Debt Dunk

Looking back, I see how I fell into the credit trap. Normal logic is that you need to build your credit in order to have credit. Warped logic if you think about it. I need to go into debt so later I can go deeper into debt. This is not only flawed logic, it is great marketing done by the credit card companies and big banks.

The problem for these companies is that they have already oversold their credit to the general public so they need to find a fresh open market. That market is Colleges! There are offers for credit cards everywhere on a college campus. free pizza, free shirts, and all kinds of other free gifts just by getting their credit card. To top it off, they hire beautiful college coeds or smart smooth talking guys who can sell these cards to the college student. They are not well trained and they are paid by each card they get applied for. They often lie or convince you that you need something you don’t. Ever heard the one, “you don’t need to use it but your get the free shirt?” Problem is, how many people can walk around with $500 or more and not spend it? Everything looks great when you use someone else’s money. Scary thing is, you have to pay it back and with interest. It will take you about 44 months to pay off $500 at $20 a month. Most students are in school for 4 years so it takes almost your whole college years to pay that little $500. That is if you pay it off without borrowing more. The average for college seniors is to have over $4000 in credit card debt. Many have more than that.

Credit cards are easy and spending on them is even easier. However, starting your adult life in debt will be like a ball dragging you down for stuff you burned through as a student. Better logic is to buy your own stupid t shirt for cash and avoid these sharks.

As a college student, you need to think about your future in everything you do. If you are already borrowing student loans, think about how much it is harder it will be to pay the loans when you also have that credit card debt. The key word for a college student is BUDGET! If you have a job, budget your money carefully so that you can pay as much of your school as possible, eat, and cover your expenses. Just like the real world, you can’t spend more than you make. If you do, you be a normal American! Did I mention, normal Americans are broke.

Is that extra pizza worth it? One pizza a week for a year on your credit card will add up to $500 or more. Each year of pizza will take almost four years to pay off. How does this make logic? Avoid credit cards! Stay away from people who push these cards even if they are so called friends. Having credit cards in your wallet is never smart. It is very easy to say charge when there is something you just have to have. Avoid the temptation by not getting the card in the first place.

No matter what the credit card pusher says, it is not true. Here are a list of things you may hear:

1. You can pay it off each month. (The mjority of credit card holders carry a balance over every month)

2. You need to build your credit by getting a credit card. ( Debt to get deeper in debt)

3. You can just get the free gift and never use the credit card (Temptation of free money in your wallet is too much to resist)

4. You are just helping me out so I can earn a commission ( Translation: you are screwing yourself to help me)

5. You can show your college support by getting a college logo card (This is not team support, this is slick marketing, they win  you lose)

There are many many more that you will hear. Some of these people pushing these cards are just average college students who are trying to earn some cash. They are not bad people but you still need to avoid them.

Be smart now so you do not spend your whole life trying to get out of debt. If you need advice or help, I am here to help, just contact me through comments or the contact form. My advice is free and if I can not help, I will suggest ways to find help. College should be enjoyed but not at the expense of your future.

Have you ever played the what if game? When it comes to opportunity cost of debt, we all play the what ifs. For those of you who are not familiar with the term opportunity cost, it is a term in economics that refers to the what you give up in order to do something else. For example, if you only had $20 and you wanted a pizza and you wanted a new video game, you have to make a choice. By choosing the pizza, you cannot buy the video. The video game is your opportunity cost.

When you go into debt, you have an opportunity cost, you give up everything else you could have done with all those payments. That dinner you charged on that credit card, that 90 days same as cash computer you bought four years ago, all the other stuff that is long gone or worthless all cost you a cash filled future. This is what you need to think of every time you go to spend money. Do I really need that new gadget or could I do better by paying extra to become debt free.

I am not against fun and new gadgets. However, if you have tons of debt, can you really afford it? If you behind on bills, you definitely can not afford it! The new gadget is your opportunity cost of having all that debt. Just think, if you did not have all those payments, you could save that money to buy your new gadget.

The old you would just pull out the credit card and say charge. This is not or should not be the new you. Gadgets are fun but they are more fun when you pay cash and can afford to pay cash. Do not fall for the instant gratification of obtaining everything right now because your future debt free living will be the opportunity cost of that debt. Just imagine what you can do when you owe no one. Your money will be free to enjoy.

