2013: A year in review

It’s that time of year when we start looking back over what has passed and what is up next on the list.  New year’s resolutions, absolutely hate them.  But, at the same time, we need to constantly make goals in our lives and push to attain them.  Just about a year ago, I set up some extremely aggressive goals for myself, trying to make 2013 a year of drastic but positive change.  Let’s take a look at how I did:

I'm pretty sure I'm the guy on the right here

I’m pretty sure I’m the guy on the right here

1.  Positive Net Worth – Technically, I hit this back in August.  Around the same time, I also made the decision to purchase a big shiny thing.  That set me back a bit unfortunately.  It ate into my savings and some of my investments but overall, totally worth it.  I’m going to have a positive net worth after January most likely (less than $1k to go) and should be easily growing this month after month from here on out.

2.  Begin really saving for a house – Well, I’m saving money.  I guess we can say it’s for a house.  But most likely, it’s for a wedding.  An overly expensive wedding!  Bah humbug to spending money.

3.  Pay off half or all of my car loan – Hah, this was crazy talk.  I paid off about 20% of my car loan this year.  I got it refinanced and started paying a bit extra.  Overall though, I decided that investing was a better use of my money than just paying off the loan.  It’ll be gone eventually, sooner rather than later, just not as aggressively as what I originally thought about yesterday.

4. Take better care of myself physically – Yeah, I think we all know how this is going.  I have started to eat better and work out more but hurting my back has definitely thrown me for a loop.  It’s bad enough that it’s going to take another few weeks for me to get back to being able to move heavy objects around but hey, it’s a marathon not a sprint.  As long as I can get back to it, I’ll be fine.

So, if we were to make a count here, I’d say I hit 1/4 of the above goals.  Not good at all, although with two of them changed midway through the year to something entirely else.  Hopefully, I can make some adjustments in 2014.  Right now, I think 2014 is going to be a great year with big events and big changes.  How did everyone else do with their goals in 2013?  Hopefully everyone accomplished some of them!

So I threw out my back

I just turned 27 a few weeks ago.  Apparently, my body decided to follow up this milestone by putting me in excruciating pain.  Yup, I threw my back out moving a Christmas tree.  Because hey, it’s the holidays!  Why not right?  This isn’t the first time this has happened.  I hurt it once in college and again about two years ago.  But this time it’s way, way worse.  Both of those times it was a tweak.  Sharp pain but I was still functional.  This time is really, really bad.  Yesterday, when it happened, I actually couldn’t walk without assistance.  The pain was at a 10 all day.  Today, I’ve been slowly working my way back.  I’m able to move, I’ve been doing very slow stretches and I’m drinking a ton of water.  I also went to the chiropractor.

Ah yes, the chiropractor.  A whole new place for my money to go.  Unfortunately, the chiropractor isn’t covered by insurance.  Also unfortunately, the chiropractor costs $75 an hour and has already asked for me to come back in this week.  Jeesh.  It looks like I’m giving myself a $150 Christmas gift here.

The bad thing about all this is that, while yes, it could have been prevented if I bent my knees more, it’s not like I’m in bad shape.  I’m not in amazing shape, don’t get me wrong.  But from a strength level, my core is actually pretty good.  Or was pretty good.  Really though, this just was a terrible thing and it happened at a terrible time.  With the holidays around the corner, long drives for some work events and my mother and sister out here for a week, I’ve got a lot on my plate coming up.  Being fairly incapacitated is definitely not going to help the situation.  Hopefully I can push through this and get better much quicker than anticipated.  On that note, I’m off to stretch, put some heat on my back, and hopefully not be in excruciating pain.  Until next time!

What you don’t know about your debt

A former roommate of mine turned me on to an article recently that I found pretty interesting.  Apparently, an offshoot of the Occupy Wall Street movement, Rolling Jubilee, has purchased just about $15 million of debt.  But they didn’t pay $15 million for it.  Not even close.  They paid just over $400 thousand to purchase $14.7 million of medical debt, which they immediately forgave, making some peoples lives much much better.  While the purchase price of the debt may sound crazy but is actually a fairly common practice in the finance and healthcare industries.  There are companies that exist solely to purchase charged off or way, way past due debt from banks and hospitals for pennies on the dollar.  They then go and collect.  When you’re in debt up to your eyeballs and the collectors are calling everyday, well, that’s these guys.

