Six Budget Trimming Ideas

March 9, 2012 in Budget, Credit Cards with 0 Comments

Six Budget Trimming Ideas

People on the journey to debt freedom are always looking for ways to trim the fat from their budgets. There are plenty of line items in my own budget that are due to get on a diet. For many people, these budget fattening items vary from daily expenses to monthly bills that are just really not necessary. Trimming these not-so-necessary items from your budget will do a few things. First, they will create margin for you. You won’t stress so much about getting your debts paid off because you’ll actually have extra cash to throw at them! Second, you’ll begin to get even more intense about crushing debts! You’ll begin to see all the things that you can do without and take even further steps to find other things you can cut out.

Here are six ideas for trimming some fat from your budget:

Cut out cable. This is something that my family did four years ago and we have not missed it for one day! People think we are some kind of crazy, backwoods, nutjobs…but that is okay!
Brown bag it. I cringe every time I go to the cafeteria at my work to spend at least $6 on lunch. I don’t regularly do this because I have a loving wife who makes a mean meal. But adding up $6 a day for a week’s worth of meals and you have $30. Do that for a month and it’ll be in the neighborhood of $120. That is a ton of money!
Brew your own coffee. I enjoy Starbucks as much as the next guy, but seriously I can buy almost a pound of coffee for the same price as a Venti Latte. Personally, I now make a little pot of stovetop espresso for about 19 cents per serving. Savings = about $4 a day.
Negotiate. This has the potential to save you a ton of money. You can negotiate many things like your cell phone bill, your credit card interest rate, and your cable/internet bill. These savings can be huge! I’m currently negotiating interest rates on my closed credit cards and also with my internet service provider. These two things alone have the potential to save me hundreds per month.
Use less. By this I mean use less water, electricity, or other variable bills. Kick your air conditioner up a few degrees or your heater down a few degrees. Seems like it would be such a small change, but it really adds up. Take a shorter shower or even take a navy shower where you turn the water on and off as you wash.
Budget in blow money. This is money that you can do whatever you want with. How is this a budget trimming idea? Well, it is more of a budget blowing safeguard. You see, if you have a budget for spending then you’re less likely to blow your budget.

These are all steps that I have taken to reduce our monthly budget and they really have worked well for us. Are there ways that you’ve used to trim the fat from your budget? What has and has not worked for you?

As a Dog Returns to His Vomit

March 8, 2012 in Debt Freedom, Stupid Tax with 0 Comments

As a Dog Returns to His Vomit

As a dog returns to its vomit,
so fools repeat their folly. – Proverbs 26:11

Have you ever seen a dog throw up and then return to lick it up? For me, this has to be one of the more interesting behaviors of dogs. I mean seriously, I have gotten sick a handful of times in my life and I’ve never had the compulsion to slurp it back up. Gross enough for you? It is for me! But, I’ve been prone to returning to my financial vomit over the course of my life. Evidently the taste isn’t so bad that I cannot stomach returning to my own financial vomit.

As a Dog Returns to His Vomit, so a Fool Repeats His Folly (HT creativeDC on FlickrCC)

If you have been reading this site for any length of time, you know a little bit of my story. I started early in my teen years exploring stupid spending habits and credit card debt. I then defaulted on some debts and lived for many years without borrowing a cent (mainly because I COULDN’T!), then got married. My wife had great credit and was able to get numerous credit cards. Surprisingly, I returned to my poor spending habits and accumulated huge amounts of debt. Actually, it wasn’t a surprise!

What can you do if you’re like me and foolish enough to return to your own foul financial vomit? First, I would suggest a good mouthwash! Then, I would encourage you to stand up, take charge, and move on. That is really what we all need. It is easy to find ourselves laying in our own stink and just give up. But, the path to true success is paved with stories of people who after falling down, got back up and fought their way out. Seriously, if you look around at personal finance sites and read the stories of people who have plugged their way out of debt you’ll see some great examples of this. You’ll see stories of people who had way bigger piles of vomit than you or I who were able to overcome. I’m continually encouraged by reading and listening to people who have been where I am and how they got their financial mess in order.

Vomit doesn’t taste good. Financial folly is not something that I want to ever revisit. I want to win with money, live like no one else, and give like no one else. I’m committed to never again returning to my own pile of filth. How about you? Are you in?

