Ed Ness In Debt

This is $555K-in-Student-Loans Bad

2010-02-16T15:51:00.001-05:00

The next time you're visiting your local medical professional, take a few moments to look past the three-figure salary and fancy car that you imagine this person has. Instead, think about what it took for this medical professional - doctor, dentist, whatever - to get to this point in his or her life. Ask yourself why you didn't pursue this same career path. (Sorry to exclude my medical professional audience in this paragraph) If I were to ask myself why I didn't become a doctor, I'd first say that the years of medical school required for such a high-profile profession were just too daunting for me.

Thankfully, though, these torturous years of medical school aren't overly daunting for thousands of other medical professionals. God knows we need 'em!

But, you and I both know that college is expensive. Medical school is expensive. And this unfortunate doctor brings a whole new meaning to a life burdened by student loans. Read about her $555,000 student loan debt and you'll think twice before glossing over the fine print of anything for a while.

Inheritance: A Different Kind of Debt

2009-08-17T15:59:00.003-04:00

If you've ever inherited money, if you've ever been the beneficiary of someone's death, then you might understand why my recent inheritance has been the very reason for my absence from this blog for nearly a year.

Inheritance is about as bitter sweet at is gets when a loved one is involved. (For argument's sake, we'll assume that the loved one to which you're calling to mind is, in fact, loved) On one hand, you're emotionally torn to pieces at having lost your mother, a sister, an uncle, whatever. And, on the other hand, you're being presented with this nice chunk of change that will reduce or extinguish your debts!

I probably wouldn't be the first person in history to say, "Take back the money, just bring my mother back!"

Obviously, it is important to formulate a plan for this sudden influx of capital. And as we've surely learned by now, any extra money we have should go to our insurmountable, heavy, and unbearable debt first! After that, you'll want to refer to the helpful five-step plan in this MSN Money article about managing inheritance. But, one of the biggest issues that arises once an inheritance becomes part of someone's life is, "How much of this inheritance will have to be paid out in taxes?".

Well if you haven't heard of Inheritance tax by now, you'll know all about it soon. And, if it's not inheritance tax that'll trouble you, it may well be estate tax. Either way, read a primer on the two tax types.

So, you're annoyed that the government is going to profit from the death of your loved one, right? That's what it boils down to, isn't it? The government collects money from your loved one when he or she dies. I'm sure that your Uncle Bob was a patriot in every way. But, I doubt he'd appreciate it very much when Uncle Sam steps in at the funeral and says, "Hold on there, partner! I know your uncle is barely in the ground. But, I get first dibs on his property, even though he wanted you to have it all." No, that doesn't seem like good manners at all.

Well, the truth is that those taxes have been in place on estate and inheritance property for so many years, we really shouldn't expect to nullify them any time soon. But, I have something encouraging for those of us who don't stand to inherit vast estates and mutual funds:

Life insurance. That's right, it is my understanding and experience that life insurance is not taxable, at least not in the state of NC as of this date.

Obviously, life insurance is a bit unique. It's not like you're going to plan to receive life insurance from a loved one. Talking to family members during Thanksgiving dinner about life insurance needs is a bit rude.

Really, it's just nice to know that a life insurance inheritance is a relatively ideal kind of inheritance to receive as far as government messiness goes. And, more importantly, it's a good thing to keep in mind when planning to help your children or siblings in the event of your death. Leaving them with a pile of money that's partly and surely going to be taken by the government is definitely less appealing than a smaller, albeit, generous sum that's being paid to them directly by an insurance company. And, who knows, perhaps your careful selection of a life insurance policy will give your kids a chance to break free of their own debt.

Debt Doesn't Take a Break, But I Do

2008-10-15T06:17:00.007-04:00

Wouldn't it be grand if you could send your personal debt on a vacation somewhere? Pack it up and say, "See ya in two weeks, credit card debt! Have a great summer, Car Payments!" With debt on vacation, you might enjoy some quiet relaxation of your own thanks to the clarity of mind a debtless few days would bring. Yes, you and your debt could certainly benefit from a much needed break, even if it would be a minor case of denial.

Okay, I'll stop myself now before I get too far into the debt-on-vacation fantasy. That would make for a funny picture though, wouldn't it? I envision a bunch of credit card bills lounging by a swimming pool in Palm Springs...

Since we can't realistically send our credit card debts and other financial frustrations on vacation, or at the very least out of the house, I've been taking my own break. I just decided three weeks ago to temporarily stop concentrating on the very content that sustains this blog. It's certainly not a responsible thing to do, mind you. But, I felt it was necessary.

Did this respite from my debt-filled thoughts have any sort of affect on my journey toward financial freedom? Did clarity of mind somehow provide me with the one solution to paying off my debt in one fell swoop?

Nope. I'm still in the red.

