Paying with Cash…Does it Save Money?

Posted by Debt Destroyer on August 30, 2008

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The other day when I was prepping for a fantasy football draft, I stumbled upon a video at Yahoo that covered a family who spent only cash for one month. According to the story they saved $1800 (24%) compared to what they normally spent. After I picked my jaw off the floor from being amazed that they could spend almost 8 grand a month, I started thinking maybe I should get in on the savings.

Some of you will remember that I’ve recently been introduced to Dave Ramsey and his method of debt elimination set out in his book, Total Money Makeover. There he proposes that you will save big money by paying all cash (12-18%). It makes sense. I mean we all do our best Bill Clinton and “feel the pain” of handing over cash rather than the ease of just swiping a card.

But do you really save that much?

I guess there is only one way to find out. Starting in September, I’ll stat paying cash. But here’s the thing, I’m not going to go all cash.

I know I won’t reap the full benefits of spending only cash, and that is fine by me. Here’s where we spent money in July. I don’t see how spending cash for some of these items would’ve saved me any money.

I’m going cash only for groceries, department store items, entertainment (eating out), and other household misc items. These are the parts of my budget where I’d love to see some savings. Even if it ends up only being 5%, it’ll be worth it.

I see that The Happy Rock has gone down the cash only road himself. From the way it sounds it didn’t work out the way he planned. I can totally see that happening in an experiment type setting. And from reading the comments on THR’s post, it sounds like a lot of people have had mixed reactions when trying something similar. The Happy Rock has also talked about the credit card premium and the benefits of spending cash.

That’s another reason I’m trying a hybrid of the cash only method. Instead of setting ourselves up for failure by going cash only for everything, I want to start small and if we see tangible results. If we do, maybe then we’ll expand this way of spending to other areas of our budget.

I’ll only have two months of spending habits to compare this new way to (July & August), but it’ll have to do. I’m really hoping that we can shave off around $100 a month by doing this.

In our house that extra $1200 a year will come in mighty handy.

As always I’d love to hear what your thoughts are. I bet a lot of you are already on the “cash” train, if so, how is it working for you? And on the flip-side, I’m also willing to bet that a lot of you have already tried something like this for yourselves. Did it stick, or did you decide it wasn’t for you?

Until next time,

-DD

» Filed Under Cash, Credit Cards, Psychology of Spending, Spending

Reader Stories - Doing What It Takes

Posted by The Happy Rock on August 27, 2008

I love getting emails about the stories of The Happy Rock readers. I wanted to share this particular one because it is a beautiful example of a family banding together focusing on what matters and making it work despite hardship. I thought you would appreciate and connect with it.

While I am not in credit card debt (been there, done that, ain’t going there again) my family is in a pretty bad financial situation:

Long story short: I have been a stay at home mom for almost 11 years. My husband had a good paying job/good insurance to support our 4 children. In 2006 he started getting ill, while I was pregnant with baby #4. His job went “south of the border” and he found out he has an auto-immune disease that he will have to take medication for the rest of his life. He now has a job that pays well below what he was making at his other job.

What we have done to survive:

Started homeschooling the children to save on gas/school expenses.
Grow our own food-including meat(grass fed so we don’t have to pay for corn).
Grow a garden (fun stuff for miss city girl here-I feel like Zsa Zsa in Green Acres)
Cut just about everything out that we can-reduced cable/got rid of long distance-only use calling cards/ talked to internet provider and got bill reduced $5.00/month, etc.
Food—I make practically everything-from my own buns, to my own chicken noodle soup. I went to the grocery store-to the convenience isle and looked at what was already prepared in a can. I now can make almost all that stuff on my own.
As for a vacation: We are planning on going on a 2500 mile round trip in a week. I am spending 70 dollars on food for my family of 6. I bake “snacks” before we go such as homemade granola, cookies, homemade “wheat thins”, caramel corn, banana bead. I also can make meals-like the ones in the convenience isle. On this trip I have prepared and canned beef stew, tuna and noodles, spaghetti, sausage-green beans-potatoes. We will be camping so that will save money too.

