I settle back in front of the computer with my morning feast, popping Fruit Loops in my mouth, patiently waiting for everything to finish loading. After typing in the appropriate information, my bank account opens.

The balance: $265.

As of yesterday, $1,062.88 had been posted from my bank to my credit card bill, my hard-earned wages busting/tearing through cyberspace to perforate the final outstanding payment owed (with interest, of course); digits whisked away on a lethal, one-way debt termination expedition. And now I’m left with …

The doubts start piling up – I peer suspiciously at the monitor. Surely there’s some mysterious purpose for this chunk of change still sitting on its ass in my account. An overlooked bill, perhaps, stuck on a dusty shelf somewhere, forgotten. In fact, I’m certain there must be a setback somewhere, something to muck everything up because this damned debt is so ingrained in me now and, Jesus, after all these years, how can it really just be … dissolved?

Holding my breath, I tap the keys again to prudently recheck the account balance — my fingers slip, I get the url wrong and pause to wipe dusty grains of cereal from my palms, to start over — suspecting that couple hundred bucks has suddenly, cruelly been gobbled up by some hellacious bank fee or other.

Nope. Still there. Two hundred and sixty-five dollars.

Exhaling slowly, I lean back and stare stupidly at the screen. I pick bits of stuffing from the arm of the chair as I evaluate this completely foreign transition of having an extra pile of dough at my disposal; so staggered, I haven’t even considered how to commemorate my new debt-free world.

With a cup of coffee, seems like a good place to start.

=^..^=

My friend and I are classic examples of two opposing views on credit. I charge almost everything to my credit cards and use my wallet’s cash compartment to store receipts. My friend (let’s call her Kate), however, could pay for anything from a pack of gum to an LCD flat screen with the cash she has in her wallet at any given moment.

Although Kate is of the ‘credit cards are evil’ mindset, her views on credit softened after her month-old iPhone was stolen from her purse on a Seattle Metro bus earlier this year. When she realized her phone was stolen, Kate called Seattle Metro and was told all she could do was report the theft to the local police department.

Kate was deflated when she called to tell me about the theft. Knowing her views on credit and doubtful of an affirmative answer, I asked if the phone was purchased using a credit card. I was surprised and relieved to hear that yes, the phone was purchased a month ago by her husband on his American Express card as an anniversary gift. I then told her why that was the smartest way to purchase her phone: a little something called Purchase Protection.

Purchase Protection is a standard insurance program offered by most credit cards, including all American Express cards, Visa Signature cards, Discover business cards, and MasterCard Gold, Platinum, and World cards. This program protects your eligible purchases in the event of theft or accidental damage within 90 days of purchasing the product on your card. That’s right, if you buy something and within 90 days it is accidentally damaged or stolen, your credit card may reimburse you the original purchase price! What’s cash got on that?

Each Purchase Protection plan differs depending on who is offering the plan (i.e. Visa, MasterCard, American Express, Discover), so be sure to review your card disclosures to read program rules. For example, not all purchases are considered “eligible purchases”. Perishable foods, motor vehicles, and custom-made furniture are examples of some products not covered by Purchase Protection plans.

Also, in cases of theft, proof of the theft is often required to help curtail fraud, which is why you should always file a police report or report the theft to local security. Most plans also require you to submit a claim within 30 days of the incident of theft of damage. If you’re able to prove you were unable to submit the claim within 30 days, then you may receive an exception and be allowed to submit a claim.

The day after I explained Purchase Protection plans to Kate, she and her husband contacted American Express and sent in the required documentation, such as the original receipt and police report. The claim was approved in two weeks, followed by an immediate credit to the credit card for the exact amount paid for the phone.

Kate still carries a lot of cash. But she now makes sure her husband is nearby with his credit card if she ever wants to buy anything she wants protected by a Purchase Protection plan.

As my supervisor scanned through resumes for screening, she never imagined she would have to turn down so many looking for a (any) job, let alone candidates with higher degrees. If overqualified applicants couldn’t find job placements in their respective field, what was the next step for them?

From Chicago Sun-Times:

Some of the dirtiest, smelliest, most dangerous jobs are suddenly looking a lot more appealing in this economy.

People who have been out of work for months are lining up for jobs at places they once considered unthinkable: slaughterhouses, sewage plants, prisons.

“I have to just shut my mouth because I can’t do anything about it,” said Nichole McRoberts of Sedalia, Mo., who pictured more for herself at age 30 than working in a poultry plant, cutting diseased or damaged flesh off chicken carcasses.

Recessions and tight job markets always force some people to take less-desirable or lower-paying work than they are used to. But this recession has been the most punishing job destroyer in at least 60 years, slashing a net total of 6.7 million jobs.

Take Kristen Thompson. Before the recession, she worked at an upscale Los Angeles-area gym arranging pricey one-on-one personal training sessions. Now she’s a guard at a women’s prison in rural Wyoming.

