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Net Worth Update: June 2009

By Stephanie on July 1, 2009

My apologies in advance… this month’s net worth update isn’t terribly exciting!

Change: -$80 or -0.21 %

Net Worth Graph June 2009

Down, but not too terribly much. It’s to be expected, since I’m still (yes, still) looking for a job and living off of freelance income from “side hustles” such as this blog, and knitting. Despite the small downturn (look how tiny it looks on the graph!), here are the upsides:

Savings: Untouched! I still have not broken into my Getting Established fund or my emergency fund for anything! In fact, my savings has grown; I met all of my current savings targets for the month. Next month will be a different story – I hope to still meet my savings targets, but since I’m getting close to “The Big Move,” I anticipate at least a few withdrawals from my Getting Established fund… since that’s what it’s there for!

Student Loans: Down! The balance is only down by $10, but that’s much more encouraging than last month, when it grew by $53. Even slow progress is progress! But I think this might be false progress, and the account just hasn’t updated the interest on my loan properly. I’ll take the small wins for now, anyway!

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Moving: Making the Decision, Part 2

By Stephanie on June 29, 2009

This is a continuation of Moving: Making the Decision, where I talked about the budget I made to help me decide if I could afford to live on my own for the year following college. The budget I made can be downloaded as a PDF, if it helps you to follow along. If you’re just joining us now, please go back and read part 1 first…

Housing

After taxes, it’s the most important thing you’ll have to pay for. Run the numbers for living at home, but remember to compare the numbers for living at home to jobs that you’re likely to get from home. You may be able to get a job in your field in the city your parents live in… or you may not. Keep that in mind. Also, talk to your parents when trying to figure out this number. They, like many parents who’ve had children who return to the nest, may want to charge you rent to live at home!

My parents are fairly lenient about this, charging me only utilities right now. But I know from an older sibling who stayed in the nest a little too long that, eventually, my mom will charge rent!

For rent prices in other cities, a good place to research is Craigslist. You can quickly see pictures of the places, read long descriptions, and it costs nothing to search. And best of all, the site is uncluttered and much easier to use than most apartment search sites.

Definitely keep in mind the idea of a roommate. You, like me, are probably 100% sick of living with roommates at this point, but the money that can be saved is way too big to be ignored. If you can make living with roommates work for a few more years, you will dramatically increase your chances of supporting yourself well.

How Much Should You Spend on Housing? Well, a beach house right on the water in Malibu might sound like a great idea now, but how much is too much to pay? I’m a big fan of the 27% Rule: your housing expenses (including utilities and everything) should not exceed 27% of your gross income. So if you’ve locked down a $50,000/year job, you can afford to spend up to $13,500 per year on housing, or $1125 per month.

One more thing to keep in mind: the incidental costs of renting an apartment. You’ll need to pay utilities, so factor those into your expected rent costs, even if you have to estimate. Also, renters insurance – which you might not think you need, but you probably do. A good estimate for renters insurance is about $20/month. It could be less than that if you bundle it with your car insurance (it could even be free!), but you should assume the higher number for this exercise.

Fixed Expenses

The only truly fixed expenses I have are my student loans. I could get by using payphones and the free internet in libraries, but I can never escape my monthly student loan payments. Student loans are nasty debt – they don’t go away, not even if you declare bankruptcy. So they’re the first expense on the list after housing. Joy. If you don’t know what your student loan payments will be, now is the time to look it up. Don’t know how to find your student loans? Look up what you’ve borrowed in the National Student Loan Data System.

Car insurance is another fixed expense that, although I could sell my car and get rid of it, I’m not likely to. Zack and I looked at one apartment that gave credence to the idea (the Metro station was literally across the street!) but ultimately, it was not to be. So I’m living with the idea that, for at least the next year, I’ll have my car and have to pay the insurance on it. If you’re like me, you’re still under your parents car insurance plan, and you have no idea what it would cost to get your own plan.

There are many, many sites you can use to get insurance quotes. Just beware that with some sites, giving over your phone number and email address will result in getting phone calls and emails from insurance companies that want your business. This is good if you’re looking to get the insurance real soon, but if moving out is actually a ways off, this can be a pain. Try using an email address other than your main one to cut down on unwanted emails. I haven’t received any emails or phone calls after using CarInsurance.com to get a quote, but it only allowed me to look at one quote. You can also try Esurance.

We’ll return to the topic of can insurance at a later time, as I walk through the process of getting my own and moving to another state. It could be an ordeal!

Car Fuel and Maintenance: not exactly fixed expenses, but not exactly not fixed expenses either. If you’ve got a car, chances are you’re driving it at least a little. Depending on what you know about your future situation, you may be able to accurately estimate how much fuel you’ll use. What you can’t predict will be the future price of fuel. (Come on, a year ago, you had no idea gas would be the price it is now. Same goes for next year!) Since I like to do a worst-case-scenario, I took the amount I spent when I was commuting 60 miles a day and gas was near $4/gallon, and projected that out over a year. For maintenance, I use the average spent on repairs, oil changes, etc. over the last two years.

Food is a fixed expense in that you’ve always got to eat, but it’s also pretty variable. There’s a big, big difference between eating ramen noodles and going out for steak and happy hours. The more you eat at home, the more you’ll save, if you shop well. Try to eat healthy, though, to keep health care costs down! (See below.) Estimating a food budget might be tough if you haven’t been buying your own food from a grocery store and keeping track of those numbers. I hear “$40/week per person” thrown around a lot, and that’s as good a number as any if you just want to estimate.

Health Care costs are an expense that many people forget to factor into their calculations. I found out that I’m actually covered under my dad’s health insurance until I turn 26, so I only have to worry about little things, like copays and over-the-counter medication and band-aids. If health insurance is a benefit you’ll be receiving from work, find out if part of the cost will be deducted from your paycheck, and how much. If you won’t have any health insurance through work, you absolutely need to look into getting your own. You’re not Superman, and even if you were, he totally has at least Kryptonite coverage. If you need to get your own coverage, you can use eHealthInsurance to get some quotes for that.

Phone/Cell Phone: you’re on your own for this one. Some people only need a prepaid phone for emergencies, and some people need both a landline and an iPhone with unlimited everything. This is very much a “know thyself” category, so you’ll have to figure out how much you’re likely to spend. Just don’t forget things like “activation costs” if you’re moving off your parents’ plan, and if you’re getting a landline, you might need to factor in the cost of getting an actual phone! (I know I don’t have a landline phone sitting around anymore…)

Internet Access is like $40, unless you get something special (or the companies figure out how to do tiered pricing, in which case we’re all screwed), or it’s less if you’re splitting the cost with a roommate. It might be higher if you get cable internet and the company requires you to get a basic cable package. Ideally, this number should really be factored into “utilities” as a part of your housing costs.

Other Categories

I’ve covered all the expenses that I projected for my first year out of college, but it’s important to note that your life is totally different from mine. Some of my categories may not apply to you at all, and I’ve probably left out at least one category that’s vital for you to prepare for. This list is just meant to get you started and get you thinking about how much things will cost you every month.

Your homework: go through all of these categories and come up with your estimates. Figure out what else you need to include, and estimate that as well. Next time, we’ll start taking a look at the big picture: can you afford all of this, and will there be money left over to save for the goals in your life?

Comments or suggestions? Please leave a message in the comments! If you have a questions that you don’t want to share with everyone, you can always email me, as well.

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The Government’s Student Bailout: Federal Loan Changes

By Guest Author on June 17, 2009

It’s not the billions received by AIG and the car companies, but at least it’s something

The following is a guest post by Emily, a 20 something single gal who writes about navigating her way through her finances and the world, at Musings and Ruminations of a Single Gal.

Like so many other graduate students, I’m facing the probability of an enormous amount of student loan debt (upwards of $100,000 in my case, since I’m a law student) and not such a large starting salary. While it is possible for some law grads to start out with a six-figure salary, those grads are usually the exception and not the rule. In this economy, where big law firms are laying off lawyers by the hundreds and deferring new hires, the prospect of a six-figure starting salary is even less likely.

This debt load is enough to make anyone anxious, stressed, and overwhelmed. Most of the time I try not to think about it and focus on the present, but that’s not always easy. Luckily, as of July 1, 2009 people like me will have reason to celebrate (at least somewhat). On that date, the Federal Government is implementing a new repayment option, Income-Based Repayment (IBR), and a low interest rate for loan consolidation.

Income-Based Repayment – What is It?

