The 46th President of the Unites States was sworn in yesterday, and President Joe Biden is not wasting any time in getting relief to Americans. One of the flurry of executive orders that have been signed into law is another welcome extension to the federal student loan payment and interest freeze. This means that no payments are required and no interest will accrue on federally-backed student loans until September 30th, 2021.
If you are a student loan holder, this is obviously excellent news. I realize there is a large spectrum of borrowers out there. For some, you may be trying to just scrape by, even with the current deferment on these loans. Or perhaps you’ve been fortunate to keep your job and the loans are one less bill you have to pay, freeing up some of your cash flow each month. Because of the nature of different financial situations, I thought I would offer up a few suggestions that may be of help.
Emergency Savings – If you don’t have something saved up already, this would be a great opportunity to do so. A savings account is a good place to put away this money for a rainy day. If you were ready to start making monthly payments again at the end of January here, and now don’t have to, consider putting part (or all!) of that payment into an account and do that for a few months and watch the savings grow. We are still living in some pretty unprecedented times, and no one can claim to know what the future will hold. Having up to 3-6 months of financial cushion to cover your expenses in the event of a lost job is a great idea.
Hold off on paying the last $10,000 – There is still a lot of talk of talk floating around about some outright student loan forgiveness. While I doubt that ALL loans or $50,000 per borrower will be forgiven, I do think this $10,000 worth of forgiveness per borrower could be a possibility. This doesn’t mean going and spending the money that you would otherwise use to pay off the “last” $10,000 of your loans, but I would probably hold off until closer to September to do so. If you have $30,000 in loans, for example, paying off the first $20,000 would be a pretty safe bet at this point. If you get down to $10,000 left, just throw the money you would be using to make payments into a savings account in case forgiveness doesn’t end up happening.
Pay off high-interest debt (or debt with any interest for that matter) – Right now, these federal loans are costing you nothing. Take advantage of that! If you have a car loan, consider paying that down. If you have credit card debt, vanquish it to the far reaches of the universe. If you have any sort of outstanding debt, get rid of it. The no payments/no interest situation with federal loans is the perfect recipe for making serious progress on any other debt you might have.
Keep making payments on your loans – While continuing to make steady payments on your loans while they are frozen is not a sexy idea, it is prudent. We don’t know what tomorrow will bring. But being a step or two closer to being totally debt free will definitely not hurt you, and I’d be surprised if you ever regretted it! As we’ve already covered, 100% of any payment you make right now is going straight to principle. Payments during this time can shave weeks, months, and even years off of your payoff timeline. If you can do it, strongly consider what it could do for your future self.
In closing today, I would like to remind you as my valued reader that financial responsibility is our responsibility. It is not the job of your employer, your city or state, or the national government. Stimulus checks and loan forbearance are nice, but at the end of the day, your fiscal fitness is up to you. You can do this!
I’ve always had a lot of curiosity about gig type jobs. When we lived in Oregon and I was looking for a full-time job after our move there, I drove for both Uber and Lyft. Later on, once I had a full-time IT job, I also drove pizzas around for Pizza Hut. That actually ended up being a pretty good gig. Despite the long hours into the evening (I usually worked ~5:30PM to close which was a little after 11PM), the money was decent. With tips I could walk away consistently making $20/hr. This was helped by the ridiculously high minimum wage in the Portland area, which was $12/hr.
Right now, I’ve got my solid IT job working in Hamilton full-time, and that job has been great. But I was curious about DoorDash as it has risen to the top and currently dominates the food delivery apps in the US. Why not drive for the company that is delivering the most food?
The sign up process was simple, here are the steps directly on DoorDash’s site:
Not very complicated to get started. Once you’ve cleared the background check and gotten your Red Card and DoorDash bag(s), you are ready to go. Here are a few things that I’ve learned in that process. As a note, I hate reviews that don’t give cold, hard facts about the actual income potential of gig apps like this. “Make up to $30/hr.!!!” “Be your own boss!!!” “Make your own schedule!” Sure these things all sound enticing. I did the hard work for you here and I’ll give you some very real numbers to consider.
