Date:	2007-11-10 00:43
Subject:	personal finance advice you can use in real life
Security:	Public
Mood:	tired

my boyfriend and i were laid off from our jobs on the same day in march of this year.  (we worked for the same company)  

that was the beginning of the wake up call as to how much we needed to cut down on spending.  

i should note here that i was unemployed for a total of 7 weeks off and on - it took me three jobs to find something i liked and could stick with.  the bf got another job about 4 weeks later and then got laid off again two months later for lack of work.  he was then unemployed for another 8 weeks.   needless to say, money was VERY tight.  we never signed up for unemployment either - even though we were entitled to it. 

1)  i made a spreadsheet and listed all of our bills, due dates, minimum payments and total balances owed.  i just used excel.  no need for expensive personal finance software.

2) i reviewed ALL of our expenses to see what we could cut down on:
        cell phone:  i canceled internet access from our cell phones and cell phone insurance.  
       savings: $12 - $42/month  
        cable: i called to cancel expanded basic and instead they offered me $5 off a month for 6 months.  we really 
        didn't want to get rid of it anyway, so I took the deal.  i also marked my calendar to call back when the six months 
        is up.
        home phone: i canceled long distance.  we don't use the home phone anyway because we have cell phones.  
        couldn't get rid of it completely because of the internet.  savings: $10/month
        car insurance:  we had separate car insurance for $57 each ($114/mo for both) with geico (him) and progressive (me).  i got rid of all coverage except liability (required by law) for both of us and it didn't make a difference.  i got quotes from four other insurance companies that didn't make a difference, either with us together (more expensive) or separate (the same).  i got a junk ad in the mail for mercury insurance that said "average customer saves $508 with us!"  and as i thought "yeah, right,"  i tried it as a last ditch effort.  THEY INSURED US BOTH FOR ALMOST WHAT WE WERE PAYING FOR JUST ONE OF US.  Saved: $51/mo.  Lesson: never give up.

TOTAL SAVED ON "FIXED" EXPENSES:  $78 - 108/month OR $936 -$1,296.00/year.

i also got really irriated with myself when i realized how much we had overspent on these fixed bills for so long.  as you can see, we hardly gave up anything and saved ourselves about $1,000 per year.  

3)  I totaled up our debts and was SHOCKED to discover we were $22,000.00 in debt.  $2900 - credit cards; $6000 - dirt bike, $4000- hospital bill (i found out we were pregnant after we had been laid off and our health insurance lapsed; i had some complications early on that couldn't be ignored), $9000 in student loans.  i did, however, thank the lord our cars were paid off.  this was an overwhelming number and i didn't know how to tackle it.

4)  i started reading msn money voraciously.  once i'd read everything on there, i typed in "personal finance" in my search engine and started reading CNNMONEY, motley fool, bankrate, yahoo personal finance, zenhabits.net, getrichslowly, and many, many others.  i devoured every article i could find on budgets, saving, getting out of debt, saving for retirement, etc., and applied what i read to our situation.  

5)  i put our credit cards in the freezer.  unfortunately, i haven't yet been able to leave them there for an extended period of time.  i'm working on it.

6) i realized we had NO emergency fund.  so i opened an online savings account with emigrantdirect.com.  (there is also INGdirect and others)  but at the time, emigrant paid the most interest - 4.75 -5.05% per year, compounded monthly (take 5 and divide by 12 = monthly interest rate).  it's MUCH better than what your regular bank pays, i can practically guarantee it.  i stuck $40 in there and then my cat got sick.  it had $1 until this month when i was finally able to sock away $311!    i love it even more because it's slow.  it takes your money out of your regular checking account but takes two days to post it to your account and two more days to make that money available.  then it takes 2 -3 days for the money to go from it to your checking if you need to transfer it back.  trust me, you figure something else out in that time and realize you don't need to transfer it back.  you can set up automatic transfers too.  if you have direct deposit at work, they may let you split your check between accounts any way you wish - ask!  you don't miss money you don't see!

Also, while i'm on the saving money part, i should tell you i didn't just open one savings account with emigrantdirect.com.  i opened six.  one for car repairs, christmas money, a new bed, dental co-pays (i need some work done), vacation fund and an emergency fund.  i picked a percentage for each as well.  (i.e. car fund gets 6.5% of whatever money i'm saving; emergency gets 30.5%).  That way, you are saving for goals instead of one big pot of money tempting you to spend it on a wild weekend in vegas. 

7) partly due to my pregnancy and the need to clean out the baby's room to get it set up, and partly because we have so much crap it isn't funny, i scoured the house for stuff we could sell on ebay and craigslist.  both have their good points and bad points.  craigslist is free and local - which means you have to let strangers in your house or meet them somewhere (if they even show up).  there are no feedback ratings either, so you don't know who you're dealing with.  ebay costs money and you have to ship stuff, but you reach a much wider audience, which means your stuff is more likely to sell.  i put the big stuff on craigslist (extra refrigerator, treadmill, punching bag, tv, PS2, etc.; and video games, dvd's, computer games, unused gift cards, etc. on ebay.)  we made $1,200 over the course of the last 8 months from stuff we no longer used.  being laid off, we needed to use that money for necessities but we were FINALLY able to sock away $311 for savings this month.  we still have some items up for sale so i'm planning/hoping to put more money in there before the month is up.  PAY YOURSELF FIRST!

