Hello! I work for XXXXX and I took one of your classes last winter at our Convention. All of your info was helpful, but I need more HELP! My debt is minimal but I have around a 550 credit score. I have two leins that add up to arond $4,000 and two deliquent student loans that add up to maybe $3,000. I also have a couple credit cards that I got 4-6 years ago that add up to $600 that have never been paid off. I have heard that sometimes it is not good to pay off debt that old so I do not know what to do. I am ready to buy a house but obviously my financial situation is not. I did go to annualcreditreport.com and retrieved my full credit report, but i still do not know what to do. I just need someone to point me in the right direction. I have bad credit and nothing to show for it. I am 24 years old and I would like to start my 401K and maybe invest in some stock. I also would like to go back to school next year with some cheddar in the bank. Can you help me, please!?! – MG

MG

Thanks for your email. Here is what you need to do (in order).

Raise money. Sell stuff on craigslist, have a garage sale, work overtime, get a part-time job. Seriously. You need extra money to pay these things off before things get out of hand. I fear that this problem could get worse if you don’t address it now. Pay off debt in the following order. Pay minimums on everything, but focus on the following debts first.

1. Pay off credit card debt
2. Lowest tax lien
3. Highest tax lien
4. Lowest student loan
5. Highest student loan

I’m glad you emailed me. But you need to take further action. Focus on raising money, and then pay this stuff off. You shouldn’t think about moving into a house until you pay this stuff off and have a 10%  down payment. If you buy a house before then, then you will run into major financial issues in about 5-7 years. Let me know if you have anymore questions.

Pete the Planner

The Premise:
Put $25,000 in someone’s checking account for two weeks to see if it changes their spending habits. The money isn’t necessarily meant to be spent on anything, but it is placed there to add a layer of comfort and security that one normally doesn’t have.

The Test Subject:
Me. Who else would I give $25,000 to? I simply took $25,000 out of my emergency reserves from another account, and placed it in my checking account for two weeks. Before we go to much further, it is important that we clear up a few points:
1. This experiment wasn’t about me telling you that I have $25k to throw around. In fact, if I didn’t have $25k at my disposal, then I would possibly be the worst Personal Finance Expert on the planet. Why would you take advice from someone that hasn’t demonstrated the ability to effectively save money?
2. I am not exactly a financial angel. I have my weak moments. Most relationships have a spender and a saver. My wife is the saver, and I traditionally have been the spender.
3. The experiment is not necessarily about spending the money. The experiment is meant to measure the change in everyday spending habits based on access to a ridiculously large amount of cash inside of a checking account.
4. I don’t have any debt other than my mortgage, so I was never tempted to “just pay off my debt.”

I’m still a monkey

I am a dumb animal. I really am. Any degree of financial success that I have had is based on me tricking myself to financial security. For instance, I normally keep my checking account super-low so that I don’t blow-through money that I don’t NEED. In addition, I don’t have credit cards. I don’t trust myself to win the mental battle between the credit card companies and my small dinosaur brain. You see, credit card companies are in the business of taking my money from me. They know exactly what they are doing. They offer points and rewards and other forms of BS in order to get my hard earned money. In lieu of a battle of the minds that I would probably lose, I have decided to just not participate in their game.

So the first challenge that I encountered was my own animalness. Yeah, animalness. New word. Work with it. I had protected myself for so long from dumb decisions that I was actually nervous that my brain couldn’t handle the challenge. By the way, not enough people protect themselves from themselves. I highly recommend it. Trick yourself into financial success.

It’s on

So I deposited the $25,000 into my checking account.  No big deal really. I didn’t feel any different in regards to my spending habits, but I was a bit nervous about having that sort of scrilla in my checking account. I didn’t want some bandit to force me into cleaning out my account by using some of the most brutal slap and tickle techniques around. I decided to carry my Swatch Swiss Army Knife that I bought back in the summer of 1987. In the event that I was accosted, I figured that I would use the scissors to cut the criminal, or use the tweezers to clean up his brow line.

