The race to zero pt.3

I’m a couple of days late with this entry; forgive me. Things have been, interesting.

When I decided to create this debt reducing thread, I had a few ideas as to how I’d proceed.

My original plan was to work more and generate income, in effect creating a surplus to my monthly income. That surplus would then go to reducing my outstanding debt.

But I hit a snag. The overtime that was offered was snapped up like bread in a duck pond by keen eyed colleagues. I missed out on some great opportunities in January.

(My daughter is sitting on my shoulder and reading everything I type out loud. It’s annoying, bless her)

I also had a bout of the flu, which lasted around 3 weeks. It incapacitated me, showing another flaw in my plan.

But I have more plans – income generation.

Jumping about

Let’s back up a bit. January wasn’t all bad. I did manage to secure some overtime, some extra work delivering training, and offered my availability to do some shadowing/monitoring for some other stuff on the periphery of my day job. That was promising and it will show its rewards at the end of this month.

It also all materialised around the same time that I was starting to worry that nothing would turn up.

January is a long month

Historically it felt that way anyway. The issue of Christmas spending and a payday that can leave you budgeting for 6 oncoming weeks can make you feel the pinch, but last year I planned properly and all was well. January was just another month.

I guess sleeping through a third of it helped.

On the downside, the credit cards have remained static, rather than showing signs of reduction.

This might take longer than I thought.

Changing shape

I had meant to look at shifting regular payments onto my card, then paying more of my salary into them per month.

I haven’t yet. I will.

It might work.

Income generation

This isn’t a new thing. In a much earlier post I spoke of how some of the greatest financial whizzes out there talk of wealth creation methodologies.

Three income streams is the key. The theory being, if you lose one stream you still have money coming in.

In these days of redundancies and corporate collapse, we need all the security we can get.

Passive income seems to be the ideal. But does real passive income exist?

I’ve been working on a couple of digital sidelines and I can tell you, they take work! I’ve no doubt that once they’re up and running the time taken to tend them will fall away but for now, it’s work work work work work.

Investing

So here’s the key; the realisation that opportunities to work more in my current role are susceptible to my health and the speed of my response to an email has led me to the realisation that I need to invest more in my sidelines. This will mean investing in myself by getting some training/mentoring.

Gurus here I come.

BSD

January 2017

Card 1= 97.9% utilisation

Card 2 = 99.4% utilisation

The race to zero pt.2

Hello all, and for some of you (at the time of writing) Happy New Year!

I’m not sure where the last 365 days went but it’s been one heck of a year. So much has happened and most of it was good; especially starting this blog.

I’m still not sure what it is meant to be but I’m throwing down some more coherent content here so I’m happy. It will get more focused the more I learn what I’m doing.

Down to business

Those of you that read part 1 of this thread will know that I am planning to eradicate my credit card debt over the next year, hopefully less. It’s not a massive amount but I would say it’s more of a psychological burden than a physical one.

I also stated in part 1 that the debt would initially increase as I planned to do some of my Christmas spending on it. I did, but I didn’t go crazy, thanks to self-discipline.

Success

good day

As stated in part one, the main strategy is to reduce the largest debt (and highest interest rate) card first by overpaying on the previous over payments. Done

Reduce any spending on them to the absolute minimum and emergencies only. I’ll have to report back in pt.3

Move regular payments to the cards where possible, then pay more of my salary into clearing those balances. On-going. The jury is still out on whether this method will work..

These are my robust rules of credit card spending. Discipline is the absolute key here.

I also discussed earning more. This is a work in progress to which I will report back periodically.

Fail

bad

Whilst on the topic of earning more, one of my strategies was to accept all available overtime that work offered me. Unfortunately, I dropped the ball a little on this one and have missed out on the initial offerings, due to not checking my work emails whilst off for the holidays. I suspect this may turn out to be a blessing.

Opportunities still exist, but I shall have to be more eagle-eyed.

Lessons from the best

good idea

I research everything, and I do mean everything. For the last 18 months or so I have been looking into ways at generating more income.

As I said in part 1, I’m a believer in sensible spending, rather than going without. I will explain more in a separate piece about extra income as one size doesn’t fit all and there are a lot of traps and get rich quick schemes out there.

