Archive for the ‘General Money Stuff’ Category

Small Time Crooks Vs. The True Masterminds Of The Economic Collapse

Recently two mortgage brokers and a real estate appraiser in Minneapolis were indicted on fraud charges for allegedly inducing lenders to make more than 1 million dollars in mortgage loans on properties based on false information regarding the properties’ values.

Over and over, we see stories like this play out across the United States, and yet the true criminals, the Wall Street financiers, the orchestrators of the worst economic collapse since the Great Depression, have  gotten away virtually scot-free with their ill gotten gains while the country continues to drown in foreclosures.

Now, I am not saying that the small timers aren’t guilty of fraud nor that they should not be gone after: of course they should. By the same token, Lloyd Blankfein of Goldman Sachs and Jamie Diamond of Chase certainly have dirty hands, and the scope of the fraud these men were involved in numbers in the billions of dollars, if not trillions, at this point.

Every day, I read stories about how the U.S. housing market continues to decline. Every day, I hear about more people losing their homes to foreclosure. Every day, I hear about the millions of unemployed who simply can’t find work because there is none to be had.

Contrast the plight of ordinary Americans with fortunes of the prime Wall Street movers, whose bank accounts are overflowing with cash, mostly owing to their ill-gotten gains made during this time of crisis. How can it be right that the very people who brought down our economy can profit nicely and get away with it?

Sure, some of the small timers, like the guys out in Minneapolis, are getting their just desserts for the crimes they committed, but the true atrocities remain unanswered.

Lessons Learned: The Frugal Future

Prior to the recession, I thought my husband and I were managing our finances pretty well.  Sure, we had some credit card debt, but we’d already paid off a couple of cards and were starting to make inroads on the balances of those that remained.

Then the recession hit and my husband’s job disappeared with the demand for new homes as the foreclosure wave drowned the housing market. My business, which up to that point, had been doing well, was suddenly floundering and we were left with facing the harsh realities of having too little income to make ends meet.

What had been manageable on our prior income was no longer manageable and the delinquencies began as we started to prioritize our expenses. Obviously food, shelter, and the utilities were priority number one. Everything else, including those credit cards that we had been diligently paying down, would have to wait.

Today, after two years of financial devastation, the money picture looks better. My husband is working and my business is picking up. We had to move to Canada to make it happen, but we are much better off financially now than we were six months ago.

The funny thing is I don’t want to spend money, now that I have it to spend. I still cringe even when we’re buying groceries and I see the numbers on the cash register terminal inching toward that $100 mark. My husband wants to buy me warm winter clothing because of the much colder winters here. I  know I probably do need the warmer clothes, having come from California, but I can’t help feeling guilty about buying a sweater. I would rather keep that money in the bank.

While I hope I don’t spend the rest of my life afraid to spend money where it needs to spent, I am glad that I have learned a new respect for the value of a dollar and that I will always think twice before spending. I think that this new found frugality will help us to never, ever again have to relive the devastation that were the last two years of our lives.

What about you? What lessons had this recession taught you and how were you changed by it?

Frugal Living: Survival Mode

Most personal finance blogs are filled with wonderful advice, provided that you’ve got a stable source of income that is adequate to support yourself and your family and enable you to save money at the same time.  While this advice is great for those in stable financial shape, it doesn’t work quite so well for those who are struggling to survive day by day. To that end, I would like to write a post aimed at those of you who are barely getting by.

Let me start off by saying that the advice herein comes from the school of hard knocks. I was there as recently as a few months ago and I can readily empathize with how you feel and your day to day struggles. I know what it is like to spend a day on the phone making payment arrangements with the utility companies for this month’s payment because I had just made last month’s payment a few days ago. I know what it is like to receive call after call from collection agencies hounding me for money I just don’t have. I know what it is like to be at the brink of foreclosure and that sick, sinking feeling you get when you know you’ve given all you can and there is nothing left inside you to give. And yet, you must go on. You must spend your hours figuring out how best to parcel out what little bit of money you have to keep a roof over your family and keep the lights on.

The first step is to figure out how much income you currently have coming in. Once you have that, then you can prioritize your expenses and debts.

Obviously, the most important expense is your rent or mortgage. If you can keep paying it, even if it takes a huge chunk out of your available money, then that is payment number 1. If you can’t make your rent, be sure to let your landlord know. How understanding your landlord is depends on him or her. If you’re only renting, you can also always find cheaper accommodations. If you have a mortgage that you can no longer afford, then that is a stickier issue. If you intend on keeping the house, then contact your lender right away and ask for a loan modification. The earlier you get started on this, the better, because, let me tell you, it can take a year or more to get into a successful loan modification!

