Debt Reduction — 2/9 — Beating Broke

Some Years, No New Debt Is Reason To Celebrate

December 14, 2015 By MelissaB 4 Comments

When you’re in debt, it’s easy to be hard on yourself.

You shouldn’t have let yourself go into so much debt.

You weren’t smart with your money.

You’re not paying off the debt fast enough.

On and on we berate ourselves.

It’s even easier to do this at the end of the year when you feel financial pressure to buy gifts for not only family members, but associates, hired help, etc.

In addition, if you’re anything like me, you may have set some lofty goals last January that you could not achieve.

Our Lofty Goals

Last January, I could see nothing but clear horizons. I set some ambitious financial goals (for our financial situation).

I wanted to put at least $3,000 in our emergency fund.
I wanted to save $1,000 for a family vacation.
I wanted to save $3,000 for a new-to-us car.

Guess how many of those financial goals I accomplished? None!

Guess how many I partially accomplished? None!

Sometimes Finances Are Just about Survival

What I could not see that fine January morning when I set my goals was that we were on the precipice of a financial cliff.

Within just a few weeks of setting the goals, we experienced a number of financial difficulties.

My husband had to get a root canal and a crown at the cost of almost $600.
I had to see a periodontist and several dentists for a cyst on my gum that finally resulted in a root canal in April and a corrected filling. The cost of all the treatment was approximately $700.
Our daughter had to have several fillings filled and then later had to have a tooth pulled. $300. (This was a special year for dentistry; I promise, our teeth aren’t as bad as this year makes it sound!)
Our car needed a $1,500 repair.
Our car needed new tires. $700.
My son needed braces. We saved and paid the first $900 out of pocket. In a few months, we’ll need to come up with another $900, and then we’ll be on a payment plan with zero interest for the rest.
Our 18 year old A/C unit was leaking Freon, causing one electric bill to be $150 more than normal, and we also paid $200 to have it serviced for a grand total of $350.

In short, this year was a financial disaster as far as paying off debt went. This year was all about financial survival mode.

And that’s okay. Some years you can’t be gazelle intense or even pay any extra on your debt because you’re too busy just surviving.

Even though the year didn’t go the way we had planned, at all, it wasn’t a complete wash financially.

The good news is that we learned more creative ways to stretch our money even further. We’ll continue to implement those strategies this upcoming year.

The even better news is that we didn’t acquire any new debt.

Sometimes, treading water is the best you can do. Overall, for this year, I’m happy with that.

If you’re paying off debt, did you make the progress you wanted to this year, or did you have a year like ours?

Are Good Deals Putting You in Debt?

October 28, 2015 By MelissaB 2 Comments

We all love a good deal, right? There’s nothing better than paying $2.40 for a pair of kids’ shorts that retail for $16 or paying $0.25 for Christmas wrapping paper at an after Christmas sale when it would cost you $2 or more to buy it new.

After all, buying things on clearance is what savvy shoppers do, right? This is an excellent strategy for being frugal with your money, right?

Well, yes. . .and no. Are those good deals putting you in debt? Ask yourself these questions and decide if you really need that good deal.

Do You Buy More Than You Need?

When something is on clearance 80% off, it’s tempting to buy alot. . .more than you need. After all, why buy one sweater at $5.00 on clearance when you could buy 8 for the cost of what just one would cost retail? Besides, you’re not paying any more than it would cost to buy a $40 sweater brand new, and you’re getting 8. What a deal!

But do you NEED 8 sweaters? Will some of them languish in the back of your closet, with the tags still on, until you decide to purge your closet and give them away or try to sell them at a garage sale?

Can You Afford It?

Sometimes, you need to pass up good deals. If you can’t afford the deal and put it on credit card, are you really saving money? By the time you figure in the interest you’ll pay, that clearance sweater may end up costing you nearly as much as it would cost retail, or, if you pay only the minimum payment on your cards, even more!

Some people have gone in debt in pursuit of good deals. Kristine Rogers, who was featured in Money magazine, explains that she went in debt buying children’s clothes on clearance: “Gymboree held a clearance sale in which every item was priced at $7.99. ‘I grabbed clothes my daughter didn’t need. I bought four of the same coat in different colors.’ By the end of the day, Rogers’ compulsion had cost her $800.” Rogers developed a full blown shopping addiction in the pursuit of sales and ended up with $50,000 in credit card debt! Sure, she got good deals, but in the end, after interest, she likely paid much more than she would have if she’d bought the items at retail.

