Archives for February 2014

5 Essentials For Paying Student Loans

Student loans net work Mint.com account — *My student loans were careening out of control. Now, I’m looking at the finish line: zero debt.*

Today, I paid off more student loans than ever before: $4,000, to be exact. This hefty deposit was made directly to my loan servicer, which will pay off federal aid debts. In May 2013, I had nearly $40,000 in debt. I was careening out of control, and my only solution was to take out more student loans. Instead, I started Frugaling and changed my entire financial future.

Even though I’m making more money than ever, it’s important to safely and smartly pay off debts. While it’s best to prevent excess debt via proactive budgeting, paying it off can be dangerous, too. In my situation, I paid off this huge chunk of debt by following the proceeding five essentials. Hopefully these will help you to safely pay off more student loans than ever!

1. Pay Off Active, High Interest Student Loans

Okay, I’m going to get a little technical here. I have two types of federal aid: A and B. My “A” loans are subsidized (no interest gaining) until I graduate from school. Unfortunately, my “B” loans are a running taxicab of interest and piling debt.

The first goal needs to be paying off high interest student loans that are active. My “A” loans are not active, and as such, do not need to be the focal point. Meanwhile, my “B” loans are ticking along at about 6.7% APR. All my energy and funds are going towards these second, active interest loans right now.

2. Pay Off As Much As Your Budget Can Bear

It’s tempting to start taking some of my newfound money and buy things. Somewhere between things I don’t need and things I’ve long wanted – oh, how wonderful that would be to buy the unnecessary but awesome!

To prevent this human reaction, I’m digging deep and paying off an uncomfortable amount of student loans every month. It hurts to pay this much because I feel uncomfortable having this little in my savings/checking accounts. Conversely, it helps me pay off more each month, and prevents needless purchases while my budget is being corrected. The less access to money you have, the less you’ll spend!

3. Subsidized Loans Are Free Money While In School

The “B” portion of my loans are my enemy, while “A” is a friendly sort. My student loans started out as a subsidized group, when the country cared about educating the masses affordably and fairly. That’s sort of changed.

I have $8,500 in subsidized loans that are protected from gaining interest until I graduate. Phew! This mass is scary and will be a priority at some point. While I’m in graduate school, I’ll aim to stock up my bank account, build an investment portfolio, and diligently follow my budget. Later, after I graduate and the interest becomes active, I’ll redirect this built up liquidity to quickly pay off the rest of my loans.

4. Keep Some Handy For Emergencies/Tax Season

This might seem contradictory, but part 2 says pay as much as you can possibly bear. Does that mean you should scrap any emergency funds to pay off student loans immediately? Well, it depends on your liabilities.

As a car owner, with certain financial obligations, I need to have some money on hand in case something goes awry. Likewise, this is the first tax season where I’ll be paying Uncle Sam. While I’m happy to do it, I need to prepare for significant budget buster in mid-April (when my payment is scheduled). The key here is to pay as much as you can, while insuring yourself against totally tragedy.

5. Recognize Your Accomplishments

Bring in the reinforcements! Good habits are largely built from strong, positive reinforcement behaviors. Pavlov and Skinner are the two psychologists credited with founding the field of classical and operant conditioning. If you’ve ever taken a psychology course, you’ve likely learned about them.

Those two stodgy, crotchety scientists were pioneers in the field of education and behavior management. Skinner’s operant conditioning reinforcement schedules are as important as ever. Simply put, when you’re done paying off a significant chunk of student loans, reward yourself! Today, mine will be an extra coffee before work. What’s yours?

Your Obligations May Actually Be Choices

By Frugaling 2 Comments

Wedding obligations bride costs money choice — *Here comes the bride… And the obligations.*

This is a guest article from Stefanie! She’s trying to find ways to stretch her budget in one of the most expensive cities out there, New York City. A graduate of New York University’s drama and psychology programs at the height of the financial crisis, Stefanie discovered the world of financial planning out of necessity. Thanks for sharing your insight!

Almost everything you spend money on is by choice. Yes, you have needs, but you choose those needs. Yes, there are expectations, but you choose which expectations you care to meet.

