by debt kid on February 8, 2010
With the recent passing of my fiancee’s mother…and her subsequent life insurance policy squabble (we are not involved in it thankfully), I’ve been thinking….
do I need to buy life insurance?
With a wife now in the picture, and the 105K or so I still owe my mother, I think it’s worth looking into to. If something were to happen to me, I need to make sure that my debt to my mother is paid, and my wife is taken care of.
So yeah, I think it’s time to look at a term life insurance policy.
how much life insurance do I need?
That’s an interesting question. I’m 26 now, were something to happen to me, my fiancee could take care of herself, she has a college degree, but I’d like her to have a nice cushion, plus I’m sure we will have kids in the next 10 years or so.
I think a million dollar policy is about right for our needs. That would insure my mother is taken care of, as well as my fiancee/future wife.
How much will it cost?
That’s what I’m getting quotes for right now. I’m getting quotes for both a million and 1.5 million dollar policies with a 30-year term.
What I’m really hoping is that in the next 5 years I’ll have enough saved up, that we’d have our own “insurance policy” called a huge savings account fund. But, since that’s not a guarantee, and I’m not the risk-taker I used to be, insurance it is.
From the free quotes I could get, a million dollar 30-year term policy is going to run me around $650/year or about $54/month. Not too bad. I’m in good health, not overweight, don’t smoke, and no major family heath issues.
How much life insurance do you have? (I’m going to look into disability insurance next)
by debt kid on February 3, 2010
This is a special post from debtkid reader Kimberly. Great tips for setting at wedding budget! Just in time for me as I got engaged at the end of last year!
Congratulations, you’re engaged! Now that you are now a “we,” personal finance should become part of the conversation. You could be thrown into this immediately with the thoughts of a wedding. As weddings can be overwhelming, expensive and all-encompassing, this series will discuss the way that personal finance and weddings can co-exist.
Dig a little into planning, and you begin to wonder – how much will this party cost? The largest party most people throw is a Halloween bash of a couple hundred dollars. Weddings can range from a $50 Justice of the Peace affair to hundreds of thousands. For those who enjoy thinking about personal finance, a wedding can present a whole host of challenges to a budget beyond adding up numbers – family expectations, relationships, and differing financial perspectives. Many will decry any restraint in the celebration of a marriage – and the kool-aid is easy to drink. If you’re determined not to be driven crazy, a budget is a must-have tool.
First, imagine the wedding of your dreams – a snazzy swing band, 1941 Packard LeBaron, bungee jumping, lobster, or a hot air balloon ride. Then imagine the smallest wedding you will enjoy, and plan for it. Write down every guest that you could ever hope to invite to (childhood friends, co-workers, long lost cousins) avoid continually revising the list upwards. Figure out a location amenable to both sets of families. Dream about location – a rural location is easier on the wedding budget, but more expensive for the traveler. Do some internet research to reveal the costs; typical high cost items include save the date cards, invitations, dress, tuxedo rental, celebrant, church rental, church musician, reception venue, food, open bar, photographer, florist, centerpieces, bridal party gifts, party favors, hotel, getaway car, rehearsal dinner, honeymoon.
Next, figure out who is paying – which inevitably means going back to step two and revising the budget! If a parent offers to pay, thank them…and remember that nothing in life is free! But regardless of who pays, no one should take on debt for a wedding – few things can shackle a young marriage quicker than money woes. Therefore, simple life hacks to reduce the budget are:
Tips To Reduce Your Wedding Budget
- skip the wedding planner
- ask guests for help in lieu of a gift – hosting (large house/yard; club membership for a reduced rental fee), talent (photographer, hair stylist), getaway car (a convertible will do), honeymoon (vacation house)
- hold the ceremony in a park – free, manicured, and less flowers needed!
- wear a used or non-standard wedding dress
- plan the day for the off-season (fall and winter)
- dance to a DJ instead of a band
- create a center piece with peacock/ostrich feathers and branches (no florist!)
- email the save-the-date instead of sending a paper version
- hold the ceremony and reception at the same venue
- serve hors d’oeuvres instead of a meal
- eliminate party favors
- hold the reception at an orchard or old barn (not inhabited by animals!)
- serve ethnic food – tends to be cheaper
Like anything, planning is the key. Create your vision together, and talk about creating a budget with your fiancé. This is harder than creating a monthly budget because you do not have a history of costs from which to estimate. One way to handle this is to treat it like a construction project and pad the budget by 10%. And as described in Debt Kid, ING offers subaccounts so that you can track your saving. Good luck, hang on, and enjoy being the ringmaster.
by debt kid on February 2, 2010
Whew. Whew. Whew……………………………………….
