Monthly Archives: January 2009

Frugal European vacation – first we need a budget

london-big-benYesterday I asked for some advice for traveling abroad on a budget. Kacie at Sense to Save is a genius, and she suggested that I post my budget breakdown to see if anyone can offer tips for cutting back.

I looked into airfare and hotel costs for two people for 12 days. Then I made some rough guesses for food and entertainment costs. I want to save enough to avoid stress on the trip (and to account for any price increases between now and next year). Of course we’ll spend as little as possible so we can put the leftover money toward debt and savings.

The numbers I found are based on a May 2009 trip instead of May 2010, so they are subject to change in the next year. Here we go:

Passports: $200

We’ll apply for passports and take care of that this summer.

Airfare: $1700

Right now, tickets to London with a return flight out of Paris this May are about $750 a ticket. We considered a round trip in and out of London because I thought it would be cheaper, but it’s about the same price.

Travel in Europe: $400

Travel from London to Amsterdam and Amsterdam to Paris by train costs about $400. Please weigh in if you’ve ever traveled Europe by rail. Is it fun, or is it a big old hassle? Would we be better off hopping on a plane?

Hotel: $1800

Hotels were the hardest thing to estimate. There are so many factors involved (including where we want to visit in each city and which areas are the safest/best places to stay). I searched for hotels in each city with low prices and high traveler ratings. I found several hotels for about $125 a night with 4 stars from other travelers. Sounds good to me.

Kacie asked if we’d consider staying in hostels to cut back a little. If I were traveling alone or with a friend, I would love to save by staying in a hostel. However, as a married couple we want the privacy of a hotel room. Nothing fancy, but definitely a place where we can be alone. ‘Nuff said.

Food: $1200

This is one area where I’m purposely WAY overestimating. I’m married to a foodie, and I know he’s going to want a considerable food budget to taste everything he can. Me too. I don’t want to spend the trip fretting about how much we’re spending on food, so I’m budgeting about $100 a day. I hope we don’t spend anywhere close to that.

Miscellaneous: $700

This is another very rough estimation. I’m still not sure exactly what we want to do and see, and how much everything is going to cost. I think $50 a day for museum admissions, tours, etc., is a reasonable estimation. I’d like to say that we’ll stick to cheap/free things while we’re there, but I know London and Paris are tourist traps. I want to have enough money available in our budget to see the things we want to see, even if they charge for admission. That said, I hope most of this money ends up back in our savings account.

Total: $6,000

I’m open to suggestions/advice. Be kind. This is just a preliminary budget plan, and I’ve never done this before. :)

Photo by 13bobby

No round up this week, gratitude instead

My apologies for missing the round up this week. I wasn’t feeling well last night, so I didn’t get a chance to get it posted. Then I was up and at ’em for work this morning, and I didn’t have a chance to catch up.

I do want to give my sincere thanks for the words of encouragement on my post about planning our trip to Europe. I have to confess, I was really nervous about sharing my plans. I had no reason to believe that my wonderful readers would be anything but supportive, but I also know that all of us in this community are committed to being debt free. I was worried that announcing such an expensive endeavour while we’ll still in debt might result in some judgment. I couldn’t have been more wrong. The comments I received were so supportive and encouraging. Thank you.

I’m excited, but also overwhelmed. We’ve never made a trip like this. So I’d also like to request advice if you have any to give. A couple of you have already offered some tips (thanks Susan and Claire!). If you’ve ever traveled to Europe — or to any other country for that matter — I would love to hear about your trip, especially if you’ve done it frugally!

I really want to have the trip of a lifetime, but since we’re still in debt and living on a modest income, we’re going to have to be creative if we want to do it without throwing off our goals too much.

I’ll be sure to write more as we continue to plan. First priority, though, is saving! :)

I hope you all had a wonderful Friday!

Do you know where your money is going?

One thing I’ve learned from the mortgage and lending crisis — you can’t be too familiar with the terms and conditions of your loans, investments, and credit cards.

Now that we’re facing a credit crisis, it’s more important than ever that you’re familiar with the policies of your lenders and investment firms as some institutions are making changes to their policies.

Take some time this month to educate yourself on where your money is really going and whether you’re getting the best deal.

Banking

  • How much interest are you earning on your savings and checking accounts? What are your options for increasing your interest rate? (Consider moving your savings to ING Direct for a 2.5% interest rate.)
  • Are you paying monthly fees for your accounts? If so, it’s probably time to switch banks. There are many banks that offer completely fee-free accounts.
  • How much do you pay for ATM fees and other transactions? You may be surprised to find out how much you’ve been spending on certain transactions.

