Decade
Bring on the New Year
So far I haven’t written any resolutions or decided on any new goals for the new year. Instead I want to spend the last day of the decade focused on all of the wonderful things that have happened over the last ten years. While I experienced my fair share of bumps in the road the last ten years also provided many wonderful moments and blessings for me. Before I look to the future I plan to take a moment to step back, reflect and count my blessings. There are so many amazing moments that I’m not sure I can remember them all.
Happy New Year!
Our Journey To Debt Freedom: Cresting The Hill
The climb to debt freedom is just about complete in the Frugal household, and soon we’ll be enjoying the thrill of living free of the burdens of debt. While I recognize that roller coasters are an overused metaphor for life’s ups and downs, I can’t think of any other feeling to compare to almost being debt free. If you’ve ever ridden a tall coaster you already know what I’m referring to.
Photo courtesy of Hey Paul
It is that feeling you get just before your car has crested the top of the roller coaster’s tallest hill. When everything opens up in front of you. When the long, anxiety-filled climb is almost behind you. It’s an exciting time, and oddly enough that euphoric feeling in the pit of your stomach is nearly identical to the one you feel just before sending in your final debt payment.
By the end of November, we will have crested that hill. A hill that has taken us over two years of blood, sweat and tears (well, at least a lot of sweat and tears) to climb. And as the landscape opens up in front of us, our only regret is that we didn’t get on the roller coaster sooner. We wasted nearly a decade when it came to finances. Yes, we accumulated some debt, but we committed no real financial sins. We just didn’t buckle down like we should have.
I’m not going to rehash how we wound up in debt, or the financial mistakes of the past, because I don’t want to miss the view from the top by looking back the entire ride. The point is, we are where we are, and how we got here has been important in shaping our personal finance belief system going forward.
That’s part of living with no regrets. You accept the mistakes you’ve made along the way as learning opportunities, and keep moving forward. So much of our lives is wasted rehashing over and over again the mistakes of the past, rather than living in the present, and planning for the future. Well, a couple years ago we decided enough was enough. We were sick of being in debt, and we wanted out. So we finally got busy making changes and stopped making excuses.
We developed a plan to boost my income. After dabbling in a number of part time job opportunities, and even resorting to mowing lawns on the weekends, I decided to try my hand at writing. Of the few people I shared this idea with, only my wife and my mom didn’t laugh out loud in response. They knew my passion for writing, and believed in me. One of the things I’m proudest of was that Frugal Dad did become a relative success before my mom passed away, so she was able to know that my perseverance paid off. I only wished she had lived to see us cresting the hill.
Getting the blog off the ground wasn’t easy. I had a $0 marketing budget, very little experience in the online world, and no friends or contacts in the field. I started with a brand new domain name, FrugalDad.com, rather than buying an established name with page rank and traffic. I bought a $5 theme, and had one of my new blogging buddies work up a logo (he’s gone on to become very successful at logo/graphics work for other bloggers. Check out his work at LogosforWebsites.com).
For the first year all I did was write an article every single day and comment on as many other blogs as possible. Some nights I stayed awake well past midnight writing the next day’s blog. Other days I woke up at 4:30am to answer emails, comment on other blogs, and try to network with others. It was an all-out guerrilla marketing assault! My plan was simply to out-hustle everyone else, both with my blog and at my full-time job – the two fastest ways I could increase my income short of selling my own plasma (believe me, I considered it).
In addition to boosting our income, we had to get control of the other side of our personal balance sheet. Our expenses were out of control. At the time we had two car payments, a small pile of credit card debt, student loans, and even medical debt left over from the birth of my daughter. We took vacations when we couldn’t afford them. We shopped when we didn’t have money. We were basically living paycheck to paycheck.
We decided to draw a line in the sand. No more increases to the monthly budget. If we signed up for a new membership, we’d have to cancel another one (or two) to offset the new expense. We started clipping coupons, and actually thinking about ways to save money on groceries. We stopped going to movies, and started using our previously underutilized Netflix account. I sold my beloved Chevy Silverado and drove a 19 year-old van. We basically committed ourselves to a frugal lifestyle at a time when living frugal was not yet very popular.
