Getting Caught Up Financially
May 22nd, 2008
When I first started writing this blog I was further in debt than I am now and I was spending money all the time. Now a couple years later I’m spending less (and making less) and I’m still in debt though not as much. The reality is that although there has been some improvements, significant ones even, it really isn’t enough. I am still struggling financially.
Now I might be struggling a bit but I also know that I can get caught up financially. I’ve made progress and this post is the beginning of making more progress in the right direction. My frustration with my finances is still there and I’m still not making enough money but I’m also juggling a few things and there’s no point for it all. It’s time to take this blog out of the theoretical and put it into practice.
Figure out where things stand
Before knowing what really needs to be done to adjust spending and get my financial situation caught up I need to make sure I know where I stand.
Step 1
Outstanding Bills:
- Cable/Phone Company: $685 (With the current Bill)
- Car Repairs $TBD (This needs to get done or I can’t renew my plates)
- License Plate Renewal $76 (need to get the car looked at first)
- Car Insurance $233 (Automatic Withdrawal)
Those are the three items that are in arrears and need to be fixed ASAP. The good thing is that I have the money in my account right now to take care of all of that any get caught up on all of my other expenses.
Step 2
The next item for figuring out where things stand is to pull together my cash flow for the past couple months and see where things stand. This exercise will be one for this evening but I have everything in place to actually accomplish it (I have kept virtually every receipt). After getting the cash flow together it’ll be time to pull all of my current bills out of their hiding place and figure out which have been paid and which haven’t.
I’ll need to know what bills are due when so they aren’t missed anymore. I need to start using a calendar and putting this information on it. Right now I’m not making a lot of money compared to what I used to make but I should be able to get the ship righted. Once I have a list of what my spending has been and what bills are due it’s onto the next step of the process: budgeting.
Step 3
Now that I know what my expenses and income are I can make sure that I don’t overspend on anything. It comes down to budget time! I’m notoriously bad for keeping to a budget but In order to spend less than I make I’m going to have to be diligent about it. This blog is going to help me with this – my goals initially will be weekly and I’ll adjust this as needed. My spending will be tracked daily (I’m still debating if these will be posts or not) and an update will be weekly. The goal with only a weekly goal is to correct and ajust to changing situations and to keep everything as tight as possible. Once I’ve managed to get caught up I’ll see about pushing this goal out a little further.
The whole idea behind this step for me is to make myself accountable for getting caught up and balanced. I have always been hesitant about showing my actual income and expenses on this site and I’m not really sure why. Maybe it’s a slight embarrassment of telling the world what I spend my money on. Regardless, its time to stop hemorrhaging money like it was going out of style and get my financial situation on track.
Posted in Uncategorized, Budgeting and Planning, Debt, Financial Situation | 3 Comments
5 Benefits of Using Credit Cards
April 25th, 2008
Debbie Dragon is a writer for Creditorweb.com, where she writes about credit card offers, responsible credit card use, and rewards programs.
With all the focus on getting out of debt and paying off high interest credit cards, you might be wondering why I would suggest using credit cards to improve your financial situation. The truth is, there are a number of reasons why credit cards can be beneficial to your finances – it’s really all how and why you use them. Here are 5 ways to make credit cards work to your benefit:
- Find a credit card with a rewards program that will actually reward you – based on how you use your card. For example, if you only travel once every four years, a frequent flyer program or free hotel program is not going to be your best option. Look for rewards that allow you to earn on all of the purchases you make using the card, and that offer rewards in the form of cashback or merchandise that will actually benefit your lifestyle.
- Use 0% balance transfer offers to avoid paying high interest on older balances, and focus on paying off all outstanding credit card balances. This will allow you to get into the habit of using a credit card for all of your monthly purchases and paying it off at the end of each month to avoid interest, yet still benefit from the rewards program. This only works for individuals who use one or two credit cards at the most, and who are not carrying a balance from one month to the next.
- When in need of purchasing a large ticket item, use a credit card with a 0% interest rate for six or twelve months to give yourself more time to pay for the item without paying interest or finance charges. Take the total price of the item and divide it by the number of months you have an interest-free promotion to find out how much you have to pay per month to have the purchase completely paid off by the end of the promotional period. Keep in mind if you are late with a monthly payment, you will probably lose your interest-free status, so do everything you can to keep up with your payments on time.
