Save money on your car
1. Car Insurance (Don’t skip this)
Believe me, if you haven’t shopped around for car insurance in a couple years - it is worth your while. I really was sure that I had the lowest rates I could get, but then I checked out Geico and found that I could save $330 a year for the same coverage. I was so blown away that they could save me $330 that I didn’t shop anywhere else.
Six months later my old insurance broker called trying to get me back and she had found another insurance company (America First) who was $250 cheaper than Geico. And again it was for the same coverage. So just to repeat - I thought I was paying a good rate, but by shopping around I was able to knock almost $600 off my car insurance bill.
2. Save money on gas
While everyone wants gas prices to go down, you can cut your monthly gas bill by taking some pro-active steps. Checkout these 75 gas saving tips and grab a few of them and start working them into your driving. And for some more advanced techniques you can learn how to hypermile as well.
Save money on your phones
3. Cell Phones
Grab your most recent cell phone bills and look at them to see what you are actually paying for.
- Are you paying for internet service that you are not using?
- Are you paying for 1000 minutes a month, when you are only averaging about 350?
- Are you paying for text messages that you are not using?
Before you call your cell phone company check other Cellular companies to see how their rates compare. If it is still worth your while to stay with your current provider, then call them up and talk to them about the changes that you can make.
4. Home phone lines
Ask yourself a tough question, “Do I really need a land line? Would it be possible to use my cell phone for all calls?”
If the answer is no, you may want to look into Vonage. I haven’t used them, but I know they are saving some people lots of money each month. (They currently have a plan for $14.99 a month that gives you local and long distance.)
If you are have a land line solely for the purpose of having a DSL internet connection, I would recommend calling the phone company to adjust your phone plan. I was not using my land line at all and was paying $25 for it. I called them and got the plan lowered to a pay-per-call plan which only costs me $7 a month.
If you can get by without a land line, call and cancel it. This will probably save you $20 or more a month just by making a phone call.
5. Save on the Internet
I am not suggesting that you get dial-up. That is just cruel and unusual punishment 
. But, if you are paying for the premium package you should consider one of the slower packages. Many people won’t notice a difference in how fast the web pages load.
Again, it may be worthwhile looking at the options available for high-speed internet service. I saved about $20 a month switching from one company to another.
Save money on Food
This is one of the easiest fixes for most people. I know I am saving hundreds of dollars a month by not doing what I used to do with my food purchases.
6. Make going out to dinner something special
Not only will you save yourself a lot of money, but it will be more fun when you do go out. Have you noticed that when you do something all the time, it just isn’t as fun anymore? This is a great way to “add fun” and save money.
A couple going out to dinner just two times in a week could easily spend $300 a month. If they knock it down to just one time a week that is $150 savings.
7. Make it yourself
You really can cook. I don’t care if people told you that you were a bad cook, don’t listen to them. You aren’t bad and it is not that hard. There are tons of meals that you can make that require little more than an ability to set a timer and read directions. Start at Allrecipies.com, they have lots of cool features that I won’t get into here - just check it out.
8. Bring your lunch
This is one of those rubber-meets-the-road sacrifices. But it pays off handsomely. If you are paying $10 for lunch to go out each day, you are spending $200 a month. If you bring your lunch 3 days a week, you should easily be able to save $100 a month.
9. Eat what you have
Buy food that you are going to eat and eat what you have. I cut my grocery bill by 50% from my wasteful years by eating the food I had and not wasting any. I could not believe how much money I was wasting by letting food spoil. Just putting a little bit of thought into your grocery list each week will be an easy way to save money.
10. Clip coupons
Most of the food we buy doesn’t have coupons, so this has never been too much help for me. But, there are some people who take pride in buying a grocery cart full of food for $25 and 100 coupons. Even if you aren’t a pro, beginners can save $50 a month without much difficulty.
11. Drink water
I saved myself $30 a month just by quitting my Pepsi addiction. A Starbucks addict could probably save $100 a month by switching to water.
12. Save on your energy bills
A lot of energy saving tips require you to buy something in order to save money in the long run. While I am all for that, the purpose of these tips is to give you more cash in your hand now so that you can pay down your debt.
