Archive for the 'General' Category

Next Entries »
16
Jul

Religion in my Wallet?

By David 6 Comments
Categories: General

Wow. Make one post about religious instructions regarding personal finance, and get a slew of personal attacks, unsubscribe notices, and general ignorant vitriol. How bitter are some of these people who commented? The post never said “these are things you should believe”, it simply stated these were some of the reasons the guest blogger handles finances the way he does. After all, personal finance is, well, personal. Why, then, are people making such a big fuss over things? As a Christian, I’m used to this sort of thing all the time. Mention Jesus around people who don’t know him, and the world implodes around you. I love America, this land of free speech. And all the people who wish to censor it.

Should posts like this receive this type of attention? No. We’re supposed to be a society based upon the free exchange of ideas. While you are quite welcome to choose not to hear others’ ideas, and quite welcome to contribute your own ideas, it’s about time you stopped calling for censorship of the ideas you don’t agree with. Like the mafia, some have used the blogger’s version of extortion — cancelling an RSS subscription — to show how much they hate the very idea of talking about God. This is incredible. When I was an atheist, I didn’t go around shoving religious people around; I simply didn’t care what they had to say. The only thing that can cause the bitter comments attached to that post is a hatred for God, and to hate God you must believe he exists. It’s such a backwards world. After all, I don’t get offended when people talk about the Easter Bunny; I’m simply content to sit back and know he doesn’t exist. Why should atheism be any different; it wasn’t to me.

Now, I won’t wax Christian all the time on this blog. To me, I’m here to write primarily about money. However, I am a Christian, won’t deny it, and won’t be silenced by people who would try to bully me into not talking about it. This is a personal finance blog, and I plan to make it personal; when religion plays a role, I will mention it. And since I tend to follow biblical laws on money, or try to, religion does belong here. However, I will not be giving altar calls at the end of each post, contrary to what some of these people feel is going on. I only hope J.D. won’t stand for being extorted, and will at least claim that all ideas surrounding personal finance belong on his blog, even if those ideas happen to be religious in nature (especially in just 1 out of many hundred posts).

Calling for censorship of any kind is becoming the downfall of our society. Freedom is a strange word; there is no grey area. Either we have freedom, or we do not. There is no such thing as “slightly-censored freedom”. People are getting more thinly-skinned by the day. Al Sharpton gets offended every time a webmaster mentions “#000000″. I have a homosexual friend who gets offended when a rainbow appears in the biblical story of Noah’s Ark (guess what, you were four millennia late on that one). Radical Muslims get offended when infidels even talk about Muhammad, much less try to draw him (here’s a sideways picture of him: 0+< (don’t kill me, please)). Our society, so delicately crafted on the principles of freedom, has arrived at a point where we must either choose freedom, or choose to allow the biggest bullies to keep us from taking part in all of our inherent freedoms, even if what we say offends those bullies.

For personal finance blogs everywhere, here’s hoping J.D. doesn’t capitulate to the bullies on that blog. Censorship of any kind is a very slippery slope, and it takes us all saying “no” before we can end this culture of censorship, thin skin, and victim mentalities. Hopefully, if we stand our ground even a little bit, their delicate skin might start getting a little thicker.

Edit: As I imagined might happen, I’ve been getting a lot of hate mail over this post for whatever reason, most of which miss the irony in calling for me to censor this post. Just to clarify things, if I sound harsh or bitter it’s likely intended to be tongue-in-cheek (i.e. the bit about the rainbow). My goal here is not to convert you to Christianity, it’s to call for an end for this whole censorship thing, and let all viewpoints be heard, even in the personal finance community. I’d love to hear the perspective of a Hindu on personal finance, as well as a Buddhist, or any person with a slightly different perspective on it. The whole point of blogging is that all views are welcome, even when they don’t match yours. How will we ever learn new ways to think about things if all we do is call for opposing viewpoints to be censored? How will I know if I’m wrong about something if I never hear the other way to do it? Even more than being Christians and Atheists or whatever, we’re all human beings, and our primary concern should always be treating others as human beings, rather than dismissing people with labels we don’t like. So please, don’t ask me to censor my own blog, because it’s not happening. And I hope nobody else will censor theirs, either.

