Ways to Deal with Debt

Debt Consolidation

This option involves taking out a single large loan that can be used to settle the balance of other loans. The advantage of this is that the single loan can be obtained at a lower interest rate, preferably at a fixed interest rate, which will make repayments more manageable. It also has the advantage of reducing the complexities of having several loans at the same time.

The disadvantage here is that in order to gain a lower interest rate the loan will have to be ‘secured’. In other words, the loan will be secured against an asset, which is known as ‘collateral’. In most cases, this collateral will be property (either a house or apartment). On the downside, whilst the monthly repayments may be lower, the total amount owed is generally much higher because of the longer period of the loan.

Debt Management Plan

A debt management plan operates by consolidating all debts and reducing the higher interest rates of existing debts. Whilst it may appear similar in essence to receiving a debt consolidation loan, in reality this option doesn’t involve any further loan at all. Rather it is simply a plan whereby all monthly repayments will be lumped together into one single, affordable payment plan ranging between 24 and 48 months.

The disadvantages here include the fact that creditors are within their rights to change their mind at any time. In addition, it may still have a negative effect on your credit rating and, as with debt consolidation, whilst the monthly payments may be reduced the total amount repaid will be significantly higher.

Individual Voluntary Arrangement

The good thing about this option is that the situation will be swung in favour of the debtor as opposed to the creditor. Whilst previously it would be the creditor who ‘calls the shots’, so to speak, piling more and more pressure on the debtor, with an individual voluntary arrangement or IVA in place, the creditor will no longer have the right to take out legal action against the debtor or to add extra financial penalties.

Drawbacks include the fact that the IVA is a formal agreement, meaning the debtor will find themselves bound to its terms, which includes having to submit financial statements each year and also that the payment terms remain very rigid. In addition, the debtor will be unable to receive any other credit agreements whilst the arrangement is in place.

Bankruptcy

The main advantage to filing for bankruptcy is that the slate will be wiped clean, as all debts will be discharged. Therefore, the debtor will then be free to an extent to start over again. In addition, bankruptcy can ensure that all of the debtor’s vital property, whether it is a house or car, will be protected. Creditors will not be within their rights to repossess.

On the downside, the bankruptcy will remain on the individual’s credit report for a maximum of ten years, making the possibility of receiving further credit within this period unlikely. In addition, whilst the ‘Bankruptcy Code’ is there to ensure no discrimination on the part of creditors or banks is permissible, such discrimination does, in reality, tend to exist.

This guest post was written on behalf of IVA Expert. If you’re concerned about financial problems, why not use the debt calculator to assess your debts?

My goal is to find companies with a market cap of at least $200 Million, a positive P/E, a stock price of below $5.00 per share and are traded on the options exchange.  From the remaining companies I will research them one by one to determine whether to move on any of the options available.  The covered calls will be out of the money options that will expire within 0 to 6 months of purchase.  The strike price will be an amount that I am very okay profit-wise.

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In a covered call I own (at least) 100 shares of a company I then sell a contract (1 contract = 100 shares) that says if the company reaches $X price (the strike price) by a certain time the purchaser gets the option to purchase the shares at that price.  When they are buying the contract they believe that the share is going to be worth more than that amount.  For creating/selling this contract I get a sales price.

My Covered Call Moves

Two of the Symbols that are still open (S and EXM) were done before I nailed down my positive P/E requirement as such they don’t exactly fit the model but they are there and thus should be shared.

For organizational purposes I will provide the update in regards to the symbol.  I think this will provide an easier understanding as to what I have done and the money I have made or lost going forward in the years to come.

S – Sprint

• Bought 575 Shares of Sprint at $2.25 on 2/22/2012 (I had a a few in the account to round me up already)
• Sold 6 Sprint Covered Call Option Contracts on 2/27/2012 for a Strike Price of $3.00 in August

Since buying the stock in the $2.30s the stock shot up and dropped back down, but since I am locked up till August it doesn’t really matter.  As I explained in the first post in the series even if it closes me out at $3 I will have made a very health gain.  If not I will just sell more covered calls.

RDN – Radian

I purchased three lots of RDN:

With those lots I have sold 4 Covered Calls:

• So I have purchased $2,432.49 worth of RDN Stock.
• I have collected (and kept) $111.97 on an expired Contract
• I still have outstanding Covered Calls that have brought in $228.89
• I have taken 10% off the table on my risk between the covered calls and if any of the contracts are called I will have collected a very healthy return.
• Currently, the investment is underwater as I bought 500 of the 800 shares at a price higher then we are at currently.

