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Control Credit Card Debt

10.10.2011 by Miles Williams //

For many Americans paying with credit cards is now commonplace. Once the monthly balance cannot be paid in full credit card debt creeps in like a homewrecker – and this is where many people find themselves today, in credit card debt.  In some cases, people are filing for bankruptcy due to their excessive credit card debt.  With so many different things dependent on a person’s credit score, this can be devastating to young families, leaving them without the means to make big-ticket purchases like replacing a refrigerator or stove.

Credit card debt in America

45% of Americans have credit card debt.  8.3% have a balance of over $9,000 on their card accounts.  The average credit card debt is $2,000.  Surprisingly, 23% of Americans do not even have a credit card.

Matt’s note: Betsy and I belong to that surprising 23%. 🙂

These statistics are compiled in part from the Federal Reserve’s Survey of Consumer Finances taken every three years.  The 2007 survey showed that revolving debt, which includes credit cards was $904 billion out the total consumer debt of $2.6 trillion.  This figure includes student loans, auto loans, mortgages, and other non-revolving debt.

The numbers may not mean much to you, but if you’re part of that 8.3% perhaps you should take notice.

8.3% may seem like a small number, but the average income for those people is only $48,600 per year.  That $9,000 along with other living expenses and non-revolving debt is usually a lot of money.  On top of the large debt amount are the interest rates credit card companies charge each month for the “privilege” of using their money.  The average credit card interest rate is 16.80%, so if you are paying only minimum payments each month a lot of your debt could be interest charges rather than the principle on the account.

So the general idea – and necessity for some people – is to be part of that 32% or even the 23% in some cases rather than the 8.3%.  This may not be easy to accomplish, given the rising cost of food, fuel, and other necessities, but it can be done.  You have to develop a plan and stick to it, resolving to control your credit card debt, or eliminate it altogether.

Build your debt reduction plan

The key to controlling your credit card debt is in controlling your spending overall.  Of course, American society does not make this easy since our economy relies on spending.  However, in this case, you can’t think of the Country’s economy, but rather your personal economy.  If you have the willpower, you can get a grip on your finances rather quickly.

  • Put your credit cards away for one month.  Instead of pulling out the plastic to make purchases, use cold, hard cash.  This does not include a check.  It’s important for you to see where the money goes, and how fast it can disappear from your pocket.  The only exception to this rule is in paying bills that require a check, like your mortgage or the rent.  Write out the checks and deduct them from your bank account before you withdraw any money to spend.  In using cash instead of your credit card or checking account, you will have a better idea of your spending habits.
  • Free up more cash by reducing other expenses.  Take a closer look at some of the amenities you have.  You may consider changing your cell phone plan to a less expensive one, cancelling or changing your cable/satellite plan, and buying less expensive brands for groceries.  Conserving energy will also put a few more dollars in your pocket.  Take that money you are saving, and use it to pay off debt – especially those high interest credit cards.
  • Buy only what you need, not what you want.  Knowing the difference between your needs and your wants is important.  For example, you need food, but you don’t need dinner in an expensive restaurant.  Transportation is a need, but not in a $50,000 BMW.  Clothing for your children is a need, but not the $100 designer jeans for your 10-year-old that is still growing.

Impulse buying is the biggest culprit in creating credit card debt.  Those purchases are usually wants, not needs.  If there is something you need, then buy it.  But if it’s something you can do without, keep your money in your wallet.  If it is something that you really want, only buy it if you can pay cash for it without compromising your ability to save for retirement or pay off debt; but until you have no credit card debt you should avoid those purchases, no matter how much you want them.  If you stick with your plan, you can be a member of that 32% that does not contribute a single penny to the $904 billion in revolving debt, and you’ll have more money in your pocket to boot!

Categories // Debt, Money Management Tags // credit cards, Debt, Finances, frugal, goals, interest, Reduce Expenses

Layaway – Buying Clothes on a Budget

11.09.2009 by Matt Jabs //

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I’m bringing Layaway back!

That’s right… all the cool kids are using layaway again.  If you didn’t hear, don’t feel bad – I’m glad to shed light on this oft forgotten friend of the frugal.

What is Layaway?

Layaway… is a way to purchase an item without paying the entire cost at once. However, rather than taking the item home and then repaying the debt on a regular schedule, the layaway customer does not receive the item until it is completely paid for.  – Wikipedia

Layaway started during The Great Depression because folks simply didn’t have enough cash reserves to make most purchases.  The programs stuck around for many decades before phasing out during the 1980’s.  By the 1990’s merchants began offering store credit cards, charging interest, and making a killing.  Once consumers bit, credit cards took over and most merchants viewed layaway programs as just another unnecessary cost and cut the cord.

