Wiping out Emergency Savings to Pay off Debt

In the personal finance blogging world, when you bring up the question of whether your primary focus should be on building an emergency fund or paying off your debt first, you will likely get a very strong passionate response supporting one or the other. Those belonging to the emergency fund first camp argue that without an emergency fund, it is easy to slip into the murky world of more debt when unexpected circumstances strike. On the other hand, those belonging to the pay debt first camp argue that to get the best mileage out of your money, use it to pay off high interest debt, instead of letting it sit around in a low interest savings account (and compared to the hay days, even the best online savings accounts look like low interest savings accounts these days!). We definitely belong to the latter camp. For us, debt feels like a constantly nagging thorn on our side and during the past couple of months we pretty much wiped out our emergency funds to pay off our debt. While there were heavy psychological and emotional overtones to this decision, it was not made lightly. I would like to lay out our reasoning here, in case someone else is in a similar boat and finds it interesting.

The psychological and emotional reasons

Before going into the logical reasoning, let me first provide an overview of our situation so it may help you understand why we were so itching to pay off the debt. During our years in grad school, which were our first few years in the US, we had amassed a whopping $42,500 in debt! Coming to the realization of how deep a hole we were in and pulling ourselves out of it bit by bit was a experience that left a permanent distaste for debt. For around 4-5 years after that we were clean. During those years we have been saving and investing aggressively. Last year however, when our trusted 14 year old 150K mile car died, we gave in to our whims and ended up buying our dream car. It was a pre-owned vehicle but way too expensive and not having the liquid cash in hand we ended up financing it. (If interested, you can read my confessions and justifications regrading that decision). While we have no regrets about the car, the decision to finance it has been sticking out like a sore thumb to us.

What makes matters worse is that during the past few months there have been rumors, which are turning to be less of rumors and more of a certainty as the months pass, that our company could soon be bought over, and I will likely lose my job. Being pregnant, it is not going to be easy for me to go find another job immediately. While I think we can handle the dramatic change from double-income-no-kids to single-income-new-baby without going financially downhill again, I would feel a lot more comfortable if we can do it without the added stress of carrying debt. So a couple of months back, when I received the stocks for the past 6 months of investment into the employee stock purchase plan, I sold them for an immediate 15% profit, withdrew almost all the money from our emergency savings and plonked all that money on the cashiers desk to payoff our car loan. Even though depleting the cash reserves was scary, the thrill of being debt-free again (apart from mortgage, which we are continuing to pay off aggressively) is exhilarating!

The plan for surviving emergencies

We did not take the decision to wipe out our emergency savings lightly (nor do I think anyone should, no matter how much of a staunch supporter of the pay debt first ideology they are). Here is our reasoning which is very specific to our situation.

Daily expenses on job loss

Fortunately, since both of us work, this case is not as severe a threat to us as it is to single income families. Even though there is a possibility that both of us could lose our jobs within a span of few weeks from each other, I doubt that it is likely to happen (in the inadvertent case that it does happen, one of the cases listed below should cover us at least for a few weeks, and hopefully one of us can find a job by then?). Currently, we pay twice the amount to the mortgage, max out both our 401Ks, invest in one employee stock purchase plan and could pay our car loan. In case of one job lost, we can cut down the aggressive mortgage payments and possibly reduce the contribution to the 401K just enough to get the employer match. Also, with the car loan gone, that is some more money freed up. With a slightly more frugal lifestyle, I think we can get on by fine for our daily expenses and possibly manage to save a little each month to rebuild our emergency account.

Additional unexpected expenses up to $1000

While we were students, both of us used credit unions. When we started working we started using a regular bank. But since our credit union was our oldest standing account, in the interest of maintaining a better credit history, we decided to leave our credit union accounts open. And in order to keep it in good standing we each have a direct deposit of $50 or so into that account each paycheck. Since we have been doing this siphoning right from our first paycheck, we do not really miss that $50 each paycheck. And since this account grows oh-so-slowly, we do not consider it a part of any of our accounting. Over a period of time we have each had a few hundred to sometimes a cushy $1000 accumulated in that account unnoticed. And it has been a good source to tap into when we have small emergencies but do not want to dip into our real emergency savings. Currently, we probably have low hundreds in each of our accounts, but with monies from both our accounts pooled, we should be able to handle small unexpected expenses up to $1000 or so.

Additional unexpected expenses up to $6000

We are not really into stock market investing (other than our 401Ks). But last year when I had an additional $5K, I had opened a Vangaurd account and had setup an auto deduction of $100 per month to go to this account. With the stock market slump, this account barely stands at $6000+, in spite of a year passing by with money being pumped into it on a regular monthly basis! While I would love to keep this around for a long time and see where it goes, I will not be terribly upset if I have to sell the index funds to pay for an emergency. Sure, I will incur some taxes and possibly lose some money, but frankly I have not been making any money on that account since I got it and the rate of returns is probably at 0% or slightly negative. So, using it up for paying for an emergency will not bother me at all!

Additional unexpected expenses up to $15,000

When the interest rates on savings accounts were high, I used to play the 0% APR balance transfer game quite heavily. With the slump in interest rates the credit cards charging fees for balance transfers, I don't play this game any longer. But between the two of us, we have access to around $80K - $100K in credit and I am assuming that with the car loan paid off and no outstanding debt, we should be able to have access to at least $15K at low interest rates. For instance, currently, I have an outstanding offer from one of my cards for a 0% balance transfer for one year, with 3% fees capped at $199. I have a $17K credit limit on that card (if necessary, by transferring credit lines, I should be able to increase that to $42K). I know this is not something I can rely on, since the offers change from time to time, but it makes it easier to justify against letting money sit in an emergency account earning next to nothing in interest.

