Saturday Links! July 25, 2015

I have been trying to live a simpler life in order to make room for things that matter. Turns out a lot of other people have, too! I’m on vacation now, so this is a little shorter than normal, but I’ll be back soon!

The Four Horsemen of the Financial Apocalypse, retire29.com. An interesting take on four things that you should never do in the financial world. I’m a little torn on student loans because I have them, but I find them to be pretty manageable. The other three I am definitely on board with!

Why the Founding Fathers Were Broke, femmefrugality.com. All of the founding fathers lived hundreds of years ago, so it’s sometimes hard to put their lives in context since ours are so radically different. This article does a great job of it, though.

Add carvings of Outkast to giant Confederate monument, says petition, theguardian.com. Nothing really to do with minimalism, but this was just hilarious. I love Outkast, and I would definitely go to see this if Andre and Big Boy were on the side of a mountain.

BONUS! My favorite local band from Charleston, South Carolina!

Photo: My Beetle was in a classic car show! I actually caused a little bit of a ruckus here because I was all the way in the back talking to some hilarious Brits with classic Range Rovers when the show ended. They shut down the street for this, so when it’s time to go you have to be ready or you’ll be blocking everyone else from leaving. I had to run all the way back up to the front and strap the surfboards down before everyone else could leave! My Beetle isn’t exactly “showroom condition” either, so everyone who drove past me asked me if I had broken down. I hadn’t, I just thought the show ended an hour later than it actually did. 

How I Plan to Pay Off My Student Loans… Maybe?

There’s a student loan bubble! Maybe? There’s also a group of people trying to get student loan debtors to go on a debt strike against the evil lenders, except that movement isn’t really gaining steam. I don’t really know how much of a problem there is overall, but I can at least share my part of the story and why I’m skeptical about paying them off, but why I still might do it anyway.

Also, I’d like to note how much minimalism and finances seem to be intertwined, at least for me. The fewer things I spend my money on, the more secure I am and the less mental clutter I have. I worry about fewer things. To me, paying off loans is akin to cleaning out a closet.

So! I graduated with about $40k of student loan debt. I went to a public university but didn’t get enough scholarships to pay for it all. (I went to high school in North Carolina which has a miserable education system with basically no money for college students, unlike South Carolina or Georgia. But that’s a whole other can of worms.) So I’m not in the worst situation ever, but not the most ideal either. Compounding the problem was the fact that 18-year-old me viewed community college as something disdainful so I didn’t get my easy credits and transfer in to a univeristy to save money. I was a very traditional four-year type, and turned to loans as a very feasible way to fund my engineering degree.

I also graduated as somewhat of an outspoken Libertarian who viewed debt as something evil that must be exterminated at all costs. (My political activism has greatly waned since then.) I paid off all of my federal student loans with a signing bonus from my first job, then made higher-than minimum payments on my state-funded loans. I also flipped a house and put my profits to paying down another chunk of my loan, and after everything I’ve done I have slightly under $18k left to go.

WHY I HAVEN’T DONE MORE

On to the excuses! I was a pretty typical 20-something that spent a lot of unnecessary money on fast cars. And lots of eating out. So I probably could have them all paid off if I was still driving my car from high school (except that didn’t have AC and I live in south Florida). But I’m a little torn on this, because I don’t want to be someone pinching pennies eating ramen but I also don’t want to be someone who’s racked up all kinds of debt chasing a lifestyle. I think there’s a good middle ground, and getting my mistakes out of the way early helped me discover what that is. I’m a big fan of budgetsaresexy; the way he tackled his debt is very inspirational, but I don’t know if I want or need to do this.

The other part of the problem is that my three student loans outstanding have interest rates of 3%, 3%, and 0.08%. That last one isn’t a typo. With rates this low I could make a better return putting my money to work elsewhere. I started doing this recently, actually. I figure that if I open an index fund and hold it for five years, I could have enough money to cash it out and pay off my loan. I’d have made maybe 5% in the market this way (hopefully!) and therefore I’d be out on top.

