Wealth Pilgrim: Money Management Advice, Financial Stress Management, & Resources

Young Couple Can’t Afford Credit Card Payment. Help Fix Their Money And Marriage

photo by Pastapopaulose, Flikr

I took a tough call yesterday from a young couple struggling with their money and marriage.  John and his wife Margaret are in way over their heads and they’re considering throwing in the financial towel and declaring bankruptcy.

They owe $50,000 in credit card debt and they can barely make the minimum payments.  They fear losing their home and their credit score.

How they got there:

Both John and Margaret are hard working people.  They got caught when his employer (of 15 years) closed down after noticing he didn’t have enough cash for his small business.  Ouchie….

They piled on credit card debt to tide them over until John found new work.  Strike 1.

At just about the same time, the credit card companies started jacking up their rates. So just when the family could least afford it, their expenses went through the roof.  Strike 2.

Finally, the city they live in came under financial hardship and doubled the residents’ property tax. Strike 3.

Those were the three straws that broke the camel’s back.

photo by Neil Carey, Flikr

The only assets John and Margaret have are their home and John’s IRA.

They have $200,000 in equity in the home and about $68,000 in the IRA account.  That is their only savings.

Their income is barely enough to pay their basic living expenses.  It is certainly not enough to cover their living expense and the credit card bills.

The couple asked me about bankruptcy.  I had to tell them up front that I wasn’t the best person to consult with – that’s why I’m asking you for your input.

Having said that, here’s the advice I did provide:

A.    Continue making property tax and mortgage payments. The home is the one asset they own that has some equity.  They simply can not afford to lose it.
B.    Perform a postmortem on the credit card debt.  How did they accumulate the debt? What could they have done differently to avoid falling into this trap?
C.    Implement a drastic plan to cut expenses and increase income. I suggested that they go through every single expense and try very hard to find a way to do without.  Also, I suggested they rent a room out in their house and find second jobs.  They simply must create an emergency fund so this problem does not repeat itself.
D.    Renegotiate the debt with the credit card companies.  I told John and Margaret to call the companies and inform them that they simply can not make the payments.  They should push the companies hard to make an arrangement.  I believe that the couple should be able to get the companies to agree to an interest rate moratorium and even a principal reduction.

I did not suggest that the couple contact a debt consolidation or negotiation company because I have heard horror stories about these firms and I was wondering what your experience has been.

What advice would you give John and Margaret?  Are there companies that really do help people facing these hardships?

After you’ve considered these questions, please consider checking out these posts and carnivals.  They are my favorites for the week.

Cash Money Life – Carnival of Personal Finance

Peak Personal Finance – Personal Finance News Carnival

How to Buy Super Bowl Tickets -  Save this one for next year! (Go Colts!!!!)

Be Vigilant of Car Recalls

Have a No-Spend Weekend

Five Reasons To Start A Side Business

Six Reasons Why Britain is Booming Again

Help with Debt

Passive Income Now – Money Hacks Carnival

Pragmatic Environmentalism

Watch Movies and TV Online For (almost) Free Using Your Computer

photo by EMagic, Flikr

The following is a guest post from Johnathan, a Wealth Pilgrim reader who wants you to watch movies and TV online (almost) for free. I got rid of cable completely and I’m not looking to replace it – even if it is for free. Still, I love the idea of saving money and I’m sure you do too.

You already know that I’m not a tech genius and I’ll admit that some of this is beyond me. But I do know that even if we only get a few ideas, it could be well worth it. Check out Johnathan’s ideas and let me know what you think:

We never had Satellite or Cable service until after our first child was born. During those wee hours of the morning, feedings, diaper changes, comforting, etc., there was next to nothing on broadcast TV. One night, we saw an ad for free Satellite installation with Tivo (DVR), for under $40/month. What the heck, we gave it a try!

Five years later, the bill climbed to $70+/month — for a service-level only one up from basic – no movies, no sports, nada! That’s a bit much, and we weren’t getting anywhere near that kind of value out of it, IMHO.

We canceled the satellite, got a new TV and hooked it up to a spare computer. Using www.ZeeVee.com/ZINC as a “Guide Channel”, we get more shows than before – can access NetFlix – plus, we don’t have to wait on network schedules: It’s online, waiting for us – the web is our DVR. Plus, we completely eliminated a monthly bill!

This bigger boatload of TV has both new (Sons of Anarchy, Burn Notice, Eureka) and old (Have Gun — Will Travel, Bat Masterson, Lost in Space, FarScape). There are other shows I’ve never seen, much less heard of! We get nearly everything we were used to, except for BBC stuff like Dr. Who – which will come out on DVD.

