Tuesday, January 25, 2011

Day 103 - Step 9: Set A Goal

January 25, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the ninth in a series of posts about my Twelve Steps to Debt Freedom.
Step 9: Set A Goal
Filomena Scalise / FreeDigitalPhotos.net
If you are ready to move on to Step 9, stop for a minute and congratulate yourself.  You have conquered the toughest part of the battle.  You have figured out you have a problem and taken significant action towards correcting it.  The remaining steps are downhill from here.

So now that you have created your budget and analyzed your finances, what are you going to do with this knowledge?  You know you want to pay off your debt but do you have any idea how long it might take?  Now is the time to start setting goals for your self with respect to your debt payoff.  Now is the time to figure out exactly what you want to accomplish.  Here are four tips to help you get started.

Make your goal measurable.   Don't just set a generic goal to "pay off your debt".  Figure out exactly how much you want to pay off and how much time you think it will take.  Be specific so you are able to measure your progress and feel a sense of accomplishment.  My goal: Pay off $60,000 in debt in 365 days.  Prior to setting this specific goal, I paid off $22,000 in 18 months - nothing to sneeze at.  But now that I have a time frame and a specific amount to pay off, I have paid off $22,000 in 3 months!  Maybe it's my competitive nature or fear of failure, but I truly feel quantifying my goal by adding a time frame and amount to it has made all the difference.

Make it a "stretch" goal.  What amount of debt can you pay off with minimal effort?  Now either pick an amount beyond that or consider paying it off in a shorter time frame.  Accomplishing your goal should take some extraordinary effort beyond what is easily accomplished.  Otherwise it's not a goal - it's more like waking up every morning and congratulating yourself for tying your shoes.  Challenge yourself.

Write it down.  This part of goal setting has really been beaten to death by so many people.  But guess what - it freakin' works!  If writing it down on a piece of notebook paper sounds pointless, get creative.  Keep track of your progress in a journal, make a giant poster, start a blog (sound familiar?), write yourself a letter.

Keep track of your progress.  I may be classified in the slightly nerdy category for thinking this is important, but I LOVE to track when and how much debt I pay off each month.  Seeing a debt balance move quickly to zero - like in my Debt Tracker - reinforces the progress I am making and gets me very excited and confident about reaching my goal.  If you are more of a visual person, draw a thermometer with your debt payoff goal at the top..  For each debt payment, color in a portion of the thermometer to represent your progress.

Setting a goal prevents you from falling into what I consider ignorant bliss.  Lack of thought or action about your goals and your future is dangerous to your well being.  What happens when you choose not to think about the food you put in your body?  Most likely you will gain weight and wake up one day with significant health problems.  What happens when you don't think about the debt you owe?  Well, you probably will never get rid of it and wake up one day with significant finance problems. 

You are never too old to set another goal or to dream a new dream.  - C.S. Lewis

What's your goal?  What's your dream?  Leave a comment and let me know!

Stay tuned......

Read About Step 10: Stop Using Credit Cards

Monday, January 24, 2011

Day 102: Wanna Be A Guest Writer?

January 24, 2011
So You Wanna Be A Guest Writer....
Image: Keattikorn / FreeDigitalPhotos.net
Do you have any personal experiences or tips and tricks related to getting out of debt that you would like to share?  The $60K Project would love to hear your stories.

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Posts work best on the $60K Project that are relevant to my overall topic—becoming debt free.  Topics in which I'm particularly interested right now include (but aren't limited to):
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Friday, January 21, 2011

Day 100 - Step 8: Cut Back Where You Can

January 22, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the eighth in a series of posts about my Twelve Steps to Debt Freedom.

Step 8: Cut Back Where You Can
Image: renjith krishnan / FreeDigitalPhotos.net
Day 100 feels like a huge milestone to me.  Partly because of the fact that I have actually stuck with a difficult task for 100 days, and partly because we have made so much progress.  In the past 100 days, Mike and I have paid off the same amount - $22,000 - that it previously took me 18 months to pay off.  Talk about progress!  A word of advice: When it comes to the Twelve Steps to Debt Freedom, don't expect to get everything right immediately.  Each step I discuss includes advice based on the mistakes I have made up to this point.  I hope to pass it along so that it doesn't take you as long as me to figure out how to pay off your debt.  Now, on to Step 8: Cut Back Where You Can.

I spent some time looking back at my archived posts where I discussed the spending cuts Mike and I made to our budget.  On Day 18 I discussed our budget for the month of November.  We decided to completely cut cable TV, eating out and spending money that month.  Day 25 talked about my previous budgeting habits and how I cushioned my spending categories so much I was living a relatively good life with a lot less progress on my debt payoff goals.  During the mid- month report on Day 32, you can see that there were even more cuts to the budget for unnecessary items like a wine club and an online fitness tracker.  Finally, you will see we hit some rough patches in December (see Day 51) but weathered the storm and made it through the holidays.