I for one want to get to he point where I have money to give a little, spend a little, and save a lot. This will mean I will not be paying back money to other people and start paying myself. I hope you are all on the same road to debt free living and if you need advice or help, feel free to contact me.

Last post I discussed the beginning of your budget. You covered your four main categories, now it is time to look at what to do with the rest of the money. First you want to start saving a little toward an emergency fund. Do this this until you save a thousand or two. This is a must so you do not have to go deeper in debt to pay off an emergency. Next, you want to look at other household expenses such as Internet, cable, phone, house repairs, and any other household bills.

Do you still have any money left? If not, take a look at the household expenses. Can you cut your phone bill with a cheaper plan? Can you live without cable and lower your Internet plan? If so, you just discovered some free cash, if you still have no more money, you need to increase income by getting a part time job, overtime, or a better job.

The next step assumes you found or have more money to pay debt. This is where life gets tricky. If the money left does not equal your debt payments, you have two options, do not pay someone or increase your income.

Again, assuming you have enough income, you pay minimum on all debts and start paying as much extra as you can on your smallest debt. Some finance experts say lowest interest or a little extra on each. I discovered neither works as well. The reason is, you believe what you see happen. If you have a small debt and pay it off in a couple months, you see it happening. It motivates you and you start to see that you can climb your way out of debt.

I know this is very basic but you will find creating your budget a little stressful. The whole family should be part of the process. Husbands, this is for you, listen to your wife! Wives, this is for you, you can’t spend more than you make. This may be reverse for some couples but you get the point. It is a partnership and you have to live with in your income.

Please share this on Facebook or other social media to help others understand. If you have any questions, feel free to leave a comment or contact me directly.

I have heard people say they do not make enough to write a budget. This is one of the craziest things I have every heard. Everyone needs a budget. Let me repeat that EVERYONE needs a budget! Budgets are not just for people with lots of money, they are for the people making minimum wage all the way to those making billions.

First thing you need to do is figure out all your income. This is every source of money you have each month. If you have a fixed income, this should be easy, if it varies each month, this is a little more challenging. For the basic budget, we will focus on fixed income. Account for everything coming in even the smallest amount. Write it all down.

Now let’s look at your expense side. Start with the basics:

1. House ; rent or mortgage
2. Food : groceries (needs not wants)
3. Electric service and heat
4. Clothing
5. Transportation

These five categories should come before all others. If you can cover these categories, you have covered basic needs and now you can move on down the list. If you get to number five and find yourself short, you are living beyond your paycheck and you have two choices, cut expenses or earn more. Make sure one of the five is not causing a huge problem. Many people live in a nice beautiful house that is eating up most of their paychecks. If that is the case, this may be something you need to address by selling the too expensive house and renting for a while or if renting, you may need smaller place.

Looking at number two, if you are buying all name brands, you may need to change to store brands or start looking for coupons. Coupons are a great way to cut your grocery bill by a lot of money. Another way is to be in bulk when you have extra or if something is deeply discounted. Making stuff from scratch is not only healthier, it is cheaper too. There are always ways to cut down in this category, just make sure your families basic nutritional needs are met ( I said needs right?)

In category three, you can use more energy efficient bulbs, make sure to not leave lights on all the time and turn the thermostat down a couple of degrees at night and even lower when no one is home. There are tons of energy saving tips available online that are easily done with little cost.

I know people love their clothes. However, this is a category where people tend to look at wants over needs. You need to look at the value of clothing before buying it. If you have a professional job and you need to dress nice for work, consider the value of each purchase. Do not buy a pair of pants for twice the cost because they last a year compared to three months if you are only going to wear them three months. I personally have never been an over spender in clothing because I see no value in it. I paid $150 for a nice pair of running shoes (most I ever paid do a pair of shoes) and I was scared to wear them. For six months, I would not wear them if it was rainy or if there was a chance to get them dirty. They had little real value to me. They fit great, looked good but lost all value in the fear of wearing them. Buy for value and need. If you can get name brand clothes for the same as a cheap brand, by all means buy them. Otherwise, always compare value to use to figure out how to save in his category.

