Is My Debt Payoff Too Aggressive? + Debt Snowball Progress for August 2015

Slaying my credit card debt is one of my top goals. I plan to be well done before my 30th birthday. What a great gift, right?

I discussed this with a friend as we were kayaking, and he thought that was a great goal. Then he told me that he had discussed maxing out his Roth IRA contribution with his girlfriend and encouraged her to do the same this year. Apparently, his girlfriend’s parents offer a matching contribution.

“Must be nice,” I thought.

I wish my parents were in a position of wealth and power to offer those types of incentives for me and my brothers. It made me think about the legacy I want to leave and why it’s important to stop paying for past mistakes (credit card debt) as soon as possible, so I can start investing more money for the future.

During my mid-year checkup with my financial planner, he grew concerned at my aggressive debt payoff strategy. I’m paying $350 more than the minimum on those cards. He’d prefer that I shuffle over more money into the Roth IRA. Who knows how long the government will keep that option available?

I definitely here what he’s saying. Plus, I’m starting to feel the pinch. Medical bills are rolling in from my surgery 10 weeks ago, and it seems as if my car, Penny, is guzzling up a good amount of gas. My small pot of discretionary income seems to be shrinking mightily, so I’ve started taking out a weekly allowance in cash to live on. Living on cash again is an eye-opener!

But I remain steadfast in my resolve because it will only take four months to get rid of Credit Card No. 2. Then just another 6 months or so to get rid of the third and final card.

I’ve started to say money affirmations daily to keep my spirits up and stay in a mindset of abundance—not lack. Things are going to turn around. I’m upward bound! (Oh, that rhymed!)

The Day a Non-Saving Bank Teller Reaffirmed My Financial Plan

Did you ever have an overweight and out-of-shape PE teacher? I did. And it always confounded me. I thought, “Shouldn’t he practice what he preaches?”

I had similar thoughts Friday at my big bank, at which I keep my main checking account. I misplaced my debit card last weekend, so I went in to get a temporary card while the other one headed to my mailbox.

Justine helped me out.

She asked if I had a financial advisor. Bank of America’s partnership with Merrill Edge allows me a free, short session with an advisor.

I told Justine that I, indeed, have a financial advisor. I’m actually going to see my him in a few days. I’m excited to talk about my progress so far and look toward the future.

While further reviewing my account, Justine said, “Miss Wise, I noticed you don’t have a savings account with us.”

“Yeah, I know,” I replied. “In order for me to save, I have to keep my checking and savings completely separate.”

I told her that I save at another bank. Two actually—one at a credit union; the other, online. Without the separate savings account, I would constantly be transferring money into the checking account and never keep a dime.

She said she understood.

“I try to be a saver, but I have too many bills,” she said, “They just keep coming.”

A red flag went up in my head. I thought, ‘But you work at a bank! You work with money ALL THE TIME!’

If anyone could be saving, I thought it would be her. Of course, I don’t know the ins and outs of her life. I know sometimes bills seem to come at you in quick succession.

Our conversation reaffirmed these actions I’ve taken along my journey to financial enlightenment:

1. Save for “unexpected” bills. Maybe Justine didn’t see some of her bills coming. But that’s the main reason we should have savings. Car repairs, medical bills and that annual AAA renewal aren’t really unexpected. At the beginning of the year, I decided to save for those annual expenses such as the AAA card so they wouldn’t seem to pop up out of the blue. One day, I want to have enough to cover the medical deductible and major car repairs, too. I’d keep a large amount in an interest-bearing account.
2. Keep the savings account separate from the checking account. It takes much more effort to actually dip into those savings if it’s at another bank. You’ll either have to drive to a separate brick-and-mortar bank or wait 2-4 days for the transfer from an online bank.
3. Make savings automatic. Having my savings automatically withdrawn from my paycheck into a separate bank doesn’t even allow me to factor that money into bill money or discretionary money. If I had to decide every two weeks whether to save or not, then I would also make a poor decision—to spend the money.
4. Reduce monthly bills whenever possible. Whether it’s lowering your phone bill or cutting off the cable, do what you gotta do to keep the overhead low. Then put the difference in savings.
5. Get advice when you need it. When something’s wrong with your car, you see a mechanic, right? I might take Justine on the Merrill Edge offer just for a tune-up. Although I have a financial advisor, I like hearing different perspectives.

