Real Solutions

We might be making a pretty good effort at making things right in our lives financially speaking, only to give up a few weeks or a few months into the process.  Heck, some of us want to give up in a few days! The real solutions to these problems?  Well, this is where we get stuck and tend to give up.  The key is to be specific about each area that needs fixed financially.  Here are some examples.

INSTEAD of making the broad statement, "I'm not going to go into credit card debt anymore", BE SPECIFIC.  I'm going to cut up my credit cards or I am going to cancel all of these store credit cards so that I won't be tempted to charge something I want but don't need.

INSTEAD of making the broad statement, "I'm going to spend less money somehow". BE SPECIFIC. I will look for used items instead of new ones.  I will meal plan and not eat out.  I will cut coupons and only buy things on sale and only those things that I really need.

INSTEAD of making the broad statement, "I'm going to do a better job saving money", BE SPECIFIC.  I will put $50 a month into my savings account each pay period.

INSTEAD of making the broad statement, "I'm going to be a better steward of my money", BE SPECIFIC.  I will be accountable to a trusted person about my spending, or I will balance my budget every Friday.

INSTEAD of making the broad statement, "I won't buy on impulse", BE SPECIFIC.  If I see something I want, I will wait at least three days to act on it, while thinking through all of the consequences of the purchase and praying about if it is really a need.

INSTEAD of making the broad statement, "I need to manage my money better", BE SPECIFIC.  I am going to take a class at church about finances, or I am going to read books by Larry Burkett and follow the guidelines suggested.

INSTEAD of making the broad statement, "I need to keep a better track of my spending", BE SPECIFIC. I will create a  budget that accounts for all of my expenditures and stick to it.

INSTEAD of making the broad statement, "I need to stop wasting money", BE SPECIFIC.  I will write down how I have been spending my money and see where I can make cuts for all the things that aren't necessary.

INSTEAD of making the broad statement, "I'm going to be debt free", BE SPECIFIC.  Using a budget, and what I learned in class or from the books, I will map out a plan to reduce my debt until it is gone.

The key to following the specific statements and staying focused on the end goal is to decide two things. 
1. The time for action is now, not later.  Staying the way you are will only dig you deeper in debt.  Or if you just make ends meet, staying the way you are will never afford you any savings, retirement, or cushion when things go wrong...and they always do.
2. You can't just SEE that you need to make changes, you have to actually DO something about it.  It is time to make the serious decisions and stick with it.  When you feel like giving up, remind yourself of the end goal and how much better things will look when you get there.  And trust me when I say that after living this way and forcing yourself to stay the course, it will actually become your way of life and you won't have to stop and think about most decisions.  You will already know the right thing to do.  Once you have climbed out of the pit, you will have no desire to jump back in!

Generate Income

The key to generating more income is being willing to do whatever it takes.  Using the resources and abilities you have there are ways that you can make money from home or pick up a part time job.  Remember that, depending on your situation, this may only be temporary and you'll need to put up with any inconvenience it may cost you in order to get on the right track with your finances.  You may lose out on playing on a recreational sporting team, you might need to give up a weekly book club meeting, or you may even need to lose a little extra family time for a little while.  Then again, you might enjoy what you are doing so much, it may become your regular job or part time job...that "me" time we are always looking for.  Here are just a few ideas.

