Video Intro

This one is where the rubber meets the road. This is where we see how bad you want to be out of debt.

The sacrifice is only temporary!

The most important thing to remember as you are reading this is that it is ONLY TEMPORARY. By making a sacrifice you are not condemning yourself to that for the rest of your life. You just need to make up for all the overspending that has taken place in the past

If you have done some of the things mentioned in the last few articles, you are on a better financial footing than you were. But, if you expenses are still greater than your income, then we are going to have to take a few more steps.

Sacrifice your stuff and sell it!

Like we mentioned before, your balance sheet is the true indication of whether or not you are progressing financially. But, if your expenses are greater than your income, it is highly unlikely that you are increasing your net worth. So, in order to move forward you either have to cut expenses or increase income.

So far we have mostly been focusing on the less painful ways of cutting expenses in order to increase our net worth. Depending on how deep in debt you are, you may need to take drastic measures to get yourself back on solid ground.

What do you have that you owe money on?

Take out a piece of paper and write them down. Do you have loans on your house, car, boat, living room set, or anything else? The goal is to minimize our expenses, so what better way than getting rid of some of the stuff we owe on? Don’t worry, you will be able to get it again later, but now your goal is to break free from the bondage of debt!

You have to open your mind to things that you might not have wanted to do. This is probably one of them.

Cars are terrible investments!

Like we talked about yesterday, we pay a lot of money for them and they basically only go down in value until they to car heaven. In my opinion cars get people into financial trouble more than anything else. Most people don’t spend tens of thousands of dollars on something that knowingly goes down in value.

The way to defeat this of course is to drive older cars (older cars have already suffered much of the depreciation and therefore lose a whole lot less in value each year).

What is good about this is that if you have a car that you paid $25,000 for and it is now worth $17,000 you can sell it, take the $17,000 and use $6,000 to buy an old car and use the remaining $11,000 to pay down your debt. Just think about this for a second. You can knock out $11,000 of debt just by making one sacrifice: driving an older car.

Now I know not everyone is in that situation, but the principle still applies. So, if you have a boat that you owe thousands on still, or a couple cars, it doesn’t really matter. If you are making payments on it, you should consider getting rid of it.

And come to think of it, if you do own it and it is still worth a decent amount, you can sell that too!

“But if I get an older car, it will be expensive to maintain.”

Not necessarily. Go to Consumer Reports and give them $5.95 for one month of access to their website. They have, hands down, the best and most useful information for buying a used car. The rate just about every car in the book for all kinds of criteria. Not the least of which is reliability.

What you will find is that over the years Honda and Toyota (on average) have consistently made the most reliable cars. If you were looking for the single best old car that is cheap & reliable, I would say it would probably be a Civic. But, do your own homework at Consumer Reports.

Sacrifice your time and get to work! Again.

Yep, if everything up to this point isn’t getting you into the black, then you may need to think about getting a second job. The good news is that second jobs aren’t what they used to be. I remember when I was younger I would put in a hard day’s work at the grocery store and then make my way to the restaurant for the completion of about 12-16 hours on my feet.

Needless to say those days were very tiring, but it doesn’t have to been that way. There are many work-from-home opportunities that you could get involved in as you work to knock out the debt.

Work Overtime

Ask your boss if he/she has anything extra you can work on to pick up some extra hours. This will likely be the best paying additional income you could find.

Sell on Ebay

This is probably the most popular method these days for people looking to supplement their income. The greatest part about it is that you can start with stuff laying around your house. If you have not sold on Ebay before, I highly recommend it as a way to generate some extra income. For more info you can read the earlier article I wrote for beginners called 7 Steps to selling on Ebay.

Freelance Work

Do you have a skill that you could make some money on the side with? If so you can post an ad in Craigslist for free. You can check out elance.com or one of the millions of Freelance job sites out there. Google “Freelance work” to get a small sampling of what is available.

What sacrifices are you making or have you made to get out of debt?

Related Articles:

• Should You Get a Second Job to Pay Off Debt?
• Set a Time Goal to Get Out of Debt Faster
• Get Out Of Debt With The Debt Snowball Method – GS4
• Making money buying and selling cars

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

I had a revelation about cars that has caused me to not really care what mine looks like. It’s not that I don’t want a really fast car, it is just that there is something I want a bit more: financial freedom.

Video Intro

Is any car worth your financial freedom?

The thing I have noticed is that so many people give up financial freedom for their whole lives solely because of the decisions they make with their cars.

I know it sounds like a bold statement, but I think it is frightening how true it is.

For most people, a car is the second largest purchase they ever make. Second only to their home. The huge difference is that even if they make a bad home purchase, generally speaking it will go up in value over time. Car Depreciation on the other hand, is a beast. Regardless of whether you buy a new or used car, is going to go down in value, but the key is how fast does it go down in value?

So, if you compare a new car vs. a 6 year old car, the new car will lose a couple thousand dollars in resale value each year. The 6 year old car on the other hand will lose several hundred each year. If you think about it from an investors perspective, it is easy to see that if you must have an investment that loses value you will probably pick the one that loses LESS each year.

What if your car choice cost you $1 million?

A friend of mine illustrated this concept perfectly. He bought a 10 year old Ford Taurus for $500 from his grandma. He drove the car for 4-5 years and then sold it for $800. Not a bad investment at all.

It is an especially good investment when during the same period I saw friends buy brand new $25,000 cars and trade them in when they got sick of them a couple years later. My first friend had a monthly payment of $0 for 5 years and sold his car at a profit, while the other friends were paying $400+ a month on a car payment and ended up selling their cars for less than they owed.

My first friend had that $400 to invest each month. The amazing thing is that one simple decision very well could have made my first friend $1 million in retirement.

That is why I am okay with driving an older car. The new car smell is nice, but not worth $1 million.

Should I never buy a new car?

Dave Ramsey would say yes. I don’t necessarily feel that strongly about it, but financially speaking it isn’t the best decision. I do realize that there are other “non-financial” factors that could be affecting the decision. But, I will say this – IF you do buy a new car…

• Research it and find a reliable one
• Maintain it
• Take great care of it
• Plan on keeping it for a decade.

