I’ve been gung-ho about debt reduction for one year now, and I’ve been really gung-ho about it only in the past month.  I’ve already learned a lot and now is the time to analyze what I’ve done well and what I’m still working on on my way to being totally debt free.  You guys know I’m not perfect right?

Things I’ve Done Well

–Tracking my balances each month: This is pretty simple, and I like seeing what progress I make each month.  I have a spreadsheet that lists my debt balances and my progress on each account for every month, which I updated at the end of the month after having paid all my bills.  I started in June 2010, and since then I have paid two accounts in full (which were a $300 dentist bill and $1700 towards the cost of my Lasik surgery), and I have five accounts remaining to pay off, which are two credit cards, a CareCredit account for the rest of my Lasik surgery, my car and a student loan.

–Canceling my cable television as of October 2010: I have had cable television for most of my life, and always since I started living on my own about 6 years ago.  But the cost of my cable and internet bill had jumped to $100 a month and I didn’t even have a DVR or HBO!  I cancelled my cable and kept my internet service for $30 a month, which has worked out great.  I still watch a ton of television on my computer, so I don’t feel like I am missing out on anything.  Actually, I really need to stop watching so much TV, but that’s another blog.

-Reducing my expenses: This has been a gradual process, but I have really reduced my spending in a lot of categories: shopping, eating out and I even put off a vacation that we had planned for the summer but decided to pay off debt first.

With shopping, it hasn’t been easy because shopping used to be a true pastime, and I would wonder around stores for hours, looking at items and placing them in my home in my mind, imagining myself wearing some piece and looking amazing in it, and other incredibly consumerist fantasies.  But I must be getting older and wiser because it’s been getting easier, and now when I go shopping, I don’t feel this burning desire to buy something, ANYTHING.  From my teenage years on, my mind has been screaming, “I just need to buy something new that feels soft/is shiny/has some crazy patterns and bright colors that no one else would wear but I can definitely pull off!  Yeah! BUY IT! BUY IT!”  I’ve calmed down considerably since then.

I still eat out with friends and family, but I will try to find other activities to do besides going out to eat, and when I go out, I bring cash and don’t go crazy on the drinks and appetizers (but they’re the best part of the meal!).

Mistakes/Missteps along the Way

I can’t do it all, man.  I get lazy.  I get tempted.  And I’m not very good at controlling my impulses.  Here are a few pieces I am still working on.

-Still carrying and using my credit cards: I didn’t ever fully put away my credit cards until 2 weeks ago.  I was still using them for $100 or less each month (usually right before a paycheck, so I was close to budgeting correctly, but still going over).  I had my boyfriend hide them from me and I have been using cash/debit since.

-Creating a monthly budget: I didn’t start the monthly budgeting form until 2 months ago.  I had printed them out in June of last year, but just looked at them and thought, “I could make a budget, but I’m just gonna put all my extra money towards the credit card payments, so why do I really need it?”  But writing it all down and deciding how much to budget for food and other categories (and then putting that amount of cash in an envelope), and trying to stick with it is MUCH different than just telling myself, “Hey don’t spend so much today.”  I am spending less with the budget.

I used the simple 1-page budget on Dave Ramsey’s site, and it has enough detail for me.

-Not fully committed to the debt snowball: I did pay off my two smallest balances first, but then I was splitting my extra money between my two credit cards, when I should have been focusing on just the lower balance card to get it paid first.  I am focused on that account now, and am even making little $20 payments towards the card when I have some extra cash or I get an expense check from work.

-Increasing my income: I am lucky in that I am allowed to work paid overtime at work, and I can be spending all of my free time at home researching new articles for this website, improving its look, and getting the name of this website out in cyberspace.  Looking at the big picture, I really need a position that is a greater challenge.  When I come to work, I like to be busy and have a lot of projects going at once, which has not been the case lately.  Although I really like my job, I need to research what other opportunities are available, and start planning for the future.  I will be documenting that process on this blog as well, because I think we limit ourselves if we refuse to even think about other possibilities for our job or business.

 

Would love to hear what you think…and some lessons you’ve learned!

