How Much Should You Budget?

My wife's sister messaged her on Skype the other day. She was curious as to about how much she should be spending on common household expenses. Well, we were curious also and decided to hit the books to see what good rules of thumb are.

According to the Motley Fool, you might consider the following very rough guidelines:

Housing and utilities, 25-30%
Food, 10-15%
Vehicles, 10-15%
Insurance, 5%
Saving and investing, 10-15%
Entertainment, 5%
Clothing, 5%
Medical, 5%
Childcare and education, 1-8%
Gifts and charity: Up to you!

Of course, where you live is a major factor in how little you pay for each category. For example the DC area, housing is very expensive. In a rural part of the country like Oregon rent and mortgage prices are more manageable.

Wedding Savings Tips

Yesterday Miel and I attended a very nice wedding given by good old friends here in Eugene, Oregon. The ceremony was at a lovely Lutheran church with friends and family, with the reception at a nearby restaurant with a great view. Both the bride and groom are local business people so the food was good and they didn't skimp on the decorations.

In honor of the wedding we attended yesterday, here are some tips you might consider when saving money in your own wedding planning:

1) Plan, Plan, Plan: If you sit down a year ahead of time and work out a budget as well as a way to cover your expenses, you'll minimize the chances of having major expenditures crop up at the last minute.

2) Save on your Wedding Dresses: Consider paying less for the dress you want, borrowing one, or even renting one. Most of the time the dress just ends up in storage. If you've got good pictures you probably won't miss spending the extra cash on the dress. One tip is to go dress shopping and bring a pad of paper to write down notes on your favorites. You can likely find one that the dress is available online or at an outlet wedding site. If you've already tried it on and love it, there is less risk in buying it from a cheaper place.

Miel found a fabulous one that was the cheapest - and nicest - dress she tried on. She found a big difference in where she shopped. Across the street from the boutique she bought it at, the dresses were nearly twice as expensive as they were in a more rural place near where she grew up. The dress she found was incredible, on sale and in her size. We didn't miss having to spend hundreds more on a more expensive gown.

3) Have a Morning Wedding: Our friends did this yesterday. This was a smart move because it lowered their expenses for alcohol, since the reception was at 2:00pm. As a result, nobody really wanted to go back to the bar for a second or third drink. I'm not sure but their food and venue rental expenses might have been a bit lower because of the timing as well.

Best wishes,

James&Miel

Three Simple Questions

Today's post is back to the basics. Here are three simple questions that will save your budget, no matter how good you are at sticking to it.

First, "Can I afford this?" Is this something that is already in my budget? Also keep in mind that your budget sometimes needs adjustment over time. If at one time you were splurging for extras, there may be times that you need to trim back.

Second, "Is this contributing to my goals and priorities?" If making a purchase is outside of your current goals and priorities, then it isn't worth buying either.

Lastly, "Do I really need this?" Or, can I afford to have it in my life. There is a price we pay for having more stuff in our lives. So it is helpful to consider this before we bring more stuff into our lives. Even if it is in your budget, this doesn't mean that you need it in your life.

If the answer is no to any of these questions, then take a pass on whatever it is you are considering to purchase. They might be very simple things to consider, but they can save your budget.

Good luck!

Miel

Stress Free Debt Reduction

Hi All,

As frequent readers of this blog will know, we are currently in the midst of paying off our second mortgage. Well, I am happy to report that we've got the debt down to $11,400 from $17,700 at the start of this year.

So far, we've done two major things to chip away at the number:

1) Reprioritized. We've routed all our secondary cash flows to the debt. This includes money from our prosper.com account, available bucks from stock dividends, the profits from our investment apartment, and chunks of whatever found money comes our way.

2) Credit Card Arbitrage. We transferred as much as we felt comfortable onto a zero balance credit card. Miel shopped hard and found a card that had a zero interest 12 month transfer offer. We ended up moving 9 grand from the second mortgage onto this card. Now, I'm not really such a fan of credit cards, but no interest on $9,000 is much better than 9% on $9,000. Also my wife Miel has a pretty good handle on paying these things off, so we should be able to avoid some of the major pitfalls associated with having this kind of consumer debt.

