Beating Broke

Personal Finance from the Broke Perspective

Debt Heroes

By 3 Comments

debt heroes
Amazon

Debt Heroes

By: Jeff Rose & Ben Edwards

Ben and Jeff approached me a couple of weeks ago and asked if I’d like to read a copy of their book, Debt Heroes.  It’s $2.99 on Amaon.

They released the book as a companion to the Debt Movement that Jeff started back in February.  They even offered it for free on Amazon for a couple of days.  I was hoping to release this review during those days, but I just couldn’t get it finished in time.  Unfortunately, it’s back up to it’s regular price of $2.99 (free for Amazon Prime members).  That’s probably good for me, as I’ll be using my Amazon affiliate links to link to the book here, but I’m a bit disappointed that you won’t be able to take advantage of the free deal.

Ben and Jeff set out to write a book about debt heroes.  Everyday people that you and I, the readers, can look up to as heroes in the fight against debt.  Inside the book, you’ll find profiles of 21 debt heroes that have conquered debt, and some tips from each on how they did it.  What I found even more interesting in each profile is that each debt hero points out what their weakness was.  Not surprisingly, it isn’t the same for each one.  Also not surprisingly, that weakness played a huge part in each of their debt story.

The book is a pretty quick read (about 177 pages if it were printed), and it’s full of inspirational stories about getting out of debt.  It’s not another “get out of debt with these steps” book, but a book to give you inspiration in your own debt battle.  Of course, the hope is that you read it and it gives you the push that you need to become your own debt hero.

I think I would have liked to have seen a little bit more of each debt hero’s story.  Each of the stories is accompanied by a link to where you can read the full story, so it’s accessible; I just haven’t progressed in my kindle reading to be clicking on links and such.

If you’re looking for a little inspirational reading to help you keep on track (or get on track) with your debt elimination, I think you’ll find what you need inside the (electronic) pages of this book.  Also, remember that you don’t need a Kindle to read the book.  Amazon has Kindle apps for Android and iOS phones, as well as for PC and Apple computers, and most tablets.

Pick up Debt Heroes today.

You’ll read about it at the end of the book, but Jeff and Ben have also created a “Debt Heroes Club” that you can join to get more tips and inspiration at DebtHeroes.com.

What is Financial Independence

By 37 Comments

In my post “Are we Doing Personal Finance Wrong“, I talked a little bit about “Financial Freedom”.  Of all the comments that the post got, that was the one thing that was mentioned most of all.  Which, to me, means it bears some further discussion.

Financial freedom, or financial independence, can be defined a little bit differently depending on the person doing the defining.  Like most personal finance, it’s highly dependent on the values of the person.  What I define financial independence as might be a whole lot different from what you define it as.  I think, no matter who is defining it, the real keystone is the word freedom or independence.  We all want freedom and independence.  Some autonomy from the rat race.  The idea of having the financial ability to declare our independence is alluring.

What is Financial Independence, for me.

Financial IndependenceMy definition of financial independence is likely pretty similar to most.  In it’s most broad sense, I define it as the ability to not be swayed by financial needs.  Breaking it down a bit more, it means not “needing” a job just to make ends meet.  It means not “needing” a job to keep a roof over my head.  It also means having the ability to take advantage of opportunities to improve my situation.  Whether that means having the cash on hand to be able to buy or start a business, buy a rental property, or just take a month off to travel or learn something new isn’t all that relevant.  It’s that I have that ability.

Something that needs to be said here is that at one point, not that very long ago, I thought of it as being synonymous with “independently wealthy”.  Which may or may not be true depending on your definition of independently wealthy.  For sure, I don’t believe that it matches up with the definition I had back then.  Back then, I would have told you that independently wealthy meant retirement and not doing a dang thing.  Sitting on the beach all day, every day, being utterly non-productive.  That definition has changed.  A lot.  Financial independence, if it’s synonymous with independently wealthy, doesn’t mean that you don’t work, but that you have the financial freedom to do the work you want to do.  Because you are free from the “need” part of the financial equation, you have the ability to do the work that you feel called to do without regard for how much it pays, whether it’s part-time or full-time, or whether it’s a short term project or not.

What is Financial Independence, for you.

