There’s a saying that you are the average of your 5 closest friends. Take a look at the people you hold dearest. Combined, they are you. If they are all in debt, chances are, so are you.
As a corollary, you are a part of your friends. If you become more financially responsible, it will rub off on the people who care about you.
Given these two rules, one way to improve yourself is to help those around you improve themselves. If your influence convinces your friends to move closer to your ideal, it will be easier, almost effortless to move closer to it, yourself.
It sound manipulative, but if you are manipulating your friends, you are doing it wrong. Don’t try to force or trick your friends, just be honest and sincere in your efforts to help. Nobody wants to be in debt. This is you being nice.
1. Suggest cheap activities.
While it is okay to splurge occasionally, don’t be afraid to suggest less expensive activities. If someone suggests going to a movie, mention the dollar theater. If they want to go out for dinner, offer to host a potluck. Trip to the casino? Game night at your house. There are almost always cheaper ways to have fun. As long as you are spending time with the people you love, you’ll have a good time. Do you really need to drop $100 to do that?
2. Don’t flaunt your toys.
If you buy an iPod and immediately run to show it off, you are going to trigger a case of “keeping up with the Joneses”. If your friends spend all of their time around people who are constantly buying expensive toys, buying expensive toys becomes normalized in their minds. Debt becomes the norm. Then extreme debt. Don’t reinforce the destructive debt cycle by showing off the expensive trophies of excessive, unnecessary consumerism.
3. Point out opportunities to save.
This is a fine line to walk. If mention how much money your friend is wasting on 13 shot venti soy hazelnut vanilla cinnamon white mochas with extra white mocha and caramel every single morning, you’re going to get annoying fast. In fact, you are already annoying me, so knock it off. On the other hand, if Caribou is having a sale on the 13 shot monstrosity, speak up. Nobody is going to complain about getting a $15 coffee for less than $10.
4. Give them a side hustle.
If you’ve got a friend who’s into landscaping and you’ve got a neighbor who needs a landscaper, make the connection! If you know a web designer and a business in need of a website, get them together. Do what you can to match the needs of the people around with each other. They will all appreciate it, and everyone will be better off. Be the guy who helps everyone connect with the people they need.
5. Be encouraging.
Put another way, don’t be a dick. Nobody likes being nagged. Nobody likes being told they are doing everything wrong. Be encouraging, not mean.
If you can do all of that, it’s natural that your friends will start acting the way you want yourself to act. The less they want to waste on a trip into debt, the less tempted you will be to do the same.
When I was younger, my dad was always trying to teach me the value of money but he never really succeeded and it took a series of monetary mishaps before I even started to learn any of the lessons that he had been trying to teach me!
image by GoodNCrazy via Flickr
Once I realized that I had been horribly mismanaging my finances, a painful lesson to learn, especially on the back of a redundancy, I began to do some research to find out exactly where I had gone wrong and what I could do to put things right.
It was at this point that it occurred to me that I knew absolutely nothing about personal finance and I couldn’t tell an ISA from a current account.
I also began to wonder if I had been taught these lessons at an early age then would I have made better financial decisions once I started earning?
For example, my outlook on personal finance was all about borrowing and not saving and I had no idea what my credit score was or how it was calculated.
Had I known that it could be affected by simply being close to the limits on my current lending streams or by applying for more credit then I may not have been so quick to spend on credit cards.
Although this was not a problem during the credit boom, when offers of guaranteed credit seemed to drop through my door on a daily basis, it has become something of an issue since the credit crunch.
Of course, just knowing the pitfalls of financial mismanagement is no guarantee that I would have done things any differently but it certainly would have made me think about the decisions I was making and the impact they would have in the long run.
All of which led me wonder whether should schools give students (or pupils if you’re in the UK) lessons in personal finance.
I think it would be a great idea as this would be something that everyone, no matter what their level of academic ability, could take with them into the real world.
And it could be the case that a school in the US is one step ahead of the rest as they already have money management lessons as part of the curriculum.
Burbank High School in Sacramento is offering students lessons in personal finance as part of National Financial Literacy Month in an effort to raise awareness of the importance of good practice in personal finance.
The lessons covered personal finance topics such as budgeting, saving and needs vs. wants and placed them into real life scenarios that would resonate with the students, such as estimating how much the senior prom will cost and ways to save and pay for it.