Whats interesting about the process is that although Miel's budget has been pressured at times, we haven't experienced undue stress in discharging the obligation. For example, we've still been able to meet each other in Switzerland, we've maintained an active social life in both DC and Kabul and I've been able to sneak in the occasional savings bond purchase. The main reason is that when we set the goal, we purposely built in some wiggle room. I think this shows that some planning and a little pro-active management its possible to have your cake and eat it too.

Thanks,

James

This post brought to you by YourCreditOptions.com.

Goals - What's next?

James & I are very keen on setting goals for ourselves and working together to accomplish them.

Right now we are currently working towards paying off our second mortgage. We have around $12k left towards our goal.

Since I'm currently in the states for a brief visit, we have taken some time to consider what our next goals are going to be.

After some consideration, we've narrowed it down to working on four financial goals simultaneously. We realize that we would achieve one of them faster if we put all of our resources into one area, but we find it more empowering to work towards several things at the same time. Here is what looks to be next on our agenda

1. Building up and maintaining a $5k liquid rainy day fund.

2. Pay down Miel's student loans.

3. Build up an entrepreneurial fund. We would like a pot of money to be available when an opportunity to build a business arises - in the mean time this would be in a dividend yielding stock that would produce passive income.

4. Max out James' Retirement. We've agreed that once we are closer to starting on these goals, that we will both budget out and decide how much to contribute to each of these on a bi-monthly basis.

We also agreed that we can individually choose any one of the goals to throw our extra cash towards. We've found that it is best to put your extra funds into something that really turns you on. So, it may be that I'm working towards getting the easy goal of the emergency funds taken care of as soon as I can, and James will put more of his extra money towards his retirement or our passive income fund.

This means that we'll be making consistent progress on all of the goals and then perhaps get ahead a bit as well.

One thing that we haven't yet established are the time lines and amounts towards each of these goals. We still need to determine how much we want in our entrepreneurial fund or how fast we want to be able to pay off my student loans. We'll look at those issues more closely once we are closer to starting on these goals. For now it feels good to know what is on the horizon after we've accomplished paying off our second mortgage.

Looking forward to achieving these goals!

Miel

The "Scheme"

The other night I was out with friends and the topic of money came up. The wife began to say that her husband had this new "scheme." The husband's response was that this "scheme" is what other people call a budget, and that it is not some revolutionary concept.

The "scheme" was to go to the ATM once a week and get out the budgeted money needed for the week and then spend from that. The couple has a two year old and have more of a need to budget these days with a little one.

While it made for humorous conversation, the thing it got me thinking about was how important it is that both partners are in agreement on the budgeting terms that are established within a couple. In this case it was clear that this "scheme" was more of a joking criticism than any real conflict within the relationship.

However, it can be easy to have a budget become some type of racket that one is pulling on the other. Granted that this is likely in the best interest of both partners well-beings, but it must also feel like it is a partnership where both members contribute to the financial management.

This of course is easier said than done if a couple is trying to be financially prudent and one of the partners doesn't know how to, or see the value in, sticking to a budget. For this reason I think it is crucial that a couple establish some type of balance in their financial outlooks.

If a couple are on two totally different financial paradigms this is likely to cause strife in the relationship. I do think it is possible to work together to negotiate this balance when a couple might be within range of doing so, i.e. they aren't the extremes of frugal and shopaholic.

Readers: What have your experiences been around striking a balance in establishing financial protocol within a relationship? We'd love to hear what your views are.

Cheers,

Miel

Complex Budgeting

Living as an expat has certainly added to the complexity of my budgeting exercises. There are many financial perks to living in a dangerous post such as Afghanistan, but there are also a number of fluctuations that I continually have to manage.

This includes:

• No danger pay whenever I'm out of Afghanistan, including while working in Southeast Asia;
• Per diem that is post tax while on business;
• Advances and reimbursements for business expenses;
• Fluctuating R&R expenses;
  
• No danger pay or post differential when I'm in the states;
• Fluctuation of taxes as allowances ebb and flow.

This means that I have to be careful with automated finances, as the incoming pay will fluctuate often as my travel bumps up in the near future.

