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How have you improved your situation today?

Every day, in some small way, it’s important to do something to improve your situation. Whether it’s paying down debt, researching inexpensive alternatives to your existing expenses, or something as simple as hugging your spouse or playing games with your kids.

Educate

I was once told that every day, you either get smarter, or you get dumber. Don’t do the latter. Never pass up an opportunity to educate yourself. Make the day good for you.

Read a book. There are hundreds of personal finance books available. Dave Ramsey’s Total Money Makeover is a great place to start.
Read a blog. Once again, lack of choice is not a problem here. There are thousands of choices. My favorites are in my sidebar, to the left.
Find a mentor. Failing that, get a PF-Buddy. Find someone you can call when you need the moral support to make an appropriate or difficult financial decision.
Take a class. Whether it’s a personal finance class, or some other way of improving yourself, do it. Many cities offer affordable community education classes. Ad Hoc college courses are another option.

Elucidate

It’s incredibly important to understand your situation. If you don’t know where you are, how can you control where you’re going?

Examine your finances. I heartily recommend Quicken to track your finances, but Mint is a great place to see where your money has gone.
Know your debt. It’s important to know your debt. Own it. Know your fees and your rates. Know every cent you owe. Get a spreadsheet or a notebook and write it all down. Keep it updated. Mint is great for this. I update my debt-sheet monthly.
Know your spending. This is another plug for Mint. There’s no better way to see where your money has gone in the past. I use Quicken for the present and future, Mint for the past and snapshots.
Find your waste. Do you have the cheapest plans that meet your needs for television, internet, phone service? Do you have AAA and roadside assistance through your insurance company?
Talk to your spouse. Discuss your finances. Make sure everyone is on the same page and there are no surprises or hidden bills. Plan together.
Eliminate problems early. If you see a problem, eliminate it before it gets out of control. The earlier you identify a problem, the easier it is to eliminate.
Family meeting. Get the family together so everyone can participate, even the children. Young eyes sometimes have a clarity that a lifetime of habits has clouded. If your kids understand the concept of money, they are old enough to participate and even help. Brainstorming means that no idea is a bad idea. It may not be implemented, but everything is worth hearing.

Eradicate

What’s left? Eliminate baggage. Kill your bills. If you’re paying for something you don’t want or need, get rid of it!

Unnecessary items. Do you have an extra cell phone or an insured motorcycle in the garage? Time to cancel.
Unused items. Do you really use the movie package in your cable bill? Are you saving money with Netflix, or would Redbox be a better option?
Forgotten bills. Did you sign up for an identity protection scheme or an appliance repair plan for an appliance that no longer exists? Cancel!
Fees. What fees are you paying? Do you have an annual fee for your credit card or minimum balance fees at your bank? Find new institutions. Loyalty to your bank may be costing you money.

Unused or unnecessary bills are nothing but unhappiness generators. They don’t provide value so trim the waste and get rid of what you don’t need.

Save Your Family

Finance, Life, Parenting

I don’t attach much importance to dreams. They are just there to make sleepy-time less boring. Last night, I had a dream where I spent most of my time trying to prepare my wife to run our finances before telling my son that I wouldn’t be around to watch him grow up. That’s an unpleasant thought to wake up with. Lying there, trying to digest this dream, I started thinking about the transition from “I deal with the bills” to “I’m not there to deal with it”. We aren’t prepared for that transition. Last year, we started putting together our “In case of death” file, but that project fell short. The highest priorities are done. We have wills and health directives, but how would my wife pay the bills? Everything is electronic. Does she know how to log in to the bank’s billpay system? Which bills are only in my name, and will go away if I die? Is there a list of our life insurance policies?

I checked the incomplete file that contains this information. It hasn’t been updated since September. It’s time to get that finished. Procrastinating is inappropriate and denial is futile. Here’s a news flash: You are going to die. Hopefully, it won’t happen soon, but it will happen. Is your family prepared for that?

The questions are “What do I need?” and “What do I have?”