After the gym laid her off last year, Thompson spent months looking for work. Even fast food restaurants failed to respond to her application. For each opening, dozens of other people seemed willing to work for less money. When she heard that a prison in Lusk, Wyo., (population 1,447) was hiring, she leapt at the chance.

In her new job, she patrols cellblocks and monitors the mess hall. Back in L.A., she never had to worry about inmates with weapons or drug stashes or prisoners getting into fights. Yet she’s hardly complaining. It’s a job.

“People have to pay the bills, so what we see is people kind of grasping at straws and taking anything that’s available,” said Matthew Freedman, assistant professor of labor economics at Cornell University.

The desperation of the long-term jobless has rippled through the labor force. More skilled and educated workers have filled clerical or restaurant jobs. So unskilled workers such as teenagers or high school graduates who once held most of those positions have displaced those even lower on the economic ladder, such as immigrants, Freedman noted…(con’t)

Link: Now Hiring: Everywhere You Didn’t Want to Work

Do employers still need to offer competitive wages in order to lure new workers in, or has competition in the job market and climbing unemployment resulted in shrinking wages for the working middle class?

=^..^=

Related Posts:

1. Rationing Cards – A Pictorial Journey Down Nostalgia Lane
2. Teenager During Great Depression Predicts DOW On Its Way to 8,500 – 9,000 Or Lower
3. Quick! Give Me Your Tax Dollars! …

So for now; one more month of subsisting on Cheerios, Ramen noodles and p&b sandwiches, with a festive splash of cheap Merlot before bath time. One more month of scraggly split ends and sweat pants, of creatively/desperately seeking innovative ways to somehow stretch those dimes into dollars. And what makes me most joyous — one more month of being overrun with credit card/car loan payment requests that have faithfully sprinkled my mail slot in perfect precision over the years. Sayonara.

Unfortunately, my bills haven’t much cared that I’d like to kick back on the hillside above the Mobil station with a Slurpee for just a god damned minute — those cursed creditors just creep on over to tap my shoulder and politely shake out every last bit of interest that can be mustered from my (threadbare) pockets. So I’d best be wise and plumpen any hard-earned income for their devouring.

Two years mired in debt. Will be over.

One. More. Month.

=^..^=

Related Posts:

1. Still Wrangling the Debt Monster
2. Paying Down Debt – What An Amazing Feeling

Instead of keeping up on financial news, the main focus has been on enjoying the outdoors and spending time with loved ones. Lately I’ve been digging around in the dirt and establishing an even bigger garden – along with veggies, there are now blueberry and raspberry brambles alongside some grape vines and strawberry patches. And, of course, the primary goal for summer is to trim away more debt.

It feels like my finances have been bleeding unexpected expenses and unfortunately my original goal of funneling $1,000 toward my debt each month hasn’t been met. Once the summer is over, my work hours will be cut back to 19 hours per week so I’m desperately trying to pinch every penny possible for the next two months.

Right now my debt is at approximately $3,000 and I’ve decided to shell out $800 for July. Although I really wanted to slap down more, my car insurance came up for renewal in June and I opted to pay for the full six months upfront instead of doing a minimum payment. I used my Cash Back Discover Card for my insurance payment and just finished paying the bill off online. Since using a Cash Back card a couple of months ago, my reward points have accumulated to $15 so far – not too shabby!

I have to keep reminding myself to be patient and feel proud over my progress over the past year because at this point, I just can’t wait to be debt free!!

Here are some simple tidbits which helped me enormously this past year.

• I stopped digging. This piece of advice (“For the love of God, stop digging!!!”) helped so much in emerging safely out of a burning financial hole. I stopped digging myself into trouble and ardently refused to take on further debt, no matter what.

Even when a sales associate plucked Crème de la Mer from the counter and enticingly waved it in my face, I politely declined. My skin may have cried in anguish and my MasterCard moped for weeks after but my piggy bank cheered the triumph.

I know it’s really none of my business but I cringe when I overhear friends breezily using credit cards as savings accounts. This may have worked in the past but rules for credit companies are rapidly changing and I fear they’ll get caught in a dangerous situation.

In fact, I’ve been a loyal customer of WaMu for over two years and never carried a balance from month to month on their card. Last week I received a letter from WaMu’s new owners JPMorgan and Chase, stating how my new rates are getting jacked up to 30% (!!!!) <- What, are they nuts??

My rule is firmly, a line of credit is not a personal piggy bank. If someone is in a bind and using credit to help close the gap, they’re compounding a previous problem with a whole passel of other complications – ie, going into even more debt. Credit companies are just waiting for you to slip up so please proceed with extreme caution here.

Which is why it’s critical to …

• Build up an emergency savings as quickly as possible. Let’s face it, unexpected expenses always crop up at inconvenient times, which is why it’s crucial to automatically set aside a certain amount to help zap these nasties.

When I started my financial journey with over $20,000 debt and zero savings, it felt absolutely suffocating. I would play with or quickly spend additional money and if anything came up, I was screwed.

