The Frugal Prof

Its Not about the Money. Its about taking charge

How Does Debt Consolidation Work

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How Does Debt Consolidation Work

Financial Freedom

 

How Does Debt Consolidation Work

 

How Does Debt Consolidation Work:  In this article, I will cover the definition of debt consolidation, how it works, and why it’s not a smart option for you.   In addition, I will address the risks involved with debt consolidation.  In the end, they offer debt solutions, but create many more risks and problems.

 

What Is Debt Consolidation?

Debt consolidation is the combination of several unsecured debts—payday loans, credit cards, medical bills—into one monthly bill with the illusion of a lower interest rate, lower monthly payment and simplified debt relief plan.

But here’s the reality: debt consolidation promises one thing but delivers another. That’s why dishonest companies that promote too-good-to-be-true debt relief programs continue to rank as the top consumer complaint received by the Federal Trade Commission.(1)

Consumer Debt Levels

The Demand for Debt Consolidation:

Americans’ total credit card debt continues to climb in 2017, reaching an estimated $905 billion — a nearly 8% increase from the previous year — according to a NerdWallet analysis. [1]

And the average household that’s carrying credit card debt has a balance of $15,654. Households with any kind of debt owe $131,431 (including mortgages), on average, the data analysis found.

Value Investing

How does debt consolidation work:

Here are the top things you need to know before you consolidate your debt:

  • Debt consolidation is a refinanced loan with extended repayment terms.
  • Extended repayment terms mean you’ll be in debt longer.
  • A lower interest rate isn’t always a guarantee when you consolidate.
  • Debt consolidation doesn’t mean debt elimination.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

Problems with Debt Consolidation:

When you consolidate, there’s no guarantee your interest rate will be lower.

The debt consolidation loan interest rate is usually set at the discretion of the lender or creditor and depends on your past payment behavior and credit score. Even if you qualify for a loan with low interest, there’s no guarantee the rate will stay low. But let’s be honest: Your interest rate isn’t the main problem. Your spending habits are the problem.

Lower interest rates on debt consolidation loans can change.

This specifically applies to consolidating debt through credit card balance transfers. The enticingly low interest rate is usually an introductory promotion and applies for a certain period of time only. The rate will go up over time.

Consolidating your bills means you’ll be in debt longer.

In almost every case, you’ll have lower payments because the term of your loan is prolonged. You will be in debt longer. Extended terms mean extended payments. Your goal should be to get out of debt as fast as you can!

Debt consolidation doesn’t mean debt elimination.

You are only restructuring your debt, not eliminating it. You don’t need debt rearrangement, you need debt reformation.

Your behavior with money doesn’t change.

Most of the time, after someone consolidates their debt, the debt grows back. Why? They don’t have a game plan to pay cash and spend less. In other words, they haven’t established good money habits for staying out of debt and building wealth. Their behavior hasn’t changed, so it’s extremely likely they will go right back into debt.

 

How Does Debt Consolidation Really Work?

Let’s say you have $30,000 in unsecured debt. The debt includes a two-year loan for $10,000 at 12%, and a four-year loan for $20,000 at 10%. Your monthly payment on the first loan is $517, and the payment on the second is $583. That’s a total payment of $1,100 per month.

You consult a company that promises to lower your payment to $640 per month and your interest rate to 9% by negotiating with your creditors and rolling the two loans together into one. Sounds great, doesn’t it? Who wouldn’t want to pay $460 less per month in payments?

But here’s the downside: It will now take you six years to pay off the loan. Six. Years.

If that’s not bad enough, you’ll end up shelling out $46,080 to pay off the new loan versus $40,392 for the original loans—even with the lower interest rate of 9%. This means your “lower payment” has cost $5,688 more. Two words for you: Rip. Off.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

You’re in debt with credit cards, student loan debt and car loans. Minimum monthly payments aren’t helping to pay your debt. Something has to change, and you’re considering debt consolidation because of the allure of one easy payment and the promise of lower interest rates.
The truth is debt consolidation loans and debt settlement companies don’t help you cut large amounts of debt. In fact, you end up paying more and staying in debt longer because of so-called consolidation. Get the facts before you consolidate or work with a settlement company. Here are the top things you need to know before you consolidate your debt:

  • Debt consolidation is a refinanced loan with extended repayment terms.
  • Extended repayment terms mean you’ll be in debt longer.
  • A lower interest rate isn’t always a guarantee when you consolidate.
  • Debt consolidation doesn’t mean debt elimination.
  • Debt consolidation is different from debt settlement. Both can scam you out of thousands of dollars.

 

 

What’s the Difference Between Debt Consolidation and Debt Settlement?

There’s a huge difference between debt consolidation and debt settlement, although often the terms are used interchangeably.

