July 21, 2015

12 Simple Things You Can Do to Pay Down Debt

Credit: Stuart Miles at FreeDigitalPhotos.net
One of the key requirements to making it financially is to work towards paying down your debt and becoming debt-free. It’s a marathon process, not a sprint, and it’s not very much fun, but it is oftentimes critical in order to really achieve financial success. Financial author Dave Ramsey has a quote related to this that I like a lot: “If you will live like no one else, later you can live like no one else.” With that goal in mind, here are twelve simple things you can do to give yourself more cash to put towards paying down your debt.
  1. Request rate reductions. At least once every couple of years, call your auto and home insurance provider, your television provider, your security system provider, and anyone else who is sending you a bill and see if they can give you a better rate. Ask them if there is anything they can do to lower your costs as you are looking at your monthly expenses. Look at it this way, there’s no harm in asking!
  2. Plan before you go to the grocery store. This works for any store, but especially the grocery store. Buy what you came to get, and unless it’s truly the deal of the century, nothing else. If you want to take a few minutes and look through the coupons before you go, that could lead to additional savings, too.
  3. Unplug the home phone. Other than telemarketers and maybe a family member or two, who calls you at home? This is a real easy way to save some cash every month, so go ahead and call the phone company if you haven’t already. Besides, you’re probably already paying more than enough for your cell phone!
  4. Sell your unused items. If you have a possession that has dust on it or you’ve forgotten you own it, you probably don’t need it. If paying off debt means more to you than those types of objects, it’s time for a garage sale and some online listings. Put the cash proceeds towards something you do need; less debt!
  5. Grow a small garden. If I had $3 for every time I buy a squash or a zucchini. What? My wife likes squash and zucchini (and now I do, too). Seriously, have you seen how expensive fresh produce can be? I’m not talking about growing your own farmer’s market, but a few berries, a few vegetables, or even some herbs could go a long way towards reducing your grocery bill. Besides, I could use a little sunshine on the back of my neck!
  6. Lower your cable package. So many channels, so little time. So many channels, so much cost. So many unused channels. Need I say more?
  7. Bye bye magazines. The next time you’re over at someone’s house look at their magazines. More often than not, I’ve observed that they will be in mint condition. Lots of people pay for lots of magazines they don’t read. The savings may not be substantial, but by cancelling unused subscriptions, you save cash, you save clutter, and you save your mailman. Win, win, win!
  8. Read a book. I’m serious. It may be the year 2015, but you can’t forget the enjoyment of one of the original entertainment devices. Books are relatively inexpensive, can offer hours of pleasure, and are a lot of fun.
  9. When you go out to eat, get two hydrogens and an oxygen on the rocks (just ask Jennifer Lawrence…). Seriously, iced tea, soda, lemonade, beer, wine, and cocktails are all delicious, but they aren’t free. Improve your personal health and your wallet’s health and consider going with delicious, usually free water.
  10. Eat at home. In line with my beverage comment, the food from eating out can be expensive, too! Sure, go on those date nights and celebrate the weekend, but if you’re trying to save cash, having a reservation at home is often the frugal way to go.
  11. Make bigger meals. Oh I can hear the super health-conscious people screaming already, but please hear me out. If you are making a salad with lots of vegetables and balsamic vinaigrette for dinner, why not make enough for lunch the next day? It is probably cheaper to add another tomato, another bag of spinach, and use a little bit more off that cucumber you’re going to throw away at the end of the week than if you make a totally different meal for your lunch. Yes, you’re eating the same meal twice in rapid succession, but you’re working towards paying off your debt in rapid succession, too!
  12. Make your coffee at home. I see so many lattes and chai teas in elevators. They are delicious, there’s no doubt about it, but they’re expensive, too. I once wrote about one expensive cup of coffee turning into a sports car as some of you may recall. Right now we’re focused on debt, not a sports car, but the principle holds true. Like other frequent pleasures and splurges, daily cups of expensive Joe can slow your financial progress.
I didn’t title today’s post “12 Easy Things” or “12 Ideal Things” because they may not be easy for you or sound highly desirable. That’s okay. These 12 things are just relatively simple to implement, and they can be good “medicine” for your financial health. It’s not quite Mary Poppins, but a few spoonfuls of these medicines might just help your debt go down.

