Frugal Intuition

When I went home at lunch today, I found a class action lawsuit check in the mail.  After a little digging, I discovered that it was in response to this lawsuit.  You can read the full ruling here .  According to the ruling, this company AmeriDebt, which also did business under a few other names like Debticated (which may have been the one dear hubby used),

deceived consumers with claims that AmeriDebt was a nonprofit organization and that it provided counseling services to consumers seeking to get out of debt. The FTC charged that, rather than operating for charitable purposes as advertised, AmeriDebt funneled profits to affiliated for-profit entities and individuals, including DebtWorks and Pukke. The complaint also charged that the defendants did not provide counseling services, but simply enrolled every customer in a debt management plan (DMP). According to the FTC, AmeriDebt also deceived customers when it claimed that it did not charge an up-front fee. Instead, the complaint alleged, AmeriDebt kept its clients’ first payment under their DMPs as its own fee, rather than disbursing the money to consumers’ creditors as promised.

I don’t personally remember much about our experiences with this company.  It might have been before we got married.  It’s been so long since my husband did business with this company, we’d forgotten about it.  He certainly never signed on for any class action suit.  I suppose he was still in their database somewhere.  We’ll be taking that $14.09 and probably going to see a matinee and sharing a Dr. Pepper.

But the whole thing got me thinking.  Consumer debt is a massive problem in our country.  You can’t turn on the TV these days without seeing an ad for some company or program that promises to get you out of debt, help you settle for pennies on the dollar, etc.  They all set off giant neon warning signs for me.

Here’s a little secret. 

You don’t need some other company to negotiate on your behalf with your creditors.  You can do that yourself.   Here’s the thing: they want to get paid.  So you call them up (an intimidating prospect if you’ve been avoiding their calls) and you explain your financial circumstances.  Don’t let them bully you into believing you have to pay them all off right then.  If you had the money to do that, you’d have done it already, wouldn’t you?  You can’t squeeze blood from a turnip, as my grandfather liked to say.  Instead, stand your ground.  Explain your circumstances and tell them what you can afford to pay them.  If you’re one of those people who has been a “good customer” and has never been late or missed a payment, but you’ve only been paying the minimum balance (and hence your balances aren’t shrinking), ask them if they can lower your interest rate.  Hey, if they say no, you’re in no worse shape than you were before.  And they just might say yes.

Now here’s what you need to do.

Take all the credit cards out of your wallet or purse.  All of them.  And any others you have hidden somewhere else.  Got them all out on the table?  Good.  Now cut them all up.  In tiny pieces.  Or you can cut them in pretty shapes and use them for Christmas ornaments.  The point is to get them OUT of your wallet and remove the temptation of using them.  As long as you continue to use credit cards without paying the balance off in full every month, you’re going to be paying for the rest of your life.

Next up, pull out all of your most recent credit card bills.  Read all that tiny print until you find the spot where it lists your interest rate.  Now highlight that. Now take all those bills and arrange them in order of highest to lowest interest rate.  You now have your priority list.  The idea is that you pay off the card with the highest interest rate first.  You will be making minimum payments on all the other cards, but this is your focus.  All extra funds should be dedicated to this card.  Once it’s balance is zero, you’re going to write a letter immediately to the company and request that they close the card immediately and send you proof of such in writing.  Save a copy of this letter.  When the notice from the company comes that they have complied with your request, staple that to your letter and your final bill and keep them in a file.  Now take the amount of money you were putting toward that first card every month and apply it to the minimum payment you were making on card number two (with the second highest interest rate).  And you’ll do the same thing on down the line.  This is known as the snowball method (because as you get stuff paid off, the amount you can pay on each card gets bigger and the payoff comes faster).  This is a long process, depending on how much debt you’re carrying, but it does work.  And if you have some kind of change in circumstances like losing your job, don’t wait until you start missing payments.  Call your card company and explain to them right off.  It will go a lot better if you let them know on the front end what’s going on.

But I thought that closing credit cards was damaging to my credit.

Okay, yes, sure, you’re going to take a little bit of a hit when you close those cards, but if you’re in debt and struggling to make payments, your credit probably isn’t in that good a shape to begin with.  In order for this process to work, you need to avoid taking out any new cards or loans of any kind until you get things taken care of.

The point of all this is that you can fix things yourself.  It just takes dedication and good sense.  So take heed and listen when I caution you against these so called consumer credit counselors.  There are more wolves out there in sheep’s clothing than actual helpful sheep.

