Get Out Of Jail Free Card - Visualize Yourself Without Debt

Posted by The Happy Rock on June 12, 2009

If you're new here, you may want to join hundreds of other readers and subscribe to my RSS feed or my free email subscription to receive free updates. Thanks for visiting!

Debt is a prison and you don’t get out of jail until your creditors are paid off. Even if you don’t feel like you are in prison debt still narrows your range of choices and options. You may be just to distracted with the shiny things you bought or by the stress of just making it each month that you might not even be able to visualize what life is like without debt.

I will tell you first hand, being out of debt is awesome. We have so many more options as a family it is so energizing and even a bit overwhelming at times, but it is a great problem to have.

This post is designed specifically to try and lift our heads out of the muck to visual and imagine what it would be like without debt.

A good way to start is to close your eyes and picture your list of debts in your head. Now cross them off one by one starting with the the debt that irks you the most. Pause after each cross off to let yourself feel the emotion of having that debt gone. I am picturing having my house paid for and a big smile comes across my face.

Once you have finished that exercise consider a few ways that getting out of debt frees up our future.

Cash flow. How much cash is tied up in monthly payments? Think about all the savings, vacations, or purchases that you could quickly save for.
Stability. How much less scary losing your job would be? How about a major repair?
Career. Think about how little you would be tied to a job you don’t like when you only have a few monthly bills to take care of. That career or job you always wanted is now on the table.
Time and Energy. Imagine all the time and energy that you were wasting on thinking, stressing, and paying for your debt. What kinds of great things you could be using it for?

There are thousands of other areas that debt effects, but it is for you to start to put on the no debt mindset.

If you really start to feel and see how great it will be,you will be amazed at how much energy it creates for your debt destruction journey.

Let’s hear it. What type of things are you going to reclaim in your life? What dreams can you begin to consider again?

» Filed Under Debt Elimination, Psychology of Debt

As Long As You Can Make The Payments – You’re Fine

Posted by The Happy Rock on January 8, 2009

“I can pay all my bills each month, I am doing well.”

In a world of leased BMWs, credit cards galore, no interest credit offers, and high standards of living, what does it really mean to ‘live within your means’?

We all might have our own definition, but I wanted lay out what I think it means and see what others think.

The prevailing definition seems to be living on less than you make. Living within your means is much more than just being able to meet your bills each month. What type of bills you have matters immensely. If you have a huge car loan for a $30,000 new mini-van and you make $50,000 a year, I am arguing that you are living outside of your means.

Living within your means = Only purchasing items that you can buy with cash

This includes cars, vacations, mortgages…everything. The only means you have is the income you take home each paycheck. So if you take on any debt, it means you are living outside what you can actually afford. If you have debt it means you lived outside of your means at some point and are still paying for it. Payments for cars and TVs are debt and proof that you couldn’t afford the item. I know we like to stick our head in the sand to forget about debt and only see payments, but debt it is real and it is an extremely heavy burden. It might be hard to hear, but it is the truth.

Using that definition I am still living outside of my means because I still have a mortgage. If we scraped every spare penny at applied it to our mortgage, we might be able to pay it off in three years. That sounds to me like I bought something I couldn’t afford.

I suspect most of us are ok with getting a mortgage, which is fine, but the whole point is that we need to reclaim our financial language to represent real financial sense not the distorted consumerist mess that we espouse today.

What do you think?

» Filed Under Cars, Debt Elimination, Psychology of Debt, Psychology of Spending

Fundamental Problem With Debt Consolidation

Posted by The Happy Rock on November 19, 2008

Putting debt on a 0% credit card or rolling high interest debt into a home equity line of credit may help save you money in the short term, but it is only addressing the symptom. The symptom is the debt; the debt isn’t the problem. The behaviors and attitudes that got you into debt are usually the problem.

Imagine a couple in a pool flailing around unable to swim or even tread water. You through them a lifeline and they are saved. The trick is though that they only stay saved if they don’t go into the water again. Unless they learn how to swim they are going to continue to have the same problems if they go in the water.

The same is true for money, although unlike avoiding water we can’t avoid spending, earning, and needing money. The only other option is to learn how to swim. We need to change our relationship and behavior towards money. Debt consolidation often helps people escape the symptoms of their problems without having to actually address the issues. Bankruptcy and bailouts usually have similar deleterious effects. People who roll their credit card debt into a second mortgage often find themselves with credit card debt again and now they have a second mortgage to boot.

The way issues get addressed is often by hitting rock bottom or the end of your preverbial rope and coming up with a real desire to change your behvaior and your financial destiny. Feeling pain promotes real change. Watching other people suceed inspires change. Hard work, discipline, and repitition change behavior. Focus on the problem not the symptom. Fix the problems and the symptoms will go away with some hard work.

