Car trouble is expensive and stressful any time of year, but winter can also make it dangerous.  Many stories are share each winter of drivers being stranded for hours, even overnight, on an interstate.

Preparing an emergency kit in your car can save you time, money and, possibly, your life.

Here are few things to consider storing in your trunk, glove box or ideally in a dedicated get-home bag you leave in your vehicle.

1.  Cell Phone Charger.  The first thing you will do in an emergency is call for help or emotional support.  Make sure you have a way to power your cell phone, preferably without the car’s engine running.  I have three or four of these Anker chargers - they work great.

2.  Flashlight.  Most smartphones come with an external light, but they are not ideal for making car repairs.  Make sure you have at least one LED flashlight available.

3.  Shovel.  Your car is buried in snow, or your back tires are stuck in a rut.  Keeping a small shovel with you could save you from a costly tow truck operation.

4.  Warm Clothes.  It’s going to be cold and you’re not always dressed for it mid-commute. Make sure you have a hat, gloves, jacket and some waterproof boots.

5.  Fuel Container.  Running out of full is not a weather dependent hazard. Take the precautionary step of being able to transport fuel if you have to make the hike to get some.

6.  First Aid Kit.  Regardless of the time of year, keeping a simple emergency kit in your car is important. You can even construct your own kit. Include bandages, antibacterial soap and pain relievers.

7.  Tool Kit.  Even if you don’t know how to fix a car, there’s a chance that someone who stops to help you will.

8.  Jumper Cables.  Much like the tool kit, a helpful passerby you might already have cables to use, but its best to not leave that to chance.

9.  Tow Straps.  With the help of another capable automobile, you might save yourself a ton on towing.  Be sure to attach them to the frame. Incorrect towing attachments can cause serious car damage or injury.

10.  Spare Tire.  If you already have a spare tire, tire iron and jack in your car, take the initiative to learn how to change a flat.

11.  Bag of Sand or Salt.  Squealing tires in a ditch or on an icy road can be fixed by giving your car traction.  Cat litter will even do in a pinch.

12.  Signal Device.  If the snow is piling up or visibility is down, you will need a way to signal for help. Road flares, cones, a signaling mirror and brightly colored fabric are great options.

13.  Food and Water.  Wherever your emergency happens, you might be stuck there for a while.  Have enough snacks and water to keep yourself and any of your usual passengers happy for at least eight hours.

14.  Entertainment.  Keeping morale up in a tough situation is extremely important.  Prep yourself a book or other games to keep yourself occupied while waiting for help.

15.  Ice Scraper and Snow Brush.  If you’re not used to winter driving conditions, it’s easy to forget how much ice can build up on your windshield.

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7 Christmas Gift Ideas for Someone In Debt

by Tyler on December 18, 2014

Gift giving of the financial sort can be a sensitive subject.  You certainly don’t want to offend the recipient by insulting their intelligence or making them feel ashamed for the financial situation.

However, chances are your friend or loved one confided in you about their debt, so when approached with the proper spirit, one of the following gifts should be well-received.

1. Offer to make a one-time monthly payment

People who are saddled with a lot of debt are probably living paycheck to paycheck each month. Whether its a mortgage payment, student loan, auto loan or a credit card debt, offering to cover at least a month’s minimum amount due will give the recipient a little breathing room.

2. Give a copy of your favorite personal finance book

I received Dave Ramsey’s Total Money Makeover book as a gift some years ago and it provided my family a lot of motivation to become debt free.

3. Offer to pay the first month of financial/credit counseling

Many people often find themselves in situations where they need to seek the consultation of a financial expert, or a credit counselor, to help them get back on their feet.  These services often come with a cost and that cost often deters more people from seeking help.

4. Pay off the balance of smallest credit card

If you are familiar with the debt snowball method of debt repayment you know that retiring that first debt is key to getting the snowball rolling.

5. Paid-for Vacation

Being under the pressure of thousands of dollars of debt causes a lot of anxiety and sleepless nights.  Your friend or loved one in debt is probably long overdue for a vacation.

6. Pay a monthly utility bill

Outside of common debt payments like auto loans, student loans or credit card bills, many people find themselves financially strapped because of rent, cell phone bills or utility payments. Offer to pay someone’s electricity bill or rent for a month to give them a little breathing room.

7. Cash

Cash can be spent everywhere, unlike store gift cards.  It can also be used to add to savings or pay down debt, should the recipient decide to do so.

Again, these gift ideas should be given with a strong degree of sincerity, and from a position of wanting to offer help.  To lessen the chances of this becoming an expectation all year around, I recommend offering something like, “We obviously can’t help every month.  This is just a little something we wanted to do for you around the holidays.”

