So I Paid Off My Student Loans- Part 1

If you’ve been following this blog for the past few years, you may know that I’ve been on a quest to pay off my student loans since… basically forever. Actually, for the first few years after I graduated, as my debt amount surged while interest piled up, I simply lived in hopeless despair. I wondered what magical miracle would occur that would enable me to pay off more than $100,000 (yes that 6th zero belongs) worth of debt – and for undergrad only! I’m not even a doctor or a lawyer or even a prosperous business person- I have a DRAMA degree, for god’s sake! And that $100,000 total is with ONE YEAR PAID OFF ALREADY by mom and grandma! So even with a whole year of school paid off, plus some financial aid, my loans were STILL that much!

And the loan kept growing, even after college ended, because in the first few years after graduation I’d decided that since my interest was high on the smaller of the two loans (one was for around $86,000 and the other was $14,000), I’d put the smaller loan on forbearance (effectively deferring it) and not pay it for awhile.

I know now that this is BACKWARDS thinking- it’s a really bad idea to put loans on forbearance unless you’re absolutely desperate and have no other choice. To be fair, most people put loans on forbearance because they have no other choice- I myself was the definition of desperate- so the warning is probably unnecessary. But forbearance is a horrible sneaky trap that only punishes your future self while your current self breathes a very temporary sigh of relief. I got the 14k loan down to 11k with a lot of blood sweat and tears, and then put that loan on forbearance for a year. When I started paying it again, after only one year of deferment, the loan had GONE BACK UP to 14K! As if I had never made a dent! The experience was both sickening and horrifying.

NYU is even more expensive now- disgustingly expensive. Somewhere around 70K a year expensive. It’s wayyyy overpriced, and pricing seems to only be only going up. The thing is, many colleges are following that same path of being completely out of line overpriced- the problem is not just NYU. To be fair, I really enjoyed my NYU program- I had private conservatory training in all aspects of acting, directing, and theater, and the 4 years were pretty amazing. It’s not a bad school. But the loans afterwards all but buried me- and I don’t recommend anyone ever taking on that kind of student loan debt. Ever. Even if  you’re going to medical school or something that should fast track to a lucrative career, I’d still advise you to think your finances through very carefully.

In a blaze of glory I finally completed my last student loan payment this February, 2018. I still can’t believe it. I remember the day I hit ‘send’ on that last payment- I cried. My body shook in front of my computer and nothing made sense. The student debt that had hung over my head for so many years of my early adult life was finally gone. It felt like a miracle- but it wasn’t. It was the result of an incredible amount of work and very carefully calculated planning. Even making very little money per year, I finally did it. I did it.

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I did it! In the next post I’ll tell you how…

 

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Can I Put All My Debt on a Zero Interest Credit Card?

The other day a friend of mine was inquiring about paying off credit card debt using a zero interest credit card.

She had moved all of her debt from a high interest credit card to a zero interest credit card and had completely paid off that debt very quickly, which was awesome.  She had two other high interest cards and asked me if she should move the debt from those over to the same zero interest card or if she should open a new zero interest credit card. I had to pause a bit before I considered the answer.

First things first.

A zero interest credit card is a credit card that has zero interest for a certain amount of time, after which the interest rate spikes up, usually higher than a ‘regular’ credit card. If you’re really diligent about paying off a zero interest credit card quickly, you can pay it off before the high interest rate kicks in.

I wrote about these types of cards before in my post: Is a 0% Interest Credit Card Just a Blatant Lie In a Pretty Package?

Zero interest credit cards have their pros and cons, and both are pretty simple. In a nutshell:

Pro: You can pay off debt quicker when you have no interest gathering on the debt while it’s on a zero percent interest credit card.

Con: If you don’t pay off your debt fast enough on aforementioned card, you’ll have a hell of a LOT of interest gathering on that debt. 

So, let’s back to my friend’s question about whether or not she should move multiple balances to the same zero interest card. Here are the facts:

  1. My friend had 3 high interest cards she needed to pay off
  2. She had one zero interest credit card
  3. She had already moved two high interest cards onto the zero interest card and had paid off one card’s debt already. 
  4. In May, the zero interest would turn to VERY HIGH interest, probably around 20+ percent, which is awful. 
  5. She still hadn’t moved the third debt and was wondering if she should move it to the zero percent card or open up a new zero percent card for that last debt.

