We are very concerned about the accumulation of debt in American households. The levels of consumer debt, student loans and mortgage debt are crippling our economy and our families. It is self-imposed slavery.
Slavery was a scourge to humanity for thousands of years. According to statistics we found, between the years of 1600 and 1800 more than 26 million Africans we're enslaved and sold during the slave trade. These people were brutally captured and taken away from their countries, homes and families, by force, by evil men who's only motive was making money.
Today self-imposed slavery to debt results in the same issues. More than 77 million people have debts that are in collections. Men and women are having their lifestyles changed: losing homes, cars and families to the "Masters" they have chosen to become enslaved to. And these masters willingly lend money to us knowing, especially in the case of student loans, that the lender is protected by law and cannot lose. They will get their money back, with interest and penalties. This type of slavery is much less brutal and violent, and it is legally protected, but it is heart wrenching and destructive to families just the same.
Once we start down the path of borrowing, rather than living on what we earn, it's hard to stop the accumulation of more and more debt. Why? Because as long as loaned money is made available to us, there will always be marketers presenting more and more enticing products and services that we "must" have.
The only way to stop the borrowing is to change our mindset. Living on what we have is challenging, but as we work at it, it becomes an awesome, fun and addictive game. There are always deals, discounts and sales waiting to be had.
Remember that whenever you have a need, there will always be someone who has the very item you want and desperately wants to get rid of it. Find that person and you'll find a deal. We've done it with clothes, cars, furniture, surround sound systems and houses! It doesn't matter what you need, if you're patient and you have cash, you'll find a deal.
Borrowed Money is Self-Imposed Slavery.
Earned, saved and carefully spent money is Freedom.
What can you do this month to become Financially Free?
We received this infographic from Allstate this week. Take a minute and study it. What would happen to our economy if all of the money being paid to lenders in interest was available to be invested, saved or spent by consumers?
Our Economy would Flourish!!!!
How do you budget the household misc items you buy at Walmart or Dollar General? Things like light bulbs, paper towels, bathroom cleaner, batteries, new spatula, a plastic basket to hold stuff under the sink, a new Sippee cup for my granddaughter, etc? These things are not food but they are in my cart when I buy groceries and I never quite know which category to put them in. Thanks for your help!!!
We put miscellaneous expense items into a named budget category: Cleaning products come out of our Food account; a plastic bucket would come out of our Home Repair or Clothing accounts, and the Sippee cup would also come out of clothes. It really doesn't matter where you take it from, just that you are consistent, and that it makes sense to you. Many household items come out of our clothing account because we can get our clothes for so little at thrift and consignment stores, that we always have extra money in that account.
If you’re constantly buying things for your granddaughter, perhaps consider making a budget category for purchases for her or for all of your grandchildren.
When we reconcile our budget twice each month, expenses like this are split between two categories, with some coming out of the Food account and the rest coming out of Home Repair. The best way to remember is to make a note in either your checkbook register or on the receipt at the time of purchase—or ring up the miscellaneous items separately, then record it in your checkbook.
This is the way we've done it from day-one of our marriage and it has worked great. You can learn more about the system we use here.
We recently did a TV spot about the power of budgeting.
Seven Reasons Why We Like Buying Used
1) It costs less—Plain and simple. Retailers have to make a profit, someone selling an unwanted item doesn’t. A re-seller also realizes that they won’t get retail value for their item, and usually this person has no need for the item anymore—it’s just taking up physical and mental space. Consequently, they’ll gladly accept less for it.
2) It works fine. Think about it – does a used book read just as well as a new one? You bet. Does a used bicycle ride as well as a new one . . . most likely. Sure, it may need a few adjustments or new parts, but it will ride just as well. How about a used car? If you’re careful and have a good mechanic check it out for you, you’ll likely save a boodle and enjoy the ride just as much as if it were brand new.
3) Depreciation. We’ve all heard that a new car loses value as soon as you drive it off the lot. That’s depreciation. But what if you buy a used car—is there instant depreciation? Not as much, if there is any at all. Your used car will hold its value better (more about this in a minute).
