I’ve Paid For This Twice Already…

Archive for the ‘tips and tricks’ Category

I’ve been reflecting on how much progress we’ve made towards reducing our debt in the past several months, and why we’ve been so much more successful this time in reducing our credit card debt. I’ve come up with some attitude and behavior shifts that have really helped it work this time. Here are ten relatively small changes that anyone can make that can add up to a huge difference.

1. Be Accountable: Having this blog keeps me accountable, as I blog about the details of money that goes to debt, savings, and gets spent. You don’t have to be accountable to the world on a blog, it could be your spouse, a family member, or a trusted friend. Before I started the blog I used my spouse as my primary sounding board and that was working well too.

2. Have a Plan: Trying to accomplish any goal without an idea of how to get there is setting yourself up for failure. Make a plan to get out of debt. Figure out how much a month you can pay towards debt, and have a list of your priorities in regards to payoff. Which debt are you paying off first? How much over your minimums are you committing to paying, no matter what?

3. Snowflake: Snowballs are great but to build up momentum to a snowball, start with snowflakes. You can read my primer on what is snowflaking here. Basically, commit any extra money to debt, and squeeze extra money out of any place you can find it. You could use coupons and apply the difference to debt, take surveys online, pick up a short-term extra job, collect the change from in your couch cushions - there are dozens and dozens of possibilities to find a few extra dollars through reducing expenses or increasing income. The key is - they must immediately go towards paying down debt. Online bill pay can greatly facilitate this.

4. Make Smart Choices: A lot of life is choice. It may not be obvious, but when you choose to buy something you don’t need vs paying that money to debt, you’re making a choice that whatever that is you are buying is more important to you than reducing your debt. We all need a little bit of “want” in our lives, even when we’re buried in debt, but make sure you have chosen the “wants” that truly enhance your quality of life. And pay the rest to debt.

5. Increase Your Income, but Don’t Increase Your Lifestyle: Try and find ways to increase your income. They could be big ways like taking on a part time job, or small ways like decreasing your tax withholding on your paycheck if you generally get a refund. But do not increase your lifestyle accordingly - all of the increase in available money must go to debt. Once you’re dependent on that money for everyday expenses it is no longer an increase and is now part of your necessary income.

6. Slow and Steady, but Take Advantage of Opportunities Too: I truly believe being consistent and slow and steady payments is a key to debt reduction. Commit to an amount to pay to debt per month, and don’t compromise on it unless absolutely necessary. But take advantage of opportunities. If you get a windfall, large or small, pay it to debt. All of it if you can make yourself do so, but at least a large portion of it. A bonus at work, a cash present from a relative, any unexpected money can go to debt.

7. Abandon ‘All or Nothing’: Sometimes if we realize we can’t meet our goal, we abandon the effort altogether. It doesn’t have to be that way. Some is better than none. If you can’t put everything you planned towards debt one month, just do the best you can and keep going. It is better to hit part of a goal than none at all.

8. Substitute: When appropriate, see if there is a less expensive alternative to whatever you are buying without sacrificing quality. The simplest place to do this is in the grocery store - many store brands are very similar to name brands in quality and taste, they just differ in price. Calculate your savings, and send that money to your debt in a snowflake.

9. Don’t Be Afraid To Ask: There are many discounts available if only you ask. From an additional markdown on a slightly damaged piece of merchandise, to a discount to bring a price lower than the competitor’s, be assertive. Ask. that’s the only way you can take advantage of any hidden markdowns that might be available to you. Again, this money saved is now available to go directly to debt.

10. Budget: Last but not at all least, use a budget as a tool for debt reduction. A budget can help you clarify what your priorities are. A budget should be a flexible tool that adapts to your life, but helps you really understand what your life’s priorities are as well. Knowing your income, expenses, and available money for debt reduction can really jumpstart your debt reduction process. you may be able to make a lot more progress than you think!

I hope you’ve found at least a little inspiration in this list, and please add your own tip in the comments if you have a secret to your success!

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I have had several questions lately about snowflaking - what is it, why do I do it, can we see examples of it - so I thought I would write a quick primer answering those questions and more.

