July 2008

Once you make the decision to get serious about your debt reduction, finding additional money to use to reduce debt can be difficult. We get used to our lifestyles, and changes to it are hard to make and stick with. But making small changes can add up, significantly. If you make 10 changes that save you $10/month, you now have $100/mo. to add to your debt snowball. Here are some ways to give your debt snowball a boost. No debt? Use these to boost your savings as well.

1. Change tax withholdings- Did you get a large tax refund last year? Start using that money now to achieve your deb t reduction goal by changing your withholdings.

2. Drop the morning latte- OK, so coffee gets picked on all the time. But by making your own instead of paying $4-5 every day, the savings can add up quick.

3. Eliminate sodas/soft drinks-Especially from vending machines- Just like brewing your own coffee, you can bring your own soft drinks at a fraction of the price of a vending machine.

4. Quit smoking- No explanation necessary here- quitting smoking is good for you and can save you money.

5. Change cell phone plan- Do you use all of your minutes every month? If not, sonsider using a lower priced plan with less minutes.

6. Change cable TV plan- Do you have more channels than you ever watch? Consider downgrading your package.

7. Change home phone plan- or eliminate it- I’ve been seriously considering this one, but right now
I have my internet connection through my phone service as well. The VOIP options in my area are limited, but I am looking in to it.

8. Carpool- Cutting your weekly commute down to a couple of times a week can save big $$ on your weekly gas bill.

9. Bundle cable, phone, and cell phone packages- Another thing I am looking into, you can probably get a better price by using the same provider for all of these services.

10. Brown bag it- Bringing your own lunch, even if it is not every day, can probably save you $5 or more each time you bring it.

11. Make your house more energy efficient- A few hours and some caulk and weatherstripping can save on your energy bills for months and months to come.

12. Garage Sale- A garage sale can be a great way to raise some extra cash, especially with bigger items that aren’t easy to ship if you sell them on the internet.

13. Sell things on eBay- Got books, dvd’s or collections just taking up space? Dump them for extra cash.

14. Get a part time job- Get a weekend or part-time job to increase your income.

15. Use Netflix instead of going to the video store- You can save money on movie rentals and gas.

16. Cut your own grass/do your own yard work- You can save a bundle here, especially during the summer when the grass needs to be cut every week.

17. Cut out the dry cleaning/Do your own ironing- This is one I got out of doing, and need to start doing again. Buying wrinkle-free clothes can help here too.

18. Shop thrift stores & garage sales- You can find great bargains on clothes, household items, furniture, etc.

19. Take care of your things- Take care of your possessions, and they will last a lot longer, which means lower replacement costs.

20. Use the library- Got a book habit? Use the library-also a great place to brush up on personal finance topics.

21. Look for free entertainment/activities- Scour the paper and other sources for free activities for you and your family. Plan activities in advance.

22. Open a high interest savings account- such as ING direct, to earn interest from your savings.

23. Look for hidden recurring fees you can eliminate- Still paying for long distance at home when your cell phone plan gives it to you for free? Eliminate it.

24. Buy generic- Give generics a try, you probably won’t notice the difference, and can save money too.

25. Go vegetarian- A few times a week, that is. Meatless meals can be great, and cost less.

26. Use fans- Your a/c uses a lot of electricity, using ceiling or box fans can keep you cool during the hot summer and give your air conditioning a break.

27. Lower your hot water heater- You probably only use hot water a few times a day. Is your hot water heater on a high temperature setting? Lower it.

28. Raise your car insurance deductible- Do you really need full coverage, or a $250 deductible? If you have your emergency fund and can cover it, consider at least raising your deductible.

29. Ditch the gym membership- Start jogging, biking, etc. Try the hundred push ups challenge.

30. Go out for lunch instead of dinner- Instead of going out for dinner on a friday night with your spouse, try a lunch date on a Saturday or Sunday to take advantage of the lower prices at lunch time available at most restaurants.

31. Shop sales and shop for deals- Plan your purchases so you can keep an eye out for sales. We are often limited when we have to buy something at the spur of the moment.

32. Use coupons- Coupons can work, and save you money on a regular basis if you use them correctly and don’t buy things you don’t need.

33. Drive more efficiently- Paying attention to your driving habits, and where and how often you drive, can save you money on gas.

34. Plan your meals ahead of time- Take a look at what is on sale this week, and plan your meals around sale items such as meat, chicken, etc.

35. Cut back on socializing- You don’t have to stop all together, but cutting back on social activities, such as grabbing drinks after work, etc., can save you a few extra bucks a week.