EXM – Excel Maritime

I purchased one lot of EXM:

I sold one contract on it which expired already:

I then sold another contract:

• So I paid $1,877 for EXM
• Sold a Covered Call with a net of $189.74 – it expired
• Then brought in another $187.74 – Still open
• I took $375 off the table in risk which I am happy about – almost exactly 20% of this trade is on the houses money.
• This stock is embarrassingly low right now ($1.06 as I write this Post) but it doesn’t matter since I am not looking to sell until the contract expires.

State of the Covered-Call Traditional IRA

While I am not particularly happy that two of the three holdings are underwater, I don’t see it as the biggest of deals as the shares of those companies are pretty locked up until August which is when most of my contracts expire.  At that time I will revisit the account to determine the future of this experiment.

I wish the United States had a news Source that wasn’t always trying to push an agenda.  It always amazes me that you can watch the same a piece about the exact same topic on FoxNews and on MSNBC and it doesn’t even seem they are talking about something that occurred in the same year nevertheless the same exact occurrence.

The Financial Times has provided me with an amazing video that highlights some fascinating statistics throughout the world without the obvious spin put forth by the other guys.  Pay particular attention to:

• GDP Size vs Growth
• Education Spending vs Education Rankings
• Annual Salary vs Pay Per Hour
• Cost for Restaurant meal for 2, movie and taxi
• Vacation Days
• Happiness Rankings
• Drinking

Would You Ever Consider Moving to Another Country?

Listening to some of the statistics from the video it makes me wonder if I could ever handle the culture shock that would obviously incur from moving to a Country like Brazil where they are the happiest
or Norway which works an entire day less than us.

Ignoring the obvious problem of a language barrier from most of the Countries named in the video, there would be a distance from my family and friends.  While I think it is a great that Eduardo Saverin decided to become an expatriate I just don’t think that move is for me.  His upside his hundreds of millions of dollars I would just be getting an extra day off!

Besides I am hoping to set myself up in a way that I too will have an extra day off eventually!  Ignoring all that is serious in the video, I am pretty shocked that Americans take down more drinks than Russia especially.  U.S.A.!

Sponsored by the Financial Times

This lead to a very simple question for all those recent Grads out there,

Did the Current Economy Come into Consideration When You Chose Your Major?

I am not interested in discussion specific majors or professions, like teaching, as such I am not going to research any statistics.  I think non-statistic based discussions can often  provide logical arguments without all the pressure of determining the basis of the studies.   Please ignore my tendency to jump in and out of graduate programs.

Why I would Consider the Current Economy When Choosing a Major

Your first “real” job out of school is probably going to depend on the major you chose.  Will the fourth or eighth? Probably not, but that first one will or you wouldn’t have chosen it! That is, if you even get your “first” job.  Maybe the current economy is now the new economy.  For example, is it possible the major you chose is in a changing or dying field?  Take the aforementioned teachers for example.  I don’t think the “heyday” of teaching is ever going to return.  Governments have less and less money to spend on teachers (regardless of whether you think this is the right move) and the job security you think you had is gone…is that still the major for you?  Would you still choose teaching if they take away those pensions? What about Tenure?

Take it away from the grim, we will assume assume that you can find a job and that it isn’t changing in any major way – is it possible that while you love your classes you hate the jobs associated with your field.  For example, lets say you loved your communication classes and thus became a Public Relations major (The Wife’s Path)….but given she had no interest in starting at the bottom working events 15 hours a day she may have benefited from a different major.

Similarly, maybe your major won’t provide you with your definition of success.  There are few social workers that make large fortunes so if your goal is money then maybe social work isn’t the right path.  Alternatively, lets say your definition of success is academic praise then maybe a finance degree is likely not going to lead to a whole lot of opportunity for scholarly papers.

Why I wouldn’t Consider the Current Economy When Choosing a Major

First thing is first, things change.  Just because it is tough for those in real estate heavy majors (whether that is building or financing) doesn’t mean it always will be.  Actually, one may be even able to argue that this would be a perfect time to jump into that major since by the time you are done with your studies hopefully the economy will turn around and you can be there willing and waiting.

If you are happy then success will follow.  If you are smiling everyday and loving whatever you are doing, I believe it is likely that success, however, you define it will follow.

Lastly, who College is 4 years, enjoy what you are studying regardless of what you plan on doing later on.  How many of us know people that are doing something meaningful with their life that has absolutely NOTHING to do with their major? College is 4 years enjoy what you are studying as the discipline and critical thinking are the two most important items you’ll pull out of school.

Alright end of random thoughts strung together loosely.

Did you consider the economy when you chose your major? What was your Major? Are you doing ANYTHING associated with your major?

His critics obviously include politicians attempting to garner the attention of the public,

Senator Charles Schumer told a news briefing on Thursday: “It’s infuriating to see someone sell out the country that welcomed him and kept him safe, educated him and helped him become a billionaire … We plan to put a stop to this tax avoidance scheme.”

