Last Minute Words of Encouragement

The Spending Fast begins tomorrow, and imagine my excitement when I received a little e-mail from Anna herself!

I can do it!

A Forecast of Things to Come? Hopefully Not

{Image Source}

Although I don't plan on starting the Spending Fast until Friday, I tried to get a little practice of "not spending" with my last paycheck.

FAIL.

My goal was to only pay my bills, pay for my trip out of town this past weekend, and I wanted to get an emergency pre-paid debit card in case something comes up during the next year and I absolutely have to spend money. 

Well, I paid my bills, and I paid for double my trip budget (I was going to split the cost of the hotel room, but I ended up having to pay for all of it).  And then there was a forgotten credit report I pulled and paid for, and some stock photography for my garden blog design, some iron on t-shirt transfers, because... I don't know, I just bought them, a few smoothies... Oh yea, and that shopping trip to Old Navy and Forever 21 for some "but I really need summer clothes before it's too late" binge. 

Instead of having close to $325 left over to use to get a head start on my Spending Fast Savings, I actually ended up going over my budget by $95.  Doh!

This "not spending" thing is going to take a lot more discipline than I thought.  I'm determined to do it... because if I don't, I'm only hurting myself.

The Countdown Begins

... and I'm really kind of
nervous

excited
nervous

What Do I Know About Debt?

{Image Source}

In a few posts I have mentioned that while I have over $20,000 worth of debt, none of it is actually "consumer debt."  It's all student loans.  I don't have a car payment, and I don't currently have any credit card debt.  While I struggle every semester to come up with tuition money (I'm over taking out loans until Dental School), I am blessed to have parents willing to help me out by allowing me to live with them rent free. 

In my situation, sometimes I wonder if I'm "unworthy" of doing the Spending Fast.  I read lots of comments left on Anna's blog.  I read about the amount of debt that some people have and it makes me feel sick.  You know, that sick, anxious, worried, I-just-want-cry-and-make-it-go-away feeling that everyone with debt has?  Some of these people have hundreds of thousands of dollars in student loans and tens-of-thousands of dollars in credit card debt, and it makes me feel like my $20,000 in low interest, "student-loans-are-good-debt" debt is a slap in the face to those really struggling.  And then I remember, I wasn't always in this position.

When I graduated high school, I was like every other young person experiencing the world for the first time.  I got credit card offers in the mail almost daily, but was careful to disregard them.  I would cut them up and throw them away, until one day,  I decided I should probably establish some credit.  Against my parent's counsel, I signed up for a credit card, and POW, I was approved for a $300 credit line.  A few months later, I got a raise at my part time job, and asked my credit card company for a credit limit increase.  At this point I don't think I had ever actually used my card, I just wanted "more" money.

By the time college rolled around, my parents told me that with three of us all going to college (and my brothers going on misisons for our church) there simply wasn't enough money for them to pay for it.  They would let us live at home to help with expenses, but that was all they could do.  In my family, college wasn't an option, it was a must, just like elementary school, middle school and high school were musts.  Without help, I was on my own to finance my education. 

I applied for a ba-zillion student loans, but never got any.  And grants?  Yea right, people like me don't get free money.  I come from a white family who lives in the suburbs, and my dad is a Pharmacist who makes a good living.  The government doesn't give people like me free money.  But what the government didn't realize was that my family had 3 kids going to college at the same time, and my parents were in financial trouble too.  Way back when, my dad wanted to be a doctor, but he spent about 8 years of college messing around and flunking out.  When he married my mom, she worked while he could go to school. Then one day, they found out she was pregnant with triplets, and by the 3rd month of her pregnancy, she was put on bed rest and had to stop working.  My dad got a part time job and continued school.   We lived on a part-time, entry-level income, and student loans six.  Needless to say, by the time I was ready for college, my parents were still struggling with their student loans.

Without financial aid, or help from family, I didn't know where else to get money, except... my credit cards!  I was able to get a big enough credit limit increase to put an entire semester on one card.  By that time I had applied for, and been approved for 4 more!  Within 2 years, I had maxed out four credit cards on tuition and books and one on gas (yes, a whole credit card of gas!)  By the time I was 22 years old, I had just under $20,000 of credit card debt.  Because my cards were maxed out, the monthly payment on one card was more than my measly, part-time, $300 paycheck could handle, let alone all five card payments!  And, because my cards were maxed out, and I wasn't making the required minimum payments, the late fees and interest rates soared!  My lowest interest rate card was 23% and the highest was an astounding 38%!

