Is there relief for credit card holders on the horizon? Possibly.

The Fed has backed recent moves to stop credit card companies from: raising the APR on outstanding credit card balances; calculating additional interest on prior billing cycles in a practice called “double-cycle billing”; and more.

You can read the full article here:

==> Fed Backs Credit Card Reforms

Another item of interest reveals that Americans are hawking their possessions in second-hand venues at an alarming rate. Why? To make ends meet.

Apparently, people feeling the economic crunch are doing whatever they can to pay their bills. In many cases, this means selling family heirlooms and other items of value.

A couple statistics I found especially interesting. The number of listings on Craig’s List were up more than 100% in March from a year ago. Furthermore, first-quarter donations to Salvation Army were down 20% as more people are choosing to sell their personal items for cash.

These are signs of the times. You can read the full article here (hat tip to Ben Settle):

==> Americans Unload Prized Belongings to Make Ends Meet

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Topics: Credit Cards, Debt | Give Your Two Cents »

I have a relative who has almost zero financial sense. She has money problems constantly. Here’s a sketch of where she’s at in life.

• She works part-time. (She can barely keep a job. She has authority issues, and will lie at the drop of a hat to get out of work.)

• She goes to school part-time, which is funded by debt.

• She lives in government-assisted housing with two room mates.

• She has a cat and recently got a dog, both of which add to her monthly bills.

• She blows money on new brand-name clothes, expensive haircuts and highlights, not to mention dress-up outfits and spa visits for her dog.

She has no car payment because her parents gave her a car and pay the car payment and insurance for her. She’s single, so her parents feel like they need to help her out.

Anyway, my relative is apparently short on cash these days and needs more money. How do I know? Because this week she asked her mom to throw her a graduation party… even though she hasn’t graduated yet.

The conversation went something like this:

“So mom, I want to have a graduation party over here this month.”

“Why now?” her mother asked. “You haven’t graduated yet. Don’t you want to wait until you finish your internship?”

“No, I don’t want to wait. I want to have a party now. So can we do it May 31st?”

“Well, I don’t know. Who are you going to invite?”

“You know, some friends and family. So we can do it on May 31st, right?”

Another relative: “Gosh, you’re being really pushy. Why is this so urgent?”

“Because I need money!”

Aha. The truth comes out.

My relative needs money. So upon further discussion we learned that she wants to throw herself a graduation party to raise money.

The plan: Her parents will host the party. She’ll invite friends and family members she thinks have money. And then she’ll ask for cash-only gifts.

Most folks who would like to make more money will work more hours, learn a new skill, or start a part-time business on the side.

Others throw themselves graduation parties even though they haven’t graduated yet.

Go figure.

Naturally, my family is invited. Now we’re torn. I don’t even want to go, and I certainly don’t want to give a gift.

If you were invited, what would you do?

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Topics: Debt, Making Money | 7 Comments »

So it’s that time of year: spring.

The time when all the motorcyclists in Colorado wake from their slumber and start dreaming of twisty mountain passes.

The time when I’ve decided to list my motorcycle for sale.

You can see my posting on Craig’s List here.

My brother Ben has been asking me every week if I’ve listed my motorcycle for sale yet. Well, now I can tell him “yes.”

And when my brother Jared saw my ad, he wrote:

Cool man… Might want to use a couple photos and better ones.

And I replied:

Yeah, I was procrastinating because I didn’t have good enough photos, not enough info, etc.

So I just listed it.

To take new photos, I have to wash my bike. To wash my bike, I need warm weather. The list goes on.

I could have procrastinated until next winter.

The lesson: If you have something that’s keeping you from reducing your debt load, then take action. You don’t have to do it perfectly the first time. Just find a way to get the ball rolling.

P.S. Despite not creating a “perfect” ad, a fellow motorcycle enthusiast is coming to take a look at my bike this week. Who knows… it might already be sold.

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Topics: Case Studies, Debt Reduction | 6 Comments »

I was going to put this tip in yesterday’s article about renting vs. buying, but the article was already getting long, and I didn’t have a good way of weaving it in. But it’s important, so I’m going to share it with you here.

