Iceland

This is going to be brief because I am at work. But this topic interested me a lot.

Iceland's government collapsed yesterday. Hmm. What do people think about that? Apparently in the past decade Iceland has gotten heavily into lending. The Krona (their currency) soared in value and almost everyone quit fishing and went to work for Banks. Fishing had been Iceland's major export for about two hundred years (for obvious reasons) before this whole lending thing happened. Then the European Union called Iceland's bluff. Meaning the EU said "We don't think you can repay all your debts." This caused a run on all of Iceland's banks, and guess what? Iceland's banks COULDN'T meet all their debt requirements.

There is a good lesson here for debtors: don't take out more than you can pay back because someone might call YOUR bluff.

The first thing Iceland did was nationalize all the banks. This was a terrible move because now the debt problem wasn't just the banks who over lent. The problem now became Iceland's goverment's. Whereas if Iceland's government had just let the banks go bankrupt, they could have stepped in and given aid to laid off workers. Making themselves look benevolent. Now the whole f-ing government has gone up in smoke. I realize that any problem that affects a nation's economy is a problem for the nation (and therefore government). But at least had Iceland's government not nationalized the banks, and thus governmentally backed ALL of those bank's debts (most of which belonged to other countries anyway), then right now Iceland might have a government.

There is a good lesson here too: in hard times, people are looking out for number one. They want to survive. Governments should be doing what is best for their people, not what is best to save their credit in the world economy. Because it seems to me that Iceland's government was too worried about their credit rating among other European countries, when they should have been worried about their own people.

updated budget

I posted a few days ago about my budgeting system: paper and pen. But I also said that I have my budget planned out through December 2009. Here it is with a few approximations! approximation #1 is that my rent stays the same for the whole year ($441). Approximation #2 is that the credit card is about $700 per month. Some months (Dec + Nov) might be higher. But I don't expect other months to be higher than that, if anything it would be lower. You'll see my salary get a bump as of July 1st. That is a cost of living adjustment, not a type-o. let me know what ya'll think or if I made any mistakes!



1/9/09 $272 + 1790 - 335(fedloan) - 75(ballet) = $1652 - 76(macys bill) - 28(DMV fee)
$1000 loan, $500 ING

1/23/09 $84 + 1825 - 441(rent) -187(private loan) - 1141.53 (credit card) = $140

2/6/09 $140 + 1840 - 335(fedloan) - 75(ballet) = $1570
$1000 Roth

2/20/09 $570 + 1840 - 441(rent) - 187(private loan) - 700(credit card) = $1082
$1000 private loan

3/6/09 $82 + 1840 - 335(fedloan) - 75 (ballet) = $1512
$1000 Roth

3/20/09 $512 + 1840 - 441(rent) - 187(private loan) - 700 (credit card) = $1024
$1000 private loan

4/3/09 $24 + 1840 - 75 (ballet) = $1789
$1500 private loan

4/17/09 $289 + 1840 - 335(fedloan) - 700 (credit card) = $1094
$1000 Roth

5/1/09 $94 + 1840 - 441(rent) - 187(private loan) - 75 (ballet) = $1231
$1000 private loan

5/15/09 $231 + 1840 - 335(fedloan) - 700 (credit card) = $1036
$1000 Roth

5/29/09 $36 + 1840 - 441(rent) - 187(private loan) - 75 (ballet) = $1173
$1000 private loan

6/12/09 $173 + 1840 - 335(fedloan) - 650 (credit card) = $1028
$1000 Roth

6/26/09 $28 + 1840 - 441(rent) - 187(private loan) - 75(ballet) = $1165
$1000 private loan

7/10/09 $165 + 1880 - 335(fedloan) = $1710
$1000 Roth

7/24/09 $710 + 1880 - 441(rent) - 187 (private loan) - 700(credit card) - 75 (ballet) = $1187
$1000 private loan

