Developing a Debt Pay-Off Plan September 26, 2009

There seem to be 3 major types of Debt Pay-Off Plans. We borrowed heavily from all 3, without really knowing it! I was just thinking about how we’ve “stolen” ideas from so many different sources, and incorporated them into our “money philosophy” when I ran across this article on MSN. Liz Pulliam Weston talks about the 3, and adds a 4th, types of Debt Pay-Off / Reduction Methods:

1.) The Debt Snowball. We learned about this when we went through Dave Ramsey’s Financial Peace University, but we had already been kinda doing it. You order all your debts from the lowest balance to the highest. While still paying the minimums on all the other debts (I usually rounded my payments to the nearest $5, just so I felt like I was making more progress! , you pay as much extra on the smallest balance debt as possible, until it’s paid off. Then, you roll that payment into the minimum payment on the next smallest balance, and pay as much on that until it’s paid off, etc. etc. If you need a big hit of “yay, I did it!”, this is a great way to go.

2.) The Debt Avalanche. You arrange all your debts according to interest rate, and pay off the highest rates first. This saves you more money in the long run than the Snowball.  But it can be challenging if you don’t get something paid off right away, and you start to get discouraged.

3.) The Debt Snowflake. I suppose this can be done simultaneously with either the Snowball or the Avalanche. As you trim expenses, or use coupons and rebates, you send the amount you saved towards your debt. I want to start doing this, because I use a TON of coupons! It would really add up! (As a side note, you can do this to beef up your savings accounts, too!)

4.) Debt Calving. This is the one Liz Pulliam Weston made up. As you get large chunks of money that don’t really have to go anywhere, use it to pay off your debts!! (I would really hope that this was common sense, but….) This is the main reason we were able to pay off our $15,000 loan 15 months early. (Yay for us!!) Kelly-Shane and I both got unexpected bonuses in the last few months, and that KILLED the loan!!

Even before you pick a plan, you have to get serious about paying it off. Which means, no more adding to your debt!

Our plan changed a bit, so it’s important to keep in mind that you CAN be flexible as your situation changes. Here’s a bit what it looked like:

Student Loan:  $350.00
Scooter: $2,500.00
Visa: $5,800.00
Credit Union Loan: $9,000.00
Car: $13,400.00

So the Student Loan had a minimum of $50, and we were paying $165 (extra squeezed from the budget). When that was paid off, we added the $165 to the $110 minumum on the Scooter. In 2 separate months, we got bonuses of about $4000 and $3000. Instead of paying off the scooter, and moving on to the Visa, we decided to knock out the Credit Union Loan, since it’s minimum payment was $545. We figured, having that much cash freed up would be much more helpful! Then, just last week, we got a lovely $5000 gift that I put towards the Visa, bringing the balance down to $528. That payment took the place of the payment that’s due on the 1st of October; I will be paying on the Scooter, then, $165 (from the SL), $110 (regular minimum) and $135 (minimum from the Visa). This is all out of our 1st paycheck. Then, with the 2nd paycheck, I’ll pay off the rest of the Visa, since this is when the CU Loan USED to be due. So, the plan is a little liquid, and subject to change.

Whatever you choose, though, make sure you can stick with it! If you’re a person that needs instant gratification, or at least a little psychological boost, the Snowball might be best. If you’re a numbers person, and are more interested in NOT paying interest, then try the Avalanche. And while you’re doing that, do the Snowflake, the Calving, and Bringing in Extra Money from my last “tip”!

Bringing in Extra Money September 22, 2009

This “tip” can be worked simultaneously with either the previous “tip” (limiting your out-going money) or  the next “tip” (paying off / down debt).

If you’ve already cut your budget to the bare minimum (hey, I’ll have to do a post about budgets…) and there’s still a gap, you need to bring in extra income.

-Interjection- I don’t think I’ve mentioned this, but it’s worth mentioning here: You won’t be able to pay off your debt if you’re still adding to it! Make a commitment to STOP using credit! If you have a gap between income and expenses, fill it by making extra money, NOT by charging. Moving on:

* Sell some stuff: The easiest way we made extra $ was selling stuff on Craigslist and ebay. We sold car parts, books (books are easier to sell on Amazon), clothes, Gavin’s old baby toys, kitchen stuff, my excess PartyLite inventory… it was amazing, the things people buy! If the weather’s nice and you have the space, try a yard sale. On Craigslist, always check the “Wanted” section, too. Some people just post what they want, but never check what’s listed for sale. Or, you’ll run across someone wanting something you have, but didn’t think about selling.