With the exception of taxes (and health insurance), you don’t have to spend money on anything. Yet, people say it all the time, “…but I have to buy…” But no one is forcing you to buy something. See, you have to recognize that you are the one choosing your spending priorities.

I hear a lot of the “I have to” justification of spending when it comes to social, cultural, and familial obligations. These obligations are typically a duty or commitment to which you feel bound, not something to which you are bound. This is an important distinction.

I know that my personal feelings of obligation and commitment fall on a spectrum. For instance, when invited to a friend’s birthday party, I don’t feel that I really have to attend, but it would be nice. With a wedding, I’ll start to feel more of that sense of obligation. The sliding spectrum continues, and if it’s my sister’s wedding, I feel completely tied, obliged to the occasion. But no matter how I feel about those events, I can’t unquestioningly commit to attending until I’ve assessed the monetary reality.

Let’s say my best friend asked me to be a bridesmaid. I would feel a strong sense of commitment, but not be able to accept until I understood the full financial implications. Would I be expected to purchase a dress? Accessories? Attend other bridal events? What would be the total cost? Now, if I were to assume an average, which according to weddingchannel.com is $1,695 to be a bridesmaid, I would have to decline regardless of my sense of obligation. Unfortunately, that’s a choice many people fail to see, and it impacts their future financial success. Their sense of obligation overtakes everything else. If you can afford it, fantastic! If you can’t, that could be downright dangerous.

The environment, society, and larger culture that you are a part of may harbor even stronger expectations. I’m going to continue to use the wedding industry as an example. It’s a relatable illustration of how we allow the sense of obligation to justify extraordinary overspending.

If I ever get married, there’d be a host of expectations surrounding the big day; especially, as I am part of a strong cultural group with deep rooted traditions. But as strongly as I, my parents, friends, and community feel about those things, the thought of spending $28,400 (the cost of the average wedding in 2013) on one day feels exceptionally wasteful. The funny thing is, a lot of people would agree that the number seems insane, but when they get down to the actual planning and fulfilling the requests of mom, dad, grandma, the girlfriends, the church, etc., suddenly the spending seems justified. Meeting expectations of others, regardless of how impractical, overtakes sound financial decisions.

My challenge to everyone, and to myself, is to never use the phrase “I have to” when it comes to spending my money. At times, I may feel a strong sense of commitment to myself and others – feeling obligated, but at the end of the day, the things I spend on are my choice. If we all accept that truth, perhaps we’ll all be a bit wiser about weighing our financial reality against our sense of obligation in the future.

Have you ever felt obligated to participate (a potluck, wedding, etc.)? How have you dealt with it? When do you feel you can choose something?

My Amazon Kindle: A Eulogy

By Frugaling 12 Comments

Amazon Kindle Broken Photo Ereader — My Amazon Kindle is broken…

From drooling wimp to reading aficionado

I don’t think I read one required book cover-to-cover in all of high school (sorry, teachers!). I didn’t enjoy reading, much to my mom’s dismay. Spark and Cliff notes eliminated the “need” to dig through the deeper meanings with tomes like Homer’s The Odyssey. I skated through high school, inspired by my brief overviews and a charismatic charm that filled in the missing plot gaps. It mostly worked.

In college, reading for enjoyment actually clicked. My grades improved and I found extra time to catch up on what I had missed. There was a simple equation: Read more to write better. Suddenly this drool-inducing, boredom-ensuing activity became relaxing and rewarding. I saw the value of it all.

A 21st century device for an age-old pastime

The transition from book avoider to avid reader was cemented by the purchase of an Amazon Kindle in college. As a nerd, geek, and all-around techie, the Kindle was the perfect blend of generations – reading power in the 21st century. When the slimmer, sleeker 3rd generation device launched, I purchased one immediately. It’s been with me ever since.

From Costa Rica to New York City, it was always with me. I chucked it onto the kitchen table, stuffed it into my backpack, and spilled a glass of orange juice into the keys. Frankly, I treated it like another paper-based book. Despite my harassment, the Kindle followed suit and kept up with my travels. Now, around four years of age (about 40 in tech years), I regret to inform you that it’s died.

