I never thought a person could enable himself or herself. It is possible though. I did it for many years. Even though I carried around a credit card with a balance of a few thousand dollars every year, I never saw myself as being in debt. (In case you didn't read yesterday's post, this is a direct example of being in denial)
The reason I didn't consider it debt was because each year in January I would do my taxes, get my refund, and pay off all of that debt. In my mind, it was not debt because it would be paid off before February 1st each year.
Then came the year when there was something more pressing than paying off my debt. I don't remember what it was. It may have been the bills from my toddler's birth. I hadn't saved for that like I did for this baby and they caught us off guard. (Doesn't insurance pay for all of that, ha ha.) Suddenly my refund did not go toward my debt. Do you think I changed my ways? Nope. It was a habit now. I had to use those cards every month because we needed groceries etc. In all honesty we could have done without a lot of the "groceries". When you shop at Wal-mart for everything a video game is considered "groceries".
It took a long time for me to realize that the tax refund had actually been enabling me. As well as costing me a lot of extra money. Think about this. I was paying around 10% interest each month on the card, so the government was collecting interest on my money all year long while they "held" it for me. On top of that, I was paying back the credit card companies for the items I had purchased, but I was also paying for being allowed to "hold" their money for a year.
How stupid! What I should have been doing was changing my W4, and holding my own money and making my own interest. Hindsight is 20/20 I guess.
Even after realizing all of this it has taken until recently for me to actually change my W4. This is going to do a lot for me and for my debt repayment efforts. I will be able to pay off my debt sooner, and I will not be paying as much in interest while "waiting" all year to get my own money back.
It is astounding how many people use this for savings. It truly is the worst savings account in the world. But, if you need to be enabled it is just perfect. Things will have to change though because in the past we have also used it to pay our house taxes at the beginning of each year. We must now create a savings plan just for that, which I will talk more about tomorrow.
So what do you think? A lot of people realize they are getting no interest and giving the government in essence an interest free loan, but they like it this way. What do you do?
Sunday, June 22, 2008
Saturday, June 21, 2008
The Debt/Weight Loss Connection
I remember a long time ago an article I read. Basically it said that many people with debt had weight issues as well. I don’t think it was trying to say that if you aren’t good with money that you aren’t good with food. I think it was more along the lines of you are in debt and are turning to food in response. However, I find it funny that I see these things linked up quite often.
Take Total Money Makeover for example. Dave Ramsey spends an entire chapter comparing someone trying to get out of debt and someone trying to lose weight. It really is striking how similar the two processes are.
Denial. I think this is the chapter in which Ramsey first talks about the comparison. It really is true. Weight denial usually comes in the form of, “Well, it is only 3 pounds. I just won’t gain any more.” Debt denial is very similar. “Well, just one more outfit charged to my card won’t hurt.” You have to get passed the denial in both situations before you can do anything. That small amount of denial about your situation just builds on itself, until the pounds are up to 30 and the debt is thirty grand.
Obstacles. The next thing is getting to know your obstacles. For weight loss, if you keep buying cookies for “your kids”, you know you won’t be able to resist and you will blow your diet. (I use this example because…. Fine, I bought cookies this week!) Think of the obstacles with debt. If you keep your credit cards around when you are not 100% sure you can live without them you are going to use them. Identifying the things that will cause you to fail is key because what you don’t know WILL hurt you.
As a side note, this was my major problem to stopping debt spending. I really believed we could not make it a month without some help from my credit card. It took me cutting them up to realize that we could. Try it!
Planning. With Total Money Makeover you use baby steps and a debt snowball to fix your finances. For weight loss, you obviously must cut calories and then start exercising. I like to think about snacks now as how I am “spending” my calories for that day. If I go over budget, so does my waistline!! Exercising is kind of like saving. You are in essence banking calories that can be used later. No exercise, no room for extra spending. The exercise in your finances is working out those debts. Until they are gone you have no room for extra spending with real money either.
Goals. Financial goals and weight loss goals are easy to write down and track. However your goals have to have a deeper meaning. The end result should actually be a healthier lifestyle physically and financially. It takes commitment and putting what works in practice consistently. If you stop taking care of yourself or your finances you are bound to wind up right back where you started. That is the key.
I have started using some of the TMM ideas toward getting in shape… if you can’t already tell. It helps me feel like I am doing something while trying to get my finances in order. One thing that has finally become clear to me is the final step I talked about. This is a lifestyle change. It is not just a process you go through once and you are done. Weight loss for it to be permanent must work the same way.