We’ve already covered consolidation: It’s a type of loan that rolls several unsecured debts into one single bill. Debt settlement is different. Debt settlement means you hire a company to negotiate a lump-sum payment with your creditors for less than what you owe.

Debt settlement companies also charge a fee for their “service.” Most of the time, settlement fees cost between $1,500 to $3,500. Fraudulent debt settlement companies often tell customers to stop making payments on their debts and instead pay the company. Once their fee is accounted for, they promise to negotiate with your creditors and settle your debts. Sounds great, right? Well, the debt settlement companies usually don’t deliver on helping you with your debt after they take your money. They’ll leave you on the hook for late fees and additional interest payments on debt they promised to help you pay!

Debt settlement is a scam, and any debt relief company that charges you before they actually settle or reduce your debt is in violation of the Federal Trade Commission.(2)  Avoid debt settlement companies at all costs.

 

The Fastest Way to Get Out of Debt

When you consolidate your debts or work with a debt settlement company, you’ll only treat the symptoms of your money problems and never get to the core of why you have issues in the first place. You don’t need to consolidate your bills—you need to delete them. To do that, you have to change the way you view debt!  Personal finance isn’t just about money.  It is also about psychology.

As I’ve said, It’s not about the Money.  It’s about Taking Charge. 

 

The solution isn’t a quick fix, and it won’t come in the form of a better interest rate, another loan, or debt settlement. The solution requires you to roll up your sleeves, make a plan for your money, and take action.

What’s the reward for your hard work? Becoming debt-free!

 

 

 




 



 

Getting Results: How I paid off $17K this year

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How I Paid off $17K in debt this Year

 

Your life as a business

It may seem unsentimental to think of your life as a business, but it is.  The fact is, every year there is a profit and loss to your financial life.  You’ve invested a year of your life and what do you have to show for it in financial terms?

Are you closer to your goals?

Are you closer to a comfortable retirement?

Are you building a financial foundation?

Are you still in debt?

For many years, I was running in place.  Instead of building a financial future, I was spending to make myself feel better today.

And my income would solve all of my financial problems.  Or, so I thought.

 

 

*Affiliate Disclosure:  This page may contain affiliate links to companies I have a business relationship with.  The reader is never charged and I strive to only discuss companies that offer value to my readers.

 

Looking back at this Year:

Looking back at this year, It’s easy to forget how much progress I’ve actually made.

I’ve tried to chronicle my decisions both good and bad the past year.   I became discouraged over the summer and I hit the wall after I had to miss a U2 concert because of a tax payment.

I was used to spending whatever I wanted, whenever I wanted.  So, planning my purchases and delaying gratification was a sacrifice I made this year. I make a good amount of money, but my spending was always going to limit my net worth.

I made big strides this year.  But, I’m not going to lie to you.  It was hard.  I put in a lot of work.

 

Relevant Articles:

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Here is the playbook I used.  It’s simple and straightforward.

Take Action:

  • I negotiated discounts on all of my recurring charges.
  • I switched to a less expensive gym,
  • I sold nearly $500 of my things on Ebay.
  • I stopped using a storage locker.
  • I started writing this blog.

Coming to terms with my spending habits: I tried to understand where my money was going.  I tried to slow down and learn why I wanted the stuff I was buying.  I learned to budget.  I set small financial goals and I hit them.

I cut back.  And I cut back even more.  I paid attention to every single penny. I paid attention to purchases that created true value in my life. And those that added minimal value, I cut out.

 

“If you can’t measure it, you can’t improve it.” –Peter Drucker, Author and Business Consultant

 

Get organized:  Creating a budget.  I created a budget using a free app, Everydollar.com.   It’s a very good app, but I didn’t keep using it.  What worked well for me was old school: keeping a notepad next to my credit card bills.  And keeping track of the good, the bad, and the unexpected in my monthly bills.  I was also keeping track of my bills in my head because I became VERY focused.

Read my post, 7 Tips To Help you Create a Budget here.

 

 

Take Action:  I negotiated discounts with almost every company I was doing business with.  I got discounts.  I got price reductions.  Ask for what you want.  Make sure you aren’t overpaying for the services you’re using.  Or cancel them.  I cancelled my storage locker.  I was paying nearly $99 a month to store items that I didn’t really need or want.

Results: Savings of ~ $600/ month. Total gain $6,000

Create Extra Income:  In my opinion, the easiest way to create extra income today, is to sell your excess stuff on Ebay.  It’s fast, easy, and convenient.  Within a week or two, you can have money coming in.  Also, it makes you realize how quickly our purchases lose value.

Results: $493 from EBay in one month.

 

Side hustle/ Create more income:  I started writing an investment column for the website, Seeking Alpha.  This was a side hustle.  And it fit my interest in the stock market and as a writer.  I wrote 78 articles for their site on undervalued stocks and those articles have received over 288,000 page views.  I was paid more than $5,000.

