Finance Tool : Debt Snowball Calculator

Posted on October 31, 2007

Over at What’s The Cost I came across a handy debt snowball calculator. The calculator lets you add up to 20 debts, their interest rate and monthly payment, and asks for how much money you can put each month towards debt. From there it will generate a nice text summary of the snowball calculations, some stats against consolidating your loans, and a nice table that plans out the snowball month by month.

The part that I think is really interesting is that it will let you chose between paying off the highest interest debt first and the Dave Ramsey method of the smallest debt first.

I loaded the calculator with 3 debts which should be a bad scenario for the Dave Ramsey snowball:

10,000 @ 12% for student loans
4,000 @ 5% on a credit card
3,000 @ 1% to finish off a new car loan

The results were interesting. Both methods will take 24 months to pay off the debt, and the Ramsey snowball will pay $254 more in interest($1,661 vs. $1,407). For me, this is more evidence to go with the Dave Ramsey method of changing our spending patterns. This method changes behavior by helping us experience positive change through small debt payoff wins. The amount of interest in the plans is negligible, since most people who are just starting to get out of debt need behavioral changes, not absolute perfect math.

So have fun, play with the numbers, and kick your debt to the curb!

» Filed Under Debt Elimination, Psychology of Debt

Do You Have Unclaimed Cash Waiting For You?

Posted on October 30, 2007

A few years ago I saw an article about state agencies having millions of dollars of unclaimed cash and property. The sad part was that no one knew the money existed or how to find it. One the article’s advice I searched the Pennsylvania State Treasury database and I found that The Happy Rockette had two unclaimed checks from college. The one was about $200 and the other was just a couple of dollars. You feel like you hit the lottery, even though it was money that was rightfully yours.

“Common types of unclaimed property include:

Bank accounts and safe deposit box contents
Stocks, mutual funds, bonds, and dividends
Uncashed checks and wages
Insurance policies, CD’s, trust funds
Utility deposits, escrow accounts”*

In our case The Happy Rockette had graduated college and left before one of her side jobs cut all of her back paychecks. Our story doesn’t quite have a happy ending, since our requests to the state for the money ran into bureaucratic problems that we haven’t been able to resolve.

So let’s see if anyone can find any money for themselves, family, or friends. Feel free to leave any success stories or questions in the comments.

MissingMoney.com - Free web search of many of the state’s unclaimed property websites. Click here to see which states participate.

BetterBudgeting.com has an updated list of the links directly to the state sites.

Please note that there should be no fees associated with claiming the property, since you should be dealing directly with state governments and other agencies.

*Source - MissingMoney.com

» Filed Under Misc., Money Savers

Payments And Credit Aren’t Leading Us Anywhere Good

Posted on October 27, 2007

Often, a huge part of getting out debt and achieving financial security is removing the option of purchasing with payments and credit from our brains. See, payments set you up to stay in debt and spend more then you can afford. We end up looking at purchases through a short term lens rather then thinking about the long term impact. Breaking things down into small conquerable pieces is a great strategy for achieving goals that seem too big, but when we do that with purchases we are remove ourselves to far from the real impact of the decision.

The drawbacks of credit purchases in our lives are quite numerous, but I wanted to highlight a few.

Payments give salesman more room to create profit for themselves. We become so focused on the monthly payment that we miss the fact the loan car note was extended to 6 years, or 9% interest. Salesman would rather deal with payment people, rather than cash people.
Payments often mask the fact that we can’t afford what we are buying. $20,000 or $380 a month, which one sounds more feasible?
The items purchased with credit often go down in value faster than the principal on the loan. Negative equity is an ugly road, that isn’t going anywhere but towards disaster.
With the exception of 0% loans, payments mean you are spending money on interest. To put this into perspective, consider that on a $25,000 car loan at 6% you will pay about $30,000 for the car over five years. A $200,000 30 year mortgage @ 6% will cost you $231,667 just in interest.
Payments add stress and rob you of freedom. There was a correlation between the number of payments I had and the amount of stress that my finances caused me. Also, things like moving, changing jobs, moving to a profession you love, and spending more time with your family all become harder and more complicated. Shackles!
You don’t actually own the item you have payments on.
Each new payment makes the next one easier. You want more, because you can spread the pain out over years. In reality you can only diffuse the pain until the house of cards crumbles, or you wake up at 50 only to realize you don’t own anything.
It is quite depressing to know that the money you are earning now isn’t yours, it MUST go to someone else. Cash flow is one amazing benefits of being debt free. Think about the things you could do if you actually controlled your money and not financing companies.

