Be Brave Not Safe

Things that drive me (most) crazy relate to waste. Especially on completely unnecessary spending. If the reader’s goal is financial independence, or at least, improved financial fitness, read on.

Within 2 minutes of leaving my driveway, to run an errand, commute, etc. I pass 2 houses which ALWAYS have an outside light on. Not just during the evening, or when they are away. We are talking 24 x 7 x 365.

This has been the case for years!

Frequent readers of this blog know what I’m going to do next: Run this example through our cost x 12 (months) x 10 (years) calculation to determine the 10 year outgo for this “little/insignificant” expense. Prior to getting to this calculation, we’ll need to first determine the monthly cost of running this single lightbulb.

To be conservative, let’s assume the example homes are burning a 60 watt incandescent light (as I don’t plan on going up to their house and checking to be sure 🙂 ). These bulbs burn (guess what) 60 watts per hour.

• 60 watts x 720 hours / month = 43200 watt-hours / month = 43 kW-hours / month.
• Our current cost of power is $0.175 per kW-hour.
• 43 kW-hours / month x $0.175 per kW-hour = $7.53 per month. Not a huge sum, in and of itself.

However, when we take the $7.53 x 12 (months) we spend $90.30 per year. And, when we multiple by 10 (years) we end up burning $903.

After writing the first draft of this post I happened by our example houses and noticed that one of them is actually burning 2 lights (at 1:20pm – broad daylight!). So, the 10 year cost just doubled, for them, to: $1,806!

Oh, how the little things add up.

I know, some may say: “Craig, why don’t you go pound sand!” What a nice gesture! In fact, I will, by taking an $1,800 trip to the caribbean where the sand is absolutely AWESOME for pounding 🙂

While we may not have the 24 x 7 x 365 lightbulb example, I’ll bet if we tried (not really that hard) we could find a simple / insignificant expense we could whack TODAY that would allow us to retain an extra $1,000 over the course of 10 years. Each time we do this and use that money to pay down debt or invest we are getting one step closer to our financial independence.

In a prior post on the subject of cutting expenses I suggested taking a few moments to tally up the “small” / insignificant saving opportunities shared in this blog, to see what they amount to. 3 words come to mind: “A Small Fortune!” The tally will be shared in a future post once it is made more painfully obvious why it is so important to kill or reduce expenses that provide NO long term value and serve to delay the timeframe for achieving financial independence.

If you’d like to pull up these specific posts you can do so in 1 of 2 ways:

1. At the top of this post, on the left, under the date, click on “Financial Success.” All posts for this category will instantaneously be presented to you! Gotta love WordPress!
2. Near the bottom of any page of this blog, on the right, you’ll see a pick list labeled “Categories.” Select “Financial Success” and voila, the same thing will happen (you will be presented with all posts for this category).

Enjoy!

When considering the strategy of debt consolidation one must be very disciplined before “pulling the trigger.”

Presumably, the goal of taking this action is to consolidate several loans and/or credit card accounts into a single, lower interest rate account. Sounds good, right? Yes, if the person is disciplined and focuses on following through by eradicating that debt.

Too often, however, the undisciplined person consolidates their debt (all good, so far) but then pulls out that credit card (I have plenty of “available credit”) after seeing a shiny new object (watch, pair of shoes, electronic device or tool) that they “think” they must have. And, they continue accumulating debt. The result: they are worse off than they were before (further in debt).

For those undisciplined in this matter, prior to consolidating debt you are encouraged to:

• Think twice, even thrice
• Take steps to limit the ability to increase debt. This could include cutting up all but one of the credit cards. And, the remaining credit card can only be used wisely and paid off each and every month with the exception of an absolute emergency (i.e., the car broke down and I must get to work).

If you are prepared to pull the trigger on debt consolidation, there is an option that many do not (yet) know about: peer-to-peer lending. In a nutshell, peer-to-peer lending is a relatively new concept which is designed to bypass banks, streamline the process for (reasonably good) borrowers to obtain loans, at rates “more reasonable” than banks. And, investors are able to fund these notes (loans) to receive reasonable rates of return (much better than what you might receive by leaving cash in the bank, in a CD, etc.). The peer-to-peer lending company that I am experienced with (as an investor) is Lending Club. You can learn more about them (from a potential borrower’s perspective) by clicking on the image below.

I will likely write a future post on Lending Club, for the investor. For now, if you’d like to learn more about them (from a potential investor’s perspective) click on this link.

In closing, debt consolidation “can be” a good strategy in an overall debt eradication plan. You can simplify (by only having a single monthly payment) and reduce the cost of debt. All good, towards reducing the timeframe to your debt freedom. Just use care not to create an escape hatch that provides an easy opening to increase debt which will only elongate the time needed to achieve debt freedom. Stay the course on your debt eradication plan. You will not believe the absolutely amazing feeling you will have with ZERO DEBT! It is only at this point that we are no longer a slave…