Debt Thoughts

I am well and truly sick of debt. Not sick of being in debt since I've been out from under it for a few years now. But talking about debt. Or more generally complaining about debt. From people who constantly sabotage themselves when it comes to debt. There was a time when I read every book on the shelf ( and some that weren't) to try and come up with a plan to get out from under the mountain of debt that we accumulated in our 20's mostly through lack of attention and carelessness. But really it was simple. Not easy. Simple. I read all the books, made a plan, decided as a family to implement it and that was it. I TWEAKED the plan as needed. I didn't reinvent it every two months as it became less exciting to do. Really just doing the plan was exciting to me. Every month my charts showed progress. I had a goal. What more do you need.

I guess more than being in debt is complaining about the cost of things like gas. If you

a. smoke
b. drink excessively
c. eat out many times a week
d. drive more than 30ish miles to work
e. have newer cars with payments
f. many many other frivolous things

then STFU about gas. Some people may disagree with d but come on. Unless like a coworker of mine you have an actual working farm sell that mf'er you are in and move closer to work or get a new job. I did both. Wow. Not hard.

Side note. I have alot of sympathy for those newly out of debt who find it a little less exciting than the journey there. I mean the goal is gone. It's one thing to get out of debt with a concrete goal. $0 debt. It's quite another to say I want to save $1M and retire. Or some other huge abstract goal. So keep at it for those who followed the light to the end of the tunnel and found.....another tunnel.

Mortgage Free - Can it be done?

The primary focus of almost anyone's debt management plan should eventually be to turn the big guns on the biggest drain on typical finances-- the mortgage. It seems like an impossible target at first. You've got the credit cards , student loans, etc, etc. But unless you've really REALLY been unwise and run up credit cards or student loans past the value of your house, the mortgage is the big one. Typically anyone can be debt free (excepting mortgage) in 3-5 years. Single people, couples with a frugal/supportive spouse and high earners may be able to pull it off sooner.



In my case after paying off all our non-mortgage debt I've struggled to regain the sense of mission and focus which I had for 3 years paying off everything else. The mortgage is almost an abstract number because even the best plan I can come up with would take 5+ years focused on only that one debt. Toward that goal I have developed a few strategies.



1. Round it off . If your payment is for example $868 per month change it in increments of rounding off. Firstly, change it to $870. Seems small but on a 30 year mortgage of 100k that will save you $1701 in interest payments and 3 payments at the end. Next round it to $900. On that same loan you would then save $22,360 in interest and 48 payments. Wow. Now that's a difference. Of course you can take this as far as you want. Round to $1000, $1500, etc.



2. Make it automatic. This ties into #1 but not everyone wants to increase the mortgage payment. Especially if you have biweekly or regular income that doesn't fit into a monthly cycle. In that case go to the bank and have some portion of that income deducted ON THE SAME DAY that you will receive. I can't stress that enough. It must be as seamless and invisible as possible. Like taxes it must look like you never received that portion of your income. Same rules apply as far as money saved in #1.



3. Make it manual. In seeming contradiction to #2 sometimes actually having to go through the motions of putting money toward the mortgage. If you are the kind that likes the "hands-on" approach to money management then this may help. It gives the kind of immediate feedback that some people need. Transfer the money to the mortgage. Check the mortgage amount and it has went down. Satisfaction feedback that is concrete and immediate.

4. Make it real. Early on I used Microsoft Money to track our finances but for us it meant I saw all the gadgety graphs and my wife really didn't get the feedback like I did. A few weeks ago I ran across an idea that I think is great. Basically you put a generic picture or real picture (depending on your skills) of your house with a graph background. Then you divide the amount of debt by the number of squares. Then you fill in the squares with a color of your choice every time you pay off that amount. Then it's easy to see how much of your house you really own. Here's the link.

Try these books from Amazon or your local library. I've read and used strategies from all and highly recommend them.

Your Money or Your Life

Financial Peace

Mortgage Free!

CCIE Pros #3 and #4

3. Never ever have to worry about unemployment again. As long as you keep it you are assured of well paying positions.

4. A plethora of interesting and challenging jobs. Related to #3

With the periodic cycle of panics that relates to keeping your job where I work it would be nice to have something (anything) that would guarantee you would keep it. Not only keep it but have employers practically beg you to come to them. Now, nothing will keep you in work if you are lazy or terrible at your job (for the long term) but I believe a CCIE is just about as close to a guarantee as you can get in the IT world. The great thing is it is a truly global certification. Want to move to Japan/China/Greece?? Throw that resume out with a CCIE on it. You'll be on a plane the next week. That is a huge draw for me. At least as much as the money.

401k Loans

This article says 401k loans are up. After thinking about it many times I finally came to the decision that it's ALWAYS a mistake except for a couple of situations I can think of.

#1 Paying off your house IF it's the house you plan to die in. Otherwise you are foolish because inevitably you will "move up" and blow any savings/security you had from a paid off mortgage.

#2 College degree. I hesitate to say it because I've seen people waste money on education so many times. I'm sorry but the purpose of a DEGREE is to help make more money. The purpose of education is to be educated. Borrowing to get a degree and make more money is ok but still needs to be considered in depth before you do it.

That's all I can think of. Really #1 and #2 won't happen to most frugal people because when they are old enough (40-45) to have a paid off mortgage they will have paid it off thru savings. #2 in general (education vs. degrees) is a pet peeve of mine anyway. In the past I've seen people blow huge amounts on school loans to be social workers.....18-20k to start. Just work your way thru school for crying out loud. Teaching degrees are only one notch above this. Don't borrow money if you are going into a field that sucks in pay. Really, it's probably a good thing they don't teach money management in schools. The vast majority don't know beans about money or financial management anyway.

Four Hour Workweek?

Workout of the Day: upper body weights - 50 min.

I must get a copy of this book.