Debt

Housing the Right Way for You

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Who Listens To The Little Guy?

Who Listens To The Little Guy? (Photo credit: infomatique)

 

I haven’t followed the status quo thinking regarding finances because for a long time. It seems to me like the deck is stacked against you if you follow the road that’s been laid out. Then the road is re-routed and the net cut away, and you’re left dragging a mountain of debt around for decades. I’m not a Christian but I know for a  fact the Bible says “The borrower is a slave to the lender”. Not the position I want to be in, Christian or not.  Been There Done That, got the t-shirt in different colors.

The old paradigm that our parents operated under is no longer viable for anyone 65 and under and the sooner you realize this the better off you’ll be.

The main one and the biggest expense…housing. What is it they always tell you? Stretch a bit to buy a house a bit bigger than you need so you can grow into it, have room for the family gatherings, traveling visitors, etc, in the best school district and it’s an investment that increases in value.

Excuse me while I find a shovel for all that poop. 

Are you having family gatherings every day? Probably not. As a kid I know some of y’all remember either your grandparents, parents, or somebody in the family who had the “living room” or “dining room”  with the plastic covered furniture that you only pass through to get to the main area of the house, only gets used 1-4 times a year and you betta not have your behind playing in there?!!  Why call it a “living room” or “dining room”?!  There was no real living or dining being done in here on a daily basis. Not even part-time living and dining.  Sorry but this never made any sense to me as kid and I was not paying any bills so it made absolutely no sense to me when I was “encouraged” to leave home at 18-19 yrs of age having to live on my own.

Out of town or overnight guests every day? Probably not…and at that point they aren’t guest anymore and need to be contributing to the household. Again makes no sense to buy to have all that space because you can’t get a discount on your mortgage payment and property taxes based on this unused space for most of the year.

Buy a house in the best school district. Another play on your emotions. Your house in the best school district is no guarantee that your child is going to learn anything. Besides,  most if not all schooling teaches kids to be drones and makes you a slave with no time to talk to,  and teach your children about the way life really works. Then, in turn they become slaves because they don’t know what the heck is going on continuing the vicious cycle.

So, the younger generations (after the World War II generation) have been encouraged to buy too much house and renovate to have too much house with the promise of ever rising home values which they forgot to tell you meant higher prices for you. Higher prices usually means higher upkeep, higher property taxes etc.

This ideology was probably ok (emphasis on “probably” because I have my doubts that it was ever ok even for those it appeared to benefit) in an era of darn near cradle to grave job security with pensions and paid healthcare in retirement. Now unless you’ve been living under a rock, that employment scenario is rare nowadays.  And if you do manage to find it, trust me in 5-10 years it will disappear one way or another. That’s a whole ‘nother post. 

Alright, I’m not saying you should live somewhere that you are scared to go home each day but all the above reasons given to us to buy a house are IMHO the worse reasons to buy or even keep a house if it’s draining your budget. A house should not be bought as an investment like a stock or mutual fund. It’s not nor should it have ever been put in the same category. The stock market is basically a legalized casino. Most sane folks don’t take their bill money down to the casino every month.

What I am saying is a house should be first and foremost a safe place to lay your head and your place of operation to nourish and replenish yourself physically, mentally and spiritually. That’s the investment that propels you into a lifestyle which allows you to get further along your life path.  It sounds like the same thing but here is the difference. You set the value of the investment by knowing your values, not the financial talking heads who are not paying your bills. But it does take courage to get off the beaten path.   

How do you set the value? You buy with your life goals that you have determined in mind with reality firmly in mind. Choices made now have a huge effect on what the future will look like. Now this means you will have to do some work.

Is it important to you to have a place that you can show off but you are never there to enjoy it because you and your SO (significant other)  have to work 80-100 hours a week to make the mortgage and upkeep? Or would you rather have more time, cash and have a place that you and everyone in the household can clean up in an 1 hr or so?

If you are already in a house, are you straining to live every month? Is it important to keep up appearances or would you rather sleep well at night? What message do you want to teach to your children if you have any especially if they are young teenagers or young adults?

Only you can and should be the determinant of what your values are, meaning what’s important to you. What’s important to me might not be what’s important to you. I don’t know for sure but I would not be surprised if my house today if I wanted to sell it, might be worth less than the price I paid for it including the interest on the mortgage and “improvements”. That does not matter to me because the skills I have learned during the 13 years I’ve been here,  the peace of mind and quality of life gained over the last 7 years being totally debt free are priceless.  Has it been easy, heck no.  But I got some of my life back that was lost a long time ago. Also, I’ve been able to significantly lower the stress levels due to happenings within my household, mine and my husband’s family of dealing with elderly parents during that time because debt was not hanging over our heads. My house is small by today’s standards, the standards when I bought it… it’s a 2 bedroom/1 bath, I have to go outside to get to my laundry room and I have no garage. I mentioned the price and interest here.

