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.

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.

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!

I have written before about Dave Ramsey and the fact that I like his program. Though I am not a huge religious person, Dave’s debt plan is solid and helps people to rid themselves of debt. I have always followed the same principles and I just needed a little reminder of being a good money manager. I have been watching Dave for a while now and my wife and I have become hitting our debt with all we can.

Since I love to learn and any new knowledge can help, we signed up for Dave Ramsey’s Financial Peace University at one of the local churches. We had our first of thirteen classes last Thursday. The program cost $100-$129 for the kit and you become a lifetime member. As a member, you can take the course as much as you want for free. It also includes access to a member only website with some of Dave’s budgeting tools and forms. You also get to meet, interact and both encourage and be encouraged by others wanting to get out of debt.

The classes consist of about an hour of watching DVDs featuring Dave Ramsey. The program is centered around his seven baby steps. Once you watch the video, there is a class discussion and homework is assigned which is geared toward getting your money in order so you know where you are and where you are going financially.

Karen and i found this class interesting and it was great to interact with others from various backgrounds. Since we have applied the basic core of Dave Ramsey and starting really budgeting in September 2007, we have paid almost $11,000 towards our debt.

All of Ramsey’s program is good old fashion common sense but it is nice to have some reminders of these things. I highly recommend this course to anyone who wants to get control of their money and become debt free. I do not believe in bull when it comes to getting out of debt. I am dedicated to provided sound information to my readers and not some scheme. There are no short cuts and I believe if you owe it, you should pay it.

I will keep you updated on my course and if you have taken the class, please feel free to share your own opinion here on the blog.

I have heard in the past where if you are prudent with your money, you will attract more money. My wife and I have noticed this since we have started to really stick to a budget. Honestly, we have always had the money coming in but now we have a set budget we can put any extra coming in can go toward debt.

We seem to be getting a lot of extra income coming from new sources that we did not have before. This makes us feel wealthier now because before we would have found things to spend it on. Being on a reasonable budget makes it easier to apply any raises and extras to debt instead of extra spending.

This is a great way to live and if you decide to follow a plan like ours, you too will see life looking better. It will look like money is coming to you instead of you seeking money. You will start to be a money magnet. As you pay off your debt, things will start to look better. You may not fit in with your free spending coworkers and friends but someday, you will be free spending with honest cash. It is no longer about keeping up with the broke people who live paycheck to paycheck. This is a new way of living that will take you to a whole new level in life.

You do not have to live as a debtor your whole life to have the things you want. Yes, you may have to skip a few fancy restaurant dinners and a few extra trips to Starbucks; however, you will have a future of anything you want if you get out and stay out of debt. Can you imagine a life where you pay yourself instead paying creditors? Life would be easier with less stress.

This can be done and as you progress, you will see what we have, money will come to you. Be prudent and smart about your finances now! Sit down now and get a budget written out. Make sure every dollar you make is written down along with all expenses. Be honest with what you need and allow a little fun. If you get on a plan and stick to it, you will stop being one of those people waiting for the paycheck to save you and then run out of money way before your next pay.

Start now no matter where you are at or how old you are. When you get done reading this, sit down by yourself if single, with your wife if married, and your whole family if you have kids and write out your budget. If you have questions or need help, I will be happy to guide you with any help I can.

The economy is tough and for a while I have been trying to find a source of increasing my income. My current job is basically per Diem or when needed. I have not had any work for about a month. The good news is, my job just picked up to the point that I will have a descent salary for at least a few months. This brings me to a good point when paying off debt.

I have talked about the two equations of a budget. One is the income side and the other is is the expense side. If expense out weighs the income, you are in trouble and either have to cut expenses or increase income. In a weak economy it is harder but not impossible to increase your income.

The most simplest form of increasing your income is to get a better job with higher pay. This is easy if you have the skills and are in a an area where the job market is booming. I for one am not in that type of area. The next method is to take on an additional job. You could deliver pizza, wait tables, work fast food, or any other job that will boost your income. This is not always desired but you have to look that it is to get rid of your debt so it should only be short term. It will boost your debt paying and get you out of debt faster.

If either changing jobs or getting a better job is not an option, it is time to look at alternative ways to make extra money. With the Internet, it is easier than ever. Many people have found a lot of stuff in their basement, attic, or garage and have made a few thousand dollars selling them on eBay. You could also have a yard sale or find a resale shop that will buy the stuff or sell it on consignment. This is short term income but it could be a quick reduction in your debt.