First and foremost, you need a will. If you have children and do not have a will, take a moment–right now– to slap yourself. A judge is not the best person to determine where your children should go if you die. The rest of it is minor, if you’re married. Let your next-of-kin, your spouse keep it. I don’t care. Just take care of your kids! Set up a trust to pay for the care of your children. Their new guardians will appreciate it. How hard is it to set up? I use Quicken Willmaker and have been very pleased. Of course, the true test is in probate court, and I won’t be there for it. If you are more comfortable getting an attorney, then do so. I’ve done it each way. You can cut some costs by using Willmaker, then taking it to an attorney for review.

It’s a sad fact that often, before you die, you spend some time dying. Do you have a health care directive? Does your family know, in writing, if and when you want the plug pulled? Who gets to make that decision? Have you set up a medical power of attorney, so someone can make medical decisions on your behalf if you aren’t able? Do you want, and if so, do you have a Do-Not-Resuscitate order? Willmaker will handle all of this, too.

What’s going to happen to your bank accounts? I’m personally a fan of keeping both of our names on all of our accounts. I share my life and my heart, I’d better be able to trust her with our money. If that’s not an option, for whatever reason, fill out the “Payable on Death” information for your accounts, establishing a beneficiary who can get access to your money if you die. Do you want your spouse to lose the house or the car if you die? Should your kids have to miss meals? Make sure necessary access to your money exists.

Does anybody know what you have for life insurance? Get a copy of the policy and make sure your spouse and someone else knows what company holds it and how much it is worth.

Now, it’s time to make some lists. You need to gather account numbers and contact information for everything.

Bank accounts. List every bank and account you own. Checking, savings, CDs.
Investment accounts. Again, every company, every account.
Mortgage and car payment information.
Life insurance. Get your policy numbers, contact information, beneficiaries, and amount of coverage all in one place.
Credit card accounts. Every card, every company. If it’s just your name on the account, your spouse will need to send certified death certificates to stop collections. Otherwise, she’ll need to pay the bills.
Utilities. Get the account number for the electric bill, the gas bill, water/sewer/garbage, cable and phones.
Other bills. These include car/home insurance, Netflix, memberships and anything else you pay.
I’ve included the account information for my web host, registrars and websites. Some of it is salable, some of it is income-generating.
Car titles. Put the actual titles in the pile of lists.
Property deeds. Keep these here, too.

Non-financial information to list:

Online accounts. Any financial sites that would be useful, or any community sites you would like to have informed about your death. Your online presence is a part of who you are.
Email accounts. Will your survivors need to interact with anybody potentially contacting you? They will need your username and password, or most big providers won’t let them in.
Social media. How many networks do you participate in? Do you want to disappear, or should all of your Facebook friends know your dead?
Blogs. Do you have a blog that needs an announcement? Does it generate income? Could it be sold?
Contact list. Who else needs to be informed of your demise? Don’t make your loved ones hunt for the information.

Now, take all of this information and put it in a nice, fat envelope and lock it in the fireproof safe you have bolted to the floor. Make a copy and give it to someone you trust absolutely. Make sure someone knows the combination to the safe or where to find the key.

Your loved ones will appreciate it.

Debt Scams

Finance

When you are up to your eyeballs in debt, praying for a step-stool, sometimes life–more accurately, con-artists–try to trip you when you are vulnerable and look for a solution. They aren’t muggers on the street. They come at you wearing ties, invite you to a real office, with real furniture and a real nameplate on a real desk. They are a real company, but that doesn’t mean they aren’t trying to scam you out of the little money you have left to put towards your debt.

Yes, I am talking about debt management scams. These scams come in 4 main varieties.

Debt Settlement companies instruct you to stop paying your bills completely and send them the money instead to be placed in a settlement fund. When your creditors get desperate enough, they will be willing to settle for pennies on the dollar.

In theory, this can be a good strategy for some debtors. Unfortunately, it has some drawbacks, even if the company is legitimate. They tend to charge high fees as a percentage of your deposits. Some take another fee when a settlement is accepted. The entire time you are building your settlement fund, your credit rating is sinking, leaving you open to being sued or garnished. The bad companies take the fund and run, while even the good companies can’t guarantee your creditors will play ball.

Ultimately, they aren’t doing anything you can’t easily do yourself. If you want to go the settlement route, stop making your payments and funnel the money into a savings account that you will use to offer settlements from. It takes discipline, but there is no upside to paying someone else for the same function.

