Here is where you can find it on youtube and subscribe to me :) TheVanzaroni
Here is where you can find it on youtube and subscribe to me :) TheVanzaroni
I’m bringing back to a little more debt situations and scenarios with this blog post. Check out the video blog I did too :) This is more of the narrative attached to the video if you’d rather read that!
Today we are going to jump off right away and talk about what debt is, how you can find out your debt, and the tools you need to utilize and realize are available to make debt, finances, and your budget much easier. Some of these include knowing your credit score, figuring out balances of loans owed, what your FICO score means, and how credit worthy you are based on your credit to debt ratio. Then we will talk about the easiest way to get a comprehensive debt analysis your self, and what you need to do with those numbers. Next segment will be based around budget. How to create one, how to utilize one, how to maximize one, and how you should treat a budget.
On a note, all of this was research I have done in my spare time. I utilize the best resource, the Internet, and look for trusted money management sites from banks, financial institutions, and professionals like Suze Orman. None of this is my own knowledge, and none of this is hidden facts. I just plan on condensing and cutting it down to fit into your attention span.
Ok, let’s talk about what debt is. Debt is obviously what you owe specific lenders for a variety of loans they gave you.
Some of them are considered secured loans and some are unsecured loans. A secured loan is something that has collateral attached to it as a way of repayment if necessary. You can consider your car loan a secured loan. If a bank or a credit union gives you a loan to purchase a car, the car itself is used as collateral. The car can then be taken back by the financial institution if necessary. These are usually characterized by a set payment and a non-fluctuating interest rate.
A majority of loans out there are unsecured debt. These are characterized by a financial institution loaning out money without a physical collateral, and have varying interest rates and payments that depend on a lot of factors.
The big question on your mind, especially if you are around my age, is what is student loan debt considered out of these two? The answer is really neither. Technically from the definitions I just gave it would be unsecured, but it isn’t. it is secured because the government secures the debt and lets the lenders know that it will be paid back. We will get into how it affects your credit score a little later.
It is important to look at your bills each month and look at how much you actually owe each lender. Take that and write all of that information down in a binder so that you know exactly the extent of your debt. Also write down your monthly payments. Do this with your other bills as well, like your credit card debt. Then also log your other payments or anywhere else you money goes. Rent, cable, cell phone, electric, internet, any of those bills. Take a sheet of paper or an excel spreadsheet and log all of these things. Anywhere your money goes needs to be logged. Take that whole number as a dollar amount of your debt each month. Take the frequency you get paid and the NET amount of each. Don’t use your gross earnings because that money that is taken out for taxes can’t be used monthly. Add that together. Subtract your earnings from your monthly debt to see where you sit with left over money. That dollar amount and how to create a very simple budget will be next week. You also need to keep one months worth of bills so you can monitor interest rates, charges for interest, and small debits on your cards that you might have forgot you agreed to.
It is very, very crucial to know your credit score too. You get one free look at your whole entire credit report from the three main credit reporting bureaus once a year. The year is 365 days, not an actual calendar year. Use this to your advantage. I had a credit monitoring website that I paid for monthly and I’ll tell you this- it was not worth it. I didn’t use it enough and that was more money out of my budget. You need to know it once a year, and you need to know what it means and how to increase it. Your credit score is an average of what the three credit reporting bureaus have found about your debt and debt repayment history. They look for a few basic things. These are as follows: they look to see the number of loans you have out, the running balance compared to available balance, the number of on time and the number of late payments, any severely delinquent accounts, and accounts and bills that have been sent to collections.
The number of loans you have out is very important. Even if you have more loans with zero balances, if you have a large number of loans you are looked at as credit reckless therefore reducing your credit score. Major credit cards with zero balances are looked on more favorable than store credit cards with zero balances.
The dollar on the loan compared to the dollar amount available for the loan, with respect to unsecured debt, it also important. If you constantly run high balances close to the threshold of available balance on a credit card, you are again looked at as credit reckless therefore reducing your credit score.
The number of times of late payments- this is a no brainer. They want to make sure that you are taking care to make sure the bills are paid on time.
Severely delinquent accounts- these might be accounts that you either forgot you had, or maybe were taken out falsely with your name or social security number. You will never know if you do not take advantage of the free yearly look into all three reports. If this is the case, the websites make it very easy to follow the necessary steps to clear that up.
