Productivity Gamer Getting stuff done, like a gamer

Gotten through the last two posts? Sweet, so now you've both gathered all of this helpful financial data and evaluated it. Now it's time to actually do something with that data.

Step 7: Pay all minimum payments and pay off any overdue amounts

It is very important to continue paying minimum payments on all of your debts while you're paying off debts. Do not stop paying one credit card to pay off another.

It's possible that while you were going into debt, you got overwhelmed and you've had some late fees and missed payments. The first thing you want to do is get all of your accounts up to date. If it's been a long time since you've paid on an account you can sometimes get some of the fees removed if you're willing to pay them enough to catch up in one sum. Also, if you can get a decent percentage of what you owe on the total debt (25% - 60% depending on the age of the account), you might be able to settle for less than you owe.

That reminds me: Do not, under any circumstances, hire any sort of debt agency. All they do is take an upfront fee, have you pay them monthly fees and they save up the money and offer to settle with the place you owe. It's a waste of money and a fair number of them won't help you at all. You will always be a better bargainer than they are, you're the one who's neck is on the line. If you're trying to settle with a creditor just call them up, try to get a branch manager, and say how much money you can pay all at once and that you'll give them that to settle the account. If they refuse, hang up on them and call back in a week. If they agree, make sure to get the deal in writing before you pay. Do not pay by giving them electronic access to your checking account.

One thing you'll want to seriously consider at this point is selling things. Especially things that you owe money on. For example, if you owe $15,000 on a truck and you can get $16,000 for it, just sell it now and buy a $2000 truck. Sure, it'll be rusty and not have that new truck machismo to it, but it will haul the same kind of loads and pull the same kind of trailers.

Right now you aren't yet making concerted efforts to pay off your debt, just getting current so you're making the payments you've agreed to. Aside from selling things, we'll get to actually paying off the debts in step nine.

Step 8: Save a $1000 emergency fund

At this point anyone who has listened to/read Dave Ramsey's stuff is going to say "Aha! You're just saying what Dave already said!"

That's right, however Dave Ramsey admits that he is not the first person to say all of these things, most of them are fairly simple money concepts. Don't buy things you can't afford, don't waste money on interest, etc. It's just that most people seem to think it has to be more complicated. It's not, you just have to face your own spending habits.

That being said, the $1000 emergency fund at the beginning is something I have directly taken from Dave Ramsey's plan. My original plan had the emergency fund coming after paying off the debt, but there are many good reasons to start a small emergency fund before you get going paying off all your debt.

An emergency fund is a good thing to have. First, it takes away that dependence on credit cards. I've talked to hundreds of people about emergency funds who have this great idea that a credit card (or line of equity, or some other type of credit) is their emergency fund. The problem with that is that when you have a small emergency, you don't have the added stress of the owing money. If you're trying to pay off debt, using debt to handle emergencies will break your momentum, and we don't want that.

Second, a small emergency fund to start out gets you started in the habit of saving and living off of less than you make. Most of America lives off of well more than they make, and now those people are getting the houses they could never afford foreclosed on. This process is a lifestyle change, not just a quick fix. But trust me, although at first it might make you feel like you have less, living off of less than you make is a lifestyle that leads to future wealth and financial happiness. And really, we all want to be happier, right?

Step 9: Focus on paying off one area of debt at a time, starting with the smallest

Alright, so you've caught up on your payments and have $1000 to cover any emergencies or unexpected costs. Now it's time to make some real progress. It's time for you to get your debt paid off. It's time to say goodbye to car payments, credit card payments, and bank loan payments for good.

There are two ways of doing this: The debt snowball and the Highest Interest method. I recommend the debt snowball, which is where you lay out your debts from smallest amount to largest amount, paying off the smallest one first. Here's an example. Let's take Joe, and say he has 3 credit cards, 2 car loans, a student loan, and a mortgage. They look like this:

Credit Card A: $1,750 - $45/mo minimum (12%)
Credit Card B: $4,000 - $100/mo minimum (12%)
Credit Card C: $6,000 - $150/mo minimum (14% - student card)
Car Loan A: $18,000 - $365/mo minimum (5 year, 8%)
Car Loan B: $22,000 - $446/mo minimum (5 year, 8%)
Student Loan(s): $45,000 - $517/mo minimum (10 year, 6.5%)
Mortgage: $120,000 - $720/mo minimum (30 year, 6%)

