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.

Having a credit card to fall back on can dissuade you from building a proper emergency fund. I think this happens for a couple reasons. First, with credit you already have a safety net in place. That’s actually one of the reasons many people get credit cards in the first place. Though this can quickly blow up in your face because you could be taking on debt at the exact time it gets most difficult to pay it back. It amazes me how many people grab their credit cards right after a job loss and began using high interest cash advances for everyday life at the exact worse time to be borrowing money. I think having the cards as a safety net allows people to feel like they’re covered so the urgency to save really isn’t there.

Second, I think another reason people don’t build emergency savings when they use cards is because they’re constantly working to clear the debts. Instead of making savings a priority they make keeping up with the card balances a priority. The more debt they have on their cards the less they have available to save and the more likely they’ll need the cards to cover their butts again and so the cycle continues.  

At some point if you want to go with out credit cards you need to break the cycle of spending instead of saving. I personally stashed away a little dough to use for future “emergencies” then stopped using the cards. Once I stopped using the cards and had some real money in the bank to fall back on all I really had to do was eliminate the balances and at that point I was done with the credit card cycle. I had no use for them anymore. I now have an emergency fund with more money available to me than I ever had available on my credit cards…oh and it’s earning interest too.

The good news is Mark has decided, for the first time ever, to start saving. He’s now quickly building an emergency fund since this’ll be his only safety net going forward. It looks like with a little encouragement and some discipline our buddy Mark won’t be “financially retarded” too much longer…at least that’s the plan.

So what’s your plan for dealing with credit cards, do you want them gone, do you really need them around? Let me know how you feel about this.

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.

They would be allowed to borrow up to 50% of the vested balance with a maximum of $50,000. That should be okay in their case because they have a balance of near $65,000 and are looking to pull about $28k.

The money in their case would be available at a 6% interest rate. The interest does go back to your account but depending on the market performance this could be a losing deal as far as growth.

The loan sort of turn offs your 401k for a period of time while you work to pay back the balance. Well you don’t turn off the entire 401k but the portion you borrowed is no longer considered part of the balance so no growth will happen to the portion you have taken out of the account.

Here’s the big reason I think 401k loans should be used only as a last resort:

If you leave your company most plans require that the balance be paid back into the account within 60 days. This comes due no matter the circumstances of your departure, if you go “Jerry Maguire” on them and walk out the door with the hot receptionist you’ve got 60 days. If you decide to leave because things get a bit uncomfortable around the office after you’ve been fired, you have 60 days. If you’re unfortunate enough to die, 60 days. If the loan is not repaid within 60 days the remaining balance is considered an early withdrawal and you will have the pleasure of paying income taxes plus a 10% early withdrawal penalty (if you’re under 59-1/2). So for many families you’re looking at a full 30%-40% tax bill due on that money. So if my friends borrow the $28,000 they needed and it blows up in their face they are looking at writing a check for $8,400 to $11,000 conveniently right around the time they lose a job. Talk about crappy timing…oh, and add that to the fact that they had to borrow money so they obviously we’re already in a less than desirable situation before they lost the job! And remeber the IRS doesn’t like to wait around for their money.

So I’m not saying a 401k loan is not an option, in some cases it may be the only option someone has to save a house or avoid a bankruptcy. I just want to throw this out there so everybody knows what road they are heading down before they board the special bus.

What’s your experience with 401k loans? Please share.

Enjoy the following guest post – and when you get to the part about “a very wise man” and “single-handedly did something Superman and an army of super heroes couldn’t have done” remember that me she’s talking about- oh yeah!

‘Deployment money” a military wife’s favorite words. Visions of Coach Bags and spa trips dance through her head while trying to fight back the tears as her husband boards the plane. We all do it, yet most of us won’t admit it. This time though I’m taking this deployment to a whole new level. I’m on a mission to go down in the military spouse hall of fame as the one who passed the Coach bags in the Exchange and with a disdainful smirk I head to the children’s section for the half priced shoes. Ever notice they put those gorgeous bags right in the front walkway of the store? I am on the road to paying off all of our debt. All of it, all $125,000 in credit cards, car loans, and the boat. Our awesome boat – yup, the one we can’t afford to put gas in.

