Learning to Behave, Financially

Personal finance bloggers give a lot of advice on what to do to save money or how to set up a budget, but it is a well-known fact that personal finance success is mostly reliant on your behaviors and patterns.  We all know that we should be saving some money for retirement and that a “rainy day” is coming sooner or later, but how can we put mind over matter?

Start small.  You may be gung-ho on getting your financial life turned around, but it often isn’t realistic to implement your plan in one day, one week, or even one month.  Instead of planning to do it all from the start, incrementally work your way towards success.  For example, if you eat out for lunch every day, start bringing your lunch one or two days a week.  If you spend substantially less than when you eat out, such as bringing a $3.00 frozen meal instead of spending $10.00, transfer $7.00 to your savings, or allocate that amount to your debts.  If you equate your behavior to actual money in the bank, you are likely to keep it up as you see your progress. 

Track your progress.  How many times have you made a perfect budget only to get so busy that you don’t track what you spent money on?  Let’s face it; not all of us are accountants with a love to tracking every cent that comes in and out.  Automate by using Mint or Everydollar, which sync bank and card accounts using a phone app and a web login.  Couples can stay in sync on income and spending by merging finances.  If a couple can get on the same page with money, you likely can conquer most other marital spats that come up over the years. 

Personally, I love tracking changes in my net worth over time.  If you have software that lets you download your finances, you can do this in Excel or run a report.  I use Quicken, but I am a dinosaur and now have to pay for Quicken, and I will give a crash course in a post later this month!  An alternative is to list all your assets on the top of a page or spreadsheet and list all your debts below.  Add up both assets and liabilities, and then take the difference of the two.  This is your net worth. Hopefully your assets are more than your liabilities, but I too once had a negative net worth.  It takes time and focus, so don’t let this number stop you before you start.

Net worth Report from Quicken Desktop 2020

Set attainable goals.  Instead of only making one big, fat, hairy goal, break it down into baby steps.  We all want to have a net worth of one million dollars when we are just getting started, but it takes years of good behaviors.  If you set out to save a million dollars for retirement, work backwards to figure out how much you will need to contribute at a historical rate of return that matches your investment risk levels.  Most retirement fund websites have calculators that you can plug in the number of years you have to work and the amount you want to retire with.  If you are paying off debt, list them out and make a game plan.  When you pay one off, celebrate a little and look forward to the next win!

Reward thy self.  If you set savings or debt reduction goals, and you meet them, be sure to splurge a little on one night out or a new clothing item.  You should set a limit for yourself, say $50, for a monthly treat, or maybe as much as a few thousand when you meet a major goal such as saving up three months of expenses or paying off all your consumer debt.  Of course, don’t go into debt or reduce your emergency fund to have fun, make sure you earmark new cash for this purpose.  Just as you sacrifice to complete a degree or get your kids through school, changing money behaviors is just as much of an accomplishment.  Change your behaviors slowly and they will become habit, which will show in the long run.

What’s your worst money habit?  Leave me a comment on my blog page!  

Easy Tips for Making Your Savings Goals Achievable

For many people, saving money in a bank account is a real struggle.  Everyone knows they should save, but many are confused on techniques to be successful.  Questions such as “should I save for retirement or an emergency fund?” or “how can I save in my already strained budget?” are common.  I will touch on a few roadmaps and strategies I have used to become successful at saving money.

The first technique I use seems pretty simple.  I just use my workplace 401(k) plan to scrape my retirement savings off the top before I even see my net pay.  Think of this like a tax payable to you at some point in the future.  While Social Security is somewhat of a safety net, it likely won’t provide enough for a comfortable retirement, especially with the rising costs of healthcare.  Saving something, especially in your younger years, will pay off big because the money has more time to grow.  If you start saving later, then you will likely end up having to more to retirement, with less time to let your investments compound.