Now, Joe is fresh out of college, and doing pretty well, he's taking home about $3000 a month, but he has $2343 a month to pay in debt. The first thing he should do is sell the cars and get one that costs less than $4000. Then he should sell things and possibly work a second job to pay off the difference. Assuming he's sold the two cars and dug up the $4000 to pay for the "new" one, he's going to have a debt that looks like this:

Credit Card A: $1,750 - $45/mo
Credit Card B: $4,000 - $100/mo
Credit Card C: $6,000 - $150/mo
Student Loan(s): $45,000 - $517/mo
Mortgage: $120,000 - $720/mo

Now, Joe has found by changing his lifestyle by stopping going to restaurants, not getting the morning cup of coffee on the way into work, and buying fewer gadgets and toys, he can live off of $1000/mo before paying his debts. That means he has $2000/mo to pay on his debts. His current minimum payments total to: $1532, so he has $468 extra. I would still recommend to Joe to start working another job temporarily to pay off the debt faster, but if he doesn't he can still burn through these debts pretty quickly. His first credit card will be paid off in 4 months. Then he can apply the $513/mo from his first card (and the extra) to his second card, which he'll pay off in another 7 months. Then he can take his $613 and apply it to the third credit card and have that paid off in another 7 months. So Joe has gotten out of credit card debt in 20 months, less than two years!

At this point Joe would roll that $763 onto his $517 Student loan payment, and take that $1276 and add it to the mortgage when he's done with his student loans.

Why wouldn't I want to pay the highest interest first?

Mathematicians out there are probably mad at me for not recommending that you pay off the highest interest loans first. Their logic being that if you pay those off first, you will pay less money overall.

While it is true that if you go that route you will usually end up paying less total, it will be longer before you have anything completely paid off. Another advantage of the traditional debt snowball is that you'll have fewer debts sooner, so you have less to keep track of. Highest interest first is mathematically better, but smallest amount first is psychologically better. Owing fewer people money will give you less stress. Mathematically it makes no sense to go into debt in the first place, so using that argument is void with me anyhow. Let's just get you out of debt and work from there.

Don't be afraid to sell the replaceable things that you're holding on to. Heirlooms and family stuff should be kept, but anything that you can replace that can be sold to help pay off the debt is worth it. It's simple enough to buy those things back or get new ones once you've gotten yourself out of debt. Until then you're essentially paying the interest on those items you refuse to sell. Be reasonable though, don't sell something for $2 that you're going to need again in two years that will cost you $50. But don't be afraid to sell anything you don't need even if it seems like you're taking a loss on it.

Some words on this process:
If you haven't already noticed, when your friends and family who live a lifestyle of debt find out about your decision to transform your life, they might get offended. If they get offended, it's because you have taken a stand against the way they are living their life. I have found that living out of debt is very similar to The Matrix. I've taken the red pill and can see the system for what it is: a system of bondage created by lenders to keep you enslaved to them for your entire life. You say "I'm building my credit score" I say you're paying for the ability to pay more for longer. Don't be fooled, a high credit score is not a sign of a good financial situation, it's usually a sign of a history of paying more than you needed to on things you really didn't need.

However, many of your friends and family won't understand this, and they'll tell you things like "You need good credit to buy a house" or "You'll never have nice things if you don't borrow money" and so on. These are all lies, which Dave Ramsey dispels in his book The Total Money Makeover, so I'm not going to bother going through them all here. To quote the Matrix: "You have to understand that most of these people are not ready to be unplugged. And many are so hopelessly dependent on the system, that they will fight to defend it."

Don't be dependent on the system. Rise above this system of debt and borrowing. It's what has made countless homes and marriages collapse, and currently it's making state and federal governments collapse. Once you've unplugged yourself from the system, you will understand that the lies you were told about debt being a way to build wealth are just that: lies. Lies propagated by the people who actually make the money off of the debt: Those issuing the credit.

Take this seriously and you will succeed. Your life might be hard and you might not look that well off in the short term, but you will lose the stress of debt and begin to truly gain wealth when this process is done.

Now stop waiting for the "right time" and get to it. You'll be happy you did.

Ever notice that some other gamers just don't seem to get it? I mean, they know how to play games, but they don't play the right way. They aren't hardcore gamers like the rest of us, right? We play a lot of games and since they only play one they just don't get the full understanding of games. Or is it that they can't seem to focus on one game and really understand the depth of it. They just keep jumping around from game to game.

