Paying Down Credit Cards with the Debt Snowball!

Today I am going to share a debt pay down plan with those of you that feel like your credit cards and other financial obligations are out of control.  If you’re like me, when you have credit cards in your wallet; it seems like nice meals, spur-of-the-moment family vacations, and all kinds of other unnecessary things find their way into your daily life!

Before you realize it, your credit cards balances can (and will) creep up, and up, and up!!  You may end up with thousands of dollars spread over many credit cards before you realize what you’ve done.  You only realize it when you are at the point you can barely make the minimum payments.

Okay, sounds like it’s time to panic, right?  No more splurging, what am I going to eat if I have to eat at home, no more free checks???  Don’t panic yet, you’re not alone!  It’s time to stop using the credit cards and work on getting those balances paid back down!  You’ll have to probably make some sacrifices for a while, but you’ll be surprised how quickly you can pay down the debt if you put your mind to it.

Most people that have any common sense will start putting all of their extra money on their highest rate credit cards first.  It seems to make sense, but when you do that, it also seems to take FOREVER to make any progress in paying things off.  One of the biggest challenges of paying down your cards is staying persistent and sticking to the plan.  This is where at least 80% of people fail and fall back into the same old habits.

Here’s an example of what happens. Let’s say you have a card with a $15k balance, and a 13% interest rate, and your other cards all have $3k balances or less, each with interest rates ranging from 1.9% up to 11%.  Some overly simple math makes it seem like the best thing you can do is get the highest interest, highest balance card paid off first.  The problem with this is staying motivated.  You probably don’t have much extra money in the first place, so you’re only paying a moderate amount above the minimum payment.  It may take a year or more to pay down the $15k card if you choose that one as your first target.  You can see why it’s easy to lose motivation and slip back into your old habits.

On to the Debt Snowball debt pay down method!!  The Debt Snowball method seems to defy the math.  Using this method, you pay your card with the lowest balance off first, even if it’s a low interest rate card.  You should be able to pay the balances off on the small cards quickly.  This does three VERY important things for you.

1. When you eliminate these smaller payments first, you free up additional money each month that you can contribute to the next card.
2. After only a short amount of time, you have eliminated some of your payments.  This saves you time, and possibly checks, money orders, and postage.  It reduces the chance for a missed bill resulting in a late fee or higher interest rate.  It also reduces the stress associated with having a large number of bills to pay every month.
3. And last, there is a psychological factor involved as well.  When the pile of bills starts to get smaller, you gain motivation to pay the rest of the balances down even faster.

In the end, you have to consider the human factors of motivation and sticking to the plan.  Even if you are making progress paying down your largest, highest balance card first, it won’t feel like you’re getting anywhere.  Paying down the cards will seem impossible.  If you’re struggling to get out of debt, consider the Debt Snowball method!!  This article was written specific to credit cards, however; it can just as easily include personal loans, auto loans, or any other obligation.

Please share your thoughts, and post your comments about this below. Have a great day!

Patriot_RAM

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Are CFL Bulbs REALLY a Good Solution to Save You Money?

Are Compact Fluorescent Light Bulbs Really a Good Solution to Save You Money?

The Dangers of CFL Light Bulbs

A number of people claim that one smart way you can save money is by changing the lighting in your home from incandescent lamps to compact fluorescent lamps, or CFLs.  Part of this claim is true – But there is a darker side of the story that needs to be known.  I am by no means an expert in the field, nor am I one of the incandescent extremists you sometimes fine.  Here is what I learned from my CFL experience.

Compact fluorescent light bulbs use less wattage than their incandescent counterparts.  This is a simple, easily proven fact.  In most cases, a 13 watt CFL light bulb produces about the same amount of lumens as a 60 watt incandescent bulb.  By using a CFL, you consume about 78% less energy.  Sounds like a win!

Before making a decision, the cost and life expectancy of light bulbs should be considered.  The cost of a CFL bulb is greater than an incandescent bulb.  But it lasts longer, right?  Wrong!!  A CFL bulb life is often advertised as 7 years, or 10 years.  In my personal experience, and that of many other people, many CFLs fail within the first year.  Some only last a few weeks.  The life expectancy is based on an unrealistically low number of hours of user per day.  My failed bulbs were mostly not heavily used.

