Financial Stability

If financial independence is the dream, financial stability is the first adult step along the path towards that vision.

On the final day of the year, fifteen years ago, I returned home from a weekend away to find my belongings on the lawn in front of the house I was renting. (I used the Internet Archive’s Wayback Machine to fact-check myself using my old, anonymous personal blog, my first time reading those entries in over a decade.)

My roommate thought I was moving out at the end of December, and when I wasn’t around, she moved two people into the room I had been occupying for several months. I had been planning to move out at the end of January, and the roommate knew this. But my name wasn’t on the lease, so perhaps she thought she could do whatever she wanted.

A later entry brought back the memory of a related event: I visited that apartment again ten days later to pick up a few remaining items, and the new occupants were moving out because that roommate committed some kind of check fraud. But I digress…

Being forced out of my living space with no notice on New Year’s Eve was the end of a particularly bad year. I lost a job, lost my car, and lost my girlfriend. I had moved to northern New Jersey for a job I no longer had. I was in my mid-twenties, but I wasn’t financially an adult. I survived by spending on credit cards, avoiding student loan bills, and accepting help from parents.

Debt Repayment Plan

A few weeks ago I was helping a client create a debt repayment plan and I found a great free tool that I’d like to share with you today.

If you have student loans, credit cards, a mortgage, or any other debt that you’re working to pay off, this tool will help you do it as quickly and effectively as possible.

Specifically, it will help you:

  • Organize your various debts in one place
  • Determine the exact order in which to prioritize your debts
  • Figure out exactly how much money to put towards each debt every single month from now until the last one is paid off
  • See how much money you can save by putting extra money towards your debt and/or prioritizing them the right way

Below I’m going to walk through the most helpful features of this tool so you can see how it works. But first, here are the links to get it for yourself:

  • Excel version: Vertex Debt Reduction Calculator (Excel)
  • Google Sheets version: Vertex Debt Reduction Calculator (Google Sheets)

Let’s dive in!

Quick note: The free version can handle up to 10 loans. If you have more than that, there’s a paid version that costs $9.95 that can handle up to 40 loans. You can get it here. (And no, I’m not affiliated with this company and don’t get paid to recommend them.)

The 3 most helpful features

The spreadsheet comes with a full set of directions that you can follow to fill it out yourself. I’m not trying to duplicate those directions here, but I would like to give you a sense of how this tool will help.

How to handle for debt

The book stays true to its root —Melanie’s blog DearDebt.com—which she started in January 2013. The book includes Melanie’s experience, as well as “Dear Debt” letters (similar to Dear John letters) that she and some of her readers have contributed over the years.

As introduced above, the book’s format is straightforward, yet it includes some gems, and unique features you won’t necessarily find in other debt reduction books:

  1. A focus on the individual
  2. The hidden power of side hustles
  3. How reducing debt affects your outlook

These points are valuable and so merit a deeper dive.

 

#1. A Focus on the Individual

Melanie is aware of what someone reading “Dear Debt” needs: support from someone who can say “I’ve been there”. Her writing is full of hope, without dismissing what it’s like to live with the weight of obligation.

Of particular note is what she writes in a section called “You Are Not Your Debt” (pg. 35). Debt can make us feel lesser than, like a loser, and Melanie—a person who’s now debt-free—helps her readers keep things in context, despite the emotional nature of their current situation. She’s also a realist, addressing those times when we all lose steam as we head toward an overwhelming goal, and shares how she felt and overcame her inertia.

 

#2. The Hidden Power of Side Hustles

“Dear Debt” changed the way I think about side hustles. At first, Melanie presents side hustles as a way to increase your income and that they’re often necessary when a primary occupation is just not enough to live on and also make a significant dent in debt in a reasonable amount of time. But she then also emphasizes side hustles’ potential to help you learn new things, expand your skill set and your confidence over time.

She points out that, because side hustles are usually associated with a willingness on the part of the employer for the hustler to “learn on the job”, it’s a great way to try our hand at something new and unexpected. In her view, our default should be “yes” to any opportunity for a side hustle because we never know what we’re going to learn and we can always find something else if it doesn’t turn out to be a great fit.

[S]ide hustling is all about gaining experience and trying something new. You’re not applying for a salaried job making $100,000. What I’ve learned is that being confident and owning your skills and talents are extremely useful when it comes to landing gigs. (pg. 90)

 

3. How Reducing Debt Affects Your Outlook

As I read “Dear Debt,” I felt I was right there by Melanie’s side, experiencing every stage of the debt cycle: from getting into it to repaying it to thriving after debt. In her words, you can feel the change in outlook, in her emotional state and in how she experiences life. It’s almost as though she wrote about every stage of it at the very time she was experiencing it.

Avoid Deep In Debt

We started our debt free journey with LOTS of consumer debt. About as much as our gross income. Yep, we screwed up…..BIG TIME.

I remember the day when we sat down and told our four kids that we had made a mess of our money. A BIG mess. We expected them to be ticked. I’m not sure why we expected them to be angry. I mean, it must’ve been obvious to some extent that money wasn’t great by the amount of times we said “no” to anything fun as we struggled to pay the bills each month.

“How did you get into debt?” the then-five-year-old asked.

“Well,” I answered with trepidation, “We spent more money than we had for a lot of years.”

“How can you spend money when you don’t have it?” he replied.

