Making A Plan
Moms View Message Board: General Discussion: Archive September 2008:
Making A Plan
When DH was in Iraq, he got a pretty substantial re-enlistment bonus, with the added benefit of it being completely tax free. We were able to pay off all our debt; credit cards, both vehicles and a few other small things. Since he has been home the credit card has definitely skyrocketed. LOL Not bad things or small spending that added up. When I bought his motorcycle I put it on the card because the rate on our card way .5% better than motorcycle financing and because I wanted the pink slip on hand. We also put our Mastiff purchase on it (which was a heart attack in itself!!) and my ring upgrade DH decided I MUST have when he got home, and those cover a majority of what we owe.
I've been stressed out lately about the debt. Not making payments or anything like that, just the mere thought of having debt. So today I finally took the stand and made a plan to get the credit card paid off. It was both a relief and an excitement, because i'm getting it paid off a lot faster than anticipated. (Of course, as long as no emergency situations come our way!) So by January 2010 we will be 100% debt free (again!) just in time to get the prior year taxes back and plan a nice vacation... paid for up front!!!
Also... I wish we could both learn not to "impulse buy". I have tried and tried and tried but I eventually break. One day I suppose.
So.... do you have a "plan" you keep regularly against paying off debt or is it more of a month to month basis on what you can afford to pay? Do you have strict guidelines for things you put on credit? I keep getting echos in the back of my head from sophomore year math class and my teacher (Mr. Pace) lecturing us and budgeting and "must not" items to put on a credit card. I bet he never knew he'd make a lasting impression. LOL Now if I would just listen..... ;)
I personally wouldn't put a vehicle on a credit card. Our debts include our house and one car, which the car will be paid for in a little over a year. Then we will not purchase another vehicle until it's absolutely necessary. Huge waste of money. Huge need, but huge waste of money that you continue to lose and never get back.
The very few times we've had debt over the years, we focus on paying them off. That has meant doubling payments, going without something, and just cutting back in general. Typically when we put things on credit, it's just for convenience (like when we're traveling, but the $ is there to pay it off when the next bill comes). We personally live in a way where the credit cards are the last thing we reach for in our wallets. We do use it for gas, but that's basically for convenience and because I get a good rebate check from it. We have an emergency fund for unexpected things, and then we replenish it as soon as possible after taking from it. (Meaning we go without something, change plans, etc.)
With respect, for someone who seems to dislike debt so much, why do you continue to get back into it I'm wondering? Seems like you got a wonderful opportunity when your DH got his bonus, but taking that opportunity just made room for more debt. I think the mind set has to be completely different. You can't be thinking in the back of your mind of getting rid of debt just so you can make more. JMHO, and one that has made us financially comfortable for most of our marriage.
I think you have to look at what goes on your cc's. For us, it's either a convenience that will be paid for in the next billing cycle (like a vacation) or it's a big emergency, with a plan to pay it off very soon. "Fun' purchases are not made with credit at our house, again unless it's convenience. Fun purchases are made on credit when the $ is there and ready to pay it off. We are saving for jet skis over the next few years. We would never put them on a cc, and we will have to consider all the expenses that come with them (insurance, trailer, gas, storage). Everything has a price. The interest on cc's will eat you up, and you end up paying so much more for what you bought. I think you also have to look at why it's so easy for you to spend on cc's, or why you like to do it. Is there something else missing? Retail therapy is a short-term high, and doesn't solve anything. It only makes more problems.
In my situation I am trying not to use credit but I have had to lately to pay for basic bills. I did call my credit companies to ask for reduced rates in finance charges; which they gave me. BUT since I was late last month on a payment, by a day, mind you, the interest rate went back up.
I called to speak to an agent. I was on the phone with several. They can not change my rate for six months and they are receiving calls from the Phillipines! I had to change "agents" because they do not speak fluent English!!!!!
I think I just live with the realization that we will always have debt in some form. Part of that too is probably "retail therapy" although I don't know what the therapy part would be for? There are no underlying issues. LOL I don't spend extravagantly, i'm the one always hitting the sales and using my coupons. I'd say we have under $1000 of "swipe for convenience" spending... the rest is what I mentioned above. We have savings that isn't touched so I don't impulse buy to a point where i'm touching the forbidden money.
I dunno... maybe it will come with time.
Our only debt is our mortgage. Both our vehicles are paid for. We use credit cards often, but usually pay them off each month. One of the rules we are good about is NOT to put anything on a credit card that can't be paid off fairly quickly. A motorcycle or a pure bred pet, for examples, are luxuries that wouldn't be purchased unless we already had the money to spare.
