Request a free copy of your credit report at AnnualCreditReport.com. Under the Fair Credit Reporting Act (FCRA), you have a right to receive a free copy of your credit report once a year from each of the three major credit reporting bureaus: Equifax, Experian, and TransUnion. AnnualCreditReport.com doesn’t provide a FICO score with your free credit report. However, you can obtain your FICO score and credit report at myFICO.com. Unless you’re in the market for a loan, you probably don’t need to know your FICO score. So, I suggest you save your money until you do.
Dispute inaccuracies on your credit report in writing. If you received a copy of your credit report electronically, then dispute errors online directly with the bureau that’s recording the erroneous information. If not, use the form provided with the hard copy of your credit report or use the sample dispute letter on the Federal Trade Commission’s website as a guide for drafting your own. Some common credit reporting errors are as follows:
Accounts that don’t belong to you
Delinquencies that are misreported such as late payments or charge-offs
Bankruptcies that are more than ten years old
Unpaid judgments that exceed the greater of seven years or your state’s statute of limitations
Paid judgments or tax liens that are more that seven years old
Hard credit inquiries, i.e., applications for credit, you either didn’t authorize or that are more than two years old
Paid liens or judgments that are listed as unpaid
Duplicate collections whereby an original creditor and a collection agency report the same account in collections
Pay your bills on time. In an effort to stick it to your lender for charging you a late fee, you might consider skipping a payment altogether. Don’t do that. Not only will you have to pay interest on the late fee and the remaining unpaid balance, but FICO doles out a far greater punishment to borrowers who pay their bills at least 30 days late. According to Liz Pulliam Weston, author of Your Credit Score, Your Money & What’s at Stake, a single late payment could cause your FICO score to drop 100 points. If forgetfulness causes you to pay your bills late, have the minimum payment automatically paid from your checking account or charged to a credit card. Don’t try this if you’re prone to overdrawing your account or exceeding your credit limit. Remember to pay off the remaining balance on revolving accounts by setting up an e-mail or text alert through Google Calendar or Mint.
Keep balances on your revolving credit accounts low. Use less than 10% of your credit limit. Some people say 30%, but let’s err on the conservative side. My credit score dropped eight points when Bank of America cut my credit limit in half. During the time, I was definitely using less than 30% of my total credit.
The FICO formula doesn’t care that you pay off your balance in full every month. Your credit report usually reflects the outstanding balance on your last statement. If you’re in the market for a loan, payoff your revolving credit accounts completely, and don’t incur any new charges until after you’re approved for a loan. If that makes you nervous, then continue as you were but make sure your payments are posted to your account before the statement closing date.
Don’t close revolving credit accounts. Contrary to popular belief, having a lot of available credit does not negatively effect your FICO score. Actually, those open lines of credit may be helping your score. A few months ago I received a letter from Citibank stating that they were going to shut down one of my credit cards due to inactivity. I hadn’t used the card in years. If I new then what I know now, I wouldn’t have called Citi and closed the account. Although the $1,300 limit was a small portion of my total available credit, this was my second oldest account. Generally, a longer credit history positively impacts your score. The FICO formula considers the age of your oldest account, the age of your newest account, and the average age of all your accounts. Closing my second oldest account makes my credit history look much shorter than it is. As a result, my FICO score took a hit. Don’t make the same mistake I did.
Use CreditKarma to monitor your credit. It’s the only reputable company I know that will provide you with a truly free credit score. Although CreditKarma doesn’t provide a FICO score, it does give you an indication of what’s happening inside your TransUnion credit report. A steep decline in your score could signal to you that something funky was reported to the credit bureau.
Shop for credit within a 14 day period. Applications for credit, i.e., hard inquiries can have a negative effect on your FICO score. Fortunately, your FICO score takes into consideration the reality that people search for the best interest rates. WARNING: This only applies to rate shopping for auto, student, and mortgage loans. FICO is less forgiving when it comes to revolving lines of credit.
Refinance cosigned debt. In the event you made the unwise decision to cosign a loan for someone who clearly wasn’t a worthy credit risk for the lender, see if you can prod the primary borrower to pay off the loan you have together with a loan for which you’re not responsible. For instance, if your former spouse was awarded the family vehicle in the divorce settlement, the loan will still show up on your credit report and affect your credit score if your name is on the loan. This might be a stretch, but your ex may be willing to release you from the obligation by refinancing the loan in they’re name only. Unless they really hate your guts, there’s probably no harm in asking.
