Updated on 08.12.11

Reader Mailbag: Reading and Blurbing

Trent Hamm

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Recovering from abysmal credit
2. Handling debt collection
3. Preparing for a layoff
4. Starting with web design
5. Repaying loans now or later
6. Deciding whether to become contractor
7. Getting started with GTD
8. Paying off a mortgage quickly
9. Severing your credit from someone
10. Why mention prayer?

One interesting situation I now find myself in is that authors now come to me and ask me to put blurbs on their book covers. “Will you send me a nice quote to put on my book?”

Some authors just put a blurb on everything. Some of them blurb nothing at all. Others just blurb for their friends.

I’ve made the (perhaps) mistake of asking people to send me a copy of their manuscript so that I can read it. The end result is that I have a big pile of soon-to-be-published personal finance book manuscripts sitting on my desk.

I’ve been trying to read them and write reviews of them that I can hold onto until they’re released, but that basically means that I’m reading and reviewing two personal finance books a week (for the time being). That’s a lot of reading!

Q1: Recovering from abysmal credit
What do you do if you have horrible, abysmal credit? I am rejected for any credit card I apply for (even the Orchard Bank ones, that everyone can get). I racked up about 10k in CC debt about 5 years ago and defaulted on my student loan…. I have since fully paid off the CC debt and my student loan is back on track but I just feel like I will never be able to establish credit. I just got a new job and will be eligible for their 401k in a year but I’d love to find a credit card and slowly start to establish credit. I am 28 years old and single with no debt except about 4k in student loans. All I have is my bank credit/debit card and I am trying to get back on track. Please advise.

– Melinda

The easiest first step to take in this situation is to head down to your local credit union and discuss options with them. Some credit unions will offer you a small collateralized loan at a reasonable interest rate to help members re-establish credit.

If that’s not an option, you can take out a secured credit card. A secured card is one where you essentially pay a deposit when opening the card and that deposit is equal to your credit limit. You then make payments as normal and receive the deposit back if you close the card, but you lose the deposit if you fail to make payments. This, again, will help you build positive credit.

Another option is to convince someone you’re close to, such as your parents, to add you to a credit card of theirs to help you raise your credit. You wouldn’t need to actually have a physical card at all or ever charge a single thing to that card. Having a line of credit on your credit report will certainly help, especially when that credit line is actually controlled by someone else that is reliably paying the debt.

Q2: Handling debt collection
I ran into credit card problems after being laid-off from my job about 5 years ago. I was paying the credit cards on time and monthly, but unfortunately, the credit cards companies ran credit report on me and decided that my debt was too high and increased my interest rates – some to 24%. After doing this, I could no longer afford the payments and my credit cards (there were four) ended up in charge-off status. The total debt is $55k.

The debt for 3 of cards was sold to debt collectors/law firms and I was subsequently brought to court and judgments were filed against me. The 4th card is with a debt collector but there hasn’t been a judgment filed.

Currently, I am gainfully employed and paying the judgments monthly. The 4th card has a total debt of 33k. I am saving up to approach this company with an offer of debt settlement.

Do I approach this company with an offer of say, 15k? And if they accept, what happens to my credit report? What can I do ensure that they remove the negative mark on my cc report (if I can at all)? Is this the best approach? (Debt Settlement)

Down the road when this is all paid off, I would like to buy a home. What can I do now to ensure that my past problems don’t make it impossible for me to purchase a home?

My goal is not to have this prior debt ruin my future and it seems that credit reports are being used more and more. Do you think that once it is paid off, it will go away? It is a huge burden in many ways.
– Kelly

Settling with these people is certainly an option here. Most likely, they’ll be happy to negotiate with you. I would suggest lowballing them for even less than you’re offering here, though.

If you do reach an agreement with them, your credit will be marked as having paid off the debt. However, that late debt will be brought up to the current date. That means that instead of having a black mark on your credit for two or three more years, you’ll have more of a gray mark (not nearly as bad) mark on your credit for the next seven years.

