Thursday, January 29, 2015

The Importance of Diversified Goals

I'm not here to talk about investment strategy, at least not in the financial sense. I think we can all agree that you should get that advice from someone with more of a financial background than I have. Instead, I'm here to talk about how you invest your energy in goal setting.

I've always been a goal oriented kind of person. Crossing one thing off my list, and moving on to the next one - that cycle energizes me through everything I do. Paying off my student loans as quickly as possible is just one of the many goals I'm working toward now. I'm also saving for several trips, working toward some running goals, focusing on my diet, and working on new skills for both work and life. In fact, this blog is part of one of my goals - writing twice a week.

So why is it important to have diversified goals?

There are several reasons I think this is important. The first builds off the idea of Dave Ramsey's Snowball Method of Debt Repayment:
"Pay minimum payments on all of the debts except the smallest one then attack that debt with a vengeance. We're talking gazelle intense, sell-out, get-this-thing-out-of-my-life-forever energy. Once it’s gone, take the money you were putting toward that debt, plus any extra money you find, and attack the next debt on the list. Once it’s gone, take that combined payment and go to the next debt. Knock them out one by one." Source - Dave Ramsey
While I don't subscribe to this method of debt repayment, I do think that the Snowball Method can be applied in other areas of life, financial and not. This method basically says that you'll feel good as you cross debts off your list, and that good feeling will help carry you through to the next debt. I think the same can be said of goals - the more you achieve, the more you believe you can achieve.

This means that my debt repayment can't be my only goal - it will take me a couple of years to achieve it. In that time I'm bound to run into discouragement, especially if I don't have other successes to look back on along the way! My goals are spread out over various timeframes, from one day to one year to decades long. Those shorter goals will fuel my success in longer-term goals. In other words, I'm building the framework for success spirals.

Another reason that diversified goals are important to me is that they allow me to change focuses without feeling guilty. Now, I don't mean that I change focuses entirely, but having goals spread out over various interests means that when I can't fathom reading another article about personal finance, I can change gears and work on my half-marathon training plan or take a French lesson in Duolingo.

I spent an embarrassingly long time on this.
As long as I'm working on a goal, I feel fine about changing gears. When I move to something that's outside my goals - outside the grey circle - that's when I start running into problems. Since I have a lot of variety in my goals, I don't feel limited by them.

Finally, it's important to diversify your goals because your goals should reflect who you are. Now, maybe you are a person with only one thought at a time - you keep thinking that thought until you're done with it. I doubt it. I know I'm not that type of person. My goals reflect me, and they change as I change. If I only had one goal, paying off my loans, for the next two years, I think I would go insane. I would almost certainly drive everyone in my life insane if that's all I could talk about.

Having diversity in my goals allows me to have a diverse, fulfilling life. And that's what it's all about.

Monday, January 26, 2015

My one-out, one-in policy for clothes

An area of my budget that I often find myself struggling in is clothing. And it's funny, because I don't really enjoy shopping or clothing all that much. Actually, I really dislike shopping - I find the whole experience overwhelming. Regardless of that, I somehow end up buying clothes every month or so that I don't need, I don't wear, and I ultimately don't even want. Why do I keep doing that?

In an effort to continue my loan payments while also enjoying my life with occasional outings and trips, I took a look at my spending and my priorities, and it became really obvious what area I would be most willing to cut back or even cut out entirely: clothes.

I've never kept a lot of clothing around, and I recently did a pretty major purge of my wardrobe. I share a single closet with my boyfriend, so there simply isn't a lot of room for extra, unnecessary stuff.

Our closet
The rest of my wardrobe

These images sum up pretty much all of the clothing I own right now, with the exception of shoes, outerwear and underwear. There are a few items in the hamper, but otherwise, what you see is what I've got. It's not much.

When I first toyed with the idea of cutting back on my clothing spending, I thought maybe I could do what Mrs. Frugalwoods did - cut out clothes shopping for an entire year. I realized pretty quickly that that wouldn't work. My wardrobe is just the right size, but if something wears out, I don't have much of a choice but to replace it!