Here’s my answer, with additional questions, in 3 parts:

  1. Can you beat the balance transfer fee? Some zero percent interest cards have a 3 percent balance transfer fee. If your zero interest card has this fee, you have to calculate whether that 3% is less or more than the interest you will end up paying on the original card before your debt is paid off. For example, if you have $1000 in debt on a card and move it to a zero percent interest card with a 3% balance transfer fee, you’d have to pay $30 to transfer the debt. If you would end up paying less than $30 in interest on the original card before you paid off the $1000, it wouldn’t be worth it. If you had a zero percent interest card with no transfer fee (they do exist), you’re fine and wouldn’t have to make this calculation. If
  2. Can you pay off the second AND third debt by the time the zero percent interest expires? In this case, if she could pay off all debts before May, her interest rate would stay at zero percent and she would get all the pros out of the card with none of the cons.
  3. Can you put all the debt from various, different cards, on one zero percent card?  This was a question I had to ask myself, and then had to google. I wasn’t sure how things worked with putting multiple debts on one zero percent card. Turns out it’s fine. It’s equally fine to put the debts on different zero percent credit cards (you can open multiple at the same time, depending on your credit score and approval, of course.)

One last MAJOR note: Don’t close the original card after the transfer, unless it has an annual fee that you don’t want to pay. Closing older credit cards hurts your credit score. 

So my friend was able to get all her debt from 3 cards on one zero percent credit card, and is on track to pay everything of by May before the interest goes up. This will save her tons of money in interest in the long run.

Hope this helps you guys understand zero percent credit cards a little better, and wasn’t too complicated. If used wisely, AND QUICKLY, zero percent interest cards can be a great tool to help get you out of debt.

 

 

Should You Have Lots of Credit Cards In Your Thirties?

You know it’s true: You’ve been tempted by credit card sign up bonuses in the past. And you’ve maybe even signed up for a credit card solely for the sign up bonus… and then canceled it? Or have you been scared that opening up or canceling lots of credit cards in your thirties could hurt your credit score?

There’s a lot of mixed information in this area that might leave you puzzled. Here’s the deal: credit cards can be really helpful and pretty benevolent unless you can’t use them wisely. It’s like anything: if you develop an unhealthy (overspending) addiction, you need to stay away. Otherwise, proceed wisely and happily. There are lots of benefits to having multiple credit cards.

Here are some tips for having various credit cards in your thirties:

  1. Pay your credit cards off in full every month

This is pretty self-explanatory, but the real trick to benefiting from credit cards, and especially from having multiple credit cards, is to make sure you pay the full balance off every month, not just the minimum. If you can’t pay the full balance off every month, stay with fewer credit cards until you can. Sign up bonuses and points aren’t worth the crazy expensive interest charges you’ll have to pay if you rack up debt.

2.  Don’t cancel the random credit cards you opened in your early twenties

Part of your credit score is calculated based on length of credit history. If you cancel the first card you ever opened, you’re shortening your credit history, and this will hurt your credit score. Unless a card has a high annual fee that you don’t want to pay, there’s no reason to cancel. If you don’t want to use the card anymore, pay it off and cut it up.

3. If you’re opening multiple cards for a point bonus, make sure you can meet the minimum spend in the correct amount of time

If there’s an American Airlines card that will give you 50,000 miles when you spend $3,000 in 3 months, make sure, if you get the card, that you’re gonna spend the $3000 in 3 months. I’ve screwed this one up before and have actually forgotten to meet the minimum. Put all your other cards away and solely use that one for awhile. If you can pay major bills, like your rent, on your credit card, you should be able to easily meet the minimum. There are actually services that can help you do this –this one is called Plastiq. Though Plastiq charges a 2.5% service fee, it can be helpful if you need to meet a minimum.

4. If you can meet multiple minimums at once, it’s best to open more than one card on the same day

Even if you have great credit, you’re more likely to get denied for a card if you open a new card every few weeks. I’ve actually opened and been approved for three cards in one day (I’m really good with credit cards and pay them off in full every month). If I’d opened one card and then waited a week to apply for the next card, I would have probably gotten denied. Wait at least 90 days to apply for the next credit card(s).

