Taking advantage of Low Interest Rates
May 6th, 2010
One of the things that really amazed me during this recession was the level to which interest rates dropped and I was able to take advantage of the decreased cost of borrowing money. My credit cards have reasonable interest rates (9.15% and 16% respectively) but my lines of credit were able to give me interest rates of 7% so I took the balance from my credit card that had the 16% interest rate and moved it to my line of credit. By doing this I’m able to save on the interest that I’ll be paying the bank while I repay the money. If I keep my payments the same as they were before I’ll pay my credit cards off that much sooner. This simple balance transfer is a great example of taking advantage of the great interest rates around.
Rates are going up
My simple example is just one way that I’ve used the current economic situation to save myself a bit of money on the debt that I’ve been carrying for years. While its never a great thing to carry consumer debt at least this way I’m not paying as much in interest for it. But rates are starting to go back up, at least in Canada they are. If you’re going to take advantage of these unbelievably low rates you might need to do it now before the rates go up too much. If you don’t know if you can do this or what your options are just go to your bank and talk to a financial adviser.
Paying down consumer debt
The whole idea behind moving balances from where I had them into different areas was done for a couple reasons: to decrease the interest I pay on them and to improve my cash flow. I have the consumer debt and there’s not much I can do about it the fact that I have it, but I can optimize how quickly it’s paid down and make sure that I’m not living from paycheck to paycheck. Now that the money moves have been done all I have to do is keep paying the same amount as before and I’ll be able to repay my debt that much faster.
Now that I’m going to be making more money I’ll also start paying more onto the debt as to get rid of it. The idea is to use the low interest rates to my advantage and maybe get rid of my bad debt once and for all.
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Overspending at Christmas – Now What?
December 27th, 2009
It seems that every year over the holidays I end up spending more money that I was originally intending; maybe I am too generous and give people too many gifts or maybe I should plan better for the holidays (possibly both). This year I had a list and worked from the list but I still managed to overspend a little. I bought my wife a couple gifts that were a bit on the larger side because I know she wanted those items (a camera and some jewelery), now its time to deal with my spending. Have you found yourself in this situation where you spent more money than you were intending and now its time to scramble a little?
I overspent now what?
This year I spent probably 300$ more than I was thinking and this went onto one of my credit cards, now this isn’t a huge amount but I am going to have to adjust my budgeting over the next few weeks to make sure that this doesn’t have a long term effect. An easy way to cover this would be to deposit an extra 100$ per pay onto the credit card to cover the $300 which would mean that by the end of January I would be back to square one. If you can’t cover the extra hundred per pay deposit $50 or whatever you can. You can manage to pay a little more on the credit cards in order to cover the extra spending fairly quickly.
Now if you can’t deposit more then you’ll need to be a bit more creative and adjust your spending more significantly, remember no one put a gun to your head and forced you to spend the money, you did that. If you’re in big trouble after the holidays then what I just suggested above will be more drastic. In the new year you might need to cut down on spending and put more onto your credit cards or you might need to work out some kind of a plan with them. Remember don’t beat yourself up over this, I know that this is something that I did in the past, learn from your mistakes and correct the problem (it will likely take time so you’ll need to be patient). If you need to there are organizations that can help – though if Christmas pushed you this far over the edge you were probably there already. Don’t panic it can be solved (most likely)
Savings Account!
What really saved me this year is the fact that in September I started depositing $50 per pay into a savings account, I knew that Christmas was coming up and I would likely need a bit of extra cash. This really saved me and where in previous years I would be really scrambling for all of January trying to figure out how to pay my bills this year I just have to pay back an extra $300. When you’re in debt its hard to contemplate saving money that could be going to pay down your debt and I’m sure there are people that would disagree with me but always always set aside a little money into a savings account. You never know when you might need that money. All I was doing is saving $50 per pay for a few months and while I don’t have any spare money kicking around after the holidays I am not panicking.
Be concious of your spending and don’t neglect savings.
Posted in Commentary, Debt, Financial Situation | No Comments
Suvival Mode
November 5th, 2009
Most people have some form of debt, from a lot of consumer debt to a mortgage, its become an accepted fact that everyone had some. Typically we make an effort to pay this debt down and keep moving forward. Take for example my situation I’ve got about 12K in credit card debt which I can slowly pay down over the next few years without altering my lifestyle at all. I don’t have to make any sacrifice to keep everything going the way that it is and I believe that a lot of people fall into this category.
