Why so much money?
Well, it was just sitting in a savings account earning less than 2%, and I need to diversify my investments a little, but I’m not ready to go back into the stock market yet. I realize there is risk involved with holding a personal loan portfolio, but I’ve met the Lending Club team, and I feel confident in their tactics and processes to minimize that risk.
I’m looking now for investments that generate cash, and Lending Club fits that bill.
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Well, It’s official.
I’m married : ).
And it’s awesome. : ) : ) : )
Yes, that was three smileys in a row on a blog.
It’s a strange feeling…sometimes it feels strange, but I’d say 99% of the time, everything feels the same with my now wife, which is great, because we are both very happy.
The past few months have been pretty crazy, lots of wedding planning, moving, living in my Mom’s basement, etc. But now I’m settling in with my wife in Portland, and we just love it.
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image from icanhascheeseburger.com
If you’re facing foreclosure, getting behind on your payments, or need to move but are “underwater” with your mortgage, help may be on the way. The new program is called: Home Affordable Foreclosure Alternatives
After the government’s abysmal failure to modify loan mortgages, they are finally giving some help to the win-win situation: a short sale
A “short sale” is when the homeowner sells their house on the open market, but the bank agrees to a sale that is less than (“short” of) the mortgage balance owed.
The government’s new program will in some cases even help the homeowner transition to new housing with a $1,500 cash allowance. Why? Because they want to stem the tide of foreclosures, and a short sale is a decent alternative. Obviously keeping people in their home would be best, but it’s just not possible for millions of homeowners right now. The program will also give $1,000 to banks who participate in the program.
As someone who successfully went through a short sale, I will say this: it’s not an easy process. This new law should speed up the process a bit, but it still can take a very long time. I was lucky to work with a very experienced short sale real estate agent, and I would highly recommend you do the same if you’re thinking of going this route.
I’ve written quite a bit about short sales including:
My take on a short sale is to think about it from a future lender’s point of view. Rather than just stopping all communication and “walking away”, you work with the bank to get an agreeable amount for your house, and you at least make the effort. It will hurt your credit score, but it won’t destroy it, and from a Banker’s point of view, it looks much better than a foreclosure.
It’s been about 1 1/2 years since I completed my short sale, and my credit score has returned to the 660 range.
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One of the things that I use to keep myself focused in my journey to debt freedom is books! I use Audiobooks usually because I can “read” these while commuting, working, washing the dishes and folding the laundry. Audible is my favorite source for audio books.
Here are my favorites:
The Total Money Makeover, Audiobook, by Dave Ramsey (2003) I love it because it’s read by Dave Ramsey himself. He has a passion for what he does and a lot of energy in his voice. I’ve listened to it several times and it’s what I turn on if I don’t know what to listen to. I no longer learn something new every time I listen to it—instead, I use it as an energy boost to stay focused. For me, having a “voice” rather than reading the book by myself is like having someone else cheering me on. (Try it, it might work for you too!)
Outliers, Audiobook by Malcolm Gladwell (2008). Also, read by the author, I like all of Gladwell’s books. His unique perspective inspires me to look at all of my circumstances through another lens. The text itself isn’t precisely related to getting out of debt, but success measurement. To me, being out of debt is a measure of success in my own life, so it applies in a less direct way.
Guerrilla Marketing by Jay Conrad Levinson (2009). This one is about marketing in unorthodox or affordable ways. If you have a “side hustle” program going on (as many of us do) this might inspire you to find another way of finding clients or reaching out to sell your product or service.
No More Mondays by Dan Miller (2008). This is a great book about finding/pursuing your passion. I do hope that is one of your post-debt goals. It helps me focus on the “after.”
The Go-Giver by John Burke and John David Mann (2008). This is another great book about change in perspective and attitude. It’s a parable, so easy to listen to, not a bunch of numbers and a good refresher on attitude. (Or maybe I should say it is “attitude refreshing.”)
The Four-Hour Workweek by Timothy Ferriss (2007). I’m personally a big fan of old-fashioned, holistic and neighborhood-based business (I’m a hippie at heart), but what I love about four-hour-workweek is what the case study individuals did once they met their business/income goals. They took their kids sailing around the planet, they pursued athletic goals and other personal goals. I love the “life is more than work” perspective, and use the case-studies as inspiration for what I might want to do when I’m debt free.