These are the best ways to get your moneys worth out of it.

Break the car-payment cycle

The key is to break out of the car payment cycle. Far too many Americans believe that they will always have a car payment. The goal should be to get the cars paid off as fast as possible, then start saving cash to buy the next one with cash. It is a nice feeling to have all your cars paid off and be in a position where you can save $400 a month to buy your next car with cash, rather than using that $400 to pay off a loan.

Homework:

Spend some time thinking about your current car situation. Are your car purchases making your bank richer or you?

Related Articles:

• Making money buying and selling cars
• How do you pay off a car?
• 6 Financial Mistakes and How to Recover Quickly
• How to Calculate Your Net Worth & Why You Should – GS3

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

Originally this article started as 16 ways to save money by NOT being normal, but over the years we have written about so many great ways to save money, I thought I would expand on it a bit to create an even larger list of some of the best money saving tips.

Video Intro

1. Use Ebates when shopping online

Normal = Don’t get any cash back on purchases

If you are shopping online Ebates is a no-brainer! Basically it works like this…

You visit Ebates.com, then click a link to your favorite online store (they have over 1200 stores like Target, Kohls, Walmart, etc) and make your purchase like normal. Ebates will then will be paid a referral fee by that retailer and will share the earnings with you. They pay you a percentage (1%-25%) of the purchase price back. It is completely free to and they even give you a free $5 gift card for signing up. I have been with them since 2008 and have earned hundreds of dollars. For more info read my review (what is Ebates?).

2. Save money on Cell Phone Purchases

Normal = Just pay the regular price at the Verizon store

I had no idea that you can save $100 or more by NOT renewing & upgrading your cell phone service at the store. Instead you can buy cheap cell phones online from Amazon.com and do it all with them. I didn’t think much of it until I saw that some of the top phones are $100 or more cheaper from them than through your carrier. You can find out more about the program here.

3. Get Rid of Your LandLine

Normal = Spending $25/m for a phone you never use

Many people can save money by only using their cell phones and just doing away with a landline. If you are like me and prefer to use a landline rather than a cell-phone, you can still save money by getting free long distance calls using a device called Magicjack. I have been using it for years, when I purchased mine it cost me $20 for the device and it costs $20 per YEAR to use – which equates to about $1.66/month. Admittedly it is a little quirky, so read my Magicjack review to be sure you know what you are getting into.

4. Save money with the library

Normal = Pay for things that the library offers for free

If you can get past the frequently outdated décor, public libraries are home to a wealth of resources. Of course you can borrow books instead of buying them, but they also often have subscriptions to high cost services or publications like Hoovers or Valueline. Our local library has grown a huge collection of popular CDs and DVDs over the last few years. So, it can be a cheap (free) ways to catch a few good movies. If you must be “Normal” and buy, at least use these 5 ways to save money on books.

5. Buying used stuff always saves money

Normal = Buy new

This is one of my favorite creative ways to save money. I first learned the power of this back in college, when I discovered that I could get my textbooks for free, by buying and selling them at Amazon. I was paying a few bucks (at most) for my textbooks that many of my classmates were paying over $100 for.

Leo from Zenhabits suggests to, “Send out an email to family or friends, or just ask around. You might be surprised. I was about to buy a printer, and then found out my mom just bought a laser printer and didn’t need her old inkjet.” Freecycle.org and craigslist.org are also good places to look. And of course, you can always check out garage sales and thrift shops.

6. Simplify your wardrobe

Normal = Buying clothes that you like without looking at the wardrobe as a whole

Don’t buy clothes that will only work as one outfit. Look for clothes that you will be able to wear with many other things, creating multiple outfits. Instead of buying that green and purple striped coat that will only go with one or two outfits, you could get a solid color gray that will work most of what you wear. Spend less money on the trendy items that won’t be in style long, and spend more on quality items. You really can do this and still be stylish at the same time. Simplifying your wardrobe is just one way you can save money on clothes.

7. Make money with your clutter

Normal = Garage sale or throw away clutter

It is easier than you may think. eBay and Amazon.com make the process a breeze. Sign up for an account, take a few digital pictures, post it, and watch the buyers come to you. HINT: The biggest key I have noticed is selling brand name items and taking a few seconds to think, “If I wanted to buy this item, how would I search for it?” If you do this, you will be much more successful.

Below are a few more ways to make money selling your clutter…

• How to sell books on Amazon.com
• How to sell your stuff on eBay
• How to sell old electronics
• Selling Your Gold? Be Careful!
• What to do with old cell phones

Of course, some of your junk won’t be worth the effort of selling it online. For that stuff – maybe garage sale, maybe just save yourself the hassle and give it to the thrift store.

8. Maintain stuff

Normal = Buy new, don’t maintain, it breaks, then buy new as cycle repeats again and again.

Even if you buy the best stuff, if you don’t maintain it you will not save you as much money as it could. You’ll then spend less on buying new stuff. When you buy something worth maintaining, take a few minutes to read the maintenance manual, and create a maintenance checklist that you can attach to the item. For important things like your car’s oil changes or tune-ups, put them in your calendar. To make it even easier schedule most of your maintenance all on one day with a Car Day.

9. Saving energy = Saving money

Normal = wasting energy

Even though, “Being green is so IN right now,” the “normal” thing to do is waste energy. So not only will everyone think you are cool, but you can save money as well. Check out these10 Energy saving tips.

Also, I am not sure how much money this will save you, but check out Blackle.com – birthed out of a question, “How much energy would be saved if Google had a black screen instead of a white one?” Supposedly, the search results are the same as the regular Google results.

10. Save money on exercise

Normal = Sign up for an expensive gym membership and never use it

Why not be extremely abnormal? You can get much cheaper access to a gym AND use it too!! Sign up for a class at a local community college (as little as $35 a semester). Then, use your ID to work out at the community college gym. That is a lot better than the $30-$40 a month most gyms charge.

