Monthly Archives: December 2016

Until You Do The Math

I’ve never gotten more push-back on a post than I have for my 30 Financial Milestones You Need to Reach by Age 30. It’s still Money After Graduation’s most popular post of all time, and since making the checklist the download that you receive when you sign up for my email newsletter, more protests are coming in.

In the time I’ve been doling out personal finance advice online, I’ve been called everything from privileged and out of touch, to colorful names I will not repeat. I know I don’t have the soft touch many other personal finance gurus have. But I have to be harsh with you because you need to know the truth:

If you do not get your financial shit together, you will not be okay.

If you do not aggressively save for retirement, you will not have enough money saved to leave the workforce on your own terms and live comfortably. If you do not pay off all your debt as fast as possible, you will not have the flexibility and security of keeping every dollar you earn. If you do not set aside money for emergencies, you will not be ready to deal with what life throws at you (and it will throw many things at you, and a handful of them will be horrendous).

But the painful truth is I cannot make any of the above easy for you. I can tell you how to do it and I can give you motivation and inspiration, but I cannot lighten the load. I cannot reduce your debts, earn you more money, or increase your investments. You have to do that part.

I also cannot (or at least, will not) lie about it. Which is why my advice sometimes comes across as “harsh” or “mean”.

 

It’s not easy.

Getting your finances under control is not easy at all. That’s actually why most people don’t do it. It is far, far easier to buy a house you cannot really afford, finance a car with a 7-year loan, make the minimum payments on your student loans, and use credit cards to fill in the gaps.

Getting Out of Debt

I’m a math nerd, I like depriving myself of stuff, and I really like to live simply…and getting out of debt still sucked.

BUT – it was one of the best things I’ve ever done.

In case you don’t really know my story, here’s the sequence of events:

  • Graduated from college, had $18,000 of student loan debt
  • Got married (yay!)
  • Together, we paid off the $18,000 and built up an actual net worth
  • Got divorced (booo…), kept the house, and therefore was thrown back into debt because I owed my ex $22,000 of our equity
  • Paid off the $22,000 in 6 months (whew!)
  • Paid off the remaining $54,500 on the home mortgage in just 12 months!

In other words, I’ve been in debt, got out of debt, was thrown back into it, and then came out of it faster and stronger than ever. I quickly became a get-out-of-debt machine.

How did this happen? It certainly wasn’t by accident. Through the unfortunate life events listed above, I discovered the absolute best tool for getting out of debt.

 

Getting Out of Debt – Discovering the Tool

No, I’m not trying to sell you something. The purpose of this post is not to jack up your spirits and then tell you that it’ll cost you $49.99 to experience euphoric bliss. First of all, I’m not that cruel. Second of all, this tool for getting out of debt shouldn’t really cost you anything. Just a few moments of your own time and thoughts.

So what the heck am I talking about? What is this tool for getting out of debt

 

Discovering My Tool: The 1st Time

When my ex and I were first married, I distinctly remember the day that my general nervousness turned to panic.

Our student loans came due, and that fateful bill came into the mail. The bill that we couldn’t afford.

It was in that moment that I put my foot down and shouted, “NO MORE!!”

No longer was I going to lie back and relax while my bank account was obviously plummeting toward the negative! It was either we fight this evil giant called “Debt” or we were going to let it rule us for the rest of our lives.

From that date when we said, “No more!”, we paid off $18,000 and cash flowed a $6,000 car in just 14 months.

 

Discovering My Tool: The 2nd Time

“I don’t love you anymore,” She said matter of factly. “I want a divorce.”

I crumpled to the floor and looked up in disbelief. I didn’t understood non-physical pain until that moment. But once I felt it, all I wanted in life was for it to go away. The only chance I had was to cut all the strings – to pay off my debt to my ex.

From that moment, it only took me just 6 months to pay her the $22,000 she “deserved”.