IBR works differently than the previous option of Income-Contingent Repayment (ICR). While both IBR and ICR base monthly payments on a percentage of discretionary income, IBR defines discretionary income differently and requires a smaller percentage. IBR caps monthly payments at 15% of the amount by which adjusted gross income exceeds 150% of the poverty line. Here is an example of the calculation for a single person:

.15% *[(AGI – 150% Poverty Line)/12] = Maximum amount of monthly loan repayment under IBR

Adjusted Gross Income: $40,000
2009 Poverty Line in US: $10,830
150% of Poverty Line: $16,245

.15%*[($40,000.00 - $16,245)/12] = $296.94

Under the IBR plan a person making $40,000/year would only be required to make a monthly loan payment of $296.94. The payment would be adjusted each year based on federal income tax returns filed by the individual.

IBR is available to both direct loan program participants and the federally backed loan programs.

Other Great News About IBR

  • During the first 3 years of IBR, the federal government will pay the unpaid interest on subsidized loans. This is because the monthly payment could be less than the amount of interest accumulating.
  • Remaining debt is forgiven after 25 years (regardless of where you are employed).
  • If you work full-time in a public service career, the remaining debt is forgiven after 10 years.

Interest Rates Also Set to Drop – Time to Consolidate

The other exciting change scheduled for July 1, 2009 is the annual interest rate adjustment.Now is excellent time to consolidate student loans – especially those that were borrowed with variable interest rates before 2006. Loans having a fixed interest rate, including all borrowed after 2006, are not affected by this change. The interest rate for variable rate loans will be reduced to 2.00-3.38%, depending on the type of loan. You can check out the Loan Consolidation website run by the Federal Government for more information:

When you consolidate your loans you lock in a new lower rate. Even those loans borrowed after 2006 can be consolidated with the earlier loans. Although those loans won’t yield the 2.00-3.38% interest rates, they will lead to an overall reduction in interest rates because the Federal Government will use a weighted average in calculating the interest rate. The rate cannot exceed 8.25% and is fixed for the life of the loan. The federal Loan Consolidation website has information on calculating the weighted average.

You can determine how much loan consolidation will save you by using the loan payment calculator, and comparing it to the loan calculator.

Here is a simplistic example of the savings. I have left the current interest rate the same on all loans (which is unrealistic given that those before 2006 would be variable) and have chosen a standard 15 year repayment.

John Doe currently has the following loans:

2003-2004: Undergrad year 1, Stafford loan: $2,625 @ 6.8%
2004-2005: Undergrad year 2, Stafford loan: $3,500 @ 6.8%
2005-2006: Undergrad year 3, Stafford loan: $5,500 @ 6.8%
2006-2007: Undergrad year 4, Stafford loan: $5,500 @ 6.8%
Total: $17,125 @ 6.8%

Without consolidating he will be required to make 4 separate payments per month (if the loans are held by different servicing companies) totaling $152.02 per month for 15 years. His total interest costs will be $10,237.31.

Until 2006, the interest rates were variable rates and they are eligible to be locked in at anywhere from 2.00-3.38%. This example will assume John Doe’s loans from 2003 to 2006 would be eligible for the 2.00% interest rate (for the sake of simpler calculations). The actual determination of the interest rate for consolidation depends on numerous factors such as the types of loans you have and whether you have entered repayment. John Doe’s loan for 2006-2007 would remain at 6.8% because the loans were no longer variable interest rate loans. Consolidating these loans will produce an overall interest rate of 3.625%.

2003-2004: Undergrad year 1, Stafford loan: $2,625 @ 2.0%
2004-2005: Undergrad year 2, Stafford loan: $3,500 @ 2.0%
2005-2006: Undergrad year 3, Stafford loan: $5,500 @ 2.0%
2006-2007: Undergrad year 4, Stafford loan: $5,500 @ 6.8%
Total after consolidation: $17,125 @ 3.625%

If John consolidates his loans, his monthly payment would total $123.48 for 15 years. That is a monthly savings of $28.54. John will only have to pay one loan servicing company (rather than 4 separate payments) and he will only pay $5,100.81 in total interest – a $5,136.50 savings!

You can submit your application for consolidation at anytime. Loan consolidation applications that are submitted now are placed on hold until July 1, 2009, when processing will resume with the new lower interest rates. The processing of your consolidation application will generally take 60 – 90 days. This is what you need to know to begin the consolidation application process:

You need information regarding all of your student loans, even if they are not federally backed. Although the consolidation application will not allow you to consolidate non-federal loans it still requires information concerning total debt load.

