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Weetabucks: how I got control of my finances

I’ve just read a post from yet another blogger who is bemoaning money woes and it has officially made my head explode. I’m going to get preachy right now. You have been warned.

Look, I know that money is complicated. I know that it’s an emotion-laden subject and a lot of people deal with money the same way that they deal with food or gambling or addictive substances: they don’t. I get it. I’ve been there. Really. And I fixed myself.

One of the biggest common issues, it seems, is the simple credit card. It’s a huge trap! They allow us to engage our inner Veruca Salt and get it now, leaving Future You to foot the bill, again and again and again, usually justifying it with lies to yourself about why you need to spend the money. I firmly believe that every one of us should be striving daily to make this world a better place, but if you are spending irresponsibly, you are preventing yourself from being able to financially help charitable causes. Think of how much money goes to Master Card and Visa annually in the form of interest and fees and now think of what it could have done to help your favorite causes! Millions of dollars could have gone to end illiteracy, clean up the Gulf, figure out a clean energy source, cure breast cancer, you name it!

Let’s turn aside a moment on how ridiculous this is, because not everyone is fortunate enough to learn the skill of money management. For instance, I grew up poor and it took until my late twenties to understand that money is a simple cause and effect relationship. Money In must be greater than Money Out. Simple as that. Credit cards blur the line, because it feels like Money In, since you can spend it. Math is hard, right? I get it. So if you want to take a serious step at ridding yourself of debt, there are a few easy things you can do to take on this very scary process:

Read five steps to get control of your finances and six mental tricks to help you get there, after the jump.

  1. Make a spreadsheet of your current debt, including every balance and interest rate. I have made several of these for friends, and there are a bunch of them available if you Google. Of course, if you send me an e-mail, I’d happily ship you a very pretty pink version that isn’t even the teeniest bit scary.
  2. Using a Debt Snowball approach, rank them based on whatever your preference. Some people prefer to concentrate on blowing some little annoying debts out of the water quickly, just for the mental joy of making progress. Other people (myself included) feel that it makes more sense to tackle based upon interest rate and whether something is tax deductible or not. For instance, I will keep a mortgage on my house until it is the very last debt I have, simply because I can deduct all of the interest, whereas I cannot deduct the interest on a credit card.
  3. Sign up for Mint and attach it to all of your online accounts, using it to track spending so that you can analyze where you are hemorrhaging money. It’s eye-opening, particularly the graphs that compare the simple MI:MO formula.
  4. Decide whether maintaining your current spending is worth paying off your credit card for 15+ years (or never) and then decide what is more/less important than the goal of getting debt free. It usually helps to play with the numbers in the spreadsheet a little bit so that you can see how a tiny little increase in a payment snowballs down to decrease the term and interest paid over a long period of time.
  5. Put the money you save toward debt and don’t justify new purchases because you deserve it since you stopped going to Starbucks daily. That’s called denial.

Then there’s the psychological part of not spending money, which is where the problem really lies for most people (come on, I know that you’re smart enough to have thought about using a spreadsheet before):