That being said you can check out these 10 ways to conserve energy and save money and these winter energy saving tips.
13. Pay your bills on time!
This is obvious, but some people (like myself) need the obvious restated sometimes Late bills often incur a fee that is nothing but a waste of your precious money.
If you find yourself forgetting to pay your bills on time, set up a free Google calendar and you can put reminders of when each bill needs to be paid. You can even set it up to email you to remind you to pay it on the correct date. While this is a shorter term fix, I prefer to set up a schedule of bill payments in order to make bill paying easier.
14. Save at the bank
Grab your recent bank statements and examine them for ambiguous fees. If you see any and don’t know what they are, call your bank and ask them to explain it. I worked at a bank for years and I know how good they can be at coming up with creative names for their fees.
Years ago, after figuring out some of the advantages to banking with a credit union I made the switch. I still bank at one of the best Credit Unions in town and use ING as my online bank.
If you find out that you are paying fees for your basic banking needs, I recommend switching. There is no reason you should be paying fees for falling below a minimum balance or anything else. It is your money. Take it somewhere where you have control over the money, not the bank.
Most credit unions will not have many (or all) of the fees that bigger banks may have. ING also has a great checking account that I use and love.
15. Save on purchases
If you are working on getting out of debt, you should be thinking long and hard about any sizeable purchases. But, if you must, then make sure you are getting the best price in the world on the item. The internet has taken comparison shopping to a whole new level.
Yea, there are a million places you can buy things online, but I have found that I almost always find the best price at one of these three places:
Microsoft’s Live Cashback search is another good tool to find the best price, but it hasn’t beat out the other three on any occasions yet. Craigslist and FreeCycle.org are also good tools for finding some bargains on used items.
Other tips to cut your expenses
- Buy greeting cards in bulk at the Dollar store or the party store. This will help you to save a lot of money and you won’t have to make an extra trip every time you need one.
- If you are an avid reader and spend a lot on books trying using the library again. Remember the library? Another option is to buy them from Amazon used. I have a couple books on my Amazon wish list that cost less than a nickel for a used copy. And here are 5 ways to save money on books.
- If you have an emergency fund built up, you may want to look at increasing your deductibles to save money.
- If clothing purchases are needed, at least look at these 6 tips to save money on your clothing expenses.
Please share some of the ways you have cut your expenses in the comments below!
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While I think few would argue that paying off debts is a good thing, there is a better way to accurately see the big picture of your finances. It is called your NET WORTH.
And no it is not just a number that rich people talk about at cocktail parties. It is what financially saavy people use to track their progress.
The simple definition of it is:
Assets(stuff you own) - Liabilities(debts) = Net Worth
It is simple to calculate and I will get to that shortly, but first…
Why Net Worth rather than just debt?
Your Net Worth is more encouraging
The primary reason for using your Net Worth as a gauge of your financial progress rather than the amount of debt you have is because it is more encouraging. When you look at your amount of debt to track progress you are only seeing the fruit of paying down those debts. On the other hand, your Net Worth increases for every good financial decision you make.
For example, you can increase your Net Worth with the following actions:
- Paying off credit cards or car loans
- Paying more towards your mortgage
- Buying property
- Funding a Roth IRA
- Getting your employer’s match on your 401(k)
- Building an emergency fund
- Buying index funds, mutual funds, or dividend paying stocks
- Or even just not spending as much money
There are many more things you can do to increase your Net Worth, but these are some of the bigger and more common ones.
Your Net Worth changes how you think about buying decisions
The second reason I prefer to use my Net Worth to track my progress is because I have found it helps change how I think about my buying decisions.
One of the most valuable financial lessons I have learned can be summed up in two words: buy assets. What I mean by that is you should spend more of your money on things that will keep cash in your pocket. So they should at the very least:
- maintain their value
- but better yet increase in value
- and the best would be increase in value and provide you income as well.
