The last two weeks went something like this:
-Announcement from megacorp headquarters that they are selling the division I support.
-Blind panic as my direct management has no comment.
-Frantic updating of resume and application for other area jobs.
-Fervent thanks for the year end bonus which allowed me to fund a mini-emergency fund.
-Announcement from my management that I was being reassigned to a team that was NOT being eliminated.
-Sweet, sweet relief.
-My boss asks me to head to megacorp HQ for a two-week long meeting (meetings can be two weeks long???) ... leaving this Sunday (this is Monday).
-Frantically rearrange schedule and take care of personal stuff so that I can be gone for two weeks.
-HQ Management decides to push meeting back for 3-5 weeks or so.
So, I've had two weeks of crazy stress...and in the end, pretty much nothing actually changed. My job is once again secure, or at least as secure as a megacorp job can be. I'm still sitting at the same cube doing essentially the same work. And, I don't have to jet out of town last minute.
My reaction to this stress was truly disturbing. I broke my budget wide open and spent money on random things - mostly lunches out with co-workers and junk food. Because, when you're worried about losing your job and how you are going to make ends meet, spending money on things that aren't in the budget and aren't necessities is definitely the way to go. Once things have calmed down a little, I need to run a full postmortem. If I can understand why I reacted so illogically and self-destructively, perhaps I can do a better job dealing with stress next time.
February 27, 2008
February 20, 2008
Net Worth Update - Month 1
Drumroll, please.
As of 2/15/08, one month into my debt reduction program, my net worth is -$40,406.27. This is an increase of $3,563.89. Which is simply fantastic progress.
My total credit card debt was $23,099.97. I whittled away $1,907.66 in credit card debt over the first month! Woo-hoo!
Now several one-time events that happened this month that really gave me a boost:
~I received a year-end bonus of approx $1,000 after taxes that I used to create a baby emergency fund.
~I received a 383.00 credit back to a credit card for a refundable flight that I never took.
~I sold off several old textbooks on Amazon.com that brought in about $350.00.
I expect that going forward, my progress will be slower and steadier. I'm beginning to seriously kick around the idea of taking a second job to create extra income. So far I've been too lazy to pound the pavement, but I'm trying to psych myself up for it.
As of 2/15/08, one month into my debt reduction program, my net worth is -$40,406.27. This is an increase of $3,563.89. Which is simply fantastic progress.
My total credit card debt was $23,099.97. I whittled away $1,907.66 in credit card debt over the first month! Woo-hoo!
Now several one-time events that happened this month that really gave me a boost:
~I received a year-end bonus of approx $1,000 after taxes that I used to create a baby emergency fund.
~I received a 383.00 credit back to a credit card for a refundable flight that I never took.
~I sold off several old textbooks on Amazon.com that brought in about $350.00.
I expect that going forward, my progress will be slower and steadier. I'm beginning to seriously kick around the idea of taking a second job to create extra income. So far I've been too lazy to pound the pavement, but I'm trying to psych myself up for it.
February 11, 2008
Prioritizing My Debts
I'm working hard on reducing my debt and building my net worth. Now that I'm firmly on a budget and actively paying down my debt, it's time to refine my debt reduction strategy. I'm concentrating on my consumer credit debt. Whether to prioritize paying off the student loan debt above increasing retirement savings is a debate for another day. If you're interested, check back in two years when I get to that bridge. There are a couple of different ways to prioritize debts and decide which debt to pay down first.
The Dave Ramsey Snowball Method
Dave Ramsey says that debts should be ordered based on amount owed from lowest to highest. The debt with the lowest balance is paid first, then the debt with the second lowest balance, and on (or and on, and on, and on, and on - as the case may be). This method allows for early victories which build psychological momentum.
The Highest Interest Rate First Method
The Snowball method makes a lot of psychological sense, but as fivecentnickel points out, Dave Ramsey is bad at math. From an overall plan cost perspective, it is more efficient (and thus cheaper) to order debts from highest interest rate to lowest interest rate and then attack those with the highest interest rates first. From a purely mathematical standpoint, this is the best method for getting out of debt.
