Friday, January 22, 2010

Today's Schadenfriday

Schadenfreude [shahd-n-froi-duh]
def: Satisfaction or pleasure felt at someone else's misfortune.
[Origin: 1890–95; G, equiv. to Schaden harm + Freude joy]

I'm feeling a bit masochistic today so I'm going to confess a sickening financial mistake I made.

I just discovered that back in 1999, I consolidated my Federal Student loans into a graduated repayment payment plan at 2.23% APR. Under the graduated plan, I had to pay a minimum amount equal to the amount of interest accrued monthly for up to 30 years. My payments start out low and then increased every two years.

What, in my moment of brilliance did I do in 2006? I re-consolidated the loan to a 5.125% APR extended repayment plan. I chose the fixed monthly payment plan under which I would pay the same amount for up to 25 years.

What's bad about this whole thing is that I'm not sure why I re-consolidated back in 2006 to a higher APR. I suspect that I wanted the assurance of a fixed payment, versus an adjustable plan where my payments will gradually increase every two years.

But seriously, I voluntarily went from a 2.23% APR to 5.125% APR? I didn't have the foresight or intelligence to stick with the original plan and just pay ahead? Sheesh. Give me the bonehead award.

It makes me sick to my stomach that I was so clueless about my financial situation and I made serious, long-term decisions so casually and willy-nilly. I guess the silver-lining to this is that I've changed my ways and hopefully, I won't be making stupid mistakes like this in the near future.

Anyhow, it's been raining cats and dogs here. Too bad it's not raining men. :-D

Have a great weekend!

Wednesday, January 20, 2010

Snowballing My Private SL Within a Snowball

I took a break from my snowball plan in November and I'm back on that horse. I'm now down to paying off my last two debts -- my private student loans and my consolidated federal student loans (subsidized and unsubsidized). As of 12/31/09, I owed $43,182.39 on my private SL and $53,568.28 on my federal SL.

With that kind of balance, I'm not going to be able to pay it off in a short period of time, especially since I've decided against using my recent windfall to pay down my debts immediately. Bummer. But I thought it might make me feel better if I snowballed within my snowball.

Specifically, my private SL is broken up into 5 separate loans. Three of the loans were taken out during each of my law school year and the fourth was a "bar loan" that paid for my living expenses while I studied for the bar exam. The fifth loan is a head scratcher. It looks like a supplement loan for the 1997 school year.

Anyhow, here was the balance of my private SL as of 12/31/09:

Private Loan Breakdown Original BalanceBalance As of 12/31/09
Bar Loan$5,000$4,139.63
1997 Loan Supplement$3,500$1,227.87
1997 Loan$11,479.00$10,535.84
1996 Loan$14,242.00$13,812.68
1995 Loan$13,104.00$13,466.37

My planned snowball payment towards my private student loan is $1,478/month. Rather than just letting the loan company apply the payment proportionally to each loan, I decided to aggressively pay down the smallest balance first.

My first snowball payment to my Private SL just posted and here's the current balance:

Private Loan Breakdown Original BalanceBalance As of 1/20/10
Bar Loan$5,000$4,101.98
1997 Loan Supplement$3,500$171.09
1997 Loan$11,479.00$10,465.23
1996 Loan$14,242.00$13,718.82
1995 Loan$13,104.00$13,376.13

Looks like I'm on my way to paying off the 1997 Loan Supplement next month and the Bar Loan by April. :-D

Why does this matter? Back in December, I pulled my FICO score and it dinged me for having too many accounts with balances. Now that I'll knock down 2 account balances within 4 months, hopefully my FICO score will improve. (Yeah, yeah. I realize my FICO score is irrelevant unless I intend to take out a loan. But I eventually want to purchase my first home so I monitor it couple of times a year.)

Tuesday, January 19, 2010

My New Resolution to Declutter and Stop Hoarding

I got a gift of a small jar of caviar this Christmas and I’ve been savoring its briny, popping goodness little-by-little, until I came near the bottom of the jar the other night. There was probably less than a teaspoonful left when I said to myself, "Better save that for later." And then I paused and thought to myself, "Save it for later for what? Why not just finish it off now?"

You may find this odd, but something clicked inside my head at that very moment. It was indeed a strange, "lightbulb" moment where I vowed to declutter, stop hoarding and stop purchasing stuff I don’t intend to consume immediately.

Bear with me while I digress a bit. My thoughts aren’t necessarily organized since this self-realization is a cumulation of recent events.

