5 Dieting Tips That Apply to Debt Management

I've said before that the words "diet" and "budget" are nasty, negative labels that equal Catholic school guilt. But like it or not there are part of our vernacular. Most of us fuss, worry or think about each of these during different times in our lives. The other day it occurred to me that they are actually quite similar. In fact, you can look at almost any diet tip and apply it to budgeting or vice versa. Here are 5 that I quickly came up with:

1. (diet) Take off the weight slowly for long-term success (budget) Controlling debt can be a slow business

Sure some people brag about dropping 20 pounds in 3 days, but we all know that that's not true for most of us. Likewise, if you've accumulated debt you could shrink it by rolling it into a lower interest rate loan, but that's just smoke and mirrors. It's a good move, but don't fool yourself into thinking you've got control of the situation. Lowering your interest rates should always be your goal, but you've still got to work at keeping down the debt.

2. (diet) Exercise is essential for weight loss—(budget) You need to work a little to reduce debt

Just like there is no magic pill that will make you healthy and slim, there is no overnight cure for debt. You'll need to work at lowering your interest rates, consistently paying down the debt and resisting incurring new debt.

3. (diet) Stay focused on being healthy, not on becoming thin—(budget) Stay focused on building wealth, not eliminating debt

Remember to keep your long-term goal in focus. You probably want to be thinner because you want to be more attractive, but being healthier is the ultimate in beauty. And your not trying to just get rid of some debt, your goal is to build enough wealth that will enable you to live as you would like.

4. (diet) Find out why you overeat—(budget) Find out why you overspend.

Some people eat for comfort, some spend for comfort, but your debt accumulation may not be that straight forward. Maybe you've run into medical expenses or some other emergency. What have you learned from this experience? By analyzing your spending you'll see that maybe you need to aim for a larger emergency fund or curb your enthusiasm for the latest techno gizmos.

5. (diet) Weight loss support: join a weight management group—(budget) Don’t be secretive about your debt management goals.

Usually when you are on a diet everyone that you know knows about the diet. It's easier that way. When they see you reaching for the donut they'll stop you. They'll also comment on how great you're looking. Debt management, however, isn't typically the same. We wear our weight out in public, but hide our debt like a dark secret. If you're serious about paying down your debt, come out of the closet. You need the support. Without it you'll find yourself trying to fake it when friends suggest a fancy dinner and a night at the clubs. Friends who know your goals will support you. They'll understand if you only order an appetizer at the restaurant. They'll get if you'd rather go for hike than to the ballgame. And they'll be there to congratulate you when you've hit your milestones.

The common denominator in dieting and budgeting is that you need to make lifestyle changes in order to be successful. So even though I don't like those words there is just no ignoring them.

Overcoming the Budget Blues

Three months ago we set a goal in our family to really stop spending more than we earned and to pay down debt. We set a timeline of 3 months to get it together. We started using a money management software to track our budget and trend our spending. We even showed the teens how to read the software and participate in our goal.





OMG!!! This hasn't been easy. About a month ago I was about to freakin throw in the towel. I'm the frugal one in the house, but after the dog ate my shoes (we'd already spent our clothing allowance for the month) I just about lost it. In fact, I did lose it--I bought shoes. I had to take money out of savings. Does that count as an emergency? It's not like I didn't have other shoes, but come on!





But guess what? We are now at that 3 month goal and we're successful. We paid off one credit card and got our spending under control and have a workable budget. Maintaining discipline is so hard, so here are my tips for keeping it together:

1. State your goal positively.
   Instead of saying “I’ve got to pay off my debt” say “I’m reducing my debt”. With the first statement you're being passive. It sounds like it will never happen. The second statement is active and implies that you are making progress.


2. Make your goal visual.
   Create a chart or that shows your current savings or debt situation and tracks your progress toward nearing your savings or debt payment goal. Do what works best for you. It might a big poster, something you carry in your wallet or a graphic that you turn in to your computer wallpaper. Hey it might even just be the first thing you see every time you log on to your money management software.


3. Don’t become obsessed.
   Don’t look at your money management tool too frequently. Checking daily or several times a day will only lead to frustration. You’ve got to see progress to keep from getting discouraged, but you won’t see progress that quickly.


4. Don’t forget your baby steps.
   Of course big changes make the most difference when you trying to boost your savings or pay down debt, but if you shrug off the small stuff, you’ll be spinning your wheels. So if you’ve vowed to give up the daily Starbucks (as I did) stick with it. I had to keep my underwhelming progress at bay and bypass drowning my frustration in a latte. But now that I've seen my coffee shop spending category dwindle I'm really off the juice.


