Commit. Plan. Take action.
How important is mindset when getting out of debt?
That’s the question I received last week from Michael (not my husband).
So I did a scope (as the cool kids call it) where I shared the following two-minute trick to change your thinking about debt.
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Many of us have been in the position where a friend or family member is asking for financial assistance. If you’re like me, you’ve even gone into debt loaning that money. If the person is close to you, it may be hard to say no. However, there are plenty of reasons you have to say no without feeling bad.
Although I won’t be loaning you that money, I will still help, and you can help your friends and family in a financial crisis too. Here’s how:
Loaning people money is a sticky area. Don’t feel like you have to give anyone anything, especially if you truly don’t have the money to do so. Have you ever turned someone down for a loan? What was your reasoning?
Photo: The One Thing
It’s time for another installment of Monica’s Two Cents where I answer YOUR questions!
If you have a question for me, I would love to hear it. You can fill out the form on the Contact page or send me a message via Facebook.
Now, let’s dive in to today’s question.
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“What gets measured, gets improved.”
If you haven’t seen my debt freedom progress reports before, each month I bring you a recap of the previous month’s progress on paying off our debt.
Young people in their 20s don’t think of life insurance as something that’s a necessity for themselves. Yet they are at the perfect age to buy a term or whole life insurance policy to take care of outstanding debts in case they die prematurely. And because young people are far more likely to carry a heavy debt load straight out of college, they need something to protect family members who co-signed for the loan. Or leave money to cover any expenses including the funeral and unpaid credit card bills. These are thoughts that no one likes to think as they’re a bit morbid, but it is a reality of life.
Young adults have the benefit of being in what’s known as a low-risk pool for insurers. They’re far less likely to have serious or life-threatening illnesses, and insurers reward that with lower premiums. The same goes for term or whole life insurance. And even though term life insurance only lasts for so long, it’s still worth buying while young. One reason is that life circumstances change over time. Someone who’s single in their 20s may be married in their 30s and raising a family. In the event they have an untimely passing in their 50s, they may still have a term life insurance policy in effect that benefits those who survive.
Take the quiz below to see how much you know about the benefits of getting life insurance at a young age. You might be surprised at what you learn!
Last week, I shared 20 expenses you can cut from your budget and how my family and I cut our grocery spending in half.
This week, we’ll look at some more ways to trim your spending to make room in your budget for paying off debt or saving up for your next financial goal.
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Hawaii, Ireland, and $49,000 of debt gone!
In this interview, Celeste and Rita share how they’ve balanced saving money with what’s truly important to them, the sacrifices they’ve made for their goal, and the unexpected result from their debt free journey.
Here is the interview:
ME: Thank you for sharing your story with Our Debt Free Family! Please tell us a little about yourselves so our readers can get to know you.
We are Celeste and Rita, and we are both 44 years old. We’ve been together for five years and married for two, and we live in Portland, Oregon.
Rita works in law enforcement. She enjoys listening to podcasts and the radio show from her hometown, running, and playing with our dogs.
Celeste works as a nurse part-time, volunteers, and enjoys making things with her hands: knitting, sewing, and crafting.
We have two dogs and two cats. We both love to travel, IPA craft beers, updating our 1957 home, and ’80’s music.
ME: Welcome! What made you decide to focus on becoming debt free?
Rita will be able to retire in about 11 years so the idea of enjoying our retirement without the weight of debt is a no-brainer.
ME: How much debt have you paid off, and how long has it taken you?
With your guidance, we’ve paid off $49,048.83 in the last 18 months. Woohoo!! We now have $279,604.76 left including our mortgage.
ME: Congratulations!! What kind of debt was it?
We have paid off three credit cards, a motorcycle, two cars, and a good portion of student loans, along with making our regular monthly payments.
ME: You’ve crossed off a lot of items from your debt snowball! What did you do for work while you’ve been paying off your debt?
