Tuesday, December 25, 2007
Saturday, December 01, 2007
It is easy to get carried away with Christmas debt. However, with some self-discipline you can help keep your purchases to a manageable limit. The key to success it setting a limit to your Holiday Credit Card Purchases. Credit cards are only an illusion that can buy more gifts than you actually can afford. Here's why you should limit your credit cards purchases this holiday season. Gifts bought on credit end up costing more.
The best laid plans.... Unexpected post-holiday expenses might postpone your credit card payment plan, lengthening your credit card debt. By sticking to a few spending principles, you can keep your holiday spending to a minimum and avoid paying for holiday gifts until the next holiday season.
How To Avoid Christmas Debt
- Save up. Spending cash instead of using credit for your holiday purchases allows you to avoid holiday debt all together. If you haven’t started saving, put aside something each paycheck starting now and use that to finance your holiday purchases.
- Set a budget before you shop. Setting a spending limit and sticking to it will keep you from overspending. Be disciplined and don’t go over your budget, no matter what.
- Make a list. Santa makes a list and checks it twice, so should you. Even though you might feel compelled to splurge on everyone in your life, you don't have to. People appreciate simple and meaningful over expensive and useless.
- Don't shop for yourself. Avoid the "one for you, one for me" shopping mindset. You'll end up spending double what you would had you shopped only for the loved ones in your life.
Ignore "big" sales. More often than not, they're not really sales at all. Those "Buy 2, Get 1 Half Off" deals only trick you into buying more than you would otherwise. Remember, stick to your list.
- Shop online first. The internet makes it easy to shop around. It also makes it harder to buy on impulse. Since most retailers have inventory on their websites, you can decide exactly what you want to buy before going to the mall.
- Leave your credit cards at home. Without your credit cards, you’ll have a hard time charging them up. If you must use credit for your purchases, pick one credit card and stick to your spending budget.
- Don’t buy if you can’t afford to pay. Keep in mind that when you use credit, you’re borrowing from your future income. You know your finances better than anyone. Only charge what you can afford and you’ll avoid paying on your holiday debt until the next holiday season.
Tuesday, November 27, 2007
- First tip, shop early but don't worry if there are not any good flight prices 2 months in advance of your trip. During the holidays the airline companies will re-task planes to popular destinations like Florida so they can accomodate more travelers.
- Shop frequently, you might have to check several airline websites everyday for several weeks before you find a good deal.
- Shop at different times of the day, evening, midnight, early morning. Sometimes the airlines release new fairs during odd hours and you could get lucky and find a great deal.
- If you can be flexible on your dates and departure times. Some times moving just one day earlier or later can mean your flight is $100 cheaper. Remember everyone wants to travel on December 26th so they can be home for Christmas but after that it is off to Florida or somewhere warm.
- Look for an early morning or late night flight. Most people don't want to get up at 3:30 am to goto the airport, however, if you are cheap like me you'll do it if it saves you a few bucks.
- Check multiple travel sites like Yahoo Travel (Fare chaser is really good).
- Check the airlines websites directly.
- Use discount airlines, generally the hub airline in your city will have the most non-stops but the discount airline might have one connection, however if you are a family of 4 saving $100 per person is a big deal and it might be worth wasting an additional 90 minutes during the layover some where.
- Be flexible on your departure airport. If might make sense for you to drive 2 hours to another airport if they have a cheaper flight.
- Look for one way ticket deals. Some times you might have to fly down on one airline and then fly back on another. Providing you are using the same airport you really won't even know the difference.
Wow that coffee is hot? Or is it? Why is Tim Horton's (THI) stock doing so well and Starbuck's (SBUX) struggling? Tim's is practically a religion in Canada. I am a huge fan as well. I usually stop in everyday and pickup a coffee. When I visit my customers or one of our factories I like to stop in and pickup some donuts and muffins. So what is the attactions to Tim Horton's vs. Starbucks? Starbucks seemed unstoppable and had perfected the feeling of "I just paid $16 for 2 coffees and 2 hot chocolates but for some reason on feel good about it". On the other hand, when I visit Tim's and get the same order it only 5 bucks.
I bought the stock the day of the IPO. The thing that convinced me to buy the stock was the ever present line of 12 cars in the drive through each morning on the way to work. People like the product. I actually could have bought is at a lower price after the IPO but that is ok. I am pretty happy with the investment so far. The really encouraging thing is that they really are only on the fringes outside of Canada. I think they have like 300 some stores in the U.S. vs. over 2000 stores in Canada.
In keeping up with my home work on the stock, which Jim Cramer always recommends I do. I listened to the 3rd quarter conference call results for Tim Horton's. They have great growth and the finished the first round of a stock buy back and they have annonced a second stock buy back. Also in some recent news Tim's just annouced that theyhave an agreement with Wal-Mart to provide food services in new Wal-Mart supercenters.
Just added a video from Morningstar on Starbucks.
Saturday, November 24, 2007
- Do you have mutual funds that are investing in China?
- Do you have individual company stock that is invested in Chinese companies?
- Do you understand how much of the companies earnings are actually coming from the stock market versus the actual operating profit?
The bottom line is as Jim Cramer always says, make sure you do your home work before and during your investing. With the Chinese market up as much as it is I am afraid we are headed for a bubble. Checkout this book on investing in China
Should you buy a Mac computer?
Thinking about buying a Mac computer? They are pretty slick. Check out this video on reasons why you should or shouldn't buy a Mac? The main reason we are thinking about getting a Mac computer is for the creative side. Things like video editing, garage band, and graphics design. My family is really starting to get into these types of applications.
Not sure a Mac is right for you check out the book Mac for Dummies. Mac OS X Leopard For Dummies (For Dummies (Computer/Tech))
We were thinking about putting the iMac in the kitchen which really isn't a problem since everything is intergrated into the monitor. You really only need to plug it in and your are good to go. It connects to our wireless network so we can surf the web. Printing isn't a problem either since we have a wireles print server. I also really like the Mac's commercials were they pick on Windows Vista. Shop for iMac Computer
Monday, November 19, 2007
Invest like Warren Buffet - How to pick the right stocks
Are you tire of trying to pick the right stocks. Just buying whatever billionaire Warren Buffett bought might be a great way to go. You don't even have to buy it the same day. Even if you bought months after his share purchases, you could still get up to twice the return of the Standard & Poor's 500 Index during the past three decades.
For example, investors would have earned an annual return of 24.6% by buying the same stocks as Buffett after he disclosed his holdings in regulatory filings, sometimes four months later, according to a soon-to-be-released study by Gerald Martin of American University in Washington and John Puthenpurackal of the University of Nevada-Las Vegas. The S&P 500 rose 12.8% a year in the same period.
