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Apr 5, 2008    |       9 comments

Three B.A.D. Ways to Reduce Debt

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This guest post is from Ryan at Debt Reduction Forumla. He’s currently is reducing his debt from $75,000 to zero and letting you look over his shoulder. If you like what you see here, stop by his blog or you can subscribe to his feed here.

This is the first guest post I’ve written for Tricia. So I spent a few days thinking about a title that would get your attention.

That’s when I came up with “B.A.D. Ways to Reduce Debt.”

Of course, B.A.D. stands for Blogging Away Debt.

To write this post, I went back through a number of Tricia’s blog posts to see what strategies she has personally used to reduce her debt during the last two years. Here are the three debt reduction strategies I came up with, along with how I’m using those same strategies.

Strategy #1: Create accountability.

When Tricia began her debt reduction journey, she started this blog to create accountability. I took a similar approach when I started writing Debt Reduction Formula. I did it, in part, for accountability.

But a blog is a lot of work, especially if you want to attract regular readers. What’s a busy person to do?

At first, I simply created a spreadsheet that listed all of my debts, their interest rates, and minimum payments. This created personal accountability because I had to acknowledge my debt problem and see whether it was getting better or worse each month.

I continue to update that spreadsheet every month to see how much progress I’m making.

Even personal accountability like this goes a long way toward keeping yourself motivated. (And, trust me, you WILL need something to keep you motivated as you pay down your debt.)

Strategy #2: Minimize finance charges.

Another debt reduction strategy Tricia has used is minimizing her finance charges by looking for the lowest interest rates possible.

In one post, Tricia shares that she called around to credit card companies to get rate reductions, paid off as much debt as she could to improve her credit score, acted on balance transfer offers when she received them, and even took advantage of a Prosper loan at one point.

We’ve all heard about minimum payments. But, if you’re like me, you may not have thought in terms of minimum finance charges. (I think I finally stumbled upon this concept a couple months ago.)

Let’s say you have monthly minimum payments of $800. If you look at how much interest you’re paying, you may discover that $600 of the total monthly minimum is going to interest!

By reducing finance charges, you free up more money to pay down principal, which accelerates your debt reduction.

Like Tricia, I’ve gotten reduced interest rates on a few credit cards. And I, too, recently got a Prosper loan to consolidate two loan balances. By doing this, I literally slashed my interest rate in half. (I’m now paying 11% instead of 22%.)

Strategy #3: Throw extra money at debt.

Perhaps this seems like a no-brainer.

But think about the “economic stimulus check” most folks will get this May/June. No doubt, some people will use it to pay off debt. But many people will spend it on a new widget or doodad.

A close friend and I were talking, and we speculated the number one purchase this economic stimulus money will be used for is… a new flat-screen TV.

Not debt reduction.

Tricia writes that 100% of their 2005 tax return was used to reduce debt in 2006. And while it’s easy to admire that kind of commitment, it’s hard to put it into practice.

Currently, I’m also using extra money to pay down debt. Where does it come from?

Since I’m self-employed, I have periods of time when I’m cash-rich and other when I’m cash-poor. So whenever I get paid a project fee, I take whatever portion I can to pay down debt.

I’m actively pursuing different ways to grow my business so I’ll have more cash to throw at my debt. Not to mention, I recently received an unexpected inheritance, which I’m using to reduce debt as well.

So tell me: what B.A.D. ways to reduce debt have you personally used? Leave a comment below.

Thanks Ryan for the guest post!

Apr 4, 2008    |       5 comments

How to Create an Emergency Kit to Complement Your Debt Reduction Journey

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This is a guest post from Carolyn at Totally Ready. She blogs all about being prepared for an emergency. I’ve been thinking of getting ourselves a little more prepared for the unexpected, so this is a timely guest post. I hope you enjoy!

After hurricane Katrina I became very concerned when I could not find a good 72 hour kit to recommend to people who asked me where the best place was to purchase one. So…I began my own preparedness business. I kept feeling there was more to do and I resurrected a blog I had abandoned. It soon became clear that if families were going to prepare for disaster they also needed ways to save money so they could afford the items they would need to purchase. Now my blog is about saving money, making money and preparing. I feel all go hand in hand and you really can’t be debt free unless you are prepared to care for all the needs of your family.

I believed in and practiced storing food long before the government encouraged us all to have a 3 month supply. It has gotten us through job losses, unexpected illness and now we are using it to keep our food budget under control as prices rise. As I watch the flooding in the center of the country and remember the blizzards, power outages and tornadoes this winter I am more convinced this is the time to prepare to care for our family during a time or natural disaster or a terrorist attach.

Get yourself a good 72 hour kit. You should have a kit for every member of your family. Even very young children can carry some of their own things. It is so important that during a time of high stress for you that they feel safe. Having their own kit will give them the sense that things will be okay. Their kits should include a small toy, a few clothes, a treat, a little water and their own diapers if they are still needed. All things you should already have around the house. You can purchase some small backpacks that have adjustable straps making them perfect for young children.

If you have elderly or disabled parents or friends get them a fishing vest for their kit. These vests have several small pockets that are perfect for stashing medications and other necessary items.

So what can you do now for free? First, run off a list of items which should be included in a good 72 hour kit.

Try a scavenger hunt tonight. Begin by collecting all the unused backpacks around the house. Eliminate any that are too small or too damaged. You will want room for everything on that list so make sure you don’t skimp on the size. If you don’t have enough back packs place all your items in a large trash bag until you can afford to purchase more packs. Now you can begin with the other items. We all have some: flashlights, whistles, TP, hygiene items, clothing, hats, sunglasses, prescription and over the counter medications. Once you have the list you will understand how many items you already have.

Just a few tips:

When you add clothing to your kit be sure the clothing for children is always at least one size too big, two sizes is better. The same holds true for diapers. You can always make something too large work but if it is too small you are sunk! NEVER include clothing with your family or a child’s name on it. In other words no old jerseys. During the confusion of a disaster you may be separated from your child and you don’t want them advertising their names. It makes it too easy for a predator to convince your child that it is safe to leave with them.

When adding food be sure you do not add foods that are salty. During an emergency there will be limited water available. This is also the reason you never want to add instant foods. There just won’t be water to reconstitute that oatmeal or ramen noodles. Be aware of expiration dates. I suggest you purchase emergency foods that are rated with a 3-5 year shelf life. You will end up spending more money if you store foods that need to be rotated and you forget. Emergency foods will last much longer than the 3-5 years suggested. There are energy bars that taste just like cookies and everyone I have given them to loves them. MREs are also a good choice. Canned foods weigh too much and glass jars are an obvious no no.

Glow sticks are wonderful. They are inexpensive, safe when there are gas leaks and have so many uses at other times. We use ours when there is a power outage. They light up the bathroom and hall ways all night while still being safe, unlike candles.

When adding soap, lotions, diaper rash med or other strong smelling item always put them in a separate zip lock bag. If you have food from the grocery store in your kit it will all end up tasting like the soap! Even mints and cinnamon candies will have your food tasting minty and cinnamony.

Bottom line, begin today to prepare your family for any emergency which may occur. If it all seems overwhelming check out my Seven Steps program. Each week we do seven things, some free, some not, to be better prepared. Be sure to check out the post for week 6 and look at all we accomplished in just 6 weeks. You can go back and start with our kickoff week or just begin now. The important thing, just like getting out of debt, just get started.

Thanks again Carolyn for the guest article!

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