Took some steps in the wrong direction...

Since my last post I have faltered in my path to becoming debt free.  My extra income I was making in overtime dried up for two weeks.  I ended up using my credit card to buy gas for two vehicles because I didn't want to touch the money I had saved up in my savings.  After the purchase of the gas, I felt so horrible and angry at myself.  I worked so hard to get where I am today and I didn't want to rely on credit cards again; even for an emergency (gas) witch isn't a real emergency.  So I ended up dipping into my savings; witch is meant to be my emergency funds.  So what went wrong?

1) I started to get used to the extra income; Even though I was paying down debt I used the extra income to go out to eat.  Therefore I was living beyond my means.

2) I started to justify the extra expenditures; “I can go out now and pay myself back later" or "I deserve to go out for all the hard work I'm doing."  You see when one gains more money it seems one wants to purchase stuff for gratification.  Basically I was being impatient with all my hard work and I told myself I needed something to show for it.

After my last payday I went back on track; I have 1k in my savings again for an emergency fund.  That way I don't use my credit card for emergency.  Also I made sure that my wife is on board with our new budget.  Remember it is important to have your partner involved or you will use your partner as an excuse to spend.  That's also one of the reasons I fell off the wagon; so to speak.  Like I posted before about the budget being on the whiteboard; well the wife and I thought we had it all figured out and didn't use the board for almost 3 weeks!  Well we didn't have it figured out and without a roadmap right in front of you every day; you will go the wrong direction like we did.  We could of easily gave in to our desires and spiraled out of control again. 

It is a total mind game when dealing with debt and spending.  One must not psych oneself into spending.  At least budget some money for going out to eat or getting your partner's nails done.  If not then your urges to go out and enjoy one's self could grow to be too irresistible.  So my wife and I, like I said, adjusted our budget together again.  Once I get a chance I can post a picture of our updated debts and monthly expenses that we have written down on our whiteboard.

So close but yet too far......

I started the path for financial independence around the first of the year.  Then I decided to blog about it and see where my path would lead me.

I have volunteered for as much overtime as I could to gain the extra cash I would need to pay off my debts.  Some of you would have to sacrifice, work extra hours or get a part time job.  Luckily for me I have been able to work at least 14 extra hours per week.  One week I did about 36 hours (my best week) but its started to slow down as of this past week.  So what was the results of all my hard work and sacrifice.

Home:                 $160k
Car 1:                   $10k
Car 2:                   $24k
Car 3:                   $13k
Credit card 1:     $6k    -$552.00
Credit card 2:     $1.5k Paid
Collections 1:     $580  Paid
Collections 2:     $350  Paid
Collections 3:     $130  Paid

Total                      $215,560.00 -1613.50 = 213946.50

Its awesome that I'm plugging away at the debt but when I look at the whole picture it makes it seem so daunting.  Some of you may just look at your credit card, student loan and other debt (not including car/home) and say to yourself..."this is impossible." "there is no way I can pay all this off and feed my kids."  A good way to figure out how to pay one's debts is to analyze what money goes into your home and how it goes out.  If you live paycheck to paycheck then it is reasonable to assume that you spend it on something, right!  Unless someone is stealing your money out of your accounts then there is a way to pay down debt and become FREE!

Another thing I have learned during this journey is the power of being positive.  It has changed the way I look at my debt.  I used to look at my debts and complain;  I grew to even hate it and hate myself for getting so deep in debt.  But as soon as I started to look at my debts and my own life in a positive light my eyes just opened up.  I am freak'n' stoked to pay off these debts because I know I will be free, I will be happy, I will be independent and my family will be taken care of.

Thanks for reading.
                                                 

My current path to becoming debt free…..

The wife and I purchased a large white board about a month ago with the goal of paying down our debts.  So far it’s been working, but had a couple of setbacks; first was when my daughter erased the board and second was when my daughter erased the board again.  The second time I had it placed higher but she climbed onto my computer chair and the rest was history.  It was a good thing my wife took a picture of the board once we had it filled out.  So I filled out the board again and we had all our debts written down.  This includes the house, cars and any collection debt we had.  Here is the gist of the numbers.

