Paying off debt can be a daunting thought, but its’ easier than you think. We paid off $20,000 debt when our income was just $22,000 per year. Here’s how we did it. [Read more…] about How We Paid Off $20,000 Debt In 5 Years On $22,000/Year Income
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Dirty Dishes Cause Debt!
Are you trying to get out of debt or just save money for better things? Dirty dishes cause debt, so tackling the dirty dishes is the first step! [Read more…] about Dirty Dishes Cause Debt!
Spending Confessions: How I Got Smart About Money
Spending habits determine whether we’re prosperous or always in financial turmoil. Here’s how I changed my spending habits and became smart about money. [Read more…] about Spending Confessions: How I Got Smart About Money
These Hard Economic Times
For a number of years, there has been a lot of talk about hard economic times. Even though the economy is down, does the talk match our spending habits? [Read more…] about These Hard Economic Times
10 Ways to Lose Weight and Gain Money
People often don’t realize that some of the same things that make you overweight also steal your money! Here are some easy steps to help you lose the weight and save money at the same time! [Read more…] about 10 Ways to Lose Weight and Gain Money
What Do I Do With My Tax Refund?
What Do I Do With My Tax Refund?
It’s that time of year when all that "free" money starts rolling in. I’m talking about the bonus money– you know, the fun money (otherwise known as our tax refund)! That is the way so many of us think of a tax refund and, five minutes after we spend this year’s tax refund, we are already thinking about what we are going to do with next year’s refund money.
Many of us look at getting a tax refund almost as if we have won the lottery. We are going to do so much with it and it seems to have such amazing powers. I mean a $1000 tax return can buy a car, furniture, a big screen TV or a family vacation all in one fell swoop. There is almost nothing it can’t do; no problem it can’t solve. It’s our mad money– our fun money.
Not!!!!!!!!!
If you have debt, a tax refund is none of the above. It is not mad money. It is the opportunity to move closer to getting out of the debt you have already committed to pay. If you have credit card debt, use your tax return to pay off that credit debt rather than to buy that big screen TV or the couch you have wanted.
Use common sense and wise thinking when it comes to spending that tax return. It is no different than a regular paycheck. In fact, when you look at the fact that you make so much money a year, the tax refund is actually part of the salary that you say you make.
Stop looking at it as a bonus and instead think of it as more income available to pay your debts. Once you pay off those debts, a tax refund can be a great opportunity to start a savings account.
We get so many questions from people who are panicking and asking what we do for an emergency fund. Instead of throwing away that tax refund check on something that gives you instant pleasure, set aside that tax refund money for an emergency (keeping in mind that even most "emergencies" are not true emergencies).
Once your debts are paid and you have enough savings, then use your refund for fun. We live in a society where we always put the cart before the horse. People used to get married and then have children but now it is common to have children and then get married. We used to carefully save our money and buy what we wanted from our stockpile but now we charge what we want and later try to figure out how to get the money to pay for it.
Because of how we think about credit, many of us don’t give any serious thought to paying for something until it is worn out and we want to buy the next one. Once the item is worn out, how do most of us feel about still paying for it? "It’s not fair that I have to pay for this and I don’t even have it anymore…" Avoid the stress later — Pay off what you owe now and stop buying things on credit.
If you are behind on your credit payments or if you’re not making the payments at all, use your tax refund as an opportunity to get current. When we buy an item on credit or with our credit card we are saying "If you let me have this product now I promise (vow) to give you money for it later". When we don’t pay our credit card bills it is no different than walking into a store, filling a basket with whatever we want and walking out with it. To my knowledge that is still called stealing. (I’ll have to check because they change the meaning of words so often to make them more politically correct. I mean who knows, maybe it’s not stealing anymore but just "temporarily using it until it is repossessed").
When you literally put the cart before the horse, (kids before marriage, buying and then trying to save money to pay for something, etc.) it will cause extra stress in your life and will make it much harder to get where you are going.
Re-think not only how to use your tax refunds more wisely but give the same consideration to any other "extra" money that comes into your life. Once you get a handle on your debt and your spending habits, you will be surprised how far your money will go. Start by making a wise decision about your tax refund.
One other thought– Make sure you have your withholding set up with your employer to not take out so much money. Set up a direct deposit into your savings account and save it yourself instead. Considering the fact that many states are on the verge of bankruptcy do you really want to give over all that money so the government can just "save" it for you? You may not get it back one day.
For more ideas to help you get out of debt, check out Dig Out of Debt!
Are You a Slave to Debt?
Are You a Slave to Debt? Land of the Free and Home of the Brave?
