I need. 

So check if your state allows you to do this.  If you are dependent, make sure they allow you to do this or give the information to your parents.  If so, see how much you save. 

Get your discount target gift cards online!

I was very excited to see target gift cards 10% off today from 6am-12pm in store.  I normally buy them for 3.5% off at cardpool, so that was really good deal.  Because of our normal spending of $300/year I decided to swing by my close target and grab them. But then I was told something great! You can buy them on target.com.   This is better because you don't have to waste gas or time out on black friday.  In addition, if you have a discover or chase freedom card online purchases are 5% back.  In store my best cash back offer is 2%.  In total, I saved over $20 for next years spending.  That is worth a few minutes time for me.  How about you?

So for you east coast people, you online have another hour.  If you shop at target, go get this deal! 

Thursday, November 20, 2014

Expenses During Buffalo's Snowageddon and Why They Pale Against the Real Fiscal Armageddon

People talk about the cost of working, and how you only need to save 70-80% of your income because your costs will go down when you retire.  This might be true for some people, but I don't think it is true for us.  We had a perfect example this week when we were stuck at home during a set of storms that hit the buffalo area.

Since we are home the food we are making is a little higher end (the meat store was open one of those days), the stove is on for longer, the electricity is on more and the heat sure is a lot higher.  Granted I am trying to do work while at home (and I do have a kid that makes that difficult) but I think most of the costs would be about the same.

However, I do have to admit I am not spending gas to get to work, which does save some money.  In this case both my husband and I will be working during the weekend to make the lost days up but if we were retired, we obviously would not.  That is about a $26 saving.  Granted my husband drives an hour each way for post-doc, five months ago that cost would have just be $6.  But let's go with $26.   Are the increase costs of staying home add up to $26?

The meat store was an increase of $5, plus some meals we normal eat on the weekends will have to be replaced for probably another $3.  But that is just $8, surely we did not spend another $18 just on utilities?  And honestly I am not sure.  I have not found an easy was of comparing utilities except for assume a 3% decrease of your costs by for every degree you lower the thermostat.   But that is monthly, plus we are not increase it for the entire 24 hour period, just while we are up. And that does not include water or electricity increases which I admit are very much increases while we are home.  Nor does it include the wear and tear of items at home.  Using my computer at home is likely to decrease years the computer useful for.  Same goes for the oven or microwave.  When I think about it, I don't think all of these expenses add up to $18, but there is a big expense I did not cover.

Health insurance
I spend a little over $140 a month for my share of health insurance, pre-tax.  My employer, well now, they send over $550 a month.  So really, I need an additional $550 plus the cost of taxes to cover my health insurance.  I know some people say, well what the ACA?  I am not holding my breath.  We might get something close but GOP won this last election and they want to get rid of it.  If the democrats don't come out in two years, we will have a republican president and congress and then ACA will be gone.  I can't trust democrats to get out and vote, because they don't.  So, I go with COBRA when I looking at expenses.

So, if compare your "working costs" against COBRA, I'm pretty sure you are going to come out ahead by working.  So please let my Smowmadegon encourage you to save and expect to spend more than what you live on now, because health insurance is not getting cheaper and we are just getting older. 

Tuesday, November 18, 2014

Paying Off My Husband's Grad Student Loans! How did we do it, and why did we have them?

My husband is within a month of the end of his grace period for his grad student loans and we are able to pay them all OFF!!!  A bill that would cost us $195 a month for 10 years will be gone with one click.  How did we do this?  Well, to learn that we have to go way back, to 2008.

DH and I were not married then but dating.  And we just started to talk money.  I found out he had $25,000 in credit card debt.  However, no student loan debt.  But, you know if you have to pick one, student loans can be better than credit card debt (at least the interest rate).  So we sat down and talked and came to a plan.  He decide to make some major cuts, and we changed much of our dating behavior.  He also increased the hours he worked.  Then, he called every credit card up and ask for a lower rate and for most of them, he got it!  But not all.  So next, he started looking a student loans.  I had just gotten a student loan for my last year of college, from discover.  They had no origination fees and because they were subsidized no interest for the year.  He jumped on it and moved $5500 of credit card debt into student loan debt.

