Do The Hustle

Do The Hustle

I spent some days in my youth bailing water out of flooded basements with my siblings. My parents got into real estate and property management and it became a family affair. We learned to bail water from tenant’s basements, and we mowed a lot of lawns. My dad’s main job was Colonel, US Army. But in early retirement, he side-hustled. My dad was born in a tent, but in the end, he collected houses.

In my last post, I discussed ways to free up money to pay down debt by learning to live on less. To get ahead, it’s also important to increase your earnings. A small increase in income can make a huge difference. For example, if you have a $3000 credit card balance at 10% interest, a monthly payment of $100 will take 35 months to pay off and cost $467 in interest. If you earn just $100 a week extra, and throw that at your balance, it will be paid off in 7 months, at only $91 in interest. Imagine what you can do if you add $500 a week to your income. (answer: you’ll pay it off in 2 months, at $33 in interest, AND you’ll have $667 in leftover cash!)  The truth is, you’re not going to get rich just by cutting back. You need to make money. There are countless ways to generate income.

If you have a career, learn how to make more money in your current job. Perhaps additional courses, certifications, or licensure would increase your chances for a raise, or a promotion. Maybe your job doesn’t offer decent pay or promotional opportunities and you need to consider a change. Learn about careers that pay well. This isn’t the time to hang on to a low-paying job and hope that the tide will change. You need to grab the bull by the horns and make money now. If you live with consumer debt; if you are not on a path toward financial independence; this is an emergency. Stop waiting for your ship to come in. You need to hustle. (And so does your spouse.)

The gig economy is hot today. Learn how to generate extra money on the side. Musicians can offer in-home music lessons, teachers can tutor, and artists can sell their creations online through Etsy or other buy and sell platforms. Online tutoring is popular for those who wish to work remotely. VIP Kid provides an international learning experience to Chinese children through virtual classrooms. You decide how often you want to work. You can find out the requirements, and sign up to become an online tutor here. Another popular site to look for freelance work is Upwork. Check out their website for short-term writing, editing, creative, IT, virtual assistant, and other remote opportunities: Upwork.

My side hustles have included selling newspaper ads, sewing/slipcover work, furniture buying and reselling, and extra work as a PRN nurse. I know people who cut and sell firewood, baby-sit, house-sit, and pet-sit for extra money. When my oldest daughter was in college, she made money house-sitting for long stretches. She was paid to live in beautiful homes but was free to come and go to her classes each day. Anyone can make extra money. Anyone. Advertising your gig has never been easier. Social media platforms are usually free and effective.

Air BnB'ing  has become a popular way to generate money, as well. If you have an additional room in your home, renting it out by the night or weekend can boost your income. I have friends who rent their entire home in the summer months while they travel. Check out Air BnB to learn how to earn money as a host. 

If you live in the country on some acreage, you may be able to rent space for campers on your land through Hipcamp. Hipcampers book and pay for their stay directly through a website, and hosts keep 90% of the payment. Check out Hipcamp.

Remember, use your extra income to focus on one debt at a time, working through the debt snowball.  To learn how quickly you can pay off your debt by increasing payments, check out Credit Karma’s calculator.

After The Snowball

After paying off all your consumer debts and celebrating this enormous accomplishment (and you MUST celebrate!!), you’re ready to build wealth. The following steps may be done simultaneously:

1-Increase your emergency fund to the equivalent of three months living expenses. Some people recommend six months; but this is up to you. You need wiggle-room in the event you lose a job, or have another major setback. And you will have a setback--you can count on it. The best way to build your EF is to automate your savings. Set up your online bill-pay to transfer a small amount of money from your primary checking to your savings once or twice each month. You won’t even feel this! Just a few dollars each payday will add up quickly. Use your EF only for unexpected car repairs, appliance replacements, or other unexpected bills when you are not able to cash-flow the cost.

