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IHTM: I Was $250,000 in Debt and Didn’t Know It

This piece originally appeared on xojane.com as part of their popular ‘It Happened To Me’ series

It all started with a discount.

I was just nineteen years old when I was shopping and saw a dress that I liked. The store was offering a discount when you signed up for a credit card. I applied at the register and was very embarrassed to be declined.

I didn’t really think about it again until a letter from the credit bureau came in the mail a few weeks later. It listed all the many reasons my poor credit was unacceptable: delinquent payments, high debt to income ratio, charged off accounts, repossessed cars, and more.  Since I was living at home with my parents, had paid cash for my 1972 Oldsmobile, and had no credit cards, so this was all super confusing. I did what any young person would do in the ’90s and fired up AOL to find out some answers.

AOL led me to the three major credit reporting agencies (Equifax, TransUnion, and Experian) and I ordered my report. Seeing it all there in black and white, a pattern began to emerge. The credit cards that I had supposedly defaulted on were to shops where a certain family member loved to shop. The car that was in danger of being repossessed was the same model that this family member drove.  There were even utilities in my name at their address. When it was all tallied up, I was in the hole just under $250,000. Did I mention that I made $5.15/hour?

I wish I could say that I was shocked, but the fact of the matter is that this was not surprising behavior. I was young and dumb and I buried my head in the sand, hoping it would all just go away.

I honestly didn’t know that much about money and credit or how it worked for and against you.  My parents always had difficulty managing money and paying bills. We lived in a very large house in a very nice suburb and had no furniture in most rooms. We had three, sometimes four, cars and I would come home from school to find the electricity shut off.

They constantly fought about money and lied to each other about spending, often making me complicit in their acts. I was asked to throw bills in the garbage so the other wouldn’t see them or hide new purchases.  Let’s just say that the personal finance lessons being modeled to me were less than ideal. To me, money was something that just showed up sometimes and it was our job to use it all up until it was gone.

So of course when I was finally approved for a credit card I maxed it out. Why bother being responsible when I was already doomed? I spent thousands of dollars on that card and literally had nothing to show for it. Not even a cool leather jacket or great memories of Lollapalooza or whatever.

I wasn’t able to pursue college because my family made too much money for me to qualify for any kind of loan or grant – but there wasn’t any money available for them to help me, either. I took a few community college classes while working full-time, but it just didn’t work out for me. So here I was, young and living paycheck-to-paycheck with no hope of getting out of the situation.

The phone calls were incessant. I hated even looking at the mail. It felt like there was no way to get ahead and all I could do was wish it away. This went on for an embarrassingly long time. I was now twenty-four years old and just realizing that I was actually going to have to deal with this. I contacted a lawyer who explained that I would have to file charges against the person who committed the fraud. Because of the nature of the crime, there was no way to distinguish myself as the victim as I could have benefitted from the fraud on some way (like the utilities). I honestly didn’t have the money or the chutzpah to do that, so I just stubbornly decided to take care of it myself. Somehow.

Luckily (?) at this point I had recently been laid off of a job and was living alone in a tiny apartment. All I had was time, and I spent most of it at the library learning about bankruptcy, how to correct errors on your credit report, and how to fix your finances for good. I learned that negative items expire from your record with seven years of inactivity. My inability to deal actually worked in my favor and a few items “fell off” my credit report. Now there was just a measly $175,000 left to clear up. The rest of the items I either tried to dispute or work out a deal.

The disputes took months, years even! I did learn early that credit companies want your money and they’ll take it any way they can get it. I was open about my inability to pay what they were asking. Most creditors settled for less than 1/3 of what was owed. When you default on your debts, the creditors sell the balance to collectors for pennies on the dollar. As long as I was offering more than that they were happy to accept it.

I hated making payments towards balances that I didn’t have the fun of running up. In the meantime, I learned to shop smart, plan a menu, get the most out of everything I own, and basically embody the old Depression saying of “use it up, wear it out, make it do, or do without.”

Empowered by my new knowledge I made a game of it. How much of this debt could I ditch and how fast? It turned out that I could work my butt off and deny myself anything but the most basic funtimes for a few years and come out on top.

I hustled as a server and bartender and took every possible shift I could manage. Being at work every evening made it impossible to go out and spend money. I had many a staff meal at the bar. I learned to hand-wash and line-dry my clothing. I learned that one quality item that costs twice as much is worth more than the crappy version on clearance. It takes a lot of effort to be that cheap!