Just wanted to let my readers/viewers know what I’m working on. I got the urge to write about improving your credit score. Although I believe we should rely on credit as little as possible, FICO is just a reality of the world we live in. Until we’re wealthy enough to pay cash for everything, let’s work on paying as little interest as possible by maintaining a good credit history.
No longer can I sit quietly while commenters on popular personal finance blogs dismiss the importance of scrimping on toiletries. Apparently, we shouldn’t concern ourselves with meaningless cost cutting strategies. Well, I’m not so busy that I can’t be bothered to restrict my toilet paper use. Cutting a dryer sheet in half isn’t beneath me. Everyone knows I’m stingy with my Eclipse Spearmint gum.
Although it’s a well known fact that I’m a scrooge, refusing a needy comrade a piece of gum isn’t about the money. It’s about my time. It’s about convenience. It’s about avoiding the feelings of frustration that overcome me when I realize my stinky breath friend chewed my last piece of gum!
If you like gum so much, buy your own.
In 7 Money Mantras for a Richer Life: How to Live Well with the Money You Have, author Michelle Singletary mentions an individual who’d drill a small hole in the top of the toothpaste cap. When squeezed, a thin line of toothpaste would dispense from the tube. Thus, less toothpaste was used. Extreme? I don’t think so. You only need a small amount. Using this technique, it’d only take a minute or two to extend the life of a tube of toothpaste three, maybe even fourfold. I rarely spend more than a buck on toothpaste, so it’s not about the money.
Toilet paper, soap, lotion, deodorant, shampoo, and other miscellaneous toiletries aren’t items most of us can go without. Have you ever found yourself without instant access to at least one of the aforementioned necessities? Were you panic stricken when you hopped out of the shower and discovered there was nary a drop of lotion to moisturize your crusty soles?
Shopping isn’t a particularly enjoyable activity for me anymore, so running to the store is a fairly painful experience. Besides, the more often you go to the store, the more likely you are to pick up something you don’t need. That’s not financially savvy. Think about it.
Judging by the number of bathrooms I’ve been in with toilet paper holders bearing a naked tube of cardboard, I suspect I’m not the only one who’s pressed for time. I’ve concluded the proper place for a full roll of toilet tissue is on the back of the toilet, next to the toilet, or on the bathroom vanity, but never on the toilet paper holder. I’m very busy.
I’m sure you are too.
Which is why you should exercise restraint. If you’re so busy you can’t be bothered to change the toilet paper roll, where do you find the time to get in your car, drive to the store, grab a load of crap you don’t need, wait in line… Do I really need to continue?
Try not to misunderstand me here. Use as many sheets as necessary to get the job done then move on with your life. Don’t scoff at limiting the number of sheets of toilet paper to five or six. Depending on the number of ply, you might be able to get it down to three or four. There’s no need to make a toilet paper mitten if you’re going to be in an out.
When I was a kid, my brother would eat anything and drink everything I put in the refrigerator. During the summer months, my mom would let my sister, cousin, and me walk to the neighborhood convenience store. I’d buy candy, fruit punch, and the occasional pickled sausage.
Don’t judge.
Even as a child I was able to practice self control and save some of my treats for later. Unfortunately, later never came because my inconsiderate and overweight brother would get to my stash before I could. Just like now, it wasn’t about the money then. If you’ve ever had your heart set on a cold icy grape soda, a slice of sour cream pound cake, or a pink pickled pig’s foot, and found out it’s been devoured before you could get to it, then you know it’s not about the money.
Perhaps I’m being unfair. Maybe a stark comparison can’t be drawn between the emotions experienced when you prematurely run out of toilet paper and those felt when someone eats the last of the pork chops. But I simply cannot be the only one who wants what I should already have when I want/need it.
Last week, a friend of mine requested I print two articles each totaling 15 pages. At $5 for 500 sheets of paper, that works out to a penny per page. Surely I can come off $0.30 to help a friend out, but let’s not get carried away. I can’t have you using up all my paper, so that my supply is depleted when I get ready to print out an internet coupon.
Okay. Maybe it’s a teeny tiny bit about the money. But I maintain that wasting my time running unnecessary errands is the primary reason I felt moved to speak out on this subject. How about you? Where do you stand when it comes to saving time, and money, on the purchase of toiletries?
Like losing weight, getting out of debt can be a long and toilsome process. However, piling on debt is easier than piling on the pounds. There aren’t any quick and easy fixes, so I’ve listed 5 tips that will help you stay motivated while you climb your way out of debt.