What are you worth? Did you realize that your Net Worth is in large part the value of your used stuff? To calculate your net worth you add up all of your bank accounts, investments, IRAs and 401ks, and then figure the estate sale value of your other possessions (cars, furniture, jewelry, musical instruments, artwork, clothes, etc). You calculate the used value of your stuff. If I come to an estate sale to buy a Kitchen Aid Mixer, it won’t be selling for its retail price: it’ll be selling for 50 to 90 percent of retail. It will be worth its depreciated value.
Two recent examples:
A) Becky’s truck. Our daughter Becky saved for several years and finally purchased the truck of her dreams in 2009. She paid $11,500 cash for a gently used Toyota Tacoma with 70,000 miles on it. In December of 2012 Becky had just purchased a 2007 Tacoma (4x4). She listed her 2003 Tacoma on CraigsList and sold it in 3 days for . . . watch this . . . $12,000 – it had 90,000 miles on it. She drove her truck for 3 years and sold it for $500 more than she paid! That’s reverse depreciation—her used truck APPRECIATED!
B) Steve’s Back. Last year Steve was working through some lower back pain and was told that an inversion table would help bring some relief. He found a gently used Teeter Inversion Table on CraigsList for $60 (delivered). For three months he did chiropractor prescribed exercises and used the inversion table. When he was feeling better we decided the inversion table needed to go (it took up too much space in our family room). We researched comparable models on CraigsList and listed ours for $100. It sold in two days!
Remember we mentioned buying a used Kitchen Aide mixer a minute ago: we did find one at a thrift store a couple of years ago and bought it for $20. Steve bought a couple of needed parts for it ($10). If we wanted to sell it, we could easily get $60 to $80 for it, but we're saving it for our daughter Becky when she gets married some day.
We are beating the depreciation rule by buying used.
4) Read More...
Buying lunch at work can be an expensive proposition. Do some simple math. Assuming I spend an average of $10 for a lunch at work five days each week. I know, some will say, "only $10," and others will say, "why not eat at McDonalds from the dollar menu." Either way, let's just make this assumption.
50 weeks per year (assuming 2 weeks of vacation)
Eating lunch out at work could cost you $2500 each year!
If you brought a brown bag lunch (or in Steve's case, he carried a blue mini-cooler) of left-overs for lunch every other day you would be able to bank $1250.
Steve brought his lunch to work almost every day for more than 20 years - it was one of the ways we conserved cash to pay off our homes in record time. Our total calculated savings over that time period was about $35,000 (at $7 per day x 5 days per week x 50 weeks x 20 years). Okay, there were a few days when he bought lunch our took clients out to lunch so lets subtract 100 days at $7 or $700.
Total Savings $34,300.
Photo Credit: Free Digital Images _ moggara12
I would like to give you an update with my progress. I just finished paying off my credit card bill and am now working on paying down my mortgage. The trick I used was to make bi-weekly payments on my credit card bill. Then when I received my income tax refund check, I finally eliminated that bill! Do you have any tips about paying off the mortgage early?
My family gave me a $200 gift card for Christmas to buy a TV. I saved it for several months, then just the other day I went to Walmart to buy a TV for the living room. The price was $468.00 for a 51" TV, so I used the gift card and my Walmart employee discount. My final price was $258.00, and I had that money saved up in cash!
I’ll let you know how I’m doing on my mortgage. I’m hoping I can pay it off in about one year from now.
Thanks for sharing your update with us. You are really staying focused with eliminating debt. The last time you wrote was about 7 months ago and you owed $2500 on your credit card.
Paying off a mortgage is much the same as paying off a credit card. Control your spending with a budget so that you have extra money each month to pay toward the loan principal (the money you borrowed).
As your income increases, take some of the increase and build your savings; another portion to pay on the house; and a little bit of the extra that you are earning to enjoy. We wrote about this in our first book, America’s Cheapest Family Gets you Right on the Money – in the Savings Chapter section about windfalls. Having a plan BEFORE extra money comes in will help you eliminate debt faster.
Image courtesy of Stuart Miles/FreeDigitalPhotos.net