- Dora the Explorer is singing about cocaine. Is that why my kids have so much energy? #
- RT @prosperousfool: Be the Friendly Financial “Stop” Sign http://bit.ly/67NZFH #
- RT @tferriss: Aldous Huxley’s ‘Brave New World’ in a one-page cartoon: http://su.pr/2PAuup #
- RT @BSimple: Shallow men believe in Luck, Strong men believe in cause and effect. Ralph Waldo Emerson #
- 5am finally pays off. 800 word post finished. Reading to the kids has been more consistent,too. Not req’ing bedtime, just reading daily. #
- Titty Mouse and Tatty Mouse: morbid story from my childhood. Still enthralling. #
- RT @MoneyCrashers: Money Crashers 2010 New Year Giveaway Bash – $7,400 in Cash and Amazing Prizes http://bt.io/DDPy #
- [Read more…] about Twitter Weekly Updates for 2010-01-16
Link Roundup
Wrestling season is finally over. Q1 is always such a busy time in my house. Now, spring has sprung and it’s time to start enjoying the weather.
On to the links.
Finance:
Here’s an intro guide to settling IRS debts.
Only someone who’s never had to deal with the full default process could think this was a good idea. The Department of Education outsources its collections for a reason. Eliminating private lenders will raise the students’ costs and eliminate options for troubled debtors. Yes, I worked in the industry for several years.
The Guide to Buying Glasses Online. I currently have 6 pairs of glasses that cost me a grand total of $150, with no loss in quality.
PenFed: Credit cards done right.
Not finance:
This is the coolest picture I’ve seen this year. Space pics for under $1000. NASA could take lessons, I think.
I miss the days when napping was possible.
38 Random Acts of Robyn. I’m thinking about incorporating this as a 30 day project.
Lawdog has a great idea to fix the problems with our legislature. It’s a beautiful Constitutional Amendment. If they have to play by the rules they set, the might start setting better rules.
“Only excepting such limited protection as offered by Article One, Section Six, Congress is hereby prohibited from exempting its Members from each, any, and all effects, duties or obligations rendered upon any citizen, or citizens, by any Law, Tax, or other action passed by Congress.”
Chains of Servitude Update
It’s been almost exactly one year since I told my wife that we were either going to take control of our finances or file bankruptcy.
At that time, we were spending at least $500 more each month than we made, and often, it was $1000 more. We had more than $5000 accumulated on our overdraft line of credit, more than $30,000 in credit card debt, $2500 on a student loan, $12,000 on a car note, and our mortgage.
Our savings were nonexistent. We had automatic deposits established, but we’d transfer the money out right away to cover other expenses. Everything that came up was an emergency and a surprise. We had no real idea how much our lifestyles cost or what it actually took to maintain.
Maintaining our finances took several hours every payday to balance the checkbook and pay bills.
Fast forward 1 year. The student loan is gone, the line of credit will be gone next month, and the car loan will be paid off before the end of the year. We’ve reduced our total debt load by more than 20%.
We have a useful emergency fund and we’re meeting our other savings goals, including a college fund for the kids. We don’t have extremely high balances, but it’s reassuring to have more than a couple of months of expenses in our savings accounts.
We’ve automated almost everything and gone to a cash-only system. I now spend about 20 minutes a month balancing the checkbook and less than 5 minutes paying bills.
A year ago, we were in a hole, digging as fast as we could. Now, we can see the end of the debt tunnel and we are rushing as fast as we can to get there. According to my debt spreadsheet, we will be completely debt free in just under 4 years, ignoring any money coming from our side-hustles and work bonuses.
We’re making better progress than I had hoped for, and it keeps getting easier. Smart spending is becoming a habit, instead of a just wishful thinking.
Update: This post has been included in the Carnival of Debt Reduction.
3 Simple Ways Keeping Your Spending Organized
- Image via Wikipedia
On of the biggest problems we had with controlling our finances was knowing where the money went. Have you ever said “Honey, do you realize we spent $900 eating out this month?” I have. The amount we spent on some categories was mind-blowing. Maybe some people don’t see $900 at restaurants, $400 on clothes, or $300 on books and movies as a problem, but I do and it was ridiculous! We’ve dialed back hard on the unnecessary spending and the first step was to understand our spending habits. That was a painful self-examination.
Here’s what we did:
- Have a Budget. This is quite simply the most basic step in organizing your finances. If you don’t have a budget, you don’t have a plan for where your money will go. Without a plan, your money goes on about its business without consulting you. Your money does not like you. It will do its level best to get as far away from you as fast as possible. A good budget is like shackles for your cash. Never underestimate the value of a good pair of shackles.
