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Freeing Up Cash For What You Need
Even if what you think you need is what you're paying for right now....
Monthly expenses. Who doesn’t wish they could whittle them down with little or no change in lifestyle?
Ooooh, the lifestyle word. As far as I’m concerned lifestyle is something most of us have paid a huge premium for, and we don’t even know what—-if anything—-we’ve gotten in return. Let me illustrate.
Sixteen years ago, when we were huddled over preliminary blueprints working with an architect to design our house, he got a serious look on his face and asked, “Tell me about your lifestyle.”
Honestly, I don’t know when we’ve ever laughed so hard. We were raising three kids on a budget, sacrificing things other families considered “normal” (like cars with basic amenities like sun visors and horns) in order to pay tuition at the Christian school, which we had prioritized over other uses for our money. But we’d scrimped and saved to buy a small acreage and now intended to build a modest home with the intention of staying there for many years.
When he pressed us to identify our hobbies, indulgences, and extravagances and our eyes glazed over, he finally rephrased, “What’s the one problem you’d like to solve with this house?”
Now he was speaking my language! I instantly knew the answer and couldn’t wait to share.
“The sock problem!” I said. I had read how Ethel Kennedy, when her brood was young, kept all the clean socks in the deep bottom drawer of her kitchen and let the kids scrounge for matches. Let’s just say she was WAY more organized than I.
“Sock,” he said, dumbfounded but definitely not dumb.
“Yes. If you could design my house in such a way that each member of the family could always find their clean socks, I would be completely happy.”
“Don’t worry about a thing.” He smirked and had a twinkle in his eye. Kind of a swirly twinkle, actually, sort of the shape of a dollar sign. “I can solve the sock problem.”
A series of shallow shelves in the laundry room, each one holding a clear Rubbermaid bin which slides out and contains one of five family member’s socks, improved our lifestyle by miles! But did it really take an architect to figure that out? I’m thinking, not so much.
These days, three of those bins are empty. The time has come to seriously reconsider how many other “sock problems” we’ve spent our hard-earned money on. However we’ve inadvertently ramped up our lifestyle in the past fifteen years in ways that no longer make sense, we are now determined to take it down as many notches as necessary for the sake of our future.
How can it be that not long ago, we believed Starbucks was something akin to a right? How could we have ever thought cable a necessity? How did it elude us that you can purchase “New Car Smell” in a can and save a boatload of money?
The thing is, I’ve always counted myself frugal. And yet until recently, while I would never pay a fee to use an ATM machine, I didn’t question the fact that my checking account had a monthly service charge attached to it. And our business checking account did, as well. $240 per year for the business and $180 for the personal account? I won’t even admit how many years I paid these fees until I finally switched to a regional bank and put the kabosh on the rip-off.
Nickel and diming my way to lowered expenses, thus freeing up cash for items and services (and savings accounts!) with genuine value for the lives we’re living now, is one strategy. But I much prefer to go after the big-ticket cash outlays and attempt to bring them under control at every opportunity. So far in 2009, we’ve updated my husband’s life insurance policies for a significant annual savings, raised the deductibles on our homeowners and car insurance (in the process discovering a $600 overcharge we were refunded) for much lower premiums, bundled some of our communications services and ditched a cell phone in favor of sharing, and are nearly ready to close on our house refinance.
We locked in a rate of 4.625% for ten years. We only had 11 years left on a 5.875% loan, and while this refi doesn’t sound like it would make a tremendous difference in either monthly outlay or total amount paid, it does. We’ll be paying several hundred dollars less per month (can you say beefed up emergency fund?) and will save $25,000 in interest over the life of the loan if we don’t pay it off early.
When you really get down to it and behave ruthlessly toward some of your larger expenses, you too may find that you can make some changes that don’t affect your quality of life (*ahem* lifestyle) at all, but put money back in your pocket for uses more in line with your purposes as a bona fide girlvivalist.
If you haven’t started whacking away at your monthly expenses, give it a try! I hope imagining how much I paid to solve my sock problem is all it takes to motivate you to bring those line items under control.
Hey, how’s this? For every $50 per month you cut back, buy yourself a cute pair of socks.
Posted by Katy on 06/05/09 in
Frugality,
Personal Finance
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Get Out Of Debt, Fast…
If you want to be able to prepare for whatever life throws at you
When my husband and I were young (and unfabulously broke!) whippersnappers, we didn’t have a single credit card between us.
Somehow, we knew instinctively that if we’d applied for one (which, as unbelievable as this sounds now, required copious amounts of proof of income, length of employment, length of time at one address, etc.), we’d get turned down by people laughing their heads off on the other end of our request.
