1 Million Dollars

Tuesday, January 29, 2013

Frugal student has added a new hat!

The frugal student is now a frugal mom of a precious newborn baby girl. So I have added another angle to my life and another "hat" as one of my favorite blogs, http://www.4hatsandfrugal.com/ calls it.  I now am a student, a landlord, a wife and a mother.  Let the craziness begin.
I do plan to take a page from another favorite blog, http://www.budgetsaresexy.com/, and track how much I spent and spend on the baby.  I do also plan to include some of the eating out during the pregnancy, since normally I just would have gone home.  Look for the first post of that series soon.

I've learned a lot over this pregnancy and my time in the hospital.  Prior to this I was like so many of financial blogger, planning down to the last penny.  Well, I have figured out that does not work when it is not just you,especially when you are in transition. When you are in transition, having flexibility as well as a budget seems to be key.    So is savings to be honest.  We did not have flexibility in our savings because I thought I had figured all that I needed and I found out I got into graduate school a few days before I found out I was pregnant so not much flexibility there either.  So how did we make it work?  Well, we got creative and we asked for help.

I let people know that we planned to shop at consignment stores, so they knew we would take used items.  A professor who had just finished having kids heard and gave us a lot.  Obviously I also did shop at the consignment shop as well as craigslist and got some great deals.  Also, we took help when it was offered.  One of my friends threw me a baby shower and my husband's family did the same when he went back to their area for a conference.  We received a bunch of things we had already budgeted to buy, as well as other useful items we would have never thought of.  This, thankfully, gave us some flexibility, which we definitely needed because we missed a lot of things, including not planning for an insurance miscommunication which cost us over $100.  Also, once I got into graduate school, I knew that we would get a federal tax break on my tuition costs.  I added it up and realized that I could add an additional exemption for 2012.  This gave us some higher cash flow during my pregnancy, instead of a large refund in April.  You might wonder why I don't expect to get my refund earlier than April.  I have classes, my daughter, sleep, lab work, a rental to list and show in March and April as well as this blog to do.  I have inputted some of our tax information but we do have a lot between both my job and my husband's, the rental, the interest payments (consider a high yield checking if you have an EF) and our tuition expenses.  I also have to keep up with regular bills.  Taxes will probably end up on the backburner for a little while.  If I have extra time, I'll do them early but I won't plan for it.

I have discovered that being a college student and then having a kid comes with a strange benefit.  College students are used to running on low sleep for short periods of time.  My husband and I have been catching cat naps of 3 hours at a time and are still coherent a week later.  Since he is back at work already, I kicked him out of the room last night so he could get a full night sleep, and he will spell me this weekend.  Hopefully between the two of us, we can keep in up for the six months it takes for little ones to get better at sleeping at night.

So that is what is up in the crazy life of the frugal student. 

Friday, January 18, 2013

I'm anti-529, normally, but not right now! Now is the time to get one!

For background, a 529 is a college savings account where the money can be used for undergraduate, graduate and professional degrees (medical school, dental school etc).  The money you deposit is not tax-deductible but the profit is tax-free, just like a Roth IRA.  In some states, though, the state gives you a tax deduction as well, for example my state, New York State.  However, if you use money from a 529, you cannot use the federal tax credit for the education expenses.  A way to get around this, is use money from your 529 for living in the dorms, if you are attending at least half-time.  There is a program that allows you to live off-campus, but not all schools are part of the program.  Check with your school.

The downsides to a 529, beside not having the federal credit, include higher fees than other brokerage accounts, few choices and the ability to change funds only once a year.  Also, similar to 401k, and IRAs, if you remove the money for non-approved expenses, you have to pay a penalty.  Personally, because of these downsides, I avoid would prefer to avoid a 529 in many cases.  So, what would I normally recommend?  Well, do remember that you can remove any money in Roth IRA for tuition and fees for higher education, as well as any deposits, as long as you have had the account for five tax years.  I know what you are thinking, but what about retirement savings?! That is where having a 401k comes in.  If you are saving 20%, to cap out of your 401k, you need to earn $87,500.  The average person does not make that.  So, the average person can use their 401k for retirement savings and a Roth IRA for their children's college education.  Obviously, the lower income group would want to take advantage of the Roth IRAs for their retirement as well, which is what I am doing but once your income goes up, start using the 401k as well.

So why now am I recommending EVERYONE to get a 529, since I am so opposed to them?  Because right now, there is free money associated with it.  Bank of America started a website called grad save, which is like a baby registry for college savings which you then transfer the money you were given to a 529.  I honestly think it is silly, but here is the free money part.  For the next four days, they partnered with living social to give you a $50 gift card for $26.  You can only buy one card per beneficiary or owner.  However, doing this only took me 20 minutes.  What college student/ grad student earns $96/hr, which is what this trick is worth when you compare the amount of time it takes to do this, and what you get for it. 

So I opened a Vanguard 529 account with the minimum required ($25) because that is what company holds my state's 529.  I, then, opened a grad saving account and then went to living social and bought the gift card.  I received the gift card code within hours of ordering it.  I added the cash into the grad save account, and once the 529 is finished being set up, I will transfer the $50.  Once this happens, I will turn around and remove the money for class expenses for this year and close the account.

If anyone is interested in getting this deal, please feel free to use the link below to do so.


Friday, January 4, 2013

Millionaire Update- Starting the New Year

We continue to grow our retirement savings and are now at $13,867.  Though we will be not be investing any money into retirement until at least September, I am pretty pleased.  Over this last year we have done very well, both because of our investing and because of the market.

We are, though, considering pulling a small amount our of my Roth IRA.  Last year I opened a Roth IRA with ING Direct and received $50 for leaving $200 in there for three months.  At that point we were only investing my husband's Roth, therefore my Roth has just sat in ING, earning very little.  I was planning on moving it to Fidelity and starting my own Roth IRA there (I have a traditional IRA only), however once I got into graduate school plans changed.

We will need about $8000 more to pay for classes than we have from cash flow.  We have the options of either using my husband's subsidized student loans from last year (we have a max available of $8500) or pulling a bit from retirement.  Part of me wants to remove the ING savings because we will have to start paying back the loan before I am done with school at it will be earning an interest rate of 6.55%.  Also, because I am not earning much in ING, I am less concerned about keeping the money in the Roth IRA. 

We also have moved my 401k from my old employer to Vanguard to lower the fees associated with it, so hopefully we will make some decent gains from that.  Even if you are a student and are going into debt, there is always something you can do, to improve your future.  I need to work on remembering that, and I bet others do too.  I read on blogs about people saying huge amounts, or paying down debt and I want to do so, but the money is just not there.  But every cent I save, is less that I will have to pay back in the future.  That counts too.