Shaving Money ($42,888.33)

As I look for more ways to save money in my routines, I had an unexpected insight on saving money with something that costs more than you realize…shaving. About a month ago, I had the pleasure of seeing Tristan Walker speak at an event. He’s the creator of the Bevel shaving system and an amazing entrepreneur in Silicon Valley. He talked about a problem he experienced with modern shaving products, which was razor bumps. Nasty little ingrown hairs caused by shaving.

He said in the 70’s and 80’s, Gillette and other companies started introducing multiple blade razors claiming they provided a closer shave with less irritation. This just wasn’t and still isn’t true (maybe a closer shave but at the cost of your skin health). Pure marketing BS. Gillette has had to settle false claims in the past. In fact, research is showing that depending on your facial hair type, multiple blade systems are more damaging to your skin and create more ingrown hairs. Specifically, men of color tend to have more curly facial hair and are more prone to these razor bumps. Again, depends on your facial hair type.

I had an aha moment because over the years I have had annoying razor bumps but never thought about my shaving routines. Gillette brilliantly sent me a Mach3 razor when I turned 18 and I mindlessly never looked back. After some research, I found that people are going back to the double edge safety razors because they cause less irritation and they’re a hell of a lot cheaper. A couple weeks later here I am with no more razor bumps.

cartridge_v_double

from hairfreelife.com

Disclaimer: Do what works for you. If you have never used a double edge safety razor, be sure to do some research on how to shave with this type of razor because it requires different techniques.

Gillette Fusion and Mach3 blades cost approximately $2-4 per replacement cartridge, but many of us just pick up a multi-cartridge pack for $20-35. The replacement blades for my current razor…100 blades for $10-14!! Each blade gives you 4-5 shaves. The blades are a lot cheaper and better for the environment because they reduce waste (no plastic). Once you’ve stockpiled enough blades, you can dispose of them properly depending on your city’s metal recycling program. Save money. Reduce waste.

On a separate note, my wife and I took a chunk of savings and threw it at the school debt. $42k left to pay off. It’s happening!

What other creative ways have you found to save money?

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Feel the Pain ($57,693.77)

I haven’t posted in a while. Guilty as charged. I got the taxes done and after all the stuff related to running my photography business alongside the fact that this was the first year that I filed as married, we got a sizeable tax return. Guess where that’s going? Straight to Navient and that good ol’ student debt. Damn I have made some good progress. Yes I am bragging. I have earned it. A couple years ago I was almost $130k in debt (school loans and credit cards). As I look back at my student debt journey, I have been trying to think why I have been so motivated and what keeps me going. One would think it is the satisfaction of seeing that debt number go down every month when I make a payment whether it is small or large…but that just isn’t the case.

It is the pain that has motivated me.

carrot_stick2

(from teen10mag.com)

That is sort of sick. What’s the story? At a basic level, we can think of motivation as the stick or the carrot. The carrot is the dream of being debt-free which is a long term goal, but even the short term goal of seeing the principal balance go down isn’t that satisfying. It’s like trying to lose weight and you’re only seeing a pound of progress per month. It is progress but it isn’t enough to celebrate like crazy. Short term progress over time will yield big results, but for me and my debt, it is the daily pain that has pushed me.

Introducing…the daily interest calculation or DIC for short. And this metric really is a dick. How do you calculate this? This is copied verbatim from the Navient site:

The amount of interest that accrues on your loan is determined by a simple daily interest calculation:

 Your current principal balance

× The number of days since your last payment

× Interest rate factor = interest rate ÷ 365.25 (number of days in a year)

= Your daily interest rate

If you have multiple student loans, you likely have multiple interest rates, so you will need to do this calculation for each loan, and add them up to see all the daily interest.

Once interest is capitalized, it becomes part of the principal balance and interest begins to accrue on the new principal amount.

At the end of each year you should receive a tax document from Navient and each of your loan servicers detailing the exact amount of interest that you paid.