Instead, what I've decided to adopt is a "one-out, one-in" policy when it comes to clothes for the next year (and beyond!). That means if something has to go out, I'm allowed to bring something else in. Otherwise, I'll work with what I've got.

A couple of key rules:
  • If I can reasonable mend an item or do without it, it doesn't need to be replaced.
  • An unexpected "occasion" is not a reason to buy a new outfit - I can work with what I have, or borrow from a friends
    • The exception to this rule would be a job interview
  • I can replace my running shoes, once
  • Finally, if I do change jobs and need to step up my work wardrobe, it will be on an "as-needed" basis, with a very strict budget
I think that about sums it up! I'm hoping that this new rule will help give me some structure in my spending decisions, and allow me to free up the extra for loans, travel and enjoying myself!

How do you manage clothes spending? I've never really had a system before, but I know plenty of people budget monthly or annually for clothing.

Thursday, January 22, 2015

I raised my payment with Navient

I made a phone call last week to Navient, formerly Sallie Mae. I was calling about changing the bank account used for my automatic debit (spoiler alert: they couldn't do that, I had to cancel and sign up again with the new account), but while I was on the phone, I mentioned that I routinely overpay my balance. And as simple as that, the customer service representative asked if I'd like to change my payment.

Now, maybe I'm just crazy, but I truly didn't think this was an option. I sort of assumed that Navient wanted to make it harder for me to pay more than my minimum each month, in order to keep collecting interest from me. I guess I was wrong, because when I said, "Sure," the woman on the other end of the line asked what I'd like my higher payment to be and put in a request, just like that.


It will take a month to activate, and about the same amount of time for my automatic debit to start working, but when it does, I'll only have one payment to Navient each month, and it will happen automatically!

This is a little scary, because it means that the payment I set is the payment I'm stuck with, but that's exactly why I went for it. Although I've been good so far about not letting my loans be an area where I pull from when I spend too much in a given month, my willpower has been slipping this month. Now? It's not an option, so I'll just have to find other ways to make things work.

All it took was a simple phone call, and suddenly I'm not the only one holding myself accountable for my extra monthly payment. It's out of my hands!

Tuesday, January 20, 2015

And I know things now, many valuable things, that I hadn't known before

Did anyone else see Into the Woods? I was surprised by how much I enjoyed it! But, I actually am here today to write about some lessons I've learnt, albeit a little too late.
  1. Pay your loans while you're in school - if there's one thing that I would without a doubt go back and change, this would be it. It would have been so simple to pay even just a little bit on my stafford loans while I was in college, and it would have saved me quite a bit in interest. I don't dwell on it, because what would be the point, but every now and then I read or hear about someone much smarter than me doing just that. If not paying while you're in school, at least paying while you're in your 6 month grace period could make a big difference!
  2. Don't take more than you need - I took out loans my first year living off campus to cover my housing expenses, only to realize that I was earning enough in my part time job to pay a large chunk of my rent. That extra money ended up sitting in my savings account depreciating, and now I'm paying interest on loans that I didn't necessarily need.
  3. Think long and hard about what you study - I know. I know. I know this is covered by every single person telling you how to get the most out of college. I got a degree in theatre. I knew going into it that it wasn't a lucrative option, but I did it anyway. It's not something I regret, but if I were to go back? Maybe I'd add a double major in something a bit more practical, or even taken some summer classes or electives that would beef up the "skills" portion of my resume.
  4. Consider where you choose to go, as well - Going to a private liberal arts college is not something I regret or would change. At all. My financial picture would be different had I gone somewhere else, but so would my entire life and worldview. That's not to say that financially it was the wisest decision, and frankly at the time, all I knew was that this was my dream school and I was going to make it work. I'm glad I did, but that doesn't mean it was smart.
These are little things. And you'll read them on any list of finance tips for high school seniors or college students. I think sometimes we see things like this, but because we've seen them so often, we ignore them and move on, they become like white noise while we search for ways to earn more and pay faster so we can spend more.

