DebtFREE-Revolution

If you visited this blog last week, then again this week, you’ve noticed a small change: at the bottom of every post is a link where you can “buy me a cup of coffee.”  I’ve also posted my thoughts and feelings on advertising on this blog, namely that I have decided I will not be running the “Ads by Google” or yahoo, or any other computer generated content-matched ads because they tend to promote things I avoid myself and urge others to avoid as well.  So this blog will be supported by donations and any profit generated from my cafepress store.

The plugin that does the little icon and link at the bottom of the posts originally was for beer LOL  Well, I think I did enough drinking back in my army days to last the rest of my lifetime, so I have switched to coffee.  Truth be told, I am lousy at making a cup of coffee though!

Before I got on the Dave Ramsey plan, I used to hang out at the local coffee shop and have a weakness for their mocha mint cappacinos, hold the whipped cream.  Those ran me about $3.50 per very large cup.  Since getting on my huge debt reduction kick, I have totally cut out the coffee shop visits.  This blow was softened by the fact that hubby makes a great cup of coffee.  I can’t figure out what or how, but his coffee always tastes like it came from a coffee shop.

Now the real dilemna is that hubby has been in South Korea since November, and is not due back until mid-November (two and a half months til I get a great cup of coffee!) so I have had to suffer with my pitiful coffee-making skills.  So I have reverted to a trick I learned in the army to make not-so-great and even bad coffee palatable: I add hot chocolate mix instead of cream or sugar.  If you’ve ever had bad army field coffee, you understand LOL

So until we are out of debt and have our fully funded emergency fund, I will not be visiting any of the coffee shops (cry, whine) but suffering with my bad coffee.  If you’d like to buy me a cup of real coffee, be sure to notate that when you click the link!  Otherwise, I will treat it like I do what used to be my coffee fund: apply it towards debt reduction.  Also, I have already had someone donate some money with the stipulation I use it to go ut to eat with my son, since surely he is suffering under my Draconian budget as well LOL  I will honor that wish on Saturday, with a trip to the chinese buffet so I can be assured the growing boy will actually get filled up and not want to snack an hour later.

According to an article on CNN Money less people are taking out ARM mortgages which is very good news, if you ask me!  The bad news out of this is the reason less people are taking out these nasty ARMs is because so many have already been burnt by them.  These Adjustable Rate Mortgages are nasty little things that are supposedly the result of the double digit interest rates seen at the end of the 70s and the beginning of the 80s.  Now, I’m not quite old enough to remember those rates myself, but I am old enough to have heard many folks who lived through them gripe about them.  Some blame former President Carter; others blame former President Reagan, and my economics textbook a couple years ago blames the oil shocks of the early and mid 70s.

Hmmm, oil shocks… as in the price of gasoline and petroleum products went sky high (for the time) when OPEC slapped the embargoes on us.  Now, we’re not the target of an embargo, but the price of oil has been going up and up in recent years.  If there really is a correlation between oil prices, inflation, and interest rates then it only stands to reason the interest rates would start rising too. 

So, many mortgage lenders used the “teaser rate” to draw customers in.  And some talking heads on the TV and various pundits in print and on the web have said the amount of these teaser rates expiring has triggered the mortgage meltdown - as I have been seeing it called - because the ones who get roped into creative financing are usually the very people who cannot afford the payments when the teaser rates expire and the interest rate adjusts.

All the bad news in recent months makes me glad I got “ripped off” as some call it with a VA Loan mortgage at 7.25% interest, fixed rate.  If I recall correctly, VA loans are never allowed to do ARMs.  However, they ARE allowed to do zero-down, and roll closing costs into the mortgage, which is what I did because back in 2001 I didn’t know as much about mortgages as I do now and went with the advice I was given.

Now, for the disclaimer: I am definitely not an expert on the subject of mortgages.  I’ve made a few mistakes myself, and the above is just my personal opinion on the current mess that has been dubbed the subprime mortgage meltdown.  For all I know, I could be full of it LOL but that really won’t change my opinion that less people taking out ARMs is still a good thing!

