About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.

Examine Your Financial Habits For Money Sinkholes

Are you ready to pay off your debt but have no clue where to start? 

Read the first post in my series about paying off your debt, then read through this series until you get to this post, our fourth in the series.

You don’t have to experience a life changing debt event to end up in debt.

Simple consumerism or spending more than you earn for a long period of time can put you in an equally horrible debt position.

Many people don’t realize how their small decisions can add up into a big problem until they experience hitting rock bottom or get that dreaded wake up call alerting them to the now bigger issues.

What Is A Money Sinkhole?

I personally think these types of money issues are very much like a sinkhole. A sink hole forms when an underground water source slowly eats away at what supports the ground above.

At first, you’ll never notice a problem because there are no visible signs of problems. As the support continues to be eaten away, the ground starts slowly sagging.

At this point, you’ll start to see small problems like cracks on concrete and tiles in your home. Then one day, without notice, the surface collapses into the hole below, causing massive damage. When the sinkhole shows itself is the moment that most people realize they have a problem.

Hopefully you haven’t actually gotten to the point of a money sinkhole swallowing your financial home, but there is a good chance your money habits are slowly eating away at the ground supporting your financial home if you’re in debt.

Instead of continuing these bad money habits that will eventually lead to your home being swallowed by a sinkhole, you can make a change after recognizing what financial problems lead to money sinkholes.

So How Do You Find A Money Sinkhole?

It’s hard to find a money sinkhole when you personally can’t see any visible signs of your spending problems. Luckily, you can you can find these problems before you get too far into debt. So where do you start?

The first step to discovering is to track your income and expenses. You’ll want to have at least two months of data in order to weed out any anomalies in the data.

The more data you have the more accurate your snapshot of your situation will be. Here’s a couple of quick ways to figure out what your prior income and expenses were in case you haven’t been tracking your finances.

One way to track income and expenses quickly is to use an aggregation tool like Mint.com. Simply set up a Mint account and link all of your financial accounts (banks, credit cards, loans, etc) to the Mint interface. Once you’ve done that, categorize any uncategorized transactions and take a look at the data in front of you.

If you’d prefer not to use an aggregation tool, you can do the same thing with a bit of time. Take statements from your financial accounts for the last few months and a piece of paper or an excel spreadsheet. Then, simply classify all of the line items on your statements into income and expense categories.

Once you have your income and categorized expense data you can start looking at the numbers to see what type of story they tell. The first thing you should check is whether you’re spending more than you earn.

The next exercise is to order your expenses from the largest expense category to the smallest expense category. If you spend your money based on your values, you should see the things you value highest at the top of your expense list and the things you value the least at the bottom of the list.

If that isn’t the case, you have some work to do.

The next step is starting to take action by making small changes, which we’ll cover next week. You’ll be surprised how quickly they add up.

Chances are you can make some changes immediately that you won’t even notice, so we’ll be able to get an easy win up front!

Looking back, have you ever experience any money sinkholes with your finances? I’d be interested to hear what you find either in your past or present finances.

Resist the Urge to Upgrade Furnishings in Your New Home

Ever since we signed our death pledge and moved into our new home, we have had the urge to upgrade our furnishings.

I’m sure this is a common feeling when you move into a new home. In our case, the new house is much larger, has an extra bedroom, an extra full bathroom and most of the rooms are larger.

There is also a lot more natural light since we now live in a single family home instead of the townhouse that we bought on a whim.

Since this new space is so different than our the one we’ve been used to, it seems like the furniture and decorations we have don’t quite fit.

Our new living room is much larger and would be awesome for a sweet sectional. My 42″ TV seems a lot smaller now that it is further away from our old couches. Even our bookcases seem a bit out of place.

So did we go out and replace it all immediately? Nope!

Resist the Urge to Upgrade!

Instead of going out and buying all new furnishings we’re currently resisting the urge to upgrade. The main reason for us is we’re still adjusting to our new house. We’ve only lived here for a few short months and we’re learning the ins and outs of our new space.

Why is it so important to learn the quirky things about your new place before you go our and buy a bunch of new furnishings? The main reason we’re waiting is so we can figure out what we do and don’t like about our new space.

We’re figuring out where the warmer and colder spots of the house are as well as where the light hits at different times of the day.

It’d stink to set up our brand new living room and then, after spending a few grand on awesome furnishings, figure out that the light comes in the room wrong all afternoon and completely ruins your TV watching experience.