Here’s the situation:

A lot of home owners who would like to sell can’t find buyers. If they are fortunate enough to find a buyer, it might take 10 months or longer. And most home owners don’t have the luxury of time. When they need to sell, they need to sell as quickly as possible.

So what’s a time-pressed home owner turned seller to do?

Answer: Become a Landlord & Try to Find a Renter.

The family who owns the house we’re living in had a job transfer with only four weeks notice. There was no way they were going to sell their home that quickly, so they decided to rent their house instead. We became their tenants.

I share this story with you because home owners being forced to become landlords is a relatively new phenomenon. In the past, only business-savvy investors who wanted to generate cash flow from real estate would become landlords.

Now, your neighbors down the street are becoming landlords… and they don’t even want to be landlords in the first place!

So a word of caution: When you rent, do your best to find a REAL landlord — somebody who rents property as a business.

By doing this, you’ll get a landlord who actually understands what it means to be a landlord. You’ll be able to call on him for repairs. There will be no ambiguity about your relationship with each other.

Not that I have a bad landlord, but I’m finding home owners turned landlords have higher expectations. They want you to take care of their property as if it were your own (even though it’s not). They want you to do things for them that go above and beyond a normal landlord/tenant relationship.

Plus, since our landlord now lives a few states away, is it really reasonable to call him to say something broke and that he needs to fix it? What will he be able to do about it anyway?

The fact is, he can’t really do anything. And he has no management company to call on. So we have to manage repairs that would normally be handled by a landlord, and then ask for reimbursement for the hard costs associated with the repair.

Not really an ideal situation.

So… *IF* you decide to rent, simply be aware of who you’re dealing with. Is it a home owner being forced to rent his house… or is it a real landlord who rents property for a living?

The answer to that question could play a huge role in how positive your renting experience is.

For more information about renting vs. buying, please see:

• How to Decide Whether to Rent or Buy

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Topics: Renting, Tips & Advice | Give Your Two Cents »

A couple weeks ago I offered a hypothetical renting vs. buying scenario and asked you to vote on which option was best.

Granted, it was a little unfair since I gave you limited information. And yet the responses were very insightful.

For instance, Bill Spaced makes the following observation:

I think it boils down — now — to your lifestyle. Buying a house versus renting a place is more about how you wish to live, your time horizon, how much you like a change in scenery, how much you like to garden and do upkeep, etc.

And Dawn McKeeth makes a similar observation. She says:

I also think a lot of it is a lifestyle choice. […] Personally, in the above scenario I would rent. With 4 kids more space is desirable and going through a transition period we aren’t sure where we want to “plant roots” just yet.

And finally, Autumn Beck writes:

Maybe I missed it but the #1 question is whether or not you have debt. It certainly is the better choice to rent until you are debt free but not the popular one.

So What Do I Believe?

The scenario I presented was from my own experience. Option #1 was the house I owned until early October 2007. Option #2 is the house I’m currently renting. Obviously, my action speaks for itself.

Here are the two choices I presented in the first post:

Option #1: Buy This Home

• 1,398 square feet above ground
• 400 square feet finished in partial basement
• Mortgage payment: $1,553

Option #2: Rent This Home

• 2,179 square feet above ground
• 916 square feet unfinished basement
• Rent payment: $1,500

Why We Chose to Rent

Up until 2007, I had never rented a property. When I got married, we bought a one-bedroom condo. We then bought the house described in Option #1 three and a half years later.

So why did we decide to rent all of a sudden?

Most importantly, I felt God told me to. So selling our house and moving was an act of obedience. But I’d be lying if there weren’t a few good reasons for doing what we did.

Reason #1: Falling home prices.

Homes are falling in value all around the country. And the volume of sales is dropping month after month, both in new home sales and resale properties.

For instance, a New York Times article published today reports, “At the current sales rate, it will take 11 months for builders to work off the current backlog, the biggest inventory pile-up since 1981.”

As I looked at our situation in late summer of 2007, I realized it wouldn’t have taken much of a drop to wipe out our equity and turn us upside down on our mortgage. (We had purchased the house with very little money down.)

