The Ten Dollar Question

Donation Jar

Photo Courtesy of Dave Dugdale.

Last week I asked the question”If someone walked up to you and handed you $10 with the stipulation you had to make someone’s life better with it what could you do?”

The inspiration came from Chris Guillebeau who wrote “The $100 Startup” which talks about starting a business for a hundred dollars or less.  I was interested in what people could do with ten dollars to change someone’s life.  Ten bucks seems like a small amount of money to make a big change but I wanted to make people think deeper.

Why think deeper?  Because many people will do for others what they will not do for themselves.  You might go buy a burger from a drive thru for someone who is hungry but would consider that splurging if you did it yourself.  I wanted to make people think about how they could make a difference in someone’s life with $10 so you could maybe see how you could change your own life or circumstances with the same amount of money.

Fortunes have been made on little startup money.  Lives have been changed with a kind word and a helping hand with no money at all.  Take ten dollars and in the next week go and make a difference with it in your life.  Start a business, make a donation, or start that retirement account you have been meaning to get to.  Make a commitment to go out and do something with a ten dollar bill during the next seven days!

What Could You Do With $10?

Ten Dollar Bill

Photo Courtesy of Eli Christman

That is a pretty straightforward question.  If someone walked up to you and handed you $10 with the stipulation you had to make someone’s life better with it what could you do?  What would you do?

 

1,972 Debt Free Miles

Debt Free Miles

Magic Kingdom from the bridge.

Some people wonder what the point of becoming debt free is.  They figure they have owed someone money their entire life so why not keep going?  I’ll tell you that one reason that is important to me is travel.

I greatly enjoy going places with my family.  By getting out of debt we have been able to experience so much in the last few years.  In fact, exactly one year ago today we started our 1,972 mile driving journey!

If there are things you want to do but don’t think you have the money for it then there are a couple things you can do to find the money:

*Do a written budget each month.
*Work on getting out of debt.
*Eliminate eating out until you are debt free.
*Visit sites like Money Saving Mom and Save The Coupons for a list of deals for your shopping trips.

All of this comes down to one thing – FOCUS!  Focus your attention on paying for that trip of a lifetime and take steps to make it happen.  Focus on eliminating your debt.  Focus on your written budget so you know where your money is going so you can get out of debt.

Ready to get started?  You can download this free Guide To Budgeting to help you.

Savings Snowball

snowballIf you have researched paying off debt in any form more than likely you have come across the “Debt Snowball” method of paying off debt.  Many people have talked about it but most notably of those is Dave Ramsey.

Ramsey suggests in order to pay of debts quicker and get a psychological advantage in your process you start with your smallest debt and work up to the highest balance debt until you are debt free.  I was thinking a few weeks ago, why not try this with my savings accounts?  And so I have and thusfar has worked like a charm.

I have several savings accounts which gets money automatically transferred into them on a set interval.  These accounts are my budgeted items – you could call them my electronic envelopes.  They are named for what they are to be used for such as car maintenance, clothing, birthdays, Christmas, etc.  I know how much I want in each of these to consider them “fully funded”.

I make a list of these accounts and how much each one needs in it in order to be maxed out at from the smallest one to the largest one.  Now, the money that is budgeted for is put into these accounts with the most going into the smallest one each pay day.  Once that one is fully funded I move to the next one on the list and put the budgeted amount into that account plus what was budgeted for the first account.  We continue this until all of the accounts are fully funded and then everything that was budgeted for them starts going into my emergency fund.

I find this to be a natural progression if you use the “Baby Steps” as part of your personal finance plan.  It easy to keep up with, you already understand the snowball, and it gives you another set of financial goals whose whole purpose is to keep you from getting back into the debt trap again.

Photo courtesy of Ryan Grimm.

$479 per month please…

Car PaymentDave Ramsey has preached for years to not ever have a car payment.  He explains why all the time but day in and day out people go and sign for a new car payment.  We live in a society where if we can make the payment then it is okay to finance it.  Well, if you want to retire very comfortably then it isn’t okay.

According to a 2007 MSN article the average car payment in the United States is $479.00.  If you carry a car payment from age 18-68 you would spend $287,400.00 in car payments.  The average household income is currently around $40,000.00 meaning you could live over 7 years without having to work and live at a standard that the average American does.  If you were to invest that money you would be a multi-millionaire when factoring in for compound interest.

The Urban Country recently posted an article stating that the average American worker works 2 hours of their day just to make the car payment:

Imagine you could work 500 hours less every year. That works out to be an extra 12.5 weeks of vacation. Alternatively, imagine you got paid for an extra 500 hours of work each year, without having to work those extra 500 hours. That would work out to be an extra $11,000 every year for an average American making $22 per hour.

500 hours a year – or 2 hours each day – is roughly the equivalent to what the average American worker will work in order to pay for their cars (the average is between 1.46 hour/day and 2.90 hours/day depending on which data is used).

Want to get a little more disturbed?  The average car loses 65% of it’s value by the end of the 5th year with Kia and Suzuki brands losing 75% in that time frame according to Wired.

So, before you plunk down a $2,4000 down payment realize you could very well purchase the 5 year old model outright and not have a payment to worry about.

Now is a car payment worth it?

6 Expenses You Should Never Put On A Credit Card

Pay CashThis is an interesting article on six things you should never use a credit card to pay for. It is an interesting read especially if you are one that always puts it on the plastic just because it is slightly more convenient.

A 59.9% APR? Seriously?

Down The ToiletABC News posted an article about First Premier Bank in South Dakota. The bank did a small test where it took around 9000 applications for a credit card that carried an interest rate of 79.9% interest. This is ridiculous that they would offer such a banking product but on the flip side 9000 people sent in an application for it!

After receiving the applications the bank decided to lower the interest rate as this was a test product. While it was a significant drop from a numbers stand point it only went down to 59.9%. The average APR in 2010 was 13.78%.

What is wrong with this? Many people will read the article and see that it is marketed towards people who have bad credit/low credit scores and they keep the credit lines around $300.00. Is this still okay? No, now they are taking advantage of those that can least afford it.

What is wrong with this is many of the people will carry a $300.00 balance and pay the high interest and will continue to be in debt and struggle. There is a reason they have bad credit and this causes these people to stay there because many of them feel they have no other options but to go with something like this.

The second thing wrong with it is their fee structure. This may be worse than the interest rate because if you are getting the card “just for an emergency” then you are paying way to much for something you are not even using. According to the article the card comes with $45.00 fee to open the account, a $30.00 annual fee (which raises $15.00 the second year), and a $6.25 monthly servicing fee. In the first 12 months assuming you do not use the card at all you will still pay $150.00 for the “privilege” of carrying it and then you will pay $120.00 per year thereafter the maintain it.

Banks like this are what keep people in debt. People who have financial troubles or are just starting out and feel like they need to build their credit score and this is the only way to do it end up paying massive amounts of fees and interest. One way to cut down on this is to teach personal finance in high schools to prepare those who will be turning 18 in the coming few years that you do not need to turn to fee-harvester banks and high interest to build your credit.

Now, in all fairness, it is the persons fault for signing up for it as well. Private business has a right to charge what the market will bare and as long as people are buying their products at higher prices they will continue to sell at higher prices. Think of it from a bank perspective: Do you give 10 people $1000.00 credit lines at 15% interest or 5 people $300.00 credit lines with 59% interest?