I’m a fan of daily fitness so I will be the first to tell you, if having a gym membership is the only way you will exercise, spend the money. The monthly gym fees will be far less expensive than poor health now and in the future.

We were able to temporarily cancel our monthly gym dues when my husband lost his job. Now that six months have passed without a trip to the gym, I’ve discovered something surprising…

I work out more now without a gym membership than I did with one.

I spend a quick 20 minutes running with the dogs or doing a workout video before making dinner each night. I do sit ups while watching TV or I jog in place. Before, if I didn’t have an hour to workout at the gym, I simply wouldn’t workout at all. Now, if I have 10 minutes, I use it!

I have always clung to my gym membership even in the leanest financial times. Looking at the impact of working out at home, I’m not sure why I held on so tight. We decided to make the temporary cancelation permanent. Rather than redirect all the money toward debt reduction, we’ve decided to keep part designated to fitness. The money can go toward new tennis shoes, marathon entrance fees, or exercise equipment. If we get desperate for a group class or a swim, we can sign up at the community center for $30 for a 3 month, two hour, twice weekly class.

Try working out at home this month. It may not work for you – but maybe you’ll be surprised at the results.

**If you do decide to cancel your membership, you may need to cancel several times. These companies (especially large gyms like 24Hour Fitness and LA Fitness ) can be very sneaky and ‘accidentally’ automatically deduct your dues for up to six months. You may need to consult with your bank to stop payments.**

Perfect.

She’s debt free other than her mortgage – and even then, she’s paying it aggressively. I’d love to tell you that her husband makes loads of money and that’s how she’s able to be a stay at home mom to four kids and remain debt free but…

He doesn’t.

My sister has found ways to live below her means and actively seeks new methods to spend less. She purchases clothing and toys for the kids at garage sales in nice neighborhoods then resells them when the kids outgrow them (sometimes, she actually MAKES money on this!), doesn’t waste money on cable TV or other ‘necessities’, drives an older yet reliable car, and she cooks fabulous inexpensive meals at home (my home cooked meals are inexpensive but they are far from fabulous).

She’s the annoyingly good at being frugal but not cheap.

Naturally, I spend this time around her basking in her infinite financial wisdom, asking questions, and learning from her example…

…and I am also the queen of England.

Sorry folks, sibling rivalry is alive and well.

So, I do the second best thing, I make my mom ask the questions and I pretend not to listen.

My advice, befriend someone frugal – even if it is your sister. I find that I don’t learn as much from the books or the internet as I do from those who may not have it all figured out, but they do a pretty darn good job.

My sister and I were discussing our choices in mortgage lenders last night and were both surprised at how pleased we were with Wells Fargo (Her first mortgage and my home equity line are with Wells Fargo). And yes, we talk about stuff like that. Today’s topic at lunch? The differences between revolving and installment accounts and their impact on credit scores – oh, and the wow factor of that good looking guy from New Moon.

Wells Fargo’s service over the last three years has far exceeded my expectations. As an example, I had a concern about my account a few months ago and wanted to talk to a Wells Fargo representative. The representative, John, resolved my concern kindly and quickly then gave me his phone extension if I ever needed to call again.

I’ve heard about movements to convince consumers to pull money out of big banks and move it to small local banks. It sounds like a good idea… but I’m not planning on removing my Vice Grip clasp from Wells Fargo anytime in the near future. If I could, I’d move my first mortgage to Wells Fargo because I feel a connection with them. I feel valued. Sometimes I pick up the phone to call John to invite him to a summer BBQ before I remember John doesn’t live in California and he’d probably be a little more than creeped out that the lady with the endless questions from San Diego wants to spend time together.

Maybe you love Bank of America. Maybe you hate Wells Fargo. Maybe you hate them both and love your local credit union. It’s not about big or small banking; it’s about where you feel at home.

Banking is about feeling valued. If you don’t feel valued, it’s time to move on.

1. When you pay off credit cards and car loans, banks turn into the very worst version of your mother. They write sappy love notes telling you how much you are missed and wouldn’t it be nice if you’d care to spend the holidays with them?

2. It’s never too early to start teaching children about the perils of debt – but constantly singing ‘If you’re happy and debt free clap your hands’ to your six month old nephew may annoy his mother.

3. It was somehow possible to lower my already sub-par vacationing standards. I went from ‘Motel 4 type establishments’ to ‘tents with 25 cent showers’ – and it wasn’t bad!

4. Marrying my best friend and celebrating five years of wedded bliss was the best decision I ever made – well…other than the decision to wear clean underwear in case of an emergency.

5. Blog readers are awesome, supportive, and helpful. Thanks for helping me grow.

6. I’ve had more than my fair share of laughter and joy. Regardless of the numbers on my bank statement, the interest rate of my mortgage, or drama of life, my family and friends are unchanging. I am a very lucky girl.

Please be safe tonight. Save money, stay home.

This change to policy will be helpful to borrowers who struggle to make payments on time and suffer rising interest rates. It also forces credit card companies to apply payments to the debt with the higher interest rate first rather than pay off the teaser rate. I am hoping this will finally give those who find themselves continually stuck in the cycle of debt, a real chance to get ahead.

One of the changes, my favorite of all, is the restriction on issuing cards to those under 21. My first card was peddled to me on my college campus at the ripe old age of 19. I got in the habit of spending more than I made and by 21, I was more than $2,500 in debt.

Of course there is still a down side to this – I read an interesting article about how the changes will affect those who are careful with payments and are ‘good’ borrowers. It doesn’t look good! Check out the article at: http://www.associatedcontent.com/article/1791592/us_credit_card_issuers_must_prepare_pg2.html?cat=3

Regardless, I think this change will be good for those seeking to become debt free.

When I call Bank of America, they never know where to transfer me and my call is often magically ‘dropped’. We never received paper statements and our online statements have been a nightmare. Other than a statement of monthly payments, no other information was made available. I had no idea if or when our property taxes or mortgage insurance where paid and I could never find our principal balance. I called to ask why our mortgage payment jumped $150 a month and the best answer they ever offered was ‘I don’t know. Taxes maybe?’

Bank of America finally listed my full account information online this month.

Holy. Cow.

First, we were not notified that the cost of our homeowners insurance jumped by 50%. Call me crazy, but that’s kinda something I’d like to know.

