Progress Report: Month 1

Day 28 | $31,450 paid | $59,267 till freedom

The dust from my financial activities in fiscal September (Aug 26 – Sep 25) has settled. After month of 1 of my challenge, here’s where I stand:

  • Starting Cash: $31,116
  • Starting Student Debt: $90,717
  • Income: $7,339
  • Expenses (including regular loan payments): $4,115
  • Debt Paid Down (excluding interest): $31,450
  • Ending Debt: $59,267
  • Ending Cash: $3,500
  • Total Assets: $62,192
  • Total Liabilities: $59,267
  • Net Worth: $2,925

Predicted student debt at end of June 2012 (i.e., delta to goal): $5,453

Looking at just the $90,717 and excluding any interest that accumulated on it over the month, I put $31,450 towards that figure and brought it down to $59,267. I’m going to go ahead and file that one under “Quick Wins,” and I don’t think that file will ever be re-opened during the next nine months. I was able to pay off one third of my student debt primarily by getting rid of my savings and realizing heavy losses and liquidating $14k in stocks and $12k in an IRA. With only $3,500 in cash now, my Screw You Fund is good for about a month before I have to go hit the street corner if I get fired. That quick win comes at the cost of my sense of security, and at the cost of realizing $3k in losses since I had invested $17k in stocks in October 2008, just before the Great Recession struck.

Assessment of Cost and Revenue Initiatives
I want to take a moment to assess–in terms of wins and losses–how I’m tracking to my cust-cutting and revenue-increasing initiatives that I laid out in Brass Tacks.

Cost-Cutting Initiatives

  1. Debt Snowball – LOSS – I was banking on an $186 extra/mo beginning in September, but this won’t actually kick in until next month. On the plus side, I’ll be adding another $53 to the snowball because I was able to pay off a $4,460 loan with the $30,840. So the $30,840 went to the $24,666 loan at $186 month and to the $4,460 loan at $53/month, and the balance will go to my federal loans. My debt snowball is now $239 starting in October.
  2. Entertainment – LOSS – I budgeted $50/mo and had been trending at $1,400/mo in entertainment at a time when I was budgeted for $850/mo prior to NMHD. For September, I came in  at $501, primarily due to some heavy spending activities prior to starting my NMHD mission, but after the September fiscal month had already started in August. While on the NMHD budget, I spent a little over $100. While I’m chalking this up as a loss, it’s a heck of a lot better than $1,400/mo, and I should be able to get closer to $50/mo going forward.
  3. Stop 401k – LOSS – I was banking on an extra  $550/mo, but only got $287 this month because I wasn’t able to turn off my contribution quickly enough. I should see the full $550 next month and beyond.
  4. Groceries – WIN – I tried to trim my budget from $330/mo to $280, and $280 is exactly where I landed for September. I didn’t actually change my shopping behavior to make this happen, so it was probably just a function of not buying any non-regular items like razor blade cartridges or contact lens solution that tend to inflate the grocery bill.
  5. Car Fuel – WIN – I budgeted $160/mo, had been trending at $225 prior to NMHD, and somehow, magically, came in at $100 for September. That being said, I have three vehicles with fuel gauges all at E, so I’m about to spend $60 + 45 + $12 on fuel for the Murano, S2000, and bike to start October, leaving only $43 in my fuel allowance to last the rest of October. I’m in a tough spot.
  6. Electricity – LOSS – I budgeted $68/mo, and I came in at $124. The $68 is an annualized number, though, since I don’t run my AC or furnace during certain days or even weeks due to the mild wealther that sometimes occurs in Austin, and I can get my electricity bill down to as low as $40.
  7. Lunch at Work – LOSS – I budgeted for $55/mo upside, hoping to cut out out my one weekly lunch out. I spent $36 in September. Oops.
  8. Dry Cleaning – WIN – I budgeted $20/mo and had been trending at $40. I came in at $22. I had no shirts to clean since the weather is hot enough to justify waring polos to work, so I spent only $20 on dry cleaning and was still able to avoid the drudgery of ironing. Score.
  9. Automotive – WIN – I’ve budgeted $200 for a couple of oil changes and miscellaneous things, and I spent $19 on a liter of synthetic oil, windshield washer fluid, and Armor All.
  10. Medical – WIN – I’ve budgeted $10 for the next ten months to spend on a co-pay for my physical, which I haven’t gotten yet.
  11. Clothing – WIN – I’ve budgeted $0 for clothes and didn’t buy any in September.
  12. House Maintenance and Repairs – WIN – I budgeted $100 for three exeterminator appointments during the next ten months. The exterminator was at the house on Saturday, but the check hasn’t been cashed yet, so that charge will fall in October.