5. You won’t ruin your credit from having multiple cards

In fact, the opposite is true. Your credit score is partially calculated from something called a debt-to-credit ratio. If you have more credit available, you’ll have a better ratio.

6. You won’t ruin your credit from canceling a card

If a card has a high annual fee and it’s not worth keeping, go ahead and cancel it. Your score will only drop a tiny bit from your lowered debt to credit ratio. And it will come back up again as you continue using your remaining cards wisely. The annual fees aren’t always worth keeping the card. The only exception to this rule is if you cancel your oldest card- that will definitely lower your score more than the others because it will change your length of credit history… as I mentioned above.

There’s a lot more tips for enjoying multiple credit cards safely, but I hope this is helpful! As always, please comment below with any questions you may have! Thanks for reading!

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When I’m Married, Does My Spouse Get My Assets?

My head is spinning right now after researching this question. It’s quite a doozy. And I don’t use the word ‘doozy’ very often.

Writing the opposite article about whether you’re liable for your spouse’s debt was a much easier undertaking. The answers were wayyy simpler. I had no idea what I was getting into with this one. But I feel like it’s very important for those of us in our thirties, since many people I know are getting married or about to get married around this time.

So here goes: I’m going to use my very best simplification skills in order to make this as understandable as possible.

First, I want to preface strongly that I’m not a Financial Advisor, so this is a vast simplification. If you are truly worried about your assets being shared with your spouse, please contact a Certified Financial Planner. Here’s a website that will help you find one.

Second, Okay, so let’s repeat the question in its simplest state:

If I have an inheritance, a savings account, monetary gifts from my dear Aunt Myrna (all of these things are known as ASSETS) does my spouse automatically get half (or any of it) when I get married?

When I started researching this, almost every article I came across was actually about divorce. I couldn’t figure it out at first, and then it hit me: none of this asset stuff is really relevant legally unless you get divorced.

This actually means: Other than if you get divorced (and hopefully you will not), you won’t ever legally be forced to share your savings, retirement accounts and inheritance with your spouse. Not really. You will probably want to share some (or most) of it, but that’s between the two of you. 

Think about it: If you don’t want to share your savings or inheritance with your husband or wife, there’s no lawyer/judge/policeman/masked villain who’s going to suddenly barge into your house and FORCE you to share your savings with your spouse…I mean, unless your spouse sues you or something (and honestly, that’s the road to divorce right there), sharing money within a marriage is kind of a private matter…a verbal agreement between two spouses. I mean, you guys can fight it out amongst yourselves (a civil conversation is also an option), but no one from the legal system will get involved. Of course, you two are building a life together so you may want to commingle (share) money (The word ‘commingling’ is actually an important one. I will come back to the whole commingling money issue in just a bit, as it will soon take centerstage in answering our question).

Once you get divorced (again, fingers crossed against this), all the legal issues/headaches/major problems come into play. 

I mentioned in my last article about debt in a marriage that there are two types of states: Common Law states and Community Property States. I’ll review the Community Property states, since there are fewer of them. They are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, the territory of Puerto Rico….and Alaska allows married couples to opt in to community-property status.

Basically, if you’re in a Community Property State (see above),AND YOU GET DIVORCED, almost all of your assets that you accumulated DURING THE MARRIAGE are divided completely in half. Even your own 401k, private savings account, or pension from YOUR job becomes half your spouse’s! Of course, there are exceptions, such as if you have a prenup where you’ve written down that you will NOT divide your assets equally, or you two agree to amicably divide the assets unequally (in which case, you’ll have to talk to your divorce attorneys and there will be a lot of writing to do.)

Two major exceptions to this rule are INHERITANCES and GIFTS. If you received a personal inheritance or personal gift, your spouse doesn’t necessarily get any of it in a divorce, unless you COMMINGLED THE FUNDS. Commingling means you used some of the funds to pay for a marital expense- this can get super tricky and involves lots of record-keeping and paperwork, so I’m not going to go into it here. My advice is: if you have an inheritance or personal gifts, try NOT to commingle those funds…yep, that might be hard. Once inheritance or gift funds that were specifically yours get commingled with marriage funds, you’ve made them fair game to be seized by your spouse during divorce proceedings. Eek.

