Once I came to terms with my debt problem, I had to figure out what strategy I would use to deal with it. I had three major options. Many people stop using their credit cards and just pay off as much as they can each month. They tend to use the snowball effect. You pay off the smallest balance first and then work your way through all the accounts. Using this method you keep they really high interest rates, so I didn’t want to use it. Also I had been ineffective up to this point at paying bills so why should I think anything would change. The balance transfer is another tactic. You take hunks of debt from one card and sent it to another one to have a much lower or no interest. I rejected this idea for a simple reason. I had many times transferred balance from one card to another and it had done nothing to help me.
Taking out a consolidation loan is a third popular option. You see them advertised on TV and the internet. Reduce all your high interest credit card payments to one easy payment. That basically covers the gist of what a consolidation loan entails. You take out one big loan to cover all your existing credit cad debt. You pay one place and you get a better interest rate. Your monthly payment is set and tends to be much larger than you minimum credit card payment. Consolidation loans can be a great help in getting out of debt, but they can also trap you in a cycle of debt.
What are the benefits of a consolidation loan? The biggest benefit you get is a much lower annual percentage rate of interest. My credit cards had APRs between 19 to 29%. The consolidation loan (SPOILER) I eventually got was under 9%. The total interest paid out for my three year loan was the same as I was paying per year on all my credit cards. The fact that the payment is fixed every month, and in my case auto deducted from my bank account, can be another big benefit. You have to make the payment. With just a credit card payment you can make the minimum payment and prolong your debt and maximize the interest you pay.
You don’t want to get trapped into the cycle of consolidation loan debt, which is one of the biggest drawbacks. The cycle of debt occurs when you aren’t sticking to your budget or your loan payment is too large. Month by month you payment is being sent to the consolidation loan but at the same time you aren’t staying in your budget. You keep whipping out the credit cards to keep up with normal expenses. So after your three or five years the consolidation loan is paid for but you are staring at another pile of credit card debt. The loan company is there with a convenient solution, another consolidation loan. And the cycle continues until your children inherit your debt. Another drawback is the same as one of the benefits. You have to make the payment every month. You can pay more but not less. If you take out a loan with too big of payment or lose some income you can end up in a real bind.
When I was trying to decide to get a loan or not, I needed to make sure that I would not fall for any of the traps. I determined about how much my monthly payment would be. I then subtracted that from my monthly income and for two months saw if I could live within the amount left. I made the minimum payments for my cards out of the amount a deducted for the loan. I took the amount I didn’t put toward the minimum payment and put it into my newly started emergency fund. For two months I managed to keep within the limits and so I decided to pull the trigger and get the consolidation loan.
The week was dominated by the Cubs. I tried not to care. After years of disappointment I tried not to riled up. I mostly succeeded.
Wednesday night they were up 10-2 in the ninth inning. I watched the game shaking my head. “They are going to blow it. I knew they were going to blow it.” They didn’t. I was confused that was’t what is supposed to happen to the cubs.
Thursday’s game they were up 8-1 in the bottom of the eighth and gave up a run. “That’s it they are blowing it. I knew this would happen”. In the bottom of the ninth they gave up 2 more runs. “Oh this is it. It’s all over now. They’ve blown it. They’ll never win another game.” They won.
I stood there on Saturday as the cubs held a 5-0 lead and were cruising along. “It’s going to be so sad that they are only 6 outs away from going to the World Series and they are going to blow. Man they are only 2 outs away. When they blow this it’s going to be way worse than 2003.” Ground ball to the shortstop. Out at second and out at first. I stared bemused at the TV as people cheered around me. “What just… THE CUBS ARE GOING TO THE WORLD SERIES!” We then sang Sweet Home Chicago.
I honestly never thought I would see this in my life.
After a long break (I checked and my last post in this series was on May 29th) we return to how I got my finances in order. So where have a been during this break? I have been working a lot. I spent most of the summer working two sometimes three jobs. I would say I have been busy all the time, but that would be a small lie. After coming home, I would rather sit down and play a video game or watch something on netflix.
First, It’s very important to understand that the budget is not sent down from on high like the ten commandments. Your budget is not an inviolate set of instructions. You will find that what you HAVE to spend money on will change several times during the life of any budget. The goal for the rest of your life, even if you become independently wealthy, is to have a budget. You will never not have a budget. That budget needs to change and adjust for your life. Prices go up and down, maybe your commute becomes shorter, all these things need to be reflected in your changing budget. Just make sure that your budget always leaves some money to continue paying off that debt or investing.