The final category is where many so called normal people get into trouble. They want to impress so they drive a new car or SUV every couple of years. Ever meet that person who owns the nicest car around and lives in shack? Paying payments for something that depreciates as fast as a car is stupid. I have been guilty of it. I never owned a new car until I got married, my wife really wanted (not needed one) so I gave in and we bought one. I used my negotiation skills and got a great price but still had payments. Stupid, did I say Stupid? I now drive a 2000 SUV and my wife a 2003 mini van. Both are paid for. The SUV was the last vehicle I ever bought on credit in 2005 and we paid cash for the van last year. If you can’t pay cash, you are buying too much. If your car payment is killing you, sell the car and buy something you can afford. The saying, ” A fool and his money will always part” applies no better place than when buying a new car.

Once you list out you income and the top five expense categories, how does it look? Do you have any money left? If yes, that is good news and we will continue the budget next post. If no and you already did some trimming to the categories, you have only one choice, increase your income with a better job or adding a part time job.

Many are now saying, you just do not understand! I have been there, I understand but reality is, there is no magic to money. You can cover your expenses by borrowing for only so long. At some point you have to come to grips with where you at and either earn more or spend less.

As always, I am here to help and will give you honest advice even if it is not what you want to hear. Leave me a comment or contact me through the contact us page. I will continue the budget process in the next post, subscribe to my feed so you never miss out.

We have all heard the saying “Keeping Up With The Joneses.” It means try to keep up with other people as far as material goods and social status. We all know these people, they always want to pick up the check at dinner, they drive fancy cars, have all the latest toys, and seem to have a huge social status. Don’t we all want to be like then?

Well let me tell you what they and others will not. All the toys and lavish lifestyle is just one job layout off or big medical bill away from all coming to a crash. You see people like this live a wonderful life on a borrowed dime. They float through life looking rich while paying on credit cards, home equity loans, and those dreaded car payments or worse yet car leases.

These people live way above their paycheck just to make an impression on the world. At night they fight over money, stress over paying the bills, and toss and turn all night. Is it worth it?

You can be like everyone else and enjoy life right now to the fullest! However, what happens when you lose your job? What happens if that fancy car breaks down. What happens if you credit limit maxes out? You can only borrow and live off credit so long before the roof caves and you are sunk. This should not be a normal life and you should not accept it as so.

If you buy a new television on a credit card and of course you get the best because you do not have to pay anything out, do you know how much that will cost? If you buy a $1200 on credit card at 11% interest (Really good rate right now) for four years, you will have to pay $288.70 in interest. Any idea what the value of that TV will be in four years. If you are lucky, $150.

That is just one example and normal people like the Jones are buying everything on credit and making small payments each month. If they charge just a $100 a month for dinners out they are paying the same $288.70 interest for a meal that is gone in less than an hour. I have been there done that and paid the price for it. This is STUPID!

Meals taste better, cars drive better, and clothes fit better when you pay cash. You do not have to worry how you are going to pay for it because you already paid for it! This is the way most of grandparents and great grandparents lived. If it was good enough for them, why is it not good enough for us? To truly be free, you have to free yourself of debt. Proverbs 22:7 says “Just as the rich rule the poor, so the borrower is servant to the lender.” This was written many years ago and it still applies. Slavery is alive and well except we put ourselves in chains.

Next time you see your neighbors car and wish your paid for car was that nice, laugh at them because they will be paying for that for at least 4 years while you are investing to build wealth. I guarantee, that car will not look that great when it is paid off but your bank account will look great.

Do not strive for normal, do not try to keep up with the Joneses, that is the bridge to poordom and you are looking for the plane to RICHDOM.

Good luck in your path to Debt Free Living and as always, I am here to help if you need advice or help.

As you work through your debt, you need to look for ways to save money. One big way to do this is by using coupons. There are tons of coupons that can save you money at the grocery store but also many other places. Many local schools sell coupon books hat can return your investment ten fold.

These books could be for car services, restaurants, and much more. There are buy one get one frees, discount off total bill and sometimes totally free stuff. My wife and I buy the one or two of these every year. The book cost twenty dollars. Some examples of savings is buy one get free dinner at a Mexican place, two for lunch and two for dinner, two half price pizza coupons at our favorite pizza place, and two buy one get one free coupons for McDonald’s smoothies. The Mexican place we save $9.50 per dinner and $6.95 per lunch. The pizza place a discount of $6.50 per pizza and McDonald’s $3 per smoothie. That is a savings of $51.90 just for three places, there are tons of other coupons that we use from the book. Not a bad deal for a $20 investment. You are helping your local school, your local businesses and saving money. What a deal!

There are other ways to get coupons. It is as simple as searching the Internet. Say you are going on trip, check the web for the place you are going and you can find discounts for just about anything from hotels to restaurants to tourist sites. Great way to plan your trip while you are saving money.

Do you have a favorite product? Why not email the company to tell them you love their products and ask for any coupons. Often times, the companies will send you freebies. Recently my wife wrote our favorite yogurt company and they sent three free coupons to get something we buy every week anyway. Imagine freebies on something you buy anyway? Great way to cut the spending.

There are coupons everywhere. All you have to do is look or ask. Sometimes you can save on things you would never expect to. No matter how much money we have, all of us can enjoy saving with coupons, they are not just for poor people.

As you send your kids off to school, you hope they will learn everything they need to know to become good adults. They learn math, science, history, reading, and writing. But the problem is, this is not enough.

Most teens graduating from high school know very little about money. They may have had a small class on how to get into debt with credit cards but not real advice on how to handle money and finances. This is partly due to the normal thinking in society is to grow up get a credit card then a car loan, then a mortgage and numerous personal loans along the way. Is this how we are suppose to live?

Back 50 years or more ago, grandpa might have sit you down and gave the advice of pay cash for everything you buy. Now days, we are bombarded with easy financing, get now pay later, and much more. Parents seldom teach their kids how to manage money because they do not know how. Is that how you want your kids to grow up?

As parents, you need to first learn about money and build an honest relationship with money. No debt is good debt but house mortgage is an acceptable debt but in the shortest term possible. This means 15 years or less and pay off as quick as possible.

There are many great books and courses on the market to learn about how to manage you money. Look for the ones who focus less on getting credit and more on building wealth. You need to learn in order to pass the knowledge on to your kids.

I will be adding more posts on how to guide your kids to be better money managers. Please be sure to favorite us and subscribe to our feed. As always, if you have money questions please ask.

Have you ever wondered how certain people always get the best deals?  When you are trying to save money and be frugal, you learn quickly how to get a good deal. In this short article I will tell you how to negotiate for anything you buy and save money in the process.

First rule to remember is that you can negotiate for anything. This rule applies to any purchase you make. You have to remember that you are in control and if you don’t like the deal, you can walk away. The best places to make a deal are from salesmen who work on commission. These people live paycheck to paycheck and their pay is based on what they sell. They will do anything (with-in reason) to close the deal. I am going to use just a couple of short examples to get you started but it is up to you negotiate the best deal for yourself.

The first deal I will mention is the big one, buying a car. Doing research is important prior to any deal but especially when buying a car. Consumer Report is good a long with Kelly Blue Book to do research on cars. When I went to buy our last new car, the first words out of the saleswoman’s mouth was how much were you looking for as a payment. Do not fall for this!! You can work out terms later; find out how much you are paying first. Dealers often entice you with low payments and tack on up to two more years to pay for it. Once you know the price you can start to work them down. Mine started with a $1500 rebate, and the saleswoman said that would be the best deal I could find. My wife was excited and wanted the car but I was a rock. First they dropped off a good faith $500 and said that was the bottom line. I said thanks for their time and got up to leave. That’s when the real fun starts!! She asked what it would take to buy today and I told them to pay my down payment of another $500 and I would take it. This made the car $3800 below blue book value. The saleswoman had to go and talk to her boss (another tactic to make it look like they are bending over for you). They agreed to my demand and said it would take an hour to process the paperwork and register the car. We left with my wife excited about the new car and returned in an hour. When I went to sign the paperwork, they tried the old switch, they put the $500 down payment back in the loan, I said that was not our agreement and they tried to convince me that it was. This is the point where you have to be willing to walk away. I knew they needed me more than I needed them. Another tip I learned was to buy at the last day of the month because the stores and the salespeople are trying to make their monthly quota/goal. I purchased this car the last day in July.  Long story short, I got the deal I wanted and walked away with great terms and a great price. Anybody can do it, EVEN YOU!!!