We Americans are proud of our freedom and our opposition to tyranny and slavery, but because of lack of self discipline, most of us are not free at all. We are enslaved by our emotions and our debt. Most of us would never consider agreeing to become indentured servants and yet, by our own lack of self discipline, many of us have sold ourselves into slavery. Have you ever thought about the fact that indentured servants usually had to work 7 years for their freedom and people who claim bankruptcy have black marks on their credit for 7 years? Are you a slave to debt?
By now all those well meaning New Year’s resolutions have flown out the window, but don’t despair: all is not completely lost. Here are a few money saving tips and ideas that will get you back on track, save you money and will actually work.
You say “I don’t want to be a slave to debt but I don’t know where to begin.” Just begin. Don’t over-think it. You don’t need to be a rocket scientist to know that you have to stop spending more than you earn.
Have you ever told your child to go pick up the toys in their room only to have them start whining and crying, “But I don’t know what to do.” It’s frustrating to hear that in a child because you and I both know an eight year old knows he’s supposed to put his toys away and his dirty clothes in the hamper. He just doesn’t want to do it. That whining and excuse making in an adult is even harder to take. As in a child, it’s just an excuse to get out of doing something we don’t want to do. Stop spending more than you earn.
Stop living a life of fear. Remember if you’re an American you live in the land of the free and the home of the BRAVE. There are two things that always amaze me. The first is grown adults that cower before a child a quarter their size and who is throwing a fit while demanding to buy a toy. The second is to watch a grown adult cower when looking at a desk or table piled with papers and bills. It’s just a bunch of paper, not a snake that is going to reach out and bite you. Be brave and start dealing with the papers and bills. Get them in order. Yes you may have to face some mistakes and things you don’t want to think about, but do it anyway. Then get on with your life. You don’t have to be a slave to debt! Learn from your mistakes and don’t make them again.
Here are a few suggestions to get that overwhelming pile of papers under control:
Quickly look at each paper and lay it into one of these 4 categories:
- TRASH – Throw out and/or shred immediately.
- FILES – Put in a box and set by file cabinet to sort and put in order some other day.
-
BILLS – Sort them in order by the date that they are due. If things are really out of control write down a list of all your bills and how much you owe. This will help give you a reality check of where you stand with your bills. You need to be brave and honest with this.
Using some common sense, start paying those bills. Pay your bills first. For a while, that may mean you have no money left for fun and entertainment, but that is the sacrifice you make for freedom.
- CORRESPONDENCE – Put correspondence in a pile. Read and deal with it after you have your bill pile out of the way.
If you are a slave to debt, it’s time to get angry and say enough is enough. I will no longer be enslaved and start fighting for my freedom from debt, even if my biggest enemy is myself!
Jill
From: Dig Out Of Debt. For more easy and practical ways to save money and get out of debt, check out Dig out Of Debt and learn more about how to keep more of your money and free yourself from being a slave to debt!
“Keep Or Cut My Credit Cards?”
Hope from New Jersey writes:
I definitely can relate to living on a low income. I just paid off $3000 debt in less than a year playing the credit card game, making some financial sacrifices and getting a windfall. I love using a credit card (I only have one now with a $400 credit limit), but being in debt like that scares me. I don’t want to go back to that again. I’m thinking about getting rid of the card, but then what will I do to build a good credit history? I’m also afraid that I might need it one day. (I’m living on a low income with one special needs child and one child that’s not.) Should I keep my credit card or get rid of it?
Tawra: Hope, we would suggest that you keep your credit card. Here’s why: Credit cards aren’t the problem –it’s self control that’s the problem. You sound like you have your spending under control, so I would suggest that you keep the card.
I would use it for convenience when you know you have the money to pay it. Keeping a credit card is good for things like making online orders or for getting gas when you don’t have time to go to the bank and withdraw the cash. As long as you have the money to cover the charge and you don’t spend it on something else before you pay your credit card bill, you should be fine.
Then pay it off each month so that you can build your credit. They are very handy to have around for those types of things. If you need a way to keep track of what you put on it just write it down in your check register and put a C in the left column so you know that is what was put on the credit card. This is also a handy way to double check and make sure they charged you correctly.
A credit card can also help with emergencies, but you have to be careful what constitutes an emergency. If you use the card for an emergency, you have to expect to plan to sacrifice somewhere else to cover the emergency, but it sounds like you’ve already experienced this.
This part is not really directed at you, Hope, but for other readers who are reading:
Regarding emergencies, going out to eat or taking a vacation because you’re under stress is not an emergency. An emergency is something like a life and death hospital emergency, fixing the only car you have so you can go to work and earn money, etc. Keep in mind that even “emergencies” have to be paid for eventually!
