Beating Broke

Personal Finance from the Broke Perspective

Need Money Quick? Have a Flash Savings Challenge

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The last few months have not been kind to my family.  As Dave Ramsey says, “Murphy came to visit.”  Within the last few months, I have had several medical tests run, my computer broke so I had to buy a new one, my husband’s pay was docked $750 for two months in a row because his employer didn’t take out enough taxes, and my husband had to pay $1,700 out of pocket for a conference for work and we are waiting for reimbursement.

IOU Piggy BankBecause we were trying to pay off as much as possible as quickly as possible on our debt, we had very little in emergency savings (only about $1,000).  All of our unexpected expenses cost much more than that, so we not only used most of our emergency fund, we also added to our credit card debt.

Because we had paid down our credit card debt for 10 straight months, having to add to it for the last two months was difficult.  Even though we didn’t come close to erasing all of our progress from the last year of gazelle intensity, we definitely knew we were moving in the wrong direction.

Righting Our Situation:  A Flash Savings Challenge

My natural urge, now that everything has settled down, was to once again try to throw as much on debt as possible.  While it might have made me feel better in the short term, I realize that the next time Murphy comes to visit (and I know he’ll be back some time), we would end up in the same situation.

Instead, my husband and I decided to focus on growing our emergency fund, and quickly, before hitting the debt hard again.

Paying the minimum on our debt for the next few months so we can grow our emergency fund is almost as difficult as watching our credit card balance increase the last two months, but we both know a healthy emergency fund is necessary.  Since I am self-employed and bring in 1/3 to 1/2 of our income and work can sometimes be sporadic, we decided not to follow Dave Ramsey’s advice of a $1,000 emergency fund (because clearly that was not enough last time); instead we are aiming for $5,000.

To get started, we challenged ourselves to have $3,000 in our emergency fund by December 9th.  We started with $611 in the emergency fund, so that meant we had to come up with $2,389 in 4 weeks.

How We Are Earning $2,389 Extra in 4 Weeks

We are only one week into the challenge, but here is what we have earned so far:

  • Sold my 8 year old breast pump: $60 (Yes, it has been sitting in the basement for 7 years.  Why didn’t I sell sooner?!)
  • Sold 2 window guards to protect kids from falling:  $40
  • Listed my kids outgrown clothes on eBay:  $124 so far, but the auctions won’t end for 2 more days, so I imagine it will be more
  • 3 unexpected jobs I got as a freelancer:  $64.67
  • Turned in our change in a jar:  $62.67
  • Returned unopened vitamins I didn’t need:  $32
  • Redeemed 10,000 Swagbucks for PayPal cash:  $100

Our total so far, one week in is $483.34

Over the next few weeks, we intend to do more things to raise the additional money:

  • Put my husband’s reimbursement check in savings
  • Cash out reward points from our credit card and use them as a credit card payment.  Put the same amount in our savings since we won’t have to pay that money on the credit card
  • Put more stuff on Craigslist and eBay (We have kids’ clothes, toys, and equipment to list as well as some of my husband’s tools he hasn’t used for years.)

Why  a Flash Savings Challenge Is Working for Us

I have known that I have a lot of stuff to sell around the house, but I just never got to it.  Now, because we have set a short goal of just 4 weeks and also an ambitious goal of over $2,300 to raise, I am motivated.  Yes, listing all of this stuff is time consuming, but it is nice to get some money in the emergency fund to make us feel more secure, and I also like getting rid of our “stuff”.

If you have extra stuff around the house, especially toys and holiday clothes, now is the perfect time to sell it and make some cash.

Have you had a flash savings challenge like this?  What were your results?

img credit:Images_of_Money, on Flickr

Killing Debt? Have a Realistic Budget

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Do you have debt?  Does it drive you crazy?  Do you stay awake at night wondering how to pay it all off?  Does it feel like you will never pay it off?  Do you argue with your spouse about your bills?

While debt can at times be a useful tool (student loans, for example), when it comes time to pay it back, debt can be a heavy burden no matter if it is good debt or bad debt.  Debt can cause marriage problems and even affect your health.

If you have decided enough is enough, and you want to be free of debt once and for all, you might be tempted to slash your spending and put all of your extra money on your debt.  Be careful, though, because this type of plan can lead to a quick crash and burn much like a person on a crash diet will only follow the plan for a few weeks before giving up.

Before you even begin to put extra money on your debt, you must first create a realistic budget.

What Is a Realistic Budget?

A realistic budget is one in which ALL of your expenses are taken into account.  Perhaps you pay your car insurance every 6 months, and it is $400.  If you want to create a barebones budget so you can pay off debt, perhaps you don’t consider this payment, which can be a mistake.  When the car insurance payment is due, where is the money to pay it?

We have been paying down our debt aggressively, and we made the mistake of not having a realistic budget.  We did have a $1,000 emergency fund, but because so much of our extra money was going toward debt repayment, we continually hit months where we had expenses such as the semi-annual car insurance payment and no cash to pay for it.  We would rob the emergency fund to pay it, and then we would have to stop our extra debt repayment for awhile to build up the emergency fund.  This cycle creates its own stress.

A Realistic Budget May Mean Hard Sacrifices

When you add up all of the payments you have to make in a year that don’t come in regular monthly intervals, you may be surprised.  There is car insurance, house insurance, license plate tabs, vet bills if you have animals, car repairs and maintenance, children’s athletics, and clothing for the family to name a few.  Add up how much you spend on these, and you probably easily have a total in the thousands.

That is thousands of dollars that are unaccounted for in your budget.

Almost a year into our debt repayment, we finally made a realistic budget.  We were shocked to see that when we set aside money each month for a portion of our annual or semi-annual payments (like $67 for our semi-annual car insurance payment), we didn’t have enough income to cover our realistic expenses.  As a result, we had to make some hard sacrifices such as cutting cable completely and pulling our daughter out of her expensive preschool.  These sacrifices weren’t easy, but making them did relieve some stress.  Now we no longer have ups and downs in our money flow.  We set the money aside, and when the bill is due, the money is there to pay it.

We may not be able to put as much on our debt every month, but we have a set amount for repayment above the minimum payment, and any extra money that comes in also gets put on debt.

Creating a realistic budget can help you avoid the stress of not having enough money certain months to pay all of your bills when semi-annual and annual payments are due.  However, you will feel more in control of your money, which can create a positive cycle.  The more in control of your money you are, usually the more money you find to pay on your debt.

What irregular expenses give you financial difficulties?

Take an Off Season Fall Vacation and Save Big

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The summer is rapidly drawing to a close, and you may think that your summer vacation window is closing.  However, if you are looking to take a trip on the cheap, now is the perfect time to take a late summer vacation and save some serious money.

For many destinations, the summer is the top vacation season.  Families pack up and take road trips to a variety of locations.  Once school begins, tourism drops off significantly.  In fact, “The Travel Industry Association says that 38 percent of trips are taken during the summer; the number drops sharply to 23 percent in fall” (MSNBC.com).

You can take advantage of this drop off by scoring better rates and benefiting from thinning crowds.  Here are some trips you may want to consider:

Take a trip to the beach—in September.  This isn’t possible for everyone, but if you don’t yet have children or you home-school, September may be the perfect time to hit the beach.  It is still warm, but the crowds have left and you benefit from discounted rates.  Great destinations include beaches on the coast of North Carolina or even Key West, where the prime tourist season doesn’t ramp up until November and December.

Visit Mickey—Take a trip to Disneyland.  Disneyland can be very expensive, but if you plan a trip in the fall, you will benefit from reduced rates and shorter to no lines for rides.  The trade off is that the park closes earlier and that there may not be as many shows being performed.  However, I will take that trade off if it means I will save a few hundred dollars on accommodations and will save time not waiting in line!

family vacation camping

Take a trip to the big city—Cities also experience a drop in tourism after the crisp fall weather sets in.  While New York City, Chicago and Miami may be prohibitively expensive in the summer months, hotels often discount their rates in the fall, making a trip to the city a bit more affordable.  Most of the big city locales, regardless of location around the country, still have relatively comfortable weather.  In Chicago and New York City, you don’t generally have to worry about biting cold weather and snow at least until November, leaving you the entire fall to enjoy.

Go big guns and visit Europe—I made the mistake of traveling in Europe in August, and it was packed and expensive.  Unbeknownst to me, many Europeans have August off and vacation with their families in addition to all of the travelers who come from outside Europe.  Save yourself money and the need to fight the crowds by traveling to Europe in the fall.  The only drawback?  You may have to deal with some rain (or sometimes a lot of rain), especially if you are traveling to a Mediterranean country.  You can defeat this drawback in part by scheduling museum days and other indoor attractions for the rainy days.

While the dog days of summer may be past us, there is still plenty of warmth left.  Take advantage of the lovely fall weather to take an off season vacation and save some serious money.

img credit: librarygroover, on Flickr.