It is really hard to beat the pants off the S&P 500, however, by following Warren's buying and selling," said Mohnish Pabrai, who manages $600 million at Pabrai Investment Funds in Irvine, Calif, you can. So how do you find out what good old Warren is buying? Check out stockpickr.com for a list of Warren's latest stocks.
Sunday, November 18, 2007
I read a interesting article in Businessweek about a new website stockpickr.com that helps you with your stock picks. Here is what the article said.
Stockpickr.com was created by hedge fund hotshot James Altucher. The site helps investors see what the smart money is doing. Last year, Altucher got an offer he couldn't refuse. A much larger fund would give him more than $100 million to invest, leveraging the strategies that he had perfected, however he had to give up everything else on his plate. It was an offer Altucher, 39, could refuse, and did.
Instead, he and his fund partner, Dan Kelly, 32, decided to take their investing strategy to the masses. The result is the Web site Stockpickr.com, where investors can view the portfolios and latest publicly available moves of hundreds of successful pros, including Warren Buffett, hedge fund great George Soros, or mutual fund manager and Yale professor Martin Whitman. The best part about it is the site is that it is free. You just need to sign up to be a member. I think this site along with the Jim Cramer tools that I have listed in a previous post should get you on your way to some excellent and educated stock picks. And remember when I say education you really do need to do some research before you pick a stock.
Several million people have visited the site so far this year, and traffic has quadrupled since January. In April, Altucher sold his controlling stake to TheStreet.com in a deal that valued the venture at about $10 million.The Internet has allowed investors to tap into a world of data about companies and markets with the click of a mouse. But the flood of information can be overwhelming and difficult for ordinary investors to harness.
Now a new set of Web sites is springing up, like Stockpickr and GuruFocus.com, to help investors tame this information glut and use it to make smarter investing decisions. Altucher adds his own perspective on Stockpickr, focusing on the footsteps of value managers, those who buy deeply undervalued and out-of-favor companies. The site's visitors also form a virtual community whose members interact with each other, answering one another's questions and sharing knowledge about various strategies.Stockpickr's front page features annotated updates of the latest pro portfolios posted by Altucher and Kelly along with new ideas they've tested using historical stock data. Recently, Stockpickr was featuring the latest portfolios from Harvard's endowment, mutual fund star John Osterweis, and stocks whose characteristics are similar to those Buffett has invested in.
The great part is the site is free; it makes money from advertising. Following the moves of successful managers just from Securities & Exchange Commission filings can be extremely complicated for a layperson, says Tong Yao, a finance professor at the University of Arizona whose research helped uncover the advantages of piggyback investing. "Web sites like Stockpickr that can process the information and provide ready-made investment signals that are proven to work will be good news for investors," he says.
Stockpickr isn't the answer for someone who wants an automated investing plan. It doesn't produce a single preferred portfolio or replace the need to sort through many potential stock plays; it's more of an idea factory. One of the site's most popular features is a function to compare ordinary investors' picks with those of the pros. More than 100,000 people have posted their own portfolios. Their performances are tracked for all to see. The site spits back an Amazon.com (AMZN )-like suggestion list of stocks owned by professional money managers whose holdings are similar.
Users who post their picks and commentary give Stockpickr considerably more vitality than other sites, says Roger Ehrenberg, president of the research firm Monitor110: "It's not like a message board. It's more like a collaborative community."
Saturday, November 17, 2007
How to stop using credit cards - getting out of debt
Now what you have worked yourself into a corner with over using your credit cards? It is a common problem, many people are struggling with personal credit card debt. Plastic is just too easy, and on top of it all, unless you look at your past statements you can't remember what you spent all the money on. Now when you go to some places if it is below $25 they don't even have you sign anymore, they make it too easy to use your credit card. In fact, I crossed the boarder the other day and I could go to the credit card only lane, when I came back on the other side they didn't have a credit card only lane and I was kinda disappointed. Another example, I went to park at the airport the other day and you can't even get into the parking lot with out a credit card.
Here are some simple steps to follow to help you stop using credit cars:
- The first step is to talk with direct family members about the situation. All family members must agree to reduce spending until your family is out of this crisis. This should mean closing charge accounts and not using credit cards. If you feel the need to use plastic switch to a debit Master Card or some other debit card which only works if you actually have money in your checking account.
- You should contact creditor(s) and explain your situation to them. Try to get them to work out a plan so that obligations are repaid. Most credit card company's would rather have you pay them back then default on the loan and stop paying your bill.
- A lot of experts will recommend the you not carry your credit cards with you and to just leave them at home. This is easier said than done in a lot of situations. Again based on my stories above at the airport and bridge. The idea is if you want to use them, you will have to go home and then return to the store. If the item you want to buy is a necessity then you will have access to the credit. If it is an impulse purchase you have the travel time back home to reconsider.
- Keep your credit card limits low, if you have a $500 or $1000 limit and you can not pay that back, what makes you think you can payback $2000 or $5000? The key is, if you are already having issues paying back your debt on a low limit, then don't ask for credit limit increases. This is a solution that many try that ends up in disaster in the long run.
- Some experts say don't use credit for consumable items such as food if you do not pay in full each month. I agree witht this comment, but is is so easy to do. I also think that you should not pay for things over time on a credit card. Probably the most important rule, don't borrow money from a credit card borrow money from a bank. I wrote another post called finding cheaper loans that I suggest you check out.
- Do you ever hear those commercials on the radio about debt consolidation? Do you ever wonder how they can advertise so much? Most consumer finance companies that offer this service charge very high interest rates. These companies will appear to be your friends but you need to watch it very carefully. If you are not good at understanding contracts, or even if you are you should have a family member or friend look over the contract first with you to make sure you understand what you are getting in to. I would suggest you look for a company that is really a not for profit debt resolution company. You won't hear these guys advertising on the radio because they don't have tons of profit to spend on advertising. Funny how that works.
- Debt guidline: If you have more than 15 percent of your disposable income in debt payments, you should take steps to reduce your credit use. Disposable income is your net income after taxes and other payroll deductions. So lets do the math, if you bring home $1000 per month then you should not have more that $150 a month in debt payments. This doesn't mean that you are just making minimum payments either because you will never pay it off and you really won't be able to borrow any more. Remember the credit card companies don't care if you ever pay it off as long as you are making the minimum payment.
Tuesday, November 13, 2007
Find Cheaper Loans
A popular topic of mine is how to get out of debt and paying off your credit cards, so it seems a little funny to me to be talking about finding cheaper loans. However, use of debt is required by most people and if used properly most people will have a better life with some debt vs. without debt. Personally, I feel that debt should only be used for bigger purchases like homes and cars. Also when you can afford them some toys like a boat or and RV. However, on the toys I encourage you to buy a nice used one and pay cash for it or take out as small a loan as you can or as short a time period as you can. The key thing to remember is the loan for the toy last a lot longer then the initial euphoria of getting the new toy.
Updated with news story on Payday loans and their dangers.
Anyway, I am rambling, let get to the point you are reading this article to find out how to find cheaper loans. The WSJ had an interesting article on the fact that credit unions generally have cheaper rates on car loans, personal loans, credit cards, and home equity loans. For instance the average 48 month car loan at a credit union is at a credit union is almost 2% lower per year than most banks.
Credit unions can provide you with cheaper loan rates because they don't pay income taxes. On the other hand banks have to pay these income taxes. Credit unions were orginally designed to cater to the savings and lending needs of lower to middle class consumers that were ignored by traditional banks. Generally, you had to work for a particular company or live in a particular area to be able to join the credit union. Not anymore, most credit unions are open to virtually anyone. If you are looking to find a credit union in your area you can search by zip code at CUNA's Website.
Paying for that flat screen TV: A lot of people will be getting new flat screen TVs this year as prices fall. Most will be tempted to put it on the plastic. Remember if you put it on a credit card you will start incurring finance charges after the first month that you do not pay the balance. Usually this will be at a very high rate, 18 to 22%. As an alternative why not finance it through the store you are buying it from. Don't sign up for the no payments until next year trick. This will just postpone the problem. I would rather see you buy that big screen TV with a 12 months no interest. Then divide the total cost by 11 and make that payment each month. I say 11 because a lot of times this type of financing is also a trick. Sometimes you have to pay the thing off before 12 months or you incur finance charges on the whole balance even though you made payments. So here is the simple math for example:
- Say you bought a Sharp LCD 42 inch 1080p HD TV total price out the door was $2200.
- 2200 divided by 11 is $200 per month.
- When the bill comes each month right the check for $200. If you can do more that would be even better. $225, $250, $300 whatever, just pay the thing off. Remember if you do it this way it really does allow you to buy someting on time and it doesn't cost you a penny more.
If the store you are shopping at doesn't have this type of financing then shop around. You will find a store that does. As soon as you walk out the door they will improve their offer. You watch.
- Paying off your credit cards
- Control your spending with a family budget
- Home based businesses
- Investing In Mutual Funds
Thanks for visiting please check out my other blogs and websites:
Sunday, November 11, 2007
I found an interesting article on Keys to search engine visibility over at the MiamiHerald.com. Improving the page rank of websites is one of the first thing that most people ask when they are doing a new web site either for their business or and online business. Here is what the article said along with my comments.
Good search engine results are vital to the success of a business. If a company is struggling to get traffic to its site, perhaps there is a need to seek out a firm that specializes in search engine optimization for websites -- which are natural results from a search engine -- and search engine marketing -- which are the paid ad link results in a search. Andrew Wetzler, president of Boca Raton-based MoreVisibility, spoke to The Miami Herald about what businesses both large and small should keep in mind in order to get the best possible search results for their websites.
This advice generally works for large companies however, if you are starting a brand new business you are probably not going to drop serveral thousands of dollars or even more to hire a search engine consultant. Most of the time you are going to have to do it yourself. I recommend the book SEO in an hour a day. It is easy to read and it gives you the basics on starting out on the search engine optimization trail. This book covers things like:
- Keywords research
- Understanding your competion
- How to develop links to your site.
- Meta tags
- Page names
He explained that keys to a successful search are to have strong content, the right keywords, other related sites that link to your site and a site design that does not have too many ''bells and whistles'' such as Flash programming features, so that a search engine can understand the site.
Q: What trends are you seeing now in search?
A: One of the most interesting things that is gaining momentum is the impact of social search on how companies market online. We do a fair amount of writing of blogs for companies and set the blog up and put all the pieces together properly. The reason that that is important is that blogs by nature are content rich and very targeted to what the subject matter is. The more content that is posted on a continual basis, the greater the likelihood that the site will do well naturally with search engines.
I read an article the other day over at another site about making money online and they described exactly that. Blogs are content rich. Mostly text, the format doesn't really matter. I a lot of cases the formats are the same if you are using a blog like blogger.com. Again keywords are the most important thing. I found a great tool at SEO book which you should check out, it allows you to put in a key word and it gives you as many variations to that word that search engines typically search for.
One of the keys to success in SEO is to target the long tail in key words. Their is an interesting book with the same title, The Long Tail. Basically, the long tail is half of a bell curve in a normal distribution curve. Don't worry about getting to the top of the search engine pages on one key word like 'lawyers" or "attorney". It will be very tough for most people starting out to get to the top of the search engine results page with this type of strategy. However it you have a site that specializes in divorce attorneys in New York specializing in helping men, you might have a better chance in getting good search engine ranking with that site.
Q: What sort of changes have there been in the industry in the last decade?
A: Not only has paid search become more important but also things like analytics, and that's a real scary term for business owners, large or small. It's extremely important that you have an analytics tool in place that can look at the traffic that's coming into your site and see which traffic is converting and which isn't and modify campaigns accordingly. Several years ago, people could only measure by how much traffic did I get and how much money is in the bank, how many sales did I get. Today we can segment so much more efficiently than we ever have before -- which keywords are driving conversions, which landing page is generating a better result, which engine converts better.
This is great advice. Analytics are tools offered by a lot of different sites. I found that Google Analytics to be a great tool. As I mentioned above, keywords are key and so is the long tail, with Google analytics I have found that some of my sites have more than 400 different keywords that people are searching for. With that knowledge you can add additional keyword rich content to your site to help push up your search engine rankings..
Thursday, November 08, 2007
Miracle of compound interest - getting rich slowly
I found a great article on the miracle of compound interest over a Kiplingers.com Here is what the article said with my comments.
The article says that compound interest maybe one of the eighth wonders of the world. What compound interest does is it turns a little bit of money into a lof of money over time, if it is invested wisely. Good old Albert Einstein said to have called it one of the greatest mathematical concepts of our time.
Compound interest formula: Since we are talking about Albert lets get into the math of compound interest. This formula is very simple, however most people don't understand it. So here it goes.
FV = PV(1 + i)n
The above calculates the future value, (FV), of an investment or present value, (PV), accruing at a fixed interest rate of i (this is the yearly rate) for n periods (usually this is number of months)
So when you save or invest, your money earns interest, or appreciates. The next year, you earn interest on your original money and the interest from the first year. In the third year, you earn interest on your original money and the interest from the first two years. And so on. It's like a snowball -- roll it down a snowy hill and it'll build on itself to get bigger and bigger. Before you know it ... avalanche!
Tips on harnessing the power of compound interest
1. Start young. When you're in your twenties and thirties, your best friend is TIME. Start rolling your snowball at the top of the hill and you'll have a much bigger mass at the bottom than someone who started halfway down. I heard a news story the other day that said if you are 21 and you just started saving $50 per month when you get to age 65 you would be a millionare. Pretty amazing.
Here's another example sited by the article: Amy, a 22-year-old college graduate, saves $300 per month into an account earning 10% per year for six years. (That's the average annual return of the stock market over time.) Then at age 28, she starts a family and decides to stay home with the children full time. By then, Amy had kicked in $21,600 of her own money. But even if she doesn't contribute another cent ever, her money would grow to a million bucks by the time she turned 65.
Compare that to Jason, who put off saving until he was 31. He's still young enough that becoming a millionaire is within reach, but it will be tougher. Jason would have to contribute the same $300 a month for the next 34 years to earn $1 million by age 65. Although Amy invested less money out-of-pocket -- $21,600 over six years vs. Jason's $126,000 over 34 years -- her money had more time to grow, or compound. (Find out what it'll take for you to make $1 million.)
Bottom line: Getting rich is easier and more painless the earlier you start. Check out our 30-Minute Investing Start-Up Kit to get started right now.
2. Remember that a little goes a long way. Don't think you have enough money to start investing? You can get into a good mutual fund for as little as $50 a month. Consider another case of Jason who was starting out and got his first job and started saving in the companies savings plan. He invested money every pay check for 3.5 years. He ended up contributing $6200 over 3.5 years and then left the company. He left the investment in the company plan and once a year adjusted the mutual funds that he was invested in and after 20 years the account grew to $30k. Five times his orginal investment.
A little bit can make a difference elsewhere in compounding, too. For example, if our 20-year-old earned 9% annually instead of 10%, he would amass only $373,000 in the same period of time. That seemingly small 1% difference in performance resulted in 29% less money over the long haul.
Another thing that I recommend is that you buy yourself a good financial or business calculator and you learn how to use it. Most people have know idea how to calculate a car payment or house payment or how much their credit card debt is costing them. The business calculators use to be expensive but now days you can get a nice one for under $30.
The 4 hour work week - how to quit your day job. yeah!
I read a great book this summer call "The Four Hour Workweek". It covers how Tim Ferriss when from making $40K per year to $40K per month. Fasinating book he covers very systematically how to get rich. His method is not easy and it is not for those who are unmotivated but it does give you a step by step plan on how to quit your day job and have a very short work week. He covers everything from using virtual assistants in India, to creating the product that make you a lot of money.
Quiting your day job is perhaps the dream of most people. How many times do you ever meet someone who really likes there day job? I only know a few people, one is a teacher at a local community college. He has great hours and gets like 5 months off per year and is usually at home by 4 pm everyday.
For more information on Tim's method's check out his website The 4 hour workweek
Sunday, November 04, 2007
How to do your own legal work, create your own will with Legalzoom or Quicken Legal.
Did you know that you can create your own will? You can use online services like Legalzoom or you can use do it yourself with Quicken Legal. Creating your own legal documents can save you a ton of cash. Most people think that they need a lawyer to do a will or power of attorney or even a trust. At minimum you should have a will but in order to really protect you and your family from probate you should have a trust. Believe it or not you can create and register a trust on your own.
Monday, October 15, 2007
I saw an interesting article in the USA TODAY called, It's a dirty job, but you can get rich. Here is what the article said along with my comments.
James Dillard, owner of Dillard's Septic Service in Annapolis, Md., once rolled his company truck. In the septic business, that's about the worst thing that can happen. He was fortunate. The front of the truck wound up facing uphill in a drainage ditch and the load drained out the back and not into the cab.
An interesting way to start this article about how to get rich. It is almost like the old saying get rich or die trying. What's interesting about this article is not about how to get rich online. It is about jobs that most people don't want to do. Every wonder how many millionares there are in the lawn service and landscaping business? I remember when I was a kid I use to cut like 6 or 8 lawns a week. How many kids do you see cutting lawns now days? Not many it is mostly big companies or adults cutting lawns. Think about it the smart ones are charging a minimum of $25 a lawn and if the have more than one lawn in the area they can pull in a pretty good wage in one hour.
Dillard goes most days without getting a splash on his clothes. "The only odor you catch is when you take off the cap and agitate the solids," he says. Dillard runs a business that most others wouldn't touch. Dillard knows that, but he takes it to the bank. He understands the attitude. His father was in the septic business, and when Dillard was in school, he was a little embarrassed by him. Dillard tried other occupations, including managing a furniture store. But he has circled back to septic, where he now charges $200 to $300 a visit. At about five stops a day, his annual income passes six figures with months to spare.
The fantastic thing about this business is that is is ressession proof business. People can't stop so they are always going to need a cleaning. It's a pretty good wage, $1000 to $1500 per day.
Turns out there are a lot of people doing well by running businesses large and small that others consider mundane, boring, beneath them or downright disgusting. Their success flies in the face of perhaps the most pervasive piece of career advice out there, which goes like this: Do something you enjoy, and the money will follow. Or, work at what you love, and you'll never feel like you work for a living.
A friend of mine started a company that takes down water towers. His business now takes down over 130 water towers a year. I am not sure in this case that no one wanted to take down water towers. In this case it was just no one new how and they did.
Sunday, September 09, 2007
31 ways to get out of debt.Found a great article at Dumblittlemen.com here is what they said along with my comments.
- Write down your financial goal. A large goal is not likely to be achieved if you don't write it down. Type it out, print it out in large font, and post it up on your refrigerator. What is your goal? A 50% reduction of your debt? Complete debt elimination in two years? Whatever it is, be specific and write it down, and don't forget it. I think the righting down goals are great, however, you need a good system to determine if you are moving toward your goal or not. I recommend that your develop a simple net worth spread sheet on Excel to track on a monthly basis your assests and liabilities. Your assests are your savings accounts, investments, real property and so on. Your liabilities are all your debts, mortgage, credit cards, lines of credit and so on. Click here for an example.
- Create rewards. People who are good at achieving any goal will tell you that rewards are important. Try to give yourself a treat at regular intervals, or little celebrations when a debt is paid off. Let them motivate you to succeed. Unfortunately, a lot of people have dug themselves a big hole by incurring too much debt. It can be a long haul getting out of this situation. When you reach certain milestones it is a good idea to take a break and celebrate. An example of a milestone might be, paying off your department store credit card, closing out the signature line of credit, consolidating all of your credit card debts into a lower rate. After you get to this milestone, go out for a special dinner or buy yourself a reasonably reward. But don't take on more debt during the celebration.
- Think positive. This may be one of the most important tips on this list. Positive thinking may sound corny and trite, but trust me, it works. It's actually crucial to debt elimination. If you start letting negative thoughts get into your head, it will cause you to want to give up. And debt elimination is such a long-term goal that it's important that you not give up. When you feel yourself thinking negative thoughts, squash them and replace them with positive thoughts. Thinking positive is great and I highly recommend it, however, you need to also think critically and creatively. Spend time in a constructive manner thinking about how to get out of debt, how can you reduce your overall expenses, where can you cut back and plow more money into the debt elimination? Critical thinkinig is not negative if you are going about it with a problem solving mindset.
