Monthly Archives: April 2016

Financial Wake Up Call Moment

As I look around the world today, still convinced that America is in for a huge financial wake-up call, I see many, many people still wandering around in status-quo spending,telling themselves that they’re just fine. And I get it. Hubby and I did this for many, many years. We leveraged whatever credit we could gain to get the stuff we wanted to have. We thought that the amount of credit banks gave us was an indicator of our success in the world, and we wore those badges proudly with new cars, nice clothes, fancy homes, etc.

We told ourselves the old lie: “We can make the payments just fine, so it’s all good.”

That is, until the job layoff. But funny enough, that wasn’t our financial wake-up call moment. We still continued to tell ourselves we’d be just fine, and made the smart SO not smart move of using our plethora of available credit to make up for the difference in income between hubby’s salary and the unemployment check.

It was nice. We could continue to live as we’d always lived: financially cozy without much consciousness of our spending.

You would’ve thought that living on substantially less income and not knowing when hubby would work again would’ve been our rock-bottom wake-up call. But it wasn’t. Not yet.

Our Wake-Up Call Moment

Then we moved out of suburbia into the country, and something happened.

I think it could best be described as “taking the blinders off.”

In the country, we didn’t have nearby neighbors known as the Joneses to keep up with. And being further away from the neighbors we did have, we couldn’t see what they were spending their money on.

Suddenly, we didn’t have so many people around us to compare ourselves with. We’d spent years comforting ourselves with the “everyone’s doing it, mom” theology. Now“everyone” was far away, and we were left alone with our pile of debt and no one to compliment our cars, our home, our clothes or our status.

It was just us, staring face to face with tens of thousands in credit card debt. 

And that, my friends, was our rock bottom wake-up call. We started to wonder how we’d make these payments if hubby got laid off again. Yep, that would suck. We’d be in big, big trouble was the answer.

And since there was no one nearby to comfort us with the “it’ll be just fine” message, we had to face the fact that if a job layoff happened it really wouldn’t be just fine. Not in the least.

It was that stark realization – the one that foreclosure, bankruptcy and all those other not-so-fun things could become a reality – that induced our financial wake-up call.

Don’t Wait for a “Forced” Wake-Up Call Moment

My prayer for the millions dealing with loads of consumer debt and bloated mortgages today is that they don’t wait for that “forced” wake-up call of a job layoff or other disaster before they start making a plan to dump the debt and build a more secure financial situation for themselves.

Take a few moments today to honestly analyze your finances and see if your financial situation really lines up with your dreams and goals. Then make a plan to reduce debt and increase savings if needed.

No one is immune to a job layoff or decrease in business income. Or major league medical or other expense. Begin the work of preparing yourselves today so that your potential rock-bottom, wake-up call moment will end with a real-life “we’ll be just fine.”

How to Build a Financial Fortress

Here’s how you can begin those preparations.

1. Assess Your Situation

Sit down today and make a spreadsheet listing each of your debts (liabilities) in order from smallest to biggest. Then list your assets (savings, retirement, homes, cars, etc.) and their values in order. Subtract the liabilities from your assets in order to get your net worth.

2. Make or Assess Your Budget

If you have a budget, look it over to figure out if you can or should trim costs somewhere in order to improve your money situation.  If you don’t have a budget, make one. Make the first budget based on what you spend, and another one based on what you could be spending in order to make your money situation more secure.

3. Cut Costs That Aren’t Value-Based

Go through your budget line-by-line and analyze each non-necessity cost. If the expense is in line with your financial goals and dreams, keep it, but if it’s not, consider reducing or eliminating it. Example: If meeting your financial freedom goals is more important to you than watching cable TV, get rid of the cable, even if just for a time.

Ask yourself before making any expenditure: Is this expense worth me delaying my financial freedom date?

4. Put All Extra Cash Toward Consumer Debt Reduction

If you’re carrying consumer debt, commit to putting all extra monies toward paying it off. Use the Debt Snowball or Debt Avalanche to help accelerate the process.

5. Decide Which Fork You’ll Take Once Consumer Debt is Gone

Once the consumer debt is gone you’ll have a choice to make. You can either keep putting all extra monies toward paying off the mortgage, split extra monies between mortgage and savings, or put all extra monies toward building up an emergency savings account and maximizing retirement contributions.

The right answer is different for everyone, so you’ll want to sit down (with your spouse if married) and have a long discussion about what financial milestones really matter most before you can make your decision.