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A little rain last night and this morning put a damper on the usual weekend outdoor activities, hopefully it will clear up. Otherwise, it may be a good day to go to the movies with the 4 year old!

I participated in 3 carnivals over the last week:

Taking Charge hosted the Carnival of Personal Finance #162-Baseball Edition and included my article “Developing a Burning Desire to Improve Your Finances-Part I-Motivation”

My favorites from the COPF were:

Not the Jet Set tells how the envelope system works and why it has been so successful for his family. I’ve never tried the envelope system but have been thinking about it; I may do it thanks to some great pointers here!

Five Cent Nickel discusses Consumption Smoothing and You-Save While the Saving’s Good. Interesting concept that makes a lot of sense! I’ve heard of oversaving, although I’m currently in no danger of it happening to me.

Shanti from Antishay Ventenne hosted the Festival of Frugality # 135-The Frugal All Over Edition and included my article ” Why Making More Money Trumps Spending Less in the End”

My favorites from the FOF:

My Two Dollars presented Save Money, Reduce Waste: Stop Buying And Start Borrowing A good reminder that many things can be rented at a significant cost savings.

Frugal Dad presented Detaching From Material Possessions a Sign of Emotional and Financial Maturity I think the Frugal Dad and I have had similar experiences, I went through a possession and monthly payment mentality for quite a while. Now I hardly want anything and get much more joy from my family and others.

Prime Time Money presented Frugal Vacations: Weekend Getaways that don’t break the budget. Good tips on planning a cheap getaway.

Help My Cash Grow hosted the Money Hacker’s Carnival # 21 and included my article “The Basics of Finding Ways to Increase Your Cashflow”

My favorites from the Money Hackers Carnival :

Frugal Fu presents Working Organics into Your Budget: Coupon Finds I will have to check these out, my wife buys horizon milk for the kids (it is great for traveling as it does not have to be refrigerated), so I will have to sign up for their coupons!

Harvesting Dollars presents Stages of Wealth Accumulation It’s always good to focus on the basics.

Other favs from around the blogosphere:

Steve at Bripblap had a great post with a career take on a football trade with A Shockey story. I live in New Orleans, so i really got a kick out of it! Hopefully the change of venue will help him(Shockey) grow up a bit.

Pinyo at Moolanomy shows us how to Lower Your Cost of Living the Geeky Way. OK-I admit it. I AM a geek. Just don’t tell anybody Using it to reduce expenses is great!

Tricia at Blogging Away Debt shows us Ways I Save Money-More About Being Resourceful. I love doing these types of things, creating something useful out of something else, or better yet, something you were going to throw away.

Patrick at Cash Money Life shows us How To Become A Millionaire- Step 1-Earn Money as part of a 5 part series.- Be sure to check out all 5 steps!

I read Nickel and Dimed- On Not Getting By in America after I read Scratch Beginnings-Me, $25, and the Pursuit of the American Dream by Adam Shepard. Since Scratch Beginnings was written in a response to Nickel and Dimed, I decided to read it and publish my review of it first; look for my review of Scratch Beginnings next week.

Nickel and Dimed- On Not Getting By in America by Barbara Ehrenreich is more of a social commentary than a personal finance book, but it does examine critical questions about the cost of living, low wages, and asks ” Can someone survive on minimum wage?” Barbara Ehrenreich, an accomplished author in her own right, meets with an editor of a magazine to discuss a piece for his magazine, and together they decide to experiment to determine if it is possible to live off minimum wage (or whatever entry level wage is available) for someone getting off of welfare and largely unskilled.

She decides to go to 3 cities, find the best paying job she can get, rent a place to live, work for a month, and see if she can pay for the next month’s rent. She will pretend to be a recently divorced homemaker, with little skill and not having any recent work experience -similar to someone coming off of welfare.

Key West

She begins in Key West, close to her home town. She looks for a job at hotels and grocery stores, but finally settles on something she wanted to avoid: waiting on tables. She starts in one restaurant, the moves to another. She learns about her co-workers lives, many of whom live in small apartments that they share, trailers, and some even in their cars. After a few weeks, her experiment in Key West ends the first day she tries to work a second job, as she goes to the restaurant in the afternoon, and gets overwhelmed and walks out.

Maine

In Maine, she finds a weekly motel rental, gets a job with a maid service, and a weekend gig helping out at an assisted living facility. working seven days a week. She manages to stick it out until the end of her month long experiment.