5. Celebrate!
   Pat yourself on the back, but make sure you don't spend money doing so. I'm not sure how we will celebrate but just being able to show the kids that we've reached our small milestone is so great.


6. Keep setting goals.
   Once you've made it to one goal set another attainable goal.


7. Expect slip ups.
   Over spending is like an addiction. Every addict knows that they could regress at anytime, it's important to recognize this possibility and get back on track if it occurs--don't give up.

NOTE: Money management software is not the same as online banking. In fact if you use online money management software it often links to your online banking. It's helpful to use both since typical online banking cannot offer trending or budgeting as easily. It's also helpful to log on to your online banking daily since this is the best way to track your cash flow and possibly detect fraud.

Vehicle Registration Increase Passes Colorado House

It's been a bumpy road for Colorado Senate Bill 108, a.k.a. FASTER (Funding Advancement for Surface Development and Economic Recovery), but yesterday it passed through the House. With a final reading today it looks like it will get the green light. Besides raising our vehicle registration, what's in it for us?

Supporters say that FASTER could create approximately 8,000 new jobs in road construction and repair by raising about $250 million. That's the estimated amount that would come from increased vehicle registration -- an average of $31/vehicle a year for the first year and $42 in subsequent years. Other funding would come from increased car rental fees. This is in addition to the $500 million Colorado is estimated to receive from as part of the national stimulus package.

So could that mean that we'd create 16,000 new jobs? ($250 million = 8,000, $500 million = 16,000). No one is really certain.

The FASTER bill does address much needed road and bridge repair. We all remember the 2007 Minneapolis bridge collapse. In our state 125 bridges are rated as “poor” or structurally deficient. The bill is written to care for 126 bridges and roads.

FASTER doesn't solve all of our road problems which are estimated at $30 billion, though you might say that something is better than nothing. FASTER does not take on the I-70 issues, but does include a provision to allow local jurisdictions to set up tolls on existing roads.

Without the Bill Colorado funds it's road repair through gasoline taxes. The State’s $0.22/gallon is a flat tax which has not raised since 1992. Vehicle registration increases would be based on weight and divided between bridge and road repair.

Registration increases as proposed in the bill would range as follows:

• The average car (2,000 lbs and under) will pay $13 toward bridge safety and $16 for roads with a total of $29.


• The heaviest vehicles (Greater than 16,000 lbs.) will pay $32 to bridges and $39 for a total of $71.00

To learn more you can visit ColoradoFASTER.

How Financially Limber Are You?

"Oh that was a bad month. The car needed repair."
"That was a tough month. We had to fly to my sister's wedding."
"December was rough this year."
"Last month was unusual. I had to pay that big dentist bill.

How many times have you made excuses for going over budget or living close to the edge? Is there really such a thing as a typical spending month where all you have to do is pay your usual bills, buy a typical amount of groceries, spend an average amount on household items and go out only a minimal amount?

There is no "average month." Something always comes up...the car breaks, the house needs something or you need a getaway. It's not bad when these things come up. And you're not a bad person if you spend a little frivolously.

The dangerous thing is setting your budget so tight that these things are then a big set back. If you find yourself having unusual months more than 4 times a year, you are budgeting too tightly.

Can you look at your spending over the last year? If not you need to start using some service that helps you analyze your spending. In my opinion online banking is the greatest banking service ever, but it's not enough. You can download your transactions into an Excel spreadsheet and setup your own analysis, but what a hassle. Services like Quicken, Mint and Microsoft Money (though I'm not a fan of the latter) are available for free or a nominal fee and let you see your spending trends in just moments.

Those months that you do happen to stay in budget are for preparation for the other months when you don't. I know you've heard of emergency savings. This is the money that will help you out with the little emergencies and keep your budget balanced.

So how much flexibility do you need? Again return to your previous spending trends. How much did those unusual months or little emergencies cost you? Average that out over a year in your current budget. Or if you see that you tend to spend more in one part of the year, tighten your budget in the months prior to prepare.

If you have no idea how much the unusual months cost, then you've just got to pick an amount and add that flexibility into your budget. Maybe start with a $200 cushion. It may not be enough but it will make the blow of unexpected expenses softer. Then watch how this works out for you and adjust the amount if needed.

