Are You Carrying Too Much Debt?
Posted by Gail | Filed under Uncategorized
Guess what my first answer to this question is. Go ahead. Guess. Right… any consumer debt – that’s stuff on your credit card or line of credit that went towards anything you didn’t need – is too much debt. Pretty hard-line, eh? Yup.
That being said, I do allow for the fact that people have some debt. On the “Life Pie” you can spend up to 15% of your income for debt repayment (not including your car payments and your mortgage). To calculate what percentage of your income you’re spending on debt repayment, add up your monthly debt repayment amounts (not including your car payments and your mortgage), divide that by your monthly take home pay, and multiply it by 100.
If you’re spending $670 a month paying off your credit cards, student loans, line of credit, furniture loan, or whatever else, and you make $3100 net a month, your calculation would look like this:
670 / 3100 x 100 = 21.6%
If you’re spending 15% or less of your monthly income paying off your debt then you’re probably okay from a cash flow. Not great, but not drowning. If you’re spending more than that, uh-oh!
The words “paying off” are important. If you’re spending 15% or more of your income just meeting your minimum monthly payments, then you’re in trouble and headed for a fall. Making just the minimum payments on debt means you’re gonna be in debt FOREVER and you’re going to pay GOBS of interest.
If you have a $3,000 balance on a credit card charging 14.98% interest, and pay a 2% minimum every month it will take 26 years to pay off your balance and cost you a total of $7,440 in interest. Yuck!
There are some other signs that you may be in over your head. If you find, for example, that you seem to have less and less money for things like food because you’re spending more and more money trying to keep up with your debt, that’s a bad sign. And if you keep dipping into your savings, keep trying to refinance, or have to take a payday advance loan, it’s a sign that you’re over-extended.
Another big clue: you keep hitting the ceiling on your credit cards. If as soon as you pay down balance, do a balance transfer to reduce your costs, or refinance in some other way, you’re right back to the limit on your credit, you’re in deep doo-doo.
Ditto if you can’t find two red cents to put into an emergency fund. No emergency fund means that the first time Old Man Trouble rears his ugly head, you’ll be right back using your credit to fill your financial gap. That’s no way to live.
And, finally, if you can’t sleep at night, if you toss and turn or awake in a cold sweat, you’re in trouble. Why are you doing this to yourself? Taking care of the problem is so much easier.
1. Admit you have a problem. Say it out loud right now: “I have a problem with my debt.” If you aren’t prepared to admit you’re in trouble, no one can help you. If you aren’t prepared to add up the mess you’re in, you’re not ready for help yet. Quit your whining. If you want things to change, start by saying, “I have a problem with my debt.”
2 Start writing down every penny you spend. Whether you spend $1.25 for coffee or $600 on a fabulous new pair of shoes, write it down. This is how you become accountable for forfeiting your future in the name of an immediate pleasure. When you look over your list at night – yes, you have to look over the list every night – ask yourself why you’re really buying. Did you get a rush? Did you feel pleasure? How are you feeling now?
3. Switch from credit to cash. It’s way easier to charge something than it is to fork over cold, hard cash, particularly when you’re getting to the bottom of the jar.
4. Commit to paying off your debt. Allocate a fixed amount to each debt, paying off the most expensive debt first while you make smaller payments on the other debts. Once your first debt is paid off, reallocate that money to your next most expensive debt. Keep going till you’re out of the hole.
Staying out of consumer debt isn’t an impossible feat. It’s a matter of not spending more money than you make. That’s right. It means not buying something when you don’t already have the money to pay for it. Life is expensive enough. Why would you add interest to the equation?
December 31, 2009 at 7:26 am
Well I have consumer debt, But I’m not over my head, we are less then the 15%, and barring some major thing happening we should have it paid off in June this year.
Regards,
Jason
December 31, 2009 at 8:01 am
No consumer debt yay….but also no assets darn.
December 31, 2009 at 8:56 am
yes another wake up but I mentioned about using cash the other day and some thought this was nuts because of all the supposed feebies I was missing by not using a plastic charge card for everything and paying it off every month.
We had people buying hot chocolate on a charge card, just one example I remember and how she got freebies for using the CC.
All that does is get you used to hauling it out for anything and every impulse buy.
