Let the Payoff Begin!

It's official, operation payoff mortgage has begun! I'm mailing my first extra principal payment today. Having goals work to my advantage because they tend to create a healthy discipline and drive in me. Generally I'm a goal keeper so once I get started, I stay the course until it's achieved ... assuming the goal still makes sense.

Do you set and keep goals?

Financial Nuggets - 3

We must all suffer from one of two pains: the pain of discipline or the pain of regret. Discipline weighs ounces - regret weighs tons.
~Jim Rohn

Budgeting is people telling their money where to go instead of asking where it went.
~John C. Maxwell

Thoughts or comments?

Paper or Plastic?

"Studies show that we spend more using plastic rather than cash." Have you ever heard that statement? I have and each time the point remains the same but the statistics change (i.e. 18% more, 32% more, etc). The primary explanation is that there is no immediate emotional connection with using plastic like there is with cash. Honestly I'm not sure if the statistics are accurate or even true because I know people who swear they spend more using cash and I know others who swear they spend more on plastic?

As for me, it really depends on what I'm buying and where I'm shopping. At the grocery store I absolutely, positively must use cash if I'm going to stay on budget. Every single dag-blastic time I use my debit card, I over spend. The other sore area for me is restaurant eating. Hmm, are seeing a theme here? Food apparently gets me into trouble (hey, what can I say, a girl loves to eat:-). I cannot think of any other area where I have to be that adamant about using cash. Actually most of my transactions are either online bill pay or cash. I do use my debit card but I primarily use cash. Over the years I have become more disciplined with my spending. Excluding the aforementioned exceptions , I do pretty good either way, paper or plastic.

How about you? Do you tend to spend more when you use plastic versus cash?

Every Penny Counts

I'm a "paperless" kind of girl. I don't like clutter and I detest junk. If I can get an electronic copy of something, by all means, please deliver it to me that way. Most of my bills are sent to me electronically or I get an e-mail letting my know that my invoice is ready for viewing. On Saturday I guess I was bored or something because I decided to look at the details of my AT&T bill. Now my phone bill does not change materially each month, it may fluctuate a couple of cents or maybe even a dollar but it's pretty much the same. Turns out my boredom was not in vein because these two items caught my attention:

$6.00 - voicemail service
$7.50 - inside maintenance plan

It's been a very long time since I reviewed my phone bill with this much attention (can you say 5 years). Let's do the math, $6 + $7.50 = $13.50 per month * 60 months = $810!

That is enough money to pay an additional 6.5 months of principal payments* on my mortgage. Guess who's about to get a call from me? You got it, AT&T. Oh, did I mention that I have an answering machine at home? Yeah, it's electronic and connected to my cordless phone. It's been "off" since I had the phone.

*I have a 30 year mortgage which equals 360 payments. When I say extra payments, I mean extra principal payment. If you look an amortization schedule, you will see that each total payment is comprised of interest and principal. For example:

Monthly Total Payment = $1,000
1. Jan: Interest $900 ....... Principal $100
2. Feb: Interest $897 ....... Principal $103
3. Mar: Interest $890 ...... Principal $110
4. Apr: Interest $883 ....... Principal $117
so on and so forth until you get to payment # 360.

If I paid $1,000 for December's mortgage plus an additional $323, then I have paid 3 extra principal payments (Jan - Mar). When I send in my $1,000 payment in January, I've moved 3 months down the amortization table to April or payment #4, and have saved myself $2,687 worth of interest (add Jan - Mar's interest). My payment made in January will be broken up as $883 to interest and $117 to principal.

Think of it this way, the amortization table tells you how much you paid to borrow the related principal amount. Taking #1 above, essentially the bank is charging me $900 to borrow $100. For February, the bank is charging $897 to borrow $103. When you prepay principal, you do not pay the related interest. Ah ha!

Budget Buster!

Sighing....

I did it again! I went to the grocery store (1) without a list and (2) without cash. Guess what happened? I busted my budget wide open. My grocery budget is $50 a week and whenever I violate those two rules, I lose. After years of trying to control my tendency to overspend at the grocery store, you would think I would do what I know works for me but noooo, I'm still going around in circles.

I went into the grocery store to get 2 ingredients to make some chicken tortilla soup, 2 ingredients! By the time I checked-out, I had a cart loaded with stuff and a tab of $117.32!! Talking about budget buster. There is no justification, this is nothing more than bad habits not going down without a fight.

How do I handle senseless budget busters...I take it out of my blow money! Yep, I blew it so oh well. On a positive note, I won't have to go grocery shopping next week so I'll sort of "add" that $50 back to what I overspent. However, let us not get it twisted, it is not a good habit to spend money before you have it.

Do you have any categories in your budget that tend to run amuck without careful and focused attention?

Financial Nuggets - 2

The purpose of a budget is to help your money to grow. It is to assist you to have your necessities, and to the extent possible, your other desires. It is to enable you to obtain your most cherished desires by defending them from your casual wishes. Like a bright light in a dark cave, your budget shows up the leaks in your money and enables you to stop them and control your expenses for definite and gratifying purposes.

~Author George S. Clason...The Richest Man in Babylon

***The book was written in the 1920's so the above quote was revised for modern language (i.e thy to your, thee to you, etc).

Any thoughts or comments?

Recession Proof

Surprise, Surprise, Surprise, the country is in a recession. Oh and get this, the country has been in a recession since December 2007. Hmm, I wonder why they waited 12 months to finally admit the state of this economy. Are you surprised? I'm not.

Several people have asked me my thoughts on the recession. It’s simple; I have chosen to opt out. That’s right, I am opting out of the recession … as in not participating. Regardless if the country is in a bull market or a bear market, the choice is always available to most of us rather or not we experience a personal recession. The last time I was in a personal recession was during the last bull market, go figure! Consequently, I learned that it’s not wise to leave my finances up to chance, the government, an employer, or even a well-meaning financial advisor. I am the CEO and CFO of Me, Inc.; it is my responsibility to actively manage my business (even if I solicit the help of others).

A few tips to avoiding a personal recession:

1. You are the boss so take control. Organize your finances, create a monthly budget, and commit to keeping it.

2. Pay off debt, especially credit cards! Period.

3. Increase your financial knowledge and practice what you learn. The rate of return on this action item is infinite.

4. Make temporary sacrifices (for example, when gas prices were ridiculously high, I switched from Dove soap to Tone and from Charmin tissue to Scott (extra soft of course:-). These were proactive, temporary changes to help accommodate the increase in my gasoline budget.

5. If applicable and necessary, increase your income.

• Obtain a new job or get an additional job


• Sell something – garage sales, eBay, craigslist, etc


• Provide a service – pet sit, cater, decorate, personal shopper, ghostwriter, baby sit, clean homes, etc.

6. Start today! It's never too late.

Are you actively managing your Me, Inc? Do you have any tips to share?