One night I finally had some sense beat into me and swore from that moment forward, 20% of any amount of money I received would immediately be stashed away into savings (10% for short term stuff – like food or a night out with the girls and 10% for long term savings not to be touched. The remaining 80% went strictly towards my debt.)

I held myself accountable to the promise and soon that svelte percentage of savings blossomed into a respectable amount. This also brought an immense peace of mind with it.

The beauty of this is, I can still strategically plan for and afford everything I want. But now I’m saving first as opposed to being devoured by the ravenous debt monster over it. Instead of thinking, “I can’t afford to!” my new mantra has become, “How can I afford to.. ?”

• Manage money well. Being stretched too thin was a surprisingly beneficial lesson because it helped me value each dollar more. I became an extremely resourceful chica and nimbly learned how to use available ‘stuff’ more wisely.

If you’re forced to crack into your savings by the way, don’t beat yourself up too harshly over it. But do try to build the amount back up as quickly as possible. I’ve done some really stupid maneuvers where I’ve been forced to dip into some of my long term savings. But take comfort in the fact that feeling stressed or guilty over unexpected expenses defeats the entire purpose of having an emergency savings in place to begin with.

Although it has been a financially challenging year, I’m so grateful for the lessons I’ve absorbed. I was caught in a damaging cycle of inaction and denial until I became angry enough to take back control of my finances. I finally had the courage to ask myself, whose life is it anyway?

=^..^=

My friend works as a legal aide and felt her company was pretty secure. Yet over fragrant sips of ginger and spicy Chai, it was her parent’s business she was most interested in discussing. Her family specializes in appraising and selling jewelry.

“Business has really been booming for my parents.” She tapped her mug and frowned. “But it’s been a disturbing change over the past few months. More frequently, financially desperate customers are coming to the shop.”

She paused and sighed.

“There’s been a surge of people bringing in wedding bands, precious keepsakes and family heirlooms – treasured pieces held in the family that are now being sold to cover basic financial costs. The stories my parents hear of why people are parting with such sentimental objects is heartbreaking. It’s getting pretty bad out there.”

A woman yesterday was forced to sell a gold diamond necklace and ring set inherited from her grandmother in order to cover family health insurance costs. And a recently laid off man came in to sell his pocket watch to pay utility bills – for him, every dollar counted. This type of situation, my friend mused, was increasingly becoming the norm. To make ends meet, people were raiding jewelry boxes and other personal items to sell whatever they could to turn assets into immediate cash under economic pressure.

On the way home from our lunch, I noticed a neon sign outside a pawn shop that had sprouted up a few blocks from me. “PAYING TOP DOLLAR FOR YOUR GOLD AND JEWELRY!” it screamed.

I didn’t have far to go before I was greeted by the next lurking signboard – “I buy diamonds! Sell us your unwanted gold! Fast Cash Now!!”

Another harbinger of lackluster economic times?

=^..^=

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

Volcker Says Finance System `Broken,’ Losses May Rise
The Bloomberg News
September 5, 2008

This bright new system, this practice in the United States, this practice in the United Kingdom and elsewhere, has broken down,” Volcker said today at a banking conference in Calgary. “Growth in the economy in this decade will be the slowest of any decade since the Great Depression, right in the middle of all this financial innovation.”

The former Fed chief projected “a lot” more losses from the collapse in the mortgage-backed debt market, after the more than $500 billion tallied so far, should the U.S., European and Japanese economies fail to pick up. He urged changes in financial regulations, echoing calls among sitting officials and legislators.

“It is the most complicated financial crisis I have ever experienced, and I have experienced a few,” said Volcker, who ran the Fed from 1979 to 1987, and engineered an increase in interest rates to 20 percent to quell inflation that exceeded 10 percent.

U.S. growth has averaged 2.3 percent so far this decade, down from 3.4 percent in the 1990s. The current growth rate is the weakest since at least the 1940s, when the government began compiling figures on quarterly gross domestic product.

Oh yes, and in other news. The U.S. Treasury announced a take-over of Freddie Mac and Fannie Mae this weekend – a historical federal rescue operation and bailout when these two mortgage giants collapsed into insolvency under the strain of billions of dollars of losses during a housing crisis that shows no signs of improving.

And taxpayers should be truly worried as they will be responsible for Freddie’s and Fannie’s considerable and expected losses. The Congressional Budget Office predicted in July that a bailout could cost between $25 billion and $100 billion, reports the Los Angeles Times. The two companies lost about $14 billion last year and such steeping numbers coupled with our current national deficit guarantees future generations to be shackled with enormous debt.

Few Stand to Gain on this Bailout, and Many Lose
The New York Times
September 7, 2008

But even after the government seized the mortgage finance companies on Sunday and dismissed their chief executives, the companies’ outgoing leaders could see big paydays — a prospect that angers many investors, particularly because ordinary stockholders could be virtually wiped out.

Under the terms of his employment contract, Daniel H. Mudd, the departing head of Fannie Mae, stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation, provided his dismissal is deemed to be “without cause,” according to an analysis by the consulting firm James F. Reda & Associates. Mr. Mudd has already taken home $12.4 million in cash compensation and stock option gains since becoming chief executive in 2004, according to an analysis by Equilar, an executive pay research firm.

