Should We Still Be Spending Money And Having Fun While Deep In Consumer Debt?

Anthony Weiner Speaking At Rally In NYC

Anthony Weiner too stubborn to quit. NYC 2013.

During the depths of the financial crisis, one of the proposals I sent to the Obama administration was to institute spending curbs based on high school or college grade point averages. It didn’t matter whether you went to Community College or UC Berkeley since everybody’s circumstances are different. What matters is how well you did in school to justify want based spending as opposed to need based spending.

For example, if you were a D+ student (sub 2.0 GPA out of 4.0) you are only allowed to buy generic clothing and ride public transportation to work for the rest of your life. No car or lollipops for you. If you were a B student, then suddenly that new $20,000 Honda Civic is available to you after the dealer scans your ID to check the government GPA database. If you are an A student, then you are free to buy whatever you want because logic dictates that if you are smart enough to study hard in school then you are smart enough to practice good financial habits.

I was shocked Obama never acknowledged my letter because my proposal would only help the government expand their authority (think PRISM) over the people of this great nation. We voted for Big Government and I wanted to support the cause as much as possible as I figured out a way to go John Galt. Although Washington DC stayed silent, fellow patriotic Americans voiced their opinions in the comments section of the post, Tax Rates Based On Work Ethic Shall Fix The World. It’s all about creating incentives.

Just imagine a world where everything is rational. Imagine everybody reading their mortgage contracts before signing so that they are aware of their financial obligations instead of blaming others when they can’t pay. Imagine if everybody adopted the attitude of not deserving something until worked for? Now imagine a country where everybody is middle class and pitches in to support our country. There would be no socioeconomic warfare, just equality. We can always dream right?

DO WHAT YOU WANT WITH YOUR FINANCES, JUST DON’T HURT OTHERS

Who Should Get A Black Card? Probably Not You!

Visa Black Card CommercialThere once was a time I was rich, but never famous as I traveled internationally four times a year for business. Each destination hosted loads of other folks who wanted to learn about the next money making idea in the global financial markets. With me was an American Express corporate card where I could expense relatively freely to the tune of ~$50,000 a year. The card provided travel insurance, access to airport lounges, concierge services, and more. 50K may sound like a lot, but that’s nothing compared to the hundreds of thousands in expenses I hear from some Black Card spenders!

I don’t have as much coming in anymore given I’m just a personal finance blogger, but I do have a lot of freedom. It’s a tradeoff many will take at some point in their lives. Given my desire to simplify things, I’ve only got one personal credit card, which is the Citi ThankYou Card. There’s no annual fee and all my spending is concentrated here to maximize my rewards points.

Since we live in the land of consumerism where we want things and we want them now, I thought it’d be a good idea to do a post for all you Black Card aspirees out there. Some get Black Cards just for its status symbol. Meanwhile, other people are a little less vain and use their Black Card for better access and service. Whatever the case, I’d like to introduce my guidelines for those who can and should not get a Black Card.

SHOULD YOU GET A BLACK CARD? LET’S SEE IF YOU QUALIFY

Gambling Your Way To Prosperity At Lucky Chances Casino

Lucky Chances Casino Poker RoomOn the way home from dropping my friend off at the airport, I took a 10 minute detour to Lucky Chances Casino. Lucky Chances Casino is located in the foggy city of Colma in South San Francisco. If you love to play poker, blackjack, and paigow, this place is for you.

I go about once a quarter on average to play $1-2 no-limit poker. I used to be hooked on the game three years ago, but after one too many bad beats on the river, and the launch of Financial Samurai, I no longer crave playing.  In fact, before this visit, I hadn’t been in over 18 months.

The one thing that always piqued my curiosity was how every time I went, no matter what time during the day, I would always see the same 10-15 people there!  At first, I thought that perhaps they were all gambling addicts who just couldn’t stay away. Sometimes I’d go in the morning.  Other times I’d go at 1:30pm like this time, and other times I’d head over at midnight and they’d always be there!  What gives?!

MONEY FLOWS FREELY

The Irresponsibility Of Borrowing Money To Borrow More Money

Swans With Their Babies In San FranciscoIf you want to know what’s wrong with people’s personal finances, just observe those who are willing to borrow money in order to borrow more money!  One example is using a credit card you can’t pay off in full each month, for a downpayment on a car.  Since the limit for credit card use for buying at the car dealership is usually $3,000, and given most downpayments on vehicles range from $0 to $3,000 to buy or lease, using the credit card is a tantalizing proposition.

