June 12, 2012

  • Credit Card Roulette: Part 2

    The Money Game.  A cautionary tale.


    "Chaaarge it..." Wilma and Betty's mantra when going shopping in the 60s cartoon sitcom The Flintstones

    "Neither a borrower nor a lender be..." Polonius, in Shakespeare's Hamlet, Act i. Sc. 3.

    “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." Mr. Micawber in Charles Dicken's David Copperfield Chapter XII

    "You always hear about "credit history" but never much about "credit future". That's because when you owe lots of money, you don't really have much of a future...." Michael F. Nyiri, poet, philosopher, fool

    I wrote an essay here on my Xanga blog in 2007 called "Credit Card Roulette". It was a featured article on the front page of Xanga. The entry detailed my steady fall into massive credit card debt, and presented hope that at some point I would straighten up and be able to climb out of the hole I'd dug for myself. The "conclusion" in 2007 was to consolidate all my debt by borrowing almost 40 grand from Bank of America at 17.99% with monthly payments of $747.00. Yesterday I read an entry by  @BoulderChristina called "The Difficulty of Living Within Our Means". I recommeded the post and left a comment telling the writer that she inspired me to write a second chapter to my own entry from 2007.

    2008: My new "consolidation" debt is draining $750.00 from my bank account each month, and is due a couple of weeks before rent, which keeps rising. Half the rent on the duplex I share with my roommate Joel is $900.00. The owner who bought the property two years previous has made several "improvements" including adding a second bathroom. He tried to get us to move, and even threatened eviction (for Joel's poor housecleaning skills in his part of the house) but I cleaned up prior to the deadline and was able to get a stay of execution. The addition of the bathroom causes us a lot of grief, with workmen getting in the way of our lives, and after the intrusion lasted more than a couple of months, Joel is going through the roof. I spend a lot of time at work, but because his cancer is in it's advanced stages, Joel is spending most of the rest of his life at home. In early 2008 he announces he's planning on looking for new lodgings.

     My finances are still deep in the tunnel of debt, and I can't see any dim lights coming up around the bend. The prospect of having to look for a new place is causing still more grief. I've been living in houses for a decade and a half, and because Joel seems serious, I do begin looking for a small one or two bedroom apartment. They all seem so tiny....and so expensive. On top of all my problems, Joel's cancer gets far worse during the summer. His lack of health puts the damper on his home search. After his death, which wasn't really "sudden" becaue he's been suffering for over four years, the economy decides to take a nosedive as well. I'm still eating in restaurants, however, and still living bascally paycheck to paycheck. Even with the consolidation loan, my nonexistant budget is a train wreck. With my roommate gone, I need to make some kind of adjustment before the next rent invoice arrives. Joel's brother cuts me a check for his half of the rent for the next month. (It's a deal we'd discussed, but Joel kept putting off actually writing this "last rent check" for obvious reasons.) Dealing with disposing of the detritus left by my former roommate, I clean our home as if preparing to move out, and post "looking for roommate" ads on Craigslist.

    I get a roommate just in time, but he just can't afford $900.00 a month, and I find myself carrying him somewhat for the few months he's living with me. My bigscreen HD TV dies, and I get another on credit with Best Buy, but it's "only" $1300.00, which is the least money I'd spent for a bigscreen up to then. It's also forward compatible with 3D, when that finally arrives. Right around Christmas my new roommate announces he'll be moving out. At this point, I'm in the red each and every month, and my Wells Fargo credit card, which is linked to my personal checking account as an overdraft account, is getting a workout every month. I'd paid the account down to almost zero after taking out my last 401k loan in 2006, but by the dawn of 2009, I owe about $3500.00. And at almost 18%, I'm not touching the principle AT ALL on my consolidation account. Bank of America has me in a viselike grip. I call them repeatedly, almost like a bad penny returning each month, and each month I'm told the same thing. An unemotional (on their part) NO.