* Get another job: We never really got second jobs, due to our schedules. We could have, but didn’t want to spend anymore time away from Gavin than we already were. But it could work for you if you have the right situation. If you already work the proverbial 9 – 5, try looking for a job with more “exotic” hours. Coffee shops are open pretty early, and some are open late in the evenings. If you can do it, paper routes are REALLY early! Delivering pizzas could be a good choice, since you’ll make tips, too. Just don’t forget to factor in the cost of childcare, if that’s an issue. Also, if it interests you, look into a direct sales company, such as PartyLite, Mary Kay, etc. These can be SUPER flexible, and really fun! I liked selling PartyLite, but I think my timing was off . ($4 per gallon gas, anyone? No one was buying candles!) Direct selling isn’t for everyone, but there are people that eventually replace their “real” jobs with it!

* Use your skills. Kelly-Shane did odd computer repair and car repair gigs. Check the “Gigs” section on Craigslist! I found a tutoring “gig” on Craigslist as well! You can get really creative with this. Like the 8 year old kid who advertised picking up dog poop. I have several friends that make Hair Clips and Hats for kids to sell (The hair clips and hats are for kids to wear. Not for kids to sell). One friend even has her clips at a couple different kids’ shops around Portland! Of course, there are supply costs involved, but if you already have a crafty hobby, this could generate extra money. Etsy.com is a great site that lets you sell your hand-made goodies! Facebook is a good marketing tool, as well. You can set up a page or group just for your items, or just post pics and prices on your own page.

* Paid Survey Sites: Ok, seriously, don’t laugh. Alot of them aren’t worth your time, but some are good. Obviously, at $1-ish per survey, you’re not going to be replacing your day job! But if you have a few extra minutes, you can make a couple bucks a day. Here are the sites I like:
1. MyPoints.com You earn points for online shopping at selected merchants. Obviously, this is only a good deal if you would be doing it anyway! They also have coupons you can print, and you earn 10 points when you redeem them, plus like 25 points if you redeem 10 coupons in a month. They send bonus emails, like a few a day, that you open to get a few points, and more points if you buy the product or service. Again, only worth it if it’s something you’d buy anyway.
2. SurveySpot.com Most surveys have an entry into a sweepstakes as the reward, but some are $1 – $5. I usually don’t bother with a survey unless there’s a cash incentive.
3. Lightspeed Panel These surveys reward points that can be used to buy a bunch of different items, or redeemed for cash via Paypal. The surveys on this site tend to be about new products and  TV or print advertising. Occasionally they’ll have in-home product testing, which is kind of cool. Once, we got a 12 pack of Charmin TP to test, plus something like 1000 points (almost $10).
4. OpinionOutpost.com Again, rewards points that can be redeemed for a check. Checks usually come in less than 2 weeks.
It should be pointed out that all the survey invitations are sent via email. You may want to set up a separate email just for signing up for surveys. Some people have complained about getting a ton of spam, but I haven’t had any problems. I also have Gmail, which has a wicked-good spam filter.

Oh, yeah, if you have a regular job where overtime is an option, that would be much easier than finding a second job. Just saying!

That’s all I can really think of right now… I’d love to hear other people’s ideas!

~April

Cutting Expenses September 17, 2009

I was thinking of the best way to get this started. Probably, a few steps and tips to get a handle on your finances? While what we did may not be “right” or “advisable”, it worked for us. No matter what advice the gurus spout out, if it won’t work for you, or you can’t work the plan, it’s not right.

The first step, I guess, to getting a handle on your money and getting out of debt, is to stop spending more than you earn. The first place to look is unnecessary expenses, like clothes, eating out, movies, stuff like that. Here are some of the things that we cut:

* I used to get pedicures and acrylic nails done with a friend every 2 weeks. That was one of the first to go!

* We had Netflix, like $8.99 a month, cuz we were horrible about returning movies on time! We ended up canceling that, and renting movies at the library. Most are free, but some of the new releases are like $.25 a day. Or something like that.

* I love buying toys and stuff for Gavin. And it’s justifiable, right, if it’s for your kid? But then I realized that he had a ton of “stuff” and only really played with a handful of favorites. So I quit buying him stuff.

Next, take a look at your “necessary” expenses. Gas, groceries, utilities…

*Cell Phone:  I know, I know, anyone that you ask for financial advice will tell you to dump it and get a prepaid phone. Well, for one, you’d end up paying a cancellation fee. Not good. We just looked at our plan and made sure it was the right fit. We had a family plan with 1400 minutes, and we used like 400 minutes. So we just switched to the next plan down, which had 700 minutes. It’s still a little expensive, cuz we have a texting plan and data plans. But we use them, and they’re both vital to Kelly-Shane’s job. So we’re keeping the texting and data!

