Living on a Budget in a Non Budget World
Issue Date: January 1, 2005
Money Saving Tips
Featured Article 7 steps for getting out of Debt
Top Conversations on the Money Saving Forums
Freebie and Contest Alerts
The Frugal Five
Frugal Recipes-Soup is good food!
Money in the News Retirement planning

Happy New Years!  2004 was a great year for us financially. We paid off all of our credit card debt. The sense of relief that I do not have to pay them anymore is a fantastic feeling.   I included some steps that  helped us a family to pay off those debts. 

If you haven't  please consider  Donating To Earthquake & Tsunami Victims     There is a listing of charities taking donations. 
 

Money Saving Tips: 

Remove car racks and other items which make your car less aerodynamic when they're not being used. Leaving them on only makes your car less fuel efficient.

Change regular light bulbs to fluorescent (or halogen) bulbs where appropriate. Fluorescent bulbs cost about 5 times more than regular bulbs, but they're 3 times more energy efficient, 4 times brighter, and last 10 times longer meaning that you'll save money in the long run.

More tips at SavingAdvice.com

Share your money saving tips

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Featured Article  

7 Steps to getting out of Debt

"Getting out" of debt and "timely manner" are all very important in coming up with these, because there are ways to reduce payment and  there are ways to reduce interest payments, but many of them don't address both the debt reduction and the time issue simultaneously.

So if you are in consumer debt (I'm leaving mortgages out of this), here  you go:

1. Stop using the cards.
If you stop using the cards, you will not accrue  any more credit card debt. Cut them up, put them in the freezer.
Now I am hearing what if I have an emergency. You don't want the emergency to go on the credit card.

2. Stop the Leaking.
What got you in debt? You need to find out. Many people who find  themselves in debt often say, "I am only living like a normal person, why am I living paycheck to paycheck?" Is it the $10 dollars lunches each day that you are pulling out the credit card for.  Do you need a new "toy" each month. Is your car payment $300 or more?  You probably want to downsize your car. 


3. Develop a Budget aka a Spending plan
Eek the "B" word. Yes that awful word budget. Okay we will call it a spending plan instead.

The best way to figure out is not high-tech at all. Just write down  everything that you spent money on this month or even the last three  months. Itemize it into categories (food, rent, mortgage, etc.) and  examine what seems high. If your not sure what you seems high, you can run your number on our money saving forums.

Anyway, a spending plan is what you come up with after you have identified and vowed to rectify your leakers. It also factors in your what comes in and compares it with your what goes out, your cc minimums should be factored into your monthly expenses  The formula is simple:

What comes in - What goes out = Surplus

If you get:

What comes in – What goes out = Deficit, then you either have not trimmed enough or you have
more of an income issue than spending issue.

It might take a few months to really get down to a system to accurately  figure and anticipate your money expenses . Don't worry. This is not pass/fail. This is something that has to be worked on and adjusted as you go, just keep  things in writing as much as possible and try to stay to the plan.

If you need more income, get a second job or work overtime.  It may even be time to find a new job.    Find unique ways to make some extra money. 

4. Lower your credit card rates.

Call your credit card companies to see if they will lower your interest rates.
A major consumer group conducted a study to find out how easy it is to get a lower credit card interest rate. Fifty-seven percent (57%) of those who simply telephoned their credit card company and asked for a lower interest rate got one instantly. This rate was anywhere from 7 to 10 points lower than their current rate.

A sample opening  on a phone call to your credit card company  may go like this I have received a pre-approved offer in the mail from _______ Bank offering me a ____ interest rate card. Can you beat or match that offer or do I have to transfer my balance to their credit card?

If you do not succeed with the customer service rep, ask to speak to a supervisor.

You can also pay the balance transfer game.   First, ask these questions:

1. How long does the introductory rate last?
2. What is the card's annual percentage rate after that teaser rate expires?
3. Does the teaser rate apply to transferred balances or new purchases or both?
4. Does that card have an annual fee?
5. What about late fees and over-the-limit fees?
6. Ask if there are balance-transfer fees (Some issuers charge transaction fees as high as 4 percent. So the higher that balance, the higher the transaction fee. A 4 percent fee on a $5,000 balance would cost $200).

5. Start your Emergency Fund and Debt Snowball.

Fund a $1,000 in a "starter" Emergency Fund. $1,000 is a good starter number because most emergencies will be less than $1000. ING DIRECT - High Yield Savings with 2.35% annual percentage yield!  is  good place to put your money.  Do not use CDs, mutual funds for your emergency fund.

Pay off all debt (except the house) utilizing the "Debt Snowball"

Here is how it works
You take all the credit cards that you have and look at the highest interest rate. This is the one you are going to tackle first. Pay as much money to that one and pay the minimum amounts on others. Once you get the first one paid off you then focus on the second one. You snowball the payment you were making on the first one to the second one.

Here is an example:
CC 1 min payment $100 percentage 19.2% balance $3000
CC 2 min payment $150 percentage 15.6% balance $8900
CC 3 min payment $50 percentage 9.9% balance $4500

If you have $500 a month to pay toward credit cards, you would
pay CC1 $300. CC2 $150 and CC3 $50. Once CC1 balance is paid off you would then pay $450 to CC2 and $50 to CC3.

To play with numbers yourself you can go to the   Snowball Calculator.

Another frame of thought from Dave Ramsey  List your debts in order from smallest to largest with the smallest payoff or balance first. Do not be concerned with interest rates or terms unless two debts have similar payoffs, then list the higher interest rate debt first. Paying the little debts off first shows you quick feedback, and you are more likely to stay with the plan.

When my husband and I were paying off our debt, we used the highest interest rate first.


