Paying for debt blows, but finding new ways to keep motivated doesn't :) And this morning I came across a BRILLIANT way to help put things in perspective! (Or perhaps give you a heart attack, I'm not sure which)

It comes from a good blogging friend of mine, Matt Jabs, and what he does is simple - he calculates just how much interest he's paying on his debt EVERY SINGLE DAY! All his mortgage interest, credit cards, loans, everything. And want to know what it's costing him? A whopping $40.13! And he gets squat from it in return. How's that for motivation? Knowing you're giving up $XX every single day until you pay it all off? Freakin' crazy mang - puts a whole new realization of what debt's doing to ya. (and yeah I know, I typed "mang" instead of "man" - I can be ghetto like that)

Now since I'm projecting Matt's debt all over, it would only be fair that I do the same ;) We don't have credit card debt or any loanage (thank God), but we certainly have mortgages up the posterior! And they come in at a pricey $350k at that.

So if we extract the total monthly interest we're paying ($1,800), and then divide it by 30 days, we're paying......drum roll please....$60 every day for our debt! WOW. That's seriously incredible to see it laid out like that, and it's not even including principal! I honestly thought we'd hover around $30-$40 a day just like Senor Jabs, but this REALLY puts things into perspective. $60 every day evaporating into thin air - unbelievable.

I highly recommend breaking it down yourself and seeing how it affects you. And if you're in the mood, dropping it in the comments and letting it out for all to see. Perhaps it would feel good? ;) Either way I think knowing this # could really help step up your get-rid-of-debt gameplan.

And if this interests you as much as it does me, check out Matt's "How much your debt costs" spreadsheet! I'm going now to add it to my best of templates/spreadsheets because I think this is some really really good stuff. You know I love me some tracking!

Labels: debt, get motivated, in the real world, interest, tools and resources

Ahhhh, the good old "pay off debt vs. save for X" debate. Gets me teary eyed every time ;) Got an email from a reader, and thought it would be better to hear from all of you rather than just me - esp. since I'm sorta anti-home owning at the present time. Well, kinda, but not really...

Anyways, here's what Mrs. Debater asks:

"I am debating on whether to save up $$ toward a down payment on buying a home or paying off my student loans first. Currently, my student loans are the only loans I have and has a balance of $5500 (one for $2000 @ 6.8% and another for $3500 @ 5.6%) but I'm only in my 1st year. Thankfully, my employer is going to contribute generously from here on out though I'm going to have to put some cash down each semester myself. I really want to buy a house in the next few years but I hate the student loan cloud over me. Would you pay off the debt or save for a house down payment first?"

Personally, I think both goals are admirable. If you pay off the debt, your mind is free'er and you can concentrate more on the house down payment (awesome), and if you start saving for the house first you'll be that much closer to owning (awesome again!). They're both great for your finances and it's pretty much a win-win situation. So that's good!

If I personally had to choose, I'd probably go w/ the saving for a down payment route. Not at all because homes are "good investments" or anything, but just because having a crap ton of cash saved up is wonderful! It's like having a giant Emergency Fund before you spend it :) Another thing to consider is that you could always use this cash anytime to pay off whatever you like. So if your saving is going well and you want to throw a couple hundred towards the loans, you can do it! Rather than the opposite of paying them down first, and then taking it out and using the money for something else. Once that cash is gone, you ain't getting it back.

I think it really comes down to your own preferences. If cutting out your debt means you're a happier person, then by all means go for it :) Especially if you've already got a decent Emergency Fund. Paying interest on loans, or anything for that matter, blows, so anything you can do to alleviate yourself from it is a good idea. But let's see what our readers say - How would YOU GUYS handle this?

Labels: debt, goals, reader mail, saving

It seems credit card debt has risen 18% in the last 6 months! This does and doesn't surprise me. It does cuz it seemed the public was getting better at managing their finances due to the jacked up economy, but it doesn't in that jobs are still going out the window and we had the holidays to deal with. Plus, people revert to their old ways in a heart beat ;)

Anywho, I got a whole mess of stats sent over by Credit Karma this week and I thought you'd find it interesting - especially if you live in any of these states. Here's what the U.S. Credit Score Climate Report found:

• Indiana - credit card debt increased by 39%
• Michigan - credit card debt increased by 30%
• Oklahoma - credit card debt increased by 32%
• Pennsylvania - credit card debt increased by 30%
• Tennessee - credit card debt increased by 34%

I'm surprised New York or California wasn't on there, although I don't have any real reasons to back up my theory. Michigan totally makes sense w/ their unfortunately high unemployment rate :( Any of you who live in these states noticing this trend? Credit Karma also researched the average debt from their 87,000 users:

• $8,079 in credit card debt
• $184,940 in home mortgage loans
• $53,744 in home equity loans
• $14,899 in auto loans
• $26,692 in student loans

I'm happy to report I only fail at 2 of these 5 categories ;) We've got absolutely no credit card debt, auto loans outstanding, or any student loans on the books. We do, however - and to my chagrin (always wanted to use that word!) - have $287k in a home mortgage loan, and $63k in an f'ing home equity loan. As you can tell I'm not the happiest home owner these days, but we deal with what we got ourselves into, right? Anyways, I'm a sucker for stats like these and comparing myself to the "average joe." It's nice to see where you land when you work your ass of like we do :)

Labels: crazy economy, credit cards, debt, in the real world

Guest post by Red.

What is the first thing that comes to your mind when you think of credit card debt? Maybe it's maniacal company executives laughing as they toss the money earned on your interest up in the air. Or the stress involved in mapping out your payments toward debt freedom.

If you've been down in the trenches - deep in credit card debt, missing payments and accumulating multiple overdraft fees - maybe your first thought is of phone call after harassing phone call from collection agencies trying to get their money back.

In 2007, I was $3,500 in credit card debt, working full-time while going to school full-time and struggling to pay my bills. I couldn't even make minimum payments on the six credit cards I had opened and maxed out to pay for my lifestyle. (Even though I was living like a student where cable and digs were concerned, I had a nasty shopping habit - clothes and new furniture were my weaknesses.)

It didn't take long for companies to begin calling me, night and day, every hour on the hour. I answered before I caught on to the numbers. I began ignoring all phone calls from numbers I didn't recognize, fearing they were from a nasty representative who wouldn't be happy that I had borrowed money I couldn't repay. I had just started dating my boyfriend. The collection agencies would start calling at 7 a.m., while we were still in bed. What could I tell him? That I had mishandled money? What would he think of me? Instead, I lied and told him I didn't know who it was. But I knew.

I easily received 15 phone calls a day. Sometimes they would leave a voicemail, but I deleted it without listening. I was terrified, and I knew what they would say. They wanted their money, and they wanted it now!

I've heard people claim credit card companies can't do anything but call you and after a while they'll stop. (Those people obviously don't know the destruction a poor credit card record can do to your credit report.) But the hourly reminder that I owed thousands of dollars at high interest rates was much more psychological torture than I could handle. The few times I'd accidentally answer the phone I'd cringe and hang up as soon as the person on the line asked, "Is [Red] available?"

Some good did come from the incessant calls. (Just don't tell the collection agencies that!) I knew I couldn't live in fear of my cell phone ringing, and I made a plan to rid myself of the debt. Here's the advice I have for anyone who is being harassed by credit card companies:

1. Know your rights!

The Fair Debt Collection Practices Act, part of the Consumer Credit Protection Act, maps out practices that are prohibited by law. These include calling outside the hours of 8 a.m. to 9 p.m., failure to cease communication upon request, abusive or profane language and communicating with consumers at their place of employment when advised that it is prohibited by the employer. If a collection agency is not abiding by the law, let them know that you know your rights and will contact the Federal Trade Commission or your state attorney general if the abuse continues.

2. Try to prevent the harassment before it starts.

Unfortunately, I don't share J. Money's optimism all that often. ;-) Credit card companies know that their interest rates are outstanding and that many consumers will treat their cards as free money. You're not the first person to go over your card's limit or be unable to pay your bill. If you're drowning in credit card debt, try to take the lead and call the companies before they call you! If you can call the company before they refer the debt to a collection agency, you may be able to work out a better payment plan. But if it's too late for that...

3. Send a cease letter.

The easiest way to stop collection harassment is to write the collection agency a cease letter. Federal law requires collection agencies to stop their collection efforts after they receive a written request to stop. Keep a record of any letters and phone calls received after sending the cease letter.

4. Create a repayment plan.

Consider your current financial predicament and work out a repayment plan. Be as honest with yourself as possible. You'll need a realistic budget to get out of this debt, and seeing the light at the end of the tunnel is better than blindly making minimum payments with no consideration to what your interest and credit card is really costing you.

5. Don't avoid the calls.

I know from personal experience that it is tempting to plug your ears with your fingers and sing la-la-la-la when you see that all-too-familiar phone number pop up on your caller ID. But, really, it only adds to your stress and encourages them to continue calling. Instead, answer the phone!

6. Contact the creditor and negotiate.

Though I still envision executives throwing my hard-earned money up in the air, dancing around their desks and laughing greedily, the representatives are human. Most of them understand that emergencies happen, and sometimes things are beyond our control. By this point, you should have a kicka$$ budget in your hands and know exactly how much you can pay toward your balance each month. Avoid offering too much. You don't want to make a deal that you know you can't keep. If you do, you'll end up right where you started. Instead, tell them honestly how much you can monthly pay for the foreseeable future. Ask for an interest rate reduction. (This rule is important whether you're in over your head or not. Most companies will reduce your interest rate if they know it increases the odds of getting some of their money back. And no one wants to lose business to a company offering a lower interest rate.)

It took me a long time to make it through this list of six dos and don'ts. But when I did make the phone calls and accepted that I needed to do something to get out of debt, I felt such a giant weight lift from my shoulders. I had a plan. I was in control of my finances instead of those collection agencies. And that made all the difference.

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This is a guest post from Red, a newbie personal finance blogger over at Girl with the Red Balloon. Her blog began as an attempt to stay money-conscious in a relationship and now includes tips and personal anecdotes on saving, budgeting, repaying debt and de-cluttering your home (and making money in the process, of course).

Labels: credit cards, debt, guest post, one of my lists

Welcome to the New Blog Alert series! One of the BEST things I remember about starting this blog from scratch was networking and getting onto "the scene" here. Every last click and comment dropped excited me like no other (it still does!) , so my hope is that we can bring a little jolt of motivation and excitement to these new guys starting out.

I can't promise you'll like them all, or that they'll even be around next month (Lord knows blogging takes some time no matter how much you enjoy it!) but hopefully these will at least bring refreshing voices to managing our money better. Sometimes all it takes is hearing one new way of doing something ;)

So give it up for our first New Blog Alert today: Deliver Away Debt! I asked Jeff to send us a bio on his background and why he started blogging, and here's what he had to say:

I've made some financial choices. My driving force has been to obtain the status and things that my parents have. They have a nice house, new cars, boats, snowmobiles and purchase whatever they want.

I've made some bad financial choices in my life. I've lived paycheck to paycheck for as long as I can remember. I've made a great salary most of my career. I received overtime pay for years and based my life on those two pay structures. By the time I was 25 I was making more money than my father. At 26 I was even my father's supervisor at one of the big 3 auto companies. I've tried keeping up with my parents since I graduated college. I bought new cars, I bought toys, and I went out to the bar almost every night. I spent money like it was going out of style. I thought my pay would catch up to my debt. I moved up in the company and every time received more money. That only allowed me to spend more and help to ensure I would be in debt forever. My wife and I finally woke up and decided this had to stop.

I started to search for answers; I needed to find some help on how to get out of debt. That led me to Dave Ramsey. I listened to and read books by Dave. I found out that delivering pizza was a great second job for people who are working the 9-5 "normal" job. I walked into the local pizza joint and was hired on the spot and started to deliver. Dave was right, the money was good.

I started my blog DeliverAwayDebt, to help people understand the process of getting out of debt. I log my weekly earnings from delivering pizza so others might be inspired to work a second job to get out of debt. I'm a true believer that you have to make your own "bailout." Nobody but you can make the sacrifice to eliminate your debt. I realized that my behaviors are what got me into debt, so my behaviors are what are going to get me out of debt. Get off your butt and make it happen for yourself!