Thank you to a very wise man who, in a 20 minute conversation, single-handedly did something Superman and an army of super heroes couldn’t have done. Got me (of my own free will no less) to pull every credit card out of my wallet, wrap them pretty in a rubber band and throw them in a drawer I affectionately call the “junk drawer.” Fitting name huh? I then proceeded to break the news to my husband. We sat down and had what was probably the most open and honest discussion about our finances in almost nine years of marriage. We mapped out a plan TOGETHER, figured out where we could cut back, then celebrated… by eating our first dinner at home in a long time! (a personal apology to all Olive Garden shareholders).

Using my husband’s first “deployment money” that came in from a recent short trip, I paid off the lowest balance debt. Seeing that first zero was almost as exciting as a new pair of shoes. The second zero balance I have achieved almost made me… well you get it.

It’s a game now. I created a sweet little excel spreadsheet staying true to my “excel goddess” nickname that auto-calculates our totals, gives me the percentage paid down on each debt and the total percentage of debt paid off to date. Are you ready for this? 10.24% in 2 weeks. TWO WEEKS!! That’s about $12,000 of worry, stress and interest we’ll never have to pay on again!! He leaves again in a few weeks for 6 months this time. And I will sit in my office every day and secretly curse all of the women telling stories of the money they spent the past weekends on shoes, clothes and manicures, and I think of all the things our family can do with our money when he comes home. Things like a family vacation paid for with actual money. All out of our bank account instead of on credit cards. Amazing.

I have a feeling the next 6 months is going to change the rest of their lives. So do you think she can pull it off? Do you think somebody’s going to get hurt if they stand in her way?

Please take a second and add an encouraging comment.

PART 1.

My lack of credit cards (the why)

Living without a credit card is actually not very complicated. In my opinion it’s actually more simple than living with one. I have now been without a credit card for over two years and have not had to change my lifestyle because of it – well atleast not in a negative way.

First I want to discuss the reasons why I don’t use credit cards. For many people who have “credit card problems” the reason is usually self control or a lack of financial knowledge. Credit cards are often used as a financial crutch to help people limp along when they don’t actually have the money to cover a purchase they can’t resist or truly need in the case of an emergency. Many people can manage credit cards without getting into any major trouble. This was the case for me personally, my credit cards and balances they carried were far from the point of blowing up our finances and we had no trouble handling the payments each month. I was even able to enjoy some of the “rewards” these cards offered to me.

So why did I decide to remove the cards from my wallet if they weren’t causing any problems and was reaping some rewards?  Well folks there were a few reasons…

I didn’t like the feeling of paying for last month’s expenses this month. I hated sending off  money I just received to pay for things I didn’t posses any longer. Even though I may have been able to pay the balances down to zero each month I still felt like my finances were a month behind. The weight of any debt no matter how small has a way wearing on me. The truth is carrying debt takes energy from your life even if it’s only the energy needed to check the statement and send the payment.

Overspending; a Dunn and Bradstreet study is often quoted in blogs, and the major media. The study reports on average you’ll spend 12-18% more when making a purchase with a credit card as opposed to cash. And to prove their point they noted the average McDonald’s transaction increased from $4.50 with cash to $7.00 when credit was used. When they looked at vending machines, the average transaction size nearly doubled. Now for me I don’t doubt that I unintentionally spent more using plastic at times (I’ve been guilty of supersizing my life a time or two!) I know for a fact I’ve done this with the thought that I’d be getting more perks by adding to what I charge. So even though this was not the key factor for dumping my cards it was defiantly a consideration.    

Paying interest; this is an easy one in my opinion. Why would you save money at low checking or saving account interest rates while carrying a high interest balance on unsecured debt? It just doesn’t make sense to me – why pay interest when with a bit of planning you could be receiving interest? I never quite understood why people will say “don’t pay off you mortgage because you can make more in the stock market” and then use credit cards with 10%-30% interest rates. But it works for you have at it

I also saw no benefit to using a credit card. I know they offered me points, and insurance, and extended warranties and cash back, but to me I realized I was putting up with the issues above and found myself never getting any real benefit from all the extras they were offering me in exchange for dealing with the negatives. And as far as the convenience factor, well to be honest my credit cards weren’t anymore convenient than my debit card.  This was the big reason I now have no credit cards in my wallet…they do nothing for me, I didn’t see the so called “benefits”

This was my biggest reason….Why spend your time trying to outsmart the credit card companies? This is what they do for a living and they are better at it than I will ever be. True some people can beat them at their own game, charge up the month on credit, pay it off on the 30^th, never pay fees, never pay interest, and collect the rewards points at the end of the month.  If that’s how you roll and how you want to spend your time and energy. I’d much rather spend my time chillaxin and not worrying about trying to outsmart them while they’re trying to outsmart me. I’m not saying you can’t outsmart these folks but I am saying it’s a lot of damn work! 