One piece of advice you’ll often hear about budgets is to never borrow from one budget category to pay another. So if you have budgeted two hundred dollars for groceries and say 100 for gas, then these amounts are set in stone. If you have some unintended travel emergencies that use up your budget well just to bad. You won’t be buying any gas from here on out so you can’t go to work and get fired. Or woops, you ran out of grocery budget so know you starve and die. Obviously these examples are absurd. Ultimately you are working toward keeping your expenses below a certain amount. So feel free to borrow from one category to pay for another.
It took me months to arrive at a budget I have been able to keep in the long term. At one point I had to add a hundred dollars or so to the overall amount because I could not stay below the previous amount. No point in having a budget you can’t stay within.
People have come up with several tricks and programs to try and help you stay on your budget. I tried a few of them. Envelops full of cash remains a very popular method online. You may be shocked but you still can pay for pretty much everything with cash. Yes the cashier may start thinking you are a drug dealer 🙂 You get a bunch of envelopes and write the various budget categories on them. Each month you get the total cash amount from the bank and put it in each envelope. When you have an expense you pull out that cash and buy the groceries or whatever. I had some problems with this system. Your envelopes are sitting at home but when you go out you just have a wad of cash you use for everything. You get some gas, then stop by the grocery store, and finally pick up some take out on the way home. You paid that out of the cash you had but how much now should be in each envelope? Now you gotta pull out the receipts and calculate how much should be in each category. And of course you don’t have the right change. I tried it for about two months then moved one.
You can use one of those prepaid debit cards that you fill with the budgeted amount each month. What I do is somewhat similar. I have another bank account with a debit card. Each month I transfer the budgeted amount from my main bank account to this account. I’ve connected the account to Mint so that it automatically deducts amounts from my budget categories. I also have an ATM just down the street if I need some cash. I’ve used this system for almost two years now. I find it amazing how much my spending is curtailed when I know I am using “real” money and not credit.
Probably the most advantageous way to spend you budget would be to use a credit card with big cash back bonuses. You have to make sure not to go over budget and pay it off each month. I don’t remotely trust myself enough to not just start pilling up debt again so my credit cards are locked in a cash box.
An emergency fund is one of the most important things to have. This will keep you from falling back into debt with those unexpected expenses. Each spring I replenish my emergency fund with my tax return.
Don’t fear readers, all 30 of you. I don’t see this becoming a fitness blog. I am old, chubby, and out of shape.
|My actual old man foot|
On Tuesday I went for my scheduled run. It was nothing long, fast, or spectacular. I am doing a modified version of the c25k program. Afterward I had some ankle pain. It got worse on Thursday so I didn’t do my run that day thinking I would postpone until Friday. On Friday it was way worse. My foot would pop and crackle and hurt. There was’t any swelling but something sure didn’t feel right. I started looking up foot anatomy online trying to figure out what tendon or whatever hurt. The image above of my actual foot shows the painful area in red. It wasn’t the achilles tendon it was behind it or to the side. It still hurt on Saturday. I even iced it that night thinking that maybe something was inflamed. I’ve come to the conclusion that running didn’t cause the problem, but the shoes I walked around in did. My right foot supinates rather badly. I wear my shoes down quickly on the outside. With this pair of walking shoes the heal actually broke in a little bit on the right side making my steps even worse. I think that constant twisting of the foot with each step is what caused the pain. I stuffed toilet paper into the right side of my shoe until it leveled out my footfall. That seemed to help a lot.
Sunday I didn’t have much pain and I had a lot of energy, so I wanted to get in a run. I put on my heart rate monitor and all my stuff and went for a jog. Right off the bat I knew my NEW heart rate monitor was having problems. Within twenty seconds of starting it warned me I had reached my max heart rate. I hadn’t. It just wasn’t working properly. At one part of the run it just bounced all over the place. I would be at max, it would go down to 140 then down to 100 then back to max. At this point I realized the monitor was useless. I ignored it and decided to try and take stock of just how I felt. I felt good. I didn’t feel winded or under a lot of stress. I decided to just keep going and going. According to runkeeper (one of the many and the oldest of the apps I use) claimed I managed my longest run ever. Maybe I should ignore the HRM more often.
You might all want to sit down for this announcement. I jogged three times this week. I actually kept to the schedule. I intend to do three workouts a week but it’s really hard for me to get to the gym now that I try not to drive. So I impressed myself with my three jogs.