Archive for the ‘debt’ Category

139th Carnival of Debt Reduction: Debtors Prison

Monday, May 12th, 2008

Welcome to the 139th Carnival of Debt Reduction, the Debtors’ Prison edition.  We may not have debtors’ prisons any more, but there is still Credit Hell!  According to wikipedia, a debtors’ prison was a prison for those who are unable to pay a debt.  The first category for today are the progress reports of those definitely not headed to debtors’ prisons:

“Prior to the mid 19th century debtors’ prisons were a common way to deal with unpaid debt.”  Sounds scary, doesn’t it?  Fortunately, we have better, non-incarceratory ways of dealing with debt today!

“In the United Kingdom, the Debtors Act of 1869 abolished imprisonment for debt, although debtors who had the means to pay their debt but did not do so, could still be incarcerated for up to six weeks.”  Student loan debt lasts much much longer…

“In 1833 the United States reduced the practice of imprisonment for debts at the federal level. Most states followed suit.”  The state versus federal dynamic in American government makes some interesting legal situations, which brings us to credit cards:

  • Christopher Johnson presents Getting A Handle On Your Credit Cards
  • Maria O’Brien presents Dealing with Credit Card Debt
  • Brice Hogan presents 3 Steps to a Lower Interest Rate
  • Ray presents Debt Reduction With Low Interest Balance Transfer Credit Cards
  • J. Savings presents Budgets are Sexy.: Credit Cards are cool

“The Province of Georgia in the colonial United States, was originally intended to be settled by debtors.”  I found this little tidbit quite amusing!

“Debtors’ prisons varied in the amount of freedom they allowed the debtor. With a little money, a debtor could pay for some freedoms; some allowed inmates to conduct business and receive visitors; others  even allowed inmates to live a short distance outside the prison–a practice known as the ‘Liberty of the Rules’”

Whew!  That’s a lot of quality entries this time around!  I do hope y’all enjoyed the fun with the debtors’ prison theme :) and be sure to read these great posts on reducing or eliminating debt.

Stagflation Survival Tip #2 Avoid Debt

Monday, May 5th, 2008

Here is the second “stagflation survival tip” I’ve picked from an older friend’s brain over the weekend: avoid debt.  (First stagflation survival tip was stock up.)  Gee, I say that one in any economic situation LOL so what makes stagflation any different?

Debt and Inflation

The big difference is that the talking heads and economic “gurus” out there will try to tell you that debt is the smart thing to do with money in inflationary and stagflationary times!  The rationale is that the dollars you repay debt with will be worth less than the dollars you borrow.

This makes sense on the surface, and if the only problem we have is straight inflation I might be half-way inclined (if I could put aside my zealous anti-debt sentiments, that is!) to agree.  But we don’t have only inflation to worry about: the economy is in some form of downturn - heck even the president has admitted that much!  Some economists think we are in recession, and the true pessimists among them are calling this the start of a depression.  While I haven’t gone quite that far into economic pessimism just yet, the truth is the economy is not as good as it was even a year ago.

Debt and Stagflation

So it ain’t just the inflation, it’s the economic downturn and inflation (classic definition of stagflation for those wondering).  How does this change your battle plan?

Well, if you read this blog regularly, you won’t be wanting to run out and get into (or back into) debt in this lifetime!  LOL  For the record, my friend who gave this advice has and uses credit cards, and believes debt is a tool, not a form of indentured servitude or slavery.  So, when someone who uses debt says to avoid it, it’s time for folks to listen up!

First, the inflation side: since the value of the dollar is no where near what it used to be, and a dollar will buy you less and less in inflationary times, you want to build in an “inflation cushion” into your budget.  I just did this for the May budget, with $50 extra allocated for groceries “just in case” while raising my gasoline category for the second straight month and the third time this year.

If you go out and get yourself some debt during these times, that reduces the amount you have as inflation cushion.  Your wages will be behind the power curve in regards to inflation and expenses, as employers will have higher costs just as you do and will try not to increase their expenses.

Debt and Recession (economic downturn)

Finally, while reading up on all the factors that go into a recession as defined by NBER (the ones who get to make the “official” call on whether we are in a recession or not) I noticed economists break up the parts of a recession into three categories: leading indicators, coincident indicators, and lagging indicators.  The leading indicators can be considered warning signs, the coincident indicators are the confirmation signs, and the lagging indicators are like that nagging cough that sticks around even after you are over a bad cold.

The lagging indicator that really caught my eye has to do with unemployment: duration of unemployment.  This is a  LAGGING … which means it doesn’t start up until the recession is already underway.  The most troubling thing is that duration of unemployment (how long until the next job is found) is one of the really straggling lagging indicator, and lasts partway through the recovery period.

So, the longer the downturn - or recession - lasts the greater chance you have of losing your job and having problems finding another.  Why in the world would anyone want to take on new debt with that possibility looming?  While I believe “Now” is always the best time to work on getting out of debt, stagflation is an even better argument for those who don’t share my disdain (or hatred) of debt.  Reduce your debt load as much as possible, because you might need the extra breathing room in your budget! 

I’m starting to sound like a true egghead, but this is what happens when college students have time off.  LOL  Besides, well-informed is well-armed, and the economic situation looks like it may be a big financial battle.

Paid Blog Posts for Payday Loans

Thursday, April 10th, 2008

I’ve noticed a rather distressing trend in many mainstream blogs: they write paid posts advocating payday loans.  I’ve known for a while that payday loan places have been running aggressive advertising campaigns on the web which include buying paid posts on blogs.  I just naively assumed most bloggers wouldn’t fall for that.

Well, I admitted it was a naive thought!  I also thought people read PF blogs more than any other type LOL  A few illusions have been crashing down over the past several months.

I’ve scratched my head, wondering what justification bloggers tell themselves to help them sleep at night after writing a paid post for a payday loan place, and then it occurred to me: not everyone knows how bad payday loans truly are.  Seriously, how long did it take Congress to figure out what payday loans do to the military?  How much longer did it take Congress to finally write and pass a law limiting how much interest payday loan places are allowed to charge military members?

Even though Congress finally woke up and discovered how badly payday loans were affecting military readiness, those same protections are not extended to civilians.   The average interest rate on a payday loan is 400% (NOT a typo!) with anecdotal evidence of up to 800% interest on some (Yes, that is EIGHT HUNDRED PERCENT interest) when “processing fees” are factored into the equation.

So why would otherwise ethical and honest bloggers be accepting money to write posts extolling the (supposed) “virtues” of payday loans?  That question has been rolling around my mind for well over a week, since I saw a payday loan paid post at a blog I respect.  Then, the answer occurred to me: some people just don’t know how bad payday loans truly are

Not everyone lives in a military town where the payday loan, check cashing, cash advance, and title pawn shops line up thicker than the fast food, bars, and strip clubs outside nearly every single gate leading off post.  Not everyone has lived on the “poor” side of town, where every liquor store has a payday loan place attached to it.  Not everyone has stuck their foot into that trap due to ignorance.  Not everyone has served in the military and seen soldiers trapped in the debt cycle, or know about the hideous collection tactics payday loan places use.

There are some bloggers (even PF bloggers) who just don’t see a problem with advertising payday loans.  There are also quite a few who just don’t know about how nasty payday loan places truly are (and very VERY bad for the “customer”/victim).  To the first category, I have nothing that I can say that will change their minds.  To the second category, I truly hope this post and these links will open your eyes and convince you to take down those paid posts that advocate payday loans.  There is a reason payday loans are often called “legalized loan sharking.”  They make so much money off their “customers” (victims) with their 200-800% interest that they are easily able to afford to pay handsomely for these ads and blog posts - and still make profits.

Common Sacrifices to Get Out of Debt

Wednesday, April 2nd, 2008

This phrase has turned up in my search hits, and I also promised Middle-Aged Man over on his blog I would do this post.  Most people who want to get out of debt quickly will make a budget, then start cutting. 