A couple days ago I read a post over at Money Crush about Getting out of ‘Survival Mode’ and this got me thinking about this so called Survival Mode. For me being in survival mode means you do anything and everything you can in order to save money, presumably to survive. Thankfully I haven’t been that situation for a while now but I have been there before and I know that you act totally differently towards money when it really matters. The thought that came to mind was how quickly would I be able to get rid of my debts if I were able to get into survival mode and stay there until EVERYTHING was paid off?
As much as I like to muse about questions like this the reality is I probably wouldn’t be able to stay there very long. I enjoy my lifestyle even if it means that I’m going to carry debt for a while. Each day I spend money on things that I don’t really need like a candy bar or coffee and I could easily do without these little temptations. Even if I didn’t enter a true survival mode I think it might be possible to enter a pseudo survival mode where you question each purchase with: do I need this purchase to survive. I think that by questioning each purchase like this and really focusing on survival elements you can save yourself a great deal of money.
Being in the situation where you have to stretch every dollar just to survive not a fun situation to be in but it does give you an appreciation for what you do and don’t have and what really matters. In the grand scheme of things if you’re floating credit card debt because you like your $5 a day latte it equates to being pretty dumb and not something that you should be complaining about.
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The Financial Baby Steps Continue
September 22nd, 2009
In my last post a little over a month ago I talked about maintaining focus on debt through baby steps and although I haven’t been posting I have managed to maintain this attitude and approach for the most part. I fell off when it came to the posting because of a great many reasons most of which are not really all that relevant on a Personal Finance blog but what I have managed to do is to keep making the small dents in the debt. Today I updated the little tracker that shows how much credit card debt I have and over the couple months that I’ve had that in place I’ve managed to reduce my debt by $585. While this isn’t a huge amount when compared to the full amount it does show continuous progress.
In addition to these small baby steps in repaying my debt I’ve also managed to set aside a little over $500 in a mutual fund account. Again this isn’t quite enough in case something came up and I needed the money it is a baby step in the right direction. For years I’ve managed to save absolutely nothing and now I’ve got a few hundred dollars invested in a mutual fund and this will continue to grow.
Seeing the results of these baby steps over time can be really motiviating (at least it is for me). Less than two months ago I had nothing saved and had more consumer debt than I do now. Just seeing these small successes and seeing them add up makes me realize that yes the debt is fairly large but it can and will be tackled. The best part of these successes is that I didn’t make any huge adjustments to my lifestyle or any sacrifices just a few small changes. Now I’m confident I can make a few more changes to continue the baby steps and speed up the process of saving and debt reduction.
Posted in Debt, Financial Situation | 2 Comments
Playing Catch up on bills is a budget killer
July 23rd, 2009
My weekly budget for last week looked riddiculous at first glance. Without context seeing that I’m spending about $1800 would probably startle even well off people. Why is this amount so high? The answer is pretty simple, I’m playing catch up on one of my bills.
Last month I wasn’t paying close attention to my finances and I missed a payment on my line of credit. By the time I realized this I didn’t have enough money to cover it without digging deeper into debt. So rather than paying a little and hoping I had enough money for my day to day expenses I decided to double pay this month. I called the bank up to let them know and made arrangements for the payment (I highly recommend this if you happen to miss a payment since banks are often gracious if you do and will forgive a single missed payment).
The impact of playing catch up this way is that I have to pay $900 to my line of credit this month and my budget is a bit tight for the rest of the month. Had this been a credit card payment I wouldn’t have had to pay nearly as much but it turned out it was my second largest bill (next to my mortgage).
This is a perfect example of what can happen if you’re not paying close attention to your finances. A simple slip up means that I am now going to have to be very carefull till my next pay. This is also another example of why you need to have an emergency fund. We all make mistakes from time to time and haivng some money saved can help prevent the need to play catch up.
Posted in Budgeting and Planning, Debt | 1 Comment
Repaying Credit Card Debt by making Myself Accountable
July 15th, 2009
I accomplished a few things in my twenties though the item with the longest legacy is quite likely my debt; my credit card debt to be specific. A lot of people use their credit cards with abandon not really caring about the consequences of their spending. At least I hope this is the way it used to be. I have never held any missconceptions about my credit card spending I knew that I would need to pay it back. Unfortunately even knowing this fact does not diminish the reality of it.
Paying credit card debt sucks!
