Thursday, November 13, 2008

Credit Cards

Credit card debt is a national problem. Most Americans carry a large amount of debt courtesy of the credit card. One report from the Federal Reserve shows that Americans are overwhelmed by more than $900 BILLION worth of credit card debt. A number which is increasing at an alarming rate. Back in 2007 we had less than half as much credit card debt.

Debt Snowball Dave Ramsey style

Right now I am reading Dave Ramsey’s book, “The Total Money Makeover”, a great book for any budding frugal wannabe. An excerpt from his book states that credit card debt is the #2 most owed debt behind medical bills. He recommends you pay off this debt as quickly as possible in order to save that money or invest in money making ideas. Using the debt snowball idea, to payoff all yours debts and become debt free in time. Or as FrugalDad puts it "The main idea behind the debt snowball is paying only the minimum payments on ALL of your debts, and throwing any additional money at the smallest debt.”

Goals and dreams

Currently I am trying to pay off my debt so I can reinvest the money elsewhere, mainly in real estate such as land. I have a goal in life to own 500 acres of land. Where I live that should not be a problem as long as the economy picks up soon, otherwise I might be hoarding my money hoping and praying that we don’t go through “Great Depression 2”.

The B word….Budgets!

A good budget should be a way of life for anyone wanting to become a frugal master. For me I have a budget setup to aggressively pay off my credit card. After that, an emergency fund will be created, another Dave Ramsey idea, and 3-6 months worth of expenses. I will cut up my credit card and never go back. I know credit cards provide convenience and a safety net. But once you have savings set aside to purchase what ever you want. There really is no need for a card. The frugal way to approach life is to save for what you want and pay cash for that item. I was always raised to believe this fact, and it is true if you stop and think about it.

Back before the credit “glory days” if you will, people always saved money and bought what they wanted. It was just a way of life, why go into debt when you can save a few months and get what you want without the stress of having to pay monthly notes on it, and in turn paying twice as much or more than the original cost of the item. I read a lot of blogs on finance and most preach the same thing. Pay off debt and buy what you want with CASH. It’s a simple and easy technique, one of which we have all lost touch with.

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Tuesday, November 11, 2008

Latte Effect

Photo courtesy of Jamey Cassell

The Latte effect as its called, is a problem we face in America if you are trying to live the frugal lifestyle. I know there are lots of writers who harp about this idea constantly. So let me throw my 2 cents in on this topic. I love coffee just as much as anyone else; I always say it’s my morning cup or 4 of personality. For me I like my coffee a little stronger than the normal person, I add 2 heaping scoops for 4 cups of coffee. But, if your like my frugal parents, they add 1 heaping scoop for an entire pot of coffee. It comes out looking like weak tea.

My problem is those who spend $5 a day on a latte or espresso, found at your favorite coffee house. Why is my question? When for $6 you can buy a 3lb can of your favorite name brand coffee at your local grocery store. It will last you up to a month and a half depending on how much you drink. Or to put it into numbers:

$5 latte per day x 5 times a week = $25 a week x 6 weeks = $150
$6 can of coffee, last 1 ½ months

This comes to a savings of $144 over a 6 week period. The expensive coffee really adds up if you put it to the numbers.

For me the budding semi frugal guy, I will stick with the cheap coffee and avoid the expensive lattes. I know there are a lot of people out there who can't give up their morning "fix" of latte, but for those who are trying, I hope this post helps open your eyes to how much you spend on your morning cup of joe!

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Monday, November 10, 2008

Semi Frugal Guy the Early Years, part 1

My frugal spending habits started out early in life, well sort of. As I mentioned in my second posting, my parents were very frugal in life and still are to this day. A few weeks ago I took my Mom and Dad to the cell phone store to upgrade their cell phone; it’s a model from the early years of this century. I am surprised it still works actually. We talked with sales representative about a new phone; it was going to cost him around $40 to get a new phone. Well that was way too much for a new phone, so he kept the old phone and will just wait for it to die before getting a new phone. So you can see by this example that frugality runs deep in my family. This is just one example of many I could share with you about my parents and how they saved.

Military Life

I have mentioned before that I am a budding frugal guy; I am trying to gain my frugal wings. A little background on me and how I got to this point in life, I first left home when I was 18 like most young men eager to spread my wings and fly. I joined the US Navy and shipped off to boot camp Nov 9, 1992. I will not go into the details of boot camp ask any veteran and they will tell you about the experience. Most are happy to share their experiences with you. After boot camp I was stationed on board the USS Abraham Lincoln (CVN 72) for 4 years of my life. My first real taste of money came while serving. After my first 6 month deployment to the Persian Gulf, I had accumulated a hefty sum of money or at least it was too me. My friends had saved just as much as I and we were not too frugal at this point. We spent our money on camping and hiking and other toys that was not too frugal. This frugal lifestyle I am learning about now was not to prevalent back then. I was just excited to have money and spend it the way I wanted too. There were many nights spent on hotels and partying with my friends. Eventually this got old and I did save some money toward the end of my enlistment. I saved a fairly large sum of money for college in the last year of my enlistment in the Navy.

On the trip home my car broke down and the money I set aside for college, well a good chunk of it went to fix my Mustang. My car had never broken down in all the years I had it. My car started smoking and shaking on the interstate. People were honking at me telling me to pull over. I drove her to a side parking and lot and called a tow truck. Come to find out I had blown a gasket. It cost me over $700 to fix my car. This was a huge blow to the money I had saved and planned for my life.

The College Years

My lifestyle in the early years was spent as a typical party guy type. Later on in future postings you will see this has caught up to me and I am no longer that way. Some would say I am the direct opposite of that lifestyle. Ok back to the story, in my early years of college I had many friends and we all wanted to do the same thing, party and have a good time. Lots of money was spent on beer and food, but we had a great time doing it. We had many parties and lots of fun for the years I spent there. Once again I will not go into detail on the parties and what went on, for fear of incriminating myself and others. Needless to say we had a great time each and everyday.

After College

After college I graduation the real world came a knocking. I got a job close to home with a world renowned children’s hospital, I worked in information technology during the boom years when employers hired high school kids too fill needed positions. The money was great and my life was off and running, the party lifestyle went on. There were trips to Vegas, and the 99 World Series among others. Saving money was not a priority of mine at the time, having fun was. And I was very good at it. Till it all came to a crashing halt when I got laid off from my well paying job, I spent over 2 1/2 years with this company one of the best jobs I ever had. My whole world came to an end as I knew it. The frugal lifestyle started there. This is the first posting in the series of once a week "About Me" postings. Next time we will get into more detail on how I started my frugal life.

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