I left the big bank happy about my current situation. I not where I want to be, but I’m making good money decisions and I’m working my plan. Yay for progress!

Debt Snowball Progress for July 2015

The snowball is getting bigger! This month, I rolled over the payment from Credit Cart No.1 into Credit Card No. 2. I also added a bit more to the amount each month so that I’m not paying a small bill in December.

It was so odd and disheartening to see such a large amount of money go to one creditor. I’m excited for the day when that money will come to me and no one else. Those dollars will go toward retirement, other investments, savings or big purchases I’ve longed to make.

I can’t even remember what I purchased with the credit card. Isn’t that a shame! Whatever I bought probably wasn’t worth the aggravation it’s giving me now. I’ll remember this feeling so I won’t go into more credit card debt when I break free. By this time next year, I will be free. God-willing, I WILL BE FREE.

How to Spend Guilt-Free While Not Living Debt-Free (Yet)

I subscribe to the EZ Bugdet or Anti-Budget from Dave Weliver’s MoneyUnder30.com. (I love that site. Don’t you?)

This spending plan is pretty simple. Dave instructs you to:

• Total your fixed monthly expenses (your Nut).
• Figure out your net (take-home) pay, per month.
• Subtract your Nut from your take-home pay.
• The remainder is what’s left to spend. On whatever you want—food, gas, beer and travel. For the purpose of this post, I’ll call this amount “the leftovers.”

The plan is supposed to help you take care of the most important stuff through automated payments, so you can spend the remainder—no matter how large or small—guilt-free.

My fixed expenses include the basics (rent, utilities, cell phone bill, etc.), and the extras:

• savings
• premiums for extra insurance not covered by my employer’s plan
• Roth IRA contributions
• aggressive debt repayment

The amount I spend toward the debt payoff is about $350 more than the combined minimum payments of $60. I’m sacrificing a large chunk of take-home pay each month to the debt snowball. So why do I feel guilty if I spend the leftovers on something cool?! I guess I’m fighting the felling that I should be doing more.

After I paid off a credit card in June, I took advantage of a Groupon sale on top of the 50-percent discount to buy a cooking class I’ve been coveting for months. The class was a reward. And it helps me achieve another goal of constant self-improvement. I paid $79.20 for a 6-hour cooking boot camp valued at $199. That’s 60-percent off!

I paid for the purchase outright. But I felt guilty! Why couldn’t I just put that money toward the next credit card?!

Shouldn’t I go ahead and pay off that medical bill?

Shouldn’t it go toward my savings?
I’ve read so many of those posts with outrageous headlines, like “How we paid off $1 million dollars in debt in a week!” Shouldn’t I cut every corner like they did?

No. Personal finances are personal.

I should do what’s right for me. I don’t want to put every single penny into debt repayment because I want to have some fun, too. And that’s OK. There’s no fun in only spending the leftovers on gas, food and household items. I don’t thrive on deprivation. Also, interest isn’t accruing on the medical bills or the credit card debts because of the balance transfers.

Dave Ramsay fans are probably screaming his quote, “If you will live like no one else, later you can live like no one else.”

Yeah, yeah. But I am living like no one else. I’m not out here looking for a new apartment (which I want to do), buying new furniture (which I’ve wanted badly for two years), looking for a new car (which I’ll need pretty soon), buying new, sexy shoes (which would be nice to have), or taking a big trip (which hurts my inner globetrotter). I’m putting at least an extra $350 toward debt repayment for goodness sake!

I must deal with this guilt. I found these tips from Divine Caroline via Intent.

Tips For Dealing With Spending Without Guilt:

1. Acknowledge your money fears, however irrational. Just like the post’s author, my irrational money fear is that if I spend a big chunk of money today on something for myself, then I’ll encounter some terrible financial misfortune that’ll cause me to regret spending money on said item. If that’s the case, then I’ll end up never spending money on anything fun. I’m not advocating for going overboard, but I must find a middle ground.
2. Make sure your personal finances are in working order. Check! Since I’m taking care of my monthly Nut before spending on anything else, then my finances are in order. The bases are covered, so go ahead and swing for the moon.
3. Set aside fun money that you absolutely MUST spend on yourself. I haven’t create a Fun Fund, so maybe I should do that now. I should plan to spend an allotment amount on self-care or fun.
4. Save for big splurges ahead of time. I already save monthly for annual expenses I have to pay for, such as, renter’s insurance, professional organization fees. I should start another savings account to pay for a vacation or furniture.
5. Give away some money to a good cause regularly. The author writes: “Superstitious or not, I truly believe that giving some money to a good cause on a monthly basis makes for good money karma (and of course good life karma overall). When you are in the position of helping others in need through financial donations, you are always in a state of abundance no matter how big your paycheck is.”
6. Be on the lookout for good deals on things you want to spend money on. I totally agree with this. Hence, my Groupon and LivingSocial obsessions.
7. Prioritize what you want to spend money on and know what makes you happy. Right now my priorities lie in lifelong learning and self-care. So I will no longer feel guilty for buying the cooking class in June, or paying for the second part of wedding planning class, a pedicure or those classic dresses I bought on sale from one of my favorite designers at Dillard’s this month. These things make me happy and feel better about my self. They’re investments.

So, guilt, be gone!

It’s Not About the Money: Can Discovering Your Money Type Set You Free?

I had double jaw surgery just over a month ago. Needless to say, I’ve had a lot of time on my hands. Recovery was the perfect time to continue reading. While spending time in my hometown for the Fourth of July weekend, I came across Brent Kessel’s 2008 book It’s Not About the Money: Unlock Your Money Type To Achieve Spiritual and Financial Abundance in the library. I’m soooo glad I found this gem and my lil’ ol’ library.

Kessel is a renown financial advisor and yogi, so he offers a unique perspective on money. He discovered that people need to understand their core financial story in order to make meaningful changes. The book helps people identify themselves in 8 money archetypes, provides information on how each archetype can revamp her finances, and provides exercises and meditations to inspire a fresh approach to her relationship with money. Meditating and looking at financial decisions more objectively can help you detach from emotions and make better decisions.

The exercises and meditations in the book are so helpful, in my opinion. Kessel asks tough questions to really help you understand your conditioning and motives for your financial behavior. He proposes that our “Core Story” was developed in early childhood and created money scripts that you subconsciously play out today. For example, growing up with little food and parents who worried about how to pay the bills could force one to try to make as much money as possible (like the Empire Builder) or worry about every cent that goes in and out of the home (like the Guardian).

The archetypes include:

1. The Guardian is always alert and careful.
2. The Pleasure Seeker prioritizes pleasure and enjoyment in the here and now.
3. The Idealist places the greatest value on creativity, compassion social justice, or spiritual growth.
4. The Saver seeks security and abundance by accumulating more financial assets.
5. The Star spends, invests, or gives money away to be recognized, feel hip or classy, and increase self-esteem.
6. The Innocent avoids putting significant attention on money and believes or hopes that life will work out for the best.
7. The Caretaker gives and lends money to express compassion and generosity.
8. The Empire Builder thrives on power and innovation to create something of enduring value.

Before reading the full descriptions of the eight archetypes, I realized that my money archetypes and philosophy have changed (for the better) over the years. Before getting serious about debt repayment and saving, I was the “Pleasure Seeker” and the “Innocent.” My pleasure-seeking lead to racking up credit card debt without regard to the future impact. The “Innocent” in me made think everything would work out even if I didn’t have a plan to reduce debt and set goals. Why did I think this way? Well, my mother exhibits this behavior. Apple. Tree.

Wow. It’s all just conditioning. I don’t have to act like that anymore. — Brent Kessel

Now, I’m much more vigiliant, realizing that being irresponsible wouldn’t help me in the long-run.  The “Guardian” and the “Saver” best describe me. I aim to become secure and wealthy by shedding debt, being careful and accumulating assets. This quiz on Kessel’s website can help you determine your archetype(s).

There are bad sides to each archetype, too. “For example, Savers rely on their habits to feel secure and safe, and Guardians turn to compulsive behaviors, constantly analyzing their financial affairs in the hope of finding some reassurance.” In the past week alone, I called about my loans, tweaked transfers and so on to try to gain the least bit of edge. My wheels are always spinning. It’s as if I’m become obsessed with my finances after years of apathy as a Pleasure Seeker and Innocent. Kessel wrote: “Often it is the archetype we reject that we most need in order to create balance and freedom in our lives.” He encourages you to find the “Middle Way”, a balance, among the archetypes to create a fulfilled life. We move toward balance “when we are not caught in the mind’s strategies to become secure or happy.”