When a tragedy happens, everyone copes differently. Some people just want to be alone, others want to be surrounded 24/7.
The last few weeks, I’ve spent most of my time in a hospital watching my future mother-in-law fight a losing battle with cancer.
After she passed away, it’s been difficult for my fiancee to cope. More difficult than she had thought. Even though she knew this day was coming, it still is hitting her harder than expected.
So, we went shopping.
Which is weird, because we NEVER go shopping.
And it felt.
Awesome.
I don’t know if it was just the stark difference in environment from a hospital, but wandering a mall for hours was blissful.
I can’t believe I even just wrote that last sentence.
Anyway, it may not have been the healthiest (for my debt at least!) way to cope, but gosh darn it, it was nice.
I never thought I’d actually see a benefit from the consumeristic nature of the “Mall”….but I did. So did my frugal fiancee.
We didn’t spend outrageously. Not by any means, but we did buy a few items of clothing at higher end stores that we might normally snub our noses at.
It really was a strange, but honestly refreshing experience.
Any other frugal people ever had an experience like this before?
by Jessica W on January 31, 2010
Image from www.freedigitalphotos.net
Friends, perhaps you’ve seen my February status post. My husband and I are getting really, really close to being Debt Free, and we can’t wait. We think if we work hard, we can have the remaining $7,000 paid off in July. But my mind is telling me “that’s just not good enough.”
So I’m going to hustle.
Here’s my plan so far.
1. Speed up accounts receivable with my existing small-business clients. Some clients are a little bite late and I can hurry them up a little bit.
2. Actively search for work in the hours that I’m not scheduled.
3. Step up the freelancing. I’ve only been freelancing part time, and I don’t solicit work every month—let alone every week.
4. Sell some stuff. Not sure how much stuff I can come up with that needs selling, but a few hundred extra bucks will do it.
Truth be told, I only work about 10-15 hours a week, and spend the rest of my time on volunteer work, home schooling the kids and housework. Oh, and Twitter. Twitter is going to have to go, and maybe even the housework.
What else should I do to try to bring in this $7,000 faster? I’ve sold almost everything of value that doesn’t also have a sentimental attachment. I don’t qualify to sell plasma… babysitting? Pizza delivery?
If you had a crazy goal to raise $7,000 extra in three months, how would you go about it?
by Jessica W on January 29, 2010
My deposits and payments are all lined, up for the first week of February. So here’s my status as of February 5 (I’ve done the bills through that date).
Credit Card 1: $0
Credit Card 2: $0
Credit Card 3:$7216.44 (we cut the balance almost in half this month, so I’ll call and see if we can get a lower rate—it’s currently at 8.9%)
Mortgage: $159,267
We’re getting close folks—really close.
This time last year there were three credit cards, two adoption loans, some back medical debt and a second mortgage of $18,000.
In 2009 we increased our net worth by $34,599.95 (even after absorbing losses in our investments). Keep in mind that our income went down in 2009 by 30% (because I was self employed for all of 2009).
Now we’ve just got $7,000 to go on the consumer debt and we’ll be screaming debt free.
Typically, our budget includes about $500 towards debt repayment each month, but any overtime or extra profit margin in our business goes towards debt, so our debt payments regularly reach $1700 in a month with $500 as our minimums. Business costs should be very little in February as I believe I have two months of inventory on hand, so this should save me $300-$500 to apply also towards debt.
We’re still hoping/planning to be free of all debt except the mortgage by July!
by Jessica W on January 28, 2010
from www.freedigitalphotos.net
For three days, I’ve drafted and re-drafted this post. How to not sound like a cold-hearted, calloused individual. The fact of the matter is, I’m a huge giver. More than once I’ve mortgaged myself to the hilt to give to others in need, always figuring I still have good earning potential, so I’ll make up for shorting my own financial progress later. I put colossal charitable contributions on credit cards. I’ve maintained giving even when my own budget was hazardous at best.
One year I received a large Christmas bonus. I planned to (for once) do my holiday shopping in cash. Then I heard about someone near to me who would be evicted with her children the week before Christmas if they couldn’t pay rent. The notice had already come and they were packing up.
My bonus was the exact same size as their rent payment. I paid the rent and never told anyone until today. I did my Christmas shopping that year on plastic. My friend was evicted the following month. I imagine that Christmas debt is still part of what I’m paying off.