2-Begin investment contributions to a retirement plan. If you are relying on Social Security to take care of you in your retirement years, think again. Social Security is either NOT going to be there, or it’s going to be a pittance. Investing is the secret sauce to becoming wealthy. Your money works for you through the magic of compounding interest. For an example of how just $1200 can turn into tens of thousands of dollars with no effort from you, read this article from the Motley Fool.

If you have a 401K or other plan through your employer, contribute enough for the company match, but try to increase your contribution over time to at least 15% of your pay, or up to the annual federal limit. Your contributions will be automatically deducted from your paycheck.

If your company doesn’t offer a retirement plan, start an investment account on your own through the brokerage of your choice. Vanguard is a favorite brokerage company among millennials because of their low fees and ease of online access.  You will find user-friendly help on their website.  Other popular online robo-brokerages include Wealthfront and Betterment.  If the world of investing makes your eyes glaze over, these companies provide portfolio advisory services for @ .3% fee. The important thing is to start ASAP. The best way to build your retirement investments is to automate it--just like you automate your EF savings. Set up your bill-pay to transfer a small amount of money from your primary checking to your investment account once or twice each month. Sock away as much as you can, and let this money grow.

3- Start additional investment savings! For an excellent, hands-on, easy-peasy beginner investment workshop, visit the Millennial Revolution blog.

Nothing is more important than being debt-free, having an emergency fund, and contributing to a retirement account. If you automate, your investments will continue to work for you in the background, slowly building wealth while you go about your life.

Carry On

At this stage, some people relax, concentrate on their careers, and let go of side hustles. Others (Millennials, primarily), blast ahead and dream of FIRE (Financial Independence, Retired Early).  Many of my influences come from the FIRE community. There are dozens of FIRE-related blogs filled with ideas on how to leave the rat race behind and live intentionally. Mr. Money Mustache (MMM to his followers) writes a blog and is a guru to the FIRE community.  He lives with his frugal family in Longmont, Colorado and retired in his 30’s. One of my favorite blogs is Frugalwoods, authored by Liz, who lives very frugally with her family in Vermont. Check in with them sometime. You’ll discover a whole new outlook on living-- I promise. Hopefully, you'll learn to break free of the consumer habits that enslave so many of us, and begin to question what you're doing with your life. Some of my future posts will include creative hacks aimed at FIRE, and I hope to feature real live folks whose adventures involved RV living,  basement bailouts, and making millions. (next)

(next)

The Debt Snowball

The Debt Snowball

Don't feel rushed. If you're still working on your $500 EF, stick with it, and come back to this post, later. Once you’ve taken stock of your numbers, stashed away your $500 EF, and found a little wiggle-room in your monthly balance,  you can attack your debt. If you do not have debt, but just want to build your cash balance, this is for you, as well. This is where things become fun and creative. My sister, Cat (see my initial Welcome to My World post), began years ago experimenting with frugal hacks to kill their debt, and it was fun following along. Not only did I learn cool pantyhose tricks, I also learned how to eat very well on a tiny budget.

There are lots of great blogs and podcasts out there to excite and inform you, and keep you motivated. More on that, in a few minutes. Before attacking your debt, please consider the following:

While not absolutely necessary, consider online banking if you’re not already enrolled.  All banks and credit unions offer this option. You need two accounts at the same bank: one to stash your emergency fund (EF), and one for daily money management (paying bills!). We use Capital One 360 and love the ease of use. We have a regular savings account, and a regular checking account. Each are joint accounts, and we can easily transfer between savings and checking accounts if we have to. 

As soon as you have opened your accounts, enroll in automatic deposit with your employer, if offered. You can usually do this online. This is not mandatory, but automation is your friend. Electronic banking will help track your spending and help you save money!