I'm 34 years old and I currently have $82,296 of debt. I've paid off $19,247 of it since May. Yes sir, that means I started with $101,543. The debt includes; 2nd mortgage, personal loan, 1 credit card, 401k loans (stupid move), and a student loan. I will be debt free in Aug 2011 working the plan I have in place right now. I'm always looking for better ways to scratch together some more coin to help pay down my debt. I'm approaching the wonderful years of the Male Midlife Crisis. I sure as hell don't want to be in debt for it sweet period of life. It's much sexier being able to buy the red corvette with cash than with a 5 year car loan. I'm sure my beautiful wife and two little kids will have other plans for our money, but I still need to have a dream.

Labels: debt, new blog alert

That's what a friend told me the other day when I mentioned I blog about money ;) It's such a simple line that I couldn't resist sharing... "If you can't pay for it, don't buy it." Yes, I like that.

The only problem with these sexy one-liners, though, is that it's much easier to say/think than to actually DO. Or hold yourself accountable for that matter. What does "I can't pay" really mean to you? That you don't have enough cash in your pocket? That your credit cards are maxed out? That you're over budget and afraid J. Money will yell at you (I wouldn't, but I like the way you think)? There are a ton of ways you can opt out here by simply saying it doesn't apply to you.

But what if we cut up a sticky and plopped it right there in your wallet or purse? In big black sharpie it would read "Sure you want to buy that?" What do you think would happen if you saw that every single time you took out a credit card or dug for cash? I know it would get ME to stop and think for a quick second or two. I'll probably continue on buying whatever it was I wanted 95% of the time, but at least then it's a conscious decision I'm making ;)

I guess what I'm trying to say is that these awesome sound bytes & ways of thinking are great to ponder from time to time, but we'll usually forget it the second we click away. You make it into something actionable though, and you never know what might happen!

Labels: advice, debt, shopping

A new TV show premieres tonight called "Bank Of Mom And Dad!" Haven't heard much buzz about it, but I have to tell you it looks all sorts of fascinating. Imagine YOUR parents moving in to help you get YOUR financial life in order? Hah!!! Here's a blurb from SOAPnet.com:

Each week, one twenty-something woman who is drowning in debt must pay the ultimate price: having her parents move in. With the assistance of financial expert Farnoosh Torabi, Mom and Dad teach their daughter to rethink her spending habits and transform her relationship with money.

It's too bad it circles around women only (maybe the guys were too panzy to try it?), but nonetheless it's juicy enough for me to watch. Check it out on SOAPnet tonight (Wed.) @ 10pm EST if you're around, and let me know what you think!

Labels: awesomely awesome, debt

You are young, carefree, and have at last been let loose into the big bad world.

Having left your tearful mom behind, a whole host of fresher parties, pub crawls and perhaps an odd lecture here and there has begun! All is going swimmingly in fact, until you pay for that late night kebab on your card and it is declined. "How on earth did I manage to blow my loan in the first week?" you ask yourself as you nurse your tequila fueled hangover...

Now, of course, this is probably a slightly extreme scenario for some. But for many an entry into the adult world is also a time to start facing up to those dreary words you once used to drown out at the dinner table, such as debt advice and personal savings. However, if you act early then there are simple ways that you can control your funds, enabling you to leave college without having to pay back the equivalent of a small country's national debt:

1. Everyone knows that part and parcel of college is the student loan. But this is a loan that you will spend a lifetime paying off. In fact, it has been estimated that it takes the average post graduate 10 years to pay back. If you have savings, it may be a good idea to use that rather than having to pay off all that interest. (J: or perhaps part of it?)
   
2. One of the biggest rules of debt management is to never borrow outside your means. Although student loans are far cheaper than other loans, you will still be paying off an interest rate for many years to come. Look realistically at the amount you need, a decision you will be grateful for in the future.
3. Choose the right bank account. Several banks like to offer enticing freebies to draw you in but the most important thing to look for is the largest overdraft at 0%. This is far more attractive in the long run than taking up an account based on a free kettle and toaster! Use this overdraft wisely as the moment you graduate you will be stung on interest rates.
4. Get a job! Working a couple of evenings or shifts a week will go a long way into relieving the debt that you are accumulating. An average wage for a bartender is $10 per hour. (J: Or how about being a Starbucks Barista? ;) ) With just 12 hours a week this is an extra $480 a month towards buying those Biology books.
5. If times are hard, remember there is support out there. Charities such as Charities For Debt and Citizens Advice are at hand to give advice. Most universities will have a dedicated person within the student union as well that you can turn to for help - especially when it comes to managing your debt!

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MoneySolve are experts in debt management, bankruptcy and IVA's. For many years, MoneySolve has helped people in the UK with their personal debts and getting their finances back on track.

Labels: debt, guest post

As I mentioned in my last post, Borrowing from yourself first is key. There's no financial point in taking on more debt when you have the means sitting right there in front of you.

Psychologically it might be a different story (who wants to deplete their nest egg?) but desperate times call for desperate measures....or something like that. The point is, emergencies and other *needs* justify the right to dip into your savings accounts or emergency funds. It may suck, but you could always fill it right back up as needed! You already did it once, right? (I'm sure you'll tell me if I'm wrong :))

The Best Order To Take Out Money.

So let's say something comes and you need X amount of dollars in X amount of days. Where would you start? Your savings? Credit cards? 401(k)? (Lord I hope not) With all the options we have at our disposal, I thought it would be a good exercise to run down the list in the order I'd personally hit up myself. After all, not all tools are worth using just because we have easy access to them! It's all about starting from the smarter routes first, and checking them off as the amount of money (and the emergency) grows. In my opinion, here's the best order to take out money:

1. Savings Accounts

I keep only what I need for bills and monthly expenses in my checking account, so all extra cash goes right into our savings accounts (after investing, paying extra towards mortgage, etc). This is the first place I'd look because this money isn't *needed* or being used for anything in particular. It helps with all splurging desires, over budgeting issues, or anything else that requires smaller amounts of money not accounted for. (we usually have anywhere from $500-$2,000 in there at a given time)

2. Emergency Fund

I'd hate to do it, but life ain't perfect and I ain't trying to break my debt-free (besides mortgages) record right now. We have $10k stored in our emergency fund to cover worst-case scenarios and to help us sleep better at night. It also works great for floating money and instances when someone asks to borrow money - and I offer it ;) Again, pulling money from here isn't desirable, but it's there for a reason and you could always fill her right back up when issues pass over.