Richard F. Syron, the departing chief executive of Freddie Mac, could receive an exit package of at least $14.1 million, largely because of a clause added to his employment contract in mid-July as his company’s troubles deepened. He has taken home $17.1 million in pay and stock option gains since becoming chief executive in 2003.

Fannie Mae and Freddie Mac have enriched their top executives for years. Mr. Mudd’s predecessor at Fannie Mae, Franklin D. Raines, took home more than $52 million while he was chief executive from 1999 to 2004, according to Equilar data.

“This is completely outrageous,” said Richard C. Ferlauto, the director of corporate governance and investment for the American Federation of State, County and Municipal Employees, a large pension fund. “It is really a slap in the face to shareholders and homeowners whose loans are at risk and taxpayers footing the bill for a bailout.”

I agree with Volcker, the financial system is hopelessly broken. And as I gaze into my baby niece’s expressively promising eyes, the moral impact of these maddening decisions overwhelms me.  This bailout will directly affect every American wallet sooner or later, while the departing heads of Fannie Mae and Freddy Mac are entitled to $9 million and $14 million in severance pay, respectively.

September 7, 2008 will be now historically be remembered as the day the U.S. government took over the mortgage market, a move that has no other precedent in history.

=^..^=

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

Last year I would never have imagined making as much headway on my bills as I have this summer, and it’s been extremely encouraging. The challenging part is sacrificing in order to stash away as much of my paycheck as possible, instead of splurging on tempting little extras for myself. But it’s truly worth it every time I see the balance of my debt shrinking before my eyes.

Whenever I feel discouraged, it helps to remind myself how I didn’t get in this much trouble overnight and thus it’ll take time to claw my way back out of the black debt hole again.

If I remain focused and stay motivated for another few months, the bulk of this debt will be gone by next year. I can hardly believe it! That means all my student loans plus my 2007 Dodge Caliber will be paid off in less than three years. It will be sooo nice not to repeatedly have to make one monotonous payment after another every month, and what a relief when my money will finally be mine again.

I can’t wait to be debt-free!!

=^..^=

† †

Featured Resources

Compare prices and read helpful product reviews to make smart buying easy through Ciao! – Price Comparison and Product Reviews for the savvy shopper.

The End of Credit Card Consumerism
U.S. News and World Report
August 8, 2008

Is the insatiable credit-binging party nearly over?

Today, America finds itself at a once-or-twice-a-century economic tipping point. A sharp slowdown, record-high gas prices, high consumer debt levels, a plunging real estate market, and the growing green movement all seem to be conspiring to dethrone King Consumer and transform the economy and the American way of life for years to come. “The process of bringing our wants and our needs into realignment,” says Merrill Lynch economist David Rosenberg, “is going to involve years of savings and frugality.”

Many consumers, of course, don’t have much choice but to scale back. Total credit card debt has increased by over 50 percent since 2000. The average American with a credit file is responsible for $16,635 in debt, excluding mortgages, according to Experian, and the personal savings rate has hovered close to zero for the past several years. High gas and food prices are causing real incomes to fall. Even worse, rising inflation will probably cause the Federal Reserve to start jacking up interest rates once the credit crisis on Wall Street has passed, tightening credit even further. “We’re shedding jobs, it’s much harder to borrow, and what used to be capital gains are now capital losses,” says Scott Hoyt, senior director of consumer economics at Moody’s Economy.com. “There’s no source of funding for spending.”

We continuously buy on credit and our government does the same, so are we in fact reaping what we deserve? The ripples from the bubble busted housing debacle continue to ricochet and the latest batch of stimulus checks are but a fleeting memory for the average American consumer.

Consumer Spending Heading for a Fall
Marketwatch
August 10, 2008

“Frugality is now replacing frivolity,” wrote David Rosenberg, chief North American economist for Merrill Lynch, who suggests that the consumption patterns of the 1950s could be coming back. “Ozzie and Harriett” is in; “Sex in the City” is out.

The first official data on third-quarter consumption will be released in the coming week. In addition to the retail sales report for July, the calendar also includes July numbers for consumer prices and industrial production for July, and the June figures on foreign trade. The data “should reinforce the view that the U.S. economy is in recession,” said economists for Goldman Sachs.

The developing slump in consumer spending will make it increasingly difficult to sustain positive growth, said David Resler, chief economist for Nomura Securities. If the U.S. consumer falters, then global growth probably will too. Consumers face three hurdles: Higher energy may be easing, but their wealth is still falling. And wage growth has been very weak.

David Walker, the former U.S. Comptroller General and director of the Congressional Government Accountability Office (GAO), had a job to audit the government’s books and serve as the investigative arm of Congress to ensure the fiscal accountability of our federal government. (I’ve written about him before in The US Economy Is Unsustainable.) Mr. Walker has since resigned from his position in order to hit the road and spread awareness of what he believes to be America’s precariously dire financial future coming straight down the pike.