Second, the extra money we’ve been paying on our principal balance the past two and half years has been offset by a reduction of our monthly payment.

This is hard to explain, but it’s sneaky by Bank of America none the less. We pay $20 extra per month on our second mortgage through Wells Fargo. They apply the $20 toward our principal balance but keep our payment the same. Since our principle balance is reduced and our payments are the same, our $20 is stretched to around $50-$75. Our $20 a month to Wells Fargo has paid off around $3,000 of mortgage debt instead of $720.

Bank of America has taken the $20 we designated toward principal and reduced our balance by exactly $20. Then, since our principal balance is reduced, they reduce our monthly payment. Unlike our loan with Wells Fargo, Bank of America has made it so we aren’t shaving any time off the life of our loan and we’re saving no money. Very Sneaky.

Realistically, I should have pushed harder for the information from Bank of America and demanded an explanation of the $150 hike. I assumed it was all from the recent property tax hikes, and most of it was, but I could have saved money by knowing there were other reasons behind the higher monthly payment. And, I would have liked to transfer the $20 I’m spending for no benefit at Bank of America and switched it to our Wells Fargo account.

I assumed my mortgage was the one payment I didn’t have to monitor closely – but I was really, really wrong.

Thank you Bank of America for making me your babysitter.

I assumed this wouldn’t be a difficult task. It’s not like there’s a strong filter for reality tv. Come on. I’ve seen Jerry Springer and Tila Tequila.

California’s official nickname is ‘The Golden State’
San Diego calls itself ‘America’s Finest City’
Humility isn’t our strong point.

It only seems obvious that we would point a camera of reality tv at our Southern California city. I went to the HGTV site, Pie Town Productions, and the DIY network. Do you know how many home remodeling shows are based in ‘America’s Finest City’?

Zero.

But, there are two shows that film anywhere, anytime – Extreme Home Makeover and Deserving Design. For Extreme Home Makeover, we lack a compelling unique story. ‘My husband lost his job… just like everyone else’ isn’t nearly as impressive or distinctive as ‘Timmy is allergic to the sun’ or ‘Little Bonnie Sue doesn’t have sweat glands’.

And remarkably, Deserving Design didn’t call me back after I submitted my husband as ‘deserving’ because only once during the last five years of our marriage has he left the toilet seat up. It’s sweet but not as gripping as Jane Doe saving the world over the last 20 years rescuing one sweatshop child at a time.

Bummer. I really needed a new back patio before the toothpicks, dental floss, and tin foil holding it together collapse.

I didn’t know they even wrote partial checks.

My husband is diligently looking for work but it’s difficult to find a job in this economy, in the construction field, and even worse, over the holidays. We’re guessing he won’t get an interview until into the new year.

But we’re still hanging on. We’re optimistic. Err. Um. He’s optimistic. I’m hanging on to his coat tails of sanguinity.

Residents in our area are often sent letters asking to reduce water use. Thanks to ‘Navy showers’, reduction in roommates, and landscaping akin to the dust bowl, we personally cut our water usage by 50%. According to water company reports, our fellow residents cut their water usage by nearly 10%.

I received a letter titled ‘Water Rate Increase’ with my bill. The water company is raising rates in part because of… get this…

Lower water sales.

Um. Didn’t you ask me to stop using water? And now I have to pay more because I actually stopped using it?

Our 50% reduction in water usage resulted in… a bill that was 5.5% less than last month’s.

Striking oil in California won’t make you rich – but striking water just might.

It’s times like these that you just have to laugh.

The big question…

How long can we hold on without my husband’s job?

Our initial numbers (without unemployment benefits) put us at 8 weeks. Our reductions to debt paired with our cash in savings and unemployment benefits put us at…

9 months.

Had this happened before we had taken control… had this happened before we made the decision to live below our means and reduce debt… we would have made it through a month, maybe two tops.

But now, we’re looking at 9 safe months. 9 months to find a job before things get hairy. Sure we won’t make progress other than minimums and we certainly won’t eat anything other than Ramen noodles but, we can hold on.

I have four words to say –

Thank. You. Dave. Ramsey.

1 – If you are hoping for a huge change… this is not the answer. Not all changes are permanent and/or large. Some adjustments may last as little as 3 months.

2 – Loan modifications are not quick. If you can’t wait the standard 9 weeks for the review of your file and another 5-9 weeks for paperwork processing, you don’t have enough time and you may want to move forward with other options like a short sale or foreclosure.

3 – Give an accurate listing of all your expenses. Don’t exaggerate but don’t minimize either. Have a good understanding of exactly how much you are paying. Keep this information available for when you call the bank.

4 – You will be rejected if you have recently made large purchases or if your credit score is low. You shouldn’t be making large purchases anyway so I can’t say as if I blame the banks for this stipulation.

5 – If you have a second mortgage with another lender, they will likely require you to get approved for the Making Home Affordable Program on your first loan before they will consider a change to your second mortgage. If you are accepted for the program on your first loan, it’s easy to submit the same paperwork for your second mortgage.

6 – This should not be your only option. It’s worth a try, but don’t fool yourself into thinking this will solve your problems.

7 – If your home is not a Fannie Mae/Freddie Mac mortgage, this program does not apply to you… BUT some lenders are still willing to modify other types of loans.

8 – This is a voluntary program. No one HAS to help you. Sure it’s good business sense to lessen foreclosures on the banks part, but if you are a problem child, don’t expect any help. Banks don’t want to keep you as a customer anyway. Be kind, courteous, and polite even if you are frustrated.

According to the bank’s calculations, my husband and I qualify. We are now in the first 9 week waiting period while they review our files. We have stellar credit scores and we haven’t made large purchases in a long time. We are good candidates for an interest rate reduction from the over 7% it is currently, down to the market rates of 5-6%.

Do I really think it will really happen?

No. But it’s worth a try.

First, we cut our dental and vision insurance. This is something that can easily be re-instated but the $25 a month can help me now.

Second, I cancelled all my appointments health related or otherwise. None of my appointments were an emergency and I requested that my doctor renew my prescriptions without the annual check-up since the last 6 years have been clear of any problems. These appointments and tests run in the neighborhood of $500.