    2009: I'm 55 years old. I work at a good job with a good salary, and I'm facing certain homelessness if I can't find a place to live. And fast. The owner of the duplex I'm living in is finally pretty obliging of my desparing situation. (I think he likes me better than Joel, anyway, with whom he's had "words" throughout our "relationship" and now of course Joel is out of the picture.) On the first day of the new year, I drive over to the senior mobile home park I'd had my eye on since before I turned 55. I jotted down the name of a realtor. Lots of homes are available (an ongoing occurence in a senior park with 500 moblie homes, and a rapidly aging community), and becuase of the sucky economy, the prices seem incredibly low.

    I dial the number of the realtor with an uneasy mix of trepidation and hope. He listens to my sob story, and tells me there is a small double wide mobile home becoming available soon, whose owner is in a nursing home. Her grown children thought they could sell if they held out, but are now forced to pay the property rent every month, and want to unload. I might be able to buy this place, which was not listed when I drove around the park, so I haven't seen it, for less than 40 grand. The prospect of buying a home for the price of a car is encouraging. Perhaps there is a light at the end of that debt tunnel right up around the next bend.

    Escrow for a mobile home is a breeze compared with that for one with a foundation. Even though I'm underwater financially, my FICO score is pretty high. The Gods smile on my intended frugality. I'm packed and moved in by February. The down payment of 5 grand is taken care of via yet another 401k loan. (my third, and hopefully final one until I take the money out of the bank during retirement.) During one of the worst times in the financial history of the United States, with a "Great Recession" in process, my financial situation begins looking a bit more rosy. I take as much advantage of the dire straights the country is going through as I can to straighten up my own. With rent and mortgage payments, I"m paying a bit more each month for lodgings than I was paying half the rent, but I now own my own home.

    During Joel's last battle with the big C in the summer of 08, I was going through a lesser bit of a health crisis myself. I had to start using crutches because two of the screws holding my 16 year old titaniuim hip replacement in place broke, and only two doctors in Southern California were able to perform the "hip revision" operation I needed. This operation is scheduled for May, and after living in my new home for only a few months, I find myself spending a week in the hospital undergoing an operation. I will also have to schedule an operation in early 2010 to replace another cataract. Good thing both operations are covered by healthcare and I won't have to pay a penny up front.

    I call Bank of America (yet again) after spending almost three years paying the nearly whopping 20% APR and hardly touching the 40 grand principle I'd borrowed. They've gotten a lot of money from me in the guise of "consolidating" my credit card debt. Kismet smiles. I guess the fates had picked the right "banker" to talk to me. After an hours long conversation, including lots of time listening to muzak versions of 80s and 90s top forty when being put on hold, I am told my APR will be reduced to 4.5% and my monthly payments would be lowered to $620.00 a month. I feel like I've won the lottery!

    I stop eating in restaurants, and begin to brown bag it at work. I create a budget and a "five year plan" to get completely out of debt by 2014.

     2010: My moblie home purchase qualifies me for a 10 percent "new home buyer's credit" from the federal government, and my tax return is almost five thousand dollars. Most of the money is spent paying down my overloaded overdraft credit account. I have to start paying my $3000.00 hospital bill for the hip revision surgery. I also have to go in for my next operation. When I make an attempt to pay at least a couple of hundred when going in for my cataract surgery, the receptionist looks at my copayment and tells me I only have to pay $50.00. I decide to take the money and run. It's a good thing I did. My 11 year old car is slowly dying, and blows it's water pump, among other expensive mechanical hiccups. The tax money I was going to use for the cataract surgery (plus another couple hundred) goes to the mechanic who fixes my car.

    2011: Just when I think my finances are finally in the black, with prospects looking better than they have in years, my TurboTax program tells me I owe $800.00 to the federal government. I'd neglected to have any of the state money I got from unemployment benefits (used during my employer's "furlough day program" during 2010) deducted, and have to pay the tax at the end of the year. I wasn't expecting this, and have to borrow more money from our controller at work. I'm living quite frugally, and entertainment consists of staying home. I do have quite a good home theater, and I love living in the mobile home estates, which contains a large pool and jacuzzis. Pursestrings are tight, but life is good, for the most part. I even begin socializing a bit with my neighbors in the park.

