In God We Trust

Teaching You How to Get OUT of Debt and Live Debt-Free

Archive for January, 2009

Jan
7

by Sandi

Actually, John was talking to me a few days ago and said, "Eventually, stuff becomes junk."  I’ve been giving a lot of thought to those words over the past few days, and it is such a true statement.  Not willing to just mull it over myself, I have speculated with others. and no matter what stuff you have, in the end it becomes junk.  My friend pointed out that things like family heirlooms, photographs, and great paintings never become junk.  The truth is, that even these precious items will eventually reach someone that sees no value in them and simply disposes of them. 

Think about when your great aunt somebody passed away, and her great nieces and nephews cleared away the accumulations of her life.  Photo albums, clothing, and an entire household of collectibles and possessions were offered up in an estate sale.  What was left was donated to charity and hauled to the dump.  Stuff becomes junk. 

I, myself, have a lot of stuff that is still brand new, and is already becoming junk.  I have a bolt of upholstery fabric that I purchased about 15 years ago to re-cover a favorite couch.  I didn’t get around to it right away.  Even though the fabric is brand new, and the highest quality I could afford, the couch it was intended for is long gone, and the fabric is so out of fashion.  My fabric is very close to becoming junk.  In fact, it already is, but I just haven’t admitted it yet.

I have other stuff rapidly turning to junk.  A pretty dress bought for a Christmas party years ago, and now a size too small.  Then there are some shoes that I loved, but they always hurt my feet, so I haven’t worn them in at least a year. 

I have craft supplies to make things that no one wants, and tubes of fabric paints that have dried out.  Clothes no longer in fashion.  Decorative pillows that are faded or the wrong color.  Yard and garden accessories and tools rusting away. 

Once, all these things were things I wanted so badly that I traded money for.  In some cases, I put the purchases on my credit card.  At the time it didn’t even cross my mind that I was just buying stuff.  What if I had just given a few minutes thought to all those things I purchased.  Looked forward a bit to try to figure out if that stuff was going to become junk before I even got a chance to enjoy it. 

What if you gave a bit of thought to your purchases.  You are purchasing stuff that eventually become junk.  Is this junk something you are willing to get into debt to own?  Try this for a few weeks or months.  Before you purchase something, try to figure out how long it will take before it becomes junk.  Then ask yourself if you really want it?  I’m betting that you will develop a whole new attitude about buying stuff.  And, if you buy less stuff, you will be able to accelerate getting yourself out of debt and saving for things that are really important.  Things like a college education for yourself or your children.  Things like donating money to help animals or people in need.  Things like a home for your family or a vacation that your children will never forget.

Stuff becomes junk.

Jan
2

It’s that time of year, again. Time to make Resolutions. No time to break them, but let’s make some good ones we can keep.

Organizing your Financial life is easier than you think. You don’t need fancy software or organizers (although having them is helpful), just some basic tools. In our counseling, disorganized financial lives are at the heart of our clients’ problems. They aren’t organized, so they don’t know where they stand, or where they are going.

Your 4 Organizing Tools are:

  1. Bill Place
  2. Checkbook Register
  3. List of Bills
  4. Financial Health Report

Bill Place

The FIRST organizing tool is a simple place to keep your bills. They can easily get lost with the associated late fees and hits to your Credit Scores. You need to designate a place where ALL your bills, and ONLY your bills go.

Every day, when your mail arrives, you take your bills and put them into your Bill Place. It’s also a good idea to sort your mail over a trashcan, too, so you can discard all those wonderful offers you get. (Trust me. They only want your money. Trash them.)

Your Bill Place can be an envelope, a drawer, a shelf… as long as it is exclusively devoted to your bills. Mt Bill Place for the past 20 years has been a plain manila file folder with “Bill Place” in big letters. I’ve taped up the edges and the seams, and it still holds all my bills. You can get started with a large envelope or folder.

Now that you have a Bill Place, go gather up every bill you can find. Get them from those drawers, shelves, cupboards, even the dirty laundry. (Yes, we’ve found them there.) Put them ALL into your Bill Place.

List of Bills

Now, you need a place to write down your bills so you can see them in the larger sense, instead of just one at a time. A cheap, spiral notebook is perfect. I get them every year during school supplies sales for less than a quarter. Any notebook will do for now.

Skip a couple of pages. (I’ll go into these pages in a later post.) Write today’s date at the top of the 3rd or 4th page.

I’d like you to sort your various bills into a few piles: Credit Cards and other debt, Utilities, and Misc. Open them all up. Find the latest one for each bill.

Write the Name of each Bill down the left side of the page.

For all your bills, write across the page for each one, the Total Due, this Month’s Minimum, this Month’s Interest and Penalties, the Due Date, and a Star if it is past due. You can find the Interest and Penalties as “Service Charge” or “Interest”. You’ll want to know the total amount your dis-organization,¬† credit cards and debt are costing you each month.

Now, you have a List of Bills you can use each time you sit down to pay your bills. You can use this to see your big picture, and make decisions about who to pay how much and when.

Scratch off the bills when paid.

Repeat each month.

Checkbook Register

You got one of these when you opened your checking account. It is that grid-looking thing that you are supposed to keep track of your checks and deposits. You probably do a lot of online banking, or use the ATM to check your balances periodically.

Without a running list of checks, withdrawals, charges, and deposits, you are bound to run into trouble sooner or later. Find it and get it out and put it back into action.

Start where you are now. Write down every check you write. Mark down every ATM cash withdrawal you make, every deposit you make, and, in an advanced move, every Credit Card charge you make. You don’t have to do the arithmetic each time you make an entry, but you should do it every few entries, at least.

With this running total, you will see another side of your financial life – your streams of cash-flow.

Financial Health Report

This is normally called a Net Worth Statement, but, for many, it could be a Net Worthless Statement instead.

What You Own

Use the next page in your list of bills to list all your assets at the top. By assets, I mean what you own. Your cash, bank accounts, savings, 401k’s, investments, house, cars – things worth something. I don’t mean your “stuff” because most of it isn’t worth nearly as much as you think it is. Leave off your clothing, furniture, collections, and other “stuff”.

Total it up.

What You Owe

Now, list all your debts. You can find that nymber from your List of Bills. Don’t bother to include utilities or any current bills like your last dentist visit.

Total all that up.

What’s Left

Now, subtract what you owe from what you own.

What’s left is what you leave to your kids if you die tonight… It is Your Net Worth, or a measure of your Financial Health. If it’s Negative, you are probably¬† in some trouble, and have some tough work ahead of you to get solvent. If it is positive, you aren’t necessarily in good shape, but you’re probably better off than you thought.

Do this Financial Health Report each month for a time to track how your financial life is progressing.

Next Steps

You are now well on your way to being Organized in your financial life. That is the first step. Your Next Strp is to set some financial goals and then make a Spending Plan for getting there.

See you next time.
John