The Frugal Prof

Its Not about the Money. Its about taking charge

Dumb Stuff I Used to Buy and My Debt Free Action Plan

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How Does Debt Consolidation Work

Financial Freedom

The dumb stuff I bought last year.

The only way to get out of debt and cut spending is to get organized.

Looking at my credit card statements was the only way to analyze how much I was spending from online shopping.   So, it was time to look at the VISA, MasterCard and American Express bills.

  • *Disclosure: My aim is to recommend products that will truly benefit you.    I believe in transparency and want to disclose that I’ve included certain products and links to those products on this page that I will earn an affiliate commission for any purchases you make.

Going through my year-end credit card statements is like a compendium of all the dumb stuff I used to do:

  • Online shopping- Yes.
  • Food delivery-Yes.
  • Bored shopping- Yes.
  • Online shopping- Yes.
  • Restocking fees- Yes.
  • Storage Fees- Yes

I paid $100 as a restocking fee on a chair I bought and didn’t like.  It was a chair for my balcony and I regretted it after I ordered it.  I thought I needed furniture on my balcony.  Because if you have a balcony, you Need furniture on it.  Right?  Wrong.

It was an online purchase.  And an impulse buy.  I didn’t even realize there would be such a large restocking fee.

I paid $100 for a chair I don’t even have.  That’s pretty dumb.

 

I was smart enough to get cash back from Ebates, which is a great resource for discounts and cash back. They get a commission from stores that you shop at and they Share the commission with you. Its a great way to save money.  (More on Ebates here.)

 



Just because I have a balcony doesn’t mean I need to buy furniture for it.  This is a topic covered very well by the minimalists who have an interesting podcast I recommend.

 

 

 

Online Food delivery:   I spent $769 on the  food delivery service Postmates.   That’s like $70 a month for online restaurant delivery:  alcohol, burgers, Chinese, and pizza delivery.  It’s like a lazy tax.  I was tired and hungry and didn’t feel like getting in the car.  What a waste of money!

Related articles:

11 Ways to Earn More Money in 2018

Luckily, I now realize how dumb this spending is.  Also, I quit drinking about 6 months ago, so there will be fewer (hopefully no) future alcohol deliveries.

 

Charity

The one thing I didn’t spend enough on is charity.  There are some token charges here and there, but clearly it wasn’t a priority last year. And I’m going to change that.

I’m a big fan of Donors choose and a few other worthy charities.  I’m hoping to budget and give regularly next year.

 

In order to become debt free I needed to make major changes.  I had to create a plan.  Here are the steps I took to become debt free.  No more dumb shopping.  No more waste.  Just action.

 

Ray Krok Success Quote

 

2018 Goals:  Less stuff.  Fewer online purchases.  Pay off my car.  More charitable giving.

 

1.  Get organized:   Its nearly impossible to stay in debt if you’re organized.  For most people this means opening the credit card statements that are unopened in a box or drawer somewhere.  You can no longer hide in denial about the credit card debt or student debt that has accumulated.  By getting organized, you will be able to Take Charge of your personal finances.  You wont need a personal loan or any debt relief.

Right now, I’m reviewing my year end credit card statements from last year and i see so many charges that I have now cut out.  And I feel great about all the money I am not wasting.  But part of me is calculating how many thousands of dollars of money that just spilled out of my life simply by not paying attention.  Read more about the dumb stuff I bought last year.

 

2.  Create a Budget:

It doesn’t have to be fancy.  On one side is all the income you have coming in.  And on the other side is ALL the expenses you have going out.  Every dime!  Which means you must open the credit card statements and really understand where your money has been going.  One of the advantages of this exercise is that it allows you to find your areas of wasteful spending.

 

Relevant Articles:

The Best Personal Finance Books

44 Ways to Create Extra Income

It’s not about the Money.  It’s about Taking Charge.

 

3. Eliminate wasteful spending.

The most obvious wasteful spending for me was a storage locker I was paying nearly $100 a month for.  It made me so angry that I eventually began this journey and started writing this personal finance blog.  Use the old maxim, A Penny Saved is a Penny Earned.” and realize when you go through your bills that every wasteful thing that you have spent money on in the past that you don’t really enjoy, is earned money.  Don’t dwell on the money that you have wasted in the past.  Focus on your debt free future.  I was paying for auto renew memberships that I didn’t even remember.  Never again.

I began to explore our current consumer culture and why we buy what we buy.  This helped me explore why I was spending so much money shopping.  More on Consumer Culture here.

 

4. Negotiate Discounts:

For those services and memberships that you like but would like to pay less for, you need to contact the merchants and ask for a discount.  Yes, you can do it.  And yes they will give you discounts on your memberships:  Cell phone carrier, cable company, Satellite radio etc…  I have written a whole post about How to negotiate Discounts.

 

5.  Create an Emergency Fund: 

It’s easy to fall into debt when unplanned emergencies happen.  Unfortunately, life is full of unplanned emergencies.  That is why you need to set aside an emergency fund of at least $1,000 to start.  I have written an article on why and emergency fund is so important,  An Emergency fund is an umbrella for your life.

 

6. Increase Income:  Depending on how much leverage you want to achieve or how much credit card debt and student loans you have, it may be time to increase your income.  When I got really motivated to pay down my debt, I wrote financial articles for a financial blog and created this blog.  You may want to find a side hustle or side income.  I have written a number of posts about the best ways to increase income.  45 Ways to Boost your Income is one example.

 

7. Stay Motivated:  I found reading the book, The Total Money Makeover by Dave Ramsey to be incredibly helpful.  Yes, it lays out the framework he used to be become debt free.  But, the big benefit of the book is it gets you fired up to get out of debt.  It is very motivational.  And that is really helpful on the debt free journey.   Don’t take my word for it.  Read the Amazon reviews.

 

Conclusion:

It’s embarrassing to look back and admit all the careless and wasteful spending I was doing.  I wasn’t even consciously aware of most of it.  The great thing about this process is it allows you to take charge of your money.  And your life.

Upward and onward this year!

What about you?  What are some of your purchases that you regret?  Post them in the comments.

 

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How Long Have You Been Waiting to Say, We are Debt Free?

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we are debt free

Financial Freedom

In this post, I share the embarrassing amount of time I have wasted contemplating becoming debt free.  And I show you the steps I took to create a life beyond debt.  I am sure we can all agree that when debt is not a priority, it can simply accumulate and eventually it becomes a problem that needs to be addressed.

It is far better to attack your credit card debt or consumer debt now and soon you’ll be able to say, “We’re Debt Free.”

It just occurred to me that I’ve been putting off creating a budget and getting my finances organized for more than a decade.  Yes, a decade. You can imagine if I was able to tackle these issues earlier, I would have saved thousands and thousands of dollars.

What was I thinking?  Basically, I’ll deal with it later.  And later never came.  Read about my journey in How It All Began.

 

The steps you need to take to become debt free are pretty simple:

we are debt free

 

1.  Get organized:   Its nearly impossible to stay in debt if you’re organized.  For most people this means opening the credit card statements that are unopened in a box or drawer somewhere.  You can no longer hide in denial about the credit card debt or student debt that has accumulated.  By getting organized, you will be able to Take Charge of your personal finances.  You wont need a personal loan or any debt relief.

Right now, I’m reviewing my year end credit card statements from last year and  I see so many charges that I’ve been able to cut out.  And I feel great about all the money I am not wasting.  But part of me is calculating how many thousands of dollars of money that just spilled out of my life simply by not paying attention.  Read more about the dumb stuff I bought last year.

 

2.  Create a Budget:

It doesn’t have to be fancy.  On one side is all the income you have coming in.  And on the other side is ALL the expenses you have going out.  Every dime!  Which means you must open the credit card statements and really understand where your money has been going.  One of the advantages of this exercise is that it allows you to find your areas of wasteful spending.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

3. Eliminate wasteful spending.

The most obvious wasteful spending for me was a storage locker I was paying nearly $100 a month for.  It made me so angry that I eventually began this journey and started writing this personal finance blog.

Tips on how to start your own blog here.

“A Penny Saved is a Penny Earned.” – cut out every expense that is wasteful and you have earned money.  It’s really that simple.    Don’t dwell on the money that you have wasted in the past.  Focus on your debt free future.  I was paying for auto renew memberships that I didn’t even remember.  Never again.

I began to explore our current consumer culture and why we buy what we buy.  This helped me explore why I was spending so much money shopping.  Thoughts on Consumer Culture.

 

4. Negotiate Discounts:

For those services and memberships that you like but would like to pay less for, you need to contact the merchants and ask for a discount.  Yes, you can do it.  And yes they will give you discounts on your memberships:  Cell phone carrier, cable company, Satellite radio etc…  I have written a whole post about How to negotiate Discounts.

 

5.  Create an Emergency Fund: 

It’s easy to fall into debt when unplanned emergencies happen.  Unfortunately, life is full of unplanned emergencies.  That is why you need to set aside an emergency fund of at least $1,000 to start.  I have written an article on why and emergency fund is so important,  An Emergency fund is an umbrella for your life.

 

Cash surveys

 

6. Increase your Income:  Depending on how much leverage you want to achieve or how much credit card debt and student loans you have, it may be time to increase your income.  When I got really motivated to pay down my debt, I wrote financial articles for a financial blog and created this blog.  You may want to find a side hustle or side income.  I have written a number of posts about the best ways to increase income.  45 Ways to Boost your Income is one example.

 

 

When did I realize things were bad?  I created a rule- do not open a credit card bill on Fridays.  Why? Because my credit card bills Always put me in a bad mood.  Maybe you can relate to this.  Was that a warning sign?  Yes.  Should I have taken it more seriously?  You bet.

But, I’m doing it now.  I’m making progress.  It feels really good to be debt free.  I wish I did it sooner.

 

In this post, I have outlined the steps necessary to begin the journey towards becoming debt free.  Get organized, create a budget, reduce frivolous spending, create an emergency fund, and increase your income.  As with all things, getting out of debt will take some time.  But, with these action steps, you will be on the way to one day being able to say, “We are Debt Free.”

 

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Can I Buy a House: 5 Questions You Need to Answer

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Am I financially ready to Buy a House?

We can all agree that buying a house is a very important financial decision.  So, before you call your realtor or think about a mortgage, or even interest rates,  let’s discuss some of the important questions to consider when buying a house.   Can I Buy a House?

In this post, I will outline the 5 questions that will improve your chances of making a successful move into home ownership.  These home buying tips are a guideline that will prevent you from becoming house poor and drowning in a house payment you can’t afford.

House poor is a situation that describes a person who spends a large proportion of his or her total income on home ownership, including mortgage payments, property taxes, maintenance and utilities.

Let me be honest, these questions might annoy you.  But, whether or not you can buy a house really depends on the answers.  So, let’s begin.

 

Value Investing

 

I believe in a few guidelines for buying a house:

  1. Are you going to live in the area for 7 years?

  2. Can you afford a 20% down payment on the house?

  3. Can you afford to pay off the mortgage within 15 years?

  4. Is the cost of the home at or below 25% of your income?

 

Now, how do you feel about those questions?

If you’re annoyed with me, you might have House fever.  A house should be a blessing and if a home mortgage is too expensive for your budget, it can become a huge burden and become incredibly stressful on a family and on a marriage.

I get it: Real estate in many cities is very expensive: Los Angeles, San Francisco, Miami, and New York etc… Home prices are incredibly high due to low interest rates.

 

I don’t expect real estate returns to outpace the returns available in the stock market.  So, having a huge portion of your income going to housing as an asset is not recommended.

If you can meet the criteria I described above, then a mortgage won’t be a huge burden and you can also save for retirement and meet other financial goals like funding your kids college education.

But if you can’t, you are at risk of having too much invested in a home you may not be able to afford right now.  It may require more savings or even increasing your income.

In addition, once in a new home, many people wind up spending to upgrade the house, buy new furniture, etc…  And these additional expenditures can prevent you from paying down debt and being able to afford to save for retirement.  I am in favor of home ownership and realize that it is difficult in many expensive cities.

However, I am in favor of doing it the right way.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

I believe one should minimize debt before buying a house.  Getting out of debt and saving for a down payment are good exercises to get one started towards buying a house, condo, co-op, or any real estate.

I grew up in a medium size city outside of New York.  The economy has struggled.  The real estate market did not beat inflation.  Real estate was not a good investment for my parents or my friend’s parents.

If you didn’t allocate portions of your capital to other investments, businesses, real estate, and the stock market, then you are not in a good position financially solely due to your home.  This is not what that generation was told.  And it has been sad to watch many people struggle financially who did what they were told.

I believe in buying a home, but as a portion of an overall investment strategy.

Rent or Buy: For me personally, I’ve moved extensively in my life and have not owned a home.  I have done well in my investments – mostly in the stock market.  It does bother me at times when I pay rent, but it’s not a dollar to dollar comparison.  In order to purchase a home, I would need to allocate 20% to a down payment and then it would be a dollar to dollar comparison between rent vs. owning.  Also, I am not convinced I will stay in this city for the next 7 years.  So, I am following the same rules on, Can I buy a home.

 

 

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Every time I bought an expensive watch this happened

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I’ve only bought two really nice expensive watches.  One was a Rolex and the other was a Bulgari.  Each was purchased to celebrate a financial “win.”  

(Don’t tell daveramsey.)

And each time, shortly after my financial “win” came a drought.  The first time I went from a steady job into a new venture.  I went from a steady, reliable income to an unreliable income and lots of financial stress.  

The second time was after a fund that I was managing had a great year of out performance. This would allow me to grow my assets under management and bring in many new clients I thought.  It wasn’t that easy as it turned out.  

Each time, instead of creating a buffer for myself (i.e. an emergency fund or stability fund), I was in need for income shortly after splurging on something I decided I deserved.  

Work hard and reward yourself.  That’s the way it was.

I was doing really well and needed to show it.  I think this is pretty common for men of a certain age, and it probably applies to women too.  Perhaps a certain piece of jewelry or expensive bag or purse.  

The truth is over time we change.  Our tastes change.  Do I love these watches the way I used to?  Not really.  My favorite watch is a bright yellow sport watch I wear on weekends.  It cost $50.  

And the truth about the expensive ones is that you worry about them.  I keep them in a watch winder.  I worry about them when I travel.  They’re expensive and valuable.  Except if I wanted to sell them, I would be disappointed in their real value.  

If my business has another great year, I’m unlikely to get a new Rolex or Breitling.  Am I becoming wiser as I age?  Or have I finally appreciated the value of things?  

We work hard and we want to reward ourselves.  We want to show our successes.  

I’m a big fan of cash right now.  Cash always gives you options.  

What are your thoughts 👍

7 Helpful Tips To Creating a Budget and Become Debt Free

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debt reitre invest

Financial Freedom

 




Basic Budget

What I learned creating my budget:

In this post I will review some basic steps to getting organized and creating a budget.  I will outline why having a buffer in your budget is important to keep you motivated to become debt free and stick with your plan.

The first two steps of getting out of debt are pretty simple.  It is simple to get out of debt.  But not easy.

 

1.  Get organized:

Its nearly impossible to stay in debt if you’re organized.  For most people this means opening the credit card statements that are unopened in a box somewhere.

I started this process.  I read every credit card statement.  It had to be done.  By getting organized, I was able to Take Charge of my personal finances.  Once you do this, you wont need a personal loan or any debt consolidation to save you.  You will be saving yourself.

As I review my year end credit card statements, I see so many charges that I’ve cut out.  And I feel great about all the money I am no longer wasting.  But part of me is calculating how many thousands of dollars of money that just spilled out of my life simply by not paying attention.  Read more about the dumb stuff I bought last year.

 

Value Investing

 

2.  Create a Basic Budget:  Income vs. Expenses

It doesn’t have to be fancy.  On one side is all the income you have coming in.  And on the other side is ALL the expenses you have going out.  Every dime!  Which means you must open the credit card statements and really understand where your money has been going.

One of the advantages of this exercise is that it allows you to find areas of wasteful spending.  I was spending way too much on designer clothes.  (More on that here).

By creating a basic budget you begin to clearly see the financial picture.  And the good news is that if you don’t like what you see, then you can begin to make positive changes.  You are taking control of your financial life.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

3. You can’t out earn your spending

This year, I finally realized that I need to:

  • get more organized,
  • budget,
  • plan,
  • and take charge of my money.

 

For most of my life, my plan was to “out earn” my spending   And I should add I am an excellent investor.  More on that here.

I realize now that it is impossible to “out earn” my spending.  I don’t think anyone can unless you are naturally frugal.  And I am not.  Spending was the reward for making money.  I have outlined my struggles with spending in this post.

Take my word for it, you cannot “out earn” your spending.  It cannot be done.

 

4. You need a buffer in your budget:

The reason for the buffer in your budget is for all the stuff you have to buy that comes out of  nowhere that will drive you crazy. Some examples are below.

 




Budget example: 

I had to pay Microsoft $69 to keep using Outlook.  They sent me an email that basically said if you dont upgrade, you’re email is not going to work anymore.  Really?  Did I have a choice?  Yeah its only $69, but that’s the little stuff of life that adds up and over time we wonder, Why am I not making more progress?  Why am I not getting our of debt?  Why do I never have any money left at the end of the month?  That’s why.

Want another example: car registration $213. Every year. For every car.

Every month there are expenses that come up that are unexpected, but still have to be accounted for.  Having a buffer allows you to stay on track for these unexpected payments.  (This is not to be confused with an emergency fund.  (More on that here.)

Creating a budget will help you become organized and better prepare for these little charges.  Once you get organized and know where your money is going, you can actually prepare for things like paying taxes and still have money left over to pay down debt or start investing.

creating a budget

Its about taking charge of my money

Once you start creating a budget and watching your expenses you can feel a sense of control over your money and your life and that’s a great feeling.  I wrote about this in the post, It’s Not about the Money.  It’s about Taking Charge.

