close out

Is it just me or did this month fly by? I can't believe tomorrow is the start of May.

I have to admit, I fell back into some old habits this weekend when it came to spending. But, I recognized it (albeit after I had spent the money) and now I'm ready to get back to saving.

Let's close out April by reviewing the last few steps of Financial Literacy Month (review the other 26 days here and here).

Step 27: Understand the cost of credit. Compare the following before you borrow: Interest rate, length of loan, the total cost of the loan (including interest), credit limit, minimum monthly payment, grace period, and overdrawn & late payment fees. I would also add any pre-payment penalty (I honestly can't believe banks charge you for being responsible). Their blog also reminds you to take into consideration the psychological costs of debt, which, in my opinion, can sometimes outweigh the actual costs (it did for me!)

Step 28: Assemble a financial team. This includes a tax advisor/accountant, a credit counselor, a financial planner, and a lawyer. You may not need all of these componants, but I've heard visiting a financial planner is an expense that's well worth the cost. It can definitely help to have an objective opinion about your finances. The Weakonomist compares your financial team to a football team (helpful!)

Step 29: Appreciate the benefits. "Change may be hard, but the payoff can be priceless." MMI provides a little checklist - "If I stick to my plan, I will..." - I have every box checked off:

feel a sense of accomplishment

have less anxiety

build a secure financial future

improve my creditworthiness

appreciate the things I have purchased

avoid legal problems

be prepared for financial emergencies

feel more in control of my finances

I would also add "have a greater sense of self"

Step 30: Moving forward & Reflections. Is it weird I'm kind of disappointed Financial Literacy Month is over? Even though many of the topics covered during the month were things I already knew, it was nice to review some concepts and apply them to my current finances.

The last reflection of FLM is "What will you do next?" One of the themes I saw over & over during the month was tracking your spending, which I do... kinda, sorta, not really. So May's goal will be to jot down every expense. Whether it's fifty cents in the vending machine at work or paying my half of the mortgage, it's going down in my dollar store journal. I'm hopeful that actually writing it, instead of just reviewing it on the computer screen, will help keep my spending in check.

Did Financial Literacy Month help you at all? I wonder if May has any kind of money theme... "Mad Money May", perhaps? Let's make it happen.

sugar lips

That title has nothing to do with money and everything to do about the massive amount of sweet treats I've eaten today. Free breakfast at work... is there anything better? (actually, a glass of milk would be awesome right now, but I'll manage.)

I'm currently waiting on Card #1's decision about my credit line (read more about that here) and I have another financial transaction pending that I'll be able to divulge more information about soon, hopefully. In the mean time, it's been awhile since we checked in at Financial Literacy Month, so let's catch up!

Step 17: Save for Your Goals. The tips for savings are "make it automatic, turn a hobby into an income, downsize, & use gifts wisely." I already started the automatic savings ($50 taken out pre & post tax into separate accounts), but I don't really have a "hobby", unless you know somewhere I can get paid to lay on the couch and watch Law & Order SVU. We don't really have a lot of stuff to begin with in order to downsize, and we recently used our tax return to re-bolster our savings account; However, if I get monetary gifts for my birthday or Christmas, I'd be lucky if they lasted a week in my wallet. That'll be a goal to work on at the end of the year.

Step 18: Where Does All the Money Go? Seriously! Where is it? This step is about tracking expenses. I hate tracking expenses, even though I know it's a necessary evil. I just can't seem to commit to carrying a piece of paper or a notebook around for more than a week. Instead, I've been trying to log onto my online banking every few days to analyze/catagorize where the money is going. Next week, I'll be breaking down this month's spending and see where I can do better.

Step 19: Identify Fixed Expenses. Sounds easy!

Mortgage: $600.00 (includes taxes)

Water/Sewer: $40.00 (paid quarterly)

Cell Phones: $178.00

Cable: $125.00

Student Loans: $205.00

Credit Cards: $300.00

My total fixed expenses are about $1,200 or one paycheck per month. I did not include the electric bill, because that's our biggest variable expense! It's like a roulette wheel every month on what it's going to be.

Step 20: Identify & Plan for Periodics. It's crazy that I never even thought to pre-budget for these expenses before now. "Often, we know when these events will occur, but still fail to plan for them." Uh, hello, that's me! As I touched on yesterday, birthdays are an expense I don't specifically budget for, even though they come at the same time every year. Renewing my car's registration is another one (for the hubs too!). I do a fairly good job at budgeting for Christmas. Usually around October I start pestering everyone for gift ideas, but I've also been known to buy things throughout the year in order to spread out the spening.

