Buy the Finer Things in Life, or Pay Off the Debt?

This inspiring article was written by Derek Sall. His article made me want to stop spending on all the frivolous things I like to indulge myself with and start being really serious about paying off our debt. Derek is a recent Finance graduate from Grand Valley State University and posts regular articles just like this one on his website, http://www.lifeandmyfinances.com.

I found my eyes lost in hers while I gently held her soft hands, and she smiled back as if I were the only man in the world at that moment. “I introduce to you, Mr. and Mrs. Sall.” We were married, and it was time to start our fabulous life together; one filled with trips to the beach and hardly a care in the world.

We moved into our apartment and within a couple of weeks, the mail parcels from “Direct Loans” began coming in. Suddenly, we realized that we had college loans to pay; they hadn’t seemed real before this moment, but now they hit us like a sack of bricks. My wife had not found a job yet, and my income was barely covering our necessary expenses. We were in trouble – and my wife needed to find a job fast.

Well, the glorious day did arrive when we found out that she had work. Soon after we received that first paycheck, we were able to pay only the interest that had been building on our deferred loans. At that moment we sat down and decided that we needed to get rid of these pesky bills.

What are the Benefits of Living Debt Free?

  • No extra interest payments over time (which can sometime be equal to the loan amount!)
  • Receive discounts with cash purchases instead of getting suckered on the payment plan
  • Have the ability to invest for your future
  • Live worry free with no debts!

After we made the decision to tackle our debt head on, we designed our first budget and began making loan payments of $200, $1,000, and at one point, $3,200. It’s amazing what can be done when we have a common focus!

Since January 2010, my wife and I have paid over $9,000 toward those student loans. One of them is completely paid and the other should be paid in full by April of 2011! It feels great!

It is completely worth it to give up a few luxuries in order to feel the freedoms that we are currently experiencing. I encourage you to start by taking a close look at your expenses – are they all necessary? If not, cut them out and put the money toward those debts! You’ll be glad you did.

Do you have a great debt story? Leave a comment and let me know how you handled it. Did you tackle it head on, or did you mistakenly allow it to build with interest?

Separate or Joint? Mine or Yours?

Want to know how to haggle? Then please make sure to check out my staff writer post at Beating Broke today, The Golden Rules of Haggling!

This post was featured in Carnival Of Personal Finance #288.

In my family we always had a common pot of money.  We didn’t have a bank account but we would put money in a big brown envelope. Yes, I still remember the color! My grandmother was in charge of it, and she would do all the necessary budgeting. If I needed money for school lunch, I’d have to ask her for an allowance. If my mother needed a new coat, my grandmother would decide when the family budget could afford it. I grew up with one brown envelope, or I’d rather say one “joint” account.

Years later, when Beaker and I moved in together, we opened one checking account and one savings account, with both of our names on the accounts. I did not question our decision. Neither did Beaker. It seemed natural for us to combine our finances and move towards our common financial goal – building our lives together.

My friends however questioned every step of this process. That’s when I discovered that some people draw a line when it comes to finances, opting to keep separate accounts. My friend, the one who hides purchases in the trunk, told me that separate accounts are necessary for separate spending. “There is our money, and there is my money,” she said. Understandably, she is very protective of her savings. Probably because having separate accounts prevents arguments about overspending.

I understand that people want to preserve what they had, what they have accumulated before they became a couple or a family. Having separate accounts gives some level of comfort and peace of mind knowing that “what was mine, remains mine.” Especially if you were financially established, owned some assets and investments, you could decide that having separate accounts works better for you. However, I believe thathaving separate accounts also discourages the development of shared financial goals.

Neither Beaker nor I had accumulated assets, houses and investments when we decided to start our lives together. We brought our debt into this relationship, so the natural choice was to have joint accounts to pay the bills, save and plan our financial future. We decided to share everything: our debts, our bills, our paychecks. We decided to share our lives.

I think that in the end, it all comes down to a question of trust. Marriages are built on trust and commitment, right? It is all about sharing, isn’t it? So, why do we need separate accounts? Is it because we don’t trust each other completely? Is it because we think that the other person will go out and spend our money? Or is it because we want to preserve a piece of us, we used to have before we were committed? Something that would show us that we have not totally dissolved ourselves into the relationship?