…with just a few of the right tools, no matter what your history with money has been, you can earn and keep money, and even grow wealthy if that’s what you want. — Brent Kessel

What makes It’s Not About The Money awesome is that Kessel gives specific tips for each archetype on the following topics: cash flow and budgeting, investing, insurance, taxes, gifting and estate planning, and philanthropy and generosity.

Kessel suggests that you suppress the “Wanting Mind”, which constantly tells you that you are not enough or don’t have enough. That feeds the negative part of the Core Story. He spends most of the third part of the book talking about generosity. He wrote: “…when we are focused on the greater good, we are not as consumed by our own self-involved Core Story, and hence more is possible.” When you look to help others, you often forget about your own hang-ups and move toward balance and freedom.

We are free when we move from a focus on getting love, abundance, peace and freedom to being love, abundance, peace and freedom. In fact, when we are identified with that part of us that already has enough, that has arrived, that feels sufficiency rather than scarcity, impulses of love and generosity arise naturally and without effort. — Brent Kessel

Being happy to pay bills + Debt snowball progress for June 2015

Being happy to pay the bills. Is there such a thing? INDEED, THERE IS!

I woke up this morning excited to check my bank account and see it reduce because my automatic payments had been withdrawn. Then I grew more excited to pay my Internet and cable bill.

Why would anyone be excited to see their funds reduced? Reason No.1: I had the money to pay the bills. Of course, I’d like to see my coffers full at all times, but I’m not worried about withdrawing too much or not having enough money to begin with. So many other people are. I used to be in that position a few years ago.

After graduating with my master’s degree and getting my job, for which I just had my two-year anniversary last week, I started keeping an online spreadsheet of my bills. The spreadsheet goes back to September 2013. At that time, I had absolutely no control or schedule in regards to my finances. Bills would come in, and I’d set them aside. Then after a few weeks, I’d look around and go, “Crap! Is that credit card bill due today?!” Thus, the scrambling would begin. I got tired of it. Sometimes, that’s what it takes to change.

The spreadsheet helped me put everything in one place — what I owed and to whom, when the payment was due, and the amount of the payment. It held my regular payments and medical bills that would come up time to time. Little did I know, this was the beginning of a budget, which I tried to avoid like the plague. Those rows and columns helped me plan where my two paychecks (and freelance money) would go each month. Then I got on the schedule of paying bills on the 1st and 15th. It has saved my life, made me happy about payday and happy about paying the bills.

I think Michelle Singletary wrote that one should make bill-paying a celebratory event. You have the means to pay the bills, so be grateful and think positively. Heck, maybe drink a little wine while pressing “Submit Payment.” Wine Wednesday. Why not?!

Now, I’m not saying that I love bills. The fewer, the better. But I’m grateful to have the means to take care of them in a timely manner.

Here’s Reason No. 2 for my happy, post-bills state: I PAID OFF A CREDIT CARD!

Woo hoo! I finally paid off the credit card I used to take care of car repairs. I planned to pay it off in April, but guess what—I had a major repair in April and split that bill between my savings and the credit card for the 0% interest for six months. It’s been a long while since I paid off a card. This is a nice little victory.

Now, only two cards stand in my way. These cards aren’t incurring interest thanks to balance transfers. After getting out of credit card debt, I’ll start killing off student loans. “If it ain’t one thing, it’s another,” the great Frankie Beverly sings. But the good thing is: I’ve got a plan. And I’m working it. I’ve already rolled over the payment from Credit Card No. 1 into Credit Card No. 2’s next payment. I pray that I continue down this path with little resistance.

Balancing balance tranfers + Debt snowball progress for May 2015

Earlier this year, I got my first balance transfer card in hopes of paying the bill in full before the 0% interest promotion ends in April 2016.

Well, I took advantage of another promotion. My main bank mailed a promotional offer to get 0% APR on balance transfers and direct deposits through November 2016. Initially, I just threw the paper aside. Then the bill for a major surgery arrived. I needed $1,800 and credit seemed like my only option. Previous medical bills had eaten most my HSA and regular savings.

