Should I Save or Pay My Debt Off First?

Welcome to The Finance Gym Action Plan for a Better Life with Money video series. My name is Stacey Powell, and if you’re ready not just to know better but do better with your money, you’ve come to the right place.

Lately, we’ve been talking about the four letter word “debt”. How to stop using debt. Today I’m going to talk about how to, both, stop using debt and how to pay off your debt. I get asked this all the time. Now should I pay all my debt down first and then start saving? And in fact, if you watch Dave Ramsey, he says to save $1000 and then do nothing but pay down debt whether you have $5000, $20,000, $60,000.

I disagree. I think that it’s really important that you pay your debt down at a rate somewhere equal to what you’re saving. Because if you don’t have savings set aside, it’s like Groundhog’s Day all over again. Emergencies are going to happen. They are always going to happen, and you’re going to need a way to pay for the emergency. If you made a commitment to stop using debt, but you have an emergency, and you have to keep going back to the credit card, energetically, it just doesn’t work. We all think a lot harder about what our options are when we have to take money out of our emergency savings account than if we just pull our credit card out.

It’s something like needing a root canal and you don’t have savings. Well, I’m certainly not going to tell you that this is the moment to absolutely stop using your credit cards. But if your TV breaks, stop watching TV for a while. If your tires go bad, well, you know what? Maybe it’s time just for a couple of months to put used tires on or take public transportation or borrow somebody’s car. There are always options out there and we look at the situation differently when we're using our savings account rather than our credit card or getting the help from some other place.

So my recommendation when it comes to paying down debt and saving is: if you’re paying $500 to bills, put $500 into savings. Make sure you’re building your savings at a rate somewhere equal to the amount that you’re paying your debt down.

As always, these things aren’t easy to do on your own. If they were, you would have done it by now. I would love it if you would join us. We have a support group on Facebook called Team Do Better. It’s private. The only people that are in there are people just like you who are ready to do something different with their money life.

You can also sign up for our newsletter at TheFinanceGym.com or subscribe to our YouTube video series right here and be sure to watch next week when I give my one last final great tip about how to get out of debt.

The Golden Rule of Buying Stuff

Hi. Welcome to The Finance Gym Action Plan for a Better Life with Money video series. My name is Stacey Powell, and if you’re ready to not just know better about your money but do better, then you’ve come to the right place.

Today we’re going to be talking about the golden rule of buying, and it comes out of the chapter of the book called Buying Stuff. In that chapter of course at some point, I get around to talking about buying a home, buying a car, buying a college education.

But at the beginning of the chapter, I take us all the way back to what we should have learned when we were kids, what hopefully some of our parents taught us. But we know most of our parents, they didn’t teach us this stuff. So now it’s time to start learning, and I start by teaching you about how to buy a bike.

Maybe it’s a $500 bike, $100 bike. You could spend $1000, $3000 on a bike and so what I ask you to do in the chapter is practice some mindfulness techniques when you’re buying. My golden rule of buying is ask how much and get 3 quotes. That’s not just when you’re buying a car, but that’s also when you’re buying a $200 piece of electronics or when you’re getting a root canal from your dentist.

When you are buying anything, just practice asking how much and that way, when you’re buying a house or a car or a really big ticket item, you’ve practiced what you should have practiced when you were kids so that it became easier.

Can you imagine asking how much? Something that the doctor’s office is going to cost. I found for many people it’s uncomfortable and becomes more comfortable when we just practice. So here’s what I would like you to do. The next thing you’re going to buy that is in that kind of mid-range couple of hundred dollars, several hundred dollars, I want you to do these 4 things.

I want you to get paper and pencil out, and I want you to do a little journaling about how important is it that you have the best of this thing you’re buying.

1. What would make a difference if you bought a new one or a used one? 
2. How many years do you plan on having this thing you’re going to buy? 
3. Then the last and most important question. If you bought the less expensive one if you’re going to buy a bike and you’re going to buy an inexpensive used bike or a really expensive brand new one, what are you going to do? 
4. If you choose the less expensive one and you’re going to save all that money, what would you do with that extra money if you chose the less expensive one? 

So I encourage you just to practice the mindfulness around your buying and practice on smaller stuff where the stakes aren’t quite so high as they are when you’re buying a house or a car. Let me know how it goes.

If you want to know where to let me know how it goes, come into our Facebook group Team Do Better and you can chat with me in our private group. You can also sign up for our newsletter at www.TheFinanceGym.com and subscribe for our YouTube video series. Now go out there and practice some mindful buying.

Light Your Debt on Fire

My friend Anne did an amazing thing last week: she lit her second mortgage on fire. It was a rite of passage that was the result of four years of persistence, prioritization and stretching out of her comfort zone.

I often weave Anne into my writing. Not because she’s fabulously rich, but because she’s fabulously consistent. And we all know from The Tortoise and The Hare fable who wins the financial race: the tortoise. When I met her, she was already living a life of intentionality. Every year, she would choose five birthday goals: three personal, two professional. With great care, she would set out and achieve them.

When I was curating my first prototype Finance Boot Camp, she was an obvious choice. I needed people in that group who were going to declare with honesty what they needed to do with their finances and then do it. I didn't know many details about her finances at the time. I didn't think she was in misery. But I knew she was like many of us, living a little paycheck to paycheck, not earning as much as she was worth and not prioritizing savings and retirement. And then the inevitable happened: her home needed a new roof. She had no savings. She had boxed herself into a corner. Either forgo the badly needed roof, which isn't really an option, or take out a second mortgage.