- Stop digging. As the saying goes, if you're trying to get out of a hole, stop digging. It's important that you stop using your credit cards for spending, and slow down your spending, so that you don't get further into debt. Need to buy something but don't have the money. You'll need to find the money first, or wait until you have it, instead of using credit. This is exactly how you got into this problem. Unfortunately we are in an instant gratification society. A 25 year old couple wants the $500K house and they go out and take on the debt and buy it. Unfotutunately they are over their head immediately and cannot afford to buy window treatments or do any landscaping. You've seen these houses. What happens when one of them looses their job. Our society encourages this type of behavior. We have commercials for equity loans that talk about paying for a vacation with a home equity loan. Does this make any sense.
- Make a list of debts. This is a difficult step for many, but necessary. If you're going to tackle your debt problem, you need to know what it looks like. Make a list of all your debts, their minimum monthly payments, interest rates, and total amount owed. A spreadsheet works well for this. Then total up the monthly payments and the total amounts owed to see what the damage is. Now that you have a clear picture of your debts, you can begin to make a plan to conquer them. See my comments above on developing a net worth tracking sheet.
- Reduce expenses. See what you can do immediately to reduce your spending, whether it be cutting on things like buying coffee (make your own), eating out (cook at home), or shopping (just stop), or whether it be looking to cut out major bills like a second car payment or your yacht. If you can reduce expenses, even by a couple hundred a month, you can use that money to start paying down your debt. Whatever you free up from your expenses, dedicate that to making an extra debt payment (see the debt snowball below). What about the cable bill ($120 per month), the XM bill, the Netflix bill, and you are still going out to the movies? My dad use to use a very simple system for keeping track of spending, he had a little tiny pocket note book where he wrote down everything he spent. If you do this you will be amazed at what you are spending. Another thing to help you with spending is switch to only buying things with cash. When you see the money flying out of your wallet your begin to realize just how much you are spending. There really isn't any pain in handing someone your Visa and you get a little slip of paper back. It doesn't have the same effect as handing someone 6 $20 bills to pay for the dinner you just had.
- Make extra cash. In addition to reducing expenses, you should see if you can bring in some additional income. Work part time, do some freelance work, sell some of your stuff on eBay, hold a garage sale, take in a boarder, rent out your yacht. Get creative. It doesn't have to be permanent, although you might decide to keep bringing in the extra income even after you're out of debt. With the extra income the you generate plow 100% of it into debt elimination first. I also recommend that you start to build up a rainy day fund as well. It may feel crappy working that extra job and giving up your Saturday's but you did spend the money before you earned it and now you are paying it back.
- Make a simple budget. This is another step that many people dread. Well, it doesn't have to be complicated. Make a simple list of the things you spend on every month, including your minimum debt payments. Write down how much you spend on each one (and be realistic). Total it up. Then add up your income, and see if the income exceeds the expenses. If not, you'll need to reduce the expenses. I have approached this in a simpler fasion. My income goes into the checking account, if I cannot pay my bills each month from the checking account and I need to tap into savings I immediately know that I am overspending. It is the simple principle of cash flow. If you bring home $3500 a month and your spend $4000 you are either incurring debt or you are tapping into your savings accounts. Your credit union or bank statement should show you this right on top of the statement.
- Watch for irregular expenses. Think ahead to expenses that may be coming up, like Christmas and birthdays, or insurance or home repairs or car maintenance or back-to-school shopping. These are things that don't happen every month, but that will definitely be coming up. Budget for them, saving a little so that you are prepared. It's best to include a small amount in your monthly budget for irregular expenses like this, so that you have the money when you need it. The best way to do this is with a special savings account. Lets face it if you have massive credit card debt you are not very disciplined. You are not going to take $20 a month and put it aside to pay for Christmas, vacation, or school tuition. It needs to be automatic. Treat these bills as normal yearly expenses, which are not really irregular since they happen each year and have that amount automatically taken out of your checking account each month and put into a special savings. If you usually spend $2400 on Christmas each year, you need $200 a month going into special savings or your Christmas club savings. If you spend $4800 on that spring vacation, you need $400 a month going into special savings. If your kids tuition is $3600 you need $300 a month for that. You get the idea. Why pay for these things all in one month and incur more debt. Spread it out and save for it all year long.
- Save an emergency fund. This tip might seem strange in a list of debt elimination tips, but it's actually very important. Without at least a small emergency fund, you'll have an extremely difficult time reducing your debt. The reason is that when unexpected expenses come up (and they always do), if you have no emergency fund, the first thing you'll cut is your debt elimination payment so that you can pay for the unexpected expense. Either that, or you'll use your credit card and get further into debt. Try to save up $1,000 in a savings account to pay for these unexpected expenses and ensure that your debt elimination goes smoothly. Once you've saved up that $1,000, put it all towards debt. See my comments above about rainy day funds.
- Stop using credit cards. Many of us have a problem with credit cards. If you're the type to pay your balance in full each month, and not carry credit card debt, you can skip this tip. If you don't pay your balance in full, cut up your cards or hide them and stop using them. The interest is extremely high, and it's way too easy to use a credit card. Credit cards are a convience and should be treat just as that and only that. Rule #1: Don't borrow money from credit card companies. Credit card companies are not your friends. There are lots of places to find cheaper loans. Credit card companies are not one of them.
- Use cash. Instead of putting all your expenses on a card, try using the green stuff instead. Each payday, withdraw the amount of cash needed for your spending expenses in the simple budget you created (see above). Pay your bills online first, then withdraw the cash for groceries, gas, and other spending. When you run out of cash, you're out. It's that simple. This is very similar to the budgeting process that I described about using your checking account. Again it is all about cash flow. In this case it is actual cash flow. When you have flown through all the cash you are done and have to wait until next month.
- Use a debt snowball. Popularized by financial adviser Dave Ramsey, the debt snowball is a simple method that works well for many people. First, identify at least $100 that you can use as your "debt snowball". Use this amount to increase your payment on your smallest debt, while paying the minimum on your other debts. Soon, your smallest debt will be paid off. Now take the total amount you were paying on that debt (the "debt snowball" amount plus the minimum payment for that debt), and use it as your debt snowball amount for your next smallest debt. Continue to do that, with your debt snowball amount building up as the debts are paid off, until all debts are paid off. An alternate strategy (and a popular one as well), is paying the highest interest debts first, as this will save you a little money in interest. This strategy can also be applied using one modification. First of all identify the debt that has the highest interest rate. Pay as much as you can on that debt first and the minimum on everything else. Do this with the extra $100 as well. After this debt is paid of attack the next highest debt.
- Automate your minimums. Make the minimum payments for each of your debts automatic, so you don't even think about them. Either allow the companies to deduct the amount automatically out of your account, or use your bank's online bill pay feature and make them automatically recurring payments. I don't know that I agree with this tip? Not sure what paying the minimums automatically will do to help you get out of debt. I would have to think about this one.