Set S.M.A.R.T. Goals
S.M.A.R.T. goals are Specific, Measurable, Attainable, Realistic, and Timely. For example, “I want to get out of debt” doesn’t meet the criteria of a S.M.A.R.T. goal. A cursory acknowledgment of wanting to get out of debt isn’t going to get you very far. In isolation, a statement like that reveals your lack of conviction.
You want to get somewhere? Say “I’m going to sacrifice cable, soft drinks, and my overpriced apartment to apply the freed up cash towards paying off $13,843.52 of credit card debt by December 31, 2009.” You don’t have to tell everybody your business, but you understand where I’m going.
Your income, obligations, and level of discipline are key factors in determining whether your goals are realistic. Don’t make too many excuses for yourself. If anyone facing similar circumstances as you has ever accomplished a goal as lofty or loftier than the one you’ve set, then it’s definitely attainable.
If you don’t know where you’re going, any road will get you there. – Lewis Carroll
Develop a Plan
It’s cool to set S.M.A.R.T goals, but a carefully devised plan is your blueprint for debt freedom. An essential component of that blueprint is a budget. Yes – I said budget. Don’t like the word “budget?” You can call it a spending plan, a financial forecast, whatever. You can get real creative. Anyway you slice it, it’s still income minus expenses over a specified period of time.
After you’ve prepared your budget, I want you to take a close look at your expenses. Identify ways to eliminate or reduce each line item. Even those “fixed” expenses aren’t spared from this fat trimming process. Any money you find will be applied to your debts.
The thought of fessing up to the wasteful spending you’ve participated in over the years can be disheartening. Keep it simple. Use any or a combination of the following tools to prepare a budget:
Personally, I prefer Mint. Use what works for you.
There are two ways to determine which debts to pay off first. Some say give priority to liabilities with the highest interest rate to minimize costs. Others say pay the smallest balances first to garner a sense of accomplishment. What do I say? I say I’ve presented you with two options. Pick one.
If you fail to plan, you plan to fail. – Who knows?
Continually Gather Relevant Information
Knowledge is a powerful tool. Immerse yourself in financial information. Listen to podcasts. Read books, blogs, and magazines. Discuss money saving techniques with the cheapest person you know over tea. Constantly listening to or reading about personal finance will keep you focused.
I’m a huge proponent of frugality. In order to save money, you need to know how to get what you need for as little as possible. But, don’t go overboard spending money to save money. Do your best to go without what you really don’t need.
Some of my favorite money saving, debt obliterating information comes from the following sources:
At some point, I’ll get around to sharing my tried and true frugal strategies, but for now, know that the list above is nothing less than pure gold.
The first step towards knowledge is to know that we are ignorant. – Richard Cecil
Track Your Progress
At least twice a month, I want you to evaluate your progress. It’s not enough to devise a plan, you also have to stick to it. This is why it’s essential you assess whether you’re on track to accomplish your goals. Seeing your debt decrease and your corresponding net worth increase is encouraging.
If you’re not getting the results you hoped for, then that simply means there is a flaw in your plan or a flaw in your follow through. It’s likely the latter, so you should probably adjust that first.
If you can actually see the fruits of your sacrifice, then you’re much more likely to press forward. Perhaps this glimpse of freedom will compel you to spread the gospel to all who’ll hear the importance of simple living. Hold on to that enthusiasm.
Change does not necessarily assure progress, but progress implacably requires change. – Henry Steele Commager
Surround Yourself with Positive People
You don’t need people around who’ll beat you up when you veer off course. Don’t get discouraged if a moment of weakness or an unexpected event causes you to deviate from the plan. Whenever I have a particularly undisciplined day of spending, I say to myself, “tomorrow is a new day.” Try it. Whatever you do, don’t quit.
If all your friends are financial misfits, find people with similar debt-free ambitions on social networking sites like Meetup or MEETin.org. Don’t get put off by the fact that these websites encourage (*gasp*) actual face to face interaction.
People are like elevators. They can take you up, or they can take you down. – Zachary Tims
If you’ve paid off a significant amount of debt, what’d you do to stay motivated? If you’ve been unsuccessful getting out of debt in the past, what are the areas that caused you the most trouble? I’d love to hear your thoughts.
I was talking to a friend today about the difference between an emergency fund and a sinking fund. She heard the term “sinking fund” on The Dave Ramsey Show so she called me up to ask if I’ve ever heard of one. Well, I listen to The Dave Ramsey Show too, and if I remember correctly, Ramsey describes a sinking fund as cash reserved for necessary, expected, but nonetheless, potentially burdensome expenses.
