Who Is Giving This Guy Money???

The city of Detroit has had it’s share of bad press over the last few years.  It’s been front and center stage to the American auto meltdown.  Home values in the area have plummeted.  Unemployment here leads the country.  It has been in the top tier of foreclosure rates for what seems like forever.  The school system was shown to be one of the worst run and the lowest performing in the country.

In other words, it’s been a mess.

I don’t live in the city but am a metro Detroiter.

In spite of all that, I still love the area I’m from.

The biggest stain, in my opinion, on Detroit’s reputation was not any of the things I mentioned above.  It was the behaviors and actions of the former mayor, Kwame Kilpatrick.

Kilpatrick was the ‘hip-hop’ mayor, elected as a young guy with great fanfare earlier in the decade.  He rolled in wearing diamond earrings and making it known that he was a fresh face with fresh ideas.  He was young, vibrant, and energetic, and in those ways represented exactly the direction Detroit wanted to go to turn things around.

Unfortunately, when it was all said and done, he turned out to be nothing but a crook.  He abused his office and the power that came along with it.

Among the alleged incidents:

  • A party at the city-owned mayors residence that featured strippers
  • 24×7 security detail for him and his family that cost the city millions
  • Purchase of city vechiles for use by his family
  • Firing of the Detroit chief of police for disagreeing with him
  • An affair with one of his staffers while both were married
  • Misuse of city property and funds tied to his affair
  • Involvement in bribery cases
  • Purjury

It goes on but that is a list of things that surrounded him.  What led to his removal from office and jail time was that he used city owned Blackberry’s to send and receive tens of thousands of text messages that proved his involvement in many of the items listed above.  Because it was city owned property, the messages were released to the public record.

Eventually he stepped down, served a token jail sentence, and left the state.

One of the items of his settlement was that he was to pay the city of Detroit restitution for money that he mis-used and for the cost of investigating the various things surrounding this.  Once he left Detroit, he claimed that he could not make these payments, while moving into a swanky mansion, paying for plastic surgery for his wife (who for whatever reason stayed with him), and making other massive expenses.

The judge, thankfully, didn’t buy it.  In fact, the judge was so angered that he ordered Kilpatrick to move up a big chunk of his payments.  Kilpatrick pled poverty (from behind the doors of his 5,000+ square foot rental).

So, when a $75,000 payment was due last week, did Kilpatrick make the payment?  No.  He didn’t pay up a penny, claiming that he ‘didn’t have the money’.

The part that amazed me, though, is that $40,000, or just over half, was paid on his behalf by supporters and private donors.

That’s right.  This guy used the city property and bank accounts like it was his own for the taking, admitted guilt on many accounts, agreed to pay restitution, then threw it back in the face of everyone by living like a king while claiming poverty, and yet there are still people willing to open up their checkbooks to the tune of $40,000?

I don’t get it.

My guess is that these are people that he could have been involved in ‘shady’ deals with that are afraid that Kilpatrick could turn on.  That’s just a hunch, but would it really be too far a stretch?

Did I mention that there is a federal investigation into his dealings, with the possibility that he was bribing companies to get awarded city contracts while he was mayor?  He could possibly be charged in a RICO (rackateering) suit, which is the same type of suit that often brings down organized crime families.

Sounds like he got $40,000 in hush money if you ask my opinion.

The saga will no doubt continue to play out.  As much as I want to see this guy punished for his criminal activities and his blatant disregard for every citizen that he was entrusted to represent, I hate seeing the further blemishes that this brings upon the city and surrounding region.

But I still can’t get over the fact that there are people out there willingly giving this idiot money.  Unbelievable.