11. Regularly Shop Insurance Rates

Normal = Buy insurance and keep renewing without checking rates

Regardless of who you buy from, you can be abnormal and save money by shopping around every year or so for insurance. I have saved over $530/year for the same coverage by getting car insurance quotes on a regular basis. Now there is something to be said for finding a top-rated insurance company – it may not be worth saving $50/year to switch to a terrible company, so use your own judgement.

Term life insurance is recommended for most people and you can read my Zander term life insurance review if you are interested. To get other types of insurance quotes you can just click the links below…

• Get a Health Insurance Quote
• Get a Life Insurance Quote
• Get an Auto Insurance Quote
• Get a Home Insurance Quote

12. Use PerkStreet Financial‘s Cash-Back Debit Card

Normal = Don’t get any cash back on purchases

My PerkStreet 2% cash-back debit card is my new favorite financial product. A lot of people like to use rewards credit cards so they can get cash back from their purchases, but just one late payment can completely negate any rewards earned that month. But when you find a debit card that pays rewards just as good (if not better) as most credit card rewards programs it seems like a pretty simple decision to me. I have been banking with PerkStreet the last two months and have earned $147 in rewards over that 2 month period – not too bad!

13. Live in a smaller home

Normal = Buy the biggest house you can afford (or more than you can afford)

For some reasons, Americans just love to assume that bigger is better with just about everything. There is a plague of families constantly having to get a larger dwelling because their stockpile of junk gets too large for their current home. Often just by throwing junk away and spending time organizing storage areas and closets, you may realize that you DO have a big enough living space, it just needed a little organizational love. A lot of money can be saved by living in a smaller place. When you think about it that way, organizing really might pay very well.

14. Buy a used car

Normal = Buy a new car, pay it off (or maybe not) and buy a new one

You can save a lot of money on car depreciation by purchasing a car 2 years old or older. Some cars can lose as much as 35% in value during the first year. It’s best to drive a car as long as you can especially if you do purchase them new.

15. Shop after the season

Normal = buying Christmas décor during Christmas season

Shop for holiday cards, decorations, and gift wrap as the season ends, and keep them for next year. We do this and then we also enjoy the nice surprise after Thanksgiving of finding out what we bought the previous year that we forgot about.

16. Shop when no one else wants to

Normal = House shopping while the weather is nice

If you are considering a new home, remember the best time to buy is in the dead of winter, when other buyers huddle inside. You can save 5 percent off the peak-season price.

17. Save money on your home entertainment

You can now watch many TV programs and many free legal movies online if you hook your computer up to your TV. Or you could spend about $60 on a device that allows you to watch HDTV on your computer. Or if you rent a lot of  movies one of the best ways to save money is to use Netflix or Blockbuster’s streaming or online video rentals. For even more, you can check out these 5 movie renting alternatives.

18. Buy jewelry from a discounter

Normal = Buy jewelry from the mall jewelry store or another traditional store

If you haven’t purchased jewelry in a while, you may be interested to know that the jewelry industry is going through some major changes. Diamonds have always had ridiculous markups, but recently there are more options for relief. Many direct importers are selling rings themselves at much better prices than you could get from the traditional stores. It makes perfect sense – the traditional stores have to pay for a storefront, sales force, utilities, etc., therefore the importers can usually beat their prices hands down. I bought my wife’s engagement ring at Amazon and ended up having it appraised for thousands more than I paid. That may just be my best way to save money.

19. Save money at the hospital

Normal = Don’t know that it is possible to save money at the hospital

I didn’t realize that you had options and to be honest most times if the hospital is involved, I am “normal” and could care less about what it costs. But, if it isn’t an urgent matter there are ways to save money at the hospital that I had never thought of. Did you know that you can bring your own stuff (e.g. pillows, linens, nightgowns)? Evidently, hospitals charge quite a bit for these items. (I have no personal experience with this one – can anyone confirm or deny?)

20. Go out to dinner for half price

Normal = Go to the same few restaurants all the time and pay full price

I love to try new restaurants, but since it is quite an expensive hobby – it is nice when you can save a few bucks. Enter the Entertainment Book. This wonderful tool costs about $25, but will pay for itself quickly if you use it a couple of times. It is available for most large U.S. cities and has thousands of coupons to participating restaurants – most of which are buy-one-get-one-free. This is one of my favorites ways to find new places to eat and save money in the process. Also consider Groupon.com or Restaurant.com who sells $25 gift certificates (with restrictions) for $10 to thousands of restaurants across the country.

Feel free to share any creative and ways that you save money by NOT being “normal.”

Related Articles:

• 5 Simple Ways To Save Money Shopping
• A few great ways to save money
• How to Save Hundreds of Dollars By Taking a Day Off Work
• 15 Ways to Cut Your Expenses – GS2

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

So, you spend more than you make – you are not alone

This is a tough one. Spending more money than you earn is common practice in the U.S., and increasingly in other countries around the world. Credit card companies have simplified the process so much that it requires quite a bit of discipline to live only on the money you make. This is a difficult task, but it is the first step (and most crucial) for most people to financial freedom.

Video Intro

Just like there are more than one way to “skin a cat” or to quit smoking, there are multiple ways to spend what (or less than) you earn. Listed below are the steps that I took to make it happen for me.

1. Believe that you can.

This is so important, because it is this belief that is going to carry you when you feel like quitting. Find people who have gone from overspending to living within their means and get encouraged by their stories. I am not sure what made me decide that I needed to change, but I had read enough stories of people changing their financial picture that I truly believed that I COULD DO IT.

If you do not yet believe that it is possible, keep reading and listening to success stories until you believe that you can do it. When you get discouraged and feel like quitting, go over the stories again and encourage yourself. The motivation gained from other people’s successes are going to be one of your main keys to succeeding, because if you do not BELIEVE that you can do it, you are NOT going to make it.