The less honest approach is to just never pay back the loan. It’ll fall off of your credit history in a few years and no longer impact your credit. It’s rather strange, but that’s how credit reports work.

Q3: Preparing for a layoff
I have just been told that layoffs for a large portion of the staff at our company may be coming by the end of the year. While I do not know for sure if this will affect me, I would like to assume it will and be prepared for it. I have no idea if there will be a severance package or if I’ll need to apply for unemployment and I would expect it might take me 3-6 months to find a similar job.

I currently have about $6,000 of credit card debt, a mortgage (which is about the same per month as I’d pay in rent around here), a small car payment and a few student loans. In addition, I have about $5,000 saved in an emergency fund (which equals about 2-3 months of living expenses). Up until now, I have been aggressively paying off my credit cards at a rate of about $1,000 per month, so I expect to have them paid in 7-8 months. However, with the possibility of a layoff looming, should I continue this path or should I pay the minimums and save the cash for when I might be unemployed?
– Angie

If I were you and I knew a job los was looming without a replacement job lined up, I would immediately go to minimum payments and start adding every dime I could to an emergency fund. It’s impossible to tell how long your jobless period will last, but you should be prepared for the worst.

If everything goes well and you quickly get a job, don’t hesitate to make a big payment on your debts out of your savings. You won’t have lost much money in the process.

On the other hand, if things don’t go well, you’re going to be incredibly glad to have that money in the bank.

Q4: Starting with web design
I am a long time reader of your blog and truly admire your commitment. I am not a technical person but I would like to learn the basics of web design and have my own web site. I have some ideas to monetize my site and yet I do not want to be dependent on a web designer at least at the early phases of my hobby/side business.

What would you recommend? There are lots of books about this at Amazon but, I cannot decide where to start.
– Canan

Since I don’t really have a grasp of your level of computer skill nor the type of project you have in mind, my honest suggestion would be for you to head down to your local library and start perusing the computer book section. Look for books that speak to your specific need and level and check out a few of those.

Another path might be to learn a software package that does this all for you. The best software package I’ve found for such things is Adobe Dreamweaver.

Better yet, do both. Knowing how to use Dreamweaver coupled with some raw HTML skills can be a valuable mix, both for your own goals and for contributing to other projects.

Q5: Repaying loans now or later
I am a full-time college student, about to start my Junior year in August. During the past two years, to finance my education, I have taken out $20,000 in student loans at 6.8% interest. I never planned to borrow so much, but poor decisions on my part and unforeseen circumstances lead me to where I am. However, inspired by your blog and similar blogs, I’ve already made drastic changes. I am transferring schools in August to save money, and my tuition and other educational expenses will be completely covered by a scholarship and grant. Further, while I’ve always had a part time job during school, I’m working full time this summer, learning to budget, and contributing to an IRA. It feels great to finally understand finances and get back on my feet!

At this point, I want to start paying off my loans – I have started reading Dave Ramsey’s book Total Money Makeover, and I just finished building my “beginner” emergency fund. Now that I’m moving onto Step 2 – Debt Snowball, I’m not sure if I should continue. My dilemma? I plan on attending law school in two years when I graduate, and there’s a very good chance I will have to take out more loans to attend. I would like to start saving money for law school now, but that means not paying off my current debt at this time. I have some flexibility in my decision: about half of my current loans don’t start incurring interest until after I am completely done with my education. I certainly don’t have the money to both save for law school AND do the debt snowball; I make less than 10 dollars an hour.

So, would you recommend I forget about paying back my loans for now, save for law school, and worry about the loans after I graduate? Or, should I stay on Dave’s plan, pay off all my debts, and maybe even forget about law school until I can actually afford it without loans(maybe 5 to 10 years from now)? Is there a compromise?
– Melissa

There are a lot of factors involved in this decision that you didn’t mention. Is the degree you’re working on now going to be able to employ you on its own without the law degree? Are you going to be able to get into a good law school (in other words, is this plan realistic with your current grades and academic progress)? What is the broader financial picture of your family like? And do you want to go to law school, or is this something you’ve convinced yourself (or others have convinced you) that you should do?