Credit Cards

  • Is your account still open? Some credit card lenders have started closing dormant accounts, so if it’s been a while since you used your card, check and make sure it hasn’t been closed due to inactivity.
  • What is your interest rate? This may have recently changed, so check your statement or call for the most current information.
  • What is your credit limit? It also may have recently changed, so make sure you know exactly how much it is. A lower credit limit can affect your credit score.

Investments

  • How much are you paying per transaction? If your fees are high, consider investing in lump sums less frequently to make the most of your fees.
  • If you’re paying high fees, consider moving your investments to no-load mutual funds through discount brokers or investment firms.
  • Take some time to check out the prospectus report for your investments. Is it time to change your portfolio?
  • How much time do you have until retirement? If you’re planning on retiring in 5 years or less, it’s time to move your investments out of the stock market and into low-risk bonds. If you’re young, now is a great time for stock market investments because prices are low and you have plenty of time for the market to rebound from its current state.

Mortgages and other loans

  • Are you eligible for refinancing or consolidation? If your credit is good, now might be a good time to consider refinancing for a lower interest rate.

It can be a pain to track down this information, but it’s worth it to know where you stand. Not only is it important to know where your money is going, but it’ll give you a chance to determine if you’re getting the best rates, fees, etc. As long as the market continues to fluctuate, I suggest you take stock of your finances every 3 months to make sure nothing has changed.

Planning a frugal European vacation

eiffel-towerLast weekend during one of our long talks, Tony and I ended up discussing the things we’d like to do before we have children. At the top of both of our lists was a trip to Europe.

There are a lot of things we’d like to do someday, but international travel is the only one we can’t imagine doing with a baby.

Ever since we met, we’ve talked about traveling to Europe while we’re young — one last big trip before we settle down and start a family. When we first started planning our wedding, we briefly considered a European honeymoon. Our budget and my inability to find a full time job after we moved quickly nixed that plan. But when we decided to take a brief (and frugal) trip to Washington D.C. instead, we told ourselves that we’d plan for a European vacation the summer after he graduated in 2010.

When we committed to becoming debt free, I shelved this lofty dream. “We can’t afford anything like that until we’re debt-free,” I told myself.

But now that we’re credit card debt free and making serious plans for a family, I’ve realized something — we’ll be paying our student loan debt for a long time. No matter how aggressive we are, we’ll be paying those debts for years after we’ve had children. I’ve come to terms with that, and I’m ok with it.

We can’t wait until we’re completely debt-free to live our lives, though. My first plan was to be 100% debt-free before having children, but there’s no way I’m waiting 10-15 years to start a family. I’ve decided to add the dream of a European vacation to that list, too. We don’t want to wait until retirement to take the trip we’ve always dreamed of taking.

So we’ve set a new goal for ourselves: we want to plan a trip to London and Paris for May 2010. If it works out, we’ll be spending our second wedding anniversary in Paris! :)

That doesn’t mean we’re sacrificing our other goals, though. We’re not going to add to our debt for this trip or stop working toward our goal to be debt-free. After some planning and discussing, here’s our rough plan:

  • We’ll pay for the trip in cash.
  • We’ll be as frugal as possible in planning the trip, and plan ahead to make sure we’re getting the best deal possible on airfare, hotels, and other expenses.
  • Our emergency fund is still our top saving priority, so any saving for Europe will start after we’ve fully funded it.
  • We’ll continue to pay a little extra on our student loans to cut the total time we’ll be repaying. After the trip, student loans will be our top priority.
  • All extra money (including gifts and extra income) will go toward emergency and vacation savings.
  • We’ll cut spending in other areas to free up money for savings and debt.

I did some preliminary research and determined that we’ll need to save about $6,000 for the trip. Including our emergency fund goal, that means we’ll have to save about $12,000 in 16 months.

I realize this plan will delay a lot of our other goals — including being debt-free and buying a house. We’ve considered all of this in our decision, and I can’t imagine a scenario in which we’ll regret the trip (as long as it doesn’t add to our debt).

I’m more excited about this goal than I’ve been in a long time, and I’m feeling good about our decision. As excited as I’ve been about paying debt, it can be so overwhelming and depressing to devote every extra penny to what seems like an endless black hole of debt. Adding an exciting goal to our plans has given me the lift I needed. I can’t wait to get started!

photo by franz88

Where do you draw the frugal line?

Lately I’ve been thinking a lot about degrees of frugality.

For instance, many of you probably think it wasn’t very frugal of me to join a gym and buy new running shoes. On the flip side, some of you might be like my husband, who believes you can never spend too much when it comes to your health. (For the record, I’m somewhere in between.)

Some of you can’t imagine spending money on disposable diapers, and some of you would rather use coupons to get disposables at a low price instead of paying close to $20 for one all-in-one cloth diaper.