2. Eliminate the temptation to spend.

I don’t really have an opinion about cutting up credit cards, because to me it is kind of like throwing away a smoker’s pack of cigarettes. It is pretty easy to go buy another pack of cigarettes and it is almost just as easy to get another credit card. Obviously, the key here is to have a burning desire to want to curb your spending. It is not a bad idea at all to cut up the credit cards. I think I did cut up my credit card (luckily, I was too foolish to know that you could have more than one credit card at a time).

Romans 13:14 says to,”make no provision for the flesh in regard to its lusts.”

I did this by not going to the mall and not going out to eat. These were my two big areas where I spent/wasted the most money. Especially with the case of the mall, I could eliminate most of my temptation just by not being there.

3. Learn to say “NO” to yourself.

Learning to say NO to ourselves is one of the most beneficial habits we can develop. I call it a habit because it is truly is. People who never tell themselves NO have a difficult time doing it. On the other hand, people who regularly tell themselves NO find that although it may not be easy, it becomes less difficult the more you do it.

Your success is based on your ability to say NO

It is difficult to find a person who has had success in any area of their lives who didn’t become good at saying NO…

• If you want to lose weight, you have to say NO to your body when it tells you that it is going to die if it doesn’t get a Krispy Kreme doughnut.
• If you want your marriage to last you have to tell yourself NO when you really, really want to say something that you probably shouldn’t.
• If you want to succeed in your career you have to say NO to your body’s desire to be lazy and work hard and smart (even when no one is looking).
• If you want to get out of debt, you have to say NO to fun indulgences even when everyone else around you has them.

The list goes on and on, but the point remains the same: Get good at saying NO.

“Do something you hate every day, just for the practice.” –John Maxwell

The point John was making in this quote was that in order to succeed you have to do things you do not want to do. People who achieve their dreams have to pass up a whole lot to reach their destination.

As I think about areas of my life where I have been able to implement this in small steps, the corresponding rewards have been great. My walk with God, my finances, and my relationships have all seen great progress as a result of saying NO in seemingly insignificant moments.

By following these simple, yet difficult steps I went from spending about 125% of what I made to 85%. If you are over 100%, make that your first goal: not getting into anymore debt, then your next goal should be to snowball your debt and move to well below 100%.

Related Articles:

• Quit spending (Part 4)
• Encouraging story of getting out of debt: Patrick Gesselman
• How to negotiate with credit card companies – GS5
• Is It Possible to Manage Credit Cards Well?

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

Video About Negotiating Credit Card Rates

How to negotiate a better interest rate

A few years ago, when I had over $15,000 of credit card debt, I was often negotiating with credit card companies to get better interest rates. I took a very active approach toward minimizing my interest expense on my debt and learning to negotiate with credit card companies was a key component. Like I mentioned yesterday I am a big fan of the debt snowball method for getting out of debt and you actually can use this as another tool to speed up the debt reduction process.

The steps to bargaining with your credit card company

These are the steps that I actually took when I was trying to negotiate with my credit card companies.

1. Gather credit card offers

I gathered up a bunch of offers from other credit card companies. I would often get 0% credit card offers in the mail, so I just saved them up for a couple weeks until I had a few decent ones that I was slightly interested in. The reason I gathered these up was to have a baseline to negotiate from. These offers would more or less allow me to prove to my card company that I didn’t need them, because I had other offers. I could have made these offers up, but I don’t believe that lying to get what you want is ever justified – even to credit card companies.

2. Organize and make a list

From this point, I would make a list of all of my credit cards, the balances on each, the current interest rate and how long that rate would last (if it were a promotional rate).

3. Call the first card company and try to reach the supervisor

Then I would grab the phone number off the back of the first card and start calling. (This is very important) Once I reached a customer service rep I would ask to speak to their supervisor. You can try to negotiate a better rate with the front-line rep if you want, but in my experience they rarely can negotiate rates with you.

Most of the reps I dealt with flat out told me “no”. Either way, ask for their supervisor. Once you are talking to the supervisor, you are now talking to someone who has authority to negotiate rates (most times) and they often are much more rational and will talk to you like a human being.

4. Plead your case

Now that I had the supervisor on the line, I would argue my case in typical Matlock fashion. I would let them know that while I have enjoyed their business, I had three 0% offers from other credit card companies. I told the supervisor that I would love to stay with them, but if they couldn’t provide me with a better rate I would be forced to go with one of their competitors.

Just like you would expect, this worked with varying degrees of success each time. Sometimes they would offer me 0% for a fixed time frame, sometimes they would try to pacify me with a 1% rate reduction. But I will say that they ALWAYS offered me something. So even if I didn’t get what I wanted, it was always better than not calling at all.

I know not everyone will be offered a discount, but you never know until you ask!

5. Transfer your balance if you need to

I had patience and was not afraid to leave, so if I couldn’t get the offer I wanted from the supervisor I would just kindly hang up and proceed to transfer that balance to one of the offers I rounded up in step 1.

6. Get the best offer by closing your account

Once I had my balance transferred, I would call back to that card company to close my account. Many of the credit card companies have “closing specialists” whose only job is to do any and everything to keep your business. You can ask these guys for a ride on a unicorn and they will try to make it happen if it means you will keep your account open.

I found that these guys often will be able to offer you a better deal than anyone else, because they know you mean business. I rarely took advantage of their deals, because I had already transferred my balance, but it is something to keep in mind.

So there you have it – my quick how to guide to negotiate with credit card companies. I assure you that you will have varying degrees of success based on your credit history, payment history, and other factors, but it never hurts to try. Oh and by the way, this is the same method I use when trying to negotiate late fees or any other charges from them.

See which credit cards negotiate the most

Another tool you can use is DebtGoal’s “Negotiate My Rate” tool. This is a pretty cool tool that uses information gathered from other customers to help you get a feel for how much each credit card company is willing to negotiate. It is definitely worth checking out before you make your first phone call.

Homework for tonight is to call all your credit card companies and negotiate lower rates.

Let us know how you do in the comments below!