In spite of those censors, though, we did the math. (Hey, we went to Catholic schools!) We knew that if we wracked up $500 in debt, we would not be able to make even the minimum monthly payments without our young children going without macaroni and cheese (Aldi’s brand). And so we self-regulated, a habit I highly suggest for not only individuals but also banks, the mortgage industry, the healthcare industry, the auto industry, and the government. But I digress. :)
We kept ourselves from giving in to the lure of debt for the first 15 years of marriage and managed to save just enough cold hard cash to bail us out of frequent minor emergencies. We never got ahead, though, in the sense of our standard of living seeming to increase. We stayed even with the world, period.
Gradually, our income increased and like magic, so did our expenses. Why did it look like we’d be able to really start saving for the future, when the reality was that our growing family’s “needs” took all the increase and then some?
You see where I’m going with this, right? All it took was for us to begin to feel firmly entrenched in the prospering middle class (plus a loosening of credit which, of course, we now recognize as one of the biggest reasons why our economy is now flailing…), and darned if we didn’t go out and get us a shiny new credit card. And a big old payment on a Dodge Caravan, too!
Evidently, our fortunes had reversed and all of a sudden—-miracle of miracles!—-we were “good for it.” Or were we?
I can’t tell you how many zero-percent-on-balance-transfers I’ve opened over the years. Granted, we never spent a single dime on interest to a credit card company. But the balances, and attempting to pay WAY more than the minimums in order to pay them off in our natural lifetimes, kept us from adding substantially to our savings. For YEARS.
Have you noticed that when you don’t have a hefty emergency fund, you seem to have no choice but to whip out that credit card yet again? But how do you build up your cash reserves while continuing to service debt?
They say the first step in getting out of a hole is to stop digging. If you want to get out of credit card debt, you must stop adding to it TODAY. And that’s exactly what we had to do. Two years ago, we accumulated enough of a cash reserve to get us through everyday life, and then every spare cent went to pay down debt, Dave-Ramsey-snowball style.
I truly enjoyed the satisfaction of watching several significant debt balances disappear one-by-one. I LOVE getting free-and-clear car titles in the mail, instead of bills from auto finance companies. And then, to be able to divert those funds into savings? The way I see it, that’s one of our Big Tickets out of the mess we (as a nation) currently find ourselves in.
If preparing for emergencies, downturns, and disruptions in services is an important goal for you and your family, I hope you’ll make it a priority to get out of debt as quickly as possible. Once you’ve accomplished that, you’ll find it easier and less stressful to go about building for your future.
And you won’t require a single credit card to make it happen.
Posted by Katy on 06/09/09 in
Personal Finance,
Debt-Free
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If You Knew For Certain That Your Life Was About To Change
And not in a good way, what would you do to get ready?
I admit that I didn’t know for sure that the business my husband and I own and operate would eventually be hit hard by the downturn in the economy, but of course, I suspected as much.
It just makes sense, doesn’t it, that some clients are going to have to cut back on the goods and services they formerly purchased from us, until their own businesses are back on a better footing? Still, until last Friday, our corporation continued to earn as much money—-or more—-than before things started going south.
But all that’s changed now, if this past week’s news is any indication. In fact, after hearing from three separate long-term clients, we’re estimating that upwards of 40% of our income will be disappearing within the next month.
We’ll be scrambling to find new clients to replace this loss, but in the meantime, I’m happy that I’ve made some significant changes to our personal balance sheet that will serve us well going forward.
It’s useful to imagine bad scenarios in life, if only so that we can prepare ourselves to withstand hardship if and when it arrives. And honestly, is there ever a circumstance in life that can’t be mitigated more easily from a debt-free position?
Getting completely out of debt (except for a smallish mortgage) has given us a far better return-on-effort than any investment in the stock market has ever returned. Toward the end of working our Dave Ramsey-style debt snowball, I think I was sending two-thirds of our monthly income to finish off that final bill.
And guess what? No sooner did we make the last payment than the stock market crashed. We lost plenty of money, but the impact on our net worth would have been truly terrible if we’d had a pile of debt on the other side of the equation.
As it was, our net worth took a dip but not for long. Because the very next project I undertook after satisfying the debt was to start accumulating a much more generous emergency fund than we’d ever had before. Plus a car replacement fund, a home repairs fund, a Christmas fund, and well…you get the idea.
I didn’t know our car was going to start behaving really badly, causing us to realize that we needed to update with a late model used car sooner than we’d planned. But when the time came, we actually had the cash saved up in advance—-something of a miracle for us!
Last week, right after the exterior of our house got wrecked by hail and before we found out about our business problems, we closed on a refinance. We lowered our rate, shortened the remaining term to ten years, and will be saving $400 per month.
So, yeah. Our lives are changing, and our successful business is facing difficulties we couldn’t exactly predict. And yet, in a way, we could. I don’t imagine we’re going to have the easiest time getting through this period, but I do know this: If we hadn’t buckled down and prepared for an uncertain future, we’d be in much worse shape going into this than we are.