Although I did tell you that I’m the spender in my relationship, it’s important that you know that I don’t really spend as much money as I used to. My spending is usually limited to food, wine, gifts for Mrs. Planner, or possibly a nice tie that would look snappy on television. That being said, two questions now arise:

1. Would I spend more money on the areas that I already tend to spend money?

2. Would I add spending categories to my spending habits?

My answers? Yes and No. Yes to #1. No to #2. I didn’t ever feel compelled to start buying things that I normally wouldn’t buy, but my radio co-host, Chip Maxwell, was making headway on his mission to get me to join him in the ranks of iPad owners. I can say with great confidence that every purchase I made during the experiment was affected by the $25,000. Check that. Maybe I should say that differently. Most purchases are make are generally affected by the low balance that I normally keep in my checking account. Therefore, the $25,000 addition lulled me to financial apathy. I didn’t consider the principles of scarcity that I normally employ when making a spending decision.. This, alone, was worth the experiment. I value scarcity. I believe it to be a valuable financial tool. Removing scarcity could be damaging to my financial life. This was very scary. Many people don’t know that they are subjecting their savings to the possibility of extinction simply by keeping it in their checking account.

I’m somewhat famous for my $62/week grocery store trip. My $62 trip became $80/week during my two week experiment. I know this was because I didn’t take the time to consider the necessity of the things that I was purchasing. I had grown accustom to considering the importance of every item that I put into my cart. I believe that we should all scrutinize the items that we purchase. By having the $25k cushion, I learned that my scrutiny was tied directly to low account balance.

I did buy Mrs. Planner flowers two more times than normal over the course of the two weeks. I consider this a good thing. I believe that I purchased at least two more bottles of wine than I normally would have. My palate tells me that it was good thing too, but it wasn’t. I made two additional nominal charitable contributions. I didn’t mind that, but we have a pretty structured giving plan so it surprised me that I deviated from it.

The bottom line

I made at least 8 purchases in the two week experiment that I normally wouldn’t have made. Many people keep too much money in their checking account all the time. If I kept up my new spending pace over the course of an entire year, then I would have spent money 208 more times than usual. Money changes behavior. It just does. I did prove to myself that my assumptions about myself were true. I am a dumb animal. I need to continue to trick myself into financially favorable situations.

I would love to hear what you think about this post. How would your behavior change if you were faced with a $25k experiment?

The very nature of sports and entertainment is simple: they distract us from our lives for a few brief moments so that we may reset our outlooks on life. However in tough financial times, many leagues pass on their financial problems to you the fan. It cost $5 to watch the cars practice, and only $20 on raceday. Although that is chump change, Belskus points to recent economic impact study that suggests that the Indianapolis Motor Speedway is responsible for $750 million per year in our local economy. Tell me who loses. No one. Great fan experience, great economic impact, and the largest drivers’ purse in racing.

So how does the IMS do it? “We are a private company and we don’t disclose our financials” says Belskus. In other words, we don’t pass on our financial problems to the fans. We figure them out, make adjustments, and then enhance the fan experience. I can’t imagine the NBA, NFL, or MLB doing that. “But just like most Americans we too have had to make some tough financial decisions, but the good news is that the changes are working.” Belskus speaks of the qualifying format and schedule changes for the entire month of May.

So there it is, the greatest spectacle in racing hasn’t passed on their challenges to the fans. They have made positive financial changes that have actually enhanced the fan experience. I think many of you have already found that making tough financial decisions isn’t a negative experience. It’s all about gathering information, measuring the impact of possible changes, and then making critical decisions. Too many times we view tough financial decisions as a negative event. But critical thinking and innovation can make for a better life. If the largest race in the world can do it, you sure as heck can too.

Definition of Debt Settlement

Debt settlement is the process of having your debt reduced by the entity that holds your debt. In other words, you agree to pay off your balance immediately…but reduced balance. For example

You owe $25,000 on your Chase Bank Visa

They agree to eat $7,000 if you pay off $18,000 in one big chunk.

In this example, you and Chase have settled on this $18,000 payment. Most banks and credit companies are being pretty aggressive with settlements these days. That means that if you have the cash, then you can settle your debts for much less than you owe. Of course the problem is that most people with significant debt don’t have significant cash. That is where things get dicey with the entrance of a debt settlement company.

Here comes the debt settlement company

A debt settlement company will get involved to help you negotiate and accumulate the cash to pay off the debt. However, they charge approximately 14% to do this. Oh, and they take the fee before they start negotiating and paying off your card. Let’s look at the numbers:

You owe $25,000 on your Chase Bank Visa

Debt Settlement Company agrees to help you for 14% of your balance. Therefore you make payments to the company for several months until you pay them $3,500. In the meantime, they have you save money into a pool of money that will be used to pay off your debt. This takes several months. By several months, I mean several several several months. All the while you aren’t paying the credit card company because you only have enough money to pay the debt settlement company and to add to the pool of money that you can use to pay off your balance all at once.