Third, I called my cable company to cancel our cable, reduce our internet speed, and reduce our phone service. I explained our situation and was surprised when they offered reduced internet costs, reduced phone costs, and added free services and free channels for a 12 month period. I would tell you how much I’m paying – but I’m afraid they’ll figure out they made a huge mistake and ‘correct’ the discount… or fire the guy who gave it to me. I would have cut out the internet and phone entirely but my husband needs internet for school purposes and job searching late at night when he gets home (free internet at the library is closed) and I’m uncomfortable without a home phone for emergencies.

Fourth, I contacted my student loan company for a deferment.

Fifth, my husband and I contacted friends and family and let them know we’d be available for odd jobs. Since unemployment doesn’t start for nearly a month after a job loss, my husband has done everything from pulling weeds to insulating walls. I have been helping a company with paperwork at night after work. We use this money for groceries and for the important bills like electric and water. At no time should you feel you are ‘too good’ for any type of job.

Sixth, we cut off all our subscriptions and memberships. If you’re like us, you may not even remember you have some of them since they are automatically billed to your credit card and you may not look at each item on your online statement. Some examples: gym memberships, club memberships, magazine and newspaper subscriptions (some automatically renew unless you cancel). Savings – $50 a month.

Seventh, we’ve been using more public transportation. It takes twice as long to get somewhere, it’s uncomfortable, and it’s far from fun, but it saves $50-$75 a month.

It’s not a lot, but each item buys us a little more time.

Sure, if I had no debt and had no plans or acquiring new debt, my credit score wouldn’t matter…

Or would it?

I was reading Parade magazine this week and was reminded of a very important reason to keep up those scores – employment. Employers are using credit scores as another way to narrow down candidates. In this rough job market, that’s the last thing you want to worry about.

My current employer ran a credit check on me prior to offering employment. I had been unemployed for 2 months but had managed to pay my bills. Had my credit score fallen, I likely would have been passed over.

Congress is considering blocking this practice but right now, it’s very legal.

Do you think credit checks are a fair way to judge potential employees?

You can read the article at Parade.com/creditscore

Thanks. Now I’ve got THAT to worry about.

In all my sitting at home time – most of which is spent in complete misery – I am able to squint open my eyes and read some of the daily news. I stumbled upon this headlining article at AOL…

http://autos.aol.com/article/cash-for-clunkers-greenwash

I found two quotes particularly eye opening…

‘Three revealing line items in a separate CNW survey noted that the drain on the family coffers would be offset by reducing the pay-down of credit card debt, deferring home improvement and removing money from non-targeted savings.’

and

‘Other critics groused that Cars for Clunkers took $2.8 billion from the general roster of 300 million citizens and handed it tax-free to a small group of 700,000 citizens.’

What are your thoughts?

Begin with an end in mind.

OK, so here’s the sad part, I don’t remember how exactly they applied that statement to management. BUT, that statement is HUGE for me personally.

Often times, I pick a task with no end. I want to get more fit or I want to eat a healthy diet or I want to live as a penny pincher and on and on and on. Here’s the problem: Unending goals like these will lead to burnout.

Head smackingly obvious right? Then why do I keep making these stupid never-ending goals?

I think that’s what I appreciated about the Dave Ramsey program and why it has worked for me. I was convinced to pay off one debt at a time. It’s a goal with an end followed by another goal with an end. I also think that’s why training for a marathon and a triathlon has kept me more motivated than working out without an end in mind. If I want to quit after I finish I can, but I have a feeling I’ll be signing up for another one as soon as I cross the finish line.

Rather than say, ‘I want to be debt free forever’, say ‘I want to pay off my car by next summer’.

Begin with an end in mind.

What is your end?

Ann, a brilliant reader, also pointed out that if I paid off my student loan first, I would lose my tax deduction.

As someone who gets WAY too much joy from writing off the student loan interest, I am grateful to Ann for reminding me of this fact.

I’m sure a lot of you have student loans and this should be a consideration in your debt payment plan.

Thanks Ann!

I left to housesit for a co-worker and came home to …

My husband explained that he had discovered mold under the floor and in the walls and decided to replace everything to be safe.

So why… why… why… did I assume that when we intended to insulate the separation closet wall in a 50 year old house, that we would simply be able to insulate the closet wall?

This is our spare bedroom as of today…

A few days ago, my husband asked if he could insulate all four walls. We both agreed that as long as we had one wall down, we should take down the remaining three walls, fix the electrical, and fix the phone line. Total tab so far? $142. I am so very thankful to be married to a talented construction man.

When making decisions like these, it’s hard not to want to put it off until later or take the easy way out. What we constantly have to consider is: Is this going to cost more later if avoided?

My nearly $200 electric bill tells me… I should have done this two years ago.

The good news? Energy improvements, including insulation, are tax deductable. Yes!

Want more info? Go to: energystar.gov/taxcredits

Dave Ramsey suggests paying the extra amount on your lowest debt (which would be the student loan) but the minimum payment on our truck is more 4 times higher than the student loan. Plus, the interest rate on the truck is twice as much.

Another good reason to pay more on the truck is to quickly rid ourselves of the hefty payment. In the event of job loss, a student loan can be deferred due to financial hardship – auto loans are not nearly as forgiving.

We’re hoping to have the truck paid off in 10 months or less.

Here we go!

But that’s not the big part of the story.

I was listening to the radio last week and the announcer spoke of the success of the fundraiser to not only pay the travel expenses of the team… but for their families as well. In this economy, where everyone is scraping nickels and pennies, residents were able to pool together well over $100,000 to be a part of a life changing event for those young boys.

The city actually STOPPED accepting money because they had MORE than they needed.

Congratulations to the Chula Vista Little League team but more importantly…

Congratulations to those who made the dreams of those boys and their families come true.

Total Starting Debt: $38,495.86
Total Paid: $16,727.33
Total Remaining: $21,768.53

Breakdown of Remaining Debt –
Truck: $11,934.57
Student Loan: $9,833.96

We’re nearly halfway there. I got an updated payoff date according to our Debt Snowball Calculator on DaveRamsey.com…

December 2010.

We shaved off 4 months so far. Can I get a Woo Hoo?

I’m fortunate to be married to a hardworking construction genius who can do the work himself (plus, my husband looks irresistible in safety goggles). We only have to pay for the materials which should run about $100.