Which Debt to Pay Off First

March 7, 2012 in Debt Freedom with 0 Comments

Debt Payoff: Which Debt to Pay First?

Debt repayment can sometimes become an interesting game of robbing Peter to pay Paul. I have found myself juggling various payments in order to make other payments, and then stalling another payment in order to keep the lights on. So, how do you know what debt to pay off first?

My approach is easy: Take care of food, clothing, shelter, and utilities first. You and your family will not be able to pay for any debts if you do not have these necessities taken care of. You’ll also feel very much at ease once you have these things taken care of. Next, if you are current with any debts, keep paying those. I would add your vehicle into this area, as long as you’re current or can get current on it. Third, pay whatever you can afford on the rest. This includes credit cards, collections accounts, medical bills, etc. Now, don’t be mistaken, these folks are due whatever you owe them and they will come after you for it. They will call non-stop and hound you in every way imaginable. They want their money. Some of them will be nice, but most will not be nice. Deal with those who are willing to deal with you first. If you can pay them a lump sum and settle, do that!

Dave Ramsey's Debt Snowball, start smallest debt first, then payoff others!

Dave Ramsey's Debt Snowball, start small and compound! If you're wondering which debt to payoff first, look no further! (HT ff137 on FlickrCC)

Special circumstances to consider when determining which debt to pay off first:

If you owe the IRS, they will take priority. They can mess with you in ways that you don’t want to find out. Render unto Caesar what is his first!
If you simply cannot pay any extra, don’t. It is not the end of the world, though it may seem so. You’ll make it through this time, trust me! J You’ll eventually need to pay, but take care of your necessities listed above first and screw everyone else!

When all that is figured out, you can take various measures to pay off your debts. My suggested method is Dave Ramsey’s Baby Steps and Debt Snowball (or avalanche, depending upon length of time to pay). Build yourself a budget, then an emergency fund, then work the snowball, then the rest of the baby steps.

What about you? What debt did you pay off first? What debt would you suggest someone pay off first?

Is Debt Bad?

March 6, 2012 in Debt Freedom, Stupid Tax with 0 Comments

Is Debt Bad?

Debt takes many forms from credit cards, student loans, mortgages, home equity line of credit, to medical bills. While debt may sometimes be unavoidable, I’d be hard pressed to come up with a really strong argument that debt is really good.

So, is debt bad?

Many people who borrow money in order to purchase real estate would argue that this is a good form of debt. There are benefits that come along with carrying mortgage debt, such as writing off interest on tax forms. While this is a nice perk, it is certainly not a valid argument for getting a mortgage. Even though you get this perk, if you had paid cash for your home, you would be able to save serious amounts of money for the life of your loan which would far outweigh any advantage from deducting interest.

Student loans are also often touted as a good form of debt due to slight tax advantages in the form of deduction of interest paid. Is this type of debt bad? Well, based upon my experience with student loans, I would say that they are a poor choice when alternatives exist.

Now, not all debt is created equal. If I had to choose between mortgage debt and credit card debt, I would choose to get a home mortgage long before a credit card. Additionally, I would choose a mortgage long before I would choose a student loan. The fact that I have both of these bad types of debt, I’d say that a mortgage is not in my near future!

The premise of this site is education, sharing experiences, helping ourselves and others get out and stay out of debt. The title of this site is Slave to Lender, based upon Proverbs where we read:

It is really true. I work a lot of overtime so that I can pay off the debts that I have agreed to pay. I sacrifice in order to get these debts eliminated. In fact, I must work overtime and earn extra money because I am Slave to Lender. I really have no choice. So, is debt bad? Honestly, after we get out of this hole, I’m not even sure I’d borrow a dime ever again…Not even for a mortgage. Cash is King, Debt is dumb!

What are your thoughts? Do you think debt is bad? Is there such thing as good debt?

How Can I Get Out of Debt?

March 5, 2012 in Debt Freedom with 0 Comments

How Can I Get Out of Debt?

2008 is a year that I will never forget. My family made a huge move across the country with little money and no jobs. Sounds like a good plan, right? Yeah, we thought so. By the end of 2008, we had approximately $28,000 in credit card debt in addition to my $38,000 in student loan debt. Our income was approximately $22,000 per year at that time. Sounds like a winning combination if I have ever heard one!

