Skip to main content
dooder / Freepik

This May Be The Most Important Article On Debt Elimination You’ll Ever Read

Start Eliminating Your Debt, Now!

Debt. The other 4 letter word. Here at The Money Dojo, debt is a dirty word, and we’re dedicated to its swift and complete eradication. I’ve mentioned in previous posts that I consider myself a disciple of Dave Ramsey. Particularly, his methods for debt elimination. Now, Dave writes entire books on this topic, but I can break it down for you in a few simple steps. Like most of the things we discuss here at the Dojo, the methods we use are simple, but they require commitment in order to be successful.

 

  1. List It: Make a list of all your current sources of debt. Write them down in order from smallest remaining principal to largest.

  2. Make a Budget: Create a budget. I briefly touched on this topic here, but will expound on it even further in the future. To pay more than the minimum on your monthly payments, you’ll have to get the most out of every dollar.

  3. Pay Extra: In your budget, put any “extra” money you have once all the bills and essentials are accounted for, and add it to the payment you normally make on your SMALLEST current debt. This will both reduce the time it will take to pay off the debt, and save you money on interest in the long run.

  4. Keep the Ball Rolling: Once you pay off your first debt, go back to your original list (step 1) and put a big red line through it. Congratulations! You’ve reached a big milestone in your financial journey. Now, add the entire payment from the debt you just paid off to the next debt on the list.

  5. Repeat: Repeat step 4 until every debt on your list has been eliminated.

There are several different schools of thought on debt elimination. You’ll notice that I didn’t mention interest rate a single time in my post. The reason we’re starting on the smallest principal as opposed to the highest interest rate, is because getting a quick victory is important. 90% of the challenge of getting out of debt is just the belief that it’s possible. Once you cross that first debt source off the list, you’ll be enticed to keep going, and in turn create a healthy financial habit.

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!

Learning is Earning

Learning is Earning

Expanding your knowledge is crucial to expanding your wallet. The more you know, the more you can earn. Learning is indeed earning. I like to do a lot of my learning the old fashioned way, books! I guess I should throw out the full disclaimer right now (this method will require reading). I know most people either love reading, or the flip side, would rather do just about anything in the world instead. I used to fall into the second category, so I know you can get out of that dilly dilly dungeon. Since you’re here at the dojo, I’m assuming you’ve found your passion in finance. Finding something you’re passionate about is the key to change. I find myself reading books…. I hate to say it…. for fun now. I believe you can too. So, I thought I’d share with you two places that I go to find books for super cheap.

  1. Estate Sales– You can usually find an entire bookshelf, or two, filled with books. Most of the time (in my area at least), the most expensive books will be $2 opening day of the sale. As the sale goes by, deductions begin to arise. A lot of final days, you can get your books, or whatever else might catch your eye for 50% off. Not to mention, sometimes you can bundle your haul together and offer up a price, you’d be surprised how many times they accept. I always use www.estatesales.net to find the best sales in my area.
  1. Goodwill– If we’re talking about giant bookshelves full of untapped potential, we’re talking Goodwill. Most of the Goodwill locations I’ve visited have a giant bookshelf that spans an entire corner of the store. A lot of them offered up for under $2. Much like estate sales if you catch a Goodwill on the right day, you can get even more discounts. Goodwill color coordinates their items. So, let’s say you have a book with a green price tag on it for $2, you noticed when you walked in, that today was 30% off all items marked in green. That $2 book just ended up only costing you $1.40. Plus, Goodwill is always rotating their inventory, so you never know what you might find. Use their website www.goodwill.org to see if there is a location in your area.

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!

 

MB

iconicbestiary / Freepik

The Best Way To Pay For Your Next Vehicle

The Best Way to Pay for Your Next Vehicle

You took our advice and narrowed down your search for your next vehicle.  You’ve honed in on the perfect used car. Great job! Now you don’t have to worry about the depreciation problem we talked about in this post. But you’re not out of the woods yet. The dealer still has a few tricks up their sleeve too. You didn’t think you were gonna get away that easy, did you?

 

Let’s set up the scenario. The car you chose costs $20,000. The dealer comes back with what they claim is a more than generous offer of 4.5% APR over a 72 month term. The monthly payment is “only” $317. Now that’s a great deal! Or so they’ll ATTEMPT to lead you to believe. Little do they know, you’ve been honing your skills in The Money Dojo lately. Don’t sign that dotted line just yet.

 

While I’m sure most of us in the market for a new vehicle could afford that $317 monthly payment, we like to get the most out of every dollar we spend here in the Dojo. The fact of the matter is (tax, title, and license aside) if you finance your car under the parameters listed above, you will actually pay $22,858.60 by the time it’s paid in full. That’s over 14% more than the original $20,000 price tag.

 

There is only one way to combat this problem. Don’t finance. Pay Cash. It may seem scary to drop such a large amount of money at one time, but in my opinion, it beats the brakes off of paying an extra 14% for the exact same vehicle. Now, this route will require a little discipline. To pay cash for a $20,000 vehicle, it requires you to have $20,000. This is where a budget comes into play. Every month, you need to be paying yourself a car note. But, instead of overpaying a finance company or dealership for your current vehicle, you will now be saving up for your future vehicle. In fact, if you were paying yourself a car note for that 72 month period, instead of the dealership, you would only have to put away $278 a month! 

 

It’s really a simple concept; it just takes the dedication and discipline to set it into action. Obviously, this method of payment will take some planning, but it will save you thousands upon thousands of dollars in the long run. Ditch the “normal” approach of wasting your hard earned money on interest, and start doing things the Dojo Way today!

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!

The $5 Savings Plan

It’s ideal to have 6 months of expenses in your savings, but that can often be a daunting amount. Not everyone is in a position to set aside this kind of money, but it’s important to start somewhere. When I was in college, I used what I called the 5 dollar savings plan. It was simple – every time I ended up with a $5 bill in cash, I would stow it away in my secret box. Why President Lincoln’s face, you ask? Setting aside $1 bills would take a long time to save anything substantial and the disappearance of a $10 or $20 bill was always felt more. Five bucks was the perfect amount as it’s an amount that could be “lost” without being noticed and could add up to a moderate savings before you know it. I worked a meager minimum wage job in college so the cash wasn’t exactly flowing in and out of my wallet, but despite this I was able to save nearly $1000 in just my first year! Now that (to me at the time) was substantial. Consider the average millennial only has that much in their savings today and it’s not a bad start.

However, it’s important to be realistic about this savings method and it’s not for everyone. You’re probably not going to retire at 40 on the beach because you stashed all your $5 bills. Also, if you’re making $50,000/year, you should be putting more than ~ 83/mo away! It’s primarily a method for individuals who have little or no savings at all to develop good habits. I know it’s tempting to see a slight excess in money just sitting in your account after all the bills have been paid, but it’s important to be disciplined with your extra fluff. Paying down debts or saving for the unexpected is much more responsible and wise than blowing it on fancy clothes or other expendables you could live without.

Be sure to subscribe to our greenbelts newsletter so you get all of our insight here at The Money Dojo!

CB