Told ya, I don’t follow the status quo.

 

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Getting Outta Debt pt 6- Airing Dirty Laundry…Debt

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This is a republishing of a post that’s part of a series on “How I Got Outta Debt” written back in 2009 when this blog was on Blogger. I know I keep saying it but this is just as relevant today as it was yesterday. If you are in the position to do so I hope that it inspires you to take control of your finances and your life.

 

Laundry is hung to dry above an Italian street.

Laundry is hung to dry above an Italian street. (Photo credit: Wikipedia)

I’m back with the calculations on all my debt listed in part 5 of this series. I’m going to show my debts, the amount of time it would have taken me to pay off the debt based on the payment amount and the total amount I would have paid doing it the way most folks do/the way the creditors want you to.

What was/is their plan? To pay the minimum payment for the maximum amount of time. This results in you paying the maximum amount of money on the money you borrowed. Translation…it’s more money that you have to work for to make these payments…forever. (it will feel like that) Here is the lowdown and remember APR is the interest rate:

 

         DEBT/ AMT/ PAYMENT/ APR/ PAYOFF TIME/ TOTAL AMT PD
  • Visa: $2371.53, $50 per mo, 12%, 65 months, $3250.00
  • H.F: $1000.00, $19 per mo, 9.9%, 70 months, $1330.00
  • Car: $3571.69, $245 per mo, 7.9%, 16 months, $3920.00
  • Capital One: $984.43, $19 per mo, 9.9%, 68 months, $1292.00
  • BoA: $4588.00, $51 per mo, 9.52%, 159 months, $8109.00
  • Perkins: $2027.15, $40 per mo, 5.00%, 58 months, $2320.00
  • Direct SL: $5786.44, $52.52 per mo, 4.22%, 140 months, $7352.80
  • Mortgage: $48175.00, $413.06 per mo, 6.25%, 181 months, $74,763.86

The total amount paid when everything is paid off according to the normal way of doing things…$102,339.86!!!

 

That $102,339.86 figure does not even include what I already paid when I had my head up my butt! Remember I mentioned that I quit playing around and got serious with this July of 2001? Well of course based on the payoff time, I would have paid almost all of these off by now (November 2009).  However, I’d still be paying on the Direct SL (Student Loan), Bank of America and the mortgage. That’s $518 on top of utilities, food, gas and whatever else for everyday living. That might not seem like much but when your income has been slashed by 50+ %,  which it had been at the time I first wrote this post, that’s a heck of a lot of extra money to have to come up with.

Also when I was writing this post, I had heard on YouTube,  a news clip from MSNBC that credit card companies are trying to jack up rates ahead of legislation going into effect to stop these practices. Well, credit card companies have always had this power and all they’ve had to do was give you a 15 day notice which is one of the reasons why I chose to get rid of them first.

In the next posts, you’ll see the RDRP- Rapid Debt Repayment plan, better known as the debt snowball plan in action.  I used that same $889.58 to not only pay off all debt except for the mortgage but to pay off all debt including the mortgage. Yes folks, it is possible to pay off all of your debt and not take the rest of your life doing so.  And you’ll see how you save not only money but your sanity as well.  But you’re gonna have to check back in to this series to see how I did it.

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Gettin’ Outta Debt pt 5-My Debt Numbers

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This is  republish of a blog post that’s part of a series “How I Got Out of Debt” when this blog was on Blogger back in Oct 2009. It is still relevant, if not more so given today’s economic environment.

 
I’m back from part 4 of this series so here’s the post showing where I started on my get the hell out of debt as fast as I can plan. You may recall from a that post in between the debt elimination, I was also saving up for an emergency fund of 1 years worth of expenses. Once that level was achieved, everything extra went towards debt payoff.