Investopedia disagrees with Ramsey’s definition. Actually, a sinking fund is a pool of money set aside by a company to help repay a bond issue. It does seem as if Investopedia and Ramsey agree on the spirit of a sinking fund, so let’s go with Ramsey’s definition since it’s sexier.
An emergency fund is for – well – an emergency: a sudden, urgent, unexpected event that requires immediate action. As far as I can tell, an emergency fund and a sinking fund serve the same purpose except one is built in anticipation of the unexpected knocking you off your feet while the other is not.
Here’s a list of some of my personal emergencies:
I locked my keys in a gym locker. Since I used an ultra hardened lock, I had to hire a locksmith to saw it off the locker. That cost about $90.
A family member passed away, and I had to fly home for the funeral. The last minute flight set me back roughly $400.
My car failed it’s safety inspection due to worn brake pads. The replacements were $180.
I didn’t think any of these things would happen when they did. If the cash in my checking account was insufficient, then theses expenses could’ve been paid with money from my emergency fund.
Contrast the events listed above with the following:
Your 25 year old roof begins to leak. That’ll be $14,ooo.
Betsy, your 1995 Geo Prizm who can’t pass a safety inspection to save your life, has to be put down. A realiable set of wheels is running around $8,000.
The refrigerator you happened upon while dumpster diving and have been using for the last five years dies. You don’t want to push your luck so you pick up an imperfect substitute for $500 at the Sears scratch and dent warehouse.
Use your sinking fund to pay for these. You know roofs don’t last forever and neither do cars and neither do refrigerators. You get my point.
You’re probably saying to yourself, “what difference does it make as long as I have the money to pay for this stuff when I need to?”
So what happens if the cost of the roof wipes out your emergency fund, then you need to pay for expensive dental surgery? Dental insurance stinks.
Don’t let something you could’ve planned for leave you financially vulnerable to circumstances you have no way of predicting. I know it’s a lot of cash to have on hand, but that cushion will help you sleep better at night if either the expected or the unexpected come calling for your immediate attention.
I don’t know if it’s arrogance, ignorance, or entitlement, but I often hear my fellow citizens exclaim the value of their time. When faced with a task they find unpleasant, they opt to pay someone to do it for them. In many cases, this is perfectly acceptable. However, I find a lot of people’s estimation of the value of their time is grossly inflated.
Let’s say you’re paid approximately $50 an hour for your services. A pedicure costs $25 and takes approximately one hour for a nail technician to complete. The difference of $25 is what you “make” by having a nail technician give you a pedicure.
But, let’s take a step back.
You have to pay taxes on that $50. Assuming 25% of your wages go to pay federal and state income taxes, Social Security, and Medicare, you’re only clearing $37.50. So, you made $12.50.
Wait just a second.
How is it possible that talking on your cellphone with your girlfriend while getting a pedicure left you with an extra $12.50 in your bank account?
It didn’t. You didn’t make a dime. You spent $25.
Unless you actually earned $50 i.e., $37.50 after tax, while you were getting that pedicure, your logic doesn’t hold up.
I don’t hear too much of this now, but there was a time when countless financial “experts” thought it’d be better to invest extra money in the stock market over paying off your mortgage. If the stock market performed as it had in the past, you could get a greater return on your money by purchasing equity shares in U.S. companies.
That could work.
The stock market has historically returned between 10 to 12%. If your mortgage is 5.25%, ignoring the tax impact, you could get a 4.75 to 6.75% return using the aforementioned strategy.
Yep. It could work.
If you actually invest the difference!
Your theory doesn’t work if you squander the additional funds on tech gadgets, vacations, or deadbeat boyfriends.
Likewise, if you’re not actually making money when someone is washing your car or mowing your lawn or styling your hair, then it doesn’t matter how much money you could make while outsourcing these chores.
I’m not against paying someone to do what you’re incapable of doing. I’m not even against paying someone to do what you’re well able to do yourself. I just don’t think it’s rational for someone who is steeped in debt to reason that they’re some how financially savvy because they could make money while they’re doing absolutely nothing to make this money they speak of.
If you can actually afford to pay someone to do the things you’d rather not, have you considered whether you’re getting good value for your money? Not every professional is particularly skilled in their craft. I’ve made the mistake of paying for services I could’ve done a superior job doing myself. For instance, I’ve never had a nail technician do a better pedicure than me. I find the average nail tech, generally, doesn’t have the patience to give my callouses the time and precision they deserve. Plus, by skipping the salon, I can rest easily knowing I didn’t contract some nasty toe fungus from an unsanitary foot bath.
