Down She Goes!

Obviously there’s been a lot of talk lately about this whole economic stimulus package that is trying to be passed here in the United States, but other countries have now started to add in their own versions — the UK, Australia, Iceland (bad luck there, dudes), and others.   It’s all in the name of trying to get things back to “normal”, where that is indicated by more people making money and doing well than not.   And right now, most of us are either starting to falter, have stumbled, or are flat on our faces and sizing up where, exactly, we would put the KitchenAid in the cardboard box.

I’ve thought a lot about this entire idea of the stimulus, have listened religiously to NPR’s Planet Money podcasts concerning various opinions and analysis, and have thought about my own situation as well as that of others.    Despite recent polls indicating that support for the bill is falling amongst Americans, I still feel it’s a good idea, but the manner in how to go about it is the tricky part.

Tax relief?   Good.   Tax credits?   Not bad, but harder to see right away.   Infrastructure spending?   Great for the long term if done right, huge sinkhole of a money pit if done wrong.     The sides on that one are pretty slippery, too, I’m afraid.   Corporate tax cuts?   Uhm…didn’t we try that one already?  Yeah, it didn’t work.

I think the hardest part for everyone is quantifying what, exactly, is going to happen that will concern us, personally.   I mean…I’m big enough and smart enough to look at the whole picture.    I very well know that infrastructure spending, while a slow, long-haul poke in the ass of the economy, will ultimately make us a better country and we’ll be glad we did it in, say, 5 to 10 years.    But to be honest, RIGHT NOW, it doesn’t mean Jack M. Squat to me in terms of my day-to-day needs and necessities.

Giving me more money to take home is a great way to say, “Perk up!  Stimulate the economy!”    But that depends on how much it is.    $50 a paycheck isn’t going to go much farther than things do now, and I’m likely to look at that and think, “Well, I could…uh….buy another case of ramen??” whereas a significantly larger amount, say, $300, is another car payment, or mortgage boost, or a debt payment, or….there’s a lot more options for that kind of cash than a five-0h carries.

It also matters in terms of where I am versus where others are.     I still have a good, decent-paying job, and feel secure that I won’t be gone anytime soon (although nobody feels 100% secure and, rightly so).    There are tons of folks out there, however (and getting worse every day), that aren’t emloyed or at least not enough, and they’re looking at the stimulus package in a whole different light, more as a savior to impossible conditions rather than a boost.

I’m certainly not of the opinion that everyone should get a huge handout.   For one, in such a situation, you HAVE to have some people on the rocks, some business failing, and some jobs lost and so forth, otherwise nobody has motivation and the system becomes a welfare state and not an opportunistic one.    BUT, that all being said, it makes sense that we’d try to at least keep the majority of folks in good shape when possible.

What do I need?   Well, if I have to be completely selfish, here’s what MY stimulus would look like:

• More take-home money in the paycheck, of a significant amount.    Iowa, take back your silly agricultural taxes (god, state taxes here are stupid-high), and federal, ease up a bit.   I’m happy to pay for roads, but — honestly.
• Debt relief in the form of lower interest rates and longer pay periods.    Don’t know what government could do about that, but making things stretch out would sure be handy.   I’m happy enough to pay off my debts, but making it easier to buy groceries would be really kickass.
• Offer the option to have a forbearance on student loan payments for a year.    Look, I’m in it till 2021 right now;  I’m not in a hurry, so…can I just take a year off?   Charge me interest if you will, but let me forget about that one for a bit, hrm?   They’re so…annoying.
• Since I’m one of those who has a house that I can actually pay for and afford, make it easy to get monies or credits for improving our properties.   Not only will we get more efficiency, but we’ll see urban renewal, and that has to be a positive.

Really, in a nutshell, those are the things that will matter to me most, given my situation and place in life right now.     I’ll probably get a few of those things, but doubtful if I’ll get them all.

Now it’s YOUR turn — tell us what would stimulate you and why it would make a big difference in your life.    If we’re lucky, a Senator’s reading this right now.

