Dave echos a sentiment I’ve begun to hear more and more often. Apparently, it’s getting more and more OK to walk away from ones mortgage:

This isn’t about having your credit score ruined or not being able to get another mortgage for a few more years. It also isn’t about a moral choice anymore, as I thought it was back in 2008. This is about people who have gotten screwed over by the very banks that we have been paying to keep in existence. The banks get all the help they need while the people get nothing – it’s a messed up system right now.

The logic here is truly mind-bending. Let me see if I can get this straight: Those darn banks got bailed out, which is unfair and shouldn’t have happened. But because we did go and bail them out, we should also bail out those people who borrowed far more than they should have. Which is also unfair, but you know, two wrongs always make a right.

As far as those people walking away from their homes, I have little sympathy for them. Nobody twisted their arm to get them to sign that mortgage contract. They rolled the dice in a game they shouldn’t have been playing. Just because they greatly discounted the odds of snake eyes coming up doesn’t mean they shouldn’t lose when it comes up. At the very least, *I* certainly shouldn’t be losing because they did.

FHA loans — you know, those loans that, when push comes to shove, we as citizens get to insure — have risen to almost a quarter of all home loans from 3% just a few years ago. Why? Because apparently they don’t care who they loan to:

FHA also has tightened lending standards, requiring a 10% down payment for those with credit scores below 500.

When 10% down payment for a credit score below 500 is an indication of tightened standards, you just have to laugh. Or cry.

Someone with a score in that range has shown an obvious lack of financial acumen, and has no business with a credit card with a $1,000 limit much less a home loan of potential $100s of thousands. Until one has shown at least the modicum of restraint — and a sub-500 credit score is just about the exact opposite — the dream of home ownership should remain precisely that: a dream.

A letter showed up today letting me know that AMEX has decided it is about time to change terms on my Blue account. Namely, a pretty hefty jump up in my interest rate. Plus a ridiculous rate on cash advances — does anyone actually do them anymore, and if so, how clueless are they? Tack on some minor tweaking to late payment fees.

credit: the Other michael

Oh, and most interesting, they are dropping all overdraft charges. Does this mean I essentially have limitless credit? Why don’t I run down to the local dealership and see if they’ll let me throw a Cayenne Turbo S on it? Eh, well, maybe not… they may just allow it! With the way the auto manufacturers are stumbling over themselves to get you into a new car, one never knows!

Go ahead. Set my interest rate to 39.9%. Make the late payment fee $497. As long as you don’t pull a brain-damaged move like Chase and arbitrarily start charging me a fee just to have the account, I’ll keep you around, if only to keep my credit utilization portion of my credit report as low as possible.

Because in the end, I just don’t care.

I don’t finance my life with credit anymore.

photo credit: frankie_3011

When did we develop the memory abilities of a goldfish? Correct me if I’m wrong, but isn’t this type of stupidity what got us into a pretty serious mess in the first place?

I’m beginning to think it’s time to start saving in some other currencies, because Americans apparently remain too short-sighted to avoid a serious financial spanking.

photo credit: me and the sysop

As I mentioned back when we killed off our non-mortgage debt, our next basic step was funding a real emergency savings account. As I’ve seen suggested just about everywhere, somewhere in that mythical 3- to 6- to 12-month worth of emergency cash was the goal.

The first thing I needed to do was figure out what the typical month should be worth, so sat down with our last year worth of monthly budgets and began adding up all the must-have items. In other words, get rid of those things that we wouldn’t be doing if we found ourselves in an emergency setting. Think things like dining out. Or magazine subscriptions. Or vacation funding. That sort of thing. Tack on 5% — just to adjust for inflation — and multiply by the number of months wanted. In the end, six months sounded like a good middle ground, and we began funneling my side income and any extra cash previously going towards debt into our ING savings account.

And again, it is amazing what focus, hard work, and a little luck can do. Because four months later we have a fully funded emergency fund for those six months. Plus another twelve months+ on top of that. A certain portion of that will probably be set aside for next year’s taxes, but at this point we track it as a savings subcategory called ‘Wow! Funds‘. Because, wow, things are really changing for us right now.