The good news is that the IRS treats capitalized interest as interest for tax purposes and is deductible as payments of the principal balance are made on the loan. However, no deduction for capitalized interest is allowed in a year in which no loan payments were made.

Let’s use my current situation. Current principal balance is $57,693.77. Last payment was 1 day ago. Interest rate is 6.125%. Using the formula above that would be:

$57,693.77 x 1 day x (.06125 interest rate ÷ 365.25) = ~$9.67.

In other words, I am paying $9.67 every single freakin’ day on INTEREST. Every 30 days, $290 is going to nothing but interest. Ouch. Pain. Motivation. That’s a solid meal in downtown Minneapolis every day. That’s a car payment every month. That’s money towards an investment that could earn me some money. That’s a kid’s tuition savings. That’s seeing a movie every day. That’s a couple drinks at happy hour. Whether it is a frivolous purchase or a responsible long term investment, that is cash money going out your pocket and into The Man’s. The opportunity cost of that money is pain that we don’t always think about.

Some people have low interest rates, which is why they don’t feel compelled to pay of their debt in an aggressive manner. I would argue that the interest you’re accruing is actively working against any positive interest you’re gaining. All depends on your unique scenario, I know.

There you have it. Some more insight into what is driving me to pay this beast down. What motivates you?

Lessons in Lending ($85,686.42)

Just a reminder, when I consolidated the majority of my loans the standard repayment plan was going to be 30 years (360 payments) and the interest that was going to accrue over that 30 years would be…

Interest

Deep breath in and…damn it. This was the panic I had before and what had prompted me to write President Obama about the future of people like me. It has been a great journey and I decided I’m going to be public about how much is left for me to pay in the title of my posts as I make progress. I had a stretch goal of $3,000 each month and I decided to bump it up so I’ve been paying $3,500 per month towards my student debt. I continue to find opportunities to make money and cut expenses. I just wanted to share a few things I have learned about student loans. Some of this might be old news or new news, but this is what I have learned.

Paying extra doesn’t automatically go towards the principal. When I started paying extra on my loan beyond the minimum, I would get to the next month and wonder why they weren’t asking me to pay. It was because the loan company used the extra amount to go towards next month’s payment. Depending on the lender, they typically don’t use the extra amount by default to pay down the principal. You usually have to tell them what to do with the extra amount by writing them a letter or making a note on the electronic payment. Some lenders don’t have that option electronically so they make you snail mail the payment with a note. God forbid the lender have a default action that helps the person borrowing the money save on interest. Jerks. Below is a screenshot from my errors and learning moments where I paid extra and it was going towards the following month’s payment. You have to tell them what to do, they are evil and want you to never pay this shit off.

Payments

For lenders that you have multiple loans with, be aware. I had one lender that I had multiple loans with that could not consolidated because of the type of loan. For example, I borrowed $2,000 in one year and another $2,000 the following year, so it’s the same lender but multiple loans at different interest rates. You need to tell the lender how you want your payment to be applied. If the minimum payment is $100 and you want to pay $200 that month, you need to tell them how to allocate the extra amount across the various loans. Otherwise, they just default to applying it equally across all loans and you may be losing money in interest depending on the rates.

Automatic payment may be convenient but it doesn’t get it paid down quickly. I had enrolled in automatic monthly payments and I stopped. Why? Awareness and motivation. Most lenders cut you a “deal” by .25% for enrolling in automatic payments but really it’s a ploy to suck you into minimum payments and only paying on the interest so you never actually pay off the principal. I also found that it created a feeling of pain manually paying each month which I’ve used to motivate my behavior. I’ve learned to channel that frustration into something productive and it forces you to be more aware of where your dollars go every month.

Read your FAQs. Grab a coffee and read through the frequently asked questions (FAQs) on your lender’s website. It’s boring but it will save you money and energy. Each lender is different and evil in its own way. At one point, I had 5 different lenders to log into. Now I have 2. I am hoping to pay another one off in the next 2.5 months.