Why are we insulating? Our house was built in the 1950’s and no insulation was used on any interior or exterior walls. Our heating and cooling bills are much higher than they need to be. The initial expense of the upgrade will be quickly paid for in lower electric bills plus, it’s better for the environment. And… our new roommates are newlyweds – that’s reason enough in itself.

It always seems like when we have an opportunity to get ahead, the necessities of life burn through the cash. Between tuition costs, new dog vet bills, and the two weddings, we have had to pony up more than $3,000 in the last two months.

These expenses would have buried us in the past, but careful planning and frugal spending have kept our heads above water.

But…

All I have been hearing about for the last week on every news station in San Diego is the Cash for Clunkers program and about angry car dealers who have decided to cut off the program early. Dealers have found themselves swimming in paperwork and unable to get timely reimbursement for the Clunkers (most dealers in this area have been reimbursed for less than 25% according to the reports). The Clunkers program was expected to last until November but quickly ran out of money in the first few days. More money was added to the pot, but it was used faster than expected as well.

And of course…

The local news stations have tied this topic to the heated healthcare reform debate. The ‘failure’ of this program has caused people to worry about governmental competence when it comes to their health.

What do you think?

Then, he casually mentioned that the guests were old high school buddies and this was really important to him.

On the inside, our home is nice. On the outside… well, let’s just say we usually wait until the sun has set and our guests have had a glass or two (preferably three) of Chardonnay. We can’t afford landscaping so our yard is a grouping of well mowed weeds and raked dirt piles.

Before we went on this recovery from debt diet, we had planned to landscape our backyard and remodel our 50 year old kitchen. Take out another loan – it would have been so easy. But now, we’re living within our means and paying off debt. It will likely be another 5 years before we can pay cash.

It’s hard to deal with the pressures of keeping up with our peers. It’s hard to not feel a little embarrassed at our less than presentable yard (though to be fair, his friends had nothing but nice things to say).

Sometimes it’s hard not to feel frustrated but…

It’s not hard to feel relief from the lifting debt. Seeing we’re only about a year away from being debt free is like breathing again.

He did not get the government job.

Short Term Financial Effects:
We will be able to pay our bills at the same pace since he won’t have to take a large salary cut.

Long Term Financial Effects:
Possible unemployment in 6-8 months. No government pension and retirement healthcare.

We’re still positive. He’s working. I’m working. We’re paying our bills. We’re living below our means. The construction market has started to take an upward turn and his job has become a bit more stable. So, we went on a 20 mile bike ride, grilled some chicken, and had a glass of wine on the back patio.

In the big scheme of things… life is still pretty darn good.

Why don’t you sell the truck?

I neglected to explain the reason we’re carrying the truck payment. It’s funny that no one noticed the debt on the truck earlier. It wasn’t until we paid down enough on the rest of our debt to make the truck HALF our total debt that someone asked about it.

My husband had a Chevy that gave out on us a few years ago and he’s one of those few people who actually need a full size truck for work. He tows trailers, fills it with concrete, moves landscaping, etc. A reliable full sized truck isn’t an option… it’s a requirement. We financed a Toyota truck for 26K two years ago and at the time, it was a great deal – or at least that’s what everyone likes to think after leaving a used car dealer.

Fast forward a few years, a few gas hikes, and a few construction related dents later and suddenly…

The truck is more than just a little upside-down – it’s hanging from its toe nails.

We’d MAYBE be able to sell it to someone for 8K… if we made them test drive it in the dark and promise them it got 58 miles to the gallon completely powered by canola oil. But since we’re honest folks, that’s not an option. Plus, we’d have to buy another full sized truck reliable enough to take the 25 – 30 thousand miles a year he drives for work.

Take the nearly 5 thousand we’d have to pay for our upside-down loan and add it to the cost of another truck and it just doesn’t make sense. I’d rather bite the bullet, pay if off by mid-year next year, and have a truck I know works for us.

I am very disappointed.

This event led to the following changes:

1. More involvement by both of us. Often in relationships, one person manages the finances. When things don’t go well and money is too tight, this person feels the stress, the pressure, and the responsibility for the mess. We have both decided to dedicate and hour each week to review each transaction. Now we have more checks and balances on each others spending – otherwise, we’ll have another bad month.

2. We are refocusing our goals and setting rewards. Our next payoff is still a ways away and we’re getting frustrated and bored. We decided to give ourselves something to look forward to after our next payoff. It’s nothing huge, maybe a dinner out or a trip to the theater, but rewards between payoffs has become something we need to stay motivated.

3. Reconsidering our numbers. We went back to make sure our numbers were working for our ever changing budget. We’ve been underspending on gas and overspending on miscellaneous necessities (car repairs, house repairs, etc.). We decided to adjust our numbers and perhaps pay a little less on our credit card so we can stop panicking when things aren’t balancing. Leaving the numbers the same would be great, but it’s obviously not working and it’s causing frustration.

4. We have decided to spread our focus. It’s easy to let finances consume our thoughts and lives. Rather than let this stress grow, we decided to let ourselves enjoy other things in life. Running, swimming, yoga, gardening groups, and organizing the garage help to keep our mind free of the finance clutter in our brains.

When there are long distances between payoffs, it’s important to work at what is frustrating you. You can’t solve everything, and it will be painful, but taking steps to at least reduce stress will help to prevent burnout. I’d rather take things a bit more slowly than give up entirely.

What have you done to motivate yourself and prevent burnout?

We were elated when he received a call back and a position test date… that is, until they dropped a bomb. The job market in Southern California, like in most places, is a tight one. They are only offering the very bottom pay bracket. If my husband received the position, he would take a 25% pay cut.

Short term, this is a bad decision. This job would put us back to making minimum payments on our debt. Our finances would become the tightest they’ve ever been.

Long term, the position offers a retirement and health package unrivaled by the private sector and offers more stability. On top of that, my husband is at the highest position he can go with his current employer. The new job is one he can stay at and grow in for the next 30 years.

What would you do?

We argued about who should pay for groceries, who should pay for dinner, and who should pay for everything in between. I hated asking him for his half of the rent each month. He was my husband – not my roommate. It finally came to the breaking point when he couldn’t afford rent and we had to clean out our savings and use our credit card to get by. We opened a joint checking account the very next month.