1. Do web or blog design.  If you are savvy in graphic design, there are plenty of people and businesses out there that need you.  Even if you only made blog templates or backgrounds, the number of blogs out there are staggering.  I'd pay $20 for a simple layout design.  And if I would, at least 100 other people out there would as well (as you can see by visiting a bunch of blogs and seeing how a lot of them are using the same design) That's $2000 for designing something only once.  Web design can run much higher, but there is also a lot more work involved designing every page within it.  If you have these skills you can easily make some extra money.
2. Make jewelry, or any other crafty kind of thing.  I have a lot of friends who have a "store" on ETSY selling their homemade crafts from jewelry to cards to knitted things.  They also sell some on Facebook and local craft events.  They really love creating things, so it's a win win to also be able to sell them.  Beware of starting a new hobby, though.  Start up costs can be expensive depending on what you want to do and you want to be sure you can make money before you sink a lot into supplies.
3. Maybe you are a good photographer.  Your options are many.  You can take photos for friends and family for events or Christmas cards or senior pictures.  Maybe you can get hired to cover an event for a company.  You can also sell photos to stock companies online.  Just be sure to know all of the ins, outs, and longterm benefits to each option.
4. Can you sew?  If so, I'm jealous.  I have tried and tried...it's just not my thing.  Making clothes, bags, scarves and other things is really big.  I know a few stay at home moms that make money on the side by sewing 3-4 of the same outfits they are already making for their child and then selling them.  They will also take custom orders.  And people like me would be happy to have something that fits just us.
5. Maybe you can do some kind of online work from home.  I've heard of people writing reviews and doing editing from home.  Just check everything out first, and be sure you know all of the fine print.  Anything that asks you to pay money to "work" is probably not what you need right now and might be a scam anyway.  Check out legitimate well known companies for this kind of work.
6. Paint!  Not only inside walls of someone's home, but maybe crafts of some sort.  Whether it be on canvas or repainting furniture to resell, find what you love, are good at, and don't put a lot of money into up front.
7. Maybe you are really good at organizing...now that would be me!  I have helped a few people completely re-do their closets.  Now that I know I'm kind of good at it and have a system, I can branch out from friends and family and make a little money doing this.  Maybe your specialty is organizing paperwork to make tax time a breeze.  I know some people who would pay for that service!
8. Clean homes.  We all know HOW to clean, but do you LOVE to clean?  Because there are plenty of people who don't!  Plus, if you can beat the prices of the companies and save people money, everyone wins.
9. Use your job or everyday skills to fill needs.  Maybe you are a personal trainer.  Get a group of people together from church to lead a class and charge them a lower group rate for an evening or Saturday.  Maybe you are very knowledgeable in the job market.  You could help people find a new job, tell them what skills they need to improve or help them write resumes.  Maybe you have a teaching degree...consider tutoring.  Look around at what holes you see in people's lives or what kind of things you see on the internet.  How can you fill any of those holes for people and make some extra income?

Shop Wisely

My name isn't Frugal Franny for nothing!  Besides eliminating spending, I learned to be a wise shopper and save money on all the things that I can't eliminate from my life.

