Debt Free or Bust

Got My Laptop Fixed - Finally!!!

Hey everybody,

I’m so happy!!! I finally got my laptop fixed. It spent a month at home waiting for me to save the money to take it in, then spent another month at the shop while they got what I needed done confused. But, all is well and I’m writing this post on my laptop.

Total cost to replace the CPU cooling fan: $174.38. That’s a lot less than originally quoted and budgeted for, so now I have a little extra money. I’m very glad I chose to fix this computer. I’m also glad I got the desktop machine back in working order. Now I’ll just have to keep a closer eye on it to keep it running smoothly.

The extra money will help pay court costs and attorney’s fees when I file bankruptcy in the next couple of weeks.

It’s been a long week. It’s dead week, the week before final exams. My students are panicking and scheduling lots of extra sessions. I’m not sure whether I’ll be done Wednesday or Thursday next week. Thursday is the last day of exams, so that’s the absolute last day for this semester. I’ll have about 10 days off before I start summer tutoring for the 8th grade LEAP test.

During that time I’ll be working on my blogs, writing my son’s 7th grade homeschool curriculum, and drumming up more tutoring clients for the LEAP. I’ll keep you posted!

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May 16th, 2008 Posted by joubess | Maintenance & Repairs | no comments

Article on MSN Money About Dave Ramsey

I just read an interesting article on MSN Money written by The Dough Roller entitled Here’s the real deal on Dave Ramsey. The author equates Dave Ramsey and debt to an alcoholic and alcohol, calling him a recovering debtoholic. I disagree.

I don’t believe Dave’s extremism about getting out of debt stems at all from his inability to control debt. I see it as Dave was scared to death and got a real feel for debt risk on a large scale. He was very young with a wife and babies to support when he went broke. He looked at his family who looked to him for their support and he was terrified. That fear was quite justified. He looked at his family and wondered how he was going to feed, clothe and house them.

I believe Dave was so scared that he will never put himself in a position where he would have to face a similar situation ever again. It’s not an addiction to debt, it’s a fear of the risk debt has associated with it that the article author doesn’t see or ever discuss.

Here’s an interesting quote from the article:

So here’s the deal: Being debt-free is not the holy grail of financial freedom. My wife and I could be debt-free quite easily. We could sell our house, pay off all our debt, and have some money left over. I guess we’d then rent a house or apartment, and I would continue to go to work every day. Would we be more financially free? Nope. I suppose we could move to a less expensive area and perhaps even pay cash for a home. Would we be any more content in life? Nope. In fact, all we’d end up doing is uprooting our family and moving away from a place we love.

Apparently, this guy doesn’t see that a mortgage ever gets paid off and you no longer have a house payment. No house payment in my life would be an extra $700/mo. Dave doesn’t say you can’t have a mortgage, nor does he condone selling your house to pay off all your debts unless you simply can’t afford your house, in debt or not.

Here’s another quote:

Keep total debt payments below 30% of your gross income. I know that for many this will be very difficult, particularly if you live in an expensive area. But I’ve found that if monthly debt payments exceed 30% of gross income, life gets very uncomfortable. And I should add that as you get older, this percentage should be going down. It should go down because your income should be going up, and it should also go down as you pay off debt.

This basically covers the amount you shouldn’t exceed with the first mortgage on your house. There is no room to borrow anything more if you stick strictly to the 30% of gross income figure. This guy must have a low mortgage payment and lots of equity built up in his house. He tells us that he is a real estate investor, so I take it his debt is tied up with his investments. He could sell a house if a deal doesn’t pan out, if the market doesn’t crash on him.

What he never discusses is what happens on the down side. Where is the risk factor? What happens when his real estate investments don’t pan out? What happens if he loses his business or his job? He doesn’t discuss the risk associated with debt, and risk is the biggest reason to get out of debt and stay out.

The author goes on to promote budgeting and not buying things of no tangible value. Why have a credit card if you don’t spend money you don’t have? You don’t need a credit card. He’s putting down Dave Ramsey and then turning around and preaching the same thing Dave teaches, except he borrows on his real estate deals.

The article author finishes as follows:

Dave Ramsey is entertaining, and I agree with a lot of what he preaches. If you choose to avoid debt as he does, I certainly won’t tell you that’s a bad decision. But I also believe that responsible borrowing can improve your finances with modest risk.

The author vaguely defines responsible borrowing to mean borrowing your first mortgage at a fixed rate and investing “wisely” in real estate. What is wise borrowing in real estate investment? He never tells us. Dave teaches that it’s okay to borrow to buy your house. Where does responsible borrowing come into play on anything else? I see no argument in this article that justifies using credit cards and spending beyond your means.

I believe Dave is more extreme in his own house than he is to the world because of his own experience. I also believe a lot of the extremism comes from Dave’s fans. Many take what he teaches and really go out on a limb with it. Some fans reinterpret Dave’s teachings into things I have heard him recommend against on his radio show.