If you’re in a COMMON LAW STATE (all the ones NOT listed above) and you get divorced, your assets won’t be divided strictly 50/50, but they will be divided in a “fair” way (read: complex). This will involve a lot of “if I take this, then you can have that” type of discussions. If discussions don’t happen, the courts will step in. It can get quite messy, especially if the whole ‘commingling of funds’ mentioned above has taken place.

Unfortunately, the main fact I came across in my research is: don’t trust your ex to tell you what you’re entitled to. They will possibly lie to your face…or they’ll honestly have no idea and make things up. If you’re getting divorced, DO YOUR RESEARCH. I know, it sounds harsh. I love to believe that people are good at heart too. But…the divorce experts who wrote the articles I read recently seem to believe more in greed than goodness. Sad face.

So that’s a lot. And not the happiest stuff I’ve ever written. If you’re still game for more, I’m attaching links to my research below for further reading. If your head is spinning, let’s review the absolute basics:

  • When you get married, you won’t be FORCED BY LAW to share your assets. You will probably want to share some or all of them.

  • When you get divorced, THEN you will likely be forced to share your assets.

  • After a divorce, Community Property states will divide most of your assets 50/50, with the possible exception of inheritance and gifts, unless the inheritance and gifts were commingled with marital money.

  • After a divorce, Common Law states wont divide everything 50/50, but they will divide things in what is deemed a ‘fair’ manner…and this can be very complex.

  • It is this very complex division of assets issue that solidifies the possible extreme importance of prenups. 

Oh man. That was a lot for a blog about the thirties. I swear, my next post will be about ice cream or something. Or maybe I’m just thinking about pints of Haagen Daaz because this was depressing.

Please let me know any questions or comments this brings up…or if you have more insight into this. Thanks for reading to the end!

References:

Managing Marital Property DO’s and Don’ts

401K division after divorce (this is complicated so I didn’t go into it here- these guys do it better.)

More retirement plan division after divorce

People hiding assets during divorce proceedings– eek!

Some good info on commingling

Sheltering inheritance

More sheltering inheritance

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Am I Liable if I Marry Into Debt?

The other day a friend of mine and I were having dinner and she was discussing buying a house with her boyfriend. They’d been together for some time and were hoping to get married within the next few years.

“I’m wondering though,” she said, “if I’ll take on his debt when I marry him. ”

For the last two or three years, the number of people I know who are engaged, about to be engaged, or married has skyrocketed. This definitely corresponds with the thirties- many people hitting their thirties are (possibly) beginning to settle down and find others they want to be with for the rest of their lives. Not everyone, of course, but it’s definitely been a trend.

Which is why I was surprised that I didn’t know the answer- I felt like I’d researched this before, and the answer was no, but I couldn’t be positive. I actually forgot to look up the answer that night and then today Suze Orman just happened to bring it up on her podcast.

For anyone about to be married and wondering about it, the answer is:  NO, YOU WILL NOT LEGALLY INCUR ANY OF YOUR SPOUSE’S DEBT FROM BEFORE YOU WERE MARRIED. (Big sigh of relief!!) If your spouse incurred debt BEFORE you got married, it’s his or her debt ALONE. Of course, you can help with the debt, and some would say that once you’re married you share everything, including debt. But LEGALLY, debt incurred by one spouse before a marriage doesn’t touch the other one. No one is going to come after you for your spouse’s debt, and if they do they are JUST TRYING TO SCARE YOU. 

To avoid all the clarification questions Suze Orman (and all the finance websites I’ve been to) get all the time, I will clarify up front: the debt you’re NOT liable for includes EVERYTHING before marriage. It includes student loan debt, credit card debt, auto loan debt, tax debt, bank loans, EVERYTHING. You’re legally liable for NONE OF IT.

HOWEVER, debt incurred AFTER you get married is totally different. If you get married and your spouse suddenly gets into a lot of debt, that debt will be legally yours too IF you live in what are known as “Community Property States.”

Community-property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and the territory of Puerto Rico. Alaska also allows married couples to opt in to community-property status. Most people do not :p

If you’re NOT in any of these states, you’re in what’s known as a Common Law state. This means that in general if your spouse gets into debt, you’re not legally responsible. There are exceptions here such as if you open a joint account together and that account goes into collections (obviously, because now BOTH your names are on the account.)

Hope this solves things for any of you newly marrieds or almost-newlyweds! If any of our Canadian, UK, and other international readers would like to weigh in on the policy in your country, I’d love to learn about that (and I’m sure others would too!)