Making purchases with credit cards hold lots of risks with it; for example if you don’t pay back the balance of your debt you end up paying a hefty interest on the purchase. Over time this can add up to more than the initial purchase. Secondly you’re not likely to use your credit card to pay back a meaningful purchase just the type you need a bit of cash for. I don’t remember what I spent my money on yet I still have the debt to show for it. Kind of a stupid trade off if you ask me.
Sadly you’re still accountable for the money.
If you’re accountable for the money it means that you agreed to whatever terms the card was offering when you spent the money. Simply put you owe the credit card company the cost of your purchase plus interest; you owe them more than the cost of the purchase. Short of bankruptcy there isn’t much that can be done about this fact you have to pay the money back. I know that I need to repay my credit cards and I need to do it fast because I am sick and tired of living in debt.
Using accountability to repay the debt
I owe a lot of money for the purchases I made and since I decided to refocus on my finances I want to make myself accountable for this not only to my lenders but also to my readers. Why would I do something like this? Well its a great motivational tool. First off I don’t want to seem like a moron for not paying down my debt and staying on top of it. Secondly by seeing the progress out in the open I’ll be able to keep myself going and pay it down faster. Finally I have always seen stories of people tackling their debt as a motivator for myself. If I am able to help even one person get through their debt with my experience I’ll be very glad.
The question that I have been asking myself is how do I keep myself accountable while I pay down my credit card debt. The answer is pretty simple I’m going to be transparent about it. I will post my current credit card debt on the side of the blog and update it once a month. A few bloggers have taken this approach and I like it; its simple and paints a picture pretty quickly.
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Debt Crushed my Self Esteem
July 14th, 2009
Over the past few weeks I have come to a very daunting conclusion: my self esteem is shot. For some people this is how they are and how they live their lives, but for me I have always felt I had a strong self esteem and I was comfortable in this knowledge. Knowing I had a strong self image is a great thing unfortunately over the years this became less and less the case until recently I finally came to the realization that I no longer had as much self esteem as I used to or as I would like.
Had my life really changed that much? The answer to this question is probably longer than a single post but upon some recollection it seems that my self esteem started going down pretty much at the same time that my debt started going up. I don’t think that this is a coincidence! If you’re in debt struggling to make ends meet especially over a long period of time your personal self image and your self esteem are bound do get battered. I know mine did.
Being broke and knowing that you’re broke as a thought in the back of your mind definitely does not help. I have been speaking about myself in this situation because I know my story pretty well, but if you take a moment and watch the people around you do the people that you know are deep in debt hold themselves up as if they had a strong self esteem? My guess would be no they don’t. With the economy being on everyone’s mind you can almost see the people who are in debt sitting on the bus in mental self anguish.
The unfortunate thing about this scenario is that it is counter productive. If you’re in debt loosing your confidence is not going to help you get out of debt and if anything it’s going to make the situation worse.
Being that I’m currently in this situation I can’t give any constructive advice; I just know that I liked myself when I had self confidence, I moved around my world freely without doubt. I am going to reclaim this feeling, slowly if I have to. If you’ve been here before let me know your story, I’m sure the details are different but it would be good to hear how you got past the lack of self esteem and nagging self doubt.
Posted in Commentary, Debt | 2 Comments
Focusing on One Goal – Finances
July 9th, 2009
For most of my adult life I have struggled with my finances, not that I haven’t been able to pay my bills or keep a steady job but more that I have been spending more money than I have made. I have been living way beyond my means! I have managed to get this under control for a bit at a time but it seems that inevitably I get back to the state of simply floating along and living from paycheck to paycheck rarely making any real progress. If you have lived this way you know its not fun and in the long run it is a very defeating way to live.
Recently I have read a few books about finances, business and success philosophy and the net result that I have gleaned from them is that in order to succeed at something you have to be passionate about it. A single driving vision or goal that keeps you going until there is success. I have always had an interest in finances (personal or commercial), which makes me wonder why I struggle so much with my own money, but I have never been truly passionate about my finances or any single goal for that matter.
I have decided that I am going to make my finances my one goal, my passion until they have been cleaned up and organized.
By focusing on my finances and any aspect of them such as debt or investing I will always keep an end goal in mind. My daily actions will be driven by my finances rather than simply floating along like I have been in the past. I am also setting a near term goal for this singular goal of mine and that is to get rid of my debt. While I am not going to ignore growing the meager assets that I do have I am going to make it a priority to get rid of my debt. Currently I am personally sitting with about $35K in consumer based debt; this will be my focus for the time being because it is a known quantifiable debt.
