How I Keep Motivated

Once in a great while I hit a roadblock where I think to myself, “I’m so tired of thinking about budgeting and money!” Granted, those roadblocks don’t last very long, but I can see how some people would grow weary of it. I do several things to keep myself motivated toward our goal.

Dave Ramsey Podcasts
I subscribe to Dave’s site, www.mytotalmoneymakeover.com, so I can download podcasts of Dave’s radio show. I listen to this every day on the way to work, over my lunch hour, and on the way back home. Listening to his callers just reminds me that I never want to be in their shoes.

Online Bank Acccount Access
I log into my bank accounts every day. Having an active interest in our accounts just keeps me excited about it. Excited about bank accounts, you ask? Yes – excited!

Online Loan Access
I have online access to our car loan and HELOC. I’ve been watching the car balance drop quite dramatically over the past few months, and it’s awesome.

Right now our HELOC balance isn’t changing because we are only paying the interest each month. Looking at that stagnant balance really makes me mad, so I know once we get our car loan paid off, we’ll go full steam ahead on the line of credit!

Books
I have all of Dave’s books. I’ve read The TMMO twice. I also have the audio version of it, and I’ve listened to that once, so I’ve gone through it a total of 3 times. That information never gets old to me. If you don’t like to read but are wanting to get started, the audio version rocks. Dave reads it himself.

You!
Comments from fellow people working off their debt, reading blogs about people getting out of debt, remind me that I’m on the right track – no matter what others say. Just a few short years from now I can tell them, “Remember when you were laughing at my plan? Who is laughing now?”

The Future
I want to be one of those people who is able to leave a $100 tip to a waitress on Christmas Eve. I want to be able to help kids who don’t get a Christmas. I want to guide other people through their own Total Money Makeover. I want to retire young. I want to travel with my family. I want to send my kids to college without having them go into debt. I want my kids to live their lives without debt, by learning from us.

And it will happen. I know it will.

May your 2008 be full of blessings and financial peace!


798. They should know that if they start saving in their 20s, they only have to regularly put aside 10% of their income to accumulate all the money they’ll need for retirement.

We Aren't Looking for Sympathy

I’ve been catching a lot of flack about living like no one else. I hear things like:

“You should be enjoying your money”
“You aren’t poor. Why are you doing this?”
“You make money so you can enjoy life.”
“I feel sorry for your family, not being able to spend any money.”

I know a lot of it is just in fun, but I also know some of the comments are serious. People really do feel sorry for us. So let’s think about the comments I would receive a few years down the road, if I continued living as we have in the past, spending money like it grows on trees.

“You don’t have any money to send your kids to college?”
“Too bad your kids don’t know how to handle their money.”
“You really thought Social Security was your ticket to retirement?”
“Will you EVER get to retire?”

I’m only asking my family to suck it up for a couple of years. If we go hard-core at this and don’t buy crap we don’t need and we commit to sacrifice, we will be debt free except for our house by September 2009. We will be totally debt free in only 4.3 years.

Without a plan, we would have been out of debt in around 10 years, at the minimum. But probably not, because we would have kept spending as usual, keeping the debt rolling. We never would have escaped the vicious cycle.

But now, in 4.3 years, we will quit sending our money to banks. We will be free to travel, buy all of the stuff we aren’t able to buy right now, send our kids to college without having to deal with any loans, be able to donate our money and our time to worthy causes, and start building some serious wealth. I bet you won’t feel sorry for us then, will you?

Getting Started

The new year is a good of a time as any to get started being in control of your money, if you aren’t already. To help you get started, here’s how we did it. It’s not exactly Dave’s way, but it’s what got us going.

Last summer, we started tracking our expenses. We operated out of one bank account, and I kept a spreadsheet. Every night I would transfer the expenses that hit the bank account that day to my spreadsheet, keeping a running balance of where we were at.