There’s plenty of issues today in the economy to be very knee-jerk about in terms of reaction and it very much bothers me to think that the country as a whole might do exactly that — reacting without thinking through the problem, exploring all angles and possibilities, and coming up with the solution that makes the most sense in the long run.  Unfortunately, many people have preconceived notions of the economy, how it works, and how to best run the country when they haven’t even really thought about the problem, but either react according to their financial station, their upbringing, their political affiliation, or all three.

“A person is smart. People are dumb, panicky, dangerous animals and you know it.”  – Kay, Men in Black

The biggest thing to remember in about 99.98% of cases dealing with the economy and government is that the correct road is the middle road, consisting of some sort of compromise between the extreme ideas being presented, with all the good aspects kept and the bad ones tossed out or at least muted to a dull roar. Unfortunately, nobody likes the “middle way” of things and people tend to fight for their team to WIN, WIN, WIN!, right or wrong. (After all, how many times have you seen a football game where they stop when they are all tied up, just for good will?)

This, I fear, will ultimately be the downturn of the situation(s) if it is allowed.

In times of great change, great stresses, or great tragedy, people start to think in extreme ways. Much like driving a car, the reaction to a sudden event (like a deer jumping onto the road) is often violent — but incorrectly so. A huge swerve at times like these means that you end up careening out of control into a completely different path that has far less chance of succeeding had you simply braked and hoped for the best. It’s very hard not to be immensely reactive — it goes against our basic instincts. A level head and a stout heart in times of trouble are certainly rare qualities.

Let’s take this housing crisis, the ensuing mortgage crisis, and all the financial hoo-hah it is causing as a result. There are a multitude of camps each shouting and waving fiery brands at each other in an effort to proponent particular solutions, and everyone has a clear path in their minds as to how to solve everything in one, fell swoop.   “Bail ‘em out!” they shout.   “Let ‘em fail!”  cries the crowd across the river.    “Where’s the pisser!?” cries the third section of folks who have just emerged from a TV-induced fog to find their country overridden by news headlines.

Some lawmakers know this and are striving to make it happen in a controlled manner. Others are taking a more extreme viewpoint and endangering the entire escapade. And then you have The Bushinator saying such obtuse things as, “The whole world is watching to see if we can act quickly.” No, you twit, they’re watching to see if we can handle it intelligently. Speed is worthless if you’re a raving idiot. Can you just keep your mouth shut until January, please?

If you really start to dig into the situation and read the reports, the analysis from both partial and independent folks, and start to see the bigger picture, you quickly realize that the situation is far more complex than, “Suzie charged too much to her credit card and now she’s going to have to eat ramen for a year.” Instead, we’re dealing with a beast that is alive and kicking as we are trying to tame it, and if we really look at the situation, it can never really be constrained fully anyway.

Noble Truths About the Economy and What Will or Won’t Fix It: (for your pleasure)

1. Some Need to Be Criminally Charged…But Not Everyone — The fact is, some lenders and investors were purposely misleading and did push the boundaries (or even break outright) the law. Those folks can and should be hunted down and strung up for being hazardous. But truth be told, not everyone was breaking the rules…in fact, most people were following them. They just had so much leeway or loopholes that it was easy enough to make it always work in their favor, so they figured, why not? After all, it’s all about making money. That’s not a crime — it’s capitalism.

2. Some Borrowers Were Suckered…But Not Everyone — There was a group of people out there who truly had the wool pulled over their eyes when it came to their investment decisions. The securities looked good, the house looked affordable, and the loan looked payable. But a good deal of folk were simply ignorant or stupid, or both, and they’re in trouble and that’s a shame, but….tough shit. Whoops.

3. You Have Two Choices, but the Third is Right — You can bet that the government, in an attempt to try to right this imbalance, will do one of two things: a) Bail out the lenders and punish the buyers or b) Bail out the buyers and punish the lenders. The choice they should make, and won’t because it involves a ton of work, is to punish the criminal lenders, punish the stupid and/or ignorant buyers, and give the rest a wave of the hand. This, however, requires a lot of digging and investigation and sweat and…well, you don’t see the government doing that, do you? I mean, Congress is on holiday half the year, for the love.