 

I am the biggest advocate of DIY when it comes to money. I know you will be most successful with getting out of debt and building wealth when you:

1) Do your own research
2) Build your own strategies
3) Basically do most of the heavy lifting.

But there are still some pretty good (and some awful) writers and experts on the topic of getting out of debt, investing, and everything else under the umbrella of Financial Freedom, Personal Finance and Get Rich Slowly but Surely. The following list covers some prominent authors/speakers and blog authors, their main stratagem, and any other worthwhile information to consider about each one.

The GURU Category

1. Suze Orman: The most famous and the biggest hack. Her resume of working in finance is not impressive. She has written a lot of books, all of them best-sellers, but her advice is mostly simplistic, emotional or wrong, as this article will tell you. She also has a co-branded “tool kit” with FICO (how many million did you get for that, SUZE?), which explains why she pushes the credit score as the most important part of your financial record. If you have cash to pay for all of your expenses, why is your FICO score so important? It’s not. You should be focused on paying off debt and creating a savings fund to account for emergencies.

FINAL CALL: TOSS

2. Dave Ramsey: He has a Southern accent and he works really hard at convincing you he’s no-nonsense. He just doesn’t have the time (Southern: taaahm) for your nonsense, darn it! His best book is The Total Money Makeover, although you can get the same ideas from his website and radio show (I just saved you $15). He advocates never using credit, creating a budget every month and his motto is “Cash is king and the paid-off mortgage has replaced the BMW as the new status symbol”. I’ve been following the Dave Ramsey/Debt Snowball plan for 10 months, so I’ll go into detail on how that’s been going in my next post. Dave Ramsey is a great place to start for anyone who is in debt, but I don’t plan on following his “mutual funds and money markets” investing plan once I am out of debt. Dave Ramsey is Christian and his advice is tied to his religion, but if you are not religious, don’t get worked up about it. It’s practical advice for anyone who is breaking old habits of never budgeting and spending more than you earn. Check his website to download monthly budgeting forms.

FINAL CALL: READ

3. Robert Kiyosaki: The author of the Rich Dad, Poor Dad books has a bad rap. Deservedly so, but I still think there are a few ideas you can take from him, even if his more specific ideas are not very helpful. The most important idea of his is building and generating passive income, whether as an investor or business owner. He advocates that these two roles are better ways of making money than being an employee or even self-employed (where you might still be working full-time). When you work full-time for a business that is not your own, someone else is getting rich off your back. Do you want to help someone else get rich for the rest of your life? So even though you don’t need to read his books, that is a key idea to keep in mind as you take control of your finances. He also doesn’t advocate mutual funds ad nauseum like most of these gurus, and this article by Kiyosaki has some great common sense advice.

FINAL CALL: TOSS

4. Kevin Trudeau: This guy is hilarious. Seriously, where did “they” find him?  Trudeau is mostly known for his weight loss and natural cures titles (and time spent in federal prison in the ‘90s), but he also has a (once best-selling) book, Debt Cures “They” Don’t Want You To Know About, which is light on content and heavy on repetition. A main tenet of advice in his book is not paying your debt until the statute of limitations on your debt runs out (between 3 and 5 years in most states), thus freeing you of your obligation to pay. Not only is this not guaranteed to work, but 3 to 5 years is a long time to sit around and wait for a statute of limitations to expire, while bill collectors harass you and your family. And call me old-fashioned but I believe that walking away from your obligations will come back to haunt you in some form or another. What if you become a reality TV star and your crazy ex exposes you for the $50,000 in credit card bills you never paid? Keep your dignity. I know you can get out of debt without believing the lies of this infomercial lifer.

FINAL CALL: LAUGH AT, THEN TOSS

5. David Bach: His most famous book is Smart Women Finish Rich and the Finish Rich series (Smart Couples Finish Rich and Start Late, Finish Rich to name a couple). He is a clear, straightforward writer, and although there is a sales pitch involved with all of these gurus, his doesn’t feel as sleazy and deceitful as the Suze Orman variety. I would recommend taking a look at any one of his books, but you definitely don’t need all of them. Smart Couples Finish Rich is a good starter book for couples to begin talking about their finances. Even if you’ve never talked money with your significant other, this book will help you start doing that without it being totally uncomfortable.

