Fabulous Financials

Check out my guest post on Consumerism Commentary!

Oh yea, he’s also the brains behind my fabulous new blog!

[image credit: e-limidebt]
Although I have no desire to discuss MY debt reduction experience anymore, a Fabulous Financial reader has stepped up to the plate to share how HE stays motivated on his journey from $21,000+ in credit card debt. Due to his focus and dedication, he will achieve his goal of DEBT FREEDOM by June 2008. I hope you enjoy this guest article.————————————

A few months ago, I emailed Single Ma to ask her advice about dealing with my credit card debt. For the past 7 years I’ve been in debt to my credit cards. I’ve made efforts to pay it off, but while I would get it down some, something would always came up: like car repairs, bad business investments, being laid off, helping out friends in need, etc. I lived paycheck to paycheck and it felt like I was working just to keep my life at status quo, not to get ahead.

This year I got serious about paying it off. I started reading the personal finance blogs and some personal finance books. I read The Automatic Millionaire by David Bach and took his advice about building up an emergency fund. I paid the minimums on my credit cards so I could build an emergency fund and I was amazed at how quickly I was able to build up 3 months of basic security. In June I took advantage of a 0% Balance Transfer offer from Chase and moved most of my debt to a 0% account for 15 months.

When I emailed Single Ma in August I still had over $21,500 in credit card debt left. She told me that while saving was a great thing, my debt was making it counter productive. I agreed with her and decided to ignore David Bach’s advice and refocus myself on getting out of debt.

So how am I doing?

As of this Friday I have paid $9,209.86 on my debt. That amounts to 43% of my total debt in under 5 months! (I think I may be able to squeeze in an extra payment before year end too) When I emailed Single Ma to give her my update she was very happy for me and asked me to talk to you all about what keeps me motivated. After doing a little reflection I came up with some of my motivators and helpful tricks.

1. I want the freedom to not have to work a 9-6 job. My current job is very challenging and I enjoy the people I work with. But this has not always been the case. In the past I have felt trapped in jobs because of my paycheck-2-paycheck existence and the load of debt I had on me. I don’t want my debt to dictate my choices.
2. My girlfriend is in a similar situation. She is aggressively paying down a combination of credit card debt and college loans. Having her be on the same page financially with me is a great help. In fact, I think it is my biggest motivator. We both help each other to not spend on frivolous things. For example we used to go out to the movies almost every weekend. We used to order dinner nearly every night. We would both work long hours and when we got home cooking was such a chore that it was just too easy to order in. We solved that problem by hiring a local college student to be a nanny for our son. She picks him up from after school, brings him home and cooks dinner for us. We end up saving money and now my girl can go to work without stressing out about picking him up from school. And she is able to work a lot more OT. And the leftovers from dinner I take for lunch. This alone has saved me a few hundred dollars a month (and we’re eating healthier).
3. When Single Ma first wrote about my debt situation, I felt a bit of a spotlight on me. With my salary, it seemed just wrong for me to not get my butt in gear and get my debt done with. I read people on other blogs who have debt greater than mine and make less than I do who can do it. Having Single Ma write about my debt and then joining the Debt Reduction Crew forced me to publicly take responsibility for my debt.
4. I want to invest. Having paid credit cards for so many years, I am DAMN tired of being on the wrong end of interest payments. I want my money to make money! And In a few years, I want to be able to use my savings and investments to put toward a house.
5. I keep my debt on my mind every day. I do this by visiting a few PF blogs every day (of course Single Ma is always on the list), and back in September, I found out about a site called Yodlee.com. I use it to consolidate all of my credit card and savings information in one spot, and then it breaks it down for me in a number of ways. I love viewing my net worth statement. Watching my debt go down and my total net worth go up is a great feeling. This is my net worth chart taken today. (Note I do not use it to track my 401K allocations yet)
6. On top of all this, I am thinking about starting a software consulting/contracting business. This goes back to reason #1: I don’t like working as an employee. I think I can offer a far greater value to clients and see a better result in my take home pay if I branch off on my own.Before I can even consider doing this full time, I need to be debt free and have enough savings to see me through a startup phase. In the short-term, I have been aggressively seeking moonlighting opportunities to get me started. Finding contract work that I can do after hours and on weekends is proving difficult, but I am keeping at it. I recognize that this is an area where I will need to seek out advice of people more experienced than I am.

So this is where I am at years end. Thinking ahead to the next year I anticipate being completely debt free by June. I will resume my aggressive *saving* once I am paid off and I hope to be doing some consulting by then as well.

Thank you Single Ma for helping me get focused and stay focused. And thank you for your frequent postings. I know I speak for all of your readers in saying just how much we do enjoy reading about your thoughts and adventures.
[you're welcome, dear. ~SM]

Wishing you and all your readers all the best in the coming year.

[the other] Mr. C.

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I’m so glad Mr. C. agreed to write about his motivation because I never thought to put it in those exact words. I didn’t think I had a reason to be debt free, it was just something I knew was the right thing to do. But since he was able to articulate what I couldn’t, I now realize my motivation to become debt free was similar to his #4 - I want to invest more.