The result of all this hard work? We now find ourselves less than a month from being debt free. My wife and I have a new motto: “Never again.” Never again will we go back to owing money. Never again will we limit our opportunities, and our choices, by being servants to a lender. Never again will we be at the mercy of bankers’ whose whims exerted control over our lives with FICO threats, interest rate spikes and ridiculous practices such as universal default. We plan to make ourselves immune from such policies in the future.
Our hands are in the air. Our eyes are open wide. This is going to be a fun ride!
Post by Frugal Dad
Thursday Night Link Love
A couple of posts I found particularly interesting this week:
- I’m Sorry, But You’ve Got to Stop Apologizing
- How To Be Married A Decade And Stay Madly In Love
- Sharing Space with Your Spouse
- Cheap Passport Pictures (Part Two): Online Ordering
- When More is Less
- 11 Great Digital Tools for Home Life
- Earning What You Have: The Mindset I Hope I Never Lose
- Knowing When to Walk Away: Financial Planning for an Unknown Ending
- The Lazy Way to Stay in Love
- 5 Ways Spending More is Actually Frugal
- Money is More About Mind Than It Is About Math
- 10 Myths About Employee Incentive Programs
- Man Goes Into Business Delivering Costco To Overpriced NYC Neighborhoods
The 11 Year-Old Pay Stub
Today I’m beginning the slow process of returning to a normal schedule. I do have plenty to say, it’s sitting down at the keyboard that’s the hard part. Thanks to all the condolences passed along from readers and fellow bloggers – really meant a lot to our family.
Those who have lost a loved one know the various phases of grieving we tend to go through. I’m still in the “numb” stage that seemed to last up to and immediately following the Memorial Service last Friday. Now I’m feeling a deep sadness, and am really missing my mom. I talked to or saw her every single day for 32 years.
While the feelings of losing Mom a week ago are still raw, I know she would be telling me to buckle down and get busy. I wish more of her tenacity rubbed off on me!
Over the weekend I had nervous energy and decided to grab a few crates down from the attic, and out of the garage, to look for opportunities to de-clutter. While looking through old pictures and documents I found something interesting – a pay stub dated June 1998. The hourly rate: $5.50.
That doesn’t tell the whole story. I only had 21 hours that pay period, and about 20 hours from my other part-time job. I was newly married, and without benefits, because neither part-time job would hire me full-time. My wife relocated to marry me, so she was unemployed for the first few months we were married.
When I did finally land a job earning $18,700 a year with benefits we thought we were rich. My wife was working for $6.00 an hour in a medical office. Combined, we didn’t earn $30,000 a year, but we lived like we earned $60,000.
Fast forward a decade. Now the situation is reversed. We are making a conscious effort to live on much less than we earn. Instead of living like we earn twice as much, soon we’ll be living on half of my income alone. What’s different? Our priorities.
Back then we got caught in the trap of keeping up with the Jones, and the media, and even what we thought to be an ideal lifestyle. I spent money to impress the new in-laws, to “provide” for our first child, and to buy a “safe” vehicle since I was now a family man.
Looking back, spending money didn’t impress my in-laws, it only made me look pretentious. And $100 toys meant nothing to my baby daughter, but a little floor time in the evenings helping her learn to crawl, watching her giggle and coo meant the world to her.
Hindsight really is 20/20. There are no such things as a financial mulligan, so I try not to spend too much time obsessing over the mistakes I made in my 20’s. Instead, I admit my mistakes, promise to never repeat them, and look to the future with optimism. And there is much to be excited about.
By the end of this year my wife and I will be debt free for the first time in our marriage. We are already car debt free, another first-time achievement as a couple. We’re also planning to have our fully-funded emergency fund in place by Christmas.
For years I’ve closed my eyes and day dreamed about how it must feel not to owe anyone a dime. How it must feel to know several thousand dollars are in the bank ready to handle your next emergency. How it must feel to budget your next paycheck and have money left after paying bills.
Dave Ramsey describes this feeling as “financial peace,” and I think that is a great description. It will definitely be a weight lifted off my spirit. For too long I toiled at bad jobs, worked through vacations, and put up with more crap than I should have because I had debt. Never again.