Taxes Are Done

Our taxes came back from the accountant and I was pleasantly surprised.  I had estimated our federal return using a couple of the online calculators.  I was close but we actually came away with about $200 more than I’d thought.  Our federal return goes as a straight percentage allocated to the following:

  • Debt Payoff – 25% – We are working to be all-but-mortgage-debt-free by the end of 2012 and this will help us take a big step towards that goal
  • Vacation Fund – 10% – We like to go on vacation now and then, and this will help pay for our trips
  • Home Repairs / Renovations – 25% – Our house is just a touch over ten years old, so I expect that bigger ticket repairs will start piling on in the next few years, such as roof, windows, driveway, furnace, water heater, etc. and this will help defray some of those costs
  • Car Repair – 5% – This is to defray unexpected car repairs, insurance deductibles, or big ticket repairs like brakes or tires
  • New/Used Car Fund – 25% – We don’t have any car loans and I’d like to keep it that way.  We purchased a used car last year, so we should be set for a few years, but this will allow us to start re-building this fund since it was depleted with our recent purchase.
  • Family Expenses – 10% – We had built a nice fund when we had Baby Beagle so that we were able to pay for big ticket items that we didn’t receive as shower gifts.  We have future plans (nothing imminent, I promise) to continue to grow our family, so this will help defray some of those costs for when the time comes.

As you can see, our federal return goes largely towards paying off things that we haven’t purchased yet.  This is done intentionally for the simple reason that, as we work towards our goal of paying off debt, we also have a goal not to take on any new debt if at all possible.  Saving money for expenses we know are coming will help us maintain this goal.

Our state refund was also a couple hundred dollars bigger than we had expected.  With our income falling from 2008 to 2009 due to my wife working only part of the year, we qualified for a bit of a refund on our property tax expenses that I hadn’t been anticipating.

Our allocation of this will be for more current items:

  • Debt Payoff – 25% – It’s our standard to use 25% of cash inflows to pay down debt and we plan on doing the same with this.
  • Carpet Cleaning – We would like to get our carpets cleaned annually and it will be time in the spring
  • Lawn Mower Repair – My lawn mower is a couple of years old and I’d like to have a general repair done.  We have a lot of nuts and twigs that fall on our grass, so I’m sure that the blades need to be sharpened, and there’s a local place that does a tremendous job with yard equipment.
  • Furnace Tune-Up – I’m embarrassed to say that we haven’t yet had our furnace cleaned and tuned up, and I know that most guidelines for reducing heating/cooling costs tell you that this is something you should do every year or two.
  • Tree Trimming – This is something that, with many trees on our yard and near our house, needs to be done every two to three years.

We may not get to everything from the state return, but we should be able to get a big chunk of our list done, and all of the items are things that my wife and I agree need to be done to keep our house and yard in the condition that we desire.

Now, we just have to wait for our returns!

The Savings Karma Was Given A Boost

In yesterday’s post, I wrote about how we had karma on our side when we did a shopping trip, and how that led to us keeping an extra $75 that we had planned on spending in our pocket.

After writing that, I got to thinking about it and I realized that we also saved money at each and every location by using coupons.  I didn’t include that in my ‘savings karma’ post because I had already factored the coupon savings into our planned spending amount, but it was significant enough where, after reflecting on it, I was pretty impressed.

To go back over our shopping trip, here is how it went, this time looking at how we used coupons at every location.

Babies R Us – We purchased a gate and used a 20% off coupon to save $12 off the $60 price.  We also purchased some other items, including laundry soap, jarred baby food (which we primarily use when we’re out of the house), baby-safe stain remover, and a couple of other odds and ends.  We had coupons for just about every item, including some where we were able to stack an in-store coupon with a manufacturer’s coupon and get nearly 40% off.  With coupons, we probably saved $25 here easily.

Olga’s – As I mentioned in yesterday’s post, we had a buy-one-get-one-free coupon that my wife got in her e-mail for having previously signed up for their rewards club, which is free.  This saved us just over $7.

Costco – We didn’t need a lot, but there were some items that we buy regularly that had coupons, that we knew we would most likely be re-stocking in the next three months or so.  We only purchased seven items, and six of these were reduced as a result of Costco coupons that are sent monthly.   We saved $17 in coupons on these six items (freezer bags, granola bars, kitchen sponges, laundry detergent, face wash, and dental floss).

Buy Buy Baby – We had a 25% off coupon for Babies R Us on our car seat that Buy Buy Baby honored.  As I outlined in the previous post, this saved us $65 off of the $260 list price.