There is no hard and fast rule about how much you should allocate to this, but the more the better.  Dave Ramsey’s retirement page suggests 15% of your gross household income, not including any company match.  While 15% is a great number to shoot for, this may be difficult for those just starting out in their field or those that have student loans weighing them down.  In addition to Dave Ramsey’s site, Fidelity also has a great set of calculators you can use for free to get an idea of what you need to save.  If your company has a match, contribute at least the minimum to receive the match because this is “free” money, or at least extra compensation that can grow and can be worth much more down the road.  If you are up to your ears in debt, then I would recommend stopping any retirement saving and putting every extra cent into paying down high-interest debt.  Another tip, don’t turn down your savings so that you can “afford” a new car with a high payment or a house that is too expensive.  The older you, at age 65 will thank you for having self-control!

The second technique is using a zero-based budget that includes a line item for saving.  Now that your retirement fund(s) are automatically accumulating, you don’t need to have a line item unless you have separate accounts that pull from your net paycheck or net income, if you are self-employed.  Start with your expected monthly net take-home pay and list out your expenses. 

You should have some room built in for savings.  I typically plan out my expenses for each paycheck and there is something left over.  Sometimes it is a small amount, other times it can be a good chunk of money.  Maybe you can’t save on some paydays but can save more on some others?  Either way, you should have savings for an emergency fund, then savings for other goals such as a new car, house down payments, college tuition, and so forth.  If you don’t have anything special to save for, really evaluate your future needs for big-ticket items and plan for something to need replacement.  There is always something that you can be saving for to avoid going into debt in the future. 

If you don’t have enough money for savings or extra debt payoff, you need to think about what you can cut to get more money in your budget.  If you have cut to bare-bones and are still coming up short, think about how you can grow your income.  Side hustles, or second jobs, are a good way to plug your budget holes, especially if the cash flow crunch is temporary due to paying off debt.  If the shortage is permanent, think about what you can do to increase your income permanently, whether applying for better paying jobs, or re-training for a more lucrative career. 

My last tip is to always be looking for “found” money, or windfalls.  These can be great ways to build up your savings faster than planned.  Income tax refunds, credit card cash back checks, birthday gifts, or refunds are all common and can boost savings quickly.  Also look around the house for items you no longer use and try to sell them on Craigslist, LetGo, NextDoor, or FaceBook Marketplace.  Social media makes it so much easier to sell things quickly while decluttering our homes.

Be sure to sock that money away in a safe, FDIC insured, high-yield savings account.  Some online banks are offering accounts with yields between 1.5% and 1.75% APR.  This is far better than the standard .05% paid by many large national banks.  You can visit NerdWallet.com for a review of the best savings accounts, plus ones with one-time bonuses for depositing larger amounts. 

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So, you want a Great Dane? Financial lessons learned in pet ownership, Part 2

This is a continuation of another blog post from March 25, 2020.  If you haven’t read part 1, please click here to brush up on the first part of the adventure.

Veteran’s day weekend was pretty eventful around my house.  It wasn’t planned that way, but things aligned and became interesting and a little exciting.  As you recall from part 1, I was begrudgingly watching Bolin, my friend’s Great Dane, while my two females were in heat.  I justified it in my head by telling myself that the dogs had all be together in the past while in heat and nothing happened, so maybe they just weren’t interested since they were all like siblings.  I was wrong! 

On that fateful Sunday afternoon, I was vacuuming the house and I overheard a yelping sound coming from my office.  I went to see what the matter was and found Spice and Bolin “locked” together.  I was a bit shocked and wasn’t sure what to do.  Then, I heard someone pull up in the driveway.  It was my friend Evan in for a visit with little notice.  I told Evan and his friend to stay outside for now and what was happening.  I went back inside and they had magically unlocked and seems okay, other than a nasty smell, which I found out is normal after this type of incident.  Well, I thought maybe nothing happened since it was under ten minutes.  I was wrong, again!

Life went on normally and I monitored Spice for signs of pregnancy.  The first indication was that she stopped bleeding from her lady parts within a day.  Then, a few days after, she had morning sickness a few time and was overly affectionate and very adorable with her neediness.  In mid-December, I noticed spice getting larger with her belly and teats protruding.  I made an appointment with the vet for confirmation.