» Filed Under Debt Elimination, Psychology of Debt

Bankruptcy…an easy way out?

Posted by Debt Destroyer on October 21, 2008

Over the past holiday weekend my family stopped by my wife’s parents house for a quick visit. We had a dinner and were able to catch up a little. One of the things that was brought up was that the neighbor girl (who was my wife’s childhood friend) and her husband had just declared bankruptcy.

Actually they declared bankruptcy back in February, but the family just found out about it now. And while it’s not newsworthy that a couple declares bankruptcy, that happens all the time. What makes this case a bit odd in my book is that it seems that it was planned out. They maxed out their credit cards and bought a SUV right before they declared.

Again this type of thing probably happens more often than I think it does (heck, my Dad declared bankruptcy twice). But what I found surprising was that my Mother-in-Law thought it was a good idea.

She views bankruptcy as an easy way to get a clean slate.

My wife and I tried to tell her that it’s not that simple, but when she quizzed us, we didn’t really know what to tell her. She didn’t mind wearing the scarlet “B” on her credit report and future job/loan applications.

“So what?” was her reply.

Here I thought it was common knowledge that bankruptcy was a last resort, not a get out of jail free card. But according to my Mother-in-law (her info is usually quite suspect), this couple is glad they did it. They lost their debt and got to keep their stuff.

So as soon as I got home, I did a google search and wouldn’t you know it, an article by Dave Ramsey came up on the first page:

“Myth: I’ll just file bankruptcy and start over; it seems so easy.
Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.”

Those of you who have read Total Money Makeover will recognize his advice on the subject because it’s taken word for word from the book. The article is fine, but it doesn’t really cover the damage bankruptcy causes.

Another hit on the first page on the search brought up www.bankrupcyinformation.com:

“The stated goal of federal bankruptcy law is to provide the honest debtor with a fresh start.”

Hmmm, I’m starting to see why my Mother-in-law thinks the way she does. I guess I don’t know what to tell her. In a way it is a fresh start, and for certain situations it IS the best option. But there must be some pitfalls to declaring bankruptcy, right?

I know there has to be a Happy Rock reader who can educate me (and the rest of us) on the nitty gritty of bankruptcy. Either with a first hand story, or an account of someone you know who is going/went though bankruptcy.

Is it a clean slate? How has it affected future financial dealings?

Until next time,

-DD

P.S. I know that this might be a painful topic for some people and I understand if you don’t want to share. It’s just that a lot of people are feeling the pinch of the credit crunch and will probably be exploring bankruptcy as an option. So reading some real-life examples might be helpful with this decision.

» Filed Under Credit Cards, Debt Elimination, Psychology of Debt

Financing College by Selling the Van

Posted by Debt Destroyer on September 24, 2008

First it was Netflix, now it’s the van.

I’ve been putting off writing this post for about a month. It has been about that long since we’ve decided that selling our van would be in our best interest (financially speaking).

I first brought this idea up way back in July, but my wife wasn’t on board quite yet. Then we both read Dave Ramsey’s, “The Total Money Makeover” and we realized that we probably made a mistake when we bought our van in the first place.

If finances weren’t an issue we’d never sell this van. We love it! It’s just that with me going back to school and only working part time, we sure could use an extra $330 a month.

We didn’t sell our van right away because we had 3 long out of town trips in the works and my wife had 5 weddings to shoot this month. So we decided to wait until after Columbus Day weekend to get the ball rolling. And almost as soon as we picked that date, we started to question our decision.

Do we really have to sell the van?

If we truly want to get rid of debt, then the answer is simple…YES!

I took out a student loan ($7750) for this school year. Hopefully this will be all I have to borrow, but it will still be adding to our debt. Our theory is even if I have to borrow a little more, we’ll still have less debt when I get out of school then when I went in.

If you remember back to one of my first posts I laid out our debt situation. There I showed that we owed $11,000+ on our van. I hope to be able to get $15,000+ for it. If we do, we’d pay off the $11,000 debt and have $4000-$5000 for the new vehicle.

Looks good on paper doesn’t it? But let me tell you, it sure doesn’t feel good.

As mentioned above, we love our van. We love having a sleek, reliable vehicle that also has handy features (leather seats, DVD player, automatic doors, & butt warmers). It’ll be sad to see it go. But even when we “cook the books”, we can’t make ends meet too much longer with a $300+ monthly vehicle payment.

So…

Anyone have any advice on selling a vehicle?

I’ve either totaled or traded-in my previous vehicles, so I have no clue how to go about this. I guess we did sell my wife’s old car to her folks, but that happened so fast that I hardly had time to pay attention. Plus her Dad took care of everything…before I knew what was going on, I had a check in my hand.