You could also find out that your new spot for that oversized sectional couch is right under the HVAC vent and you can’t stand it when they blow on you.

It’d be even worse if the furniture couldn’t be rearranged or could only be rearranged in a way that makes your new space awkward.

The Financial Benefit to Resisting the Urge

There is another side benefit to waiting a while to upgrade your furnishings in your new home. It’ll probably take a few months to figure out the quirks of your house and during that time you can be searching to find that perfect piece of furniture to your new house.

You can be searching garage sales, craigslist and even regular retail stores for amazing deals. You might find that perfect piece at a bargain because you gave yourself time to find the perfect furnishings for your new home at the right price.

The Most Awesome Conclusion You Can Come To

All of this talk of upgrading and finding the perfect piece of furniture sounds great, but there is an even better conclusion that you can come to.

After a few months of living with your old furniture in your new home, you might figure out it works a lot better in the new space than you thought it would.

Why is this the most awesome conclusion? You get to keep your well-tested, quality furniture AND you get to save a bunch of money at the same time. I’m secretly rooting for this to happen to us… but don’t tell Tori!

Whenever you have moved have you felt the urge to upgrade your furnishings? How did it turn out for you and how did you go about upgrading to new stuff? Any advice to find awesome deals? I might need it…

How To Discover Why You Ended Up With A Terrible Mess Of Debt

Are you ready to pay off your debt but have no clue where to start?

Read the first post in my series about paying off your debt, then read through this series until you get to this post, our third in the series.

I bet you’re psyched to figure out which debt you should pay off first, but you’d be jumping ahead of yourself.

In order to completely vanquish consumer debt for good, as your new mindset states, you must first figure out how you got into consumer debt in the first place.

Without this knowledge, you can’t prevent yourself from falling into the same consumer debt trap twice.

You must examine your past and learn from the mistakes so that you don’t make them again in the future.

There are two major ways most people get into debt. The first is a major life changing debt event and the second is through simple money sinkholes, which I’ll explain in the next installment of our series.

For now, let’s take a look at some major life changing debt events that could have caused your debt.

Look In The Past For Life Changing Debt Events

Not all debt is due to overspending and consumerism, but that doesn’t change the fact that you want to get rid of it. There are a few times you can have life changing events that put you in serious debt that you never expected to incur.

Take a look back in your past and see if you can find any of these life changing, debt incurring events.

Higher Education and Student Loans

The first life changing event was the one my wife personally experienced. She ended up with over $80,000 of student loan debt.

Going to college and taking out student loans can leave people in a pretty serious debt situation, much like the one we were in. You can graduate debt free if you really put your mind to it, but the past is the past.

To avoid incurring too much student loan debt in the future, don’t let yourself or any family members go into more debt than they can afford.

You need to calculate this based on their post college career path. Make sure you have a solid plan to pay that debt off once you achieve your educational goals.

Medical Bills – With or Without Health Insurance

Another horrible, life changing debt event happens more often that we’d like to think. A simple medical problem can easily put someone with or without health insurance into thousands or tens of thousands of dollars of medical debt.

Even though you can normally negotiate the bill down or set up interest free payments, this debt can be soul crushing.

The best way to avoid going into a huge amount of medical debt is to protect yourself and your family with health insurance. Add in a decent emergency fund and you should be well covered.

Death Of A Loved One Without Enough Life Insurance

If medical debt wasn’t bad enough, you can get into even worse financial trouble should someone in your family pass away.

In addition to dealing with the final arrangements of your family member, you’ll now have to learn how to live on less. A big chunk of income could have disappeared and you’ll still have the same bills and debt to pay off.

The best way to prevent going further into debt in this situation going forward is to make sure that you have enough life insurance so that your financial life won’t be a struggle if something should happen to your loved ones.


Divorce is another nasty debt inducing event many people face. Splitting up from your significant other can get nasty in a hurry and can leave you with more debt than you can handle on just your income alone.

You could have been forced to take out a larger mortgage to pay you ex-spouse their half of the equity in your home. You could have been burdened with half of the credit card debt that you didn’t even know existed.

Regardless of how it happened, it is in the past. Just make smarter decisions going forward and make sure your next marriage, if you remarry, is with someone you are a better fit with in both finances and personality.

Job Loss or Extended Unemployment

Preparation is key for avoiding financial speed bumps. Most people I personally know aren’t prepared for one of the biggest financial speed bumps you can face, the loss of a job.