The next week, the vet confirmed little puppies were growing inside Spice.  Cost of this quick appointment was $200.  I then made the announcement via Facebook and Instagram in case anyone was interested in a puppy.  Luckily, I had a few people express interest.  About a week later, Christmas had almost arrived and I had plans for a family gathering on the big day.  I was out with the dogs in the yard and watering the yard during our dry December, and suddenly Sugar and Spice were in a fierce fight with blood drawn.  My heart raced and my first instinct was to yell.  That did nothing, so I tried pulling them off each other.  After about ten minutes, I managed to separate them and get Sugar in the house.  She was torn up pretty bad.  Spice fared a bit better but still had cuts and wounds. 

Great Dane with day old puppies
Spice with her day-old puppies by W. Vance

The vet was booked, so I took Spice to an emergency vet and about $400 later she was okay.  It was Christmas Eve, so I couldn’t get Sugar in as well.  The day after Christmas, I got Sugar in and her wounds were starting to get infected.  After $700, she was okay and on the mend.  Now I had to separate them in the house.  In between I took Spice to the vet and she had an x-ray to verify the number of puppies I could expect, costing a cool $200.  Low and behold, January 10th, 2020 came and the pups were born.  Everyone was okay for a few weeks.  Then came January 31st.  The pups and Spice were vomiting and had the runs.  Back to the vet for another $1,100 round of treatments.  I was relieved that they were okay while my credit card was feeling the pinch.  Luckily Citibank offered me 0% on my card for 10 months with only minimum payments.  I figured I could just pay it back with the proceeds of selling the puppies.

Fast forward to February and all was good.  No fights, no sickness, just a lot of poop, puppy food and pads.  At one point I had a box of puppy pads coming from Amazon every five days.  All of the supplies and food ran well over $500.  At the end of February, it was time for the puppies to get their first shots.  That went alright, except one pup had a slight heart murmur, and she was reserved. Luckily the new owner felt a connection to her and still wanted her for the full price.  I was relieved, but not after another $475 bill for the shots and exam.

Then came March 6th, 2020.  My old friend Kate, from my high school days in the 1990s, came out to pick up her puppy.  By this time I had reunited Sugar and Spice after testing the waters with muzzles and all seemed okay, so we seemed to be getting back to normal.  My judgement was a little premature.  There was a great deal of excitement when my friend arrived and the girls got into a big fight again.  It was in the house this time and I tried to grab Spice by the collar and get them apart.  In an instant I was bit and my hand was squirting blood.  I still tried to get them apart and managed to get them in separate rooms in a couple of minutes.  There was blood on the walls and all over the dogs.  The puppies were okay as they were separated in a separate room.

I cleaned up my hand and thought I’d be okay, so Kate and I went to dinner.  My hand began to throb more and more and the glass of wine didn’t seem to help much.  I got back home and Kate went on her way with the puppy.  My roommate washed up the girls and cleaned their wounds since my hand was in paid and not very usable.  It was so bad I could barely type and ended up missing an assignment.

Saturday, my hand didn’t get much better.  In fact, that night it got worse.  Sunday morning, I got up and went straight to urgent care.  After about an hour of waiting, the doctor said you need to go to the ER.  I went to the ER, and they saw me.  It was bad.  It was infected and my hand was swelling more and more.  They decided to admit me after sticking an IV with antibiotics in me. I had an MRI and went to a room where I waited while they decided what to do.  About 7:30 that Sunday night, the doctor came in and said we would likely need to operate.  My swelling went down a little and the paid was somewhat manageable. 

The next day I awoke and waited to hear what was happening.  Around 9:00 am they came in and told me they would for sure operate.  I mentally readied myself to be knocked out and have my hand cut open.  At this point I just wanted to feel better.  I worried about the costs, but I do have insurance, so I knew the worst it could be was my co-pay.  After a successful surgery and several days of healing with IV antibiotics, they released me from the hospital. 

Now that a few weeks have passed, the bills have rolled in and I will hit my out-of-pocket max of $3,500.  Couple this with another $700 in vet bills to clean up the girls after that fight and I’ve managed to lose about $2,800 on having a litter of puppies when you consider my out-of-pocket medical costs. If I didn’t have insurance, the retail value of my treatment was well over $40,000, and I’m still going to physical therapy to regain full use of my left hand.  I always did say I was doing this for the experience of raising puppies and not for money, and I sure did get my money’s worth, didn’t I?

