Financial Freak Show

While cruising around twitter I came across a guy cruising around Detriot delivering pizzas in an attempt to cruise his way out of $101,000 in debt. To keep himself sane while he’s working deliverawaydebt updates his loyal followers on how his pizza delivery world.

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!

Honestly I’m stunned at how much money I’ve pissed away over the years on stuff I didn’t really need.  This was brought to my attention recently when the arm broke off of my sunglasses – my sweet pair of sunglasses. Now I had a couple options here.

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.

This is a quick shout out to my friend Mark. He, as of today is 8-days clean! He has managed to live the last 8 days of his life without using his credit cards. I know this may sound like no big deal but to him it is. He has been financially retarded (his words) for many years and has now decided to make some adjustments. 

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

A USA Today article reports that credit scores are dropping due to credit card limits being lowered by card issuers. Credit card companies are closing risky accounts and lowering borrower’s limits now that fees and fines will be more regulated (I can’t blame them for that, they have the same risky customers but less legal profits to cover the lending risk).

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.

It’s hard to dodge all the input and influence of people around you when you’re itching to drop some cash on a purchase (especially a big purchase). It’s even more difficult to ignore the marketing and sales pitches that come at you constantly telling you what normal people are doing with their money and how crazy you’d be to not take advantage of the same great offers.

Just ask any car dealer or mortgage broker (or sadly enough many politicians) how much they think you can afford and I bet they tell you it’s more than you thought you could. Case-in-point – Cash for Clunkers program and Adjustable rate mortgages. Both of these programs were designed to quickly and painlessly separate the consumer from their hard earned money. Though these deals sound like they’re out there to benefit the consumer that it really depends on if the consumer is signing up for deal that’s truly in their best interest considering their own situation. Cash for Clunkers is especially financially lethal because it has now encouraged over a million people to close their eyes to common sense and invest in a guaranteed depreciating asset while grabbing their share of the 3-billion dollar* government windfall. According to Kiplinger’s Magazine it’s estimated a new car looses an average of 20% of it’s value the day it’s purchased. That means for example a $40,000 Lexus ES300 you purchase on Saturday will only be worth $32,000 on Sunday – and this doesn’t even come close to the 65% loss in value over the next 5 years bringing your value down to a pathetic $14,000. Money guy Dave Ramsey has it right when he says “the worst car accidents happen on the showroom floor.”

I’m all for dropping some cash on your ride but do it because it makes sense for you and your family not because they can’t shut up about it on the news. Remember always, always, always think long term when making financial decisions and if somebody’s telling you it’s too good of a deal to pass up they may be right but make sure you’re the one making that call not them.    

Oh well, at least one good thing came out of this Cash for Clunkers program…there are now a lot less warn out cars on the road polluting our precious environment with their filthy disgusting “Election ’08” bumper stickers.

If you’re trying to take your debt out of your life focus is what’s going to get you there (though some extra cash won’t hurt!) Before I had a very well defined plan in place for removing all my debts I was attempting to pay down all my balances at the same time. Each month I would add 20, 30, sometimes 50 bucks to each of my debt payments to chip away at the balances. I noticed I was paying extra on everything but not making any significant progress (well not life changing progress anyway). So I took the Dave Ramsey “Debt Snowball” approach and it worked….it worked well.

I began adding all the extra money onto the one debt with the lowest balance and just paying the minimum that was required on the rest. (I did care about the interest rates because this stuff wasn’t going to stick around for long!) At this point it was around $300 that was being spread across 7 different payments each month. By this time my lowest balance was a Master Card with $1248 on it (one of our Master Cards that is). I was now dropping $420 payments on a $1200 debt – and that’s assuming I wasn’t able to whip any extra cash to add a little more fight to the battle! Once that was all wrapped up I threw that $420+ on top of the next debt’s minimum payments for a total of $525 and Round 2 was in full swing.

Have you tried the “Debt Snowball” approach yet? How did it work out for you?