All in all, we saved over $100 just by handing over a few coupons.  There are people that will argue that coupons aren’t always worth it, but I would use this shopping trip as an example that, at least for the Beagle household, it’s well worth it!

Unexpected Savings Karma

Last Thursday, we set out on an evening of shopping.  There were three stops (plus dinner) that we needed to make for various reasons.  We knew exactly where we needed to go and what we needed to buy, so beforehand, I was able to make a list and a budgeted amount.

Seemed pretty straightforward.  However, things started taking a peculiar turn and kept going from there.  Luckily, savings karma was on our side.

Here was a quick recap of our shopping night.

First stop – Babies R Us.  At our baby shower for Baby Beagle, which was held nearly a year ago, we received a baby gate that we had registered for.  Our intent was to install it at the top of our stairway.  Well, that was one of those gifts that went into the basement for awhile.  We didn’t need it before Baby Beagle came along, and even during the first few months, Baby Beagle wasn’t moving around on his own, so it wasn’t necessary.  However, he’s now quickly mastered the art of crawling, so it was time to pull the gate out and install it.

Except that we registered for the wrong kind.  The kind we asked for was a pressure mounted gate, which uses tension to stick between two walls.  This is good for sealing off a room, but because it’s only tension holding it in place, it is considered unsafe for the top of stairs, since babies (or adults) could press it hard enough or run into it and knock it loose.  We realized that we needed a gate that mounted into the wall.

Since so much time had passed, we were unsure if they would exchange the item at all, and if they did, how much we would get back.  We took it up to the desk, and….no problem!  They gave us full credit even though the gift givers may have used a 20% coupon.  I was expecting a refund of about $48 if we got one at all, but we got $60.  We picked out a new gate for $60, but had a 20% off coupon of our own, so we ended up spending $12 less than I had thought.  Awesome!

Unexpected money in our pocket so far: $12

Second stop – Olgas.  With all the running around, we knew dinner at home was not an option.  My wife found a coupon for buy-one-get-one free at Olga’s, so we stopped at one that was along the way.  Between our two Olga sandwiches and a basket of Olga’s snackers, I had estimated we would pay about $14.

Imagine our delight when the waitress came back with a bill for $9.  The reason that we got the buy-one-get-one in the first place was that my wife had signed up for a free Olgas rewards card last time she was there.  With the card, you get ‘free money to spend’ after making so many purchases.  At the time, they also had a promo where they pre-loaded $5 of credit onto the card.  She had forgotten all about it, but when they ran our card to validate the coupon, the credit took the five bucks off our bill.

Ka-ching!

Unexpected money in our pocket so far: $17

Third stop – Costco.  After the Olga’s suprirse, I actually commented that we were two-for-two in coming up with register bills that were lower than anticipated, and wondered if we could duplicate that at our other two stops.

So, with our bellies full (including Baby Beagle who got fed his baby food, some cucumbers, and a torn up Olga Snacker), we headed off to Costco.

We didn’t need much, but we identified six items that we purchase regularly that had coupons in this month’s coupon book.  A seventh item was a package of formula for Baby Beagle.

I had wanted a ballpark figure of what we’d be spending, so earlier in the day, I had Googled ‘Costco’ withbeing the actual item I was looking for.  Most times, it led me to the Costco web site where the business members prices of the exact item I looked for came up.  I figured that to be the same prices I’d pay in the store, so I calculated what we’d be spending.  I had figured our bill to be $94.

When we started going around to collect our items, I happily discovered that, for whatever reason, the website prices were higher.  So, we got all of the items I had on this list for $81, saving us $13 more dollars versus what I had expected to spend. We were now officially on a roll!

Unexpected money in our pocket so far: $30

Fourth (and final) stop – Buy Buy Baby.  It’s getting time where Baby Beagle will not fit in his baby carrier for much longer.  He’s allowed to stay in there until he reaches either 30 pounds or 30 inches. He’s probably a month or so away from hitting one or the other, so we’ve been doing our research and had decided on buying a Britax convertible car seat.  Britax is normally rated among the safest in car seats.

