So, now that we have your insurance needs straightened out, we’ll talk about estate planning. Estate Planning is the number one thing you can to do tell your family that you love them.
I worked for an Estate Planning attorney in Las Vegas, and that was probably the most beneficial job I’ve ever had. I learned many valuable things about estate planning during that time. Now I’m not an attorney and am not 100% familiar with Tennessee state law, as I only worked with Nevada state law, so you need to seek the council of a certified professional.
There are 4 main documents you should have and they are: A Will, a Living Will, a Durable Power of Attorney, and a Trust. We're going to break each one of those down so that you can understand why and when you need one.
Wills
If you hate your family, do not get a will. A will is the single most important estate planning document that you can get. Why? Because a will not only distributes your property, but it names guardians for your minor children and appoints and Executor of your estate. A will also helps you speed through the probate process.
What happens if you do not have a will? Well, the state does all that stuff for you. And to be perfectly honest, do you think it's a good idea to let the STATE decide who gets your assets, who gets your children, or who distributes your estate? NO. It's a terrible idea, which is why you need the one to lay all of these things out before your death.
Another reason to have a will is that the state does not work for free. Naturally, if the state has to step in and distribute your assets, then the probate fees and costs are going to be much higher. If I am leaving my family something behind, I don't want the state to take more than is absolutely necessary.
So again, a will is very important and will make your family's life much easier upon your passing.
A Living Will
A living will is a document where you decide if you wish to remain on life support or if you wish to die. It also generally expresses your wishes regarding organ and tissue donation. It's main goal is to make sure your choices are honored in the event you are unable to express your wishes, and to take the burden off of your loved ones should the un-thinkable happen. When you have this document and express your wishes, then no one is left wondering what you would want. No one is left with the unnecessary burden of artificially prolonging your life or painfully "pulling the plug" which is a painful choice. This removes the added, unnecessary pain that your loved ones could go through.
A Durable Power of Attorney
This document appoints someone to act in your behalf should you become incapacitated or unable to make decisions for yourself. Obviously, you should name someone that you trust and to whom you can explain your wishes ahead of time. The person who you name in this document will be able to carry on every-day actions in your name, as well as make healthcare decisions, decisions to handle your property, income, bank accounts. Generally speaking, a spouse is named as the one to handle these issues.
If you wait until you need one, then it is too late. One of the sisters in our class explained a time when she needed one of these, and she took it to her husband, whose health was failing, and he no longer remembered how to write his name. That is a prime example of why you cannot wait to get one until you need one. Generally speaking, you can pick one of these up at your doctor's office for free, or you can get them for a low price. It's a very valuable document and one I suggest everyone getting.
A Trust
You need a trust if you have some assets. If you do not have any assets, then at trust is essentially pointless. Since we only own our vehicles and have very little wealth built up (just our mini emergency fund), we do not have a trust. It would be overkill in our situation. But when we begin getting some investments going, we have that fully-funded emergency fund, and we own our home….then we will get a trust.
A Trust protects your assets while you live and after your death. That is why they are generally refered to as "A Living Trust" because you can utilize the wonderful abilities while you are still alive.
One such example of this is that all of your assets are signed over to the trust. This is wonderful because if someone sues you, they cannot take your home, your property, your assets, etc. Why? Because it no longer belongs to YOU, it belongs to your estate – held in the name of the trust. Now in some states, someone can sue a trust, but it is very difficult and there are a lot of protections on trusts.
Another reason trusts are great is that you can not only outline what goes to whom, but you can put limitations, restrictions, and guidelines for disbursement. When I worked for the Estate Planning Attorney in Las Vegas, a casino owner had passed away, and in his trust there was a section about one of his sons. In order for his son to receive his portion of his inheritance, he had to pass drug tests. He also had to have random drug testing over the course of so many months and years in order to keep receiving his portion of the estate. While I don't think many of us would have to worry about that particular instance, it is nice to know that you can say that your child will get ____ amount of money when they graduate college, with a bonus of ______ dollars if they get a 3.5 or higher. Then ______ goes to them on their wedding day, and ______ when they have their first child, and so on. It's very nice to be able to outline everthing like that.
The most important thing a Trust does is that it keeps your estate out of probate. And why do you want to avoid probate? Because it is a LONG process, it is very costly because of all of the fees, and your estate becomes public record. If you have a lot of assets, you do not want money to go to the state and for your assets to be listed as public record for all to see.
Where Do You Get Estate Planning Documents?
Well, there are attornies that deal specifically with Estate Planning. They are very good at what they do, and their number one goal is to make sure you and your family are protected in the event of your death. However, they can be a bit more expensive than many people can afford right now. If I remember correctly, a very very basic will for one person cost about $50 at our office.
However, there is a website that will send you a state specific will. It is US Legal Forms (www.uslegalforms.com). We use US Legal Forms and for a Will, a Living Will and Durable Power of Attorney for both my husband and me, it cost $44.00. That is quite a bit less than what you will pay at an attorney’s office…believe me, I know.
Now Trusts should be done at an attorney's office. This document is far too important to try to take it into your own hands. It is a very long, lengthy document and Estate Planning attornies are the best choices for handling this matter. Depending on the size of your estate and what is involved with distribution, the price can become expensive quickly. When I would type up the trusts, I was amazed at how much work really went into them. We handled many celebrities and casino owners, so the estates were really large and very complex….some paid thousands of dollars for their trusts. However, the regular people with regular stuff didn’t pay nearly that much.
As part of the Nevada State Bar Association, attorneys were required to complete a certain number of pro-bono (or free of charge) cases each year. I believe that requirement exists in many states, so you may be able to talk to an estate planning attorney and see if they’d be willing to draw up a trust for you pro-bono if you have assets and would like to get a trust. It never hurts to ask.
While this was not a thrilling, fun-filled lesson, I hope that it did clear up some confusion you may have about Insurance policies and Estate Planning. All too often people go through life without adequate coverage (both estate planning and insurance) and their families are left scrambling after their passing. I do not want to see that happen to any of us. I do not want us to find ourselves bankrupt because we didn’t carry adequate liability coverage. I do not want to see us or our families struggling with making hard decisions about elder care, life-support, or going through a lengthy probate process.
There is too much pain in the lives of those who did not plan ahead accordingly, and the pain is left for those they leave behind. Do not put this stuff off for another day. Do not say that you will do it later, because there may not be a later. Do not say that you do not need health, disability or life insurance….because you do. Do not say that you do not need a will, or a living will, or a durable power of attorney….because you do. Every single one of us needs those things. We need them, and we have to make them a priority in our lives.
We didn’t have homework last time, but we are certainly going to have it this time, so make sure to look in the homework section.
Saturday, June 6, 2009
Sunday, May 17, 2009
Power Over Purchase - Part 1
Alright, so let’s get down to the nitty gritty. This is a FUN class. This is the most entertaining lesson, and it is the one that, if you get it, it will change the way you look at things. If you get this lesson, then it will almost guarantee your financial peace. Because while the emergency fund and getting out of debt are some amazingly important steps, that paradime sift we talked about in March comes from what I’m going to teach you tonight. What I’m going to teach you just might rock your world, it might just make you look at money a little differently. It might just put you on the right path towards changing your family tree. So, make sure you get this class tonight!
We are going to be discussing how to buy big bargains and how to have power over our purchases.
Caveat Emptor or Let the Buyer Beware
By now y’all know that I’m a facts kind of gal. I like statistics and so here are some that I found interesting. We already learned that we live in the most heavily marketed culture in the history of the world.
In 1971, the average consumer had 500 advertisements presented to him each day.
Today, we have over 4000 advertisements presented to us each day. That is an 800% increase! Holy cow! We have more people selling us more stuff, in more ways than ever before. It’s no wonder that the phrase caveat emptor or buyer beware is certainly more applicable today than ever.
Companies make their money based on selling us stuff, and they are good at it. They have training rooms full of people, teaching them how to perfect the art of selling their goods and services. This isn’t a game people, and if you think it is, then you’re going to be broke for the rest of your lives.
We have to Just Say No. Yes, that’s a 1980’s flashback, but seriously….it applies. Just say NO.
And because of their marketing on TV, Radio, the internet….it is much more difficult than ever to say no. Did you know that about half of the news is sent out by the public relations department of a company? It is packaged to look like news, but if you pay close attention, all the little kids in the puff piece are wearing osh-kosh clothing, or they’re standing in front of a Dairy Queen while talking about how hot the weather is and how a nice cold ice cream cone goes a long way. On a slow news day, you’ll see these things. We are hit from every angle, and the best trick of the trade is repetition.
I can hear you all now, “Oh, but I’m a wise consumer, that repetition stuff wouldn’t work on me.”
Okay, let’s play a game. You fill in the blanks….just shout out your answers….but you WISE consumers probably won’t know any of these, will you?
1. Bye, bye Miss American ____, drove my ____ to the levy, but the levy was _____.
(((shame on you!)
2. Have it your _____.
3. Melts in your mouth, not in your ______.
Yeah, you’re right….repetition doesn’t work, does it?? It has a HUGE effect on your buying!
Some other things that affect your buying are:
Brand Recognition Name brand versus Generic. Seriously, do you think Kroger and Walmart have their own factories that make all their generic products? No, they don’t. The same people that make the store brand products make the name brand products – they just have different packaging. Those CVS brand paper towels look suspiciously like the Bounty ones. Hummm….
Shelf Positioning. The most expensive name brand stuff will be eye level. The store brand stuff will either be up on the top shelf or on the bottom shelf. Why? Because people who are in a hurry will grab the first thing they see, and if it’s at eye level, guess which one gets picked up? The expensive one.
Packaging & Color. People get paid very well to study the reaction of people to series of colors. That’s why some products have insane packaging…because it catches someone’s eye better than the competition.
Product Placement. This is a BIG deal. They have professional product placers that come in and position things just right so as to optimize their sales. Take those ice barrels at the gas station for example. They are always at the most convenient spot. Two inches to the right, they’re a nuisance because they block to much of the aisle. Two inches to the left, and they don’t sell as many because they’re not obvious. Do you think they keep fresh ice in there at all times for your benefit? No….they do that because when it’s hot outside, there’s nothing that looks more refreshing than pulling that nice, cold bottle of soda out of that ice barrel, watching the ice slide down the bottle, and you know that that is going to be one fine bottle of sprite you’ve got there. They know that you’ll pay more money for that bottle of soda than you would for an entire 12 pack of cans at the grocery store down the street…why? Because it’s placed and presented so that you want it.
Seriously people, this is not a game. It’s what they do on everything – big and small purchases.
Significant Purchases
Let’s talk about significant purchases. Generally speaking, a significant purchase is anything over $200. In our house, it’s anything over $100…in yours it might be anything over $500. Whatever your idea of a significant purchase is, there are some things you need to know.
First, your body actually goes through physiological changes when you make a large purchase (or are about to make a large purchase).
Your eyes dilate slightly, endorphines are released, sweat forms in your palms and upper lip, adrenaline is released, and your heart rate shifts slightly.
You get so excited that you buy that thing. You get it home and then you get hit with it. Buyer’s Remorse. You know, that feeling that you get after making a big purchase without really thinking it through? Where you say to yourself, “what did I do?” and you usually feel sick and scared. Yeah, I bet we’ve all had a case or two of that in our lives.
Did you know that realtors have actually learned to tell people to expect the feeling of buyer’s remorse? Yep, when they started warning people, they found that fewer people would back out of the contracts because they woke up the next morning, felt the buyer’s remorse, and said, “wow honey, we’re normal” and just moved on with the bad purchase.
Well I am going to give you some ways that you can avoid that buyer’s remorse feeling, and that you can have power over purchases.
Power Over Purchase
You have to learn to say, "No!" This is important. We’ve all seen the kids in the supermarket that are flailing on the ground pitching an ever-loving fit because they want those Lucky Charms and they want them now. Well, I hate to tell ya this, but we’ve all got those little kids inside of us. We women, at the furniture store unleash that kid “I know we have china we never use, but I want that china cabinet NOW!” and the men, at the electronics store unleash their kid, “But it is a 52 inch HDTV with surround sound and I know we have a 50 inch but I want 2 more inches. I want it NOW!” We need to learn how to tell those kids inside ourselves to shut-up. Adults delay pleasure, children do what feels good.
As an adult, there are 5 things you do before purchasing: The unwritten #6 is to pay in cash because all of your purchases should be done in cash. If you do these things you will either be very glad you purchased it, or very glad that you didn’t.
1. Wait Overnight. But what if it’s gone the next day? There are 10 more TVs shrink wrapped in plastic on a palate in the back. If it’s gone, then maybe you weren’t supposed to have it.
2. Consider Your Buying Motives. Exactly why do you want it? Do you want it because it’s new and shiny? Do you want it because you need it, or because the neighbors have one and you want one too? (Oh, there’s that grocery store fit kid coming out again)
3. Never buy anything you don't understand. Especially insurance and investments. “Oh, I’d never do that” Oh really….and how long did you have your VCR before it stopped flashing 12:00????
4. Consider the Opportunity Cost. Factor in what opportunity you will lose the chance to do by making that purchase.
5. Seek the council of your spouse. You do NOT make a large purchase without first seeking the council of your spouse – seek their wisdom. Don’t you hate it guys when your wives get “a feeling” Proverbs 31:10-11. If you take the council of a virtuous wife, you will have no lack of gain. Women, you have to virtuous – not a barking Chihuahua. Larry Burkett says, "Ladies this does not give you permission to become the holy spirit." Guys, what’s good for one is good for the other.
Now that you’re on the same page and you’re ready to make the big purchase (because you did all 5…well really 6 things), then you need to learn that you should only buy big big bargains.
You do NOT have to pay full price for anything ever again. Seriously, just go under the assumption that everything is negotiable. In America we get in our fleeced car, fill it up with gas card gas, drive to the mall and put something on our 28% credit card because it had the word “Sale” over it. In other countries, there is a process to buying things. How many of you have been to other countries? Negotiating is a way of life. And I’m amazed at how many people get offended when I tell them about the great deals I’ve gotten.
You do not have to harm someone in order to get a good deal. For some reason, we have it so engrained in our heads that if we get a good deal, then we are hurting someone else in the process. That is entirely not true.
You can come to a win/win situation. I’m not saying you need to go in and be relentless, but you can reach a win/win situation that both parties can be happy with. At the mall we’ll automatically just pay whatever the price is for something that we want, but if we go to a yard sale, man….you’ll get vicious. I’ve had many a yard sale and some of those ladies will try to talk me down on a $10 for $.50. They’re vicious, but I bet they pay full price for everything at the store. And you know what….when they’re vicious like that, they don’t get the deal. So I’m hoping to show you how to get the deal so that everyone wins.
We are going to be discussing how to buy big bargains and how to have power over our purchases.