    Besides the loan used to pay taxes and keep me financially stable for the time being, my car keeps wracking up expenses. The mechanics tell me it's common "wear and tear" which causes my belt pulley shaft to break one morning. It's an unforseen glitch which causes me to use my overdraft credit card to pay the $500.00 bill. Every time I seem to pay down my Wells Fargo card (at 23.99% APR) I need to use it again. And when my car's radiator hose breaks later in the year, causing boiling water to run into the engine block, rebuilding the engine is prohibitive at over $2500.00.

    I'm devastated. By the end of the year, I've finally paid off all my hospital bills, and now I've got to either fix my old car, which will probably need even more "fixing" or just buy a new one. Again, the loss of the auto industry is my gain, and I buy a brand new 2011 Mitsubishi Lancer with no money down and payments of $250.00 a month.

     2012: I'm still swimming through my debt, but the water is getting shallower as time goes on. I got a 5% raise (the first since 2006) just when it was needed. The car payment is being budgeted in and I'm just getting by, but I'm not in the red each and every month anymore. I just passed a rather important benchmark, too. I now owe less than 15 grand on that 2007 $37,500.00 consolidation loan. By 2014 I will have paid it off completely. I will also have paid off my mortgage on the house. I'm working on paying down the overdraft credit card.

    Most of my bills are paid online these days, and I used budgeting programs of my own devising and on the Wells Fargo website. I've begun to sell some of my collectibles to help get some much needed income. I sold a vintage Fender guitar for $800.00 and a 1966 Grateful Dead rock and roll poster on eBay for $300.00.

    The yearly subscription bill for my website, www.allthingsmike.com (which is my legacy containing my writing, art and photography, and hasn't been updated in over two years.) is due in a couple of months. I'm looking into switching providers.

    Heck, I'm even clipping coupons these days. And with the prospect of hopefully retiring in less than a decade, I've increased the amount of money I have going into my 401k every week. I should ALSO have the last 401k loan paid completely by mid 2014.

    In a few years (knock wood, if I'm still around) I will finally be out of debt.

    I'm looking at mobile home parks in Florida as a retirement home for the future. The rents are lots less than in California. Or maybe I'll become an expat American. Who knows?

    I've got my whole life ahead of me, and hopefully I've learned some lessons from all this. I took my first vacation in over a decade on my birthday May 1st, taking advantage of all the discounts I could get. My Christmas present from last year (using my bonus, which equals a paycheck) was to upgrade my home theater to 3D status. DirecTV even offers 3D movies for rent on demand!

    As I stated in my first "chapter" of this sad tale, if you're young, don't let the seeming idea of "easy credit" trumpeted by the banks sucker you into living a life which at first seems filled with "toys" (all of which break down eventually) leaving you holding a spiraliing bill of "credit due" which never seems to be paid off. It's a scam the banks have perfected, pure and simple, in the disguise of a "free economy." And with federal regulations even tighter, they're finding even more insidious ways to get (and keep, and get more of) your money!


    Posted: June 06, 2012 8:14 AM

Comments (10)

  • Hello again Michael! 

    What a harrowing tale, and one that so many people find themselves in. Juggling debt to stay ahead of the ball is a scary game indeed, and I am sorry you had to play. I am also sorry to hear about the loss of your roommate, that couldn't have been easy. There are so many people who begin the game with their credit intact and their future looking bright to have it end in unemployment and bankruptcy. It's a sad state of affairs.Thank you so much for sharing your story with me, and I look forward to hearing about your progress as we inch closer to your goal date.
    Take Care,

  • Debt seems to follow everyone anymore. It gets worse and worse each year!

  • I'm trying to cut down my expenses, and stop using credit cards to pay for things all the time. You're right, it's hard to cut down the expenses, bills will still continue to come.

    Good to know you're still updating.