You'll probably need to find areas in your budget that need trimming to come up with this cushion. It's not as hard as you think. Once you dive in and look at the numbers you'll find ways to cut some fat. For our household small cuts in fast food and coffee shops was enough to plump the cushion. This month we've had an unusual amount of gifts to purchase and a sizeable dental bill, but thanks to the cushion our budget didn't crack at all.

Remember a budget is more of a guideline. The more rigid your budget the more likely it is to break.

Hidden Bills that Suck Your Budget

I was re-reading an article by Karen Datko of Smart Spending entitled The least important bill in which she talks about eliminating bills that really aren't essential. Naturally, they fall into the entertainment category with things like music download services, online video/game rental and the such.




These are the bills you never see. Typically when you set up these types of accounts they require that you give a credit card number or event a direct link to your checking account for billing. And so they are virtually invisible. Worse than credit card spending when you use these services you don't even have to think about how much your spending.



I was checking iTunes the other day to see if there are any thresholds to help impose budgeting. No surprise...there aren't. You can't freeze the account or set a $$ limit/download per month. Blockbuster online does let you suspend the account without cancelling which is nice if you'll be away for an extended time or you want to give your budget a short break without cancelling.

So someone might default on a mortgage or dig a grave of debt by only paying the minimum on credit cards, but still be happily gaming away.

What are the sukkubusses to your budget? Do you ever give them much thought?

photo by Steve Rhodes

How does your budget compare?

This year I'm taking my job as family CFO seriously. And as Suzy Orman says the first step is to be honest. So, honestly, our budget is a mess. In the past my husband and I have sat down and reviewed/revised our budget somewhat regularly, but still we always get off course. As I'm using Mint in conjunction with online banking I'm discovering the reason for our derailment. It's simple--our budget isn't real. It's a well crafted piece of fiction complete with twisting plots and unpredictable characters that have bad habits and a disregard for rules. Well, it's not that bad, but Mint is forcing me to see exactly where we're spending. It will take more than one month to come up with a workable budget as I see our spending trends and assess our real needs.

Meanwhile, I was wondering what an average family budget looks like. So I found an average family budget courtesy of Money-zine.com. Personally I thought it was a bit odd that things like alcohol and tobacco were separate line items. In green are my Mint categories and current slices of our budget that they consume. Some things are categorized differently for example "books" are under "Shopping". Overall our percentages don't look to bad. I think the "Education" on the National Average is a bit low for families. For us this category is completely absorbed by preschool costs, and our preschool is very low in tuition comparatively.

Of course every family's budget will vary from the average. But this table gives you a picture of whether you are completely off kilter in any area.

Free Book Download from Suzy Orman

Suzy Orman's got a new book to motivate your personal money management. It's appropriately titled Suzy Orman's 2009 Action Plan and you can download it for FREE here until January 15th. If you miss this deadline you can order it from Amazon for just $9.99.

Millionaire Mommy Next Door recently shared her notes from Suzy's Oprah appearance promoting the book. She came away with some good action steps that I'll share with my own take on them.

#1 Tell the Truth. Of course you should be truthful to the people that you must share money responsibilities with, but also be truthful with yourself. It's easy to set up a budget that includes your salary minus expenses such as utilities, housing, debts, food, clothes. But do you really pay attention? Or at the end of the month is your budget blown and you wonder where the money went? Are you denying your incidentals in the budget like coffee, dvd rentals, the occasional donut? By ignoring these items you're just making it worse. Work them into the budget and control them.

#2 Pay off the credit card before creating a savings account. High interest debt will kill you and your paltry savings won't be able to do anything about it.

#3 Improve your credit score. Hey, it's January get a new copy of your credit report. Make it your goal to improve your score by the end of the year. A score of 650 is good, but you want to get as close to 850 as you can.

#4 Eliminate Wants. If you've got debt, you have no room for wants. If you have no savings, eliminate wants.

Get the free download today. Hey, it's free it can't hurt.

Have you budgeted for the holidays?

Yes, it's Halloween, but it marks the beginning of your wallet's most frightening event known as "the holidays." There are just 58 days until the big spending season. You've got nothing to fear if you are one of those people that prepares all year long. But for the rest of us, I'll be taking this week to look at ways we can prepare our finances. We'll look at quick ways to set aside some cash and stick to your budget. We'll explore some smarter shopping strategies. You might have noticed that Wednesdays are usually dedicated to small business articles, so we'll take a look at how the holidays affect small biz retailers. I'll give you some ideas for non-traditional gifts that keep giving. And we'll wrap up the week with an appropriate Friday Encore.