1. Meal planning!  I've said it before and I'll never stop saying it, planning well when it comes to meals can save you more money that in most any area of your budget.  There are a lot of different ways that different families do meal planning.  Try a Google search to see what you come up with.  I've tried different ways over the years based on my lifestyle at the time.  When I had a very low paying job, I planned my meals around what was on sale at the store that week.  That can work well for some people, especially when the stores plan items on sale that also have a coupon in your paper that week.  Some people buy items at warehouse stores and then do what's called "power cooking" or once a month cooking.  They spend a day making multiple meals, then package them for the freezer.  That way something can be pulled out quickly on those busy school/work nights.  But for me, I found an easier way.  I made a list on my computer of all my family's favorite recipes and next to each in a smaller font, I listed out all of the ingredients except for things like water, salt and pepper that are always in the house.  I post this list on the frig and highlight all of the meals that I have all of the ingredients for.  I then start watching the sales ads and coupons for ingredients I need for the other meals.  As soon as I have all of the ingredients for something else, I highlight it.  When I make that meal I check it off.  When all of them have been checked off, or close to all of them, I print out a new list and start over.  There are about 30 meals on this list.  So I could go for a month without repeats, and that doesn't include nights we have leftovers or maybe grill something from the freezer.  I also use this list as a reminder on what things I can stockpile.  I have 7 recipes that call for petite diced tomatoes.  Obviously when those go on sale I buy them in bulk.  I have only 2 recipes that call for sour cream, so I buy one container on sale that is big enough for both recipes and be sure to have them both before the sour cream expires.  Occasionally I will try a new recipe, but not if I have to buy specialty ingredients, or a bunch of things I wouldn't otherwise use.  You don't need to have 100 recipes (or 20 cookbooks!).  Get really good at the ones your family really like, and work up to enough in your rotation that your family doesn't get bored.  You can always throw in a few easy nights of breakfast for dinner, spaghetti or tacos to make it stretch even further.
2. If you have kids, figure out a system for hand me downs.  I have a friend who has 3 brothers and sisters and they all have kids staggered out a little bit.  They trade clothes throughout the whole extended family.  So my friend might hand down 10 outfits to a cousin, and then they pass along those 10 outfits to another cousin and so on.  By the time my friend gets 10 outfits for her next kid, there might be 2-3 of the original outfits, but also some new to them outfits that were bought by someone along the way either on sale or as a gift.  You could set up something like this with a mom's group, or friends from church.  There are a lot of consignment sales now and swaps, where you bring your clothes, pay a certain amount to get in then swap as many clothes as you have for free.  Do an internet search in your area or ask other mom's what might be available.
3. Try bartering for the services you normally use.  For a little while I cleaned the place where I got physical therapy in exchange for using the therapy pool.  I heard of a mom that cleaned the dance studio where her daughter got lessons in exchange for the cost of the lessons.  Work with your neighbors exchanging skills and machinery.  We own a pressure washer that our neighbor uses regularly and he watches our dogs for us when we have to go out of town so we don't have to pay to board them.  Maybe a friend can clean your house and you can cook her some meals.  Check with friends and neighbors to see how you can meet each others' needs and save each other money.
4. Check out your local library.  You can get on a waiting list for a bestseller and read it when it becomes available instead of running out and buying it.  Do this especially if it is a kind of book you are only going to read once.  The library may also have DVDs and music that you can check out as well as ebooks.  Some libraries offer all kinds of services like genealogy classes and computer classes.  Your library might have all kinds of passes to local events as well as a lot of programs for the kids.  See what your library has to offer to make your entertainment dollar stretch further.
5. Consider paying your bills online through your bank.  I now pay almost every bill through my bank's website rather than write out checks and use stamps, both of which you have to pay for.  Some places will offer you a discount to go "paperless" like this.  Some places will also offer a discount if you let them take it out of your account automatically.  I don't recommend going to each company's individual website and paying that way.  To do that you have to enter your banking info through their website.  I have had a friend lose money TWICE paying this way.  Set up bill pay through your bank's website and you are entering account info for each bill into one more secure site.  You may not even need to enter your entire account info.  For example when paying a credit card bill, you might be able to say "account ending in 3581" rather than typing out the whole account number.  It's worth looking into.  I'd much rather my bank have my cable account number than my cable company have my banking accounts numbers.
6. Be smart about buying gifts.  You usually know who you will have to buy a gift for throughout a year and when.  I used to keep a "gift bin" and bought things on sale, place them in the bin and when it was time to give a gift, pull something out of the bin.  This worked well for some things but not for others. I once got something for a great deal from Pampered Chef thinking this will make a great gift.  It sat in the bin for over 4 years.  Buy just what you need, but buy smart.  You know your daughter's birthday is in October, so watch all year long for sales and coupons for things you know she would love.  Do the same for any other person on your list.  There really isn't any need to buy a bunch of maybe things to keep in a closet to maybe pull out one day.  It's a waste of money when it just sits there, and it's also a waste of money if it's something the recipient doesn't want at all.
7. Consider how much money you spend on vacations.  I know it would be great to take the kids halfway across the country to a famous amusement park, but when it costs thousands of dollars for one week of entertainment, is it really worth it?  Find something closer to home that's still fun.  Maybe there is a "smaller" large amusement park within driving distance.  Or maybe it's 4-5 hours away, but with advanced planning you can get a great deal on a hotel room and cut that vacation down from $4000 to only $1000 for the park, the room and your meals and gas.  Hey, saving $3000 can refill your emergency fund 3 times!!  At the same time, do you need to go AWAY for vacation every year?  My husband and I are taking a 3 day vacation for the first time in 3 years.  We don't feel deprived.  We took a few one day road trips and saw some interesting things.  Sure we would love to spend a week on the beach, but at this point in our lives, saving the money was more important to us and we found more creative ways to entertain ourselves that created just as good of memories.

Eliminate Spending

When you finally make the decision to do whatever it takes to get out of debt, it pretty much requires going into survival mode.  Here are some ideas to eliminate spending.