Babies R Us had been running a special where if you took in an ‘old’ item from a list of normally expensive items, they would give you 25% off a new item.  The list included things like car seats, high chairs, etc.  The extra 5% over using one of their 20% coupons that we get in the mail made it worth our while.

But, of course, they didn’t have the exact car seat we wanted, whereas Buy Buy Baby did.  For those of you who may not know, Bed Bath and Beyond has gotten into the baby store business, and Buy Buy Baby is their creation.  They’re only in select markets, and luckily the Detroit market is one.  The stores are laid out in the same ‘square’ model as Bed Bath and Beyond, and what makes it really nice is that they accept their own coupons, coupons of their competitors (i.e. Babies R Us) and, since they’re a Bed Bath and Beyond subsidiary, they take those coupons too!

Since they take competitors coupons, they would match the 25% off that Babies R Us was offering, but they also wanted us to bring in an old item.

My parents had my old car seat, manufactured in 1974.  It was nothing like what they have now, and was in a box about half the size.  And, my dad told me that, at the time, it was a top of the line car seat, also rated high by Consumers Reports back then!  We took it in, and I was extremely amused to see the curiosity of many of the employees, who wanted to see what a car seat from 1974 looked like.  It became quite a discussion piece!

Well, we went back to the car seats, and looked for the seat that we wanted.  We wanted one that was $320 but was ‘fully loaded’.  We saw that there was the one we wanted, but also one that had the exact same pattern for $260.  We flagged down a clerk and asked what the difference was.  There were two slight differences.  The first is that the more expensive one ‘clicked’ when you pulled it tight.  We are always very fastidious about making sure our baby is snug, so this was not a ‘must have’ feature.  The second difference was a plastic bumper on the outside of the seat.  This, as it was explained to us, was not for the protection of the child, but for passengers that might be next to the seat.  The bumpers gave an extra cushion from the passenger running into the framing of the car seat.

My wife and I talked it over and noted that we have passengers in the back on a very, very rare basis.  We’re talking once every couple of weeks at most.  This will increase when we have more kids, but then they’ll be in car seats of their own, so the risk of them hitting against this is minimal.

Because this didn’t directly affect the safety of the child (we even double-checked to make sure that the structure of the seat was not different and this was confirmed) and the chances of a passenger being affected are so slight, we went with the $260 seat.  That’s a $60 difference which translated into $45 when you backed out the 25% savings voucher that we got with the ‘trade-in’.

Add that to the $30 we avoided paying so far, and the total unexpected money in our pocket was $75!

That’s not chump change!  By this time, everybody (including Baby Beagle) had had it, and since we had everything off our list, we headed home with a car packed full of stuff and a little extra money in our bank account!

Yes, it’s true that we had to ‘spend to save’, but in case we saved the money on items that we had intended to purchase anyways and that we needed!  There was not a single instance where we ‘added’ an item or upgraded an item, spending more along the way, in order to save money.  Nope, this was money that went directly into our pockets that we’d been planning on spending.

It seemed almost karma-like that we were able to save money in every single location.  If that’s the case, I’ll take that karma anytime!

To Carry Cash Or Not Carry Cash

Some people find that cold hard cash in their pocket is an invitation to spend.  Others feel that carrying cash makes them spend less.

Some people spend exclusively by cash.  Some would prefer never to have cash.

I started thinking about it and wondering where I fit in.

I used to spend pretty much exclusively in cash for most everyday purchases except for groceries and laundry, where I think I’ve pretty much always used a credit card..  When I’d go out to eat, I’d pay in cash.  When I went out with friends, it was cash.  Things like the dry cleaners, haircuts, clothes were all done with cash.

When rewards credit cards came into play, I moved more and more of my spending to credit.

It was only when my wife and I combined our accounts that I converted nearly all of my cash spending to the use of the debit card.  Since then, I can take out ten bucks and it will often last a month or more.

