Success Warrior: The Blog That Embraces ADHD

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."

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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.

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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