On the other hand you should avoid buying things that are going to take cash from your pocket. Coincidentally, these are most of the things most of us spend our money on. When you buy clothes, food, electronics, decorations, cars, entertainment, you are (generally) using cash to for something that is going down in value and therefore decreasing your Net Worth. Examples of this would be:
- Spending $200 on new clothes
- A $50 steak dinner
- Getting the new iPhone
- Going to the Yankees game
- A brand new BMW
Think about how much you could sell each of these for 2 years from now. Each one of them is a depreciating asset, so 2 years later they would not be worth what you paid for it, if anything at all. But if you had spent it on…
- Buying property
- Funding a Roth IRA
- Getting your employer’s match on your 401(k)
- Building an emergency fund
- Buying index funds, mutual funds, or dividend paying stocks
You would have a much better chance that it would be worth at least what you paid, and it would more than likely be worth more than you paid for it.
Obviously there is more to life than Net Worth, and you can never avoid spending money on depreciating assets, but you can avoid spending ALL of your money on depreciating assets. This is the key to why many people never get ahead financially. They spend all of their money on stuff that goes down in value. Once you start buying things that increase in value, you begin building a snowball that just grows larger and larger, faster and faster.
I don’t want to get the cart ahead of the horse, so lets get back to our Net Worth. The reason I mentioned this is because I want you to be thinking about the end result of each buying decision. None of the things listed above are necessarily wrong, but they should be thought about and decided upon rather than just reacting to what you “feel like doing”. Your Net Worth will reflect each buying decision that you make - good or bad.
How to calculate your Net Worth
This shouldn’t take more than a hour if you have never done it before. When you update it in the future it will take even less time than that. I have created a template from my own balance sheet that you can use if you would like. You can download it here.
1. Get a spreadsheet
First off, you can do this on paper if you really want to, but I suggest Excel, Google docs, Open Office, or really any kind of spreadsheet will do.
2. Total your assets
List every asset you can think of. Anything that you could realistically sell. For the purposes of sanity and simplicity I don’t bother with items under about $500. Yea, I am sure I could find someone on Ebay to buy my socks, but I am just looking for a general picture. So I just lump together all these smaller items as one line called “Misc items” and take a conservative guess of what they could be sold for.
So your house, cars, retirement accounts, stocks, savings accounts, checking accounts, emergency fund, jewelry, and anything else similar would fall in this category.
To get real estate values you can use Zillow to get a decent estimate of what your home may be worth. For automobiles you can check out Kelley Blue Book to see what they could be sold for. For all your checking, savings, investment accounts you can either check the balances online, or just use your last statement.
Once you have them all listed with the estimated selling/liquidation value you can total them up.
3. Total your liabilities
A few lines below the Assets total, we are going to now list every debt you have. Mortgages, credit cards, student loans, they all apply. Do the same as above checking balances on each one and then total your debts to get your liability total.
4. Subtract them
Now you can subtract your liability total from your asset total and viola! You have your Net Worth. Date it and save it.
Now what?
When I first calculated my Net Worth, it was -$13,843.84. Which was eye-opening to me. I knew I had a bunch of debt, but didn’t realize how below par I was. Regardless of what you number is, just look at it as the starting point. It is from this point that it will become larger.
After we had been working at it for one year it was up to $746! We were so excited to have a positive Net Worth! Even if it was only $746. As we kept on working on it, it has just continued to grow.
I normally update mine about two times a year. But if you are working really hard at it and need to see the encouragement of it increasing, do it more! As in just about anything, you are either moving forward, or you are going backwards. If you are increasing your assets by making good buying decisions or minimizing debts your net worth will be growing.
Next we will start looking at ways to make your Net Worth rise!
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Are you looking for help getting out of debt?
Great, I think you have come to the right place. At the time of this writing, I am right there with you on this journey to break free from the “slavery” that the Bible calls debt (Proverbs 22:7). It is not easy, but it also isn’t that difficult either. Over the last two years my wife and I have paid off nearly $30,000 in consumer debts from some mistakes that we made in the past.
The 7 steps that I am going to take you through are things that we did to pay down our debt or we would have done if we had the opportunity. Each article is fairly long, so you can feel free to bookmark it and come back later or use the print button towards the bottom of each article to print them out.
If you are serious about getting out of debt, I recommend that you read each article, even though the first two are a bit less practical than the last five. I believe that they the first two include the keys to successfully getting out of debt.