This was the big reason…. So to briefly summarize why I don’t use credit cards…I don’t like to pay interest, I don’t like to being tempted to over spend, I don’t like the hassle of making the payments on time, and finally I never really received any benefit from the incentives they offered. So basically it came down to multiple negatives and no real positives.

Let’s put it this way….Let’s say you were dating a credit card. She charged high fees when you used her and possibly charged you when you didn’t use her, then tempted you to do things that weren’t in your best interest like overspending, then she drove you crazy by making you pay her a 25 days after the fun was over or risk having to pay her even more, then she offered you restricted “benefits” and “rewards” that you didn’t really care to use and if at any point you fail to keep your promises in the relationship she will call incessantly, threaten you then ultimately drag you into court and win. Then after you and her work out all your monetary issues you realized she never really cared about you in the first place and was only after your money – I don’t think that’s a very healthy relationship. Sorry, no matter how good that hot little number looked being flaunted around town with me I’d have to break it off!

To reinforce my thoughts around credit cards but with a little less Vinny Financio I want to refer back to my post So When is Debt Okay?  In this post I lay out four things to consider when determining if a debt is okay. Rule 1: Common Sense Rule 2: A Guaranteed way to repay Rule 3: Peace of heart and mind Rule 4: Unity;

In my opinion credit cards do not satisfy the four rules outlining when it is okay to borrow. Well it could fit into rules #1, #3 & #4 Common Sense, Peace of Mind & Unity. Though this all depends on your household situation but in my household we came to “Unity” on the fact that we didn’t see the “Common Sense” in borrowing money day to day and coming to that agreement gave us “Peace of Mind” knowing we were always living on what we had. As for Rule #2 Guaranteed Way to Repay; most credit cards I know of don’t have this guarantee built into them. They are only guaranteed by your future income but your future income is only guaranteed to the point that you have sufficient income. Lose your income and you have no guarantee there for it’s not a “Guaranteed Way to Repay.” Credit Cards are not secured by any real property which is why credit cards are referred to as unsecured debt.

I only have one more point to make regarding using any form of debt in your day-to-day life. This one though is intangible and hard to quantify with numbers. The feelings & emotions people feel around having debt in general. In several of my posts I’ve shared the experience others have had with their own personal battles with debt. Here are a few of those quotes:

Being away from my family at night is one of most difficult things I’ve had to do.  When I look into my kids eyes though, I know it will be worth it.  - Jeff, Deliver Away Debt

and I think of all our family can do with our money when he comes home. Things like a family vacation paid for with actual money. Out of our checking account and not on credit cards. Amazing.  - Military Mom, Deployment Money

he called me the day after our discussion and let me know he cleaned out his wallet to make room for some cash instead. 8 days later he’s still on the wagon as he puts it. I told him he sounds like a recovering crack head, he said that’s about how he feels.  - Mark, 8-days Clean

Now that I’ve laid all this out there for you I want to finish with the thought that you’re all big boys and you can make your own big boy decisions about your finances but that’s my $.02

Part 2.

Living without credit cards (the how)

Once I decided I was no longer going to depend on credit cards as a way of making purchases I needed to come up with another option that would allow me to make all the purchases I needed to without cramping my style too much.

There were a couple issues I took consideration before I got rid of all my cards. How was I going to have access to my money anytime & anywhere?  Second how can you function without a credit card, especially since I travel a bit and my wife almost is never carrying much cash? Here is what I came up with and so far it has worked flawlessly for us.