I can’t answer these questions for you. However, I will say this. If you’re sure that law school is the path you want to follow, I would plan on doing it right after graduating and I would start saving for law school immediately. If you leave school for a while, you’ll find it increasingly difficult to return and the return on investment of a higher education degree will grow smaller each year you’re out of school.

Sit down and think about what you want, first and foremost.

Q6: Deciding whether to become contractor
I am 27 years old in a pretty decent financial situation (0 debt and over 6 months of expenses in savings), single and in good health. I’ve received an offer to become a long term contractor doing similar work as I do now. The pay would be about double my current hourly rate but there would cuts to benefit options by becoming independent (I would be paid/managed by a professional services agency instead of workplace). What things do I need to be thinking about when making my decision about the job?

– Charlie

How good is your resume? Do you have a skill set that will make it easy for you to find work elsewhere if the situation changes? Are you actively building your skills?

What exactly does the long term contract look like? What are the “outs” for you and for the company? How long is the term of that contract? Are you eligible to continue your current health care plan for a while under COBRA?

I would be asking myself and all parties involved those questions. I would only make this leap if you were really in the driver’s seat when it comes to your career. If you’re really a top performer, you’ll make more as a contractor. If you’re not, contracting will be a painful experience over the long term.

Q7: Getting started with GTD
I read through your GTD series and I have two quick questions.

How do you deal with daily items. You used an example of making pizza or cooking dinner. If you cook every day, or close to it, do you really have next actions on your lists for cooking dinner? For instance, I would like to incorporate this into my life with my wife. Much of her day is composed of daily routine. Doing laundry, daily house cleaning (not a deep cleaning or something you would plan that I can see as an actionable item), picking and dropping kids off at school or friends, etc.. Basically my question is, what is your demarcation line between things that make the list and things that don’t need to be written down.

I also work from home and over the years I’ve done a pretty good job at adjusting to the presto change quick change required sometimes to transform from project leader in crises to daddy pick me up in the space of 30 seconds. Yet, it’s vital for me to create separation between home and work, separate time, work space, etc.. Do you keep separate action lists for home and work? Separate systems? Or do you find it easier to lump it all in?
– Larry

I don’t put things that are normal parts of my daily routine into my inbox. Instead, for them, I have a daily checklist that I just move through. If I really want to establish a new routine, I add it to my daily checklist. My “inbox” is for irregular activities and ideas.

Some people will undoubtedly be governed more by a checklist and less by an “inbox.” It really depends on how routine-oriented your days typically are.

As for your other question, I don’t keep a separate system for home and for work. I found that there were too many things that made sense to combine to keep them separate. For example, if I’m driving to the next town for a meeting and research, it’s worthwhile to know that I also need to stop at the grocery store or to pick up a baseball glove or something like that on the same trip. I chose to work at home to take advantage of these synergies.

Q8: Paying off a mortgage quickly
First some background on our financial situation. We have: no debt, 3 months of living expenses in an emergency account (we would like to get to 6 months), $13,000 in my Roth IRA, $5,000 per year in my company retirement plan (tax-deferred), $8,000 in my wife’s IRA, and she fully contributes to company match ~$1,500 per year (tax-deferred). We also have a HSA with $300 and $500 monthly surplus after all our bills. We also have general savings of $15,000 and good credit (760).