I sure am glad I saved that pay stub. It reminded me of all I have to be thankful for today, and how far we’ve come. Instead of being stashed away in the attic it now has a permanent spot on my bulletin board, serving as a reminder of the turnaround that’s possible when you really put your mind to it.
Post by Frugal Dad
Credit Card Overlimit Fees Taking a Hike?
When I worked in a credit card customer service call center a decade ago I bet I took a dozen calls a day related to overlimit fees being charged to cardholders’ accounts. I was of course trained to toe the company line, explaining that fees were well documented in our terms and disclosures, and by using the card customers agreed to those terms. Inside I always felt a little dirty.
Ultimately, I decided to leave the industry altogether for a variety of reasons, not just because the companies I represented charged fees. But one that always got me was the overlimit fee. To me, overlimit fees were an interesting example of human behavior mixed with strange business practices.
On the surface, you would think a $39 fee would be enough of a deterrent to keep people from charging above their credit line. Unfortunately, that is not the case, but it is not the whole story either. Credit card companies are nice enough to include an “authorization pad” (usually a few hundred dollars) so charges in excess of your available credit may be approved by merchants. Nice service, huh?
It would be a nice service if they didn’t follow up their generosity with an overlimit fee. Theoretically, a $10 purchase that barely puts you over the credit limit could cost you $49 thanks to the additional fee.
Why don’t credit cards decline transactions in excess of the available credit? Their answer (spin) is usually something like, “We are saving customers the embarrassment of being declined.” Gee thanks. And what a bargain! The real truth is they allow the charge to go through so they can charge overlimit fees.
That practice may not be happening for long though. As this Consumerist post points out, Amex and Discover have already ditched overlimit fees. Before you feel too sorry for Amex or Discover (yeah right), realize that this loss of income will be made up elsewhere - probably by reducing reward program benefits, and increasing rates.
This move to get rid of overlimit fees can be credited mostly to the CARD Act passed in the spring. When enacted, the CARD Act will require issuers to “opt in” to the feature of being able to exceed their credit limit, and be subject to a fee. That involves a lot of maintenance to cardholders’ accounts, so Amex and Discover decided it wasn’t worth the hassle. I’d expect other issuers to follow suit, except the subprime credit card issuers who would tack on a fee for being charged a fee if they could.
Any worries over credit card overlimit fees can be ignored if you simply decide not to spend on a credit card, particularly one that is nearing its credit limit. Charging in excess of your credit limit is the financial equivalent of spending more than is available in your checking account, and both actions may result in nasty fees.
Post from: Frugal Dad
Weekly Roundup: Car Payment Almost Gone Edition
My wife and I are closing in on a status we have never achieved during our married life together - without car payment. Just a couple months after we married I leased an SUV. The lease represented one of the dumbest finance moves I’ve ever made, and has haunted us, financially, for a decade.
When the lease was up I refinanced the balance into a traditional loan, and before that loan was up I traded in the SUV and financed our current vehicle. We are now within one month of saying goodbye to car payments - forever. We plan to continue to pay our car payment to ourselves by depositing the same $310.00 we’ve been paying for our curerent vehicle into an online savings account. In a few years we’ll use what’s in savings to buy a new (used) family car and I’ll drive the old one back and forth to work. We will continue this pattern for the rest of our driving lifetimes.