We don't have any credit card debt. We pay off the balance each month. If we don't, we pay it off within a few months. Like this year, we charged our vacation, but we paid it off in 2 payments. We just don't buy things that we can't afford to pay off right away. If we want something big, we either save for it, or wait until dh gets his yearly bonus. We also have a pretty good sized savings if we do have an emergency.
The only debt we have is our house and one car. We got a very low interest rate on our car, but I am sure we will still pay it off early with one of dh's bonuses.
Before we got married, dh and I both had some credit card debt. We sat down, made a budget, cut back on going out, going out to eat for lunch, etc. They we came up with an amount to pay each month toward our cards. We started with one, and paid the extra each month until it was paid off, and then we moved onto the next one. I think we had 3 total. We started this when we got engaged, and a year later when we got married, they were paid off.
I hate the feeling of debt! It is just not worth it to me. We are the kind of people that drive our cars for 10+ years. Cars aren't a big thing for us. We like to take a nice vacation each year, so we usually just put a part of dh's bonus aside for that. But, we have even cut back on that lately. We have started just going to the lake with family, and the kids love it. It is so relaxing, and not very expensive. In fact, we are already making plans to do it again next summer.
I only put the motorcycle on the credit card because it was generously discounted at 3K below MSRP so the price was a great opportunity. Also DH was spending about $500/mo commuting to work in his truck and with the motorcycle he's averaging $120/mo. With .5% below financing and 8 months I still had on the credit card at 0% interest, it seemed like the smarter decision at the time for a savings in the long run.
Sooo.... another question:
How old were you when you got to the point of NOT regularly using a credit card? Is it something you've learned with age or as it always been a part of your spending?
Also.. I always find this interesting. (And it's NOT pertaining to anyone here. Just a generalization as I was reading a few days ago on bankrate.com):
-9 out of 10 Americans say credit card debt isn't a source of friction in their lives.
-75% of Americans say they don't put major purchases on credit cards.
-69% of Americans say they won't put any purchases on their card that they can't pay off immediately.
But.... the amount of credit card debt America is in speaks a much different tune. I just find that interesting. ;)
I've never regularly used a cc, except when I was in college. I was working 45hrs/week, paying for school on my own almost all of that time, and I just simply didn't have enough $. I paid it off after college. That's the only time I've used it regularly when I really didn't have the $.
It's really just a matter of budget. Try taking the cc out of your life completely for 6mths. or a year. If you don't have the $, you don't buy it. That's a pretty simple motto. If you have a savings, then you have money for an emergency.
We plan to have a mortgage debt until retirement age. We know we will have one vehicle debt off and on throughout. We had college loan debt for a few years after we got married as well. Those aren't 'bad' debts. CC debt is bad debt in that it can overtake you easily.
I didn't mean to imply that it WAS retail therapy, only to ask yourself that question. You mentioned "Now if I would just listen"
I guess to answer your original question - if we charge something that we can't pay for in one month, then we come up with a budget before buying it. It really needs to be paid off in 3 mths for us, or we won't buy it. If that means $500/mth for 3 mths, then we have to make sure we can pay an extra $500/mth for 3 mths. or we won't buy it. Our vacation $ and big improvements to the house come from DH's bonus each year.
I used credit cards when I graduated from college. I had some debt, but not alot. Mainly I used it to help furnish my apartment, etc. Before dh and I got married, we talked about buying a house, and paying off our debt. I was 29 at the time.
We do make some major purchases on our cards, but we have the money to pay them off at the end of the month, or within a few months. I like to get airline miles.  .
And, on occasion we have carried a balance for a few months. We did this on one of our moves. We carried a balance for about 6 months until dh got his bonus.
I guess my point is, we don't go out and make big purchases without any plan to pay them off. Like Deanna said, you pay SO much more if you charge things and just pay the minimum payment.
How you spend your money is, of course, your business. But you did ask for advice.
So - first, as long as you have credit card debt that is not paid off in full monthly, don't "hit the sales". Even if you have a coupon, if you don't need the item it is an extravagance. If you are spending money on something you don't need, even if you have a coupon, you are not really "saving" anything, just spending a bit less. Yes, kids need clothes, and yes, you and dh need clothes; kids need school supplies, and yes, toys. But, take a look at what you've bought in the last couple of months - how much of it was stuff you (and dh and the kids) didn't "need", but it was cute, it was on sale, and you bought it. (If you are bored and want to do something on Saturday afternoon, take the kids for a walk or drive to a playground or park, or go on a picnic - at some place free, not an amusement park or a Chuckie Cheese type place.)