I have driven DoorDash for nine weeks, on and off. With DoorDash, you have two options to drive: you can schedule “shifts” within the app, and then go online when your shift starts. For instance, last night I snagged a 5PM-9PM shift, and it was a good time to be out there since folks are hungry and ordering dinner. The other other option is to “Dash Now” which basically allows you to go online on demand. However, you can only do this if there are not already too many Dashers out and about. You will only be able to go online on demand if there is higher demand for delivery than the number of drivers currently on the road. During busy meal times, I have usually been able to go online at will. I believe that pre-scheduled drivers get order priority over those that Dash Now. So if you want the best case scenario for getting orders, schedule your Dash ahead of time.
During these nine weeks, here are my cold, hard, fast, and honest numbers:
Total Deliveries: 132
Total Hours Worked: 60.15
Total DoorDash Pay: $535.75
Total Tips: $515.59
Total Income: $1,051.34
Average Total Hourly Income: $17.48
Okay, a few things to unpack here. First, let’s just get to the number you care about. With tips, I have been able to make almost $17.50 an hour. That’s fine. Not life changing, but it is better than a kick in the pants. And it’s less than what the gig apps will promise that you can make working for them.
Secondly, you’ll notice that a TON of the income relies on people’s generosity (read: mercy) by offering tips. 51% of my income has been from the base pay, while 49% has been from tips alone. Crazy. If you don’t consider tips, I am in the range of Montana minimum wage ($8.75 starting Jan. 1st) at $8.91 an hour. Not great. The point is, if you don’t get decent tips, this is a crappy gig. Another side note here: if you order from these food delivery apps, try not to be cheap. The person delivering your food is not getting rich doing what they are doing. And a good tip goes a long way in making a driver’s night.
Things I Like – There are a lot of things I like about driving for DoorDash. I don’t have to do it if I don’t want to, and I can if I do. When you work a regular second job, you have shifts and expectations. With a gig job, you do it when you want. This flexibility is actually quite nice. I don’t have to haul people around in my car. This is my introvert side coming out. Driving for Uber or Lyft is filled with making small talk with strangers, trying to play the right music in your car, blah blah blah. I don’t have to impress the food I am delivering, it doesn’t judge.
Getting direct deposit payment once a week is nice to. Every Tuesday morning after I work, even a little bit the week before, I’ve got some extra cash in my account. Nice!
The DoorDash app is actually really well done. It is easy to use, makes finding restaurants and delivery spots pretty easy, and generally just does what it is supposed to do pretty well.
Being able to know how much you are going to make before you take a delivery is nice, too. If an order comes in for a 10 mile drive for $3, I’m not doing it. $6 for a mile drive? Sure, why not. You have some autonomy in which orders you decide to take.
Things I Do Not Like – While I have been fortunate to get tips at a good, consistent rate, it stinks that you have to rely on people’s generosity to make this a gig worth your time. It would be nice if the base pay was higher, making tips what they should be, which is icing on the cake. Tip culture… ughh I could write about how messed up it is in our country but I will refrain for the time being.
Finding houses and apartments at night can be a real hassle. The orders to well-lit, well-labeled neighborhoods usually go smoothly. But rolling into a maze of huge apartment buildings that all look the same and don’t have street addresses on them… don’t even get me started. Frustrating and a big waste of time.
This is neither a positive or negative, but hustling helps your bottom line. If you take your time going into a restaurant, driving, or finding the door to deliver to, you are wasting your own time and money. Having pep in your step improves your bottom line since you get to the next order faster. More orders = more base pay + more tips = more money.
You are at the mercy of restaurants being efficient and ready with your order. Most are great. I run in, the order is sitting there waiting for me, and I’m on my way. The not so good ones, I show up and have to wait 10 minutes for it to finish, or there is a long line at the drive through window I have to wait in. You don’t get paid for this wasted time. The faster you move, the better.
Some Basic Tips – Use a phone holder. I have one mounted to my car’s windshield, and it is perfect. Having your phone/maps app at road level is both convenient and much safer than holding your phone while you drive. This is actually against the law almost everywhere, so just go ahead and get a phone mount.