The 7 Steps to getting out of debt
- Step 1 - Realize it is not about you
- Step 2 - Open your mind
- Step 3 - Create a balance sheet
- Step 4 - Quit spending
- Step 5 - Cut expenses
- Step 6 - Make sacrifices
- Step 7 - Snowball your debt
If you go through these articles and just do some of the stuff mentioned, you are going to be in much better financial shape than you were before. But, I recommend that you sit down with each article and really spend some time with it. The last five articles are going to require some actions on your part. So, spend a couple weeks and make getting out of debt your new hobby and work hard at it! You will be rewarded for your efforts!
So get ready, the series starts on Monday! If you want to make sure not to miss any, you can subscribe to the free email feed and they will land in your inbox each day!
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This is a reprint of an article I wrote for Being Frugal a few days ago…
When I was about 14 years old, my uncle suddenly and unexpectedly went home to be with the Lord. He had meticulously taken care of the finances for their family and left my aunt on a very solid financial foundation. Obviously, this didn’t take away the pain of him being gone, but his preparation eliminated additional stress that would have been present without it.
It’s one of those things we all prefer not to think about, but it is always better to be prepared. My aunt is still reaping from what my uncle sowed by having his things in order.
My FLOP
Being impacted by my uncle’s premature death and wanting to do everything I can do to help my wife, I decided to create a system for keeping things organized.
It has been a work in progress over the last few years, but has evolved into a very helpful tool. Simply put, it is a single file or location for all your financial account details. I call it a FLOP (Financial Life on One Page). FLOP sounds a little cooler than FLOOP, but not much
In adding to it over the last few years it has come to have three main purposes. The first being that it is a:
1. Balance Sheet
One of the best pieces of advice I received about 5 years ago, when I started my journey to clean up my finances was to keep a balance sheet. I didn’t really understand why at the time, but I did it anyway. I have updated it twice a year since I started it and it has been a great source of encouragement as I have fought to get out of debt.
The reason it has been such a source of encouragement is because a balance sheet not only takes into account the debt you have been paying off, but all of your good financial decisions. So increasing your savings, paying down debt, making wise purchases all will affect your balance sheet in a positive way.
Also, looking at the size of your debts or assets does not necessarily give an accurate report of your financial condition. To get a accurate picture of your financial situation you need a balance sheet to calculate your net worth. It is very easy to do and is just a big subtraction problem:
Assets - Liabilities = Net Worth
If you have never started a balance sheet, I recommend doing it. It is a simple way to track your financial progress as you move towards your goals. For most people it shouldn’t take more than an hour to gather up all your account balances and asset values.
And as with most things, you are either moving forward, or you are going backwards. If you are increasing your assets or minimizing debts your net worth should be growing. If your net worth is getting smaller, then it is an indication that you should re-evaluate how you are spending your money. And even if your situation is not very encouraging, it will force you to see the financial truth so you can make adjustments as needed.
How to create a balance sheet
- Use Excel, Google docs, or some other spreadsheet software.
- List every Asset you can possibly think of from cars to stocks to jewelry for the amount that you could quickly sell it for. (To save time, you can lump together smaller assets like “misc. household items”) Total these items up to get a subtotal of your assets.
- Below the Assets total, list every debt or liability that you have. Mortgages, credit cards, student loans, they all apply. Total your debts to get your liability total.
- Subtract your liability total from your asset total to get your Net Worth.
2. Organize all my login information
Another piece of good advice I got a few years back was to create an extremely unique login ID and use it for every website that I had an ID for. I followed the advice and it has helped, but it is not a fail-proof system. Some sites require your email address, some want more than 8 characters, some want less, etc. And in this day in age, where you just about need to login to open your refrigerator, it can be difficult keeping track of all your login information.
After adding all your accounts in the balance sheet section above, you should have all your account information listed already and you can just add a column to add your login for that company. If you use various passwords you could list them in another column as well, but consider using a password hint rather than the actual password. I still come back to my FLOP at least once a week to figure out a login that I forgot about.
3. Financial roadmap for my wife
The third and most important reason for my FLOP is for my wife. In most families, one person manages the finances and has a better understanding of the overall financial picture. I am that person in my family. Are you that person in yours?
