7 Surefire Ways To Stay Poor

By Liz Pulliam Weston

In trying to unscramble a friend's finances, I noticed she was making a fat car payment. I knew she drove a clunker, so I couldn't figure out why she was paying so much.

Her previous car had needed a $2,000 repair, she told me. She had no savings or room on her credit card to pay the bill. But her friendly neighborhood used-car dealer offered her "easy financing" on another used vehicle -- at an astronomical interest rate, thanks to her bad credit -- with a monthly payment she could swing, just barely.

Of course, the cost of this loan meant she had no money left over to pay down her credit card debt, build up her savings or even properly maintain the vehicle. It didn't take much imagination to picture her even deeper in the hole next year.

Such are the economics of being broke.

When you don't have much money or the money you have never seems to last, you're constantly backing yourself into financial corners. Instead of gradually building your wealth over time, you tread water or go under.

In the past, you might have been able to count on raises at work and a gradually improving standard of living to bail you out. But those doors are closing for many because:

Incomes aren't growing the way they used to. In fact, when adjusted for inflation, median incomes are below where they were in 1999, the Census Bureau tells us.
Inflation and health care costs chew up a bigger part of what we earn.

More people experience wider swings in their income, as my colleague Jim Jubak explained recently in "Where did our financial stability go?"

A swing upward is great, but not if you base your spending on getting overtime at work and then your hours are suddenly cut or your job is eliminated.
It's setbacks like those that, when you're already broke, can easily send you over the financial edge into bankruptcy.

7 life-altering mistakes

With so many headwinds, it's more important than ever to get the basics of money management right. Otherwise, you're just guaranteeing you'll stay broke by:

Getting the big stuff wrong.
A lot of "save money" advice focuses on the little stuff: how to cut back on lattes or trim your utility bill by a few bucks. But those who are chronically short of cash often overspend on the big stuff, especially shelter and transportation.

If your mortgage or rent payment eats up much more than 30% of your gross income or your vehicle costs you more than 10% (including financing, repairs and gas), you're going to have a tough time making ends meet.

(MSN Money's Home Affordability Calculator offers a realistic look at what's truly manageable. And here's a great tip for estimating what you'll spend monthly on any given car over five years: Double the price tag and divide by 60.)

Confusing needs and wants.
This is a biggie, and it's a problem for people at every economic level. But when you're broke, the consequences of deciding you need something that's actually a want can be devastating.

Here's the drill: Our needs are few, and they include shelter, food, clothes, transportation and companionship. Our wants are endless and quickly will transform a need like clothing (which can be Goodwill finds or hand-me-downs) into an extravagance such as a new suit.

Figuring out what we really need, and how to get it for less, can help get our finances under control. If you find yourself saying, "I need a (whatever)," stop a moment and consider whether you really do. You probably don't have to live without it forever -- just long enough to truly get on your feet. (See "The difference between 'want' and 'need'? 3 months" on MSN Money's Smart Spending blog.)

Considering only the monthly payments.
Whole businesses thrive on getting you to ignore the total cost of your purchase. Payday lenders, rent-to-own shops and car dealerships want you to focus on the short-term payments, not the long-term expense. Avoid the first two.

Anytime you consider a loan, bring a calculator so you can multiply payments by the number of months you'll be on the hook to get the real cost of what you're buying. (See "Keep you old clunker or buy a new car?")

Failing to track where the money goes.
If you're broke, you need to find out where every nickel is being spent so you can make intelligent decisions about how to trim. J.D. Roth, the blogger for "Get Rich Slowly" and who dug his way out of $35,000 in debt, says getting a handle on his spending helped him turn around his finances. Technology makes that easier than ever before: You can use personal-finance software such as Money or Quicken, or sign up for an online solution like Mint, Wesabe, Yodlee or Quicken Online.

Carrying credit card debt.
You probably didn't mean to do it. You just ran into a jam one month and couldn't pay your whole bill, and somehow it has snowballed from there. But carrying credit card debt costs you a fortune and puts you at the mercy of credit card companies.

If you can't pay your bill in full, stop using credit. Pay far more than the minimum, and come up with a plan for paying it off entirely before you pick up the cards again. (See "Your 5-minute guide to managing debt.")

Living close to the edge.
Every setback is a crisis when you have no cushion. Failing to have any savings also increases the chances you'll bounce checks, incurring expensive fees, and pay bills late, trashing your credit scores -- those all-important numbers that determine how much you pay for loans, insurance and housing. (For more, visit MSN Money's Decision Center on credit scoring and read "Don't be duped by bounced-check 'protection.'")
Even a few hundred bucks can make a difference, so read "Why you need $500 in the bank" for details on building a financial pad.