But with the rates that low, why would I cash out the index fund at all? Why not make minimum payments on a loan that basically amouts to free money? I know a lot of people with mortgage rates higher than this and they’re doing virtually nothing to pay them off early. The answer is 100% psycological. I still have that libertarian-leaning attitude that debt is generally bad, even if it’s paid for something good like a house or an education. When I’m free of my loans I’ll simply feel better. Even though they’re low interest loans, it’ll still be nice to keep more of my paychecks every month.

But I still have the battle, because the rational part of me knows I could do better things with the money, and the emotional part of me wants to be free of debt at any expense. Like before, I think a middle ground is warranted. I’ll probably end up paying them off early, but not as early as to sacrifice some of my lifestyle. So I might pay off my student loans early. Maybe. Depending on which part of me wins out.

SPEAKING OF WHICH…

I recently started kiteboarding (video below for those who live inland!) which isn’t a particularly cheap hobby, and I don’t want to sacrifice my entry into the sport to pay down loans marginally faster. It’s all about tradeoffs and maximizing happiness! I’ll be writing a little about this sport in the future, though, because it’s crazy amounts of fun. The reason I live by the beach is so I can do things like surf, paddleboard, and kite. It’s not an expensive lifestyle, but it’s not the cheapest, either. At least I’m not into jet skis and swamp buggies.

I’m also going on vacation to my semi-hometown of Charleston, South Carolina this week. Pictures of this will follow as well!

Continue reading How I Plan to Pay Off My Student Loans… Maybe?

Saturday Links! July 18, 2014

For Americans Seeking Affordable Degrees, German Schools Beckon by Soraya Nelson, npr.org. Why hasn’t the United States been able to figure out education while almost every other first-world nation has? It’s mind-boggling, and also sad because I’m one of those millions with student loan debt.

Jobs That Will Pay Back Your Student Loans, mrandmrsbudgets.com. If moving to Germany isn’t your thing, there are a lot of other options that don’t require you to graduate with crippling debt.

Perfection Is The Enemy Of Frugality, Mrs. Frugalwoods, frugalwoods.com. If perfection is the enemy of good, it’s also the enemy of frugality. Also remember: Advertisers create need, and that’s part of the problem for anyone trying to be frugal. The Frugalwoods’ (Frugalwoods’s? English is weird.) blog is one of my favorites and always a great one for inspiration on how to live contrary to how most people seem to live.

3 Ways to Get Help With Your Down Payment, femmefrugality.org. There are lots of ways to get a mortgage, and you absolutely don’t need 20% for your home, especially if you are a first time home buyer. I wish I had this information about four years ago!

BONUS: What I’ve been listening to this week:

Have I linked to Cobalt Cranes before? If so, they’re worth repeating. From California, but they recently made a stop through West Palm Beach. Pretty cool!

Photo: Think roaches are annoying? This is a Cuban Anole, a rather large, aggressive lizard that lives in my banana trees. This one is about a foot and a half long. When he shows up on the porch I have to chase him off with a palm frond which he usually attacks pretty viciously until I coax him away from humans. #tropicalproblems 

Saturday Links! July 4, 2015

Mortgage as a Forced Savings Account to Build Wealth by Financial Samurai. An interesting way to think about your mortgage is as a savings account that you absolutely have to put money into. An upside to buying a house is that your asset will probably appreciate as you’re saving, but the downside is that your savings account probably isn’t very liquid.

What Would Happen If We All Stopped Paying Our Student Loans, Together? by Jennifer Schaffer, Vice. An interesting take on the student debt problem wich involves forming what looks like a “debt union”. Really, it’s about using a “debt strike” as a tool to promote social change, because there is definitely a problem that no one seems willing to address on their own.

Yo ho, yo ho, an FI life for me! by Mr. 1500, 1500days.com. “FI” stands for “Financially Independent” in case you were wondering; Mr. 1500 is on a 1500-day mission to build a portfolio large enough to retire on. He touches on one of my pet peeves about retiring early: people asking you if you’ll just be bored once you don’t have to work anymore. ABSOLUTELY NOT. There’s so much to do! I think people that are afraid of this are more likely to have this happen to them.

