(Very Short) Blog Break

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I hope you are having a fantastic week! My husband and I are traveling and I didn’t bring my computer with me. Well, a more accurate representation would be “my husband is traveling, and I’m tagging along.”

In any case, since TSA gives us enough trouble scrutinizing everything we carry, we try to bring only the most basic things. And as useful as my iPad is for helping me stay in touch with the world, it certainly is not the most ergonomic or user friendly way to blog. However, if you are still interested in what shenanigans I might be up to over the next few days, I’m doing my best to keep my Instagram updated.

Visit and follow us at http://www.instagram.com/karibefrost

I look forward to a full keyboard and detailed posts next week, because some exciting things have happened since my last post, and I can’t wait to share!

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Don’t Pay People For Tasks You Can Accomplish Yourself

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Two days before Thanksgiving (the busiest cooking day of the year) my dishwasher died. I called in a Sears technician who charged me $60 to tell me that it will cost $350 to repair the dishwasher (LOL what? No). I had to tell him on the spot whether or not I was going to accept the repair or reject it. Otherwise, I’d be charged another $59 for him to come back again if I later chose to repair the appliance. While I’ve been fortunate enough to avoid costly home repairs, I always make it a point to know what all of my options are. Before he showed up at 2 pm, I went online to check dishwasher prices and they were on sale, so I was ready with an answer. Since the sale prices for the ones I was considering were between $250 and $400 (from $400-$550), I knew it would be worth ordering a new one and, as a result, declined the repair.

I got online and immediately ordered a new dishwasher. But here’s what the $300 price tag does not cover: the connecting cables ($20), the delivery ($70), hauling away the old one ($15), 5-year complete warranty ($150) and installation ($200). Doesn’t seem like such a good deal anymore, does it? Well, I’ve never been faced with a transaction I where I could not find a cost-cutting measure. So I ordered everything except the installation. I mean, how hard could it be to install a dishwasher? Last night, I found out.

When the delivery man came in and pulled out his box-cutter, my adrenaline was pumping! I could barely contain myself because of the various possibilities: I was either going to have wild success and save myself some good money or it was going to be a complete disaster that could range from causing damage that costs more than $200 to repair or end in the death of one of us through electrocution. No big deal.

We had dinner before starting the job, because what sense does it make to do any of this on an empty stomach? The fact that I wasn’t hungry throughout the process probably kept us from fighting. I got under the kitchen sink to turn off the water supply, while my husband went to the basement to turn off the power. This turned into it’s own adventure, because none of us knew which switch operated the dishwasher. The genius builders decided to label 4 of the switches “appliances”, causing us to trip everything from the fridge, to the oven and the microwave, before we finally cut power to the dishwasher (of course it was the last one).

I will spare you the details, but let’s just say that after 90 minutes, 3 Youtube videos, 2 leaks under the kitchen sink, and 1 unfortunate incident of my husband accidentally hitting himself in the face with the wrench, we have successfully installed a functioning dishwasher for $0! Sure, we invested the time into doing it, however we learned a lot, which is invaluable. If nothing else, we at least know which switch powers which appliance now.

I don’t encourage you go around hooking up your own appliances to high voltage electricity if you don’t know what you’re doing, however, I do recommend that you consider doing certain things on your own so you don’t have to spend money unnecessarily. We have the tendency to crack open the yellow pages the moment something breaks. Give it a shot first. You’ll be surprised what you can achieve when you’re not afraid to try.

Should You Pay Your Children’s Higher Education?

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I had this discussion with a co-worker a few months back when he said that he was at odds with his wife over their daughter’s tuition bill. She did not think it was a good idea for them to co-sign a loan for her. I wasn’t sure if he was asking for my opinion or just venting, but I wouldn’t be me if I didn’t put in my 2 cents. So it became of matter of to pay or not to pay.

I came up with a little test to help you figure out which way you should go. It’s as simple as answering YES or NO to the following questions:

Are you debt free? – Credit card debt, your own student loans, car note, etc.

Is your primary home paid off?  – No other bills besides taxes, utilities, association dues, etc.

Are your retirement accounts maxed out? – The IRS released the 2016 401K contribution limits here.

Do you have enough in an emergency fund? – Minimum 3 months of living expenses.

Are you adequately insured? – Health, life, personal property, car and homeowners.

If you answered YES to all of these questions, you can afford to take whatever money you have left, after meeting all your obligations and putting food on the table, to pay for your child’s high education. If you have enough to pay the entire bill, more power to you. If you’re just contributing to part of it, well your kid should be grateful nonetheless.