Believe me when I say that I know the sick, anxious, worried, I-just-want-cry-and-make-it-go-away feeling that comes with debt.  I felt it often, everyday, hanging over my head, laughing at me.  My magic money (yes, that's how I referred to my cards) was gone, and I was up a creek.  It was then that I realized I had to do something.  I had seen a show on Oprah about people in debt.  These people followed her Debt Diet, and were able to become debt free in just a few years.  I looked into it, and it seemed doable.  I had long, in depth conversations with my parents about dropping out of school for a while, and asked if they would continue to let me live with them if I did.  They were extremely upset, and didn't agree with my plan, but they know the stress and heartache that comes with financial problems and so they agreed. 

So, I dropped out of school, a decision that I knew would be extremely hard to recover from.  I picked up more hours at work, and slowly, slowly, slowly I began reducing my debt.  I started with card with the the highest interest rate, and put as much money towards it as I could, while only making the minimum monthly payment on the other cards.  Pretty soon, the first one was paid, so I worked my way down.  It took years, and it was hard, and as I watched my friends graduate college, and graduate medical school and get their master's degrees, I was saddened and jealous.  I wished I was in their same position but I also realized that I had to get rid of my debt.

I paid off my last credit card in April of 2010.  Over $20,000, paid!  While many might read this blog and see that I currently have only "good' student loan debt (which is still debt so it's actually bad), I am only half way over the hill.  I still have a long way to go. 

And for anyone else out there struggling with debt.  You can do it!  It is going to suck and it is going to be hard.  But you CAN do it.

Budget = BadCredit Cards = Good?

I finished reading Young Fabulous & Broke in two days!  I loved it!  It spoke to me, it speaks to our generation about financial problems we're facing.  "It most definately is not our parent's finince book."

While reading, I loved not only was this book helpful in teaching me about scary money words I hear used all the time, like Mutual Fund, Retirement, and Savings, but I realized that the financial advice I've heard my whole life is not geared for people my age.  Most [well known] financial advice is geard towards the baby boomer generation.  So imagine my surprise when I read two of my now favorite tips from the book:

Budgeting = Bad

Credit Cards = Good

Wha... what?!?

Budgeting is Bad

Let's be honest.  How many people have taken the time to sit down and create a budget?  How many people have actually stuck to their budget?  I have created numerous budgets, and I have never stuck to one for more than a month.  Operating under constant stress and worry and the constant monitering of receipt to bank account matchups, is more than I can stand.

Suze says that while it, "is a good idea to take a look at where your money is going... there are far faster ways to determine if you have cash flow issues."  To see if you have cash flow issues, check out these examples:

• You are finally makeing more money, but your bank account balance is the same as it always has been
• You hold your breath everytime you use your credit card waiting to see if the charge will be accepted
• Your credit card balance keeps rising
• You consider it a good month if you only bounce one or two checks

 Typically, most finance books would say, Oh you answered yes to one or more of those questions?  Great, here's a budget spreadsheet, now get cracking.  But Suze's answer is different.  She says, "budgets are about as successful fad diets where you lose a ton of weight at first and then gain back even more."  Instead of suggesting a financial crash-diet, she lists ways for you to "find" money to put towards your savings goals- no budgeting, now worrying.

Digging for Dollars

So how does someone who's broke "find extra money?"  It's almost insulting isn't it?  There are a few ways that I've heard before, and a few I've never thought of.

