When Leah and I got really serious about getting out of debt, we looked at "the numbers" very closely. We added up our debts from Turner's birth and the debts we already had, and looked at our income and any other variables we could think of.
While things change and some numbers change, we are still focused on getting out of debt on our target date. That date?
December 31, 2008.
We are happy to say that, since April of this year, our debts have continued to go down. We have not added a penny to them. While we do not know if we will "hit" that target date, we are going to do our very best.
Hopefully we can keep you up-to-date on this blog as to how we are doing.
In other news...
Where Your Treasure Is has been added to pfblogs.org. This site is a reader--much like an RSS feed--of scores of personal finance blogs. However, to be added, a site has to be reviewed and approved. I am proud to announce that we were approved yesterday and added late yesterday. Check out the site for literally hundreds of great articles from dozens of blogs and watch for articles from Where Your Treasure Is!
Showing posts with label debt reduction. Show all posts
Showing posts with label debt reduction. Show all posts
Friday, December 28, 2007
Thursday, December 20, 2007
A GREAT Month!
Usually, December is a hard month in which to really "pay down" debt. With Christmas shopping (which, for us, includes driving = $ for gas) and the electric bill starting to rise, this just usually isn't a very fun month.
But December 2007 will go down as a great one in the Faughn house!
We budgeted for Christmas throughout the year and are going to be right at the budget. We still have a couple more gifts to purchase, but we still have money left, too. So that came in right on schedule. Our family helped very much. We all set a limit (that was equal for everyone) on what we would spend on Christmas presents. We set a limit where we could get each person something he/she wanted, without feeling the pressure to buy anything huge. It took some savvy shopping, and some online work, but we met that goal.
Also, our electric bill (for November; paid in early December) was low for this time of year. We have been staying around 50 degrees and have actually been up in the 70s for a few days in late November, so our heater didn't have to run all that much. Also, when we went out of town for Thanksgiving, we turned the unit way down, so it would hardly run. While our water bill was a bit high, it was more than covered by the lower electric bill.
We have had two negatives this month, though. First, we have had to travel a bit more than expected, so we are going to barely make our gasoline budget (if we make it). Gas prices have come down just a bit, which is helping, but we are still paying quite a bit (about $2.85 on average). Also, our DirecTV bill had a mistake on it and the mistake was ours. We had been paying it, but we had been unintentionally late a couple of times. We just did not realize that our payment was due on the 1st of the month, and we had been waiting until the 2nd week of the month, because we pay all our bills out of that one paycheck. We had to pay the extra money, but we also had DirecTV move our "due" date back so we can continue paying without the late charge. We also went ahead and paid January's bill early.
Now, for the big "upside" factor. For the past 3 months, I have been teaching a class for Faulkner University, one night each week, on the Book of Acts. I finished last week and quickly graded all papers and sent in the necessary paperwork on the night of the final. I was hoping to get my paycheck before Christmas (kind of a "special" holiday treat). They were good to me, and we got the paycheck yesterday.
Add all these up, and December became a banner month for us:
1. First, we got cash to pay for our entire trip to the Freed-Hardeman University lectures in February. The trip is already taken care of, which will be a big help in January's budget.
2. Second, we are up to date on all bills (since we got our mistake taken care of with DirecTV). We have never been behind before--and still haven't intentionally--so this is a great relief.
3. Finally, and most exciting for us, is the fact that we paid off...are you ready for this?...over $1100 in debt this month! We did that while going Christmas shopping and taking another 2 trips out of town! By sticking to out budget and using the extra money from my class, we were able to attack our debt.
When you have good news, you just have to share it. And this was great news to us. We're not debt free, yet. But we are working on it, and this month really pumped us up to work even harder in 2008 to finish our journey out of debt!
But December 2007 will go down as a great one in the Faughn house!
We budgeted for Christmas throughout the year and are going to be right at the budget. We still have a couple more gifts to purchase, but we still have money left, too. So that came in right on schedule. Our family helped very much. We all set a limit (that was equal for everyone) on what we would spend on Christmas presents. We set a limit where we could get each person something he/she wanted, without feeling the pressure to buy anything huge. It took some savvy shopping, and some online work, but we met that goal.
Also, our electric bill (for November; paid in early December) was low for this time of year. We have been staying around 50 degrees and have actually been up in the 70s for a few days in late November, so our heater didn't have to run all that much. Also, when we went out of town for Thanksgiving, we turned the unit way down, so it would hardly run. While our water bill was a bit high, it was more than covered by the lower electric bill.