Related Articles:

• Negotiate Credit Card Interest Rates with NegotiateMyRate.com
• 6 steps to reducing your credit card interest rates
• Surviving the inevitable Credit Card crisis
• Make the most of Credit Card debt (part 2)

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

Debt Snowball: The Preferred Method for getting out of debt

Creating a debt snowball is my preferred method of getting out of debt. The strength of using this method is that it focuses on the behavioral side of personal finance rather than the mathematical. Since we are not robots that always do exactly what we know we should, I recommend this method for most people.

Video Intro

These are the simple steps to snowball your debt

1. Create a list of all of your debts: credit cards, car loans, student loans, mortgages, etc…
2. Next to each one write down the total balance owed.
3. Re-order these from smallest to largest debts (use Excel or Google Docs to make this simpler.)
4. Pay the minimum payment on all of the debts – except the smallest one.
5. Put every extra dollar you can find towards paying off that smallest debt.
6. Celebrate like crazy when you get that first debt paid off.
7. Take the amount you were paying towards the first debt and put towards the next smallest debt. Do this until this one is paid off.
8. Celebrate again!
9. Continue this process until each one is paid off.

What you will find is that each time you pay off a debt, the “snowball” gets larger. Since you are taking the amount you used to pay off the first debt and putting it all + the minimum payment that you were already paying to the second together, you are making more of an impact towards that debt. Each time you pay off a debt, the snowball gets larger and more powerful – which is great, because it just increases the speed that each debt gets paid off.

The numbers don’t lie

If you are like most logical people out there (like me ) you are probably saying, “you could save more money by paying the highest interest rate cards off first.” You are right – calculators do not lie and they will give you the correct logical answer. Paying your credits cards off starting with the highest interest rate to the lowest is “mathematically” the best idea. But, let’s look it at from another angle:

If we DID what we knew we SHOULD do 100% of the time, using the mathematical approach would be best. But, we are emotional beings and even the most disciplined among us still have emotions and are affected by them.

Computers use logic 100% of the time. Humans do not. We were not created to. We make decisions based on our emotions. We get let down, we get encouraged, we feel motivated, we get scared, we feel hopeful, we feel like quitting. These are all emotional states that each one of us could feel on any given day!!

Knowing that we are emotional beings, the key is to use our emotions to our advantage. Just like jogging with the wind at your back, it is a nice little boost to use our emotions to give us a little edge. So, rather than tackling the debt like a math problem, we can tackle it in a way that will give us emotional boosts! After all, isn’t it better to get out of debt and spend an extra $100 in interest than to give up half way to our goal because we were discouraged?

Status Bars and Debt

Ever wonder why there are status bars showing you the progress of the item you are loading on your computer? It is to keep us from going crazy while waiting 10 minutes for the computer to do what we told it!! Even though that little bar moves slowly sometimes, it is encouraging because we know how much longer we have to endure the torture of waiting.

It is extremely DE-motivating when there is no end in sight. Without that “light at the end of the tunnel” it can be hard to keep going. That little bar that shows us the progress that we have made gives us hope. What if there were no status bars? Or what if you saw no progress on the bar until you got to the 70% loaded point? Would you keep waiting or would you reboot assuming it there was a problem?

When on the phone, have you ever been waiting on hold for 15 minutes wondering, “Did they forget about me? Should I wait it out? What if the never remember that I am on hold?” Do you cut your losses or wait it out having no idea when they will pick up, or if they ever will?

This is the advantage of using the snowball approach to paying down debt. If you focus on the highest interest rate, it could be months or even years before you reach that first milestone. Would you have the endurance to keep going that long without reaching that first milestone?

It is a wonderful feeling to be able to celebrate your first milestone – paying off the first credit card is a blast! Speaking from experience, I was fueled with motivation after reaching that first milestone. The fact is that most people are strengthened by seeing even a small goal accomplished. I love the snowball approach to paying down debt because it focuses on reaching these small goals first and using them as motivation to keep going. Let me know how it works for you!

Homework

• Follow steps 1-3 tonight and get your debt snowball rolling!

Related Articles:

• How To Apply A Lump Sum Payment To Your Debt
• Which Debt Should I Pay Off First: Car or Student Loan?
• Set a Time Goal to Get Out of Debt Faster
• Making Sacrifices to Get Out of Debt – GS18

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

While I think few would argue that paying off debts is a good thing, there is a better way to accurately see the big picture of your finances. It is called your NET WORTH.

And no it is not just a number that rich people talk about at cocktail parties. It is what financially savvy people use to track their progress.

The simple definition of it is:

Assets(stuff you own) – Liabilities(debts) = Net Worth

It is simple to calculate and I will get to that shortly, but first…

Video on Calculating Your Net Worth

Why Net Worth rather than just debt?

Your Net Worth is more encouraging

The primary reason for using your Net Worth as a gauge of your financial progress rather than the amount of debt you have is because it is more encouraging. When you look at your amount of debt to track progress you are only seeing the fruit of paying down those debts. On the other hand, your Net Worth increases for every good financial decision you make.

For example, you can increase your Net Worth with the following actions:

• Paying off credit cards or car loans
• Paying more towards your mortgage
• Buying property
• Funding a Roth IRA
• Contributing to your 401(k)
• Building an emergency fund
• Buying index funds, mutual funds, or dividend paying stocks
• Or even just not spending as much money

There are many more things you can do to increase your Net Worth, but these are some of the bigger and more common ones.

It changes how you think about buying decisions

The second reason I prefer to use my Net Worth to track my progress is because I have found it helps change how I think about my buying decisions.

One of the most valuable financial lessons I have learned can be summed up in two words: buy assets. What I mean by that is you should spend more of your money on things that will keep cash in your pocket. So they should at the very least:

• maintain their value
• but better yet increase in value
• and the best would be increase in value and provide you income as well.

