Happy New Years’ 2012! Let’s make this year a prosperous one! First, you may consider transferring those high interest rate credit cards to a card that can give you 12 months of no interest and no balance transfer fee.
Last month I pondered the question if I sacrificed too much on my path to becoming debt free. Context then and context now is important. I wrote the article in response to a performance review from my employer stating that my 60+ hour workweeks were not sufficient. Naturally I was a bit annoyed, and I questioned the purpose of working even longer unappreciated hours.
Job-hunting doesn’t take nearly as much time as my old job, but it’s practically a full-time commitment. The sudden cash drought and boost in personal time actually opened my eyes to an interesting way to discuss spending habits on leisure and entertainment. If for whatever reason you have been procrastinating about changing your spending habits, the following information may convince you that taking control of your finances won’t actually suck the fun out of your life. Read the rest of this entry »
There are two camps to the emergency savings issue. Camp A tells you to immediately pay off your debts and let credit be your emergency cushion until you can start saving money to cover 3 months expenses. Camp B encourages you to put away 3 months living expenses as you slowly pay off your debts. Some say Camp A’s advice is risky and potentially costly, and others say Camp B’s choice is costlier in the long run.
It’s funny timing for me to be writing about emergency savings because I’ve just been fired from my job. Trust me, I’m happy about being freed from my unreasonable employer of questionable ethics and even more questionable employment practices. I went down only because I asserted my boundaries, and I’m confident I’ll find work elsewhere.
My personal experience doesn’t make me recommend one camp’s advice over the other, however. I support Camp A because of circumstances I have working for me. On the other hand, Camp B might be the entirely better choice for someone else. The truth is, an emergency can happen tomorrow, so why not structure your emergency savings plan that way? The following chart will help you examine your financial picture and determine if Camp A or Camp B is best for you. Read the rest of this entry »
As I steadily venture into new territory of debt free life, I must admit that my confidence is beginning to wane. It’s sort of like being the new kid in school. I have no idea what to expect, and I’m fearful of the unknown. But most importantly, I’m afraid of screwing up.
I can’t avoid making mistakes in life, but I can make cautious decisions. There has been lots of news about foreclosures and unconventional loans, which I plan to avoid. To be safe, I’m going the traditional route by saving for 10% down payment on a house and obtain a 30 year fixed-rate mortgage. (If I were single, I’d be shooting for 20% down payment.)
Originally I thought saving for a down payment would be a daunting and downright impossible achievement. The process is actually not going to be that bad. I got most of the hard work out of the way by nearly eliminating credit card debt and establishing a strong credit score. The task now involves some homework and persistence.
Here are some recommendations I liked from some trustworthy sources. Read the rest of this entry »
“After today, the fortune fan will find you… look out, after today.“- David Bowie
Last week I wrote about confronting your net worth, which hopefully wasn’t too disheartening an experience. If you’re a negative or low net worth person, I’m in the same boat. At this moment, my net worth hovers around $2,000- the positive value attributed to my young, but growing 401(K), and my shrinking credit card debt. My $9,800 student loan is mostly what is dragging me down.
I can either choose to feel crappy about my low net worth and do nothing about it, or I can take action to further reduce debt and build wealth. Here’s what I decided. I thought about what my finances were like one year ago, and I compare them to now. In only 8 short months, I’ve turned my negative ($10,000) net worth into a positive value. There was no secret, magic or easy-fix: just hard work, a plan and a budget. In the near future, I’m going to use this same tactic in my wealth-building plan. But first, I need to sort out how I want to make my net worth grow. Read the rest of this entry »
“Homer: He might have all the money in the world, but there’s one thing he can’t buy.
Marge: What’s that?
Homer: A dinosaur.” -The Simpsons
I’ve always found the topic of net worth to be scary and frustrating, mostly because of the “worth” part in the term. It’s frightening to connect my knowledge and handling of money to any sort of measure of my worth as a person. If I were to base my worth solely on my assets, I probably wouldn’t feel too good about myself. I imagine that the shadowy meaning of “worth” is one of the many reasons why many people under 30 don’t want to look at their net worth.
Other reasons could be that 1) it seems impossible for any member of Generation Debt to cross over to positive net worth 2) the idea of calculating and then comparing net worth to that of others sounds like a recipe for depression or anxiety, and 3) the concept of net worth is obfuscated by so many differing perspectives from various personal finance resources that it can be extremely confusing. Read the rest of this entry »
“Perhaps all pleasure is only relief.”- William S. Burroughs
In this series about preparing for life after debt and how to get there, I’ve covered how to identify bad debt; ways of organizing your finances to reduce bad debt; ideas for implementing a functional budget; and I released the Queercents Expense Tracker to make developing or staying within a budget easier. (Side note: It turns out the Queercents Expense Tracker is functional on both MS Excel and Open Office.)
Now it’s time to start thinking about what to do after the debt is gone. Certainly, the range of topics to consider will involve saving, wealth-building and estate planning, which I’ll cover later in this series. But on my debt reduction path, I’ve come across a greater lesson that often gets overlooked in personal finance topics: quality of life in the present. Read the rest of this entry »
“There is all of the difference in the world between paying and being paid.” -Herman Melville
Why expense track? For most of us, money comes in much less often than it goes out. If you want to figure out how to control your money better to keep more of it, expense tracking allows you to see where to cut down on the spending. It takes less than five minutes of data input per day, and just a bit of commitment.
Some people truly hate this practice because it seems high-maintenance or impractical. I used to agree until I became desperate for a way to manage my increased income. Being that I lived as a careless spender all my life, the common sense solution to understand my loose-fisted ways (as someone with a degree in behavior analysis) was to create some sort of picture of my spending patterns with qualitative and quantitative details. Simply put, I needed to track expenses to wake up to the reality that I’m spending more than I make. Read the rest of this entry »
“Some of us think holding on makes us strong; but sometimes it is letting go.” — Herman Hesse
Merriam-Webster defines a budget as “the amount of money that is available for, required for, or assigned to a particular purpose.” As Nina pointed out earlier, not many people spend with purpose. They just spend without regard to how much they can afford.
It’s hard to reach people who don’t want to confront a problem. I was one of many Americans dangerously spending more than they earn despite the vast amount of information available about budgeting. Three years ago, the only budget constraint I acknowledged was an aversion to overdraft fees on my credit cards and checking account. Read the rest of this entry »
“My fault, my failure, is not in the passions I have, but in my lack of control of them.”- Jack Kerouac
So now you know the difference between good debt and bad debt, and you’d like to get rid of the bad debt. But if you got into debt in the first place, how are you ever going to have enough money to get out of it?
There’s no way around the fact that you need more money for debt reduction. Trust me, playing hide and seek from reality doesn’t make debt go away. I’ve been in debt throughout my twenties for painfully stupid reasons. I didn’t want the responsibilities and hours that come with a higher paying job, nor did I want to cut back on my lifestyle. I preferred to live with my messy financial picture because it seemed easier than fixing it.
I came to the obvious conclusion that I could reduce bad debt if I simply started organizing my finances. Organizing finances is a bit different from budgeting, which I’ll cover next week. By organizing finances, I simply mean taking control of my money. Here’s a simple three-step strategy that worked for me. Read the rest of this entry »