Hopefully history will repeat itself.

Until next time,

-DD

» Filed Under Debt Elimination, Financial Succes, Psychology of Debt

Free Debt/Credit Documentary - In Debt We Trust

Posted by The Happy Rock on September 21, 2008

No, not through Napster or some other torrent, but through the unique site Snag Films. The current offer over 300 independent documentaries for absolutely nothing. They have quite a few quality films on there, so be sure to check it out if documentaries interest you.

One of those free films is In Debt We Trust. Here is the description of the film :

In America’s earliest days, there were barn-raising parties in which neighbors helped each other build up their farms. Today, in some churches, there are debt liquidation revivals in which parishioners chip in to free each other from growing credit card debts that are driving American families to bankruptcy and desperation. ‘In Debt We Trust’ is the latest film from Danny Schechter, “The News Dissector,” director of the internationally distributed and award-winning WMD (Weapons of Mass Deception), an expose of the media’s role in the Iraq War. The Emmy-winning former ABC News and CNN producer’s new hard-hitting documentary investigates why so many Americans are being strangled by debt. It is a journalistic confrontation with what former Reagan advisor Kevin Phillips calls “Financialization”–the “powerful emergence of a debt-and-credit industrial complex.” While many Americans may be “maxing out” on credit cards, there is a deeper story: power is shifting into fewer hands. And with frightening consequences.

I have watched the first 20 minutes and it is quite well done and interesting, but it is hard for me to carve out 98 minutes to sit in front of the computer to watch it. For those that are getting out of debt or even for those that don’t think debt is all that bad it will provide some well meaning fuel to keep the debt destruction fires burning.

Break out the popcorn and the scissors to cut up some credit cards and enjoy the show.

» Filed Under Debt Elimination, Psychology of Debt, Psychology of Spending

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

Total Money Makeover - The Snowball Starts

Posted by Debt Destroyer on August 8, 2008

In part of the interview process I went through to get this cushy gig, I remember being asked what I thought of Dave Ramsey. I had to admit that I heard of him, but that I didn’t really know much about him. I remembered him being featured on “60 Minutes” some years ago, but that was it.

Luckily for me, that embarrassing answer didn’t instantly disqualify me.

And after this past weekend, I can no longer claim ignorance on the Dave Ramsey front. Thanks to THE HAPPY ROCK sending me a copy of Total Money Makeover, I now can say I know Dave Ramsey’s method.

Actually I was already aware of a similar method.

As newlyweds my wife & I attended a couple of adult education classes put on by the Minneapolis Park & Rec Dept. We went to “Sink & Faucet Repair” and “Invest in Your Debt”.

We never repaired our sink(but it did give me the confidence to tackle a toilet issue that arose), and we never really fully invested in our debt either. But it did motivate us to pay off our smallest debt first then apply those payments to the next smallest and so on and so on.

Sound familiar?

Obviously we didn’t stick with this plan, which is why I’m back to square-one when it comes to our debt, but it gave me a background to digest “The Total Money Makeover”. Devour might be a better word because I read it in a day (skipping the success stories).

I was hooked.

The motto “If you will live like no one else, later you can live like no one else,” spoke to me. I cruised through the myths & hurdles, commenting to my wife, “When does he get to the plan?”

Then the plan came and I didn’t put the book down the rest of the night. Like Dave says, it’s not complicated, but very difficult. Too bad I didn’t look into this information after watching him on 60 minutes because I would be in a very different place right now.

But what truly has me fired up about this book is that my wife is now reading it. That alone is a major accomplishment (the pile of books that I’ve recommended her to read and she says, “I’ll get to it” would reach the ceiling), so it shocked me when after I told her she should read this, that she started right away.

And the best part is that it is also reaching her.

Just today she was telling me that maybe you all weren’t that crazy for bringing up the idea that we sell our van. She now sees the mistake we made when we bought it in such a haphazard manner. She’s still not quite ready to get rid of it just yet, but the possibility is now on the table.

Of course I wish I was working so I could really throw ourselves into this method, but this way we’ll be in the right mindset when I do start working again.

From the comments I’ve been getting I’m sure most of you are already familiar with Dave Ramsey and his system. If you are, how about giving a progress report on how it’s going for you. Does his system work for you? Did you need to alter it at all? Has it inspired your own system?

Let’s hear some success stories…remember I skipped the ones in the book.

Until next time,

-DD

P.S. For those of you who were like me and don’t know who Dave Ramsey is, check out The Total Money Makeover.

» Filed Under Motivation, Psychology of Debt

keep looking »