Live Frugally or Die Broke

What To Do, What To Do?



I believe the title of this post is probably one of the most discussed topics in personal finance. I’ve read plenty of articles discussing strategies supporting both methods. Take my situation for example. I have a student loan that is currently at a 3.65% interest rate. I know it’s tax deductible and the interest rate will be reduced a quarter of a percentage point after 12 months of on time payments. Let’s compare that with an ultra safe investment like an FDIC insured CD or money market account. The best interest rate I can get at the time of this posting is around 1.10%. So if I save my money, I lose about 2.50% in arbitrage.

Now let’s focus on a more risky investment like bonds or equities. It’s often been said that the S&P 500 yields about 8% average returns every year. The last few years have been anything but average. Age can often play a factor as well. The younger you are, the higher your tolerance to risk will be. I would feel like a dummy if the stock market went up 20% from these levels and I sat on the sideline.

Each Situation Is Different

What you do depends a lot on your current situation. Do you have an emergency savings account? Is you car on the verge of dying? Do you live in a house or rent? If you answer no to having an emergency savings account, then you need to fund that up to 3-6 months worth of living expenses, before you do anything. If your car is unreliable then you need to take that into consideration as well. If I owned a home, I would be less apt to gamble my money, as renting is more flexible.

What you decide to do is ultimately up to you. There is no right or wrong answer. You need to take into account everything I just discussed. I would not be gambling money, unless my financial house was well in order. That being said my emergency fund is fully funded, my car is unfortunately on the verge of breaking down, and I rent a beautiful and cheap apartment. I am fearful of trying to make money in risky investments right now. The stock market looks anemic and I read about banks failing and companies going bankrupt on a daily basis.

Paying Down Debt Is A Guaranteed Return

If I decide to put all of my money into student loans, it’s a guaranteed return of 3.40% and I can’t beat that in a guaranteed investment like an FDIC insured account. I yearn for the days of savings accounts that paid 5.50%. It seems like only yesterday when those types of CDs were readily available. I fear it will be many years before we see those interest rates again.

I’m not much for taking on risk at this point in my life. There are too many unknowns in my life right now. Will my car work another year? Will I lose my job? Will my housing situation change? The fact that I don’t have answers for those questions means I will continue focusing on debt reduction for now.

A Brief Rest In My Battle To Become Debt Free



I’ve been learning slowly after suffering the effects of the financial fallout. For most grads, working two jobs is the only way out of the debt trap. I’ve been working 60-80 hour weeks now for almost 3 weeks. I haven’t been posting much obviously, because every extra minute I get I am trying to catch up on sleep and making other ends meet. It’s been torturous and agonizing on my health and well being. The paychecks are keeping me going and the constant dreams of becoming debt free help me rest easy. I come home so exhausted some times that all I can do is walk straight to my bed and crash. It’s been an emotional roller coaster ride and very depressing watching kids play and friends BBQ, while I am slaving away at both jobs.

Slashing Expenses Even Further and Moving To The Country

It’s not just making extra money though that will help me meet my challenge. I am finding even more ways to cut down my expenditures. After searching high and low for a new apartment, I have found a diamond in the rough. One of my good friends has an employer who needs some help starting a new restaurant chain. My buddy will be the general manager of the first store opening up. The owner of this chain would like him to live at one of his properties that will also serve as the office. Because of this, he will have to work long hours answering phones and sending out mail, faxes, and receiving packages from this address. Due to this and the fact he has so many new responsibilities, a deal was cut on our rent. I have been asked to split rent at this new country property well outside the city. You won’t believe the deal him and I just received.

I haven’t actually seen this property yet. The stories I’ve heard had me so excited, I am nearly in disbelief. This 3 bedroom house lies on 20 acres of property about 6 miles outside the city. We have a wood burning stove that will heat the house and plenty of room to garden. Rent will be split between my friend and I at an even share of $250 a piece. Utilities will be split 3 ways. The owner will pay for half and my friend and I will split the other half. This will equate to about half of what I currently pay.

Help Is On The Way, No I Don’t Mean The Stimulus Package

I feel like help is coming soon. With my new found work ethic and slashed expenses, my frugality feels reinvigorated. I feel it is time for an update on my progress. I will give you a snapshot every month of my financial picture. My income has now soared to about $700 a week after taxes. I know I mentioned in an earlier post that I would attempt to become debt free on my pizza job alone. I still plan on sticking to this job as per my challenge outline. My census job is only temporary and should start winding down in just a few weeks. I am squeezing every ounce of energy I can to juggle both jobs. Becoming debt free in less than a year is going to be extremely difficult, even with my second job and reduced expenses. I feel reinvigorated now. I grew up in the country and loved every second of it. God bless people who live outside of the big cities. I am very excited for country living. I can’t wait to blog about my garden and what it’s like to live inside a home heated with firewood. It sounds very enchanting. We should also have internet access soon so I will be updating when I can.

I’ve caught some flack in the above spreadsheet. This is a breakdown of my savings/investments and debt. It is NOT a budget. This is what my assets and liabilities currently look like. I’ll update this at the beginning of every month. Remember I have challenged myself to be debt free and have $5000 in savings one year from April 2010.

P.S. I’ve heard some rumors my RSS feed is running a muck. Others have complained that this blog looks severely deformed in Firefox. I would appreciate if someone could verify this in the comments section. I would estimate 98% of all posts on my blog are spam. So I’m not sure if the information I have received is indeed accurate.