Having a credit card to fall back on can dissuade you from building a proper emergency fund. I think this happens for a couple reasons. First, with credit you already have a safety net in place. That’s actually one of the reasons many people get credit cards in the first place. Though this can quickly blow up in your face because you could be taking on debt at the exact time it gets most difficult to pay it back. It amazes me how many people grab their credit cards right after a job loss and began using high interest cash advances for everyday life at the exact worse time to be borrowing money. I think having the cards as a safety net allows people to feel like they’re covered so the urgency to save really isn’t there.

Second, I think another reason people don’t build emergency savings when they use cards is because they’re constantly working to clear the debts. Instead of making savings a priority they make keeping up with the card balances a priority. The more debt they have on their cards the less they have available to save and the more likely they’ll need the cards to cover their butts again and so the cycle continues.  

At some point if you want to go with out credit cards you need to break the cycle of spending instead of saving. I personally stashed away a little dough to use for future “emergencies” then stopped using the cards. Once I stopped using the cards and had some real money in the bank to fall back on all I really had to do was eliminate the balances and at that point I was done with the credit card cycle. I had no use for them anymore. I now have an emergency fund with more money available to me than I ever had available on my credit cards…oh and it’s earning interest too.

The good news is Mark has decided, for the first time ever, to start saving. He’s now quickly building an emergency fund since this’ll be his only safety net going forward. It looks like with a little encouragement and some discipline our buddy Mark won’t be “financially retarded” too much longer…at least that’s the plan.

So what’s your plan for dealing with credit cards, do you want them gone, do you really need them around? Let me know how you feel about this.

Once I received the news that evening my wife and I decided we needed to travel three states away and we needed to leave that night (and I’m not talking about crossing three of those little East Coast states, I’m talking about crossing three big fat West Coast states). When we were discussing our options about flying, driving, going or not going, a funny thing happened that was sort of new to us…not once during our discussion did my wife or myself ask the question “Do we have enough money” or “How much will it cost?”  We knew stuffed away in a local credit union was had everything we needed to do whatever we needed to do.

At 2am, within couple hours of receiving the emotional news Mrs. Financio, Mrs. Financio JR, and myself found ourselves in the SUV, making a quick stop at the ATM to grab some cash then we made a break for the border(s).

18 months ago this whole scheme would have played out a bit differently. It likely would have involved some unpleasant discussions about money and credit cards and bills and gas money, all are the last things I want to talk about when things complicated. After all was said and done there was no debt incurred, there was no discussion about the money involved in making the trip. We were free to do what we felt we needed to do without any concern for the dollars involved. This unexpected trip that came about by a huge loss in my life was in a way also huge success for me financially and, proof that some sacrifice and good decision making can pay off in big ways that can’t be explained in terms of dollars. The crazy part was that this came right on the heels of our Serious Budget Busting Week I think somebody out there is testing me to see if I’m really serious about this whole debt free thing!