The first thing I did was create a place to stash the money. Since I wanted to have access to this money with the same ease as using a credit card I went for an account with a debit card. I opened a high interest free checking account at a local credit union. This is not the same place we have our primary checking account we use for everyday expenses though. I chose a different bank for our emergency savings for two reasons. One, I wanted to make sure the debit cards we were issued were Mastercard card since our primary debit cards were Visa. Two, I wanted to be linked to a different banking system. Both of these reasons were to ensure that I always had access to money if either Mastercard or Visa had problems or if either of the banks were having technical problems for one reason or another. After working with a credit card fraud team for some time and on the back end of a couple e-commerce websites I realized how inconvenient those issues are and how easily they can arise through no actions of your own. So far to date I haven’t had any issues getting access to my money. 

Now that we had a place to stash the money it was time to actually put some money in there. I first opened the account with $1200 we had set aside in our regular savings account. Now that I was going to only rely on this money instead of relying on this money and credit to get by I know I needed to add to this account as quickly as possible. So for a few months any money we could manage to pull out of our budget went directly into that saving account. At the time I was also working a second job to help knock out our debts too, so any money I made there went into this account as soon as we got a hold of it. This all quickly added up to several thousand dollars and now there’s even more. The funny thing is there is more money in there now than I ever had available on my credit cards.   

This new account was only to be used for an emergency and we BOTH had to agree this was an emergency. Since our marriage is based on trust and shared goals there is no issue with us both having easy access to the money. We trusted each other not to let the other down. Plus if either of us was going to screw this up it was probably going to be me.       

So at this point the only thing left to do is stick to our plan. To date we’ve not had any issues that have made me second guess this plan. We’ve traveled, we’ve rented several cars, we’ve bought things over the internet, basically we’ve have done most everything everybody swears they need a credit card but have done it with a debit card. If somebody were to steal my money or I have to disagree with a transaction (both of which I’ve had happen btw) I just grab my other debit card and put gas in the car just like you would with a credit card but without needing to pay it back next month.

To sum it all up….

1. We have more money available; like I said we have more in the account than we ever had available on our cards.
2. We now earn interest, not a lot but it is adding up. True we didn’t set this money aside for growth but it is a nice bonus to the deal.
3. We’re never owe anybody at the end of the month and if something were to self destruct in our financial lives we won’t be borrowing money at the exact time it gets most difficult to pay it back.
4. We have no need to use credit cards and no need to deal with the card companies – I don’t have any personal credit card horror stories but I sure don’t want to start any

People wonder how I can function without a credit card….I wonder why they can’t?

.

A contractor friend once told me this quote:

When you come across an electrical problem and a plumbing problem…don’t try to fix them both at the same time!

In other words don’t try to do too many things at once. I decided I would be better served by focusing on debts now which has allowed me to focus more on financing my retirement and reaching those larger goals. I once heard a story about a apartment maintenance man that bought his employer’s apartment complex with cash and managed to retire with over $3 million in the bank years later (that story could be  total B.S. but I did hear it). Well the story goes like this…He saved his butt off and even though he wasn’t making a ton of money over time he managed to save up enough dough to buy the small apartment complex he worked at and began creating some wealth. That’s pretty much the story. Instead of spending his money he saved his money and as the story goes eventually had enough dough to make a big fat real estate purchase. My guess is this person was a pretty simple dude and probably kept himself out of debt (I don’ see any other way he could really save up a ton of money like this). The obvious advantage though is that he was able to use his income to build something instead of paying for crap he bought in the past + interest.

Even if the story I heard was total B.S. the theory’s still valid. Freeing up your income by clearing your debts will allow you to stash away more money and collect interest instead of paying interest. Do that long enough and large enough and you could eventually turn that stack of money into investments to replace your income and build some wealth.  In my post I Call a Do-over I talk about some other advantages to freeing yourself from your everyday debts. As long as your income keeps going towards interest payments on credit cards and cars its going to be hard to use this money for much of anything else (it’s hard to save it if you don’t really get to keep it). So by wiping out my debts I’m now able to save and invest money much more aggressively because I actually have more available money now. 

I’m a long way from paying cash for my an apartment building but I’m a whole lot closer now that my money stays with me at the end of the month.  Freeing up my income has now given me access to the one tool I need to begin building some wealth, my income. 

If you were able to free yourself up from monthly debt payments what would you do with all that money?

