Personal Finance Benchmarks for 20 Somethings – Debt

I was recently turned on to a site that has a slew of metrics for 20 somethings. I have been searching for some time for data like this so I can compare our household finances to that of our peers. In turn I hope to find out that we are doing better or worse.

The metrics I found were located here.

All the data for these stats came from the Survey of Consumer Finances, Federal Reserve 2007.  This data is interesting as you can separate the numbers by income further breaking down the measurements for a more meaningful interpretation. So the data might be a bit dated and will not include any changes from the “Great Recession.”

My next several posts will be looking at different metrics and comparing my wife’s and my personal finances to these benchmarks.

Debt

The first subsection I will explore is Debt.

According to the stats:

80% of 20 somethings have debt

94.4% of 20 somethings in our income range have debt ($40,000-$60,000)

I am not sure if it is comforting to know that we fall within 94.4% of our peers, but I guess company is company.

45.4% of 20 somethings have credit card debt

61.6% of 20 somethings in our income range have credit card debt ($40,000-$60,000)

Now this stat is comforting. My wife and I have temporary credit card debt weekly which we in turn pay off before any interest is accumulated. We have stocked up 25,000 world points (which I discussed earlier is only a 1% earning) through this process. So not only have we beaten the majority of our peers, but we have made a bit of change in the process!

34.7% of 20 somethings have student loan debt

40.9% of 20 somethings in our income range have student loan debt ($40,000-$60,000)

Now I am unsure how to interpret this data. There could be several things going on. First, one would assume that the majority of college students are people in their 20s. Maybe this assumption is wrong, but as you go through the 30s, 40s, 50s+ the % of people with student loan falls, so this assumption is probably correct. That argument does little to explain why such a small % of 20 somethings have student loan debt. If anything one would assume it would be higher.

A second assumption is that maybe many college students are graduating with no student loans. Maybe parents are paying 100% of peoples rides. Maybe more students are working their way through school with no debt. I find this theory also unlikely as the majority of podcast, problems, and other financial blogs out there concern student loans. These could be the vocal minority through.

The final assumption, and the one that may be impacting this study is a failure on my part to realize how many people do not attend college. I am not attempting to be elitist, but rather after spending the last 6 years of my life on a college campus involved in that life you just come to assume that college people are everywhere as that is primarily the only people you interact with.

Now that I am outside of the “college bubble” I start to hear more and more about the growing high school drop out rates, teen pregnancies, and other issues impacting today’s grade and high school youth.

The assumption that the majority of Americans in their 20s carry no student loan debt is, in my guess, two-fold. There is a minority of students (say 10-20%) who are lucky and have a full ride through school through work or parents’ generosity, and a much larger majority of students (40-50%) fail to make it to college and in turn do not incur any debt.

In these paragraphs I am looking purely at a population that would attend college. I know there are thousands of jobs in the American economy that require no college education and can pay very well. I am not an advocate that college is for everyone and on the contrary believe that there should be a greater emphasis in American high schools on placing kids into the right programs (technical schools, programs, and job placement) and less emphasis on every kid in college.

63.4% of 20 somethings have installment loan debt

74.3% of 20 somethings in our income range have installment loan debt ($40,000-$60,000)

I am making an assumption here believing installment loans to be primarily auto though it surely contains other sources of monthly payments outside of the other major categories (student, mortgage, credit card) loans.

Again my wife and I have beat the odds and ended up being on the good side. We currently have no auto loans or other installment plans and in turn have that much less pressure on our financial peace.

24.0% of 20 somethings have a mortgage

33.2% of 20 somethings in our income range have a mortgage ($40,000-$60,000)

Now this is a tricky one to analysis. Yes, my wife and I do not currently have a mortgage. So we are in the majority of people in our age group who are most likely renting or living with our parents.

