SWB: Alan B. Rowley II - Success Coach - ECoaching - Email Coaching

Playing Hard To Get with Money

Tia and I were talking during a car ride on Monday and we agreed on an observation.  I've been giving it some thought and mentioned it again to PTE Rick today.  I'm sure there's a known psychological reason behind it but it doesn't matter.  All that matters is understanding that it exists.

Tia and I could buy things but we don't.  We say, "We could . . ." a lot.  We don't buy much though.  (I did buy this arch-thingy for one of my climbing roses on Monday.  I'll take a picture when the roses are blooming.)

I think a lot of it goes back to people wanting what they can't have.  Credit cards and store credit have solved the problem of not being able to have it but people still can't afford much of what they buy.

Once you can, items seem to lose their desirableness.  We just buy what we truly need or want.  It seems like a paradox.  We shop more when we can't afford it and shop less when we could actually buy things.

I still believe that part of it comes back to the idea of spending money.  Credit isn't money.  You aren't spending *your* money when you use a credit card.  The pain comes later.  When you are using your own money, your more picky.  At least that's how it works for us. 

Taking What I Can from Bernanke

My close friend, Ben Bernanke, will probably be dropping interest rates for the next few months in an effort to try and keep the country out of a recession (don't you dare suggest that we are already in a recession or I'll be forced to defend Ben's stance).

I'll be keeping an eye on the interest rate and when it looks like it's been dropped as much as it's going to go, I'll refinance my house.

Remember, boys and girls, when I talk about refinancing, I'm talking about refinancing for the amount that I owe.  I won't refinance and take the equity out of my house.  I called that "the sinister refi" and that's completely different.

Unlike bigger cities in the US, houses here have continued to appreciate in value.  What this means is that I will be able to lower my payments with the lower interest rate and I will probably be very close to being under the PMI limit.

We'll probably get a mortgage for 80% and a second loan for any amount over that.  We'll put all the extra money toward the second loan which will be at a higher interest rate to get it paid off as quickly as possible.

This will free up more money on a monthly basis to deal with the possible rocky financial road that lays ahead of us.

That's the plan anyway.

The Wendover Effect - Part 2

You can read Part 1 of the Wendover Effect HERE.

Living here in isolation has had several other effects on us.  Some would probably have happened anyway but being here changed us more quickly.  Writing this blog changed things too and I probably wouldn't have spent so much time on my blog if we didn't live here.  We changed our life when we moved here so that one of us was with Trey all the time.  That put an end to our social life.  We also knew that Wendover was a temporary stop to regroup and so we haven't gone out of our way to create new friends that we'll just be saying goodbye to.

One important lesson that we've learned is that we don't really need much stuff to live.  We don't buy very many things because we just don't need them.  We see things that seem nice or fun to have but by the time we get to town, we don't remember what it was.  If it's something that we really need, that need will keep coming back, reminding us.

The Wendover Effect

Moving into the middle of BFE was a bit of an adjustment but in the end, we think it has worked out for the best.  Between living here and writing this blog, our financial lives have changed.  Here's some of the factors and some of the results of living in the middle of the desert, 120 miles from a city. 

The first difference is the lack of stores.  There is a grocery store and a poor attempt at a hardware store and an adult toy store and a Family Dollar.  That's it.  If you can't find what you're looking for in any of those, it's a 90 minute drive to get it.

We learned 4 very good lessons from this:

1.  The Internet is a better invention than sliced bread, by far.  We order things on line all the time.  Shipping and handling are cheaper than gas and save us 4 hours of travel time.

2.  We plan better.  We anticipate our needs and we make lists.  If we have to go shopping, we know what we want and what stores we'll be going to.  We don't browse.  When shopping on line, we try to get as much stuff from one place as we can.  Just because S&H is cheaper than gas doesn't mean we don't try to reduce it when we can.