- Make the debt elimination payment a bill. The extra payment you're making on one of your debts (see debt snowball tip above), on top of the minimum payments, should be treated as a bill, not as an optional expense. That means, when you pay your bills, be sure to pay the debt elimination payment along with the rest of the bills. Don't let it be optional at all.
- Get lower rates. Either find a balance transfer for your credit cards that will lower your interest rates (read the fine print carefully), or work out a plan with your current credit card companies to lower your rates. Many credit card companies are willing to lower interest rates if you tell them that you will move to a competitor with lower rates.
- Monitor impulse spending urges. Impulse spending is the culprit that leads us to get into debt, and often keeps us there despite our desire to get out of debt. Learn to monitor your urges, so that you're aware of them and can control them. Often, when you get the urge to buy something, your heart beats faster and your breathing gets a little heavier. If you can get past these urges, you can control your spending.
- Use a 30-day list. A good tool for controlling impulse buys is to use a 30-day list and to stick to it. Every time you get the urge to buy something that isn't absolutely essential (and by "essential" I mean things like groceries, not the latest iGadget), write it on the list with the date you wrote it on the list. Then don't allow yourself to buy it until 30 days have passed. Often, the urge or need to buy that item will have disappeared.
- Stop shopping. Don't go to the mall or other usual shopping hangouts. Don't go places to "shop" -- only go to a store if you have something specific to buy (a need, not a want) and don't buy anything else. Get in, then get out.
- Don't buy online either. Shopping applies to online shopping sites, such as Amazon or eBay. It's so easy to buy online that many of us do it way too often, and don't realize how much we actually spend. Stay off these sites if possible.
- Eat at home. If you tend to eat out a lot, try cooking for yourself instead as much as possible. Make a weekly menu of stuff you like to eat that's not difficult to cook, make a list of the ingredients you need, shop for them, and then cook the simple meals each day. Eating out once in awhile is OK, but if you can make a dent in your dining out spending, you can often free up a lot of cash for debt elimination.
- Maintain your focus. One of the hardest things about achieving a long-term goal such as debt elimination is the tendency for our focus on that goal to fade away. Focus is the key to achieving any goal, and to achieve a long-term goal, you have to find ways to maintain that focus. Having a debt-elimination partner, or joining an online forum, is a good way, as is posting your goal or a picture of your goal somewhere visible. Also keep a debt diary or email yourself reminders every so often. Do whatever it takes.
- Leave yourself wiggle room. It's unwise to eliminate all extra spending and dedicate it all to debt elimination. That's a recipe for disaster. You have to give yourself some spending money to eat out or buy things now and then (but much less frequently than before), or you will begin to feel deprived and eventually give up.
- Brown bag it. If you eat out a lot for lunch, try packing a lunch and eating at work. This can save a lot of money over the course of a month. It requires buying stuff to make for lunch, and a little time in the morning (or the evening before) to pack it, but it's worth the extra effort. Bonus: it's usually healthier too. Ever wonder how we got to the point where goint to lunch costs $11 a person? How did we get to that point. If you don't like to bring your own lunch find cheaper places to buy lunch. Get carryout instead of full service. You don't have to tip and drinks are cheaper.
- Find free entertainment. Entertainment is another expense that can greatly hurt your debt elimination efforts. And it's one that you can reduce drastically in most cases. Instead of going out at night, or going to a bar, or going to the movies, or whatever you do for fun that costs money, find ways to have fun for free (or at least for cheap). Staying home and reading or doing fun things at home, or going to the park, or exercising, or spending time with family or friends, can all be a lot of fun without costing a lot of money. Lets face it as I stated before we are an instant gratification society. Another problem is we are never satitisfied. We just want more and more. We come home from a weekend of RVing or a week long vacation and the following weekend my kids are asking me what are we doing this weekend. They are looking for more entertainment. I am feeling taped out and they are ready for the next adventure.
- Reduce big expenses. The big expenses, like housing and auto, can often be reduced by a large amount if you examine them carefully and give them some thought. Of course, making a reduction in these expenses isn't as easy as cutting out your morning latte, but they can make such a big difference that it's worth the effort. Housing costs, for example, should be no more than 33 percent of your household income (as a general guideline of course), including mortgage payments, property tax, and both property and homeowner's insurance. Shop around for lower insurance rates, refinance your mortgage, or look for ways to reduce utility costs. If you are house poor and live in an area where you can sell your house, sell it. It is no fun be a slave to your home. You will be amazed at the relief that you will feel by down grading the size of your home and the size of your payment. Make sure you put all the extra cash flow into debt reduction.
- Look for bargains. Some people are born bargain hunters, and the rest of us have to learn the skill. Whenever you're going to purchase something, take the time to do the research, find the best prices, look out for sales, even ask for discounts. If you can get bargains on your purchases, you can reduce your expenses by a good amount.
Look for free or used stuff first. Instead of buying something when you need it, see if you can find someone else who has the item but doesn't need it. Send out an email to friends and family, letting them know what you need. Or look on craigslist.com or freecycle.org. If you can't find it for free, try finding a used version of it for cheap, at garage sales, thrift shops, eBay, etc. Two words of advice, buy used. Go to garage sales, if you don't do that find someone who goes to garage sales a lot and tell them what you need. Chances are they will find it at a fraction of the cost like 10 cents on a dollar. Buy used cars as well. You know how it goes, you buy a new and in one year it doesn't look like a new car anymore. Why not start with a nice clean used one that is 10K cheaper than a new one, and in one year you will have a car that looks like a used car.
- Debt free? Save, then spend. When your debt is finally paid off, save 60 percent of what you were using to pay debt, and enjoy the other 40 percent. This will allow you to feel the freedom of being debt free while saving for your other goals.
Educate yourself. If you're going to tackle a problem like debt, it's best to arm yourself with information. Do some research on the web, read "Your Money or Your Life", read Dave Ramsey. Go to the library instead of buying these books, if you are like my wife and like to read paper backs, buy them used. You can get them for $.25 on a garage sale. Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence
- Get creative. Getting what you need and what you want without spending much is an art form. It can be done with a little imagination and creativity. Find new ways to meet your needs without spending a lot. It can actually be a lot of fun.
Spend 60 percent of your income. A good guideline used by many people is to make your necessary monthly expenses equal only 60 percent of your gross income. For the other 40 percent, divide it among savings, debt payment, and spending.
- Be patient. Debt elimination doesn't happen overnight. You didn't get into that debt in a month, and you won't get out of it in a month. For many people, it can take several years. While you may be enthusiastic about eliminating your debt, and want to do it right away, realize that you're in this for the long haul. Now settle in to your new lifestyle, and savor the thought of being free of this debt burden.