To make sure that I was keeping this delicate balance I recently spent some time updating my budget. James' budget is relatively fixed, so I'm just concentrating on mine for the moment.

Here are the figures that show the variations that should be expected. Note that the taxes had to be done as a percentage of what is currently being deducted, and may have further fluctuations.


Here is what the pie chart of my finances looks like:

Looking at the allocation of my expenses you can see that I'm spending less money than ever before, with only six percent of my finances going to discretionary expenses. Having no place to spend my money helps this considerable.

If you add it up I've also got 21% going towards reduction of debt and another 47% going towards retirement funds and investments. Note that this includes investment of paying off our second mortgage.

Other findings include discovering that although I won't be paid danger pay while I'm leading tours in Southeast Asia, the added post tax per diem will actually put more in my pocket in the end. This is a bit of a relief, as I wasn't certain how this added travel would impact my budget. I will of course find more things to spend my money on in Vietnam than Kabul, but I'm willing to endure such hardships. ;-)

All in all it looks like we've got things on track when it comes to budgeting. As you can tell from the detail on the budget image, there is a pretty large fluctuation in the final excess cash. To adjust for this I will not be paying James or the R&R fund while I'm in the states, and then invest the additional excess funds for when I'm in Kabul or leading trips.

I hope this helps people get a picture of what our budgeting looks like. I know the exercise has been helpful for us.

Cheers,

Miel

Stuck In Neutral

My wife Miel and I usually meet twice a week online. Among other things, we usually discuss our personal finance situation. When we talked yesterday both of us were feeling frustrated with our financial situation.

Our net worth hasn't grown much at all. When we measured it back in December we were worth $368,000. Last month it was $373,000. That's a modest increase of $5,000. We don't have monthly goals for our wealth growth, so we don't have clear expectations for what the numbers should be but still - we both would have liked to have done better.

Some things have been aggravating the situation:

1) Miel's student loans came due. Since February, the amount we're paying for her loans to Citigroup increased from $100 to $370. This puts a bit crimp in the rest of our budget and pressures our ability to achieve other goals.

2) The property tax bill arrived. We were not excited to receive the DC government's property tax bill in the mail. We'll need to come up with the $566.77 in the next couple of weeks to get this taken care of. Of course, we're happy to contribute our share to the well being of the district, but considering our net worth progress the timing could have been better.

3) Our Swiss vacation was expensive. If you've been following our blog, you'll know we just got back from Switzerland. The country is fantastic, but it was hard on our pocketbooks. We spent more than $3,500 on hotels, dinner, some modest shopping and plane tickets. While the trip was wonderful, next one we organize will probably be someplace significantly less expensive.

4) I've been wasting money. Specifically, I've been dropping a pretty good amount of cash on take out, lunches, movie rentals and stuff like that. Even a hundred dollars or so ads up to extra pressure on our budget and makes it harder to achieve our goals. So, basically my own spending habits have been contributing to this situation as well.

That said, we've been successful at building wealth in the past so I'm optimistic we'll be back on track soon. Stay tuned.

Best,

James

Two Cents Worth

I remember buying penny candies at the only store in our small town. I thought they were tasty and within my twenty-five cent budget. My mom wasn't so keen on me buying twenty-five tootsie rolls just because I could. I now have a better understanding of why she wouldn't want my twin sister and I bouncing off the walls, even if it did just cost a quarter for the ride!

Being in Switzerland recently had James and I talking about our beloved penny. It seems that even though it now takes more to make a penny than it is worth, in fact double its value, the feds still aren't willing to give it up.

The underlying reason for holding out on the penny comes down to a possible increase in inflation. Presumably once you don't have a penny around, folks will just round everything up.

There have been several attempts to do away with the penny, but thus far nothing has stuck.

1) Cost is an issue. Would you pay two dollars for a one dollar bill? Is it not bad enough that we already get screwed on the exchange rate, but then we shell out more than its value to make pennies.

2) Most financial transactions are done electronically these days. This means, that as is still the case for some countries, you can charge for the value of a penny without having the expense of making pennies.

