Could You Erase $70,000 in Debt in 1 Year?

Kiplinger.com recently profiled a young woman who was determined to wipe out her $70,000 in debt in order to stay at home and start her family. As regular readers of this blog know, I am a big supporter of living on a single income to raise a family. That being said, I acknowledge it is a lifestyle choice that is not for everyone.

But the fact remains that getting out of debt is always a good thing, and it’s especially helpful if you do need to live on a single income. After all, when a sizable chunk of your income is going toward paying off your lifestyle of the past it leaves you somewhat handcuffed in times of emergency or financial hardship.

So, how did Jaime Tardy (the woman in the Kiplinger article) accumulate her $70k in debt? Well, it broke down like this:

• About $26k in student loans
• $25k home equity loan
• $20k car loan

Looking at the breakdown of her debt, it seems to me like a fairly average breakdown for most people.

Her secret to getting out from under all this debt – and gaining a $23,000 surplus in savings?

Hard work, downsizing and determination to doing what it took.

That’s it folks. It’s not Rocket science. Getting out of debt is simple, but that doesn’t mean it’s easy. Jaime and her husband took on extra work where they could. The downsized their lifestyle by trading in their new car for a used car, canceling the cable and cell phones. They then took all the money they were saving and the extra money they were making and whacked off the debt.

While my wife and I were (thankfully) never quite so far in debt when we decided to get our financial house in order, we followed many of the same steps. We’ve cut our cable bill by $40 a month, traded our costly monthly cell phone plan for a pay-as-you-go Tracfone and bought a used car instead of a new car when we needed something bigger for the expanding family.

It’s not always easy, but it can be done. It’s amazing how much you can do when you put your mind to it and you realize it’s for a short period of time. And chances are, after that period of time where you’ve cut costs and busted your rear to make that extra you’ll discover you’ve changed your whole outlook on money an materialism. You’ll likely discover you’ll lead a simpler, happier life as a result

You can follow Jaime on her new goal of amassing $1 million on her blog: http://www.eventualmillionaire.com/

Related Posts:

• Balance Transfers – Simple Solution or Debt Enhancer?
• Pssst… The Joneses Don’t Care About You!
• Debt is Really a Good Thing?!
• Living on a Single Income: 7 Years and Counting.
• How to Get a Good College Education with Minimal Debt.

5 Small Sacrifices to Save Big.

With a few small sacrifices and some smart money decisions, it’s easy to start saving big. One of the best ways to save money is to first know where your money is being spent. Create a list of your spending in a week; it seems like a dull task, but at the end of the week, you should be able to see where costs can be cut or what things you can do without.

Here are 5 small sacrifices to save big:

1.On Food.

Cook at home whenever you can. This may be quite difficult for others who don’t eat together, but you can start out with the habit of cooking and eating together at home once a week and slowly increase the frequency. If cooking a meal is too time-consuming for your busy lifestyle, create a weekly plan of your meals.

Shop for all your grocery needs in one go, prepare the meals ahead of time, store them in separate containers, and freeze them. The next time you are too tired to prepare a meal, you can just pull out a container in the fridge and heat it up right away. If you always eat at work, consider taking a packed lunch.

You don’t have to do it every day so as not to isolate your coworkers. If the entire office is going out for lunch, go ahead and connect with them. But for other days, try to convince some of your colleagues to join you in brown-bagging lunches. You’ll never know they might also appreciate the idea of saving extra money from it.

If you just can’t seem to stop yourself from binging on food, carry some snacks in your purse, keep some in the car, or have a stash available in the office too. This way, you can avoid going to convenience stores or the vending machines whenever your hunger pangs strike.

If you are a coffee person, you may already know that the coffee you pick up every morning adds up to a significant amount of money. Even though it seems like a small indulgence, skipping designer coffee will turn into a lot of savings in the long run.

You don’t have to completely avoid drinking coffee, but as often as possible, make one yourself at home. If you need it on the go, invest in a reusable thermal travel cup, so you can take your homemade coffee with you. If you can, get into the habit of drinking water.

But avoid having to spend a lot of money on bottled water by investing in a tap filter or pitcher and filter. You can use a reusable bottle that you can refill and take anywhere with you so you’ll never have to buy bottled water again. Not only is this much cheaper, it’s also better for the environment.

2.On Energy.

Regulate the energy you consume at home. Switch off anything that runs on electricity when not in use. If you keep forgetting, invest in a motion detector so that the light switches off automatically when no one is in the room. Unplugging an appliance will help you save more than simply switching it off. Control the thermostat of your heating and air conditioning units as they consume a large amount of electricity than most appliances.

In the winter, layer your clothes so you can lower the temperature a little bit. During summer, use blinds or curtains in your windows to block the sunlight from coming in; but make sure that there are other windows, situated in cooler direction of the house, that are open so that air can circulate inside your home. Choose the most energy-efficient and eco-friendly models when buying new appliances or replacing your old ones.