Naturally, as you read in my letter to Henry Paulson, I was inspired by the recent ~~bailout~~ economic rescue package. But nothing has resulted thus far from my attempt to garner some of that cash for my own family's bailout. They say it'll take some time to implement a plan and distribute the funds appropriately, though. So, I'll let you know when the fraction of that $700 billion makes its way down to me.

With all the events in recent weeks, I am glad I decided defocus my sights on personal debt for a little while. Just listening to NPR each morning last week was enough to depress me. I mean, how many times does a person have to hear "economic crisis" before becoming clinical? I'm listening to music on my morning commutes this week. Perhaps some I'll get some creative insight on living below my means from The Best of Mississippi Fred McDowell.

Keep fightin' the debt, folks!

In Debt :: Ed Ness

A Treatise on a Debt Bailout

2008-09-23T08:21:00.006-04:00

Dear US Treasury Secretary Henry Paulson:

Your efforts to relieve the debts of some of this country's greatest financial institutions are truly admirable. Seven-hundred billion dollars is an enormous burden for any group of people, much less one brave individual, to distribute for the sake of our great countries economic supremacy. Clearly, you are dedicated to all that is good in the realm of finances and prosperity, a true enemy of debt.

Many lesser patriots choose to scorn you for this Nobel-Peace-Prize-worthy plan to bailout our struggling financial roll models with one fell-swoop. But, I, for one, applaud your endeavor to help the good people who tirelessly and selflessly manage our money, supply us with loans or insurance when we need it, and employ so many hard working MBA's across the land. These people, these saints of the financial sector deserve to have their debts washed away in the blink of an eye. And, who better to provide a resolution of such biblical proportions than the United States Treasury? So, thank you, Henry Paulson.

Now, since the bailout bill has yet to be passed, I wonder if you would entertain an additional request: My own family (one wife, two adorable little boys, and a mother-in-law) could really use a little of that bailout fund for our own personal debt. While the corporate entities in need of your assistance require millions of American dollars in assistance from you, my humble family would only need about $10,000 to cover our credit card debts. If you have enough, we could use another $20,000 to pay off our cars and student loans. If you're feeling really generous, which I know you are; so let me rephrase that: If your bailout budget allows, we'd really love another $150,000 to pay off our mortgage. So, minimum request: $10,000. Maximum, if you can get the numbers to work: $180,000.

As you know, figuring my personal debt into the soon-to-be-passed testament to your genius will certainly help improve the economy. Without bad debts to worry us, my family will have more funds to buy stuff from retail facilities. We'll be able to sell our small home and buy the slightly bigger one with a large yard that we know we need. We'll have less stress at the end of the day, because our bills will not be so oppressive. And, as everyone knows, a family under less stress is the very picture of American ideals. Imagine what you'll be preserving with just $180,000, a mere fraction of that seven-hundred billion dollars you're preparing to manage.

I know, in all your innate goodness, you'll want to to bail out my family with these funds. You're probably writing the check right now. But, of course, your detractors will probably have something to say about it. Just remind them that we're faithful taxpayers, too. Thanks for your time, attention, and overall dedication to reducing debt across the land Mr. Paulson. Have a great week!

Sincerely In Debt,
Ed Ness

Cash in Lieu of Credit Cards

2008-08-26T15:01:00.003-04:00

Always on the lookout for new ways to save money and pay down my debt, I took an interest in a video on Yahoo's home page this afternoon.

The video, from ABC News, documents one family's efforts to save money by spending only cash rather than using credit cards ABC News follows the family for a month. It is yet another testament to how much we can actually save when we put our minds to it.

My family and I are not quite ready to only use paper money for our purchases. But, if any of you decide to take on this project yourselves, I'd love to hear about it.

In Debt,
Ed Ness

More Ways to Save Money for Debt Reduction

2008-08-25T10:50:00.006-04:00

If you are looking for more ways to decrease your spending while paying down those nasty debts, I am happy to relay another set of great tips from the financial experts at Yahoo! (They picked the article up from Businessweek.com)

The article is really just a list of common-sense reminders that we've all seen before. But, that is exactly what we need. I mean, if you think about it, common sense would have kept most of us from getting into debt in the first place. (Don't have the money in the bank? Don't buy it)

Anyway, if you do not have time for the long article at the other end of that link, I've picked my top three favorites and commented on them below:

Shop Smart [article item number 25]
I like this part of the article because it reminds me that I need to stop being so lazy about using coupons. I have always avoided using coupons for groceries because I felt like it made me look cheap. Well, cheap is how we're going to get out of debt, right, people? I just conducted a search for "grocery coupons" in Google and found approximately 1,830,000 results. That represents a lot of opportunity for us to save, doesn't it? So, let's shop smarter.
Buy Used [article item number 24]
I'm putting this one among my top three favorite tips because it makes me feel good about something I've always liked doing anyway: Getting a good deal on something used. This is especially the case with technology items. I'm a pretty big nerd when it comes to computers and stuff. But, I am perfectly happy not to purchase the latest and greatest digital gear. I research stuff for weeks or months before settling on the outdated item I want. Then I watch it on ebay or craigslist for another several days before plunking down my hard-earned cash. In many cases, I end up with something that is as good as new. It's fun. And, according to Businessweek.com, it's smart, too.
Institute a Waiting Period for Major Purchases [article item number 20]
This is a good one, because you will be amazed at how often you may decide that you do not want something you thought you needed so badly two days ago. I've had some people say they're waiting period consists of walking out of the store and around the mall before deciding whether they really want to buy the coveted item. While this is a, um, nice start; the 48-hour time frame suggested in the article is probably a better system. I consider a major purchase anything over $80. That's a lot of money to me. It's a utility bill in some cases.