Now for our potential home purchase info. We have chosen an upper limit of $75,000 because we are in a position with a down payment, home prices, and interest rates, that we could pay off a place in 5 years or less (which I consider “non-traditional”). Because this isn’t the norm, and our first home purchase, I am interested to hear your thoughts. Below is a potential home in our area which meets our criteria:

Potential monthly costs ($65k list price condo/townhouse)
$945 – mortgage ($50k mortgage after $15k down payment, 5 years at 5% interest)
$120 – HOA (water, trash, exterior maintenance, roof, plumbing, a/c, etc.)
$75 – electricity
$30 – homeowner’s insurance
~$1,170 total

Since we are a younger couple, paying this off in 5 years and reducing our housing costs (and our only real financial obligations) to $225 per month for HOA, utilities, and insurance would really improve our financial flexibility for the long-term. We could save substantial amounts of our salaries, go to one salary (if we have kids), or even rent it out. It almost seems too good to be true. The one downside I see in aggressively paying off the mortgage is it would reduce our ability to save for retirement during our potentially most important investing years for compounding interest. On the other hand though, eventually eliminating our single largest monthly expense is pretty big too.

Again, since this is a non-traditional mortgage length and I have to wonder, are we crazy? Am I missing something in this situation? Is it too good to be true?
– Justin

Even if you can pay it off in five years, I would not get a 5/1 adjustable rate mortgage. If you were to slip in your plans, the interest rate adjustment would be a big fistful of sand in the oil of your progress.

Instead, I would get a fifteen year fixed rate mortgage and make extra payments as often as possible. You’ll still get a stellar rate right now with some breathing room in the event of something changing in your life. Aside from that, your plan sounds good.

Many people plan their lives as though nothing can ever go wrong and then find themselves in a real pickle when things do go wrong. Don’t put yourself in that situation needlessly. Another fraction of a percent in interest is worth it to keep yourself out of a mortgage rate adjustment when you don’t need it.

Q9: Severing your credit from someone
I am recently divorced and have looked at my credit reports on the big three. Found that I have not been divorced financially from ex in their systems. Oh, I have good credit, and all, but I am also listed as residing at his address on one; am paying well and on time at the jewelry store for her engagement ring; etc. When I contacted the credit bureaus, one wrote that I had to send a copy of my divorce decree for them to sever my credit report from his. That’s a problem as every governmental agency that I’ve contacted to get my name back wants an original (63 pages at $1.00 per page – plus raised seal). At least one of the bureaus hasn’t updated my/our information for years. My question: Is it worth the hassle to work with the bureaus to get my credit severed from his or do I wait until it is done, more or less automatically? So far, he seems to be doing okay with his credit.

– Frances

Having your credit tied together is a risk for both of you. If you damage your credit, it will damage his and vice versa. The question really is how big that risk is?

If I were you, I’d probably change every piece of information I could for free, then allow the others to slowly drift away. You should both start switching to lines of credit that are free from the other person, ceasing use of the old lines of credit, and eventually closing them.

This will take time, of course, and you’re both risking that the other person won’t do something damaging to their credit. If that is a concern for you, then you should probably send copies of your divorce decree to every place necessary with regards to your credit.

Q10: Why mention prayer?
Whenever you mention meditating, you also mention prayer (and vice versa, I guess). Why?

– Kevin

If you ignore the spiritual realm entirely, meditation and prayer serve pretty much the same function. They give us a few moments to put our mind at ease and escape the flood of information and thoughts that burden us in our daily lives.

For those who are religious, prayer does also offer an avenue of communication with one’s god. The value of that depends a lot on the value that person puts into their faith. However, the solace that meditation provides is still available to those who are not religious.

Simply put, I mention them together because they can provide benefit to everyone, regardless of religious belief.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Kevin says:

    “If you do reach an agreement with them, your credit will be marked as having paid off the debt. However, that late debt will be brought up to the current date. That means that instead of having a black mark on your credit for two or three more years, you’ll have more of a gray mark (not nearly as bad) mark on your credit for the next seven years.”

    This is the second time in recent mailbags where Trent has provided incorrect information on this topic.

    The truth is, just opening a dialog with the debt collector is enough to reset the clock. So if you approach them about settling, and you think they’re still asking for too much, it’s not like you have the option of just waiting the remaining 2 or 3 more years for it to fall off your report. By talking to them, you’ve already reset the clock, and that black mark will remain for 7 more years, starting from today.

