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Indiana, United States
Debt free empty nesters...ready to stretch our wings. Life is good and we plan on making it even better. This blog is mostly about our trips to Vieques Puerto Rico, with a few odds and ends thrown in about our life after the mortgage.

Sunday, December 12, 2010

Being Debt Free

 "5 ways to save $2000 a year." That was the title of the video on Yahoo "Shine" that Lorrie and I watched last night. Always ones to be interested in finding new ways to save some dough, and at $2000,  we gave it a view.  I've got to say it was worthless, well almost. They did say  negotiate with your cable provider to see if there are any promotions they offer. That's the wrong approach. If your gonna do battle you had better bring some artillary.

 Thinking about just how worthless that clip was and knowing full well there are so many other tangible ways to save some money, take control and  live debt free, I've decided to share some of what we've done to get us to where we are. You know..."After the Mortgage."

1. To take control you've got to know where your money is going. There is no secret system to getting out of debt. Dave Ramsey and all those others are just putting a different wrapper on what's nothing more than simple math. What's coming in minus what's going out. You want the incoming larger than the outgoing, of course.   When we were first married, "ahem", some 24yrs ago.....I used to take a calendar and mark each week with what bills had to be paid and how much money was left over. I did this every January and did the whole year. That way, each week, Lorrie could look and see just how much money was left over, also showed you when to pay each bill. Not the best system in the world but at least we knew where it was going and we were in some sort of control. Now I use a simple spreadsheet in Micorsoft works:

For us the spreadsheet is not really necessary anymore, I still maintain it anyway.  The point is one should know exactly how much it costs to live. Include everything. All utilities, insurance, food, car gas, car payments, day care, monthly memberships.  If you pay your insurance bi-annually then divide that amount by six. If you pay your house insurance once a year then divide it by twelve.  If you don't know how to set up a spreadsheet you could always go to the library and get a book or inlist the help of your child or a friend. You could always do it on paper, but it doesn't offer you the flexibility to see what happens if you pay off a car. You immediately see the change to the bottom line. That $400 car payment means another $4800 a year. The beauty of this is you only have to set it up once. You can always add a bill or changes incomes.
This is the part that most people don't like. Mostly because they don't want to face reality, secondly because many are just lazy. How many of your friends know exactly what their living expenses are and I'm not talking about the mortgage only?   Once you do it, and you know exactly where you are at,  it will influence your financial decision making or at least it should. If you've only got a few hundred dollars extra each month the premium channel subscription on DirectTV might not be as appealing. Somehow make sure you know your bottom line and check it regularly.

2. Raise your deductable on your insurance as high as possible. When I tell people this they say "But what if I get in a wreck? I don't have  $1000 for the deductable."  I say you do because your paying out each month, albeit a little bit at a time. I say raise your deductable and open a home equity line of credit. Use it only if you need it in case of an accident to pay the deductable. A second option is to get a no annual fee credit card and use it to pay the deductable. This should save you at least 10-15% each month.

3. If you have a cell phone dump your land line. That's a pretty simple one. Why pay twice for the same service? If there are other services you have that are dependant on a land line then evaluate whether they are necessary or not.  i.e. security systems, sat tv, internet.

4. This brings me to one of the biggest leeches out there, sat TV. We have become so conditioned to think that we've GOT to have 100's of channels of TV, do we? Is it worth the cost? I mean really. If your not ready to dump the sat TV try this: If you've been a subsriber to say DirectTV for some time call them up and say you want to cancel your service. I did it before we were ready to totally get rid of it. They gave me a $10 rebate  each month  for a year. Not only that they did it twice, two years in a row. I'm telling you that the internet is eating into their business and they are losing customers. You have the advantage here. We totally dumped sat TV and now use the internet and Netflix online.

5. Along those same lines if you use ADT security and have been with them for awhile you can call and say that your want to cancel your service. They cut ours in half before we dumped it all.

6. Get a dry loop DSL line. You don't have to have local phone service to have DSL.

Up to this point I've only talked about changes that really don't require any effort on your part. But to really get ahead of the game you've got to put some effort into it. So here we go:

8. Take your lunch with you. The savings from this are huge but you've got to do.

9. Drink water at work and I don't mean bottled water either.

10. Only buy used vehicles, never new ones. Huges savings on insurance not to mention the underlying cost of the vehicle. Did you ever think what the purpose of a vehicle is? It's to get you from point A to point B. Well if you buy the brand new vehicle the cost of getting to point B is darn high. Especially when you figure in insurance and gas, somewhere in the neighborhood of $700 a month or $8400 a year. I used a $400 a month car payment, $100 full coverage insurance and $200 a month gas.

11. Buy used cloths. yeah I know...but I can save 1k year by going to resale shops. You pay the premium price....I'd rather spend a month in Vieques.

12. Recycle, compost and burn (if your in an area where you can) the rest. I canceled our trash service and built compost bins and a incenerator. Compost bins are nothing more than plastic garbage cans with holes drilled in them. The incenerator cost $200 to build. I was paying $18 a month for trash service. I'll recoup my cost for the incenerator in the first year. After that we are saving $200 a year.

13. Make you own laudry detergent. We make 5 gallons for under $2. We used to buy the  ALL free and clear. It cost would .25 cents a load to use. Our own costs less than .02 a load. Roughly you'll save between $50-$70 a year.

14.  Learn the lost art of cooking and eat in. I don't mean microwaving a frozen meal either (huge waste of money not to mention how unhealthy it is).

15. Un-plug all charges and electronics that are not in use. If you've got a TV in the basement that is rarely used, unplug it. Use compact  fluorescent bulbs.

16. Use your local library instead of buying books. Your already paying for it...so use it.

Hopefully this may be of use to someone. By far the biggest living exspense for most is their mortgage payment. Pay it off and the rest is easy. You pay it off by diverting as much extra cash as possible towards it each and every month.  If it means forgoing a vacation, then do it. If it means taking your lunch and having co-workers look at you strange, do it anyway. If it means not driving the latest and greastest new car, then do it. I can't tell you just how great it feels to watch your extra cash grow each month once you reach the debt free point. Everything changes.

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