Caveat Emptor or Let the Buyer Beware
By now y’all know that I’m a facts kind of gal. I like statistics and so here are some that I found interesting. We already learned that we live in the most heavily marketed culture in the history of the world.
In 1971, the average consumer had 500 advertisements presented to him each day.
Today, we have over 4000 advertisements presented to us each day. That is an 800% increase! Holy cow! We have more people selling us more stuff, in more ways than ever before. It’s no wonder that the phrase caveat emptor or buyer beware is certainly more applicable today than ever.
Companies make their money based on selling us stuff, and they are good at it. They have training rooms full of people, teaching them how to perfect the art of selling their goods and services. This isn’t a game people, and if you think it is, then you’re going to be broke for the rest of your lives.
We have to Just Say No. Yes, that’s a 1980’s flashback, but seriously….it applies. Just say NO.
And because of their marketing on TV, Radio, the internet….it is much more difficult than ever to say no. Did you know that about half of the news is sent out by the public relations department of a company? It is packaged to look like news, but if you pay close attention, all the little kids in the puff piece are wearing osh-kosh clothing, or they’re standing in front of a Dairy Queen while talking about how hot the weather is and how a nice cold ice cream cone goes a long way. On a slow news day, you’ll see these things. We are hit from every angle, and the best trick of the trade is repetition.
I can hear you all now, “Oh, but I’m a wise consumer, that repetition stuff wouldn’t work on me.”
Okay, let’s play a game. You fill in the blanks….just shout out your answers….but you WISE consumers probably won’t know any of these, will you?
1. Bye, bye Miss American ____, drove my ____ to the levy, but the levy was _____.
(((shame on you!)
2. Have it your _____.
3. Melts in your mouth, not in your ______.
Yeah, you’re right….repetition doesn’t work, does it?? It has a HUGE effect on your buying!
Some other things that affect your buying are:
Brand Recognition Name brand versus Generic. Seriously, do you think Kroger and Walmart have their own factories that make all their generic products? No, they don’t. The same people that make the store brand products make the name brand products – they just have different packaging. Those CVS brand paper towels look suspiciously like the Bounty ones. Hummm….
Shelf Positioning. The most expensive name brand stuff will be eye level. The store brand stuff will either be up on the top shelf or on the bottom shelf. Why? Because people who are in a hurry will grab the first thing they see, and if it’s at eye level, guess which one gets picked up? The expensive one.
Packaging & Color. People get paid very well to study the reaction of people to series of colors. That’s why some products have insane packaging…because it catches someone’s eye better than the competition.
Product Placement. This is a BIG deal. They have professional product placers that come in and position things just right so as to optimize their sales. Take those ice barrels at the gas station for example. They are always at the most convenient spot. Two inches to the right, they’re a nuisance because they block to much of the aisle. Two inches to the left, and they don’t sell as many because they’re not obvious. Do you think they keep fresh ice in there at all times for your benefit? No….they do that because when it’s hot outside, there’s nothing that looks more refreshing than pulling that nice, cold bottle of soda out of that ice barrel, watching the ice slide down the bottle, and you know that that is going to be one fine bottle of sprite you’ve got there. They know that you’ll pay more money for that bottle of soda than you would for an entire 12 pack of cans at the grocery store down the street…why? Because it’s placed and presented so that you want it.
Seriously people, this is not a game. It’s what they do on everything – big and small purchases.
Significant Purchases
Let’s talk about significant purchases. Generally speaking, a significant purchase is anything over $200. In our house, it’s anything over $100…in yours it might be anything over $500. Whatever your idea of a significant purchase is, there are some things you need to know.
First, your body actually goes through physiological changes when you make a large purchase (or are about to make a large purchase).
Your eyes dilate slightly, endorphines are released, sweat forms in your palms and upper lip, adrenaline is released, and your heart rate shifts slightly.
You get so excited that you buy that thing. You get it home and then you get hit with it. Buyer’s Remorse. You know, that feeling that you get after making a big purchase without really thinking it through? Where you say to yourself, “what did I do?” and you usually feel sick and scared. Yeah, I bet we’ve all had a case or two of that in our lives.
Did you know that realtors have actually learned to tell people to expect the feeling of buyer’s remorse? Yep, when they started warning people, they found that fewer people would back out of the contracts because they woke up the next morning, felt the buyer’s remorse, and said, “wow honey, we’re normal” and just moved on with the bad purchase.
Well I am going to give you some ways that you can avoid that buyer’s remorse feeling, and that you can have power over purchases.
Power Over Purchase
You have to learn to say, "No!" This is important. We’ve all seen the kids in the supermarket that are flailing on the ground pitching an ever-loving fit because they want those Lucky Charms and they want them now. Well, I hate to tell ya this, but we’ve all got those little kids inside of us. We women, at the furniture store unleash that kid “I know we have china we never use, but I want that china cabinet NOW!” and the men, at the electronics store unleash their kid, “But it is a 52 inch HDTV with surround sound and I know we have a 50 inch but I want 2 more inches. I want it NOW!” We need to learn how to tell those kids inside ourselves to shut-up. Adults delay pleasure, children do what feels good.
As an adult, there are 5 things you do before purchasing: The unwritten #6 is to pay in cash because all of your purchases should be done in cash. If you do these things you will either be very glad you purchased it, or very glad that you didn’t.
1. Wait Overnight. But what if it’s gone the next day? There are 10 more TVs shrink wrapped in plastic on a palate in the back. If it’s gone, then maybe you weren’t supposed to have it.
2. Consider Your Buying Motives. Exactly why do you want it? Do you want it because it’s new and shiny? Do you want it because you need it, or because the neighbors have one and you want one too? (Oh, there’s that grocery store fit kid coming out again)
3. Never buy anything you don't understand. Especially insurance and investments. “Oh, I’d never do that” Oh really….and how long did you have your VCR before it stopped flashing 12:00????
4. Consider the Opportunity Cost. Factor in what opportunity you will lose the chance to do by making that purchase.
5. Seek the council of your spouse. You do NOT make a large purchase without first seeking the council of your spouse – seek their wisdom. Don’t you hate it guys when your wives get “a feeling” Proverbs 31:10-11. If you take the council of a virtuous wife, you will have no lack of gain. Women, you have to virtuous – not a barking Chihuahua. Larry Burkett says, "Ladies this does not give you permission to become the holy spirit." Guys, what’s good for one is good for the other.
Now that you’re on the same page and you’re ready to make the big purchase (because you did all 5…well really 6 things), then you need to learn that you should only buy big big bargains.
You do NOT have to pay full price for anything ever again. Seriously, just go under the assumption that everything is negotiable. In America we get in our fleeced car, fill it up with gas card gas, drive to the mall and put something on our 28% credit card because it had the word “Sale” over it. In other countries, there is a process to buying things. How many of you have been to other countries? Negotiating is a way of life. And I’m amazed at how many people get offended when I tell them about the great deals I’ve gotten.
You do not have to harm someone in order to get a good deal. For some reason, we have it so engrained in our heads that if we get a good deal, then we are hurting someone else in the process. That is entirely not true.
You can come to a win/win situation. I’m not saying you need to go in and be relentless, but you can reach a win/win situation that both parties can be happy with. At the mall we’ll automatically just pay whatever the price is for something that we want, but if we go to a yard sale, man….you’ll get vicious. I’ve had many a yard sale and some of those ladies will try to talk me down on a $10 for $.50. They’re vicious, but I bet they pay full price for everything at the store. And you know what….when they’re vicious like that, they don’t get the deal. So I’m hoping to show you how to get the deal so that everyone wins.
Big Purchases - Part 2
You have to keep this in your head at all times. EVERYTHING really is negotiable.
Rule #1: You have to tell the truth. I have no idea why I have to remind people of this, but sadly, I do. You must tell the truth, and you cannot misrepresent yourself in any way.
You MUST have extreme integrity. Not just regular integrity - EXTREME integrity. You cannot misrepresent yourself or the items you’re buying or selling in any way. Ripping off a button to get a discount on a shirt is LYING and STEALING. It’s not living with integrity. You have to have extreme levels of integrity.
Rule #2: You must be paying in cash. Why? Because cash has power.
The Power of Cash
Cash has an emotional value. When you see a big wad of cash you get happy, right? Well, that’s one thing the sales people cannot control. They like to see cash. You pull out cash and you’ve got a flock of salespeople hovering around like seagulls.
With cash, you have a definite limit AND leverage. If you have $700, then you cannot spend any more than $700. That is huge blessing to you. You will not be overpaying or overstretching yourself to purchase the item, and you will have some definite leverage in the purchase process.
Cash has immediacy. When you hand over cash for something, it means the deal is closed. You have your item, they have their money…both people win. There's no waiting for credit approval or checking with their banker. It's done.
You cannot haggle when financing an item. Seriously, you cannot say “yeah, we’re going to finance it 90 days same as cash, and by the way, we’d like a really good deal on it.” They’ll smile at you and walk into the back and laugh. You just can’t get a good deal when you’re financing something. And don’t just say you’re going to pay cash, count it out with a little bit of drama. It messes with people. You’ve got people at the cash register that aren’t sure what to do with it. Honestly, they freak out a little when they have a big wad of cash, because people buy things with cards and don’t get those good deals. The sales associates will follow you around like a slobbering puppy when they see you have a wad of cash. It’s great…have some fun with it. Be proud that you’re paying with cash and snicker if they mention financing (and whip out a wad and say, “no thanks, we’ll be paying in cash.” Or “we don’t do financing.” It messes with them!
I know, you are all thinking, "But what if I get mugged?"
Well honey, you've been getting mugged at the mall for years, why start worrying about it now? Seriously, walking around with it for a couple hours one day isn’t going to kill ya. Don’t walk around with a wad of cash on you at all times, but to the electronics store isn’t going to give you much of a complex.
I mentioned this a bit earlier, but I want to re-emphasize that you need to have some flair when paying with cash. It’s got to be an event. It’s gotta have drama, intrigue, and by all means….have some fun with it.
If you’re buying a $1000 item, have 10 $100 bills and count them out SLOWLY
If you’re buying a $100 item, have 20 $5.00 bills to count out. Either way, the reaction will still be the same…sales associates who get happy when they see cash.
Have some fun with it. I personally like to count it out at least 3 times per large purchase. I do it once on the floor when about to haggle, once after haggling, and once or twice at the register. It’s just SO much fun to mess with them.
And true story…the first time I did this, the gal at the register had to call 2 people over there to count the cash because she kept messing it up. Seriously…..they don’t know what to do with cash!
Know Where To Shop
My favorite place is HH Gregg in Rivergate. I've always gotten great deals there. Other stores where the employees are paid on commission are great places to try. I typically avoid the mom & pop stores because their overhead is so small anyway that I feel that by making them go into my price range, I'd be creating a win/lose situation for them. Big stores like Sears just don't care and won't bother haggling.
Marriage
You CANNOT act Married to an item. You have to at least act indifferent towards it. The sales people are trained to know when you are so “in love” with that new appliance. They see how you gaze at it lovingly, as you imagine all of your laundry going into the super capacity front loading washer – in your favorite color, red. They see how you look at it, and they know at that moment, that they have you. You are already sold to it, and your chances of haggling have just flown out the window.
By all means, admire the heck out of the item, but do it online or at another store. Get it all out of your system before you walk in that store. Walk around a little, checking out other ones, and then begin negotiations.
You CANNOT be married to buying it at that store. Just because you’ve always shopped there isn’t a good reason to keep shopping there.
You must be willing to walk out! Yes, I said it. You must be willing to leave the store and go to another one to try to get the deal. 9 times out of 10, if you offer a half-way sane offer, you will be stopped by that associate before you even reach the parking lot. They know that if you leave their store, or their lot, then they just lost that sale and it went to someone else. They do not want you to leave their store without having first handed over your money. You have value to them – act like it.
Practice
Like our mommas always said, Practice makes perfect, and this is no different.
Practice Asking for a good deal. We have to get rid of the fear.
Practice your body language. My hubby and I honestly practice with each other before we go. We practice our looks of indifference, our thinking and pondering looks.
Practice Your Script. We have a script. We honestly do. We do the good cop bad cop thing…but it’s more like normal husband, shrew of a wife thing. It works because he’s laid back and isn’t into haggling, and I am in it for the kill. :o) So, find a script that works for you and practice it. We have automatic responses to things or key words that we only know the meaning to. It keeps us on our A game because we prepare for all the possibilities.
Practice Shutting Up. You need to learn how to shut-up. Silence creates drama. Ask a question and then shut-up. Someone wants to jump in, and if it’s not you – then they will come down on price before you even enter in on the discussion. You’ll be amazed at what standing there being quiet with cash will do for you. This is an art. Dave related a story where he just felt like messing with someone that day, so he went to a used car lot. The guy came out, Dave was looking at a car, asked a simple question and just shut up. The guy answered the question and when Dave just kinda grunted, he kept talking. He dropped the price twice as Dave went around – silent as can be, just looking intensely at the car. He just so happened to stop at the bumper and just not say anything. The salesman said, “Well, you’re obviously an intelligent guy and you can tell this car has been hit.” Dave had NO idea that it had been hit. None whatsoever, but his silence made that guy not only lower the price but disclose information on the vehicle. Silence is powerful stuff.
Practice Saying "That's Not Good Enough!" You have to let them know that “that’s not good enough.” Quit playing price. If they give you a price you say, “that’s not good enough.” And then shut-up. If they ask “what is” then say “I don’t know, but I know that’s not it.” And then shut-up. Sometimes their first drop in price is lower than what you’d have started with.
Practice using contingency closings. If you’re having trouble ironing out the price, then you can do the “if I” contingency close. If they want you to meet their price, ask them to throw something else in with the deal – free installation, free delivery, a free blue ray player with that big screen TV, free surround sound. If I meet your price, then I’m going to need free surround sound to go with my new TV. “Well, I can’t do that” Well you’re going to have to give me something else...act as if it already came with it.
Whatever their first (and sometimes second) offers are is not good enough. They don’t have to do business with you – someone will. That’s alright.
Now here are some of my personal tips and tricks from having done this a couple times before. Do your research online. Pack your pockets with money (know how much is in each), Act indifferent, and Drop a Competitor's Name.
Let’s see how this played out during our most recent big purchase.