On the other hand you should avoid buying things that are going to take cash from your pocket. Coincidentally, these are most of the things most of us spend our money on. When you buy clothes, food, electronics, decorations, cars, entertainment, you are (generally) using cash to for something that is going down in value and therefore decreasing your Net Worth. Examples of this would be:

• Spending $200 on new clothes
• A $50 steak dinner
• Getting the new iPhone
• Going to the Yankees game
• A brand new BMW

Think about how much you could sell each of these for 2 years from now. Each one of them is a depreciating asset, so 2 years later they would not be worth what you paid for it, if anything at all. But if you had spent it on…

• Buying property
• Funding a Roth IRA
• Contributing to your 401(k)
• Building an emergency fund
• Buying index funds, mutual funds, or dividend paying stocks

You would have a much better chance that it would be worth at least what you paid, and it would more than likely be worth more than you paid for it.

Obviously there is more to life than Net Worth, and you can never avoid spending money on depreciating assets, but you can avoid spending ALL of your money on depreciating assets. This is the key to why many people never get ahead financially. They spend all of their money on stuff that goes down in value. Once you start buying things that increase in value, you begin building a snowball that just grows larger and larger, faster and faster.

I don’t want to get the cart ahead of the horse, so lets get back to our Net Worth. The reason I mentioned this is because I want you to be thinking about the end result of each buying decision. None of the things listed above are necessarily wrong, but they should be thought about and decided upon rather than just reacting to what you “feel like doing”. Your Net Worth will reflect each buying decision that you make – good or bad.

How to calculate your Net Worth

This shouldn’t take more than a hour if you have never done it before. When you update it in the future it will take even less time than that. I have created a template from my own balance sheet that you can use if you would like. You can download it here.

1. Get a spreadsheet

First off, you can do this on paper if you really want to, but I suggest Excel, Google docs, Open Office, or really any kind of spreadsheet will do.

2. Total your assets

List every asset you can think of. Anything that you could realistically sell. For the purposes of sanity and simplicity I don’t bother with items under about $500. Yea, I am sure I could find someone on Ebay to buy my socks, but I am just looking for a general picture. So I just lump together all these smaller items as one line called “Misc items” and take a conservative guess of what they could be sold for.

So your house, cars, retirement accounts, stocks, savings accounts, checking accounts, emergency fund, jewelry, and anything else similar would fall in this category.

To get real estate values you can use Zillow to get a decent estimate of what your home may be worth. For automobiles you can check out Kelley Blue Book to see what they could be sold for. For all your checking, savings, investment accounts you can either check the balances online, or just use your last statement.

Once you have them all listed with the estimated selling/liquidation value you can total them up.

3. Total your liabilities

A few lines below the Assets total, we are going to now list every debt you have. Mortgages, credit cards, student loans, they all apply. Do the same as above checking balances on each one and then total your debts to get your liability total.

4. Subtract them

Now you can subtract your liability total from your asset total and viola! You have your Net Worth. Date it and save it.

Now what?

When I first calculated my Net Worth, it was -$13,843.84. This was eye-opening to me. I knew I had a bunch of debt, but didn’t realize how below par I was. Regardless of what you number is, just look at it as the starting point. It is from this point that it will become larger.

After we had been working at it for one year it was up nearly $15K to +$746! We were so excited to have a positive Net Worth! Even if it was only $746. As we kept on working on it, it has just continued to grow.

I normally update mine about two times a year. But if you are working really hard at it and need to see the encouragement of it increasing, do it more! As in just about anything, you are either moving forward, or you are going backwards. If you are increasing your assets by making good buying decisions or minimizing debts your net worth will be growing.

Your homework tonight is to calculate your Net Worth.

Related Articles:

• Do You Need an Emergency Fund? GS13
• Get Your Financial Life On One Page (FLOP) – GS12
• 3 Simple Steps to Building Wealth
• How Much “Fun Money” Should You Spend Per Month?

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

Video Intro

Save money on your car

1. Car Insurance

Believe me, if you haven’t shopped around for car insurance in a couple years – it is worth your while. I really was sure that I had the lowest rates I could get, but then I checked out Geico and found that I could save $330 a year for the same coverage. I was so blown away that they could save me $330 that I didn’t shop anywhere else.

Six months later my old insurance broker called trying to get me back and she had found another insurance company who was $200 cheaper than Geico. And again it was for the same coverage. So just to repeat – I thought I was paying a good rate, but by shopping around I was able to knock over $500 off my car insurance bill. (get quotes here)

2. Save money on gas

While everyone wants gas prices to go down, you can cut your monthly gas bill by taking some pro-active steps. Checkout these 75 gas saving tips and grab a few of them and start working them into your driving. And for some more advanced techniques you can learn how to hypermile as well.

Save money on your phones

3. Cell Phones

Grab your most recent cell phone bills and look at them to see what you are actually paying for.

• Are you paying for internet service that you are not using?
• Are you paying for 1000 minutes a month, when you are only averaging about 350?
• Are you paying for text messages that you are not using?

Before you call your cell phone company check other Cellular companies to see how their rates compare. If it is still worth your while to stay with your current provider, then call them up and talk to them about the changes that you can make.

4. Home phone lines

Ask yourself a tough question, “Do I really need a land line? Would it be possible to use my cell phone for all calls?”

If the answer is no, you may want to look into Skype or Magicjack. I have used both and have saved a ton of money from it.

If you are have a land line solely for the purpose of having a DSL internet connection, I would recommend calling the phone company to adjust your phone plan. I was not using my land line at all and was paying $25 for it. I called them and got the plan lowered to a pay-per-call plan which only costs me $7 a month.

If you can get by without a land line, call and cancel it. This will probably save you $20 or more a month just by making a phone call.

5. Save on the Internet

I am not suggesting that you get dial-up. That is just cruel and unusual punishment . But, if you are paying for the premium package you should consider one of the slower packages. Many people won’t notice a difference in how fast the web pages load.

Again, it may be worthwhile looking at the options available for high-speed internet service. I saved about $20 a month switching from one company to another.

Save money on Food

This is one of the easiest fixes for most people. I know I am saving hundreds of dollars a month by not doing what I used to do with my food purchases.