Related Articles:

44 Ways to Create Extra Income

11 Best Side Hustles in 2018

 

 

 

Trade time for money

Use your time to create income, not more expenses.

According to a New York Times article entitled, How much Do we Love TV?, the average American spends 5 hours and 19 minutes of television per day.  When I decided to get motivated, I realized that I preferred being active and trying to earn money instead of being passive and watching television.

At the very least, get paid for surveys while you watch TV.  Some pay up to $20/ Hour.  (More info here).

 

In my opinion, trading time for money will allow you to create the life you want.

Budget:  Essentially, a budget is the process of deciding what is really worth your money.  I cut out pizza from my budget.  Yes, delivery pizza didn’t seem worth the extra $12 compared with the store bought kind.

I decided my fancy gym wasn’t worth the extra $90 per month.  I unsubscribed from store e-mails to make mindless shopping less tempting.  I started to think about why I buy the things I buy.

Deciding what is worth your money (and your time), is a really helpful exercise.  Look at your credit card bills.  I cut back on convenience purchases like food delivery.  I was spending $44 a month on delivery alone.

 

Stay Motivated:  I’m a big Dave Ramsey fan.  He created the debt free genre.  And his podcast was very helpful to keep me motivated, especially when I hit the wall on this debt free journey.  And if you’re just beginning to get serious about your finances, his book is a must read.

Year- End Results: Budget cutbacks: $6,000 +Side Hustle: $5,000 + Car paid off: $6,000 = $17,000

 

The benefits:  Running my life more like a business means that each quarter and especially at year-end, there is a profit and loss to my financial life.  I actually know that I spent less than I made this year.  And that I made enormous progress financially.

I paid off my car.  I contributed to all of my retirement plans.  I paid my estimated taxes on time.  I created extra income to speed up the process.  I grew both financially and personally.

 

There is no doubt in my mind that you could have similar results in your own financial journey.

Go for it!

 

 

Related articles you may enjoy:

How it all began.  What made me say enough.

Why your family needs an emergency fund

Survey Sites That Actually Pay

 

 

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Thoughts on Consumer Culture and Advertising

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Consumerism:  the preoccupation of society with the acquisition of consumer goods.

 

Thoughts on Consumer Culture and Advertising:

*Affiliate Disclosure:  This post may contain links to companies and products I endorse.  I receive a fee for this relationship, but the reader pays nothing.  These fees defer the costs of producing this blog.

Peak Consumer Culture: Costco on Circular Day

Don’t get me wrong; I love Costco.  In fact, when I lived in Manhattan, I used to rent a car and go to Costco and stock up on all my supplies for the month.  I loved those trips.  I felt incredibly smart as I drove back to New York with massive quantities of discounted paper towels, toilet paper, frozen dinners,  and protein bars.

Now that I live in California, I couldn’t pass up a groupon offer that came my way:  $60 membership fee and receive a $20 cashback card as a thank you.  Done!

One problem:  I needed to join before November 30th.

So here I was on one of the busiest shopping days of the year, when they release their holiday circular, stuck at Costco trying to activate my membership.  The definition of consumer culture. Shopping hell is an understatement.  The parking lot felt like the parking lot for the SuperBowl, and not in a good way.

I signed up.  I got some stuff.  I didn’t blow my budget and I left.




 

Frugal Takeaway: I will share one new observation with you. In a world dominated by Amazon, Costco is no longer a great value.  In fact, I think Amazon is now better than Costco, especially if you use Subscribe and Save.

 

 Amazon Subscribe and Save:  Amazon gives you a bulk discount of 15% on household items.  In fact, if you use Subscribe and Save and then use an Amazon cash back credit card, the savings come to 20%  Pretty great, right?   You make a list of the items you use frequently on the Amazon page.  Then, once a month they send you the items at a reduced price.

If you order more than 5 items, the cost is reduced by 15%.  Because Amazon ships the items together, they save on the shipping costs.  And they pass the savings on to you.  I love it.  It’s very convenient.  The cost savings are huge and it saves me time as well.

 

What I bought on Cyber Monday

On cyber Monday, I bought an Amazon Echo with Alexa.  It was difficult to pass up at $29.95 and I thought I might like it.  Here’s what I discovered.  It wasn’t really that cheap.  I liked it.  It seemed cool and fun.  Except that I bought it for music and it had none.  Specifically, you could Join Amazon’s music club.  Or, upgrade to Spotify Premium, etc…  I can use my IPAD to play music from a bluetooth speaker.

So, apart from telling Alexa, “Play music.”  I wasn’t getting anything from this purchase.   And I would wind up with an extra $5 or $7 monthly charge for music.  The Echo was inexpensive and cool.  Yet, it really didn’t add any value to my life. And I returned it. Products that don’t add value to my life go back to the store.