Any steps you could take now that would soften a blow, should it come? Why not get started, while the stress isn’t as great as it would be during a full-blown disaster?
Who knows? It could even turn out that your pre-emptive efforts will keep disaster from striking at all. Or, if it does, its effects won’t take as desperate a toll.
Posted by Katy on 06/26/09 in
Economy,
Personal Finance,
Debt-Free
— 4 Comment(s)
News:
When the economy started to squeeze the Wojtowicz family, they gave up vacation cruises, restaurant meals, new clothes and high-tech toys to become 21st-century homesteaders.
Posted on 05/25/09 in
Survivalism,
Personal Finance
Beginning of an ongoing saga chronicling one family's mission to live within their means.
Posted on 05/25/09 in
Survivalism,
Personal Finance
The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Posted on 05/28/09 in
Economy,
Personal Finance
"Compared to other people that say it's going to be a doomsday, I could be considered an optimist."
Posted on 05/28/09 in
Economy,
Personal Finance
Debt Is Financial Cancer! Minimize It, Pay It Off Early and Stay Away From Credit Cards
Posted on 05/28/09 in
Survivalism,
Personal Finance
Progressive health care reform groups demanded on Thursday that Washington’s NBC television affiliate refuse to air a 30-minute infomercial funded by a conservative group opposed to creating a public insurance plan.
Posted on 05/29/09 in
Healthcare,
Personal Finance,
Media
Can you find all the agendas buried in this article? Here's one: "What’s more, low-income families don’t benefit from the tax breaks associated with health savings accounts the way middle- and high-income earners do."
Posted on 05/29/09 in
Personal Finance
By domiciling in Florida, I will personally save $13,800 every single day. That's a pretty strong incentive.
Posted on 05/30/09 in
Economy,
Personal Finance
When it comes to buying stuff, I'm still fiercely frugal. I drive a 17-year-old car and won't even think of replacing our battered kitchen appliances. The last major "toy" I bought myself was a 40-year-old South Bend 10K metal lathe for $1,500 four years ago, but that doesn't count because it's a tool.
Posted on 06/07/09 in
Frugality,
Personal Finance,
Family
After last year's market meltdown wiped away huge chunks of their savings, more investors have decided to seek professional help. Just not from a financial advisor.
Posted on 06/07/09 in
Economy,
Personal Finance,
Health
An Israeli woman mistakenly threw out a mattress with $1 million inside, setting off a frantic search through tons of garbage at a number of landfill sites, Israeli media reported Wednesday.
Posted on 06/10/09 in
Security,
Personal Finance
The brute force of the recession earlier this year turned back the clock on Americans' personal wealth to 2004 as home values shrank and investments withered.
Posted on 06/12/09 in
Economy,
Personal Finance
Shoppers in Germany will soon be able to buy gold as easily as bars of chocolate after a firm announced plans to install vending machines selling the precious metal across the country.
Posted on 06/17/09 in
Economy,
Personal Finance,
World Events
Taxation is theft, the best way to combat it is to understand every legal deduction you can take or create.
Posted on 06/19/09 in
Economy,
Personal Finance
With or without health insurance, you can negotiate reduced charges with medical professionals. Here's how.
Posted on 06/21/09 in
Healthcare,
Personal Finance
Some Amish Lived It Up Until Hard Times Hit; Dinners Out and LED-Appointed Carriages
Posted on 07/02/09 in
Economy,
Personal Finance
Even before the collapse of the housing and financial markets last year, Americans were woefully unprepared to pay retirement in the traditional sense of a post-career period of leisure and personal pursuits supported by a pension, well-managed nest egg and Social Security.
Posted on 07/31/09 in
Economy,
Personal Finance
So gold did fall today based on the CPI number and the Producer Price Index, which was also down. But my question is why anyone would buy gold at this point, and therefore why gold hasn't fallen more in price, given its three-year price run up. Gold is traditionally an inflation hedge. But if there isn't any inflation just what are investors hedging when they buy gold.
Posted on 06/02/10 in
Economy,
Personal Finance
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Serving up fresh, money-saving tips daily. No reservations necessary!
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Trent Hamm buckled down and got out serious about personal finance (and debt control!) at a young age. Trust me, you will benefit from his wisdom!
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Get Rich Slowly is part philosophy, part psychology, and part good old-fashioned financial common sense. Oh, and with wonderful gardening tips, too!
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A personal money management expert, Dave Ramsey is an extremely popular national radio personality and best-selling author of The Total Money Makeover, Financial Peace and More Than Enough. Through his proven plan, Ramsey helps people eliminate debt and credit cards, learn to budget, avoid bankruptcy, build wealth and find financial peace.
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