With the advent of the 2008 financial crisis, many stores who did discontinue their layaway programs have begun jumping back on the bandwagon.  Families are actively seeking out stores that do… especially around back-to-school or holiday shopping!

Why use Layaway?

By no means is this list meant to be exhaustive, but here are a few solid reasons to reconsider this old school frugal fashion custom.

  1. Using layaway will teach you and your children the proper relationship between saving and purchasing – no money, no goodie.
  2. Using layaway trains you to use “saved money” rather than credit cards thus avoiding having to pay interest for your purchases.
  3. Using layaway will help you to ween yourself off the instant gratification boom that has plagued America for decades.
  4. Using layaway gives you more time to properly contemplate your purchase to better determine whether or not you actually need it.
  5. Using layaway helps you spend less since you have to pay for the purchase before you get to take it home.

My recent Layaway Love Story

The coat and receipt you see above are both from my own personal layaway experience… from yesterday.

November 2009 marks the adoption of The Jabs Family Envelope System. One category that never received any love before we started using cash envelopes was the clothing category.  For the last 6 months or so, my wife has very patiently foregone any clothing purchases for the betterment of our family budget; and although I appreciate her sacrifice I realize not setting aside money for clothing is not sustainable in the long run.  She works a professional job that requires nice clothes, and I am looking to simplify my wardrobe by getting rid of 80% of my existing supply and buffering/replacing it with extremely high quality, long lasting and durable replacements.  We have also lost over 60 combined pounds over the course of the last year and are both to small for a lot of our existing wardrobe.

In light of these facts we decided it was important to create and designate money to… a Clothing Envelope.

I won’t lie, it is fun to have money set aside specifically for clothing each month.  Since November is our first go at setting an amount, we went with $60 each.  Now that I have a set amount, it is one of my goals in life to get the highest quality clothing, for the best possible price.  I have been wanting a warm, durable, winter Carhartt jacket for years now but just never got around to buying one… so I decided to make it happen.  After church yesterday we stopped off at Tractor Supply Company in search of the perfect Carhartt coat.  It did not take me long to find it… but it cost more than I had in my envelope.  What should I do?

Enter Layaway…

My purchase turned out to be about $85 for the coat and a removable hood.  The coat is super high quality and can be worn in just about any cold weather situation.  It will last me for years and years, has incredible reviews, and is extremely warm and functional.

Since the store I was at offers a layaway program, I decided to take advantage.  I will use $40 from my November clothing envelope, and will purchase it next month with $45 additional from my December clothing envelope.

Which Stores Offer Layaway?

I cannot list each and every store, but here are a few who do or do not currently offer layaway:

  1. Stores that do NOT… Walmart (stopped layaway program in 2006), J.C. Penney, and Target to name a few.
  2. Stores that do… K-Mart (champion of layaway), Burlington Coat Factory, Sears, TSC, Toys R Us (for big ticket items), Best Buy (some locations), T.J. Maxx and Marshall’s (some locations.)

Will you become a layaway enthusiast?

Up until yesterday, I had not used layaway since the early 1990’s when my parents employed it to secure our school clothes… that is nearly 20 years!  Although now-a-days I usually save my money before making a purchase, I was happy to discover the layaway programs of America’s retailers were still alive and well.

What about you?  Will you be using layaway any time soon?

Like this article?  Here are 3 free ways to join the community and follow the progress – Sign up for email updates, Subscribe to my RSS feed, And/or follow me on Twitter.

DFA is passionately dedicated to helping people break the bondage of debt and work toward financial freedom using biblical principles.

Categories // Spending, Tips Tags // frugal, Money Management, save, Spending

A Frugal and Sensible Diet & Weight Loss Mindset

06.04.2009 by Matt Jabs //

This is a motivational post written to deliver the personal secrets of how my wife & I have successfully trimmed our grocery budget along with our waistlines!

Above is a picture of me at my new weight.  I know, it’s a terrible picture, but the best I could do with a self portrait on a cell phone!

