10
Apr

Weathering the Tough Times

By David 0 Comments
Categories: Circumstance Navigation and Frugality

We got bad news at work last week. There’s an issue with cash flow, and our pay has to be cut in half for the next month, maybe two at most. While the economy is finally improving and we have work coming in, we’re simply out of money. Perils of a small business, I suppose. But since it’s small, we can adjust and make it out, instead of losing our jobs!

I’m just happy that half pay is not going to kill me! I’m down to my last 2 grand or so in debt repayment, and my monthly expenses are noticeably less than they used to be. While I won’t have any extra money and my debt repayment will be on hold, I’m not freaking out. I have an emergency fund in the bank, my expenses are down, and by using coupon shopping the past month, I am well-stocked on enough groceries to supplement me for a month!

So in light of many people having to adjust to similar situations, or possibly having to adjust in the future, here are the things I’ve done to help me weather what would otherwise be a dark time in my financial life:

1) Build an emergency fund. A month’s income is about right. That is enough to fix a car, pay for small medical bills, keep you afloat for a month in case of job loss, etc. Since I’m at half salary, I could easily live at my current means for two months before I felt an impact. That’s a long time, and enough time to find a small side job or take on small projects.

2) Reduce expenses. It goes without saying, but the best way to reduce debt is by spending less. Now that my budget is way below the money I make, making less is not going to kill me! I won’t be able to put as much extra money towards my remaining debt, but I can survive on half salary, possibly without even dipping into my emergency fund! The money is there if I need it, but now that my expenses are low, I won’t need much of it. Now, this isn’t easy to do. You’ll have to become frugal…

3) Become frugal. There is a “cheap” person, and there is a frugal person. The latter is pretty much the same, just less annoying. Don’t go to a restaurant with people and bring grapes and crackers to eat - that’s being cheap; just pick something that doesn’t cost much, or don’t go at all. Frugality is a mindset in which you don’t spend more than you have to on the things you need, and don’t buy the things you don’t need. Chances are, you don’t need a lot of things. You probably don’t need digital cable or satellite, a netflix subscription, and internet. Most TV is available for free online. Use the library for books, which can provide hours of entertainment per week. Borrow DVDs from a friend instead of buying them all the time. Use coupons when you shop (google The Grocery Game). Check for better prices on phone, insurance, and utilities. Research online ways to get those services even cheaper.

4) Calm down. Stress is evil. If you freak out about losing pay, then you will not sleep, your productivity will be down, and you might even lose your job! Just keep calm, and plan for these situations ahead of time. If you are well-planned, you have nothing to fear. Calculate a worst-case scenario, and find a way to live through it. My worst case scenario was temporarily moving back home, and lately it is moving up to get married earlier. Yes, it would be terrible to have to do things that way, but it is the worst case.

5) Build relationships. We’re in a new era, and people are starting to go back to relationships. In the end, the government won’t be able to help you, your boss won’t be able to help you. The people you can trust to keep you afloat are your family and friends. Build a network of close friends that can support you. Then, the worst case becomes bunking on someone’s couch for a few weeks. I have volunteered at a lot of soup kitchens, and the common thread among the poorest among us is that they didn’t have family or friends to fall back on. When you’re building a career, it’s easy to sacrifice other people along the way. The problem is that careers are fickle. People will stand by you forever.

I hope this helps some people. A year or two ago, this would have nearly done me in. I likely would have had to move back home. I probably wouldn’t have met my fiancee, and things wouldn’t be going this well at all. Get rid of your debt today! You’ll gain peace of mind, financial freedom, and the ability to weather small storms in life, like this one. It’s tough, but if you persevere, there’s nothing that will be able to take you down!

09
Mar

Losing Weight (On a Budget)

By David 2 Comments
Categories: Uncategorized

After reading the blog 344 Pounds, I noticed many similarities to myself. I am very obese, at 320 pounds, but thus far have been healthy, had good self-esteem, and generally had no good reason to lose weight. I have great blood pressure, cholesterol, and have no risk of diabetes or heart/liver condition. However, I have recently wanted to be more active. I have a wedding in June, this spring looks like it will be beautiful, and I want to be able to get outside and get active. However, at 320 pounds, this becomes a bit difficult at best. So, I need to lose weight. However, if I am going to succeed in getting rid of my debt before I marry, I can’t afford a gym membership, super healthy foods, surgeries, etc. But I’ve learned a few tips to hopefully shed a hundred pounds without spending much extra money. Here are some tips in case you’re trying to do the same!