- Don’t close your unused or paid off credit cards. Many people believe that reducing the number of credit cards on their record will improve their credit score, but the reverse is actually true for most people. If you close out your unused or paid off credit cards, you start reducing the amount of credit you have available. As the amount of credit available decreases, your debt to available credit ratio increases – making it seem as if you’ve charged almost all that you are able to charge; and putting you into a risk pool. This will often result in a lower credit score, even if you’re making your payments on time. It’s better to have more credit available – just don’t go on a crazy spending spree because you know it’s there!
- Credit cards frequently offer additional benefits in the form of purchase protection coverage, extended warranty coverage, and various travel insurance coverages. They don’t cost anything more but provide you with protection you can use if needed.
Posted in Debt | 2 Comments
Cars are Expensive
April 11th, 2008
Let’s face it cars are expensive, from car payments to insurance costs to gas prices all of these items add up to a great deal of money. When I was younger I really took this for granted. As I got further and further into debt I started to look at where my money was going and I realized that my car was costing me a great deal of money.
Now when I see a young person driving an expensive car I wonder how they’re able to afford it. In order to have a nice car or even a new car most of us need to incur a lot of debt to get that vehicle. We need to find a way to finance that car somehow from loans to leasing the average new car will cost hundreds of dollars per month.
It still blows my mind just how expensive it all gets and that’s before the cost of actually driving that car. The simplest way to illustrate this is with my own costs. For the privilege of having a car I can drive whenever I want I have to pay the following on a monthly basis:
- Car Loan: $350
- Insurance: $230
- Gas: $150
- Maintenance: $50
- Total: $780
All of this adds up to just under $800 per month! The really scary thing is that I drive a used car, I can only imagine what this would be like if it was a new car. If I didn’t have this car I my debt load would decrease dramatically. Until I looked at these numbers a few years back I took it all for granted and I think that a lot of people are in the same boat. We simple assume we need to have that car and that it’s not expensive. The reality is that having a car can cost you more than you would pay for your mortgage.
There are a few things that you can do to keep these costs down. First off don’t buy a brand new car especially if you’re going to need to finance it. A used car that’s a couple years old will cost you thousands less than if you were to buy it new. The best part about doing this is that with a little effort you’re likely to get everything that you want in that car with low mileage. The next item to keep the costs down is don’t drive a gas guzzling car, with the price of gas where it is these amounts can very quickly add up to hundreds a month that could be invested or used to pay down debt.
How you drive will also affect how much your car costs you; by driving slower (aka the speed limit) you’re going to burn less fuel. Not to mention you’ll be less likely to get a ticket which will keep your insurance costs down. Also don’t be afraid to shop around when it comes to your insurance; with a little bit of looking around you can find a better deal than you have and quite possibly save you hundreds of dollars a year.
We have become addicted to our cars, our cities are planned with cars in mind and we are simply expected to have them. Going to the store or out for dinner means we hop into our cars to get there even if the place is close. The transit systems in our cities also don’t help the matter since often it’s a serious inconvenience to use public transit. If you’re looking to buy a car take a serious look at how much it will really cost you to have that car and what that will mean to your finances.
Posted in Budgeting and Planning, Commentary, Debt | 1 Comment
What is Snowflaking?
March 25th, 2008
I’ve been hearing a lot recently about snowflaking and although I understand the idea behind it I’ve never really looked into it. I wanted to learn more about the idea and to see if there was any real merit behind it.
The idea of snowflaking is pretty straightforward in that any extra money that you save or make is applied to a financial goal right away regardless of the amount. Paidtwice has some great articles about snowflaking and this is where I learned a great deal about it:
Snowflaking a Primer
Five Golden Rules for Snowflaking
Here a Snowflake There a Snowflake
The concept is pretty simple in that you have to keep track of your money and your spending and anything that you save gets applied to a financial goal. This also goes for any extra money that you happen to make. Over time these small amounts really add up quickly. If you buy a latte from Starbucks for say $4 a day that adds up to $1,460 over the course of a full year. Most of us completely ignore that $4 and continue with our lives. The snowflaking idea is in principle very simple and it should work.