Minneapolis

In Minneapolis, due to a recent jump in rental demand, she has trouble finding an apartment. She ends up working at Walmart, staying at an expensive but very seed motel, and eventually, after not being able to fins a place she can afford, ends up quitting there too. But she did not take the highest paying job available, and it was difficult to decipher how hard she was trying to find somewhere more affordable to stay.

Thoughts:

While Nickel and Dimed was a pretty good book and well-written, I did not get the impression that Ehrenreich actually expected to succeed in her experiment. While in Key West, she quits her waitressing job, because it is too much after her 1st day working after she starts second job in the morning. While in Key West, she decides not to take a job at a Winn-Dixie because she does not want to deal with the “indignity” of a drug test, as she puts it. Later, in Minneapolis, she again rails on employee drug testing (because she had smoked marijuana in the previous few weeks) and decides not to take the test, then only does after she takes measures to mask it. Maybe she has been a writer for too long, neither in the blue-collar world or in white-collar corporate America, since she works as an author and freelance writer. Drug testing is common in many lines of work, and there is a reason for it: safety and liability. For someone working in a chemical plant, refinery, or construction industry, it is quite obvious of the safety concerns. But warehouses, and stores like Walmart and Home Depot, have those concerns as well. Someone who was “stoned” could pull a heavy box or item off a shelf and drop it on a customer’s head. Or drive a fork-lift in the back and damage something. Also, it is probably more difficult to visually detect if someone is stoned than if they come in reeking of alcohol, I would imagine. In her wrap up chapter, she calls drug testing a indignity that may violate the 4th amendment. I have had to take several drug tests in my lifetime, and if you have nothing to hide, I don’t think most people consider it anything but a very minor inconvenience. While working at Walmart, she talks of the workers organizing and tells some they should form a union; not surprisingly, since in the beginning of the book she tells how her husband is a Teamster (union) organizer. Her attitude towards the people she was working with seemed a little condescending as well. She mentions her education frequently and how she is in “good shape” and healthy (compared to people she works with), but complains at how working all day makes her body ache. The fact is ( and I know from experience after working manual labor for several years) is that you get used to “physical work” after a few weeks.

She does point out many hardships and difficulties for those who, whether lacking education or other reasons, have to start out at the bottom earning minimum wage. It is difficult to get by, and even harder to get ahead. I would not expect it to be easy, but I am not sure if Ehrenreich expected it to be quite so hard. I am also not sure if her experiment was long enough to tell, or if she gave it her full effort. However, many of the points she brings up are true. It is incredibly difficult, I would imagine, for someone who was born into poverty to break the cycle. Other factors such as being a single parent or not having an education can make it all the more difficult as well. But it is not impossible. Nevertheless Nickel and Dimed was well-written and may be worth reading just for that fact. If you have never worked in a low paying job before, it may open your eyes. It also points to the difficulties many have just paying for rent and food in this country, while making only minimum wage. But it just didn’t seem quite genuine to me, and her attitude towards some of her co-workers was unappealing as well.

With the advent of the cell phone, computer, and internet, anyone can start a small, part-time business these days. You can get a website or blog up and running in a matter of days, provide services over the internet, or sell a product or item all over the world on eBay. You can also go old-school and sell products, services, or knowledge in your local community. Starting a part-time side business can be a great way to supplement your current income, dip your toes into entrepreneurship, or to begin your journey towards becoming self-employed. Whether you are entering the field of e-commerce, moonlighting at what you do during your day job, selling on eBay, performing website design, or mowing lawns in your home town, there are several keys which can greatly increase your chances of creating a lasting, enjoyable, and profitable business.

Do something you are passionate about or at least enjoy

What are you really passionate about? Do you have hobbies? Can you turn them into a money making opportunity? Even if you are not passionate about something, you have to at least enjoy it enough to be willing to trade your time and energy for the money it provides. I know several guys who mow a few lawns on the weekends for extra spending cash even though they have full time jobs that pay them pretty well. Why do they do it? Because they actually enjoy it, to some degree, getting outside and getting a little exercise-or at least enjoy it enough for the money they make doing it.

Don’t wait for the perfect time

The perfect time will always be sometime in the future. Go ahead and start now. You will never have enough time if you wait until next year, or until your kids are a little older, or until you finish up that big project at work. A lot of people become successful at a business by just starting and working at it.

Create a plan

Starting a business or part time venture without a plan is akin to taking a long trip without a map (or I guess a GPS unit in this day and age). How many hours a week do you want to work? How much money do you want to make per month? What are your goals 6 months, 1 year, and 5 years down the road? These questions, and ones like them, need to be answered to provide you guidance with your venture.

Be prepared to work

Lofty goals are nice, but don’t expect to make a lot of money without putting in long hours and hard work. It can happen, but it doesn’t happen enough for it to be very likely. The majority of the time, being successful is directly related to the amount of time and energy you put in to a project.

Start small but think big

Starting small is great, you can start off working part-time, at your convenience. But don’t forget to think big. If you want to expand your part-time venture into a full-time one, you have to set goals with the big picture in mind. When the amount of work gets too much for you to handle by yourself, consider bring in another person or part-time help to assist you.

Don’t Forget to Market

No matter how small your business or service is, or how good or useful it is, you still need to market it to others. Make up business cards, print flyers, use word of mouth, or the internet to tell others about your business. Ever notice how much large, established companies market with commercials, ads, etc? There is a reason for it.

Image by EvinDC

This past weekend, I cranked up the BBQ grill (charcoal, of course) and grilled up chicken breasts, tuna steaks, beef round steaks, some bratwurst, boudin, and hot dogs for the kids. Basically, in about 2 hours, I cooked enough food for the main courses or base of about 10 adult servings, with about 4-6 servings left over for lunches, etc. I also threw some corn on the cob and eggplant slices on the grill as well. While I didn’t cook 10 entire meals on the grill (although if you read The Barbecue Bible by Steve Raichlen, it is possible to do) I did save a lot of time for my wife during the week, as all she had to do was reheat or do a quick prep with the cooked meat, and whip up some veggies; as well as saved money since: 1.) We planned our menu for almost the entire week-so no take-out, etc., and 2.) the chicken and tuna were both purchased on sale, the others relatively cheap anyway.

Here was the main dishes of our planned menu:

Sunday- Tuna steaks

Monday- Bratwurst

Tuesday- Chicken

Wednesday- Beef fajitas

Thursday- Grilled chicken salad

There were leftovers from the fajitas, as well as bratwurst that I ate during the week for lunch as well. Now of course, some of these items are not the healthiest, such as sausage, but I believe moderation is the key to everything, so indulging myself from time to time is not a big deal. (Plus, I really like sausage.) You can make this healthier by sticking to chicken and fish, grilling more veggies, etc. But for a change of pace and to keep your meal preparation time lower during the week, cooking outside on the weekends is a pretty good way to go if you ask me.

Image by bucklava

When I was younger, I feared different things at different times of my life, from the fear of the dark as a kid, to the fear of rejection when talking to girls when I was a teenager. I guess I ended up growing out of most of those, however. I guess I really don’t have too many fears these days, but I do worry about some things, so I guess you could call those my fears. In the not to distant past, I have worried quite a bit about money-related issues, so many of my fears had to do with or can be relieved by proper attention and planning with my finances.

What are your biggest financial fears?

I could list many more that you may or may not have, but you can see how many of them relate to money. For each of the money related “fears” listed above, one can take positive steps to insure they happen or don’t happen, to achieve the desired result and alleviate your fears. Planning for your future can eliminate much of the “worry” about these issues.

What positive steps can you take to alleviate those types of financial fears?

Afraid of losing your money in the stock market?- Develop a diversified portfolio and invest for the long term.

Afraid of becoming disabled and not being able to work and earn income? - Look into purchasing a disability insurance policy .

What are your biggest financial fears? What steps can you take to alleviate those fears?

Image by camshafter

As part of Mrs. Micah’s Single Step Personal Finance Challenge, I have decided to get aggressive with paying down my credit card debt. I recently built up an emergency fund, and I have been paying more than the minimum on my credit cards, but it does not feel like enough. I have a pretty significant amount of credit card debt as well, about $13,500 as of a few days ago. It was a little higher several months ago, but I have been taking steps to reduce it, by paying off more than the minimum and not using them except for gas purchases.

So how do I get this credit card debt “monkey” off my back?

Looking deeper in my situation, I have come up with 3 potential “plans” for eliminating my credit card debt:

Plan 1- Normal Payment Schedule - Paying a little above the monthly minimums (which is about what I am doing now)-$500/month.

Plan 2- Above Average Payment Schedule (Stretching it) - By tightening up my budget, trimming expenses, I could probably pay about $1000/month.

Plan 3- Aggressive Payment Schedule- paying over $1000/month, hopefully averaging about $1200-$1500/month.

Since debt elimination is a priority, I am going to follow Plan 3- an aggressive payment schedule, in order to try and eliminate this debt as quickly as possible. I plan on implementing a form of the debt snowball to accomplish this.