With tweets like his “stiffy alerts” (when folks don’t tip him) and various other customer updates I had to learn more about Jeff and his leased Hummer H3 drivin’pizza delivery story. Actual tweets from deliverawaydebt:

4/14-Delivered to the local Moose Club. I deliver to their cook every friday night. I walk in and shout JIMMY! He shouts JEFF! back. Nice

0/21 STIFFED stupid lazy lady wouldn’t get off her big butt to sign the credit card slip. Had her kid walk it 2 feet to her- LAZY!!

3/18-1/31 Thanks for the buck! I loved climbing the 75 stairs to get to you door. Hope you don’t get any bbq sauce on you, 20 wings

STIFFY ALERT!! 0/13 Guy looked like a drug dealer. Had on a watch that looked worth $10 grand plus. Prob rhinestones from the be-dazzler kit

First the Lions win today and then my first run is a 5 dollar tip. What a day!

STIFFY ALERT-lady was singing the song from Dora the Explorer. I even finished the song for her and she still stiffed me. Guess I need vocal lessons

2/13- dude was in a smoking jacket. Must’a been expecting a playboy bunny. Sorry man no dice.

$62 on 13. Made more on Sunday than Friday again. Time to go home and go to bed 5am is just around the corner

4/16-0/12.96 STIFFY ALERT yeah she counted out the 96 cents for me. Thanks lady I guess it’s back to the Coinstar machine later.

This guy is killing it for all the right reasons! – enjoy this post written by the legend himself…

Everyone who’s working on paying down their debt has a specific moment they decide to start the long and painfully journey.  For my wife and me it was a couple of months after returning from an overseas assignment in China.

In February 2007 we had taken an excellent promotion which would fast track my career and put the money we needed into our pockets so we could pay off our debt.  At this point we still had not combined our money; we’d been married about 6 months.  She was working and paying for her car, credit card, and her other bills.  I was paying all of my bills, the house, and entertainment for us.  We were two people with proportional amounts of debt given our separate incomes.  We never sat down and talked about money, we never took the time to see the totals of our debt.  I was making good money and all the bills were being paid, so there must not have been a problem.  Budget, not us we didn’t need one.  Budgets are for poor people who don’t make as much money as we do.  The new job was going to take care of the debt anyway, right?  Our thought was once the normal bills were paid everything left over would be applied directly to our debt. 

We returned to the US in March 2008.  I decided I didn’t like the job and was not the right person for the position.  Add on the fact that we really didn’t like the location.  We were 2 of 20 foreigners living among 3.8 million Chinese.  I took a demotion and returned to my old job.  Now remember the new job was going to pay off the debt we had.  Upon our return we had made zero progress on paying down the debt, wasting a whole year of opportunity.   The next major problem was that we loss of the $1,950 per month by working outside the USA.  Upon returning all overtime was eliminated, the $2,000 a month I received before the trip was now gone.  We had a deficit of almost $2,000 per month to figure out how to cover. 

My wife worked in Media Planning (marketing) before our move to China.  She could go back to work to make up our money shortage, but we also found out we were pregnant for the second time.  Day care for a young toddler and a newborn would cost us $1800 per month, wiping out any money my wife could have made.  Back to the drawing board we went.  I’d been listening to Dave Ramsey for a couple of weeks when I heard him say that delivering pizzas was a great way to make extra income.  After talking it over with my wife, we decided that I would make the sacrifice and take on a second job.  I applied and was accepted to a new pizza joint down the street.  I started delivering in May 2008. 

In January 2009, I drafted our first budget.  Following Ramsey’s advice and after reading a ton on the subject of budgeting, I was able to put everything on paper and see how the money moved in and out of our hands.  We did this for a few months and felt that we were in control but the debt wasn’t going down.  There had to be a better way.  In April 2009, my wife politely suggested we seek out some professional help (she’d been asking to do this for quite awhile, but I was the roadblock to making it happen.)  Yep, I am definitely one of those people who never ask for help.  It’s a good thing my wife knows this and stepped in to straighten me out. 

I looked for a Financial Coach on the Dave Ramsey’s website under the Endorsed Local Providers section (ELP), and found one that was in my area.  With one call to the ELP we had an appointment set up for the next week.  After our initial counseling session my wife and I were excited to get started.  We drafted a better budget and started to use it.  Two weeks later we meet with our Financial Coach and were able to fine tune it and put his system into practice.

