Debt - Good and Bad

Jeff at SustainableLifeBlog recently wrote an interesting post on how his view of debt has changed over the past two years. It got me thinking.

There seems to be two different camps of thinking when it comes to debt. There are those who hate it and want it all gone and there are those who use debt as leverage. I'm a huge believer that not all debt is bad and in fact if it is used correctly it can help us increase our wealth.

There are three types of debt that I've had and so I'll only speak to what I know: credit card, student loans and mortgage debt.

I consider credit card debt as bad debt. Not only are interest rates high on credit cards, but often credit card debt gets racked up because people are not living within their means.

I think student loan debt can go either way. Our world requires a knowledge-based workforce and you gain the credential you need for many jobs by going to college. I know I make a lot more money now than I would if I didn't have my higher degrees. However, if you are going six figures worth in debt to get a degree, you may want to step back and decide if it is really worth that much debt. While costs are rising everywhere, there are always other options. I've made all my final decisions about schools based on money and I still believe these were the right decisions. I have student debt, I'm working hard to get rid of it, but I'm thankful for what this money allowed me to accomplish.

Finally, there is mortgage debt. If leveraged the right way you gain a home and you build equity. The recent financial crash taught us we shouldn't take out the biggest mortgage we can and we shouldn't necessarily purchase the biggest house we can afford. However, if you have the money for a down payment, purchase a home that allows you to have payments that fall within your means then I think taking advantage of  mortgage debt is a fantastic way to build wealth. One day that house will be paid off, and in the meantime you are building equity.

I currently have student loan and mortgage debt. I've decided that I'm sick of my student loan so I'm working hard to pay it off over the next two years. However, I'm doing the opposite with my mortgage. I'm trying to refinance to a lower payment so that the rent will cover my costs. Then once the market comes back I'll sell and hopefully make enough of a profit that the money can be used as a down payment for a house for the husband and I. In the meantime, I'm thankful that my apartment is not under water and that every month I'm building up my equity.


Debt is complicated and you have to figure out how much you are comfortable carrying.


picture by Brad_Chaffee

The First Year of Marriage

I apologize for being mia this week and I hope to return to blogging very soon. In the meantime a post I wrote about the first year of marriage is up at the Adventures of Team Pancakes! Please head over and read it if you have a chance.

There is even a real picture from our wedding! 

Would You Give Yourself An Allowance?

I came across this article while browsing through my reader today. The author suggests that after allowing for fixed expenses you should give yourself an allowance for those items that you know you overspend on. I've never thought about giving myself an allowance.

Though looking back I did do something similar when I was studying abroad. I wanted to save my money for weekends spent traveling or hanging out in the city so I allowed myself x amount to use Monday through Friday. I also made sure I had cash so I wouldn't use my credit card. It wasn't a perfect budget, but it helped me reign in my spending so I could spend my money elsewhere.

Shopping bans and spending fasts are popular and I think are a huge help in reigning in spending. But maybe an allowance is the middle ground between spending like crazy and completely stopping. I've never been good at completely stopping anything. Hence, my spending fast fail. Instead, I am a huge believe in finding the balance in all things in life, especially in spending. Maybe an allowance is a step towards doing that?

picture by photophonic

Spending Fast Fail

I'm currently on a spending fast. Basically, I've decided to not spend any money on clothes this month. Or really, anything that doesn't fall into the categories of food and personal care.

I am admitting that I have failed my spending fast. This weekend I went to use a gift card my mom gave me for Christmas and ended up spending $60 of my own money. I knew I should have waited until February to use it!

I have also spend some money on ebooks. Overall, this spending fast has not been going well. However, a few bumps in the road does not mean I should give it all up. Instead, I'm back to focusing on my spending fast for the   last two weeks in January.

picture by ell brown

Friday Fun With Links

The professional side of me found this advice on getting along at work a great reminder that attitude and perception really matter!

It is amazing how privileged Blue Ivy is from the very beginning. What a life she will have.

I’m all about simplifying my life, but not as good as simplifying my digital live.  I agree making new girlfriends when you are older can be difficult, but worth it.

When it comes to politics this is sad, but true.

Finally, on the personal finance front we are spending more and that is a good thing. A good article on why insurance is important. Finally, I do everything this article suggests for automating my bills/savings and not-budgeting. Expect I consider it budgeting. I’m still deciding how much I have to spend and I’m still checking in to make sure I don’t over spend that amount. You can say it is not budgeting, but I don’t believe you. It is just a less strict type of budgeting.

I’m ending today’s Friday Fun With Links with a look back in MEMEoriam...

2011: In MEMEoriam - watch more funny videos

A Financial Check-Up

I try to give myself a financial check-up every January. Mostly this includes checking my credit reports, looking up my credit score on credit karma, and reviewing my retirement accounts and re-balancing if necessary. This gives me a chance to make sure everything is where I think it should be, but also to review how far I've come and think about where I want to go.

Earlier this week I went to annualcreditreport.com to look up my credit report, don't be fooled by those free credit report services that actually charge you  money, this website allows you to access your credit report for free once every 12 months. I was happy to see no surprises.

I also checked out my credit score and was even happier to see my transrisk score to be 780 (it is steadily increasing) and my vantage score to be 923. According to the website a vantage score is:

Your VantageScore on Credit Karma was calculated based on information in your TransUnion credit report and follows a familiar academic scale for ease of understanding: A (901-990), B (801-900), C (701-800), D (601-700), F (501-600).