I wish I could come up with witty slogans that rhymed

I wish I could come up with witty slogans that rhymed

Ok, so, let me back up.  I may have rushed into the idea there.  Let’s start with the concept of medical bills and debt being sold from hospitals to parties otherwise unrelated to your medical procedures.  A hospital may do $100 million in business a year at their cost but, at the end of the day, is only able to take in $30 million in revenue.  The difference typically amounts to several areas: medicare and medicaid reimbursement rates, charity care, and bad debt provisions.  The $100 million is what the cost of the services for the hospital should be but, after they get reimbursed by everyone and deal with debts and self payers, they only ever see $30 million of the revenue.

This is where the collectors come in.  A typical hospital will see about 60% of its gross revenue being medicare or medicaid based.  The remaining 40% will be broken up between those with insurance and people the healthcare industry call “self payers.”  Basically, uninsured people or people who have hit their lifetime spending cap under their insurance.  A hospital wants to limit how many of these people it sees because, typically, they will immediately write off 95-97% of self payer revenue.  So if our example hospital has maybe 15% of its gross revenues tied up to self payers ($15 million), they can sell it to a collection agency for some immediate revenue.  Looking at the example given by Rolling Jubilee up top, the hospital can receive $400K when it believed it would never receive a thing.  It saves them the time and expense of trying to collect on it.  The collector, meanwhile, doesn’t have to get the $15 million to make a nice return. If they can turn their $400K investment into $3 million, they have made a good return after expenses.

And this is where the point of this whole thing comes in: everything is negotiable.  Right now, 60% of bankruptcies in the United States come from medical bills, meaning that somewhere in the process I mentioned above, ordinary people are losing control of their financial lives.  What no one ever told them is that debt, when it is traded on an open market, is negotiable.  If someone is accumulating debt related to medical procedures or anything done at a hospital, well, the price is far more negotiable than you think.  Just look at the above!  The hospital is going to sell your debt to someone for 3% of the full price that they want you to pay.  If you can’t pay the full amount but can pay 10%, offer it!

I know this may seem like a crazy person’s advice but I honestly mean this.  I see a lot of personal debt out there.  I review financials of companies and people.  I perform due diligence on hospitals and see them losing money as the self payer amounts rise and they continuously write the amounts off.  One of the big problems in the world of healthcare is the rising cost.  A part of the rising cost is the fact that many people have, for years, been unable to afford the healthcare.  Because they can’t afford it, the hospitals write off the amounts and pass the charges along by gradually, inexorably, raising the costs elsewhere.  As they do this, more people can’t afford the care, it gets written off, so on and so forth.  It’s a bit of a terrible spiral down.  The only people who win, in the end, are the collectors.  And let’s face it, we all hate collectors!

The next time you find yourself falling into debt, whether it is credit card or medical debt, and you’re getting to the point where you cannot pay anymore, take a deep breath and pick up the phone.  Your bank, your hospital and your credit card company will all work with you to make sure that you can pay.  In the end, they just want to be paid for services rendered and you just want to be out of debt.  Remember, in the world of finance, everything is negotiable.  Until next time everyone!

 

Photo courtesy of Aaron Bauer

Finding extra cash in our every day lives

If there is one thing which we call all agree upon, it is this: we all have too much stuff.  Over the years we buy stuff, replace it with more stuff and eventually all of our stuff ends up in the closet together.  New stuff with old stuff hanging with the weird stuff no one wants to talk about.  The point here is that when you’re trying to rehabilitate your financial life, all this stuff is gold.  Especially when it actually is!  Where I’m going with this is that we all have movies, books, clothes, or jewelry that we don’t use or need.  And every single one of these items, although used, is worth something.  That means it’s something we can use.