Have you ever stopped and really looked at how many choices you have on the laundry aisle these days?  There are a zillion brand name detergents–liquid and powder varieties.  Regular and ultra.  There are bottles of fabric softener and dryer sheets and wrinkle releaser and bleaches and bleach alternatives…  The list goes on.

At one time or another, I’ve tried all of them in an attempt to find one that didn’t irritate my husband’s skin.  See, he’s got an allergy to a lot of the perfumes in detergent (so does his mom), so most of what’s available commercially makes him itch.  I did have good luck with All’s perfume/dye free detergent, but it didn’t seem to last very long and the bottle took up a lot of valuable space (our tiny house was built in 1964, so the washer and dryer are out in the storage room).  I figured there had to be a better way.

Then I read about making your own laundry detergent.  There are oodles of recipes out there, most containing borax, washing soda, baking soda, and perfume free soap in various combinations.  There are liquid recipes, but I really wanted something in a powder form that would take up less space as it was stored.  So I found this recipe at Soaps Gone Buy:

• 1 cup grated Fels Naptha Soap
• 1/2 cup washing soda
• 1/2 cup 20 mule team borax
  

Mix and store in airtight container or bag. For light or small loads, use 1 tablespoon. For normal loads, use 2 tablespoons. For heavy loads, use 3 tablespoons. Cost per load $0.15.  Note: a single bar of Fels Naptha Soap grated makes 2 cups, so just grate 1 bar and add a cup of washing soda and a cup of borax. Sadly, I’m not exactly sure how much I’m saving by making my own detergent, but a double batch lasts me about 6 to 8 weeks, which is longer than the commercial stuff ever lasted in our house.

It took a little doing to find all the ingredients as our Walmart only carries the borax and baking soda rather than washing soda (which IS something different).  All the ingredients are available at Soaps Gone Buy, but with shipping costs these days, that takes the savings out having to ship something that heavy.  But, hurray, Kroger does carry washing soda and Fels Naptha soap.   I made the switch well over a year ago and have never looked back.  No more itch or sneezing.  I no longer have to use fabric softener, and I rarely have a problem with a stain not coming out (for which I do resort to commercial products like Shout).  And hey, it’s environmentally friendly!

Soaps Gone Buy does warn that their “recipes will NOT make suds in your washer so don’t be alarmed.  Fels Naptha Soap is a pure soap and typically makes little or no suds in the water.  This makes it perfect for use in the new HE washers as well as tradional washers.

For a list of other make your own detergent recipes, TipNut has gathered several here .

Internet shopping can be a wonderful thing.  As someone who absolutely hates the mobs  hustle and bustle related to holiday shopping, I consider it a lifesaver.  You will not find me up at 4 in the morning standing outside some store in the cold on Black Friday.  No siree.  The more I can avoid the crowds when shopping, the better.  And, of course, online you have the world at your fingertips.  You can do price comparisons at multiple merchants with only a few strokes of your keyboard and clicks of your mouse.  The internet truly offers the best in comparison shopping.  This is a great tool for the shopping savvy and allows you to save beaucoup bucks if you do it right.

It’s just so convenient.

But there is one particular aspect of online shopping that irritates me to no end.  It is the bane of impulse shoppers everywhere.

1-click ordering.

Merchants across the internet have this capability.  If you’ve ordered from them before and they have your credit/debit card information on file, as well as your address, you can go from browse to bought in the time it takes a web page to load.

This is very very bad.

Why?

One-click ordering removes your time to think about the purchase.  For impulse shoppers, this is very very very bad.  Because one of the biggest keys to overcoming the impulse to buy is having time to think about it.  One-click ordering takes out all the middle steps of adding to your cart, reviewing your cart, entering your payment information and your shipping info.  In theory, if you click on it and the order is placed, you should have time to cancel it before it gets processed–IF you go right then to take care of it.  But most people don’t.  They’re still cruising on that high of “oooo, I bought stuff” (because, come on, admit it–you love shopping).  It isn’t until down the line when you’ve already received the purchase and then your credit card bill comes in that the buyer’s remorse starts to set in.

And then there’s the issue of accidental clickage.  Have you ever noticed that on Amazon, the 1-click purchasing button is right by the Add To Wishlist button?   My husband has “accidentally” ordered several things over the years because he “accidentally” clicked the button and didn’t realize it in time to cancel the order before it processed.  You notice my skepticism about this…but I’m not going to go there.

Well if I order something accidentally, I can just return it.  No harm, no foul, right?

Wrong.