‘I.O.U.S.A.’ a big screen look at the U.S.’ monster debt
The Washington Post / Seattle Times
August 10, 2008

In March of this year, Walker resigned from the GAO so he could be even more vocal on the debt crisis, becoming chief executive of the newly formed Peter G. Peterson Foundation, set up by Peterson, billionaire co-founder of the Blackstone Group, a major private-equity player.

Their message: You probably know that the national deficit stands at $9.6 trillion and rising. What you don’t know is how bad things really are. If you include all the unfunded entitlement obligations — Social Security, Medicare, Medicaid and so forth — we are actually in a $53 trillion hole, Walker says.

And it will only get deeper as we get older.

In an interview, Walker is full of grim one-liners, such as: “The debt has increased our risk of being held hostage by foreign lenders” and “Our situation is serious, and it is deteriorating with the passage of time” and “The financial condition of the U.S. is worse than advertised.”

The nation’s debt now accounts for 66 percent of the gross national product. But unless things change, the film argues that the cost of aging baby boomers will push that proportion to 244 percent by 2040, twice what it was at the end of World War II, our highest level of national debt.

A debt that high, even super-investor Warren Buffett says in the film, “could create real political instability.”

Our overseas brethren are feeling the pain as well.

It’s worse than we thought, admits CBI. The CBI, the UK’s largest employers’ organisation, has warned that the UK economy is deteriorating faster than it previously thought.

UK Economy ‘Worse Than Thought’
BBC News
August 10, 2008

Letters Warn of Darkening Mood in the Economy
The Guardian / Observer
August 10, 2008

Leading employers’ organisation the CBI will this week perform a significant U-turn and warn its members that the economy is deteriorating at a faster rate than it had predicted.

As recently as June, Richard Lambert, the CBI’s director-general, took a relatively optimistic view, saying we should avoid talking ourselves into recession. But in a letter to mark the first anniversary of the credit crunch, he writes: ‘There is no doubt that the mood has darkened in the last two or three months,’ and warns that growth prospects for next year and 2010 ‘look no better than anaemic’. It is the most pessimistic assessment of Britain’s economic prospects that Lambert has delivered.

He concedes that: ‘The CBI, along with most other forecasters, has been consistently over-optimistic about the economic outlook over the past 12 months.’ He blamed the volte-face on a surge in inflation that ‘took us by surprise’ and the prolonged credit crunch, which has been ‘bigger and broader than at first appeared likely. A year ago, it seemed reasonable to hope that the worst would by over by now. That has not turned out to be the case.’

Lambert criticises ‘years of unsustainable increases in government spending’, which have ‘left the public finances in poor shape to cushion the economy against these adverse shocks’, and warns Gordon Brown not to take measures which he claims would make the situation worse, including changing the Bank of England’s 2 per cent inflation target.

So what are productive solutions for a service-based society with a waning manufacturing sector to compete in a globalized economy? The situation feels like being trapped in a maddening Catch-22 with no easy answer. How do strapped Americans effectively divert a monetary crisis through conservation and savings when the foundation of our fiat currency and financial system is based off credit and debt?

=^..^=

New Threat: The ‘Obama’ Market
The Sun
June 30, 2008

Mr. Allmon has been in the stock market for over fifty years and currently manages over $200 million in assets – and has outperformed this year’s rocky market with modest gains of between 1% and 2%.

Mr. Allmon says, “Senator Obama is leading a children’s brigade, but the problem is children shouldn’t be leading this country.”

Further, the veteran adviser, who publishes a 46-year-old monthly investment newsletter, the Growth Stock Outlook, out of Bethesda, Md., made a marvelous market call last July with the Dow Jones Industrials hovering around 14,000 and bullish sentiment rampant. In an ominous warning to subscribers, he urged extreme caution, predicting the Dow was on its way to 8,500 to 9,000, which he noted was a forecast that “could be on the high side.”
With the index having plummeted more than 2,500 points since then, his crystal-ball gazing talent is not to be taken lightly.

At the time of his forecast, Mr. Allmon recalls, some subscribers rang him up and told him, “You’re nuts.” But now, he says, “They’re beginning to recognize something is really wrong in this country, and an 8,500 to 9,000 Dow is very possible.” Thursday and Friday’s wicked two-day Dow decline of 465 points, or nearly 4%, he says, may be a prelude to that drop.

Mr. Allmon’s parting words: “We’re in a bear market that’s got more to go; don’t get sucked in.”

David Walker, the nation’s top accountant and former comptroller general of the United States, is a highly respected public figure who has run the Government Accountability Office. (The GAO audits the government’s books and serves as the investigative arm of the U.S. Congress.) Below is a short clip taken during a candid interview with 60 Minutes last year, where Walker foreshadows an inevitable economic collapse if the United States government continues its present irresponsible fiscal policies.