4. Not All Bail-outs Are Bad — I hear a lot of shouting by folks going, “HELL NO!” to the government hands that are extending to pick up the likes of Lehmann, Merrill, etc. I appreciate your enthusiasm, but you’re mostly wrong. Here’s the facts of the picture — these are huge, huge companies. Gigantic. They represent not only thousands of employees but millions of bonds, trusts, insurance policies, 401(k) accounts, etc. What if that all went *POOF!*? That is not a good thing and you’d probably have people running down the street screaming in agony.  Yes, I’d like to see some of them tank (see my next point), but they have their finger on TOO MUCH of the economy to just cut the strings. That is, unless you LIKE economic depressions? We’re not in one…yet…keep that in mind the next time you buy Ben & Jerry’s with spare cash, because you won’t have any if we get that far.

5. Some Companies Should Tank — That being said, some companies should absolutely tank out. And it should scare the begeezus out of some folks, because it’s a Very Big Dealâ„¢.   Some controlled crashes of both companies and the stock market are necessary to really get the economy out of this and people out of the mindset that, “Everything will be just fine in the morning,” because it’s not, folks. We’re screwed for a good long bit now, and it’s about time folks start taking it seriously.

6. Many, Many Investors Should Tank — You’re going to continue to see homeowners lose their houses and go into financial ruin, companies that bet too much money in mortgage securities go belly up, and businesses close their doors over this. This is all good, if you can believe it. Why? It’s because of a little something called Capitalism, which runs our economy, and states that the more risk, the more potential for more return, but the more chances of dying a screaming, horrible death. If you cancel out any one of those factors, the system breaks down. We can do a lot to prevent the economy from kicking the bucket outright, but it’s going to slump, and people are going to be in serious trouble for a long, long time. That’s unavoidable.

7. Do Not Forget that Capitalism Has No Morals — None of what has happened in this entire issue has been the “fault” of the economy. Rather, the system is running as it should — allowing people to take great risk and reap wonderful reward, then grabbing the nearest 2×4 and smacking them down to a pulp for being pompous assholes. The fact is, capitalism does not have a set of morals, feelings, ethics, or otherwise — it’s just based upon an economic “king of the hill” theory.  That’s not to say that the dollar-chasers were completely wrong — they were using the system, too. But again, with great risk comes great reward — or punishment.

And for all of you who are sitting there, going, “But….I didn’t take any risk, and someone else is fucking my economy!” I have no sympathy.   This is the system, folks — take it or leave it.   You’re a part of the system whether or not you partake in the feeding frenzy of the markets or if you lie low and hibernate.   The economy goes up or down as a whole, not just in one place or via one person.   Maybe if you had invested more, we wouldn’t be here — or maybe it would have been much worse.    Inaction, however safe it might be, is still action.

8. Rash Decisions and Regulations Do Not an Economy Make — Trying to throw laws and edicts at this problem is not going to solve it.   Flailing about in random directions, without any real directions or background intelligence, hoping that this or that will stimulate the economy back into a decent heartbeat will not help us in the long term.   We tried this idea with 9/11 and the Afghan/Iraq wars, and look where that got us. We need to prop up the economy as best we can and THEN do our research and investigations into the best long-term solutions. Right now, Congress is trying to pass a whole slew of laws that include not only provisions for now, but for long-term, and that’s wrong. They’re two different beasts, and we can take care of it better once we have time to step back and evaluate.

En Conclusio:

As you can see, all of these points take a middle-of-the-road approach to the entire problem. Why? Because that is going to be the best way to handle this in the long run to ensure the relative stability of the country and economy without fighting the system as it is supposed to operate.

Life is going to change, whether or not you like it. But we can have a role in deciding how those changes happen and how fast, and it’s important to do that correctly — for my sake, for your sake, and everyone else’s sake.    Fight for sanity, choose level-headed leaders and policymakers, and keep your wits about you — we’ll all make it together somehow.

On Saturday we braved the horrific crowds of people (of which about 78% were complete and total morons) and got all of our Christmas shopping done in a single day. We hadn’t really done any shopping except for the online bit and wanted to take one trip to do it all. It worked out well — we were both braced for the grueling task that it was and we got it all finished except one person, which considering how many freaking gifts we have to buy for all our families and celebrations, that’s a feat.

