Financial Freak Show

If you’re trying to take your debt out of your life focus is what’s going to get you there (though some extra cash won’t hurt!) Before I had a very well defined plan in place for removing all my debts I was attempting to pay down all my balances at the same time. Each month I would add 20, 30, sometimes 50 bucks to each of my debt payments to chip away at the balances. I noticed I was paying extra on everything but not making any significant progress (well not life changing progress anyway). So I took the Dave Ramsey “Debt Snowball” approach and it worked….it worked well.

I began adding all the extra money onto the one debt with the lowest balance and just paying the minimum that was required on the rest. (I did care about the interest rates because this stuff wasn’t going to stick around for long!) At this point it was around $300 that was being spread across 7 different payments each month. By this time my lowest balance was a Master Card with $1248 on it (one of our Master Cards that is). I was now dropping $420 payments on a $1200 debt – and that’s assuming I wasn’t able to whip any extra cash to add a little more fight to the battle! Once that was all wrapped up I threw that $420+ on top of the next debt’s minimum payments for a total of $525 and Round 2 was in full swing.

Have you tried the “Debt Snowball” approach yet? How did it work out for you?

A survey for AmeriCredit for Market Facts asked 1000 consumers the order in which they pay their bills when they know they’re going to be late. The results were good to see (maybe there’s still some comon sense out there.) True most of this seems like common sense but it never hurts to chat about it. You never know when someone might ask you the question.

Here are some of the results: (this shows what they would pay first - last)

1. Mortgage or Rent 79%
2. Car Payment 41%
3. Auto Insurance 39%
4. Credit Cards and/or Cell Phones 38%
5. Cable and/or Satellite Television 32%

The survey results look good to me. If someone is in crisis mode the first thing they need to do is shore up their position as best they so they can hopefully “live to fight another day.” This means taking care of the essentials first. Food, Shelter, Clothing, & Transportation. If these four things are taken care of you can hopefully keep workong to address whatever your other issues are (and we know people got some issues!) Beyond the essentials look to cover your secured debts next. Things next like car payments or other property. Since these debts are secured by liens the lenders may be much faster to attempt a repossession of the property.  Next address your unsecured debts. Things like credit cards, phone bills, cable bills, old medical bills etc. Obviously all these debts need to be addressed but aside from questionable and sometimes illegal collection tactics these folks have little ability to retrieve their money with out taking you to court first. True, you do need to get these thing taken care of but the dentist can’t usually repo your dental work instead he’ll have to slap a lawsuit on you before he can legally take back the fat gold grill in your mouth.

Remember the unsecured debts (especially credit cards ad payday loans) will likely be the first to start yelling since they are in the first loser’s position if you file bankruptcy. They yell loud and they yell often hoping that you’ll become emotional and pay them before you feed your kids.  All the creditors obviously need to be addressed but if you or someone you know finds themselves in a seriously tight spot try to leave emotion (as much as you can anyway) out of the process and address the bills in a way that gives you the most flexibility to keep fighting.

In many cases monthly spending just sort of happens. Then at the end of the month you look up and say something like “What the ****! Where did it all our money go” or if things worked out more in your favor it may sound something like “Woohoo! I get paid tomorrow and there’s still money in my account…who’s yo’ daddy now!” Either way this is often a byproduct of us just living our busy lives. So here’s a few steps I recommend to insure you’re yelling “Woohoo” with somebody more often than you’re yelling “What the ****!” at sombody.

Don’t worry this one’s pretty easy I promise.

1. Figure out what you’ve got coming in each month and where the heck it’s all going.
2. Next figure out what you can cut back on (ex. heat, clothing for the kids, food, you know the unnecessary stuff) and what you’re not able to cut back on (ex. booze, smokes, online gambling – you know the important stuff in life) – FYI, that was a joke
3. Begin making some tough decisions and adjust your budget accordingly. Apply the extra money toward your goals– make sure everybody involved comes to agreement on this stuff
4. Come up with a cool way to track you progress. A nifty spread sheet is what I used (but I’m sorta nerdy) Another idea may be to put a big list on the fridge where you can see it everyday and cross things off as you go (ask any kindergarten teacher, this may sound lame but it works!) Use what works best for you and helps keep you on track towards your bigger goals. 

The important thing here is to work on refining your money habits to accomplish the things that really matter to you. Personal finance in many cases is more of a psychological game than a numbers game so play to win. Many of us make enough to accomplish our goals but don’t always behave in ways that allow us to.

 If I’ve got correct goals, and if I keep pursuing them the best way I know how, everything falls into line.  -Dan Dierdorf

Another financial blog caught my attention recently (the name’s withheld because its a pretty good blog with a only a few questionable posts) The post I’m writing about was regarding the purchase of a new “quality” BBQ vs. buying a less expensive model. As a FinancialFreak that thinks long term this makes obvious sense to me as quality is often worth the extra price if you plan to use the item to its fullest. Buying quality may not be a responsible option though if you’re not in the proper financial situation to pay for it. 

 The blogger posts about how he wanted to buy the Weber E-310 BBQ which sells for close to $800 – a pretty sweet BBQ which he’d been saving for. He then goes on to say he made a better purchase and settled for a Char-Broil BBQ for a little less than $400 – again good job, you did some homework and saved some cash.

Here is what made me say what you were thinking…

The next post on the blog was titled “Housing Update: Short Sale, Foreclosure, etc.” I assumed this was a post about his opinions about the complicated housing market. Turns out this blogger has been trying to sell his house for more than 16 months and is currently on the verge of a foreclosure. Here’s a quote from his post:

Our savings is gone, our emergency fund is nil and I have cashed in about half of what little retirement we had put away. I am earning as much side income as I have time for and my wife babysits anywhere from one to five children (beside our own) everyday in order to make ends meet. At the moment, our credit is good and God has provided for our needs, but we are at the point where we are starting to incur major debt on behalf of this house.