I am a huge believer in joint accounts because they create a concept of  “our” instead of “mine.” They reinforce trust and commitment, and ultimately they create a sense that “ we are in this together.” Isn’t that what marriage is all about?

My Life Without Christmas

We did not celebrate Christmas in the Soviet Union. It all started with the revolution. Vladimir Lenin eliminated Christmas. Under Stalin‘s regime the Christmas tree was outlawed. This was always difficult for me to imagine – December with no Christmas spirit and no tree. But understandably, Christmas had no place in the atheist society.

Later, Stalin lifted his ban on Christmas tree and declared the New Year’s a national holiday which eventually became one of the biggest holiday’s of the year.

In fact, the New Year was what Christmas has become in the Western world –  a time for family to gather together and celebrate, share gifts and food. The attributes of Christmas such as a lighted tree and gifts, were assigned to New Year’s Eve. So, essentially it was a sort of substitute Christmas stripped of all Christmas meaning.

I know for sure that a lot of people still celebrated Christmas even when Christmas was outlawed. Except that these celebrations were not public, in the open but underground, in the dark, not talking about it to anyone, constantly looking over their shoulders to make sure no one knew.

Of course we had Santa Clause. But our Santa Clause was called Grandfather Frost (somewhat a direct translation from Russian). He would come from Siberia and bring gifts to us on New Year’s Eve. Grandfather Frost also wore a long beard and a red hat. He always would be accompanied by a beautiful Snow Maiden who would help him to distribute gifts to children. Essentially, you could get one gift per child (not to go overboard and spoil a future humble and modest communist generation.)

Ironically, it was December in 1991 when the Soviet Union ended its existence. Gorbachev resigned on Christmas day and the Soviet Union was officially dissolved the next day. In Lithuania, because it is a Catholic country, we finally were able to celebrate Christmas in December. Russia (because it is a Russian Orthodox country that follows a Julian calendar) started to celebrate Christmas again in January.

I ended up having a few Christmas celebrations: Christmas in December with one part of my family and some of my Lithuanian friends, and later, in January, with another part of my family and Russian friends. I think I replenished all uncelebrated Christmases then.

New Year’s Eve was a national family holiday for many, many years. It was my favorite holiday. As a kid, and later as a grown-up, I always got excited about New Year’s. I love Christmas too. I think I like the spirit of Christmas in spite of its huge consumerism, high expectations, overspending and TV and radio commercials that drive me crazy. But somehow, even now, I always look forward to New Year’s Eve.

Old habits die hard, I guess.

Twelve Days of Giving

First Gen American suggested a writing experiment – an embellishment on the 12 days of Christmas. So, here I am…writing away…

Remember the lines of 12 Days of Christmas? Of course you do. These are my favorite lines :

On the twelfth day of Christmas,
My true love gave to me…

Isn’t it a great idea to give, send, bring a loved one, a family member, a friend, a co-worker, or even a stranger something every day like in the 12 days of Christmas?

To really embrace a selfless spirit of Christmas, try doing the following:

Day 1: I love shopping. But you already know it. It wouldn’t be me not to recommend shopping. So, go shopping! Just make sure to use shop.livewordly.com and you will be helping charities around the world.

Day 2: If you are a blogger, a writer… just like me, you sometimes run out of ideas or words! Build your vocabularywith freerice.com and for every word you get right, the World Food Programme donates 10 grains of rice to end hunger.

Day 3: Enough already of spending all this precious time on the Internet! Turn off your computer and renew your old friendship with someone you have not talked to for a long time.

Day 4: If you cannot live without the Internet, then do at least something different. Befriend your favorite charity on Facebook or follow it on Twitter.

Day 5: Think about great causes and donate to Yakezie Scholarship Fund.

Day 6: Are you an animal lover? Think about animals in your local animal shelter and donate something to it. You can give food, toys, money, your labor… anything!

Day 7: Don’t be too frugal (oh… me and frugality!). Tip generously this Holiday season. Tip extra to your barber, your paperboy, your limo driver…?

Day 8: Hair getting too long? Get a haircut and sign up to donate your hair at matteroftrust.org.

Day 9: You don’t like homeless people because they scare you. You don’t trust them. You suspiciously watch them riding on a bike while talking on an I-Phone. I am with you! But we still can bring canned food to a local homeless shelter.