We knew we wanted to get a 42 inch HDTV but we weren’t 100% sure which brand we wanted to go with. We saw that the prices were in the 900-1100 range for them, so we figured that we’d plan on spending $650-750 for one. We set our limit at $750 and started packing our pockets. We had $600 in my hubby’s wallet, $25 in each pocket, and $50 in various places in my wallet. We looked around, saw what we wanted to buy and the hovering sales associate said, “It’s on sale today for $999 (which we knew was the standard price).” I smiled at him and said, “that’s not good enough.” He went away, came back with a new offer of $880. I said, “Yeah, that’s still not good enough. I’m thinking much less than that. What can you do for us?” He said he’d talk to the manager and he himmed and hawed, and went to the computer, back to the manager. Meanwhile, we decided that we were going to be firm in our offer of $715 since we knew we needed some money for a digital antenna. He came back and said $775. I then took out the cash (that we put together in a nice little stack while he was running around doing his thing) and counted it out – NICE AND SLOWLY. I looked at him and said, “Well, here’s $715 cash – will you do the deal for that? He hesitated and I said….if not, it’s okay…we’ll go across the street and try Electronics Express.” He went back one more time and came out willing to do the deal for $715 after tax. So, we got a $999 tv for $655 (before tax) – that’s a savings of $344. I’d say that qualifies as a big, BIG bargain.
And we did the same thing with a new washer the year before. You just cannot get those kinds of deals when using credit.
Rule #1: You have to tell the truth. I have no idea why I have to remind people of this, but sadly, I do. You must tell the truth, and you cannot misrepresent yourself in any way.
You MUST have extreme integrity. Not just regular integrity - EXTREME integrity. You cannot misrepresent yourself or the items you’re buying or selling in any way. Ripping off a button to get a discount on a shirt is LYING and STEALING. It’s not living with integrity. You have to have extreme levels of integrity.
Rule #2: You must be paying in cash. Why? Because cash has power.
The Power of Cash
Cash has an emotional value. When you see a big wad of cash you get happy, right? Well, that’s one thing the sales people cannot control. They like to see cash. You pull out cash and you’ve got a flock of salespeople hovering around like seagulls.
With cash, you have a definite limit AND leverage. If you have $700, then you cannot spend any more than $700. That is huge blessing to you. You will not be overpaying or overstretching yourself to purchase the item, and you will have some definite leverage in the purchase process.
Cash has immediacy. When you hand over cash for something, it means the deal is closed. You have your item, they have their money…both people win. There's no waiting for credit approval or checking with their banker. It's done.
You cannot haggle when financing an item. Seriously, you cannot say “yeah, we’re going to finance it 90 days same as cash, and by the way, we’d like a really good deal on it.” They’ll smile at you and walk into the back and laugh. You just can’t get a good deal when you’re financing something. And don’t just say you’re going to pay cash, count it out with a little bit of drama. It messes with people. You’ve got people at the cash register that aren’t sure what to do with it. Honestly, they freak out a little when they have a big wad of cash, because people buy things with cards and don’t get those good deals. The sales associates will follow you around like a slobbering puppy when they see you have a wad of cash. It’s great…have some fun with it. Be proud that you’re paying with cash and snicker if they mention financing (and whip out a wad and say, “no thanks, we’ll be paying in cash.” Or “we don’t do financing.” It messes with them!
I know, you are all thinking, "But what if I get mugged?"
Well honey, you've been getting mugged at the mall for years, why start worrying about it now? Seriously, walking around with it for a couple hours one day isn’t going to kill ya. Don’t walk around with a wad of cash on you at all times, but to the electronics store isn’t going to give you much of a complex.
I mentioned this a bit earlier, but I want to re-emphasize that you need to have some flair when paying with cash. It’s got to be an event. It’s gotta have drama, intrigue, and by all means….have some fun with it.
If you’re buying a $1000 item, have 10 $100 bills and count them out SLOWLY
If you’re buying a $100 item, have 20 $5.00 bills to count out. Either way, the reaction will still be the same…sales associates who get happy when they see cash.
Have some fun with it. I personally like to count it out at least 3 times per large purchase. I do it once on the floor when about to haggle, once after haggling, and once or twice at the register. It’s just SO much fun to mess with them.
And true story…the first time I did this, the gal at the register had to call 2 people over there to count the cash because she kept messing it up. Seriously…..they don’t know what to do with cash!
Know Where To Shop
My favorite place is HH Gregg in Rivergate. I've always gotten great deals there. Other stores where the employees are paid on commission are great places to try. I typically avoid the mom & pop stores because their overhead is so small anyway that I feel that by making them go into my price range, I'd be creating a win/lose situation for them. Big stores like Sears just don't care and won't bother haggling.
Marriage
You CANNOT act Married to an item. You have to at least act indifferent towards it. The sales people are trained to know when you are so “in love” with that new appliance. They see how you gaze at it lovingly, as you imagine all of your laundry going into the super capacity front loading washer – in your favorite color, red. They see how you look at it, and they know at that moment, that they have you. You are already sold to it, and your chances of haggling have just flown out the window.
By all means, admire the heck out of the item, but do it online or at another store. Get it all out of your system before you walk in that store. Walk around a little, checking out other ones, and then begin negotiations.
You CANNOT be married to buying it at that store. Just because you’ve always shopped there isn’t a good reason to keep shopping there.
You must be willing to walk out! Yes, I said it. You must be willing to leave the store and go to another one to try to get the deal. 9 times out of 10, if you offer a half-way sane offer, you will be stopped by that associate before you even reach the parking lot. They know that if you leave their store, or their lot, then they just lost that sale and it went to someone else. They do not want you to leave their store without having first handed over your money. You have value to them – act like it.
Practice
Like our mommas always said, Practice makes perfect, and this is no different.
Practice Asking for a good deal. We have to get rid of the fear.
Practice your body language. My hubby and I honestly practice with each other before we go. We practice our looks of indifference, our thinking and pondering looks.
Practice Your Script. We have a script. We honestly do. We do the good cop bad cop thing…but it’s more like normal husband, shrew of a wife thing. It works because he’s laid back and isn’t into haggling, and I am in it for the kill. :o) So, find a script that works for you and practice it. We have automatic responses to things or key words that we only know the meaning to. It keeps us on our A game because we prepare for all the possibilities.
Practice Shutting Up. You need to learn how to shut-up. Silence creates drama. Ask a question and then shut-up. Someone wants to jump in, and if it’s not you – then they will come down on price before you even enter in on the discussion. You’ll be amazed at what standing there being quiet with cash will do for you. This is an art. Dave related a story where he just felt like messing with someone that day, so he went to a used car lot. The guy came out, Dave was looking at a car, asked a simple question and just shut up. The guy answered the question and when Dave just kinda grunted, he kept talking. He dropped the price twice as Dave went around – silent as can be, just looking intensely at the car. He just so happened to stop at the bumper and just not say anything. The salesman said, “Well, you’re obviously an intelligent guy and you can tell this car has been hit.” Dave had NO idea that it had been hit. None whatsoever, but his silence made that guy not only lower the price but disclose information on the vehicle. Silence is powerful stuff.
Practice Saying "That's Not Good Enough!" You have to let them know that “that’s not good enough.” Quit playing price. If they give you a price you say, “that’s not good enough.” And then shut-up. If they ask “what is” then say “I don’t know, but I know that’s not it.” And then shut-up. Sometimes their first drop in price is lower than what you’d have started with.
Practice using contingency closings. If you’re having trouble ironing out the price, then you can do the “if I” contingency close. If they want you to meet their price, ask them to throw something else in with the deal – free installation, free delivery, a free blue ray player with that big screen TV, free surround sound. If I meet your price, then I’m going to need free surround sound to go with my new TV. “Well, I can’t do that” Well you’re going to have to give me something else...act as if it already came with it.
Whatever their first (and sometimes second) offers are is not good enough. They don’t have to do business with you – someone will. That’s alright.
Now here are some of my personal tips and tricks from having done this a couple times before. Do your research online. Pack your pockets with money (know how much is in each), Act indifferent, and Drop a Competitor's Name.
Let’s see how this played out during our most recent big purchase.
We knew we wanted to get a 42 inch HDTV but we weren’t 100% sure which brand we wanted to go with. We saw that the prices were in the 900-1100 range for them, so we figured that we’d plan on spending $650-750 for one. We set our limit at $750 and started packing our pockets. We had $600 in my hubby’s wallet, $25 in each pocket, and $50 in various places in my wallet. We looked around, saw what we wanted to buy and the hovering sales associate said, “It’s on sale today for $999 (which we knew was the standard price).” I smiled at him and said, “that’s not good enough.” He went away, came back with a new offer of $880. I said, “Yeah, that’s still not good enough. I’m thinking much less than that. What can you do for us?” He said he’d talk to the manager and he himmed and hawed, and went to the computer, back to the manager. Meanwhile, we decided that we were going to be firm in our offer of $715 since we knew we needed some money for a digital antenna. He came back and said $775. I then took out the cash (that we put together in a nice little stack while he was running around doing his thing) and counted it out – NICE AND SLOWLY. I looked at him and said, “Well, here’s $715 cash – will you do the deal for that? He hesitated and I said….if not, it’s okay…we’ll go across the street and try Electronics Express.” He went back one more time and came out willing to do the deal for $715 after tax. So, we got a $999 tv for $655 (before tax) – that’s a savings of $344. I’d say that qualifies as a big, BIG bargain.
And we did the same thing with a new washer the year before. You just cannot get those kinds of deals when using credit.
Smaller Purchases - Part 3
You need to realize that you do NOT have to pay full price for anything ever again (with the exception of some groceries).
Dented cans can be consumed quickly without problems and can save you 50% or more.
Clothing with small flaws can be discounted. I bought a dress at Dress Barn (courtesy of a gift card) a few weeks ago, and the dress I liked had a broken loop on it. I’m talking that this thing only needed 2 stitches to be fixed, and I was able to get 20% off the dress by haggling with the lady. Yes, it was free because of the gift card, but because I got that 20% off, I was able to get a clearance shirt to go with it. Many stores will give you at least 10% off if you buy slightly damaged or defective clothes or items. Remember integrity and don't rip a button off to get a discount.
Never underestimate a scratch, dent, ding, chip, or missing piece. Deep discounts are given when you buy slightly defective merchandise that they wouldn't otherwise be able to sell.
Discounts on Home Maintenance & Other Services: Ask for a discount if you put their sign in your yard (or on your car). Ask for a discount for giving them the names and addresses of your family and friends. If you have a large enough blog or website, then ask for a discount if you feature them on it. I am part of a social networking site of moms, and Walmart sent me 2 $100 gift cards to buy baby clothes and write about my experience. Because they knew that I have the potential to reach thousands of moms a day, they were more than happy to send a couple hundred bucks of free clothes my way.
Bartering: Trading Goods & Services. This is a great way to get things for free (or nearly free). We needed some minor auto work done, and a guy we knew (who just so happened to be a mechanic) needed a sitter for 2 days while his wife was out of town, and so I watched his kid and he fixed our car. No money, no problem – it was a win, win for both of us.
Yard sales and estate sales are great ways to get some good stuff. Yes, some of it is junk, but I know I’ve sold some pretty darn good things in my yard sales. If you buy things at a retail location, they are buying at TV at $100, they have to sell it for more than $100. At yard sales, the person buys something for $100, they’re willing to sell it for $10. You get a much better deal because they see the item as “in the way.” Their stuff has more value to you than it does to them. (Pay attention to that if you’re selling stuff!!!!) Don’t be mean or cut them down, but realize that their stuff means more to you than to them – most of the time. I sold a $50 vase for $5 once – it wasn’t mine (a friend was getting rid of it and I took it for my yard sale), it was in the way, and it was a means to get some money for paying off debt. The person who bought it got a very good deal.
Auctions: You have to be extremely careful at auctions. If you do your homework and know what you’re bidding on, they can be great. But too often people will get all worked up and pay way too much for something they could have gotten elsewhere for much cheaper.
And now for the moment we’ve all been waiting for….my #1 way of saving money & getting free stuff……
CLIPPING COUPONS!!!!
Where do you get the coupons? The Sunday paper, some Friday papers, Printable Coupons Online, Manufacturer Websites, In Stores, From Promotions, From Free Samples. The possibilities are endless as to where you can get coupons. You just have to dig around and see what’s out there. Sometimes you can get your family and friends to give you their coupons that they aren’t using. Coupons are wonderful, wonderful things.
Now if you’re saying, “I don’t have time to clip coupons” then I urge you to stop thinking that this very instant and just listen. It’s not like it used to be. It’s not something that poor people do to make ends meet. It’s something that smart people do because they’re tired of seeing all their money go to other people. You don’t have time NOT to clip coupons because it can be a huge blessing to your family, if used properly.
Couponing Rules:
Don't buy something just because you have a coupon. Seriously, if it’s $1.50 more than the generic equivalent even after the coupon savings, it’s not worth it just to use the coupon. So, only use the coupons if it truly is going to save you money. Just because you have a coupon for $1.00 off colon cleanse, it doesn’t mean you need to run out and buy it….unless you really need it.
Match coupons with sales ads to maximize savings. Coupons by themselves are good, but when paired with sales for additional savings, they can be phenomenal. I’m going to give the Walmart spill, but they will honor competitor’s sale prices. You just have to bring the sales ads with you. So you can get all the sales in one stop, and you can use your coupons to maximize your savings.
All coupons are potential money makers. Just because you don’t use Colon Cleanse, doesn’t mean that you should throw that coupon away. Sometimes stores, especially CVS and Walgreens, will have sales that will earn you money by buying certain products. I will explain it later, but all coupons are potential money makers.
Couponing Secrets
At most stores B1G1 deals accept the use of 2 coupons.
B1G1 coupons can also be used with B1G1 sales, making it a B1G2 deal.
One coupon per purchase means that each item is a purchase. Each time you cash out is a transaction. Don't let a clueless cashier ruin your couponing by saying you can't use more than 1 of the same coupon in a transaction. As long as you are using the same number of coupons as you have purchases, you're fine.
The Walgreens Game
This is where it gets a little confusing, but bear with me and we’ll sort it all out.
Walgreens has a few different ways to save: Register Rewards (RRs), Rebates, and in-ad coupons.
You can use both a Walgreens coupon and a manufacturer's coupon on the same product.
When buying an item to get RRs, you cannot use a RR from the same company and get more. This is a serious pain in the rump. They do this to keep limits on how many each person can buy. However, if you buy some Huggies diapers and get some RRs from that, then you use those RRs to purchase Ragu pasta sauce to get more RRs, then you can use the Pasta Sauce RRs for more Huggies. You have to interchange them for it to work. BUT, you have to know your companies. You have to know who makes these products because Proctor and Gamble does things like Pringles, Always, Gillette, Crest, and Tide. You wouldn’t always mesh those things together, but it can ruin your RR flow.
You must have the same number of items as you have coupons. This is especially tricky. You can use a manufacturer’s coupon and a Walgreens coupon for one item, but you cannot use a register reward, a Walgreens coupons and a manufacturer’s coupon for one item because Register Rewards count as Coupons!!! So, you need to get some filler products. Leftover pencils from the previous holiday are great things. Also candy bars or clearanced products work just as well.