1. Build a Home Gym. It might be a new concept, but you don’t need fancy machines to lose weight. Buy a set of dumbbells, which should cost less than $50 easily, and you might be able to pick up some for less than $10 on Craigslist or a yard sale. You can do pretty much anything with a dumbbell you can do on weightlifting equipment, with modified exercises. Don’t worry too much with leg exercises for now; when you are overweight you get enough workout on the legs by simply using them. You may also choose to buy a floor mat, a weight bench, an exercise ball, resistance bands, etc. If you really want to spend nothing, fill some gallon jugs with water to use as weights, and use a towel for resistance exercises. It might not work long-term, but it should definitely get you started!

2. Use Nature. Want a truly free way to lose weight? Get outside. Seriously. Throw a frisbee, ride a bike, walk, jog, run. It doesn’t matter. These things all work to benefit both your muscles and your heart, you get fresh air while working out, and it is truly fun. Embrace getting sweaty and playing hard, like you did when you were a kid. You don’t need a treadmill or elliptical (though they certainly do the job great), if you have the great outdoors to play in.

3. Eat Smart. You don’t need to go all-organic premium foods to eat more healthy. Yes, fast food is cheap, but should be avoided at all costs. Use whatever vegetables are on sale that week. If you are busy, then you may have to eat out a few times per week. Don’t sabotage yourself though; look in advance what types of foods are best to eat at the places you like the most. Usually salads are the best, but not always. I was surprised that Chick-fil-a’s chicken sandwich was fewer calories than their wraps! Go for grilled over fried (trust me, after a few weeks you won’t miss it). Substitute the fries for something else, or get a small fry and eat only half of it. It is possible to eat fast food and still eat healthy, you just have to be smart and informed before you go.

4. Drink Water. Water is free. Don’t buy bottled water. Use tap water, a good filtration system or pitcher, and invest in a good water bottle that you can carry with you and doesn’t sweat. Fill your bottle every morning, and at work if the water is good. Bottled water is too expensive anyway, for something you can get for free (or really cheap if you use a filter). You know what costs you a lot of money? Sodas and other drinks. Give up alcohol too, or cut back. If you have to have coffee, learn to drink it black (it is healthy for you, and you’ll spend less on sugar and cream). If you have to have tea, cut back on the sugar or honey. Both coffee and tea are cheap to drink, if you drink them correctly. You should not have to drink a lot of milk, but if you can’t give it up, then use store-brand lowfat milk. But your calories should be invested in food, not drink. Water is free, both monetarily and calorically.

5. Shop Creatively. Use coupons, or use The Grocery Game (google it) to maximize your food budget. Don’t feel like you can’t use canned vegetables if they are cheaper. But if you see fresh vegetables on sale (or have a good farmer’s market nearby), then load up. Incorporate whatever meat is on sale that week into your menu. In general, it is easy to tell what foods are healthy or not. If you tend to eat a lot of TV dinners, buy some Lean Cuisines when they go on a good sale, and stock up. Whatever your strategy, stick to it and you’ll be fine. I actually spent $25 less over the past week on foods that were very healthy. Use fresh herbs and spices to add flavor to your food, and you won’t feel like you are sacrificing anything!

6. Adjust. As you lose weight, you should be eating even less and exercising at a higher intensity. While jogging might help you drop initial weight, you may notice a plateau. At some point, you may have to get a gym membership in order to get the higher intensity you need. But by this time, a gym membership is a good investment; you are dedicated to the process, so you don’t have to worry about not getting good use out of it. The biggest mistake is to buy one and not use it at all. By starting at home, for cheap, you build a habit that can carry over to the gym. Look for gyms that are local or privately owned, and you may save even more money. For foods, you should be buying less, since you should be eating less.

In general, though you may be spending more on quality foods, gym and recreational memberships, and adventures you will be able to go on, once you lose weight you should theoretically be spending less on volume of food, medical care, clothing, etc. Lack of money is no reason not to start losing weight today! You can make a few small changes right now and gradually keep adding changes in, until one day you have changed your whole lifestyle. And all that, without spending any extra money!

09
Feb

A Macroeconomic Look at Credit Cards

By David 5 Comments
Categories: Credit Cards

Ok, if you’re reading this, you probably agree that credit cards are bad. After all, we’re in debt more than ever, and only now that our economy has tanked are we starting to realize that it’s imperative to get rid of our debt. Personally, I’m down to slightly more than $2k. I’ve found there is no easy way. No amount of snowballing, snowflaking, etc. can replace the simple idea that you have to either make more money or reduce your lifestyle in order to pay off debt quickly. It has humbled me. However, I propose that credit cards are actually mathematically dangerous at their core, not just due to bad behavioral patterns.