We have had two negatives this month, though. First, we have had to travel a bit more than expected, so we are going to barely make our gasoline budget (if we make it). Gas prices have come down just a bit, which is helping, but we are still paying quite a bit (about $2.85 on average). Also, our DirecTV bill had a mistake on it and the mistake was ours. We had been paying it, but we had been unintentionally late a couple of times. We just did not realize that our payment was due on the 1st of the month, and we had been waiting until the 2nd week of the month, because we pay all our bills out of that one paycheck. We had to pay the extra money, but we also had DirecTV move our "due" date back so we can continue paying without the late charge. We also went ahead and paid January's bill early.
Now, for the big "upside" factor. For the past 3 months, I have been teaching a class for Faulkner University, one night each week, on the Book of Acts. I finished last week and quickly graded all papers and sent in the necessary paperwork on the night of the final. I was hoping to get my paycheck before Christmas (kind of a "special" holiday treat). They were good to me, and we got the paycheck yesterday.
Add all these up, and December became a banner month for us:
1. First, we got cash to pay for our entire trip to the Freed-Hardeman University lectures in February. The trip is already taken care of, which will be a big help in January's budget.
2. Second, we are up to date on all bills (since we got our mistake taken care of with DirecTV). We have never been behind before--and still haven't intentionally--so this is a great relief.
3. Finally, and most exciting for us, is the fact that we paid off...are you ready for this?...over $1100 in debt this month! We did that while going Christmas shopping and taking another 2 trips out of town! By sticking to out budget and using the extra money from my class, we were able to attack our debt.
When you have good news, you just have to share it. And this was great news to us. We're not debt free, yet. But we are working on it, and this month really pumped us up to work even harder in 2008 to finish our journey out of debt!
Monday, December 10, 2007
"The Automatic Millionaire" (Chapter Seven)
In this, the shortest "action" chapter of David Bach's book, the author simply gives some tips on how to use your new automatic system to get out of debt and then stay that way. Getting and/or staying out of debt is a major step in becoming a millionaire. As you know, if you don't have to pay Mastercard, Visa, and other cards, you have freed up money each month, and you are not paying interest.
How do I get out of debt? Bach offers five steps, but, before doing that, he reminds us all of how bad credit card debt really is. If you are like the typical American family, you have $8,400 in credit card debt (and only credit card debt!). If you pay just the minimum and never charge another thing, you will pay over $20,000, and you will be paying it off for over 30 years! (pages 195-196)With those things, in mind, how do I pay off those cards quickly? Here are Bach's five steps:
1. Stop Digging. It's pretty simple when you think about it. If you don't have credit cards, you won't build up debt on them! Dave Ramsey recommends cutting up your cards (which I did a long time ago). Bach never makes a statement quite that bold, but he does recommend that you never go shopping with a credit card in your pocket.
2. Renegotiate the Interest on Your Debt. A lot of people don't even realize you can do this. Check the fine print to find out how much interest you are really paying, then simply call the company and ask for a lower rate. If they act like they won't do it, tell them you will be closing the account and moving (transferring) the money elsewhere. If they won't go lower, ask to speak to a supervisor. If that person won't go lower, transfer the money. Another way to accomplish this, is to move all your debt to one card (or account, since, hopefully you'll get rid of the actual card). Many companies will take a higher amount and give you a lower rate.
3. Pay for the Past; Pay for the Future. Here is where I disagree with Bach. He says that you should continue to put money into retirement and pay off the debt. He says that you will see progress in both areas and that will be a great motivating factor. I disagree. I would rather get rid of the debt as quickly as I possibly can. Either way works, as long as you stay focused.
4. DOLP Your Debt Our of Existence. "DOLP" stands for "Dead on Last Payment." This is basically the same idea as Ramsey's Debt Snowball, but is a much more math-intensive way of doing it. Here are the steps (quoted from page 206):
- Make a list of the current outstanding balances on each of your credit card accounts.
- Divide each balance by the minimum payments that particular card company wants from you. The result is that account's DOLP number. For example, say your outstanding Visa balance is $500 and the minimum payment is $50. Dividing the total debt ($500) by the minimum payment ($50) gives you a DOLP number of 10.
- Once you've figured out the DOLP number for each account, rank them in reverse order, putting the account with the lowest DOLP number first, the one with the second lowest number second, and so on. [Page 206 has a table that shows you small example; using three credit/charge cards.]