    I wish Trent would get this right. It’s frustrating to see him repeatedly providing factually incorrect advice on a topic when he’s already been corrected in previous posts.

  2. Johanna says:

    Q2: Actually, there are two separate “clocks” involved here. There’s the clock for credit reporting – how long until the debt falls off your credit report? And there’s the statute of limitations for the debt – how long until you can no longer legally be sued for the debt (and therefore, for all intents and purposes, don’t owe it anymore)?

    As I understand it, the law states that a charged-off account is supposed to fall off your credit report seven years from the date the account first went delinquent, regardless of whether you later settle the debt or pay it off in full. There is not supposed to be any “restarting the clock” on those seven years. But this law isn’t always followed – creditors sometimes falsely report a more recent date for the debt, which keeps it on your credit report for longer.

    That’s why it’s crucial, before you give the debt collector any money, to get an agreement in writing about how this will appear on your credit report. Get them to agree to the date of first delinquency, and whether the account will be reported as “settled,” or “paid as agreed,” or something else (these all mean different things).

    But even if you can hide from the debt long enough for it to fall off your credit report, that doesn’t mean you don’t owe it anymore, because the statute of limitations clock *does* get reset by certain actions. This is a matter of state law, though, so the details vary by state.

    Moral of the story is: Get a written agreement with the debt collector.

  3. Johanna says:

    (I got this information from a Liz Pulliam Weston column called “Is there a statute of limitations of debt?” You can read that for more information.)

  4. Kevin says:

    @Johanna: Thanks for the clarification, great info. I just don’t get why Trent remains willfully ignorant, particularly after just posting an entry a few days ago about how he’s “constantly striving to improve” himself, and often preaches about finding “learning opportunities” everywhere he can.

  5. valleycat1 says:

    Q3 – I agree with Trent, and would add that you might benefit from beginning to trim your budget & phase out spending on ‘wants’ and luxuries over the next 6 months. That way if you do end up being on the layoff list, your spending will already be at the level it needs to be.

    Also, although working with layoffs looming will be very stressful, it’s important to keep putting in your very best effort and to maintain a great attitude at work. And don’t jump ship unless you get an exceptional offer elsewhere – if your current company may be in the position to rehire in the future & you would want to return, you want to be as high up on that list as possible. I worked for a contractor that went through several major layoffs depending on the current contracts,and those who remained an asset to the company were, as much as possible, kept on board as long as some work was available. (I once was literally the last person left at one company, other than the owners, twice – & ended up also working for the bank that took over the business & shut things down.)

  6. Other Jonathan says:

    Q4 – There are lots of great resources on the web as well. I am decently skilled at web design, and I don’t think I’ve spent a dime on my education. It was all through online tutorials and the occasional library book and LOTS OF PRACTICE. Hands-on application is by far the best way to learn. Make yourself a bunch of practice websites, applying your skills as you learn them. Most importantly, do NOT neglect good design in favor of bells and whistles. It was a dark time in the late 90s when everyone with a pulse was creating awful gaudy web pages flashing with crazy animations, terrible color combinations, page counters everywhere, grainy low res photos, etc.

    Q6 – I don’t know much about being a contract employee, but a friend who made a similar transition says the biggest issue (only main one) he has with it is all the work involved with doing his taxes, which are much more complicated than for a standard W-2 income.

  7. Diane says:

    Good lord – terrible advice on Q2. It may or may not fall off your credit report (I still have unblemished credit accounts from 15 years ago reporting on mine, go figure, but I don’t mind), but it doesn’t just relieve you of the debt.

    YOU CAN BE SUED AT ANY TIME FOR THE DEBT WITHIN YOUR STATE’S LIMITATIONS, and if it gets sold and reactivated it will pop back up again. Pretending it doesn’t exist is not a good long term strategy.

  8. Courtney20 says:

    Q1: Trent says “Another option is to convince someone you’re close to, such as your parents, to add you to a credit card of theirs to help you raise your credit. You wouldn’t need to actually have a physical card at all or ever charge a single thing to that card. Having a line of credit on your credit report will certainly help, especially when that credit line is actually controlled by someone else that is reliably paying the debt.”

