Survival in a difficult economy

Let's face it, the world is going through quite a lot of change right now. Personally I think it will settle down because all nations are interlinked in terms of investments and want to make money which requires a 'healthy business climate'. Meanwhile costs continue to rise, food, gas, energy, credit becomes harder to obtain, more kids not going to college because they cant get the loans, housing problems..layoffs..

Clearly some problems right now and for some time ahead.

What are your strategies to ride it out? I don't think it's all bad. We can still eat.

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supertechCETma

I think flexibility is the key. If you are determined to stay in an area (for whatever reason), seek out the business/industry that is happening locally and adapt. Technical skills get the job done but knowledge of a company's operations and market will show real worth to a prospective employer. Personal networking is still the best way to get a job. Participation in professional organizations will expose you to others in the industry, afford contacts for jobs, resources, etc. ...just a few ideas that have worked very well for me in the last 8 months.

snadam

royal wrote:

undomiel wrote:

royal wrote:

If everyone would get rid of their credit cards and paid in cash, you know, living within your means, the economy and the world would be a better place.

You can go either way with this. Msyelf, I like to pay every day things with credit cards. But you know what? I pay off the credit cards every month. Because I pay everything with credit cards, I get free rewards. I make money by using my credit cards knowing that I will pay off my credit cards every month. I recently bought my Playstation 3 using some of my reward points. Pretty nice. Another reason you may want to use credit cards is so you don't waste money with the change you get back. We know a lot of people just throw change around and forget where it is, etc.. To me, why not put it on a card and you paid exactly the amount needed.

One thing though, is your credit is based off of your your credit utilization. If you don't have a big limit, don't do this as you can hurt your credit by putting too much on a card. I forget what the general recommendation is for credit utilization, but I think it's 15% or so.

+1!!!

I follow the same thinking. Cash is king, and I always pay off immediately. I HATE having unnecessary lingering debt.

eMeS

nl wrote:

I'm assuming a lot of TEers have student loans -- interest rates are up on some of those loans so make sure you keep an eye on them! My buddy's just jumped up to about 15%.

15% sounds a little steep for a student loan. I'm not sure that I've ever heard of one being in that range, but I guess it's possible. In fact, about the highest I've ever heard of on a private student loan is prime+6%, which would be a little above 10% right now....

Did he miss a payment or something?

In any event, there are plenty of lenders that would be happy for him to transfer this loan to a lower rate, as student loans are really low risk for the lender. All or most of the loan is guaranteed by the government.

Student loans are generally one of the best types of debt to incur. The interest rates are usually low, and generally the terms are such that you don't have to pay on the debt until you stop attending (hopefully graduate) school.

Additionally, student loan interest is one of the last forms of interest that is tax deductible, up to a defined income amount, which is I believe higher than the average college graduate earns in his first few years out of college.

I know many people that had the money to pay for college, but instead took a student loan at 5% to pay for school, and invested their money to earn 10%+ per year. In a situation such as this, why would anyone ever pay off the student loan? Doing so is like saying that you don't want to earn 5%+ more per year....

Also, I know several people that graduated school with student loans. Once they started applying for jobs they were able to work out deals with their employers where the loans were paid back as a type of sign-on/retention bonus. I know of this happening in the past, and recently, and it usually is related to the person having a skill or degree that is in high demand.

My opinion is that debt in an of itself is not a bad thing. For example, I have a mortgage financed at a low interest rate. If I were to pay it off I would lose money because of the amount generated from the money being invested. What is a bad thing is poor management of debt.

"Good" debt includes student loans, mortgages on 1st and 2nd homes, and margin interest. My goal is to maximize these types of debt at the lowest possible rate. This allows me to increase my standard of living while using my cash to invest and generate more money.

My advice then, if you have set yourself a goal of eliminating debt is to start with high-interest debt which offers no tax advantage. After that, even if you have $800 on a 20% interest credit card and $6000 on an 8% interest credit card, it is always best to pay off the highest interest debt which offers the least advantages first....

MS

royal

eMeS wrote:

I know many people that had the money to pay for college, but instead took a student loan at 5% to pay for school, and invested their money to earn 10%+ per year. In a situation such as this, why would anyone ever pay off the student loan? Doing so is like saying that you don't want to earn 5%+ more per year....

I follow the same train of thought. I graduated and have $29,000 of student loands. $40,000 after 20 years. My interest rate is only 3.25%. Because of this, I'll take the 20 years to pay off the loan since the interest rate is so low and eventually open an IRA to invest at ~10% every year instead to take advantage of the compound interest while I'm still < 30 years old. Because my interest rate is so low, from a long-term perspective ,I'd make the ~$10K back I lost in interest back from investing in an IRA with compounding on my site plus a lot more.

Now if someone has credit card debt that's high, I'd of course pay that off as fast as possible since it can hurt your credit in addition to the fact you're wasting so much money on interest.

blargoe

Good points about the "good" debt. And sometimes you can turn bad debt into better debt or good debt into better debt.

