This month’s Group Writing Project is about Personal Experiences with Loans, so we’ll tell the story of our first, somewhat disastrous experience with loans, of how we got in trouble and rectified the situation.

In May 2003, when we moved from Hawaii, we lived in a tiny garage apartment in Hayward, CA (more about this in Our Family Financial History). After a few harrowing experiences of walking as long as 3-4 hours through the dodgy neighborhoods to run errands, we decided we needed to buy a car ASAP.

Not knowing the first thing about buying a car or obtaining a loan, we set out on foot on Memorial Day 2003 and walked several miles to the car shopping district. The first used car salesman we spoke to asked us about our credit history, of which he had none. He told us we wouldn’t be able to buy a car without credit history and made some suggestions that we buy some jewelry on financing to build credit. Well, we needed a car then, not a year after owning jewelry we didn’t need, so on we went.

At the next used car lot we stopped at, a young salesman hurried out to speak to us. I can’t quite recall what was said in the conversation except perhaps that we were looking to buy a used car. Before we knew it, we had been whisked off in one of the used cars and driven over to the KIA dealership a block down the road and seated at a table with 2 car salesmen.

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Welcome to the 139th Edition of the Festival of Frugality! This week’s edition celebrates the sensational achievements of Michael Phelps, holder of 15 Olympic Gold Medals and 7 World Records in swimming, in the past week and a half at the 2008 Olympics with photos and inspirational quotes from the champion himself.

I am also hosting the Money Hacks Carnival tomorrow, so be sure and check back for more great reads! If this is your first time here, please look around and consider subscribing to our RSS feed. 

Now on with the carnival!

(AP Photo/Mark J. Terrill)

Editor’s Picks

• Silicon Valley Blogger presents Lost Money: How Money Drains Add Up To $175,000 In 10 Years.
• MoneyNing presents Frugally and Happily Back to School 9 Different Ways.
• Kevin Brink presents “Sale” Can Sometimes be Just Another Four Letter Word.
• ISPF presents 10 Tips to Get Anyone into the Habit of Cooking at Home (Even if You Have Never Stepped into the Kitchen Before).
• Savingadvice presents Reached Financial Independence. Now What?

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Madoline and I live in fear of debt; that is one of the reasons we are so vigilant about saving money. We have witnessed firsthand the consequences of extravagant spending and debt (perhaps we will share these stories at a later time), and that is why we live the way we do. So how do we stay out of debt? The solution is so simple it almost doesn’t seem like bona fide advice, but it really is.

I know everyone hates hearing these trite statements, but the reason they are so often repeated is because they are true. In fact, they are so basic they should be considered common sense. These principles work for both staying out of (and maybe even getting out of) debt.

The simple solutions to staying out of debt are:

• Spend less than you make
• Don’t waste money
• If your expenses are higher than your income
  • Cut back, and/or
  • Make more money

How to spend less than you make

Before you spend money on any treats for yourself, set aside what you need to pay your regular bills. If you aren’t able to keep from spending that money by only mentally setting it aside, try the following:

• Open a new bank account for your regular expenses (rent, utilities, etc.). Tip: Credit unions offer accounts without fees or minimum balances. Let’s call this account your “Expenses Account.”
• Add up all your bills and expenses at the beginning of each month and transfer that amount from your main account to your Expenses Account.
• If the bank or credit union issues you an ATM card and/or checks for that account, keep them in a safe place at home instead of carrying them in your wallet or purse.
• If you get paid every 2 weeks and your bills are due at the end of the month, try not to spend any money on luxuries with the first paycheck of the month. If your expenses are less than the amount of your paycheck, put all of that amount into your Expenses Account, plus a little extra padding just to be safe (to prevent overdraft charges in case you added wrong).
• After you have set aside all the money necessary to pay your bills, see how much you have left. Put as much into savings as possible, but if you feel like you need to treat yourself to a little something, do so at your own discretion.

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Merriam-Webster defines the word “vacation” as “a respite or a time of respite from something”. Well, if that “something” from which one is taking a respite is “peace and quiet” then I would have to agree with the definer. Otherwise, gathering from my 2 recent “vacations” (one to Disneyland, one [working] vacation to Las Vegas from which I have just returned), vacation seems more like a respite from peace and quite to me.

Anyhow, I thought I would put together a pre-vacation checklist to help all you other poor vacationers prepare for your vacations, because if there is one thing I have learned, vacations are costly - and I am not just talking about transportation, lodging and amusements, but all the little everyday necessities - and the only way to travel frugally is to travel prepared. Also, the better prepared you are, the better the time you will have on your vacation; knowing that everything back home is taken care of and that you are prepared for most common travel mishaps will allow you to enjoy yourself to the utmost.

And yes, I am the extremest of Type A personalities, but admit it, sometimes it is handy to have someone who has the bases covered. You’ll certainly be glad to have one of us along when the unexpected happens because we’ve planned and prepared for it (or at least have given some thought to it beforehand so as not to be caught by surprise). This isn’t a list of what to pack (toothbrush, underwear, etc.) but rather more of a pre-departure to-do list to help prepare for your trip. I’m not saying you need to do everything suggested, but hopefully a few items will prove helpful or relevant to your circumstances.

Prevention is the best medicine

Just because you are on vacation, it doesn’t mean everyone else is. This goes for utility companies, burglars and your own plumbing and wiring. When you come home from vacation, you want to make sure you still have an intact home to come home to, and aren’t met with a mountain of additional expenses. Therefore before you leave, you might want to try some of the following:

(These checkboxes are check-able, so feel free to come back and use it.)

Home and Business

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It is generally accepted that buying in bulk is the best way to save money and the backbone of a frugal lifestyle. I do agree with this, but not for all things. With products and foods we regularly or quickly use and consume, I almost always buy in bulk without question. But there are cases where I find that buying in bulk is not always the right solution.

A few instances where I often choose not to buy in bulk are:

• Trying a new product
  I recently shopped for a multi-purpose household cleaner. (We try to use vinegar and baking soda when possible, but there are times that we feel we need a stronger cleaner.) Because we have pets, we try to be as cautious as possible when choosing cleaners, and I found one called Simple Green that I liked the looks of because it claims to be safe and biodegradable, and it comes concentrated and makes several times the amount of the bottle.

  Simple Green comes in 3 sizes at our local Ace Hardware: 22 oz. spray bottle ($5.99), 1/2 gallon jug $8.99), and 1 Gallon jug ($10.99). Needless to say, the larger the jug, the lower the cost of use. With the larger sizes significantly cheaper than the smaller sizes, I was tempted to purchase the gallon sized jug. However, having never used or heard of the brand, I was hesitant to purchase such a large quantity for fear that it would turn out to be unsatisfactory for various reasons. Our local Ace Hardware charges a 15% restocking fee for all returns, which I consider a waste of money, so I don’t like to think of that as an option.

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I’ve seen several threads on forums where individuals in debt have posted a general plea for help in reducing their debt and most people simply respond by telling them to cut spending. But how to cut spending and decide what to cut and what not to cut? This is where you have to discern luxuries from necessities.

A necessity is an item/service that you simply cannot do without in your everyday life and that is vital to your survival and situation.

A luxury is anything that is not a necessity.

A few examples of necessities (or necessary expenditures) would be:

• Food
• Rent/mortgage
• Auto insurance
• Home insurance
• Health insurance
• Gas
• Auto Maintenance
• Utilities: electricity, gas and phone

Of course these are not the only necessities in the world, and it’s different for everyone, but when you really think about it, true necessities are actually quite few in number, and many things that you think you need are in fact not that necessary.

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