If so, would your spouse (or other beneficiaries) know where to find your financial information? Insurance policies, bank accounts, investment accounts, safe deposit boxes?
I know for my personal situation I know a bit more about our financial details than my wife does. I use my FLOP to layout all of the pertinent details for my wife, if she ever needed them. It contains the name, phone number or web address of each institution, our account numbers for those institutions and any other pertinent info that may be needed.
I then burned the file to a CD and kept it in our safe. Every year or so I put a copy of the updated FLOP in there.
Losing a loved one is a terribly difficult process. Having a “roadmap” prepared in advance for your loved ones is a great way to help eliminate unnecessary stress.
If you are interested, you can download a copy of my template for my FLOP.
This article was included in the Carnival of Personal Finance
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I signed up with ING about 4 years ago and have had a great experience with them. They have been a model business that has worked very hard to satisfy and meet the changing needs of their customers. These are just a few of the ways they have helped me.
1. They are nuts about safety.
A study from the University of California, Berkeley was just published that measured occurrences of identity theft at the top banks. Guess who came out the winner. Yep, ING was rated the safest bank from that study. It is really no surprise to me, just going through their login process you become well aware that it would be a tough feat to hack into someone’s account.
2. Consistently good interest rates.
You may occasionally be able to find a better interest rate online, but ING consistently has good rates. And the rates still clobber any brick-and-mortar bank.
3. Free Bill Pay.
Yes, you can get free bill pay from just about anywhere. But, I have used a few different bill-payment services and theirs has been the easiest and quickest to use.
4. No overdraft charges
This is an a brilliant service that they offer. Most banks charge you about $30-$40 overdraft fee if you bounce a check. With ING, you don’t have to worry about that. Rather than charging that overdraft fee, they basically lend you the money at a competitive interest rate until you bring the balance back to $0. So if you are short for a couple days, it might cost you pennies rather than $30-$40.
5. They send paper checks for you
If you need to send a paper check to someone, you just go to their site and fill the check out like you normally would. They will then mail it to whomever you would like. How easy is that?
6. CDs with no minimum.
Not only do they have very competitive rates on their CDs, but they also have no minimums. This makes it very convenient to do a CD ladder and open up multiple CDs with different maturities to take advantage of the rates available. Many banks only offer good rates to customers with $10,000 or more. Not ING.
7. They make budgeting easy.
ING has been my budgeting tool of choice for the last few years. I am not sure if they created it to be a great way to budget or if it was an accident, but either way it is great. You can read more about how I budget with ING if you want.
8. They now own Sharebuilder.
I opened a Sharebuilder account about 5 years ago and currently have most of my stocks with them. They only charge $4 to purchase stocks, which was the best deal going at the time (Now Zecco offers free trades). I was happy with Sharebuilder before, but now that ING bought them, they have made some nice improvements to it as well. Lowered some fees, simplified some processes, improved the user experience, etc.
9. Great customer service.
I have called them about 5 times over the last 4 years that I have banked there and I have not had a bad experience. They still do NOT outsource their calls, so every time I have been able to speak to someone who speaks my language 
- that is a good thing. I have never been on hold more than a couple minutes and most times I have gotten someone right away.
- that is a good thing. I have never been on hold more than a couple minutes and most times I have gotten someone right away.10. Bonuses for friends.
One of the things that ING has become famous for has been their referral program. New users get $25 if they are referred to open an account, while the referrer gets $10. Not a bad deal. So of course I will send you a referral if you are interested. Just let me know.
What did I miss? Are there other features or other banks that you love?
oh, and this post was featured in the carnival of money hacks…
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7 Things about money I learned over the 3 years that we have been married
1. Money issues need to be talked about
Many people try to avoid subjects (or really anything) they don’t like or are afraid of. You have to face the giants. If your finances are a mess, you have to face up to the truth. How can you expect to move a mountain that you refuse to admit exists?
2. Decide what you want to accomplish - together.
In order to succeed financially as a team, you have to have unity. You may not agree about everything, but find those areas that you are in agreement and shoot toward those goals. They will be a lot easier to attain if you are both putting focused energy towards them rather than pulling against each other for your own thing.