I find that when it comes to whether I spend more or less with cash, I think that I actually spend more. With me, it all boils down to percentages.  Meaning, that the less I have in my wallet, the greater percentage of cash that each purchase will make.

Say I have $100 in my wallet.  If I pass by the vending machine and decide that a $1 soda looks good, I can think to myself ‘That only represents 1% of my total cash, so why not?’.  In relative terms, the purchase represents 1% of what I have, which, to most is ‘no big deal’.

If I only have $5 in my wallet, suddenly that $1 soda represents 20% of what I’m carrying around.  For me, that will turn a potential purchase into an empty-handed walk away from the soda machine.

Meaning for me, the less cash I carry, the less overall spending that I do.

I think people are wired differently.  Some people see the use of a debit card as a black hole and so they prefer not to use it.  Personally, I track our debit card spending almost daily and we have a pretty strict monthly spending limit, so each purchase definitely makes me consider whether I really want to spend money on it knowing that there might be other uses for those dollars.

I think the trick, no matter what, is to create spending limits, track them, adhere to them, and modify them if necessary.  You need to modify them if you’re finding yourself short on essential things like food, gas, or other important things.  Allowing yourself more so that you can buy a new pair of shoes every other week probably violates the spirit of spending limits.  The key is to set realistic spending goals, and also to track your purchases.

Either way, I think every person should understand their ‘cash’ preference and how it affects their spending.  With so many options available for many people, it only makes sense to make the adjustments that will reduce your discretionary spending.

Moving Back Into Demand Notes

The bank that we use for depositing paychecks and paying bills has a horrible interest rate.  It’s practically non-existent actually.  So, we’ve always had a savings account for our long term savings and emergency funds.

For the longest time, I’d been using a GMAC Demand Notes account.  Basically, that was a money market account that paid a higher interest rate than any other account I’d ever seen available.  There were two catches.

First, you had to be an eligible GM employee or relative to participate.  I come from an automotive family so this was no problem.

Second, the account is not FDIC insured.  So, it’s considered along the lines of a stock or mutual fund that it could be devalued at any time.  Traditionally, this wasn’t a concern, and so in the heydey of higher interest rates, I was more than happy to take a return of 5.5% or more on our long term savings.

Last year, when both GM and GMAC were in trouble, I started to worry about the possibility of GMAC defaulting on their demand notes.  So, I pulled a pretty sizable chunk out and moved it to a new ING Direct Orange Savings account.  At the time, ING was paying almost identical rates to the Demand Notes account, and was aggressively pursuing new customers.  We even got a $25 sign up bonus!   Since ING Direct is FDIC insured, we had the best of both worlds!

Since then, ING has cut rates a lot so that they are no longer what I consider a top-tier payer of interest rates.  They are currently paying 1.25%.  GMAC Demand Notes, on the other hand, is currently paying 2.15%.  That’s a 72% premium.

I have been watching everything closely, and I believe that the risk of GMAC Demand Notes defaulting is minimal.  GMAC has received government bailout funds a couple of times, so I believe that the government has no interest in letting them fail or default.  I also believe that they’ve strengthened their balance sheet and are on the road to recovery.

So, while I don’t think that GMAC is out of the woods, I believe that the risk has been minimized to the point where we are slowly increasing our balance in our GMAC Demand Notes account.  Basically, our strategy to date is to make payments out of our ING Direct account (our winiter property tax bill was the most recent payment) and make new contributions to the GMAC Demand Notes account.

As our ‘most afraid’, we had about 95% of our long term savings in ING Direct.  As of right now, we’ve lowered that to about 85%.  I’m not sure what blend I feel comfortable with.  At this point I don’t think I’ll ever be comfortable with 100% in an uninsured account again, but I could consider a 50-50 blend being reasonable depending on market conditions.  The extra interest income is sure nice as well as long as I believe the risk to be minimal.

Our Rule Of Twenty Five (Percent)

One of our biggest financial goals is to get out of all non-mortgage debt.

Thankfully, we don’t carry any credit card debt and our cars are both paid for, so the only thing we have at the moment is student loan balances.