As long as you are not paying off your credit cards in full every month, don't use your credit cards for anything but emergencies - use your check/debit card. There is a psychological difference when you are buying with what you know is cash, what is presently in your bank account. (Annie is in a totally different situation, actually an emergency kind of situation.)
While you're working on your get-out-of-debt plan, don't forget to put aside a little savings each month. That will eventually be your emergency or vacation or big purchase money. Put aside a minimum amount, either a fixed dollar amount or percentage of income, each month. Consider it a "payment", just like your housing or utility bills. I personally use ING, because it is easy to put money in and, if I really need it, easy to get money out, but it does take a couple of days to get the money out so it is not really available for impulse items. You can open a savings account with ING for $25, and you transfer money between your bank account and ING by telephone or on line. It is FDIC insured for all but the investment accounts ( the insured accounts are savings, money market accounts, CDS, and a form of checking/debit card account). I've been using ING for about 3 years now, and find it convenient and safe. And, as I said, because it takes a couple of days for money to be transferred from ING to my checking account, I don't think of it as being available for ordinary spending, but rather for plan-ahead things. And ING pays a relatively decent rate of interest - I think around 3% right now, which is higher than bank savings accounts and not as easy to get at as a savings account at your bank.
Recognizing that you are heading for trouble is a good thing, and the first step. Making a realistic plan to get out of credit card debt is the second step, but make sure your plan is realistic. Given that you do make impulse purchases, leave yourself some leeway in your bank account for impulse buying, with a specific budget amount.
If you haven't already, keep a spending diary. Carry a little notebook with you and write down every single penny you spend, including necessities (housing, utilities, gas, groceries, etc) and especially non-necessities. And I do mean everything - McDonald's, the neighbor kid's lemonade stand, what you put in the Salvation Army kettle or equivalent charitable giving. If it comes out of your pocket/bank account/credit card, you are spending it, and should write it down. Set up a chart on your computer and enter your expenditures every week, just as you would in your check book, with categories (groceries, clothing, gas, eating out, etc.) with the date and store/vendor. At the end of a month, print it out and really, really look at it to see how and where you are spending money. There is something about actually writing it down that gives each expenditure a little bit more reality, and a little bit more of a measure of accountability. When you can see how you actually spend money, you and dh can think about where you really do - and don't - have to or want to spend your money.
Well so here is another view.
Currently we don't use credit cards, we actually only own 1 that we still have a card for. My husband uses it for business only. Everything and I mean everything gets paid for in cash. We use a debit card for gas, so it is like cash. This started about 5 years ago.
The reality for us is, we used credit cards instead of figuring out what we could really afford. That age old, do we have enough money in our checking account, just put in on credit. Now we had money in savings, so all we had to do was transfer money and pay it off. But that takes work and discipline, that my hubby and I do not have. We racked up about 40k in debt in about 4 years. But our minimum payments were low, we get bonuses etc, so we would write a big check once every couple of months and honestly it just didn't bother me. However we got transferred back to texas and financing the house we wanted became an issue. We didn't get as low of a rate because 40k in cc debt is excessive.
This turned the tide for us. We moved in summer of 2003, had some major family deaths and still didn't do much about it. It took about 2 years, but we became debt free. For us that means we had to give up the cards, literally, we don't carry one with us. It would be nice to have some reward benefits, etc, but this wasn't the first time we learned that we lacked discipline. See for us if we dont' actually spend the cold hard cash, I found that we double spend. Oh we got a 2k tax return, lets buy furniture, so we do, put it on credit. Then a week later, we say oh lets spend that money on a trip, so we do on credit. A month passes and now we have 4k of debt and what is left in our account of 2k (which was never the full amount). So after a lot of prayer and conviction, we went to the all cash system.
I will admit, it is odd among our friends. But we now keep a close eye on our money and simply say no, it isn't in the budget. Initially we pulled cash out of the bank, 200 dollars for groceries for example and it went into an envelope labelled groceries. When the money was gone, it was gone till pay day. We have our money budgeted exactly. We have a 100 dollar misc envelope that was for emergencies. But we both knew if we touch that money, then we might not get milk the last week of the month..LOL. On payday that misc money went into the vacation account.
We started that when we were about 30. Now we dont use the envelope system, but just had a discussion to go back to it. We also know we have to readjust our budget a little.