Another deal was when I bought a computer; I like Circuit City because their sales people are on commission and want to make the sale. I went in knowing what I wanted and what I wanted to pay. I use this example because sometimes you can’t always get a cheaper price but they might give you something. The price was great on the computer and the salesman would not budge on the price. So I did the next best thing, I asked for upgrades (for free of course). Many times when you buy something like a car or a computer, upgrades are cheap for the business but they make a huge profit on the mark-up. I ended up getting a better hard drive, an extra memory chip and a superior monitor upgrade for free.

These are a couple of examples of how negotiated some deals, another way is if you buy a product that was damaged or a part is not working. We bought a freezer seven years ago and when it was delivered, the back had a dent on it. I stopped the guys from bringing it in the house and called the salesman. He gave the old 10% discount offer and I told him I will have them load it back up and bring it back and cancel the order. It was 92 degrees outside and the guys were not very happy at this point. Once again, I knew I had the upper hand. No salesman wants to deal with angry delivery guys at the end of the day, plus he did not want to lose the commission he made. I ended up with a 35% discount and the dent was hid from site when I put the freezer against the wall. Don’t settle for less than you can get and once again be willing to walk away from the deal.

Sometimes you just want to pay a better price for a service you use all the time. I have a satellite dish because I can’t get cable and I have been with the same company for many for 11 years. I have called four times to negotiate a discount or a free upgrade. I call and tell them I want to disconnect my service (this only works if you are willing to follow through). Every time, they send me to the retention department, whose job is to keep a customer, and they always want to know why I am leaving. Twice I just said I couldn’t afford it right now. The first time they cut my price in half for a year and gave me a free movie package and the second time they gave me $7 a month off and a free movie package for 6 months. The other two time was because my equipment was having problems and out of warranty and I wanted to replace it (for free of course).  The answer was no until I was switched to the retention department and BINGO, I got the receivers replaced with better equipment. You have to remember that it cost a lot of money to get a new customer; these service providers will do anything to keep a loyal customer. This does not work if you are always late on your bill and of course you must be willing to walk away from the deal.

These give you examples of what can be negotiated if you take the time and are willing to walk away. Always remain calm, be polite, and give respect and you can negotiate just about anything you ever want to purchase.

It is much easier to account for your money when you are single. You do not always make the right choices but it is your money and you are the only one you have to answer to. This is good and bad but it is yours all yours. However as you get into a serious relationship and get married your life chances and so does the money part of your life.

When you are married, the finances are combined and so are both the rights and responsibility. This is where communication is key. If both husband and wife are spending freely with no regards to where the money is going, it will catch up to them and in a very bad very real slap in the face reality way. At all times, I repeat, at all times, both spouses should be able to know where the money is and where it went. If this does not describe your marriage, YOU HAVE A PROBLEM! Excuses like., my wife always handles that or my husband handles all the money is no excuse at all. If you are not a partner in the finances, you need to educate yourself and become one.

This is not to say that one spouse can not do the majority of the financial paperwork and keep the books. Most couples have one who is more equipped or willing to do that job. This is not to a bad thing and in my marriage, I am that person. However, at any given time, you should know where the money is and how much of it there is.

One of the top reason for divorce is money. People go through life sailing along debt to debt and spending freely. One day, the train of credit cards slow down and they realize they have hit their max. How are they going to pay all the debt. That is where the fights begin. First it is anger at the situation, next it is anger at one spouse or both blaming the other. How many couples do you know or have you  heard of who have lost everything because they maxed out? Many times you hear one of them say something like, ” I had no idea, John always handled the money.” Ignorance is no excuse!