    Except the credit bureaus no longer count authorized users towards credit scores, for exactly the reason Trent suggested it – the authorized user has no responsibility for the debt (and may not even be an actual “user”). There even used to be instances of people paying others with good credit to allow them to be authorized users on their accounts, thus piggybacking on anothers good credit.

  9. SystemError says:

    @Q5: I would seriously consider putting off law/grad school for a few years after you graduate. Here’s a few reasons: Law school is expensive. You will most likely need to take out more loans. Taking a year or two to work fulltime in a related field, not only gives you some experience and world view that is helpful in grad school, but also gives you some time and perspective to make sure you really to go to law school. I think too many people when they’re about 20 or so get on the law school track before they realize they really don’t want to be an attorney.

    The other thing you may want to do is speak with new attorneys and others straight out of law school. You’ll find many of these new grad are having problems finding internships, let alone full time jobs. It’s tough out there, and as long as law schools keep on churning out more and more grads, its going to get tougher.

    All recent grads should give it a few years before going on to grad school. The kids that went straight from undergrad to grad school in my grad program tend to be a bit lost at times… :)

  10. Johanna says:

    @Courtney20: “the credit bureaus no longer count authorized users towards credit scores”

    I don’t think this is true. The latest formula for FICO scores (the scores used by most lenders) now seeks to distinguish between people who would have a legitimate reason to be authorized users on another’s credit card (such as spouses or parents and children) and people who try to game the system by buying an “authorized user” slot on a stranger’s card. Exactly how they make the distinction, and where they draw the line, is confidential, though.

  11. Des says:

    Q8 – Trent, your answer doesn’t match the question here. I read and re-read it and I don’t see anywhere that Justin said he wanted to take out an ARM. The example he illustrates uses a 5 year fixed mortgage. Whether or not he can find such a thing is debatable, but it seems just as likely that he means to get a standard 30 year fixed and pay it off like it was a 5 year term. Also, the rate he is proposing is clearly fixed-rate level, and is a bit high at that. Bankrate lists the average 30 year rate at 4.19% right now. Did you read the question?

    To answer Justin’s actual question – no, you’re not crazy, but you are missing some expenses. First, property taxes. That will vary depending on your location , but it should be easy information to find. Next, repairs and maintenance. This will be less since it is a condo, but Murphy’s Law was made for home owners :) I budget 1% of the value of my home each year for this. You might have less since you have an HOA – or you might have more if you plan on doing any updating to the place. It is hard to make an educated guess until you have been a homeowner – so maybe use 1% as a rough guideline?

    You don’t say how young you are, or if you plan on continuing your current retirement contributions, but if you are in your 20s and can do this plan while still contributing at least 10% to your retirement accounts I think you’ll be in good shape. More is always nice – but so is a mortgage-free lifetime :) Also, it doesn’t have to be black and white – you can pay on your mortgage aggressively and still make large contributions to retirement accounts (or even taxable investment accounts.) Money is fluid in that way :)

    One other thing to consider is that your housing needs will (not might) change if/when you have kids. So, you may end up upgrading later in life. That doesn’t mean it is a bad idea to pay it off now – just something to be aware of.

  12. JS says:

    @9: I can see your point, but it does vary from person to person. I’m really glad I went straight to grad school. In both undergrad and grad school, I was always busy with school or work. I’d go weeks at a time without a day off. I think if I’d had a break in between the two, I wouldn’t have been able to regain my momentum.

    I agree that you should thoroughly research the field before going to law school. I also work in a romanticized profession, and I took a part-time job in it before applying to grad school. It wasn’t much like it was portrayed in popular culture, of course. I still loved everything about it, but I know other people who didn’t do their research and became disillusioned once they started classes or started working.

  13. jim says:

    In Q1 Melinda says that she can’t get an Orchard Bank card. Trent then suggests she try to get a secured credit card. Orchard Bank specializes in secured cards.