Around July 2001 is when I got super duper serious and ready to do just about whatever it took to get the heck out of debt. Now my numbers are slightly off since credit minimum payments are not the same and back then, the minimums were really low percentage wise of the balance owed. Keep in mind the creditors are not trying do you any favors because their mission is to keep you perpetually in debt, thereby making lots of money off you in interest. Though they still do that but it’s my understanding that they have raised the minimum payments which allows you to pay off your debt a microbit quicker. You will see later just how costly it is to remain in debt using myself as an example. Here are the numbers:

Visa – $2371.53, APR 12% approx, $50 per mo.
Household Finance – $1000, APR 9.9%, $19 per mo.
Car Loan – $3571.69, APR 7.9%, $245 per mo.
Capital One – $984.43, APR 9.9%, $19 per mo.
Bank of America – $4588, APR 9.52%, $51 per mo.
Perkins Student Loan – $2027.15, APR 5%, $40 per mo.
Direct Student Loan – $5786.44, APR 4.22%, $52.52 mo.
Mortgage – $48,175, APR 6.25%, $413.06 per mo.

Adding up all the payments, I was paying $889.58 per month just for debt service. $889.58 before I have put any food in my cabinets so I can eat, gas in the car so I can get to work to make the money to pay these bills, insurance for the car I need to drive to get to work to make the money to pay these bills, utilities like water to drink so that I can live to drive to work to make money to pay these bills, etc!! It’s a vicious cycle! 😦

OK, I know y’all are probably wondering how I had such a small mortgage balance. I live in an area of town where the price range for housing goes from $10,000 to $150,000 at the time I bought this house in 2000, which was right about the time prices started really ticking upward. I’ve mentioned before that my home is small, a shoe box by today’s standards but I made a deliberate decision to purchase small and to live in an area of the country where housing prices were reasonable. Of course that means incomes are lower here as well. Also my Direct Student Loan rate started out at 8.25% APR. Later there was a rate reduction some time in 2002 I think, to the 4.22% I have listed.

Alrighty, the order that I have everything listed is the way I paid everything off pretty much after the Direct Student Loan rate reduction. Before, I had it listed right behind Bank of America. Now I bet you are also probably wondering why I have the car loan in front of Capital One which is no longer in my wallet.  My reasoning for putting the car loan in front of Capital One even though it has a lower interest rate was because at the time business at the job was going really well. I got paid a base salary and a commission for additional business sold whether that be new business or products. I handled all the paperwork etc for all these transactions whether I sold them or someone else did.
I figured even though the balance is much higher but if I could hurry up and pay it off, I would be applying $245, any extra monies, plus the $20 I was already paying Capital One instead of the other way around.

In addition, the mortgage did not start out at 6.25% APR or $48,175 for that matter. Noooo, I had been dumb and stupid in the years before buying my house. A lot was due to things that were on my credit record from my 1st marriage, but the period after that was all my fault. As a result my credit score was not to good so yeah, I was one of those “sub-prime” borrowers starting out with a 10% APR on a $32,500 1st/12.5% APR $10,000 2nd mortgage with a pre-payment penalty. After about 1 1/2 years of hard work and paying down some of the debt listed above, I was able to refinance in June 2002 to the rate you see above and it was to a 15 year mortgage with only a $6 increase in my payment amount. YAY! The payment was $407 to the previous mortgage holder with the increase in the mortgage balance due to that *#%@ prepayment penalty and outrageous fees. However with the interest rate basically cut in half, a whole lot more of my payment would be going towards principal. I looked at it as another “stupid tax” and hella motivation for me to continue bulldozing this albatross. Nothing motivates me more when I figure out the game. At first I get mad, then get I figure out a way to even.

Next, I’m gonna show you using the numbers presented above and a debt calculator I found online, how much in total I would be paying/paid not using any kind of accelerated plan. Meaning once something was paid off that money was not redirected to debt payoff. This is gonna blow your mind so stay tuned for part 6 of this series.

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How I Got Outta Debt: Resources I Used To Become Debt Free pt 2

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This is part 2 of a series that I wrote August 10, 2009 when this blog was on Blogspot.com. I feel that it is as more relevant now as it was when I wrote it then. It is my hope that it is of inspiration and motivation that yes, an ordinary person can do this.OK, I’m back to continue talking about the resources I used to become debt-free. I mentioned 3 books in the last post and I’m going to talk about what I liked about each and what I used from each on my journey. Now this is not going to go along in a linear fashion as my brain does not work in that way.

I used “Debt Proof Living” by Mary Hunt and “Your Money, Your Life” by Joe Dominguez and Vicky Robins together, but I’m gonna start with “Debt Proof Living” first. “Debt Proof Living” is a really good basic how to on the way money works and how to get your money to behave as Dave Ramsey would say.NASHVILLE, TN - MARCH 06: (EXCLUSIVE COVERAGE...