6. Stick With the Plan

As Ruth shared here, perseverance really does pay off. After only 4.5 years of working her plan, she and her DH are well on their way to retirement, and Ruth is only 53! That is huge, my friends. In another few years, Ruth will be able to leave work and pursue her dream of a career in writing, and just over 4 years ago she was deep in debt with no plan or way out. It’s never too late to begin a journey out of debt.

MONEY SENSE FOR US

Why the need for the new vocabulary? Our generation is looking at money differently. Sometimes we’re confronting new issues. Other times, we’re confronting age-old issues in new ways. And when an entire generation is faced with unprecedented money obstacles, it’s going to take some new words to sort through the numbers and the emotions behind them. Because when it comes to millennial money, some of it is good, some of it’s bad, and some even gets a little ugly.

The Research

First things first. Let’s talk research. How do I know all this? Besides being really smartspending all my time on Twitter, Filene Research Institute sent me their Millennial Money Chatter findings, a summary of an online ethnography that looked at semiotics, syntax, and other things that I haven’t thought about since I was an English undergrad. See? Smart. But seriously. The report analyzes the way millennials talk about money online* with words, hashtags, and emojis. And it turns out, we’re talking about everything from being good grown-ups to drowning in debt.

*They’re reading our tweets, guys! We’re basically famous! Now when do we get to be rich?

The Good

Adulting – We’re adulting! We made it. And we’re totally owning it. We have jobs, we pay bills, we rent, we buy. We are officially grown-ups. Merriam-Webster says the use of adult as a verb showed a six-time increase in 2016 compared to 2015. Why shouldn’t we make a little noise? We’re figuring life out and doing awesome things.

Degifting – An example of our awesomeness? We’re not just big on DIY. We’re not just stretching our dollars with staycations. We do both of those things, and we also degift. Instead of just regifting, many millennials are pausing or stopping the gift exchange. Some of us are trying to stretch our dollars further. Some of us are looking to minimalism and meaningful experiences. And most millennials are taking a long, hard look at the consumerism that literally crushed my closet.

The Bad

Frugle – I love me some frugality. I crushed our grocery budget goal. I spend $7 on breakfast all month. Aldi is my BFF. That’s frugality by choice and for a purpose. Being purposeful with my money takes the latte factor out of my closet and helps me tackle goals like slaying the mortgage monster. So what’s with the weird spelling? It turns out that frugle is similar to frugality, but it is due to financial hardship. Forced frugality, if you will. When I stumbled across this word, it was another great reminder to check my privilege.

The Ugly

#debth – What do you get when your debt feels like a death sentence? Debth. Before anyone accuses our generation of being hyperbolic, let’s look at the numbers. This study quoted other research (like Inception but with data, not Leonardo DiCaprios) that shows 43% of millennials have delayed starting a family over debt, 55% worry that they won’t actually pay off their debt, and 75% have delayed saving for retirement because of debt.

Pause. No, full stop.

Almost half of the people surveyed aren’t having families on their own time because of money. Over half don’t feel like debt will ever end. And three-quarters of the people surveyed are going to be sad old people because of their currently-overwhelmed-selves.

While the numbers aren’t all pretty when it comes to millennial money, the fact that an entire generation is talking so loudly about a topic that was once considered incredibly taboo speaks volumes about what we can do. We can have smart conversations. We can share real stories. We can climb out of debt and make sense of our money in ways that should leave other generations inspired.

Frugal Habits That Were Right On Money

Many of our grandparents were born between 1910 and 1925. This is what Tom Brokaw dubbed “The Greatest Generation” when America was developed and defended on the backbones of its hard-working citizens. Anyone with silver hair, no matter their birth date, has spent an entire lifetime making choices and reaping consequences. It is our choice whether or not we will learn from our grandparents’ experiences and advice. That is why I’ve comprised a list of frugal habits I’ve learned from watching my own grandparents as a child.

It only just dawned on me that I’ve been learning from their example all of my life even though they’ve all passed on.

Even my grandpa “Big John,” who passed away from a heart attack when I was four, left a legacy in his community as a reliable and trustworthy man others looked to for business advice. Things like that, 25 years later, stay with me.

Grandma’s Top 10 Frugal Habits That Were Right on the Money

I titled this piece “Grandma’s Top 10 Frugal Habits” because many of us had “that grandma” who wore the same three outfits and that one pair of shoes.

But this list will also include other grandparents who had a powerful influence in my life.

1. Driving a used car.

My grandma Dorris drove the same used car through my entire childhood. It wasn’t new or flashy, but it was nice, reliable, and paid for.