    Q4 Canan : I would not plop down >$300 for Dreamweaver right off. Trent linked to the cheaper student version of Dreamweaver but if you aren’t a student it costs a lot more.

    What you need to know about web design and what tools you would use depends on what kind of website you want to setup. If you want to make a blog then WordPress will do that. If you want a store then theres various solutions. A generic site management package like Joomla might work for most things. The books at the library may be out of date or limited. It won’t hurt to check there but it might not help a ton. Theres tons of free education online about web design. If you’re just starting then learning the basics of HTML would be a good step. It helps to know the basics of HTML. You won’t need to program in it but some understanding of whats going on underneath will help.

    Q5 Melissa : If you’ve got excess money then paying off your unsubsidized loans first might be OK. But you shouldn’t pay off all your debts and leave yourself cash poor.

    Are you really sure law school is right for you? If you have pretty high LSATs (>150 at least) and you’re really interested in law then OK. But if you just have an idea you might want to be a lawyer and your LSATs or GPA aren’t so hot then I’d rethink it. Law school is expensive. Theres lots of lawyers out there. The bottom 50% of new lawyers only make $45-60k range. Thats not a salary to warrant the kind of time and cost of law school. So unless you’re really smart or have your heart really set on doing it then I’d reconsider. Law school is not at good financial investment for many many lawyers.

    Q6 Charlie : If your salary will be double then its hard to see how that won’t work out in your favor financially. But I’d be careful to add up all the cost differences. Look at all the benefits you get and figure out how much it costs to replace them. Have you shopped around for health insurance? What about disability insurance? What happens if you lose your job, are you eligible for unemployment? Be aware that self employment tax will require you to pay double the social security/mediare rates. So thats 7.65% higher taxes.

    Q8 Justin: Sounds like a good plan. I agree with Trent that you should avoid an ARM at this point. Even if you plan to pay off the condo in 5 years your plans could change. Its not clear if you’re getting a 5 year loan or a 5 year ARM or just getting a 30 or 15 year loan and paying extra principal. You cited 5% interest, which sounds like the rates for a 30 year loan. You should shop around for rates if you haven’t. Tor a 30 year fixed it shouldn’t be hard to get 4.5%.

    Its hard to say if you’re under cutting your retirement or not since we don’t know your income level. But sounds like you’re saving a fair amount and having a paid off home is a good goal. One major issue with condos is the stability of the condo development and the HOAs. You should see if there are many units in that building that are up for sale or in foreclosure. A development with a lot of units for sale or vacant could spell serious trouble for future HOA rates. If half the residents vacate then the other half are left with all the HOA bills.

  14. Tom says:

    I just don’t get why Trent remains willfully ignorant, particularly after just posting an entry a few days ago about how he’s “constantly striving to improve” himself, and often preaches about finding “learning opportunities” everywhere he can.
    Everywhere besides the comments, I suppose. I don’t think he reads them often, if at all.

  15. Maureen says:

    Q1- Melinda, my first question is why do you think you even need a credit card? I almost filed bankruptcy ten years ago and was denied a credit card for several years. Finally after about 6 years, American Express gave me a card. I never use it – never because of a few reasons. First I have a well established emergency fund so I never need to charge something to a card. Second, debit cards will do everything a credit card will do.

    You’re sucked into the belief that you have to have a credit card to re-establish your credit, but in my experience that’s just not true. Paying your student loans on time and other debt like car payments will restore your credit over time, you just need to be patient.

    Not having a credit card whereby you can start charging again is NOT going to get you back on track. Credit card companies want you to think this is the way, but like I said, in my experience you can reestablish your credit just by paying what you are on the hook for on time.

    Good luck!

  16. Maureen says:

    Q2-Kelly, If you don’t mind me asking, how old are you? What did you charge that resulted in 55K in credit card debt?

    The way the post is written it seems as if you already had the debt and then because of the job loss began having difficulty paying the bill not that you used your credit cards to keep living after you lost your job, is that correct?

