Optimize Your Budget for Any Debt Level

You’re not going to believe the trick I use while budgeting to pay down my debt load.

Optimized Budget

Your Budget Will Be Optimized

This may solve your debt problems simply and if you want to know how it works, click below.

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Financial Hauntings

Do you realize that you drag your financial past decisions around like Jacob Marley did in a Christmas Carol ? All of those odd decisions that you made in the past build a chain that you are now hobbled with, and will continue to be hobbled with. Dickens had Marley’s chain signify the horrible decisions he made about mankind, and while that is a lovely sentiment, the financial chain that you create for yourself here and now is just as crippling (if you continue to make bad decisions).

Jacob Marley

Jacob Marley and his Chains (Sir Alec Guiness)

Getting the point across to younger folks, that pretty much all the odd decisions that they make early on in life will follow them one way or another, in pretty much all aspects of life, but especially in financial terms, is not an easy task. When you are young you have all the time in the world, and if you make a few mistakes it won’t caused you any issues later in life, or will it?

  • If you decide to forego putting money in your RRSP, and decide to get a nicer car when you were 25, you then have more links in your financial chain to carry. You will have to save more later in life to retire the way you wish.
  • If you don’t quit smoking until you are 40, you have 20 years of spending money on your habit, and shortening your life (and paying more for your life insurance as well). More links in your financial chain. You might want to look up how much term insurance costs for a smoker over the age of 50, if you think I am being alarmist.
  • Every debt that you think you will pay off at a later date, or worse each month you carry credit card debt, you forge many more strong links in your financial chain.
  • Every lottery ticket that you have bought over the years adds more links to your chain.

The financial chains you forge in your youth, are a heavy weight to carry into your golden years.

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Debts are Like Weeds

A short one for today

Dandelion

Bloody Weeds

Debts are so much like Weeds, removing them (one by one) seems like an insurmountable task, yet, if you go at it a little bit at a time, in a shorter period than you thought, they are all gone, but you have to stay diligent or they will continue to dominate everything.

There is your lawn and finance tip for the day, if you want a fitness tip read Debt is Like Fat .

 

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Debt Won’t Just Disappear

I have had a few folks take exception to my statements in Questions with an Answer: Get Out of Debt, in that they question whether it is more important to incur some debt to build wealth, than worry about growing debt, and if I could figure out how you type a Bronx cheer, I would, but I will simply say bunk!

The exact exchange was:

My response was simply, I would rather owe nothing. Savings of all kind can drop in value very quickly (depending on how it is being held), but debt will never magically decrease in value (and severity) without you doing something about it.

You may own a house worth $400,000 right now, and you have a mortgage that is for $125,000, however, it is not outside the realm of possibilities that the house could (in a very short period of time) be worth less than what you owe on it, then where are you? I have rarely (if ever) heard the opposite where suddenly your mortgage was forgiven and you owed nothing on your house, but your “Wealth” is mercurial.

The ephemeral nature of wealth is sometimes lost on folks, if I own $1,000,000 worth of BCM Enterprises Stocks (as options, which don’t vest for another 6 months) and I owe $160,000 on my mortgage,  my Net Worth is?

Anybody?

– $160,000

Correct! Stock options are worthless until  you see the money from the transaction in your bank account. I had over 10,000 shares of Nortel in options and 1 bright day they were finally worth $300, and then they were worth nothing again (as an obtuse example).

How about if I own a $1.5 Million home in a lovely section of the Beaches in Toronto, and I owe $400,000 on the mortgage, how much am I worth?

Anybody?

– $400,000

Correct Again! OK, that one is going to cause some comments, but, having things that you think are worth something is a wonderful thing, but until somebody pays for it, it is worthless. More likely than not my beautiful cottage in the Beaches (no I don’t live there) will sell for more than $1.5M if I tried to sell it, but maybe not.

One more: I have a Pension that is going to pay me 60% of my salary when I retire, I have $200,000 in my RRSP but I still owe $95,000 on my home, and I have $10,000 worth of other debt (bad gambling debts, let’s say), what is my Net Worth now?

Some might say: $95,000 at least because you have all that lovely RRSP money and that juicy pension, but do I?

If I cash my RRSP in, I am going to get SLAUGHTERED on taxes, and say this heavenly Bull Market we are in goes Bear very quickly, what am I worth? My Net worth would be closer to $0, and then you can figure out what you can valuate your pension however you like (but remember you have to live long enough to enjoy that as well).

All of this to say, that Wealth is Ephemeral, and can disappear like a Fart in the Wind, but DEBT is like an abscessing tooth, until you remove it, it will hurt and it will not go away until you do something about it!

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Questions with the answer, “Get out of Debt”

Let’s make life simple for my return from vacation, and get back to basics, so let’s kind of head towards Jeopardy’s model, and here is the answer that you need to ask a question for:

Get out of Debt

Debt

Working Through Debt Problems

How hard could that be, let’s see how many interesting questions that could have that simple response:

  1. My wife feels that while our relationship is good, she wants us to be much closer, what should I do?
    Get out of debt, that way you don’t argue about money any more, and you can concentrate on the important things in life.
  2. I feel worried all the time, and I have a hard time sleeping these days, how could I fix that?
    Get out of debt, you will then have 1 less thing to worry about. This is the simplest thing in your life to start fixing, so get at it
  3. I never have any money in my wallet, and I am living from pay cheque to pay cheque, which has caused me to be impotent, what should I do?
    Get out of debt, seriously if your money worries are giving you issues with your love life, you really should get the hell out of debt.
  4. I am staying at my in-laws and they are driving me insane because they keep asking me when we are going to move out and have our own place, is there anything I can do?
    Get out of debt, you are living with your in-laws, ’nuff said! Oh and definitely move out if your in-laws live in Debt, Ontario.

Just had to get that one off my chest. Were there any questions that I might have missed?

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