So I called up the bank to learn more about he offer. The representative, Denise, was so helpful. We talked for 40 minutes. She helped me understand the conditions of the promotional offer, talked about her past issues with credit and gave advice on how to repay my credit card debt.

Denise said she was trying to keep up with the Joneses in Atlanta. She was charging purses and whatnot on her credit cards to look fly. Before she knew it, she had a major problem/ Just like me, she took advantage of balance transfers with 0% APR promotions to climb out of debt.

I decided to go ahead and get a direct deposit to pay for my surgery. Denise said she knows so many people who are using credit to pay off medical expenses.

I told her about the credit cards I’m paying off. Then she asked how much interest I was paying on a store card. When I told her, she was like, “Girl, go ahead and transfer that balance to this card.” She said it doesn’t make sense to continue to pay that high interest rate, when you can use this offer to pay if off without accruing interest until November 2016.”

Then she asked if I had more questions.

“Could you lower my interest rate?”, I asked.

“I’m so glad you asked,” she replied.

It cracked me up because although I’d read about asking for interest rate reductions, I hadn’t asked in such a long time. “Clothes mouths don’t get fed on the boulevard.”

Denise lowered my interest rate on that credit card and another card, which I’ve paid in full and haven’t used since, by 3 points each. She also gave me an extra year on the promotion and

With the direct deposit, I essentially created more debt. I hate that notion, but I realize that what’s more important is that I have a decent plan to pay it off in a decent fashion.

I’ve reworked by debt snowball plan, leaving out student loans. That’s a whole ‘nother can of worms. According to my calculations, I can get out of credit card debt in a year and 2 months—so before my 30th birthday. What a gift that would be!

Mid-Year Financial Check-Up | Progress on 2015 goals

Wow! I haven’t blogged since late January.

What happened? Love happened…well, a little bit. I started dating a handsome guy and reading everything about love and relationships. And I just got lazy. My cares about personal finance blogging took a backseat.

But I’m getting back on track with reading and writing about money. And I feel as if I’m on track in regards to my goals.

Let’s revisit the financial goals I set at the beginning of 2015:

• Save $53 per pay period to have an additional $1378 in the emergency fund by the end of the year –> I have been automatically saving that money each pay period. I’ve had to use some of those savings for big purchases, but that’s what it’s there for.
• Learn more about investing by reading at least one book or completing an online tutorial quarterly –> I haven’t kept this up, but I look forward to catching up.
• Reset Roth IRA contributions to contribute at least $100 per month –> I reset my Roth IRA contributions, but to $50 a month. I decided to put more money toward debt repayment for now.
• Pay off two of the three remaining credit cards in full using the Debt Dash or snowball method –> I will pay off the first of those three cards in June. I should repay the second card by the end of the year.
• Pay at least one extra student loan payment within the year by making a small extra payment each month –> I decided to put more money toward repaying higher-interest consumer debt instead of toward low-interest student loans.

Seeing some progress is better than seeing none. At one point, I never thought I’d finish paying off credit card No. 1. It was a card I got for car repairs. The card allowed promotional purchases in which you wouldn’t incur any interest for six months. But when those six months were over, the 29.99% interest kicked in. Woo!

So finally seeing a balance of about $2,100 (near the $2,500 limit) in June 2014 go down to a couple hundred bucks (MY LAST PAYMENT) is a huge feat. I’m excited to roll that payment into the payment for Card No. 2 and paying it off before the interest kicks in March 2016. Also, I think I’ve saved enough so that I won’t have to use the card again. Progress, people! Progress!

How to Be Financially Successful in Your 20’s

Weeks 2 and 3 of the Live Richer Challenge were full of tasks that I had already completed after applying lessons from previous readings, which is a good thing. The Budgetnista’s in line with other financial planners.

This week (Week 4) is all about credit; and the next, investing. I’m excited for the investment portion for sure. That topic often scares me. The Budgetnista has a way of breaking down tough concepts into simple measures so most can understand it. That’s great for her target audience of young, black women.

The main points I took away from Weeks 2 and 3 were the importance of automation and notes from this free ebook The Budgetnista contributed to on MoneyTips.com — The Millennial Next Door [Revealed]: How To Be Financially Successful in Your 20s. The survey answers from other 20-somethings helped me see where I am among my peers.