The requisite information includes:

§ The contact information for all loan servicing companies
§ The interest rates for all your loans
§ The principle amount of all your loans
§ Your Federal Student Aid PIN (the same one that is used in completing the Free Application for Federal Student Aid “FAFSA”)

Student loan consolidation is a good thing to look into. While it may not be for everyone, it could end up saving you a lot of money in the long run. All information (and the application for consolidation) can be found at the Federal Government’s website.

Disclaimer: The content of this article is for general information and does not constitute advice. While the author has written from both personal experience and research that was both true and accurate at the time of writing, she gives no assurance or warranty regarding the accuracy or applicability of any of the contents. The author of this post and the website accept no responsibility for and excludes all liability in connection with utilizing the above information. Complete and current information on student loan consolidation can be found by visiting http://www.loanconsolidation.ed.gov/.

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Moving: Making the Decision

By Stephanie on June 15, 2009

on the brink of independence by Joseph Gray on Flickr Oh sweet, you graduated! Or maybe you didn’t, but you’re moving on anyway. Moving out (and moving up) may seem like the natural progression from here, but more and more grads (and non-grads) are deciding to return to the nest for a while. According to a survey conducted on CollegeGrad.com, 77% of college grad job seekers moved back home in 2008, up from 73% in 2007, and 67% in 2006. Pair that with the National Association of Colleges and Employers annual student survey, which found that only 20% of 2009 college graduates who applied for a job actually had one by the end of April, down from half in 2007.

Basically, we new grads don’t have jobs, and trend of moving back home is growing. So should we? Or is it time to leave the nest, job or no job?

Personal Factors

Some people don’t have a great relationship with their parents, for whatever reason. Moving back in might not be smart, or safe. Or maybe you’ve just got crazy helicopter parents that will want you back home by 11pm each night. Maybe you’ve got a lot of younger siblings and your parents just don’t have the space for you to come back home. There could be a lot of reasons why moving home just isn’t right for your situation.

Or perhaps it has nothing to do with your parents at all – you might just have a gut feeling that it’s time to fly the coup for good. Go with your gut on this one. Sure, you could write out a long list of pros and cons, spend a lot of time researching areas you might want to move to, etc. etc., but I honestly don’t think it will help you in this decision. You will be swamped with more information than you can reasonably juggle, and your decision-making skill won’t improve any for your trouble (that is, if chapter four of Malcolm Gladwell’s book Blink is to be believed).

Your life, so far, has been building up to this moment. You have in the back of your mind all of the information you need to decide what to do at this crossroads. Listen to your heart – it knows the way right now.

Financial Decisions

However, coming up with the money to support the decision to move out may be another matter entirely. It’s one thing to know if moving out on your own is the right thing to do on a personal level, but can you financially support yourself right now? How do you even figure that out?

During my last term of college, I took a personal finance course. I was pretty cocky about the course – taking it pretty much to get an easy A. I mean, I’m a personal finance blogger! Don’t I know everything there is to know already? (Alright, I didn’t really think that. But I did correctly anticipate that I would be bored during the first few weeks.) But some parts of the class really surprised me, including the final project. We were asked to write up a budget for our first year out of college, and to weigh choices we might have to make, and to run the numbers on different possible scenarios.

I, as you might imagine, went above and beyond on this particular assignment. Partially because I already had a lot of the information I needed on hand (like my exact spending patterns for the past two years, the cost of living in the areas I was considering moving to, etc.), but mostly because I just like this sort of stuff. (Obviously, or this site wouldn’t exist!) I was still genuinely surprised at how much I learned from the act of writing out that budget, and how much more secure I feel in the decisions I will make over the course of this year. So, while my advice is usually the opposite (I don’t budget!), I am actually going to suggest you write a budget for your first year on your own. Even if “on your own” means living at home with your parents!

How to Start a Speculative Budget

You’ll want to figure out what will likely happen in different scenarios. What will your income be if you live at home? If you move to one city, or another? What will you make if you get your dream job? What will you make if there are no jobs available in your field, and you have to take a 20 hour per week minimum wage job? What’s the minimum wage in the cities you’re looking at? This may not paint a pretty picture of the next year, but as I wrote in my budget report, “I use the worst case scenario throughout this report, because it is easier to adjust a budget if things go better than you think than if things go worse.”