Leave a comment explaining a time your gut was saying “NO” to but you said yes against your better judgement?

Why you should pay your rent or mortgage during the COVID-19 crisis

The health and economic ramifications of the coronavirus outbreak seem to get worse with each passing day.  Despite a massive stimulus plan passed last week, retailers announced the furlough or layoff of approximately 600,000 workers.  Top management at many firms are taking huge pay cuts for the time being and even corporate-level employees are getting laid off.  So it seems that paying rent for so many of these people should be the last thing on their priority list, right?

Wrong. 

Even if you don’t have the cash to make your April 1st, 2020 payment, on-time, whether for rent or mortgage, you should try to reach out to your landlord or mortgage servicer and let them know today, rather than in two weeks.  While the ramifications of the COVID-19 outbreak aren’t your fault, they also aren’t your landlord’s fault.  Landlords, and even the large companies that own apartment complexes, depend on rental income to pay their employees and put food on the table.  They are still obligated to fix your unit if something goes wrong and maintain the grounds whether that entails plowing snow or greening up the grass as spring arrives. 

But I lost my job and was living paycheck-to-paycheck before all of this happened!

This situation is totally understandable, and millions of Americans are feeling the pinch.  It is estimated that 78% of U.S. households live paycheck-to-paycheck.  However, you should have applied for unemployment benefits and with the increase of up to $600 per week in benefits, you should be able to make good on your rent between that and your stimulus check due in about three weeks if you received your last tax refund via direct deposit.  Sit down and make a budget.  The first thing you need to do is eat, second, pay utilities, and third, pay rent or your house payment.  If you are in a bad predicament, don’t be afraid to take advantage of food stamps or local food bank programs.  It may be a hit to your pride, but help is out there if your situation is so bad that you have to choose between food, heat, or paying to keep the roof over your head.

Turn your financial life around!

If you are scared and worried about your finances and cannot make good on your obligations, this is the best time to turn your financial life around.  Visit Dave Ramsey’s site to get tips on turning your finances around.  Not being able to pay your rent should scare the living daylights out of you and make you want to question how things got so bad, so quickly.  While it is nice that many governors and mayors have outlawed evictions, foreclosures, and late fees for the next 90 days, eventually, you will have to pay the piper.  I’m sure you have heard the saying “there’s no such thing as a free lunch.”  The same applies for rent.

Think about the big picture

When you don’t pay, you are contributing to the continued slowing of our economy.  Believe it or not, it’s not just big shots on Wall Street who have investments.  Most mortgages are securitized and managed by real estate investment trusts, or REITs, which have issued stock and are owned by little people through mutual funds in 401(k) plans.  Moreover, if the Fed buys mortgage backed securities to get more cash into the economy, it’s the taxpayers (you and me) who are on the hook when people don’t pay.  So do what you have to, but try to pay for your housing as soon as you can.  With dedication and perseverance, our situations will improve, and hopefully your financial habits will change for the better so you can weather the next economic storm with a healthy savings account.

Leave a comment!

If you lost an income stream or have seen a decrease in pay, what are you doing to keep your bills paid? 

So, you want a Great Dane? Financial lessons learned in pet ownership, Part 1

Sugar Lynn the Great Dane at 3.5 months of age by W. Vance

Life is a continuous learning adventure.  We often do things because we think the grass is greener on the other side, or we just want something so bad that we just make it happen at the expense of many other things.  Other times we are just too nice to say no to others and know we’ll regret it later.  Both of these behaviors have gotten me into some personal and financial stress when it comes to my dogs. 

In November 2016, two of my best friends got a Great Dane puppy.  When they were talking about getting such a large dog, I was criticizing them, telling them they were crazy to want such a large, pony-like, canine, but I soon found out what an amazingly loving, goofy breed they are.  About a week before Thanksgiving, Bolin, their new puppy, arrived in a crate on a jet plane.  My heart melted and I was in love.  That night I was canvasing puppyfinder.com to find my Great Dane.  I joked about getting a female and all of us having a litter of puppies someday.  Well, the Saturday after Thanksgiving, my little bundle of joy arrived.  Her name is Sugar Lynn, who got the Sugar part of her name by default because she was so darn sweet I kept calling her sugar.  The name stuck and I added Lynn since she is from the Eastern hills of Tennessee. 