The primary reason that credit cards are evil is simply that they are a gamble at best. If you do not have money to pay for something today, then you are betting that five years from now, you will have the money. And in the meantime, you reduce your monthly spending power by a minimum payment. The combination of these two is dastardly; you will simply never be able to save enough money to pay the cards off while paying the minimum payment every month. This is a simple concept to understand, because how else would creditors make money? They prefer you to keep a balance, making those minimum payments until you die. Even with the new laws requiring principal to be paid off each month, it still takes years to recover from a single purchase. Yes, you might have bought that laptop on sale, but you spend eight years paying it off? Not smart. And it’s not only your fault; it’s how the very industry is set up.

So, what’s wrong with thinking you’ll have more money tomorrow than today? Well, for starters, check out our economy. You might not even have a job tomorrow! A close second is that mathematically, we simply don’t make more money, despite raises. Here’s a look at it using college macroeconomics…

United States GDP (per capita) only increases an average of 2% each year [source]. Now, that is actual economic growth per living person, adjusted for inflation. This means that unless you are in an industry of uncommonly high growth, you can expect to have an income increase of a maximum of 2% each year. In actuality, that percentage trickles down from the CEO, so you might be left with 1% growth at best. Unless you do something like get a degree, change careers, or get a promotion, you simply won’t have more money next year than this year. And thanks to the trillions of dollars in bailouts (inflation fodder), you will probably make less money this year than you did last year!

On the other hand, credit cards charge an average interest rate of 14%. This means that over the course of a year, you get charged 14% to use that credit card. Meanwhile, you make 1% more money. You’re doing 1% better, but paying at a rate of 14% extra! That speaks for itself. Now, if you only have a few hundred dollars on the card, that 14% may work out to equal the 1%, and you might be able to pay it off. But for many people, they hold half their annual salary on those cards, meaning it’s still seven times greater than what you gained in income. Add in the factor that people with that much debt typically have greater than 14% interest, and the situation clearly worsens.

Thus, credit cards are not a sustainable system. And this is part of why we’re in this economic mess today. Some people are able to not get trapped; either they don’t get too far in debt, wind up changing careers or making more money, or happen to be in a lucky field that makes more than the average GDP growth. But, for every industry growing faster with respect to GDP, there is an industry or two that is growing slower than the average GDP. This means that some people aren’t even getting that 1% increase each year. Some people don’t even get an increase equal to inflation!

If you still carry credit card debt, get started today on eradicating that junk! You will have to decrease your lifestyle, pick up second jobs, find things to sell, etc., but the freedom is worth it! It has been incredible to see those dollars gradually roll away, and actually have more discretionary income to use once those cards get paid off! That sense of freedom is totally better than the coolness of having a new TV paid for with a credit card. 

Look, we all want cool things, but seriously, save for them. If you can’t afford it by saving for it, you definitely cannot afford it by using a credit card. I hope I showed you how mathematically unsound they are in terms of economics. Yes, you might be one of the lucky ones who are able to use them without getting trapped, but it’s a gamble. Like a casino, the house always wins.

17
Jun

Niche-Industry and Internationalism

By David 1 Comment
Categories: Business and General

There is a lot of talk today about how bad of a state the US is in right now. Of course, gas prices are high, unemployment is high, wages are low, and all signs point to economic recession. However, I have more work to do in my office than I’ve ever had before, and our business is booming. It may not be “personal finance”, but as someone entrepreneurial-minded and always looking at what does and doesn’t work in business, the past several months have really taught me some valuable business lessons that will keep me from making terrible mistakes when I do own my own business.

The economy started floundering around this time last year, even before that. The government was in major deficit due to war spending, and contractors that weren’t for war production started losing money. At the time, I was in a small business whose primary source of income was subcontracting on scientific/engineering government projects with the Department of Energy. However, with more deficit comes less spending, meaning less work for us, even though we bid low. Our problem is that we replaced human labor with automated computer labor, and even though we were low bidders, the government’s role when the economy is dipping is to keep its citizens in jobs. So due to the lack of work, and the inability to quickly navigate to foreign markets, half of us were let go and the other half turned to consulting.

Now, then I found my current job, and even though the economy is dipping even more, we seem to have a lot of work. We even have government work that isn’t war related. The contrast is very simple to make in this case–this company made strides more than a year ago to find partners all over the country and world that would sell our products. Now that the US dollar is so low against foreign currency, those partners can’t get enough of us; we’re now both the lowest bidder and the best equipment for the job. Money from those jobs have allowed us to R&D new technologies that the government (Army COE) is interested in. So by diversifying into foreign markets, we were able to retain the US market to some extent, even in the midst of a recession.