Additional unexpected expenses up to $30,000

As listed early in the history of this blog, our financial goals and the approach to realizing them is to rely primarily on our 401K contributions, and owning our house outright as soon as possible. In addition to that, our outside investments (as and when we can) have been mostly into the real estate back in home country. During the past few months, with the car loan, medical expenses etc, we have not been able to do much towards the overseas investments. But during the golden 4-5 years in the middle when we were debt-free and saving like squirrels, we did manage to stash away a little in these investments. In the worst case, for largish emergencies we should be able to liquidate some of our holdings and pay for it. This will likely cause a lot of stress and heart ache and may even cause us to lose some money, but if it an emergency that large, I doubt we will really care! What's money good for if you cant use it when you need it? Besides, we will never stash away $30K in a liquid emergency fund, so this would probably be inevitable in case of large emergencies anyway!

Additional unexpected expenses > $30,000

Finally, for those super large blows (which I hope we will not have to face in this lifetime!!!) I think we can dip into our last resort - a 401K loan, or a home equity loan etc. This one will likely impact our ability to retire on our own terms, but if we are faced with super large emergencies, and live to tell the tale, then that will likely be a small price to pay. Besides, we are still young and we should be able to rebuild from scratch....

Since this analysis was specific to our situation, I don't know if it will help anyone make their own decisions. But it sure was helpful to me in ensuring my peace of mind that in spite of depleting our emergency fund, an emergency in the near future (until we plump up our emergency funds again) will not throw us over the edge into the debt hole again. Irrespective of whether you have a blog or not, I encourage you to do this analysis with your own situation. If you are in the same boat as us (early stages of financial life) or much ahead, it will help offer the peace of mind that you can possibly survive many of life's curve balls. If you are where we were 5 years back (just paid off all debt, but don't have much in savings yet), I am sure an analysis like this will motivate you to stay frugal and save as much as you can. And if you are where we were 7-8 years back (with a pile of debt in front of us, and no savings whatsoever to speak of), then I am sure an analysis like this will push you into digging out of that debt hole much faster. Either ways, feel free to share your thoughts!

*Image Credit: Photograph by 24thcentury (via Flickr Creative Commons)

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5 Ways to Save Money in College

(This is a guest article by Heather Johnson*)

When you’re in college you never have enough money. It’s just the way it is, unless you’re a trust fund brat. If you don’t have mommy and daddy’s big pockets, you have to find alternative ways to get by. Chances are most of your purchases will revolve around beer and books. With this in mind you have to figure your budget for each semester to have a goal of saving enough during the summer and winter breaks. But when you’re actually at school, there are many ways you can make sure you always have a little dough to spare. Here are five tips for saving money when you have no real income while in college:

1. Have a financial record. This can be as easy as having a sheet of paper in your desk where you can keep track of your income streams and expenses. Write down how much you’ll have coming in during the month and what you have going out. This will keep you prepared and aware of what you have at your disposal. Once you have this knowledge you’ll know what you can afford when it comes to the weekend. Too bad the weekends start on Wednesdays. Good luck.


2. Keep your receipts. This sounds tedious but it’s important in case you’re ever overcharged. You can’t afford a company’s mistakes. If you’re overcharged you’ll have the receipt to recoup your lost money.


3. Spend money only on what you need. If you went to the store for a twelve-pack then don’t come out with a case and a bottle of wine. Only buy what you absolutely intended on buying. You never know when a parking ticket will appear on your windshield or when you’ll need a new set of tires. Always be prepared for a hidden expense.


4. Consider your options. Go to a local bank near your school and speak with a financial services representative about the different programs they have specifically geared to college students. Most banks will have some system in place for college students and are great ways to get introduced to the real world.


5. Pay your bills on time. The last thing you need are late fees and other expenses associated with not paying your bills on time. Stay current with your credit card bill as the interest alone can clean you out later on down the road. If you stay up to date with your bills there will be no out-of-the-blue fees.

*About the author: This article was contributed by Heather Johnson, who is a regular writer on the subject of instant credit card approval. She welcomes your questions, comments and writing job opportunities at heatherjohnson2323 at gmail dot com.

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How Much Should You Borrow for Your Education?

(This is a guest article by Miranda Marquit*)

One of the items that seems to continually go up in cost is education. It's up there with food, health care and gas. Only you don't usually have to take loans out to buy those other things. The rising cost of higher education pretty much guarantees that you will need to take out student loans in order to help fund your degree.

The good news is that there are many sources for student loans, both from the government and from private sources. And even in the current climate, there are still plenty of loans available. Indeed, the danger becomes borrowing too much, and then having to pay it all back. While student loans can help you offset living expenses so you can focus on school (in addition to paying the cost of tuition), few people really need the maximum amount they are approved for.

My mother's voice echoes in my head "Just because you can, doesn't mean you should." This is just as true for figuring out how much to borrow in student loans.

Create a budget

Take a realistic look at your expenses and your education costs. Find out how much you will pay in rent, and get an estimate of the cost of utilities. If you live in housing provided by your school, most utilities are included in the cost of your rent. Even if you don't, many apartment managers can give you a good idea of how much utilities will cost. Estimate a food budget, transportation costs and even a little fun money. Are you planning on getting a job? Figure any income into your calculations. A part time job will reduce the amount you will need to borrow. Also, if you have scholarships and grants, that will reduce your student loan amounts.

Multiply your estimated monthly expenses by the number of months that you will be in school. Then add that number to the cost of your tuition, student fees and estimated cost of books. Take the amount of scholarships, grants and estimated income and subtract that from your total expenses. The difference is how much you will need to borrow. In order to allow for leeway, take 125% of that difference, and round it up to the nearest $1,000. Example:

You estimate that your total cost for attending school is $30,000. Between scholarships, grants and a part-time job, plus your savings, you have $20,000. The difference is $10,000. Multiply 10,000 by 1.25 to get 12,500. Round it up, and you would borrow about $13,000. Each year (if you are getting a four year degree), you would borrow $3,250.