In January and February, I paid $7,000 in total towards student debt. We can do this!! What lessons have you learned about loans?

President Obama Writes Me Back

Throughout college I used to send letters to the President of the United States on a variety of topics (for both President Bush and President Obama). Everything from education to community issues to my thoughts on the future of our country. I’ve received electronic responses that were usually general responses like the one below.

Obama Letter Electronic

If I remember correctly, I wrote a letter sometime in late 2010 and resent again in April, 2011 about my loans. I didn’t write only to complain, but I wanted to share the challenges that lie ahead for myself and for my generation. The tone was frustrated but hopeful, and a concern I shared was that people like me weren’t going to have families until later for career and financial reasons. I was also concerned that people like me would not be contributing to the housing market as quickly and that the interest being paid on student loans would be a whole bunch of money that could be invested in our country’s economy in a variety of ways.

The President responded.

I initially received the email below and thought it was spam.

Obama Letter 01

They sent me a PDF copy of a handwritten note and offered to send the original to me. The letter arrived in the mail in an ivory envelope. It read…

Eric – Thanks for the letter. I know what you’re going through – Michelle and I had $120,000 in combined debt after we got out of law school. That’s why I’ve made it a priority to expand college grants and a better deal on student loans. So please don’t be discouraged; you are incredibly young, and as the economy comes back, your investment in your education will pay off.

Sincerely,

Barack Obama

Obama Letter 02

Democrat, Republican, or otherwise, it was cool to get a handwritten letter from the President of our country. I was also insanely jealous that his combined debt coming out of law school was $120,000. It was a reminder of how badly I screwed up on my financial aid decisions, but a wonderful reminder that I am, as the President put, incredibly young.

I’m just sharing an update with you Mr. President that I am making some serious progress on paying off the beast. I’m about 4 years older now and the debt is down from ~$128,000 to ~$89,000 (most of that paid in the past year and a half). Seeing what I’ve paid in interest has angered me and motivated me like no other.

If I can pay this off quickly, maybe I can take a run at being the President some day? Just kidding, I’m not eligible for the Office of the President because I was adopted from South Korea. More importantly, it is the most stressful job in the world and most of us can’t plan our lives accurately for the next 4-8 years let alone the future of the free world. I empathize with whomever is in office. Sounds terrible.

While my student loan interest rate is 3 times higher than mortgage interest rates currently, I’ll continue to pay off that school and put off buying a house as long as possible, but I am making progress!

Make Money. Save Money. (even if it’s embarrassing)

I spent time talking about kicking out the victim mentality and last post, I talked about how I’ve been using Mint.com to stop the bleeding. Using Mint helps me understand where I waste the most money. Spend less than you earn. Eat less than you burn. Sounds easy but requires a lot of discipline. There were a few other categories outside of food that were eating away at my money every month. You have two options. Make more money or spend less money. I drew a line down a piece of paper and came up with ideas for both options. Let’s start with what I did on the left side (make more money).

Disclaimer: This is the post I’m struggling the most to share because it is a little embarrassing to share a couple of the things I’ve done to pay off this flippin’ debt. It’s not that I’m broke. I just really want to be debt free.

I got a promotion. I worked hard and got a promotion. If you work hard, ask to be rewarded. I’ll write separately about career stuff. More to come on that topic.

I started a business. I’ve talked about it since my early 20’s. I’ll start a business when I get older…well I’m not getting any younger, so I started a photography business. I identified a variety of skills/experiences that I have that other people would pay money for and I landed on photography. I already had quite a bit of equipment, I love capturing people and events, and it’s a hobby that has really turned into a passion for me over the past few years. I have been learning so much about small business and it has been an amazing learning experience. I have also met a lot of wonderful people in the process.

I give plasma. I gave plasma on and off throughout college and grad school. I used to participate in some medical studies for extra money in college and would get locked away on weekends for research studies but was getting paid to study for class and meet cool people. I don’t give plasma every week, but it is an extra $60 per week when I do. I started back up because I saw they were giving an extra $250 for new donors. It takes about an hour for me to donate and I get to watch House of Cards on my iPad. Not bad. I’ve made a rule that says I can go out to eat if it uses the plasma money.

