Click here to read all of the 33 Days And 33 Ways To Save Money And Reduce Debt posts.

I’m a pretty independent guy. I don’t mind being by myself and I could pretty easily spend a few weeks “right by myself”. But, when I decided to get out of debt, I wanted a forum where I could share my story. So, I created No Credit Needed. I wanted a place where I could be open, honest, and real. (To read about my debt reduction journey, click here.)

Today’s tip: Share Your Story

Find a friend, a relative, a group of people at church, an online community - find someone and share your story with them. I found that blogging about my debt reduction kept me motivated and honest. If I failed to update, one of my readers would email or comment, asking about my lack of posts. Even when I missed my goal-date, readers continued to push me forward. If you are uncomfortable with “blogging”, share your story “offline”. Be sure to talk with your spouse, if you have one. Maybe call your sister or brother. I believe in the power of accountability. It is so important to have someone to talk to - someone to celebrate with - and I cannot overstate how important “sharing my story” has been to me. Without this outlet, I might still be in debt! Note: I’m not encouraging you to start a personal finance blog, but I am encouraging you to FIND someone who will listen to you, encourage you, call your bluff, and cheer you on.

(If you are looking for an already established network of folks trying to get out of debt and save money, consider joining us over at the NCN Network. Upload your goals, and in a few days, I’ll have a chart up and running, just for you!)

Have you found someone to share your story with?. Leave a comment and let us know. If you are a blogger, write a post about why you blog about your finances and contact me. I’ll be more than happy to link to your post.Click here to read all of the 33 Days And 33 Ways To Save Money And Reduce Debt posts

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In an effort to better organize my financial documents, I’ve been going through a box of old bills. I was somewhat surprised to see just how many of those bills were from store-branded credit cards. I found old bills from Belk, JC Penney, and Sears. The bills were dated January 2003 - December 2004. As I was flipping through the bills, I noticed the following::

1. I made purchases at one or more of these stores, every month, for the two year period starting January 2003 and ending December 2004. That’s right. I shopped at Belk and/or JC Penney and/or Sears consistently for two years. I was a loyal and dedicated customer. I returned, again and again, like a horse to a trough.
2. I never once, despite repeated promises to the contrary, paid a balance “in full”. I paid interest on every purchase. I did manage to pay (at times) more than minimums, but I never took a balance all the way to “zero”.
3. The lowest interest rate for any of these cards appears to have been about 19.99%.

Wow. Those bills represent only a small portion of the store-branded credit card bills I’ve received over the course of my adult life. I hate to think about the amount interest I’ve paid over the last decade and a half. But, more important than the amount of interest paid, is the fact that I continued to shop at the same stores, over and over, despite the fact that I already owed them more than I could afford pay back. Why? Why in the world did I continue to shop at these stores?

Now, let’s take a quick look back over the two year period from April 2005 until April 2007. Remember, it was in April of 2005 that I decided to stop using credit cards and to get out of debt. So, I put all of my store-branded credit cards in a drawer and “forgot about them”. In March of 2007, I had transferred the balances from all of my store-branded credit cards to a single Visa card. I had a “clean slate”. I was no longer receiving monthly bills from the above mentioned companies and I was working hard to pay off the Visa card. Let’s take a look at my “new relationship” with these same companies:

1. During the two year period from April 2005 until April 2007, I made one purchase from Sears, four purchases from JC Penney, and six purchases from Belk. I used cash.
2. I never received a bill, so I never had to worry about paying interest, and I never had to worry about “minimums”.
3. I never paid interest on a single purchase, because I paid cash.

After making the decision to no longer use credit cards, not only did my interest payments go to “zero” but my spending went down. Dramatically. I broke a cycle. I am no longer “store loyal” or “brand loyal”. I do not feel “privileged” to have a store-branded credit card.