Next money step? Think it’s time to see about getting our little five-year-old future education taken care of…

I really have to laugh at the various credit card companies and their reaction to the imminent passage of new credit card legislation that curtails some of their most egregious activities. Threatening that they may just have to start screwing over their most responsible customers in order to make up for no longer being able to screw over their less than perfect ones as badly.

“Those who have managed their credit well and currently have very good credit card deals will find that card companies are limited in their ability to distinguish between them and those that have credit problems,” Edward Yingling, president of the American Bankers Assn., said in a statement.

“The result will be some subsidy from those that manage their credit well to those that have problems, affecting negatively the terms the former will receive.”

Who do they think they’re kidding? Those most responsible customers don’t need their silly pieces of plastic, after all. They are merely a convenience. Attempt to nickel and dime them, and you’ll see a mass exodus to either those credit card issuers who know that a fairly treated customer can be a profitable one, or off the credit merry go round altogether and using their debit cards.

Or, god forbid, back to cash. The Horror…

photo credit: fotograf1v2

Glancing at the calendar, I notice that almost half of the month has disappeared in a pile of other people’s tax documents. The brain is just a little crispy right now…

Which is not to say that little has gotten done with our debt destruction progress. Actually, all of a sudden our future debt reports have gotten incredible simple. Not that they were all that complicated to begin with, but by the end of this month, the report would consist of a single line containing our mortgage balance.

That’s right. As of sometime next week, when our medical bill shows up and we write out one more check, we could call up Dave and shout WE’RE DEBT FREE! Well, except for the mortgage, which Dave seems OK with. Which always felt a bit disingenuous to me, when most people’s biggest debt is an oversized mortgage, but that’s a whole ‘nother post.

So, how did we kill off $27k+ in a single month? More awesome side job income? Nah. I didn’t tap those funds at all. Just letting those stockpile up for the time being for next year’s tax bill. Instead, we finally got rid of my father’s gift, which covered the loans taken out against it along with leaving a few thousand extra to work with. We plan to kill off the last of our medical and use the rest as an initial boost to a real emergency fund. OK, and we may blow just a bit of it celebrating.

Anyway, enough prattling on. Let’s take a peak at what is probably the final State of the Debt report:

So what’s ahead?

The State of the Debt reports are probably done. Seems a bit boring to report something like ‘Yep, made another mortgage payment.’ I fully intend to accelerate paying that mortgage off as quickly as possible, but a monthly report on that progress? Eh. Maybe in passing I’ll mention milestones, but really, I’ll have to see if I can come up with something a little funner to point out…

Like I alluded to, a real emergency fund, in the neighborhood of six to twelve months of expenses. Haven’t sat down to ponder the exact level, but somewhere in there. Our miniature one has come in handy when stumbling blocks appeared along this path, but having something substantial in place should a more extreme emergency make an appearance definitely would be a good idea. Plus, having that to fall back on gives you freedom to take advantage of opportunities you’d otherwise be hesitant to consider otherwise.

More life simplification. In my free time (in other words, not in the last six weeks or so) I’ve been reading quite a bit on life hacking. Think along the lines of books such as:

• Margin by Swenson
• Your Money or Your Life By Dominguez & Robin
• The 80/20 Principle by Koch
• The Myth of Multitasking by Crenshaw

Like too many people anymore, I spend far too much time doing things that add far too little to my life, and far too little on the things that actually do.

I will be correcting that imbalance.

photo credit: danesparza

As I mentioned in my last post, we accomplished something that I consider absolutely huge — we no longer have any credit card debt. And I’d like to extend my thanks to Chase for being the pricks they are for motivating us to pull as much out of budget in order to kill them off as quickly as we did!