Once you have done the above, you can look at the various at home ways of earning money. If you have good typing skills, there are doctor offices and medical companies that pay you to do medical related transcripts and billing. If you are a good writer, you could find freelance jobs on the Internet to earn extra income. Some companies people to do customer service work from home. These are just a few suggestions to up your income at home, there are many more. Just be careful not to fall for scams and never pay someone to work for them.

One way my wife and I use to earn extra money was to do mystery shops. Many of these companies reimburse you to eat at nice restaurants and also throw in a few dollars to cover your expenses. Though this is not big cash, it does give you free meals, and products with just a little bit of time. When we lived in a bigger area, we were going out once a week to steak houses and having $40 meals and we got reimbursed for filling out a survey about how the place looked and how the staff performed. It sure did help with the budget. As I advised for the home work stuff, never pay to do these types of shops. If you have pay a fee, it is scam and all you are buying is a list of sites you can find on your own.

The final way I will mention is bartering for things you need. Even though this is not cash, you will get something of value which you would buy otherwise with your income. If someone else has something you need, find something that you can do to get it for free. I have exchanged many things before to get things I need. These could be skill work or physical products. Anything you can get for free that is moral and not against any law is a good thing.

The ways I mention here are just suggestions to get your mind working. Increasing your income is a great way to speed up your debt payoff. However, be aware that it will not help if you continue to use credit cards and just increase your expenses to meet your new income. The main key is to spend less than you make and pay off your debt as soon as you can.

Have a great way that you have increased your income? Please share by leasing a comment to help or inspire others.

Many so called finance experts recommend that you should carry a mortgage because you will have a write off for your taxes. This is bad advice! I am not saying you should never have a mortgage. Most people at some point or another have a mortgage. What I am saying is that if you can afford to pay off the home with cash, you should not continue to carry a mortgage.

If you itemize, mortgages could lower your taxes. However, that amount will be a small part of what you end up paying for interest. So you are paying $10 to save $3. This so called logic is not smart or even financially responsible. If you have to carry a mortgage, by all means take the tax write-off. However, if you can pay it off, do so as soon as possible.

The amount of people in the world who are waiting to buy a home until they can pay cash is growing. If you can do so, you will be a step ahead of the so called normal family. If you can’t save to pay cash, make sure you are otherwise debt free and that you have saved at least twenty to twenty-five percent to place a down payment and do not take a mortgage for longer than 15 years. .

Being a smart home owner will fit into the rest of your plan as being the CEO of your own personal finances. Though mortgages are acceptable debt when required, they should also be paid off as soon as possible.

There are many people who have been burned financially and still never learn from their mistakes. Credit card companies are not your friends no matter how nice they are. These people do not lend you money just because they like you. It is not an act of kindness. You will pay and pay and pay! Why then do people repeat the same money mistakes over and over? The answer is, somewhere along the line, you were taught stupid people tricks.

Society teaches us that if we want something, first we have to borrow money. If we ever want to be a success, we have to establish our credit. Even people who have gone the ultimate financial crisis, bankruptcy, start right away thinking of ways to rebuild their credit. Believe it or not, there are people who do not use credit. Take a moment and sit down, because yes, there are debt free and cash paying people in the world.

Remember the stupid tricks you have seen people teach their dog? I have seen dogs do just about anything to please their master and get a small treat. Well, I hate to be the one to break it to you but you are like a dog being trained by a society that believes you can not live without going into debt. It is the number one stupid people trick taught to most people as they grow up. If you want to get out and stay out of debt, you need to be reprogrammed. Debt is not a way of life, it is a roadblock in the road to freedom.

I know now you are thinking. I need a new car, a new house, or something else. The one and only debt I now see as ever legit is a home mortgage. That debt should only be obtained if and only if you are debt free and you have an emergency fund in place. You also must have at least 20-25% down, take a loan for no more than fifteen years, and pay it off as quickly as possible.

Yes, I want a $300,000 house with all the amenities! It would be great and I would love the feel of inviting people into my home. Now back to reality. I live in an old farm house that at times I feel like calling in the bulldozer. I am planning on someday getting a nicer house but reality is, I can not afford it until I become debt free and have a savings and a good down payment. Am I deprived? No, I live in my house and enjoy what I have. Honestly, we could go out tomorrow and get the new mortgage and worry later how to pay for it. That is what society has taught us. However, I no longer perform that stupid people trick.

Break out of your programing and take control of your own life. You are now the CEO of your personal finances! Bank of America is not your buddy and banks are used to manage your cash not to finance your fancy toys. Be smart and you could find yourself richer than you ever thought possible.