Day 10: Do you suspect that your gifts are usually being re-gifted? I hope not. But just in case, make a change this year and don’t buy them. How about handmade gifts? Give your chocolate crazed co-worker a homemade hot fudge! Give it to me, I wouldn’t re-gift it!

Day 11: If you do need to buy a gift card, buy it at justgive.org and whoever gets it will be able to redeem this gift card for a great cause at almost any charity around the world.

Day 12: Have something to share, to teach, to pass on to the next generation? Go to mentoring.org and become a mentor to a child age 6 to 18 in your area.

And please remember The Grinch:

Maybe Christmas, he thought, doesn’t come from a store.
Maybe Christmas, perhaps, means a little bit more.

“If You Don’t Know, You Can Feel It Somehow”

I am starting a series called “Beaker’s World.” Guess who is Beaker? My husband! He agreed to share with my readers some of his stories, thoughts and opinions. Believe me, he has plenty! Remember how I mentioned once that when Beaker and I met, both of us were really poor? Well, I have omitted the fact that six months before we met, Beaker was unemployed and starving. This is his story…

It was a bad year. My girlfriend of three years dumped me. I lost my job and because I could not handle life at the time, I quit school. When I look back I don’t regret a thing except quitting school. But that is a topic for another day. I wanted to talk about being out of work for eight months with no savings, not a single way to pay bills and absolutely no money to pay for food.

My friends and my family kept me alive and kept me trying in the darkest time in my life. It was hard to get out of bed some days, and to be honest, some days I didn’t. What was the point? I could not afford gas to go and look for a job. I didn’t even have money for the bus. I would try and set up a ride to go get applications at restaurants because waiting tables was what I did for the last ten years.

I could not stand being a server anymore. I had too many bad experiences serving food to people who are mean, cheap, and bitter. I believe a few of them treated me like scum because their parents were taken captive, tortured, and killed by a waiter from a Denny’s or an IHOP. My heart was just not into it anymore, and the managers at the restaurants could see right through my fake enthusiasm and wouldn’t hire me.

The times got worse and worse, and I had to go a couple of days without food. I would drink a lot of water, and I actually tightened my belt as far as it would go. That helped. I thought it was an old wives’ tale, a horror story your parents told you about when they were growing up in the depression, but it really did lessen the hunger pains.

I needed a job and I needed to step up my efforts. I knew I couldn’t work at a restaurant anymore, so I went to a Job Staffing business.  They were able to get me on some catering jobs. Some caterers only need a few extra people for a couple of large jobs. They use these staffing businesses to get additional people to help them with bigger events that they have booked.

At one of these events there was music being played, and a song inspired me. It was U2’s “Beautiful Day.” Near the end of the song the lead singer Bono says: “If you don’t have it, you don’t need it now. If you don’t know, you can feel it somehow.” It struck me really hard. Everything that I thought had meaning in my life was gone. At that point I had nothing but my meager belongings.  Bono was right! I didn’t need all I used to have because there was more out there for me.

I was living a life that I didn’t want to live, and I was on the verge of starting from scratch. I could do anything I wanted, and this was my chance. I didn’t know how I was going to achieve this miraculous rebirth, but I felt that it was right. That night, after the catering job, I just knew that everything was going to be alright. A week later I found a job at a warehouse, and started earning a steady paycheck.

I know what you are saying, “This is a stupid story! Bono from U2 did nothing to change your life.” And you would be right. I didn’t find a job the next week because I heard a song on the radio. That would be a ridiculous story, and I wouldn’t waste your time with that. What changed my life was that at that moment I realized that I wasn’t the only one out there who didn’t know what the hell they were doing in their life. There were other people who were as naive and scared as I was. I was not alone, and it was alright to make mistakes.

I believed I was a failure at love, at a career, at school. And at that point I was, but I knew that I would figure it out eventually, and I shouldn’t give up and feel ashamed.

You are right, Bono did not change my life. But he let me know, and now, I am going to let you know. You are not alone. There are 5 billion people out here, doing just exactly what you are doing. No one has this figured out, and there is absolutely no reason to feel ashamed, scared, or like a failure. Just keep going because you know something better coming. You can feel it.

