The following exercise will be enlightening to those deep in credit card debt, entertaining to those not in debt, and a cautionary tale to those too young to have experienced it. If you are in the former category, like me, I encourage you to hunt down your most recent credit card statement, or simply lookup your credit card balance online.

How Much Of Your Debt Can You Itemize?

Now that you know how much you owe, set aside five minutes, grab a sheet of paper, and brainstorm all the things you purchased with that credit card. How much of the outstanding balance can you account for? 50%? 75%? 100%? Your answer is probably indicative of your relationship with credit cards. The lower the amount you can account for spending, the higher the chances your spending is out of control.

A Credit Card Debt Audit

I’m fortunate that I’ve been able to whittle away at my credit card for some time now, and am finally seeing the light at the end of the tunnel. But even as the balances decrease, memory of the purchases made to run up the debts fail me. Well, there was the vacation we took in 2007; back to school clothes for at least a year or two; the occasional car repair; and the new bedroom furniture we just “had to have.” That represented about 70% of my remaining balance, and I’ve paid it down over the last year!

The other credit card charges were mostly forgotten living expenses. Expenses charged because we were living beyond our means. Sure, we had our share of legitimate emergencies, health scares, and educational expenses associated with my dream of completing a degree. But to justify accumulating debt for these reasons is to make excuses for our lack of financial planning. We should have had an emergency fund in place. I should have saved for school and paid cash.

I guess the lesson learned from this exercise is that the things that we “just had to have” probably could have waited, because only a year or two later I can’t even remember what half of them were! Sad. The rest is accumulated interest and probably the occasional fee assessed before I got my act together.

Armed with this information I can do two things: I can sell as much of the stuff I bought as possible and apply proceeds to my remaining debt, and I will no longer charge impulse or lifestyle items on my credit cards. I keep exactly one card in my wallet for emergencies, and I promptly pay it off immediately in the event I have to use it for car repairs, a replacement appliance, etc. Never again will I find myself wondering where half of my credit card debt comes from. Never again!

A couple days ago I performed a highly unscientific poll on the subject of thermostat settings. I asked Twitter followers to share their overnight indoor temperature settings and how cold the outside temperatures were in their neck of the woods. My hypothesis was that people are much more frugal about their temperature settings than we are–and I was right!

Based on the responses received the average thermostat setting was 63 degrees at night, and the average outside temperature was 31 degrees. Several mentioned that they keep their thermostat on 70, or higher, because they have small kids. We are in that category as well.

A few months ago I installed a programmable thermostat. During winter days, particularly when it is mild (above 50 degrees), we set the thermostat to “Off.” However, at night we have it programmed to warm the house to 72 degrees while we go through bath and bedtime routines. Once everyone is hunkered down under blankets, we drop the temperature to 68 degrees overnight, before returning it to 72 about half an hour before we wake up and being our morning routine.

As the kids get older I imagine we will drop this temperature down a bit to shave a little more off or our utility bills. Some of the Twitter responses indicated they set their thermostat as low as 55, and one follower even remarked, “We usually knock our thermostat down to 40 at night (and low was 17). We get under enough covers that I still manage to get hot!” 40 degrees? Yikes!

Tips For Staying Warm

Properly insulate your home. Besides having proper insulation installed in walls and attics, also check out door sweeps and areas around windows. Hold a lit candle in front of doors and windows on a breezy day. If the flame flickers it is a good indication air is seeping in. Replace weatherstripping and sweeps around doors for a better seal, and caulk around window joints.

Double up on the covers. Seems obvious I know. But many people simply sleep under a bedspread or comforter, rather than a blanket made of heavier material. A quality blanket will help insulate you by trapping body heat and allowing you to drop the inside temperature further.

Gather around the fireplace. In the early evenings a fire in the fireplace can replace the need for central heating, assuming everyone gathers in the same room room.

Dress windows to help keep cold air out. We recently hung curtains in one of our bedrooms and felt a noticeable difference. The room felt less drafty at night, and during the day we pull back the curtains to let sunlight warm the room naturally.