We learned to work beside each other and the arguing stopped.

We made our mistakes – financing nice cars, charging vacations to credit cards, and remodeling our bathroom on credit – but now that we’re working to become debt free, we are partners in the fight. I wish someone had told me early on that working together as a couple was a necessity for a good marriage and good financial health. As I listen to my co-worker talk about his wife ‘owing’ him money for tires on her car, I couldn’t help but think… ‘No wonder he’s on his third marriage.’

So how do we do it? We each get a $3 daily allowance in cash each week. I don’t care what he spends his on, and in return, he doesn’t care what I spend mine on. We usually spend the money on work clothes or a bi-weekly dinner out together. This week, we split the cost of a silly $15 video game we both would enjoy and a $25 set of solar lit pavers for our garden. (And yes I know, $3 may be more or less than you spend, but it works for us)

My husband and I rarely argue about money now that we’ve enacted the $3 daily allowance rule, but we still fight about very serious issues… like the direction of the toilet tissue.

Do you keep your money separate? Or do you have a joint account? And how much do you allow each other to ‘blow’ each day?

I hate our couches and I think they are ugly.

This week, my husband did what good husbands do – he attempted to solve my dilemma of ‘seating space’. He came home with a behemoth of a recliner and said, ‘Look honey! More seats!! Can you believe someone was going to throw this away?!’

I bit my tongue before a ‘Yes’ slipped out. Instead, I said ‘Wow hon, it’s… wow.’

‘And they have TWO! I’m picking the other one up tomorrow. How awesome is that?! Seats!!’

He happily jumped in the chair and reclined, a big grin spreading across his face.

How could I be mad or ungrateful? He solved my ‘seating dilemma’. Sure I have an ugly blue giant in my living room (err… soon to be two), but I’ve learned to take his efforts for what they are. That ugly chair is a monument to the fact that my husband listens to me and he’s doing his best to make my life easier… without spending a dime.

I’m going to stop whining about the sofas for a while. Who cares about sofas when I have a man like that?

But then again…

This is the same guy whose ‘sound judgment’ created the likes of Junior and Jingle All the Way.

And now, he wants to prolong it for several years through a special statewide ballot?

When I make less, I have to spend less. I can’t demand more money. Why can my state live financially irresponsible in a way that I can’t?

I didn’t give my approval on May 19th. I have to figure out how to survive on my new tiny salary; can’t I demand the same for my taxes?

Is this just a California thing or are you spending a couple extra Benjamin Franklin’s a month on taxes?

Um.

I hate to disagree with a professional financial advisor but…

He’s dead wrong (and is obviously invested in Starbucks).

At least when it comes to me anyway.

I don’t buy big items. I bought my dining room set for $75 off Craigslist five years ago. My couches are ten years old. My bed is a hand me down from my sister. How do I spend my money?

According to my online banking… I spend it in tidy $20 increments over… and over… and over again. My money doesn’t flood out, it trickles. The article recommended taking 24 hours to consider every purchase over $100. Good advice, but the last purchase I made over $100 was months ago. It’s not the $100 purchases that are killing me!

I feel like the article should have simply said, ‘Watch where the bulk of your money is going and try to find ways to save from there.’

My goal this month is to watch my ‘trickle’ problem. I’ve gotten to the point that I have to seriously consider every item I purchase AND if I wait long enough, will it go on sale? will the newspaper run a coupon?… or will I forget I even wanted it in the first place?

Is your problem a trickle? Or a flood?

So here’s an open note to my mother – and I’ll try my best not to sound like a Boyz to Men song.

Mom,

Thank you for teaching me that children don’t need money to be happy. You made sure I knew love from my family was worth far more than the cash so frequently doled out to my friends from their uninvolved parents. I had the happiest childhood (and heck, adulthood) a kid could ask for and it was never because you showered me with the finest things in life – you knew you couldn’t buy joy. You showed me love, compassion, kindness, and at times… the back of your hand when I deserved it.

Thank you for teaching me responsibility. You didn’t teach me how to get into a financial mess, but you taught me how to own up to my mistakes and pay for them no matter how much it hurts. And speaking of taking responsibility… um… yes, I was the one who left the candle burning and set the counter on fire 11 years ago. Sorry about that.

Thank you for your faith in me. When we went on that college campus tour and I saw the $26,000 a year price tag, I told you it was a nice dream but it would never happen. You looked at me like I was insane and spent the next few hours with the financial aid department. They told me I had to keep a nearly perfect GPA and you told me you knew I could do it… and I did… but only because you believed in me more than I believed in myself.

I wish every kid could have a mother like you. The world would be a great place.

I love you mom

Not only does this prevent your credit from being misused, it also gives you a clear picture of where you stand financially.

If you’d like to join me, next on the list:

Trans Union

I’ll remind you again in four months! Happy Credit Score!

Update: I forgot to say where to go for the free reports. Please visit http://www.ftc.gov/freereports for the only TRUE free credit reports. Thanks L!

During my childhood, my parent’s water source was a well (actually, it still is. They’ve lived in the same house for 30 years). They never worried about water rates rising. They never had a water meter on their house. They simply had to worry about…

Their water source drying up.

Try selling a house with the very minor problem of no water.

Conservation was always a big deal in our house.

City living has spoiled me. I learned that showers longer than 2 minutes are a gift from God.

But our latest water crunch and water hikes have reminded me that conservation, in resources and in money, is my responsibility. I have conformed to the water company’s request that I take shorter showers (sometimes I skip all together… this has NOTHING to do with the fact that I usually skip a shower when I wake up late for work) and stop watering at least 20% of my lawn (since we don’t have a lawn, it’s fairly easy to stop watering it) but we’ve gone a step further – we rerouted our washer.

For $15, we bought some pipe and fittings to connect to our washer. All water now drains to our trees and roses.

We water our landscaping for free.

Those living in the southwest should consider this. Not only are you doing good for the environment, you’re saving money on your water bill.

(Just don’t forget to make sure your detergent is biodegradable)

Jaime asks:
I remember at one point you were going to give more details about your side business. I’ve always wondered what you are doing and how it is going. I love it when you say things seem to be going well with it, and I just want so much more information about it!

If you care to share that is!

