Suck It freecreditreport.com

I hope this is not news to you, but freecreditreport.com is not free. Although the company isn’t doing anything illegal, I think they still deserve a swift punch to the throat. It infuriates me that a company boasts about it’s free credit report service, when in fact it is a we-hope-you-don’t-realize-you-are-signing-up-for-a-monthly-subscription service. Sure, your initial report is free, but they stick it to ya 30 days later if you haven’t had the due diligence to cancel the contract you probably didn’t know you signed up for. Now I haven’t been tricked by suckycreditreport.com, but a lot of people I speak with think that is the place to go.

Okay now that I’m done with my ranting on to better things. Yesterday, I hopped on annualcreditreport.com (the truly free site) to review my credit report. I do this every four months. I usually print off a copy of the report and keep it in my files. It’s important to periodically check your credit report. Why? It’s the best way to protect yourself against identity fraud. If someone manages to get their hands on your personal information, it wouldn’t be too difficult for them to sign up for a credit card in your name. If you don’t check your credit report, there is no way of knowing if someone has opened unauthorized accounts. If you don’t know what a credit report is, it’s basically is a complete list of all debts you have had over the last seven years. Credit cards, school loans, late taxes, car payments, they all will be in your credit report. Even those who have gone all Dave Ramsey and sworn off debt, you still need to check your report.

This leads me to my question. If you follow me on twitter, I tweeted about this the other day, but now I want to bring it to all the PF bloggers stopping by. Is credit monitoring worth it? I have been utilizing my three free checks per year and so far haven’t had any identity theft issues. I did some simple browsing yesterday, and it looks like for about $10 to $20 you can get a decent amount of protection against identity theft. It would be super convenient to get email notifications each time an account was opened in my name. Or a text message each time a large purchase was processed on my credit card. But is it really worth the monthly fee? Do you pay for credit monitoring? Have you dealt with having your identity stolen? I bet it only takes one incident to convince someone credit monitoring is a worthwhile expense.

Choosing to be broke

Last night I spent some time with some friends and it made my little ninja heart sad. Only one of them knows that I love finances, and none of them knew I have a financial blog. There was one continuing theme that seemed to reoccur throughout the night. These people are stressed.

A little background on these peeps, one has a steady job as a teacher, one was recently laid off but found another job, but took a pay cut, and the other is in a masters program. They are all roommates and they all live well outside of their means. These were some of the conversations that occurred during dinner last night.

The Teacher. The majority of my conversations with her focused on a used car she was looking to purchase. She currently owns a 2006 Honda (which she bought new) and after three years of driving it, she believes it is time for an upgrade. She has her eyes set on a $25K used 2007 hybrid. She also mentioned to me that she has credit card debt, a small school loan, and $900+/month rent. She’s a teacher, so I know she is not bringing home big money. She really has no need for the upgraded car, aside from the fact that she “wants” it. This girl is financially strained and tomorrow, that strain is only going to intensify when she comes home in her new ride.

The Recently Laid Off. I did not have direct conversations with her about her financial situation, but overheard comments she made like “I have no money.” After she was laid off, finances obviously became a little tight for her. She was fortunate enough to find another job quick, although she mentioned it does pay less. After taking the pay cut she knew money was going to be tight so what did she do to improve her financial situation? Well, she went and bought a new car. A brand spankin’ new Honda. Her justification: “My car payment and insurance stayed the same, but now I get better gas mileage.”  I wish I could have slapped her and said that is a short term solution to a much bigger problem. The only reason she has equal car payments…she extended her loan out for six years. She is so desperate to try and make extra money, she almost got suckered in to a craigslist scam. Fortunately I hopped on the computer, after hearing about her “exciting opportunity”, and was able to prove to her that it in fact was a sham. I’ve always wondered what kind of people fall for the craigslist scams. The answer…broke people. To cap the night off. She told me about how she sent in some gold to Gold Exchange and received a check for $33. I chuckled in my head and wished she would have read yesterday’s post.

The Student. Now I don’t know to much about the student aside from a few comments about how rent ($900+/month) was really stretching her financially and that she was strapped for cash. Unfortunately, I was unable to learn more about her situation. The reason, she left to go shopping at Nordstrom. Ummm, excuse me, but if you’re broke should you really be going to Nordstrom right now?

Spending the evening with these girls was a frustrating reminder that sometimes people choose to be broke. They live like rockstars, but don’t have the income to back it up. The two with jobs make enough money that they could easily live a comfortable life, but they chose to be financially strained, stressed, and stupid by doing things like spending every dollar they make. It’s craziness, but a great reminder that living within your means, improves your overall quality of life. Life is good, because I have chosen to make it that way.