I just refinanced my mortgage even though I've only been in my house for a little over a year. I was able to go from a 30 yr fixed at 6.375% to a 15 yr fixed at 5.25% with no PMI. Payments only went up about $100 per month. Even with having to pay the loan fees again, that decision was a no brainer. If I unexpectedly have to do something with my house in 4 or 5 years, I'll have a lot more equity to work with.

royal

Ya, that was a pretty smart move. I move into my first house on June 27th. I really can't wait! I would have gotten a 6% interest rate with PMI or do something called mortgage lender paid interest which puts me at 6.375% with no PMI. I think that works out great for me, especially since I only plan on being in my place for a few years. By then, when I move into my next place, I'll have enough for a 20% down payment which will give me an even lower interest rate and avoid PMI. Or heck, even if I do plan to stay in the same home, I could just re-finance with a lower interest rate without lender paid mortgage insurance and without PMI once I get 20% equity built into the house.

eMeS

royal wrote:

Ya, that was a pretty smart move. I move into my first house on June 27th. I really can't wait! I would have gotten a 6% interest rate with PMI or do something called mortgage lender paid interest which puts me at 6.375% with no PMI. I think that works out great for me, especially since I only plan on being in my place for a few years. By then, when I move into my next place, I'll have enough for a 20% down payment which will give me an even lower interest rate and avoid PMI. Or heck, even if I do plan to stay in the same home, I could just re-finance with a lower interest rate without lender paid mortgage insurance and without PMI once I get 20% equity built into the house.

One thing to remember is that the loan officer works for you. There is no absolute requirement that any loan, regardless of the percentage paid down requires PMI. Lenders define their specific requirements on loan products. The 20% equity thing is plain and simple a myth.

All you have to do is ask for a loan that does not require PMI. I say 'ask'...require is a better term. I bought my current house 5 years ago, paid 0% down, and have no PMI monkey. My interest rate is low (I think somewhere around 5%, but too lazy to look). It's a 30 year note, but I would finance for 3000 years at that rate if I could.

This is not my first property, and it is not a starter home. I have never paid PMI on any mortgage.

IMO, PMI is one of the biggest scams ever. Why would I insure someone elses' risk?

Even if to get a loan you have to take a 6.5% loan without PMI (vs. 6.375% in the quoted example with PMI), it's still a better deal for you because all of that interest (+.125%) is tax deductible. I'd rather have my additional funds invested vs. being locked into an illiquid asset at a value to me of +.125%....

Buying a home is a confusing process, but really the buyer is in charge. Borrower risk should be reflected in the interest rate, not in add-ons to the loan that increase the borrower's payment without additional added benefit to the borrower.

MS

Claymoore

Almost a year ago, my finances were getting too low for comfort so I had to make some changes. I recently changed from being an hourly contractor to a full-time employee, but I was still spending like I was a contractor. If I wanted to spend an extra few hundered dollars on something, I would just bill some extra hours, but that option went away when I became a salaried employee. I also bought a new (used) car and that came with a new car payment. My previous car had been paid off for about 18 months and I wasn't used to making payments and I did not adjust my spending accordingly. I make a nice income, but I really needed to get my spending under control.

So I decided to reduce expenses by $10 a day.

First step was to quit smoking - not only did my health improve, but I cut about $4 a day.

Next step was to start bringing my lunch. I lived alone for a few years, and it can actually be cheaper eating out most of the time than cooking at home. However, once my girlfriend moved in we were able to take advantage of some economy of scale and shared labor so we started eating at home. Leftovers for lunch are definitely cheaper and healthier than fast food.

Those two things alone put more than $300 a month back in my pocket.

In order to improve your financial standing, you either need to increase the amount of money coming in, or decrease the amount of money going out. Studying and working hard to earn a promotion or a new job are definitely good choices over the long term. However, it's been my experience that expenses will rise to meet income unless you pay attention to them as well.

Turgon

Claymoore wrote:

Almost a year ago, my finances were getting too low for comfort so I had to make some changes. I recently changed from being an hourly contractor to a full-time employee, but I was still spending like I was a contractor. If I wanted to spend an extra few hundered dollars on something, I would just bill some extra hours, but that option went away when I became a salaried employee. I also bought a new (used) car and that came with a new car payment. My previous car had been paid off for about 18 months and I wasn't used to making payments and I did not adjust my spending accordingly. I make a nice income, but I really needed to get my spending under control.

So I decided to reduce expenses by $10 a day.

First step was to quit smoking - not only did my health improve, but I cut about $4 a day.

Next step was to start bringing my lunch. I lived alone for a few years, and it can actually be cheaper eating out most of the time than cooking at home. However, once my girlfriend moved in we were able to take advantage of some economy of scale and shared labor so we started eating at home. Leftovers for lunch are definitely cheaper and healthier than fast food.

Those two things alone put more than $300 a month back in my pocket.