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9 Simple Ways To Improve Your Credit Score

by Tyler on December 17, 2014

I don’t have much use for credit scores these days.  Except for the occasional store card we open to save on a big purchase, I figure my credit score is largely irrelevant.

Having said that, I also do not go out of my way to earn a bad FICO score, since credit scores are still used for things like qualifying for a mortgage and determining insurance rates.

It wasn’t long ago my credit score suffered from too much outstanding debt, a collections item (thanks to an old issue with a cell phone provider), and a number of other factors.  I made it a point to learn what it would take to raise my score, but honestly most of the improvement has been a natural byproduct of our focus on reducing debt and avoiding new credit cards.

A 9-Step Plan To Raising Your Credit Score

1.  Stop applying for new accounts.  Each time a potential credit supplier inquires your credit file it can be detrimental to your FICO score.  Opening new accounts also lowers the average age of your overall credit file, which also counts against you.

2.  Continue to pay your bills on time.  Roughly one-third of your credit score is derived from payment activity.  And it takes seven years for collection items to drop off.

3.  Clean up credit report blemishes by paying them off.  Even if you have a collections item reported on your credit report, it is better to have a paid for collections item than one that is still outstanding.

4.  Keep credit cards opened after paying them off.  Cut them up if you like, but leave the account open.  One factor used to determine your credit score is the ratio of debt to credit available.  By canceling your account you effectively remove that available credit from the equation, causing your credit utilization ratio to go higher and your credit score to go lower.

5.  Aim to keep credit balances at less than 30% of credit limit.  Maxed out credit cards are a sign of elevated risk and are viewed negatively when calculating credit scores.

6.  Maintain different types of credit accounts.  While I would not go out and get a mortgage or car loan just to satisfy this requirement, it is generally a good idea to have a mix of credit types.

7.  Check your credit report twice a year.  I like to check my credit reports every six months to look for items reported in error.  If you find a mistake, follow the credit reporting agency’s requirements for disputing the erroneous item.

8.  Consider timing of balance pay offs when applying for mortgage.  I do still maintain a credit card, but I pay it off every month.  Because balances are reported to the credit reporting agencies monthly and are essentially a snapshot in time, it might look like I carry a high balance.  Before making a large purchase such as a mortgage it is a good idea to avoid spending on credit cards.

9.  Consolidate revolving debts with an installment loan.  Tread carefully here.  The absolute worst thing you can do is consolidate your debts with a loan and then run up each of those accounts again.

 

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7 Best Survival Products For Every Day Carry

by Tyler on December 16, 2014

Assembling a survival pack, or bug out bag, for emergencies is essential in today’s society.  You never know when a national emergency might happen.  That emergency might look life a weather event, a terrorist attack, or some other form of natural disaster.

For most of us, however, it is not practical to go about our daily lives with a bug out bag strapped to our back (though I do like the idea of stashing one at the office and/or in the car).

I also like the idea of keeping some basic survival tools on us as part of our every day carry (EDC) toolkit.

Here are a few items to consider taking along in your pants pocket or purse.

1.  Lighter.  It only occurred to me just recently to begin carrying a lighter every day.  No, I don’t smoke, but in terms of fire-starting ability it doesn’t get much easier than the flick of a Bic.

2.  Knife and or multi-tool.  A Swiss army knife or good multi-tool can provide a variety of practical tools in a small package.  I carry both; a Kershaw folding knife in one pocket and a small multi-tool in another.

3.  Flashlight.  Bright flashlights can actually double as a weapon.  I often carry a Surefire P2X Fury Tactical flashlight on me when I anticipate being out after dark, or in a dark area (movie theater, etc).  It was expensive, but having 500 lumens at the ready makes me feel safer.  As a bonus, it’s perfectly legal to carry.

4.  Cash.  In this plastic age many people overlook the need to carry a little cash, or as my grandfather used to call it, “walking around money.”  Make it a point to always keep a couple hundred dollars on your person – not so much that you worry about getting mugged, but enough to cover any small emergency.

5.  Protection.  If your local laws allow the conceal carry of a firearm, I recommend it.  However, if carrying a firearm is not practical in your situation, consider these alternatives to guns for personal protection.

6.  Water filtration.  A water filtration device such as the LifeStraw is a relatively easy way to make potable water in a crunch.

7.  Pocket survival kit.  This last one is something I made from a used Altoids tin.  I lined the bottom edges with black electrical tape to make it harder to open (and somewhat water resistant).  Inside I placed a mini Bic lighter, a couple band-aids, cotton swabs (kindling), safety pins, $20 in assorted bills, a mini LED light and a Benadryl tablet in its blister pack.