A Few Good Things

On Blogging
I started blogging in August, joined the Yakezie challenge on September 27, 2010, opened my self-hosted site on October 18, 2010. This is how I have progressed up to this point:

Alexa Ranking as of September 27, 2010: 2.6 MM
Alexa Ranking as of October 18, 2010: 15 MM
Alexa ranking as of December 8, 2010: 244,353

October traffic: 458
Average visitors per day: 32

November traffic: 1,171
Average visitors per day: 39
Unique visitors (I installed Google Analytics on November 4, 2010): 481
New visits: 89%

I cannot thank enough of my fellow bloggers for all the promoting, commenting and tweeting they’ve done.

When I started blogging on my new self-hosted website, my posting schedule was very erratic and inconsistent. As my readership base started to grow, I switched to a stricter posting schedule and now I am trying to post three times a week (Monday, Wednesday and Friday). So, don’t forget to check my new posts on those days.

I also included a Guest Post page on my blog. Yes, I am accepting and actively seeking guest posts. Check out my guidelines. Hopefully they are clear enough.

Interestingly enough personal finance topics seem to dominate the content. Aloysa’s Kitchen Sink has become more of a lifestyle blog with emphasis on personal finance.

On Staying Fit
As you might remember I injured my shoulder a while ago and stopped working out. It was somewhat a disturbing time for me because I became obsessed with gaining weight, Weight Watchers and food. My shoulder has been doing a lot better, and I am back to the gym lifting weights! Hopefully, I am not going back to physical therapy.

And as far as food goes… I am not obsessed anymore. It is Holiday season and who wants to think about eating too much! I said to myself: eat up, Aloysa! You are worth it.

On Christmas Tree
We finally put the Christmas tree up over the weekend. Last year we had neither time nor desire to decorate our condo. We went to China in November and it turned out to be an incredible adventure and the best vacation ever. We came back home in the beginning of December, and I got sick with a horrible cold that knocked me down for a week.

When I finally got back to my normal self, Christmas was a week away. We thought about decorating but decided against it. It seemed a little absurd to put the Christmas tree up just to take it down in a week.

This year our Christmas tree is up, and our condo is looking festive. I finally feel that Christmas is just around the corner.

Aloysa’s Reading Picks

There was an interesting discussion on the Yakezie forum about how everyone is keeping up with reading each others blogs. I have to say that keeping up with reading is not that easy. But we all try, and overall we all are doing really well.

But if you think that you could have missed some of the great articles, make sure to read some of the great posts from this list:

First Gen American suggested a writing experiment – an embellishment on 12 Days of Christmas. Some of the great bloggers participated and wrote:

12 Days of Christmas – Writing Experiment @First Gen American

The 12 Sips of Christmas @From the Pint On

12 Days of Christmas @Budgeting in the Fun Stuff

Walking in the Winter Wonderland @Invest It Wisely

12 Email Spammers of Christmas @Every Day Tips

Other interesting, funny, thoughtful and simply great articles in PF blogosphere:

One of the bloggers might not be able to retire by 40. Find out why: Retirebyforty Biggest Obstacle #1 @retireby40

You have debt and you are thinking about tapping into your 401K. Smart or stupid? Read  Tapping Your 401K Plan: The Pros and Cons of Taking Out A Loan @Spurce Up Your Finances

Want to get a job but don’t want to work in an office? Be careful and know How to Avoid Work At Home Scams@MomVesting

Planning on giving a special gift to a special someone? Read Homemade Holiday Gifts That Won’t Collect Dust@Frugal Confessions

Have some fun with Funny Money Comic 7, Passing on Lattes @Money Reasons

Don’t like to tip? Like to tip? Express your opinion after reading Is Tipping Getting Out of Control @Squirrelers

Wondering how to handle a homeless person when he or she asks you for money? Read Should You Give Money to Beggars and Homeless @Get Happy Life

Dreaming about winning a lottery? Organize your thoughts while reading How To Deal With $10 Million @Ultra High Networth

Feeling lazy lately? Lazy Pays Pretty Well @Minting Nickels

Like cartoons? Love personal Finance? You will love Samurai’s Jack Guide to Personal Finance @Saving Money Today

Hate being rejected? Does rejection discourage you? A must read – You’re Rejected! How I Use Rejection To Motivate Me Every Single Day @Financial Samurai

Holiday stress is getting to you? Find out Tips To Reduce Holiday Stress @Frugal Zeitgeist

Store Credit Cards for Holiday Shopping?