My best-worst-case scenario (that is, if I manage to juggle a part-time job, a paid internship, and my freelance work) had me making only $16,542 during my first year out of college. Even this number feels a little ambitious considering the amount of time that’s passed since I wrote that report, four months, and the fact that I haven’t found a job during that time. But that, of course, it’s why it’s the best-worst-case scenario! My worst case had me earning $6,000 for the year, and I had a mid-level scenario where I would earn $9,292.

Taxes: These income numbers I came up with are gross income, so I still had to factor in taxes. In may case, freelance income (like the money I earn from Poorer Than You) is taxed as self employment income, so I have to pay double in social security and Medicare taxes. Just something to keep in mind if your income estimates include any freelancing or self employment. If not, you can just use something like PaycheckCity’s Paycheck Calculator.

Where to go from here? There’s a lot more ground to cover – including fixed expenses, variable expenses, savings, and planning for the unexpected. I don’t want to overwhelm you with a big project, so we’ll take it in chunks. Your homework is to estimate your income in three different scenarios of your choosing. You don’t have to share it in the comments, but please let me know that you did it!

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Moving Out on Your Own

By Stephanie on June 12, 2009

Ah, summertime! If you’re relaxing, chilling, or just enjoying the freedom of homework-less-ness while working a cool summer job, I hate you. I managed to graduate, which means I have to start real life stuff now. Like moving out of my parents’ house and getting a job. Pssh – I don’t remember signing up for this!

But life moves on and I am, in fact, moving on. Moving on out of state, that is! And there’s a lot of ground to cover: packing, getting an apartment, (getting a job), re-registering my vehicle, getting off my parent’s insurance and cell phone plans… and a bunch of things that I know I haven’t even thought of yet. Now is a time of change, and you get to come along for the ride. Welcome to the Summer of Moving.

As I work my way through the process of striking out on my own (in more ways than one), you’ll be treated to a summer-long series of posts. I’ll share everything I learn from moving myself and watching my boyfriend and friends get established, too. All posts in the series will be titled “Moving: …” so that you can easily identify them. And I’ll update this page to link to new entries, so you can bookmark this entry if you wish.

But the best way to keep up with the series? Subscribe to Poorer Than You! You can subscribe to the RSS feed or you can subscribe by email.

Making the Decision: Part 1
Making the Decision: Part 2

Got stories about moving out on your own? Share them in the comments, or contact me about writing a guest post!

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Net Worth Update: May 2009

By Stephanie on June 1, 2009

The other day, I had a fight with a vine of poison ivy and lost. So now I’ve got an awful rash on the wrist of my dominant hand. Fun, huh? So I’ll be keeping this short, as well as trying to round up some awesome guest posts for you guys to read while I’m indisposed. Because right now, I only can type for about 10 minutes at a time. (If you’re interested in writing a post for Poorer Than You this week, contact me.)

Thankfully, my money is doing better than my skin right now. Let’s check it out:

Change: $351 or 0.93 %

Oh, I am so happy to keep seeing this line go up each month! It makes me so happy, I’m using it as a secondary itch remedy: look at my graph, no more itching for a minute! Yay! Changes of note:

Savings Accounts: I added three new savings accounts to reflect my current goals. I discussed two of those new accounts in my latest Savings Snowball update, and the third is for paying my student loans. I also have still managed not to dip into my Getting Established Fund, which I’m quite proud of. The longer I can hold off on that, the more interest it will earn, and I can use it to better prop myself up.

Student Loans: The balance on these is growing, not shrinking, even though I’m making payments now. Why? Because only one of my three loans is in repayment right now, and one of the remaining two is earning interest in its grace period. I hope to be able to pay that interest off before the loan enters repayment in September, but it’s not a top priority. Some people may disagree, but I feel that I’m at a point in my life where having cash on hand is more important than worrying about early repayment of a loan with a 6.5% interest rate. For example, it would do me no good to pay off that interest, and then not have cash to make the monthly payments on the same loan.

That’s really it – bit of a slow month! It’s back to the bottle of calamine lotion for me….

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Celebrities Help Us Get Un-Broke Tonight on ABC

By Stephanie on May 29, 2009

What do Will Smith, Samuel L. Jackson, the Jonas Brothers, Christian Slater, Cedric the Entertainer, Seth Green, Oscar the Grouch, Rosario Dawson and the E*Trade Babies know about personal finance? Hopefully a lot, because tonight they’re all participating in a one-hour ABC Special called UN-BROKE: What You Need to Know About Money.