All total it took me five years to manage a quarter million dollars in debt. While I really, really wish I didn’t have to deal with all of this, I don’t take for granted the lessons learned along the way.

I am now a boring middle-aged lady with two kids. Using the knowledge I gained through my awful experience, I have been able to guide my family to success. I bought and paid off a house in 3 years, sold it for a profit, bought my dream house in Pittsburgh, bought 2 new cars with cash, and stayed debt-free through the whole thing.

Whether you’ve made your own poor choices or had others poor choices thrust upon you, there is a way out of personal finance hell. The calls won’t stop and the bills won’t take care of themselves – but you can change your future by correcting the past. There are one million finance bloggers handing out free advice online. Find one who speaks to you and learn a few things. Get a book from the library and take notes on debt payoff. Get your credit report and look it over, you might be surprised at what you find. I sure was.

What It Means To Be Frugal

This piece originally appeared on Sapling.com

Have you ever decided against instant gratification and instead chose to wait for an even more satisfying experience later? Maybe you passed on a mediocre cookie while on a quick break so you could enjoy a full, delicious piece of cake at home. Maybe you had enough vacation days at work to go take a long weekend away, but you waited until you accrued more so that you could enjoy a proper week off. Both of those decisions, at their core, are made from a place of frugality. You value your desserts and you want to enjoy those calories, not rush them. You understand the importance of taking time away and would like as much as possible, even if you have to wait a little bit longer.

Saving money just for the sake of watching it pile up is cheap. Saving money so that you may apply those savings towards a goal is frugal.

We’re all familiar with the stereotype of the ultra-thrifty super couponer who stockpiles dozens and dozens of cans of tuna in their basement – they were such a good deal! That person is cheap. But if that same person wants to help stock the shelves of a local food bank and can only afford to through their coupon skills? That’s frugal.

To truly be frugal, you must first find your purpose. Are you trying to save up for a house? Paying down your student loans? Once you’ve targeted your goal, all your thrifty efforts suddenly make sense and are purpose-driven.

To be frugal is to make choices based on the long-term return, which admittedly can be very tough to do. We’re surrounded by machines that manufacture automatic and instant information, affection, food – whatever we want is just a few taps away. Those fleeting happy moments are false. They aren’t meant to create a lasting feeling of satisfaction, they’re meant to keep you coming back for more of the short bursts of pleasure.

By focusing on your end-game, you can learn to detach from the instant gratification of sub-par lunches in exchange for the delayed satisfaction of one killer meal per season at a Michelin starred restaurant. The choices are for you to make every day.

True frugality is considering your spending as it reflects your goals.

What Even Is a FICO Score?

Even if you’ve never used credit or borrowed a dollar, you’ve got a FICO score. And that sad little score is 0 — for now! Through on-time payments, keeping accounts open and in good standing for a few years, and not using all of the money made available to you, you’ll slowly build your FICO score up to a respectable number.

So, what is this “FICO” you speak of?

FICO stands for Fair, Isaac & Company. Fair Isaac aggregates data based on lender reports to generate a number for each consumer. Their scores are purchases by the billions by lenders who then make decisions about customer’s creditworthiness based on the data. There are lots of ways that lenders can accumulate data and evaluate borrowers on a case-by-case basis, and they did until the 1950s when Fair, Isaac & Co. was started.

Age ain’t nothin’ but a number, but FICO is your whole future.

FICO is the fastest, easiest, and most widely available way for a lender to decide if they want to lend to you. Landlords, banks, health insurance companies, and even employers use FICO to evaluate their risk.

Don’t get us wrong, you can get by with bad credit, but life is a lot easier and less expensive with good credit. You’ll pay less in interest over time and have a lot more options afforded to you. So how do they calculate your FICO score?

  1. Payment history. Pay your balance in full each month. If you can’t afford to pay your balance, cut your spending.
  2. Credit utilization. Just because you have a $50,000 limit on your card don’t mean you can spend it all. Keep it under 1/3.
  3. Account history. A long history shows that you aren’t going to skip town anytime soon.
  4. New credit. Don’t go out and open 10 new store accounts the month before you apply for a mortgage. It makes you look like you reallllly need money.
  5. Credit mix. Care loans, traditional credit cards, mortgages, whatever – just mix it up. Have a few different types of accounts shows that you are a well-established and well-rounded consumer.

