- Up at 5 two days in a row. Sleepy. #
- May your…year be filled w/ magic and dreams and good madness. I hope you…kiss someone who thinks you’re wonderful. @neilhimself #
- Woo! First all-cash grocery trip ever. Felt neat. #
- I accidentally took a 3 hour nap yesterday, so I had a hard time sleeping. 5am is difficult. #
- Wee! Got included in the Carnival of Personal Finance, again. http://su.pr/2AKnDB #
- Son’s wrestling season starts in two days. My next 3 months just got hectic. #
- RT @Moneymonk: A real emergency is something that threatens your survival, not just your desire to be comfortable -David Bach # [Read more…] about Twitter Weekly Updates for 2010-01-09
Actions Have Consequences
- Image by reidmix via Flickr
Six months ago, my laptop quit charging. This particular model has a history of having the power jack come loose inside the laptop, so I ordered the part and waited. When it came, I disassembled the computer, carefully tracking where each screw went. I installed the part, the put it back together, with only a few extra pieces.
It didn’t work.
After spending the money and doing the work, I tested the external power cord. I could have saved myself a few hours of work if I would have done that first. It was trash, so I ordered a new one. That’s time and money down the drain due to my poor research.
As an adult, I know that I am responsible for my actions, even if the consequences aren’t readily apparent. If I tap another car in a parking lot, I am going to have to pay for the damages, even if I didn’t see the car. This has manifested itself in credit card statements I didn’t read, speed limits signs I didn’t notice(or ignored!), and–on occasion–my wife and I not communicating about how much money we’ve spent.
Kids have a much harder time grasping that concept.
My son enjoys playing games online. Some of the games are multiplayer games he plays online with his friends, others are flash games he plays at home while his friends watch. They like to take the laptop into the dining room where they can play without being in the way. A small herd of 10 and 11 year old kids hopping around expensive electronics can’t be a good idea.
Yesterday, we saw that the power cord was fraying at the computer end from being dragged all over the house and jerked by kids tripping on the cord. We got six months of life out of the cord because of kids who should have known better not acting appropriately around the cord and the computer. Not happy.
My son got grounded for a week and honored with the privilege of replacing the cord. Now he isn’t happy, but he understands that he needs to pay for the damage he causes, even if he didn’t know that what he was doing could cause the damage. If it was something he would have had no way of knowing, there would have been no punishment, but he should have known not to jerk on the cord of leave it where it can be tripped over.
What do you think?
Invisible Cushion
Earlier this year, we experimented with abandoning the strict budget in favor of automating as much as possible on our credit card, and keeping our discretionary spending under control, but on the same card.
We failed. It was 2 parts lack of communication, 3 parts lack of discipline, and 1 part “we’re dumb”. Transitioning back to cash hasn’t been that smooth. The problem is that we went over budget for a couple of months and our renewed budget had to shrink to cover the credit card.
To recap: Coming off a few months going over budget, we had to tighten our belts even more than we had before…after breaking our good habits.
It didn’t work out well.
If one of us forgot to grab cash, we’d just charge whatever we were buying, which gave the month’s budget a spanking, every time.
Last month, I added a new category to our budget. It’s just a cushion. I’ve got $200 whose sole purpose is to make sure we don’t go over budget.
But there’s a secret.
The cushion is a secret.
I’m not a fan of hiding money from my wife, but I’m hiding this. Generally, I think that money and relationships and secrets don’t mix.
However…
She’s told me that, when she knows there’s extra money, she has an urge to spend it. If I told her there was an extra $200, she would spend it. If I tell her that we have $40o to cover our discretionary spending, and she goes over by $50, we’re still $150 to the good, which leaves me room to have lapses in discipline or memory, too.
Then, at the end of the month, any of the invisible cushion that is left over can get applied to our debt payments.
This system should let us keep rolling, with less stress and fewer arguments, while still helping us get rid of our remaining debts. The biggest flaw is the secret. I’m bad at keeping secrets from my wife, especially about things that affect both of us, but if i let it slip, the invisible cushion will go away.
What do you think? Am I a jerk for hiding part of our budget? Do you hide anything about your finances?
