Debt Free or Bust

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1. Rant away, it’s entertaining!

   What exactly are you selling? The “Red Beans & Rice” blog? Ad space? Coffee? I searched everywhere and can’t find anything else to buy!

   Let me know ASAP because I love to shop!

   Comment by cassandra | April 7, 2008

2. Hi Sherri,

   You say you won’t file for bankruptcy unless you have no other choice. How does a debtor know they have no other choice?

   Elsewhere you said you can’t pay the interest and that gets added to your loans. Excuse my ignorance about financial planning, but surely that is just borrowing more money. At what point will you decide you can’t borrow anymore?

   Wishing you every success,
   corey

   Comment by corey | April 7, 2008

3. The following quotes are all from Hemingway. He was a man who wrote for a living.

   “Forget your personal tragedy. We are all bitched from the start and you especially have to be hurt like hell before you can write seriously. But when you get the damned hurt, use it-don’t cheat with it.”

   “I like to listen. I have learned a great deal from listening carefully. Most people never listen.”

   “There is nothing to writing. All you do is sit down at a typewriter and bleed.”

   “Writing, at its best, is a lonely life. Organizations for writers palliate the writer’s loneliness but I doubt if they improve his writing. He grows in public stature as he sheds his loneliness and often his work deteriorates. For he does his work alone and if he is a good enough writer he must face eternity, or the lack of it, each day.”

   “A man’s got to take a lot of punishment to write a really funny book.”

   sherri, if a little bit of comment critcism has got you this wound up, are you sure that ‘writing’ (or blogging) is really your calling after all? I am very surprised you are not retrenching into a more solid proposition, AT LEAST FOR THE TIME BEING.

   You *saying* you have “a business” and saying you are making money in one breath, and then claiming you are at wit’s end and don’t know how to avoid bankruptcy and destitution on the next breath, does not bode well.

   In aircraft lingo, when emergencies happen, and things get difficult and complicated (’the furball’), they say you need to remember to “first fly the plane.”

   In modern life, you have to make your way financially sufficient to cover your obligations. It seems to me, you are dithering and not doing what needs to be done to cover that essential first imperative.

   First, fly the plane.

   Comment by coolguy3000 | April 7, 2008

4. Can you square this for me then:
   I have a job, and a damn good paying one at that. joubess | April 7, 2008
   and
   There will be good income months and months where we may not even barely get by…
   Both comments in the same post!
   Would you care to define this “job”, please because it doesn’t sound like my definition of a job.
   I still think you need to cut down the time you spend blogging and doing “business” on the internet because it looks like you’d earn more doing one hour’s tutoring than you earn in a month off the internet.
   I look forward to seeing April’s financial statement, too.

   Comment by arthurwankspittle | April 8, 2008

5. @cassandra, thanks for the encouragement! In my far right sidebar I have books from Amazon for sale. Just mouse over them and a window will expand. Click on it and it takes you to Amazon and you can buy anything you want there. You can buy on my invader zim blog as well. There is eBay merchandise and more Amazon links. If you have friends who like to shop, please have them stop by any of my blogs. I do mostly sell books right now, but I’m branching out from that.

   @the rest of you so far: About my job, it’s hourly, but the schedule is not always steady because of school breaks and student cancellations. Sometimes I don’t make as much as I plan on, others, I make more. It also depends on which students cancel a session. If it’s a $45 student that hurts a lot more than a $19 student. I do my best to make up hours during the month, but that’s not always possible.

   Leave your tough love all you want. I’m listening. But, the final decisions are mine whether any of you like or agree with them or not.

   I’m reading Financial Peace right now. If you want to know when you have to declare bankruptcy, call Dave Ramsey and ask him. You only know when you come to the end of a rope you can’t see the end of until you get there. I’m in survivable shape right now because all the debts that are way behind are unsecured so they can’t come into my life and seize assets. I have time to build my income and hit the snowball harder as it grows. I’m seeing I don’t need a total money makeover, I need financial peace. I’m following Dave’s advice and Dan Miller’s advice.

   Comment by joubess | April 8, 2008

6. But, the final decisions are mine whether any of you like or agree with them or not.
   If you are going to blog about them, then people will disagree with you. That’s the nature of blogs and forums. I will join in and comment. You, as the blog owner, can delete my comments and ignore my questions if you want. But don’t pretend that your interpretation of a Dave Ramsey course is the only answer, or that your “business” is cost effective. You asked earlier about other people’s personal P&L statement and balance sheet. So, just to let you know, I have paid off 6 figures of debt using my entrepreneurial skills and hard work. Included in that is a failed business which cost me about $60,000. I now have no debt. I’ve been there, done that, got the T shirt as they say.