We going to the pawn shop

We going to the pawn shop

When you’re looking at your financial life and you want to turn things around, you need to have a completely new way of looking at things.  If you have credit card debt but lots of shiny things, it may be time to have less shiny things.  The point is that nothing is off limits when financial freedom is the goal.  For example, I have an ungodly amount of dvds.  Near my old, scary apartment was this used dvd store that was always running a “buy two get one free” special.  In those days I didn’t have the internet in my apartment or a tv.  In fact, I didn’t even have a computer.  I watched my dvd’s on an old portable dvd player.  Dark times.  So, anyway, I’d go the store and buy three movies, paying may $7 total.  This was roughly a weekly thing (I’d get pizza once a week and it was next to the pizza place) and was a terrible use of my money.  Now, four years later, I have a massive dvd collection of terrible, awful movies.  And I need to get rid of them.  Doing some quick research, I find that there is a website (http://www.musicmagpie.com/) where you can sell old dvds and cds.  Perfect!  Just by selling half of my dvd collection, I’ll make an easy $100.  Not a ton of money but still, it’s money and it’s now in my bank.

Other people may be able to make much more money than me.  Maybe you have some really nice clothing or jewelry that can fetch a decent amount.  What we all need to do periodically is take an inventory of all the stuff we have in our lives.  Some of it may be stuff that we have no practical use for anymore but could help us pay off some debt or build our savings.  Doing this twice a year will help build an efficiency in your life, allowing you to be more aware of what stuff you use and don’t use.  In turn, this will help you to refine your spending habits further.  When you feel the need to buy something, you’ll think back to the last time you cleaned everything out and sold the exact same sweater.  There are only so many things in life we need (beer, friends, a roof) which means that there are numerous things which we can sell and eliminate from our lives entirely.  The real question here is how many of you, my readers, are willing to actually go through your things and find something, anything, you don’t use anymore and can sell for a little bit of extra cash.  Until next time!

 

Photo courtesy of  El Negro Magnifico

Always know where your money is

I was talking to my friend the other day and it turns out that she doesn’t entirely know where all her savings and investments are.  Now, while this is usually a bad thing, it’s not the worst thing in the world for her.  She’s still young and is an expat, so it’s not terrible for her to have someone else managing her US based investments and taxes while she is abroad.  But even then, she should probably have some idea where her money is, as should us all.

Even George is frustrated with people losing him

Even George is frustrated with people losing him

For many of us, our parents managed our money when we were kids.  They co-signed the accounts, set up any investments, etc.  While this wasn’t necessarily the best option, as it didn’t teach any of us financial responsibility on our own, it did manage to keep money safe from crazy teenage spending sprees.  The problem is now, as is the case for my friend, we may not know where the money is anymore.

Another situation is that as we grow older, we simply forget where things are.  I know plenty of people that have a 401k somewhere.  That’s the extent of their knowledge.  They have a 401k somewhere.  Maybe it’s with Fidelity or John Hancock, who really knows?

Well, HR knows.  But that’s besides the point.  The point is that we need a series of action steps in order to find all our damn money!  So let’s put some stuff on paper.

1.  If you’re younger and have just left the house, ask your parents.  Have them put together a list of all your accounts, bonds, cds, precious metals, whatever!

2.  Contact the HR department of any old employees.  You may have an old 401k account that you could rollover into an IRA and don’t even know it!  I know way too many people that don’t pay attention to this.

3.  Check with National Association of Unclaimed Property.  Eventually, if you don’t touch your accounts, the bank or investment firm is going to report this to the state.  Eventually the state will just take the money and hold onto it, making sure that your bank doesn’t claim the money as its own.  Each state does this and each state has its own way of searching, so please look for whichever state you think works best.

4.  Now that you’ve found all of your money, consolidate it!  If you can, put it all under one roof (USAA is great for this).  If you can’t do that, at least try to keep it in no more than two different institutions.