After those two months, we evaluated where our money was going. We were SHOCKED to see how much of our money was spent on eating out. The first month it was almost $300. We also spent $700 on random stuff like golfing and hotel rooms. We also found we were spending $530 per month on groceries. And those are only examples – we were spending money faster than it was coming in. I sat there in disbelief, and thought to myself, “Holy Crap.”

(If you want a sample of the spreadsheet I use every month, email me.)

I gathered up all of our debts and wrote them down, largest to smallest. We had several little annoying bills. Best Buy had a $400 balance, Nebraska Furniture Mart had $1000, and so on. Over the next 2 months, we got rid of all of those and cancelled all of the accounts.

We then proceeded to cancel our credit cards. The companies didn’t like to hear that we didn’t plan to get taken advantage of anymore. “You’ll need these for emergencies.” No thanks, we’ll use our own money for emergencies, thanks.

We started selling a lot of extra stuff: a mower, saxophone, bunk beds, etc. We netted several thousand on those things. All that money went straight to debt!

So that brings us to today. We are down to three debts: my car, home equity line of credit, and our mortgage. I can’t explain the feeling that I have that I am in control of my money. I really want you to feel the same way!

We are acting our wage.

We are living within our means.

If we can’t pay for it in cash, we don’t buy it.

We don’t by crap we don’t need.

We WILL be debt free.

My Envelopes (aka Spreadsheet Columns) Didn't Like Christmas

So, I’m not so good at budgeting for Christmas. I did pay cash for our entire Christmas but I spent way more than I had saved. Even with all of the deals and sales I utilitized, I spent a large chunk of change.

December was our first attempt at envelopes, but ours were kept in spreadsheet form. (Don’t worry, blog friends, I’m going to try actual envelopes next month). I underestimated our personal expenses by about $300, due to a few unexpected doctor visits, new shoes for both boys since their toes were curled up in their other ones, etc. The good news is that I didn’t do any major grocery trips this month – I used what was already in our fridge, cupboards and freezer. I’ve only spent $164 so far this month for our family of 4! So the remaining balance in that category can be moved to cover negative amounts in other categories.

Thanks for the comments regarding the CD. Hopefully you can guess that I would love to throw that money at debt, but we both need to be on the same page in order for that to happen. Anyhoo, it’s still sitting in our savings account.

I do have some GOOD news! I may have gotten a relative on board with Dave Ramsey’s plan. I’m doing what I can to keep her sucked in! She may stop by this blog today or tomorrow, so if you can leave her a comment to get her motivated.

Merry Christmas!

Wishing you and your family a happy holiday season...

Pool Boy, green3, Three and Green

The CD is Cashed!

We just cashed in CD that we’ve had since 2005. While I’m not a fan of CDs, it worked well for us while we had it. Back in 2005 we were not in control of our finances, so the CD was a great way to keep money “hidden” from ourselves. If we wouldn’t have had the CD, I’m positive we would not have this money today.

So now we have a lump of cash, and Pool Boy and I are disagreeing on what should be done with it. I know what should be done with it, and he doesn’t have any idea what should be done with it – only that he doesn’t want to do what I want to do. So basically we’re doing nothing with it until we agree on it. It’s sitting in a bank account right now patiently waiting for us to decide.

I did take the interest amount on the CD and applied that to our car loan. That makes $2,322.43 sent to our car loan over the past 3 weeks. That rocks!

For Your Sports Fan

I know this is a late Christmas idea, but I have to share with you how much our son loves his basketball court in the basement, thanks to JustInTymeSports. Yes, we converted one large room into a basketball court! Each end of the room has a mini basketball hoop on the wall so we have an actual court. We also have a real scoreboard program from the same company that we use on our laptop. Yes, this is exactly how it looks on your screen!

Oh yeah, we're the real deal down in the basement!

Rich and Poor

I’ve been confronted about our money-saving ways. “Why are you doing this? You are acting like you are poor, and you aren’t poor.”