Step 21: Document Your Spending. FLM suggests uploading your monthly expenses into their worksheet or a similar one in Excel or Quicken. I know my SIL uses a spreadsheet tracker. I guess I better jump on this bandwagon!

Step 22: Identify Ways to Reduce Spending. One way I've reduced spending that I've briefly mentioned before is carpooling. I now only have to get gas 3-4 per month instead of 5-6 times. It doesn't seem like a lot, but with as prices on the up & up, saving an extra $60-$70 a month comes in handy! I also use the GasBuddy app on my iPhone to locate the cheapest gas near me. A penny saved is a penny earned, right?

Step 23: Save Money on Groceries. Ugh, yes, this is what we need. You may recall the other week when I noticed we spent almost $500 on groceries in March 2012. And there's only two of us in the house. FLM's website encourages weekly meal planning. One of my co-workers does this with success, but I really haven't been able to get into it. What I plan out on Sunday just doesn't translate by Thursday when I want chicken instead of fish. Instead, I've been utilizing my favorite stores apps to make lists and stick with them and trying to set an overall budget. It's a work in progress, but I'm getting better.

Step 24: Share a Financial Tip for Change."When you identify ways to reduce spending, you are being honest with yourself about your finances.  Being honest with yourself and others about your finances will ensure your success." Well this blog is one big lump of honesty - the good, the bad, the ugly, it's all here.

Step 25: Document Your Desired Spending. In other words, indicate how you would like to change your spending. I actually just revamped my budget last week and set up e-mail alerts so I know when I'm at or near my budget threshold. I decreased spending in a few catagories (namely personal catagories like health/clothing).

Step 26 (for good luck): Protect Yourself by Performing Personal Financial Check-Ups. Check in on your home/auto/health/life insurance policies to make you're covered in a way that best fits your lifestyle. There's no sense in paying for stuff you're not going to use!

How is your financial literacy month shaping up? I think it's clear my goal for May needs to be an exhaustive documentation of my month's expenses! Has anyone received a good financial tip lately?

the why factor

Anyone out there a Storage Wars fan? I bet you know my answer:

thanks, dave

Anyway, Darrell "The Gambler" Sheets is always talking about "The Wow Factor", but I'm going to talk about "The Why Factor". This past week, I've been listening to a few podcasts about money and my favorite by far is Adam Baker's Man vs. Debt podcast. Seriously, I have about four pages of notes/quotes on the subject. Here's a little nugget:

We've been sold a myth...that the pursuit of a living environment filled with things is going to grant us security- even grant us happiness. In the pursuit of these things we start to identify with these things... [without stuff] it's easier to bounce back of anything negative that came into life... what happens when you need to adapt? Either physically, emotionally, financially to any situation? At best, you're restricted, you're clogged, you're congested...How much more fufilling would life be if you started collecting experiences instead of things

That's just a brief synopsis - he talks more about how we're in a cycle of working longer & harder in jobs we don't like and rewarding ourselves with more stuff which is putting us deeper in debt so we have to keep working. I make no bones about the fact that I don't like my job all that much, but I stay because of the salary. How great would it be if I could take a pay cut and not worry about whether I could pay my bills? (the answer: super great).

Today is the hubs' and my first wedding anniversary. On Saturday, we invited some of our friends over to have a little get together. Afterwards, we were in the kitchen talking and I asked him what our goals should be for Year 2 (the goal for Year 1 was just not to kill each other). He looked at me kind of strange at first, but I kept talking about what we should be working towards as a couple and how by researching topics for this blog I had learned a lot about goals. And I essentially admitted to him I had more credit card debt than I was comfortable with (I didn't give him the exact number), but I was ashamed to tell him about it. Of course he told me I shouldn't have been worried and he expressed he felt like he wasn't contributing as much to the household as I was and that's probably why I felt like I was coming up short each month.

While we didn't set exact goals, we agreed to work together towards paying off my debt. It was really nice to have an in-depth conversation about what we wanted - which we dont do nearly as much as we should - and I hope it's something we can continue to do in the future.