Students were also encouraged to put a portion of any weekly earnings or allowance into a savings account to teach them the importance of saving for the future from an early age.
I think that these were the values that my dad was trying to instill in me from an early age but I failed to take any notice.
I now have two sons that I have to try and keep from making the same mistakes that I made, so any help I can get will be greatly appreciated…here’s to future school pupils focusing on personal finance!
Today, I am continuing the series, Money Problems: 30 Days to Perfect Finances. The series will consist of 30 things you can do in one setting to perfect your finances. It’s not a system to magically make your debt disappear. Instead, it is a path to understanding where you are, where you want to be, and–most importantly–how to bridge the gap.
I’m not running the series in 30 consecutive days. That’s not my schedule. Also, I think that talking about the same thing for 30 days straight will bore both of us. Instead, it will run roughly once a week. To make sure you don’t miss a post, please take a moment to subscribe, either by email or rss.
On this, Day 7, we’re going to talk about paying off debt.
Until you pay off your debts, you are living with an anchor around your neck, keeping you from doing the things you love. Take a look at the amount you are paying to your debt-holders each month. How could you better use that money, now? A vacation, private school for your kids, a reliable car?
If you’ve got a ton of debt, the real cost is in missed opportunities. For example, with my son’s vision therapy being poorly covered by our insurance plan, we are planning a much smaller vacation this summer–a “staycation”–instead of a trip to the Black Hills. If we didn’t have a debt payment to worry about, we’d have a much larger savings and would have been able to absorb the cost without canceling other plans. The way it is, our poor planning and reliance on debt over the last 10 years have cost us the opportunity to go somewhere new.
The only way to regain the ability to take advantage of future opportunities is to get out of debt, which tends to be an intimidating thought. When we started on our journey out of debt, we were buried 6 figures deep, with a credit card balance that matched our mortgage. It looked like an impossible obstacle, but we’ve been making it happen. The secret is to make a plan and stick with it. Pick some kind of plan, and follow it until you are done. Don’t give up and don’t get discouraged.
What kind of plan should you pick? That’s a personal choice. What motivates you? Do you want to see quick progress or do you like seeing the effects of efficient, long-term planning? These are the most common options:
Debt Snowball
Popularized by Dave Ramsey, this is the plan with the greatest emotional effect. It’s bad math, but that doesn’t matter, if the people using it are motivated to keep at it long enough to get out of debt.
To prepare your debt snowball, take all of your debts–no matter how small–and arrange them in order of balance. Ignore the interest rate. You’re going to pay the minimum payment on each of your debts, except for the smallest balance. That one will get every spare cent you can throw at it. When the smallest debt is paid off, that payment and every spare cent you were throwing at it(your “snowball”) will go to the next smallest debt. As the smallest debts are paid off, your snowball will grow and each subsequent debt will be paid off faster that you will initially think possible. You will build up a momentum that will shrink your debts quickly.
This is the plan I am using.
Debt Avalanche
A debt avalanche is the most efficient repayment plan. It is the plan that will, in the long-term, involve paying the least amount of interest. It’s a good thing. The downside is that it may not come with the “easy wins” that you get with the debt snowball. It is the best math; you’ll get out of debt fastest using this plan, but it’s not the most emotionally motivating.
To set this one up, you’ll take all of your bills–again–and line them up, but this time, you’ll do it strictly by interest rate. You’re going to make every minimum payment, then you’ll focus on paying the bill with the highest interest rate, first, with every available penny.
DOLP
This is the plan promoted by David Bach. It stands for Done On Last Payment. With this plan, you’ll pay the minimum payment on each debt, except for bill that is scheduled to be paid off first. You calculate this by dividing the balance of each debt by the minimum payment. This gives you an estimate of the number of months it will take to pay off each debt.
This system is less efficient than the debt avalanche–by strict math–but is better than the snowball. It give you “quick wins” faster than the snowball, but will cost a bit more than the avalanche. It’s a compromise between the two, blending the emotional satisfaction of the snowball with the better math of the avalanche.
Snowflaking
For each of these plans, you can give them a little steroid injection by snowflaking. Snowflaking is the art of making some extra cash, and throwing it straight at your debt. If you hold a yard sale, use the proceeds to make an extra debt payment. Sell some movies at the pawn shop? Make an extra car payment. Every little payment you make means fewer dollars wasted on interest.