In addition to pedicures, I’ve taken on the task of shaping my eyebrows, cleaning my car (albeit on an annual basis), and washing and folding my laundry. It actually takes less time to do these things myself.
I’ll admit there is a benefit to casually assessing a monetary value to your time. By doing so, perhaps you’re less inclined to waste it. Again, assuming your bill rate is $50/hour, two hours of daily television will cost approximately $2,300 a month after taxes. Paying someone to watch television for you isn’t much fun, so you do it yourself. Excluding the cost of cable, DVDs, etc., do you actually think watching the tube is worth over $27K a year?
Maybe television isn’t your poison. Do you waste time playing video games, aimlessly surfing the web, or nurturing one-sided relationships? I confess that I’m no saint.
If your occupation requires you to perform routine tasks that don’t require much brain power, think about how you can make money while you make money. Instead of bobbing your head to Beyoncé’s greatest hits, listen to an audio book or a podcast that’ll increase your knowledge. Nothing against Beyoncé, but she’s rich. The information you obtain could eventually materialize as cash.
I applaud you for doing your part to support this great nation’s economy, but suffer no delusion that watching television while a maid cleans your house increases your cash flow.
I’ve been told by a few people to stop being cheap. It’s interesting that every person who has told me that has a lower net worth than me. They don’t seem to understand the purpose of being frugal. I think they believe I enjoy self deprivation and sacrifice. There are probably a few of you out there who get a rush from participating in activities that bring you within an inch of insanity or death, but I don’t particularly care for such things.
I’m not independently wealthy. At least, not yet. Although there are certain material possessions I quite enjoy, my primary purpose for wealth accumulation has very little to do with stuff accumulation. For me, being frugal is a means to the ultimate goal: FREEDOM.
You see. When you don’t have the resources, i.e., money, to buy the things that are necessary for your survival, you’re at the mercy of your provider. Whether that provider be an employer, a spouse, a parent, or, for those of you who are self-employed, a customer, you’re a slave.
Nothing makes me more uncomfortable than feeling out of control. I’ll tolerate authority, but I don’t like it. I’ve decided I’ll conform just enough to function and progress in society. If you’re even a little like me then you’ve thought about the possibility of losing your passion for your current profession. If you didn’t have any money, would you be relegated to a job that the mere thought of caused you to seize up in terror?
You may already have a boss whose face makes you ill. Would you look at that mug everyday if you were financially independent?
What about your spouse? Would the loss of their income render you insolvent? I’m not suggesting that you don’t have an income of your own. You might bring in more bread than your significant other, but the question remains: Do you depend on their spoils?
Regardless of how well you get along with any of your providers, unforeseen circumstances could lead to the deterioration and dissolution of your current arrangement.
Death, disability, bankruptcy, incarceration, and ANY other untold number of things could leave you wondering how you’re going to take care of yourself.
Okay that’s pretty grim, but allow me to share what drives me to be frugal. It’s the uncertainty. It’s the feeling that ultimately, with the exception of God, all my hope rests in me. I look forward to the day that I won’t have to work. Not that I’ll ever stop working, I just don’t want to be required to work in order to sustain myself. I want the freedom to tell, at a moment’s notice, any previous provider that I’m done…
A couple of years ago, I got a taste of what freedom feels like. At the time, I had $7,500 saved up. Although I worked for a wonderful company, I suffered from stress-induced, work-related chest pains. Basically, I hated my job. On the fateful evening of Wednesday, November 27, 2006, an inconsiderate and arrogant manager I worked with decided to chastise me in front of a fellow team member. Being that I was a colleague and not his wife or kid, I was especially infuriated by this behavior. Friday, November, 29, 2006 rolled around, and I politely and professionally put in my two weeks resignation notice without so much as a single job prospect.
Now, $7,500 may seem trivial, but it was enough to get me through about three months of unemployment. Fortunately, my job search only lasted two weeks. Although I admit my skills were in pretty high demand at the time, the stench of desperation is still the saboteur of the most qualified of candidates.
As was the case a couple years ago, I find the quickest and simplest way to save money is to decrease your expenses. Primarily because dramatically increasing your income in the short run, generally, isn’t practical. As a salaried employee, overtime is a waste of time if you’re looking to increase your net cash flow immediately. You might get a bonus of some unknown amount if you work longer, harder, and faster for your employer.
Even if you’re an hourly employee, overtime may not be an option provided by your employer.
