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 Post subject: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 8:38 am 

Joined: Wed Jun 08, 2011 5:47 pm
Posts: 5
Hey everyone, I've been reading GRS for a few months now, but this is my first time on the forums. I've recently been taking huge steps in securing a responsible financial present and future for myself, and I thought it'd be a great idea to start a journal on here! :)

I had never been a saver. I was good at saving up to spend, but not just for the future. My dad has always done the financial stuff in our family, including school, and since he has always VERY generously said that he plans to pay for my sister's (16) and my college educations, I never really worried about my student loans.

Now for the second part of the story... my mom has been battling Breast Cancer for the past 10 years. It spread everywhere, over and over again, requiring endless chemo (really, for the past 4 years she was on chemo once a week "for the rest of her life"), radiation, surgeries (including brain surgery/whole brain radiation/cyberknife on her brain since it was continually coming back there). Although my dad had great insurance, it still cost us ~$20k/year out of pocket (I didn't realize this until recently). Not only that, but my dad decided to leave my mom about 3 years ago, renting a house in our overpriced town for ~$35k/year.

In December, my mom became terminal and passed away in February. It's been really difficult for all of us, especially with my dad moving back into the house, but the grieving that comes with mom's death is something for a different forum. Because dad had left her (they never divorced though), she named my sister and I as the sole beneficiaries. We are receiving about $75k each (50k being life insurance, $25k being estate).

As soon as I found out I was receiving a large (for me-- I know it's not particularly large) sum of money, I became obsessed with personal finance and how I could best "use" (by use I mean save/invest) it... it's my mom's final gift to me, and it's really important to me to make sure I don't waste it. From all this I became interested in all the other parts of personal finance, and had a HUGE wake up call when I realized that I've only been through 3 semesters of college (I go to Northeastern University where I'm on co-op for 6 months-- I get paid, and only cover living expenses, no tuition) and my debt is at $41k... almost to what I expect my first year's pay to be. I began to understand that while my dad works extremely hard and makes a very generous income, hasn't made the best decisions with it, and I decided to get in charge of my student debt by making a plan with him.

SO. This fiscal fitness journal will be about:

-the plan I made to tackle my student debt
-the implementation of this plan
-my journey to be frugal along the way
-deciding how to best save/invest/use (only a small portion) of my mom's "final gift" - $75,000.

I know this has been extremely long, but I'm going to post again with our plan and current progress! If you've read this far, thanks for sticking with me! :P


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 9:10 am 

Joined: Sat Apr 30, 2011 9:46 am
Posts: 27
Welcome! Looking forward to hearing about your progress. So sorry about your loss - to say that's rough doesn't begin to cover it. I lost my mom last year and used the small life insurance ($11,500) to add to my emergency fund. Makes me feel like she is still looking out for me. I used a past inheritance ($10,000)to pay off a credit card, start a savings account, and start a Roth IRA. It took me awhile to decide on what to do because I wanted to use it respectfully and use it to get started on the right financial foot. And that would be when I started reading up on finance and some of those ideas really started sinking in. So, take your time with it. I think it's fantastic you're taking steps to make a plan. Good luck!


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 9:27 am 

Joined: Wed Jun 08, 2011 5:47 pm
Posts: 5
So, now for my plan and progress.

My plan with my dad to beat student loans:
Current total loans: $41,000 (@7.5%)
We are emptying my college fund (~$26,500) into my loans in July.
He contributes $15k/year for the next 5 years (about 10% of his gross income). TOTAL: $90k
I contribute $35k over the next 5-6 years.

This covers both loan pay-back/interest and new tuition costs. It's much more in depth than this, but for the purposes of this forum that's mostly what you need to know.

Remember how I said I wasn't a good saver before? All this GRS education has TOTALLY changed that. Automated savings have become my best friend. Here's a better look at my situation.

Currently I work two jobs:
-my co-op (which is 6 months long, but ends June 30) 30 hours/week @ $12/hr
-my job on campus (not work-study), where I just got promoted to Supervisor ($12.53/hr). I will work here for the rest of my time in college (3 more years-- 4 semesters and 2 co-ops-- it's a 5 year school). Right now I only work 8hrs a week, but it's extremely flexible and I'll be working more like 30hrs/week in the fall.

