The start of my own out-of-debt journey

As I’ve discussed before, my own journey to rid myself of $40k worth of debt started almost 10 years ago this year. Deep in debt and at a low point in my life – I finally wised up and began the slow 5-year “excavation” process.

My big influences at the time were some very thrifty roommates, supportive family and the book, The Total Money Makeover, by Dave Ramsey (which we have referenced on more than one occasion here).

One of the very first things I did was to make a note of everything that I owed. After that, I created a very simplistic budget in Word so that I could see where my money was going and to give it a place to go. Writing down where your money is going and what you are spending it on is a great first step exercise for those looking to get rid of debt. In my case, it helped me “wake up” to what I was doing with my finances.

The next step was to decide which debt to tackle first.

The two schools of thought on which debt to pay first

I just want to mention the two views on paying down debt and then I’ll tell you which worked for me (and I would recommend). 

1. Smallest balance first. One of the first lessons I learned from Dave Ramsey was that our finances are often tied into our emotions (or the heart) vs. logic (the brain). To deal with our emotional self, Ramsey (and others) recommend paying off your smallest debt first. The idea behind this is to build some confidence and encouragement as you just start out. Crossing off balances on your list will give you an emotional boost that will prove to be invaluable on your journey. After the smallest balance is paid off, you move on to the next smallest and so-on. This is also where you can apply a debt snowball too – where you pay off the smallest balance and then apply what you were paying to that balance to the next smallest, and so on. It’s a good way to expedite your debt-payoff (I explain this with more detail in the preceding link).
   
2. The balance with the most interest. This method is the most logical: pay off the debt with the highest interest rate so you won’t be paying more money in “stupid tax” (interest) than you have to. Quite simply – you would just jot down all your debts, and then list them by greatest interest rate to the least. And then start knocking off the highest rate debt. This approach can work – and is probably more geared toward those who spend more time in their head than in their heart.

My thoughts

If I had to pick between the two, I would encourage you to start by paying off your smallest balance first. Many of us did not get into debt because we failed to add or subtract wrong but rather, made some poor emotional decisions with our money. This was the case with me. And because of this – appealing to our emotional self is important when we are getting control of our finances again.

What has worked for you in your out-of-debt journey’s? Any other advice for Nicole?

Other posts you might be interested in:

• Paying Off Debt One Cent at a Time
• The 2012 Personal Finance Challenge
• On creating a debt-free legacy
• 13 Ways to Know You are a Dave Ramsey Follower
• What Happens If I Default on My Student Loans?

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One recent story really tugged at us emotionally and we’d like to share it anonymously in the hopes that you might feel moved as we did to help out. This is from a reader we’ll call Jill:

My husband & I have a large family and have struggled for the last 10 or more years. He pastored a small church, commuting an hour each way. His secular job, pretty much tanked with the economy. I  work from home. Together we make just enough to get by and no more. Anything that can get “put off” is put off for as long as possible.However,the accumulation of the things we have put off is taking a huge toll. For me this has meant no dental work in 15 years. Now, with 6 teeth needing attention the pain is nearly unbearable. I found a dental clinic which has a sliding fee scale. After x-rays they gave me a total for the work should I be able to get it done.When I saw the total I could not choke back the tears. Absolutely no way to get it done in time to save my teeth. Perhaps it is my pride knowing how I will look with several missing teeth, but more than that I know that once you have missing teeth you get bone loss making something like dental implants only possible if you have further surgery– if I could even afford that somewhere down the line. I am desperately sad on top of being in pain and just thinking about it weighs me down. Of course there is much more to our story.. and you can see how we have been slowly descending further and further into poverty. I want a chance of a better life.. to look as professional as possible… to keep some of my dignity. If you could help me save even one tooth (the one that shows the most) I could at least pull the others myself and find some relief. Total the dental work will cost $800. I am not sure how much one will cost. Currently I am trying to sell off some of my things that might be worth a small bit. Thank you humbly for your consideration.

If you are interested in helping Jill offset her $800 dental bill – please click on the donate button below. You’ll be sent to Paypal, where you can make an online donation. All proceeds will be given to Jill.

Thank you for your consideration – and for being a part of the Three Thrifty Guys community.

Other posts you might be interested in:

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One of the reasons our family ended up in so much debt (can you say “65% debt-to-income ratio”?) is because we didn’t comprehend the importance of each and every penny that came into our household.