Value Investing

Advertising and Consumer Culture

There is a disturbing television commercial I keep seeing.  Maybe you’ve seen it.  The Parents watch their child in the backyard.  It is clearly the West.  Its Christmas, but there is no snow.  The child looks sad.   Shot of the mother clearly disturbed by her child looking sad.  There is a problem here.  What kind of parents don’t offer a child snow on Christmas?

Solution: Thanks to a new $90,000 Range Rover, the parents drive all night to solve this problem:  they arrive just in time for their daughter to enjoy Christmas in the mountains with snow.  The problem has been solved.  The family is happy.  All is well.

The ad is everything that is wrong with consumer society. It is manipulative and ridiculous. It is the essence of everything that is wrong with consumerism in America. Money is nice, but it will not solve all your problems.  It feeds into the idea that I can always buy something to “fix” my problem.  And I have been guilty of this mindset too.



Relevant Articles:

Consumerism:  Do we even know why we want what we want

Use Ebay to create quick Cash

What made me say Enough

Consumerism: Buying to solve my problems.

I admit that in the past, I have tried to use money to solve my problems.  It doesn’t work well. I can see how much mindless shopping I have done over the past few years.  That is one reason why I suggest people unsubscribe from retail email lists.  It removes temptation.  I’ve been guilty of using shopping to cure things like boredom or stress.  It doesn’t work in the long run.

Stoicism and Consumerism:

I read the book, The Obstacle is the Way recently and it was incredible. It’s basically a historical view of Stoicism.

Stoicism:  There is a very simple, though not easy, way of living. Take obstacles in your life and turn them into your advantage, control what you can and accept what you can’t.

Essentially, you have to accept what is.  We can’t make everything perfect.  Its not a perfect world.  Seeking to find solutions through money and shopping is a lie sold to us through marketing and advertising.  We have to power to decide what messages are true and which are distortions.

Conclusion:

There is no perfect Holiday season.  It’s odd how we pretend to be in a good mood during the holiday season leading up to gift giving.  And by February, everyone is suffering a bit of a hangover.   The gifts and presents haven’t kept us happy.  We have bills.  The cheer is gone.

The larger goal in my opinion, is to create a life that is fulfilling most of the time.

Becoming debt free and achieving financial freedom will create a much more fulfilling life.

 

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Getting Results on the Path to Life after Debt

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Debt Success

Getting Results on the Path to Debt Free

 

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

 

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 in a box or drawer somewhere.   By getting organized, you will be able to Take Charge of your personal finances.  You wont need a personal loan or any debt consolidation.

Right now, I’m reviewing my year end credit card statements and 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 that I lost simply by not paying attention. 

Read more about the dumb stuff I bought last year.

 

 

  • 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.

 

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.

 

Make sure you’re getting discounts and cash back:  I use Ebates and they give me cash back for nearly all of my purchases.  Ebates gets a commission from stores you shop at and they share the commission with you.  Average cash back is about 7%, which is great.  Right now, they are offering a Free $10 Gift Card when you join and spend $25.  More about Ebates Here.

 

 

 

3. Eliminate wasteful spending.

I was wasting nearly $100 per month on a storage locker.  It made me so angry that I eventually began this journey and started writing this personal finance blog.

“A Part of all you earn is yours to Keep.” – Richest Man in Babylon.

Realize when you go through your bills that every wasteful thing that you cut out is earned money.  Don’t dwell on the money that you’ve wasted in the past.  Focus on your debt free future.

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

 

Relevant Articles:

45 Ways to Increase your Income

9 Best Ways to Save $7K This Year

11 Legitimate Survey Sites for 2018

 

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.

 

Value Investing

 

 

5.  Create an Emergency Fund: 

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’ve written an article on why an emergency fund is so important,  An Emergency fund is an umbrella for your life.

 

6. Increase your Income:  Everyone wants to increase their 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’ve 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.   Read the Amazon reviews here.

 

The path to life after debt:

The only way to assess your current situation is to take the time to understand where your money is going.

I compiled a budget which allowed me to tell my money what to do instead of wondering where it all goes.

Read 7 Helpful Tips to Creating a Budget here.

It was time to be debt free. Here are some of the action steps I took:  My advice: Take Action!

  • I closed my storage locker.
  •  I switched to a less expensive  gym.
  • I negotiated a discount on my XM Satellite radio.
  • I made some extra money when I sold a bunch of my stuff on Ebay.
  • I reviewed my credit card purchases.
  • And I started taking control of my money

 

That was my debt reduction plan.  And you can do it too!  I cut back on every purchase I wasn’t getting maximum value from.  I cut out dumb spending.  And each month I was able to save and invest much more of my money.  It was time to take control of my finances.  That’s the process of how to become debt free.

