Category Archives: Problems

Advice for Spendthrift Friends in Debt

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While reading a post on GetRichSlowly.org, I came across an article called: “You are your own worst enemy“.

We all have friends like the “Gillian” that is described in the article.  Often time (at least in my case), we are too polite to say “What is wrong with you!  You can’t afford that!!!

Well, I finally found a funny but relevant advice video to show your friends and close ones that have this problem.

So the next time someone asks you your opinion about buying something “crazy expensive”, and they are in over $10,000 in debt to the credit card companies… already…  Have them watch the above video on youtube.com (search words”  Newhart Stop It”).

😉

-D

Pre-Vacation Nightmare!

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Let’s travel back in time to last Sunday 11/01/2009, it’s 4:39 am in the morning and I’m about to get my son up to leave for our vacation flight.

Being half asleep, I bumped my son’s hamster cage by accident, but his hamster doesn’t move…  Hmmm, I bumped it harder this time ( intentionally), but again the hamster doesn’t move. 

This is not the way a vacation should start!

Yes, unfortunately, my son’s hamster is no more…  So I had a decision to make, tell him then, or not…

I decided “not“!  I called my mom and had her drive over and put the hamster in the freezer via a ziplock bag, so I could delay the decision until after we got back.  It was a hard choice to make…

My Options:

  1. Buy another hamster that looked identical to his, and possible lie to my son.
  2. Tell him then and there and deal with it.
  3. After we get back, tell him the cat ate it (just kidding).

After a lot of internal debating, I decided to go with option 1) “Buy another hamster that looked identical to his, and lie to my son.”  I would hate to lie to my son, but he’s only 9 and he still gets very attached to his pets (we already dealt with a gerbil dying a few years ago, not a fun ordeal).  After breakfast, the first thing he wanted to do before going school was to check on his hamster.  Luckily, since we decided to let him get an extra hour of sleep instead of riding the bus, he didn’t have time to do that.  At least that is what we told him.

So I went to PetSmart, to buy another Russian dwarf hamster.  Of course, the batch of hamsters that they had were not the right color.  His hamster had grey fur with just a slight bit of brownish tinge around the edge of it’s back, and a white underbelly.  The latest batch of hamsters had no grey and almost all brownish colored fur on their backs with a white underbelly.

Just my luck!  So, that would not do…  So I bought a different species of dwarf hamster that had what I thought was close enough coloring. 

It cost $15, not a lot of money for the price of a potentially happy kid (or at least not sad kid)…

So, did it work?  Sort of…

He said that “Twirly” looks like he’s a different color, but that he hasn’t seen him for a while and maybe he forgets what his colors look like…  I didn’t say anything to that remark…  So far, he hasn’t commented other than that statement.  If he continues, I won’t lie to him…

I’ll be walking on eggshells for the next few days!

Is the Government Destroying Our Banking System?

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I ask this because the government keeps making it harder for the banks to recover.

First, the government provided the bail out money from TARP.  But then they said that the banks need to keep certain capital levels in reserve.  Then, they complain that banks aren’t lending out money…?

Now, I read today that Barney Frank has introduced a bill to give the government the power to take over the banks whenever an emergency or whatever arises.  Now that is crazy!  I don’t have much respect for the politicians anymore when they start thinking they can run businesses better than the experts in the field.

I found a great article that really presents out how illogical the government is handling the entire banking mess Here at SmartMoney.com

I wish the government would stop focusing on the short term problem, and focus their attention on the real issues of job loss in the United States, instead of punishing the stockholders of the financial systems (some of many real victims in this mess).

Now, I don’t like some of the credit card practices that banks are pulling, but let’s let the bank get off of the ice before we pull the rug out from under their feet.

-D

Walking Away From Debt

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Rich defaulting on their mortgages

I read an interesting article on msn.com today (Click Here for the msn article) about the rich walking away from their mortgages.  Some are even double dipping, they stop paying on their mortgage and if they have a line of credit, sometimes they pull all of that money out too.  The msn article calls these defaults, “strategic defaults”.  In California, the strategic default cases increased by 68 times from 2005 to 2008(not percent! times… WOW)

What if you lived in an area that had a financial perfect storm kind of occurrence?

Okay, what if you do live in one of the real expensive areas of the country (parts of California,  Florida, etc), where the value of your house has lost more than half it’s value?  What if you find a house that is a bigger better house than your, and it was in foreclosure in a great area, and discounted by 50%?  So now you have the possibility where you can buy a bigger better house for less money than you paid for yours…  And one that will probably double in 5 years when all of this mess is behind us (hopefully…).  That can be pretty tempting!

Hmmm, the financial logic is:  I’ll buy that bigger house in the more prestigious area that was foreclosed on for half price it was originally, then let my house go into foreclosure.  If after 5 or so years, the house market recovers, they gain on the uptick potentially doubling their money. And if the house doesn’t appreciate that quickly, they are still in a better area than before, possible with a better school system.  Only the banks lose out, wow, that is tough.  I live in an area where the houses didn’t fall much in value, so the people in my area are not presented with that immediate temptation.

Depending on the amount saved in such a transaction, that could be a big temptation.  I don’t know if the damage to your reputation would be worth that… but perhaps it is, it’s a hard choice.  In the past, there would be consequences for skipping out on your debt like that.  I bet if you were in a different country, that wouldn’t be allowed.  But in our country, most of the blame seems to be directed towards the banking system.  We the people, were just innocent lambs lead by the noses to be slaughtered.   I think the government underestimates some of us…  Some people, (probably most of use reading financial blogs) feel like we have been getting the short end of the stick lately, with government programs that benefit just a few of us, and not equally distributed like it should be.

While I don’t agree with the tactic above, I can see the financial logic and temptation that is presented and if you’re upset with the banking system or government…  Hmmm…

 

For most areas of the country though, below are some things to consider.

Money Reasons not to walk away from your mortgage:

  • Damage will be done to your credit score
  • Banks will be cautious to loan you money in the future
  • Eventually, the value of your house will rise again
  • You’ll regret leaving, especially if you hurt your neighborhood
  • You’ll have a reputation as a non-trustworthy individual, forever…
  • People will pity you and think that you can’t control your money
  • Ethics!

 

Sad, I hope this trend of strategic defaults, doesn’t catch on much more than it has, else wise, we might have more systemic risk problems down the road.  Another possibility might be longer stagnation in the housing market…

-D