When my wife was working, we were able to dedicate big chunks on a pretty regular basis, and the balances dropped quite a bit. My wife left the work force last year to take care of Baby Beagle, and coincidentally, her paychecks stopped.  Sadly, this reduced our ability to pay extra in most months.

(In all seriousness, we realized this going in and were fine with the trade-off)

Even so, we still want paying down debt to be a priority, so we now have a rule of twenty five percent.  That simply means that any ‘extra’ income we come across, twenty five percent will automatically go towards paying down debt.

At the moment, our extra cash inflows are pretty much limited to tax refunds.  We haven’t gotten our return yet, but we did ‘hold back’ some money from each of my paychecks last year that we knew would be refunded to us if we’d let the government withhold more.  We have that amount available to us now.

We’re also anticipating an actual refund.

As a one time thing, you may remember last year when I announced that my grandmother had passed away.  She left us some money, and we will be applying the same rule towards the money we receive from her.

With these three items, we’ll be able to reduce our student loan debt about 20% from it’s current level.  Our goal is to have these loans completely paid off by the end of 2012, and this will keep us on track.

I like the rule of twenty five percent, because it makes the application of the money towards the loans almost automatic.  We know we’re coming into a little bit of cash, and we automatically take that twenty five percent out of any discussion of what we want to do with it, as my wife and I know that it will be going directly toward paying down debt.

How Citibank Paid For Our New TV

Read the title of this post and you might think that Citi got generous and sent us a new TV.

Unfortunately, the generosity of Citi isn’t quite to that level.  However, it was the next best thing in my book.

Both my wife and I have been using our Citi Dividends cards for over three years now.  Citi Dividends is a cashback rewards card that currently has no annual fee.  Since we pay our credit cards off every month, I pay little attention to what the interest rate is.

The Citi Dividends card pays at least 1% cash back for all purchases.  They pay an extra percent (total of 2%) for certain categories of purchases including those at grocery stores, gas stations, convenience stores, drugstores, and utilities.  I believe that there are others as well.  You accumulate reward cashback every month, and when your balance hits $50 you are eligible to request a check.

My wife and I have both been putting purchases for all of the 2% categories on our card, as well as most ‘bigger ticket’ items, figuring that 1% is better than nothing.  When we get a check, we have been banking it in our long term savings accounts (currently split between ING Direct and GMAC Demand Notes).

Last year, around the holidays, I found a Slickdeal on a TV for our kitchen.  We previously had a small tube TV, but it was bulky and took up a lot of room on our countertop, which is often in high demand.  The deal was a nice 19″ LCD HD TV for $129.99 including shipping, plus we received a couple bucks back through Bing’s cashback program.  When it came time to pay for it (and it went on our Citi card, of course), I simply removed the money from our earmark and paid it off.

My wife and I have decided that we want to use that money for more ‘luxury’ purchases rather than to pay bills or pay down student loan debt.  I think we have both agreed that we’d be using this for electronic type purchases, so additional TVs, computers, etc. would be funded completely or in part with this ‘free’ money that we earn just by using our credit card.

We make sure that we don’t buy things unnecessarily, so it’s not like it’s costing us money to use the card via unnecessary purchases.  As I mentioned, we also pay it off every month, so there’s no offseting interest charges for us to worry about.

I know that there are other cash back cards out there.  In fact, I think that Citi no longer even offers this particular card for new customers, but I know that they have other cash back cards out there, so I’d recommend shopping around in the event that you don’t have a cash back rewards card but are interested.

Citi has had the same level of rewards for a few years now, and I’ve never ‘chased’ other rewards cards for fear that as soon as we got new cards paying a little more, they’d end up cutting the rewards anyways.  So, until one comes out that has a deal too good to pass up or until Citi cuts their rewards or raises their rates, they have at least two loyal customers.

Customers that like ‘free’ TVs, too!

Note: This is an unsolicited post; I was not paid or asked by Citi to write this post.

Did The Banks Force You To Sign Your Mortgage?

My Two Dollars posted an article last week that made me see red.  In the article, David (the author) said that he’s changed his mind and that he now thinks that it’s OK to walk away from your mortgage if your property value has declined to where you’re underwater on your mortgage.

