Financial Freak Show

Man I’m glad I don’t have to deal with credit card companies any more. Sunday evening I was catching up on my laziness and decided to watch an old episode of Frontline titled the Secret History of the Credit Card. No, I don’t normally make a habit of relaxing to episodes of highly biased news programs from 2004 but I figured you FinancialFreaks might benefit from my pain – so I took one for the team!

The program itself started out by revealing the history of how credit card companies positioned themselves to take advantage of a lack of regulation in some states. They then went on to discuss how the companies then came to exploit the lack of regulation to take care advantage of the consumer/borrower (told you they were biased…but then again so am I).  I’m not going to suck the life out of you with the intricacies if the credit card business here today but I will say the more I pay attention to the business the more I wonder, aside from the stock holders, who is really benefiting from their practices. The one thing I found surprising was how many ex-credit card industry professionals came out to speak against industry practices.  

Now I’m not here to completely bad mouth these guys but it does reinforce to me why I choose to find other options than credit cards. Remember these consumers, including myself, signed up for this ride and if you don’t understand the contract maybe you shouldn’t be so quick to sign on the line. I am personally a share holder in several banks through my mutual funds so I love it that people several million people can’t control themselves almost to the point of bankruptcy then manage to fight their way back through 30% interest rates and late fees then immediately jump back on board for another trip. To that I say….YEEHAW boys! Let’s ride these hogs all the way to retirement on the backs of out of control consumers trying like hell to save the embarrassment of a low credit score! Keep it up suckers, daddy needs a new Maserati!   

So if you have 40-ish minutes of your life you won’t regret spending on the couch and you have an odd fascination with money, business & credit click here: FRONTLINE: Secret History of the Credit Card or even better read my Credit Card Debate page to learn how you don’t have to ever deal with them if you don’t want to.

When you’ve got what’s known in the business as a “butt load” of debt, managing it can get tricky. I used to be horrible at this – Actually I wasn’t horrible at it, it was more that I didn’t really do it at all. I was slovenly, unorganized. When I decided it was time to address the issue I would scream obscenities at objects like pens, or various other office supplies. I would punch our hot water heater and throw the cat at the dog (okay, not really, I made that last part up).

To get started I first listed everything I owed in an Excel spreadsheet. It was immensely helpful to have all the info in one place. You could write it down and keep it all in a big fat Black Book of Debt if you prefer. Once I laid it all out most of the time it’s smooth sailing; I would simply just update the balances on the spreadsheets and pretty much leave the rest alone. Every now and again there was an opportunities to move around a balance. Occasionally though I’d have to get all FreakShow budget crazy making and start juggling thousands and thousands of dollars. Often these moments in budget anarchy happen for good reasons though sometimes it was due to events like my serious budget busting week or even better the follow up

During moments like this is felt more like I was trying to de-fuse a movie bomb…”is it the red wire or the blue wire? Three seconds left before the end of my financial world. Which is it Financio, the Red or the Blue?” With beads of sweat rolling down my face I would send online payments off via the inter-web while credit card and checking balances were checked and rechecked all the while hoping I didn’t just vaporize my family’s finances by sending every extra penny we had off the to the enemy. Knowing all too well that in another couple weeks I will once again sit down under intense pressure and attempt to diffuse our personal time bomb where all I can hear over the incessant pounding in my temples is the polite question of our progress from my wife and I lovingly respond with….

Iamtryingtopaythestupidbillsheredoyoumind?! Seriously, do you?!

At what point do you feel mental pain as a result of a purchase (or in the case of married folk physical pain?) How much money can you blow before you feel you need permission so your other half won’t “bring the pain?” If you’re single at what dollar amount do you feel guilty for buying something?

 Since my wife and I are trying to reach some specific financial goals we are kind of strict about any money that we blow. The dollar amount that would trigger my wives fury while we were trying to eliminate our personal debts (I know this may sound insanely low to many of you) was around $25. Do remember though that my wife is a saver by nature and I’m the one that liked to spend. Also remember that I’m talking about spending money that wasn’t in our spending plan – I’m not talking about things like food, gas, needed things around the house, car maintenance etc. – I’m talking about things we hadn’t planned for like a cool $52 sweatshirt, or a $175 replacement for the broken cell phone – you know that sort of stuff.

Now that our debts have been cleared (with help from some learned behaviors like this one) our spending threshold has now been adjusted accordingly. We’re now closer to the $80-$100 range for “free” spending. Now that we’ve worked so hard to always discuss and share our finances we usually talk about most things over $50 anyway (note that we talk about it…not fight about it). Hopefully one day with enough hard work and discipline when I surprise my wife with the new Cadillac she wants and the only discussion we’ll have will be where we’re taking it for dinner that night and who gets to drive – now there’s the spending threshold I’m shooting for!

Agreed upon spending limits is where a couple’s shared finances can really help a couple succeed over the long term due to the unavoidable accountability. How’s the saying go? “At some point he’ll have to come home!”

What dollar amount do you feel you should have agreement with your spouse before buying something as to avoid your home turning into a bad Jerry Springer episode?  If you’re single at what dollar amount do you feel you’ve let yourself down buy spending too much?

In my post Money Creates Options I jokingly talked about how I hope to always have enough money that I never need to rent a PT Cruiser again. Well once again having little cash in the bank opened up an unexpected option for us. Last week someone very important to me passed away.

