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Reader Mail: “Looking For a Little Advice”

by J. Money on Wednesday, December 19, 2012

cash pile

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. :)

  1. Own up to your debts
  2. Create a plan to PAY OFF your debts, and make sure it’s one that works for YOU
  3. Come up with a plan for all the money you’ll then be *saving* once all those debts are gone!
  4. 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

Other Debts:

  • 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.

  1. I was spending too much time and effort trying to keep up with the Jones!!!
  2. This was the biggest realization that I came to!
  3. The line between want and need was non-existent
  4. I needed a plan!

So after some visits to many websites and late night reading, I decided that I had 2 options:

  1. Walk away from my debts and file for bankruptcy (at age 29)
  2. 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!

-J$

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 :)

-J$

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[Photo credit: khrawlings]


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{ 14 comments… read them below or add one }

1 Christopher @ This that and the MBA December 19, 2012 at 8:38 am

I have those same talks with my wife…every morning she still gets her 3 dollar dunkin donuts and i try to tell her that amount over the year but it goes in one ear out the other…She comes up with the excuse I work too so dont worry about what I spend money on. Sometimes her mentality gets to me because the money does affect me while I may not be earning it, it that 3 dollars a day could be saved and having the power of compounding and we enjoying it during retirement… I usually get frustrated talking to her about those frivolous purchases that I have kind of written them off as not having earned as much.

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2 Paul December 19, 2012 at 9:04 am

So your reader has at least one of Dave Ramsey’s books and it looks like he kind of started going through the Baby Steps, but he felt lost when he finished step 2. Why not just continue on to step 3, and set up a 3-6 month emergency fund? Then it’s on to step 4 (investing) and step 5 (paying for college).

I recently had a similar issue with my wife and we came up with a solution. Previously, I had a $200 per month fund to “Blow” on anything I wanted, but she did not. She would just spend and spend on whatever and it used to drive me crazy. So now, she also has a fund of $200 per month. We also set up another account to save for inevitable repairs, etc. We originally set it up with $100 per month each for Auto, Home, and Vacation. We have since added an additional $100 per month for Gifts and Clothing. I also use this account for our water bill, which is quarterly. The bill is usually around $70, so I put in $25 for the first two months of the quarter, then take it out when the bill comes and make up the difference from that month’s pay.

I think the next talk we are going to have to have is about how much she spends on education for our son. We home school, and sometimes it looks to me like she is buying every curriculum available. As long as she has a budget, she will stick to it. It’s just getting her to agree to a budget that is sometimes difficult. Eventually we will account for all eventualities.

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3 Catherine December 19, 2012 at 10:15 am

So great the blogging is helping ‘real people’! Hubby and I also use to have a disconnect about the small purchased (on his behalf) it wasn’t until he got really involved with our budget and actually saw the impact they made that he stopped and started making much better financial decisions.

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4 Joanna @ Our Freaking Budget December 19, 2012 at 11:14 am

Really great advice… your readers are lucky to have you! My husband and I both used to get ornery about our lack of personal spending, but then we added an “everything else” category to our monthly budget to be spent on anything, as long as it stayed under a certain number… like you were saying. No more money grumbling = a happy home :)

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5 Mom December 19, 2012 at 11:33 am

Hubby and I have set up “blow money” line items in the budget. We can do whatever we want with that money – no questions asked. Additionally, we have a smaller budget line to use for our daughter’s “random stuff” – like swimming lessons, a new toy, etc. That’s what helped us with overspending on the daughter or using the daughter as an excuse for spending. If your reader wanted to have a split line item for the kids – ie. Mom gets X to spend on the kids, dad gets X to spend (or rationed based on % of time mom vs dad buys stuff for kids), that could help hold off that argument.

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6 Pam December 19, 2012 at 11:39 am

WOW this is really timely for me because I am at the same spot. I took a DR course late in 2007, got laid off in 2008 and only could find a job at half my old salary. I also thought about filing bankruptcy but wound up paying off over $90,000 in debt.

I currently only have one debt and my mortgage and like the other person I’ve lost my steam. It is almost like I am back to my old ways of I see it, want it and buy it but since I don’t have any more credit cards it is getting paid off every day.

I have to up my emergency fund and then move on to my retirement.

I love reading about other peoples success because it gives me hope that one day too I can be there.

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7 Samantha December 19, 2012 at 12:28 pm

Having been through Dave Ramsey’s course and plan, and currently working on Baby Step 6 (pay off the mortgage), I agree with Paul that your reader should continue on with the steps. It is VERY hard after paying off all the little debts and losing steam. We lost our way for a few months with unneccesary purchases. But then we broke up the Emergency fund into chunks to work toward (like 1 month of expenses) and we were able to hit it in no time because of how large the “snowball” had gotten.

As far as the disagreements about the small purchases, it is essential that you set up categories for fun for each of you, that you can spend on whatever you like, No more arguing about each other’s vices, i.e. Starbucks, cigarettes, etc. Its not about values here: its about money. We give $100/month to each of us, just like J$ does. If I want to spend $60 on a massage that he thinks is frivolous, thats up to me cause its my blow money. If he wants to save up all his money for 6 months to buy (yet another stupid) laptop, I can’t say a word. Its working for us!!!

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8 Joe @ Retire By 40 December 19, 2012 at 12:36 pm

Congratulation on paying down your debt. You did a great job and deserve a hand. :)
We have an allowance system and we can spend our allowance on whatever we want. I’m saving up for some clothes and I think Mrs. RB40 is saving up for a new purse. It works out well because we don’t have to monitor each other’s usage.

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9 Alexa @ travelmiamor December 19, 2012 at 3:04 pm

he should totally check out mint.com too. We use to help budget and LOVE it! You can break it down as far as you want it go, i.e. restaurants vs fast food (or in his case Starbucks). We just put any dinning out under restaurants. I love it…I could talk about it all day :D

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10 K.K. @ Living Debt Free Rocks! December 19, 2012 at 5:25 pm

The part about having goals really reasonated with me since I just wrote about topic that in my post yesterday. It really is important to focus on accomplishing something that you really are motivated and excited to accomplish otherwise more often than not it ain’t gonna happen.
Kudos to the reader and his wife who chose to do it the hard way and pay off the debts. Of course there are circumstances where bankruptcy is really the only viable option but a lot of people take the shortcut and find themselves again back up a creek with with a broken paddle!

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11 daveM December 20, 2012 at 1:39 am

I have one little loan outstanding which irritates me each month when I get the statement. My remedy was to reduce the daily trips to the local donut shop by a few and use that money to eliminate my balance. Seems to be a simple step to take but I have had that loan for many months and refused to discipline myself to eliminate it.

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12 J. Money December 20, 2012 at 10:34 am

Happy to see y’all enjoying this one :) And that it’s helping others out there reading this right now and just not commenting – I know there are plenty of you! Haha…

Some responses:

@Christopher @ This that and the MBA – I’m sorry to hear that man, sounds frustrating indeed :( What do you think about those ideas I listed above? Setting aside an amount each month for either of you to do as you please? Maybe if it’s all built in within the budget it wouldn’t bother you as much? Either way it should give you at least *some* comfort that she’s not out spending $30/day on stuff you don’t agree w/, or worse – $300! ;)

@Paul – Awesome though! Glad those budgets you guys are making are working! Once we know what our limit is, we tend to be better about sticking to it – at least in our heads :) Interesting to hear about those different Dave steps too – hadn’t heard them before though I really NEED to. Being a personal finance blogger and all ;)

@Catherine – Great! The more that both sides are in the middle of the finances the better – def. helps put things in perspective. Though admittedly it’s much easier said than done ;) I still, after all these years, can’t get my wife to really soak it in! Haha… she listens to me and chimes in when I ask questions here and there, but I can tell she’d rather be walking into a pit full of snakes than having an in-depth discussion on money ;) Oh well… it’s good one of us enjoys it I suppose!

@Joanna @ Our Freaking Budget – Good!! And thanks so much for the kind words – I love my job! :)

@Mom – Agreed! A great idea indeed :)

@Pam – Yes! And you’re out there SEARCHING for it too online which helps, so def. keep that up too :) You’re doing great killing all that debt!

@Samantha – Haha… you don’t think having 5 laptops is necessary? ;) Cool you guys are working on paying off your mortgage too! I literally think, and work towards that, every single day… I can’t wait for the biggest expense to be gone forever! It’s gonna be awesome!!

@Joe @ Retire By 40 – Yup! Monitoring (aka “hovering” as I like to think of it) is liable to drive everyone crazy. You get enough of it at work and other places, so a good solid plan/solution is def. needed to bring some more peace into the household. Even if it’s just on your side cuz the other half is perfectly content, haha…

@Alexa @ travelmiamor – Haha, Mint.com IS pretty good – you’re right :) Glad you found something that works (and excites!) you guys!

@K.K. @ Living Debt Free Rocks! – Yup! I always hesitate before stating my views on bankruptcy too, just cuz there *are* times where it makes more sense and isn’t about just over-spending/etc (like mainly with hospital bill stuff and what not). It’s just that 9 times out of 10 the person doesn’t want to put in the hard work and take responsibility, and that’s the kind of stuff that frustrates me to no end.

@daveM – Haha… yeah, cuz you’re trying to give up one of the most tasteful things on Earth! Haha… how about giving up something you hate? ;) Or can adjust? (like cable/phone bills or something)

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13 Nikki December 27, 2012 at 6:11 pm

Regarding spousal disconnect, I agree that you both need to get on the same page. I also agree that each of you having a ‘no questions asked’ budget is really important. But I have to ask, do you think that the lectures on how much her daily coffee adds up is going in one ear and out the other because it’s just that: a lecture?

I think the key to having both of you on the same page is to really focus on this as a team. Talk together about what goals you have. Talk together about retirement. Agree that you’ll both pool receipts and discuss them on the first and third Sunday of every month. Whatever works for you. Just make sure that one half of the partnership isn’t feeling bossed and smothered.

Even though my husband of a year and a half doesn’t make me feel like that, it’s hard to navigate. He makes more than me. He bought the house before we married. I have student loans. He wears a company-provided uniform to work every day. I have to buy clothes. But I came into the marriage with no credit card debt and while the wedding virtually wiped out my savings, we paid for it ourselves. I came into the marriage after ten years of being financially independent and handling it just fine – and in the space of one evening suddenly felt like a financially smothered little kid. Like since he made more I had to feel guilty about every little thing I bought.

Sit down and talk to her. Ask her why she buys what she does and how it makes her feel. Is is a subconscious assertion of independence? Something else? Tell her the ways in which you struggle when you’re not discussing her purchases. Just saying something like, “They put in a new taco truck between the office and home. I really wanted to stop and get a torta on the way home but I kept driving!” might help her remember that you’re both making sacrifices in the name of long term gain.

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14 J. Money December 29, 2012 at 3:00 pm

Great GREAT advice to think about for sure! Thanks so much for sharing, Nikki – and congrats on your somewhat-new marriage! :)

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