- Enjoy yourself. If you absolutely hate your new frugal lifestyle, you won't last in it for very long. Learn to enjoy yourself, enjoy finding ways to be frugal, and reward yourself for eliminating debt. You'll be much more likely to stay in it for life.
Sunday, April 01, 2007
Get the lastest buzz on stocks, find the hot stock tips
I read and interesting article about Instantbull a stock message board aggregator. Pretty cool site. Allows you to see real time chat on stock from multiple messages like Yahoo, Google Finance, and MSN. After you have selected a particular stock on the left hand side you can see all of the recent messages from all the different message boards in real time. If you just mouse over the latest message you will see that page of the message board.
It also has a cool feature that lets you instantly checkout different websites data on a particular stock. For example you can see options, cash flow and balance sheet views from mutiple sites.
Another feature that I really like on Instantbull was the Hot List. This feature allows you to see in a tag cloud which stocks are being talked about the most. The larger and bold the stock symbol the more the buzz.
Tuesday, March 27, 2007
- Merrill Lynch CEO, Stanley O'Neal $91 million
- AT&T CEO, Edward Whiteacre, $60 million
- Coca Cola CEO, Neville Isdell, $32 million
Businessweek just did and interesting article on the relationship between a CEO home size and the stock performance. There study indicates that company stock of the CEOs who have a smaller home tend to do better than the ones who have the mega mansions.
Related reading: Rites of Passage at $100,000 to $1 Million+: Your Insider's Lifetime Guide to Executive Job-Changing and Faster Career Progress in the 21st Century
I hope you enjoyed this post. If you have a question or a idea make sure you leave a comment and I will try to research it and write about it. Final thought if you enjoyed this post why not Subscribe to Strategies for Life its free.
Sunday, March 25, 2007
Saving for College
Great article over at Yahoo Finance on Saving for College, here is what they said along with my comments.
Both students and parents can make the most out of the educational dollars they set aside by exploring the many savings tools available. Since the cost of higher education is rising faster than the rate of inflation, traditional saving vehicles like CDs and savings bonds just can't foot the bill alone. Fortunately, options such as Coverdell Education Savings Accounts (CESA) and 529 Plans make planning, saving and paying for college easier.
For Students: It is never too early, or too late, to begin saving for college. If you earn your own money from a part-time job, try to put some away before you decide how to spend it. Start out small with maybe 5%, and gradually increase the amount as your earnings allow. As your piggy bank grows, put your savings to work for you. Open a bank account that lets your hard-earned money grow but still offers easy access. Most banking institutions offer traditional savings accounts and certificates of deposit that pay interest. It is interesting to watch how different families approach the issue of paying for college for their child. Some families feel as parents they need to fund the entire costs and they stress about this because they don't know how to do this. Others think it is ok for the student to take on studet loans and pay for the education themselves over time. I think it needs to be a balanced approach. My personal experience was I paid for college myself, when I left high school I had saved enough money for only 1 year at the university however, I went to a community college for 2 years which effectively allows you to cut your tuition costs in half. Every summer I worked a full time job and cut lawns on the weekend and I was able to earn enough money to pay for my room and board and even a $1000 per year in spending money. I drove and $800 car, went to the bar on Thursday nights and did three spring break trips. I finally ran out of money in my last year of college and my parents paid for $800 of my tuition. It can be done and I did it without any loans or finanicial aid. On the financial aid part I was stupid because there were several merit scholarships that I could have received if I would have met with a counselor and explored the options.
For Families: Saving money is the primary way to prepare for the costs of college. By setting aside a certain amount each month or payday, your family can build up a viable fund for college. For instance, investing just $100 a month for 18 years will yield $48,000, assuming an 8% average annual return. In addition, if parent and child begin saving early, the amount you have to set aside each month will be smaller. Regardless of the amount you can afford to save each month, it is important to consider what savings or investments will minimize risk while maximizing the return on your money. Some of the most common investments are described below. Several ways to approach this as the article mentions, we started saving for our kids college costs when they were born. We have gradually increased the monthly savings rate as they got older and I could afford to do so. Several articles that I have read all point out that the parent should not take out the loans to pay for the childs education. As the parent of a college student you are most likely 38 to 48 years old and should be thinking about retirement. Taking on an additional $100K in debt as you push toward retirement will not help you sail into retirement easily.
Coverdell Education Savings Account (CESA)
Formerly called Education IRAs, the Coverdell Education Savings Account helps families save money for the education expenses of a child. One important difference between a CESA and other education savings plans is that funds can be used to pay for primary and secondary (K-12) education as well as higher education. This provision is set to expire in 2010 unless Congress passes a law to extend it. The CESA allows you to make an annual non-tax-deductible contribution of $2,000 per child into an investment trust account. As the funds in the account grow, they are not subject to federal taxes. Additionally, withdrawals for qualified education expenses are also free from federal taxes (although they are usually not free from state taxes). Qualified expenses include tuition, books, and fees at an eligible educational institution. Contributions must be made in cash before the child reaches age 18. Anyone can contribute, including grandparents, family, friends and even the student, as long as the income qualifies. To qualify for a full or partial contribution, the contributor's adjusted gross income must be less than $110,000 if single and $220,000 if married. Funds are controlled by the account owner at all times and can be used for education expenses of a sibling if the money is not used for the originally intended beneficiary. To learn more about a Coverdell Savings Account, speak to a financial advisor. This is a plan that my wife pointed out to me a long time ago. We have not done this yet but we should. It is an excellent way to help defer the cost of private K12 educational expenses.
529 Savings Plans
Now, no matter what state you live in, there is a 529 program available for you to begin investing in. These state-sponsored plans help families set aside funds for future college costs. Commonly referred to as "Section 529" plans (after the Internal Revenue Code that authorized them) these come in the form of either prepaid tuition plans or savings plans. The 529 prepaid tuition plan allows you to pay now at today's rates for school tomorrow. Your account is guaranteed to pay for tuition and fees at public universities and colleges in the state by the time your child graduates from high school. Room and board is not covered in a prepaid tuition plan. While you may use a prepaid tuition plan to pay for a private or out-of-state school, you may risk forfeiting some of your plan's value to do so.
The 529 savings plan, on the other hand, allows the full value of your account to be used at any accredited college or university. The 529 savings plan also covers all qualified higher education expenses, including room and board. Each state determines its plan design, including what the maximum contribution per student per year will be. Investments in 529 plans grow tax-deferred until the child is in college, at which time they will be subject to the child's presumably low tax rate. Distributions to pay for the student's college costs are federal tax-free, and individual states may offer additional tax breaks as well. To learn more about 529 Savings Plans, speak to a financial advisor. We finally have a 529 for our childern. Thanks to my father in law who got of the dime and got it done. He contributed some and we did also. Now we can look forward to tax free growth on these savings.
Saving isn't the only way to pay for college. Federal, state and private grants and loans can bridge the gap between your savings and tuition, even if you think you make too much to qualify.