Now, before someone leaves a comment suggesting that I was irresponsible, let me be the first to agree! I was also foolish, ignorant, and naive. I believed that I would “one day” make enough money so that I could pay off all of my debts. I believed that I “knew what I was doing”. I made promise after promise. But, nothing ever happened until I put the store-branded credit cards away and forced those stores to EARN my business. If you want me to shop at your store, you better offer low prices, good customer service, an easy-to-understand return policy, and friendly cashiers. I’m no longer impressed by the name on your door. It’s no big deal to me where my clothes come from or how much they cost. Plus, I’m not longer enticed by “save 10% when you use your store-branded credit card” deals. Why? Because, I know that I am saving MUCH more than 10% because I take the time to compare prices and I go to the store with the best deal, not the store with the easiest financing options!

Recognizing that some of you will think I’m crazy, I challenge you to do the following. Put your credit cards, all of them, in the back of your dresser drawer, and live without them for three months. Then, examine your spending habits. I’m not much on “guarantees”, but I’d (almost) guarantee you that you’ll spend less money, you’ll be less “brand-loyal”, and you’ll find newer, less expensive places to shop. I dare you!

(If this post suffers from grammatical inconsistencies, I apologize. As I type this, my son and daughter are running laps around me, playing freeze-tag. I am, to say the least, a little distracted!)

• 16 Comments

I was talking to a friend the other day, and he asked me, “What’s the big deal about being debt-free?”. Here is a summary of my answer:

I do not have to worry about late-fees, penalties, interest charges, lost payments, universal default, or other “debt-related” issues. Instead of worrying about how to pay for items I purchased in the past, I am free to plan for the purchases that I am going to make in the future.

If something where to “happen” to me, my wife would be free from the pressure of debt. Instead, she would be able to focus all of her attention on taking care of our kids and herself.

Interest rate fluctuations work for me and not against me. If interest rates, which are currently at all-time lows, begin to creep upward, I have no worries. Why? Because, those higher rates will be working for me, in my savings account, instead of against me, in a credit account.

I have a great job, working with and for great people. I no longer work simply for a “paycheck” but I work because I am doing a job that I love.

I can fully fund my emergency fund, retirement accounts, and college savings accounts. In the past, a good portion of my income was dedicated to debt repayment. Now, that same portion (and more) is divided into my various savings accounts.

I have clearer understanding of the difference between a beneficial purchase and a silly purchase. When I was in debt, and not focused on my financial future, I would “reward” myself by purchasing a “toy”. Now, I reward myself by sending an extra $500 to my Roth IRA.

I enjoy helping other people. Living without debt ‘frees up’ more income for helping others.

I have decided to live without borrowing money. This FORCES me to be ‘intentional’ with my money. I must live on a budget, I must plan for my future, I must balance my checkbook, I must think about major purchase, I must be in control.

Living without debt (and not tapping into available credit) can be challenging, especially when you consider ALL of the major purchases that we make in our lifetimes. Cars, houses, furniture… these things cost a LOT of money. I am (TRUST ME) well aware that it will take some very, very diligent planning to live without EVER borrowing money. But, that is my goal, and that is my plan. Will I succeed? I hope. So far, I’m 15 months ‘in” and things are going well.

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If you are debt free (or you plan to be debt free) then you know the freedom of not having monthly debt payments. But, your goal isn’t just to GET debt free, your goal is to STAY debt free. Here’s my plan for living a debt-free life:

(First, a word about retirement: I save for retirement in my 403b account. Personally, I try to balance my long-term savings for retirement with my desire to stay debt free and not borrow any money. Right now, I am putting 20% of my gross income into retirement. I also have an Emergency Fund of six months worth of expenses in my savings account.)

I determine how much money I need each month for living expenses. I place that specific amount in my checking account, and I create a monthly budget using that amount of money. All of the other money that I receive goes into my savings account. Here are some pretend figures: Suppose I made 100 dollars a month, and I needed 75 dollars a month to pay my normal expenses. I would put 75 dollars in my checking account, create my budget based on 75 dollars, and then put the other 25 dollars in my savings account.

On paper, I allocate my savings account according to my savings goals. Here’s how that works:

–I keep six months of expenses in my savings account at all times. (I refer to this amount of money as my Emergency Fund and it is to be used exclusively for real, major emergencies.)