Other considerations

You also need to consider how much you can afford to borrow. With the job you get when you finish, will you be able to handle the loan payments? If you won't be able to afford the loan on your salary, you might want to reconsider your major, or the amount that you are planning to borrow.

Perhaps you should consider a less expensive school as well. Private schools can cost as much in one year as many state school cost in the entire four years. Consider that most private schools do not offer a big enough edge to make paying (and having to borrow) the extra worth it.

Consider your loan type

Another thing to consider is the loan type. If possible, avoid private student loans, since the interest rate is usually higher, and this will result in paying more money back. A federal student loan will result in a lower interest rate, and if you get a subsidized loan, you will not accrue any interest until after you are done with school. This can allow you further savings.

Carefully consider your options before taking out student loans. They can be very helpful, but like any other debt you can find yourself in over your head.

*About the author: Miranda Marquit edits information on debt consolidation for DestroyDebt.com.

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10 Ways for College Students to Cut Costs where it Counts

(This is a guest post by Heather Johnson*)

There are three essential liquids that every college student needs to survive and prosper. These vital beverages are (in no particular order):

1. Water — The original clear stuff quenches your thirst like nothing else and helps you sustain that fit young body.


2. Coffee — Nothing else stimulates and sharpens a mind dulled by too little sleep or too much of everything else like a hot, strong cup of mud.


3. Alcohol — Whether you prefer the stuff that comes in a stein, a snifter, or a shot glass, the only way to make the whole college experience worthwhile is to enjoy an adult beverage every now and again.

During the four or five or nine years that you spend as an undergrad, you could easily spend several thousand dollars on just these three indispensables. Follow these ten simple strategies and you will never go thirsty again (and you might even have enough money left over to pay your tuition).

Water: This topic will be addressed in just a couple of points because it is so damn easy to save a ton of money by making simple changes.

1. Drink Tap Water: That’s it—done and done. Get a Nalgene or steal your friend’s empty nine-dollar bottle of volcanic spring water and then just fill it from the faucet. Tap water really doesn’t taste all that bad and is usually better for you than pricey bottled water because of the various minerals that are added by your friendly local government. Best of all, it’s virtually free. Carry your new best friend everywhere you go and you won’t be tempted to spend your change on soft drinks that not only cost money but are bad for you as well.



2. Fake Filter: If you just can’t bring yourself to drink water that’s not filtered in some way, then buy a Brita and never bother to change the filter; you’ll never notice the difference. Keep this glorified pitcher in the fridge and every sip will be cold and delicious. Make this simple adjustment from bottled water and you won’t believe all of the extra cash suddenly stuffing your pockets.

Coffee: Drastically reducing the amount of money that you spend on your daily caffeine fix is a simple task as well. Follow these couple of rules a smaller portion of your cash will end up in the Pacific Northwest.

3. Caffeinate Like a Towny — Track down a native and follow him to a local java house rather than following the herd of your classmates to the big chain in the student union. Find the right place and you’ll still get a great cup of joe at a significant discount.



4. Brew Your Own — Better yet, cut out all of the middle men and their outrageous mark-ups. Invest in your own coffee machine, buy some cheap beans, and start your day with a cup of the good stuff before you even open your front door.

Alcohol: You’re likely to spend more on beer and its brethren than water and coffee combined and this list has been constructed with that reality in mind. Here are six methods to saving money without sacrificing any fun.

5. Be Cheap — Once you’ve sacrificed a few decades to the workaday world and have earned that corner office, you’re welcome to all the Johnny Blue you can drink. Until then, drink your can of Natty Light and smile; the cost fits your budget and in the long run it does the job just fine.



6. Pre-Game — Bars and restaurants make money on their huge mark-ups. Hit up Discount Liquors on the way home from your last class and spend an hour or two on the couch before heading out.



7. Let Them Woo You — Local establishments will do almost anything to draw a college crowd and that is good news for you. Become a walking calendar of drink specials and hit the right spots on the right nights.



8. Be Flexible — Speaking of specials, don’t just seek out discounts on pitchers of Bud Light. Expand your horizons and hit up the tapas joint for half price sangria, the burrito dive for two-for-one margaritas, and the sushi bar for sake bomb Sunday. Never discriminate when it comes to cheap booze.



9. Brew Your Own — Just like #4 above, this will cut out all sorts of costs and inexpensive starter kits make it simple to start your own mini brewery under your bed. Plus, there are worse things than being known across campus as Mr. Beer.



10. Be a Hot Girl — Sorry if this last one is not a feasible option for you, but it is the one truly fail-safe way to ensure that you will never ever have to buy your own drinks. (Other than not drinking, of course, but that is not even worth mentioning).

*About the author: Heather Johnson is a freelance business, finance and credit writer, as well as a regular contributor for BusinessCreditCards.com site for comparing small business credit cards. She welcomes questions, comments, and freelancing job inquiries at her email address heatherjohnson2323@gmail.com

*Image Credit: Photograph by mre770 [via Flickr Creative Commons]

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Best student credit cards to apply online!

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401K Lessons (Learning it the Hard Way)

Last year was my first full year at work. I managed to max out my 401K contribution with one paycheck left to go. So for the last paycheck I set the contribution rate to 0%. This week I had to go in to reset it back to the original rate. Boy, was I in for a painfully rude shock - my 401K returns were negative. When I was younger I used to wonder why people who have money still worry about money. But in that one moment when I was staring at the numbers in red indicating negative returns on my hard earned money (that I had scrimped and scrounged to save, I must add) it was suddenly very obvious. The knot at the pit of my stomach did not feel good.

To cut a long story short, things have gone further south since then, and as of today, I am down 5% for the year. And my all-time returns have shrunk so badly that the returns on my 401K statement are beginning to resemble that of my bank statement. I have had 401K on my mind for the past few days, and here are some lessons I am learning.