I did spend $64 on non-categorized items such as an update to my anti-virus software (I accidentally enrolled in the automatic update, which was my mistake), faxes, casters for my office chair, copies of the house key, and other miscellaneous items.

Revenue-Increasing Initiatives

  1. RSUs – June timeframe; no comment
  2. Raise – Budgeted a 10% rase for an extra $500/mo net of tax beginning in October. I got the new job/promotion, now I just need to transition into it, so the raise might not hit my paycheck until the middle or end of October.
  3. Tax return – April timeframe; no comment
  4. Bonus – May timeframe; no comment
  5. Pedi-cab job – LOSS – in the Brass Tacks post, I  budgeted $490/month, but I actually lost $136 in September through the purchase and return of the bike, as well as the licensing bureaucracy costs.
  6. Landscaping Biz – LOSS – I spent $50 on the site. The first  $25 was wasted on reserving a domain name that ended up not making sense for the business, so we had to reserve a second domain name for another $25. That being said, I have n’t budgeted any income from this venture–or any additional jobs, for that matter-so anything going forward will be complete upside to  bridge the $5,453 delta.
  7. Roommate – WIN – I estimated $650/mo with one roommate, but that was a bit unrealistic compared to the market, which I hadn’t analyzed prior to making that estimate. Now I have two roommates and I’ll be getting $450 + $400 from roommates 1 and 2. This month I got their first and last month’s rent plus $150 security deposit from each, and I banked it all.

October Outlook

Cost Challenges

  • Entertainment @ $50/month

I’m flying out to Ann Arbor, MI for a crew team reunion from 9/29 to 10/2. I’m extremely excited for the trip, and I’ll be crashing at my friend’s house and going to house parties during the nights, so that’s all free. I do anticipate a lot of lunches and dinners out with friends, so I’ll have to keep an eye on spending.

I’m flying out to Detroit, MI on October 21st for my cousin’s wedding. I’ll be staying at my parents’ house, so lodging will  be free. It would be nice to see if I can keep that weekend’s entertainment down to $0. Of course, I’ll want to reconnect with old friends when I’m in town, so that might be difficult.

All flights were purchased months ago, so the plane tickets won’t hit my income statement, but any expenses I incur during the trips will.

  • Electricity @ $68/month

With more 95+ degree days in Austin forecasted for October, it’ll be hard to bring down my $100+ electricity bill–especially now that I have two roommates.

  • Fuel @ $160/month

For reasons already mentioned above, I’m not in a good position to stay within budget.

Revenue Challenges
I don’t think the roommates are going anywhere, and I haven’t built into my budget any incremental revenue from any additional jobs, so there are no risks there.

The only risk is that my new salary might push out a couple of weeks.

Final Thoughts
All in all, a heck of a month. I chopped off $30k from my loan obligation, and instead of spending $1,057/mo on student loans, my new monthly obligation will be $818, a drop of $239. It was a tough and emotional first month, but I think I’m getting into the groove of being frugal and working hard to generate extra revenue, and I’ll continue to chip away at the debt. The full ten-month outlook is below. Note that you’ll probably have to click on the image below twice–once to open, a second time to zoom in.

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14 Comments

Filed under General Status Updates

14 responses to “Progress Report: Month 1

  1. Mike

    Nice post. Some thoughts:

    1. $50/month for entertainment? Do you think you might want to increase that slightly to help avoid an eventual “LOSS” for every month? (I’m quite frugal, and even I spend slightly over $50/month except in months in which I desire to be really tight.)

    2. 401(k) stoppage. You only *cut* it, correct? …To the amount matched by Dell? Otherwise, throwing away a instant vesting dollar-for-dollar match of 5% of gross income doesn’t sound so great. [I read your post on my mobile, so perhaps I missed something really obvious on the small screen.]

    3. Fuel and groceries — nice job on the savings!

    4. Electricity — though having roommates is almost a no-brainer, perhaps it will creep up the electricity budget slightly? Of course, the rent far more than compensates, but maybe budget a bit higher with an extra two people using electricity, washer/dryers (electricity again), etc.?

    5. Medical — Does the new healthcare law provide for preventative care, such as physicals, for free? I thought it did, but I may be wrong.