The other reminders in today's personal finance article are good, too. It's really worth reading when you have a chance. But, today anyway, those three items above are my favorite ways to save money and pay off debt.

In Debt,
Ed Ness

Success on Ebay | A Little More Cash for Debt Reduction

2008-08-20T11:46:00.004-04:00

Success is certainly a subjective term. I use it in this post, because I've successfully sold items for the first time on ebay. Thus, I've accomplished what I set out to do in July: Sell stuff on ebay in order to help pay down my credit card debt. So, the comic books finally sold yesterday - for a whopping $11.01. Something is better than nothing, right?

Now, you are probably sneering a little and mentally devaluing my choice of words. (Okay, I know you're nicer than that) Eleven dollars seems like hardly a success these days, especially when compared to credit card debt in excess of $9,000. If I'd managed to garner an even larger sum for those comics, then, for the purposes of the grand plan to reduce obligations to Visa and MasterCard, we might call it a success. After all, eleven dollars might as well serve as cash for lunch rather than be allocated toward our debt relief fund.

Well, don't dismiss my first successful sale on ebay so quickly. I'm sure I've written before that we must think small when it comes to changing our financial lives. This is no secret. The big things, like paying down oppressive amounts of debt, are comprised of smaller things. You've seen it before in numerous personal finance blogs and books. David Bach talks about the Latte Factor®. Get Rich Slowly is built on that principle. You already know this.

So, don't be afraid to attribute a relatively small sum to your debt reduction efforts. I made eleven dollars just by posting some pictures and a description on ebay. That's awesome. Now I just have to find some more expensive stuff to sell. I wonder if I have anything that could fetch around $9000...

In Debt,
Ed Ness

Moonlighting: The Second Job to Reduce Debt

2008-08-19T09:10:00.004-04:00

Yes, I finally found a second job in order to subsidize my debt reduction project. It's a step I've considered for several months. But, until now, I was more focused on securing an entirely new position altogether; one that would replace my current full-time occupation and feature a higher salary. Times being what they are, though, it seems this second, part-time job is a better alternative.

While my second job doesn't entail fighting bad guys or private detective work, it does necessitate a little searching and finding. It's a contract position that involves monitoring website performance for a development company. In fact, just finding the job itself required some searching. Basically, I was looking for employment that would satisfy these primary criteria:

Part time, few, and flexible work hours
Something I can do at home
Competitive compensation
Allows me to use some of the kinds of skills I'd like to further develop

Right now, many of you are probably thinking that those criteria describe the kind of second job you are trying to find, too. That's not surprising. If I had a penny for every time I heard someone say they wish they could work from home, I'd be relatively debt free. Perhaps that is why there are approximately 327 million results in Google for the search phrase "work from home". Those of you who've investigated such opportunities know that the potential to work from home is one of the great lures of online scam artists. You've seen their ads. They promise big results for relatively easy work.

So, how, you ask, does one manage to find supplemental income obtainable from home at one's leisure?

Start small. You are not looking for a new career at this time. It is a second job to help pay down personal debts. I wasn't looking for a fortune. I just wanted something fair and supplemental. Some income, after all, is better than none.

If you haven't looked already, I suggest that you start with the job postings on Craigslist.org. Since it is free for employers to post open positions on Craigslist, it is an ideal venue for finding lower priority opportunities like the kind of work-at-home-contract employment we want. Sure, free posts also entice the scammers. But, they are easy to filter. Check the boards every day. Check in different categories. Genuine opportunities for part-time, at-home work get picked up pretty quickly.

A second job is not for everyone. As you might expect, moonlighting will make you extra busy. And, if you have a family, you'll be hesitant to subtract even more of your daily free time. (That is partly why I put off applying for a second job. I have a wonderful wife and two adorable sons. Lately, though, I've been waking especially early each morning. So, I expect to get much of my supplemental work done then) An article on Bankrate.com offers some excellent suggestions for determining whether a second job will be a good idea for you. I'd suggest reading that and thinking long and hard about your wish to get a second job. Only you can decide if the price of your credit card debt is comparable to the price of your free time.

If you also have a second job, or are in the process of finding one, I welcome your comments on this post. Being that I'm just starting this part-time position, I'll be interested to know how those of you in similar situations have fared with supplemental income going toward your debts. Thanks for reading.