Back to the podcast (this all relates, I promise) - the central theme Baker talks about is "Your Big Why":

[the] real, honest, transparent, selfish reason that you are getting out of debt or you are stepping up to take back control of your finances. The real reson.

He says there are three levels: In the first level, we take the "why" at face value-

"Debt is bad. Being rich is good. So I'm going to pursue this thing that's good and not this thing that's bad." Baker says "We simplify that much because we aren't willing to really dig deep and analyze the big why, the deep why, the real reson that we're doing this - why do you want to get out of debt? why is debt bad?"

Obviously, my first level is along those lines as well. But why? In the second level, you answer that why. It may be because you want to have extra money to buy expensive things with cash instead of credit. Baker emphasizes it's okay to be selfish here. He literally says what my second level is in the podcast "I just want to get away from the stress. The stress of having to pay bills. The stress of this debt. The weight of this debt. I just want to get it off of me." But why?

Your Big Why exists three levels down... Why do you want to get rid of the stress of your debt? What's the real reson deep down?"

I feel like I'm falling short of what I really want out of life. The hubs and I have talked in the past about moving out of state and I would love to be able to do that and not worry about if I'll be able to find a job that pays what I make now. I want to be a person who works because they love what they do, not because they have to. I want to be able to explore other career paths without fear that we won't be able to afford our monthly bill payments. I used to be this really fun, spontaneous person who was always up for anything and now I feel like I plan everything and I don't do or experience as much as I used to because I'm always concerned about money. I'm sick of settling.

Today's step of Financial Literacy Month is about making the commitment. They recommend creating a visual map of your goals and surrounding yourself with them. That's definitely something I'll be doing in the coming days so I can be reminded daily about why I'm on this journey.

What's your Big Why?

Monday Spent: $3.84 Wawa breakfast
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Monday Saved: $0.00

goal tending

In continuing the theme from Wednesday's post, we're going to sail on into Financial Literacy Month with more tips. This weeks FLM topics seem to be centered around goal setting and goal tending. Ironically, I was listening to the Man versus Debt podcast yesterday and Baker interviewed a blogger who believed in a "no goals" theory.

I'm not sure yet whether goals are for me, but perhaps that's because I have a hard time setting realistic goals. Or even if the goals themselves are realistic, I can't deal with slow results. I'm a "needed it yesterday" kind of person. I want immediate results, whether it's in my finances, weight loss, the house, etc. So as you can imagine, I'm often disappointed when things don't happen as fast as I think they should and I abandon whatever the goal/resolution was. I'm honestly surprised I stuck with the Lenten goal (for the most part) even when I wasn't able to make big dent in the debt overall.

But back to Step 12: Set short, mid, and long-term goals. Their default goals are: Pay down debt (short), establish emergency savings (mid), and Retirement (long).

My goals would be:

Short (one to two years): Build our emergency savings back up & save for a new car

Mid: (two to five years): Pay off credit card debt (we established back in February this would take me at least four years)

Long: Continue contributing to my retirement accounts and increase the contributions back to 10% once the debt is paid off. Establish a solid long-term savings. Sell our house and buy one I actually like in Atlantic County.

Step 13 of FLM covers a topic we're super familiar with around these parts: methods to pay down debt. They provide the examples of Debt Snowball (lowest balances first) and Debt Avalanche (highest interest rates first). I'm not one to beat a dead horse, so here's a handy debt pay-down calculator if you're interested.

Moving right along... we're going to bang out Steps 14 & 15 today as well, since I'm a bit lax on the weekend blogging.

Step 14 talks about the importance of an emergency savings account. This is an area I've been worrying a lot about lately, since our savings was wiped out after the bat removal. If we hadn't just received our tax return, I don't know how we would have managed. I know most financial websites recommend saving three to six months of living expenses which would put us somewhere between $7,377 & $14,755. Yow-za. I think we have $1,300 in the account right now (all thanks to the hubs).

Step 15 makes me feel better since it's about preparing for retirement and I'm all over that. Prior to this debt paydown journey, I was contributing 12% of my salary to a Roth IRA and a Deferred Compensation plan. This was in addition to our mandatory pension contributions (which, to be honest, I wish I could just opt out of since I doubt NJ will have the money to pay it back to me when I retire). For now, I'm contributing 2% while I focus on knocking out my debt, but I'm look forward to getting back to fully funding my retirement accounts once my credit cards are wiped out. The Hubs also contributes a lot (I don't know the percentage off the top of my head) towards his 403(b) plan so we're on track to spend our retirement golfing (him) and at the beach (me).