Now, reading the section head and the paragraph below you may be mistaken into thinking that I think of myself as the best. I don’t. Not by a long shot.

I have committed many crimes to personal wealth and prosperity and am now in the process of cleaning it all up. I have great faith in myself but as with learning any skill, it’s harder if you try to do it alone.

Here is what I’ve been reading to help me with this:

  • Forbes guide to budgeting – home of the 50,30,20 rule. They also have some nifty budgeting freebies and how to earn extra income.
  • Ramit Sethi’s I will teach you to be rich programme. Lots of great advice from a self-made success story. Automating Your Personal Finance is one of his teams free titles and is full of great advice.

As always, if you’re in serious debt, as in the kind that keeps you awake at night or worse, please, please seek help. Suffering in silence is never the answer.

If like me you have stubborn debt, then give these two links a look and let me know what you think.

win win

So that’s it for part 2 and indeed 2017!

I’m about to settle in for the evening to enjoy what television has to offer and go smiling into 2018. There’s so much to look forwards to because that’s the way I’ve planned it!

Thank you for your support and have a Happy New Year!

BSD


 

December 2017

Card 1 = 94.97% utilisation

Card 2 = 99.78% utilisation

The race to zero pt.1

About this time of year I undertake a review of my personal finances. 

The reason I do this is two-fold;

  • I want to make sure that I’m in some sort of decent shape for Christmas and
  • I use this time to set financial goals for next year.

I go through everything, checking that I am on the best deals or using things in the best way; from energy bills to how I do the food shop, nothing goes unchecked.

This December, I’ve decided to take decisive action on my credit card debt and eradicate it over the next year.

My debt isn’t particularly high, but I’m in that daft cycle of paying just above the minimum each month, so effectively only paying the interest on a month by month basis.

This is great for them, not so great for me.

My target is to be down to 1/3 of the available balance on both of my cards by the 2018 review, with the real kicker being that I actually want to zero both cards by the summer, then use them as they should be used.

Ace

At the moment, I’m taking calculated risks with my credit cards. My balances are quite high on both but I’m hedging this against my ability to earn more money next year.

I’m not a spend less person but I am a spend wisely person, and that makes all the difference.

I’m also an earn more person and that is the key to this working.

What I intend to do differently over the coming year, is to journal my thoughts, actions and balances (in percentages) in order to either help and inspire others, or to reflect on good and bad practice. I’ll do this once a month.

I have a 3 point strategy

As usual, discipline (and delayed gratification) is the key.

  • Pay off as much as possible month-by-month, by *snowballing;
  • Reduce utilisation, as an extension of solid budgeting;
  • Increase utilisation, through regular payments.


In order for this to be a success, I have to understand my credit cards. The following is what I already know:

  • Which has the highest interest rate;
  • Which is more punitive on spending;
  • Which has the most perks or greater incentive for correct use.

I’ve mentioned correct use a couple of times. With cards, the idea is to keep your balance low then pay it off monthly. Sometimes easier said than done.

My issue came in that transition from two incomes to one; things needed to be bought and paid for. Items that shouldn’t be purchased on a card (when your utilisation of credit is quite high) started to creep on there regularly, rather than once in a blue moon.

As a consequence, I know have a robust set of rules around the use of credit. I’ll place these in the December update.


November 2017

Card 1 = 99.95% utilisation.

Card 2 = 97.22% utilisation.

green shoots

Time to get to work.

*snowballing – weighting your outgoings to pay off the debt with the highest interest first.

BSD

Holidays are coming…

And I’m talking finances.

For some reason, one of the obvious factors of becoming a single income household, the halving of the number of earners putting in to the family coffers, had not registered on my radar of anything, until that dip in income started to bite.

There is no pressure like financial pressure as it can feel like an ever descending spiral. This can lead to worry and depression which can itself lead to mood swings or some other harmful coping mechanism.

So the lead picture is Santa squaring up for a fight – you get the analogy; Christmas is coming and that can present a real financial squeeze, if you’re not prepared.