In order to improve your financial standing, you either need to increase the amount of money coming in, or decrease the amount of money going out. Studying and working hard to earn a promotion or a new job are definitely good choices over the long term. However, it's been my experience that expenses will rise to meet income unless you pay attention to them as well.

I dont know how much a pack of cigarettes is in the US..4 dollars? Here in the UK it's over 10 dollars a pack!

What about savings for US folks? I know with the falling dollar this is a cause of concern over there.

eMeS

Turgon wrote:

Claymoore wrote:

Almost a year ago, my finances were getting too low for comfort so I had to make some changes. I recently changed from being an hourly contractor to a full-time employee, but I was still spending like I was a contractor. If I wanted to spend an extra few hundered dollars on something, I would just bill some extra hours, but that option went away when I became a salaried employee. I also bought a new (used) car and that came with a new car payment. My previous car had been paid off for about 18 months and I wasn't used to making payments and I did not adjust my spending accordingly. I make a nice income, but I really needed to get my spending under control.

So I decided to reduce expenses by $10 a day.

First step was to quit smoking - not only did my health improve, but I cut about $4 a day.

Next step was to start bringing my lunch. I lived alone for a few years, and it can actually be cheaper eating out most of the time than cooking at home. However, once my girlfriend moved in we were able to take advantage of some economy of scale and shared labor so we started eating at home. Leftovers for lunch are definitely cheaper and healthier than fast food.

Those two things alone put more than $300 a month back in my pocket.

In order to improve your financial standing, you either need to increase the amount of money coming in, or decrease the amount of money going out. Studying and working hard to earn a promotion or a new job are definitely good choices over the long term. However, it's been my experience that expenses will rise to meet income unless you pay attention to them as well.

I dont know how much a pack of cigarettes is in the US..4 dollars? Here in the UK it's over 10 dollars a pack!

What about savings for US folks? I know with the falling dollar this is a cause of concern over there.

I'm not a smoker...never have been, but I think in some places like NYC smokes are much more than $4 per pack...

I think declines in the value of the dollar might be a concern if you had a large amount of money sitting in a pure cash account earning a low interest rate. Even in the best of times doing so would result in losing some % of your principal to inflation.

However, there are so many financial options that relatively safe and liquid cash-type investments can earn more than the year over year increase in the cost of living.

IMO, the actual price or amount of goods I can buy per dollar doesn't really matter, what is important is that my relative purchasing power, assets, and income continue to grow over time.

One way I saved a ton of money a while back was eliminating a daily (sometimes twice) trip to Starbucks. It's amazing how $4-$8 per day adds up over time...

Another thing...I'm not so sure that what we've seen is nothing more than a temporary blip (just for grins, I can tell you that I am definitely not a republican). Increased supply of dollars tends to be correlated with intense investments in new technologies. Not foolproof, but one of the best ways to see this is in the NASDAQ index, which is tech-heavy. The last 3 months have shown excellent returns, which fits with the Feds' increasing the supply of money. This amount of increase in a 3 month period tells me that there are a lot of dollars chasing a smaller supply of equities. Not saying that A causes B, as there is no way to prove that, but there appears to be a strong correlation. Also, compare NASDAQ to FTSE-100, S&P 500, or DJIA for the last 3 months to further illustrate the point. S&P and DJIA are just about even for the year, whereas the FTSE appears to have recently started a decline.

I believe that we are at the beginning of another boom cycle driven by two things. First, the need to reduce energy costs in a reasonable way that doesn't cause food prices, etc.. to skyrocket. Second, continued improvement in technology capability, primarily driven by the entertainment and energy industries and the ever-increasing need for faster access to information. (I would love to see how many "economic stimulus checks" were spent on GTA IV, HDTVs, and PS3's/Xbox 360's????)

I believe the low value of the dollar allowed US companies to sell inventories to the rest of the world, which will in-turn fund increased expansion.

In fact, I would say that in Texas, as least the part where I live we have been somewhat insulated from this recession. The natural gas industry has taken off over the last few years, and almost everyone that owns land owns mineral rights. Thus, a lot of extra money suddenly appeared in the economy from 2007-2008. For example, I received a substantial bonus for assigning the rights to retrieve the natural gas from beneath my property, and I get a decent sized check every month. All money that wasn't expected. This is common in North Texas.

MS

snadam

Turgon wrote:

I dont know how much a pack of cigarettes is in the US..4 dollars? Here in the UK it's over 10 dollars a pack!

What about savings for US folks? I know with the falling dollar this is a cause of concern over there.

Depends on which state you live in. Since AZ is a smoke free indoors state now, they put an extra tax on cigarettes. That, and they kept adding taxes over the years. I think we pay $6/pack now. I dont really smoke cigarettes (cigars on occasion), but i still find it expensive.

blargoe

Claymoore wrote:

I also bought a new (used) car and that came with a new car payment. My previous car had been paid off for about 18 months and I wasn't used to making payments and I did not adjust my spending accordingly.

