Here are my borrowing costs ending June 30, 2008:

• We had been doing quite well at keeping our borrowing cost down right up until June. Then we essentially doubled the amount of finances charges, etc. that we have paid.

  In June I was hit with 1 month’s worth of 30% interest on my largest balance transfer. I had not paid interest like that on a credit card since my intern year when I didn’t have a clue about my finances. It was an unfortunate oversight b/c it essentially negated all the 0% balance transfers I had taken out.

• In June I also learned how much investment banks don’t like the little guys.

  Due to the falling markets I was assessed a $75 low balance fee on one of my IRA accounts. I have had a very difficult time figuring out exactly how much it costs me to invest my savings but this was pretty obvious on my statement.

So basically at this point I cannot complain about my student loan expenses. I am essentially paying twice as much in credit card interest and fees than I pay in student loan interest.

This is even before I take into account the student loan interest deduction I get on my taxes.

I will have lots of room to save money in 2009 by eliminating these careless expenses and fees.

They take time to organize, time to post and they are definitely overkill when we don’t have anything interesting to report with our finances.

But.. we are already halfway finished with 2008 so I’ll keep it up for this year.

Here is the data for the month ending May 2008:

The only extra charge in May was an unexpected yearly fee for a credit card.
The good news is that this meant that we were doing OK at containing our costs of borrowing money. I did drop the ball earlier this month when I let my largest balance transfer expire. That $557 charge will double the interest we have paid so far this year.

Awareness has been our biggest asset.
We are lucky that we have developed an awareness of how much any debt costs before we managed to accumulate any more debt than we currently have.

As a young professional, I am in a stage of life where many of my friends and family have begun accumulating the large sums of debt that they will be repaying for many years. Clothing, cars, furniture, and electronics are everywhere and most of these things are being bought with future earnings.

Items normally bought by prior generations in their prime earning years are being bought by our peers, setting an unrealistic example of what our standard of living should be.

The problem is that future earnings are theoretical while debt incurred is a reality. I believe that our view of the future may not be based on the economic reality that currently exists.

We will continue to show some restraint while safe, simple investing will be our path to success.

Here is the break down for the month ending in April:

My thoughts on this category:

• My wife and I have been able to limit our banking and credit card costs until recently

  With most cities having some form of free checking available and hundreds, if not thousands of credit cards without annual fees available it is relatively simple to keep these expenses low.

  Until I started looking, I had no idea just how much money I was sending to the banks for the privilege of being their customer.

• Our student loan payments remain a reminder of the fine education we received and the good times we had in school.

  The bulk our my loans are currently in forbearance and will go into repayment this August. We were able to get a small tax break on the interest paid on these loans so we are not in a hurry to pay them off.

• I continue to be in the dark about what my investment expenses truly are.

  The finance industry definitely doesn’t want to be to clear on how much we are paying them each year for their services.

  I know that our expenses are a little on the high side because the average expense ratios for our current batch of mutual funds is around 1.6%. I also scan my quarterly reports and I will occasionally find a $50 fee assessed for various reasons.

I was pretty satisfied with these results at the time. We had spent less than $500 on borrowing money during the first 4 months of 2008. This has obviously changed in the past two months which illustrates how quickly the tides can change.

A positive tidbit about being busy is that until I sit down and fill out my spreadsheets, I don’t have an idea how we are doing each month.

From what I see here, we did well in March on containing the borrowing costs for our $197,000s worth of Debt!!!

Although having over six-figures of student loan debt will be significant financial burden for many years into the future, I choose to focus on a couple of positive points.

• The first benefit is steady work. My wife and I used our time in college(and after) to gain marketable skills in industries that had a history of having steady jobs. I actively pursued a career in health care knowing that in the future I should at least have a job if economic times got bad.
• The other positive point is that a student loan is one of the better forms of debt to have. This year my wife and I were able to reduce our taxable income through the interest paid on our student loans. It doesn’t reduce our taxes dollar for dollar like a tax credit could but it does help with the mental anguish.

Those of you who have been following along may notice that I have removed the $4,000+ of student loan interest I accumulated in 2007 from my February totals. I have been using a modified form of cash accounting with this series and do not want to account for the interest accumulated until it is actually paid.

The trap of doing this it that it visually appears to minimize the total costs of carrying these loans for a full 30 years. To keep the total costs of these loans in perspective I will total the interest paid for the life of the loan.

At this point, I am almost appalled by how large the numbers are getting and we are only 2 months into the year.

Here are the results from February:

A quick summary of the results:

Banking Expenses/Fees For the average American, the banking system has a number of products out there to help you avoid banking fees IF you are willing to jump through a number of hoops. To keep our fees down we use direct deposit and rarely use ATMs. If we are traveling and need cash we just use cash back from our debit card and use credit for everything else.

Credit Card Expenses It is no surprise that we have some charges here. Although we carry a large credit card balance, it is financed through 0% balance transfers. The majority of the $225 we have spent in this category is for annual fee’s on a couple of our Airline Cards and a premium card. I think over the next 12 months we will have to decide if these cards are really worth their yearly fee.