(Oops, I had to remove the embedded video due to a coding issue with FireFox web browser. To view a clip of the video, click the link below)

The U.S. Economy Is Unsustainable

Is the United States scouring towards a financial brick wall at a precipitous speed? I wonder what proposed solutions Obama and McCain have stuffed up their sleeves for repaying our current $9 trillion national debt.

=^..^=

A financial update. Oh baby, how far we’ve come

While rummaging through some older posts here on Broke-Ass, I stumbled across a lot of stuff I’d forgotten about. A post from last year showed how I’d gone from $0 in savings in January 2007 to $1,000 in savings four months later (see Surviving Paycheck to Paycheck? You Can Still Start Saving).

It was a huge milestone for me. For someone who had never adequately been able to hold onto money for very long, I began to realize I could achieve anything I really put my mind to. This included learning habits that would aid my search in finding that elusive concept known as financial freedom.

Yesterday I decided once again to review my progress. I tend to have a ‘do it and forget it’ approach, meaning every time I receive money, at least 20% is manually deducted and siphoned away into some form of savings. (And, well, basically forgotten.)  A little over a year since my last financial update post, I have hit another milestone. Actually I was quite shocked when I added everything together and realized …

… I now have approximately $6,000 stashed away in some form of savings.

I’d also managed to clear a sizable chunk off my debt as well. In fact, if I remain aggressive on paying off debt as a main priority, I’m now on course to being debt-free within twelve months at the very latest. And the thought of no debt lingering over my head is exhilarating!

So what’s next on the financial agenda?

Preserving wealth amidst inflation

Preserving wealth right now means uncovering creative ways to keep the inflation beast at bay and preventing this rabid little monster from devouring portions of savings.

If my savings account isn’t keeping pace with inflation, purchasing power is being diminished and I’m unfortunately becoming a financial loser. But isn’t putting a safety cushion of money into a savings account supposedly one of the ‘Golden Rules’ touted by financial advisors ad naseam for smart beginner investing?

Surprisingly I know many people who openly scoff at the interest rates attached to most savings accounts.  “But Jennifer,” they ask. “Why put money into the bank when I’m receiving such a pitiful return? With a tiny bit of effort, I can do so much better myself.”

So how are they doing it?

These folks say they recognize the importance of preserving their current wealth by always keeping a sharp eye out for opportunities. They’ve become experts in finding little niches that will help them keep pace with inflation (and possibly even net a profit in the process!) When federal interest rates start dropping is also when it’s crucial for savers to get their inventive juices flowing.

When the going gets tough, the tough get … creative!

Just to throw some quick questions at you – do you have a certain hobby that can be capitalized upon? Can current interests or skills be used as an asset for opening your own business? Do you enjoy collecting antiques or other collectibles or are you an avid coin collector and a fan of numismatics? Have you ever considered visiting estate or garage sales in your area for underpriced (unrealized) items?

The goal, they explain, is to invest your money in something that will inherently keep its value and thus (hopefully) rise with inflation. It also needs to be an area you’re knowledgeable about and feel comfortable enough to park money into it. For example, many investors enjoy precious metals, such as gold and silver, as a hedge against inflation. Once you dabble your toe into a certain area, you can even try accumulating a bit of ’interest’ in the process.

Here’s another example. I know quite a few who frequent both estate and garage sales and continually make a killing by arriving early and recognizing hidden treasures nestled among other junk. These treasure hunters are aware of the real value attached to many antiquities. They make handsome returns by buying low and selling high and have a lot of fun in the process. Consider becoming educated in a hobby or area of interest and you too may develop a niche and one day be a whiz in this type of ’horse trading’.

If I’ve learned anything from these pros, it’s this tidbit of advice. Start small and always keep cash on hand. You never know when an opportunity might present itself and you’ll want to be prepared to immediately pounce if it does.

Unfortunately the sobering fact is, it doesn’t matter how much I’ve saved if inflation continues chomping away on my hard-earned dollars. So now it’s time to get innovative and try to prod this irksome inflation beast back to its insidious lair.

~†~ Baby Steps Are Key  ~†~ When interest rates are down, savers truly suffer. Use the internet (which allows access to a potential worldwide customer base) and other skills to your advantage to discover your own creative ways to both accumulate and preserve wealth. 

~¤~¤~

Also check out the Carnival of Personal Finance for many great submissions on financial topics. A huge thank you to Mrs. Micah for hosting this week’s edition.

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In The Current Turbulent Economy and Financial Sectors, What Gives?

I’ve become somewhat of a CNBC junkie lately, which has resulted in some pretty bizarre sleeping patterns. It’s not unusual to catch me propped up on my pillows at 4am, munching on some Cheerios and sneaking in an hour or two of ”Worldwide Exchange”. Month after month I’ve held my breath and cringed as the Federal Reserve continues to slash key interest rates. The suspense! The horror! And most gut wrenching of all - the sheer anticipation as the world frantically wonders what card Bennie Bernanke will extract from his magical hat of endless financial illusions next.