These days more and more companies are charging a “restocking” fee.  They don’t want their products back.  Companies are not in the market for customer service.  They’re out there to make a profit.  If you need to return a purchase you “accidentally” made or even one that you legitimately need to return (such as ordering clothes that turned out not to fit properly), you will not only likely get hit with the cost of return shipping, but you may get hit with a restocking fee of up to 20%.  And if you make the mistake of sending your product back via an untrackable shipping method, there are some companies out there who will claim you never sent it back and you won’t get your refund at all (which brings up the issue of follow up, but I’ll tackle that in a future post).  There are also some companies out there where there is no return policy.  Many times clearance items cannot be returned.

So what am I supposed to do?

Most vendors have a place in your account settings to turn off 1-click ordering.  By all means do this.  But what I find is even better?  Don’t save your card information to that vendor website.  Yes, that means you have to re-enter your address and payment information for every purchase, which is a PITA and takes more time, but the name of the game is becoming AWARE of your spending habits.  If you jump through all those hoops every time you buy, you’re more likely to actually think about the purchase and, hopefully, will make a smart and conscious decision about whether or not to buy it.

“Beans, beans, the musical fruit.  The more you eat ‘em the more you…”  Ahem.  I digress.

With the cost of food on the rise, I’ve been on the lookout for ways to slash the grocery bills.  Given that the most expensive thing on the list tends to be meat in its various forms, one way you can cut costs is to explore alternate sources of protein. Beans are an incredibly cheap, flavorful source of protein that are low in fat and packed with good for you nutrients.  And there are ways to avoid the “musical fruit” part (I’ll get to that in a bit).

Beans are available at your local grocer both dried and canned (and in some cases in the freezer section).  Canned beans are pre-cooked, convenient, and require no effort on your part other than opening and rinsing.  But I’m going to make the argument that dry beans are a much better value.  Here’s why.  A can of beans ranges from 15-16 oz.  That’s about 2 cups of beans.  Here’s how the prices for the store brand canned varieties stack up at my local grocery:

That sounds not so bad, right? And certainly it’s cheaper than meat per serving.  But look at how dried beans (also store brand) stack up.  One pound of dried beans = 2 cups of dried beans = 6 cups of cooked beans.

That’s 40-50% cheaper per cooked cup.  These guesstimates may be a bit off on how much the dried beans produce cooked (it varies from variety to variety), but either way, dried is cheaper.  That makes beans an outstanding value and a great, cheap source of protein.

Remember, the little things add up.

But dried beans take time to prepare.

Well, yes, they do.  But it requires forethought, not a lot of actual work on your part.

That crock pot that’s been hiding out in your pantry collecting dust?  Yeah, pull it out and clean it off.  This is your new best friend.  If you’ve maintained a close personal relationship with your crock pot since someone gave it to you as a wedding present or for your first apartment, good for you.

The first step is to pour the beans into a colander and sort through them to make sure there aren’t any rocks or twigs or other indigestible things in there (this is not a huge problem, but this is a natural food and from time to time something will slip through the sorting machines).  Give them a rinse.

Now, there are two ways to prepare dried beans.  You can soak them.  Or you can not soak them.  If the “musical fruit” aspect of beans bothers you, I suggest you soak them.   Ideally, you would dump your dried beans into your slow cooker crock and cover them with 6-8 cups of cold water.  If I bother with this step, I generally do it overnight.  You can remove the most indigestible complex sugars (this is what causes flatulence) by changing out the soaking water a few times during the 8 hour soak.

After you’ve soaked your beans overnight (or for at least 8 hours), pour off your soak water and give the beans another rinse.

Now dump them back in your crock pot and cover with 6-8 cups of cold water (the water level should cover the beans by 2-3 inches).  Cook on low for 8 hours or high for 4.  Use as you would canned beans for any recipe.

Once they’ve cooled, you can store them in ziplock bags or small plasticware containers (I can get 4 2 cup containers at the Dollar Tree for $1, so that’s what I use).  They’ll keep in the fridge for a week and in the freezer for…well I don’t know personally, as they never last longer than 3 weeks in our house, but one source says up to 6 months.

The fact of the matter is that what you’re paying for so often at the grocery is convenience.  Don’t even get me started on those boxed dinners whose slogan is “Today’s Homemade.”  Shudder.  If you just take some time to do a bit of prep and packaging yourself, you make your own convenience foods that are cheaper, healthier, and taste better.  All it takes is a little bit of effort.

I’ll be talking more about batch cooking later on, so stay tuned.

My husband does not balance his checkbook.   I remember finding this out early on in our dating career and thinking that for a smart guy, he was being really dumb.