3) I would also advocate for a stronger push on one and two dollar coins, they save money because they last longer and are handy for small transactions. Pennies have served their purpose in allowing me to slide my shiny coin up on the counter for a lolly, but I think their time has come. Here are a couple of things to consider in the great penny debate:

Switzerland, as well as most of the rest of Europe, said goodbye to their penny equivalents. Folks there end up using debit or credit cards so often that people don't have to deal with coins if they don't want to.

We'll see how long it takes us to come around. I imagine that it only a matter of time before the old penny is a thing of the past, just like one cent candy.

Cheers,

Miel

You can check out more at The Mint.

Budget Travelers Beware

Switzerland is not the place for you!

We DINKS have been in Switzerland for about a week now and can attest to the Swiss having the reputation of the most expensive country in Europe. We selected Switzerland because it was the only country in Western Europe that Miel hadn't been too, plus James speaks German, and it is moderately half way between DC and Kabul. We didn't consider the fact that Miel may have avoided Switzerland in her days of backpacking, as your money doesn't go far around here.

Speaking of which, the decline of the dollar is definitely felt as we are roughly equivalent to the Swiss Franc. The difference is that your average meal, not at the spendier places, is around $20 each, plus $5 for a soda. Vending machine prices are about 4 bucks for a pack of candy and large lattes at Starbucks are $9. As you can imagine, we haven't gotten "mein latte" from Starbucks this trip.

We are currently in Interlaken, and the train ride up to the highest peak in Europe is $173 per person. Yikes! We did just get a fabulous dinner and beer for a steal of $40 at the local pub.

The moral of this posting is...Go to Switzerland. Get sticker shock. Enjoy the Alps. Enough said.

Best,

Miel&James

Budgeting for Vacation

Whether you are treating yourself to a deluxe vacation or are traveling on a shoe-string, I've found that it really helps to budget things out. This certainly helps while traveling as an individual, but it is tremendously valuable for couples. I should also note that this applies when traveling with a friend as well, since often choices in where you go and what you do will affect both of your budgets.

Vacation is an easy time to want to treat yourself and spend in ways that you normally wouldn't. While this is completely understandable, you'll likely be much happier and content, even if you are set up to spoil yourself.

Here are a couple of steps that help to make sure that you are on the same page and know what to expect for travel expenses.

• Determine the main purpose of your trip. This may seem like a no-brainer, but it helps to consider what you'd like to take away from the vacation. Whether it's trying new foods, lounging on the beach, sight-seeing, or adventure experiences you are after, this will affect your budget significantly. If you know that food is the most important part of your trip to Italy, then you'll feel fine by dropping some Euros on a nice meal. However, if what you really want out of your trip is to go sky-diving in New Zealand, you won't be as content to have spent all of your money on an expensive hotel room. The main point is to make sure that you're putting your money on what you value most. Looking back you'll appreciate what you spent your money on more than if your dough was shelled out on something that you resented having to pay for.
• Decide what level of travel you'd like to travel at. This could mean $3 hotels in Peru or $300 rooms in Dubai. I've done both, but it helps to have a good idea of what your expectations are before you head out.
• Make a budget of expected costs. This should include accommodation, food, transportation, communications, entertainment, sight-seeing and souvenirs. Once you realistically think about the costs of everything, they tend to add up. This will help to make sure that you realize how much you will shell out before you are standing with the bill.
• Make sure the money is already in the bank. It's easy to over spend on vacations and think that you'll just sort it out later. It's best to look at what your expected expenses will be and then make sure that you've got your costs covered before you head to the airport or drive off into the distance.

If you do all of the above, I am most certain that you'll be less stressed during your trip and relieved to have planned and enjoyed another well-deserved holiday. The stress of being on vacation with someone who wants to stay at the Ritz and someone who'd rather being eating bread and cheese for every meal is no fun at all.

I'd love to hear from our readers on what experiences they've had with budgeting for vacations (or not).

Happy Vacation Planning!

Miel

Back from the Ivory Tower

Hello All,

One thing you learn about being a graduate student is that the isolated culture of academia is alive and well in America's universities. After several weeks of study, I took my first set of comprehensive examinations a day ago. The results aren't in yet, but comprehensive exams are a rite of passage that graduate students have to go through - a bit like a Bar Mitzvah for Jewish people or a tribal initiation rite for African bushmen - so I'm glad to have them behind me.

At any rate, while my nose has been stuck in a book, the real world has been moving fitfully onward.

The recession bells are ringing: The major US domestic stock market indicator, the Standard & Poors 500, has taken a hard beating with the ugly stick. Similarly, the down jones industrial average has been in decline. The NY times is reporting that major retailers are emphasizing low prices in their advertising and the federal reserve recently cut interest rates by .75 basis points to stimulate economic growth. Basically folks, the consensus seems to be that tough economic times are on the way.

"Stimulus" and free money: After surveying the blogsphere yesterday, the chatter seems to be about the proposed stimulus plan that's being discussed in congress. The bill is currently in the senate, but whats on the table is a tax rebate up to $600 for individuals and $1,200 for couples. Both the Democrats and the Republicans support the stimulus package and everyone seems to want it done fast, so its probably going to happen.

Personally, there may some cause for concern about the stimulus package. Coming up with another $150 billion is likely to add to the federal deficit. In case you haven't been paying attention the feds have been spending way over their budget for the last twenty years. Another $150 billion in debt can't be good for the deficit, even in a titanic economy like America's. I sometimes wonder if maybe we shouldn't elect our politicans for terms longer than 4 years, that way there might be less pressure for this kind of hasty legislation.

Thanks,

James

Money can't Buy

Hi Folks,

I just wanted to respond to a number of comments that I've received over the past months since I've been in Afghanistan.

Many of our readers seem to feel that I'm in Afghanistan only for the money and that my values are focused only on the bottom line. While it is true that James & I have a finance blog and that we enjoy personal finance and blogging as a hobby, my sole focus in life is certainly not money.

Another thing to set straight is that most people working in Afghanistan in development are not there for the money. I can't speak for security folks, as these guys sometimes don't even know they are in Asia. (Only one case study from Kansas to prove this point! ;-)

While it is true that working in Afghanistan gives extra money for danger pay, on a day to day basis this doesn't mean squat. Most of us don't even concern ourselves with money since our budgets are rather streamline. There are more important things in Afghanistan to worry about. This means that there might be more in our accounts, but it's not like earning more money affects our lifestyle. It actually works against us, as our lifestyles are diminished in ways by being in Afghanistan - but also enhanced in ways that most would find hard to conceive.

All the people I've met in Afghanistan, myself included, are passionate about what we do and enjoy working in another culture. Living and working in a place like Afghanistan is not to be taken lightly. It's not for wusses and no amount of money would make it worth living there if it weren't for a passion for living in other cultures.

For me this experience was a once in a lifetime opportunity that came at a very good time in our lives. While my job in Washington afforded me the chance to travel about four to five times a year, this isn't the same as living in another culture. After five years in the states, both my professional and personal needs were pointing overseas.

Before this opportunity came up I had gone through a series of career coaching sessions and had worked with James to identify what next in our lives. When the job opportunity in Afghanistan came up it allowed for me to live overseas and still be able to see James for seven to ten weeks out of the year. This allowed me to fulfill my career aspirations while James is finishing his doctorate. Were I to wait until he is done with his doctorate I would be either pushing the possibility of children to later in life or foregoing my career passions.

The job itself is also a perfect match. I'm currently the Study Abroad Manager and get to lead faculty members on study abroad programs in Southeast Asia for about a third of the year. In college I couldn't have dreamed up a better job for me. Afghanistan might not be for everyone, but for me it is.

It's not about the money but the adventure in life. During my college years I saved ever penny I could on college tuition and spent any extra on traveling as often as I could. There are some things money can't buy, and one of those is passion and desire to travel. People thought I would grow out of the travel bug with time but that just hasn't happened yet. Money I can get when I'm old, but the opportunity to travel and explore the world is irreplaceable.

I know some of you might not give a hoot what I'm doing in Afghanistan but I figured it might be helpful to provide some more context for those who are interested.

Safe Travels,

Miel

Taliban is Helping my Budget

(Written with all facetiousness put right up front)

So for those who may not have heard the news, there was a pretty big incident here in Kabul. The Taliban stormed the only five start hotel in town with suicide bombs and spraying bullets. Six people were killed, including an American, a Norwegian, a Filipino, and three Afghans. While terrorist attacks are nothing new in Kabul, it was the first attack aimed at westerners since the supposed fall of the Taliban in 2001.