3. Fun Fund

It sounds weird listing this as #3 here, but I never like playing around with the money stored in my fun fund: A box at home specifically set aside for true-life actual FUN. As hardcore as I am about saving/investing/being frugal, I've gotta allow myself a little breathing room to really *enjoy* what money can buy us in life. Plus, I never have much in here anyways ($200-$500 max), so it would have to be getting bad if I started extinguishing options #1 and #2 above. And in which case I'd need this money even more to help pep myself up at that point ;)

4/5. Family Members/Credit Cards

I'm not sure which I'd choose first if it came down to this, so I'll put both here under the assumption it's going to take some time to repay. If it's 3 months and under, I'm rolling with my friends/family. If we're talking 6 months or even a year+ to pay back, then it's on to the credit cards! We have some serious limits on both our house cards & personal cards, so I reckon we could grab up to $70k here. Not optimal, but with rates hovering around 6% for us it would be better than what's next on the list. Plus, USAA is always rockin' out special rates when you call BEFORE using it (either purchases or cash advances) so I guarantee we could lock one in around 4% at the most. *If you have jacked up credit or jacked up credit CARDS however, consider this your #7 option - It could seriously screw you up.

6. Bank or Credit Union Loan

The only bank loans I've ever taken out were for our mortgages, so other than those I'm not sure what loopholes or rates you're really going to get. I'm assuming if I need money for something non-housing related I'd take out a personal or business loan (if applicable). And I'm guessing that would run us at least 8-9% with GOOD credit. But again, I have no direct experience with this one so I'm hoping someone else could share. Regardless, you're still swimming above water here. Update: Be sure to check out local Credit Unions too! Totally forgot about those - you can usually get a loan a bit cheaper than your average bank. The last car loan I had was through a credit union and I want to say I got it for only 4% when rates were 6%+ a couple years back.

7. Home Equity Line of Credit

Or a "HELOC" as many of us like to call it. I drop this guy here at #7 due to the recent fiasco going on with the housing industry. If you're in the same situation as I am and your house is underwater, you can forget even having this option. Homeowners that have equity in the house, however, can usually pull from that by either taking out a loan against it or by refinancing and "cashing out" the difference. Neither option is that great since you're backing it up with YOUR HOUSE, but it's still better than the options that are soon to folllow. HELOCs can have interest rates ranging from the mid 2%'s (it's rare, but it's possible in this economy - ours is at 2.8% currently, un-locked) up to 10%+ depending on your situation and your credit. Just be sure to do your research before jumping in and using your house as an ATM.

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*****Now, from this point forward $hit has either hit the fan or you're up to some cool business plan that requires a major investment - or at least I hope ;) Either way, here's how I'd personally proceed:
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8. Roth IRA/Traditional IRA?

This is where it starts getting scary! Anytime you're forced into pulling from your retirement funds things BETTER be bad. Don't be one of those idiots who uses their 401(k) as an Emergency Fund - that's not what they're intended for!!! But if you've exausted all other options, then yes start pulling from your Roth. Take out only what you've contributed so far over the years and you won't pay a dime in taxes (you already paid that before you xfered in the money). Be VERY carefull here though because when you start pulling out everything, including any profits you may have earned over the years, you'll start accruing hefty fines! It may not matter to you at this point, but just keep it in mind. Read the IRS' online IRA resource guide for further information - I'm not a professional!. You could also pull from your Tradional IRAs as well if you have those accounts. I don't so I'm not too familiar with them, but it would still fall under #8 here in the list. Check out more on the IRS's site concerning Traditional IRAs.

9. 401(k)

By this point you're running out of options and your 401(k) is basically your last resort. The first thing to do is to see if you qualify to take out a loan against it. In a perfect scenario this would mean taking $XXXX out, and then paying $XX back on a scheduled basis until it's filled back up. It'll cost you a relatively small setup fee, but you won't have to deal with tax penalties and the lot. You WILL, however, have to make sure you remain at your employer the entire time. If you quit or get laid off, you're usually responsible for paying it back ASAP. Call your plan holder for additonal details, or start researching the IRS' website on 401(k)s (again, don't take my word for it)

10. PayDay Loans/Cash Advances

Most of you know how much I despise payday loans, but it's still "an option" even if not much of one. At the very least it's worth a little research in seeing what the best offers are here. Make sure to determine *exactly* how long you think it will take to pay it all back! The more you extend it or stop paying it back, the higher your fees and interest rates go (we're talking 30-40%+). In other words, this is one of your last options.

There you have it - the best order to take out money! There are some other avenues I've skipped along the way (certain types of insurances for example), but they're a bit out of my scope for this blog and probably don't affect most of the readers here anyway. I do hope this list helps though!! Once again it all comes down to personal preference and what YOU are comfortable with - don't go and do something drastic before consulting a professional (have I hinted, enough?) :) Now let's just pray you never have to make it past option #7!

Labels: advice, debt, money management, one of my lists

Borrow from yourself first, that's what I say. It sounds funny, but think about it. What if you needed $1,000 or $2,000 in cash right now, where would you get it? Would you pull it from your emergency fund? Take out a payday loan or credit card advance (please say you wouldn't)?

I ask this because people do the oddest things when it comes to getting their hands on money. They'd borrow, steal, and even cheat sometimes before pulling from their own cash reserves. I once knew a guy who'd take out an 8% loan every time he "needed" something instead of dipping into his $5k+ savings account. Why? I'm all for doing what makes you comfortable, but financially I just don't think it makes any sense.

We have savings accounts, rainy day accounts, and emergency funds set up for a reason - to have cash available at a time of need.

If you don't pull from it then, then when? We all validate "emergencies" in different ways, but it really IS OKAY to pull from your stash when needed :) I know that sounds crazy, but that's seriously what they're there for.

In fact, I had a brilliant idea of listing out all the possible ways you could get your hands on money - in order of need & financial smartness - but after an hour and a half (and going) I realized it's better set for another day. And that day being Monday ;) So go out and enjoy your weekend for now, and we'll get back to this tantalizing list of options upon your return. I'm hoping you like it as much as I do!

Labels: advice, debt, loaning money

Check that out: IH8 DEBT. Hah! That belongs to my boy Brad from Enemy of Debt and just goes to show how passionate he is about spreading the good word.

