June Challenge Wrap-up/July Challenge

June Challenge Wrap-up

So we are at the close of the June Challenge, which was "all cash all the time." I slipped up a couple of times and had an auto emergency that required some credit card usage. Overall, this was actually more difficult then I anticipated. Especially with the added challenge of no ATMs. Some lessons learned:

1) Going all cash takes planning. Not just planning that there is a whole day the bank isn't open to get cash. Budgeting, planning what the next few days may have in store for you, how much gas, groceries, and entertainment is coming up.

Part of that is to plan for the unexpected. Have a back up bit of cash in the house, car, and/or work to have something there for the unplanned for event is a great idea. Maybe the restaurant's internet goes down and need cash only. Maybe your kid needs field trip money that they didn't remind you until you pull up to the school ( I did that to my parents all the time). Don't have time to go out for lunch at work, so you grab something from the vending machine. Your wallet or purse is stolen and you are on E, having cash for gas will get you home. Having that back up money will help.

2) Cash can save you money. Some up front money, such as saving 8 cents per gallon at the pump. It can save you money by making you think harder about the purchases you are making. Knowing you have $10 in your pocket for groceries makes you prioritize your choices a bit. It also saves you on interest. I just learned (and I asked others and they didn't really put it together either) that no interest financing on a department store card for a certain number of months is not billed with the total divided so that you have a zero balance on the last payment. Minimum payments will not generally get you to zero. So the consumer needs to plan what that payment should be. You have to take control. I know for myself, fake credit card money is difficult for me to control. Out of sight, out of mind.

3) Money is real. I know that sounds weird in a few ways. Money is actually not really real. It is a piece of paper that has an ever changing imaginary value. Money is a note, and now it is not even backed up with gold. It is just paper. A dollar in 1900 was a lot different then a dollar today, but it is still a dollar, 10 dimes, 20 nickels, 100 pennies. But the meaning of it has changed over the decades. Talking to the elder generations illustrates this every time. "I remember when bread was 5 cents." Now it is $3.50! We have stopped seeing money. I see it in the cashier's eyes when I hand it over...that "what is this?" moment. A few weeks ago I had someone buy a refrigerator with cash...$2000 worth! Seeing it in the "real" thing was weird. I sell that refrigerator several times a week, just swipe the card and it is your refrigerator. But to see a stack of $20's makes the magnatude of the purchase feel more real for some reason.

4) Credit cards are not all bad. 

We live in a society that is almost ruled on credit. Credit decides whether you can get a house loan, student loan, employers sometimes check credit to make sure you are trustworthy. To get in an apartment, you need credit history. Banks even do it to decide if they can give you a debit card that can be backed by Visa or Mastercard...otherwise you get the ATM card. If you had no credit history because you always use cash, you have a credit score of 0. 

Credit cards are not the Enemy...it is just that we tend to abuse it. We live above our means. We think we have a $9000 credit limit and that $9000 can buy a few vacations, furniture, etc. then I just have to pay $30 for the rest of my life to pay it off!

We could still use credit cards to our advantage. Many credit cards offer points that you can get cash back, gift cards, airplane tickets, etc. You earn those points without ever having to pay interest! Free money! All you have to do is be disciplined enough to pay the bill IN FULL each time you get it! Then you can enjoy 1-5% back typically...which is a better rate than you even get in a bank savings account!

So let's say you have credit card debt right now. What do you do to get out of it without declaring bankrupcy? Some things I have learned from personal experience that might help others fight debt:

I had $10,000 in credit card debt because I paid for a year of college on it because I had no credit history to get a loan. I paid the minumum for years. That allowed me to have a pretty good credit rating, which allowed me to get a better interest rate on a new credit card or negotiate with the existing credit card company (I did both).

Then I took the amount I had and moved it to a card that was offering 0% for 6 months. Then I threw every extra penny to it for 6 months. Have a garage sale, sell plasma, go minimalist for a bit, go back to the dog days of ramen noodle dinners of college, get a part time job, income tax refund, birthday money, whatever you can do. It is just 6 months. We can all do something for 6 months. A short term sacrifice for such a sense of accomplishment, freedom, and peace afterwards. 

I didn't have a zero balance after 6 months, but I had a lower interest rate on the new card and a much smaller balance for that interest to go off of. I just kept focused for a bit longer and made payments each paycheck. Within a year, it was gone. Zero balance. Each month I auto pay something with that credit card and then pay it as soon as the bill posts. No interest, but it is still active which counts a lot toward credit history and rating. Having a credit card that is never used is actually a hindrance to building a credit rating. Use it a little and pay it immediately. 

This is just what I did. It may help, and it may not...just some thoughts.

Things happen...

Things happen that will possibly demand that need for credit. Your car dies prematurly and a new car is needed, a great deal comes up for a house, medical issues come up, etc. Having planned some ahead by keeping your credit history active and saving toward those large purchases (even if you didn't have time to save to buy it all on cash, you will be taking a loan on a smaller amount and pay interest on a smaller amount which saves money in the long run) you will be in a much better position then if you hadn't planned ahead. 

Keeping in mind that money is real, maybe that will slow your roll and let you think if this is really something to go into debt for. Maybe a good used car will do ok instead of a brand new car. Maybe buying a fixer upper house in a better location than a dream house in an ok location will save money and can eventually become the dream house with some sweat equity and in a great location...which will save money, maybe even make you money when you sell. You can fix the house, but you can't fix the location.

Bottom line: Remember, you rule your money, don't let money rule over you.

July Challenge: Clean it up!

I tend to leave cleaning for the last thing on my list. It has to get pretty disorganized or messy for me to break down and clean. This month, I am going to dedicate 15 min a day to all out clean and organize. 465 minutes this month devoted to cleaning. 7.75 hours.