Investment Expenses/fees This is one category that still looks good but I have the feeling that I really need to do some better detective work. Most investment fees are buried in the investment so that it is difficult to discover just how much it is costing you. My contributions to my IRA last month were to an existing no-load fund. In theory there should not be any additional fees other than the yearly operating expenses.

Student Loan Expenses/fees The number that jumps off the table above is the extra $4000 in student loan interest accumulation. I realized last month that I was not accounting for the interest accumulating on my $100,000+ of student loans still in forebearance. Although the total for 2007 was reported last month, it was accumulating at the rate of about $335/month for the past year. Since I only get the bill quarterly at best, I’ll only report the change in balances at that time.

The interest alone on our student loans is greater than all of our monthly expenses except rent and food.

All of a sudden that $100,000 education isn’t looking to cheap.

The focus of this series is on how much of my hard earned income is being used to Finance my life. I wanted to include everything from credit cards and student loans to how much it is costing me to manage my retirement portfolio.

This is the information that I should have been aware of three years ago and will likely be a real eye opener to anyone who has a significant amount of debt of any type.

Here is the Start of the Year:

Here are my thoughts on the categories:

1. Banking Expenses: Our family has rarely spent a significant amount of money here. We don’t use out of network ATMs, we don’t bounce checks, and there are a ton of free checking options for anyone who willing to use direct deposit. Given the major turmoil rocking the financial industry right now, I wouldn’t be surprised to see the banks looking for some way to squeeze some money out of us here.

2.Credit Card Expenses: We had done very well here until last month, hence the $180 out of our pocket. I missed one of my credit card due dates by a day and was hit with a late payment fee and the ubiquitous finance charge. The majority of this category however is the yearly fee for a couple of our frequent flyer cards.

3. Investment Expenses/fees: I have not made any investments this year and thus have yet to pay a fee. This was the category that killed my attempt at following my borrowing costs for 2007. Most of the companies I use to manage my investments don’t go out of their way to show you how much they are charging you to invest with them. My goal for 2008 is to follow this metric carefully because the only thing I can control with my investments is my allocation, costs and tax burden. Control what you can control and don’t worry about the rest.

4. Student Loan Interest: This category is surprisingly low. Out of my monthly student loan payments, only $66.07/month goes to interest and the rest to principle. This is also due to the fact that this only represents the loans I am actively paying off. The bulk of my consolidated loans accrue the interest lump sum at years end(it accrues all year long but the company only sends out quarterly statements) This category will be much higher come next month when my statement is accounted for.

So, I spent almost $250 of my hard earned post-tax income last month financing my modern miracle lifestyle.

That same $250 invested every month for 30 years at 7% average return would be over $300,000 by the time I was 60. Not a million bucks but a heck of a lot better than giving it to the credit card companies every month.

The key word in that sentence is Finance. The majority of these expenses are expenses that would be completely avoidable if I lived a cash only life. I do not belive in living a cash only life and it would have been impossible for me to get where I am today without financining my education.

I will break these costs into a few basic categories:

1. Banking Expenses and Fees: The introduction of online banking and the general competition for customers should help keep these costs low for most individuals. For our family, these costs are minimal. The hospital I work for has a special agreement with the bank we use and this waives some of the various fees they would normally charge.

2. Credit Card Expenses and Fees: Historically this has made up a large percentage of my borrowing costs. Once I educated myself and learned how to take advantage of the 0% balance transfer game these expenses fell dramatically. Now these expenses are comprised mostly of my balance transfer fees.

3. Student Loan Expenses and Fees: At this time the majority of my educational loans remain in forebearance collecting interest without me actively having to pay them. I will not count the accumulated interest as an expense until I write the check for it each month. This will only represent the financial costs my loans are placing on me at this time.

4. Investment Expenses and Fees: Most studies show that people have more money at retirement if they pay lower fees over time and control their taxes. This is basic, common sense investing but is harder than it appears. I would bet that most of us don’t actually follow how much we are paying in fees each year. By actually following how much it costs me to invest I hope that it will help me make better decisions about how and where I invest for my retirement.

I was waiting for a good starting point for this series but I decided that the best starting point is now.

Here is how much I spent in August to Borrow Money:

Things to note from this first post:

1. Our Banking Fees are almost non-existent. We only use our bank’s ATMs for cash withdrawals and if we are traveling we just use debit with cash back to avoid the fees.

2. Our credit card expenses are high this month due to the two balance transfer fees I had to pay to play the 0% balance transfer game. In the process of consolidating this information I did find that my wife had at some point signed up for a “credit protector” program for one of her credit cards which has been charging her $12/month for their services. By cancelling this we were able to save a few extra dollars each month.

3. Our Investment expenses have been low because we are not currently very active investors. The year to date fees from this category are the result of my investment of $4000 in a Traditional IRA in April. I am willing to bet we will see a lot more of the “Adminstrative Fees” of our investments at years end.

4. Suprisingly our student loans are only activily costing us about $66/month. This is strictly the interest we pay each month. I am not including the principle. This amount also does not include the bulk of my loans for which I only recieve quarterly interest statements because they are not in active repayment.

I hope you find this interesting. It has definitly been useful for me to organize this information.