PocketCoinage

I was never one for carrying a balance on my credit cards.  Everytime the bill came in, I would pay it off immediately.  The problem with me was I had way too many cards; From store brands to your standard Visa and Mastercard.  I had about 6 in total all with different due dates.  This just made my finances more complex.  With the complexity came more stress, “Did I pay that credit card off?” So I decided that enough is enough and I closed out all three store cards about three weeks ago.  Let me tell you, it was very liberating!

Funny Story
Just yesterday I decided to cancel two more credit cards: my Visa and Mastercard.  These by far were the most fun to cancel because of the representatives’ responses.

The first representative at Bank of America told me, “What?  You can’t cancel your card now!  It’s springtime!” That was pretty comical trying to keep me on as a customer.  Being that it’s springtime has nothing to do with closing my credit card, but okay.  The account was closed and we had a nice chat about the weather between Maine (where she was located) and New Jersey.

The next representative at Wells Fargo was very boring. He brought up the fact that my “score with them would be lowered”.  One can only imagine that would be my credit score; I told him that was fine.  Once the account was closed, he told me to “feed the card to my dog” and that it was as good as “feeding him chocolate.” With his monotone voice I could not tell if he was joking or not.  However, you can clearly tell he doesn’t enjoy his job.

Right now I am left with one credit card that I have open for “just in case”.  I do not plan on using it, but there could always be a time between now and when my emergency fund exceeds that credit limit.  I’ll feel more comfortable about getting rid of it once I have my student loan paid off and my emergency fund built up.  Overall, I have not used any credit since December; everything’s been on a cash basis.  It really has kept my spending under control.  When I would charge things with the credit card, I would find that I would purchase more goods.  Which, in return, didn’t give me the leverage needed to pay down my student loan debt as quickly as possible.

More Reasons to Close the Cards
Canceling the cards was not only for personal relief, but to relieve some future financial burdens.  Once I heard about what these big banks are planning, I decided it was for the better to closet down the cards.

According to this WalletBlog.com article, “…Bank of America recently announced plans to apply $59 annual membership fees to about 5% of its credit card customer base.”  The worst of the news came from my grandma.  Bank of America is currently charging her $4 for each check image printed on a statement!  She incurred $12 in fees last month for doing something your normally do with a checking account: writing checks!  This weekend I will be taking her to a local community bank and patronize their business.  At least they still have a soul!

Have you been used by the mega banks?  If so, do you still do business with them?

Back in August, I stumbled upon Dave Ramsey’s material while researching personal finance articles.  I have heard about him before through J.D. Roth’s podcasts and blog on GetRichSlowly.org, but I never really looked into his material.  Let me tell you, I wish I looked into him sooner.

I started listening to his podcasts and I was hooked.  There were real people, with real debt problems, calling into his show to ask for his advice.  So I sat, listened, and learned.  I found out that I was on the right track with my Emergency Fund and paying off my debt.  However, I did not have the mindset to pay it off sooner.  I was on target to get my student loans of $17,000 paid off around 2015 and just accepted it.  Once I started listening to his show, I looked at that date and thought there has to be a better way!

Through his show, I found out that Dave has 7 Baby Steps to getting out of debt and building wealth:

1. Save $1000 for a starter Emergency Fund.
2. Use all available money above and beyond the $1000 Emergency Fund (minus retirement) to pay off debt; starting from the smallest balance and work your way up to the largest.  He calls it the Debt Snowball
3. Once you are debt free (except the house) start on your emergency fund of 3-6 months of expenses; not income.
4. Save 15% of income towards retirement.
5. Save for your children’s college.
6. Pay off your home mortgage.
7. Build wealth like crazy so you can live and give like no one else.

And that is the proven plan for financial fitness.  Doesn’t it seem simple?  That’s the beauty of it; It’s so simple and has common sense!  However, most people have trouble finding the right footing.  If you are committed and follow the plan exactly, you will become successful with money.  Which, oddly enough, makes you become successful in other areas of life (career, fitness, etc.).

You can start off with Baby Step 1 immediately, but there are a few things that will help you jump start your debt snowball:

• Live on less than you make
• Do a monthly written budget
• Cut back on lifestyle

I already live on less than I make, but I was pulled in so many different directions that I felt as if I could not get any traction.  I putting money into my Roth IRA, Emergency Fund, House Fund, and Vacation Fund.  Once I got myself on a written budget, I was able to see where all my money was going and gained a whole lot of control.  I found that I had about $1000 of free money to throw towards my student loan debt.

Through Dave’s advice, I was able to reduce my student loan target date from 2015 to 2011!  As of today, more than half of my loan is paid off and I have between 7 – 9 months left until it’s finished.  If I did not discovered Dave, I’m not sure that I would have been as intense in getting rid of my student loans.  To also keep me accountable, I post my student loan balance on the right side of my blog, the average monthly payment amount to reach my goal, and my target date.

You can find Dave’s one hour free podcast through iTunes and his book, The Total Money Makeover, on my list of recommended readings on the right.

It’s been almost two months since my last posting and I’m sure many of you are wondering where I’ve been.

Well, I’ve been killing my student loan debt.  Just this past week I paid off one of my loans and have two more to go.  If you look in the right-hand column of my blog, you will see my countdown.  The $700 is what I calculated the average monthly payment to be.  However, in the last two months alone, I’ve been putting my payments into overdrive.

I’ve been sacrificing by cutting back my lifestyle, selling things, and budgeting to become debt free sooner.  Guess what?  It’s working! I can see the light at the end of the tunnel.  In the past three months alone I was able to allocate almost $4,000 towards my loans!  The feeling is incredible.  Before I got fired up, I was on course to pay them all off in 4.5 years.  I never thought I would pay my student loans off in a year or less.  Now I’m on target for Summer/Fall of 2011!

The key is staying motivated, having a plan, and staying focused on one goal; not a few.  I think that was my main problem.  Now with the one goal in the crosshairs, I can take it on!