5. Now Make It Automatic! You knew this was coming, didn't you? Automatically pay your debts from your paycheck (or checking account) until the debt is gone. When it is gone, call that company and close the account completely, then automatically pay off the next debt, paying all you can each month to get it gone (including the money you were sending into the first debt).
Now, you are debt free, your house is being paid off quickly and you have money going into retirement. There is still one more step, though.
Thursday, November 29, 2007
"The Automatic Millionaire" (Chapter 5)
NOTE: I'm sorry it's been so long since our last update in this series. I really don't have any excuse for the delay, and I apologize.
Chapter five of David Bach's book is entitled "Automate for a Rainy Day." As you might expect, this chapter deals with building an emergency--or "rainy day"--fund. The chapter even contains a purpose statement: "This chapter answers two basic questions: How much money should you put aside in order to protect yourself from the proverbial 'rainy day,' and where should you put it?" (pages 135-136).Nearly every financial planning book contains this step, because, no matter how much planning we do, things go wrong. There are emergencies. Sadly, these emergencies often sidetrack people's financial goals and lead them back into, or further into, debt. If we have a plan, though, we can avoid such a serious setback.
Bach, as Dave Ramsey does, uses "months" instead of "dollars" to figure out a rainy day fund. On page 136, he writes a short "sleep well at night" test. Here it is:
My monthly expenses currently total $_________.
I currently have $___________ saved in a money market or checking account.
This equals _______ [insert number] months' worth of expenses.
The numbers can be estimated, because most of us have a pretty good idea how much those are. Tragically, for many of us, the second number is $0!!!
The next step, after realizing that you need money to handle emergencies is to follow Bach's "Three Rules of Emergency Money."
1. Decide how big a cushion you need. Bach sets the minimum bar at 3 months' worth of expenses. He goes beyond Dave Ramsey by suggesting that some people may even need as much as two years' worth! The main thing is that it is enough (1) to cover a certain number of months, and (2) to help you sleep at night.
2. Don't touch it. Bach mentions that many people start saving their fund, only to have an "emergency" all the time! Notice what Bach says, which is worthy of reading and remembering:
What's a real emergency? Be honest with yourself. You know what a real emergency is. A real emergency is something that threatens your survival, not just your desire to be comfortable. (140)
3. Put it in the right place. While Bach doesn't think we should put the money in something like stocks or bonds (because it has to be liquid), he also points out (with a GREAT story, I might add) that we don't need to bury it in our backyard or stuff it under our mattress. You should earn at least some interest on this fund, because you need at least a small hedge against inflation.
Bach's suggestion is to "shop for a rate like you'd shop for a car" (143). His primary location for a rainy day fund is in a money market account, but some pay terrible interest and others have a lot of fees. If you are frugal, you will shop for a car very carefully, trying to get the best deal. The same should be true of a money market fund. Just a small percentage difference, over time, can pay off in a large way.
Over the next several pages, Bach walks the reader through the process of setting up an account and answers several important questions which are worthy of your reading. He even lists several places that have money market accounts that are fairly easy to use.
He then mentions using US Savings Bonds as a possibility. I disagree with him here. While buying bonds has become easier (you can do it online), they have a terrible rate of return and, in my mind, you are helping the government use debt!
Finally, Bach mentions the question, "What if I'm in debt?" In other words, if you aren't debt free, do you need to build up an emergency fund. Bach differs from Dave Ramsey here slightly, bu the principle is the same. Whereas Ramsey says you should start off with $1000 in your emergency fund, Bach says you should work toward building up one months' worth of expenses, then go back to paying off debt aggressively. To me, either is acceptable and both are reasonable.
Of course, Bach says over and over that you should automate the savings into this account. In other words, when you set up your rainy day account, make sure you set it up to automatically come out of your paycheck (or your checking account) at a specific time each month.
With these steps out of the way, Bach has you paying off your debt and building up your emergency fund at the same time. While that's not my favorite way of doing it, the benefits are there, if you can stick with the program.
Tuesday, September 11, 2007
Need Some Motivation?
Recently, we completed a book review of Dave Ramsey's The Total Money Makeover. Ramsey's principles have helped thousands upon thousands reach financial freedom.
Often, when reading books, it is easy to forget that real people have become debt free. Leah and I are working hard toward that end, and getting closer every day. I truly believe that we will be debt free by the end of 2008, and hopefully sooner than that.
Sometimes it can be easy to lose motivation, though. This is a long process, and there are defeats. So how do you stay motivated? You realize that others have done it!