3.  We go without.  We used to impulse buy and now the only thing that stays on the list is stuff that we think we'll really need.  When it's not Christmas, we might go for 3 months without going into town.  If we still want or need something after 3 months, it's usually worth the purchase.  When stores were close by, we'd go on a whim for a single item and then usually pick up some other neato stuff that we didn't really need.

4.  We've learned to improvise with items from the available local stores.  Did you know that you can MacGuyver a rolling pin out of a dildo?  Our Easter sugar cookies with the rabbit imprint were a big hit!

Here's Something To Be Thankful For - The Van Is Paid Off!

We wanted it paid off before Thanksgiving.  We cut it kind of close but it's done.  We paid it off in about 2.5 years or so.  The balance was zero yesterday, a day before Thanksgiving.  That means that we'll be going through the holiday season with one less bill and when we get the title in our dirty little hands, we'll call the insurance company and get our insurance lowered.

We're going to ease off on paying things off (things? My Saturn and a house that's up for sale) until January.  We are planning on putting the extra money from January into savings to prepare for my wife to cut down to one job.  She works in a school where 9 months of work is spread out over 12 months of pay and we aren't sure what will happen if she quits in the middle of the year.

Once we know that outcome, we'll be off and running to pay off the Saturn (and then lower the insurance again - schwinggg!).

Unless we sell the house.

Success Warrior Retirement Plan

Cherise requested that I do a post on retirement.  I fear that she will find this significantly lacking in useful information.  Not because I don't know anything about what to do for retirement but because I don't agree with what I read.  It's a personal thing.  Most of the information out there is probably good but it has never resonated with me (add "resonated" to my list of overused words for this election - too many Ron Paul articles include "his message resonates with people" and as a coach, I read the word way too much).

With that disclaimer in place, let me describe my personal retirement plan at this point in my life.  It could very well change in the future but this is what's going on right now.

First, I fully expect to work until I just can't work anymore.  Until the Alzheimer's kicks in to the point where I just don't make sense any more (and doesn't continue to help in my humor posts), I'm going to be doing something that brings in money. 

Not because I have to so that I'm surviving on cat food and crackers but because I think that human beings were built to serve a purpose.  When people stop serving a purpose, they die quicker.  Not that making money is necessarily a purpose but I have no dream of working hard until I'm 60 and then never working again.  I fully expect to live to be at least 100 years old and I don't want to be bored during that time.  I will probably be doing something that gives me an extremely flexible schedule and not necessarily be 40 hours a week so that I can spend time with kids and grandkids.  I'll be doing something though.  I may be a writer or speaker or something.  After our next move, I'm thinking about going back to college to be Economist.  It will be something that doesn't require too much physical strength and keeps my mind active.

Can We Really Pay Off the Van Before Thanksgiving?

That was the prime question in our weekly meeting, which we held last night.  We played with the numbers and went back and forth with ideas. 

The bottom line is that it's going to be possible but it isn't going to be easy. 

I'm going to remind you that we're paying off the van a couple years ahead of schedule and we realize that if it takes us an extra month, we're still way ahead of the game.  We know this.  We understand this.  We even talked about it but we kept coming back to . . .

How cool would it be to enter the holiday season without the van payment? 

We would have our house payment and the $120 Saturn payment as our only debts. 

It wouldn't just be a monetary change but a mental and emotional change.  You want something to be thankful for on Thanksgiving?  How about one less debt?

We figure that we can do it but we are going to have to be more careful with our money.  In small ways, but we're at the point where every little bit helps.

When the debt is large, it's harder for us to be motivated.  As it gets smaller and smaller, each dollar pays off a greater percentage and our motivation goes up.  We're at the point now where our motivation is high and trying to figure out how we can cut costs.

The problem is, we have cut most of the fat off already.  We have been spending on average an extra $25 a week at the grocery store.  So, we'll cut back there.  That gives us about $100 extra dollars.  We have been going out to eat once a week which is about $20 a week.  We're going to cut that out until the van is paid off so that's another $80. 