The thing about our side business is that it is in such a small niche. That prevents me from giving more details then the generic ones I have given. I tell a few more details in response to Anonymous Reader’s question below.

Sharon asks:
Hi Tricia, I’m curious if you’ll continue to become totally debt-free at the same intensity as you did with becoming credit card debt-free.

And last, once you’re totally debt free, do you want to stay and live in the same area where you are now? I think you’ve commented before that you’d like to be closer to family but couldn’t afford to right now. I love when you talk about buying your future “cabin”. Congrats on all you’ve accomplished!!!

Now that we have paid off our credit card debt, our rate of debt reduction will slow down. There is some spending we’d like to do in regards to our home. We’ve put off a few repairs so we had more money to put towards our credit cards. We are also going to concentrate on filling many baskets (see this post for more info). For my regular paying job, I’d rather not say what that is.

We do love where we live. We fought hard to live here and make it work. I do miss my family like you wouldn’t believe. The goal is to have a lifestyle and income that would allow us to travel more to visit them.

Thanks for the congrats!

Jim asks:
What do you focus on now?

Many, many things LOL. I detailed them in this post (written after your question).

Anonymous Reader asks:
It might be helpful to share a few details of the business – how you selected the idea/product, how long it took you to set it up, what it cost to set up, how much revenue it has generated and when, and how much you net from it now. If you see the business as replacing one or both of you job incomes in the future, how much revenue and net profit you expect from the business and how long until you make the change?

I have really enjoyed reading your blog and watching your ideas and attitudes evolve over the last several years. The quotes from your son demonstate how much you have changed. I hope you will continue to update your readers on your progress in paying off the remaining debt and increasing your income.

With our business, it was the result of finding a small niche that needed products we could provide. It took a lot of our time to set-up due to laying down the infrastructure and creating products. But it didn’t cost much to get the ball rolling (less than $3K). It is forecasted that the business profit will surpass my husband’s income next year.

All of our income from various sources went towards our expenses and the extra went towards debt and savings. An exception would be the capital that we initially invested in our business.

As of right now our student loans are roughly $29K. Our mortgage is at $33.5K. The plan is to concentrate on our mortgage and pay extra money towards that (I gave some reasonings in my responses to questions yesterday). For our son, I mentioned some time ago that he will not have money given to him for college. I have changed my perspective on that a little bit. He may have some help, but he has to work towards it as well. We will not advise him against student loans, since they may be necessary depending on where he goes to college (if he chooses to go). But he will understand the full ramifications of what taking one out means and I hope everything we teach him the next 10 years will prepare him for making sound financial decisions.

I am glad you have enjoyed reading my posts. I will still be writing on here although not on a regular basis and I will give more details about that tomorrow.

Thank you everyone for your questions!

Pat asks:
Hi, Tricia. I wondered what you felt were the 3 most important things you did to have more money to put toward your debt? I also wonder what you feel is the best route to take to make more money in order to pay off debt faster? Thanks!

P.S. I’m a stay-at-home mom and have already cut back on groceries, no cable, cars are older and have been paid off for a while. We eat at home and the kids/husband brown bag lunches.

There were so many things that we did that contributed to the extra money to put towards our debt. Boy, it’s hard to think of three that were the most important since I think everything came into play. By golly, you stumped me LOL. So, I’m going to modify your question a bit and list three things that I think were helpful that most people could try.

Stopped going to stores as often. I can look back our spending (pre-debt reduction) and see debit card charges almost every day of the week. We went to the store way too often to pick up a few things. It all adds up so quickly and most of the times things were purchased that we didn’t need. Stores are very good at encouraging impulse buys. By curbing our frequent visits to the store and replacing them with thought out occasional visits, it cut our spending.

Decided that stuff is stuff. We had too much stuff and most of it didn’t serve a purpose. Our multiple garage sales really showed that. I haven’t missed anything that we sold. With that in mind, I really think about something before we purchase it and make sure it will get used and if we really need it.

Tracked our finances. We use financial software to do it, but you can also do it with pencil and paper. The important thing is to keep yourself accountable for your spending and to add up all of those receipts. Tracking your finances also is helpful to get an idea of how much you can pay towards your debt since you will have a better understanding of your finances overall.

As for making more money to pay off debt faster, if you can, look to your current employer first. Can you get a raise? Can you work overtime? If that’s not possible, can you get another job? I say that hesitantly because you do have to be careful. For me, I am an emotional shopper and when I get stressed I think about some retail therapy. The last thing you want to do is find yourself going on a shopping binge or deteriorating your health to the point where money doesn’t matter. You can try to push yourself, but find a healthy balance.

Regarding your P.S., if you haven’t already, make sure you check out WAHM.com forums. I’ve found a few work at home jobs there

L asks:
I was wondering how old your son was? You talk about him a lot and he sounds adorable.
And….WHOO HOOO on paying off the credit cards!!!!!

Thanks for the Whoo Hoo! Our son is approaching eight years old, although sometimes it seems like 14 LOL.

Marie asks:
I’m wondering if your student loans bother you and if you could tell us what % they’re at for some context. Are you going to accelerate your payment on these or are you content to pay as agreed.

We have no consumer debt no car loans even, just a mortgage and student loans. Our student loans don’t bother DH but they drive me crazy – all are below 2% interest though.

Good question Marie. To think of it, I’m not sure if I even noted the interest rate on our student loans at all on here. They are all a little over 5% right now. While I’m not happy about the student loans, I do like that we can deduct the interest on our tax returns. We are unable to do that with our mortgage. We are not planning on paying extra right now but I will be looking into changing the payment plan. We are currently on a graduated plan which gave us a longer payment term and a lower monthly payment. I still need to dig into that, though.

Maria asks:
Hi Tricia, I have a question for you- I’ve noticed that there are certain times in the month when you are able to pull out extra money for debt reduction and or savings but how do you determine when that time is? Is it more towards the end of the month when all of the monthly expenses are paid or at the beginning? What is your cash flow like? Do you keep a few dollars in your checking account? How does that work? Thank you in advance.