3.On Bills

Seeing an overview of you budget might make you more conscious about your spending habits. So, spend some time to create a detailed and organized budget, and stick with it. If possible, automate all your payments to make sure that you do not overlook some of your bills, which can charge you extra fees for late payments. If not, when you receive your fund, immediately divide it to pay for all you financial obligations.

Use cash instead whenever you can – it’ll save you withdrawal fees to transferring fees, and other bank fees you may not be aware of. But when withdrawing cash from the ATMs, make sure that it will not charge you any transaction fees. If it does, then don’t use it and find another one which doesn’t or withdraw directly from your bank. If the money just isn’t there, don’t spend – it’s that simple. Using a credit card will force you to buy on debt and it may be hard to pay it off completely especially when the interest starts adding up.

4.On Leisure

Plan and book your vacations ahead of time; it will not only save your sanity but also give you enough time to look for inexpensive airfares, hotels, and other travel packages that will eventually save you a significant amount of money. If you are not really fond of traveling, consider your local tourist destinations and look for activities that you can do on your idle time.

Visit your local library. You might be surprised that you can get a wide selection of books and DVDs at very minimal cost. Usually, your library card can let you borrow them for free. This is a better option than buying them because there is a great possibility that you will only read a book once, and watch a movie once.

If you really like something, then that’s the time you purchase it. Better yet, buy used books at second-hand stores or online shops like EBay and Amazon. It may be a little scruffy, but considering that you can get them for almost as much as half the price of the new ones, it is a small price to pay. For DVDs, see if you can get a membership to the DVD stores for discounted prices.

5.On Transport

Avoid buying a new car if possible. A new car depreciates in value as soon as you drive it out of a dealership, and it is still more costly than getting a pre-owned vehicle or maintaining an old car. Compare the money spent on repair and maintenance of an old car against the monthly installment of a new car and see the difference.

Either you choose to spend some extra thousand dollars for a new one or you shell out just a few bucks in repair maintenance for a slightly used car with a low mileage on it. Whatever it is, your goal is to keep your car as long as possible. As long as the repair costs are low, lengthen its life by having a regular maintenance schedule.

If you can, choose walking or biking when going someplace, especially when the weather is great. And if it is hard to get by without using a car, share a ride with your spouse or colleague. Planning a carpool can save you hundreds of dollars a year and reduce your carbon footprint in our air. You are not only saving money this way, but also saving the environment.

Related Posts:

• Living on a Single Income: 7 Years and Counting.
• When is it Ideal to Drop Collision Auto Insurance?
• Minimalism vs. Simplicity – Are You Missing the Point?
• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)
• How to Waste Your Money in 15 Easy Steps.

Ending America Saves Week With Advice on Saving.

As America Saves Week draws to a close for 2011, I thought I’d share just one last post of savings advice and commentary. I hope you celebrated by increasing your savings, or at least reconsidering your spending

Retirement

I encountered a problem with my 401(k) and saving for retirement and thought many others probably have experienced this too. I couldn’t find any real solutions on the web, so I wrote about my own solution to Save for Retirement When Your 401(k) Plan Sucks.

RC from Think Your Way To Wealth answers a question that many people ask once they’re out of credit card debt :
I’m Saving Enough To Get the 401k Match From My Employer, Where Do I Invest My Money Next?

College

Anybody with a child of college age knows that college tuition these days is insane. Heck, my oldest kid is in 1st grade I’m terrified to think at how expensive it will be when they head off to college. By that time, kids may be taking out an equivalent of a 30 year mortgage – just for education expenses!

Well, one alternative is to skip college altogether. I’m not saying it’s the best alternative, but it may be beneficial to Save Money and Skip College, at least for a year or two.

But if you or your children are looking at that costly expense, you should probably reconsider majoring in any of these 8 College Degrees with a Poor ROI. Thanks to Financial Highway for the list!

Either way, check out the article at The Amateur Financier about How to Survive 4 Years of College Without Going Broke.

Health savings

Perhaps the biggest expense outpacing incomes aside from college tuition is healthcare. MoneyNing shares a helpful list of 7 Questions to Ask About HSAs and Other Ways to Pay for Medical Expenses that can help get you thinking about how to mitigate these essential costs.

Emergency savings

A basic pillar of personal finance is the emergency savings account. But what is that savings fund for? Well, interestingly it turns out that The Most Common Emergency Expenses are the same regardless of income level. I suppose that’s because some things are unexpected whether you’re a line cook or Bill Gates.

Lastly, Ron at The Wisdom Journal has a poll you can vote in :Which Is Greater – Your Emergency Fund or Your Credit Card Debt?. The results may surprise you…

Related Posts:

• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)
• Save Money – Skip College!
• America Saves Week 2011 Is Here!
• When Saving Money Can Cost You.
• Minimalism vs. Simplicity – Are You Missing the Point?

How I Cut My Cable Bill By $40 A Month!

Saving money is a good thing, and since this is America Saves Week, I’m sharing how I saved $40 a month on my cable bill! The cable bill seems to be one bill most Americans hate the most – and for good reason.

It seems to keep climbing steadily upward, year after year and there comes a time when every cable customers questions, “Am I really getting my money’s worth?”