That was everything we could see to cut.  Beyond that, it becomes a matter of sticking to the plan and watching for ways to earn a few extra bucks.

It's going to be close but it's going to be worth it if we make it.

Weekly Meeting: Sliding Backward

We had our weekly meeting last night.  We didn't have it last week because we were out of town but there wasn't any extra to catch up on.  We've been doing this long enough that the mechanics really flow smoothly.

Tia has added an extra part to what we do now.  She's been doing it for the last month and I don't know if I have mentioned it here before.

When we get together, we look over how we spent our money for the last week to see if there is anything that we want to improve on.  We've gotten to the point now where that is very rare.  We have built up the discipline that we spend money where we intend to spend money.

We review our goals and the dates that we have set.  Every couple weeks, there's a bit of tweaking that needs to be done.  Some goals are moved closer, some are moved back.

I go over our current balances and how they compare to each other.  That's the sliding back part in the subject line.  Our money versus debt went backwards a bit this time.  Our debt went down but our money went down more.

The fact that our debt went down is what's important but I like to track the difference.

We spent money on our trip so that was money that went out but not against our debt.  My 401k is tied to the stock market and I own a few stocks.  Both of those went down (even though they promised me the housing fiasco wouldn't affect the economy - damn them!).

After that, my wife shows me her plan for how we are going to spend our money for the rest of the month.  I give my input but at this point, we are on the same wavelength so it's more a matter of just keeping me in the loop. 

We are going to start setting money aside each week for items on our wish list.  We have set a minimum that we will continue to pay toward our debt so that we can reach our goals.  Anything left over goes to the next item on the list.  The first item on the list is a computer.  It's time.  As much as I'm going to hate to part with my TRS 80, it's time. 

Actually, I won't be parting with it.  I'm going to disconnect it from the internet and let Trey use it for his Hooked on Phonics and anything else that we get for him.

Any extra money that I can bring in will accelerate the purchase of Wish List items.  Tomorrow, I start my babysitting gig so that is going to help on that front. 

It's a system that really works well for us and I highly recommend that you use some kind of system for yourself.  You can develop your own, you can use mine, or there are probably hundreds of other variations out there.  The bottom line is that you have to know where you are and what you want to achieve if you want to be in control of your money.

Burst Your Way Out of Debt

Here's something that I cover by example in my book.  Leo Babauta of Zen Habits did a guest post on Get Rich Slowly and spells it out even better.  I'll give you the general idea and encourage you to visit his post to get the full story.

For people that have a hard time paying a little bits at a time toward debt each paycheck, you can set up systems where you pay your monthly payments and then when you money that isn't in the form of a paycheck, you put that money toward your debt.  You might be able to pay off some of your debts in this way in one swoop.

This would also work for people who have gotten themselves into debt to the point where there just isn't much money left from each paycheck.  You can use this "windfall" money to pay down or pay off debts.  That will free up money from your paychecks that you can start paying toward the rest of your debts.

Use the money as a way to get out of debt if that system works better for you or use it as a way to get things rolling if you are using a "snowball" system.  Either way, it's a great way to reduce debt more quickly and give yourself some financial leeway.

Full Article:  How to Eliminate Debt in Bursts Instead of Incrementally

5 Sword Points for PTE Rick for sending me the link.

Joining the KMA Club

The object of my game right now is to join the KMA.  In the police world, the KMA meant that you had your 20 years in so you could retire at any time.  If you didn't like something, you could tell them, "kiss my ass," and walk out.

Of course, most of them would immediately have to go out and get another job so they weren't really full-fledged members of the club.

I'm not talking about never working again because I think there are plenty of things that I like to do that will bring in money.  It's not a *job* though when it's fun or you're really looking forward to doing it.

I'm talking about not being reliant on the job or worse, trapped.

PTE Rick's post on what some companies do to their employees is an excellent example of what I'm talking about.  People who get themselves into this type of situation will have the hardest time joining the KMA Club.