Do not track the returns of the 401K on a daily basis
This is advice I need to learn to live by, since I value my sleep too much. Until this week, I hardly paid attention to how my 401K was doing, except for an occasional look out of curiosity, and I was doing fine. But now that I know it is not doing well, I have an obsessive urge to check it the first thing every morning. And with the losses going higher each day, it is turning out to be a heck of a lousy way to start the day.

Pay attention to asset allocation
When I started my contributions, since it was still very early in my career, I presumed I should be able to take a lot of risk. So I did. I put 100% in stocks - 20% large cap, 40% in mid cap and 40% in International. And now it is clear to me that this risk level is way too high for me to handle. It is very important to look realistically at what risk you can stomach, and balance it against how much returns you hope to make. So, I finally took some time out to go through all the funds, their volatility levels, their performance history, the expense ratios etc. and reallocated my future contributions. My asset allocation choices are - 50% domestic stock, 32% international stock and 18% bonds. And the funds I have selected offer performance close (though not quite there) to what my earlier allocation did but have much lower volatility. I still have a few questions about some of the funds, and have mailed the fund managers for details. Once I get the information, I hope to finalise my selection and freeze the allocation and only visit it once every 5 years or so to see if the risk tolerance is still OK.

Don't lose perspective
I have at least 30 more years to go before I can retire (assuming I do not retire early). The amount I have in my account is a small drop in the pond when compared to the final balance that my 401K account will have. The 5% loss on that small figure is but a ripple in the pond. In the long run, this experience is just a small blip that might not even register on the radar. It is important to have this long-term perspective to avoid losing sleep and to control the temptation to mess with the allocation every now and then.

Nobody else can determine what is best for you
Our company's 401K plan provides us access to some financial software and I went through it to obtain some advice on what my model allocation should be. I also had several discussions with the better half and some older colleagues. I used all this advice, but in the end, what I chose was uniquely suited for my particular situation. It is easier to let someone else handle the decisions (e.g., financial advisers, spouse, parents etc.) but to really be peaceful, it helped for me to go through the details of the funds and determine what was best for me.

In a way, I am glad that I chanced upon looking at my 401K when it was doing particularly bad. I had not paid much attention before and had randomly picked funds with seemingly good performance in an effort to maximize my returns without really paying much attention to the associated risk level. Now I have put in a lot more reading of the funds offered and have picked the ones that I believe are more suitable for me for the long run. I don't know if this is the allocation I will stick with forever, but for now at least, I feel a lot at peace with my choice.

*Image credit: Photograph by jay d [via Flickr Creative Commons]

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Getting a good math lesson in 401K's is a great way to jumpstart your financial future. There are even several degree programs online which may help you become more fiscally responsible by using educational grants and loans.

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10 Best Gift Cards for the College Student on Your List

I am a huge fan of gift cards, and think that they make much better gifts than arbitrary stuff that I don't really need. They do lack the charm and personality of a hand picked gift, but that usually flies out the window when I have in my hands this tiny piece of plastic that I can use to buy what I want, when I want. And this year, if you are looking for a gift for that college student on your list, here are some great ideas for what gift cards will be a hit!

1. Amazon.com: This is undeniably going to be the most popular choice. Amazon offers such a range of options that it can satisfy the needs of most people, not just college students. But for college students in particular the choice of books, CDs, DVDs, games, cell phones and a lot of the items that they will use on a daily basis is incredible. Add to that Amazon’s free shipping policies for purchases over $25, and you have on your hands the making of an ideal gift.



2. Ikea: If your college grad is just starting out or moving out of the dorm into an off-campus housing, then this is certainly the way to go. Ikea has a lot of low priced inexpensive furniture with a modern take that many college students like. One thing to note though is that if there is no physical Ikea location close by then the shipping policies by Ikea are not all that great and may eat away into the gift budget.



3. Best Buy, Circuit City or Fry’s: Many college students love cool electronic gadgets. And there are tons of new toys coming out every year that you may not even be aware of. So giving a gift card to an electronics store and letting them take their pick is surely going to be a great gift, if your college grad loves tech toys.



4. iTunes: If your college grad has an iPod, this is sure to please them to no end. On the other hand, if they don’t have an iPod and you have a big enough budget, then throw in an iPod with the iTunes gift card and you will be their hero for a long time to come!



5. Gift card to favorite restaurants: Most college students are perpetually broke. Eating out is usually a luxury that is much looked forward to. So if you know the favorite restaurant that the gift receiver likes, then buying a gift card to that restaurant is bound to be a sure fire hit.



6. Gift card to a travel site: This may be a gift they may not appreciate right away, especially if they have traveled a lot to meet you. But come spring break time, which is not that far from Christmas, you are bound to receive a huge “Thank You” note :)



7. Mall: The local malls in my area allow me to buy a gift card that is good in all the stores within that mall. If your college grad was a big spender before she/he went to college and got all sobered up due to the high cost of tuition and text books, they are bound to enjoy an evening of splurging at your expense.



8. Gas Cards: With the gas prices starting to climb up again, and the prices of crude oil showing no signs that this will slow down in the near future, this is a great gift. It does not have the wow effect like many of the other gift cards on this list, but if you are a family with a history of practical gift-giving, then this is bound to be better appreciated than a pack of socks or ill-fitting clothes.



9. Local grocery store (Walmart, Target, HEB etc.): While we are on the topic of practical gifts, we may as well cover the gift cards to local grocery store. Personally, I would hate to receive a gift card to a grocery store, since I already have a budget for grocery shopping and can get it done even without the help. Any other gift card in the list so far, let’s me “indulge” but the grocery store gift card is just too practical to be any fun. But like I said, if your family has a history of giving practical gifts, then this is something you might want to consider.



