That was the start of an email chain between a reader and I which ended up turning into a LOT of advice, haha… But hey – that’s what happens when you’re addicted to money and interacting with awesome blog readers! ;) Which this post today is all about. Our entire email conversation is pretty much copied and pasted back and forth here in hopes it helps others with similar problems too – particularly with debt and savings. Where one is a nicer problem to have than the other ;)
If you want to see more of this kinda stuff here on the site, just let me know. I’m doing a lot of it over at Blog Sexier, and so far people seem to really enjoy it (and it saves me time too because I can literally spend hours emailing people back, just like I can writing up all these blog posts too – something I’m just naturally slow at, wha wha…)
Anyways, it’s pretty lengthy, but here are the key takeaways for all those with A.D.D. :)
- Own up to your debts
- Create a plan to PAY OFF your debts, and make sure it’s one that works for YOU
- Come up with a plan for all the money you’ll then be *saving* once all those debts are gone!
- And finally, if there are disconnects between you and your sig. other, it’s smart to work ’em out ;)
Let the emailing begin!
Hey there J$,
I started reading your blog about 4-5 months ago and absolutely love it! I am looking for a little advice, but I figure I would let you know where I am coming from before I dive into what advice I need.
Here is where I started!
About 2 and a half years ago, my wife and I had our second child. Once we got the medical bills from her birth, I figure that we were close to having the following debt loads. And to add insult to injury, I also had to take a 25% cut in pay! BOOM!
- $10,000 in a car loan
- $7,500 in CC
- $7,000 in a Harley loan
- $5,000 in medical bill debt
- $2,500 in vet bills
- Anywhere between 4-5 other small debts adding up to about $2,000
- Mortgage – $237,000
- Student Loans – $38,000
Now, here is something that I still kick myself about. We got an inheritance from my Wife’s grandmother to the tune of $16K and we(I) blew it paying off credit card bills, only to rack them back up.
After spending way too many nights not being able to sleep because I did not know how the hell I was going to be able to make ends meet, pay my bills, and make sure that my family had a roof over my head.
So, I had to take a good look in the mirror and figure out what was causing the issues and I needed a game plan to get out of it.
- I was spending too much time and effort trying to keep up with the Jones!!!
- This was the biggest realization that I came to!
- The line between want and need was non-existent
- I needed a plan!
So after some visits to many websites and late night reading, I decided that I had 2 options:
- Walk away from my debts and file for bankruptcy (at age 29)
- Come up with a plan
So what I decided to do was to use a modified version of Dave Ramsey’s Debt Snowball. Over the past 2 plus years, I have eliminated all of my debts other then my mortgage and student loans. And to be honest, typing that out makes me feel pretty damn proud of what I have accomplished.
However, now comes that part where I am looking for advice. I have done a pretty darn good job paying off my debt (insert a pat on the back here) and I now I have finally started putting some money away. But, the part that I am getting frustrated with is that I am not seeming to put money away as fast as I was able to pay off my debts.
I can get more into my budget if you like. But I guess that I am looking for some words of encouragement? I don’t really know… maybe I just needed to actually write it down to see what I have accomplished.
Wow dude, that’s incredible!! And I’m loving that you went with option #2 w/ the “plan” over just filing bankruptcy – I know it makes sense for some people, but really it just irritates me when people walk away from their responsibilities, esp if they have the power to be able to knock it out themselves like you did. So A+ in my book, friend! That is truly some impressive $hit :)
RE: Savings & Goals:
I’m not sure how much you were applying towards debt vs putting into savings, but assuming it’s the same number I’m gonna guess your problem is not having any more GOALS to hit now. Which most of us need to keep on going strong and stay excited! You got a “rush” every time you knocked out your separate debts (like, 10 of them over the 2 years!), but now you get nothing, haha… Which is of course a good problem to have ;)
I should probably ask you first though if you DO have any goals in mind with it? Maybe they’re too big or not that fun? I’d imagine a large Emergency Fund is in there, but outside of that “what’s the point” of all that savings in your head? For safety? To get a car? Different house? Invest in stocks?
I think asking yourself a lot of those questions may help you to tweak things as time goes on… I know for me this same type of stuff happened. I was on a binge with knocking out my credit card and car payments and other random loans that were floating around, and with each one I killed I got stronger and more excited over time. Then it was like “ummm… now what?” haha…
So I started maxing out my 401k so I could get free matches from my company and at least stuff it all in there to get the retirement plan in action, and then when I had more after that I went on to maxing out my ROTH IRA. Both of which have nice limits that have an “end” point ya know? And then after that – which is where I am at this stage of life – I’ve decided to tackle the one thing I hate the most – our mortgages. Which is a bitch, as you probably know yourself. And also the hardest to accomplish cuz it’s sooooo much money and will take sooooo freaking long! haha… but I’m doing it all in baby steps :) And knocking off the 2nd one first (at around $36k now, down from $60k when I started) so I can get the easier win, and then the big 1st one at $280ish right after.
The point to it all, though, is that you always need a mission to keep energizing yourself. And no matter how big or small it is, once you’re done you need another one :) And also to reward yourself in between too so you don’t burn out!