Blogs, blogs blogs! I get many personal finance and debt-reduction blogs in my Google Reader, but seldom check it. My very favorite blogs are delivered to Facebook and my email where I’m more likely to read them. Whenever I have a moment of “hmm… I could use some inspiration” I can usually find some within moments on my mobile phone. Surf around for some of the best of the best. I especially enjoy those with a humorous perspective and a youthful voice (Debtkid, PunchDebt, Man vs. Debt, and Budgets are Sexy).
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For many of us, the battle to get out of debt is a long one, taking many months or years. I’m 15 months into my journey now, and I have about four more months to go.
Right now I’m having a harder time than I have before staying on task. The remaining debt is the biggest “snowball” and is a hefty $10k. It’s also been hanging around like a member of the family for so long it’s become nearly invisible (the balance has been roughly this size for about four or five years years). Waking up every morning and staring that thing down and saying “you’re next sucker” isn’t working because I can practically hear it shouting back to me “yeah right kiddo… just try…”
We’ve covered maintaining the motivation several times (links below) but today I want to focus on immediate and right now ways to get your eye back on the goal.
In our house, we’ve found ourselves beginning to stray now and then—eating out more frequently saying “well, we’ll be debt-free in four months, so let’s celebrate now” or slipping up and beginning to add lifestyle extras. Now that we’ve noticed this—here’s how we’re tackling it.
This isn’t the home stretch—it’s crunch time! We’ve enrolled our oldest daughter as the “traffic cop” to help us all stay accountable on this. Kids notice everything, may as well reward them for pointing out things like this. Besides, when your kid calls you on “bad behavior” you have no choice to but to shape up. There’s no rationalizing to children.
That last snowball is intimidating, so break it down. We used to budget $1,300 to $2,500 for our snowball payments. It got broken up into several places but now we’re down to writing one gigantic check to the last debt every month. I’ll admit it, I’m a wimp. It’s psychologically difficult for me to write one gigantic check—part of me wants to hang on to the money “just in case” something comes up. Instead, I’ve started writing weekly payments to break the big payment into smaller ones that don’t hurt so much to write and maintains some cash flow security. If you are doing this with a credit card account make sure they accept multiple payments in a month as some charge an extra fee for doing this.
Amp it up! Amp up the energy. Talk about your progress to goal every week, or every day. Make a chart or keep a list—whatever energizes you.
Surround yourself by those who’ve done it. One of my favorite things to do is to download the Friday Dave Ramsey podcasts. Every Friday, he invites listeners to call up and scream “I’m Debt Free!” Then he interviews them about the hardest parts, the best parts, and how much they paid off in how much time. I always find myself energized after listening to these, and sometimes listen to them more than once!
Re-focus on the why. I recently realized that I had completely lost track of this. I cannot remember why we were getting out of debt. It took me some thinking to remember what prompted our conversion to the debt-free lifestyle and I realized that one of the motivators wasn’t a factor any longer. (We were attempting to adopt two kids who I met on my travels to Ethiopia, but they’ve since found another family, which is truly OK by us, but I had to step back and re-evaluate my reasons for continuing on this debt-free journey. Additional freedom, reduced need for income, and security for the kids we already have at home proved to be sufficient motivators for me). A few minutes of fantasizing what would happen to us if my husband lost his job (and excellent health insurance) was enough to get me back on the wagon. Take a minute and remind yourself WHY you’re getting out of debt. Make a list of what being debt-free will allow you to do and put it on your checkbook, or your bathroom mirror, or your forehead.
Next up: Motivational reading and soundtrack ideas for maintaining the focus.
In case you’d like to look back at some of our other motivation posts, the links are below.
Motivating yourself when you want to spend
Some techniques to keep yourself on task
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Back in 2006, getting a mortgage to buy a home was about as easy as buying a tub of butter. Except, well, you actually had to PAY for the tub of butter upfront, whereas you could get a loan for the house. Even for the self-employed, there were NINA (no-income no asset) no-doc loans, or SISA (stated income, stated asset) loans that with the right credit score, you could qualify for. Heck, even with a bad credit score, you could still get a loan (granted your interest rate was higher).
Now that times have changed, what can a self-employed person do to even have a chance at getting a home loan?
20% is the new 0%
The days of getting a loan without good credit with a conventional mortgage are over. Your only, and best bet if your credit blows is an FHA mortgage.