I sold stuff on Craigslist. I sold random stuff I didn’t need anymore. I didn’t make a ton of money doing this but it helps. It’s amazing what you can find that someone else will buy and the space you could save by purging some junk.

Now onto the expenses that I have cut out…

I stopped eating out so much. I shared that in my last post.

Use discounts and coupons, and leverage your network. I work at Target. I get a discount. I also love using Cartwheel and my Red Card to save money. Ask for discounts. Barter where you can. Clip coupons if needed. I saved a ton of money by working through someone in jewelry instead of walking into a retail jeweler to get an engagement ring.

I cut cable. I kept internet. I realized how much TV I didn’t watch and mostly watched Netflix, free TV online, or watched live sports somewhere else. That was a good chunk of money every month.

I cancelled my gym membership. I tracked how often I actually went and calculated the average cost per time I went. Disgusting. I wasn’t getting much out of it and there’s plenty of free activities to keep me active. Free workouts online, running, biking, sports with friends.

I haven’t had a hair cut in over a year. Initially, this started as a joke. I tried it once without butchering myself too bad and found it to be kind of enjoyable in a weird way. You can get some nice clippers for $30-40.

I have an amazing fiancée and future in-laws. Just over a year ago, I had the opportunity to move in with my fiancée who lives in an old house that her parents own. Her mom grew up in this house, and all that rent I was spending is now going towards paying back my educational investment. Words cannot describe how thankful I am for this. It’s huge! I was paying over $1,000 per month for my 2 bedroom apartment in south Minneapolis. Not sure how long we’ll be in this situation, but I am forever grateful. I know many of you do not have this option but think about how you might be able to make housing cheaper.

Now that we are beginning to plan for our wedding, I’m doing my best to be extra mindful with money to save for our big day. I check in on my progress on Mint almost every day. Make a plan. Stick to it. What have you done to earn or save more money?

plan meme

(from memegenerator.net)

Stop the Bleeding

We’ve established the why and some of the attitudes and beliefs that I’ve held over the past couple years or so in order to make actual progress. Let’s call those the first 2 steps of my financial aid repayment journey. I just pulled up my 1098-E forms for 2014 taxes, and I paid nearly $6,200 in interest last year (almost $11,500 in 2013). According to Mint, I paid just over $27,000 towards loans in 2014. Boom. Let’s get to some of things that I have done to make that sort of insane progress.

Tax tip: You cannot take a student loan interest deduction if your modified adjusted gross income (MAGI) is $75,000 or more ($155,000 or more if you file a joint return). More info at IRS.

Assess the damage. Step 3. Money in. Money out. Simple, right? I felt no control over money. I didn’t think I was spending that much money outside of my monthly expenses, but at the same time, I did not have a good idea of where all my money was going at the time. I was making good money but still felt like I was living paycheck to paycheck. Mint.com has been my savior. For those of you who aren’t familiar, it is a website that you can sync with all your financial accounts (e.g. checking, savings, 401(k), credit cards). Based on the types of transactions in those accounts, Mint will categorize them. You can customize categories, set goals, and my favorite feature is that you can setup text messages and other types of alerts when you get close to your budget for the month. It recognizes patterns of spending too, so I have it text me for unusual spending, which is a great safeguard for theft.

After I set up my Mint account, I quickly discovered where I was financially bleeding the most. Food! I love food, but I had no idea how much I was spending on eating out. I lived alone in a 2 bedroom apartment at the time and cooking for one is kind of a pain, so going out to eat was both convenient and a social event for me. We’re not just talking about an extra $50 each month going to food, we are talking hundreds of dollars going to eating out every month. Insanity. Working in downtown Minneapolis, I was grabbing lunch every single day and most nights was eating out. I also realized how much I was spending on little things here and there online that I didn’t really need.

bleeding

(from memegenerator.net)

Another moment of anger. I felt like a victim again to my own habits. I heard a powerful phrase this week, which is “patterns are our prison.” It’s true. Behavior is a bitch. Let’s say you could cut back $100 per month on eating out. That’s $1,200 extra to put towards anything. That’s an awesome vacation, a new television, some bling bling for your honey, or of course, extra each month to pay off some debt.

