Dropping Debt

The Financial Controversy: Crash-Diet Mentality vs the Healthy Diet for Establishing Long-Lasting Change (Part 2)

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by Alex on April 10, 2012

In our last article we mentioned a controversial method to working through your budget, through paying down your debt and working towards not only debt freedom but essentially any financial goal you are trying to accomplish.  But why is our approach so controversial?  Because one prominent mind-set out there is the all-or-nothing approach.  Its the method that as of tomorrow, you have spent your last dollar on a candy bar.  As of tomorrow you will not go out to eat again.  As of tomorrow you will not go on a family vacation for 5-10 years.  Its applying that crash-diet mentality applied to your finances.  You are not going to do anything you are doing today.  And if you do, then you’ve immediately failed.

The approach we found that worked for us is one of a completely different mindset.  As opposed to the crash-diet mindset (I really need to stop writing these right before lunch :)), we are working slowly towards a healthy diet – or in other words your finances as something you can see yourself as living the rest of your life.  This new diet concept really isn’t a diet at all, but adopting a healthier approach to how you manage your finances while you take those savings and invest them in your debt or savings – no matter your financial goal.  We will be sharing more in each week, but really its going to come down to implementing small change that will result in a total transformation in your financial mindset.  And you’ll see that these incremental changes throughout the process will bring you closer to your goals.

Now we know that some of you might be wondering just how that is going to make any kind of substantial change?  How can that type of approach to your finances end up changing your finances overnight?  Well, we need to answer the second question first.  You aren’t going to change your financial situation overnight.  Just how long did it take you go get into it in the first place?  Why would you expect to see an immediate change overnight when it took you years to get into it?  But before we cause you to despair, remember we also paid over over $100K in just over seven years.  So to answer the question how our incremental and small changes will end up with substantial change we’ll just use ourselves as an example.  After 3.5 years of trying that crash-diet budget, that all-or-nothing approach resulting in paying off only $15K, when we implemented the small/incremental changes over a period of time we did see substantial change (the remaining 3.5 years we paid off off that final $85K)!

And the secret we’re trying not to reveal too soon is that your initially small, incremental changes won’t necessarily stay that way.  We don’t want to get too far ahead of ourselves, but as you start applying these changes you’ll actually find yourself getting better at it as time goes on.  What starts off small, with just a bit of work starts to encourage you.  You start to see the changes and you want more.  And because you’re starting to get a feel for how your family can work together you can then accomplish even more!  Yes, it is much like a snowball where you start small and the momentum will cause that small, almost seemingly insignificant start to change your finances dramatically!

But let’s not get ahead of ourselves.  We will be laying more ground rules next week, but we want to remind you of three assumptions your family is going to need to accept.  We know from personal experience that some of these just might be hard to swallow.  But we want to lay the foundation so you are ready to hear the plan we used ourselves and understand why this works.

Realize you are in this for the long haul
One of the major problems we haven’t identified in the crash-diet approach is what happens after you meet your goal.  For example, say your family is in the minority of those that can eat that mac ‘n cheese day in and day out for weeks, months and years to achieve your goal – and you’ve done it!  Sure, you recognize that you don’t want to go through that again.  But what do you do now?  Do you start adopting some of your old spending habits (you’ve met your goal of course) you had prior to starting your crash-diet?  Do you notice that other than possibly being more content with less (that’s a truly amazing step), you really haven’t established any spending habits that are lasting?

Our goal of introducing our approach is to help you make those small changes up-front, to adopt a more frugal lifestyle and even an entrepreneurial spirit into your family that is long-lasting.  As you adopt changes that naturally help you spend less (hint: there’s some extra cash to throw at your debt/savings) while finding yourself eating and living healthier you’ll become excited that you are making long-lasting lifestyle changes for your family.  As you find yourself even finding additional opportunities to bring in some extra income, you’ll see your family learning more about their talents and gifts that they can develop and possibly even turn them into a permanent means of bringing in income.