And if that's not refreshing enough, just read any of his posts - that guy puts his entire heart and soul into this stuff! So today, I pimp him out to you all ;)

We may disagree on leveraging our credit cards to our benefit, but he's got a firm grasp on what he wants in life and how to acheive it. And one of the ways he does this is by visualizing. In particularly, visualizing a life without debt! It may sound hokey, but it's certainly working for him. And he's now working to convet me as well - check out his latest email to me, freakin' brilliant:

Working subliminally on J's future thoughts --> Breath deep, & clear your mind...Now picture yourself on a tropical island, sipping on your favorite drink. Picture you and your wife on a spontaneous vacation debt free with no payment in the world!

With no debt you have funded this 7 day vacation at the last minute with your last paycheck, after all you are Jay Money who is making BANK now! You are relaxed because you have no financial concerns because EVERYTHING is paid for. Knowing this you decided to have your next 4 paychecks directly deposited into your chosen investments, with the fifth one going to your favorite charities. Compound interest is your bee-otch and is now working harder than you are. Your earnings from Budgets Are Sexy are covering utilities, fun, and other expenses. Playa play on!

At the end of your vacation you pull your paid for car into your paid for garage, and walk into your paid for house. Now you and your wife decide to go chill with some drinks and have a relaxing swim in your paid for pool. Ahhh...complete freedom from ALL debt, even good debt, has more options after all. Now you consider calling Brad from Enemy of Debt, to thank him for being so damn cool! LIFE IS GOOD! VISUALIZE!

I like it! I want in! haha...I sincerely thank him for allowing me to post this up. It's people like him who get us energized and really INTO this finance stuff. Straight up how-to blogs have their part in the online world, but it's that extra "it" factor that really draws you in and gets you to actually act on it. So keep doing good things over there Brad, I'm proud to call you my friend! *end man love*

Labels: awesomely awesome, debt, life

Fighting the collection agencies? My girl Kim (aka Little Miss Fortune) just put out a brilliant piece on how to settle and save BIG! $14,000 big in her case. And not only that, but she was just featured on a CNBC Segment to show how she did it :) As you can tell, I'm definitely impressed over here.

Here are a few of the tips she shares to help YOU beat the collection agencies:

• Go into the conversation knowing you should be able to settle for about 60 percent less than your full balance.
• Call on the last day of the month, when the debt collectors are scrambling to meet their quotas.
• Mind your manners! You'll get a lot farther by being calm and pleasant than you will by being angry and defensive. (It's okay to feel angry and defensive. Just don't let them know!)
• If you have a lump sum to offer, start low and let them talk you up. (I told one person I had $3,500 and wound up settling for $4,100.)

I'm proud of you Kim!!! Lets keep from getting back into debt now, eh ;)

Labels: advice, debt, in the real world, money hacks

Fresh from our weekend getaway, I am still in shock that the father of our Declaration of Independence remained in debt his entire life!

From the day his father passed away, to the day he passed away himself, Thomas Jefferson owed a lot of money to a lot of people.

This may or may not come as a surprise to many of you scholars out there, but it certainly did to me. Especially since in many of his writings he explains how important it is to NOT burden future generations with all your lingering debt! And TJ most certainly did, leaving behind around $107,000 worth of trouble to be cleaned up after he was gone (that's anywhere from $1,000,000 to $2,000,000 in today's times!).

That's not to say it was entirely his fault - he inherited a chunk, co-signed notes for relatives who flaked, endured the Panic of 1819 - but he certainly didn't live below his means ;) After all, he built (and revised many a times) his dream home of Monticello on 1,000+ acres with a plantation and team of 150+ workers & slaves just to maintain it all! That takes one helluva line of credit, esp. if you're not bringing in enough to support it. Luckily for him, his public stature was all he needed to back it up - a perk of being a President and founding father.

When all is said and done though, this debt business fails in comparison to the brilliance and remarkable impact Thomas Jefferson had on this beautiful nation of ours. From drafting the Declaration of Independence, completing the Louisiana Purchase, and founding the University of Virginia, he has without a doubt left this country with an incredible legacy.

I leave you now with a piece of advice Jefferson would have certainly agreed with: immerse yourself in education. Whether in architecture, law, or personal finance, the more you learn the better you get at life. Just try not to live such a lavish lifestyle, okay ;) This concludes my book report.

Labels: debt, education, in the real world

Bills as in "the accounts you owe", not the Clintons or O'Reillys ;) (Although, some would prefer to forget about them as well, but that's a whole other topic)

Today, I share with you my 3 super fantastic steps to managing those pesky bills of yours. Or at least the way I prefer to handle them! I look at 'em, I pay 'em, and then I happily ever afterly forget about 'em! Nice and easy, right? Here's how to do it:

Look at the Bill. Does it look about right? Were you expecting it to be a lot higher or lower? One of the perks of getting your bills down to a relatively small number is that you can easily give it a thumbs up or thumbs down upon first glance. You can do this by cutting back & getting rid of some completely (the best way), or you could do it by throwing as many bills as you possibly can on a credit card (my personal method, but not great for everyone). Either way, you get a general idea of what those totals should look like every time a bill comes in. If it looks good, move on to step #2! If it's jacked up? Do your research and get it all squared away.

Pay the Bill. Similar to the credit card method, I try and funnel as many bills as possible one way - electronically. I do everything I can to attach it to my online world since I know I'll be connected to it almost every single day ;) I set up email alerts, online billpay, and as many automatic payments as feasible. The more you can get technology working on your side, the more you can spend on the exciting & important stuff in your life. For all those bills I can't automate, I pay right away as soon as I confirm the amount's legit. I don't like them lingering around and tempting me to forget!

Forget about the Bill. The whole out of sight, out of mind idea - except you're conscientiously choosing to for this ;) No one likes looking at bills more than they have to, right? As long as I'm budgeting for them okay and following steps #1 and #2 above, I can safely cross them off the list and move on with my wonderful life. No pressure, no problem!

That's it! The secrets to my stress-free bill paying. Of course, the more bills you cut back on the less you have to worry about, but easier said than done ;) We'll always have something or another popping up to eat our money, but if you have that game plan locked in there's less chance of it phasing you. And that's really what it's all about.

Labels: advice, bills, debt, money management

Welcome to a guest post from my insanely talented brother :) Needless to say, you can tell who the "real" journalist is in the family. But even more importantly, he's finally got his financial act together out of all these years! You're my boy Blue!

