10 Reasons to Become Debt Free in 2013

If you already are debt free you might want to skip this post but if you aren't, read through these great reasons to get out of debt then head over to Dave Ramsey's website and follow his plan (I am a HUGE Dave Ramsey fan because following his plan, and watching his daily show for nearly two years straight, is what got us out of debt!).

1. You won't have to work nearly as much (and it's corollary, you won't have to work at a job you hate or be afraid of losing your job since when you have no debt, you can easily support yourself with a part time or minimum wage job).
2. You won't fall victim to scams.  There are a number of scams that use debt and credit to scam money from unsuspecting people (ie: something along the lines of "Mrs X, we did not receive your payment for your credit card bill last month and now we can sue you...unless you pay us with another credit card. What is that card number now?"  And scams like that really happen!  Shocking!).
3. You will be better able to handle a crisis.  Whether it is taking time off of work to be with a sick loved one or throwing all of your income at buying a new ______ (stove, washing machine, etc), it is much simpler to handle a crisis when you aren't up to your eyeballs in debt.
4. You won't leave your spouse buried in debt if you unexpectedly die.  I saw this happen more than a half dozen times when I was working in social services.  A person, usually a lady, would come in looking shell shocked due to her husband's death then she would drop a huge bag of mail--mostly bills--on my desk and ask what she should do since she had never worked before or earned very little money and there was so life insurance and nearly ever piece of mail was a bill.  It's sad.  And scary.  I would never want to leave the hubby like that.
5. The sense of freedom at becoming debt-free is truly liberating.  It is really hard to describe the feeling of having NO DEBT.  You feel inordinately free and the first few months are kind of weird because you keep waiting for bills to come in and there aren't only, just lots of left over money that used to go to pay debt that is now just sitting there with no claim on it.
6. You will officially be "weird".  According to Dave Ramsey, "normal" is broke and in debt while debt-free people are "weird".  I would much rather be weird.  And debt-free people tend to act a bit weird too--they don't have the newest cell phone (too expensive and not worth the hyper-inflated price), they pay cash for their cars, they live frugally even when they don't have to, they will go on a vacation...for a month or two.  Stuff like that.
7. You will be able to actually afford stuff.  With cash.  Weird concept, I know, when it seems like every retailer on the planet has gone to extremes to help their customers "afford" stuff (in 1000 easy payments or so).  This makes it both better (you won't be paying interest or late fees or having your expensive stuff repossessed when you miss a payment) and worse (being a rampant consumer ceases being "fun" when you understand how much you have to work to afford each item you buy so you become super careful with how you spend your money). 
8. Your stress level will ratchet down considerably.  For most people, their stress level directly correlates to their debt level.  When you are in debt, your credit cards are maxed out, you are paying interest fees/over limit fees/late fees, you can't call in sick to work because you can't afford to not get paid for that day, and you have three financial crisis hit in the same month, life sucks and you are stressed.  When you have no debt, you may still stress a bit about money (mostly about how you will earn the money to pay cash for your next big purchase) but it is not nearly as debilitating as when you are in debt.
9. At the end of 2013 you will thank yourself for being so wise at the beginning of the year and also thank yourself for digging yourself out of debt so you can start the next new year DEBT FREE!
10. You will set an example for others.  Maybe.  People in debt don't often want to hear others preach about becoming debt free because it sounds good in theory but it is a whole lot of hard work which is about where the enthusiasm for becoming debt-free stops.  And then you just sound like a religious zealot.  So while setting an example for others, remember to be subtle and only offer advice as it is requested.  Or you can just blog about it...and blog...and blog...and blog.

So here's to a debt-free 2013!  There is no better time to get out of debt than NOW (and yes, I'm taling to myself as well.  I absolutely hate having any debt and even though our house mortgage is considered a "good debt" it still is a debt and I want to get is paid off ASAP).