So which is it? Do you know which type of gamer is the "hardcore" gamer? Is there such a thing as a hardcore gamer that never completes any games? Can you be a hardcore casual gamer? Tired of getting looked down on for the way you play games? Well, I can't help you with the last one, but I can help you understand why you're getting looked down on by the people you look down on yourself. Maybe with a little more understanding we can all just get along. Wouldn't that be nice?

I propose that there are basically two types of gamer: Those who are dedicated to a particular game or series, and those who try to play everything. These both come in "casual" and "hardcore" forms, but hardcore and casual gamers of the same type tend to get along already so I'm not going to get into those differences here.

The Dedicated Gamer - aka The Obsessed Fanboy

This type of gamer will typically play one game at a time. They almost always play multiplayer-focused games such as First Person Shooters, Real Time Strategy, and MMORPGs, although there are occasionally some who will be totally dedicated to any particular game or genre. Most have a particular game or game series to which they are dedicated, let's call that their home game.

Some traits of Dedicated Gamers

• They will typically only venture out to play other games in the same genre or with a similar theme to their home game.
• They tend to take offense to any criticisms to their game by anyone who isn't also dedicated to it.
• They refuse to try other games, even if they can borrow the game from a friend.
• Their gaming looks like a part time job, sometimes a full time job.
• They have a difficult time explaining why they play their game.
• They see themselves as better at their game than anyone who plays less than them and, in fact, most people who play more.

The advantages of being a Dedicated Gamer

• They tend to finish the games they play.
• When they start a new game in the same genre or theme, they typically start at a much higher skill level than others.
• They understand the smallest nuances of their games.
• They experience the full depth of all the games they've played seriously.

The disadvantages of being a Dedicated Gamer

• They're usually far behind the curve when it comes to new games.
• They tend to lose actual enjoyment from their game, but won't quit due to a perceived sunken cost.
• Which can lead to being overly defensive and taking personal offense at any comments on their game.
• It can also lead to them spending even more time as they find themselves competing for superiority with others in the same situation.

How to get along with a Dedicated Gamer

Dedicated gamers have a hard time getting along with other gamers in general. This is due to the level of obsession with their game or game series. However, the best way to stay on their good side is to just not do or say anything that could be considered flame bait. Here are some basic tips to keep from getting frustrated with a dedicated gamer:

• Don't let them talk you into starting their game
• In most cases, if you haven't had the desire to play the game they play, don't start because they say it's fun. It's easy to come up with excuses to not play it that don't appear to knock the quality of the game.
• If they're insistent, play their game for a little while, play it very poorly, and give up
• Sometimes a dedicated gamer will think that you're just being stubborn or otherwise insist that you should play their game. If you play their game for a while and just do a really bad job at it, then you can say "It seems like it should be fun, but I'm just really bad at it." That will make their skill seem even higher and get you out of making any commentary on their game.
• Never mention their game. Ever.
• If they bring their game up, avoid the following words (and their conjugations):
  • Balance
  • Grind
  • Fun
  • Hardcore
  • Obsessed
  • Why
  • Old
  • Simple
  • Repetitive
  • Boring
  • Waste
• Most importantly, never express any kind of opinion on any game unless you are absolutely sure they agree with you. This is tricky, because asking them for their opinion can lead to awkward silences or outright rage.

Final Thoughts on Dedicated Gamers

I know it sounds like I hate these dedicated gamers, but that's just not true. Not only have I been in that position, I am friends with many people like this. The issue they have is not a basic personality flaw or even a communication skill. In fact, most have no issue at all, only those truly obsessed with one and only one game or game series (not a full genre, just a series) can have an actual problem. Usually it's just a sunken cost or lack of confidence in trying something they might not be good at right away. If you come at it realizing that the person who gets hyper-defensive isn't angry at you, they have self image problems you'll be in a better position to talk to them. They have usually banked a frightening amount of their self image on their skill in this game, so they want to think their game has more value than it truly does.

The Distracted Gamer - aka The Game Starter

This type of gamer tends to have a large stack of games they've been meaning to get to. If you've spent more than $200 on games that you haven't opened or started (and you keep buying more), you're definitely a distracted gamer.

Some traits of Distracted Gamers

• They somehow have opinions on games they haven't played
• They'll buy a game because they think the idea sounds cool, then never play it
• They are more likely to play single player games
• They probably don't play WoW, or if they do, they don't raid
• They're usually pretty bad at most of the multiplayer they play
• They're likely to drop a game before finishing it, sometimes right before the end.