1. Stop eating out!  People spend more on food than any other area in their budget, besides housing.  In some cases people spend more on food than they do housing!  This is the quickest and easiest way to eliminate some spending.  Start cooking at home more and save eating out for treats and special occasions.  Click HERE to read a previous series, "cooking on a budget".  It talks about menu planning, shopping, and how even the busiest people can cook at home.
2. If you have a membership to a warehouse store, figure out if you are really saving money.  Personally, I found that I could get better prices on items in a regular grocery store using their sales and coupons rather than buying bulk items from Sam's or Costco.  It might be different for your family, but it's worth doing the math to see if you could save that membership fee and even save money at a regular store.
3. If you already have a cell phone, it might be time to get rid of your home phone.  We did that and saved around $47 a month.  We still have a landline plugged into the wall, because it's the law that even if you don't pay for home service, you can use a landline to call 911.
4. Look into other ways to bundle or restructure bills.  Start shopping around.  All of the cable companies offer bundle deals for cable and internet...and phone if you can't part with that land line because maybe you don't get good reception in your house.  Always ask for a better deal and do your homework.  If they say this is the best you can do let them know that another company has offered you something better but you prefer their service.  Once they know you are thinking about going with a competitor, they will usually offer you a better price.  If you are trying to get a deal from your existing company and the person you're talking to isn't offering you anything, ask to speak to the customer retention department.  One caution, do not threaten to leave unless you are ready to say, ok, go ahead and terminate my service.
5. How brand loyal are you and is it time for a breakup?  Food brands, clothing brands, shampoo...anything.  Is there a specific reason you are brand loyal?  For example, I have extremely sensitive skin and have only found one kind of shaving cream that doesn't make me want to scream from razor burn and itching, so I'm not going to try anything new.  But do you really need to have someone's name stitched on the label of your sweater?  Do you really need to spend more than my phone bill on salon shampoo and conditioner?  Did you know that a lot of store brand foods are actually made by the same company that makes the name brand stuff? Think about buying generic or non name brand items to save money.  Sometimes you can get the name brand food cheaper when it is on sale and you have a coupon.  Also, you can find designer labels at thrift stores that might be like new or just need a button sewn on or a stain removed.  Look around and see what really saves you money.
6. Think about how much gas you are using.  I drive a full size truck...yes, really...and I cut my monthly gas bill down by $200.  I did a few things to get to this point.  There are some activities that I cut out because they were so far away.  There are more than one grocery stores in a certain chain, so I go to the closest one to whatever I'm doing the day I go to the store, or I give the list to my husband who drives right by one everyday to and from work.  Try carpooling the kids to school, going to work, going to church and other activities.  Plan days to stay at home and do cleaning and laundry or family activities.  When you go to do errands, plan your route so that you go to the furthest place first, then work your way back home in the most direct route without backtracking.
7. Limit what you do for your kids.  I know them's fightin' words for some of you, but remember, it's time to get serious, and if kids know they are doing what they can to help out, they almost always want to.  You might need to stop or cut back allowances.  You might need to tell them to pick only one sport or one lesson.  What do they enjoy and/or are really good at.  Stop paying to belong to every league, and to take every lesson that their friends take.  We are done keeping up with the Jones' as all that has done is help get us into debt.  Kids don't need elaborate expensive birthday parties, especially when very young and they won't remember it.  Keep it low key and fun.  Memories are more important than matching tablecloths and fancy $30 a dozen cupcakes.  It's time to meet their basic needs, not their every single want.  This won't be fun or easy if your kids are used to getting a lot, but again, if they know it's for the good of the family, they will usually be on board.  Sticking to it will be well worth it.  Studies show that after food, most of the budget goes towards kid's activities and purchases that are not essentials.
8. Limit clothing for the whole family.  How many outfits do you have for each season?  How about your kids?  I recently asked my husband to keep only 12 of each item in his closet.  12 polo shirts, 12 button down shirts, 12 sweatshirts, etc.  I picked 12 because that is two weeks worth of work clothes plus Sunday.  Saturday is usually spent in camo pants and a torn or stained shirt of some kind.  Even then if you consider 12 long sleeve shirts in with the 12 sweatshirt like shirts he wears, he could actually go a month without repeating outfits.  Do we really need that many clothes?  If the seasons are only 3 months each, and if you follow a rotation, the most you will wear something is 3 times a year.  I'm not going to tell you how many times you have to wear something or not, it's just a guideline we use to keep our closet from busting at the seams.  I still feel we should cut down even more, but it's hard.  What is easier is to say we obviously do not need to buy any clothes...even something on MEGA sale.  Spending $5 on a shirt we don't need is a waste of $5.
9. Above all, think through all the services you are paying for.  The gym, nail and hair appointments, dry cleaning, housekeeping, subscription radio, newspapers and magazines, clubs, you get the idea.  What can you do without?  What could be stretched further, such as haircuts every 8 weeks instead of 6?  For example, I got rid of everything in my closet that said dry clean only and I won't buy anything new that requires this.  That may not work for everyone.  You might have the kind of job where you have to wear a suit.  But could you air it out in the dryer and get another wearing out of it before it has to go to the cleaner's?  Can you find deals, coupons or ask for a discount there?  I quit paying for a gym membership as it was very far away from my house and I could only use the pool due to my physical limitations.  With gas and membership, it was costing me over $10 every time I went to use the pool for an hour.  Not worth it to me.  

You have to decide what will work for your family.  I can tell you everything I did, but you don't live where I do, have the same size of family that I do, have the same amount of time that I do, etc.  That doesn't mean that you should say, my family needs all of these things so we're not giving anything up.  Chances are if you are reading this, you need some kind of financial help, so you DO need to figure out what you can do and where you can eliminate speding. Like I said it may not be easy or fun, but once you get to a financially stable place, it will be soooo worth it!

Start Your Budget

The first step in preparing a budget is getting organized.  To create an accurate budget, you must list every bit of income and expenses.  Figuring out the income is the easy part and takes mere minutes. Figuring out the expenses takes a little longer.  It's easy to figure out how much your monthly bills are, but it's the other things that trip us up.  How do you budget for groceries and clothes?  The easiest way to do this is to start by figuring out how much you've spent in the past.  Look over your credit card and checking account statements for the past year and figure out how much you spent on what things, like groceries, clothes, entertainment, car maintenance, giving, saving, etc.  You may be shocked at the totals, but that's in the past, and we are only going to look forward from here!

Let's begin...
1. list your income
2. list your monthly expenses

• giving - tithing
• saving - retirement, etc
• expected payments - monthly bills, utilities, house payments, usually fixed amounts
• variable payments - groceries, medical, clothes, gifts, hair appts, entertainment, and yearly things such as vehicle insurance, and car plates
• debt - credit cards, hospital bills, student loans, car payment etc.

3.  decide who will be the CFO of the family and let that spouse decide what plan he or she will use

4.  work TOGETHER to develop your spending plan 

Now to allocate money to each category.  Chances are if you are following this series, you are spending more than you are bringing in, so those totals you have from last year are going to have to be cut down.  If you are living paycheck to paycheck, things will be tight until you can get some of your debt paid off. Also, if you are very tight due to debt, I recommend not worrying about savings and retirement until debt is paid down, then the amount you were paying on debt can go into retirement and savings.

Let me do a sample budget to get you started

Income per month $5443

Tithing - $544

(skip saving right now)

expected payments

electric - $175

water - $25

phone - $71

House - $1000

life insurance - $106.88

cable and internet - $171

Debt (minimum payments)

car payment - $350

hospital bill - $380

credit card - $120

Variable expenses (yearly things, divide by 12)

car plates - $5.17

car insurance - $113.42

fire protection - $17.50

safe deposit box - $2.50

students loans - $250

right now we spend $3331.47 a month, leaving $2111.53 to divide among the following

Groceries

Medical/dental/vision

Clothes

Gifts

Cleaning products and "beauty" supplies

Hair appointments

Gas

To fill in these amounts, we need to figure out what we have spent in the past year, divide by 12 and see how close we can get to filling in these gaps.  Chances are you will have gone over $2111.53.  So you'll have to figure out a number that fits, and that you can live with, keeping in mind, it would be best to have some left over that you can add to the minimum payments for debt, and eventually have enough for savings and retirement.  Here's what I came up with...

Groceries - $450

Medical/dental/vision - $380

Clothes - $100

Gifts - $50

Cleaning and "beauty" supplies - $100

Hair appointments - $75

Gas - $330

now leaving us with $626.53.  Using the snowball effect mentioned in a previous post, I would put as much of that as possible on the debt with the smallest balance until it is paid off, then move it to the next one.  You may not want to put the entire $626 on the debt for the first three months to be sure that the variable amounts you came up with are doable or if you need to put a little more in one category.  I caution you though...do not look at the $626 and say, "look at all that...I could buy a few more clothes!" Remember our goal is to eliminate our debt, not spend more, needlessly. 

Remember, communication between husband and wife is an extremely important part of developing an accurate picture of your household budget.  Put everything out on the table, or it won't work.  The monthly budget is like a written contract between you and you both must agree to stick to it no matter what.

Also note that I do not have any money allocated for movies, eating out, or vacations.  If you did that, the $626 would be gone in a flash and again you wouldn't be moving on your debt at all.  It may sound harsh for a while, but fixing a problem is rarely fun and games.  Find out what things you can do for free in your town, for vacation be a tourist in your own town or one within a short driving distance, and if there is a special occasion where you really want to eat out, use part of the grocery budget keeping in mind you will need to scrimp for the rest of the month.  

Trust me when I say that this is totally doable.  Due to medial bills, a husband out of work, and using credit cards to get through that, we were once $22,000 in debt.  We completely got rid of that in just under three years.  It took self control, and only one mini vacation during that time, but it was so worth it.  You will feel so good about yourself when you get to that point.  You'll feel lighter and less stressed, I promise.

