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11/12/2008

Last Friday, I happened to check my bank balance and to my surprise (or shock), I had only 98 dollars in my bank. I’m not exaggerating or making this up. I had exactly $98.05 in my bank. Yes, I’m officially poor now. The financial tsunami that has swept the world has affected me too. Having said that, I must accept that part of the reason is me and my inability to keep track of my financial life. Laziness is the word that comes to my mind instantly. Right from utility bills to car payments, I have had trouble keeping a tab on my expenses. So beginning last Friday, I decided that I’m gonna take matters into my own hands (who else?) and start this mini-experiment. Let’s see if it works. If it works for me, then you could try it out as well. If it doesn’t then I will just accept that I suck and nothing can be done about it. The experiment will go on until the end of the year. On Jan 1st, we shall crunch our numbers and see where we stand However, it might take longer than just a couple of months for me to catch up with my Debt-Meter (check out home page). Let’s see!

Let’s see here. Basically, I’m gonna try and keep track of every expense that I make and before every transaction, I’m gonna say my little mantra. The mantra I have come up with is ‘Are you sure?’. I’m gonna use that mantra every time I swipe my credit card, my debit card or in fact take my wallet out. ‘Are you sure you want that $200 bike that you’re never going to ride?’ ‘Are you sure you want to buy the latest and greatest Blu-ray disc that you’re gonna probably watch just once?’ I have never asked that question to myself before making any purchases till this date. I know, I know sounds too fake. I have, but the answer that has come back has always been ‘Yes’ or ‘Aah big deal, just this one.’ In fact, I used to live the mantra, ‘Is it gonna bankrupt me? C’mon it’s ok!’. I have realized that that doesn’t work!

Anyways getting back to the experiment, the second task in the experiment would be to eliminate pricey and unnecessary expenses. I think this has been my biggest problem

A) paying way more than its worth
B) buying way more than what I need.

A few examples of A. Last week I bought a USB cable for my iPhone (this is the third one) from BestBuy for 18 bucks. Yes just a USB cable from BB cost me 18 dollars. I looked up the price for it on eBay and you would not believe how much it was selling for. $2. SO I paid what? 9 times more!

I have already given you my bike story as an example for B. But just to emphasize a little more, here is another one. A while ago I had purchased a free credit report from www.freecreditreport.com, just to get an idea as to where my FICO score stands. I enrolled in their 30-day ‘credit protection plan’ and never bothered to cancel it. I’m being charged $15 month after month after month for the past 2 years now. That is $360 for the last two years. There are numerous such examples. In this experiment, I’m going to track every A. and B. category item and make sure that I cut back on it as much as I can. Let us start then!

Oh, wait. I forgot to mention the third and most critical task of this experiment. Like most Americans (even though I’m not one :D), I have managed to accumulate debt (I call it The Monster) over a period of time. The Monster has been getting bigger and bigger over the past several years and harder to manage. The third task would entail getting rid of this Monster pronto.

OK what I’m gonna do is categorize A, B and C items and see what can be done about them. Your help and feedback is greatly appreciated by the way.

Category A - Paying More

1. Gas - Hunt for the cheapest priced gas in the neighborhood. www.gasbuddy.com is the site I’m gonna use. (Current : $140 per month)
2. Electricity and Water - This might in fact help me with my Go Green Project! ($80 + $35)
- Will replace all non-fluorescent bulbs with high efficiency CFLs. Costco would be the best place to get them in bulk.
- All electronics run only when being used. So no more using the plasma as a room heater.
- Save water. Will have to cut back on the number of times the washer is used every week. Dishwasher as well.
3. Needless to say, find the best deal before pulling the trigger on any purchase.

Category B - Buying More

1. Magazine subscriptions. I never ever read them. Not to mention the amount of trash that gets piled every month. ($70/yr).
2. Credit report memberships. ($15)
3. Clear out the attic. Even though we don’t have one in our apartment, I can assure you that there’s stuff in our home to fill many an attics. (Will update after every sale.)

Category C - Paying Off

1. As of today, I have $9339 in credit card debt. I made a few balance transfers at 0% to pay off my car loan. I also have a housing loan which I need to pay off by Mar 2009 (for an amount of $14000). For the past couple of years, a huge chunk of my income has been going into paying off for my apartment in Bangalore. Nonetheless, we’re very excited about owning the place come March of next year. 14k in 4 months would mean 4 payments of $3500 each. I’m not sure how much would that leave me with to take care of the CC balance. Let me breakdown the $9339 based on APRs and the time horizon on each balance.

$3000 - 32 months 0% - $93.75 per month
Rest until 08/09 @ 0% - $600 per month

P.S: I shall not be using any of my existing savings or money out of the emergency fund towards payment of the aforementioned balances. I don’t think, however, I will be able to save anything over the next year or so. I shall be blogging about the experiment almost on a daily basis giving you an up-to-date report on my current financial status. Please bookmark this page for the most recent post. I have also created a category titled ‘My Money Experiment‘. Wish me luck

Image courtesy: http://hullstudent.com/files/money_tree5.jpg