Archive for the ‘Debt’ category

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Guarding Against Identity Theft

September 28th, 2007

One of the best ways to block identity theft according to the Discover Card mailing I got is to pay them $12.99 a month (sure glad I could keep the penny out of the thirteen dollars).  However, I’ve got another theory: dump the cards.  Once I pay off this credit card I’m going to dump it.  Gone.  I’m hoping, like Dave Ramsey, to have a credit score of 0 (zero, zilch, nada, nothing).  I’d rather pay with cash.

I’d love to seem them steal the identity of George Washington, Thomas Jefferson or Benjamin Franklin [I actually know a guy named Benjamin Franklin, so technically I guess they could take his ID, but it wouldn't be the guy with his face on money - at least yet].  If you pay Discover $12.99 a month for a year you will have spent $155.88.  That would be enough money to go have a nice dinner with my wife.  That would be enough money to sock away for 20 years in a moderate investment (returning 8%) and get $8,430.59 saved up.  If you could get more interest and save longer you’d really have something.  Say for example that you got 12% interest for 30 years: $46,803.36.  You know that Discover/Novus is going to be using your money for investing while you don’t have an ID theft issue.
I’m going to side with me making money and not risking identity theft by using cash on the off chance that my children want an inheritance.

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Posted in Debt, Foundations, Investing, Retirement, Savings Opportunities, Tips'n'Tricks

Tell a Young Person

September 16th, 2007

Today I called back a younger guy whom I have discipled in the past at a church I used to attend in Texas.  He asked, “Randy, what do you think about mutual funds?”  And that started off a long 109 minutes of conversation about finances.  A really, really good conversation that was full of his questions and my past mistakes.  You see I wanted to warn a younger person about the mistakes I’d made and give him the chance to be well grounded from the get-go.  The few things I want to communicate about include debt, investing with interest, and planning for the future.

Debt

I warned the young man about the dangers of debt and how debt steels your money from you in the future even if the present you gets something with instant gratification.  I also warned him that a good emergency fund could help reduce the chances of you needing to be in debt due to an emergency.  Debt being what it is he got the idea to ask me if he were to get married should they try to live on one income and save the other.  I told him that’s exactly the idea!  Save up money for the future needs you’ll have as well as the opportunities that you will to invest.

Investing with Interesting

We spent some time with him asking me about various investing opportunities and what the long term gain would be.  We started with the lower investment returns such as 5% so that he could see that even a lower return can build up over time.  Then we moved onto evaluating what higher interest rates would bring.  He was excited to think that even if he didn’t have huge amounts of money to put into things in the near term that long term his wealth could grow.

Planning for the Future

I suggested that he figure out what future goals he have and save up for a good house down payment, save up cash to buy (used) cars ahead of time.  By looking at the future and planning for it this young man can be way ahead of most of the people his age no matter their income.  He’ll be prepared.  Retirement won’t be a mystery, it’ll be a plan.  All of the elements that distract the indebted individual will just not be part of his life.
What would you warn younger people?

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Posted in Debt, Foundations, Retirement, Savings Opportunities, Tips'n'Tricks

Ignorance is Distress

September 15th, 2007

If you’ve embraced the old maxim, “Ignorance is bliss.” then you’re possibly wrong.  You see not so long ago my wife and I were a bit distressed because we had debt of an unknown amount and bills coming in of unknown amounts kicking my sorry bum at unknown times.  Basically our ignorance of our financial state kept us spending with credit cards, panicking over those bills, and wondering where all our money was going.  We were ignorant and in despair.

However, after going over a very, very thorough plan of our budget we discovered that we had a lot more money left over if we were disciplined and that we could tackle the debt issue.  What you have to do is find out where you’re at so that you don’t step onto any land mines.  Just like the Windows game “Mine Sweeper” we were clicking in the dark with fear that we might be clicking on an explosive month with more month than money.  Now we’ve got a goal, peace and a plan.

If you’re frustrated with bills, now is the time to get ahead.  I’d strongly recommend reading “Your Total Money Makeover” by Dave Ramsey if you want a good plan and some motivation.

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Posted in Debt, Debt Redux, Lesson Learned, Money Management

Credit Card Fodder: Discover “Helper” Letter

September 15th, 2007

I got a mass-mailed letter from Discover card with large lettering on the top stating, “Get a 1.9% APR* and the tools you need to take control.” [they have orange text, so I made this orange] Here’s the killer: control of your finances means not in debt. But Discover does not want you to have zero debt, they want you to manage your debt at a constant volume of greater than zero. To help mask their real motivation with positive spin they have the following information as the main content:

Stay Informed
Go online for an up-to-date report of your current statement and account activity
Keep Organized
Review your past 12 statements and sort them by date, amount, description or category
Set your own limits
Stay in control by signing up for timely email reminders that alert you when you’re close to your credit limit or any other limit you set

You see – this isn’t debt. Nope, its financial opportunity, that comes with fees, high risk, and a false sense of security. Discover’s advertisement gives a false sense of control. There are two very prominent elements on the page that are orange and say control. But Discover wants to control your spending by giving you a false sense of control. Keep spending, you can quit any time you want to. You’ve set up your own limits underneath their limits.  The purpose of the advertisement is to help you feel comfortable with a constant level of debt in your budget.  Their vocabulary is entirely positive and makes all parts of their involvement in your life seem good and normal.  It is a lie and their rewards program gives you a tiny, tiny percent back in contrast the amount that they charge in interest.

The last element on the page is the concept of getting only 1.9% APR interest charged on new purchases between now and February 25th 2008.  Your old balance, which has a higher interest rate, will get payed off first when you make payments so that if you keep a balance over this time period your spending will eventually get the higher interest fees.  The wolf sneaks up on the innocent sheep hoping to not be detected.  The sheep, thinking that he’s safe walks right into the trap.  The debtor is slave to the lender Discover.

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Posted in Debt, Foundations, Money Management