6. Make going out to dinner something special

Not only will you save yourself a lot of money, but it will be more fun when you do go out. Have you noticed that when you do something all the time, it just isn’t as fun anymore? This is a great way to “add fun” and save money.

A couple going out to dinner just two times in a week could easily spend $300 a month. If they knock it down to just one time a week that is $150 savings.

7. Make it yourself

You really can cook. I don’t care if people told you that you were a bad cook, don’t listen to them. You aren’t bad and it is not that hard. There are tons of meals that you can make that require little more than an ability to set a timer and read directions. Start at Allrecipes.com, they have lots of cool features that I won’t get into here – just check it out.

8. Bring your lunch

This is one of those rubber-meets-the-road sacrifices. But it pays off handsomely. If you are paying $10 for lunch to go out each day, you are spending $200 a month. If you bring your lunch 3 days a week, you should easily be able to save $100 a month.

9. Eat what you have

Buy food that you are going to eat and eat what you have. I cut my grocery bill by 50% from my wasteful years by eating the food I had and not wasting any. I could not believe how much money I was wasting by letting food spoil. Just putting a little bit of thought into your grocery list each week will be an easy way to save money.

10. Clip coupons

Most of the food we buy doesn’t have coupons, so this has never been too much help for me. But, there are some people who take pride in buying a grocery cart full of food for $25 and 100 coupons. Even if you aren’t a pro, beginners can save $50 a month without much difficulty.

11. Drink water

I saved myself $30 a month just by quitting my Pepsi addiction. A Starbucks addict could probably save $100 a month by switching to water.

12. Save on your energy bills

A lot of energy saving tips require you to buy something in order to save money in the long run. While I am all for that, the purpose of these tips is to give you more cash in your hand now so that you can pay down your debt.

That being said you can check out these 10 ways to conserve energy and save money and these winter energy saving tips.

13. Pay your bills on time!

This is obvious, but some people (like myself) need the obvious restated sometimes Late bills often incur a fee that is nothing but a waste of your precious money.

If you find yourself forgetting to pay your bills on time, set up a free Google calendar and you can put reminders of when each bill needs to be paid. You can even set it up to email you to remind you to pay it on the correct date. While this is a shorter term fix, I prefer to set up a schedule of bill payments in order to make bill paying easier.

14. Save at the bank

Grab your recent bank statements and examine them for ambiguous fees. If you see any and don’t know what they are, call your bank and ask them to explain it. I worked at a bank for years and I know how good they can be at coming up with creative names for their fees.

If you find out that you are paying fees for your basic banking needs, I recommend switching. There is no reason you should be paying fees for falling below a minimum balance or anything else. It is your money. Take it somewhere where you have control over the money, not the bank.

Most credit unions will not have many (or all) of the fees that bigger banks may have. I currently use Perstreet for their debit card with cash-back rewards and ING Direct as a savings account.

15. Save on purchases

If you are working on getting out of debt, you should be thinking long and hard about any sizeable purchases. But, if you must, then make sure you are getting the best price in the world on the item. The internet has taken comparison shopping to a whole new level.

Yea, there are a million places you can buy things online, but I have found that I almost always find the best price at one of these three places:

• Ebay (yes, they have new stuff too)
• Amazon
• or using the discount from Ebates

Craigslist and FreeCycle.org are also good tools for finding some bargains on used items.

Other tips to cut your expenses

• Buy greeting cards in bulk at the Dollar store or the party store. This will help you to save a lot of money and you won’t have to make an extra trip every time you need one.
• If you are an avid reader and spend a lot on books trying using the library again. Remember the library? Another option is to buy them from Amazon used. I have a couple books on my Amazon wish list that cost less than a nickel for a used copy. And here are 5 ways to save money on books.
• If you have an emergency fund built up, you may want to look at increasing your deductibles to save money.
• If clothing purchases are needed, at least look at these 6 tips to save money on your clothing expenses.

Please share some of the ways you have cut your expenses in the comments below!

Related Articles:

• 4 Ways To Budget For “Gotcha” Expenses
• How to Manage Your Bills – GS1
• 10 easiest ways to save money
• 9 Bills You Can Lower Starting Today!

Bob enjoys dark chocolate, paying off debt, giving, Foosball, loose-leaf tea, helping people succeed, learning, anything God created, playing guitar, Philippians, excellence, Chick-Fil-A, and making his wife smile. He started ChristianPF in 2007 and Co-Founded Blogging Your Passion in 2011. Find him on Facebook & Twitter.

Many people are going through a difficult time in regards to their financial situation. They owe more on their house than it’s worth, credit card bills are piled high, and there is little to no hope for their financial future. Sounds like what you’re going through? Well, there are three simple tips you can follow today to turn all of that around.

You might think that I’m about to tell you to get a budget. While that’s a great step, and budgets are certainly needed for financial success, they are not the only thing needed. The principles I’m going to ask you to participate in are principles that require an attitude adjustment and sheer determination. Let’s get started.

Tip 1: Seek financial accountability and stability.

If you’re married, you have the potential to become very strong and stable financially. Consider the potential benefits:

• The opportunity for two incomes. If one person loses their job, at least the other has a job! Two strands are stronger than one.
• Each partner keeps another’s spending in check. Even just knowing that a purchase might not please your spouse leads you to spend less. This is a great opportunity for accountability.
• Each partner encourages the other to do well in work. I don’t know about you, but sometimes I get burnt out. My wife is always there to help me through those difficult times.

• Find someone who is a close friend who will hold you accountable on a regular basis (for example, who will look over your budget every week or month).
• Build up a larger emergency fund to fight against life’s unexpected events. Anything can happen. If you lose your job, will you have enough money to last until you find another job?
• Share your long term financial goals with your friends and family. The simple act of sharing your goals with friends and family will help keep you accountable. It’s a great motivating factor that pushes you to live up to what you said.

Tip 2: Systematically eliminate your debt.