–I prioritize my savings goal from “most important to least important”.

–Using this list, I allocate my savings. For me, college savings comes first, automobile savings comes second, furniture savings come third, and housing savings comes fourth.

–At the end of each month, I transfer money from my savings account into my various investment account. I invest in basic index funds.

–I do not try to save for everything all at once. Right now, my focus is on this year’s college savings. Every dollar that I can save is going to go into my daughter’s ESA.

–After I fully fund my daughter’s ESA for this year ($4000), I will turn my attention towards saving for a newer automobile. Once I finish saving for the automobile, I will turn my attention towards saving for furniture replacement, and then housing.

–For my automobile, furniture, and housing savings, I use a simple low-cost non-retirement account. Again, I invest in index funds (or index ETF’s). If I were concerned about volatility in the market, I would simply keep my money in my savings account which is earning close to 5%.

As you can see, all of my savings (except for the $4000 for college) will be readily available. On PAPER, I will be saving for different items, but in REALITY all of the money will be in “savings”. So, what happens if my dish washer breaks? Well, if I’ve been saving for a new automobile, I can simply “borrow” some money from my automobile account, buy a dish washer, and then “pay myself back”. The reality is, if you are going to live without borrowing money, you MUST save lots and lots of money in non-retirement accounts. The money must be accessible and you must be able to use it “penalty-free”.

One side-note: I am NOT an advocate of skimping on retirement savings. In fact, I think that saving for retirement with pre-tax dollars is an awesome idea! But, the reality is, if you wish to live without borrowing money, you have to fund your retirement AND save up for major purchases.

My ULTIMATE GOAL: I hope that I will one day have enough money (in non-retirement savings) to pay for my kids’ college, buy nice, used automobiles, replace items in our home, and buy a house. I also hope that I will have enough in my retirement savings to provide for my monthly expenses. (I am looking into the viability of using a Roth IRA to save for my home purchase. I’ll let you know if I decide to go this route. As of now, I’m using my standard investment account.)

–One last thing: At the end of the month, any money that is my checking account gets “swept” into my savings account and then “swept” into whichever account I’m funding that particular month!

Associated Posts and Resources:

Trying To Save 60% Of Gross Income

ING Direct Savings Account Referrals

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• 13 Comments

I’ve made some pretty dumb debt decisions in my life. I’ll list my “Top 5″ starting with the “dumb” and finishing with the “dumbest”.

Dumbest Debt Decisions Ever: #3

When I was 18 years old, I financed my first brand-new car. My parents had purchased a used car for me when I turned 17, but I was determined to “get something cool.” I was a senior in high school and I was working for the local hospital. I was working for $5 an hour and my monthly take-home pay was roughly $600. So, I figured I could “easily” swing a $250 car payment. (Forgetting, of course, that I needed to pay for: gas, insurance, oil changes,etc. Plus, I was 18 and dating.) My father co-signed a loan with me, and I purchased a brand-new, 1993 Eagle Talon. (An Eagle Talon is a little “sports car”. Mine was black! I thought that I was the coolest guy in the world.) The total price for the car was about $13,000. I financed the car for 5 years, and my payments were about $275 a month. Here’s a brief history of the Eagle Talon:

I purchase the car for 13K.

I make 3 or 4 payments.

I quit my job, and get behind on my payments.

My dad has to take over the payments.

I feel like a total loser.

I finally get a new job, and I manage to help with making some of the payments.

My dad ends up paying about 75% of the car payments over the next few years.

After about 6 months, the paint began to come off of the car. The auto dealer says it’s my fault and will do nothing about it.

I own the car for about 3 years, and then I try to trade it.

The dealership will give me a grand total of $1000 dollars for the car. This is less than I owe on the car! I’m upside down on the loan. What do I do? Well, I roll the OLD loan into a NEW loan for another car!

An 18 year old kid working a part-time job has no business financing a new car. I should have been happy to drive the used car and I should have saved up to purchase a newer car.

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