The advantages of being a Distracted Gamer

• They are usually ahead of the curve on new games.
• They've played almost every type of game.
• They have a larger background in games.
• They're more likely to give a flawed game the time of day.

The disadvantages of being a Distracted Gamer

• It's pretty expensive, which can lead to bad financial decisions.
• They don't get very deep into most of the games they play.
• They don't beat most of the games they play.
• They're never the best at any game

How to get along with a Distracted Gamer

Distracted gamers can get just as easily offended as dedicated gamers, but for different reasons. Here are some tips for dealing with a distracted gamer:

• Don't get every game they recommend - you'll go broke
• Don't let them lend you more than one game at a time - they'll forget and never ask for it back.
  • I know it sounds good (free games, right?), but if you're trying to be friends with the person it's best to give them their games back. Eventually they'll remember they had a game and they might remember you have it. That's a pretty lousy way to lose a friend.
• Don't insinuate that they're not hardcore gamers. They might go after you with facts on upcoming or obscure games.
• Don't agree to play through a long co-op game with them, they probably will disappoint you by quitting and starting some other game before you've finished.
• Don't lend them money to buy a game and expect to get it back.

Final thoughts on Distracted Gamers

Distracted gamers can seem ADD when it comes to playing games. They'll typically be nicer to most games than the dedicated gamer, but they're more likely to admit the faults of a game they like. Distracted gamers tend to be the less financially responsible with their game purchases. However, if you're looking for someone to explain the differences between genres or the nuances of an obscure subgenre, find a distracted gamer.

Just getting along

You don't want to be overly dedicated or overly distracted, but leaning heavily to either side is fine as long as you're careful. Just don't take your way of gaming too seriously and respect people who game differently. Understand that your way of playing isn't necessarily the best, and try to see things from the other person's point of view. Even if they are a little too obsessed or too distracted.

Armed with this knowledge, hopefully you get along with different types of gamer and understand your own gaming habits better. If you are unhappy with how dedicated you are (your blood boils when people critique your game) or how distracted you are (YouTube is where you see all your game endings), spend a little time trying to change. Too dedicated? Calm down, understand that your game isn't perfect, and try something new. Too Distracted? Focus. Set boundaries on monthly entertainment spending and focus on finishing a small game to start.

My final advice for gamers of all sorts: Games are entertainment, treat them as such.

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Alright, so you've gathered your data, right? Tracked at least a couple of weeks of spending? Good. Keep tracking your spending, it's a good habit and will help you to keep your finances in order in the future.

Ready to get going? Ok, but first I'm going to have you do one thing first.

Write down a financial goal. Be realistic but aggressive. You're not going to pay off $100,000 in debt over 6 months on a $30,000 income without selling something big (like property). However, you might be able to pay it off over a few years with some lifestyle changes. Phrase it like this: I will be out of debt by 2011. I will be investing in my future.

Now that you've gotten your goal written down, time to get evaluating all this data you've gathered. You need to realize this one thing before you continue:

You are responsible for your finances.

Take responsibility for your mistakes and take ownership of your future. Don't blame the economy, don't blame your spouse, don't blame your employer. You are responsible for how you spend your money. Nobody made you buy that new car, you made that decision.

Step 4: Find areas of overspending

If you're in debt and haven't been able to get out of debt no matter how hard you try, you have your spending values misplaced. I'm going to get to some percentages and raw numbers soon, but first I'm going to address the number one problem in most families' finances: competition.

Life is not about how much you can buy. Having better, newer, or more stuff than your neighbors and coworkers will never make you happy. You might get a short feeling of self satisfaction, but that won't last and will only make you feel emptier long term. If you spend ANY money at all trying to out do somebody else, you've overspent and wasted your money.