If you feel that you don’t have control of your spending, I would suggest only keeping a credit card for true emergencies.
As for you, Hope, it sounds like you have done very well and are on your way to being permanently debt free. Congratulations on your hard work!
From our Dig Out Of Debt e-book
photo by: kanir
How To Get Out Of Debt!
How To Get Out Of Debt! Don’t Bury Your Head in the Sand!
I had a dog once who, when I would scold him, would run and hide under the bed. He knew he had done something wrong and thought that by hiding he wouldn’t get into as much trouble. I think he figured if he couldn’t see me, I couldn’t see him and he wouldn’t get scolded.
There was just one slight problem. He couldn’t fit under the bed. Only his head and front paws were hidden but his back half was in full view. He had put himself in the worst possible position but since he had buried himself under the bed he didn’t know that.
It’s human (and critter) nature to think that, if I don’t acknowledge something, it won’t come to pass or it will go away and I won’t have to deal with it. We are often like the two year old who thinks there’s a monster in his room. He will cover his head up with a pillow thinking “If I can’t see the monster then the monster can’t see me and it will go away.”
We adults laugh and think how silly this is. We know that if there really WAS a monster, hiding our head under a pillow would not help us. If anything, hiding our heads would make it worse because we can’t see what the monster is doing and so we are unable to come up with a plan of attack to protect ourselves. Meanwhile, the monster takes a bite out of our britches.
Even though we find the dog or the two year old’s actions foolish and amusing, many of us do the very same thing when we don’t deal with our financial situation and our debt. Have you ever decided not to open a bill or look at a credit card statement because you don’t want to know what the balance is? Clicking your heels and saying “There’s no place like home” is not going to help.
How about your bank statement? Do you balance it every month or just throw it in with the pile of unopened bills because you don’t want to know how much is in your account? I hear someone saying “But I don’t know how to balance it.” Then learn. There isn’t a bank in the world that isn’t willing to show you how to balance a checkbook if you ask.
My grandson in the third grade has enough math skills to balance a checkbook but I often hear from college graduates, full of pride with their degrees, that they can’t balance a bank statement. It is just another excuse that helps them keep their heads buried in the sand. Learning to balance your checkbook is much easier, much less time consuming and much less stressful than hiding from the monster.
Another excuse many people use is refusing to use cash. Often when helping people get their credit card debt under control, I suggest that they get rid of the credit cards and just carry a small amount of cash in their wallets. The first thing that I always hear (and I have honestly never yet had anyone say anything different) is “I can’t carry cash because I will spend it”. This statement makes no sense to me. What do they think they are doing when they pull out their credit cards to buy something? Lack of self control is lack of self control no matter how you package it.
If you allow yourself $20 cash, don’t keep credit cards in your wallet and you are shopping you MAY spend the full $20, but when it is gone there just “ain’t no more” to spend. On the other hand, when you use a credit card, once you spend $20, you can pull it out again and spend another $20 and another and then maybe even $100. You don’t even have to keep track of how much you spend for the day. Just stuff the receipt away and put your head under the bed!
If you have a credit card problem, you will end up spending 2-4 times as much with the credit card than if you just use cash… But this is why people in financial denial love credit cards… They don’t have to acknowledge or see how much they have spent. “If I don’t see it it won’t hurt me.”
In 1 Corinthians 13:11, it says “When I was a child I talked like a child, I thought like a child, I reasoned like a child. When I became a man I put away childish things.” We need to put away childish or foolish actions where our money is concerned and start using adult reasoning concerning it.
If this is you, stop burying your head in the sand! Stop being afraid and start taking an honest look at your finances. Open those bills, balance those bank statements and acknowledge how much you spend! Then figure out how to get it under control.
-Jill
P.S. Just to keep our e-mail box from overflowing with misunderstanding, I thought I should clarify this one thing: If your financial situation is fully under control, but you use a credit card for convenience or for reward points or some other reason and pay it off every month, this story is not referring to you. I am specifically addressing people who don’t know how much they spend or who do not spend within their income.
For more easy and practical ways to save money and get out of debt, check out Dig out Of Debt and learn more about how to keep more of your money.
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Pay extra attention to the interest. Unless you have an investment that is earning significantly more interest than the interest you are paying, the interest you are paying is simply money that is wasted. I talk to people who have credit cards with a high interest rate and are maintaining savings or retirement accounts earning low rates of interest. If you are paying 13% interest on a credit card and putting money into a retirement account earning 5%, you would be better off paying off the debt first.