Monthly Archives: August 2009

Recession’s Silver Lining: Consumer Debt On The Decline

Posted on by  at  6:00 am
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Credit Karma recently released its U.S. Credit Score Climate Report reflecting data for July 2009. It revealed a few interesting trends, the most interesting being the continued decline of consumer debt for those currently holding a credit card. This means that, overall, Americans are paying off more than we are spending.

Of course, this is bad news for retailers, and bad news for the overall debt-driven economy. However, our personal economies seem to be improving (assuming you have avoided a layoff or similar household emergency). I’m encouraged to find out people are paying off debt, particularly credit card debt.

In our own household we have reduced outstanding credit card debt by about 30% since May of this year. We have been 100% sold out, gazelle intense about being credit card debt free, and if it weren’t for a few family emergencies we would have closer to 50% paid off by now. The bright side is we did not accumulate any new debts during these mini-crises.

How are others doing? Here’s a look at the Credit Karma survey results from last month.

Average consumers had:

  • $6,818 in credit card debt
  • $193,036 in home mortgage loans
  • $52,559 in home equity loans
  • $14,449 in auto loans
  • $26,368 in student loans

$26,000 in student loan debt? Yikes! That figure and the home equity loans stood out to me. Combined, those two categories alone represent nearly $80,000. Wonder how many people took out those loans for the tax deduction on interest, or to pay off other debt, and just ran it back up again. I also can’t help but feel bad for new graduates who racked up thousands in student loans to find one of the worst job markets in recent history. While the outstanding debt balances still seem high, I’m hopeful that the downward trend continues.

Another nugget from the survey is that Midwesterners seem to have the lowest amount of debt. Wonder what lessons from the Midwest we could learn throughout the rest of the country? I know in many Midwestern states there is a thread of self-sufficiency running through many households not felt in other parts of the country. Homes are probably more reasonably priced than in other areas of the country, too.

I’m curious to hear from you on this one. Have you also paid down debts during the recession? Do you think you would have done it otherwise, or was the negative economy a motivating factor?

Happiness For Others Comes From Contentment With Yourself

Posted on by  at  7:10 am
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Why do we have such a hard time being happy for others? It is something I have struggled with over the years, and I recognize much of my resentment towards others’ success has been a result of my own insecurities.

Back when we were really floundering, my wife and I were friends with several couples who made much more money than us. They lived in huge houses in the best neighborhood in town, drove nice cars, and took luxurious vacations. We had little in common, except for the church group the moms were members of – MOPS (Mothers of Preschoolers).

My wife and I often confided to each other that we always felt a little out of place at Christmas parties and other social events hosted by these wealthy couples. My “out of touch” feelings began to fester, and soon I was downright jealous. Why couldn’t I land a great job and earn as much money as them? Why couldn’t we afford a bigger house, and a nicer car?

Fortunately, as part of my financial turnaround, I finally came to terms with what I was feeling. Turns out I wasn’t so much jealous of the “Joneses” as I was unhappy with my own situation. My resentment for others’ success was born from my own lack of success, and I ultimately only had myself to blame.

There was another angle to this I had not considered before this time of reflection. What if those couples were up to their eyeballs in debt? They probably had a huge mortgage payment, two car payments and credit card debt higher than my annual income. After all, outward appearances can be deceiving. Is that really what I was after? Or would I be more content with a modest home, paid-for cars, and the freedom that comes from not carrying any debt. The choice was obvious.

It was at this point that I went through sort of an early mid-life crisis. Up to that point I had been fast-tracking the career ladder, having started literally on the bottom rung and made my way to middle management. Of course, the promotions often meant more headaches, more travel and not much more money. I came to a point in my life where I would gladly give up the late nights, Saturday mornings and two week cross-country trips for more time with my wife and kids.

Sure, we would probably not make as much money as those “rich” friends of ours, but we would be wealthy in other ways. So in March of 2004 we relocated, left the financial industry and found more meaningful work. Now, I make significantly more in a year than I did in those days, thanks to my new career and my side hustles. Aside from a few nice things we enjoy, we still live a modest lifestyle by most standards.

