Financial stuff

It sucks to send money to pay my student loan knowing that all I will get for it is a little less debt. One of the ways I try to get a tiny bit back for paying my student loan is to pay my student loan with my credit card. This allows me to earn credit card rewards and/or meet the spending requirements for a credit card sign-up bonus.

It is no longer possible to pay my student loan directly with a credit card.  It is possible to pay my student loan indirectly using a service called Plastiq. Through their website I can make payments on my student loan using my credit card. The drawback is that there is a 2.5% fee for using a credit card which makes using the service a poor deal for me in most circumstances. Fortunately, they have promos that allow you to earn fee-free dollars. I signed up for a referral promo earlier this month and earned 400 fee-free dollars. That allowed me to make $400 of payments to my student loan without paying a fee.

This promo is still going on and now that I’m a member I can refer members as well. If you sign up through my referral link I will earn 800 fee-free dollars and you will earn 400 fee-free dollars after making your first payment of at least $20 between March 14, 2017, 12:00 a.m. EDT and April 18, 2017, 11:59 p.m. EDT.

Note that after you sign up that it will only say you have $200 fee-free dollars, but after you make the payment of $20 or more it will change to saying you have $400 fee-free dollars. It can take a day or so after you make your payment for the fee-free dollar amount to change.

I’ve made three payments using Plastiq so far and the process went smoothly.  The payments did take about ten days to post which is a little slow, but I can live with it.  If you have any questions please ask. I hope you will use my referral link so I can make some more fee-free payments to my student loan.

On this blog I write about ways to keep your expenses low. I don’t write about ways to make a big income or make money investing since I don’t have any expertise in those areas. I’ve never accumulated a lot of money since I’ve never made a lot of money and I’ve only made mediocre returns on my investments. Despite those shortcomings it appears that I am an above average saver.

According to this survey, 69% of Americans have less than $1000 saved. That is pretty surprising statistic. Even more surprising 34% have no savings at all and 40% of Americans making $100,000+ a year have less than $1,000 in savings. I’m not sure how it is possible to make six figures and have so little in savings. I’ve never made more than $30,000 a year and I still have more savings than that. According to this study I’m an above average saver. When I’ve had jobs that paid an hourly rate equivalent to $45,000 a year my savings accumulated rapidly. Of course, not everyone is as frugal as me and many have dependents to support as well. Still you would think that they would be able to accumulate more than $1000 in savings.

Part of the reason for the low amount of savings reported in the survey might be due to how the savings question was asked. The survey asked, “How much do you have saved in your savings account.” With interest rates currently being so low many people don’t bother putting their savings in a separate savings account. They just keep their savings in a checking account. Also, taking the question literally survey takers with all their savings in CDs or money market accounts would report $0 savings. I think it is quite likely that the survey under reported the amount of savings for most people. A better survey questions would be, “How much do you have saved outside of retirement accounts?” That would give a more accurate picture of how much people have said.

Even if the survey under reported how much Americans have saved I’m sure that most people need to save more money. I need to save more money myself. It doesn’t make sense for me to save much money right now since I have student loans accumulating 6.8% interest. My strategy is to just keep about $2000 in my savings account in order to maintain a little liquidity and put any excess money towards my student loan.

Are you surprised by the amount of savings reported by the survey?

Last year I had a total student loan balance of about $138,000. After paying over $19,000 towards that student loan last year I currently have a balance of just over $126,000. That is just a $12,000 reduction. The other $7000 I paid went to interest. It is tough to make much headway on this loan since it incurs about $600 in interest every month.

Other than the money that went to medical bills I used all of the settlement money from my accident to pay down my student loan. If I wouldn’t have had that small windfall I would have made very little progress on paying down my loan last year. It is unlikely I will get another windfall. That is why I’m looking for other large chunks of money to pay down my student loan. The only large chunk of money I have are my IRAs.  I have about $30,000 in my IRAs which if I were able to apply the total amount to my student loan would at least allow me to get it under six figures. There would still be a lot left to pay but it would result in a decent amount of interest savings.