 

 

Related articles you may enjoy:

How it all began.  What made me say enough.

44 Ways to Create Extra Income

Getting results on your debt free journey

 

Debt Success:  My bank account balance was growing steadily into April.  And then on April 15th, my bank account went flat.  All gone.  I had to pay my taxes and it was pretty discouraging.

But here’s the thing.  I wasn’t discouraged because I knew the process of becoming financially free was working.  My bank account showed little in the way of results.  Yet, I knew that the process was working and I would accumulate more money in my bank account over the next few months.

 

 




 

This will set me on the path to becoming debt free and retire early.  But, there is a lot of work to do.

My setback was caused by taxes.  But everyone has financial setbacks while cutting back and reducing debt:

Setbacks are part of life.  That’s why you need a buffer in your budget and an emergency fund.

Focus on the process to become debt free.  Once you’ve begun to make these changes, the process will create results.  You’ll begin to see results and will be able to visualize the day when you are debt free or able to retire early.

 

Free travel

 

But in the beginning, focus on the process of debt reduction.  That’s how you will get results.

And Keep Going!

 

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5 Tips to Avoid a Ripoff

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I think that you’ll agree with me that even financially smart people can make bad financial decisions.  What I am about to share is a bit embarrassing, but in this blog post I will give you the 5 signs that you’re about to get ripped off.

Here are the 5 signs of trouble that will prevent you from a ripoff.

 

rip off

5 Signs You’re about to get ripped off:

1. Procrastinate  until something becomes a mini crisis.

I didn’t want to get glasses.  Because eyeglasses are for old people and needing glasses would mean I am getting older.

So, I procrastinated doing the sensible thing.  I have some inexpensive cheap glasses, but have known for a few months I needed real prescription eyeglasses.  I waited until it was a mini crisis.

So, instead of researching glasses online or asking around, I scheduled a last minute appointment with a local optometrist and an eye exam.  I wanted to see a reputable doctor to check out my eyes.  And I was planning to buy glasses via Costco later on.

 

 

Relevant Articles:

44 Ways to Create Extra Income

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2.  Don’t research before you head out.   It was a mini crisis, so I made an appointment for the same day.  The appointment went well and I wanted to support the Doctor by purchasing glasses from her boutique.  I knew nothing about the pricing.  I was a sitting duck because I hadn’t researched the online costs.

Value Investing

3. Listen to a sales person.   I’ve never worn glasses, so I was astonished at how much they charged for the frames.  And I kept asking the guy,

Are eyeglasses really this expensive?  Don’t you have anything less expensive?

When you go to the upscale boutique, you’re gonna pay more.  I was in a hurry and my goal was to check this off my list.  “Got glasses.”



 

4.  Go to an upscale boutique.  Disaster.  I was lazy and in a hurry.  So, I got sold 2 pairs of eyeglasses that could pay a month’s rent in most of the country.  They were much more expensive had I bought them online.  More stupid tax.  And lazy tax.

 

I always get cash back because I use Ebates and they give me cash back for nearly all of my purchases.  Ebates gets a commission from stores you shop at and they share the commission with you.  Average cash back is about 7%, which is great.  Right now, they are offering a Free $10 Gift Card when you join and spend $25.  More about Ebates Here.

 

Related Posts:

How I paid off $17K in Debt

How to Create Fast Cash with Ebay

Do I Regret the $600 COncert Tickets?

 

5.  Stop thinking.  I’m not sure where my brain went during this fiasco.  It was at the end of a long day and I really wanted to cross “get glasses” off my list.  After heading home and feeling like I had purchased two versions of the Brooklyn Bridge of glasses, I started regretting this disaster Big Time.

 

Trying to Minimize the damage:

I went online and did some research, which I should have done before making the purchase.   I quickly called the boutique and told them I was willing to pay a little more than Costco, but not their ridiculous markup.  They said they would get back to me.

 

What happened?  I spoke to the manager and I basically said I appreciated the optometrist appointment, but couldn’t justify paying so much more than Costco.

She managed to find room in their pricing and reduced the bill by about 60%.  This was acceptable to me because I liked the frames I purchased and I didn’t want to go to Costco and spend 2 more hours shopping for new glasses.

Tips to Negotiating here.

I reduced the damage, but I still got ripped off because I ignored these 5 signs.

 

Conclusion:  I was really mad about this.  I texted my cousin to check how much he paid for his glasses at Costco. I should have done this before being in the situation to make a purchase.  I was dumb and in a hurry.

I made this happen.

  • I procrastinated.
  • Then, I was in such a  hurry that I did no research.
  •  I listened to a sales person.
  • I went to an upscale boutique when I didn’t need to.
  •  And I simply stopped thinking.

