Fighting lifestyle inflation June 20, 2010

So I forgot to mention something back when it happened.  I got a raise!  Yeah, it somehow slipped my mind.  But I’m not just bragging about it.  I’ve got a personal finance lesson in here!

Remember when I modified my 401(k) contributions?  I upped my contribution by 1%.  A week or two later, I found out about my raise, and then a few more weeks later, my raise kicked in.  I noticed that, even though I increased my contribution, my take home pay went up with my raise.  I did a little math and figured out the difference between my newest paycheck amount and my old paycheck amount.  Since I get paid every other week, I set my ING Direct Savings account to remove that amount from my regular checking account every other week.  That way, I wouldn’t see the money in my checking account, so I’d be less inclined to spend it.  Plus, I’ve directed this money towards my “Down Payment Fund“, so that is an added bonus.  Only tens of thousands more, and I can afford a down payment!

As I mentioned in my last post, I have been thinking of doing something else with money besides putting it into savings.  So, perhaps, I might redirect the “extra” money from my paycheck towards paying off my loans.  Or upping my 401(k) yet again.  Still figuring that stuff out, but I’ll update with another post soon about what I’ve figured out (or at least what I’m doing so far).

Personal Finance Stagnation June 13, 2010

If you’re a current reader of my blog, you know that I’m not the most prolific blogger.  I post whenever something (financial or otherwise) happens, or when an idea strikes me.  And so I guess my life has been boring, and I have no new ideas?  No, that’s definitely not true.  My younger sister just graduated from MIT, and I’m so incredibly proud of her!

But in terms of financial things happening, I feel I’ve sort of just let things mellow.  Even though it’s important to get everything on autopilot (direct deposit, auto-transfers to savings, 401(k) and IRA auto-withdraw into funds, etc.), I feel like I’ve gotten TOO hands-off with my money.

I’m not aggressively paying off my debt.  I know I should be, but I’ve just been letting my student loan and car loan automatically withdraw the monthly payments.  What I should be doing is paying more than the monthly payment (i.e. more than the minimum).  I feel kind of ashamed that I haven’t been working harder at paying off my debt.  I think I felt more compelled to aggressively pay my student loans off back when my interest rates were hovering around 8.5%.  But now that they’re around 3.5%, I don’t feel that same urgency.

I think I need a plan.  A goal.  A due-by date.  If I’m following the general mantra of:  1) Start emergency fund, 2) pay off all debt, 3) finish emergency fund, then I have probably already taken care of 1 and 3.  My only other option besides (or in addition to) accelerating my debt payoff is further increasing my 401(k) contribution.  So that’s comparing a guaranteed return of 3-5% (if I pay off my debts) or a possible 8% return (the supposed return people quote on investments if I invest more).

And so I’m reaching out to you, my dear readers.  Help me!  How did you set your goals?  I was thinking if I figure out how much extra money I have each month, I could direct that at loan payoff, and keep going until the loans are gone.  Or I could set an end date (that is achievable) and make sure it’s all paid off by then.  Or I could split the “extra money” into half (or some other fraction) leaving my paycheck to go to my 401(k) and put the other amount against the loans.  I just don’t know!  Advice, please!  How did you pay off your debt loads?