30
Jun

June Roundup

By David 0 Comments
Categories: General and Monthly Roundup

June has come and gone, and it’s been an exciting month, a month of experimentation. For the first time, I’ve kept good track of all my money and where it has gone. I have made a solid effort to decrease spending in my major categories. I have kept a budget and stuck to it. Most of all, I’ve explored the areas where I have psychologically been deficient and made an effort to correct those. I think the main problem most people have with finances comes down to problems in mindset. I have made frugality a game. However, I’ve also failed already. I bought a few things that, while useful, I did not need. I didn’t exceed my budget, but that is money I could be using this month to pay off some major debt.

So, let’s look at my current state. I began June with $8,486.40 in credit card debt, and ended with $8,680.16! What?! It really surprised me that since I have made all my payments on time, my balance would be higher. Totally unintuitive. However, I reviewed all my statements, did some math, and determined that there are 4-5 late fees from May that did not post until June’s statement, increasing my balance more than the minimums I payed off. Plus, I made no “extra” payments this month, choosing to get into a better payment routine over making more payments.

However, my biggest goal for June was to pay no bank fees, no overdrafts, no NSF fees. In this goal, I did wonderful, except for May’s credit card late fees seeping through to my balances. I had no overdrafts, even at the expense of digging deep into my pantry to avoid overspending. Not only that, but I have ended the month with $200 in my bank account to put towards July. It is my goal to carry a revolving balance of $500 before I make considerable extra payments to debt, because I need an extra $200 for the first half of the month anyway, and this can double as both a cushion to keep overdraft away, as well as an “extreme emergency” fund. Once I pay off some higher debt, I want to get a legitimate emergency fund going with a few thousand dollars, but until then I just need something in case my car’s water pump goes out, or something.

Overall, I think June was satisfactory, but I admit I was expecting that CC balance to start dropping. It makes me a bit disappointed I didn’t catch the late fees ahead of time. I am happy with my mental progress, as well as making better spending habits. And I am realizing this is going to be difficult work, not as easy as I expected initially.

My goals for July are simple. First and foremost, I am to maintain the lack of overdrafts and avoid all late fees from CCs too. I will be setting up automatic payment plans either with the CC or my bank. I hope to end the month with at least $500 in my account. Anything over that amount will be used in August to pay off more debt. In addition, I have a goal to do at least one or two side jobs for extra money. I will decrease yet again the amount of times I eat out (currently dropped 50%, plan to drop another 50% from last month). And most of all, I will continue to explore the areas in my mind that have a messed up view of money, and try to correct them. To top it off, I will encourage my friends who are also trying to become debt free and help them along the journey. July’s going to be a great month!

21
Jun

Money Myths for Young Graduates

By David 4 Comments
Categories: Attitude Adjustment and General

Looking at other people my age, I consider myself lucky to have already made the failures in finance that I have. While they are starting their first jobs, I have already learned how to function properly in the workplace. While they are only starting to come to terms with how to spend a lot of new income, I have already misspent enough to learn the lesson of budgeting correctly. While they are saying no to a 3% matching retirement plan to slightly increase their monthly budget, I made the calculations long ago to see the benefit of saving for retirement early on. While they are buying huge purchases on credit since they can obviously pay them off with the $36k they are making, well, I wouldn’t be doing this blog if I hadn’t made that mistake already and learned from it.

Don’t get me wrong, I don’t have all the answers either. But watching them go down the same roads I have already travelled gives me the opportunity to alert most of them to decisions I know are definitely bad, and hopefully save them from a pile of debt when they are 30. Knowing other 30 year olds that are worse in debt than myself makes me even happier that I’ve started now. When I am 30, I will be debt free and well on my way to a comfortable retirement.