The Spread the Love Method
Add up all the money that you can put towards debt then account for making minimum monthly payments towards each debt. Any amount above and beyond these minimum payments is divided evenly amongst all. Using this method, you'll be making incremental progress on all debts.
The Snowflaking Addendum
This isn't a method per se, but a mindset. Snowflaking, popularized by PaidTwice, is putting small amounts of money towards your debt throughout the month as it comes in. This money can come from any source: savings in your budget, alternative income, or gifts. I plan on snowflaking regardless of the overarching method I choose.
I'm still weighing the pros and cons of the methods. For me it keeps coming back to the psychological benefits of the Snowball method versus the financial benefits of the highest interest rate method.
What method are you using/did you use?
The Dave Ramsey Snowball Method
Dave Ramsey says that debts should be ordered based on amount owed from lowest to highest. The debt with the lowest balance is paid first, then the debt with the second lowest balance, and on (or and on, and on, and on, and on - as the case may be). This method allows for early victories which build psychological momentum.
The Highest Interest Rate First Method
The Snowball method makes a lot of psychological sense, but as fivecentnickel points out, Dave Ramsey is bad at math. From an overall plan cost perspective, it is more efficient (and thus cheaper) to order debts from highest interest rate to lowest interest rate and then attack those with the highest interest rates first. From a purely mathematical standpoint, this is the best method for getting out of debt.
The Spread the Love Method
Add up all the money that you can put towards debt then account for making minimum monthly payments towards each debt. Any amount above and beyond these minimum payments is divided evenly amongst all. Using this method, you'll be making incremental progress on all debts.
The Snowflaking Addendum
This isn't a method per se, but a mindset. Snowflaking, popularized by PaidTwice, is putting small amounts of money towards your debt throughout the month as it comes in. This money can come from any source: savings in your budget, alternative income, or gifts. I plan on snowflaking regardless of the overarching method I choose.
I'm still weighing the pros and cons of the methods. For me it keeps coming back to the psychological benefits of the Snowball method versus the financial benefits of the highest interest rate method.
What method are you using/did you use?
February 10, 2008
Best of the Blogosphere - 1/10/08
My favorite post of the week is from Paul Michael at WiseBread. His post outlines the nine ways that Star Wars can inspire you to save money. The post appealed to my inner-geek! The rebels were definitely fighting a war on the cheap. And anything that allows me to think of myself as a Jedi makes MB very, very happy! Jedi MB -- I love the way that sounds. Where can I pick up my lightsaber?
Other great posts from around the blogosphere this week:
Other great posts from around the blogosphere this week:
- Early Retirement Extreme discusses investing for Financial Independence.
- Get Rich Slowly shares a fantastic free language learning resource.
- WiseBread shares ways to volunteer abroad for free.
- Canadian Dream sees a new trend of young mercenaries.
- PaidTwice wishes she learned earlier about inflation.
- TheSimpleDollar presents 100 tips for those of us just getting started.
- Blueprint for Financial Prosperity explains bar stool economics.
- BripBlap says that it isn't about the money.
February 9, 2008
I Don't Do Sadness
CNN is running a story on how emotions influence shopping habits. It's no surprise to any of us that emotions are deeply intertwined with finances. That's what makes personal finance personal. But, the study showed that watching a video (either neutral or sad) had a huge effect on purchasing decisions.
Study participants who watched a sadness-inducing video clip offered to pay nearly four times as much money to buy a water bottle than a group that watched an emotionally neutral clip.
If just watching a sad video can have such a pronounced effect, imagine how strongly the emotions tied to our personal lives can influence us. Even more disturbing, the study participants had no idea that their emotions were playing a role in their purchasing decision.
Despite the big difference, participants in the sad group typically insisted that the video's emotional content didn't affect their willingness to spend more -- an incorrect assumption, said one of the study's co-authors.
I find it hard to believe that emotion plays so big a part in my purchasing decisions. I guess I like to pretend that I'm totally rational. However, a rational person doesn't run up $25,000 in credit card debt and end up with nothing to show for it. If rationality can't explain it, perhaps emotions can.
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