You may recall that several months ago, after considering my options for what to do with my iPhone 5C (trade it in, sell it, consign it, auction it, donate it, or keep it) I’d decided to sell the phone to the online company that had given me the best cash offer.
That didn’t happen. Within hours of posting that column, I received a message offering one more option:
When I was young and stupid, I accumulated more than $100,000 in unsecured, credit-card debt. I didn’t get into that mess overnight. It took 12 years and many financial mistakes along the way to nearly ruin my life.
During the 13 years it took to get out of the mess, I learned how important it is to deal with mistakes as they happen so they don’t turn into major setbacks.
No one is perfect. You’re going to make mistakes, and when you do, you need to know how to react and what to do to minimize the damage.
Several years ago I met Kathryn and Galen who live in Missouri. At the time, not only were they were drowning in debt; Galen was dealing with a protracted season of unemployment. Their financial situation appeared grim.
I agreed to work with them to set up a plan that, if followed diligently, would get them out of debt and on their way to financial freedom.
Together, we determined that given a scaled-back lifestyle and financial commitments, they were $1,000 short every month—an amount they would have to find somewhere, some how, if this plan were to work.
Never have I seen a couple so committed to getting out of debt. They didn’t complain or expect any pity. Instead, they adopted a “scorched earth” attitude as they became committed to doing anything and everything possible to reach the goal.
Here’s Kathryn’s list of the 25 things they did to find the $1,000 they needed every month in order to stay on track with getting out of debt:
Habit is defined as behavior repeated so often it becomes almost automatic. I am in awe of the power of habit. It’s a force to change your life, and it is available to anyone no matter your situation, no matter your circumstances.
For five years, author Tom Corley observed the daily habits of the rich and the poor and documented his findings in his book, Rich Habits: The Daily Success Habits of Wealthy Individuals. Corley defines the rich as those earning at least $160,000 per year, with a minimum of $3.2 million in assets. Individuals with an annual income of less than $30,000 and fewer than $5,000 in assets are defined as poor.
Remarkably, Corley discovered that rich folks have a lot more in common than only income. They share the same habits and daily behaviors, which for the most part he did not find among the poor. Corley presents a compelling argument that becoming rich is not about how lucky you are. It may have more to do with how you spend your day, beginning with the hour you wake up.
Our kids are fortunate to be growing up in the most progressive and exciting time in history. Sadly, the very culture that offers them the world is also perpetrating this lie:
You are entitled to have everything you want even if you don’t have the money to pay for it. It’s not a problem. You deserve it. Buy it now and you can pay for it later!
There’s a huge consumer-credit industry out there planning to give your kids their very own credit cards—personal passports into the abyss of consumer debt. This is not going to require your permission or approval, something that one reader is experiencing first hand.
DEAR MARY: My daughter who is in college got a credit card and now she is in over her head, unable to pay what she owes.
She works part-time and makes a very small salary. With the high interest and late fees, the balance is now over $2,500. I will have to step in and handle the account.
How can I negotiate with the credit-card company to settle for less? I don’t know how she got this card on her salary but she kept quiet about not being able to make the payments until we started getting collection calls for her. I appreciate your thoughts and expertise. Millie
The wedding was complicated and expensive. But it’s over and you are ready to settle back and enjoy your new life together.
Lucky for you I’m here to warn you about some common money myths that newlyweds have been known to bring with them into their marriages.
Myth: Double the income, half the expenses.
This is what I call newlywed fuzzy math: Merging your lives and incomes into one household is the equivalent of getting a raise. Don’t believe that, not for a second.
Counter: Start out living on only one income and save the rest. This will require going against everything the culture insists you deserve, but it will allow you to move seamlessly into parenthood. When that day comes you’ll have an impressive savings account and options. And a gallery of envious friends.
Myth: There’s stuff we can’t live without.
No there isn’t. But it will be easy to convince yourselves that you absolutely must have matching furniture, new cars, and all kinds of gadgets and services to make your lives easier and to keep up with your expectations, to say nothing of your friends.
Counter: Make a pact that you will never go into debt for “stuff.” Period.
I know it’s hard. I know you’re desperate. You’re stressed and losing sleep. Things are tough. You have to do something, and soon.
But whatever you do, don’t touch your retirement account. Don’t borrow against it. Don’t withdraw from it. Leave it alone.
What’s so bad about liquidating a retirement account?
Momentum. Your retirement account, even if it’s currently losing value, is money you are going to need after you reach retirement age. And I can guarantee you are going to need it much worse then than you do now. If you bleed it dry now, you stop the momentum—the pace at which it is growing. Think of your retirement account as completely out of your reach for now.
“I don’t do math—numbers give me a rash.” That’s a line I’ve used a lot, mostly because it’s true, but also because it gets me a laugh.
Truth be told, most of us stink when it comes to doing the math on the fly. That’s a problem because being hopeless with math makes us putty in the hands of retailers.
Why is it socially acceptable to say that we’re bad at math, but not to say we’re bad at reading? The truth is that it’s not okay to be hopeless with numbers. Here are three ways that our aversion to math costs us money:
The number 9. Amazingly, 65 percent of all retail prices end in the number 9. Unconsciously, we’re charmed into believing the item is a bargain.
Whenever you see a product priced at $29.99 or $9.99, the retailer is attempting to “charm” your brain by marking prices just below a round number. Because our brains are trained to read from left to right, the first digit is the one that sticks in our head and the number we use to decide if the “price is right.”
Both Steve Jobs, who came up with the 99-cent app, and the guy in California who founded the 99-Cents Only stores have made millions off this human quirk. Retailers use 9 on purpose to lure us into buying something because they know we’ll assume it’s been discounted.
This phenomenon is known as the left-digit effect and studies have shown that it absolutely works and has a big impact on our buying decisions. So whenever you see a price ending with a .99, get in the habit of rounding up, then decide if it’s a good deal.