- Bad. My 3yr old knows how the Nationwide commercial ends…including the agent's name. Too much TV. #
- RT @MoneyCrashers: Money Crashers 2010 New Year Giveaway Bash – $9,100 in Cash and Amazing Prizes http://bt.io/DZMa #
- Watching the horrible offspring of Rube Goldberg and the Grim Reaper: The Final Destination. #
- Here's hoping the franchise is dead: #TheFinalDestination #
- Wow. Win7 has the ability to auto-hibernate in the middle of installing updates. So much for doing that when I leave for the day. #
- This is horribly true: Spending Other People's Money by @thefinancebuff http://is.gd/75Xv2 #
- RT @hughdeburgh: "You can end half your troubles immediately by no longer permitting people to tell you what you want." ~ Vernon Howard #
- RT @BSimple: The most important thing about goals is having one. Geoffry F. Abert #
- RT @fcn: "You have enemies? Good. That means you've stood up for something, sometime in your life." — Winston Churchill #
- RT @FrugalYankee: FRUGAL TIP: Who knew? Cold water & salt will get rid of onion smell on hands. More @ http://bit.ly/WkZsm #
- Please take a moment and vote for me. (4 Ways to Flog the Inner Impulse Shopper) http://su.pr/2flOLY #
- RT @mymoneyshrugged: #SOTU 2011 budget freeze "like announcing a diet after winning a pie-eating contest" (Michael Steel). (via @LesLafave) #
- RT @FrugalBonVivant: $2 – $25 gift certificates from Restaurant.com (promo code BONUS) http://bit.ly/9mMjLR #
- A fully-skilled clone would be helpful this week. #
- @krystalatwork What do you value more, the groom's friendship or the bride's lack of it?Her feelings won't change if you stay home.His might in reply to krystalatwork #
- I ♥ RetailMeNot.com – simply retweet for the chance to win an Apple iPad from @retailmenot – http://bit.ly/retailmenot #
- Did a baseline test for February's 30 Day Project: 20 pushups in a set. Not great, but not terrible. Only need to add 80 to that nxt month #
Money Problems – Day 7: Paying Off Debt
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?
How to Deal with Debt While You’re Out of a Job
This is a guest post from Marc Chase of My Credit Group.
Dealing with a lot of unpaid debt can be a hassle on its own. Having to pay those debts when you don’t even have a job to provide you with the money to do so can be a nightmare. While you’re hunting for a job to help make ends meet, your debts continue to pile up, leaving you scrambling to find a way to take care of them before they cause you to slip further into the poor house, and leave your finances needing credit repair services.
Since you’re likely more concerned about finding a job than anything else, we put together this handy checklist of what you should do to avoid your unpaid bills and debts getting the best of you while you search for a new job.
• Apply for unemployment benefits. This should be your first order of business after you’ve lost your job, especially if you’re one of the many Americans currently living paycheck to paycheck. Unemployment benefits go a long way towards helping consumers stay on top of their bills and credit accounts. Don’t make the mistake of thinking another job is just around the corner – there’s a good chance you can’t afford to wait.
• Keep paying the minimum balance. If you’re on the verge of drowning completely in unpaid debt, you may be tempted to stop paying your bills completely, at least until you get some additional funds in your account. Do this, and you’ll find yourself in need of credit score repair before you even get that call back for a follow-up interview.
Instead, do everything you can to at least pay the minimum balance on all of your credit accounts and bills. This will ensure that your credit history doesn’t take too much of a beating, and saves you from paying even more in interest fees down the line.
• Stop spending money like you have it. Because the sad truth is, while you’re still unemployed, you likely don’t have a lot of money to spare. If you’re still living your life as though you can afford to pay for everything – eating lunch and/or dinner out more than twice a week, generally buying things you don’t NEED – now’s the time to stop.
Stop charging every purchase you make to your credit card – break them out only in an emergency. This will help keep you from sinking further into debt while you’re out looking for a way to pay for your purchases.
• Eliminate and prioritize your bills. Now’s a great time to take a long look at some of the bills you’re paying, and deciding if they’re even worth the service. That doesn’t mean you should stop paying bills you consider “less important” than others; it means looking at some of the things that might have once been necessities (a land phone line if you primarily use a cell phone, a full package TV cable bill, etc.) and re-evaluating your stance on how important they are now that you can’t afford them all. In many cases, you can get in contact with your service provider(s) and talk about ways to reduce your bill (say, cancel cable but keep internet).
This is a guest post from Marc Chase, President of Product Development for My Credit Group, a website dedicated to helping consumers with managing their credit.
