Would you Pay Off Credit Cards with a HELoC?

Y’all have seen the ads: some smiling beautiful person is trying to tell the world how much easier their life is since they “paid off” their credit card bills by using their HELoC (Home Equity Line of Credit).  It might have been on TV, in the newspaper, on the radio, or even online.  It’s touted as the “smart” thing to do.  There is so much wrong with this idea, I am not even sure where to begin!

First, let’s tackle the erroneous notion that you can “pay off” debt by borrowing (more debt).  Yes, a HELoC is borrowing…it’s borrowing against the equity of your HOME.  Dave Ramsey has a cute but very true saying: “You can’t borrow your way out of debt.”  He is 100% right on that point.

Now let’s look at the (lack of) wisdom in this strategy: The notion that taking unsecured credit card debt and moving it to a secured debt situation is “smart”.  Credit card companies will scream, holler, and cry blue murder if you don’t pay them …

Trust me I have had personal experience with this … but the worst they can do is ding up your credit report (and score) then discharge the debt and sell it to a collection agency who usually has as bad or worse phone tactics.

Common Sacrifices to Get Out of Debt

Most people who want to get out of debt quickly will make a budget, then start cutting.

Naturally, the first thing you need is a budget!  Once that is drawn up and you see where your money is going (and how much) here are the most common budget items that go on the chopping block and get sacrificed:

  • Eating out: Restaurants can kill your cash flow fast.  trust me on this one, it is a vice I struggle with myself.  While dine-in restaurants can take large chunks out of your budget at one time, my problem has always been the convenient
    and “cheap” fast food drive-through while out and about and pressed for time.  Yes, that’s a double whammy: the food is less than nutritious and it hurts the budget.  When I first started out on the budget last year, I allocated only $20 per week for all eating out.
  • Cable or satellite television: This one waited until last summer to go on the chopping block.  Now I am not even sure why I waited!  Since there is no “a la carte” channel choosing option available in our area, we were paying for 60 channels and only watching about 15 of them.  Last fall, I decreed that until the cable company offers the “Nerd Channel package” we weren’t going to bring this back (nerd channels: Sc-Fi, TLC, Discover, A&E, History, etc.  You know, stuff “only nerds watch” that I do enjoy.)

My experimenting – My Teenager Son on Budget

Y’all asked me to post about how my experiment with putting my teenage son on his own food budget is going.  Tonight was our first stab at it, and the testing ground was perhaps the most challenging of all: Wal-Mart.  Yes, I turned my 14 yo son loose on a Wal-Mart with $45 and his own shopping cart!

I would call tonight’s shopping expedition a smashing success.  I fussed at the teenager to make a list, informed him he had to buy his own milk, juice, fruit, pasta, and what-not.  I figure I can cover him on things like condiments and margarine, but he is *SO* on his own with the milk.

Yes, he objected to the milk idea, but I held my ground then pointed out an obvious benefit: with his own milk he won’t hear me throw a fit when he decides to drink a tall glass of it at every single meal and snack time.

I guess it was a huge eye-opening experience for him in the dairy case, since he only bought himself a half-gallon instead of a full gallon!

I´m Putting My Teenage Son on a Budget

I went grocery shopping yesterday with my teenage son, since he’s been grumbling that I don’t get him enough of the foods he likes.

Big mistake.  Actually, BIG MISTAKE.  Things kept “jumping” into the cart when he thought I wasn’t looking.

By the time I got to the deli counter (and was quite happy to see all the sale signs) I was getting quite fed up with my son’s antics.  He was bouncing into the chip aisle, the pop (soda) aisle, and through the freezer aisles as I waited for the lady to slice up all the cheeses for me.

It was then I got this “brilliant idea.”  I am going to stop grocery shopping for my son completely!  Instead, I am going to give him the money I would usually spend on his food (he for some strange reason is a vegetarian) and then I will let him get his OWN grocery cart and buy his own groceries.

Tips for Budgeting for Irregular Income

How about a useful post?  One of the common “excuses” for not doing a budget is “I never know how much money I am going to make/bring home because I am not on a set income.”

Bah!  (Fiddlesticks!)  That excuse is just weak!  If you work on commission or tips you can still make a budget.  Irregular income is no excuse, you still need a battle plan for your money.

While most of our household income is fixed (about 75% of it) I still bring home some irregular income because I work on tips.  I still need a plan for what to do with that money, or it ends  up burning a hole in my pocket and “disappearing” like unbudgeted money usually does.

When you don’t have a guaranteed income level, you need to shift to a prioritized spending plan, where you list out your expenses in the order of importance.

If you have no fixed income, then your entire budget is a list of spending priorities: