Spending Habits and Easy Money

Every spendthrift American is prone to bad spending habits. These habits are fanned even more due to quick availability of loans and easy access to credit cards which eventually results in neck deep debt. Debt is a monstrous hole that is engulfing the young generation into its clutches.

Are you a reckless spender? Is this habit leaving you at the mercy of debts? Instead of spending sleepless nights, consider checking your spending habits. It’s not a very difficult task to accomplish; rather it’s about being a little more disciplined with your expenses.

Here are four tips to kick start your debt reducing plan:

Prepare a Monthly Budget

If you choose to cut down on your expenses, creating a monthly budget is a must. It’ll help you keep a track of your expenses. Just be honest and disciplined with the budget. This will not only improve your money management skills, but will also save you a considerable amount.

Avoid Using Credit Cards

Since it’s easy to overspend with credit cards, use them only when it’s absolutely necessary. Use your debit card or cash instead for all your purchases.

Do Not Compare Your Finances With Others

Your friends and neighbors might afford certain luxuries that you cannot. Do not be disheartened. It is not a very wise idea to follow the rampant spending spree of others. You are not aware whether they are already debt ridden or not. They may have an alternative source of income to afford the extravagance.

Recreation is needed in the mundane everyday life; however savings is also of utmost importance. It is unreasonable to cut out all entertainment, just make sure to spend within the stipulated budget.

Search For Alternatives For Regular Expenses

Do you have any idea how much you spend on snacks, coffee and cigarettes monthly? Smoking is especially addictive. It not only affects your health but also burns a hole in your pocket in terms of expenses. Try to cut down on such expenses and you will be able to increase your savings.

Switching off the lights, AC, heater when not needed, can also save you a lot of money every month.

All you need to do is develop a logical mindset towards your expenses. Refrain from taking audacious financial decisions and do not indulge in wild spending sprees. Think smart and think economically.

Do You Have Young Children?

Good news for you! Especially if your kids are young enough that they haven’t started thinking about clothes yet. Until your kids learn about brand-name clothes and join the in-crowd, you can save a bundle on clothing.

Neighbors can be a Good Source of Information

Our neighbor first showed us how to save money on clothes when she came home with some really nice Gymboree and Learning Place clothes for an incredible price. That’s when we learned about resale shops. The great thing is, young kids – and especially babies – grow so quickly, that you can get barely worn clothes for a fraction of the original cost.

Garage Sales and Re-Sale Sites

Last year, my wife found an appliance she wanted on Craigslist. When we went to pick it up, the lady asked us if we had any children around 7 years old. We did! And she gave us a bag of very nice, hardly worn clothes. There was even a pair of nearly brand-new Nike shoes.

It is pretty easy to save hundreds of dollars getting clothing in this way. And your young kids won’t know the difference. At least ours didn’t.

Finally, don’t forget garage sales. There are an abundance of them during the summer selling baby clothing. Most of this type of clothing hasn’t been worn for more than half a year and the savings are deep.

The Debt Snowball

Whether you have been working towards getting out of debt for several years, or you are new to the game, one of the most effective ways of paying off debt is the debt snowball. Applying the debt snowball strategy to your debts will save you a lot of money in interest charges while getting your debts paid off much, much faster. And the best thing is you never have to pay out any more per month than what your current minimum payments are.

How the Debt Snowball Works

1. Make a list of all your debts.
2. Order them from the smallest dollar amount to the largest.
3. Make the minimum payment on each debt every month.
4. Optionally, add any extra money you may have to the debt on the top of the list. This will accelerate your debt payoff.
5. Once the first debt is paid in full, cross it off the list and congratulate yourself. A pat on the back is in order :)
6. Now, and this is where the snowball gets going, apply the money you were paying on the debt you just paid off to your next debt. So if your first debt was $50 a month and your second debt is $75 a month, you will now be paying the total of both, $125, toward your second debt.
7. Repeat until all your debts are paid.

A Really Big, Fast Snowball!

Let’s say all your minimum payments added up to $800 a month. By the time you have all but the last debt paid off, you will be paying $800 a month on that last one. Now that is a fast moving snowball!