Why not you are going to get add up flyer points free.
yes you might get enough points to fly but I haven’t flown that much and for sure you must be spending more in addition say the vacation package..funny most canuks don’t even know the rest of their country, let alone been to a few of the places but they’ll go to Cuba, Haiti.Florida etc
December 31, 2009 at 8:58 am
I have consumer debt – a LOC – and make large payments monthly to pay it off in 2 years. I’d like to hear from other people about what they think about this. Starting January, I will have $600 more per month. I’m not sure what to do with it. Do I put it in an emergency fund – only have $800 in there now – or do I put it all towards the LOC? Or do I do both?
December 31, 2009 at 9:22 am
Nadine, I think Gail would say do both. I just finished her book and one comment about having more money when one part of the debt is paid off is to split it up. You must save for emergencies and long term savings. If you are not saving in an RRSP (for example) begin now. Split up the 600 in thirds perhaps. 200 more toward next highest interest debt, 200 toward emergency fund and 200 to long term savings. Good luck.
December 31, 2009 at 10:05 am
No consumer debt here, thankfully. The fifteen percent (and more!) instead goes to the mortgage in an effort to try to pay it off faster.
It’s a bit strange, some people (less than before, though, I think) think it’s crazy to not have any consumer debt. Someone recently shocked me by saying that it was ‘ridiculous’ to wait to buy things when they could afford the monthly payments. To be fair, this was after I had mentioned that if they couldn’t afford to pay for something now, how could they afford to pay for it with interest on top?
December 31, 2009 at 10:10 am
Nadine, I agree with Diane and split it up. Knowing my own personality I would split it $400 extra to debt, $100 to retirement and $100 to emergency fund. It’s really tempting to just pay off the debt but then if there’s a problem and you have no EF to cover you, you’ll just go back to credit.
What would happen to the world if credit cards vanished? No one would be able to try to make you feel guilty for not buying something because “you can just charge it”. We’d probably spend more time having fun with each other rather than buying stuff.
December 31, 2009 at 10:34 am
Nadine: IMO, I think you need to build your emergency fund. You might consider adjusting the amount you’re putting toward your EF up to at least 10% of your new net income, then put the rest toward paying off the debt.
Alternately, you could put it all into the emergency fund until you reach a certain amount (like, say, $2500) then adjust the amounts to have some of it going towards the debt.
Congratulations on the extra money! Is it $600 before or after deductions? Take that into account when you’re doing your calculations. I used to make that mistake a lot.
December 31, 2009 at 10:41 am
I still have a lot of consumer debit. The credit cards are almost paid off then I will start on the huge LOC that we built by making bad choices and having to have it all now.
The good thing is I can look back and see where I was 2 years ago. (Sleepless in Wooler) and see the huge improvement and that the debt is NOT getting any bigger.
Coming to this website and watching TDDUP has helped me to realize that you don’t have to have debt. Jay…. you are correct when you say people think you are weird for buying used or waiting before buying new. Just about everyone I know says ‘everyone is in debt and will always be in debt’. I no longer believe this and one day I will be saying I am debt free.
Thank you to Gail and everyone for their comments over the year and I wish everyone a happy financially smart 2010.
December 31, 2009 at 10:51 am
@Amelia (Nadine, Diane),
Initially, I would have recommended pay down the debt asap (I’m debt adverse), but your recommendation makes much more sense. Having an emergency fund will hopefully stave off the use of credit when a crisis hits (job loss, medical emerg, etc.). Gosh, wouldn’t it be a better place if we could all do away with the plastic and the instant gratification that goes along with it. People look at you weird if you say you saved to buy a big ticket item (car, big screen tv) – it’s like there is something wrong if you don’t have car payments or haven’t ever used buy now, pay later schemes!
Happy New Year to all,
cheers
December 31, 2009 at 11:01 am
@ John: There’s nothing wrong with credit cards if you use them wisely. I think even Gail agrees with this statement.
Personally, I used a total of $45 in cash for all of 2009 because I hate the idea of cash. With my credit cards (I have six) I get cash back rewards (5% on gas, 3% on groceries, 1% on everything else), I double my warranty protection, and I can cancel a credit card if it gets stolen. Cash doesn’t give me any of those benefits.