Inflation is becoming a growing whisper of concern even among the stoutest of mainstream media. Some professionals insist official data has been skewed and inflation is rapidly approaching the 5% mark or greater. Amidst economists bickering back and forth about the particularities of what constitutes a ‘global slowdown’, a ‘recession’, a ’stagflation’ or a zesty myriad of other terms, one thought continues to become astoundingly clear.

Prices are going up. And at current interest rates, my savings are getting royally screwed.

The Demise of Debt?

As a novice in the financial arena witnessing it all as I lay wrapped snug in my blankie (yes, I still have a blankie!), it’s been a hell of a ride so far. Certain financial markets are roaring to life while others cool themselves into near oblivion.  In these daunting financial waters, investors scramble to find their potential life rafts. Will history continue repeating itself? Is our mounting national debt and insatiable consumerist desires about to nip us in the rear as we struggle to deleverage ourselves?

Well, I do know one thing. If everyone stepped out of debt today, it would certainly cause a catastrophic economic collapse.  Our entire currency is based off debt, meaning that every dollar you hold in your hand entails someone else needing to be in even greater debt for that dollar amount you’ve just stuffed into your wallet to even exist. If everyone simultaneously paid off their loans and refused to take out new ones, the entire financial system as we know it would come to a grinding halt. Quite a pickle to be in, don’t you think?

Statistically it would be impossible for everyone to pay off their debts all at once anyway. When loans are made, the principle is zipped away to the wide expanse of the money pool (or total money supply). But we all know we’re not merely paying the principle amount back when we repay a loan - who can forget the exorbitant interest rates we shell out for the privilege of buying the latest shiny trinket with money we don’t have yet. So where does the interest money come from anyway? Well, it all comes from the same money pool - the one containing everyone’s initial principle. The one containing only the principle amount.

It’s a continuous game of musical chairs, folks, and this time the subprime mortgage borrowers didn’t grab a chair quick enough before the music stopped playing.

Those poor sods.

Debt Still Isn’t Kosher

With interest rates so low right now, it unfortunately doesn’t do me a lick of good stashing too much into a savings account. The wisest route will be to focus on aggressively tackling my debts. Unfortunately even if I didn’t have ANY debt, putting money into a savings account would be a losing proposition. So all remains quiet here and for the moment you can find me tucked into the wee hours watching the financial news and enjoying an early morning snack.

Just don’t expect me to peer underneath my bed. There may just be a big scary inflation monster peeking back at me.

~†~ Baby Steps Are Key ~†~  Money used to represent value. Now money represents debt – and debt is enslavement.

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Sayings of the Wise

By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. -John Maynard Keynes

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. -Alan Greenspan

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A Continuation Of My Struggle Battling Alleged Credit Card Debt

The beginning of this story can be found at Broke-Ass Student Just Got A Whole Lot Broker with a bristled rebuttal at How To Fight Back Against Collection Agencies.

I squinted at the words scrawled across the pages through the dim light, entirely absorbed in my reading, when suddenly loud rasping at the door interrupted my thoughts. Sighing, I set the book aside and took a moment to wiggle into slippers before shuffling toward the door. The clock in the kitchen read 7:03. Was I expecting someone?

A heavier set woman stood outside my door, entirely bundled against the brisk evening chill. Suddenly she thrust fat mittened hands engulfing a clipboard toward me.

“Jennifer Lynn?” the tart voice came.

“Yes?” I shivered and stepped outside.

“Please sign here.”

I surrendering my signature and was presented with an unimpressive plain envelope. I had actually been expecting a mail delivery from Victoria’s Secret, but this small morsel didn’t represent the sleek package I had been anticipating.

“Err, what is this?”

“Jennifer Lynn, you’ve just been served a summons.”

“A what?!”

I gave an incredulous stare as she spun on thick heels and strutted away.

“Hey lady,” I bellowed at the Pillsbury Dough boy retreating back. “What the hell is this?”

“Read the summons. All the information is contained therein,” the curt reply sliced through the air. A car door closed, an engine started, and she was gone.

I immediately felt queasy – as well as utterly baffled and confused. What on earth was I being sued for? I numbly stepped inside and tore open the thin envelope. A neatly typed two-page document was nestled within. After a few minutes, I finished reading and dropped into a chair, letting out a long shaky exhale.

What the hell?

It was indeed a summons for the local city court, and I was being sued by a law firm on behalf of a federal bank for an alleged credit card debt of $5,000.

Since I had been served in person by the female process server, the document stated that I had ten days to file an appropriate answer to the summons with the city court. If I failed to oblige, I would lose by default.

Ironically, a day earlier I had received a letter in the mail from this law firm regarding an alleged debt with almost the same amount stated. I had frantically racked my brain for any outstanding debts I owed but came up blank. All my modest balances were faithfully paid off each month. And $5,000 sure as heck seemed like a pretty hefty amount to simply have forgotten about.

Earlier that afternoon I sent a validation letter disputing the alleged debt through certified mail with return receipt requested. And now a mere three hours after delivering my validation and dispute letter to the local post office, I’d been served a summons at my door.

What was going on here?

I didn’t rest well that night. Nightmares of court rooms and angry judges chased me into an uneasy sleep.