Furthermore, I knew I didn’t want to live in the house long-term. Since we have three young children and I work from home, we felt like we needed more space. So we didn’t want to become “stuck” in our property because of a drop in home values.

Reason #2: Proximity to family.

With three children, we wanted to be closer to parents. My wife and I like to have regular date nights to keep our sanity. Being close to parents makes it easier.

Both my parents and my wife’s parents live in Parker. So that’s where we decided to move. (Becky Belnap points out that some families prefer not to be close to parents. She writes, “Some people NEED the space.”)

Reason #3: More space for less money.

The housing boom of the new millennium depressed the rental market in many parts of the U.S. And where I live you can often rent a larger property for less money.

It is not uncommon to be able to get 20% more space and save 5% to 10% on monthly payments.

Some will point to tax deductions as an advantage of buying. While that is true, renters save not only in payments, but also in home maintenance. I’ve personally enjoyed not having to worry about fixing things or improving the property.

Reason #4: Unsure of where to “settle down.”

Another reason we decided to rent was uncertainty about where we would like to live long-term. We’re definitely not in favor of moving around every year, but we also want to make a smart decision about where we plan to send down roots.

So renting gives us the freedom to “test drive” a neighborhood and get familiar with other neighborhoods in the area. For instance, having lived in our current neighborhood, I would not choose to buy a home here. I would not have gained that insight without living here on a trial basis first.

Reason #5: A desire to pay down debt.

As you already know, I’m diligently paying down debt and trying to become debt free. I felt that renting would put us in a better position to achieve that goal.

Some view a mortgage as “good debt” or sometimes even as an “investment.” I personally view a mortgage as a monthly expense. And a mortgage is debt any way you cut it. It just happens to come with a few potential benefits that other types of debt don’t have.

What I Dislike About Renting

My wife and I have the mindset of homeowners. We want to improve the property, to make things better. But we can’t. It would be a waste of time, energy, and money.

We’re finding it hard to suppress the urge to make improvements, even though it is keeping us from spending more money.

Another thing I dislike is the feeling that I’ll have to move again so soon. I really don’t enjoy moving. It’s a lot of work. And so I have this looming deadline that steals more mental energy by the day. Where will we move? What will we do? The uncertainty is, well, unsettling.

Why I’d Like to Buy a House Again

As I’ve already mentioned, I’d love to be able to not only THINK like a home owner, but also to ACT like a home owner. So I look forward to buying a house so I can make improvements and invest in the property.

I’d also like to be in a position where I don’t have to move if I don’t want to. And, ultimately, I’d like to send down some roots and become involved in a community. Not only for me, but for my kids as well. (It was particularly hard on my daughter when we moved because she was no longer able to play with her “best friend” from across the street.)

Hopefully, when the time comes to buy, I’ll be in a better financial position and the market will have mostly bottomed out.

The idea of buying a home and then watching $30,000 of equity go up in smoke is not pleasant. In today’s market, you could literally “lose” your entire down payment in a matter of months.

Some Guidelines for Renting vs. Buying

Consider renting a house when…

• Home prices are falling.
• It’s cheaper to rent than to buy.
• You plan to move again within three years or less.
• You don’t have a 20% down payment.

Consider buying a house when…

• Home prices are rising.
• It’s cheaper to buy than to rent.
• You plan to stay in your home for more than three years.
• You have a 20% down payment.

For more information about whether to rent or buy, you might want to check out Lynnae’s post There’s No Shame in Renting or FrugalDad’s post Attention Newlyweds: Rent a House.

So, for now, my choice is to rent. How about you?

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Topics: Debt Reduction, Mortgages, Renting | 6 Comments »

As promised, yesterday I interviewed Jesse Aschenberg, a Christian bankruptcy attorney who specializes in Chapter 7 and 13 bankruptcies.

I want to thank you for being a loyal reader, so I’m going to give this audio interview to you for free. By taking a half hour to listen to this interview, you’ll learn:

• The difference between Chapter 7 and Chapter 13 bankruptcies. (The differences are not as simple or straightforward as you might think.)

• How we got into this mess in the first place. (Are creditors or debtors to blame?)