By the time Sugar had arrived, I was well over $1,000 into this, plus puppy food, and then she had “the runs” and I was worried sick.  I immediately made a vet appointment, which costed in excess of $200, but she was okay.  Then there were vaccinations, which with each exam, ran about a $100 each time, until she was fully vaccinated after three trips.  Food for one great date can cost between $60 to over $100 per month, depending on how far up you decide to go. 

In April of the next year, I wanted to get Sugar a playmate.  I looked at another puppy, but thought I would try and adopt.  I found a big Euro Dane named Diesel in the San Francisco Bay area.  I paid the $400 adoption fee and gave him a try.  After a few weeks, I was feeding him and he bit me.  It hurt badly, but I was okay and managed to not go to the doctor.  I was scared of Diesel, arranged to take him back to California and let them keep my donation.  I was out several hundred dollars at this point and no second Dane. 

Baby Spice at eight weeks of age sleeping on the outdoor lounge by W. Vance

I decided a puppy was again the best course of action.  I found another little girl for sale for $700 in Tonopah, Nevada, about a four hour drive from Reno, and arranged to get her Memorial Day weekend 2017.  That is when Spice came into my life.  She was seven weeks old and cute as a button.  Vet-wise, I did the shots and exams, bought good food at Costco, and things went pretty predictably until last November, when I decided to let Bolin stay at my house for a few days while his owner was out of town and both my girls were in heat.  This is where the real fun **sarcastic laugh** begins.

To be continued next week! 

In the meantime, what, if anything, would you do different regarding your pets?  Maybe it’s how you went about acquiring an expensive breed, or vet bills?  How do you maintain the best life for you pets while not blowing the bank? Leave me a comment!

Looking on the bright side of things: Unintentional savings during the COVID-19 lockdown

Another day of social distancing, self-quarantine, and isolation is in the books in hopes of curbing the spread of COVID-19.  The debate continues in Washington, D.C. on how the economy should be propped up, and the stock markets took a little more of a stumble today, which is seeming the new normal.  This prompted me to think about controlling my outgo as opposed to hoping for a government bailout.  This lockdown of society is helping me to spend less.  I thought about how my inability to go out to dinner with friends, shopping malls, or the movies has cut my spending in recent days.  My gasoline usage is down about 90% from normal.  Not to mention the fall of oil futures has impacted the price we are seeing at the pump, which is compounding the savings. 

I did go out on Saturday, sanitary wipes in-hand, so that one of my Great Danes could get her scheduled vaccinations, and happened to be near the Home Depot.  I stopped in for a few items needed to get some things done around the house.  Besides reading, homework, and intensive home sanitizing, I have been able to get outside and start some spring projects such as pruning and recovering the backyard from the dog-pee fest that gets left unchecked because of the cold weather.  One of the Items I picked-up at Home Depot was a Simple Green Outdoor Pet Oder Eliminator.  This was my cheap Saturday entertainment! 

Normally, I would be going out the get lunch and hit up multiple grocery stores for sale items and impulse my way over budget.  However, to reduce exposure to the outside world, I made a list and sent my roommate and friend out to execute my list, which saved me money because he is great at not adding extra items to my list.  I also didn’t get to go to other stores like Marshall’s, Target, or Kohl’s for the same reasons, or the fact they are closed.  To boot, I have been eating at home since I’m working from home, which is saving me at least $10 per day over going into the office.

Your savings could be growing! Image courtesy https://www.myfinance.com/how-to-save-money/

I also have been making due with what I have because it is more difficult to just pop out to the store.  Instead of shopping for a new rug for my office that was recently re-arranged to make it more work-from-home friendly, I remembered I had a rug shoved under my roommate’s bed.  Albeit, it is eventually going back to the living room when my roommate moves his stuff out, it’s better than nothing under my office chair, which has a tendency to mar the floor if not on a rug.  Quite often our propensity to easily go out and buy something new makes us forget about old things stored away in closets or the garage.  I am planning to use more of this time to go through and really assess what is needed and what can be donated when this all passes.  You may be surprised at how those clothes fit that you put away two years ago?  Maybe you’ll fall in love again with that pair of jeans or a shirt that you had forgotten about?

