My Debt-Free-Wannabe Diary

PeachPickle

DontDoDebtKids wrote:

CDs: £10 (actually my gf bought ages ago, I just paid her back this week because she remembered - oops!)

:rotfl: :rotfl: Ah, your diary makes me laugh

DontDoDebtKids

Hi all,

Not been updating here for a while because there's not much to say! Still waiting from my cheque from Capital One and still stashing some cash to add to the money from Capital One to pay off my Egg Loan, so all going smoothly.

I had been surfing the web for money articles, looking for the seven rules from "The Richest Man in Babylon" (well worth a read and I have now bought it second hand from Amazon as I thought it was so good), and found the following website:

http://www.mdmproofing.com/iym/

There are collected articles summarising several different money management concepts from several different books on the subject, including "The Richest Man in Babylon" and "Rich Dad, Poor Dad" so I've trawled through them and I think they're quite well summarised.

One in particular, The Baby Steps (link), contained some really good ideas, summarised as follows:

1. Make minimum payments on all your bills. Squeeze your budget until you've accumulated $1,000 cash. This is your beginner emergency fund.

2. Pay off your debts, smallest to largest. "Snowball" the payments.

3. Create a full-fledged emergency fund containing 3 to 6 months' worth of expenses.

4. Fully fund 15% into pre-tax retirement plans and Roth IRA, if eligible.

5. College funding.

6. Pay off your home early.

7. Build wealth! (Mutual funds / real estate)

I'm extremely tempted to move to this plan - I haven't got an emergency fund and it would be nice to have some money just in case! I'm already doing 2 and I'm doing it in order of interest (which will soon be a choice between 3.9% and 4.9% - big deal).

It's what comes next that interests me: I don't really have a plan for what I will do after becoming debt free. I want to invest some money and I don't want to get back into debt so I'm tempted to start with the plan above as my blueprint.

Six months worth of emergency fund would take me six months to gather if I continued the rate at which I am paying off my debts but changed the target from my credit cards to a savings account.

I'm already saving 4% into a final salary pension scheme so I could save 10% more into a SIPP or similar and run a High Yield Portfolio (see the Motley Fool for more details on this - well worth learning about).

Replace college funding with private school funding (hopefully any little bundles of joy that come along will get scholarships...)

Then 6 and 7 need more information from elsewhere.

DontDoDebtKids

This was an interesting read, about a survey of wealthy (defined as net assets over $1 million) people in the US:

According to the research, the truly affluent in America have seven standout characteristics common to all of them. Each factor played an integral part in the means by which these people achieved their enviable financial positions.

I assume this means that those who win the lottery, or similar, usually squander it so don't remain wealthy for long enough to be included in this survey!

1. They live well below their means.

Contrary to popular belief, frugality is the foundation of wealth. Mundane consumption habits that are void of luxury-car purchases and fabulous yachting sprees may not impress the neighbors or the media, but then, impressing the public isn't the goal of most first-generation millionaires. Financial independence is.

This is very interesting, but I've come round to this way of thinking a little while back. What I find, however, is taht it's actually quite hard to carry out in practice! I should really be saving most of my money in some way to produce passive income (e.g. dividends from shares, buy-to-let rental income) rather than going and buying a new computer.

I think that I will continue to keep a spending diary after I pay off my debts, to keep that mentality of "do I really need this?".

2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.

The wealthy know how to budget their money, and they know how to budget their time. They anticipate and plan their incomes and expenses — often as much as a year in advance. They spend significant time researching their investments. They spend time examining ways to increase their unrealized income; i.e., tax-advantaged investment accounts. They do not spend much time researching the purchase of their next luxury automobile.

This is also interesting: budgeting income and expenses a year in advance! Cripes! I'm a complete novice at this and just budget for the month ahead in a very informal fashion and hope that I have enough money to cope! I don't mind researching investments and examining ways to increase my income.

To Do: Budget income and expenses for next year.

3. They believe that financial independence is more important than displaying high social status.

The wealthy understand that conspicuous consumption and high levels of "domestic overhead" will likely impress Joe and Jane America, but these status expenses carry a highly negative correlation with one's true net worth. The wealthy aren't interested in status vehicles or other showy products. After all, it is much easier to appear wealthy than it is to be wealthy.

Yup, this goes back to the first point again - appearing wealthy rather than being wealthy. It's basically the difficulty of rejecting consumerist society!