I find unnerving the number, and acceptance, of “boomerang” kids (kids who go to college, graduate, and return home to live with their parents) have today. When is a kid expected to grow up, take responsibility, and learn to live on their own? While there are uncontrollable circumstances in the world that can force a kid to temporarily live with their parents (1-2 months) the number of kids living with their parents 1-5 years is insane. Growing up it was a fact that at 18 I was an adult. My mother wished me the best in my endeavors, sent me to college, and proceeded to redecorate my room even before I left. Growing up with that expectation of being required to fend for myself at 18 forced me to confront my future adulthood and be a stronger adult for it. I can now live in the current world, pay my bills, and support my family… I believe many of those skills are inhibited from being fully developed by parents wanting to give their kids some more time to “grow up”.

Now even though today, at age 25, we do not have a mortgage it is a goal of my wife and I to purchase a home in the next 2-3 years. So, we may still fall into this minority of 20 something home owners in the not-too-distant future.

In conclusion, in relation to debt I feel my wife and I stood up pretty good against the national averages of our peers. We tended to be on the right side of the various debt ratios and appear to be on track to go into our 30s financially successful.

How did your own personal finances measure up?

Posted in Education, Expense Management, Finances, Financial Tools, Graduation, Graduation Finances, Personal Finances, Resources, Student Loans | Tagged , , , , , , , , , | 4 Comments

Auto Expenses – The most frustrating dollars you will ever spend

If you are like me you cringe when you throw money into your cars. Yes, they are a means to an end. If you cannot travel to your job you will have a hard time making money which could have serious long-term effects.

This issue I arrive at when looking into car expenses is that the money has no value other than transportation. That dollar I just sunk into fixing a tire or tinting my windows will never be seen again and ultimately will be followed by future dollars to again fix the same tire or tinting 5 years  from now.

I am currently between two relatively large auto expenses:

Retinting my work car (1998 Mazda 626)

Fixing and/or Replacing my wife’s front tire (2008 Honda CRV)

I am still trying to figure out why my wife gets all the new toys. New cars, new ipods, new kindles, etc etc. I guess I should just consider myself lucky as I eventually get to inherit her hand-me-downs.

My Issues:

Mazda

For the car tinting I have gotten estimates that range from $90 for just the front two windows (potential driver safety) to “deluxe” packages up to $250+ range for full car tinting. The issue I have with this entire exercise is that I am the only driver of my Mazda 99% of the year and I can see fine through the slightly wrinkled tint and by deductive reasoning no new tinting should be required. My mother and wife have instead ganged up on me and are in the process of wearing me down arguing it is a safety issue of the utmost importance and if not fixed immediately the dogs of hell could be released… and nobody wants to see that.

Honda

My wife’s front tire, on the other hand, is a necessity that will require attention immediately. My wife and I returned from a four-day trip to Indiana to celebrate my sister’s graduation to find that our car had developed a flat in the parking garage. What a wonderful conclusion to a one hour drive, two and a half hour flight and a two-hour drive left to get back home.

Tomorrow my game plan is to first take it to a tire repair shop as my brother and I believe it is but a minor leak somewhere we just could not find where. If that option does not satisfy my need for safety for my wife and our baby that she is carrying then we will look into replacing the tire completely. I will give an update to this post tomorrow with how the numbers break down.

Repair vs New

The decision my Wife and I went with was to repair the tire. I find that the concept of refurbished or repaired items was at first something to avoid. It seems that many 20 somethings, and maybe just people from large families, always want to get something new or replaced with something new. There is a negative connotation with getting a hand-me-down.

In the end by repairing our tire for $12.75 we were able to safely save over $100.00 as the cheapest price I could find for a CRV specific tire was $120.00.

In the end auto expenses are a necessary evil and one I will most likely never truly get over. I would be very interested in how others view auto expenses. Please feel free to leave comments below sharing your views on the “black holes of budgets” or how “freedom of the open roads” sets your world on fire.