That being said, let's look at some harder numbers. Here are some tips on how to determine overspending:

• Housing should not be more than 40% of your net (after taxes) income. This includes mortgage/rent, real estate taxes, home owner's insurance and any other housing expenses like furniture, renovations, or repairs.
• Entertainment should not be more than 15% of your net income. Some entertainment is necessary to keep from getting burned out, but don't overdo it. 15% is an absolute maximum, it really shouldn't be consistently that high.
• Utilities should not be over 15% of your net income. It might be time to roll back your cell phone plan, stop paying for cable or satellite, and cool down your house in the winter (or warm it up in the summer).
• Food should be 10% or less. This includes fast food, groceries, and even that Starbucks you grab in the morning.
• Transportation is tricky. I would say spend less than 5% on transportation if you can, but cars are expensive and often need repairs. Keep in under 10% and don't buy new cars and you should be fine.
• Spend as little on clothing as you can. Keep your children clothed and have all the clothes you need, but don't buy $100 jeans or anything just for the label on it. Keep it under 5%, under 3% if you don't have kids.
• Don't spend more than 10% on personal needs. This is another category to keep as low as you can. You're going to need a thing here or there, but don't go nuts.
• Any debt is overspent. However, if you're trying to follow this, debt is a reality. Pay off all you can as quickly as you can and make all your minimum payments at the very least. We'll get into this category soon.

How many of those areas have you overspent on? Most of them will just take some discipline to keep low. What about housing? Did you overbuy? If your mortgage is more than 30% of your income or your total housing expenses are consistently more than 40%, it's time to sell your house and move into something smaller. I know it's hard to face, but it's just the truth of your situation. It was a mistake to overbuy, or if your income has dramatically lowered recently, it's just a fact of life. Face the hard reality of it and the pain of leaving your house and buying a smaller one will be much less than the consistent pain of paying too much for housing.

Step 5: Evaluate Needs vs. Wants

This is a difficult one to face, but one of the most important. I could write an entire blog about needs vs. wants. Luckily, many other people have written on this topic extensively. I suggest reading some of what Leo Babauta over on Zen Habits. He writes quite a bit on simplifying, which is an excellent method to eliminate wants without eliminating your happiness.

Finding out what is a need and what is a want will help you reduce your spending in almost every category. No, you don't need that $4 latte on your way to work every morning, a travel mug with coffee made at home will give you much the same effect. What's the big deal about a latte? Nothing, in moderation. I enjoy a good cup from Starbucks or a small coffee shop. However, when you pay $4 EVERY work day, that's over $100 a month. That's where it ceases to be worth the money.

Now, I want you to go over your expenses that you've been tracking and write an N for need or a W for want next to each one. Don't try to fool yourself here. If you purposefully overspent on a need, consider it a want. For example, if your old 15" CRT monitor broke and you legitimately need a new one, you may consider the 24" LCD monitor you bought a need. No, you needed a monitor; You didn't need a big, expensive monitor. That qualifies as a want, not a need, sorry. The same thing applies to clothing, vehicles, and so on.

Anything you have a W next to could be eliminated or reduced. Buying an occasional want is okay, but for now let's focus on getting rid of your debt as fast as possible. This leads nicely into Step 6.

Step 6: Reduce All Unnecessary Expenditures

This is the first step where the rubber meets the road. It's time to start thinking about each purchase before you purchase it. An easy way to start is to stop carrying credit cards. In fact, if you have more than $3000 of credit card debt, I want you to stop using credit cards altogether. Don't carry them, pay them off, and close the accounts. If you have more than $10,000 of credit card debt, cut up your cards RIGHT NOW. We'll work on paying them off in step 7.

This step just requires one action: Think. Think first and think often. Buying that $100 pair of jeans on your credit card could end up costing you over $300 if you just let it sit on your credit card and pay minimum payments. That's just a stupid waste of money.

I can't stress this enough. Stop and Think! It's the bane of every salesman, but it's the only way out of your debt.

Summary for today:

This was mostly evaluation. I'm trying to get you to really think about how you spend your money. The better you keep track, the better you can evaluate your situation ane make intelligent decisions.

Here are the habits I want you to focus on developing.
Every day:

• Write down all expenses, preferably as you make them
• Do a daily balance sheet to make sure you've accounted for all of your expenses. You can do this easily enough by spending only cash, and writing down exactly how much you have at the end of every day, along with any money you've gotten from the bank. The amount from yesterday plus anything you've gotten from the bank minus your expenses should be equal to how much you have now. If it's not, it's time to think more carefully over your day. You don't need to count checks sent to pay bills in your daily balance sheet. Keep it logged on your expenses though.

Weekly:

• Evaluate your week's expenses as needs or wants
• Find categories you can reduce spending in.

You'll probably have extra money left over. For now I want you to keep 30% of it in a savings account separated from your checking, and send the other 70% to your smallest debt. It might not be your highest interest debt, that's ok. Make sure all of this extra money is after you've paid off all minimum payments, we don't want you paying late fees.