Of course, we couldn’t simply buy $OMG in Christmas gifts, we had to buy a new car as well. This was actually somewhat planned — well, the car at least, the new part just happened to fit with the needs. My new job at Cambrex is a 40-mile drive each way. Because of this, I’m burning a fair whack of gas. At 24mpg on the Galant, and running only premium and higher, it was costing me about $50 every 4 days to drive to work. So, I wanted something that got great gas mileage and wouldn’t cost me too much in monthly payments.

I did some pre-research so I’d at least have an idea of the scope of the arena — Honda Civic, Toyota Corolla, Chevrolet Malibu, and the Chevrolet Aveo were at the top of the list of gas-sippin’ vehicles. We stopped first at our favorite car dealership in Waterloo, Rydell Chevrolet, and never really got any further. They had sold me my 2003 Mitsubishi Eclipse GTS back in Sept of ’03 and they managed to sell me a 2008 Chevrolet Aveo LS.

It’s actually a Daewoo Kalos that’s been re-branded by Chevrolet to sell in the United States and other locations. Manufactured in South Korea, it is designed to be comfy yet efficient, a typical sentiment of most other countries that aren’t the United States. It sports a 1.6L inline 4-cylinder engine pumping out all of 103 horsies. The engine is so CUTE! You open up the hood and can’t help but go, “Aw…look at that!” Remember, folks, 1.6L is less than a 2L of soda — it’s got itty-bitty cylinders and eensy-weensy pistons in it, but still manages to hump out some decent power.

The big seller? It is 26 city, 34 highway for gas mileage, and the salesman says typical people get 35+, which will save me a TON of money in gas. (and it runs on 87 octane!) In addition, it has a 3 year/36,000 bumper-to-bumper and a 5 year/100,000 mile drivetrain warranty so it’s almost guaranteed to be reliable for a long time, and if it isn’t, I can get it fixed easily. I did order add-on cruise control, which gets installed on Wednesday (with the commute, it made sense to get) and the undercoat/rustproofing since it’s a thin chassis and I live in Iowa where they’re using some incredible chemicals to clear roads. I really hadn’t planned on buying a new car, but it worked out to be the same price as a used vehicle with the same efficiency, so it was a no-brainer.

It’s not zippy or very fun, but it runs and isn’t awful, so it’s perfect for a commute.

Enjoy, if you will, some pictures:

Front View: How about that color!?	Rear View	Engine Compartment: A 1.6L I4 DOHC E-TEC II making 103 hp. Isn’t it CUTE?
Engine Side View: Mmm…throttle body.	Front of the Engine, Looking Down: Check out all the space available! I could fit another engine in there!	The Front Seats: Cloth covered, manual adjust. Not too shabby for comfort.
Rear Seats: Able to cart around 5 people if you don’t mind a little knee-squishing action.	Driver’s Side View: Clean, simple.	Instrument Panel: Tach, Speedometer, Temp, and Gas. The radio is AM/FM only, no CD, but it has an AUX jack for iPods and so forth, and I just bought a 2GB MP3 player, so I’ll be using that for tunes.
Trunk: Incredibly roomy considering the size of the car. I was shocked.	The 60/40 Split Rear Seat Folds Down: Both sides fold down to pass things through, which is a great thing.	View through Trunk with Rear Seats Folded: Ready for plywood, baby!

I had a friend when I was growing up that constantly got help from others to make it through the trials of life. No matter what the situation, he could find a way to get someone else — family, friends — to do the ‘dirty’ part of it, the hard part, the unpleasant part. In short, he ended up avoiding nearly all major responsibilities and consequences, or at least he had help in them and so he didn’t hit the ground nearly as hard when he fell.

No doubt a lot of you have heard about President Bush’s latest dubious action, which was to strike a deal with the mortgage market and attempt to freeze some interest rates from climbing so people didn’t have to foreclose and lose their houses. The essential idea behind it is this — during the housing bubble of the past few years, a lot of people either bought their first house or upgraded. Because interest rates were so low and lenders were giving out mortgages left and right for great terms, a lot of people bought a bigger place than they could really afford. They could do that because lenders gave out a lot of ARMs — Adjustable Rate Mortgages. It essentially means that for the few few years, your payments are low and your interest rate is, too. After that, however, the interest rate readjusts, usually higher, and your payments go up steeply.