Speaking from experience, I’ve done the splurge for the festive season thing. It’s short term gain for long term pain. Historically, I would do this weird thing where I would pay most of my bills, before spending what I wanted to spend. This eventually led to problems, as you can imagine. When bills aren’t paid, companies (rightly) grow concerned and want what is owed them.

Then the letters start

Dealing with them is easier said than done and they are extremely easy to ignore. However, problems rarely go away if ignored so if you find yourself in this uncomfortable situation, give your creditors a call and explain your situation. It’s in all of your best interests to come to a solution.

This post isn’t about that; it’s about this

I want to talk to you about projecting forwards, as prevention is better than cure. I enlisted the help of a dear friend of mine,  Zane Groves, an entrepreneur who happens to be a bit of a financial whizz. Good job really as he’s a financial advisor.

He owned his own mortgage consultancy at age 26 but more impressively, manage to grow his business when large institutions were folding as the world experienced the deepest recession in living memory.

He’s a planner and he’s come up with a short and sharp, 6 point plan for a financially fit future. Over to him.

green shoots



1) What are your goals.

This may seem very obvious but have a plan. This can be from saving for a holiday to a deposit for your first home. Once you know what your goal is, plan how you’re going to get there and the sooner the better!

2) Make saving a habit.

We often say “I can’t afford to save” or I’ve only got £50 to save, what difference will that make. We let me tell you, you’ve been saving for that rainy day for 2 years and the boiler breaks, guess what you’ve got the money so you can pay for it immediately and not get into debt with your flexible friend. If you’re lucky enough not to need it then great!

3) Work pensions.

Pay! your employer does (UK law) and the younger you start the better. The average pension pot at retirement currently stands at £50,000 which isn’t going to go far. If you want a comfortable retirement save as much as you can afford. The same if you’re self-employed.

4) Protect your income.

In most cases spending 1% of your annual salary will protect the other 99%. Don’t rely on the state, incapacity benefit is currently around £88 per week, try living on that one.

5) Reduce your debt.

Where ever possible try and pay down your unsecured debt and focus on the higher interest rate charging vehicles.

6) Invest in yourself.

If finance really isn’t your bag, employ someone who’s it is. You wouldn’t after all get a baker to look after your car so find a suitably qualified financial advisor and let them work with you.

Money

 


He doesn’t mince his words. As a thank you to him I’ve included a link to his website througout the post.

I want to quickly dig a little deeper on some of his points, which if you look at them again, have one key personal factor involved; self-discipline.

The success depends on your ability to delay your gratification; want it now will lead you back down the rabbit hole.

Finally

My plan for Christmas this year is to splurge, in a controlled manner of course. I’m in a position where I can guarantee overtime for most of 2018. My plan is to put in some extra hours and ‘snowball’ my most expensive debt away. It’ll be tough, but it’s the trade off for running up the cards over 2017.

Please remember this; over the festive period your children ultimately want your time.

Looking back to my childhood, I can’t remember if I ever got that train set, or the Evil Kenevil Rocket Edition, but I can remember being loved, warm and safe.

I can remember spending time decorating the tree and I can remember falling asleep on the sofa, full of food and watching Christmas films. Relax and be happy!

tunnel light

BSD

If you are struggling with debt, please seek help; there are some great free resources available online.

If you’re in the market for financial products as well as good advice, please check out Mr Zane Grove’s website

It’s time to talk money..

I came across a definition of the difference between being poor and being broke whilst browsing yesterday; it struck a chord with me.

It was an excerpt from Rich Dad – Poor Dad  and it was this:

The difference between poor and broke is that poor is a mindset whilst broke is a temporary condition..

www.richdad.com October 2009

My first thought was ‘thank goodness I didn’t call myself Poor-Single-Dad’. Not alone for the fact that P.S.D sounds more medical. More importantly, I have never felt poor, and that is important – it’s a mindset.

Separation brings significant issues, even if you are the one that decides to call it a day, as I was in this case. Issues both physical and emotional that you just have to work through; there is no short cut. Money is a major hurdle but it is not impassable.

One home will become two and domestic finances become a sole responsibility. This can be a greater challenge if you were unaccustomed to handling finances pre-break-up.