We aren’t doing this because we were on the verge of bankruptcy, living paycheck to paycheck, or because creditors were calling our house. It wasn’t even close to any of those things. We just decided we want to keep our money instead of send it off to everyone else. What good is your money if you don’t have any of it?

And really, how can you tell if someone is rich or poor? Do you base it on the house they live in, the car the drive, or the clothes they wear?

Take one of Dave’s recent callers as an example. Her husband made $280,000 per year, so people would tend to put them in the “rich” category. They lived in a $700,000 home – again, another reason people would consider them rich. But they also had this:

$650,000 mortgage on that home
$50,000 home equity loan on the home
$68,000 in credit card debt
$35,000 in student loan debt
$22,000 loan against their 401K

They also had a $19,000 property tax bill due every year, paid for their daughter to go to private school and had a nanny come to the house. They had major debt and they were scared. They were current on all their bills but didn’t have anything left over at the end of the month to pay down their debt. As she described it, they were “hemorraging money.” Even though they had a good income, they were extremely poor.

She said she was “trying to put together a budget, but it’s hard.” Dave got all in her face and told her they needed to quit acting like a prince and princess and quit buying stuff. Their take home pay was $11,000 per month for crying out loud! “You need to learn to sacrifice,” he told her bluntly. “You’ve never sacrified in your whole life and now look where you are!”

Frankly, I don’t want to be where they are. I’ll learn to sacrifice on my own, thankyouverymuch.

Our First Attempt at Envelopes

Before I go into details, I need to admit that I’m not using actual envelopes. I know, I know, it’s breaking the rules. But at least I’m trying! I am keeping it in a spreadsheet that is updated every day, so it’s a start. (For those of you now familiar with envelopes, it’s basically a budget for each category.)

Here are the “envelopes” I created for December:

Fixed Expenses = $2525
Groceries = $375
Personal = $400
Entertainment = $200
Spending Cash = $160
Gas = $300
Christmas = $300*
Total Expenses = $4260
Amount left over to send to debt = ya right, not sharing that one!

*The Christmas line item is for additional gifts that our Christmas fund did not cover. Even with the savings I did this Christmas, I still spent way too much. We went way over our original Christmas fund, and way over the additional amount budgeted above. It’s really hard when there are so many people to buy for. But at least I’m paying cash for Christmas!

This is the first winter in several years that we do not have a vacation planned. We’ve been to Colorado on our annual ski trip for three years, then we went to Vegas last year. This winter we’ll just be staying home, but it’s ok. We are going to DisneyWorld in June so Pool Boy is working extra to save up for that. Don’t feel bad for him – he loves refereeing wrestling.

On a side note, my car loan is now under $10,000! In addition to the $336 car payment paid on December 3, I’ve sent them an additional $800 so far this month. This money came from a few different sources (selling stuff, working side jobs, etc.) I can see the end in sight…

Do you use an envelope system? How do you like it?

Things I Wish I Had Known When I Was 21

1. You need to start investing now. I could be almost a millionaire right now if I had started investing right out of college.

2. Just because you can afford the monthly payment doesn’t mean you can afford it. This one is the number 1 reason I’m having to deal with debt at the age of 35. Up until last summer, every big item I bought (house, cars, pool) was based on whether or not I could afford the monthly payment. Stupid, stupid, stupid.

3. Don’t spend every penny you earn.

4. Everything except for your house should be bought with cash. And when you buy your house, only get a 15-year mortgage. If you can’t pay it off in 15 years, you can’t afford it.

5. Don’t buy a home until you have enough cash to put at least 20% down. Paying PMI (mortgage insurance) stinks.

6. You don’t need a credit card for ANY reason.

7. You should never, ever buy a brand new vehicle. They are a horrible waste of money.

8. Borrowing money to buy a car is stupid. If you need to borrow money, you cannot afford the car. I’m working my rear end off to pay for my car now. Each month I’m sending around $1000 to the loan. It’s not fun.

