Credit Cards

 

Do you know what credit cards you have?  What about the ones you never use?  Could there be some still open that you thought were closed?

These are a few of the questions I asked myself as I started trying to get my financial life in order.  To help answer these questions I used AnnualCreditReport.com to pull my credit history from all three credit reporting companies. Another option is CreditReport.com, I haven’t used this site.  These are free reports and you can get this information for free once a year, if you aren’t doing this make sure to do this.

I made a Credit Card Spreadsheet to track all of my cards along with their information.  First going through my drawers to find any existing credit cards I was or wasn’t aware of to input on the spreadsheet.  Then I began going through each of my credit reports finding what accounts were still open and putting that in the sheet.

Cut those credit cards up!  I really loved this part of the whole process.  Once I found a credit card that was already cancelled or I cancelled the card I had a great time cutting those dang things up.  There was such a relief and pure joy from doing that, even to this day I can still feel how great it was to do that.  So, I have a confession to make about a credit card.  I still have one in my wallet, well it won’t work as it has been cancelled, but the fact remains I’ve been to lazy to take it out and cut it.  Maybe there is some emotional tie to it or something.  No!  I’m just lazy and forget about it

Make a plan to get rid of those bad boys.  I haven’t gotten rid of all mine yet as they still have balances but once the balance is gone I cancel the card and get rid of it.  Even if you only cancel one card that is better than nothing.  Use the credit reports to help you clean up any old accounts and check them each year to make sure someone else isn’t opening accounts in your name.

Another reason to get all your credit card information gathered up is if your wallet gets stolen you have a way to cancel them.

I felt 100% better after getting my finances organized and its made everything I do easier.

Financial Documents

The great thing about going back through my debt steps is I’m finding ways to improve or change what I’m doing.  Some things will help me spend less time on this money stuff while some will just make it easier to accomplish.  Let’s get it on!

Financial Sheets - These will help show your financial picture.  Do you owe more money that your worth?  Have more or less equity than you thought?  Unless you have this broken down on paper and not in your head then don’t know for sure.

What We Owe - This is what I used to get my information organized to see who we owed money to and how much money we have.  I listed each name, amount, as of date and interest rates.  I used this sheet as my main page to fill into the next two sheets.

Debt Snowball – There are different ways that debt can be listed on this sheet, each person is different in what they want to do.  I decided to list all my debt smallest to largest; another way is by interest rate.  Thankfully I had just transferred most of my credit cards to 0% interest cards and so this was an easier decision for me.  For my wife this was the better way to do it because she could see the smaller debt being marked off and see it starting to work.  This can be a psychological more than anything else; you have to change your behavior and the way you think if you truly want to be out of debt.

Equity Sheet – Finally we get to see what were worth, well mine doesn’t include everything but at least I’ve got a picture of my financial situation.  Most of the information is pulled from the What We Owe sheet but still some has to be input and kept up to date.  I’ve seen a big change in mine from just the first few short months I’ve been attacking my debt.  This could have been used to list everything in the What We Owe sheet but for me it was easier to input the information as I came across it in a more random way.

Here are my financial sheets; there are three tabs at the bottom for each of the sheets we discussed.  Most of the information on the What We Owe sheet as I said earlier fills the other two, making the process easier when I update my numbers each month.

I’ll be honest that after I was finished filling my equity sheet that I was both excited and depressed.  It was unbelievable that after all those years of working and earning money I was worth so little.  The excitement came from knowing that I had nowhere to go but up, and in a few short months my equity sheets have gone positive several thousand dollars.

Where the Money Goes

Purpose – This is a good way to find out where your money has been going in the past.  It can also be a way to look at your utilities to follow patterns of use.

How to Use it – I’ve used the past electric bills to track when we use the most energy in the summer months so that I can adjust my spending plan.  Also when you make changes to the way you keep the thermostat you can look in the past to see how your adjustment affected the most recent bill, but you’ll have to look at the price per kilowatt to really know how it changed.