Posted in Auto Finances, Expense Management, Finances, Personal Finances | Tagged , , , , , | Leave a comment

How to pick a Graduation Gift

When a young (or old) person graduates from high school or college it is a time of transition. They are leaving what has been home for the last four years and dispersing to make their mark on the world. Graduations are also a time of family, celebration, and, in turn, gift giving. How does one pick the perfect gift to recognize the achievement and efforts it took to reach the milestone of gradation? I have identified three types of gifts I have experienced and debated buying for others at different times below:

  1. The Novelty Item
  2. Item to Start New Career
  3. Cold Hard Cash
  4. My Presence at your Special Event

1. The Novelty Item

When purchasing this gift you are looking for the most trendy item on the market today. This item will show your graduate that you understand what is cool and that you want them to also be seen as a trend setter as they start out on their new life. A great example of this gift right this second would be the infamous… iPad.

2. The New Career

This gift is a recognition that your loved one has moved on up in the world. If graduating from high school this may be a new wardrobe for college. Buy some new jeans, shirts, shoes, socks, underwear, etc… and let him or her redefine themselves as they see fit.

If graduating from college this could be their “get a job” suit. Often, new graduates have zero money saved up, and unless they are lucky enough

to land a job that pays an upfront bonus of some sort they will be severely strapped for cash to purchase that first suit or outfit for work. By providing their first professional outfit you are not only setting them up for success, but could potentially be preventing the start of the credit card spiral as they charge, charge, charge to ensure they can “fit-in” at the office.

3. Cold Hard Cash

This is the gift most commonly given in my opinion. This is not because people just love to give cash, but on the contrary people often feel giving cash is a cop-out. This option is often used as a last resort if no other gift can be thought of to reward and recognize their loved ones.

I contend this can be one of the best gifts for a new graduate. While, yes, they will forget that you wrote them that $20, $50, $100 dollar check probably 5 minutes after they cash it you will be helping set-up your new graduate by reducing the anxeity of starting out on their own.

No one ever truly knows another persons financial portrait unless that person goes out of their way to make it very clear what that portrait looks like. Graduates are probably even less prone to discuss how they accumulated $50,000 in student loan debt, need to make a down payment on an apartment and that their car has been running on three flat tires for the past 3 months. By gifting cash you give the new graduate the power to make those new adult decisions on how to prioritize their money while also helping to reduce the stress that is present with any coming-of-age milestone.

4. My Presence at your Special Event

While I do not want to down play this “gift” I do feel this is a legitimate way to celebrate a persons success, especially if you are strapped for cash and just paid $500 in plane fare, $300 in hotels, $200 in food, and $200 in rental cars just to be at that loved ones event. Not everyone plans ahead for the day that special person graduates, though much like pregnancy you should probably have a pretty good idea when this event will be happening and can save beforehand. So if you find yourself a month out before graduation and are choosing between paying your car payment or giving your brother or sister a cash bump to start out. Do both of you a favor and pay your car payment. I have rarely seen placing yourself in a bind as something that starts out a new graduates life that much easier.

What gifts have you found to be the most successful at Graduations? High-School Graduations? College Graduations? What was your most memorable gifts from these coming-of-age celebrations?

Posted in Education, Finances, Graduation, Graduation Finances, Personal Finances, Resources | Tagged , , , , , , | 3 Comments

Happy Mother’s Day

This post is a thank you to all the mothers in the world. There is often a lot placed on a mother’s shoulders including the Finances of the household.

To all the mothers who are cutting coupons, balancing check books, making it work on one income, and still finding the time to raise happy and successful children I commend you.

Keep up the great work and know while we may not always show you the appreciation you deserve this is the one day where we get a chance to take a second and recognize your hard work.

Posted in Personal Finances, Resources | Tagged , | Leave a comment

Coffee Today vs House Tomorrow

Good Morning Readers,

As I was going through the financial blogs I read daily I saw a great article at www.DelieverAwayDebt.com in which he explains how cutting out a coffee a day can have a major impact on your finances.

Friday Frugal Tips – Don’t Get Nickel And Dimed

While the article is true and the math can be staggering as you extrapolate out the data I was reminded of the Quicken Personal Finance podcast I had listened to just last week. The podcast had on a financial planner who said that people get to wrapped up into the nickel and dime savings of day-to-day living and that it should not be the approach 90% of people should take to start saving money.