My issue was that over the years, I became complacent. I earned well but those earnings fell behind the cost of living. If you’re lucky enough to earn well but your increments do not keep pace with inflation, this is a bullet-time recipe for bad times; the way back isn’t easy.

Take Control

Recognise the issue and even if it has crept up on you, it’s never too late to take control of your finances. Read up on monetary issues and controlling finances. I follow a lot of money minded individuals on twitter and online. Barnaby King; Debts to Riches; Tori Dunlap; Zero Day Finance; Debt Free Geek; Dirt Cheap Wealth to name but a few.

I follow these folk for two reasons:

  • Hints, tips and ideas and
  • Most of them have found themselves in fiscal hot-water historically and have dug themselves out.

Seeing that others have not only survived but actually thrived, from positions often worse than yours can serve as great inspiration and reassurance, that you can take control.

Keep an eye out for signs of stress…


Lets fix this

good idea

Count everything

This is essential. If you weren’t doing it before, do it now. Account for absolutely everything you spend over a month or two. The outcome will surprise you. Scratchcards, Coffee, buying lunch every day will all add up.

Use an app if you have too. A quick search will give you lots of options. I use OnTrees; which is a Money Supermarket subsidiary. Other’s are available.

Once you entered the access details to all of your accounts and cards, they will track and even categorise your spending.

Cut back or earn more

Once you’ve plotted your spending, usually followed by stating ‘I spend how much on xyz??’ you need to make a decision. Are you going to cut back on certain areas or earn more money?

I’m not a great one for lavish spending. In fact i’m pretty frugal and I always have been. My issues are that I have too many liabilities and not enough assets. This is a classic way to ensure that there is a lot of month left at the end of your money. The liabilities that I have are ones that I’m keen to keep so therefore my option is to earn more.

I won’t go into money-making methods now but [hopefully] you’re reading one of mine.

If you don’t fancy pulling extra shift, pulling pints or whatever niche you find to monetise, then you’re going to have to rationalise your spending.

False loyalty

Ruthlessly got through everything. Credit cards, loans, utilities, insurance, assurance, the lot. Are you still on the best deal? Some companies have a funny habit of penalising loyalty so shop around, don’t just renew blindly. It’s not hard to do and there are a lot of comparison sites out there that are perfect to mull over whilst you’re having a coffee.

You may seem like you’re moving things around for the sake of pennies but mark my words these little changes will add up.

Budget and discipline

This can be the hardest element to control. By the middle of every month, I have laid out my income and outgoings for the next month. I look at the last two months and decide on how much ‘slush’ I have. This is set aside for non-essential elements.

Again, there are apps out there that will package this all up for you. I’ve tried a few but found them difficult to stick with. By the time I’d edited, tampered and corrected the entries I was better off creating something myself. Personally I use an excel spreadsheet which does the job just as well.

Once you have a budget, discipline yourself to stick to it. It might seem hard at first but the results are worth it.

I recently stumbled on the 50-20-30 rule whilst virtually thumbing Forbes.

  • 50% of your income should go on living expenses and essentials;
  • 20% should go on financial goals such as debt reduction or savings;
  • 30% should go on flexible spending; things you don’t need.

It’s not easy. Once I’d put these percentages on my weekly spreadsheet I saw how out of kilter things were.

If you have debt such as credit cards, make sure you pay these off first. Snowball if you have to by paying off the most costly debt first.

Treats

Otherwise what’s the point?

An endless slog, or something that feels like it, is usually doomed to failure, unless you have steely focus and military like discipline.

Plan your treats. Whether its a take-away once a month or a foreign holiday once a year the further you can plan ahead and break costs down the better it will be. Obviously I’m talking about the holiday here rather than a takeaway – if you have to plan ahead for a takeaway you may be spending too much on it.

plate

Planning ahead also gives you something to look forwards to, and occasional rewards should keep you on track.


Finally

Don’t despair. There are real problems lurking out there and trust me, money isn’t one of them. If you have your mental and physical health, you can achieve most things.

black-and-white-sport-fight-boxer

BSD

None of this post is sponsored. Links are to external sites. Twitter folk have no idea I’ve written about them (it’s all complimentary).