Squandering what you have.
Most workers contribute to some kind of retirement fund, typically a 401(k) account that they can take to their next job or roll over into an individual retirement account.

But nearly half cash out when they leave a company. That's nuts. You lose a fortune in taxes and penalties -- and worse, you lose an even bigger fortune because the money isn't there to grow and support you in retirement. People who raid their retirement funds won't just be broke now. Later, they'll be old and broke, a pretty awful combination. (See "Retirement for the not-so-rich.")

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This For That Mentality

When you decide you are going to get out of debt you must also establish a this for that mentality. The concept is very simple. First you have to decide if what you are about to purchase is a want or a necesity. If its a necesity than you must purchase only enough for what you need. If the item is a want then you have decide what you can get rid of or sell, or you must decide what is going to take the place of that purchase. Many are forced to make that decision these days because of high gas prices. Others are making that decision because they want to be frugal with their money.

Personal example: I just signed up for a gym member ship next door to where I work. The monthly fee is $67. The first thing that I thought about when I heard the price was bring in my lunch to save money and to save time so I can workout during lunch. Keep in mind this is a top of the line gym membership but i'm paying for it.

Another example is ordering water. My wife and I only order water when we go out to eat, we give the money we would have paid to our waiter as a tip. This has saved us a ridiculous amount of money.

What are you willing to give up in place of what you need or want? Thus developing a this for that mentality to become debt free. I know its not normal but you know what normal is:

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Debt Free Graduate

On May 15, 2008, Fabian, Debt Free Hispanic, also became known as Debt Free Graduate.

As I look back at my academic career I realize that graduating without debt is possible. I attended a private University and still graduated debt free. How did I do it? I worked and I worked some more and I didn't rely on Sallie Mae to fund my studies. But not everyone can afford college, right? I couldn't afford it as well going in to college but once I stopped buying stuff I didn't need, not paying car payments and focussing on school instead of material possessions, I started to afford college. I wanted to spend on clothes, eating out, purchasing the new electronic gadgets, Apple computers. But I did without and I paid for my Masters of Arts in Management degree in CASH.

Not only did I graduate debt free but since I was using my own money I did the best that I could and I finished with what people would say is an impressive 3.85 Grade Point Average (GPA). See my grades below for proof. When you spend your own money instead of taking out loans, you tend to make better grades. Listen, my mom only has up to a middle school education and my dad has up to a 6th grade education, its not about what you came from but from where you can go. I love my parents and they have been my support through my education but I know that I was financially doomed going into college but with perseverance and hard work, I am done and 100% debt free.

-Debt Free Hispanic Graduate

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Why not Be THE MAN

Have you heard the saying, "The man keeps me down". When people cannot get ahead they often say that "The Man" is keeping them down, holding them back or standing in their way. You know what I say to that, Become the Man. If the man keeps you down, Become the man so that you don't have anything to worry about. When it comes to finances, the man is always going to be ahead, so become the man. I live my life in a way where I am the man not giving excuses to any circumstances. One way to become the man is to become debt free. When you are debt free, the man cannot take your money, the man cannot own you financially, you BECOME THE MAN. - Debt Free Hispanic

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Stop Spending : Draw a Line in the Sand

One of the hardest things you will ever have to do to get out of debt is to stop spending. I don't know why spending is so important, maybe its because of the emotional rush. People tend to feel good when they are in stores spending money, but it doesn't last long. The other day I was eating dinner because it was dinner time but I wasn't hungry, but I ate anyway. Thats what people do with spending, they spend even though they don't have any money. Draw a line in the Sand, enough is enough. I remember when I made the decision to become debt free, I said that I will not borrow any more money, no matter what! That was my line in the sand. Now I have control of the most powerful wealth building tool ever known to mankind, MONEY. - Debt Free Hispanic

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Hispanic Debt

Hispanic Debt : I love my people but something has to change. Who in this world is going to speak to Hispanics in a loving way? In a way where Hispanics can get educated and know how to take care of their personal finances. I read a lot about Hispanics in Hispanic Business Review, Hispanic Trending, Entrepreneur.com but everywhere I read its about marketing to Hispanics. Everyone wants to know how to Market to Hispanics.


Marketing to Hispanics does not help us build our economy, it does the opposite. If you help Hispanics in the area of Personal Finance, they can earn their way to becoming homeowners instead of renters. Not all Hispanics rent but the majority do. It's not unusual to find more than one family living in a rented home. First of all, you need a SS# to qualify for a home loan, now how are 1st & 2nd generation Hispanics going to get approved for a loan without a SS#? They won't qualify so they rent. 2nd & 3rd Generation Hispanics such as myself are homeowners because we have been educated in finance and we qualify for mortgages.