Other frugal tips :

Bread bags/ties-clean bags and use for holding other foods. When the bag is on it’s last legs, I usually store bacon in it, then throw it away.
Milk Jugs-punch holes in the bottom for kids watering can. Tops-kids practice tracing shapes, use for crafts, recycle.
Foil-wash and use over. I rarely use plastic Wrap. I buy 1-2 foil boxes a year.
Wax paper-I never buy this-I use the inside cereal box linings
Peanut butter jars-clean, use as storage for dried beans, rice or left overs in fridge. Also, for the husband…use to store nails, screws, washers in.
Newspaper (we don’t get one, but can acquire it from relatives) wash windows with it-no streaking. Also, wrap presents with the funnies.
Frozen juice cans-I make cookie dough and squish it in them. cover(put in freezer bag) and freeze for up to 3 weeks. When ready to use, defrost and it usually falls right out. Just like store bought refrigerated dough. (though cookies are somewhat larger)
Mustard bottles- wash and use to squeeze out paint for crafts
Canned food (soup or vegetables)-recycle or my husband uses them for feeding scoops (for the animals) also we sometimes start plants in them and the plastic milk jugs
We also use what is on hand for science experiments (homeschool)
I buy storage bags about once a year (except when freezing produce)
I don’t buy a lot of fancy craft supplies for the kids
I can’t remember the last time I bought a food storage container
I don’t buy a lot of cleaning products-I mainly use vinegar
I go to the local bakery outlet about once a month and buy bread for the bags and ties. I usually make our own bread. Bread there costs 49 cents to 79 cents a loaf.

» Filed Under Frugality, Money Savers, Reader Stories

Just canceled Netflix…trimming the budget fat

Posted by Debt Destroyer on August 26, 2008

It was a sad day here at the Debt Defier household. We just canceled our Netflix account. We were already on the lowest plan available, so it’s not really a huge money saver. But as mentioned earlier the little things can add up, especially the ones that are a total waste.

And that is what Netfix has been to us for over a year.

We started out loving it. 3 movies at a time, no late fees. Friday, Saturday & Sunday night all turned into Movie Night! When the mail man would deliver our movies the house filled with excitement. I filled up our queue with triple feature themes. One weekend was a Hitchcock weekend, the next was documentaries, the following was chick-flicks. It was great!

But then the novelty wore off, and we got busy.

We might only get to one movie in a weekend instead of three, or perhaps we went out of town and god forbid, didn’t watch any movies at all!!!

But the real killer was my wife becoming a wedding photographer.

I won’t expound on it to much in this post, but there’s a lot more to being a wedding photographer than people think. Especially when you’re still working a day job and starting a family at the same time.

A smart person would’ve canceled his membership then. But I was hooked!

I loved my queue, I loved seeing the recommendations I’d get from my friends, but most of all I loved rating movies. In a very short time I rated 1200+ movies. To show you how pathetic I was, I’d come home from work and do it during my lunch hour. Finally I stopped that, but I could bring myself to cut the Netflix cord completely.

Until today.

I was just going to put membership on hold, until I reviewed our rental history. At first it was a fun walk down memory lane, remembering all the films we watched. My wife even got in the act by recalling some of her favorites (Kiss Kiss Bang Bang, The Door in the Floor, & The Notebook). But the fun turned to despair when I noticed the return dates. Since January 2007 we had only returned/rented…10 movies.

10 movies in 20 months. 10 movies for $100. $10 a movie.

We were probably Netflix’s favorite customers. We were where movies were sent to become profitable.

I can’t believe I didn’t cancel sooner. I’ve been talking about it for months. But we all know that talk is cheap, I guess not as cheap as $4.95 month, but it’s still pretty worthless. Well no more!

I hit cancel and and I feel good. Sure it’s tough when an era comes to an end, but we’ll just have to get our movie fix elsewhere. Like the local rental shop where you can get 5 movies for 5 days, for $5. We took advantage of that deal after my wife gave birth (even while Netflix subscribers). Maybe this Thanksgiving we can catch up on some films that were languishing on my queue these past couple of years.

We have one more Netfilx movie to watch, one that has been sitting on our TV for months, Eastern Promises. I sure hope it’s good, because I could’ve bought a couple of copies for as long as we’ve had it.

Goodbye Netflix, I’ll miss you…perhaps we’ll meet again.

Since misery loves company, how about you share some of the things that you have sacrificed in the name of “living like no one, so later you can live like no one.”