  • Yeesh, what a story. Bills just keep piling up, don't they? But your story is very inspirational, glad to hear you're doing well. I'm lucky in that, aside from my student loans, I don't really have a lot of debt. A few years ago I had to charge a few large expenses when I didn't have ready cash, and it took for.ever to pay off the card. I finally got it down to a zero balance from almost 2,000 - which I know is almost nothing compared to what some people have! - and I'm very proud of myself. Nowadays I charge things on occasion because I'm told that NOT using the credit card is just as bad on your credit as racking up the bills with it, but I do my best to pay off the bill every month. My current car is paid off but I'm sure I'll need to look for a new one in the next year or so, and I'm hoping that my credit rating is good enough that I won't have an insane interest rate. 20% interest is ridiculous, I can't believe they got away with that. No wait, yes I can.

    I think what happens to a lot of people is that they either don't plan well enough and end up over their head, or a bunch of unexpected emergency expenses pop up that they can't deal with and aren't prepared with. Medical issues, job loss. I read somewhere that most people wouldn't be able to survive more than a month (if that) if they lost their job today. Nobody's got anything in savings. A former coworker of mine was constantly in debt but also constantly purchasing the newest must-have electronics. Their debt situation was created when both she and her husband were laid off when their former company went out of business. Even though they could barely pay the rent most months, she still indulged in a lot of what I would consider "luxury" payments. I also remember a few years ago a couple won $300 million in the lotto. With that money, they were able to get out of debt. They owned 2 new SUVs and a giant house with a mortgage. Some of it's bad luck and some's common sense.

  • I am glad things are  going well for you. I know it has been a struggle for you, but you have faced things and stuck to  your plan! none of it  easy!!!

    Time passes  regardless, you have some thing  to show for the time!! GOOD FOR YOU!

  • Mike, you are certainly to be commended for your ability to stick to your plan to get out of the all-to-familiar credit mess.

    I was lucky enough many years ago to marry a lady whose background of enforced frugality helped teach me the proper use of credit (don't use it if you can possibly avoid it) and the "Measure the Pleasure"philosophy of spending has put us in a debt-free and very comfortable retirement.You are quite right about your look at Florida as a place to retire. I've spent most of my life here - moved away after retirement, but moved back after 12 years because of the tax, medical, and living expense differential.  On the whole, FL is a good place for retirees and right now housing and living is pretty cheap. Like CA, FL is a state with very diverse living areas. I grew up and worked -off and on - in South Florida but now live in far North FL (about 20 miles from the GA border) which is much like the FL I grew up in. I won't be going back to Miami.If you are serious about coming here, I urge you to visit first and take a long look at the whole state - it's a good deal different from most of CA (which I've visited several times - both Northern CA and Southern CA - but has its own attractions. I'll be glad to give you suggestions.

  • Finances is a tough topic to write about Mike. I am glad you are surviving. Hope you realise your long term goals...

  • Your tale sounds all too familiar to me. I used to be the Credit Card Queen. Thankfully, I was dethroned. (It's a good thing, too!) I'm learning the hard way. Hey, at least I'm learning, right? You would love FL. Then again, I'm partial as I am a native Floridian. I live in the Panhandle. It's very beautiful here....

  • I hear you.

    We never used plastic for anything lavish...no toys, or trips.
    But when I needed spinal surgery that ran over 130K (twice) we were responsible for 20 percent...and since walking wasn't optional...it went on plastic.

    After five years of playing the "minimum payment game", we finally killed an IRA to clear off the debt.

    No one lost a dime...in fact the made lavish profits...but our credit is still ruined because we refuse to plastic. Cash only for the last five years. One third of your credit score is based on credit card usage. We have almost no debt...just the last of a mortgage...but we can't get a credit card.

    You caught the part about no one losing money on us? No bankruptcies...we paid what we owed.

    But I have friends who carry 30K in credit card debt, could NEVER pay it back...but because they make minimum payments had sterling credit til recently.  Now they are suddenly looking at "debt to income ratios", and their credit is gradually getting shut down. Problem...they NEED the 30K a year they charge to maintain their lifestyle.

    Credit is a trap...cash rules.

  • Sweet blog! I found it while searching on Yahoo News.
    Do you have any suggestions on how to get listed in Yahoo News?

    I've been trying for a while but I never seem to get there!

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