5. Cut out anything that doesn’t add value:

The next step is to cut out the purchases in your budget that aren’t adding value to your life or your family’s life.  For the budget items that you decide to keep, you should be negotiating discounts and saving money on many of these services.  I wrote a post about how I negotiated discounts on many services I subscribe to in the post, Negotiating Discounts on the Way to Debt Free.

I’m getting on top of my budget now.  So, I’m looking at every little charge and cutting back on anything that doesn’t add value.

The point is that all those charges that come up like

  • medical deductibles,
  • anti-virus programs,
  • cell plan charges,
  • parking fees,
  • uber to the airport,
  • checking fees,

They’re coming and we have to prepare for them in the budget in order to stay motivated.

 

6. Create Extra income

Increase your Income:  Depending on how much leverage you want to achieve or how much credit card debt and student loans you have, it may be time to increase your income.  When I got really motivated to pay down my debt, I wrote articles for a financial blog and created this blog.  You may want to find a side hustle or a source of side income.

I have written a number of posts about the best ways to increase income:

 

7. Personal Finance is Personal:

So, the only logical thing to do is plan to save a little more ie have a buffer for things that come up unexpectedly in your financial life..  The reason is really more psychological than personal finance.

The buffer is to make sure you don’t get discouraged.  If you’re trying hard to save money in a month and you get three $70 charges hit you out of nowhere, its reasonable to be discouraged.  Don’t get discouraged.

So, my advice is cut  back a little extra and its game on.  Also, increasing your income is a great way to add a buffer in your budget and pay down debt faster.  More on income opportunities.

 

My attitude: I’m gonna win with my money.  Whatever it takes!

 

 

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How It All began- Life After Debt

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What made me begin this debt-free Journey?

In one of my favorite books on personal finance, there is a quote that reads, “A part of all you earn is yours to keep.”  It is true.  It is wise.  But it only applies if you have a budget and decide to keep a part of what you earn.

Otherwise, all that you earn goes to consumer purchases, credit card debt, student loans, and new restaurants.   At some point, it becomes necessary to take back control of your money.  In this post and in this blog, there are lessons that I learned the hard way.  Learn from my mistakes and advice.

 

*Affiliate Disclosure: This post contains affiliate links.  Business partners may compensate me for inclusion on this blog, but I strive to only partner with quality businesses and the reader pays nothing.

 

Life after Debt:  How it all began

 

I had had Enough

It wasn’t a huge bill.  It was $162.  The storage place I had been using decided that I wasn’t paying Enough.  It wasn’t a big deal when I started renting my storage unit.  It was less than $100.  I believe it was $97.

And here I was staring at a letter from them explaining that $162 for a storage locker seemed fair to them now.

$162 for a storage locker?  Now, mind you I had never even visited my “stuff” at this place.  It just sat there.  And every month on my credit card bill I paid $97 because that’s the way things are.  What else could I do?  And this wasn’t nice stuff or expensive stuff.  It was yearbooks, photos, baseball cards.  The stuff you accumulate in a life of accumulating stuff.  I tried to negotiate, but they explained that they were more expensive than other storage places because they have air conditioning for my stuff.  My stuff got the first class treatment.  I felt even worse.

I admit I kinda snapped.

Not immediately.  But in November around Thanksgiving after listening to one too many Dave Ramsey podcasts, I just said no more.

No negotiating.  Not a lower rate.  Zero.  Zilch.  NADA.  I WAS DONE.

I wasn’t paying another dime to these folks.  It was lazy and stupid and wasteful.  My baseball card collection at best was worth $2,000.  So, a year in this place cost me $1,944.  No Way.  No more.  I took a bunch of garbage bags and cut everything down in half and threw it out.  And took 6 boxes home with me that night.  The next morning I cleaned out the last 6 boxes and ended my contract.

Savings: $1,944

Frugal tip:  when you show up with bags and take boxes home, they will negotiate.  More tips and strategies on negotiating discounts.

For me, it was way too late.  I was done.

 

 

It was amazing.  I felt so great.  My expenses were in my control.  Every penny that goes out on my credit card bill was under my control.  I wasn’t paying another dime unless it was something that was actually adding value to my life.  I started cutting back and creating a budget.

 

Related Posts:

How I paid off $17K in Debt

How to Create Fast Cash with Ebay

Do I Regret the $600 Concert Tickets?

 

I have a few extra boxes in my home from cleaning out the storage locker and will try to reduce and sell off these items on Ebay. Tips on how to create fast cash on Ebay here.

I’m on a bit of a minimalist kick right now anyway, so having fewer items in my life is fine for now.  Less clutter.  More space.  More financial freedom.

That’s what got me started. And from there I paid off $17K in debt in one year.

How did I do it?

 

So, here we go.  Thank you for being part of this journey

 

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