For some, time is worth more than money. Maybe you’ll willing to spend extra money on things that buy you more time.

We all have different ideas about what’s really frugal. As I’ve said many times, frugality is not one size fits all. Not even close. There are a million different degrees of frugality.

Whatever you decide, the important thing is that you draw yourself a frugal line in the sand. Figure out what’s important to you, and try your best to stick with it.

For me, frugality is about balance. It means most of the time I can’t have it all. If I want to spend money on a gym membership, I have to cut some of my entertainment spending. If I want to go to a movie on Saturday night, I can’t go out to dinner, too. That’s where I draw my line. I cover the necessities, and find a way to balance the extra stuff.

Where ever you draw the line, try to be consistent. If you decide to give up meals out so you can afford to go to the movies, don’t look at your frugal friend who spends her entertainment budget at restaurants and convince yourself that you can have it both ways. Remember your priorities, remind yourself of the decision you made, and stick with it.

At the same time, don’t feel guilty if you’re spending money on paper towels or disposable diapers while your other frugal friend uses rags and cloths. Trust your decision, and balance your budget accordingly.

It’s ok to change your mind. It’s ok to change your priorities. But always make sure you’re doing it for yourself and your family. Don’t base your decisions on someone else’s frugal choices. If you’re frugal, I’m sure you don’t believe in keeping up with the Joneses. But you also shouldn’t try to keep up with your frugal neighbors across the street.

Everyone’s line is different. Just make sure you stay on the right side of your own.

Don’t spend your tax refund before you get it

I know, I know. I shouldn’t be getting a tax refund, because I should have my deductions set correctly to avoid giving the government an interest free loan. I know. But the fact is, I typically err on the side of caution. I’d rather give the government an interest free loan than owe a huge lump sum of money during tax time.

This year, we’d probably be expecting a refund anyway since we got married half way through the year. Because I make twice as much as Tony, we’ll most likely get a tax discount for filing jointly. Which means we’d be getting a little money back anyway.

How much? The fact is, I don’t know. But in the past, I’d have plans for what I was going to buy with that money regardless.

I’ve used my tax refund to buy a new wardrobe, take a vacation, and buy more electronics than I want to think about. Sometimes I was so broke that I had to wait until I received the refund to spend it. Sometimes, though, if I knew it was coming, the spending spree started before I even received the check.

This year, I’m not spending a dime of it. I already know what I’m going to do with the money, and it doesn’t involve a spending spree. It’s going directly into a savings account to help us cover the two months out of the year when Tony won’t receive his teaching salary.

I bristle at some of the tax preparation commercials I’ve been seeing on TV lately. “Need a vacation? Bring your taxes to us, and we’ll get you the tax refund you need to pay for it.”

The fact is, a tax refund isn’t “extra money.” It’s money that you should have been getting in your paycheck all year, which means the same rules apply to your tax refund as your regular income — don’t blow it.

I realize there are situations where a lump sum tax refund might be helpful. For instance, if you’ve been avoiding major car repairs because you don’t have the lump sum to pay them. That’s completely understandable. By all means, use your refund to get your car in working order.

But if you’re considering using your refund for something unnecessary, I urge you to think of that money as regular income. Can you really afford to spend it? Do you have a 6- to 8-month emergency fund in place? Are you debt-free? Are you fully funding your retirement accounts and education savings accounts? If the answer to those questions is yes, then maybe you can afford a big vacation or a new wardrobe right now.

But if you’re like me — with a tiny savings account, way too much debt, and a non-existent retirement account — then you’d probably be better off putting that money to more practical use.

Menu Plan & Grocery Round Up: 1/24-1/30

Because I haven’t been feeling well this weekend, my wonderful husband offered to take care of the grocery shopping and let me rest. We planned our meals together, and put together a list, but he did the actually shopping by himself while I slept. Isn’t he so sweet? :)

He did a fantastic job of keeping costs down, too. The total was $42, including $5 off from our grocery store’s rewards program. Not too bad considering the amount of food he brought home.

The highlight of this week’s meal plan is no doubt last night’s broccoli cheddar soup. I was craving Panera, so we searched for a recipe to recreate it. I’d say it was a success. We’ll definitely be adding it to our regular menus. It was pretty easy, too. I recommend you give it a try!

Here’s our menu for the week:

Saturday: Broccoli Cheddar Soup
Sunday: Spaghetti with meat sauce
Monday: Leftovers/sandwiches
Tuesday: Grilled chicken sandwiches (Held over from last week after a change in plans.)
Wednesday: Potato soup
Thursday: Dinner with friends (Half priced appetizers at our favorite pub.)
Friday: Homemade pizza

Now head over to OrgJunkie for more menu plans!

