Want to Save Some Serious Cash? Try a Spending Fast

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Want to Save Some Serious Cash? Try a Spending Fast Posted: 30 Mar 2011 04:00 AM PDT When we hear of friends or family who are able to pay off debt fairly quickly, or we learn that someone working a job whose salary is half ours can somehow still find the funds for that luxury vacation, we wonder how they manage to put away so much money. Of course, tons of personal finance advice articles out there will suggest that putting aside only a small portion of our paychecks, somewhere in the arena of ten to fifteen percent, will, over time, enable us save up a tidy sum for emergencies, vacations, or debt repayment. Saving Sometimes, however, you may want to embark on a radical savings project. If you have a specific goal in mind, like completely wiping out your debt, or moving to a certain city at a specific date, try doing what’s called a “spending fast”. Recently, a CNN Money article featured a young girl who did some radical saving and ended up putting away $18,000 in the process. Her story is a truly inspiring one for those of us who are tired of living paycheck to paycheck. Amy Newell Jones, a Colorado-based freelance photographer whose day job entailed working as clerk, decided in January of 2010 that she’d take a more hard-lined approach to her debt pile – over $25,000 worth. She promised herself that she would not spend on anything that did not fit into the “necessary” category. That meant no more shopping, going out to movies, eating out, or engaging in any activity that wasn’t absolutely necessary to her survival. She focused in particular on changing her mode of transportation to work. Instead of driving, she opted for the city bus, a lifestyle change that saved her thousands alone. The key to her success, Jones noted, was having a definite goal in mind, one that truly motivates you. In her case, it was eliminating the debt she had amassed without even noticing it. She ends her article stating, “Because convincing myself to stand in the freezing wet snow and wait for the bus even when I don’t want to comes from a deep desire to remain debt free.” Of course, going on a year-long spending fast as Jones did may be a little bit extreme for some of us. However, you’d be surprised at how easy the process can be once you adapt to simply not spending. Even if you don’t attempt it for a year, even if you strive for a smaller no-extra spending period of time like one to three months, you can still save an amount that you never thought you could. Personally, I’ve been on a similar “spending fast” for almost three weeks, and I’ve saved over a thousand dollars in that time alone. So give it a try, make a commitment, and see how far some extreme spending restraint can take you. Raine Parker, regularly writes on the topics of accounting degree.

Book Review: Debt Free Life Posted: 29 Mar 2011 10:00 AM PDT Debt Free for Life As the title suggests, "Debt Free for Life" focuses on eliminating debt, whether it be from credit cards, mortgages, or student loans. Bach starts his book by discussing ways people get themselves in debt.  The tricks that lenders use (low monthly payments), the compounding, deadly powers of monthly interests, reasons to not be in debt, and more, are all reviewed.  He advises that the most effective and immediate way to stop debt from accumulating is to cut back on spending – which I wholeheartedly agree.  These chapters are motivational and get readers to truly see how debt deters people from reaching financial freedom and achieving their dreams. Next, Bach reviews the DOLP method and Debt Wise.  The DOLP plan (Done on Last Payment) is Bach's method to organize debts in order of their balance size and to focus all the efforts in paying off the smallest debt first while making minimum payments on the rest.  Debt Wise, on the other hand, is a debt repayment plan online – except with a monthly fee.  This appears counter-intuitive in a book aimed at cutting spendings.  But oh, of course, with the book comes a month of free Debt Wise use. Then, Bach teaches reader how to negotiate the interest rates on credit cards.  Tactics include researching interest rates of other credit cards, contacting the company, knowing who to talk to (floor manager), and letting them know that there is some difficulty making the payments.  It may take more than one phone call, but the work is worth the money saved. Using the principles from the first half of the book, Bach continues to discuss ways to pay off mortgage and student loan – both as soon as possible.  If all else fails, consult an attorney to discuss "time-barred debt."  This is any debt past due for longer than the applicable statute of limitations.  The money is still owed, but there is nothing creditors can legally do to force payment.  This may be informational for readers, but it may also be misinterpreted for some to continue their debts in hopes that they would be "dropped" as time goes on. If anyone has tried to get debt repayment under control but failed, perhaps it is time to turn to professional credit counseling.  However, Bach advises against debt settlement because it does not always work and may instead create more debt and problems.  It may also hurt credit score and increase tax bill. Finally, Bach advises people to automate their personal finances in terms of paying bills, saving money, and investing.  This is especially important as more of us are becoming technology savvy, and it is also helpful in preventing missed payments, thus saving money.  Bach also discusses seven ways to find unclaimed money through various websites. Overall, "Debt Free for Life" is a decent read for those motivated to get rid of their debt once and for all.  I especially recommend the DOLP, as it is easy to understand and follow.  It is nothing innovative, however, and may be found in dozens of other debt-related books or even blogs.  Also, I would advise readers not to be trapped into the Debt Wise program; it just does not make sense to pay money to get out of debt.  Nevertheless, Bach does have good tips to debt repayment, such as credit card interest rate negotiation and automatic payments.  This book is easy to read, but if you have already read other financial books (by Bach or not), there is really nothing specifically new to take away.  The core ideas are still the same: spend less, save (or in this case, pay back) more.

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