I find it much easier to be happier for others now, if they are truly happy. If I discover they are unhappy with their inflated lifestyles, and are merely working for the trappings of the rich and famous, then I feel a little sorry for them. I hope over time they will break free from the grips of materialism so that they can discover what is really meaningful to them. Maybe it is more time with their family, or more time to volunteer to a cause they believe in, or maybe just more time out on a boat fishing. Whatever it is, I hope they find it so I can truly be happy for them.

The Value of Establishing a Permanent Residence

Posted on by  at  6:00 am
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A few days ago I wrote about the pros and cons of renting versus financing a home with a mortgage. In that post I presented mostly advantages to renting: no debt, more flexibility, less costs for insurance, maintenance and taxes, etc. However, I failed to present one major advantage to buying a home, and staying there until it is paid off – having a permanent residence for you and your kids.

This occurred to me just last night as I was logging on to ING Direct to check my savings account balances. One of ING’s security questions is, “What is the street number of the house you grew up in?” The question gave me pause. I didn’t “grow up” in any single house.

My mom was a Marine Corp brat, and traveled extensively around the country growing up, moving from base to base as my grandfather was reassigned. Eventually, she got married and had me, but was soon divorced from my dad and found herself a single mother trying to raise a son on her own. Thankfully, my grandparents were close and provided a lot of support.

Throughout my childhood my mom and I bounced around from apartment complex to another. It was a big deal when I was in junior high school because we rented a little house in a neighborhood – I had a yard! Unfortunately, that was short-lived, and we were back in an apartment for my high school years. In fact, my mom didn’t own her own home until she was in her 50′s.

Growing up, I was always a little jealous of friends who had their own house. Didn’t matter if it was a tiny shack, or a mansion, it was theirs. They always had a “home base.” My best friend in high school, and eventually my roommate in college, lived in the same home from the time he was in elementary school. His parents still live in that home today, and no matter where he goes, or decides to live, that is always his “home base.”

My wife’s experience growing up was much like mine. She did even more bouncing around than I did, especially when she was very young. Because of the background we both had, providing a stable home for our kids is something we have worked to provide for our own kids. I tend to believe home is where you make it, and I have very little emotional attachment to the “sticks and bricks” that make up your home. But I do very much value the idea of giving my kids a “home base” – somewhere they will always feel welcome and secure.

I know it must appear that I’m arguing with myself, after just writing at length about the benefits of renting only a couple days ago. I’m not waffling; I still believe renting makes a lot of sense in some situations. However, more and more, I find myself valuing the idea of settling into a permanent residence to raise our kids. My mom and my mother-in-law didn’t have a choice, but we do, and we plan to work hard and sacrifice a few toys to make it reality for our kids.

Learn Online, Learn Frugality

Posted on by  at  6:00 am
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This guest article was written by Adrienne Carlson, who regularly writes on the topic of accredited online university . Adrienne welcomes your comments and questions at her email address: adrienne.carlson83@yahoo.com.

When it comes to education, we usually try not to spare any expenses in getting the best there is, because knowledge and learning are invaluable assets that enrich our lives and make us grow in stature. Money spent on learning is an investment rather than an expense, so we go all out if it means we are going to gain more out of it in the long term.

However, with the advent of online education, not only are you able to earn a quality degree, but you’re also able to reduce your expenses significantly. If you’re wondering how, read on to find out:

  • Online education is much cheaper than paying tuition at colleges that offer traditional degrees. You save a large amount of money when you enroll online, with the added bonus being that you don’t have to take out a loan in order to finance your education and thus put yourself in debt.
  • When you study online, your schedule is flexible. So you have much more time for other activities, time which you could use to earn money at a part or full time job. Not only does online education help you save money, it also aids you in earning it.
  • When you learn online, you don’t need to spend money on commuting to and from college every day. You save on gas, bus passes, parking permits and wear and tear on your car.
  • You don’t have to shell out money for accommodations on or off campus.
  • Your food expenses are also minimized because you’re at home, not on campus and fending for yourself.
  • Online education does not involve significant additional expenses like furniture and other knickknacks for your dorm room or campus life. All you need is a computer and an Internet connection, and since most of us already own and use one for other purposes, it’s not going to be much of an expense.
  • Studying online means you are not tempted to party and socialize as you would when you’re in a regular college. This saves you a lot of money that would have otherwise been spent on booze and other trivial pursuits.

