Putting the “Personal” Back in PF

For the longest time, I had assumed that I was good with money. After all, I made a decent salary, saved 10% of it each month and had no credit card debt. I financed a new Hyundai Sonata right out of college and had a staggering amount of student loans, but I always thought that they were “good debt” and that everybody had them. And I would have continued to live with my head in the sand, had I not stumbled onto some good personal finance blogs. Once I realized that no debt was particularly good, I wanted to get started with paying them off as quickly as I could.

But for a beginner, there is just so much information available on the internet that it can really be overwhelming. There are many different types of budgeting, conversations about rolling your IRA into a Roth IRA, debates of whether credit cards are necessarily evil and so on. I would feel enlightened and wise after reading one blog and then go onto another which talked about the exact opposite and made a lot of sense too. After an hour or so of blog hopping and reading, I would feel muddled and end up not doing anything. I then realized that, like everything else in life, there is no one magic way to pay down debt faster. While reading a blog or an article on finances, my expectations have changed from “This blog will give me the master plan to pay down debt faster” to “Let me find out what different methods people use to plan their finances.” I go around around the blogosphere, gathering information and then use that to create my “personal” plan. Afterall, isn’t this what personal finance is all about.

Personal finance experts like Dave Ramsey are all about living debt free and eschew the use of credit cards. But I know that many personal finance bloggers say that they use credit cards for everyday spending and pay the balance in full every month. I fall into both camps a little. I don’t believe that credit cards are evil and have enjoyed many gift cards and miles as rewards from credit cards. However I have been in credit card debt and know that using my credit card could easily lead me down that path again. I use my credit cards to pay my utilities, phone bill, car insurance, internet and cable – they are all set to Auto pay. I get paid biweekly and it is usually difficult to set up autopay on my checking account because I get paid on different days each month. Rather than have a large buffer of money sitting in my checking account each month to cover these, I let my credit cards take care of these and at the end of each month I pay off my credit card. This way there is no risk of overspending on the credit cards. When I buy some big ticket items, like a TV or flight tickets I use my credit card to pay for them to get additional warranties and insurance. This way I have some rewards coming my way now and then, and still avoid the risk of credit card debt.

When we talk about budgeting, the cash only envelope system seems to be a very popular option. I can see how having fixed amounts for each category would help curb spending. But like I mentioned before, I use my credit card to pay my utilities and other fixed bils. And my savings are automated so that fixed amounts go to my ING account with every paycheck. My spending in areas like clothes, health, groceires are pretty normal. But I spend way too much money on eating out and groceries. It’s not that I am a bad cook or hate cooking, but takeout is so much easier at the end of a long day. And no dishes to do too. 🙂 To keep my eating out in check, I withdraw a fixed sum of money after each payday and use that in restaurants. When I run of cash, I eat at home until the next payday. I have just started trying this out and it seems to be working great so far.

I am new to the PF world, and upon reading into this topic, I feel that I commit a lot of cardinal sins. For instance, I pay for about 100 channels on TV via a satellite dish and a DVR, when I know most of the shows I watch is available for free on Hulu and on the Netflix subscription I also subscribe to. But I don’t have any expensive hobbies and live alone on and off (Mike travels a lot for work). Having the TV on at home gives me a feeling of having another person at home and I keep it on while cooking, doing laundry and so on. I don’t listen to a lot of music and have not spent more than $40 in 5 years in iTunes. So I don’t feel guilty at spending so much on TV every month and don’t want to look into alternatives. On the other hand, I drive a brand new car that I bought right after graduating. While I love my car and love the fact that I don’t have to worry about maintenance except the oil changes, I figure I would have gotten a better deal buying a slightly used car. It would have been just as shiny and now that my car has lost the new car smell, all I am left with is a hefty loan at an unhealthy interest rate.

So the next time you go to a personal finance blog or website and you see a radical new idea being discussed, don’t take that to heart right away and start implementing it. Nor should you take offense and judge if you think otherwise. Sit back, take a deep breath and evaluate if that idea would fit into your plans. If you feel it is a good idea, start taking parts of it and work it into your plan. After all it is your life and you get to decide how you want your monies to work for you.
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2 Responses to Putting the “Personal” Back in PF

  1. Ella, you make such a great point. This is what I try so hard to get the people I talk to to understand. I would like to add something that I have seen alot of during the time that I have been reading PF blogs.

    This one thing is the importance of having a plan/strategy to build your financial foundation. If one has this when they are reading new ideas they will be able to decide if the idea is aligned with their ultimate goal and strategy. When I follow a blogger I can tell if they don’t have a plan/strategy because they never say it or they flip flop between ideas often. Normally not waiting enough time to see if what they are doing really works.

    *****
    On another note…if you want to live a debt free life without credit cards you can set up recurring bill payments from your bank to the bill company, so you don’t feel the need to use a credit card as the middle man. This puts you in total control. Just a thought.

    • Ella says:

      Thanks Broke By Choice! I really understand the point you make about having a strategy. I didn’t have any for a long time. I would make a meal from scratch one day for dinner and feel happy thinking I saved so much money. But since I didn’t have a budget I didn’t know that I had spent way over on food already that month!

      I would really be interested in not using credit cards. If I have recurring bill payments, would they have to be on the same day each month? Coz I get paid biweekly and I am not able to pick a day when I would have the money in my account each month

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