I’ve done similar things in the past where I have set aside small amounts regularly over a period of time to find that it very quickly added up to a significant amount. I can see a problem with the concept in that you have to keep a very close eye on your money to make it work. Keeping track of extra money that you make is pretty simple but all the money you don’t spend is harder and unless you’re diligent you might lose track of it.
Personally concepts can make sense but how they are applied really makes the difference if the idea has any real merit. To find out if snowflaking is a good idea for me or where there might be some issues with it I would need to put it into practice. In the month of April I’m going to test out the concept of snowflaking to see the ins and outs. All of this will start with making sure I have a detailed budget in place for the 1st of the month at which point I will apply the snowflaking idea for the 30 days following.
Trying an idea out is the best way that I know if it really works, or more appropriately how it works for me. I already know that snowflaking works great for a whole bunch of bloggers but I can see myself having some issues really applying it. This test will give me better ground to stand on when it comes to forming an opinion about it. I’ll post my results and then an assessment at the end of April. Wish me luck and if you’re interested have a read through Paidtwice’s posts they’re very informative.
Posted in Budgeting and Planning, Debt | 2 Comments
Paying Down Debt Takes Time
March 8th, 2008
Originally uploaded by Garretc
Debt is a way of life for many people; they pay their credit cards in order to be able to use that credit for their day-to-day expenses. They are so tapped out that they simply have no room for error; their day job becomes so important because everything is in a very fine balance. They use one payment to make sure another one gets paid and they are stressed out of their minds. I hope I’m not describing you! I know what its like; I used to live this life. This might not be your exact situation but if you’re in debt you feel its pressure and getting rid of it takes time.
So you’d like to get out! You dream about it, it captures your every thought. Guess what, if you’ve managed to get yourself into some serious debt its going to take time to pay it down and get out. There is no quick fix for getting out of debt unless you make a mountain of money all at once. Paying down debt is a process that takes time. Personally I’m still struggling with this process and I’ve slowly made some headway, but it has been slow.
The perfect example, an inspiration for me, to keep paying down debt and proof that there is light at the end of the tunnel is Tricia from Blogging Away Debt. She knew it would take time to get out of debt and she applied herself and did everything possible. She even worked two jobs for a while. She’s still in debt but I’ve been watching her credit card debt creep down slowly over the past couple years while mine has close to the same. It’s all a long process and you have to apply yourself.
Its not fun to pay down debt versus spending more money but the reality is you need to get that debt paid down to be able to have any financial freedom. You might not have enough money to be free from having to work but that doesn’t mean you have to be weighed down by the debt. Another great benefit once you actually pay off debt is that purchases won’t cost huge amounts of money due to interest. For example I’d like to buy a new laptop for myself but I don’t have the necessary $750, I contemplated putting it on a credit card (briefly). If I don’t pay that laptop off in a year I’m paying $135 in interest (standard 18% card). Being in debt prevents me from making purchases like this because I know there is a chance I won’t be able to pay everything down quickly enough. I don’t want to pay 2 or 3 times for my purchase just because I’m in debt. It’s not fun passing up purchases because you need to maintain a minimalist lifestyle.
The good news is that although this process might take a fairly long time you can see the effects and the light at the end of the tunnel does get brighter. Can you imagine what it would be like to not live from pay to pay? I’m looking forward to that day.
Posted in Debt | 3 Comments
Frugality Sucks
March 4th, 2008
Lets be honest, not too many of us are naturally frugal people. I know that might seem a little strange at first but if you take a moment to think about it how many people do you know that are truly frugal? My guess would be very few. I was thinking about this myself and I could only come up with a couple examples out of the people that I know that are truly frugal. Being frugal isn’t fun and personally I think it sucks. But that doesn’t mean it isn’t necessary.
There are times in our lives when being frugal isn’t a choice but something that we simply have to do. When you have children and don’t make a lot of money you have no choice and you have to be frugal or meals won’t make it to the dinner table. When these times arise you simply do what needs to be done. I think this is one of those adaptabilities that humans posses. We do what we need to survive and what we need to do to protect our loved ones and offspring.