Easy Saver Catalogs have been discontinued. There is some buzz going around about a loyalty program like CVS has, but nothing has been put in stone yet. As of now, there is no more ESC. Some items will still give rebates, and the rebates are now printed from the Catalina machine.
Call me if a Register Reward doesn't print. I have a number to call. You will have to keep your receipt so you can verify the information.
Now let’s play the game a little bit this week (5/17): Bayer Quick Crystals are $2.49 with $2.49 RR. That means, you pay $2.49 and you are then given $2.49 in RR after you check out. You can then use that $2.49 towards the purchase of Colgate Visible White for $4.49. There is a $1.00 off coupon if you go to www.iheartwags.com to find the link. You would need to pick up a very cheap item (because you'd need 2 items since you'd be using 2 coupons). You'd use your $2.49 RR from your first purchase and you'd get back a $4.49 RR. You could then take that $4.49 RR and use it towards the purchase of the $5.00 Clinical Strength Dry Idea. There is a $2.00 off coupon (see iheartwags.com again). Pick up another cheap item since you'll be using 2 coupons. You'd get both for free, and you'd get $5.00 in RR to use on your next purchase.
The CVS Game
CVS is also going through some changes and their sales are not what they used to be. They have caught onto us frugal shoppers out there, and they’ve lowered their limits and have changed some things. But don’t fret, good deals are still to be had.
You must have a CVS Extra Care Card. Ask for one at the register. Call the 1-800 number on the back to register it. Make sure to give them your email address because they will email you valuable coupons, somtimes certificates for free stuff! All of your coupons and Extra Care Bucks are tied to this card!
Ways to save: Extra Care Bucks (ECBs), in-store coupons, cash register tape coupons, beauty book coupons (ask for them in store. For those in class, those are the coupons I handed out), and magic machine coupons. That's the red box that acts as a scanner for pricing. If you scan your card under it, it will print out coupons. One scan per day.
You can use a CVS coupon and a manufacturer coupon together. Those are the cash register tape coupons, magic machine coupons, beauty book coupons, and emailed coupons.
You can use several ECBs in one transaction. Unlike Walgreens, ECBs do not count as coupons, and you can use 10 for one purchase if you like. You just have to be careful because if you have one for $5.00 and you only spend $3.00 – you lose the other $2.00. So always get enough to use up your ECBs.
Use $/$$ CVS coupons first, then use other coupons, THEN use ECBs. Sometimes lovely things will print out or be emailed to you for $/$$ purchase (example is $5/$25). They are handy and can save you quite a bit of money. There is an order to it though. You must FIRST give them the $/$$ coupon, then the other coupons, THEN the ECBs. That is the best way to maximize your savings.
You do not pay tax when paying with ECBs. Unlike Walgreens, ECBs do not act like coupons - they act like cash. So, when using ECBs to pay for a purchase in full, there is no sales tax. It is counted as a pre-tax discount, unlike coupons. So if you have a $4.99 ECB and you buy something that costs $4.99 before tax, then you walk out of there having paid NOTHING.
Watch for limits per hoursehold. There are limits on the sales items, especially those that give you ECBs. If there’s a limit of 1, then you should only buy 1 of that item, get your ECBs and use those towards another item that earns you more ECBs.
You can roll ECBs, if there's a limit of more than 1, to get more ECBs on the same item. So if the limit is 2, unlike Walgreens, you can use the same ECB from the first transaction, to pay for the exact same item in the second transaction, and more ECBs will print. You then would take those and max out the number of items that it will allow you to get, and then go on to the next item that earns you more ECBs.
Ask for rainchecks if they are out of an item. Sometimes their stock just stinks, and then there are greedy people who empty shelves. If they are out of something, ask for a raincheck. Depending on the cashier, you will either get the ECBs subtracted off the purchase price (sometimes making it free) or you will act like it’s a normal purchase and they’ll manually print out the ECBs for you.
Quarterly ECBs are given. They are 2% of your quarterly spending. When you get really great at playing the game, you will find that you MIGHT get $1.00 every quarter. But in the beginning, especially if you get a new card, you can get some really great quarterly earnings. My card, when I first got it, had over $300 worth of purchases on it because that’s the one they’d just use at the register whenever people without a card would go through the line. That was nice!
ECBs (like RRs) expire. And once they expire, there’s nothing they can do about them. They are now refusing to reset them for people, and so you will get stuck with them if you do not use them.
This isn’t necessarily a game of buying only needs. Sometimes you buy stupid things just because they are free and earn you more ECBs. The things you do not want, you can donate, because you’re not out anything.
So, let’s do a little playing with the CVS game this week (5/17): Dry Idea deodorant is 2 for $5.00 with $2.00 ECB when you buy 2. There are $2.00 off coupons (go to www.iheartcvs.com for link). With both coupons, you would pay $1.00 out of pocket for 2 dry idea deodorants. You would then receive $2.00 in ECBs. That is a profit of $1.00. You could then spend the $2.00 on another purchase that earns you more ECBs. Generally I do not buy anything there unless it earns me more ECBs.
Publix
Watch carefully for B1G1 sales. You can use 2 coupons on a B1G1 sale.
Publix doubles manfacturer coupons up to $.50 every day.
Publix in-ad coupons and mailed coupons (register for their clubs at Publix.com)can be used with manufacturer coupons for double the savings.
Monday is penny item day. If you spend $10 (before coupons) you get the featured item for 1 penny!
Publix sales run from Wednesday to Tuesday.
Publix offers a UPromise shopping card, so if you have student loans, have a child, or are in college yourself, then you can set up an account and a percentage of qualifying purchases gets put into your UPromise account.
Let's look at a possible good deal at Publix (as an example): Ritz crackers are B1G1 at publix for $3.69 (I think...lost the ad). There are $1.00 off coupons at kraftfoods.com. If you print 2 of those coupons out, you can get 2 boxes of Ritz crackers for $1.69 (or whatever the price is) because you can use 1 coupon per item (even on a B1G1 deal). That's a huge savings if you eat crackers in your house. We certainly do!
As a side note, Fred's doubles coupons up to $.75 every Saturday.
Now I know what you’re asking. Does it really save that much money? Does playing the CVS and the Walgreens and the Publix games really matter that much? Is it really worth the time and effort?
Is It Worth It?
Yes, Yes it is! And that is just the free stuff!
For as much as we have, we've given almost that much away. Can you believe that? Between family, friends, and charities, we’ve given away boxes and boxes and boxes of this stuff…stuff that I got for free….just by using coupons and sales ads, and playing the games.
I realize that there was not a lot of food pictured, but that’s because we eat it. I never think to take pictures of my grocery shopping trips because I just put it away and call it good. We have been so blessed by using coupons. It’s kept our grocery, toiletry, diaper, and household product part of the budget down to $200 a month for our family of 5 (and that’s living large). We’ve been able to build a year’s supply of toiletries and household products for our family by doing this. This is not a game folks…we call it one, but it’s not. It’s life. It’s a way for me to hold onto the money we have and do something more positive with it than just buy stuff. I realize food is not “stuff” but the less I have to spend on these things, the more money I have to change our family tree.
All it takes is a couple hours a week and some planning and plotting. It takes changing the way you look at buying things – both big things and small things. It takes changing your attitude towards things, and not being frivolous with your money. If something is sub standard, or the product is defective, call them on it. Complain, give them the info from the packaging. They will replace it. We've gotten free batteries, diapers, taco shells and more by complaining about sub-standard products. I have 2 coupons in my coupon files for 2 free boxes of Taco Shells because we bought some that were greasy and chewy. There were defects in about half a box of some Huggies diapers I bought (24 out of 70 diapers) and they sent me a coupon for a free box. So stop settling for less than the best. Start thinking about where your money is going. Stop just handing it over….try holding onto some of it.
How Do You Do This?
By Starting! Just take the time to begin. Start getting your feet wet.
Clip those coupons, search the sales, hit the internet, dig for the good deals, plot and plan. On average, spend about 1-2 hours a week doing those things. In the last year, I spent (on average) 78 hours doing the coupon thing (and I know it was less since I took a 3 month break) and I got over $2500 worth of stuff for FREE. I kept some, donated some, and gave some away. For every hour I spent clipping coupons, I made my family $32.05. Where else can you get $32.05 an hour?
Now you are not going to start out bringing in hundreds of dollars of free stuff. It took me a couple years to get to this point, but with time, effort, and know-how…you can get there too.
Again, keep your integrity in tact! This is the most important thing to remember. You will not win with money if you do things that are not right. You cannot get something for free with coupons and then return it. It’s not right. You cannot illegally obtain coupons and use them. You cannot lie, cheat, or manipulate the system. You cannot have the intention to do harm to those you do business with. You cannot be merciless when haggling with people. You must have extreme integrity when you do these things. You MUST, or you WILL NOT win with money.
You need to wake up, look at what you're spending your money on. Decide today that you are going to stop handing over your money to someone else, by paying full price for things that you can get for less. It's YOUR money, keep it in YOUR pocket.
Dented cans can be consumed quickly without problems and can save you 50% or more.
Clothing with small flaws can be discounted. I bought a dress at Dress Barn (courtesy of a gift card) a few weeks ago, and the dress I liked had a broken loop on it. I’m talking that this thing only needed 2 stitches to be fixed, and I was able to get 20% off the dress by haggling with the lady. Yes, it was free because of the gift card, but because I got that 20% off, I was able to get a clearance shirt to go with it. Many stores will give you at least 10% off if you buy slightly damaged or defective clothes or items. Remember integrity and don't rip a button off to get a discount.
Never underestimate a scratch, dent, ding, chip, or missing piece. Deep discounts are given when you buy slightly defective merchandise that they wouldn't otherwise be able to sell.
Discounts on Home Maintenance & Other Services: Ask for a discount if you put their sign in your yard (or on your car). Ask for a discount for giving them the names and addresses of your family and friends. If you have a large enough blog or website, then ask for a discount if you feature them on it. I am part of a social networking site of moms, and Walmart sent me 2 $100 gift cards to buy baby clothes and write about my experience. Because they knew that I have the potential to reach thousands of moms a day, they were more than happy to send a couple hundred bucks of free clothes my way.
Bartering: Trading Goods & Services. This is a great way to get things for free (or nearly free). We needed some minor auto work done, and a guy we knew (who just so happened to be a mechanic) needed a sitter for 2 days while his wife was out of town, and so I watched his kid and he fixed our car. No money, no problem – it was a win, win for both of us.
Yard sales and estate sales are great ways to get some good stuff. Yes, some of it is junk, but I know I’ve sold some pretty darn good things in my yard sales. If you buy things at a retail location, they are buying at TV at $100, they have to sell it for more than $100. At yard sales, the person buys something for $100, they’re willing to sell it for $10. You get a much better deal because they see the item as “in the way.” Their stuff has more value to you than it does to them. (Pay attention to that if you’re selling stuff!!!!) Don’t be mean or cut them down, but realize that their stuff means more to you than to them – most of the time. I sold a $50 vase for $5 once – it wasn’t mine (a friend was getting rid of it and I took it for my yard sale), it was in the way, and it was a means to get some money for paying off debt. The person who bought it got a very good deal.
Auctions: You have to be extremely careful at auctions. If you do your homework and know what you’re bidding on, they can be great. But too often people will get all worked up and pay way too much for something they could have gotten elsewhere for much cheaper.
And now for the moment we’ve all been waiting for….my #1 way of saving money & getting free stuff……
CLIPPING COUPONS!!!!
Where do you get the coupons? The Sunday paper, some Friday papers, Printable Coupons Online, Manufacturer Websites, In Stores, From Promotions, From Free Samples. The possibilities are endless as to where you can get coupons. You just have to dig around and see what’s out there. Sometimes you can get your family and friends to give you their coupons that they aren’t using. Coupons are wonderful, wonderful things.
Now if you’re saying, “I don’t have time to clip coupons” then I urge you to stop thinking that this very instant and just listen. It’s not like it used to be. It’s not something that poor people do to make ends meet. It’s something that smart people do because they’re tired of seeing all their money go to other people. You don’t have time NOT to clip coupons because it can be a huge blessing to your family, if used properly.
Couponing Rules:
Don't buy something just because you have a coupon. Seriously, if it’s $1.50 more than the generic equivalent even after the coupon savings, it’s not worth it just to use the coupon. So, only use the coupons if it truly is going to save you money. Just because you have a coupon for $1.00 off colon cleanse, it doesn’t mean you need to run out and buy it….unless you really need it.
Match coupons with sales ads to maximize savings. Coupons by themselves are good, but when paired with sales for additional savings, they can be phenomenal. I’m going to give the Walmart spill, but they will honor competitor’s sale prices. You just have to bring the sales ads with you. So you can get all the sales in one stop, and you can use your coupons to maximize your savings.
All coupons are potential money makers. Just because you don’t use Colon Cleanse, doesn’t mean that you should throw that coupon away. Sometimes stores, especially CVS and Walgreens, will have sales that will earn you money by buying certain products. I will explain it later, but all coupons are potential money makers.
Couponing Secrets
At most stores B1G1 deals accept the use of 2 coupons.
B1G1 coupons can also be used with B1G1 sales, making it a B1G2 deal.
One coupon per purchase means that each item is a purchase. Each time you cash out is a transaction. Don't let a clueless cashier ruin your couponing by saying you can't use more than 1 of the same coupon in a transaction. As long as you are using the same number of coupons as you have purchases, you're fine.
The Walgreens Game
This is where it gets a little confusing, but bear with me and we’ll sort it all out.
Walgreens has a few different ways to save: Register Rewards (RRs), Rebates, and in-ad coupons.
You can use both a Walgreens coupon and a manufacturer's coupon on the same product.
When buying an item to get RRs, you cannot use a RR from the same company and get more. This is a serious pain in the rump. They do this to keep limits on how many each person can buy. However, if you buy some Huggies diapers and get some RRs from that, then you use those RRs to purchase Ragu pasta sauce to get more RRs, then you can use the Pasta Sauce RRs for more Huggies. You have to interchange them for it to work. BUT, you have to know your companies. You have to know who makes these products because Proctor and Gamble does things like Pringles, Always, Gillette, Crest, and Tide. You wouldn’t always mesh those things together, but it can ruin your RR flow.
You must have the same number of items as you have coupons. This is especially tricky. You can use a manufacturer’s coupon and a Walgreens coupon for one item, but you cannot use a register reward, a Walgreens coupons and a manufacturer’s coupon for one item because Register Rewards count as Coupons!!! So, you need to get some filler products. Leftover pencils from the previous holiday are great things. Also candy bars or clearanced products work just as well.
Easy Saver Catalogs have been discontinued. There is some buzz going around about a loyalty program like CVS has, but nothing has been put in stone yet. As of now, there is no more ESC. Some items will still give rebates, and the rebates are now printed from the Catalina machine.