Most people, myself included, are afraid to make the jump into foreign markets, especially small businesses of less than 5 people. However, the way my boss did it was a great idea. First, he found partners that would do all the networking and selling. Then, we would heavily train those partners in our equipment and methods and split any profits. The upside is that we only interface with a handful of people, who in turn interface with the end users. Really, the only inconvenience is having to ship internationally, and since a lot of it is freight it’s really no different than shipping to California. It allows us to focus on building and improving technology, and our partners handle the selling and the first tier of technical support.

It’s not like our stuff is in a massive number of places now either; we’re a niche market and always will be. However, by putting ourselves out there internationally, we’re keeping ourselves at the front of that niche market. If we do decide to grow, it will be much easier, because we already have the partners in place to get our stuff out there even more. Plus, with partners/resellers comes additional feedback to allow us to make improvements.

So, when I start my own business, one thing I’ll be looking to do is make sure it has an international focus. When the dollar goes weak, I will get more international business, and when it strengthens I will have had enough improvements to be more than competitive in the national market too. I’m not an advocate of mashing every country’s governments together into one happy family, and am not even a supporter of the UN. But from a purely business perspective, internationalism makes a lot of sense.

10
Jun

Apologies, Snowflaking, and Updates

By David 0 Comments
Categories: General and Snowflaking

Yes, it’s been more than two months since my last post. I’m a bad blogger! But I see that people are still subscribed, and I get a lot of visits here these days, so I will try my best to add content from time to time. To balance the long wait in-between posts, I will ensure that every post is full of good information, and delve a bit less into my personal problems.  I’m not a full-time blogger, so I apologize that I cannot post every day, but if you’re looking for good information from those type of people, I have a lot of good links on my blogroll! I still hope to contribute good information to the community, though, and am thankful I have people that still email me and care about my progress to becoming debt free!

You may notice there is a new page at the top called “Snowflakes“. I have found several ways to make small amounts of money online with little effort. Combined, it puts about an extra $20 per month or so into my debt removal process. It’s not a lot, but for a few hours of time per month, it definitely helps the cause! None of these opportunities are scammy or evil, because I choose only things that I enjoy doing and have already received a check from, before I post it to that page. Right now there are 5 opportunities that can net you some extra snowflakes for your debt snowball, and hopefully more as I discover them. I will also do a whole review post on these at some point, and any new ones I post. If you have a hot tip, please let me know, I’ll sign up, check it out, and if it’s legit, post it here. Note that this doesn’t include conventional things like blogging, starting businesses, selling stuff, performing actual side jobs, etc., but rather it is things you only spend a little time on and can do solely online. I hope it’s valuable to some of you!

Now, some actual updates on my situation. My financial aid for summer is STILL not going through, so I am forced to keep the debt snowball rolling the old-fashioned way. I’m almost at my halfway point of being debt free, and am on track to get rid of all my credit card debt sometime between May and December of 2009. Right now I have a ring to buy for a special someone, a potential wedding next year, and a ton of money going towards finishing school, so my repayment abilities are very limited. My girlfriend lives 2 hours away, so my fuel budget is skyrocketing since I spend most weekends there. Plus, now that school has started, I’m back into some bad habits, including buying vending machine items, fast food, restaurants, etc. Once I get some time I’m going to hit up Costco and develop some solutions for eating all day when life is really busy, and my budget should come back under some control. Things are looking up, though, and it’s still a long way forward, but I’m confident things will go well!

17
Mar

Would You Refinance Your Debt at 7% Interest?

By David 1 Comment
Categories: Debt Repayment and Scenario

I believe I have the golden opportunity, here. For once, my financial aid finally went through for school, and while I wasn’t approved for “free money” like grants or need-based scholarships, I was approved for federal stafford loans. Not only does this mean I can go back to school in summer, but it also means I will have an extra $3000-8000 to work with, if I so choose. Here’s the deal; most of that is in unsubsidized stafford loans. This means the loans sit there, gaining interest, until I enter repayment. This means a higher initial principal, but I don’t have to worry about high interest rates. However, when you compare that to credit cards, astronomical rates, and generally feeling like a ruined man, I think there is only one path forward.

I’m going to pay off my credit card debt with student loans.