Naturally, the first thing you need is a budget!  Once that is drawn up and you see where your money is going (and how much) here are the most common budget items that go on the chopping block and get sacrficed:

  • Eating out: Restaurants can kill your cash flow fast.  trust me on this one, it is a vice I struggle with myself.  While dine-in restaurants can take large chunks out of your budget at one time, my problem has always been the convenient and “cheap” fast food drive-through while out and about and pressed for time.  Yes, that’s a double whammy: the food is less than nutritious and it hurts the budget.  When I first started out on the budget last year, I allocated only $20 per week for all eating out.
  • Cable or satellite television: This one waited until last summer to go on the chopping block.  Now I am not even sure why I waited!  Since there is no “a la carte” channel choosing option available in our area, we were paying for 60 channels and only watching about 15 of them.  Last fall, I decreed that until the cable company offers the “Nerd Channel package” we weren’t going to bring this back (nerd channels: Sc-Fi, TLC, Discover, A&E, History, etc.  You know, stuff “only nerds watch” that I do enjoy.)
  • Cell phone package: If you are under under contract like we are, then the cell phone calling package gets stripped down to the lowest level.  The teenagers in the house will cry and moan, but as an adult I personally see no reason to text message “lol” and “what u doin?” all day.
  • Store brand groceries: Buy the store brand at the grocery store instead of the name brand!  Usually they are made by the same company anyway, so this isn’t much of a sacrifice except in image.
  • No “window shopping” for entertainment: So-called window shopping and mall-crawling end up in impulse purchases that we so often don’t need.  If you need to venture into the land of retail temptation, make a list and stick to it!
  • Cut the clothing budget: Buy only what you need.  I don’t consider myself a clotheshorse, yet I have enough clothing in my closet to last two weeks without doing laundry.  Honestly, I don’t know how this happened.  Children outgrowing clothes is a necessity.  Work clothes are a necessity.  A nice outfit you might wear only once a quarter isn’t.
  • Movies or DVDs: I haven’t been able to stomach movie theater ticket prices for about half a decade now, unless you are talking about the dollar movie theater (which is now $1.50 even!), but impulse buying DVDs were a drain on our finances.  We now have a movie-buying policy: If we won’t watch a DVD at least five times we don’t buy it.
  • Home phone (Land line): If you have a cell phone package that includes long-distance, you can cut your home phone service to local only, then strip off all the little add-ons like call waiting, caller ID, and about a dozen other little services that I don’t even recognize anymore. My monthly home phone bill is under $21 a month!  That is for local calling only, which is the only thing I use it for anyway (and to receive incoming calls from friends and relatives who have had that phone number for years).  I’m even thinking of getting rid of the home phone completely.

This is just a list of the simple little budget sacrifices that often add up to a surprisingly large number!  Cutting back on these things often doesn’t even feel like a large sacrifice after a short time of adjustment (usually two months max).  I haven’t even touched the larger sacrifices some folks make to slash their budget like selling vehicles with notes attached or actually going back to a dial-up internet connection (which I shudder at!).

Now I’ll throw out the question: What are some common budget sacrifices that you know of and have done?

My Podcast Debut - Interview on Field Guide

Wednesday, March 26th, 2008

The podcast interview went off without too much trouble LOL considering I was a bit nervous and there was a typo in the call-in number at first.  Since I used to be in the Army and lived under the “be five minutes prior to the five minutes prior,” that glitch was fixed before the show was scheduled to start.  Big thank you to Duane of All American Blogger for inviting me to speak on his Field Guide to American Politics podcast show (direct link to my interview).

I’m listening to it now, and my immediate reaction is: I don’t sound like that!  My son disagreed with me when I said it out loud.  I sound almost like a female version of Dave Ramsey LOL but my voice sounds “funny” to my ears.

We didn’t talk politics, but we did cover all the questions he had sent me in email.  We talked about making a budget, setting up an emergency fund, saving money when buying things, the debt snowball, and of course just how great life is once I became debt free.  He asked me about why I started the blog, and where I get my inspiration.  We also talked about marketing and resisting impulse buying.

Hubby is now chuckling at hearing me on the internet.  Of course he hears all of these things every day.  Now, if you want to (and are brave enough) you can hear it also.