Call me if a Register Reward doesn't print. I have a number to call. You will have to keep your receipt so you can verify the information.
Now let’s play the game a little bit this week (5/17): Bayer Quick Crystals are $2.49 with $2.49 RR. That means, you pay $2.49 and you are then given $2.49 in RR after you check out. You can then use that $2.49 towards the purchase of Colgate Visible White for $4.49. There is a $1.00 off coupon if you go to www.iheartwags.com to find the link. You would need to pick up a very cheap item (because you'd need 2 items since you'd be using 2 coupons). You'd use your $2.49 RR from your first purchase and you'd get back a $4.49 RR. You could then take that $4.49 RR and use it towards the purchase of the $5.00 Clinical Strength Dry Idea. There is a $2.00 off coupon (see iheartwags.com again). Pick up another cheap item since you'll be using 2 coupons. You'd get both for free, and you'd get $5.00 in RR to use on your next purchase.
The CVS Game
CVS is also going through some changes and their sales are not what they used to be. They have caught onto us frugal shoppers out there, and they’ve lowered their limits and have changed some things. But don’t fret, good deals are still to be had.
You must have a CVS Extra Care Card. Ask for one at the register. Call the 1-800 number on the back to register it. Make sure to give them your email address because they will email you valuable coupons, somtimes certificates for free stuff! All of your coupons and Extra Care Bucks are tied to this card!
Ways to save: Extra Care Bucks (ECBs), in-store coupons, cash register tape coupons, beauty book coupons (ask for them in store. For those in class, those are the coupons I handed out), and magic machine coupons. That's the red box that acts as a scanner for pricing. If you scan your card under it, it will print out coupons. One scan per day.
You can use a CVS coupon and a manufacturer coupon together. Those are the cash register tape coupons, magic machine coupons, beauty book coupons, and emailed coupons.
You can use several ECBs in one transaction. Unlike Walgreens, ECBs do not count as coupons, and you can use 10 for one purchase if you like. You just have to be careful because if you have one for $5.00 and you only spend $3.00 – you lose the other $2.00. So always get enough to use up your ECBs.
Use $/$$ CVS coupons first, then use other coupons, THEN use ECBs. Sometimes lovely things will print out or be emailed to you for $/$$ purchase (example is $5/$25). They are handy and can save you quite a bit of money. There is an order to it though. You must FIRST give them the $/$$ coupon, then the other coupons, THEN the ECBs. That is the best way to maximize your savings.
You do not pay tax when paying with ECBs. Unlike Walgreens, ECBs do not act like coupons - they act like cash. So, when using ECBs to pay for a purchase in full, there is no sales tax. It is counted as a pre-tax discount, unlike coupons. So if you have a $4.99 ECB and you buy something that costs $4.99 before tax, then you walk out of there having paid NOTHING.
Watch for limits per hoursehold. There are limits on the sales items, especially those that give you ECBs. If there’s a limit of 1, then you should only buy 1 of that item, get your ECBs and use those towards another item that earns you more ECBs.
You can roll ECBs, if there's a limit of more than 1, to get more ECBs on the same item. So if the limit is 2, unlike Walgreens, you can use the same ECB from the first transaction, to pay for the exact same item in the second transaction, and more ECBs will print. You then would take those and max out the number of items that it will allow you to get, and then go on to the next item that earns you more ECBs.
Ask for rainchecks if they are out of an item. Sometimes their stock just stinks, and then there are greedy people who empty shelves. If they are out of something, ask for a raincheck. Depending on the cashier, you will either get the ECBs subtracted off the purchase price (sometimes making it free) or you will act like it’s a normal purchase and they’ll manually print out the ECBs for you.
Quarterly ECBs are given. They are 2% of your quarterly spending. When you get really great at playing the game, you will find that you MIGHT get $1.00 every quarter. But in the beginning, especially if you get a new card, you can get some really great quarterly earnings. My card, when I first got it, had over $300 worth of purchases on it because that’s the one they’d just use at the register whenever people without a card would go through the line. That was nice!
ECBs (like RRs) expire. And once they expire, there’s nothing they can do about them. They are now refusing to reset them for people, and so you will get stuck with them if you do not use them.
This isn’t necessarily a game of buying only needs. Sometimes you buy stupid things just because they are free and earn you more ECBs. The things you do not want, you can donate, because you’re not out anything.
So, let’s do a little playing with the CVS game this week (5/17): Dry Idea deodorant is 2 for $5.00 with $2.00 ECB when you buy 2. There are $2.00 off coupons (go to www.iheartcvs.com for link). With both coupons, you would pay $1.00 out of pocket for 2 dry idea deodorants. You would then receive $2.00 in ECBs. That is a profit of $1.00. You could then spend the $2.00 on another purchase that earns you more ECBs. Generally I do not buy anything there unless it earns me more ECBs.
Publix
Watch carefully for B1G1 sales. You can use 2 coupons on a B1G1 sale.
Publix doubles manfacturer coupons up to $.50 every day.
Publix in-ad coupons and mailed coupons (register for their clubs at Publix.com)can be used with manufacturer coupons for double the savings.
Monday is penny item day. If you spend $10 (before coupons) you get the featured item for 1 penny!
Publix sales run from Wednesday to Tuesday.
Publix offers a UPromise shopping card, so if you have student loans, have a child, or are in college yourself, then you can set up an account and a percentage of qualifying purchases gets put into your UPromise account.
Let's look at a possible good deal at Publix (as an example): Ritz crackers are B1G1 at publix for $3.69 (I think...lost the ad). There are $1.00 off coupons at kraftfoods.com. If you print 2 of those coupons out, you can get 2 boxes of Ritz crackers for $1.69 (or whatever the price is) because you can use 1 coupon per item (even on a B1G1 deal). That's a huge savings if you eat crackers in your house. We certainly do!
As a side note, Fred's doubles coupons up to $.75 every Saturday.
Now I know what you’re asking. Does it really save that much money? Does playing the CVS and the Walgreens and the Publix games really matter that much? Is it really worth the time and effort?
Is It Worth It?
Yes, Yes it is! And that is just the free stuff!
For as much as we have, we've given almost that much away. Can you believe that? Between family, friends, and charities, we’ve given away boxes and boxes and boxes of this stuff…stuff that I got for free….just by using coupons and sales ads, and playing the games.
I realize that there was not a lot of food pictured, but that’s because we eat it. I never think to take pictures of my grocery shopping trips because I just put it away and call it good. We have been so blessed by using coupons. It’s kept our grocery, toiletry, diaper, and household product part of the budget down to $200 a month for our family of 5 (and that’s living large). We’ve been able to build a year’s supply of toiletries and household products for our family by doing this. This is not a game folks…we call it one, but it’s not. It’s life. It’s a way for me to hold onto the money we have and do something more positive with it than just buy stuff. I realize food is not “stuff” but the less I have to spend on these things, the more money I have to change our family tree.
All it takes is a couple hours a week and some planning and plotting. It takes changing the way you look at buying things – both big things and small things. It takes changing your attitude towards things, and not being frivolous with your money. If something is sub standard, or the product is defective, call them on it. Complain, give them the info from the packaging. They will replace it. We've gotten free batteries, diapers, taco shells and more by complaining about sub-standard products. I have 2 coupons in my coupon files for 2 free boxes of Taco Shells because we bought some that were greasy and chewy. There were defects in about half a box of some Huggies diapers I bought (24 out of 70 diapers) and they sent me a coupon for a free box. So stop settling for less than the best. Start thinking about where your money is going. Stop just handing it over….try holding onto some of it.
How Do You Do This?
By Starting! Just take the time to begin. Start getting your feet wet.
Clip those coupons, search the sales, hit the internet, dig for the good deals, plot and plan. On average, spend about 1-2 hours a week doing those things. In the last year, I spent (on average) 78 hours doing the coupon thing (and I know it was less since I took a 3 month break) and I got over $2500 worth of stuff for FREE. I kept some, donated some, and gave some away. For every hour I spent clipping coupons, I made my family $32.05. Where else can you get $32.05 an hour?
Now you are not going to start out bringing in hundreds of dollars of free stuff. It took me a couple years to get to this point, but with time, effort, and know-how…you can get there too.
Again, keep your integrity in tact! This is the most important thing to remember. You will not win with money if you do things that are not right. You cannot get something for free with coupons and then return it. It’s not right. You cannot illegally obtain coupons and use them. You cannot lie, cheat, or manipulate the system. You cannot have the intention to do harm to those you do business with. You cannot be merciless when haggling with people. You must have extreme integrity when you do these things. You MUST, or you WILL NOT win with money.
You need to wake up, look at what you're spending your money on. Decide today that you are going to stop handing over your money to someone else, by paying full price for things that you can get for less. It's YOUR money, keep it in YOUR pocket.
Wednesday, April 15, 2009
Dumping Debt - part 1
Welcome to the 3rd installment of the All Things Financial Group. Tonight we will be covering a lot of information, so let's get going.
Please watch the following skit from Saturday Night Live.
As humorous as that clip is, it is really true. Don’t buy stuff you cannot afford, because doing that has gotten us all into debt at some time or another. The only way to dig our way out of debt is to stop buying things we cannot afford.
This is an incredibly difficult lesson for me to teach because you have had your ideas about debt and credit reports for many years. What I may say tonight might challenge your beliefs. It might make you question what it is that you’ve been doing all these years? It can be incredibly difficult to swallow, and by slide number 4 you may want to write-me off completely and put “nutjob” right on my forehead. But I ask you to hear me out, keep an open mind and heart, and then if you want to call me a nutjob on the way home, then you are more than welcome to do that. But for the next hour and a half, just be open to what I’m saying, on the off-chance I might be right.
Fact vs. Fiction
There is a myth floating around out there that everyone has debt, and some debt is good. Well, let’s go ahead and de-bunk that myth.
Dave Ramsey says, "Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you're in debt, then you're a slave, in the sense that you do not have the freedom to use your money to help change your family tree."
Wow, so if you have debt, then you are normal. And most normal people are broke. Following that logic (which is correct by-the-way) then I don’t want to be normal. I want to be weird. We have been referred to as a “peculiar people” so why on earth would we want to be normal when it comes to being broke and in debt up to our eyeballs? It just doesn’t make sense.
Let’s just go ahead and get this out here and now – Debt is not a way to become prosperous. It just isn’t.
But….since we’re here and we have debt, it isn’t going to vanish just because we really want it to – so we’re going to have to work through it.
I now want to de-bunk a series of myths that have been fed to you about debt, that we have bought as truth. If you tell a lie often enough, loud enough, and long enough then eventually it will become accepted as truth. Even though we know deep down that it isn’t true, we will eventually conform and go along with it. That’s just how things work, and these are some of the things that we’ve been told often enough, loud enough, and long enough that we, as a society have accepted them as truths.
Myth 1: Having debt helps you build that FICO score so you can get a mortgage.
Truth: Having credit cards with a 0 balance actually negatively impacts you when buying a home or refinancing a mortgage. This is true because if you have a bunch of credit cards with a $0 balance and then you get a new home, statistically speaking, you will go out and buy all new home furnishings for your new home, and then you will become a liability for not paying your mortgage. Having open lines of credit increases your risk, and especially nowadays, mortgage lenders do not want to see anyone who appears even remotely risky. So keeping those cards open because it builds credit can actually end up hurting you much more in the long run than taking a small ding on your credit report for closing them.
Myth 2: You need a credit card to rent a car.
Truth: Most car rental companies take debit cards, and the ones who don't are too expensive anyway.
Myth 3: You need a credit card to buy things online.
Truth: Visa or Master Card debit cards work just as well and carry the same fraud liability as credit cards. Now I know you’re saying “but I don’t want them tied to my bank account.” Well, since it has the same fraud liability, and the banks (at least the good ones) have some pretty great ways to keep you secure, then you’re pretty safe. Many banks will return the money to your account within 24 hours (and reverse any fees if they were accumulated). Of course, they do conduct an investigation, but if you’re a victim of fraud, you’d have to clear it up anyway. And if your bank doesn't offer this protection, it's time to switch banks.
Myth 4: It's okay to use the credit card as long as I pay it off every month.
Truth: 78% of you won't. And no one pays it off 100% of the time - no matter how disciplined they are. Life happens and gets in the way, and then you just spent money you didn't have to spend.
But…but….but….
I get rewards points, air miles, or cash back bonuses! Seriously have you ever tried to use them? I had a platinum card with a $6500 balance on it. Do you know what I was able to get when I cashed out my points after finding Dave and cutting the card up? A pizza stone and a golf umbrella! $6500 of debt and I got a stupid pizza stone and a golf umbrella! I could have saved myself the $6450 and just bought those stupid things myself.
but....but....but....
Having cash burns a hole in my pocket, so I spend less with a card.
Actually, you spend 12-18% more just because you use plastic, and if you're using plastic at the grocery store, then you can end up spending 40-60% more. If you don’t believe me on this – take $100 to the grocery store and leave the cards at home. I guarantee you will only walk out of there with $100 worth of stuff. If you go in with the intention of spending $100 on plastic, I can almost guarantee that you will walk out of there having spent WELL over that $100. It will happen every time. Don’t believe me? Well, even a seasoned veteran and tightwad like myself went into Walmart on Saturday to do the grocery shopping. I hadn’t gotten cash for our envelopes since it was payday, and sure enough, I spent $104.63 when I only intended to pay $100. Sure $4.63 doesn’t sound like much, but it is 4.5% and I became a statistic.
So what do we learn from all of this?
Credit cards are snakes. If you play with snakes, you will eventually get bitten. Remember Steve Irwin, the Crocodile Hunter? I thought he was a great man, but he played with the most dangerous creatures on the planet, and one ended up killing him. Even fearless Steve couldn’t out maneuver this universal law, so what makes you think that you can do it and not get bitten?
Ways they bite you:
1. Increasing interest rates
2. Lowering limits. Sometimes you don't know it and use the card and go over the limit. Then you get hit with #3.
3. Fees, fees, and more fees.
4. Universal default. If you default on any card, ALL of your credit cards will increase their interest rates.
So, let's talk some more about debt.
Debt is the most aggressively marketed product in our culture today, and to even imagine living without it requires a paradime shift. That means that you have to change the way you look at things completely if you want to live a debt free life. We are inundated with commercials on TV, ads on the internet, credit offers in our mailboxes, and even children’s toys are now equipped with credit cards! Debt is a product and is now part of our culture. When you are an awakened and aware consumer, then you become dangerous. My goal is to give you a paradime shift – a new belief system.
Debt has not always been around. It wasn’t until the 1960’s that it began to be marketed. Just take a moment and think back if you will. We all do family history, so let’s put our knowledge to work. Do you think your great grandparents had debt? Probably not, and here’s why:
Our great grandparents viewed debt as a sin. It wasn't just bad - it was a sin.