Once enrolled in online banking, go to the Bill Pay option and load your payees (bills). This will require your account numbers, billing addresses, and phone numbers. It takes a while to set up, but no pain, no gain! Establishing online banking accounts and automatic payroll deposits may take a couple of days, so start the process as soon as possible. Try to steer away from paper checks, and paper deposits. Some older people are afraid of security issues and avoid electronic banking. You are more likely to suffer a security breech using paper. Paper checks are easier to steal and can get lost in the mail. Electronic transactions require secure logins and passwords, and paper products do not! Remember, you don’t have to enroll in online banking, but it’s highly recommended.  Okay.  Do you have your two accounts? Are you ready?

Say hello to the debt snowball.

Debt-buster guru Dave Ramsey is a big advocate of the debt snowball, and I am, too. Here’s how it works:

Attack the smallest debt, first. This means the smallest debt BALANCE (in parentheses on your expenses list). After paying only the monthly minimum on each of the other debts, throw extra money at this smallest debt. Do whatever you can to pay more than the minimum. Laser-focus, one debt at a time, to speed up your efforts. Every extra dime should go toward this smallest debt.

When that debt is paid off, move on to the next smallest debt, continuing to pay only the monthly minimum on each of the others, and throwing even more money at this one. (You’ll have more money to do so, after paying off the previous one.)

Move on to the next debt in line: rinse, and repeat, until all your consumer debt is paid in full. This should happen fairly quickly. In my introductory post I mentioned that my sister, Cat, and her husband, paid off $25,000 in eight months.  Once the snowball starts rolling, it moves quickly.  

Wait! Shouldn’t I attack the debt with highest interest rates, first?? Many people argue that debt will move faster using this approach, often called the debt avalanche approach. It’s true- you’re going to save interest money by hitting higher interest debt, first. However, for me, knocking out the smallest balances, first, gave me a huge psychological boost. Eliminating 3 or 4 small credit card balances, regardless of lower interest rates, was much more satisfying than trying to chip away at a massive, higher interest auto loan, for example.  The only exception to the debt snowball approach, in my opinion, is when you have debts with balances that are close to the same amount. In this case, paying off the higher interest account makes obvious sense.

You’ll notice that budgeting has not been discussed here. We do not budget, per se. My philosophy is this: if you try every month to not spend ANYTHING, you’ll reach your goals faster. So, while in the debt-reduction phase, I approached every month as a no-spend month. (This implies no-spend for extraneous things like eating out, buying clothes, grabbing Starbucks coffee, etc.) Obviously, it’s not easy to avoid extra spending. The goal should be to keep discretionary spending as close to zero as possible. Every dollar blown on Starbucks is a dollar less to throw at debt.

For motivation along the way, I highly recommend acquainting yourselves with blogs, books, radio shows, and podcasts designed for people like you and me.  I also welcome your input, here. My good friend, Seung, recommended the first two fantastic resources for me, and I am grateful for his advice.  These resources and life hacks will follow you beyond debt-reduction and well into the wealth accumulation stage.  Google the following, and see what you think!

Blogs:

Mr Money Mustache –for people interested in FIRE (Financial Independence Retiring Early)

Frugalwoods- for those interested in FIRE, but mainly creative frugal hacks and intentional  living

Podcasts:

Dave Ramsey - for those wanting debt-reduction advice, and wealth building tools (religious)

The Scott Alan Turner Show-  for debt reduction advice, wealth building tools, real estate investing

The Minimalist Podcast- living on less, with less

Books:

Total Money Makeover by Dave Ramsey

The Millionaire Next Door by Thomas Stanley and William Danko

You now have the basic tools required to get started on a new financial trajectory. Stay the course. Don’t beat yourself up if you fall off the wagon. Jump back on! Find friends who share your desire to become financially independent and seek their encouragement. Some people climb out of debt in months, some take a few years. It shouldn’t be a miserable time—in fact, for me, I had fun trying new ideas and experimenting with ways to lower my expenses. If my sister, Cat, doesn’t kill me first, I may even share some of what she taught me.

(next)

Fix Those Numbers!

Fix Those Numbers!

