In January, I made the decision to lend my parent Bum (who is no Bum!) $15k to pay off some credit card debt.  I believe that since I asked and accepted financial assistance from Bum for my 1L and 2L year for some living expenses I contributed to the debt.  But, the biggest culprit was my older sibling the Other Child who refuses to get a real world job and is going after his entrepreneurial dreams while Bum picks up the check.  I tried conditioning the loan on Bum cutting out the Other Child financially but Bum was having none of that so the $15k was a no-strings-attached unsecured interest free personal loan.

The only drawback to the loan was that I was not willing to wait around for my $15k to be repaid.  I wanted an aggressive repayment plan since Bum wasn’t willing to cut the Other Child out.  I lend the money this January.  I specified that I wanted my first payment of $5k on March 31, next $5k on June 31, and the next $5k on October 31 and oh maybe a nice little “gratuity” in December for being so so considerate. 

At the end of my post I asked my readers whether now that I have paid off the $15k in credit card debt, whether Bum will save the money to repay me or whether the increased cash flow means more money will end up going to the Other Child.   Guess what happened?  Bum is doing both.  Yes, both! 

Bum Spends More on the Other Child  

Bum is spending approximately $1,000-$1,200 per month on the Other Child for residential rent, office space rent, student loan payments, car insurance, food, gas, cell phone etc…  It started with $500-$700 and now it is almost double.  So, readers who predicted the Other Child will really benefit from this move were correct.  The Other Child is benefitting like crazy.  Its entire lifestyle is subsidized by Bum. 

Bum is Saving More

But, Bum is also saving money.  In fact, Bum already has my payment of $5k saved up that is due on March 31.  I think the high interest credit card debt was a huge burden on Bum and making it all go away in one swoop was a good thing and it is enabling Bum to save more (and spend more on the Other Child).  So, right now things are looking good but nothing is final until the $5k hits my bank account on the 31^st. 

So, in this transaction everyone wins except for Bum. 

• The Other Child gets more financial support and can continue working on its entrepreneurial venture. 
• The credit card companies got their payment. 
• I will (likely) get all my money back and I am expecting a little extra in the form of a gift. 
• Bum gets to continue supporting a grown adult, live an even more frugal lifestyle, work harder and longer, forego fully contributing to the 401(k) etc…  Poor Bum.   

And on top of all this, I went to visit Bum this past weekend and dropped a huge bomb about my career.  More to come on that.

Millionairehood

Departure: 2008 – Age 24 

Arrival: 2028 – Age 44

Speed: Aggressive.

 My blogging friend Don and I decided to buddy-up and join J. Money’s Millionaire’s Club.  It is an e-club for prospective millionaires.  The only requirement is that you make the committment and list the steps you will take to achieve your goal. Right now, since I haven’t landed a job yet I have no idea about my earning power but I am going to estimate conservatively and give myself 18 more years to achieve my goal.  I plan to become a millionaire by doing the following things:

1. Develop multiple income streams.
2. Diversify my career.   
3. Invest wisely for retirement.
4. Live below my means.
5. Give back to the community.  

Develop multiple income streams

I will develop multiple income streams that will increase the amount of money that I bring in. 

• Start a business before 30
• Open a Roth 401(k) or other another tax advantaged retirement plan available to the self-employed. 
• Identify and consistently develop five income streams before 2011.  
• Use the “snowballing” technique to keep track of all the small amounts that come in. 

Diversify my career. 

Basic fundamentals of supply and demand tell me the legal field is doomed until the ABA wakes up.  I must diversify my career.   

• Get a job with an organization I can see myself staying at least 5 years. 
• Attend night school or go back to school and obtain a degree in another field where the supply/demand ration isn’t so out of whack. 

Invest wisely for retirement

I will invest wisely for retirement by using every tax advantaged retirement vehicle available to me and by always getting my 401(k) match.