If you need a little motivation, watch (or listen to) the following video. I hope it helps you get going...or get going again!
Often, when reading books, it is easy to forget that real people have become debt free. Leah and I are working hard toward that end, and getting closer every day. I truly believe that we will be debt free by the end of 2008, and hopefully sooner than that.
Sometimes it can be easy to lose motivation, though. This is a long process, and there are defeats. So how do you stay motivated? You realize that others have done it!
If you need a little motivation, watch (or listen to) the following video. I hope it helps you get going...or get going again!
Tuesday, August 21, 2007
WYTI Links: 08.21.2007
- Top 10 Wealth Building Ways of Ordinary People (via The Digerati Life) I like how the list separated the types by "main assets." It's important to know our inner strengths that will help us make strides toward our goals...
- 5 Key Strategies for Getting Out of Debt (via The Happy Rock) These basics are not new to anyone who has read much about personal finance...yet our nation still abounds in debt...
- Envelope System Video Tutorial (via No Credit Needed) Adam has mentioned the importance of the envelope system in their lives...here is a video tutorial about it...
Monday, August 20, 2007
WYTI Article Featured
This is a week old now, but James' article about Credit Card Protector Plans was featured in last week's 100th Edition of the Carnival of Debt Reduction (hosted last week at No Credit Needed).
The article even produced a playful comment from NCN...
The article even produced a playful comment from NCN...
Wednesday, August 15, 2007
WYTI Links: 08.15.07
I'm feeling very "foundational" this week for some reason...so here are some current links that reinforce sound--and basic--financial principles:
- The 11 Principles (via Money Crashers) One sentence summaries of MC's basics.
- 24 Signs That You Could Be in Financial Trouble (via Generation X Finance) Foundational Principle: You have to honestly evaluate yourself and your financial standing.
- A Maxed Out Roth IRA = $11 A Day (via My Money Blog) Foundational Principle: A little done a lot is more than a lot done a little.
- The Top 3 Mental Blocks to Personal Finance [And How to Get Past Them] (via Get Rich Slowly) Foundational Principle: There is an emotional aspect to finances that must be addressed.
- Getting Rid of Debt Without Worrying About the Latte Factor (via Money, Matter, and More Musings) Foundational Principle: There is more than one way to do things and still be financially healthy.
- How to Balance Your Checkbook in the Era of the Debit Card (via The Simple Dollar) Foundational Principle: You have to know what's coming in and what's going out.
Monday, July 30, 2007
"The Total Money Makeover" (chapter 13 and recommendation)
It has been fun to re-read Dave Ramsey's The Total Money Makeover. This makes four times through the book for me, and I get excited every time I read it. Each time I read the baby steps, and see them build, I want even more to be debt free. It is going to be a great day! We have a goal in place, and we are doing all we can to reach it!
The final chapter is very brief, only covering 5 pages. It is meant to put the teachings found in the book into their proper place. Ramsey mentions Proverbs 10:15, which teach that a rich man's wealth can become his walled city. He goes on to simply remind us that, even if we become debt-free and have millions of dollars to our name, that's not the most important thing. I couldn't agree more!
If you haven't been able to tell, I highly recommend reading and applying this book. I have tried to mention a few things in the book with which I do not agree, but there simply are not many! Ramsey makes the process logical, focused, and--when done as a family--fun.
If you wish to order a copy of this great book, click on the link below.
The final chapter is very brief, only covering 5 pages. It is meant to put the teachings found in the book into their proper place. Ramsey mentions Proverbs 10:15, which teach that a rich man's wealth can become his walled city. He goes on to simply remind us that, even if we become debt-free and have millions of dollars to our name, that's not the most important thing. I couldn't agree more!
If you haven't been able to tell, I highly recommend reading and applying this book. I have tried to mention a few things in the book with which I do not agree, but there simply are not many! Ramsey makes the process logical, focused, and--when done as a family--fun.
If you wish to order a copy of this great book, click on the link below.
To read any of the chapter reviews in this series, click on the appropriate link:
Chapters on "Attitude"
Chapters on "Action" (the Baby Steps)
I hope this series has been helpful and has helped you think about your financial situation. The next book I will review will deal specifically with giving.