Now get to work on your own budget and see what you can do!!

Budget Benefits

Budgeting has a lot of benefits, but mostly it gives you a common vision, a guide to decision making, and a decrease in tension, especially if you argue a lot about money.

Common vision - it's not easy living month to month, and really not easy to go through expenses and realize you will both need to make sacrifices.  It is stressful to see all of your debts listed on one page and talking about how long it might take to pay them off.  But a budget is a common goal that you can work together to meet.

Decision making guide - with a budget, you begin every pay period knowing exactly how each dollar will be spent. By creating and living on a budget, you are better prepared for the unexpected, and because all of the numbers are there on paper, you can regularly measure your spending and keep finances in balance.

Decrease tension - I can imagine that you fight about money, even with yourself.  There's blame and guilt associated with every mistake.  By having a budget, the answers are there in front of you to solve any problem.  If the money is there, great, if it is not, well, decision made!

Next week, time to get down to the nitty-gritty.  You can do it!

Budget Specifics

Before you can tackle debt, or even think about retirement and college funds, you have to develop a working budget that goes above living paycheck to paycheck and helps you plan for the future.

First you need to figure out your income and expenses.  Income includes any form of take home pay to add to the family finances, this can include paychecks, part time income, commission checks, etc.  Expenses include any money that goes out the door.  Giving, saving, living expenses, variable expenses, and debt.

Remember that living on a budget isn't something you do for a few months or until one big bill is paid off.  Living on a budget is a lifelong commitment.  Before we go any further into the specifics in the next coming weeks, be sure you and your spouse are committed to this idea and are willing to do what ever works to get to a better point in your financial life.  Start thinking about all of your debts and all of your income.  Pray, meditate, and communicate.  Then we will get down to the details.

Snowball VS. Top Down

There are 2 ways to start pounding out your debt: the snowball effect and the topdown approach.

First you need to list out every debt you have, except your mortgage.  Remember, we're trying to wipe out all of the debt except that one first.  You might also want to write down the percentage of interest you're paying on each balance.  Now choose one of the following ways to start knocking down that debt as quickly as you can.

Snowball effect: pay as much as you can on the account with the lowest balance while paying only the minimum on the others.  Once the lowest balance is paid off, put all the money you were paying for that onto the next lowest balance.  Repeat the process until all debt is paid off.  You will quickly reduce the number of bills you pay each month, and you will feel a bigger sense of accomplishment by cutting them out quicker.

Top down approach:  Use the idea from the snowball…all of your extra money on one bill…only this way do it on the bill that has the highest interest rate, not counting your mortgage.  Overall you will end up paying less in debt by getting rid of the higher interest rates first, but you will need to stay on top of all of the smaller ones each month so they don’t get lost in the shuffle.

Example...you have 3 debts as follows, and you have $50 extra a month to put on something
Visa $500 12% interest minimum payment $25
Store credit card $1000 23% interest minimum payment $50
Car loan $13,000 4.9% interest monthly payment $300

For the snowball effect you would
pay $75 on the Visa 
keep the other payments at the minimum
as soon as the visa is paid off you would pay the $50 a month on the store card PLUS the $75 you were paying on the Visa for a total of $125 a month
as soon as the Visa is paid off you would pay $300 a month for your car PLUS the $125 you were putting on the store card for a total of $425 until all is paid off

For the Top down approach you would
put the extra money on the store credit card until it was paid off since it has the higher interest rate, then you would go to the Visa card, then the car

Personally, I like the Snowball effect.  It gets rid of the smaller bills quicker leaving me fewer bills to keep track of every month.  But, if you have a lot of high interest, the top down might work better for you.  That's entirely up to you.

Write it down, compare the plans, and start paying off you debt!

Moving Mountains

To move mountains, you first have to have a vision.  I've said before that you both have to be on the same page (if you're married), you have to make a commitment, and you have to become a team.  Your commitment level has to be 100%.  You can't just say, oh, that sounds good, but as soon as the rubber hits the road, give up.  This commitment level will only be in effect if the hearts of both of you are fully invested in the out come.  So sit down together and come up with a vision you both have...where you'd like to be.

Now that you have a vision, you have to plan to make it reality.  It's time to sit down and list every single debt.  ALL OF THEM.  Big and small, maybe secret ones...it's time for it to all be laid on the table.  In preparation to write out a budget, also write down every single bill.  Don't forget those once a year ones even if they are very small...like the safe deposit box rental, a fishing license, car tags, etc.  Every single bill.  Check to be sure you have them all by looking through a years worth of check registers and credit card bills to see what you've paid.

