Beating Broke

Money Rules by Jean Chatzky

April 30, 2012 By Shane Ede 6 Comments

Money Rules : The Simple Path to Lifelong Security

By: Jean Chatzky

Chatzky is a pretty big name in the realm of personal finance media, so when I was asked if I wanted to review her latest book, I jumped at the chance. In Money Rules, Chatzky aims to break down personal finance into it’s most simple denominators and give it out in a set of rules. Overall, there’s 94 rules. Each is a paragraph or two long. And, each is pretty solid. I had a hard time finding any of the rules that I could argue against. There are a few that are borderline, but I think that they get a pass in the sense that they can be considered a standard personal finance rule.

There are some readily acceptable rules too. Increasing savings with each raise, not treating your primary home as an investment, not shopping hungry, and 90 others. From the longer ones, to the shorter ones, the book is a quick read, at 114 pages, so you don’t really have any good reason to not read it. I think that it’s one of those books that you can read quickly, and refer back to occasionally for guidance and reaffirmation of some basic personal finance principles. Because of it’s size, you’re not going to get bogged down in the nitty-gritty details of each point, but merely get the point and be able to find ways to apply it in your own life.

Currently, the book is a bit over $10 at Amazon in paperback, and a bit over $9 for the Kindle.

P.S. I’ve got a couple of copies to give away, so come back tomorrow to see the details on that!

What is a Debt Management Plan

April 27, 2012 By Shane Ede 4 Comments

As you no doubt know, this is a blog about personal finance with a leaning towards getting yourself out of debt, staying out of debt, and learning how to handle the money you make once you’re out of debt. There are lots and lots of ways to get out of debt. My personal favorite is pretty close to the Dave Ramsey “Total Money Makeover” method. Not everyone is willing or able to go “gazelle intense” and bust their debt down to nothing the TTM way though. For some, they’ve gotten so far down into that debt black hole that they just don’t know where to start. Those people will, more often than not, end up at a bankruptcy hearing long before they’ll be exclaiming “I’m debt free!” on the radio.

But, if you’re one of those people, there’s one last stop on the debt freefall before you declare bankruptcy. Call it a last ditch effort if you will. That stop is a Debt Management Plan. Too often, the DMP is associated with shysters posing as financial advisors who promise to get you out of debt, while loading you up with fees on the backend. The problem with a DMP that charges fees is that you are actually adding on extra debt as you try and pay off your debt. But, there are some reputable places that do offer a free debt management plan. There are some that will help you to pay off your debt without going into further debt and without declaring bankruptcy.

What exactly is a debt management plan? The administrator of a DMP acts as your agent. They contact all of your debtors, like credit cards, auto loan lenders, etc… and negotiate a payoff schedule with a payment that you can afford. Usually, that payoff schedule will include some pretty significant drops in the interest rate as well. You make one large payment to the DMP agency, and they distribute the payments out to your debtors. At the end of the DMP, you’ve paid off all of those accounts. Any good DMP will require that you don’t add any new debt while on the plan. It also will include at least a minimal amount of counseling to help you avoid getting back into debt when you’ve finished with the debt management plan.

A debt management plan isn’t perfect. It’s not the ideal way to get rid of debt, but for some, who are having issues getting their debt under control, or, issues making all their payments, they can be a valid way to go about doing so without the pain of bankruptcy. Your credit will still take a hit, however. Not nearly the hit that a bankruptcy would deliver, but the accounts will get reported as being negotiated.

In the end, if your choice is between a debt management plan and bankruptcy, I’d take the DMP any day.

Do You Let Television Affect Your Reality?

April 25, 2012 By MelissaB 11 Comments

Do you watch a reality show such as Storage Wars or Sell This House?

Perhaps you have watched Storage Wars and have seen some of the participants walk away with as much as a $5,000 to $10,000 profit. (Of course some participants also have weeks where they lose a few thousand dollars on storage units, but we, as humans, like to be optimistic and focus on the units that make thousands of dollars.) Maybe you watch a few episodes and think, “I can do that!”

Or, maybe you like to tune in to HGTV on the weekend and watch people renovate their yards and homes in their spare time or watch experts come in and make a home more aesthetically pleasing so it will sell faster as they do on shows like Sell This House. You may begin to think about projects around your home that have bothered you—the old wooden kitchen cabinets that you wish you could brighten or modernize, the old worn out couch you would love to replace but can’t afford to.

The Benefits of These Types of Shows

These types of reality shows may help you make frugal improvements to your home. Take that worn out couch—maybe you watch Sell This House and learn how easy it is to cover your couch with a slip cover and make it look much better. Maybe you learn that you don’t have to spend $50 per window treatment; instead, you can go to Goodwill or a thrift store and buy flat sheets to hang on the window. By watching the show, you are learning simple, frugal tips to improve your home.

The Problems with These Shows

The problem comes when you watch these shows and they cause you to become dissatisfied with your current situation. Maybe you never thought about creating a patio of pavers behind your house, but because you saw it on one of the shows and liked the results, you want to do the same. You spend $500 to have someone lay the pavers for you and create your paver patio. Supplies were another $200. You have now spent $700 for something you didn’t even think of, let alone want, before watching the show.

Another problem is when you watch enough of these shows to think that you know what you are doing and will be able to replicate the success of the people on the show. An acquaintance I know was dissatisfied with his job and quit. His back-up plan? Buy storage units and sell the contents. The problem is that he does not have the expertise or the eye for valuables that the people on Storage Wars have. He pursued this line of work for several months and lost quite a bit of money. Now he is back to work in his old field.

These types of reality shows can be useful sometimes, but often, they increase your level of “want” or make you think you can do something you are really not qualified to do. Remember, these shows are for entertainment purposes, and the chance that you will be able to replicate the success of the participants is slim.

Have you watched a reality show that made you think you could do something you couldn’t? Did you lose money?