I really could go on, but that is quite a list already! So, next time your discipline is wavering and you want to use credit, come back to this list and use it to renew your strength.

What problems have payments caused you over the years that I missed?

» Filed Under Chasing Dreams, Debt Elimination, Materialism, Psychology of Debt, Psychology of Spending

Why Personal Finance is Personal

Posted on October 24, 2007

The reason they call it personal finance is because there aren’t any right answers. That’s right, no right answers. If there were right answers, we could call it something like personal financial decision science. Everyone would be doing the same 20 step program and trying to achieve similar goals.

That isn’t how it works. It is our money. We are all different. We all have our own quirks, goals, personalities, and dreams. Personal finance can not escape that fact that it has to deal with humans, and that is where the personal side of equation comes into play.

Consider two families who just went through their house and de-cluttered. They are both left with a pile of junk, but they decide to do something different with that stuff. One family sells the items through eBay and Craigslist, while the other donates the items to the local children’s shelter. Did either family make a wrong decision? No, they both chose according to their own goals, desires, and values. One was willing to sacrifice income while the other willingly sacrificed the benefits of altruism. One of the tricks to learn to be aware of what our decisions are really costing us.

Sure, maybe the family who sold the stuff will have more money, but that isn’t the goal of personal finance, is it? If it were, we could move closer to a finance science since we have an empirical goal by which to judge all actions. The fact is our money goals are very personal and cover a broad range of topics.

Does that mean some choices aren’t better than others? Of course not. It is still possible to judge the value or helpfulness of a given choice, but it is hard to do without having some understanding of the personal and situational context within which the decision was made.

Ok, so why do I mention this? I honestly feel that we will only cause ourselves trouble without truly understanding the realm in which personal finance decisions are made. In order to make the best decisions and help others make wise decisions, we must be honest about imperfect nature of personal finance. We must be willing to judge actions by not only outside empirical evidence, but also how the decision relates to our goals, personality, and values.

» Filed Under Favorites, Personal Finance, Psychology of Debt, Psychology of Spending

Save Money By Using The Internet : A Walkthrough

Posted on October 23, 2007

For the frugal person with a little bit a tech savvy, the internet provides amazing access to deals that you would never be able to find otherwise. For learning purposes I wanted to run through the process I used to save 55% on an external hard drive.

After years of procrastination I finally decided that we should be backing up our computer’s hard drive. The amount of pictures and other important data was just too much to bear losing. Unless you have been through a major loss of data, backing up never seems important enough. If you aren’t backing up, please take this as a friendly reminder to start.

I started by searching my usual deal tools to decide what I wanted and how much I wanted to pay. First, I loaded up Amazon to decide which brands of external hard drives would be good enough and their general pricing. Other sites like Epinions and CNet are also very valuable. Western Digital and Seagate seemed to top the list and were around $100 dollars for the most common sizes. Reviews were good enough, and I was ready to find a deal. Click here for some example hard drives here :

To find a deal I started by searching Slick Deals and Fat Wallet. If you haven’t heard of these sites, bookmark them. They are communities of hardcore internet savvy people that are constantly scheming about, posting, and rating the hottest deals on the net. I found some decent deals for larger drives, but I really didn’t want to spend more than a hundred dollars. I was patient and by the weekend I had found a good deal. I saw a few posts that Staples was liquidating some smaller size drives(60gb,80gb,120gb), so I went to my local staples and saw an 80gb WD Passport for $64.50 on clearance.

Not bad, but the story doesn’t end there. A little more searching revealed that it was customer appreciation week, and by printing a PDF coupon I could save another 12%. I also saw mentions of a $30 off a $75 dollar purchase at Staples. I couldn’t find a link to anywhere, so I checked eBay and found the exact coupon with instant email delivery from a reputable seller. The recent feedback said the coupon worked, so I was willing to take a chance. I paid the seller $6 for their time spent finding the coupon and one 15 minute trip later I came home with two packs of nice pens, a 4-pack of tape, and the 80gb drive for $43 dollars. Slick deal!