“But I’ve got online account access.  I can see how much is in my account at any given time,” he argues.

Uh huh.  And what happens if you don’t remember every check you write or every debit you put on your card?  And what about when the bank makes mistakes?

“Uh…”

Yeah.   We’ve been married for over 5 years, together for 9.  He still doesn’t keep a checkbook ledger.  We simply don’t have joint checking.

Not keeping a checkbook ledger is something I hear more and more often in our modern world where everyone has online checking access.  As people have shifted from writing fewer and fewer checks to debiting their purchases and bills, the idea of keeping a ledger of purchases seems to have fallen by the wayside.  It’s no longer convenient to jot down that date and amount of a purchase when it’s not right there by the check (or these days, card).

My System

For each debit purchase, I take the receipt and wrap it around the card.  Once or twice a week, I sit down and unwrap all those receipts and enter them into my checkbook ledger.  I also log in to my bank to check their record of the purchase to make sure that it matches the receipt in my hand, and I balance my checkbook as I go.

For those of you more technologically inclined, I recommend getting a program like Quicken or Microsoft Money.  Now I know you can download your statement from the bank directly into those programs, but the POINT of this exercise, is to keep your own records of purchases to compare to the bank’s.  Yeah, it’s kind of a PITA, but then when discrepancies arise, you have your original receipt.  What?  You don’t?  Yeah, you should keep those.  All receipts during the course of a month should be kept until they have cleared your financial institution and you have verified that your financial institution has recorded the correct amount.

Why is this such a big deal?

Well, a few reasons.

1. By writing everything down yourself and not relying on the bank, you have a full record of how much you have spent, regardless of whether it’s cleared the bank or not.  Some businesses take time to report their transactions to the bank.   You can’t afford to be unaware that transactions haven’t cleared.
2. By writing everything down yourself and keeping all your receipts, you are in a position to notice and challenge discrepancies.  For example, sometimes you will see a different amount on a restaurant charge than you paid.  Sometimes this is a waiter or waitress changing the tip amount after the fact.  Sometimes they ran the wrong card for the wrong order.  The point is, if you don’t have your receipts and didn’t write it down, you won’t know and can’t do diddly.

That’s right.  Banks can screw up.  

A story from my own life to illustrate.  Back when I was getting ready to go to college, I had a tiny credit card with a $300 limit.  My parents had gotten it for me when I began driving as an “Emergencies Only” measure.  Prior to my departure for school, my mother had me out purchasing necessities for dorm life. She also sent me by the pharmacy to pick up an expensive prescription for her, so my balance was higher than the norm (sigh…I miss the days when a month’s worth of gas was less than $60).  Then I went to pick up a new pair of running shoes.  When I got to the register, my card was declined.  Okay, fine.  I’d reached my limit.  It was mostly stuff for Mom anyway.  So I wrote a check to cover it.  I’d just made a $150 deposit in the account a couple of days before.  A day or two later, I received an insufficient funds notice in the mail.

Excuse me, no, I have money in my account.

Well, after some investigating and producing of receipts, etc., it came out that the bank had made an error and counted my $150 DEPOSIT as a $150 DEBIT.  All my fees were reversed and the money returned to my account because I had proof that they had screwed up.  Now, granted, this kind of thing does not happen often (thankfully), but it DOES happen, and you’d best be prepared.

That story is also a good illustration of why you should keep a ledger for your credit card as well.  I know.  GASP!  Making extra work for ourselves.  But if you’re someone with a lot of consumer debt, it will be very helpful for you to write down all those credit card purchases as you make them.  Keep a running tally.  I bet you’ll be surprised at how often you swipe that plastic.

Over the course of the year as gas prices began to spiral out of control, we felt it not only at the pump but in every other area as well. The cost of everything went up as a consequence. I noticed the last time I went to the post office that there are no longer prices on their signs. They were changing so fast, they didn’t bother. That’s alarming.

Groceries were no better. I remember the day I saw milk go over $4 a gallon. MILK? Much of the produce I normally purchase went up by as much as 50%. Even the canned green beans I buy (store brand), which had been 30 cents before, have now gone up to 50 cents. Everybody is feeling the pinch.

In a quest to find a way to slash my grocery bill (which went up by about $100 a month), I stumbled across Angel Food Ministries . My immediate thought was that this was some sort of charity for the less fortunate, and that there would be some sort of income cap for participants. Nope. Their website clearly states, “There are no qualifications, minimums, income restrictions, or applications.” According to their mission statement, ” Angel Food Ministries is a non-profit, non-denominational organization dedicated to providing food relief and contributing to benevolent outreaches in communities throughout the United States.”