**UPDATE 7/22/2009 – I have now lost 38 pounds and have finally reached my desired body weight of 175 pounds.  I decided I’m going to lose 5 more and see how I feel.  If it’s to much, I plan to gain the 5 pounds back.**

Over the course of the last 10 months I have lost 30 pounds, and my wife has lost 20.  It sounds silly to say, but prior to losing nearly 15% of our body weight, few people would have classified us as “overweight”.   Looking back now…we have a different perspective!  Though I’m pretty skinny these days but the truth is, I’m 7lbs away from my goal weight of 175lbs and could use a “kick-in-the-pants” to help carry my momentum to the finish line…enter the PF Blogger Weight Loss Challenge (BWLC).

Despite the fact that he is moving half way around the world in a few days, Baker @ ManVsDebt.com has graciously given of his time to form this competition that will undoubtedly be a blessing to so many fellow Personal Finance Bloggers.  The BWLC consists of 30 bloggers and has been broken down into six teams of five people each.  The teams names are Alpha, Beta, Gamma, Delta, Epsilon, & Zeta.  I have been named to the Beta Team and am a proud member!

Here are my fellow Beta Teammates (and me):

  • Josh Smith – Find Josh:  On WalletPop.  On ImJosh.com.  On Twitter @Josh_Smith
  • Miranda Marquit – Find Miranda:  On YieldingWealth.com.  On Twitter @MMarquit
  • Jessica Ward – Find Jessica:  On PennyWiseFamily.  On JessicaWard.me.  On Twitter @jessc098
  • Savings Not Shoes – Find SNS:  On PennyPence.  On Twitter @savingsnotshoes
  • Matt Jabs – That’s me! (shameless self-promotion) On Twitter @MattJabs

As one who has been at this weight loss & budget trimming game for nearly a year, I felt compelled to share how my wife & I have shed excess pounds from our frames while simultaneously trimming excess fat from our grocery budget.

Change your mindset…

A mindset is a terrible thing to waste! A change in the way you thing about food & health is paramount to a change in behavior.  I recently wrote an article on FiveCentNickel about how changing my financial mindset was the best thing that ever happened to my finances; health, diet, & weight are no different.

  • CHANGE your diet, don’t “go on a diet“ – In his original 1828 dictionary Noah Webster defined diet as, “a manner of living or mode of life”.  A diet is meant to be a way of life, not just a 2-week starvation binge, then back to the same-ole-same-ole.
  • Food for fuel not pleasure – Please do not misunderstand this point, there is a careful balance that needs to be struck here.  I love food and find much pleasure in preparing & eating it.  However, the longer I eat healthy the more I see food as fuel, and less for pleasure.  This increases my awareness and helps me to more carefully consider what I put into my body.
  • Find joy in health – Just as you have found joy in McDonald’s french fries, cheesecake, Doritos, & hot pockets in the past; begin learning the joy of healthy, life building, foods and habits.  Be creative and involve the whole family when purchasing & preparing food.  It’s amazing how fun it is to reinvent the family diet & discover your hidden culinary creativity.

Stop gorging…

One of my first & most useful steps to success was the realization that I did not need nearly the amount of food I had been consuming!  It never failed, whether eating at home or dining out…we were both eating way too much.  I believe this stemmed from eating out too much, the portions they serve are ridiculously huge.  The trend seemed to carry over into every dining experience.

Here are some tactics to combat becoming a self-blotation device:

  • Start with smaller portions – when dishing up your meals consciously give yourself a smaller portion.
  • Drink more water – choosing water is frugal, it’s healthy, & drinking it during meals will lead to less over-eating.
  • Wait 5 minutes – Once half your portion is gone, STOP!  Now drink your full glass of water (not soda!).  This will make you feel more full and is a great way to end the meal time.
  • Split meals & get to know the “doggy bag” again – Restaurants serve HUGE portions so when eating out, split meals with your spouse or simply take half of your meal home and have it for lunch the next day.  For more pointers on eating out, see this guest post I wrote on BibleMoneyMatters.com entitled “The Frugal Guide to Eating Out“

Properly size each meal of the day…

Contrary to popular American culture, you should eat large early and tail off food intake as the day grows old.  Your body’s metabolic rate (aka “fast metabolism”) will increase in speed and efficiency when proper food intake patterns are introduced.

Also, my wife & I plan out our weekly meals and hit the grocery store only once per week.  Since it is currently just the two of us (please pray for a healthy baby soon!) we normally just make one or two meals each week and feast on leftovers often.