We didn’t get ourselves into massive debt by going on vacations, buying new furniture or vehicles, or even by buying an abundance of expensive clothing.  We got ourselves into debt a nickel and dime at a time. 

In 2012, when we made our first “real” attempt to get out of debt, one of the first things that went was that we cut eating out at restaurants dramatically, down to once a month or so.  We thought we were doing well in this area, until we began our real getting out of debt journey in January of 2013.

In order for us to get a better handle on our spending, I went back and tracked all of our 2012 grocery purchases, gas purchases (for me, because I’m a stay-at-home mom) and out-to-eat/entertainment purchases.

What I found was staggering

Even though we only went to  “real” restaurants once a month, we wasted nearly $175 a month on grabbing snacks at the Target snack bar, trips to McDonalds, and going to Chipotle to get orders of rice and a side of guacamole instead of a whole meal, which I prided myself for as being frugal.  $175 a month!!!

When I went over our grocery bill, I found out more clues to how we ended up so deeply in debt when we “weren’t spending any money”.

Our self-imposed $600 a month grocery limit was actually more like $900 a month.  Why?  Because of 2 or 3 extra trips a week to the grocery store to “pick up a few things”.  That left us $3600 over our so-called grocery budget for the year.

No wonder we were in debt!

What I’ve learned after studying last year’s habits and then changing the game up for this year (by tracking all spending and staying on budget) is that every single penny really does add up, whether for the betterment of your financial situation, or for the destruction of it.

Crunching the numbers

Let’s take a look at how much money you’re really saving with those pennies, should you choose not to spend them.

Let’s say a person has $25,000 in credit card debt, is paying 10% in interest, and paying $500 a month toward those credit cards.  The cards will be paid off in 65 months, with a total of $7,474 paid in interest to the credit card companies.  (Yes, you just handed the credit card company a check for nearly $7,500).

But if that person pays only $30 extra a month on those cards, roughly a dollar a day more, and the cards will be paid off in 61 months instead of 65 months, and the total interest paid will be $6,892 instead of $7,474.  So, instead of paying $32,500 on your credit cards over that 5 years ($500 x 65 months), you’ve paid $32,330 ($530 x 61 months), so, $170 less in total payments, for which you “earned” $582 in saved interest paid.

If you’re considering a debt payoff journey, or are currently on your road to debt free, I encourage you to, at least for a short while, take those extra “few dollars” that you spend on lattes, eating out, or snacks at the grocery store, and shelve those habits for just a little while.  If you do, your arrival at your debt free destination will happen much, much quicker, and you’ll save hundreds of dollars for the sacrifice of a few dollars here and there.  Here’s to a debt free you!

Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer.  Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life. 

Other posts you might be interested in:

• What Debt Do I Pay Off First?
• The 2012 Personal Finance Challenge
• On creating a debt-free legacy
• 13 Ways to Know You are a Dave Ramsey Follower
• What Happens If I Default on My Student Loans?

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“If we were to gain God’s perspective, even for a moment, and were to look at the way we go through life accumulating and hoarding and displaying our things, we would have the same feelings of horror and pity that any sane person has when he views people in an asylum endlessly beating their heads against the wall.” 

Money, Possessions, and Eternity

Last year, I told you my worst money mistake happened when I bought a bright and shiny, slightly used Volkswagen Jetta with a 10% interest loan. The salesman had sold me on the idea of how cool I would look in the vehicle, driving my friends around. 

The car purchase was my first in a series of bad financial decisions that eventually put me over $40,000 in debt and in despair. Not only did the Jetta put me in the hole – but it failed to live up to expectations. It didn’t change my life and the thrill of owning such a fine piece of automobile eventually wore off and within months I was asking the dealer if they could take it back.

The owning myth

I recently stumbled on a series of articles on wanting and having that have really intrigued me. Most of these were precipitated by a June piece in the Journal of Consumer Research entitled, “When Wanting Is Better than Having: Materialism, Transformation Expectations, and Product-Evoked Emotions in the Purchase Process” (sadly you’ll have to pay $14 to read the whole thing).

And just this past Tuesday (June 11), the Atlantic addressed the issue with their own contribution: Why Wanting Expensive Things Makes Us So Much Happier Than Buying Them. Author Derek Thompson writes:

Happiness, for most people not named Sartre, is other people; and experiences are usually shared — first when they happen and then again and again when we tell our friends.