And I have no debt of any kind, so “credit cards” does not equal “no impulse control.”
December 31, 2009 at 11:20 am
I admit that I have consumer debt, but I’ve just reduced one of my debts ($18K and change) to a 2.99% offer until Sept/10, so the chunk I was paying on the higher interest will still go to the new cc, but will get paid down faster. I feel like this website is both a godsend and a confessional! There’s another $9K also on a 2.99%, but I’m going to try and increase the limit of the other card to transfer over that too, just to be paying only one cc debt payment more than anything to keep it simple for my wee debt-full brain.
Whew, I guess THAT was my confession to myself and to everyone here! The difference is I’ve got a plan in place, am still contributing to my EF, RRSP, and ‘planned spending’ accounts (clothing, gifts, entertainment), AND I’m paying down my debt. Christmas took a wee hit because I briefly took my eye off the prize, but I’m back with even more conviction than ever and it feels great. I don’t know if I can be successful in being debt free this time next year, but I’m putting my heart and soul into it for sure. I’m tired of writing in my journal every December/January that by the end of “fill in year here” I will be debt free and never seeing it happen. Yes, it goes down, but hasn’t been at ZERO (or even only 3 or 4 digits) in far too many years.
Thanks Gail, thanks all the people that post here, and thanks to finally having an intelligent plan rather than shooting arrows in the dark hoping to make a target, I will be back here next year either completely debt-free or with only a payment or 2 to go!
Happy 2010 everyone…big debtors, little debtors, and no debtors alike!
December 31, 2009 at 11:32 am
Good luck Michelle and good for you.
Debt-free means freedom in so many ways. Tackling the debt, I learned important lessons about life (thanks Gail) and have taken those lessons into other areas of my out of control life and applied them there. I’m using the same strategies for debt management and applying them to weight loss. I’ve made goals to declutter my home, and I’ve made the same changes at work (my co-workers are taking tours of my now spotless and uncluttered office wondering what has happened to me).
My goals for 2010 are to build the emergency fund up so 65% of my former debt payments go to emergency fund, the remaining 35% go to various other funds (like xmas, vacation, house repairs). Once I have the emergency fund to where I think it needs to be (9-12 months of expenses since I could become unemployed in 2011) then it’s on to beefing up the RRSPs.
Having medium and long-term goals and working towards achieving them is one of the greatest lessons I learned on this site and from Gail’s show.
I’m very inspired by Gail and all the people who post here. Thanks for sharing your stories and strategies. Happy new year!
December 31, 2009 at 12:12 pm
This post reminded me of that old Saturday Night Live skit with Steve Martin . . .
http://consumerist.com/2007/04/snl-skit-dont-buy-stuff-you-cant-afford.html
December 31, 2009 at 12:24 pm
I think everyone here has some great ideas. In the end, every situation is unique, but I would lean heavily toward paying down consumer debt before investing in RRSPs. Your risk reward ratio in stocks isn’t that favourable and I don’t think it makes sense to carry credit card debt at 19%+ rates while your savings account earns 1%-2%.
Having said that, I still think a small emergency fund is important either way, especially if, like us, you can see your washing machine giving up the ghost in the next year or so.
December 31, 2009 at 12:46 pm
@ANN
Thats not what Gail typed above specifically switch from credit to cash.
I don’t whether you are bragging or complaining about owning 6 credit cards….must be a badge of some sort.
Nobody needs six credit cards
December 31, 2009 at 12:48 pm
Nadine:
Make sure that there are no hole in your budget. Keep separe your EF (meant for job loss, illness… dire situations) from your maintenance expenses (house, car, …) and your retirement fund. The 85% of your income should include the 10% towards savings (EF + retirement). The % for house should include its maintenance and the % for transport should also include its maintenance.
Calculate your percentage towards debt repayment. Fill it up until you reach 15% of net income.
You job security will determine how fast you must fill up your EF. Remember that once you are done repaying your debt, put that 15% towards your EF until you reach AT LEAST 6 months of expenses.
(I agree with the question: $600 before or after taxes?)
Enjoy!
