Ideas for Staying out of Debt 6 – Track your money

In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

If you often spend money and by the end of the month your asking yourself “what did I spend my money on?” then this is for you. You got to make sure that your tracking your Expenses vs. Income. When I first tried this I would often just give up for months at a time. It was hard to make sure I entered every transaction into GnuCash and one year I just completely stopped, since I was becoming lazy.

Here’s what you need to do in order to keep track of your money

  • record purchases as soon as you buy an item
  • keep all receipts until you enter them
  • if no receipt, then make note, for me I use my cell phone
  • sit down once a week to do all your bills
  • every so often reconcile with your bank’s online banking
  • make sure you plan for big purchases

The first three are all related, make sure that when you purchase even a meal that you sit down and record the purchases. I was/am horrible about this and I would often forget to and ended up forgetting what I even bough. Now I try my best to record it within a day or two.

You need to set a day aside each week to pay all your bills. This way you can open the checkbook once and be done. Plus you can start to get a better view of your finances. I know when I do that I end up thinking is it really worth the cost I paying.

This is one thing I do every couple of days. I just give my bank’s online banking a quick visit and ensure that nothing unusual is going on. I will also make sure that the purchases match up and wasn’t over charged.

Finally, make sure to plan for big purchases. Case in point I knew I’ld be building a computer and for three months I prepared for it. Now in my case I started to buy individual parts for it bits at a time, but I could have just the same saved back the money. Just a little bit here and their can go far. Often times a big purchase I want I spend a long time planning before I actually make the final decision to buy.

Ideas for Staying out of Debt 5 – Budgeting the Babylonian way

In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

For those of you that have read The Richest Men in Babylon you know which method I’m taking about. This method is mainly for those of you who are in debt, but I’ll show you my modification once out of debt. For those of you that have not read that book the method is devised as followed:
  • 10% you save right away from each paycheck. The point in this is to have extra money that is yours outright.
  • 20% you divide between all your creditors. You would take out a piece of paper and write all your creditors in it and divide the 20% to all of them, pro rated. Just as an example, if you owe $250 to Creditor A and $500 to Creditor B you may make $375 which means 20% is $75. You would pay Creditor A $25 and pay Creditor B $50.
  • 70% is to be used on your living expenses. All your bills are to come out of here. You cannot dip into the 10% or 20%. For some people this will be hard, especially if your making minimum wage. Yet it also means you have room to spare once you’ve trimmed your bills down to this level.

The part that I find interesting that other Personal Finance Blogs talks about is saving at least 10% for retirement. While in this book they said to save 10% to invest safely. To cover this problem, I believe once your debts are paid off you should put the 20% towards retirement, that way you have money in the bank and/or investments, no debt, and your bills are getting paid.

Ideas for Staying out of Debt 4 – Extra Income

In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

This is one area I can speak about from experience. When I first started my business I made less then $1,000 the first year. I had no ads, no car, and I wasn’t sure if I wanted to do it. My primary income at the time was helping out at the family business, a steel yard and a farm. Over time I got my business built up till last year my business out earned the family business and I haven’t looked back.

Now, if you are in debt right now the extra income from a side business or just working longer could be used to pay it down quicker. Or you could use it to build up your savings. This way you will have more income to work with. Think about it, your in risk of going into debt with your current job. By adding an extra $100-$300 a month of income could mean the difference between scraping by or ringing up debt.

For short term debt such as a personal or payday loan then selling items you no longer use on eBay could help. Just make sure you properly describe the object and take real pictures, the buyer would want to see what it really looks like. But for the long term debt you would be better off ether working more hours (if possible) or even starting a side business. I started my business on the side and eventually now it’s my only source of income, after about 3-4 years.

No matter what option you pick, make sure you actually use the extra money to pay down debt. Once you are debt free, then you can splurge a bit, or save it up. Just make sure if you don’t already have an Emergency Fund, to set that up with the extra income first. After all, you want to make sure a bad tire doesn’t wipe out the extra bit you just paid down.

Ideas for Staying out of Debt 3 – Don’t use credit

In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

First off, let me say that I am not talking about the people who are able to pay off credit cards in full. I am talking about such topics as car loans and store credit aka Buy Here, Pay Here.