His argument is that if people would spend the same amount of time and energy on the major life decisions (Insurance providers, home mortgages, car loans, etc) shopping around for the best packages they could in turn save thousands upon thousands of dollars which in the long run may make that $4.00 mocha you are enjoying less of a strain on your daily finances.

Below you will find an example of how just a bit of interest rate shopping could potentially have a HUGE impact on ensuring your family’s financial peace of mind:

Home Value Down Payment Loan Amount Interest Rate Interest Paid Cost of Loan
Bank 1 $120,000.00 $20,000.00 $100,000.00 6.0% $51,894.23 $151,894.23
Bank 2 $120,000.00 $20,000.00 $100,000.00 5.0% $42,342.85 $142,342.85
Bank 3 $120,000.00 $20,000.00 $100,000.00 4.5% $37,698.79 $137,698.79
Net difference $14,195.44

Assumptions:

  • Down payment 20% of loan value
  • Minimum Payments
  • 15 Year Fixed Rate Loan

Now using DeliveringAwayDebt’s math of $5.00 a day in latte’s costing you $1,825 a year by spending some extra time shopping around for your home loan you could potentially have coffee with no net change in your financial picture for 7 years and 9 months.

The take away from this article is that watching for the nickel and dimes can have a significant impact. Just be wary of getting caught up in the little details and miss the big financial decisions that could have a much larger impact on all aspects of your life.

Question to Readers:

Have you ever missed a major financial decision that you wish you could go back and change? Got locked into an interest rate that killed your monthly budget down the road? Please share your stories in the comments.

Posted in Finances, Personal Finances, Resources | Tagged , , , , , | 4 Comments

Yakezie challenge

Good Morning Readers,

I am attempting to join a group of financial bloggers via the “Yakezie Challenge.” The goal is to gain more legitimacy as a personal finance blog, attract more readers, and to gain insights into how I can improve the content and quality of my personal blog.

If you are seeking more information on what exactly I am doing please check out these two post:

Financial Samurai’s introduction to Yakezie post

Yakezie Challenge report on Credit Card Chaser

Posted in Uncategorized | Leave a comment

Purgatory of Student Loans – The Grace Period

I am writing this post in honor of my sister who will be graduating from college in two weeks. The sooner she comes to terms with her debts the sooner she can work her way out. My brother made the joke recently that as my sister passes the podium degree in hand I will have her loan repayment schedule waiting for her. My three step response was as follows:

1. Buy a Lotto Ticket

2. Win Lotto

3. Pay off student loans

I later reflected on this joke and realized it stemmed from what many college students face when they get to the opposite end of that podium. A sense of a tunnel with no light at the end. May the post below be your glimmer of light.



Purgatory is defined by dictionary.com as “any condition or place of temporary punishment, suffering, expiation, or the like.”

I believe I am in Student Loan purgatory, the grace period. Students have 6 months after they graduate to set themselves up financially before the harsh reality of student loans sets in for a 10 year ride. The students who see the light take this purgatorian opportunity to seize the day and make huge leaps on reducing the principle on their student loans that will pay in dividends over the years. The students who look down during their purgatorian vacation slowly realize on that 6th month and 1 day that the vacation is over.

Now my situation is unique and as I found out over the last 15 months very beneficial. As you will find out over the course of my blogs I am a “silver lining” type of guy. Now as I laid out in a previous post I had over $50,000 in student loans as broken down below:

Subsidized $8,500.00
Subsidized $17,000.00
Unsub @ 6.8% $26,507.65
$52,007.65
Interest Accumulated $   2,420.22
Total Liabilities $54,427.87

Before going further I must go into detail on my unique circumstances. Typically when one graduates from college he or she goes out and seeks a job. In my situation, in order to graduate from my graduate program I had to complete a one year paid residency in which I lived in the community, worked 8 to 5 at the organization, and completed some topical paperwork on how my on-the-job experience rounded out my didactic studies. The key word to the situation is the “paid residency.” So technically I was still a student and yet had an income to cover my living expense and then some. Essentially, I had my 6 month grace period turned into an 18 month grace period, but nothing is free of course. During that 12 month paid residency I paid out $3,894.00 in tuition in addition to all the payments I was making to my student loans to keep from going further into debt.