We had a total of 3 coaching sessions and after a little over 4 months after starting our plan we had paid off over $13,000 on our debt.  Wow, looking back this was the single most valuable step we’ve taken in our quest to eliminate debt.  Now 100% of the money generated through delivering pizza is applied to our debt.  We’ve paid off both vehicles and use that extra $700 per month to eliminate the debt.  We’ve also been able to pay off another credit card giving us another $100 per month.  That totals to around $2,000 per month including the pizza money that we put toward the debt. 

My wife and started with $101,000 to eliminate.  That’s including our second mortgage and all personal, credit card, and student loan debt.  We finally feel like we are making headway, our debt free date is Oct 2011.  This will be a long in difficult road, but having a plan and working it is the only way we will get there.  Being away from my family at night is one of most difficult things I’ve had to do.  When I look into my kids eyes though, I know it will be worth it.  They will have completely funded college accounts, they will have parents who don’t argue about money, and they will learn about money at an early age and will have their Father around to play with and love them.  It’s tough, but nothing in life that really matters is easy. 

If you’re interested in reading about the day in the life of a pizza delivery driver, follow me on Twitter at @deliverawaydebt.  I tweet about the crazy things that happen during my shifts. I’ve also started a blog to write about all the fun my family is having paying off debt.  http://deliverawaydebt.com/

Thanks to FinancialFreakShow for allowing me to share my story with you

 Jeff Kosola

-post written by Jeff Kosola - Thanks Jeff, your an inspiration!

1. Toss them to the curb and go back to the old standby pair. (makes good sense)
2. Toss them to the curb and replace those bad dogs with a fresh pair. (how I would have done it in the past)
3. Try to track down the world’s smallest screw and attempt to make those NASCAR pit crews jealous with my rockin’ repair work.  (likely not going to work but what the hell I’ll give it a shot, 3 it is!)

So I figured all I needed was the world’s smallest screw. I stopped into a sunglasses store and asked the girl if she could help. And bless her little sales-girl heart, she recommended that I might be interested in a new pair. So I asked her “do they cost the same price as the screw?”Apparently the answer was “No” since she never actually responded while she dug around in a drawer behind the counter. She came up with a small box with atleast 2000+ assorted little screws and several screwdrivers. While she “screwed around” with my glasses she again mentioned that they had 10% off this same particular brand and she pointed to a big hanging sign displaying two hotties wearing some sweet new shades having the time of their lives on the beach. She then told me I should try a couple pairs and see what I liked. So I figured what the heck, lets browse around while I’m waiting for her to do her magic. Sure enough 30 seconds later I began having those “hey, these are pretty nice” thoughts. Luckily before I asked to try them on I heard “looks like I got it here”.  Good timing little sales girl that was seriously a close one! So I thanked her for the free fix up job and hit the door. 

I felt like a new man. I felt like I had single handedly concurred the little sales girl and stared into the face of one the world’s vast marketing machines. At this point I was thinking about how easy it could have been to separate me from my cash if she hadn’t been able to fix my sunglasses.  But since I started my never ending fight towards my domination of personal money matters I’ve noticed the commercials and marketing BS seems much louder and more obscene than I remember. There’s a constant prodding to take action, to conform or to be different depending what wares they’re trying unload on you. You’re too fat, too skinny, too gray, too many wrinkles, your boobs are too small, and that car is sooo last year. The pounding never ends and thank goodness we don’t consciously take in all the sales and marketing that’s presented to us every day. If somehow I was able to pay attention to all if it I’d probably only buy two things…a bottle of Jack Daniels and a handgun and attempt to ease the pain from the overload it’d cause.

It’s an ugly world out there when it comes to your money so keep your guard up. Keep your financial goals in mind. Remember that your money is finite so spend accordingly.

After a lengthy discussion last week explaining how you can function in the world without needing a credit card Mark decided to toss out his 3 near the limit credit cards and instead replace them with cash (well as much cash as he has once he makes his credit card payments). It’s your call as to what will work best for you and your family but for myself I’ve decided that I really saw no benefit from carrying and using credit cards in my everyday consumer life. Apparently this idea sounded pretty appealing to Mark, he called me the day after our discussion and let me know he cleaned out his wallet to make room for some cash instead. 8 days later he’s still on the wagon as he puts it. I told him he sounds like a recovering crack head, he said thats about how he feels.    