• Stop getting a tax refund.  Everyone with a job pays income tax, but most young people are paying too much.  We get so excited about our big fat refund check, and yet struggle to make it month to month.  Suze's suggestion is to change your withholding so that less money is subtracted from your paycheck.  Change your W-4 to change the number of exemptions you claim; the more exemptions you claim, the less money that is withheld, and the more money you have to pay your bills every month. 
• Loose the Life Insurance policy.  Because most of my peers are young and don't have anyone depending on them, there is no need to pay for a life insurance policy.  It's money down the toilet.  Most companies offer a free policy that is usually around $15,000; enough to cover your funural should something happen to you (Heaven forbid). 
• Raise your insurance deductable.  If you are accident prone, or have a bad driving record, this may not be an idea for you.  However, the majority of us don't need to worry about low-to-the-flo' deductables.  The lower the deductable, the more the monthly payment is.  If you need cash, raise your deductable and save yourself a ton in wasted monthly installments.
• Cell It.  Do you really need the internet on your phone, iPod, etc?  Did you know that canceling it could reduce your phone bill by 50%?  Wait until you're at home to check your Facebook.
• Look at your bank statements.  I never did this!  EVER!  Until one day I did, and noticed that there was a charge made to a surf shop in Utah for $60.00!  I called my bank to complain about fraud, and they denied my claim, because the charge had been occuring monthly for 4 months!  Money down the drain, all because I couldn't take 5 minutes to check over a piece of paper.
• Check your credit card statements.  Again, look at it, really look at.  It takes two minutes to check for inaccurate information or mistakes.  New fees, and charges magically appear on credit card statements all the time, and people pay them because they don't even know they should be there.
• Wait an extra week to get your hair done.  Instead of every 6 weeks, go every 8 weeks.  The extra growth won't be to drastic, and at years end you will have saved the cost of two trips to the salon.
• Dry clean less.  Use the washing machine, or laundromat.  The dry cleaner is convienient, but it adds up.
• Brown bag it.  Even lunch from a fast food restaurant costs just under $10.00/day.  If you brought your lunch to work you'd save a fortune on groceries and up to $2,600.00 a year!
• Stay home for the movies.  You could spend up to $40.00 for a movie date.  Wait a month until it comes out in the Redbox and pay just $1.00, or wait until its on TV.
• Get a roomate.   Living alone is the ultimate in "I'm an adult," status, but if you're trying to find extra money, a roomate is the best way to free up some dough.  Have them pay half your rent, and you'll be saving big in no time.

Even those of us who are "broke" are able to scrounge up a little extra money every month.  Take a minute to look over where your money is actually going, and then start making cuts.

Credit Cards are Good

For the 20-30 year olds out there, we have so much potential.  Our lives and our careers are just getting started, and this is the time of our lives to stop making mistakes start planning for our future.  Suze thinks the most important thing for us to do is get a jump on our careers.  If you find yourself in a job you hate, it's time to go, no excuses!  In this market, it is unlikely that someone with a decent paying job has the luxury of leaving and finding something pays more, or even the same!

This is where Suze says it is OK to use your credit cards.  If taking an entry-level position in a field you love is your only option, go for it.  "Many of you YB&Fers feel so much financial pressure that you're loosing sight on the long term.  You give up on your dream careers that may offer great long term opportunities because you can't afford to live on the starting salary." 

"This is where credit cards come to the rescue!"

Stay focused on your career goals, and don't worry about the paycut.  Obviously you need money to live on, so the credit cards are to be to supplement your income.  They will pay the difference between what your bills cost, and what you earn.  Notice I said what your bills cost, not what dinners out cost, or a new wardrobe costs.

However, this game is tricky, and requires you to be extremely responsible.  Saying credit cards are good is not a free pass to pile on extra debt by taking vacations, shopping, or going out with friends.  The credit card strategy is soely for the purpose of paying expenses that you need to live on.  If you are conciously doing everything you can to get by but are still coming up short, then this strategy is for you.

If you have to lean on your credit card for monthly expenses, keep it under 1% of your annual income.  For example, if you start your dream job making only $30,000 a year, use your credit cards, but for no more than $300.00 a month.  In the mean time, don't ask for a raise, and work your butt of so that your company realizes you are an asset, and they depend on you, not the other way around.  After doing this for two years, you should have proved yourself at work, and if they haven't offered, you can now ask for a raise.  By this time, your credit card balance will be around $7,200.  Stop using the cards and begin paying them down.  Don't freak out about the numbers.  Instead commit to a plan of paying $50-$100 on time every month and you'll have them paid off in no time.

Is it worth it?