December 31, 2009 at 12:56 pm
Nadine – I would follow the advice of the others and split up the $600 that will be extra in the New Year. It is tempting to see that LOC go down quickly, but having available money for an emergency (or planned spending like vehicle maintenance or insurance) is a freedom all of its own. We sold our van in November and wanted to use that money for the vehicle loan that is sitting on our LOC. We didn’t though, and I am glad. When we put the winter tires on the car this week, the mechanic had to replace the brakes on all the tires … and our summer tires were in such bad shape that he kept them – so that meant that instead of just under $200 for the tire change, we are at $900 for the change plus the brakes, and in spring we will have to buy new summer tires too. It still makes me cringe to watch my planned spending account go down … but is much better than watching my LOC or credit card balance go up.
December 31, 2009 at 1:09 pm
I read Gail’s new book and I am amazed how much I have learned about debt repayment, budget and everything else in a very short period of time.
I have also been reading Gail’s website/blog every day and I love everything about it.
I felt that I should post something here today, however I am preparing a “sucess story” post as well.
I truly feel that getting educated about finances, working on my budget (first time in my life – I am 46 y old) and working on a debt repayment plan is a success, isn’t it?
I was planning to repay most of my debt in 2010 but I didn’t have a clear idea of how I would do it. Now I am working on my plan and I have tons of questions and I also think that this is the perfect place to share my plan which I will do in a couple of days.
Thank you Gail and thank everyone for the wonderful stories, comments and advice. I hope you can help me along the way.
Happy 2010!!!
December 31, 2009 at 1:12 pm
I actually sat down to figure this one out to see if I could figure out why I’m always strapped for cash and as it turns out my Mortgage/Property tax is 26% of my income, Add in my car payments that are 12% you get up to 38%. Plus I have two student loan payments that are 7% for a grand total of 46% (doesn’t add up due to rounding). Wow. I need to get a second job or something . . . or maybe my spouse could get off of face book and daytime TV and make some money for a change.
December 31, 2009 at 1:16 pm
Michelle- I was in the same situation in September- although my income only went up by $300. The thing I wanted most to avoid was just incorporating it into my new variable spending and worrying less about the bottom line every month because of the new cushion. I put 200 on my debt payments and the other 100 into my TFSA, which is my EF at this point. I kept the rest of my budget exactly the same, and it has been painless. And I think I actually feel richer with this raise than I would have if I had just begun spending the money.
December 31, 2009 at 2:02 pm
I like credit cards, too. There’s no reason not to have as many as you like, as long as you’re paying off the balance in full every month. For me, it’s cash that runs through my fingers – because I know it won’t be appearing on a bill at the end of the month. For that reason, any cash withdrawals get categorized as “entertainment”. I stick to two cards so that the rewards (1%/3%/5% cashback) are more efficiently used. The best rewards are frequent flyer miles, but I don’t travel.
When Gail says to switch from credit to cash, I think it’s understood that she’s talking about people who are carrying balances and/or have a debt issue. She’s said herself that she uses reward credit cards (and pays the entire balance).
Saving to buy things can be a deterrent. Sometimes you want something and there’s a good deal to be had on it. My trick?
Save BEFORE you want anything. It’s almost like an emergency fund. Every month a portion of fun money, any unused variable spending budget, plus 1/4 of any extra income goes into my “big ticket item” fund.
Now, when I see a great deal on something, the money is already there. I’ll also think pretty hard before depleting the fund. That being said, if you let the fund get big enough, even expensive things will only put a dent in it. If 3 of your friends suddenly say “Let’s go to Barbados!”, you can go with them instead of saving and going next year by yourself.
It’s like ‘planned spending”, except without the defined goal.
The vulcan logic goes like this: If you don’t waste money on interest, you can afford to have more fun. So save the money before you buy. And since sometimes fun is spontaneous, save the money before you even want something!
Doing it this way, you can have more fun than people using credit, yet only the very first item will be delayed in any way.
December 31, 2009 at 2:20 pm
@Nadine ~ you’ve received a lot of very good advice. If the $600. is net I’d put $200. in EF/Savings and the other $400. on debt repayment. Just MHO. I’m anal about paying down the debt.
As for the discussion pro/con credit cards – if you handle them (no matter how many there are) with no debt incurred by the end of the month – who cares? If everyone was the same it would be a dull old world.
