Category Archives for Saving Money & Frugal Living

The Most Popular Way to Stay Broke

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Do you know of anyone that has voluntarily signed a piece of paper that will keep them broke for the next 30 years? I know it sounds crazy, but I have many friends that have done this very thing!

They get all jazzed up about how they can look important to others so they sign up for a 30 year debt that they can barely afford, which then keep them in bondage for much of their adult life. Is this the American Dream that all of us are searching for?

Buying the House of Your Dreams

I have a friend at work that was brought up in a poor home. Instead of being thankful for what he has today, he seems to be on a mission to separate himself from his past by buying up all the nice things he can today. Just a few months ago, he rolled up in a nearly-new Audi and was so proud of himself that he always parked it outside of the window near his desk, just so he could look at it every day.

Well now the Audi isn’t enough. He has moved onto bigger and better things. Yup, he is looking at purchasing an executive home that will likely keep him broke forever. This is how he described it:

“Take a look at this house, Derek. It’s a 5 bedroom, 4 bath executive ranch house in the wealthy side of town. Sure, money will be tight for the first couple of years, but both my wife and I expect to get promoted soon, so it will get easier and easier to pay the mortgage as the years pass by.”

My jaw almost dropped to the ground. First of all, he and his wife have only one child and could easily live in a 2 bedroom, 1 bath house that is less than a quarter of the cost of this “executive” home. Secondly, if they were to buy this house, they would have to watch their spending for the next 30 years! Their cash flow would be next to nothing, and unless the house increased in value they would not be able to sell it and would be forced to live there, continuing to make that monstrous mortgage payment. And, with a cash flow of less than $100 a month (or less after they pay all of their bills), they would not have any opportunity to invest in their future and will still be broke when they turn 60!

My Simple Lifestyle

Many people decide to live their life from paycheck to paycheck, just barely getting by. They assume that it’s the normal thing to do, so they just keep making those big purchases on credit and living in the moment. It might seem like they are having fun on the outside, but I’m sure there are many money arguments and escalating stress levels going on behind closed doors.

For me, I would much rather live in a simple house and have a large amount of excess cash each month. I can either chose to spend it or maybe I’ll invest it in the future. It’s my choice. But I won’t be bound to a hefty mortgage payment and car payments. These loans will only bring you down and keep you down.

My friend will be living in a large house and will be driving nice cars, but he will be working until he is 70 years old. I will be completely debt free by the end of this year in my 3 bedroom, 2 bath house and will likely have the option to retire by the age of 35.

How about you all? Which option would you choose?

***Photo courtesy of http://pixabay.com/p-31085/?no_redirect

Why You Should Never Go Broke to Buy a House

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

It’s almost the American Way, going broke to buy a house.

After all, a house is the biggest of all purchases, and it takes just about every nickel that you have in order to make it happen. However, as common a practice as it may be closing broke can be a complete disaster from a financial perspective.

You’re better off to buy a little bit below your means, and make sure that you have some money saved up after you close on the house. Being broke is never a good state of affairs, and it can be even worse immediately after purchasing a house.

There may be major expenses right after closing

Whether the house that you buy is existing or brand-new, you can virtually predict that there will be one or more major purchases necessary after the closing. Often, it turns out to be a repair issue that did not turn up in a home inspection. It can also be a condition that wasn’t obvious at the time of purchase because the house was brand-new.

Whatever the cause, the may cost you a couple thousand dollars or more to remedy the problem. In other situations you may need to purchase a major appliance or system component. This can be anything from a new refrigerator to replacing the air-conditioning unit in the house.

You have to be prepared for this kind of outcome by having some extra money saved up after your closing.

Owning a house makes emergencies more likely

You know how everyone one tells you that you need to have an emergency fund? If that is true when you are renting an apartment, it’s doubly true when you own a house.

Every house, no matter how old, has repair and maintenance needs. Some properties, even new ones, can turn out to be certified money pits. For example, though it may not seem obvious at the time of purchase, you can find out that a brand-new house has water drainage problems that needs to be repaired. Didn’t see that coming!

And on an older house, the number of emergencies can increase exponentially. A leaky roof, wood rot, drainage problems, or backed up pipes are hardly uncommon. You’ll need to have money at all times in order to deal with these problems as they arise. This is even more true if you’re not the type who can handle repair and maintenance issues on your own, and you need to rely and paying outside services.

“You can’t eat a house”

A lot of people are so enchanted with the idea of finally owning a home, that they convince themselves that nothing else matters. I don’t care as long as I have my house! But that thought will do you little good if you have other expenses apart from the house itself – and you will.