This sounds too good to be true.

No, it’s really not. The food is the same quality you could purchase at your local grocery store. There’s no dented cans, about to expire, day old, almost spoiled anything. Check out the menu available for purchase this month. For $30, you get 1 regular unit, which includes (so they say) enough food to feed a family of 4 for about a week. And there are also other packages available once you’ve bought 1 regular unit, including a fresh veggie/fruit box, or various meat boxes. I haven’t done my comparison shopping yet, but I can tell you right off the bat that the grill box I bought this month for $21 (2 pounds of hamburger meat, 2 pounds of sirloin steaks, 1.5 pounds of baby back ribs, and 1.5 pounds of bone-in pork chops) would have cost me considerably more at the grocery here. I’m not sure about the regular unit (I’m going to compare next time I go to the grocery, and I’ll report back).
Super convenient

Once you find your local site, you can print off the order form and mail in your payment (which saves you gas to go to the grocery). About 2 weeks after, you’ll go to the hosting site to pick up your food. This morning was my first time. I drove up, presented my receipt. They took my box (you bring your own box for the regular unit), and by the time I’d driven around the back of the church, they walked out the other side with my box full of food, and the other grill box I’d ordered, and put it right in my back seat. Fastest grocery shopping ever. As someone who hates wandering around the grocery or Walmart, this convenience cannot be overstated.

There were a couple of things I wasn’t interested in out of the batch (we just don’t like cauliflower, broccoli, and carrots), and a few things I would never buy myself (like pre-made lasagna) but for the price and convenience, we can certainly give those to someone who does like them. The quality of the food looks fine, and the meat actually looks like better quality than what they’re offering at Walmart (which is our local grocery). The only drawback is that I underestimated the amount of freezer space all this stuff would take up (we have an IIIIIIIITY bitty freezer). But a quick clean out of the fridge and freezer took care of that problem. For the two of us, I think the meat between the regular unit and the grill box I bought, will likely last us the entire month, leaving just stuff for lunches and sides. That is not bad at all. I’ll have to check and see how much this slashes my monthly grocery bill and report back. But I’m excited.

What are you paying every month for your cable or satellite?  Seriously.  $40?  $50?  $75?  $100?  The cost of these services seems to do nothing but go up and up and up.  They may have a great introductory rate, but after the first 3 or 6 months or year, the monthly price skyrockets.  And you know, it seems like there’s never anything good on.  There is much money to be saved here, folks.

Now I’m not saying that you suddenly have to live in the dark ages before television, where you sit around staring at each other over candle or oil lamp light and go to bed at sundown.  But I am going to suggest some alternatives.

I don’t want to miss my favorite shows!

You know what?  If your favorite show is on a major network, chances are they are putting that show, in it’s entirety, on their website in a streaming video form.  I can’t tell you the number of times I’ve wound up missing something and going back and watching it on my computer.  If you have the right kind of connector on your TV and a VGA cable, you can even turn that TV into a monitor for your computer and watch it on big screen.

But my favorite show isn’t on the network website!

Alternative number two: Blockbuster and Netflix .   Both of these services have free trials so you can try them out.  With the move the last decade towad putting television series on DVD, many of your favorite shows, popular or obscure are available in this format.  And you can find them through one of these programs.  Both work pretty much the same.  You create a queue, load it up with all the stuff you want to watch, and depending on the plan you choose, they send a certain number of DVDs right to your house (so, hey, saves on gas for going to the video store).  Blockbuster starts as low as $3.99 a month for a 1 DVD at a time plan.  Netflix starts at $4.99, also for a 1 DVD at a time plan, plus 2 hours of instant streaming from a separate library.

Now my personal preference is Blockbuster.  Why?  Well I love their Super Saver, Total Access plan, which allows for 1 DVD at a time, 2 per month, plus free in-store (as in your local Blockbuster) exchanges twice a month for $9.99.  Yeah, that’s only 4 DVDs a month, but when you’re watching TV shows, there are often 6 episodes on a disk.  You can supplement your other TV watching time with those online shows I was talking about earlier.  If 2 a month isn’t enough for you, their next plan is unlimited DVDs through the mail, still with 2 in-store exchanges a month for only $11.99.  Doesn’t $12 sound a heck of a lot better than the $40+ that you’re paying now?  That’s money in the bank, folks!