3. Realize that you balance each other out
This might not be the case for everyone, but for my wife and I, this was clearly one of the reasons God brought us together. We both bring different financial mindsets to the table and it keeps us in proper balance. If one is a spender and the other is a saver, I got news for you: it is probably by design. If my wife were just like me, we would be living an unbalanced life, probably saving too much for the future and focusing not enough on today. We both bring balance to each other’s life financially. In our case, we both had to make sacrifices to meet in the middle, but because of it we are living more in line with God’s best for us.
4. Support your spouse (yes, even if they have problems)
It is so critically important to cut each other some slack and allow your spouse an opportunity to grow. None of us are perfect and we all have areas to grow in. Part of the growing process involves making mistakes, so if your spouse isn’t being as financially disciplined as you are - cut him/her some slack. If you are constantly nagging your spouse about money (or anything for that matter) it doesn’t give them much incentive to change and it keeps them from being open with you about their failures. Being able to encourage each other when either one of you fails is very important.
5. A budget is necessary
Living on a budget is different for a single person than it is for a married couple. Let me say, I think everyone should use some sort of a budget, but especially married couples. The reason being is that a single person who doesn’t budget ultimately knows the responsibility for the bills, debt, consequences, etc. will fall on them. When a couple lives without a budget they both can be secretly thinking, “well I will let my spouse take care of it,” and things can fall through the cracks. Having a budget creates an unbiased system to hold both parties accountable for their actions.
6. Individual spending money is necessary
It is way too much of a hassle to have to discuss EVERY purchase you make. Each person needs a specific (and small) amount that they can spend however they choose - but just like allowance, no more when it is gone. It has worked well for us to make this cash solely for individual purchases - going out to eat, clothes, buying food for potluck at work, etc - misc things. You can look at how we manage our money, but basically 95% goes to our joint accounts to pay our bills, pay debt, common saving goals, etc. The remaining 5% gets divided between us for our individual interests.
7. Eliminate sources of strife
This was eye-opening to me. When we first got married, we paid for gas for our own car out of our individual spending money. It just seemed logical to me and seemed like it would work fine. We only had a limited amount of spending money for each of us and it would be enough to cover the gas for the week and other miscellaneous things we needed like I mentioned above.
The problem arose when in a very subtle way - we both seemed to be keeping a mental list of how often we drove places together in each other’s car. And of course, we both often thought that we were driving our car more than the other person. We really were not selfish in other areas of our marriage, but that one small thing was causing unnecessary strife. Now we pay for all of the gas out of a joint account - problem solved.
Have you learned any lessons about money and marriage that you could offer?
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Money Market accounts only allow six withdrawals per month
It doesn’t happen too often to me, but since I use my ING sub-accounts for budgeting I occasionally make more than six withdrawals per month. When this happens they send me a kind, but firm email informing me that if I make that mistake again they may be forced to close my account.
What you will get in your inbox from ING if you are bad…
Based on recent activity in your Orange Savings Account™, we want to remind you that you cannot make more than six withdrawals from your account each month. This is a federal regulation that all banks are required to follow for savings accounts like this one, so if this type of activity occurs more than three times in any 12-month period, we will have to close your account.
Since this is not the first time that you have made too many monthly withdrawals, we will be required to close your account if you do this again - and we don’t want that to happen!
So here’s what you can do to prevent your account from being closed:
Take a look at your statements or go to ingdirect.com and review your account activity. Keep track of how many times you transfer money out of your Orange Savings Account, including transfers to other ING DIRECT Accounts, and make sure you’re not making more than six withdrawals each month. Make one or two larger transactions rather than moving money numerous times. This will reduce the number of withdrawals you make each month.
Having worked closely with Money Market accounts earlier in my career I am very familiar with these restrictions. As the email mentions, the six withdrawal per month limit is a government restriction on the accounts, the bank itself can get in trouble for allowing customers to make more than six. Some banks will be more strict about enforcing this policy than others. But, if it comes down to it most banks will eventually close your account if you continue to abuse it.