We found ourselves face to face with some tough decisions. Debt collectors were hounding us daily, even going so far as to call our families to discuss the debt (which isn’t exactly legal). We were hanging by a wire with our landlord. We were pushed to enroll in government assistance for food. Our water got shut off once. We were in a mess! Thankfully, God gave me a raise and I was able to start working some decent overtime. By spring of 2009, we were on debt repayment plans with our creditors and everything was running smoothly.

How Can I Get Out of Debt is a scary question. Maybe not as scary as this cat! (HT peter_heilmann on FlickrCC)

Even though I started making substantially more money, I found myself trying to figure out how I was going to get out of debt. Now, I had heard of a fella named Dave Ramsey before, but he entered our lives at an opportune time this time around. I began to listen to his radio show as much as possible and started following some of the advice that he gives. Dave has what he terms ‘baby steps’ to getting out of debt. Whew, just what I needed!

The baby steps are simple, especially for those of you who are asking, “How can I get out of debt?” They are:

Save $1000 emergency fund.
Work a debt snowball, ordering your bills from smallest to largest and throwing every available dollar that you can paying them off in that order.
Save 3-6 months living expenses as an emergency fund.
Invest 15% of your income for retirement.
Fund your kid’s college funds.
Pay off your home early.
Build wealth and give.

Pretty easy, right? Yeah, I thought so too! To be honest, I haven’t always followed the plan as prescribed. I have had lots of starts and stops along the way. I have had to deplete the emergency fund more times than I care to admit. But, for those of you wondering “how can I get out of debt”, these steps may be just the lifeline that you need. They give you a roadmap to getting out of debt and staying out!

How are we doing in our quest to answer our own question of “how can I get out of debt?” We are plugging along. We have paid off approximately $9,000 in credit card debt. Good news! Yes, it is, but the problem is that we financed a car and also have charged another $4,000 on another credit card. Stupid! But, we’re committed to plugging along and that is one of the primary reasons for this site. I want to share victories as well as setbacks. It takes a community to do this and I need you as much as you need me!

Top 8 Reasons You’ll Never Be Debt Free

March 2, 2012 in Debt Freedom, Stupid Tax with 0 Comments

Top 8 Reasons You’ll Never Be Debt Free

Being debt free just isn’t for everyone. Most people will always have debt. People have always been in debt to others. In this day and age, you just cannot avoid being in debt. In fact, you just aren’t an American or even a human if you don’t have debt and borrow beyond your means. You don’t want to miss out on that tax write off if you get out of mortgage debt.

Sounds pretty silly, right? I’ve heard many of these arguments given by otherwise thinking individuals as reasons for getting into and staying in debt. While these may be reasons that some folks use, let me give you my top eight reasons that you’ll never be debt free:

You don’t believe that it is possible to live without debt. This is really a generational issue. Modern society/marketing has told us that if we have nice houses and cars, we have arrived. You’ve bought this one hook, line, and sinker. You think you’ll always have a mortgage and a car payment.
You are unwilling to change you spending behaviors to match your income.Seriously, $5 lattes
Top Eight Reasons You'll Never Be Debt Free (HT andreanna on FlickrCC)

didn’t exist 20 years ago. You lived then, and you’ll live now. Impulse buying has been one of my pitfalls. Lock up the debit and credit cards! It is what I have to do!
You are unwilling to work extra so you can pay debts off. If you’re anything like me, you like your job well enough. But spending too many hours there can drive you batty. You’re unwilling to work extra to really get after paying these debts!
You and your spouse cannot agree on spending/investing/debt reduction. I have heard thousands of times how husbands and wives cannot agree on spending/investing/debt reduction.
You have stuffitis. Let’s face it; it is really easy to buy stuff now. You don’t even have to leave the house and it is delivered to your door in two days. Sounds awesome! Yeah, it is pretty cool, but only when you can pay cash!
You are unwilling to be laughed at. People will make fun of you when you deny yourself the pleasures that they are indulging in. You must be willing to be laughed at!
You worship at the altar of FICO. FICO is really an indication of your ability to borrow and repay money. It is based upon a number of things, but largely how much and how you pay it back. You think that an 820 FICO is better than having none at all. Me, I’m shooting for ZERO!
You cannot follow a written budget. This is one that I struggle with at times. Things come up and the money has to come from somewhere. You have to follow a written budget in order to win with money!

What reasons would you add to the list? What are some other reasons that you have heard or even used yourself? I’d love to hear them!