At the same time I am going to make sure that I am living below my means rather than above them; there is no possible way of getting ahead if I am spending more money than I am making. For the next few weeks I am going watch my spending and adjust it to make sure that my spending is under control; once that has been accomplished focus will shift to the debt.
Having a single goal makes decisions a lot easier: the question quickly becomes does it help the goal? if the answer is not yes then it is no. This type of thinking although very stark in nature does help focus on the end goal. I will start chronicling this in more detail on this site in order to share with others like myself as well as to keep myself accountable.
Posted in Budgeting and Planning, Debt, Financial Situation | No Comments
Quality of Life and Frugality
May 12th, 2009
Does it make sense to sacrifice our quality of life for the sake of frugality? This is a personal question that each of us has to grapple with to some extent especially if we are trying to cut back our expenses or save for something. How much do we give up in order to save money or pay down our debt? Do we give up everything and exist on a bare minimum or do we afford ourselves a few niceties in life.
One of the things that my wife and I enjoy is a glass of wine or a beer in the evenings. The question is do we give up our evening glass of wine for the sake of saving a few extra dollars a week? If we were in a situation where we are not making ends meet and we’re barely able to pay our bills the answer to this question is quick and obvious, of course.
The question becomes a bit gray in my opinion when it isn’t a matter of necessity. My wife and I are in debt and we have decided to focus our energies and finances on paying this down. We are able to pay all of our bills without too much difficulty but at this rate it will take us a long time to pay down this debt. The question becomes how much do we decide to give up in order to speed this up?
Some authors and financial gurus will say that you need to do everything and give up everything in order to get financially ahead. Although in principle this is a great idea do you want to give up everything that you enjoy because it will save you a few extra dollars?
The reality is it’s a bit of a toss up; if your sin is enjoying a latte from Starbucks that costs you $5 a day over the course of a year this adds up to $1,825 which could be used for a great many other things that would be more enjoyable or beneficial. But if you really enjoy that latte it might make your day to day life less enjoyable. Can you go without the latte? Of course you can. The question is do you need to go without the latte if it’s really important to you?
I think a balance needs to be set, if you are about to give up everything or almost everything for the sake of a financial goal the frugality you’re undertaking should have a purpose. You are choosing to forgo your quality of life for the sake of a financial goal. With a specific goal in mind I am happy to make sacrifices but it’s a choice that everyone has to make. For the sake of our current financial goal we’ll give up some of our niceties but not necessarily all of them. The question that I am still grappling with is how many of them and to what extent because the goal is important to me but so is being able to enjoy my life.
Posted in Commentary, Debt, Financial Situation | 3 Comments
Keeping Useless Stuff and Collecting Debt
May 11th, 2009
One of the main reasons that I got into as much debt as I did was that I collected stuff, I purchased it with credit and in the end I didn’t really need it. The problem with some of the stuff is that it was expensive so I held onto a lot of it. David’s post at My Two Dollars about getting rid of stuff made me think about this, how much stuff do we really keep that we shouldn’t? Another question that came to mind was: Why do we buy so much needless stuff?
Unfortunately I can’t speak for everyone but I know that I have become a lot better at purging unneeded things yet a few items have managed to move with me a couple times. Going back to David’s post there is a laptop that I bought and used a bit but not excessively that I have carted with me on three separate moves. The computer is now almost 9 years old yet I still keep it. Why you ask? Well it cost $1,800 at the time and I purchased it on a store credit card so in the end I paid over $3,000 for it. It’s not quite junk, yet, I can still use it but it holds little value to me now. Yet I keep it, how much other stuff that should be junk do I keep around?
I also got to thinking about all the stuff that I have purchased over the years and never used, some of it still has some value and use but why did I buy all this stuff? Well I think it has something to do with the consumer mentality that most North Americans get into as they grow up. The latest and greatest gadget comes out and we purchase it, without really determining if we need it.
There is nothing wrong with being a consumer if you can afford it (environmental issues aside), but I doubt that I am the only one that purchased a lot of my stuff with credit. Since starting this blog a while back I have become much more aware of my spending and as a result a lot less useless stuff has been purchased but I am not completely innocent. Now whenever I am about to purchase something that might end up being stuff I stop myself and think do I need this item or do I just want it? With our focus to repay our debt this questioning of purchases is going to increase.
As for that laptop, it’s still tucked away in the basement but it will be tossed when we clean the house in preparation for the kitchen renovation that’s coming up.
Posted in Commentary, Debt, Sites/Articles | 1 Comment