Someone advised me a while back to ALWAYS have a car payment budgeted and taken out of your paycheck. Even if you don't actually have a note on a car that you're paying to a bank. Pay it to a savings account if you have to. I started doing this after I got my cars paid off last year. Serves two purposes - you never have to get used to having a car payment coming back out when you buy the next car, and the savings account will give you a sizeable down payment toward your next car, or maybe even pay for the car completely.

Claymoore

blargoe wrote:

Claymoore wrote:

I also bought a new (used) car and that came with a new car payment. My previous car had been paid off for about 18 months and I wasn't used to making payments and I did not adjust my spending accordingly.

Someone advised me a while back to ALWAYS have a car payment budgeted and taken out of your paycheck. Even if you don't actually have a note on a car that you're paying to a bank. Pay it to a savings account if you have to. I started doing this after I got my cars paid off last year. Serves two purposes - you never have to get used to having a car payment coming back out when you buy the next car, and the savings account will give you a sizeable down payment toward your next car, or maybe even pay for the car completely.

That's great advice and is the same thing I will tell anyone who is asking me for advice about buying a car. Even 3 months of doing that is enough to cover taxes, title and license fees so you don't have to roll that into the loan - why pay interest on taxes? Unfortunately, I did not follow my own advice because I wasn't planning on buying another car for about a year. I will drive a car till the wheels turn square and then go buy another used car. My old car needed some unexpected repairs that were going to cost more than the car was worth so it had to go. Throwing good money after bad was worse than not having a down payment saved up.

I sold cars for a month between projects back in 2002 after the dot-com bust. I did it for several reasons, but one of them was to learn how to buy a car. After what I learned in that one month, I will never get screwed by a dealer. I don't want to hijack this thread, but I could list a few car-buying pointers in a different post in order to help out the members who are in the market for a car.

HeroPsycho

blargoe wrote:

Someone advised me a while back to ALWAYS have a car payment budgeted and taken out of your paycheck. Even if you don't actually have a note on a car that you're paying to a bank. Pay it to a savings account if you have to. I started doing this after I got my cars paid off last year. Serves two purposes - you never have to get used to having a car payment coming back out when you buy the next car, and the savings account will give you a sizeable down payment toward your next car, or maybe even pay for the car completely.

That can be a good strategy, but make sure you have paid off your "bad debt" first before doing this. For example, if you pay your car off, but still have $5000 of debt on a 12% interest rate credit card, pay your credit card off first. The reason being is a car loan typically has a much lower interest rate than a credit card. If you pay that $5000 debt off, the monthly payments on that debt could make up a bit for that next car loan. And so what if you could pay for the car in cash in that situation anyway. Your car loan, had you needed to get one, would have been far less than 12%.

Also, keep in mind that piling money up in a savings account can work against your best interests. A certain amount of money in an account with high liquidity is a good thing, but the interest associated with traditional savings accounts nets you often is less than increases in cost of living. Look for high interest rate savings accounts, money market funds, etc. that may sacrifice a little in liquidity, but net you better interest rates.

undomiel

The wife and I spent most of yesterday looking around to see if it was viable to trade down our Civic to get into something that gets equivalent or better gas mileage but would also take a couple thousand off our debt on the car end. Came close but didn't find anything that was a good enough take to be worth it. Our plan is once we get out of debt we will put money away and then just trade up and pay cash until we own the car (or cars) that we want. We'll never take out a car loan again. By the way don't forget to budget maintenance on your car as well. If you want to make your car investment worthwhile then you will want to keep it in good condition. Also learn to change the oil yourself. If you're feeling adventurous then get a shop manual for your car and learn to do some more maintenance yourself. You'll be able to save a bit more that way. Every bit helps!

royal

And just some more information about the emergency funds that I wrote about earlier. It's advised to get 3-6 months of living expenses. I currently have mine at 3.5 months. Now, every month, I have $30 automatically deposited into that account. I also have it in an HSBC Online savings account so I net a higher interest rate. I get about $25 in APY every month. So I'm still adding almost $85 per month to it. I eventually want to get it to a full 6 months of living expenses and I will then just let it build more with interest alone. I will take money out of this account ONLY if I get laid off or something breaks in the house. I will then work to replenish it as fast as possible.

This is a VERY important step to ensure you have the money in case an emergency hits, even if you feel like you have good job security.

HeroPsycho

undomiel wrote:

The wife and I spent most of yesterday looking around to see if it was viable to trade down our Civic to get into something that gets equivalent or better gas mileage but would also take a couple thousand off our debt on the car end. Came close but didn't find anything that was a good enough take to be worth it. Our plan is once we get out of debt we will put money away and then just trade up and pay cash until we own the car (or cars) that we want. We'll never take out a car loan again. By the way don't forget to budget maintenance on your car as well. If you want to make your car investment worthwhile then you will want to keep it in good condition. Also learn to change the oil yourself. If you're feeling adventurous then get a shop manual for your car and learn to do some more maintenance yourself. You'll be able to save a bit more that way. Every bit helps!

What's wrong with car loans?