Lenders are going to want to see not only your last two years tax returns, but they may even ask for bank statements for the last 12-24 months of your business. You need to be able to show without a shadow of a doubt that your income stream is going to continue to be profitable into the future. If your business is less than 2 year old, you’re probably out of luck.
I actually talked with a bank loan officer last summer, just to look at the possibility of ever buying a home again. I just gave up after the meeting. In another year or so, I may go back and look at the possibility again, but for now at least, even getting a mortgage would be impossible for me.
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Being engaged is a strange place in life. You’re no longer just “dating” and yet, you’re not yet married.
It’s a heck of a lot of waiting.
Waiting to move (more on this).
Waiting to live together (til after we are hitched).
Waiting for checks to come so I can pay off more debt (I want to pay off my car this month!)
Wait. Wait. Wait.
I swear, I’ve read more news and blog posts in the last two weeks than I have in the last few months.
I’m trying not to spend much money on my business right now, keep costs low, and profits up, and so I’m bored at work half the time. But I head to the office….because what else am I going to do all day?
I am excited about moving to Portland Oregon.
My fiancee and I will be looking for a place in the next few months before our wedding. She will live in our new place for a few months while I move in with my Mom for a few months until we are married. Free rent!
So, lots of change coming. Just. Not. Yet.
I read a really interesting article on smartmoney today about millionaires. Number 7 was that the median college GPA is 2.9.
My cumulative college GPA?
2.9
Ha, that made me laugh. Next time my fiancee mentions my not so stellar college grades, I’ll bring that little statistic out!
JD Roth of Get Rich Slowly fame is a Portland area blogger, but I don’t know of any other personal finance bloggers in Portland. If you know any, or are one, leave a comment and we can meet at some hole in the wall coffee place sometime and talk about the “weird” that is Portland.
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With the recent passing of my fiancee’s mother…and her subsequent life insurance policy squabble (we are not involved in it thankfully), I’ve been thinking….
With a wife now in the picture, and the 105K or so I still owe my mother, I think it’s worth looking into to. If something were to happen to me, I need to make sure that my debt to my mother is paid, and my wife is taken care of.
So yeah, I think it’s time to look at a term life insurance policy.
That’s an interesting question. I’m 26 now, were something to happen to me, my fiancee could take care of herself, she has a college degree, but I’d like her to have a nice cushion, plus I’m sure we will have kids in the next 10 years or so.
I think a million dollar policy is about right for our needs. That would insure my mother is taken care of, as well as my fiancee/future wife.
That’s what I’m getting quotes for right now. I’m getting quotes for both a million and 1.5 million dollar policies with a 30-year term.
What I’m really hoping is that in the next 5 years I’ll have enough saved up, that we’d have our own “insurance policy” called a huge savings account fund. But, since that’s not a guarantee, and I’m not the risk-taker I used to be, insurance it is.
From the free quotes I could get, a million dollar 30-year term policy is going to run me around $650/year or about $54/month. Not too bad. I’m in good health, not overweight, don’t smoke, and no major family heath issues.
How much life insurance do you have? (I’m going to look into disability insurance next)
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Photo Credit DjCodin from www.freedigitalphotos.net
A reader asked us last week “what’s a snowball?” Fair question. We’re talking money, not weather here at DebtKid.
Here’s the answer, the best that I can give it to you, but it is further explained in the “Total Money Makeover” by Dave Ramsey. (I highly recommend the audio-book personally).
Imagine a snowball rolling downhill. It gets bigger, right?
Some financial experts teach you to pay off your debts beginning with the highest interest rate. Dave Ramsey, on the other hand will teach you to pay them off smallest balance to largest balance. It doesn’t make much mathematical sense, but it does make sense in other ways.
First, it gives you a sense of accomplishment. When you’re feeling crushed by debt, a few quick wins feel really, really good. Good enough to work as hard as you need to in order to get out of debt. There’s a real psychological boost. Second, there’s a cash-flow advantage to it.
Two words of caution. The debt snowball will only work for you if you’re on a budget and planning a certain amount of income each month towards your debt at a minimum (extra is always good too). You also need to have a small emergency cash reserve in place just in case. This is so that you don’t need to resort to creating more debt, but be sure that it is not so much that you might be comfortable being in debt. (Debt-busting is not about comfort and relaxation!)
Here’s how you “roll” the snowball.