But what we want to impress upon you is that the changes you are making probably won’t get you out of debt overnight nor fill up that savings overnight either.  We know we’ve mentioned this a few times already, but we remember just how frustrated we became when we saw a balance come down slowly and that we had months to go before paying off the next debt.  Be patient.  It can come and will come with endurance, keeping the goal in front of you and being intentional.

Realize this is a learning process
Maybe its just my personality, but this is one place I struggle with in the extreme.  When I start a task I want to know the best way from the start how to accomplish it.  I struggle with learning something from the very first and then later to state, “I wish I knew then what I know now.”  But unfortunately it doesn’t work that way.  Sure, our goal is to give you the resources and process we used (and learned painfully) in paying off our debt.  But even with that you know that if you read every post, every book on the subject and even had the best mentor, you’re still going to learn throughout the whole process and wish you knew then what you know now.

If you are already up to this, then please skip to the next point.  But we encourage you to not give up because you don’t have all the answers now.  We encourage you to not think you can start because you don’t know how you’re going to deal with something coming down the pike.  And realize this is how our lives work.  Even when Solomon talks to his son in the book of Proverbs he tells hims to seek after wisdom and understanding – not assuming that he already has it nor that it would make sense for him to have it from day one.

Realize things are not going to go to plan
Are you the type of person that just knows you need the perfect plan from day one and if you don’t make every detail and follow it to a “t” that you just won’t be able to make this plan work?  Let’s be honest.  We both know that even those perfectly detailed plans will have gotchas in them, those unexpected surprises that come up.  Have you been planning to pay off your vehicle in three months?  Well, don’t be surprised when that same car just happens to need a repair the week before you pay it off (or rather, the week you were planning to pay it off).

We are trying to recommend the James 4:15 model: “If the Lord wills, we shall live and do this or that.”  You cannot predict the future – there is only One that can.  But you can be a diligent steward of those gifts you have been given and work diligently with those God-given gifts towards your goals.  Do you agree that you cannot predict the future?  Do you agree that even if you made the best plan available to reach your goals that unfortunately you can’t plan for every contingency? (I know, there are some of you thinking the answer is yes :))

Please remember that as you are in this for the long-term, as you continue to learn what works best for your family that you need to accept those unforeseen, upcoming circumstances that will throw your plan off.  But this is where our incremental plan (based off the actuals from the prior month) will be so beautiful.  You see, its because we’re in this for the long-term that we can accept that, be patient and work towards that healthier approach to your finances.

A few final words…
Its true this concept isn’t going to be the popular answer out there.  We get that.  The get-rich-quick scheme, that fad diet that will answer all your problems – all of these will be the fad.  We all want an answer to our long-term problems right now.  But we hope you see some of the reasons why making these long-lasting changes will ultimately give you the better solution.

Next week we’ll be setting down some more ground rules as we prepare to share with you this plan we are speaking about.  And we pray that if nothing else, it will get you to think about the long-term.  If you are using that crash-diet approach (and its successful for you), just what are you going to do once you reach your goal?  We are so excited to be this close to sharing our process – and we hope you’re excited too!

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Alex & Cassie
 

How Our Crash-Diet Budget Crashed Our Budget (Part 1)

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by Alex on April 3, 2012

Wow how time flies.  It seems like its only been a few short weeks since we shared our first set of tips in Developing Your Family Economy by helping provide resources for your family to set their financial goals – and now its almost three months later.  Did you have a chance to sit down and work through the goals with your family?  As we’ve said before and will say it again, one of the most significant pragmatic tips we have for working together on your family goals is to be intentional – purposefully developing a plan together, intentionally scheduling time to meet as a family, and then carrying through are the biggest tips we can give.  Maybe I should be more intentional on writing these articles (next one scheduled for next Tuesday – I promise! :))

But now we want to share something that is close to our heart.  It may sound odd to discuss in terms like that when the topic of the day is budgeting, but it is.  Because you see, this plan is how we paid off over $100K in consumer debt in just over seven years.  This is the plan we used to motivate ourselves to keep going – even, and especially, when the going was tough.  But we don’t want you to think we developed this over night.  Not even close.