I've been netting about $365/week, BUT that was when I was making $8.40 an hour before I got promoted. This Friday I'll get my first paycheck with my new wage, which will probably be around $400 total when added to my co-op's paycheck.

"Budget"

Net Income: $365/week
College loan payback (Goal: $3,000 by 7/1): $215/week
2-month Summer savings (Goal: $1,000-$1,200 by 7/1): $50/week (used to be $75, then $60-- I've scaled down as I've neared my goal)
Gas: $75/week (ONLY FOR JUNE)
Checking (to spend/save/do whatever with): Remainder, usually ~ $25

I've been going home (4.5 hour drive each way) every weekend in June for a long list of reasons, but that costs me about $75 in gas each week, but I'll no longer have this cost after June. Also, sometimes my boyfriend will fill up my tank since normally he'd be coming to see me some weekends, so the gas money goes to savings. My car is totaled (only cosmetic damage though) '96 Chevy Corisca (now with ~73,000 miles on it) that I got for free when my Grandma didn't need it anymore 3 years ago. It's running great, the mpg is about 20-23 (ehh), and when it dies I probably will hold off on a car for awhile and then buy a used hybrid car. That shouldn't be for a few years though.

Here's a look at my current progress on my goals:
Loan savings: $2,485/$3,100
Summer savings: $1,050/$1,000-$1,200
Checking account: $150 (this is low due to 2 smaller paychecks and a recent weekend vacation).

Also, I just won a $400 scholarship from my church!! :) So come July (when I get home), here's what the student loan stuff will look like:

Loan (starting): $41,000 (@7.5%)
College account: $26,500
My contribution: $3,100
My scholarship: $400
__________________________
Loan (ending): $11,000

Here's what my portion of student tuition/loan debt will look like (this is what I will owe over the next 5-6 years):
Starting: $35,000
July: $31,000

Yay! :)
______________________________________________________________

NOW for a few thoughts on the $75,000 inheritance:

$5,000 to a ROTH IRA - life cycle fund through Vanguard
$20,000 to keep in savings @1.5% - may eventually buy CD when rates go up, also may help max out ROTH in the next couple years before I earn salary.
$45,000 in index funds (and maybe a mutual fund or two) through Vanguard.

$5,000 to eventually spend - likely some on a vacation to Scotland with my sister next summer. My mom always wanted to go but never got to. I'm also a photographer (forgot to mention I often make money from that as well), and some of this may HELP fund a portion of my next camera when the upgraded version (with video, thank god!) comes out. Not many people know that cameras actually have lifespans (measured in shutter clicks, basically), but mine has far exceeded the 150,000 click lifespan, and unfortunately the under-performance is showing, which affects my hobby and client work.

I hope this was all clear... I know there's a lot of information and it's a bit scattered! I'm happy to answer any questions, and I'm very open to hearing any suggestions or advice! :)

Thanks for reading!


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 9:32 am 

Joined: Wed Jun 08, 2011 5:47 pm
Posts: 5
Thanks Wende!
I'm sorry to hear about your mom as well. It's good to hear about how people chose to use their inheritances, and I think that's a great idea that you used it for an emergency fund. I'm hoping my mom's money always serves mostly as emergency fund (the part I keep in savings) and as a piece of financial security, and that I try to do everything as if I never got it, at least for several years. I may eventually use a part of any growth to help with a LARGE down payment on a house, but that's many many years away :P


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 2:17 pm 
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Joined: Wed Sep 23, 2009 9:01 am
Posts: 5402
Not a bad plan. You might consider putting that $20,000 you have earmarked for Roth IRA into paying down your student loans though. Retirement savings are important but the interest rate on your student loan is fairly high. I would pay the $20,000 into it and effectively earn 7% per year on that money rather than 1.5%.

Good luck to you and I'm sorry to hear of your loss.


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 2:34 pm 

Joined: Wed Jun 08, 2011 5:47 pm
Posts: 5
Thanks DoingHomework, that's something I'm considering, although since I've only just started being financially responsible, I have a few worries when it comes to that course of action.