This is a guest post by Tim Chen who is founder and CEO of NerdWallet.com, a website that helps consumers to find rewards credit cards.  Tim also educates consumers about credit cards and debt management at the Forbes Moneybuilder Blog, the Huffington Post, and the Christian Science Monitor.

Between overly aggressive sales clerks and cryptic PA announcements, shoppers could be led to believe that store credit cards are hotter than $499 HDTVs this holiday season.

Store cards have high interest rates, lousy credit card rewards, and none of the benefits of your average card, but all too often customers will look right past these issues and only see the initial discounts. So for those who can’t be talked out ofapplying for store credit cards this holiday season, know that using them wisely can still save you money and raise your credit score. Here’s what you need to know to get the most out of store cards, and avoid getting taken to the woodshed.

Do Your Research
Don’t give into pressure to apply for a card where you rarely shop. Just because it offers you 10% off your first purchase doesn’t mean its actually going to save you money in the long term. On the other hand, if you’ve been considering a card for one of your favorite stores, do a little research. Which cards offer the best rewards?

For instance, Kohl’s sends 15 to 30% off discount coupons 12 times a year, plus pick-a-day savings six times a year if you spend $600 within 12 months. Best Buy offers 0% interest offers for big-ticket items and, when you use your Best Buy rewards card with your Best Buy credit card, you’ll earn extra bonus points. These are two of the best offers for frequent customers.

If you make the decision to open a card for a store you know you’ll shop at frequently, pick your day appropriately. Don’t open your new JC Penney’s card on a transaction where you’ll only be spending a few bucks. Save your 10% bonus savings for a day when your total is high and you can maximize the rebate, but don’t go so high that you won’t be able to pay the bill at the end of the month because the interest charges will mitigate the benefit.

The Macy’s credit card offers two consecutive days of savings – so apply for the card on a day when you know you can shop both days, preferably the day before a new, big sale.

Pay at the Register
Worried about getting into trouble with your store credit card and its 22% or higher interest rate? Carry cash and make a payment – in the same amount as your purchase – immediately. The clerk may roll her eyes and the credit card issuer won’t be thrilled, but you won’t have to worry about remembering due dates, keeping track of grace periods or setting aside the cash for the bill.

Keep a Budget
Those zero percent interest credit card offers from stores like Home Depot are very appealing for big-ticket items. But if you don’t pay off the balance before the introductory rate expires, you’ll get jammed with even more interest than you though.  The way these work is that you get charged interest retroactively for those months where you thought you were paying 0%, which won’t save you any money.

Set a budget for your purchase. If you just bought a home theatre system for $2400, including taxes, warranties and installation, with no interest for 12 months, make sure you can afford to pay $200 per month on the card. Also understand the difference between no interest/no payments and simply “no interest” offers. If you have “no payments,” keep that money in the bank, but make sure you set it aside where you won’t be tempted to touch it, since the payments will come due in the end.

Use Store Cards to Improve Your Credit Score
Your FICO credit score will take a few dings (3 to 5 points) whenever you apply for a new credit card, since recent credit checks count against you. And it’ll take another hit (up to 10 points) when you open a new account. But like any credit card, a store credit card can help your credit if you play it right:

– FICO counts retail and gas cards as “diverse” revolving credit, and a better mix of available credit aids in 10% of your credit score calculation.

– Since you won’t be keeping a balance on the card, you lower your credit utilization ratio, which makes up about 30% of your credit score.

– And paying your bills on time and in full also helps your payment history, or 35% of your score.

– The longer you keep the account open, the better it reflects on your credit score, since length of credit history makes up about 15% of your score.

Don’t give in to those impulses to get a store credit card just because you’ll save 10% on your $10 purchase in a store you visit once a year. Just tell the salesperson something like, “I just bought a house/car,” or – in the case of a really aggressive clerk – “I’m in bankruptcy.”  That’ll shut them up pretty quick.

Why Women Lie About Shopping

This article is not a generalization. It represents my observations only.

One of my married friends always goes shopping alone. She always pays cash. Why? Because there will be no monthly credit card statements and no paper trail. There will be no questions from her husband about what she bought while shopping because she won’t show him her purchases that are tucked away in the trunk of her car.