It’s not all that hard to find your money.  What it really comes down to is a conversation with your parents about money (always awkward) and calling the HR department of the place that may have fired you (definitely awkward).  At least when you’re searching the unclaimed property registry you’re just dealing with an internet search.  Although, if they actually have something of yours, you’ll probably have to talk with someone from your local government (also awkward).  So yes, this will be an awkward and rewarding process.  But mostly awkward.  Good luck everyone! If anyone finds something ridiculous (insane secret inheritance held by the state?  Hell yeah!) let me know!  I’d love to hear some good stories related to this.

Today’s post is delayed

So, I woke up this morning with the idea that I would quickly put together my April Net Worth post and put it up.  Unfortunately, I received an email that completely threw this idea out the window.  On the first of every month, I receive an automated email from my Apartment Manager showing what I owe.  It’s usually just my rent, plus a few dollars for water for the month.  Today it was not.  Guess how much extra showed up on the bill.

$1700.

WHAT?!?!?

There’s no breakdown or explanation, just an open hand saying “pay me.”  The leasing office opens soon and you can bet your ass I’ll be making a fuss. I have literally no idea where they could get $1700 in fees but I’ll be finding out, contesting every single one and making sure I don’t pay a cent of this.  In the meantime, I’m going to be going back through my leasing contract to see what the hell they could possibly be charging me for.  We’ll just consider it prep for later in the day.

You’ll probably get my Net Worth update later today or you’ll get a double posting tomorrow.  We’ll see how this works out!

Boston Marathon

By now everyone has heard about the bombings in my hometown, the armed robbery and shooting which followed at MIT and the unprecedented manhunt for the remaining suspect. Everyone back home, stay safe. Stay indoors and keep your eyes open. This has been a tough week for all of you. I love you all and just want you all to stay safe.

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Happy Easter!

Happy Easter/Passover/whatever you may celebrate everyone.  I hope everyone is having a fantastic weekend.  I especially hope people got last Friday off.  For some reason, my company gives me that day off.  We don’t get New Year’s Eve off but we get Good Friday.  I won’t complain about a three day weekend but it sure doesn’t make sense.

I just wanted to give everyone an update that they may see some changes to my site over the next few weeks.  I’m most likely going to be changing the site design.  The wordpress theme I’m currently using isn’t supported or updated anymore and I keep running into little technical issues that I can’t change.  If anyone out there has any thoughts on a wordpress theme they particularly like or found useful, let me know!  I’m open to ideas.

I’m also going to finally start looking for some guest posting opportunities at other sites this month.  If you know of one or think you may want me to write something for you, let me know!

And with that, have a great day everyone!  We’ll be back into regular posting tomorrow!

Everything you own will one day be junk

That’s right, everything you own will eventually be junk.  But then again, so will everything I own.  It’s the unfortunate cycle stuff that we life in these days.  Your car, your laptop, everything, will eventually break down.  So how can we protect ourselves from these events?  I mean, the girlfriend needs new brakes for instance.  What could / should we do to make sure we’ve got enough money in the bank for these things?

This thought has been rolling around in my head for a long time.  It goes hand in hand with my savings, cash flow, and investment goals.  Basically, we all want nice things.  But we hate spending money and we hate using our credit cards (or we’re at least supposed to….$30K Millionaire anyone?).  Even worse, we’re all pretty awful at planning.  Just because I’ve got a budget doesn’t mean I’m good at it!

So how the hell do we plan for these things?  A lot of the things that go wrong, laptop dying or your car breaking down, for example, tend to pop out of nowhere.  If we’re talking about the unexpected, then this is going to be a difficult thing to plan for.  If we’ve done things right then we’ve got our emergency savings ready to help us take care of any unforeseen event.  But at the same time, that’s for when we lose our job, not for buying a new laptop.