I will never forget the day when I was driving home for lunch.  It had been a long morning as I dealt with each and every frustration at work.  The line of work I was in was nothing but stressful – and nothing but a big question mark as to whether I would have a job the next day.  I was battling thoughts of hopelessness on that drive so I decided to turn on the radio to ease my thoughts.  As I tuned the radio I heard someone that I had never heard before – and he was talking to people and giving them financial advice and telling them to get out of debt.  He was telling people there was hope to get out of their financial situation.  I hurried home, turned on the radio and Cassie and I listened to his show – I can’t tell you how many time that tears were pouring down my face that day (yes, this is still Alex).  This is what we needed and at the right time!  I’m sure you already know we were listening to Dave Ramsey.

I’ll save more of the details for another article in our Deep in Debt to Debt Free series, but we knew we needed to write out a family budget.  We agonized.  We cut – and cut deeply – where we thought we could.  We decided to change our eating out habit (at a tune of hundreds of dollars per month) to one of eating fully at home.  No eating out – zip, zilch, nada.  We were going eat rice and beans (which ironically, we do now but for different reasons that we’ll share in another post).  We were so proud of ourselves because we were about to live like nobody else. – we had slashed up to 75% of our spending from the month before!  This was the ticket – in no time we would put a huge dent in our debt!

So the first month of trying to live by our new budget started off fine – at least for the first few days.  We met our budget just like we planned.  And then something happened – whether it was me working late or being out running errands for a long period of time we can’t remember – we ate out, thus making us immediately fail that month’s budget.  And if you know “all or nothing” people like us then you then know what happened next.  We knew we blew our budget so instead of trying to regroup we just stopped that month.  We would try again “next month”.

These months kept creeping up on just like this with little difference – for over three years which meant paying off just over $15K of that consumer debt.  And try as we might, we would fail.  We knew that everyone else in the Dave Ramsey system (so we thought) were having the time of their lives by paying off their debt.  We knew we couldn’t afford to continue living like everybody else.  After trying the Dave Ramsey way we knew we couldn’t live like nobody else.  So we knew after too many months of trying that we needed to come up with something else.

We realized that we were trying to slash our budget by using the crash-diet method.  You know the routine – when you try to cut out all of the carbohydrates, or protein, or cut out the caloric intake by thousands of calories – resulting in instant weight loss!  The mindset is always the same – you want to find that one instant solution that will solve all your problems overnight.  Of course we don’t want to mention the fact that you probably didn’t gain all that weight overnight or that you probably didn’t spend yourself into that much debt overnight.

With that, we finally developed our own system that worked for us – one we used to pay off that remaining $85K in just over three years.  We learned it would be easier to slowly incorporate better financial habits into our lives each month and then build on those each subsequent month. And you know what?  It did work! And its a system we have used to pay off our debt.  Its a system we’ve used to greatly increase our savings (so I could come home and work with our family businesses).  Essentially, its a system you could use to help you meet any of your financial goals.

Do you want to know what that system is?  We’ll be sharing more in part two next Tuesday.  Have you struggled with the “all or nothing” scenario?  Do you “fall off the wagon” when it comes to your budget?

Disclaimer:  We are truly thankful for finding Dave Ramsey, his radio program and books.  We know his ministry has blessed us and is truly one of the many reasons we can now live as The Thrifty Couple.

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Alex & Cassie
 

Step #1 in Developing Your Family Economy in 2012: Identifying Your Goals with FREE Download

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by Alex on January 3, 2012

We all know the new year is a time for making resolutions that are often broken and forgotten within just a few weeks.  But when a new year comes up for us, we try to look at it a bit differently.  How?  Think of our country, city or even a local business.  Each entity has a defined year and its own “economy”.  If you work for a company, you know the planning that occurs early in the fiscal year is important to meeting its fiscal goals.  You know the country or local government has a defined time period in which budgets are set for the year.  We see the family as another such entity and we look at the beginning of the year much in the same way as would a company or civil government.  Yes, instead of trying to set a number of resolutions, we look at the family as its own economy – and what better time than the first of the year to take a break from our busy lives and sit down to practically discuss and come up with the goals as we prepare for 2012.