We adopted our kids with credit (Hey, if it is for their benefit, it’s “good” debt, right? That’s what I told myself at the time. Looking back we could have covered our legal fees with a second job or fund-raising or searching for adoption grants.)
After Financial Peace University, we seriously re-evaluated our giving and elected to stick to a planned giving schedule. We planned and budgeted for all of our charitable giving for 2010 back in December, before Haiti’s earthquake. (Lesson #1—plan extra next year as a “discretionary” amount).
I watched the news and the telethon with big tears in my eyes. Many of my friends’ adopted children are Haitian, and through our contacts with adoption agencies, we keep up with some of the orphanages there—especially those caring for children with HIV and AIDS, as that’s a cause that is very important to our family.
I asked my husband in our budget meeting if we could send more. He reminded me what we learned in class – that we cannot sacrifice the security of our family for others.
Here is where we’re apt to disagree. Personally, I don’t see debt as “peril” in comparison to the dire circumstances that others are—but he does. “We’ll give like crazy people if you want” he told me “after the debt is paid.” Likewise on my planned mission trips—to build an orphanage and school in Africa. “Not until our life, and our childrens’ security are assured. No debt, medical savings, and education savings—and then give/do whatever you want for whomever you want.
It breaks my heart, but my mind does know he’s right. We sent a small token contribution to Haiti, and then sent all of our airline miles (hey, we’re not traveling anytime soon) to Medical Teams International who will have medical teams in Haiti for the next five years. (If you have Alaska miles you can make a charitable transfer for free). It doesn’t feel like enough to me, and I feel like a wretched human being for not doing more.
When we’re debt free and have built our emergency funds though, we will be planning in some funds for Haiti’s recovery. We should be ready early next year—and by then, Haiti will likely be out of the limelight and in need of additional funds for rebuilding.
Dear readers, I welcome your thoughts on this—even if you think I’m wrong.
Is it OK to justify debt? Is it OK to borrow for a “good cause”?
Do you find yourself classifying your debt into “good” and “bad?”
Perhaps the hardest one justification for me is “helping” others. I’m a helper by nature, but part of our Financial Peace University commitment to stick to our budget is really straining me right now. I put a sticky note in my wallet with the scripture from the lesson in FPU to make me think before I write a check– “But if anyone does not provide for his own, especially for those of his household, he has denied the faith and is worse than an unbeliever.” 1 Timothy 5:8
by Jessica W on January 26, 2010
Photo Credit DjCodin from www.freedigitalphotos.net
A reader asked us last week “what’s a snowball?” Fair question. We’re talking money, not weather here at DebtKid.
Here’s the answer, the best that I can give it to you, but it is further explained in the “Total Money Makeover” by Dave Ramsey. (I highly recommend the audio-book personally).
Imagine a snowball rolling downhill. It gets bigger, right?
Some financial experts teach you to pay off your debts beginning with the highest interest rate. Dave Ramsey, on the other hand will teach you to pay them off smallest balance to largest balance. It doesn’t make much mathematical sense, but it does make sense in other ways.
First, it gives you a sense of accomplishment. When you’re feeling crushed by debt, a few quick wins feel really, really good. Good enough to work as hard as you need to in order to get out of debt. There’s a real psychological boost. Second, there’s a cash-flow advantage to it.
Two words of caution. The debt snowball will only work for you if you’re on a budget and planning a certain amount of income each month towards your debt at a minimum (extra is always good too). You also need to have a small emergency cash reserve in place just in case. This is so that you don’t need to resort to creating more debt, but be sure that it is not so much that you might be comfortable being in debt. (Debt-busting is not about comfort and relaxation!)
Here’s how you “roll” the snowball.
1.List your bills smallest to largest citing the total balance owed, and the minimum payment on each.
2.Pay off the bills as fast as you can with the smallest. Plan on a minimum payment for every bill and direct any extra towards the top of the list—the smallest bill. In our house, we knocked out the first three bills for a total of about $200 in the first month. This freed up an additional $200 the next month. There’s your cash flow advantage. Rather than just paying minimums, as soon as you get a small bill out of the way there’s a little extra money wiggle room to make even more progress on the next bill. This month I’m paying off a card that has a $209 minimum monthly payment, which is freeing me to make a whole lot more progress every month on my last remaining debt.
3.Any time you have extra, unexpected money (tax return, birthday card from grandma or yard sale money) immediately send it to your smallest bill. What looked like a bunch of $30 and $50 payments suddenly becomes real money once they’ve all vanished and you have that extra cash every month to throw at the big looming debts.