    To me the bigger issue is why 55K in credit card debt. Until you figure out why you racked up that kind of debt you are more likely to get your self into credit card debt again when your financial situation starts looking up.

  17. jim says:

    Yeah it seems Trent doesn’t read the comments. But he might.

    Its possible that since he has stuff written in advance it takes a long time for new information to find its way into articles as we see them. e.g. he writes an article in August that goes live in Sept. after which someone points out a factual error and that factual error doesn’t get into new articles until, Sept, but by then he already has another months articles written so we don’t see the factually correct information hit his articles till November.

    Trent is a one man operation as far as I can tell and he does write a lot, so he probably doesn’t have a ton of time to keep up with all the comments.

  18. Brianne says:

    Q2 – I would look into whether or not the forgiven debt would be considered reportable income. You may have to pay taxes on it.

  19. Des says:

    Q9 – If it were me, I would pay the money to become as severed as possible from a former spouse. He may be doing ok with his credit now, but what if he messes it up in the future? Bad credit can cost you money in the form of high interest and insurance rates. I would consider it an investment. His bad decisions could end up costing you much more than $63 in the long run. Not to mention the mental/emotional value of wiping the slate as clean as possible.

  20. JuliB says:

    Q10 – Kevin – I find it refreshing that he mentions prayer as well. While there’s a big difference between the two, it’s tiresome to see only meditation mentioned when both can give good physical and emotional benefits.

    Q1 – Melinda – it’s soo hard to deal with the pain of student loan defaults. Are yours combined? A LONG time ago, there was a miscommunication between the bank and univ., and my first couple of loans were put into default while I was in my 5th year of college. It took years to pay them off, and then years of waiting for them to come off my credit report. However, as the time went on, I was able to get credit. I just had ‘bad’ credit until 7 years after paying them off.

  21. S01 says:

    Q4 – Hard to know what your trying to do however there are plenty of pre-configured and customizable content management systems for websites you can setup yourself or come pre-configured. eg if your after a blog site just go to wordpress or blogger that way you can focus on content and not worry about configuration of a website…unless of course your website is about website design etc…

    I’ve found wordpress to be a great substitute just enough customization but not so much that running the site becomes a hobby in itself…something I was trying to avoid (been and done that via dreamweaver and hand coding)

    Good Luck :)

  22. deRuiter says:

    “Another option is to convince someone you’re close to, such as your parents, to add you to a credit card of theirs” Oh great, and when this person runs up a lot of charges on his parents’ account they are stuck with the bill.
    As to becoming a lawyer, New York Law School is currently being sued by graduates unable to find work. NYLS advertises “95% of cour graduates from the last graduating class are employed” or something similar. Turns out that doesn’t mean they are working as lawyers! Some are bus boys, waiters, supermarket check out folks, gas station attendants, etc. The school never mentions that there are so many law school graduates that it is impossible for them all to find work as lawyers.
    “Here are the questions answered in today’s reader mailbag, boiled down to five word summaries” As to our favorite finance author who is always striving to improve his work, the “five word summaries” are 80% NOT five word summaries, only 2 of them are five words. Why not strive for accuracy by stating, “Brief summaries.”???

  23. valleycat1 says:

    #22 deRuiter – re the intro – this was pointed out to Trent relentlessly when he first started the summary list. I don’t think he really needs that explanation at all – just his usual slice of life & then on to the questions of the day (the linked list followed by the Q&A).

  24. slccom says:

    #5, DON’T GO TO LAW SCHOOL!!! Get a degree or certificate as a paralegal, do that for a few years and decide if this is really how you want to spend your life. If you are good, and find a good employer, you may get them to pay your tuition and go part time. And search “lawyer alternative career” for a really eye-opening look at the reality of legal practice.

  25. slccom says:

    Trent wrote: “Many people plan their lives as though nothing can ever go wrong and then find themselves in a real pickle when things do go wrong.”

    And that, in a nutshell, is the argument for young people to get whole-life insurance policies.

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