Responsible credit use over a period of time makes the world go ‘round. Get on board!

Here’s Exactly What’s Going on With the Federal Reserve

So, you may have heard something about the Fed increasing the rates this year. But what does that even mean?

The US Government’s Federal Reserve Open Market Committee (FMOC or ‘the Fed’) controls the rate at which banks pay interest to the Federal Reserve for borrowing money. Why do the banks need to borrow money from the Fed? Because they must meet the federal mandate for banking reserves, which was set up after the Great Depression.

Just like we advise you to have a three- to six-months cushion of expenses put aside, the Fed advises banks to do the same. That is their reserve.

When a bank runs out of money, and it occasionally does happen, they can either borrow from another bank or the Fed to meet their minimum reserve. Borrowing from another bank would be easier and cheaper, but since there aren’t too many banks left, they tend to run into difficulties (like being shut down by the Fed). Ever-changing regulations (set up by the Fed) coupled with mergers and little banks being swallowed up into big banks (okayed by the Fed) creates a situation where the Fed is the only place to turn to when reserves need to be met. Oh, and the Fed sets the reserve minimums.

So…does the Federal Reserve need money? Is that why they charge more interest? Nope! The Fed prints money, they don’t need more – they make it. And since we’ve departed from the Gold Standard, the US dollar is essentially valueless. We create it here, exchange it here, and the “value” is determined here by our market’s supply and demand.

When the Fed raises interest rates, it makes it more expensive for banks to borrow money from them. Why would they do that? To make the supply of money smaller. With less money circulating, it becomes more valuable and people (you) will pay more for it in the form of loan interest for houses or cars.

Raising the interest rate is the way that the Fed manipulates the economy by either restricting or flooding the market with money.

What does it mean for you?

Prepare for an increase in borrowing rates for houses, cars, education, credit cards, rent, food, and anything you pay for with money. The Federal Reserve interest rate will be 3% by the end of 2018; it is currently 0.75%.

Real Housewives Book Club

Teresa Giudice is like if Yahoo Answers came to life.

That being said, I really wanted to hate on this book but just couldn’t. It’s like Michael Pollan for idiots, really. If you were just starting to think about getting into a healthy lifestyle, and wanted a little bit of xenophobia or slut shaming mixed in, this would be a great book for you!

This cookbook lifestyle-guide hybrid was co-penned by Heather MacLean, who writes pretty straightforward books on registering for baby items and planning family reunions. I imagine that she and Teresa worked separately, remotely, and with a third person refereeing. As you read, it’s pretty easy to sort out who wrote what. For example:

While describing carbohydrates, Teresa says sugar-rush let down is like “a gold digger leaving her fiance to party at the river.” While Heather obviously wrote the paragraph that begins “In 2000, the Institute of Biomedical and Life Sciences…”

But wait, there’s more! Sprinkled throughout are Juicy Bits from Joe, including one very charming story about him throwing a man out of their shore house for fornicating in front of their children. The rest of the Bits are anecdotes about how rocks are heavy and eggs shouldn’t go in the microwave.

There are even some interjections from Teresa explaining how to get garlic stank off your hands (rub them on stainless steel) and how to tell when herbs go bad. Then there is a very large, very bolded instructional about NOT using olive oil as a personal lubricant. Just in case you were so moved by her love for the oil that you wanted to just really go for it, health-wise. Don’t put it in you.

Oddly, that sexxxy little story isn’t out of place in this cookbook. every other paragraph talks about how good in bed her husband is, how much she likes to do it, and how crazy in love with sex they both are. Every other-other paragraph is calling out Danielle Staub for being a huge prostitution whore.

There is actually a lot of name-calling in this book. She calls Betheny Frankel a liar, Danielle Staub a whore, Caroline Manzo a fake, and the Olive Garden a fraud and a phony. Que horror!

The recipes are very simple, as are most traditional Italian fare. Simple, fresh ingredients and a little love. There are also 40 pictures of her daughters eating pasta, if you’re into that sort of thing.

Oh! And there is a very awkward line about buying premium olive oil (NOT TO BE USED SEXUALLY) to impress even “the guy from the IRS that won’t stop knocking on your door…” She is in jail presently for defrauding the IRS, btw.

Overall, this was a very quick read that I wouldn’t recommend to anyone, ever, unless you were recovering from some type of head injury that made you forget everything you knew about food and how to eat it.

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