9. Start a budget today. Don’t wait until you are 35 and are used to spending money like it’s water. It’s much harder to start at 35.

10. Don’t buy dumb things. Here’s a short list of dumb things I’ve spent money on:
A collection of Liz Claiborne purses @ $80 each
Eating out every day for lunch – this went on for years
Everything I’ve ever bought on a “no-interest” plan
Not to mention the new cars and the pool…

Reasons Why People Don't Pay Attention

Do these reasons sound familiar?

I’m doing just fine. I make good money so I don’t need to do anything about it.
If you have consumer debt (credit cards, lines of credit, no-interest plans), you don’t have as much money as you think you do. The only reason you think you are fine is because you aren’t willing to deal with the debt. It’s all a charade - you are living on borrowed money. I lived the charade for many years without even realizing I was doing it. I just assumed that’s how everyone lived. Then I realized YES, that IS how everyone lives and it sucks!

I’m not interested in money issues. I think it’s boring.
Once you start digging into it and figuring it out, you will probably find that it’s exciting because you finally feel like you have some control of the situation. You know how much is going in, you know every single penny that is going out. It’s an awesome feeling.

I don’t understand money and investing.
Personal finance is not brain surgery. You need to spend less than you make. If you don’t have the money, don’t buy it. As for investing, you don’t need to spread your investments all over the place. Pick a few that are somewhat reliable (growth stock mutual funds and paid-for real estate) and learn about them.

I don’t want to give up my lifestyle. I like new clothes, toys, entertainment, etc.
You’ll never succeed until your lifestyle matches your wage. If you have consumer debt, you are not acting your wage. This will come back to haunt you, so you need to decide if you’re going to deal with it now or wait until disaster strikes and you are forced to deal with it. Disasters happen all the time – people get sick and can no longer work, lose their jobs unexpectedly, and so on. How long would you be able to pay your bills if the primary wage earner in your family was suddenly without a job?

My employer has a retirement plan. That will be good enough.
It will not be good enough, people. You are the one who needs to be responsible for your retirement – not your employer.

Think You Can't Do It? Think Again.

These people did. So can you.

The Mortgage Myth

Pool Boy and I have about 11 years left on our mortgage. (yeah!!!!) I’ve had more than one person tell me that we are crazy to pay off our mortgage. “Why would you do something so stupid? You’ll lose your tax deduction! Plus, you could use that money to invest instead and come out ahead.”

They apparently don’t have basic math skills.

Let’s run this example (borrowed from Dave Ramsey, of course):

Your mortgage interest rate is 8%.
You can invest and get 12%.

You may think you’re losing out on 4%, but this is where you are wrong, in my humble opinion. First of all, would you really invest that money or would you just spend it like the rest of your money, without a plan? If that’s the case, then it REALLY doesn’t make sense. But let’s say that you do have a financial plan and you wouldn’t just blow the extra money.

The interest part of the mortgage payment is is $830/ month, which equals almost $10,000 per year you are paying in interest. If you’re in the 30% tax bracket, this would give you a tax deduction of $3000. So if you didn’t have this mortgage payment, I would have to pay an additional $3000 in income taxes. So to those people who say I’m stupid, let me say this. You want me to send $10,000 to the bank just so I don’t have to send $3,000 to the IRS?

Now for the investing portion. If you don’t pay extra on your mortgage and spend the extra money on investing, it would appear that you are gaining 4% each year. Keep in mind that the interest you would earn is taxable, so take the taxes out of that extra 4%. Not all that much left now, right? Add risk to that equation. What if you/your spouse were to get called into the manager’s office this afternoon and be fired? What if you/your spouse got sick and could no longer work? Would you still be able to pay your mortgage? If you got fired or sick, where would you rather have your $10,000 be sitting? In the bank’s pocket or in your mutual fund?

Learn how to keep your money, friends. There are very, very few good arguments for having debt.