If you decide that a second job is the way to go, I’d encourage you to crunch the numbers before jumping in. Where I live, middle income workers could end up forking over 40% of those additional earnings in taxes, e.g, state, federal, Social Security, Medicare, so it may not be worth the effort to take a part-time job making much less than what you earn as a full-timer.
If you live a frugal life, you’ll have more time and money to follow your passion or focus on more lucrative business opportunities. If you have a business idea that requires a modest amount of start up capital, you can use your own savings to finance your vision. You won’t have to fool with investors or lending institutions who’ll, rightfully, want a return on their investment. Again, you’ll be free to run your business as you desire without outside input from those who have a vested interest in your success.
Frugality means adhering to a simpler, greener way of living. You’ll have to give some things up. Although it may be painful in the beginning, consider what you’ll eventually obtain: FREEDOM.
This article was featured in the Carnival of Pecuniary Delights: Sweet 16 Edition! Check out the other articles at Wise Bread.
During my never ending quest for knowledge, I stumbled upon an audio book at my local library by Kevin Trudeau titled Debt Cures “They” Don’t Want You to Know About. The “they” Mr. Trudeau refers to is the consumer lending industry. I’m all for Americans gaining their financial independence and getting out of all kinds of debt. Unethical business practices should be exposed so that consumers are fully aware of the wealth prevention traps credit card companies set for the ignorant and uninformed.
I’ll give you an example of one such trap even I’ve fallen into. When you’re trying to get out of credit card debt, many financial experts recommend you transfer balances on higher interest credit cards to those with a lower interest rate. To me, this sounded like good advice. There was no shortage of credit card companies who were willing to offer me a 6 month introductory rate of 0%. So, I took advantage of the 0% interest rate and transferred the balance on my old credit card to the new credit card with the favorable, introductory rate.
Like an idiot, I charged additional purchases on the new credit card. Naively, I thought that my payments would be applied to the charges with the highest interest rate. Not so. I called the credit card company up to ask that my payments be applied to the highest interest rate charges first. Their answer was no – too bad.
There are numerous tactics credit card companies use to extract as many pennies out of the American consumer as legally possible. But, let’s take a moment to revisit Mr. Trudeau’s Debt Cures “They” Don’t Want You to Know About.
I’m probably not being totally fair. I’m drafting this blog entry although I haven’t finished listening to Mr. Trudeau’s 10-hour audio book. However, he brings up a lot of issues that really make my blood boil. He doesn’t adequately address the concept of personal responsibility. It seems Mr. Trudeau believes that consumers are being taken advantage of, railroaded, and raped by the consumer lending industry. According to Mr. Trudeau (and I’m paraphrasing) these poor blameless fools didn’t understand what they were getting themselves into. Late fees, over the limit fees, and default interest rates charged by the credit card companies are absurd.
Mr. Trudeau gives several examples of individuals who found themselves steeped in credit card debt after they lost their job, experienced an unexpected medical emergency, or had to pay for a car repair. I understand that it’s practically impossible to prepare for the infinite number of circumstances that could render any of us insolvent. However, there are many things within our power that we can do now that will mitigate the risk of reasonably expected and non-routine events causing us to succumb to the temptation of credit card debt.
I’ve been told that I’m cold. I’m not sure I agree with that assessment of my personality, but I don’t have a lot of patience for people who lack a sense of personal responsibility.
Mr. Trudeau gives an example of a young woman, who at the age of 21, had her car repossessed, defaulted on two loans, owned eight credit cards, and couldn’t even open a savings account because her credit was so bad. Oh, let me add that this young lady worked a part-time job making minimum wage. I don’t know this young woman’s story, but let’s just call her a deadbeat for simplicity’s sake. She sounds like a thief to me. I don’t see how someone working part-time making minimum wage could even afford a car note, let alone eight credit cards and two personal loans. Am I to assume that she was totally unaware or conveniently delusional about the fact that she’d be unable to pay back the money she borrowed? I’d suggest this young lady gets serious about honoring her obligations by securing a full-time job in addition to the part-time job she already has so that she’ll have more money to pay down her debts.
I find it interesting that Mr. Trudeau suggests that people generally use their credit cards during times of crises. He mentions a man who lost his job after the small company he worked for went under. For 4 weeks of unemployment, the man was “forced” to use his credit card to cover his car payment, rent, and food. Fortunately, the guy found a job after about a month, but he’d incurred $5,000 of credit card debt during the interim. I guess I could feel sympathy for this individual who didn’t even have enough money set aside to cover one month of living expenses when the popular recommendation is to have 3 to 6 months. I don’t.