Establish an long term emergency fund
An emergency fund is really just savings. But it is not savings for a particular item or even an investment for your future or your retirement. It is your "rainy-day" fund. But unlike insurance where once you pay your premium, the money is out of your hands, your emergency fund is yours to keep.

So how much do you need? How can you build your emergency fund? And where should you keep the money?

The easiest way to figure out how large your emergency fund should be is to take your current income and multiply it by the number of months you could be out of work. If you make $3,000 each month and you want to be prepared for a 6 month "vacation", you will need $18,000.

Consider putting your money in  ING DIRECT - High Yield Savings with 2.35% annual percentage yield!which is paying higher interest than most local banks.

6. Can you get rid of anything?

You probably got a lot of stuff that you have bought on credit cards over the years. Are you really attached to that DVD that you bought two year ago but have watched in 18 months. Sell it. Sell it on ebay, half.com, amazon. All 3 offer places to sell your stuff.
If you can't pay your car off in 18 months or less, consider selling the overpriced car. Buy a clunker instead.


7. Address the "excuses"

Is there a reason why you won't or can't do #1-#8?

“I can't do a spending plan because the problem is my husband.”
Sit down with spouse and say we are in debt. We are drowning in it. Money problems are one of the leading causes of divorce. If your spouse wants to continue living the high life, continuing doing the debt reduction plan yourself. If your spouse sees you bringing your lunch to work each day, selling old movies on ebay and paying items in cash. Also consider putting in "blow money" in the budget each month.
“I can't balance my checkbook because I am bad at math.”
Okay this is just as bad as the dog ate my homework. Spend a few dollars and buy a budget program such as Quicken  , Microsoft Money  or Mvelopes Personal
“I don't have a leak because most of my debt is to hospitals.”
Even if this is the case, you can still focus on paying off your debts. You probably do have leaks. Analyze your spending plan and put as much money towards the medical bills. Also consider why you have so many medical bills-do you need new health insurance. Do you need a medical spending account to help plan for this in the future.
"I get frequent flier miles or some reward for using my credit cards"
Cut up the credit cards. If would be one thing if you were paying off the balance each month on all of your cards but you didn't. Now you have $20,000 in credit card debt. You are better off using cash at the store. That is expense control. Also  surveys have shown that people who have reward cards will spend about 15% more than someone who doesn't have a reward card (I actually think that it is higher). Does the reward factor pop into your head when you decide to add the appetizer or you see that item in the aisle display that you did not know that you needed?
If someone is going to deny that their use of credit cards is not a problem, then the first thing that they start doing is justify how they can still use the cards and not have problems. They also use the rewards as a reason why they have to keep using cards.

 

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Top Discussions  on the Money Saving Forums

 Money saved I know this is going to sound stupid, but when is money really saved? I'm having a hard time understanding this. If I go to the store and I buy groceries and I use coupons that are worth $5.00, did I really save $5.00? Or did I not spend it?

 I'm jealous of the Jones!!!!!!!!!  I admit it. I'm EXTREMELY jealous of the Jone's. With things so tight this year, we aren't having a big Christmas. But I see the neighbors pulling into their driveways with huge stacks of presents in brand new cars and there is no doubt about it that I'm jealous. I want to buy all those things.

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The Frugal Five
Shannon Jarvies is debt consolidation broker and a work at home mom.  You can check out her website for lots of finanical info at Debt Management Program   plus runs Money-Management Email list

What is your financial  life?                                                I'm married with five children. My husband works and I am a work at home mom. Right now my husband is bringing in 90% of the income. We owe approximately 30,000 on our home and  will pay it off in four years - yeah! But our credit card debt is at an all time high. We live in southern Colorado.

What is your budget buster?
Eating out

What is your favorite money saving tip?
I make a list before I go to the store and make an educated guess about how much the total will be. Then I take that amount of cash. This keeps me from "impulse shopping"

If you had an extra $1000 what would you do with it?
Definitely put it towards a credit card

What is your best resource for frugal living?
Dave Ramsey books
 

Thanks Sharon  for sharing all of your great tips!     Let us know if you would like to be profiled in the Frugal Five   $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ 
Frugal Recipes  Soup is good food!

Soup is the perfect recipe for a cold winter's night. It is filling and frugal and usually a pantry challenge meal!

Taco Soup
A perfect (and cheap!) dish for the cold winter months.
Ingredients:
1/2 lb ground beef
1 pkg. taco seasoning
1 can tomato sauce
1 can diced stewed tomatoes
1 can corn
1 can kidney beans

Directions:
Brown ground beef in sauce pot, drain. Add the rest of ingredients (with juices). Simmer until heated through. Serve with tortilla chips, sour cream and shredded cheese.


Baked Potato Soup                                                                    A creamy filling meal
Ingredients:
4 large potatoes
2/3 cup butter
2/3 cup flour
1 1/2 qt milk
4 green onions, chopped
1 cup sour cream
2 cups crisp-cooked, crumbled bacon
5 ounces Cheddar cheese, grated
salt and pepper to taste

Directions:
Heat oven to 350F degrees and bake the potatoes until fork tender. Melt
butter in a medium saucepan. Slowly blend in flour with a wire whisk
until thoroughly blended. Gradually add milk to the butter-flour
mixture, whisking constantly. Whisk in salt and pepper and simmer over
low heat, stirring constantly.

Cut potatoes in half, scoop out the meat and set aside. Chop half the
potato peels and discard the remainder. When milk mixture is very hot,
whisk in potato. Add green onion and potato peels. Whisk well, add
sour cream and crumbled bacon. Heat thoroughly. Add cheese a little at
a time until all is melted in.

If you have a frugal recipe to share Frugal Recipes

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Money in the news

Retirement planning

The art of planning

Retirement planning mistakes

Retirement takes planning, so you better get started now: