UPDATE: The Breakdown: Defeating That Pile of Billls

As I wrote about in my previous two posts, tackling your finances after a major life interruption can be very intimidating. I admit, I'm extremely intimidated and frustrated with myself for letting all the work I did previously disappear and ending back where I started.

So, I sat down with my notebook and my piles of bills and called the necessities: electric, gas, cable, water.

To my surprise, things weren't as bad as I thought. I woke up today with much less anxiety and it's because I stopped avoiding the mess and dealt with it head on. I still have medical bills and some taxes I need to take care of but home is taken care of.

I wanted to share my small victory. This is what this financial journey us about. Small victories. Small victories add up.

Next, I am planning to address my budget...or lack of a budget....

Until next time...

The Breakdown: Defeating That Pile of Billls

Breaking out of your funk can be intimidating.

In my last post, I outlined what needs to be done. I realized simply following those tips is way easier said than done. I realized this when thinking of my own situation. I'm intimidated. If I am, I know you are too. To lower some of that anxiety, I have decided to break down each step more. More information is always better than less. My hope is to let us all know...we got this!

I have been sitting looking at my pile of now opened, sorted, and written down bills and am feeling intimidated. I'll admit, this pile is scary. Knowing that everything in it needs my attention. Knowing that I owe money to each of those bills. It's all intimidating.

So, let's start at the beginning. Opening those bills.

Grab that pile and take a seat. Make piles. Trash. Bills. Other. That's all you have to do, first. Even if you know it is a bill, open it. Open everything.

Throw the trash out, that's probably a huge part of your pile. You have bills and other important mail left. If you aren't too overwhelmed (take a break if you are. Even if you come back to it a day or 2 later.) get a notebook (a notebook specifically for getting your finances back on track) to make notes on each bill. Write down how much you owe, contact information, any other important information. You can put them in order by when they are due or by how much you owe, but make sure you make a list that makes sense to you. This is the start of getting organized.

In your finances notebook is now a list of things you need to address. You have started your plan.

Next, we will look at your current spending to see where you can open up money to start attacking your financial mess.

Until next time...

Sometimes Life Happens...

I started this blog what seems like a lifetime ago. I wanted to share financial tips that I was learning myself and help people reach Financial Independence...but...sometimes life happens and what you have planned for doesn't happen. You get side tracked by a death or an illness or losing your job.

Things happen. Your life might be falling apart, but something you don't realize at the time is that you are most likely neglecting your finances along with what your dealing with. When you make it through your storm and try to return to normal you realize that pile of bills you have been ignoring are bills.

Now you are starting all over financially. You know all the right things to do. You remember the lessons you learned. You know what you need to do.

First thing you do...is open those bills. 

You can't fix the problem if you don't just jump in and see how bad it is. It might not be as bad as you think. Put the bills in piles according to what they are. Get a notebook and write everything down. Putting it on paper helps me to get organized. I'm a list maker. If lists don't work for you...find something that does. Piles. Baskets. Envelopes. Whatever works for you. 

Then put everything in order from the lowest to the highest. Plan to pay the little bills first.

Next, start planning. Look at your bank statements. Look at your current spending. Start a budget. Make a list of your expenses. The plan is forming now. You have a list of what you owe due to, life. You have a list of your expenses. 

I know it looks overwhelming, but you got this!

Now, go through your bank statement and put all your spending into categories to find out where you can cut back to pay off some debts. Make the categories: Essentials, like rent, car note, electric, etc.; Extras; like eating out and entertainment; Savings; you may not have a savings yet but you will.

Take your list of what you spend and breakdown things like eating out and shopping. You can cut these back or even out. You will be surprised to see how much you spending eating out. This category is usually much higher than people anticipate. 

Finally, you can make a budget. 

Budget for the Essentials first. Then, based on what you spend on food and your situation, add Extras to your budget. Your budget will change, so don't be discouraged when if you have trouble meeting every item on your budget. Overtime, your budget will change and eventually become something that you can, realistically, stick too. Make sure that you budget something to go to savings every month or pay day. I use an online savings account and have automatic deposits set each month. This way it is not something I have to consciously do.  

Don't let your current situation stop you from achieving a better life. One step at a time and before you know it your situation will have changed, if you develop a plan and stick to it. 

Until next time...

New Year, New You? Part 2

In part one we talked about how change and planning are so important to getting your finances and life in order. We made a list of our goals, wrote down our monthly bills, made a  list and arranged what we knew we owed (before looking at our credit report), and made our first budget.

A couple important things to remember:

* Writing down our short, medium, and long term goals makes us think about the long term. Most times, we don't think about the future and how we are going to get there.

* Do you know what exactly you have to pay each month? That's what writing down when and what you owe monthly does for you. I have my bills written on a monthly calendar on my desk at work and in my office at home. I'm have a pretty bad memory, so I also have alerts set up on my phone to remind be a day before to pay the bill if I haven't done so already. Knowing is half the battle...

* The reason we write down what and who we owe, as far as debt, is to start to get a grasp of just how bad - or good - the situation is before you start tackling the debt. The good thing about you making the list is that YOU get to decide the order to place each debt in. Maybe you owe a family member and are behind on some monthly bills, what would you tackle first? Personally, I would jump on those monthly bills. Make sure you discuss with the person you owe and let them know your plan to pay them back also. Acknowledgment of the debt will go a long way with building good faith with that person.

* We made a budget. Not a final budget but a trial budget. This first budget is a trial budget because it takes a couple attempts at budgeting to make one that you are comfortable with. Trial and error. Don't get upset if this first budget doesn't work. There will be more.

So, now that we have the beginning stuff done, let's move on...

1. Go to Annualcreditreport.com and get ONE copy of your credit report. You are allowed one copy of each of the the 3 reporting agencies each year. Spread them out and get one copy every 4 months. The reports are not exactly the same so we get each one separately to make sure we are aware of ALL of the debts.  Make sure you answer all of the security questions as best as you can because if you get one wrong it can make getting that report a bit more difficult. Put each debt and contact information into the debt list we made last time, from most to least important.

2. Using that Mint account you set up, go over your monthly spending. Where do you spend too much? where can you cut back? Spending too much on lunch at work? Pack your lunch a couple days a week.

3. Adjust your budget. Using Mint, or however method you chose, to make your budget, adjust the budget to change what wasn't exactly realistic. Don't just change amounts because you want to go out more, but if you saw you didn't spend all of the budgeted money on wants, lower them. If you need more money for transportation to work, raise it a bit. Don't go over your monthly limit.

4. Now that we are starting to control what and where we spend money, it's time to start finding money. Do you have a hobby you can turn into extra income? Sell the clothes you don't wear? Tutor? Freelance? Get a part time job? Make a list of 5 things you can do to make extra money.

Smile. Your starting to get your financial life in order. We still have a ways to go but you will see all this effort start to pay off very soon. All of this is getting you organized for the real work. It seems like a lot now but you will be glad you took the time to get this in order later. That vacation you want to go on, the house you want to buy, those shoes...we are planning to get those things, without worrying about paying for it because we have planned our work and worked our plan...

New Year, New You? Part 1

January 1st is here. 

Every New Years day we all set resolutions to change things in our lives that we don't like. We make resolutions about money, our health,  and our relationships that don't last more than a month or so. Then, we fall back into our old routine that didn't get us where we really wanted to be in life.

Do something different this year. Make your resolutions... life changes. And wait to actually start seeing results before you get discouraged and give up. Part of the problem with the way we make resolutions is the idea of the change is way better than the hard work and sacrifice it takes to actually be the person that we dream of.  

We are lazy. I know I am. I have never really tried hard at anything, in my life. I have done pretty well for myself considering I have never tried. I somehow managed to luck into a pretty comfortable life. I work and I live. I have gotten comfortable and stopped trying to reach the way that I sit around and think about life being.

Making changes is hard. But... One interesting fact about most people is that once we see the beginnings of results, we are more likely to keep up with the activity.

This being a personal finance blog, I am going to give you some easy tips to make changes to your finances that will help you keep your financial resolutions.

1. Write down 3 short term goals. These are goals that you set for 6-9 months. Like, saving enough to take a trip this coming summer. Write down 3 medium range goals. These are goals that you set for 9 months to 2 years. Like, planning for a wedding. Write down 3 long term goals. These are goals that will take longer than 2 years. Like, buying a house, child's college education, or retirement.

2. Write down your monthly bills. Everything you have to pay, every month. Then, make a list of everyone you owe. Friends, family, ...everyone. Go to Annual Credit Report.com and fill out the form to get ONE of your credit reports. (To do this read this.) Add those to your list.