Debt Management plans are used when you owe more than you can afford to pay. These companies work with your creditors to adjust interest rates and minimum payments and they try to get some fees waived for you.

A good company will work with you and your creditors to make sure everyone is working together towards the goal of eliminating the debt. A bad company will tell you they are working with your creditors while ignoring any contact from the creditor. They’ll tell you the creditor isn’t willing to negotiate while never stepping up to the negotiation table. Another trick is to offer the creditor a set payment, with a “take it or leave it” clause. Any input from the creditor is interpreted as a refusal to participate. This, coupled with high fees paid by the debtor, make debt management firms a risky proposition. Most states require the firms to be licensed. Check to make sure they are before giving them any information.

Debt/Credit Counseling companies work with you to establish a budget and eliminate expenses; in effect, they are training you to be in control of your finances. They are often organized as a nonprofit, but not always.

Some–the sleazy ones–lie about what they are doing, or attempt to misconstrue what you are agreeing too. Be careful not to use your home as collateral to consolidate unsecured debt and don’t walk into a Chapter 13 bankruptcy without that being your intention. Both of those are common debt counseling scams. If the company isn’t able to provide all of the details of a transaction–company name, address, licensing information–or they aren’t willing to spend as much time as necessary explaining the details of the transaction, walk away. This is your life, you are in charge of it. Don’t let anyone bully or prod you into signing something you aren’t comfortable with.

Credit Repair is almost always a scam. There are ways to get correct bad information removed from your credit report. If the information is correct, those methods are illegal. There are two legal methods to repair your credit. First, stop generating bad credit. Make your payments on time and eventually, the bad items will fall off. Second, write letters disputing the actual incorrect items on your credit report. There are no quick fixes, and anybody telling you different is flirting with a jail sentence, possibly yours.

How do you avoid the scammers?

Be skeptical. If it looks to good to be true, it probably is. There is no such thing as a magic wand to fix your credit and make your debt disappear. Bankruptcy + 10 years of your life is the closest thing to magic credit repair in this world.
Only use a legitimate credit counselor. Verify them through the Better Business Bureau and the National Foundation for Credit Counseling (1-800-388-2227 or www.nfcc.org)
Check the license. Most states require credit and debt counselors to be licensed. If they’re not, run away and report them.
Read the find print. Don’t sign anything you don’t understand. Like every other piece of your financial life, own the transaction. Know what your are doing, or don’t do it.
Are they willing to work with you? If they’ve got a generic plan that doesn’t account for your specific situation, they are probably a con. At the very least, they are a worthless company and a waste of both time and money.
Are they willing to work with your creditors? If not, they won’t be accomplishing anything for you.
How much do they cost? Higher fees may not be an indicator of a scam, but call around and find out if they are in the right ballpark. Triple or quadruple the going rate is a sign of someone who will disappear late one night, with your hopes, dreams and savings in tow.
Above all else, trust your gut. If it doesn’t feel right, it probably isn’t. There is nothing a counselor can do that can’t wait a few days while you check them out.

There is no magic bullet to kill debt. You’re not fighting a werewolf, you’re fighting a lifetime of bad or unfortunate choices and circumstances. It’s important to keep a realistic outcome in mind.

Update: This post has been included in the Carnival of Debt Reduction.

Mistakes Made

Finance, Life

: Image by K. Sawyer via Flickr

My wife and I started dating when we were 19. We married shortly thereafter, and–at 31–we have 3 kids.

Now, most of a decade into my career, with a dozen years of experience as both a husband and an adult, I think we make decent decisions.

When we were younger, though, we were dumb. We didn’t think much past the “year” in “0% for a year”. Our long-term financial planning was non-existent. Heck, most of the time, our short-term financial planning usually consisted of a call to the bank to see if we had enough money to buy whatever we wanted at the moment or rushing to the bank to deposit the change we found in the couch, hoping to beat the last check we wrote.

We were never able to judge ourselves based on how happy we were. It was always a matter of how we were doing in relation to someone else. A relative–a close relative–is 10 years older than we are. That means, naturally, that she had a 10-year headstart on us. We saw the nice house, the nice cars, and the nice furniture and couldn’t help but compare it to our situation. Their stuff was always shiny and new, while we were making repairs and ignoring rust.