Collections bills are another thing that you may not know are attached to your name and social security number. My husband and I move around a lot, and he recently discovered a $650 collections bill for something he had done 5 years ago when he was 18.
The total number of dollars you have used up versus the total number of dollars you have available on your debt is what they call your credit worthiness. If you barely have any breathe room between what you have for balances on cards and what you potentially have available on them, you can absolutely reduce your credit score and credit worthiness. They consider this your FICO score. This is used to evaluate, very basically, if you should be allowed and are responsible enough to take on another loan. Mortgage lenders, car dealers, and other credit card companies use this to evaluate their risk in lending you money.
You need to know your credit score because you will need to know ways to improve it. On time payments are a big thing. Paying off store credit cards and closing them down is a plus as well. Getting rid of delinquent accounts by calling the credit card companies to figure out what you need to do to bring the account back current. This may require a bigger monthly payment and consecutive monthly on time payments for a length of time. Using your credit cards for smaller purchases and paying them all the way off builds your credit score.
This can be maximized after taking those numbers I had you calculate before and using them to your advantage. Let’s say I have an income of $2000 a month. I calculated my debts and realized that I spend $1200 a month on everything I have committed to paying. The rest of my money is not tied up to any one particular thing. That means I have a left over surplus amount of $800 in this case. But don’t get too excited. This is left for everything else- groceries, gas, going out, out to eat, hair cuts, gym membership, dog food, and unforeseen circumstances like new tires, brakes, or anything else big ticket. The idea is to budget and factor some of this into your monthly expenses because we are going to get out of debt. Getting out of debt requires you to NOT USE YOUR CREDIT CARDS. Period.
I hope this helped shed some light onto what you are up against. Next segment we will hash out a budget and talk through steps to maximize it and your income. As always, if you want to reach out to me, check me out at newlymarriednewlydebted.tumblr.com for more tips and insight.
In the shower, preparing for my day, I was caught thinking about all the things I need to do, and how and in what order I should do them. I am not going to drive out to North Olmsted to drive back to run an errand only to find myself out that way again. Why drive past the post office on the way to said errands unless I drop off the package I need to mail. While I go run out on my merry way, why not see if I can sell some clothes at Plato’s closet. All these thoughts run through my head as I plan out a road map for today and what needs to be done. And then it hit me- this is how you get out of debt.
This is exactly how you get out of it. Once and for all.
Road map it. I did this, the first day I sat down with the guts to look at our debt, I mean really look at it. Not just minimum payments but total balances. Stomach the idea that we could be paying off our debts for the next 30 years. To really own it and internalize the debt that we had always hanging over our heads. To finally answer the question, “why don’t we have any money?”. That self-reflection and internalization was a bitch. A totally slutty bitch. She took all my money and I am going to sue her because I want it back. I want my money back. I want my life back. I want to be able to do the things I want to do, not the things that my debt allows me to do.No more ball and chain.
That mind set, to essentially maximize efficiency while reducing output, is exactly the mindset you need to be in to own your debt. To really get it. This is the philosophy of a lot of mega big businesses. Duh, I thought to myself. Duh. Maximize efficiency while reducing output. Maximize my budget, reduce my monetary output, and reap the rewards.
Now, for the maximizing my budget part. Some of these will make sense, some of them hopefully will be new to some of my few readers.
1. Don’t worry if your meal doesn’t make sense. I can hear mostly crickets chirping at this point in time since I lead with this, but hear me out. It is ok to have breakfast for dinner. It is ok to have cereal for lunch. It is ok to have salad and couscous. It doesn’t matter that you didn’t cook a gourmet meal complete with perfect side. It doesn’t even matter if you didn’t eat. Utilize what you already have in your pantry and in your cupboards. No sense in having three cans of kidney beans if you never plan on using them to compliment your omelet. Think outside the box.
2. CVS can be a girls best friend. Some of you think- well, it’s just another drug store. How can there be much more difference between them and Walgreens? I live in Lakewood, OH where there are more drug stores per capita then restaurants or residential dwellings. Let me tell you why. I just went there today to get mascara because I had an $8 off coupon. Eight freaking dollars. Exclusions? Don’t buy alcohol, giftcards, Rx, or money orders. Anything else in the store is free game. Combine with any other offer! Spend $10 on Revlon cosmetics (ex for today) get a $3 off coupon for next time.