July 07, 2015

Switching to a Single Salary

Credit: Ambro at FreeDigitalPhotos.net
I’ve had a number of friends and blog readers ask me about switching from a two-income household to a one-income household over the past few weeks, so I can’t help but wonder if this is a topic many more of you may be interested in. Sure, this post is going to be primarily directed towards a family where one spouse has decided to stay at home, but many of the thoughts and tips I’m about to offer can also be applied by a family if one person thinks they are about to be laid off, a family if one of the breadwinners’ health is failing, or even an individual who is going from two jobs to one. Here are some suggestions:
  • If you can, experiment before you try it. If Mom is considering staying at home to look after the newborn, agree to stop spending Mom’s current take-home pay for several months to see what it’s like. Except for an absolute emergency, I’d really urge you to hold true to not spending Mom’s take-home pay because lessons you may learn such as not being comfortable with your remaining emergency fund when you had to unexpectedly pay for that new HVAC unit are important lessons that may affect the overall decision and/or timing of going from two incomes to one income.
  • Make a painfully detailed budget and see if you can make one income work. If Jane’s career is soaring and John’s career is painful, Jane and John should take a look at what would happen before John tells them to take the job and…, well take the job. There are going to be relatively fixed expenses such as mortgage payments and utility bills, and family revenue will be going down if John quits, so unless Jane makes enough to cover all of the fixed expenses and the discretionary expenses, it’s likely some of the discretionary expenses are going to have to go or at least be trimmed in order to make ends meet. Look to things like shopping, golfing, massages, lattes, unused gym memberships, vacations, and eating out. In happier news, if income is going down, it’s quite possible your taxes will naturally go down, too, so that will at least help a little! This is also a time where it could be beneficial to finish off debts such as student loans or car loans to reduce your fixed expenses and help the math work.
  • In some ways, realize up front that you cannot keep up with two-income families. That being said, realize that they cannot keep up with you, either. What I mean is that if one spouse quits working in Family A, it’s possible that Family A’s financial trajectory and spending power may go down when compared to two-income Family B. However, when it comes to the percentage of the family’s time taken up by work, the flexibility of the family, and the amount of time on the weekends the spouses have to spend doing chores around the house, Family B may be a little jealous of single-income Family A. I’m certainly not saying one approach is better than the other. What I am saying is that from the onset, you need to realize there are often pros and cons that can make you different from other families you are close to.
  • Put it all out there with your spouse. Going from a two-income household to a one-income household temporarily or permanently is far more than a financial decision. Why are you doing this? Do both of you want this? What if it doesn’t work for the stay-at-home spouse emotionally? What if it ends up not working for the family financially? Do the household chores/responsibilities change? Should they? What will the stay-at-home spouse do for entertainment and social interaction in light of the loss of friendly co-workers? Will the new entertainment and social interactions add to the family expenses? Should they? These are deep questions, and only you and your spouse can hack through them. The hacking does need to be done, though, as I’ve seen some serious resentment and jealousy fester from the employed spouse vs. the non-employed spouse and vice versa.
  • Make sure the working spouse is properly insured. There are many careers where once you leave the working world, you become a little “stale” and lose some of your ability to become gainfully employed in the future. With this in mind, the breadwinner’s income stream usually becomes a little more valuable and, accordingly, needs a little more protection. I’d suggest you take a long, hard look at the employed spouse’s life insurance, short-term disability insurance, and long-term disability insurance. Don’t go crazy, just make sure you are adequately protecting the non-employed spouse’s financial well-being should the employed spouse become disabled or meet the proverbial fatal bread truck. If the stay-at-home spouse is providing a service such as looking after children that would still be needed if they were to become disabled or unexpectedly pass away, some additional insurance may also be needed on that spouse to protect the-income generating spouse's financial well-being!

Thank you to those of you who asked me about this topic. I’m always happy to help, but sometimes I can only help if you ask.