{Image Source}

Today, just for fun, I was thinking about ways that I can cut costs, in case I feel as though my "needs" are causing me to spend too much money when I start the fast.  Of all my "needs budgeting" I was surprised to see that I had budgeted the most money for gas!  I don't drive a very gas-friendly car, but it's paid off, so I'm not willing to trade it in or sell it for something more economical.  I work just less than 3 miles from my house, and then possible other driving (church, visit family, visit boyfriend who lives across town - grr)... so I really don't use a ton of gas.  I do need to fill up my tank once every pay period, and that alone can get expensive, especially when the average price per gallon in my city is just under $4.00! 

I recently considered riding a bicycle to and from work each day.  The weather is so lovely in the early mornings here and the entire ride to work is downhill.  The downside is something my mom brought to my attention.  The route home is 3 miles of uphill torture, now, throw in 120°+ temperature...  It might save money, but I might end up spending more money, like when I get sent to the hospital for heat stroke, exhaustion and dehydration. Plus, have you actually stood outside in the sun when it's that hot?  I can take about five minute before I start looking for shade and water.  Another 10 and I'm ready to head back inside.

Last night, I checked into my City's public transit system.  Now, anyone who lives in my city will say, "what transit system?"  And they're right.  For being such a big city that thrives on [tourists] getting around, we don't have a subway or anything like it.  But, we do have a bus system.  My community is not exactly "friendly" for people who have to take the bus, and in the 20 years I've lived here I can honestly say that I have never seen one within a 5 mile radius of my house.  My community caters to people with money, people with expensive cars, people who are not going to do a Spending Fast.

I was pleased to find that there were in fact two bus stops within walking distance of my house.  I found the route to and from work, and it's almost the straight shot I drive everyday.  I would arrive at work 15 minutes early, and have to stay 15 late. (Umm, hello overtime pay, meet the Spending Fast!) 

I'm not thrilled about riding the bus, but that could just be pride talking.  I did it in the 3rd grade and hated it.  When it droped me off at school in the "bus unloading zone," rather than walk through the gate to the playground, I would often walk around the entire field to the "parent drop off zone" so that people wouldn't know I rode the bus... Plus I've heard stories about public busses, eww.

So why do I mention any of this?  Well, as with anything dealing with time & money, there is always a trade off, so when it comes to taking the bus:

The Pros:

• It would cut my gas costs in half, saving me over $720 a year
• I would have free time on the way home to relax, read a book, or whatever.
• Nearly 3 hours of extra overtime each week!  Time and half = Yes please!

The Cons:

• Time.  It takes me 8 minutes to drive to/from work everyday.  If I took the bus I would have to allot 30 minutes of just travel time.
• In the mornings, I would have to walk quite a ways to the bus stop.  Google maps estimates the walk to take 17 minutes.  And in the evenings I would have to walk home (estimated 10 minutes).  With the 30 minutes of actual bus time each way, my normal 15 minute round trip to work would take me nearly an hour and a half every day.
• No sleeping in!

So what do you think?  Is the saving money worth taking the extra time?

Are you broke?

At work on Friday, I told a few people about my plans to do the spending fast.  In the past I've heard that telling people you're working on something, like loosing weight, can be hazardous.  The more people who know what you're doing, the more people will be disappointed when you fail.

I'm looking at a it a little differently.  The more people I tell that I'm doing this, the more people I am responsible for being accountable to!  It's like, I said I'm going to do it, and now I have to, or that makes me a liar.  I was surprised at how supportive my co-workers were!  Two of them even wanted more information, and have both expressed interest in doing the Spending Fast as well!

{Image Source}

Anyway, back to the point of this post.  I have been reading Suze Orman's Young Fabulous & Broke, and I have to say I'm in love with it!  I expected it to be a boring financial book that would speak a language I don't understand.  To my surprise, I read half the book in one night!  It's an easy read, and every part relates to me, to my generation.  It really is not "your parent's finance book."  I plan on blogging about some of the parts I find to be most interesting (and go completely against everything I've ever been taught about money).

Now, I dont' have any consumer debt, but I do have student loans, so I didn't really consider myself "broke."  To start the Spending Fast off on the right foot, this morning I decided to check the balance of my student loans.  Yikes!  That is a scary number, but the scarier part is that until I looked it up, I thought I only had about $20,000!  The actual number is actually $25,000 *facepalm* and then I saw that I have accrued almost $2,000 in interest!  I forgot about interest!  I nearly peed my pants!  I AM BROKE!