I understand that this is a small sacrifice, but like Dave Ramsey says, “Baby steps.”

Until next time,

-DD

P.S. In the near future I’ll be reporting a much larger sacrifice we’ve decided to make. But I’ll wait to discuss that after I’ve had proper time to mourn the loss of my queue.

» Filed Under Frugality, Money Savers

Finding Out What Matters - A Perfect Day Review

Posted by The Happy Rock on August 25, 2008

I recently finished a fiction novel called A Perfect Day by Richard Paul Evans. I am not sure how it got on our bookshelf, but I needed something to read one night and the dust jacket pulled me in enough to start it. I was pleasantly surprised. It isn’t a masterpiece, but it kept my interest and left me satisfied. I was even more surprised that it touched upon a couple of personal finance topics that I find near to my heart and I had no personal finance agenda when I started out.

The story covers a business man that finds himself abruptly out of work and decides to accomplish a life long dream of finishing his first novel. The novel lands him a top the bestseller list and he relishes the whirlwind fame while his wife and daughter are left watching his life from a distance. The main character ends up on an unexpected journey to find out what is important to him in the midst of his new found fame and money.

Below is an excerpt that will give you a flavor of the story behind the story. The scene is towards the end of the novel during an interview between the main character and Diane Sawyer with his wife and daughter watching back home. It is the point were he begins to come to the realization that he lost his way, an apology of sorts.

Diane Sawyer - I imagine that your sudden success has been a little overwhelming.
Robert Harlan - It has. In ways I wasn’t ready for it. Frankly, if I had to do it over again…I wouldn’t
Diane Sawyer - There are probably several thousand aspiring authors watching us right now who would give anything to be in your shoes.
Robert Harlan - I am sure there are. And I don’t mean to sound ungrateful. My readers have been great, so have my publisher and agent. But success can be a trap. Maybe someone else could have handled success better. But I lost sight of the big picture. My book is a best-seller for a little while, at least until the next big thing bumps me off, but I will always be a husband. And I will always be a father. If I give up those things for a temporary seat in the musical chairs of fame, then I am a fool.

If you like that type of fiction or those topics interest you, grab a copy from the local library and give it a read. It might just impact your career and your finances.

» Filed Under Books, Careers, Chasing Dreams

Decisions, Decisions…It Is Hard To Choose A New Career

Posted by Debt Destroyer on August 24, 2008

When I last talked about my future plans I mentioned that I contacted two local schools.

A State School where I’d earn a teachers certificate.
A Private School where I’d become a Rad Tech.

Option #1 would take 3-4 semesters. Option #2 would take 3 years. Option #1 would cost about one third of what option #2 would cost. Option #1 would also make considerably less than option #2 upon graduation.

Hmmmm.

I decided to be a teacher.

Almost everyone who I talked to this last month when I explained my choices has said, “you’d make a good teacher” or something to that effect. I think deep down I’ve wanted to be a teacher for a very long time. But various reasons have kept me from exploring this idea. I think the lack of pay was the biggest. The next biggest would be my mother.

She would always rant and rave when teachers would be on the news asking for more money (South Dakota ranks 51st in the nation for teacher pay…we must be very proud of this fact, because we’ve done nothing over the years to change it). I would always take the teachers side of the argument. At the time I thought I was just playing devil’s advocate to spice up a boring dinner conversation, but looking back I think there was more there. Interesting…two straight posts with some personal reflection.

At least that is the plan today, it could easily change by the time you read this.

I say it could easily change because there are a few concerns about going this route:

Will we be able to afford me going back to school?
Will I find a job upon graduation that doesn’t require relocating?
Will I like it

This first one is my biggest concern (probably because we will face it right away). My wife’s wedding photography business if doing great, but I think she’s still 9 months away from making “real” money.

I of course will be working while going to school, but part time jobs around here pay peanuts (heck most full time jobs do too). So I’m thinking about applying for a sanitation worker opening that is being advertised currently. This way I could work until next fall when my wife’s business should really be going strong and we’d definitely be able to afford sending me back to school.

The second area of concern is also related to my wife’s business. She’ll make more money being a wedding photographer than I will as a teacher. So it will be stupid if I have to move to get a low paying job that will require her to relocate her business and start from scratch.