While the incident itself was quite horrific, the consequences afterwards are even more dire. The Taliban has issued a warning that they will be targeting western frequented restaurants and shops.

This means that we are now and lock-down, and can't even leave the house for toothpaste. I was disgruntledly ruminating on the reality of being on house-arrest, I realized that the Taliban has actually done my wallet a great favor. This means that I'll certainly spend at least two to three hundred dollars less each month simply by not being able to leave the house.

The irony is that this gives no comfort to not being able to leave the house. Another reminder that money isn't any good if you don't have freedoms.

Be appreciative for each step you take in the free air.

Regards,

Miel

Bud Hebeler's analyzenow.com

It doesn't sound like much, but analyzenow.com is the brainchild of Henry K. "Bud" Hebeler. We're featuring Hebeler's website today for two reasons. First, Henry Hebeler is one of those self made guys that everyone wants to be like. Bud is the former president of the Boeing Aerospace company, has multiple degrees from MIT and has published in the field of retirement planning. His biography, here, coveys an impressive level of civic involvement in corporate and retirement activities.

The second reason we're promoting Hebeler's website is because its full of great stuff. Analyzenow.com features articles on saving, spending and retirement planning - all of which are relevant, well written and highly informative. Also, analyzenow.com offers a number of beefed up excel tools to assist with investment, pre-retirement savings and post-retirement budgeting. The main thing is: most of the Hebeler's stuff is free.

Check it out: analyzenow.com.

Feed your 401 (k) instead of taxes!

Most people know that it's a good idea to be saving away while you are young for when you are old and gray. Many people look at their budgets with discouragement that they don't have enough extra at the end of the month to put more (any) money into their retirement account.

Well, I've got news for you!

What if you could contribute more to your retirement without taking a big hit in your monthly budget?

Sound too good to be true?

In the past I've understood the magic of putting more into your retirement and not feeling the impact as much as you'd think. In my last paycheck I was given a big reminder of this that I wanted to share with our readers.

At the end of 2007 I was contributing $3,513.64 to my retirement and $1,864.68 to taxes on a monthly basis to make sure I maxed out my retirement.

At the start of 2008 I bumped back down my retirement to evenly max out my retirement for the year; paying $1,192.30 per month. However, this pumped up my taxes to $2,659.52 per month.

This means that I'm now paying an extra $794.84 per month in taxes by not contributing to my retirement as heavily. So instead of having an extra $2,321 per month, it is now only $1,600.

Considering that retirement accounts are compound over time, it makes much more sense for me to take that extra $700 that I'm paying towards taxes now and put that towards my retirement instead. Given then I'm already maxing out this will mean that I'll paying larger taxes later in the year, but the feds might as well wait their turn until my retirement is paid up.

Lessons learned:

• If you aren't contributing as much as you'd like to retirement, consider that by hiking up your monthly contributions your pay check may not be as affected as you'd think!
• If you have the wiggle room in your monthly budget it may be better to pay your retirement first and the feds second.

Food for thought!

Happy savings!

Miel

2007 Financial Ups & Downs

As we did last year, we'll be taking a look at our financial ups and downs for 2007. (Looking back on this post feels like a lifetime ago!)

Miel opened her first ROTH IRA and maxed it out for the 2006 tax year.

Miel maxed out her ROTH IRAs in 2007.

Miel survives the DRCongo while managing to shell out over $20k cash during her three week visit!

James invests in Southern Copper Corporation (PCU) and Provident Energy Trust (PVX)

Miel maxes out her 401(k) for the first time!

By April we began rethinking our approach to prosper.

In April we also reset our networth goal - having already reached out initial annual goal- and set this at $340,000.

In May we enjoyed a fabulous trip to California to visit family!

In July we enjoyed our one year anniversary and set a new 2007 stretch goal of $400k!

Miel accepted her current position in Afghanistan - changing our status to the international DINKs!

We enjoyed a fabulous vacation in Hawaii where the best things are free!