10. The good old Visa Cash Card: Finally, if you just can’t decide, go for the good old Visa debit card. They are as good as cash and can be used anywhere credit cards are accepted. Depending on who you are giving it to, this could be treated as the king of all gifts, or the most impersonal cop-out ever! Your call :)

Do you like receiving gift cards? What are some of the “best” gift cards that you have received?

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Single Parenting and Finance

(This article is part of a weekly guest column by Claire Moylan*)

When you are a single parent, it becomes even more important to have a good handle on your finances. You may have one or many children that are relying on your ability to generate sufficient income and reduce expenses enough to keep a roof over their heads. While the responsibility of single parenting is enormous, it can become even harder when faced with additional financial burdens. Here are some tips to help you provide for your future and that of your little ones.

Get Help Sooner Than Later – If you are divorcing, make sure that you get enough child support to help you bring up the kids. If you need help and have a low income, you may qualify for some assistance, either through food banks or daycare or financial assistance programs.

Have A Job With Benefits – For a working parent, benefits are essential to providing good healthcare and other additional perks. Some of the benefits that can work well for single parents besides healthcare are flexible spending accounts and company-matched retirement accounts. Using flexible spending accounts a parent can budget daycare and out-of-pocket health care costs in a pre-tax format. Company matching retirement accounts help make the little you do manage to put aside grow a whole lot faster.

Locate Reliable Daycare – Daycare is expensive, but it can cost you your job if it is unreliable. Unlike a dual parent home that has an emergency backup in case your regular daycare is closed, a single parent doesn’t have another adult in the home. You will want to make sure that your daycare is reliable or have some emergency backup daycare providers (family, neighbors, friends) so that you can continue to work.

Take Advantage of Low-Income or Parent Programs – There are low-income programs for school lunches. Some day care provides a discount on multiple children. After school programs sometimes offer single parents a discount too. If you’re not sure, ask. It may surprise you to learn that there are discount programs out there targeted specifically towards helping single parents survive.

Understand Your Tax Situation – If you are single head of household, you will be in a different tax bracket than a married householder. This can also lower your withholdings and make you eligible for a child tax credit at the end of the year. Be sure to check out your tax obligations early so that you have the money in your pocket during the year when you need it.

Be Creative With Your Situation – Maybe you can trade instead of pay for some of your services. Is there another single parent around who can do daycare in exchange for a room in your house? Why not pool your resources? Do you have a hobby you can turn into a side business after hours?

Reduce Your Expenses – Most single parents know all about consignment shops, discount grocery stores, and how to make do with very little. The three main expenses of food, clothing, and shelter all need to be budgeted to make sure that you always have what you need to make do.

Locate Sources of Credit – You will have debt as a single parent. The point is to not get in over your head. You do need to locate sources of credit for those emergency situations. If family can’t help, then using a credit card can be one way to extend your ability to pay. Just keep a tight reign on this as it can easily balloon out of control.

Get Free Emotional and Physical Support – If there is no single parents group in your area, think about starting a network or hopping online. You will need to access to resources and programs out there that can help you overcome some of the financial hurdles that single parents face. It’s also important to have someone to share your troubles with so that you don’t feel alone. This can help you to keep a positive attitude.

Being a single parent is tough and there are multiple ways to cope financially. However, all children grow up and these financial hurdles will eventually pass as they fly the nest to make their own way in life.

About the author: Claire Moylan is a freelance writer specializing in ebooks and custom-tailored articles for niche websites. You can view her portfolio online or check out her constant content page for more information about her writing assignments.

*Image Credit: Photograph by WhatDaveSees [via Flickr]

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Is Your 401K Tempting You To Borrow?

(This article is part of a weekly guest column by Claire Moylan*)

It’s certainly nasty out there in the lending world right now. As banks tighten their credit requirements, some people are wondering how to pay back large credit card debt or fund a down payment for a home. While many Americans haven’t been model savers in the short-term, many have retirement accounts that are a tempting source of money when times get tough. The amount of people borrowing from their 401K plans is increasing. It’s estimated that at least 20% of Fidelity’s clients are borrowing against their 401Ks. However, is this really a good option when money is tight?

Some Things To Consider

The reason people borrow from their 401K plans is because it’s easy to do. You just go to your employer and fill out some paperwork. In about a week, you have a loan to you from your own 401K account. The loan repayment can range from 1 to 5 years, sometimes 10 years, and is usually with a lower interest rate. Whatever interest you do pay when you repay the loan is returned to your account. So, the idea of borrowing from your 401K to reduce your debt burden elsewhere is very tempting. Even though there are limits to how much you can borrow (typically 50% of your vested interest up to $50,000), if you have a large retirement account and you aren’t anywhere near retirement, you may think putting the money towards paying down debt is a good strategy.

This might be the case, if it weren’t for one thing: You don’t know how secure your job is in this economy. If you are laid off, terminated, or even quit to get a better job before you pay off the loan, the entire balance is due in full – and, within 60 days of your leaving! If you do not pay the loan back within that amount of time, then you are subject to the same penalties and taxes as an early withdrawal. These are quite hefty and can result in a tax bill of up to 20 to 50% of the value of the loan; depending on what tax bracket you are in. So, taking a loan from your 401K is a risk if you leave your present job (for whatever reason) and can result in a large tax bill.

The Alternatives

Other forms of loans that can help you in the event you need to get funds for a major purchase, like a home, or to repay a large amount of debt are: home equity loans, loans from credit unions or banks, or even a personal loan.

• Home equity loans – A home equity loan uses the equity in your home to help you consolidate your debt and pay it off. You can get some good rates on home equity loans and is a way of putting your equity to work for you, even while you still live in the home. Although this type of loan won’t come due if you lose your job, you do have to continue to make the monthly payments on time in order to keep your home. Since this is a risk with any home equity loan, you want to check to make sure that the terms of your agreement can be met and that you can afford the loan.


