Wednesday, October 27, 2010

Cut the Crap

Baby Boomers like big white underpants.
Okay Spendy Spenderson, It’s time to get real and see where you can cut out some of the crap in your life. I’m a child of parents from the baby boomer generation. The generation that told their kids that we can be whatever we want to be and have whatever our heart’s desire when we get older. The problem is that the boomers failed us in teaching us how to afford getting there and that you need to save for it. I hear all too often from my parents’ generation that we are spoiled and we feel too entitled but where the H-E-double-hockey-sticks do they think we learned that from? Why am I not a zookeeper, finishing his PhD who owns an apartment building and just won the latest election to become Prime Minister? The truth is the message was a good one, work hard and you can have whatever you want, but they didn’t lead by example (Okay Gail, you’re an exception to the rule).

As you may have read from my last post, my spending is all over the map and I’m not putting any of it where it should be – into my savings account.  As confessions_of_an_ordinary and myself highlighted in my last post, my “restaurant expense is way too high.” There’s a restaurant across the street from work (that is so effing delicious and would become a fast growing chain if Rita MacNeil ever discovers it) which I was eating at on average of 2 times per week and at $8 an order that’s freaking expensive. If you’ve tried their General Tao Chicken you would be able to understand. But really, think about it, there are 52 weeks in a year, multiplied by 2 multiply that by 8 and I’m spending $832 per year on ONE restaurant! And the worst part is that I’m paying to expedite my office-worker belly! Now the other bad news is that I also ate out every other day of the week at other restaurants and the average cost was about the same. So let’s take $8 multiplied by 52 weeks, multiplied by 5 work days for a grand total of $2,080 per year on lunches!

After doing my analysis, places that I frequented became highlighted and I was able to say “oh ffffiretruck, I’m wasting my money.” This is when you sit down with your stuff and scrap the crap. Good news is that you won’t  have to invest in any more Depend undergarments since you will no longer be $hitting your pants from the shock of your analysis. So what do you cut? Well, you need to figure out how much money you should be spending in each of the following 5 (Gail approved) categories so that you know how much you have to live on:

Savings: 10%
Debt Repayment: 15%
Transportation: 15%
Life: 25%
Housing: 35%

This is Gail’s list, but she does allow for some tweaking here and there and no offense Gail, but some of us are capable of getting into debt long before we have kids and a house payment. So here’s my single-childless-guy-living-downtown-without-a-car budget:

Savings: 15% (10% for long term, 5% for ‘wants’ and emergency fund)
Debt Repayment: 45%
Transportation: 1%
Life: 14%
Housing: 25%

Quit reading picture captions and get a Life!
I’ll go into further detail about Savings, Debt Repayment, Transportation, and Housing in future blogs so for now let focus on Life! Life cereal is delicious, and Life the board game can provide hours of family fun. Just kidding guys, Life cereal is kind of blah, and Life the board game has too many pieces for children to choke on and for me to lose. Okay, okay, Life is the category where all your groceries and personal care, clothing, gifts, entertainment, and other unplanned expenditures show up such as the dentist, doctor, meds, pets, etc. In my case, my life category works out to just $94.11 per week to spend on ALL of these things. If you’re anything like my friends, you’re all saying, “no freaking way can you live on that!” Well for the past 3 weeks, I have been. When you add in the cost of bus tickets (which I almost never use) my total allowance for 1 week is $100.83.  I rounded down to $100 for simplicity sakes. Here’s what it looks like in actual money:

Transportation: $6.00
Clothing & Gifts: $10.00
Groceries and Personal Care: $40.00
Entertainment: $38.00
Other: $6.00

Are you nucking futs?!? That’s generally what I hear (with the letters switched) when I tell people this is the amount of money I live on every week. Keep in mind that this money accumulates every week that I don’t use it all and I can dip into each amount to cover for each other. What was really nucking futs was that I was spending 87% of my income on “Life.” $2,543.66 in actual money! I reduced my “life” spending by 73%!! This journey is going to be quite arduous. In my next blog I will get more in detail about my debt, which is the reason I’m forced to live as though I’m a first year student who’s pi$$sed through their student loans in their 2nd week of university. So my generation, you so-called self-entitled spoiled brats, and all you baby boomers out there too, pay attention because you just might learn a thing or two! If you do learn something, pay it forward, you’d be surprised how grateful people are to be able to talk about their finances with someone who has lots of knowledge about it.


