Humpback Whale, Hawaii, Debt Reduction

Reduce Your Debt. Get Started Now!!

Hawaii, Vacation, Debt Reduction
Hawaii, 2010

What Are You Waiting For? Grab the Future You Deserve!!

In today’s day and age debt reduction is something on all of our minds. If you are anything like me, you have found yourself in either too much debt at one time or another. Perhaps simply regret obtaining the debt in the first place. Regardless the reason, there are several things we can do in order to start getting ourselves out of debt today.  One of the easiest ways is simply keeping track of your bills, along with the due dates.  In yesterday’s post, Credit Problems? I provided a Budget Tracker.  Start there. The main reason you should keep track of due dates is because the average American spends hundreds a year in late fees. Money, which could be going toward paying down your debt.

Our Story: The Financial Diet

I recall many years ago when Ron and I were living in Hawaii. Somehow we managed to get ourselves thousands of dollars in debt. The most astonishing part about it, is the fact that we both had high paying jobs. To any normal individual there would be no reason for us to have any kind of debt, let alone a very sizable debt.  Getting there is easier than you think.  A couple of nice car payments, two credit cards and a bad habit of eating out and bam, recipe for disaster. At this point it doesn’t matter if you are bringing in $2,000 or $10,000 a month. After taxes, retirement and bill paying, the bank account is still going to be tapped.

We have all been conditioned to live outside our means, which is what all this freely given credit is about, we simply got another credit card. Or, as we did, purchased furniture with a two-year same as cash clause. Sure, we paid it off, but at the expense of our other bills.  That is money we could have, and should have used to pay our debt.  BUT we could pay all the bills. That was the problem. We hadn’t actually defaulted on any payments. We had more than enough money coming in. Or so we thought.

Being stationed in Hawaii with the Army is a three-year gig. We new it would end eventually.  Before I tell you how we fixed it, let me tell you the financial implications. Because we lived in an area with a very high cost of living, we both received a cost of living allowance. I’m guest-a-mating, but I would say it added about $3,500 onto our monthly pay.

Reality Has a Way of Catching Up With You

About halfway through our time in Hawaii we sobered up and realized we needed to make some severe and immediate changes.  After all, when we came back to the mainland that $3,500 would vanish. We knew three thing to be true. One, there was no telling when or what type of job I would get when we moved. Two, we wanted to buy a house. And lastly, we certainly were going to lose about 33% of our current income.

In that moment I coined the term, Financial Diet. For a couple of spoiled brats this was rough. Not to mention we are each other’s worse enemy. If it makes the other happy, we will go along with it regardless of the implication.  I tell you all of that because I want you to know that I know what you are going through. Reading some random post online that tells you to stop getting Starbucks every day, is easier said than done. I know. We did it. But to be honest, looking back all I see is the thousands and thousands of dollars we wasted.

Pay Your Debt Now!

Don’t Delay Even One More Day

I found a great site called Becoming a Minimalist. The site itself list 33 ways you can start paying off your debt.  I’m going to tell you a few personally hard, but easy ways Ron and I used in order to get you started on your journey. We started with number two, drop cable services. In Hawaii the only thing available was satellite TV.  Due to the whether it was always out. No brainer, it was gone. Hundred bucks back in our pocket.

Lesson 1: Buy on Sale

I am a master at number seven, buy on sale.  I HATE paying full price for anything. Reject the impulse to buy something on the spot. Give it a week or two and it is sure to be on sale.

Lesson 2: Use Wal-Mart Gas Card to Save Money

Number eight was not available when we were in Hawaii on the Finance Diet, but we use it today.  Both our cars guzzle gas. Wal-Mart offers a gas card. The great thing is, this is NOT a credit card. You simply add as much money as you like. Instead of swiping your debit/credit card you swipe the gas card. By using the Wal-Mart card you save .03 cents per gallon. Doesn’t sound like a lot, but over time it adds up. The real question is, why would you pay more than you have too?

Lesson 3: Cancel ANYTHING That is Not a Bona Fide Need

Number nine, cancel anything that is a want instead of a need. This is an absolute must for two reasons. First, if it’s not a need, it’s money that can be put toward reducing your debt. Second, if any of the “wants” are being paid with credit, you are digging yourself into a hole. That $40 manicure after interest will likely be a $60 or more manicure by the time it’s paid off.