Though owning a house can make excellent sense from a financial standpoint in the long run, it’s important to understand that a house is not liquid. This is especially true when you first take ownership of the property, since there is no equity to borrow against. If money is tight for you to buy a house, it will be even tighter after the closing. You’ll need to have extra money to cover any needs that you may have – anticipated or otherwise. If all of your money is tied up in the house, you’ll have a big problem – or a series of them.

Creating destructive patterns

The general thinking when buying a house is that you buy on a shoestring, and your financial situation will improve as time goes on. That’s typically true – your income rises and your expenses begin to settle down into a predictable pattern.

But sometimes the situation goes in a different direction. Sometimes you develop a pattern of “buying for the house”, always thinking that things will get better at sometime in the future. If you start getting used to not having money and using credit lines every time you need any, you could be setting up lifelong patterns that can land you in the poorhouse sooner or later.

Ironically, too much optimism when buying a house can set you up for just such an outcome. You could develop the “buy now, pay later” mindset, always thinking that the tight money situation you’re in now is only temporary, and that things will get better in the future.

They may, but it’s always best to not make assumptions.

Being broke just feels bad

As happy as you might be at the prospect of owning your own home, being broke has a way of throwing cold water on your celebration. Yes, you have your home, but if you don’t have money for an occasional dinner out or trip to the movies, or if you constantly find yourself borrowing from Peter to pay Paul that good feeling that comes from homeownership could start to get older in a hurry.

If you really want to enjoy your new home from the get-go, plan on having some money set aside for contingencies, emergencies, and extras after the closing. Going broke to buy a house – common that it is – is vastly overrated.

How about you all? How much of your monthly income generally goes towards paying for your house? Are you comfortable with the amount that you’re paying?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/danmoyle/5634567317/sizes/n/

3 Hobbies That Are Fun, Trendy, And Won’t Break The Bank

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

I was thinking the other day that I really don’t have a hobby anymore.

I danced for over 20 years growing up and taught ballet as one of my jobs throughout college. It was such a big part of my life that definitely slowed down when I moved out of the country and of course, had two kiddos.

I’ve been thinking I want to take a dance class soon. After all, that’s a lot of my parents’ dollars plus such a long time to train and build technique for it to go to waste. There are many dancers still performing at age 30 so there’s no reason why I can’t get back into shape and at least take a ballet class. Plus, I still have about 10 pounds to go to be back at my pre-twin weight so the exercise won’t kill me.

I find it interesting that it took me this long to realize that for my whole life, I really haven’t had that many outside activities since I didn’t play sports or bake or do anything except go to dance class 4-5 times a week. So, as an adult I might expand my horizons a bit more in addition to getting back into one of my passions.

So, in honor of branching out and doing more fun things outside of work, here are a few hobbies that are fun and trendy and if done just right, won’t break the bank:

Biking

One mistake that many people make when they become interested in biking is buying a really expensive bike to start out with. They get excited after watching the Tour de France and decide that they will become the type of person to ride 100 miles every weekend.

I definitely admire anyone who takes on this challenge (after all, Jacob is a huge biking fan and raises money every year with it!) However, my biggest advice is to start off slowly. That’s how you can make sure that biking won’t break the bank. Borrow a friend’s bike for the first few weeks to see if you like it and want to stick with it. Purchase a used bike off of Craigslist that’s nice but not a $600 brand new one just to get a feel for it and see if you enjoy it.

You can also buy an inexpensive bike at a big box store and try riding it around your neighborhood. If you find that you ride your bike often and enjoy it, then save up and make the investment for an expensive bike later. However, as far as casual hobbies go, this one is quite inexpensive once you get past the cost of the bike. If you become a more serious biking enthusiast though, the gear and the bikes can definitely add up.

Cooking

My husband absolutely loves to cook. I always tell him it’s the main reason I married him since I am not too skilled in the kitchen. Cooking is the best hobby to start right after you get married because typically you get a ton of cooking gadgets as wedding presents. This helps to cut down on the upfront costs.

Now, ingredients can get pretty pricy too especially if you have to buy a pinch of this or a pinch of that so if you are on a tight budget, just pick one meal every week that you’re going to experiment with for fun. It helps if you choose ingredients that will overlap with other things you want to cook that week. For example, this week I am making a tuna salad and an Asian salad that share 3-4 of the same ingredients. This helps me not to waste food and to have two things I enjoy without buying extra food at the store.

Essentially, with enough careful planning, cooking can be a rather inexpensive and fun hobby for anyone.

Reading

I love to read and have ever since I was a little kid. I find I go through phases though where I read a ton and fly though a whole series in one month and then go a few months without reading anything except blog posts. For those times when I am really into reading, I always like to borrow books from the library, rent audio books, or use some of my iTunes credit to download a book for free. It’s an easy and fun way to escape or learn something new that can be a completely free hobby!