Sunday, October 24, 2010

Going Anal over my Analysis

This is the part where most people lose their $hit. Doing a spending analysis can feel a lot passing a gall stone or giving birth; neither of which I have done - THANK GOD. Others could liken probing through your finances to actually getting probed. After all, you can’t spell analysis without anal. Now, all jokes aside, doing the analysis wasn’t all that bad. It was kind of exciting to see how I was spending all my hard earned moolah. When following the Tao of Gail she asks you to look back through all your finances for the past 6 months. Yes, that is about 180 days worth of spending. Gail thinks that looking back anything more than six months is excessive.  I just think you’re flaunting it in my face so quit showing off!

Debit and Credit cards are made from the Devil's feces.
I’m certain that most people who have dug themselves into nearly $40,000 of debt (like me) are also big fans of plastic. I’m not talking nose jobs here; I’m talking credit and debit cards. My debit card was actually attached to the pleasure centre of my brain so that every time I used it I felt like I won the lottery. Oooh! I entered the magic code and money came out! Hooray! Anyway, where was I? Oh yes, debit and credit cards. Ok, so if you’re like me, you use these things every single day and therefore have a great record of where you spent all your money. Here’s what you need to do; print all of your bank and credit statements (yes you have to open them now) for the past 6 months and split everything up into categories so that you literally see where you spend. Gail Vaz-Oxlade’s amazing book Debt Free Forever provides a plethora of categories to divide everything into. The categories you use are going to depend on your “lifestyle.” For example, I don’t have children (unless you count goldfish as children) so I was able to leave all that kids stuff out. The categories I used were:

Rent; Electricity; Furniture and Home Décor; Public Transportation; Taxis; Doctor’s Fees, Dentist, Optometrist, Prescription, and other Medical Costs; Cell Phone; Groceries/Personal Care; Restaurant; Convenience/Corner Store; Clothes; Hair/Tanning/Spa Services; Entertainment; Sports; Reading; Music; Booze; Electronics Store; Drugstore; Pet; Family/Gifts; Vacation; Charity; Bank Fees; Debt Repayment; Interest Costs; Cash Withdrawal; and Other

Depend Undergarments will be your best friend during your Analysis
If you’re reading all this and going OMFG, that’s a bit excessive, consider that I only used about 1/3 of all the available categories that Gail provided. Wowsa. I used Microsoft Excel and made a spreadsheet to add up all my expenses. I also printed all my statements off the internet (yes you can do that so no excuses about lost statements) and crossed things off as I entered them. For entries into savings, you don’t count them at this point. It’s just thought of as moving money around, not “spending.” A few hours or days later, you will have a lovely spreadsheet full of all your expenditures. I used colours in my spreadsheet to make it look more pretty and jazzy because finances are more boring than 4-year-olds playing hockey. Alright, so you have all your totals for each category added up. Now take those amounts and divide them by 6 (for 6 months) and be shocked! That’s how much you’re spending on everything each month. Yep, every month! Now, put on some Depends and take that number and multiply it by 12. Good thing you were wearing Depends, because you probably $hit your pants. 

You’re probably curious to know where I was spending my money, which is why you read this in the first place. Yes I know you’re all talking to your friends and saying “Oh-Em-Gee, this one guy on the Internet has $40,000 of debt and telling people about it openly!” And then you say something like: “We should subscribe to his blog and tell all our friends to subscribe too.” Ok, so here’s where my money fell each month. Some cases, not so bad, if anything, impressive, other cases, well...

  • Rent: $690.61 (Usually lower than this, but had to split 2 ways instead of 3 one month)
  • Electricity: $14.15
  • Furniture and Home Décor: $9.31
  • Public Transportation: $2.64
  • Taxis: $15.00
  • Doctor, etc: $14.75
  • Cell Phone: $93.07 (Yikes!)
  • Internet: $15.74
  • Groceries/Personal Care: $228.45
  • Restaurant: $406.81 (So not worth it!)
  • Convenience Store: $10.70
  • Clothes: $157.40
  • Hair/Tanning/Spa: $15.43
  • Entertainment: $119.32
  • Sports: $127.63
  • Reading: $10.32
  • Music: $29.49
  • Booze: $175.93 (good thing I quit)
  • Electronics Store: $13.35
  • Drugstore: $54.16 (on what?)
  • Pet: $3.76 (not laughing at goldfish so much now are you?!)
  • Family/Gifts: $31.80
  • Vacation: $117.33
  • Charity: $20.83
  • Bank Fees: $19.12
  • Debt Repayment: $718.80 (So depressing)
  • Interest Costs: $314.06 (So angry!!)
  • Cash Withdrawal: $555.00 (No idea where I spent this)
  • Other: $38.34