I found out about UN-BROKE last week when an awesome teenager (and fellow Buffy fan) I know posted this clip staring Seth Green on her Facebook account:

(RSS and email readers may have to visit the site to see the video)

I was thoroughly impressed with this clip – not only is Seth Green still one of my favorite actors, the financial advice in the clip is fairly sound. Sure, some of the advice is a little generalized, for example: keeping your housing costs under 1/3 of your gross monthly is a good rule-of-thumb, but it should really be less than that if you have significant debt. Still, if you’re looking for a little financial education that’s pretty much guaranteed not to be boring, this is definitely worth checking out.

If you want to see more clips from UN-BROKE, there’s some related videos in the embedded video player above you can watch. Or you can visit ABC’s UN-BROKE website and watch them there.

UN-BROKE hits the airwaves tonight, May 29th at 9pm EDT. Check your locals listings for more details. And if you’re on Twitter, you can catch me (and many others) live-Tweeting the special using the hashtag #unbroketv. You can join in as well, just by adding that hashtag to any tweets about the show!

Hopefully the special will be up on ABC’s streaming video service after it airs, for any of you who miss it tonight!

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Parents Bamboozled by FreeCreditReport.com

By Stephanie on May 28, 2009

Before I can tell you this story, a few things need to be mentioned. First of all, this is not an indictment of my parents in any way, or a mockery of them for being “stupid.” They were mislead by a clever advertising campaign, just as many other people have been before them. Secondly, it is impossible to talk about my parents in any coherent way without explaining my family situation: when I refer to my “parents,” I am talking about my mother and her partner of 14 years. Together they have raised me since I was nine years old. I call my mom’s partner my “stepmom,” because that is the word that comes nearest to describing our relationship.

Saturday was my Graduation Day! As a treat for successfully completing my Bachelors, my parents took me out to eat, along with my older sister and my boyfriend. As usually happens when my sister and I are together, the conversation eventually turned toward personal finance. My mother chimed in to let us know that she and my stepmom had just pulled my stepmom’s credit report… via FreeCreditReport.com.

Like many people, the web address “FreeCreditReport.com” had been drilled into my parents’ brains by a singing pirate/angry husband/subcompact car driver. Even I thought some of the commercials in the ad campaign were rather clever. But I’ve been getting my credit reports from AnnualCreditReport.com for over two years now, because I know that it’s only authorized source to get the three credit reports you’re guaranteed each year by the Federal Trade Commission. The problem is that my parents didn’t know that.

How FreeCreditReport.com Gets Money Out of People

The name is the extremely misleading part, but there’s one bit of their commercials that you should pay particular attention to: “Requires enrollment in Triple Advantage.” As you might suspect, Triple Advantage is the not-free part of FreeCreditReport.com. It’s a “credit monitoring service” which watches your credit reports from all three reporting agencies (Experian, Equifax, and TransUnion) and alerts you whenever there are changes. This service is actually run by one of those three agencies, Experian. When you sign up for FreeCreditReport.com, you get both your credit report and credit score from Experian, but you also sign up for Triple Advantage, which costs $14.95 per month.

If you cancel your account with FreeCreditReport.com within a week your credit card will not be charged. This is how they can get away with calling it “Free.” But it also brings up an important point: you should not have to enter in credit card information to get your free credit report! The legitimately free credit report service, AnnualCreditReport.com, has other ways of verifying your identity, and does not ask for a credit card number.

About the only advantages I can see for FreeCreditReport.com are:

  1. You get your Experian score, which you don’t get for free from AnnualCreditReport.com. But, you can get your TransUnion score for free from ad-supported CreditKarma. And with CreditKarma, you can get it for free as often as you like, whereas your free Experian score from FreeCreditReport.com is a one-time deal.
  2. If you actually want Triple Advantage, and you sign up knowing what you’re getting into, it’s not a bad deal. You could also get credit monitoring service from other companies, such as MyFICO, which I’ve used before and trust more than a company that engages in deceptive advertising.

Cancelling FreeCreditReport.com

If you’ve been tricked by the musical ad campaign as well, you’ll be happy to know that cancelling the service is fairly easy. And as I said before, if you cancel within a week of signing up, you shouldn’t be charged. Which is exactly what my stepmom did, the day after we talked. You have to call their Customer Care directly in order to cancel (1-888-829-6560). It’s actually extremely easy – I suspect they get a lot of cancellations! The first option in the “phone tree” was “Press 1 to cancel your service,” which connected us with a live operator, and the whole thing was over about a minute later.