Saving up for the HOliDAys

Maybe you might think it's too early to start thinking of Christmas. Or you're nauseated by the appearance of holiday items in the store. I have to ask, "Have you budgeted for the holidays?" Typically the same people who are organized enough to shop early have also budgeted and saved throughout the year. For everyone else this is the ultimate savings challenge.

I just read this article distributed by Kiplinger entitled, "There's Still Time to Save $1,000 for Christmas Shopping". The most unique idea in this article is to Adjust your tax witholding.

The average tax refund last year was about $2,700. If you got a refund, that means you paid Uncle Sam too much money! Keep it for yourself to pad your holiday fund instead. You simply need to change your tax withholding by filing a new W-4 with your employer's human resources department. To find out how many withholdings you should be claiming, try our Easy-To-Use Tax Withholding Calculator. The changes will go into effect on your next paycheck.

The smart thing about this is that by now you've paid your tax dues for the year. Why loan the money to the government? If you eek out 2 months of average witholdings you could put $450 toward your holiday budget. But don't forget to change it back or you'll end up oweing Uncle Sam a bundle the next year.

Other ways to save might sound cliche, but now is a great time to test them out. There are tons of tips on how to be more frugal. Apply just a few and stuff the savings into your holiday budget. Who knows, you may even be able to use these savings tricks in the future and reach your savings/investing goals.

Some other simple ideas:

Skip holiday movies. The movie industry always pumps out their holiday movie fare right about late October. They know that colder nights leave you with less entertainment options. Be creative and you can find plenty of ways to occupy your Friday night and save a bundle.

Split dinner. Eating out doesn't have to reduce your wallet and increase your waisteline. You can enjoy a night out at your favorite restaurant and save money by splitting an entre.

Adjust your daily budget. Gas prices are sliding down for the short-term and chances are that we'll see them rise again. So take the money that you've budgeted for gas and allocate it toward your holiday shopping.

Speaking of the "B" word--Set a holiday budet. Most people overspend for the holidays because they haven't set a budget. So follow these basic steps to keep your spending under control.

1. Review your monthly budget for adjustments to put toward the holidays.
2. Establish a total amount for the season.
3. Make a list of the people you'll be giving to and divide your budget accordingly.
4. If your giving list outweighs your cash flow either cut down your giving list or adjust your spending per person.
5. Avoid borrowing from future earnings by using a credit card. Use your credit card for online purchases and for items that could be insured by the card. Don't use your card to push holiday purchase payments to your 2009 paychecks.
6. Most important-Spend within your means.

Speaking of Budgets

It's October and we're all looking at budgets right now. Businesses typically review their budget and plan for the upcoming year. I'm looking at our family budget, as I do monthly, to see where we can cut back or make other adjustments. Municipalities are also reviewing their annual budgets--you should too.

The budget of the community in which you live should be as important to you as your home budget. It's at this level of government that you really can have a say.

In my town, which isn't Golden or Arvada, but somewhere slightly north, we've got budget issues. And so I can't just sit back and let the trustees spend on some things when we really need other things.

Washington Street improvements are a major line item in the proposed 2009 Golden budget.

photo by Ken Lund

Fortunately every town has a system for informing residents of budget allocation plans. For Golden residents City Council will have public hearings about the 2009 capital budget and 10-year capital improvement plan at their next three business meetings, Oct. 23, Nov. 6 and Nov. 13 before adopting a final plan. The capital budget and 10-year improvement plan are available at City Hall for anyone who would like a copy, and city staff members are available to answer questions about the budget. The budget is also available on the city's Web site at http://cityofgolden.net/News.asp?NewsID=587.

Make it your civic duty to review your town budget. You ought to know how they are spending your tax dollars. If we all took a little more proactive approach to government spending we might just be able to keep this country in check. And if you choose not to at least take a look, you should also choose not to complain.

How the bailout affects you right now

Everyone is anxious to see how the big bailout is going to affect the economy. Meanwhile the stockmarket isn't behaving as we hoped. But most of the aspects of the bailout haven't been put into place just yet--except one. We heard this was going to happen, but the speed at which it was implemented was surprisingly quick for government work. I'm referring to the increased deposit insurance.

Statutory Share Insurance Change: $250,000
The new law became effective on October 3, 2008, and will remain in place through December 31, 2009. The law provides for an increase in the minimum NCUSIF coverage from $100,000 to $250,000 on member share accounts. This includes all account types, such as regular share, share draft, money market, and certificates of deposit. Individual Retirement Account and Keogh account coverage remains at up to $250,000 separate from other types of accounts owned.

It's about time.