Take Total Money Makeover for example. Dave Ramsey spends an entire chapter comparing someone trying to get out of debt and someone trying to lose weight. It really is striking how similar the two processes are.
Denial. I think this is the chapter in which Ramsey first talks about the comparison. It really is true. Weight denial usually comes in the form of, “Well, it is only 3 pounds. I just won’t gain any more.” Debt denial is very similar. “Well, just one more outfit charged to my card won’t hurt.” You have to get passed the denial in both situations before you can do anything. That small amount of denial about your situation just builds on itself, until the pounds are up to 30 and the debt is thirty grand.
Obstacles. The next thing is getting to know your obstacles. For weight loss, if you keep buying cookies for “your kids”, you know you won’t be able to resist and you will blow your diet. (I use this example because…. Fine, I bought cookies this week!) Think of the obstacles with debt. If you keep your credit cards around when you are not 100% sure you can live without them you are going to use them. Identifying the things that will cause you to fail is key because what you don’t know WILL hurt you.
As a side note, this was my major problem to stopping debt spending. I really believed we could not make it a month without some help from my credit card. It took me cutting them up to realize that we could. Try it!
Planning. With Total Money Makeover you use baby steps and a debt snowball to fix your finances. For weight loss, you obviously must cut calories and then start exercising. I like to think about snacks now as how I am “spending” my calories for that day. If I go over budget, so does my waistline!! Exercising is kind of like saving. You are in essence banking calories that can be used later. No exercise, no room for extra spending. The exercise in your finances is working out those debts. Until they are gone you have no room for extra spending with real money either.
Goals. Financial goals and weight loss goals are easy to write down and track. However your goals have to have a deeper meaning. The end result should actually be a healthier lifestyle physically and financially. It takes commitment and putting what works in practice consistently. If you stop taking care of yourself or your finances you are bound to wind up right back where you started. That is the key.
I have started using some of the TMM ideas toward getting in shape… if you can’t already tell. It helps me feel like I am doing something while trying to get my finances in order. One thing that has finally become clear to me is the final step I talked about. This is a lifestyle change. It is not just a process you go through once and you are done. Weight loss for it to be permanent must work the same way.
Friday, June 20, 2008
Thanks Reader Shelby T.!!!
Recently, in a comment, Shelby asked how I was doing with my debt repayment. I knew it was lower, but I thought perhaps I had made a mistake in my calculations because it was thousands of dollars lower than I thought it should be.
Well, I decided to figure it up. I subscribed to NetworthIQ last year so I had the exact figures from August of 2007. Since then I have paid off around $6000 of debt! Maybe that is not a lot for a whole year, but considering that was the exact time when I stopped my debt snowball and started saving for the baby I think it is quite good!
On top of that my net worth has improved. At the time I last checked it was -$21,000 it is now -$12000. So it has increased $9000 even though it is still in the negative. I think that is really awesome for one year. That of course comes from retirement savings and the savings that were to go toward the hospital bills.
Anyway, this gave me a nice little pick me up. So, thanks for your question Shelby!!
Well, I decided to figure it up. I subscribed to NetworthIQ last year so I had the exact figures from August of 2007. Since then I have paid off around $6000 of debt! Maybe that is not a lot for a whole year, but considering that was the exact time when I stopped my debt snowball and started saving for the baby I think it is quite good!
On top of that my net worth has improved. At the time I last checked it was -$21,000 it is now -$12000. So it has increased $9000 even though it is still in the negative. I think that is really awesome for one year. That of course comes from retirement savings and the savings that were to go toward the hospital bills.
Anyway, this gave me a nice little pick me up. So, thanks for your question Shelby!!
Gasoline Experiment
Lately I have been experimenting with changing up my driving habits a little. I haven’t tried to do a full blown experiment, but today I decided to try just that. After my trip to work and back, I realized my gas needle, which usually changes by about an eighth of a tank, had hardly moved at all.
So I filled up my tank and I am going to try all of my little tricks out for the next week. Here are my plans, and also some cautions if you plan to try any of this.
Slower Acceleration
Pretty self explanatory. When coming from a dead stop I will accelerate more slowly. (Just in case you did need an explanation!)