In this time of uncertainty, get your mind off the news and think about the bright side of things.  Maybe you are like me and working from home and saving all that commute time?  If so, make sure you are using that time productively.  Make more food at home, try to resist ordering out unless you are financially secure and just have those funds in your budget.  We will make it through COVID-19 and eventually, things will return to normal. 

Have you been able to save money on day-to-day expenses like food, gas, or groceries?  Have you been able to cut childcare expenses if you are working from home?  Reply to this blog post and let me know! 

What chould you be doing with your money in these unprecedented times?

As I write, our economy is coming to a screeching halt.  Life is going from freedom to confinement at home.  It almost feels like you are taking your life in your hands to leave to go to the grocery store, where controls have been set up to stop overcrowding and hoarding of commodities.  Large, multi-national companies such as GUESS, Bath & Body Works, and The Cheesecake Factory are either closing their doors for at least ten days or highly modifying operations to combat the spread of COVID-19 (Coronavirus). 

Hopefully you aren’t on the receiving end of any financial impacts from these closures through layoffs or furloughs.  If you are, I send my best hopes that you have a plan in place and an emergency fund.  Our leaders in Washington are trying to minimize the impact of this outbreak on our economy.  Today there is talk of potential cash stimulus being sent out in the form of $1,000 or more checks to individuals.  Such drastic measures seem to be gaining bi-partisan support and if leaders really do act swiftly, we could see money in the next two weeks.  So, what should you do if you get some extra money from the government?

First, remember why this money is being sent out:  to help people cope with unexpected expenses or loss of income due to COVID-19 impacts.  Perhaps you end up getting laid off from your restaurant or retail job, without pay?  You need to save this money or keep the lights and food going in your home.  If you do lose your job, try applying for unemployment insurance through your state.  Don’t be too proud.  It is meant for us in times of need! Even if you are currently secure, the most prudent thing to do would be to add this to your savings for now.  Perhaps in a few months this will all be over and will be remembered like an apocalyptic movie.  If that scenario pans out, then go spend your windfall this summer.  The worst-case scenario would be you losing your job due to a continued downturn in the economy.  In this case, you again need that extra money.

Image credit: https://tenor.com/view/trump-stock-market-explosion-down-gif-16459871

For those of you with investments that are tanking due to the markets almost literally going off a cliff the last two weeks, just hang tight.  Hopefully you weren’t planning on retiring in the next week or two since you hadn’t reallocated your funds, so you’re in it for the long run.  Just keep working as long as you are gainfully employed and contribute like you have been.  If you can, it is a good time to ratchet up your contributions because stocks are on sale and your contributions to retirement plans buy more shares! 

If you have cash well beyond your emergency fund of three to six months, it may be a good time to buy up some cheap stocks now, or in the near term, of companies that have been dragged down but have great long-term prospects.  I can’t believe how discounted UPS and FedEx shares are since people are now stranded at home in many areas with only e-commerce to scratch that retail therapy itch.  Also, some strong retailers such a GUESS and American Eagle Outfitters have seen their stock dump by as much as 75% since last month.  Although they will be closed for ten days, it is highly unlikely solid companies will go under and within a year, it is likely share prices will return to where they have been in the past year.  If stock picking isn’t your game, then buy an index fund that follows the DOW or S&P 500.  If you have cash to invest now, it is likely you will see the biggest rewards for buying when everyone else is running for the exits.

These are just a few suggestions on how to manage your money in these uncertain, yet opportunistic times.  I would love to hear how you are managing your finances today.  Are you doing the same thing as before, are you saving more, investing, or doing something completely different?  Leave a quick comment below!

It’s also a great time to give money or time to those in need!  If you can spare it, see if you can support those in need in your local community.