With this goal of getting rid of my debt, it's easy for me to be motivated to work hard and sacrifice to see my total go down. If I eliminated it all up front, I'm worried that I wouldn't be nearly as motivated to save every little bit and make back that original money from my mom.

My thinking is that a) I want to start maxing out my ROTH IRA as early as possible because you can never make up for previous years b) this way, once I've paid my loans off far ahead of schedule, I'll have developed great financial habits that have been ingrained into over the past several years, so that when I start making a salary, it won't be tempting to be irresponsible with it.

Also, I know this is financially silly, because no dollar is truly different from another, but at least at this point in my life (where I'm still quite emotional about my mom's death), I feel like I want to make my mom's money last as long as I can, and have it as a financial safety net while I pay down debt/eventually build up wealth as though I never had the money. When I do eventually use it, right now I want it to be for something meaningful, like possibly a home, to help fund early retirement, or something of that sort.

I think your suggestion makes a lot of sense financially, and once I'm less emotional about this money (and I feel that my saver habits have become ingrained enough in me), I will likely look into it much more. Thank you!


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 3:10 pm 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
Welcome!
I think you're on track. I'm really sorry to hear about your mom, and as I was reading your profile name (Em T.), I thought of empty, and I got sad. I hope you're not feeling empty. Yes, your mother left a hole in your heart, but she left you in a good financial place, and you will benefit from it, if you play your cards right. Be grateful for that.

Keep posting!


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 3:20 pm 

Joined: Wed Jun 08, 2011 5:47 pm
Posts: 5
Thanks peachy!

Oh gosh, I didn't even think of that for my name! It's actually just initials :) While this has definitely been tough, I'm really lucky to have a great family, boyfriend, and friends in my life, so I don't feel empty :) Thanks for your comment!


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Tue Jun 14, 2011 9:26 pm 

Joined: Sat Apr 30, 2011 3:40 pm
Posts: 60
Location: USA
Welcome. Sorry for your loss. I hope many brighter days lie ahead for you.

For your plans:
EmT wrote:
$5,000 to a ROTH IRA - life cycle fund through Vanguard
$20,000 to keep in savings @1.5% - may eventually buy CD when rates go up, also may help max out ROTH in the next couple years before I earn salary.
$45,000 in index funds (and maybe a mutual fund or two) through Vanguard.

DoingHomework already mentioned paying off loans. I'll offer one other thought to consider. Rather than earmarking the $20,000 for a potential source of IRA funds, why not treat that one as an emergency fund? Do you have one yet?

If you kept that account locked away, then used the $45,000 as an IRA source, you'd have a solid fund for emergencies, while essentially just moving investments from a taxed account to a tax-free account each year as the IRA permits.

Granted, the types of emergencies you're likely to have as a college student probably aren't as severe as the ones some of us worry about (prolonged unemployment while bound to a mortgage). Nonetheless, it's good to have some money around that's easy to get to and that you don't plan to spend.

Best of luck in your efforts, whatever you decide.

(Edit) Sorry, I just noticed you had already mentioned using part of this as an emergency fund in a previous post replying to Wende.


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Wed Jun 15, 2011 12:03 am 

Joined: Tue Jan 11, 2011 3:43 am
Posts: 31
You sound like you're off on a great path. Make sure you don't get burned out. Does the interest on your student loans not get deferred until you graduate? If not, I would agree with Doing Homework and look to pay some of it off. Nowhere else can you make that kind of return on your money without any risk.


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 Post subject: Re: a 19yo's journey to beat student debt and save!
PostPosted: Wed Jun 15, 2011 12:30 am 

Joined: Fri May 09, 2008 12:00 am
Posts: 132
I hope I don't come off as condescending but can I just say you sound like a really awesome person. I hope I have a kid like you one day.

You're honoring your mother's memory and really seem to have it together. I am sorry for your mother's loss also. If you don't mind the advice, perhaps you can talk to your sister about your finances and what you're trying to do? I feel like I started too late with my brother and now he won't listen. :)


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