Snowflaking is a spinoff of the Snowball approach to debt reduction popularized by Dave Ramsey. With the Debt Snowball method, you figure out what amount you can pay to debt every month, and then you keep paying that amount, even as your debts shrink and your minimums get smaller. To implement it, in a nutshell, make a list of all your debts, order them from either smallest to largest or highest interest to lowest interest (that is a debate in itself), and you focus all extra money above the minimum payments on a single debt (either the smallest total or the highest interest, I use interest order). As you eliminate debts, you apply the payment you were making to that debt to the next debt in line until the snowballing effect of decreasing minimums and increasing amounts applied to particular debts eliminates all the debts on your list.

Well, what are snowballs made of? Snowflakes! I have a set amount I pay to debt without fail every month that is above my minimum payment due (about $800). On top of that, I also try to collect up little bits of money wherever I can and I apply those as well to my top priority debt as immediately as possible. I take surveys online, I sell possessions on craigslist and ebay, I have yard sales, and any money I get from these endeavors goes directly to my debt. I also keep a very strict accounting of all the money that comes in every month and what I spend and everything left over at the end of the month not earmarked for future expenses also goes directly to debt. These are my snowflakes. I have averaged over $200 extra going to pay down my credit card debt every month due to these snowflaking efforts.

Many small snowflakes make a snowball, and no amount is too small for me to snowflake. I used to pay my credit card directly every time I collected a snowflake through their online interface, but now that I have moved my credit card debt to another card with a 0% interest offer, I collect the snowflakes and pay them once per week (I am limited to the number of payments I can make to this card a month). If you are able to and your debt is not at 0% interest, I highly recommend the “pay snowflakes immediately” method. The faster your balance is reduced, the less interest you will accrue.

So, that is my snowflaking method. Small efforts matter, and many little things can add up to a huge snowstorm.  I use it because of anything I’ve tried, this has kept me the most focused and deliberate about debt reduction and eliminated debt the fastest. I cannot take credit for the idea or the implementation, many many other personal finance gurus and bloggers alike have used this method before me, and I first read about it on an iVillage Debt Support message board. I am just a subscriber to it. Maybe someday I should read some Dave Ramsey and learn from the granddaddy of the snowball himself.

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A few weeks back, I talked about how I was like my new cell phone - cheaper but I know more stuff. Since then, I’ve been pondering… what “more stuff” do I actually know since starting this debt elimination journey?

Things are likely to be more expensive if you pay for them in the future

This seems obvious but honestly, I never really thought much about the connection between stuff I bought and the payments I was making to the credit card. I don’t mean that I didn’t know that I was still paying for stuff I already had (and sometimes was long done with) with each credit card payment, but they were sort of divorced in my head. So I didn’t really think about that I was basically paying in the future for what I had today. I have been very conscious now of linking the fact I am paying on my credit card still to what might I have bought so long ago with it. Which leads to…

Don’t count on tomorrow to pay for today

If you buy things thinking “Oh I can just put it on the card and pay for it later” without having that “later” money already saved up and available… you might not be able to after all. Something else might come up, or something might happen to your income, the unexpected should be expected. Counting on money you are getting tomorrow to pay for something today is a dangerous game. I have a plan now to get out of debt, but I also know every day of that plan I’m walking a sort of tightrope, hoping I get tomorrow’s money to finish paying off not even today but yesterday.

Interest rates are important

Pay attention to interest rates! Make sure yours are competitive for whatever you are doing. Not all interest rates are created equal, and it is obvious but lower is better. I honestly didn’t really think too hard about interest rates when it came to my student loan, I just assumed I would get whatever was good. I was dumb. I know it now. I am dumb no more. (Hopefully).

Live for today, save for tomorrow

It is important to have a comfortable and happy life… now *and* later. Don’t live within your means (barely) now and have nothing to show for it later. No one gives out loans for retirement (or at least, not ones anyone would realistically want). I’m still working on finding what that balance is, but at least now I know there should be a balance.

A penny not spent is a penny earned

Sometimes it seems saving money might be impossible, so instead look at just not spending money. It kind of washes out to be similar things, but sometimes the best thing you can do to improve your financial situation is just not spend money whenever possible. I used to spend “extra” money when we had it or I felt like we had it. Now I don’t change my spending habits just because we have a little more money in a month. I just have more money left over to pay down debt with (and someday, to save).

Minimum payments are not your friend

Seriously. You could pay for $1000 for like 20 years if you just pay the minimum. the best answer is to not carry a balance at all but sometimes, that ship has already sailed and we just have to minimize the fallout. Pay as much as you can above the minimums, even a few dollars a month can make a big difference over time.