• Max out my Roth IRA as long as I am eligible.  If I cross the eligibility territory then max out a regular IRA.
• Max out or place 20% of my income yearly into a 401(k) before 30.  After 30, I need to max out the 401(k).

Live Below My Means

I will resist the urge to keep up with my cousins.  I will not buy possessions in order to impress other people. I will live on 50% or less of my salary.

Give Back to Family & Community

In my zeal to become a millionaire, I will not forget the importance of staying connected to my family and giving back to my community. 

• I will either give my time or money to worthy causes that match my values. 
• I will stop being a safety net for Bum my parent and help Bum make wise financial decisions to the best of my ability.
• I will look into opening a Vanguard Foundation to best maximize any donations that I wish to make. 

 Don’t forget to head over to Money Reasons to see Don’s list. 

Is a million what it used to be or should we be aiming higher?  Do you believe you can become a millionaire?  What are you doing right now to achieve that goal? 

Okay, let’s break down why January 2010 was the most expensive month of my life. 

1. When the person you love the most come with an outstretched hand, you give…to the tune of $15,000.
2. There’s a First Time for Everything…Including Towing.  Stupid decision to park at my friend’s apartment cost me $100 and a 3:00 a.m. trip to go pick up my car from Alexandria, Va. 
3. That last law school tuition even after the scholarship hurts.  Badly. 
4. Way more driving…Gas was up due to my drive from home and because I am driving more because of my externship.
5. First dinner party resulted in Craigslist purchases of a cutlery set, salad bowl with tongs, dinner plate set, and some unrelated things like an Anne Klein coat!

Dining Set $15

 

Anne Klein Coat $25

Cutlery $6

 P.S. Thanks to reader “Howard” on MoneyHoneySF’s Blog who explained how to post word tables to a blog!

I finish all my exams and arrived home for my winter break.  The very next day, I start my holiday job at the big box retail store.  The Other Child (OC), my older sibling, was back at home because the OC quit a training program/job after six months and was about to launch an entrepreneurial effort.  The OC spend all its time at home researching and doing various things for this new business.  You know, the business that was going to be the one that succeeds.

 Bum my parent and I spoke again about the loan.  Bum was not going to cut off the Other Child completely as I desired before the OC’s business took off…which could be a number of years.  But, after having a $0 tuition bill for the last two semesters I would have to pay $9k in tuition for my final semester of law school.  That was going to hurt me financially.  But, I can’t stand by and do nothing while Bum struggled with credit card debt. 

I decided to help Bum out by giving a loan of $15,000 without any of the earlier conditions  for three reasons. 

 (1)    I would regret not helping Bum

I knew I could never forgive myself if I stood by and didn’t help Bum in Bum’s hour of need.  Thirty-years from now when I look back I knew for sure that I would regret not loaning Bum the money. I have to take some responsibility for the debt that Bum is in because I spent Bum’s money without care and did not take the adult decision of letting go of the financial umbilical cord when I was capable of doing so.

 (2)    I wouldn’t have my current savings without Bum

I wouldn’t have the hefty savings that I have now if not for Bum’s help with expenses my first year of law school that included everything except for tuition and rent such as groceries, eating out, cell bill, textbooks and supplements, clothes, gas, car insurance etc…  My second year, Bum helped me with all this plus rent.  Bum had easily spent $15k on me in the last two years while all the money I earned working during the summer went straight to my savings untouched.  September 2009 was the first time in my life when I had paid for 90% of my expenses.  Bum still pays for my cell because I am in the family plan and Bum has paid for my car insurance up to February 11.      

 (3)    I am Bum’s Safety Net. 

The Other Child’s safety net was Bum.  But, Bum’s safety net is me.  And my safety net is my savings.   Bum knew that I was sitting on some significant savings and we both looked at it as an emergency fund  that could be tapped if necessary.  I encouraged this view in some ways and have always told Bum that I would support Bum if some form of emergency came up.  I was thinking it would be in the form of some terrible accident and not credit card debt. 