If you’re unable to provide basic necessities to you and your family during times of hardship and credit allows you to survive, then you should pay for the privilege. I find it hard to believe that there are no other options, but IF credit is the only way, then be thankful you and your kids didn’t have to die of starvation because you didn’t have any money. Assuming credit card companies aren’t charities, there’s a cost to using their product called interest.
Now I don’t want to beat up Mr. Trudeau without offering the 6 simple solutions for outsmarting the credit card companies that I promised in the title.
1. Use cash. Included in the cash category are debit cards and checks. No one is forcing you to borrow money. Be warned that if you bounce checks or overdraw your account, the penalties can be just as cumbersome as credit card interest and fees.
2. Pay your bill on time. Have your credit card’s minimum payment automatically paid from your checking account. If paying by check, you want to be extra diligent in making sure that you mail the payment at least 10 business days in advance of the due date. Verify that the payment posts to your account on time. Credit card companies are notorious for holding checks and thereby forcing their customers to incur late fees.
3. Pay your balance off in full every month. If you don’t carry a balance, you won’t have to worry about the credit card companies arbitrarily increasing the interest rate on past purchases.
4. Don’t go over your credit limit. You have to police yourself. Don’t expect the credit card company to shut you down before you exceed your credit limit. Keep your balances to no more than 30% of your credit limit. Your wallet and FICO score will thank you.
5. Don’t buy stuff you can’t afford. The other strategies are a lot easier to follow if you abide by this golden rule.
6. Have an emergency fund. Three to six months is the conventional recommendation. Having access to your own cash can make a crisis look like a minor inconvenience.
I encourage you to search for ways to increase your income and reduce your expenses. By doing so, you’ll live within your means, save up an emergency fund, and avoid consumer debt.
Remember that the decision is yours. Make up in your mind that you’re not going to grovel at the feet of the credit card companies. Accept personal responsibility. It’s so much easier than blaming someone for a situation they have no interest or intention of helping you out of.
There seem to be an infinite number of frugal living tricks to save money, but I want to share some basic principles I adopted to pay off $25,000 of debt and save up a 3 month emergency fund in 13 months.
Even though I’m never averse to exploring ways to save money on the products or services I purchase, it’s almost always more cost effective to not make the purchase in the first place. Let’s say you want to buy a digital camera. You hunt for the best deal on websites like PriceGrabber or Amazon and check for coupon codes at RetailMeNot. Unless the digital camera is free after you maximize your savings by applying a coupon code to the lowest price, you’ll still need to spend money to finalize your purchase. Of course I’m not saying you should never buy the things you enjoy. But, I am saying that if you want to save money, a great way to do so is to hold on to your cash by not spending it.
Look at how broke people handle their money, and then do the opposite. Once you make the decision to travel down the road to financial freedom, your financially destitute relatives, friends, and coworkers may even offer you a few choice words of “wisdom” on how to manage your finances. I want you to listen to them carefully. When you find yourself modeling their behavior, be reminded that you’ll get the same results they’ve been getting.
Know your weaknesses. Remember the character Pookie, played by Chris Rock, from New Jack City. Pookie was kicking his crack addiction and getting along just fine before he went undercover working in a drug manufacturing plant. Don’t make the same mistake Pookie did. If your inability to refrain from stocking up on last season’s sandals – even at rock bottom prices – got you into a financial mess, stay out of the mall and any where else you’re prone to suffering a relapse.
I can’t remember where I heard this quote, but it’s fitting. “If you break your arm in three places, then don’t go back to those places.”
Make excuses to not spend money. Last Saturday I met up with a friend at the flea market. I parked my car near one of those Pay to Park stations. About 15 minutes prior to my 2-hour parking pass expiring, my friend and I headed back to the parking station to add more time. It wasn’t until I put a quarter in the machine that I realized I didn’t have the option to add more time to my current parking pass. I’d essentially waste $0.25 by adding money to the parking machine 10 minutes before my old parking pass expired. So, I retrieved my quarter from the parking machine and waited. My friend thought I was insane for refusing to give up the quarter. I told her it was a beautiful day and that I enjoyed standing outside chatting with her. Next time I’ll park my car for free on one of the residential streets and walk the 3 or 4 blocks back to the market. I could use the exercise.
I’m sure the example I provided may seem silly to most people, but we come up with so many ridiculous excuses to spend money, why not start brainstorming ways to save money that are equally outlandish?
Do you have any experiences you’d like to share that are relevant to the 4 ways I’ve listed to save money?