So the “silver lining.” I had 18 months to make the biggest dent in my student loans possible which will in turn save me thousands over the course of the debt. The goal was to pay off the interest accruing unsubsidized debt before the grace period of June 15, 2010 comes around meaning we had a $28, 927.87 dollar hill to climb. Daunting to say the least.

Tools to complete the Job:

DINK (Dual Income with No Kids) household – Both of us are paid bi-weekly meaning we had a total of 4 extra paychecks a year. I automatically considered half of each of these paychecks, and sometimes more, as earmarked for the student loans giving us an even greater accelerated pay-off period.

18 Months in which to break down payments (would have to average at least $1,607.10 not including any additional accrued interest over the 18 month period)

Intangibles: Knowledge of loans, income, expense, and determination to take aggressive steps to rid self indebtedness

Understanding of student loan process at ACS-Education (a BoA loan agency)

I found out my 3 student loans had been placed into 2 groupings. The first had one part the $8,500 subsidized amount at 3.475% variable rate. The second had two parts. $26, 507.65 unsubsidized and $17,000 subsidized both at 6.825% fixed rate.

I am not 100% sure how I figured this out, but I could chose between the two groups to make my payments. So of course I made the payments to the 6.825% rate. What I came to find out 6 months later is that the loan company was dividing principles payments between the subsidized and unsubsidized portion meaning that I was paying down principle amounts on loans that were not actively accruing interest against me while the unsubsidized half of the loans were.

I learned that I had to make a verbal request by calling their 1800 number, could not set-up a standing order, to have the entirety of my payments applied to the unsubsidized portion, thus decreasing the total amount of active principle ticking interest against me daily and in turn saving me more money. I have made this phone call for every loan payment since I discovered their allocation method.

All this to say, I stumbled upon this phenomenon and because I got lucky and discovered the process to give my loan payments surgical precision I was able to save substantial amount of money which in turn got applied to the principle saving me eve more money.

Be very critical of your loans and do your homework. The credit companies are not there to walk you through the process, they want to make as much money off of you as possible.

Consolidation

I thought that consolidation was some magic process that my loans were reduced and the payment period could be shortened. I was very disheartened to find out that consolidation does nothing but make it more “manageable” for the lendee to make payments. The basic consolidation equation is the weighted average of your student loans + a charge or fee for the process. The only scenario this would be an effective measure is if the majority of your student loans was on a variable rate plan with an extremely low rate at the moment. Since over 80% of my loans were at the fixed 6.825% rate it made no financial sense to pursue the consolidation adding an additional 1-3% charge to the principle for the process. Also, I found that consolidation did very little if you were on an accelerated pay-off period, because by the time you saw any savings from the reduced interest rate you could have paid off the majority of the loan.

Payment Time-line:

2009


2010


So as of today I am approximately $2,000 away from our goal with two months of payments left to make.

Why?

You may be reading this wondering why are they in such a rush to pay off these loans. Student loans have a tax incentive up to $2,500 dollars, they are “good” debt, and we had 18 months to say up money.

The biggest reason why we got debt crazy is because I do not like having my money spent before I make it. Knowing that nearly $400 of my money would be gone before I even brought it home pissed me off. I also have a strong feeling that if we had not made a conscious decision to apply this money to something constructive we would have found ways to waste it away. The trap many 20 something’s fall into, buying cars with payments, tvs, and other expensive toys. This task was not easy and as I broke our financial picture down into ratios we learned we were giving 20 cents (20% of take home pay) of every dollar we made towards our student loans. The thing that makes us sleep easier is knowing that 20 cents over three years is a lot better than paying 10 cents a day for the next 10 years in turn “making” us money.

As you read this post ask yourself if you have a firm understanding of your student loans. Do you know your interest rates? Do you know when your grace period ends? Do you even know how much your student loans are? Now is the time to take an hour and figure these questions out. That one hour could be one of the highest paid hours of work you ever make potentially saving you thousands in the years to come.

Please leave a comment below outlining what student loan situations you may be in or how you paid yours off. Did you find this post helpful in framing how you approach your loans?

