"Get Smart About Credit" Day

Disclaimer: I am not a financial planner/adviser nor do I claim this commentary as financial advice. I am a widower and single parent of two teenagers, and I have experienced financial hardships and continue to struggle with managing finances in an effective and responsible manner.

Today, we celebrate "National Get Smart About Credit" day. I think it is an important celebration, perhaps one we should observe every three months, a call for all of us to become more informed about the credit industry and how it affects (some would say, destroys) our finances and our lives.

Let me be blunt: credit is evil.

One more time: credit is evil.

It really is worth repeating: credit is evil.

Credit is evil in many ways. First, it makes it easier for us to be irresponsible. That is, it makes us less able to respond to our long-term financial needs. Why? Because it makes us incredibly dependent on others for our needs and wants.

Second, credit has made it possible to bypass the process of saving for something that we need or want, and we have lost the willpower, discipline and skill to work, save and plan for those things.

Third, getting things quickly and easily has diminished the value of those items, and has lessen our enjoyment from acquiring them.

Finally, credit has enslaved us financially, turning our present pleasure into future suffering.

Credit is used in many scenarios:

• The poor use credit to get things they need. Using credit ensures they remain poor and/or makes it harder for them to get out of poverty. This is financial/economical slavery. This is what slave/plantation owners and early industrialists used to do: force workers to buy from them on credit so that they were forever indebted and could not leave. Slavery. 
• People use credit to get things they want. We all fall into this trap. 
• We want a new phone: sign the credit contract and it is yours. Except we pay a lot for that new phone in charges that we otherwise would not. 
• We want a new car: get a loan. If we look at the terms (especially the things that they try to hide from us) we can quickly see that loans can be very expensive. For example, when I bought my latest car (back in December 2012) I got tricked into buying an extended warranty that I normally would have not opted for. How? The finance manager altered the interest rate to make the payment stay "about" the same. Except he could have given me that better interest rate to begin with and not add the extended warranty (which is, as many of you know, pretty useless and pretty expensive). Extended warranties are free money for car dealers, so they always try to sell you one. And so does BestBuy and Walmart and everybody else.
• We want a new home: get a loan (with no money down) that includes much more than just the home (IE., appliances, fences, etc.). Since the 2008 financial woes, the minimum down payment has been enforced more closely, but many builders still lure buyers with "no money down" deals. I have fallen twice for that. The first time was a total disaster, and the second time could have turned out poorly if not for extenuating circumstances.
• We want to go to (or send our kids to) college: this is one of my pet peeves: another form of modern financial slavery. So many fall for the false paradigm that we have to start college immediately after high school, pay for college with loans and finish our college education in x number of years. None of those are true. Don't fall for that story line. High schools and colleges try to sell you on their plan, the one that is in sync with banks and lending organizations, so that they can slave you for decades. Just say no. Do it some other way. Work part time and go part time to school; find a trade and have fun with it — you can make lots of money and be debt free. A good carpenter, plumber or electrician can have a much higher net income than that of a surgeon over their lifetime. Look into it and think about it. Don't buy into false promises and lies.
• The wealthy use credit to finance projects with other people's money, promising better returns on investment than they would get from other sources (such as the stock market).
• The government (at all levels) uses credit to finance projects, which most of us end up paying in the form of increased taxes — unless you are wealthy or a corporation because then you can get away with paying no taxes and forcing the middle class to foot the entire bill.

I am sure there are other scenarios in which credit is used, rarely responsibly, mostly carelessly. And in almost all ways I can think of using credit, I think we are better of saving the money and being disciplined to live within our means and only buy what we can afford, what we can pay for right now, not next month or next year.

Shakespeare said it best: "Neither a borrower nor a lender be." 

The Daily - Monday, October 8, 2018

THERE IS A NAME FOR THAT

It turns out there is a name for smart financial living: FIRE, or "Financial Independence and Retire Early" (or is it Financially Independent and Retired Early; who knows!).

Not surprisingly, there is some debate and controversy on the topic. I came across an article by Mr. Money Mustache explaining some of the misunderstanding and misconceptions around the FIRE philosophy. I will let you make up your mind as to who may be right or wrong on the truthfulness or accuracy of the FIRE concept, especially the early retirement part of it. The truth is, being financially responsible is not a new concept. Being frugal is a well-known viewpoint that was practiced by Benjamin Franklin and many others even in the early days of our nation, and I am sure they did not invent the practice, they learned it from smart, frugal people.

Being frugal means being smart with your money and with your spending habits. It means tracking how much you make and how much you spend; from that you learn what you may not need to spend on. You must make a budget and then stick to it.