4. Their parents did not provide economic outpatient care.

Statistics demonstrate that the more financial assistance an adult child of affluent parents receives, the less likely it is that that adult child will become wealthy. Generally speaking, the more dollars adult children receive, the fewer they will accumulate. These gifts, whether for down payments or for a grandchild's private-school education, will, more often than not, simply generate higher levels of consumption. After all, it's much easier to spend someone else's money than your own.

Ah yes, the American obsession with blaming one's parents! Saying that, there is most likely a grain of truth in this: if you had "loads of money" when you were little, you didn't have to cut back or go without and so you continue that existence.

"Being kept in the manner to which one is accustomed" I believe is the phrase.

Welcome to the real world, DDDK!

5. Their adult children are economically self-sufficient.

"The role of enlightened parents," the authors write, "is to strengthen the weak." They found that cash gifts from affluent parents to their adult children serve dual outcomes: They act to increase the children's dependence upon the parents for continuing financial support, and they continuously deplete the parents' financial position.

This is one to note for the future methinks!

6. They are proficient in targeting market opportunities.

Finding specific niches and exploiting them is often the key to generating an above-average income. In a nation geared toward turbocharged levels of consumption, market opportunities are created constantly for those willing to supply new products or ideas.

So basically, be an entrepreneur (sp?)...

7. They chose the right occupation.
Profitable industries abound. But just because a business is profitable doesn't mean its owners and employees will become wealthy and affluent. Wealth is generated through talent, desire, and discipline. One millionaire, when asked why he thought there are four times as many millionaire entrepreneurs as there are millionaire employees, stated it this way:

"There are more people [employees] today working at jobs that they don't like. I'll tell you honestly that the successful man is a guy who works at a job, who likes his work, who can't wait to get up in the morning to get down to the office, and that's my criteria. And I've always been that way. I can't wait to get up and get down to the office and get my job underway."

Not particularly helpful for most people, but I see his point. I'd say I'm relatively lucky in this regard because I quite enjoy my present job!

DontDoDebtKids

Direct Debit for Lloyds CC went out today, so totals are:

Debt Totals

Egg: £6464.32
Capital One: £1901.88
Lloyds: £1880.06
Amex: £5715.22

Total: £15,961.48

DontDoDebtKids

I finally plucked up the momentum to place two matched bets at the weekend so I'm on track to start going again!

I'll let you know how they pan out - hopefully I haven't gone wrong after all this time, me being out of practice and all!

DontDoDebtKids

It's a bad one this week:

Spending Diary

35.63 Presents (Christmas)
45.00 Petrol
16.32 Groceries (to be refunded)
4.40 lunches at work
0.55 postage
2.76 Richest Man in Babylon book
10.60 Going out (theatre programme, ice creams and beers)
69.58 car bills
80.00 renewing domain names (late because I'm an idiot and didn't update my contact details so they lapsed and I had to pay late fees on both :mad:)
100.00 Premium Bonds

Total: £348.52

Leaving me £242.32 until payday...

DontDoDebtKids

Got a 50p survey from YouGov and £4 from Pinecone this weekend, however, which is good!

DontDoDebtKids

Yippee, £20.48 in Quidco money on the way as well as over £80 from ebay on the way over from PayPal.

Made about £10 from a matched bet at the weekend too.

Still waiting for the 16th of November when I should finally get my cheque from Capital One...

DontDoDebtKids

Huh? Very odd - my post (and it was a cracker) has gone!

First it appears under a random username...

quite odd...

and now it has gone.....



Shall I try again? It won't be as good this time

DontDoDebtKids

Yo, me again!

Two no spend days this week!

Spending Diary

2.49 ebay postage
11.89 expenses
2.30 lunches at work
79.15 (I think) celebrating on wednesday
45.00 dinner on friday
1.00 poppy :A
14.99 xmas pressie
4.50 xmas pressie
10.97 three books from oxfam (two as pressies)

Total: £157.91 :eek:

Well there we go! Got lots of good Christmas pressies for people - will be splitting total cost with gf when we've got everyone something so should get something back as have borne the brunt this year - and got myself a great book on investing from oxfam to bury my head in.

Went out TWICE :eek: this week - wednesday to celebrate my brother finishing university and friday with gf and both outings were so good that I DON'T CARE. It's obviously letting off steam so no telling me off!

I'll be better this week...honest!