On the other hand, if you own all your property free and clear (including your house), it's very easy to change where your money comes from.  If you get to the point where your money is making money, it gets even easier. 

I think I would get bored if I didn't have something that I was working on but I want to be the one choosing how and when I spend my time (and how much time that is).  There are plenty of predators out there or companies who are so focused on the bottom line that they don't care in the least what happens to you.  It's up to you to get yourself in a position where those things have very little, if any, effect on you.

Work on joining the KMA today.

Weekly Meeting: Disappearing Money

It went up again this week.  Not because we incurred any new debt.  That's what the big spike is, a new car loan.  The immediate drop off after is a huge payment against the van loan.  This week went up because we spent money that didn't go against debt.  We reduced our checking and savings without reducing our debt.  As you can see, that doesn't happen very often.

"Money" in this case is a very individual thing.  Different people will track different things.  None of them are wrong.  It's just a matter of what you want to keep track of.  Each client has different thoughts on this as do you.

Let me go over what I keep track of.

Plan B - Always Plan B

Okay, I didn't get the job so it's time to re-evaluate.  It seems like we do this a lot.  We adjust and adjust and when we think we have a solid plan, something happens and we adjust again.  Plan B is becoming a joke with us because it seems like we are never working on Plan A.

The gut that interviewed me liked me and it's likely that he's going to be calling me when another job opens up.  He said that I would be perfect for a postion that he had in mind and that he had just filled two weeks prior.  It all works out though because we weren't actually looking for this job and weren't as ready as we would have liked to be as far as moving goes.

So, here's the new Plan B, which will stay in place until the next event happens and we change again.

Is it possible for nothing to change and yet to feel changed?

We have been very frugal with our money for the last 14 months.  Not that my wife and I have ever been too wasteful.  We just aren't like that but we have been even more cautious with our money since we decided to get out of debt. 

The more money that we can aim at our loans, the faster we can pay them down.  The faster we pay them down, the less interest we pay which makes it so that we can pay them down even faster.

Interest in the big factor.  The object of our game is to stop paying interest and start getting paid interest.  We are doing both at the same time but concentrating more money on the stopping part. 

I bring this all up because yesterday my wife decided to buy a new purse.  She wanted one.  She doesn't have one.  She's been using this dayplanner thing that I got for Christmas a couple of years ago.  The velcro on the part that holds the cell phone has worn out and her phone has fallen out a couple of times.  She decided to get a purse to carry stuff instead of the dayplanner. 

She didn't get the one that she thought she would really like because it was $100 and because she doesn't like to buy things like this online.  She wants to be able to check her purchases over before making a decision.  We don't have a trip into the city planned for another month so online was the only choice.

So That's Where My Money Is Going

One of the best things that my wife and I ever did was start writing down every bit of money that we spend.  It really can be an eye opener for a lot of people.  I hear people say, "I'm pretty good with my money."

What I usually find out is that if there is money left over,they are pretty good with it.  If there isn't money left over, they aren't good with it.  There are so many factors involved that it really doesn't have much to do with how good they are with their money, really. 

People have habits with money.  Some the know about and some are so old or ingrained that they don't think about them anymore.

It can really be an eye opener to write down where you spend your money.  I'm not talking about just your checkbook register.  I'm talking about all the cash you get from the ATM too.  And everything that you use a credit card for.  You aren't spending cash when you do that but you are buying something and promising to pay for it for a long, long time.  If you're going to make that commitment, you should write it down.

People who do this sometimes end up scratching their heads saying, "So, that's where my money is going."

***

For those that enjoy my humor, you might want to check out today's Chronicles post.

Remember that I'm looking for a slogan.  Put your submission in the comments of this post.

I failed to mention an important milestone

My wife and I meet each week to discuss our finances as well as other things.  It was something that we started when we started working on our plan to get out of debt.  I have created a form for these meetings and I update the information each week.  We then write notes on the form and post the form on the fridge for the week.  At the end of the week, I take the form down and put it into a notebook.

