April 2008 Archives

Barbara

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When I was a child, I learned somewhat of a clothing mantra: Buy it on clearance, hand it down, repeat.

As the youngest of four girls, I quickly became familiar with "new to you." This was, generally, a practice I was fine with. My wardrobe did occasionally include a questionable piece from say, the mid-'70s (keep in mind I was born in 1984), but it was OK. And to be fair, I did get clothes now and then that weren't the pre-worn type.

My childhood "fashion" gave me the hand-me-down  mentality. When I shop, it's usually a beeline to the clearance racks. While I'm willing to spend a bit more on things that will last, generally, I stick to the marked-down merchandise.

But every once in a while, the rebellious bug strikes me, and I find myself in the checkout line with a full-priced Anne Klein  dress. (To my credit, it was full-priced at T.J. Maxx , but still.)

Sometimes I wonder if other folks have the same reaction after a frugal upbringing. Do you ever just get the urge to spend on something you usually are frugal with?

Caroline

Editor's note: The Student LoanDown is thrilled to welcome back Caroline Hanson from family leave — and just in time for all the earth-friendly festivities happening this week!

When I graduated from college 14 years ago, people weren't all that serious about "going green." Most of us recent grads were driving giant gas-guzzling cars from the '70s and early '80s. And back then, being a "granola" was much more about wearing flannel shirts and Birkenstocks  than saving the environment.

For those of you in college now, you really have a great opportunity to live "green" for your whole adult life. For me, I've really only recently become more conscious of living "green." The cool thing I've noticed is that doing things that are environmentally friendly will almost invariably save you money.

It's almost like if you just make a conscious choice to spend less money, you'll automatically be doing things that are also good for the environment, whether it's buying a car  that gets great mileage, turning down your thermostat, or using compact fluorescent light bulbs .

Conversely, if you struggle with saving money, try shifting your focus to living eco-friendly instead. You might find that living green saves you green.

What environmentally-friendly things have you done that saved you money?

Staci

Since it's Earth Day  today, I thought I'd share with you a new Wells Fargo initiative encouraging folks to "go green" with online only statements.

It's actually quite cool: To be automatically entered for a chance to win some green — one lucky winner will claim the grand prize of $25,000! — sign up for online only statements for all your eligible personal and/or business accounts (student loans included) by June 10. Check out the Sweepstakes Rules for all the necessary legalese including how to enter for free.

Why go paperless? Well, because you'll be part of an effort that saved over 180 tons of paper in 2007 ¹. From manufacturing to disposal, the benefits of eliminating that much paper adds up in some pretty dramatic ways. Last year, customers who signed up for online only statements helped the environment by:

• Saving 562 tons of wood, the equivalent of 3,888 trees

• Conserving 6,605 million BTUs (British Thermal Units) of energy, enough to supply energy to 73 homes for a year

• Eliminating 4,686 pounds of sulfur dioxide, the equivalent of taking 852 18-wheelers off the road for a year

• Cutting 986,290 pounds of greenhouse gases, the equivalent of taking 90 passenger cars off the road for a year

• Eliminating 2,146 pounds of particulates, the equivalent of taking 192 buses off the road for a year

• Saving 3,276,032 gallons of water, enough to fill 5 large swimming pools

• Eliminating 389,877 pounds of solid waste, enough to fill 15 full-sized garbage trucks

Plus, if you're anything like me, going paperless also helps you be more organized. I receive very few paper statements at this point in my life, so with pdfs  of my online statements stored on my home computer (and, of course, responsibly backed up on my portable hard drive), everything's in one place and easy to find.

Small step for you, big victory for our planet!

¹ Statistic used for comparisons based on research done by the Paper Task Force. For more information, contact Environmental Defense at www.papercalculator.org .

Barbara

Financial literacy is often on my mind, but this month especially as I'm reading about it on many fabulous blogs  and in the news . Last April was declared National Financial Literacy month, and this year many people are using the month again to promote financial literacy .

When it comes to finances I like to think I have a good head on my shoulders. But I'll be the first to admit, I am far from financially fluent.