The 3rd area of concern is one I have with everything. As I mentioned in a previous post I’ve never had a job where I enjoyed what I was doing. So now it’s a constant worry that I have. But I’m not overly concerned with it this time. So far I’ve never really had a job that focused on human interaction, and I think that is what I’ve been missing. Plus the flexibility of two full months off in the summer would be great.

So here I am after 4 weeks still pondering the same basic ideas:

School or Work?

Garbageman or Teacher?

What are your thoughts?

Until next time,

-DD

» Filed Under About The Debt Defier, Careers, Chasing Dreams

Interest Free Payments…are they a bad idea?

Posted by Debt Destroyer on August 22, 2008

Just like most of you, I peruse a lot of personal finance blogs. Today I came across one that posed an idea that got me thinking.

Not Made of Money posted a nice piece about not buying stuff with a payment mentality.

I left a comment saying that I totally agreed that its a great idea to get rid of payments. But what about interest free payments? I used an example of saving enough money for an $800 item then being offered interest free financing at the time of purchase.

Would you take the offer or pay in full?

In my pre-Happy Rock days I always took the offer.

When my wife’s Grandfather passed away, an estate sale was held. The proceeds were then divided up and each grandchild got a check for $600. At the same time, we were looking at a headboard and foot-board set for our bed that, wouldn’t you know it, cost $600.

When we went to purchase the set, we took advantage of 6 months interest free plan on purchases over $500. I then paid $100 a month for 6 months and that was that.

Another example was when we built a fence. We were going to use our tax rebate to buy the materials needed to build a picket fence. At the store I noticed that if I signed up for a store credit card not only would I save 2% on the purchase but I’d also get 12 months interest free financing.

So I signed up for the card and paid for my fence over the course of the next 12 months instead of all in one day.

But would I make this same decision today?

I understand there are some pitfalls of the interest free game. In my examples there were minimum payments to be made and if I was ever late I’d have to pay a fee and lose the “interest free” time allotment and have the added cost of interest to deal with. Luckily this never was an issue for me, but I could easily see how this could happen.

But I could also think of a couple of advantages to using interest free credit as well.

Lets say you get a longer period (we once had 30 months “interest free” to pay off our bed) combined with a larger purchase price. If you already had the money saved up, couldn’t you use this time to earn a little extra interest while you made payments? I know it wouldn’t add up to be much, but I just showed how the little things can make a difference so maybe for some it WOULD be worth it.

The other advantage that came to mind was the piece of mind that the added cash flow could offer someone. The money may be already spoken for, but it can feel good seeing the higher balance.

Even though I’m now The Debt Defier, I think I might still use interest free when it’s presented (Assuming of course that I’d already have saved the amount needed for the purchase). But with my current situation, I don’t think I’ll be making any large purchases any time soon.

But lets say I was going to be making a large purchase soon, would I be stupid to even think about using an interest free option? Are there some pitfalls that I didn’t think of that are associated with this idea? Or perhaps a lot of you take advantage of these kinds of promotions and I’m just late to the party?

As always, I appreciate getting your feedback on this stuff so please let me know what you would do.

Until next time

-DD

» Filed Under Credit Cards, Psychology of Debt

A New Stage In My Financial Journey

Posted by The Happy Rock on August 21, 2008

Like most things in life financial maturity is a journey not a destination. If we are open we will keep changing and broadening our perspective. Recently this has taken the form of questioning my definition of the purpose of money. I used to think that the definition of money took on two distinct stages, but I am starting to be drawn to a third stage that I am not sure I could have imagined a few years ago.

Stage 1 – Money = Stuff

This is the stage that we all know and love. It is the stage were the 10 year old realizes he can save his money from chores and get the latest Nintendo Wii game. It is the stage were the 22 year old graduate realizes they can lease a BMW. It is the stage were the 30 year old married couple can buy more house than they know what to do with.

As I began to peer out from under $70,000 in debt, I realized there were a few problems with this stage. There is always bigger and better stuff to get and buying more stuff usually breeds discontent with the stuff you have. Also banks are more than willing to lend you their money so that you can ‘fulfill all your dreams’. Eventually that fancy new car breaks, you get laid off, or the grind just gets old and your left discontent with the stuff but still paying for it. This is where I started to move to stage 2 and clear away all my debt. Stuff, debt, and payments were just dead weight that was keeping me from doing the things I really wanted. Things that if I really started to be honest with myself didn’t really include stuff at all.

