Thursday, September 30, 2010

How large should your emergency fund be when you are broke?

Today I was reading an old posting on a blog called Wise Bread, about the size of your emergency fund. As you'll notice, my current savings is at zero ("...point zero" - for those Howard Stern or Animal House fans out there). Anyway, I'm smart enough to know that I need to start growing my emergency fund. What I'm unsure of is how big I should grow it. Since savings accounts are currently paying next to nothing in interest, any extra funds I have at the end of the month, I'd almost rather put right towards lowering our high interest debt.

I do plan to set aside $100 (or more) per month into savings, but at what point will my emergency fund be complete so that I can begin putting that $100 towards debt? I've read different theories on this one. Some say 3-6 months worth of expenses should be your target. That would take me a very long time to do and I think it's a bit more than I feel I want to do at this time. Others recommend $1000 as a good start. I'm worried that $1000 may not go far if I were to lose my job, especially given that our rent is currently at $1375.

I'm leaning towards my emergency savings goal being equal to one month of expenses - to start. I would like to increase that in time, but I think this is a realistic goal to shoot for. A quick analysis of my budget tells me that one month of expenses is about $4500. Wow. That's not rock bottom expenses though. It includes our current cable package, cell phones, NetFlix, paying a little extra on our debt, putting some in savings, etc. If I had to cut some things out and live on the bare necessities, I'm sure we could lower those expenses some. For now though, I'll think I'll target $4500 as our new emergency savings goal.

My current plan puts me meeting only half of that goal by the end of 2011. That would mean December 2012 is when we'd hit our emergency savings goal target. Hmmmm, kinda far off for my liking, but I guess some goals are a little harder to achieve to than others. I keep telling myself that it's a marathon, not a sprint and that we'll get there. We'll get there.

Wednesday, September 29, 2010

Ways to Get More Money

Since I recently analyzed how to cut costs in our budget, I thought I should also consider ways to increase our cash flow.

Increase Our Income
I do plan to ask for a promotion later this year, so hopefully my income will increase at the same time. If not, I'll probably begin a job search in the new year.

My fiance has been looking for work for a while, but due to the economy, has come up empty. In addition his hours were recently cut at work. Since he's paid hourly, this negatively effects his take home pay. (Although it does give him Saturdays off, which means we have the weekend together now, which I do love!)

Start a 2nd Job
I'd really like to start a home based business to start earning some extra income. I'm still not exactly sure what it is I'd be doing yet. I have a lot of passions and things that I think could make money, but I know I'll be most successful if I can decide on a niche. This has been holding me back some. Once I actually sit down and figure out what to focus on, I think it would be good for us. Sure, the business may take away from some "us time" for a while, but it may be necessary to help dig us out of debt quicker. A home based business would enable us to write off part of our home as an expense for the business, which would be an added perk come tax time! (Which I sorely need this year, but maybe I'll get to that in another post!)

Sell Stuff
Okay, I'll admit it. I'm a bit of a pack rat. We're not talking that TV show Hoarders or anything, but I do keep my fair share of items longer than I should. I'm going to make it a goal to start going through our stuff and selling some of it. It will be a bit challenging for me, as I tend to think that I may not need an item right now, but possibly could in the future and it would likely cost me more to re-buy it later. I'm willing to try though! Honestly, as I get older, I am finding that it's a bit easier to let things go. Maybe it's because we move a lot and I'm getting tired of lugging all of our stuff from place to place. That's probably it! Although we may not make a lot of money, we'll end up with fewer non-essential items (aka - CRAP!) and a cleaner place.

Question : How have you increased your income or found creative ways to get more money? Any suggestions to share?

Tuesday, September 28, 2010

Areas to Cut Costs in Our Budget

Our monthly budget doesn't have much wiggle room to decrease costs, but there are some possible areas that we could look at...

Rent - $1375
This could be decreased if we move to a smaller location or further away. Since my fiance and I carpool together and we both detest driving too far to work, moving further away isn't really an option. Although moving again would royally suck... we're open to moving to a smaller location. We've passively looked at new places and haven't been successful. Perhaps this will be on the 2011 goal list as a way to cut costs. My goal would be to get something closer to $1000 per month. That would definitely help things!

