by debt kid on February 17, 2010
I’m about 3/4 the way through “Stop Acting Rich” by the same author of “The Millionaire Next Door“, Thomas Stanley.
The good news is that for the most part, my consumption and spending habits match exactly with the frugal millionaires (or Toyota Millionaires) that Stanley lusts over.
I don’t even drink Vodka, but if I did, I’m sure it would be the $10 bottle brand, not the $60 grey goose brand.
I drive a Toyota, which is good according to the book (well built, not flashy, good value). And I don’t lease. My car isn’t totally paid off yet, but I hope to have it paid off at the end of this month. Then I’ll go buy a new Mercedes….
Just kidding. My fiancee and I will probably keep my Scion Xb (a Toyota brand) for years to come. It’s a great little car.
Now, the one part of the book that worries me a little bit is that Stanley statistics show that the area you live in determines your spending habits. Not a shocker, but I think this will be a struggle for me when I move. We are planning to live in a nicer neighborhood in Portland, though will be renting. I don’t think our spending habits will change, but according the “Stop Acting Rich” they most certainly will.
I know for a fact our food budget is going to go down. It’s always been my Achilles heel. I’m just not much of a cook, and I’m willing to part with dollars to get food. I love food. So, our food budget has been way too high for a long time. Living together however, and without the stressful job my fiancee has now, I think we will cook a ton more. In fact, I know we will. As cliche as it is, she is looking forward to cooking more, and I’m looking forward to eating! (and doing the dishes of course!)
Why do so many people, especially my age group (young professionals), “Act Rich”.
Well, we think that to be “Rich” you have to drive a Mercedes, and buy a fancy condo. We don’t drive around town with our savings account balances as our hood ornaments, but maybe we should.
So, as I prepare to live in a nicer part of town after I’m married, both me and my wife will vow to not “act rich”. One, because we aren’t. And two, because being rich isn’t about status symbols. It’s about freedom, and the ability to sleep at night without worrying that the Repo man is taking away your leased Mercedes.
by debt kid on February 11, 2010
Being engaged is a strange place in life. You’re no longer just “dating” and yet, you’re not yet married.
It’s a heck of a lot of waiting.
Waiting to move (more on this).
Waiting to live together (til after we are hitched).
Waiting for checks to come so I can pay off more debt (I want to pay off my car this month!)
Wait. Wait. Wait.
I swear, I’ve read more news and blog posts in the last two weeks than I have in the last few months.
I’m trying not to spend much money on my business right now, keep costs low, and profits up, and so I’m bored at work half the time. But I head to the office….because what else am I going to do all day?
Moving To Portland
I am excited about moving to Portland.
My fiancee and I will be looking for a place in the next few months before our wedding. She will live in our new place for a few months while I move in with my Mom for a few months until we are married. Free rent!
So, lots of change coming. Just. Not. Yet.
10 Things Millionaires Won’t Tell You
I read a really interesting article on smartmoney today about millionaires. Number 7 was that the median college GPA is 2.9.
My cumulative college GPA?
2.9
Ha, that made me laugh. Next time my fiancee mentions my not so stellar college grades, I’ll bring that little statistic out!
Portland Finance Bloggers
JD Roth of Get Rich Slowly fame is a Portland area blogger, but I don’t know of any other personal finance bloggers in Portland. If you know any, or are one, leave a comment and we can meet at some hole in the wall coffee place sometime and talk about the “weird” that is Portland.
by Jessica W on February 9, 2010
For 2010, I’m trying to be even more frugal. As I mentioned before, there’s just $7,000 left of debt to bust and I’m looking for a way to get there even sooner. Groceries consume about $500 in our budget each month for our family of four, so that’s certainly a candidate for “tweaking.” Sure, we could give up the few organics that we buy, or we could eliminate meat and eggs, but my low-carb diet would make that really hard. So I’ve decided to start gleaning.
What is Gleaning, exactly?
Perhaps you are wondering what gleaning is. Gleaning is a the process of salvaging food that stores can no longer sell, or crops that are left behind after a harvest. It’s such an old practice that it is even discussed in the Bible.
This week, I joined a co op gleaning group. It’s a non-profit and I pay an annual membership of $30 to support the groups’ activities. There are about 30 members and they take turns with their responsibilities. This way I’ll only be going to stores to pick up items two to three times per month, however, other members get the other days. This way, each store is gleaned each day and doesn’t have to hold spoiling merchandise. We’ll all be getting it fresh enough to freeze or preserve. Once a week, I’ll pick up my “share” of the gleans from a central location. All told, it’s a time commitment, of 3-5 hours per week.
We’re encouraged to share our surplus with others in the community—I have several elderly fixed-income neighbors and will share with others in my church if there is anyone in need.
Where do you glean?
My group will glean a major warehouse store, a natural foods market, two supermarkets and two bakeries. Additionally, I’ve signed up for crop gleans and salmon gleans (when the Department of Fish and Wildlife has collected the roe that they need from salmon for hatcheries they need somewhere to send the dead fish and our gleaning group is a recipient).
Since I can, juice and freeze, the erratic nature of the gleans will work for me—if one day yields 7 lbs of aged grapes, I can figure out what to do with that pretty quickly. This summer I bulk-purchased tomatoes and peaches and canned those. Gleaned tomatoes may be too blemished to can, but could be turned in to spaghetti sauce and canned. While many would consider a crate of zuchinni a blight, I can think of what to do with it in no time. (One thing about gleaning is that you can’t pick-and-choose—you have to take the entire glean).
Tonight after my orientation, I followed my new friend to the house that hosted the day’s bread glean. She didn’t want all of her share of bread, so invited me to pick up whatever I’d like. It was a great surprise to come home with several loaves of artisan bread from a bakery and a big bag of bagels. (I’m so regretting my low-carb diet right now).
I go to train in stores Monday and Tuesday and should be able to post on gleaning progress before long.
Find a gleaning club
If you have volunteer time and a car (the bigger the better) and would like to join a gleaning club, they can be hard to find. Good places to start looking are local community message boards, food co-ops, churches, cooperative extensions through local universities (usually Agriculture universities) and food banks. Some food banks allow gleaners who volunteer on behalf of the food bank to share in the glean as well in exchange for their time.
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!