Anyway, in the introduction of the book Suze lists her 7 definitions of broke for people my age.  If you read these and find yourself nodding your head and saying, "Yup" to any of these definitions, YOU ARE BROKE and I would suggest doing something about it.

1. Do you rely on cash advances on your credit card to pay the rent or mortgage, and pray that you have enough on your line of credit to do so?
2. Do you have a ton of student loans that make you nauseated when you think about how long it is going to take you to pay them off? YES
3. Do you not open your credit card bills because you're terrified to see what you owe and have no way of paying.  So instead, you get hit with late fees and finance charges?
4. Do you want to buy a home but have no clue where you can come up with the down payment? YES
5. Do you count every coin in your change jar as well as scrounge under the sofa cushions in desperate attempt to find the dough to cover a bounced check and the $25 fee your bank is going to charge?
6. Do you want to save for your kids' college education but not know how to swing it because you are already strapped paying a mortgage and you haven't even started saving for retirement?
7. Do you not have one penny saved, even though you have a good job?  Or if your car breaks down, will you break down too because you don't have the money for repairs? YES

If you are in your twenties or thirties, you can relate to this book.  If you can manage to spend $9.00, you can buy the book at Barnes & Nobel, if not, you could try doing Anna's Spending Fast... it's free.

P.S.  Do you have any idea how embarrassing it is to publicly announce how much debt I have?  But, like I said if the FAQ, I'm going to be 100% honest about it or else I'm only hurting myself.

Young Fabulous & Broke

I've seen Suze Orman on TV for years, but I've never watched her show.  As I sit on the couch channel surfing, I'll occasionally stumble across CNBC.  Whenever I see her yelling and screaming at some poor dope who wants to know if he can afford $200,00 on a fishing boat, I quickly press the button to skip over her show.  She's a scary lady and from what I've gathered, she denies EVERYONE of their hopes and dreams…

Of course it's easy for her to deny everyone, she is financially sound, makes a great living, she has a TV show and probably a boat and a beach house/cabin.  I imagine her mental dialogue as she denies people trips to Disneyland, and home renovations, "Peasants, all peasants."  This has been my problem with her in the past.  I get very defensive and shout at my TV, "Not everyone can be rich, what about the average Joes?  What about the working man?"  And then I hold my fist up in the air, powerful, as if my word and fist gesture alone represents the working man as a whole.

However, while doing my Saturday cleaning, I had on Nancy Grace for background noise.  Afterwards, the Suze Orman show came on.  Too busy to change the channel, I left it, figuring maybe her yelling at poor people would somehow have the same effect on me as a drill sergeant and my cleaning would get done faster.

After overhearing a little bit, I decided to sit down and watch, and you know what?  This lady knows her stuff!  Because the language of money is practically foreign to me, I was lost through most of the program, but I picked up a few words, and was egger to learn more.  So I got online and decided to purchase one of her books.

The Money Book for the Young Fabulous & Broke and Women & Money came in the mail today.  I bought the chepest ones I could find on sale (under $10), with a 30% off coupon code, I got free shipping, and purchased through Ebates.com for an extra 4% back!  (Do you know about Ebates?  if not, get there!  You get 2%-6% of your money back for shopping online!) I'm so excited to read these books, and maybe pick up a few extra tips before the Spending Fast begins!

There is an Upside

As I wait for July 1 to roll around, I am becoming ever more anxious about whether or not I can really do this challenge.  I keep thinking of all of the "stuff" I want to buy, and am trying to figure out how I can get it all with my final paycheck before the challenge starts- What is wrong with me?  This is a bad sign.

I've had a worry floating around the back of my head about online shopping.  Regular shopping makes me feel overwhelmed and anxious, but online shopping is a whole other ball game.  I love it!  And it's so easy.  The problem here is this, I've shopped online so much that I have completely memorized my debit card number! 

Sometime between last night and this morning I lost my debit card.  I have mixed emotions on it but I'm leaning more towards "good."  I do realize that this is a bad thing, so I've put a hold on the account and I'm giving myself until this afternoon to try to find it - otherwise it's getting cancelled.  For those wondering why this is good news: if I have to order a new card with a new number, it's one I dont' have memorized, and thus the temptation to online shop won't be so unbearable! 