As I mentioned above, your definition might differ slightly (or a lot) from mine.  Maybe, for you, it really does mean sitting on a beach somewhere, doing nothing.  Maybe it means not having to work and spending all your time volunteering instead.

However our definitions might differ is somewhat irrelevant.  Our personal definitions still mean that it’s something worth pursuing to each of us.  And, if our end-game is to be financially independent, I still don’t think we’re doing personal finance right.  I still don’t think we’re even close.  I think we need to break away from the systems we have, find the ones that work for our personal finances, and then achieve our financial independence.

Achieving your Financial Independence.

Breaking away from the systems we have for personal finance won’t be easy.  Heck, our definition of financial independence will probably change along the way and require a new system again.  But, achieving that financial independence should be our primary goal.  Not retirement.  Not our childrens’ college education.  And certainly not saving up cash to pay for that big SUV.  Our primary goal in our personal finance should be achieving financial independence.  Once we’ve achieved that, retirement, education, and big trucks will come.  And they’ll come without sacrificing anything.

The Path to Financial Independence.

Much like our definitions differ, so too will our path to financial independence differ.  Undeniably, I think that the first landmark on that path has to be the complete and utter destruction of all debt.  Before we worry about anything else, we have to be free of the yoke of debt.  Joan Otto, the community manager at Man Vs. Debt, wrote about this recently specifically referencing retirement accounts.  Take a minute or two and read it.  Then, pay special attention to the comments.  Aside from a few people, almost all of the comments are people who think she’s off her rocker.

Is she off her rocker?  Or is she just developing a new system for her personal finance that leads towards her financial independence?  It takes a certain amount of courage to admit to the thoughts and ideas that she does in that post.  (I should know, see: Why I’m Withdrawing from an IRA)  But, then try and remove what you’ve been taught about retirement and saving from your mind for a minute and re-read section 4 of her post.  She’s not being irrational.  In fact, I’d argue that she’s being overly rational.  I think I’ll have to write more about that in another post, but the Vulcan, logic loving, part of me thinks she is right.

Our paths to financial independence will vary.  Some of those people in the comments of Joan’s article will achieve it using the current system.  Many of them will have started saving early, and found ways to drastically save.  But, will they have the liquidity available to make a move on an opportunity in the 30’s, 40’s, or even 50’s?  Or will it have to wait until they’re past “retirement” age and have penalty free access to their nest eggs?

Find your path.  Start the journey, and achieve your financial independence.

Have you already started on your journey?  Have you found your path?  Have you achieved your financial independence?  There are many of us here, including myself, that are new to the journey or haven’t even begun yet that could benefit greatly from your story.  Will you share it with us?

img background credit:Fireworks at Swindon by Stephen_Gunby, on Flickr

Why I’m Withdrawing Money from an IRA

By 15 Comments

I’ve been going back and forth with myself over whether I should write a post about how I am withdrawing money from an IRA.  It’s not something that is recommended, and certainly not something that most people who write personal finance blogs talks about.  In fact, it’s somewhat embarrassing that I am doing it at all.  And, I had decided that I might not talk about it.  Until I saw this post on my friend Sandy’s blog, Yes, I am Cheap.  For those of you who won’t click through the link, I’ll give you the quick rundown.  One of Sandy’s readers lost her job a while back.  Since then, the reader has used all of her savings to pay bills, and her unemployment status is in a sort of limbo.  The reader has 21k in her 401(k), and she asked if she should take that money out to help pay the bills until she can find work.

What that post did for me, and the reason that I’m writing this post, is remind me that I’m not an island in the personal finance ocean.  When I started this blog, I didn’t have a 401(k), or really even know what one was.  I was up to my eyeballs in debt, and contemplating bankruptcy.  As I searched the internet for information about that and other personal finance related topics, I decided that I wanted to share what I was learning, in an effort to help others who might be in a similar situation.  Sometimes, when writing post after post, here, I forget that I’m not the only one who has the same questions, or who is in the same situation.  There are other people who’s circumstances might make them cringe when bills show up at the door.  It’s for those people that I write here and share here.  And it’s for those people that I am writing this post.  I think this may be the longest introduction to a post I’ve ever written. 🙂  Let’s get on with it, shall we?

