Guest Author - Evelyn Rainey
This is the second article in a two-part series about helping veterans cope and overcome financial problems. Please read part one Veterans Battle Against Finances first.
Taking the high ground
1. Look at your green circles. Immediately put checks next to the items in the green circles you can do without for one year. (I didn’t say stop paying the bills, I said stop paying for certain things that you have already admitted are not important to you and you are paying a lot for). Here are some suggestions:
a. Cable or satellite – Do you realize how much of your life is wasted in front of the “boob tube”? Have it turned off and do something productive and creative with those hours you used to lose just sitting. Face it – you probably get your news and favorite TV series on the internet and can rent movies for far less than you pay for cable.
b. Pedicures, manicures. OMG do your own. One $3.50 bottle of polish will last you six months compared to the $45 dollars a month you’re paying someone else to do this for you. Think -- $3.50 times two equals $7 compared to $45 times twelve equals $540.
c. Phones – I have two toss-away phones. I bought one for $50 dollars five years and the other for $15 last year. The cheaper one has a camera, internet, texting, messages, bells and whistles and a lantern! I use one for business only and take it off my taxes. The other is for family and friends only. I was able to purchase a “double the minutes” card for each one. I can buy 90 minutes for $19, which when doubled is 3 hours worth, anywhere – local or long distance. I have a friend whose phone has the same features as mine, but costs her about $75 dollars a month. And the phone itself was over $300. I’m not suggesting you do away with your phone system. I am saying there are cheaper ones out there. Shop wisely.
d. Clothing, shoes, as well as toiletries and make-up – As a professional consultant for my day job, I wear designer outfits and brand name shoes. I buy them at discount stores by shopping with a passion for high quality and low prices. Why should I spend my hard-earned dollars for a $89 dress when I can buy the exact same dress next door for $19??? I’ll keep that extra $70 thank you! Same with make-up. Do you really need a $25 mascara when the same exact ingredients are in that $5 one?
e. Services – lawn, pool, house-keeping, laundry. If you are physically able to do these activities by yourself, do it. Remember, this is just for one year.
f. Utilities – you learned this in sixth grade ecology class. Turn things off. Turn the thermostat down or up and put on a sweater or take off a sweater. Turn down the water heater or turn it off during the day. Don’t use a dryer. I save an average of $40 a month on my utilities by hanging out my clothes.
g. Snacks, sodas, cigarettes, booze, and other substances – expensive things which only cause poor health. Live without them for one year. (Alright, keep the potato chip dip – that’s actually a food group in and of itself.)
1. Credit cards and small loans
a. Change your credit cards into small loans by cutting them up. Now they will only grow from the additional interest and you can treat them the same as you would any other loan.
b. Write a generic letter to each of the credit card companies letting them know that you have voluntarily cut up their card and will be paying them off in monthly increments. Thank them for their patience with your account and assure them that you will have the debt paid off in a feasible amount of time. Keep a copy of the letter for your records. Include the card shards in the envelope. Should a bill collector call you for any of these accounts, tell them to look in your file and to stop calling.
c. Go online to the Credit rating giants and check your credit. You have an option to dispute each item. Don’t dispute them, but do type in a short I am making a concerted effort to pay off this debt. Once you have made this statement on your file and filed a letter of intent with the creditors, any other phone calls from them can be considered harassment (check your state rules).
d. Make a list of your loans. List the company name, the total amount, the annual interest, any fees or charges, and the minimal amount due. Leave another column blank – you will use it to write down how much you will send the creditor each month. Call it the to be paid each month column.
e. Write the total amounts in blue and the annual interests in red, then number them highest to lowest. Remember, the higher the interest, the more you are going to pay in the long run. Put green checks next to the loans that have a red number higher than the blue. This is where you will have to make sacrifices.
f. In the column to be paid each month, write down the minimum amount plus ten dollars next to each loan that does not have a green check.
g. Take the total amount you spend each month on these loans. Subtract the non-green to be paid each month amounts from the total. Look at what you have left (Amount A). Look back over your green circles from taking the high ground above. Take half of what you will save each month by implementing those strategies (Amount B) and add it to the amount you have left. This is your weapon, and here’s how you’ll use it:
i. Divide Amount A by the number of green checks (Amount C)
ii. Find the lowest amount due in your list of green checks. Add Amount B (half of what you’ll be saving) to Amount C and put it in the columnto be paid each month. Pay this amount to this creditor every month until the debt is paid off.
iii. For the rest of the green-checked creditors, put the Amount C in each to be paid each month column, as long as it’s higher than the minimum amount due.
iv. When that first green-checked debt is paid off, add all of the amount you were paying to the Amount C of the next lowest debt and continue paying that off until it’s gone.
v. Keep going until all of the green-checks are paid off. Then do the same for the non-green checked amounts.
h. Do not apply for any more credit cards until you are debt-free. And by the time you are debt-free, you’ll have discovered the joy of being free from credit cards and most likely won’t get any more!!
Make a commitment to do this for one year. Circle the date on your calendar. Plan a celebration for that anniversary (even if you’re still in debt). Do not let anything sway you from taking charge of your life. It takes seven years for a bad credit mark to be removed from your credit report. Be patient and realize it might take a few years, or a decade. But do this in increments of just one year. It’s not that long to persevere when you consider that you’ll have to spend the rest of your life in poverty if you don’t start now.
At the one-year mark, start again. Assess the situation, draw up a battle plan, take the high ground, and accept that there will be collateral damage.
Once you are able to breathe again financially, don’t forget to help others along the way.