Saturday, February 27, 2010

My Debt Roundup - March 2010

This month my debt was reduced by $ 2, 456 to $20, 850. A few posts earlier, I wrote about changing jobs. It happened this month and finally I got my first paycheck after 2 months. The pay looked better in the offer letter but translated into just a couple of hundred dollars more in the actual paycheck. It shows we (maybe just I) generally anticipate higher future income. The expectations are not necessarily bad but racking up credit card debts on an anticipation of higher income isn’t a smart move. My debt payments look still farther after getting a new job. Even if I just spend money on rent and eat PBJ sandwiches every meal, it would still take me more than a year to pay off my debts.

Wednesday, February 17, 2010

How much does it cost to live?

Last week a friend and I had a spirited discussion on how much money we need to live comfortably (without any extravagance). Our back of the envelop calculation on cost to living in any decent neighborhoods in the world for a family of four is shared here. 
Rent or Mortgage = $1500 to $2500
Rent or mortgage in any decent neighborhoods in the world cost at least grand or more for a three to four bedroom apartment or house. The rents are considerably cheaper in some parts of developing world but the neighborhood may not be desirable. Similarly, a rural location in the United States maybe cheap but may lack certain amenities or employment opportunities.

Health = $600 to $1200 for 4 people ($150 to $300 per person)
If you are lucky to be born as a citizen of a country that provides you with a free decent health care, congratulations! However, a lot of places, such as the united States need you to buy a health insurance. Some places, there may not be have a good alternative but to save up for rainy sick days.

Education = $2000 to 3000 for two kids ($1000 to $ 1500 per kid)
Some places such as the United States have a free education till the high school. However, you are partially paying for it through a local tax. Everyone needs to save up for collosal future college bills. Even if college education is free in your country may not influence your kid who wants to study in a private American or other world-class foreign student. Beside that, education generally also include cost for extra lessons, supplies and more,

Food = $600 to $1000 
Food cost somewhat depends on what kind of meal you eat. The cost may get considerably high if you eat high quality local/organic ingredients or eat out regularly.  

Transportation = $600 to $1000 ($300 to $500 per adult)
Driving a car (car payment, insurance, maintenance, gas) or take train, bus or cab (fare) for family adds up.

Household & miscellaneous = $500 to $ 1000
All household and miscellaneous needs such as furniture (upgrades and maintenance), household maintenance, gadgets, gifts, unexpected fees and items, movies, entertainment are bundled up here.

Pocket change = $400 to $ $800 ($100 to $200 per person)
Everyone needs a couple of dollars of pocket change every day.

Vacation = $400 to $800 
A week worth of vacation every year for a family of four will at least cost $4000 to $5000 with airfare, car, hotel, restaurant, activities etc. If you do it twice, then double the cost. 

Lower estimate = $ 5, 600 per month or 67,200 per year*
Upper estimate = $11,300 per month or 135,600 per year*

*Sadly, these incomes needed are after tax income, which means it needs to be 30% or more than what’s given here.

Indeed as someone said, “balancing the act between the cost of living and the cost of earning - is the art of surviving!”

Wednesday, February 3, 2010

Credit cards and asterisk

I haven’t applied for new credit cards in nearly 3 years. While talking to one of my cousin about my debt, he suggested to apply for a new credit card with 0% APR since I have an excellent credit history. According to him, every penny saved on interest is worth.

After looking around for a few months, I finally found a credit card with 0% APR for 12 month and 12% APR thereof, Citi Platinum Select. I thought I can save on interest if I transfer balance from my 11% APR card, even after transfer fees. I applied and got approved. During my card activation, I wanted to transfer my balance. I was told that my 0% APR is upto 7 months and my interest thereafter 17%. I protested and informed about the offer I saw. The Citi representative informed me that probably there is word “upto 12 months” for balance transfer offer and “as low as 12% APR” on the offer. He continued, if it is not right there, there must be an asterisk.

I don’t demand banks to give me a low APR. They are business and can charge as much as it’s legal. My problem is this type of offer is a deceptive marketing and a bad business practice. Imagine you see an ad for all you can eat buffet* for 10 cents. You go and eat. While getting the bill, you are told that it is all you can eat for first 2 minutes (hence the asterisk), thereafter you are charged $10 a minute. If a person like me who is nearly obsessed with paying their credit card debt is duped, think about all the people Citi bank (and others) is cheating on. Citi and other credit card companies, please start being honest to us. 

Tuesday, February 2, 2010

My Debt Roundup - February 2010

I started my journey to pay off my debt more than eight months ago. I paid off merely $4, 313. Getting rid of debt is more difficult than I thought. I took on roommate, virtually stopped eating out, haven't bought anything new or old, sold unnecessary items, got a part time gig. Still I am - 23, 306 in debt. Often, I feel like giving up paying off my debt. How long can I hang on edge like this? Maybe I should accept that I need debt to survive. Yet, some part of me just can't give up. Not giving up on my grad school got me a doctoral degree, while not being able to give up also made me vulnerable during relationship breakup. I hope my "not giving up" nature will help me and let me prevail through these tough times.

Monday, February 1, 2010

3 simple reasons why ipad will fail

Generally, I tend to stay on topic, i.e., my debt and finances. After hearing all this fuss about ipad, I decided to put my 2 cents. I was one of very early adopters of iphone. I got it the second day of its release (and I also own a Mac). Iphone, over time, has cost me around $2500 (plus any incurred interest on my plastic) and yet I still don't consider it among my worst financial decisions. Here are my 3 simple reasons why ipad will fail

1/ No pedestal/stand to keep the monitor at 90 degrees. Do you really think people will hold up 1.5 lb monitor for even 22 minutes to watch a sitcom? Putting ipad on lap will just give you a neck a strain.
2/ It is not a reading device like Kindle or Que. Monitors use light to display the character while e-readers use actual particles to display. The difference is that light strain your eyes but particles do not strain as much. Think about it, books are printed particles on a flat surface. In a nutshell, ipad won’t replace any e-readers. PS., see how e-ink work by displaying a partical depending on polarity of current.
3/ No webcam or USB. Ipad, at best, is glorified netbook (in tablet form) and one of things people use netbook is to video chat and connect different devices/media using USB.