This may be a little long, but if you like my writing style you're REALLY gonna love his. Perfectly punctuated and grammatically correct too (imagine that?). If you dig it, drop a comment and show him some love :)

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I used to be a squirrel - a bearded, six-foot-two varmint who routinely stored his hard-earned acorns in the mouth of a tree trunk. I wanted to be prepared for those proverbial "rainy days." I told myself I was saving up for the inevitable. You know, in case I needed to have my car fixed, my condo upgraded, or if Jessica Alba ever put herself up for auction.

Point is, I was preparing ... but for what, exactly?

Growing up, my parents instilled in me a sense of responsibility that still resonates to this day. Always floss, don't drugs, yadda yadda yadda. All of that after-school-special stuff guided me along my path from geek to chic, but what really hit me was the importance of staying financially healthy. I had to always balance my checkbook, save my receipts and look for sales. I had to build a home, put up those tacky lawn ornaments and live in the black.

My parents vehemently stressed the importance of saving money, of putting portions of each paycheck into a bank account and leaving it there. I remember when I was making a few greenbacks at a seafood restaurant, and I would come home smelling like I had spooned with a lobster for eight hours. They wanted to know if I would be putting some of my paycheck away for the future. Yes, I told them. Right after I spend some of my hard-earned money on outrageously priced Nikes.

My folks were always on my back about money, but it worked ... to a point. After I graduated from college in 2003, I applied for my very own credit card. One thing led to another, and I found myself owing $1,000 to Best Buy, $800 on two credit cards and several hundred against my bank's line of credit. At the time, I was only making $30,000. While I could have been paying down my debt (slowly), I instead felt obligated to beef up my savings from a paltry $1,800 to somewhere in the $2,500 realm. I needed to save money, a la my parents' advice. Besides, I could always pay off that debt, right?

Wrong. That line of thinking was ridiculous. I was so dumb that when I had a brainstorm, it just drizzled! I had a lot of unnecessary debt at the time, but I still felt the urge to store my acorns for that rainy day. Truth is: That was the rainy day. Debt is bad. It's like kissing your sister and liking it. You don't want to have it, and you certainly want to pay it off before you fatten up your savings account. Nothing's worse than having to relegate whole checks to debt payment.

Long story short, I wound up paying it all off by stripping for money at my family reunions. That was about five years ago, and today I have a 401k I'm trying to maximize; I bought a condo as an investment; I've built an emergency fund of $6,000; and I'm planning on investing in CDs and stocks. I no longer rely on a savings account that gives me a few dollars in interest every year- I'm beginning to diversify. Oh, and I'm debt free.

My parents taught me a lot about money, but what I learned on my own is just as important: Spread it around, baby. Act like your money is margarine and the bagel is your future. You're the knife, and if you're sharp enough, you'll cover all the financial bases. In the end, you'll find it's better to have a lot of nuts in various trees than soggy nuts when it rains.

Labels: credit cards, debt, guest post, money management

You will win, as you always do, but i'm still putting up a fight! And how do you always know when i have extra cash around anyways? Do you have spies at my beloved USAA?

However you do it, know that I'm not a fan. And when this little relationship is over one day, I'm sorry to say that you will not be missed. (no offense)

So yeah, I will still give you my freakin' money for the time being, but I just want you to know that you're slowly sucking away all motivation. And that's coming from ME - Mr. Frugal, Mr. "I know it's best to pay off my c/c"! Mr. "this is easy as hell so why am i thinking about it?"

Yes, the Cash bug has bitten me all over and it's starting to itch. (Cash bug = lots of cash coming in and me not wanting to depart with it). You see, all of a sudden I'm getting some extra money in that i hadn't originally planned for. That in itself, ofcourse, is awesome as $hit - it's the giving it away part that's starting to irk me. Here's what just came in:

• $776.00 - From the money I lent my brother last year! That little nugget of joy actually paid me back in full - imagine that ;) So while I'm now 1 for 2 in loaning my family money (the other was a $100 loan not to be seen again), I won't be able to reap the rewards as it's going straight to the c/c.
• $542.89 - Extra money from good budgeting, as well as maxing out my 401(k) last year. My calculations were a bit off, so I ended up hitting the max. limit of $15,500 a bit early - thus putting the extras back into my check.

Again, not complaining i have extra reserves here, just that i'm tired of waving good-bye to it. So while i'm always a postive guy, today i reserve the right to bitch a little....it's good for the soul :)

And when all is said and done, i'll be a good little boy and throw that extra $1300 right at my remaining debt (besides mortgages) - $3214.87, for the rest of the car loans. It may not happen right away, but i promise to apply it as soon as i'm done staring at all it's beauty in my checking account!

Labels: debt, free money, money management

If i became a celebrity, i'd be an outcast. There's no way i could muster up enough balls to take on a multi-million dollar mansion out in The Hills...

Even IF my man Beckham lived next door! Or even Britney Spears for that matter - and that's saying something ;)

Of course, money is crazy and it can steer the best of us down the wrong path at times. Just take a deeper look at the whole Ed McMahon debacle. The poor guy can't even pay his mortgage :( I swear, if you ever see or hear me getting like this, STOP ME in my tracks and call me out, okay? Good, good.

I know the whole Ed thing is old and played out (the news, not the guy...meanies) but I find the whole thing incredibly interesting. I guess cuz it just goes to show that no matter how rich you are, or think you are, you are SCREWED w/out good money management!

Here's a clip from Ed's interview w/ Larry King:

"King: And the payments, you can't make -- what's the problem?

Ed McMahon: Well, if you spend more money than you make, you know what happens. And it can happen. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen. You want everything to be perfect, but that combination of the economy, I have a little injury, I have a situation. And it all came together."

His wife also joins the convo and adds that they probably should have paid more attention to managing it all earlier, and that "Because you're a celebrity, people think you have a lot more than you have." Hmm...yeah okay i can see that. But, and i'm kinda being harsh here, if you KNOW you're not great at watching your financials, find someone who is! Or even hire a professional money manager. Doing any of that would save you a great deal of money in the long run, not to mention your sanity.

Of course, this is all easier for me to say since a) i'm not in their situation, and b) i'm not dealing with millions and millions of dollars ;) Whatever happens with their situation though (the foreclosure process had already started as of June '08), I do hope that it all gets worked out. No one deserves to go through all that pain and suffering, no matter what the situation.

I'd also like to give them MAD credit for stepping up to the public platform and spilling all their details to the world!