Then, as he starting pay the debt down the 0% offers came rolling in.  He moved the rest of his debt to 0% offers (with 3% fees) and continued to pay the debt down.  Life went on.  We both applied to grad school and he got in but I did not.  He proposed and I agreed to go with him to buffalo.  At this time, the 10% tax credit for buying a house, up to $8000 was into effect. We started looking at rent, and house costs and realized we could buy a duplex and spend the same on the mortgage as we would for rent.  But with what down payment?  I had never spent the $5500 student loan I had, plus I had set aside $7000 in my traditional IRA for grad school so I could cover a small downpayment and lucky for us, duplexes in buffalo were going for $60,000-80,000.  We could afford a small one.

But, that was great and all but what about getting to buffalo.  That would cost $3000 plus renting while we were finding a place.  We had the summer to make this money up, plus we needed another $3000 for closing costs.

So we went to work.  We both picked up extra shifts at work plus he picked up a second job.  We cut the budget further and planned a tight budget for when we got to buffalo.  By the end of the summer, we had all the money we needed plus his debt was down to $5500 in student loans and a little less than $9000 in credit card debt.

We camped out as we drove across the country, living mostly out of food bought in the grocery store (which we stored in a cooler given to us by my mother).  We did get a couple treats but that was it.  We landed in buffalo, found a place to rent and off we went to find our new home.  It took the entire semester but we found a place that we bought for $60500 and closing was covered by the seller.  That meant our $3000 could be used as an EF.  And as soon as we closed DH moved the credit card debt to student loans ($8500), again being subsidized they charged no interest.

I was still trying to get into grad school, but having no success.  We started fixing up the duplex and I looked for a job.  I found a server job, making decent money ($20,000 for the year) that I used to pay for our wedding, and pay for the classes I was taking, to increase my chances of getting in the Master's program.  We finally found tenants and that money went into our Roth IRAs.  We got married as I kept beating my head into the wall of grad school admittance and finally got in.

However, beginning in a Master's program I received no aid and this was just when we found out that graduate students would lose subsidized loans.  So to cover me, DH took out another year of subsidized student loans ($8500), just in case.  However, I had enough from working that we were ok.  Then we found out I was pregnant.  Kind of scary, but we were not going to let it stop us.

We ended up using the rental money for daycare, plus we did get some tax aid.  But all through this, the $8500 sat with our $3000 EF in our high yield checking, growing and growing.    We kept the budget tight and soldered on.  Then something wonderful happened, I got into the PhD program and with that came a $25,000 annual salary.
We saved 15% of our income but the rest was split between daycare and debt pay-off.  Now, being in the program 11 months, we have enough to pay off both student loans, and yet still keep that $3000 EF.   We were lucky to get all of these breaks but we took advantage of them as they came along and work hard to get there.  And the reward is coming.  One less debt over our shoulders by the end of the month.

Saturday, November 15, 2014

Three Weeks of Groceries, what a spendy time!

We overspent so much this last three weeks!  We spent $283.93, a budget busting $85.93 more than budget!  That is more than a weeks worth of food.  What did we spend it on?  Well we spent $48.13 on chicken because the meat store had a sale for 1.49/lb (.50 cheaper than the grocery store), but we had to buy 30lbs.  And we had bought a couple splurge items when Tops Market had some major sales and then we stocked up. 

So what are we going to do?  We are $357.28 over our spending with seven weeks to go and Thanksgiving and Christmas shopping is in there.  There is no way I can spend $14.96 a week.  However, we won't have to buy chicken for the rest of the year (and probably even longer) so I am going to take this as alright.  We will end up dipping into our EF to cover this which sucks but that is life. 

So what is the plan?  Because we know we are buying our turkey next week at Top's, we decide to not doing major shopping this week.  We are hitting wegmans for some basics on Sunday (which looks to cost less than $40) and then next Saturday will buy our turkey for .48/lb but we need to spend $25 more to get that price, so we will probably do the thanksgiving spending there and spend about $30-40 that week.  The week after we will see what we have left over from thanksgiving and go from there.  We may not be able to make up all of this money but we can do some fixes.

One of the best things I have learned from this is to change things up when they don't work.  It may work great one week but not work the next.  Don't be dogmatic, and you can take on anything!