Forget the fact that these car buyers don’t make 10X the value of the car in annual salary.  They can’t even pay cash for the car or come up with even 10% of the value of the car as a downpayment!  Look, I know more than anyone how alluring it is to buy a nice car.  I used to be a car addict with 7 different cars in as many years.  It’s just irresponsibile of consumers to use their credit card for a downpayment when they don’t have a healthy savings account balance to match the entire value of the car before purchase.

BANK OF MOM AND DAD FOR REAL ESTATE

Corporate Greed By PG&E Killed My Friend’s Family And My Credit Score

PG&E San Bruno Gas Explosion

Pacific Gas & Electric (PG&E), your San Bruno gas pipeline blast killed my friend’s wife of over 20 years and his daughter in 2010.  Thousands of people depend on you for energy to heat their homes and cook their food.  How can you let this negligence happen?  Is this a case of profits before safety?  What the hell.

We have been silently grieving for the past two years, and we were healing until I get a notification from my refinance bank that you guys screwed me on my credit score due to a $7 late payment from 2009 which was never sent to my correct address.

The $7 late payment, as later explained to me was due to a “landlord service continuation fee” where I take over all PG&E charges between the time my tenants vacate the property and when a new tenant arrives.  News to me guys.

PG&E TOO LAZY TO DO THE RIGHT THING

Greedy Banker or Thoughtful Banker?

Turkish BacklavaMy friend is leaving his job of the past five years to work on his own start-up.  When he got an e-mail solicitation from his mortgage officer about whether she could come by his office with a set of boxed lunches for him and his colleagues, he told her “no thank you” because he was leaving.  He purposefully kept his plans vague and hoped she’d just leave him alone as he attends to his new life.

Instead, she came back with the following response,

I am sorry to hear that? When you land at another organization, please let me know.  Also, let me know if I can help through the transition. Since you are still on payroll, I always suggest putting a Line of Credit in place. And if you need a brokerage account to rollover your 401K, we can certainly assist.”

Pretty thoughtful right?  Or is it?  My friend responded,

Thanks.  It’s actually voluntary.  Doing my own thing.  I’ve got enough saved up for the next 8 years, so I don’t think I need a HELOC, unless the rates are super low.  Even then, I don’t need it because I have the cash.”

Seems like a nice way of saying he’s fine and does not need the banker’s help.  Instead, the banker comes back and says,

“I always suggest putting a line in place even if you have cash on hand. Especially since you are still on payroll as it makes the process much easier. I recommend investing your liquid savings in higher yields within your comfort zone and instead put a home equity line in place for say $100,000 to act as your emergency line.  If you need it it is there for you, if you don’t great it does not cost you anything.

At this point, my friend is starting to get annoyed.  He’s been polite about saying “no thank you” twice now, and yet the banker keeps on pushing.  She recommends my friend use his 8 years of excess liquidity to invest in riskier assets, so he can borrow money from the bank via his home to keep liquid!?!  This seems to make no sense.

“Sure, give me a risk free 4% yielding security and I’ll take out as big a Line of Credit as you want!”

No response from the banker yet, and it’s been a week………

Recommendation

Shop around for a mortgage. LendingTree Mortgage offers some of the lowest refinance and new mortgage rates because they have a huge network of lenders to provide mortgage loans, home equity loans, and home equity lines of credit. If you’re looking to buy a new home, consider using LendingTree to get multiple offer comparisons in a matter of minutes. When banks compete, you win.

Regards,

Sam

Photo: Turkish Delight & Backlava in Istanbul, 2015.  Someone ate more than half.  SD.

 

Credit Card Enlightenment: Track Your Expenses Wisely

I’ve decided to start a new series entitled, “Credit Card Enlightenment” revealing a portion of what I spend on a monthly basis from my personal credit card and any enlightenment that is found through the analysis.  This monthly series will be a good way to track expenses and keep things from getting out of control as peripheral income grows.  In other words, tracking credit card expenses is one way to battle lifestyle inflation.

The use of credit cards is critical in the way I spend.  I buy items with confidence knowing that I have 30 days interest free to pay it off.  I also like how credit cards provide reward programs and buyer protection in case of product dissatisfaction and fraud.  Finally, I do not like carrying much more than $80 in my wallet.  Credit cards are easily replaced if my wallet is lost or stolen, whereas cash is usually gone forever.

Besides my mortgage, my credit card is my largest monthly expense.  I own three cards: a corporate card for work, a corporate card for my online business, and a personal card.  The discretional spending really comes from my personal credit card, hence this card is what I will focus on in this post.  I try and put everything other than business expenses on my personal credit card because the credit card tracks all my expenses, provides free financing, and produces rewards points.