• Who should (and should not) file bankruptcy.

• Is it okay to file bankruptcy if you’re a Chrisitan? Jesse provides his perspective.

• What you should never, ever do if you’re considering bankruptcy.

• And more.

This audio interview is 32 minutes, 1 second. You can press play to listen to it through your computer speakers, or you can download the MP3 to listen to it on your iPod or MP3 device.

If you have listened to this interview, please leave a comment below with your feedback.

• Did you like the interview?
• Did you learn something new?
• Would you like to see more interviews like this one?

Thanks! I appreciate you.

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Topics: Bankruptcy, Debt | Give Your Two Cents »

I’ve pretty much ignored everything about the upcoming tax credit… until now.

That’s because on Tuesday night I paid a visit to my CPA to wrap up my personal taxes. I still owe the government $1,228.00, so we needed to finalize the paperwork and get the payment out.

Before I left, he said, “Here’s good news,” and he passed a sheet of paper over the desk.

It was an estimate of how much I’ll receive when the economic stimulus tax rebate payments are made this coming May/June.

The estimate says I’ll receive about $2,100.00. Which is really ironic since I’m cutting a check to the government right now for twelve hundred bucks.

I sincerely doubt the rebate has anything to do with showing benevolence to taxpayers. It’s really U.S. politicians’ last-ditch effort to save themselves and the Fed-run economy.

So the government gives and the government taketh away, depending on what self-serving goal they’re trying to accomplish.

I try to stay emotionally uninvolved in these things. Rather, I do whatever is required to avoid audits, penalties, and jail time. (I have been audited, and it’s no fun.)

On the positive side, assuming cash flow is good when the rebate comes, I’ll be able to use 100% of it for reducing my debt. I’m looking forward to that.

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Topics: Debt Reduction, Taxes | 3 Comments »

The price of crude oil closed over $110 a barrel today, and hit $112 a barrel during trading hours, its highest price ever.

I imagine it won’t be long before gas is over $4 a gallon. (Especially considering we’ll probably be at war with Iran before April is over.)

Every extra dollar spent on gas is one dollar less you can use to pay down debt.

Which is why bicycles are looking better all the time…

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Topics: Debt Reduction | 2 Comments »

As my sister and cousin stood in the kitchen, they looked at my wife and said, “Don’t you hate girls like that?”

They said it in a joking tone, but you could tell they weren’t entirely joking.

My wife has had three kids. And she looks pretty darn good. But she didn’t get fit watching TV and eating junk food.

Actually, she works really hard at losing the baby weight. She exercises two or three times a week, and watches what she eats. It takes about a year of disciplined diet and physical activity to get down to her pre-pregnancy weight.

My sister and cousin are overweight. Naturally, they envy “the skinny girls” (like my wife). And rather than take responsibility for their own actions (or inactions), they’d prefer to pretend like fitness is something you inherit. As if some girls have it and some don’t, and that’s just the way it is.

But fitness is not accidentally acquired; it is achieved.  And if my sister and cousin ever want to become fit, they’ll have to accept responsibility for their physical condition, and then do something to change it.

Why do I bring this story up at all?

Because while we are in debt, it is easy to have the same negligent attitude as my sister and cousin. We might as well say, “Don’t you hate those debt-free people?” As if being debt-free is some kind of accidental condition!

So long as we have an attitude like this, we won’t get very far. Rather, we must acknowledge that poor money habits caused the debt and better money habits will eliminate the debt.

In other words, we must change. And the first step toward change is acknowledging where the problem started: us!

Today’s assignment: stop blaming and start changing.

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Topics: Case Studies, Debt | 2 Comments »

Tricia over at Blogging Away Debt sent out a request for guest bloggers three weeks ago. Naturally, I decided to take her up on her offer. (She has nearly 2,000 readers according to Feedburner.)

So, on Saturday, Tricia published my guest post. You can read it here…

==> “Three B.A.D. Ways to Reduce Debt”

Flashback: I also wrote a guest post in November of 2007 for plonkee. If you’re interested, you can read that post here…

==> “A Tale of Two Men”

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Topics: Debt Reduction | Give Your Two Cents »