Online education makes you more efficient because it forces you to manage your time better, earn while you learn, and cut unnecessary costs.

Editor’s note: I completed my degree online after years of toiling away in the evenings separated from my family. While completing an online degree does take extra discipline, and can be costly depending on the institution, Adrienne points out the many benefits of choosing an online education over a traditional course of study.

Weekly Roundup – College Football Picks Edition

Posted on by  at  6:00 am
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Late night tonight, and I have no energy to think of something witty to write here. I would normally come up with something fun to share related to money, but it’s approaching midnight, and I need sleep. When all else fails I turn to another subject near and dear to me – college football.

With fall practices well underway, who is your pick to win it all this season? Realistically, it is hard to count Florida out considering all the players they return from last year’s team. Note, I am not a Florida fan, but recognize they are a solid football team, top to bottom.

I’m an Auburn man myself, and this year with a new coach, a new (old) quarterback, and new coordinators all around, it should be interesting. My prediction for Auburn’s season sounds like most years – we’ll beat a team or two we shouldn’t, but we’ll lose just as many to teams we should beat. And so it goes with my Tigers.

Feel free to share a prediction for your favorite team in the comments section.

The Frugal Blitz

Stress-Free Back to School: Setting Up a Homework Zone. An excellent idea for those of us with kids heading back to school. I know I always work better with a clean, organized environment free of distractions. Even more important for kids. (@Organizing Your Way) Side note: Mandi is the newest member of The Life Skills Network!

Spend Time to Save Money. It’s true what they say, “time is money.” But the opposite is also true. Investing a little time can go a long way towards saving you money, as this article points out. (@Mrs Micah)

AMEX To Raise Late Fee and Rates on My Cards.  The same thing happened to me with an AT&T Universal card. I know credit card companies have the right to jack up rates as high as they want, but I also have the right to put a sharp pair of scissors to their increasingly inferior products! (@The Sun’s Financial Diary)

The Get-Started-Now Guide to Becoming Self-Employed.  If you have ever thought about venturing out on your own, read this. If you have never thought about venturing out on your own, read this. Either way, it will affect your opinion on being self employed. (@Zen Habits)

The Myth of Stable Employment. Gone are the days of 30-year retirement ceremonies, complete with a gold watch and a pension statement. No such thing as a “stable job” these days. (@Brip Blap)

How You Can Prepare For A Background Check. Most people feel pretty helpless when they discover a position requires a background check. However, there are a number of things you can do to improve your chances of passing with flying colors. (@The Wisdom Journal)

9 Really Weird Ways to Make Money. Trust me, there are some really weird ones listed here, but for good reason. Sometimes extreme circumstances require desperate measures, and if you really need the money, these are nine quick ways to generate extra cash. (@Moolanomy)

Personal Finance Basics: Key Purposes of Budgeting Systems. An excellent post on the seven key purposes of a budgeting system. (@My Super-Charged Life)

Pedal Your Way to Health, Wealth and Happiness. An excellent guide for those planning to become a bicycle commuter. This is something I have tried in the past, but never stuck to. Maybe the cooler weather will motivate me to put these notes to use this fall. (@Wise Bread)

The Library Still Rocks! Yes, I Like The Free Movies And More. My kids love to go to the library to check out books, and recently discovered movies there, too. Libraries are a great source of free entertainment for both children and adults, and the educational opportunities are endless. (@The Happy Rock)

Overtime – The Best of the Rest