Tulsa Oil Field Photo Credit: http://www.tulsaworld.com

My dad was born in a tent in the oil fields of Oklahoma in 1917. His family was, literally, dirt poor. My dad purchased the only home that my grandparent’s ever owned. He was in his thirties at the time.  You are starting down a road that includes living debt-free and having a healthy stash of money put away.  You are not dirt poor. You are just living above your means. You can fix this.

Evaluate your monthly after-expenses balance from my previous post. You have to create positive cash flow and increase that balance as much as possible.  You can’t pay down debt without wiggle-room.  You can do it on paper- right now- in 30 minutes- and you’ll also raise that $500 emergency fund, fast!

Look at your monthly expenses, and start trimming where you can. Start with the most bang for your buck. Do you contribute to a 401K or other retirement plan? If so, guess what I recommend?

Pause your contributions to your retirement plan UNLESS your employer offers a matching contribution. In this case, scale it back to the minimum to receive the match (it’s free money, after all). This is a temporary move to help increase your paycheck while you’re in debt-reduction mode.  Do not pull out of your plan. Do not ever borrow from it. Just cut it back to free up more cash flow.

Now, look at the last group of items on your expense list and see what you can live without. Start adding those numbers back into your leftover balance.  If you are still in negative territory after eliminating luxury expenses, you need to step it up!

Look at the items in the top group of your expense list. Can you get rid of cable TV and just use internet to stream Netflix, etc.? Perhaps you can switch to a simple antenna and watch free channels, only.  Check out the 2018 cord-cutting guide from The Simple Dollar. Call around for cheaper auto insurance.  Find a more affordable cell phone plan.  Get rid of the landline.  Maybe there is wiggle room in your grocery expenses. Consider shopping at Aldi to lower your monthly food dollars.  Yes-you really will save a lot of money there.

If you are still in negative territory after eliminating or reducing extraneous living expenses on paper, you need to ramp it up.

Consider a job change, working overtime, or working a side gig. Can you move to a cheaper place? Do you need to sell the house and rent a more modest home for a while? I know several people who rented out their homes and moved to cheaper rentals. I might even be one of them.

Make hard choices in order to live below your means. Remember, for this step, your goal is to fix those numbers. You need to create positive cash flow and increase your leftover monthly balance as much as possible BEFORE tackling that consumer debt.  Remember-this is a short-term effort, for long-term gains.

And, while you’re at it, it’s time to say goodbye to a few old friends. Pull out every one of your credit cards EXCEPT for your bank debit card, bundle them together with a rubber band, and put them in a drawer or somewhere safe.  Do NOT cancel or close them. Leave them alone. Your debit card is your only plastic going forward. If you want to be debt-free, you can’t continue accumulating debt.  Now let’s kill that debt…    (next)

Welcome to My World

Welcome to My World

Debt is stressful. I know. I developed a debt habit straight out of college and increased my debt load gradually, into my late 20’s. I fell for the ease of credit, and I made poor choices. I also relied on the safety net of family members to bail me out. I thought my problem was an income problem. It took me a long time to realize I had a spending problem. And an attitude problem.

I wasn’t a wild spendthrift. I just didn’t live within my means. I thought if I needed a car for work, I should buy a new car. And to me, financing a new car through the dealership was what people did. I thought having store credit to make consumer purchases was the way to go, so I had credit cards for my favorites:  Sears and JCPenney. I fell for the common belief that homeownership is always smart, and that a house is an asset (not necessarily). And when it came time to buy the first house, I believed that one should buy as much house as one could qualify for. (one shouldn’t)

I never once considered  interest rates. In fact, I didn’t consider debt to be an issue as long as I could meet the minimum monthly payments. The only time my debt was a problem was when the car broke down, or when Christmas came around, or when I went over my credit limit and my card was declined at the checkout counter.  Debt was an annoying, but acceptable, constant in my life. It shouldn’t have been. My schooling cost me nothing. I became an RN on a state grant, and I never worried about employment.