Are there any other principles you’re living by to either get out or stay out of debt?
This morning I cried. I cried because I was given the bad news that my precious corduroy jacket could not be found at the establishment I visited last night.
Guilt overwhelmed me when I realized I should’ve just paid the $10 to reenter the parking garage so that I could retrieve my jacket before somebody snagged it. But, my inner miser got the better of me. Out of principle, I refused to pay for parking again and retreated home. It’d been a rough night. I said to myself I’d just call the restaurant in the morning to see if it’d turn up in lost and found.
A man answered the phone when I called the restaurant. He asked me where I sat and to describe my jacket. I explained it’s a medium, brown, corduroy, J. Crew jacket. The man on the other end of the phone put me on hold to go look for it. After waiting on hold for about 9 minutes, I hung up and called back. It was then that the man I’d spoken with told me that he couldn’t find my jacket after looking around the restaurant. According to this guy, he’d even engaged a fellow employee to help him unsuccessfully find my jacket. As consolation, he told me that he’d leave a note asking the previous night’s manager if he knew where the missing jacket was. At that point, I was instructed to call back tomorrow.
Grief overcame me. Did someone take it? Why would someone want my outdated and oddly sized corduroy jacket? If it’s not there today, why would it be there tomorrow?
You have to understand. This isn’t any ol’ jacket. It’s so versatile, so light, yet so warming. I LOVE that jacket. In tears, I called my mom to discuss my loss and the emotions that’d overtaken me. After 5 years, it was finally over.
Since I’m a bit more sensitive to cooler temperatures than most people, I always carry a jacket with me if there’s a possibility I’ll be spending time indoors when away from home. Thoughts of replacing a jacket for a woman of my stature is worrisome. My arms are long, and my upper body is slim so I have a hard time finding something that fits me well. Besides, I am mentally maxed out on unexpected expenses resulting from last week: a $40 parking citation, $180 brake pad replacements, and a $1,000 mattress set. And now, 100 bucks to replace my jacket. Fortunately, I can afford to pay for all these things even if I really don’t want to.
I recalled an experience from last month that reminded me that even your closest friends can have next to no regard for your money. Your loss doesn’t cost them anything. With that experience still sorely fresh in my memory, I had to ask myself “how much could a complete stranger care about my loss of what he likely considers a disgusting, unfashionable, brown, corduroy jacket? Did he even look for it?” Even if he did, his search couldn’t have been performed with the same level of zeal that I would’ve conducted the search.
Peeling myself off the couch, I wiped away my tears, got dressed, and headed off to the restaurant. When I entered the restaurant, I checked the bathroom stall I used the night before, examined the bar hook where I hung my jacket, and questioned the bartenders. After that got me no where, I turned to the host who took me to the lost and found. Well, wouldn’t you know, I spied the sleeve of my beloved peeking out of the lost and found drawer. I claimed my jacket and immediately started jumping up and down like a school girl, laughing and clapping my hands. I didn’t care that people were watching. Mind your own daggum business! I clung to my jacket as if I was Peanut’s Linus and it was my security blanket. I thanked the host and skipped (figuratively) back to my car.
I share this experience with you in hopes that you’ll be reminded, or informed if you don’t already know, that no one cares about your time, money, or things as much as you do. Take care of them, and always remember to take care of yourself.
, a single late payment could cause your FICO score to drop 100 points. If forgetfulness causes you to pay your bills late, have the minimum payment automatically paid from your checking account or charged to a credit card. Don’t try this if you’re prone to overdrawing your account or exceeding your credit limit. Remember to pay off the remaining balance on revolving accounts by setting up an e-mail or text alert through Google Calendar or 
, author Michelle Singletary mentions an individual who’d drill a small hole in the top of the toothpaste cap. When squeezed, a thin line of toothpaste would dispense from the tube. Thus, less toothpaste was used. Extreme? I don’t think so. You only need a small amount. Using this technique, it’d only take a minute or two to extend the life of a tube of toothpaste three, maybe even fourfold. I rarely spend more than a buck on toothpaste, so it’s not about the money.
It’s cool to set S.M.A.R.T goals, but a carefully devised plan is your blueprint for debt freedom. An essential component of that blueprint is a 
You don’t need people around who’ll beat you up when you veer off course. Don’t get discouraged if a moment of weakness or an unexpected event causes you to deviate from the plan. Whenever I have a particularly undisciplined day of spending, I say to myself, “tomorrow is a new day.” Try it. Whatever you do, don’t quit.