On the other hand, objects wears out their welcome. If you really love a rug, you might buy it. The first few times you see, you might admire it, and feel happy. But over time, it will probably reveal itself to be just a rug. Try to remember the last time an old piece of furniture made you ecstatic. For me, at least, it’s a difficult exercise. The wonder of my potted plants certainly wanes with time. “Psychologists call this habituation, economists call it declining marginal utility, and the rest of us call it marriage,” Gilbert wrote in Stumbling on Happiness.

Thompson also notes how “retail therapy” helps people from time to time – not necessarily because they are buying things – but through the act of wanting and sharing the experience with others. Most of the satisfaction happens before the “checkout counter”.

Of course, all this is not new. We often experience this in our own lives. Planning the vacation can be more satisfying than the vacation itself. And, building and wanting the “dream” home is better than occupying it. All possessions’ lose their luster and fail to satisfy.

How this can change our own perspective on materialism

Don’t get me wrong. I drive by big homes and beautiful properties all the time and think, “wow – it sure would be nice to own that!”

But, to think more about this concept of wanting vs. having and to realize that often – with having –  comes responsibilities, bills and less freedom.

“The things you own end up owning you. It’s only after you lose everything that you’re free to do anything.” - Chuck Palahniuk, Fight Club

I’m thankful I made a few bad decisions early on in my life, owned some things that were definite “wants” – only to realize they weren’t (in themselves) very satisfying.

Ultimately – it’s the experiences you have with those things you really cherish.

What do you think about this – and have you experienced this in your own life? How has this changed your perspective on consuming more and more?

Other posts you might be interested in:

• Does Money Make You Mean?
• How to save for a short term need or want

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Should I purchasing rated coins? 

After first dabbling in coin collecting, by buying the lower graded coins, I decided to venture out and look at buying my first rated coins. In not knowing where to start, I went right to the two main numismatic rating company’s price guides. I’ve relied heavily on Professional Coin Grading Service (PCGS) and Numismatic Guaranty Corporation (NGC).  These two coin rating companies update their price guides daily, and are the closest to real time price updating that you’ll get.

In my experience, I researched these sites a lot before I ever thought of buying my first rated coin. I wanted to understand the different ratings and what each one meant. If  I was going to start spending more money on the nicer coins, then I needed to know I wasn’t getting ripped off. Also I’d highly recommend researching what defines each rating, and why. Here is a great list of how to rate coins, and what each rating really means.

List of Numismatic Raters

• PCGS
• NGC
• Independent Coin Graders (ICG)
• ANACS
• Sovereign Entities Grading Service (SEGS)

Storage of Coins

Storage of your new valuable possessions is extremely important. If you are storing rated coins, then NGC and PCGS produce great storage boxes. Check out Google Products for PCGS Storage Boxes and NGC Storage Boxes to find the best deal. Also consider buying individual sleeves for unrated coins to continue to protect these treasures too. Once you’ve got the container figured out, then consider how you are going to secure your coin investments.

Bank security deposit boxes are a great option to keep your coins in a secure, fireproof, and “off-site” location. Typically, these boxes start at about $25/year and up, but it all depends on the size. Second option is a safe in your home. Having a safe at your home comes with more risk, and I wouldn’t recommend any small safes (ones that you can just picked up and walked out of your home with). Consider buying either an extremely large safe or one that can be locked down securely. Also make sure that your safe is fireproof, and pay particular attention to what resistance your safe protects you against (flood, fire, or other act of God). In general, I’m not a huge fan of the Wal-mart safes, because these are cheaper, smaller, and can be easily walked out of your house with.

PCGS News Channel

Finally, as you are getting started in your collection, I’d recommend finding as much about coins as possible and a good starting point is the PCGS Weekly coins updates channel on YouTube. Below, is this week’s status update, and be sure to subscribe to continue to follow them. They have a lot of information on what coin shows are coming up, and what are happening with coin prices.

So on Monday the comments on my previous article were a little on the low side, so I’m going to spice up today’s post! If you post a comment, subscribe to our twitter feed, or subscribe to our e-mail list (3 chances to win), then you’ll be entered to win a pre-1900 Morgan Dollar. I’ll mail you one from my personal collection. If you retweet our post on twitter, then you’ll be entered 5 times. So be sure to enter and your chance to win ends at 8pm on Thursday – 6/13/13).