• Loans from banks and credit unions – If you belong to a credit union, they are very good for helping people lower the rates on their existing loans. Banks will have more market-competitive rates but are also a good source for lending, if you have good credit and some assets.


• Personal loans – Don’t overlook friends and families. You can even go to Prosper.com and get a personal loan from total strangers. If you want a loan to start a business or consolidate high interest debt and are having trouble with a bank, try to find someone who might know you who is willing to take on the risk based on your character. If you are paying 10% to someone else and they are willing to give you the loan at 7%, you are not only making a friend richer, but saving yourself some money too.

There are a number of creative ways to find financing, besides your 401K. Unless you are sure you intend to be at your job for the duration of the loan, or have funds to pay it back quickly, then it’s best not to tap this source.

About the author: Claire Moylan is a freelance writer specializing in ebooks and custom-tailored articles for niche websites. You can view her portfolio online or check out her constant content page for more information about her writing assignments.

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If you feel tempted to take money from your 401K, look into getting a small grant from the government. If you need the money for school, there are many educational grants that can assist you, not to mention pell grants.

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How To Keep That Caring Spirit When You Are Broke – Part II

(This article is part of a weekly guest column by Claire Moylan*)

Yesterday, in part one of this article, we discussed the Caring versus the Thing economy. We also talked about the principle of paying yourself first, even when it comes to volunteerism. Here are some practical tips to learn how to do just that.

How To Pay Yourself With Volunteerism

One of the nice things about this service placement that I am doing is that Naropa University helped me to define a profitable volunteering experience for myself. They did it by having the format that helped to establish clear goals and the environment for achieving those goals. The non-profit group also had to follow guidelines that talked about their role in the volunteering and what they were expected to do too. Even if you don’t have a formal process to get started in a volunteer position, it can help you to define what you want to get out of this experience by following the same format. Write out five goals, your expectations of the people you are choosing to volunteer with, and how you intend to use this experience to further your goals in life.

So, keep in mind the following things when selecting a volunteer activity:

• Know Your Field Of Interest - If you are learning to be a veterinarian, don’t volunteer at the local library. Try to get into a veterinary hospital. This is experience that can go on your resume and give you several references too.


• Define Your Objectives – Like a good resume has a career objective at the top, so you should have some clear ideas of your objectives for this volunteer placement. Make sure you speak about them before you decide to commit your time. Tell them what your areas of interest are and try to get experience there.


• Limit Your Time – Yes, you do want some experience, but remember that your paying ventures come first. They are what pay the bills. If you commit to five hours a week, don’t increase it out of guilt.


• Network – Volunteer placements can be wonderful for networking. If you volunteer for specific conferences, you are sometimes allowed to go in for free too. This way you not only get paid to volunteer, but you have more opportunity to network with professionals in the field of your interest. How much is it worth to you to meet a famous person that you wouldn’t have met otherwise?


• Eat For Free – While many people won’t pay you in dollars, agencies do like to sometimes offer volunteers free coffee, donuts, and the like. Eat up, and pay yourself some more. You already paid for gas to get there.


• Do Your Best – Treat your volunteer work as a professional job. You never know when this experience might land you the job of your dreams. Keeping a professional attitude ensures that when they call for your reference, your name is associated with professionalism.


• Do Learn What Feeds Your Soul – It isn’t all about the dollar bill and many people find they are happier doing things that have fewer financial payoffs. This is very valuable information and should be part of your volunteer experience. Learning what creates an expansive heart in you will ultimately provide health benefits, longevity, and a pleasure in life that a dollar bill will never be able to buy.


• Don’t Be Afraid To Learn New Things – Okay, so they might ask you to do something outside your objectives. Make a careful decision on whether it will help you, them, or both of you. Then decide after you have a long conference between your head and your heart. Say no, if you really can’t afford the extra time. If you want to learn something new, saying yes might be a way to get new skills.


• Know When To Cut Your Losses – Some volunteer jobs may seem ideal until you get in and they offer no experience, no networking, and no training. Leave. Answering the phone all day isn’t enough to pay you back for your time and gas. Unless you are extremely committed to this agency, you have to also think about how valuable your own time is and why they don’t answer their own phones when they are paid to do so.

Hopefully, at the end of the day, you will have learned new skills, gotten a new perspective on life, had a great volunteer experience, and still feel good for having helped someone out.

About the author: Claire Moylan is a freelance writer specializing in ebooks and custom-tailored articles for niche websites. You can view her portfolio online or check out her constant content page for more information about her writing assignments.

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How To Keep That Caring Spirit When You Are Broke – Part I

(This article is part of a weekly guest column by Claire Moylan*)

Americans are typically big-hearted givers, but today’s chronically stingy economy can make a time miser out of anybody. It seems that if we want to make money, we don’t have the time to do the things that speak to our hearts. Fred Block, a teacher of economic sociology at UC Davis, talks about the two disparaging economies in his article entitled "The ‘Thing’ Economy and the ‘Care’ Economy." He makes a viable case that the strategies that support the economies into separate spheres are no longer working, and they are now competing against each other, and yet the two economies are important for a balanced society.

The Thing Economy Versus The Care Economy

The “Thing Economy” is all about productivity and the world of business. It is about producing goods and services that help society to run. Obviously, this is where companies and factories make most of their money. However, there is a whole another economy that is either completely unpaid or non-profit. This is the “Care Economy” and Block suggests it is all about when people care for each other or their natural environment. Block suggests that the two economies actually are competing for time and the care economy is getting the short shrift. While he offers no monetary comparisons or time being spent doing work within either of these economies, the idea may have some basis.

I am having that same battle with a service placement I am doing currently. Service is the opportunity to give back to our community the same way it gives to us. So, basically it is volunteering. I love the work, it is being offered for a non-profit that really can use the help, but there is no money in it. However, the volunteer placement is required by a Master’s program that requires 120 hours of community service in my field. So, I have to ask myself: Is it really worth it to me to give 120 hours worth of work for free to anyone when you are trying to get your own bills paid?