Please don’t be dumb.

Did you get the memo that the economy is in shambles? I’m willing to bet if you turn on the TV right now and flip through the channels you will see one of two commercials. The first, “Give us your gold, and we’ll pay you big money” The second, “We’ll eliminate all of your credit card debt.” If you find either of these two commercials appealing you are either a douchebag or braindead. Take your pick.

The only thing worse than the companies behind the commercials, is the actors in them. If you haven’t seen ’em check out this gem 🙂 …

Although I think Cash 4 Gold is a joke, I want to communicate the shear stupidity of signing up with a credit counseling company. The first indicator that these “credit counselors” are shady: You gotta pay them a crapload of money for them to “try” and reduce your debt. That’s right the majority of these companies will charge you a couple thousand dollars without guaranteeing the reduction or elimination of your debt.

Even more stupid than giving the sketchy companies your hard earned cash is the fact that you are most likely paying them to do something you could do on your own. They will try and sell their counseling with phrases like “We’ll use secrets the credit card companies don’t want you to know about.” WTF! These aren’t secrets. Just google “How to reduce credit card debt” and I bet a million PF blogs will come up with helpful strategies!

Did you know you can almost always negotiate down your credit card debt if it is 3+ months late?

or

Did you know you can call the credit card companies and ask them to lower your interest rate?

I assume the majority of the people reading this have the common sense to know these are scams, but I still can’t help but wonder why people fall for these traps? Is it out of desperation? Is it lack of self responsibility? Are they truly convinced these companies have the individuals best interest at heart?

Please don’t mail your gold jewelry to some company hoping they will give you top dollar for it. Please don’t pay someone $5K to “help” you get out of debt. And remember, if it sounds too good to be true, it probably is. Anyone out there ever heard of a positive experience with a cash 4 gold or credit counseling company? Maybe I got it all wrong, but I have heard nothing but bad news.

Debt makes me pissed

If my blogs url doesn’t give it away, let me spell it out for you

I-H-A-T-E-D-E-B-T. It hasn’t always been this way. Two years ago, I was impartial. I knew debt was bad news, but didn’t really know why. It wasn’t until I used this nifty little student loan calculator, that I realized the ramifications debt could have on my financial situation.

I finished college in 2007 and deferred my student loans for the six months I was able to upon graduation. I then consolidated my $28,000 balance with Sallie Mae to delay the payments for an additional month. This debt thing was pretty sweet at first. I got a four year education and only had to make $178 monthly payments afterwards. It didn’t really bother me that I was on a 20 year payment plan. I thought “My student loan payment stays the same, but my income is sure to go up. Sweet.” Basically I was a big fat stupid head.

I didn’t realize the implications of interest. I knew that I would have to pay off a larger amount than the original $28,000 balance, but didn’t really realize how much it would be. When I crunched the numbers, I saw my total repayment would be $52,000. I just about crapped my pants. My first thought was “Is this legal? Surely they can’t charge nearly double my loan amount… can they?” Turns out, the devil Sallie Mae can do whatever she wants.

To further fuel the fire, I continued on my number crunching extravaganza and realized the $178 payment plan Sallie Mae put me on was also evil. Running the numbers revealed this tasty little morsel… $28,000 at 7% means I will be paying $1,960 in interest each year. If I made minimum payments each month I would pay a total of $2,136 each year. Do you know what this means? After two years of payments, my balance would have gone from $28,000 to $27,648. Yeah that’s right, after forking out about $4,200 in cash I would have only lowered my balance a whopping $352…bull$h!t.

I hate debt because it’s deceptively expensive. Borrowing money costs too much for me to want to flirt with it ever again (except for a reasonable mortgage). We all know debt sucks, we all know high interest rates suck, but do we all take the time to realize that only $350 of our $4,000 in payments actually went to lowering our balance? At first, I sure as heck didn’t, but you better believe once I saw the light, I was gonna do everything in my power to punch debt in it’s ugly little face.

People finance the darndest things

You remember that show “Kids say the darndest things?” It was hosted by Art Linkletter. He usually asked kids a simple question and they end up saying some crazy funny responses. You can check out a clip of the show
here.