Paying interest means you are paying for everything you buy…again. Do whatever it takes to make debt go away, and you will find yourself able to take advantage of more opportunities and spend more time doing the things you want to do. Life will be less stressful and rainbows will follow you through your day. Unicorns will guard your home and leprechauns will chase away evil-doers. The sun will always shine and stoplights will never show red. Getting out of debt is powerful stuff.
Your task today is to pick a debt plan, and get on it. Whichever plan works best for you is the right one. Organize your bills, pick one to focus on, and go to it.
Assuming you are in debt, how are you paying it off?
English: Jalopy car in Joshua Tree National Park in Hidden Valley Campground (Photo credit: Wikipedia)
When it’s time to replace your car, most people focus on the new car, instead of the old, but that is ignoring real money. Your old car–unless it has disintegrated–still has value. Sometimes, it’s just time to ask yourself, “When should I sell my car?”
When you’re looking to sell your car (like with We Will Buy Your Car), you generally have several options:
Tow & crush. If your car has been wrecked, doesn’t run, or is just old and beat up, you may be stuck with calling a junkyard and accepting $50 for them to pick up your car and crush it for scrap.
Trade it in. This is probably the least hassle, but–other than #1–doesn’t pay well. Dealerships are willing to pay something under what they will get at a wholesale auction, which is quite a bit less than the blue book value.
Sell it yourself. Now you’re thinking, “He’s going to buy my car! Oh, bother.” It can be a pain, but it’s also the best way to get a decent price for your wheels.
When you sell your car, there are a few things to keep in mind, much like when you sell something on Craigslist.
Don’t be alone. There are bad people in the world, but they don’t like witnesses. Bad things are much less likely to happen if you have company.
Know your price. Specifically, know three price: your dream price, the price that would make you happy, and the absolute lowest price you are willing to accept. Make sure you figure these numbers out ahead of time. Know what you are comfortable with before it comes time to close the deal.
Check IDs. The buyer is going to want to test-drive your car. That’s fine, but you want to make sure you know who is driving off in your car. “Officer, Sumdood took my car. He was wearing jeans.” That won’t get your car back.
Clean it up. Get the car detailed before you show it to a potential buyer. A sparkling-clean car will almost always bring in a few hundred extra dollars. It’s well worth the expense.
Following this plan should make the sale go as smoothly as possible and bring you the most possible money.
Readers, what have you done to dispose of an old car?
This is a sponsored post written to provide some insight into the world of used car retail.
This is the 307th Carnival of Personal Finance, the Silver Edition. As of 10:00 PM CDT last night, silver is at $43.76 per ounce. Three years ago, when I last bought silver, it was at $11.30. In honor of that, and inspired by my first editor’s pick below, I’m going to share some facts and history about silver.
The last time prices rose like this was in 1979, when the Hunt brothers bought or controlled close to 50% of the world’s silver. They managed it by leveraging their silver hoard. As they bought more, prices went up, increasing the value of their hoard, which they then used as collateral for more loans to buy more silver, which caused the prices to go up so they’d use it as collateral…. You get the idea. Prices went from $11 per ounce to $50 per ounce in less than a year, before the regulators figured out the game and changed the rules, bringing the whole thing crashing down. The resulting losses and lawsuits bankrupted the former billionaires within 10 years.
Editor’s Picks:
First, we have a post from Squirrelers, Is There a Silver Bubble? How High Can Prices Go?. This post reminded me of not only the Hunt brothers story, but the small box of silver I own. Now, I’m debating taking it to a precious metals dealer and cashing out for 400% of my purchase price.
Suba from Wealth Informatics brought Never Pay full price : How to save 10-50% on every purchase. This was entirely new to me, which surprised me. I see a lot of ideas presented in new ways, but rarely see something I know absolutely nothing about.
If you’ve got legal papers you need to fill out, or questions you need answered, you could do far worse than to start with the site Jeff Rose from Good Financial Cents gives us with 7 Free and Cheap Online Legal Resources. If you think you don’t need the resources, that means you a complete estate plan, right? You have a will?