This past Christmas, my family and I went to IKEA to look for some furniture for my sister’s new house. While we were wandering through the store, my father noticed a small box of pencils provided by IKEA for its customers to mark down merchandise numbers. I watched my father take a couple of pencils and stuff them in his pants. At the next pencil box, I watched my father take another couple pencils. I stepped in front of my father when he gleefully tried to make a beeline towards the next pencil box. I said, "You’ve had enough. Don’t take anymore." Taken aback, my father mumbled, "Oh, okay." My sister was more direct, "Put them back." My father refused.

My mother told my sister and me that my father’s been doing this for years. He brings home buckets of golf balls from the golf range, toilet paper/tissue boxes from hotel rooms, fist-full of mints from restaurants, blankets from airplanes, etc. When my mother told my father to stop, he became belligerent and obstinate so she’s since stopped trying. She sighed and said he probably committed thievery during the war, during his poverty-stricken youth. He stopped as he matured and dug himself out of poverty. But now, with his dementia clouding his common sense and judgment, he’s reverted back to his old habits.

This made me wonder whether some trauma in our life causes long-lasting behavioral problems. I wonder, since over the years, I’ve developed one particularly disgusting habit - - I hoard.

Note: Not my fridge.

I think my own personal "trauma" started several years ago, when I maxed out my credit card and got rejected for a new one. I was a week away from payday, had nothing in my savings or checking, had no money or credit to buy groceries. For a couple of days, I survived on stale bread and Top Ramen I bought from God-knows-when. Thank goodness I had a pre-paid business trip that week, where food and drinks would be provided by my employer. I guess you could say I had a Scarlett O’Hara moment where I vowed, "I’ll never go hungry again!"

Now, I realize that I’m being over-dramatic about what happened. I had other options besides going hungry. I could’ve easily called my friends or sister for some money. But I just couldn’t bring myself to admit to my friends and family how bad of a financial situation I was in. I guess you could say my false pride traumatized me.

Ever since then, I’ve been telling myself to, "Save that for later. I may need it." Over the years, my freezer’s been stuffed with items that I’ve "saved for later." If you look in my freezer today, you’ll find bag of chicken wings that has one drummette, a bag of pita with couple of pockets, a box of pyrogies with 2 dumplings, a 1/4 bag of hashbrowns, etc., etc. You get the idea. Many items are so freezer-burned that they’re now inedible. What I've saved for later, that "later" never came.

My closet is similar. I’ve got clothes dating back to when I was in college that I can't/won't wear anymore. Yet somewhere in my mind, "I may need it for later." I somehow can't bring myself to donate something I haven't worn in over a decade.

It made me sad to see my father as a petty thief. Since I’ve also inherited a lot of physical characteristics from my father - - my looks, dark complexion, my curly hair, my asthma, etc. - - I am petrified that I will one day become like him. There's nothing much I can do about genetics but I know I can change my habits and way of thinking. I am hoping that if I make an ongoing and concerted effort now to stop hoarding and completely consume what I buy, I may not end up like my dad or those sad people you see on A&E's show, "Hoarders."

I'm slowly cleaning out my freezer. I've been tossing out items that are completely overtaken by freezer-burn and finishing off what's still edible. I've also cleaned out two bagfuls of clothes and shoes out of my closet. And I still have more to go. This will be a work-in-progress that will take weeks, if not months, to accomplish.

Anyhow, going back to the caviar - - I scooped out the final teaspoon and ate it all. And it was the best tasting part.

Monday, January 18, 2010

Shedding The Last Vestiges of Credit Card Indebtedness

I started accumulating significant credit card debt in 1995. Once I started down this path, I became accustomed to living with debt. I saw my balances go up and down (mostly up) and I just paid whatever I could. I guess you could say that I expected myself to be in debt forever, especially since I also carried an onerous student loan debt (and still do.) I was really never successful in saving money and paying down my credit card debt.

At some undetermined point in my life, I decided to add a “credit protector plan” on my credit card. With the plan, I would pay approximately $0.68 for every $100 balance I had on my credit card. I wouldn’t need to pay my monthly minimum and I wouldn’t incur any interest in the event of a lay off, disability or hospitalization. Although I didn’t realize it at the time, I enrolled in this plan in lieu of having an emergency fund.

humorous pictures

Flash forward to the present. I’ve paid off my stinking credit card and I’ve also managed to squirrel away some decent dough for my EF. I’ve concluded that I no longer need the rip-off credit protector plan.

