In our Dealing with Car Dealers post, I mentioned my wife and I would be venturing out into the vast expanse of car dealer lots looking for a larger, yet economical replacement to our smaller Hyundai Sonata. We succeeded! We had driven through a few lots pricing cars on the Saturday before Memorial day. We also spent some of the three day weekend researching prices online, so we knew the likely breaking point for our target vehicles. We took our strategy to task on the Tuesday after Memorial day when we visited a car dealership.

The dealership was about a 20 minute drive from our house, so on the way I coached my wife on what to expect. Do not expect to leave with a new vehicle tonight, I told her. We cannot get roped into an emotional purchase. We had our eyes on a 2006 Dodge Caravan. The price was right and the size of the vehicle would allow us to cart around the little one without too much hassle. We arrived and talked to a salesperson. In no time we were driving around a large country block, testing brakes (gently, of course) and other things like acceleration.

The van met and exceeded our expectations. We hoped to buy it without sacrificing any money each month, which meant the payments had to be in the same ballpark as the previous car. We still owed $5,500 on the old car. The dealership of course didn’t want to give us $5,500 for our old car, which meant we would have to pick up the difference. I was disappointed, but told the salesperson if that was all they could do then that was fine. We left on good terms, and with a slightly better counter offer. I told them to call me if they could do $500 better.

I received a call the next afternoon.

It wasn’t too much of a shock. I figured $500 wouldn’t keep them from selling the car to me. The biggest thing was being cool enough to walk away. Two years ago I wouldn’t have done that. I would have conceded the $500, which amounts to two months worth of payments. The deal keeps us at the same payments a month, so we’re both thrilled.

In the end, the deal came down to what we could afford in our budget and negotiating to get to that point. Of course, in the loan paperwork office they offered us a three year warranty that amounted to an extra $40 a month on the loan payment. That’s for five years. Wow. An almost $2,500 service plan on a three year old vehicle. I don’t think so. Be sure you watch what you sign up for. All in all it was a great experience, and we now have the little one to go with the van. More on that in my next post.

One of the most obvious ways to save money is to reduce debt. The biggest pain in the financial rear comes from credit cards. If you’re in good standing with your credit card lender, then you probably enjoy a finance rate around 10%. The more unfortunate might see rates around 20% or even higher. What can you do to reduce your credit card debt and ultimately save yourself those high finance charges every month?

If you read our latest Frugal Mindset post, you probably know we’re big on financial perspective. When you change the way you see your credit card, then you’ll begin the road to change. We can use a credit card to buy everything, right? We can. But we shouldn’t. A credit card should be a lifeline in an emergency, not the financial ties that bind us. Here’s some steps to severing our ties to a credit card followed by a few tips on reducing credit card debt quickly.

How to Severe Ties with Your Credit Card

1. Cut it to pieces. It takes willpower and determination to do this step, but its the most effective. We don’t recommend closing an account, as credit cards do help your credit score (when paid on time).
2. Call the creditor for reduced interest rates. A quick solution to a high interest rate. Don’t be too optimistic with this solution. The dire financial state has made many creditors raise their rates to make up profits. Still worth a try.
3. Transfer the balance to a different card. While not the best solution, many credit card companies offer low interest rates on transfer for a limited time or for an extended period of time. It can save you a substantial amount, unless you go back to the old card and start loading up purchases.
4. Steer clear of cash advances. The interest rates on cash advances usually exceed those of standard purchases. To keep your credit card in check, stay away from these outrageous rates.

How to Erase Credit Card Debt

After you’ve taken a few of the above steps, you can begin drafting a plan to tackle your existing debt. For starters, you should tabulate the amount you owe among all your cards. This can help you create your plan.

A plan should be tied into your budget. You need the money to pay more on specific debts in a downward triangle approach, the beginning point should be the least amount of debt, unless that debt accrues a low interest rate. For instance, a $650 Department store card with high interest rate should be first obstacle in the pay off.

I recommend focusing on the small debt first, then taking on the next biggest one. The only exception being the low interest rate small debt one. If you have large debt with a very high interest rate, then that needs paid off before a low interest rate small debt card.

If you’re like me, then you probably want a timeframe. How long will it take to pay off xyz card with this type of interest rate? An Excel document can calculate the amount of time it would take to payoff a debt. You don’t have to do the heavy lifting though. The folks at Vertex42.com have a free credit card debt payoff calculator using Excel. It’s very well done and free. It’s very simple to use too and gives you the amount of time it would take to pay off debt with a certain interest rate.

Download the Debt Calculator Excel File

Good luck paying off the excess credit card debt. Once you have that obstacle out of the way, you will realize monthly savings from the lack of finance charges.

I was talking to my mother the other day. She can still remember her father ripping napkins in two at the dinner table. They were frugal. But that was a different time — a different age. It was frugality born out of necessity, not unlike our trying times now.

Most of want nice things for ourselves, but we also want security, financial freedom, and independence. We work extra hours to make extra money. When our determination to save money falters, we might dine out, buy something out of our price range, or impulsively shop. It’s our culture. More and more of us have grown up in the buy now pay later era. We’re not accustomed to the thrift and cut coupons era of old.

With more and more people losing their jobs, or fearing a loss of income, frugality has again taken center stage. What does it really mean to be frugal. It’s more than a simple desire to save money. It’s sacrifice, starting with lifestyle choices. A frugal approach to life changes one’s perspective. It’s not unlike Zen. It’s transforming and liberating.

Frugality is storming the nation. We can see from the retail numbers than less and less money was spend during the holiday season. Frugality is more than just spending less. It’s about changing ways, learning to live without, and buying quality products inside a budget.

A traditional family nowadays should be able to make due with less. The more stringent among us may have taken measures to ensure we can have financial security. We may have cut subscriptions from cable, satellite radio, magazines, newspapers, and more. Those money savers have likely found ways to entertain without spending too much dough. We may visit parts, playgrounds, museums, instead of dining out, going to the theater, or taking some extravagant vacation.

Frugality boils down to perspective. We need to filter our vision of the world through a different lens. Many of us cannot continue to buy now and pay later. Those days are in the past. Now it’s time to cut costs, pay off debt, and start storing for the future. It can be a rough change — one that takes trial and error, but the benefits are lifelong.

What change can you make today that would affect the way you spend money?