- Use a Spending Journal. Before we went cash-only, I was a no-cash spender. Every purchase was with my debit card and every receipt went into my wallet. That’s a disorganized, but effective spending journal. When it was time to balance the checkbook, I could look through my receipts and no exactly where the money went. It was nice to have a chance to wave good-bye and send it a postcard as it ran away from home. Other people use a small notebook or even–for the truly cutting-edge–the register that comes in a box of checks. Whatever system you choose, make sure you use it. If you don’t know where your money has gone in the past, how can you plan for the future?
- Use a Ledger. Most people call this the checkbook register. I use Quicken. About once per month, I sit down with any receipts we’ve generated and the list of transactions on the bank website and I balance the checkbook. I note everything we’ve spent, flag everything that has cleared the bank, and make sure all of the numbers match. This gives me a chance to review everything we’ve had incoming and outgoing and address any abnormalities while there is still a chance to get the bank to address problems.
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How do you track your spending?
Update: This post has been included in the Carnival of Personal Finance.
5 Ways to Change Your Spending Habits
If you keep doing what you’ve always done, you’re going to keep getting what you you’ve always gotten. One of the hardest things about getting out of debt is changing your habits. You need to break your habits if you’re going to get yourself to a new place, financially.
How can you do that? Habits aren’t easy to break. Ask any smoker, junkie, or overeater what it takes. There are a lot of systems to break or establish habits, but they don’t all work for everyone.
Here are my suggestions:
- Commit to just 30 days. I’m a big fan of doing new things for 30 days. If you can do it for a month, you can do it forever, no matter what “it” is. For just one month, don’t buy anything. I don’t mean avoid buying groceries or toiletries and I certainly don’t mean to stock up on new crap the day before your 30 day spending fast or rush out for a shopping spree on day 31. Just don’t buy anything for a month, no exceptions but the things necessary to stay alive and healthy. No movies, no games, no cars, no toys, and no expensive meals. Just 1 month.
- Switch methods. If you pay for everything with a credit card, restrict yourself to just cash. If you pay cash for everything, switch to a credit card. Breaking your long-established habits is a way to get used to spending consciously: taking the time to think about what you are doing, instead of just spending mindlessly.
- Identify your spending triggers. I can’t go into a book store and come out empty handed. So, I avoid bookstores. My wife has problems with clothing stores. A friend can’t walk out of a music store without some body piercing equipment. What are your triggers? What makes you spend money without thinking? Figure out what those things are and then avoid them like the plague…or the clap.
- Quit buying things for pleasure. Buying things makes us feel good. It sends a rush of endorphins through our bodies. The more we get that rush, the more we crave that rush, so the more we do to get it. You need to stop that. Before you buy something, ask yourself if it’s something you actually need, or if you just want a pick-me-up.
- Avoid shopping online. E-commerce sites make it far too easy to buy things at a moment’s notice. You don’t have to think about what you are doing or if you actually need whatever you are buying. You just buy. The best way too avoid them is to delete your credit card information from any site that save the information and delete the sites from your bookmarks. Whatever you can do to slow down the buying process will make it easier to avoid buying things, which can soon be stretched into NOT buying things at all.
Habits—especially bad habits—are hard to break. There is an entire self-help niche dedicated to breaking habits. Hypnotists, shrinks, and others base their careers on helping others get out of the grip of their bad habits, or conning them into thinking it is easy to do with some magic system. How do you avoid or break bad habits?
Changing Circumstances
When I started this blog in 2009, I was broke and in debt to my eyeballs. It began as a way to publicly hold myself accountable and vent my need to talk about my money problems.
Those needs are changing for me because my circumstances are changing.
When my mother-in-law died, she left us a big physical mess in her house, but the financial picture is coming out nicely. Even though the details and paperwork have been horribly scattered and difficult to piece together, the end result is significant.
I have 2 side businesses that are not generating enough money to quit my day job, but should be by this time next year.
Right now, I have just under $17,000 in credit card debt. By Monday, it will be $3500. By December, it will be gone.
We’ll be dropping $15-20,000 into modernizing the house we’ve inherited, but then we should be able to rent it out for a net profit of $800 per month.
We paid off the inherited car last night. We haven’t decided if we’ll keep it or sell it.
All told–by the end of the year–we’ll have no debt except our primary mortgage and the additional income stream of a rental property. By the end of next year, our mortgage may be gone.
That’s a significantly different place than the one I started in 3 years ago.
What’s it mean for Live Real, Now?
It’s hard to talk about paying off debt every day when you don’t have debt. I imagine I will post more about making money and increasing the top line rather than shrinking debt and reducing the bottom line.
What’s next? I’m not sure, but I do know that I won’t be going away. You’re stuck with me. What would you like to see?