Unless you get a new job quickly, you’ll be burning through your cash reserves and racking up the debt very quickly after your last paycheck hits your bank account.

Few people have an emergency fund large enough to last through the difficult times of an extended unemployment spell. The best way to prevent going into debt in the event of a job loss is to have a fully stocked emergency fund of at least six months worth of expenses.

Failure Of A Business

The failure of a business is much like a job loss because you’ll no longer have an income to support yourself, but in some ways it can be much worse.

Many people throw every last penny they have trying to save a failing business and that normally includes maxing out the credit cards in a last ditch effort.

To avoid this horrible outcome, try to take a step back and evaluate your business objectively. Hopefully you’ll be able to see the writing on the wall before you incur massive amounts of debt trying to stop a sinking ship.

Accidents or Acts of God (Hurricanes, House Fires, etc)

Accidents or acts of God can be financially disastrous. Whether you’re in a car accident, are victim of a burglary, house fire, flood or hurricane, these types of events can set you back thousands of dollars easily.

If you didn’t have the proper insurance or money in the bank you might have to go into massive debt to get your life back on track.

Make sure you’re properly insured for the property you own and that you have enough cash to cover any deductibles on these policies if you want to avoid going into debt because of these events.

Short or Long Term Disability

A disability, whether caused by an accident or an illness, can either be a short term or a life long problem for your finances.

If you’re unable to work and didn’t have short or long term disability insurance your financial life could be ruined by the fact that you can no longer earn money for your family.

In the short term you could end up in a ton of debt while you’re waiting to heal before going back to your job. If you end up being disabled for a longer period of time you may never be able to recover financially.

Once again, insurance and a well stocked emergency fund can prevent the financial part of the disaster of becoming disabled. We’ve dealt with a couple of short term disability stints and were very glad Tori had short term disability insurance through her employer.

Prepare For These Situations To Avoid Debt

As you can see, there are many times when an unexpected life event can throw you tens of thousands of dollars into debt if you aren’t well prepared with proper insurance and a well stocked emergency fund.

Do your best to prepare for the worst case scenarios. By doing so, you will have eliminated many of the threats to your debt pay off journey.

The next step, which we’ll cover next Monday, is taking a look at money sinkholes and how they can put you in the same horrible debt that these life changing debt events can.

Once you understand all of the ways how you’ve gotten yourself into debt you can protect yourself against it happening again. You’ll be well along your way to paying off your consumer debt once and for all!

Have you experienced any of these awful life changing debt events? If so, did you end up in debt or were you well covered by insurance and an emergency fund?

Setting Yourself Up For Success To Pay Off Your Debt

Are you ready to pay off your debt but have no clue where to start?

Read the first post in my series about paying off your debt, then come back and read this, our second post in the series.

Now that you know everything about your debt, including how much you owe in total, it is time to take the next step in your debt pay off journey.

Hopefully you’ve let the magnitude of the debt that you owe sink in.

You Need A New Mindset

You know that you’re in consumer debt. You can no longer deny it. You’ve added up the numbers yourself.

There is only one way that people get into consumer debt. You spent more money than you earned. Plain and simple.

So how do you get out of debt?

The answer is just as easy on the surface. You have to spend less than you’re earning. That isn’t all though. You need to spend a significant amount less so that you can both make the minimum payments on your debt AND still pay extra to knock out your debt quickly.

Why is it important that you pay your consumer debt off quickly? Consumer debt is an emergency!

You’ve set your financial life on fire by going into consumer debt. The only way out is to slowly put the fire out by suffocating it completely through paying off your consumer debt permanently.

Once you realize this, you’re on the right path but you’re just at the beginning of the road. Don’t get frustrated and whatever you do, don’t give up already.

My wife and I know exactly how you feel. When we were staring at minimum payments over over $700 per month for over $80,000 of student loan debt we thought it’d take decades to get out of her debt.

Luckily, we saw the light and followed the exact path I’m explaining now. We ended up paying off all $80,000+ of my wife’s student loan debt within just three short years.

You can get out of debt, too. So how do you get started along the path?

Quit Using Consumer Debt Forever Starting Now

The first step is breaking the cycle of going deeper into consumer debt. You MUST give up consumer debt all together.

You can no longer use the tools that enabled you to get yourself into the situation you’re in now. Are you ready to make that commitment? When you are, continue reading.

Now that you’ve decided to give up consumer debt for good it’s time act on that promise to yourself.

