Debt: It's Not What You Have, It's How You Look At It

If you have had debt for years, you know how it is. You can approach it in two ways. The first way to handle debt is to have it take up most of your paycheck and many of your life decisions. The second way to handle it is to push it in the back of your mind, still live life “normally” (let’s be real here, your version of normal probably got you into debt in the first place) and open up as many bank accounts and credit cards as you can.  Consider this article a snap back to reality either way you look at debt. I promise I will be nice about it!

If Debt Takes Up a Chunk of Your Life

Congratulations! You are just like me. If you haven’t noticed already, I like to think about money from an educational perspective and am always striving to achieve financial responsibility and security. If you are paying off debt with all of the money you have left over after living expenses and a little bit of fun in your budget, in my opinion you are doing the right thing! With the method of allocating all of the money you aren’t spending to paying off your debt (not to mention that you are living at or below your means) it will pay off big time in the end. In fact, it’s not an uncommon that every dollar you pay off in debt now will equate to over $200 in savings over your lifetime.

As awesome as this method is, there is one annoying thing you need to avoid: a little thing I like to call Debt Recovery Depression. This happens when you are obsessed with getting out of debt to the point where the debate of whether or not to buy a cup of coffee will send you into a tizzy. If you find yourself avoiding reasonable purchases, sitting home along for weeks at a time or eating an incredibly unhealthy diet to save some change, take a step back and take a deep breath. With your habits, you WILL get out of debt. Your sanity is just as important though, and if $10 for a healthy meal makes you feel better for the next few days, than so be it.

If You Ignore Debt Like An Ex

All right people, pretend that your debt is your loveable (cough cough) ex-boyfriend that just walked into a party. Oh, and this is at least the 10^th party that you have seen him at since you broke up three years ago. If you are one of those girls who bolts to the bathroom and then sneaks out to avoid saying hello even though you couldn’t legally enjoy a glass of wine while dating him, I have three words for you: get over it. Mr. Debt is a friend of your friends, and he isn’t going anywhere. It is always better (and very girl power satisfying) to be the one to walk up to him, say a polite hello, chat for five minutes and then walk away with a satisfactory grin on your face knowing that he was a complete idiot for dumping you. So do that with Mr. Loser Debt. Pull out your credit card bills. Answer the calls from collectors. Start paying more than minimum payments and most importantly, stop spending more than you can afford! Eventually you will stop seeing him at parties, as long as YOU are the one who chooses to move on. 

If You're A Newbie, Do It Right The First Time

There are people out there who are lucky enough, smart enough or a combination of the two to avoid debt for the larger part of their twenties. This may be because parents are generous (say thank you!), scholarships are won (nicely done!) or budgets are kept (impressive!). Whatever the reason may be, there is one thing to keep in mind: at some point in your life you are going to be in debt. You just have to be smart about it.

Debt is defined as something, typically money, that is owed or due. Before you pay a credit card bill, even if you pay it in full every time, you are in debt until you do so. When you buy a house in your adulthood and sign a mortgage, you are in debt that you dig out of little by little every month. The reason why I am telling you these things is not to scare you, but rather to have you get used to the idea and not be deathly afraid of debt. Don’t get me wrong, there are some instances where you should definitely be scared (that’s for the next blog post), but if you’re looking at the land of debt through the rose-colored glasses of no outstanding monetary obligations, everything could be okay if you handle debt responsibly. I’m here to tell you how to do just that!

Having debt is just like getting your license – it’s a great idea to have someone in the passenger’s seat when you start out just in case you forget to put your clicker on. Consider me your co-pilot. We will start with these three basic driving rules:

Determine Your Destination – Before you take the leap into spending more than you can afford at the moment, ask yourself why you want to. You better have a pretty darn good answer to that question, and once you have the answer, ask your personal co-pilot (parents, a financially responsible best friend, mentor, cousin’s spouse) for an objective answer. The worst thing you can do is forget to ask this question from the get go and then ask yourself why why why why why you did that years down the road when you are wallowing in bills. The last thing you want to do is end up staying in a motel on a deserted highway when you could be in Hawaii instead.

Map Out Your Route – Once you have a destination determined, figure out how you are going to get there. Financial advisors are like the Google Maps of your monetary wellness. GO TO ONE. Fidelity and Vanguard are two of my faves and try your hardest to go see a financial planner in person. They will help you determine whether you should take the express or local train when you start paying off your debt. Faster is usually better, but this can vary on a case-by-case basis.