Of course, along with the hobbies above, there are those hobbies that will probably always be pretty expensive like learning to play a musical instrument, scuba diving, flying planes, deep sea fishing, etc. Even scrapbooking and crafting can add up significantly if you purchase all of those products consistently. Of course, all of these are great if you have the budget and the time. However, if you are looking to start a casual and fun hobby that’s not too expensive, try out some of the ones listed above.

How about you all? What are some of your hobbies? Are they expensive?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/pixietart/4184841/in/

The First Step You Need to Take When Buying a Home

The following post is by MPFJ staff writer, Grayson Bell. Grayson, who runs the finance blog Debt Roundup, is a fan of personal finance, brewing beer, and working on cars.

There are so many things to think about when buying a home.

The process is very involved and it takes a lot of work to get through it. Having gone through the process myself quite recently, I have a few words of advice, but also something you should do before you even go through everything.

The reason buying a home is such an involved process is due to how much information needs to pass through different companies. All of your information is verified, then verified again. But, here is the first step you should take when you want to buy a home.

Can You Truly Buy a Home?

Many professionals tell you to check your credit before you buy a home. I do think that is sound advice, but you really need to do something else first. You need to understand if you can truly afford to buy a new home. You need to create a budget for all the costs necessary to obtain and close on a new home, along with moving in and any repairs.

It costs money to obtain a mortgage, so why not create a home buying budget before to see if homeownership is attainable?

If you can get the costs associated with this process together, then you will have a better picture of your financial situation. Here are some of the costs that come when buying a home.

• Credit Report Pull – This fee is paid at closing, but it costs money for the lender to pull your credit report to see if you can qualify for a mortgage. It might range from $25 to $50 depending on the lender.
• Due Diligence Fee – This is not required when you put an offer in on a home, but more and more sellers want to see it. You can choose the amount, but a go-to is around $250. This money shows the sellers you are serious about your offer. The due diligence period gives you time to get an inspection, home appraisal, and find out if you can afford the home. If you pull out of the contract during this period, the sellers keep the money. If you reach closing, this fee is credited back to you.
• Earnest Money – Your earnest money is paid to an escrow account, which is then paid toward your mortgage when you close. You do have to give it upfront though. This fee is typically around 1% of the sales price. If you are buying a $200,000 home, then you should think about giving $2,000 in earnest money.
• Down Payment – This is going to be the biggest expense. You should see if you can afford to make a 20% down payment on the home. If you can’t then you will have to pay PMI (private mortgage insurance) until you have 20% equity in the home. If you have a down payment, then the lender knows you are serious about buying the home and your financials can support the home purchase.
• Home Appraisal – The lender requires a home appraisal. This shows the home price is justified by the value. Appraisal costs differ by region, but it can average around $450. This fee comes back to you in the form of a credit at closing.
• Home Inspection – Some lenders require a home inspection, while others do not. A home inspection is recommended as it can uncover potential issues with the home. Having one done by a licensed inspector can also give you the ability to request repairs from the sellers. Inspection fees vary by region and services provided. They also range based on square footage. A typical fee might start at $350, but others services will add to the price, such as tests for radon , water quality, asbestos, lead, septic systems, and more. These tests can be pricey.
• Additional Inspections – If your regular inspector uncovers some issues, they may tell you to call a licensed specialist. If you have plumbing issues, then a licensed plumber should come out and look at the issue. While you can ask the sellers to pay for these extra inspections, they are not required to do so.
• Closing Costs – Most lenders have a cost to process your loan. These are called closing costs. You can try to get the seller to pay for them, but if you can’t, then you have to come up with them. They can range from $1,500 to $4,000 and they need to come with you to closing.
• Wire Transfer Fees – When you need to pay for closing costs, most title or attorney offices like to get wire transfers. These cost money, averaging around $25. It might not be much, but it does cost money.
• Moving Supplies – Moving is expensive. It costs money to pack your items up. If you don’t have a way to get free boxes, then you will need to pay for them, along with tape and packing materials. Depending on how much you need to pack, these supplies can be costly.
• Moving Truck/Hiring Movers – Hiring movers is going to cost money. They are not cheap and sometimes you get what you pay for. If you want to move yourself, then you will probably need to rent a truck. These are available from places like U-haul. You should compare the costs along with time involved to deal with moving and add up how much these two options will take.
• Repairs/Painting – Once you move into your new home, you will probably want to make some changes. From painting, replacing floors, and doing minor repair work, these all cost money. Paint can be very expensive depending on the size of the home and who much you actually want to paint. If you have to make repairs, can they be done on your own? Do you need to hire a professional? These move in expenses can add up to quite a lot.