I know how much we can pay off at any given time since I project cash flow in real time. It’s hard to explain, but I have three months of future regular expenses (overestimated) and income (underestimated) entered into our financial software. I can see by entering a transaction exactly what a payment of $500 would do to our future cash flow. If I see us going into the red anytime in the next three months we scale back the payment. If I see a healthy balance, I increase the amount. I tried to keep a buffer in our checking account for anything I may have missed (filling the car with gas, urgent trip to store for medicine, etc.) but for the most part we ran things really close. I do plan on keeping a better buffer in our account going forward. We had some very close calls over the past three years.

Debt Free Dan asks:
Now that you are credit card debt-free, what remaining debts do you have and what do you plan to do about them?

What are your future plans for credit/credit cards? Are you going to swear off of them or keep them around “just in case”?

We still have our mortgage debt and our student loan debt. Our plan is to pay extra towards our mortgage right now. It has the highest balance and we are unable to deduct the interest on our taxes. We can deduct interest for our student loans. There were also other things that contributed to that decision as well.

We are not going to swear off our credit cards. In fact, we have been using one for purchases to earn cash back. But we have rules in place, like never charging when we do not have money in our checking account to turn around and pay it immediately. We will also keep them around “just in case” at least through the shaky economic situation the US is currently in. After things look brighter, we will start closing some cards.

Michelle asks:
I have only been reading for the last 6 months or so. So what I would really like to know is all of the strategies you used to eliminate your debt – and to be as specific as possible. A kind of “how I did it” post. Love your blog. It’s already been a big help.

I’m glad my blog has been helpful to you As for that post you are looking for, it is in the works! I wrote way too much the past three years – but I’m almost done with a recap post. Here are links to the recap posts for 2006 and 2007.

More answers will be coming tomorrow! I also did an interview at Ask Mr. Credit Card in case you would like to read the questions and answers over there.

I thought I would feel a little different after paying off our debt. Like maybe I would want to kick my feet up for a while. You know, take some deep breaths and relax a little. Instead, things are back to normal. We went to the grocery store and still searched for the deals. We are still working our jobs and working on our business.

I think my sights have already shifted from our debt to everything else we need to take care of financially. We have a lot yet to do. Here’s what our list looks like so far:

• Increase Emergency Fund to $10,000
• Start Saving for a Car
• Start Retirement Contributions
• Start Savings Account for New (smaller) Home
• Increase Mortgage Payment by 100%

To be honest, I look at that list and wonder how the heck we are going to do it. I start to feel like I did way back when we started reducing our debt. There’s a lot to accomplish and I get that feeling of “It’s going to take forever.” Talk about déjà vu.

But then I look back at what we did. I am taking a deep breath right now. We can do this, and we will do this. The first order of business is to get our emergency fund up to $5K. Then we start splitting up all extra money to the four savings baskets as start paying more towards our mortgage. I’m not sure how our extra money will be split yet (except for the mortgage – I would like to double the monthly payment).

Now I’m feeling excited. Just the thought of having $10K in our emergency fund puts a smile on my face. Rome wasn’t built in a day and this isn’t a race. We’ll get where we’d like to be. Just like with paying off our debt – it is going to take some time. Patience young grasshopper…patience.

We got a C. I have a feeling that this calculator doesn’t give partial credit! LOL.

In any case, it’s a pretty neat calculator that highlights your trouble spots and could be a nice resource for those staring on their debt reduction journey.

Hat tip to The Yellow Piggy Bank. She got a B+!

Several times in the past month I’ve received a recorded call from “Heather” with “Card Services” offering to lower the interest rates on all of my credit cards to 6.9 percent. She then instructs me to “press 1″ to be transferred to a live agent.

[Via Yahoo]

It turns out that these “Heather” calls are claiming that they can lower your interest rates by negotiating with your creditors. In actuality, you’ll receive a debt pay down book. They are asking for a lot of money for information you can get for free by checking out a personal finance book from the library.

I get a lot of those recorded calls. Most are for an auto warranty but I have received a few of these calls that claim that they can reduce your interest rates. I don’t recall if the woman in the recording was Heather or not – but it sounds very familiar to the call in the article.

My rule of thumb is to not do anything when someone I don’t know calls me – even if it is someone wanting to do a survey. I tell them that I never do anything over the phone and to please not take it personally. 98% of the time they hang up on me without even saying good bye so I’ve been following that rule for quite a few years.

Thanks Jen for sharing this article with us!

On a related note, I’m sure the extra cost will start to surface in our grocery spending. We’ve also started buying some name brand items due to the nutritional content. We also buy some organic items since sometimes they are less processed or they have less sugar or salt (two of the things we have to control in our household). I know we are eating a lot healthier. I couldn’t tell you the last time we had Hamburger Helper…which we used to have all the time when we could get it for $1/box. *shiver* That stuff is sodium central!

I have heard people say that eating healthier is cheaper and some say that it is more expensive. I am leaning towards the more expensive side. One of these days I would like to break it down – just to see. We do make more things from scratch, but for the things we can’t the “healthier” version is more expensive. Olive oil is a perfect example. We used to always cook with vegetable oil (which is cheaper) until we started reading about the benefits of olive oil. So we cook with that now.

Now that I think about it, we have made a lot of changes the past few years. Our financial health is improving and we are eating healthier. It has taken us a while, but we are finally getting our act together

Jen sent me an article at Boston.com about a woman who survived debt. She just happens to be a nationally known authority on networking. I never get tired of stories about people who dug themselves out of debt!

Beverly sent me an article at Reader’s Digest. It’s a question and answer with Jean Chatzsky. I like the way she tells people to face their finances even though they are ugly. I really believe that getting a handle on your finances is one of the key steps to getting out of debt.

I also have an interesting blog post to share from another blogger. $165K in debt got a text message (that cost money to read) from a local politician and decided to ask that politician for reimbursement. It wasn’t that much money, but it was the principle behind receiving spam text messages. The politician did reply.

Lastly, I have to say thanks to a few people. First up is Danielle. She gave me three cheers when we reached the credit card debt is less than savings level. I’d also like to thank Lucy Lou from MoneySavingGuide.com for including me in her list of 10 Female Bloggers Who Paid Off Big Debt.

As consumers seek relief from the recession and spiraling food prices, grocery auctions are gaining in popularity as an easy way to cut costs.

[Via Yahoo.com]

I have worked in the grocery business, and I have had to throw out perfectly good food that was only a day past their use by date. It made me feel sick to my stomach – it was good food going to waste. It seemed like there could be a place for that food to go instead of the dumpster. Hearing about these auctions gives me hope about that practice. The store makes some money and people get discounted food – it’s a win-win!

