Thanks for reading!

You all should probably get used to these monthly thank you posts where I go on and on about how much it means to me that you read my blog and reiterate how much I appreciate your support.

Here we go for this month:

Thanks so much for keeping up with my blog and encouraging others to take a gander in their free time. This blog means a lot to me and the overwhelming positive response I've received makes me happier than words can possibly express.

Please, please, please write to 25andretiring@gmail.com if there is anything you would be interested in learning more about or seeing discussed. I haven't begun Thirsty Thursdays but that's mainly because no one seems too thirsty. hahahaha.

Lastly, please make sure y'all are keeping me accountable. If you're seeing that my 9-5  9-9 is taking over my life, please yell at me. "Speedy! When is the next post coming?!" I would greatly appreciate it.

Thank you, thank you, thank you again!

Talk about MOTIVATION!

A friend of mine picked this up after the 20-something gentleman in front of her left it at the ATM he'd just gotten cash from. She twitpic'd it and it made me feel some kind of way. Even if he was born with money...that's fine...I still feel like a SLACKER.

Talk about MOTIVATION....

Snowballll Fiiiiight!

Honey, it's snowing outside!

In the spirit of snow, I thought I would write a post on snowballing. Ironically when I googled this, some really ridiculously nasty sexual practice came up...please note, I will not be discussing that type of snowballing in this post. I learned about this concept back in grad school. Snowballing is a popular method of paying down debt quickly and has been made popular by Dave Ramsey, a financial guru type fella with books and his own tv show. It's the concept of paying down debt by paying off the smallest debts first and eventually allowing your payments to snowball to become debt free.

Here's Dave explaining the Debt Snowball:


hahaha gotta love Dave's enthusiasm. So it works like this: (this is a simple example I got from wikipedia that does not take into accruing monthly interest)

A person has the following amounts of debt and additional funds available to pay debt (the debt is listed with the smallest balance first, as recommended by the method):
Credit Card A - $250 balance - $25/month minimum
Credit Card B - $500 balance - $26/month minimum
Car Payment - $2500 balance - $150/month minimum
Loan - $5000 balance - $200/month minimum
The person has an additional $100/month which can be devoted to repayment of debt.

Under the debt-snowball method, payments for the first two months would be made to debtors as follows:
Credit Card A - $125 ($25/month minimum + $100 additional available)
Credit Card B - $26/month minimum
Car Payment - $150/month minimum
Loan - $200/month minimum

After two months (presuming the person has not added to the balances, which would defeat the purpose of debt reduction), Credit Card A would have been paid in full, and the remaining balances as follows:
Credit Card B - $448
Car Payment - $2200
Loan - $4600

The person would then take the $125 previously used to pay off Credit Card A and apply it as additional payment to the Credit Card B balance, which would make payments for the next three months as follows:
Credit Card B - $151 ($26/month minimum + $125 additional available)
Car Payment - $150/month minimum
Loan - $200/month minimum

After three months Credit Card B would be paid in full (the final payment would be $146), and the remaining balances would be as follows:
Car Payment - $1750
Loan - $4000

The person would then take the $151 previously used to pay off Credit Card B and apply it as additional payment to the car loan balance, which would make payments as follows:
Car Payment - $301 ($150/month minimum + $151 additional available)
Loan - $200/month minimum

It would take six months to pay the car loan (the final payment being $240), whereupon the person would then make payments of $501/month toward the loan (which would have a $2800 balance) for six months (with the last payment at $234).

Thus in 17 months the person has repaid four loans, with two of them being paid in a mere five months and three within one year.

Now the point of snowballing is to pay debts off in the order of balances. There is also something called avalanche-ing which pays debts off in the order of interest. The differences between these two methods is that you pay more interest but pay debt off quicker with snowballing and you pay less interest and it takes slightly longer with avalanche-ing. Another reason snowballing is favored over avalanche-ing is because, mentally, you get a sense of encouragement from paying off debts every few months.

Linked here is a free spreadsheet that helps you keep track of your snowballing debt plan (complete with tabs and formulas already there). Click the download now button on the right.

This is REALLY useful if you're trying to get rid of multiple debts. Snowball away!

Rent vs Buy

Came across this interesting equation on CNN Money.

I know I've struggled with whether I should continue to rent or buy a place. I've stuck with renting because I'm not quite ready to be completely settled. I'd like the option of being able to pick up and move quickly, without having to worry about a property somewhere. Not sure if many of you have gone through the pros and cons of renting vs buying now that you've begun your career, but here's a cool way to know whether it's smart for you to buy versus rent according to the housing market.

Purchase price of a home

                                        _______________________       =     Rent/Own Ratio

Annual rent of a similar property

If this ratio is less than 15. You should buy. If it's over 15, it's probably financially better to rent.

