Debt Free – Can you see the day you become debt free?

Posted on | by Franklin Thoreau | 471 Comments on Debt Free – Can you see the day you become debt free?

Can you see it? I mean really see it. Can you visualize the day you update your spreadsheet and the total debt balance says $0.00? Does that seem real to you? Do you think you can actually get there?

I read a post over at Get Rich Slowly today- Reader Advice: How to Live Debt Free that really got me thinking about it. I’ve read many stories about people becoming debt free. I’ve heard lots of people call the Dave Ramsey show and scream it. I’m not sure what the difference was, but as I read this post I really thought about it and thought about that being me one day.

I can only imagine what it will feel like to be finally free from debt, and I’m certain it will feel 100 times better than I think it will now, and I already get excited just thinking about it. I really know that I’ll get there. It’s just a matter of time. It won’t be easy, but I have a plan. I never had a plan before. I was just coasting along, spending like a fool, only worried about how to make the minimum payments each month. I was going nowhere. Now I’m going somewhere. There is a reason for everything I do with my money now. I do my best to plan where every dollar will go and I fight to keep every dollar from being wasted on things that aren’t in line with my plan.

You can’t get there if you don’t really know where you’re going. I don’t think I ever understood before what it would really mean to be debt free. It didn’t seem real before. I didn’t know people actually lived that way. If you’re not there yet, you must surround yourself with people who are making that journey or have already completed it. I haven’t yet been fortunate enough to meet anyone in my life who is like that (that I know of), but that is why I take the time to read books and blogs, listen to stories, and write my own blog. I want to get there and I want to help other people get there. If I learn anything along the way I want to share it here.

Right now, I’m facing a mountain of debt- $263,697.62 to be exact. That’s a really big number. It can feel overwhelming to look at. However, I can look at it now without fear. I truly have hope. I can see the day that number changes to $0.00. I have an idea of what it will feel like. I have an idea of what I will do on that day and how my life will change. The few successes I have already had in changing my financial life give me hope that not only is the journey worth it for the end result, but as I make my way down the path my life will continue to improve in many ways. It’s a great feeling to take back control of something that controlled you for so long. I’ve gone too far to quit now.

I felt compelled to write this now so I can remember these feelings when times get rough. I hope that something I’ve written here can inspire others to make the sacrifices and do the work that is required to reach success with money. Let me know if you can relate and please share your stories of what drives you to become debt free.

I don’t have a personal finance success story yet….or do I?

Posted on | by Franklin Thoreau | 557 Comments on I don’t have a personal finance success story yet….or do I?

About this- My humble submission to the Get Rich Slowly writing project. Winning the contest would be cool, but I’m happy to participate just because I’m a big fan of J.D. and the Get Rich Slowly website.

I wish I could share a story about how I am debt free and on my way to a comfortable retirement. Sadly, I’m not even close. I have a large, mountain of debt to bury before I can write that story. So how can I share a personal finance success story? I believe that even through the early stages of my plan to get out of debt I have achieved some notable successes.

My total debt is going down now instead of up– this is a huge change! For years my debt number has only gone higher and higher. I kept spending more than I earned and hoping that some day I’d make enough money to pay for it all. Pretty much the typical American way, but thanks to Dave Ramsey and the personal finance blog world I realized that I didn’t have to be typical. I could get out of debt! I started that process by making a budget and spending less than I earned. That simple step was enough to reverse the never ending debt trend that I was on for so many years. Now there is hope.

I went from $0.00 in a savings account to $1,000– that is a huge change! I’ve never had savings before. I spent every dollar I could! It’s a really good feeling too. It feels good to know that I can save money and that I have money available when an emergency strikes. Now there is no need to have a credit card. I just can’t justify it at all- and that is a good thing.

Instead of spending money until my checking account is empty, I plan where every dollar will go at the start of the month– making a detailed budget was really life changing for me. I used to just spend money without any direction or plan, then wonder why I didn’t have money when I needed it or why I kept getting hit with overdraft fees. Now, I have dollars allocated for every monthly need. I know that the bills will get paid and I know how much money I can spend at the grocery store or anywhere else I go. If you haven’t tried a budget yet, I strongly encourage you to do it. It’s an incredibly empowering tool. I can’t imagine living life without one now.

I make some smart decisions with my money now– of course I’m not perfect yet, but I’ve come a long way. I don’t see something I want and rush out and buy it. If I want something, I take some time to think about why I really want it and look for ways that I could get the best possible deal. This usually leads me to not make a purchase at all. I think about how I can simplify my life and be frugal. I have embraced frugality! I thought that was something only ‘cheap’ people did before. Now I get it! Now I see the benefits for my life in general and specifically with my money.