Don't get me wrong, it's obviously better to pay cash and not borrow money to purchase anything, but car loans aren't that bad. I own a Civic myself with a 3.99% interest rate loan. As far as I'm concerned, there is no rush for me to pay that off faster. Every other debt I have has a higher interest rate than that one, and all my investments have a higher return than that.

As for oil changes or other car maintenance, I have a different perspective. If I'm unemployed, or have some other reason I have oodles of time to do it, I'll do it myself if I think I can manage it. However, and this is especially true of oil changes, if it takes me more time than it's worth to pay someone to do it who I can trust to do it correctly, I'll pay someone every time. It would honestly take me over an hour when it's all said and done to change my oil, when you factor in buying the oil, performing the oil change, and taking the oil to be recycled. Now factor in the cost of buying the oil and filter myself, and the gas to drive the oil to be recycled, and that's probably $10-12. I could spend that time studying for a new certification, and that would do me more good than the $10-20 it costs me over changing it myself to get someone to do it for me.

On the flip side, the labor involved to change the transmission fluid is about the same as changing the oil, but mechanics charge way more to do it. I'll gladly do that myself!

undomiel

HeroPsycho wrote:

What's wrong with car loans?

Don't get me wrong, it's obviously better to pay cash and not borrow money to purchase anything, but car loans aren't that bad. I own a Civic myself with a 3.99% interest rate loan. As far as I'm concerned, there is no rush for me to pay that off faster. Every other debt I have has a higher interest rate than that one, and all my investments have a higher return than that.

As for oil changes or other car maintenance, I have a different perspective. If I'm unemployed, or have some other reason I have oodles of time to do it, I'll do it myself if I think I can manage it. However, and this is especially true of oil changes, if it takes me more time than it's worth to pay someone to do it who I can trust to do it correctly, I'll pay someone every time. It would honestly take me over an hour when it's all said and done to change my oil, when you factor in buying the oil, performing the oil change, and taking the oil to be recycled. Now factor in the cost of buying the oil and filter myself, and the gas to drive the oil to be recycled, and that's probably $10-12. I could spend that time studying for a new certification, and that would do me more good than the $10-20 it costs me over changing it myself to get someone to do it for me.

On the flip side, the labor involved to change the transmission fluid is about the same as changing the oil, but mechanics charge way more to do it. I'll gladly do that myself!

Well let me expound a bit more then!

On the subject of oil changes and car maintenance, I was staying on topic for this thread. The gist seems to be about saving money and making it easier to weather the hard times. If you're in one of those hard times it may be very worthwhile to do your own car maintenance and oil change. If you're in a more comfortable situation then it most likely will be more worthwhile to work on something else than to change your own oil. Right now I'm at the point where I have to put off an exam for a while because the finances are really tight. So it is worth while to me to do my own oil change.

Car loans? The approach there is from the perspective of all debt is bad. The wife and I are dead set on getting out of debt and staying out of debt permanently. We don't see a reason for our money that we have worked hard for to go to someone else. We see something we like and want? We check our budget. No money in the budget for it? We don't get it. Still want it? We wait until we have the money saved up for it and pay for it out right. No debt involved, no losing money to a middle man. Also on the subject of cars if you come in to the dealership with 100% cash on hand they will bend over backwards to get that cash from you. So you can get a really good deal on a car that may not have been as attainable as when you go in having to talk loans. You are completely in the position of power there.

So if you are in debt and have a car loan and the rate is lower than say your credit card debt? No reason to put a priority on the car loan. Getting the higher rates out of the way first would be more important, mostly. There are exceptions. My recommendation would be to check out this book by Dave Ramsey: http://www.amazon.com/Total-Money-Makeover-Financial-Fitness/dp/0785289089/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1212437082&sr=8-1 I think I saw a better price for that when I was in Barnes & Noble the other day. Anyhow he has lots of great advice about debt management and I would highly recommend looking into it. The plan we currently have mapped out is eliminating our credit card debt first, then we hit the car loan (we'll have a pretty big snowball by then), all of our student loans and then finally some money I owe my parents. The nice thing about the loan from the parents is that there is no interest and they never expected it to be paid back. But it is always good to pay back your debts. It has been working out pretty well for us, we've eliminated several credit cards so far and we'll have another one knocked out in a month or so. We've eliminated so far over 20k in debt in a year and a half. We still have a long ways to go but it is working good.

HeroPsycho

I agree in principle to the other points you made, although I will say that sometimes concerning yourself to a high degree to being debt free can be detrimental. When I switched careers to get into IT, the only way I could afford to get certified was to borrow money. It scared the crap out of me how much in debt I was getting into. However, I'm paid it off and am in way better shape than I was before I began running that debt up in order to get into IT.