The story also got me thinking about waste in general. I have heard stories about retail stores that throw out perfectly good products that they no longer wish to have on their shelves. Although I am not happy we are in a recession…perhaps there will be some positives that come from it. I hope stores decide to go the auction route with products that were going to end up in the dumpster.

“We have gotten into the habit of spending money we haven’t earned, to buy things we don’t need, to impress people that we don’t like. So get rid of that habit.”

- Deepak Chopra

[Via ABC News]

I love that quote!

I have known several people lately who have been working toward paying their credit card balances down. They’ve been rewarded for this by having their limits slashed and interest rates dramatically increased – both of which have had a huge negative impact on their credit score (debt-to-credit ratio).

I’ve been hearing more about credit card companies giving those unpleasant gifts to people who didn’t do anything wrong. They didn’t pay late. In fact, some are paying more than the minimum payment to try to pay off their debt and some have high credit scores.

The reader was wondering if anyone is taking the above situation into consideration when paying off their debt – especially if you are looking to get a mortgage soon. You can pay off your debt and lower your debt to credit ratio – but you may find yourself a lower FICO score if your credit limit is slashed.

It’s a tough situation. There is no guarantee that your credit card company will be one of the “bad” ones. But if you pay off your debt you are guaranteed to look better to lenders. I completely understand being hesitant on this (it was tough for us to get a small mortgage with all of our debt). I don’t know for sure, but perhaps if you pay off debt and your limit is reduced, maybe you can bring proof of that change to the lender and maybe they’ll take that into consideration?

Anyone have more thoughts about this?

I think trying to not think about money was an unrealistic goal. No matter what we did on Saturday, I thought about money. Maybe it was something that my son said. It somehow got connected to money in the web-like way that my mind works.

At least my mind has been rewired a bit. Instead of thinking about how neat it would be to buy a particular item and remembering how much credit we have available, I now think about the most important question first…

Do we have the cash available to purchase it?

If we don’t, the item gets put away. If we do, then I go through a series of questions about that particular item.

Is it a want or need?
Will it actually get used?
Is it a good value for the price?
Does it fit into our future goals?

It’s a more complicated thought process than before, but it has done wonders for our finances. Instead of digging deeper in a hole we’re finally digging ourselves out. I wish I could rewire my mind for a few non money-related things

For my husband and I, we have become accustomed to getting a receipt for everything. Some stores ask if you want a receipt, and we always say, “Yes.” We also ask that it is not put in the bag. That way, it can go in our wallets.

Here’s where it should be simple. We take the receipts out of our wallets and put them in a designated spot. Having a designated spot works well for our bills. I have a letter rack where our bills to pay go, as well as anything else that needs our attention. The bill rack is hanging near the calendar so we get a daily reminder of anything important.

Receipts in a wallet get clunky and folded. They also stay in the wallet for a little too long and sometimes those thermal printed receipts fade. I tried using a cheap organizer basket but it didn’t work out. The basket would get moved around and receipts wouldn’t always make it there. Having a designated spot is definitely what we need.

We also need a routine for our receipts. There are days, sometimes weeks where we don’t spend money (except for bills which are paid by check or through online bill pay). So a daily emptying of our wallets is not an easy habit to get into. I have to admit – keeping track of our receipts was easier when we were spending more money…probably because of the daily routine!

I think what we need to do is find a nice basket that can hang on the wall somewhere. It has to be big enough to handle clunky receipts and probably be nice on the eyes. I’m sure there is something that could be bought to fit the bill but I’d rather make something if possible. I looked on instructables.com and didn’t see anything (that is my new favorite site for DIY projects). Any out there have any suggestions on a receipt routine?

I’m not a big coupon user. If I have some, I may use them. For the most part, though, we buy generic items since they are the cheapest. I do happen to glance into other customers’ carts while shopping (I admit it ) and I usually see a lot of name brand products.

Well, during our latest trip, some of the generic products that we normally buy were completely sold out. Other things only had a few boxes left. I looked around at other generic items and they were either very low or empty. The brand name items were almost fully stocked. I checked out a few carts and noticed quite a few with generic products.

I found this very interesting – perhaps it is a sign of the times.

First up, Matt at One Million and Beyond is wondering if you are scared of your money. In a way, I am scared of money when it comes to having lots of it. I’m not sure where that fear came from. Maybe it’s apprehension for how money can change things when you have more of it than you normally do.

Next up is Lazy Man and Money. He took a look at his rent versus buy situation. This was a timely article to read. My husband and I were just talking about this. We didn’t get into the meat of the conversation (he had to go to work), but I was leaning towards rent and he was leaning towards buy. Of course, this is talking about what we should have done since we did purchase our house.

Lastly, Mr. Plasectomy talks about the financial irresponsibility of a parent. It is tough to see anyone we care for be irresponsible with money.

I took a few minutes to do some blog reading. I don’t do that as much as I’d like to due to so many things going on. There were a few articles that caught my eye.

I read an entertaining article at Financial Hack where Beks is debating her weekly treat of Bud Extra. She buys two cans a week as a treat. She’s looking for comments, so I thought I would see if any of you have anything to share. Since I no longer regularly drink and didn’t give it up for financial reasons, I don’t have much to add to the conversation.

Plugged in Finance shared how he did some grazing for free food at Costco. I don’t have a Sam’s Club or Costco near me, and we rarely see samples at our grocery stores. I’m jealous

Lastly, a few of you have been asking about JW at Need to Be Debt Free. His blog has been deleted so I contacted JW about it. He said that I could share with you that they are fine. Due to some recent events he had to delete his blog.

Netflix is also showing some hefty profit increases. We’ve been tempted to go to Netflix but our local video store still has 99 cent rentals and we would end up spending more with Netflix on a monthly basis (we have been also using hulu.com).

On the downside, the Girl Scouts are feeling the pinch of consumers tightening their financial belts. That might end up being the case for school fundraisers as well. I know we haven’t purchased anything like that in some time and I turned down one young man selling pizza kits not too long ago. I used to sell things like crazy when I was a kid so I know how it feels when you do not make a sale. It’s not easy saying, “No thank you.”

You can read the entire article here.