So let me summarize here. He’s earning as much side income as he can, his wife is babysitting extra kids for money, he used his emergency and retirement funds to help weather the storm. If I were counseling this couple on their finances my advice to them would unquestionably be to spend the money they saved and invest in a new $400 BBQ. This is really the only option they have left to help prevent their family from being foreclosed on. If we were on the verge of foreclosure and I came home with a new $400 BBQ it would not be a pleasant conversation over freshly grilled steaks with my wife – who knows it might even be the last convesation we have as a couple!

My thoughts do go out to this family as nobody wants to go through a foreclosure….then my FinancialFreak mind kicked in and my thoughts quickly changed to “I wonder what sort of deal this guy will give me next month on his almost brand new $400 BBQ?” I better go back and bookmark that post!

I was walking out of Starbuck’s $4.00 lighter in the wallet, I noticed a new sexy black sedan next to me. Now those of you that know me know that I love black cars (notice that black is the one color that every car comes in). Also those of you that know me probably wouldn’t call me a sedan kind of guy. Though with the addition of our daughter a while back maybe my tastes have changed a bit. After I saw this car I now know for a fact I’m now a sedan guy, I’m not sure why….it may have been the safety and comfort of this particular car that changed my mind or more likely it was the shiny Maserati badge on the grill that got me all worked up.

Big and inexpressibly masculine, broad and low, with a rising rhythm from nose to tail and perfect isometric tension, the QP has a self-possession and – that makes its six-figure, four-door competitors – Mercedes-Benz AMG S-class, Audi S8, BMW 760Li – look like prison dentistry.

– Los Angeles Times

Any car that’s “inexpressibly masculine” and can make an AMG Mercedes-Benz S-class “look like prison dentistry” is okay in my book! With a selling price of only $130k that works out that I only need to save $71.23 a day…every stinking day for the next five years and that baby is mine. That’s going to take a bit more than cutting Starbucks out of the budget. But I guess it’s one more reason to keep my finances in order so someday my family will have a proper 440 horse power grocery-getter that will deliver us to McDonald’s Play Land at 177mph!

After catching a glimpse of the world of possibilities we live in today I approached my work with a refreshed attitude and drive. So aside from a good street fight what gets your blood going?  Cars? Boats? Charity work? Respect in your field? A sweet vacation? Ladies of the night? 

Comment on why you get up in the morning and decide to put up another fight for another day.

This is not a post about the cool deal my employer offers where I get paid out for not using all my sick days each year. This post is about the small but real pick-me-up that came along with the miserable cold I had the pleasure of enduring.

Recently I was struck down with a pretty hearty cold (actually it kicked my butt pretty bad!). This meant that I missed several days of work as to not infect my fellow employees and to bless them with my chipper attitude I’m sure I had during that time. To get back on my feet I took a total of three sick days off from work plus my entire weekend to get to the point I could be fairly productive again. The interesting side effect of being sick over this 5-day period was that I spent very little money. I because of that was able to make a small step forward toward our financial goals by taking advantage of the miserable situation. This sickness really worked out to my advantage and put a little extra cash between myself and future financial ruin.

I figured I saved approximately $48 during those several day, mostly on gas and food by not driving to work and not feeding myself at the office. That’s $48 saved after you deduct the $11.96 super-jumbo-Costco-sized economy pack of Nyquil I picked up to help me weather my personal storm.

So what did I do with my new found wealth you ask? I took advantage of this financial windfall by transferring the money I saved from out checking account into our six month emergency fund we’re working on (and making great progress I might add!) True this $48 won’t change our lives but it does mean the money will go towards something productive instead of vanishing like it normally would. Even though I was physically miserable for a week I was able to feel a little less financially miserable.

Please let us all know what odd tiny steps you’ve taken toward your financial goals recently? The more odd the better!

Only 17 weeks until Christmas!

Just in case nobody told you, Christmas will be in December this year and since people seem to forget this they also seem to forget to plan for it EVERY stinking year. I thought this would be a good time to send everybody an early reminder. It seems every year Christmas sneaks up on those that are unprepared and end up paying for it for months in the form of bloated credit card payments. So as a well prepared FinancialFreak get up right now and go get yourself an envelope (a little white one if you’re like me or one of those big brown ones if you’re already filthy stinking rich) and write on it in big easy to read letters “XMAS 12-25-09” Next plan out what you’re going to spend and begin to stuff the envelope with the appropriate amount of cash over the next couple months. Once Black Friday arrives (or Cyber Monday for you crowd-dodging faceless Internet shoppers like me) spend it all away guilt free.

Now remember (here comes the tough love part!) when the envelope is empty the shopping is done. If you happen to run out of money before you have bought for everybody on your list this is your fault and you should now be shammed! So at this point you get to make them a nice hand written card that says “Sorry I’m a cheapskate this year but I’m finally getting my financial act together! Next year I will better plan for my holiday budget.”  If they can’t appreciate that consider putting them on next year’s naughty list. I now that sucks but do you really want to be making credit card payments for this Christmas next July? If you said “yes” to that please feel free leave my website. (To exit now click the little “X” in the upper right corner of your screen)

Though if you were an over achieving FinancialFreak and managed to have something left over please remember your fellow FinancialFreak here. I like blue and wear a large….oh, and Cadillac’s are a man’s best friend.

How do you plan to stick to your Christmas Budget this year?