So ask yourself what *moves* you and gets you excited for all that money, and see if that does anything… Believe me, there’s a TON of places you can put that money, but not all of them are fun (“car repair fund”, “house repair fund” “X months of living expenses”, etc). As long as you have have nice goals set up though, you’ll be a bit more happier with things :)
Hope this helps! And again, a hearty congratulations on flat out KILLING it with all those past debts… I was not expecting you to tell me they were all gone at the end, haha…. so way to go!
What up J Money!
Thank you first and foremost for actually responding to my email and responding in such a timely manner.
When I sat down at my two options, it really came down to a moral decision. Financially it made more sense to walk away, deal with 7 years+ years of crappy credit. However, that was not how I was raised. I had made my bed, and now I have to lie in it! Even though I was so far in debt, I had worked since I was 15 years old, and there had never been a bill that I hadn’t paid.
Thanks for the advise on savings. I think you nailed it on the head! I believe that it really does come down to psychology, and I believe that Dave Ramsey touched on it too, when I was reading up on his debt snowball concepts. There were two different ways to handle it. 1. Was to put the highest percentage rate first on your list and knock that down… but in my case, that would have be the 20% split I had on my mortgage and there was no way that I could see myself sticking to a plan to pay off a 30K debt first. That would have been setting myself up for failure. It really came down to knocking off the smallest debts first and letting that cascade over into knocking off the next bill, ect, ect.
So, I guess that I just need to sit down like I did last time and really figure out how my wife and I are going to tackle savings and what tangible goals we need to hit.
My 401K is pretty decent (for only being 31), I have started setting aside my emergency fund, I set aside a small amount per pay check to invest in a small Scottrade account, I got my 529’s rolling for my too kids. Just reading through your email and typing this out has brought a bit of clarity…. What am I saving for? Sounds like my wife and I have some brainstorming ahead of us!
Now, here is a topic that I would absolutely love to see you write about some time:
Over the past two years while I was paying down the debt, I would get on my wife about (what in my eyes) were frivolous purchases. I have tried time and time again to explain to her about why I get upset when I see $10 at Starbucks here, $10 lunches twice a week, $50-75 at Target, ect., etc. At times I think there is a disconnect between her and I on what is a want and what is a need. And what had really brought the situation to a head was the kids. The way I see it, she uses the kids as a crutch to spend money and sees it as necessities for the kids.
Anyway, food for thought…
p.s. thanks for letting me lay down on you digital financial therapist chair.
Glad it helped brotha! Always nice to bounce ideas/thoughts to others and get a fresh perspective – I do it all the time myself :)
And I’m with you on all that psychology stuff too – people hate on me (both online and offline) when I choose the least financially smart method, but at the end of the day it comes down to KNOWING yourself and what excites you over what doesn’t. There’s no point in going the “right” route if it’s wrong for you. You’ll fail miserably. So I’m glad you stuck w/ the one that fit your personalities more too :) In the end you probably didn’t lose much money anyways, so let the haters hate!
RE: savings plans – Yup, brainstorm away and set up a list of priorities – maybe a Top 5? – to start funneling money to. Which can be much easier said than done when other people are involved ;) Even more important then to have those types of talks or there will still be that disconnect there w/ the wife!
RE: Disconnect w/ the wife
I hear ya man. While I’m usually on the other side of the camp which says “I don’t mind small expenses here and there as long as 80% of the goal is being hit,” if it bothers you then it’s a valid concern that needs fixing. And I bet the answer is something as simple as budgeting an amount for all these “extras” going on or something similar! Which more than likely will continue unless you REALLY make a stink about it, which you may or may not want to do, I’m not sure.
Either way, maybe setting up an allotment for all the gray areas or “extras” could give her the padding she needs to be able to spend as she finds fit, but not over a certain amount you both agree to? Like, say, $100 a month or $20/week. More often than not you’ll both get what you want out of it :)
Something similar that we used to do was throw $100 from each paycheck into our own separate accounts to be spent any way we please, no questions asked. That way if I wanted to blow $200 on an old coin from the 1800’s that the wife would shoot me for, I could, and if she wanted to color her hair for $150 she could do that too without any wrath whatsoever ;) It doesn’t work out with all couples, but it is an idea to keep in mind if you guys wanted to try it…
Okay, i’m gonna end this before it turns into another novel here. I swear I sit down to just spend 5 mins on my emails but I get sucked in! Esp when having to do with money and/or readers of my site – it’s what keeps me going :)
[Photo credit: khrawlings]
PS: Some of my favorite tools:
|Personal Capital (FREE) -- If you’re looking for a robust financial tracker, Personal Capital is the way to go! They’re like Mint, but on steroids and have much better tools for investment and net worth tracking. // Full review|
|Digit (FREE) -- A super easy (and automated) way to save. Every day Digit analyzes your income and expenses and will push money aside for you any time it sees extra sitting there. I've saved over $4,000 myself using them so far! // Full review|
|Acorns -- Having trouble finding money to invest? Check out Acorns – they round up all your transactions to the nearest $1.00 and drops the difference into an investment portfolio for you. Easy way to start investing! // Full review|