Beating Broke

What does being “debt responsible” mean, and how do you do it?

Being debt responsible means taking responsibility for your debt and it’s payoff without making excuses or trying to find easy ways out through debt write-off, negotiation with creditors, or bankruptcy.  In a nutshell, if you signed on the dotted line, you must pay it off.

Why must you be debt responsible?  The most commonly referenced reason that you must be debt responsible is that, by signing the note, you were guaranteeing that the debt would be paid.  You also accepted the conditions of repayment.  Some of those conditions, such as interest rate, are somewhat negotiable even after you sign the note, but not the amount of the actual debt.  The most important reason for being debt responsible (to me atleast), is the moral requirement.  Morally, whether you look at it religiously or secularly, you have a responsiblity to repay the debt.   Again, it goes back to your acceptance of the debt and it’s conditions.  Morally, you have a responsibility to uphold your part of the bargain.

Luckily, for most of us, it’s extremely easy to be debt responsible.  We just have to pay our bills each month.  But what happens when an emergency strikes and you can no longer pay your bills?  That depends.  Can you really not pay your bills, or can you not pay your bills because you have to go out to Red Lobster next Thursday?  If you really, truly cannot pay your bills, you have what is one of the only exceptions to any of the above rules.  You are free to negotiate as much as possible to reduce your payments, delay your payments, and even reduce or eliminate your interest payments.  Only in the most extreme cases should you try and reduce the debt or eliminate the debt.

Being debt responsible isn’t always fun.  (Who am I trying to kid?  It’s never fun.)  But, it’s the right thing to do, not just morally, but for your personal finance as well.

J.D. at Get Rich Slowly has a great review up of a new exhibit at the Epcot center at Disney World, Orlando.   He and his wife went down to Orlando and gave “The Great Piggy Bank Adventure” a test drive.

The Great Piggy Bank Adventure features five stations, each of which allows kids to play on their own, or work as a team with other kids or adults. (We saw lots of parents and grandparents joining the fun.)

It’s good to see some of the bigger entertainment names (like Disney) get involved in smarter finances learning.  Sure, if they reach enough people, they might end up with fewer visitors, but they also realize that they could also end up with a bunch of repeat visitors who have budgetted and saved for their trip and have no guilt in spending every dime they came with.  I’m not sure about you, but I’d rather have a customer who isn’t afraid to spend their money.

I’ve been a big proponent of financial education at an early age, and this is a good step in the right direction.  It isn’t a cure by any means, but it is a very good step.

You can plan an online version of The Great Piggy Bank Adventure and read the T. Rowe Price page with details.

I want to share a story with you about work. About working for what you want, so that you can not only get what you want, but pay for it with cash.
My roommate in college (one of many) graduated college with no college loans. Not because he had scholarships, but because he paid for it with cash. Not only that, but he had a nice pickup and an even nicer classic car. It was a very nice drop-top convertible with a deep burgundy metal flake paint job. Every summer, he did a little bit of work on it until it was painstakingly nice.
One day, while we were out and about enjoying the sun with the top down, we happened to stop somewhere. It’s been a while ago, so I don’t exactly remember where. While we were there, some older guys (I’m guessing 40-50ish) came over to look at the car.
After asking the normal courtesy questions, like what kind of motor was in it and if the seats were original, one of the guys asked the wrong question.  “That your Daddy’s Car?”

My roommate isn’t exactly a shy person, but even he will admit that, at first, he was taken aback by the question. Despite our age (21ish), he had worked hard to put that car in the condition that it was in.  It was his car.  Not his daddy’s, his.  After he regained his senses, he made sure that the man who asked the question knew that it was his car. That he had done the work and he had paid for it.  The guy laughed his question off like it was a joke, although it was obvious that he hadn’t meant it jokingly.

Like most stories, this one has a moral at the end.  Or, at least, I’m giving it one.  Giving us all something to learn from it.  No matter how hard you work for something, there will always be that guy who will assume that you got it handed to you.  Nice car?  Must be your daddy’s.  Nice house?  Inheritance.  Or more loan that it’s worth.  Or you make a lot of money.  Or.  Or. Or.  The point is, they will find a way to assume that you got whatever it is by some other method than actual hard work.  And, like my roommate, you might feel that you need to set them straight.  Whether you do or not, is irrelevant.  What you need to take from this story is that when you set those goals, and you work hard to reach them, you must expect that there will be few people who will believe that you got it by working for it.  Some, you will be able to set straight.  Others will continue to think it no matter how many times you tell them.  Being disciplined and hard working requires a thicker skin.  You’ve got to be able to ignore the people who won’t believe.  They believe that anyone who has nice things got it the same way the majority of other people do.  Credit.  But you know better.  You got you’re things the Beating Broke Way!