That comparison always made responsible spending difficult. We watched one friend upgrade her house twice in 2-3 years, while driving nice cars. Why couldn’t we do that, too?

Bad logic.

In one year, we put an addition on our house, got married, bought a brand-new pickup, and spent 10 days on a ship in the Caribbean. We did that with a gross household income of about $40,000. Before that summer, we didn’t have a mortgage. Since that summer, we have had a car payment, a credit card payment, and a mortgage payment.

I can still smell the scorched plastic peeling off the sides of our well-used credit cards. That year was when we figured out how everyone else affords all of the nice stuff: they bury themselves in debt.

The debt was never a big deal to us. Yes, money was tight. We always had more month than money, but we also had $50,000 in available credit on the cards and a $5000 credit line serving as our overdraft protection. Since we never missed a payment, we thought we were doing well. After all, you don’t have to be able to afford the debt, as long as you can afford the payment, right?

After that, we started putting the nice truck to work hauling home new furniture. Who can go wrong with 0% for a year? Surely, I’d have a raise by the time that comes due.

The same time we paid off the truck, I got a raise. It was a good raise. There we were, a wallet full full of balance-laden credit cards, a mortgage that we could have done without, furniture we were still paying for years later, a freshly paid-for truck, and a small stack of new money. That meant, of course, that we could “afford” a new car that came with a payment that was–coincidentally–equal to the raise. No problem.

Six weeks later, I got laid off.

Two weeks into the layoff, we found out that we were no longer “trying” to have another baby, we were just waiting for 9 months.

I wish(wish!) that would have been a wake-up call, but that moment of clarity was still 18 months away. The driving obsession to get out of debt was another 18 months away. Unemployed and expecting brat #2, I still wasn’t ready to take a rational look at my finances. That, however is a story for another day. Today, is my day to share my biggest financial blunders, not my successes.

What financial mistakes have you made?

Where the hell have I been?

Finance

For the last year or so, I haven’t been writing much, which feels weird. I used to write three timer per week. I’d write about saving money, investing, frugality, sometimes, relationships and parenting.

But that stopped. Why?

When I started this site, I was about $110,000 in debt, and just starting my journey out of it. A few months before, I was looking into bankruptcy, because I didn’t know how to get out of debt.

For years, the ways I saved money, cut corners, and earned extra money was fodder for this site. Everything I did was about saving money, earning money, and paying off debt.

Now? I’m about 2 months away from being completely debt-free. I paid my mortgage off last month, and have about $10,000 in credit card debt at the moment. I know, I paid that off backwards, but there are reasons. Reasons I’ll share another time.

4 years ago, I was essentially working 4 jobs. My day job, my gun training business, my internet marketing business, and my websites(including this one). I was working all of the time. It was necessary, but it’s a path to burnout. Then, I changed jobs a couple of times, nearly doubling my day job’s pay. My business partner got promoted out of a position that generated leads for one of our businesses, then had an accident that the other shared business on hold for a while.

Suddenly, I had free time and enough money coming in that I didn’t need to work all of the time. It was a crazy place to be after spending more than a decade pretending to be a workaholic just to keep my head above water. (Here’s a secret: I’m incredibly lazy. I’m just the busiest lazy man I know.) So I started pursuing hobbies.

Linda and I have been taking ballroom dancing lessons and are nearly to the point that competing is a real possibility.

I cleaned out my garage and assembled a decent wood shop, which is something I’ve wanted to do roughly forever.

I’ve been taking blacksmithing lessons with my teenage son.

I’ve been playing games with my kids, dating my wife, and simply enjoying my life.

This site?

Through all of that, I haven’t known what to write about.

“Dear audience, this month, I paid my bills, didn’t go on vacation, and bought a drill press.”

“Dear audience, my debt went down another $500 this month.”

“Dear audience, I didn’t buy a car I can’t afford this month. Again.”

Those aren’t good articles. Financially–while paying off debt is disturbingly exciting–my life is very repetitive. That’s the hardest part about paying off a lot of debt. It’s good, it’s necessary, it’s boring. My wins have been spaced out by several years lately, and I haven’t been creatively frugal. Screw frugal. If you can afford some conveniences and luxuries, frugal sucks.

