Detours On the Road To Be Debt Free

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You made the decisions to get organized and knock out that debt. With a budget in one hand and Dave Ramsey's book in the other hand, your being all gazelle intense. But be careful there are going to be some bumps in the road to the debt free life. Here are a few of the bumps you may hit.

Being too ambitious

Once you've decided to attack your debt, it can be tempting to get carried away by your enthusiasm. In all likelihood, it has taken several years to work up any debts you may have so you're not going to clear them overnight.

When you decide to sort out your finances, try to do an honest appraisal of the situation and set yourself realistic targets. If you attempt too much too quickly, you could fail and become disillusioned with the process.

Borrowing to cover debts

You probably already know how effective balance transfer cards can be if you want to repay your credit card debt more quickly and cheaply.

However, balance transfer cards are something of a special case. If you're not savvy, borrowing to repay an existing debt could exacerbate your financial problems.

If you are going to take out another loan to cover a debt, you should make sure you are getting a more competitive rate of interest. Otherwise you're unlikely to make any progress.

Borrowing money to make the minimum repayments on another debt will probably send you further on the downward spiral. If you do reach this point, it could be a sign you need professional help with your debts.

Spreading yourself too thin

Although you might want to pay off all your creditors as soon as you can, this may not be the most effective debt busting technique.

Take a look at all your debts and the interest rates on each. It could be prudent to use a technique known as 'snowballing' in which you focus your efforts on repaying one debt - normally with the most expensive interest. Meanwhile, you continue to make minimum repayments on everything else.

As soon as this is paid off, you could turn your attention to another debt - until they are all cleared.

Over-reliance on family and friends

Taking a loan from your nearest and dearest could be an effective short-term solution if you're experiencing cash flow problems.

However, it could well be a mistake to rely on these kinds of loans to cover regular outgoings and debt repayments.

If your family are always around as a financial safety net, there won't be much of an incentive to stand on your own two feet. Likewise you're probably not doing your children much good if you constantly bail them out of financial jams without talking to them about the cause of their problems.

It's taken you years to get into such deep debt, it will probably take a few more to get you out. Just stay on your budgets, don't make dumb mistakes and you will be debt free soon. Just be patient.

Related articles

• Out With The Old, In With The New: Clean Up Your Debts (thesimpledollar.com)
• Good Debts and Bad Debts:What You Need to Know (debtsettlementevents.wordpress.com)
• The Snowball Method and Balance Transfers (balancetransfercreditcards.org)
• Debt Management Strategies (thinkup.waldenu.edu)

A Get Some Rest: Weekend Roundup

Here's a list of my favorite posts of the week:

Over at DINKS there is a challenge to save. Could You Save $5 Every Day for One Year?

At Bargineering they are talking about taxing online purchases. Your Take: Should Online Purchases Be Taxed?

Get Rich Slowly tells us about The Dangers of Store Credit Cards

Five Cent Nickel says there are Life Lessons From E.T.

Personal Finance By The Book writes about being truthful. Dealing With Poor Performance: Lessons From Simon Cowell and Jesus Christ

Free Money Finance write how frugality is spreading with Americans Trying to Save Money by Cutting Back

The Biz Of Life budget post describes how the US Budget is out of control. What's 16 Feet Tall and 43,000 Pages Long?

Barbara Friedberg Personal Finance write how rich we really are.
ARE YOU WEALTHIER THAN YOU THINK? What do Success and Wealth Mean to You?

Last week was crazy so maybe squeeze in some rest this week. I still have some shopping to do and if you do, why not get it done this weekend. 

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• The Best of Get Rich Slowly: November 2010 (getrichslowly.org)
• Save Money by Paying Upfront Instead of Over Time [Personal Finance] (lifehacker.com)
• Use the Reverse 4% Rule to Trim Expenses and Bolster Your Retirement Savings [Personal Finance] (lifehacker.com)
• Best of - Personal finance posts (christianpf.com)
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Ways To Live The Frugal Life

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Is the new frugality a fad or a new way of life for Americans. What is it like to practice frugality? Does it mean sitting in your home wearing tattered clothes and making your own soap? Or is it about having a different view on life and money. Frugality isn't just about pinching pennies. We all know people who can pinch a penny till the the Brylcreem comes out of Lincolns hair. My wife is like that and she's taught it to me. Thank you, Dear. 

1. Frugality means consumers are putting needs above wants, sticking to budgets, deferring purchases and spending less — and they aren't shy about letting others know about it. In fact, those who have embraced the new frugal mindset are proud of their accomplishments, and they should be.