In other financial news, the side business that is becoming my main focus continues yielding gangbuster results. I assumed that after the holidays, things would rapidly slow down on that front. But it looks like January has ever so slightly passed up the incredible December. That said, next month is unlikely to see the same debt killing as this one, as I really need to set aside a pretty healthy chunk for quarterly taxes. I set aside none this month to ensure that we could kill Chase, so I’ve got a little catching up to do.

Anyway, on to some numbers… let me just say right now, 2009 is going to be awesome!

For the first time since I initially laid down the plastic to pick up some trinket almost 20 years ago, we are officially credit card debt free!

Following my little rant over Chase doing extensive modifications to our agreement, we shuffled a few items around in our budget, waited for my side business commission check to come in, and then scheduled one whopper of a payment to them. The payment cleared last night.

And now, I have an envelope on my desk containing the remains of a credit card along with a letter requesting account closure just waiting for me to find a stamp.

photo credit: jeremyfoo

With the success of our recently discovered income source, all of a sudden we have a healthy chunk of extra debt destroying powers. Since we have a variety of potential targets, we sat down recently to decide which target was most deserving of the full wrath we could focus on it, and made plans accordingly.

Since none of our debts vary all that much in interest rates, we thought we’d take the Dave Ramsey route and go smallest to largest. So, looking at the latest State of the Debt, that would mean knocking out the medical debt, followed by the HELOC, followed by the Low Energy Loan, followed by the Chase card, and then finally the mortgage.

But upon checking the balances of our various accounts online this afternoon, the order has been altered a bit. I noticed that Chase was ten bucks higher than YNAB said it should be. Wanting to fix what was likely an entry error on my part, I investigated further. Only to discover a mystery Account Service Charge for $10. Being as I had no idea what it was for, I sent off a quick email inquiring about it. I received this back:

As your credit card company, we value your business. It’s important to us that we address your questions regarding the terms associated with your account. Thank you for sharing your concerns with us.

We consistently review our business practices to ensure that we provide valued services and remain competitive in the business. As noted in your Cardmember Agreement, we may change the terms associated with your account and will notify you of the change in writing in accordance with applicable law.

Our records indicate that a Change in Terms notice was sent to you in November 2008, which advised of the addition of a $10.00 Account Service Fee and a change to the required minimum payment for your account, effective as of your January 2009 billing statement. Please note that the Annual Percentage Rate (APR) on your account is not changing and you may continue to take advantage of the promotional APR currently in effect on your account.

First off, Chase doesn’t send me a thing. I am enrolled to receive electronic statement, and haven’t received a single piece of paper from them since the last time they sent me a new card because the last had expired.

Nevertheless, searching out past statements just to see what I have apparently agreed to, I find a pdf of my Change in Terms Notice. Along with my Bose Sound Offer and my Holiday Rewards craptacular junk jewelry offer, which I had to check out because who knows what else they may have decided to sign me up for, as they can pretty much arbitrarily change the agreement to whatever strikes their fancy. (And in case you were wondering, nope, no Bose radio is on the way, nor any overpriced costume jewelry!)

And here is the gist of the Changes to my Terms, my emphasis added:

We’re sending you this notice to advise you of some new changes to your credit card account. These changes will take place automatically and will be effective with your January 2009 statement.

Here’s a summary of the key changes:

• A new Account Service Charge of $10 per month will be applied to your account.
• Your minimum payment due will increase from 2% to 5% of the ending balance on your monthly statement. As a result, your required monthly minimum payment will increase.

Important: Your APRs will not be impacted by these changes.

The key factors we considered when making these changes include the current APRs and revolving balances associated with your account.

The minimum payment jump of 3% doesn’t bother me so much. Only, quite honestly, because we can afford it now. Six months ago, it would have caused some serious hardship. There is a world of difference between a $324 minimum payment and a $850 one!

But the $10 a month Account Service Charge? That’s just petty. And pettiness deserves, well, a swift kick to the nether regions.

If you have any questions regarding these changes, please contact us by calling the customer service number on the back of your card.

Hello, Chase CSR? Please close my account. Immediately. I’ll scrape together the cash to pay it in full by the end of the month.

Oh, and bite me.