Now that you have your budget down on paper, it might be time for you to do some expense cutting of your own.  A few words of advice:

Don't expect to get it right the first time.  Although most of us are used to a lifestyle that includes instantaneous access to most everything, don't think that you are going to be able to get the right expense balance immediately.  It has been 100 days since we really got serious and it has only been in the past couple of weeks that our budgeting habits have really started to click.

A budget is not something you create once.  In the past, my attempts at budgets were the "one size fits all" method.  I tried to make every month's expenses fit into this one specific mold.  In my opinion, this is just a waste of time that results in never looking at the budget again after a few months of failure.  Recognize that what you spend in December is most likely very different from what you expect to spend in August.  Rather than creating one budget, review your budget every period and tweak it for expenses you know will be happening and those you might be able to put off.  Your budget should be a living document that you revise every period, not just at the beginning of your plan.

If you budget for it, you will probably spend the money.  I used to budget about $200 a month for "spending money".  Guess what? I always spent it.  Now, the term "spending money" is banned from our household and I don't carry "spending money" cash around.  And guess what?  I decreased our total expenses by $200.  I know it is tempting to cushion your budget just in case you might need it.  But that cushion was an underhanded way for me to continue with my poor spending habits under some sort of ridiculous justification that it was all right because it was in the budget.

Make your new lifestyle into a habit rather than a sacrifice.  I never thought I would get used to a lifestyle that involved this amount of reduced spending.  I just figured it would be miserable until all of the debt was gone.  Surprisingly, I actually feel good.  I don't feel as deprived or miserable as I did a month ago.  Paying off the student loan a few days ago actually reinforced our new behavior and gave us additional momentum.  Just remember that new habits don't form overnight - it might take about....ohhhhh.......I'd say maybe 100 Days!!!
We are what we repeatedly do.  Excellence then, is not an act, but a habit. -Aristotle
 Be excellent today.  Stay tuned.

Read About Step 9: Set A Goal

Thursday, January 20, 2011

Day 98 - Word of the Day

January 20, 2011

awe-some-sauce [aw-suhm-saws]

What is the definition of awesomesauce?
Urbandictionary: a beautifully assonant phrase which can and should be used on any occasion where joy and elation are expressed.
Wiktionary: The essence of awesomeness.

Can you use it in a sentence? 
"The fact that we just completely paid off another one of our debts is so totally awesomesauce!!"* 

*No, really -  Check out the updated Debt Payoff Tracker and Mike Student Loan #1 balance - zero baby!)

Do people seriously use this word in real life conversations?
Only cool people.  And people who live in Awesometown - aka Valencia, CA.  Shout out to my girl, Pepper. Woot!

Variations on awesomesauce.......
Awesome possum; awesome saucem; awesome squared; awesome to the max; awesome tots; awesomepants.

What is the opposite of awesomesauce?

Now go forth, pay off your debts and smother yourself in awesomesauce.

Stay Tuned,

Tuesday, January 18, 2011

Day 96 - Step 7: Make A Budget (Part II)

January 18, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the seventh in a series of posts about my Twelve Steps to Debt Freedom.
 Step 7: Make A Budget
Image: Michal Marcol / FreeDigitalPhotos.net
Let me start by giving you major props for continuing to slog your way through a two-parter on making a budget (haven't read Part I yet? Click here).  Anyone who has made it this far in the Twelve Steps to Debt Freedom has a high probability of obtaining debt freedom based solely on their tremendous will power and perseverance.

To help you get through both parts of this step and provide a hands on experience, I have provided a link to the 60K Project Budget Template that I use during my budget discussion.  I have also embedded the template into the blog post so you can play around with it.  I don't learn much from reading alone - I have to dig in and actually try something out before I start to get it.  Hopefully making the template available will make it easier to understand how this step works.

Part II - Non-Recurring Expenses and Take Home Pay

Non-Recurring Expenses.  These expenses should be handled exactly the same way as the recurring expenses you worked with in Part I.  The only difference is that expenses in this category should be ones that you do not expect on a regular basis.  Think about upcoming personal commitments you may have during the period - gifts, fines, haircuts, emergency vet bills.  You can also apply the same analysis you did to your recurring expenses to determine whether any of these items could be removed or reduced.  From my experience, most of the non-recurring items are unavoidable expenses in the period.  Otherwise, you would have put off including them until you absolutely needed to pay.

Actual and Variance.  No surprises here - track the actual amounts you paid for your non-recurring expenses.  The spreadsheet has a built-in formula to automatically calculate the variance between budgeted and actual.

Total.  The row labeled 'Total' should only reflect your total expense amounts - both recurring and non-recurring - for the period.  This should automatically calculate for you in the spreadsheet.

Paycheck.  Input your take-home pay for the period in this row.  Take-home pay should reflect the amount actually deposited in your bank account and excludes money taken out for tax, 401(k), insurance or anything else.  This is because you want your budget to reflect the actual amount of money available for you to use during the period.

Total Income.  This row reflects the total take-home pay during the period if you have more than one income source.  This amount should automatically be calculated for you.  Note that the amount is the same as the Paycheck row because there is only one source of income during the period.