Like the show, I thought we could play a round of “People Finance The Darndest Things.” I’ll start by sharing a story about one crazy thing that I saw someone finance…

Breast Implants: I am a closet MTV watcher and particularly enjoy watching the “True Life” documentaries. The most recent one I saw was on two girls that wanted bigger breasts. One girl wanted them so bad she tried drinking liquids and rubbing creams on her chest hoping they would increase her bust. Surely enough, those products didn’t help. Towards the end of the documentary she is pleading with her boyfriend to allow her to get the implants. Their conversation goes something like this…

Girl: Baby, I just really want these implants so I can feel better about myself
Boy: I love you just the way you are though, and we can’t afford them
Girl: I heard there are options to finance them, if you put $500 down
Boy: Baby, you know we are already struggling financially and can’t really afford more payments.
Girl: But I really want them (she starts crying and they hug)

At the very end of the documentary they agree to start contributing $25 a month to her “Implant Fund.” After six months she managed to save $100…WTF…shouldn’t she have $150? Basically this chick is desperate to finance something she clearly can’t afford. If she wasn’t even able to consistently contribute $25 a month towards her down payment, how the heck does she plan to pay the couple hundred dollar a month payment on them? Could you imagine walking around, knowing that you don’t actually own your breasts? What happens if she doesn’t make the payments? Does the plastic surgeon come and repossess them? Haha wouldn’t that be hilarious. Seriously though, am I the only one that thinks this is crazy? This is exactly why people can’t ever get ahead. They go and take on loans for things they can’t afford and that are, in the grand scheme of things, simply unimportant.

What’s your “People finance the darndest things” story? I’d be dying to know just how crazy it gets. Im sure breast implants are just the tip of the iceberg.

I’m dumb for consolidating my student loan

One of the worst days of my life occurred two years ago this month. I was in my senior year of college and life was good, that was, until I got a piece of paper in the mail that rocked my world. It was a tiny white envelope from my school’s financial aid office. It said I had a mandatory student loan exit interview to attend prior to graduating.

No big deal right? Wrong! I sat down for my exit interview and was given a piece of paper  summarizing my student loan balance. This was the first time I saw the damage in it’s entirety, sitting there laughing in my face. It was a dark day in my life. I was a month away from graduating, had no employment lined up, and was told it was time I started making payments on my over $28,000 balance. I felt like I wanted to throw up. Needless to say, I knew I needed to get my priorities in order and figure out exactly how I was going to tackle the intimidating $330 monthly payment.

I did a little research and discovered the world of student loan consolidation. Everything I read (probably from bank websites and Sallie Mae) preached about how amazing it was (let’s just say I didn’t know about PF blogs back then). I saw that it would lower my monthly obligation and lock in my interest rate. Turns out locking in my interest rate was stupid. I locked in at 7% and am kicking myself in the pants. Interest rates dropped the next year to 6% and are now at 5.6%. Even worse, they are scheduled to continue dropping through 2011 to 3.4%.

Shoot me in the face. I would have gladly paid a variable interest rate for four years and then locked in at the 3.4% interest rate in 2011. I ran the numbers and assuming I made minimum payments for 20 years, I would have saved exactly 10 buttloads of money by not consolidating my loans for the first four years and then securing the lower interest rate. 

I have learned that consolidating is not always the best option, especially when you are consolidating at one of the highest interest rates in recent history. Luckily I only plan to be making payments for another two years , so overall it wont affect me too much.

F you Sallie Mae for tricking me into a 7% interest rate, you win this round.

"A dilemma"….follow up

About two weeks ago I posted about a dilemma I was having. For those unfamiliar, I was unsure of the amount of my disposable income I wanted to allocate to my “future house fund” and how much I wanted to throw at my student loan. That article has been my most read post and by far the most responded to. After mulling it over, running numbers, and deciding what I wanted my goals to be, I have reached a conclusion. I am committing to throw $1,000 each month towards that bad boy. That was the overwhelming recommendation from each reader that responded! I think in my head I was justifying the necessity to hoard my cash and put it all in my savings, when this clearly opposes mathematical reasoning.

Although I still believe personal finance needs to remain personal, I agree the numbers need to be strongly considered. I became focused on the desire to purchase a house (taking on more debt) when I should have been concerting my efforts towards breaking up with Sallie Mae.

This decision couldn’t have come at a better time! With a little over $12K in the bank, my Emergency Fund is fully funded (6 months pay) and allows me the freedom to throw as little or as much money as I’d like at my future house fund, or even better, towards my school loan.

So on this day, April 3rd 2009, I commit to putting a minimum of $1,000 to my school loans each month. Thank you fellow bloggers for whispering wisdom in my ear and opening my eyes… hey its like that Ace of Base Song… “I saw the sign, and it opened up my eyes, I saw the sign!Booya for Ace of Base, Booya for sweet advice from bloggers, and double Booya for paying down debt!

I am punching Sallie Mae in the face!