You can no longer use credit cards. You can’t take out payday loans anymore. No more borrowing money from friends, family or co-workers. No borrowing money from anyone. No more going into debt for consumer purchases.

This is serious and you should treat it that way.

Remove The Temptation

The best way to give up consumer debt for good is removing any temptation from your daily life.

Go cut up your credit cards or freeze them in a block of ice so thick that you can’t get to it for an impulsive consumer purchase.

Go out of your way to avoid the payday loan shop that you normally stop at to get some quick cash.

Tell your friends and family straight up to never, ever loan you money again. Heck, your friends and family will probably be quite happy about that!

Are you addicted to shopping online at Amazon.com with your Amazon Prime membership? Cancel it and remove your credit cards from their system. Turn off one click ordering and remove your Amazon bookmark from your browser.

You must make sure to remove anything that tempts you to spend money that will put your further into debt.

Trust me. After a couple of months you won’t miss spending money as much as you think you will.

Making the conscious decision to change your mindset is no easy task but it is absolutely essential if you want to change your relationship with your money and destroy your consumer debt forever.

Once you’re committed to the new mindset and have let it sink in for a bit you’ll be ready to begin tackling the next steps of the debt pay off process.

The next step is figuring out how you got into debt in the first place, which we’ll cover next Monday.

Have you ever changed your mindset on your money and how you spend it?

Have you committed to never go into consumer debt again?

Let me know about your debt story in the comments below! Help inspire others if you’ve already conquered your debt or let me know what you’re struggling with if you’re trying to pay your debt off. I want to help you!

How Our New Addition To Our Family Will Affect Our Finances

In case you missed the hidden announcement in last year’s Thanksgiving post, we’ve welcomed our son to the world!

We’ve been eagerly anticipating his arrival and we’re definitely glad he’s here.

His arrival means some major changes for us, including our finances.

Here’s what we expect and what we’ve learned so far.

Baby Showers And Friends Are Amazing

The first thing we learned is baby showers and friends are amazing. We are super thankful for all of our friends and family that bought our son things he would need for the beginning of this life.

We got a ton of clothes and many other essentials that made the first few weeks of his life much less stressful. Financially, they also made the first few weeks of his life a lot less expensive, too.

In addition to things we actually needed, we got a lot of things that made our life much easier. For someone who has never had a baby before, there are a lot of expensive gadgets that I probably would never buy that have been able to save us a lot of time or headache.

Diaper Costs Will Add Up Fast

I really should have known this going in, but disposable diapers are expensive. Yes, we could use cloth diapers and save a lot of money in the process, but I’d much rather pay a bit more and not have to deal with that mess.

Thankfully, we have a membership to the local Sam’s Club and they run great deals on diapers pretty often. We’ll just have to learn how quickly we use them before we stock up during the next sale.

We Need Life Insurance

While my wife has a small amount of life insurance through work, I have no life insurance at all. In the past, I’ve always stated we didn’t need life insurance because if something happened to my wife or I, the other one of us would be fine financially.

Now that we’ve added a child into the mix, as well as a more expensive home, that is no longer the case. If one of us passed away, the other would struggle trying to raise our child and hold down a full time job.

We have enough money to last long enough to figure out what to do, but it would definitely be very stressful.

I’ll totally admit I don’t know much about life insurance, so this is something we’ll be researching in the near future. We definitely know we don’t want whole life insurance and will likely pull the trigger on a term life insurance policy.

The questions are how much do we get and how long of a term do we get. I’ll likely post more about this as we figure out what to do.

Need To Decide On College Savings

We also need to decide if we want to put aside money for our son’s future education and if we do, how we want to go about it. My parents helped me pay for half of my college costs and that was a huge help.

While I would want to help my son attend a reasonably priced college as well, I do not know what the future holds. Maybe he won’t want to go to college at all. After all, I don’t directly use anything I learned in college to be a personal finance blogger.

We’ll continue investing our money as we do now and if my son goes to college, we’ll see what we can do to help at the time.

Who knows, maybe we’ll be financially independent by the time he heads to college. If that’s the case, a little bit of work would surely help pay his way. Time will tell.

Things We Never Expected To Change Will Change

The four items listed above are just the super obvious financial changes we’ll have to deal with in the next 18+ years. I know there will be a lot more to deal with, but we’ll take them as they come.

For now, we’re just enjoying spending time together raising our son.

If you’d like to share some things we should be preparing for, I’d love to hear about them in the comments below!