Monday, April 28, 2014

Paying Off Debt (Part Two)...The BEST Advice I Ever Received

After my last post I know everyone bought the book, listened to a few of the podcasts and made themselves a budget, right? Yeah, I know but I had to ask.

The BEST advice I ever received for paying down credit card debt I heard on the radio. Yep, I said the radio. Since the radio is public domain I am hoping that person doesn’t mind me sharing it with you.

Actually, I first heard it in a wealth building seminar and then I heard it again (same person) on the radio a few weeks ago. Here it goes:

People advise that you pay extra on your credit cards every month to pay them off faster, right? A few years ago credit card statements started including information that etimates if you pay an extra X amount a month, you will have your balance paid off in X months/years.

Don’t do it. I repeat do not do it!

Let me explain…

Let’s take a nice round number and say you have a balance of $1,000 and you are sending extra which makes  your monthly payment $100 a month. According to the credit card company, you might have your card paid off in about 4 years right?

Here’s the math $100 month X 48 payments = $4,800 total

You just paid them over 4.5 times what you ‘borrowed’ to call it even.

The solution?

Pay the minimum. 

Yep, pay the minimum and save the extra.


Because if you save the “extra” instead of paying it to the company you can actually pay it off in 10 months. Here’s how:

Let’s say you can pay an extra $100 a month. Take that extra and save it. SAVE IT! 

What is $100 X 10?

You got it! $1,000

And how much was that bill?

Yes… it sure was. $1,000 total.

It sounds so simple after you think about it. It sounds so elementary when you realize that you are throwing your money away paying a little extra a month while the credit card company is adding interest on your balance monthly. A balance that is barely moving.

But what about the interest while you are saving and paying the minimum? Does it really matter at that point? No, because you have enough to pay it off…in less than a year (depending on your individual budget).

That is the best advice I have EVER received about paying credit card debt and revolving debt PERIOD! I remember everyone’s face after he finished explaining it. We were all looking at him like he had lost his mind but the next day I started a savings account to pay off those last two damn credit cards!

Where do you get the “extra” to pay it off? You can find it after you do that budget we talked about in the last post.

Until Next Time,

Peace & Blessings...

Wednesday, April 16, 2014

Paying off Debt (Part One)...How I Did It

Since April is Financial Literacy Month I decided to make my "return" to blogging focus on finances this month. After the end of the marriage I was left with all of the collected debt. I guess someone usually ends up with the debt, right? Lucky me. It was the price I was willing to pay to get out peacefully. My credit was the better of the two so most of what we had was in my name. Once again....lucky me.

I am the average "working middle class" woman in America and am not claiming to be a financial planner. What I did was pay off all of the marriage debt, credit cards, overdue accounts, etc. in five years without receiving a pay raise in three of those years. The first thing I did was to pull everything together and realize the amount of debt I was facing. Luckily, I have always been frugal. You know, what some people call cheap.

Step One: Get a budget (and know how much money you make)

Ah, that word budget. It might be uglier than cheap, right? It is a must. You must know what you spend and you must know where you spend it. My first response to a budget was, "But, I don't have any money!" You will be shocked at how fast a dollar here and three dollars there adds up. How much have you spent in fast food, a cup of coffee and the vending machine today?

You can find a few budget guidelines online for free. This book is a great resource. I have listened to the author for years on the radio during my lunch break. He is the reason I bought my house and got out of debt. I will forever be grateful for finding his radio show. He shows you how to manage your money without changing your lifestyle. That was a big plus for me because I didn't have much left to cut back. If you have the chance to attend one of his seminars, do yourself a BIG favor and go! Most of them are free.

I added know how much money you make for a reason. You may say, "Who does not know how much they make?" I said the same until I went to a building wealth seminar and the question was asked. Only three people out of around 100 knew how much was in their paycheck. can you manage something when you have no idea how much you have to work with?

Step Two: Track Your Budget

What good is the best budget if you ignore it? Don't have the time? Well, you have a phone. Chances are it is a smart phone that you have with you all the time, right? Guess what? There's an app for that. I use the free version of this one. There are many apps that track your expenses and there is a good write up on a few of them here. There are always new apps available but bottom line is find one and use it. It takes about the same amount of time to make an entry in the app as it does to send a text. My main focus is four areas of my budget, food, gas, utilities and pet supplies. Those are my four areas that fluctuate so I try to keep a close eye on them. I use sub-groups to cheat the app a little because you can only track four "budgeting areas" in the free version of the app I use.

At the end of the year you can save a copy of your data and export it into excel to organize/manipulate it to see what you spend and where you spent it compared to your budget.

That is the beginning. A good first step. I have a few other things I have used over the years. More to come...

Until Next Time,

Peace & Blessings...

Thursday, April 3, 2014

What is Your Truth?

This an old speech and say what you want about her now but it worthy of watching. It should make you think about how you live everyday. Do you dance in the misery of others? What is your truth?