She hated doing it. She had long been on a mission to pay off her home, and was closer than many because she bought it in her 20’s and hadn't succumbed to the ever enticing “home equity windfall” that so many had. The thought of more debt was dreadful to her, as was the thought of another monthly bill.

In her words from her Facebook post:

"Five years ago I was stuck in a job I hated, $23K in debt, & barely able to make ends meet. I felt horrible. With the support and skills I learned at Finance Gym, I turned it all around. I'm SO much happier today -- on many levels. If finances are a problem, or you simply want to get better at planning, financial accountability and building toward your dream, please consider www.thefinancegym.com. It works. The proof is in the burn."

Every person who has ever been in a Finance Boot Camp has a story of financial transformation to tell, and I greatly appreciate that she always calls out Finance Gym as the impetus for her financial turn around. But the truth is, Anne has done all of the heavy lifting. She’s the one who gets the kudos.

If you want Anne’s secret formula to financial success, here it is. With great consistency:

1. Be honest about your financial facts with yourself and select others,
2. Be honest about your financial feelings with yourself and select others,
3. Find cheerleaders to help you along when it gets rough (because it will),
4. Take courageous action in finding work that you love, and that compensates you at a level worthy of your skills and talents,
5. With every salary increase or windfall, mindfully allocate it to savings, retirement and debt repayment, and
6. Be measured about your spending (not frugal, which leads to all or nothing behavior.)

Did I mention consistency? Above all else, the thing that has shifted Anne’s financial reality so dramatically is that she’s made her financial life a little bit better every single month. Over time, it’s added up to all of her debt being paid off (other than her first mortgage) and a substantial amount of money in retirement, savings and reserves. (Yes, that’s three different types of savings.)

Congratulations Anne! You’re an inspiration. I look forward to the ceremony when you light your first mortgage on fire!

- Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups.
Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

#Debtfree2014

I have long believed that the reason so many of us feel stuck financially is because we don’t talk about money. I write about it all the time. I think the single most important thing you can do to change your financial position is to find someone to have a constructive conversation about it with.

So imagine my surprise this month when I (for the third time) was making a concerted effort to engage in Twitter (I feel so old) and found people on Twitter talking about their money. I knew there were people like me, financial experts, using Twitter as a platform for their business. But I wasn't expecting everyday people telling their friends about how they've paid off another credit card, made their final car payment or sharing the actual amount of debt they've paid off.

One particularly courageous soul (@famdebtjourney) links to her blog where she’s declared 2014 the year to put it all out there and share her family’s story about their journey to get out of debt. Beginning with a blog in January, My Family's Debt Journey itemized their debt:

• Credit Card Debt:           $27,102

• Auto Debt:                     $16,173

• Mortgage:                     $133,968

Can you imagine posting everywhere your truth? That’s laying the gauntlet down! Making that kind of public declaration will no debt propel them, and hopefully provide inspiration when the going gets rough. Just like a diet, becoming debt free is a journey with peaks and valleys for sure.

Who would you be willing to share your numbers with? Do you think it would propel your financial health?

-Stacey Powell


Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 

Reach your financial goals. Get motivated. Get support. Get results. Are you ready?

Gratitude for Milestones

I got an email from a past Boot Camp member the other day. She wanted to let me know she’s passed the milestone of accumulating over $100,000 between her reserves and retirement, and that she was grateful. 

That’s a huge number. Who wouldn’t be grateful to be staring at that number on a piece of paper? 

It made me wonder, though, if she experienced gratitude along the way, with every deposit into her savings and retirement account. When people start trying to figure out what's wrong with their money, they dive into the details. They pour through their credit card statements, utility bills and examine how much they’re eating out. They look at the amount they’re putting away every month. Details are important, but they can also keep you from seeing what is most important: the big picture. 

It’s hard, month in and month out, to get excited when you’ve paid just a portion of a debt off, or put just a little away in savings. That singular action you take by sending money to your 401k or IRA or emergency reserves account is one thread of your overall safety net. We should find a way to be just as grateful for that one thread, as we are for the whole net. It’s all of those threads that help us weave the entire net.

Experiencing the gratitude propels us forward as well. There isn’t much better in life than the feeling of deep gratitude. It’s the kind of feeling that you want to recreate. Connecting that level of deep gratitude of caring for yourself via your savings, and for reaching such an important milestone makes us want to do it again, build more, and hit the next milestone.

I have a debt that I’ve been working on paying off. It’s a large debt that I want gone. Sometimes I’m not all that happy about sending that check off every month. Sometimes I’m annoyed at myself for having the debt. But when I was looking at my own big picture numbers this month, I realized that I’m at the one-third of the way to the milestone of it being gone, and that I’ve made a huge dent in the overall debt. Deep gratitude swept over me, and when I sent the check this month, I smiled to see it go. 

I hope I can remember every time I send that check off to keep smiling. I hope I can remember that sense of gratitude.

What one little thing do you do every month that you should be grateful for?

-Stacey Powell

Finance Gym offers personal finance coaching in professionally facilitated peer-advisory groups. 
We teach. We inspire. We support. We help people change their lives by improving their finances.