Every month I was spending and average of $3,985.83! That number is very sobering. This is why the analysis is so important. $314.06 on interest wasn’t even registering in my brain. When I had finished adding it all up I was terrified, mad, and a little blue. But that wasn’t even the worst part. You add up what you actually take home in pay AFTER taxes and get some fresh Depends. My actual monthly average was $2,912.88.  You know what that means?!? I’m over spending EVERY month $1,072.95!! Now, deep breath, every YEAR I overspend by $12,875.44! That, my friends, is how I got into debt.

It’s that simple. When you spend small amounts here and there you don’t think that $8.00 on lunch is that big a deal, or $20 on prophylactics is excessive, but really, it all adds up to one giant flustercuck of a mess. Wow, that was exhausting. It is such a good thing to sit down and really see where you sit with your spending. I challenge you all to do this exercise yourselves and get the same wake up call that I so desperately needed. Next post, cutting out the crap.


Friday, October 22, 2010

My New Roommate, Gail

Somewhere between spending money on the gym, the spa, concerts, booze, restaurants, music, and all that other crap, I would tune into one of my favourite reality shows: Til Debt Do Us Part. For those of you not familiar with the show, the premise is based on the fact that one of the most popular reasons for divorce is money. I don’t know about you, but I remember money definitely being the source of more than one argument around my home growing up, and I even see a pattern emerging in my current relationship from time to time. Each episode follows a couple who carries a $hitload of debt and usually has no plan to get out of it, and no savings to speak of. 

Gail Vaz-Oxlade will change your life!
Enter: Gail Vaz-Oxlade, Canada’s Financial Guru - and my hero. Gail uses a lot of tough love and shows people how they are spending their money, how much debt they are carrying, and where they are going to be financially in 30 years. The results are always astounding. Some people had the potential to be $750,000 or more in debt in some episodes!

Now picture me lying on the couch eating a box of Triscuits (with cheese of course) and thinking, man these people are stupid! And how can you eff up your finances so terribly? I thought I was in such good shape because I never did a rent-to-own system, and I only bought things I really needed – or was I? I started to do a “budget” back in April. Basically all I was doing was keeping a list of what I had paid that month to ensure that I had covered all my expenses. I calculated that I had only $1,500 of expenses every month. That figure included everything – Rent, Cell Phone, Power, Gym Membership, etc. That left me with lots of money to spend on whatever the hell else I wanted. I was paying more than the minimum payment on my debt, so I was doing fine - right? After 5 months of this and seeing my credit card continuing to climb higher (maybe I should have stopped using it for starters) I had a mini freak-out.

What was I to do? Who could I turn to? I don’t know anyone who actually wants to talk about how much debt they have. It’s so funny how we can boast about all our ‘stuff’ but the reality is that in comparison to my debt, I really don’t own anything I have. I wouldn’t even come close to $40,000 if I added the value of what I own. And then it dawned on me; Gail must have a book to help me out of the money manure pile - and she did!  I picked up her book – Debt Free Forever. The title alone promised me everything that I was looking for. Debt-free AND forever; how great is that? So headed down to my local Chapters (because it’s cheapest there) and picked up my new bible. It’s a bit embarrassing to shop in the “self-help” category and lucky for me it wasn’t there! I grabbed my book from the business section and headed down to the cashier. “This is my last frivolous purchase” I said in my mind.  When I handed the book to chubby cashier, hair adorned with the loveliest scrunchy you’ve ever seen, she looked at me and said, “this book is amazing.” She didn’t have to tell me, once you go Gail, you never go back.

With Gail in hand, I was ready to get cracking on my new debt-free life. However, I wasn’t quite prepared for what I was getting myself into. Gail makes you work your a$$ off! My first experience was the adding up my debt process. I had always thought that I was sitting around the $30,000 mark when I finished school, but it wasn’t until I sat down and actually added it all up that I realized I was actually $37,193.12 in debt!! This was an especially harsh realization since I had quit drinking a day or two beforehand (for medical reasons, not by choice) and I didn’t smoke or even drink caffeine for that matter, and I really needed a fix of something after that! I went downstairs to my roommates proclaiming my shock and horror and told them Gail was officially moving in because clearly my budgeting approach was total weenuk (cree for dirty balls).