Stage 2 - Money = Freedom

As my debt cleared and I began to be able to control my own cash each month, I began to feel a sense of freedom. I started to get rid of stuff. I realized I could quit my job and do something I really loved, something more fulfilling than stuff. I could spend more time with my family, children, and wife. I was less stressed. I wasn’t spending time worrying about stuff being broken or what the next new thing was. I started using money to stash away an emergency fund which bought me freedom from having to worry about finances. If I wanted more time with my family or for a business endeavor I could use money to hire a cleaning person. Just like with stuff though, the more freedom you get the more you want.

Lately, I have been starting to realize that I have set up freedom as the end goal. It seemed perfect at the time, but now that I have gotten towards the top of that plateau and peered out, the scenery is beginning to look different. I am asking different questions than I was five years ago. It is quite exciting to be a part of ongoing growth, but also a little nerve-wracking because I thought I had it figured out.

Stage 3 – Money = Serving Others

I know it sounds a little crazy, but the idea is that freedom isn’t the end goal. It is what you do with the freedom that makes it worth it. Since I am early in this new revelation, I don’t have the language to describe exactly what is going on. Hopefully this isn’t a jumbled mess. The more I read and the more people I meet the more I am drawn to those that are voluntarily giving themselves and their money away. Being a parent definitely is having a big influence on this shift. Radical and crazy, sure, but their lives and words ooze life, contentment, and joy to me. Are we wired to truly come alive when we give? Is that true fulfillment? Is it coincidence that many millionaires and billionaires start to seek avenues to give their money and time away? Am I crazy? Does anybody connect with what I am saying? Hopefully in the future I will be able to more adequately describe what stage 3 might look like. Is stage 4 money doesn’t matter at all? Any thoughts or is stage 2 it and I am just going overboard?

» Filed Under Financial Succes, Happiness, Psychology of Debt

Rich Dad, Poor Dad…Owning Your Family History

Posted by Debt Destroyer on August 18, 2008

I bet lots of you have read Robert Kiyosaki’s, “Rich Dad, Poor Dad” where he talks about the different ways his father and a friend’s father taught him about money. When looking back at my own life I see that I too had different perspectives shown to me.

My parents split up when I was 4, and went in very different paths upon their separation.

My Dad who was a plumber when he was married to my Mom, moved back in with his parents in the Twin Cities so he could go back to school and be close to better health-care (he was a multiple cancer & heart attack survivor). He was very outgoing and ended up being elected class president at the community college he went to. He studied business and became a real estate agent after graduating.

I remember him being a realtor for a while but it wasn’t his passion so when the market turned bad, he went back to being a part-time plumber. But his main source of income was disability payments.

My Mom was a rather shy and conservative bookkeeper. Due to my Dad’s poor health she was often the only one working while they were together, so she knew how to stretch a dollar. A few years after the divorce she married her boss. The business grew from 3 employees to 30. They partnered up with another couple and bought several rental properties. They’d work 60 hours a week and then work on their rentals on the weekend. They are the epitome of “hard work = success”.

On paper it seems like a clear case of whose financial advice I should follow:

My Dad declared bankruptcy two times.
My Mom saved almost everything she ever made and should have no financial worries.

But real life isn’t lived on paper.

My Dad was an optimist. Even though he struggled his whole life, he always thought things were going to turn around. Which probably explains why he tried so many pyramid schemes, excuse me, I mean multi-level marketing systems. While his situation did cause him stress, he was generally a positive person who was always smiling.

Where as my Mom is a walking ball of stress with a permanent scowl on her face. She is afraid of almost everything and believes that Murphy’s law is written in stone. Don’t get me wrong, she too is a very pleasant and caring person, but only those close to her know that.

My Dad always told me to find something that I loved doing and I would be a success. My Mom always stressed security.

I didn’t realize this until just now, but this duality has been messing with me my whole life. Like in college I majored in Radio TV & Film, but shortly before graduating I abandoned this due to it paying peanuts straight out of school. I instead took a marketing job and have been in a corporate mindset since. It also explains why I can go in long stretches of great financial discipline, but then blow it all away just like that.