We are compiling a set of resources that we have found useful in doing just that – helping you develop your family economy this year.  As every economy requires, you need to have incoming funds and outgoing funds (with the goal as the outgoing is less than the incoming :)).  You need to identify the priorities of where you will spend your money.  But where we start here is helping you identify your goals for this year and initial, high level actions to meet those goals.  And as we mention in the questionnaire, we encourage you to sit down as a family to complete this task.  If you as a family can commit to establishing your economy you will be further along in the process of having a better financial future for not only your family now, but for future generations as well!

Snapshot of the Family Economy 2012 Questionnaire

Step 1: Identifying Your Family Economy Goals and Actions for 2012 (download the questionnaire here)

We encourage you to sit down with your family as you work through the following checklist. The goal of this is to help you start thinking outside of your daily, busy schedule and force you to work together on becoming intentional with your finances. We all know the adage: If you fail to plan, you plan to fail. And although it seems trite, we have found in our own experience just how true it is.

One of the most important lessons we learned in our own household is the idea of ensuring open communication and committing as a whole family to pursue this plan.

We recommend setting aside some time one evening as a family to enjoy together and as part of that take the time to work through this checklist. If that is too daunting, possibly try to work through it during a family meal. No matter how big or small, just try to do something. This is your checklist – do with it what you will! As one idea, prior to starting ask each family member the following questions:

  • Is everyone in the family willing to participate?
  • Are we ready to do an even better job this year (compared to previous years) with our budget?

Finally, keep this checklist as we want you to refer to it the full year. The making of the goals and decisions is the easy part – following through takes hard work, dedication and accountability. Are you ready to get started?

Download the questionnaire by clicking on this link!

Also join us this year at the 2012 Family Economics Conference in March where we were invited to share practical ways to help develop a family economy.  Plus make sure to check our promotion code to give you a discount on your registration (we want to help you save even on that) just for being a reader!

Stick with us as we will continue providing you our own personal resources for developing and maintaining a healthy family economy this year!  This is just the beginning!

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Alex & Cassie
 

I’m Sorry, You Probably Didn’t Hear Me…….

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by Cassie on April 23, 2010

no credit needed sign

I have a story I wanted to pass on to you! We received our first credit card solicitation call since becoming debt free.

This is how the conversation went:

The gentleman on the other side: “Hello Mrs. Guess what, you have qualified to receive the Visa Platinum Card with a low interest rate and……” (me kindly interupting), “well, we are actually debt-free and we would like to keep it that we so we are not intrested.”

Gentleman: “Oh, okay, well this card has a balance transfer of 1.9% to help you finish (excuse me finish or transfer??) paying off your debts.”

Me: “I’m sorry, you probably didn’t hear me…but we are debt free and we would like to keep it that way.”

Gentleman: “Oh, ok…….(pause).”

Me: “Thanks anyway, and have a great day!! (click)”

Wow, that felt good – and what better excuse to not get another card…..being debt-free and wanting to keep it that way! I left him response-less on the other line ;)

Soon, we will start sharing our “deep-in-debt to debt-free” story, but wanted to share that with you! Stay tuned…..

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Alex & Cassie
 

We’re Debt Free!!!

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by Alex on April 3, 2010

Debt Free!!!

If you’ve been following us the last few months, we have detailed that we were nearing the end of paying down our debt.  Well, as of today, we can now scream “WE’RE DEBT FREE!!!” (of course, minus our mortgage which we will attack soon!!)  :)  There’s no more car payments, no more credit cards, student loans or any other type of stupid debt!!!  We will be sharing our journey with you over the next few month of how we couponed, saved, earned more, and worked towards debt freedom!!  As Proverbs 22:7 states, “the borrower is servant to the lender”.  We are so thankful that we have been able to kiss that bondage goodbye!!

Please stick with us as we share how we went from DEEP in debt (you’ll find out just how DEEP The Thrifty Couple was!) to FREE of debt!!  And we must say, we are ever thankful to our Sovereign Lord and Creator for we give Him the glory and we know all good things come from His hand.

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Alex & Cassie