This isn't a long post, but the work will take you a little while.  Start with the vision, and be sure you are both on board.  Then start writing everything out.  Next week we start talking about how to knock out that debt quickly.

Communicate Part 2

Here are a few ideas to help you communicate better.

1. Designate a financial leader.  Usually in a marriage, there is one person who is better at finances than the other.  Even if that isn't the case, decide on one person to be in charge of keeping up with accounts and paperwork.  That doesn't mean the other person does nothing, there is just one person doing the detail work.  
2. Have regular budget meetings.  During these meetings be sure to discuss things like:
• bills to be paid
• your spending up to that point
• what needs to be purchased with money left at that point
• any unexpected expenses
• whether or not you are on track
• how the goals are looking
• worries or concerns from either one of you, but watch the emotions
• any large expenses coming up that might change the plan at all
• etc, etc, etc
3. Consider a second account.  I DO NOT mean for you to separate your money.  This would only be if it would make your life easier such as one account would be for the expected bills that are the same amount each month and the other account could be for the variable bills and where you might save for larger purchases especially if you have an interest bearing account.
4. Use E-mail as a form of communication if you have to.  It's not always a bad thing, especially if you are both so busy that you can only connect this way sometimes.  Also, it is a written and saved statement that you can refer back to if needed.
5. DO NOT KEEP SECRETS.  If you have any right now lay them out on the table with set rules beforehand, such as, this is the time to be completely honest without any fear of emotional outbursts, the slate will be cleaned and we will move forward from here.  You must both agree to not lie anymore in the future and to have forgiveness for each other if someone makes a mistake.  Remember, if you aren't on the same page, this will never work.

Communicate Part 1

Money is hard to talk about.  In the middle of the conversation there can be feelings of pride, resentment, shame, and feeling like you don't measure up.  The results are hurt feelings, arguments, isolation and sometimes even lying to each other.

So why would you want to communicate about money?

1. You have to help each other understand the real financial state you are in.  Not only do you need to know the numbers, but you also need to understand the spending patterns that got you there.  Communicate calmly, putting aside emotions and expectations, so that goals and plans can be made.
2. You have to hold each other accountable in spending habits.  Talk things through, and establish checks and balances to head off problems.
3. You have to build trust.  When you learn to communicate without emotions in the way, you'll find that your team is coming together.  You are working together with a purpose, you can face problems together.  As you accept each other's advice and see progress being made, a new level of trust is built.

Becoming a Team

If you are married, you have got to become a team to tackle this problem and to be on the same page from here on out.  You have to be committed to each other.  Even more important that that, you need to commit your finances to God....they're His anyway. He is the one who gives you the ability to produce wealth.  Committing your finances to God is the first step in becoming a team.

Now that you're a team, here are 5 areas you need to work on/think about/fix.

1. Communication - do not fight, do not blame...learn to communicate about money effectively
2. Budget - create and communicate about the budget.  My husband and I communicate about the budget on almost a daily basis so we always know where we stand.
3. Unexpected expenses - is your $1000 emergency fund in place?  Not planning for those emergencies is a dangerous hole to fall in.
4. Home purchases - don't buy a home too soon or buy a home that takes up most of the budget.  It's very tempting, but more stress than you may be able to live with.
5. Spending money before you have it - do not take on unnecessary debt.  Save for the purchases you want, budget for the ones you need.  Don't fall into the buy now pay later trap.

Commitment to Change

To get out and stay out of debt, there must be a commitment to change.  And it has to be strong.  You didn't get into this mess overnight and it won't go away overnight.  If you are a married couple, both people have to be on the same page or it will never work.  You must both be on board.  And then it's time for some attitude adjustments...

You must have an attitude of commitment.  it's not easy to walk a narrow path in a very long journey, especially when you may see very little along the way, but you have to keep your eyes on the goal not the boring path.

You need to have an attitude of obedience.  As in, all you have is from God...He owns everything not you.  What does God want from you regarding your finances?  It's very clearly stated in the Bible, and when you choose to obey that, it makes the journey a little easier.

You also need an attitude of surrender.  Obedience equals sacrifice.  You have to sacrifice your wants and limit your expectations materially speaking.  Note, I don't say this is easy, but it's an attitude that must be in place for success.

And you must have an attitude of prayer.  You can't do this by yourself.  If you were that strong things wouldn't have gotten out of hand in the first place.  We have to lay aside our wants and ask God to give us the strength to stay the course.