Obviously, I have a pretty strong grasp of student loans (despite never having any), thanks to my job. I also know about budgeting and emergency savings. But there is one word that still scares me: investing.

Stocks, bonds and all that jazz intimidate me. It has something to do with the image the word "investor" conjures up in my mind, I think. You see, to me investors are those mathy folks who wear suits and say things like "dividend"  and "hedge fund." 

Now, I have a 401k and make regular contributions, but the money still goes to the default fund. I have yet to research and reallocate my funds. Each time the quarterly statement arrives I think, "You should really read up on this." But I have yet to follow through with that thought.

Since we're in financial literacy month, I'm going to fight my fear and get over my preconceived notions. Local library, here I come to arm myself with investing information!

I know I shouldn't need a special month to motivate me, but sometimes a little extra push helps.

If you need a push, here's one from me: Check out Wells Fargo's Hands on Banking® Program  to learn more about the financial topics you don't know much about. There is even a section specifically for young adults.

And if you're looking to boost your student loan literacy let us know what you're curious about or start with some basics from the blog. 

Staci

It's April 15: Tax day. (Insert your favorite ominous music here.)

My 2007 taxes  were finished a few weeks ago, and already the small refund has been directly deposited in my account. Barbara had to pay in a little this year, but in 2008 she should be able to reap the tax benefits of a full year of homeownership.

However, the April 15 deadline still looms for other financial decisions. Just yesterday I made the mad dash to my broker's office to deposit the allotted 2007 nondeductible contribution amount for my Roth IRA. Nothing like getting it in under the wire.

If you're still in college, you might not be thinking about retirement just yet — I know I wasn't. In fact, my IRA was a college graduation gift from my father. He contributed $2,000 annually for 10 years — a pretty generous start to my retirement nest egg. (Thanks, Dad!) Over time I converted it to a Roth account from a Traditional IRA and upped the contributions as both the law and my income allowed.

This year, I decided to put some of my tax refund toward my IRA contribution and use the rest to pay the first installment of my 2008 property taxes — certainly not the splurge items I used to treat myself to! It all feels so grown-up.

Where's your tax return going this year?

Barbara

After we talked about financing an education in the United States if you aren't a U.S. citizen, we fielded several questions about how U.S. citizens can fund study abroad .

I've always been intrigued with the idea of studying abroad. Several of my friends spent time at a university in Spain. They came back with awesome stories and Spanish speaking skills far superior to my own — yes, I'm still jealous, but I digress.

Some students choose to study abroad for a semester or so through an exchange program  with their home university. Others choose to seek their degree in a different country.

In each of these scenarios, federal funding from the U.S. is usually available. Foreign schools can choose to participate in the Federal Family Education Loan Program (FFELP). Of course, before you borrow, consider options for grants and scholarships that you won't have to pay back after you graduate. There are some notable scholarships  designed to help students study abroad.

Just like when attending a U.S. school, you'll work with your financial aid office to get your funding squared away.

If you do need to borrow for your education, your first step to federal aid is still the FAFSA  (Free Application for Federal Student Aid). But you might have to do a little extra work. Some foreign schools may not be able to receive the Institutional Student Information Record (ISIR)  electronically, so there might be additional steps to the process. Check with the school to see if they need you to mail a paper copy of your Student Aid Report (SAR).

And if federal aid, coupled with scholarships and grants, isn't enough to fund your education, some lenders offer private loans for study at foreign schools. In general, Wells Fargo isn't a lender at colleges and universities abroad. However, there are some exceptions.

If you're looking for more information on funding, NAFSA , an association of international educators offers a great resource page  for students pursuing education abroad. Or don't be shy about talking with your financial aid officer.

Let me know if you have more questions. I'll just be contemplating taking a couple years off to get a graduate degree at Oxford .

Pip, pip, cheerio!

Dinna

Do you eat breakfast?

I normally don't...well, I guess I get my soy chai latte . But on the weekends, I love to eat breakfast...or should I say I love eating out for breakfast!