Having a phone charger is another must. There is nothing more stressful than having good success with orders and then your phone starts indicating low battery! Keep yourself charged too. Bring some snacks or even a small meal if you are going to be out ad about for a longer shift. Bring a water bottle too, it’s important to stay hydrated.
You will also want to hone your judgement in accepting the “right” orders. As I said earlier, you can get some pretty ridiculously cheap payouts for super long deliveries. Don’t take them! Decline them and wait for a better one to come in, they usually do. It’s also good to take into consideration the restaurant you are picking up for. Some do a good job of having orders ready for gig workers to pick up, but others drag their feet or consistently have long drive through lines. The worst! The only way to know these things is to practice by doing. You’ll soon find a good balance of which orders are worth your time and effort.
Other Considerations – The vehicle you use to drive for food delivery is important, in my opinion. We have three cars right now (trying to get rid of one soon). I only ever drive the ’94 Honda Accord (probably worth about $2,000) or our ’08 Toyota Prius (probably about $5,000). You do not want to put a lot of miles on a newer, more expensive vehicle. With the miles you put on and the inevitable potholes you hit, you are draining the resale value of your car. If you drive an older car, like the Honda, for example, most of the depreciation on it has already occurred. I bought it for $2,200 with 174,000 miles I think. It’s got 182,000 on it now. I could drive it to 200,000 and still sell it for around $2k. If you drove a nice $20,000 car around and put a lot of miles on it, you won’t be able to sell it for even close to that. In the Ovenell family, we call low priced cars that won’t lose much value cars that are in the “compression zone”. Thanks Dad and Grandpa for that one…
Don’t forget your other expenses of driving around. Besided the depreciation, you will go through tires faster, you will have to perform repairs more often, and will need to change your oil more frequently. You don’t want to neglect vehicle maintenance since the car is your main money making tool doing this. When you subtract out that maintenance and gas for driving around, that $17.50 an hour shrinks considerably. Something to consider.
I haven’t done this, but you may want to track your mileage with an app like Everlance. When tax time comes around, you can write off the mileage you’ve driven for the gig apps. This can help you reduce your taxable income at the end of the year, which will in turn lower your tax bill.
Best Application of Gig Jobs – A job like this has its place. I would not do it full time. You are going to drive your car into the ground, making just okay money in the process. In my opinion, you are better off trying to find a lower-end job doing something that doesn’t involve driving your personal car around. If you do go for a near minimum wage job, try to get one that involves receiving tips. In my example, you can see that tips can change the game.
For me, driving for DoorDash allows me to drive which I love, puts a couple bucks in my pocket, and lets us send an extra payment toward debt every now and again. I don’t rely on it for reliable or must-have income, and I don’t think it should be used as such.
If you are trying to make progress on paying off credit cards or student loans, heck, I’d say go for it! It can be a good financial shot in the arm, and can give you an extra edge if you don’t have overtime or other ways to make more money at your main job.
Perhaps I am the only one, but I am hoping I am not. I have no motivation. None.
I’ve let two to three days pass sometimes in between taking a shower (eww!), spend a lot of time moping around the house, and generally it seems I am unable to do anything that resembles productivity.
I am over this virus. We’ve had to stay home on and off for almost a month now due to exposure at work and within our families. We’ve each had a couple of tests each, always negative. But man, this thing has really run its course. I am sick and tired of it.
I’ve been uninspired with work, underperforming and not being my usual go-getter self. I don’t know what it is, but I struggle to get myself to do much of anything constructive.
Our finances have been equally lethargic. We are making some progress, but not at a very impressive rate. Christmas time brings with it some added expenses, which is always to be expected. I am hoping that the spring and summer will prove more fruitful in 2021. I have a goal of having our student loan and consumer debt paid off by my 30th birthday in June (holy smokes I am getting old), but this seems unlikely at this point.
I would be surprised if student loan debt forbearance didn’t get extended past its current end date of January 31st. Until the new vaccines are able to take hold in a good part of the population, I think ongoing relief in that regard will be necessary. COVID has continued to take bites out of Jos’ income, which I know has been frustrating for her. We are very fortunate though, I know, and for that I need to be thankful.