I was frustrated about not being able to withdrawal my money once I reached this limit, and then the simple solution dawned on me…
The ING Hack to get around the six withdrawals
My wife and I budget for gifts and some months (i.e. December) we may be transferring a lot from the Gifts fund to our checking account. Once we reach five withdrawals for the Gifts account and we know we will need to do more that month, we simply transfer the remaining balance of that account to an unused (or a new) account. Then we just rename the new account “Gifts”. Viola, now we have another six withdrawals that we can make that month.
Renaming and opening new accounts (once you have opened the first one) takes about 20 seconds. So, really it is a very quick and easy process. I wouldn’t want to have to do it often, but it is better than getting your hand slapped or having your account closed.
A phone call to ING
I was also curious about what exactly they meant when they say they will, “close your account.” Did this mean just the individual savings account or did it mean the ING user account as a whole?
So, I called them and they confirmed that after exceeding the limit three times within 12 months, they will close the individual savings account. They did also mention that if a user does it multiple times for multiple accounts, they may consider removing that user’s profile from the system.
Just FYI.
Does anyone have any other ING helpful tricks or tips?
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I found a good video from Dave Ramsey that goes over the basics of his plan for getting your finances in order. It is pretty funny to watch him try to squeeze everything from his book Total Money Makeover into a 5 minute video.
Enjoy!
http://www.youtube.com/watch?v=b–HwXE3064
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Debt Snowball: Dave Ramsey’s method for getting out of debt
Creating a debt snowball is Dave Ramsey’s preferred method of getting out of debt. The strength of using this method is that it focuses on the behavioral side of finance rather than the mathematical. Since we are not robots that always do exactly what we know we should, I recommend this method for most people.
These are the simple steps to snowball your debt…
- Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc…
- Next to each one write down the total balance owed.
- Re-order these from smallest to largest debts (use Excel or Google Docs to make this simpler.)
- Pay the minimum payment on all of the debts - except the smallest one.
- Put every extra dollar you can find towards paying off that smallest debt.
- Celebrate like crazy when you get that first debt paid off.
- Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this one is paid off.
- Celebrate again!
- Continue this process until each one is paid off.
What you will find is that each time you pay off a debt, the “snowball” gets larger. Since you are taking the amount you used to pay off the first debt and putting it all + the minimum payment that you were already paying to the second together, you are making more of an impact towards that debt. Each time you pay off a debt, the snowball gets larger and more powerful - which is great, because it just increases the speed that each debt gets paid off.
The numbers don’t lie
If you are like most logical people out there (like me ) you are probably saying, “you could save more money by paying the highest interest rate cards off first.” You are right - calculators do not lie and they will give you the correct logical answer. Paying your credits cards off starting with the highest interest rate to the lowest is “mathematically” the best idea. But, let’s look it at from another angle:
If we DID what we knew we SHOULD do 100% of the time, using the mathematical approach would be best. But, we are emotional beings and even the most disciplined among us still have emotions and are affected by them.
Computers use logic 100% of the time. Humans do not. We were not created to. We make decisions based on our emotions. We get let down, we get encouraged, we feel motivated, we get scared, we feel hopeful, we feel like quitting. These are all emotional states that each one of us could feel on any given day!!
Knowing that we are emotional beings, the key is to use our emotions to our advantage. Just like jogging with the wind at your back, it is a nice little boost to use our emotions to give us a little edge. So, rather than tackling the debt like a math problem, we can tackle it in a way that will give us emotional boosts! After all, isn’t it better to get out of debt and spend an extra $100 in interest than to give up half way to our goal because we were discouraged?
Status Bars and Debt
Ever wonder why there are status bars showing you the progress of the item you are loading on your computer? It is to keep us from going crazy while waiting 10 minutes for the computer to do what we told it!! Even though that little bar moves slowly sometimes, it is encouraging because we know how much longer we have to endure the torture of waiting.
It is extremely DE-motivating when there is no end in sight. Without that “light at the end of the tunnel” it can be hard to keep going. That little bar that shows us the progress that we have made gives us hope. What if there were no status bars? Or what if you saw no progress on the bar until you got to the 70% loaded point? Would you keep waiting or would you reboot assuming it there was a problem?