Withdrawing money from an IRAThose of you who are regular readers will recall that I quit my job in November of 2011.  It was a decision that I had been coming to  for many months, and a decision whose timetable was advanced by several situations at that job.  All of those situations made it very unhealthy for me to be there anymore.  So, I quit.  I didn’t do much planning, and hadn’t done much saving.  I had to quickly cancel the mortgage paperwork we had been trying to push through as we wouldn’t be able to afford the house we had been planning to buy.  All in all, it wasn’t the greatest idea, financially.  Emotionally and mentally, it was the best idea I’d had in a long time.

Why I needed to withdraw from an IRA

I then spent about 7 months working part time while trying to rapidly build my blogs, here and elsewhere, to a point where they might sustain my without having to get another full time job.  I didn’t succeed.  And I ran out of savings about a week and a half after I had taken a new full time job.  It’s a good job, and I enjoy it quite a bit.  But, it doesn’t pay nearly as much as my other job had.  When I started there, our finances were still bleeding.  They continued to as we continued to try and make ends meet.

Sometime last fall, it became apparent that the ends were going to begin to not meet.  If you’ve ever been there, you know that looking forward to a month where you might have to decide which bills to go delinquent on isn’t a very comfortable spot to be in.  It became very apparent, after several hours going over our budget, that we had a cash flow issue.  Too much going out, not enough going in.  The problem wasn’t with discretionary spending, however, although we did find some places to cut there too.  The problem was that we had too many payments taking up too much money.  If we wanted to survive, financially, we needed to find a cash flow solution.

I should say that it wasn’t an easy decision to tap into my IRA.  At  the time, I’d only recently rolled my 401(k) from my old job into it, so I’d just taken a hit by doing that.  But, I needed a way to create some cash flow, and an infusion of money would do it.  So, I called my adviser and had him issue a check for the amount I needed.

It’s my money.

There will surely be a few naysayers who come upon this post.  Most of them will tell me (and you) that what I did was a terrible thing to do.  That I’ve permanently set myself back for retirement, and that there had to be other ways to accomplish the same thing.  But, there weren’t.  Trust me when I say that I know my finances.

Yes, it will set my retirement saving back by quite a bit.  Yes, I’ll have to save more in the future to achieve any sort of retirement nest egg.  I know all that.  But, I feel that remaining current on my bills, and not having to potentially declare bankruptcy is more important than that.

There’s also a rebellious part of me that would like to just say that it’s my money and I’ll do with it what I want. 😉  In all honesty, it is my money.  Just so much as the money in your IRA or 401(k) is your money.  And, in my opinion, our money is only worth anything when it is improving our situation.  My situation needed improving now, not in 40 years.  (not that it likely won’t need improving then too)

Using the withdrawal from my IRA

For those of you who are thinking to yourselves that if I made a withdrawal from my IRA, it’s ok for you to do it too, just stop.  This was a last ditch effort to stop us from going into delinquency on several accounts.  Would it have bankrupted us eventually?  Maybe.  I’ll never know, and I didn’t want to find out.  But, what I will tell you is it took a good deal of thought to make the decision, and it took a good deal of determination to use the money properly when I did get it.

When the check arrived, I cashed it and went to the casino.

Just kidding!  Ya’ll were looking so dang serious!  I deposited it.  Directly into our checking account.  During the decision process, I’d taken a full audit of our bills each month and determined the ones we would need to, and could, eliminate in order to get ourselves back on the right track.  So, even before I asked for the withdrawal from my IRA, I had a list of the things that I was going to pay off.  Over the next several weeks, as those bills came in, I send them payment in full.  Until all but one of them was completely paid off.  The one remaining was a bonus bill.  I didn’t have enough to pay it off in full, but was hoping that I could get them to negotiate the amount down.  I wasn’t able to.  So we still have that payment.  But, once it was done, we eliminated several hundred dollars worth of monthly payments.  More importantly, we cut our monthly payments by enough that we have enough each month to pay the remaining bills while still having enough left over to pay a bit extra. We’re on the right track again, and making strides to keep it that way.

Would you withdraw from your IRA?

There are only a handful of reasons that most people will tell you that making a withdrawal from an IRA is a good idea.  Most of them involve exemptions from the tax penalty.  Would you ever take a withdrawal from your IRA?  In my situation?  In any situation?