I am losing weight– okay, that isn’t a personal finance success story, but it is because of my focus on getting my finances in order that I feel motivated to lose weight again. Weight is something I have struggled with from time to time, but I strongly believe that the behaviors that put me deeply in debt are at fault for the weight gain as well. It wouldn’t make sense to change my life and win with money and continue to gain weight at the same time.

Like I said at the start, I have a long way to go, but I already have a solid foundation of successes to build my future on. I didn’t get into debt overnight and I won’t get out of debt overnight, but I have hope for the future and I know that some day I’ll be writing another personal finance success story.

Turning Junk Into Debt Payments

Posted on | by Franklin Thoreau | 560 Comments on Turning Junk Into Debt Payments

I posted previously about how much junk I have and how I’ve wasted money on ‘stuff’. Over the last couple of weeks I’ve started work on getting rid of this stuff and turning it into some cash for extra debt payments. So far this month I’ve brought in an extra $267 by selling stuff that was collecting dust on a shelf or hidden away in a closet somewhere (you know, in case I needed it some day). I can’t say that I miss any of it. Well, I do miss my Seinfeld DVDs a little, but I already watched them once and it was unlikely I would watch them often enough to justify the cost (could always get them on Netflix later). This money will be going straight to debt and that actually has me excited to find more junk to turn into cash.

I took some books and DVDs to a local used book store to save some time over listing all of them on Ebay. They don’t pay a lot, but for not-so-popular items, this is really a time saver. I also listed some items on Half.com. Only one has sold so far, but the price is decent and the fees you pay to Half.com are much lower than on Amazon.com. I listed the higher value and more popular items on Ebay. I tried a few new things on these listings, with mixed results. I started the prices really low and I don’t think that worked out so well for me. I’ve never done this before and I felt like most of my auctions didn’t finish as high as they could have. I also listed on a Saturday and I’m not sure that was a great move either- I’ve always listed on Sundays before. I can’t tell which change resulted in the weaker results, but I’ve always felt better about my Ebay sales in the past so I will be going back to my old ways next time.

I still have a fair amount of stuff to sell, but I’ll be very busy wrapping up a project this month so it may be a little while until I can get the rest of it sold. However, this will give me some time to take a few more looks at the shelves and closets and see what else I can do without- do I really need those Simpsons DVDs? I’m afraid I don’t. 🙂

My Plan To Get Out Of Debt

Posted on | by Franklin Thoreau | 369 Comments on My Plan To Get Out Of Debt

I’m a big fan of Dave Ramsey and his debt snowball plan. I think it is probably the easiest approach for most people to get started with getting out of debt. I’m following the majority of his plan, though not exactly as Dave outlines it- no offense Mr. Ramsey. 🙂

If you haven’t seen it, here is the basic Ramsey plan:

  • Stop using your credit cards
  • Make a written budget
  • Get current with all of your bills if you aren’t already
  • Suspend retirement savings
  • Save $1,000 for an emergency fund
  • List all of your debts from smallest balance to the largest
  • Pay minimum payments on all debts, but pay any extra money you can find toward the smallest
  • Work your way down the list, rolling the payments from debts you pay off into the next one on the list
  • Once you are debt free except for the house, save a 3-6 month emergency fund
  • Resume retirement savings
  • Pay off your house

I am following the overall structure of the plan, but I have made a few modifications. Rather than paying off my smallest debt first, I decided to attack my highest interest rate credit card, which also happens to be my largest credit card balance. See the details below and I think you’ll know why I did this.

  • $10,110.72 @ 11.9%
  • $7,120.97 @ 4.63%
  • $5,535.76 @ 4.99%
  • $1,702.75 @ 3.99%

Not all of those lower rates are fixed for good, but they will last a while and the finance charges on the high rate card are more each month than the other three combined. It just makes too much sense to pay the high rate card first. Overall, the credit cards taken as a whole are the smallest debt when compared to the student loans and the mortgage, I’m just not breaking down each card in order to pay the smallest first.

In my opinion, the most important part of this process is tracking your spending and making a budget. As Ramsey says, write down every dollar on paper, on purpose. You really have to plan every single dollar and make sure you balance everything each month. Doing this step was like getting a raise. I’ve found so many ways to cut my spending and I’m making very nice progress on my debt snowball now. Look for a post soon that will cover my budget in detail.