8/7/09 $187 + 1880 - 335(fedloan) = $1732
$1000 Roth

8/21/09 $732 + 1880 - 441(rent) - 187(private loan) - 700 (credit card) = $1284
$1000 private loan

9/4/09 $284 + 1880 - 75(ballet) = $2089
$1500 private loan

9/18/09 $589 + 1880 - 335(fedloan) - 187 (private loan) - 700 (credit card) = $1247
$1000 Roth

10/2/09 $247 + 1880 - 441(rent) - 75(ballet) = $1611
$1000 private loan

10/16/09 $611 + 1880 - 335(fedloan) - 700(credit card) = $1456
$1000 Roth

10/30/09 $456 + 1880 - 441(rent) - 187 (private loan) - 75 (ballet) = $1633
$1000 private loan

11/13/90 $633 + 1880 - 335(fedloan) - 700 (credit card) = $1478
$1000 Roth FULLY FUNDED

11/27/09 $478 + 1880 - 441(rent) - 187 (private loan) - 75 (ballet) = $1655
$1000 private loan FULLY PAID

12/11/09 $655 + 1880 - 335(fedloan) - 700 (credit card) = $1500

12/24/09 $1500 + 1880 -441(rent) = $2939

law school laavas

Stemming off a bit from the previous post, law school leaves its graduates with a shitload of debt. That is clear. Here is a great story provided by one of my lovely, lovely readers:

find it on the web here.

Divorcing Law Grads, Stressed Over $190K in Debt, Victims of 'Education Hoax'

Some time after he graduated from California Western law school in 1995, Joel Kellum married his law school sweetheart. The couple had $190,000 in student debt.

Kellum and his wife made $145,000 in loan payments, but they paid off only $21,000 in principal, Forbes magazine reports. The variable-interest rate debt, which leapt as high as 12 percent, was a major source of stress in their marriage, according to the couple, and they divorced last year. "Two people with this much debt just shouldn't be together," Kellum told Forbes.

The magazine uses the couple to support the thesis of its article. It calls the lawyers "victims of an unfolding education hoax on the middle class"—the myth that college and advanced degrees translate to a life of economic privilege.

The average law grad has $100,000 in student debt, according to the magazine. UCLA law professor Richard Sander says the problem can be compounded for African-American students, who are lured in to improve law school diversity rankings without being told that less than half will pass the bar. Schools also "goose employment statistics by temporarily hiring new grads and spotlighting kids who land top-paying jobs, while glossing over far-lower average incomes," the story says.

"There are a lot of aspects of selling education that are tinged with consumer fraud," Sander told the magazine. "There is a definite conspiracy to lead students down a primrose path."

Private loans can be more onerous than those funded by the government, the story says. Many lenders charge 10 percent loan origination fees and 18 percent variable interest rates that start to accrue as soon as the loan is funded. And student loans cannot be discharged in bankruptcy.

Many educators tout the statistic that college graduates will earn $1 million more than high school grads. The magazine examines the claim and says the statistic doesn't account for some facts.

First, the higher salary figure may reflect the fact that college graduates are smarter and work harder—characteristics that could boost salaries for such people even if they don't attend college. Second, the cost of a college degree has risen at twice the rate of inflation, coming to nearly $100,000 for a private school. Third, college students give up about $125,000 in pay for the four years they are in school.

The story cites a College Board study that found one in four college grads earns considerably less than the top quartile of high school grads.

One law school dean, Richard Matasar of New York Law School, says law schools are "exploiting" students who don't succeed in life, according to an account of his remarks at a recent program by TaxProf Blog.

Matasar said registrations for the law school admissions test are flat or below the norm for this year. "That's never happened in a downturn in the economy before," he said. "They're catching on. Maybe this thing they are doing is not so valuable. Maybe the chance at being in the top 10 percent [helpful in landing a good job] is not a good enough lottery shot in order to effectively spend $120,000 and see it blow up at the end of three years of law school."