  • Think about what you can do now with what you have. Stop thinking about what you don’t have. Think about what you DO have. We live in the most flush country in the world and chances are you are in the top 5% of the richest people in the world (if not higher). Yes, those new iPads are sexy but ten years ago you probably would have pined away longingly for your current phone or laptop! If there’s something you really really want, sell some possession(s) on Craigslist or bring in extra income to cover the cost.
  • Reduce clutter. Wait, what is this doing in a money tips list? I don’t know what it is, but it seems like the people who have a messy financial house usually have a lot of visual clutter too and I think one might cause the other. I’m horrible about clutter (I told you that I’m speaking from a place of experience) but I’m getting better and it definitely helps you feel as though you have your life in control. Besides, how many times have you needed to purchase a second or third whatsit because you couldn’t find the one you already owned?  (PS. If you read this tip and had an immediate fantasy about a shopping trip to The Container Store, please reread the first bullet in this list)
  • Practice saying NO. No, I can’t buy stuff from your son’s Boy Scout fundraiser. No, I can’t go to New York for your bachelorette party. No, I can’t loan you money. No, I can’t pick up the tab for lunch. No. No excuses needed. Just “No, I couldn’t possibly do that.”
  • Figure out why you spend money on non-essentials. Lots of time, people justify expenses through a series of mental leaps that make a lot of sense at the time, but crumble upon closer examination. Remember: anything that makes something easier, more convenient, saves time or just looks pretty is usually really purchased because of the simple reason that “you wanted it”. No, don’t argue. Yeah, sure, you’ll wear that new suit to work but unless it’s a uniform or a replacement for another suit that requires dry cleaning (and the new one doesn’t). The other side of this column are those expenses that were avoidable. For instance, there are no groceries in the house and you’re so starving that you end up going out to eat, or you didn’t get your DVDs back to RedBox in time and got charged extra. When you spot those instances, make a SMART goal (more on that later) to avoid those situations in the future (because let’s be real, it’s probably going to happen again).
  • Money doesn’t buy the friends you want. Remind yourself that you don’t need to spend money to impress people or keep your friends. I have a friend who threw several parties for friends, footing the bills, each more than several hundred dollars, because she wanted to help celebrate her friends’ accomplishments. Ok! You know that celebrating is totally free, right? And just because someone registered at Pottery Barn or Williams & Sonoma doesn’t mean that you can’t buy them something from a less expensive store or make it yourself. If they think less of you for it, screw them! You’re smart and creative and can think of other ways to make people feel special without spending a single penny. The most expensive thing you can buy into is your fear and oddly enough, the more money you throw at it, the more expensive it gets to shut up the inner voices, so just put a stop to it right now.
  • Make SMART goals. You can’t succeed unless you figure out an action plan to support the five steps above, so make a list of some goals and use the SMART principle. So, in other words, saying that you’re going to “pack more lunches” or “go to Starbucks less” is awesome, but it needs to be really specific. How much is more? What is “less”? For how long do you do this to consider it a success? You have no way of measuring it unless you define it. Vague goals are the reason that so many people have problems with New Year’s resolutions. They decide to run toward some ideal but since it’s so far on the horizon that it never seems like they are making progress, so they give up or slowly just stop doing the things that were supporting their goals, which ends up making them feel like they failed. Support your goals by doing a little tracking and you’ll see what an awesome rock star you are and the progress that you’re making!

How about you? What are your tips for getting your mind in a place of financial freedom?

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  1. Linda wrote:

    One tip would not only be controlling spending, but taking a certain amount of your check and putting it in savings IMMEDIATELY, so you don’t even know it’s gone, because if it’s in checking, you will dribble it away. If you can save automatically, that’s even better. Don’t just not spend–save in a place that’s harder to access immediately/thoughtlessly.

    Wednesday, October 6, 2010 at 6:15 pm | Permalink
  2. Rachel wrote:

    All really, really good tips. Getting my money under control has been one of the hardest things I’ve done, but there are fewer things I’ve been more satisfied doing. Sure, it’s still not perfect and there’s lots of stuff I’ve had to give up (like the most fun weekend in March and pretty, pretty clothes) but not being able to answer the phone and being in a sweaty panic ALL THE TIME isn’t not a fun way to live. And yes, it does get better and yes, it is doable. Hard. But doable.

    Wednesday, October 6, 2010 at 8:46 pm | Permalink
  3. Nicole wrote:

    Something that really works for me, but seems like a cheat, is only buying myself things that I REALLY love. I used to avoid those purchases, because they tend to be things that are expensive and I felt like I couldn’t afford them and anyways, they were too nice for me, right? Then I went and bought a dozen cheap versions that never really fit the bill and would fall apart within a month. So I would spend more money, and still be dissatisfied. Finally, after cleaning out my closet that was bursting at the seams and discovering that there were only 5 or 6 items out of all that mess that I actually liked (and at the same time, my bank account was empty due to all the shopping), I made a decision to stop. I would buy only stuff that I loved. And if it cost more than I had to spend, I would save up til I could afford it. Once I started having really beautiful things, I didn’t want to waste money on cheap stuff. I kind of like the delayed gratification as well. Its like the build-up to Christmas as I collect my pennies. And I became ADDICTED to my spending spreadsheets! Very good advice.