I’m convinced that debt crushes one’s ability to prosper. It keeps you down in a number of ways:

• You’re paying interest. In other words, you’re spending money to spend money. This can sap your wallet in no time, and keeps you financially poor.
• You’re betting that you’ll have income in the future to pay off what you’ve already spend money on. But what if you don’t have as high of an income in the future? Well, you’ll default on your loans and might go into bankruptcy.
• It keeps your stress level high because you’re having to think about your mountain of debt. Debt is very burdensome. But sometimes we don’t realize how much stress it is causing us until we get rid of the debt.

You can get rid of your debt in a number of ways, but I recommend using the debt snowball technique. That’s where you pay off your smallest debts first moving up to your largest debts. You might ask why you would want to do that when you could pay off the highest interest rates first? Paying off smaller debts first motivates you to keep going, and the difference you’ll save paying off higher interest rates first typically isn’t very substantial.

Tip 3: Surrender your finances to God.

To get, you must give.

To be secure, you must surrender.

To live, you must die to your self.

These themes are repeated time and time again in the Bible, and they are true for our financial health as well.

If you aren’t giving to your local church, today is the day to start. Giving money to God and letting God manage the rest through you is the best financial decision you can make. Taking on the burden of giving feels more like losing a burden. Control when lost can help you trust God with your financial situation. Be responsible with your money and manage it God’s way.

If you follow these three principles, you’ll receive a boost to your financial health. Try them out, and I’m sure you’ll be happy with what you see!

How have you been able to boost your financial health in the past year? What worked for you? Share your story with us in the comments below!

Image by Tatiana Popova/Shutterstock

Related Articles:

• How To Set Strong Long Term Financial Goals
• What’s Your New Year’s Financial Resolution?
• 4 Fundamentals of Christian Financial Advice
• 7 Tips To Improve Your Financial Competence

John Frainee is a personal finance writer at TheChristianDollar.com. His goal is to provide biblical financial principles that encourage people to live healthier lives. Beyond personal finance, John enjoys spending time with his wife and two crazy cats, playing a competitive game of Monopoly, and reading just about anything he can get his hands on. You can also find him on Twitter and Facebook.

Does it surprise you that 86% of 4-year undergraduate students who apply for federal student aid will borrow money to go to school?  With average student loan debt hovering over $23,000 for graduating seniors, it’s easy to see how so many people can be affected by the burden of student loan debt.

If you were a May graduate, your six-month grace period is ending and those student loan payments are going to kick in within the next month or so.  Now’s the time to take control of those debts and these tips will get you on the right track to paying down those debts faster than you can imagine.

1. Get Organized

For those students who are in school right now, do yourself a favor and stay organized.  Create a separate folder for each lender you use and file each notice you get from them.

If you’re out of school, you should be getting summaries in the mail about your payments and current balance.  Be sure to organize those and keep the online account login username and password in a place you can access if you forget what they are.  We use a financial snapshot to organize our account information, and it’s saved us the headache of resetting our password when we forget what it is.

Bonus Tip For Getting Organized

If you’re in school, open a separate checking account for your student loans and only use this account for school expenses (not eating out or other things you should pay for with money you earn.)

I was foolish my freshman year and saw a surplus of $500 in my loans account.  Instead of using it the next year for school expenses, I withdrew it to ‘live on’ during the summer.  I didn’t really need it, and encourage you to keep those accounts separate and designated only for school expenses.

2. Build a Loan Payment Account

My wife and I opened a savings account at our bank and told our loan provider to draw each month’s payment from this account.  Before the payment is drawn each month, we automatically move money from our checking account into the savings account.  This helps us to keep the loan payments separate from other bills and automates it for us.

One thing that has helped us tremendously is to keep a buffer in the savings account.  If an emergency comes up and we can’t move money from our checking account fast enough, the buffer in the savings account will take care of the student loan payment.  We try to keep an extra $500 in the savings as a buffer, but you may need less depending on your loan payments.

Bonus Tip For Creating a Buffer

If you automate a transfer from your checking account to your savings, round up the payment to the nearest round number plus $10.  The loan payment that’s withdrawn from the savings account will remain the same, but you’ll build a buffer in your payments account that way.  This way, you’ll be prepared in case you run into trouble one month and can’t seem to make a payment.

3. Budget for the Payments

Log into your lender’s website and look for the ‘calculate my payment’ link.  They should provide you with an estimate of what your payments will be.  (I’d encourage you to do this while you’re in school too!)

With your payments in mind, you should be able to anticipate how your budget will be affected.  Use the six-month grace period to your advantage and try to tweak your budget to include the loan payments.  Set aside that monthly payment during the grace period and use that to build an emergency fund before you have to really start making payments.

Bonus tip for Budgeting the Payments

If you don’t think you’ll be able to afford the payments, you can apply for Income Based Repayment through your lender.  Income Based Repayments (IBR) lengthens the repayment of your loans and lowers your payments according to your adjusted gross income and loan amount.

4. Snowball the Loans

Dave Ramsey popularized the debt snowball, and it works great for paying down those pesky student loans.  You’ll probably notice that your loans are broken into a few different types (Stafford, unsubsidized, Perkins, etc), have different rates, and have different lenders.  If so, you can use this to your advantage and eliminate the small school loans with extra money you make.  Paying down a small loan completely will free up that payment, allowing you to snowball the next biggest loan.

Bonus Tip for Snowballing Debt

If you’re looking for a way to track your loans and see how the debt snowball will work for you, download this free debt snowball spreadsheet provided by J.D. Roth at GetRichSlowly.org.

These tips have worked for us and I hope they work for you too!  How have you managed student loans?  Meet you in the comments!

Image by Dmitry Kalinovsky/Shutterstock

Related Articles:

• Which Debt Should I Pay Off First: Car or Student Loan?
• How To Avoid Taking Out Student Loans
• College Debt & The Student Loan Trap
• What You Need to Know Before You Get a Student Loan

Tim is a personal finance writer at Faith and Finance a Christian financial help blog that provides financial insights for individuals, businesses, and churches. Outside of finance, Tim enjoys spending time with his wife, playing the saxophone, reading economics books, and a good game of RISK or Catan. Find him on Twitter and Facebook.