Many criticize this method because it has no regard for the interest. Certainly, I’d bypass this method if I had a few small medical bills at 0% interest and some payday loans at 800% in the middle, but otherwise, this method if followed with intensity can usually be worked in 18 months to two years, so the difference between one credit card at 8% and one at 12% in my family has made very little difference.
Hope that helps!
by Jessica W on January 25, 2010
Perhaps the easiest step you can take in your journey to debt freedom is to cut your spending.
In our house, we’ve found ways to save on practically everything we buy. I’ll list a bunch of items here and ways to save 30% or more—and I invite you to post questions of items you’d like to save money on, and I’ll reply with my best cost-cutting idea and encourage others to do the same!
1. Baby diapers (disposables) or overnight trainers: Costco is pretty good, Toys R Us is also good. At any costs, don’t buy these at the grocery store. The very best place however, is a liquidator’s shop. They’ll sell bags that were damaged in shipping, have misprinted labels or are odd lots. A pack of pull-ups for our tot are usually $16. I spend no more than $9. Bonus if the pack is damaged and you can negotiate a price because it’s missing one diaper or one is torn/cut. Never buy baby products like this though if the pack has been damaged in shipping with water or other contaminates. I try to make sure that the damage appears to have come from opening the box. Switching to cloth diapers for some families (especially families with multiple little ones). Independent liquidators will often negotiate!
2. Office Supplies: Find a thrift store that carries them. I found one that is run through a church and is often donated things like paper, pens, post-it flags and more. I go through a lot of legal size paper that usually costs $70 to $80 a case if I use a coupon. The thrift store sells me the cases of paper (usually with one broken strap or missing the box lid) for $10.
3. Auto Service: Ok, this one isn’t a guaranteed 30% savings, but that’s usually my goal. First, shop around the price on the service you need. (Don’t forget to check auto shop’s ratings!) Also, ask about discounts that may apply to you. USAA member, Military member, Senior, AAA member? This will usually get you 10-15% off. Combine that with a local coupon (check the service provider’s Web site) and finally, ask if they’d give you a discount for allowing them to schedule the work at their slow time? The week of tax day auto shops are dead. Same for the week of Christmas. I just got a large auto service done over New Year’s weekend and saved a bunch of cash. Also, ask if they can extend the discount to services needed but not yet scheduled. I need a serpentine belt and a transmission flush that I didn’t have done on New Year’s. Would they give me the same batch of discounts if I bring in my car again at the end of the month? Sure, why not. Just tell them it’s “Eric’s deal” they told me, and signed the quote on my receipt. Cool beans. Never be afraid to ask. Especially when they know you have plenty of time to shop around.
4. Groceries: First, make a price book, and step outside of your grocery routine. Try ethnic markets and bulk food stores. Next, check co-ops. Finally, especially for large families, consider joining a gleaning club. I’ve just joined one in my area, and in exchange for one run twice a month to a store to pick up produce or breads that are expiring soon, I get a weekly allotment of the whole clubs’ gleans (some glean dairy, some glean breads, others other foods, supplies). If you can or freeze or have a spare freezer, this is a great way to fill your pantry. Liquidators are also good for canned foods, coffees, etc. Learn food safety (i.e. never open a can that bulges) and buy non-perishables that are dented or discontinued. You can check the shelf-life of food at www.stilltasty.com if you want to know if the food is still good.
5. Detergents/Soaps/Cosmetics: I use bulk liquidators/chains for these things. Big Lots is my favorite. I can always find my favorite dishwasher detergent for 50% of what I usually buy. Also, for laundry detergent, I make my own. It costs me about $3 to make one year’s worth. I used to spend $17 a month on laundry detergent. Cosmetics like shampoo, makeup, lotions are very, very easy to find at BigLots and usually very affordable.
6. Eating out: STOP! Do not pass go! Do not collect $200. You don’t need to eat out—you’re getting out of debt. See item 4 and go pick up a can of tuna and a can of SPAM at a liquidator’s. Surf and turf baby!
In sum, on anything you need to buy, try the following: Craigslist free or Freecycle.org (today I got a garbage can lid–mine blew away, and I gave away a fitted crib sheet), pawn shops, thrift stores, consignment shops, liquidators, bulk stores, barter/trade and negotiate. Sometimes you can even combine the above techniques.
So what do you need to save money on? Let’s brainstorm some solutions!
by debt kid on January 18, 2010
This is another post in my series about busting debt, in partnership with Lending Club. I wrote about the 9 rules to follow to get out of debt recently.
