Frugaling

Save more, live well, give generously

Frugality, What Is It Good For?

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When I talk about frugality, I tend to focus on saving money, living simply, and making more. It’s a winning combination. By combining all three components, I knocked out nearly $40,000 of student loans, a car loan, and credit debt.

Unfortunately, I sometimes develop fatigue from concentrating on ways to prevent spending. It’s tiring to always keep watch for wasteful spending, and easier to simply swipe a card.

Thankfully, strong reasons such as reducing climate/carbon impact and disdain for contributing to major banks’ profits keep me motivated. I have a purpose, rationale, and philosophy undergirding everything I do. Without these, I’d fall off the wagon and spend crazily again.

Ironically, part of the reason I live this way is to spend money. I mean it. I save and save and save to spend money. Crazy, right?

The difference, now that I’m without debt, is that when I purchase something, there’s no interest against me. I’m following the age-old wisdom of the financially privileged/savvy to be liberated from banks’ powers to constrict and restrict.

Without loans and carried credit card balances, I’m free. And now, I can spend it the way I’d like. So after all the money gets deposited, invested, saved, what do I actually spend it on? What are all these efforts good for?

Since I’ve embraced frugality, three major spending areas continue to be of importance:

1. Travel

I’m currently in graduate school, which keeps me restrained from many travel opportunities. Frankly, that’s probably a good thing for my budget. But every now and then, I can save and purchase a flight — all interest free.

Most of my money actually gets spent to see family twice a year. Although, this fall break I’ll be going to Colombia!

When I fly, I look for the best deals possible by shopping various sites, check my frequent flyer mileage accounts, and book about 1.5 to 2 months out. I tend to decline most forms of trip and travel insurance, as my credit card provides those benefits for free. When I land in a new destination, I immediately try to find local shops and supermarkets to try and stock up on a few snacks/non-perishable foods. This planning allows me to experience the local cuisine and cultural foods, while managing the budgetary blast.

Travel is exceptionally important to me, but it has a powerful price tag. I don’t offer unsolicited advocacy for travel and don’t recommend that people travel to some faraway place. The fact is that travel remains relatively expensive, and it’s one luxury that I’ve been able to partake in with a positive net worth. It’s okay if you can’t travel today. Save for that opportunity.

2. Charity

Recently, I released my first book, Frugaling: Save more, live well, give generously. The title seemed to summarize everything about this site. The latter aspect – giving – is one of the most significant reasons for my frugality.

Throughout my life I’ve always given money to charity. Regardless of my current debt load, I’ve made efforts to give to others in time and donations. Today, charity holds great importance in my life, as I can give without going into debt. Every dollar to my favorite charities doesn’t represent a dollar to a bank, which will be placed under a horrific interest rate.

I don’t have a set percentage, amount, or expectation for giving each year. Rather, I find causes over the course of the year that mean a great deal and/or donate to what’s consistently moved me. Two organizations that I regularly donate to are Doctors without Borders and the Always Remember Never Surrender Endowment.

3. Professional opportunities

As a graduate student, I get paid a small stipend to work and study. Soon, I’ll be applying for internships (similar to a doctor’s residency) for counseling psychology. That process may cost $2000-3000, but is an essential part of the process to get a Ph.D. Afterwards, I’ll hopefully be hired at a site and begin to have more substantial paychecks.

Having my own savings allows me to pursue various options for employment without going into debt. Additionally, the process of becoming a licensed psychologist, which I desperately want, requires a formal examination. The test costs thousands of dollars – not to mention the study materials. It’s another area I’m saving and planning for.

From travel to charity to academic opportunities, these options became possible after I paid off the debt. Previously, I used loans as a method for travel and adventure and even giving. But I was simply digging into a deep, dark hole of debt. There was little hope or light before. All I can say is that good things come to those who can cut costs and pay off their debt fast.

A lot has changed during my journey to change my debt. What you’ll notice is that I’m not saving for a car, house, or large physical objects. I’m a product of the Great Recession, skeptical of big banks, and not ready to make such financial commitments. As such, I cannot envision taking on a mortgage, car loan, or anything else at this time. For now, I’m free from the trappings of debt and living well.

So what is your frugality good for and where do you ultimately spend money?

Debt: The Destroyer Of Dreams?