The Selling of Stuff

So you’ve dug yourself a hole and you are sitting at the bottom of it looking up. You can see the sunlight way up there. You’ve decided that you despise making those stupid payments to your debt every single month. You’re done giving your money to other people. You’d kind of like to keep some of it. But the hole you are in is so deep, is there a way out? The answer is YES, but it will take some sacrifices. One sacrifice is to sell some of your stuff.

You’ve got to have extra stuff (aka “junk”) sitting around that could be thrown at your debt. Don’t say you don’t have anything, because all of us have crap laying around that we don’t need, or even want. Here are some things we’ve sold:

Brand new, shiny red, zero-turn lawn mower = $2,200
2 loft beds = $100
1 couch = $150
1 saxophone = $1,600
Books = $15.00
NASCAR Tickets = $1,300

I only listed 6 things there, but those items alone got rid of $5,365.00 of our debt in just a matter of a few days. It took minimal work, and we really don’t miss those things. If we weren’t on a mission to live a better life, we’d be trying to figure out how we were going to pay those extra thousands. It never would have occurred to us to – *GASP* – sell some of our stuff!

Look around your house. Yes, you may have to physically look because some of your stuff has been sitting there so long you don’t even really see it anymore, as was the case with our couch. Do you have any of these things that are “necessary”?

Extra vehicles
Fancy, expensive toys (big screen tv, zero turn mower, boat, motorcycle)
Exercise equipment that is collecting dust
Unused furniture
Extra appliances
Home décor stuff
Instruments (We just bought a used saxophone from Craigslist for $400. Someone wants your instruments!)

And the list goes on and on and on. The hole you are sitting in doesn’t have to be as deep as it is. Use some of your stuff to get you a little closer to the top so you can ESCAPE!

List

Some days my to-do list seems longer than is doable. Today is one of those days. So was yesterday. And tomorrow will be more of the same.

Link

Awesome post about you and your spouse being on the same page when dealing with finances and life in general. Go here!

It's a Personal Decision, Part 2

I know that the decision to be in control of your finances is a personal decision. Here are some questions I would love to pose to those living with debt and who are not aggresively getting rid of it.

1. Do you know how much debt you have?

2. How does it feel to write out checks each month for your car, your truck, your student loan, your new toy in the garage, and so on?

3. How do you think it would feel to be able to actually KEEP your paycheck rather than make payments with it?

4. Wouldn’t it feel great to retire at age 45 or 50?

5. Look at the “stuff” you have. Is all of your “stuff” worth the stress it causes your family because of the expense involved to have it? Remember, family is way more important than your stuff.

6. Does your family have a history of financial stress, generation after generation? Don’t you think it’s time to change that with your generation?

7. Do you want your kids to have to be where you are today, working and working to make payments on cars, credit cards, and mortgages? They need to learn about money now, while they are young. They need to know debt is not a way of life.

8. If you are still running up balances on credit cards, why? What are you purchasing that is so important that you are willing to go into debt to get it? If you don’t have the cash, you should not be buying it.

9. Do you know exactly how much you are spending each month?

10. Why do you choose not to aggresively pay down your debt?

I don’t ask these questions to be mean. I just want to give everyone the chance that I’ve been given. I am so, so fortunate to have gotten on this track. Each of you has the ability to make a difference in your family’s financial situation. Get started today. It’s not too late!

It's a Personal Decision

Getting out of debt seems obvious to me now, but a year ago I would have laughed at you and said, “Isn’t that what life is about? Working to make money so you can send the minimum amount due toward your debt payment?”

Now that I’m on the other side, I can’t imagine going back to the way were living. We had no financial plan, tons of debt, new cars, weekly trips to the mall, almost daily trips to the grocery store. We were spending and spending and spending. We felt were were ok because we weren’t using credit cards and we had a healthy savings account. But we also weren’t seeing our financial situation progressing forward. We were stagnant. Every penny we made went right back out. And more often than not, more money went out than came in. We could tell our savings account was slowly dropping, but we never knew exactly why. Pool Boy would say, “What happened to our savings account this month?” Truth is, we had no clue. We made deposits and wrote checks. Whatever happened, happened.