HOW WE GOT THERE

Two years ago, I got a new computer and noticed the improvement in video quality. The screen was 24″ and HD, using DVI. I tried a DVD movie, and it was more clear and crisp than our 36″ tube TV! At the store, I began to look closely at the new flatscreen TVs and saw that a few had PC/VGA video plugs. Hmmm…interesting.

Over time, I would scan the web for video, and found an interesting assortment, like the old Star Trek series, at http://www.cbs.com/classics/star_trek, “The Ascent of Money” at http://www.pbs.org/wnet/ascentofmoney and a slew a stuff at http://www.snagfilms.com/. Took Hulu, Veoh and Joost out for a test drive. Signed on for a NetFlix trial (1 DVD/month), to try their “Instant Play”. It was a lot to take in, much less manage and organize, somehow.

Then, I found the ultimate “glue” to use as a “Channel Guide”, bringing Hulu, network websites and NetFlix together: www.ZeeVee.com/ZINC.

Hmmm…more interesting.

THE TUNER

Time to try a broadcast TV digital tuner for the PC. When the switchover to all-digital broadcast started, I noticed that we got not only clearer pictures, but more channels for each station. As the kids are younger, they’re pretty happy with PBS, and we get two PBS stations, one with four channels, the other with three. Hey, how much BARNEY or CAILLOU can they watch?

The way to go seemed to be the HD HomeRun, made by SilconDust, which puts two tuner signals into the home network, complete with software for all our computers. A little pricey, but it works well, turning any PC into a TV receiver and DVR. It plugs into any router/switch on the network, and for reception, we already had a coax cable running to the outdoor antenna.

Now, we record “Cook’s Country”, “Defying Gravity”, “Red/Green Show”, “Survivor” and “Woodwright’s Shop”. Fast-forwarding through commercials works better than the old TIVO did. Not that we have time to watch every episode…

THE FLATSCREEN
Now, if only I could put this whole mishmash in the den with a big screen, we’d be “cooking with gas” for sure! The choices were Plasma and LCD. Plasma has problems when physically tilted, like when you move it (ask any “Wal-Mart” employee in that department). The wife approved the LCD picture quality – decision done!

In LCD’s, the 55″ VIZIO was the biggest, and had a slew of connections — including VGA for PC’s, which many of the others did NOT have (at the time). The picture looked good, and according to the store’s employees, there were few returns. We got one, paying by American Express, as that extends a manufacturer’s warranty by a year.

I hooked up my usually unemployed backup computer (bought to closely match the desktop in speed and graphics), a dual-core laptop with an NVidia graphics card. After installing ZINC and configuring NETFLIX, we were up & running.

SOUND

Audio—Some laptops have a problem with sound; mine was one of them. Fixed this with a USB gadget, the “Audio Advantage“  for $30.

VIZIO speaker sound is not great, but it’s OK. Depending on what’s playing — DVD, NetFlix or ZINC — and sometimes, whether it’s newer or older material, the sound may have to be adjusted. We often use the ROCK or JAZZ setting; it seems to make voices clearer. Sound volume varies a lot, too, depending on the signal source — these online services really need to set a standard; so do some of the DVD producers.

We’re going to try hooking up the old BOSE surround system, with digital output. There is also a “Speaker Bar” available for the Vizio, which is supposed to be close to surround-sound quality. Since the new TV centralizes sound, we can just leave whichever one on all the time, and won’t need yet-another-remote.

KEYBOARD

I could NOT find a remote with trackball AND scroll wheel. The closest was an RF (not infrared) keyboard from DSI Model RK-768 http://www.dsi-keyboards.com/keyboard/item.php?id=49 (refurbished from Amazon. It has general volume control, media controls (for Media Center), a thumb-trackball, clickable scroll wheel and mouse buttons. A bit bulky, but works great. Now, I read the RSS news page from my lounge chair — though I did have to adjust the general Windows screen fonts much larger. Sometimes, I need to adjust browser fonts with CTRL + and CTRL -.

BLU-RAY, DVD “UP-CONVERT” & MUSIC

To go with the new TV, we browsed the store for an inexpensive DVD UpConvert unit. I saw a Samsung BluRay player that had NetFlix, Pandora (web radio), and UpConvert. A no-brainer!

I also ended up buying a $25 network “switch”, since the laptop, tuner and BluRay all use the net. Had to run a cable under the floor, to the router.

The Pandora works so well that we “retired” the music CD jukebox, transferring all the music to MP3 on the computer. By sharing the directory, all the PC’s in the house can use it, and the wife can finally use the little MP3 player she got as a gift. From me. Last year. It’s possible I procrastinated a little on the whole digitizing thing.