It's hard to measure how helpful that could be to others, but i can tell you that it def. made ME stop and think twice about stuff. It's easy to get complacent and think you're on the right track all the time, but it's hard to know 100% until you're actually tested in battle. Or perhaps that's when you know you're okay - When you basically never get INTO battle?

Whatever the case, I'd like to think that when i become a celebrity (aww yeahhh) I'll have all my ish together and be ready to start saving that money! Now i just gotta figure out how to go about being one :)

Labels: celebrity finance, debt, foreclosure, money management

Or at least stop adding to it :) One of my friend's bf had been going slowly under in credit card debt for years now, and finally decided to do something about it.

My friend (the same friend who thought she got $300 extra on her stimulus check) told him it was about time to clean it up so he can stop stressing and worrying about it. Smart!

At first he wasn't too happy about hearing that stuff from his girlfriend (who would?) but it eventually sunk in and he knew it was all in the spirit of love. I guess his family and friends were all in the same boat, so he considered it "the norm" and didn't realize how bad it actually was.

He was $13,000 in credit card debt, spread across 3 cards with interest rates at 22%, 28% and then another that i can't remember right now...but it was equally high. His payments were a good $500/month, and almost all of it went entirely to just INTEREST alone! It seriously made me want to vomit when i heard that...can you imagine? it's one thing to have a lot of debt, but it's entirely another to have a lot of debt with high a$$ interest rates.

My friend asked me for some advice, and i told her exactly what i'd do if i were him:

1. Call each company right away and ask to have your rates lowered. Play the loyalty card if you can, and say you're thinking of leaving if they say no right away. Throw in a sob story if you have to, i don't care as long as you get each one lowered. You can do 3 calls in less than 30 minutes and save hundreds, if not thousands, easy as that.
2. Consolidate! This won't work for everyone as your options depend on your credit and such, but I find it much easier to pay off one balance than 3 scattered about. You might even get lucky enough to stumble upon a 0% card offer for 12 months, or even a personal loan around 10% or so. Unfortunately it's a little hard to do these days, but it's worth asking around.
3. Talk with your bank or financial advisor. Especially if you can't consolidate on your own. They have a handful of ideas and plans they could line you up with, or at least offer you suggestions. Start with your own bank or advisor if you already have one, and then go from there.

She relayed them over ASAP and he surprisingly worked on them right away! WOOHOO! Unfortunately i celebrated a bit too early though. His credit wasn't low in the dumps, but it wasn't up to par either - more in the lower middle range, thus making consolidation and 0% interest cards harder to come by.

He did, however, get a cple of the cards' rates lowered (by 5% on one, and 6ish on the other) so that helped, but he still needed a better plan. Somehow in his research he came across one of those shady "fix it all" companies who said they'd get rid of it all for him, and even increase his credit! They said all he had to do was stop paying his payments on all cards, and pay this company $400+ each month which, over time, would pay off the entire balances over 3 years....plus the credit help, of course. The alarms were ringing when i heard this, but he went for it anyways.

Long story short, the creditors were on to the game and started calling non-stop for 2 months straight. He started getting worried and eventually cut the company (losing only $150 in the process), and started making the payments again. Whew!

This time, he decided to confront his parents and explained the whole situation to them. Not only were they not upset, but they loaned him enough money to pay it all off in one huge swoop! Awesome! He probably should have done that sooner...but i don't blame him, us guys like to handle things ourselves. But now all c/c debt is paid off, and he now makes the payments to his parents each month with a minimal interest rate (i think like 5% or maybe even 0%, i can't really remember). Not too shabby.

So the moral of the story, besides don't go in debt? When you find yourself going deeper in the whole, commit yourself to a gameplan and actually DO SOMETHING about it. That, and always listen to your girlfriend ;)

Labels: credit cards, debt

So I started reading this book "Your Money or Your Life"and I just about shot myself.

Maybe it's because I'm reading the older edition (remember how i got this book for "Free" since they shipped me the wrong one?), but my damness it's so B-O-R-I-N.... zzzzzzzz. It's so sad because i was really excited to read it! Maybe i just haven't gotten to the good parts yet?


Anyways, so I decided to pick up a non-personal finance book this time for a nice change of scenery. And funny enough it brought me right back to finance. It's not THAT crazy i guess cuz money plays a part everywhere in life, but it def. caught me off guard and got me zoned right back in again :)

The book is called "The Pleasure of My Company" by Steve Martin (yeah, THAT Steve Martin). It's a fiction/comedy about the musings of this super smart/obsessive compulsion type guy. At one point he's looking out his window at these apartments for rent, and he relays the following to us:

"...twenty minutes later i saw a couple in their thirties, Porsche-equipped,pull up and park half in the red zone. Oh, I can read them like a book: too much money in the Porsche, not enough left over for the rent. This is a young hotshot three years into his first good job, and the one thing he wants is a Porsche. Sort of the boyhood dream thing. Finally he gets the car and has a strong attachment to it. The wife came later, but dang, he still loves his Porsche. So they think they have plenty of money for rent until they start checking into prices and find that their affordable number of bedrooms has shrunk by 1.5"

I love these types of generalizations because that's all they really ARE - generalizations. This one happens to go against the common thought, but it really depends on who you ask. You'll have some people saying/thinking "oh yeah man, that guy is LOADED! look at that hottie car and that blonde bombshell next to him", while others, mainly those in the PF mindset, will think "No way, that guy's totally in debt - what an idiot! Doesn't he know that if he invested that $60k in XYZ stock at 9.3456% he would have $82.50 right now?!"

I, personally, take a little reasoning from both sides and formulate my own little mix. It goes a little somethin' like this, "Wow that's a hot car! He must really like it cuz he just blew alotta money on it. You'd never find me driving it, but I can appreciate his choice of style...I just hope he's not in debt! Maybe he just won the lottery? Or maybe he just lives on the edge?" I never like to say one way or the other whether someone's an idiot or not without knowing the facts ;)

The beautiful thing about this stuff is that it fosters such great discussion. Everyone has an opinion and can back it up with a million reasons and experiences, but there's never a clear cut answer. So everyone wins! I guess you could always walk right up to the person and flat out ask what's in his bank account, but even then i doubt you'd strike the total truth ;) It would certainly add more fuel to the fire though!