So as you can imagine I am very pleased! My goal is to continue what I'm doing so that my credit score stays high. My credit report card is all A's except for a B in the amount of accounts that I have. I'm okay with that B.

Last on my list are my retirement accounts. That always takes more thought and time then just checking in on my credit report and score.

photo by aldoaldoz

2012 Travel Plans

I've had two big years of travel. 2010 included three weeks in India and Sri Lanka and 2011 I spent three weeks on the west coast of the U.S. All of this traveling really makes me want to go somewhere big again this year. Traveling always makes me want to travel more!

However, financially a big trip is probably not in the cards in 2012. When the husband and I started dating we once talked about how we want to incorporate traveling into our lives. We decided that an every other year plan was a good one. Every other year we would go on a big trip, most likely abroad. The years in between we would do something local that would be less expensive. This gives us the chance to have enough money saved to  enjoy our trips abroad while having the cash to pay them off.

We may have to stick to some local trips this year in order to give us time to build back up our savings. I'm already going to New Orleans for a conference and hopefully the husband will come along. He has a conference in Philadelphia as well. We also plan to go to Chicago and Toronto. If all goes well we will be able to save a ton of money so that we can do a really big trip again in 2013.

In the meantime I'll just dream about traveling to Brazil, or Cambodia, or Iceland, or Panama City, or ....


picture by Vanessa (EY)

I'm Changing the Way I Save

If I believe anything about personal finance is that it is an ever-changing endeavor. I like to set things and then forget about them, but every once in a while I realize something isn't working. Since I have started my emergency fund I've had a hard time keeping the money in there. Something always comes up and I end up taking a little bit out to pay off one thing or another. The problem is that majority of reasons I'm pulling out money are not emergency related. I realized there has got to be a better way to save.

When the husband and I got married we opened a joint savings account. We both fund this every month and we have slowly seen the amount increase. In fact, this month we decided to raise the amount we each put into the savings account and decided that half of our tax return money will immediately go into this account. Even though we are diligently putting money into this account every month we haven't really decided what this money will be used for. I like to think of it as our down payment or other big life changing endeavor fund. What I do know is that it I did not want to use it as an emergency fund.

So the husband and I decided to sit down and crunch some numbers. Now that there are two of us the likelihood of both of us losing our jobs at the same time is low, especially because of the nature of my husband's job. So instead of adding up 6 months of what we need to survive if we both lost our jobs. We looked at what we would need if one of us lost our jobs, took the higher number and multiplied that number by 6. We ended up with a reasonable number that we were both confident would be enough to help us get through 6 months of unemployment that wouldn't be overwhelming to fund.

The husband had more savings put away than I did, so he was able to fund his half immediately. My savings tracker on the right shows what I have left to fund. I'm much more careful with shared money than I am with my own, so I know that after I finish funding my half it will not be touched unless there is an actual emergency. For once in my life I will have a real emergency fund!

I'm now trying to build up a slush fund of personal savings to help with overages in my budget. While most of our accounts are with ING, I decided that this slush fund should be attached to my checking account. My goal is to build it up to $1000 and then focus on either retirement or travel savings. Once I have an emergency fund completely set up the saving possibilities are endless!

I know, only a complete personal finance geek would get excited about savings. I'm happy to call myself one!

photo by 401K

The Laziness Has Ended

I can admit it. I got lazy towards the end of 2011. It was as if all the drive and all the motivation I used to get through my M.P.A. while working full-time completely drained me. I thought that my 3-weeks traveling would revive me, as traveling normally does. Instead I came back lazier. I went from a highly productive person to someone who had a hard time getting off the couch. While I've always been someone who could sit and watch 6 hours of a movie marathon or a great TV show every once in a while, this was different. I had no motivation to run and I got discouraged just from searching for jobs (not even applying). Needless to say, it was bad.

I do have another theory why the end of 2011 was full of selfish laziness. 2010 was an amazing year for me. I loved my job, I was doing well in school, I got to travel to India and Sri Lanka with some amazing friends and I got married. That is pretty hard to beat. While 2011 also had its high points - I finished my M.P.A., I went on a three week honeymoon, and I celebrated my one year anniversary. I also became bored at my job, and the raise and more responsibility that I hoped for never materialized. As I began my job search, I was discouraged to see how few jobs there were out there. Life was not where I expected it to be.

I am determined that 2012 will not be like the end of 2011. Already the husband and I have started be more proactive (over something too personal to mention just yet), and we are enjoying the city more on the weekends. While I haven't applied for any jobs yet this year, I have been searching for possibilities  and reminding myself that this job search may take a while, but will be worth it.

I am determined that this will be a year of being proactive and determined. I'm going to work hard at getting what I want and be open to new things and experiences. 


That is my pledge to myself in 2012

picture by pixajen

Friday Fun With Links

Every new year should begin with a laugh. Check out these 9 brave predictions. And come on, how could you not laugh when you see this.

No matter what you say, we can all use some simplifying in our life. Here are 5 simple ways to get that started.

How fun would this mug be! I wonder if it changes while you are washing it as well?

With the start of 2012 many personal finance bloggers are putting together their goals. I love how Stacking Pennies also includes her travel goals. I may have to steal this idea. Speaking of traveling, my husband and I really want a world map that we can use to track our traveling. After seeing this, I may just make one.

Since I overspent on clothes and shoes in 2011, I enjoyed reading this post on some new year's clothes resolutions.

This crock post bolognese sauce looks delicious. I'm trying to cook more in the new year, so I may have to try and make this.

As always, I have to end with some cuteness.