Electricity - $100
I am determined to get this lowered! For some reason when we moved from a one bedroom apartment to a two bedroom condo, our monthly electricity doubled! We have the same lamps, don't use heat and have no A/C... so I'm stumped here. I even called the electric company previously to see why it would have increased so much but they weren't much help. The only suggestion they had was to shut off the switch for the heat in the breaker box, because it's possible some heat could still come up, even though the temp was set to zero. I've done that and nothing has changed. I've even changed all of our light bulbs to energy efficient ones, but haven't seen any difference. I'm thinking maybe it has something to do with our hot water heater, but I'm not sure. One day I'll figure this out!

Cell Phone - $150
I currently cover 5 people on my cell phone plan: my parents, my fiance, my niece and myself. I enrolled in a 1400 minutes a month plan, with unlimited texting. The plan below this one is 700 minutes - which is closer to what we actually use. My only fear here is that I'll lower the monthly minutes and we'll go over and be stuck with the high cost of overages. Plus, my niece is a teenager, who actively sends texts and there would be a per text charge, so I'm thinking in the long run, it's probably cheaper to just stay with this plan until my parents and my niece get on their own.

Cable & Internet - $120
I'd love to be able to lower this one. We actually lowered it once before, by removing HBO. We tend to watch TV a lot... and when I say "a lot", I mean A LOT. (Please don't judge us, it's just how we like to relax after a day of work.) The only premium channel that we have now is Showtime and there are a good number of shows (Dexter, Weeds, The United States of Tara and The Big C) that we watch on there, so we'd like to keep it.

I've considered lowering our internet speed if it would get us a cheaper rate, but our internet is already soooooo slow. We can't image a slower speed than we currently have! So, unless we start to look into other cable and internet providers, it looks like this area is fixed for now as well. Perhaps another area to look into for 2011...

NetFlix - $9
Although this is not a necessity... we've enjoyed it and I'd say we've gotten our monthly cost worth. Sure, I could go to RedBox and rent a movie for $1 a night, but the selection is less than desirable and we can't watch some of the TV series that we are able to get from NetFlix.

Wrestling Show - $4
This is another thing that isn't a necessity, but my fiance loves watching the old days of wrestling! So it's well worth the $4 per month for the amount of joy he gets from watching these old shows.

Sirius - $197.04 Annually or $16.42 Monthly
I've been a loyal Sirius subscriber since Howard Stern joined way back when. I tend to pay for an annual subscription to Sirius every year. There are two reasons why I think I'll let my subscription lapse which will enable me to save a few bucks: 1) Sadly, Howard's contract expires at the end of this year and he may be leaving Sirius for good and 2) Our car that had satellite radio installed was recently donated, so we don't even have the capability to listen in the car anymore. Although we loved listening to it while driving (nothing beats a road trip without having to change the station!), since it's gone now, we're getting used to just using the iPod instead.

Question : Where do you cut costs in your monthly budget? Any suggestions for me?

Aggghhhh! Is it 10/10/10 yet?

The big day is fast approaching for me! I'm tying the knot on 10/10/10 at an intimate ceremony (just the two of us) in Vegas. I'm really looking forward to the day! Not sure if it's pre-wedding anxiety or what though, but I'm feeling a bit stressed and on edge. Everything "wedding-wise" is falling into place nicely. I think the thing that is getting me down is the damn budget! My fiance and I tend to be spontaneous and I love that about us. However, this time our spontaneity is making things a bit more stressful then they have to be. Had we officially set the date a little earlier or started saving beforehand, we would have a bit more flexibility. But hey, hindsight is 20/20, right?

As I mentioned previously, I have a budget that I plan to kick off in November (hopefully!). But in the meantime, I have a budget to get us through the month of October. Honestly, this budget is pretty tight. It's purposely designed that way so that we can enjoy ourselves to the fullest while away. But each day, I seem to have to add a new, unplanned for expense, into the budget and our "fun money" just keeps dwindling. You'd think I was balancing the federal budget or the friggin former CFO for Enron the way that I'm sweating over our budget for the next few weeks!