If you answered NO to any of these questions, you CANNOT afford to pay for your child’s school and he or she needs to figure it out. Why? Because your creditors are not going to care that it ain’t cheap for Junior to go to Stanford. They’re going to want their money and they will make your life miserable, as well as ruin your credit to collect their funds. Because it would suck for Junior to come home for thanksgiving break and find you homeless after a foreclosure. Because the older you get, the less time you have to work and save for retirement and NOW is always the right time. Because an emergency could set you back financially for years to come. Because not having appropriate insurance can put you or your survivors under extreme financial strain.

But this guy asked about student loans, not tuition. The answer is no. Don’t do it. Let me make this clear: NEVER CO-SIGN A LOAN FOR YOUR CHILD’S TUITION. If they die, you are stuck with the payments. If they default, you are stuck with the payment. If they drop out of school and default, you are stuck with the payment for a degree they didn’t even get.

I graduated college at 21 and started working 2 weeks later. I later got an MBA while continuing to work. So I have worked uninterrupted ever since undergrad, and I plan on retiring at 65, sooner if I do well on my investments. That’s 44 years of potential for full time work where I can earn enough money to pay my own bills. My parents are in their 60s and my dad is thinking about retiring within the next 2 years. Do you think it would have been fair for him to be looking down the barrel of 10 years of loan payments? Who can afford it the most? My father or myself? Even if I lose my job, I probably won’t be out of work for 30 years. My parents will be if they live 30 more years (which is not too far fetched because my grandma is 90 and my grandfather died at 94).

They have the rest of their lives to work and pay back their school loans. You have maybe another 15-20 max left of working and saving for retirement. How much blood pressure medication co-pays do you think your social security checks will cover after you’re done paying for your child’s student loans?

If you don’t believe me, maybe you’ll believe someone who already made the wrong choice on that one.

The Balancing Act

I logged into my bank account this morning to pay some bills as well as make some transfers. Then I started to think… We often hear people say that we have to save both for short-term rainy days as well as our golden years when we may not have as much earning potential as we did when we were younger. However, many of us are in debt. This has to be one of the most severely indebted generations in American history. So how do we decide what to prioritize? If you’re wondering how you can possibly save when you have creditors breathing down your neck, I have to say you are certainly not the first to wonder that. I asked myself the same question in the past, which has allowed me to come up with a system that makes sense.

It all comes down to balance, common sense and some basic math.

Many people who find themselves in debt, are in that position because they indulge. But that’s not representative of everyone. Some people simply live paycheck to paycheck and a minor emergency subsequently morphs into a gremlin they can’t control. A bad flu landed them in the hospital with a high co-pay, a busted transmission on a car that was paid with a credit card, a broken AC system, can all conspire to derail even the most disciplined.

This means, your first step is to eliminate one of the primary sources of sudden insurmountable debt. If you had a leak in your house, would you start mopping up the water before plugging the hole? Because you can mop all you want, but if you don’t take care of the source, you’ll be mopping every time it rains. The best way to tackle that is to have a decent emergency fund. That will mean you’re prepared to pay for an emergency without having to charge your credit card. Some people recommend 3-6 months of living expenses, others have said 8-12 months. I think it depends on your personal situation but I’m a fan of the 6-month guidance if you have a spouse, and if you are single and on your own with no one to help contribute to your salary, I’d say err on the side of caution and have 9 months stocked away. Of course, you’re not going to accumulate that quickly, but it’s ok to take your time. What matters is that you’re working towards it.

Next, pay your debts, and do it aggressively. For example, my student loans are $400/month, but I pay $800. The extra $400 gets applied directly to my principal, shortening my payment period and reducing the amount I have to pay interest on. If something happens (i.e. breaking my dishwasher and paying $500 for a new one), I can choose to not pay the extra $400 for the month I have the unexpected  expense. I make sure the minimum amount is on auto-pay, and the remainder is paid at my convenience. The more you pay, the shorter your payment term and the less it costs you in the long run, helping you get out of debt faster and cheaper.

Finally you can start saving! Why is saving for non-emergencies dead last on the list? Think about the interest rates banks are paying us these days. In fact, think about the BEST advertised rate you’ve seen in recent weeks or months. What was it, 1%? Maybe 2%? What sense does it make for me to save at 1.5% and not paying my loans which are costing me 5.9%? I’m actually losing 4.4% overall. It really makes no fiscal sense. I already have an emergency fund, a home, and two solid cars. This means, anything I save beyond is money I’m not paying my debt with.

What’s your balancing act?