Know the Fine Print.

Do you know how much you owe on your loan?  How many dollars per month is that interest rate?  What happens if you are late, are there fees?  How much does the interest rate go up?

These are important questions for any loan (student, house, car, credit card).  It is sometimes easy to use the worry about it later mentality.  This is especially true with student loans.  We are so focused on getting into and getting through school, some of us just sign on the line at the financial aid office.  The same thing can happen when buying a house or car.  The sales people are in the business of making it easy for us.  Lending is a huge profit earning industry.  It is a business.  We need to be smart consumers so when that first payment comes in the mail, reality doesn't smack us in the face.

If you are wondering about your loan interest, here is a loan calculator that will explain what 8% means in dollars http://bit.ly/eAmQl1.  After you type in the loan amount, interest rate, and terms, click on the amortization table.  If you follow the total interest column all they way down to the bottom, it will show you the total amount of money you will pay in interest.  Many people are unaware of how much they are actually paying.  Ignorance might make you feel better in the moment, but I think knowing this information will inspire you to skimp on the beer and throw cash on the loan.

Examples:
If you have a $50,000 student loan at 8% and are paying $477 for 15 years you will end up paying $36,000 in interest making the total cost of college $86,000.

If you buy a $150,000 home at 5% and only pay the $800 due every month, at the end of the 30 year mortgage you will have paid almost double for that house $290,000! 

There is a better way.  

·         Don’t Over Commit Yourself

If you are starting out, do not borrow for the biggest house and the nicest car you can afford.  All good things will come in due time.  If you are maxed out now what will happen when you hit a bump in the road?

• Over Pay

If you are currently in a loan, plan to overpay.  Any amount you can throw on top of the minimum will save you in the end.  A $50 per month over payment on the mortgage example will save you almost $20,000 in interest over the life of the loan.  The sooner you can make it disappear, the sooner you can do other things with your money. 

·         Sign up for Financial Peace University

If you are feeling overwhelmed about your financial situation, click here

http://bit.ly/dSDkpT to find a 14-week Dave Ramsey class in your neighborhood.  Learn about how to become debt free while building a support network.  FPU has helped thousands of households, it can help you!

Get on the Same Page.

I have been un/underemployed for five years.  During this time we have moved twice and I have chosen to go back to school.  It has been challenging for us financially.  With challenge comes the opportunity to think outside the box and be creative.  Not only have we stayed afloat in the five years; we also managed to pay off all the credit cards, two car loans and a student loan (one more to go).  Trust me, I’ve had to be creative.

Each January, I set some new goals.  Phase I of my of my 2011 new year’s revolution was to stop using the credit card at the end of the pay period for groceries.  Other people in my house (that will remain nameless) did not see a problem because we always pay it off the following week.  It was a problem for me because every two weeks, we were behind trying to catch up.

So, I ended the debt card usage and reset our grocery budget with our pay cycles.  There was one week of whining.  We had to eat whatever was in the freezer and cupboard (and mine are not very stocked).  However, it was temporary and we got through it.  Yay team!

My plan for phase II included Dave Ramsey’s Financial Peace University classes.  I have enjoyed his articles and radio show for years now.  I was ready get serious.  What I really needed was a partner on board to get serious with.  I went to http://bit.ly/dSDkpT and found a class in our neighborhood, and signed up.  I told my husband (with a mandatory look in my eye) that I really wanted to do this together.  After our first night of class, I wanted to cry.  I was so happy to be there and I had one regret.  I wish we had taken this class before we got married. 

The class consists of an hour of Dave Ramsey http://bit.ly/e9H0rm presenting the material on DVD followed by small group discussion.  Dave is so engaging, funny, and serious.  But most of all he speaks from his heart.  He has been through abundance and loss.  He teaches with compassion and humor.  Dave has counseled many people and he understands us.  He speaks to the “nerd” in the family that likes crunching numbers.  He addresses the “free spirit” that likes to disregard rules.  He has a way of directing these two personalities to get on the same page very quickly. 

We are now finishing week five and we have our annual expense budget, our monthly budget, and our paycheck spent “on paper and on purpose” before it comes in.  We are using cash or automatic payments.  The envelope system is up and running for short-term categories (non-food grocery items, gas).  We have online bank accounts through ING http://bit.ly/hxRYVt to save for non-monthly items (water bill, oil changes, gifts).  And we have meetings when we need to make changes.  

Dave Ramsey’s Financial Peace class is fantastic in so many ways, but the most noticeable was his effortless process of getting us both on the same page.  A true partner is a great gift! 

"Normal is Broke"

How many of us remember asking our parents for a Barbie house, varsity jacket or spring break trip because we wanted what everyone else had.  And their response was, "if everyone else was jumping off a cliff, would you want to do that too?"  That seemed too obvious as a child.  I would stop when I saw the cliff, of course.

But when we look around at the financial world we have created today, a whole bunch of grown ups made decisions, often following the crowd, and have fallen off a cliff they did not see coming. 

There are so many people driving a huge car payment because he is trying to look the get the girl, or signing large mortgages to keep up appearances.  Not to mention the credit card debt because we need a new thingy and cannot say 'no'. 

Being upside down, dodging creditors, or living in the red, is no way to live.  When 45% of credit card holders pay the minimums, 1.5 million bankruptcies were filed last year, and financial problems are the leading cause of divorce; there IS a problem.  These are the outward effects.  Many people suffer from depression, anxiety or are suicidal when there is a perception of their financial picture goes terribly wrong.

I do not take this lightly, nor do I judge.  I have personal familiarity with many of these situations.  And I can say there is always a way out.  There is a lot of information and tools out there.  Learning to budget and practice discipline takes effort.  But when you can take back the power in your life doesn't change make sense? 

Dave Ramsey says, “Normal is broke”
I don't know about you but I don’t want to be NORMAL! 
What would your life be like if there were no budget fires to put out and you had peace?  

I think we should start a revolution. 

Let's pay all our bills
Let's buy things when we have the cash to pay for them
Let's end shelling out extra on interest, late fees, and penalties

Let's take back our power
and reach out for help when we need it.

I am not suggesting we get angry at the institutions.  That is not my purpose here.
I am suggesting we demand change from ourselves!
Radical Change!  and NOW!

Stay tuned…