It is a rather simple process, really, but it is not easy to do. But I think Dave Ramsey has one of the best, free methods to help anyone achieve long-lasting financial freedom. Start with the "7 Baby Steps" and you will be on your way.

AM/PM EDITIONS

I believe the AM/PM editions experiment has been proven unattainable during regular work days. If I did not have an 8-5 job I could easily do this. But work will always interfere with this hobby and so I will end the dual daily edition. I think, instead, I may migrate to a single topic posting, and post as many of those as seem prudent during the day. 

The Daily - Sunday, October 7, 2018 (PM)

DIVIDE AND CONQUER

This morning's run was less than stellar. I only managed to log 0.67 miles before my body claimed my attention; the body has a funny way to dictate what one does. Although 2/3 of a mile is OK, I simply was not happy with that. So, after dinner tonight, I got into uniform and went for a 2.2 mile jog. It was still warm and humid, but I made it. Now I am happy. I love jogging. And now I am on track for tomorrow morning and another 2 mile jog.

SELF-FINANCING, DEBT RE-ORGANIZATION

As I mentioned earlier, MacKenzie and I decided to pay for her car on our own. She is putting in $1000 from her savings and I am putting the other $1000 from our emergency fund. This meant that I would need to replenish both of those funds as quickly as possible. But I also saw the opportunity to apply a Dave Ramsey principle and get rid of my only other revolving debt: a credit card balance of about $2000. Our plan right now is to tackle the credit card debt first. Why? Because it is the most expensive debt we have. On the average it is costing us $30 in interest every month. Even if I repay MacKenzie with some reasonable interest, it would be lower than the credit card payment. Eliminating the credit card debt will be a multi-step process:

1. Stop any new charges on the credit card — this will help re-build better, more responsible spending habits.
2. Pay off as much as possible every month.
3. Once my other car is paid off (December or January), then apply all that money (almost $400/month) to pay off the credit card.

I estimate that the credit card will be paid off by February 2019.

With no credit card debt, then we will start rebuilding the two savings accounts. I hope to re-pay MacKenzie no later than May 2019. After that I can rebuild the emergency fund and start building a Kia repair fund (it has 156000 miles and needs some preventive work, such as a timing belt).

With a solid plan like this, by September 2019 the only debt I will have is my mortgage. My plan is to get rid of that debt sometime in 2020 or 2021. 

I very much look forward to becoming and staying debt free.

The Daily - Saturday, October 6, 2018

NO MORNING EDITION

The morning edition today just did not happen. Don't get me wrong. There was time to get it done. There was material to get it done. There was no energy to get it done. And, to be honest, I felt free to skip it. The advantage of having a small, unpaid membership is that there is flexibility for creativity. Honestly, the reason for the two daily editions was to help me write more often, avoiding the nightly rush to get a post in before the end of the day. It is a self-imposed challenge and, as with such comes the ability to choose. Today, I chose to rest, to sleep a lot, and to take a day off from many of the regular routines. My body was calling for it, my mind was calling for it, and my spirit was calling for it. And that is what happened: a day of rest.

HEALTH & FITNESS

Another "Zero" day? No way!

I woke up right on time and, although I had a slow, sleepy start, I did go for a 2.5 mile jog and it felt fantastic! I have missed my jogs the last three days. During the jog I thought I should start a daily running challenge and see if I can jog for 31 days straight. If so, then this would be Day 1. :-)

GOALS, DREAMS, HABITS, RITUALS

Another thought that flowered during my morning run is that it would be helpful to keep up with the "streaks" and then report on those at the end of each week, perhaps on Sunday. Having a list of streaks has helped me stay on track with several aspects of self-improvement. I will work on the idea this week and will report on it on Sunday, October 13.

FINANCES

After much research and consideration, we have decided to self-finance my MacKenzie's Honda. Having the money in the bank was one consideration in favor of the decision. MacKenzie is putting half of the asking price, and I will be putting the other half. The strategy is not ideal and it leaves is a bit vulnerable because we are taking most of her savings and all of our emergency fund for the transaction. On the other hand, this will save us money (in finance charges) and it will reinforce in MacKenzie the value of saving for major purchases.

The money that MacKenzie is putting in is money I will reimburse her. I want this car to be her high school graduation gift. How the repayment will happen is interesting and a bit unusual, and I will go into that tomorrow.

KAVANAUGH: IMPEACHABLE?

Judge Kavanaugh was confirmed, as expected, by the Senate. There are many that have advanced the notion of an impeachment procedure at some point. This would require that the Democratic party have control of the House. Only one time in the history of our nation has a Supreme Court Justice been impeached (Samuel Chase, 1805) and he was acquitted of all charges (March 1, 1805).