 I know that Bum’s retirement savings are nowhere near robust as I would like them to be because Bum helped with both of our educational and living expenses instead of maxing out retirement contributions.  Although Bum has never asked me for this nor hinted at it, I expect and will provide no-strings-attached financial support for Bum in the future.  I wasn’t expecting the opportunity to arrive so soon. 

 And as Bum’s financial back-up, safety net, personal bank etc… I wrote the check for $15k and established a schedule for payment. 

Now that Bum doesn’t have a credit card balance due everymonth, do you think Bum will put that money towards paying back the loan or will it go towards the  Other Child?  Let me know. 

I go home for Thanksgiving and my parent Bum and I have a face-to-face talk.  Bum wants a loan to pay off all the credit card debt.  By this time, Bum has estimated the figure to be about $15k and the interest rate are in the high teens but no specific figures are disclosed to me.  I get frustrated about the lack of disclosures provided to me as a prospective lender, but I realize that this was a great opportunity to get rid of the Other Child from Bum’s financial picture once and for all.  

 So, I go in for the (financial) kill:

My Offer to Bum

• (1) $15k loan with no interest rate with repayments according to an agreed schedule. 
• (2) Complete disclosure of all debts and interest rates with documentation.  
• (3) Sign a contract agreeing to the terms. 
• (4) Must completely and utterly stop financially supporting the Other Child. 
  • First violation: Loan will have a 5% interest rate and interest will be immediately due. 
  • Second violation: Interest will increase to 10% and the interest will be immediately due. 
  • Third violation: The loan is in official default and all money must be returned immediately. 
• (5) Every term except for #4 dealing with the Other Child is negotiable. 

Bum’s Response?

You want me to sign a contract?  You don’t trust me?  You don’t trust me?  I can’t just stop supporting the Other Child.  It’s not that much anyway.  If I don’t make the payments on the student loans then it will destroy the Other Child’s credit.  He will declare bankruptcy…la..la..la…I am a single parent who can’t let a child fail…..la…la….la…it will destroy the Other Child’s future…la…la…la. 

I respond.

What you thought you can just hit me up like a bank?  There are strings attached to this money and that one string is that you must cut off the Other Child.  The Other Child has absolutely no incentive to be on its own because you are always there to save it.  Let the Other Child fail once in a while!  As long as you’re there with financial help the Other Child will always rely on you and will always be a drain on your finances.     

Bum is disappointed.  I am disappointed.  I return to DC.

In September, I was talking to Bum about money when Bum just happen to mention Bum has some money on Bum’s credit card that needs to be paid off.

Wait.  Hold up.  Did you just say credit card debt?  Whaaaaaatttttt?

I was blown away.  Bum is not someone I would think of when I think of the stereotypical person with credit card debt.  Bum doesn’t go shopping that much.  Bum eats out once in a while.  Bum’s biggest purchase most recently was a new hybrid paid in full through a HELOC.   Bum makes very good money.  But, Bum has two children who was still relying on Bum for help. 

So, my next question was: What exactly is all this credit card debt from, Bum?

It turns out that it was us.  (1) Me and (2) the Other Child.   Before September Bum helped me with my expenses such as my rent, food and other incidentals.   While I paid most of my rent for my 1L year and part of my 2L year I started to turning to Bum for help.  I have always told Bum that I would stop asking for financial help if Bum would stop financially supporting my elder sibling–the Other Child.  The Other Child despite being 2 years older and intellectually more capable than me has never held down any kind of a job thinking itself to be too good for small jobs.  I felt the best way to get Bum to stop supporting the Other Child was to impose a double tax of a sort where if Bum was paying for the Other Child then Bum should pay for me too.   I never really realized that it was actually putting Bum in financial strain. 

Well, how much credit card debt do you have?

Bum was vague.  Bum couldn’t just give me the figure outright because there was more than one and Bum wasn’t entirely sure of the amount.  But, it was definitely in the teens. 