I was looking back through these old forms looking for some information for my book and I found that the very first meeting that we had was on April 2, 2006.

We have been working this plan for just over a year now.  That's pretty cool.  We've learned a lot in that year and we've made a lot of progress on our debts. 

In about two months, we'll have the student loan paid off.  About 4 months after that, we'll have the car paid off.  That will just leave us with a mortgage.  "Just" might not be the right word since it's the biggest debt but it is going to feel like "just". 

It really is amazing what people can get done in a year on their finances if they will try.  Most people don't have a clue what's possible.  Between that lack of information and not wanting to feel like they are depriving themselves, a lot of people don't even make the attempt but it is so worth it.

We will be saving so much money by not paying interest.  We will have so much more cash available to us by reducing our monthly bills.  And most importantly, the reason why we started this whole thing is to give us a sense of freedom.  Not owing anyone any money will give us options we didn't have before.

My disclaimer

I want to continue with the housing issue but as I thought about yesterday while hauling tons of dirt out of my yard, I felt that I should step in with this disclaimer.

My plan works.  My plan will make is going to make our life better.  Yours too, if you follow it.  My plan is simple but not necessarily easy.  I think that if everyone would follow it, we would dramatically change the US for the better.  People would have more control over their own lives and over money.  People who control money, control the country. 

The views of the future that I express about credit cards, the state of housing, and anything else that catches my attention may in large part, be just my guess about things to come.  I read and watch different sources as I research for these posts but that research is not necessarily deep into the subject.  I might go into it just enough that I can make a post for the day. 

On top of that, many of the things that I'm going to say will be directed at people who are following this plan or a similar one.  I am talking to the people who are trying to free themselves from the trap.  Some of the posts that follow might seem callous.  I do not intend them that way but I'm talking about what we can do today to help with tomorrow.  If you continue to max out your credit cards, you'll have to look in the dictionary for sympathy because you won't find it here.

If you are one of the 60% of people who grossly overstated their income on a "liar loan" and are now looking at foreclosure, what can I say except, "What did you think was going to happen when you had to start making payments based on your imaginary pay?"

If you expect me to take the small man's side on every issue because the banks seem to be screwing everyone, you'll be disappointed.  Is it stupid for a bank to loan money on the honor system?  Certainly.  Is it their fault that so many people lied in order to buy a house that they couldn't afford?  Certainly not.

This blog is for people who have at least a shred of sense (not common sense because in my days as a cop and now as a financial coach, I have found that sense is uncommon).  Or for people who realized that they made a mistake and are now trying to fix it.  I've made some big financial mistakes in the past.  I try not to keep making them though.  The best part part about pounding your head against the wall . . . is when you stop (Thanks Lisa!).

Tomorrow (and I do mean it this time), we are going to keep on going with the housing discussion.  Especially if it's still snowing.

Cheating on discipline

My plan could take a lot of discipline.  I read an article yesterday where the author made a couple of comments about how difficult it is to stick to a plan like this.  My wife and I cheat. 

We track all the money that we spend so we have a fairly good idea about how much it's going to cost to get us to the next week.  I get paid every week.  She gets paid once a month.  We only have to get to the next paycheck. 

For all my talk about financial strength, we live from paycheck to paycheck but it's for a reason.  We don't need much discipline to do that.  When we get my check, we spend it all.  We pay the bills, figure what it's going to cost for groceries and things like haircuts, and then we send the rest of the check to the debt that we are currently paying off. 

There are people who go the other route and wait until they get to the next paycheck and send any extra money from the previous check to their debts.  That takes discipline and usually yields a low amount (low, as in zero) being paid toward debts.  We know that we would probably be the same way or we knew we would when we started.  We probably wouldn't be now that we've been doing this for almost a year.  But this system is working for us so we aren't going to change.

Your emergency fund

My wife and I put money aside into savings in case of emergencies.  Right now, it's a very small amount and the emergency fund is growing very slowly.  About a third of the money that we count as our savings (which includes investments) goes toward the emergency fund.