As you can see, there are a lot of costs associated with buying a home. These can lead to thousands and thousands of dollars, which you need to come up with in order to close on a new home. If you don’t properly budget for these items and any unforeseen ones, then you could have a hard time paying for the transaction.

Make Your Budget First

You should take time in the beginning to put together a detailed home buying budget. Call around to get mortgage quotes and ask how much they charge for closing on a loan. You should also ask how much it costs to pull your credit and get a home appraised. You don’t need to have a home picked out yet, as they probably charge a flat fee.

The items listed above should be included in your budget. Check around your area to see what the range of prices are. Shop around and then put the average in your budget. You should also include a miscellaneous category, which can help you cover unexpected costs that arise. There will probably be costs involved which I didn’t cover, but that is due to so many different loan types.

So before you jump feet first into the home buying process, make sure you can afford to get involved. A lot of money will be moving hands, so you should always make sure you have enough to cover it, along with extra to keep you financially secure. If you can’t pay for these cost, then home buying might not be for you at this moment. Wait until you can easily cover the related costs and it will make the process much smoother.

How about you all? What was the first step you took when taking the plunge on buying a home? Did you first look at houses from a personal perspective, or did you first consider the finances?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/86530412@N02/7932571974/sizes/l

The Best Vacations On a Budget

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Are you currently on a tight budget, but feel like you deserve to take a vacation once in a while?

It seems like every couple of months, your friends are gallivanting on the white beaches of Bora Bora or are touring the sights all around Europe. While it may seem like they are enjoying life much more than you, they most likely don’t know what the word “budget” means and are getting themselves into severe debt.

Instead of wishing you were taking the same time of vacations as your friends, make a point to take a budget friendly vacation, but still make some great memories in the process. So what are the best vacations on a budget? Read on to find out! 

The Beauty of a Staycation

A staycation might not sound too exciting, but by taking some time off and exploring the wonderful events in your area, you could make a ton of memories and hardly spend any money at all!

Think about it. You don’t have to spend any money on travel and you don’t have to worry about traffic jams, lost baggage, or exotic diseases. Instead, you can enjoy activities in your own hometown such as:

• Going to the museum
• Go to a movie
• Take a cruise around town on your bike
• Go to a show (a play or musical)
• Go for a walk in the park
• Read a book
• Go to the pool or the beach
• Go shopping with friends
• See a baseball game
• Go for a hike

The possibilities are endless and the dollars that you’ll need to spend are few (compared to the multiple thousand dollar vacations of your friends.

Explore the Area by Camping

My girlfriend and I enjoy the outdoors, but also enjoy seeing new things. We have both lived in Michigan for many years, but still have many things to explore and see in this great state. Just last year, we decided to head out to Mackinac Island. This could have been quite pricey if we rented a hotel on the island (typically $250 or more per night), but instead, we enjoyed an entire day on the island and spent the night camping in a tent on the mainland. This ran us a whopping $15 a night.

We plan to explore much of the U.S. with this tactic. Hotels are expensive and can rack up a bill quite quickly (and often account for 40% or more of the vacation expense), so why not see what you want to see and do it for a minimal expense? For a budget-conscious person like myself, this will make for a much more enjoyable vacation.

Last-Minute Deals

If camping isn’t your thing (let’s be honest – not everyone loves to sleep on the ground), then you might want to focus on last-minute deals instead. If your schedule is pretty flexible and you can take a week off with only a month’s notice, then you could find some pretty sweet deals through sites like CheapCaribbean.com or Travelzoo.com. I have seen all-inclusive trips to Aruba for only $500 a person before. When you factor in the flight, the room, and the food, this is an amazing deal! Just keep an eye out for these offers and you could be vacationing to some exotic places for super cheap!

Visit Your Friends

When you get to be in your late 20s or older, some of your friends most likely moved away from the area. At this moment, I have friends that live in New Jersey, Tennessee, Georgia, Florida, and California. Many of them have offered to have me stay at their place if I ever wanted to come visit. Since hotels are often the most expensive part of any vacation, this could be a huge savings and would make for an amazing vacation experience.

It doesn’t have to be expensive to have a great time and make memories. Save up some cash, choose your budget-friendly vacation, and have the time of your life! By paying with your vacation for cash, you’ll most likely have a much better time than your friends that are spending outside of their means anyway. Happy travels!