Next question:  Why didn’t you tell me about this before? 

Turns out that Bum didn’t want to worry me about things like money when I should be concentrating on my academics.    For example, for rent for me one month Bum took a cash advance on one of the credit cards without telling me.

Okay, Bum.  Why the heck would you take out a cash advance from your credit card for my rent?! 

This is beyond ridiculous because Bum knows that I have money saved up that I can easily use.  Sure, I always say that Bum should be supporting me if Bum was still supporting my elder sibling.  What’s fair is fair.  But, it was time to change my tone. 

I stop asking Bum for money. 

Right after I heard about the credit card debt I decided that I’ve been immature about demanding Bum to support me just because Bum was helping out my elder sibling who is perpetually chasing entreprenuership dreams with little income coming in.  Instead of saying, I deserved a cut too  I decided to become independent and tried to manage my personal finance.  That was right about the time I started this blog. 

Next:  Bum asks for a huge loan and I respond as any attorney-to-be.

Ideal the  See Jane Get Rich Blog Reader: I think a lot of bloggers share personal stuff like the daily growth of their chia pet, conversations with friends other people can’t see and hobbies like people watching.  I find these quite interesting.  You could join them, you know. 

Jane:  Ha, ha, ha haaaaa!  Oh, you were serious?  Um, ok.  I dunno ‘bout that.  Well, here is something “personal financy.”  I gave my first dinner party where I cooked and people actually liked what I made.  I was so insanely nervous about that dinner party. 

Ideal: You had a dinner party and you didn’t invite me! 

Jane:  Really, Ideal.  Let’s not get ahead of ourselves here.  You are really a figment of my imagination. 

Ideal:  I am as real as they come!  Anyway, what did you make?

Jane:  You should’ve been there.  I made Salmon with fresh dill, lime juice and olive oil with a side of asparagus wrapped in prosciutto.  I made a fantabulous spinach salad with crumbled goat cheese, dried cranberries, toasted slivered almonds and walnuts, dried cranberry and fresh grapes.  Served it with white wine and had assorted sweets for dessert. 

Ideal: That sounds like one tasty meal.   

Jane: Now, I am on this big cooking spree because I fancy myself a mini-Martha Stewart.  Um, without all the insider trading.  White collar crime is so 2002. 

Ideal: Well, this could be a really nice post about your first dinner party and how you did it the frugal way.  How much did you spend?

Jane:  I don’t want to share that!  And no, I am not going to post about this!  I overspent because I had no clue about the portions.  I over-shopped.  I got too much wine, too much goat cheese…well, too much of everything.  I am so not gonna tell them that I spent like $50 on a dinner for 4 people!  This is one post that is so not going to happen.  They’ll never know. 

Now, Ideal, it has been fun but I have more important things to do like measuring the hourly growth of my chia pet and watching unsuspecting people who walk by my window.

I had to make a decision about which internship to go with.  If I am only thinking about the short-term then the best choice would be internship #1 because it is a legal internship that would relate to the kind of courses I am taking right now.  Internship #1 is a highly desirable experience for a law student.   Internship #2 offeres regulatory work which isn’t strictly legal.  It also offered a smaller department to work in and a director who seemed eager to mentor incoming externs. 

I chose internship #2 and here’s why. 

 Mentoring – I felt that internship #2 had a director who was more focused on mentoring.  As a recipient of really good mentoring from many of my current and former mentors I strongly believe in it.  I need to have an ally or a “true fan” on my corner.   Having a mentor can smooth the road to attaining many goals.   I need to be very careful about that crucial “first job” of my career and I can see myself being part of this organization and growing within in it.    My director knows that I turned down a very sweet legal offer for the chance to work with her.  Coming in to an organization with a favorable impression is golden. 

