Monthly Archives: July 2008

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Cadillac EscaladeLast night on the NBC news, there was a story about how the big 3 automakers in Detroit are scaling back their options for leasing new vehicles.

GM and Ford are increasing the rate to lease SUV’s and pick-ups. Chrysler’s going so far as to remove the option of a lease entirely.

Hardly surprising.

At the end of a 24-48 month lease, these gas guzzlers are essentially worthless. The whole idea of ‘renting out’ this type of vehicle is a money pit for the manufacturers. That’s why it makes sense.

But at the tail end of the story, the field reporter said something along the lines of, “Americans will soon be forced to drive automobiles that they can afford,” like it was a bad thing.

My wife and I just bemusedly looked at one another and chuckled.

Wow, can you imagine that?

Only being able to drive something that you can actually afford?

How dare they!

It’s sad that things have gotten to the point in this country where you can drive a Cadillac Escalade on a welfare budget.

Evidently, that’s about to change. From where I’m standing, that’s a good thing.

Jim Cramer of Mad Money fame…For much of the day yesterday, the headline on CNBC’s website read, “Wall Street Hangs On As Credit Crisis Hits 1st Year”.

My first thought was, “Has it really been a year?

I don’t really remember all of the non-stop doom and gloom reporting starting until well into the fall. Looking through the PIAC archives, I didn’t really make mention of a “credit crisis” until March of this year when I wished the Fed would stop screwing around with interest rates in a feeble attempt to control things that were never in their control anyway.

So, since it has apparently been an entire year, I thought I’d go back and reflect on how far I’ve come (or gone) since then. You know, with the economy in free fall, home prices dropping, and credit apparently impossible to acquire, how have things gone?

Back on July 31, 2007, we were in the midst of having $26k worth of work done on our house. In fact, I’d just written the check for the final payment on the project.

Heading into August, my net worth had dropped 12% for two consecutive months. Ouch.

Not exactly how you want to start off a recession… though no one was calling it that back then. Still, in hindsight, one would have assumed I was headed for disaster. It’s like I stumbled before I even reached the gate…

My credit card debt was riding high again hovering at $18,820 — some at a high interest rate. All of my debts combined totaled $147,627.

But things weren’t spiraling downward. Not to my knowledge, at least…

A few months passed, the media started talking up foreclosures, the “crisis” word was thrown around, and Jim Cramer went ape on the live television.

Later, the government would send me a check that I didn’t really need, a bank I’d never heard of would fail, and more people would lose their homes — a friend included (though they totally deserved it.)

So now, one year into this “mess”, my debts only total around $115k.

That’s down $32k from 12 months ago.

No, I didn’t even cheat by filing for bankruptcy or something. No government assistance either. No freebies at all — well, except that Stimulus Check, but I didn’t ASK for that…

I’m pretty proud of the pace that I’ve maintained…

And at this rate, I’ll take a credit crisis, recession, mortgage-meltdown, or whatever other name they have for it today any time.

Sure, my 401k has remained pretty stagnant for the past 12 months, but that’s long term stuff anyway. Doesn’t affect my day-to-day finances at all. Warren Buffet has long said that he doesn’t care about the next quarter — it’s the next 20 years that really count. I’ll have to agree with him on this one.

Work hard, stick to your guns, and don’t try to cheat the system. That’s what I did. That’s also what others in my situation (i.e. doing just fine) have done too.

By doing that, none of this mindless doom-and-gloom reporting has really mattered in the short run. If anything, it’s lining us up to be in an even better situation once things turn around…

If you’re interested, here’s the CNBC link to the story I took the headline from.

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Meerkats at the Metro Toronto ZooAs expected, CitiBank hit me on my latest statement with some Foreign Transaction Fees we unknowingly incurred while we were on vacation earlier this month.

On my last statement, they charged me $5 for one Canadian transaction that I made online to buy some CFL football tickets.

Naturally, though I’d made the initial purchase weeks in advance, they didn’t display that additional fee on my “latest transactions” until after I’d already made 6 more purchases while in Canada. Gee, thanks…

You see, the Metro Toronto Zoo was a pretty good deal and I enjoyed the meerkats, but had I known that it was costing me an additional $5 each time I pulled out my Citi MasterCard, I probably would have kept it in my pocket.

So on this latest statement that came out this morning, I was kind of expecting $30 in foreign transactions fees, you know, $5 multiplied by 6. That would make sense…

But I was incorrect.

The foreign transaction fee listed on my latest statement is $31.33.

No explanation of where that number comes from. It doesn’t even divide evenly?! Just some arbitrary number apparently…

I’m not going to call them on it. I’m just moving on and chalking it up as a learning experience: I won’t be using their card in Canada ever again.