Saving
Dimes, quarters, and half-dollars were 90% silver until 1964. Half-dollars continued to be 40% silver until 1971. At that time, the government tightly controlled the price of silver and kept it at $1.29 per ounce so the face value of the coins matched the value of silver they contained. Today, a supply of 90% silver coins with a face value of $5 can be had for the bargain price of $173.74.
Fanny from Living Richly on a Budget – Personal Budget Blog presents How to Build the Crucial $1,000 Emergency Fund, and says, “How do you finance unexpected personal expenses, such as car repairs, medical visits, home maintenance repairs, etc? The most effective way to finance these expenses is through a personal emergency fund.”
Flexo from ConsumerismCommentary presents Silent Inflation is Destroying Your Net Worth, and says, “Inflation continues to deflate individuals net worth and there are no signs of it getting any better.”
Adam Piplica from Magical Penny presents Avoid Hitting the Rocks of Financial Ruin, and says, “This post draws on a famous story in Homer’s Oddessey how a captain made it safely passed the Sirens because he had protected himself from making a poor short-term decision. It’s exactly the same thing you have to do if you want to grow your pennies.”
Clint from Accumulating Money presents Baby-Boomer Generation Must Get Serious About Planning for Retirement, and says, “The “Baby-Boomer” generation has undergone two severe business-cycle reversals in the past ten years alone. Many of these fifty and sixty year-olds are now facing a daunting task – how do you rebuild your net worth in so short a remaining time period?”
Jason from One Money Design presents Planting a Garden to Save Money, and says, “As Spring is here, planting a garden is a great way to help feed your family and save some money at the same time.”
Career
Silver is almost always found with lead. Through most of history, mining silver meant mining lead and breathing lead dust. In the ancient world, silver miners had a life span of about 3 years, so free men refused the job. This was a slave occupation.
Crystal from Budgeting in the Fun Stuff presents Job Experience – Don’t Rock The Boat, and says, “Being young and ambitious may seem like the best thing in the world but knowing your audience and environment is very important. You don’t want to come off as the young new hothead…here’s a story all about exactly that.”
Well Heeled Blog from Well Heeled Blog presents 5 Ways to Spend Your Raise, and says, “Congratulations, you got a raise! Now what? Now, what to do about this extra money? No matter what, don’t want to fritter this raise away. Here are 5 ways for the extra money to work hard for you. ”
Kathryn @ Financial Highway from Financial Highway presents 30 Common Interview Questions and How to Answer Them, and says, “This guide not only tells you what the interview questions are but also provides insight into what the interviewer is really asking and what types of answers will help you get the job.”
Credit
Around 500 BC, Athenians discovered a huge silver mine on land belonging the city-state. This find was used to finance building their first effective navy, which catapulted them to the heights of power they achieved.
Tim Chen from NerdWallet Credit Card Watch presents Premium Credit Cards: The Value Beyond the Cost, and says, “A premium credit card is a step above your average card: better rewards and extra perks offered at, well, a premium. These exclusive credit cards come with additional goodies like lounge access and free plane tickets, as well as hefty annual fees.”
Kevin (for Moolanomy) from Moolanomy presents How to Avoid Credit Cards and Credit Repair Scams, and says, “Credit cards don’t have to be a bad thing, but they definitely have their fair share of scams out there. Here’s how to avoid them.”
Real Estate
In World of Warcraft, silver is a rare spawn of tin. If you want to find silver, you should try mining tin. Over and over. (Source)
The early discovery that water, wine, milk and vinegar stayed pure longer in silver vessels, led to its desirability as a container for long voyages. Herodotus wrote that Cyrus the Great, King of Persia, a man of vision who established a board of health and a medical dispensary for his citizens, had water drawn from a special stream, “boiled, and very many four wheeled wagons drawn by mules carry it in silver vessels, following the king wheresoever he goes at any time.” (Source)
Donna Freedman from Surviving and Thriving presents This isn’t your grandparents’ recession, and says, “When the going gets tough, it’s tempting to invoke our grandparents and their tribulations during the Great Depression. But some of their advice wouldn’t help us. ”
Glen Craig from Parenting Family Money presents Inexpensive (Cheap) Date Night Ideas for Parents, and says, “It’s tough getting out with the spouse when you have kids. With babysitting and the date it can get expensive. See some inexpensive date night ideas and how you can save on babysitting as well.”