Looking back at it, my main regret was not aggressively pursuing IT as I could have because I was afraid of the financial repercussions of it. Instead, I tried to do it as cheaply as possible, which prolonged me getting my certifications longer than it needed to be, so I didn't get that first IT job until years after I began studying.

undomiel wrote:

On the subject of oil changes and car maintenance, I was staying on topic for this thread. The gist seems to be about saving money and making it easier to weather the hard times. If you're in one of those hard times it may be very worthwhile to do your own car maintenance and oil change. If you're in a more comfortable situation then it most likely will be more worthwhile to work on something else than to change your own oil. Right now I'm at the point where I have to put off an exam for a while because the finances are really tight. So it is worth while to me to do my own oil change.

Ask yourself what that exam means to your career, especially financially. Compare that to what interest on the cost of getting certified plus the interest you'll be charged for borrowing that amount. That tells you if it's worth borrowing to do it. Your certifications should pay off handsomely in the end, or else you need to examine closely why you're doing them in the first place.

Take my personal example above. I was a struggling school teacher making $35,000/yr. I pursued MCSE at the cost of roughly $40 per exam book, $125 per exam, and $125 sometimes per Transcender product, although for the sake of simplicity, let's assume that was per exam. That cost me roughly $300 per exam * 7 exams = $2100. I ran this up (not that there aren't smarter ways of doing this) on a credit card with roughly 12% interest. Assuming I never paid down the principle, that would be $250/yr in interest, and let's say I've carried that debt all the way from 2001 when I started to 2007, not paying down any of the amount. I'm being generous here to the credit card company, because that didn't happen. That would be $1764 in interest, plus the $2100 I charged for a grand total of $3864. In 2004, I got my first full time IT job making $72,000/yr that I absolutely would not have gotten had I not been an MCSE. That's a $37,000/yr jump, and the interest and money I spend to get MCSE in that scenario was WELL WORTH IT!

Don't get me wrong; it's not good to charge things you don't need or don't help you in the future, but borrowing to invest in yourself pays handsomely in the end when done wisely. Hard rules about not carrying debt can often be against your best interests (no pun intended).

nel

not to stray too far of the subject but how do people feel about this outside of the US? as ive noticed apart from turgon ( i think ) that the rest of the posts are from the US? i just want to try and get a balanced feel because some parts of the world has higher costs than others?

I would love to have 3 - 6 months worth of money for bills etc but i find that my gf and i struggle to pay bills with both of us working! with the costs of living, rent, stupidly high interest rates, petrol etc all going up, i find it hard to save anything at all some months! in fact this scenario is very common, of the top of my head i think i know about 70-80% of the people i know in this situation are the same. Maybe this is why in the UK many of us like to drink our selves unconscious by the weekend because so many people are sick of this way?

HeroPsycho

I found when I was struggling as a teacher that you often are spending money on things you just don't realize cost as much as they do over a period of a long time.

When I first got married, my wife insisted on grocery shopping at a local grocery chain that was I guess you'd call it the premium variety. I would buy Boars Head Premium swiss cheese and ham for my sandwiches I'd make to take to work. We wouldn't really buy food based on price, but just what we wanted to have.

It didn't take long living this way to realize that this wasn't working. The first thing I found helpful was that we balanced our checkbook with Microsoft Money, and we categorized our expenses, quickly zeroing in what was eating our budget - groceries and dining out!

We immediately cut back on going out to eat, and went to the Subways of the world instead of the Outbacks of the world more often when we did.

We also began changing what we bought at the grocery store. Boars Head Premium swiss cheese tastes fantastic, but Kraft swiss cheese costs half the price. We then also began shopping at *gasp* Wal-Mart for groceries. We cut our food costs substantially.

Someone on this thread already pointed out the costs of cigarettes. For those of you who smoke, think about that.

Alcohol is expensive! Those of you who drink, look closely how much that costs you over longer periods of time like a month or year. It adds up!

A few years ago, I began driving in a manner that maximizes my gas mileage. I went from 26MPG in my Civic due to my aggressive driving and quite frankly ignorant driving habits that served absolutely no purpose to 38MPG. It's mainly common sense stuff if you really think about it. I noticed that driving in stop and go traffic by making sure that jerk next to me won't cut me off and get in front of me was a big fat waste of gas, and absolutely did not get me anywhere faster. So what if he does?! Ask yourself the next time you see a red light ahead of you why in heck is your foot still on the accelerator! Getting to that red light any faster doesn't get you home any faster. Start trying to get to the red light late enough that it turns green and you're still moving. If anything, you get where you're going faster when you do that, and you save money on gas, and reduce wear and tear on your car. I had to get my tires changed on my first Civic at 35K miles, but my new Civic at 50K only because I hated the tires and wanted something that gripped better in bad driving conditions. My brake pads, still the original ones, aren't even half way done yet!

It's just little stuff that honestly doesn't make your life noticeably less convenient that added up makes big differences!

Sie

Made me think of the fridge magnet I have at home:

"Just when I was about to make ends meet, somebody moved the ends"

HeroPsycho wrote:

What he said

(Whole quote can be seen above, removed to save space

)

I agree with HeroPsycho, looking at your costs and working out what your sepending your money on is the first place to start.

Once you do that you can find places to save and where you can do things cheaper.