 Now I don’t think everybody in the world necessarily needs to do this (I like making money on bank stocks too) but I do think most people should dump their cards. If you ever have a balance, ever pay interest, ever pay any fees or ever pay an annual fee on your card(s) then you should consider your options, otherwise it’s costing you money.

It’s your call how you handle your money but at least think about who’s really benefiting from your use of debt.

Congrats on being 8 Days Clean Mark! You’re still a financial retard (his words) but at least your one stop closer to climbing off the short bus. congrats!

Young people knows how to run fast but old people knows the way   -unknown

A survey of over a of over 1100 people ages 62-75 were posed a retirement question that only they have the experience necessary to answer. No matter how many finance blogs or books you’ve read, and no matter how many classes you’ve taken…nothing you have done to date, unless you‘re retired, will give you the experience and life lessons required to answer the following question:

If you could turn back time how would you have planned differently for retirement?

56% would have started saving earlier  

39% would have allocated more money towards retirement

27% would put money into safer investments

7% would put more into riskier investments

5% would have used a professional advisor

I found the results interesting because the two biggest I shoulda’s were behavior based mistakes and not really what I’d call investment mistakes. The two biggest mulligans they would take had little to nothing to do with investment proficiency and everything to do with the actual task of just getting the retirement savings in place and growing. So I’m thinking no matter what your situation may be right now it’s a good time to get about the business of putting yourself into a position where you can take the advice of these old timers and get things moving for your future. Imagine if you not only were able to run fast but you also knew the way.

So now that you know what the people “living the dream” have to say about their retirement savings what steps are you going to take to heed their advice? Or are you going to look back in a few years and repeat these same survey answers to the next crowd?  

Source: Harris Interactive and Financial Freedom Senior Funding survey of 1,140 seniors age 62-75

From October 2008 through April, an estimated 24 million U.S. card holders had their credit card limits reduced or accounts closed, even though they had no new “risk triggers” such as late payments in their credit reports, Fair Isaac says. Of that group, 8.5 million saw their credit scores fall.

Lenders are doing this to cover their butts, lower limits, and less risky accounts, to help ensure a predictable customer base with less loses in the future (thats the theory anyway.)

What people are whining about though is the fact that since their credit score is partially based one how much debt to available credit they have and how long these accounts have been open, they’re taking a hit to their credit scores when card issuers make these adjustments (BTW they’re allowed to make these changes according to the contracts the borrowers signed). In my post Zero Credit Score I talk a bit about how scores are calculated and how I feel about the formulas they use. The lower credit scores mean some folks may have trouble borrowing more money in the future, and if they are able to borrow they could receive less favorable rates (that could be the best thing that ever happened to some of these people!)

USA Today quotes some 62 year old lady named Reid to make their point. This is what they had to say:

Chase had closed two of her accounts, citing inactivity. Since then, four other lenders have closed or cut limits on eight accounts. One lender also more than doubled her credit card interest rate, prompting her to close the account.

Reid says the lenders’ moves have taken a toll on her credit scores.

Her FICO scores have dropped — each of the three major credit bureaus has its own FICO score — with her Experian score plunging the most, down 52 points to 722. She attributes the lower credit scores largely to lenders’ credit reductions. As multiple issuers closed or reduced her credit lines, Reid says, she borrowed from an inactive card to try to prevent it from being closed.

Wow! She sure showed them! My guess is with lenders making adjustments to six of her eight credit card accounts maybe…just maybe, she’s not as credit worthy as she thinks, just a thought Mrs. Reid.

Here is another great quote from this article:

Consumer advocates say regulators and Congress need to address lender actions that are unintentionally hurting credit scores. They say that as underwriting standards tighten, even a small change in a credit score could affect what rate consumers get on a loan — if they get one at all. Some analysts also say the fact that consumers’ credit scores can fall even if they’ve never missed a payment or exceeded their credit limits raises questions about the score’s usefulness.

Now here’s an even better plan, run to Congress to save you from the contract you signed up for! So to that I say if these folks (the companies) are making your life so darn difficult that you need to run to Congress to fix it maybe you should shut your whining pie hole and just stop doing business with companies you don’t agree with…just another thought Mrs. Reid, remember you signed the contracts. All eight of them! 

Then again maybe we can regulate the lenders out of business by taking away their ability to remain profitable, then throw an even bigger fit when they lay people off and we get to bail them out again.