We have been in our house for 11 months now. While it seemed too soon to do so, I have been keeping an eye on refinance rates, and despite our 3.625% fixed rate on a 30 year being pretty darn good (especially historically), I have continued to see even lower rates, and the temptation was too great. Right now we have a 2.625% fixed on a 30 year locked in, and we are working on getting all our paperwork submitted for that. I am hoping to have that process complete by the end of December. At that point, I will do a write up and review of the company I chose to do the refinance. I think that will be a helpful article when the time comes.
This has been an exceedingly challenging season for many here in 2020, I know. Between transitioning jobs, losing my Dad to leukemia, dealing with the challenges of social isolation due to COVID, and a host of other hurdles and bumps along the way, I will not be sad to see this year close. Despite my not posting hardly at all for the past few months, I appreciate those of you who have continued to check in and read, I see that and appreciate it. Seeing that folks are checking in was my only motivation for making this post in the first place today.
Hang in there, folks. Although I don’t know when, I do know things will improve.
For years and years, I have been what is called “net negative” financially. Basically, I owe more than I own.
Sometimes you may here about people talking about “net worth”. This may sound like a complicated concept, but it really is a simple principle. Your net worth is a simple equation of all of your assets – everything you own – minus all of your liabilities – everything you owe.
With student loans and credit card debt, I have been in the net negative since I was about 18 years old. As soon as I took out that first college loan, the total amount that I owed in life surpassed all of what I owned. It has been that way for a decade. Until just recently.
I tend to push myself pretty hard, and I rarely allow myself to enjoy a good victory when they do come along in life. Instead I often keep my head down and try to keep pushing toward the next goal or challenge. But, I need to be better about this! So today I am going to celebrate that Jos and I are finally net positive for the first time just recently.
A few things definitely helped us get to net positive. We were fortunate in buying our house when we did in late December/early January this year. As a result of the house continuing to go up in value, that has added some equity that counts towards this net positive.
We have also cut loose some of the things that were dragging us down. We were able to pay off most of the credit card deb that we had accumulated during the first few months of being in the new house. I finally unloaded the electric car that I had. We are now once again both driving used, paid-for cars which helps a lot. The only debt left is the mortgage and student loans.
Today, we celebrate being net positive and we look forward to continuing to make smarter decisions financially. As I’ve continued to write this blog, it really has been a case of truly Figuring Out Finances. It is a work in progress. We are learning. We will still make mistakes. And we will have other victories to celebrate. The important thing is that we strive to be good stewards (or managers) of the resources that God has entrusted us with. May that always be the core of what we do and the core of this blog.
As a final note, I have had a couple of friends and readers reach out to me with questions or stories from their own financial journey. I will say again that I LOVE to talk finances and would love to hear from you, whether is a question for me, or a tip you have learned along the way that might be beneficial to me or other readers. Have a blessed day!
If you have Federal student loans, you’ve been enjoying the temporary 0% interest and the option to not make payments at least until the end of September. Due to a controversial mandate from President Trump, there is a good chance that those benefits will be further extended through the end of 2020. This would be great news for those of us carrying Federal student loan debt.
The temptation during this time is to forgo making the payments you’d typically have to make and instead use it for something else. For us, we did hit the pause button on making loan payments for a few months. We took that time and extra cash to pay off our 0% interest credit card that our new house purchases landed on. Thankfully all our credit cards are paid in full now, and I also just sold the Chevy Spark EV this past week. That leaves us looking at our solitary consumer debt: the grad student loans.
Now that our other debts are out of the way, it would be easy to skate along and not worry about the student loans until 2021. But there are serious advantages to taking them seriously here in the last third of 2020.
Interest is the biggest thing to pay attention to. I will use our current, real numbers to paint this picture. Here are the terms for our outstanding loan debt:
Loan 1: $20,971.88 @ 5.75%
Loan 2: $8,361.93 @ 6.75%
Loan 3: $21,631.93 @ 6.35%
Under normal circumstances, this amounts to us owing $262.00 in interest alone each month. It is a significant chunk of change, and it is nice to not have to pay that now. But we can better our situation in a significant way if we continue to take action with interest paused.
If we made a $500 payment towards loans with interest, only about 47% (or $238) would go toward paying down principle, or the actual money we owe. The other $262 would get eaten up by that nasty interest. Not a good deal.
