Monday, August 28, 2006

10 Dumb Things to avoid

10 Dumb Things to Avoid while trying to get out of Debt:

1. Taking out loans to pay off other loans.
That includes refinancing a mortgage or using a Home equity line of credit. Dealing with debt that way is dangerous, and as the huge number of bank incentives to do so SHOULD show us.. doesn't usally work. Two wrongs don't make a right. Your bad habits got you in debt to begin with.. all those poorly thought out decisions.. don't take on new temptation.. you'll end up regretting it.

2. False Economy.
Your time is worth something. Don't spend hours that you could be making money or creating wealth (see below) dealing with frugal things that only save pennies at best. Don't choke on a gnat and swallow a camel. Installing thousands of dollars of weatherproofing/insulation in a house you won't stay ten years in.. that's poor economy... you'll never recoup that money.
I could fill a book with all the ways we practice false economy.. Instead, I challenge you to reconsider every frugal choice honestly to see if it's really saving you anything, or if it's a net loss.

3. Do any remodeling projects.
Seriously.. they always cost more than you think. Painting a room might be ok.. but be prepared for things to go wrong and your couch to need recovering after somebody trips with a paint can.

4. Start a business.
Any business. Just say NO! Most businesses fail after the entrepreneurs pour thousands of hours, thousands of dollars and untold levels of stress into it. Don't do it. Wait til you are debt free before even considering it. Unless you've hit on a model that requires no capital, minimal time, and no space... (and if you have.. let me in on the secret!).. no business startups please!

5. Close any lines of credit.
Pay it off, cut up the card, but leave it open. Open credit will help get you a better score.. a better score translates into a better interest rate, and lower interest rate translates into less money you spend. Don't open new debt.. but you CAN leverage a good credit score into a better interest rate on what you already have.

6. Buy "wholesale" club memberships and use them.
It's very difficult to save enough money using a wholesale club to justify the membership, time, and temptation. Those places are filled with things you don't need but will want the second you see it.. better stick to your neighborhood grocers.

7. Drive more than a little out of your way to fill up at a cheaper gas station.
Do the math. A 30 gallon tank of gas at $2.85 will cost you $85.50. A 30 gallon tank of gas at $2.77 will cost you $83.10.. just $2.40 difference per fill-up. Factor in how much gas you spent getting there, wear and tear on your car, your time..
you can easily find a net loss if you drive more than a few minutes farther.

8. Go shopping unless you absolutely have to.
Groceries.. you need them. Anything else.. you can probably do without, or buy online where it's easier to ditch the stuff in your "Cart". Going to malls or any store just to browse, or without a specific thing in mind is a very bad thing. Consumerism is what got us in debt in the first place (usually), and the best way to avoid temptation is to steer clear of merchandise in the first place.

9. Have a Yard Sale.
You won't make much money.. usually just pennies on the dollar spent, and that's for stuff in good shape.
Instead... itemize your junk, just make a simple list (like.. 3 mens shirts, 4 slacks, 15 womens scarves etc).
Place it in boxes or bags, and take it to your nearest Battered Women and Children's shelter and get a tax receipt.
It's better than Goodwill IMO. They sell the stuff they can't use to Goodwill for $5.00 a bag.
Take the tax receipt and your itemized list.. and deduct up to $500.00 from your taxable income.
The IRS has a splendid chart, but you can approximate it by figuring what your stuff would be priced at a thrift store and claiming that.
By the time you figure your costs, time, and stress.. it's a rare yardsale that's worth the effort. Trust me on this one.. Yard Sales aren't the way out of debt!

10. Spend alot of time "researching" Getting out of Debt/Frugal Living/Personal Finance etc.
Frugality, Personal Finance, Debt consolidation.. you can spend hours researching it.. but what you really need to be doing is putting your own sense of reason in action and DOING something about it. Get organized financially. Keep good records. Declutter your house (mind) of things that oppress you and slow you down. Learn better habits, break old bad habits.
This principle.. is to stay focused and not get too caught up in "the best way". There will always be a latest, greatest way to get out of debt, lose weight, get organized, become wealthy etc.. The only one that will work though.. is the one you start and finish. Don't get sidetracked.. pick something easy and stay with it.. avoiding temptation by not pursuing every "best" idea you come across. Get started DOING something about Debt today.

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