A difficult decision about student loan repayment

Once we became credit card debt free, we had an extra $200 a month available. We decided to put some of that money toward retirement savings every month, so we only have $100 left to work into the budget.

Yesterday, Tony and I looked at our budget, and talked about where we’d like to put the money.

We have a huge amount of student loan debt (about $60,000 all told). My plan has always been to pay off credit card debt first, and then move on to my private student loans. Private loans account for about 1/3 of our student loan debt, but they carry about a 7% average interest rate. We also have about $40,000 in federal student loans with a much lower interest rate (about 4%).

When I think about all of that debt, I feel so overwhelmed. To make it easier on myself, I’m focusing on one loan at a time — for now the private loans (about $22,600).

I plugged some numbers into a loan repayment calculator to figure out some scenarios. The numbers are disappointing.

  • If we continue paying our current amount ($200 a month), it will take us 10 years to pay off my private loans.
  • If we put the extra $100 toward student loan debt (my original plan), it will be 8 years before the private loans are paid off.
  • Even if we could come up with $500 a month to put toward the private loans alone (while continuing to pay the minimum payment on federal loans), it would take about 4 and a half years to pay off just the private loans. Then we’d still have to pay off $40,000 in federal loans.

“Don’t worry,” people tell me. “Your income will go up.”

The problem is, it probably won’t. Right now I work full time, and Tony makes the equivalent of a part-time salary teaching. Sometime after he graduates, we want to have children. At that point, our roles will switch. He’ll bring in a full time salary, while I work part time (hopefully from home). So we’re looking at quite a while before we see a significant increase in our income.

Tony and I had a long talk about our short- and long-term goals. As much as I want to be debt free (and believe me, I really want to be debt free), at this point in our lives with our limited income and the economy a wreck, my gut is telling me that saving is more important.

Once we’re settled somewhere that we know we want to stay long term — and we have an emergency fund in place — our focus will shift. At that point, we’ll be able to put everything we have into debt. But for now, I want to have as much money stashed as possible.

So we made the decision to continue making minimum payments on student loans for the next year and a half while we beef up our savings. After that, we’ll reassess our financial situation. Hopefully we’ll have enough in savings that we can hold off on saving and shift our focus to debt.

I’m disappointed that we can’t do both, but I’m also confident in our decision. When I look at the difference an extra $100 a month will make in our savings, I feel calm and reassured. I don’t feel that same calm when I see the minor change in our debt that would result from paying an extra $100 a month on it for the next 18 months.

I also don’t regret putting $100 toward retirement every month. If we don’t plan for our future, no one else will. Putting $100 away for retirement every month makes me feel incredibly empowered.

The important thing is that we’re doing what works for us. The best part? Liquid savings is, well, liquid. If we change our minds, we can always pull that money out of savings and put it toward student loans.

TGIF Round Up: Fighting a cold edition

Ugh. I don’t know why I’m surprised that I’m coming down with a cold. I haven’t been sick since October and we’re right in the middle of flu season, so I’m due. I just always feel so shocked when I start to get sick, like I can’t believe it’s happening to me.

Hopefully I’ll suffer the worst of it over the weekend. I hate to use my vacation time when I’m sick, and there’s nothing worse that working through a cold when all you want is to be in bed.

Being sick on the weekend is no fun, but at least I’ll have plenty of time to rest. I’ll park myself on the couch with the remote control and plenty of fluids. I guess the upside is I can skip the gym until I’m feeling better. :)

Here are my favorite reads from the blogosphere this week:

  • Mrs. Micah asks what kind of work is beneath you? Working in retail with thousands of dollars of student loan debt was no fun for me, but it helped me pay the bills. Honestly, though, I found that a lot of employers were wary to hire me if I was overqualified — they weren’t looking to hire someone who was looking for “something better” and might leave at any time.
  • Northern Cheapskate was looking to simplify her life, but decided that sometimes the extra work (and income) is worth the chaos.
  • Sense to Save reminds herself what motivates her to get out of debt. We all have our reasons, and it’s good to take a step back and remember them every once in a while.
  • Almost Frugal offers helpful tips for drastic frugality when there’s more month than money. I’m glad that we no longer live paycheck to paycheck, but I’ve certainly been there.
  • Being Frugal explains how budgeting provides freedom. I feel the same way! When I know exactly what I can spend, I feel more free to live my life without worrying if I’ll have enough money.
  • Frugal Upstate offers a handy guide for creating a budget in 5 steps. It really is that easy.
  • Being Frugal is Fabulous is enjoying the convenience and simplicity of meal planning for the first time. It can be a hard habit to start, but once you get into it, you’ll wonder how you ever lived without it.

Now I just have to make it through the work day, then it’s off to bed for me. :( Happy Friday!