Her husband will never know about the three pairs of shoes that will later be put into her closet. Or the new pair of jeans that she will wear when they go to the movies. Or the new skirt she will put on for a day at her office. He won’t know, he won’t ask questions and he won’t suspect how much was spent.

If we don’t point out to our husbands or boyfriends a new wardrobe piece that we are wearing, would they eventually notice? The majority of men don’t notice which also means that they don’t ask “Is that something new?” Even if they do ask us, those of us who don’t want to admit that a piece is new, indeed can always say “Oh no, I’ve had this forever.”

Even if we do show what we bought while shopping for new clothes, we still might omit or alter one very important fact such as … the price. We might tell a partial truth about an item that we have just purchased.

Why do some of us keep our wardrobe price tags a secret in spite of the fact that we work, earn money and want to look good?

Maybe because we are feeling guilty about spending money on ourselves when we can be spending on our kids, or paying off debt, or putting it into savings, or investing it into our future.

Maybe we think that we overpaid for a great looking dress. Sometimes we do overpay but we don’t want to admit it, even to ourselves.

Maybe we think that the price is irrelevant. Receipts are shredded, price tags are destroyed. We lie about it … well… because those damn shoes are worth it.

Maybe when we come back from a store, we don’t want to be interrogated: “Why did you buy it? How much did you spend? Couldn’t you get anything cheaper?” Or even better “How many shoes (skirts, bags, jeans) do you need?”

And the final Maybe:

Maybe being financially honest and having full disclosure means having similar goals, workable budgets, understanding and most importantly accepting each other’s spending habits.

Five Reasons To Stop Being Frugal And Get A Life

This post was inspired by Invest It Wisely and his post Challenging Your Thoughts and Beliefs.

This post was featured as an Editor’s Pick in Carnival of Personal Finance #286.

This post was included in The Best Personal Finance Articles of 2010 by Free From Broke.

I like spending money. There… I said it. I like shopping (if you didn’t know that, read about it here). I like going on vacations even if it means only a two day getaway to some place I’ve never been before. I like eating out with my friends. So, overall I like spending money and I don’t feel guilty about it. Or even worse – I don’t feel like a fool who is parted from her money.

Some people like saving money, some people like spending their hard earned dollars. It is a personal choice. Do you believe you can be frugal and not be afraid to spend money?

A frugal lifestyle could require a lot of work, time and patience. It could overtake your life. It could control your life in the following ways:

1. You spend endless hours researching, exploring, shopping around for good prices and deals. A frugal person like you understands that shopping is not fun. It is hard work comparing prices, planning and timing your purchases, organizing your schedule to accommodate your shopping trips so that you can get precisely what you need for exactly what you want to spend on it. Instead you could be walking in the  park with your dog, playing with your kids, spending time with your friends, visiting your parents, reading a book or watching the news.

2. Your hair will eventually grow out of control, lose shape and style. But, being a frugal person you cannot justify spending more than $20 for a haircut. Annually. You decide to cut your own hair, even though you cannot see if you cut it straight in the back. Instead of looking stylish and preppy, you choose to look frugal. Come on… what is really important? Definitely not looks. Substance.

3. You separate the 2-ply toilet paper rolls into 2 separate rolls. You even start considering to use newspaper instead of a toilet paper. You wash and re-use plastic storage bags. You make your own soap and you tell yourself it is better for your skin (and it probably is). You cook at home all the time. Why go out and pay someone to serve you the same food you can make yourself? Time consuming? Yes. Boring? Probably.Instead you could be … see #1 above.

4. You don’t want to pay money for cable or the Internet. You sign up for your local library to get free books, magazines and movies. You wait for months because all popular books and movies are taken, and the waiting lists are huge. However, you don’t mind waiting because you don’t have time to read or watch movies. Insteadof reading and watching movies, you are busy cooking, cutting out coupons, making your own soap, unrolling and rolling toilet paper and washing plastic storage bags.

5. You don’t go on vacations because they cost money. Instead you take naps and dream of places you have never been because that doesn‘t cost anything and gives you so much needed relaxation.

If after reading this you are still considering frugality is a way of life, think twice. And for Goodness sake, go get a life!