    Thursday, October 7, 2010 at 2:10 am | Permalink
  4. Jas wrote:

    One thing that constantly frustrates me when other people are complaining that they have no money is that, when they make a budget, they leave out things like cigarettes, 20 oz. sodas from the gas station, candy bars, etc. Add that stuff up! I guarantee it’s a lot more than you think it is. I have a friend who told me that she only $50 left at the end of the month to buy groceries, diapers, etc. She had gone over all of her bills and expenses and added everything up and that’s what she came up with. There was NO WAY for her to save more money. Of course, she was smoking from a pack of Marlboros as she said this and while we were out she stopped and bought a doughnut and coffee. I’m pretty sure neither the smokes or the snacks made it into the budget, but it had to be at least $10 extra right there. I’m not saying she shouldn’t smoke or eat snacks, but a budget also isn’t useful if it doesn’t take into account EVERY bit of money going out.

    Thursday, October 7, 2010 at 12:49 pm | Permalink
  5. Editrix wrote:

    Financial advice from someone getting ready to pay for college: Save for your child’s education in a Roth IRA in your name, not a 529. Even though the 529 is an asset in your name, it counts when calculating financial aid, while retirement funds do not. But you can withdraw from a Roth to pay for college without a tax hit.

    Something I wish I’d known 10 years ago.

    Thursday, October 7, 2010 at 2:05 pm | Permalink
  6. On the clutter front, can be very helpful. If her strategies seem obvious to you, then by all means skip it because you probably have a better innate handle on the situation than I do. But I’ve spent my whole life struggling just to do stupid, simple things like keep dishes from piling up or keep the bathroom clean, and now I have been more or less consistent about it for about a year. I digress though… decluttering is probably her #1 focus (she also draws parallels between a cluttered home and financial problems) and her strategies and overall ideas for not getting burned out on tasks, and doing stuff a little at a time so you never have to do a marathon of anything, are REALLY helpful.

    Friday, October 8, 2010 at 8:50 am | Permalink
  7. Poppy wrote:

    A small way to save is to dump your change every day in to a big jar. I use this as a way for vacation saving – the last time we changed it all in we came out at something like $700 for a trip to New Orleans. We’re saving now for our future trip to Italy in 2012. I have also heard that a similar way to save is to save every $5 bill that comes into your wallet – it’s a small enough amount to not really be missed yet it adds up quickly.

    Friday, October 8, 2010 at 9:57 am | Permalink
  8. Jean wrote:

    …if you watch the nickels, the dollars take care of themselves.

    It’t not usually the big things that bite us, but the slow, dribble of money out of our purses.

    My technique is waiting. I make myself wait at least 7 days to buy something I think I want. If it’s gone, oh well. If it’s still there, more often than not, I don’t want it any more.

    Friday, October 8, 2010 at 11:02 am | Permalink
  9. Fork wrote:

    We got a loan two years ago to consolidate all of our credit card debt, and canceled all our accounts. I don’t care how it affects our credit, no more credit cards for us! We will make our last payment on the consolidation loan December 2011. Three years to pay off more debt than I’d care to publicly share. It was a challenge, but it feels so good to know we’re almost out of it.

    Friday, October 8, 2010 at 12:26 pm | Permalink
  10. Nimble wrote:

    My spouse and I are recovering from a bankruptcy and foreclosure last year. We are not in a position to save right now (he’s in school and has a part time job and my state job provides big benes but small paychecks). But on the other hand, we said goodbye to our debt last year too.

    I wanted to thank you for your rant and tell you that it’s been a kick in the pants for me to get our bills/important papers picked up and orderly. I’ve been throwing them on a shelf for a few months now. Enough of that. I’m ready to be in charge again.

    Monday, October 11, 2010 at 7:32 am | Permalink
  11. Niki wrote:

    I…cannot find your email address on the site. Is it hiding or am I just missing it somehow? I would love a copy of your spreadsheet (will you really make it pink?), but if the requirement is that I send you an email, well, then, I’m stumped.

    Friday, October 22, 2010 at 10:22 pm | Permalink

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