Some people go overboard with the self-help stuff and start believing that because they did something by their interpretation of Dave’s books that it should apply to everyone else. I’m a member of the MyTMMO.com site and the forums get really extreme. I see things I can’t believe the moderators haven’t removed. They certainly don’t fit with anything I’ve read in Financial Peace Revisited or The Total Money Makeover.

I’ll ask the same question the author asks:

Is Dave Ramsey’s approach to debt the right approach for everybody?

I think the answer is yes and no. Being debt free is the key to financial freedom. Ask wealthy people if you don’t believe it. However, you have to gauge where you are on the debt-to-income spectrum when you approach getting out of debt. If you don’t fit The Total Money Makeover you shouldn’t use it. You should read and apply the principles in Financial Peace Revisited or take Financial Peace University because you are in a different risk category than those with a good income who spend more than they make. Financial Peace Revisited explains what to do and why you should do it when you’re truly broke and in desperate trouble. TMMO is the how on becoming debt free and building wealth. In my opinion from being a long-time listener of Dave’s radio show and reading both of the above books, he doesn’t intend for the how to supersede the why.

How would you answer the above question? Please speak your mind in the comments.

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May 12th, 2008 Posted by joubess | Debt Reports, Financial Peace | 8 comments

May 2008 Debt Report

Debts Paid in Full:

• Debts paid in full: 8
• Amount paid in full: $5,345

Status Report:

• May 2008 payments: $940.89
• Total amount of payments made to date: $13,456
• Debts left to pay off: 15
• Next debt in line before bankruptcy: Northland Group (Cap One Visa): $3,717.17
  

Balance Report:

• Original Debt Balance: $246,281
• Current Debt Balance: $248,020
• Balance change since last month: $1,739 (increase)
  
• Balance change since starting the plan (April 2007): $1,739 (increase)

After Bankruptcy Projection:

Debt snowball:

• CFCU Visa: $4,402.81
• Chase HELOC: $5,021.64
• Capital One HELOC: $21,637.43

Debt Balance excluding co-signed student loans: $30,985

• Co-signed student loan approximate balance: $45,051 (need a complete audit on these accounts; not sure this balance is correct or even close)

Debt Balance including co-signed student loans: $76,037

First mortgage balance: $117,803

Discussion

I paid off two small debts that crept up on us: $140 to Professional Emergency Physicians from when my son needed stitches a few years ago, and One Hour Air Conditioning for last year’s cleaning and maintenance.

Since I haven’t received anymore notices from the student loan people, it’s possible the friend I co-signed for is paying them again. The bankruptcy trustee will likely require an audit of these accounts as part of my remaining obligations. If the trustee doesn’t, I’ll require one before I start making any payments. I don’t know what’s been paid or what is still owed. I won’t make any payments on these loans until I pay off my own debts. It’s the biggest balance debt anyway, so would come last in the debt snowball.

I didn’t pay anything on the debts I’m going to bankrupt. I don’t see the point of spending money on them when they will be gone about this time next month.

New Summer Income Source

I found a new tutoring opportunity after school is out. All public school students in the 4th and 8th grades must pass the Louisiana LEAP exam to progress to 5th and 9th grades. If they don’t pass in the spring they have a chance to take it again over the summer. Failing 4th grade LEAP isn’t too big a deal. Students who fail it often are on the young end of the age limit and need another trip through 4th grade if they don’t pass LEAP remediation in the summer.

But 8th graders who fail the LEAP are extremely stressed out to pass it over the summer so they can go to 9th grade with their friends. It’s a huge social issue with 8th graders who need remediation. Those parents are very motivated to help their kids succeed and will pay for tutoring on top of the school system’s program.

This test is a must-pass thing. Even if a student passed all classes in 4th or 8th grade, they fail if they didn’t pass the LEAP test.

I made a flier, I’m getting it copied tonight, and I’m distributing them starting Monday to the public middle schools to give out to students who failed the 8th grade LEAP test. A friend who works in the school system has several of the remediation workbooks and is lending me a set to use over the summer. I’ll have to make copies for my students, but that’s relatively cheap compared to what I’m charging. I should be able to start working with these students as soon as school is out, but may not get as much work until remediation begins the first week of June. The test will be administered again the first or second week of July.

I’m charging $25/hour. I’m not charging full price ($45/hr.) because these are public school students and the families may not have the money private school families have. That’s $6/hr. more than my tutoring company pays me. Another reason to only charge $25/hr. is I’ll be undercutting all the tutoring companies so I’ll get more students.

Depending on the amount of work I can score, I’ll deliver pizzas on my free afternoons and evenings. I’ll go up to full-time pizza delivery after LEAP test tutoring until mid-August when tutoring picks back up. Then I’ll go back down to part-time pizza delivery again.

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May 9th, 2008 Posted by joubess | Bankruptcy, Debt Reports, Earnings Updates | 6 comments