Without interest in play right now, however, your payment dollars go MUCH farther now than they usually do. A $500 payment right now goes all to principle. It lowers the total amount you owe by that full $500, not the smaller $238 if interest was involved. Making payments now can significantly lower your principle, skirting interest payments for the next few months. This is a huge advantage!
With things being relatively uncertain economically and with job security on the rocks, I will note here that keeping some kind of emergency fund in place right now is as important now as it ever has been. If you can save up at least a month’s worth of expenses (3-6 months’ worth would be ideal), you will be in a more secure position to make moves like these all-principle payments we’ve been discussing. Losing a job or having income cut right now are real threats, so it is important to make sure you have good financial footing before continuing to make progress on debt repayment.
If you have questions about your specific situation and would like a second opinion or just some friendly, free advice, drop me a line through the Contact Me page. Stay safe, my friends!
When I started this blog, I was pretty on fire to cast debt to the side and move on with life. Jos and I lived a modest life during our two years in Oregon, and with our more frugal lifestyle and my solid job (as well as some pizza delivery on the side, you’ll recall), the debt seemed to melt off pretty quick.
Life happens though, as they say, and late last year we made a few steps financially – some forward, and some backward. We saved a down payment for our house and put 5% down to get into it. We are seven months into home ownership and we couldn’t be happier. That said, the whole process ended up being much more expensive than we had anticipated. Our down payment wiped us out financially, so the things we “needed” to get for the new house ended up on a 0% intro APR credit card. Our credit card debt had been zero going into buying the home – but in just a few short months at the beginning of 2020 we were back to over $8,000 in credit card debt. Ouch!
Well, we were finally able to get in front of that debt and get it paid off without accruing any interest on any of it. I’d call that a win, except for the fact that I had sworn off credit cards long before that, and there we were using them again. But I never claim to be an expert on this blog. My writing will hopefully always document the mistakes alongside the wins. The other thing that set us back for the past year was a dumb mistake that was all my own, and that was buying my first electric car, the 2016 Chevrolet Spark EV.
The Spark was a mixed bag for us. It was incredibly economical when we drove it, not using a drop of gas. We loved how it didn’t need oil changes or any other maintenance other than tires and windshield washer fluid. It was quick and fun to drive, very nimble. It basically was a trial run, in my mind, for us to eventually get a long rang electric car. I felt I needed to convince Jos that having an electric car was a good idea before we put a bunch of money towards one.
We had the car for a year. Here are some stats about it for you numbers folks:
Purchase Price: $8,800 + $450 in dealer fees
Terms: $9,250 borrowed for 60 months @ 4.49%
Monthly Payment: $174/month + $80/month for insurance
Miles driven: ~5,000 in one year
Sell Price: $7,000
I had a heck of a time selling the Spark. Electric cars are already not popular here in Montana, and short-range electrics even less so. And for good reason. I found out quickly that the Spark’s strengths were short drives around time for groceries and social outings downtown. It was great for that, but trips outside of town were not possible due to the limited range and lack of charging stations in our geographic area. As you can see, we didn’t put nearly enough miles on the car to justify the cost.
I posted the car for sale on May 2nd, and just closed the deal on it yesterday. It took three months to sell the car, which is pretty rough!
I had some interest and low-ball offers on the car over that time, but nothing that I was interested in parting with the car for. I looked into either trading in or selling the car to Carvana for $7,800, but I quickly learned that I would need to trailer the car myself down to Denver, CO, which is a 13 hour drive for me. Hardly worth it with needing to rent a car trailer and the gas, not to mention all the time, and likely expenses like lodging and food along the way.
I did some more research and found Vroom, another online car dealer that buys used cars. I found that they DO pickup used cars, which was a huge plus. I plugged in my numbers for the car and it spit back an offer of $6,000. I was disappointed with the lower offer, and once again was not willing to part with the car for that.
Much to my surprise, a few days later, I got a follow up email from Vroom saying that my appraisal value had gone up! The new offer was $7,000. This I could do. I sat down and collected all the documentation needed, and filled out some information online to get the sale process rolling. They were very responsive and the process has been easy so far. My paperwork is submitted, and I made a $595 payment to cover the remaining balance of my car loan in addition to the $7,000 sale price. All in all, a very good experience so far, and awesome that they will schedule and pickup the car here at my house.