I’ve just completed my 2010 budget – for now. My job will probably be redundant at some point this year….so it’s retirement for me and making another budget. Till then I’m trying to pay down our LOC as much as possible. That is our only debt. If my calculations are correct…the amount I paid off on the LOC in 2009 would pay it off in 2010 all but $3,000. Wouldn’t that be nice? Ah…but we have to have our house rewired in the Fall of 2010 – estimate $3,000. – so that is in our budget and it will take me longer.
I remember you saying when you purchased your home Gail that you would need a new roof and you were putting money aside for it. I learn from the master!
Have a safe New Year’s Eve BB’s! (that’s Budget Buddies…)
December 31, 2009 at 3:15 pm
@ John: Not bragging, just showing that someone can have many credit cards and not make stupid decisions. Also, in the past Gail has mentioned on this blog that credit cards are okay if used responsibly. I could go through the archives and hunt down the statement, but I have better things to do with my time.
Credit cards aren’t evil. It’s how you use them.
December 31, 2009 at 3:45 pm
No problem, but I am not afraid to use cash.
As for your 6 credit cards I wouldn’t know, nor anybody else what you put on them so I can’t rationalize your buying decisions on them or when you pay them But YMMV
If its such a good idea for CC use in general thats how it all starts doesn’t it, I can see why so many people on Gail’s show get into trouble then cry the blues.
Should make for no shortage of candidates for the show and its continuing status.
December 31, 2009 at 4:44 pm
Through good planning and some good luck, my younger wife and I are consumer debt free and have been since I was 29 (I’m 35 next year.. good god I’m 35? WTH? Other topic) And we have a very nice house in central Toronto and a very good little boy, so I feel very blessed and can’t imagine how people live on debt. But then again I’m the type of the guy that just this week learned how to fix a zipper and sew a new stopper on it rather than pay to have my son’s coat repaired, as I watch TDDUP on a 32″ tv I bought in 1999 so perhaps I’m just not a big believer in the necessity of debt. Although as I write this, I realize I have a mortgage that starts with a 3 and it scares me so perhaps I’m not as worried about debt as I thought?
Happy new year y’all!!!! -Geoff.
December 31, 2009 at 8:27 pm
@ John: Credit cards can be used for organizational purposes:
1 – groceries
2 – gas
3 – Internet purchases
4 – US dollar for US travel so I don’t get dinged the 2% forex fee
5 – everything else
6 – back up
December 31, 2009 at 8:35 pm
As long as the bills are paid in full it really doesn’t matter how many cards you have…some people have several bank accounts to keep track of various spending categories…some folks prefer credit cards…as long as there’s not a balance going forward every month (just like not going into o/d on the bank account) then why not take advantage of the different things offered on credit cards??…I love my travel visa and I use the points…when I go to Holland again this year I will have aprox 400.00 to put towards the cost of my ticket…and it didn’t cost me a penny in interest!!…yay for credit cards and using them responsibly!!!
December 31, 2009 at 10:58 pm
For me, ANY debt is too much debt, and I’m loath to enter into a car loan if my current car kicks off before I have enough money saved to replace it. Ideally, my current car will survive another 3 years, but hubby tells me I’m dreaming…
We are nearly consumer debt free – only a few thousand left to go – which should be paid off completely by early spring. What a feeling that will be… after 10 full years of living in our credit line, we’ll finally be “flying solo”! Barring any financially bad times over the next year, we should have about one month’s essential expenses saved in our emergency fund by this time next year. Boy it builds up slowly but it’s so worth it. We are motivated and committed to saving for our future now. We now have RRSP savings, RESP savings and planned spending savings. It’s great to have a plan!!!
December 31, 2009 at 11:05 pm
Hey Geoff,
Your TV is just a young’un, as are you! Our TV is 17 years old (purchased in 1993) thus is the first thing on our “planned spending” list to be replaced. As for your 35 years of life, I’ve got you beat by 9 years, and I’ve decided that I’m simply going to subtract 10 years from my birthday count, starting this year… so instead of turning 44 this coming year, I’ve decided I’m only turning 34. You could try that too! Cheers!