Schumer and Senator Bob Casey, both Democrats, said at the briefing that they were proposing legislation to crack down on what they see as expatriate tax avoidance.

Under the bill, expatriates worth $2 million or more, or with average income tax liability exceeding $148,000 over the past five years, would be presumed to have renounced their citizenship for tax avoidance purposes.

These high-income expatriates would get a chance to prove otherwise to the Internal Revenue Service, but if they could not do so, then they would face a 30-percent tax on future investment gains, no matter where they were residing.

So long as the taxpayers failed to pay these taxes, they would not be allowed to re-enter the United States. “We simply cannot allow the ultra-wealthy to write their own
rules,” Casey said.

As often is the case when Senator Schumer provides sound bites, I have no idea what the hell he is talking about.  Does he mean that every foreigner who comes here for school should pay taxes forever?  Why does anyone have a duty to continue to pay taxes after those services stop?  I think an analogous situation would be when I go to Dunkin Donuts.  There is a tip jar, I rarely use it, if you want more money from me charge me more.  If Mr. Schumer wanted more tax dollars then the rules should have forced him to pay more.  Crying about it afterwards seems petty and childish.

At least, Mr. Schumer is trying to make sense…Mr. Casey just seems like he is jumping on the class warfare bandwagon.  How did Mr. Saverin make his own rules?! There are laws and rules regarding one’s action to expatriate. You know who created them? Congress. Mr. Saverin is just following them, if you don’t like the rules, change them that is why you are a freaking Congressman.

I truly believe that no one has to patriotic duty to overpay taxes.  My feelings go so far as to say you can leave your Country for greener tax pastures.  Is it a move that I would make? Probably not, but unlike Mr. Saverin, my family is here, I was born here, I have no business interests outside the US, my friends are here and I feel a tie to America that he obviously does not. I am a HUGE fan of my Country, but this isn’t Mr. Saverin’s Country, or alternatively, he doesn’t feel the bond that I do.

This situation reminds me of  one of my favorite legal quotes by Judge Learned Hand in Helvering v. Gregory (1934),

Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes and public duty to pay more than the law demands

This wasn’t said last month or even last year Judge Hand uttered those words in 1934! For reference purposes, the modern income tax system was created in 1913.  If arranging one’s affairs means leaving this Country then so be it!

Hat tip to you Mr. Saverin.

Yes, I see that it is sort of ironic that I claim to not understand the hype, but this is the second time I am writing about Facebook in the span of a week. 

expatriate

Can anyone tell me if any of these rules are new:

1. You are on your own
2. Start planning Early
3. Money Can be Accessible
4. You can Contribute to an IRA
5. Consider Health Care
6. Prepare to work longer
7. Think Beyond the money

Was there ever a time you weren’t on your own? Was planning early ever a bad idea? Did anyone ever say money shouldn’t be accessible? Of course I can contribute to an IRA (obviously the ridiculous slideshow doesn’t talk about situations where the IRA contribution may not be deductible).  Oh wait a minute I am NOW supposed to think about health care? If I don’t have enough, I will have to work longer…I never knew that to be true back in the day.  and finally I will throw something in because it has nothing to do with this terrible article, but 7 sounds better than 6.

Retirement, in it of itself, is a new institution because Humans didn’t retire, we just sort of died.  Notwithstanding, who the hell approved this list? It could have been published yesterday, 10 years ago or 20 years ago prior to the internet and it would read the same.

Is all my stuff gold? NO WAY, but I don’t get paid to write nor do I have editors that approve my stuff…although maybe I should lol. I am shocked CNBC which has fantastic content would allow this drivel to grace its pages.

Am I wrong? are any of these rules “new”?

The article describes how global powerhouse Allianz is trying to apply that technology to personal finances and investments,

Cathy Smith has spent months talking about aging — how many wrinkles someone may have when he’s 65 years old, the circles under his eyes, even hairlines. No, she’s not an expert in plastic surgery. Nor is she a makeup artist. Smith is the co-director at Allianz Global Investor Center for Behavioral Science. And her work? To help Allianz craft a tool that will virtually age investors in moments, in hopes it’ll be the push they need to take their retirement plans seriously.

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As digital tools become more commonplace in retirement planning, helping reps visualize how a client’s financial plans are materializing, a new tool is expected to bring those later years into another kind of focus. Instead of clients seeing their investments mature, Allianz wants investors to see themselves mature as well — in physical terms.

While the statistics they use seem laughable something just resonates with the conclusion being true.  Specifically,

Three studies from Stanford University, the last in 2010, showed college students who were virtually aged by about 45 years put away more money into a hypothetical retirement account than students who didn’t get to meet their older selves.