I am glad to be done with that car experience. I learned a lot. Having a car loan is stressful: making payments, budgeting for it, having to pay higher insurance rates on a newer vehicle. It didn’t help our debt pay down progress, and in fact it really hindered it in significant ways. If we hadn’t gotten the car, we could have used the nearly $255 per month in car payment money and insurance to go towards the student loans. But I am a sucker for cars, and I justified it. I am hoping I will be able to be content at least for the next year so we can finish paying off these remaining student loans.
I must say that I feel a bit foolish writing posts like this. But I didn’t set out to be an expert, just to learn by doing, and analyzing my mistakes along the way. I am looking forward to having a more lean budget again, and making progress toward becoming debt free except for our mortgage.
Finances are fun, and they are important. But there are times when life throws you a curve ball, and adjustments must be made.
Our curve ball came in February when my Dad began to not feel well. Something was off, and he spent the next weeks and months trying to get a handle on why he was having low energy, nausea, and other difficult symtoms. There is a lot to the story, but I am not sure I want to get into detail about it here. It will suffice to say that in mid-May, we were finally given a diagnosis for Dad’s condition, and a timeline as well: 2 – 4 months.
This came as a total shock.
I am certainly in the middle of actively processing this brutal news. On the positive side of things: my work has been extremely gracious and flexible, allowing me to spend time with Dad while working remotely from his place. My immediate family has been able to spend a lot of time with him, doing many of the things that he loves. Spending time with him is a huge gift, and I do my best to not take the time for granted. Most days, he is in high spirits and generally pain free which I am so grateful for.
If you as a reader think of it, please pray for my Dad. For strength, peace, and a miracle, as I do believe that God still works through miracles. Thanks for your patience as the blog takes a pause during this challenging and heartbreaking time.
I try to go on regular walks during the week. Today as I walked out the door and down the street, it was quiet. Really quiet. Hardly anyone driving the streets of our neighborhood, and during the course of my 45-minute walk, I only saw a couple of people. The one person I encountered walking towards me on the same sidewalk deliberately avoided me (for good reason) and stepped off the sidewalk to pass farther from me in the street. The sky matched the mood, threatening rain with dark streaks streaming from the sky on the horizon. The feeling was nearly apocalyptic.
This pandemic seemed so far away for many of us when it was first reported. Every day, it seemed to grow more and more ominous, reaching closer and closer to home. Some parts of our country started to practice social distancing, then restaurants and bars started to close to serving the general public. Before we knew it, only “essential” business was allowed. As the giant gears of our economy and society seemed to grind to a seeming halt, all of a sudden there became a new fear of not enough work, and with it, not enough money to get by. The stock market tumbled and erased all the impressive gains our current president has seen during his time in office. Unemployment applications skyrocket each day, with more than two million claims made just this past week. There is a staggering amount of fear in the news, in our homes, and in our minds. These are unprecedented times. Is there any hope?
I’ll just start off and say that yes, there is hope. As my walk continued, the clouds above the mountains broke slowly and exposed the previously-hidden sun. The warmth on my face reminded me that the world continues to turn, and life does go on, even when it seems that it may all be falling apart. Now, I don’t want to discredit anyone that is going through a particularly rough patch right now. I know there are some extremely challenging situations facing people out there. But you already know all these things simply by turning on the news. I think a different tone and take on things can be helpful.
In the very near future, relief is coming in the form of $1,200 checks for many Americans facing an immediate need. Soon, many businesses should have access to various forms of relief via low/no-interest loans and other financial supports to help float them in these tumultuous times. Mortgage payments are being deferred or suspended in some cases and in some parts of the country. Most notably for this blog, student loan interest AND payments are paused until the end of September.
All of that said, there can still be a lot of panic about what can be done before that relief arrives. While some things may be out of your hands, there are a number of things that are still in your sphere of control. Here are a few things I would suggest:
Keep cash in hand. Not literally, but try to stay as cash-rich as you can.