Photo Credit: kkiser

If you read this blog through a feed reader, or just haven’t visited in the last week or so, you likely haven’t seen the new banner that I’ve put up on the right side of the site.  It’s a lovely little banner (designed by me) for a White Paper / Report that I put together.  The subject, fittingly, is Your Credit Score.  In it, I write about what a credit score is, how it is used, and the steps that you can take to improve your credit score.

My hope is that the report will be help people learn what the correct usage of a credit score are, and what the benefits are of having a good credit score.  Which is why I’ve made it a FREE report.  All you have to do is sign up for the Beating Broke newsletter.

What is the newsletter?  Well, it’s a bit in the fledgling state, but the idea is that you will get the occasional update about the site with an article or two as well as some articles and information that won’t appear here on the blog.  I promise to not fill up your email inbox with the newsletter.  In fact, at the moment, I only plan on sending it out once a month at most.  More likely, bi-monthly.

The report is well worth it if you ask me.  I’m a bit biased since I wrote it, but I really do think it could be a very valuable resource for someone who doesn’t know much about credit scores.

Also, I want the report to get into as many hands as possible, so if you want a copy without signing up for the newsletter, just send me a note with the contact form and I’ll send you a copy.

No matter where you go, the advice of those that already do to those that want to do is almost always, without fail, just do it.  Want to be a writer?  Forget the courses, workshops, and conferences.  Just write.  Want to be a photographer?  Just go out and take some pictures.  Want to be healthy and fit?  Yes, Nike said it best.  Just do it.

The mantra holds true for personal finance as well.  Want to retire rich?  You’ll need to save quite a bit up.  Don’t hem and haw about how much you can afford or when, just save it.  Want to become debt free?  Just pay it off.  Whatever it is in your personal finance life that needs work, you need to recognize that it’s not going to improve itself.  You’ll need to work on it.  And whatever it is, you need to also recognize that if you don’t just do it, you’ll never get it done.  Do your research, make a decision.  Once you’ve made a decision, follow up with it as quickly as possible and execute it even quicker.  100% of plans fail that don’t get acted upon.

Recently, I was asked to participate in a blogger round-table/conference call.  The call was hosted by ING’s investing and insurance division, and was arranged and moderated by Jennifer Jones of JA Jones Consulting.

As part of the round-table, I and several other bloggers were asked to play with a few new tools/calculators and to give feedback on those.  While I did give them some feedback, I have had a bit more time to digest the other blogger’s comments as well as the responses of the reps at ING.

The first tool was a tool called CompareMe (INGCompareMe.com).  It’s a fun tool where you give it some anonymous data about your finances and lifestyle and it gives you a report that compares you with people who have similar lifestyles, income and living situations.   The downsides to the tool are that there is no way to save your data to go back and edit or tweak it later when your situation changes or you just want to play a game of what if.  There is a potential, if the function of the tool were to be combined with the ability to save and some social media functionality (A facebook App “Where I rank” perhaps?  Or a twitter account that tweets random stats.)  that it could gain traction as much more than a novelty comparison tool.   According to the reps at ING, the tool was initially seeded with about 5000 record sets, but has now reached several billion.  Although, it would seem that you’re only being compared to the few hundred or thousand that are relatively similar in data sets.

The second tool we were asked to give feedback on was a tool they’ve called “Your Number” (INGYourNumber.com).  It begins with a very simple form that asks for some simple info like your age, income, retirement age, and retirement length.  The tool takes that information and gives you back “Your Number”.  Your number is the amount you need to have in your retirement accounts to live the retirement you indicated you wanted to live in the preceding form.

As a simple tool, this one is sufficient, but has acres and acres of room for improvement.  One of the most commented issues was, in fact, the tools simplicity.  The input is only 5 or 6 fields.  There is room for all kinds of situational changes and variables that make the tool nearly useless for a percentage of the people using it.  I also thought that it would be more useful if it gave you, instead of a grand total, a monthly total.  In some cases, if a person has a pension or wants to use Social Insecurity for part of retirement, they likely won’t know what the grand total of that benefit is and merely have a monthly number.  Having a monthly number in the results of the tool would allow for deducting any money from a pension or from Social Insecurity and give a much more accurate idea of how much really needed to be saved.

I think that most of us agreed that one of the greatest improvements that they could make with either of these tools would be to somehow tie them together so that you could compare the results of the Your Number tool in the CompareMe tool and so that you could also use the information in the CompareMe tool to help calculate the result for Your Number.

I Will Teach You to be Rich
By: Ramit Sethi

I’ve been a reader of Ramit’s blog (iwillteachyoutoberich.com) for several years now, so when I heard that he was writing a book (and publishing one) I knew it would have to find a way onto my list of books to read. Which it did, and I did read it.

If you aren’t familiar with Ramit’s writing style, it’s some what irreverent. Light and joking, it’s as if he were talking to you over a beer. Which, of course, works pretty well for a book that is meant to be read by a twenty-something single person. There’s a reason it’s on the New York Times Bestseller list!

Ramit takes you through a 9 chapter, 6 week journey of personal finance.  He covers everything from credit cards, savings and checkings, investing, budgeting, and saving for goals.  For the person who finds themselves fresh out of high school or college and overwhelmed by the amount of credit offers and spending temptations, this book is a must read.  Ramit did a very good job of pointing out and explaining some of the very common pitfalls of personal finance, and he does it in a way that makes sense.

There were only a few things that I found I disagreed with.  The biggest of these was what he calls Conscious spending.  As he describes it, it is the act of consciously setting limits and goals for spending so that you don’t overspend.  Where I disagree is when he says that it isn’t a budget.  It certainly sounds like one to me.  While it may not be a budget that accounts for every penny and every category, it still is a budget.  Maybe I’m giving budgeting too broad of a description, but to me any ordered system that sets limits and goals for spending and saving is a budget.  What conscious spending is, is a very high level budget.

Anyone who has read this site for very long will know that I am not a fan of credit cards.  I’m not really a fan of debt at all, but credit cards (to me) are one of the worst offenders.  So, it was with some trepidation that I began the chapter on credit cards.  It was somewhat refreshing to have someone actually explain how they use cards, and why.  Because of my stance on credit cards, however, I couldn’t help but disagree with several points.

Overall, this is a spectacular book for it’s intended audience.  Seasoned personal finance students will surely find a few nuggets, but the rest is likely review.  If you know anyone that is just stepping out on their own personal finance journey, I suggest you get them this book.  Ramit does an excellent job of laying out a wonderful foundation for successful personal finance management.  And, yes, it may even teach you to be rich.

You can pick “I will teach you to be rich” up at Amazon, or just about any corner bookstore. As of this writing, the book is less than $11 at Amazon, which is likely better than you’ll see it anywhere else.

I’m a little disappointed in Dave Ramsey’s “big announcement”.  Not because I don’t think it will be an excellent event, I do.  But because I won’t be able to attend any of the locations that will be hosting the event and there isn’t currently a way to watch the event online or after the fact.  I’ve had a little birdie tell me that it might be available on the Fox Business network that night, but that doesn’t help me either.  If you’re streaming an event of this magnitude to over 5000 event locations, what’s another live feed on the website for those of us that live too far from any hosting sites?

The event itself should be quite amazing.  I just wish I could attend.  If you want to check to see if there is a location near you that will be hosting the event, you can click on the attend button on townhallforhope.com and do a quick search.  It really should be something to see.

This week’s Carnival of Personal Finance is up at Mighty Bargain Hunter.  As usual, it’s a pretty good one.  There are plenty of good articles to read, including one from Beating Broke!

Go check it out!

ChristianPF posted a very thought provoking article today.  In it, he talks about how spending money wisely is a life skill.  The choices that we make in spending our money are the root of how we live our lives and can bleed through into the businesses that we run or work for.  Basically, the way that you spend money is a very important.

I think I would take it one further.  Not only is the way that you spend your money a very important skill, but, as the title of this article states, the entirety of your personal finance management is a life skill.

Schools all around the world concern themselves with teaching children life skills.  Skills like writing.  Reading.  Wood Working.  Mathematics.  Science.  And even Cooking (0ne of my favorites).  Perhaps personal finance isn’t as important as things like mathematics, writing and reading (the three Rs), but I would argue that it’s just as important (or more so) than the rest.

Improper management of your personal finances can lead to some pretty dire circumstances in your life.  You can find yourself falling into a trap of revolving debt and upside-down mortgages.  Too easily, you can find yourself making the choice between ramen and gas to go to work.  And yet, people continue to put personal finances aside as something that isn’t all that important.

Over the last decade, I’ve spent my time learning many of the tenets of personal finance management.  Even with the knowledge I had gained, it was a very difficult trip to take.  I started as close to the bottom as I cared to get.  I’m still a long ways from the top, but I’m getting there.  And most of that is owed to learning to manage personal finances properly.

Take the time today to learn something about taking care of your finances.  Teach it to your children.  Teach it to your friends.  If we all learn a little bit more each day, week, and month, we can turn our situations around and help more people.  The more people we help with this, the less likely that our economy will ever find itself in this situation again.