So how do I plan on achieving this goal? It is easy to say I want to do it, but where am I going to get the extra money?

First, and most critical, is not to incur any additional credit card debt. This is key.

Work Overtime-I have the opportunity at my job to work some overtime in the coming months, and I plan on taking advantage of this to boost my take home income.

Micropayments or Snowflaking- Taking any additional money,and applying it to my credit card balances as soon as it is available. I plan on selling some items on Ebay, cutting some expenses, and I have a few other ideas on generating more income.

Consider a 0% balance transfer- About $10,000 is on cards with interest rates between 10% and 15%. A 0% balance transfer could save me significant money over the course of the year, but I am not to keen on signing up for another credit card. I will have to look into and think about this one.

By combining the above actions, and following an aggressive plan, if I average $1500/mo in payments, I will have the balances paid off in appx. 9 months. I am going to chart my progress and provide regular updates here on my blog.

Any comments or suggestions?

It’s one of those hot, lazy summer weekends, where you don’t feel like doing a whole lot, especially outside. I got my yard work done this morning, and will be doing some grilling and let the kids play in the yard (probably involving the sprinkler!) once it cools off this evening.

I participated in 2 carnivals last week:

On Financial Success hosted the Festival of Frugality #134, and included my article “The Irony of the 3 Day Only, 50% off Salebration” .

My favorites from the festival:

Can you feed a family of 4 on $70/week? Find out with LivingAlmostLarge’s Hillbilly Housewife $70/week

Squawkfox’s Recipe: How to Make Authentic and Low Fat Hummus. My wife and I love hummus, and almost always have some in the fridge. Will have to try out a couple of these recipes!

The Budgeting Babe hosted the Carnival of Personal Finance #161, Feeling Renewed Edition, and included my article “Determining Your Next Action With Your Personal Finances”.

My favorites from the carnival:

So Sick of Debt announces that she’s DEBT FREE!

10 Commitments You Should Make for Your Own Financial Success by Ron at the Wisdom Journal.

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This Saturday marks a new feature on Think Your Way To Wealth, book reviews!

I may not have one every Saturday, but it will be at least twice a month. There are so many good personal finance books out there, and you can usually learn a thing or two from just about all of them.

A Million Bucks by 30 is Alan Corey’s story of how he reached his goal of becoming a millionaire. By living frugally, he managed to accumulate 1 million dollars by the time he was 29, beating his goal of becoming a millionaire by age thirty.

Alan Corey headed for New York City from the Atlanta area and took a job for a company as technical support. He lived very frugally, at one point eating ramen noodles for lunch every day for 3 months. In his determined quest to reach his goal, Corey came up with all sorts of ways to earn extra income, including appearing on several reality shows for freebies, a game show, and even appeared on the Jerry Springer Show in order to get a free vacation out of the deal. He lived off a fraction of his income, investing the max. amount in his 401k as soon as he started his job in NYC.

Even after he graduated, Alan Corey lived like a college student, taking a roommate in on his 1st real estate purchase, a one-bedroom apartment, which helped cover his mortgage payment.

The real basis of reaching his goal and the increase in his net worth came from real estate. After a couple of years, he rented out the one bedroom apartment, bought a duplex, and turned it into one large house with 6 bedrooms. He rented these out, and the rental income ended up covering his mortgage. Over the next few years, including the real estate boom of the early 2000’s, he bought several other properties(with partners), renovated them, and sold them for hefty profits. This boosted his net worth exponentially, until he hit 1 million dollars in net worth at age 29.

However, he also took frugal living to the extreme. The book is interspersed with some of his extreme tips on saving as well as not spending money. He hid money from himself, took advantage of free entertainment, put himself on an allowance, and frequently challenged himself to spend less and less money. Two of the more questionable ones I found amusing were: 1.) reusing popcorn bags at movie theaters on multiple visits, and 2.) getting a free umbrella from the lost and found from retail establishments! While these are a little too much for me, it shows how dedicated Corey was in his quest not to spend money, which was equaled by his desire to find additional income sources.

Thoughts:

A Million Bucks by 30 is actually a pretty good book. He gives a pretty detailed account of his life, the extreme frugality he employed, and how he bought and renovated several properties. He admits he reached his goal early due to the fast rise in real estate prices. However, his overall dedication to reaching his goal, and his endless pursuit of it, are the real reasons for his success. It is an easy read, interspersed with humor, and gives a true account of how one young man reached his goal of becoming a millionaire. It shows you that whether you invest in real estate, start a part-time business from home, or some other method, frugality and extra income are good ways to assist you in reaching your financial goals.