Luckily, my brain came back and I fixed this disaster.  But, I created the disaster.

Learn from my mistake.

 

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Frugal Living Tips: Oprah’s magazine is not one of my favorite things

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Frugal living tips:  O magazine is not one of my favorite things.

 

debt reitre invest

Financial Freedom

I don’t tell people how to live or spend their money.  I have chosen to scale back, do a budget analysis, and find frugal living tips in order to retire early.

In the process of making theses changes, I have become much more aware of our consumer culture.  More on consumer culture.

That is why I was so disappointed when I picked up Oprah’s magazine.  And let me say, I am a fan of her positive attitude.  I like her show, Super Soul Sundays as well as Oprah’s Masterclass.  But, her magazine is not going to make my list of favorite things.

 

 

Related Articles:

How I used Ebay for quick cash

The Best Personal finance Books

How I paid off $17K this year

 

O magazine:  I’ve enjoyed reading the magazine in the past and have gotten interesting book ideas and read some interesting articles. However, since I’ve started on this debt reduction journey, I’ve become much more aware of consumerism in the culture.  And honestly, Oprah’s Magazine was a bit disappointing on that front.

 

Consumer culture:

What struck me is how much the magazine glorified spending.  But I’m talking about the content of the magazine.  The content of the magazine was all about spending as a way to self-improvement.  And that’s not a message I subscribe to.  I believe your best life is life after debt.

 

 

Products as content: One page in the magazine reviewed makeup and had 63 products on it.  Yes, I counted. Again, this is not an ad I’m describing.  This is a page in a magazine that people pay for.  You’re paying Oprah to promote her favorite things to you.  And the articles written by guest authors weren’t actually articles.  They were “my favorite things” type of descriptions of their favorite products, including this $45 Vanilla Cake.

 

I just stopped reading the magazine.  I’m not a big cake person.  But, $45 seems like a ridiculous amount to spend on a vanilla cake.  I’m not talking about a wedding cake or birthday cake for your kids.  I don’t know who the target market for this magazine is, but the last thing Americans need is $45 vanilla cake.  Seriously.

 

Spending as the answer to all of our problems: 

Oprah is a mainstream personality and I was more than disappointed by her tone deafness.  Americans have $2T worth of debt. (see above)  Many people struggle with student debt and credit card debt.   And many (like the good people who read this blog) are working  to pay down debt and lead happier lives by being more thoughtful in their spending.

 

Debt free is my favorite thing:

This notion that once I can afford Oprah’s favorite things, my life be better.  My life is better.  I paid off $17K in debt this year and paid off my car.  There’s nothing better than that.  Debt free is my favorite thing right now.

 

What do you think?  Please share your comments.

 

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It’s Not About the Money.  It’s About Taking Charge and Becoming Debt Free

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How to be debt Free

Its about taking charge of my money

It’s Not About the Money.  It’s about taking charge and becoming Debt Free.

Here are the steps I used to Become 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 have been able to cut out.  And I feel great about all the money I am saving.   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

Survey Sites That Actually Pay

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

 

3. Pay Down Debt:

The debt snowball method is a great  debt reduction strategy where you pay off debts in order of smallest to largest, gaining momentum as each balance is paid off. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance.

It looks something like this:
Step 1: List your debts from smallest to largest.
Step 2: Make minimum payments on all your debts except the smallest.
Step 3: Pay as much as possible on your smallest debt.
Step 4: Repeat until each debt is paid in full.

 

4. 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 understand why I was spending so much money shopping.  More on Consumer Culture here.

 

5. 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.

 

6.  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.

 

7. Increase your Income: 

For most people it’s 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.  Want to start a blog?  Read 7 Rules for a Profitable Blog here.

Side Hustles:

You may want to find a side hustle or side income.  I’ve written a number of posts about the best ways to increase income.

45 Ways to Boost your Income is one example.

11 Best Sources of Side Income for 2018

Cash surveys

 

8. 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.   More about the Total Money Makeover here.

 

Ray Krok Success Quote

 

9.  Keep Making Progress:

I was amazed at how much money gets through the cracks.  In reviewing my credit card bills, I realized I was paying for all of these items that gave me no value.

  • multiple anti-virus recurring charges,
  • membership to a sporting goods VIP club I didn’t remember,
  • delivery charges every month
  • an expensive storage unit
  • bank fees

These are all credit card charges that gave me no value, but I was paying for.  And I was paying because I was too busy to pay attention.

But, this stops today.  I’m taking control of my money.

When I canceled the VIP club the woman said, “Oh we’re sorry we charged you for our VIP club when you haven’t made a purchase in 3 years.”  Yeah Right.

Here’s the truth:

“Were sorry to see you go because we make so much money off people too busy to pay attention to their credit card bills.”