There is no college course, or high school course, for real money management and personal finance. I find it appalling that most graduates can at least draw a supply-demand curve, yet cannot calculate how much they can be hurt by credit card misuse and calculate amortization tables to see how long it takes to pay off that new TV. Granted, the easiest way to learn is by experience, but I think we can all agree that there is far too much “experience” going on these days. Thanks to the internet, however, people have the opportunity to learn these things ahead of time. If just one young person comes across this blog, or one of the other finance blogs, and decides to be proactive about finance, it’s worth the whole thing. In that spirit, here are some lessons I’ve had to learn the hard way.

1. Money will bring happiness.
It is often said that money does not bring happiness, but I think we secretly believe money will indeed make us happy. At least, we act and spend like it. We look at drunken celebrities and say, “If I had that life I would never act like that,” ignoring the obvious fact that so many celebrities do act that way, meaning it may not be as glamorous as we think. We buy new things and trendy clothes since the companies say that we too can be happy, like the people in the advertisements. Look at them all smiling! They’re not worried about debt and budgets! Also, we think the right car or house or clothes will make other people like us more. The truth is that material goods can make for a more comfortable life, but only the intangible things of life can bring any sense of true happiness. I have seen happy poor people, happy rich people, discouraged poor people, and discouraged rich people. Money clearly plays no role in happiness, only the types of problems that detract from it.

2. Credit is an easy way to get that happiness now.
If you need proof we actually believe money brings happiness, then look straight to the credit industry. I would love to know the ratio of legitimate credit spending to “feel good” purchases; I bet it’s astronomical. In fact, the truth on this one is so twisted that the entire credit industry shouldn’t even exist. People think credit will make for a more comfortable life, when in reality the mounting debts causes more stress, fatigue, and depression than having nothing at all does. Yet the credit card companies insist that yes, you too can have a great life, and oh yeah, they also care about you as a person, and in fact, you happen to be an awesome person! They say you can flash that plastic and make friends. In reality, every time that card goes out of your wallet you’re building a higher wall to imprison you. The creditors are your wardens.

3. It takes a large income increase to make drastic financial changes.
While more income certainly isn’t a bad thing, the reality of personal finance is that time, not income, is the major component of change. I was shocked to see that adding only $40-50 extra per month to my debt cut the entire payoff time almost in half! In the same way, it only takes a little extra money to save each month to retire with an extra million. While doubling my salary would be nice, I think finding an extra $40 in my budget is a little more realistic right now. Yes, you sacrifice a little bit now on the front-end, but the return is always worth it!

4. Rebates, coupons, and sales are great ways to save money!
This is only true if you are buying something you would have bought anyway. Yes, you may have bought a $200 pair of shoes for $20, but you didn’t save $180, you lost $20! I would estimate that about 80% of the time I have seen a friend (or myself) buy something on sale, it was not something I would have bought anyway. Really, in any situation there is a winner and loser, and I can guarantee the stores aren’t losing. Otherwise, they wouldn’t put on sales! Sure, if you can replenish your wardrobe within your budget on sales, great for you! But do not get into the habit of finding deals on things you were not planning to buy anyway!

5. If you’re renting, you’re throwing away money.
I used to believe this as gospel. After all, if I were putting that money into a mortgage, I would own a house earlier, or at least build equity for later. The truth is, if I would have bought a house when I was thinking about it, I would be far much worse off right now. The simple fact is that owning a home costs way more than renting, in terms of both money and stress. It also makes life decisions more difficult to make; it’s no longer just breaking a lease to take a new job, you have to sell a house. If you are certain you can pay the mortgage, and certain you are willing to live there almost a decade, then buying is a smart decision. However, the cost-friendliness of renting an apartment (no unexpected maintenance costs!) almost always wins for young unmarried people, and likely a lot of young married couples too. A home purchase is a serious decision, and should be well calculated out beforehand. And with the market as it is now, it is clear that you are not guaranteed to make money on the sale of your home as the advice has been for a decade now.

