Word of the Day: Emcumbrance

Encumbrance2The daily horoscope in the local newspaper spoke to me today. Usually, I take everything with a grain of salt because they could be used for any other sign besides Aquarius. Anyhoo, the horoscope read: “It’s time for those material possessions that don’t serve your well to be released to someone who will put them to good use. Immediately the lack of encumbrance will make you feel younger.”

Hmm…Encumbrance. It made my nose turn up as if an odor assaulted by olfactory system. Using my context clues, I was could tell it had a negative connotation.

A quick Google search showed that encumbrance means a “burden or impediment.” Synonyms include: hindrance, obstruction, obstacle, impediment, constraint, handicap, inconvenience, nuisance, disadvantage, drawback, etc.

Yep, debt is definitely an encumbrance. All of this baggage will slow down my journey to financial prosperity. I’m going to keep this image in mind. The term could also be used to define a mortgage or other charge on property or assets.

But as far as I’m concerned, my credit card debt and student loans will be known as encumbrance. I mean—who doesn’t want to get rid of that quickly?!

Should Freelance Payments Go Toward Savings or Debt Reduction?

I got a highly anticipated email today. The direct deposit from some freelance assignments in is progress.

“Amen!” I exclaimed at my cubicle. “Amen.”

I had to ask four times in the past week about these payments, so I’m glad it finally came through. Unfortunately, this money is going straight to debt repayment.

I’m going to pay off one of my credit cards with the lowest balance to attain my goal of paying it off by September. SCORE! Then the minimum payment I was making toward that card will go to the next to get the snowball rolling. (Yes, I will keep that promise to myself this time.)

But I don’t know where to put the remainder of the funds:

  • Do I replenish the $300 I took out from my emergency fund? I want to build that to $1,000 by the end of 2015.
  • Do I put that money onto the card I used during my summer shopping spree?
  • Do I put that money on the card with a hefty car repair bill on it in order to pay off that promotional purchase before the six-month period without interest expires?
  • Do I spend $80 on those music festival tickets I’ve been eyeing?
  • Do I go the mechanic to finally check out those car vibrations?

I’d actually save money in the long-term by reducing the balance on the shopping spree card. The interest rate on that is 19 percent. But my goodness, I really want to replenish my emergency fund because I feel guilty for dipping into it. Putting money back into that account would really boost my happiness in the short-term. The savings account’s interest rate is 0.25 percent. If I put that money in the emergency fund, then it could reduce the chances of me using a credit card. Hmmm…. Decisions, decisions.

This money isn’t an unexpected windfall per sé, but the many personal finance writers have different ideas for how to use this nice chunk of change. Put in savings. Splurge with 5% of it. Pay off debt with it.

Perhaps, in the future I should go ahead and allocate where my freelance money will go before I get it. That way, the decision’s already made.

Purchasing Power: Here’s How $100 is Worth in Each State

Screen Shot 2014-08-19 at 3.36.40 PMThis is totally random, but I dig this graph that compares how much $100 is worth in each state. I immediately thought of my girlfriends and their residences along the East Coast.

  • D.C. $84.60 
  • N.C. $109.17
  • O.H. $112.11

Graphs like this remind me that life isn’t created equal across the states. And, of course, I’d like to live a little while in an area where I won’t get the most bang for my buck. When I was looking for jobs at the end of grad school, I used this handy dandy Cost of Living Calculator from CNN Money to compare my current and ideal locations. I’d need a whopping $23,000 MORE in salary to live in D.C. I promptly realized that I needed to keep my a$$ where I was until I got a more solid financial footing.

I also read that a child born in 2013 costs $245,340 to raise. OMG! I’m keeping my A$$ childless for a while, too.

Half of people 18-29 aren’t saving for retirement

People without retirement savingsAccording to this study discussed in The Washington Post, 50.5 percent of folks ages 18-29 are not saving for retirement. I wonder if the results are skewed by the people right out of high school. I didn’t start thinking about retirement until I earnestly entered the workforce five years ago, and I still feel behind. Nothing was being contributed the year I attended grad school.

I’m worried about my younger brothers. Should I tell them to open at Roth IRA ASAP and just start adding $25 per month to it? In theory, they could have significantly more money in their accounts by the time they reach my age. Thanks, compounding interesting.

The report also says one in five people in retirement age don’t have any savings. I don’t want to be one of those folks. It’s time to actually figure out the amount of money I need to retire, ya know? So I won’t be the person in that Prudential commercial who’s blue piece of paper runs out before she reaches her final years on Earth. I want to retire and I want to do so comfortably.

Cash Curbs Spending: How I Spent Less Than $100 On a 5-Day Vacation

This past weekend was a long one. I split five days between both sides of my family in South Carolina and North Carolina. Before I left, I took out $200 from the ATM. That was it. That was the limit because (1) I didn’t want to spend much money, (2) I knew I would be eating at home with my family at no cost and (3) I just needed to keep my car gassed up. I came back home with half of that money. Woo hoo!

Here were the expenses for trip:

  • Gas — $61.41
  • Eating Out — $22.73
  • Earrings — $3.08 (I accidentally left my jewelry at home and felt naked.)
  • Entertainment — $8 (“Move On Up” movie)
  • GRAND TOTAL: $95.22

Carrying just cash is a great practice in self-control in regards to spending. I realized that doing the 21-Day Financial Fast at the beginning of the year. Spending those finite green pieces of papers and shiny coins makes you think carefully before you get to a register. You naturally want to keep as much as possible because it’s a finite resource. Using plastic — debit or credit — gives you the opposite feeling. People are willing to pay twice as much for items when they use cards instead of cash, I’ve read. What’s funny is that a recent study shows that the U.S. is becoming a cashless society, and some folks cited the fact that they are more likely to spend when they carry cash.

When I returned home, I decided to try to live on the remaining bucks in my pocket until Monday.  I’ve already bought gas and groceries, and plan to coast throughout the weekend. I like that my online back account balance has displayed the same figure for several days. I’m going to make this $200 stretch for a long as possible.

Short On Cash Infographic