In the research, 50 college-aged participants were told they’d unexpectedly received $1,000 and were asked to divide the money into four buckets: retirement, a checking account, a nice gift for a friend or loved one, or on a special and expensive outing. Students then donned virtual reality goggles, with a select group shown a version of their 70-year-old selves. Afterwards, they were asked to divide up their money. The results showed that students who virtually met their aged avatars saved twice as much for retirement versus participants who only met their current selves.

I am not sure how many people really read that statistic in the magazine, but what kind of study only has 50 participants nevertheless between 3 studies.  What happened in the other 2 studies? Ignoring the studies, doesn’t the conclusion just seem correct.

I believe it is human nature to avoid negative repercussions and thus showing someone an older version of one’s self we would that to believe that the person is well taken care of, otherwise, because our only other option would be to pray for Doc Brown and the flux capacitor.

Would Numbers or an Older Version of You Make You More Aggressive in Saving for Retirement?

We all know that personal finance is personal and seeing I think this upcoming technology can revolutionize Retirement Planning but it makes me wonder about what is more effective:

• A Spreadsheet/Document which shows just how far away the goal of a comfortable retirement is OR
• A picture/avatar of Future Evan

For me, personally, I would guess the spreadsheet, but I don’t think I am particularly normal when it comes to personal finance issues.  I mean I do run a boring bad ass personal finance blog.

What would get you moving more – a picture of your future self or a spreadsheet that shows you are broke?

I, like every other American, have and use facebook, but I, like every other American, use google and I don’t own that stock either. I, like every other American, use Microsoft products, but again, I don’t own that stock currently.  Just because something is used doesn’t mean it is priced correctly as a Stock.

What I do see is a company that is being valued at 75 to 100 times its earnings which my gut screams is lunacy in toady’s market. Yes, it does have a moat with a 900 million member head start on any competitor and yes facebook has a passionate CEO but the valuation seems a little crazy to me right now.

I could see maybe a purchase on opening day in the hopes that the market goes crazy, and then selling shortly thereafter or even purchasing one of a few companies that guy in way before the IPO.  MoneyWatch provides 6 publicly traded companies that own Facebook shares prior to the IPO maybe purchase those companies in the short term?

Although as of this morning LNKD in is selling at a crazy 600+ P/E so maybe I am the crazy one. LOL.  Since I am going to go with me being the crazy one don’t listen to anything I say on here as investment advice.

Do you have plans to buy shares when they go public?

In my goals and objectives post I said,

I freaking love creating streams of income, it is my passion.  I would love to have 4 or 5 great ones.  My Journey to Millions is an amazing one, as is an offshoot of this blog that I work with a partner on, and my job is number 3 (and way too big in comparison to the first two lol).  My goal is to create a 4 and 5 this year.

They will obviously be a lot smaller than the 3 already up there, but if I can start to get that trickle going I’ll be happy.  I have two projects that are getting worked out (both websites but not blogs), so my goal this year is to get streams of income 4 and 5 off the ground.

We are approximately 5 months into the new year and I have yet to get 4 or 5 off the ground and that just pisses me off.  I have created a new site recently and re-did another site but both are far from an income stream.  The new site is a blog written by two of my really good buddies and myself and is about all issues that concern being a man called Manceptional, and the re-done site is ran by one of the same buddies and myself and it is a free baby birth date guessing site called Pregnancy Pool.

My Journey to Millions isn’t a big site, but when I create content it is often picked up and commented on.  As such it seems that  have forgotten how hard it is to build a website to the point where it throws off an income.

Am I giving up? Hell freaking NO. 

I just have to regroup my thinking – determine what’s working for me and what is not in terms of current income as well as cultivating those little trickles, as well as digging new soon to be streams.

Alright, self-pep talk over! Put me in Coach.

Don’t Subsidize My Life

Anytime I complain to a company about lowering my bill they are doing it at the expense of their profit margin, as such, they are forced to overcharge someone else.  Don’t be that someone else.

Take a simple example from my college days.  The Wife had a few sorority sisters who were bartenders and since The Wife had to court all of this, the girls would not charge me. In an effort to balance out their register they would overcharge other people at the bar or would go a little lighter on their drinks so the bottles wouldn’t empty as quickly.

Well guess what? your cable company is the bartender.  If they are providing me with premium service at “I bitch too much” prices then they have to offset me as a customer.  Don’t be that guy.

This applies to various monthly commodity type products:

• Cell Phone
• Cable
• Internet
• TV Service
• Credit Card Interest Rates
• Certain types of Insurance

Are you that guy? When was the last time you tried to lower your monthly nut?