Gather Little By Little wrote an excellent piece for this week’s Carnival of Debt Reduction called “Good Debt?? There Is No Such Thing” that I whole-heartedly agree with.  What started LbL was an article on CNN Money That makes the rather “normal” assertation that debt can be labelled good as well as bad.  As someone who has been both in debt and debt free, I can say with certainty that debt free is the way to go!  It’s also what I am working my way back to!

LbL does differentiate between the degrees of bad debt: high interest unsecured debt (credit cards in particular) are the worst (baddest) of debt, with auto loans ranking as rather bad also … which I second!  I’ve paid off the credit cards and the car note, now the truck note is the last one standing and also will be the longest to kill off. 

Not-as-bad debt would be mortgages and student loans, as long as they are not abused.  Yes, those can both be abused: Do I need to mention the current subprime mortgage meltdown?  I have also heard of students using their student loans for living expenses as well as tuition and books, which inflates the amount borrowed.

Of course, the most questionable use of debt is to borrow to invest.  I know, I know, you see it on PF blogs all the time: “Borrow money at a low interest rate to invest it for a much higher return.”  I’ll say right now you won’t ever hear/read ME advocating that.  It just doesn’t make sense to me, since no one can predict what investments will do.  Up until this past year, real estate was supposedly a “sure thing,” as was the stock market.  Sorry, but I would never go into debt for an investment (which is why I don’t yet own investment real estate) because even a rental property is NOT a sure thing.

Perhaps the most entertaining part of LittlebyLittle’s post is the myriad of comments and spinoff posts he has gotten on the subject, and yes this is yet another one LOL.  It is a great debate in an intellectual way, but my gut agrees with the assertation that all debt is bad, and it is just a degree of evil to go into debt.

OK, so today was the first day of classes for the fall semester, which means I had to buy my college textbooks.  This is exceptionally painful now that the only classes I have left are the science classes.  I will be buried until December under organic chemistry and physics homework and studying!  One of my coworkers and a couple of my classmates think I am doing the equivalent of academic suicide by taking these two classes together, but I really don’t want to drag out another year before heading off to pharmacy school so I will just have to survive and hope my GPA does the same.

The worst part of college is the costs are going in only one direction: UP!  My physics book purchased USED is still $126.50.  Ditto for the organic chemistry book, plus the bookstore sold me a “survival guide” to accompany the organic chem text for another $95 saying it was required for the course.  The only problem was they sold me the 6th edition of the text and the 7th edition of the so-called survival guide.  I still have to go to the campus bookstore to get the lab manual for organic chemistry, which was written by the professor and is only available on campus.  Thankfully, the professor puts his foot down and tells the bookstore they cannot charge more than $31 or $32 for his lab manual, even though some in the class reported the bookstore charged them $45.  Any wonder why most students try to buy their books off campus?

Now for the good news for today: Even though I spent $331 this morning on only three textbooks, I can now take two back!  The survival guide is going back because it was simply the wrong book.  The organic chemistry textbook is going back because one of my physics classmates took it last year and couldn’t sell it back for more than $0.25.  So she kept it and after class gave it to me for free, saying I should just buy her a Pepsi on break one of these nights.  I plan to give her at least $20, since she is saving me over $100!

Now, for my twice annual rant about college textbooks, and college bookstores:  This is legalized highway robbery!  I mean, give us students a break!  The publishers change a few pages here and there to make a new “edition” every other year, which means we all h ave to buy new books at inflated prices ($186 for a NEW chemistry book this year).  If that isn’t bad enough, the bookstores are in on the racket.  They will sell you an organic chemistry book for $186 then 4 months later offer you $20 to buy it back, only to sell it to another student the very next semester for $126.  No matter how you look at it, the student is getting the shaft financially here.

OK, I’ve got that out of my system until the next round of buying books.  Feel free to add your own prices paid and rants about the whole subject.  I know I can’t be the only college student who can do this kind of math.

It may sound like a strange question on the surface, but what does money mean?  I’ve already spent many many keystrokes on the subject of money just here on this blog, and many many more keystrokes over at My Total Money Makeover site, and just this morning halfway through my first cup of coffee, it hits me: What does money really mean to me?

In the past, money meant stress and anxiety because it has always seemed I never had enough.  The few times I have had enough money for the month meant security and a feeling of relaxing deep in the pit of my stomach.  The many more months where it seemed I didn’t have enough money meant a knot in my stomach and restless sleepless nights wondering how to pay the next tuition bill, how to pay for textbooks, how to pay for my son’s back-to-school expenses, how to come up with car insurance premium, etc.  Remember, I never learned how to do a real budget until almost nine months ago!

During my first marriage, money also meant some hellacious money fights with my then-husband.  We both worked over 60 hours a week at one job, and rode in together, usually fighting about the money there and back (during a 45 minute commute!).  It eventually split us up, being the superficial symptom of some seriously irreconcilable philosphical differences.

Back in the spring, while my current husband was still the reluctant spouse, he accused me of only talking about money when he called or we caught each other online.  There is quite a bit of merit in that accusation, but this morning it hit me: I wasn’t really talking about money itself!  I was talking about things that are just easier to discuss using the money metaphor: a sense of security, hope, dreams of my college education, worries about those dreams because the GI Bill won’t last forever, and also our future: dreams, hopes, and worries.

Dave Ramsey loves to say he can figure out a couple’s value system by just looking at their checkbook register.  David Bach also equates how couples spend their money with their value system, and devotes an entire chapter in Smart Couples Finish Rich to writing out the values and dreams each spouse wants to accomplish using their money.

Really, when you look at money itself, there isn’t much to like or even love.  It’s just funky printed cloth and little chips of base metal alloys (no offense to the coin collectors out there).  So to say someone loves money isn’t really accurate.  It’s what the money means to a person!  So let me throw it open to hear what others think: what does money really mean?

It’s now official!  Hubby’s credit union finally processed and applied my nice big payment on the truck note, aka the stupid tax on wheels.  I just looked it up on kbb.com and it lists the value between $14,950 and $14,090 since I would consider it in “very good” condition but not “excellent.”  The loan balance is down to $14,007.89 so either way we finally have a few bucks worth of actual equity in it rather than being upside down with negative equity.  For the record, its value is still dropping “like a rock,” which still irks me.

Hubby finds the dropping value surprising and shocking.  He says he never knew how fast new vehicles drop in value!  In fact, he asked where all of this information was back when he bought the truck in late 2005.  I asked why his father didn’t teach him this, because I knew the car salesman knew this and wasn’t about to tell him!

He also had another unpleasant surprise when I told him about the ongoing problem with his credit union claiming we aren’t carrying insurance on it and tell us we can’t have the deductible over $500 and also that they insist on being listed as “loss payee” which means they get the first check cut if the truck is totalled.  He waited patiently while I called up my insurance agent’s office to have them set the credit union straight…again (2nd time in 8 months, since we switched to State Farm from GEICO, who promptly told them we had dropped it).  My agent’s office is very cool, and the gal promised to read said credit union the riot act about sending us nasty letters when all they had to do is call the office to verify that the insurance policy was still ongoing.  I’ve “only” been with State Farm for 17 years…gee I might swicth insurance companies in the middle of the night!  Yeah, right.

Then we got on the subject of credit cards.  I don’t know…it was late for him in Korea and I hadn’t had my first full cup of coffee yet LOL  I was actually disappointed when hubby said he melted his AmEx and Chase MasterCard.  I had this wonderful plan of taking our credit cards to Franklin, Tennessee and having Dave Ramsey cut them up with his huge pair of scissors on air while broadcasting.  When I asked if he closed the accounts yet, he said the time difference (he’s 14 hours ahead) makes it difficult to get through during the right hours on the right day. 