Conclusion – This isn’t for everyone and in the big picture of becoming debt free this isn’t a very important piece, using and doing the spending plan is far more important.  This can really be a useful tool if you spend a little bit of time going over past bills, you’ll get a better idea of where your money has actually gone.  Once you get it set up and use it in conjunction with your spending plan it doesn’t take any time to use.

The spreadsheet that I use updates the numbers from my spending plan with a push of the button.  The sheet in Google can’t be used this way but you can view it there for an example.

Spending Plan

One simple change to the wording of a budget helped my wife and I come together.  Thanks to Dave Ramsey’s simple suggestion I started calling the budget a spending plan.

Purpose – You want to spend every dollar before you ever see it, each dollar has a purpose prior to anything being spent.  I estimate what my income and expenses will be for the month by breaking them down into bi-monthly sections.  Some people do weekly or an entire month, you’ll have to decide what works best for you.

Plan – You don’t want to plan for the perfect month but instead try the best you can to plan for what is coming up.  The first month we started this there wasn’t enough money in our school fund for supplies, we knew it was coming but were way short of what it needed to be so we had to pull from another category to cover it.  An example of something to plan for in the future is christmas or property taxes.  If possible put a little bit aside for things coming up in the future so it doesn’t hit you all at once.  Doing this will be trial and error, some months you’ll be perfect and other months you will be short but the point is that doing some sort of plan is better than nothing at all.

Result – After the month is over take a look back to see what you did well and what you could do better with.  Don’t expect perfection.  Some people will take all money that wasn’t spent and put it on existing debt, while we do something a bit different.  We keep money that didn’t get spent in their respective category to give us security in the future, an example is we’re trying to build up a doctor copay and prescription balance so that when we get sick a few times in a month it won’t hit us all at once.  We could use that shortage each month on our debt but we’re trying to have a longer term plan with some expenses, vehicle maintenance is another category we’re trying to build a positive amount for.

The spreadsheet I use was modified from one I found on the web and another was from someone I know that I modified as well.  Here is mine and another one.  They are each a little bit different on the monthly tabs but have a lot of the same functionality.  The names will auto fill from the first tab to each month while the numbers will fill to the first tab from the months.  Google is great for sharing documents but I just haven’t felt comfortable enough on these spending plans to do them within google docs, unsure if it can handle everything I want it to do.  If you would like the spreadsheets just send me a comment or email.

Edited to add – I’ll be more than happy to modify or customize what I can to help out.

Organizing

This is more of pre-baby steps than it is actual baby steps.  To be honest this is boring and tedious but something that must be done to see where you are.

I may have done more than you will want to but I’m a nerd.  I’ll also be more than happy to share my sheets with anyone who wants them, in fact I might link to some examples.

- Spending Plan  – This is still a work in progress to this day but I wanted to start getting this ready before we actually wanted or were ready to use it.

- Where the Money Goes - This sheet showed what expenses where in the past and will be in the future.  I’m a numbers geek and already had the numbers to do this.

- What We Owe – I used this sheet to start tracking all of our debt and money.  In this sheet I included what our balance was, interest rate, vehicle payoff, house payoff, savings accounts and checking account.  This was used to break down other documents.

- Debt Snowball – People do these differently but for us I wanted my wife to see the benefits so I contructed this largest to smallest.  I listed every single debt, except the house, from smallest to largest.  I included minimum payments and calculated based on our current path how long it would take to pay off each.  I then totaled the total debt and minimum payments to show how much we owed.

- Equity Sheet – I could have skipped this step but really wanted to see where we were at.  I took what we owed and things were worth, plus any savings and retirement to see what our net worth was.

 - Credit Cards – I’ll dive into this more later but I wanted to basically show what open cards we had and what cards were closed.

- To Do - As I went through all of this I kept a notepad going of items that I needed to do.  This is easier for me as I don’t want to remember everything, and frankly can’t remember it all.

These are some of the things I did while my wife and I talked and planned.  You can get started without doing each of these but I feel in order to really move forward you have to know where your money is so that you can make a plan of what to do with it going forward.

I think that I’ll explain each of these in greater detail with examples over the next week.