Hold off on paying your student loans for now (double-check with your loan company before doing this). If your loans are federal, they are not accruing interest right now, and payments aren’t expected until the end of September.
Avoid at all costs any unnecessary expenses if you are short on cash. Review your recent bank statements, and cut out any “extra” expenses that you typically incur. If you are short on cash, one of the best things you can do right now is to minimize expenses.
If your work has laid you off or your hours have been significantly impacted, file for unemployment. Our country has these systems in place for you as a tax-payer to leverage when there is a need.
Avoid taking on debt if you can, especially on credit cards. It is tempting to swipe a credit card in these trying times, but take a step back and evaluate if your purchase is truly necessary. If you are honest about it, you might find it is not a necessity.
If you own a house and are truly in a pinch, check with your lender to see if your mortgage payments can be lessened, postponed, or if something else can be worked out. REACH OUT TO THEM before you become delinquent on payments (this is true for any debt you have). If you are a renter, reach out to your landlord and try to reach an agreement. In all likelihood, they will be reasonable about payments.
Take a deep breath. This too shall pass. It really will. While we don’t have a solid timeline yet, we do know this won’t last forever.
This pandemic is causing a lot of mayhem, but it is also a gift that we may not see if we don’t recognize its disguise. Time at home may give you the opportunity to reconnect with your spouse, your kids, or your pets. If you haven’t talked to a loved one or a friend in a while, now is a great time. Chances are, they have a whole lot of nothing going on right now, just like you!
While it may be difficult to see the light at the end of the tunnel, I would encourage you to take advantage of the gift that is today. Try to lead a balanced life when possible, eating as well as you can, exercising when you can, and turning off the news. If you are a person of faith like me, take this time to pray that these difficult days would soon pass us by.
If you or a loved one have specific questions about your specific situation, feel free to drop me a line at firstname.lastname@example.org. I am not a financial expert, but I would be happy to verbally work through your situation with you. Sometimes it’s just nice to have someone to listen.
Above all, stay well, stay healthy, stay six feet apart. 🙂
Ready for a way to get free money today? This isn’t a scam! It’s just being smart with your money.
Have you set up a retirement 401k or IRA with your work already? If you haven’t, this would be the first step. You can typically reach out to your HR department to get started with this. If you have done that already, well done, you are headed in the right direction. It is usually very easy to enroll in your company-sponsored retirement account, and I can’t stress to you how important it is to take this step. The magic of compounding interest over the course of your working career is crazy!
The way to get free money, legitimately, from your employer is to take advantage of the company match (if it is offered). My most recent job included a 100% company match up to 4% of what I contributed. This means that if I made $50,000 a year (this is just for an example), and I contributed 4% of my annual paycheck, which would be $2,000 that I would contribute to my retirement each year. With that match though, my company would throw in an additional $2,000 to match the $2,000 I had put down. Without hardly lifting a finger, my retirement savings have already doubled! That is free money if have ever heard of it!
One of the tough things about getting out of debt is knowing when and where to cut back or contribute to your savings, spending, retirement contributions, and other financial goals you may have. Unless you are completely strapped for cash on a paycheck to paycheck basis, the minimum you should be contributing to your retirement account at work is whatever it takes to max out your company’s match. If they match 4%, I’d recommend contributing at least 4%. If they match 8%, first pinch yourself because that is a great deal, and then contribute at least 8% yourself.
While it is easy to think that you will be able to save more tomorrow, there really is no time like the present. Here is a quick example of what your retirement account would hold if you put in $1,000 at the age of 25, 35, and 45, and retired at 65. This is assuming you made no other contributions, and earned a conservative 8% on your investments:
Age 45 – 65 (20 years): $4,926
Age 35 – 65 (30 years): $10,935
Age 25 – 65 (40 years): $24,273
Pretty crazy how much the age you start at has such a huge bearing on how much your money can grow. Sure, you may have more disposable income as you get older and further along into your career, but without compound interest working as hard in your favor, catching up is extremely difficult, and sometimes impossible to do.
If your company offers a match of any sort on your retirement account contributions, take it seriously and think about how much your future self will thank you!
As I have noted previously in other posts, I use a handful of online tools and apps on my phone and computer to keep a pulse on our finances.