How about you all? What sorts of vacations have you taken where you were surprised how much money you saved? Have you used any of the ideas mentioned above?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/vsmoothe/

6 Yearly DIY Maintenance Steps To Keep Your Lawn Mower Humming

The following post is by MPFJ staff writer Travis.  Travis is a customer blogger for CareOne Debt Relief Services, and also appears weekly at Enemy of Debt.  Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband he provides a unique perspective on balancing debt, finances, and family.

“Are you ready for it to officially be Spring?,”  I asked my wife as I wheeled my lawn mower onto the driveway.  The day I get to take my lawn mower out of my shed, fire it up for the first time of the season, and fill the air with the smell of freshly cut grass is one that I look forward to all Winter.

She just shook her head and laughed at me as my dramatic pull of the start string resulted in nothing but a sickly chugging sound from the engine.  I stated that the gas tank was completely dry, and it would take a few pulls to get it primed.  I pulled the string again and again, but it was very obvious that it wasn’t going to start.  Puzzled, I looked at my lawn mower, and realized that I had completely skipped my usual Spring lawn mower maintenance routine.

I know some people that will take their mowers in for a tune up each Spring.  A local small engine repair shop will tune up my lawn mower for $60,  but in my opinion, the only thing that’s getting tuned up is the mechanic’s wallet.  In seventeen years of home ownership, I’ve owned only two lawn mowers.  The first one lasted 8 years, and was the cheapest lawn mower I could find (about $100) at the time.    Had I spent $60 a year on a tune up, I would have spent $480 over the life of the mower, and it wouldn’t have given me any benefit.  The wheels fell off and the frame was cracked and broken, but the engine still started on the first pull!  The mower I have now is entering it’s 9^th year of use, and while the paint is fading a bit, it’s still in perfect functional condition.

Instead of taking my lawn mower into have it professionally tuned up, I do the following steps each and every spring to keep my lawn mower in tip top shape:

Clean It Off:

Seven months of sitting in a shed will leave a lawn mower looking pretty grisly.  I usually like to first spray it down with the hose.  Then, I take some paper towers or a garage rag and wipe it down.  After that, I tip it on it’s side, and remove any stuck on clumps of grass that may be impeding the blade, or blocking the exit chute.

Sharpen the Blade:

While I’ve got the mower tipped upside down, I remove the blade to have it sharpened.  You can take it to a small engine repair shop, but in my case I have a neighbor that has the equipment to do it himself.  Having it done for me will cost about $9, but I get it done for free.  I actually have two blades that I alternate using, always keeping one sharpened and ready to go just in case I want to switch the blade and my neighbor isn’t around at that very moment to help me.

Add Oil:

Lawn mowers don’t use a lot of oil, so it’s something that gets forgotten by many people.  Each spring I buy a new bottle of oil, check the dipstick, and fill it right up to the line.  Make sure you follow the manufacturer’s suggestion on what kind of oil to use with your specific lawn mower.

Clean/Replace the Spark Plug:

Most seasons I usually just remove the spark plug, and clean off the bottom and top connectors with sand paper to make sure the contacts are clean.  However this year, that wasn’t enough.  For the first time in my adult life, I had to replace the spark plug.  A new one only cost me just under $2 with tax at Walmart, and I had it installed in a matter of minutes.  If you do replace your spark plug, I recommend removing it first, and taking the old one with you to the store so you can match the part number printed on the side of the plug.   Nothing’s more frustrating then finding out you bought the wrong part and have to go back to the store.

Add Gasoline:

Last but not least, fill it up!  I have a five gallon gas can will last me about two months.  This reduces the chances of me hurrying home from work to mow the lawn ahead of an approaching storm only to find that I need to take an extra fifteen minutes to run to the gas station.  Obviously I need to fill the lawn mower more often than just prior to the first mow, but after a long winter in storage, my gas tank is usually bone dry. I like to fill it up, and hit the primer button a few times to get everything flowing through the gas lines.

Check For Leaks:

Now that I’ve added the necessary fluids, I give my mower a careful once over to make sure oil or gas aren’t flowing out of any leaks in the engine. If any leaks ARE found, this is where I would break down and consult a professional.  It may simply mean it’s time for a new mower.

By following these simple steps in the Spring, I start out the lawn mowing season with:

• Oil for the entire season – $4.00
• Gasoline for a few months – $17.50
• A sharp blade – FREE
• A new spark plug – $2.00

Total cost for my Spring preparation: $23.50.

The next day, after following my normal routine, I again asked my wife if she was ready for Spring to officially begin.  I pulled the string once, and the lawn mower roared to life.

Nailed it.

How about you all? How do you get your lawn mower ready for the season?  What’s the longest a mower has ever lasted you?

Share your experiences by commenting below! 

***Image courtesy of antpkr / FreeDigitalPhotos.net

Stop Searching and Start Acting!