One of the things I really like and will talk about today is what Mary Hunt refers to as “Freedom Accounts”. Back in the day this was the good ole “envelope system“. My Mom & Moma (my mother’s mother) used the envelope system religiously and taught me the value of it. I had been using a version of the Freedom Accounts when I would take a certain amount out each month and set it aside for my renters insurance for the apartment I was in before I bought the house because that’s the only way the insurance company offered it. It was either a 6 month or 1 year policy…no monthly payment option. These “accounts” are also great for those “unexpected expenses” like car repairs, car tags, licenses fees etc. Anything that is not actually paid on a monthly basis.

I place “unexpected expenses ” in quotations for a reason. Whether we want to see it or not, these things are part of your monthly living expenses and if not recognized as such, can wreak havoc when they come due sending you running to the credit cards. Nothing wrong with credit cards if you use them in the right way by paying off the entire bill before it’s due but terrible if you don’t.

This is where many people trip themselves up because they do not have an accurate number on what it takes to maintain their lifestyle each month. When I say accurate, I mean including all known liabilities. If you drive a car in most states, if not all, you must have at least liability insurance, license plates/stickers which must be renewed yearly where I live, driver’s licenses every 4 years, tires that wear out, oil changes needed, and the list goes on and on. Y’all  know what I’m talking about! 🙂 By getting all of this down on paper, you’ll begin to see that it really takes $2500 per month for you to live on.  But you’re only accounting for $2000, thinking you have $500 to “play with”. Then you go and blow it on whatever has caught your attention.  End of the month Day 30 rolls around with your car tag or homeowners insurance due. Now you wonder where in the heck am I going to get the money to pay this? Add in the refrigerator breaking down along with the car.  See how this can get one in trouble?

Doing this also allows me to have overdraft protection on my account without having to pay the bank for the privilege, saving me money as well. What I did was to look at the due date for the “fixed” cost items like the license plate tag for instance, estimate a little bit higher than what I paid last year and divide that up into 26 payments because I got paid on a bi-weekly basis. I would deduct that amount from my checkbook balance as if was going to write check for the bill and mail it off. When the time came to pay it, I would add the total of the deductions back into my balance and write a check for whatever that amount was and start the process over at the next pay period. This is mucho easier if you use financial software such as Quicken. I did this the old-fashioned way before I got a computer, let alone financial software. For things like car repairs which don’t have a “due date”,  I started out with an amount like $50 a month and put it in the “account” religiously. Time and time again, whenever something came up and y’all know with cars, SOMETHING is going to need fixing/replacing etc at some point in your ownership of the car, more often than not I usually ended up with enough money in the account to take care of the problem. You can use a separate savings account but I only did it for the large things like car repairs, homeowners insurance and property taxes which in my case while I was still paying a mortgage, were not escrow-ed for the first 2 years.

Before getting serious about taking charge of my money instead of it taking charge of me, I was one of those folks I talked about earlier. Many a car repair, you name it, ended up on a credit card which in the long run cost me more money because I was not able to pay off the balance charged when it was due. Yep, “stupid tax” borrowing from Dave Ramsey again…I done paid a plenty.

Stay tuned for part 3.

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How I Got Outta Debt-Resources I Used On The Road to Being Debt Free pt.1

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dump the debt

dump the debt (Photo credit: Friends of the Earth International)

This is a series I wrote back in 2009 when this blog was on Blogspot.com. I think it is as relevant as it was back then, if not more so now given the times we are living in.

I’m gonna start off by saying that getting out debt is not easy and not for the faint of heart. It can be compared to eating healthier, dreadlocking your hair or even wearing your hair out in its natural state. Though it may be a bit more accepted now, it’s still a long hard journey that takes loads of patience and thick skin. Why is that you ask? All go against the grain and many times the biggest opponents to your success will be your family and friends. I mention this because how well you can ignore their ignorance while keeping your eye on the prize is crucial to getting where you want to go. In addition to that, it’s a permanent lifestyle change, otherwise you’ll be right back where you started.

#1. IMHO, stop believing that stupid saying that’s been going around for decades that there is good debt and bad debt.  I don’t think “bad debt” needs explanation however “good debt”, is paid off debt.  End of story.

One of the keys to getting out of debt and staying out is to become conscious of what you are spending your money on starting TODAY!! Yes I’m shouting a bit but I’m trying to make the point that it is extremely important aside from point #1. Examine everything because if you are in credit card debt, more than likely there has been some unconscious spending going on! Many people have absolutely no idea how much they are living on vs what they actually bring home to pay the bills. Also a crystal clear distinction between needs and wants must be made. You may need a purse but you come home with a Coach or (whatever the designer names are) bag. No problem if you are financially OK, but big problem when you’ve got mountains of debt, doing these kinds of things for a long time, zero savings and the boss tells you that you’ll be out of a job in 2 weeks. Can’t quite live in or eat that Coach bag…can you?