Finance
From 1998 to 2009, Bernard von NotHaus marketed the Liberty Dollar as an alternative to U.S. government fiat currency. Liberty Dollars were made from silver and later, gold and copper. von NotHaus was later convicted of–among other things–counterfeiting coins, even though he only produced his own coinage and didn’t pretend it was the same thing.
N.W. Journey from Net Worth Journey presents What is Compound Interest?, and says, “A basic introduction to compound interest.”
Bret from Hope to Prosper presents Age 21: A Year of Change and Humility, and says, “The year I turned 21 was the most tumultuous of my life. In many ways, that one year shaped my life more than any other and determined the direction of my future.”
Economy
Colloidal silver is claimed to be a near-magical cure-all. Its proponents claim it has the ability to “benefit the immune system; kill disease-causing agents such as bacteria, viruses, and fungi; serve as an alternative to prescription antibiotics; or treat diseases such as cancer, HIV/AIDS, diabetes, tuberculosis, syphilis, scarlet fever, shingles, herpes, pneumonia, and prostatitis (inflammation of the prostate).” Scientific evidence for any of this: none. (Source)
Money Beagle from Money Beagle presents The Economy Must Be Improving, and says, “I don’t need a government report to show me that the economy is improving; I look no further than the latest coupon offerings from local restaurants!”
Darwin’s Money from Darwin’s Money presents Stop Complaining About Gas Prices, and says, “Americans are complaining about prices at the pump. I say “Stop Complaining and Look in the Mirror”. Here are some very rational reasons and real solutions.”
Investing
The best method of storing silver is in bullet form. When the werewolves attack, none of us will have long to fight back.
Mike from The Dividend Guy Blog presents 7 Deadly Sins of Investments, and says, “Are you making these mistakes with investing?”
Mike Piper from Oblivious Investor presents Replacing Index Funds in Your Portfolio, and says, “For the most cost conscious of investors, it might make sense to build a portfolio of individual securities rather than index funds.”
RJ Weiss from Gen Y Wealth presents How to Convert a 401(k) to Traditional or Roth IRA, and says, “Reviewing your options with your 401(k) when leaving or changing jobs. More specifically, to look at the steps to convert your 401K(k) to an IRA, since this is most likely the optimal choice.”
Michael from DoughRoller presents How Half a Percent Can Ruin Your Retirement, and says, “Investing for retirement is crucial to securing your financial future. Make sure to find the best interest rates available, as even half a percent can ruin your retirement aspirations. ”
Money Management
I had a silver ring in my septum for almost 10 years and, in fact, still maintain the piercing, but it’s usually empty.
Cathy Moran from Money Health Central presents An Alternate Truth About Financial Literacy, and says, “Financial literacy is grounded in understanding bigger truths about money, not in acting on those truths.”
Kara from Frugal In My Forties presents Worst Money Lessons My Family Taught Me, and says, “My parents had great financial skills: Unfortunately they weren’t really great about passing them on to their children. These are the 4 big things that I think they should have done differently!”
Mike from The Financial Blogger presents Teaching Finance In High School, and says, “A look at getting finance across at the high school level.”
Eric from Narrow Bridge Finance presents How Your Insurance Rates are Calculated, and says, “Ever wonder how insurance companies determine your monthly rates? Find out what you need to know here.”
FMF from Free Money Finance presents How Millionaires Become Millionaires, and says, “Many people mistakenly think that most millionaires have their wealth handed to them from either their relatives or some stroke of luck (like winning the lottery, being gifted with amazing abilities/talent, etc.) This is completely false. Most people with over seven-figure wealth got it the old-fashioned way, they earned it.”
Matt Bell from Matt About Money presents Money Lessons From the Royal Wedding, and says, “Amid all the royal wedding hoopla, did you notice what Prince William and his fiancée, Kate Middleton, asked for in terms of wedding gifts? Since this is one couple that truly does have everything, they asked anyone wanting to get them a gift to consider making a donation instead. For all of us commoners, there are two lessons we can learn from the royal couple’s philanthropic mindset.”
Debt
Sterling silver is 92.5% silver and 7.5% other, usually copper. Pure silver is too soft for most applications. It is, however, the most optically reflective element.
Junior Boomer from Consumer Boomer presents Top 5 Bankruptcy Myths Dispelled For You, and says, “For those who have been considering bankruptcy, but are concerned about the overall impact it could have on their financial future, we are going to break a few myths.”
