People approach me very regularly about investment advice and my suggestions are very simple. Budget. As a general rule don’t use debt to purchase anything other than a house, vehicle or education. If you have debt, pay it down. Pay it down as fast as you can. Stop the small purchases that suck cash out of your jeans. If you need a vehicle, buy a used reliable car instead of new sexy one. Better yet, move closer to transit and get rid of the car.

Take care of your health both physical and emotional. Educate yourself and your children.

After you have done all that come see me and I’ll explain how to invest for yield, growth, safety or gains or invest in ETFs, strips and zero coupons, currencies, commodities etc.

Spend and invest like my immigrant parents and you’ll do fine.

In Gail’s budget builder and worksheet she states that 15% of my net income should go towards debt repayment, however in her calculations she includes car loans in the transportation costs which equals another 15%. Does this mean the 15% debt repayment is on top of my car loan payment? But then in the blog above she includes car loans as a debt.

My question is this, do I include the car loan in the 15% debt repayment or not, because this would make a huge difference in the amount of money that I will be putting onto my debt. Instead of $600 a month it would be $1000. With a net income of $4200 a month, this seems excessive.

In the days leading up to sanity we had several a-ha moments. One of the biggest ones was the day I discovered that cute little line on the credit card statement where they actually tell you the amount of interest – in dollars!! – that they are charging you for that month.

I always thought of my credit cards by their percentages. My Visa card was 12%. My MasterCard was 17%. My Sears card was 28%. Therefore the Visa and MasterCard were the good cards and the Sears card was the evil one.

Percentages led me astray because they just didn’t click into my reality. After all if the good people at Visa were only charging me 12% that works out to just 12cents on the dollar and who can’t afford 12 cents? Well apparently we couldn’t when we were paying 12 cents on $15000.00. Doing the math showed us that 12% was a basic $1800.00 a year or $150.00 per month. Just in interest. Not even including paying for the actual stuff we had purchased.

The first time I read “Interest $150.00” I had to go and get a magnifying glass to re-read it because I thought that my eyes were playing tricks on me. Big mistake. $150.00 is bad enough. $150.00 (to the power of 10) is unbelievably depressing.

But this discovery changed our lives and led us out of and way beyond our normal debt repayment lethargy.

The first thing that I did was to set up our Budget Sheet with a line just for credit card interest. Treating the interest as an expense and debt all of its own helped us to keep our eye on the ball. It truly is shocking, yet amazingly motivating, to see how much more the stuff you bought is costing you – simply because you didn’t wait for cash but borrowed the money.

From that day forward we made every minimum payment (and hey! Did ya know they actually have a line on the statement that tells you when you are supposed to make the payment?) plus whatever interest was charged for that month. That way – in our warped little minds – the minimum payment was going to pay down the principle while the interest payment was paying the interest. I know it doesn’t really make any sense. I don’t know why the splitting of one amount into two amounts in your head makes you feel so good. All I know is that it does.

\While I agree that paying off smaller balance over higher interest is illogical, so is beating someone over the head with advice that is more effective when unconditionally offered.

I was 60k in debt 2 years ago, now I will have a projected net worth of $80k at the end of this year ($70k in cash that I will allocate to retirement/savings etc).

It’s interesting, because my parents used to tell me, “You can’t control your income, but you can control your spending.” Watching TDDUP, though, I see that you CAN increase your income! (To be fair to the parents, they now tell me to spend more on fun.)

But I’m not going to apologize for having a different opinion and broaching this in a respectful and even-handed manner in an attempt to provoke further discussion and dialogue.

Anyway, I really didn’t mean any disrespect, and I’m sorry if I offended her or anyone else – I admire Gail greatly and owe a lot to her advice.