We are debt free!!!

On December 5, 2014 we have made our last payment. Watch us visiting Dave Ramsey radio show in January 2015!

We have been debt free for a year! Awesome feeling!

Eugene, Tanya and their kids (now family of 5) are Debt Free!

Roses are red and budgets are great…

Original picture is borrowed from http://girlfromthehills.files.wordpress.com/2010/07/red-roses-photo.jpg

A few weeks ago I have decided to buy some flowers for my lifelong girlfriend (AKA wife J) and during my lunch I rushed to the other side of the town, ran into VONS (grocery store), bought a dozen of Red Roses and delivered them to Tanya’s work.

Of course she was pleasantly surprised, of course I was showered with kisses and hugs, of course she told me how much she appreciated the flowers and then…. I got reaffirmed that Tanya and I are on the same “financial page” and we are both focused on our goal of getting out of debt when she asked me this question.

-          Wait a minute… Where did you get the money? What budget line does this purchase belong to?

I had to laugh! We both laughed! Even during the time of surprise and show of affection, budget was on our mind! So I explained that this is from the extra money I earned from ebay sales (something I do on the regular basis to create additional stream of income).
I love my girlfriend!!!

Mark is winning with his money!

I am not sure who wanted this to happen quicker; my eight year old son Mark or I. For some time now he has been saving money to buy Nintendo DSi. Here are some things I reassured in as I was watching him earn, save, give and spend his money.

Long awaited package

Finally!!!

1. Setting a reasonable goal  - helps you stay focused and motivated. Mark's savings plan started with us asking him one question - "what would you like to buy for your self?". He did not have to think long - DSi was something he wanted long before his dad knew what it was. To help him stay motivated from time to time I would ask him to tell me how much he already saved, if he knew what the latest prices for Nintendo were and if he had any ideas on how to earn more money. (Side Note - in our family there is no such thing as allowance, instead, we have commissions. Allowances teach kids all the wrong things - Parents are ATMs, money grow on trees, entitlement is a norm of life and finally how to "occupy Wall Street". On the other hand Commissions will teach your kids - responsibility, work ethics, independence, creativity and many other positive character traits and life skills.)
2. Working on achieving your dream - pushes you to be more proactive. When Mark realized that saving enough money for his toy will not happen over night but the process can be expedited if he could earn more money, he really surprised me. As he was watching me sell our unwanted stuff on ebay and craigslist he asked me if he can do the same and he actually sold a couple of his toys he was no longer playing with. Every time he volunteered to help out in the kitchen, vacuum around the house, help dad pull weeds in the backyard - Commissions always brought a smile to his face. Funny how quickly he started asking us - "what else can I do?" You see desire to have some thing, get somewhere in your life, or do something different with your life - will not get you far - you need a plan and you need to work your plan to achieve your dream
3.  Achieving your goal - Priceless. Finally! After long months of saving his earnings Mark saved enough to pull the trigger and buy his DSi. But not so far, we had to do some "fishing" to find the best deal for  the money. Although he had enough money to save a brand new DSi from any store that sold electronics, I had to show him what he could purchase used from ebay for the same amount of money. Many attempt were made to win various packages, but only one was Mark's!  This week Mark is celebrating his victory! His victory is an inspiration to me and Tanya as well. One day we too will achieve our Financial Freedom and it will be an unforgettable moment - I know it for a fact!

Proud Owner of Nintendo DSi, 11 games and many Accessories

WWW

Picture location

Acronym is formed from the first letter of each word in the term. Today, I wanted to talk about the Three Ws that will get you and keep you in the debt, and also about the other Three Ws that will keep and/or help you break out of the debt.

• First W stands for Whining. When we are whining about the things we so desperately want and absolutely need RIGHT NOW, without setting aside our feelings and looking at the situation from the sober perspective, we tend to make financial mistakes. Don't get me wrong, I am not saying that wanting stuff is bad, however wanting and getting stuff with the money you do not have- is.  But... I want it, I want it, I want it! I will love you so much more if you let me buy A, B, C... If we only had X,Y, Z, we would feel so much better... But we deserve this vacation package! But I always dreamed to have this, we need to buy it, this is our only chance - look at this sale price! But everyone else has it, I should too!

• Second W stands for Wussification. This is the process when we do not want to make anyone feel bad, or think poorly of us, or think we do not have the means, or when we worry about the status quo more than about the future circumstances and cave in, or simply when we just buy stuff with the money we do not have trying to impress people we do not even know. This is when one cannot say "NO" to wants and the budget is blown. This is when we charge our credit card and justify it with some silly excuse. This is when you let the "Here and Now" culture control your wallet. This is like driving a car without a brake pedal or a steering wheel- eventually there will be an accident - Guaranteed!

• Finally, third W stands for Wambulance. Once in a deep financial problem caused by prolonged Whining and financial Wussificaiton , one often makes another crucial mistake by calling in the Wambulance that will only treat the symptoms and not the disease. Too much debt with high interest rate - get a new card and do a balance transfer  - 0% for 6 months. Yes, feel much better! Too many credit cards and can't keep up with paying everyone on time - consolidate - one low monthly payment! Yes, already feel richer! Nothing works - file for bankruptcy! Whew, that was a close one! Now we can start all over again... Where was I? Oh, yes, Whining!

So, what's the solution? 

1. W -  Wait! Things will never bring you happiness, nor will they ever bring permanent satisfaction! Quit buying stuff you do not need! Start thinking purchases through. Click Here to find out how we do it.
2. W - Withstand! Grow a back bone and learn to say "NO!" Its a good word, say it - NnnnOooo! Now say it to your self and to whoever and whatever is breaking your budget! Take control of your Finances!
3. W - Win! Stop looking for help in the wrong places! Change your attitude towards the money God gives you, learn to manage it and manage it well. If you were a business owner and the manager who was managing your business was doing it the way you manage your own money today, would you let your manager have the job tomorrow?

Wait, Withstand and start Winning!

Needs vs. Wants

According to the Merriam-Webster Dictionary, a " want " is defined as having a strong desire for something. The word " need " is defined as lack of the means of subsistence. In every arena of our life, the two concepts are opposing elements (Merriam-Webster Online).

Tanya and I find it very helpful to have a"Need" and a"Want" (or a "Wish") lists in order to stay within the budget and keep our finances in order. Both lists consist of items that are over $200 and do not fit percentage wise in any of the categories in our monthly budget, so we are saving money to purchase such things with time.
This strategy will help you avoid compulsive spending, emotional purchases and out of control petty purchases. We recommend keeping your need list very short and sweet - the most essential things you really need for your family's basic needs. To cross STUFF off our lists we are following two rules;
                                                   
                                              A. BUDGETING and B. SAVING

Need List - Not constant - Things can be added, scratched off, demoted to a "WISH LIST" and moved up in the importance latter.

1. Vacuum cleaner. We have one now, but it broke number of times, old (at least 7 years) and does a very poor job vacuuming. So, we are saving money for Dyson.                                     
2. Bar Stools. We have moved into our house in February, 2012, however we are still in the process of saving money for our Bar Stools so we can eat by the kitchen counter. Meanwhile we are having our meals at the dinner table instead, or at the island standing :), no big deal. Although I should say that Isaac is the only family member who always has a place to sit - in his high chair!                                                                                     
3. Entertainment Center. We wanted to purchase one for a long time. Nevertheless, more important items have always superseded importance and now, since we got rid of the cable - Truly Directing our TV, we are actually reconsidering and thinking of moving this item down to our Want List.                                                                                 

Want List  - is similar to our Needs list, but it is not crucial for us to have these items to have a quality life. The following STUFF can wait until after our Needs List is done with.

1.  Couches. Our current couches have served us well and we intend on keeping them for a long, long time. However we WANT to buy a newer set for our family room and move the set we have into the play room for kids to enjoy.                                                                                     
2. Hardwood floor. Our house was built in 2005 and the previous owner took good care of the floors, however, we would like to some day (my prediction in 7 years or so) to have hardwood floor installed in the house.                                                                                        
3. Pool. I always wished to have a pool in the backyard. I will not even speculate on when this want will be moved on to our "NEED" list. Perhaps we should create a "Dream" list. Keep Dreaming!