2. Gardening.

My grandpa Lloyd plowed Michigan soil every season of his adult life. In retirement, his favorite pastime was taking care of his beautiful garden.

Grandma Dorris and I spent time picking and snapping green beans straight from her garden into the dinner pot.

When I graduated from high school, grandma sent me a letter with two packets of seeds to start my own garden. That was my grandparents’ legacy.

3. Scratch and dent.

Grandma helped me shift my mindset and think about things like manager’s specials and clearance racks. She went a bit too far some days, coming home with food that looked like it was ready to crawl out and burrow itself into the ground, but the lesson was still valuable.

I probably won’t hunt for nearly spoiled food and cereal boxes that look like they’ve been flattened by a forklift. Still, finding food on sale because of a simple blemish or dent is a win in my book.

4. Saturday garage sales.

If I visited grandma Dorris over a weekend, we’d either end up at the “scratch and dent” store or we’d go to garage sales. If I didn’t bring my own spending money, grandma didn’t buy me anything.

I remember only one time when she got something for me. It was a knock-off Barbie doll with chopped hair and a missing foot. It couldn’t have cost more than a quarter. Still, I cherished her gift and played with it for many years.

5. No TV.

I have so many childhood memories of showing up at grandma’s house, diving under her couch for a pack of Uno cards and sitting across from her as we played for hours. Not once did my grandma own a TV.

We’d occasionally listen to Peter Rabbit on her record player or catch the latest Detroit Tigers game while we cooked dinner together.

These types of memories stay with me as I raise my own children. I love the idea of our TV being a side product to our house, not the central focus. We don’t have cable and we try to spend as much time in the play room, kitchen or outdoors as we can.

I want my kids to have as much fresh air and the color green in their memory banks as I had.

Top Tips for Debt Free

Last week we celebrated our second anniversary of becoming consumer debt free.  It was an intentional plan that started back in the summer of 2010 and fifty months later we had accomplished paying off $109,000 worth of debt.

The journey started years earlier when my wife and I got married and started a family. We never really had a plan for our money, overspending over the years to get to that point. We didn’t communicate often about money, other than to say what credit card to use to pay for something we didn’t have the money for. We had five credit cards at one point, juggling minimum payments until they became too much to handle even with a six figure income.

It was at that point we knew we had to make a change. We began to educate ourselves about all things personal finance, built a plan and dug in. We involved our three children and kept our eye on the end goal of being debt free.

With two years under our belts, being debt free is even sweeter than I ever imagined. Stress has been reduced in our lives, the money fights don’t occur often, and we are better prepared to handle what life throws at us. I say “we” because it has truly been a family effort. I think the thing I’m most excited about is the head start our three teenage children will have with personal finance knowledge. I can’t wait to see what they will do with it.

Credit Cards

Credit cards were the tools we used to sink into six figures worth of debt, but what we’ve learned over the last few years is that it wasn’t the plastic card in our pockets that was the problem, the real problem was our behavior.

Once we learned to change our behavior and break our bad habits with money we can use credit cards responsible. They are just tools like a debit card, checks, cash, etc. For a period of time we cut up our credit cards because we didn’t trust ourselves to use them responsible.

We now, believe it or not have four credit cards. We pay off all credit card balance in full each month. We only use credit cards to purchase items with have cash for. We do this to take advantage of rewards and save money on travel. An item that has a lot of priority in our lives. We saved over $2000 on airfare this summer following this method.

Even two years post our debt payoff we still need to be diligent about our spending. It can be very easy to slip back into old habits and overspend using plastic. We never want to go back to that place ever again, so we continue to track spending and communicate often.

Cost of Holding On / Letting Go

I recent read two great articles by Carl Richards, one about the cost of holding on to something and another a follow-up about letting go. I even dropped him an e-mail. The really helped me put some closure on my year two experience of living debt free. It has been great from one stand point, less stress, better communication, but a job loss hung around for several months. It happened right at the point that we were really feeling confident about our new debt free status. I’m grateful that we were debt free and had savings when the event occurred, but still it was lingered.

Reading and listening to Carl was just what I need to stop wasting energy on those things in the past. My former company, my co-workers, being downsized, etc.

You might be asking how is this related to money. Well I was spending so much time thinking about these things, wasting time and energy it was costing me focus. It was clouding my ability to focus on things like moving forward, make more money, saving money, pursuing things, etc. I know that may sound a bit vague, but try it yourself, read and listen to Carl’s articles than let something go. Once you’ve put it to bed, take that extra time and invest it somewhere else more productive.