Lesson 4: Make Your Own Coffee

Lucky number 27, make your own coffee. This was by far the hardest one for us.  We were so methodical about it. It’s like we stopped at Starbucks automatically without even talking about it. It was a given, going out for the day? Why yes, I will take some Starbucks.  At roughly $12 a pop, even basic math will tell you it saved us hundreds a month. But I’m a math geek, so I’m going to show you anyway.

$12 dy. X 30 days (average) = $360 per month X 12 mo = $4,320 annually

Because I only speak in finance terms, I’m crying a little just typing it. No matter what your daily habit is, maybe its energy drinks. It doesn’t matter. Start small. You don’t have to quit cold turkey. Reduce the amount initially, then go from there. Put that money toward paying down your debt.  If saving more money is your goal, put it in the bank for a rainy day.

Lesson 5: Make Your Own Lunch

Good old number 28. Pack your own lunch. I have always been good at this. I’m extremely picky about what I eat at lunch because I have a gluten sensitivity. Therefore I pack my lunch. Ron. Not so much. He made huge strides though and it saved us a lot.  Sure, there were some setbacks but every day he wasn’t eating out was money in our pocket. As you have likely already discovered we were bleeding money. I don’t think a tourniquet could have helped. Personally I used 29, eat left overs, just for this purpose.  We are both great cooks, so we simply made more than we could eat.

Lesson 6: Program Your Thermostat

At the time we were on our Financial Diet we lived in post housing on Schofield Barracks.  My point here is that we didn’t pay the electricity bill. However number 31, program your thermostat, is something we live by today.  Our thermostat is set to get really cool at night, which I love. Depending on the time of year, if we are on vacation we may turn the system all the way off.  During the day when we are at work, the thermostat goes up about four degrees.  I don’t know exactly how much this saves us, but I know it does.

It Doesn’t Matter How You Start, Only that You Do

Regardless of how you get started, just start. Doesn’t matter if you can only scrap together an extra $5. Just do it.  That is $5 more than last month and $5 less you will be paying interest on next month.  That is the key. It doesn’t matter how little it seems. When you pay down your debt you pay less interest. In return that saves you money.

Here is a graph that in simple terms shows you the advantage of paying extra.  For the fun of it because I’m all math geeky I will finish out the payments in order to illustrate how long it will take to pay off $500. I do also want to say this. If a credit card is only $500, the minimum payment would be more like $20. Regardless, this will show how much faster you can pay something off by paying even a small amount extra each month.  

The link to the spreadsheet is too small. Check it out on  Pinterest!

There is Always Fine Print

Keep in mind that in order for this to work, you have to not charge on the card. If you do, you are shooting yourself in the foot.  Second, I used a minimum of $50 for the payment. Because a $20 minimum is more realistic, paying the minimum would be more like a 3 year event. Again, as long as no additional charges were made.

Forget What Other Think. What Do You Want?

Volvo S40, T4, High DebtThe most important thing to do when trying to reduce debt, forget about what others think. I went from a fully loaded Volvo S40 T5 to Honda Sport (no leather, no options). I had a goal. We achieved it. Reducing the car payment freed up money we put toward other bills.

I have given one example for paying off a debt. However, if you have more than one, you need to take the money from that payments and apply it to another bill. So on and so on until all your debt is paid off.

I am happy to report that Ron and I were able to get our act together and pay down our debt while saving money for our house.  When we moved to Texas we purchased the house we live in. Luckily we paid off our debt. By the time we moved in 2013 the DoD had a hiring freeze and going through sequestration (furlough). I wasn’t able to get back in the system for a year and a half.  Had we still had all that debt following us, we may have been looking at bankruptcy.

It just goes to show that it’s never too late. There is no amount to small. I’m a bit of a tight wad. I still cut coupons, save money on gas, rarely go to Starbucks and buy everything on sale. Don’t let the car fool you, this girl is tight-fisted when it comes to money. In fact, that is what made me want to write about finances. We work hard for our money, so let’s get the most out of it.

The last though I want to leave you with is this.  People always want to get rich. No ONE, and I mean no one gets rich spending every dime they make to impress their friends. Make your money work for you.

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