Sorry if this wasn’t the most fun topic ever, but it’s an important one as we head through the thirties. Here’s some funny photos of a flash mob I did once to lighten the mood, haha:

There were 50 of us dressed as brides and we stormed Times Square and took a lot of people by surprise.

There were 50 of us dressed as brides and we stormed Times Square and took a lot of people by surprise.

We were promoting a pretty terrible movie called "The Big Wedding." ;)

We were promoting a pretty terrible movie called “The Big Wedding.” 😉

 

Below are some links for even more details about marriage and debt:

The Simple Dollar: http://www.thesimpledollar.com/financial-infidelity-4-steps-for-healing-marriages-torn-by-finances/

Bankrate- http://www.bankrate.com/finance/debt/wife-not-married-to-spouse-s-old-debts-1.aspx#ixzz3Nzez1PNj

Nolo- http://www.nolo.com/legal-encyclopedia/debt-marriage-owe-spouse-debts-29572.html

Lifehacker- http://twocents.lifehacker.com/how-to-protect-your-credit-when-you-marry-into-debt-1576458795

 

 

 

How to Set Goals for Finances- New Years Resolutions Series

The countdown to 2015 continues…though hopefully no one’s standing outside in Times Square yet waiting for the ball to drop. You never know, though. I wouldn’t put it past people.

Anyway, I thought I’d kick off some New Years resolution money talk for thirty-somethings.

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Last year, I made a resolution to put 30 percent of every paycheck I received towards savings, student loan debt and retirement. I actually started doing this slightly before New Years so I cheated a bit.

I split up the 30 percent this way- 10 percent went into my Roth IRA, 10 percent towards my savings, and 10 percent towards my smallest student loan. (My largest student loan already had a crazy amount of money going towards it because its minimum was so high. But I digress.)

And I followed my financial resolutions through thick and thin for the whole year and am continuing with them. There was a moment where I even tried to up my payout percentage to 40%, but that was way too much. Other than that- the 30% resolution was actually quite simple: whenever I received a paycheck I’d log onto Chase.com and make my transfers. There was something extremely satisfying about the whole thing.

If you’re making financial resolutions for the New Year, my advice is much like Jane’s in her last post: break down the goal into easy steps. My financial resolutions last year were simply:

1. Put money into savings

2. Pay down student loan

3. Put money into Roth IRA

A lot less would have gotten done if I’d stopped there instead of making the simple breakdown of 10% from every paycheck towards each category.

So, if you have savings goals, save yourself a headache and break them down into steps that seem so easy as to be almost automatic. In fact, you can even automate the savings process by having your bank automatically put a certain amount of money into your Roth IRA and savings account every month. Just about all banks will do this for you.

Since I’m self-employed and am paid a different amount every month, I kept my process manual. Also, I get a gleeful joy out of manually saving money, but I’m weird like that.

Anyway, this year my financial goals are:

1) Pay extra $$ towards my BIG student loan

-This is broken down into the easy steps of

a) Finish paying down the little student loan the same way I was before. Just about done!

b) Put the 10% (plus the monthly minimum) I was putting into the small loan towards the big loan instead.

Tada!

2) Find a savings account that pays way more interest than my bank. 

– Done! I guess once more I cheated on this one…I did it last week before New Years. But don’t worry if you hate your savings account, I’ll talk about better ones in another post soon and help you set that up too if you like. For now, if you’re interested in how much you should be saving, I wrote about it here.

3) Switch my Retirement Plan from a Vanguard Target Date fund to a different Vanguard account now that I have more money in my Roth IRA. 

– This involves a couple of breakdown steps including investigating Vanguard’s other options and figuring out more about how to manually choose funds. I’ll explain why I’m doing this in another post as well. And if you’re interested in retirement plans in general (or if you don’t know what the heck I’m talking about), I talk all about why retirement accounts are important here and here and here.

Of course, there’s my fourth financial resolution which I haven’t yet broken down, and that’s:

4) Discover additional sources of income. 

I lied about not having this goal last year. I have this goal every year, and I’m always messing with the breakdown. There’s quite a bit of work ahead. Sometimes breaking down resolutions can be as tough as keeping them 😉

What are some of your financial resolutions for the new year?

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