The Frugal Prof

Its Not about the Money. Its about taking charge

Pay Off Credit Card Debt

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Financial Freedom

Pay Off Credit Card Debt:

I’m sure we can agree that paying off credit card debt is a worthy goal.  After creating an emergency fund, paying down debt smallest to largest is the next step to become debt free.  In this post, I will review the steps I took to get out of credit card debt as well as discuss my decision to shift away from credit cards in favor of debit cards.  Let’s begin.




 

Getting Results by paying off credit card debt

 

The 7 steps you need to take to become debt free are pretty straight forward:

 

 

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 and I see so many charges that I’ve 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 because I was 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.

 

3. Eliminate wasteful spending.

For me, the most obvious wasteful spending was a $100 storage locker.   It made me so angry that I eventually began this journey and started writing this personal finance blog.  (If you’re ready to start your own blog, begin here.)

Don’t dwell on the money that you’ve 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 and why we buy what we buy.

 

Make sure you’re using discount codes and getting 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.

 

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 your Income:  Everyone is looking for a way 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.   More on Dave Ramsey’s book here.

Value Investing

Credit Cards vs. Debit Cards

I’ve recently changed my mind on credit cards.

I always pay off my credit card balances each month.  And I never pay credit card fees or interest.  So, when I got my MasterCard bill this weekend, I knew something was very wrong.

They charged me a $25 fee.   Ugh

Which means I have to waste 10 minutes talking to them to reverse a fee that could never have even happened if I listened to Dave Ramsey and cut my credit cards up. Maybe he was right. Anyway.

Well, It was my fault.

I sent the wrong amount.  I was off by $3.43.  (Just Another sign I need glasses!)  I paid on time, but I sent them the wrong amount. I was off by $3.43  And they pounced  to add late fees and interest charges.

Read my related post on Banks that still offer free checking with interest here.

This is their business.  This is what we agree to when we use credit cards.

Of course, I called the credit card company and had it reversed.

And it happens every now and again, I’ll send them money and because of a holiday or something, they receive it a day later than the “due date” and they do the same thing:  late fees and penalties.  And that’s my fault, of course.

 

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

But, I am struck by this feeling that they are ready to profit from anyone who:

  • falls behind on their payments,
  • gets sick,
  • loses a job,
  • has a crisis etc
  • …  the credit card companies are not messing around.

 

This is another great reminder of why you really need to  have an emergency fund, read my post because they’re waiting and so are other companies that will take advantage of your situation: credit card companies, payday loans, auto leasing companies, etc …  emergencies happen and it is essential to be able to handle them without taking a loan from these companies.

And I’m not saying credit card companies are not a perfectly legal business.  I’m saying it’s a perfectly legal business where they make more money from fees and interest when you are most vulnerable.  When you lose a job or have a crisis or someone gets sick.

 

 

What am I trying to say? Life happens.  Be prepared.

  • I’ve lost a job,
  • had a family crisis,
  • and gotten sick in the last 5 years.

And I wish I had an emergency fund in place.

My view on credit cards is essentially that over the next couple years I want to have a couple of debit cards and only two credit cards. Simple. Easy.  And focus on living debt free, invest, and retire early. If they offer a big cash reward to open a credit card like $500, then I may take advantage of a credit card offer now and again.  Other than that, I will mostly be using debit cards.

Why not close all my credit cards?

Well, I get benefits from one of my credit cards when I travel like access to airport lounges etc… that I think is really worth it.  It makes traveling easier.  And I get value.  But I’m not saying no, either.  It’s possible.  At some point, I may decide to use debit cards exclusively.  We’ll see. 

I’m canceling the majority of my other credit cards.  Just not worth it. The more of them I have open, the higher the possibility of something going wrong.  What about you?

 

 

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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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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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Emergency Fund: An Umbrella for your Life

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The emergency fund is the first step in any debt free journey.

Emergency Fund Definition:  An emergency fund is an account used to set aside funds needed in the event of a personal financial dilemma, such as the loss of a job, a debilitating illness, or a major expense.

*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.

 

According to financial host Dave Ramsey,  the first emergency fund is a $1,000 that should be set aside for unexpected emergencies.

A larger emergency fund is when one becomes debt free except for your home.  This  should cover 3-6 months of expenses.  So, for many people this could be between $12,000-$24,000, depending on your income.

An emergency fund prevents you from becoming desperate when an unexpected emergency happens.  And they will.   Getting a credit card advance or a payday loan are terrible alternatives.

 

How big should your emergency fund be?

The more stable your income and household are, the less you need in your emergency fund.

If you’re part of a two-income household or you’ve had a steady job for several years, then a three-month emergency fund is probably just fine.

But if you’re a one-income family, you’re self-employed, or you earn straight commission, then a six-month emergency fund is probably a better idea for you since a job loss could make you unable to pay the bills.

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

 

Value Investing

Where should I keep my emergency savings?

Your emergency fund should be liquid, meaning you need to keep it in a place where you can get to it easily and quickly.  (See my post on banks that still offer free accounts.)

The best option is a simple checking account or money market account that comes with a debit card or check-writing privileges. That way, you can pay that doctor or mechanic quickly and with no headaches.

But . . . make sure you’re not keeping your emergency fund in a place that’s too easy to access. You don’t want to be tempted to dip into it!

What’s an emergency?

When a sudden expense pops up, it can feel like an emergency—but that might not be true.

Here are three questions to ask yourself to determine if you need to tap into your emergency savings:

1. Is it unexpected?
2. Is it necessary?
3. Is it urgent?

 

How to Quickly Build an Emergency Fund

One of the easiest ways to beef up your emergency fund is to sell some stuff! Go take a look in your garage or dig through your closet—is there anything you could part with? Selling some items that are collecting dust can add up to major cash in your emergency savings. And every little bit helps! You’d be surprised at how quickly $5 here or $10 there can add up.

 

Related Articles:

11 Ways to Earn More Money in 2018

Survey Sites that Really Pay

 

It’s important to note that investments do not count towards an emergency fund. Your retirement or 401 (k) does not count.  These accounts are not liquid or easily accessible (there are serious tax consequences for 401 (k) withdrawals.)

People who don’t have an emergency fund wind up being forced to take out a pay day loan or get a cash advance on a credit card.  Getting access to emergency loans or emergency cash is not what I want for you.

I don’t want this to happen to any of my readers.  The interest rate on a payday loan and credit card cash advance are incredibly high and will delay your ability to become debt free and invest.

 



An emergency fund is vital. It’s vital because emergencies happen.

People get sick, lose a job, car accidents happen, tornadoes, hurricanes, riots, fires, earthquakes all happen as well. As an adult, we prepare just in case something like this happens to us.  Because they will.

  • I am in my late 40’s:
  • I have lost a job,
  • had a health scare,
  • lived in a city that experienced a major riot (Los Angeles 1995),
  • and in a city that experienced a major hurricane and flood (New York 2012).

 

Life happens.  These were all near misses that should have been wake up calls for me.

Don’t wait.  At the very least, start saving for your $1,000 emergency fund today!

 

Having an emergency fund is an umbrella for your life.  Be prepared.

 

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