Whichever service you choose (and I’ve used both Blockbuster and Neflix in the past), they have multiple distribution centers around the country, so you’ll rarely have to wait more than a day or two between return of your last rental and receipt of your next one.  The other fantastic thing about these services?  No late fees.  With the cost of renting DVDs in store locally being upwards of $4 a rental for 5 days (And really, who the heck needs a movie for 5 days?  It’s just a ploy so you’ll forget to return it on time and they can earn more money in late fees.  I miss the old classic over night rental.  Watch it.  Take it back the next day.), if you only rent 2 movies a month through one of these services, it’s paid for itself.   Another plus?  No commercials!  One of the prime reasons we buy so much stuff is that we’re brainwashed by tv ads–that’s kind of the point of them.  If you aren’t watching them, you’re less succeptible to product advertising.

An unexpected source of rentals–your local library

One unexpected place that you can rent DVDs (and sometimes games and other things) for absolutely FREE is your local library.  The selection is going to vary from place to place, with some locations having a wider range than others, but this oft neglected resource should definitely be investigated.  Check with your local branch to see what they offer.

Hey, what about video games?

My husband informs me that our local video stores presently charge about $8 to rent a video game for 5 days.  I about keeled over in shock.  Unless you play constantly in your free time, the likelihood that you’ll beat the game in that span of time is slim.  So, I present to you another alternative.  Gamefly .   This is the same kind of thing as Blockbuster or Netflix, but for video games.  If you are a gamer, or if it’s your spouse or kids, this service is DEFINITELY worth looking into.  It’s more expensive than the movie services, but then it’s also more expensive to rent games.  They have two plans.  Their regular plan is $22.95 a month for 2 games a time, as long as you want.  They’ve got a 1 at a time plan for $15.95 a month.  They also have a nifty “Keep it” feature, where you can essentially try before you buy the game.  This is often cheaper than buying games in-store.  They’ll ship you the original case and instruction manual.

Take Home Message

Regardless of your preferred form of entertainment, there is usually a cheaper way to do it.  Don’t be afraid to look outside the box and try some new things.

Disclaimer: Part of the blog platform that hosts this blog relies on ads.  So you’re going to see ads above here and to the side that may be for debt reduction or debt consolidation.  I know nothing about these companies and do not endorse them.

When I was a kid, maybe around 9 or 10, I remember my parents getting me one of those motorized banks where you put in the coins and it automatically sorted them for you into chambers for rolling.  This thing was pretty high tech back in the day.  I was fascinated by the process, so of course I kept picking up additional chores and working for coinage so I could put more into it (I have a funny story about my “rates” for another time).  What did I learn from this bank?  That all the pennies, nickels, dimes, and quarters really added up over time.  Giving a child a bank, be it fancy or a simple porcelain pig, is a great first step in teaching them to save.  Personally, I think it helps if it is the kind of bank that isn’t easy to get into.

The same principle holds true for adults.

This was a lesson that was really difficult for my husband to learn.  He grew up in a household where brand name foods were the norm.  Green beans were Del Monte.  Canned tomato sauce for chili–Hunt’s.  Ice cream–Breyers.  I grew up on store brand everything, and I certainly didn’t notice any difference.  On one trip to the store (before I stopped taking him with me), he picked up a brand name can of green beans.  I put them back and picked up the store brand for 15 cents cheaper.  “It’s 15 cents,” he said.  “Yep, it’s 15 cents, times the 4 cans a week we eat of green beans (green beans are one of the few vegetables he likes), times 52 weeks a year, and that’s over $30 a year saved on green beans.”

The little things add up.  

DH had never saved before me.  His paycheck used to burn a hole in his pocket every time.  He’s a classic example of someone brainwashed for our instant gratification society.   I tried for years to get him to set up a savings account, even if he only put in ten bucks a month.  He didn’t see the point of saving so little.

There’s this wonderful thing called compound interest.

Interest on a savings account is like free money.  Basically, you’re putting your money in the hands of a financial institution and allowing them to use it while you’re not (of course, if you need to withdraw it, they always allow you to do so).  In exchange, you earn interest on that money.  The best example I’ve ever heard for explaining compound interest is this one.  If, in his own time (think 1492, people) Christopher Columbus put one penny in a savings account earning interest at the rate of 6% and then instructed someone to take out the interest every year, the value of the interest earned by 2005 would be almost 31 cents.  But if he put that same penny into the same savings account with an annual interest rate of 6% and left the earned interest to compound — earning interest upon the interest — the resulting balance for 513 years would be $95,919,936,112. That’s $95 billion! (HowStuffWorks “A Dollar Saved…(or Invested)” )

The little things add up.