2. People with a frugal mindset view money as a tool, not a status symbol. They don't see money as the end result but rather as a means to help achieve a more balanced, comfortable life. So they tend to transfer their spending from things that are less important, such as brand-name products and luxury items, to things that are more meaningful, such as freedom from debt, a home or an emergency fund.

3. Those who practice frugality more effectively distinguish wants from needs. They don't interpret essential needs — food, water, clothing, shelter and transportation — as their more upscale counterparts — eating out, Perrier, designer clothing, luxury homes and new cars each year. Instead, they look for value when purchasing necessities. They also recognize extras, like cable TV and magazine subscriptions, as desires — not must haves.

4. Frugal people track their bills and manage their cash flow. Disciplined spending and budget tracking are at the core of the frugal mindset. Every dollar and expense is accounted for. Saving before spending is the norm. And credit is a last resort.

People who are frugal focus on their long-term goals instead of short-term indulgences. They rarely spend money on immaterial purchases that give them immediate satisfaction. Instead, they are committed to saving for future financial goals, such as college for their children or retirement.

For consumers who embrace it, frugality has an upside. It's a shift to a new value system and provides relief from the burden of "keeping up with the Joneses." It's even helping to bring some households closer, with more opportunities to spend time together at home playing board games, participating in outdoor activities, preparing meals and watching TV as a family. And here’s one ancillary benefit to this lifestyle: Parents are leading by example, teaching their children how to save and spend more responsibly.

So is the era of conspicuous consumption gone forever? Evidence suggests that, as with the Great Depression, this change in consumer behavior toward frugality will last even after the economy gets back on its feet, largely because consumers have less confidence in the economy and are less willing to run up debt. But only time will tell if the new frugal mindset is permanent. One thing is for certain: Living within our means could be a very good thing.

Related articles

• How to Develop a Frugal Mindset (money.usnews.com)
• How to be Frugal and Have Fun (christianpf.com)
• Forever Frugal? Survey Confirms Persistent Frugality (treehugger.com)
• The Road Not Taken (thesimpledollar.com)

Grandma's Money Lessons Still Are True

As we grow up we are influenced by many people. Perhaps the most influential in my life was my grandparents. Grandma and grandpa were always there to set me straight. They were no nonsense and taught me many things. They didn't live exstravagant lives. They always cooked from scratch with rare exception. As I look back there were many instances where they would try to share with me some facet of their life. Some of those lessons were about money. Here are a few of the best.

1. Always save for a rainy day.

This sure was grandpa's favorite lesson. I think it was one of the most talked about by them. Saving money and using what you had wisely. Not wasting money, food or anything. For me it helped me prepare for life's future needs. Like saving for retirement or kids going to college. Never wasting money on interest payments when borrowing. They taught me to be aware of every penny I had.

2. Credit is not your friend. 

Grandpa used to say how proud he was that he never owed a penny to anyone. In his day he would save and pay cash for his needs. It's a foreign idea to think that way today. We make excuses that we would never have anything if we didn't borrow to pay for it. They lived on much less than we do today. Grandpa would say how his pay was only $5 per week when he was a young man. But it was relative because things were much cheaper then.

I believe they had less things to spend money on than we do today. We have all kinds of gadgets and conveniences, that in our minds, have become necessities. They had less things to spend money on. We have a never ending supply.

3. The only person that won't let you down is yourself.

Being self sufficient was a more common trait in the the days of my grandparents. It was a necessity because you had less outside help than you do now. The lifelines we have today like social services, food stamps and housing help didn't exist in their day. They learned to be self-sufficient. More people cooked at home. They sewed and made clothes. In Grandpa's day you could count on neighbors, friends and family to be there and help you through your tough times.

4. Always live below your means.

I would watch my grandparents not be wasteful with their money. They would cook every night. If there was a party they would never think of having it catered. They would prepare all the food for it. Lights would be turned off. Water would never be wasted. Clothes would be mended and worn till thread bare. The homes were simple and they were not very big. There was never an expensive car and th car was driven till the wheels fell off.

Money was regarded as a precious commodity and never misused. Vacations were few and far in between. There were no credit cards or debt. My grandparents were in control.

5. Nothing good or bad lasts forever.

This is my favorite lesson of this list. When things are not going so good in your life like a relationship or a financial problem, Grandma would tell me that this is only temporary and it would eventually get better. She said time would eventually heal all wounds. This is very true and comforting when your going through a hard situation.