Adding insult to injury, the transaction fee didn’t even get me reward points.

Net Worth UpdateBeginning this Friday, I’ve decided to simplify my monthly net worth chart.

Who really cares about the numbers at the start of the year? And are all the percentages really necessary?

I don’t think so.

So starting August 1, the chart will only display the past month’s progress. Really, that’s all that matters anyway.

Maybe at the end of the year, I’ll do a full year recap with a big confusing chart where I’m the only person who can make sense of it, but maybe not.

The past few months, a number of PF bloggers have stopped reporting their net worth all together. Most recently, Lazy Man comes to mind.

The greats, like JD from Get Rich Slowly or Trent from The Simple Dollar have never really done monthly updates at all — and they’re still great!

But there’s something to be said for sites like Consumerism Commentary where Flexo has illustrated how he’s taken his net worth from as low as $13k in December of 2003 all the up to nearly $156k just last month — month-by-month.

It gives his words, stories, and advice, I don’t know, some credibility, I guess.

It gives you that, “Hey look what this person did… I can do that too!” feeling.

Some might find the monthly updates to be boring posts, but for me, the real numbers people use on their own sites are most inspiring in a “keeping up with the Joneses” sort of way…

Maybe it’s just me…

Not sure how the founders of Cuil (pronounced like “cool”) hope to stick it to their former employer, Google, when all their site has been displaying is:

Cuil Debut

I wish them luck, but there have been quite a few Google challengers over the past few years…  None have been successful.

Yahoo is still hanging on (How? I have no idea…), but unless Cuil offers something really really new and exciting, well, they’ll go the way of Magellan — my original search engine of choice — in a matter of months…

Credit Card Debt in AmericaFor most of last week, the talking heads had been gawking over the rising amount of debt American’s are carrying. The number thrown about was $8565 per household, apparently up almost 15 percent since 2000. And that’s just credit card debt.

I’m not really surprised. I’ve carried a lot more credit card debt than that with regularity.

Can you imagine if they roped in auto loan debt? I’d guesstimate that the average 2-car household owes more than $20k to someone just on their auto loans.

Student loans? Well, I think that those are more limited to people under 35. Tuition didn’t get stupid until the late 1980’s.

I don’t have student loans, but some of my friends do. My sister has ’em. Roll those into the equation, double it to make it a household number and, well, yeah, Americans are definitely carrying a lot of debt.

That’s pretty sad.

As a result, I’m all but certain that most people are only a paycheck or two away from living on the street — to a degree, myself included. And my non-mortgage debt is under $4k!?

How can this be?

The real story isn’t actually the debt people are carrying — it’s really a case of our expenses.

In my case, my monthly expenses routinely exceed $2500.

It doesn’t take a skilled mathematician to tell you that if my income were suddenly non-existent, I could only continue on for a few weeks, at best.

What the general population needs to come to grips with is that it doesn’t matter if you make a $100,000 a year when you then go out spend $101,000… You’re not not getting anywhere.

You’re actually going backwards. Again, simple math indicates that.

I’m semi-guilty of that sort of mindset. I got a raise and bought a BMW.

Wanna talk about stupid?

Yeah, that was stupid.

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Financing the Mortgage the Old Fashioned WayRight now, I’ve got $2056 more to go to hit my latest benchmark on the mortgage.

Yeah, the 78/22 percentage mark that I’m still unsure about. Will it qualify me to cancel Mortgage Insurance? I still don’t know for sure.

But assuming it will, I think I’ve come up with a plan to get there without having to finance it using a 0% credit card offer, which as I mentioned yesterday is something I’m not totally comfortable with doing.

The statistic bantered around the media this week was that the average household’s credit card debt is $8565, up almost 15 percent from 2000. For me, 2008 marks the first year since 1998 that I’ve been below that mark. I was carrying over $20k for a good 5 years…

With this new idea, I won’t need to borrow anything…

With my weekly auto-payment of $150 towards the mortgage each Monday, and one more Monday remaining this month, the amount needed will decrease to $1906.

Currently, I’ve got just over $1000 in my ING Savings account. Let’s say I take $1000 from there and throw it at the mortgage too. Now I’ve only got to come up with $906 more.

As luck would have it, July is a three-paycheck month for me and it just so happens that, as a result, I’ll have $906 to spare…

With that, I can hit the mark on the first of August without having to finance anything!

The good news with this strategy is that I won’t be carrying a balance on any of my credit cards. I like the feeling of that.

On the downside, money will be *really* tight for the month of August. I don’t like the feeling of that.

I’ll make my decision this week.

Can You Dig It?