I asked about the Star card…he replies “I might need it.”  Yes, I was banging my head against the desk.  I’ve been so proud of him listening to the FPU audios that I burned on CD for him…but he is clinging to that Star card still.  He justifies it by saying it is zero interest on purchases in the military clothing store.  He says he might need it if something happens to me and he has to fly home on his own dime.  I can see this will be as hard as getting a security blanket away from a 4 year old.  Maybe he’ll feel he can give that one up after he gets home … I sure hope so.  We don’t need credit cards anymore because we have a solid financial plan that really works.

Browsing around this morning I found a blog post I really wish I had written, Do You Realize That You Are In Debt?  Seriously, this one is good!  It also triggered the forehead slap on this end, because DUH this really is the very first step.  You can’t address a problem until you acknowledge the problem.  At least that is what each and every 12 step program says.

So, I have to ask: do YOU realize you are in debt?  I have heard many say they aren’t in debt, then list things like a student loan, a mortgage, or even (gasp!) a car lease or payment.  If you don’t count these as debts, then just how can you work up a decent debt reduction plan?

Another one I tend to hear is people say they don’t have debt because they pay off their credit cards every month in full.  This one puzzles me, because when I start asking why they use a credit card to begin with, they claim it’s for a “free” 30 day loan.  Ummm, loans are debts…no matter how short or long they last.  Debt is debt is debt.  And debt is one place I don’t want to be in anymore!

What I really like about Lynnae’s post at Being Frugal is she tackles it from a personal integrity point of view.  Simply paraphrased, if you are in debt you are under obligation and the question becomes “Am I good for my word?” because debt is actually a promise.  I think that is an excellent way of looking at it.

This week there have been not just one but TWO Murphy’s Law attempts on my finances.  Neither one will be successful, though, and I won’t even have to touch my “baby” emergency fund to handle either one.  I love this plan Dave Ramsey calls “financial peace.”

Murphy Attempt #1: the City!

A while back ago, my neighbor’s car had the rear axle lock up, and I gave him permission to put it in my extra driveway while it was being repaired.  Well, last week I received a letter from the city’s board of codes and building letting me know that a car on jackstands was against city ordinance and it needed to be moved by this past Monday.  The fine for non-compliance is $50 a day.  I immediately let my neighbor know about it, and he worked all weekend and is out there again in over 100 F heat still trying to get it fixed.  I’ve tried to talk to the citing officer, but all I get is voicemail and no return call.

If I do get fined, I guess I will just pay it (I have the money sitting in my account) and mark it as “charity” in my budget since this neighbor is retired and on a fixed income.  Usually I pay him every summer to mow my lawn as a way to help out without offending his pride.

Murphy Attempt #2: Son’s school

I’ve been puzzled for the last two weeks since my son’s school hadn’t auto-drafted the tuition payment yet.  Today when I opened the mail I found a bill for the August installment of tuition.  After a quick call to the business office there, I discovered something was wrong with the auto-draft I set up back in the spring … oh, and that payment is due by Friday close of business.  Here I had been under the impression that the private civilian sector was better with this kind of thing than the army is…

Well, I haven’t spent the tuition payment yet…it’s been sitting in my account since the beginning of the month “just in case” there had been some kind of mistake, since I had some vague recollection of a tuition payment being due this month.  Yesterday I had been entertaining happy thoughts of using that money towards the stupid truck payment, but it looks like I did the right thing when I erred on the side of caution and did not spend it or send it off.

I usually do not make a debt snowball payment until the very end of a month, and these two situations have shown me that is the wisest course of action for me.  A little bit of planning, and a little caution on my part have averted what would have been two serious money crises and a lot of stress just one year ago when I wasn’t operating with a budget and an emergency fund (even though I didn’t have to use it).  Did I mention how much I love this financial peace idea?