I have read some articles where the expert suggests not even starting a debt reduction program until you have built up your emergency fund.  This seems like a big mistake to me.  Especially when some of them say that you should have 6 months worth of funds built up before you try to reduce your debt.  Might as well say "never".

See, here's the thing.  If you put a little bit into your emergency fund and put as much as possible into debt reduction, you increase the time that the money will cover.  As your debts go down, the more months your money will cover the rest of the debts.

For example, let's say that you have $4,000 in bills and that it takes you another $2,000 for food and utilities each month.  $6,000 times 6 months means that you need to save up $36,000 before you start reducing your debt.  How long would that take?  If you are like many people who are trying to figure out how to just cover the bills each month, it will be a long time.

If you were able to cut expenses and find 10% of your money freed up and you put $600 a month into saving, it would take you 5 years to get that amount of money.  Then the experts say you're ready to get started on your debt reductions.

YIKES!

If you follow the plan that I have outlined, you can pay off all your debts in 5 years.  At that point, how long would it take you to save up 6 months of living expenses?  About 3 months if you didn't put any money into savings during the debt reduction part.  None if you put a little bit away each month.

More on this tomorrow.

Why I share our numbers

The progress we are making is probably better than some and no doubt worse than others.  I share my progress because it allows me to put real numbers behind my plan.  It's an example of what can be done.  The numbers should get better and better and I don't do this to brag.  Anyone who follows this plan will have a similar response.  Of course, Your Mileage May Vary, but my wife and I are a good example of what can be done. 

We work the plan just like I teach it.  We don't follow a budget and we aren't as strict as we could be.  This plan is not about strict budgets and going without everything you find enjoyable in your life.  You can work it that way if you like but this plan is for people who want more flexibility but still want to make progress.

The closer to debt free people get, the more options they have.  The more cash you have in your hand, the more choices you can make with what to do with it.  Spend it, save it, or invest it.  Some of all three.  You don't get those choices when every paycheck is already spoken for by the banks. 

When you hear people talk about being trapped in their jobs, they aren't really trapped in their jobs.  They're trapped in debt.  They have to stay working at the same payrate they are at in order to pay off everyone that they have promised to pay for the next 20 to 30 years.  They can't take a job they would enjoy more that pays less.  They can't work part-time while they go to school or get training for what they would rather do.  They can't drop out of the work force and start their own business.  The job doesn't have them trapped, the debt does.

The more debts that you can pay off, the more freedom you have.  I blog about our journey to show that it's possible, to talk about our struggles, to talk about our hopes and goals, and to talk about our successes.

Quite frankly, from where my wife and I started financially, if we can do it, absolutely anyone can do it.

The plan can work slowly if you like

To make this plan work, the bottom line is that all you have to do is not borrow money again.  Don't get loans and especially don't use credit cards.  It's been a while since I've mentioned credit cards so I'll probably have to do a post on them soon.  Credit card companies are getting more predatory every day.  You have to free yourself from them.

If you don't want to make the sacrifices that we've made, you don't really need to.  We put all our extra money toward our debts but you don't have to do that.  You can spend it on anything you want.  If it scares you to go without, then don't go without but only buy what you can afford.

The thing about going without for a little while and putting the money toward your debts is that you free up more cash on a monthly basis.  Think about how much more money you would have each month if you didn't have any credit card bills.  What if you didn't have any car payments?  What if you didn't have a house payment?

My wife and I are probably going to take a couple months off from paying things down as quickly as possible after we have paid off the student loan and the car.  All we'll have left to pay off is the house and we're going to reward ourselves by seeing what it's like to live without the debts that we've paid off and have the extra cash just laying around.  Then we'll get to work on the house because there is going to be so much freedom for us when that's paid off.

The other benefit to going as quickly as possible is the tens or hundreds of thousands of dollars that you save in not paying interest.  The less interest you pay, the more money YOU have.  A simple fact that most people just don't seem to realize.