Debt

Home:                  $160k

Car 1:                     $10k

Car 2:                     $24k

Car 3:                     $13k

Credit card 1:     $6k

Credit card 2:     $1.5k

Collections 1:     $580

Collections 2:     $350

Collections 3:     $130

Total                      $215,560.00

So after we wrote down all our debt on a large white board we can see daily, it gave us the motivation to start paying down our debts.  Some like using excel, others use budget programs but I believe that nothing can truly motivate a person/family to pay down debt like a large reminder you see daily.  Yes, it takes time to write it all down manually and calculate the math but when the wife and I did that together it helped us get on the same page.  We used to argue all the time about money and budget.  I was the one to always say “babe we can’t buy such and such item now because I just paid the credit card” Then the wife would get annoyed at me because she had plans to buy such item next payday.  I personally used excel to keep track of my budget but I was the only one who saw it.  Also I tried a computer software program called Quicken but again I was the only one who saw it.

The most important key to start on the path of becoming debt free is to include your partner or if you’re single; do it with a good friend.  It’s one way to keep each other on track or accountable.  Next would be to have a financial coach.  They will help lead you to the path of becoming debt free and grow wealth.

Second, purchase a large white board or several pieces of paper and place them on the wall of your home; list all debts, bills and income so that you will have an idea what your financial situation is.  A good financial coach would have plugged in all your numbers and printed out what your financial situation currently is.  It is still a good idea to write down the numbers given to you from your financial coach onto the white board; so that you can see it everyday.

Third, write what your top 3 Goals are for the next 5 – 15 years.  Think about how will you achieve your goals.  These steps should give you a great financial foundation.

Next time I shall show witch debts I paid off and how I felt when I paid them.

How I was convinced to get life insurance for my kids!

About a couple weeks ago while I was starting my new path to financial independence, I wanted to protect that independence with term life insurance.  To properly protect one’s family from catastrophic financial burdens one must have life insurance!  There is no getting around that fact!  So I looked into several insurance companies online and through my bank.  I ended up getting a reputable financial planner (good friend of mine) to come down to my home and explain the differences of the life insurances you see on T.V.  On my own I already have heard and read about term life insurances.  I was listening to Dave Ramsey on the radio and watching Suzie Orman on YouTube.  So I basically learned that Term was the best option but never fully understood why besides the fact it was cheaper and only covers for a set time (20 year term lasts 20 years).  So long story short I ended up buying term life and was happy that the wife and I was covered if anything should happen for the next 35 years.  Problem was that I felt I should not get the children life insurance because of what I already have learned and researched. 

Here is what I was offered:

            Option 1 600k me and wife 400k with children rider of 25k

            Option 2 300k me and wife 200k with children rider of 25k

            Option 3 200k me and wife 200k with children rider of 25k

All the options was for 35 year level term and the children up till 25 years old with an option of multiplying in value 5x to 125K for each child.  So on hindsight what option, based on my income, should I have gotten?  Well the experts say one needs to have 8x to 10x their annual income so that the insurance will replace the income of the family member who is deceased.  I ended up getting option 3 because I’m still trying to pay off one more credit card.  Option 3 was about 94 bucks a month with a 10k children rider.  If I had gotten option 1 then payments would be about 50 bucks more a month and my goal of paying off my credit card in 3 months would be delayed. 

If I did it right I should not have gotten the children any insurance and just covered the wife and I.  I could have, for the same price, got option 2 or stuck with option 3 at a lower price and all the extra money go towards my credit card.  I am able to change my plan within 6 months without getting another medical exam and with the credit cards paid off I will be getting option 1.  I just felt guilty not getting the kids life insurance when I was getting the wife and I some.  Plus my buddy kept saying that their life insurance will be multiplied 5x when they get older.  I will be canceling the child rider next time I get a chance.

Below are links to why children should not be insured.

Here's Why Your Child Probably Doesn't Need Life Insurance

My wife did have Gerber life when my first child was born but it defiantly was not worth the cost for coverage.  The child rider on my current term life was a better option if I was forced to choose.

Work in progress

This weekend I will be starting my classes on financial planning.  Already I have learned so much with my own research into life insurance and wealth building.  On separate pages located on this blog, there will be a lot of information that a typical life insurance salesman or financial planner will not give you.  Please take a look and get informed. 

I will also post my personal experiences so far with life insurance.  One of the first types of life insurance I will tackle will be group life insurance because I was under the Serviceman Group Life Insurance (SGLI) and why I replacing it would be a good Idea.  Hopefully I can get a copy of the policy and post it.

“A policy of life assurance is the cheapest and safest mode of making certain provision for one’s family. It is time our people understood and practiced more generally life assurance. Many a widow and orphan have great reason to be thankful that the advantage of life assurance was understood and embraced by the husband and father. A large amount has been paid… to widows and orphans when it formed almost their only recourse.”

                                                                                                                              Benjamin Franklin