Focus While On The Road – There are so many distractions when you are driving. Your cell phone, the radio, the surrounding scenery, the list goes on and on. Once you set off on your debt adventure, keep your eyes on the road. Yes, that sushi restaurant is awesome, but you don’t need to go three times a week. Yes, that movie theater has really comfortable seats, but playing a DVD at home and making your own popcorn every once in a while won’t ruin the movie. Stay focused on paying off your debt. Motivational monetary quotes or songs do the trick for me. Destiny’s Child’s song Independent Women: Part I gets me back on the road every time.

So, my friends, the best advice I have for you is to be wise and act as if this debt determined whether or not something very important to you happened. Would you get into debt and then pay it off if it could make the Cubs win the World Series? Would you get into debt and then pay it off if it meant you could find your soul mate? Would you get into debt and then pay it off if it meant you could FINALLY have six pack abs? You get the idea.

Now get in the car. That is, after you have filled up your gas tank, tested the air pressure in your tires and made sure your AAA account is still active. Just in case. 

Don't Let Debt Haunt You

Happy almost Halloween, everyone! For those of you who have not yet chosen a costume, don’t fret, great ideas come at the last minute. I beg of you though, please don’t be Miley Cyrus and Robin Thicke. I’m sure they are very nice people, but there are wittier costumes that won’t make people want to stick their tongue out to the side. It’s just an odd facial expression.

Anyways, we all know that Halloween has the implication of bringing out our biggest fears. I hate horror movies and anything that is beyond the scariness threshold of The Haunted Mansion in Disney World. Most Halloween terrors are seasonal, but unfortunately there are just some haunts that can’t be shaken off, no matter what time of year. One of the biggest ghosts that affects twenty-somethings today is debt. According to PNC, in 2012 over 60 percent of millenials are stressed out about their outstanding debt. Because I feel that this topic is SO important, I am going to make this into a two part blog post series (not including this one) that addresses how to avoid debt if you are lucky enough to not be in it and how to shoo those debt ghosts away (they are, in fact, real).

For now, go enjoy the fun of Halloween! In a green way of course…make sure you are using a reusable bag for trick or treating and make your costume with items that you already have in your closet J.

Have a spooktacular time tomorrow!

If You Really Need an Excuse to Love Sustainability…Blame it on Your Wallet

I will openly admit it…I love Starbucks. I know. It’s against the Holy Grail of all things cool and “actually” hipster, but hey, I’m not a hipster, so it’s all good. I frequent the coffee shop about two to three times a week and I am proud to own a few reusable travel mugs and iced coffee cups that I bring in and hand over the counter to be filled. However, this morning I was in a rush and left my travel mug in my apartment. In the grand scheme of things it’s not a huge deal, but I wince a little bit every time a barista hands me a paper cup (even though they are much more ecofriendly than they used to be). The same thing goes for plastic bags at the grocery store. As a city dweller I walk to and from the store every week, so remembering a durable reusable bag is totally worth it from the I-don’t-want-sea-turtles-choking-because-of-me perspective and from the common sense I-don’t-want-my-vegetables-falling-on-the-sidewalk side of things. Although I have no problem unabashedly flaunting my eco-friendliness, some of my friends find it a little odd that I will go back up the stairs to grab that canvas bag from Old Navy and are slightly embarrassed to do it themselves. It’s not that they are bad people or don’t care about the earth, there’s just a lack of motivation and a societal status quo that encourages us to be lazy and get that cool holiday themed disposable coffee cup. Well I’m going to make you love sustainability, and it’s all because of your wallet. And the sea turtles.

One thing most people don’t know about Starbucks is that when you bring in your own reusable mug, they will give you 10 cents off your drink. Now, that may not seem like much, but let’s do the math on my caffeine habits. If I go an average three times a week, I will save a total of thirty cents weekly. Multiply that by 52, and all of the sudden at the end of the year I have an extra $15.60, which will go straight into my fun budget (or, if I’m feeling really ambitious, my Emergency Fund i.e. my last post). The 156 paper or plastic cups I haven’t used are an added bonus. What was the the total saving in paper cups in 2012 you ask? Well, last year coffee was served in reusable tumblers 35.8 million times, saving more than 1.6 million pounds of paper from landfills. Not too shabby, my friends!  