One of the most important things for us in making progress in our financial journey has been having a clear picture of the money that we owe. As the saying goes, the first step in recovering is admitting that you have a problem. This is true with debt as well. And one of the best tools to track that “problem” that I have come across is called Undebt.it.
The concept is pretty simple. You manually add each account that you owe money on – the total balance, interest rate, due date each month, the monthly payment, and other information if you’d like to add it. You go through and add each account separately, whether it is student loans, credit cards, personal loans, medical debt, whatever it may be. While this can seem overwhelming, this is an awesome way to come to terms with all that you owe. Once you know what you owe, it’s much easier to come up with an effective gameplan to get moving in the right direction financially. For the sake of transparency and for an example, here is what my main dashboard currently looks like. The Quicksilver credit card has an introductory 0% interest rate, and we are going to pay it off in the next couple of months, so not to be too alarmed.
Once all of the information is entered for each of your debt-related accounts, you can begin to get an idea of how to best attack each of the accounts to effectively and efficiently pay each of them off. That’s where the usefulness of this tool really begins to shine. Under the Payoff Plan section, you’ll find the Debt Snowball table.
I’ll quickly review two of the most popular methods for paying off debt: the Debt Snowball and the Debt Avalance. The Avalance method is the logical way to pay off debt. You start by making the largest payment on the debt with the highest interest rate and work your way down the list, paying off the highest interest debt to the lowest interest debt, until all of the debts are paid. This method will typically guarantee that the least amount of interest is paid over the lifetime of your loans. The second method, the Snowball, is slightly less logical, but more psychological. With this method, the smallest debt is attacked first, followed by the next largest, and so on. We’ve been using the Snowball method ourselves as it has proved to be an excellent motivator to stay the course as the smaller accounts have “dried up” and gone away as we have successfully paid them off. It’s how I was able to extinguish all of my undergrad debt, paid off our initial credit card debt after getting married. We still are running with this strategy today.
The real fun comes in with Undebt.it when you start to calculate what you can pay on your debt each month. To be able to know what you will be able to put toward your debt each month, an existing budget is necessary. With the zero-based budget, you’d basically add up your total income, subtract all of your monthly expenses and spending categories and then whatever is leftover would be part of your debt snowball. In this screenshot, you’ll see what the first few months of paydown would look like for us if we were sending $2,000 per month toward debt:
If we did this $2,000 per month toward debt between the two of us, all of our debt would be gone in 39 months, or 3 years and 3 months from now.
Perhaps we were only able to send $1,500 per month toward that debt instead. This would balloon the payoff timeline to 4 years and 5 months. Much less appealing.
Now say we were able to really ratchet down our spending and send an outrageous amount of money to our debts, say $3,500 per month. That would shrink down the pay-off timeline down to only 1 year and 9 months. Pretty crazy swings in the amount saved in interest and the time it would take to pay everything off. Even making an extra $50 or $100 payment each month on debt can make a pretty large impact on the amount of money you save and the amount of time you take to pay it all off.
For me, this “hypothetical situation” tool is awesome in keeping me motivated. Every dollar that can be freed to help fight debt is a small win that multiplies.
You can see here that there are two very basic truths that arise with this payoff process. Decreased expenses are extremely valuable, and so is increasing income. Side hustles, getting a raise, a promotion, a bonus, or any other influx of income can make a huge difference in making this process a better experience. Got a tax return in your near future? You can use the Additional Payments section of this site to visualize what kind of progress this would help you make if you sent some or all of this amount toward your debt instead of potentially spending it elsewhere.
Tools like this can be daunting and sobering, pushing you to stare your true financial situation square in the face. But this can also be a huge opportunity to realistically evaluate your situation, construct a gameplan, and start to execute it.
Perhaps this is a tool that you would like to use, but don’t know where to begin. I would be happy to get you going in the right direction with a free tutorial and quick test drive of the website. I think it is that valuable! You can reach me at email@example.com.
I will also mention that the creator of this website offers a premium Undebt.it+ version and subscription to their site. I think it is great to support other people’s work, and this is a great way to show appreciation for this innovative author’s creation if you feel so inclined.