I’ve been having a think lately about why we purchase things. And if *things* are usually the reason so many millions of us are stuck in debt.
Me? Yeah, I made some dumb purchases (a $2,000 camcorder in 2006 come to mind), but on the whole, my debt resulted more from my trading losses than my spending patterns. But I’m not the normal debtor.
Lots of people get into debt because of medical bills. That’s been well documented. I’ll stay away from that debt debate.
I’m fascinated by the individual that goes into debt to impress others.
I can relate to that person in some respect. The whole reason I was attracted to day trading was because I deep down, wanted to show others how ahead of the game I was. I was trading advanced options and currencies that 99.9% of people don’t even understand. It made me feel superior (of course, superiorly-stupid in retrospect).
Meet Johnny Debt
Why do people purchase a luxury item when they are in debt? I mean, lets say Johnny Debt is 5K in credit card debt. Johnny goes and buys a new flat panel LCD TV for $1800, though his current 32″ LCD works great.
I think Johhny’s purchase comes down short-term vs. long-term thinking.
Making that purchase, Johnny improves his *image* in the short term, right?
Long term, that purchase adds to his credit card debt, and assuming his past patterns continue, he’ll go further and further into debt.
Does Johnny think he’ll get a big promotion at work in the next few years? Does he just not even think about paying off the TV in the future?
I’m super curious about this type of behavior now. I think my thinking is so long term now, that it’s difficult for me to imagine this frame of mind.
So, debt isn’t attractive. But what we can finance with that debt is attractive, right? (To some people at least)
What do you think? Why does someone in debt purchase a non-essential item?
by Jessica W on January 14, 2010
Yes, that's my office, and my, um, secretary.
I own a small business which requires computers, and we have some personal computers at home, so software is a substantial investment around our house. Forget the actual machines themselves—don’t scratch those disks people, a computer can be easily replaced but oh, the software!
I’ve bootstrapped my little business along with the version of Office from 2002 that I already owned on my newer work computer and have decided that it really wasn’t going to work. It was crashing several times a day and loosing data occasionally. Disagreements between older and newer software was crippling my productivity and causing every imaginable error, but only on my deadlines. I’d been dreading it for months, but as I sat down to prepare my 2010 budget, I knew software had to be part of it.
I penciled out my budget (combined home and business) and had about $2,000 in software upgrades—from anti virus renewal, to a new Office suite for business (I wasn’t planning to upgrade the 2 home computers) plus the child-safety software for our daughter’s machine.
Ultimately, I consulted experts. That’s right, by experts, I mean Twitter. I poked around for alternatives and found people using Google Documents and Open Office as an alternative to the expensive Office Suite. A friend of mine works as a music teacher and travels between a studio and student’s homes. He’s found that Google Documents fits the bill for him because it acts as his file server. I work with legal documents and wanted to keep everything off-line and secured on my machine, so I choose to use Open Office. I also don’t want to rely on the Internet connection for productivity.
I easily converted all of my previous files to Open Office files, and kept .doc and .xls copies.
The only solution that wasn’t available to me as an alternative to Outlook and I’ve managed to get Windows Mail to fit that bill (it was built into my computer). (If anyone knows something better, I’m all ears!) I’m using Google’s calendar which syncs nicely with my Blackberry.
We subscribe to a software for monitoring the kids’ use and filtering for safety called “Safe Eyes” which is an excellent program, but at $50 a year, I’d love to reduce that cost too. A friend introduced me to to a free program called “McGruff Safeguard” which meets our needs for free!
I’ll still annually renew my Norton subscription, but now we can run three machines indefinitely at the cost of only the annual anti-virus renewals. Ok, yes, I realize a possible change of operating system or upgrade of Windows may be down the road somewhere… but I’m not ready to think that far ahead just yet.
If you’d like to try the transition as well, (or already have) I’d love to hear how it’s going for you at home or at work.
If you would like to try Google Documents you can reach that from the Google home page. Google Documents is free “cloud” software which meets most of your normal office suite functions. If you would like to try Open Office, you can find it at www.openoffice.org. It also has a program comparable to each office task including word processing, presentations, spreadsheets and databases. It’s a free download and very simple to install and convert your files.
Oh, and as for the $2,000 I saved. It’s going on my debt snowball—that’s an extra $2k in profit!
Also, an update, for those wondering how I’m doing on my 2010 goal: I haven’t made my snowball payments yet for January, but I am down ten pounds so far!