Next are the utilities. Most utility companies are very good at working with you on payment arrangements. Just explain that you are having financial difficulties and they will be willing to work with you. Sometimes you get a representative on the line who won’t cooperate. If this happens to you, ask for a supervisor and more often than not, that does the trick. As a shout out, the Verizon folks were always pretty good with me, barring a few individuals, as was Southern California Edison.

Following that is food. There are some tricks here to help you get by with less, and many of you probably already know them, but I am going to share them here anyway:

1: Check the mail for your weekly circulars. These will have the sales that are happening that week. The basic idea here is to look for items that you use that may be on sale. Many times you can get decent cuts of meat like london broil (top round in Canada) for as little as $1.77 a pound. Similar sales will be on for ground beef and chicken. You can shave off a good $20-50 off your weekly grocery bill by hitting up all the grocery stores with the best sale prices.

2: Chicken is your friend because it  is pretty cheap. It is also healthy, and eating healthy will be quite challenging on a limited budget. You will probably find yourself eating a lot of it. To help with the boredom of eating the same foods week in and week out, search for recipes on line or try different marinades. (These will often be on sale for cheap as well.)

Next, this is a no brainer, but cut out any unnecessary expenses such as cable or satellite tv. You don’t have to cut it out all together, but you can drop down to the basic package to cut costs.

Finally, consider moving away from your current location. Even in the States, there are regions that have not been as hard hit as some other areas have. The northern central region of the country is doing ok, and so are some southern states. Both coasts have been buried by the economy as well as the sunbelt region. You may have better luck finding work in areas where the ratio of workers looking for work and available jobs is a better percentage.

If You’re Poor, Forget College

Ok, I haven’t done one of these in a while, but I was browsing through my Google Reader today and in comes this post from Frugal Dad.  It’s a post about student loan debt, which I can agree with the author is too high. However, the guy actually says this nonsense:

Do you need to go to college? A college degree not only doesn’t guarantee a job, but it also doesn’t guarantee a high paying job. Before you go to college because “it’s expected of you,” or “that’s what the cool kids do,” you should take a few minutes and try to determine your career goals, what is required to achieve those goals, whether or not you need a college degree, and if it is worth the expense. Many times college isn’t the answer and taking student loans while you try to determine your career goals is a recipe for disaster.

Well, instead of throwing a bunch of opinion out there without any facts to back it up, let’s take a look at some hard numbers. The unemployment rate for those with no degree is 10.1% as compared to only 4.5% for those with a bachelor’s degree. The numbers don’t lie. While the author is correct: a college degree doesn’t guarantee you anything, it just may make finding work a little easier for you. You need every edge you can get these days!

Here’s another fact: many jobs that previously did not require a college degree now require one. For example, an entry level manager trainee position at Enterprise Rent-A-Car, which really is a glorified sales position, requires a college degree.  Not having a degree can seriously limit the number of jobs available to you today.

What troubles me more than the stupid platitudes espoused in this post as well as many other similar ones I have seen since the economy went into the ditch is that we now seem to be “ok” with telling people with humble backgrounds that they need not even try to reach beyond the station to which they were born. Think about what posts like these suggest: you should not go to college if you cannot afford to pay for it yourself, or if your parents cannot afford it. Furthermore, you ought to evaluate any degree you do pursue by its dollar value, not by personal interest or by the desire to look at a career as more than just a way to make money.

Look, I am not going to suggest that college is the answer for everyone or that it can guarantee you anything, because it isn’t and it can’t. However, if you want to go to college and you need to take out a loan to do it, then you ought to be able to do so, regardless of the cost later. Student loans need to be reformed to be in line with what they used to be: an investment in the future. Investments may not pay off and that’s the risk the banks take in loaning the money. Furthermore, repayment terms need to be made easier and interest rates capped. Half the problem with student loans today is how onerous they are to pay back. You shouldn’t have to indenture yourself to the banks for the rest of your life for a chance at a piece of the pie.

Finally, I just want to say that employers also need a reality check. Is it really necessary to require a college degree for a job that pays $30K? Do you really need to limit your pool of qualified employees to those with college degrees? A bit of common sense here would be welcome about now.