Top Frugal Habits and The Right of Money

Many of our grandparents were born between 1910 and 1925. This is what Tom Brokaw dubbed “The Greatest Generation” when America was developed and defended on the backbones of its hard-working citizens. Anyone with silver hair, no matter their birth date, has spent an entire lifetime making choices and reaping consequences. It is our choice whether or not we will learn from our grandparents’ experiences and advice. That is why I’ve comprised a list of frugal habits I’ve learned from watching my own grandparents as a child.

It only just dawned on me that I’ve been learning from their example all of my life even though they’ve all passed on.

Even my grandpa “Big John,” who passed away from a heart attack when I was four, left a legacy in his community as a reliable and trustworthy man others looked to for business advice. Things like that, 25 years later, stay with me.

I titled this piece “Grandma’s Top 10 Frugal Habits” because many of us had “that grandma” who wore the same three outfits and that one pair of shoes.

But this list will also include other grandparents who had a powerful influence in my life.

 

1. Driving a used car.

My grandma Dorris drove the same used car through my entire childhood. It wasn’t new or flashy, but it was nice, reliable, and paid for.

 

2. Gardening

My grandpa Lloyd plowed Michigan soil every season of his adult life. In retirement, his favorite pastime was taking care of his beautiful garden.

Grandma Dorris and I spent time picking and snapping green beans straight from her garden into the dinner pot.

When I graduated from high school, grandma sent me a letter with two packets of seeds to start my own garden. That was my grandparents’ legacy.

 

3. Scratch and dent.

Grandma helped me shift my mindset and think about things like manager’s specials and clearance racks. She went a bit too far some days, coming home with food that looked like it was ready to crawl out and burrow itself into the ground, but the lesson was still valuable.

I probably won’t hunt for nearly spoiled food and cereal boxes that look like they’ve been flattened by a forklift. Still, finding food on sale because of a simple blemish or dent is a win in my book.

Whats The Debtors Speaking About Debt Reduction

November is Financial Literacy Month, and Monday evening of this week, I spoke at a local public library about our journey out of debt. Most people who attend talks about personal finance are already financially literate. They seek out opportunities to learn more in an ongoing effort to keep their financial health strong. My talk wasn’t going to fit the bill for these people. It was a presentation for debtors who who don’t normally set foot in a room under the banner of “financial literacy”.

Twelve people had registered for the event, and my hope was that at least one person would come away from it with a strong sense of encouragement. My talk was promoted on the library’s website with the title “Getting Out of the Red” and as “A Personal Journey”. It stated that my experience would be “presented in a language that resonates with many, and hopefully will inspire others to get out of debt.” I hoped that people actually struggling with debt would be drawn to it. Much as I  admire financial whizzes, they weren’t my target audience.

 

Nervousness . . .

As the day approached, I had to make a real effort to keep my focus where it was supposed to be: on the people who would be listening and on the message of hope I had to share. It was a challenge to keep that focus as so many worries crept in:

  • There was no way I was going to be able to present without reading. Would that be OK?
  • Would the 12 people who had registered actually show up?
  • Would the right people show up? Debtors who would be able to relate to what I had to say? Or would there just be personal finance keeners who would find it a waste of time?

My talk was scheduled for 6:30, and  at 6:25 there were 2 people in the room. “This could be really awkward,” I thought. But within a few minutes, there were 20 people. It was time to start.

 

Personal mixed with perspective and advice

Over the next 50 minutes or so, I shared our story as DH advanced the PowerPoint slides. If you’ve been reading  this blog and/or Prudence Debtfree for any amount of time, you already know the chapters of that story:

  • My many, many years of head-in-the sand chaotic finances
  • DH’s  job loss during the high-tech bust
  • Our 6 years of financial stress
  • The launch of DH’s successful home business and our return to “normal”
  • Our financial wake-up moment
  • Our journey out of debt – both the practical side and the deeper side
  • Our encouraging progress after 4½ years

Interspersed with our personal story, I included national trends and statistics to give the context of increasing and widespread indebtedness in society, as well as advice and insights from the sources that we’ve tapped into – especially Dave Ramsey’s book The Total Money Makeover.