I'm sure you're thinking that I need to focus on getting out of debt and not "fun money" and believe me, I plan to! I really do. It's just that this is our wedding and honeymoon and I want them to be really enjoyable for us and I don't want to have to think about money in the slightest. But I guess that's what got me into this situation to begin with, right?

Friday, September 24, 2010

Goals for the remainder of 2010 - UPDATED!

As I continue to read more blogs and get a better idea of how this whole thing works, I've decided that it will help me to develop some goals. Although I'm anxious to get started on my goals for 2011, I think I should still write down a few for 2010 since there's still 3+ months left.

  • Officially start the new budget! This probably won't be until November, due to the wedding/honeymoon next month :)

  • UPDATE : We did start our new budget and we're off to a good start. I've learned some things over the past couple of months... it's almost impossible to budget for everything (which is why it's important to have an emergency savings to fall back on when life's little bumps come up) and don't be too hard on myself (I wanted to be perfect, right from the start, but it's like learning to ride a bike or play a new sport - you're gonna fall down sometimes!).

  • Reach back out to CC companies to request lowering my interest rates. I've done this once before but I was not successful. I'm determined to try again though. Since one of the accounts is closed, I probably won't have luck with that one, but the other one should hopefully lower the rate some.

  • UPDATE : I did this and was unsuccessful. One company told me my rate was frozen, as is, until the card is paid off and the other said they no longer lower rates for customers. I'm not giving up all hope though. I'll plan to call back in the new year and see if I get the same answers. Determination, that's where it's at!
  • Relax and enjoy my wedding and honeymoon! Sometimes it's hard for me to relax and live in the moment. I really want to be able to do this. It's the first tropical getaway that my soon-to-be husband and I have had in a while and I'd really like to make the most of it. Especially since we may not get a vacation like this for a long while!

  • UPDATE : I definitely did this :) We had a wonderfully simple wedding and honeymoon. It was perfect for us.

  • Stick to my current way of eating, on Atkins, and continue to lose weight. This has been a great way of eating for me. I'm trying to avoid calling it a "diet", since it's more about a way of life. I've lost weight (20lbs in just under 2 months), my clothes are looser and I feel great! I want to remember how I feel now and make sure I continue on this path.

  • UPDATE : Well... let's just say we weren't as committed after the honeymoon, as we were before! We're both feeling a bit sluggish now though and plan to recommit in the new year. It's great having a partner that you can share these things with, who is by your side to succeed as well.

  • Finish reading a book! I'm in the middle of "Too Fat to Fish" by Artie Lange and I'd like to finish it and move on to something fiction. I love Artie, but it's been a slow read for some reason and I just need to get it done!

  • UPDATE : I did finish reading a book! Not the one I mentioned above, but another one that I took with us on our honeymoon. I'm going to put this one back on my goal list for 2011.
  • Request a promotion! This will be a challenge for me. I motivate friends and colleagues to go after what they deserve all the time... but when it comes to pushing myself to do the same thing, it's a different story. I think it's time though. I've proven myself in my current position and I am ready to take the next step.

  • UPDATE : I did request a promotion and now it's a waiting game to see if I got it or not. I'll probably find out for sure by February. I'll keep ya posted!
  • Update my resume. Ha, this is kind of funny, considering my goal above. I should do it though. I don't do a great job of selling myself and my vast skill set. I need to sit down and take the time to write up a better resume. Hopefully if the goal above is successful, I won't need to send it out - but just in case, I'll have it ready.

  • UPDATE : I've started to update my resume. It's a work in progress right now. I'm hoping the promotion will come through and I won't have to worry about finishing it, but if it doesn't, I will definitely finish it up and start a job search in the new year.
So, that's it for my goals for the next few months. I'll try to get in a routine of updating my progress periodically. Hopefully this blog will help hold me accountable and I will be successful in achieving these goals!

Thursday, September 23, 2010

Reading Debt Blogs!