Starting a Business Using Credit Cards

March 1, 2012 in Credit Cards, Stupid Tax with 0 Comments

Starting a Business Using Credit Cards

Being a business owner is one of the great American ideals. I have personally attempted numerous times to get a

Starting a Business With a Credit Card: Good or bad idea? (HT sovietmole on FlickrCC)

business off the ground and running. Some of them have been traditional business, providing goods and/or services and some have been some not-so-traditional businesses. In my excitement to get some of these businesses off the ground, I have taken extreme measures to fund these businesses. I have used approximately $18,000 of credit card debt and $2,000 of student loan money to fund these ventures. The return on that investment, as you might imagine, has been very low. As in negative. As in I am still paying for these things today, long after I’ve given up on these business ventures.

One of the businesses that I started would actually have been successful. In fact, if I started the same business in the same town today, I guarantee that I would turn a profit. The execution of the idea, on my part, just didn’t have my full attention. I was fairly newly married, a new father, and working a full time night job. Overall, this business ended up costing me about $1,000, which isn’t terrible.

One of the other businesses that I got involved with was a multi-level-marketing business. There was a physical product, but it wasn’t really a product that masses of people would be interested in. It was also pretty expensive, as in a couple thousand dollars just to buy the product. My real job would be to drive web traffic to the sales page. Sounds pretty easy, right? If you have ever tried to get legit traffic to a website that you have little control over, you know how hard this is. I spent more money than I even care to admit (actually, I’m just not exactly sure how much I spent!) in Google Adwords, direct mailings, and various other online marketing efforts. The problem? You cannot buy yourself success. You have to work for it. It takes work and time. Both of which I was short on.

As you might imagine, most all of the things that I have tried in order to start my own business have not worked out as planned. Why? Well, I don’t want to only attribute it to going into debt for the funds to make it work, but seriously you cannot buy yourself success. I thought I could simply throw more and more money at the issue and I would be successful. WRONG!

So, can you start a business with credit cards? While I’m not an advocate of debt simply because I’ve got plenty to go around, I do think that a person could smartly start a business using credit cards. The only problem is that most people who don’t have the money have other factors going against them as well. They are generally desperate. They are generally impatient. They generally lack follow through. How do I know? I was one of those guys. I was desperate to get something going, got impatient, and spent a ton of money. When it didn’t work, I gave up. Coincidentally, just before this great MLM fiasco, I had become decently successful on a small scale with affiliate marketing and search engine marketing. But that wasn’t bringing in the big payout, it was small potatoes. The cool thing is that many of the things that I learned from falling on my face with the MLM and also with my successes in affiliate marketing are benefitting me today.

Thinking of starting a business with credit cards? Think again. Seriously, think about all the possibilities of what might happen. Think through a really good business plan. Talk to other people. Talk with your spouse. Do not simply sell your spouse on the idea, as I did. Really talk it through.

Giving and Debt

February 29, 2012 in Debt Freedom, Giving with 0 Comments

Should I Give Money When I’m in Debt?

Getting out of debt is one of the highest priorities in my household, and if you’re reading this I’m guessing similar holds true for your household. As such, every spare dime that we get is thrown at the next available debt so that it gets paid off quicker. Early in this debt repayment journey, I struggled with the giving away any of the money that I had made. You’ll notice in that last sentence I said something very blatantly wrong; Money that I had made. Truth be told, it all belongs to God. I only earned as God allowed and gave to me to manage. So far, I’ve generally done a pretty poor job of managing the money that God has given me. I had to struggle to understand this concept. Additionally, I had to struggle with the idea that I had trouble paying most of my bills, so how in the world was I going to pay the same bills with less money?

Giving and Debt. Can you give charitably while in debt? (HT stevendepolo on FlickrCC)

The idea of giving, or tithing as Christians believe, is not new. The idea is that we give the first fruits to God because he has given so lavishly unto us. Tithe literally means a tenth, so effectively you’re giving away 10% and managing your bills/life with the other 90%. In all honesty, I’ve not always been spot on with this, I’ve not always given as I should or want. However, ever since my wife and I made the commitment to be intentional with our giving, we have not been forgotten. God has done exceedingly more with the 90% that I do keep than I could ever do with 100%.