Posted in Education, Finances, Personal Finances, Student Loans | Tagged , , , , | 6 Comments

April in Review

To our readers.

Below you will find an honest and very revealing statement of my wife and I’s accounts. We know this is a very taboo subject, to share one’s personal finances, and my wife and I have been struggling with exactly how much information to share. We kept coming back to what we look for when we read financial topics, real world examples with concrete numbers. Without the actual numbers financial writers are essentially spouting theory and principles without bridging how those theories and principles may look like to a individuals finances. We are hopeful that the data below will be helpful in creating understanding of our personal financial situation, and in turn provide inspiration to start your own personal financial journeys.

If you feel in any way uncomfortable knowing these personal details please redirect yourself from this post now.

Thanks!

W & B


April in Review


Revenue vs Expenses:

As you can see we successfully saved more than we spent. You may notice these small black lines falling down from the peaks on the “Revenue” line. These represent 10% demarcation. Our goal is to shoot for a 10% savings each month. Sometimes we make it, and sometimes we don’t. Often times when we don’t it is because we have done some super payments to our student loans.

Another interesting line we have placed into our Revenue vs Expenses graph is what were our expenses without the payments to student loans. As we were doing our expenses last year we just had the red expense line present in our graphs, over time we felt it was not a good indicator to see if our “living” expenses were trending up, down, or remaining stable. As you can see in April our line was relatively stable and continues to remain below what we spent in 2009 which is good as our income will be cut in half in a few months when B will be staying home with the baby.

Expense Trending:

We continued to see a great expense management month in April as our total expenses without student loans came out at $3,288.91. This is still a bit high for what our budget will be after B quits her job at the end of June, but we believe this will be manageable as we had over $300 in expenses related to our Cruise Vacation recently which trickled down to our bottom line. We were also proud of the fact that we were able to meet our tithe amount for this month ($617.10 of the $3,288.91) giving back to various community organizations to improve the lives of others.

Loan Trending:


We crossed the $30,000 milestone in our student loans!

In April we saw a chance to take on a significant portion of our student loans. We were able to pay $3,750.00 towards our loans this month representing roughly an 11% reduction in the principle. This extra large payment was largely possible due to the extra paycheck I received this month (one of the two extra paychecks a year on a bi-weekly compensation schedule).

We are currently working on an accelerated schedule trying to get as much of the student loan paid off before B quits her job to raise our new baby. Our goal is to have the unsubsidized portion completely paid off before the two subsidized portions of the student loan kick in. That will equate to roughly paying off $26,332.05 (51% of total student loans)  in approximately 14 months. An aggressive goal, but one we both felt was obtainable without sacrificing our standard of living to an extreme.

Interest paid year-to-date 2010: $288.24

(Tax limit is $2,500 for tax benefit for student loan interest)

Cash Flow Statement:

During this month we made several large movements in our cash positions across accounts. We made a large payment towards our student loans leveling off our liquid cash statement at around $18,500 mark while making a very positive move in our net worth position. During the last week of April the stock market took a big dip (mostly on April 30). Due to this fact we moved approximately $2,250.00 ($1,500 from checking, and $750 from savings) into our investment money market account to take advantage of some lower stock prices in early May.

Our current stock position is made up primarily of a pharmaceutical holding company, PDL BioPharma, Inc. (NASDAQ: PDLI), which we invested in during March to take advantage of two special dividends that would be present in 2010. We currently hold 1925 shares at a weighted average of $6.85 each. If the price remains under or close to the $6.00 mark we will most likely buy another group of shares in anticipation of gaining equity and dividends as investors buy back in during October for the $0.50 special dividends. Our plan is to hold the stock until the dividend pay out at a minimum and then reassess the situation on whether to liquidate the equity or hold the shares.

We are by no means stock market experts and are not recommending any stocks. Please invest at your own risk.