I would like to hear from you. What do you set your thermostat to on cold, winter nights, and what tips you might have for keeping warm without turning up the heat.

In response to a recent article on credit cards closing accounts, a Frugal Dad reader (we’ll call him John) submitted the following scenario and question.  I told him I’d answer his question here with his permission, and solicit feedback from fellow readers who may have more experience with similar situations and be able to add to my response.  Here are the pertinent details of John’s story:

I started my own business 3 years ago.  In that process I got a $15k debt on one credit card.  Since that time I have hardly used it–maybe $500-600 tops.  I make $400-500 or more payments every month.  I have never missed one.  I have been late a few times here recently due to them moving the due date around, and also due to decreased income in the economic crunch. They have raised my rates to 29%.  I have had this card 7 years and been a good customer.  I have never been even 5 days late but they tell me that they can move my due date around by 5 days which they do often now.

I have asked nicely, begged, pleaded, and threatened bankruptcy to them to try to reduce the rate to a reasonable level so I can try to pay it off.  I have made like zero headway in 3 years.

The only option they give me is to cancel the card and they put me on a payment plan which would drop the interest to 4.75% and have no due date as long as I made a payment each month.  Also, if I make the minimum they said it will be paid off in 5 years and I can pay it off sooner with no penalty.  I want all that in writing because I don’t trust them.  Do you know if this would negatively affect my credit score?

John, a couple different things in play here.  I’ll try to address them at a high level and then turn things over for comments.  First of all, kudos to your for starting up your own business.  The entrepreneurial spirit and industriousness of Americans is what built this country, and you had guts for giving it a go.  Having said that, accumulating $15k in credit card debt trying to float your business is not sustainable.  Not much you can do about it now, but I hope others reading this will think twice about funding a business venture on their credit cards.

You mention being late “a few times here recently,” and I suspect that is what triggered the default terms now in effect on your credit card.  Unfortunately, the card issuer was probably within their rights to increase your rate according to the terms you agreed to when you began using the card.  That doesn’t take away from the fact I think charging a 30% interest is borderline usury!

From the sounds of it, the card issuer has offered you a work-out arrangement whereby you surrender your charging privileges in exchange for a lower rate on the remaining balance, and a more manageable minimum payment.  To answer your question, yes, this will probably negatively your credit score, but no more so than being late several times.  I suspect the damage to your FICO score is already done, and if that is the case, having your card canceled by the issuer isn’t going to matter much.

The terms you have described seem reasonable, but your natural instinct to be distrustful is good.  Get everything in writing before agreeing to do anything–especially closing your account! In the near term, I would talk with a local bank or credit union to see if they would be willing to loan you the amount to pay off the card and close it on your own.  Unless you have some collateral to put up, or your FICO score has not been damaged as I suspect, you might not be able to qualify for a signature/personal loan for this purposes.

Another thing to check out is social lending via a provider such as Lending Club.  You may find more favorable rates, and a more forgiving group of lenders (many of whom are entrepreneurs themselves) here than you would at a traditional bank.

If you go the work-out route with the credit issuer, do not allow it to drag on for five years, particularly since there is no early prepayment penalties.  Investigate strategies for getting out of debt and do it with urgency!  I hope this all works out well for you.  Thanks for sharing your story here with us.

Ask the Readers:  Any additional advice you can provide John?

My W-2 arrived with my paycheck today and I was reminded that once again, it is tax time.  I’ll probably run the numbers through TurboTax in a couple weeks, see what the damage is, and then wait until the last possible minute to pay my taxes for 2008.  Fortunately, I made a little extra money this year.  Unfortunately, I think I’m going to owe quite a bit for it (even a little more than I estimated).

The Roundup

Buy American.  I like Steve’s take here, and share his sentiments on the loss of American manufacturing capacity.  Unless you happen to live in one of the few remaining industrial cores in the country, I suspect your town looks a little like mine.  A drive from one end of the main road to the other yields not a single business that manufactures anything.  I hope that changes one day.

How To Work Full Time While You’re In College.  Lots of people are down on the idea of working through college, but I managed to do it with a family and appreciated my grades much more!