This leaves us with a great big gray area in my opinion. Most of us in debt look at our budgets and we cut back on the things we really don’t need to spend money on. We’ll cut our cost of entertainment or maybe trim down our food bills so that we’re living below our means. But we are being frugal by choice and often times this isn’t fun. This is the part of frugality that sucks. I’m in that boat right now. I’ve decided to cut back on my spending to make sure that I can make ends meet and really make them meet rather than fool myself into a false sense of belief.
Those of us out there that are naturally frugal simply won’t spend the extra money and as a result they would never need to cut back; at least not to the same extent as your average person who is in debt. In my efforts to get my finances under control I’ve stopped spending money on the things I thought I needed and really just wanted. I took a very hard look at what I was buying and why. But cutting those items down and in many cases out of my expenses I’ve been able to cut away the fat that didn’t need to be there. The net result for me has been a more simplistic approach to life in general.
Do I still want the big screen TV? Kind of but I know that it’s a want and not a need. I get enjoyment from watching movies with my wife but I know it’s not essential to my survival and that TV will do nothing but cost me money. If I had spare money I might purchase one but until that time arrives I can walk past them in the store and not think twice about buying one.
I am by no means perfect since I still want some things that I don’t need and worse still spend money on some things that are kind of pointless. For me this has been a process rather than a quick fix. I took a long time getting into debt and I want to make sure that when I’m out of debt that I don’t fall right back in. Finding a good balance between spending for want and for need will, I hope, help me live within my means. This is important to me because I do not enjoy being frugal and I don’t think many of us do. It’s simply something that needs to be done sometimes.
Posted in Saving Ideas, Debt | 3 Comments
From not getting paid to getting paid twice
January 17th, 2008
In my last post I talked about not getting paid when my paycheck was due and the impact that this had on my life. Yesterday I received my second pay in two days. I have now been paid in advance an extra pay. This wasn’t intentional but the reason that things were a little screwed up with my paycheck caused this problem as well. Now don’t get me wrong I am not complaining about the fact that I have more money. Its actually quite nice at the moment.
Getting a months worth of money does bring with its own challenges though. I am used to a standard pay which comes in every couple weeks. I plan most of my debt repayment and expenses around this. Having a sizable amount of money is never a problem but having to stretch it for a longer period is. I now have to make sure that the money I do have lasts the full length of time without running out.
The nice thing about the whole situation is the fact that my raise has kicked in. Its not as much as I would have liked but it is by no means bad. The way I am intending to tackle this problem is to make sure that I pay all of my necessary commitments up front. This will allow me breath a little easier if all of the upcoming payments are handled (especially the important ones such as the mortgage).
As with not getting paid on time getting extra money and then not getting paid for 4 weeks is yet another reminder that I need to ensure I stop living from paycheck to paycheck as quickly as possible.
Posted in Debt, Financial Situation | 1 Comment
Not Getting Paid: The Dreadful Horror
January 14th, 2008
I won’t shy away from the fact that I am still living mostly from paycheck to paycheck. I’ve been making a fair bit of progress though my debt load and lifestyle really didn’t have me rolling in the money. This past weekend the reality of such a lifestyle really came crashing down. My paycheck wasn’t in the bank when it was supposed to be. The company didn’t go bankrupt but there was some odd clerical error and the automatic deposit wasn’t in the bank. I’ve been assured that it will be there tomorrow. Fortunately this happened at a time when few payments were automatically withdrawn.
What did happen was a forced reality check on my part and the impact that something as simple as not getting paid can have for me. The reality for me is that I spend more money than I make and I somehow manage to float along. Savings are something that I think are a great thing but never manage to keep for too long. And the worst part of the whole scenario is the fact that I truly live from pay to pay.
Would you survive if you didn’t get a paycheck?
I now know that I would be very hard pressed to survive if I missed a pay. I hate the effects that this has on me and I don’t think the full gravity of them shone through until I missed one of these magical pays. Coasting along in the status quo is what a great many people do. They don’t do this for a couple months or a year they do it for years on end and sometimes decades and then when retirement sets in they’re in trouble.