5 Critical Financial Moves That Put Us on the Road to Solvency

Just a few short years ago we were mired in debt and it looked like I would be working until I was 90. Obviously we were doing everything wrong financially that you could think of but we were so comfortable in our rut that we didn't know, or didn't want to know, what to do to get out of it.
Then I found Dave Ramsey, listened to his show religiously, made some (many) changes, and now today we have our debts paid off and I was recently able to quit working and travel for a while until we decide what to do next.
These are the five critical changes we made that, without which, we would still be up to our eyeballs in debt:

1. Pay cash for a car and drive it until it dies. For many years we leased cars, had insanely high car payments, and just thought that was the way that everyone did it. Today we have one car, it is paid off, and we will drive it until it dies and not a moment sooner. I think car debt is the number one change that people could make in their financial lives that would immediately put them on the road to solvency.
2. Don't use credit cards. Aside from car debt, we also had the habit of running up our credit cards (there were many) as high as the banks would allow (and when that didn't work we would call the banks and grovel for a credit limit increase which they would often grant). The amount of unsecured debt we had on credit cards was ridiculously stupid but we had no one to blame but ourselves. Today we pay cash for everything and have paid off our credit cards. Hubby has one credit card that we don't use (he feels more secure with it for some reason) and I have no credit cards (and no desire to ever have one again). There is absolutely no reason you, or anyone else, should be guaranteeing your future income to buy something you want today, at 20%+ interest no less.
3. Don't eat out. Again, we had the high-flying lifestyle with the cool cars, the crazy credit card debt, and the major shopping sprees. With all of this debt, we were also working like maniacs just to tread water with these debts which meant we weren't often home which meant we both--along with the kids--ate out literally every day. Often we would eat all three meals out. Needless to say this was an expensive habit that only served to rack up credit card debt even faster (and it certainly wasn't healthy either). Now I see that eating at home can save SO MUCH money. For example, feeding a family of four dinner out at a restaurant can easily run $50 to $80, for one meal. For that much money, you can feed the same family of four at home for an entire week!
4. Have an emergency fund. When you have a huge amount of debt, everything is a financial crisis. Until I heard about Dave Ramsey, I had never heard of the concept of having an emergency fund. When Dave said that you need an emergency fund so that if an emergency arises you don't have to use your credit card to cover it, it was like a light bulb went on in my head. Duh. Since I put together my emergency fund, as Dave had predicted, we have never had to put a financial crisis on our credit cards because we had the cash to cover it. This allowed us to pay off our credit cards once and for all. If you don't have a "starter emergency fund" of $1,000, you need to do this today.
5. No. More. Shopping. I used to shop recreationally. My friends and I would run to the mall during lunch, I would see someone with a new purse, think I needed one, and cruise by the mall after work to pick one up. The hubby and I would spend our weekends walking around Costco, the mall, and other big box stores being subtly convinced that we needed more and more stuff to be happy. Needless to say, that kind of hobby can bury you in debt faster than just about anything else. Today we shop only when we absolutely need something and there is no more aimlessly wondering around a store just because we are bored. I also don't feel compelled to shop just because I see someone else with a new purse or new shoes and I don't equate my self esteem and "status" with what I own.

With those simple steps, we were able to dig ourselves out of the mound of debt we had buried ourselves under for years. It really is that simple. Yes, your ego may take a hit when you drive up in a car that is older than your kids, when your purse is so many seasons old it can't be identified, or when you have to opt out of the expensive restaurant meal with friends because "that's the place you have always gone to" but it no longer fits in your budget, however the feeling of freedom that comes with being debt free more than makes up for any temporary ego problems you may have.

"How Can You Do That?"

I was at the bank today, doing one of the myriad tasks that I need to get done before we leave next month, and the banker I was talking to about switching around a couple of accounts asked why I was doing this so I gave him a quick "we are planning to travel for the next year or so" which kind of brought everyone in the office to a stand still. His manager came over and sat down and started chatting and the ladies in the few desks that were near his seemed to be inordinately interested in our conversation.
Both of the bankers wanted to know how we could possibly do such a thing (btw, as they were asking if they could sign me up for a credit card because they saw in my account that I didn't have one of their bank credit cards...go figure).
So I gave them my quick recap of how we really could do such a thing, using their question about the credit card as a segue. I simply told them that we are able to do such a thing because:

• We don't use credit cards or carry debt.
• We drive one old, paid off car.
• We are selling our house so we won't have house payments to make.
• Our kids are grown so we don't need to worry about #1 supporting them or #2 all of the extra stuff that is involved when you travel with kids.
• I have (a currently very small) income from my online businesses.
• We have some, but not a lot, of savings.
• Hubby is retired with both a pension and social security (it is an adequate amount to live on in the US yet it some foreign countries such an income would allow us to live very, very well).
• We have minimal stuff and in fact, we are selling off almost everything we have.