***

By popular demand, I have started a new blog about events in my life.  The first post is about a chat I had with Don Rickles and can be found at http://successwarrior.typepad.com/chronicles

The second and ongoing reward

I told you about our initial reward when all we have to pay off is the house.  We're going to relax and do whatever we want with the cash that we have for those months.  Obviously, the faster we pay off these last two debts, the longer we have that freedom

The second reward will start in 2008 when we go back to work and try paying off the house.  We are going to put all the money we have into paying off the car except what we were using for the car payment.  That money we are going to split in two and each of us will be able to use it anyway that we want.

It will slow down paying off the house by a little bit but it could take a couple years to pay off the house and during that time, we don't want to feel like we are completely depriving ourselves.  It will make the time that it takes to pay off the house a little easier to handle mentally this way.  We have made great progress and by the end of this year we will have done something wonderful.  It will be time for us to enjoy some of the fruits of that labor.

We think that even while doing this, we will be able to pay the house payment each month plus almost twice that amount against the principle.  If we are able to do that, the house will still be paid off extremely quickly (relative to 30 years).  We want to be able to use some of our money for things that we have gone without to make this happen.

Tomorrow, let's talk about interest on the house.

We have two rewards planned for ourselves - here's the first one

At some point this year, we will have paid off every debt except the house.  At that point, we are going to completely relax for a couple of months.  We have been going without as much as possible in order to reach this goal as quickly as possible. 

When we get the car paid off, we are going to stop working the debt payoff plan until 2008.  We are hoping to have the car paid off by October.  That will give us the rest of October, November, and December to just relax and take the self imposed pressure off of ourselves.

We are going to buy what we want, when we want (without incurring new debt) for the remainder of the year. 

The difference will make it feel like we have hit the lottery.  Going from spending nothing to spending everything that doesn't go to the house payment, food, and utilities.  I don't know that we'll spend everything and that's going to be even more freeing mentally.  To have the money and be able to spend it is more important than actually spending it. 

Everyone's situation is different but for many people, having no bills except a house payment would free up a lot of money.  That's how it will be for us.

We'll probably take one of those months and build up our savings and then just enjoy the holiday season without any financial worries.

Money trickling in

A few years ago, I told my wife that I was going to work on getting money coming in from several different sources.  My thought was that if I could get $50 coming in from 10 different places, that would be nice.  Improvements in some of them would increase the overall money coming in.  My wife, as always, was supportive.

I haven't made that happen yet but each month, I work on getting closer.

There are two very nice things about this multiple streams of income approach.  The first is that every little bit helps.  Each additional income source helps even if a little.  On top of that, you can leverage it even more but putting money from one into another.  I have money earmarked from one source that I use to put into Prosper which earns interest.  I am reinvesting the money from Prosper back into itself as well so that it will build up to the point where it is bringing in more money.

The other nice thing about it is that if you build up your sources enough, you can lose one without it being devastating.  Right now, the two main sources are mine and my wife's day jobs.  We can't go without them right now.

Our goal is to reduce our debt to zero so that we just need living expenses if things go bad and increase the different streams to that the loss of a job just means less amenities.

Add enough of the little streams together and you'll have a mighty river.

The heat bill and my allowance

The two aren't connected but I wanted to cover them both today. 

Last fall before it got cold, the electric company raised its rates by 12%.  Our heater is electric not to mention that in the winter you use more lights.  I have some thoughts about the size of the increase and maybe I'll go into that tomorrow.  Today it's enough to know that they did a huge increase in time for winter.

We vowed not to let our bill go up by 12%.  It just wasn't going to happen.  We have kept the thermostat at least one degree lower than last year and at night we put it even lower.  I taped around a door that we never use to keep warm air in and we put plastic over our worst offending windows and the french doors. 

This month's bill was 10% lower than last years even with the price hike.