Monday, July 2, 2007
The Total Money Makover (Chapter 3)
Debt Myths: Debt Is (Not) a Tool
We are often told that OPM (other people's money) is the way to wealth. While there may be some truth to that statement, most of us do not understand how to use OPM. In this chapter of The Total Money Makeover, Dave begins to list some very common myths about money and then give his answer to them.Here are a couple of my favorite "myths vs. truths":
- Myth: "If I loan money to friends or relatives, I am helping them." Truth: "If I loan money to a friend or relative, the relationship will be strained or destroyed. The only relationship that would be enhanced is the kind resulting from one party's being the master and the other party a servant." I have had this happen. We borrowed some money from relatives. They never held it over our heads in any way, but I knew. I couldn't wait to get it paid off. When we wrote the check it was one of the best feelings!
- I like this one just because of the way Dave writes the "truth" part. Myth: "Cash Advance, Payday Loans, Rent-to-Own, Title Pawning, and Tote-the Note Car Lots are needed to help lower-income people get ahead." Truth: "These rip-off examples of predatory lending are designed to take advantage of lower-income people and benefit only the owners of the companies making the loans." How do you really feel, Dave? Seriously, if you ever get a chance to see how much the annual percentage of the interest is at Payday loan stores, you would be shocked. Some are as high as 900%!
- Myth: "'Ninety days same as cash' equals using other people's money for free." Truth: "Ninety days is not the same as cash." When we agree to pay for something in this way, we add a great amount of risk. Also, if we don't pay off the item in those 90 days (or one year, or whatever), the interest is staggering (usually around 30%), and is added to the original price of the item, even if you've paid off almost all the price! Finally, if you walk in with cash, you might be able to get that same item cheaper anyway.
- Myth: "Car payments are a way of life; you'll always have one." Okay, how many of you think this way? Most of us. But notice the Truth part: "Staying away from car payments by driving reliable used cars is what the average millionaire does; that is how he or she became a millionaire." To be perfectly honest, this one section is worth the price of the book if it will change your mind about car payments. I know I have one right now, but my goal is to make this my last one!
Most of the remaining part of the chapter deals with credit cards. We will have a ton to say on this site about those, so I won't list anymore "myths." This chapter continues to deal with our attitudes about money and debt, and it really gets the reader to think. When we are honest, most of us have said similar things to some of the myths listed in this chapter. When we face the truth, though, we see money working in a different way.
Friday, June 29, 2007
Sometimes It Hurts
Getting out of debt isn't easy. It takes focus. It takes sacrifice, at least to some degree.
But sometimes, like today, it hurts a bit.
I know we aren't supposed to be attached to "stuff," but some "stuff" has sentimental value, and today we got rid of two pieces that were a little hard to get rid of.
First, we put some things in a yard sale with a neighbor. We didn't have enough items to have our own, so we asked if we could just combine with them. They were kind enough to allow us to do that. One of the items was a futon that we bought just before moving to Haleyville. It was our "big piece" in a den in our first house in Haleyville. Not a major loss, but it still was a part of us that moved from Somerville to Haleyville.
But, the other WAS a big deal. About 5 minutes ago, a guy drove off with a car. My 1991 Ford T-bird sold on eBay yesterday, and the man came to pick it up today...and actually hauled it off! This was the car that Leah and I dated in. We took it on our honeymoon. It's been to Kentucky many times. Faughnmobile II is no more.
But, while getting rid of stuff like this hurts a bit, the cash in my pocket is really helping things. And, then, when I think of going to the bank tomorrow to put that cash on our loan...things really start to brighten up!
...and it's just "stuff" anyway!
But sometimes, like today, it hurts a bit.
I know we aren't supposed to be attached to "stuff," but some "stuff" has sentimental value, and today we got rid of two pieces that were a little hard to get rid of.
First, we put some things in a yard sale with a neighbor. We didn't have enough items to have our own, so we asked if we could just combine with them. They were kind enough to allow us to do that. One of the items was a futon that we bought just before moving to Haleyville. It was our "big piece" in a den in our first house in Haleyville. Not a major loss, but it still was a part of us that moved from Somerville to Haleyville.
But, the other WAS a big deal. About 5 minutes ago, a guy drove off with a car. My 1991 Ford T-bird sold on eBay yesterday, and the man came to pick it up today...and actually hauled it off! This was the car that Leah and I dated in. We took it on our honeymoon. It's been to Kentucky many times. Faughnmobile II is no more.
But, while getting rid of stuff like this hurts a bit, the cash in my pocket is really helping things. And, then, when I think of going to the bank tomorrow to put that cash on our loan...things really start to brighten up!
...and it's just "stuff" anyway!
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