What are your financial goals? Do goals motivate you or do you get discouraged like me? Any tips for better management?

April is Financial Literacy Month

Did you know that? I didn't until I was doing research on a different topic for the blog.

Money Management International is sponsering a Financial Literacy Month Challenge as well as guest bloggers on their Blogging for Change website which highlights each days "step". You can enter the Challenge for a chance to win $500 - you know I did!

I'm a bit behind on the steps, so lets kick this baby into overdrive to catch up, shall we?

Step 1: Commit to Change. Done!

Step 2: Assess Your Finanical Situation. I scored 12 points on their quiz, which "reflects a good effort to manage your money effectively. The 30 step plan can help determine changes that can be made to improve your financial well-being."
Step 3: Clearing Out Financial Clutter. I will give myself a pat on the back for being pretty organized; I usually alway toss receipts (except for major household purchases), I print & save our utility bills for one year to compare costs. I'm hit-or-miss on saving credit card statements. Lately, I've just been reviewing them online.We have a big bag of bills I need to get around to shredding then burning in our fire pit. I need to add our paystubs to the pile now that we've received our tax return. The blog post for day 3 lists an interesting tip about carrying three different registers - one for cash, one for your bank/debit card, and one for credit cards. The author also mentions people who struggle with their finances may need to document their spending for longer than a month (ugh!)

Step 4: Set Yourself Up for Success. I would consider myself the Family CFO, meaning I track and pay the majority of our household bills. Again, I'm pretty organized with our paperwork. We're half & half on automated payments- I should probably work towards full automatic payments. I couldn't view the webcast at work though, unfortunately.

Step 5: Get Copies of Your Credit Report. Done - over 40 pages!

Step 6: Clean Up Your Credit Report. Easy-peasy since there were no errors from the three reporting agencies.

Step 7: Make Your Money Count. Using their Income Worksheet Form, I calculated a monthly take home of $2,553.24 (a bit more than my previous estimates due to knocking down my retirement contributions in the short term).
Step 8: Identify Your Starting Point. I calculated my net worth at $1,130.87. Woo-hoo! In the positive! I didn't have the information on the balances in my pension & IRAs so I just estimated some rough numbers based on my last year & a half of contributions. I did not factor in our joint savings because I haven't recently contributed anything to it (whomp whomp)

Step 9: Passing the Debt Test. I answered "yes" to four questions:

Is an increasing percentage of my income going towards debt payments: yes, but that's because I'm riding the debt meteor

Is my savings cushion inadequate or nonexistent: bats- 1, savings account- 0

Are you at or near your credit limits: depends on your interpretation of "near", but I answered yes anyway

If you lost your job would you be under immediate financial strain: hell yes. this scenario gives me nightmares.

The guest blog posts lists "5 Great Reasons to Have Less Debt". They all sounds fabulous.

Step 10: Set Your Priorities. When filling out the worksheet they provided, I could almost place each priority in the "need" catagory, but I decided to be reasonable. The blog tells you to "market to yourself" what your priorities are instead of letting the mass media market to you which I think is a really interesting concept.

Rank 1 (most important): Paying off unsecured debt; Making on-time payments on secure debt; Maintaining a savings account (all ranked as needs)

Rank 2 (semi-important): Buring a car (still more a want than a need), taking a vacation (want), having money for entertainment (want)

Rank 3 (not as important): Saving money for a down-payment on a house. Obviously, we already own a house, so we don't need a D.P. but we should work on increasing our home equity.

Step 11: Set financial goals. They use the acronym SMART:

S - "A smart goal is specific. It pinpoints something you want to change to achieve." (I want to pay off my credit cards before I turn 30.)

M - "A smart goal is measurable. You can measure or count a SMART goal."

A - "A smart goal is achievable. Setting goals too high can lead to frustration." (going to be hard, but achievable)

R - "A smart goal is rewarding. Reaching the goal should be a reward for your hard work."

T - "A smart goal is trackable. Set milestones and schedules for your goals." (first goal: Pay off Card 3 by July at latest)

That brings us up to date on our steps. Are you motivated to take the Challenge now? I'm actually kind of excited about it. I'm definitely a person motivated by challenges/experiences so this is right up my alley.