The opposite is also true, when things are going well, look out because its only a matter of time when they could go bad again. The lesson here is prepare and get ready for that time, its coming. I have seen many people riding high on salary increases or business booming like never before. These folks think it will last forever. They don't put a thing away for the rainy day. They spend every dime and when the ride is over, they are broke. Again.

6. Waste not, Want not.

I agree that being frugal and not wasting is also a way of preparing for the future. Not wasting assets today will only provide more for future use. It's that Recession, Depression mind set of being ready for that time when things may not be so good. We see this demonstrated many times in nature when animals display survival skills. They are ready for the coming cold weather, drought, or lack of food. Observing their behavior should teach us a lesson of taking care of our lives, come what may.

Our money and what it provides, is our means of surviving in the world. It's something we must learn to not waste. We must plan by using budgets and making wise decisions. Grandma knew all about this, it was just plain common sense to her.

Related articles

• Money Management Advice from Grandpa (christianpf.com)
• 7 Frugal Lessons from Great-Grandmother (wisebread.com)
• Do you have nicknames for your grandparents? (christianpf.com)

Harry Potter Star Responsible With Money

If you are living under a rock you may not know that the latest Harry Potter movie came out. One more time hoards of wizards and muggles are rushing to theaters to see the latest adventures of one Harry Potter. This is the seventh movie with one more to go. The Harry Potter film franchise is the highest grossing film series of all time when not adjusted for inflation, with well over 5 billion dollars in worldwide receipts. It has made stars out of the 3 main characters. These 3 young people have had fame and fortune cast upon them. Ten years ago they were penniless, now they are millionaires.

Young stars with instant fame and fortune have usually gone down the wrong path. Some have crashed and burned like Lindsay Lohan and Brittany Spears. They've gotten into drugs and alcohol.

But here is a young woman who has managed to stay away from all that nonsense. It's "Harry Potter" star Emma Watson. This 20 year old actress, through all her fame, has chosen another way. Her fame has made her a millionaire many times over. Money hasn't changed her. She remarked "By the third or fourth film, the money was starting to get .... serious. I had no idea. I felt sick, very emotional. It was a real shock". Her fortune is estimated to be around $32 million dollars.

Currently she is a student at Brown University in the United States. She is doing some acting and voice over work at this time.

What makes one person go over the edge and another remain completely grounded? We are all exposed to the same temptations of life. Yet one young woman is managing it, while the other is dreadfully failing.

One theory is money makes you more of what you already are. If your a jerk, money will make you a major jerk. If you tend to a life of debauchery, money will only magnify that. If your are a kind hearted person, you will only be more of that.

The tip off I got from Emma Watson's comment was her physical reaction to learning how much money she did have. I am assuming it probably was her parents who told her, because they are managing it. And because they didn't tell her before, I believe they are caring parents that didn't want it to go to her head. The result was disciplined parents producing a level headed child. A lesson for all of us. This actress is going places.

The Real Reason Why You Don't Take Out Loans For College

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Watching my four children on their college adventure has given me time to pause and reflect how proud I am of them. My wife and I have preached and preached how important a college education and the following job is to a successful life. Thankfully they have listened.

Throughout the college journey it has been hard to avoid loans. We have a prepaid college plan for all of them. There have been Pell Grants and scholarships. There has been out of pocket expenses, but nothing that couldn't be cash flowed. We were lucky. But we were prepared and able to have the income to pay for it and avoid loans, for their sake.

Some families don't have the resources or access to scholarships. They don't know about the FASFA application and sources of college money. What they do is take out college loans. Here's where the problems begin. Here is something I believe most people don't even think of.

There is a new study that says that only 22 percent of students enrolled in bachelor's programs at for profit colleges and universities graduate within 6 years, this according to The Education Trust, a Washington, D. C. based group. That compares with 55 percent for public universities and 65 percent for private nonprofit schools.

It is very possible that you will not finish your college plans. Taking out student loans and not finishing is a mistake that will follow you for many years. In the students life many circumstances can come up that will delay the completion of college. There are financial, health, relational and physical problems that could cause the student to never finish. With those outstanding loans your finances will suffer for years to come.

Taking out loans is considered the only way to go to college to most people. But with escalating tuition costs and a new awareness in the culture to be more frugal; students and their parents are finding new ways to better prepare.

If you don't have enough money to pay for college you have two options. Either reduce costs or increase cash. You will have to decide. It will be hard but paying off student loans is much harder.