WHO DO YOU THINK YOU ARE?

When attempting to get out of debt you have to take actions you have never taken before and go places you have never been.  Sacrifice is the key word in becoming DEBT FREE and for many that is a brand new concept because before sacrificing to win financially sounded like punishment and abuse.  On the journey to getting out of debt I hit the problem of debt from all possible angles.  Of course our family found new ways to bring in additional income, but the most beneficial changes came from cutting back on certain items and services.  One area that I cut back on was clothing for not only me, but for the entire family.  I use to be the person who wore only name brand clothes and shoes and the same was true for my husband as well.  We had been dressing this way ever since we were in college.  That all changed once I was on unemployment and $48K in debt.

At that point shopping at Goodwill and consignment shops became a new hobby.  I could no longer justify spending $20+ on a pair of jeans or $40 on a pair of shoes because we didn’t have the funds to cover it.  For those of you who don’t know what Goodwill is it is a store that sells used clothes donated by others and the proceeds go to career training for individuals in need as well as other services.  Before I started shopping there I use to look down my nose at Goodwill and you wouldn’t catch me dead in there.  That all changed one day when I went to one of the local stores and seen multiple BMW’s and other luxury cars in the parking lot.  Before going in I said to myself the drivers in these cars must be here to donate clothing, but once I was inside I seen a couple of the ladies actually buying for themselves!  At that moment I realized that these women are just continuing the spending habits they had before they owned the luxury cars and there was no shame to them to be shopping at Goodwill.  This store was allowing them to save money in their clothing budget so they could spend in more important areas like college funds, retirement, and vacations.  Right then and there I said to myself “WHO DO YOU THINK YOU ARE?”  “These wealthy individuals don’t think they are so much better that they can’t shop in Goodwill why do you think you are?”  From that point on I have been finding great deals at Goodwill and consignment sales and tell you the truth it is those clothes that I get the most repeat compliments on. 

I attend consignment sales mostly for my son’s clothing and shoes because if you have kids you know that they don’t care if they drag their shoe until it is a hole at the toe.  They don’t care about crawling in the dirt until the jeans they are wearing are no longer recognizable.  That is exactly why their clothing shouldn’t cost you a lot of money.  I hate to see parents spend $100 on a pair of sneakers when they could just spend $8 or less at a consignment sale and put the rest in a 529 college fund.  Kids are not hard to impress in fact every time I bring home clothes or shoes from a consignment sale my son always says “mommy you got me some new shoes, thank you mommy!” They don’t care where the shoes come from as long as they light up and they can play outside in them.  We as adults are trying to impress other adults when we buy our kids expensive clothing and all we are doing is depleting our own bank accounts for the future.  When I was employed in my first pregnancy five years ago I bought all of my son’s items brand new. Brand new changing table, crib, stroller, car seat all of it was coming out of my bank account at full price.  I know I spent thousands of dollars before he was even born.  I am now eight months pregnant again, but this time I bought the stroller, car seats, changing table, diaper bag, bath tub, etc, from church consignment sales and saved thousands!  The point of all this rambling is that you don’t have to care what people say if they see you shopping at Goodwill or consignment sales because they may be laughing, but if they saw your bank account the laughing would surely stop!  I actually brag about the deals that I get now because I want people to know that there are more important things in life than clothes.  So the next time you find yourself sticking up your nose at Goodwill and consignment sales while at the same time in debt do what I did and say to yourself “WHO DO YOU THINK YOU ARE?”

Have you ever saved money by buying used clothes?

Let’s Celebrate!

April is more than a month where we get to play practical jokes on unsuspected victims, it is also designated as Financial Literacy Month!  During Financial Literacy Month there are events taking place daily that attempt to educate the public about money management.  The goal is to help both young and old realize that Financial Literacy is nothing to be afraid of, but instead embraced and conquered.  I know that your own financial life can be overwhelming at times, but hopefully I can give you a few starting points that you can implement during the last thirteen days of April.  April is just the beginning, the idea is to keep going until you master your own financial life!

Steps:

1.    List your short (3-6 months), intermediate (3-5 yrs), and long term (10-15 yrs) goals for your life on a sheet of paper and put it on your refrigerator.

2.    Open a savings account and start saving a certain amount each paycheck. Even if it is $10 just save something!

3.    Write down all your debts both small and large. (Face the fear of knowing the total)

4.    Determine how much money you have coming in (paycheck) versus how much money is going out (bills). Write it all down on a piece of paper.

5.    From that piece of paper (budget) determine which are needs and which are wants.  Determine what can be cut back or cut out.

6.    Once you figure out in your budget where you can save money start adding that extra money to your smallest debt and pay it off fast! Then repeat with the next smallest debt until all debts are eliminated.

7.    Find an accountability partner.  Someone who will encourage you to keep going when times get tough and remind you of those goals you have on your refrigerator.

I know that personal money management can be overwhelming.  It can feel like you are trying to eat an entire elephant all at once. Just remember to take one piece at a time and eventually that elephant will be completely gone.  That is why I put seven steps instead of thirteen for these last thirteen days so you can take your time and get it done by or before April 30^th.  The steps are simple all you have to do is say to yourself “I am ready to make a change for the better in my financial life” and the rest will take care of itself.  Don’t give up; complete the journey because in the end all of the financial strife that use to be a part of your life will just look like a bad dream and all that will be left is financial success!