The next morning, I called the city court clerk to see if the summons was a legit document or not. She confirmed the docket number was indeed real. Next, I decided to research the name of the female server who was stamped on the summons to see if she was legit or not. And indeed she was.

Ok, my brain rationalized, so this was obviously serious business. And I was starting to develop a serious headache. The law firm had expended quite a bit of money to issue this summons. The document also stated that all legal fees accrued on their end would be included with the amount I was being sued for.

Thus, I concluded, the law firm seemed pretty confident they would be victorious in court. Well, they should be able to tell me what this alleged debt was all about then and I could finally get to the bottom of this whole ridiculous fiasco.

As mentioned previously in this post (Broke-Ass Student Just Got A Whole Lot Broker ), I called both the law firm and the credit card company to inquire about the alleged debt. No one I spoke to was able to provide me with any information or refer me to anyone who could help. I felt more confused and frustrated than ever.

As I debated what my next move should be, I spent sleepless nights researching anything I could uncover on the actual law firm suing me. And things began taking an intriguing twist.

This suing ’law firm’ had quite a notorious reputation for being a bottom feeder collection agency with an extremely unethical stigma attached to its services. In 2004, New York State residents filed a class action suit against them for engaging in rampant and abusive collection practices. The firm appeared numerous times on different consumer protection resources and sites, such as Ripoffreport.com.

Repeatedly, on each site and message board I visited, the warnings were similar; beware. bottom feeders. notorious for winning by default. unethical collection practices. extremely shady. barely on legal side of the law. watch your back.

So these bastards were mainly hoping to win by default, were they? Unfortunately for them, they had picked the wrong target. Although it was traumatizing to know I was being sued, I wasn’t prepared to give up without a fight. And the more research and information I compiled the more in control of the situation I felt.

I visited a few different attorneys in the area who offered free consultations. Finally I hired a consumer protection lawyer at a very reasonable rate to file my answer with the court in proper legalese. By that point, I had acquired so much knowledge through my personal research that my attorney seemed impressed and asked if I was studying to be a law student.

My attorney chuckled when, in a frenzy, I pointed out the ten day limit to file an answer (which loomed ominously closer).

“Oh boy,” he said as he glanced through the document. “I’ve dealt with this firm before. You give these guys way too much credit.”

The plaintiff, my attorney explained, was responsible for typing up the actual summons and not the courts. And the law firm suing lied about the time to legally file my answer. By law, it exceeded way more than the ten day limit they stated. Obviously these slimeballs hoped the defendant would feel pressured by such a limited time frame and nervously submit a half-assed answer, or feel frazzled and not bother to respond at all.

The receipt for my dispute and validation letter came back a few weeks later, signed in sloppy blue ink. I figured these guys hadn’t anticipated my immediately firing out a validation letter disputing the debt before they had a chance to serve me with the summons. At least now I had proof of disputing the debt in its entirety before the female process server had arrived at my door.

After filing my answer to the summons with the court, I sat back and tried to patiently wait for their next move. Two months later, it finally came. But it wasn’t quite the validation response with the information I expected.

Dear Mr. XXX:

In an effort to avoid the cost and uncertainties of litigation, we would like to discuss an amicable resolution and possible settlement with your client, Jennifer Lynn.

Sincerely,
Scumbag Law Firm  Cohen and Slamowitz

My lawyer presented the letter to me and thoughtfully tapped his fingers together.

“Well, it’s up to you,” he said slowly. “If you want to settle and throw $50 or $100 at these monkeys to get them off your back for good, it might cost less than if we go to court and push for a discovery process. During the discovery process, we’ll be forcing them to reveal any hard evidence they actually have in their arsenal against you.

However, if they can’t intimidate you into settling and have no evidence to support their claims, they may realize it’s hopeless and cut their losses.”

“But,” I protested, “I can’t settle. They still haven’t validated this alleged debt. I have no clue what it’s for.”

My lawyer raised his brow and nodded slowly.

“I’m just laying it all out for you.” He smiled faintly. “You’re obviously a bit smarter than the average bear. They thought they could use scare tactics for payment or a default judgment. And certainly didn’t expect a fight back. I’ll leave it up to your own discretion which direction you feel is best. The ball’s now in your court.”

“No,” I said firmly, taking a deep breath. I felt like a scrawny little David stepping up to the behemoth Goliath. “I do appreciate you laying out all my options. But they need to first provide documentation and validate this alleged debt. There won’t be a settlement.”

“Very well, I’ll notify them of our decision immediately.”

That was  four months ago and I have not heard anything further from them (at least, not yet). I wish I had a more substantial update, but perhaps this little bit can help others in a similar frustrating situation.

One of the most valuable lessons I’ve learned through this nightmare is the criticalness of checking credit reports every year for discrepancies or errors. Again, I encourage everyone to go to Annual Credit Report.com for a free copy of their credit reports from all three credit bureaus (TransUnion, Equifax and Experian).

Stay tuned for further developments.

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