1.List your bills smallest to largest citing the total balance owed, and the minimum payment on each.
2.Pay off the bills as fast as you can with the smallest. Plan on a minimum payment for every bill and direct any extra towards the top of the list—the smallest bill. In our house, we knocked out the first three bills for a total of about $200 in the first month. This freed up an additional $200 the next month. There’s your cash flow advantage. Rather than just paying minimums, as soon as you get a small bill out of the way there’s a little extra money wiggle room to make even more progress on the next bill. This month I’m paying off a card that has a $209 minimum monthly payment, which is freeing me to make a whole lot more progress every month on my last remaining debt.
3.Any time you have extra, unexpected money (tax return, birthday card from grandma or yard sale money) immediately send it to your smallest bill. What looked like a bunch of $30 and $50 payments suddenly becomes real money once they’ve all vanished and you have that extra cash every month to throw at the big looming debts.
Many criticize this method because it has no regard for the interest. Certainly, I’d bypass this method if I had a few small medical bills at 0% interest and some payday loans at 800% in the middle, but otherwise, this method if followed with intensity can usually be worked in 18 months to two years, so the difference between one credit card at 8% and one at 12% in my family has made very little difference.
Being in debt is like being eaten alive by a duck...
There are a number of schools of thought on debt payoffs.
-Highest interest first—Suze Orman
-Smallest payment first—My financial planner from USAA
-Debt Snowball (smallest balance to largest balance)—Dave Ramsey
-Secured debt first, unsecured later—source unknown
I must confess, I’ve tried all of these methods in the past ten years, and the only one that has worked for me is the Debt Snowball. Why?
I can do math as good as the next guy, and I know it doesn’t make sense to leave a credit card balance out there and pay off a subsidized student loan, but I also know myself and I don’t like to fight loosing battles.
Progress for me can’t be measured in tiny bites. I’ve said it before; being in debt is like being eaten alive by a duck. One doesn’t notice one little bite—or maybe even two. Before long though, it’s all out of hand.
For me to feel progress, I’ve got to take big whopping steps—burning the village steps—to feel like I’m making progress.
Listing my debts smallest to largest and working up the list feels good. The list lives by my computer on an index card and gets updated monthly. I cross off debts. I ring a bell, or twitter or have the kids do a happy dance—whatever strikes my fancy. We put payoff certificates on the fridge and celebrate them like an honor roll report card. It’s mom and dad’s report card for doing well. We can now officially take off the dunce caps we’ve been wearing (they respectively read “Visa” and “Master Card”).
This year, we received a very large tax refund due to our claiming the adoption tax credit. The intention of this was to pay off the plane tickets we’d purchased to adopt our daughter (still on a Master Card at 8%). Instead, we used it and paid off two smaller loans—an adoption loan of $4,000 and the remaining $2,000 on a student loan. The rest was applied to other small debts.
I know I could have made a serious dent in the credit card debt, but instead, we received two certificates of payoff, and whacked off half of our “smallest to largest” list—even if it is just half in length, not half the outstanding balance.
Like a snowball rolling down hill, claiming more snow as it rolls, our cashflow has improved with each of these payoffs—substantially! Each of those little debts we paid off had a pretty high monthly payment. That $15,000 credit card balance has a monthly payment of about $42, but the student loan was $110, and the adoption loan was $150 and there were some other small loans in the $100/mo range. Having all of those paid off frees up several hundred dollars per month to apply towards our bigger debts.
Finally, we see progress on those bigger debts. Stretching and straining to send an extra $200 or $300 per month was miserable, but now we automatically send $200 or $300, and stretch or strain a little bit and send another $200 to be dropping our balance measurably each month. That feels good.
Now, each time my husband takes on some overtime hours, or I take on an extra project, the money we earn is earmarked for those bigger debts. The whole family is seeing progress and the excitement has caught. We’re getting “gazelle intense” about busting our debt….and it is fun.
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I don’t mess around with platitudes and greetings. I prefer to cut right to the chase and show that I truly care about someone by helping them. I’m just not that good at saying so. Don’t get me wrong. I’m no recluse, I truly care about people I don’t even know, and regularly help complete strangers, but my personality just doesn’t lend itself to a whole lot of socializing in the process.
Also, while I’m not prone to thinking a negative thought about someone without a good reason, there are a few things that really set me on edge. Money mistakes—some of which I’ve made myself—really bother me. The ones that make my list are rooted in impulsivity or lack of self-discipline, which are items on my short-list of things I won’t bail friends out for.