PERSONAL CREDIT CARD EXPENSES FOR NOVEMBER, 2011

Mortgage Refinance Strategies And Points You Should Understand

Alas, after 8 weeks my primary residence mortgage refinance is now done  It took so long that I actually forgot I was refinancing my mortgage until the bank called to ask when I could meet the notary to sign all the documents.

The process was pretty painless since I refinanced with the same bank. I sent them the general paper work such as my W2, bank asset statements,  and pay stubs.  They did one appraisal which took all of 20 minutes and all I had to do was wait four more weeks to get it done!  The refinance this year was much easier than the refinance in 2010, boding well for the thousands of others out there who are also looking to refinance their mortgages.

I learned some new things in this 2014 refinance beyond the basics which you might find useful in your mortgage refinancing or initial mortgage application process.

MORTGAGE REFINANCE TIPS TO THINK ABOUT

Debt and Bankruptcy Go Together Like A Horse And Carriage

Debt and bankruptcy are two words most people frown upon.  After all, debt is usually the cause of bankruptcy followed by an excuse of a lack of income.  I look at debt as a key motivator.  Debt is something that has driven me to work harder.  Without debt, I would ironically feel a little empty making money because it doesn’t take much to make me happy.  Before buying rental properties 10 years ago, I sometimes questioned the point of working one’s entire life away.  It felt pointless logging onto a computer screen just to see your savings go up.

When you are single, you really don’t need that much money to survive.  Even in big cities like San Francisco, Manhattan, London, and Tokyo, $45,000 is enough to live a happy life as a single person.  There’s only so many fancy meals you can eat a year before you start getting sick of eating out.  Your Macbook and gigantic big screen LED TV should last you at least 4 years.  Meanwhile, the ladies love guys with bus passes since it shows that we are enviro-friendly and keep it real! A black Porsche 911 Turbo is so 2007.

So how does one go from a happy life to utter financial ruin?  Getting obnoxiously way over our heads in debt, that’s what.

BE CAREFUL WITH DEBT, IT MAY GET YOU DRUNK

What Would You Do With $250,000 Right Now?

Imagine waking up one morning to see a Genie at the foot of your bed with milk and cookies.  She grants you the wish of converting your future earnings or current illiquid net worth into $250,000 cash.

For example, say you were to work for 20 more years and earn a median income of $60,000 a year before taxes.  Instead of methodically saving 20% for the next two decades, you can get all that money right now.  Would you take it?  I bet most would say “yes” since it’s your money and the present value of a buck is greater now than later.

The big question is, what are you going to do with the $250,000?  The stock market is volatile, bonds are bubbliscious, and savings interest rates are less than 0.2%!  Perhaps you’ll use some of the money to pay off your debts, further your education, and help out your loved ones.  Or maybe you’ll invest the money in your start-up company and watch it grow into the multi-millions.

Finally, maybe you’ll do absolutely nothing with the $250,000 and just keep it liquid for a rainy day.  The political landscape is pretty horrific as there’s no way the Jobs Act Bill will get passed since it attacks charities and municipal bonds which fund state construction.  Massive layoffs are imminent before the holidays despite cashed up corporate balance sheets because demand is uncertain.  You might very well be in for rough times, and that $250,000 + $1,600/month in unemployment insurance will help you get through!

Genies are appearing in front of many homeowner’s beds thanks to Ben Bernanke and the Fed’s low interest rate policy.  Few people would have ever expected the 10-year yield to drop below 2%, but it has.  Cash-out mortgage refinances are tempting people night and day now, but the party can’t last forever.  Ben’s nickname is “Helicopter Ben” for making it rain money.  I prefer to call him “Bengenie.”

WHAT I’D DO WITH $250,000 OF MY OWN MONEY (REMEMBER, IT’S NOT FREE MONEY!)

* Look for attractive 8%+ yielding 2 bedroom, 2 bathroom rental properties.

* Decide which municipal bond ETFs to buy.  Examples: CMF, CXA, HYMB, INY, ITM, PVI, NYF, PWZ, PWA, SHM, SMB, SFI.

* Invest $10-20,000 into the Yakezie Network for better user experience, interface, etc.

* Look for offshore high yielding, but stable assets given the USD will likely continue to remain weak or depreciate.

* Send $15,000 to my parents to help contribute to their home remodeling project.  Good luck guys!

* Do absolutely nothing with all leftover funds and wait for a potential recession to come when Obama gets re-elected.  There could be much better opportunities in the stock markets as a result.

Readers, what are some of the considerations before accepting the Genie’s wish? 

What would you do with an extra $250,000?

Regards,

Sam