Determining The Costs Of Volunteering

Unfortunately, the way that we have been programmed to see our time is by the billable hour. So, if you take your hourly wage and multiply it by the number of hours you intend to volunteer (don’t forget travel time, meals, and gas expenses), you begin to really wonder what the point of volunteering is anymore. It certainly doesn’t help to pay the bills in the present and actually costs me to volunteer free time. It’s not really free time because I’m paying for it and that is the core of the conflict within the Thing versus the Caring economies. How can I care when I don’t even have the basic things I need to allow me to provide my services for free?

I’m sure I’m not the only one with this dilemma and that’s why most of us would prefer to give a few dollars here and there than to actually have to spend time helping someone else. It costs far more to actually have to go somewhere and help someone else. Then we begin to feel volunteering or caretaker burn-out and resentment can set in. Is this really a product of too much giving, or is it due more to the comparison that automatically happens when we give? We start to think about how much it is really costing us in a dollar sense. Is there a way to do this volunteering business such that we take care of ourselves also while attempting to help another? Wouldn’t that be the ideal?

Learn How To Pay Yourself First

You’ve heard it before in financing: pay yourself first. If you want to save, you have to pay yourself first, otherwise the emergencies and day-to-day hassles of life suck you dry. Could it be though that this financial principle is really more of a philosophical principle that could help us learn how to properly implement a caring society? Is the point of a caring society to deplete the resources of those who care or is it to learn to give wisely to those in need? I think we should use this principle in many areas of our lives, even in volunteering.

So, don’t fall into the trap that volunteering is all about giving, otherwise, you’ll never give enough back to yourself. You have to be able to receive too, otherwise, what you are agreeing to is just another form of slavery. It may make you feel good to volunteer, but if you have financial obligations that aren’t being met because of your volunteer activities, find some way for that volunteerism to benefit you financially in the future. Volunteering can still work in a thing economy, if we learn to pay ourselves first. That is a basic exercise in all good accounting systems. If you don’t pay yourself first, you will be left without later on when you need it.

Tomorrow, I will talk about the step-by-step instructions on how to learn to pay yourself first when you choose to volunteer.

About the author: Claire Moylan is a freelance writer specializing in ebooks and custom-tailored articles for niche websites. You can view her portfolio online or check out her constant content page for more information about her writing assignments.

*Image Credit: Community Service Program @ Milton Academy

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Kicking off a Stress-Free Holiday Shopping Season

It looks like every year the holiday shopping season starts out just a little bit earlier than the previous year. I was quite surprised when I went to my grocery store the day after Halloween and in the spot where the pumpkin patch was, there stood Christmas trees! For Pete’s sake, it was Nov 1st and Christmas was still almost two months away – but that didn’t seem to daunt the store owner from trying to woo the shoppers by putting up a few fake trees and a huge banner next to it proclaiming “Get your fresh cut Christmas tree here!” So, it looks like the 2007 holiday shopping season is officially here. And you have only two choices - either get stressed out by it, or really enjoy it. What’s it gonna be?

If you chose to really enjoy it, way to go! If you can’t beat 'em, join 'em, right? Here are a few pointers to get rid of any lingering stress to make it a season of fun, joy, cheer, giving and receiving, without quite breaking the bank.

If you have a Christmas fund, take stock of it now. If not, start one ASAP.
If you learnt from your mistakes from last year, and the years before, and already have a Christmas fund, kudos to you! Whether it is a jar stashed under your bed or an online account, take stock of how much you have saved. If you have not started your Christmas fund yet, it’s still not too late. Start one NOW. There are any number of ways to save for your Christmas fund – raid your coin stash and cash it in at Coin Star, have a garage sale to get rid of all those gifts from previous years that are collecting dust in the basement, replace your lunch outings with brown bag sandwiches, cut your grocery budget by 10%, use (more) coupons, etc. Every dollar that you can stash away now, will reduce the stress and the resentment later. Think of it as paying forward for all the gifts *you* will receive :)

Make a budget of how much you are willing to spend.
Be honest and practical with your estimation. Remember that you will likely exceed that estimate, so be sure to leave some wiggle room. Do not make the estimate based on “what will people think of me” but rather “what can I/we afford”. Don’t worry about looking cheap – there are some great tips below for finding great gifts and still stay within your budget. With some advance planning (which I am sure you have got started on already as you read this post) and some hard work (don’t worry, you don’t have to leave your couch), you can make this Mission Impossible possible with as much finesse as Tom Cruise (Eww… I don’t know why I used that example, I don’t even like him anymore, but since I can’t think of anything else, the example stays. Moving on…)

Make a list of the expenses
Obviously high on that list will be gifts. In addition, there may be expenses associated with parties that you plan to throw. Or travel expenses to meet your family/friends or just getaway. Maybe you plan to attend someone’s party and need a nice outfit. Or you may be able to pull off a great attire by mixing and matching something in your wardrobe, but need a new coat to add the getup a new flare. Maybe you need a baby sitter (or a pet sitter). Think of all the things that could lead to inflated expenditure and add it to the list.

Break down your list and fill in the details
When it comes to gifts, make a list of all the people you need to give gifts to. Next to each name, jot down a few possible gift options and dollar amounts. If traveling, try and finalize the dates so you can book your airfare/hotel early and save some money. If throwing a party, sketch out some of the details like the number of people, place settings, stockable groceries etc.