The following post is by MPFJ staff writer, Grayson Bell. Grayson, who runs the finance blog Debt Roundup, is a fan of personal finance, brewing beer, and working on cars.

I am known for the amount of planning I do when trying to make a decision.

I rarely just jump into something without fully understanding the pros and cons. No decision is too small for me, which is why some people call me a defensive pessimist.

My desire to research options came from my father, who does the exact same thing. My older brother also is a researcher. We research a topic until it is almost dead. While I used to think it was good to research and plan everything, I have found that is not always the case. My decision making has changed a bit, but more importantly, my desire to act.

There is Nothing Wrong with Searching

When I was in debt and realized there was a problem, I took to searching for answers.

The internet can be a great place to find information, but it can also provide information overload. If you don’t understand how to sift through all of the opinions, it can be hard to find what you are looking for. I am an advocate for people searching for options, especially when it comes to getting out of debt.

There is not one person who has the same situation as another. Each person’s financial picture is different. While there is a lot of awesome information about getting out of debt, it might not apply to you. For this reason, I recommend people take the time to search for an option which works best for them. Blanket advice can start you on your way, but it won’t likely be the best answer.

Don’t Keep Searching

I have a confession to make. I tend to overanalyze my options and it leads to me beating a dead horse, so to speak. I can work on researching options for a problem, yet whenever I find the information I need, I can’t make the decision. When I can’t make a decision, I start searching for more options. It ends up being a tiring cycle.

Over the years, I have realized this is my problem. I look for the most desirable option, but then my mind pushes me to continue searching. Second-guessing is in my nature. I have problems jumping out of the searching phase and into the action phase. Remember, actions speak louder than words. I can plan all day, but until I take action on that plan, it is nothing more than words.

Stop Searching and Start Acting

It took me four years to pay off my debt.

While that time period is behind me, that was a long time. I wasted a lot of my money on interest payments and I didn’t save for retirement or all of the other cool things you can do when you are not in debt.

The reason why it took me so long was I needed to find the absolute best option. I searched and searched. I was putting off taking action until I found the answer. That was until my wife muttered “just start paying it off already!” She had a point. She had a really good point.

How can you pay off debt if you never actually make a payment toward that debt? How can you reach your goals if you don’t actually take steps to reach them? There is nothing wrong with researching your options, but you need to take action in order to make a difference. If I could go back to my debt repayment days, I would have just started paying more toward my debt. I wouldn’t worry about the snowball or avalanche method. I wouldn’t worry about any of that. I would just start and then search for options as I went along.

Don’t get hung up on overloading yourself with information. That process can come later. If you need to do something, then research just enough to get started. Take the action necessary and then research some more. Once you take action, you will be on your way to reaching your goals, whatever they may be.

My biggest piece of advice for anyone in debt is to stop searching for options and start taking action. Nothing beats just taking the first steps. All of the other thing will fall into place afterwards. Action is more powerful than words.

How about you all? In what circumstances in your life have you found yourself doing too much prior research, when in reality, taking the first action step would have been more productive?

Share your experiences by commenting below! 

***Image courtesy of Celestine Chua

Delay Your Gratification (Even If You Have The Cash)

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

Do you have any idea how people used to spend their money 40 years ago?

In a time before credit cards were main stream, people used cash to purchase everything. If they did not have the cash in their bank accounts, then they simply could not buy the goods that they wanted.

Our world is much different today. Since credit is so easily accessible, people often see an item that they want in the mall and quickly whip out their credit card to buy it. They don’t need to think about whether they have the cash in their account because they can just borrow the money now and repay it over the next few months or maybe even years. This method of spending has just become a way of life.

The Smart, the Dumb, and the Wealthy Weirdoes

There were basically two types of spenders forty years ago.

There were those that spent their money immediately when they got their paycheck (and never had a savings), and there were those that lived below their means and put a little bit away each week. The weekly spenders were considered to be financially dumb and the savers were considered to be smart.

Today, there are actually three types of spenders. With the option of credit, you actually have 1) the individuals that spend more than they earn (and have a consistent balance on their credit card), then 2) you have the people that keep their spending in check and live paycheck to paycheck (but pay off their credit card each month), a then 3) there are those that actually put money away and invest in their future with their excess cash.

The spenders who rack up credit card debt are considered to be financially dumb by many. The paycheck to paycheck spenders are considered to be smart since they do not depend on credit to survive. And then there are those that put money away and have a plan to grow wealthy with a budget – these people are thought to be crazy (or “wealthy weirdoes” as I referred to them as in the title) because they are taking the exact opposite approach to spending as everyone else. But, these are the individuals that will become ultra-wealthy while everyone else struggles through life.