Our grandparents borrowed only on a home.
Our parents borrowed only on a few things.
We borrow on EVERYTHING!
Seriously, dental offices have credit cards! You can buy a new puppy on credit at the pet store. It is ridiculous that we can put anything and everything on credit. The only thing we can’t put on credit is tithing, and I’m sad to say that some churches (obviously not of our faith) even allow you to use a credit card to pay your tithes and offerings. Seriously! They do! You can put everything on credit! Wake up people – something is wrong here!
And what makes me laugh is that it hasn’t always been like this – debt is a new phenomenon.
Let’s discuss the history of debt for a moment.
Sears: The 1910 Sears catalog said, "Buying on credit is folly"
James Cash Penny (J.C. Penny): did not allow credit to be used at his stores while he was alive.
Ford Motor: They did not offer credit for 10 years.
Diner's Club: First credit card appeared in 1950.
Bank of America: First bank to offer plastic in 1958. It was called the Bank Americard.
Bank Americard eventually becamse Visa.
Discover: Splintered from Visa in 1986.
Isn’t that interesting? Sears, who reported having about 1 million credit card applications a month at one time said, in their own catalog that buying on credit is folly. Sears makes more money on their credit program, than they do selling merchandise. Don’t get me wrong – I like Sears. We buy some of their tools from yard sales, but doesn’t that just blow your mind about quickly greed fueled this downward spiral of debt?! It's all new, but we are so engrained with it in our culture that we can't imagine life without it. Our government has spent billions of dollars so that people can continue to borrow money.
This is why we need a paradime shift – to stop that downward spiral of debt and to dig our way out. Proverbs 22:7 says, "The rich ruleth over the poor and the borrower is servant to the lender."
When we are in debt, we are servants to our lenders. They set the terms, and we pull out all the stops to meet those terms every month. That isn’t living our lives. If we want to win with money, we have to do what rich people do - and rich people don't borrow money.
Joseph B. Wirthlin said, "Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our things own us.
It’s in the scriptures, prophets and apostles of the Lord have said it and are still saying it. When you are in debt, you are in bondage. You are not free. You are a servant to the lender.
The only way to break those chains that bind you is to pay off your debts and refuse to ever go into debt again. That is how you will win with money.
So what is the secret to winning with money?
Intensity.
Intensity has everything to do with how successful you will be with paying off your debts. Believe me, it is with intensity (through much help from the Lord) that we’ve been able to accomplish what we have in our lives with paying off our debt. $45,000 in 3 ½ years on a $31,000/year income while having 3 children in the process only by intensity.
Read Proverbs 6:1-7
I am going to liken the scriptures unto the Discovery Channel for a moment. We’ve all seen the nature shows where the lovely little gazelles are grazing in the fields, but you know where there are gazelles, there is also a big cat of some sort lurking in the tall grass. Now today, it’s going to be a cheetah – the fastest animal the gazelles could ever encounter. So, the cheetah is lurking and creeping up ever so quietly, and the gazelles are hanging out and eating grass. Well, gazelles have a cheetah detector behind their ears, and one of gazelles stops and looks up because the cheetah detector just went off and he tells his buddies, “Cheetah, guys….there’s a cheetah.” But they don’t run away – not yet. They wait until they see where the cheetah is coming from. Well, the cheetah realizes that he tripped the cheetah alarm so he comes out. You may not know it, but the cheetah can go from 0-45 mph in 4 leaps. So, the gazelles see the cheetah and yell “CHEETAH!!!!!!!!!!!!!!!!!!!!!! and begin running for their lives. They are weaving in and out because they know they can’t outrun the cheetah, and they are weaving in and out with some major intensity. Their very existence depends on them outrunning the cheetah, and only 1 in 18 times with a gazelle get caught by a cheetah.
I tell you this because we need to be those gazelles, and our debtors are the cheetahs in our lives. I think sometimes we forget that. I think sometimes we are having a rough time and we pray “Oh Jesus, I don’t know what to do. Please help me through this Jesus. I promise I won’t be stupid again, Jesus.” And then we go out to check the mail and we get a brand new Visa card and we say, “Thank you Jesus!” Jesus did NOT put that credit card in your mailbox! The correct response would be to take that Visa card and yell CHEETAH!!!!!!!!!!!!!!!!!! and snip that card to a million pieces.
Now these are 6 Steps of Gazelle Intensity. I promise that if you do these, you will become gazelle intense, and you will work your way through your debts faster than you ever thought possible.
1. Avoid the cheetahs, and get rid of the ones that you have. Cut up those credit cards. And as an example to everyone, I cut up the following cards.
Bank of America – you started this mess, so you go first. (snip)
I promise Target, takes cash. (snip)
Life doesn’t take Visa, Visa takes life. (snip)
Oooohhh, Platinum…..(snip) just looks like plastic to me.
Discover a new life – without credit cards (snip)
You cannot serve the Master and Master Card. (snip)
Anyone have any credit cards they want to cut up? Anyone want to perform plastic surgery as their first step towards becoming gazelle intense??
2. Save money (the $1000 emergency fund).
3. Prayer - it really works. You have to include the Lord in this process. Only he can help bring about that mighty change of heart.
4. Sell something. Sell so much your kids think they are next. I know mine sure do.
5. Get a part time job. It's not forever - just to get the cheetahs out of your life.
6. Understand and use the debt snowball.
Please watch the following skit from Saturday Night Live.
As humorous as that clip is, it is really true. Don’t buy stuff you cannot afford, because doing that has gotten us all into debt at some time or another. The only way to dig our way out of debt is to stop buying things we cannot afford.
This is an incredibly difficult lesson for me to teach because you have had your ideas about debt and credit reports for many years. What I may say tonight might challenge your beliefs. It might make you question what it is that you’ve been doing all these years? It can be incredibly difficult to swallow, and by slide number 4 you may want to write-me off completely and put “nutjob” right on my forehead. But I ask you to hear me out, keep an open mind and heart, and then if you want to call me a nutjob on the way home, then you are more than welcome to do that. But for the next hour and a half, just be open to what I’m saying, on the off-chance I might be right.
Fact vs. Fiction
There is a myth floating around out there that everyone has debt, and some debt is good. Well, let’s go ahead and de-bunk that myth.
Dave Ramsey says, "Debt is dumb. Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you're in debt, then you're a slave, in the sense that you do not have the freedom to use your money to help change your family tree."
Wow, so if you have debt, then you are normal. And most normal people are broke. Following that logic (which is correct by-the-way) then I don’t want to be normal. I want to be weird. We have been referred to as a “peculiar people” so why on earth would we want to be normal when it comes to being broke and in debt up to our eyeballs? It just doesn’t make sense.
Let’s just go ahead and get this out here and now – Debt is not a way to become prosperous. It just isn’t.
But….since we’re here and we have debt, it isn’t going to vanish just because we really want it to – so we’re going to have to work through it.
I now want to de-bunk a series of myths that have been fed to you about debt, that we have bought as truth. If you tell a lie often enough, loud enough, and long enough then eventually it will become accepted as truth. Even though we know deep down that it isn’t true, we will eventually conform and go along with it. That’s just how things work, and these are some of the things that we’ve been told often enough, loud enough, and long enough that we, as a society have accepted them as truths.
Myth 1: Having debt helps you build that FICO score so you can get a mortgage.
Truth: Having credit cards with a 0 balance actually negatively impacts you when buying a home or refinancing a mortgage. This is true because if you have a bunch of credit cards with a $0 balance and then you get a new home, statistically speaking, you will go out and buy all new home furnishings for your new home, and then you will become a liability for not paying your mortgage. Having open lines of credit increases your risk, and especially nowadays, mortgage lenders do not want to see anyone who appears even remotely risky. So keeping those cards open because it builds credit can actually end up hurting you much more in the long run than taking a small ding on your credit report for closing them.
Myth 2: You need a credit card to rent a car.
Truth: Most car rental companies take debit cards, and the ones who don't are too expensive anyway.
Myth 3: You need a credit card to buy things online.
Truth: Visa or Master Card debit cards work just as well and carry the same fraud liability as credit cards. Now I know you’re saying “but I don’t want them tied to my bank account.” Well, since it has the same fraud liability, and the banks (at least the good ones) have some pretty great ways to keep you secure, then you’re pretty safe. Many banks will return the money to your account within 24 hours (and reverse any fees if they were accumulated). Of course, they do conduct an investigation, but if you’re a victim of fraud, you’d have to clear it up anyway. And if your bank doesn't offer this protection, it's time to switch banks.
Myth 4: It's okay to use the credit card as long as I pay it off every month.
Truth: 78% of you won't. And no one pays it off 100% of the time - no matter how disciplined they are. Life happens and gets in the way, and then you just spent money you didn't have to spend.
But…but….but….
I get rewards points, air miles, or cash back bonuses! Seriously have you ever tried to use them? I had a platinum card with a $6500 balance on it. Do you know what I was able to get when I cashed out my points after finding Dave and cutting the card up? A pizza stone and a golf umbrella! $6500 of debt and I got a stupid pizza stone and a golf umbrella! I could have saved myself the $6450 and just bought those stupid things myself.
but....but....but....
Having cash burns a hole in my pocket, so I spend less with a card.
Actually, you spend 12-18% more just because you use plastic, and if you're using plastic at the grocery store, then you can end up spending 40-60% more. If you don’t believe me on this – take $100 to the grocery store and leave the cards at home. I guarantee you will only walk out of there with $100 worth of stuff. If you go in with the intention of spending $100 on plastic, I can almost guarantee that you will walk out of there having spent WELL over that $100. It will happen every time. Don’t believe me? Well, even a seasoned veteran and tightwad like myself went into Walmart on Saturday to do the grocery shopping. I hadn’t gotten cash for our envelopes since it was payday, and sure enough, I spent $104.63 when I only intended to pay $100. Sure $4.63 doesn’t sound like much, but it is 4.5% and I became a statistic.
So what do we learn from all of this?
Credit cards are snakes. If you play with snakes, you will eventually get bitten. Remember Steve Irwin, the Crocodile Hunter? I thought he was a great man, but he played with the most dangerous creatures on the planet, and one ended up killing him. Even fearless Steve couldn’t out maneuver this universal law, so what makes you think that you can do it and not get bitten?
Ways they bite you:
1. Increasing interest rates
2. Lowering limits. Sometimes you don't know it and use the card and go over the limit. Then you get hit with #3.
3. Fees, fees, and more fees.
4. Universal default. If you default on any card, ALL of your credit cards will increase their interest rates.
So, let's talk some more about debt.
Debt is the most aggressively marketed product in our culture today, and to even imagine living without it requires a paradime shift. That means that you have to change the way you look at things completely if you want to live a debt free life. We are inundated with commercials on TV, ads on the internet, credit offers in our mailboxes, and even children’s toys are now equipped with credit cards! Debt is a product and is now part of our culture. When you are an awakened and aware consumer, then you become dangerous. My goal is to give you a paradime shift – a new belief system.
Debt has not always been around. It wasn’t until the 1960’s that it began to be marketed. Just take a moment and think back if you will. We all do family history, so let’s put our knowledge to work. Do you think your great grandparents had debt? Probably not, and here’s why:
Our great grandparents viewed debt as a sin. It wasn't just bad - it was a sin.
Our grandparents borrowed only on a home.
Our parents borrowed only on a few things.
We borrow on EVERYTHING!
Seriously, dental offices have credit cards! You can buy a new puppy on credit at the pet store. It is ridiculous that we can put anything and everything on credit. The only thing we can’t put on credit is tithing, and I’m sad to say that some churches (obviously not of our faith) even allow you to use a credit card to pay your tithes and offerings. Seriously! They do! You can put everything on credit! Wake up people – something is wrong here!
And what makes me laugh is that it hasn’t always been like this – debt is a new phenomenon.
Let’s discuss the history of debt for a moment.
Sears: The 1910 Sears catalog said, "Buying on credit is folly"
James Cash Penny (J.C. Penny): did not allow credit to be used at his stores while he was alive.
Ford Motor: They did not offer credit for 10 years.
Diner's Club: First credit card appeared in 1950.
Bank of America: First bank to offer plastic in 1958. It was called the Bank Americard.
Bank Americard eventually becamse Visa.
Discover: Splintered from Visa in 1986.
Isn’t that interesting? Sears, who reported having about 1 million credit card applications a month at one time said, in their own catalog that buying on credit is folly. Sears makes more money on their credit program, than they do selling merchandise. Don’t get me wrong – I like Sears. We buy some of their tools from yard sales, but doesn’t that just blow your mind about quickly greed fueled this downward spiral of debt?! It's all new, but we are so engrained with it in our culture that we can't imagine life without it. Our government has spent billions of dollars so that people can continue to borrow money.
This is why we need a paradime shift – to stop that downward spiral of debt and to dig our way out. Proverbs 22:7 says, "The rich ruleth over the poor and the borrower is servant to the lender."
When we are in debt, we are servants to our lenders. They set the terms, and we pull out all the stops to meet those terms every month. That isn’t living our lives. If we want to win with money, we have to do what rich people do - and rich people don't borrow money.
Joseph B. Wirthlin said, "Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our things own us.
It’s in the scriptures, prophets and apostles of the Lord have said it and are still saying it. When you are in debt, you are in bondage. You are not free. You are a servant to the lender.
The only way to break those chains that bind you is to pay off your debts and refuse to ever go into debt again. That is how you will win with money.
So what is the secret to winning with money?
Intensity.
Intensity has everything to do with how successful you will be with paying off your debts. Believe me, it is with intensity (through much help from the Lord) that we’ve been able to accomplish what we have in our lives with paying off our debt. $45,000 in 3 ½ years on a $31,000/year income while having 3 children in the process only by intensity.
Read Proverbs 6:1-7
I am going to liken the scriptures unto the Discovery Channel for a moment. We’ve all seen the nature shows where the lovely little gazelles are grazing in the fields, but you know where there are gazelles, there is also a big cat of some sort lurking in the tall grass. Now today, it’s going to be a cheetah – the fastest animal the gazelles could ever encounter. So, the cheetah is lurking and creeping up ever so quietly, and the gazelles are hanging out and eating grass. Well, gazelles have a cheetah detector behind their ears, and one of gazelles stops and looks up because the cheetah detector just went off and he tells his buddies, “Cheetah, guys….there’s a cheetah.” But they don’t run away – not yet. They wait until they see where the cheetah is coming from. Well, the cheetah realizes that he tripped the cheetah alarm so he comes out. You may not know it, but the cheetah can go from 0-45 mph in 4 leaps. So, the gazelles see the cheetah and yell “CHEETAH!!!!!!!!!!!!!!!!!!!!!! and begin running for their lives. They are weaving in and out because they know they can’t outrun the cheetah, and they are weaving in and out with some major intensity. Their very existence depends on them outrunning the cheetah, and only 1 in 18 times with a gazelle get caught by a cheetah.