I'll admit it... I've become a bit obsessed - with reading debt blogs! Debt is something that is on my mind multiple times a day. I'm anxious to get my new plan/budget going, but I'm holding off until after the wedding. Which is in 17 days, by the way :) Come on, 10-10-10!

So, it looks like the official new budget will start in November. In the meantime, I've been reading blogs and working on the budget through 2011. I found a great list of debt blogs to read and I plan to work my way through them, one by one. Like a boxer before a fight, I want to get myself pumped up, mentally, to take on this challenge!

One that caught my attention mentioned a $100-A-Day-Rule, to prevent impulse buying. Basically, for every $100 that a new item costs, you must wait one day before making the purchase. You can read about the concept in more detail by clicking on the link above.

I really like this idea! Although my new budget doesn't have much wiggle room (read: none, really) for any random $100 purchases, I know it could come up and I plan to implement this new rule.

Good Idea : Implement $100-A-Day-Rule

Question : Do you currently do this? If so, how is it working. If not, do you think you could do this?

Tuesday, September 14, 2010

Where things stand!

So, I've been dying to get back on here with an update of where things stand. Here it is:

Credit Card #1

$19,624.15 - But honestly, this one is in flux... Due to the upcoming nuptials, this balance may actually increase a bit. I am literally cringing as I write it, but I want to be truthful. I'm still putting a couple of things on it, so that we can have some flexibility while on our honeymoon.

Credit Card #2

$19,063.37 - This one is not going to increase. Stupid Chase! Actually, I take that back. It's probably in my best interest that this one won't increase. Technically, this account is "closed". Not sure exactly what that means or how it will effect my credit score. (My apologies if I should have used affect instead, I still get those confused!) Anyway, the story with this one is that I was waiting on a large deposit to clear my bank before paying my card one month. I had the minimum payment in the checking account already, but wanted to be good and pay extra. So, instead of paying early, as I normally due, I waited until a few days before it was due and until the deposit hit the checking account. I then made a large payment to Chase and patted myself on the back for doing so.

Unfortunately, a few days later I got an email from Chase that my payment didn't clear and they were charging me a fee for the "missed payment" and for the item not clearing! Then I got an email from my bank as well, letting me know that they were charging me a fee for overdrawing the account! Aggghhh, I was so angry. I chastised myself for not just making the minimum payment earlier, since I had it in my account. Turns out that the bank places holds on large checks for several days. It looked as though it had cleared online, but actually hadn't. Oh well. Lesson learned, I thought. Turns out that Chase took that opportunity to jack up my interest rates to double what they were! I had been a card holder for about 15 years by then, without a single late or missed payment. I called to complain but they said it was their right since I "missed" a payment. The only option they gave me was to "close" out my account and retain the current interest rates while I paid it off. I selected that option and I really look forward to paying this off and being done with Chase.

Car Loan

$21,868.20 - This is a new one to join the club! As you may have read in a previous post, I recently bought a new car. For the first time in my life! I've never really had a car payment, besides $50 a week when I was a teen for a couple of months. Otherwise, it's been used cars, bought in cash - all the way. I have to admit that I'm loving my new car! It fits me. I know I won't be loving 60 months of car payments, but it was a necessary evil.

Grand Total (drum roll, please)... $60,555.72

All I can say is, "Wow".

Wednesday, September 8, 2010

5 Year Plan

Okay... so I'm really anxious to get started on my official "get out of debt plan"! Before this weekend, I was toying with a pretty tight, but good, 3 year plan. Then, after getting the new car and engaged, it's now going to have to be pushed out to 5 years. As much as I don't like it, that's more realistic at this point and will give us a little more breathing room. Unless of course, I win the lottery. Which, I know some people don't like, but I do play! Someone has to win, right?!? Why can't it be me? :)

Luckily we'll probably plan a fairly inexpensive and simple wedding/elopement. We've both been married before and live across the country from our family and most of our friends, so this is the option that we are leaning towards. We both have fun in Vegas, so we're thinking of a quick elopement there. Not sure yet about a honeymoon. Wish we had a little more saved up so we could plan something nice, but it looks like that may have to wait...