Delay Gratification and Become Rich

If you care about your future, you want to be a wealthy weirdo.

In our world today though, this is not an easy thing to do. Many people understand that it is wise to pay for items with cash so that you don’t pay the bank interest on your stuff, but this is where the intellect seems to end for most. If you want to be wealthy, then you need to learn how to have thousands of dollars in your account, but not purchase that item that you want so badly even when you do have the cash.

I used to spend money quite frequently. When my savings account hit $5,000, I felt pretty rich and was almost looking for things to buy. Before I knew it, I had a new TV, surround sound, and a new stereo in my car. None of these things were necessary and the only reason I bought them was because I thought they would make me happy. Plus, I had the cash to pay for them, so I wasn’t being unwise with my spending. Wrong, wrong, wrong. Even though I had the cash, I hurt myself financially be making these purchases. I could have invested that $5,000 and earned many thousands of dollars for myself in the future.

Today, I have learned to overcome this spending habit and am on my way to wealth. My mortgage is nearly paid off and I will soon invest in real estate (in addition to the index fund investing I am doing now) to earn an additional thousands of dollars each month. By continuing to reinvest my earnings into future investments, my wealth will soon grow to an amount beyond most individual’s imagination. If you want to be rich, I strongly urge you to delay your gratification, even if you do have the cash!

How about you all? What category of spender do you fall in to? Are you conscious about saving money each month before spending money on gratification?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/marcygallery/

What Are Your Morals When It Comes to Money?

The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com. 

Money and morality seem to go hand in hand. From the way you report your income on your taxes to how you handle a basic return at a store, money forces us to make decisions between right and wrong every single day.

Of course, what makes things interesting is that gray area, the situations where some people would consider an action to be moral and the right thing to do whereas others might see it as a breech of an ethical code. Here are some examples:

1. Buying One Movie Ticket for Two Movies

A friend of mine really loves to go to the movies. It’s their absolute favorite past time, but movies have become outrageously expensive in the past few years. He often pays for one movie and stays inside the theater afterwards and goes to see another one. He argues that he’s a good customer, goes to the movies all the time, and that the theater is ripping people off anyway.

I tend to think this falls in the category of the wrong thing to do, but then again, I’m not much of a movie person. I’m always the girl staring blankly when people dish out movie quotes in conversation, so maybe I’m missing something. On that same note, people bring candy into the theater all the time too. I know I do, so is that any better than seeing two shows?

2. Loaning Money to a Friend

I’ve written extensively about this, and although it’s harsh, I don’t advocate loaning money to friends. In my opinion, friendships are too important to be ruined by debts. One could argue that close friends would loan money no matter what and that it’s the right thing to do. However in my experience, it adds a layer of awkwardness. I am just so in tune with my finances that when I have loaned someone money in the past, I can’t even look at them without remembering that they owe it to me. It’s probably a flaw in my character or something, but I’m just so aware of numbers and finances that it’s hard for me to let it go when someone doesn’t pay me back.

However, if you are someone who doesn’t mind loaning money to friends because you believe it to be the moral and right thing to do, then my advice would be to go ahead and make it official. Sign a contract, add some interest to it, and send statements. This might make them more likely to pay, but it also adds in a sense of business obligation, which makes things decidedly less “friendly.”

3. Returning Used Items

I recently received an article of clothing as a gift, and the giver was nice enough to include a gift receipt. I was going to return it when I got the chance, but then my mother in law ran a load of laundry and included the new outfit with it. (She was being sweet and trying to help me with my chores!)

It still looked brand new when it came out of the wash, and for a moment I briefly considered returning it anyway. Then, I thought about how I might feel if I bought something from the store that someone else had washed and returned and decided against it. However, I know that many people wear things and then return them, especially at stores like Nordstrom that have awesome return policies. Some people would argue that it’s not wrong; otherwise, why have the return policy to begin with? I just couldn’t bring myself to do it personally.

4. Fudging Your Taxes

I feel like there are so many ways to handle your taxes.

Obviously, it’s immoral to lie and cheat on them, but there are some smaller rules that people seem to break a lot. For example, lots of people love to deal in cash because it’s not traceable. Whether you’re selling something at a garage sale or paying your babysitter, chances are there are some cash items that pass through your hands every year that don’t end up on your taxes. Is this something that we should all be more aware of?

5. Giving Money to Panhandlers

On one hand, it takes a kind person to hand money to someone who is begging for it. Still, others would argue that when you give a panhandler money, they might not use in the way you had hoped. I have mixed feelings about this, and honestly, it really depends on the person and the situation. I’m much more likely to help someone who is asking for food rather than asking for money. I’m also an advocate of becoming involved and really helping someone who needs it rather than a disconnected toss of a quarter into a bucket. I’m not sure what the right thing to do is, especially if you have spare change on you, but I’m interested to hear your opinions on the topic!