To me this article really sums up one basic thing: you have GOT to pay more than your monthly payments/interest. The only way to really get out of debt is to start working on the principal. If you can only make your minimum payments, you will be paying 10 times what you really owe. The couple in the article made $145,000 worth of payments that paid off $21,000 in principal. HORRIBLE! The article tries to say they were duped into it. Well, I would have to say I disagree with that. No one is duped into $190,000 of debt. They might be too stupid to realize exactly how much $190,000 is and how long it will take to pay off and how much their interest rate is, but they were not DUPED into taking the loans. They decided they wanted to be lawyers and go to law school. Any law school tuition is online and very easy to find. I have (semi-recently) gone through the loan process and it is very obvious the amount you are applying for. No one fills out the loans for you, you do it yourself. No one filled out the loans for this couple, they signed their own death wish.

But I do like this article for other reasons. I like it because it shows the truth about the fallacy "all lawyers are rich." Law school is expensive and lawyers' salaries have not gone up in the same linear exponential line that law school tuition has. BF's family thinks we are rich because we are both lawyers. I want to look at them and say "you didn't help your son with college or law school AT ALL, how could we possibly be rich?" that is my issue, not yours. :) but still, many people think that lawyers, no matter who they are and what type of law they practice, are rich. Truth be told, there are many lawyers who are rich. But there are just as many people who aren't lawyers that are also rich. Being a lawyer isn't a degree to be wealthy.

I have plenty of friends who married someone they met in law school and combined their debt. It was a big decision for me to marry someone who had more debt than I did. I thought long and hard before I decided I wanted to marry BF (no, I didn't do my thinking while he was down on one knee). Taking on someone else's debt is a HUGE deal. You are tied to this person for life and their creditors can come after you to settle their debt. Although, if you get divorced like the above couple, then the other person's creditors cannot come after you anymore for their debt. There's a little law for ya'll. One of the reasons I thought marrying BF and thus combining our finances would be ok is because we TALKED about it. We talked about our debt, we talked about my concerns marrying someone who had a lot more debt that me, and we talked about how we would pay them off. I told BF that I felt uncomfortable making payments on his loans (after mine are gone). I didn't want all my hard earned cash to go to his debts. Although my views on this have changed slightly now that we are married and happy. We have worked out a system where I fund both our Roth IRAs for the year and pay off my own loans, and he pays as much as he can towards his loans. I am much more comfortable with this situation and it is still a win-win for him too because he gets a Roth IRA without having to divert money away from his loans.

I really believe that the people who don't talk about their debt and talk about their attack plan/repayment plan are at a disadvantage. If you just TALK about what you both want to do with repayment, it makes both your lives so much less stressful! Go out there and TALK, I say!

passion party finances

hello lovely readers! It has been too long! I apologize for my tardiness. This week at work was a biatch, to put it politely. Maybe we'll get into that later, but for now lets focus on PF stuff.

Yesterday I went to a passion party that my friend G was throwing. (Yes, this is PF related, give it a minute.) The host was hilarious and had all us girls rolling on the ground laughing within minutes! I know the girl who threw the party and a few others who were there from law school. It was good to catch up with everyone. Law school is known for giving its graduates HUGE amounts of debt. And while, yes, the starting salaries are higher than say, a non-lawyer. It is still extremely difficult to meet all your debt obligations after you graduate and (hopefully) pass the bar in your state. Take A for example. She was at the party last night and I was chatting with her. She was telling me about a mutual friend, J, who was getting married, etc. Then she told me that she had moved in with her sister. Now, I know A makes a good salary. I'm pretty darn sure she makes more than me (not hard, I get paid very little in the law field). She probably makes low to mid $80s. That's a lot of money in my opinion and she should be able to afford a place of her own. But she told me that she graduated from our law school with $200,000 in student loans and $30,000 in credit card debt. She lived alone all through out law school (I know this) but NOW she decides to move in with her sister to save money? It just doesn't make sense. She then got uncomfortable and said she was sorry for telling me. I told her that I'm actually kind of into personal finance, so I'd love to hear her financial situation. A went on to say "whenever I have the chance I throw $500.00 at my credit card debt." What? $500.00?!? What is $500 going to do against a $30,000 cc debt with an approximate interest rate of 20% (give or take depending on when she missed her last payment)? The interest alone is $500 a month!! 20% is not even a high interest rate these days. BFs brother has a cc bill with 28% interest. She told me all the debt is not on one card and that she is doing a pretty good job of moving the debt around to different cards to capitalize on the low interest rates. W.O.W. As a small side note, I know that G has serious cc debt too. But I don't know how much.