I tell you this because we need to be those gazelles, and our debtors are the cheetahs in our lives. I think sometimes we forget that. I think sometimes we are having a rough time and we pray “Oh Jesus, I don’t know what to do. Please help me through this Jesus. I promise I won’t be stupid again, Jesus.” And then we go out to check the mail and we get a brand new Visa card and we say, “Thank you Jesus!” Jesus did NOT put that credit card in your mailbox! The correct response would be to take that Visa card and yell CHEETAH!!!!!!!!!!!!!!!!!! and snip that card to a million pieces.
Now these are 6 Steps of Gazelle Intensity. I promise that if you do these, you will become gazelle intense, and you will work your way through your debts faster than you ever thought possible.
1. Avoid the cheetahs, and get rid of the ones that you have. Cut up those credit cards. And as an example to everyone, I cut up the following cards.
Bank of America – you started this mess, so you go first. (snip)
I promise Target, takes cash. (snip)
Life doesn’t take Visa, Visa takes life. (snip)
Oooohhh, Platinum…..(snip) just looks like plastic to me.
Discover a new life – without credit cards (snip)
You cannot serve the Master and Master Card. (snip)
Anyone have any credit cards they want to cut up? Anyone want to perform plastic surgery as their first step towards becoming gazelle intense??
2. Save money (the $1000 emergency fund).
3. Prayer - it really works. You have to include the Lord in this process. Only he can help bring about that mighty change of heart.
4. Sell something. Sell so much your kids think they are next. I know mine sure do.
5. Get a part time job. It's not forever - just to get the cheetahs out of your life.
6. Understand and use the debt snowball.
Dumping Debt - part 2
The Debt Snowball
List your debts smallest to largest. That means, smallest balance to largest.
Pay only minimum payments on all but the smallest debt. Every single extra penny goes towards paying off that smallest debt.
Once that debt is gone, take its minimum payment and every extra penny and put it on the next one. Each debt you pay off gives you more "snow" for your snowball, and your monthly payments will get bigger and bigger and bigger.
It works, regardless of how small your snowball is to start out with. Our debt snowball started at $1.50. Yes, it was that pitiful, but it has grown into hundreds of dollars a month in 3 1/2 years. It is amazing how the debt snowball works!
Let's look at an example:
Item Payoff Min Pmt New Pmt
Target $210 $23
Visa 1 $798 $69 $92
Discover $2115 $98 $190
Car 1 $4899 $325 $515
Car 2 $12070 $405 $920
Student
Loans $22070 $425 $1345
I know what you're thinking....."but, but, but...wouldn't it be better to list them in order of highest interest rate? Wouldn't that be proper mathn?"
My response, "Honey, if you were so concerned about the math, you wouldn't be in debt in the first place." Why? Because if you are concerned with math, you'd know that paying interest on debt is stupid.
President J. Ruben Clark, in the 1938 General Conference Report said this about interest, "Interest never sleeps, nor sickens, nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its ways or cross its course, or fail to meet its demands, it crushes you."
So why do it this way?
It changes behavior! Remember that only 20% is math and 80% is behavior. By changing the behavior, you set yourself up to win with money. Working through your debts, making sacrifices, and being intense changes your behavior and the way you look at money.
Recently, I was interviewed for an online article I was featured in and she asked me if I would ever go back to my old ways once we’re completely debt free. After thinking for a moment, I could honestly answer. “No, I know too much, I’ve learned too much, and I’ve changed too much. I woke up and realized that I was living in bondage and that my money, wasn’t my money at all. I owed it to other people, and what I didn’t owe, I gave to others by over spending. Never again will I let that happen.” That is that paradime shift I was talking about earlier.
Another reason we do the debt snowball this way is that it gives you quick victories and instant gratification. It really does give you instant gratification to see these creditors go away forever. Once you knock the first one out and you get to say “goodbye forever” to them, then you will be pumped. You will feel a major rush every time you pay off a debt. If you were to do it any other way, chances are you’d get discouraged because you would not see instant results. When you see instant results, you are more likely to stick with it.
This plan and program has been proven time and time again to work. In the 3 1/2 years we've been doing the Dave Ramsey thing, I've seen so many couples get out of debt. Nearly every week I meet people who are screaming "We're debt FREEEEEE!!!" because they did this program. And one day in the near future (probably mid 2010) we too will be doing our debt free scream, because this plan works!
You may be asking, "But wouldn't debt CONsolidation be a good alternative?" No! And here's why:
Debt CONsolidation is a huge CON. They charge you money to move around the debt. You don't reduce the amount of money owed, you just owe on it longer - and actually you pay more interest since you're paying it over a longer period of time. The major reason to avoid it is that it doesn't change behavior. I have known so many people who consolidated their debts into one "manageable" payment, and their behaviors weren't changed. They felt some false freedom and ended up going further into debt again. So, not only did they have the original amount, they had twice as much as before because of the new debt.
The debt snowball changes behavior, and a behavioral change is necessary if you're going to win with money.
You do need to remember that all of this won't happen overnight. Dave Ramsey said, "I have been broke, I know how scared I felt, and know how fast I wanted to get out of debt. I know how you feel, and I have learned that what really works is unbelievably fierce, focused intensity."
If you make the changes you need to make, you will be amazed at how quickly you can get out of debt. We fully expected to be in debt for the next 30 years of our lives before we woke up and got a clue. It was normal to "always have a car payment" or those "emergency credit cards." But I have been constantly amazed at how much traction you can get in a short amount of time doing the debt snowball. Never would I have thought it would take 4 1/2 - 5 years to pay off 70,000 in debt, without drastically increasing our income. It's a program of intensity and quick victories which lead to winning the war. That's why it works.
List your debts smallest to largest. That means, smallest balance to largest.
Pay only minimum payments on all but the smallest debt. Every single extra penny goes towards paying off that smallest debt.
Once that debt is gone, take its minimum payment and every extra penny and put it on the next one. Each debt you pay off gives you more "snow" for your snowball, and your monthly payments will get bigger and bigger and bigger.
It works, regardless of how small your snowball is to start out with. Our debt snowball started at $1.50. Yes, it was that pitiful, but it has grown into hundreds of dollars a month in 3 1/2 years. It is amazing how the debt snowball works!
Let's look at an example:
Item Payoff Min Pmt New Pmt
Target $210 $23
Visa 1 $798 $69 $92
Discover $2115 $98 $190
Car 1 $4899 $325 $515
Car 2 $12070 $405 $920
Student
Loans $22070 $425 $1345
I know what you're thinking....."but, but, but...wouldn't it be better to list them in order of highest interest rate? Wouldn't that be proper mathn?"
My response, "Honey, if you were so concerned about the math, you wouldn't be in debt in the first place." Why? Because if you are concerned with math, you'd know that paying interest on debt is stupid.
President J. Ruben Clark, in the 1938 General Conference Report said this about interest, "Interest never sleeps, nor sickens, nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its ways or cross its course, or fail to meet its demands, it crushes you."
So why do it this way?
It changes behavior! Remember that only 20% is math and 80% is behavior. By changing the behavior, you set yourself up to win with money. Working through your debts, making sacrifices, and being intense changes your behavior and the way you look at money.
Recently, I was interviewed for an online article I was featured in and she asked me if I would ever go back to my old ways once we’re completely debt free. After thinking for a moment, I could honestly answer. “No, I know too much, I’ve learned too much, and I’ve changed too much. I woke up and realized that I was living in bondage and that my money, wasn’t my money at all. I owed it to other people, and what I didn’t owe, I gave to others by over spending. Never again will I let that happen.” That is that paradime shift I was talking about earlier.
Another reason we do the debt snowball this way is that it gives you quick victories and instant gratification. It really does give you instant gratification to see these creditors go away forever. Once you knock the first one out and you get to say “goodbye forever” to them, then you will be pumped. You will feel a major rush every time you pay off a debt. If you were to do it any other way, chances are you’d get discouraged because you would not see instant results. When you see instant results, you are more likely to stick with it.
This plan and program has been proven time and time again to work. In the 3 1/2 years we've been doing the Dave Ramsey thing, I've seen so many couples get out of debt. Nearly every week I meet people who are screaming "We're debt FREEEEEE!!!" because they did this program. And one day in the near future (probably mid 2010) we too will be doing our debt free scream, because this plan works!
You may be asking, "But wouldn't debt CONsolidation be a good alternative?" No! And here's why:
Debt CONsolidation is a huge CON. They charge you money to move around the debt. You don't reduce the amount of money owed, you just owe on it longer - and actually you pay more interest since you're paying it over a longer period of time. The major reason to avoid it is that it doesn't change behavior. I have known so many people who consolidated their debts into one "manageable" payment, and their behaviors weren't changed. They felt some false freedom and ended up going further into debt again. So, not only did they have the original amount, they had twice as much as before because of the new debt.
The debt snowball changes behavior, and a behavioral change is necessary if you're going to win with money.
You do need to remember that all of this won't happen overnight. Dave Ramsey said, "I have been broke, I know how scared I felt, and know how fast I wanted to get out of debt. I know how you feel, and I have learned that what really works is unbelievably fierce, focused intensity."
If you make the changes you need to make, you will be amazed at how quickly you can get out of debt. We fully expected to be in debt for the next 30 years of our lives before we woke up and got a clue. It was normal to "always have a car payment" or those "emergency credit cards." But I have been constantly amazed at how much traction you can get in a short amount of time doing the debt snowball. Never would I have thought it would take 4 1/2 - 5 years to pay off 70,000 in debt, without drastically increasing our income. It's a program of intensity and quick victories which lead to winning the war. That's why it works.
Collection Practices
We are switching gears now, and I want everyone to read this. You may feel inclined to skip this section if it doesn't apply to you; however, someone you know may need your help, and by reading this section you can give it to them.
Bill Collectors
Even if you have bill collectors calling you, you are most likely not bankrupt - so get that thought out of your head. You just need to devise a plan on how to deal with it.
The first thing you need to learn when in this situation is that bill collectors are not your friends, and they are not your financial advisors. They are in it for their money, and they will employ many different tactics to try to get it.
I knew someone who was a bill collector by profession. He ended up working his way up to VP over collections at the bank he works at. He could get results and was good at what he did. However, I learned a lot of lessons from him. I learned that they are not your friends and they will say whatever they need to say to get you to pay. Every single night, I’d hear collection stories, and in every single story, he would refer to the person (or people) as “deadbeats.” The newly divorced mom of 3 – deadbeat. The man who just lost his wife to cancer – deadbeat. The husband and wife who both lost their jobs at the same factory – deadbeats. He didn’t care about those people, but he played “financial advisor” to talk them into paying his company. It was toxic and corrosive just to hear the stories and the venom he had for those people, and the bill collector on the other end of your phone is no different. Do not allow them to "befriend" you or to become your "financial advisor" because they are not looking out for you.
Don't get me wrong, there are some good collectors, but many are not. Now when I say some are good it doesn’t mean that they are your friends. It means that they follow the rules, while others don’t. Why wouldn’t they all follow the rules? Well…..it’s a little known fact about the collections world, but the turn-over rate is astonishingly high. The average lower level collector is only on the job for an average of 92 days. That’s not long enough to really learn how to do their jobs much less learn the rules. Because they do not have adequate training or experience, most are ignorant to the federal laws protecting your rights. They are just there to do the job and go home. They do whatever it takes to get their money.
They have a database on you, and they will try many different tactics until they find one that works. When they do, they will log it in the computer, and they'll try that same trick over and over and over again. So let's learn their tactics so we aren't caught off guard.
Their Tactics:
1. Evoke strong emotion (anger or fear): Their goal is to make you very afraid, very angry, very something. If you’re in a bad financial situation, chances are you’re paying stuff intellectually you’re taking care of necessities, and if Master Card wants their money, they know they cannot get to the top of the list with logic. If they make you emotional, then they know they stand a better chance of getting you to bump them up to the top of the list. Some use confusion to evoke strong emotion. They ask you to tell them what’s going on (like they’re your friend) and half-way through your story (when you’re nice and vulnerable) they will scream into the phone, “I don’t care about your sob story – you need to pay your bills!” It takes you so far back that it can’t help but evoke emotion – mostly anger.
In his Financial Peace University course, Dave Ramsey tells a story of a bill collector who called his house and asked his wife, "Why do you stay with a man who doesn't take care of you and pay his bills?" His wife naturally told him this, and he got so mad, so angry, that he ended up paying them. Sure enough, next month rolled around and the guy on the end of the phone said, "Well, Mrs. Ramsey, I'm surprised you're still there." In that time both she and Dave learned their tricks, and she was able to say "You'll get your money when you get it." She didn't let them evoke strong emotion.
2. They call at inopportune times. The most likely time you will get a call is during dinner time – why? Because they know it’s a bad time, and they know that if they call you, then you’ll either agree to get them out of the way, or they will make you so mad that you will end up paying them just to get some peace. Again – evoking strong emotion.
3. They will call at work or at a friend or family member's home. They sometimes will call the homes of your friends and family to ask them how they can get in touch with you. That is in large part to embarrass you because who wants a neighbor to say, “This guy with Visa called about you today so I gave him your number.”
4. Act like they care / help you by being your financial advisor. We already talked about how they are not your friends and they only have their interests in mind.
It is easy to let them get to you, and it’s especially easy to feel like victims after one of their phone calls, but it is important for you to know that You DO Have Rights.
Your Rigths
In 1977, this lovely little law was passed called the Federal Fair Debt Collection Practices Act. This act protects YOU against rogue debt collectors, and we all know that there are some of them out there. So let’s look at just some of your rights. I recommend going home and doing a google search for the Federal Fair Debt Collection Practices Act to get more in depth information, but for tonight, this will give you some basic rights you have.
1. They can only call you between 8 a.m. and 9 p.m. YOUR time, not theirs. That means that if the company is on the West Coast and you’re on Central time, then they, by law, cannot call you after 7 p.m. their time, which is 9 p.m. our time. If they do, then you can tell them that they are violating the Federal Fair Debt Collection Practices Act by not calling you between the hours of 8 a.m. to 9 p.m. – your time. As soon as you say that you’ll get a dial tone.
2. They must stop calling you at work if you reqest that they stop. Many times they will call you at work. They may even threaten to call so much that your boss gets tired of it and fires you. They told a friend of mine that once. You can request that they stop calling you at work, and they have to honor it. The best way to do that is to send them a letter requesting that they no longer contact you at work – certified mail return receipt requested. That way if they do it again, you can say that they are violating the Federal Fair Debt Collection Practices Act by contacting you at work after you requested that they stop, and that someone at their company signed that certified letter on ____ date, so they are no longer in compliance. Again, you’ll probably hear a dial tone.
