Monday, November 29, 2010

Fareed Zakaria and the New Puritans

After my regular Saturday morning English Premier League soccer match, I tuned into Fareed Zakaria, GPS over on CNN. I had seen an ad for the show regarding consumer spending, and thought it would be interesting to get the point of view of a non-western, non-finance related personality on our troubled economy. I usually enjoy Dr. Zakaria’s show (he holds a doctorate in Political Science from Harvard) and respect his opinions on the various world happenings he covers. His forte not being economics or personal finance, I was really intrigued as to what he might have to offer on the subject of consumer spending. I wasn’t disappointed.
 His take on the subject began with the opinion that we (the US/western culture) have become overly dependent on immediate gratification. He noted that in the past, though America has always been a nation of a strong work ethic, our forefathers had always saved for a rainy day. He pointed out the Puritan ethic of frugality and saving that had helped to build this country into what it is today. However, that level of financial discipline, Dr. Zakaria continued, stands in stark contrast to today’s consumer culture that dominates the west. Westerners are obsessed with shopping, and retailers have stove the consumers’ fires, whether it be by pushing increased holiday giving or by providing special shopping dates such as “Black Friday” and the week following Christmas, just to name a couple. This consumer mentality, in the doctor’s opinion, has contributed to the overall debtor situation that we, as a country, share. He said we should look to the Pacific Rim nations for an example of how to save; that it is the Asian people who are now the new “Puritans”.
I’m not sure if I completely agree with this assessment, but I do agree that we need to be a little more discerning in our spending, and a little less dependent on others for our next “free meal” should we get in trouble. At least Dr. Zakaria did not tell us we need to be more like the Europeans, and only work a four day week and retire at sixty. That only leads to needing a handout (see the current European financial crisis).
I’d rather be like the Puritans. I guess even if that means having to look to the east, rather than to our forgotten forefathers.

Tuesday, November 23, 2010

Altruistic Gifts

With Black Friday approaching and all the great deals on merchandise and possible holiday gifts available, I'm reminded of Christmas two or three years ago. Back then I had little money available, and I decided to give most everyone in my family the same thing; a $25 gift voucher from This is a humanitarian financial aid organization that helps small entrepreneurs around the world. These gifts continue to give to this day, but before I go on about this organization I need to check up on how the various members of my family perceive those gifts from a couple of years back. I'll check with them and write more later about Kiva and how it panned out. For now, I'm interested in other unique gift ideas for the holidays. I know I have a nephew who is building "houses for humanity" and giving the gift of his time. Perhaps you have some ideas of your own, things that don't cost too much or are simply gifts of our time; whether these be charitable ideas or just good frugal ideas for those we love. So drop some ideas on me, and enjoy the upcoming Thanksgiving holiday.

Thursday, November 18, 2010

A Dollar Saved Is Not A Dollar Earned?

The holiday season is pretty much upon us. Halloween is a memory, and Thanksgiving is quickly approaching. This is a great time of year. I'll be celebrating Thanksgiving twice this year, first this weekend with my extended local family, and then again with my mother at her assisted living home on the traditional date. That's two free meals, I consider that a pretty good haul.
From a budget point of view, food may not seem like all that great an expense, and truthfully if you regularly eat at home, then it probably isn't. But a dollar saved is a dollar earned I was always told. So whenever I get a chance for a freebie I take it. I want to earn that dollar. The funny thing is, that age old adage is actually incorrect; a dollar saved is NOT a dollar earned.
What? That's financial heresy!
Wait, wait, before you go throwing me under the train, you'll see my point is that a dollar saved is actually MORE than a dollar earned.
If I spend a dollar at a store or on some good of some sort, then it would seem that I have used up one dollar that I have earned. Actually, I have used up more. Every time I earn a dollar I must give a portion of that dollar to several different tax authorities; the IRS, the state comptroller, entitlement fees, etc. (Now I'm only talking about income taxes and social security programs here, don't get me started on sales tax and use tax and all those others.) Let's say I pay 30% of my salary in income tax and entitlement fees to the government. That leaves me with only 70% to take home, or only 70 cents on the dollar. In reality, at a 30% tax rate, I would have to earn $1.43 in income in order to bring home $1.00 of spendable income.
So, where does that leave us? The adage is "A dollar saved is a dollar earned." But in today's world, apparently, a dollar saved is $1.43 earned.
When put this way, its easy to see why getting a couple of free holiday meals is a real bargain!

Monday, November 15, 2010

Is Credit Card Debt My Fault, Or Do Credit Cards Suck?