How about you all? What do you think of the situations listed above? Can you think of any other situations where the difference between right and wrong is murky?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/psd/1806225034/in/

The Risk-Averse Way to Wealth – Dave Ramsey’s 7-Step Plan to Wealth

The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

So, if you have $10,000 in your life savings, how comfortable would you be with betting it all on black at the craps table?

If you answered, “Very comfortable”, then I’m guessing that you have nowhere near $10,000 in your bank account. If you ever want to see that amount of money in your account (and much more), then I suggest that you learn how to get rich with the non-risky plan that I am about to roll out for you.

I have followed this plan for the last 4 years and it has helped me go from a broke college graduate with a net worth of -$20,000 to a very prosperous adult with a net worth over $150,000. It is not an exciting plan, but it flat out WORKS. Give it a try for yourself, and you will soon be on your way to wealth like me.

The Dave Ramsey 7-Step Plan to Wealth

I received a copy of Dave Ramsey’s book, “Financial Peace” when I was 24 years old, and it changed my life forever. After reading this book, I soon realized that I was not going to get rich by playing the stock market or investing in gold. Nope, if I truly wanted to accumulate wealth, I needed to get out of debt and build up some serious cash flow. This is how Dave suggested that I get wealthy and I am going to relay the same message onto you.

#1. Build up a $1,000 Emergency Fund

The main objective of the Dave Ramsey plan is to pay off all your consumer debts, but before you do that, you need to build up a cushion (so you don’t end up using those credit cards in a financial emergency). So, sell some stuff on Craigslist, mow some lawns, baby sit for your neighbors. Do whatever you need to do to save up that thousand bucks. Then you can start paying down your debt and building your net worth!

#2. Pay Off Your Consumer Debt

Dave calls it the debt snowball. You start out by paying off your smallest debt and then applying that payment to the next one. Before you know it, you are making large payments on a debt you may have thought that you’d have forever! All in all, this can take some time, but with focus you can probably pay off all your debts much faster than you thought you could.

#3. Save Up 3-6 Months of Expenses

A $1,000 emergency fund is nice, but it won’t last long if you lose your job. Once your consumer debt (credit cards, student loans, and car loans) are paid off, then you should beef up your emergency savings to cover yourself for 3-6 months. This might take some time also, but it is absolutely essential to protect yourself from the inevitable financial problems that life throws your way.

#4. Invest 15% of Your Income

This is where the wealthy part starts to come into play. Sure, it is important to get rid of your debt, but this alone will not make you rich. In addition to getting out of debt, you need to invest some money today so it grows into a big pile of money in the future. Dave suggests that you invest in mutual funds, but along with that I would also suggest Index funds and real estate investments. Personally, I invest 15% of my money (with the help of my company match to my 401(k) investments), and I am also putting money aside for future rental property purchases.

#5. Put Money Away for Your Child’s Education

College is only getting more expensive, and if you would like to help your child pay for their education, then you most likely want to start saving today. One way to do this is to put money into a 529 fund, which is basically a 401(k) for your child’s college expenses. By putting money away today, you can grow quite a large amount for your kids 18 years from now.

#6. Pay Off Your Mortgage

I am working to pay off my house right now. When I purchased the house, I borrowed about $71,000 from my local credit union. Less than three years later and I only owe about $43,000. And, I have this crazy idea that I am going to pay off the entire mortgage by the end of this year!

This is the part of Dave’s plan that most people think is crazy. In their minds, your house is an asset and will appreciate in value at a faster rate than inflation. Plus, with interest rates at an all-time low, why would you want to pay it off early? There are plenty of reasons for this, but the most important one is CASH FLOW. How much money do you pay into your mortgage each month? Probably over a thousand bucks. Well, what if you didn’t have that mortgage anymore? That’s right, you could get super rich super fast. Which leads us to the next step…

#7. Get Rich and Give!

With an extra thousand bucks every month (after your bills are all paid for), wealth will come very easily for you. I modeled a plan to start investing in real estate and after just 20 years, I could buy 59 homes for cash (valued at over $5,000,000) that produce $500,000 a year. At this point, money is just not a problem. And, once wealth is accomplished, you can start giving money away! How great would it feel to just give $1,000,000 to your favorite charity with no strings attached? Follow this plan and I am confident that you will experience the feeling.

How about you all? At what step are you in the process laid out above?  What do you see as your main obstacle to becoming wealthy?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/abulic_monkey/135488031/