My CFLs were manufactured by one of the industry leaders, not a cheap knock-off.   Some companies claim to warranty the bulb and replace it if it fails within that amount of time – and they will.  Sounds great!  If you want to spend all your spare time sending emails and light bulbs back and forth, then go for it; but please consider the rest of my experience first.

When an incandescent lamp fails, the filament breaks and you’ll hear a “pop!” and see the familiar “flash” as it burns out.  When a CFL fails, it’s a whole different story.  Manufacturers will tell you that the lamp may flicker, or burn dim and orange.  The base of the lamp may get hot, smoke, and produce an odor.  The Underwriters Laboratories (UL) will also tell you that this behavior is expected, and even explain that the base is made of flame retardant plastic.

They are leaving out some VERY IMPORTANT facts.  Read on to learn the real truth.

John Drengenberg, consumer affairs manager at UL, explains how a CFL burns out.  “People expect to see the bright flash and to hear the popping like a traditional incandescent bulb, but the burn out of a CFL is different. The light dims over time and might produce a more dramatic pop, emit a distinct odor, and maybe even release some smoke,” said Drengenberg.

The UL article also states, “In some cases, Drengenberg said that the plastic at the base of a CFL can turn black, but comments that this is also normal in most cases, as safety standards require the use of special flame retardant plastics in the base that do not burn or drop particles.”

And finally, “Because CFLs contain a small amount of mercury, they should be recycled rather than thrown out in the trash. Additionally, special considerations should be taken if a CFL should accidently break.”

Now let me be clear – This article says that the burning out CFL may “release some smoke”, “can turn black”, “produce a more dramatic pop”, and that they “contain a small amount of mercury” which requires “special considerations” if the bulb “should accidently break”.  But that’s okay, because “safety standards require the use of special flame retardant plastics in the base that do not burn or drop particles.”  Again, I’m not an expert in CFL technology, but it sounds like these things can be dangerous!!

Let me tell you about one of my CFL experiences.  I was in the kitchen when my wife and I smelled something burning.  While we looked for the source of the odor, and heard a loud “BANG” that seemed to have come from our bedroom.  We rushed to the bedroom and found a CFL in our ceiling fan to be the source of all the commotion. What we found shocked us.  The CFL base was slightly burned and smoking.  The glass from the bulb had exploded and was covering the bedroom floor and our bed (a 13 foot radius).  The carpet directly under the CFL had a piece of melted plastic and glass smoldering in the carpet.  There was a “string” of melted plastic extending from the CFL base, eight feet down to the smoldering piece on the floor.  Clearly, the CFL had a catastrophic failure.  We immediately evacuated the room as to not inhale the mercury vapor that escaped when the lamp exploded.

Clearly, my experience contradicts what the UL and manufacturers say should happen.  This bulb took it’s “expected” burnout sequence to the next level, and did exactly what they say can’t happy.  The flame retardant plastic that Mr. Drengenberg states “do not burn or drop particles”, dropped extremely hot material onto the (thankfully) flame retardant carpet below.  Had this been 18 inches farther over, it would have landed on our bed.  This experience contradicts everything stated by the UL.  Always be careful before you put 100% of your faith and trust into a certifying agency!

I contacted the manufacturer in regards to the violent failure.  I reluctantly shipped the failed lamp back to them for analysis.  Their quality assurance department inspected the lamp, and concluded that it did, in fact, fail due to a manufacturing defect.  The manufacturer replaced every lamp in my home, as well as the ruined carpet.  This is the most violent of the dozens that have failed in my home since 2007.  Nearly all of them got very hot and smelled aweful.  Seven of them have generated sufficient heat to break the glass bulb, and releasing the mercury vapor into the atmosphere in my home.

My family still uses CFLs in some areas of the home, but we are slowly transitioning away from them.  LED technology looks more promising from a safety standpoint.  Hopefully they will come to market with some good, reasonably priced products soon.

Source(s):
“UL sets the record straight on safety and compact fluorescent lamps.” Compact Fluorescent Lamps.
http://www.ul.com/global/eng/pages/corporate/newsroom/storyideas/compactfluorescentlamps/ (14 Jul. 2011).

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