1. The third week of October is apparently our week for eating dinners out. Sunday we took my wife’s mother out just to enjoy her company and thank her for watching our daughter five days a week for free (I figure that’s worth tossing some Thai food her way every once in a while). Monday we I needed to pick up my vehicle (I’ll get to that one in a minute!) so that lead to another dinner out. Though this time we were hooked up with a $10 off online coupon so that covered the beer. Tuesday, my favorite aunt was in town for a business conference so once again we headed downtown to catch up over some chow. Friday we find ourselves at a rehearsal dinner for a friend’s wedding – true, the dinner is free but the baby’s new outfit necessary for flower girl duty…well that’s not so free! I consider this a dinner related expense.
2. Saturday gets pricey downtown again even with our crazy hookups! Due to the above mentioned wedding we spent the weekend in a downtown hotel suite. True we only live 30 minutes from downtown but with the baby and a lot to do we decided to get a place to stay in the city. With my wife’s crazy hotel hookups (she works in sales in the hotel business so she knows everybody that matters) we got the room for less than a third of the regular price. And since I worked my crappy second “get out of debt” job as a valet at this same high-end hotel the $38 per night parking fee only cost me a smile and a couple fist-bumps with the ex-coworkers.
3. The crazy hookups continued to ease the pain through the weekend but we still dropped some dough.  Saturday my hot little sales-lady wife pulls some more strings and we find ourselves at the Zoo with $30 worth of free passes. Well free that is if you exclude the $5.00 parking, the $12.00 snack and the $7.00 Starbuck’s drive-by on the way there. I guess that’s the cost of some beautiful moments with my little girl. And you can’t buy that at your local Wal-Mart!
4. The wedding Saturday night had no official cover charge. Dinner was provided by our hosts but there was a gift purchase involved so in a way there was a cover charge. No big deal though, dinner was good and it was all so terribly romantic that it probably would have induced vomiting if any outsiders were watching. (take a moment here and wipe your eyes – I know, I’m a little choked up as well).
5. Here was our big budget killer this week! I had the pleasure of forking over the money to replace the engine in my SUV.  This expense stung like hell but the good news is since I got such a sweet deal on the car (once again Viny Financio and his fist full $100’s talked louder than the seller’s asking price) I was still right at Blue Book value even after we dropped in the new engine. Of course this was due to me having a very good friend that does this sort of stuff for a living so instead of laying out the estimated $6,800 I was in it less than $4k I’m glad we were able to cover all this with cash from our emergency fund because they don’t accept credit cards for homie-hookups! And thanks to another good friend I also managed to get by without needing to rent another PT Cruiser/death Trap.

So all-in-all this week cost us right around $4,500 not including our regular living expenses! Things did work out though, and it helped that October is double a Magic Month for us. In a way though I still feel sort of like I was accidentally kicked it in the groin by my own friends and my own possessions but we’re still rolling FinancialFreakShow debt free and we’ll keep fighting but I promise you Vinny Financio will keep fighting dirty!

According to my calculations if I would have stuck to the $5 a day plan every stinking day I would be completely debt free in approximately 21,400 days. Not a bad deal…if I wanted to be debt free around my 90th birthday! Actually it’s more likely I’d be debt free well before that because at some point I’d have to kill myself over it. Of course then my wife could bank the insurance $money$. Anyway, where was I? So at the time the thought of removing all my debt at the rate of $150 a month seemed laughable, but the idea behind the book made perfect sense. The idea was to get in the habit of paying your debts before you had the opportunity to spend your money on something else. At the time I took the book at face value I think because I was desperate for a solution. Now that I look back at it the book makes perfect sense even though the numbers don’t jive. In may posts Micro Paymentality & Sick Day Bonus Pay I talk about how this exact idea can work only on a larger scale. The idea is to fight like hell to find extra money each month then apply it to your bills.

If you manage to get a grasp on your finances and put a couple of the basics into place like a household budget and an emergency fund to prevent you from needing more credit to get by, the $5 a day idea could actually work. No matter how much you can manage to eek out of your budget, as long as you can eek out something, if you put it towards your debts before you allow it to wander out of your life, and assuming you don’t rack up any new debt, you’ll eventually become debt free. Though in my case I busted it and used what I affectionately call the Vinny Financio’s Debt Free on $60 a Day Plan and it worked. I guess I was just a little too impatient to wait until I was 90 or dead to live like this.

Of course to make the Magic Month work for you I advise that like a true FinancialFreak you plan for this well in advance. Work these extra funds into your budget prior to getting that fat fist full of cash and take advantage of this magical windfall instead of letting it wander out of your life. No matter what your present financial situation is you can pay down some debts, shore up your big fat emergency fund, lock it away towards one of your savings goals, and maybe even blow a reasonable amount of it.

*Note I said blow a reasonable amount! As always let’s plan ahead, be responsible, have a little fun and make Mr. Financio proud. Remember we’ll likely have this same talk again in a few months so with a little discipline maybe it will be more talk about fun and less about paying debts!

Now, I always have some cash in my pocket, especially since I refuse to use credit cards anymore, but I sure as heck don’t have $3000 in my pocket very often. Since the thought of having my very own fist full of $100’s sounded so exhilerating I figured I’d give this big shot technique a try and see how it worked for me. This sounded like a logical experiment so shortly after meeting Fist-full-of-100’s Guy I withdrew my entire starter emergency fund of just over $1500.00 rolled it up and stuffed it in my front pocket. After leaving the ATM I headed over to Starbucks to meet up with a friend.  I was excited just thinking about the moment I’d get to whip that wad out of my pocket and say “I got this one.” Just like Fist-full-of-100’s Guy had done a few nights before.  So without hesitation as soon as he placed his order BAMM! The fat wad was out of my pocket and a smile was on my face. The only problem was I looked like a complete idiot bustin’ out $1500 to buy two cups of coffee. 

And sure enough the barista saw right through me. With a smirk on her face and a smart little attitude she said “Is that all you have?” Ouch! I was busted by a 17 year old coffee pusher! 

So I did my best to play it off all FinancialFreak cool and said “Why, how much do the other guys usually tip?”

All in all it was a lame experiment to roll like a big-shot but in the end I came out looking more like Al Bundy than Al Capone

How much cash do you usually carry in your pockets?

Two hours later the lady I live with (aka. my wife) came home and with a smirk asked how my writing was going.  I then told her how I had killed two full hours just hanging out on the couch. That’s when it hit me…my evening sounded like that Kenny Chesney song

 So I’ll just sit right here, have another beer in Mexico do my best to waste another day

-Kenny Chesney

I realized I wasted an entire evening when I should have been writing. Looking back it seem this happened because I began something without a reasonable plan in place. I was easily distracted since I started without any direction right from the beginning. This is what many people do financially everyday. Normal people rarely move forward financially with any real plan, strategy or focus. They look up and realize they’re in debt with no emergency fund and no viable strategy for anything different in the future. As a FinancialFreak you should devise and follow a plan to win financially, which is sadly not the norm (thats why were freaks – we’re not normal). True there will be many corrections and adjustments to the plan along the way but at least your not just along for the ride your instead driving the bus.

 So next time you get the urge to sit on the couch waiting to see what low fat recipe Oprah’s pimping this week or which stars can’t dance or who’s getting thrown off the island. Here are a couple ideas of things you could do instead….

Evaluate your financial position – create a personal balance sheet (what you have minus what you owe – third grade math I think even you can pull that off!)

Create a monthly spending plan for you household (again third grade math)

Write down you financial goals; 1yr, 5yr, 20yr etc.

Devise a plan to realistically accomplish your goals  

Maybe even take a few minutes to discuss your thoughts about the household finances with your significant other

Read something - improve some aspect of your life you feel needs attention (work, relationship, or maybe visit some older post on this site – you just might learn something….or not)

Then again maybe I’ll just sit right here and have another beer….

What advice do you have for those that struggle to keep their focus for the long-haul? What do you do to keep yourself on task?

 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 also noticed when something went wrong while I was your broke I didn’t have an emergency…I actually had two emergences. The first was the actual emergency itself and the second was the money emergency that arises from the initial emergency. In the one case of a couple I was counseling a recent accident was further compounded by several hundred dollars in overdraft and late fees that were applied by their bank. The additional expense drug the problems into the subsequent months amd magnifying the financial fun they were having. They actually incurred over $400 in late fees and overdraft fees and if I remember correctly this actually required almost as much money to clean up as the initial emergency required in the first place!

The Emergency fund is really the only way to prevent this from happening without going into some sort of debt. The Emergency fund though can only prevent problems from growing to the extent you actually have enough dough to fight the battle. True in most cases you could go into debt to resolve the problem and that’s what most people do – it seems like an easy enough answer. Since they rarely have access to much real money they pull out the plastic crutch and beg for mercy. This does work but you have now stretched this emergency into the subsequent months, and often times years, until the debt is paid. The big problem with this strategy is that now you have weakened your current financial position and will have to fight that much harder to survive the next emergency. This is especially true if the next emergency arises while you are still trying to pay for the last one(s). So now do you not only owe money (plus interest) but you still don’t have any money, I know this because if you did have any money you would have used it in the first place.