Well, three or four years later, here we are, and a lot of homeowners are finding themselves in dire straits. Their ARMs have readjusted and, because interest rates went up, so did their payments — significantly. Suddenly that $350,000 house in Orlando is sucking up all of their income and they’re eating ramen to make it. If borrowers can’t make the payments, the lenders foreclose on the property and take it back and they lose their house as well as getting a black mark on their credit history.

So, the government is stepping up and saying, “Hey — a lot of foreclosures are bad for people and bad for the economy, so we’ll help you folks out and here’s some programs to assist you through this tough time.”

Excuse me? Since when was this a good idea?

Frankly, I’m miffed. By doing this, the government is basically condoning the actions of stupid people. Just like investing in Internet startups in the late 90s, everyone got too excited and did dumb things that they’re now regretting. Feeling a bit bad about buying a house that cost you $600/month for the first few years and now costs you double that? Want me to call the waaambulance?

As I heard one financial analyst say on the BBC, people are financially motivated in two ways — the pursuit of gaining wealth and the fear of bankruptcy. Both features exist in capitalism to balance the system out and make it dangerous to be reckless with your money. Sometimes that risk pays out — and sometimes you hit snake eyes.

I feel bad for anyone who had the wool pulled over their eyes about a bad mortgage, but only a little bit. Buying a house is not a trivial matter — you’re are making a huge purchase that will extend over years of repayment and financial situations — it behooves you to know exactly how your loan will behave at any point and what your risks are. Assuming everything will be fine because the banker says so is stupid. Failing to understand the risks you are taking is also stupid.

Call me cold-hearted, but I think this sets a bad precedent. Just like my childhood friend, this basically says that being idiotic with your money will result in the government stepping in to make sure you don’t suffer from it. If they do that now for mortgages, do we get a slippery slope to other risks in life? Oh, you made a bad choice by jumping off a roof — let us help you pay for that. You bought a huge-ass SUV and can’t afford the gas now to drive to work? Let us help you subsidize that. A bad hand at poker? You didn’t mean it, did you — here’s a Benjamin to keep going.

A bankruptcy would suck — but life isn’t all tea and sandwiches, either. Sometimes the only way people learn is by making mistakes, but apparently letting people make them isn’t ok anymore?

When I was younger and fresh into college, plastic was my friend. Not only did it hold my computer together and make it possible for me to reheat cold ramen noodles days after they had been cooked, but it enabled me to obtain a magic card — a card that with a single flick of the wrist and swipe of the stripe would give me anything I needed or wanted with seemingly no effort whatsoever. Sure, a piece of paper appeared once a month with figures on it that crept upwards, but on the whole, it was pain-free instant gratification.

Such began my short road into massive credit card debt. A naïve student unleashed with a seemingly endless form of money and a lack of any sort of real income was the recipe for a disaster waiting to happen.

Eventually one card led to two — after all, two is better than one, right? More charges, more shrugging at the bills — after all, I was graduating, moving to a new apartment, and had to furnish it, right? Besides, I was starting my first full-time job — the paycheck looked enormous! I could afford to spend now and pay later a bit because I was going to “catch up” real soon.

The months and years passed and “catching up” became my mantra — “I’ll just catch up next month.” The money always seemed to disappear faster than it came in and that big paycheck wasn’t nearly as big as I thought once you took out rent, insurance, food, and other necessities. Two cards turned into four, and then five, as I struggled to afford not only the cards but life in general.

Eventually I started to despair and stopped spending, but the damage was done. Monthly bills for minimum payments kept coming and I kept writing checks, furiously trying to keep the hounds at bay. “Forget” to send a payment and you got an enormous late fee and another bill — “forget” again and you started to get nasty phone calls asking when you planned to, “catch up”. I started to become fearful of the phone and avoided answering it in case it was a credit card company calling yet again to find out why I haven’t paid this month, and can we take care of that right now over the phone? We take a check, sir. Sir?

When I had finally had enough, I started to think about loans — but what bank would give me a loan to cover credit card debt? I had no house, no property, no collateral at all to speak of…even my car wasn’t paid off yet. Another job wasn’t likely, although I thought long and hard about flipping burgers for some extra cash. I was in a bad place and getting worse.