Buy Here Pay Here

Example of Store credit, with Photo by Hugo90

When most people think about debt they associate it with numerous items, Credit Cards included along with various loans like car loans and student loans. I would like to believe in the idea that besides a house one can live life without debt. Yet the only way to have no debt is to never use credit and/or keep a balance. For many people I can understand this being hard. I myself simply didn’t have the cash when it came time to buy books, so I took out a loan, wishing now I never did.

What would it mean to not use credit? For me it would have been to not accept the loan. While to others it could mean delaying the purchase of a car. Yet to others it can mean even more things. But not using credit has an almost negative view in society. It is almost expected of you to go into debt at some point in your life. Yet who benefits from this? Almost any company offering loans/credits generate income from providing this service. Take most loans, your charged interest on the amount you pay, which is extra income to the business.

Had you used the advice in the previous post about savings you could have waited a few months and paid with money you had. Which while in savings it could have made you a little bit of interest, which to be fair is less then 1% for most banks at the moment. I’ve read numerous posts on other personal finance sites about this topic and if possible I say save up and pay with the money you have. if you follow the classic saying of not buying what you can’t afford, then you can’t get into debt.

On a side note, what do you the reader think this site should discuss. Also I hope to get a logo up by the end of the month and we’re on Facebook now.

Ideas for Staying out of Debt 2 – Make sure to save

In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

This is one issue i cannot stress how important it is. If you do not have money saved back at all ether as a buffer or as a separate account and disaster hits, how will you pay for it? But anyone who has read any other finance site should know this. Yet how many of us do this? I myself have been very bad at doing this, and the results are never good. But when money is in my account it is good. Take something recent that happened, my windows got broken. There was a bad storm and my back windshield and two side windows both were broken. At the time I had money to cover it and I could just write a check and pay for it. But had I not had any money in my account, it’s likely I’d still be driving around with broken windows.

So how should you save? This is really an opinion question. What works for one may not work for someone else. I’ve read about automating your savings and I even tried it, but for me being self-employed one month on the scheduled date there wasn’t enough and I haven’t used it since. But for someone on a regular job this would be an excellent way to start saving. You would start with say $5 or $10 a week and just slowly increase it till your at your comfort spot for where you want your savings to be. (Topic for another day)

Another way of savings which is what I do for taxes is every single time you get paid, save a percentage of that pay before you have a chance to spend it. Which for me has worked out great, come quarterly estimated tax payment times I’ll have no issue sending it in. But I only did this after realizing my flaws with not moving the money out. I would believe my business was doing good and blow it on stuff I didn’t need. Then when it came tax time (about now) I would freak out and be angry at myself for not putting the savings in a savings account.

While for some people, they may not need a savings account. I personally know people who will keep a buffer of a few thousands and this works out great for them. Just try out different approaches till you find the one that works. I know before automated savings were popular some would make their own “payment slips” which would be a deposit slip with the amount already written and would mail it to their bank like it was a bill. Which I tried that method and it worked out good for a targeted savings goal. Once you find what works for you, just stick with it, do not one month forget about it and say oh, I can make it up. If anyone is like me, they never will make it up.

Ideas for Staying out of Debt 1 – Don’t buy unneeded items & services

In Ideas for Staying out of Debt I plan to cover my ideas/plans on how to stay out of debt.

As the title states, do not buy items and services you don’t need. I myself have an issue with this as a consumer. It’s just so easy to spend money on items you think you will use/need. Take electronics for example, I’ve spent countless dollars on items and after a few weeks, I no longer use it. I’m sure you the reader knows of a few items you’ve over spent on. And I myself find it way to tempting to spurge on new(er) items. Electronics are a big one for me as I do Computer Repair and will go overboard.

Same for services also, although you can expand this more by getting your money’s worth. The classic example is insurance, but this topic has been discussed to death in many other blogs. Instead focus on other aspects such as how can I reduce the cost of needed repairs which The Simple Dollar did a post on this recently. I have to agree on trying to reduce the cost myself. Just recently the back lights on my Ford Explorer went out and while several people in my family would just go to a shop , I just went to Advaced Auto and paid $4 for the bulbs. After about three tries I got the bulb replaced.

In the end what it comes down to is are you getting your money’s worth and time’s worth. I used to play the GameCube when I was younger and I got my money’s worth for less then a fraction of a penny per hour for all the hours I would play, along with only getting games at the $20 or less mark. While for services I have no issue paying for an oil change as I know nothing about how and I can walk to work so I’m out no time.

feel free to drop a comment on what you have gotten your money’s worth out of or what tasks you would pay others for.