I feel building an emergency fund is crucial to any financial plan. To be honest I think it’s more important than paying your debts off completely. Though I think to build a solid financial foundation you need to do both. It’s also much easier to build your emergency fund once you have freed up the cash you were previously paying towards your debts. If you added up all the money you pay out in credit cards, student loans, and car payments how long would it really take you save up 3-6 months worth of expenses in an account? This was a major motivator for me to pay down my debts, I knew that would allow me to build a bigger financial cushion between me and life and paying away my debts would free up the money to accomplish this relatively quickly. 

The first thing I did to build to save for emergencies was create a place to keep the money I knew if I saved this money in the savings account that was tied to my checking it would wander away from me like Seahawks Super Bowl win never to be seen again! So I took steps to “idiot proof” our savings. This post tells how I worked around the issue of having the money available when needed without using debt 29% Interest? Are you Kidding Me?

Another option is a money market account. These are nice because they usually offer a higher interest rate than a typical bank checking or savings account. Many will also allow you the ability to write checks from these accounts (often 4-6 checks per month are allowed). Personally I liked having a back up debit card in my wallet in case something weird went wrong with our regular checking account and I was stranded without gas somewhere.

My plan is to use both a checking account and a money market fund for our emergency money. I know that sounds a little complicated but it gives me the best of both worlds. We can have immediate access to a couple thousand dollars to get us through a pinch which for us should cover most anything that we have to deal with on the spot (a dead car, an exploding septic tank, etc.). All the while we’re earning interest on the remaining balance. If we need access to more we can write a check or do a quick transfer and have access to more within 24 hours or so.

How much money do you feel you need to have access to sleep well at night? If you already have an Emergency fund in place what type of accounts do you use for its safe keeping?

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!

If you didn’t want to pay 29% why’d you sign the stupid contract then?

Now to my FinancialFreak mind this seemed like a perfectly logical question. If you didn’t want to pay 29% why did you agree to borrow money at 29%? According to this person it wasn’t their fault (can you believe they actually attempted to shift the blame on this one?) Apparently they agreed to a 1.0% interest rate in the beginning. That was all fine and good until a payment was made late and the card company killed her on the rate with no warning. Okay in my opinion that’s not entirely true, they did send a warning, it was in the fine print when she signed up for the stupid deal in the first place. So you’re telling me since the card company raised the rate it was their fault? I’m sure it wasn’t your fault for signing onto a bad deal then not making the required payments so the company adhered to the contract and raised your rate because they think you’re a flake and won’t pay them back in the future?   

When a person signs a contract for a credit card (or anything else for that matter) you agree to the terms of the contract. If you don’t like the terms of the contract then you should probably not sign up.

So that then brought up the question of how one would get by without using credit cards. What do you do if you have an emergency? How do you buy stuff online or travel without a credit card? Actually the answer to this is pretty straight forward. So I told her what I’ve done to avoid needing credit cards.

First I removed all my credit cards from my wallet and cut them up – how are you going to stop using them if you keep using them – seems pretty obvious to me.

Then I worked to pay them all off. Since in my case this took some time to do I proceeded to the next steps while I worked on paying the balance down from buying crap I couldn’t afford to impress people I didn’t even like (that’s with interest added of course!)

Next I opened a second free checking account with another bank that also gave my wife and me a couple debit cards, just like our regular checking account so yes we now had two checking accounts and each carried two debit cards.

The next step was to fund this account. We did this by not spending more than we made for a couple months (I know another tough concept for many to grasp). By doing this for a while we were able to gather up some extra money which we deposited into this second checking account. At the time this was about a $1200 (which is where we tried to keep the balance while we were paying down our debts.)

We called this our emergency fund (well a starter version at least). This was only to be used for an emergency and we BOTH had to agree is was an emergency. Since our marriage was based on trust and shared goals there was no issue with us both having easy access to this money. We trusted each other not to let the other down. Plus if either of us was going to screw this up it was going to be me since I am a spender but I know better than to unleash the wrath of my saver wife….again!      

Now that this was all in place we were left with our “emergency cards” and our normal debit cards. These were not credit cards so we only had access to what we had in the account. True we only had a $1200 safety net between us and the world but that seemed adequate for most issues that may arise. Seriously how often do you spend more than $1200 in one shot? In our case this was not nearly enough to protect us from a job loss or major illness but it covered the occasional car and home repairs that always seem to pop up at the worst possible times. Funny thing was this was ten-times the money than I used to keeping the bank but since it was my only safety net now it scared the pants off of me and motivated me to finish the process.   