Here’s my train of thought. I pay $300 per month in credit card minimums, normally about $500-600 per month as I can. At this rate, it might only take me a year to finish paying everything off, assuming I can find ways to add to that snowball. So over a year, I’m not really paying a ton in interest rates if I continue this method, but I’m still paying about an extra $1k in interest over that period. And as I learned when I lost my job, nothing is permanent. At any moment something could sweep by and ruin my whole plan. If that happens, I don’t want to be stuck with high interest rates. Enter the student loan. If I still put $500 or more per month toward that loan, it will take me between 11-13 months to pay off the debt, only a few less than my current method. However, the money I pay each month goes largely to principal, and if something happens to wreck my plan (losing a job), I’m not even in repayment yet! Not only will I be able to pay off this loan, but it should free me up to be able to pay off more than this student loan by the time I graduate. Meaning I graduate owing less in student loans than I already do right now.

I think it’s the smart move to make. If my future was certain, I’d just continue my current plan and get it paid off. However, I know with my job comes a direct pay increase once I get my degree, so I can count on making more money when I actually enter repayment. If something does go wrong, it’s effectively like hitting a pause button; I’m no worse off for it. With regular credit cards, they are not too keen on giving you free money. The best case scenario is that I pay off my debt even earlier, and the worst case scenario is that I freeze my debt where it currently is.

Some side benefits are peace of mind, likely a giant leap in credit score, the knowledge that if something happens to my situation I’ll be ok, and the ability to start putting money towards solid investments greater than 7% return (peer to peer lending comes to mind). I can’t think of any downside to this plan. Granted, I technically can’t use student loans to cover debt repayment, but I can use them for food and rent, and then rebudget that money to pay off the credit cards. The net result is that by August, I will have no debt at an interest rate above 6.8%! You can’t touch that type of refinancing with a ten-foot sub-prime pole!

Can anyone foresee any problems with this arrangement?

22
Feb

FAQ (or, Searches That Found This Blog)

By David 1 Comment
Categories: General

I’ve maintained a variety of websites, but this blog has turned up some fairly unique Google searches compared to the other sites! I don’t know if other finance bloggers have the same results, but I’ve had some hilarious searches. So, in an effort to make those people feel at home here, I’ll attempt to give some good information on those topics, as I’m sure you didn’t find it here the first time. Some of these are intended to be a bit funny, but hopefully provide some decent content for these situations as well!

  1. does it make sense to pay off car payment? - Many of these searches are entire questions. Of course, the answer to this one is, yes, it makes sense to pay off your car payment. You do not want to get it repossessed! I know, funny, but the better question would be rather to make multiple payments or not. There are two takes on this. Dave Ramsay believes in the psychological impact of debt, and would have you make as many payments as possible to pay it off sooner. However, mathematically if your interest rate is less than 7%, it might make more sense to invest your extra money. There are benefits to both methods. Personally, I prefer to just get it paid off as soon as possible, then start saving up to pay cash on my next car.
  2. getting rid of debt through prayers - Whew, I wish it were this easy! Now, while I believe in the omnipotence of God, I also believe in the stupidity of humans. If we managed to get ourselves into debt, I think it’s our responsibility to get back out of it. That’s not to say it doesn’t take a lot of prayer to get the strength to do it, just that if everyone prays to win the lottery, then whose prayer does God answer? There are no quick fixes, you just have to get up and do it every day.
  3. is it beneficial to make half car payment every two weeks - Likely not. Basically, it’s confusing and you’re likely to miss a half payment. Plus, most auto loans are behind the times, and offer very little in terms of online payments and account management. The easiest way is to make one payment per month with as much as you can pay. The interest rates of typical car loans in a 15-day period is usually not as debilitating as those on credit cards, and to me, the hassle of it all is not worth the 5-10 bucks per year you’ll save. Your mileage may vary, though.
  4. using your brain to trick people - I got a lot of interesting searches after the article on NLP. While there are ways to use NLP for less altruistic means, most of which are quite fun, this is unfortunately not primarily an NLP website. However, basic NLP can be useful for training your mind to accept positive thoughts about your goals and to get rid of negativity that could be inhibiting you from success. As far as tricking other people, though, I can’t help you there. :)
  5. a shortcut to debt free life - Sorry, but there are no shortcuts to a debt free life. I know I have a series called “shortcuts”, but those are just part of a larger picture. There are a lot of small things you can do that have major impact on your finances, but in the end, it comes down to hard work and dedication, like everything in life.
  6. 15k loan no credit check - Good luck with that, and let me know if such a lender exists!
  7. taboo 2 - Um, this is hardly that sort of website. You’ll have to get those sorts of movies elsewhere. :)

Ok, so that concludes the first edition of FAQ. Keep those awesome google searches coming in, and I’ll do my best to answer your questions!

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