   Comment by arthurwankspittle | April 8, 2008

7. Which business do you mean when you proclaim “I HAVE A BUSINESS”? The winding-down CFP business, or the so-called “online business”?

   Neither are making you any appreciable income. From your earlier comment, it sounds like you work 8+ hours a day on your “online business”. But you’re making peanuts for it: $0.50 a day in Adsense, and then they shut you down anyway? The occasional “latte” in your Paypal tip jar? The occasional few percent in Amazon affiliate earnings?

   But yet you’re paying subscriptions for things like Blog Mastermind; you’re buying software like Ad Box Professional. You’re falling for every scheme going; you’re getting scammed by the hidden charges in the small print.

   If being online is your business, treat it like a business. What is your net income, after expenses, from being online? For how much time expended? Is it ever going to grow to provide the substantial replacement income you crave?

   My money’s on “no”. Oh, we can see what you’re trying to do: build web properties that either draw a nice passive income or can be sold off wholesale. But the niches you’ve chosen aren’t great (a canceled Nickelodeon show? red beans and rice?), your execution isn’t great, and frankly your sites aren’t that interesting. Readers can tell when a site is built purely to pull in cash, with no love behind it; they tire of the tip jars and the lattes and the affiliate links and the endless blogging about blogging and shilling of make-money-online schemes.

   Damn right it’s tough love; because from the outside, all we see is you spinning your wheels online for hours a day, talking big talk but making nickels and dimes. And there are thousands like you all chasing the same scraps. How does Yaro Starak make money online? By marketing his stuff to marks like you.

   But you do have a business that is moneymaking and profitable now: your private tutoring. Your private students are much more profitable than your agency students: why are you not treating that as your business? That’s cashflow, right there, just waiting for you: replacing one agency student with a private student gets you an extra $26 for the same hour of work. That should be the business you work to develop.

   Comment by lawnmower man | April 8, 2008

8. When you blog about your private life, you are inviting readers to comment on it. There are no if or buts about it. I emailed you privately about this a while ago, but I’ll say it here again: I don’t believe this is the right way to pay a debt. You have paid more than $10000 and still owe more than you did before you started? It sounds like such a waste of money! There must be some type of debt consolidation you can go through to help you make this worth it. Have you looked into that? And about the decisions you’ve made regarding work, I think you’re not doing it right, at all, but ultimately, it’s up to you. The only way we can learn is to make our own mistakes.

   Comment by db321 | April 9, 2008

9. “You only know when you come to the end of a rope you can’t see the end of until you get there.”

   So your business plan is to continue trading with no real idea of if you are solvent or not?

   Comment by corey | April 9, 2008

10. Wow Sherry!

    The comments in moderation are really piling up! You must be busy working!

    Comment by cassandra | April 9, 2008

11. Keep the tough love coming! Y’all are inspiring me.

    Replacing agency clients with my own clients is what I do as often as possible. But I won’t drop an agency client to give the spot to someone who comes along later that I would get $45 for if I took them. That would be unethical. I will take them if I can manage to get them anywhere into my schedule that fits with their’s. I’ve already limited the number of hours I devote to agency clients, and any growth I get is from my own clients. That is helping a lot. That is becoming one of my businesses and the most successful the quickest.

    I haven’t moderated comments today because I mowed grass for $30 for a neighbor and talked to a friend about delivering pizzas. A friend manages some franchise stores in my area and is looking for drivers. Wednesday is also a very long, busy tutoring day.

    I’m nearly finished reading “Financial Peace”. I find I haven’t gotten to baby step 1 and I am not ready to do a total money makeover. There is no way for me to get current on all my debts. Many are in collections and I’ve been sued twice so far. I’m using some of my Traditional IRA funds to cover essential needs and pay off some of the small debts for this month and next, until I can get more cash coming in. Since none of the debts I’ve defaulted on are secured, they can sue me but they can’t come in and take assets. They have to wait for payment or bankruptcy, or they can file a writ of garnishment. In my case, it will be payment or settlement. I’ll also be cashing out my Roth IRA to pay debts. There isn’t much in it, but the penalty is on 10%, so it’s worth doing.