15 Uses for Coffee Filters.  Some great ideas here!  We bought a pack of filters a while back, but aren’t big coffee drinkers.  Now we can put the remaining filters to use.

Slow Economy Has More People Learning How To Cook.  One of the things we’ve been doing more often is finding crock-pot recipes.  It is easy to toss the ingredients into a crock-pot in the morning and have a meal waiting in the afternoon.

How I Look at Economic News: Beyond the Talking Heads.  Whether or not the recession is as bad as it is made out to be in the media probably depends on where you live.  Still, I can’t help but think much of this negative news drum was beaten in the name of a creating an “October surprise.” Unfortunately, members of both parties bought into it, and their knee-jerk reaction of doling out billions in bailouts has only worsened our financial position.

2008 Federal Tax Brackets Explained.  The author asks, “Why does it have to be so complex?”  It’s a good question, and one I don’t know the answer to.  I wish we could completely overhaul the tax system in this country, moving to a Fair Tax or similar based on taxing consumption rather than income.

How Long Do We Really Need to Keep Those Papers?  While we are on the subject of taxes and financial organization, this article provides some guidelines on how long to retain paperwork.

Save Money on Airfare.  Traveling soon?  If so, Lazy has some great tips for saving on airfare.

Online Savings Account Interest Rates History.  Looking back a year or so reveals a very depressing trend of rate reductions at once high-yield online savings account.  Since the time I signed up, my ING Direct Orange Savings account has dropped from 5.05% APY to 2.40% APY.

6 Reasons Why Recessions Are a Good Thing.  Hard to argue with these benefits of a recession.  Just don’t tell them to the guy that just lost his job. Assuming your employment is relatively stable, and you have your financial house in order, there are some incredible deals out there now.

On an average day I read about a dozen blogs that have little to nothing to do with frugality.  Several of them discuss saving money occasionally, but most of them are all about making more money, or entrepreneurship, or small business issues, etc.  In fact, many of the books I read are on these same subjects.  You might be surprised to learn I even read a couple blogs that don’t like the idea of living frugal at all.  Blasphemous, I know!

The reason I read these books and blogs is because I believe the path to ultimate success is a combination of improving your income while watching your expenses. It is increasing the gap between what you earn each month and what you spend each month that leads to debt reduction and increased savings. For too much of my life those two amount have been equal (and some of that time the expenditures ran even higher!).

While I am known as the “frugal dad,” I also like to think of myself as the “side hustle dad” because I love the idea of finding creative ways to improve my income.  Some of them are related to my 8-5 job; most are not.

One of my daily reads is written by Ramit Sethi of IWillTeachYouToBeRich.com.  Ramit is an admitted frugal-hater, writing in one post, “I hate frugality and all the frugality sites that waste my time focusing on saving money on frozen orange juice and rice cakes so I can save $1 per week.”  Fortunately, I don’t think Ramit hates me because I’ve never written about saving money on rice cakes.  But if I did, I would point out that generic rice cakes sold in bulk quantities through wholesale clubs…I digress.

Ramit does have a point.  The risk many of us frugal living followers take is that we get too caught up in the small stuff. Yes, I know we are supposed to sweat it, but perhaps we could make bigger strides towards improving our finances if we thought bigger.  Instead of spending our life energy saving a few dollars on homemade laundry detergent (yes, I’m going there again), maybe we should spend that time finding creative ways to make an extra $100 per month, which could add $1,200 a year to our bottom line.

Instead of driving all over town to find the cheapest price on gasoline, or shopping at three different stores to save $7 using coupons, perhaps we should value our time and look for ways to spend it more wisely.  After all, we could use the two or three hours a week spent hunting bargains, rinsing plastic bags, and making homemade cleaners to attend a class at a local college to improve our job skills, or to acquire a skill that we could use to start a side hustle.

Of course, many of us do these things because we are frugal by nature.  We simply do not like to waste things, and we refuse to pay more for something when there is a quality alternative available.  I get that, because I am the same way.  However, I am becoming more and more mindful of how I am spending my time, and making sure I spend it in just as frugal a manner as I spend my money.