6. You can save money by rolling debts into a mortgage or home equity loan.
If you spend $350 on credit card per month, you can indeed save $100 per month by paying them off with a longer loan with smaller interest. However, without calculating it out, you may very well be spending more in the long run by letting the debt ride for 30 years than if you had paid it off at the higher interest rate. If you really need the extra $100 per month (if your financial situation changes or something), it may be an acceptable loss. However, long-term consolidation loans are rarely the great deal they seem in such a situation, unless the interest rate is dirt cheap. A much better way is to negotiate for lower interest rates for the credit cards and try to pay more than the minimums consistently. Drop that magazine subscription if you have to.

7. All credit is bad.
Now, everyone is entitled to their opinion on this, but I personally believe that not all credit is inherently bad. If you have student loans at 3.5%, it is sometimes better to put any extra money into a 4.5% interest savings account and earn a little extra on it. Sometimes, peace of mind is more important and you might want to pay everything off first. Credit, when used wisely, is not always bad. The unfortunate reality is that credit, as used by the majority of people today, is indeed a bad thing. But if you have control of your finances and a stable income, and are paying rent anyway, taking out a mortgage is not a bad thing, as long as you’re purchasing within your means. Be pessimistic about your financial situation whenever credit comes into the picture (i.e. assume you will be making less next year, not more).

8. Having a very detailed budget is necessary to control spending.
I’ve seen a lot of support for this view out there, with hundreds of Quicken categories and microanalyzing every small subcategory of a budget. However, as a mid-twenties guy who procrastinates, I can say with confidence that normal people will give up if the budget is too difficult to handle. I personally use a 5-category budget, and am trying to figure out a way to get it down to four. Realistically, there are only a few things that change from month to month, and only a few things you’re flexible in. Why bother microanalyzing every little thing? It’s much easier to sit down and sort into 5 categories than 50, and takes less time. At first, consistency, not detail, is the key. Work on being consistent with 5 categories first, and then start getting creative with how you analyze. This is why I love systems like Wesabe or hopefully Mint will be, as they allow for tagging expenses to whatever you want (giving you organizational flexibility).

These are just the major lessons I’ve learned thus far. What are some major financial lessons you learned, that you wish you would have been taught in high school?

11
Jun

Mentioned On Carnival of Debt Reduction!

By David 0 Comments
Categories: General

It has only been two weeks or so blogging here, but I’ve already received a great honor! I posted my last article, Finding the Joy in Frugality, to this week’s Carnival of Debt Reduction. Not only was it accepted, but the host, NCN Podcast, gave some excellent comments and additions to it. If you do not have NCN (both the podcast and blog) on your RSS feed reader, it’s a great read/listen, and I highly recommended it.

One thing the host mentioned is something I alluded to, but never explicitly stated. There is something true about sacrifice in the present creating success in the future. Spiritually, this is along the lines of “store up your treasure in heaven” or “he who is last will become first”. Emotionally, this is along the lines of my article. A few years of sacrifice right now will help my marriage in the future, and living below our means then will help my future children begin their lives as well as making our future retirement pain-free. There is simply something true to the notion that temporary sacrifice almost always leads to a better situation years down the road. And that is where the joy comes in, really.

And, to clear one thing up from the podcast, this is indeed a new blog, but I’m a long time blogger. I have a software related blog that I’m starting back up again, as well as a few personal blogs I maintain for family and friends. However, I’ve never really had something great to say or a reason to say it until I decided to take charge of my finances. I do hope my experience, and walking it out online, will be a help to someone along the way.

01
Jun

History

By David 2 Comments
Categories: Credit Cards and General

I guess with anything in life, history is an important element. You really do have to know where you’ve been in order to figure out where to do. Since this blog is currently about my debt, I figure I need to go back to the time when debt began.

I received my first credit card my freshman year in college, 6 years ago. What did I sell my credit-virgin soul for? A school T-shirt. Granted, that was one extra day I didn’t have to wash clothes, but it was hardly worth my current agony. I sometimes wish I could view back in time to see who else was wearing that particular shirt. I wonder if they also have credit problems now.