My heart goes out to all Hispanics who are busting their butts, working hard for a living, but using that money for the weekend or to purcahse vehicles. I wish I could sit down with more Hispanics and show them how to retire with dignity, with pride, but more importantly, with money. I'm going to change my family tree forever, will you? -Debt Free Hispanic

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More Money More Problems

Have you heard the saying, "More money, more problems". Nobody buys into that. Actually the more money the more opportunities in some cases. Problems occur when people get more money and not change their spending habits. I often think what I would do with more money coming in. Well I would do what I currently do, invest and save the money. I am currently looking for ways to make my money work for me and not me work for my money, hmmm theres an idea or a blog title. The more passive income we can create the more money we will make. But if you do not educate yourself and change your spending habits than the more money you make the more problems you will have. - Debt Free Hispanic



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12 Ways to Trim Financial Fat to Cut Debt

In order to have extra money to pay towards debt, people must be willing to trim their financial fat. So what is financial fat? Financial fat is anything extra that people spend money on that does not include basic necessities (Food, Shelter, Clothing). So here are a list of fattening consumptions:

1. Cable
2. Extra Cell Phones
3. Movies/Rentals
4. Magazine subscriptions
5. Dining
6. Cleaners
7. Lawn Maintenance
8. Beauty treatments (spa)
9. Monthly gym memberships
10. Newspaper
11. Internet Providers
12. Impulse Shopping

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Attack debt, do NOT let Broke people get you down

Have you ever been at the point where you feel like you are the only one trying to get out of debt and everyone else is spending money like crazy?

Maybe you take lunch to work everyday and your co-workers go out to eat every day. Eventually you go with them and order water while your friends order special drinks and sodas. Well if this happens to you, you are not alone. People do not understand their own spending habits. The truth is by doing simple things such as ordering water which is healthier than sodas can save you $712 annually. Well how so, well at $2/day * 356 days a year, that equals $712 which you could have used to save up or pay down your debt. Why do I write this? To encourage my readers to keep attacking your debt or keep up your saving habits. Do NOT let Broke people get you down! You will feel better than others later because of the choices you make today. I know I feel good about my finances especially when friends continue to live paycheck to paycheck, not this Debt Free Hispanic.

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Be Content or go further in Debt

To be content is to be satisfied. As people look at their lives and compare themselves with others its obvious that we are not content with what we have. People that are not content tend to spend more thus going further into debt than others. Those who do so as well are people who deal with their self esteem. That is why many advertisers are using the "pamper" yourself slogans. They are trying to pull in people who are quick to say that they work hards and deserve new stuff only get themselves further in debt. Be content with that you have and only buy what you need not what you want. - Debt Free Hispanic

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What is your PASSION?

You've heard the saying, "Someone with Passion can be 10 times more effective than any man with a desire". So what is your Passion? What are you most passionate about? What is it that captures your full attention? For me its finances. When someone is talking about money and how they make money, I listen. I listen because I want to know how they did it and I want to look for ways to do it better and make even more money. That is how I got out of debt. I started to see how people were living their lives that had money and I realized that the way I was living was going to keep me in debt. So I went on a journey of not eating out and living off of sandwiches which I love, and bring lunch to work and only ordering water when I ate at restaurants. I think I took it too far because now I get disturbed when people do not order water and pay over $2 for soda or a special drink. But i'm passionate about staying out of debt and living life in a way where people can see my passion for saving. So I ask again, What is your PASSION?

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Hispanic Debt On The Rise

With the Hispanic population growing to be the major minority in America, debt is also on the rise for Hispanic families. It's easy to see why Hispanics are acquiring more and more debt. Hispanics have great purchasing power and a lot us do not have a financial plan. So what do Hispanics do....SPEND.

We spend money on self gratification. The following are areas in which Hispanics tend to spend most of their money: Trucks, Weekend Entertainment, Jewelry, Televisions, Stereos, Expensive Food, Alcohol, Clothing and mortgages just to name a few. You'd be suprised how many Hispanics do not have a checking account and cash checks on pay day. You don't believe me, here's a fact that i'm throwing out because I know it's true, ready, Hispanics spend more with cash than they do with checks and credit cards. That is why outdoor Flea Markets are successful with the Hispanic population. So how is debt rising? Well the credit card companies have made it easy for Hispanics to apply for a VISA. Hispanics fall for the cash back scheme which is appealing since we handle cash more than we do checks.


