Great Financial Decisions in DelMoniq History #3 - Takinng out Student Loans

These decisions aren't really in any particular order (other than the order in which I thought of them), so now we're going to take a little trip back in time and talk about student loans.

I mentioned a while back about my college years and how my parents were really awesome in paying for pretty much my entire undergraduate experience. So, there were no loans or anything from that time. What there was though was a crap-ton of credit card debt from my wonderful "pay for it later when I have a real job" attitude.

So, I graduated, moved across the country, and started graduate school. Again (I don't know how I keep doing this, but whatever), I lucked into an awesome situation. Two of my good friends from undergrad moved to the same city the year before I was moving there. They rented a two-bedroom apartment together. During my week-long drive cross-country with my dad (and two cats), one of my friends called me (I had been planning on staying with them while I found my own place) and said that the other friend was moving to Japan to teach English for a year or so. And she asked me if I wanted to take over her half of the apartment. YAY! I had a place to live AND an awesome roommate, and I had not even made it into the state yet. Okay, if I don't speed this up, I'll be writing a novel before I get to the point.

The point of the apartment story was that I lucked into a really cheap living situation in a really expensive city ($400/month, which dropped when we took on a 3rd roommate later on). During grad school, I kept up my frivolous college spending habits, and my credit card debt kept rising. (I could side note here another great decision involving Best Buy, my best friend, a bunch of martinis, and $2000, but I'll save that for later.)

Eventually (probably in my 3rd year), I hit the wall. My spending had maxed out my limits. My credit was GONE, and I couldn't get any more cards. I think that at the peak of my horrible-ness, I had 7 or 8 cards plus a Dell computer account. What's that you say? Where did my pay check go? Well... there was rent, food, and pretty much the rest of it went to paying the credit card payments. Pretty much, I was broke and barely keeping my head above water. And (not really learning my lesson yet at this point) once a card got paid down enough, I would just buy more crap or whatever and BOOM, card was maxed out again.

One day, my best friend, MsK (same from the Best Buy story) had a brilliant idea; she was in similar situation to myself; however, it was more dire for her. She lived alone and had her utilities cut off more than once (luckily, she's much better now). Her idea: take out student loans. Wha...????

Student loans are available to graduate students (like both me and MsK were at the time), and have a MUCH lower interest rate than credit cards. So, our plan was to take out the loans, which we didn't need for paying for school, and use them to pay off credit cards. The beauty of this was that this got the debt to go away, AND it put it all into a much "better" debt of the student loan, which would not require payments or accrue interest until we were out of school, which turned out to be another 3.5 years (for me).

The plan was GENIUS! With a few exceptions. (1) I couldn't be trusted with $5000 cash at one sitting and (2) I ended up moving a couple of times. So, here's what happened. Yes, a bulk of the credit card debt got paid off with student loans. But, not all of the loans were used to pay off credit card debt. I would venture to say that about half of the loans went to debt, and the other half was spent on buying stuff and moving expenses.

Overall, this was a GREAT decision. I wish that I had handled it a bit better, and paid off more debt with it AND that I was able to keep myself from USING the paid off cards. But all in all, I was able to pay down lots of debt, and get myself in a much better place financially for the next few years.

Now, I have been paying off the loans since 2004, which basically means I've been paying interest. And it isn't that bad. I've had ups and downs financially since then, and I am still working on getting all my other more pressing sources of debt (Taxes, credit cards, CitiLoan) paid off before majorly tackling the student loan. I just checked online, and my total student loan at this point is $39,254.02.

**shudder**

But I have faith that once my CitiLoan is gone and the credit cards are gone and the taxes are paid (not in that order, mind you) that I will be able to get this debt gone as well. Luckily, student loan interest is tax deductible.

I am a LONG way off from being 100% debt free, but taking out the student loans was definitely a GOOD idea. I just need to curb my spending and just keep plugging away.

An interesting find...

So, I'm bored tonight and scrolling through my livejournal (which rarely gets updated these days), and I came across a post that I thought I'd share here...

Oct. 13, 2008 So, according to my Quicken, over the past three years and 13 days (Oct. 1, 2005 to Oct. 13, 2008), I have increased my net worth by $12,603.53!! This is counting my student loan and whatever is in any savings accounts, so it's not like have that much cash just lying around. But it does mean that in general, my debt has decreased since I've been in Connectihell. And really, that stayed rather constant until August 2007 when my net worth increased by $11,806.52. That seems insane to me. But it's been my strategy of paying debt and not getting new debt. The only exception has been the fact that I had to take out a $7500 personal loan to pay off my shitty-ass therapist last year. So, yeah, I still have a negative net worth (~2/3 of which is student loan), but it's ticking up. It'll be nice once these last two credit cards are gone completely. I love bringing account balances to zero. =)

Interesting. Rereading it now, I'm curious to look up these numbers and delve deeper into this, but the Quicken is on the other computer and I'm all comfy here in bed.

Woah. Too much data in a short amount of time.

So, I'm sitting here tonight, awaiting the impending thunderstorm and watching The Bold and the Beautiful, and I get to thinking about my money. Well, I was thinking about all kinds of things, really, and chatting with Dr. Faith. She's got me excited about something that I never thought that I'd be excited about (but that's for another post). Anyway, the conversation turned to finances. She pointed out to me that Debt Ninja posted about getting your free credit report today.