• The majority (55%) earn from $25,000 to $75,000
• 63% have less than $25,000 in assets
• 30% say student debt has impacted their ability to be financially independent or successful
• 87% of successful millennials have set financial goals and are on track to meet them at least to some extent
• 85% successful millennials keep budgets
• On average, successful milleninals save 21% of what they earn
• 91% say they are financially literate

The top 5 financial concerns are:

1. Saving enough to live comfortably in retirement (47%)
2. Earning enough to afford the lifestyle I/we want to live in the future (46%)
3. Pay off student loans (35%)
4. Living within my/our means (34%)
5. Maintaining my/our current lifestyle in the event I lost my job and/or can’t find work (29%)

The biggest financial missteps so far include:

1. Taking on too much consumer debt (23%)
2. Spending frivolous (22%)
3. Racking up college-related debt (19%)
4. Making investment decisions they later regretted (8%)
5. Not saving enough (5%)

The e-book featured great tidbits from financial planners and bloggers.

Words On Budgeting

Matt Becker said he understood that budgeting isn’t something that works for everyone.

“I think it sets people up for failure by putting the focus on spending less instead of the real goal of using your money purposefully to get more of the things that make you happy. Instead, I encourage my clients to focus on three things:

1. Automate savings
2. Tracking spending (so you can make informed decisions)
3. Creating good habits that align their daily lives with their long-term goals”

Words On Debt

“The biggest financial misstep I see millennials make is taking on large amounts of unnecessary debt for things like home, vehicles, or college. Many of these same millennials would say they place a high value on flexibility and freedom, when in reality they are getting neither. Debt almost always limits flexibility and freedom.” — Ben Wacek, CFP

Words On Setting Goals

“While finance is very mathematical, it’s also very emotional. People tried to accomplish their goals faster when they’re tied to something that’s exciting to them.” — J. Money

Words On Investing

“Just get started. Many people do tons of research and are victims of paralysis by analysis. Trying to decide whether they should invest into load or no-load mutual funds, ETFs or dividend-paying stocks. Take a small amount and invest into something. Even if it ends up being a crummy investment you’ll learn a ton by going through the motions versus doing more and more research.” —Jeff Rose, CFP

Two Checking Accounts Keep Bills and Spending In Check

Has anyone tried the two-checking account system? This is when you use one for bills and one for spending. It’s no different than earmarking savings accounts for different goals —vacation, car maintenance, emergency fund.

On Day 11, Tiffany “The Budgenista” Aliche prompted us to define our dollars by opening multiple accounts that day. Otherwise, you’ll have “gumbo money,” she said.

“When you have all of your money in one pot, you never know how what’s really happening. How much of this is for saving? How much for bills? How much for savings?”

Tiffany’s task couldn’t have come at a better time. While reading her prompt, I remembered that just minutes before I was calculating how much money I’d have left in my checking account after paying bills. It can be exhausting to think: “When this payment goes through, will I have enough money for the oil change, the hair appointment, gas, etc.?”

I already have multiple checking accounts (Big Bank, credit union and online bank), but two are tied to savings accounts that I don’t want to touch. I’m afraid if I start using those two checking accounts, then I’ll start transferring money from my savings. Don’t want that! The debit cards are out of sight and out of mind for that reason.

My main option is to open another checking account at the Big Bank. However, I’d need to directly deposit $250 each month or have a large average daily balance of more than $1,000 to avoid a $12 monthly fee. Decisions, decisions.

When you have all of your money in one pot, you never know how what’s really happening. How much of this is for saving? How much for bills? How much for savings? — Tiffany “The Budgetnista” Aliche

Of course, I looked to the great wide Internet to find out how other people are using the two-checking account system for paying bills and discretionary spending. Some folks have it all figured out.

Here are some reasons to use two checking accounts for budgeting:

1. You don’t worry about dipping into your bill money for discretionary spending.
2. You can automate all of your bills and spend less time managing your money. You know the money will be there, so you can put your finances on autopilot.
3. If forces you to be more frugal and save. You will be motivated to save as the money in your “Spending” checking account grows. Who wants to see it depleted all the time? Because the amount of money in the “Spending” account is finite (and not nebulous) and I can see exactly what’s left in the tank, then I’ll be forced to really think about what I’m spending.
4. No overdrafts.

Great reasons, right? This system could really help me clear my mind and separate money for different purposes so spending doesn’t affect paying the bills.