ROKU
The bedroom has a 32” tube set, so we added this to get NetFlix. This neat little gizmo has both Wired and WiFi networking, plus every possible TV connection, from COAX to HDMI, so it works on a new or old TV. Resolution is 720, not 1080. http://www.amazon.com/gp/product/B001PIBE8I/

The ROKU lineup recently expanded – exploded, actually! Originally, there were all of three items: NetFlix, Amazon VOD and MLB. All of a sudden, there are dozens of “channels”, mainly web-based “shows” with some news and weather. A nice plus!

The old set, a 10-year-old 36″ tube, is now in the basement. The kids like to go down and watch it. No idea why. More of that (expletive-deleted) BARNEY and CAILLOU. Hmmm…Maybe, if I cut the head off a stuffed Barney, mount it and tell’em he’s dead, they’ll watch something else! Probably shouldn’t try that with CAILLOU, though – might scar them, psychologically. Well, maybe not the youngest, (a potential lion-tamer), but I really shouldn’t take chances with the older one, being the first-born and all.

CAVEAT
Media Center for both Windows XP and VISTA does NOT work well for broadcast only — the Guide Listing does NOT get sub-channels! The official word is, via folks at www.TheGreenButton.com that Microsoft will not fix this in XP or VISTA. It’s supposed to be fixed in Windows 7, but the SiliconDust unit comes with TotalMedia, so it doesn’t really matter.

SIDE EFFECTS: Fewer Remotes and a Videophone
As a result of all this, we now have only three remotes, down from six. If we get a new PC with a BluRay drive and Windows 7, the Samsung can go downstairs. That would leave two remotes – but, as the TV acts like a monitor, turning itself off or on when the PC says so, which brings us down to just one, the keyboard. Well, there’s the old VCR remote, but that won’t get much use.

Only ONE remote? Now THAT is progress! (Though it IS keyboard-sized…)

Moved the webcam to the Den, so the kids can now see & talk to both sets of Grandparents (who remember “Buck Rogers” from the movie theater serials http://www.amazon.com/Buck-Rogers-Buster-Crabbe/dp/6305989397/), using Skype as a Videophone. Very cool! I had to set things up for them, but one physical trip and the rest via www.LogMeIn.com isn’t too bad. Microsoft webcams work best, IMHO.

On commercials – There are NONE with NetFlix. Recorded broadcasts are easily fast-forwarded. In ZINC/HULU/web shows, they can’t be avoided, but they ARE brief, 15-30 seconds. In all cases, you can hit PAUSE, to answer the phone or go get a snack.

FIGURING THE FINAL TALLY
$1400 TV
$180 BluRay/DVD UpConvert/NetFlix/Pandora
$150 Tuner
$100 Roku
$100 Misc (cable, keyboard, switch)
———
$1930 TOTAL

Assuming we get ten years out of the equipment, the cost oughta be about $193/year. Add $108/year for NetFlix, and that’s $300/year, vs. $800/year for satellite service.

Easy math!

How to Save Money – Stop Buying Personal Finance Books (Except Mine & JD’s :))

If you pick up a personal finance book and only get a nugget or two out of it, it’s a fair trade. If you are extremely fortunate, you’ll buy a “PF” book that speaks to you in a way no other has before. This can be a life-changing event for you and your family. I know it has been in my case.

Often, the messages are similar, but the way writers deliver the message varies. So if one particular book connects with you, go for it. I’m a fan.

What I’m not a fan of however, is when an author becomes a cult figure and sells his/her schlock to you non-stop. Pardon me. Does anyone have to write the same book 47 times?

Even if the 47th title does have some nugget that the 46 titles before it didn’t have, there comes a point for readers to stop learning and start doing. The 47th title might be OK but it can be a distraction that keeps you from doing what you should be doing.

That’s why it bothers me when authors re-write the same book over and over again. I see this constant barrage of publications as dangerous to your financial health. The distraction cost worries me far more than the price of the book.

The people who write these books know this. But it doesn’t stop some of them from churning out anything they think you’ll buy. My conclusion is that they just want your cash. I know I’m naïve but this really ticks me off. This behavior is simply unethical.

Here they are writing about how to save you money when all they want to do is separate you from it and put it in their own pocket.

The best (maybe worst) example is Rich Dad, Poor Dad Inc. As you probably know, Robert Kiyosaki is the man who started this organization with his first book, “Rich Dad, Poor Dad”. His message is that you are better off financially as a business owner than an employee and that you are better off as an owner than as a lender.

(This message might be true for some people, but not for everyone. Some people actually get into big trouble because they try to be business owners when they don’t have the skills to do it. So if you read his book and “drink the Kool Aid”, you might end up in a world of pain.)