His article further supports what another reader [NoFearingTheMoney] previously mentioned, “it is important to think about why you want to be debt-free in the first place….then the debt elimination becomes a means to an end…a necessary step to achieve a larger life goal.”

Fabulous Financial tip from Single Ma’s readers:

Identify the REASONS you want to be debt free (i.e. tired of working for someone else, mutual goal in a supportive relationship, desire to invest, it keeps you up at night, Single Ma put you on blast so now you gotta show and prove lol, etc.) then use them to fuel your debt reduction strategies. Get started, stay focused, and don’t stop until it’s ZERO.

Dang, my readers are smart! Ha!

~*~*~*~*~*~
Work to achieve, not to acquire.
And as always, BE FABULOUS!

Today’s guest post was written by Sara Wallace and submitted by Mark Daoust. Sara Wallace is a member of Debt Management Talk, a forum where you can earn money by learning debt strategies.

Ever play Monopoly? Ah, what you can learn about life from a board game?! Follow these rules and you’ll be sure to win the debt reduction game:

Don’t Cheat

I don’t care what the excuse may be. The dog’s sick, you had fewer hours at work this month, you have an unexpected bill. Doesn’t matter! You must pay your bills every month. Missing even one month can set you back hundreds of dollars in interest. Late payments also hurt your credit score. And trust me, you don’t want to play Monopoly with bad credit—you’ll end up with no property!

Extra Turns

I love rolling doubles and getting an extra turn! I always look to the person next to me with that “Ha-Ha, I get to go again” smile and gladly roll the dice for another chance at the much desired ‘dark blues.’

When you get a credit card bill in the mail, take an extra turn and pay more than the required minimum. This is the most important rule to getting out of debt! The credit card company wants you to send in only the minimum. They make a lot of money off you in interest. Roll twice—or even three times—by sending in as much as you can. When doing this, you’ll want to pay off the credit cards with the highest interest rate first.

Concentrate on the Game

Make winning your priority. Say “No” to spending money on things you don’t need. Take your lunch to work, rather than buy it. Rent a movie instead of going to the theater. Borrow a friend’s clothes, rather than buying something new. Then you have more money to put toward the game.

Don’t Quit

Can’t win a game if you don’t stay in it, right? You can do it!

~*~*~*~*~*~
Work to achieve, not to acquire.
And as always, BE FABULOUS!

We interrupt our regularly scheduled program to hear a few words from our sponsors my boi: Hustleman!

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Whether you have a home-based business or that you have sold something on Ebay, you can apply for a business credit card. You can put your name as the business name and your social security number as the tax id. Your business is called sole proprietorship and it’s perfectly legal with the IRS.

There will be a hard pull, but business credit cards will not show on your personal credit report. Hence you can open and close accounts, open more new accounts, and max your credit limit without worrying about your credit report. The $250 bonus is worth a hard pull in my opinion.

The $125 annual fee is waived for the first year. If you don’t find the card worth keeping, keep in mind that you can always cancel the credit card without paying any fees.

Here’s the fine print from American Express:

Apply for the Business Gold Rewards Card and make a purchase by 12/31/07. Upon the Basic Cardmember’s first purchase, a one time bonus of 25,000 points can be earned toward the Basic Business Gold Rewards Cardmember’s Membership Rewards® account and may appear as separate credits of 5,000 and 20,000 bonus points. The maximum 25,000 bonus points are available to first–time Basic Business Gold Rewards Cardmembers only; they are not available if you transfer an existing account. Welcome bonus points will be credited to your Membership Rewards account 6 to 8 weeks after your first purchase appears on your monthly billing statement. The bonus 25,000 Membership Rewards points may be redeemed for one domestic round–trip airline ticket.

The 25000 points bonus is a limited time offer. Just like the $250 Chase bonus, take advantage of this offer and apply right away.

For more information, check out Hustlermoneyblog for all credit card bonuses.

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And tomorrow, we will continue with our regularly scheduled program, Part C of On My Own Two Feet.

Same place, same time. LOL

Peace & Blessings

~*~*~*~*~*~
Work to achieve, not to acquire.
And as always, BE FABULOUS!

~SM

This entry was submitted in response my question, “What makes you financially fabulous?” From SF Mom at Seeking Contentment, she is loving life and has every reason to:

First, I need to say that I read your blog every day. I’m a big, big fan. You are witty, intelligent and just down-right fabulous. (Do I need to write more, or do I get the book now?) Just kiddin’. [thanks babe, luv ya already! LOL --SM]

I’m glad that you posed this challenge to me. I started my own blog back in July and was really gung-ho about it. Mostly, I wanted to be held accountable for my financial actions and learn how to save and invest my hard-earned money. I found out quickly enough that keeping up a blog is work and at that point in my life, I couldn’t keep up the pace. Nevertheless, I read blogs everyday and continually try to improve my financial life. This past year has been fabulous on several accounts: personally, spiritually, and professionally.