When I got to school today, it refused to turn on. I followed a number of troubleshooting guides, too – no luck. There was nothing I could do, as the screen simply wouldn’t wake up or change pictures.

This shouldn’t be my gut reaction…

You might wonder why I’m writing about an inanimate object, when I aspire and espouse for a minimalist and anti-materialist lifestyle. Thanks for keeping me honest, readers! The real reason is that the loss of one object often begets a question: What’s next?

What should I get? What will be a frugal upgrade? Should I even buy another? How about a tablet, instead? What’s my price range?

Despite the eulogy, it’s felt more like an inconvenience on the way to an upgrade – another lifestyle inflation. The rapid replaceability swept the feelings of loss quickly under the rug. As I work to right my budgetary problems, this seems like room for error. The immediate reaction to buy another something – better and possibly more expensive – speaks to a disrespect for the exchange of money.

In the past, my gut reaction would be to purchase that next new device. Instead, I’m going to wait and make a frugal, informed decision that feeds my desire to read and fuels my budget. That is what’s next for me.

When you break something, what’s your gut reaction? Have you ever immediately purchased a new item to replace the broken? Or, do you take time before buying another?

Warby Parker Prescription Glasses Review: Frugal And Fashionable? (Updated!)

By Frugaling 3 Comments

Ugh, I’ve been delaying the inevitable: I need new prescription glasses. My old ones are scratched, beat up, and my eyes have changed over the last few years. I can’t wait any longer, but I’ve had a difficult time finding a frugal and fashionable pair of prescription glasses.

80% of the market is owned by one company

If you venture into any LensCrafters, Pearle Vision, Target Optical, and/or Sears, you’ll find a curious coincidence: The brands and price structure are the same. An Italian-based company, Luxottica, is behind most of the prescription glasses you’ll find at those stores. With a crushing grip on production and sales, the company dominates the margins and swarms consumers. In fact, they own 80% of world’s major eyewear brands.

Over the years, I’ve supported this company – whether I wanted to or not. They own brands like Oakley, Ray-Ban, and Oliver Peoples, while making co-branded products for Burberry, Coach, and many other companies. Chances are, you’ve helped the company’s bottom line.

Say hello to Warby Parker

While I wanted something frugal and fashionable, I thought I’d have to sacrifice and buy a no-name, standard frame. Fortunately, I found a growing company that’s mixing up the glasses market: Warby Parker.

The founders of Warby Parker realized the aforementioned fact – that one company has near-complete pricing power – and decided to throw a wrench in the system. They used their Wharton Business School education to analyze the supply chain and found a Chinese glasses manufacturer (the same one as Luxxotica) to make their frames. Now, the company is run like a tech titan and has even received a variety of angel investments and seed money.

Their business model is reminiscent of Zappos.com. Customers can purchase frames online, upload a copy of their vision prescription, and in a few days the frames are yours. Likewise, their customer service handled all my questions in a respectable and timely manner. But there’s more that makes Warby Parker unique.

Free, at-home try on and returns

Warby Parker Prescription Glasses At-Home Try on — *This is what my Warby Parker at-home try on kit looked like!*

Without vision insurance benefits for a new pair of glasses or lenses, I wasn’t able to find much in my price range before Warby Parker. Unlike Luxxotica’s exotic pricing, most WP frames are about $95, ship free, and include premium lenses (anti-reflective and scratch resistant).

What about trying them on before you spend the money? All you have to do is browse through their website, pick up to 5 frames, and they’ll ship them to you to try on.

When I received my package about four days later, I immediately tried them all on and picked a pair that worked for me. I packed the container, with the five frames, and shipped it back via UPS, hopped online to their website and purchased the exact one I wanted.

The process could not be more convenient – you get prescription frames direct to your doorstep! I’m exceptionally happy about the experience and will purchase again.

Do you know of any other places you can get frugal and fashionable prescription glasses?

Update: Just received my brand new pair of Warby Parker prescription glasses! The entire experience was flawless and the glasses are awesome. I will definitely be choosing this frugal option again!

Archives for February 2014

5 Essentials For Paying Student Loans

1. Pay Off Active, High Interest Student Loans

2. Pay Off As Much As Your Budget Can Bear

3. Subsidized Loans Are Free Money While In School