As we are saving money, we are also constantly watching the prices and looking for bargains. What are your needs and wants? Don't let your emotions break your wallet and your budget! Budget, Save, Buy at the bargain prices!

Pareto Principle - 80/20 rule

In 1906 Italian economist Pareto, observed that 80% of the country's accumulated wealth was owned by 20% of the people. Later he detected that the same rule applied to other various environments and eventually this principle became Pareto Principle or 80 - 20 Rule. Here are some of the examples where this rule is applied.

• 80% of the profit comes from 20% of your customers
• 80% of the sales comes from 20% of your products
• 80% of the sales made by 20% of the staff
• 20% of the patients use 80% of the health care resources
• 80% of the crime is committed by 20% of the criminals
• 80% of your phone calls are from/to 20% of your contacts
• 80% of the decisions made in the meeting come from 20% of the meeting time
• 80% of the headaches comes from 20% of the employees, etc.

How does this rule applies to fighting debt?

1. Ability to get out of debt is 80% about the attitude and 20% about the hole you are in. Henry Ford once said - If you think  you can, or if you think you can't - you are right. Stop neglecting your debt - it's not going away, Start fighting - don't let your debt paralyze you, Keep fighting - knowing that you will win.
2. Identify and address top 20% of your financial issues and it will fix 80% of your problems. Things will start looking brighter once you know what your major problems are. Create the plan of attack and intensely work on resolving the biggest issues.

 

What makes getting out of debt a real battle?

I think that getting out of debt is hard because:

•         You do not see the benefits of getting out debt. When was the last time you dreamed about not having monthly payments to your lenders? Can you imagine falling asleep and waking up in the house that has no payments? Can you think of any other reasons to go to work besides earning more money to be able to afford your monthly payments? Can you imagine not paying “monthly alimony to your girlfriend whose name is Sallie Mae” or your boyfriend whose name is “Nelnet”? Can you imagine giving money freely to people who ask you for help and support?

•      You have to completely change your lifestyle. We have changed our preferences on the stores we shop at, how often we shop, and taking lunches to work is a must.  It’s like losing weight. You can’t hope to lose weight while consuming 3,000 calories a day. You can’t all of the sudden change your deeply rooted spending habits; it takes effort, desire and perseverance. If before our average moving speed at COSTCO was $300 an hour, now we have a shopping list. If before we would “Shop at will”, now we have a list of “WANTS” and “NEEDS” (I’ll blog about them in the near future).

•       You have to sacrifice a lot of things you love or would love to have. Sacrifices have to be constant and you have to be consistent. Stick to the budget and act like a grown up and not a little kid who is sitting in the shopping cart screaming his head off demanding the candy from his mother who is trying to check out at the registrar; I want it!!!! But I deserve it!!! But I need it!!!  But I can’t live with out it!!! Sell the STUFF you love and dump the cash on your debt. 

•          Everyone else seems to be OK with debt, why should we be abnormal? Since when is what’s normal in society – a norm for your family? Normal – SUCKS! Delay pleasure now! Live like no one else, so you can live and give like no one else in the near future! AAAAAAAAAH I get fired up just by writing and reminding myself about it!

•           It can take a LOOOOOOONG time! Look, the truth is – you did not get into this mess overnight, you are really not going to get out of it overnight either. If you are serious about getting out of debt – you better suit up for a long haul. On average, individuals who attack debt with gazelle intensity become debt free anywhere between 12 and 36 months. For you it might me a shorter or a longer period of time – depending on the depth of the whole, your focus, and passion for freedom.

•           No strategy or poor planning. Set up a plan and don’t be afraid to ask for help! If you tried on your own and failed, seek help from friends, professionals, someone who has gone through this process before, someone who will hold you accountable and be supportive of your decision.

         Don’t let these excuses slow you down! Fight the fight! Win one battle at a time!