I just read an older article from the "Free From Broke" blog site. The article was titled (if you can believe it) "Credit Cards Don't Suck, You Suck!". That headline naturally caught my eye, so I stopped and read the author's rant. Though he made a few good points, overall I felt like he really was missing the boat. He blamed card holders for not reading the fine print, for not paying over the minimum, for being late, etcetera, etc.
I remember when I had a mountain of credit card debt. I had had an excellent credit rating and made a nice income. My card rates were all under 14%, with most around 7%. I had used my cards to finance business purchases and had earned some very high credit lines too. Then, one day business wasn't what it had been and I fell into some debt. The expenses I had taken on were starting to become unmanageable and then the business went away altogether. So now I had debts and car payments and it took time to unwind some of these things. When all was said and done, I found myself unemployed and about $40,000 in debt after closing the business. It wasn't long before the credit card companies somehow found out about my predicament. I had a couple small investments and was able to pay the minimums with the profit I was making there, but that was before the card companies took action. Without ever having been late on a payment, all (and I mean all) my credit card interest rates were jacked up to 20% or above. What had been a difficult (but what I still felt a manageable) situation, suddenly became a nightmare. My credit card debt skyrocketed over the next year as my plan for employment (I put myself through a trade school) became delayed by a full year. Though I continued to make all my minimum payments, the increase in the interest rates I was paying finally took me under. When I finally declared bankruptcy (under the pre-2005 laws when you could still erase any credit card debt) I had never been late on a single payment, but was floating on a sea of credit card debt. I had not made a card purchase of any sort (other than possibly gas) for the previous year either.
My point is: yeah, I had a big hand in what happened. But I couldn't have predicted the collapse of my business market, or the interminably long time it would take to get into a new profession. I did all I could to pay my debts and stay timely with my creditors. But in the end, the CARD COMPANIES THEMSELVES helped dig their own graves. By jacking my card rates up from 7% to 25% they insured that I would not be able to pay them off, almost no matter what I did. They virtually forced me in to bankruptcy.
I still wonder today, whether I would have been able to get out from under had the rates been left as they were. I guess I'll never know.
But to the author of that other article; sure, there's a sucker born every day. But sometimes it's you, and sometimes it's the card company.

Monday, November 8, 2010

More Regulations for Shady Companies

More bad news for debt settlement companies. Not long after federal regulators cracked down on some of their more shady practices, states are now getting into the act too. Outgoing Kentucky Attorney General, Jack Conway, released a press memo Friday announcing that the final provisions of Debt Adjuster Regulation HB 166 went into effect as of November 5, 2010. “The regulation completes implementation of HB 166 (2010 Regular Session), which added several new protections for consumers entering into debt-adjusting contracts”, the statement said. Other states are also moving toward tighter control of these companies and many business models will fold as more and more of these regulations take effect. 
Consumers need to be cautious when selecting a path toward debt reduction. As stated in my previous post, hiring a professional law firm to negotiate on your behalf is still your safest bet. Don’t fall for these fly-by-night companies operating out of someone’s garage. Look for a tested track record; especially look for testimonials from previous clients. And WATCH OUT, real debt relief is available, but you should go with a firm you can trust.
Then start on your way to debt freedom, it’s a good feeling.

Bankruptcy, Law Firms or Debt Settlement

So, I was just reading on another blog that it's recommended to pay off your debts. That's all well and good if you are in a position to pay off your debt, I agree, do it. But what if you're not? Then what do you do? You could choose bankruptcy, or you could try those debt settlement companies. But bankruptcy won't eliminate all unsecured debt any more and debt settlement companies are coming under governmental scrutiny of late. Besides, a creditor does not HAVE to deal with a debt settlement company if they don't want to.
However, there is a better alternative; if you have credit card debt you can get it drasticly reduced by getting professional help.
Try seeking out an ATTORNEY to represent you. Some can save you 50% of the principle this way (even AFTER their fees). And considering interest, you'll save even more.

Here's an example: Let's say you have $20,000 in credit card debt. You find a law firm that will help you set up an account to make monthly payments toward your debt for, let's say two years. You pay in to the account and also pay the attorney, and after two years you have paid something like $11,000 total. Because you have an attorney, you are getting no hassle calls from creditors, and interest has stopped accrueing on debts turned over to them. Had you been paying, say 20% interest, over 2 years, that debt would have gone to $28,000 or so. And you get out of it for only $11,000! Pretty good, huh. And it's way better than bankruptcy, where credit card debt is NOT eliminated and your credit is affected for 7 years.
This is the best alternative I found. You set your own payment schedule and get out of debt in just a few years. Then you can start rebuilding your credit and in the time it took to eliminate the debt, you can be credit worthy again.

Thursday, November 4, 2010

MSN Debt Evaluator

Just read an article on MSN Money that plainly sums up the path out of debt. “Whatever you do, don't give up. You didn't get into debt overnight, and you won't get out that quickly. Getting out of debt takes time and patience, but it pays big dividends down the road.” Never were truer words spoken.
A great “debt evaluator” was embedded in the article, too. Here’s the link; give it a try and see how you stack up!

Wednesday, November 3, 2010

A Blog About Real Debt Relief

A growing number of people are finding themselves in serious debt trouble. I’ve been there myself and, at the time, did not realize that I might have options other than the ultimate realization of bankruptcy. To make matters worse, now, with the change in bankruptcy rules in 2005 regarding unsecured debt, this ultimate option has become even less desirable than it was before. So I’d like to discuss exactly what options are available to the average consumer, what types of debt may, or may not, be considered for relief, and finally, exactly how these various options might affect a typical debtor's credit rating.
So I hope you’re ready to participate, and maybe we can learn how to better survive these tough economic times. After all, times will eventually get better, and we all want to be ready to prosper when the “good times roll”!