So in reality, let’s do the math and see the savings. Say the next time I came in I only got 2 2 liters of pop, therefore getting us close to $3. So we aren’t using an example of applying that $3 to a bigger purchase. I picked up mascara and eye shadow and spent $6 of my own money. I got a $3 off coupon (which, like I said, I am using to buy pop in this hypothetical scenario, which should not make me have to spend my own hard earned money). So $6-$3 for my coupon. So I realistically got Revlon mascara and a 4 piece eye shadow for $3????! Talk about budget friendly! The lady signed me up for their beauty rewards. I spent $30 on makeup, shampoo, hoisery, lotion, nail polish, some vitamins, and a few misc categories and I get $5 off. For stuff I already spend money on. I mean, this is great! Use CVS to your advantage. They have a great customer retention model they created through coupons.
3. Plato’s closet. This has been a recent one. Now, you have to have either a huge closet and turn over many items or are still subject to shopping and buying things you might not need for you to see the true benefit here (cough, cough. :) )
The one by my house buys mens and womens so I am in luck. Our normal MO is to donate to Goodwill. I am not saying you should stop this- I am saying let some girl pick over them and offer you cash on the spot for stuff you were going to get $0 for anyway. I made $30 today on stuff my husband didn’t even know he had, and will certainly not miss. They pay higher dollar for clothes you might have with tags on (yeah, I know I know. So shoot me).
4. It doesn’t have to be on-brand, especially at the grocery. Get Giant Eagle brand cheese. Skip organic celery. Opt for their own brand lunch meat. Potato chips are just as bad whether they are Lays, Ruffles, or Kroger brand.
5. How much do you watch cable? If the answer is not a lot, opt for Hulu and the basic. We did. Saved us $30 a month for now. We might even cut down further and save $30 more. Evaluate the things you think that you “do”, like watch TV at night. Do you actually watch it? Or do you surf channels and settle on one for background while you read my blog? :) Do you use your TV for anything other than DVR? Hulu is the same price you pay for the DVR, but no bullshit.
6. You have to road map it. You absolutely have to sit down and sign into everything, gather your bills, and hash it out on paper. You need to see what your left over budget is each month and where it needs to go to climb out of the hole. You need to be scared by it and let that help you save yourself. It needs to be a constant burden- you did this to yourself, so you alone must get yourself out. You can do it.
You can do it. It can be done. We are doing it. It’s hard, so very hard. We have set backs daily. That is OK. Keep a clear path, be obsessed with the numbers, and fix it. Fix it so that later on you don’t really have to sacrifice.
Ah, here it comes. Here comes the real test. The real pain. The realization that we have to make real sacrifices we are not used to making. Oh, this is what it feels like to have a budget and to have to say no and to have to work through feeling bummed out, broke, depressed, down on life.
Ugh, this is going to be way harder than we envisioned. And suck way more.
We had a good moment yesterday. We severely cut down our daily spending, I went to the grocery to get supplies since we were having friends over for dinner. I spent $15 and felt like “damn that is so much money!” We had it yesterday, we were going to do it. We read an article of a couple who saved a ton of money and quit their jobs to travel for a few years. Well, hell! we thought, they sights were higher than ours. We can do this.
Fuck. This is going to be hard. Harder than we thought. We have been this depressingly poor before- when were first lived together we were broker than now and had no money to our names. We have been there/here, we know we can live like that. (That is also how I know our marriage can survive anything we throw at it- that level of broke and fighting was so unreal and depressing that if anyone can survive that, I’d bet they can do anything in the world. Even fight crime. Or perhaps perform surgery without being a doctor. Who knows.)
My husband had a realization that the next few months are filled with things that we already committed to, and now have to pay for. He had to put something he was looking forward too off for a few more months because we just simply can not afford to do that and all of our other obligations. I need to refill a prescription, the dogs need to get their shots, we need gas, we need coffee,…….
How are we going to do this? It has to be easier than this. I have never really been one to say “I want to fast forward through life to get to this point so that I can achieve this goal”- wishing and thinking that thought, (though it can not happen, at least for this decade) makes me feel like I am wishing away all the good times with the bad. I have had enough ups and downs in my life to know that with the bad times come some awesomely good times, times that should not be fast-forwarded, not skipped, and not put on mute. The bad times are out there and placed in front of the good ones so that you don’t loose sight that the world and life is bigger than you are, and remind you that you are a part of something so COOL. I mean, think about it. The world is such a large place, there are billions of us, billions of humans all struggling, all celebrating, all living. Things doth not define you. Moments do. What you remember. What you forget. What you chose to do. What you didn’t do. What you should have done. How you felt. What you didn’t feel. Each moment on this earth is how you are defined and how you will be remembered.