Kids are so logical it’s annoying.

Next thing we knew we were educating our kids about credit cards, about how they give you money to spend on stuff but then ask you to pay back more than you borrowed because of interest.

It was then that the uselessness of it all become crystal clear. The uselessness of keeping up with the Joneses. The uselessness of caring what others think about what we owned or didn’t own. The shock when we realized that we were okay with giving our money to the banks instead of keeping it for ourselves.

We told the kids about how we always believed that wealth was a “luck of the draw” thing: either you had it or you didn’t. And about how we found some info online (the blessed world of personal finance blogs) that showed us that we didn’t have to stay deep in debt and struggling for money.

We told them that we wanted things to be different for our family; that we didn’t want to have to struggle for money anymore. And we told them that our journey to debt freedom meant money would be really tight for a while as we reigned in spending and put extra cash toward debt.

We then made a budget for the first time in our sixteen years of marriage. Like Brian and his family, we used tools like Dave Ramsey’s debt snowball to make a plan for getting out of debt.

Steps to Making Money Better

It’s post election, 2016. I know I’m not alone in wondering what the hell I can or am supposed to do now. Everyone around me is asking what this means for themselves, for America, for the causes they care about, and the safety of their families and friends.

People are experiencing a collective, visceral need to get involved, make a difference… do something! But many I’ve spoken to, while adamant that they want to help, aren’t sure if they can. As soon as their minds jump to “I should donate money”, they immediately feel stress and anxiety because of their own financial situation, or lack of knowledge around money. These are good people who want to make a difference. They have the desire and drive to help, but don’t feel they have the means to do so.

The good news is, it doesn’t have to be like this. If you want to give more of yourself but feel like you can’t yet – here is how you can!

This seven-step guide will lead you through the work you need to do in order to make your money matter. You’ll discover why money is important to you, how you currently use your time and money and how your money can better reflect your personal values. You’ll find the tools you need to help put you on firm financial footing so you can help others, and understand the empowerment that comes with a values-based budget. You’ll have the opportunity to choose where you want to donate your time and money and learn the power of gratitude. You’ll move from a sense of helplessness to empowerment as you make decisions with your money that allow you to truly make a difference and impact in your community.

So, let’s get it started!

Note to Self: This is a process. It will not happen overnight! Change rarely does, so don’t expect to blaze through every single step in this post in 30 minutes and come out the other side as conqueror of your finances. But if you are serious about making a difference in not only your life but in the lives of others, then the work you need to do will be well worth it.

Rich is yours

Who it’s for: Young adults under 30, written with young men in mind.

Readability: MEDIUM. Ramit writes in his own voice and has presented the material in a well-organized, predictable fashion, which makes the book easy to read and reference.

What I liked about it: Ramit has organized the book both by theme and by step:

  • focusing the reader on “first things first” in getting their finances organized
  • getting started with investing the right way, and
  • changing our attitudes about the “why” behind saving.

The end of most chapters (1, 2, 3, 4, 5 & 7) includes a page of action steps for the reader to follow, complete with what to do and an estimate of how long the activity is likely to take. This type of summary is effective because the clearer the work and effort involved, the more likely we are to follow his advice. (As an aside, I did take action and double-checked some information on my credit card rewards.)

The advice Ramit provides is based on solid personal finance principles, such as “pay yourself first”, automate your finances as much as possible, pay off consumer debt before you invest, and think of a home as a purchase first and investment second. And the reader is never left to wonder why Ramit thinks it’s the best way to go—he spells it out clearly.

What I didn’t like about it: I expected this book to be fun (which it is) but I didn’t expect it to be crass*. I don’t see why selecting a bank for checking and savings accounts needs to be compared to selecting from a line up of strippers at a club (with the apparent similarity being that they both really want your money). The information is very good, as is the humor, but the cheap dirty jokes are unnecessary and trivialize the great advice provided. Unfortunately, that and its sexist undertones can turn off female readers.

Also worth noting: The last section on relationships was awkward compared to the rest of the book. The scripts for conversations and the suggested actions didn’t seem as thought out as the others and it might have been better for the author to leave them out completely. Is it a surprise based on the above that I wouldn’t call him a relationship expert when it comes to the opposite sex?

How to Make Total Money Makeover

Who it’s for: Anyone who has debt and is looking for both the motivation and the system they need to get it paid off.

Readability: HIGH. Ramsey’s writing style, the book’s clear objectives and organization, larger font size and the success stories it contains make it an easy read, despite clocking in at 200 pages.

What I liked about it: Ramsey’s TTMM offers a no-nonsense approach for household money management. His instructions are clear, as is the rationale for his recommendations. Dave takes the reader through his plan, baby step by baby step, from denial all the way to financial security, debunking money myths along the way. I also like that the advice he covers in this book is supported by a daily radio show that takes caller questions and shares success stories from families who have successfully become debt-free as a result of his program.

What I didn’t like about it: The book is preachy in all senses of the word* (though he does offer a warning about that fact right up front) and includes tenets that few would appreciate, such as renouncing the use of credit cards, dismissing the value of a credit score and a strong focus on home ownership. I also dislike the lack of information about fee-only advisors and the strong focus on mutual funds vs. lower cost options, not to mention the stated belief that a steady 12% return is a realistic return for most investors, or even as a total market return, making it possible to live off 8% of the total investment base annually!