I am a big fan of gamification. FitBit has done it with physical fitness. Tripadvisor has done it with reviews. I’m sure there are other examples, but these are the best known. I have often thought it would be a great idea for personal finances. Something like Mint.com but as you add goals you get badges for reaching those goals. Since no one has made that happen yet, I am just making something up for myself. Nothing fancy, just setting some goals and celebrate when certain targets are hit. While not exactly what I had in mind, there is a site you can learn lessons, take quizzes and earn points and badges. Better Money Habits is a partnership between Bank of America and Khan University. Sign up for free, pick a topic and learn something. Even if it is a repeat of what you already know, it’s good to help keep you motivated.
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:
- 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.
- 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.
How did we get here?
One important aspect of getting out of a pickle in knowing how you got there in the first place. Generally when people come into a lot of money (inheritance, lottery, bonus, etc) it leaves their wallet as fast as it got there. Why? The reason is they never learned to manage their money. That’s why they were in debt and why they’ll get back there as quickly as they got out. Much like losing weight too quickly is unhealthy, so too is trying to get rich quick. There are a lot of fads making extreme promises but in the end they hurt more than they help. Take a look at each debt, why it’s there and what can you do to prevent it happening again.
A few of mine are easy:
- Student loan. My largest and most persistent debt. I had to take out loans to get both my bachelor’s and master’s degrees. They help get me in the career I have now, so it seems like money well spent, however, I was living above my means and so lived off part of that money. If I’d been more careful back then, I likely would not have near as much left as I do now.
- 401k Loan. Next up is the 401k. I took this out to combine two high interest credit card debts. I normally would not advise doing this since it’s just rearranging the problem, and you miss out on potential growth of the funds that are not in your account. However, I was barely able to make the minimum payments so doing this has allowed me to actually start paying down principal. But how did those two credit cards get so out of hand? One I used for an attorney to get an amended divorce decree. I was spending an enormous amount of time on the road just to see my daughters. Their mom was not working with me at all, so I needed to get it in writing. It was difficult and messy, but now I spend way less time getting them, bringing them, to my place and taking them back. The other credit card was mostly due to renovating our house. The house had smelly old carpet, no closet space and no bathroom space. My wife was moving in with me and we needed to get the changes done soon. I could not get a home equity or other better financing so I used a personal loan and credit cards.
- Auto loan. After 17 years, I needed a new vehicle. I wanted something that could haul the entire family, go on road trips, go camping, etc. I chose a used vehicle, but did get an extended warranty. All financed on a four year note.
- Personal loan. Home improvement, see #2.
- Personal loan. Taxes, after my divorce, I forgot to update my W-4 with my employer. As a result, I way underpaid my federal income tax. I’d rather owe a bank than the IRS.
- Credit cards…more taxes from my wife doing what I did, a vacation that I bought impulsively, road trip with my girls for spring break, camping equipment, trying to get more points putting my expenses on a card and failing miserably to pay them off each month. Clearly I need to reign in my spending.
Now that I know my weaknesses I am now able to ask myself if I really need a thing more than I want to see that damn debt gone. It helps to have a visual to remind me what’s important.
The M.O.N.E.Y. show interview with J.D. Roth
This was one of my favorite episodes of the MONEY Show. JD Roth is the founder and former owner of Get Rich Slowly blog. He now runs a blog called Money Bo$$ and travels the country with his girlfriend in an RV. I like hearing stories about how people dig themselves out of a hole whether that’s a financial, health related, relationship, whatever. Coming from behind and making something of yourself; not giving up even when things seem bleak. I find inspiration in these stories.
What affected me most though was how similar his story is to mine. Family business, making bad decisions with credit cards, divorce after many years of marriage, love of nerd culture, etc. While his track was one of entrepreneurship and no kids, mine was one of kids and career. He was able to come up with something that, while not unique, was innovative and captivating. Today he lives off the fruits of that labor and inspires others to reach their goals. He also had an interesting take on looking at our personal finances as we would a business.
In business you generally want to make a profit. You want your expenses to be below your income. The gap between those two is your profit. You want your personal finances to be the same. Working to increase that gap and make sure you’re saving for the future.
The other thing was how he “gamified” getting out of debt. Nowadays you can find all kinds of gamification for health (Fitbit), travel reviews (Travelocity), etc. where you get points badges for accomplishing small goals. While there really is no site that does that for personal finance, you can still do something similar on your own. Setting small challenges with yourself or friends, posting about it to be held accountable and celebrating when you hit a goal. Anyway, it inspired me to get my head wrapped around my debt situation and to start denying myself a few things to reach this goal.
What affected me most though was how similar his story is to mine. Family business, making bad decisions with credit cards, divorce after many years of marriage, love of nerd culture, etc. While his track was one of entrepreneurship and no kids, mine was one of kids and career. He was able to come up with something that, while not unique, was innovative and captivating. Today he lives off the fruits of that labor and inspires others to reach their goals. He also had an interesting take on looking at our personal finances as we would a business.
In business you generally want to make a profit. You want your expenses to be below your income. The gap between those two is your profit. You want your personal finances to be the same. Working to increase that gap and make sure you’re saving for the future.
The other thing was how he “gamified” getting out of debt. Nowadays you can find all kinds of gamification for health (Fitbit), travel reviews (Travelocity), etc. where you get points badges for accomplishing small goals. While there really is no site that does that for personal finance, you can still do something similar on your own. Setting small challenges with yourself or friends, posting about it to be held accountable and celebrating when you hit a goal. Anyway, it inspired me to get my head wrapped around my debt situation and to start denying myself a few things to reach this goal.