Lessons Learned: Getting Through College Debt-free

Are you thinking about getting your first degree, or perhaps a master’s?  We all know paying for college is expensive and sometimes it feels nearly impossible to think of paying cash all the way through.  I felt that way once I got into my bachelor’s degree almost a decade back. I did my research and figured out exactly how much per month I would need to pay to ensure my student loan was paid back at the end of each term, and if paid back within six months, any accrued interest would reverse. Sounds like a great plan, right? 

Well, things didn’t start out too well.  Once school started, I also wanted a new truck. Instead of just driving my nine-year old, 2005 Altima, I ran up a $34,000 auto loan, which I rationalized by talking about the low interest rate I received, as if this validated spending roughly two-thirds of my annual salary at the time. That first great big $480 loan payment came due a month and a half later and I was deep in auto and student loan debt, with no way out for a long time.  With ballooning debt, I pretty much ignored my new school loans and pretended like they didn’t exist.  

The one saving grace, or so I thought, was the $5,250 tax-free, annual tuition reimbursement I had received from my employer.  The problem here was that I was taking loans for education and then used the later reimbursements for other things I wanted.  Again, no discipline on my part and a mistake that still haunts me today.  

Fast forward about 18 months and I was now receiving job offers to get into accounting.  I was excited to leave retail, but would now owe back nearly $10,000 in tuition reimbursement because I left before completing a year of service.  How would I pay this back? Drumroll! Tap my 401(k) proceeds to pay them back. While better than taking out more debt, it was a serious blow to my retirement savings, that I’m still recovering from because of the missed growth from 2014-2019.  

I did wise up around late 2015.  I moved up through a couple different positions and increased my income.  I made it a point to stop using student loans once I got stabilized at my job and got some permanent tuition reimbursement going.  Now, I use that reimbursement to fund my next semester and any overages, I make up in cash. My last student loan was on December 27, 2015, and I managed to pay cash through Graduation in September 2016.  I managed to pay about $10,000 out of pocket, so I walked with $42,000 in federal student loans.  

When I went back for my master’s in 2018, I had a new plan!  I only went back when I had a job that would pay for my degree and if I could make up any differences between reimbursements and costs.  I also held myself to having the cash to pay my tuition when it was due, or a credit card paid off, in full a month after before interest accrued.  This strategy has worked very well. I am in my last semester of my master’s program and have paid off over $4,000 of old student loan debt and paid for current school.  

Each time I had a plan, but what was different? Execution and sticking to the plan. At age 32, I still felt compelled to have new things and not reign in the spending, while today, at 39, I kept driving my paid off truck, put tuition reimbursement back into paying for the current semester by floating a semester on my rewards card for a cycle. I did use credit card debt, but very carefully and have always paid it off without interest and never used a balance transfer to achieve my goal here. I also had the cash on-hand to clean up the mess quickly and wasn’t hoping a next paycheck could cover it. One other difference was going to a state school for my masters instead of an online private school. University of Phoenix, where I earned my undergraduate degree, charged approximately $1,900 per upper division course for tuition and fees. At my state school, graduate classes have been about $1,300 per class for a graduate degree. I won’t even get into how many great people I’ve met who I think will be instrumental in my career in the future as we all graduate hopefully move into management roles.

What tips can you share on getting through college debt-free? If you have loans now or payments coming due soon, how will you manage the extra financial weight?

Expecting the Unexpected

Remember the saying “life is what happens when you’re making other plans”? It’s the absolute truth.  As I sit here on day number four of my hospital visit, I am thinking more and more about how the medical bill copays will pan out and if I’ll make it back to work in time to not have a lapse in my normal earnings, my anxiety grows, but isn’t as bad as if I didn’t have an emergency fund in place.  Many popular personal finance personalities recommend three to six months of expenses in a liquid savings account (not stocks or bonds!) but often fail to talk about how emergencies other than unemployment can come up. Dave Ramsey often mentions car breakdowns can probably be prevented or foreseen and are not always an emergency when you are getting out of debt. So, how can you better test your emergency cash preparedness needs?