I hope you enjoyed this post. If you have a question or a idea make sure you leave a comment and I will try to research it and write about it. Final thought if you enjoyed this post why not Subscribe to Strategies for Life its free.
Sunday, March 18, 2007
1. The Warren Buffet
2. Jim Cramer Mad Money Books
3. How to Make Money In Stocks
In regards to magazines and newspapers I would recommend the Wall Street Journal, Investors Business Daily and Baron's Weekly.
1. The Wall Street Journal
2. Investors Business Daily
FreeCreditReport.com is not the place for free credit reports. If you didn't know that, you may have paid for something that you did not want or that should have been free. Apparently the company that operates FreeCreditReport.com had its own sort of confusion. A federal court ordered the company to stop misleading consumers last August. Then last month, the Federal Trade Commission said the company was still not telling customers what it should, under the settlement order. I always wondered what this company was about. After all they pound us with their radio and TV ads and it seemed to good to be true. Last summer I went to their site and started to click through and I noticed that you had to put in a credit card, so I went slow and started reading. I ended up not putting in the credit card number because I could see there was going to be a charge for my free credit report.
In late February, the FTC said Consumerinfo.com, which is a unit of Experian, the credit bureau, didn't adequately disclose that anyone who signed up for the "free" report at FreeCreditReport.com would also automatically be enrolled in a credit monitoring program that costs $79.95. An expensive free credit report as far as I am concerned. Consumerinfo.com paid $950,000 to settle the original charges. Now, the company has to pay another $300,000 for violating that settlement order. Experian spokeswoman Heather Greer said there was a problem in one of the company's television ads that was fixed last year. Meanwhile, if you want a truly free copy of your credit report, the place to go does not have free in its web site address. It's annualcredit report.com. I tried this one and it actually is free. If you want to get your actual FICO score there is a charge for that but I felt I didn't need that.
Where to go for your possible refund: Anyone can use that site to get a free credit report once every 12 months from each of the three credit bureaus. Anyone who was unwittingly charged for credit monitoring by Consumerinfo.com may be eligible for a refund. The settlement covers customers between Nov. 1, 2000 and Sept. 15, 2003. For more information, go to ftc.gov/freereports. Or send a letter to: Consumerinfo, P.O. Box 19729, Irvine, CA 92623-9729.
Saturday, March 17, 2007
I found and interesting article titled, Maxed out on debt? The cool thing is the offer that help's on way, in a film and a book. So if you are a person that would rather wait for the movie you are in luck it is available. Here is what the article said about people struggling with debt along with my comments.
Checkout the following video from the Movie Maxed Out! Shop for the movie Maxed Out.
The twofer this month is the feature-length documentary Maxed Out, and a companion book, Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders. The movie opened in select markets last week. I think every high school at least should find a way to get the film shown to its student body. James D. Scurlock, author and director of Maxed Out, hopes to do with the overselling of credit what former Vice President Al Gore has done for global warming -- elevate people's consciousness about a terrible threat to our existence. In this case, it's our financial well-being. As you prepare for retirement financial planners will recommend and coach that one of the most important things to do it eliminate your debts prior to retirement. This doesn't mean you take on a giant debt consolidation loan right before you go into retirment. Additionally, most people don't realize how quickly you are paying for something 2 to 3 times when you finance the items with credit card debt. If you have a credit card with 18% annual interest, according to the rule of 72 you will pay interest equal to the amount of the purchase in just 4 short years. If you want to play around with this check out the rule of 72 calculator.
Both the book and film examine the proliferation of debt in America. Among others, Scurlock interviews debt collectors, a Harvard professor, pawnbrokers, people in debt and the people who have watched loved ones struggle with debt. I laughed when Scurlock shows old black-and-white clips of students being taught how hard it is to qualify for credit. You have to have good character and a proven capacity to pay it back, an unnamed man tells a young boy and girl. Credit is easy to get now a days and it is just as easy to get in trouble with credit. When someone extends you credit and you use it you get debt. Your goal is to not be in debt. Simple rule of thumb, never use credit to purchase something that doesn't last. Don't pay interest on the dinners you ate out last month, or the vacation you took in February. It doesn't make sense. Use a special savings account and establish a budget to help you pay for these items and control your expenses.
Shop for the book. I was most moved by two mothers, Janne O'Donnell and Trisha Johnson, who sit side-by-side and talk about their children -- college students -- who committed suicide largely because of credit-card debts. O'Donnell's son had amassed a debt of $12,000 on 10 credit cards. Johnson's daughter was a freshman when she spread her credit-card bills on her bed and then hanged herself. She owed $2,500. Scurlock's book takes you along on his journey to make the documentary. Credit is just too easy to come by, when I was in college I did not have a credit card. In the days of debit cards I don't think any college student needs a credit card. It is just too easy to get in trouble with. A college roomate of mine had $5000 in credit card debt when he was in college. He had no way to pay it off. He didn't have a job. I would never want that hanging over my head.
He takes a few missteps in the beginning when he criticizes radio talk-show host Dave Ramsey, who rightly encourages people to get out of debt and shun credit (except for a home mortgage). As in his film, Scurlock's snide references to tithing come off as useless pot shots rather than insightful dialogue. People are not in debt because they tithe, as he seems to suggest. But when Scurlock focuses on the larger issue of easy credit, he's right on the money. "The federal government -- and the majority of Americans -- can no longer get by a single day without taking on additional debt," he writes. "And as more borrowing goes to simply pay off old debt, or to make interest payments, the new debt does little more than increase banking profits."
Some facts Scurlock points out:
- The Commerce Department reported that the nation's personal savings rate for all of 2006 was negative 1 percent, the worst since the Great Depression.
- From July 1, 2005, to last June 30, there were almost 1.5 million personal bankruptcy filings.
- Credit-card issuers have increased the number of mailed credit-card offerings sixfold since 1990, from just over 1.1 billion to a record 6 billion in 2005.
- Revolving credit-card debt, the amount you don't pay off every month, increased 6 percent from $827 billion to $876 billion in 2006.
- Low- and middle-income households have, on average, $8,650 in credit-card debt.
"There is an even greater misconception at work," Scurlock writes and presents in his film. "A misconception that debt is not what it used to be. That there is `good' debt, for example, and `bad' debt. The idea that one should stay out of debt, period, is now considered unrealistic. Even more frightening is the notion that debt is our friend -- a magical tool that allows us, in the words of Napster's new ads, to `own nothing, have everything.'"That deserves an "Amen." Scurlock said his goal for the book and the movie was to "paint the story of our debt-fueled culture in broad strokes." He says he wants to challenge the assumptions about the way we live our lives and shift the debate. "Do we really want to be in perpetual debt?" he asks. Read this book or watch the movie and perhaps you'll answer with a resounding "no."
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