I encourage you to go and open a savings account today.  Now I don’t mean trotting down to your local branch and opening one up with them.  Why not?  Well, local banks usually don’t have the best interest rates.  You need to hop over to Bankrate to compare interest rates .  You’ll want to click on the one under “Savings” that says “MMA/Savings” (MMA is a money market account.  I’m going to explain those in a bit).  Next, choose your state, then choose the town/city nearest your location.  Then leave it set to the top option “MMA and savings account”

Now what you’re going to see is a big chart with a bunch of information on it.  There are 4 things I want you to pay attention to:

• The type (savings vs. money market)
• APY (Annual Percentage Yield–this will be slightly higher than the “Rate After Intro” and illustrates the compound interest concept)
• Open $ (how much is required to open an account with that institution)
• Monthly SVC Fees (service fees)

If you’re like we were, you don’t have a lot of money to open a savings account, so the very first thing I want you to do is click on “Open $” to sort by that field.  You’re looking at accounts that only take $1 to open.  $1.  That’s less than you spend on the super value menu at your favorite fast food place after tax.  Everybody can come up with a single dollar, so that excuse that you don’t have enough to open a savings account?  Not valid.

Next up, you want an account that has no monthly service fees.  On the particular screen I’m looking at, none of the institutions that require $1 opening balances charge fees.  This is good.  We get charged fees out the wazoo on every other service in the world.

Next, take a look at that APY–Annual Percentage Yield.  Okay, no brainer here–the higher this number is the better.  These numbers may not look like much.  Interest rates are down in the current economy (making Chris Columbus’ 6% look like a dream)–and that’s for loans AND savings (never for credit cards–but that’s another post).  I personally have had accounts with both HSBC Direct and ING Direct.  I started with ING, then moved over to HSBC because they had a slightly higher interest rate.  Both have given me excellent customer service, so I highly recommend both.

But there’s no branch of any of these institutions in my home town!

No worries.   These are on-line savings accounts.  Because they don’t have branches everywhere, it cuts down their overhead and that translates into additional savings for you.  You will be able to tie this account to any local bank to make transfers into it.  You want to be sure to pick an institution that is FDIC insured.  For those of you worried about identity theft, online banking with national institutions like HSBC and ING is safe.  They have numerous safeguards in place to make sure it’s really you.  Each has a bit of a lengthy sign up application, but they’ve got detailed instructions to help you out.

What about that money market thing?  

The simple explanation is that it is a savings account upon which checks can be written.  So it’s sort of like checking that earns interest but with limitations.  HowStuffWorks has a great article on how they work.  You’re certainly free to choose this option, but my personal advice (and I’m no banker) is to go with the savings.  It takes 3 days to transfer money to and from most online savings accounts.  Before you panic, that’s a good thing.  We want this money to be hard to get to so that you’re not tempted to dip into it for a whim.  We’re trying to develop an attitude that the money in this savings account is not to be touched except in cases of dire emergency.  ‘K?

I’ve got my shiny new savings account.  Now what?

Okay, whether you opened that new account with $1 or $100, the important thing to do is to add to it regularly.

But I owe more than I make!

You did not get into debt overnight, so you’re not going to get out of it either.  Debt is going to be a fixture in your life for a while.  Part of crawling out of The Pit is developing a contingency fund so that when emergencies occur like the dog needing to go to the vet or the car needing repairs, you have money set aside and don’t have to turn to credit cards or some kind of loan.

You can start small.  Presently, my husband and I get 4 paychecks a month (from our primary jobs–I get others from my other jobs but we’ll leave those out for now).  I get paid bimonthly, he gets paid every 2 weeks.  The moment that money is deposited into checking, I immediately transfer $25 from each check into savings.  That’s $100 a month, $1200 a year.  Maybe $25 is more than you can afford.  That’s fine too.  Start with $5 a check.  That’s a meal at a fast food place.  You can give that up–it’s bad for you anyway.

Let’s look at some other places you can find money to put into savings.

• Never tried store brand products before?  Start!  Pick a few things you normally buy brand name and buy the store brand.  Pretend you bought the store brand and bank the difference into savings.
• Stuck on brand name?  Use a coupon.  Bank the amount you saved using that coupon.
• Addicted to Starbucks?  Start making your coffee at home.  Figure out the difference between that daily shot of java from the coffee shop and making it yourself. Put that in the bank every week.
• If you use cash, always put your change from the end of the day into a jar.  You can eventually roll it and deposit it as well.  Remember, the little things add up.