The same thing goes for paper or plastic bags. If you use your own bag at Whole Foods you save 10 cents for every bag you bring, and in some cities like Washington DC, it’s a mandated law that you can save that 10 cents in any grocery store. It doesn’t stop at Whole Foods either. In every Target, CVS, Safeway, Kroger, Winco and Fred Meyer (I swear I’m not making names up…some of these stores are just regional!) you can save  money off your total purchase if you use your own bags,  If I use two reusable bags once a week for one year, it adds up to $10.40 (considering you receive the ten cent savings). Again, I know that may seem like a pittance amount, but I am stubborn enough to keep these habits up, so over my lifetime I will save around $1500. Oh, what a twenty something could only dream about doing with that sum of money to spend guiltlessly.

From just a sustainability perspective or a financial perspective alone, this argument may not be that convincing. But that, my friends, is what the beauty of my blog is all about. When the two merge together it becomes more than just money and more than just a few trees. So if you’re embarrassed or annoyed at the thought of lugging your own reusable bag or travel mug somewhere, take solace in this: you will make the person behind you in line wince at the thought that they won’t get the discount. And hey, the clink of another dime in your piggy bank isn’t bad either. 

Birthday Dinners and Emergency Funds

It has become known amongst my friends that I am the unassuming finance nerd, so every once in a while it will get me into a conversation that leaves at least one person at the table taken aback. Let me note that I use the term “unassuming” loosely; I did get my undergrad degree in Marketing, I do watch Shark Tank obsessively and I live with two accountants that I happily engage in chats with regarding what they are studying for their next round of CPA exams. Anyways, this inconspicuousness will get me into a conversation that leaves some eyebrows raised…in a good way. This happened to me about a week ago at a best friend’s birthday dinner. Hey, we don’t only talk about the Kardashian’s.

Over dinner we were all joking around about what my friend, who is a year younger than most of us, could accomplish over the next year in her life without Lilly Allen or Taylor Swift’s lyrical input about being anything older than 22. Because there is so much room to grow (and room for error) without the genius input of these two singers, we all started enthusiastically throwing around ideas like, “visit China!” “run a marathon!” and “finish a five pound burger!”.  Although these ideas are very twenty somethingish, Birthday Girl’s idea took us all by surprise. After she finished taking a gulp of her wine she shouted, “I want to finish saving for my Emergency Fund!” Huh?

Birthday Girl is certainly on the right track. A financial Emergency Fund is one of the first things that everyone needs to have under their belt by their mid to late twenties. No, it’s not for those leather boots that you have been salivating over. Rather, it helps you to avoid overspending and going into debt due to a real life emergency, which can be anything from losing your job to getting in a car accident. Most experts suggest that it be the equivalent of three months’ worth of living expenses, including rent, food and transportation costs. Don’t let that statement make your eyes glaze over and your heart start to palpitate. Here are a few tips to make achieving your Emergency Fund goal easier!

Don’t Underestimate What You Spend – It’s rough to come up with an estimate of how much you spend over a month in a certain category off of the top of your head. Spend a month tracking your expenses by registering on a website like www.mint.com or simply creating a note on your phone that you update every time you hand over cash, check or credit card.  An accurate budget estimate will keep you from coming up short in the long run.

Set a Realistic Time Frame – An Emergency Fund is something that can be saved for over a two to three year period. Setting a realistic time frame to save for your Emergency Fund will take some of the pressure off of you, but at the same time a designated time period will keep you from putting your Emergency Fund on the back burner.

Contribute Weekly – Weekly contributions to your emergency fund will not only help you reach your goal faster, but it will also form an invaluable habit of saving that will quickly become natural. One of the easiest ways to do this is to set up an automatic withdrawal from your checking account into your savings account. Your weekly contribution doesn’t have to be huge either. The larger the amount the better, but even $15 a week can make a significant difference. That’s the equivalent of cooking one meal at home as opposed to going out to dinner. Not too shabby!

Contribute Monthly – Some months we get lucky and have a little extra cash left after paying the bills. This is exactly when the green light goes off for a little extra saving! Set a goal of what you want left in your bank account at the end of the month, and if you have exceeded that goal, transfer whatever you have left. Want $700 left in your banking account at the end of the month and end up with $716.63? Put the $16.63 in your Emergency Fund. I promise you will be surprised at how quickly it adds up!

Following these tips, both you and Birthday Girl can be well on your way to reaching your Emergency Fund goal this year. Trust me, the sense of security gained from an Emergency Fund is priceless.