Add up your normal expenses including food, transportation, housing, minimum debt payments, and any other necessities such as medical prescriptions. You want to base your amount of what you actually spent in the last several months, so tracking your expenses is important in planning for future expenses. Next, make sure you include and irregular expenses. For me, this includes auto insurance, property taxes, sewer, and HOA dues. You may not incur some expenses if you are out of work for a while. These may include childcare and excess fuel costs you may spend on due to a long commute. Don’t forget to factor in health insurance needs. If you lose your job, you can continue COBRA coverage, but it may be several hundred to over one thousand dollars per month.

Sum these amounts into a monthly amount and multiply by three to six months, depending on your employment patterns and economic conditions in your industry. You need to decide how comfortable you feel with the decided on amount. It’s okay if you feel the lower end is enough. Having some safety net is better than none at all.

Next, consider other emergencies. My recent trip to the hospital for a dog bite had been much more intense than I could have imagined. While I have a relatively low co-pay on my Health Savings Account (HSA) medical plan as recommended by Dave Ramsey, it is still $1,500, and there will be other random bills that may be out of network and not covered. Not to mention possible missed pay if your company paid leave runs out before you are better.

These are just some basic recommendations on what to plan for. What other emergencies do you plan for? Comment, and I’d love to hear your ideas!

Whose Financial Plan is Right for You?

Photo by William P. Vance

Depending how much you keep up on the advice given by well-known financial coaches Dave Ramsey and Suze Orman, you may, or may not, know the differences in their plans.  While both plans ultimately encourage you to become financially responsible and independent, their views on debt are vastly different.  Some people believe in “good” debt, such as fixed-rate home mortgages and student loans used to land a good-paying job while others, such as Dave, believe all “debt is dumb” and only accept a home mortgage made on a 15-year fixed payment schedule and is no more than about a quarter of your take-home pay.  How can you tell what plan is right for you?

credit cards, cash, checkbook
Taken by William P. Vance

I want to put it out there that I listen to the Dave Ramsey show via podcast and have done so since 2009 when we were in the depths of the Great Recession.  I started out on the Ramsey plan and swore off credit cards twice, but could never bring myself to cancel them and lose my fabulous credit score and the opportunities to easily refinance my home and get super cheap car insurance.  While I believe you don’t need a credit card to live a great life, I do feel like having a great credit score makes things easier, only if you have the discipline to say no to impulses and make credit purchases as part of your monthly budget and pay them off in full before interest accrues.  This advice falls in line with what Suze preaches and is the dead-set opposite of what Dave’s plan suggests.

So, how can I tell if Dave or Suze is better?  In a nutshell:  it depends on you.  If you have a history of not paying off your cards in full because you tend to just swipe, and then get anxiety when you get that little email showing your new statement-ending balance and cannot pay it off before the due date, then you are a candidate for Dave’s plan.  You need to go “cold turkey” and learn self-control.  Cutting up the cards is likely the route for you unless you can temporarily make it without your cards and pay off all of your outstanding debts and stick to a budget. 

If you have cards, use them to earn rewards or discounts, and pay them off by the due date and hit your savings targets, then you likely won’t be held back over time by credit card debt.  No matter which plan you follow, both Dave and Suzy believe in having an emergency fund of three to six months of expenses.  This emergency fund is like an insurance policy against life, and although it can be difficult to leave it alone when the big-ticket item is staring you in the face, think about how horribly you will sleep at night knowing that if you lost your job tomorrow you would likely be having a tough time making rent or your mortgage payment. 

The gist of picking the right financial plan is that there is not a universal plan for everyone.  If you have kids and an old car or house, the chances of an emergency cash situation occurring is likely and having car payments or too much debt only increases the chance of ruining your budget and financial success.  If you are single and don’t plan to have kids, you needs are different.  I believe that if you stick to Dave’s plan, the “baby steps”, you will ultimately win.  So the next time you decide whether to spend or save, remember my piece of advice:  no one ever said, “I sure wish I wouldn’t have saved that money for a rainy day”.  You can always act cautiously today and put off spending, likely making a wiser decision tomorrow.

Whose financial advice do you follow?  Share some of your favorite financial celeb’s advice in the comments below!