3. Arrange the list so that your debts are in an order that fits your situation. The most important debts should be paid off first. Paying bills up to date is the most important priority. Then, use the Snowball Debt Method to pay down the rest of your debt list.

4. Make a budget. Give yourself a set amount for each expense each month. Don't go over that amount. Like, say you are only going to spend $25 a month eating out, $150 a month for transportation. The point of the budget is to start tracking your spending and controlling your money. When you make your budget, cut back on wants and focus on needs. Open a Mint account to organize everything.














This is going to seem like a lot but over the next couple months we are going to go more in-depth with each step. So, for now let's start with step 1. write down goals.


My goals:

3 Short term goals -
Pay off short term debt. Save for summer trip. Get frames for my degrees.

3 Medium range goals - 
Pay off credit card debt. Move. Save $5,000 in my Emergency Fund.

3 Long range goals - 
Pay off my car. Pay off my student loan debt. Buy my dream house and car.

What are your goals? 

Stay tuned for step 2 - organizing our bills and debts...

Reader Stories: How to pay off debt and save money! Part 2

This post is from the series called "Reader Stories" about tips, success, and lessons learned by our readers. Be kind and enjoy!

Today's Reader Story comes from a mother of two with an eye for discounts. She has found ways to save money on many items and services we all use every day. Many tips are so simple, they are profound.

Understanding the difference between need and want is critical in being successful once you embark on a financial plan or goal

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If you absolutely need something try looking for it on Ebay or Craigslist prior to purchasing in a store.  One example is a cell phone charger.  I could have purchased one at the sprint store for 29.99 and decided to check on Ebay where I got not one but three chargers for a total price of $5.64.  I wanted a bobby pillow before having my second child to make breastfeeding easier and because this was a want not a need I decided to look for it used on craigslist versus buying at Baby R Us for $39.99 and ended up getting a used one for $5. 

According to Pet Education, the cost of owning a dog over its lifespan is anywhere from $5k-$14k depending on how thrift you are.  If you are thinking about purchasing an animal, I would advise against it if you are trying to pay off debts or save money because caring for animals is costly and a want not a need.

Clothes shopping?  I only shop at goodwill or salvation army for clothes.  Salvation army has 50% off most of their clothing and shoes every Wednesday which makes their prices much lower than goodwill prices.  I wear dresses often because the price is $4.99 at goodwill for a dress where an outfit would end up costing more than that.

Buy generic when better and take a calculator with you to the store.  If you are trying to determine which diapers or cereal box is the better deal.  Take the price of the item and divide by how many items you receive or ounces you get, then do the same for the other item so you know exactly how much you are paying.

$15.99 for 103 diapers (15.99 divided by 103 = 15.52 cents per diaper) 

$5.00 for 33 diapers ($5.00 divided by 33 = $15.15 cents per diapers)

In this example, it is a better deal to get the 33 pack diapers because per diaper it is cheaper.  I buy dental floss, mouth wash, aluminum foil at the dollar store and buy anything generic you can.  Walmart has equate Valvoline for $1.00 where the Valvoline (name brand alternative in same size bottle is $2.79).

I now only buy soda pop if I can get it for 25 cents a can or less and anything more than that, I am simply not interested.  This means I can have enjoy 6 cans over 6 days for the same amount of money I would have spent on one 20 ounce bottle at the work vending machine.  However, tap water is much cheaper than soda pop so would be the best option.

The average household in the United States has over 8k in credit card debt.  An $8,000 debt at a rate of 18% interest will take more than 25 years to repay and cost more than $24,000.  Do you know your interest rates?  If you don’t call your credit card companies and find out.  Some credit cards can charge interest as high as 30% or as low as 13%.  You want to pay off the 30% credit card first versus the 13% card.  However, work to never spend more money than you make.

How could a credit card pay you to use it? That sounds too good to be true.  The reason credit card companies want you to use them is because they get a cut every time you purchase something.  Credit cards charge the merchant for accepting the credit card 2-4% of the purchase price

Look for programs to help you save for your future goals.  For example, citizens bank has a savings program for purchasing a home where you save $100 a month for three years and they give you $1,000 in free money towards the down ayment on a home.  They also have a college savings program where you save 25 a month, each month, and are rewarded $1,000 in free money once your child reaches 18 years old.  Go here for more information:  http://www.citizensbank.com/savings-and-cds/college-saver.aspx

Buying a home, use an easy rule of thumb to ensure you are living within your means.  Never purchase a home greater than 2.5 times your yearly income.  Doing so could put you in dire financial strain in the future.