I got my allowance today.  That's what my wife called it.  I don't know that it's MY allowance because I put the money into savings and investments.  I get a little less than 5% of our net as my allowance.  Right now, I'm splitting the money evenly between savings and investments.  I'm going to do that until I have my saving up where I want and then I'll switch to just investing.  It will take me a while to get my saving where I want it though.

Every little bit helps.

10% saved on the electric bill.  5% gaining interest or value.

It all helps.

Looking ahead to 2007

My wife and I had our weekly meeting last night and I'll give you some of the highlights.  It had been a couple of months since our last meeting so there was quite a bit to go over.  We usually meet each week but we put everything on hold for the holidays.

One of our biggest goals for this year is to reverse what I call the financial inertia of our money.  Essentially, we want to stop paying interest and start earning interest.  We are going to work on both goals at the same time during this year.

To slow down paying interest, we are going to pay off my student loan and the car loan.  That will leave us with just a house loan which we will start paying extra payments toward.  Every payment to principle lowers the amount of interest that you pay for the rest of the loan.  I'll be talking more about this in the future.

To start getting more interest, we are going to do a few different things.  I'll continue to put in the max amount that my company will match in my 401k.  It's a percentage and I'll be getting a raise this week so that amount will go up.  We are going to move most of our saving from our bank where it's earning a whopping .7% interest to ING where it will be getting 4.5%.  We are going to start investing in mutual funds and stocks.  I will also continue to play around with Prosper which probably won't make tons of money but I think it's valuable for now.

We reviewed our goals and changed a lot of the dates that we are aiming for.  Most of the dates, we moved closer.  For instance, we previously had that we wanted to be completely debt free by the year 2016.  Last night in looking over everything, we decided that we could probably do it by 2010. 

We reviewed our daily activities to remind ourselves of the small things that can be done daily that will help us.  Every week, we pick one that we think is the most important to work on for the next week.  This week we picked "Monitor Expenses Daily".  We want to make sure that we get out of "holiday mode" right now.

We usually review our weekly spending next but we haven't been keeping track so there was nothing to review this week.

We looked at what's coming up in the next week as far as appointments go.  I have a meeting with the HR director and my wife has a couple of appointments.  Nothing financial but we keep track anyway so that we both know what's going on.

We have a miscellaneous notes section that we left blank this week.

Next is to list everything that we didn't get done from last week which was left empty because we didn't have a meeting last week.

The next section is things that we want to bring up next meeting.  This is for things that wouldn't or can't be done in the next week and so won't be included in the "Weekly To Do" list.  We left it blank last night but I remembered something today that we were going to do in January so I have added "Review FICO" to bring up in the next meeting. 

The last section on the page is the weekly to do list.  We put down that we will invest $100 and move our savings to ING.  We also put down a couple of non-financial things down.  We list everything for the week, again just so that we can stay on the same page.

When that was done, I shared a sketch of a floorplan for a house with my wife.  I drew it last summer and we looked it over and made some small changes to it.  We are going to be moving in a few years and will probably build a house.  I'm drawing the house that we would like to live in.  Whether we are in a position to build it or not is still up in the air but we have found that magical things can happen if you have a clear picture of what you want.

Our first weekly meeting of the year is tonight

As luck would have it this year, my wife and I will be having our first weekly meeting of the year on January 1st.  It just happens that the first day of the year falls on a Monday this year but it does seem appropriate.

I have covered this before but I want to go over it again for those that weren't reading this blog the last time I covered it.  My wife and I meet each week to discuss our finances and other topics.  She works days and I work swings so we tag team on taking care of Trey.  If you are working at getting out of debt, I highly recommend something similar.  To become debt free as quickly as possible, you have to be working toward the same goal.  It doesn't have to be weekly but I recommend that you have a meeting for each pay period.

I'll tell you what we do so that you have an idea and maybe you can adapt something similar for yourself.  Remember half of Step #1 of the plan is to know where you are. 

We check online and we record what we owe on our loans and what we have in savings, investme