Bottom Line
Ready to roll toward debt elimination?
For those of us who have a trailer full of debt, the thought that one day we could be totally debt free seems miles and miles away. However, a few tough but simple steps can help to bfing it within sight.

By Steve Freidell
Land Line contributor


In the February issue, we discussed using personal financial software, which would track your expenses and provide you with the ability to create a budget. This month we are going to discuss ways to begin using that plan to cut your expenses and to categorize your debt.

Let’s review what you have accomplished since that article was published in the February Land Line. By now, you will have used a computer finance program such as Quicken or Microsoft Money to download and organize your recent transactions. Now, this software can automatically create a budget from the data you entered. You can also upload your files into their online server and access them from any computer. This is perfect for long haul truckers whose families maintain a household elsewhere.

Keeping track of expenditures and paying bills on time will never be a problem again, and it will be much easier to eliminate your debt. If you aren’t computer savvy enough to do this, keep a spiral-type notebook.

Now it’s time to sit down and take an honest look at your budget and where exactly your money is going. Does fast food have a higher budget total than groceries? Does your dining out category look like the national debt? Don’t worry; with a few minor adjustments, you can change all that.

Budget your groceries by creating a menu a week in advance. Whether you or your spouse does the grocery shopping, here’s a good rule: Never go to a grocery store hungry or without a list. Grocery stores prey on shoppers with fancy displays and product placement hoping you will throw those extra items into your cart.

Having a grocery list will be your shopping plan, and deviation from it will only get you into trouble. Even if you remember something that wasn’t on your list, don’t buy it – which will help you create better lists in the future.

Rather than dining out while on the road, buy groceries and keep a fridge or cooler in your truck, which saves you money and helps you eat healthier. Following this plan will cut 25 percent to 40 percent off your grocery and dining out bills alone.

How many cars do you have? Can you sell one? We are so conditioned to want to buy new cars. Millions of dollars are spent on advertising by car manufacturers telling us that now is the time to buy. As a result, too many people own more cars than they truly need. Sell one and use the money to pay off your credit cards. Buy a quality used car if you must have two cars. Encourage family members to find a car-pool buddy or see what public transportation is available.

It’s not just the car payment that you save, but the gasoline, insurance, taxes, maintenance, registration, car washes, oil changes, interest and parking expenses to name a few. Your actual savings may vary, but selling one car will save you, on average, $1,000 a month or more. More importantly, it directly eliminates some of your debt.

To supercharge your debt reduction process, try this tip: Assume that you are taking a 50 percent reduction in pay. Look at your budget and see what you could cut if you had to meet this goal. You will be shocked at what is really necessary and what is frivolous spending. Whatever you do cut, apply that first toward debt reduction such as a credit card bill – not the regular monthly installment, but a single significant extra payment.

Have some money in your budget to reward yourself and your family at the end of the month, but only if you meet your budget goals. Everyone will benefit from the feeling of accomplishing a goal and will continue to work harder in months to come.

As soon as you start saving, you must begin to create a plan to eliminate your debts.  Put all of your debts on Quicken, or manually make a list of every debt you have. Categorize your list of debts and rank them in order of highest interest rate to lowest.

Never skip a payment. It destroys your credit and will add additional points to the rates on your current credit cards. Never go over your credit limit, never cut up your cards, and keep them in a secure safe place. Paying your bills on time and adding an extra $5 to your normal payment every month will improve your credit score by as much as 35 percent.

If you have debts such as equipment loans, student loans, car title loans and furniture loans, you may have to make some calls to determine the “Annual Percentage Yield” (APY) being charged on your debt. Start by paying off the most expensive or highest APY first. As one debt is paid off, apply the monthly payment used to pay off debt No. 1 and add that to your regular payment to pay off debt No. 2 and so on with debt No. 3. Each debt will be paid off faster than the one before it.

Most important: Have a plan and stick to it. LL


Steve Freidell has assisted clients in their cash management, trading, and portfolio management of fixed income securities since 1975. Steve started his career at the First National Bank of Kansas City and later served as first vice president with Commerce Bank where he served his clients for 25 years. He joined the DeWaay organization in 2006, the financial management company utilized by OOIDA.