George Zimmerman: The High Cost of a Legal Defense
Most people have heard of the controversial nature of the George Zimmerman murder trial. Zimmerman, who defends his actions and is claiming self-defense, is on trial for murdering Trayvon Martin, a 17-year old with a social media profile that projects anything but innocence. While his defense attorneys claim that race had nothing to do with the murder, the prosecution thinks differently. In fact, a majority believe that Trayvon Martin would still be alive today if he hadn’t attacked Zimmerman. Regardless of your stance on the case, there is no denying the fact that Zimmerman’s trial is building strong emotions from both sides.
In an effort to get a not guilty verdict, Zimmerman has hired a top-rated legal defense team to argue his case. Trials are expensive and the average person may not be able to afford a team willing to take a case for the fame. If you are charged for a crime, you have to consider the cost for legal defense. Here is what you need to know about how much you can expect to spend on a legal defense team.
Fixed Prices Versus Variable Prices
Not everyone has a group of supporters raising money to pay for their legal defense. Just because Zimmerman has bad credit does not mean that he had to leave his legal defense up to a public defender in Sanford. If you do not have a Legal Defense Fund where people can donate money to your defense costs online, you will need to distinguish between fixed prices and variable prices for legal defense. During your consultation, the defense attorney should be able to quote you a fixed price based on the case details. Experienced attorneys do not charge on a pay as you go basis because they are confident their abilities. The actual fixed price of the attorney depends on the case, and can range anywhere between a $1000 and hundreds of thousands of dollars. O’Mara and West, who are defending Zimmerman, have quoted $1 million for their services in total. While they have not be paid completely by the Zimmerman Defense Fund, this is money that is due to them.
The Cost For Expert Witnesses
Zimmerman’s team introduced several expert witnesses including an animator, a medical examiner, and a self defense expert. All of these witnesses are paid to testify, and the cost is not always included in the initial quote. If your case is complex, there may be a need for an expert witness. When you are pricing the cost of defense, see if this is included. Assume that you will spend about 10% more than quoted so that you can cover all of the outside costs.
Zimmerman may have been unemployed and working as a volunteer neighborhood watch member, but he does have one of the most experienced legal defense teams working for him to get a not guilty verdict. You may not need a million dollars, but legal defense is not cheap. Keep in mind that you get what you pay for when legal defense is concerned.
Insurance
If you must use lethal force, you should be prepared to spend tens of thousands of dollars defending yourself. It’s worth looking into self-defense insurance. The USCCA is the only such company that offers up-front expenses and is willing to cover bail.
Related articles
Debt Scams
When you are up to your eyeballs in debt, praying for a step-stool, sometimes life–more accurately, con-artists–try to trip you when you are vulnerable and look for a solution. They aren’t muggers on the street. They come at you wearing ties, invite you to a real office, with real furniture and a real nameplate on a real desk. They are a real company, but that doesn’t mean they aren’t trying to scam you out of the little money you have left to put towards your debt.
Yes, I am talking about debt management scams. These scams come in 4 main varieties.
Debt Settlement companies instruct you to stop paying your bills completely and send them the money instead to be placed in a settlement fund. When your creditors get desperate enough, they will be willing to settle for pennies on the dollar.
In theory, this can be a good strategy for some debtors. Unfortunately, it has some drawbacks, even if the company is legitimate. They tend to charge high fees as a percentage of your deposits. Some take another fee when a settlement is accepted. The entire time you are building your settlement fund, your credit rating is sinking, leaving you open to being sued or garnished. The bad companies take the fund and run, while even the good companies can’t guarantee your creditors will play ball.
Ultimately, they aren’t doing anything you can’t easily do yourself. If you want to go the settlement route, stop making your payments and funnel the money into a savings account that you will use to offer settlements from. It takes discipline, but there is no upside to paying someone else for the same function.
Debt Management plans are used when you owe more than you can afford to pay. These companies work with your creditors to adjust interest rates and minimum payments and they try to get some fees waived for you.
A good company will work with you and your creditors to make sure everyone is working together towards the goal of eliminating the debt. A bad company will tell you they are working with your creditors while ignoring any contact from the creditor. They’ll tell you the creditor isn’t willing to negotiate while never stepping up to the negotiation table. Another trick is to offer the creditor a set payment, with a “take it or leave it” clause. Any input from the creditor is interpreted as a refusal to participate. This, coupled with high fees paid by the debtor, make debt management firms a risky proposition. Most states require the firms to be licensed. Check to make sure they are before giving them any information.