Net Worth Calculations:


Net worth is a snapshot of ones ability to pay off their liabilities given the assets they have at their disposal at that very moment. I will not say that the way we are tabulating our net worth is 100% representative of all assets that could be sold, but below you will find the break down of accounts that goes into the calculations:

Liquid Net Worth

BoA Checking BoA Savings BoA Credit Card ING Savings Stocks Money Market

Fixed Net Worth

BoA Checking BoA Savings BoA Credit Card ING Savings Stocks Money Market 401K (Warren) 401k (Barbara)

As you can see I include some “fixed” or “long-term” assets into our fixed net worth. I like to include these into the fixed net worth because they could technically be tapped in some sort of dire emergency if needed. I keep them out of the liquid net worth as such an emergency better be life or death meaning they really are just untouchable accounts. The great thing about monitoring this net worth over time is that I get a series of snap shots that when graphed like above can show a significant movement in the right direction.

There is a good chance B and I may cross over into the positive (+) net worth section this year which would be very exciting. This, however, is not a goal that we set out upon this year. If it happens we will be very excited, but with the other major life changes taking place (going to a one income household and adding a new member to our family) if it does not happen we would not consider it a failure.

We would be very interested if anyone can help direct us towards some reference material on what the average “20 something” family has in net worth. Are we ahead of the curve, behind, right on track, etc. ? We always like to compare against peers.

Notable Changes:

Extra Pay Check (Revenue Category: Warren): $1,470.02

Closed Old Savings Account (Revenue Category: Misc Checks): $98.01

I found out that I had a couple of accounts still open from High School in my hometown. I contacted the bank and had them closed. Since we have started tracking our finances in detail I cannot tell you how many times you “stumble” upon money that help you reach your short and long term financial goals.

Cruise (Expense Category: Other):  $ 396.94

Loan Payments (Expense Category: Student Loans): $3,750.00

Energy (Expense Category: Fixed Expenses): $46.36 down from $61 prior month

Conclusion:

In conclusion, April was a great month for our household. We were able to take a vacation, made significant improvements in reducing our student loan debt while also taking advantage of stock market opportunities (we hope), and have done well in managing down our expenses to a level that will be appropriate in the future as our income will shrink.

All the analysis was performed by us with the help of excel sheets that we created from the ground up. As we learn new financial tools we implement them into our excel sheets and see if they are useful or just another stat. If there are things we are not looking at or if you are interested in mimicking what you see above with your own numbers please leave a comment or e-mail us at odysseustoday@gmail.com. Both of us have a deep passion for teaching and would be very interested in helping you get on the road of financial freedom as we have.

Posted in Finances, Financial Tools, Monthly Report, Personal Finances, Student Loans | Tagged , , , , | 6 Comments

Vacation Finances – A study in Luxury

Hello, my name is Warren, and I do not like to spend money. If it was not for my wife I would still be wearing the same jeans with the same shirt she met me in back in November of 2004. But with all successful relationships there must be balance, and she is my counter-weight. Where I save, she spends. I have learned to appreciate this quality in her over time as I have come to understand that money has no value in itself, other than the value of money to provide options and experiences to its user.

Remember Vacations are a Luxury item, no one has ever died because they did not get a Vacation. Think of these as a reward for being a responsible financial steward of your monies.

Cozumel


Today, my wife and I have returned from a 4 night cruise down to the port of Cozumel, Mexico to celebrate our relationship and the future birth of our first child. I surprised her with this trip nearly a month and a half ago on her birthday and she was completely caught off guard as this gift was highly out-of-character for yours truly. Now that we have returned, sunburns and all, I get to begin the sadistically fun part of analyzing what this trip cost our household.

When I say “cost our household” please do not read a value statement into that, I mean merely what did this trip do to the numbers in our accounts to enjoy this experience.

The accounting:

Vacation Cost Accounting
Cost
Prepaid
Cruise Tickets x 2 $820.26
Parking $40.00
$860.26
Galveston
Gas $50.07
Meals $23.35
$73.42
Boat
Refunds -$3.20
Blackjack $103.00
Internet Minutes $8.95
Drinks $33.89
Souvenirs $32.95
Gratuity $80.00
$255.59
Cozumel
Taxi $50.00
Souvenirs $21.00
Cigars $30.00
Excursion $78.00
Food $41.00
$220.00
Total Cost of 4 Night Cruise to Cozumel $1,409.27
One final relaxing get-away with Wife Priceless

This numbers are as correct as I can remember. I had to rely heavily on my wife to assist with number procurement as once we arrived in Mexico my mental state remained somewhat altered.