Tuesday, November 11, 2014

Get out of the dorm! Save money by moving.

The semester starting to wind down and exams, papers and craziness is starting to ramp up.  But take a few minutes to see if you could move out of the dorms and save some money.  Depending on where you are, living in the dorms may be cheaper than renting a room or much, much more expensive.  How do you decide?

Well you need to add up all the costs associated with each.  Sometimes when you rent, utilities are included, like the dorms but often if you rent directly from a landlord instead of just a room, that is not true.  Ask the landlord what the average utilities costs are.  Google internet in your area and get an idea of that cost. Obviously there is no reason to have a landline because you have your cell, so ignore those ads.  You'll need a way to get to school, should you live near-by or farther out?  That depends if you work and if you have car.  If you don't have a car and can find an apartment on a bus line, that is often better than buying a car.  Remember you are likely to move once you graduate.  Never the less, include the cost of transportation if you did not need in, living in the dorms. Also, remember to add in food costs because you won't need a food plan once you are living on your own.

Then add up the dorm costs and remember to include that food plan!  Once you have everything added up, compare them.  Which is a better choice for you?  If staying put is better, obviously don't move but if moving is better check if you signed the dorm contract for the semester or the year.  If it is for the semester, then plan to move into a new place come spring semester.  If it is a year lease, then you have to do more work.  Every university has someone who oversees the dorms and if you are nice, they may be willing to allow you to break the lease without a penalty.  They don't have to, so don't be a jerk about it, but the answer is always no, if you don't ask.

Come January we will go into how to find a good apartment, from both a tenant and landlord perspective.  See you soon.

Saturday, November 8, 2014

Over Your Head: living paycheck to paycheck

A friend posted on facebook about trying to save but not being able to because every week there was new "surprise" bill.  She said she has cut every personal thing and still, she can't get above water.  Sadly, many of my friends agreed.  Honestly I was flabbergasted because some of her bills were not surprises, like car insurance.  But, when you are living on edge, I guess they can.  Personal finance bloggers often say, pay your car insurance bill every six month, but if you can't save that little bit every month, how does that save you money?  However, if you can pay your car insurance every month, you CAN pay it every six months.  It just takes a change in attitude and planning.  So, let's be about it. shall we?

Often people are told to make monthly budgets but that sets you up for "surprise" bills that only come every six month or annually.  I recommend everyone make an annual budget and go from there. 
My budget looks like this:
house insurance
car insurance
taxes of house
house repair
fun money
school cost
baby expenses

Every bill I could think of is on there, and then under it is a list of things to add to the budget when I get more money including replacement costs of things like computers, large household items like a fridge or stove, everything.  I may not be able to put money in everything but I can start.  That helps me know where to put extra money if I get it or if I get a raise, if that ever happens.  
Can you see something is missing though?  I have no emergency fund on that list.  And I have a very good reason for that, my extra money goes to my emergency fund (EF).  Most of that money is from the rental but also little things like if I use amazon gift cards, that I get from swagbucks, instead of cash, I put the cash in my EF.   Everyone does need an EF, though many young people don't have one.  And that means putting those surprise bills on a credit card.  But even if the EF starts with $5 a month, that is a start.  And for young people starting is the most important thing.  Once you start thing snow ball.  Many of my bills are annual or semi-annual so I have a slush fund every month and except for a few months out of the year the slush fund grows (and throws a little interest into my EF).  So, what are some things you can do TODAY to stop living paycheck to paycheck?
Join swagbucks
Join My Points
Find a cheaper insurance company, my choice is Geico but check EVERYWHERE
Join ebates if you shop online
For that matter, see if shopping online is cheaper
If you pay for electricity, unplug everything!  Don't leave your computer plugged in or put it on a power-strip.

And if you are buy your own groceries check out money saving mom and cut your groceries spending at least for the one month.
By the end of the year you will have enough to change your car insurance to every six month which will save you an additional dollar.  And all of that will add up to a small emergency fund that will keep growing.   Just don't stop, keep the snowball growing and in no time you will not be living paycheck to paycheck.
If you have an idea that will help people stop living paycheck to paycheck, let us know in comments!