Wealth Building Tools

To start getting our of debt, you need to know just how deep in the hole you are.  I use Mint.com to track my personal finances and keep a loose budget.  It also calculates your total assets, liabilities and net worth.  I wanted something more though.  If you know anything about getting out of debt, you’re familiar with the “debt snowball” or paying down your debt using the snowball effect.  Every person that writes about getting out of debt will mention this at least once, because it’s a powerful tool.

The general idea is you have to make the minimum payments on your debt.  If you order your debts smallest to largest then throw anything extra you can at that first debt and pay it off, you take that same amount and add it to the next.  When that is paid off, you move it to the next and so on.  The outcome is your debts get paid off quicker as time goes on since you always spend the same, just move it up the chain.

A couple of rules or it won’t work:

  1. Don’t add more debt.  If you add debt, you’re defeating the purpose.  You’ll need to live on less than what you make.  Free up any extra pennies to put towards the debt.  Find ways to trim your expenses.  You may even need…{gasp}…a budget.
  2. Earn enough to cover your living expenses with enough leftover to pay the minimum amounts.  If you can’t, you’ll need to get creative.  Get a second job, sell stuff, form a side hustle, whatever.
Assuming you can do those two things, you’ll need a way to track and plan the attack.  I went looking for an Excel spreadsheet to do this.  I LOVE Excel spreadsheets. I could make one, but why reinvent the wheel when someone has clearly done this before?  I found one at The Wealth Formula.  It’s not complicated, has a nice, easy to understand layout and plenty of room to add in the numerous creditors some of us have.  Leave off the mortgage, that’s something to be dealt with later.  Do add car loans, credit cards, personal loans, 401k loans, student loans, etc.  Be as complete as possible.  Once done, figure out how much more than minimum you can do and the sheet will calculate how long it will take. Mine is currently just under 3 years.  To think that in 3 years, we’d only owe on the house if very exciting.  To think about all my wife and I could do with that amount freed up each month!  Travel, save and invest (obviously), buy real estate.  The possibilities are endless.

It pays to call

I got my AT&T phone bill today and looking it over, I was charge $30 for at tech to come out and check our line.  This is not the first time they have come out or the first time they have tried to charge me.  So I made a quick call (about 10 min) to customer service and asked if they would remove it.  They did and I get to keep my $30.

It is a good idea to always check your bills.  Electricity, Natural Gas, Phone, these are all bills that need to be looked over carefully.  If you see a charge you don’t recognize, it costs you nothing but some time to make a call to find out what it is.  It might be an error or can be removed as a “courtesy”. 

For credit, debit and banking accounts, it is important to keep on top in case there is an error or worse someone got a hold of your info.  This happened recently to my wife’s debit card.  Thankfully it happened at a time the account was low so they could not get much.  Our bank called and emailed us about the possible fraud so we got it shut down and most charged back quickly.  We are still not sure how her card was compromised, but it appears to have been a prank.  The charges were book clubs and Netflix.com and were shipped to our home address.  My favorite site to keep my finances in order is Mint.com.  Very quickly and with few exceptions, you can have all of your accounts in one place.  I used to use MSMoney, which cost about $20-30 a year.  Mint is free.

So, keep a close eye on your finances and bills to save yourself some money.