So last Sunday, I packed my family in the car. All of us were excited to have French toast, crab hollandaise , savory crepes, and Mickey Mouse-shaped pancakes at our favorite breakfast destination. When we arrived, however, we were devastated to see a "Thank you for your business" sign posted at the entrance. Our beloved Crepevine had closed down! We took our grumbling tummies back home and complained while we ate cold cereal and milk.

Unfortunately, I'm noticing a lot more businesses closing around town...not just restaurants but furniture stores, specialty boutiques, pet shops, tea bars, etc. I guess it's a sign of the times. It makes me think about what I should be doing to prepare myself for a financial "rainy day." Of course the obvious (but not so fun) thing to do is to cut back on expenses.

Comfort food  is my vice...but I guess I could make breakfast instead of going out. Maybe I could have that $3 latte a couple of times a week instead of everyday. And do I really need that glass of wine with dinner? Wait, let's not get carried away!

In these economic times, it doesn't hurt to be a little more disciplined. I mentioned in an earlier post that I was thinking of going back to Australia to visit. Well, that's an expense I've decided to do at a better time...maybe when the exchange rate for the dollar is more favorable.

How has the current economy affected your lifestyle?

Staci

As I get further into the home building process, I'm confronted with a lot of "might as well" temptations. You know — I might as well add extra square footage here, I might as well install more lighting there, I might as well finish the basement now instead of waiting a few years.

Before I know it, I've might as welled myself right over my budget.

College presents you with a lot of "might as well" temptations, too — ones that you might be paying off for a long, long time, if you're not careful. Here are a few examples:

Might as well (MAW): I don't need all of these student loans, but they've been offered to me, so I might as well take them.

Why you should resist (WYSR): If you don't need the money to pay for school right this minute, don't take the loan. You're going to have to pay it back, with interest. In most cases, the interest starts accruing as soon as the loan is disbursed. Why pay interest on money you don't need yet?

MAW: I've got leftover financial aid money — I might as well use it to buy an Xbox .

WYSR: If you have leftover financial aid money — and really, you shouldn't, if you look at the previous WYSR — throw it at next semester's tuition, or use it to pay for living expenses. An Xbox does not count as a living expense. Besides, shouldn't you be studying? If you really need to play Halo  or Guitar Hero  (and sometimes you do — it is good stress relief), just head over to your friends' place and take advantage of their poor financial decision making.

MAW: Even though I'm financing my college education with loans, I might as well skip my Economics class. It's boring, and I'm tired!

WYSR: Think about what your classes cost per credit hour, figuring in books and other materials. Then think about the interest rate on your student loans. There's some sort of mathy economics formula for figuring out exactly what skipping class costs, but you don't know what it is because you skipped Economics! Bottom line: time is money. Get your money's worth by getting out of bed and going to class.

Feel motivated to fight off the "might as wells" now? I sure do. I'm off to resist the temptation of granite countertops.

Barbara

March went out like a lion  in South Dakota. We had quite the winter storm system pass through the area this week. That thick layer of frosting now covering the emerging green grass inspired me to talk to you about snow, well, actually snowflakes.

Snowflaking is a concept that personal finance blogger paidtwice  discusses on her blog I've Paid For This Twice Already... .  She offers a basic introduction to the idea of snowflaking here. 

Basically, it's taking any extra money you scrounge up and throwing it at your debt — even if it's only an extra dollar or two. Earlier in March, I offered similar advice to one of our readers through comments. It's a practice I follow myself. Each month, a little extra ($44) goes toward my mortgage balance.

Recently, paidtwice offered a great illustration  of how throwing a little extra toward your debt balances can pay off. So, to bring my advice full circle, I decided to calculate just how much power that $44 each month has.

According to the calculator she links to, here is the estimated payoff:

If I paid the minimum amount, I would take 190 months to pay off my mortgage and I would pay $63,743.00 in interest.

But by adding that $44 every month my payoff time is reduced to 179 months. Not only do I take a year off of my repayment, I also save over $4,000 in interest! Those are pretty big results for a little extra each month.

So, while real snowflakes are hindering spring and all of its new beginnings, financial snowflakes can be a great catalyst to help us reach our financial new beginnings faster.