This plan is important to me because I need to wrap my brain around how I'm going to get out of this situation. Dealing with debt is like a having huge weight on your shoulders. It's on my mind daily, often hourly, and it's mentally draining. Sometimes when I think about it all, I get really overwhelmed. It can feel as though you are drowning, in a way. Breaking it down into doable monthly payments, where there is at least a rough end date identified, helps me immensely. That's why I'm excited to get it all down on paper, to start the process and kind of in a way, to begin the healing.

It figures...

So, no joke - moments after I publish my first post and I start feeling proud of myself that I am making some progress and on the way to financial freedom... a co-worker enters my office and sweetly asks me to check out a catalog of gift items for a fundraiser at her child's school. Aghhhhh! Of course, I smiled and enthusiastically said, "Yes, I'd love to!" What I was thinking in my head was more like: "No effin' way! Did you know that I am about $60K in debt?!?" or "I don't even have kids, what gives you the idea that I'd want to fund your kid's school?" or "Are you kidding, you make way more than me! There's no way I can afford anything in there." But no, instead I took a look through the "catalog of crap" (as I fondly refer to them as) and prayed that the selection would be more than just a bunch of cheap chocolates and lousy holiday wrapping paper. I was pleasantly surprised to see that they now offer magazines! Not that I need a subscription to any, but my fiance loves to peruse Entertainment Weekly while in the bathroom (I know... TMI!). So, I spent $20 and I ordered a subscription for him. Hopefully it will start around the holiday and I can chalk that up to a gift for him.

As I begin this journey and come across situations like that (as I'm sure there will be more), I'm going to try to find a gem of wisdom to learn from. I figure this path won't be easy and I'll have to be prepared to handle these situations as they arise.

Lesson Learned : Although it may not be comfortable, come up with a nice way to decline when asked to donate money or purchase items that are not needed. (Preferably without having to share my financial situation.) Make it my "go to" phrase when those situations arise. Learn how to kindly, but comfortably say "No".

Question : What is your "go to" phrase when asked to spend money that you really shouldn't?

Time To Change

Tuesday, September 7, 2010

And so the journey begins!

I've been thinking about blogging for a while. Unfortunately, I couldn't come up with the topic I wanted to discuss. After finding the "Blogging Away Debt" page (which is great by the way!), I knew what my topic of choice would be... debt. I've got way too much of it and need a plan to get out of it! Being a bit OCD (self-diagnosed, of course), I thought that this would be a great way for me to come up with the grand rescue plan, actually write it all down and face the cold hard truth - that it's time for a change! (Why is it that the "Time to Change" song from the Brady Bunch just came in my head?)

Anyway, let me introduce myself :) My name is Steph. I debated using a fake name, to maintain my confidentiality and keep the mystery alive, but a) it's only my first name b) I'm an honest person at heart and c) I'd like to be open and keep this blog truthful to the core! So, more about me... I'm in my mid 30's, live in sunny California, recently got engaged (as in this past weekend), and have a good job in Management.

Okay, here's the juicy stuff... I am somewhere between (drum roll, please) $38-40K in credit card debt and after having to buy a new car this past weekend, add another $21,868.20. The car was a necessity, as the old one had over 302K miles on it and was not likely to last much longer, even after repairs. Sure, I could have tried to get something used or less expensive, however I have no savings and nothing for a down payment. With these options, I did what I thought was appropriate and went with the new car at .9% financing. I did lots of research beforehand and overall, felt that I got an okay deal on a car with a good reputation of quality. As far as the cc debt, I've put that range down because I have a few things waiting to post. I'd like to take my new statements as they come in and log those amounts down for better accuracy. So the final number is yet to be tallied!

I'm hoping this blog will help keep me honest and give motivation to others in a similar situation. Please feel free to ask questions and post your thoughts and feedback along the way. I know the situation I'm in and I'm not looking for guilt trips or lectures. I hope you'll join me on this journey and maybe start your own blog. Support is welcomed and appreciated as I buckle down and try to dig myself out of this mess!