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Money Problems: Day 10 – Debt Insurance
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 10, we’re going to talk about debt insurance.
Debt insurance is insurance you pay for that will pay your lender in the event of your death, dismemberment, disfigurement, disembowelment, or unemployment. Exactly what is covered varies by insurer, type of debt, and what you are willing to pay for.
Private Mortgage Insurance(PMI) is a common form of debt insurance. Generally, if you take out a mortgage with a down payment under 20%, you’ll be expected to pay for PMI. According to the Homeowners Protection Act of 1998, you have the right to request your PMI be cancelled after reducing your loan amount to 78% of the appraised value of the property. That ensures that the lender will be able to recoup their money by seizing the mortgaged property if you should happen to fall under a bus or get hit by a meteorite.
Another common form of debt insurance is for your credit cards. Card companies love it when you buy their insurance. If you buy their life insurance, your card is paid off when you die. Disability insurance pays it if your get hurt. Unemployment insurance…you get the idea.
Here’s the deal: Get life insurance and disability insurance separately. It’s cheaper than getting it through your credit card company and let’s you get enough to actually live on if something tragic happens. Unless, of course, you die. Then it will leave enough for your heirs to live on.
As far as unemployment insurance, build up your emergency fund instead. That’s money that gives you options. Credit card insurance is money flushed down the toilet. Many of these policies cost 1% of your balance. If you’ve got a $5,000 balance, that will mean you are paying $50 per month. By comparison, if you’ve got a 9.9% interest rate, you’ll be paying about $40 per month in interest.
Debt insurance is a bad idea, if you can possibly avoid it. A combination of life insurance, disability insurance, and an emergency fund provide better protection with more flexibility.
Your task for today is to review your credit card statements and mortgage agreement and see if you are paying debt insurance on any of it. If you are, cancel and set up the proper insurance policies to protect yourself and your family.
Money Problems – Day 4: Making a Budget
Today, I 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.
This is day 4 and today, you are going to make a budget.
Now that you’ve got your list of expenses and you’ve figured out your income, it’s time to put them together and do the dreaded deed. Your going to make a budget today. Don’t be scared. I’ll hold your hand.
Here are the tools you need:
- Your list of expenses from Day Two.
- Your list of income from Day Three.
- A spreadsheet. I recommend the spreadsheet included in Google Docs, but Excel or the Open Office alternative, CALC, are acceptable substitutes.
Setting up the spreadsheet is dead simple.
Create a column for the label, telling you what each line item is. Create a column to hold the monthly payment amount. At the bottom of column 2, create a formula that totals your expenses. If you are including a bill that isn’t due monthly, use a formula similar to the day 3 income formula to figure out what you need to set aside each month. To figure a quarterly bill, multiply the amount by 4, then divide by 12. To figure a weekly bill, multiply by 52 and divide by 12.
Scoot over a few columns and do the same thing for your income.
Scoot over a couple more columns and set up a total. This is easy. It’s just a matter of subtracting your expenses from you income. Hopefully, this gives you a positive number.
To make this even easier, I’ve shared a blank budget spreadsheet. No excuses. If that simple spreadsheet doesn’t meet your needs, I’ve got a much more detailed version that includes categories. I use the detailed version.
Making a budget may be the most intimidating financial step you take, but everything else is built on the assumption that you understand where you money came from and where it is going. Without,it, your navigating a major maze based on a coin flip instead of a map.
Money Problems – Day 5: Boosting Your Income
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.
Today we’re going to look at ways to boost your income.
People spend a lot of time talking about ways to reduce your expenses, but there is a better way to make ends meet. If you make more money, you will—naturally—have more money to work with, which will make it easier to balance your expenses. I’ve found it to be far less painful to make more money than to cut expenses I enjoy.
I can hear what you’re thinking. It’s easy to tell people to make more money, but what about telling them how? Guess what? I’m going to tell you how to make money because I rock.
By far, the simplest way to make more money is to convince whoever is paying you to pay you more for what you are already doing. In other words, get a raise. I know that’s easy to say. Money’s tight for a lot of companies and layoffs are common. None of that matters. Your company knows that hiring someone new will involve a lot of downtime during training. If you’ve been visibly doing your job, and the company isn’t on the brink of failure, it should be possible to get a bit of the budget tossed your way.
- The first thing you need to do is get visible. If you habitually come in 15 minutes late, make it 15 minutes early. If you are working an alternative schedule, consider switching to the standard schedule, so everyone who matters can see you are at work. Start sending status updates to your boss, including copying him on emails to other people you work with, if those emails signify important milestones in a project.
- Next, log your work. Keep track o what you do, what you’ve accomplished, and—most important—how much money you have made or saved for the company.
- Third, do your research. Hit the salary survey sites to find out what other people in your field are making. Don’t worry if you are on the high side. There is always someone making more than you. If you are the exception to that rule, try using a similar variation of your job description and title. What’s the concrete difference between a software engineer I and and a software engineer II? About $15000.
- Finally, schedule a meeting with your boss and ask. Lay out the things you’ve done, the amount you make for the company and what other companies are paying. Chances are, your boss will have a hard time refusing your request.