When I was given my last pay rise I arranged standing orders for the extra amount to pay off my debt, I lived off my salary prior to it so not having the extra didnt hurt and it isnt missed and all the time its paying off what I owe. I know its far too easy to live to your wage rather than what you need to spend, soon that extra money isnt enough because you get used to spending it on other things this way I continued as I also had and will shortly be debt free

www.moneysavingexpert.com has some good information on saving money and getting the most from it, take a look if you get time, infact I would recommend making time to have a look.

I eat foods I like, drink, drive (last two never together!) and smoke, (not to excess) im know I could pay off things quicker if I didnt but its about finding a comfortable medium where you dont miss out too much on either side as far as im concerned.

My Gran always said, "Look after the pennies and the pounds will look after themselves." theres quite a bit of truth in that, when I was single I got in debt. Now im in a relationship with a bigger house and bills to pay not to mention a child and instead im now paying off the debt. Odd how things can work out if you take the time to look at it and sort it out.

undomiel

HeroPsycho, yes if you put everything to the calculator the loan does come out better in the end to quickly boost your value. But on the other hand getting out of debt is not just about loans, it is about spending habits. You may have the discipline to put everything into a loan or on a credit card and have it paid off before it comes back to bite you for a good chunk more of your change. Most of America does not have that sort of discipline though. Don't worry, I'm not going to make generalizations about other countries as I don't know spending habits and life styles there. Japan, China and Korea maybe, but not the rest of the world. Anyhow back to topic, it is a debt driven society that we live in. While it may make more fiscal sense to take out that loan or to pay off those cards to get freebies and build credit, the facts of life are that most people can't handle that amount of discipline. Most people don't even have a budget much less stick to a budget. Even the wife and I have troubles sticking to a budget some months so that eats a bit out of our snowball. It takes a good number of tries to put together a budget that works. Most people aren't willing to reform their spending habits either. If my wife or I talk to anyone around work about getting debt free or smart money spending or habit reforms (even just dietary, not money) they all talk about wow that is so amazing I could never do that. You always hear the I could never do that. It's the one line that is consistent among pretty much every single one. They don't even want to reform spending habits, but are very quick to complain about having no money. One of them has made some strides towards paying off their credit card. Their parents paid it off for them once, they were really happy about being debt free, then less than a month later they are back up in debt after big screen tvs and stereo systems and such. They started working hard on getting that paid off, then they go and shoot it back up again with a really expensive dog. Now they have another family member offering to pay it all off for them. One of them is thinking of refusing the offer just because she thinks that they need to work it off themselves otherwise things will never change. It is all about getting those spending habits under control. That is why I put debt free first. Sure I can't take my test immediately, but that is ok, a month or so of extra studying won't hurt my score at all. It will mean that I'll have my MCSE a month or so later but that's ok, I'll still be gaining good work experience and I'll still be learning more and sharpening more skills. So I'll be even more valuable when I attain it.

Anyhow, the biggest place for reforming your budget is in the food as HeroPsycho noted. Cutting down or even out the eating out makes a huge difference. Something else that helps with keeping your food budget under control and actually sticking to it is paying for your food in cash. When it runs out, it runs out. Having your debit card available gives a form of detachment from spending the money. It enables you to overspend. Another way to jump start things is SELL STUFF! For instance the wife and I sold most of the video games and movies and a huge number of books. We didn't play those ones much anymore and the books usually don't get re-read. That gave us a good start place for getting our debt paid down. It's just stuff after all. Sure it sucked to sell some of those games, but it is just stuff. It didn't quite knock out a credit card but it did make a good dent in it. And once we were able to scrape together some more money out of the budget and get it paid off having that required minimum payment gone made a HUGE difference in both stress as well as being able to pay other things off faster.

Just some more ideas how to get things under control. And just so there is no confusion I am really glad that the loan helped jump start things for you HP, I'm not coming down on you for that. I disagree about it being the best way for most everyone, but I'm not trying to tar and feather you or anything.

edit: Oh one other thing I just thought of for the saving money that I had forgotten to post. Don't forget to check your local library! They may have some excellent studying resources for you. It really helped me out for the 70-270 and 70-290. Also anyone nearby that you can borrow books from really helps out as well.

Claymoore

Groceries are getting more expensive so try clipping coupons. Between coupons and advertised/bonus savings, the gf and I saved $50 off a $250 total bill the last time we went grocery shopping.