Here is a good post on Altoid survival tins for some inspiration.  I’ll share some pics of my own on Altoid survival tin on the Debt Reckoning Facebook page.

 

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Running Your Household Finances Like a Business

by Tyler on December 15, 2014

Have you ever known someone who was great at running a business, but lousy at running their personal finances?  Unfortunately, that’s been me for the majority of my adult life.

When it comes to spending company money, I’m frugal, thoughtful and borderline tightwad.  When it comes to spending my own money I’m very much the opposite – frivolous, impulsive and borderline spendthrift.

It was only when I adopted the same strategies that have made me successful in business to my personal finances that things began to turn around.

Here are a few ways we now try to run our household finances like a business.

Record Every Expense and Assign It a Category

Businesses go to great lengths, and expense, to adopt a financial system which allows them to track every outgoing expenditure, assign it a category and report those expenditures by category each month, quarter and year.

In our personal household we have found the most success when are disciplined about recording every single outgo from our monthly budget – from our mortgage payment all the way down to an afternoon candy bar from the vending machine.
There are many ways to accomplish this, from using automated tools such as Mint.com or other budget programs and elaborate Excel spreadsheets, to the simplest form – a pencil and legal pad.

While our method is the most labor intensive, we have found it provides us the best results.  We record all daily expenditures in a household ledger book.  The book features columns for:  Date, Item, Debit, Credit and Balance.  

LedgerWe also assign each expense a category, such as:

  • House (mortgage, repairs, investments/upgrades)
  • Vehicles (gas, insurance, maintenance)
  • Food (groceries, fast food, school lunches)
  • Investments (retirement, college funds, sinking funds)
  • Medical (dentist, doctor, health insurance)

You can make the categories as broad or as specific as you like – whatever works best for you.  We keep our household ledger book and a small calculator in a central location in our home and update it each night before retiring.

Watch Your Cash Flow

Like any business, our goal is to stay cash flow positive.  That is, we aim to earn more than we spend on a monthly basis.  Failure to accomplish this goal results in the accumulation of debt, or the draining of cash reserves.

This approach has helped me from becoming too overzealous about things like debt reduction or investments.  In the past, when I obsessed over carrying any sort of debt, I would often make large payments to service those debts to pay them off faster.  That’s a noble goal, however if too much is spent on paying down debt you may find yourself short on cash for regular monthly expenses, and you have to borrow more money to cover the difference.  It’s a vicious cycle.

Establish a debt repayment and investment schedule that works well for you given your monthly income.  Avoid going cash flow negative in an attempt to speed up the process.

Diversify Income Streams

Any good business recognizes they cannot hang their hat on a single product, or line of products.  The key to surviving ups and downs is to have multiple income streams from a variety of sources.  The same goes for your personal finances.

Consider the following hypothetical situations:

Example Household #1 Sources of Monthly Income

  • Salary from full-time job
  • Interest on savings in money market account

Example Household #2 Sources of Monthly Income

Naturally, Household #2 is far more likely to survive a reduction in any one source of income by relying on income from others.  Household #1 is likely living paycheck to paycheck.

Reduce Operating Expenses

Any good business is always looking for ways to reduce their overhead expenses.  While some expenses are fixed and may be considered a cost of doing business, others are variable and may be influenced heavily by streamlining, sacrificing and downsizing.  The same is true of personal expenses.

Consider your current monthly budget.  What are your top five expenses?  Which of those expenses could you dramatically reduce and how?

  • Mortgage.  Downsize into a smaller home.
  • Car payment.  Sell expensive vehicle and pay cash for used one.
  • Utilities.  Adjust the thermostat.  Cut the cable.  Drop land line phone service.
  • Food.  Stop eating out. Clip coupons.  Buy staples in bulk.
  • Insurance.  Shop car insurance.  Qualify for better health/life insurance rates by improving health.

Grow Slow and Steady

In business, and in our personal lives, explosive growth is so highly rewarded we often try to give the appearance of such growth prematurely.  We invest in bigger homes, and fancier cars and expensive wardrobes in an attempt to appear successful.  Those things are fine if you can afford them, but chances are you cannot, especially early on.

When just starting out, or recovering from past financial sins, it’s best to grow slow.  Buy a modest home, or rent the first few years.  Make do with your existing car even if you could technically qualify to lease a newer one.  Save cash for expensive items like furniture, or vacations.

Reinvest in your home buy upgrading to energy efficient appliances, upgrading your insulation, planting trees, and other things that will drive down your monthly expenses going forward.

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