Consider yourself warned… don’t complain to me that you have money problems if you’re currently doing anything on this list. I just won’t be sympathetic. For sympathies, try DebtKid, he’s nicer than me.
Here’s my list. I’d love to hear from readers if you have any to add.
1. “Ghetto Wheels”: Don’t put $2,000 wheels on a $500 car. First, you can’t afford them. Second, they’ll get stolen. I’m going to make a sub-category here for any kind of fancy wheels on mini-vans and station wagons. What are you trying to say with the fancy wheels? I’ll tell you what I hear “I’m impulsive and I like shiny things.” I’m all for fancy wheels when you can afford them (not in debt, not behind on taxes or other essentials), but make sure your ride is worthy of them.
Image from Benzworld.org
2. “Ink”: If you didn’t pay your taxes or you’re behind in your credit card payments, or receiving public assistance, but you got a new tattoo, don’t tell me. You’ll get an earful from me—and I don’t mean another piercing.
3. Eating/Drinking out: I’ve been out to dinner with friends and had their bar tabs reach more than my mortgage payment. I never add myself to a tab. I pay cash for my food and drinks. And if you just ordered your third $9 margarita, I really don’t want to hear about your money problems—even if you’re funny when you’re blitzed.
4. Money-making schemes: A little part of me dies when broke people fall for money-making schemes like “order this software” and “buy this tape system” and multilevel-marketing programs. Starting a new “independent representative” business is a great idea if you have money. If you’re broke and in debt, it’s a bad time to start a new business. Please don’t. It breaks my heart and I’m not tactful enough to plead that don’t without hurting your feelings.
5. Rent-To-Own anything: If you’re on a payment plan for your 56” flat-screen, well, all I can say is please don’t breed.
6. Spoiled Children. Children can be ruined with stuff. You’ll impart a sense of entitlement into their psyche that is not a blessing. It will be an albatross they can’t shake off. They don’t learn respect for their things. I have a soft spot here for parents because I know that we all want to give our children everything. We just have to be the grown-ups in the equation and know when they have “enough.” It’s for their own good. Just remember, you’ll be able to spoil all you want when your kids grow up properly and provide you with grandchildren.
7. Car leases: You’re not taking advantage of the auto industry. You’ve not somehow found a new trick to work the system. You’re getting financially raked over the coals.
8. Using home equity to pay off credit cards: Why would you convert an unsecured debt to be a debt secured by your home? Also, why take a short-term debt and stretch it over 30 years? When asked if gravity was the most powerful force in the universe, Albert Einstein (a pretty smart guy) replied “no, the most powerful force is certainly compounding interest.”
9. Lottery tickets: Lottery tickets (and other gambling) are not an investment scheme. You are not entitled to win after 30 years of faithfully buying a ticket every Friday. Don’t plan on winning it. And for heaven’s sake, if you’re buying tickets, don’t tell me about your money problems. Would you have money problems if you could get back every dollar you’ve ever spent gambling?
10. Smoking. Cigarettes, medical expenses, taxes, etc. This habit is too expensive for the broke. Buy yourself some really spectacular cigars when you celebrate your freedom from debt. Champagne too. Why not? Please note that I get twice as cranky about people who are using illicit substances while complaining about their lack of funds. If you can afford your drugs, you can afford your bills. Furthermore, you’re flirting with legal and financial disaster for the consequences of those actions, so stop it!
11. Entitlement Vacations: You don’t deserve a break simply because of the stress of being broke. I understand that being broke (or even on a budget) is sometimes not fun. But hey, be a grown-up. With some self-discipline and hard work it won’t last forever. Don’t even think about busting out the plastic right now to hit the beach and then complaining to me about your money troubles when you get back . I’ll be irritated for your mistake and jealous of your tan.
Dear readers, what do you think? Anything I should add or remove from the list? Be sure to know I’m not going to accost a stranger on the street for their expensive wheels or smoking habit. I’ve just found that I’m not able to muster sympathies when a friend comes to me complaining about their financial difficulties
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As a dumb 20-something, I day traded away over a quarter-million dollars and found myself deep in debt.
This blog documented my journey through bankruptcy, a short sale, living in my office and more. Now it's a resource for thousands of people in trouble every day.
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