The Richest Man in Babylon
I read this classic again since I’m on the hunt for financial independence. This is one of my favorites since it lays out very simple rules for growing wealth slowly as the philosophy of hard work all in the form of parables and stories. It’s important to focus on our goals and read things that help us reach those goals. This book is short so you can finish it in a couple of hours.
Because I love it so much, and I want to give my kids the benefit of learning these rules early, I bought a copy for my oldest as she is about to start earning. For those unfamiliar with the book, have a look at the wikipedia page. There you’ll get all the details. If you want a copy of your own to mark up and re-read, I suggest Thriftbooks.com. The prices tend to be cheaper since it’s sort of like Amazon before it became bloated trying to be the Walmart of the online world.
Goodbye Bally Total Fitness
I have had a membership here for quite a while. I have enjoyed it and used it quite often. However, I have lately started doing more “whole” exercising like riding my bike, playing with my kids, swimming, walking, etc. Using actual movements and body weight as resistance, the hope is to get in shape without much risk of injury. Case in point, I have a pain in my left shoulder that will come back from time to time and has been aggravated by pressing weight.
To cancel your membership with Bally, they do not tell you anything on the website except to call in. Of course, that is so they can try to keep you as a member. In many cases you can set the account on inactive, for $4 a month or transfer to another person for a “one time fee”, in this case $100. If you outright want to cancel, you need to do it in writing like so to the following address:
Bally Total Fitness
Attn: Cancellation Dept
PO Box 96241
Washington, DC 20090
5/31/2011
[Your name and address]
RE: Member#
To Whom It May Concern:
Please cancel my membership and stop all automatic withdrawals.
Hope that helps.
Healthcare? What’s that?
I recently received a bill for $275 from Cook’s Children’s. One of my daughters was playing in the yard and got knocking in the noggin by a swing. It was a pretty ugly lump, so Mel rushed her off to the urgent care to get it looked at. The nurse spent 15 minutes taking a look and told them to go home and keep an eye on her. That’ll be $275 please. I am ashamed that for a moment I wanted Mel to wait a bit before taking my daughter in because I knew it was going to cost a few bucks, but of course I’d spend a million more to make sure my kiddos are alive an healthy.
I now see people (read Republicans) that want to repeal “Obamacare”. Forgetting for a moment that the healthcare “overhaul” was heavily watered down and did not change much, it was a step towards making healthcare a right in this country. As a group of citizens, we need to take care of those who cannot take care of themselves. To many people avoid getting regular checkups at the doctor or forgoing treatment because they cannot afford it. In the end, it costs us, as a society even more than if we had cooperated to begin with.
Think I’m being a socialist? What do you think we do right now? Insurance is a capitalist attempt to implement socialist ideas. The risk is spread among policy holders with some drawing more out than others. The biggest problem with all of this is the profit motive. I fully agree that I want my doctor well trained and well paid. When she is happy and not worrying too much about making ends meet, she can spend time with me and make sure I am healthy. Unfortunately, most doctors work for hospitals, that want to make a profit. They get their drugs and equipment from companies that want to make a profit. We pay for insurance from companies that want to make a profit. The actual cost of healthcare goes way down when fewer want to make a profit.
So, what’s the solution? This is a very simple list, but our country is smart enough to make it work.
- Have the public pick up the tab for doctors education. The loans those people have to take out (for schools trying to make a profit) are enormous. If that is not a concern, doctors cost less. We will also get a lot more doctors since it will be a more attractive profession without all the current hassles. No waiting lines.
- Get rid of insurance companies and replace them with a healthcare tax with no loopholes. Think you already pay too much in tax, think about what you pay for insurance, make it a % and have everyone pay that percentage.
- Cancel free healthcare for Congress and other “public servants”. We are in this together, we need to be on the same page.
It really should not be too hard.
Capital One you sneeky little devils
I have been paying my credit cards off for a while now and finally got it down to one. I have some accounts with Capital One so I thought it was a safe bet. Earlier this year, CO decided to increase everyones rate across the board since those poor defenseless banks just aren’t getting the billions in profits they once were. I don’t think I got this notice, but I have no way of knowing for certain. The notice in not put on any of your regular banking statements, so most people did not get a chance to “opt out”.
What’s that you say? Opt out of a higher rate? Yes, if you did not respond, they take that to mean you are cool with having your rate increase. In my case by 236%. Is the legal? Yes, Ethical, certainly not. So after two days of calling, you get sent to the same place with a “Senior Account Supervisor” who cannot do anything to change your really high rate. They have no supervisors with more authority. In short, you are stuck.
So here I am with a minimum payment that is only sightly higher than the interest they are getting (I pay more than the minimum always.) If I were some poor soul who did not understand this, it would take almost a decade to clear that debt. As it is, I will just work harder to clear the debt and then start working to close my accounts. How very sad they just don’t like customers.
I finally got a personal loan and wrapped that account up.
Insurance idiots
So here is my story…
I got a bill from a small clinic we visited a few times. I called to let them know that they were charging me too much. I would be happy to pay the addition fee over my co-pay, but not the total amount they bill the insurance for that was denied.
She tells me, “Well that was the cash price, the amount we billed insurance was required under our contract with them.”
“Wait, you are billing my insurance twice what I could just pay out of pocket, when we all knew the insurance company would not pay it? Did you tell me there was a “cash price” that was only a little more than my deductible?”
“Well sir, you hand us an insurance car, it’s not our job to tell you”
“Who else would know?”
It’s not just insurance companies…it’s also the 1) incompetent underpaid staff working the counter or 2) small clinics trying to make as much as possible.
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.