* Internet: Again, most people will say “dump the high-speed”! If you can get by with a slower, cheaper connection, go for it! Maybe try Clear? We have Comcast, and tried to switch to Clear, but we couldn’t get a good enough signal at our house cuz of this big hill.  We ended up sticking with Comcast (cable internet and basic cable, cuz they can’t shut off the tv part, or something…). And again, it’s not a “luxury”, we HAVE to have it for Kelly-Shane’s job.

*Insurance: If you have multiple policies with different companies, think about getting quotes to have ALL of them with the same company. We have 2 cars, the scooter and our renters with State Farm. Generally, you’ll get a multi-policy discount. And I think alot of companies give a discount if you have the payments automatically withdrawn from your checking account. Just make sure you have the money in your account! Also, look into raising your deductibles. Just make sure it’s an amount your comfortable with spending, if you need to! That could drop your monthly premiums quite a bit.

*Gas: Well, what we did PROBABLY won’t work for everyone! This is how Kelly-Shane got his scooter. He was driving 50 miles everyday in his 1970 Plymouth Station Wagon. We spent about $30 every other day in gas. Do the math: that’s roughly $450 a month! Even though we had to finance the scooter, we’re saving money during the month (probably not so much in the long run, cuz of interest, but I haven’t run the numbers). The payment is $110, and he only spends $40 in gas a month. Not to mention it’s MUCH more eco-friendly!   Also on the subject of gas, we became much more consciencious about our driving. We combined alot of trips, and tried to only go “up to the store” (Fred Meyer at the top of the hill in Oregon City) 2-3 times a week. It didn’t always work out, but we cut down our trips alot. Plus, not so many impulse purchases at the grocery store! We’re still working on that one: trying to plan out more than 1 or 2 days worth of meals at a time.

It’s still really a work in progress. One of the biggest issues for me: being content with what I have. I love to shop! Sometimes, it just feels good to spend money that isn’t planned out to the last $.50. Especially when there hasn’t been any money TO spend! But I worked really hard to… train myself, I guess?… to just be OK. We had everything we NEEDED. Everything else I just WANTED. And it was always nice to step back, look at the big picture, and go “This isn’t permanent. We’ll be done soon, and everything will be much better!”

My brain is pretty fried right now, and I think I’ve forgotten some things I want to add. I’ll catch it up later. I think my next topic will be about bringing in extra money.

~April

Voodoo Money September 16, 2009

I kinda stole this name from my husband. He started a site last night called Voodoo Buddy, referring to all the mods and upgrades he’s done to his Genuine Buddy scooter. He and some other people got the nickname because no one really knew what they were doing, they were using parts not meant for a Buddy, and generally figuring things out for themselves.

I sort of feel like that’s how we started our approach to handling money: we didn’t really know what we were doing, picking and choosing what seemed to work, and figuring it out for ourselves!

Here’s the background:

My husband and  I got married when we were both 20. We were high on love and all that, and didn’t really think about our finances. We had no budget, even though my mom nagged me to do one! Shortly after we were married, (I’m talking like 2 months, people!) we were both out of work. And it just seemed like we were scrambling for a foothold for months and months. Of course, in the meantime, we were using our credit cards for survival. Then, after a bit of steady work, we had the amazing opportunity to open a coffee shop with 2 of our friends. At this time, I think we were 23 years old, had no savings, and generally had no business starting a business! The business went well for a while, then not so well, then not at all. Kelly-Shane worked at the cafe full-time (not cashing a paycheck for the last like 4 or 5 months) while I worked at Wells Fargo and then at my dad’s cabinet shop. We simply couldn’t hold on any longer without a second income. And we had been using the credit cards, again, to survive. Not to mention the debts we had from the cafe itself. Fast forward a bit, and we’re working pretty decent jobs, but have major payments on all those debts. And a baby! So in December of 2007, we got a personal loan at a Credit Union to pay off all those cards. That loan would have been paid off in December of 2010, but we did it YESTERDAY!! Which prompted the start of this blog.

I don’t pretend to know all the answers. We’ve learned so much over the last few years, and a friend suggested I should be a “financial advisor for young people”. I’m not quite up for that, I think, but I figured I could try to write up what we’ve done to get ourselves out of debt, and hopefully someone will find something useful in all of it!

~April