In Debt,
Ed Ness

Paying Down Debt in Lieu of the Emergency Fund

2008-08-18T09:21:00.005-04:00

I was perusing the latest bit of debt-reduction advice over at Get Rich Slowly and found a very interesting link to another post regarding the gratuitous Emergency Fund. A regular person like you and me, who calls herself Abby refuses to save money for an emergency fund while paying down debt.

I was immediately drawn to Abby's post because, I, too, do not have an emergency fund at the moment. I'd created one earlier on in this endeavor to pay off the credit cards. But, due to some extra bills one month, the emergency fund disappeared fairly quickly. And, it's been missing ever since.

I'd been feeling pretty much like a failure for not maintaining an emergency fund. Much of my research on the subject of personal debt harped on establishing a reserve of around one thousand dollars while allocating additional money for credit card debt. Ouch! That is great advice. But, I was having a hard enough time paying the regular bills. (Yes, even after we canceled our Cable TV service) So, when my first attempt at an emergency fund went away, so did my dedication to that part of the debt reduction equation.

I now have a little more confidence in my current perspective on the emergency fund, or lack thereof. After you read Abby's article, you will see that she advocates paying down more personal debt with the money that she would otherwise allocate toward an emergency fund. She even has some actual numbers demonstrating how this process works for her, proving that the no-EF method pays off the credit card debt two months earlier.

Similarly, I find that relying on my credit card - my brand new, shiny blue, 0% interest-for-twelve-months Wachovia Visa Platinum card - is much better for me should an emergency expense happen to arise. Sure, an emergency situation adds another couple hundred dollars to the very bill I'm trying to make go away. But, with the 0% interest credit card, I'm not paying interest on that added expense; at least not for several months. So, rather than taking away money from my paycheck to replenish an emergency fund, which, in turn, would decrease the amount I could be using to pay toward the credit card bills; I'm just continuing to pay all that I can toward the debts. It's sort of like rebuilding an emergency fund, but not really.

Naturally, foregoing the emergency fund is not something everyone should do. Like anything personal, paying down your personal debts is a different process for everyone. Who knows, maybe I'm way off base in my perspective on having an emergency fund right now. I'll let you know in future posts.

In Debt,
Ed Ness

Saving Money Inspired by Saving Energy in Juneau

2008-08-15T08:51:00.005-04:00

Today's inspiration for saving money to reduce our personal debt comes from Juneau, Alaska. Following an avalanche on April 16 that knocked out the hydroelectric dam supplying the city with much of its electricity, Juneau residents saw their power costs rise from around 11 cents per kilowatt-hour to 52.5 cents per kilowatt hour. Needless to say, the whole city rushed to conserve as much energy as they could or else face some of the highest electric bills anyone has ever seen.

The Juneau residents managed to save tons of money on electricity when they cut consumption by 40% in a little over a month.

Sure, 40% looks like a big number. But, what does it mean in real life? Well, a story from NPR describing power-saving measures following the crisis illustrates how some residents did without and managed to get used to it. We're talking about people cutting up scrap wood to cook with a wood stove, unplugging electronic appliances when not in use, and cutting back on excessive energy use in general.

This lesson in modifying behavior to conserve a costly resource shows just how capable we are of saving and sacrificing for the greater good. I know that sounds a little preachy. But, I'm sure you know what I mean. These good residents of Juneau had to conserve some of the everyday comforts or pay a very high price for them.

Likewise, we are on a mission to save money for the sake of debt reduction. We already have our Juneau power bills, folks: They're debts to the credit card companies. And, they'll only go away when we pay them off. And, there's no better way to do that than to conserve our money and direct it toward that debt-reduction diamond in the sky. [Fade-in: Sound of choral angels]

In Debt,
Ed Ness

The Pitfalls of Using Ebay for Debt Reduction

2008-08-12T15:43:00.002-04:00

I recently outlined my plan to reduce credit card debt by selling stuff on ebay. I was attempting to sell a modest collection of Batman comic books, which I'd been storing in a closet since I was thirteen. Well, they didn't sell this time. My guess is that the cost of shipping didn't warrant the inherent value of the collection. (I'm telling you, it's a very modest collection) So technically, if I wanted to look at this experience from a negative perspective, I've actually dug myself deeper into credit card debt, a whole fifteen cents worth, by trying to sell stuff on ebay.

Let's have a moment of silence for my failure.

Okay, being that I don't like to give up too quickly, I've decided to give it one more shot. A fantastic bit of objective advice about being an ebay seller encourages me to follow a few guidelines this second time around. Coupled with ebay's own advice for the would-be internet auction profiteer, I'll hope to at least get some financial reward for my childhood comic collection.

Of course, it could be that there isn't a single ebay user out there who wants my pitiful collection of comic books. I can accept that. I'll let you know how it goes. Even if I get just $5 out of the deal, that's $5 dollars I can pay toward my credit card debt.

In Debt,
Ed Ness

Another Good List of Ways to Save Money and Pay Off Debt

2008-07-30T13:03:00.005-04:00

Since we've all made getting out of debt our obsession here, it goes without saying that saving money and paying off debt are practically synonymous at ENiD. After all, money saved is money allocated for our debt consolidation project, right? Therefore, you probably won't mind that I am sharing another great set of tips to save money, or get out of debt, each month.

This article, composed by the knowledgeable folks at ConsumerReports.org and relayed by the friendly people at Yahoo Personal Finance (yes, them again), caught my attention with the first tip: Find Cheaper Auto Insurance. Why didn't I think to do this earlier? The article states that many of the readers surveyed have stayed with their current auto insurance provider for more than 15 years. I haven't had a car that long. But, I could easily see myself staying with the same provider for a long time simply because that's just one of those things I don't imagine dealing with on a regular basis. Guess what I'll be shopping for later this evening.

As usual, I don't want to spoil the article for you. It's not long, so take a few minutes to glean a few more ideas for setting aside money to pay down your debt. It's interesting to note that the article lists paying down debt as one of the best ways to save money each month. Ironic, isn't it?

In Debt,
Ed Ness

When in Debt, Sell Stuff on Ebay

2008-07-29T09:56:00.004-04:00

Aside from saving money by cutting daily expenses, it doesn't take a genius to realize that making more money will also help in one's quest for a debt-free life. I've been exploring a nifty little auction website that allows registered users to buy and sell things right over the Internet. It's called ebay.com. You may have already heard of the site, lots of primary colors in the logo, sort of playful. (In my humble opinion, I think this little business is gonna go places) So, this past weekend, I started making a list of things around the house to sell. The first thing to go: My collection of Batman comics that I obtained around eighteen years ago. I'm selling it in installments so as not to overwhelm all those collectors out there. I've only listed one lot for now just to see how it goes.

After seeing that the sale is going rather slowly, it occurs to me that the cost of shipping the comics I've listed may not be worth it to many buyers. So, maybe selling my paltry comic collection isn't the best thing for me to sell on ebay. But, I'll try a couple other lots over the course of a two weeks and see if anything goes. It's a slow means to making more money. But, if I get, like, twenty bucks out of the whole deal, it sure beats throwing the comics away. And some money is better than no money when you're trying to get out of debt!

In Debt,
Ed Ness

Can Buying Lottery Tickets Get You Out of Debt?

2008-07-25T12:51:00.002-04:00

No, it's very unlikely that you'll get out of debt by spending money on lottery tickets. Now, if you happen to win the lottery...Just kidding. Don't waste your money. I just read this article about how feeling financially challenged may inspire more lottery ticket purchases. It's an important lesson for those of us feeling the pressures of being in debt.

In Debt,
Ed Ness

Tips For Saving Money and Reducing Debt

2008-07-25T08:39:00.003-04:00

While searching the Yahoo.com Personal Finance pages recently for new ways to reduce my credit card debt, I was struck by an article that outlines ten ways to save money entitled "Cut it Out" by Lauren Baier Kim of the Wall Street Journal Online. It's well worth reading, because it supports much of what I've been finding elsewhere and writing about on ENiD.

Some of the tips are obvious reminders, like brewing your own coffee at home in lieu of stopping at Starbucks every day. Other suggestions are more interesting: Did you know that cutting your daily shower from fifteen to ten minutes could save your household approximately $208 over the course of a year? And, then, there are a couple of goofy suggestions, too. (I'll leave it up to you to determine which tips fall into the goofy category) Enjoy. Save your money. Get out of debt.

In Debt,
Ed Ness

Use Your Tax Refund to Pay Down Debt. I Didn't.

2008-07-15T08:31:00.004-04:00

If you haven't spent your tax refund and economic stimulus check yet, good for you! Now spend every cent of it on paying down your debt. Do it now. I'll wait.

I should have used the refund and stimulus checks to pay off more of my own pesky credit card debt. I'd intended to do the next best thing: contributing to the value of my home by upgrading the floors. That's sort of like paying down debt in an indirect way, right?

But, what actually happened was this: I thought about what sort of new floors to buy for too long, fearing the commitment of brand new laminates or hardwoods in my living room. Once it's down, it doesn't come up easily. I mean, do you realize how many options for flooring there are out there? Obviously, I couldn't just pick the best of the best, because, after all, I'm on a strict budget. And, I was going to do the installation myself. So, I needed to make the right choice the first time, make the best decision while spending as little money as possible. You understand, don't you? The trouble was that I continued to spend little bits of my extra money on little things here and there while doing my research on floors. So, when I was finally ready to almost decide on the material, I didn't have enough tax refund and stimulus check left over.

Smart, right? I'm a real genius. If I'd just done what I should have done in the first place, I'd have a nice chunk of credit card debt paid off and the freedom to think more about flooring without the pressure of having to buy it right now.

No matter how old and smart you think you are, some lessons are still learned the hard way, I suppose. This is particularly true in the case of consumer debt, that phenomenal blight on common sense.

In Debt,
Ed Ness

Paying Down Debt: The Chase Solution

2008-05-06T09:22:00.004-04:00

A couple of posts ago I mentioned that I was weighing the pros and cons of low-interest credit cards and personal loans to pay down credit card debt. Before I disclose what I ultimately chose to do, let's go over the basics of these two debt elimination options.

Everyone is probably familiar with the notion of transferring debt from one credit card with a relatively high interest rate to a new card with a lower or even 0% rate. You get offers for this sort of opportunity in the mail all the time. Or, you can be a little more proactive by going to sites like bankrate.com or gozeropercent.com. The catch, of course, is that the lower rate on the new card lasts only for a specified introductory period of three to fifteen months, at which point the rate on the new card will increase to some other percentage. Although, that new percentage rate, according to some of the more enticing credit card offers, will still be substantially lower than the 15% or 20% APR you've been paying for the privilege of using your other card. And, of course, if you are at all late with a payment to this new credit card company, your introductory APR will be changed faster than you can say "grace period". But, ideally, if you are able to play by the credit card company's rules, you'll be able to take advantage of the lower rates; saving money on interest while paying down that nasty debt.

Alternatively, you could opt for a personal loan. There are the secured and unsecured personal loans from which to choose. The secured loans require collateral of some sort, like your house, while the unsecured loans trust your good credit history for repayment. I would personally never want to risk losing my house just to pay off credit card debt. So, the secured loan option isn't even a consideration. But, some financial institutions like Capital One offer unsecured personal loan products that are quite appealing. My wife and I each received an "invitation" for these particular loans in the mail. But, they're available on line, too, of course. The fixed rate is as low as 6.99%, assuming you meet the credit requirements after officially applying for the invitation. And, as with many consumer loans, there are options to pay it off in two to six years. Having a pay-off date in site is a good feeling. Also, knowing that the relatively low rate would be fixed for the life of the loan is also nice. So, the unsecured personal loan option is another way to go when trying to get out of debt.

The choice seems pretty obvious, doesn't it? The unsecured personal loan is more direct and offers a guaranteed low interest rate for as long as we are paying off the loan. Enter the latest offer from Chase Bank! Just when we were about to complete the application for a personal loan with Capital One, we received an offer from Chase Bank for a Visa card with a 0% APR for 15 months, no balance transfer fees, and a 7.99% APR after the introductory period. This card was not featured on any of the credit card comparison sites. Hmmm...A little mathematics was in order. Thanks to a very useful debt consolidation calculator over at Yahoo!, I figured out that the Chase Visa Card would save us over $1,000 in interest more than the amount we'd save by using the Capital One personal loan. This is because 15 months of 0% interest will allow us to reduce the interest bearing debt significantly enough to offset the slightly higher interest rate of the credit card over the loan.

It's a little risky simply because we're dealing with a credit card - fees, interest rates that could change at a whim, etc. But, we're committed to playing by their rules in order to get the most out of efficiently paying off our debt. So, for now, thank you Chase Bank Visa Platinum! Proactive debt elimination sure feels good.

In Debt,
Ed Ness

Stages of Debt Psychology

2008-04-29T08:43:00.005-04:00

A few weeks of analyzing one's personal finances and reading about breaking out of debt can be empowering for someone who, just last month, felt almost hopeless about his financial situation. Does this new optimism mean that I've paid off a significant amount of my family's personal debt? No, not even close. But, I've managed to adjust my attitude and gained even more determination to get out of the red. Attitude makes a difference.

As I review the knowledge obtained from my newest hobby, I've decided that there are some significant psychological stages to getting out of debt. I'd venture to guess that the keywords in the following statements would apply to most any destructive habit.

Of course, one is in denial that his debt is a problem: "Sure, I've got a little credit card debt and a car payment. But, doesn't everybody?"
The debtor acknowledges that his financial liabilities are, in fact, a problem: "I think I've got to do something about the frequency with which I overdraft my checking account... Where did all this credit card debt come from? What do we buy from Target every week that costs us so much?"
One resolves to pay off the debts burdening his potential financial peace of mind: "I'm going to get out of debt!"
The enormity of the task incurred by stage three's resolution hits our hero hard, causing a period of self doubt: "OMG! I have more debt and less income than I thought! I'm never going to get out of debt!"
A period of introspection ensues, allowing the in-debt individual to determine why it is important to be free of debt. "I have to get out of debt for my family, for our future, for my sanity..."
A renewed sense of confidence is the ideal next stage. One takes a step or two toward his goal and realizes that everything he's read about getting out of debt can be done: "I can do this! I've just secured a lower interest rate for my credit card debts. And, I've devised a plan to pay that off in a much shorter time than I imagined. I can totally do this!"
Additional stages remain. But, we'll have to stay tuned for those to be revealed.

Obviously, such an informal analysis of the psychological stages comprising the debt-free evolution is based on limited, personal experience. But, debt is a personal, yet universal, thing. And, there is no need to ascribe more complexity to it than necessary.

In Debt,
Ed Ness

The Budget to End Debt: Or, How I Learned That I Don't Make Enough Money to Pay My Bills

2008-04-03T15:51:00.005-04:00

In an effort to create the ideal budget for myself that would help pay down my debt as efficiently as possible, I inadvertently discovered that I was more than in debt - I was broke! My monthly bills, not necessarily the trivial expenses or liabilities, but the utilities, Cable TV, Internet Connection, the mortgage - stuff I can't pay off in minimum payments - totaled to more than my monthly income. And, the sum wasn't just a few dollars over my monthly salary; it involved a couple hundred dollars! This was a humbling, depressing revelation. I've felt even more demoralized than I was when I first resolved to get out of debt.

How am I supposed to create a budget from negative income?

At first I thought that I couldn't do away with any of these monthly payments. I mean, I've gotta have power. I can't do without water. My family and I just moved into this house a year ago. We're not moving out of it. We gotta have a phone. We can't do without cable...Wait! Yes, we can live without cable. And, I could certainly live without the extra fee for text messages on my cell phone bill. There are things I can cut out of my monthly expenses after all.

So, once again, my presumptions about this project surprise me. A budget doesn't just involve planning with the money you have. It can force you to acknowledge how much money don't have. Sometimes, in my case for example, a budget first requires a serious cleansing process in order to set you on the path to a debt-free life.

I checked out Start Late Finish Rich from the library yesterday. It's author is David Bach, the originator of "The Latte Factor ®" and major force behind Oprah's Debt Diet. I've read the first third of the book and feel inspired, which is good, because, as I see it, that's the guy's job. A lot of it is the usual motivational seminar lingo. But, it's helpful to absorb some of that, at least for me at this time, in order to get me pumped about getting out of debt again. Moreover, Bach helps outline the steps I can take to really pay down my debt more quickly than the credit companies would like. And, finally, he emphasizes saving money for the future at the same time.

My action item for this moment is to consolidate my high interest credit card debts into one low interest card and pay it off fast. Given my lack of confidence in my financial ideas, I'd been questioning this solution for a while without doing much about it. But, Bach explains it in a way that puts me at ease. So, I've been comparing credit cards recommended for balance transfers today.

However, there's a tempting offer for a personal loan from a reputable bank with an interest rate of 6.99%. The loan amount can be from $5,000 to $30,000 and have a payment schedule from 2 to 7 years. I wonder if this would be a more viable option than transferring my balances to another credit card. Granted, the new credit card might have an introductory rate 0%. But, there's no way I will pay off my balance in less than a year. And, that leaves me searching for a new card to which I may transfer my balance next year and so on until I pay of the debt. It's my understanding that numerous new credit cards will more than likely screw up my credit score.

So, I'm thinking the single personal loan from the bank will be a wiser choice. I've conducted some searching on the 'net for opinions about consolidating debt with a personal loan. And, there are many warnings. The primary concern seems to be that those taking advantage of such a loan to pay off debt will not correct their spending habits in the long run. But, being the resolute kind of guy that I am, I feel that I'll have the will power to avoid such a pitfall.

I'm still weighing my options on this though. Getting out of debt is no small matter. And, choosing the wrong way to get out can cost me even more. So, I'll let you know what I decide next time.

In Debt,
Ed Ness

Whoa! I Really Need to Get Out of Debt!

2008-03-18T11:48:00.005-04:00

Ever prepare yourself for a serious project, like paying off your debt, by telling yourself you know this is going to be challenging; then realize that the scope of your project is much bigger than you thought you'd imagined? My decision to become comfortably debt free is turning out to be such a project. It's daunting, but not overwhelming - yet.

My resolution to get out of debt evolved into a more pressing endeavor than ever after I did some more research on the subject. It seems to me that one of the major contributors to getting into debt is the absence of debt as a concept from one's mind. This is why so many of the Get-Out-of-Debt strategies and step-by-step programs force you to first realize how much debt you actually have. Looking at your total debt forces you to consider the interest associated with it. And, that's what really gets you. I'm paying way more than $3.99 when I buy breakfast with the ol' Master Card from Starbucks every morning. At 10.9% APR, that's actually costing me $0.43 more each year. Sure, if I paid off my $5,000 credit card bill in a year, I wouldn't mind so much. But, if I could do that, I wouldn't be writing this. In total my wife and I have approximately $28,000 in credit card bills and auto loans. (To be clear, $17,300 of that total is for one car) The total annual interest on that sum is approximately $2,000. That's annually! So, we're gradually giving $2,000 to credit card companies and banks for their willingness to let us buy more than we can afford.

Whoa! I really need to get out of debt!

