My Debt Blog

I have wanted to watch this documentary for some time now. There was even a post about Debt Documentaries awhile back when I started this blog. Well I have seen it and this could be considered a review from my perspective.

This documentary is emotional because not only do you see what debt does to people, but that you see what it does to people. Blogs make it easy to hide behind a veil of being relatively anonymous on the internet. If we passed each other on the street you would not know who I am and I wouldn’t know anything about you. I think it is the people that make the documentary so powerful.

Part of this documentary focuses on people who buy up the bad debt people defaulted on. They operate out of a small office where their collectors are busy calling (harassing?) people through the phone to get money out of them. There is a whiteboard and they make the comparison that it is a game and it is all about making a touchdown or scoring. What bothers me more is they feel it is legit to call up neighbors and family members of the individual they are collecting on. There are laws out there called Fair Debt Collection Practices Act which their victims don’t seem to know much about.

One story with an older lady having a garage sale to come up with enough money to keep her house is very sad. I don’t know much about the background of her situation, but the reality is she needs to be selling her house and not trying to hold on to it. There are also stories of two other ladies and the financial happenings of their children which was very powerful.

Then there is the political side of this in that the government is making it more and more difficult for people. Credit card companies don’t have regulations in place to prevent giving a college student with no income a credit card. President Bush signed a new bankruptcy law into place but the bill was funded by MBNA. The debt that I have got myself into is my debt and I have nobody to blame but myself. I’m not going to pretend the government is going to fix my problems with credit card debt. Our own government is in so much debt and the problem is not going to correct itself over night, but one day it could blow up on us all.

Comments(8)

Today I have finally turned 25 and am glad I am at the point where I am with my life. I remember back when I was 15 what high school was going to be like, and then at 20 dealing with the challenges of college. Now at 25 it seems like what was once so complex is now much simpler than it used to seem. Sure I have made mistakes, made good choices and bad ones, got into some debt, but I’m finally working on moving towards a more positive direction.

So for the past few weeks I have been listening to The Dave Ramsey Show and am starting to understand why people become motivated by him to handle their debt and take control of their money. It isn’t completely him that makes this happen, it’s the callers who have real life situations probably much similar to some of our own, and people almost help other people through the show. At any rate my wife got me his Total Money Makeover book for me to read about his system. I also went on his website and found his software for only $10 along with another book I want to read, The Millionaire Next Door. I am cautious to consider his system because he does not believe in credit period.

Comments(3)

The whole concept of have now, pay later has always bothered me, but sometimes things need to be replaced quickly. I should be saving money to probably just buy a washer and dryer. The washer is not very old but very cheap, and the dryer is very old and expensive to operate (both came with the house.) I thought about just continuing to use them until they just break down and we’ll get something else, but my wife does not like that idea. If these things break, we might not be at the point to replace these things. I’m trying to find ways to avoid financing this purchase besides just saving for it.

On the upside, Sears is currently offering no interest, no payments for a year, so technically the purchase will not cost me anything in the end, as long as I pay it off before that year expires. I did the same type of deal with my stove and paid that off in March. At the same time I wonder if having newer and more efficient appliances will help save me money on my utility bills. I do most of the laundry (I’m a guy too, I know it’s rare) and wash nearly everything in cold except the under things and socks I use warm. My dryer takes sometimes 2 hours just to try an average size load of laundry, and it’s a gas dryer. The little knob on the dryer is broken too so sometimes the stupid thing doesn’t turn off and will run much longer than necessary, which is a huge waste of money.

This has been going through my head lately while at the same time I’m trying to pay off my debt. It’s really hard to move forward if you fall backwards and get deeper in debt. I hate pretending to own things but at this point I might not have a choice. My wife likes the idea of new appliances because she also thinks they add value to the house. I don’t think an appraisal of the house would be any different based on the appliances in it. They would probably help drive a better offer some day when we’re ready to sell. I hate justifying this stuff to myself it is driving me nuts.

Comments(5)

I have been talking to my credit card companies for some time now trying to get myself better rates. One of the major problems I was having was my balances were too close to the limit in order to offer me a better interest rate. A technique I applied was to ask them for a credit line increase, sometimes this can offset the utilization to reduce the interest rate.

My Bank of America card got raised by 1k and I called this month and got the interest rate down to 17.24% APR which is much better than that 25.24% I had been paying. My Citi Dividend card got a nice $3600 increase bringing my utilization way down. Called them last night and asked them if they could reduce my 11.24% APR, they said no. I asked for a supervisor and sat on hold awhile, got a rate specialist and asked her for a lower rate. She told me I had a good rate, which I told her that is a decent rate, I want a great rate. After telling her that I get offers in the mail all the time for much better rates she finally threw 9.9% APR at me, sold!

Now I must admit the bad news regarding debt not the event. It is coming up to my one year wedding anniversary and we both would like to celebrate it in style since it is the very first one. We’re going to stay at a Jacuzzi suite and go to a fancy restaurant, and for now the plan is to hold over the cost on a credit card. I’m also trying to figure out what we should be spending on each other. I don’t want to start any fights over trying to budget this stuff. These minor increases are temporary and will be my focus to get rid of so I can get back on track. I’m also going to start setting some money aside now in preparation for Christmas so I try to avoid doing this in the future.