Are You Tying Up Current Cash Flow?

Assuming you don’t go into debt to buy good deals, you may still be tying up your cash flow. If you spend $40 on 8 sweaters that you buy in May but won’t wear until November, you’re tying up cash flow. If you don’t wear some of those sweaters at all, you’ve wasted money despite the good deal.

Be More with Less explains, “If you buy wrapping paper on December 26^th and stock up on sale items year round, you are spending more than you would if you just bought what you needed. Don’t be fooled by the cashier that tells you, ‘you just saved $22.00’ when you just spent $300.”

What do you think? Is it worthwhile to pursue good deals, or can it be a slippery slope to overspending and debt?

Do you buy items on clearance? Do you always use all of the items, or do you accidentally buy too much?

The Habits of People With No Debt

September 18, 2015 By Thomas Bawdy 2 Comments

When you’re battling debt and credit issues, you might take comfort in knowing you’re not the only one to experience this situation. For that matter, you might speak with friends who have endured something similar to get their advice and encouragement. When you’re dealing with financial disaster, listening to another person’s credit story can motivate you to work toward recovery. But what if you don’t know anyone who’s gone through a similar experience?

Fortunately, you don’t need a direct connect. Thanks to the Internet, finding a testimonial video that relates to your current situation is much easier than you think. Whether you’re dealing with a low credit score, debt, unemployment, or another financial problem, the stories you read online are educational and a practical resource for improving financial matters. Vicki’s credit story featured on Creditrepair.com is an excellent place to start if you need encouragement and motivation. Maybe you’ve been in a similar situation and need helpful suggestions.

A lot of good can come from watching or reading another person’s testimonial. Your credit matters and it takes a plan of attack to overcome financial hurdles. At the end of the day, you want to avoid repeating history. You can learn a lot from people who’ve risen above financial problems like Vicki. If you want to get out of debt and avoid future problems, it pays to familiarize yourself with the habits of people who don’t have debt.

They don’t have egos

Some people get into credit card debt because they want to have the best and newest of every item. Whether it’s an electronic gadget, a car, or a house, some people have to keep up with the Joneses at all cost, even if it means getting into deep debt.

They exercise patience

People with no debt are patient. They might have access to a credit card or a nice savings account, which gives them the option of buying whatever they want. But they also understand the importance of saving up for purchases and buying when the price is right.

They pay with cash

Using a credit card can build your credit history and it can provide emergency funds when you’re short on cash. But for the most part, people who avoid debt believe cash is king. They would much rather save up and purchase an item outright than get into debt and deal with monthly payments for years to come. It might take them longer to purchase an item, but at least they can sleep soundly knowing they don’t have a huge payment hanging over their heads.

They check interest rates

Since most of us aren’t rich, we have to get a loan to buy a house, car, or pay for other important things. Getting a loan isn’t bad in itself, but people without debt make sure they’re able to pay off their balances as soon as possible. They only finance what they need, and they shop around and compare interest rates to keep their monthly payments manageable. Comparison shopping can be time consuming and prolong getting a loan, but it’s much better to get a loan you can afford than realizing down the road that your payments are too much for your budget.

They avoid expenses that bleed them dry

Some people get into debt because they shop uncontrollably. Others get into debt because their income isn’t enough to support their lifestyle. Every expense adds up. If you’re buying coffee every day on your way to work, or if you’re going out to lunch every day with your coworkers, you might be spending hundreds unnecessarily every month. Additionally, household services like cable, housekeeping, and lawn care can eat into your budget and leave you in the red every month. If you don’t have enough income to pay important expenses, you might pull out a credit card to close the gap. Evaluate your budget to assess what you’re spending, and make adjustments that can create more disposable income and help you avoid future debt.

They plan for the unexpected

It’s much easier to spend money than to save it. People who don’t carry a lot of debt know the importance of planning for the unexpected. If you don’t have an emergency savings account, it only takes one unexpected expense to plunge you further into debt. Make saving a priority and aim to save 10% of your salary.

Getting ahead financially takes a lot of work, and it can be hard to improve your finances when you’re stuck in debt. Your situation might seem bleak today, but with an effective plan and determination, you can erase debt and dramatically improve your financial health.