Hills
There are not a lot of hills in my area, but today I noticed two on my way home. I took my foot off the gas about 25 yards before the hill and coasted down. It added 5 mpg to my speed and I was able to get up the next hill to the stop sign without adding any more gas.
Coasting
I have started coasting as soon as I see lights turn to amber, before curves, and up to stop signs (and obviously on hills as prev. mentioned.). In the past, my habit was to stay on the gas and brake hard at the stop. This caused me to use more gas and lose all that energy when I suddenly stopped. This new way means that I stop using gas at the beginning of the coast, and lose less energy when I have to stop.
Speed Limit- Speed Reduction
I am doing the speed limit on all streets now and if I get behind a slow car, I STAY behind them. This is probably going to be the hardest thing for me because I am really used to going 5-10 MPH over the posted limit… I know tsk, tsk.
I am also going to reduce my speed on the highway by 10 MPH. Actually it will be even more since I was going closer to 80 and will tune it down to 60 from now on. I recently read that you lose 5 MPG when you go 10 MPH over 55, and 5 MPG more for each 10 over that. If this is true, than this is where I will pick up the most extra mileage.
Cautions
I have already realized I am going to have to keep a sharp eye out for other motorists. They will pass you because you are not going fast enough and pull out in front of you if they can make it. Keep an eye out for these folks.
Be cautious when coasting. I took a curve today after coasting to it and still needed to apply the brakes a bit more than I expected. When you coast it is a good idea to keep your foot on the brake NOT the accelerator because if you are startled you may romp down on the wrong pedal.
Revelations
So far I found it really amazing how much speed can be picked up coasting on hills. I knew I would pick up some speed, but I didn’t expect it to get me up the next hill.
I also found out that I can start coasting about 100 yards from my street, apply the brakes to turn, and still make it to my house without adding any gas. I still had to use the brakes to turn into the drive and I am about the 8th house down on my street!!
So I filled up my tank and I am going to try all of my little tricks out for the next week. Here are my plans, and also some cautions if you plan to try any of this.
Slower Acceleration
Pretty self explanatory. When coming from a dead stop I will accelerate more slowly. (Just in case you did need an explanation!)
Hills
There are not a lot of hills in my area, but today I noticed two on my way home. I took my foot off the gas about 25 yards before the hill and coasted down. It added 5 mpg to my speed and I was able to get up the next hill to the stop sign without adding any more gas.
Coasting
I have started coasting as soon as I see lights turn to amber, before curves, and up to stop signs (and obviously on hills as prev. mentioned.). In the past, my habit was to stay on the gas and brake hard at the stop. This caused me to use more gas and lose all that energy when I suddenly stopped. This new way means that I stop using gas at the beginning of the coast, and lose less energy when I have to stop.
Speed Limit- Speed Reduction
I am doing the speed limit on all streets now and if I get behind a slow car, I STAY behind them. This is probably going to be the hardest thing for me because I am really used to going 5-10 MPH over the posted limit… I know tsk, tsk.
I am also going to reduce my speed on the highway by 10 MPH. Actually it will be even more since I was going closer to 80 and will tune it down to 60 from now on. I recently read that you lose 5 MPG when you go 10 MPH over 55, and 5 MPG more for each 10 over that. If this is true, than this is where I will pick up the most extra mileage.
Cautions
I have already realized I am going to have to keep a sharp eye out for other motorists. They will pass you because you are not going fast enough and pull out in front of you if they can make it. Keep an eye out for these folks.
Be cautious when coasting. I took a curve today after coasting to it and still needed to apply the brakes a bit more than I expected. When you coast it is a good idea to keep your foot on the brake NOT the accelerator because if you are startled you may romp down on the wrong pedal.
Revelations
So far I found it really amazing how much speed can be picked up coasting on hills. I knew I would pick up some speed, but I didn’t expect it to get me up the next hill.
I also found out that I can start coasting about 100 yards from my street, apply the brakes to turn, and still make it to my house without adding any gas. I still had to use the brakes to turn into the drive and I am about the 8th house down on my street!!
Thursday, June 19, 2008
The Result of My Crisis Plan... Debt Free Baby
To discourage anyone from starting a Blogger blog I am leaving this picture like it is. Blogger is stupid and this is how my right side up picture came out.BUT.... this post is about the fact that THIS is a debt free baby!!! Our plan gave us the money to be able to pay our bills in full, so no extra debt due to baby!! Yea!!
It is also to brag on my beautiful baby!!
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