At any rate, I was a fairly intelligent kid. Went to a great school, always excelled in book smarts. I even had a budget. However, there’s something about that little piece of plastic that can twist your intelligence, making you think “oh, I can spend $500 here, it’s only like 20 bucks per month”. And I was right, I could have paid that off. However, that $500 grows into $1,000. That’s not even too bad, I could afford it then.

The kicker was when I had a bad month, or really a bad year. I lost the scholarship I came to school with, and was forced to take loans. However, I was in an apartment, and still needed money to live on, as the loans only gave me about $400 to live on that semester. You guessed it; credit card to the rescue! And one was no longer enough; I got a 0% interest card to move my balance to. It was smart at the time, but it assumed I would be able to pay it off somehow in the next year.

That’s the assumption most people have before they have to “grow up”. I don’t claim to be fully grown yet, but I have reached the epiphany that I’m probably not going to win a lottery, create the next billion-dollar idea, or magically inherit a million dollars from a long-lost uncle. I grew up without money, nobody in my family has money, everyone I grew up around was also in debt. I think the magical money rescue is never going to happen. I may be wrong; it might happen. But I can no longer live my life as if it’s a guarantee.

Anyway, that $2k balance quickly turned into $3k, and into $6k. Before I knew it I had 4 cards and was already starting to miss payments here and there. Fees started coming, my interest rates skyrocketed, and it placed me into a position where it will now be next to impossible to easily pay them off quickly. It’s going to be quite difficult. Furthermore, it’s ruined my credit and left me in a position where if I marry soon, we’ll be lucky to get a house in the next decade.

On top of all the credit card debt I have the obligatory car loan, and student loans from the 4 years I went there. However, the car loan is less than my credit cards right now since it’s under my father’s name, and my student loans are still under deferment since I’m still in school (dropped out temporarily to work full time; the result of bad credit decisions). So, neither of those are posing an immediate threat to me. It’s the credit cards that need to go, and soon.

The kicker is that during all that, there was a 12 month period where I made about $60,000 while in school! Even after having to maintain two apartments (I was away on contract and still had an apartment back home), that would have been plenty of money to erase all my credit card and student loan debt. But, I was stupid, and used it all to eat at nice restaurants and buying a new gaming computer, an ipod, a car stereo system, things like that. It’s amazing how far $60,000 won’t go when you’re spending it on that sort of junk. The thing is, none of it is around now! Oh, it makes me sick. By now, with the money I’ve put towards credit cards in the years after, I could have a solid down payment for a house, and no car note at all if I would have paid it all off then. Not to mention no student loans haunting me now.

So, there you have it. No amazing reason I’m in debt, just the general deceptive nature credit has, and the psychology of a person who grew up without having everything he wanted. Oh, I made up for that by buying everything I desired, but quicky realized it’s not worth the stress it causes down the road. It’s totally worth living in a poopy house and going without things in order to get finances together. If I put that $400 for an ipod in mutual finds, I can buy 10 ipods when I retire. I’m a scientist and mathematically-oriented person, and those numbers make sense to me. Saving money instead of spending it at my age gives you a whole order of magnitude more money down the road. I’m just glad I’m starting this at 24. Beats trying to figure it all out after a family comes into play, and I have ample respect for those who do.

31
May

First Post

By David 0 Comments
Categories: General

So, here goes. This is not my first blog, but it will be the first blog I have regular updates for. I’m doing this in an attempt to be accountable for getting out of debt, in addition to sharing what works for me and what doesn’t with others who are in the same boat. Hopefully, along the way I will garner a readership of whatever size that will pass their tips back to me. I realize I’m not the first to do this, and please know my goal is not to be the big kid on the street. I’m looking forward to being a part of the growing online debt-reduction community, which I believe performs an invaluable service to end the growing credit epidemic.

So, I ask that you give me constructive criticism along the way. If you see potential pitfalls, please tell me. If you benefit at all from this, tell me. If I slip up, ask me why. The power of being online is not anonymity, as some would claim; the power is in community. I hope to be a contributing part of that, and here’s to the journey in becoming debt-free…

Next Entries »

Subscribe

RSS Feed

Personal Blogs - BlogCatalog Blog Directory