We both worked our jobs mentioned earlier. About ten months ago, Celeste decreased her work hours from about 35/week to about 10/week, which also decreased our income.
ME: What has your annual income been during this time?
About $65,800.00, which includes both of our incomes and rental income from the attached apartment we rent out.
ME: Did you do anything to increase your income?
Rita volunteered for two work trips where she was able to earn overtime.
ME: What sacrifices did you make to reach your goal?
Rita going on those trips was a huge sacrifice for us. She was gone for 30 to 77 days. It’s tough to be apart and away from home for so long.
We also decided to downsize from two cars to one. Now we only pay insurance/maintenance/gas for one car and one motorcycle. It has forced us to think ahead and to limit those trips “for just one thing.” We also use public transportation and ride bikes or walk whenever we can.
ME: What are your best money-saving tips?
Perhaps the most important thing we do is buy with intention. We ask ourselves, “Do we really need this new item? Can we borrow or share an item? Can we purchase the item second hand?”
We would rather spend our money on experiences than “stuff.”
With Celeste not working as much, she’s explored DIY methods to save money and decrease toxins/plastics in our home.
She makes our laundry soap, hand soap, lotion, almond butter, shampoo, and toothpaste. She’s also made produce bags from old t-shirts and reusable hankies from an old sheet.
We buy most of our dry foods (i.e. spices, rice, beans, flour) in bulk to decrease packaging and save money.
Because we produce less trash we’re able to use “on-call” trash pick up about every 6 weeks.
We wash our clothes in cold water and use the clothesline whenever possible. We both take lunch to work, and Rita has her coffeemaker at work to cut down on runs to the coffee shops.
ME: You’ve done a lot to cut your spending! What advice would you give to someone considering starting their own debt free journey?
We haven’t stopped doing the things we enjoy in order to pay off our debt faster. Instead, we just do them less often to keep us sane. Everyone is different and has different ideas of happiness. This works best for us.
Also, don’t beat yourself up for slipping sometimes. Most people haven’t been taught about money management. It takes time to learn and of course, practice and patience. Taking little steps can make a difference.
ME: That is great advice! Have you made any big purchases with cash? If so, how long did it take you to save up?
Rita is from Ireland and goes back every year to visit family. In 2015, we both visited for about $5,000. We also took a vacation to Hawaii and spent about $3,000 on the trip.
We started saving for the trips about a year in advance, saving $100 of each paycheck ($400/month). We also used some money from Rita’s work trips for these vacations.
We bought a much-needed new mattress and box spring set for $1,700. We used money from Rita’s work trip and bought when it was on sale. Celeste made a cool headboard for $200 to go with it. The fabric for the headboard was discounted with coupons.
We also put in a small deck with used composite material for less than $200. The composite decking itself would have been $800 if we had bought it new!
ME: You’ve accomplished a lot in the last 18 months! What has been the best part about your debt free journey?
Learning about healthy financial habits has been really liberating!
An unexpected benefit is how it’s enhanced our relationship.
Combining our bank accounts and debt was really hard for Celeste due to her large amount of student loans. She didn’t think Rita should pay for the debt Celeste incurred before they were married.
It’s been a process, but through it we’ve become more of a TEAM. We’ve opened up our communication, and it’s brought us closer.
We are on track with each other and our goals are now in sync.
ME: Thank YOU, Celeste and Rita, for sharing your story with us!
What parts of Celeste and Rita’s story did you find most inspiring? Which tips can you apply to help you reach your financial goals faster? Share in the comments below.
Of course, every financial challenge is a lesson. Because I’d not been able to save or invest in a while, I may have jumped into saving money too quickly.
You’re probably thinking to yourself, “Is that even possible?” For me, it was (and still is). Below you’ll find tips and advice on how to avoid rushing into savings.