The rest of my debt snowball seems a long way off, but I will attack the student loans after the credit cards, then the mortgage. I will most likely boost my emergency fund and start some investing after the credit cards are gone. My student loan rates aren’t great, but I don’t want to delay investing and savings any longer than I have to. Of course, I have some time to figure this part out, so my plans are subject to change. I wanted to share this to help you get a feel for where I am coming from and how I am working at getting out of debt. I hope it helps someone too!

How To Save Money On Food At Work

Posted on | by Franklin Thoreau | 299 Comments on How To Save Money On Food At Work

Recently, I posted about my poor budgeting and spending at work. Now I would like to share some tips on how to reduce spending on food at work and what I have done to save about $100 a month compared to my old ways.

Skip Starbucks and drink coffee at work– a lot of offices have coffee available for free. If so, that is obviously a great chance to save some money. I don’t have that option at my office so I bought a Senseo coffee machine and brew my own coffee at my desk. The Senseo machine is about $60, but you could pay for that by skipping lattes for a month. Admittedly, you could get a less expensive coffee maker, but the Senseo does not require filters and is easy to clean up. I think it payed for itself very quickly for me. The Senseo doesn’t brew the greatest coffee, but it’s not bad and for less than $0.50 per cup it gets the job done. Whatever your substitute, the goal is to cut out the $4 lattes.

Brown bag it– again, an obvious solution, but if you haven’t tried it you will truly be amazed at how much money you can save by doing this. My favorite ‘brown bag’ lunch is leftovers from dinner, preferably pasta or something easy to heat up in the microwave at work. Another easy option is sandwiches, which can even be made the night before to save time in the morning. I also keep an emergency stash of Hot Pockets (Lean Pockets) for days that I don’t feel like preparing anything or days that I forget to bring food (I keep some in the freezer at work). A lot of these options depend on having a refrigerator at work, so hopefully that is possible for you. If not, your variety may be limited a bit, but perhaps an insulated travel bag with an ice pack would get the job done. Even if you have to go out and buy something, it will quickly pay for itself.

Keep snacks and favorite drinks at the office– I’m trying to cut snacks and sodas out of my diet as much as possible, but if I am going to indulge, I don’t want to pay the prices at the vending machine. Your money goes so much farther on these items at the grocery store, so stock up on the things you like, but don’t let yourself go crazy with it. For example, I try to allow myself either one cup of coffee or one diet soda per day at work. Sometimes I’ll skip one or the other for the whole week. My desire is to avoid becoming dependent on these drinks and form a habit that could get pricey. Some of my coworkers will go through four or more sodas per day, and buy them at vending machines- paying a huge premium over the grocery store. The other part of this tip is to replace the foods you like with low calorie options- I try to go for some Baked Lays or the new Nabisco 100 Calorie snacks. I’m not going for perfection here, just trying to make the best choices I can while I’m away from home.

Drink water– most offices have a water cooler, which makes this so easy (and free). I don’t have that option at work- only a drinking fountain. I’m not thrilled with drinking tap water, and even less thrilled with the germs that may be floating around it, but I just bring a bottle of water to work each day and refill it. I’m really tempted to bring in a gallon of purified water each day, if for nothing else than to avoid the germs around the fountain, but I haven’t bothered yet and I’ve survived on the tap water so far. 🙂

Tell your coworkers you’ll never eat with them again! Okay, that’s a joke, but you definitely can’t make it a habit to eat out every day if you want to save money on your lunches. If saving money isn’t important to you or the camaraderie is worth more, then by all means go for it. I work with programmers, who tend to be a quiet bunch, so we are fine with going out to lunch together every couple of weeks or so. That works for us and makes it easy on the budget. If going out to lunch can somehow better your career or help you get ahead (maybe going to lunch with the boss) then I would consider it money well spent, you’ll just have to look for other areas to cut back.

A typical month in the past would have seen me spend about $80 – $100 eating out at work (that’s after I had kicked the latte habit). There is nothing inherently wrong with spending some money on lunch. However, for myself I found that I was often just picking up something convenient and fast and eating it at my desk in a hurry. There just wasn’t a good reason to spend $5 – $10 to do that when I could bring food from home about a fourth of the cost and get the same result. If your office goes out to lunch and you want to be part of the culture then make that part of your budget and have fun. At the very least, I think everyone can benefit by spending less on coffee and skipping the vending machines. I practice all of these tips and it has made a big difference in my budget. Good luck!