So, we need to figure out how much things cost.  Let’s use a laptop and a car as our two examples.  A low end macbook pro, non refurbished, can be purchased for $1,200.00.  A used diesel Jetta can be purchased for about $9,000.  Now let’s look into this a bit further: what are the useful life spans for each object.  While the macbook pro is great, we’d probably replace it after 3 years, because we’re kind of snobs.  For the used diesel Jetta, we’re looking at an additional 10 years.  They run forever and we’re talking about paying cash for them.  So three and ten years down the line, we need to make sure we’ve saved up the rough equivalent of today’s value, in order to just buy what we need and move on.  Assuming a 5% annual growth rate (we’re considering a Vanguard indexed fund or something like that for our savings), we really don’t need to save that much per month.  Only $40 per month for the laptop and about $100 a month for the car.  By identifying what we’ll need way down the line, we can save ourselves some heartbreak and set the money aside now and grow it over time.

Through some careful planning, we (mostly me) can figure out how to not bust our budgets and save for things we want, like cars, laptops, or suits.  If saving $40 a month for three years means I can get a sweet laptop (or three good suits) then I’d have to say that I prefer that to the alternative of just spending money I don’t have when I think I want something.

Less debt means more money

I honestly don’t get the Media sometimes.  Between them and politicians, I might go crazy.  Seriously, I mean it!  The other day I was browsing a couple of sites and I see a link to a Pew Report on debt for young households (“Young” being defined as the head of the household is between 20 and 35).  So, I start taking a look at this and in general, I like what I see.

Turns out, we young folk aren’t doing too bad.  Between 2007 and 2010, the last year data is available, we decreased the median level of debt in our age group by nearly 30%!  That’s ridiculous.  What’s more ridiculous is when you see that the rest of the country (everyone over 35) only decreased theirs by 8%.  Even more ridiculous are the facts that 22% of young households have no debt and 61% of households don’t even have credit card debt!

So here I am, reading this and thinking wow, we’re doing good.  We’ve got less credit card debt, less mortgage debt, less auto debt.  In fact, the only debt that’s growing is student loan debt and that only makes up 15% of the total debt for the age group.  Overall, we’re doing really well!  This is exactly how you build a good, solid foundation for later on in life.

As I start reading a little more, I see there are some outliers, as there are in any studies.  25% have debt over $106K, with 25% holding 80% of the debt.  That’s not good, especially when you take into account the good facts about.  But overall, I don’t think this stat ruins the Pew report at all.

But there’s at least one person out there who thinks this is all bad news.  The same day I saw this report, I saw this headline on the front page of CNN: “Why Less Debt among Young Adults is Bad News.”  Nin-Hai Tseng wrote this piece and I’ve gotta say, I really disagree with the sentiment.  I get what Tseng is trying to say: young adults aren’t spending as much and America is a consumer culture.  If we don’t spend more, like the generations before us, then the economy will drag and will never reach our full potential, outgrow the government debt/spending and we’re doomed.  Doomed!

If you know me, you understand that I just can’t get behind this realm of thinking.  For example, last year the US government paid almost $360 Billion in Interest, just to service their debt.  From 2003 to 2012 we spent $3.89 Trillion on interest payments on US government debt alone.  Trillion.  With a T.  Now think of that as your household.  It won’t be trillions but it will be thousands.  For example, let’s say you use your credit card and purchase $10,000 worth of goods at 18%.  You didn’t want to do this of course but you felt guilty of making the economy drag and slow down after reading Tseng’s article.  You start paying down your debt every month, putting $200 towards your credit card bill.  After 7 years and 10 months, you’ve finally paid off your credit card!  And you only paid $8600 in interest over those years.  I won’t even get into how much money you’d have if you had invested it (it’s worth a downpayment on a cheap house).  The point is here, Tseng is arguing that we’re slowing down the economy by not using debt to fund our lifestyles.  I’d like to think that we’re really just finally being smart with our money.

If anything, Tseng does bring up the point of wages being lower for young households.  It’s true that less of us have ordinary jobs, let along good paying ones.  But I think it says something to how we’ve obviously wised up to the mistakes of others, especially if we’re not utilizing credit cards and other financial instruments to make up for lost cash flow.

In the end, I think that maybe, just maybe, our generation is going to be OK.  If we keep up with maintaining less debt then we’ll ultimately have more cash to spend.  And I think in the long run, that’s more of what we need than using debt to fund everything we do.