Like I said, I can't change any of this for myself, but if you're early enough along in your student loan journey to be able to consider these things, don't tune it out.

What would you change about your past financial self? If you had access to a time machine, would you use it? I probably wouldn't - I'd be too scared of changing everything that I'm so happy with now!

Later this week, I'll focus on the positive.

Saturday, January 17, 2015

Mid-Month Mint: January 2015

Let's go ahead and make this a series, shall we?

This month, my Mint pie (that does not sound delicious) is not looking too great:

That "home" section is really taking over - stupid table. You'll also notice that the education slice is a bit underwhelming. Don't worry, I'm not going back on my word already and paying less on my loan. I made a payment at the beginning of January for half of my Stafford loan, and I'm making the other half at the start of next week. I also just sent a check for my family loan, so that will be reflected next week as well.

The food and dining section and shopping sections are, as usual, where I need to focus my energies. I'll talk more later this week about my plans for getting those under control. Particularly when it comes to shopping, I've got a fairly rigid idea in mind, and one that I think I'll actually be able to stick to!

In all, the chart above isn't really surprising to me, but it is helpful to look at my spending like this, and see how one or two decisions can really impact my financial picture. I'll check in on this again at the end of the month, so we can see how the categories hopefully shift a bit.

Wednesday, January 14, 2015

No, it won't "all work itself out" - my attitude problem

I have an attitude problem when it comes to my finances.

I have a nasty tendency to think that things will work themselves out. Basically, if I ignore the problem, it will go away. I'm about to drop some knowledge here - the problem will not go away on its own.

Last week, I impulsively purchased a table. This week, I accidentally spent more than I planned to at drinks with friends. I'm still paying my loans at the rate I planned to, that's not the concern here. The concern is that I'm not entirely sure where the money is coming from. It'll all get paid, on time, but it's going to be a much tighter month, and I probably won't be able to transfer anything extra to my vacation account. A little over a month ago when I opened a second bank account, I planned to put the extra $100 incentive toward my loans - that money is now going to go toward my credit card.

I don't regret these purchases, necessarily. It's the attitude that's a problem. It's the attitude that says, "Future Becca will figure this out." So far, it's always worked out, but I'm setting myself up for failure here. There will, without a doubt, come a day when Future Becca can't bail me out of whatever nonsense I get myself into. That is, if I continue with things the way I have been. So I won't.

Here's where I make a declaration: I am going to change my attitude, and my actions. I am no longer going to defer to my mysterious future self to solve my problems and make my bad decisions go away. I won't be perfect, but I'll try harder and I'll eradicate from my mind the idea that "it will all work itself out."

Sunday, January 11, 2015

Motivating yourself for long-term goals

One of the hardest parts about my goal to pay off my loans is that it requires a lot of motivation, over a long time. To be able to put the majority of my discretionary spending money into my loans means delaying gratification each and every time I want something.

So how do I maintain my motivation? This is something I'm still working on, but here are a few tactics that I've found to be helpful so far in this process:

  1. Set shorter term goals - things like "increase my payment by $50 this month" or my resolution to be under $9,000 by the end of this year seem more manageable.
  2. Allow for small failures - in fact, I plan on small failures when calculating various scenarios for my repayment. There might be a month that I can't pay the full extra payment, and that's okay. I'll just have to find a way to get back on track.
  3. Plan how I'll reward myself - For the first month that I'm debt free, I'm planning to take half of my loan payment to treat myself. I'm not sure yet what that will look like, but you can bet I'm having a grand time thinking of ideas!
  4. Plan my next goals - after I finish paying, I have several savings goals and life goals I'd like to achieve, but I know I can't give them their due focus until I've crossed this one off the list.
  5. Don't delay all gratification - I think I would be miserable if I let myself believe that because I'm paying down loans, I can't enjoy myself. It's just a matter of striking a balance. I'm willing to work more hours if it means I can go on a couple of trips this year while also paying my loans. I'm willing to whittle down my entertainment budget if it means I can go out for drinks twice a month. I might feel differently in the home stretch, but for the time being, I can't imagine spending 2+ years without having any "fun" money to spend, and I don't want to!
These are just a few of the things that have been working for me. What do you find most motivating throughout the payment process? Feel free to share in the comments!