Debt/Credit Counseling companies work with you to establish a budget and eliminate expenses; in effect, they are training you to be in control of your finances. They are often organized as a nonprofit, but not always.
Some–the sleazy ones–lie about what they are doing, or attempt to misconstrue what you are agreeing too. Be careful not to use your home as collateral to consolidate unsecured debt and don’t walk into a Chapter 13 bankruptcy without that being your intention. Both of those are common debt counseling scams. If the company isn’t able to provide all of the details of a transaction–company name, address, licensing information–or they aren’t willing to spend as much time as necessary explaining the details of the transaction, walk away. This is your life, you are in charge of it. Don’t let anyone bully or prod you into signing something you aren’t comfortable with.
Credit Repair is almost always a scam. There are ways to get correct bad information removed from your credit report. If the information is correct, those methods are illegal. There are two legal methods to repair your credit. First, stop generating bad credit. Make your payments on time and eventually, the bad items will fall off. Second, write letters disputing the actual incorrect items on your credit report. There are no quick fixes, and anybody telling you different is flirting with a jail sentence, possibly yours.
How do you avoid the scammers?
- Be skeptical. If it looks to good to be true, it probably is. There is no such thing as a magic wand to fix your credit and make your debt disappear. Bankruptcy + 10 years of your life is the closest thing to magic credit repair in this world.
- Only use a legitimate credit counselor. Verify them through the Better Business Bureau and the National Foundation for Credit Counseling (1-800-388-2227 or www.nfcc.org)
- Check the license. Most states require credit and debt counselors to be licensed. If they’re not, run away and report them.
- Read the find print. Don’t sign anything you don’t understand. Like every other piece of your financial life, own the transaction. Know what your are doing, or don’t do it.
- Are they willing to work with you? If they’ve got a generic plan that doesn’t account for your specific situation, they are probably a con. At the very least, they are a worthless company and a waste of both time and money.
- Are they willing to work with your creditors? If not, they won’t be accomplishing anything for you.
- How much do they cost? Higher fees may not be an indicator of a scam, but call around and find out if they are in the right ballpark. Triple or quadruple the going rate is a sign of someone who will disappear late one night, with your hopes, dreams and savings in tow.
- Above all else, trust your gut. If it doesn’t feel right, it probably isn’t. There is nothing a counselor can do that can’t wait a few days while you check them out.
There is no magic bullet to kill debt. You’re not fighting a werewolf, you’re fighting a lifetime of bad or unfortunate choices and circumstances. It’s important to keep a realistic outcome in mind.
Update: This post has been included in the Carnival of Debt Reduction.
Credit Cards: My Failed Experiment
Back in April, we went off the cash plan.
In the two years prior to that, we paid down about $40,ooo in debt by completely forgoing credit cards. We went on a strict budget and all of our daily expenses–other than gas for the cars–was paid in cash. The only other exception was anything bought on the internet. Amazingly enough, Amazon doesn’t take cash. When that happened, the amount we spent online was taken out of the cash supply and set in a box until we could get it back in the bank.
No other exceptions.
In April, we decided that we had changed our relationship with money and could–judiciously–move back to credit card use, to take advantage of the rewards. We’d still use the same amount we had budgeted for groceries, clothes, and everything else. I set up an automatic payment for the budgeted amount, so we could use the card for our daily spending and the bank would automatically pay it off every month. What could go wrong?
Ugh.
We are not predisposed to be able to use credit cards well. It’s just not good for us. Credit cards just don’t feel like real money going out. When we were using cash for everything, we could see when money was running low, and we’d adjust our spending to stretch it out as needed. With plastic, it just became too easy to keep spending.
For the first couple of months, it was easy to overlook the problem. We paid my son’s vision therapy on the credit card, to get a discount on the therapy and cash in on the rewards program. That was around $4,000. Combined with the regular spending, it took us a couple of months to get it all paid off and current.
This month, we’ve managed to overshoot our monthly budget by $500. We’re only halfway through the month.
This weekend, we had a fairly unpleasant conversation about money. In the end, we decided to go back to cash-only. It works for us, in a way that credit cards don’t. Credit cards were a failed experiment. We’re going back to what works.
Have you ever had to switch from cash to credit cards and back? How did that work out?