If you are reading this, the first step is to ask your spouse, “where is the money honey?” Second is for both of you educate yourself on the matters of money. Take a class, read a book, research online, or ask a financially responsible friend or family member for help. Make sure you know where the advice is coming from! If it is a book written by a credit card company or another debt related company, skip it. Learn from those who have been there and recovered and are no longer a slave to debt. If you want to lose weight, do you go to the biggest person you know? No, you go to the person who has loss weight and kept it off. If you want to succeed in money, you do not go to a person who is broke or in extreme debt.

Finding financial success means opening your eyes and learning from your mistakes. If you are in debt, borrowing more will not fix it. Join hands with your partner for life and form a new partnership, the Financial Us. Working together and knowing all about the money will secure your finances and prevent a bankruptcy of your marriage.

If you have a question or need help, maybe I can help, leave a comment here or got to the contact us section and send me a private message. I will try to address it as quickly as possible.

I have written in the past on how it is so important to be as debt free as possible and be prepared for those bumps in the road of life. Well since those post, I have built a beautiful new house. In the process, I took a 15 years mortgage and added extra payments when I can. If you followed my other post, you know that I lived in old farm house which was in rough shape. This being said, I lived there until my wife and I could afford a nice house without putting our financial security on the line. I live what I write and I prepared for any possibility.

Well guess what? As life happens, we moved in our nice house, both of us had good jobs and the extra payments were tacking away at the mortgage. We was living the dream and feeling the joy. That was until the rug got pulled out from under us. I worked a ten month job during the school year and on the second day of the school year, I got the dreaded call. My job was being cut and I was being laid off in one of the worse job markets ever. I worked for a non profit and we knew it could be possible at some point but not quite this quick.

This could have wiped us out of we had bought our new house before we got our financial house in order. However, we are OK. I paid off almost everything we owed prior to buying the house. I prepared a budget that would allow us to live on one salary if needed. When my wife’s car was demolished in a car wreak, we paid cash for a used mini-van. The only debt we have is my student loan and the new mortgage. I was able to sell my old farmhouse with owner finance so we have a little income from that coming in. Everything else we pay cash for. Would I like to have another good paying job? Yes, that would be great. Before the lay off, we were on track to have our house paid off in 7 years. However, we are still living good. We have a nice house, reliable (not fancy) automobiles, and food on the table. We have a little entertainment money and good family and friends. This could not have been possible without one thing!

Getting your financial house in order is the biggest key to surviving a disaster. Do you really need a brand new car with big payments? Do you need a new house or can you wait until you can afford it? Is that credit really a need or is it a stone weighing you down? How many homeless people have you personal heard about because of a sudden job loss? Are you prepared?

I have done some stupid things with money in the past. I tell everyone that if I knew then what I know now, I would be much better off. We can not turn back time, forget about the past! It is time for you to live in the now and this is where you start. If you are overwhelmed and think there is no way out, there is! You need to first sit down and do a budget. It can be very basic but you need to know where your money is going. Most people have learned that we deserve the good life and we deserve it now. You know, we do deserve it, however; we need to be able to afford it first.

Start right now by sitting down and looking at what comes in and what goes out. Food, shelter, transportation, power, and heat are first out. Then you need to see what is left and start paying down your debt. If you can’t afford that big car payment, you should not have that car. Buy a beater until you can upgrade. Cars and trucks are what of the biggest traps of buying new. They appreciate the minute you drive off the lot and lose most of the value with in two years. I drive an eleven year old SUV. It gets me from point A to point B. Is it beautiful? Nope, it has rust, a dent, A/C doesn’t work, and it squeaks like crazy. Would I like a brand new truck? Of course I would but not at the cost of the stress involved in the extra payments and the fear of financial ruin.

Look at your life, see where you have done stupid things with money and start fixing it. You are not alone, millions of people share your fate. Does that make you feel better? I hope not! I want you to be above that. I want you to take hold of your finances and rise above. Start now and start with a basic budget. I am here to answer any questions if you need help. I am still fixing one mistake; a student loan. However, the others are gone and a valuable lesson was learned. I paid all my debt, screwed no one including the credit card blood suckers and I am in a position to survive a major life downturn. My hope is that you too can get in that position.

Feel free to leave your comments. If you really want advice personally geared to your life, please use the contact form and I will get back to you to answer any of your questions. The time is now, prepare, fix, and live a more fulfilling life!