Another simple idea is to get a second job. Personally, I hate this idea, but it works wonders for some people. Gas stations and pizza stores offer flexible schedules and they are always hiring. If they aren’t willing to work with your schedule, or it doesn’t work out, you can always quit. This isn’t your main income, after all.
My favorite option is to create a new income stream. What can you do?
Take a piece of paper and a close friend and brainstorm how you can make some money. Write down every type of activity you have ever done or ever wanted to do. Then write down everything you can think of that other people who do those activities need or want. Remember, during a brainstorming session, there are no stupid ideas. Take those two lists and see if there is any product or service you can provide.
You can start a blog—although don’t expect to generate much money early—or try writing for some revenue-sharing article web sites, like hubpages or squidoo. Other options include affiliate marketing, garage sale arbitrage(buying “junk” at garage sales, fixing it up and selling it), or even doing yard work for other people.
One interesting business I’ve seen lately is a traveling poop-scooper. These people travel around and scoop poop out of ddog-owners’ yards. Business booms in the spring when the snow melts, but it can be an ongoing income, since dogs don’t stop pooping.
Raising your income can make it easier to pay your bills, pay off your debt, or even taking nice vacations. How have you made some extra cash?
Money Problems: Day 12 – Paying for College by Doing Without
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 11, we’re going to talk about one method of paying for college.
I have a secret to share. Are you listening? Lean in close: College is expensive.
You’re shocked, I can tell.
The fact is, college prices are rising entirely out of proportion to operation costs, salaries, or inflation. The only thing college prices seem to be pegged to is demand. Demand has gotten thoroughly out of whack. The government forces down the interest rates on student loans, then adds some ridiculous forgiveness as long as you make payments for some arbitrary number of years, creating an artificial demand that wouldn’t be there if the iron fist of government weren’t forcing it into place.
Somebody in Washington has decided that the American dream consists of home ownership and a college education. Everything is a failure. He’s an idiot.
College isn’t for everybody.
Read that again. Not everyone should go to college. Not everyone can thrive in college.
Fewer than half of students who start college graduate. The greater-than-half who drop out still have to repay their loans. Do you think college was a good choice for them?
Then you get the people who major in art history and minor in philosophy. Do you know what that degree qualifies you for? Burger flipping.
Yes, I know. Just having a degree qualifies you for a number of jobs. It’s not because the degree matters, it’s because HR departments set a series of fairly arbitrary requirements just to filter a 6 foot stack of resumes. The only thing they care about is that having a degree proves that you were able to stick college out for 4 years. That HR requirement matters less as time goes on and you develop relevant work experience.
A liberal arts education also—properly done—trains your mind in the skill of learning. First, not everyone is capable of learning new things. Second, not everyone is willing to learn new things. Third, a passion for learning can be fed without college. If you don’t have that passion, college won’t create it. Most of the most learned people throughout history managed without college, or even formal education. Even if you want to feed that passion in a formal classroom, you’re assuming the professors are interested in training your mind instead of indoctrinating it with their views.
Now there are some pursuits that outright require a college education. The sciences like engineering, physics, astronomy, and psychiatry all require college. You know what doesn’t require college? Managing a cube farm. Data entry. Sales. I’m not saying those are bad professions, but they can certainly be done without dropping $50,000 on college.
Some careers require an education, but don’t require a 4 year degree, like nursing(in most states), computer programming(it’s not required, but it makes it a lot easier to break into) and others. Do you need to hit a 4 year school and get a Bachelor’s degree, or can you hold yourself to a 2 year program at a technical college and save yourself 40,000 or more?
That should be an easy choice. Don’t go to college just because you think you should or because somebody said you should, or to get really drunk. College isn’t for everybody and it’s possible it’s not for you.
Money Problems – Day 2: What’s Going Out?
Today, I 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 2 of the series, you need to gather all of your bills: your electric bill, your mortgage, the rent for your storage unit, everything. Don’t miss any.
Go ahead, grab them now. I’ll wait.
Did you remember that thing that comes in the plain brown wrapper every month? You know, that thing you always hope your neighbors won’t notice?
Now, you’re going to sort all of the bills into 5 piles.
Pile #1: These are your monthly bills. This will probably be your biggest pile, since most bills are organized to get paid monthly. this will include your credit cards, mortgage(do you rent or buy?), most utilities and your cellphone.
Pile #2: Weekly expenses. When I look at my actual weekly bills, it’s a small stack. Just daycare. However, there are a lot of other expenses to consider. This stack should include your grocery bill, gas for your car, and anything else you spend money on each week.
Pile #3: Quarterly and semiannual bills. I’ve combined these because there generally aren’t enough bills to warrant two piles. My only semi-annual bill is my property tax payment. Quarterly bills could include water & sewer, maybe a life insurance policy and some memberships.
Pile #4: Annual bills. This probably won’t be a large pile. It will usually include just some memberships and subscriptions.
Pile #5: Irregular bills. The are some things that just don’t come due regularly. In our house, school lunches and car repairs fall into this category. We don’t have car problems often, but we set money aside each month so our budget doesn’t get flushed down the drain if something does come up.
Now that you have all of your expenses together, you know what your are on the hook for. Next time, we’ll address income.