Labels: debt, randomness 3000

Every now and then a friend or two will ask me for my best financial advice, and while I wished I could refer them to a single post of mine, unfortunately I never could....until today!

This post encapsulates my all-time favorite "words of wisdom", jotted down in one simple place.

There's a bazillian of things I'd love to share with everyone, but there are 4 main biggies I repeat over and over again - whether on this blog, or when talking to friends, family, or strangers. They aren't new, but they sure do work! And I follow each and every one of them personally, even if I do slip at times ;)

I truly believe that these will improve anyone's finances, regardless of age, occupation, or net worth. Your wallet will thank you, your peace of mind will thank you, and you'll find yourself feeling sexier than ever! So here they are - my all-time favorite pieces of advice:

1. Pump up your 401(k)

If your company offers it, jump in as hard and as fast as you can! Contribute AT LEAST as much as your employer matches. if they match 100% of 6% invested, invest 6%. If they match 25% of 3%, invest 3%. Whatever the case may be, their portion is FREE money baby! Aka 100% guaranteed profit before it even gets invested! And if you have the means to put even more in? Then you, my friend, qualify for the Bad A$$ of the year award ;)

Not only that, but Uncle Sam will hate you for it... at least for now (that's a good thing). The more you invest, the fewer taxes you pay out that year. Say your annual gross income is $50k. Well, if you don't put anything in at all, you pay taxes on that $50k. BUT, say you contribute $10k towards your 401(k) in that year, well now you're only taxed on $40k! (you pay the taxes later) So yeah it may suck initially "being out" of a little money each paycheck, but over time you'll get used to it and maybe even forget since it's all automated. Either way, those amounts pile up BIG time over the years, and you'll be thankful you jumped on this money train when you did!
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*if your company doesn't offer a 401(k), OR they don't match, consider picking up a Roth or Traditional IRA instead (or in addition to). There's a pretty cool breakdown of the differences and benefits here

2. Track your spending for 3 months

This is the one thing you can do to learn EXACTLY where your hard-earned money goes to. Think of it as an E-True Hollywood Story based on Your Financial Life - you think you know, but you have noooo idea! haha...okay, well maybe it's not that drastic, but you'd be amazed at the things you'd find if you actually sat down and sorted through it all. Even if you do it just one time, and one time only, it'll give you a better over all picture of your finances.

Once you know EXACTLY how much you spend, you can then figure out how to move forward - whether it's to remain on the same route you're currently taking, or move to a newer one. I went back through 3 months of checking and credit card statements to figure out my habits, and boy was i surprised! It wasn't so much in seeing the items purchased, as I remembered them all, but it was the grand total of the expenditures that hit me. I had a guestimated a budget of $500 for my credit card each month, but in reality i was spending between $800-$1200! Woops. I then created a more realistic budget ;)

3. Create an Emergency Fund

Simply for a great peace of mind! There's something to be said in having a pile of cash in your account for whatever it is you'll need it for. I really don't know what constitutes an emergency, exactly, but for me it's more of a stash to keep myself out of trouble ;) As for how much to put in there, I personally shoot for 3 months, but it really depends on what you're comfortable with. It can be 2, 3, even 6 months, whatever you feel would make you sleep better at night. Once you reach that point, you're all set! You can then go about using your money as you wish, knowing you have that safety net.

4. Pay off all Bad Debt

Get rid of it! Whether it's credit cards, outstanding loans to friends or family, or whatever - it's not great to have. This is much easier said than done, of course, but my goodness if it's not true. It effects everything from credit scores, mortgage rates, car loans, and even worst - your overall happiness :( What would you do if you had $0.00 in debt?! How insanely awesome would you feel! It's not gonna happen overnight, and it certainly won't be easy, but it's definitely imperative to work it all out. Whatever you need to get rid of it, just start.

And that's it! Those are my Top 4 all-time favorite pieces of advice I give out. Some are easier to follow than others, but they all work magic on your financial health!

Labels: 401k, advice, budgets, debt, emergency funds

It feels GREAAAAAAAAAAAAAAT! (in the voice of Tony the Tiger). I know this because the Mrs. and i JUST paid off all 3 outstanding credit card balances today. That means no more interest charges, no more budget fenagling, and especially no more annoying bills to pay ;)

While it doesn't feel all that *different* per se, my brain does feel a bit more organized and clearer. I think it's just nice overall knowing that the only debt we have left right now is our mortgages and car loan. Unfortunately this will only last through August when Mrs. Budgetsaresexy starts grad school - yikes! The word on the street, though, is that it falls under "good debt"! haha...i agree it's def. better than c/c debt, but it's still not fun .

Either way, you need a solid game plan when it comes to defeating those evil credit cards.

Don't get me wrong, I'm a HUGE fan of credit cards in general - i charge everything i can to them, and then *usually* pay the balance off in full each month using my c/c budget - but what i'm NOT a fan of is recurring balances and the fees/charges assigned to it. When I find myself in this nasty territory, I set up a game plan and get the F outta there!

Here's the 4 steps we followed to sneak outta credit card hell this time:

1. We set up a time frame. It's hard to reach a goal without a marked finish line, so we decided that we wanted to be c/c debt free in 1 year. This started last November for us when we picked up our new iMac, and continued as we added a little more debt along the way. (most at 0% financing, but it's still debt)
2. We took a look at our budget. I knew there was no way in hell we were gonna pay it all off until we figured how where this money would come from. Since I already had a sexy little budget to rely on, i pulled it up and started re-working it until I couls squeeze an extra $100 a month out of it. This Benjamin, matched w/ the Mrs.', would be enough for us to reach our 1 year goal.
3. We applied the alotted money efficiently. The trick is paying off the highest interest cards first, and paying the minimum on all others. Some prefer paying off the smallest amount first to get quicker accomplishments along the way, but it didn't make sense for us. So we paid $30 or so towards minimums, and then $170 to the card with the highest interest rate...which at the time was only 5% ;)
4. We applied unaccounted for money towards the cards. This was the final killer! We used a good portion of our $6k wedding money to pay off all remaining balances, despite the urges to refurnish our house or pick up a sexy new pair of Dolce and Gabbana shades!

So after some re-budgeting, patience, and good fortune, we are now c/c debt free and ready to start saving that extra money! That is, after we take a month or so to enjoy the spoils first :)

Labels: awesomely awesome, budgets, credit cards, debt