I use a similar strategy for most of my ‘major’ purchases($50 or more). On smaller purchases, the time investment usually isn’t worth the savings.

» Filed Under Frugality, Money Savers, Spending

Using Amazon Instead Of iTunes To Download Music And Save Money

Posted on October 21, 2007

For those of us who are interested in legally downloading music, Amazon has recently unveiled their DRM free MP3 download service. “DRM-free means that the MP3 files you purchase from Amazon.com do not contain any software that will restrict your use of the file.” I figured I would try out the service and give it a review, because being able to inexpensively download a single song saves me from buying a whole CD when I just want one song. It has even helped my avoid albums that I wouldn’t have liked. Sometimes just listening to the sample of the tracks on a CD can give you a sense of whether you want the album or not.

Now iTunes seems to have some competition. The prices are very similar with most of the popular songs costing $0.89 and all other songs costing $0.99. If you are a CD junky, you can definitely save yourself some many by going electronic as most full albums are under $9.00.

What I like to see is that the record companies are finally learning that if you make it easier for people to buy their goods, they will actually make more money. I don’t own any Apple equipment, so downloading songs in their DRMed format was a hassle for me. Another recent entry that is shaking up the market is Radiohead’s new album which is being offered on there site for whatever price you want to pay, even free.

Here is the overview the simple buying process at Amazon :

1. Select the song or album. The search feature is pleasant to use. Click here for an example. Each result has a play button next to it, so that you can hear a snippet of the song before you buy. Selection is solid, but definitely not top-notch.
2. Click ‘Buy MP3’ and you are whisked in wizard like process very similar to the normal Amazon check out.
3. I skipped downloading the Amazon Downloader, and in four more clicks I had the song on my desktop in MP3 format. Note: The Amazon Downloader is required for buying albums, because it queues the downloading of the songs. It will also provide the added benefit of importing the songs into iTunes or Windows Media Player. The 12mb song I downloaded took only a few seconds on a cable connection.

Here is a smattering of popular songs if you want to hop in and check it out :

Crank That (Soulja Boy) [Travis Barker Remix]
Don’t Know Why - Norah Jones
Big Girls Don’t Cry (Personal) - Fergie
Comfortably Numb (1994 Digital Remaster) - Pink Floyd
American Pie - Don MaClean
Rehab - Amy Whinehouse

One final thing to note is that Amazon does not allow re-downloading, so remember to back up. Adding a re-downloading option would definitely be a very nice to have. For more information on the service, consult the FAQ.

For me, I will still buy used CDs off Amazon or eBay, but buying single digital songs at Amazon provides me with greater flexibility and options at a similar inexpensive price. This type of service makes quickly and easily recording a mix CD for The Happy Rockette possible.

Does anyone else out there use iTunes or Amazon to purchase their music?

» Filed Under Misc., Money Savers, Reviews

Change Your Child’s Genetics By Giving Up The BMW

Posted on October 18, 2007

We recently talked about financially changing your family tree as financial motivation, but for those of us needed some more convincing here is evidence that our decisions about money go much deeper than just dollars and cents. Our choices are crucially importance to our children and this offers early stage evidence that our choices can cover over ‘bad’ genetics.

The researchers “studied 109 children who had been removed from their parents’ care due to reports of abuse or neglect and 87 control children with no reports of abuse or maltreatment.” The children also had two gene polymorphisms that put them at a greater risk for depression. The researchers also assessed each child’s support system and assigned each one a score for their support system quality .

I picked up three import things from the recap of the study. First, the effects of the depression amplifiers only held true for the children who were abused and neglected. Second, children with strong support systems almost completely escaped the effects of the ‘bad’ genes. Third, genes alone weren’t likely to make a child depressed, but maltreatment alone can.

Picture the ‘bad’ genes as little seeds. Give the seeds water polluted with mistreatment and lack of support and the ‘bad’ genes flourish. Nurture them with a safe supportive water and the children could likely overcome the ‘bad’ genes. At least in this small study the age old question of nature versus nurture is answered. Nurture wins .