December 31, 2009 at 11:20 pm
I agree that credit cards are handy but with some people they are a double edged sword. I use a regular CIBC Dividends Visa. no fee for use, but i get back 1% of all my purchases. i have pretty good impulse control and pay it off fully every month.
I actually pay a bit each paycheck i get. i don’t wait until next month to look at the total. I use online banking to keep track of the balance. If i get paid on the 1st i pay off what ever is currently on there, then by the 15th or so when the next pay cheque comes in i pay off what ever i have spent on again. That way i don’t get hit with a big bill next month. This year i bought a house and have done a lot of renos. I got back $169 from visa with out paying a cent in fees or interest.
I agree there are benefits to using some credit cards but a lot of people who are “addicted” to their cards need to totally break off using them for a while to help reduce their impulse spending. Once they have things under control they can start using them again for small planned spending.
January 1, 2010 at 12:24 am
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January 1, 2010 at 11:38 am
Thanks so much everyone for your advice. The $600 is after tax. After reading all this, I think I’ll put $400 in the EF and $200 more towards the LOC. Funny, my friends just think now I’ve got lots more money to spend… and they all owe way more than me and have never heard of an EF. Once I get to $2500 in the EF, I’ll flip the amounts and go on that way. Again, thanks everyone for your helpful input.
On the credit card front, I can see both points. John’s so right about it being too easy to use – lazy people should not use them cause it’s just too easy to forget that you did. But, like Anne says, if you use them and right away put money away so the end of month statement is paid in full, they have a lot going for them. My card gives money back at the end of the year and this year, I got more than $300 taken off my Dec. statement. That pays for a lot of Xmas presents.
January 1, 2010 at 12:06 pm
I have just finished Gail’s new book. Debt Free Forever. I went and bought a copy for a neighbour for her Christmas gift. I heard Gail’s voice the entire time I read it. She even yelled at me a few times. It was great. I have had the grace of being able to pay off the high interest cards recently and start the emergency fund ($2,000.00). I have added my visa (that already had a low interest rate because I called and asked for a reduced rate) to my Line of Credit at an even lesser rate. The plan is to have it gone in just less then three years. My cards and my husband’s have been put in a safe place. We continue to use the Home Depot card for things that are an investment in our home. We have used their money for many home improvements for free. You just have to be disciplined and pay of the full amount in the six months anything after that NO MORE FREE MONEY! I do use the Master Card for groceries and gas having the money set aside to pay what I have spent and earn the points. NO MORE DEBT! You can use the cards and the cash as long as you always keep your focus! Thanks Gail and your families for showing us that there is a better Debt free life awaiting us!
January 1, 2010 at 1:14 pm
I wish I could say that my boyfriend and I have no consumer debt. After 2 years of very uncertain employment, and plenty of stupid purchases, we’ve now got a $50,000.00 monkey on our backs that I can never take my mind off of. We’ve made some steps in the right direction, getting our credit cards to a lower interest, making a spending plan, each of us getting a small allowance each week, but as soon as we get on track and we start to feel a bit secure, the bottom drops out again.
The only consolations are that we are still better off than some we have met in our travels, and we’ve been through this a few times before, so we can make it through this too.
January 1, 2010 at 3:34 pm
@Sharon – the first point in your favour is that you recognize that you and your boyfriend have a financial problem. It’s hard to stick with it…I know. But, here’s the scarey bit. With an amount of $50,000 owing now…and with so many of life’s adventures still to come (and cost money) please put your nose to the grindstone and work diligently to get things turned around pronto. When you start to ‘feel secure’ again…celebrate and party hardy WITHOUT spending a dime. It can be done. I know that too. Just MHO.
January 1, 2010 at 4:18 pm
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January 2, 2010 at 10:19 am
I am 38 years old and have a problem with consumer debt….phew! My first confession for 2010 and the start of a journey that I am committed to – a journey to becoming debt free. I’ve read all the posts on this site and am inspired by what everyone has done and I am spurred on to (1) take true account for my debt, (2) start tracking my expenditure on EVERYTHING, and that includes the cash withdrawals I make and have never tracked in my life, (3) commitment to debt repayment and (4) starting up a EF.
Ideally I would like to see a huge chunk of my debt paid off by the time I reach 40 years old; there’s a lot of it so I’m only being realistic — I think I can clear it all of within abut 5 years. It is websites like this, TTDUP, and one’s own personal drive and determination to change habits which helps.