When on the phone, have you ever been waiting on hold for 15 minutes wondering, “Did they forget about me? Should I wait it out? What if the never remember that I am on hold?” Do you cut your losses or wait it out having no idea when they will pick up, or if they ever will?
This is the advantage of using the snowball approach to paying down debt. If you focus on the highest interest rate, it could be months or even years before you reach that first milestone. Would you have the endurance to keep going that long without reaching that first milestone?
It is a wonderful feeling to be able to celebrate your first milestone - paying off the first credit card is a blast! Speaking from experience, I was fueled with motivation after reaching that first milestone. The fact is that most people are strengthened by seeing even a small goal accomplished. I love the snowball method because it focuses on reaching these small goals first and using them as motivation to keep going. Let me know how it works for you!
If you are having trouble organizing your debt snowball, you may want to consider Debt Snowball software.
Technorati Tags: Debt snowball, Dave Ramsey
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To the beginner…
Money management is not just for big corporations. It is for you and I as well. It doesn’t need to be labeled with terms like money management or budgeting. If you are where I was, it means nothing more than GETTING RID OF THE CHAOS.
If you are just beginning to get your financial life in order - I am excited for you! It is a fun journey and it is well-worth the effort. The peace that comes with knowing how much money you actually have and being in control of your spending is truly priceless.
Not too many years ago I was out of control financially with my maxxed out credit card and empty (and likely overdrawn) bank accounts, and not a dollar in savings. I decided that I was not going to live my life out of control and had to get things in order.
It did take a little work and a little time, but it is not much different than cleaning out a junk filled garage. It looks like an overwhelming task, but once you get going, it is easy to keep going. And once it is finished, it brings a sweet taste of satisfaction of a task accomplished.
Money Management
If you are looking for a way to get your bank accounts set up to to make bill-paying simpler I have laid out how I organize my bank accounts. And how I manage my bill payments will show you the steps that I take to keep my bills in order and pay them 2 times a month.
I also use a balance sheet to keep track of my financial life. You can also download a copy of my balance sheet template that I use.
Budgeting
If you are making the wise move to start a budget, I suggest reading why budgeting is like baking cookies to get some fun into your budgeting and these 4 quick tips to sticking with a budget.
Then you can learn some techniques with how to budget with the envelope system or how to budget with ING direct.
Saving Money
If you are having trouble spending too much money, then I suggest you read how to quit spending more money than you make or the trick to saving money.
If you are having trouble finding money to save read how to find money to save. One great way to find extra money to save, is to use the money from your raises at work. Read what to do with a raise for a more detailed analysis of what I do with each raise.
As you take your beginning steps with managing your money you will find that it is a lonely journey sometimes. Most people do not ever get their financial lives in order, and sometimes you can feel like you are not normal. Well, the truth is that in the U.S. “normal” means living paycheck to paycheck and in debt up to your eyeballs. Who wants to be normal anyway? Here are 16 ways to save money by not being “normal”
Building an Emergency Fund
One of the best tips for beginners is to build an emergency fund. Experts recommend anywhere from 1 month to 6 months of your expenses. It really depends on your personal situation.
Don’t be intimidated by the amount, just start saving, realize it may be a distant goal, and keep going and you will get there!! It is a very comforting feeling, knowing that if the car breaks down or the water heater breaks that you have money in reserve waiting for it.
If you are wondering if you need an emergency fund you can read “do I need an emergency fund?” and if you already have one and are looking for ways to make more money with it check out how to make more money with your emergency fund.
Saving for Retirement
So you want to retire? You mean you don’t actually want to work until you are 85? Good, me neither. The good news is that it is never too late to start saving for retirement. And, the earlier you start, the better off you will be. I have a quick and easy solution for twenty-somethings to retire well off.
You can find out more about saving for retirement with these 4 quick steps to retirement savings.
I think this should give you a good start at managing you money like a pro, keeping checking back (or get updates in your inbox) as I regularly aim to provide money management tips for beginners and veterans alike…
Veterans: Do you have any suggestions for beginners? What financial advice do you wish you would have received when you first started the journey?
Technorati Tags: beginner tips, money management
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