I think the secret to financial peace is to be honest with yourself about what you spend. It is a harsh reality when you see that you spend 200 a month on ice cream and treats, or starbucks, etc. Yes there are expenses that are just part of your life and worth it. That is different for everyone. Our personal vice is going out to eat. If we could do without that we would have a LOT leftover each month. Some people it is on gas, or on drinks, etc. We really went through several months tracking what we spent, including the grocery store trips. Not just groceries, but what type of groceries. My hubby eat sf pudding like it is going out of style..LOL, it adds up. But we spend less than 10 dollars a month on drinks, because we drink water or ice tea and only buy wine when it is an amazing deal.
Anyway, I am sharing this openly because I think there has become this stigma with how we spend money. I feel like it is okay to spend on what you want to spend on, but you have to know what you are spending on.
Would I have put a motercycle on a cc. No, but because we don't use them. Might it of been the wisest choice for you? Yes. We did just buy a car, and we financed it, we could of bought less of a car and paid cash, but decided this was the right choice for our family.
I am going to say, my oldest just started high school. If you don't get a handle on your money and your spending you will be ever so in debt when they hit this age. It is VERY hard for us to stay in budget. Everytime we turn around there is one more expense. If you think children cost a lot, you haven't even touched the tip of of the iceberg. My hubby said, having young kids, is like nickels and dimes, middle school takes paper money, and by high school you just carry the checkbook. We are really struggling, and I thought we had planned it out well. IN 18 months we will have a driver, which means insurance, maybe another car, 18 months later, add kid 2 to that, then college for kid one, another driver, another college kid, etc. The next 10 years will be a finacial challenge for us.
Hope this helps some Melissa.
Ditto Ginny and right on, and great story from Kaye!
I think I can identify with you Kaye in that our friends look at us as so conservative on certain things. Our friends are buying new cars every 3-4 years, just to look good I suppose. They live in homes that are taking way too much of their income to pay for, let alone furnish and maintain. Their 4 yr olds are wearing high-end clothes that are as expensive as adult clothing. I don't get it, but we have often been deemed "old fashioned" with money. Our 'big' expenses (cars and house) are well within what we can afford. One car is paid for, the other will be in another year or so, and it's 0% interest. We always wait for deals when we've bought cars, meaning it has to be 0% or we don't buy it until it is. We did just upgrade our home, but it's still well within our budget, and our previous home was purchased almost 10 years ago and low even for our income back then.
You've been given some very good advice.
Sounds to me like you have a plan and are very aware of your finances. You are doing a great job. I think those are the main keys to financial success...you have to have a plan and know what's going on.
Melissa - if you need the name of a really good website that has lots of tips and moms who are really supportive of each other when it comes to this type of thing, email me. dora dot d dot payne dot gamw at st ate fa rm dot com
My advice is cash only. Nothing but cash for everything. A debit card is great but when possible, always pay cash. If you don't have the cash, don't buy it.
DH laughs because when I am bored and feel like shopping, I rearrange the furniture in the house. For some reason, that helps me get past the urge to go waste money on things we really don't need.
Ditto Ginny.
The cash only thing is a good idea, especially if you know you could get into trouble financially otherwise, but personally, I don't like to carry a lot of cash on me. Obviously it can get lost or stolen, but for ME, if I have cash on hand I'm more apt to spend it on unnecessary items. LOL! I'm much more disciplined using a cc. Hard to explain, but that's me. Different things work for different people. The key is to find something that works for YOU.
Also, keep in mind that using a CC responsibly builds credit.
I have a no cash rule. I'm one who will spend it on everything.... including Starbucks twice daily if I could! ;)
Actually, when I tell myself no spending and I set a time line to get the card paid off, it's really easy for me to stick to. It's just not putting back on that card when there is a zero balance.
Our mtg is nearly paid down. We do not owe anything on our cars. We pay $1,350/mth for after school care(this is down from this summer where we paid over $2000 for summer camp) so this is a relief. Besides our mtg, utilities, kids' programs etc we charge EVERYTHING else on our one cc that we carry. My parents who are retired and basically living on some savings and SS checks are both authorized users on our card. We pay for all of their living expenses.. groceries, gas, entertainment, trips etc. They pay for their rent (very low - senior/gov't funded rate), health insurance and utilities. My dh's parents are very well off and do not need any financial assistance from us. We do take them out to dinner at least once every 10 days and treat them to special events etc. DH and I are not heavy spenders.. much of our money goes towards our kids and extended family though once in a while we will treat ourselves - mostly in the form of travel with our boys. I like most of you do not like having a debt; hence, I pay off the card each month. Also like Trina I like using a CC (1) to keep track of where I spend the money. If I use cash I can't account for it. I just don't have the time to keep record of it all and (2) the reward check. If I'm going to spend the money anyway why not get some cash back? But I agree with those above... you have to be honest with yourself and be responsible and accountable to yourself and your family.
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