Money, Money, Money, Money

Yes, I am singing the song in my head.

So, have I gotten anyone watching Til Debt Do U$ Part? 

I love this show.  LOVE. 

Each episode, Gail Vaz-Oxlade teaches different couples how to manage their money, create a budget and debt repayment plan, and stregthen their relationships.  (By the way, it now comes on daily on CNBC.)

She basically has the same approach as my main money man, Dave Ramsey, with a few small differences.  One big difference is that the show is filmed in Canada, so alot of government programs are different.  (Such as they get paid maternity leave and there is such a thing as stress leave.  STRESS LEAVE!!!  I could use that every week!)

The couples spend 4 weeks in Gail's budget boot camp.  The first week, she shows them all their numbers.  How much they're overspending, their projected debt in 5 years, their interest rates, etc.  She takes away all credit & debit cards. 

They're given jars for food, transportation, clothing & gifts, and other.  (She usually comes in with an initial budget budget prepared for them.)  They're given their weekly allowance and the Budget Binder.  They're instructed to put all their receipts in the binder.  Between those receipts & the cash in the jars, it should always equal their weekly allowances. 

Then the couples are put through three challenges.

The first week is usually their Financial Planning Challenge.  And usually it's one of two things.  If it's a clueless couple, she makes them do their own budget.  I'm always shocked by the number of couples who say they've never done a budget!  Aaaggh!!!  If it's not that, then they're usually instructed to earn an extra XXX number of dollars per month to make her budget balance.

The second weeks is the Life Lesson Challenge.  Whatever their vice is - shopping, cars, eating out, etc. - Gail tries to teach them a way around it.  Sometimes it's been to hold a yard sale, or sell a car, or take cooking classes.

The third week is the Relationship Rescue Challenge.  As we've all heard, financial problems is the number 1 reason couples split up, so inherently, these couples usually have relationship problems.  These challenges are so creative.  Sometimes it's an obstacle course; I've seen them have to stop people in the mall and explain compound interest, it's usually creative and bonding.

At the end of the four weeks, Gail comes back to their home to see how they've done.  If they've met all her goals, stayed in their budget, she gives them up to $5000 to pay down their debt.  If their attitudes were poor or if they didn't complete a challenge, she'll give them less.

The show is really fascinating to me.  I'm always amazed at the people's reactions.  And while you probably won't learn anything earth-shattering, I think it's always good to learn. 

Side note - can I please have this job when I grow up?  Come in and beat people up over money and then save the day with a check?  Pretty much the best job EVER!

The Costs of Luxury

Sorry for last week's absence...huge event at church that I was in charge of.  Back to the real world this week.

Yesterday afternoon my mom took my two oldest kids for the afternoon.  She took them to a local playground and they had a blast.  I had a little luxury...a Sunday afternoon basically free.  (When you have three kids, only one seems "free.")  I spent it catching up on my favorite restaurant makeover shows and Gail Vaz-Oxlade's newest show, "Princess." 


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 The basic point of the show is for "princesses" - those who think they deserve the best of everything...and get it - to be cut off and learn to live on their own without going into debt.  If they succeed for 6 weeks and complete all of her "challenges" they win up to $5000. 

(Don't even bother trying to sign up to be on it...unless you live in Canada.)

But one of her points this weekend was eye-opening to me.

She had one of the princesses calculate how many hours of work it would require to buy their luxuries - purses; shoes; travel, eating out, etc...  But that wasn't the eye opener, she had them calculate it using their disposable income.

Basically, the girls would have to do their budget for the month, and (for simplicity) let's say they'd have $60 left over...yes, for the whole month.  An average, 40-hour/week, employee works 160 hours a month.  60/160 = $.375 of disposable income per hour.  Meaning, if they wanted a $400 pair of boots, it would require that they work 1067 hours.  That's 26 weeks...or half of the YEAR!!!

Not many people would work half a year for a pair of shoes.              

(Me...if it were the right pair...just maybe.   Lol.)

So I started doing that with random things around my house.  Not bragging, but just being honest, when you're debt-free it doesn't take long to pay off little things like a night out or a new dress. 

So I started doing that with the big things, Christmas, our Florida/Disney vacation we're planning in May 2012. 

And wow...it's going to take a while to work for those things.   More than a month is a lot to me..

More than two months is an eternity.  (What can I say...I have ADD.  Much longer than that and I lose interest.)