PS.  I'm considering creating a page and posting stuff I want to buy during the fast.  I wonder if this would help, or make things worse?

The Spending Fast

Lately I have become OBSESSED with money. 

Don't get me wrong, since I was out of work for a year, I have been money conscious, but it's never been like this.  I have always hated money.  That tends to happen when you grow up in a house where there is always a money shortage...  I just hate it.  When I was out of work, I taught myself to coupon.  Extreme coupon even.  I learned to only buy things if they were on sale and if I had a coupon or multiple coupons.  While I saved a-crap-ton of money, I still ended up with a bunch of stuff I didn't need, and had no room for.  Couponing taught me that I was spending less, but buying more.  My spending habits were still out of control. 


Do you know how many times I've gone to Target for toothpaste, and come out with a receipt for $150 and a bad case of buyer's remorse.  Did I mention I would usually forget to buy the toothpaste?  But hey, I saved $94.63!

I don't know what it is, but for the past few months I have been really worrying about "being prepared" (prepared for what?  I don't know, just prepared) and "money" and "saving" (as evidenced by previous posts, and my monthly Save Money Series).  I feel like I am nowhere close to where I should be financially at this stage of my life, and the more I think about it, the more anxious/worried/sick I feel.


I do have a savings account to which I contribute 10% every pay period.  But I usually chip into it to support unnecessary spending, so by the end of each month, my savings account is essentially non-existent.  I am finally out of (consumer) debt, and yet, I still find myself "broke" a lot of the time.  Even though my current job is paying me twice my asking price, I keep thinking the problem is that I need to make more money (isn't that the case with everyone). 

The real problem is that I have a "leaky bucket," and rather than fixing it, I'm just getting frustrated that all my water is leaking out.

I've tried budgeting.  I create these totally awesome Excel spreadsheets where all I have to do is enter the total amount on my receipts.  It tracks my money, tells me how much I can still spend, and would help me stay on track.  I create it, and then never look at it again.  I've tried being like Audry Hepburn in Breakfast at Tiffany's and only using cash. They say using cash creates a mental drive to stop spending, because you physically feel the money leave your hands.  I've tried only using my debit card- bad, bad, bad idea.  The only thing I haven't tried is to just stop spending (Duh! Doesn't it seem like this should be the first course of action rather than the last?).

While cleaning my room this weekend, I had the TV on for background noise, and the Clark Howard show was on.  He had a guest named Anna who became debt free in just one year!  How did this young, thirty-something State Clerk/part-time-photographer go from having $19,000 of debt to getting rid of it in just one year without getting a new job or adding income? I had to know.

I started reading her blog And Then She Saved, and ended up reading every.single.entry.  Anna basically cut out unnecessary spending for an entire year.  In 2010, she paid her bills, and bought only what she considered to be essentials - food, gas, insurance, phone, medical, and even a gym membership.  She cut out everything else - travel, makeup, eating out, music, coffee, salon trips, entertainment, even gifts (all Christmas, Birthday, Shower gifts were handmade or re-gifted items) etc.  By the end of the year, she had saved almost $20,000 and was able to become completely debt free! 

While reading about The Spending Fast I thought, "eww fasting..."  In our church we are encouraged to fast on the first Sunday of every month.  If I'm being honest, I've never done it.  I've tried, believe you me, but usually around three o'clock I feel a migraine coming on, and have to sneak a few Cheerios.  The word "fasting" is kind of a dirty word, and even though many blessings come from any kind of fasting, it is, well, hard.

I decided that I want to try  do this Spending Fast.  I am going into this knowing full well that it is really going to suck, and at times I might fail, but a small failure is OK, I'm not going to let it deter me from the big picture.  I am starting on July 1, 2010 and am going to continue for a year.  There are a few roadblocks in my way already, because I do have at least two trips planned this summer but again, I won't let it deter me.  I am blinded by the lights and glitter of $20,000 which for me, would be a down payment on a house!  I'm a little nervous but mostly kind of excited.  Not quite "I'm going to Disneyland excited" but more than "Tomorrow is the first day of school" excited.

P.S.  This year, Anna is doing a Spending Diet, which is a little easier than the Spending Fast (this time she allots $100/month for spending money).  For anyone who wants to try this out, check out her blog to get the rules!