Of course, I check it out. Holy crap! There is a ton of information out there about me, and there was a lot of stuff that I hadn't thought of in years on there. So, I've got 29 pages of my own personal financial data to go through this weekend. Most people would yawn or scoff, but I'm excited. At first glance I've noticed a few things:

(1) I'm not as horrible as I thought I was.
(b) No one has stolen my identity.
(iii) My total revolving credit is down to 47% (meaning that 53% of my credit card debt is paid off).
(4) My student loan is kicking my ass.
(e) I (again) owe my parents a HUGE truckload of gratitude.

It's getting late, and I still want to watch these two episodes of Samantha Who?. So, I plan to tackle all this head on this weekend. I don't have to work this weekend (thank GOD), and I've got 30 episodes of Days of Our Lives to watch. So, I'm going to multi-task some major PF blogging with some hot soap watching tomorrow.

I intend to discuss my student loan in more detail, which will probably come in the form of the long awaited History of My World - Part III post. I'm going to use the summary table from the credit report to rekajigger my status bars (and possibly adjust my 2009 goals). I'm going to figure out how I'm doing on my $100/week plan for July, and figure out where my money is going this month in a more systematic way (instead of a haphazard list). And we'll see what interesting information we can gather from my credit report. I'm totally stoked.

But for now, I'm going to enjoy (for probably, and hopefully, the last weekend of my life) my one remaining bad-vice, and then settle in for some more TV.

My PF Mad Lib

Yanked from Debt Ninja (Thanks, Dr. Faith for the link.)

Hi my name is Okturn DelMoniq. I currently have $1 dollars in my wallet. When I started managing my finances I was worth -$45,807, and now have a net worth of -$46,097. I currently work at a university and have been doing it for 3.5 years. I make roughly $45k per year. I want to have money waiting for me when it comes time to retire. Aside from learning about finances, I really enjoy soap operas, toaster strudel, and my cat. I think the world would be a better place if Connecticut didn't exist. I had Raman Noodles for dinner last night and it was beeftastic. I have had 30 total and 6 major significant others over the course of my lifetime (counting awkward middle school relationships). One thing that makes me different is my ability to be obsessively organized and haphazardly messy at the same time. Now that I'm done with this mad lib, I think I'm going to find something to eat in the kitchen and finish my Jean-Claude van Damme movie.

Okay, that being said, I feel like crap that my net worth went down by $290. Mainly I attribute that to the difficultness surrounding the events of June and finally getting my taxes taken care of. The bulk of my debt at the moment is my student loan ($34,575), so if we don't count that, my net worth looks much better. But still not good. But I've only been anally keeping track for about 6 or 7 weeks. There is much more work to do still.

Some Goals for 2009

If you noticed over the past hour or so, I've been updating the Strudel Trackers with some actual numbers and goals. For 2009 the goals are all about debt of some form or another.

I have four sources of debt right now. Credit Card, Student Loan, CitiLoan, and my 2008 Taxes.

Basically, the student loan is inconsequential in the long run. It's a huge loan (more on this in the coming days), and my monthly payment is only $105.66. As long as I pay it each month... no problem.

Credit Cards: A topic to be discussed in more detail in future "History of My World" posts, since it is a prevailing theme in the horrors of my financial past. Currently, I'm down to only two credit cards only one of which I can actually use. The Mastercard is closed and being automatically paid every month. The CitiCard used to be that way until a while ago when my "good payment history" allowed them to open it again. As of January 2008 statements I owed a total of $10,394.74. WAY down from past highs (again, more later), but still high. Upon looking at what I typically pay each month, I've set the goal to pay a total of just under $4,400 in 2009 to get the total debt down to $6,000. After paying the June bills, my total balance is now $9,694.69. So, I've paid $700.05 so far in 2009, and for the first time in a long time, my total balance is down to four digits! Go me!

The CitiLoan: The reason behind this loan is ridiculous and worth of more discussion in future posts, but the short version is at the end of 2007, I took out a $7,500 personal loan from Citibank. At the end of 2008, I restructured the loan to get roughly another $1000 from Citibank. I can't find a current statement, so I don't know what the total balance is right now. But this loan seriously damaged my finances. So, a goal for 2009 is to pay this down. I hate that I had to take out this loan, but there were no other options at the time. My minimum monthly payment is $217.19, so the goal for 2009 is to keep that up and pay off roughly $2,700 of this loan. Since I've paid for six months, I'm half way there.

My 2008 Taxes: This is another horrible situation that I've found myself in. Okay that's putting myself in a passive position, which isn't the case. We'll talk a lot about the taxes and the horrors of being blessed with an NIH fellowship. But for now, just accept that I owe roughly $5,000 in taxes to both Federal and the state of Connecticut. The goal for 2009 is to pay my taxes, which for the most part is going to involve frugality and throwing every spare dollar and penny I get into my savings account in hopes of getting it all taken care of by the December 31 deadline. In the grand scheme of tax evasion, I'm small potatoes, but the idea of prison does not sound good to me at all. Basically, my savings account is what I paid into it on Sunday, so there's a long way to go on this one. The goal for 2009 is to get $6,000 to pay the taxes and start rebuilding the savings account for what it's actually for--saving money.

There's one more goal. It's not entirely financial, but it does involve money. I need to quit smoking (again). Another thread throughout my history, and there definitely will be more on this later. But smoking is gross, addictive, expensive, and can kill me, so it's got to go. I'm going to start this month, so I'm hoping to get this kicked over the summer. Part of this blog will be about that as well.

So, there you have it. My 2009 goals: pay down debt, quit smoking, and don't go to prison.