The CNN feature went over 12 cities in the U.S. and whether it's smarter right now to rent or buy. Unfortunately Chicago wasn't on the list, but it's still cool to see the cities in case you're ever looking for a move.

Tax Tantrum Tuesdays: What is the point?

Tax convos between myself and close friends are revving up as tax season is well underway. One thing I've noticed...time and time again, is that people don't really understand the purpose of the infamous tax return. More specifically they don't know that doing it "right" means owing $0 and getting $0...it means paying in exactly what you owe.

Nowadays I get annoyed when I hear folks say..."Girlllll, I can't wait for my refund!" The point of the tax return is NOT to have a refund. Of course that is more desirable than having to owe but the most desired outcome is to owe nothing and receive nothing. You think I'm crazy...hear me out.

So when you start a job, you fill out a W-4. It asks you to specify how many allowances you want to claim for your federal and state withholding. For most single folks with no dependents we put 0 or 1. Sidenote: you can actually put whatever number you want. hahaha. For some reason I remember someone telling me I had to put 0 or 1. Now I know that's not true. I can't put 5 if I damn well please...but that would be very dumb. 

Anyway, what exactly does this number mean and what does it control? That number tells the government how much money to take out of your check every pay period for taxes. By law, everyone has to pre pay at least 90% of their taxes throughout the year (or an amount equal to 100% of your previous years taxes). Sorry, that was technical. In short, that just means, if you wanted to just have no money withheld from your check and write the government a big fat check in April for whatever tax you owe, you could be assessed a tax penalty because by law you have to pay 90% of that tax throughout the year. So this rule is why we even have federal taxes withheld from our checks in the first place.

Now, for the fun part. The lower your federal allowance (remember the 0 or 1) the MORE money the government takes out of your check. This means if you're 25 with no deductions and you practically get taxed on all of your income then you should probably be at 0 or 1. But if you're a 25 year old who owns a home and contributes tons to charity (thereby racking up let's say $20,000 in itemized deductions), you know that your taxes are going to be lower...so you might hike that allowance number up to 2 or 3. That's what you're supposed to do. Now let's talk about what happens when you ignore these facts and decide you're gonna cash out every April.

See you think you're smart...but the fact of the matter is the government is smarter (and then there's me of course...the smartest teeheehee). The government has you GEEKED UP because you get this huge check in April...but what you don't know is that, THAT check is of total benefit to them and not a lot of benefit to you. I know this is getting good right.

 Let's say you're the 25 year old with a house and you contribute tons to charity. You have itemized deductions of about $20,000 but you leave your allowance number at 0 because you want to have a fat return. Let's say tax time roles around and your accountant tells you that you're getting a $7,000 refund on the money you overpaid in taxes...you're elated...money money money monayyy. Wait a min...SAY WHATTTT? I overpaid the government? You mean to tell me, there was $7,000 I could have been getting in my paycheck over the course of the last year (if you get 24 paychecks a year that's an extra an extra $291 PER paycheck you've been missing out on) but I basically let the government hold a 0% interest loan (from my broke a$$).

Does that make you feel dumb? It's okay, I still struggle with being excited about the little refund I get. The government is basically getting a free loan up outta ya. Holding on to your overpayment for 12 months (well actually 15 months if you count Jan-Mar of the next year) and not even paying you interest!

Now some of you ambivalent folks who don't want to believe that your tax refund in fact is not the best thing since sliced bread may say...so what?! I mean regardless of whether I'm getting it in my paycheck (extra $291 each paycheck) or all at one time ($7,000 tax return)...at least I'm getting my money.

Well for youuuu...let me tell you like this. TVM. Time value of money. #1 rule of finance...a $ today is worth more than a $ tomorrow. Actually the only thing I really remember from finance...lol. If you took that $291 each paycheck...deposited it into an investment providing an 8% return (for the sake of simplicity let's just do simple interest) you would end up with $7,560 at the end of 12 months. You are more than halfway on your way to some red bottoms with an extra $560! So now, think about it like that.

This has gotten long so...

Let's recap: What is a tax return? A loan you've given the government...that they hold on to...interest free...for 15 months...and then give it back to you like they're doing you a favor.

Now, trick question, what should a tax return be?

$0 and [almost] a pair of red bottoms. Woot woot! #pow

Til next Tuesday....

Deeper in Debt

So...my previous post regarding my personal student loan debt and my personal sentiments about it brought about a lot of feedback. Most of it positive...many people can relate to the struggle of student loan debt and find it encouraging that I'm talking about it. Some of it negative...well momma Speedy Spender didn't really appreciate my complaining about my blessings...or putting my business out there. I chalk part of that up, actually no, most of that up to the generational gap...and I'm moving on. Luckily, because I've had such an outpouring of support from my peers and readers, I know that I'm doing something right here.