Then I found a non-profit organization that deals with helping people get out of credit card debt. There are now tens, if not hundreds of them on the TV these days, advertising everywhere, but back then, there were only a few. My friend had started with these folks and liked them. I figured I had little to lose that I hadn’t already, so I called them.

Boy, am I glad I did.

As of the 7th of December, I will be completely and utterly free of credit card debt for the first time in over 8 years. Over the course of the program, I have paid off almost $10,000 in debt with nearly $19,000 in $300 monthly payments, a far cry from the much larger amount I would have had to pay had I done it the traditional way. Instead of interest rates from 15% to 23%, the company got most of my cards down to 9.9% and made it easy for me to make one monthly payment, not five, and took care of distributing the monies to the companies. The phone calls stopped, my anxiety went away, and I’m so glad that I did this.

Just as a note before I tell you who they are — this is not a paid endorsement. They never contacted me, they never said, “Give us a jab and we’ll line your pockets.” I won’t get a red cent out of mentioning their name. I’m writing it here because I feel they’ve done a superb job for me and saved my ass when very little else could. For that they deserve my thanks and recommendation to others, that’s all. Maybe by mentioning them it’ll save someone else, too.

Take Charge America (TCA) has been a super-friendly, super-professional company to work with over the past years. The staff has always gone out of their way to be helpful, make things work, and to keep me updated on my progress. Every phone call from or to them is a great one — their people must really like to work there, because they’re all pleasant to speak to, every time. I can’t say enough about their customer service.

The program isn’t easy, so don’t think you can take the sunny road home. First Rule: No more credit cards. At all. None. You can’t use any, you can’t have any that are active, and you can’t get any while on the program. Credit card companies are happy enough to help you get into a debt management program (TCA does the negotiating for you) but if you act like you don’t care, then they will kick you out so quick it’ll make your head spin. You can’t even have one for emergencies — the only way the program works is if you stop cold turkey.

Yes, for the past 6 years I’ve not had or used a credit card, not even once. Which has proven to me that I do not need to have a credit card. I can live perfectly fine without one. Oh, sure, there were plenty of times when I wished that I did have a card, but I wasn’t able to, so I figured out how to get by without one. The program makes you be better with money and more resourceful when it comes to pinching pennies.

The second rule is that you actually have to pay them off. Sure, you don’t have to make separate payments each month to each card, but my overall payment really didn’t go down — $300/month wasn’t anything small to sneeze at. TCA gives you an amount they think your income and budget can handle and you have to stick to it. The advantage here is that instead of going to pay off mostly your interest on each card, the money starts to pay off the principle, which is the key to getting rid of it once and for all.

There were times during this stint on the program when I wished I hadn’t, when that $300 was really a major payment and I couldn’t bear to see it go to pay off debt — debt that existed for things I didn’t own anymore or benefit from any longer. Some of it was even things as stupid as groceries and beer. There is nothing worse than paying off debt that means nothing to you.

But, here I am, and I’ve come this far and I’m almost done. I couldn’t be happier. Will I get another credit card? Probably. My new job has already asked that I have one to cover business expenses and then they’ll reimburse me. I’m thinking about getting a charge card, which requires that you pay it off in full every month. Also, having one in case, say, the refrigerator breaks down, would be very handy and smart. I will not, however, get another card to cover expenses “in between” paychecks. I will not get one to buy the things I really want but can’t afford. I will not get one to compensate for a lack of preparation, planning, or control. I’m free now, and I’m not going back into that prison again.

So…if you are an American and you have a lot of credit card debt and are at the end of your rope about it, I’d highly recommend TCA. It’s not a quick or easy way out, but it’s a sure way out, and that can be the savior at the end of the road, trust me. It would have taken me over 40 years to pay off my debt by paying the minimum — now I can move on.

If you’re not in massive debt or you’re on the edge of it, DON’T fall into the trap! It was one of the worst things I’ve ever done in my life and I regret every moment of it. You do NOT need a credit card, despite what everyone (and the media) tells you! Debit cards, yes. Everyone needs some plastic, but not a credit card. They make it so easy to rack up unsecured debt that you don’t realize how hard it will be to recover from it; that’s part of the trickery. Take the advice from someone who really borked up and got out of it, thankfully, in the long run.