Debt-Free Forever Gail Vaz-Oxlade (best ereader for epub TXT) 📖

2. You can set up one savings account and then keep a paper trail of what’s going into the account and what it’ll be used for. Let’s say you’re saving for a roof ($5,000), a vacation in two years ($2,500), and those stunning new boots ($240). You’ve allocated $350 a month to the roof, $250 to the vacation, and $50 to the shoes. You’d move $650 a month to your savings account each month and you’d note how much more you have for your planned spending within each category. When you hit your goal amount, you go shopping.

See how easy? The idea is to have a system for dealing with the money you are accumulating to spend at some future date so that you don’t use credit that can’t be repaid immediately.

Strategy 2: Figure Out What It’s Really Going to Cost

Shopping consciously also means being aware of how much of your life’s energy you are exchanging for the stuff you’re buying.

You’ve decided that you just have to have the newest cell phone that spits nickels and whistles “Dixie” while calculating how far you haven’t walked this week. It runs for $379.99. You’re planning to spend the money, so you’ve put it on your Stuff List. And you’re accumulating the money you’ll need so you don’t put it on credit. Good for you.

So, how many hours are you going to have to work to get that Phat Phone?

This is a useful step to see how much energy you’re prepared to expend to have all the Stuff you want. While it’s easy to spend money mindlessly, when you take the time to figure out how many hours you will have to work to get that great new whatever, you may find it just isn’t worth it.

Let’s say you take home approximately $50,000 a year net. That translates into a net hourly income (assuming 50 weeks and 40 hours a week for work) of $25. You make a whopping $25 an hour after taxes. But that’s not your disposable income. You have to cover stuff like rent, car payments, debt repayment (for the last phone and all those dinners out), savings, and the like. Okay, let’s say your essential expenses—rent, food, and all the other things you must pay—add up to $3,300 a month. That breaks down to $19.80 per hour.

Are you still with me?

So your actual disposable income is your net monthly income of $25 less your essential expenses of $19.80, which leaves a whopping $5.20 an hour as your Hourly Disposable Income (HDI).

Now here comes the really painful part.

Take whatever you’re thinking of buying and divide the cost by your HDI to see how much of your life’s energy you have to swap for that handy-dandy new device. In the case of that Phat Phone, you’d have to work for about 73 hours—almost two weeks. Hmm.

If you really want the phone, and you have the money set aside to pay the bill right off the bat, you should buy it. But you should also do this exercise since it’s useful for putting things in perspective.

If you really want the phone and you’re going to put it on credit, then you have to add in the interest you’ll pay to come up with the right number of hours of your life you’ll be swapping for it.

Strategy 3: Stay Focused

Everyone has stuff they can’t pass up. For some it’s that fine cup of coffee. For others, a great handbag. Some guys love browsing the aisles of the local hardware store, looking for the perfect tool that will make that job at home worth doing.

But how many of the things you buy come as a complete surprise to you? You don’t set off to buy a new set of wineglasses, but there you are standing in the store, paying for them. Sure, they’re great-looking glasses, and you can always come up with a good reason or three why you need them, but you didn’t intend to buy them.

GAIL’S TIPS

Slow your spending down by creating a 30-Day List. If you have an urge to buy something, first you have to put it on your 30-Day List. You can buy it (if you have the money) after 30 days, assuming you still want it and something else hasn’t jumped up and captured your Impulse Gremlin’s attention.

Could it be that you can’t stay focused on what you do want? You want to be debt-free, you want to save money for a home, you want to have a big, fat emergency fund, but the end seems so far away. It may be wonderful to be debt-free, but giving up your day-to-day indulgences just doesn’t feel like it’s worth it. After all, it’s going to take months, even years, to get out of debt, and who wants to spend all that time denying all those small pleasures?

So how do you make your goal feel satisfying when you’re skipping all that coffee, not buying that purse, forgoing the walk around the tool department, all to make your dream of home ownership or debt-freedom a reality? How do you pass up dinner with friends, a movie with the kids, or that cruise you’ve been dying to go on with your honey? Here’s how: you create a tangible way to track your progress.

Parents who are trying to teach their kids about saving up their money to make a big purchase face the same problem keeping their kids focused. With short attention spans, kids often have difficulty deferring today’s gratification—the bag of chips—for tomorrow’s goal: the new video game. Here’s what I suggest parents do with their children when they’re trying to keep the kids focused on a goal they are saving for:

1.Cut out a picture of whatever your child wants to acquire and paste it on a page171ith the price beside it.

2.Find out how much your child wants to save each week and divide that into the price of the item. So if an item costs