Debt Free Blog

A lot of people get Christmas bonuses at work that range from a free turkey to several thousand dollars. Unexpected income usually leads to unexpected purchases! If you know you’re going to get a bonus, plan on using that money before you get the check.

Here are some productive ideas for how to use your Christmas bonus:

• Pay off debts
• Build an emergency fund
• Start a child’s college fund
• Pay down on your mortgage
• Contribute to your Roth IRA (up to the max)

Next time you get a bonus or unexpected income, have a plan for how you will use the money. You’ll avoid the “morning after” regrets and put the money to good use!

I recently watched Maxed Out, a documentary about the dark secrets of America’s banking industry. If you’re reading this blog, then you most likely already know that debt is bad… but you probably have no idea how bad it is.

Maxed Out focuses on banks and financial institutions that lend money to people who are less than credit worthy, knowing they can’t or won’t pay their bills. These credit card companies and banks make the majority of their profits off the late charges, over the limit fees and high interest they charge to people who are behind on their payments.

The documentary uncovers the shady (and possibly illegal) practices of some of the nation’s largest banks, as they prey on the young and the poor. From giving credit cards to college kids with no income, to ruthless collection agencies that use scare tactics to get people to pay on their past due debts before putting food on the table, Maxed Out is a moving film that will have you seriously questioning our casual use of debt in this country.

Maxed Out is a moving and informative documentary that will make you think about the banking industry (and government) is a completely different way.

How many times have you woken up the day after making a big purchase and regretted it? That TV, computer, furniture or car seems a little more expensive than it did yesterday. You suddenly get a funny feeling in your stomach as you realize the credit card bill’s coming in the next few weeks.

Retailers rely on impulse purchases (trust me, I own and run online stores).They use all sorts of tactics to get you to purchase today instead of waiting and really thinking about whether it’s a good decision.

One simple decision has saved me hundreds, maybe thousands of dollars…

Never spend more than $100 on a purchase without first doing these three things… Continue reading »

There are two schools of thought when it comes to paying off your debt. One says that you should start with the account with the highest interest rate, then move to the next nighest interest rate and the next until you’ve paid everything off. The other says that you should pay off the smallest balance first, moving to the next smallest, etc. Which is the best?

Continue reading »

Dave Ramsey is a speaker, trainer and consultant on debt and financial planning. After making it big in real estate, his debt got the best of him. He went bankrupt after the bank called in some large short-term notes and he vowed never to go into debt again.

He has a popular radio show and several bestselling books and travels around the country giving speeches and seminars teaching people how to get out of debt.

We just picked up tickets to his Total Money Makeover event in Atlanta September 13. There are also events coming up in Birmingham, Tulsa, Houston, and more. If you can’t make it to a live event, check out his radio show which you can listen to live on the Internet.

You should know my stance on using credit cards for purchases (don’t!) but debit cards and checks can also be bad. They just don’t feel the same as using cold, hard cash. When you use real money, you tend to spend less of it. It hurts more, and you’re very conscious of how much you have (it’s in your hand).

One thing we’ve done as a family is set monthly personal spending budgets, and we get our money in cash at the first of the month. $100 for my wife and I, and $25 each for the kids. The money can be used for anything… eating out, buying something, going to the movies, anything.

We started with a very small amount so that we could see how fast we spent. We’ll increase the amount gradually, as we learn how to control our spending and pay off our credit cards.

The first month of the experiment, I remember asking my wife on the 5th how much money she had left for the month. None! As the months have gone by (we’re on month 3 now) we’ve gotten much better at managing our “extra” cash and as a result, we’re more conscious of other purchases and their financial impact as well.

Give it a try, and I guarantee it will make you think about your spending habits more (and hopefully cause you to spend less).

Mint is a free online financial management application that lets you track your different financial accounts such as checking, savings, credit card, mortgage and investment accounts.

Mint allows you to see your current financial snapshot, your “net worth” at a glance. Mint automatically categorizes purchases, and remembers your changes. If you re-categorize a particular store, it will give you the option to also change past transactions and set a new default.

Mint is totally free - they make money by selling advertising. They have all your financial data, so they sell advertising to credit card companies, banks, and other complimentary services. They don’t reveal any of your personal financial information, but do match up certain offers with your finances. For instance, if you’re currently paying 10% interest on a credit card, Mint might suggest a 4.9% offer from another credit card company. Or if you’ve got a standard saving’s account at your bank, Mint may suggest a high-interest savings account such as ING.

I have been using Mint as more or less a reporting tool for several months. It keeps getting better and better at categorizing our expenses, and it’s really amazing to look at where we’re spending our money each month.

Mint is free, so give it a try and see what you think.

It was a sunny Fourth of July, and we loaded up to head to the lake. Me, my wife, and our two kids got in my wife’s car and she started to back out of the garage. I noticed my truck in the rear view mirror, and as it got closer and closer I called my wife’s name in a tone as to say, “Hey, see that?” She apparently didn’t.

My truck got closer and I screamed “Stop!” but it was too late. My wife backed her Honda Pilot right into my Chevrolet Avalanche. And put big dents in both of them.

After a few minutes of cooling off we proceeded to the lake and had a great Fourth. On Saturday, we called the insurance company and realized that we had to pay two $500 deductibles, one for each vehicle.

It cost us $1000 for a simple accident.

It sucks. It makes me furious, because I work so hard for my money and my wife does too. $1000 is a lot of money for us, but fortunately we have it.

I would say I can’t imagine what it would be like without an emergency fund that would cover an accident or emergency like this, but I do know exactly what it’s like. For so long, we lived paycheck to paycheck. Every little emergency seemed like a red-alert crisis. The only options we had were borrow from family/friends or put it on a credit card.

Neither of those options sound good. They both lead to MORE stress, in an already stressful situation.

Build up an emergency fund of $500 - $1,000 for those inevitable small emergencies that are bound to occur. Having the money to cover it won’t make it hurt any less, but it will lessen the emotional impact and give you peace of mind to know that at least financially it’s taken care of.

Emergencies happen. Below are just some of the small emergencies that can really create a problem for many of us:

• Wreck or Mechanical Problem with your Car or Truck
• Emergency room visit
• Unexpected home repairs
• Unexpected tax bill

Have you ever noticed that when you don’t have any money, everything is an emergency? If your family household income is around $30,000 or less, put away at least $500. If your household income is more than $30,000, put away at least $1,000. Before you get out of debt, and before you buy anything else that’s not a necessity (not including bills of course).

Prepare yourself so when something happens (and it will) you’ll at least have the peace of mind that it’s paid for.

An article published by CNN says that stress is bad for your health. According to the article, people with high levels of debt experience more severe health problems such as anxiety, ulcers and heart attacks than those without debt.

The higher stress of having debt also made it harder to concentrate and accomplish goals, the study said. These findings are not really hard to believe, but should be a wake-up call to us Americans. Our fast-paced lifestyle of living above our means is affecting more than our bank accounts.

Do you know how much that new TV or bedroom suit is going to cost you by the time you pay it off? 

Millions of Americans borrow money every year, and I’d estimate the vast majority of them don’t understand how compounded interest works. Interest can be a powerful tool to earn money (as with investments) or a dangerous financial handicap.

So how much is that $1,000 purchase going to cost you? Continue reading »