Graduated Learning: Life after College

I got my degree, I got a job…now what?

Loan payments getting real September 30, 2008

Filed under: Personal Finance — Stephanie @ 10:31 pm
Tags: , , , , ,

I came home on Monday to see a few important-looking pieces of mail on my kitchen table.  And they both had to do with my new car.  One was the official paperwork from my car insurance.  I’ll admit, I’m not quite sure I understand everything relating to my car insurance.  It’s possible that I didn’t get a good deal, or that I got the wrong sort of coverage.  I’ve decided that reading through the information can wait until this weekend, when I can actually work through it to make sure I understand what’s covered and if I got all the correct discounts and everything.

The other piece of mail came from the credit union that I got my car loan from (through AAA).  I think this piece of mail really made the payments hit home.  I received my “Loan Payment Book”.  It’s basically a booklet with tear out pages with the amount due that I’ll send in every month.  I’m pretty sure that I can do this online (not 100% certain), but hopefully that’s the case, as I’m not really keen on paying for postage every month, and risk not paying on time.  I realized that there are two different ways to look at this booklet.  I can either look at it and feel overwhelmed:  look at all these payments that I’ve got due each month.  I’m going to be paying for this car (with interest) until almost the end of 2013.  Or I can look at it as an easy thing to accomplish:  I’ve only got to pay this amount 60 times, and then I own the car free and clear.  Granted, either way I look at it, I’m hoping I can pay this off sooner, which will lower the total amount I’ll end up paying.  But it’s definitely a visual plan that will help me to see progress towards owning my car.

So, we’ll see.  I’ve mentioned in the past that I hope to pay down all my debts a lot faster than the banks would like me to.  But this does make me realize that I should actually have a plan for paying off my debts.  I know plenty of people talk about debt snowballing, and I’m pretty sure I’ve seen a link from another blog to this before, but there’s a pretty simple site to help you figure out just how long it will take to pay everything off.  Now, instead of telling myself (and you all) that I’m going to pay “extra” every month, I can actually look and see what amount I should pay.  Sounds like this could actually provide results.

One can only hope!

 

My interest rate epiphany September 2, 2008

Okay, it’s really not that impressive of a revelation.  And many people have probably already realized this.  But it required the help of my boyfriend telling me to take a step back and look at my finances before I could realize this for myself.

I was struggling with the idea of going into even more debt to have a car.  And I kept saying I just wanted to pay off the car as soon as possible.  But as I mentioned before, my interest rate is actually lowest for the car out of all my debts.  And that’s when Aaron pointed something out:

Once you have the debt, it doesn’t matter if it’s “good debt” or “bad debt”.  You just develop a plan and pay it down.

It’s really that easy.  Sure, you should try not to incur more debts.  And of course, if there are tax or other benefits involved in paying off certain loans, you should bring that into the equation (which might make some debts slightly “better”).   But the typical good debts, like student loans and mortgages, are more often allowed in the personal finance world, compared to consumer debts.  But you can’t keep kicking yourself for making that decision; regretting a choice wont make the consequences go away.  But that’s how I was looking at the car debt; it was bad debt that I needed to get rid of ASAP.  Which really isn’t the financially smart thing to do.

Some people prefer following a debt snowball, starting by paying off the smallest debt first.  It may not be the best choice, mathematically speaking, but if you will actually do it, it’s a heck of a lot better than saying you’ll pay the highest interest rate debt first, but not doing it.

If you’re able to look at the debt in a purely logical way, and not in an emotional way, you can create a plan, and stick to it.  So that’s the plan for me.  I’m going to pay the amounts due each month (of course) and figure out how much extra money I have in my budget when considering monthly expenses, including putting money into savings and retirement investments.  And whatever that “excess” is, I’m going to pay that towards the student loans with the highest interest rate.

I think this is where the “personal” comes in with personal finance.  Sometimes you need to bring your feelings into the money equation, because they will inevitably affect you.  But I believe that I can look at the finance just numbers that need to go in a certain direction.  This may not work.  I think I’ll need someone to hold me accountable on this.  Make sure I actually sit down and write out my budget, rather than spend and then track the spending afterward.

I think I tend to make a lot of to do lists.  And sometimes I don’t do everything on the lists.  But I think that paying off my debts really needs to be something that takes top priority.  Which means I need to do the budget, and actually make the phone call to the bank where my student loans are from to find out if I can consolidate my loans at the low rate that they currently are (thanks to the low fed rate).  It really doesn’t take much time at all to do something like that.  But I just need to do it.

And like I said before, it’s better to do the thing that works, rather than the “best” thing if it doesn’t work.  So we’ll see if this plan works.

 

 
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