Aim to never buy a house unless you have 20% of the purchase price to put down on the home.  Why?  If you do not have 20% down when you purchase the home the bank considers you a risky person to lend to and buys “private mortgage insurance on you (AKA PMI).”  You will be paying an extra monthly charge with your mortgage of $37.50 a month or $450 a year.

Stay tuned for part 3 and don't forget to comment and discuss!

Want to share your success and tips? 

Email personalfinance4thepeople@gmail.com to find out how.

Reader Stories: How to pay off debt and save money! Part 1

This post is the first in a series called "Reader Stories" about tips, success, and lessons learned by our readers. Be kind and enjoy!

Today's Reader Story comes from a mother of two with an eye for discounts. She has found ways to save money on many items and services we all use every day. Many tips are so simple, they are profound.  

I bought a house for $56k and a car for $16k just five years ago and have paid them both off with an income of $45k a year.  I was also able to afford $6-8k a year in daycare expenses.  How did I do it?  Hopefully these tips will help.

     

The two biggest ways to manage or save money is through budgeting and auto-deductions.

1.)  Budgeting- Review all credit card statements and ATM withdrawals to find out exactly how much money they are spending in different areas.  From there, you can prioritize what's most important to you and where you are willing to cut back on spending to free up money to put toward their financial goals.  Typically, people are spending a lot more money than they realize on food, entertainment, miscellaneous expenses throughout the day, and clothing.  It's also a great idea to have people carry around a check register or regular pen and paper to immediately write down every expense they incur for one whole month.  It's amazing how fast expenses add up!

2.)  Auto-Deductions- Just like people have 401(k) contributions set up to pull money out of the paycheck before you see it.  People automatically adjust their lifestyle to spend whatever is left in their account so you most likely will not even miss it.

3.)  If you shop on the internet, don’t check out without googling a coupon code.  I have saved over $100 and received free shipping by simply finding these coupon codes online.  I recently made a purchase at K-Mart online free ship to store.  The local store already had the items I wanted and I used a coupon code to obtain 20% off my order and when I went to pick them up I didn’t have to wait in a large line or go look for my items.  They had my items ready to go and I already paid.  This saves time and money. 

4.)  Look at all your bills?  I have saved $5 a month for a year just by calling my cable provider and asking if there were any promotions or discounts available or anyway to reduce my bill.  I already had the smallest package they offer but they still were able to give me $5 off a month for a year because of my persistence.

5.)  Don’t go to the cell phone store, call them instead.  I went to a sprint store and they told me there was no such thing as a 500 minute plan.  They told me this, I propose, because they do not make any sales bonuses off selling contracts like this.  I called sprint customer service and obtained a 500 minute plan with free sprint to sprint (all I need) for $35 a month on a basic phone.  Not having a fancy phone is an easy way to save money.

Stay tuned for part 2 and don't forget to comment and discuss!

Want to share your success and tips? 

Email personalfinance4thepeople@gmail.com to find out how.

Short Money, Long Month

Personal Finance 4 The People is pleased to team with others who are able to share their expertise in various areas. We hope to combine our efforts to bring a greater financial effort in order to help you reach YOUR Financial Independence. Today's guest post comes to us from J S Aikens.

There is an epidemic of this condition.  I have talked to many people who feel they make enough money to meet their financial obligations, until the bills come.  If you’ve ever wondered where your money went, here is a way to find those pesky leaks for those of us who are not accountants.

The $1 solution.  I’m sure you’ve seen those plastic envelopes in dollar stores and dollar aisles of stores. Pick up one for your car, one for your home, and ladies, carry one in your purse.  Every time you make ANY PURCHASE the receipt needs to be placed in whatever envelope is with you.  If you’re in your car, put it in the envelope. If you have your purse, slip it in that envelope, and when you get home, empty your pockets and put them in that envelope.  At the end of the month, when you’re paying those bills gather those envelopes and total your spending.

Now there are some who will tell you to cut your expenses, save your money and live below your means. Then you’ll have saved enough money for your family to cover your funeral costs. Doesn’t that sound great! That’s right, it doesn’t. Now I’m not condoning frivolous spending (we’ll talk about that another time). But there are things you enjoy and should have. You just need to know what those treats cost you, and then figure out a way to afford them. Stay tuned.