Next she told me that herself, A, J, and G (the girl throwing the party) all have their federal student loans in deferment. All three of these girls make more than I do. I just can't quite figure out how none of them can make their federal loan payments?!? A told me that they all sign up for classes at the local junior college and then drop the classes later in the semester. They sign up for JC classes and send their deferment paperwork into the federal government and then drop the classes after their loans have been deferred for that semester. What do you think of that? I understand that federal loans are not the number one priority to pay off, they aren't my number one. But BF and I are doing interest only until the end of this year. Interest only on the maxed out federal loans is only $335 per month. Thats a make-able amount, I think. After you pay off the private loans, move on to the federal ones.

Moving on in my story, the girl who was our host from "passion parties" had an interesting way of couching her terms. She told all of us, if we were ever in the dog house that we should use this one item on our significant other because then he would forget about "how much we spent on the credit card that day." I was fascinated and completely offended that she would say that. Is that what women are like? Do we spend more money than we have? Do we spend more money than our husband makes? I felt like I was in a herd of cows because all the women burst out laughing like they totally knew what she was talking about. All I could do was look around the room at this point because #1, I am still offended that anyone would think I would spend more than I could pay off AND that I would be spending my "husband's money." Hello, I have a JOB. whatever. and #2 I realize that I am sitting in a room full of people who are full of credit card debt and it is no big deal to them. No one even bats an eyelash because they assume everyone else has a shitload of cc debt too. it was an eyeopening experience for me. And a sad one at that.

After the "passion parties" host finished her show it was time for everyone to buy what they wanted. Fortunately at this point it was really late (midnight) and I needed to get home before I fell asleep at the wheel. Thank goodness I was able to make my exit. Yes, I went to a passion party and did not spend a dime. (sidenote: BF was THRILLED). But A and G were just warming up to get some serious shopping done. These sex toys and lotions, etc. were NOT CHEAP. Let me get this straight, A has $30,000 worth of cc debt, but she is going to drop like $100 on sex crap? SEX CRAP? really? Don't get me wrong, I know some people are really into their sex toys and I think thats great. In fact, I am a total feminist, so I think it is GREAT that this day and age women can sit around and talk about what toys or lubes makes their sex life better. I'm just making the point that A is already so far in debt, it seems to me that the only thing she should be putting on these credit cards is the BARE necessities (like food, rent, and MAYBE car insurance). Our world has become so instant gratification oriented, take sex toys for example. Sex toys are OBVIOUSLY for some instant gratification. People are so oriented towards instant gratification these days that they will add to a $30,000 cc debt principle. It was fascinating to me.

When I left the party I called BF. He was THRILLED that I didn't buy any of the sex crap. because, lets be honest, we're all friends here: all that stuff really is CRAP! I don't need more stuff cluttering up my life. BF and I had a great night together because he was turned on that I DIDN'T buy anything. (Although he wanted to hear about it). People need to communicate more in their relationships, i.e. don't buy something you can't afford if your signifcant other told you not to. and also, people need to deal with a little delayed gratification. Delayed gratification is not what is hip, I know, but it is what is responsible at least in regards to debt repayment and personal finance.