Anyway, I want to delve deeper in debt...specifically calling attention to this "Student Loan Bubble." Firstly, I want everyone to understand that the purpose of my last post was not just to complain about my student loan situation (ha. who am I kidding...okay maybe partially it was), but instead to provide a snapshot of the seriousness of the student loan matter from someone who is actually in it. Furthermore, through writing my story, I have become much more intrigued by this "Student Loan Bubble" that some suspect is currently brewing and how this is going to impact the economy IF this bubble does in fact burst.

Take a look at this:




And this:


Dude...this mess is crazy. How are you feeling about it? What do you think will ultimately happen? I'm not completely willing to jump onto the "this is going to turn out just like the housing bubble" bandwagon yet...but I'm definitely not confident that we haven't gotten ourselves into a ton of trouble here. But what is the solution?

College prices have sky rocketed, partially due to how easily colleges saw students getting money to pay them. Hey why not up the prices, these students have somewhere to get the cash from! If student loans become more difficult to get does that necessarily mean lower college tuition or just less people going to college? But...is less people going to college a totally horrible thing? I've read that the difference in income for a college grad versus a high school graduate is about $7,500 per year. Now I paid more than that this year alone in my student loan INTEREST. Granted that $7,500 probably becomes exponentially larger as we go farther into our careers...it still goes to show that while college is in fact an investment...it isn't always a good one. I think in all of this student loan talk...people have forgotten about one verrrrry important component of any investment...

ROI.

And with that...all I have left is...

Go Bears!

This is my story...

Placing the Blame as Students Are Buried in Debt

That's a link to this awesome article. Yes, the article is long. But it's my exact story. To the tee. Find and replace New York University (NYU) with University of Michigan (UM), up the salary a lil bit, and up the monthly loan payments toooo....

Okay let's start over.

Speedy Spender, what would you consider the biggest mistake of your life so far?

My school loans. It's such a conflicting feeling. I loved attending Michigan. I miss it, everyday. I was challenged, I learned a lot, met some great peeps, grew A LOT as a person, and thoroughly enjoyed myself. But if I had a choice to do it alll over or walk away and leave all of those great things I gained behind, I'd walk away.

Moment of clarity: I'm pretty ashamed of the amount of student debt I've racked up. Why? Because I don't think it accurately reflects how smart I actually am...which pisses me off. I'm okay with telling people I'm around about the $100,000 mark. But I think I've only admitted to one person outside of my family how much that amount actually is.

Channeling the courageousness of my lovely line sister Samantha...drum roll please...

$139,000

This is the total amount I would have to pay back today, including interest accrued up through January 2011.

Granted...I have two degrees with that amount. That makes me feel slightly better...I guess. In 20 years or so, when I finish paying my loans, I will be able to say that I put myself through school. That's empowering. God has blessed me with a job that even allows me to pay back my loans (a lot of people can't say that) regardless of how uncomfortable and hard it is. At the end of the day...I should be happy right?

Wrong.

Okay, forgive me Lord, for the massive amount of complaining I'm about to do. Please. Thank you.

I have these battles...in my head...all the time, where I try to convince myself not to feel horrible. I have all out emotional break downs asking myself what in the world have I done. Dreams of saving up enough money to purchase my first home...I don't even really think about it...as it stands I'm basically already paying off a 25 year mortgage. My degrees are my house. As of now, I can't even afford to LIVE on my own, renting. In essence, having my own, cozy, 1bdrm apartment, would require me being able to pay two rents essentially, seeing as though my loan payments are a rent in and of themselves. There isn't really anyone to blame wholly. I was young...I didn't know. My parents were proud...and my high school teachers and counselors told them not to worry, getting loans to pay for school was "normal" and my wonderful degree would make it all worth it. I actually think my mom still believes this to a certain extent. She always tells me "this was an investment." And in my head I say "yeah, a really bad one."

Now don't get it twisted. I had scholarships, grants, etc. My cost of attendance as an out of state student was $40k for four years of undergrad and $60k for one year of graduate school. That's $220k for 5 years. My loans, federal and private, account for about half of that pre-interest. So I wasn't just some lazy student unwilling to look for free money. However, free money doesn't come AS easy to middle class students whose parents "make enough" to pay for them to get through school. You know, too rich to be poor, too poor to be rich. That thing.

Anyway, all of this was to say...many of you may wonder how I can be 25 and so financially conscious. I kind of don't have a choice but to be. I've already dug a pretty deep hole for myself. There's very little room for error left.  
I often feel trapped. I often feel blessed. I often feel hopeless. I often feel hopeful. I often feel angry. I often feel overjoyed.

My school loans. It's such a conflicting feeling.

That's my story. If you got nothing else from this post, at least now you know where the name "Speedy Spender" came from. ha!

And while I don't know who to blame...the article raises a good point. Whose fault is it? If lenders and schools continue making school loans so easy to accumulate for students graduating in an economy where they are even less likely to be able to pay them back...will we see a loan bubble similar to the housing bubble? Scary.