Interesting…I think I just saved myself thousands in therapy

**You’ll note that I’m referring to my Dad in the past tense. He passed away in 1996. If he were alive today he’d probably be working for my uncle’s plumbing & heating business, be a fantastic grandfather, and he’d be trying to get us to become Monavie distributors. **

But enough about me, what about you?

Where did your financial philosophies come from? Are you following in someone’s footsteps or did you carve out your own path?

Until next time,

-DD

P.S. For those of you who were hoping for a review of the “Rich Dad, Poor Dad” book, here is a one liner:

I found it to be an easy read which opened my eyes to the benefits of passive streams of income, and not to think of my house as an asset.

» Filed Under Children and Money, Psychology of Debt, Psychology of Spending

New Jersey 2007 Homestead Rebate Deadline - August 15th Extended

Posted by The Happy Rock on August 17, 2008

The original filing deadline for the New Jersey(NJ) 2007 Homestead Tax Rebate was on Friday August 15th. Fortunately New Jersey extended the Homestead Rebate filing deadline until October 31st 2008 for those that missed it.(1)

Homeowners who owned a house in New Jersey before October 1st of the previous year, paid property taxes, and make less than $150,000 AGI are eligible for a tax rebate. You can view the exact eligibility requirements here on the NJ Taxation website. Also remember that the NJ State Budget requires that they use the 2006 property tax amount in order to help cut costs. The last couple of years we have gotten back about 20% of our yearly property taxes(~$600), but you can view specific rebate calculations here.

If you think you qualify and haven’t received a packet in the mail or have other questions, view the official FAQ for answers.

Source
1. NJ Taxation Site

» Filed Under Real Estate, Taxes

The little things…starting to trim the budget

Posted by Debt Destroyer on August 12, 2008

Here in the Debt Defier household it feels like we’ve been wrestling some very big ideas lately. But as you seasoned vets out there can attest, the little things in life matter just as much if not more than the big ones.

This is true in our financial lives too.

Below are a few recent examples of how little things made a difference in our budget:

Earlier this afternoon I was paying some bills and noticed a flyer in my electric bill informing me that I could pay my bill online with a credit card. I thought what a great way to save a stamp and to earn some more cashback rewards, so I go online to set it up. I thought I noticed something in the fine print in the acceptance agreement about fees, but I didn’t pay too close attention when clicking through. Well sure enough, they charge a $4.95 fee to pay with a credit card.

Needless to say, I canceled the online payment and sent it off in the mail.

Another example of a little thing that can make a difference, is our mortgage insurance. Every month we pay an extra $32 for mortgage insurance because we didn’t put at least 20% down when we bought our house.

This $32 annoys me to no end.

Don’t let your brokers tell you not too worry about this because everyone else pays it. Save up a little longer and come up with the larger down payment so you don’t have to bother with this pain. When I get the house painted, I’m thinking about getting another appraisal to see whether or not the improvements we have made has pushed us over the 20% hump.

I’ll end with a positive example of little things making a difference.

The family set off on a shopping excursion to Target this weekend, we don’t get out much so we always enjoy these trips. And to make this trip even sweeter we had our 10% off coupon. The trip started off with an act of selflessness by my wife. She decided to return a pair of shorts that cost $21 (What a team player!).

Then we decided we didn’t really need much other than diapers, wipes and some hair-gel for me (yes, Carly Simon wrote that song about me). So we were already doing better than our normal routine of load up the cart with everything because it’s 10% off (We’ve been known to use two carts at times).

And if that wasn’t enough, we then decided that our son could poop and pee in store brand diapers instead of the name brand ones in which he has been relieving himself into ($5 difference).

But our biggest find was on the way to the checkout. While glancing at allergy medicine, we noticed that little kid humidifiers were on clearance. This must be a our lucky day! This spring we decided that we needed a new one for our daughter and here was the lovely Hello Kitty one that she flipped for a few months ago.

Hello, Kitty!

When we strolled to the checkout with only four items and then plopped down the 10% off coupon, it was actually fun paying the bill for a change.

Hey…I told you we don’t get our much

But this got me to thinking that I can’t be the only one who finds the wonder in these small financial discoveries. So, I was hoping that you could share some of the little things that help or hinder your finances?

Until next time,

-DD

» Filed Under Money Savers

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