Avoiding The Debt Trap

Not all debt is bad and most people can’t avoid accumulating some debt, unless they’re heir to some massive fortune. Having said that, some debt is just plain toxic and should be avoided like the plague.

Payday Loans/Cash Advances

Payday loans let you borrow money from your next paycheck. They’re meant to act as a stop-gap when you have an emergency expense that is outside your budget. However, payday loans are a deadly trap because of the way they’re structured and the expensive costs associated with them. For one thing, they’re extremely short term and must be paid back, in full in one to two weeks.  If you’re already living paycheck to paycheck,  you’re almost certain to be short after paying back the payday lender and need another advance from your next check, plus an additional fee to last you until your next pay day. This is how payday lenders make their money and how the payday debt trap closes.

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Moving For A Chance At Prosperity

Well, my husband and I moved 2,300 miles, from Lancaster, CA, to Winnipeg, Manitoba, Canada for the chance at a better life.  It is difficult for me, as an American, to say this, because I was always taught that people came to America to look for a better life.  For a long while, that was primarily true: many immigrants came for the promise of the American Dream, and many have achieved it.

However, times have changed. The last forty years have seen a weakening in strong labor, the rise of outsourcing, and the big box stores that crowd out the smaller competition. Wall Street has been given free reign to pursue astronomical profits as their due. All of these things, in combination, have made the American Dream nothing more than a myth. Today’s generation will be less prosperous than were their parents, for the first time in decades.

The pundits and politicians alike tell us that this is the “new normal” and we’re just going to have to live with diminished expectations. I hear this and wonder where the America I grew up in went? Where is that can-do spirit that allowed us to put a man on the moon in a single decade? Where did the strong leaders like FDR go, who regularly went before the nation to remind us that “we have nothing to fear but fear itself?”

Well, my husband and I have had enough of it. We’ve had enough of watching our savings and hard work go down the drain as we struggle to make ends meet without work. We’re sick of the politicians playing games with the unemployment lifeline that so many Americans depend on today, and we’re sick of the giveaways to the banks and other vested interests who ruined the economy in one fell swoop.

So, yes, I moved out of the United States to Canada in search for a better life. And guess what? We are on our way there. My husband found work not three weeks after we arrived and we are looking at buying a house here. The economy is thriving…no dearth of jobs…and healthcare that you don’t have to mortgage your firstborn to use.

I’d like to hear from you. How many of you have moved elsewhere (even just to another state) in search of a better future? How many of you are considering it?

Moving To Canada

You may have noticed that I haven’t been writing much for the last couple of weeks. The reason for this is that my husband and I are preparing to move to Winnipeg, Manitoba, where he’s originally from. We live just north of Los Angeles in the lovely state of California right now. We’re leaving on August 23rd, so that means that a lot of my time has to be occupied with fun stuff like packing.

The reason we are moving is quite simple: the economy here is moving nowhere and jobs are scarce. I keep hearing about how we’re in a recovery period right now, but I just don’t see it. My husband has been out of work for two years now (he was in new home construction, so guess where his job went?) and he has been diligently looking for work all this time. In this time period he has had two interviews…only two! There is just not enough work available for everyone who wants a job, it’s that simple.

Canada has weathered the global recession better than most of the G20 and is truly in full recovery mode. Some parts of the country, like the place where we’re headed: Manitoba,  weren’t really affected, and have just continued to experience slow but steady growth.

I will return to daily updates of news and information relating to debt, and making fun of those smug personal finance folks who make stupid statements once we are settled and I can get Internet again. I anticipate that will occur some time in September…the earlier the better.

Renting After Foreclosure

Losing your home to foreclosure is a terrible event. Not only is it stressful and demeaning, it ruins your credit score, which can make it harder for you to rent an apartment. Here are some tips to help you find a rental:

Stay away from big corporate owned apartment complexes as these have strict guidelines and will most definitely do a credit check.  Instead, focus on smaller apartment buildings or homes owned by  private landlords as they are less likely to run your credit. You can find these listings most often on Craigslist or your local newspaper. Stay away from rental guides, as most of the apartments advertised there will be run by huge corporate owned property management firms.

Network with friends and family to see if they know anyone who has an apartment or house to rent and is willing to forego a credit check or who will be willing to rent to you despite your damaged credit

Stay in your home as long as possible and save as much money as you can during that time.  While the foreclosure process, from the formal filing of the “Notice of default” to the foreclosure sale can take four months, the average foreclosure today is taking more than 15 months from the date of the first missed payment to the date of the auction.  Use this time to your advantage to save as much cash as you can.

Be prepared to pay up to three months rent in advance, plus the typical security deposit and first and last month’s rent. Have this in cash. Most landlords will be happy to rent to you if you have cash in hand.

If  there is no way you can avoid a credit check, have someone available with good credit to be your co-signer. Family should be first and then friends. 

Get references. Ask your employer and the manager of your local bank branch to write you a reference letter. Keep this in reserve if a prospective landlord asks for it.

Don’t lie, but don’t volunteer information, either. If you’re asked about something, be honest, but never offer up unasked for information. For example, don’t walk into the rental manager’s office and present him or her with your reference letter or offer up any long explanations. Doing so will only raise unnecessary alarm bells with the landlord.

While renting after foreclosure may be a little harder, it is not impossible. With the number of foreclosures going into the millions by the end of this year and continuing apace for the next number of years, foreclosure is no longer the black mark it used to be. Most landlords are understanding, and if you can demonstrate your ability to pay, having a foreclosure on your record will not prevent them from renting to you.

Credit Card Companies Milking Consumers: The Number One Reason Why We Need Elizabeth Warren as Director of The Consumer Financial Protection Bureau

An article today in the Washington Post discussed how credit card companies are now charging customers with good credit, who manage their finances wisely by paying off their balances in full every month. Such customers are now finding that they’re having to pay an annual fee, where they didn’t before.

The reason for this is that credit card penalty fee income has been reduced by the new credit card regulations and the banks, not wanting to see sources of profit dry up, no matter how ill-gained those profits were, are now having to charge the only customers they have left: those with good credit who have traditionally never been a great source of profit. As Curtis Arnold, owner of CardRatings.com says “The only true deadbeat customer is someone who has a card and never uses it. Just having good credit alone in today’s market is not enough for that customer to be profitable."

The article goes on to say that this problem illustrates the “challenges” facing the credit card industry, as if the only choice credit card companies have in order to make money is to find new ways to screw people. Really? Why is interest income not enough? Why do they need fee income? They don’t…they’re just greedy, having been accustomed to years of being largely unregulated and able to do whatever they wanted without consequence.

Because the credit card industry and Wall Street in general is so corrupt and so greedy, we need a strong watchdog to lead the newly created Consumer Financial Protection Bureau. Harvard Law Professor Elizabeth Warren is the best qualified person for that job, and if the Obama Administration allows Timothy Geithner and his cronies to place another industry sycophant in that position, then you can be sure that the agency will do nothing more than rubber stamp whatever fee scheme the credit card companies come up with next.

If you don’t want to be charged exorbitant fees, then I suggest you write to President Obama and to your senators and tell them you want Elizabeth Warren to head the CFPB.

Debt Collectors Using Facebook?

A recent story in the Arizona Daily Star revealed how one debt collection firm pressured a businessman into paying what he owed based on information gleaned from his Facebook page. The businessman had apparently claimed to be broke and filing for bankruptcy, yet he was stupid enough to post pictures of his new Corvette and pictures of a recent fishing trip to Florida. The debt collector was able to use this information to get the fellow to pay up.

The fellow in this story clearly had the funds to pay what he owed. However, he is not among the majority of people hounded by debt collectors day in and day out in this country. Especially with the economy being as bad as it is. The fact that debt collectors are now sniffing around the social media for information that they can use to put pressure on debtors is concerning.

For one, privacy is at issue. Clearly, the information that people put up on the social media is meant only for people who know them. The fact that debt collection companies have now joined in with prospective employers in sniffing around the Internet for information on people is more than a little creepy. Having said that, if you put your life-story on the Internet for anyone to read, how much privacy can you reasonably expect to have?

For another,  how credible is information that people reveal about themselves on the Internet? Anyone could post stock images of a nice car or home and say that they belong to them. It is called bragging and the relative anonymity of the online world allows for such liberties. Of course, using your real name online reduces this anonymity somewhat, but still, you can be a millionaire online even if your bank account is empty.

I suspect that if the debt collection industry makes searching the Internet for information they can use against debtors to pressure them to pay becomes more widespread, that more than a few court cases will come up about the issue. How the courts will decide is anyone’s guess.

For the time being, I strongly suggest that people who use social media like Facebook and Myspace to share details of their lives change their settings so that only people who know them can access their pages. You don’t need to share your information with the entire world…especially if you value your privacy.

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