Spreading the Word About AnnualCreditReport.com

One of the things my mom said during our conversation was that she’d never heard of AnnualCreditReport.com, or their ad campaign to counter FreeCreditReport.com and other sites claiming to be “free.” In other words, she’d never seen this commercial:

Which is a shame, but let’s face it, the FTC isn’t going to spend as much money on an ad campaign as Experian does. So it’s up to those of us who know about AnnualCreditReport.com to spread the video around. So think about your parents, your relatives, and your friends: if they wanted to check their credit reports for free, would they know to use AnnualCreditReport.com, or would they too be bamboozled by a sleezy singing pirate?

Spread the word! Send the FTC commercials about AnnualCreditReport.com around to your friends and family. And most importantly, if a commercial for FreeCreditReport.com comes on the television while you’re in the room, check with the people around you to see if they know the truth about the service.

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18-Year-Olds and Credit Cards: Discussion Continues

By Stephanie on May 22, 2009

Earlier this week I brought up the proposal in the Senate-passed CARD Act (Credit Card Accountability, Responsibility and Disclosure Act) which would require adults under the age of 21 to get a cosigner in order to get a credit card (or prove significant income, whatever that means – don’t we have to do that anyway?). I’m not the only one who had an opinion on this particular feature of the new legislation. Here is a taste of what other people are saying about the proposal:

Man Vs. Debt: 18 Year Olds Now Require Co-Signer To Obtain Credit Cards. Still Maintain Right To Catch Bullets With Their Face!

Either you are a legal adult at 18 or you are not.  If you are considered old enough to fight and die for this country, you should be considered old enough to not have to jump through a bunch of hoops to get a credit card.

If you don’t think 18 is mature enough to obtain a credit card or even to consumer alcohol then we should be raising the legal adult age to 21, not placing a bunch of government restrictions, exemptions, and regulations.  In addition, it appears card holders will need co-signer permission before increasing credit limit and making other changes.  Mommy, Daddy, please let me get a credit card…  please!

Independent Beginnings: Attention Students: You are Gonna Need Permission to Open that Credit Card

Traditionally, eighteen-year-old freshman college students have been immediately attacked by credit card offers as soon as they start school. Lacking education on how credit cards work, many of these students jump at the opportunity of opening one of these “magic” cards and end up falling further and further into debt. It will be interesting to see how this will change now that students under twenty-one have to get their parents to cosign with them (or another adult over twenty-one). Will this allow students more time to learn about how credit cards work before amassing huge amounts of debt on them? Or, will this have little effect whatsoever? I guess it would largely depend on the student’s parents’ views on credit card usage.

No Debt Plan: Credit Card Act Passes Senate

Then again it always makes me nervous when government gets involved with business affairs. Yes, the credit card industry has cost millions of Americans billions of dollars. The changes to the age limits makes me uncomfortable. I know that college students have been ignorant on credit card use, but what about the ones who are responsible? And why should the Bank of Mom and Dad have to foot the bill if the student is irresponsible? And what happened to building up a credit history as soon as possible?

(Note: No Debt Plan’s article also has a nice explanation of the difference in the House version of the bill, which doesn’t have the same “under 21” restriction as the Senate version.)

Bad Money Advice: Credit Cards and Our Nation of Children

American laws are ambiguous about when adulthood starts.  For many purposes, 18 is the magic number.  At that at age you can vote, get married, join the armed forces, and, with the looming exception of credit cards, enter into binding contracts including a car loan or a mortgage…

This inconsistency bothers me, but not as much as the worrying general trend of increasing the age at which we consider people to be grown-ups.  And that is just part of an even larger trend, the growing reluctance to treat anybody as a grown-up.

I highly encourage you to check out each of this articles, and pay special attention to the discussion going on in the comments for each. This is getting to be a hot topic, and I say “Good!” It’s about time we talked about young people and debt! I really hope that this under-21 restriction doesn’t make it into the final version of the bill, but I am somewhat glad that it was there to spur discussion.