Will you take the first step TODAY?

I Can’t Do That!

You would be amazed at how many people say that sentence when it comes to getting out of debt.  They say “I CAN’T” save an emergency fund, “I CAN’T” pay off my student loan, “I CAN’T” pay off my car loan, “I CAN’T” stop eating out or going on vacations. I CAN’T, I CAN’T, I CAN’T!  Every time I hear someone say those two words I think back to my childhood tennis coach David Lash who use to always respond when I said “I can’t” with the question “are you American?”  Confusingly I would say “yes” and then he would continue with “you need to understand as an American you are an Amer-I-CAN!”  It was simple, but it made sense.  He always instilled in me that I can do anything if I put my mind and energy into it. 

I recently learned of a single mother who had an annual salary of $21K and she paid off $17K in eighteen months!  This woman obviously erased “I Can’t” from her mindset and instead buckled down, cut back, and put all her extra money towards the debt.  She got to the point that she said to herself “ENOUGH IS ENOUGH” and she made a life altering change to her finances and as a result she is DEBT FREE!  People who don’t want to change their financial situation usually come up with all kind of excuses.  Excuses such as I don’t make enough money, I deserve a vacation because I work so hard, I don’t have time to cook so I need to go out to dinner, so on and so on.  What is really happening here is that the person has not reach the point of ENOUGH and they continue to pile on debt and when ENOUGH does come, the reality will set in of the opportunity lost because they continually said “I can’t”. 

I use to be one of those closet “I can’t” people when it came to my finances, but then I was slapped in the face with a lay off from my career.  Right then and there I had to grow up and realize that when I use to say “I can’t” I really was saying “I don’t want to” because in my mind it was an inconvenience to the life I was use to living.  I would have to stop eating out, buying new clothes, new shoes, going on vacations, etc if I wanted to truly get out of debt and live a prosperous life.  Everyone has a choice to make when it comes to their own finances and the first decision has to be to stop saying “I can’t” and replace it with “I CAN!”

If you are still in debt, after reading this will you move from “I can't” to “I can” and change your financial future?

When Will We Ever Learn?

I am sure you have heard the definition of insanity, but in case you have not the gist of it is “doing the same thing over and over again and expecting a different outcome”.  Between the years of 2000 and 2008 America was flying high above the rest of the world and everyone was prospering, at least it appeared that way.  The prosperity that majority of Americans were displaying was actually an illusion.  The reason is simple and complex at the same time.  During this time there was a housing boom and everyone who could breathe or spell their name was able to qualify for a mortgage.  Credit was flowing freely from banks and individuals as well as companies could borrow to the max.  If people had equity in their home they would cash it out to buy cars, go on trips, pay for college, start businesses, etc.  All majority of Americans did for these eight years was spend money they didn’t have and live the illusion of the “good life”.  Want to know what Americans didn’t do in those eight years?  SAVE!!!  During the same period there were times when the savings rate was in the negative meaning that people were spending more money than they were bringing home in income.  Everyone thought this illusion of prosperity would continue, that their home values would continue to rise, and that banks would continue to lend, but then 2008 arrived and the magician revealed that the past few years was all a trick and the unfortunate treat was upon us.

In 2008 the economy collapsed and a snowball of catastrophes hit America from all sides.  The “why” behind the collapse is complex, but a broad overview would be this: Banks were like the Americans giving out more money than they had on hand and dealing in risky business practices.  Banks gave mortgages to people who eventually would not be able to afford them.  Homeowners mortgage rates started to rise and as an added insult companies were laying off people left and right and so there was no income to go to paying for the mortgages that these banks were so carelessly handing out earlier in the decade.  The banks being so heavily invested in these mortgages started dropping like flies, the most famous one being Lehman Brothers.  I still remember the night I was looking at CNBC watching the employees coming to empty out their offices, such a sad sight.  Americans were losing their jobs, homes, cars, retirement savings, and families.  As a result of all this loss behavior started to change.  People went from spending all they had to saving everything they could. In fact the savings rate was at an all time high of 4.2% (of disposable income) in December 2009 and it appeared that Americans had learned their lesson and had turned away from habits of the past.  You can say that the insanity had disappeared, but not so fast as of February 2012 the savings rate is back in decline (3.7%) and Americans are heading right back to the habit of spending more than they bring home in income.

  

I am sure you are asking the question why would people go back into this insanity?  Why would people go back to car loans, buying expensive shoes, going on trips, taking out home equity loans, etc?  The only answer that I can come up with is that people are starting to feel safe again, because the economy is improving and jobs are coming back, but that does not mean that you should run right back to the edge of the cliff with your finances.  We all have to learn our lesson from how we felt in 2008.  That uncertainty made us change our habits and we have to resist the urge to go back.  When the economy went off a cliff in 2008 a month later I was laid off by Pfizer and my family was in $48,000 worth of DEBT.  We had to change our behavior towards our finances or become a casualty of the economy and another statistic.  That is exactly what we did, we stopped borrowing money and paid off everything.  We also built up an eight month emergency fund of expenses because we are determined to never let the American economy affect our personal economy again.  If the economy ever decides to take a nose dive again we will be ready this time.  Insanity is NO LONGER welcomed at our home!

Have your finances become a victim of insanity?