FINAL CALL: READ

Having reviewed just a few of these personal finance experts, I want to look at some favorites of mine in the blog category. The personal finance/debt blogs offer a ton of targeted, specific advice and are extremely useful. I think they have to provide more value since a reader may only linger on their site for a few seconds before deciding to stay and look around or leave. Check some of these sites (which I will also add to my blogroll) until American Debt Project really gets busy…

 

The Blog Category

1. Frugal Dad: A boatload of information. This website is what inspired me to start my blog. As Frugal Dad says, everyone should have a side hustle. This website is updated frequently, but he also an excellent archive of articles. Check out the Get out of Debt post and 7 Side Hustles for quick inspiration.

2. Get Rich Slowly : A top personal finance blog. So much information on here and a lot of personal background on the author and his wife, like this recent Redbook interview, that is very interesting.

3. 20smoney: Focused on markets, investing and generating income as a self-employed person, especially generating online income. A lot of useful information regarding how he has built his site into a sizeable monthly income.  He doesn’t focus at all on personal finance but I still learned a lot from the PF Manifesto.

4. Google: Oh yeah. Whenever I get bored with the usual sites, I just start searching for key terms on debt, investing and business (and desperately try NOT to get distracted and search for “Mob Wives”). New blogs are being made every day and they deserve a chance too. Great writing happens everywhere: craigslist, hubpages, whatever. Keep branching out.

 

We have to talk about money. It used to be impolite to talk about money, but we also used to call Alan Greenspan* a genius. Times change. I don’t want to be rude, or improper, or make anyone uncomfortable but not talking about money is what got me here in the first place. Not talking, not planning and spending away is the surest path to financial ruin.

If you are in debt, don’t have a considerable amount of savings, and/or are in a low-paying job, you have to talk about money. It makes me uncomfortable to talk about money. I’m pretty embarrassed to admit that I have a such a high amount of consumer debt when I have the means and ability to be debt-free. But that’s what the American Debt Project is all about: I’m taking responsibility for my past actions, but I’m also talking about what I did and analyzing the world around me so I’m not doomed to create a cycle of debt for the rest of my life. The only way we can get out of our financial black holes is by doing our research, finding new ways to make income, reconsidering our spending habits and about 8 million other things having to do with money.

I know why I love trashy reality shows. Besides the fact that the stars are clueless nimwits who confuse delicacy and delicatessen, it’s also the underlying idea that money is no object for these people. Like the characters in an F. Scott Fitzgerald story for whom money is everything yet absolutely nothing at all, I watch people on-screen and wonder, what is that like? What is it like to never have to think about money? (Obviously, we now know that most reality stars’ finances are in shambles and the gaudy homes and tasteless wardrobes are simply a facade, but the message remains.) If I didn’t have to think about money, it seems like there would be a big gap to fill. If I don’t have to worry about bills, what is there to worry about?

I know that this line of thinking is silly. Lots of people are newly debt-free and discovering they still have plenty to think about. There are emergency funds, college funds, savings and investments to consider. Paying off debt is just the first step in a long, interesting road of personal finance. But now you can worry less and plan more for a more secure financial future. There are no guarantees in life, but it’s nice to know you’ll be able to pay for shelter, food and transportation, even if you lose your job or your business unexpectedly.

So we have to talk about money. It makes us uncomfortable, and finding out about other people’s finances feels voyeuristic (she has how much?!). But money needs to lose its taboo status and become just another tool for human development.  I read something by a young woman saying she didn’t share her “very private finances” with her boyfriend. Why not? You’re in your mid-20s and clearly not a millionaire, so what do you have to hide? If you know you have much more or less than he does, will it be weird if he finds out you were hiding it from him? I’d rather keep my relationships private and my finances out in the open. Money is one of the biggest factors predicting divorce rates. Couples who fight about money are the unhappiest couples and you don’t want to be one of them right? And if you’re single, well, it’s even worse to argue with yourself about money.

*On a side note, I saw Alan Greenspan in Laguna Beach last year, and he was surprisingly small in person. Andrea Mitchell was much more imposing.