BONUS! What I’m listening to this week:

The late-90s Britpop resurgence had some gems in it, and not all of them were Oasis.

Photo: I grew this pineapple in my back yard. It’s huge! It’s almost like I’m living in Hawaii!

Windfall Profits From Selling My Truck

OK, so I didn’t exactly make money from my truck, but I did sell it. My plan was to take this sum of money from the sale and purchase an index fund (and also use some of it to pay off some extra principal on my mortgage). Index funds are great because they’re not actively managed. They don’t try to beat the market, they just try to match it. You save a lot on fees (versus mutual funds) and you still get the great return-on-investment that the stock market generally provides. At least as long as you don’t panic.

I’ve had luck with a particular index fund in the past. After I sold my first house, I put most of the money I made from that transaction into a fund. Otherwise, it would have just sat around in my savings/emergency account doing nothing. I got pretty lucky, purchasing the fund back in October at a low point in the market and then selling them off in January at a high point in order to put a down payment on the house I’m currently living in. I made 5% on this investment in just over three months. Pretty solid!

This time around, I invested in the same fund but seem to be having opposite luck. I bought it last Monday, right before the stock market took a huge plunge. It’s recovered some, but I lost almost 3% right off the bat. It’s recovered some since then, but if I know anything about these types of funds, it’s this:

DON’T PANIC.

Index funds are good long-term investments, so while they do go up-and-down with the market, they’ll generally make you money as long as you wait it out. The market has already recovered, but it’s still down. I actually took the stock market decline as a sign that I needed to buy more, so I consider this volatility more of an opportunity than a disaster.

My plans for this fund, though, are more medium-term. I still have about $18,000 in student loans (down from $40,000 originally) that I’m trying to eliminate. $16,500 has an interest rate of 3%, and $1,500 has an interest rate of 0.08%. The plan is to put money that I’d use to pay off the loan into the index fund (while making minimum payments on the loan) because the index fund will probably do better than 3% growth. Once it reaches a point where I could pay off the entire debt, I’ll sell the index fund to pay it off.

I’m hoping this strategy gives me the best of both worlds. I’ll get the better return-on-investment by investing in the index fund instead of simply paying off the loan. I’ll have extra capital (from capital gain on the index fund) to pay the loan off. And I’ll eliminate a debt, which is my #1 financial goal at this point. (Not to mention the fact that my cash flow situation will improve without this monthly payment.) To me, this seems win-win. I just have to hope that we’re not actually in a bubble that’s about to burst. If we are, though, I’ll just have to take my financial advice from the most successful book ever to come out of the great publishing corporations of Ursa Minor!

Photo: Who needs a truck when you can have a Volkswagen and an index fund? I used the Beetle last week to take two people and one dog on an adventure in the Intracoastal Waterway. We took my paddleboard and a kayak and tied them both down to the roof. It was actually easier than getting both of them in the bed of my truck! The Beetle did great, too!

Saturday Links!

Permission to Let Go by Joshua Fields Millburn & Ryan Nicodemus, theminimalists.com. These guys are pioneers in the minimalism movement, and they always find a nuanced way to tell you that it’s ok to let your stuff go, to live intentionally and simply, and to make room for what matters in your life.

The Great Mortgage Payoff  by marciab, Proceed Until Apprehended. I’m in the beginning stages of my own mortgage and I’ve been throwing a lot of extra cash at the principal. I’ve never really bought into the idea of “good debt” and it’s great to see other people who have kept going with the goal of being debt-free, even if it’s with something “good” like a house.

Is It Better to Rent or Buy? Mortage-vs-Renting calculator at the New York Times. I’ve written about my own house and a little about how I calculated whether to rent or own, and it’s good to see that this calculator also says that I should definitely have bought a place.

BONUS: I’ve been going a little old school this week.

Photo: It’s rainy season in West Palm Beach. We have two seasons here, “rainy” from June to October, and “dry” from November to May. Also sometimes referred to as “really hot” and “not quite as hot”. During the rainy season, you can expect storms like this every day in the afternoon for at least an hour.