Anyhow, I just thought that was a neat little challenge that I would pass along.  When you're planning that weekend away or the new appliances, it is eye opening to see how long you have to work for it to be able to pay for it.

Funding Your Emergency Fund

If you're just starting FPU, your first "baby step" is to fund your emergency fund with $1000.  (This is so you don't add to your debt, while paying down debt.)

When we first started FPU, saving $1000 seemed almost impossible.  While $1000 is not life-changing, it's nothing to sneeze at either.  If we could save $1000 in a month, why would we be in debt?  I thought it would take us 2 or 3 months to fund our emergency fund.

So, I was shocked when we were able to raise $1000 in less than a month.  I know...in a matter of 4 weeks!!  And this is how we did it...

1.  We held a yard sale.

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Now, I am not a fan of yard sales.  Holding or going.  As much as I love saving, I hate haggling and being haggled with.  So I piggybacked.  One of our friends held a yardsale.  I took my stuff over, let them price and sell it.  I had zero stress and just got to pick up the cash.

2.  We sold excess furniture online.

Look around your house and I bet you can find at least two pieces of unused furniture that are in fairly nice enough condition to sell.  I was shocked when I listed a coffee table, end tables, and a dining room set on Craigslist and they all sold.  (It does help to be in a college town.)

3.  I sold everything I could on ebay.

I love purses.  (Before I collected shoes, I collected purses.)  I sold at least half my collection on eBay.  Along with candles, decorations, cookbooks, luggage, makeup, kitchen items...

Anything still in the box, with tags, or unopened, got sold. 

4.  We paid the minimum payment on EVERYthing.

This was the hardest for us.  We had always paid extra on everything.  (And yet, still grew deeper in debt.  Bad math, I know.)  We cut all our payments back to just the minimum and banked the difference.  Including our credit card.  It still turns my stomack to think about.

5.  We cut our variable expenses by half.

Heard of the rice & beans budget?  That is what you're supposed to live off while you're getting out of debt.  The first month, we just had the "rice budget."  I'll admit it, we ate ramen for dinner more than once.  We spent $0 on groceries other than absolute bare necesseties like milk.  The rest, went into savings.

These are only 5 options, I didn't even touch on second jobs, consulting income, etc.   $1000 can seem daunting, but it's doable.  And there is a direct corellation between your determination and your success. 

Hmm...maybe we should do it again...I could sure use some new shoes! 

Just kidding.





Maybe.

Debt Fatigue - Signs & Symptoms

Over the weekend, I had a conversation that enlightened me. 

We talked about debt fatigue.

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When we decided to get out of debt, I being the lovable, furry, old nerd that I am, made twenty-eleven different budgets.

(In case you didn't know, 20-11 is a southern expression for a ridiculous amount.)

I made budgets where we paid off our debt in five years, three years, two years, paid as much as possible, paid as little as possible.  Every different recreation, I tried it.

If you follow Dave Ramsey's plan, you pay as much as possible every month.  You work, work, work and sacrifice to get out as soon as possible.

If you follow  Gail Vaz-Oxlade's approach, she limits you to no more than 15% of your income - as long as that pays off all your consumer debt in 3 years.

If you're staring at mountains of debt, living in poverty like conditions for years on end can seem daunting. If you don't pay off enough, you begin to feel like you're making no head way and get fatigued and worn out.  But if you sacrifice too long, that wears you out.

But if you go the other way and only pay the minimums and take too long, you lose your momentum, your steam, and tend to fizzle out. 

And that's why they call it fatigue...because you get tired of it.

Like a week of volleyball camp in 110 degree weather in a giant gym with absolutely no air circulation...

That kinda tired.

It's been 15 years since volleyball camp, and I still remember that fatigue vividly.

But speaking of fatigue, I'm exhausted.  Hence the post that doesn't really make that much sense.

But maybe you got the point. 

Frustrated

So a week from today, we'll here...

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Otherwise, known as my favorite place on earth.

This year, we got a larger than normal tax refund...thanks to baby #3.

And I specifically set money aside for our vacation. 

Today...one week before we are beachside, we slashed that vacation budget in half.

See, we had to replace a heat pump a couple months back. 

That drained our savings.

Over the last few months, we built it back up.

Then, we had to get new tires.

Ding to the savings.

Then my brother gets married and (graciously) asks 4 out 5 of us to be in the wedding...