Now, let’s just round up to $1,500 dollars for simplicity’s sake. Did the trip have a $1,500 value is the question to be asked. If the answer is yes then as consumers of Cruise Vacations my wife and I would again look to a future Cruise, if the answer is no then other options would be explored for future  vacations (trips to Miami, inclusive resorts, travel abroad, etc).

The trip not taken

In my opinion the cruise was worth the $1,500.00. Say hypothetically, we had decided to travel to Miami (we stopped over for one night in Miami during our honeymoon and both sincerely enjoyed the shops, food, and atmosphere of south beach and will return someday).  Below is a hypothetical vacation worksheet for what that trip may have cost us:

Hypothetical Trip to Miami
Cost
Prepaid
Airfare $591.80
Hotel $400.00
Parking $40.00
$1,031.80
Miami
Food $240.00
Gas $50.07
Souvenirs $51.00
Taxi $50.00
$391.07
Total Cost of 4 Night trip to Miami $1,422.87

As you can see by taking this route many of the “inclusive” expenses start to rear their ugly heads. Also, we avoided a large impact on our finances that serves largely no major “experience” purpose- the airfare.

In the end, the decision to take a trip by Cruise won out largely due to the uniqueness of the opportunity. The experience was much more relaxed as there was no air travel involved, the vacation was the first Cruise for both of us, we got to travel to a different country, and be utterly pampered with all you could eat meals, entertainment, and serene views of endless water.

One question you may be asking is how can we have $1,500 just sitting around for an impromptu vacation. Well, as I described in a previous post, a little planning and an understanding of how you get paid can result in a forecast of cash inflow that is largely at your discretion to “invest” (April happened to be one of the months with an extra paycheck for me). Could we have taken that same $1,500 and put it toward our student loans? Of course. But as a very predictable major life changing event was on our horizons we took that money and made an investment in our relationship. As a child enters our family our lives will never be the same as they were. It was in our best interest, and his future best interest to spend this money, take some times for us, and ensure our relationship foundation is strong.


Before taking any vacation I would strongly urge you to take a second and see how it fits into your “big picture”. Every  person’s financial reality is different and should be viewed with its own unique lens. Just ensure you are applying the foundation of financial principles, that you make more than you spend, and pay cash. If you cannot pay cash or float the vacation on your credit  card (paying it off as soon as you return) for the “rewards” (yay for 1,400 points) then you probably should not be taking a vacation in the first place, at least not one that entails travel.

Vacation Cost Accounting
Cost
Prepaid
Cruise Tickets x 2 $820.26
Parking $40.00
$860.26
Galveston
Gas $50.07
Meals $23.35
$73.42
Boat
Refunds -$3.20
Blackjack $103.00
Internet Minutes $8.95
Drinks $33.89
Souvenirs $32.95
Gratuity $80.00
$255.59
Cozumel
Taxi $50.00
Souvenirs $21.00
Cigars $30.00
Excursion $78.00
Food $41.00
$220.00
Total Cost of 4 Day Cruise to Cozumel $1,409.27
One final relaxing get-away with Wife Priceless
Posted in Finances, Personal Finances, Vacation | Tagged , , , , | 1 Comment

Additional Podcast

I have subscribed to two more free podcast revolving around personal finance:

  • Kiplinger’s Personal Finance
  • Quicken Personal Finance – I would highly recommend this podcast. I listened to every cast they had done and was impressed. The main host from Quicken is a goober, but the speakers he brings in are top-notch who explain basic financial planning principles very well. Highly Recommend!

Since I will be sitting on a boat for the next 4 days I will have ample time to sample their wares and get back to you.

Adios!

Posted in Education, Finances, Financial Tools, Resources | Tagged , , , , | Leave a comment