I'm praying for you too through this journey.

What Money is

What money is:

• Temptation - to be self reliant, but God wants us to depend on Him
• Teacher - when couples and singles learn to manage their money they learn valuable lessons about trust, resourcefulness, patience and responsibility
• Tool - we need to be better stewards of what God has given us and to give more freely...when your hand is open to give it is also open to receive gifts from God
• Testimony - God uses these lessons to mold and shape your character...sometimes these lessons take longer to learn than others

From: Learning to Live Financially Free by Marybeth and Curt Whalen

What Money Isn't

We can budget and plan all we want, but without understanding money, none of it will work.  Let's start by talking about what money ISN'T.

• not a measure of love...material gifts and pursuits do not equal love.  Deep abiding love cannot be purchased.  Buying things to make ourselves feel better is similar to taking drugs to make you feel batter.
• not a gauge of worth...God does not judge you based on your bank account or net worth, but on your heart.  Our financial picture has no impact on our value in God's eyes.
• not a reward for spiritual living...God's economy is not ours.  Remember that it says in the Bible that His ways are not our ways.  In God's economy, blessings come not through financial gain, although He sometimes chooses to bless us in that manner, but rather, in the form of purity of heart, grace, love and peace.
• not a guarantee of satisfaction...money does not bring happiness.  Maybe a temporary good feeling, but our souls want so much more.  Something richer and deeper and much more permanent than the world's economy has to offer.

Think about these things this week while you continue to build your $1000 emergency fund and beyond.  Examine your feeling about money and how much it may control you and your thinking.  Next week we will discuss what money IS.

$1000 Emergency Fund

Our first priority for getting out of debt isn't actually touching any of the debt at all.  This may seem counterintuitive to some, but having this emergency fund in place will keep your debt from growing in that, when an emergency happens you won't have to put it on a credit card.

At the same time, you can continue using some of these ideas for building your fund to put extra money on your debt.

Stop using credit cards.  We are now on a spending freeze.  It's time to decide what is a want and what is a need.  For needs, try to use cash and coupons whenever possible.  Don't use the credit card.

Find all the cash in your home.  This one might surprise you.  Get all the change from your "bucket", pockets, seat cushions, coat pockets, old purses, ashtray in the car, etc.  It all adds up really fast and you'll be surprised at how much you find.  Once you have found it all, never leaving it laying around again, have a central spot to put all loose change.

Find other hidden money.  Gift cards you haven't used...use them or sell them on websites like gift card granny.  Or, if you haven't used any on them at all, regift them, and put the money you would have spent on a gift into your fund.  What about any points you have on your credit cards or other reward programs?  Figure out how they can be used for bill credits or again for gifts and then "save" the money you would have spent.  What about your taxes?  It's worth it to get a company like H&R Block to check your taxes to see if you could get more from last year.

Get some extra income from more hours at work or get a part time job.  This may seem like a step backwards or something you just don't want to do, but keep in mind, it is only temporary until you are on your feet and have learned how to stay there.

I would love to hear from any of you about how much you find and/or save.  I love hearing your stories.  I, myself found $20 in a jacket pocket I don't ever remember putting there!

Get out of Debt Overview

In this series we will be talking about how to get out of debt and stay out of debt.  Sprinkled in will be money saving tips, ideas and strategies.  Listed below are the basic steps we are going to follow to get there.  Keep in mind that I have a Christian perspective and Biblical worldview, so my goals may not completely match yours. Further description and game plans will come in the following weeks for each step.  Funny thing, I've been planning this for months, the my pastor preaches on it and has almost the exact same steps! So, Pastor, if you're reading this...I had it first! (just teasing!!)

1. Establish a $1000 emergency fund and if you use it replenish it immediately. This fund is for things like your refrigerator or stove breaking down or a tree falling through your roof....not for a great deal on a beach condo.
2. Pay off all debt except your house...that comes later.
3. Establish a fund equal to 6 months to a year of living expenses.  Pastor described this one better than me...this is a rainy day fund, and it WILL rain sooner or later.
4. Invest at least 15% of your income into retirement savings.
5. Establish a college fund for your children.  Yes, this comes after your retirement.  If you don't take care of you, you can't take care of them.
6. Pay off your home early or just now buy a home.
7. Any personal wealth built after this is to be given away for the sake of the Kingdom. Missions, church planting, helping out a single mother financially, extra tithing, etc.

Next week we will start working on the $1000 emergency fund.