I’m wishing myself luck – and all the best to everyone in 2010.
January 2, 2010 at 11:23 am
I use a credit card to pay for all purchases. The card gives points which I convert at the end of the year into ’stuff’ – mostly gift cards to give to family for christmas – like movie cards, bookstore cards, restaurant cards etc. The trick I use is to immediately move, in a virtual way, the money I put on the card that day over to the credit card so that come bill date, there are no surprises and the money is there to pay for it…I have a great software on my computer that downloads my transactions, keeps track of my accounts, does the monthly reconciliations, etc. By recording the credit card transaction immediately, and then virtually moving the money from my chequing account to the credit card account, I know exactly what is left in my chequing account, and when the credit card bill comes in, voila – money is already there to pay it off immediately.
For those with computers, a financial software makes this so much easier, managing accounts is just minutes a day, and I know at any moment what the balance is in any of my accounts. There’s lots of financial software out there designed for home use – from opensource freeware, to inexpensive, mid-range or expensive. I have a mid-range cost software that also tracks my retirement investments and their daily value, and allows me to set up my budget and tracks whether I am overspending. It was about $100 and well worth the expense for me.
January 3, 2010 at 1:43 am
Gail, You are mean, you want these poor people to live on nothing. I am horrified by how mean you are. If everyone followed your logic, the economy would collapse. We need people to SPEND!!!!!!!!
January 3, 2010 at 3:18 am
Debt Debt Debt. Wouldnt you agree all that thought process attracts more debt?? Isnt it better to think about abundance?? or for instance the power of compounding: Question? would you rather have 1 million dollars now or a penny a day doubled for 30 days(month) The answer is….
have your fans figure it out and when they do they will have learned a principal!!
Thats Powerful if implemented.
January 3, 2010 at 1:24 pm
@Ed~oh dear, I think you have clicked into the wrong internet site for you. You are looking for one that comprises bloggers who are completely debt free – no mortgage, no consumer debt, no $$$ owed to anyone. Surely, from your comments that is where you are in your financial life and I applaud your success! Bravo!
Our quest here at this site is to reach the summit of that mountain where you stand. We will all reach it some day never fear …. with Gail leading us, pushing us, and dragging our sorry butts. All of us here love her to bits and are thankful she is a part of our lives.
If you look up the word ‘mean’ in the dictionary it says: low in quality or grade; poor…low in social position or rank; humble….of little importance or value….of poor appearance; shabby….small-minded; ignoble…humiliated; ashamed….hard to manage; troublesome; bad-tempered…selfish and ill-tempered; vicious, unkind…
Gail is none of these things.
Best wishes to you for continued success in 2010!
January 4, 2010 at 3:56 am
I did the math. Debt reduction 11.8% and, while we haven’t been able to adequately fund an Emergency Fund and I’ve gotten away from the set-aside accounts I used to do for things like property taxes, car insurance, etc. this is the year I go back to doing it.
The one place where I would disagree with you is that I do as little as possible by cash. Cash is a giant black hole for me. I do everything possible by debit (with regular bills pre-authorized and irregular ones paid online) and then I have line by line what I spent money on. I can go back 6 months later and add it up by category. I couldn’t tell you what I spent cash on yesterday or how much. Writing things down is great and I always start off doing it, but there’s always a bobble somewhere. And once I falter, that’s probably it for the month. I’m a perfectionist. I want to remember every penny and enter it before I enter anything else. With debit I can still go back whenever I want to and figure it all out. And my credit union chequing account has *no* fees and unlimited debit use.
January 4, 2010 at 6:18 pm
To all you credit card holders, to be remember the more possible credit you have EG 6 credit cards the less you are eligilble to borrow for a morgage or car loan even if there is not a pennie on them at the time you need to borrow its still considered potential debt
January 4, 2010 at 8:18 pm
Emily – good point. I was actually surprised to learn that when we were looking for a mortgage. The total amount of credit available to us was taken as if we had actually used it!
July 22, 2010 at 11:05 am
If you want to see how institutionalized the industry is, check this out:
http://www.collectionrecoverysolutions.com/crs2008/index.html