I married young, and became a young mother. My husband and I both shared an attitude that went something like this:

You only live once. Our families will never let us fall through the cracks. We’ll have more money when we’re older. Everyone has debt. Nobody can save. Life is hard; we deserve to have fun.

We believed these things and said them aloud. My husband and I shared our debt journey, but when we parted ways after twelve years, I had a chunk of debt all to myself. No problem. I had my safety net—and, for a while, I coasted along with my mother’s help. And then--

She said no. Other fine family members who had provided a safety net also declined to help, and I fell into the biggest funk of my life. Once I picked myself up, I took a better paying job and started facing my dilemma. I worked extra shifts when I could, and slowly started to wrap my head around my mess.  

Cue my sister, Cat, and her own newfound frugalness! Cat started paying attention to Amy Dacyczyn’s Tightwad Gazette Newsletter, and opened my eyes to the concept of frugality. She seemed to have fun with clever money-saving tips and shared cool ideas that made my synapses fire. I mean, when I discovered that attaching a piece of used nylon stocking over the end of my dryer hose and letting it blow into the house could help heat my home AND humidify it, I was hooked! (by the way, use extreme caution and keep the nylon lint free - try this tip at your own risk)

The first Tightwad Gazette book came out in 1992, and included appealing tips like: “How to slice your bills in half,” and “How to be frugal without feeling deprived.” Cat and her husband practiced frugal hacks and to my astonishment, they paid off over $25,000 in consumer debt in eight short months. This, on modest salaries. How the heck does anyone pay off ALL his or her debts? I was newly interested in spending less, but the thought of actually being debt-free was a completely new concept for me. I mean, everyone has debt, right? You just pay the minimums. Forever.

Inspired b y Cat and The Tightwad Gazette, I challenged myself NOT to spend money. I made my own bread, planted a garden, sewed my kids’ clothes, made and froze many home cooked meals, and had fun doing it. I learned to live within my means. I stopped charging things, and started paying down my debts. It took a very long time- a few years, actually. Admittedly, I didn’t do it alone. After a time, I dated again, and when my now husband moved in, he shared the rent and utilities. I learned to make smarter choices as new people in my life introduced me to retirement savings (401 K-duh!), and taught me about compounding interest, and buying cars second hand (always!) instead of new.

My debt habit, over time, gave way to a savings habit. Debt acceptance became debt intolerance. We lived below our means and slowly paid off all existing debt. The satisfaction of becoming debt-free pushed me toward desiring to live well below our means.  I had an attitude adjustment, and it went like this:

You only live once, so be smart about it. You should never expect others to be your safety net. We’ll have more money when we’re older because we saved it. Most everyone has debt, but they don’t have to. Most anyone can save. Life is much easier when we have fun we can afford.

Living debt-free and having money in the bank changes people’s lives. I’m a nut about it because money habits directly impact quality of life. Money habits make and break relationships. Money habits impact mood and emotions. Most money problems are fixable, and most money problems can be turned around quickly. (I said most; not all. Some people have situations beyond their control-like medical catastrophes and hurricanes.) The principles required to change your trajectory and become financially independent are simple, and they start with deciding that enough is enough. Have a conversation with yourself, and with your significant other, if you have one. Decide together that enough is enough, and get on board with doing what you need to do to change your money life. Then, welcome to my world.  I’ll walk you through tried and true steps to get out of debt and start living well. And, without delay, here we go:

Step One

It's a new year, so for some spendy-pants, it represents a new start. Before learning frugal hacks and building wealth, the first step is to become debt-free. Here's how to begin, regardless of how much debt you carry:


Step 1- If you live paycheck to paycheck and do not have an emergency fund, work toward saving $500 in a savings account. This $$ is hands-off, except for true emergencies. You may have to sell some items, or give up cable TV or Starbucks coffee to stash this money away, fast. Just do it. To follow the steps in order, just click next.