3. They cannot discuss your account with anyone other than yourself (or co-signer). Often they will threaten to tell your friends, family member, or even employer, but under this law, they cannot disclose any account information to anyone who is not on the debt. Now if you and your husband are both on the account, then they can talk to him about it.
4. By law, they cannot use profane language, threaten you, or berate you. They should conduct their business professionally, but this is the number one violation of most collectors. If you have a rogue debt collector who is verbally abusive you have a couple options – 1. you can inform that collector that under the FFDCPA they cannot verbally abuse you and use profanity, so they are in direct violation of that law by the way they are speaking to you, and then you’ll hear the dial tone. Or 2. you can let them hear the dial tone first. You do NOT have to tolerate that kind of behavior, and you can say something like, “You can call me back when you can be nice” or something along those lines if you wish.
5. They cannot take control of your bank account or paycheck without first suing you. The only exceptions are the IRS and Student Loans that are federally insured. Those are the only two entities that can garnish your wages or extract money from your accounts without first suing you and getting a judgment to do so.
6. They cannot have you arrested. Seriously, many people have had collectors tell them that they will alert the police and tell them that they committed a crime. There was even one story of how a collector told the person’s child that if mommy and daddy didn’t pay their bills, they were going to be locked up for a long time. They cannot do that.
7. They cannot misrepresent the amount of money owed.
8. By law, they must stop contacting you if you send them a cease and desist letter – certified mail, return receipt requested. However, be prepared for them to make the next step, and that is sending you to an attorney. That can be both a good thing and a bad thing. Once an account goes to an attorney, you finally have someone with a brain holding your debt and you can usually work out a reasonable repayment plan. The down-side is that you are going to get attorney fees on top of what you owe, and of course there’s always the whole getting sued thing that isn’t very fun. I certainly do NOT recommend going down this road if it can at all be avoided.
Now that you know that you have rights, it will be easier for you to set your own terms of repayment – not let them dictate how much you pay, knowing full well that if you pay that much you won’t be buying groceries.
Set Your Terms of Repayment
If you (or someone you know) find yourself in collections, the best possible thing you can do is to communicate with them. Call them more than they call you, send them paperwork, go over your budget with them, and work with them on something that is reasonable for you. Let them know ahead of time if you aren’t going to be able to make the payment. Often there is something they can do to skip a payment, reduce payments, etc before you are delinquent. If you cannot work something out, then you need to communicate with them more than they communicate with you. Send them paperwork. Show them your budget, that you got laid off, where you’re money is going, and that you just don’t have it to pay.
Give them a 2 week window. You can set up a stipulation with them that they can call you once every 2 weeks (if you get paid bi-weekly). Explain that your situation isn’t going to change within the next 2 weeks because you get paid and that’s when the stand the most chance of getting some money – when you get paid. If they’d like to call you once every 2 weeks, that’s okay but explain that you will only talk to them once every 2 weeks. If they call within that 2 week window, you can simply say “You are violating our once every 2 week agreement – call back in ___ days.” And hang up. You do not have to talk to them. Do not avoid them, but talk to them on your agreed upon terms.
Realize that your credit report will be shot, and that’s okay. You just worry about getting from point A to point B and sorting this all out in time. You have to realize that if you cannot pay your bills, you cannot worry about your credit report.
Send them what you can, when you can. If you can’t make an entire payment, send them what you can. I have yet to find a company that won’t take your money when you send it to them. There is a great solution to paying your creditors what you can – and that is called:
The Pro Rata Plan
The Pro Rata plan works like this. After you’ve paid the necessities – tithing, shelter, food, utilities, and reasonable transportation, and you find that you are unable to make the minimum payments, and you are doing ALL you can….then you need to add up your debts. Let’s say that you have 3 debts that you can’t make all the minimums for. 1 is for $3,000, another is for $5,000 and the other for $2,000. So, that’s 10,000 total.
Next, you figure out how much “disposable income” you have. This is what you have left over after you have paid the things I listed above. Let’s just say that you have $200 of disposable income.
Then, you take each debt as a percentage of the whole. In our example, the debt that is $5,000 is 50% of your total debt, so they get 50% of your disposable income as payment. The debt for $3,000 is 30% of your total debt, so they get 30% of your disposable income, and the same goes for the debt of $2,000….it’s 20% so they only get 20% of your disposable income.
That would mean that you’d pay $100 to the $5,000 debt, $60 to the $3,000 debt, and $40 to the $2,000 debt. Yes, your creditors will all kick and scream and throw a tantrum because you aren’t paying the full amount, but you can show them (again, communicate and provide documentation) that you are giving them their fair share of your disposable income. They are equally as important as your other debts, so you are giving them their fair share. You are doing all you can, and that is all you can do.
This will keep you from being sued 99% of the time. It messes with their system when you do this. It doesn’t know to send you off to the attorney when you’re paying something, so that's why it works and is effective of keeping you floating along until you can work out a long-term solution to this problem.
Bill Collectors
Even if you have bill collectors calling you, you are most likely not bankrupt - so get that thought out of your head. You just need to devise a plan on how to deal with it.
The first thing you need to learn when in this situation is that bill collectors are not your friends, and they are not your financial advisors. They are in it for their money, and they will employ many different tactics to try to get it.
I knew someone who was a bill collector by profession. He ended up working his way up to VP over collections at the bank he works at. He could get results and was good at what he did. However, I learned a lot of lessons from him. I learned that they are not your friends and they will say whatever they need to say to get you to pay. Every single night, I’d hear collection stories, and in every single story, he would refer to the person (or people) as “deadbeats.” The newly divorced mom of 3 – deadbeat. The man who just lost his wife to cancer – deadbeat. The husband and wife who both lost their jobs at the same factory – deadbeats. He didn’t care about those people, but he played “financial advisor” to talk them into paying his company. It was toxic and corrosive just to hear the stories and the venom he had for those people, and the bill collector on the other end of your phone is no different. Do not allow them to "befriend" you or to become your "financial advisor" because they are not looking out for you.
Don't get me wrong, there are some good collectors, but many are not. Now when I say some are good it doesn’t mean that they are your friends. It means that they follow the rules, while others don’t. Why wouldn’t they all follow the rules? Well…..it’s a little known fact about the collections world, but the turn-over rate is astonishingly high. The average lower level collector is only on the job for an average of 92 days. That’s not long enough to really learn how to do their jobs much less learn the rules. Because they do not have adequate training or experience, most are ignorant to the federal laws protecting your rights. They are just there to do the job and go home. They do whatever it takes to get their money.
They have a database on you, and they will try many different tactics until they find one that works. When they do, they will log it in the computer, and they'll try that same trick over and over and over again. So let's learn their tactics so we aren't caught off guard.
Their Tactics:
1. Evoke strong emotion (anger or fear): Their goal is to make you very afraid, very angry, very something. If you’re in a bad financial situation, chances are you’re paying stuff intellectually you’re taking care of necessities, and if Master Card wants their money, they know they cannot get to the top of the list with logic. If they make you emotional, then they know they stand a better chance of getting you to bump them up to the top of the list. Some use confusion to evoke strong emotion. They ask you to tell them what’s going on (like they’re your friend) and half-way through your story (when you’re nice and vulnerable) they will scream into the phone, “I don’t care about your sob story – you need to pay your bills!” It takes you so far back that it can’t help but evoke emotion – mostly anger.
In his Financial Peace University course, Dave Ramsey tells a story of a bill collector who called his house and asked his wife, "Why do you stay with a man who doesn't take care of you and pay his bills?" His wife naturally told him this, and he got so mad, so angry, that he ended up paying them. Sure enough, next month rolled around and the guy on the end of the phone said, "Well, Mrs. Ramsey, I'm surprised you're still there." In that time both she and Dave learned their tricks, and she was able to say "You'll get your money when you get it." She didn't let them evoke strong emotion.
2. They call at inopportune times. The most likely time you will get a call is during dinner time – why? Because they know it’s a bad time, and they know that if they call you, then you’ll either agree to get them out of the way, or they will make you so mad that you will end up paying them just to get some peace. Again – evoking strong emotion.
3. They will call at work or at a friend or family member's home. They sometimes will call the homes of your friends and family to ask them how they can get in touch with you. That is in large part to embarrass you because who wants a neighbor to say, “This guy with Visa called about you today so I gave him your number.”
4. Act like they care / help you by being your financial advisor. We already talked about how they are not your friends and they only have their interests in mind.
It is easy to let them get to you, and it’s especially easy to feel like victims after one of their phone calls, but it is important for you to know that You DO Have Rights.
Your Rigths
In 1977, this lovely little law was passed called the Federal Fair Debt Collection Practices Act. This act protects YOU against rogue debt collectors, and we all know that there are some of them out there. So let’s look at just some of your rights. I recommend going home and doing a google search for the Federal Fair Debt Collection Practices Act to get more in depth information, but for tonight, this will give you some basic rights you have.
1. They can only call you between 8 a.m. and 9 p.m. YOUR time, not theirs. That means that if the company is on the West Coast and you’re on Central time, then they, by law, cannot call you after 7 p.m. their time, which is 9 p.m. our time. If they do, then you can tell them that they are violating the Federal Fair Debt Collection Practices Act by not calling you between the hours of 8 a.m. to 9 p.m. – your time. As soon as you say that you’ll get a dial tone.
2. They must stop calling you at work if you reqest that they stop. Many times they will call you at work. They may even threaten to call so much that your boss gets tired of it and fires you. They told a friend of mine that once. You can request that they stop calling you at work, and they have to honor it. The best way to do that is to send them a letter requesting that they no longer contact you at work – certified mail return receipt requested. That way if they do it again, you can say that they are violating the Federal Fair Debt Collection Practices Act by contacting you at work after you requested that they stop, and that someone at their company signed that certified letter on ____ date, so they are no longer in compliance. Again, you’ll probably hear a dial tone.
3. They cannot discuss your account with anyone other than yourself (or co-signer). Often they will threaten to tell your friends, family member, or even employer, but under this law, they cannot disclose any account information to anyone who is not on the debt. Now if you and your husband are both on the account, then they can talk to him about it.
4. By law, they cannot use profane language, threaten you, or berate you. They should conduct their business professionally, but this is the number one violation of most collectors. If you have a rogue debt collector who is verbally abusive you have a couple options – 1. you can inform that collector that under the FFDCPA they cannot verbally abuse you and use profanity, so they are in direct violation of that law by the way they are speaking to you, and then you’ll hear the dial tone. Or 2. you can let them hear the dial tone first. You do NOT have to tolerate that kind of behavior, and you can say something like, “You can call me back when you can be nice” or something along those lines if you wish.
5. They cannot take control of your bank account or paycheck without first suing you. The only exceptions are the IRS and Student Loans that are federally insured. Those are the only two entities that can garnish your wages or extract money from your accounts without first suing you and getting a judgment to do so.
6. They cannot have you arrested. Seriously, many people have had collectors tell them that they will alert the police and tell them that they committed a crime. There was even one story of how a collector told the person’s child that if mommy and daddy didn’t pay their bills, they were going to be locked up for a long time. They cannot do that.
7. They cannot misrepresent the amount of money owed.
8. By law, they must stop contacting you if you send them a cease and desist letter – certified mail, return receipt requested. However, be prepared for them to make the next step, and that is sending you to an attorney. That can be both a good thing and a bad thing. Once an account goes to an attorney, you finally have someone with a brain holding your debt and you can usually work out a reasonable repayment plan. The down-side is that you are going to get attorney fees on top of what you owe, and of course there’s always the whole getting sued thing that isn’t very fun. I certainly do NOT recommend going down this road if it can at all be avoided.
Now that you know that you have rights, it will be easier for you to set your own terms of repayment – not let them dictate how much you pay, knowing full well that if you pay that much you won’t be buying groceries.
Set Your Terms of Repayment
If you (or someone you know) find yourself in collections, the best possible thing you can do is to communicate with them. Call them more than they call you, send them paperwork, go over your budget with them, and work with them on something that is reasonable for you. Let them know ahead of time if you aren’t going to be able to make the payment. Often there is something they can do to skip a payment, reduce payments, etc before you are delinquent. If you cannot work something out, then you need to communicate with them more than they communicate with you. Send them paperwork. Show them your budget, that you got laid off, where you’re money is going, and that you just don’t have it to pay.
Give them a 2 week window. You can set up a stipulation with them that they can call you once every 2 weeks (if you get paid bi-weekly). Explain that your situation isn’t going to change within the next 2 weeks because you get paid and that’s when the stand the most chance of getting some money – when you get paid. If they’d like to call you once every 2 weeks, that’s okay but explain that you will only talk to them once every 2 weeks. If they call within that 2 week window, you can simply say “You are violating our once every 2 week agreement – call back in ___ days.” And hang up. You do not have to talk to them. Do not avoid them, but talk to them on your agreed upon terms.
Realize that your credit report will be shot, and that’s okay. You just worry about getting from point A to point B and sorting this all out in time. You have to realize that if you cannot pay your bills, you cannot worry about your credit report.
Send them what you can, when you can. If you can’t make an entire payment, send them what you can. I have yet to find a company that won’t take your money when you send it to them. There is a great solution to paying your creditors what you can – and that is called:
The Pro Rata Plan
The Pro Rata plan works like this. After you’ve paid the necessities – tithing, shelter, food, utilities, and reasonable transportation, and you find that you are unable to make the minimum payments, and you are doing ALL you can….then you need to add up your debts. Let’s say that you have 3 debts that you can’t make all the minimums for. 1 is for $3,000, another is for $5,000 and the other for $2,000. So, that’s 10,000 total.
Next, you figure out how much “disposable income” you have. This is what you have left over after you have paid the things I listed above. Let’s just say that you have $200 of disposable income.
Then, you take each debt as a percentage of the whole. In our example, the debt that is $5,000 is 50% of your total debt, so they get 50% of your disposable income as payment. The debt for $3,000 is 30% of your total debt, so they get 30% of your disposable income, and the same goes for the debt of $2,000….it’s 20% so they only get 20% of your disposable income.
That would mean that you’d pay $100 to the $5,000 debt, $60 to the $3,000 debt, and $40 to the $2,000 debt. Yes, your creditors will all kick and scream and throw a tantrum because you aren’t paying the full amount, but you can show them (again, communicate and provide documentation) that you are giving them their fair share of your disposable income. They are equally as important as your other debts, so you are giving them their fair share. You are doing all you can, and that is all you can do.
This will keep you from being sued 99% of the time. It messes with their system when you do this. It doesn’t know to send you off to the attorney when you’re paying something, so that's why it works and is effective of keeping you floating along until you can work out a long-term solution to this problem.
Subscribe to:
Posts (Atom)