Your credit card companies will continue to harass you. Most people get so scared and frustrated that they start paying their credit card companies, and stop paying the debt settlement company. This means that they completely wasted money that they pay to the debt settlement company. Here is what that looks like:

$3500 to the debt settlement company

Still owe Chase $25,000.

Booooooo

Working with a debt settlement company is a very bad idea. I would suggest that you never do it.

1. Forgetting to file your Homestead Mortgage Exemption. If you have a mortgage, and you haven’t filed this exemption with the county, then you are likely paying THOUSANDS of dollars more in taxes than you need to.

2. Buying company stock inside your 401k. This is a bad idea. You don’t need your retirement and your current income hinging on the same thing: the performance of your employer. If you insist on ignoring me on this one, then make sure you don’t have any more than 10% of your 401k in the company stock. But how about you just don’t ignore me. Trust me, I’m a doctor. No I’m not. But, seriously, just trust me.

3. Ignoring collection calls. If you have a debt that goes into collection, don’t ignore it. People will tell you that you can ignore the calls to gain leverage, but those people are wrong. Collections aren’t like the common cold. They just don’t go away. You need to call them back.

4. Letting a home builder or car dealer tell you how much you can afford. This is possibly one of the most heinous errors that you can make. Yet, most people have done this. Know what you can afford before you walk in the door. If you make this mistake, I don’t blame the seller, I blame you. Prevent yourself from getting blamed by me.

5. Loaning money to family or friends. I have always been a hard-ass about this. I have seen this scenario occur numerous times over the years, and it rarely works out well. And don’t get tempted to be part of my rarely. There is a reason that a lending institution won’t give them money to borrow. You should take a hint from that, and decline their request.

Avoid these things like the plague.

Every single person uses something different when it comes to motivation. Some people are able to rationalize that saving money will lead to a brighter future…and then act on it. Believe it or not, this is a small group of people. Others need to get so scared of future misery that they force themselves to act on their financial priorities. So what do you do if none of your techniques are working? Allow me to introduce you to guilt.

Prepare to be blasted. Don’t worry. This is how guilt works.

Remember the last time you lost $100 at the casino? Yeah, that was a bad idea. You haven’t even started to save for the college educations of your three children.

Remember that new purse you just bought? Yeah, that was a bad idea. Your parents just gave you $1500 to get out of credit card debt, and you bought a stinking purse. You should have given them the money.

Remember how you buy new golf clubs every 2 years, but you get mad when your wife wants to buy the kids nice school clothes? Yeah, that makes you selfish.

Remember how you pay $80/month for someone to clean your house, but you refuse to pay $35/month to buy the right amount of life insurance? Not cool, Holmes.

Remember how you have a $600 car payment, but you refuse to buy your kid braces for his crooked crooked crooked teeth? At least you will be driving his crooked grill around in a nice car.

See, guilt sucks. It does. But it sucks because it’s true. If you can possibly relate (or know someone that can relate) to any of these situations, then please take action. Use guilt to accomplish your goals. It works.

“We are pleased that Green Candy is helping do great things for this community, all the while raising money and awareness for The Leukemia & Lymphoma Society,” says Sara Glenn, manager of special events for The Leukemia & Lymphoma Society.

The two-hour event will feature several prominent speakers. Some of the experts scheduled to appear are: Gerry Dick, President of Grow Indiana Ventures, who will discuss the climate of business in central Indiana. He will also discuss what industries are hiring in central Indiana. Peter Dunn, radio talk show host, WISH-TV Money Analyst, and founder of Green Candy, will discuss preparing your finances for a job change. Chuck Gose, a local networking and social media enthusiast, will be highlighting the importance and dangers of social media during a job search.

“Searching for a new career can be a tedious process, and we are glad that we can help bring some encouragement and tips to those that are looking for work,” says Gerry Dick, host of INside Indiana Business.

Peter Dunn, founder of Green Candy notes, “With unemployment hovering around 10%, we must make sure that we support those that are looking to enter or re-enter the workforce, this includes recent college graduates that are starting their job search for the first time.”

WISH-TV plans on highlighting the event as part of their continuing coverage of the unemployment challenges in Indiana. “We have long believed that the entire community is uplifted when the unemployed feel the support of their fellow Hoosiers,” says Jeff White, president and general manager of WISH-TV’s 24- Hour News 8.

The Do. Be. More. Job Hunters Workshop will be held from 9-11am on April 22nd. Cost for attendees is $10. All money will go directly to the Leukemia and Lymphoma Society of Central Indiana. Seats are limited. For tickets and information go to www.GreenCandy.com or call 317-576-8550.