3 Questions to Ask in a Spending Crisis
Having a well-funded emergency fund is one of the foundation blocks for almost every saving or debt-repayment plan. The theory is that you’ll be better able to weather a financial storm if you don’t have to raid your budget or beat on your credit card every time an unexpected expense rears its ugly head. The number varies based on your pundit and your stage of life, but generally ranges from $1000 to 8 months of your expenses. The money needs to go in a liquid account, so it can be accessed when necessary, but it needs to be completely ignored otherwise. What good is an emergency fund that has been spent?
Now that you have your emergency fund, you are set, right? But what happens when something comes up? When is it okay to spend that money? Emergencies can take so many forms: medical emergencies, car repairs, accidents, a good sale. Wait. What was the last one? What actually constitutes an emergency that is worth shredding your security blanket?
Here are three questions to ask yourself before you spend that money:
- Is the expense necessary? If it’s a voluntary expense, you should create a savings goal and wait to buy it until you can actually afford it. Emergency funds are meant for emergencies, not whims. A good sale is never an emergency.
- Is it important? When my motorcycle breaks down, it gets parked until I can afford to pay for the repairs. When my car breaks down, I need to get it fixed so I can get the kids to daycare and myself to work.
- Is it urgent? Is this an expense that can be postponed until next month, when you have a chance to sell something you don’t need, or rearrange some items in your budget to “find” the necessary cash? If it doesn’t need to be paid right now, it may be best to put it off. In the case of medical bills, you can usually get on a payment plan with no penalties, if you ask. That can change an expensive obligation to a manageable monthly bill.
Your emergency fund should only be used on things that are important, necessary, and urgent. Anything else should get postponed until you can afford to pay it using your on-budget expense items. As the wise man once said: “Lack of planning does not constitute an emergency.” Of course, if you are in a financially stable situation and willing to take a small risk for a short time, eliminating an entire debt item to save the interest can be the right decision.
What would you be willing to spend your emergency fund on?
Teaching My Child about Money in a Way I Was Not Taught
When I was in high school and working 15 to 20 hours a week, my mom gave me free rein to use the money I earned as I would like. Actually, she said nothing to me about saving for college or putting some money into savings.
When I had friends who complained that they had to put away some of their earnings, I commiserated with them. How unfair of their parents to make them save some of their money! They worked hard for their money, often at crappy part-time jobs. They deserved to spend the money any way they saw fit.
The way I saw it, why save for college? According to financial aid rules, if the student has any savings, she would have to use the majority of it to pay for college. How unfair. To add insult to injury, if prospective college students have some savings, they would qualify for less financial aid, which often meant fewer student loans.
The injustice.
Yes, it was better to spend my hard earned money than save it and be penalized.
No one told me differently. In fact, many people in my family agreed with me and encouraged me to buy a used car to get to and from my job. Of course, I paid the loan payments for the car, the gas I used and my insurance out of money from my job. That was a responsible use of money, but I also went out to eat with friends, a lot. At 16, I was going out to eat with my friends twice a week at least.
However, my plan worked perfectly. When I went to college, I didn’t have to use any of my hard earned cash. No, not me, because I hadn’t saved anything. Instead, I left college with nearly $20,000 in student loan debt. I took two years off and paid down as much student loan debt as I could, getting it down to about $8,000, but then I went to graduate school and took on more student loan debt. I graduated with nearly $25,000 in debt total. I am still paying on it today, 13 years later.
Now that I am the parent, I am one of those “awful” parents who makes her kids save. My son knows when he gets his allowance, some goes to save, some goes to donate, and some goes to spend. True, it makes me cringe when he uses his spend money on little trinkets like temporary tattoos, stickers, and gum, but I keep silent. He did the work to earn the money, and he can spend it as he likes. However, I am inflexible with saving; that money must be set aside. When he goes to college, I expect that he will have to use the majority of that money. Rather than seeing it as a waste, I see it as an important component of his financial education. Spending his money to pay a portion of his college education will hopefully make him take college more seriously.
Meanwhile, I have already begun having chats with him about money, spending, and budgeting. He watches his dad and I work hard to pay down our debt with gazelle intensity. He sees me use a calculator at the grocery store to see how much our groceries will be.
Ultimately, he will make his own financial decisions as he grows up, but I plan to teach him throughout these important years so that even if he turns into a spendthrift, he will have a firm financial understanding to revert to as he ages. While my mom taught me how to stretch money further, she never taught me how to save; I hope saving is a lesson my son takes with him throughout his adulthood.
How do you teach your kids about money management?
Melissa writes at Fiscal Phoenix where she encourages people to rise from the ashes of their financial mistakes as she and her husband are doing.
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.