Don’t get me wrong, I respect Mr. Kiyosaki on many levels. First, he’s a great business person, writer and entrepreneur. He’s also encouraged folks and helped some. I’ll be the first to admit that his first book helped me.

But Bobby, you should have stopped while you were ahead.

Ok…Ok….maybe the Cash Flow game was cool too….but that’s it. Who needs 50 titles – a full 4 pages on Amazon – of Rich Bla Poor Bla????

If you do an Amazon search on Kiyosaki, here’s a partial list of the products you’ll find:

1. Rich Dad Poor Dad: What the Rich Teach Their Kids About Money
2. Rich Dad’s Guide To Investing
3. Rich Dad, Poor Dad for Teens
4. Cash flow Quadrant: Rich Dad’s Guide to Financial Freedom
5. Rich Dad, Poor Dad
6. Rich Dad Advisors
7. Rich Dad’s Retire Young, Retire Rich
8. Rich Dad’s Increase Your Financial IQ
9. Rich Dad, Poor Dad 2: Cash Flow Quadrant
10. Own Your Own Corporation
11. Rich Dad Poor Dad Classics
12. Rich Dad’s Before You Quit Your Job
13. Rick Dad’s Rich Kid, Smart Kid
14. Rich Dad’s Prophecy
15. Rich Dad’s Real Estate Advantages
16. Rich Dad’s Advisors – Guide to Investing In Gold
17. Rich Dad’s Guide to Becoming Rich
18. Padre Rico, Padre Pobre
19. Rich Dad’s Advisors – The ABC’s of Writing Winning Business Plans
20. Rich Dad’s Advisors – The Advanced Guide to Real Estate
21. The Real Book of Real Estate
22. Rich Dad’s Advisors – Other People’s Money
23. Rich Brother, Rich Sister
24. Why We Want You To Be Rich
25. Rich Dad’s Conspiracy
26. It’s Easy to be Rich
27. You Can Choose To Be Rich
28. Discussion Guide – Rich Dad Poor Dad

Am I the only one who thinks this is ridiculous?

Does anyone on this planet think that the materials are all that different? That the ideas are new? Don’t you think Mr. Kiyosaki could have reduced this to maybe 4 different books and have covered everything?

When I see a list like this it completely discredits the author in my mind so I don’t even take his or her work seriously. That’s probably another character flaw of mine (add it to the list) but I’ll bet I’m not the only one who operates this way.

There are other authors that come to mind who have made an industry out of their names and for the most part, I don’t respect what they do either. There is of course, the exception.

Dave Ramsey.

He also has a large number of items for sale on Amazon. But he only has a handful of books for sale. Also, since he released the “Total Money Makeover” he hasn’t released any new books. Dave probably thinks he’s said what he needs to say and now it’s up to us to “get ‘er done”. If that’s so, it’s really refreshing.

Maybe I’m wrong but it feels like Dave is all about taking action and not selling more crap. That’s just the feeling I get anyway. I could be wrong but I get the sense that Dave would be the first one to tell you to implement everything from his course or book and you won’t need to buy anything else.

Also, everywhere you turn you see people who report on miraculous changes as a result of going through his materials. You can’t argue with those kinds of results.

How can my rant be useful to you?

Before you buy another personal finance book, ask yourself if your problem is lack of knowledge or lack of action. If you need more knowledge, by all means, study the table of contents and if the book looks like it’s going to fill in that gap, buy it.

But, if after you search your heart, you realize that your problem is lack of action, put the book back on the shelf and get to work.

Forget about the person who wrote the book. Think about the principles behind the book and only buy it if you need that message explained.

So after writing a 1,000 word rant on authors, how can I have the nerve to create products to sell to you?

Maybe I shouldn’t. Maybe I’m in denial.

You be the judge.

I have one book out and another on the way. I’ll be writing e-books on very specific topics (to sell) and I offer coaching too.

So am I the biggest hypocrite you ever met? Should you start calling me “Rich Pilgrim, Poor Pilgrim”?

I obviously hope not. But is there really any difference? Do you have the same reaction I have to authors who pump out book after book in the personal finance realm?

Your Personal Budget Plan Just Got A Whole Lot Easier

How much do you think you spend each month on average? Take a guess. (We’ll need to refer back to your number later, so please write it down. Thanks.)

You know what? Most people underestimate this number by 30%.

Can you see how dangerous that mistake can be? Let me give you an example.

Why My Phone Company is Afraid of Me (and You) Now

My phone company is scared to death that more & more people are going to pull the plug and cancel their land line.

They should be.

After decades of terrible service and high rates, my wife and I did exactly that.  Now, we’re going to save at least $1000 a year.  Fantastico!