This is all pretty cool, but what if you would like to know how much money you could save? Or how much faster could you be debt free? Or how much more money would you save if you make an extra payment? Or better yet, what if you added an ongoing extra payment? If you knew these answers, it would really help you keep excited about sticking to your commitment. But it would take a lot of math and calculating to figure all that out by hand.

Is There Software to Help You Do All This?

This is where debt elimination software comes in really handy. And it makes putting together your “get out of debt” plan really simple. All you have to do is put each debt into the software. And it will automatically calculate all the hard-to-figure-out numbers for you.

Most software packages will allow you to put in your debts. Then they will create a debt payoff report for you, showing what to pay on each debt each month. The better packages will also allow you to enter either a one-time extra payment (for the yearly bonus), or an ongoing extra payment. Really nice ones will even let you change an interest rate mid-way through your payment plan. This lets you handle a mortgage rate change, for example.

See How Much Time and Money You Can Save

Be Debt Free America is one of the really nice packages. It allows for all the above and even comes with a few handy calculators. After you enter your debts, the site will tell you immediately how much money and time you will save by following the debt payoff plan. You can check out a sample debt elimination page where you will be able to see the functionality of the site.

This service automatically orders your debts from highest interest rate to lowest as this generally will save the most in interest charges. However, based on certain calculations, it may put one or two at the top. Paying off one or two really fast will keep you excited by seeing some quick results. Either way, you can manually change the order if you want.

How Does Free Sound?

Be Debt Free America is also a pretty inexpensive service. Okay, it is free. At least for the first four debts. The free version does have a few limitations. There is a premium version that allows for unlimited debts and has all the features available.

Seven Productive Years With My Employer

I was working from home, something I pretty much never did. A few minutes past 9:00 am, the phone rang. It was my director. My immediate supervisor was on the line as well.

 “This can’t be good,” was the first thought to cross my mind. “Layoffs. And this time my number has come up,” the thought continued.

 “Hello, Chris. This is Jared. I have Khahn in my office as well. I don’t like to have to do this over the phone, but we are having another round of layoffs. This has nothing to do with your performance. You understand. Upper management says we have to make some more cuts.”

The company had already been through 9 rounds. I guess that would make this one about number 10.

Hunkering Down

My wife heard my end of the call. She immediately knew what was going on. Later that day, we sat down and began figuring out what we would need to do to survive the coming months. Here’s what we came up with:

1. We paid off the car. We did WHAT, you ask? Yup, that’s right, we paid off the car. I know, it seems like an odd thing to do after just losing a job. The company gave us some money after laying me off. And a little extra for being old :). I guess 40 is old now days? Anyway, I didn’t ask any questions. Our line of reasoning was pretty simple. We needed to reduce our monthly expenses. No car payment equated to a monthly savings of $523.
2. We reduced our monthly mortgage payment. How could we do that, you wonder? Well, I had foreseen the possibility of a pink slip a year before it showed up. So I refinanced my mortgage well in advance. We got a 5 year mortgage, amortized over 30 years from Ing Direct. (I wouldn’t recommend this for most situations.) We were making large extra payments on it, with the goal of having it paid off in 4 years. This also allowed us to stop making the extra payments in the event of a job loss. Phewww!
3. No eating out??? We were already living pretty frugally. The layoff added a little to the frugality. No eating out. Clothes purchases were drastically reduced or even eliminated. No movie theatre tickets. We did, however, rent a few movies from Red Box. To really sum it, we shrunk the monthly budget where ever we could.
4. No job translates to less expense. And less expense is a good thing when you don’t have a job. My monthly vehicle gas bill dropped from about $175 a month to under $60 a month. And, even though my wife usually made me a lunch to bring to work, I was able to eliminate the couple times a week I ate out.
5. Could I forget unemployment insurance? Nope, of course not. Even though we were able to drastically slash our budget with the steps above, unemployment helped out in a big way. We received $630 a week.

Unemployment Ended Up Being Enjoyable

I understand not everybody who goes through unemployment will come out the other end in the same way I did. We were able to live on 65% less than what I was making while employed, all while not touching our savings. Yes, we were blessed financially.