The article I read about the couple that saved and traveled sold everything that “tied them down”. How freeing! So often we think that we need things to show who we are. To show off. To let others know what we have (money, nice cars, nice handbags, toys, clothes, etc). Why? I am guilty of this too. Why does it matter what we have? Why do we have to have nice things, parade around like a peacock? What good does it do? Acting like you are famous does not make you famous. Acting like you have money does not give you money. Why does all of this matter? Why does all of this matter to me?
Having nice things if they make you happy is one thing. We love our nice apartment, we love our nice car for it’s functionality regarding our life, and we love to spend money on our dogs. But why am I stuck in this cycle of portraying a well-off couple who has their shit together? We are neither of those. I need to realize that to be that couple, we have to be the couple we are now: broke, scared, tired, and perpetually in need of a break.
So, the other day I spent the whole entire day creating a budget, looking deep into our debts, pulling out the numbers of total amount of debt owed, how much we pay here, how much we pay there, where we can put more each month to get out of this hole quickly and once and for all.
I road mapped a sure fire way to success, figured out each month exactly what we would pay more to, exactly where our debt would sit after each month and each payment. I took all of our income, figured out what we’d have left over, and viola! A budget. It is bare and it is scary. There is hardly anything left over. No fun nights out spending money like rappers and celebrities, dropping a hundey on dinner and drinks for two people. No more “let’s go get dinner and drinks and then have breakfast out the morning after since we are too hung over to cook”. Frivolous acts indeed. Easy. Be more conscious. Done and done.
Previous to this “debt diet” we are on, I was having a horrible rough spot at work, and we decided as a couple I should look elsewhere for work. I quit my job without a real prospect of another. I have a few hot leads and am confident in myself and what I offer. So that’s not the scariest part. It’s the job I really want right now won’t match what I make. But it’s my choice and we can do it. We can do this. It’ll be scary but we can adjust. We have bigger picture things- houses, kids, another car. We have goals and this will get us there. Great!
We have been really talking about it, owning our debt, and realizing that we got ourselves there. I really believe that this is the first step in getting out of debt. With my background in health and health behaviors, I really believe that shopping as a way of coping, and the debt that comes with it, is a very real and scary mental disorder. I know I personally am guilty of shopping to get the feeling of….. accomplishment? Of the thrill of the chase? I am not sure. It’s hard to explain. But my personal promise to my husband was to stop shopping. I have a closet full of clothes and regularly give them away to friends, including items with tags on them still that I haven’t even worn one time. Shame on me.
My husband sat down, looked at our “silly” (credit card) debt, and had this realization- that about 75% of our credit cards were store specific that did not offer us anything to keep us as customers. 10% off coupons are a crock of shit. That’s a little over what it takes to cover state taxes on taxable items- you aren’t saving anything! So then it began to take shape, to become more tangible, to become something real that we had to deal with. But now we are excited at the prospect of things we can do next year after this is done. Like save for a house! Buy a new car. Consolidate our student loans once our credit scores go up. Extra money for stuff we want to do for fun.
My first real test was grocery shopping. I figured, we are just two people so let’s budget around $200 a month in groceries. If we go every other week and spend $100 we will have food to cover us for all meals for about two week- two weeks later: wash, rinse, repeat.
I totally, utterly, and fantastically failed this one. I walked out of the grocery store having spent half of my next trips budget! $150. For two people! And I even TRIED to not spend a ton! Get off brands, savings any where I could. Only bought chicken to cover us for a couple meals. W. T. H?! Where did my money go??? How do I cut it down even more than that? I have to look into what we allocate money to. More budget friendly meals. Planning out what we eat each week or two weeks. My heart is 110% in this, but I need to change and shift my mentality more towards saving at every possible avenue. It’ll take work, but I am confident in my abilities.
That is my recent predicament. However, we were very successful on another endeavor! We had friends contact us to meet for dinner tonight- we opted to have them over. I am cooking with 90% of what I have in my house! So that helped build our self-esteem. We really can do this. All we have to do is lie to our friends and tell them we are paying off the wedding. No one guffs at that, no one saying “oh come on come out it won’t be too bad”. We might actually be able to stay on course and really do this thing. I guess only time will tell…….