    The interest I’m being charged is getting criminal. I’ve looked back over what the original balances were, principal and interest, before they sent the debts to collections, and they’ve tacked on about $50,000 in interest and fees in two years. I quit using credit over 2 years ago when I had to pay one credit card with a cash advance from another. I’ll be saving some money and settling the biggest of these rather than paying what they say I owe now, or will owe by the time I get to them. The interest rates are anywhere from 18% to 32%, so I have to make a hell of a lot to just cover the interest on the highest debts. That’s not going to happen for awhile.

    Dave advises in “Financial Peace” to pay for essentials first and then pay what can be paid on all debts, delinquent or not, smallest to largest, then let the others go until there is enough to pay on them. That will prevent $7000 going to interest (like I did this year) and get a lot more going to actually pay things off.

    Dave describes in a lot more detail how he got through his financial crisis, although he ended up having to declare bankruptcy when he couldn’t cover secured debts after assets had been repossessed (cars, houses foreclosed on). They will come in and take your assets at that point and you have to declare bankruptcy if you want to continue eating.

    If you’ve followed my debt reports you know that I’ve paid nearly $12,000 on my debts over the last year, but only about $5000 has been paid off. Had I not paid the others anything and paid the $7000 to the smaller ones, I’d be much farther ahead now than I am. Big lesson learned there.

    I have two tax refunds coming, and some will go into the hill-and-valley fund to cover summer living expenses when tutoring hours will decline, and the rest will go to the debts, smallest to largest. I’m shutting off the business phone line, and that will provide another $65/mo.

    I tried to get a debt consolidation before I found Dave Ramsey, but CCCS turned me down, issued me a certificate saying I was eligible for bankruptcy and sent me to a lawyer when I was making $3800/mo. I discussed it with the lawyer, but decided not to file until I had no other choice.

    You don’t know where the end of the rope is until somebody serves you with an asset seizure warrant or a writ of garnishment. When they do that and you can’t make enough to live with the loss of those assets or that much being taken from your paychecks (25% or more), then you have to declare bankruptcy. You usually only have 10 days to respond when something like that gets issued, so you have 10 days from the receipt of those papers to file and protect your ability to eat. It also protects your other creditors because they all get a slice of the pie when you declare bankruptcy, not just one creditor who gets a writ of garnishment or seizure.

    Oh, and my Invader Zim site is the most lucrative site I have. It actually makes money every month. I’ll be selling advertising sponsorships on my sites that have monthly traffic of 500 or more (Invader Zim is currently at over 2000 visitors per month and growing fast). Invader Zim is a cult show and I sell a lot of DVDs, Download episodes and merchandise from Amazon and eBay. You may not find this stuff very interesting, lawnmower man, but the surfing public does. It just takes time to get traffic to your sites when you don’t have money for AdWords campaigns.

    I haven’t worked on redbeansandricerecipes.com in awhile, and I may turn it into something along the lines of inexpensive recipes of all kinds. Red beans and rice has a lot of economic and cultural meaning in South Louisiana that many outside of the south don’t recognize or understand. That site gets 200 visitors a month, and I don’t remember when I posted to it last.

    Comment by joubess | April 10, 2008

12. @coolguy3000, I hate Hemingway. I’m a Ray Bradbury fan. He also writes for living (he’s still alive and writing) and is far more successful than Hemingway. Many of Bradbury’s works are now considered literary classics in his own lifetime. If you’re looking at my writing from a Hemingway point of view, well, you’re never gonna like it. Oh well…

    Comment by joubess | April 10, 2008

13. First thing, if there’s any chance of having to declare bankruptcy, surely you can leave your IRA alone?
    quote “Dave describes in a lot more detail how he got through his financial crisis, although he ended up having to declare bankruptcy…
    So even the guru you went to got it wrong? The information is out there for free on the internet on how to snowball and the like. Stop paying this guy’s “club fee” for one, please.

    Comment by arthurwankspittle | April 10, 2008

14. @arthurwankspittle,

    I hear ya and I agree to a point. I’m not going to pay anything off with the IRA money. I’m just going to take out enough to cover necessities while I ramp up my income over the next couple of months. With all the deductions from closing a failed business, I won’t take a big tax hit at all. I can also continue to deduct interest on the business debts until they are paid off even after the business is closed.

    Yes, Dave got it wrong when he went broke. But he learned a lot of lessons that he shares free on one of your local AM radio stations, “The Dave Ramsey Show”. He believes that if he knew then what he knows now he probably could have avoided bankruptcy.

    I’ve purchased 3 of his books, all at deep discounts. I bought rather than borrowed from the library because I wanted to write notes in the books and highlight what I could use the most. And boy, did I make notes and highlight. I also refer back to forms and example letters he published in them.