And being home for most days, I was able to get a lot of things done around the house and on some web sites I was building. Best of all, I was home so much that my one-year-old daughter was able to connect with me. As you know, infants generally connect with their mothers first and it isn’t until years down the road that the father-connection is made. Unemployment brought that connection around much sooner than otherwise would’ve happened. Awesome! Now my daughter asks my wife everyday if daddy is at work. She still expects me to be home.

Can It Really Be Made For Less Than One Quarter?

Yup! Imagine the savings. I think the last bottle of syrup we bought cost over $4.00. Have you ever found a coupon for 95% off? Me neither.

The Recipe

1 cup water
2 cups sugar
1/4 cup brown sugar

In a saucepan simmer all the ingredients for 15-20 minutes. Remove from heat and stir in one teaspoon of maple extract.

Refrigerate what you don’t use. If you prefer warm syrup, you can reheat it in the microwave before serving.

Listening to the Radio on the Way to Work

Jonni McCoy was being interviewed about her book, Miserly Moms: Living Well on Less in a Tough Economy. She had some great ideas on reducing the grocery budget, so I’ve summarized some of her thoughts.

What About Convenience Foods?

I spent several years in South America. One of the things that made the biggest impression on me was their slow-paced lifestyle. Apart from a one-hour siesta every day, it wasn’t uncommon to spend a hour or more sitting around with friends and drinking mate. In my opinion, we tend to get way over-paced here in the United States. And that, it seems, makes us more inclined to purchase convenience foods.

The largest waste in a food budget is convenience foods, not spoiled food. Any food item that has been somewhat pre-cooked, pre-packaged, pre-washed or pre-chopped. A convenience food can run anywhere from 3 to 5 times more than making it yourself. Leaving those convenience foods on the shelf can make a huge savings on a food budget.

You can make your own pancake syrup for less than a quarter, compared to roughly $4.00 at the market. You’ll spend about a $1.00 per pound to make your own granola versus $4-$5 a pound purchasing it. Pre-washed, bagged lettuce costs about 5x more than buying it by the head.

You Can Save 35% Off Your Grocery Budget

Nearly every grocery store has an advertisement flyer at the entrance of the store or on their website. The items on the front and back pages are called “loss leaders”. These are items the store is losing money on to attract you. My advice? If they are items you use, buy them. You can either purchase the loss leaders by themselves, or plan your weekly meals around them.

Warehouse Clubs

We have a Costco just down the road from us and we really enjoy going there. We’ll generally buy a few things that we need if we see a good price. But be warned, not everything at a warehouse club is a good deal. Just because you purchased that 50-roll pack of bulk toilet paper, doesn’t mean it was actually less expensive.

Sales at grocery stores will almost always be cheaper per unit than at a warehouse club. For example, peanut butter tends to run about twice as much at a warehouse club than the sale price at the market. On the other hand, milk, cheese, eggs, produce, batteries and personal care items generally tend to be a pretty good deal at warehouse clubs.

Pulling Out the Coupons

If you would be purchasing the item anyway, then coupons are a great thing. The problem happens when you spend $4.50 on a product, thinking you saved 15%, when you wouldn’t have purchased the product to begin with. Do you really need yet another 12-pack of Lever 2000? There’s a great article about your coupons may be making you poor over at Frugal Dad.

Save Time Finding the Best Weekly Deals

My Grocery Deals lists a lot, of not all, of your local grocery stores’ weekly featured discounts. All in one place. Convenient.

Woohoooo!

My first blog! This should be fun. This blog will be geared toward equipping people with the information, tools and support they need to get out of debt. At least those people who desire to be debt free.

As the blog matures, we will be spending time looking at wise ways to use money. We will also consider ideas about being prudent with the resources we have. Every once in a while, maybe I’ll do a post about something completely unrelated to finances. You know, just to keep us all on our feet. There is, of course, much more to living than money, right?

Come on Back

So I hope you come back often to see what is happening at Be Debt Free America. And I look forward to many of you becoming debt free much sooner than you would have anticipated.