I have a traditional IRA with about a $20,000 balance. A big problem with using the traditional IRA to pay down my student loan is that I would have to pay a 10% early withdrawal penalty and income tax on the amount I withdrew.  That alone is enough to keep me from using the traditional IRA to pay my student loan.

I also have a Roth IRA with a little over $9000.  Since I have had the IRA for over five years I could withdraw my contributions – but not my earnings – and not have to pay the 10% early withdrawal penalty. The contributions were already tax and thus the withdrawal wouldn’t be considered income and subject to tax.  My Roth IRA doesn’t have any earnings since it has lost money so I’d be able to withdraw the entire amount without paying the penalty. This amount wouldn’t make a big reduction in my loan. As I’m almost 50 years old I wouldn’t have a lot of time to rebuild my retirement savings. An additional $9000 probably isn’t going to be much help when I’m retired but it would be better than nothing.

What do you think I should do?

I have finally gotten another Friday Flip post written and published. I’ve also changed the name from Flippy Friday to Friday Flip since I like the sound of the new name better. In this post I will share my most profitable flip in November.  In order to show both the bad and the good I will post my least profitable flip of November next Friday.

The item for this week’s flip is an Olympus WS-802 Voice Recorder that I purchased on clearance at Staples for $26.50. I was able to sell it on Amazon for $108.97. After subtracting the Amazon fees of $11.39 I was left with a profit of $71.08.

There was also an expense to ship the item to the Amazon warehouse. Since I send several items at a time it would be a pain to calculate how much the shipping expenses is for each individual item. This is a small and light item so the shipping expense wouldn’t have been too significant. I also earned 5% in Staples Rewards on this item. The item was also purchased with either a 2% cash back credit card or a discounted Staples card which would add a tiny bit more profit.

One drawback to deals like this is that they aren’t repeatable. Staples only had one of these recorders on clearance so I couldn’t go back and buy more once this one sold. In order to find more deals I have to browse the clearance area every time I visit. Although I don’t always find something worth flipping I find stuff often enough that it is well worth my time to scan the Staples clearance whenever I’m there.

After reading a blog post at Afford Anything that discusses several books including the book, “Your Money or Your Life“, I decided to compare my lifetime earnings to my net worth. That is one of the recommended actions in the book to help transform your relationship with money. Although I read the book when it first came out in 1993 and several times since then I never compared my lifetime earnings to my net worth.

Figuring out my lifetime earnings was easily accomplished by going to SocialSecurity.gov and looking at my earnings record.  According to their records I’ve made $328,576 in 31 years of working. Since I’ve also had some earnings from paid medical studies that weren’t subject to SS tax I’m going to bump up the total to $350,000.

Determining my net worth took a little bit more work. Personal Capital tracks  financial accounts and shows you your net worth. Unfortunately, they don’t have the correct total for my student loan and I also have some accounts that I don’t track there so I had to determine my correct net worth myself.

Assets
Cash – $4387
Traditional IRA – $21,225
Roth IRA – $9,602
Loan – $1800
Car/Stuff – $5000

Liabilities
Student Loan – $125,331
Credit Cards – $10,593

Net Worth = $-93,910

Out of the $350,000 I’ve earned over my lifetime I have managed to accumulate -$93,910. I knew the total would be bad, but it is still a bummer to see the actual figure.

The credit card balance is from the 0% balance transfers I took out earlier this year to pay down my student loan. That might not have been the best strategy. Once I get the balance transfers paid off I’ll reconsider the best way to pay down my student loan.

It will probably be a while until I can improve my net worth since I have some big bills coming due in January. I also have a few thousand dollars worth of inventory at Amazon that would have made my net worth a little better. Since it is hard to determine a correct value for the inventory I left it out of the net worth calculation.

I’m probably going to start calculating my net worth on a monthly basis. If there is any interest I will share the results here.