Once we climbed out from under or debts we we’re able to quickly increase this fund to several months of living expenses. Now, hopefully, we have the ability to handle much larger emergencies like a really broken car of a really broken job, without going back into debt. I will say we’re still a long way from driving around in a Bentley with $60,000 gold teeth tossing $100 bills out the window…but if we do I can pretty well guarantee we won’t be paying 29% interest to make it happen

Have you ever signed up for stupid deal you had regrets over? Did you learn any lessons?

I was driving my Cadillac from Seattle to CA for my grandmother’s funeral. This was an unexpected trip so I didn’t have time to plan for the expense (not that I would have really planned for it anyway). So on I-5 somewhere in Oregon at 3am in the morning I stopped to fill up on gas and caffeine. Since the state of Oregon won’t let you pump your gas like the big boys in other states I gave my debit card to the attendant and went inside. When I returned from getting coffee and spending down the last $20 bill I had in my pocket the pump attendant handed me my card back and said “Got another? It won’t take it.” That’s when I realized I had handed him my checking account debit card which had no money available until mid-night the next day. Thats also when I realized there was an attractive the girl at the next pump was who was overhearing the conversation (talk about the ultimate “game breaker!”) “No problem,” I said as I apologized and pulled out my Platinum Visa card which easily had a whopping $200 left on it, I know this for a fact because I checked before leaving this was all the money I had until my pay check hit my account the next day. Soon I was heading off in my shiney red Cadillac, with my face the same shade of red as the car, and barely enough money to put gas in it. That uncomfortable realization paired with a ten-hour solo drive through the night set my financial wheels in motion. That sounds so tame because basically I feakin’ lost it! I was so damn pissed at myself I knew I had to change it.

So when I got home I had a talk with my wife (yes, I’m married I wasn’t trying to date the gas pump girl – she just caught my eye and greatly magnified my humliation!) Anyway back to the story…we decided this money situation had to change. I didn’t know how we were going to change it since we barely made enough money to cover the monthly payments so how the H-E-double-hockey-sticks was I going to fix it? So I started reading (because it was cheap!) and began looking for an answer. I read a lot of books; listened to radio shows, watched money programs on TV, talked to a lot of people who were much smarter than I was about money and life and stopped listening to people around me who were broke.   
It worked, we we’re able to turn our balance sheet upside down. In just over two years we paid off over $100,000.00 in debts and saved up a nice emergency fund. We now have more coming in than we have going out each month, everything now has a name on it and a place to go. The funny thing is it becomes more fun everyday.

So when people ask me how we did it or what I think about a money situation this blog is my answer to them. I think most money problems and money successes are a result more of your behaviors around money than an actual numbers game. I think if people learn to exercise good discipline and judgement with their money the numbers part can work out in their favor no matter what the numbers actually are. Many people think it’s a numbers game and a hopeless endless battle….and most people are broke 

So where did the FinancialFreakShow come from? Well after talking to many people about poor financial decisions I have realized most people look at me like I’m crazy when they find out I no longer use credit cards, or make car payments, or use charge accounts and I have a personal goal of a future credit score of ZERO (yes you read that correctly – ZERO!). They don’t quite understand how that can work or how you can survive but so far it has treated me quite well. So since I was treated as a freak by those around me I went with it! I happen to like not being like the broke people around me so I’m going to roll with it! So welcome to my FinancialFreakShow.
Feel free to hang around and pass this stuff onto friends or one that can’t quite get their acts together if you want to. Let’s see where we can go from here. Send me some emails, post some comments, let me know what you think about this crazy out of control yet completely controllable money world. Maybe together we can inspire some common sense.

If you want to read the follow up/dejavu moment to the above funeral roadtrip story please read this post: Emergency Fund Don’t Fail Me Now! to get a better idea of how our life has come full circle and changed for the better. Different Funeral…Different story

FYI, I’m a blogger not an author so I am a horrible speller and rarely use proper grammar so if Spell Check doesn’t catch it I likely won’t catch it either. Enjoy!