While I have made progress on this one category, I still have weeks here and there where I am terrible. I slipped and fell back into bad habits for a while and just over a month ago, I started focusing on this category again. I created the following rules for myself to guide my decisions and behavior.

  1. Eat breakfast at home.
  2. During the work week, I am allowed to eat out for one lunch per week.
  3. I can go out for dinner up to 2 nights per week, and if it’s with my fiancée, we try to use gift cards that we received over the holidays or coupons.
  4. Have only one drink at happy hour.

Rules have helped me. Since I have re-committed to this aspect of my financial wellness, I have saved a lot of money to put towards school, and I lost 7 pounds. If you focus on one goal, you might find ripple effects in other areas of your life. I’ve also coined January as Introvert January. Winter sucks in Minnesota, so I’m hibernating and saving a bunch of money. Food is just one category I changed my spending in and I’ll talk about other categories (some are very embarrassing) in my next post.

The Victim Mentality

Last post, I talked a lot about why it is important for me to quickly pay off student loans. Again, the ‘why’ is what should drive and motivate you.

For a while, I felt a lot of resentment towards my parents about how much student debt I had. For some reason I thought they should have helped me pay for school. I was very jealous of my friends who did not have any school debt (and still am). I was angry at my universities for how much they charged. I was angry at the decisions I made to study abroad on school loans and go on another international trip in grad school on school loans. I was angry I didn’t budget better in college. I was overwhelmed at the thought of what my paycheck-to-paycheck life was going to be for the next 20 years. Yep. Pissed off and disappointed in myself. I didn’t feel like I was in control at all.

The last time I felt like this was in high school. Early in high school, I had no plans to go to college. My parents divorced at the beginning of my freshman year. I decided to stay with my mom who battles bipolar disorder. At school, many of my friends probably viewed me as the happiest kid walking the halls with my big smile and high energy when it was quite the opposite at home. I could probably write a novel about my childhood but I’ll save that project for later on. I had a guidance counselor at school that saw me come in and out of her office frequently with tears in my eyes in between football/baseball practices, work outs, classes, and my job at a fast food place in town. Frustration about the life I had at home and the sense of resentment I had towards my family. I was jealous of my friends who had parents that were present and active in their lives. I was an angry adopted teenager who felt like he was the victim of some terrible crime. I was overwhelmed by the balancing act of school, sports, work, and life at home.

My school counselor saw something in me that no one had ever vocalized in such a beautiful way. She said, “Eric, you are going to get through this and go to college away from here, and you are going to do what you want with your life.” She helped me fill out college applications and registered me for advanced placement courses my junior year and kept me focused on getting the hell out of Madison, WI.

Fast forward to 2013 and I ran into my guidance counselor back home, and I told her I had a master’s degree and worked at a Fortune 50 company. Tears. Hugs. It was a powerful moment of accomplishment and lesson of gratitude. I’ll have to write more about that later on.

Resentment. Jealousy. Anger. It was happening again but now it was financially driven and had come full circle from my high school hopes to go off to college to escape my life at home. I have been there before and I have won. I could not let the victim mentality win again.

It is easy for us to fall victim to the barriers that lie ahead. The barriers that are between us and our goals. For me, it has been a change of attitude. While the sky seems to be falling, I realize that I still have two feet on the ground. I’m still breathing, and I have the resources to overcome these obstacles. I am in control.

control

(from troll.me)

Now that I’ve spent a few posts talking about my vision for being debt free and the attitude shift I’ve gained, I’ll finally talk about how I’ve been making it happen…in the next post.