And the wedding was in Michigan...hundreds of miles away.

Can you say "Ka-ching?"

T-bone crash dent to the savings.

Since we seem to be spinning our wheels lately, half of our vacation budget got gutted and put back into savings.

I mean, I'm thankful we have a vacation budget.

But sheesh - I thought when we became debt free it would all be so much easier.  How did I ever afford debt in the first place?

The Big O

I don’t get to watch many movies.  In fact, it took me over 5 nights to finish Julie & Julia. 

My recent attempt is Confessions of a Shopaholic. 

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It is a harrrible movie.  No; that’s not a typo.  It’s the southern expression of “horrible.”

It’s painful.  Like ripping a band-aid off slowly.  But I can’t stop watching it.  I have to finish.

Maybe because I can identify a small bit with the main character who can’t stop shopping and writes a personal finance column…all the while having $16,000 in credit card debt.

Attn Mr. DDA: I am not $16,000 in credit card debt.  We are not in any debt.  You can breathe.

But I do have a confession.  Something that is extremely hard for a personal finance guru. 

I overdrafted my bank account. 

GASP!

Ouch.  That hurt. 

More painful than this movie.

I was never “into fashion.”  I paired flip flops with jeans and a t-shirt; and kept the same hand me down Adidas tennis shoes for 8 – yes, EIGHT – years.

I don’t know if I got struck by lightening or what, but I am addicted.  I spend hours at night scouring the web for jersey knit wrap dresses, patent black wedges, and croco embossed hobo bags. 

And thanks to my recent discovery of the amazing world of shoes, bags, & dresses, I overdrafted my bank account.  So my lovely peep toe pumps and my amazing, red, Calvin Klein, knee-length I-haven’t-worn-a-dress-like-this-since-college dress that I was oh-so-thrilled with last week, get to get returned to the store this week. 

What a welcome into the fashion world. 

Bummer.

But more than I hate returning clothes that I love, I hate wasting money. 

Now I get to throw the overdraft fee out my bedroom window. 

If you drive by, maybe you can catch the $10 bill.

At least one of us wouldn't be losing it all...

A French Move

Last night, I was watching Julie & Julia.  As much as that movie was panned by critics, and maybe even tanked, I loved it.   

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I love food.  I love cooking.  I love Julia Child.  It was a perfect movie for me.  All about a blog, obviously!

But last night, as I sat there, I was struck with the fact that Julia Child, as a 40+ something year old, MOVED TO FRANCE!

I knew it before, but somehow the gravity escaped me.

Who just ups & moves to France? 

Besides Julia Child and Rachel Green.  (Well, almost moved…until the plane’s phalange was broke and Ross called her and all was happily ever after.)

I want to up & move to France!

I want to up & move to England.  Perhaps this recent obsession was started with the whole Royal Wedding thing and the fact that over there, they get to wear some awesome hats. 

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(Obviously, pre-princess Kate – not Beatrice.)

I just want to move 30 minutes away!  All I know is that I need change!!!!!!!!!

Alas, I have a job here.  Not to mention 3 kids.  Not to mention a hermit crab-esque husband who gets grumpy when we’re on vacation too long.  (I know – weird!)

I am convinced some people are born with “the bug.” 

The do-something-totally-different-than-everyone-else-you-know bug. 

I’ve got it and I’ve got it bad. 

I can’t help but feel that I am not meant to run the same old rat race.

I am just not meant to get up every day, work for someone else till I retire and can draw a pension - and be happy.

So while I’m not sure the Lord wants me to attend Le Cordon Bleu, I do know He has something in store for me. 

And I have to start somewhere. 

So I think I’ll finish today. 

Doing what I’m supposed to do. 

Maybe find a hat store and make shrimp provençal for dinner…

And then see where tomorrow takes me!

Be Your Own Boss, But Don't Lose Your Shirt

As you’re working your debt-free plan, you may be encouraged to get a second job.  It’s a task that seems impossible for busy moms.  Carve out 2 or 3 nights a week!?!?! 

Direct sales can seem like the perfect solution.  Set your own hours.  Be your own boss.  You’ve heard the spill. 

Dream come true, right? 

Well, maybe.

Direct sales can be a fun, rewarding, and even in some cases lucrative business.

But it can also be a “get poor fast” scheme. 

I have a couple friends that do it; a few that even do it successfully.  At one point in my life, I even tried it.  So if you’re looking into it, or doing it, here are some financial tips to keep in mind.