There are loads of ways to find money to save, most of which involve analyzing and changing your habits.  The important thing is to make it a priority in your life.  Instead of waiting until you’ve paid all your bills to see what’s leftover, pick a set amount from each paycheck and put it into savings first.  You can even set up a recurring deposit to suck it out of checking and into savings before you even know it was there (though if your paycheck isn’t on direct deposit and you don’t balance your checkbook on a regular basis, you might want to avoid this).

I’ll be writing more about places to shave off expenses and bump up the amount you can save.  Stay tuned.

Okay, there are oodles of books, articles, blogs, forums, etc. out there about saving money, how to get out of debt, and how to do things on the cheap. So why should you listen to me?

Well, I’ll tell you my story.

I am the daughter of two bankers. Fiscal responsibility was something taught to me at a very early age. My parents always paid for things in cash, up front, in their entirety–with the exception of their house–and even then, they didn’t do a traditional mortgage. My mother came from a humble background and was taught by her father to budget and scrimp and save, even after such practices were not vital necessities to getting the bills paid each month. Each of them had good jobs when they got out of college, and they never really had any serious financial hardships in their marriage. Then I come along. I was raised in a solid upper middle class household. Saving was a foregone conclusion and debt was the devil. My parents (bless them) taught me to work for things and earn them. My first summer job, I made $700. It took me almost a year to decide what to spend it on (my first SLR camera, incidentally, and an extra lens, in case you were wondering). I did well in school and earned enough in scholarships to cover my college education. So when I graduated in 2002, I had zero debt.

Then why the heck am I talking about debt? Yeah, I’m getting to that.

Enter my husband. We dated most of the way through college and married in 2003. He comes from a more humble background than I and was taught no money management skills. Financing major purchases was the norm in his household. What he learned from his first jobs was “Oooh, I have money, I should spend it.” I was partially aware of this when we married, but I was under the naive impression that that sort of behavior was going to miraculously change when he said “I do.”

Um, no.

So we began our marriage with several thousand in credit card debt in his name. We hadn’t been back from our honeymoon a week before we were both out of a job. That’s the sort of catastrophic thing that happened to us. We’d be about to finish crawling out of the hole, then something would happen to drag us back under. Job loss. Car crapping out. There were at least a few occasions when I let him talk me into purchasing something on a 12 month no interest, no payments kind of deal, which we always had intentions to pay it off before year’s end. But something would come up and we’d get socked with obscene amounts of interest.

Without getting into the specific details, I will sum up this part of the story to say that he ran up thousands in credit card debt, was bailed out twice only to run up more and hide it from me. He had a recurring problem with depression and his self-medication of choice was buying stuff. Not inexpensive stuff like the occasional paperback that I’m prone to. We’re talking expensive electronics and video games. It wasn’t until he’d begun to drag my credit down that I reached the end of my rope. We had what is referred to in the South as a Come To Jesus talk. I threatened to divorce him if he didn’t get his act together.

So he did clean up his act–for a while. We paid off several things and managed to buy our first house, a serious fixer upper, but it was ours. This had been an enormous goal of mine from the day we married, so it was a major accomplishment. Then a year ago, during a discussion of our very tight budget for paying off our existing debts (his student loans, car loans, mortgage, etc.) and putting some money into savings, he confessed that he’d run up more debt. $4k more in credit cards. C’mon, I deserve props for not killing him right then and there. And the scary thing was that he didn’t know what he’d spent the money on. That was frequently his story. I couldn’t and still can’t fathom that sort of attitude. I can tell you off the top of my head where most of my money goes, and if I get to look at my records, every penny is accounted for. He didn’t even balance a checkbook (reason number 1 why we will never have joint checking accounts). Just follows his balance online.

Well I’m not sure what was different this last time. Maybe it’s a sign that he’s finally growing up, but he felt true, honest to God remorse for his actions and since that day has made a concerted effort to change his ways. It has taken us almost a year and me working two jobs to pay off that $4k of credit cards and get them all closed. We’ll be making the last payment on the final one at the end of this month (thank God). Now we’re back about where we were last year when he made his confession in regards to our budget for getting things paid off. I’m starting a third job in January and hope to get one of our two car loans paid off by the end of next year. Hubby has gone back to school to finish his bachelor’s degree. We’ve finally come together on what we want out of life and our resolve to become debt free and stay that way.

The purpose of this blog is to document the remainder of our journey and serve as a forum for me to share the things that have worked for me.