I realize that I have a wonderful life, a great family, a beautiful daughter, a great home, plenty of wholesome food, and more than enough money to buy the things that I need and want in life. I love my job, I love my boss, I love my life. It took me a long, long time to be so happy with this fate. I think that is what comes to us in our 30s. We start to appreciate things, people, events, everything. We slow down. We’ve defined our character and who we are (or what we want to become.) These things are constantly being fine tuned, but deep down my core values and beliefs are defined. I’ve grown closer to God. I’ve devoted myself to understanding my faith. I attend my church regularly, I pray, I read inspiring spiritual stories. I’ve grown tremendously in 2006.

My financial life has exceled as well. I increased my salary by 57.8% this year, that’s over $75K more. I’m in sales which is a cyclical process. I’ve worked smart and hard for 3 years and this year has really paid off. I also understand that this number can fluctuate dramatically; this is sales.

I have reviewed my spending patterns for this year and figured out exactly where my money went: 27.23% taxes, including property tax; 22.86% mortgage payments, including investment property; 11.66% 401k, Roth IRA, Traditional IRA, 529, E-fund, and Daughter savings account, explanation detailed below; 4.04% medical insurance, flexible spending, auto deduction, legal insurance (for will and trust), dental, Supplemental AD&D insurance, 34.21% all other.

This was in interesting exercise because I learned several things. We remodeled our kitchen and finished up a bathroom remodel this year which cost approximately $50K. We have about $12K in our HSBC account sitting and collecting interest to pay off a no-interest credit card next April. That’s a nice chunk of money working for us! The rest of the remodel has been paid off. No fees for opening an equity line and no outstanding debt. My confession is that I’ve paid about $500 in credit card interest this year. This was one of the lessons learned (and hopefully this faux-pas won’t be repeated.) However, I’m not too upset about it because I got bonus points on my credit cards to be cashed in for free flights, and I got to enjoy my kitchen. I could have done it differently, but I didn’t. Lesson learned. To sum up: the 34.21% of all other included this remodel and an ~$10K trip to Italy with my family and in-laws. After these two expenses, our all other category drops to 9.34% of the total. That includes groceries and stuff.

Despite what it seems, I am maxing out my 401k. I contributed approximately $12,500 this year which is about the max I can contribute in my company. I am on the verge on not qualifying for a Roth IRA anymore, so I stopped contributing to it a couple of months ago. We may still qualify after deductions for the year, but it will be close. That’s a bitter-sweet pill to swallow. I haven’t contributed enough into my husband’s traditional IRA, and I only have about $2800 in an e-fund. However, the e-fund is still an improvement as I didn’t even have one a few months ago. I realize that I want to increase my total savings to 20% of my total financial picture. I missed that goal this year, but think it should be attainable in 2007 because we won’t have such huge expenses. I also realized that my percentage of charitable giving was paltry. It was embarrassing really. I strive to increase it to at least 5% for next year.

I reviewed financial goals that I made back in August 2006. I gave myself 12 months to complete these goals and I’m happily impressed with my progress.

Short-term:

1) pay off credit cards & debt to electrician. DONE
2) restart automatic contribution to Roth, Trad IRA, 529. Half way done. Roth stopped. Traditional IRA, started and then stopped. 529 started and continues.

12 month plan:

1) $10K in HSBC savings for E-fund. $2838.33 in account. Well on my way.
2) Use credit cards wisely and pay off each month. All paid as of Dec16.
3) Max allowed to Roth and Traditional IRAs. Stopped contributing to talk to accountant. Will put max (or as close to) into Traditional IRA after we talk to our accountant in February.
4) Max 401k. Done.
5) $175 to 529 plan for daughter each month. Done
6) Pay down portion of kitchen remodel that was on credit cards $13K. Entire balance is sitting in HSBC account waiting to pay off the no-interest credit card in May 2007.
7) Extra payments to 2nd mortgage for investment property to pay it down quickly. This is the highest interest mortgage payment that we have at 7.5%, but it’s only for ~$20K. I’ve since changed my mind about a portion of this since I spoke to my mentor. I’m going to try to make a couple of extra payments (they are only $200 a month.) to decrease the 30 year payment schedule, but I’m not going to try to have it paid off in the 5 years or so that I had originally planned.

Well, there you have it. The state of my mental and fiscal affairs. I’m working on goals for 2007. Overall, I’m impressed with what I’ve done. I have plenty of improvement, but I know I’m taking the right steps to increase my savings and decrease our overall spending.

Stating goals, following through on those goals, and constantly learning has become an unstated motto. I’m doing just that. I’m improving my life, trying to help others, and growing financially, mentally, and spiritually. That is, indeed, why I’m FABULOUS!

Well what can I say? Can a sista get a loan? LOL

No seriously, I do want to comment on one thing…

Before getting to the details of her finances, I noticed she first mentioned her faith and her relationship with God. This tells me two things: 1) God is at the TOP of their priority list, and 2) she attributes her good fortune to the One and Only who has the power to giveth and taketh away.

I can relate to this approach in life. Whenever I put God first, everything seems to fall into place. But when I second guess Him or try to do things MY way, it becomes 10x harder. Now I’m not saying my life is perfect or without stress and challenges, but I do know to whom I should credit my blessings. He makes my life fabulous!