·         Don’t spend more than you make.  Genius, right?  Give me the Nobel peace prize.  J  But seriously, take a minute to add up the cost of all your prizes, giveaways, incentives…  I often heard Senior Executives say, if “I’m going to make $100 from a party, and it only costs me $20, I still come out $80 ahead.”

That’s true.  But do realize that is still 20% of your income.  If you have to spend 20% in addition to hostess rewards, you’re with the wrong company.  It’s okay to give “From Me” freebies, but make them contingent on something else that earns you more money.

·         Don’t get fixated on a title.  After I got out of my direct sales company, I found out a dirty little secret.  My “Senior Executive” spent hundreds, if not thousands, to keep her title up.  She needed so many units active; and when they didn’t perform, she had to funnel shows their way to keep their performance up.  She was barely making it each month. 

She was losing thousands of dollars in sales and income for a title.  Yes, that brought some additional revenue.  But do the math.  Are you losing several hundred dollars a month for a 2% bonus?  Make sure that bonus is more than you’re losing.

·         Don’t buy into performance goals.  Performance incentives are to make you work harder and can be a great thing.  I once knew a consultant who spent $4000 to meet a production goal for a “free cruise.”  $4000 buys an awful nice cruise.  Earn them honestly.  Your credit card will thank me for it.

·         Keep track of what you use.  Even though tomorrow is technically tax day, I have to throw in a tax tip.  Keep records of your personal consumption.  Makeup, purses, candles, etc.  If you use it, it is not deductible.  You cannot buy “kit additions”, carry it around town for two months and then deduct the cost of it.  That’s personal.  If you don’t account for your personal use, the government will and you probably won’t like that number.

·         And one more tax tip, remember that the IRS considers anything that loses money for 3 years a hobby and is not deductible.  If you’re business is running in the red year after year, someone, other than the IRS needs to give you a wake up call.  Get out or sell more.  Period.

·         Set a budget for your business.  Your business won’t last forever on your starter kit.  You’re going to have to replace those catalogs, order forms, samples, etc.  Put money aside each month for business expenses and include postage!!! 

Direct sales is a business that is completely reflective of your work.  You won't get any more out of it than you are putting in. 

Work it like a full time job, and it can make full-time income.  Work it like a hobby, and you'll probably stay in the red.

More Money Monday

Well, today is the day.

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Taxes are due today!

I know, it’s April 18^th not the 15^th.

But thanks to some random DC holiday known as Emancipation Day, the due date was pushed off. 

(Something that was cleverly disguised by a lot of preparers.)

I’m no expert, but I know a thing or two about a taxes.

It’s my “schtick.”

There’s not much you can do to change your tax bill for 2010, but here are my top 5 tips for slashing next year’s bill.

5. Open a “Flex” spending account for your child care costs.

If you have daycare costs, you can set aside up to $5000 a year in a flex spending account.  It reduces your taxable income dollar for dollar.  These days, $5000 is a drop in the bucket when it comes to daycare costs.  If you do the math, it’s waaaay better than getting the child care credit.  Check with your employer to see if they offer one and the requirements for it.

4. Give By Check!

We all know my love/hate relationship with tithing.  But it does pay off at tax time. The key is to give by check!!!  Having documentation is so important!  Banks don’t always return checks but most let you print (or save) a copy on line for 60-90 days.  Do it faithfully for all your donations and expenses.  At the end of the year, double check your giving statement from organizations against your records.   You’ll probably be surprised how much you gave.

3. SAVE!!!

Yes!  Save – as in for retirement, for college…  Those with lower incomes get deductions for saving!  (Note: Saving for your new bass boat does not count!)

2. Seek professional help.

No – not your therapist.  (Although I wish some people would strongly consider it.)  If you’re confused or not sure what to do, seek some help.  It’s sooo much better to pay a little to ensure a correct return, than to pay a lot later.   (And that “a lot” will have penalties and interest!)

1.   Open a Health Savings Account

This is my number 1 recommendation for almost everyone.  Open a medical savings account.  The rules on it have recently changed, but you can still set aside up to $5000 a year for co-pays, prescriptions, glasses/contacts, dentists, etc…  The list goes on and on.  Most of us with families, and those with other health issues such as diabetes, can spend thousands on medications and doctor visits.  Whether you can itemize, have kids, etc. This one tip can benefit everyone.