Net.  This is a very important number.  Net reflects the amount of money (if any) that you have left over after accounting for all of your expenses for the period.  If you notice a negative amount here, get ready to start cutting expenses - you don't have enough money this period to pay everything!  In addition, the Net amount may be that extra amount you need to apply towards your debt.  Maximizing this number is in your best interest.  For us, we have to make sure our Net amount is at least $800 at the end of the second half of the month in order to cover all of the bills due during the first half of the month (all but one bill is due during the first half of the month).  All of this hard work is so you can hopefully find some way to reduce expenses or increase income - meaning increasing the Net amount!!  Meaning extra money to use to pay towards debt!!

Bank Balance Reconciliation.  This section really helps me because a lot of times my budget spreadsheet doesn't reflect what is in my bank account.  This is a quick reconciliation to figure out why.  Usually it is because a check I wrote to someone two weeks ago still hasn't cleared.  Another time I had a calculation error in my budget.  Taking the time to complete this section allows for a check to make sure the numbers seem reasonable.  You will eventually make a mistake - try to catch it quickly.  This reconciliation is one way to help.

Future Periods.  Each period I create a new tab and use the prior period's ending balance as the next period's beginning balance.  I'm basically rolling forward the remaining balance each month.  The template I provided shows January Part I, January Part II and February Part I.

What Else?  Wow, you should get an award for getting to the end of this step!  If you look half as good as the girl in the photo above who supposedly has a headache, then you are way ahead of me!  Remember that you should really find a process that works for you - don't just follow my directions.  Download the 60K Project Budget Template and change the format, content or time period reflected so it fits your fact pattern and you get something out of this exercise.  Make it pink and purple, add a graphic or motivational quote, make it your own!  You will need this template for Step 8 so don't throw it in the fireplace yet!

Let me know how you improved the budget process I described so I can share with other readers.  There is always room for improvement so let me know!

Read About Step 8: Cut Back Where You Can

But first, stay tuned for some comic relief.........I'm feeling 12 Steps overload.

Monday, January 17, 2011

Day 95 - Step 7: Make A Budget (Part I)

January 17, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the seventh in a series of posts about my Twelve Steps to Debt Freedom.
Step 7: Make A Budget
Image: Arvind Balaraman / FreeDigitalPhotos.net
You probably didn't expect the budget part of this exercise to be all the way at Step 7!  I thought it was important to be mentally prepared, well organized and in possession of a roadmap before tackling what is usually referred to as the 'dreaded' budget.  But if you think about it, you should already have most of the information you need - take home pay, expenses, pay period - from completing Step 4: Get Organized.  The hard part is already done - now all you need to do is some additional analysis.  I have broken this post up into two parts - don't be intimidated by the length and decide to forget the plan altogether.  Trust me, most of your work is done.  Now you just need to use your head a little bit.

Just remember your ultimate goal: Pay off debt.  In order to do this, you need to either reduce your expenses or increase your income (or both).  While working on Step 7, keep your goal in mind if you start to feel frustrated or confused.  You can do this.

Part I - Opening Balance and Recurring Expenses

Put everything on paper.  After you have decided the best time period to look at your spending habits (e.g., monthly, bi-monthly, pay periods), it's time to try to get a feel for your spending patterns.  This might be better explained with screen shots.  I created a sample of the budgeting tool I use every pay period and have included screen shots and explanations.

Sample Budget - Opening Balance/Recurring Expenses
1. Bank Balance.  This budgeting tool is very similar to your checkbook register.  You want to make your starting point your bank balance as of the beginning of your budget period.  In this example, the budget period is 1/1 through 1/15 so the opening balance is from 12/31.  Make sure you take into account all purchases that haven't yet cleared your bank account.

2. Recurring expenses.  List out what you think your recurring expenses will be during that period - meaning any expense you expect to see on a regular basis.  Utilities, rent, car payment, insurance, gas, etc.  Look at old bank statements to help you remember.

3. Budgeted.  Next, determine how much you think you will spend on these recurring expense items during the month.  This amount will go in the 'Budgeted' column.  Some of the amounts should be easy to determine since it shouldn't change from month to month (for example, rent).  Other amounts you will just have to take your best guess.  Don't worry about getting it perfect.  You will find that you will get better at it as the months go on.
Analyze your recurring expenses.  Now that you have everything on paper, do you see any expenses listed that could potentially be reduced or removed completely?  For us, this was a monthly wine club, cable, and an overpriced gym membership.  Do you have any expenses that automatically come out of your paycheck each period that you haven't necessarily thought about?  Now is the time to pare down and free up as much money as you can so that you can apply more to your debt - that is what this budgeting exercise is all about.  Worst case scenario?  You cancel your cable and a month later realize you can't survive without it.  You can always get it back!  This is also a great time for you and your partner to put your heads together and make these tough decisions.  It will be a tough meeting but you will feel great when it is over.

4. Actual.  As you go through the period, update the 'Actual' column to reflect the actual amounts you spent on your recurring expenses.  Don't wait until the end of the period to do this - it is in your best interest to be aware of your actual spending habits versus what you thought they were.  I update my 'Actual' column a minimum of every other day.  The color-coded boxes I have at the top are to track expenses with the entire amount paid, expenses that will still likely increase during the period, and expenses that have not yet been paid during the period.  This helps me to easily see where my remaining expenses for the period might be by highlighting the text in the appropriate color.  In the above example, it is the end of the period so all expenses are final - so everything is typed in black.

5. Variance.  The 'Variance' column is just a way to easily analyze your budgeted versus actual spending.  In the example above, you can see that I under-budgeted for gas and electric by about $60.  I realized that because San Diego had a chilly December, our heat and fireplace usage was fairly significant, resulting in a much higher bill than months where we don't need heat.

Read About Step 7: Make A Budget (Part II)

Saturday, January 15, 2011

Day 93 - Mid-Month Report

January 15, 2011

Mid-Month Report

The first and fifteenth of each month I will update you on the status towards our goal of paying off $60K in one year.  

** Check out the Real Time Debt Tracker!!!  Keep up to the minute tabs on our debt balance and whether we can pay it off in 365 days!

This month we were slightly under budget and didn't really have any unexpected expenses come up.  It felt surprisingly easy to stay within our budget this pay period.  I think this is partly due to the fact that the holidays are over, but I also think we are getting used to the reduced budget.  Eating in more and spending less is starting to feel like a habit rather than a sacrifice.

Scheduled Payoff of First Debt:
As soon as Mike gets paid (just a few more days), Mike Student Loan #1 will be gone!!  THIS FEELS SO GREAT!  We are ahead of our original schedule by about a month.

Increased Income: We decided a long time ago that once Mike's first student loan is paid off, the monthly minimum payment of $134 that I have made will now be used for monthly expenses.  Although this decreases the total amount going to debt, I think we could really use this extra money.  Plus, with the increased income we will receive from the payroll tax reduction (which we will use for debt), we will not end up applying less to our debt each month.

Payroll Tax Decrease:  The amount of payroll tax taken out of your paycheck in 2011 decreased 2%.  For us, this equates to about $250 in extra income a month.  Since we never included this amount in our monthly expense budget, we are going to apply that extra money to our debt payments.  If we do it now, we should never notice a difference since our budget has always excluded this extra income.  We'll reassess next month and see how this is working.

Challenges: Nine months left to pay off $37,373 (after Mike's payment in a few days). This equates to approximately $4,152 a month in debt payments.  We know that we currently can't pay that much a month towards debt.  But the bright side is that when we calculated this last month it was closer to $4,252.  If we can find about $500 extra a month to apply to our debt we should be right on track.  By continuing to put extra money towards debt this should continue to go down and (hopefully) result in our goal of paying off $60K in one year.  Any ideas???

Upcoming Significant Expenses: Physical therapy, vet appointment and doggie meds

Additional Cutbacks: No new cutbacks to speak of.  We feel like we are living without many extraneous expenses.  The only additional cutbacks we foresee are when we have an unexpected expense come up.

Stay tuned,

Wednesday, January 12, 2011

Day 90 - Step 6: Create/Follow A Plan

January 12, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the sixth in a series of posts about my Twelve Steps to Debt Freedom.

Step 6 - Create/Follow A Plan
Image: nuttakit / FreeDigitalPhotos.net
Feedback?  Before I get started on discussing Step 6, I would like to know if any readers want to share their experiences or stories about working on the 12 Steps To Debt Freedom.  Feel free to either comment directly on the post if you have a suggestion.  Also think about whether  you would like to be a guest writer for my blog and discuss your experiences with other readers.  As always, you can send me an email.

Now for Step 6!  Are you ready?  Have you been able to get through the first five steps?  I recommend completing steps 1 through 5 before continuing on with the program.  Don't worry, I'll wait..................

Ok, fine.  For those of you who can't stand the suspense, now is the time when you get to see some action!  Up until today, all of your work has been to prepare you mentally for the challenge ahead and also to help you get organized.  You should now be ready to find or create a plan that best fits your needs in terms of achieving your goal to get out of debt.

Why is a plan so important?  In my opinion, it creates a sense of definitiveness.  In other words - Steps 1 through 5 really focused on the Who?, What? and Why? aspects of your debt free goal.  The next step is to figure out When? and How?  Notice those last two are very active questions while the first three are more focused on a fact finding mission.  Knowing that you want to accomplish a goal is one thing, but knowing how to proactively tackle a goal is the key.  There are a lot of Thinkers in this world but not nearly as many Do'ers.  The right plan is your bridge to Do'erville.  Not to be confused with Farmville, the popular Facebook app that is a complete and total waste of your time.  Not that I would know anything about wasting a bunch of my time playing that ridiculously addictive game........ok, moving on!

How do I find the right plan for me?  Obviously, I'm a little biased because I think The Total Money Makeover is a work of genius.  But prior to finding Dave Ramsey, I can't even begin to count how many other personal finance plans I read about or tried to come up with on my own.  From Suze Orman (Young, Fabulous and Broke) to Robert Kiyosaki (Rich Dad, Poor Dad) to David Bach (Smart Women Finish Rich).  From paying for everything with a credit card to paying for everything with cash.  The key here is that there is nothing wrong with any of the advice these experts have given - it just hasn't been the right fit for me at the time.  If anything, I have learned quite a bit about personal finance by trying to figure out which financial habits work for me and which don't.  The right plan for you is the plan that works, plain and simple.  How do you figure out if it works?  You TRY.  You TAKE ACTION. You DO.  You may not find it on your first, or even fifth try, but the knowledge you gain from your efforts will be worth it in the long run.  And eventually you will find the right plan for you.

I've found a plan I want to try.  Now what?  Time to cross that bridge to Do'erville.  Don't just read the book and move on.  Gradually start to implement the ideas into your lifestyle.  I don't recommend diving in and going cold turkey - that type of extreme change always seems a little too overwhelming and discouraging for me.  Write down the goals you want to accomplish and the time frame you expect to implement each part of your plan.  Keep a journal, a calendar or any other kind of written documentation to help keep you accountable.  Then just follow the plan's steps (aka "DO") and see what works.  Keep in mind that often you learn just as much from failure as you do from success.  If you find something isn't working for you, take note of what you have learned about yourself and move on.

Good luck with your search!

Read About Step 7: Make A Budget (Part I)

Tuesday, January 11, 2011

Day 89 - Food For Thought

January 11, 2011

Image: Boaz Yiftach / FreeDigitalPhotos.net
 I LOVE eating out.  I think my next life will involve traveling around the world as a food critic.  Mike and I used to eat out on average four to six times per week, depending on our busy schedules and degree of laziness.  It's not just about the food for me - it's the whole experience including ambiance, service and good company.  I grew up in a family notorious for spending a considerable amount of time gathered around the dinner table even after the food was long gone and the waiter refused to bring any more iced tea refills.  I thought this behavior was typical of most families until I went off to college on the West Coast and met people who actually shoveled food down as fast as they could and left the table before the thought of a good conversation could even begin - insert *horrified* look here.

It wasn't until Mike and I went cold turkey on eating out that I finally realized how much money we actually spent at restaurants on a monthly basis.  Prior to our dining hiatus, spending anywhere from $30-$80 on a decent meal seemed reasonable.  For some reason the light finally switched on in my head this week.  We easily hand over five hundred dollars a month for meals out.  Yikes!!  Imagine how much less debt I would have if I had actually thought about paying $500 extra dollars a month.

The AHA! Moment (Took Long Enough......)
Since I received a restaurant gift card for Christmas from the partners in my office, Mike and I decided it was finally time to use it.  We ended up having a great evening eating at one of our favorite restaurants.  We each had a beer and split a salad to start.  Mike ordered the Sloppy Joe and I ordered the Fish Sandwich.  The bill came to $60 including tip and the gift card was for $50 so we spent ten bucks for the tip.  Typical nice meal out.

A trip to the grocery store the next day is when the high price of eating out actual hit me.  We typically plan our meals for the week prior to hitting the store to prevent frivolous spending.  Total bill for five days worth of food (breakfast, lunch and dinner) for two people: $75.84.  I'm still not sure why the fact that our Saturday dinner out costing almost as much as a week's worth of groceries is such a revelation to me all of the sudden. 

Why is this obvious comparison so important to me?  It helps me realize that I am starting to pay more and more attention to my spending habits rather than just blindly purchasing at will.
Image: FreeDigitalPhotos.net

We have worked hard to stop eating out and get our grocery bill to a reasonable level while at the same time maintaining healthy eating habits.  A few changes we made:

Don't just settle for the nearest grocery store.  We used to shop at Von's - a typical gigantic supermarket with everything you could possibly imagine at your fingertips.  It was very easy to walk out of there with a bill between $150-$200.  My parents stumbled upon a store called Henry's Market.  It's a small chain of natural food stores that carries locally grown produce (organic and conventional) as well as grass-fed beef and hormone free dairy.  Think mini Whole Foods including a mini price.  High quality produce is surprisingly inexpensive.  We even opt for organic for certain fruits and veggies that tend to be more susceptible to pesticides (see the Dirty Dozen).  Although not everything here is cheaper than a megastore, I believe the smaller size and limited selection also aides in reducing our spending.

Plan your meals for the week.  Figure out what meals you are going to eat during the week.  Make sure that some of your meals are quick and easy for those days you come home from work exhausted.  And either make enough to take for lunch the next day or be proud to wave that PB&J sandwich around in a bind.  By figuring out exactly what ingredients you need for the week, you limit extraneous spending on items you don't necessarily need.  I believe it also provides less spoilage when each item you buy has a purpose.

Use coupons.  I have to admit this is something I have never done on a regular basis.  I tend to find coupons lead me to purchase something just because I have a coupon and not because I really need it.  But some people swear by coupon clipping and end up purchasing items for mere pennies.  Something I would definitely like to learn more about if anyone has any experience.  Guest writers, anyone?  Send me an email.

Check out the sales.  Knowing that we want to incorporate fresh veggies into every meal, I tend to pick based on what is on sale that week.  Learning when produce is in season will also help you predict the best items to buy.  One good example is grapes:  some weeks they can be $0.88 a pound versus $2.99.  Huge price difference.  Might want to reach for the pears this week.

Become a flexitarian.  Flexitarian just means semi-vegetarian.  I don't think I will ever be able to give up cheeseburgers and juicy steaks, but I have considerably cut back on my beef (and other meats) intake.  Explore other protein-rich options such as beans, quinoa, peanut butter, veggie burgers, hummus, Kashi cereals and greek yogurt.  These are healthy options that will also trim your grocery bill when substituted for animal protein.

Be thoughtful about the food you buy.  Don't let anyone convince you that you can't eat healthy and cheaply at the same time.  Bigger does not always mean better.  Pay attention.  Keep that debt free goal in mind.

Stay tuned,

Monday, January 10, 2011

Day 88: Step 5 - Educate Yourself

January 10, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the fifth in a series of posts about my Twelve Steps to Debt Freedom.

Step 5 - Educate Yourself

Now that you have gathered and organized all of your financial information, it's time to figure out what to do with it.   Rather than going blindly into creating some sort of budget for yourself, take the time to become a human sponge and start learning finance and budgeting basics.

Read, read, read.  And then read some more.  There are so many books on budgeting and personal finance it is almost ridiculous.  Head to your local bookstore or library and browse through all of your options.  Find a few that speak to you and dive in.  DON'T walk out of the bookstore with $200 worth of new books - that kind of defeats the purpose of your debt free goal.  Many libraries now have an online search function - search from the comfort of your home and put a request in for the books you want.  The books will be sent to your local library if they aren't there already and you will be notified when they are available.  Key word: FREE!  If you aren't sure where to start, ask your friends, librarian or Google for recommendations.  Tip: Don't assume that what you are reading is correct or the best way for you to become debt free.  Always read with a skeptical eye and question what you are being told.  Often you will learn more about personal finance from those people you disagree with.  A few of my favorite personal finance books:

The Total Money Makeover: A Proven Plan for Financial FitnessPersonal Finance For DummiesThe Millionaire Next Door: Surprising Secrets of America's Wealthy Debt Free For Life: The Finish Rich Plan for Financial Freedom

Embrace Social Media.  There are some pretty amazing people out there talking about their own experiences and frustrations with personal finance.  Jump on Facebook or Twitter and do a key word search to find people writing about debt.  There are also numerous bloggers writing about the best way to tackle debt.  And don't forget podcasts!  The best part about social media is that it is portable.  Most of the time you can access everything from your phone so if you find yourself sitting around with some free time while you are out and about, take this opportunity to read up on the people you decided to follow.  A lot of times, I listen to podcasts through my headphones while I am at work or during my commute.  Tip:  Subscribing is the best way to follow social media.  Information is sent directly to you to read - no need to search every day.

Surf the Web.  These days, most information is just a few keystrokes away.  Make an effort to read the financial sections of newspapers (Wall Street Journal, New York Times) or check out online magazines related to personal finance (Money, Kiplingers).  Even CNN and MSNBC both have pages devoted to money.  You may not understand everything you read but the fact that you are exposing yourself to financial topics will pay off in the long run.  Tip:  Not all newspapers or magazines will fit your needs.  Some are geared towards people who already have a lot of money and are looking to invest; others are just filled with a bunch of crummy advice.  Take some time to figure out what works best for you.

Share Your Thoughts.  Once you become more comfortable with personal finance concepts, start talking to people.  Ask questions, discuss ideas and options, brainstorm.  This will further develop your understanding and also help you find like-minded people who are also interested in improving their financial situation. 

Read About Step 6 - Create/Follow A Plan

Sunday, January 9, 2011

Day 87 - Step 4: Get Organized

January 9, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the fourth in a series of posts about my Twelve Steps to Debt Freedom.

Step Four: Get Organized
Image: jscreationzs / FreeDigitalPhotos.net
The first three steps I discussed are all meant to prepare you mentally to pay off your looming debt balances:
Step 1: Admit You Have a Problem
Step 2: Take Responsibility
Step 3: Get Everyone On The Same Page

Now it's time to finally take some action!  Each section below offers advice on how to become more informed about your income, expenses and debt.  This isn't the time to start making a budget (don't worry, it's coming soon).  But I think this is one of the most important steps to your success.  It is time to sit down and take a look at your financial situation and truly understand what is happening.  Each section provides some general advice about becoming more informed.  For those of you who feel ready to do even more, I also included some advanced tips.  If you feel ready to tackle the advanced stuff, go for it.  If not, don't worry about it.  So let's get organized!!

Income: Do you know how much money you take home each pay period?  By "take home" I mean the actual amount deposited in your checking and savings accounts after taxes, retirement and insurance are taken out by your company.  If you are not sure, don't worry.  You are definitely not alone.  But get ready to become informed and take more control.  Find your pay stub and take note of that amount.  Double check other pay periods to make sure that your pay is consistent.  WRITE IT DOWN!  I don't care whether you use an Excel spreadsheet, a piece of notebook paper or the back of a napkin.  This is a very important number that you should commit to memory.

Tuesday, January 4, 2011

Day 82 - Step 3: Get Everyone On The Same Page

January 4, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the second in a series of posts about my Twelve Steps to Debt Freedom.

Step Three: Get Everyone On The Same Page
Photo by Paul Martin Eldridge / FreeDigitalPhotos.net

Now that you have embraced Step 2 and taken responsibility for your situation, you have reached a critical point in your debt free process.  Realize that you can't do this alone.  Based on my experience, support from the people in your life is of utmost importance.

For example, part of your attempt to reduce expenses may likely decrease travel, entertainment and dining out.  Your friends may think you are crazy when you start turning them down for the weekly Happy Hour ritual.  Your family may become upset when you tell them you can't afford to fly home for [insert any holiday/event here].  Your husband or wife may freak out when you tell them you don't want to pay for cable or dinners out anymore.  Believe me, I spent one year working on my debt by myself and did fairly well.  But when Mike and I decided to join forces we began to do remarkably better - just check out the Debt Tracker in the corner!
Sharing your goals with the people closest to you introduces a sense of:

Accountability - Now that I am accountable to someone other than myself it tends to remove the desire to slip up and buy that latte or lunch out.  When I know I will have to explain my purchases or ATM withdrawals to Mike, it creates a system of checks and balances and discourages me from being lazy.  Any respectable person may be more inclined to "cheat" on their budget (we're only human after all) if they have no one looking over their shoulder - just like when the plate of cookies in your office break room disappears but you never actually see anyone eat one!  Put the plate next to your desk instead and see what happens.

Support - Face it, you can't do this alone.  You are going to need someone to help you through the tough days and tell you to walk away from the really cute dress you saw at Banana Republic (even if was on sale!).  If your family and friends are naysayers and think you are crazy, look elsewhere.  There are many discussion groups online that revolve around getting out of debt.  At one point, I listened to Dave Ramsey's three hour radio show EVERY DAY to help keep me on the right track (there is a one hour podcast version for those of you who aren't slightly crazy like me).

Understanding - If people don't know you are trying to cut back on spending, they are still going to invite you out to events where you will be encouraged to spend money.  Remove the temptation.  By explaining to them the situation beforehand, they may be a little more sensitive to your needs.  Plus your success is a great way to encourage your friends and family to rethink their own spending habits.

Think of the people who matter to you most and are your biggest supporters.  Give them a call this week and let them know what you would like to accomplish.

Read About Step 4: Get Organized

Monday, January 3, 2011

Day 81 - Step 2: Take Responsibility

January 3, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the second in a series of posts about my Twelve Steps to Debt Freedom.

Step Two: Take Responsibility

Once you have mastered Step 1 by admitting you have a problem with debt, the next step in changing your thought process is to own up to it and take some responsibility.  Based on my own experience, my parents unknowingly exposed me to financial issues from a very early age.  We lived on credit cards, lived paycheck to paycheck and had utility cutoff notices stuck to our front door on a regular basis.  If there was ever a windfall (and there rarely was) it was always used to play catch-up on late expenses.  My parents couldn't pay for college yet I was still expected to obtain a college degree at a highly ranked school even if it meant taking on significant student loans.  So what did I do?  I went to college, got a credit card, ran up a balance and took out multiple student loans to pay for it.  Once I finished graduate school I leased a brand new car, continued to use credit cards and was on an interest only student loan repayment plan.  I thought I was living the high life.

It took me until about age 30 to realize that carrying $100,000 in debt wasn't exactly smart living.  I realized that despite my accounting degree, I was completely in the dark about basic financial principles.  There were so many people I could blame for my predicament - my parents, the car dealer, my school counselor, the loan officer.  But eventually I learned that regardless of the situation, the only person who can really look out for my best interest - and who is most interested in fixing it - is me.

So what advice do I have for those of you who may be facing a similar situation now or sometime in your future?
1. Don't just take other people's word for it.  Make sure you really understand a situation before jumping into it.  That person approving you for a mortgage loan has an alterior motive aside from "helping" you.  Your parents generally mean well but may not have the knowledge to put you on the right track.
2. Don't waste energy by blaming yourself or others.  Channel that energy towards a solution. Regardless of who is to blame, you should focus on what you will do to change going forward.  Rather than focusing on blame, focus on change.
3. Take responsibility sooner rather than later.  The longer you wait, the more difficult it may become to make financial changes.  More debt, kids, weddings or life may just get in the way.

Read about Step 3: Get Everyone On The Same Page

Sunday, January 2, 2011

Day 80 - Step 1: Admit You Have A Problem

January 2, 2011

I have developed a guide to help you achieve the mindset and principles required to successfully become debt free.  This is the first in a series of posts about my Twelve Steps to Debt Freedom.

Photo by m_bartosch / FreeDigitalPhotos.net
Several readers have sent me emails discussing their desire to become debt free, but the idea sounds so overwhelming to them they don't even know where to start.  My own mother goes into a fit of panic at the thought of paying bills - even if she has plenty of money in the bank.  How do we overcome our fear of finances?  Twelve Steps to Debt Freedom provides a structured process that will help you create not only a plan for paying off your debt but will also ensure you have the right mindset to feel confident enough to succeed.  Remove your fear of the unknown and take control of your financial situation.

Step One: Admit You Have A Problem
To some of you, this first step may sound slightly familiar.  I will admit that my program is very loosely based on other Twelve Step programs for various addictions.  In a sense, exhibiting a pattern of excessive spending habits could be considered an addiction.  Or a lack of knowledge.  Or somebody else's fault.  Regardless of your justification for debt, you must first admit that carrying this debt is a problem in your life - whether the amount you owe is $500 or $500,000.  

Debt results in unnecessary stress, limited freedom of choice and restricted cash flow.  That brand new car may be nice to drive around, but that $600 monthly car payment won't feel so good when you decide you want to make a career change.  You can't change jobs - you need to make your car payment!!  That vacation to Hawaii sure was fun.....until you got the credit card bill that adds 19% interest to your already expensive airfare and hotel costs.  I have experienced both of these scenarios and I assure you I felt nothing but remorse afterwards.

Sadly, the examples I just gave are standard fare for most Americans.  Consumer spending is a significant percentage of the United States Gross Domestic Product.  As a result, messages of "spend, spend, spend" surround us especially during periods of economic downturn.  Remember when we were all encouraged to purchase American cars at zero percent interest in order to do our part to help our country?  On top of this increasing pressure, any attempt to keep up with the Joneses usually results in an excessive spending spree (come on, we've all done it!).

As part of accomplishing Step One, I ask that you take a step back and become more aware of your spending habits.  Do you consistently spend more than you make?  Do you splurge on high dollar purchases or are you slowly throwing your money away five dollars at a time with your latte addiction?  Do you see any problem with consistently purchasing items on credit (if you don't, then I suggest you stop reading now)?  How many credit cards are in your wallet?  How much do you put in your savings account and 401(k) every month?  Do you feel stuck because of your financial situation?  Does spending money fulfill a need for something else you are lacking in life?  Jot down your thoughts - getting in the habit of writing things down is a good habit to start now.

If you are beginning to see some unhealthy spending patterns or negative consequences as a result of the debt you owe - congratulations!!  This is the first step to debt recovery!  You can't fix a problem unless you admit you have one first.  Now, introduce yourself to the group, grab a donut from the back and look forward to graduating to Step Two: Take Responsibility.

Read All About Step Two: Take Responsibility

Saturday, January 1, 2011

Day 79 - New Year's Revolution

January 1, 2011

Image by Filomena Scalise / FreeDigitalPhotos.net
No, there isn't a typo in my title - that 'V' should definitely be there.  I have spent many years of my life coming up with a list of resolutions to pursue at each turn of a new year - anywhere from the standard "eat healthy and go to the gym more often" to the more obscure "take a metalsmithing class".  I am grateful that each new year brings a built-in time of reflection on life and the direction it has taken the past 365 days.   

This year I want to do more than reflect - and I challenge you to do the same.

Dictionary.com defines resolution as:

res o lu tion [rez-uh-loo-shuhn] - noun.  a resolve or determination.

In terms of New Year's resolutions, you probably thought about what you would like to change in your life in the next year and then made a list of things you would like to accomplish.  Great start - so now what?  It's time to start a reVolution.

Day 79 - January Report

January 1, 2011

The first and fifteenth of each month I will update you on the status towards our goal of paying off $60K in one year.

** Check out the Real Time Debt Tracker!!!  Keep up to the minute tabs on our debt balance and whether we can pay it off in 365 days!

Scheduled Payoff of First Debt: We are still on track to pay off Mike Student Loan #1 by mid-January which is almost a month early.  Thanks to the Christmas bonus and not giving in to unnecessary expenses during the holidays, we are ahead of our original plan.
Challenges:Creating a budget tracker that works for us.  We have been through multiple versions of budget tracking and I think we FINALLY found one that will work for us.  Since I get paid the 15th and last day of every month, we started tracking all of our expenses on a bi-monthly basis.  For example, I have a spreadsheet that details our estimated expenses for January 1-15.  As we spend money on certain items, I track the actual amount spent compared to the budget and also calculate any variance.  Any leftover money gets rolled over into the second half of the month's budget - January 16-31 - which is a new tab in the spreadsheet.  This is especially important for us since most of our expenses fall during the first half of the month.  Our second half spending budget is based on having enough money left over at the end of the month to roll into the next month's bills.
Upcoming Significant Expenses: Desk chairs, physical therapy appointments
Additional Cutbacks: Monthly massages are on hold but physical therapy is now recurring so this is pretty much a wash.  Still have the housekeeper.  I'm holding out as long as I can on that one!

Stay tuned,
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