September was marked with enjoying more dinners at home together and romantic things like looking at our budget and drafting wills and power of attorney docs in preparation for Miel's departure to Kabul.

We also started to have our own sub-prime meltdown with prosper.

We set our current finance goal of paying off our second mortgage of $20,187.28.

Over the last couple of months we've adjusted to some of the financial implications of our long distance marriage.

Miel and James finished the year with a total increase of 26% in their wealth.

Looking back at a year of blogging it doesn't appear that our financial lives are too sexy, but we seem to be making steady progress. The biggest change over the last year is that it really feels that we've moved on from the stage of being newlyweds to an established marriage. We've certainly managed to work out many of our quirks. In the last year of posts I was only able to find one true financial argument; about buying an ottoman!

I know we are both looking forward to what 2008 may bring. Next we can't wait for our first vacation as a long distance couple in Switzerland for Valentine's Day! We've bought the tickets and now it's all set. Wish us luck!

Miel & James

Burden of Student Debt

I've been an advocate of paying off highest interest first. For us this has meant aggressively paying off our second mortgage and paying close to the minimum for student loans. This in principle seems like a very sound proposition - pay off highest interest debt for the fastest possible pay down overall.

I've also advocated for this on the basis that the odds of someone coming along and paying off your mortgage are unlikely, but the odds of help or forgiveness of student loans from employers and so forth is a remote possibility.

All this being said, it feels different now that my student loans are coming due. Given that I'm in Afghanistan and have one more course to finish towards my Masters degree, my deferment status has recently changed. I will also have one final payment due next summer when my independent course is complete.

Sure the payments aren't too retched, around $400 a month, but the thought of it makes my throat tighten. It feels extremely restrictive to have this payment looming over my head for the next umpteen years.

This is particularly the case given that if we choose to graduate out of the DINKs category, it would fall during that time period. Right now I have every capability of readjusting my budget and making this monthly payment. However, should I ever want to take off any time for the possibility of children, this would become even more restrictive.

My twin sister has faced this as a challenge herself. I've seen her have to deal with being forced to work only to cover the cost of day care and her student loans. Not having the flexibility to choose if that was her priority.

I've told myself that I don't want to end up in that situation. Now it feels that it's time to put my money where my mouth is. Thus it seems that after we've reached our goal of paying of our second mortgage, that I might just have to buck up and settle my debts for the attaining the education that has allowed me to get where I am today.

While the idea of forking my extra Afghanistan cash towards student loans doesn't feel as fun as looking into additional rental property or starting a business, the reality is that it would give me the freedom I seek later in life. In the end we will work to find a balance between the two to reach our goals.

Money can't buy you everything, but it can give you options. I'll still need to think about it some, but this feels like a reasonable use of my time here.

Wish me luck!

Miel

Our Top Five Financial Tips From Eric Tyson

At home, my bookshelf is next to the computer. 'm starting this posting and I'm looking at the books on my shelf. We must have dozens of personal finance titles, everything from the classics like The intelligent Investor to junk like Charles Givens piece Wealth Without Risk. There are also thousands of personal finance blogs available in the blogsphere and hundreds of firms who want to sell you investments. - sometimes difficult to know whats good advice and what isn't.

So, drawing on my most favorite personal finance author Eric Tyson, I wanted to offer 5 points of advice that at a minimum, won't steer you wrong:

1) Take Charge of Your Finances: - The longer you procrastinate the more you'll disadvantage yourself. Don't wait for a crisis to get your act together, just do it.

2) Save and Invest At Least 5 to 10 Percent of Your Income: The best thing to do here is save through a retirement savings account to reduce taxes.

3) Invest Your Long Term Money in Ownership Vehicles: The main reason for doing this is that stock or direct ownership of companies often have long term performance that beats bonds or bank accounts.

4) If You're Married, Be Sure its a Partnership: Discuss your joint goals, issues and concerns. Be accepting of your other partners personality. Compromise and act as a team.

5) Own Your Home: Some people are able to gain more wealth by renting and carefully investing. But, in the long run, owning is more cost effective than renting. That said, its best not to buy unless you can stay in one area for a while.

Hope some of this helps!

Best,

James