Once I received the news that evening my wife and I decided we needed to travel three states away and we needed to leave that night (and I’m not talking about crossing three of those little East Coast states, I’m talking about crossing three big fat West Coast states). When we were discussing our options about flying, driving, going or not going, a funny thing happened that was sort of new to us…not once during our discussion did my wife or myself ask the question “Do we have enough money” or “How much will it cost?”  We knew stuffed away in a local credit union was had everything we needed to do whatever we needed to do.

At 2am, within couple hours of receiving the emotional news Mrs. Financio, Mrs. Financio JR, and myself found ourselves in the SUV, making a quick stop at the ATM to grab some cash then we made a break for the border(s).

18 months ago this whole scheme would have played out a bit differently. It likely would have involved some unpleasant discussions about money and credit cards and bills and gas money, all are the last things I want to talk about when things complicated. After all was said and done there was no debt incurred, there was no discussion about the money involved in making the trip. We were free to do what we felt we needed to do without any concern for the dollars involved. This unexpected trip that came about by a huge loss in my life was in a way also huge success for me financially and, proof that some sacrifice and good decision making can pay off in big ways that can’t be explained in terms of dollars. The crazy part was that this came right on the heels of our Serious Budget Busting Week I think somebody out there is testing me to see if I’m really serious about this whole debt free thing!

Emergency money was a key in my strategy to remove the debts from my life. In my posts To Whom the Accidents Happen and So the Accidents Don’t Happen to You, I talked about the importance of saving some money to help cushion you from some of the lumps you take just by living your life.  After reading up on the subject a bit (actually quite a bit – I knew nothing about having money in the bank) My conclusion was if I was going to lower my debt I first needed to put some money in place to prevent me from using debt to live my life every day. Now my only financial safety net is my bank account where before I used credit lines – I sleep much better now.

How long could you cover your household living expenses with your current liquid savings? This survey of 2,318 adults 18 & older asked how long people could survive on the liquid money they had available. It proves how unprepared many Americans are with less emergency money available than the professional financial nerds out there recommend.

• Less than one week 17%
• One week - one month 14%
• One month - 90 days 24%
• Three - six months 10%
• Six months or more 19%
• Declined to answer 17%

The scary numbers are the first two. 31% don’t think they could make it a month. That’s a scary state of affairs for a lot of people out there. Most advisers recommend 3-6 months in liquid money. According to this survey only a third of Americans measure up to those recommendations though it sounds like from recent reports the current economy may have scared some more money into savings accounts over the last year or so. From my experience lately though people have been spending more time whining about being broke than actually doing something about it…I guess we’ll see the next time “it rains!”

So how does  your family measure up? Post a comment and lets us know (don’t worry you can even use a fakie name if that makes you feel better about yourself)

*Survey source: LexisNexis Martindale-Hubbell’s Lawyers.com survey of 2,318 adults 18 and older.

Last night I received phone call from Military Wife about her Citibank credit card interest rate being raised from 13% to 29% interest. Actually if I remember correctly her exact words were…

the %!<&\# at Citi just jacked my interest rate right after I made the stupid payment

Her call sent Vinny Financio into action and prompted me to snoop around the inter-web a bit. Little did I know I would find out that Citigroup has also started charging annual fees to card holders who don’t put more than a specific amount on their cards, typically $2,400 per year. So let me get this straight…If I use a card you charge me, (I get that) If I don’t use my card you charge me (thats the part I don’t get!).

Okay that’s not really true, I do get it they are charging customers more fees. That’s what they do, that’s what their consumer business model is based on. The part I don’t get is why do they still have customers? You know the saying though…

you can lead an idiot to water but you can’t make him drown himself

It amazes me what people are willing to put up with. Luckily though Military Wife, due to her recent financial progress, was able to close the account and I doubt she was able to contain her ex-Marine Corp potty mouth when she told them what she thought about their new programs. I guess at this point for those that are willing to accept this treatment more power to them. Somebody has to get bent over the bar to keep those bank stocks in my mutual funds afloat for another 30 years. Personally I’ll take my own road on this one.

A couple years ago at the very beginning of my quest to become debt free I read a small little book called Debt Free on $5 a Day (at least I think that’s what it was called, I don’t really remember it was a couple years ago). The idea behind the book was that if you set aside $5 a day, every day before anything else and applied that to your debts you would work yourself out of your money problems. At the time I thought the idea was…well how do I say this best, ”retarded?”

According to my calculations if I would have stuck to the $5 a day plan every stinking day I would be completely debt free in approximately 21,400 days. Not a bad deal…if I wanted to be debt free around my 90th birthday! Actually it’s more likely I’d be debt free well before that because at some point I’d have to kill myself over it. Of course then my wife could bank the insurance $money$. Anyway, where was I? So at the time the thought of removing all my debt at the rate of $150 a month seemed laughable, but the idea behind the book made perfect sense. The idea was to get in the habit of paying your debts before you had the opportunity to spend your money on something else. At the time I took the book at face value I think because I was desperate for a solution. Now that I look back at it the book makes perfect sense even though the numbers don’t jive. In may posts Micro Paymentality & Sick Day Bonus Pay I talk about how this exact idea can work only on a larger scale. The idea is to fight like hell to find extra money each month then apply it to your bills.

If you manage to get a grasp on your finances and put a couple of the basics into place like a household budget and an emergency fund to prevent you from needing more credit to get by, the $5 a day idea could actually work. No matter how much you can manage to eek out of your budget, as long as you can eek out something, if you put it towards your debts before you allow it to wander out of your life, and assuming you don’t rack up any new debt, you’ll eventually become debt free. Though in my case I busted it and used what I affectionately call the Vinny Financio’s Debt Free on $60 a Day Plan and it worked. I guess I was just a little too impatient to wait until I was 90 or dead to live like this.