8) found money:  things like getting your deposit back from your home phone service provider or whatever.  or my bf won his work's football pool last week to the tune of $100.  stick it in savings!  you wouldn't have had the money otherwise so you can't miss it.  

9)  figure out what needs routine maintenance and take care of it.  i just learned that you are supposed to replace the timing belt in your car after so many miles.  my particular car (honda civic) you are supposed to do it at 65,000 miles.  i have 135,000 miles and never knew i had a timing belt.  if it breaks, on my car, it WILL cause engine damage.  cost to replace timing belt: $325.  Cost to replace engine if timing belt breaks before i change it: $1600.  which would you rather pay?

10)  i ordered a weekend subscription to the county paper in order to get the sunday coupons.  even if i only save $8 per week with the coupons, which i use at target anyway because the grocery stores are SO expensive and target has an ever-expanding food section, that $8/week adds up to $416 over the course of a year.  Cost of the paper just on weekends for 1 year: $117.  it eats into the savings... so i should really say our savings is $299 per year.  also, don't clip coupons for something you wouldn't normally buy.  that's kinda the hard part.  while i'm on coupons, stop throwing out your junk mail.  there are local coupons for restaurants, mechanics, etc.  i needed new brake pads on my car and called all the places that had coupons in the pennysaver and local mailers.  Out of 17 places, i got quotes from $70 - $190 and everything in between.  it pays to shop around.  

11) start saving for retirement.  if your employer has a 401(k) or an IRA or whatever... sign up.  ESPECIALLY sign up if there's a company match or you're just throwing money away.  the younger you start the better.  don't touch it for anything.  i hear the rule of thumb is to sock away 10% for basics, 15% for comfort or more if you think you'll live to be really old or want to spend a ton of money in retirement.  yes, the company match counts in this formula.  i'm 27.  i'm putting 8% of my gross pay in my 401(k) with my firm putting in 6% of my salary.  that's 14%.  401(k) contributions are also taken pre-tax so that lowers how much you pay to the IRS.  and let's face it, that makes it sweeter.

12)  Find the article on MSN money called 10 things you should never buy new.  and don't buy them new anymore.  on the list: books, dvd's, and other things i can't remember.  look for used books on amazon, ebay, bn.com.   shipping is $4 per book, but if you can find a used copy of the book you want for $1, your cost comes to $5.  i bought two books on personal finance from amazon today and spent $10, albeit $8 for shipping.  BUT, the two books new would have cost me $40.  

13)  i collected dvd's for about 4 years.  many of the movies were only watched once, if at all.  i have a bad habit of buying movies before i've seen them, which leads to buyer remorse.  if i buy it when it first comes out, watch it, and then immediately list it on ebay, i almost always get my money back - plus i got to see the movie.  this really only works with new releases, however.  

14) back to the elephant in the room: $22,000 worth of debt as of March 2007.   we are down to $17,000 now though.  $5,000 paid off in 8 months isn't a bad start.  except paying as much as we could on everything seemed to barely make a dent.  and then - just today - i read the synopsis for dave ramsey's "total money makeover" book.  he is pushing something called the debt snowball - look it up.  i plugged it into my spreadsheet and boy do i ever have a new debt repayment plan!  (i also ordered a used copy of his book for $6.00 w/ shipping on ebay today!).  the concept is simple:  write down your debts.  put them in order from least to most.  pay the minimum on everything but your smallest debt and put all your extra cash toward your smallest debt.  once it's paid off, move to the next one.  for example:  we were paying $100 a month on four different credit cards.  that was more than the minimum balance.  but between interest and then (really stupid) using that $100 to get us through the month - was not getting us out of debt at all.  those four credit cards that we had $400 each month to pay off had minimum payments of $11, $22, $24 and $46.  a total of $103.  our balance on one of those cards was $400.  we made the minimum payment on everything but that card this month - AND put that card in the freezer to make sure we weren't tempted to use it.  next month, we'll pay off the final $100 and still have $250 to put on our next highest card balance of $500 ($46 min payment), bringing that one down to $250.  work this out on your spreadsheet and i'm telling you, you will see how genious this method is.  One side note:  dave ramsey does say you should build an emergency fund of $1,000 before you get to work on the debt snowball; otherwise you are a car repair away from being back in credit card debt.  makes sense.  

15) you know what else i noticed?  late fees on our fixed expenses.  our water company charges us $10 for being one day late on the water bill - $15 if a reminder is sent.  $15 is more than 1/2 our water bill!!  unfortunately, this bill is a pain in our ass because it can't be paid online.  it has to be paid with a check and mailed or dropped off at the facility.  i really need to start doing that.  other late fees:  $5.00 cable, $5.00 cell, $6.00 phone.  that can add up to $31 a month in late fees!  start adding in overdraft charges, ATM charges, astronomical credit card late fee charges, interest charges, credit card fraud protection charges (drop those!), and so on and so forth - and you could literally be paying HUNDREDS of dollars a month for ABSOLUTELY NOTHING.  

these are the tweaks i have implemented (or tried to).  figure out what works for you.  save something every month, even if it's just $20.   i will post more as i discover them.  good luck!

Date:	2007-11-10 00:08
Subject:	intro
Security:	Public
Mood:	tired