Any thoughts on A's or G's financial situations?

my budget

Here is my monthly expense budget. I will also post my anticipated pay off of my 2009 goals shortly (friday or saturday). I can't post it right now because I have been playing with my withholding. I have changed my federal withholding to single 3 although I left California at single 2. I am now rethinking that decision. California is in such a horrible state (excuse the pun) of bankruptcy that I want to make sure I am not owed a refund at the end of the year. I want to make sure I owe THEM money due to the fact that California is issuing IOUs instead of refunds this year. how embarrassing! I mean, the budget hasn't been approved on time in 3 years. It is pretty lame. I know what I would do, but we'll leave politics out of this blog for awhile, at least until I feel like I know ya'll a little better.

yearly budget divided into monthly installments:
$69,326 divided by 26 = $2666.4 x .70 = $1866.48 per paycheck take home (approximate)

monthly budget:
federal loans $335 -- due on 18th of month
PLUS loan $187 -- due on 1st of month
(loan total: $522)
rent: $441 -- due on 1st of month
utilities: $44
food: $400
gas: $75
car insurance: $118 every 4 months -- due on 30th
total: $1600 (without loans: $1078)



Tidbit about withholding: If your salary is increasing, don't worry about changing your withholding a few times to find the sweet spot. All the fed and the state care about it whether you are increasing your monthly tax payments with your increasing salary. The increases don't have to be linear. you just have to make sure that you are paying more in taxes this year than last year, if your salary went up. The fed and state don't make you calculate your taxes before the year even starts, just make sure to give a "good faith" effort, and give more money than you did last year. but this won't be a problem IF your salary is going up. IF your salary is stagnant (like the economy) or unfortunately going down, do NOT do the above. You must pay at least the amount of taxes you did the year before, unless you were laid off or didn't work, etc. BF and I play with our withholding all the time. Infact, I think I am going to change my state withholding to single 3. just to be safe from IOUs. are any of you scared about this? is anyone withholding a little more because of the bankruptcy?

I also have a few gem Roth IRA articles I plan on discussing here once I get a little more motivated (and time). BF did a lot of research this week and last weekend. GAWD I love it when I don't have to do everything and I know it is being done right. don't you? You see, I'm a bit obsessive-compulsive and, I would assume, most PF addicts are too. am I right? I know I am right about a few of you out there. :) I handle all aspects of my finances and am totally engrossed. But taxes has never been an aspect that interested me. Its probably because you are LOSING money, instead of making it/gaining it. My dad did my taxes before this year, when BF and I got married. Now, it makes me happy that BF can take over the job and not get us into an audit since he has been doing and filing his own taxes since he was 20 or so. yay! But since I track and handle all our day-to-day and monthly expenses, this seems like a good trade off. dontcha think?

In personal news, I am going to a "pleasure party" on friday night at a good friend's house. I have never been to one of these before, so it should be interesting to put it mildly. There should be about 10 of us girls and hopefully a lot more than that of beers. I will let you all know how it goes.

This is interesting and educational! Click away!

http://www.rethinkingschools.org/just_fun/games/mapgame.html

day off!

Today is a great day, if only for the fact that I don't have to work! hooray! I needed a day off. my immediate supervisor really ticked me off on friday. I need some more time to let the steam release. :) There was a big party last night for one of our retiring chiefs. He had been with the office 23 years and the military before that. He truly was an inspiration and I hope the office will have many more like him. Although, to be honest, I don't think the office will. :(

I have noticed a great many bloggers have started posting their pre-blogging life history. MEG started off and herevercentcounts did it too. Vixen gave me a shout out this morning, which was really exciting!! Hi! ::waves::

Hereverycentcounts made some generalizations about what makes a PF blogger. So I thought that I would share my story. Maybe I fall into the generalizations, and maybe not. My parents are planners. wait, maybe I should phrase that a different way: my parents are PLANNERS. They plan when they are going to plan things. I was planned, my approximate birthday was planned, my brother and his approximate birthday were also planned. My parents planned to have 2 children and no more. Although our sexes were not planned. They planned to send us to college and pay for it. My parents planned for my mother to take off several years of work (4, I think) to raise us and then go back to work part time. I come from a family who plans everything. Around the holidays when we are all home, we sit down and plan out the day. "mom and I will do this, while you and dad do that. Then we will meet up for lunch and go play golf." This is comfortable to me. I like knowing what the day holds (unless its work, and then I already know). This has transcended into my married life: if BF and I don't plan something for a weekend, then we probably won't do anything outside what has to be done (i.e. the grocery shopping and laundry).