So, should you give money while you’re in debt? My answer is a resounding yes. Especially as a Christian, you have instruction from God that you should be giving back to Him. There is something especially freeing about knowing that you are co-workers with God. It is powerful to know that your toil goes for something more than paying your light bill; it is going to Kingdom work.

What if you’re not a Christian? This is a matter of your heart. I know many folks who are not Christians are give lots of money to various organizations. They give to Alumni Associations, Cancer research, Toys for Tots, and a host of other organizations.

When I hear people talking about not giving because they are in debt, I have one thought: They are just copping out. They are greedy and don’t want to bless others with what they have been blessed with. Seriously. It is a lame excuse. If you’re not giving when you have little, will you really give when you have more? Doubtful.

What are your thoughts on giving while you’re in debt?

Alternatives to Going to College

February 28, 2012 in Education, Student Loans with 0 Comments

Alternatives to Going to College

A college education has long been heralded as the ‘must have’ for those who want to succeed in life. With promises of higher pay, better promotion potential, and a better overall quality of life, many people are drawn to education. But are there alternatives to going to college? Is there a better way to achieving the same result without spending a lot of time and money getting a diploma?

The Diploma -- Are there alternatives to college?

The College Diploma is the holy grail of a twenty-something. But, are there alternatives to college? (HT soundman1024 on FlickrCC)

I’ve talked some about how I have accumulated nearly $40,000 in student loan debt, much of which was paid directly to higher learning institutions for tuition. Hindsight being what it is, I have come to the conclusion that I overpaid for what I got. Now, my time in college taught me many things, like how to work with others, how to conduct research, how to write a cohesive sentence, and a host of other ‘life skills’. But, could I have achieved the same level of success without dropping huge amounts of cash? Certainly! In my current profession, I would have been just as prepared had I graduated High School and attended a 6 month Police Academy. This would have essentially given me the skills I need to do my job. Now, for my degree program, I would have been just as suited by participating in an intense residency program for Christian Ministry. Yes, I am aware that borrowing $40,000 to become a minister is wrong on so many levels!

So, what are the best alternatives to college? In my opinion, there are many ways to achieve a similar result. Depending upon your chosen profession, you may have some options that involve a hybrid of on-the-job training and formal education. If you’re studying a trade of some sort, they generally involve some book learning mixed with learning by doing. The cost for these programs is generally low and by the time you graduate you’re actually equipped to perform the job which you’ve chosen.

Possibly you are like me and could have simply completed an intense residency. I’m very encouraged to see many churches offering these residency programs to folks seeking to enter ministry. These typically involve a great deal of one-on-one training and on-the-job leadership skills training.

Maybe the best course of action for you is to delay college. It is common in many countries to spend some post-secondary time exploring different career paths. I think this is a great idea on many levels, but specifically because it really helps squash the indecisiveness that many college students face. They are better equipped to make a decision about what they want to spend the majority of their lives doing. Additionally, they most often have great employment prospect after completing college because they have experience and contacts in their chosen field.

So, are there alternatives to college? Most certainly. Do they look a little strange on the surface? Probably. But I’d be willing to bet that more people would be more fulfilled in their careers if they really knew what they wanted to be when they grew up.

What about you? Have you chosen a non-traditional approach to college? How has this effected your career?

Dave Ramsey’s Debt Snowball for Dummies

February 27, 2012 in Debt Freedom with 0 Comments

Dave Ramsey’s Debt Snowball for Dummies

If you have been around the personal finance world for any length of time, you have undoubtedly heard of Dave Ramsey’s Debt Snowball theory. Really, the debt snowball is only one component of the larger “baby steps” Dave teaches in his financial counseling books/seminars. If you’ve never heard of the baby steps, they are basically this:

Save $1000 emergency fund.
Work a debt snowball, ordering your bills from smallest to largest and throwing every available dollar that you can, paying them off in that order.
Save 3-6 months living expenses as an emergency fund.
Invest 15% of your income for retirement.
Fund your kid’s college funds.
Pay off your home early.
Build wealth and give.

You’ll notice that the debt snowball is early in the process. After you’ve set up your budget and saved your emergency fund, you begin to attack your debts in the snowball.

How does the debt snowball work? Well, basically you write down all of your debts, smallest to largest. Then you begin making minimum payments to all but the smallest until it is paid off. Then, you apply that payment amount to the next smallest debt, continuing to pay that one until it is paid off. You continue this method until all of the debts have been paid off, then you move to the rest of the baby steps.

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