Other posts you might be interested in:

• How to Start a Coin Collection

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During my youth, my dad always had this old black vinyl box with red satin lining that he kept all his old coins, wedding rings, and other valuable trinkets (it always had a distinct musty smell in it too). Every so often I’d sift through his coins, not really knowing what I was looking, but admiring the heavy silver coins he collected. Primarily, he collected Morgan Dollars (1878-1921) and a few of the Peace Silver Dollars (1921-1935). 

Where to start?

Without knowing a thing about coins in 2006, I decided to start with something familiar, and that was any pre-1921 Morgan Dollars. I first started by searching Ebay.com and other local coin dealer shops. At the time I had no clue about ratings, and why someone would way more than $100 for a coin (seemed ludicrous!). So I started by just buying basic silver dollars for the silver content. I figured, if anything, that the coin was at least worth it’s value as a precious metal (since the Morgans are 90% silver), and I couldn’t get burned that bad. At the time I was buying most of my coins for anywhere from $11-$14, and I felt uncertain if that was a good price or not.

In starting your own coin collection, I’d recommend by starting out small. Go with something familiar. Something that appeals to you whether it is gold or silver coins. For me that just happened to be the Morgan Dollars. I’d recommend buying coins that were manufactured prior to 1965, since most of these coins have intrinsic metal value (gold, silver, and copper). Also, when Nixon took our currency off the gold standard in 1971, it made our currency a fiat currency. Overall, there are a lot of great coins made after 1964, but my suggestion would be to stick to precious metal coins.

Where to buy coins?

So you’ve made up your mind to buy a few coins, but at the same time you don’t want to get ripped off. A good place to start is online with auction sites, and evaluate what people are paying already. In your communities, it’s always a great idea to get involved a meet your local dealers and visit a coin show. However, be cautious of what you are paying, since most of the people have high overhead with a store front or coin show booth cost. Here are my recommendations for where to buy your coins from:

• Ebay (great place for beginners) – Ebay is always a great place to use as a research tool, and obvious place to buy coins. Using Ebay as a research tool? What? Ya…with any commodity, an asset’s value is determined by what someone is willing to pay. Start out by searching the coin you are interested in and select ‘Sold Listings’. These results will show you how much the coin or type of coin has gone for recently. By narrowing the search down to a specific year and mint location (for example: 1941 D Walking Liberty Dollar), then you’ll be able to find more applicable sale prices and value.
• Heritage Auctions (advanced collectors seeking rare coins) – from watching a lot of the PCGS weekly coin updates on YouTube, I came upon this great auction site. HA is known for selling a lot of the world’s rarest coins, and usually sells a lot of the higher end coins. HA just recently auctioned off the 1913 Liberty Nickel, which went for an astounding $3.172 million.
• Local Coin Dealers & Shows (great place for beginners to advanced collectors) – the area I live in has a lot of great reputable dealers, and numismatic raters. Most of the dealers in our metro area will sell ya coins at close to market value, but every once in a while you’ll find a coin shark. You can always spot them a mile away with the slicked back hair, and are always fast talkers. It’s almost like talking to a car dealer! So be careful! I highly recommend using maps.google.com and first search for coin dealers in your area (coin dealers near My_City_Name, State). A helpful tip in using google is to check out the reviews on the dealers in your area. This has definitely helped me stay away from places I could get ripped off at.
• Direct from the government (all investors) – if you are looking for post-1964 coins that are minted by the government, and are a basic bullion USMint.gov. I’m a huge fan of the American Eagle and American Buffalo gold bullion, which are on the higher end most people’s price range (currently $1700+), but is a solid option for all investors.

So this is the first of two posts I’ll be writing this week. On Wednesday, I’ll post the second post in this series in which I’ll talk about should I buy rated coins, numismatic raters, storage of coins, some of my favorite sites, and a few pictures of my collection.

In the mean time, I’d like to hear from some of our readers. Do you have a coin collection, and how did you get started? What are some of your favorite coins to collect and why? Also I’m interested in knowing where other people buy their coins and some of your favorite coin sites!

Other posts you might be interested in:

• How to Start a Coin Collection – part 2
• 7 Best Ways to Save Money on Your Water Bill for 2013
• How to Start a Community Garden
• 10 Best Ways to Save Money for 2013
• How to Get Started in Farming

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