Both my parents came from mostly poor families. My dad's family is from North Carolina and they were VERY poor. Fortunately, my dad is extremely smart and was able to get a scholarship to undergrad and a scholarship for his Ph.D. My dad's parents could not afford to pay for college for either him or his sister. My mom's family was also not well off, although had a bit more money than my dad's family. My mom's family was from Oregon and they paid for her and her sister to attend a state university. College did not cost what it does these days, so it wasn't that expensive for their parents to pay for. But after college my mom's parents bought her a car, not a nice one, just a car so she could get to her new job.

I am from a fairly affluent town in central california. The cost of living in that area is high. My parents got into the housing market at just the right time in order to capitalize on the (relatively) cheap morgages prices and to also capitalize on the re-sale value about 15 years later. My dad has worked for the federal government for 29 years, so he doesn't make a HUGE salary. and my mom is a reading teacher in the district.

Although my parents have more than enough money now, they didn't have as much when we were growing up. Our family never rented a house and wondered where the next meal was coming from. But, I knew the reason I never got a candy bar in the checkout isle at the supermarket was because we couldn't afford it. I read a post, that i can't find at the moment, who said at the end of month her mother wouldn't eat, to make sure that she had enough. Things were never like that for us. Money was always something we talked about, but didn't have an endless supply of.

My parents gave us music lessons (until we were 18), ballet lessons (for me until I was 12 or so), golf lessons (until we were 18), we also played a lot of sports like baseball and softball. I played field hockey my freshman and sophmore years of high school. And any school activity that cost money was covered. Also, my parents paid for our college tuition, housing, and spending money. I think there is some sort of tax write off for this, but it was nice not having any debt from undergrad. My parents said that if we went on to higher degrees (like law), we would be on our own for tuition, but they would help with housing and spending money. They did this so we could see the value of our schooling, not because they couldn't afford it. Education was always number one for our family, so they wanted to help and encourage us to get higher degrees. And as if I didn't have enough already, my parents bought me a car as a graduation present from undergrad.

So I suppose, my brother and I lived a fairly charmed life. But the most important thing I learned from my parents was planning. Sure, they could have had kids as soon as they got married, but they waited until they were 33 for me and 35 for my brother. They waited and planned so they could have more money and be able to raise a family the way they saw fit.

I have definitely learned this from my parents. My husband and I are going to wait until all our student loans are paid off to have children. I will be about the same age as my mother (32/33) when all this debt is gone. I don't want to bring children into the world who might have to hear about "student loan bills." I think this is one reason my parents marriage has been so strong and lasted so long. They say the number one reason people fight is over money. My parents never fought over money. I guess its easy to say that they never fought over money because they always had it, but the point here is that they waited to have kids until they DID have money. They both had basically nothing when they got married (they each had a car, I think). but they both worked hard and saved for a down payment on a house and then had children.

Also, my family talks about everything. They have always talked about money and any problems we were having at school, etc. If I had questions about money, they were always there to answer them. My parents also want to help future generations, like MEGs grandparents. They will likely set up a trust or 529 for my children and my brother's children's education. As I said before, education is the most important thing in my family.

phew, that seems like a lot, but I could have gone on about my family and their monetary choices. I feel like my parents did the right thing from the get-go, always pay off credit card balances every month and the only debt they had was a mortgage (gone now). BF's parents did things WAAAY differently. I will post on that sometime. If you have any questions, feel free to ask away!