Here are some everyday examples. Do you really need a cell phone and a land-line phone? Do you really need 25 calling features and voice mail on your land-line phone? I know it sounds like I’m fussing but I think I can do that because that was me at the time. lol Unless you are using every one of the features and making a lot of long distance calls, many times these so-called bundles are not saving you any money.  In reality, they’re costing you more. Even if you are using ALL of the features and making a gazillion phone calls, there’s probably a cheaper way. As for voice mail, get an answering machine. That feature alone is approx $7 a month as part of that “package” so in a year you’ve paid $84. Keep the service for 5 years and you’ve paid $420. Now I know you can get an answering machine for way less that $84 and even on the rare chance you had to by a new one every year, you’ll still come out way cheaper and have $50+ dollars to put on that 20% interest credit card debt. Heck for that matter, in the case of long distance, use email more or **gasp** snail mail. It’s the drips like this when looked at individually, don’t look like much but when applied across the board begin to become cracks in the dam in terms of the money being used here and not being available for debt repayment. The only folks getting rich off interest are the bankers.

Another way I’ve let money slide through the cracks was not paying attention to the price per unit of whatever it is I was buying. Not to mention the health aspect but that’s another post. For example, I was eating  ice cream at that time so I would get the

It's the picture of Italian ice-cream in a sho...

Image via Wikipedia

half-gallon of vanilla for $2.50. Looking elsewhere, I found a 5 quart container for $4.00. Now what most people do is look at the price of $4.00 vs $2.50 and immediately choose the half-gallon for $2.50. This can be applied for anything you are consuming on a regular basis. Before I got hip to pricing,  I purchased more ice cream next week getting another half-gallon for $2.50. OK, so after 2 purchases, I’ve spent $5.00 for one gallon of ice cream. Now I’m sure y’all remember that 4 quarts is 1 gallon right? Go up just a bit in this paragraph and see how much ice cream I  got for $4.00. 5 quarts. Without doing any more calculations you can see that I jipped myself out of a quart of ice cream. Not only that, I paid more for less ice cream! Now these were 2002 prices that I’m noting here so you know as I know, it’s gone up a whole lot more since. I bring this up to point out a practice that’s been going on for quite a while.  But you gotta admit, the ice cream in the photo looks really good! 🙂 OK…back on topic.

I’m referring to how corporations are raising their prices and/or leaving the price the same but making not so readily noticeable changes in the amount of product. It boils down to what is still a price increase. They are counting on is you not paying attention. Think I’m kidding…here’s another one for ya.  A pack of cookies, (it should be obvious by now that I love sweets lol) used to have 4 big cookies in it and cost $1.00. So that works out to be $.25 per cookie. Now, the company decides to change the packaging, tell you it’s space saving, bigger cookies or whatever jive talk that are spittin’ out and only put 2 cookies in there but leave the price the same at $1.00. Now each cookie costs $.50 each. That’s a 50% price increase!! In many cases using this same example, they’ve not only reduced the amount to 2 cookies, they’ve raised the price to $1.10. That’s an even bigger price increase. Many times it’s not quite as glaringly obvious as the last example but it’s there nonetheless.

So folks, ya gotta start becoming conscious and paying attention to where ya money is going. I’ve focused on this first because it’s the fastest and most efficient way to get more money freed up to have to accelerate debt elimination. What I came to find out was that I got more motivated to look for more ways to slash my budget so I did not have to go out and get a second job.

A few books that I used as road-maps on this journey were:

1)”Debt Proof Living” by Mary Hunt. She has a website of the same name as the book that is a paid subscription site which is quite reasonable at the time I had one. The non-subscription part of the site was nice.

Cover of

Cover via Amazon

2)”Your Money Or Your Life” by Joe Dominguez & Vicki Robin

See if your local library has them first. Then if you like them, you can look for used copies or again, examine the details and see if buying them new will come out cheaper. With Amazon.com, if your purchase price is $25 or more you can get shipping free. I’ll talk more about these books and others later.

Are you ready for more? I hope so! Then on to part 2.

Disclaimer: All of the products mentioned in this post have been purchased by me or borrowed from the public library. I have no affiliation with the producer/manufacturer or distributor of the product nor am I being paid to review the product mentioned. The opinions set forth in this post are solely my personal opinion.

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