 

 

Related articles you may enjoy:

How it all began.  What made me say enough.

44 Ways to Create Extra Income

Getting results on your debt free journey

 

Conclusion:

Today I realize it’s not about the money.  It’s about the control.  It’s about knowing that every dollar I make is mine.  No waste. No exceptions.  Nothing lost.

“A part of all I earn is mine to keep.” – The Richest Man in Babylon

Every dollar belongs to me and if I spend it, it’s on something that really adds value to my life.  And that principle is important whether you make $50,000 a year or $500,000 a year.

So, I’ll keep going.

I’m taking control of my money.

 

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Consumerism: Do we even know Why We Want What We Want? 

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consumerism

Financial Freedom

I’m sure you can agree that you can’t begin a debt free journey without starting to re-think your relationship with spending, credit cards, and consumerism.  It’s a worthwhile exercise.

This is an example from my own life.  It’s a good example of consumerism and how it’s possible that we’re piling up debt on credit cards to buy luxury goods we want and don’t even know why.

I have nothing against branding or advertising.  In fact, I have purchased plenty of designer clothes,expensive watches, and attended pricey concerts. 

She was a very pretty girl who was used to getting whatever she wanted.  That much was always clear to me.  She worked as an assistant to a Wall Street executive and was used to having men with huge egos and bank accounts woo her.

She always wanted to have dinner at one of the three most expensive and or hottest restaurants in New York. Nobu and a few others I can’t even remember.  Honestly, at the time, I was ok with all of that.  She was actually very smart and insightful, but her financial expectations became frustrating even then.

Consumerism Definition:  We spend money we don’t have, to buy things we don’t need, to impress people we don’t even like.

 

Why do I bring this up?  We were dating during The holidays a few years back and she mentioned she wanted lingerie from La Perla.  Think Victoria’s Secret but with a 700% markup.  I had to research it myself.

I became really interested in this company and brand because I have almost never seen a markup like that for any other product.  Their bras were like $100-$200.

As an investor, I was very intrigued.

  • Why was La Perla so good?
  • Is it the quality?
  • The fabric?
  •  Why is it so much more expensive than every other brand?,”

I asked her.  She was annoyed and defensive and I think she may have even intimated I was being cheap (Me Frugal?).  I was very confused.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

And I quickly realized that she didn’t know what made it the best.  She didn’t know why it was better than other luxury  brands.  All she knew was that her friends would be impressed.  She knew the name and the cost.  And that was all that mattered.  This is the world we live in: consumerism, advertising, and branding.

She didn’t know why she wanted it.  She just did.

 

Value Investing

 

This reminds me of a podcast of The minimalists I just heard where they talked about how Rolex became such a powerful brand.

Apparently, in the 1950’s and 1960’s, men used to go on vacation and dive using Rolex watches.  These were wealthy, rugged, adventurous men who preferred a quality dive watch.  And other men started to buy the watches and it became the huge brand it is today.

But, it is primarily a quality dive watch.

And most men pay a premium for a watch that can safely go to 2,000 meters.  But many of them never use it in the water except, in the shower or a pool.

Rolex makes you feel cool, rugged, adventurous, and wealthy.  But first, they need your $2,500.00

 

The smarter you are the more you realize how powerful advertising, branding, and social influences are in our decisions to spend money.  It’s powerful.

 

Sometimes we don’t even know why we want what we want.




 

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How to Negotiate Discounts on the way to Debtfree

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The goal is to pay down debt, invest, and retire.  Simple, but not easy.

One of the best ways to reduce your spending is to negotiate a lower price on the things you use. Here are some tips on negotiating.

*Affiliate Disclosure:  Some links in this post may contain affiliate links to business partners of mine.  I may be compensated for this arrangement, but the reader pays nothing.  I strive to do business with quality, reputable companies.

The best way to get a discount is to firmly ask for a discount.

People have so many ill conceived ideas about negotiating  The media presents this ridiculous image of an alpha male business executive brow beating someone into getting whatever he wants.  This is pure fiction and makes too many intimidated to simply ask for what they want.

Ask for what you want. Firmly and confidently.

 

Value Investing

 

Ask for what you want.

Did you watch the TV Show, Mad Men?  Mad Men was a very good show about Madison Avenue in the 1960’s.  Here’s why I bring it up:  one of the senior executives is fired and a prime office becomes available.  The office has a dozen alpha male junior executives who all want the office.

But who ends up getting the office?

The most junior person -Peggy Olson- That’s right, the only female copywriter with the least experience gets the office.

Why? She was the only person with the courage to ask for it.

If you can get a 10% discount on many of the items you’re using, then you are that much closer to getting out of debt and investing for your future.

Discounts and Cash Back?  Yes!