I made these calculations after perusing two very helpful get-out-of-debt resources: Oprah's debt diet and a rather concise, yet pleasantly helpful, Debt How-To Guide created by the folks over at Fool.com. I found the latter bit of information more helpful because they incorporate a rather detailed workbook, a free download, that explains what you're doing along with the insightful advice in the online guide. In the first lesson of "How to Get out of Debt" I learned to calculate the annual interest on my total bad debt (credit cards and car loans), something I never bothered to think about before. The lesson went on to explain the debt-to-income ratio and further confirmed that I am pathetic. Regardless of the unflattering portrait this revelation paints of my financial profile, I like this workbook better than the material supplied for Oprah's Debt Diet because there was frankly more space to fill in the numbers. It's a trivial critique, I know. But, I really have an appreciation for general usability. Check out the two documents for yourself if you feel like it. You'll see what I mean.

The next step in the process appears to involve creating a budget, which is apparently a scary thing. I'll let you know how it goes. In the mean time, I'll also do some further reading about what Dave Ramsey has to say regarding debt. There's a lot of debt info out there.

In Debt, Ed Ness

Debt Got You Down?

2008-03-14T14:24:00.007-04:00

Feeling oppressed and heavy by the weight of your financial obligations? Well, maybe it's time to go on a debt diet - the Oprah Debt Diet! This is one of the top results in Google upon searching for "debt". Go figure.

Apparently Oprah, the sage of our time, has a series of debt-centered web pages fueled by one of her specials. There's a step-by-step plan with a handy dandy chart and everything. The episodes on which the diet is based feature families in deep debt who were blessed by the infinite wisdom and power of Oprah and her team of experts. It actually looks like a pretty neat resource. Many of you may have already seen the TV episodes or checked out the diet online. If you are a former debt dieter, I hope you'll let me know so that I can forfeit any further energy on Oprah's plan. Because, if you're reading my articles, the diet probably didn't work for you.

The first step on Oprah's plan to in-debt-pendence (I made that up myself) is to assess how much a debtor (that's me) owes. Now I feel smart, because I figured out that I needed to do this yesterday - without the help of Oprah. But, of course, I didn't get around to calculating my total debt in time for today's post as promised. So, it works out for the better that I found Oprah's diet with it's debt calculation chart. I'll fill it out tonight, maybe this weekend, and then reveal my total debt for you.

In addition to "Step 1: How much debt you really have?" there are seven more steps in the plan. The brief description of each seems sensible and worth considering. So, I'll consider these, try applying them to my life, and let you know how it goes.

If Oprah's Debt Diet goes as well as her site makes it appear to go, there may not be as much debt research for me to conduct as I'd initially thought. At least the Diet speculates payoffs over the course of years. So, even if I don't have to scour the web for ways to get out of debt, I'll at least be able to give you updates on my payment and saving plans. Maybe we could form a club, get together and have a potluck, or something. I'm kidding. Let's stick to writing and reading about getting out of debt.

In Debt, Ed Ness

A Plan to Get Out of Doubt

2008-03-13T17:05:00.006-04:00

Welcome to Ed Ness in Debt. You are in debt. I make this presumption without judgment. See, I am in debt, too. How do I know you are frustrated by the same credit card bills, student loans, and insufficient paychecks that keep me awake at night? Because you've managed to point your browser to here. Why would you care about what someone like me has to write about debt unless you are seeking debt relief? You wouldn't. Reasonable people such as yourself do not Google phrases like "get out of debt", "debt help", or "save me from all this debt, I have no money" unless you are in debt. Well, welcome to the club.

Now that I've impressed you with my talent for deductive logic, you're probably ready for me to tell exactly how to get out of that money pit in just a few simple steps. You want that easy answer, or even a slightly challenging plan to pay off the bills and finally be able to afford a vacation. You've avoided the scams to "consolidate" your debt so far. And, you know there's an intelligent alternative to achieving a debt-free lifestyle.

Are you ready for it?

So am I!

See, unlike many people writing about debt as if it is a disease they've cured or seen affect loved ones, I have no answers whatsoever. I'm a young man with a family who has more expenses than household revenue. I want to be able to provide more for my family than I do for the people at Master Card or Sallie Mae. So, I'm on a quest to get out of debt. I've been thinking about it for a long time: "I've gotta make more money. I make okay money at my job, and it's a decent place to work. So, maybe I could just find an extra source of income. Maybe I could pay off these bills. But, there's not enough time!"

Sound familiar?

Yeah, I know. It hurts. Let's all take a breath and think about our loved ones, something that makes us smile.

Okay, back to that debt and why I'm writing about it:

I'm using this blog to log my progress as I learn how to get out of debt. I'm literally starting this project from scratch right now. I don't even know how much debt I have. (Stay tuned for that in tomorrow's post) So, I'm going to do some research and report to you what I find out about debt. I'm going to tell you how I'm doing with paying off the bills. I'm going to lay it all out in real time (almost) for you. Maybe, one day, some indebted person like me will stumble upon this blog and have the benefit of finding the answers after the fact. You and I, however, will be learning as we go.

In Debt,
Ed Ness