Tuesday, January 6, 2015

An impulse purchase

With a new year beginning, and all of these resolutions whirring about, you would think I'd have a little more self-restraint. Alas, you'd be wrong.

I moved into my apartment a year and a half ago. At the time, it was just me, but I knew that my boyfriend would be joining me over the summer, so I found a place that, while small, would comfortably house the two of us. When he eventually moved in, we moved some things around, made some small changes, found a place to keep his bike, but for the most part, everything stayed the same. That changes today.

Our kitchen table up until now is a piece I inherited from my mom - it's an oval shaped drop leaf table, and the supports extend diagonally to hold up the leaves on either side. It's a great table, but more and more we've been finding that it doesn't suit our needs. It's not the most comfortable for dining, and it's definitely not designed to seat more than two people comfortably. So with that in mind, we decided to purchase a new table, and it's coming today!

Of course, the flip side to this is that the new table (and chairs, because the ones we have now are the cheapest ikea chairs I could find while I was in college) ran us about $300, and it's an expense that *gasp* I didn't budget for. I know I should have waited and saved up for a couple of months to purchase it, but I wanted it now. Not a good reason, not a good practice, and I know it's something I need to work on. When I decide I want something, I can get a bit obsessive. I was the same way with my bicycle, but you know what? $500 later, I have a great bike that I rode quite a bit in the fall and I'm excited to pick back up in the spring!

So, I could beat myself up over the table. I'll have to borrow from my savings to pay off my credit card this month, probably, and that's not a great feeling. But what's done is done, and I'm excited to have something that's ours, not mine. We're keeping the old table, folded down, and we're going to try to find a way to store the old chairs as well, so we suddenly have twice as much seating and we can host more humans in our apartment. Maybe I should feel guilty about all this, but I don't.

Thursday, January 1, 2015

My New Years money resolutions

Until last year, I hadn't been one for New Years resolutions. I made them, certainly, but they were always vague, and mildly impossible. Last year, instead of ambiguous big picture items, I made concrete goals. Most of them were a reach, but none of them were totally out of the question. Looking back at the things I've done this year, I think I did a great job!

For this year, I'm focused a lot on my finances, with a couple of other goals thrown in for kicks (and to keep myself from turning into a robot). So, here they are:

  • get my stafford loans under 9k - if I pay according to the plan in place now, I'll be under 10k, but I'd like to believe I can do better than that. It's about reaching, after all, and if I don't succeed, I'll still have paid off more than I would have otherwise.
  • find a way to earn from a creative side hustle, whether knitting on etsy, writing, or some other wort of creative work.
  • learn a new skill, preferably a marketable one. Whether it's something I learn at work, through a professional development class, or by teaching myself, I'd like to walk away this year with something learned.
  • take advantage of my employer match for my 403(b). That will kind of happen automatically, but it's still a big deal. This is assuming I stay at my current job through at least July, or that my new employer considers time previously served.
  • don't spend beyond my travel budget. I've been contributing for the past few months to a travel savings account, and I'll continue to do so. By this summer, I'll have several hundred dollars saved, which is what I'll use to find my airfare and any housing costs for my trips. When I run out, I'll ever have to find it elsewhere in my budget (lighten the grocery load, spend less on entertainment, etc) or else stop traveling, period. Which means I'd better figure out where I want to go, how much I'll need to save, and get on that!
  • open and contribute to a holiday/birthday savings account. I don't buy for a lot of people, but it sure will be nice to be able to pull from there instead of trying to scrape money together each time something comes up. As more of my friends start getting married, this will also be the one for wedding/shower gifts. Man, having friends and family is expensive...
  • continue to use mint to track finances regularly

So, a kind of long list, and it doesn't take into account my other resolutions/goals, but in general, I feel pretty good about it. Most of it is just taking what I'm already doing and stepping it up a notch. All in all, I think it's going to be a good year.

Happy 2015 everyone!