Now, don’t start thinking, oh, you’re doing the self help book thing? That’s lame, I’m not actually going to learn anything from you that I couldn’t just learn in her AMAZING book. But you’re wrong! Everyone struggles through their debt differently. My stories will help to inspire you, I promise. Up next, my spending analysis - get ready for more OMFG moments.


Thursday, October 21, 2010

How did I get in this Money Mess?

Welcome to my blog about my journey to kick my debt to the curb. A few weeks ago I made a conscious decision to do something about my debt. I have tried budgeting in the past and have had zero changes to my debt. Actually, that’s not true; I have actually gone further in debt! I think my own delusions led me to believe that I was getting further ahead, but the reality was that I was not even close. It got to the point that I had stopped opening my bills, especially my credit card. I was receiving a letter from Student Loans almost every month to tell me that I missed a payment! The payment is only $107.99 for fox snakes! I couldn’t understand what I was doing wrong. At 28 years of age, I came to the harsh realization that I am almost $40,000 in debt! I have zero assets other than my education so this was horrifying to say the least.

I wasn’t always the debt monger that I am today. In the beginning I started out pretty good. I was always a great saver as a child. I opened my first savings account when I was 5 years old. I was so good at saving that I would occasionally be lending my money to my parents to buy essentials like milk, eggs, or whatever else I could to help the family out. They always paid me back eventually and I wasn’t using the money anyway so it really taught me how to save my cash. Growing up with little cash I was never raised to be a spendaholic and I knew all the tricks to shop on a dime, take advantage of sales, and live within my means. When I got out and working on my own, I was able to live on $5.85 an hour in a part-time job. I bet you’re thinking, with all my great saving skills, how the hell did he get nearly $40,000 in debt? Here’s how:

As much as I could “survive” on next to nothing, after 2 years of this kind of work, I decided to go back to school and take a course on web design. My choice to go to school came with a hefty price tag of $14,000 for a 1 year course. I took out a student loan with the federal and provincial governments and I was well on my way to becoming a poor student. I needed a computer so I asked my mom to use her line of credit for me to buy a new computer worth $3,000. It was a great investment since I bought it in 2002 and it’s still working 8 years later. I was quick to pay off my debt to my mom and in about 6 months I had paid her back entirely. Keep in mind that I did this working a minimum wage job, so that was almost half my salary every month. If there is one thing I can’t stand, it's being in debt to family members.

Out of school a year later, I worked my butt off and got my debt from school paid down from $14,000 to $8,500. I was really on track to becoming debt free. After working in a job where I knew I was smarter than my boss made me head back to school. This time however, I decided to go to school without any financial assistance. Thanks to my (former) amazing credit history, I had now been approved for 3 credit cards, an American Express, and Ikea Credit Card, and a Bank of Montreal Airmiles MasterCard.  I was always paying off my balances in full for the Amex and the MC, but I forgot about the balance on my Ikea card and got taken to collections over $300! I was so mad since I had never received a bill from Ikea. I quickly cancelled my Amex after that and stuck to one card – my MasterCard. MC loved me the so much! When I first got the card, I started off with a limit of $1,500. Today, that limit is at $15,700!! Why oh why did I let them do that to me?? I never in a million years thought that I would let myself get to the point where I was reaching that limit. The interest rate on this card was 19.5%! And to top it off, I fell for their stupid “balance insurance” scheme which made my balance climb higher and higher! I had that idiot insurance for years. Combine that with last minute emergency flights home and using my credit card for crap and restaurants, my current owing on my MasterCard is a disgusting $14,581.45 in credit card debt!!

That accounts for $14.5K, so where does the rest of the $40K come from?  Well, as with most students, I built up more debt when I went back to school. I was living in an apartment I couldn’t afford on my own; eating at restaurants like I had been debt free forever; and flying home at whenever I felt like it without any paid vacation and paid for nothing with my own money. I could see myself swirling down the toilet bowl that is debt and now I’m in the sewer with the rats and all my crap. Over the time as a student, I hit $4,991.57 (out of $5000) on my regular line of credit, took out another $9,174.74 (out of $10,000) on my student line of credit, and after paying down all the the interest on my previous student loan it remains at $8,445.36. Add it all up and we’re talking $37,193.12 of debt!

Wish me luck!!!