I mentioned in my last post that I needed to get in the game.   By getting an externship I am on the sidelines watching the game closely.  My goal now is to make a move from the sidelines to the actual field and get in the game.  In other words, I need to land a job here. 

s

Only go to law school next year if (1) you have always dreamed of being a lawyer; or (2) you are accepted by a very prestigious institution; or (3) you are offered a full scholarship.

Dream I don’t know about “always” dreaming about being a lawyer.  I wanted to be a lawyer towards the end of middle school.  I was never the argumentative kid everyone said should go to law school.  So, I wouldn’t meet #1. 

Prestige I go to a pretty good law school.  It is not an ivy league school, so, I would fail to meet #2 since I don’t attend a “very prestigious” law school. 

Full Scholarship No, full scholarship here.  I attend a private law school and that costs a lot of money.  They don’t just give out full scholarships to anyone.  I was able to bring the cost of attendance down with a school fellowship plus multiple outside scholarships.  The highest outside scholarship being $10,000 and the lowest scholarship amount being $500. 

Did I make a terrible mistake by going to law school?

I think there are thousands of individuals who do not expressly fall into these categories and do just fine.  First, I did have a wish to become a lawyer because I believed the degree would help me find work that I enjoyed doing.  Second, I didn’t get a full ride, but I did well enough for my scholarship to increase and gained a few outside scholarships to ease the tuition burden.  I was able to get well paying summer jobs for both my 1L and 2L summer that helped with living expenses.  The process for paying for my law degree started in undergrad and due to careful planning I will graduate in a few months with a J.D. without debt.  And finally, prestige in the legal environment means the title of ”very prestigious” is only relegated to a handful of schools along the line of Harvard, Yale, and whatever other school the U.S. News & World Report will have tied for the third spot.   

I have been sitting here calculating my tuition payments and my scholarships to determine how much tuition I have paid for my law degree and it turns out I have paid $29,377.50.  This is just tuition and does not include books and living expenses.  Okay, let’s break the figure down:

1L Year $20,600

2L Year $0

3L Year $8,777.50

Total = $29,377.50

 Not too bad for a law degree.

Financial Goals for Spring 2010

1. Make my 2010 Roth IRA Contribution
2. Roll over 401(k) from my holiday job to a Roth or transfer it to my brokerage
3. Find more affordable car insurance before February 11
4. Obtain a credit report from one of the three agencies
5. Budget/Keep track of my expenses
6. Diversify my investments

 Come February, I will be covered by Geico.  The gecco offered me an unbeatable rate for liability insurance for my 1997 Honda Civic with 150k miles on it.  I never had full insurance coverage on a car.  This was a terrible decision for my first car since I wrecked it within 3 months of getting it but since I am a more experienced driver the libility-only mode of coverage has worked well for me.  Also, since I live in DC, I have alternative options for transportation.  I live near two bus stops and while the metro is not very close it is a doable 15-20 minute walk. 

Before 

Nationwide Insurance

• 6 Month Premium = $241.36
• Per month: $40.22

After

Geico  

• 6 Month Premium = $138.80
• Per month: $23.13

Total Savings:

• Per month: $17.09
• Per year: $205.12

I have been with Nationwide ever since I started driving.  We’ve been together for a long time but its now time to move onto greener pastures.  So, why the big savings?  It wasn’t all about Geico’s “15 minites or more could save you 15% on your auto insurance,” rather “Not having your paret paying for your car insurance can substantially lower your insurance premiums.”  The payment I made with Geico recently is the first time that I paid for car insurance because my parent has been paying my insurance all these years.  When someone else is paying for it you take it for granted and don’t compare shop as you would with your own money.  I didn’t notice the amount since I had no reason to.  I didn’t even find out what my actual insurance was until I called Nationwide to find out my monthly rate so I could do some comparison shopping.  I am glad that I took the time to compare my rate and make the switch.  I only wish I had done it sooner.   

How fabulous is my car insurance makeover?  Do you always compare shop?  What about when you were younger and you were using your parent’s money?