    Quite a cool post, and thanks for posting the detailed summary!

    -mike

    • 1) October is going to be over $50 for sure, but I think I can do $50 for all the months but December, since I’ll want to do something for New Year’s Eve. This is just a temporary situation, so it’s not at all meant to be sustainable.
      2) Haha, no man, you haven’t missed anything. For ten months, I’ll be intentionally leaving money on the table. Again, it’s for a short period of time, so I’m okay with it.
      3) Cheers!
      4) It definitely will. I will probably just need to increase the budget for electricity so I can be realistic about it.
      5) Good question. Either way, it’s ten bucks, so I’m not going to sweat it too much.

  2. Jim B

    Great stuff. I notice you have to get super granular to make this work. I’ve listened to a few podcasts by Dave Ramsey and he is really big on pushing to get the snowball effect in motion. He is really good at pushing on the psychology of clearing down debt. For example don’t necessarily focus on paying down the highest interest debt first, pay down the smallest bills, then go bigger, irrespective of interest rate. This might not be economically rational but this is not an economically rational battle, its behavioral economics in action. Conquer the emotional battle with money one liability at a time, then you will win the war….

    • Jim, exactly–I couldn’t agree more with your point about behavioral economics vs. rational economics. In fact, I’m saving my highest-interest loans for last because at $60k, they’re way too massive to snowball. It also helps that I plan on being debt-free in nine months, so the the difference between ten months at a high rate versus a low rate isn’t terribly massive.

  3. Colby

    You rock man! Their are so many of us in your shoes and you are helping so many people. Thanks man! Also, I think you should monetize this blog. You have a great product, use it.

    • Cheers, Colby! I’m trying to abstain from monetizing since I want to see if I can pay down all $90k in ten months with “organic” or natural income that doesn’t come from the sensationalism of what I’m trying to do or the associated brand.

  4. I don’t remember if you said you had ever been in charge of a house with a lot of roommates before in a non-college situation (college has more predictable patterns of arrival and departure)… but I have. I’m sure you realize this, but shit in that kind of situation changes all the time, even in 10 months. Even if you are in a high-demand area for renting out rooms (as I have been), the time and cash-moving-around issues are still annoying and not trivial.

    I know we’re talking about a relatively short period of time, but I wouldn’t breathe a sigh of relief yet that the roomies you have now are staying for the length of your project. I’m sure you will finesse it well enough that you won’t actually lose money in the long run, but it will also eat up time and might deprive you of cash flow at a specific time when you were wanting to use to make a payment.

    In case I seem like Negative Nancy here, you are doing well generally; very curious to see how it all plays out. 🙂

  5. Jyoti

    Question – what do you use to track your expenses? Are you just pulling your stuff in directly from a cc bill? An online thing like mint.com? On your own in Excel via something like PearBudget? Rationalizing my credit card statements makes me want to punch my brains out so any advice would be appreciated!

    • I just have a second tab in the Excel file that I linked to in the post, and on that tab I categorize my credit card expenses into entertainment, fuel, groceries, automotive, medical, clothes, gifts, donations, misc, and out-of-budget. Everything else has a line item on that first tab. Those expenses, in addition to entertainment, fuel, and groceries get a monthly budget, the remainder get an annual budget. I copy and paste my credit card statement into Excel each month and move each line item to each category and track it that way.

  6. Ron

    Way to go on the personal accounting alone!

    A for the question of monetizing te blog, I totally get where you’re coming from but I have an idea. If your goal is to reach/inspire the greatest number of people, I would definitely keep the content free. However, what if you put up ads (even google adsense or something) and banked the money to a separate account to put towards an alternative goal? At the end of this experiment you could donate it to charity, use it to develop a free / cheap product or service (e.g. pay a virtual assistant to help edit your experiences and lessons learned into an ebook), or just host a big party for your friends/family/readers when you reach your goal.

    I’m just trying to figure out a way to not leave money on the table and leverage your existing efforts to accomplish more net good. I don’t think your readers would begrudge you a couple of ads / affiliate links, especially if you were transparent with what that revenue was going towards.

    • Ron, definitely agree that money should never be left on the table, and donating it to charity would be awesome. I could even turn it into a poll: where should we donate the money for this blog? That said, I don’t know how much money I could really make with this blog. How many hits/unique views can generate revenue?

  7. Pingback: Emulate Success | Student Loan RAGE

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