To me, this is truly amazing! Think about the implications. Does it change how important we view sacrificing the BMW and huge backyard, so that we can have a stay at home spouse. Do you have to work 60 hours a week to support your current lifestyle? Is your debt stressing your relationship with your spouse and your children? Maybe we are sacrificing too much? Maybe we should be giving more time and money to support those willing to adopt and provide supportive homes for maltreated children? Hopefully studies like this help to illuminate which decisions are the truly important ones in life. What do you think?

» Filed Under Children and Money, Living with Purpose, Materialism, Motivation, Serving Others

Quiet Millionaire Book Contest Give Away And Free Land Update

Posted on October 16, 2007

First, I am giving away the brand new copy of The Quiet Millionaire that I reviewed. To enter the contest leave a comment on this post that lists your top reasons you got out or want to get out of debt. If you don’t want to get out of debt, list your reasons why. Simple as that. A winner will be randomly chosen Sunday October 21st @ 9pm EST.

Click the following links for more information on the book :

My Quiet Millionaire Review
Queit Millionaire Amazon Page

Second, poetloverrebelspy @ Less than a Shoestring shared a great NY times article with us. The article relays some real life experiences about one family’s move to North Dakota. Cities haven’t lived up to their promises, and citizens aren’t as open to change as they need to be. It is a long read, but pretty interesting if you found the free land in the Midwest article interesting.

» Filed Under Misc., Real Estate

Change Your Family Tree By Making Solid Financial Decisions

Posted on October 15, 2007

If you have ever listened to Dave Ramsey, there is a good chance you have heard him say “go and change your family tree”. It is a beautiful saying that paints a wonderful backdrop for our motivation to make healthy and wise financial choices. The idea being that the money choices we are responsible for now can and will affect your children and family. These are huge shoes to fills, and they get even bigger when broaden the perspective to grandchildren and great grandchildren.

Let’s not operate out of fear though. Be encouraged by that fact that if you stop your family’s reliance on debt, or align you decisions with your values, or even make wise investment choices, those choices will positively affect your family tree for generations to come. Think about being the grandparent that your great grandchild points to in photo albums and say he is responsible for changing the family’s relationship with money.

You can see that power of this principle at work when a couple’s perspective changes upon hearing that they are pregnant. The ensuing scramble to undo or right their financial ship is often frenetic. Too often those changes die and shrivel, as life, not us, starts to take control again.

The beauty of the saying is that is takes our focus off of us, and gives us something bigger and more wonderful to live for. When we hang on to those types of higher purposes, we receive long lasting sustainable energy. When we are motivated by short sighted and selfish goals, the changes are often short lived.

For those without immediate family, don’t be discouraged either. The trick is to find motivation from goals that are bigger than ourselves, and not on things that lose their appeal when the next new invention or model comes along.

» Filed Under Living with Purpose, Motivation, Serving Others

Principles in Action #2 : Accountability and Friends Can Save Your Finances

Posted on October 12, 2007

This is the second post in the principles in action series that will illuminate a practical application of a positive life principal. The first in the series addressed treating others like they have value.

The advertisement @ the Clever Dude was about the 100th time I had been bombarded with the free $250 for opening an American Express Business Rewards Gold Card offer, and I was finally ready to give in and get the money. I usually stay away from signing up for credit card schemes or opening a new savings account at every bank with a good intro offer. I just don’t think these schemes are usually worth the stress, effort, hassle, and most importantly they rob my attention from tasks that I deem more valuable to our overall health and wealth. That offer didn’t fit into our financial plan when we were getting out of debt and still doesn’t, but my resolve was finally beaten down past the point I could handle.

Over dinner I mentioned the offer to The Happy Rockette and asked her opinion. She politely said, don’t worry about it. It wasn’t our style, and her resolve wasn’t waning. She knew our plan and our values, and this wasn’t part of it. Two seconds after hearing that, I snapped back to reality and said ‘you’re right, what was I thinking’. The blinders had lifted, and I was back on track.

The principle here is to involve yourself with people in your life who will keep you accountable. People who will gracefully smack you around, and say you are being silly when they know you have lost your way. During the long haul of climbing out of debt, this is an utter necessity. You will lose focus and self control. At some point life will undoubtedly give you more than you can handle. The trick is to admit ahead of time and plan for it. Start building that support network now.