That was probably way more information than they expected but they certainly paid attention. The bottom line, is that you can pretty much have anything you want--a nice house, a brand new car, travel, a closet full of designer bags, the latest and greatest tech stuff--it just depends on what your priorities are. It may be difficult to have all of those things at the same time due to financial constraints but if you want one of those things, it is entirely possible to dedicate your work and your income to having said item.

Money Saving Tips I Gave a Friend (Which May Help You Too)

I met up with a friend yesterday and in the process of our conversation I gave him some tips to help him save money which I then figured could probably help others as well. My friend is a great guy, unfortunately he has had a pretty messed up life (drugs, alcohol, in a biker gang...yikes). Fortunately over the past five or six years, he has really pulled himself together. Now he is sober, sincere, employed in a legitimate job, bought a house...just an amazing succession of events that a decade ago, no one, least of all him, would have thought possible. To say I am so proud of him is an understatement. He did this literally one step at a time...join AA, get sober, ditch the old "friends", get new friends, start out at a pretty lousy job but do your best anyway, get a better job, bank his income, save for a down payment...basically all of the things that one is supposed to do to succeed but which people, especially those with drug and alcohol problems, don't do which leads them to a life of chaos and usually jail. So anyway, while everything is coming along pretty good for him, he does still have some minor financial issues and like everyone else, could use some extra money in his pocket at the end of the week. These were my suggestions:

• His house is financed at 6%+ with more than 25 years left to pay. I suggested he refinance his house (interest rates are around 4.5% now) and chop the term down to 20 or even 15 years. Even though he shortens up the term of the loan, the payments shouldn't be too much more than he is paying now because of the drop in interest rate and because he would be cutting off years of interest payments.
• His employer will pay for a metro transit pass for him each month. Currently he drives to work, and pays for insurance, parking, and gas. Since he lives on the bus line, I explained that taking the bus can be a much better option than driving. The pass would be free, he could save parking fees, possibly lower his insurance, and could possibly even get rid of one of the family cars. Even though he would have to get up a bit earlier to ride the bus, this would give him a bit of exercise when walking to the bus stop, he read or play with his smart phone on the way to work, and the bus would drop him off practically at the doorstep of his office.
• He added that he was waiting for his girlfriend to get off of work so they could go out to dinner since it was her payday. I can totally understand wanting to reward yourself for a couple of weeks of hard work, but the restaurant they were going to go to is expensive! I suggested that they keep up their every other week date night but that they choose a cheaper alternative. The hubby and I used to eat out every day, for nearly every meal. Now we eat out maybe once every two weeks or so and we usually end up splitting a $5 subway or going to Wendy's for a baked potato and chili ($4 for the two of us). I know from experience that cutting back on eating out has saved us a ton of money.
• He still has debt. IRS debt, legal debt, and some old credit debt. Currently he is paying the minimum on these debts and feeling overwhelmed. Making the minimum payments on debt can make you feel overwhelmed and make your efforts feel futile because often the minimum payment barely covers the interest charge. I told him we have been able to pay off quite a bit of debt over the last couple of years by picking the smallest debt and hammering away at it. We have had garage sales, sold gold, sold furniture...basically anything we could do to get extra money to throw at our debts (smallest to largest). This has helped us pay off debts much faster than we ever thought possible.
• Since he has turned his life around, he has been free of the legal system for more than five years. I can't begin to figure out how much money this has saved him. Even minor legal problems usually end up with court costs, attorney fees, fines, etc. He told me how one year, when he first started getting his life back together, he didn't have any way to pay his fines so the judge let him work off all of his court fees...to the tune of over 900 hours in community service. Wow. For quite a few months his full time job was community service and his part time job paid his minimal living expenses. Avoiding legal problems all together is a much better option and saves quite a bit of money.
• My friend has goals. When I first met him, he had a low wage job that barely paid his bills. At the time, he had a goal to get a job with a major employer in our area. I didn't even think it was possible because of his comprehensive and lengthy police record but he kept his goal in mind while he worked towards the things he needed...good references in the community, a couple of years of good work history, no police problems, etc...and before you know it he had an entry level job with this company. Now after about three years he has got raises and better jobs within the company at a startling pace. Amazing.

Overall my friend is doing really well and I am really proud of him. With a few more tweeks to his already pretty good life, he should find his way out of debt and he should end up with more money than he ever dreamed possible.

A Cool Debt Free Story...With Tips On How You Can Do The Same

I just saw this story on Consumerist about how a lady was able to pay off $14,000+ debt in 20 months. Along with her story are some great ways that you too can make simple changes in your life and get out of debt. These kinds of stories rock!