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Student loans ruined my relationship with money. It ripped out executive functioning of the prefrontal cortex, spit, stomped, and rolled it flat with a rolling pin. The critical-thinking components died an unfriendly, brief death. Suddenly, I couldn’t think straight or make sense of the “cost” of anything. I was the walking automaton with a mantra that wouldn’t stop: click, swipe, buy, repeat.

When you own nothing, the bank owns you. The lack of money became a thief of sleep, calm, and patience. This emotional vertigo sucked the fun out of future-oriented goals and dreams, as everything had reservations: lives comprised from decades by debt. In this confusing, cyclical spin, I temporarily lost the clarity that can be found within goals.

New questions refused to leave me alone. Why did I pursue this route in the first place? How will I possibly pay this off? Who can actually help me if something goes wrong? Where do I go for objective advice and feedback?

Then came questions about aging. How old will I be when the debt is done? What age will I be when I retire? How will I retire? Will I ever retire? How can, potentially, six-figures of student loan debt be paid off?

Lastly, were the questions about life and debt. What happens to my debt if I die before paying it off? Will it be passed on to a spouse, child, etc.? What if I left the country and never came back? What would I do if I got injured and either missed or was no longer able to make loan payments?

I briefly considered debt forgiveness plans. In some circumstances and areas of study, the federal government “forgives” debt after on-time payments after agreed upon periods of time. Debt forgiveness would allow me to wipe the slate clean, and be free faster. But I couldn’t wrap my head around the concern that might come from not graduating or being able to pay on time. What if something/anything interrupted my plans?

Debt is the ultimate restriction of freedom. From dreams at night to dreams of the future, debt knows no boundaries. It doesn’t politely wait for your day to begin or end. It’s the constant burbling and gurgling noise that confuses focus. And I’d be shocked if debt doesn’t restrain students’ ability to study and proficiently pass through school.

Nobody deserves this discomfort and stress. While many parents fork over gigantic savings for their children to attend college, countless undergraduate students pay their own way. As a culture, we’ve exalted the role of higher education and repeatedly shown statistics for success. “You’ll make more over your life as a college graduate,” they say. And they’re right, most people do.

Unfortunately, not everyone can or will take the same path. What if you aren’t excelling in college and decide to drop out? What if you get hurt in the four years of college? What if, what if, what if…?

For every student that decides to pay their own way through college, they take a leap of faith in themselves. Our culture admires their choice, risk, and self-investment. But despite this admiration, we do not reward them by heavily subsidizing their educations. Instead, we enshrine them in debt bubbles that are ready to burst.

Debt becomes the great opportunity maker; unfairly, as only some of us will carry this burden and it totals over $1.2 trillion.

As a country, we need to attack this debt — the wealthy and impoverished, together. The United States should be a leader in education for the masses. Between 5 and 18, we suggest that people deserve it. We say it’s a right. Children should receive a rounded education. Then, you graduate high school and — poof! — the right becomes a privilege afforded to the wealthiest among us.

To solve the debt crisis, we must rethink the entire privilege-based system of higher education in America. Fundamentally, we need to wrap our heads around our economic needs for an educated, working-age populace. The immoral shackles of debt that we place on hardworking students shouldn’t exist.

President Barack Obama, Student Loans, And The Need For Reform

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2016 is fast approaching, and that means election season. Major news networks will stalk and highlight candidates from left and right sides of the aisle. In this highly televised and recorded world, nearly everything will be analyzed and critiqued – moment-by-moment. The primaries will be a grueling process where candidates likely undercut their opponents and new ideals.

As contenders begin to take form, I can’t help but think about what issues will be most important for my generation and those to come. Financially, we are hurting. Millennials are not saving at the rates of previous generations. We are entering the workforce with record levels of debt and stagnant wages. Despite a somewhat recovered economy, we are starting behind the curve.

One of the biggest reasons for our trouble is student loan debt. In fact, it eclipses all other forms from credit cards to cars to mortgages. America is addicted to debt, but the favorite kind seems to center on youth pursuing educations. Unfortunately, this policy of placing higher cost burden on students has led to numerous unintended consequences. Graduates are suffering, despite being raised to believe that college was a simple path to prosperity.