Too Much Debt

Wednesday, March 19th, 2008

I am still fuming about the Fed rate cut, and as I read around on various money news sites, I keep seeing a little phrase that just irritates me to no end: the notion that our current economic problems here in America are “caused by” the subprime mortgage debacle.

The subprime mortgage mess isn’t a cause, it’s a symptom.  It’s like saying your fever is the cause of your illness, instead of addressing the underlying root problem.  In the illness case it would probably be a viral or bacterial infection.  In the economy, the root cause is TOO MUCH DEBT.

Consumers are overextended like never before: zero down adjustable subprime mortgages are only the tip of the iceberg.  There’s auto loans, there’s credit cards (and more credit cards), there’s personal loans, there’s HELoCs, there’s HELs, and worst of all, there’s loans against your retirement savings (for those who have any retirement savings).  With so many different ways to dig yourself into the debt hole, is it any wonder the economy is now flailing?

Consumers aren’t the only ones with the debt problem: businesses are now being described as “overleveraged” which I guess is a fancy term for being too far in debt.  From what I have been reading, the overleveraging is at least half the reason for the financial markets’ volatility.  The other reason I am seeing is sort of related: no one is sure how much these mortgage backed securities critters that all the subprime mortgages were packaged into are actually worth, or just how risky they are.

We can’t leave our government out of the debt-binge party either.  Just how much of a budget shortfall does the government really have?  Is anyone even sure anymore?  The numbers quoted make my head hurt and eyes glaze over, and some watchdog groups claim those numbers are way under actual.

Basically, it all boils down to too much debt.  It’s like a long weekend fifteen kegger frat party, and now it’s the first day back to class and everyone is waking up with a hangover.  Instead of admitting to drinking way too much, everyone is saying it must have been  because the beer was so cheap that they are hung over.  Instead of admitting too much debt is the problem with the American economy, people say it’s the housing bubble and subprime mortgage contagion that is spreading.

Just call it like it is: the American consumer has too much debt.  American businesses have too much debt.  And the American government sets the standard for having way too much debt.

So what is the solution?  Gee, if I had that answer I would be making a whole lot more than minimum wage plus tips!  On the personal level, use your so-called “economic stimulus” check to start digging out of debt as you make a budget and get your personal finances under control.  I really don’t see much of anything the average person can do about the business side of things, and as for government: VOTE.  Vote even when the choices stink (like they tend to do).  And don’t wait for the government to help you, they have their own debt to worry about.

In Debt and Need Help

Sunday, March 16th, 2008

I’m getting a huge amount of search phrases that basically say the same thing: “I’m in debt and need help!”  It’s sobering and sad to read the different variations of search queries that bring some folks to this blog:

  • how to become rich?  help im in debt
  • how to get your life together when you are in so much debt
  • the sucking sound of debt
  • i owe a lot of money and i want to get debt free
  • can i get myself out of secured debt?
  • how to get out of debt without wife finding out
  • anyone who can help bring out someone from financial debts
  • i am in such debt how to get out
  • i am 42 and broke how do i get out of debt
  • will i ever be able to get out of debt and buy a home again
  • i am in debt. want to get out it.
  • spouses that dont understand debt
  • how to get debt paid and stay happy

These are just for the first 15 days of this month!  I’m getting more all the time, so either the search engines are listing me better, or people are searching for these things more than before.  I am hoping the search engines are listing me better, but I have this niggly little feeling it may be a combination of the two.

There was one search phrase on the list so far this month that made me smile:

  • getting out of debt encouragement

I hope I was listed as number one for that search term!!  I hope the people who found this blog from all of the above listed search phrases found some encouragement here!  Some of the searches sound desperate, some sound bereft of hope, some sound depressed … but I sincerely wish for everyone who made the search and clicked through to my site to have found a little encouragement for their struggle to get out of debt.

Getting out of debt ain’t easy.  I wasn’t blogging back when I started this financial journey, so y’all didn’t get to hear my thoughts, fears, and occasional despair.  It happened, but I stuck with the plan and kept my eyes on the goal: ridding myself of the debt that was dragging us down.  I had my down days, and I had a few times when I totally spazzed out about where the money would come from.  But it **IS** possible.