I live in a city that has two major newspapers and we get Sunday delivery of both just for the coupons. I had never used coupons before, but she started clipping coupons and we started saving money. Once I got over my elitist attitude that equated coupons to food stamps, I started helping her. If you can be flexible on what brands you buy and when you buy them, you can really maximize the savings. According to the gf, companies issue coupons at the beginning of the month to get you to try their product and then they authorize the store to put them on sale at the end of the month to get you to try them again. If you can wait until the end of the month to use the coupon you win! (I guess she learned something in all those MBA courses she took.) We also tried different grocery stores and found out the 'nicer' store did not verify the coupons. As long as they weren't expired, we could use them even if we didn't buy the correct size or number of products.

undomiel

Oh yeah I was totally going to mention coupons as well. Thanks for bringing it up claymoore! My wife and I didn't have too much luck with coupons but that was because we are sticking to a stricter diet so the time/benefits pay-off wasn't really there. Something else to consider is checking out any co-ops in your area. You may be able to get an excellent deal on produce. Farmers markets are also a good source for great deals and great produce.

dynamik

If you haven't already, call your CC company and ask if it's possible to get a rate reduction. My wife and I have done this successfully several times for significant savings.

If you're using your CC and paying it off every month, make sure you're not being charged interest on your average daily balance. You may be paying interest even though you're paying off the entire balance every month. Discover is notorious for this.

I was surprised no one mentioned this before undomiel, but sell stuff. This is my project for the summer. I can probably knock $2-3k off my CC, but it's all going to by in $20-100 items. I have a ton of old computer equipment, video games, movies, *cough* *cough* HD-DVDs *cough*, misc electronics, etc. I haven't had the time, but now that I have a break from school, it's time to clean house.

HeroPsycho

undomiel wrote:

HeroPsycho, yes if you put everything to the calculator the loan does come out better in the end to quickly boost your value. But on the other hand getting out of debt is not just about loans, it is about spending habits....

That is why I put debt free first. Sure I can't take my test immediately, but that is ok, a month or so of extra studying won't hurt my score at all. It will mean that I'll have my MCSE a month or so later but that's ok, I'll still be gaining good work experience and I'll still be learning more and sharpening more skills. So I'll be even more valuable when I attain it.

I don't want to belabor the point, but look at what you're saying here, and think rationally for a second.

You just said in my scenario, it makes sense to have borrowed money to do what I did. And the extra month of studying is only beneficial if it helps you gain skill and/or pass the certification. If all you get by waiting is a higher passing score, it's simply not rational to do that. All that matters is gaining skill, and validating it with a cert. That's really the nitty gritty for why we should be pursuing certification. Has a potential employer ever asked you what your score was on any exam? None, for me. They just care if I have the certs they're interested in, and they ask questions to ensure I'm not paper. Past that, they couldn't care less what my scores were.

Think about it - opportunities come and go quickly. An extra month on this exam, or that exam, and the next thing you know you've prolonged achieving a certification by months. Ask yourself how much it might cost you in interest had you borrowed to do it. Hopefully, you won't have missed an opportunity for a job you see on Monster, or Dice, or someone calls you up out of the blue for it because you don't have the certification they require for you to get the position because you were trying to save a few bucks in interest. Charging the credit card to get your exams done faster is well worth it in many cases. Sometimes borrowing is a good thing.

My point is being hard nosed about being debt free can be a bad spending habit, too. I'm not advocating charging $2000 on a plasma TV because you wanted it. I'm saying be smart and borrow when it makes sense to do so.

borumas

Lately I have been trying to save money by eating out less, I figure I can save over $55 a week if I don't get an energy drink in the morning on the way to work and if I can take a lunch to work at least 3 days a week. I've also stopped going out as much.

One thing I would recommend along with saving at least 3 months of pay is to stock up each trip you go to the grocery store by spending $4-8 on food to be stored, like cans of tuna fish, rice, beans, etc.. After about 5 trips to the store you should have a decent cache of food in the event of an emergency. I was nearly stranded about 60 miles from home once due to a flood and after that I bought a backpack and filled it with some basic survival stuff like matches, a pair of clothes, a good knife, snakebite kit, medkit, and even a sleeping bag along with some water and food- this way in case of a similar problem or a horrible even like Katrina I could get stranded somewhere for a few days without being totally miserable.

A few ways to lower gas prices would be to talk to your congressman or woman to make the dollar stronger, this should help lower gas prices for the world and not just the US as the price of oil goes by the dollar. Another thing that hurts the US for price of gas is we haven't built and oil refinery here in over 30 years and we need a couple more, also allowing companies to drill offshore would help lower prices- countries like China are already drilling off our shores in international waters so why can't we let companies do the same a few miles further in to help lower prices and add more product to meet the demand?

undomiel

borumas wrote:

One thing I would recommend along with saving at least 3 months of pay is to stock up each trip you go to the grocery store by spending $4-8 on food to be stored, like cans of tuna fish, rice, beans, etc.. After about 5 trips to the store you should have a decent cache of food in the event of an emergency.

To add to that, especially stock up on sale priced items. It is kind of a no brainer but there's nothing wrong with picking up a whole bunch of an item (of course depends upon the expiration date) so that you won't have to get it on your next trip. Of course if the flexibility of your budget allows.

You can also contemplate breaking your coffee addiction.

dynamik

Coupons and sale items make my spend more money. Oh look, buy one $30 steak, get the second half off. That's like saving $15

I just end up getting a bunch of crap I don't need. Maybe CompTIA will make a Coupon+ to help me out.