I know I talk a lot about Dave Ramsey, and I’m well aware that is annoys the hell out of Pool Boy sometimes. But I really feel it was an amazing blessing that I discovered him at the time I did. We are still young and still have time to turn this situation around. I know I’ll never convince all my family and friends to see how important a financial plan is. I doubt I would have listened to anyone a year ago either. In fact, I remember making a specific comment about someone else’s frugality and laughing. Oh, if I could take that back because they were actually the smart ones. I know people are laughing at us now, but I also know that we will be the ones who will be debt free and retiring MANY years before them. I wasn’t put on this planet to make payments, and I don’t intend to live that way my whole life.

I encourage you to ask yourself these questions:

1. Do I know where every single dollar of my money goes each month?

2. Are there things that I am making payments on that aren’t necessary, such as newer cars, trucks or toys?

3. How much money will I need to retire?

4. Do I have an aggressive plan for paying off my debt?

5. Do I even know exactly how much debt I have?

6. Am I properly insured in case something happens to me?

7. Do I know how I will support myself in retirement?

8. When do I want to retire?

Please don’t wait until it’s too late to get on the right financial track. Every day you wait to get it figured out, every penny you spend, is taking you further and further away from making your family a financial success.

Show The Love, Blog Friends!

A friend of mine needs to feel the blog world love. This week she had a very small fire in her house. Her husband had turned on the stove while a nylon lunch bag was sitting on the burner. They got it out in a matter of minutes, but the house is still unliveable. When the furnace kicked on, it sent smoke and fumes throughout the house. Every single item in their house is contaminated. They had to move to a hotel – with two little girls – for a week or two while a company goes through their house cleaning it inch by inch.

Locally we are collecting money for a Target gift card for them so they can go buy essentials they need on a day-to-day basis.

So go over there and leave her a comment. Show her the love, friends!

May 3, 2008 Cannot Come Soon Enough

If you are wanting me to hang out with you next May 3, I'm sorry. I won't be available. Because I'll be at DAVE RAMSEY'S LIVE SHOW IN KANSAS CITY!

That's right, folks. Dave Ramsey is finally coming somewhere within a 4-hour radius of me! And because I'm a member of mytotalmoneymakeover.com, I even get a discount on the tickets.

Want to come with me? I need to buy my tickets, like THIS WEEK, so if you want to come along you need to tell me now. Can you tell I'm excited???

Quote

It's not about how much money you make. It's about how much money you keep.

Spare Time

Everyone’s busy. We all say we don’t have time to do anything. I catch myself saying that a lot. But in reality, you probably do have some free time every day. Are you using that time wisely?

My spare time occurs during my drive to and from work, which totals an hour each day. I also have a lunch hour. At night, I have an hour or two after the kids go to bed. So really, there are about 4 hours a day that I can officially consider “spare time”.

My drive to and from work is spent listening to podcasts on my iPod – my NEW iPod with cooler features than my old one, thanks to Pool Boy’s early Christmas present to me. My regular podcasts include mostly Dave Ramsey (of course), a little Anderson Cooper 360, Joel Osteen and any other personal development podcasts I come across.

My evenings are spent doing some contract work, learning a new skill such as how to use Flash or researching all the features in Photoshop, or reading personal development or personal finance blogs and books.

I don’t watch much television, and it’s not because I’m against it – I just have better things to be doing with my time. I’d rather know tools to help me be successful than to know the main characters on “House” or “24”.

Anyone who stops learning is old, whether at twenty or eighty. ~Henry Ford

We're Off!

Work, that is. Pool Boy and I both took Monday off to go to Des Moines and get our Christmas shopping done. I have everyone done except for the boys, so it should be a full day of toys and games!