This happened to me recently, after settling into a new job and a new home I began to cast a critical eye over our family budget and realized that not only was I paying $171 per month for cable, phone and Internet but that they were raising the price another $7 a month this month!

Here’s how I fought back, and you can too…

Know the enemy’s battle plan

They will try to give you extras in the hopes of satisfying you. Let’s face it – it’s cheaper to give you extra service for free than to continue providing you your current service for less. Cutting your monthly bill hurts their bottom line, but giving you free Showtime for a couple months doesn’t.

Here’s what I was offered:

• 3 months of a free premium channel – Showtime, HBO, etc…
• Increased Internet bandwidth.
• improved phone service features like 3-way chat and the ability to see what numbers have called my number.

In my case, these were meaningless offers. I already have too little time and too much to watch, so a few months of free Showtime wouldn’t be of much benefit (besides, they just hope I get hooked on a new show and sign up for the channel at the end of the free period).

Increased bandwidth doesn’t do much good either since I don’t use all the bandwidth I currently have available to me. And I detest using the phone, so 3-way chat is a non starter and our home phone handset already logs the last 100 calls received and sent from our number so that wasn’t much of an enhancement either.

In the end, I found it very easy to reiterate my initial request that my bill was too high, and I wanted it lower. I didn’t want an extras, I just want to pay less for what I actually use.

Be prepared

Do your homework.

It’s not enough to simply say you saw a competitor’s offer and it’s for less money. Do your research and have a comparable offer from a competitor. Have the specifics. Here are some tips:

• Know what the offer includes and what it doesn’t.
• Have the specifics at hand in case you need them during the call:
  • Competitor’s name
  • Monthly cost
  • offered channel package
  • Internet bandwidth
  • term of the offer, and the price once the term is up

You should also anticipate the arguments. For instance, one common argument runs like this:

Customer: “I have an offer from ABC Satellite Co. for a comparable package at $100 less per month than I’m paying now.

Cable Rep: “I understand that, but you have a contract with the competitor, and the rates will go up in the middle of the contract! With us there are no contracts – you can cancel at any time.”

You should anticipate this line of reasoning and have an appropriate response. For example:

Customer: “Yes, I understand that but even after the rate goes up, they charge $20 less per month than I’m paying now. At the end of that contract term I still save money switching to them.”

A word about what constitutes comparable service..
Many times companies try to trick consumers with what they portray as comparable offers. Sometimes they try to compare their apples to the competitions oranges. Don’t be side tracked by this. What matters is what services you actually use.

They will try to convince you that the service you’re getting now if vastly superior to the competition. Maybe so. But what you need to look at is how much of that superior service you actually use, because the truth is you’re paying for all of it anyway.

You may get a Lamborghini with your cable company, but your really driving it like a Honda Accord through city streets. Bottom line: Pay for what you use, or at least get as close to that as possible.

The key to this step is to research the competing offer as though you will actually be switching to them, because in the end you may need to do so to save money. Besides, it also makes your argument stronger when you get to the negotiation phase if you can tell the rep that you’re ready to switch but you’re giving them a last chance to keep you as a customer.

The sweet talk

Be prepared for the soft sell. They’ll attempt to justify their ridiculous rates by outlining the upgrades to your viewing experience, and a brace new world of new features they now provide.

In my case, the representative told me about new features like being able to set my DVR to record online or record a show that just ended.
My response?

“Those sound like great features for some people but to be honest, I don’t use them and I don’t see myself using them in the near future.”

I then reiterated that I am happy with the service and features I use, but am very unhappy with the price.

I like my television package, I like my cable Internet and phone service, but the truth of the matter is that you can get phone service anywhere, Internet is about the same and I like DVR and the shows I watch, but I’m not going to plan my life around them.

I’m in control of my television, not the other way around!

Negotiate

Negotiation is more art than science, but there’s nothing mystical about it. In fact, if you’ve done your homework and prepared your own battle plan then you’ll find the negotiation phase of the operation to be little more than basic scripting.

You’ve outlined your problem – your bill is too high for the services you use. You’ve presented your options – I have an offer from ABC provider for much less money. If you are truly ready to move on to the competition, then the negotiation is simply walking the customer rep down the path to your desired solution.

That being said, you still need to be reasonable. If you have an offer from a competitor that’s comparable service to what you use today but $40 less per month, don’t expect your cable company to lower your bill by $100..

Final thoughts

Keep the conversation polite, but remain firm. Reiterate your position that you are happy with the quality of service and the features you use, but you are paying too much.

Let the rep speak just long enough to get the general direction of his point established, then give your response. You don’t want to cut him off too abruptly or too often, but you can’t let him monopolize the conversation and control the direction.

Once they see you’ve done your homework and are serious about switching, they will start to offer you real options.

Related Posts:

• How To Stream Online Content To Your T.V..
• Where To Watch Online Content Streamed To Your Television.
• 7 Tips for Cutting Spending and Putting Cash Back in your Pocket. (video)
• Minimalism vs. Simplicity – Are You Missing the Point?
• How To Cut The Cable Cord And Lower Your Tv Bill (In 3 Easy Steps).