About that "New Toy"....

On July 26th, I shared how excited I was to be the proud new owner of a Keurig coffee maker. My reasoning behind the purchase was largely because I was spending quite a bit of my food budget at Panera Bread on coffee and bagels.

Well whaddya know. Just two days ago, my colleague bought a Keurig coffee maker!!!

I'm seriously reflecting on my $120+ investment. I've thought about selling it on CraigsList or Ebay....that way I won't have to keep up with the occasional $13 purchase of fancy K-cups and I can freeload off of use the ones at work.

What do you think? Should I sell my new toy and indulge in the one at work? 

Or Should I keep it?

I Got A Rewards Card!

I finally got around to getting a rewards card. Yesterday, on a whim, I called my credit card company and told them I'd like to upgrade my card to a rewards card. I had a sense that the time was right, because they recently upped my credit limit. I'm also pretty sure it had something to do with my paying my balance in full every month for the past six months (and keeping the balance relatively low, prior to that).

Nevertheless, I made the call, was advised that an "upgrade" would not suffice and that I'd have to open a new account, so I did. I answered questions about my income, bank account balances, and rent payments. All in all, it took about 12 minutes.

In the coming weeks, I should receive a shiny new credit card with a $15,000 limit. I don't care what the APR is because, like I've done for the past several months, I'll be paying the balance in full. Additionally, there is no annual fee. I will earn 1.25 miles for every dollar spent, miles do not expire and there's no limit on the miles I can earn. Additionally, I can redeem my miles for airfare, hotel, and more (I'm most interested in airfare purchases). If I spend $1400 a month on my new card, I can rack up 1,750 points a month (21,000 a year). I'm already thinking about what expenses to charge (phone bill, groceries, gas, miscellaneous expenses). Sadly, this will impact my "Keep the Change" savings; however, I'm hopeful that the purchases I'll be able to make with my miles will offset the change. I'll keep you posted!

Do you have a rewards card? 

What's your favorite feature of the card?

What do you use your points/miles for?

Too Soon?

Lately, I've been obsessing over what my budget will look like once I pay off my car. Assuming that I remain on track, this new budget will take effect May 2011. Nevertheless, I've plotted out what to do with the $1055 I would NOT be spending on a car note. So far, I've come up with a combination of the following expenses:

• Increase the amount I pay on my student loan from $230 to $350 (the standard repayment amount; currently, I am on a graduated payment plan) .
• Increase my student loan payment to $400
• Increase my student loan payment to $500

• Set aside $810 in my ING Direct account. In addition to the $25 I set aside in my Bank of America savings account, a total of $835 towards savings accounts will yield  $6680 by the end of 2011, and $10,020 over the course of 12 months. One of the goals I've set for myself includes having $10,000 in emergency savings.

• Set aside $625/month (from May to December) to max out Roth.
• Set aside $200/month for Roth.

• Set aside$200/month to travel.
• Set aside $100/month to travel

• Set aside $258/month for miscellaneous expenses which may include Roth, fun stuff, additional savings, additional principal payments for student loans, and who knows what else.

I'm sure it would be helpful to see the variety of scenarios I've plotted out, but I assure you that that's an exercise in futility. You see, I've drafted more than 15 of the various budget scenarios, some in my handy-dandy composition notebook, others on index cards, backs of envelopes, and other random pieces of paper. The recurring themes, however, are that I set aside a hefty chunk for savings (especially since I haven't been doing so while eliminating this car note) and paying more than the $230 currently requested of me to pay my student loan. By the way, I my current payoff amount is $30,801.65. Yikes!

What would you do with the "new" budget?

Stay on Track or Defer?

Conventional wisdom in personal finance circles says one should pay off higher interest rate loans before tackling lower interest loans. I’ve shared that I’m on a mission to pay off my car note by the end of March 2011. In a separate post, I divulged my shortcoming of using a credit card and not paying the balance in full. Well, I decided to pay off the higher interest rate loan, my credit card. Although it use to carry a 6.99% interest rate, thanks to my credit card company’s ability to increase rates at their convenience, my interest rate is now 15.9%. Compared to my car loan interest rate of 7.88%, it’s easy to see that, over the long term, the credit card would be the more expensive loan. I went to bankrate.com, used their “credit card minimum payment calculator” and learned that it would take six years and eight months for me to pay off this balance of $775.69 (I’m happy that this information is also reflected on my credit card statement; we have the CARD Act to thank for these details :>). Keep in mind that this would NOT include any additional purchases (which, if past performance is any indication of my future actions- is completely NOT gonna happen). 

My credit card company calculates minimum payments at 2.45% of the balance at the end of of my billing cycle and in the 80 months that it would take for me to pay off my credit card bill (if I only paid the minimum amount due, which is $19), I would pay a total of $1,242.87. Where the heck did this amount come from? Well, it’s the money I used plus interest: $775.69 + $467.18 = $1,242.87. If I paid $27/month (and made no additional purchases) it would take approximately three years to pay off my balance, at the end of which I would pay a total of $982 ($775.69 balance + $213.31 interest).

Cartoon from www.mordantorange.com

Being a tad bit impulsive, I said to heck with the credit card debt and paid it off....with the funds I ordinarily use for my super-duper $1045/month car payment.  

Here’s my question to you: Should I make my super-duper car payment with funds from my savings account or should I make the regular payment only (and wait until next month to get back on track)?

A few notes: I would have at least $500 readily available in my savings account for an unexpected expense after moving $705 to my car payment to stay on track. Alternatively, if I make only the regular payment, I will postpone my payoff date to April 2011 (one month later). 


To be fair, the interest assessed on the credit card is for a smaller amount of money- $775.69- compared to the outstanding balance of $9,118.93 on the car note. Between now and the end of March, I will pay $251.34 in interest charges for the car loan. If I postpone the super-duper payment, between now and the end of my car loan I will pay $286.48 in interest charges (a difference of $35.14).