I originally started this blog to chronicle my trials, tribulations, and victories as I worked towards becoming debt free.  Now that I have achieved my goal, I hope this blog can serve as a beacon of hope to others who are thinking about getting rid of their debt and encouragement for the ones who are currently doing battle with the debt monster.

I’m going to keep an eye on the search phrase list in my stats.  I have already compiled a list of search phrases that need posts to answer them, and will be adding to that list.  Search engines have a strange way of pulling seemingly random words out of a post or page of posts to give a query results, and it truly does make for blogging inspiration for me.  People are searching for these things.  I’m going to try to offer a few answers, and a lot of encouragement!

Debt Collectors on the Phone

Wednesday, March 5th, 2008

Nowadays, I don’t get debt collection calls for me.  Now, if the phone rings and it’s a collection agent on the phone, they are looking for my ex-husband so I just make fun of them for actually loaning that man money.  LOL  But, once upon a time those calls were for me!  These are some of the ways I dealt with these calls.  Note: this was before I ever heard of Dave Ramsey, but he advocates similar (although more polite) tactics.

Collector: “Blah blah blah … you need to pay $XXX of money … blah blah blah”

Me: “You can’t squeeze blood from a turnip!  You’ll get your money when I have it to give.”  Note: this line is especially fun if the call center is in India or even the NorthEast part of the U.S.  Somehow that phrase is never in their call scripts.

Collector: “Blah blah blah … authorize a post-dated check … blah blah blah.”

Me:  “I don’t write or authorize hot checks anymore.  Besides that is slightly ILLEGAL in this state.  Are you trying to get me to break the law?”  This one apparently isn’t in their call scripts either, and can often be fun.

Collector: “Blah blah blah … authorize monthly payments to be automatically withdrawn from your account … blah blah blah.”

Me: “Y’all (or XYZ company) already screwed that one up royally and I am not doing THAT one again!”  That is the polite version, I was known to use much stronger language when hung over.  This one is usually followed by much crying and pleading about how they will change or not be that way … kinda sounds like a dumped boyfriend (girlfriend) who got the boot for wrongdoing and promises to change. 

Perhaps I should mention that I was usually hung over when collectors called, and somehow they always called me in the morning.  A few called at ungodly hours of the morning, and when I not-so-politely pointed that out to them (and explained the concept of different time zones in similarly rude fashion) they still tried to insist they weren’t breaking the law.

Law?  There’s a law governing what collectors can and can’t do??  You betch yer britches there is!  It’sa federal law called the Fair Debt Collections Practices Act, and right here it is in pdf format.  Here is the wikipedia page on it, which might be more readable.  Here is a handy Q&A format on the FDCPA from the Federal Citizen Information Center.  And finally, here is a page from a law site which includes some sample letters you can use to deal with collectors - especially if you don’t like the thought of using the line “I have a handgun and a hangover … so come and try to get the money!” when they threaten to collect in person … of course such a threat is technically illegal on both sides LOL  Yes, I really had one collector threaten to send someone in person, and I really did use that line.  Funny, that one didn’t call back for at least a year!  But in all seriousness, they are limited to only making valid threats, and cannot make any type of physical threats.

They cannot garnish your wages without a lawsuit.  They cannot threaten your job.  They cannot call up your friends and family and tell them about your debts.  If you tell them to not call you at work, they have to stop.  They cannot put a lien against any of your property without a court judgement (that is part of the lawsuit process).  They cannot call at unreasonable times of the night or early morning, and that is using YOUR time zone, not theirs.  Learn the law if you are prioritizing your bills and receiving debt collection calls!

At the time I received most of my debt collection calls, I was not aware of the law.  I could have had so much more fun with the collectors if I had!  So, if you are getting calls yourself (especially from collection agencies) it would behoove you to learn this law, then use it like a club to beat them back because they WILL try to verbally abuse you and get a response.  Debt collecting is pure psychological warfare, and if you flinch and give in, they have won that round … and notated it in their database so they know which tactics work on you.