There are few reasons for hope. Congress is a house divided. They’re split on nearly everything, and funding education via taxation isn’t on the table. This instability and counterproductive snowball-lobbing Congress cripples younger generations.

Thankfully, there’s a light amidst this partisan dueling: President Barack Obama. He recently sat down with a few high school and college students to talk about issues in education and student loans. The President acknowledged that he only paid off his own student loans in full the year before he entered congress, and that they were more than his home mortgage.

Instantaneously, the sometimes-deified leader of “the free world” became real. The students that filled the room nodded in unison and seemed appreciative. The President leaned in, and questioned the group about their own experiences.

He asked one student what she wished she would’ve known or something that was difficult about the process. She responded that student loan interest was mentioned, but not entirely explained. And she’s not alone. Most college students don’t have a firm grasp of what student loans can do. The President kindly responded that institutions tend to just hand the bill at the end of college.

This was a man who aimed to talk with students around this country – not just in that room. And no matter how planned, prepared, staged, and for-show this event was, it highlighted something rare and powerful in politics: approachability.

This administration and President must’ve known that this segment for Vice News would provide positive sentiment for the White House. But that shouldn’t matter, because this is how that office chose to connect – in a radically different way than every office before it. Regardless of the calculated nature of the time with these students, it made an impressive impact.

In a political world that could not be more hostile and aggressive, we need politicians that sit down with younger generations and empathize with the struggle in higher education. There’s hope for a better future if more do so.

Come 2016, I want to see a candidate who can sit down with younger generations and truly lean in. I want a future president who’s approachable for diverse – socioeconomically disenfranchised – people.

President Barack Obama and his staff have mastered this element, and I look forward to someone who can do even better. We need action and reform to solve the student loan crisis.

I Owe $4,000 In Taxes!?

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Photo: Philip Taylor/Flickr

Frugaling my way out of debt

I’ve been a student of some sort nearly all my life. I never worried about ponying up extra funds for a tax payment until 2013. And honestly, when I created Frugaling, I had nearly $40,000 in debt from credit cards, a car loan, and student loans. There was no way the taxman would give me anything but a fat return.

Then, a financial miracle occurred. In the summer of 2013, I began to make thousands of dollars in affiliate/ad revenue from Frugaling. The money poured in, and I was giddy. Finally, I could begin paying off all the debt — in record time.

I dropped all of it into student loan debt, and paid off nearly everything (finished the rest in 2014). My nerves calmed, and I could suddenly see freedom and future. Cheesy, I know, but my loans had dampened my spirits. Suddenly, I was renewed.

Ugh, self-employment taxes

As this new influx of funds padded my wallet, I unfortunately realized that by the end of the year, the taxman would be knocking. All of these funds from Frugaling were coming in untaxed — no withholding. These are self-employment taxes. Ultimately, this income must be declared and taxed at a penalty rate to pay for social services (i.e., Medicare, Medicaid, and Social Security).

After calculating all the money made and entering the numbers into TurboTax, the hypothetical refund reversed to a payment. The government wanted about $1,000. I sat there dumbfounded for a moment. All these advertisements and campaigns suggested I would “Get the biggest refund ever.” Those pesky self-employment taxes obliterated my student status.

It was a lesson in the difference between income and net worth. That year I had made over $30,000 between graduate student work and the website. I had barely any savings and negative net worth. Yet, I was being penalized for making money that could pay off financial aid faster. To me, it seemed preposterous that I was being taxed at a higher rate for this side income — with no net worth.

I owe Uncle Sam how much?!

In 2014, I paid off my remaining debt and my net worth has been hovering at a few thousand dollars. My stress over debt is non-existent, and I feel better than ever about my financial situation. But I’m not done with the struggle to make wealth while in graduate school.

I made over $20,000 “on the side” for Frugaling/business-related self-employment (I no longer make that kind of money, as I removed credit card affiliate links for now). After inserting my income and expenses into TurboTax, a shiver went down my spine. The numbers catapulted up over $4,000.

I’m fortunate that I’ve been saving for this moment. My savings account has enough to cover it, but my net worth will be swept away come mid-April. It feels awful to work this hard to save, make, and write. I have no net worth, and yet the funds I made will be disappearing.

But instead of letting this payment dampen my mood, I am more focused than ever on writing for you all, staying frugal and minimal, and building some real savings.

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