The Fab Five
Early Retirement or Meaningful Work? Thought-provoking post which asks, would you rather “retire” early or continue meaningful work? To me, the question is asking, would you rather hang up your current job to spend your remaining time in an endeavor that is meaningful to you. Which begs the follow up question, why aren’t we already doing meaningful work? Like I said, very thought-provoking. (@ Brip Blap)
Your Real Wage. Do you know your real wage? No, not your hourly wage…your real wage? I’m referring to the amount you are paid after taxes, commuting costs, employment costs, child care, etc. Read on to figure out your real wage. (@ Hundred Goals)
Five Ways to Make Laundry Day Easier. My wife recently had to tend to an ill family member, leaving me alone for a couple days with the kids. I typically help with laundry duties, but rarely do I take the lead. I was reminded why I dislike it so much over those couple days. The tips in this article remove much of the stress (and expense) from laundry days. (@ On Simplicity)
Recoup Your Lost Savings. The last time I looked at my retirement account statements I was closing in on being down 40% from the highs of last summer. Thanks to a slight rebound, I’m hoping the most recent quarterly statements will look a little better. Kiplinger has put together a helpful calculator to figure out how long it will take to get back to those high balances again. I’m still depressed. (@ Kiplinger.com)
How to Live Well on Less in Retirement. This post goes along with the theme of my favorite personal finance book, Your Money or Your Life, which emphasizes the point that you don’t need to be a multi-millionaire to enjoy a comfortable retirement. By making sacrifices early on, and living frugally both before and during “retirement,” you can live on less than you might think. (@ Get Rich Slowly)
The Best of the Rest
- 6 Job Search Tips for New College Grads
- An Amex Credit Card Bill You Won’t Believe
- 5 Practical Steps for Generating New Ideas and Insights
- New Debit Card for Teens and Parents - The Discover Current Card
- When How You Spend Determines How Much You Spend
- Cheap Summer Activities
- Four questions to help redirect your life plan toward your dream
- Save Money By Turning Off Your Television
- I Am An Investor
- Investment Strategies I - Passive Investing
Site of the Week
Early Extreme Retirement. I was planning to include this site in the roundup itself, but I found so many interesting posts I decided to just link to the entire blog here. Any time I feel like I am sacrificing too much I go read a post at Jacob’s blog about how he became financially independent and I quit feeling sorry for myself. This guy has made some incredible sacrifices, and I like that his ideas are outside of the normal personal finance advice box.
Post from: Frugal Dad
Financial Impact Of Having Kids Early
When my wife and I had our first child we made the decision she would stay home with her until school age, and then possibly rejoin the workforce. We were young parents, and had only been married about a year when we found out my wife was expecting.
Of course we were elated to be starting a family together, but I couldn’t help but worry a little. At the time I was working an entry-level job and floundering a bit when it came to finishing my degree. Around the same time we had two sets of friends who recently had their first child. In fact, our kids were around the same age and as both moms became friends through various “mothers of preschoolers” (MOPS) events at our church, so did our kids. But there was one big difference in both cases - the couples were about ten years older than us.
Both sets of friends had completed college degrees, and enjoyed nearly a decade of career success. With no kids during that time they also managed to build some serious wealth. They drove new vehicles, lived in a huge (compared to ours) house, and their kids wore handmade dresses and such from the trendiest shops in town. Unfortunately, we made the mistake of trying to keep up appearances with these friends, probably because we were a little insecure about our own finances, even though our situations were entirely different.
The first mistake I made was leasing a new SUV because we just had to have a bigger vehicle with a baby. And of course, leasing made sense to the younger me because I could simply turn it in a couple years and get another one. Of course, now I realize this method of “renting” something to drive is not a wise financial move in most cases.
We also made the mistake of charging a bunch of junk on credit cards when my wife quit work because we did not gear down spending once we were living on one income. From talking with other couples in similar circumstances, I understand this is a common problem. But unfortunately that didn’t make it any easier to swallow when the bills came due.
I share these mistakes in the hopes that other young couples don’t repeat them. And by mistakes, I’m not referring to having children while still young. I am referring to falling into the financial trap of keeping up with older couples who chose to build a more secure financial foundation before having kids. That method probably makes the most sense from a financial perspective, but there are many other factors to consider when having children. And I would argue finances, though important, is not the top consideration, despite what others wondering if they should pay off debt before having kids might think.
Make no mistake; the decision to start a family has a significant impact on your finances. However, it is the decisions we make that ultimately lead to success or failure. In our case, it was the poor financial decisions we made early on that caused trouble, not the fact we had kids. We could have easily made those screw-ups when it was just the two of us!
Having kids magnified those issues because it intensified the pressure I felt to provide a solid foundation for my wife and kids. In hindsight, it probably would have made sense to wait a few years to finish my degree, work my way up the corporate ladder (in other words, beyond the first rung), pay off our debts and build some savings. But, I wouldn’t have it any other way!
Post from: Frugal Dad