Knowledge is power

This is for me the most important. For a long time I thought it was better to have my head in the sand and not know the real details. But knowledge is power — with knowledge you can institute change. That’s why I made this my one money advice when asked. Knowledge is power. Ignorance will not help you. Know how much you owe, who you owe, interest rates, how much you’ve saved, where you save, fees, everything related to your money. You’ll be glad you do.

So, like my new cell phone, it turns out I know a few more things now than last year’s model did. Most likely, many people already know these things and have known them all their lives. What can I say, I’ve got a steep learning curve. But I am learning.

~J

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As I have alluded to several times over the course of this blog, I work part time from home. I am an independent contractor doing quality control over a whole bunch of data from the comfort of my home computer. Any more specific than that violates my confidentiality agreement. I have been doing this for roughly 3 1/2 years now (3 years as a parent) and I thought I’d share some of the things I’ve learned about how to effectively manage working from home, from the perspective of a full-time parent. Here are some tips to consider if you’re a parent and thinking of making the leap from outside-the-home work to in-home work.

1. Just because you are at home doesn’t mean you can do it all at once. To me, this may be the most important point and bears repeating. I do the vast majority of my at-home work when my spouse is home to take care of the kids, if both of them happen to nap at the same time (I have a 3 year old who occasionally naps and a 10 month old who naps daily), or when the 3 year old is at preschool and the 10 month old is napping. Very very rarely can I work and parent at the same time, and assuming you can be as productive in a typical 8-5 or 9-5 schedule while parenting your kids is going to set you up for failure unless you have care arrangements for the kids during that time. Working at home while parenting necessitates thinking outside the box at alternative time schedules or other flexibility options.

2. Set up a schedule for yourself and stick to it. It is easy to let work slide when there are so many other things you could be doing around the house. The flexibility of working at home is great, but without some sort of structure it is very easy to not work at all, or work much less than needed. That being said, realize your schedule can be flexible and can vary from week to week if need be. I have a pretty structured first 15 hours for every week, but as the week progresses, I adjust each day to add in more found time, so my overall hours can increase up to 30+ depending on what I have going on and my available workload.

3. Have a dedicated space with as few distractions as possible. My office is a structured place attached to but separate from my kids’ playroom. In retrospect, I may have wanted to set it up in our guest bedroom instead, because it can be distracting when my spouse is playing with the kids and I am working at the same time. Having a completely separate space though that is just my office helps me to focus on what I am doing much more than when I shared my office with the nursery and the master bedroom (ah, the crowded apartment days). And it helps tremendously with keeping everything organized.

4. Treat your time as valuable - Time management is key! There is only so much time. Much of it is spent sleeping. thin about what you’d like to do with the rest of it. Break time into manageable chunks of work and play and make sure you are not undervaluing your time. Don’t mix too much “play” into the work time or you may find you’re earning far less than your time is worth.

5. Lists are your friend - organization is time management’s best buddy. Just as planning your time can help you be successful, planning your tasks is also very important. What do you want to accomplish today? Tomorrow? this week? Make a list. Write it down. Find what organizational style works for you, but do it and stick to it. Ideas are easily lost, tasks are easily missed, without a backbone of organization.

6. Realize that there will be interruptions, and know when you need backup. Just as my son woke up for the day in the middle of me writing this post, unplanned interruptions happen. If you just cannot be interrupted, make sure you have backup, be it your spouse or a friend, who can step in for you in the parenting department until you are past the phone call/deadline/task that needs to be done right then.

7. Know when being the parent is more important. Sometimes, your kids just need *you*. One of the benefits to working from home is that you can put down what you are working on (usually) and spend some quality time with your kids. It is important to stay organized and on track and focused, but allow room for just being. I know when my son starts bringing me every toy he owns and saying “look here mommy, fun” that he needs me to take a break and spend a little one on one time with him. And a lot of the time, that break can refocus your energy so when you come back to working you’re refreshed and ready to go.

Those are some of my favorite tips to having a happy successful work at home lifestyle as well as being a great parent besides. With some organization, thought, and hard work it can really be a positive thing for you and your family. If you work from home, or have thought about trying it, weigh in with your best tip or idea as well!

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