***Start hunting for bargains***
This is THE most important step! At this point you probably have a good idea of what you want. Maybe there are still a few things that are hazy, but don’t worry about it. Every body’s list has that one person that is the difficult to shop for and every travel plan has a few details that just can’t be ironed out. Put them on the back burner for now, and focus on checking off as many of the other items as you can. Put technology on your side! Here is a great primer for using RSS feeds to track and save on items you are looking for. Bookmark this list of popular deal sites and check out the sites in the list to populate your RSS reader. And bookmark this list of price comparison sites to make doubly sure that you are getting the best possible deals! If you are buying books, make sure you check Addall.com to investigate the prices. Use this list of travel sites to find the best deals on travel. Add fare alerts on several different sites like orbitz, expedia, Travelocity, airfare watchdog, southwest airlines etc. so the deals come to you! And finally, when you find great deals, don’t hesitate to pull the trigger.

Stay away from temptation to indulge yourself
With all this shopping and deal hunting, it is very likely that you will find at least a few items that you would like to buy for yourself. Don’t give in to the temptation! Instead drop hints for people around you that you found a great deal on something that you would really like to have as a Christmas gift. If the request is reasonable, they will be glad you just made it easy for them to buy your gift :) Oh, yeah, when you buy gifts ahead of time, leave room for some swapping so you can accommodate a few last-minute hints that come your way :)

Use your credit card!
I know a lot of you will scoff at this, but a credit card is a great way to keep track of exactly how much you are spending! Additionally, if you are going to be doing most of your shopping online anyway, you may not have a choice in the matter. Just make sure that the credit card has some reward points or cash back for the money you spend and you pay off the balance in full as soon as the statement arrives with money from your Christmas fund. (If your Christmas fund is not fully funded yet, make sure you have a strict deadline for paying back your credit cards in full within a month or two at most! And as soon as the cards are paid off, start saving for your next year's Christmas fund so you can skip this step next year!)

With such a well-planned agenda, you will be way ahead of everybody else with your holiday shopping. When Christmas finally arrives, you can enjoy decking the tree and putting out gifts knowing full well that you got the best possible presents for the people you love while not getting yourself into debt in the process.

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Should Parents Try To Influence Their Children's College Applications?

It is college application time. While kids scamper to put the application packages together, parents fret and worry about the choice of degree and choice of colleges. While the kids are busy rating how "party" friendly the different schools are, parents are busy trying to figure out how "pocket" friendly they will be. A teenager's idea of a cool career is bound to be different from their parents' idea. Unsurprisingly, this could lead to a lot of flare ups when parents don't quite agree with their children's choice and the children don't want their parents to interfere.

Consider for example the case of my colleague. She wants to make sure that her daughter goes into a major that will lead to good career prospects. She wants her daughter to lead a worry-free life. My colleague is a brilliant engineer. As a first generation immigrant, she knows what it is like to struggle through life to get to a financially comfortable position. She wants to protect her daughter from having to go through what she considers "unnecessary pains" of making bad career choices. She feels that her children have a lot more opportunity and guidance than she did when she was younger and so they must be able to coast through life. She would prefer for her daughter to major in engineering. If her daughter must rebel she wishes it were to pursue a professional degree like law or medical school :)

He daughter on the other hand wants to pursue fine arts. She is an honor student with several advanced placement classes under her belt. But in her senior year in high school she was influenced by her peers into thinking that professional degrees are for dorks and losers. And now she wants to pursue a fine arts degree.

Which degree (or discipline in general) is better is only one of arguments that they have. Which college to send apps to is another huge point of contention. Some of the schools of choice for the daughter come at a hefty price tab of $40,000 per year. And they are known "party" schools. My colleague has the money stashed up, but it took a lot of blood and sweat to raise that money. She believes it is a complete waste to throw it away on an arts degree from an expensive party school.

I don't think there is anything very unique about my colleague’s situation. This drama is played out over and over every year in thousands of households across the country. Parents in their infinite wisdom want to protect their children from making stupid mistakes. They want to give their children the opportunities they perceive that they were not provided. They want to save their children from making some of the mistakes they did.

The children on the other hand are not really children anymore, but young adults. They believe that they know what they want. They want to stand for themselves and what they believe is their best option.

So, should the parents try to influence their children’s choices?

I believe that if the parents are paying for the education, they have every right to set some ground rules. Unless the parents inherited the money themselves, they must be able to have some influence over what and how their hard-earned money gets spent.

Now, if the parents can't afford to pay the children's college expenses and the child is actually taking out a loan, things get a bit dicey. Some of my friends believe that the parents don't really have a right to interfere in such a situation. I disagree. I think that it is a parent's responsibility to prevent the children from making what might be a choice that they will regret later in life. Just like a parent would never allow a child to walk into a busy street with a lot of traffic, they should also try to protect their children from burdening themselves with huge college debt for majors that can't provide for them in later life. The children may not listen, and they may fight back, but that didn't stop you from teaching them the right thing to do when they were younger and wanted to play with a knife!

It’s easier said than done. But there are ways in which this can be achieved. For instance, in my colleague’s case, they have established a truce of sorts now. My colleague has convinced her daughter to consider a degree in computer animation. Since a degree in computer animation requires her daughter to take some computer courses as pre-requisites, she feels comforted, that later in life if push comes to shove, her daughter can work as a software programmer. Her daughter has agreed to the option since a degree in animation will allow her to explore her creative side. As for the school they are still working it out :) The current offer on the table is that my colleague must allow her daughter to go to any school that the daughter can obtain at least 50% financial aid. In some schools (particularly the one that the daughter wants to go to), that is still a huge amount. But I am sure they will find a way to resolve it.

What would you do if your kids wanted to take up a major that you firmly believe will not prepare them for life in the real world? What if it involves taking our a huge student loan? How did your parents try to convince you?

In the mean time, if you are looking for some resources to share with your kids, here are some good starters –

• Is your degree worth $1 million -- or worthless?
  (A must-read if you are dealing with this situation!)


• ‘Top Chef’ Dreams Crushed by Student Loan Debt


• Is a Graduate Degree Worth the Debt?

*Image Credit: FranchisePick.Com