    I don’t agree 100% with Dave, but I think he has the right idea. I may not renew my MyTMMO.com membership when it runs out, which would save me $89/yr. I use the budgeting tools the most, and it gets me all three hours of the podcast each business day, but I can use an Excel spreadsheet for the budget and settle for one hour of the podcast for free each day. Since I don’t need a total money makeover, the membership doesn’t serve me right now. It may by the time it runs out in 8 months.

    My plan now is to stop paying the unsecured debt people anything until all the basics are covered each month: house payment, basic utilities, food, basic clothing (used if possible), medical and dental care and transportation.

    Then I will pay my two secured debts, my HELOCs. If anything is left over, I’ll pay the SBA SOHO loan payment.

    Then I’m putting at least $10 away from each source of income so I can settle later on the biggest debts, those over $10,000. I may be able to settle with some less than that as they get older, but if I don’t stash some cash I won’t be able to do settlements. I also don’t want to run the risk of having no emergency fund of 3-6 months of expenses since I no longer have any credit, so a little has to go into savings for the emergency fund. In fact, until there are 3 months of expenses saved in the EF, I won’t be using any cash to settle debts.

    If anything is left over after the above, I’ll pay it on the first debt in the snowball, and write a letter to the rest of the collectors that I don’t have enough to pay them anything close to a sizable payment, that I will pay them more when I can, and include a check for $1-$2. They’ll continue to call and harass me and send me nasty letters, but they can’t do much more than that.

    Some have sued me, some may sue me in the future. But my money has to work a lot harder for me than it has been, so I’m not paying $12,000 next year to pay off $5,000.

    What do you think? Does that sound like a plan to you?

    Comment by joubess | April 11, 2008

15. Sherri, what is the purpose of sending creditors a check for 1-2 dollars?

    Comment by corey | April 12, 2008

16. I’m not going to pay anything off with the IRA money. I’m just going to take out enough to cover necessities while I ramp up my income over the next couple of months.
    Please look at what you have written. Why will you be able to “ramp up” your income this time when you haven’t been able to do so in the last 10 months? What’s going to be different this time?
    You plan doesn’t look like a debt snowball to me. Surely you have to put everything down and prioritise it? There’s no “if anything is left over”. If there isn’t anything left over you either need to earn more immediately and or cut back on some spending. If you cannot work out a way out of this, then declare bankruptcy.
    I have looked at some of your other posts and had a play with my calculator. I don’t think you are taking all your debt minimum payments into account. If you have this in a spreadsheet, please tell me what the total minimum payment you should be making is. When you add that to your “necessities” (c $2300), what do you need to bring in per month? $4000? $5000? I’m concerned that you aren’t even close.
    I’m also concerned that you aren’t even close with some of your ideas.
    Then I’m putting at least $10 away from each source of income so I can settle later on the biggest debts, those over $10,000.
    How many sources of income have you? 10 would have you putting away $100 a month to pay off debts plural of over $10,000. How long have you got?
    I also don’t want to run the risk of having no emergency fund of 3-6 months of expenses since I no longer have any credit, so a little has to go into savings for the emergency fund. In fact, until there are 3 months of expenses saved in the EF, I won’t be using any cash to settle debts.
    Again, 3 months expenses excluding debt payments is about $7000. So now are you saying you aren’t paying anyone until you have saved $7000? You say you haven’t got an emergency fund but you are OK to dip into your IRA? None of this is making much sense to me any more.

    Comment by arthurwankspittle | April 12, 2008

17. Also, are you saying you don’t plan on paying your debts anymore until you have 3 months saved on an emergency fund? That makes no sense to me. Do you realize how long it will take you to save those three months? The same is true of putting away $10 to pay a debt of $10,000 (yeah, I understand you mentioned several sources of income, but still…. it can’t be that much)… this doesn’t sound like it will amount to much.

    It’s great that you stay positive and think your income will increase significantly over the next few months, but you shouldn’t base your future plans on that. The truth is that you don’t know what’s going to happen. Hope for the best, sure, but base your plans on your present reality, not on hopes and dreams.

    Comment by db321 | April 13, 2008

18. Answers to all the questions asked since I last posted a comment will be in the next post. Here’s a link for those who have subscribed to comments by email so you can go directly to that post

    http://debtfreeorbust.com/102/comment-answers-and-a-total-money-makeover-epiphany/

    Comment by joubess | April 16, 2008

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