Other
Silver fulminate is an explosive, ionic, fulminic acid salt of silver. Yes, silver goes boom.
Echo from Boomer & Echo presents Assessing Your Estate Plan, and says, “Before making an appointment with your lawyer take some time to assess your situation and review your estate plan.”
Sustainable PF from Sustainable Personal Finance presents Eight Favourite Blogs, and says, “There are some awesome PF blogs out there and these are 8 you shouldn’t miss!”
Nicole from Nicole and Maggie: Grumpy Rumblings presents Dissecting an emergency room bill, and says, “Nicole and Maggie discuss how a recent bead up a preschool nose cost one of them $1400. (Actually $1700– a additional bill just came.)”
Tom Drake from Canadian Finance Blog presents The new breed of financial bloggers: Young, frugal and vocal, and says, “I’ve discovered a lot of young bloggers who do care about personal finance. Young bloggers can fill a void in financial education for young people.”
Tom from Stupid Cents presents What Is Term Life Insurance?, and says, “Life insurance is important for everyone but it can be expensive. That is where term life insurance can be the most helpful.”
Philip from PT Money: Personal Finance presents How to Pick a College that Suits You, and says, “Financial and other considerations when deciding on a college.”
That’s it. If you enjoyed this little journey through silver, please take a moment to subscribe to Live Real, Now.
When you’re buried in debt, bankruptcy can seem like the only option. When you get make ends meet, no matter how hard you pull on them. When bill collectors interrupt every dinner. When you have to choose between food and rent. When there is always more month than money. Do you have another choice?
Yes, you do.
Before you rush to file bankruptcy, take the time to understand your options.
Debt Settlement
Debt settlement is when you quit paying your bills and start sending the money to settlement company. The settlement company does…nothing. Really. They take your money and drop it into investments or interest-bearing accounts. You don’t get the interest, they do. Eventually, when your creditors are howling, the settlement company offers to make a settlement on the account. If the creditor accepts pennies on the dollar to kill your debt, the settlement company pays them. If not, they get to howl louder and make you more miserable.
While this process is playing itself out over years, your credit is taking a beating. You are doing nothing to dig yourself out of the hole you’ve dug. Finally, when your creditors are so desperate that they accept the settlement offer, you get a huge additional hit to your credit. “SETTLED IN FULL” is not a good status to have on your credit report.
Debt settlement companies do nothing you can’t do for yourself, and doing it for yourself at least lets you keep the interest your money is earning.
Debt Consolidation
Consolidating your debt comes in two varieties, a debt consolidation loan and a debt management plan.
A debt management plan is when you send one large payment to a debt consolidation company, and they pay your creditors for you each month. The company will usually attempt to contact your creditors and negotiate your interest rate and payments to try to get you into a situation that precludes bankruptcy and will keep your creditors happy. In the simplest terms, this is a debt payment consolidation.
A debt consolidation loan is generally done by taking out a line of credit against your home or other collateral and using that money to pay off all of your bills. Then you make the payments to the bank, to pay off your line of credit. The problem is that, if you can’t make the individual payments, can you make the payment to the line of credit? If you can’t, you risk losing your house.
Repayment
This option is my personal favorite. It involves taking responsibility for your decisions, cutting out the unnecessary expenses in your life, and paying your bills. There are a few popular plans for accomplishing this, including Dave Ramsey‘s debt snowball. The most important thing to remember are 1) debt it bad so stop using it; and 2) pay off as much as you can afford to each month. It isn’t as sexy as making all of your debt disappear, but it’s still a good option.
Bankruptcy
Let’s see. You borrow money on the promise to pay it all back. After you borrow too much, you renege on your agreement. You admit your word means nothing and you get all of your debt cancelled, forcing your creditors to raise the interest rates for all of the responsible debtors out there, as a way to balance the risk of those who will never pay. In exchange you doom yourself to lousy credit for the next 10 years. In extreme circumstances, bankruptcy may be the only option, but, I’m not a fan.
As you can see, there are almost always better options than bankruptcy. Please, before you take that leap, look into the other choices.
This is a sponsored post written to provide some insight into the world of bankruptcy and debt consolidation.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/quotes_7a.gif)