Anything new happening in my world that would apply to this site would make it read like an accountant’s ledger book. $100,000 minus $1500 plus $10,000 minus $300, ad nauseum.

Instead of inflicting boring accountancy on you, I’ve been absent.

What next? Who knows. I enjoy writing. I enjoy writing here. I’ve started writing a novel.

What would you like to see here?

Living the High Life

Finance, Life

This post is part of the Yakezie Blog swap. I have swapped this week with Eric at Narrow Bridge Finance. This is a post from Eric discussing the theme: What Motivates You to be Financially Responsible? Please take a moment to read my post, Monsters, at Eric’s site.

Unlike my blogger buddy Jason here at LiveRealNow, I have no family. Quite the opposite in fact, I am loving the single guy life. I don’t have much debt. I love going to the bars and partying on the weekends. I have a good job. I have relatively low expenses. Things are good.

So what is my motivation to be financially responsible? It is two-fold. First, I want to be able to keep doing whatever I want whenever I want without worrying about money. Second, I do want to settle down someday in the not too distant future and make sure I have a good foundation to start the next chapter of my life.

I Want to Do Whatever I Want Whenever I Want

Is that selfish? Probably. But who cares? I don’t have kids, I don’t have a wife. I don’t even have a girlfriend at the moment. I do make an effort to donate to local organizations I believe in and I am happy to have friends over for a pre-game and buy a round of drinks, but that is as far as my obligation to others goes.

Doing whatever I want is not always cheap. I like going to concerts. I enjoy nightclubs. I love traveling and exploring new places. $80 tickets, a $15 cover plus drinks, and a $500 trip are fairly common occurrences in my life.

As you know, money doesn’t grow on trees. I have to work hard to pay for the things I want and the experiences I have. I am totally okay with that. But I have to plan now to be able to do what I want later.

I live in a modest and inexpensive apartment. I try to keep my food budget low. I bought a small car that would be reliable, low maintenance, and fuel efficient.

By cutting out wasteful spending and thinking before I spend, I am able to do pretty much whatever I want. If you have the same goal, dive into the depths of your budget. Dig in deep and see where you are spending money. Not to be cliché, but the ‘latte factor’ is a big deal. Those stops at Starbucks, afternoon snacks, energy drinks, cable bills, and other cash drains might not be worth it. If you don’t really, really enjoy it and get pleasure from it, why would you spend money on it?

My Future – Family, Travel, and Early Retirement

I am 26. I am at that point where I am going on a lot of dates. I am meeting a lot of great girls. One of these days, probably when I least expect it, I will fall madly in love and get married. You know the story.

My short term dream is a life of travel and urban living. My long term dream is to get married to a hot Jewish girl (I am Jewish, so it makes sense to “keep it in the tribe”) and have two or three kids. Once kids are in the picture, we move out from the urban fun areas and settle down in the burbs.

But just because I will give up the party life does not mean I have to give up my passions. I want to show my kids the world, give them amazing life experiences, and help them grow to hopefully be even more awesome than me, which is a hard bar to beat.

To do all of that and reach financial freedom, I have to set my goals and work to achieve them. (In case you were wondering, Jason recently wrote a great post on financial goal setting. If you have not read it yet, you really should.)

To get there, I am already working on saving and investing. I am contributing over 10% of my gross income at work to my retirement plans. I am working hard to pay down my student loans and save up a down payment fund. I am planning ahead and saving for my future goals.

How to Reach Your Goals

You probably have financial and life goals too. What are you doing to get there?

We can always tell people about our dreams. However, unlike when you are two years old and dream of being an astronaut police officer that lives in a toy store with an ice cream machine and a McDonald’s in it, your dreams today can be a reality.

With few exceptions, every person can reach their goals. Do you want to retire at 40? Take steps to save and create residual income streams. Do you want to travel in space? Save up to buy a ticket on Virgin Galactic. Do you not have enough money? Diversify your income streams and make more. Do you feel chained down by your traditional desk job that you hate? Start a business and transition to self employment.

Yes, it is easier said than done. But you will never reach your goals unless you take solid steps to get there. Don’t just dream it, live it.

Please take a moment to head over to Eric’s site, Narrow Bridge Finance. While you’re there, be sure to subscribe. You don’t want to miss his posts.

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Educate

Elucidate

Eradicate