Comments(5)

I’ll start out by saying that I do have some student loans. In college it felt like I had no choice but to resort to getting a loan to pay for education. I could have put education on hold while saving up the money, but the problem with that is actually going back to school.

Growing up my parents reminded me to save my money for college. So I saved a lot of money, spent very little of it, always paid my bills, and stayed debt free throughout grade school. When I got to college and the bill came, I paid it from my savings. After three semesters that money ran out fast. Then I did something really stupid, paid for college with a credit card! My girlfriend (now wife) had been borrowing money the whole time thus far and urged me to get a student loan. Signed up for a loan, to cover school related expense so that I could the (beer) money from my student job for myself.

Graduate college with a bunch of credit card debt and now student loan debt. At least my student loans are consolidated into a nice low rate under 3%. Living on credit cards in college is about the stupidest mistake I could have made. Now I am paying, and then some, for that mistake. The student loans in my opinion are not a mistake, just necessary at the time to get to the point to get a job. I still remember that first paycheck from my salary based job and thinking I’ll be able to get out of debt in no time. Bills came in and then I realized how little I had left after the basic needs have been met.

Once the credit card debt is gone my next priority is paying off these student loans because I’m not going be paying these things for 20+ years. I set my goal to pay off my credit cards by March 2009, we will see how well that date is come this time next year. After that is gone I will be debt free except for the house. Are student loans worth it? I think it would take me longer to be at this point in my life without them.

Comments(0)

I hear various offers and ads on how to get out of debt. There’s so many methods out there I figured I would give my analytical look at each one. Some of these I’m actually considering doing and others are not even worth my time looking further into.

Ways to get rid of credit card debt:

• Make the minimum payment each month - I was using this calculator over at Bankrate to figure out how long it would take to pay only the minimums to rid myself of credit card debt. Needless to say it would take over a decade and I would pay several times over what I actually owe present day.
• Pay off accounts from highest to lowest interest rate - If I look at the simple math, it would make sense in theory to pay less interest over a long timeline.
• Pay off accounts from lowest to highest balance - This is the “Dave Ramsey” system in a way, I read about this before so I cannot give him full credit, by paying off a small balance first and applying the payment to the next debt helps decrease principle faster which should in turn reduce and eliminate debt faster.
• Using home equity/consolidation loan - Taking the credit card debt and converting it from high interest unsecured to lower interest secured debt. Partial benefit of this is being able to use the interest paid as a tax deduction come tax time.
• Debt payment plan - Some companies out there will basically take over the credit card payments for you by paying them a lump sum every month. These services do cost you though, roughly 20% of the original debt you’re paying goes to them. Why pay someone else to make payments for you?
• Debt settlement - I hear so many offers where you can save, “up to 50% on the dollar” off your debt. The problem with these debt settlement services is you are paying them to build up a payoff in order to settle your debt. Most of the time this is done instead of just paying on the debt, which will destroy your credit. You can also handle debt settlement yourself without a need for a third party.
• Bankruptcy - Too much debt? Hit the reset button and get a clean start! Yeah right. Credit reports stay messed up for 7-10 years and it is a long struggle to re-establish credit. I think some people out there think this is some sort of safety net for their poor mistakes they made with credit.

I use a combination of some of these methods to get my debt under my control and not let it control me. As various credit card offers throwing the 0% interest come across my hands, I do consider the math in terms of if I were to transfer a balance to it I could pay pure principle on that debt and eliminate it faster. The other is to get the high interest debt into a secured loan or transfer it to one of those life of the balance cards. By converting the debt into other forms does not pay it off, but it helps motivate me to get it paid off faster and pay less interest. If I missed something by all means let me know.

Comments(5)

Getting to the bare all point here, I wanted to find out just how much I am worth? Turns out my own personal net worth is not bad. I’ll make it clear that this is my personal net worth and does not include the debt my wife has. For the sake of this blog, as I have always stated, I am focusing on my credit card debt.

Ordering of how I would like to do things:

1. Credit card debt - This debt pile has been sitting on me since college. I want to try to put as much focus into getting rid of credit card debt over the next year or two until it’s gone!
2. Offsetting student loan debt by investing - As much as paying off student loan debt faster, I think it would be wiser to offset it through investing in stocks or mutual funds. I do not see student loan debt as bad debt because the interest is tax deductible.
3. Saving emergency fund - Having a pool of money built up just incase something were to happen (i.e. job loss, disability, etc) it would be nice to have a few months living expenses available to use if needed.
4. 529 college savings plans - I will estimate by the time I get near this point in my life, I’ll be a father. College today is extremely important in order to have access to more jobs, more income, and more out of life.

This may not all necessarily happen in this order as life is never a straight road with no bumps, potholes, or speed limit. I would love to run my own business because I have that entrepreneurial spirit and dream of doing this some day. Doing the 9-5 regular W2 job gives me stability though in the sense that I know what I have coming in each month. I am trying to work out the details to get a business going on the side though, more on that later.

Comments(1)