I’m not a big fan of protecting people from themselves. You know that bumper sticker that says “Let’s just remove all the safety labels in the world and let stupidity take its course?” Well, I’m not quite that harsh, but I think that people only need protection from the things they can’t protect themselves from. I can’t protect myself from a doctor while I’m under anesthesia, but that’s why we have laws and medical malpractice suits. I can’t protect myself from poisoned food and drugs, but that’s why we have the Food and Drug Administration. But I can protect myself from overspending and living outside my means.

As I’ve said, I don’t have a problem with most of the measures in the CARD Act. There are some shady practices in there that are hard for people to protect themselves from, since the credit card companies make all the rules. So go ahead and regulate those things… but don’t tell me I’m suddenly an adult who can handle a credit card at 21 instead of 18.

Sure, I’m a lot better about money and credit cards now, at age 22, than I was at 18 or 19. But that’s because I had the opportunity to screw up. I was 19 when I got that first credit card, and within six months I had run up a balance, because I was living outside my means. In my case, living outside my means meant “trying to go to an expensive film school” instead of “buying Playstations, HD TVs, and drinking every weekend,” but it was still living outside my means. But I dug myself out of that hole and now I use my credit card to earn rewards - paying off the full balance every month. The difference in those three years was experience and education, not some magic maturity that happened when I hit the legal drinking age.

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May Savings Snowball Update

By Stephanie on May 21, 2009

My savings have seen a sort of whirlwind of activity as of late, which made me realize it’s been a while since I last checked in and let you know how things are doing. Well, there’s good news, and there’s bad.

Just as a reminder, here’s what my "savings snowball” looked like the last time we looked at it:

Name Goal Total Progress Monthly Payment
Bro’s Wedding ? $0 All extra $$
Emergency Fund $10,000 $514 $10
Future Car Fund $10,000 $76 $10
Retirement Infinite $47 $5

So how’s that working out for me?

Bro’s Wedding: Here is the major fail. I haven’t put anything aside for this yet. See, my savings snowball used to be easy. The “all extra $$” thing worked quite well… when I had steady employment. I would throw handfuls of cash at whatever goal had that for the “monthly payment.” Now that I’m making my way on freelance income? It’s a different beast. I need to adjust my habits accordingly. As you’ll see below, I’ve done fine with the goals that had set monthly payments.

So, I need to set a minimum monthly payment for this. Some months are really lean, but I think I can pull off $25/month for now. Hopefully, I can get back into “all extra $$” once paychecks are steady.

Emergency Fund: This is just hopping along at $10 per month. I know, I should increase that amount. I promise I will when I get a job. But for now it’s actually doing better than expected. I thought I’d have to dip into this fund in order to buy new tires for my car the other day. Turns out all the mechanic needed to do was clean and reseal my tire. And he did it for free! So my e-fund is completely intact.

Future Car Fund: If you’ve been reading along, you’ll notice I moved this from my Citibank account to a new SmartyPig account. But, not much difference other than that – it’s still chugging along at $10/month.

Retirement: Once again, an amount that will increase when I get a job. Employment is important for savings, you know? But it’s growing at its own little pace of $5/month.

New! Charity Fund: The charity that I’m highly involved with, Students for Cambodian Schools, held a big fundraiser a few weeks ago. I gave a lot of my time (I only slept for 7 hours during the 65 hour fundraiser), but I still wished that I could give more of my money. So I started a charity fund in the Citibank account that I vacated my car fund from. And because I’m lazy, I left the automatic deposit at $10/month. That sounds good for now.

Getting Established Fund: Not included in the snowball chart above (because I’m no longer contributing to it), but worth talking about regardless. This is another place for good news: I haven’t dipped into it yet! Yep, I have neither touched this nor my emergency fund since classes ended. If all goes well, I won’t end up using the entire thing, and I’ll be able to roll what’s left over into another goal… like saving for my brother’s wedding.

New Savings Snowball

Name Goal Total Progress Monthly Payment
Bro’s Wedding ? $0 $25+
Emergency Fund $10,000 $571 $10
Future Car Fund $10,000 $106 $10
Charity Fund Infinite $106 $10
Retirement Infinite $62 $5

Conclusions: Well, different life/employment situations call for different savings strategies. You think that would be obvious to me, but sometimes it takes a few months of doing it wrong to see how to do it right. But all-in-all, I’m quite proud that I’ve managed to live off of my freelance income these last few months, instead of dipping into my savings. If I can keep that up (and get a job!), this will all work out.

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