Discounts on Online Shopping: 

Make sure you’re getting cash back from online shopping:  I use Ebates and they give me cash back for nearly all of my purchases.  Ebates gets a commission from stores you shop at and they share the commission with you.  Average cash back is about 7%, which is great.

Right now, they are offering a Free $10 Gift Card when you join and spend $25.  More about Ebates Here.

 

Cash surveys

 

 

An example from my own life:  As you know, I’m cutting back on frivolous spending.  So, I’m reviewing my credit card bills for all the monthly subscriptions I receive (there are a lot!).

Anyway, I really like XM Sirius radio in my car, but I would like it a lot more, if it was less expensive.

So, I called them.  I used a simple, honest approach.

I told the woman that I really liked the service, but I’m not sure I can keep getting it because it’s too expensive and I’m cutting back.

What happened?  She offered to cut the fee in half  (from $200/ year to $100).   I had to pay for the year upfront, which I agreed to do.

We both got what we wanted: I got a better deal and her company kept a customer.

Win. Win.

 

Save money on insurance:

One incredibly important way to cut your monthly bills is to compare insurance rates.  Companies are always changing their pricing to gain market share in this area, so it’s always worth it to check to see what competitors insurance rates are.  E-surance is a subsidiary of Allstate and offers very competitive insurance rates.

A few minutes can save you thousands of dollars a year just by being smart.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

Introverts are good negotiators.

The goal of every negotiation is for both sides to get most of what they want.  That’s why alpha males are not the best negotiators and why research tells us that introverts and shy people are actually good at negotiating.

Why?  Because in order to be a good negotiator, you need to consider things  from the viewpoint of the other side.

When I ask for a 10% discount on a TV, I give the salesperson the ability to get what they want: the ability to tell their boss they made another sale.   Salespeople have credit card bills to pay too and they have pressure to make a sale.  Makes no difference what the product is.

 

 

If you don’t get what you want, walk away.

I’ve been meaning to open a new bank account lately because my bank no longer has any convenient atms near me and I’m NOT paying $6 per withdrawal!  So, I called the closest bank and spoke to them about opening an account.

In order to waive the bank fees

  • they wanted me to keep $7,000 in the account,
  • or a direct deposit every month,
  • or 10 debit card transactions.

Sorry, but no.

See my post on Banks that offer Free Checking here.

I walked away.

 

And last month, the same bank had a promotion for new accounts: they would waive the bank fees for just $1,500 in the new bank account AND they would credit me $250 to open the account.  Bingo.  Now, I’m interested.

 

Conclusion:

 

Negotiating takes a bit of courage, which is a muscle we all need to flex.  And it allows you to have more control over your life.  Which is a feeling we all want.

Ask for what you want.  You’ll be surprised how often you can get it.

 

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Designer clothes and living in debt

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debt reitre invest

Financial Freedom

 

Lets talk about designer clothes and living in debt. 

Right now, I’m focused on debt reduction, investing, and retiring early. But that does not mean that I know nothing about luxury clothes, online shopping, and consumerism. 

Unfortunately, I know a lot.  Ive spent a lot on designer clothes and I am paying the price today.

Ralph Lauren is not my friend.  I’ve spent so much money on designer clothes over the years that I don’t even want to think about it.

But I need to think about it to figure out why I spent money the way I did and whether or not I’m going to miss it if I stop.

For me the question came down to this:

What’s really important? Becoming debt free or designer clothes?

Even though I own a lot of Ralph Lauren clothes, I rarely purchased it them at retail stores. I usually bought them at Outlet Stores.  Luxury at a discount.  What could be better?

And I spent a fair amount buying designer clothing online as well.  But, Who hasn’t?

Related post:  Why You Don’t need Lululemon to work out here.

 

 

Luckily, I discovered Ebates a few years ago. I use Ebates and they give me cash back for nearly all of my purchases.  Ebates gets a commission from stores you shop at and they share the commission with you.  Average cash back is about 7%, which is great.  Right now, they’re offering a Free $10 Gift Card when you join and spend $25.  More about Ebates Here.

 

Related Articles:

Use Ebay to Create Fast Cash

Why you dont need Lululemon to work out

Achieve Financial Freedom with these Books

 

Financial regret:  There is nothing I can do about the money I spent on designer clothes.  You live and learn.  Perhaps you can learn from my mistakes.

Right now I choose to focus my energy on debt reduction, investing, and retiring.

  • I was able to create a plan to pay off $17K in debt last year.  More on that here.
  • And that led to me paying off my car.  More on that here.

I can’t go back in time.  But, I can take control of my finances from this point forward.

 

 

Am I never going to buy another luxury item? No.  But, in order for me to shop at an online luxury retailer these days, I need to love it and it has to be worth the inflated price.

 

I’m sick of living in debt.  My job is to make myself wealthy.  Not make Ralph Lauren wealthy.