So when Hispanics receive the credit cards, they take out cash advances because thats how they spend money. All the while they are racking up credit card debt with every cash advance. Since a lot of Hispanics live for the weekend, its not unusual for them to take out a Pay Day Loan. Another example is how Hispanics pay for their vehicles. Hispanics pay their monthly car payments with cash because its easier for Hispanics to pay with cash at the dealership than to mail in a check. If I owned an auto dealership I would set up a plan that would help Hispanics to pay with cash, I guarantee, more Hispanics would purchase vehicles from that dealership. At the end of the day even with most Hispanics paying with cash, purchasing on credit is becoming easier for Hispanics and so debt continues to rise with the growing Hispanic population. -Debt Free Hispanic

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eBay as a source of Income

How much money do you make on your days off? Last night I checked my eBay account so see how my products did and I made $100. Not too bad for taking time to post and ship. I was selling merchandise on eBay so I can get out of debt and now that I am out of debt, I use the income from sales and apply them to my savings account. I am going to quit my job so that I can sell merchandise on ebay? No, but I will use it to make some extra income. The wealthy always have more than one source of income. Now thats Million Dollar advice.

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Garage Sale Saturday

It's Saturday morning 8am. It's Garage Sale Saturday. The best way to make a little extra money is to get rid of the extra junk that you don't need. The stuff that clutters the house anyways. Instead of throwing it away, open a garage sale and see if you can get some money for it. Hey, your junk may be another persons treasure. There is junk all over eBay selling for huge amounts of money, I know because i'm selling it. Get in the game, have a garage today or next week and earn some extra money to put toward the debt. The phrase that helped me get out of debt, "It all adds up". - Debt Free Hispanic

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Write a post on my blog, Debt Free Hispanic

Do you have good information on getting out of debt and you want to help people? Send me your article and i'll post it for you.
For me to publish your post keep the following guidelines in mind…

• It must be an original article - I will check copyscape and random other sources to make sure that it hasn’t been published elsewhere. This will avoid Google’s duplicate content penalty.
• No Affiliate Promotions! I’m in the blogging business to make money, not give it away. If you include an affiliate link… it will be deleted.
• Keep the post between 300-1500 words.
  You may include a picture if you’d like
• No profanity!
• Must be somewhat site targeted. I run a blog about helping others become better with their finances. It’s a pretty broad target, so it shouldn’t be that hard to comply with.
  If you are interested, you can send your article(s) to debtfreehispanic@gmail.com. Make sure to include “Guest Blogger” in the subject line. I’ll review them and then let you know when (or if) I will post your article.

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How to Drive Free Cars for Life

That right...you can drive FREE cars for Life.

Think about it:
What if you decided to STOP messing with car payments?
What if you invested that old car payment every month instead of giving it away to the bank?
What if we showed you a six-year plan that would put you in free cars for the rest of your life?
What if that plan also made you a millionaire?
Interested?
Here is how you do it. This changed my life. Click Here to view the video!

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Cut Your Credit Cards NOT Your Money

When you play with snakes you will eventually get bit.


Having credit cards and using them to pay for junk is like cutting up your money. It's painful, its a waste, it doesn't make sense and it sure does not get you ahead financially speaking. Pay with cash and keep your money instead of having to pay banks for lending you money.

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7 Baby Steps by Dave Ramsey

My wife and I are going through the 7 Baby steps that Dave Ramsey teaches with Financial Peace University which are:

1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. Three to six months of expenses in savings
4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give! Invest in mutual funds and real estate

We are proud to say that we are on step #3. It's a hard step for us because that adds up to $9K. But with only less than $1K away, we should do it by the end of the month or mid-April. I've yet to call in and scream I'm Debt FREEEEEE!

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Build Wealth With Your Income

The most important wealth building tool is your income! People in America today have their income tied up in credit card debt and it keeping them in financial bondage. I remember paying $379/month to drive around a new True Blue Ford Mustang, from 2000-2003. Thats a total of $13,644 not including insurance in three years. When I sold it I still owed $8K. I bought it new and now I know that buying a new car is a total rip off. If you must buy a vehicle, buy a 2-3 year old car that has already depreciated its value. The value of cars drop fast and they are in no way an investment unless you are using it for work and getting a good tax break off of it, even then they stink. Drive a nice affordable, PAID FOR, used car to get around in. Don't worry about what people say about you, at least you won't be broke driving a new car. Be wealthy and invest in long term mutual funds instead and retire rich.

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