I called Citibank to cancel the plan and, as expected, I faced some resistance. Initially, the telephone rep asked why I wanted to cancel my plan. I told her, “Because I no longer carry a balance month-to-month.”

The phone rep replied, “That’s wonderful! But this plan will allow you not to have to pay your credit cards in the event of disability, layoff or hospitalization. The benefits of this plan are quite exceptional and I will mail you some information as a refresher so you can have time to think it over.”

“Uh, no thanks. Please just cancel the plan.” (Internal dialogue: "That's what my EF is for.")

Undeterred, the phone rep pressed: “Since you’ve been a loyal customer for many years, I would like to offer you a discounted price of $XX for every $100 of your balance.” (At this point, I’ve stopped listening so I don’t remember the price she quoted me.)

Strangely enough, while I wanted to yell, “Just f&#*ing cancel the d&mn plan!”, I found myself giggling inside. I composed myself and said, “I admire your persistence. But my decision is firm.” (I didn’t want to be mean to the phone rep since she’s only doing what she’s required to do. No point in being nasty to someone for her employer’s idiotic policies.)

The phone rep finally relented and said, “Okay. I will go ahead and process your request. But I do want you to know that you’ve already paid $XXX into this plan and I would hate for you to let that money go to waste.” (Internal dialogue: “Uhhh… I think it was wasted the moment I paid it.”)

“Wait a second, how much have I paid into this plan to date?”


“Wow. Thanks for canceling the plan.”

I couldn't believe that I’d wasted $853.39 over the years to insure my financial irresponsibility. Once the shock wore off, I was dance-in-my-underwear elated that I no longer have to pay this premium. For some reason, this made me much happier than any of my recent milestones. Perhaps I was happy that I could brag about my financial accomplishments without guilt to my credit card company, albeit its lowly phone rep.

But after the ecstasy wore off, I calculated that I’d charged over $125,499 on this card over the years. (I’m assuming that the cost of this “insurance” remained constant at $.68 per $100.) OMG. And that’s just one card. God only knows how much interest the cc companies have made off of me...

Wednesday, January 13, 2010

Should I Set Aside Money for Morbid Reasons?

I've set aside $5,000 of my recent windfall for my parents. No, I'm not planning to give it to them - - I'm thinking about setting it aside to deal with their eventual death.

It's no secret that my parents seriously mismanaged their finances. They don't own their own home (they rent) and they live off of Social Security (which barely pays their rent) and a small pension from my dad's old job. They have no retirement or savings to speak of and no life insurance. My dad bought himself a $200,000 term life insurance policy that will expire some time in 2011.

My mom (age 67) is in relative good health, but my dad (age 73) is a complete mess. He suffers from serious COPD, or chronic obstructive pulmonary disease. Just think of the person with the worst case of asthma you know, who's constantly wheezing and sucking on an inhaler/nebulizer. If that wasn't bad enough, my dad suffers from advanced dementia. When I saw my dad this past holiday, his memory loss has progressed to the point that he can't even remember what he did/ate the night before. And one last thing -- my dad's a diabetic. In other words, my dad is no longer insurable for life insurance.

My parents have made no plans for their death. No wills or trusts (not that they need one since they have no assets) and no pre-planned funerals. With no life insurance, the cost of dealing with their death will be borne by my sister and me.

This article talks about how to plan for a frugal funeral. The best way to save money on a funeral is to plan it and pay for it now. According to AARP, the price of a funeral doubles an average of every seven to 10 years. You could also spread out the payments over several years and the price still won't change. The pre-paid money is put into an insurance policy or a trust and can't be touched. Merchandise isn't bought and stored.

I don't expect or wish for my parents' imminent death. I just want to be prepared for it now. After all, there are 2 certainties in life, tax and death. I haven't broached my parents with this topic yet and I'm not quite sure how without giving them the impression that I want them dead.

I asked an older friend for advice about this and she felt that the money should be spent on the living. Since there is very limited time left where my parents will be both mobile, perhaps I should use the money to go on a vacation with them. She especially feels that my mom deserves a break for caring for my sick dad. I have to admit, my mom's caretaker fatigue is clearly showing.

What do you think?

Monday, January 11, 2010

January 2010 Charity - San Diego Food Bank

My company revamped its Employees' Handbook this year and there were some bummers in there. For example, my company will no longer pay for its employees' educational costs to obtain certain industry certifications. They previously also used to pay its employees pretty nice bonuses for successfully getting those certifications. Needless to say, the bonuses are gone too. (There goes my Christmas Fund. Just kidding.)

But there's one bright spot -- my company used to match $2 for every $1 of its employee's charitable contributions in excess of $100 in the calendar year. This year, my employer lowered the threshold to $50 and they will now match $3 for every $1 donated! The maximum cap on the company match is $1,000, so I've decided to donate $1,000 total to various charitable organizations this year, or about $83 per month, per charity. With the company match, each charity will get about $332 (i.e., $83 my donation + $249 company match) total. Sweet!

Without further ado, this month's $83 goes to the San Diego Food Bank.

Miss (soon-to-be-missus) M noticed a while back that there seems to be two, concurrent yet separate recessions - - those who are affected and those who are doing remarkably well in this economy.

I too have noticed that high-end restaurants and stores catering to the well-to-do are doing brisk business in this "recession." Fact of the matter is, I can't help but to think that this economy is being supported by, and at the expense of, those who were laid off to shore up corporate bottom-lines. Many laid off people and recent graduates continue to struggle to find employment. That's why I will primarily focus on charities that help feed, train and clothe those in need.

If you have any worthy charities, please give me some suggestions. Thanks!

The Tax Man Cometh

For the 2008 tax season, I made the mistake of buying Turbo Tax too early and missing out on subsequent price cuts and sales. This year I decided to be patient and just as I expected, Costco issued a $10 off coupon that's effective between 1/27 - 1/24/10. My taxes are relatively straight forward so I purchased Turbo Tax Deluxe (Federal and State) for $39.99. I spent a good part of Saturday morning estimating my tax liability for 2009.

I was a bit worried about my 2009 taxes in light of the fact that I got a significant windfall on New Year's Eve. The most I've ever paid in taxes was back in 2007 when I temporarily halted my 401k contributions and sold off a bunch of my stocks to pay down a significant chunk of my debts. In 2007 I had to pay $653 in Federal taxes and $489 in State taxes.

I thought my taxes in 2007 were pretty bad. Do you want to venture to guess how much I approximately owe this year?

Wait for it.... wait for it...

$916 for Federal taxes and $2,359 on State taxes. Oy! If you consider the amount of tax that had already been taken out, I'll be paying an obscene amount (IMHO) this year. I never ever thought I would pay this much tax.

I'm not complaining, mind you. I've always believed in a progressive tax system. In my opinion, taxation should be based on one's discretionary income and ability to pay. I also actually agree with Justice Oliver Wendell Homes that you pay for the privilege of living in a civilized society by paying taxes. There's absolutely no excuse for cheating on taxes and I'm prepared to pay my fair share.

Besides, I already suspected that I would I owe about $3,679, so I mentally took that amount off the top of my windfall from the get-go. There are no disappointments or surprises here.

Actually, I did learn something new while estimating my taxes. I sold my company stocks for a $305.97 loss earlier this year. In a separate transaction, I sold the stock for a realized gain of $405.91 for which I was hoping to take an offset of my $306 capital loss. Unfortunately, I am subject to the wash-sale rule and can only take a part of the capital loss.

A wash-sale rule occurs when you sell a stock for a loss and acquire the same stock (or a substantially identical stock) 30 days before and after the sale. The rule was established by the IRS from preventing taxpayers from creating a tax loss while still holding a position in the same stock (and thereby avoiding capital gain taxes). It is irrelevant whether you intended to harvest a loss or not.

Anyhow, I can only claim $168.31 of my loss in my tax returns this year. The $137.66 loss that I'm prohibited from taking this year can be used to reduce my cost basis for the stocks that I acquired during the 60-day period, though. I guess if I'm really motivated (or bored), I'll read the IRS Publication 550 - "Investment Income and Expenses" to learn more.

Friday, January 8, 2010

Crash Diets Are Easy. Lifestyle Changes Are Hard.

Sorry for the lack of posts this week. Like most people, I gained an extra 5 lbs during the holidays. (The gift baskets, chocolates and other goodies we received at work from vendors haven't helped.) I've been trying to make a "lifestyle change" by incorporating exercise and healthy eating habits into my daily routine. When all I've been doing the past couple of years is sitting on my keister in front of the TV or computer, this change takes a bit of getting used to. I'm trying to get the hang of my new regimen and schedule.