Like I said, for me, saving too quickly was a possibility. I set goals that made life a little bit harder. I wanted to save $400 a month to start. However, I budgeted myself down to the penny to get there. There was nothing left for me to do anything besides sit in the house. Not only will that make for a rather boring Saturday night, but it will also make you loathe saving money (and possibly tempt you to take from savings down the road). Here are three tips I’d give anyone about to start regular savings for the first time:
When you’re budgeting to save money, don’t strap yourself like I did. A huge part of this financial challenge was to simply become more aware of my finances. Setting such a steep savings goal to start off definitely made me take a closer look at what I was spending each month. However, it also made it so that I couldn’t do much else other than saving money. If you are trying to save up for something specific or need the cash quickly, this isn’t a problem. But, for long-term savings plans, you want to have something you can stick to for a long time without feeling strapped.
Which brings us to my next point. You’ve got to be realistic when you are setting your savings goals. No matter how much you are able to save, something is better than nothing. Start out with a small financial challenge for saving, like the 52 Week Money Challenge or the 365 Day Money Challenge. Once you get the hang of putting money aside every day or every week, you can move on to bigger goals. Just be sure they are within your current budget.
Finally, consistency is key. In any kind of challenge, and especially in a financial challenge, staying consistent can prove to substantially beneficial. For instance, if you’ve decided to put $50 per week into a savings account but skip one week to go bowling instead you may be inclined to skip your savings deposit in weeks to come as well. If you stay consistent, however, it will become almost second nature. (Setting up automatic deposits is a great way to remain consistent with your savings goals.)
Whether you are trying to save or you’re trying to get a better look at your finances, taking on a challenge is a great way to get started. Check out my first post on My Financial Challenge and, as always, feel free to reach out!
If you’re a regular reader of the blog, then you know that I love sharing debt free stories with you. And today I have another inspiring journey to share with you!
Deacon and Kim Hayes are a young couple living in Arizona with their baby boy.
They paid off $52,000 of debt in 18 months!
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Being in debt often limits your options. You cannot get an affordable loan due to the higher risk factor you now carry. It is also difficult to get your personal finances in order, considering you have many loan repayments to handle each month. Your options may be limited, but that doesn’t mean you can’t take steps to improve.
Pursuing a master’s degree in fields such as business administration is a sure-fire way to boost your career to a new level. Better career means better income, which in turn can help you recover from your debt. That said, a master’s degree can be relatively expensive, so is it a good idea to pursue a graduate degree when you’re in debt?
Let’s take a look at how you can pursue a master’s degree when you’re in debt. You can start by looking into online programs from reputable names such as Rutgers Online. Online courses are now accredited and allow you to get the same valuable degree as their offline counterparts.
There is another big advantage you will gain from going the online route too: affordable fees. Online degrees like AACSB online MBA are up to 50% more affordable than the equivalent offline degrees. Not only can you get an accredited degree that will help push your career forward but you can do it without spending as much money in the process.
Before you jump right in and enroll, however, there are more things to consider. Choose a degree that gives you the most career advantage. If you’re in marketing, for instance, look into online MBA programs that will help you become a better marketing executive and a prime candidate for a promotion.
Choosing a degree to pursue is just the first step. Since you have a less-than-stellar credit score and plenty of bills to take care of every month, you need to go the extra mile to make the pursuit of a master’s degree work.
You can start by seeking scholarships and financial aid. There are scholarship programs designed to help online students; these are the programs you should start with. Not all scholarships are based on merit and there are many opportunities to get them, especially today.
Financial aid is just as easy to find. Companies now offer incentives to persuade their employees to get a higher degree. This is because promoting an existing employee to a higher position is much cheaper than recruiting new executives. Check with HR if you can take advantage of such incentives.
If you still need a loan to finance the degree, then make sure you get the right type of student loan. Take your time and compare quotes from multiple lenders before borrowing any money. Calculate the total cost of using each loan and go with the best option you have in hand.
With an accelerated master’s degree such as the AACSB online MBA mentioned earlier, you can earn a master’s degree in as little as 12 to 15 months. The extra income you bank after giving your career a much-needed push will help you get your personal finances in order.