Retirement aside many people, myself included, would be in serious trouble if a single pay was missed. Some people would be able to cope for a few weeks or months on credit cards alone but that’s not a way to live. This little misadventure should be resolved shortly for myself but that does not mean there is no lesson to be learnt. It’s time to make some sacrifices and changes to remove the need to rely on the pay to pay never ending cycle.
Posted in Budgeting and Planning, Debt | 5 Comments
Dreaded January Bills
January 7th, 2008
Are you one of those people who are dreading the bills that are coming in January? Did you overspend on Christmas and aren’t sure what to expect? I would guess that many of the people who come to this site are. Personally I know I overspent on Christmas by a fair bit but I am taking responsibility for this. I’m not dreading any credit card bills that might be coming in since I didn’t spend money on them. I am dreading the double payments on a couple of my bills though as I play catch up.
Regardless of how you put it overspending during the holidays is something that a great many of us do. I don’t remember the exact statistic of how long it takes the average person or family to pay off their Christmas bills but it’s a very long time. The worst part about the whole thing is that I know a lot of people will use this as an excuse for not having money in the early part of the year. Its not Christmases fault, it’s your own. No one put a gun to your head and forced you to spend thousands of dollars on gifts.
Taking Responsibility
If you are prone to overspending on Christmas or anything at least have the presence of mind to accept responsibility for this. If you know you do this and are likely to do it again then plan for it. Spending thousands of dollars at any time without knowing what’s coming is simply a recipe for never getting out of the debt hole. Credit card interest rates are scary to say the least; do you really want to pay them all that interest just so you can repeat the process?
Learn your Lesson
I don’t know if this is a general take on society or if it’s just me but I notice that a lot of people I know overspend on a regular basis and then are surprised when they end up living from paycheck to paycheck. Sadly I tend to do this myself (it’s a failing of mine). A definition of insanity is doing the same things over and over again but expecting a different result. If you’re going to spend more money than you have or can afford you’ll be in debt. There is nothing that can be done about this other than learning your lesson and stopping doing something that’s pointless.
I’m going to get caught up on my bills this month by spending a lot less than I normally do. It might end up taking me a month or two to actually get caught up but I will. The difference this time is I know when my next round of big expenses is and I am already starting to plan for it so when it comes I don’t have to scramble to figure out how to pay for them.
Posted in Budgeting and Planning, Debt | 1 Comment
Being Frugal doesn’t mean being Cheap
September 21st, 2007
There are times in your life when you really need to tighten your belt and reduce your spending. You need to become very frugal with your money. This is an understandable situation and one that will come up. Some people on the other hand are simply frugal with their money all the time.
Being frugal is a choice, you spend less money, purchase fewer things and in general you’re simply much more conscious of where your money goes. I’ve started becoming more and more frugal since starting this blog; I now fully understand the difference between want and need and I spend accordingly. This doesn’t mean that I discount quality products or the desires to spend on a whim on the odd occasion.
Being cheap on the other hand for me means that you’re resistant to spend money regardless of the reason or the quality of a product. Cheap people avoid spending money at all costs and will go out of their way to not pay for something even if the expense qualifies as a real need. If you’re cheap you won’t spend the money even if you have it!
For me there is a very distinct difference between the two since there will be times in your life where you have to be careful how you spend your money to make sure you don’t go into debt. Or you simply have no way to get any more than you have. Frugality denotes some reasoning behind trying to spend as little as possible. If it happens to be a limitation then its forced but when it’s a goal it’s no different.
Cheapness comes with no reasoning behind the attempt to spend as little as possible. Not spending money for the simple sake of not spending it – purchasing items with the lowest cost regardless of needs, desires and product quality.
If you’re overly cheap this could end up costing you more money in the long run, buying sub par items means they’re more likely to break which will require replacement sooner. For example if you were too cheap to buy a decent used car and bought one for $500 lets say versus one for $5,000 will translate to additional maintenance costs and you’re far more likely to run into an issue which will force you to buy another car. This is without considering the value of your time.
Personally I don’t think I can ever become a cheap person, I value my time and money and if I have to spend more to ensure that in the long run I can save both by spending a little more up front for additional quality then I will (if I have it of course).
Posted in Commentary, Debt | No Comments