I've been easing myself into a new lifestyle that is a compromise of eating/exercising moderately while very occasionally indulging in the so-called "bad" stuff. I know I won't lose weight quickly this way, but this is the only way to go. After all, I know myself - - I know I'll stick to a crash diet and exercise only for the short term because: (a) I'm a yo-yo dieter, (b) I hate exercising and (c) I love to eat, especially deep fried, salty, fatty foods. I'd rather try to aim for a lifestyle that may not be the paragon of health but is at least do-able for the long-term.


Just as much as I don't care for the boot camp-style crash diet and exercise, I don't care for the crash-elimination of my debts either. I'd rather attack my debts at a steady pace while trying to maintain a financially responsible lifestyle. (Keyword: trying.)

I bring this up only because I was pondering whether I should use my recent windfall to pay off a significant chunk of my private student loans. After careful consideration, I've opted not to do so based purely for psychological reasons, not economic.

I have a masochistic need to self-flagellate myself for the debt I've gotten myself into. Paying off a significant portion (over 50%) of my private student loans in one fell swoop with a windfall feels like cheating. Kind of like a weight-loss contestant who uses diuretics right before his/her weigh-in. I know, I know - - The analogy is not perfect. But just as water weight will inevitably return, I'm afraid that debt paid off with "easy money" will just as easily come back in a different form. I've witnessed too many people who "pay off" their debts by using inheritance money or refinancing their homes, only to get right back into debt. I have a deep seated fear that I will be one of them.

As you know, I fell off my snowball plan in October when I paid off my credit card debt. I spent money freely in November (and especially) December, knowing that I was going to come into the windfall. I have yet to get back to my frugal ways. I feel I haven't demonstrated to myself that I am financially responsible. Until I do so, I think it would be best not to put my debts on a crash diet. Instead, I'm sending my windfall to my savings account to gain some fat.

Wednesday, January 6, 2010

Opened An EverBank Account

Some of you already know that I have an insane accounting system. Since I also rate chase, I also collect savings accounts like a crazy cat lady collects cats. I've added a new cat... errrr.... savings to my collection - EverBank.

At the time I opened my account on 12/31/09 the 3-month bonus rate offered was 2.51%. Looks like the bonus rate went down in the mean time. *Sigh*

Anyhow, the purpose of the EverBank account is to hold a windfall that I came into on 12/31/09. I can't discuss the source or reason how I came into the windfall due to confidentiality clauses and other legal reasons. All I can say is that it's not from an inheritance, illegal activity, lawsuit settlement, lottery, gambling or from a side job of stripping.

My net windfall totaled $33,475. For now, I intend to keep everything liquid and set aside in my EverBank account. I'm pretty sure that with this windfall, I'll be subject to the AMT, so I'll probably pay a big chunk of tax from it. I'm also embarrassed to admit that I spent over a couple grand of it already in December that I'll have to pay in January.

I'd eventually like to use the majority of the windfall as a down payment for my first home. But with all best laid plans, things can go awry. I could get laid off and I may have to use the money as an EF. I could suffer some uninsured loss. I've decided to call this chunk of money my "X-Fund" since I don't know what the ultimate purpose of this money should be. Heck, I may just use it to pay a big chunk of my private student loans off. I just don't know yet.

On a side note, I'm currently enrolled in a free free credit monitoring program through Southern California's AAA. It immediately alerted me to the fact that EverBank checked my credit report. I'm glad to know the free credit monitoring program is really working!

Sunday, January 3, 2010

December '09 Progress Report

Hope you all had a wonderful New Year's. I certainly did. My final 2009 net worth progress report looks pretty upbeat too.


Starting Debt (6/08)

Last MonthThis MonthDIFFERENCE
Private SL$49,528.99$43,557.31$43,182.39$(374.92)
Fed'l SL$55,852.68$53,717.32$53,568.28$(149.04)
Car Loan

*Sigh* This is the last month that I'll put my snowball plan into abeyance. Next month, I'll resume my plan and hope to pay down my debts by at least 1% per month. It'll be hard to get back onto the frugality horse again, but I'm just gonna have to do it if I want to get rid of my debt in 4 years. *Sigh*





Eh, nothing new here this month. But I've come into some windfall that will be reported in a future post and next month's progress report. Stay tuned.



Whoa Nelly! My net worth increased by $65,862.20 in one year, but I'll only take credit for ~$53,213, which represents the sum of the contributions to my 401k (including employer match), Roth IRA, I-Bonds, savings and the amount of debt I reduced. ~ $12,649 arguably represents the market rebound. I'm not sure whether the market in 2010 will go up or down, but I just pray for less volatility for the sake of my sanity.

The breakdown and the history of my net worth can be seen here.