  • A big healthy breakfast – Every weekday my wife & I have vanilla yogurt parfaits mixed with blueberries & granola.  It is a healthy, quick, & delicious breakfast & a great way to start the day
  • Mid-morning snack – I take a snack to work every day and eat half of it around 10am.  It usually consists of some fruit, nuts, or healthy crackers like Tricuits.
  • A big healthy lunch – I am lucky enough to have lunch provided for me every day.  My employer created a cafe in our office and we have a free selection of hot lunch, salad bar, & sandwich bar each day!  I usually have a HUGE salad complete with a protein source (beans, cheese, eggs, chicken, etc.)  & lots of veggies.
  • Mid-afternoon snack – Around 3pm I will have the other half of my daily snack.
  • A smaller supper – Like I mentioned above, we plan out  & prepare 1 or 2 meals each week and eat off the leftovers.  Follow this plan and just take smaller portions for dinner.
  • Evening snack – Heaven’s to Betsy!!  Did you endorse eating a snack after dinner??  Yes…indeed I did.  As long as you exercise self-control, there is no reason why you cannot have a SMALL bowl of ice cream, some Triscuits, or some air-popped popcorn (no oil, but with a little real butter, YUM).  I invented this ultimate healthy chocolate chip cookie recipe that my wife & I make a batch of & freeze so we always have some on hand.

Choose whole foods over commercially processed foods…

I don’t think I have to go into detail here, but suffice to say if you eat a lot of Hamburger Helper, you may want to pay particularly close attention.  This is a lot easier than it sounds, you just need to choose simple ingredients over man-made ingredients.  Tip:  choose what God has provided in natural state over chemical laden, man-made creations.

  • White sugar – We use raw honey or natural unbleached sugar
  • White flour – Replace this with whole wheat flour, or whole rye flour
  • Breads – We started using the bread-maker that was just collecting dust in our basement and now make a fresh loaf of homemade bread once a week.  We both love it!  The cost is about a dollar a loaf for whole wheat bread, compared to around $3 – $5/loaf at the grocery store.
  • Beans – EAT MORE BEANS, they’re really healthy, really cheap, & really good!
  • Hydrogenated oils – Avoid these like the plague.  We do things like, make our own homemade salad dressing.  It’s incredibly simple & delicious, especially if you use fresh herbs from your garden.
  • High fructose corn syrup (HFCS) – I call this “Satan’s syrup”.  Again, avoid products containing HFCS.  Once you start looking for it, you’ll be amazed just how many products it is added to.  I attribute this to the lobbying efforts of the corn industry, but this post is neither the time nor place for that discussion!
  • Prepackaged meals – Any meal or ingredient that is “ready-made” is also going to contain a ton of preservatives due to commercial processing.  Instead of using these ingredients, do most of your shopping in the fruit, vegetable, & whole grains sections of your local grocery mart.

Eat at home more…

We stopped going out to eat, and will save $5,000+ this year alone.  Not only is this been a HUGE financial blessing, it has also been a huge part of our weight loss success.  Here are some tricks & tips to help you ease into the process of staying

  • This is a blessing – Not only are we saving thousands of dollars, we are so much happier now that we eat over 90% of our meals at home.  We always get to prepare what we want, with the ingredients we want, and use the exact level of spice that we want!  Believe it or not, the kitchen is also a great place to spend quality time together.  Eating at home more often has without a doubt brought my wife & I closer together!
  • Make a weekly menu -Each weekend my wife & I sit down for about 15 minutes to discuss what we meals we need to prepare for the upcoming week.  We ALWAYS focus on using up any soon-to-expire ingredients in our refrigerator or pantry.  Most of the time, based on what you already have & need to use up, planning the menu is easy.
  • Eat before you go grocery shopping – This is not a new concept, but definitely worth mentioning.  It helps you stick to your list…speaking of lists…
  • Preplan grocery shopping – My wife & I make a list based on what we need for our weekly menu and we stick to this list!

Give yourself a break…

We’ve all heard the old adage, “Everything in moderation.” This holds very true regarding a healthy diet.

  • Take a day off per week – When just starting out it is a good idea to take a break one day a week, usually on the weekends.  Just don’t binge eat & you’ll be fine.
  • Just take a break whenever – If you’re disciplined, you can just treat yourself once in awhile, then return to your normal diet.  This is the route I take because I do not like regiment, I prefer spontaneity; especially regarding my diet!
  • Things get progressively easier – The longer you eat healthy, the less you crave bad foods.

Well, there you have it folks.  By following the above tips my wife & I have both been able to shed 15% of our body weight!  I’m sure I have forgotten a few things so please make sure & list your ideas in the comments.

As for team BETA & the PF Blogger Weight Loss Challenge…I hope this helps us win!  GO BETA!

Categories // Money Management, Spending Tags // dining, dining out, frugal, healthy

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