Even if you can afford to pay.

Huh?

His argument (and he links back to another article in the NY Times that advocates the entire thing) is that the banks have been unwilling to help the borrowers out who they know are underwater, so turning around and ‘sticking’ it back to the banks is fair play.

I think that’s baloney.  I actually think it’s a lot more than that, but the words I’d like to use are ones that I try to stay away from in a public blog.

First, two wrongs don’t make a right.  Just because the banks are being ‘big meanies’ doesn’t mean that walking away will somehow wrong that right.  There are other ways to go about dealing with this issue.  Keep working with your bank.  Try to sell your house.  Or, keep making the payments.  I mean, to act all flabbergasted that the banks are not jumping up and down to work with you, are you serious?

If anybody really thought that the banks were their buddies just because they acted all buddy-buddy to get a mortgage deal signed, well, give me a break.  Banks are in the business to make money, and they do so largely in part by signing loans.  Why do you think that the bank owes it to you?  Let me ask this of anybody who thinks that it’s OK to walk away: If the value of your home had continued to go up and you sold it for a nice profit, would you have ‘shared’ that profit with the bank?  Didn’t think so, but how is anybody throwing a tantrum because the bank won’t ‘work with them’ any different?

Second, nobody forced you to sign the papers in the first place, did they?  As far as I know, a lot of people signed a lot of papers agreeing to pay a lot of money for houses that, as it turns out, were not going to hold their value.  While I agree that this is bad news, the fact is that there was nobody from the banks or the mortgage company holding a gun to anybody’s head (except maybe on the Sopranos).

Let’s face it, many of the same people that bought houses inflated in value was because they saw it as an investment.  Just like any investment, a stock, a bond, whatever…there’s a risk.  But, instead of these people dealing with their losses like they would in any other investment, they would now rather  leave someone else to deal with their losses.

That’s baloney.

Third, the short-sightedness is unbelievable in the logic that David uses. Why? Because banks aren’t the only ones that lose here.  Yes, you might be ‘sticking it to the bank, but let’s think for a minute of all the other people, real people that aren’t hiding behind corporations or skyscrapers, that get screwed every time someone walks away that could afford to keep paying:

  • Neighbors – Anybody around the vacant home now has to deal with an empty house that will, more often than not, turn into an eyesore as the lawn goes uncut, the snow doesn’t get shoveled, and gets open to all sorts of problems such as infestation, scavenging, broken pipes, or any other number of things that even a few months of neglect can bring on.  And usually these sit for more than just a few months.
  • Neighbors – Yes, I’ll mention the neighbors again because now what happens is that the bank will have to foreclose and this will usually lead to lower values in the neighborhood.  So, every one of your neighbors watches their own home value drop when you walk away.  You think the bank is the one eating your loss, but chances are your neighbors are even more.
  • The municipality you live in – I’m guessing that when you walk away, you’re going to stop paying the property taxes.  Since most municipalities rely on property tax collections to fund their operations, you’re leaving them with less for as long as the foreclosure process goes on.  That means less money to provide police and fire safety, less money to keep up infrastructure such as roads and other essential services in a time when many cities are barely scraping by as it is.
  • The kids in your school district – Where I come from, property taxes also fund the public school system.  You leave, and there’s less money to fund the schools.  At least here in Michigan, educational spending has already been cut a few times, largely in part because of declining property values AND less property taxes collected because of people who enter foreclosure.  To think that there are people contributing to this willingly is simply nauseating to me.

I wonder if anybody that walks away simply to screw the bank  looks in their rearview mirror as they’re driving away and sees all the rest that they’re leaving behind.  Because, there are a lot of other people affected by that selfish decision, not just the bank.

Let’s also mention the circular effect. As I mentioned, walking away typically leads to a foreclosure, which more often than not leads to a decline in the home value on the abandoned property and all the properties around this.  These declining values will then lower values so that someone else goes underwater.  Then, they walk away and that depresses the value even further, which leads to someone else walking away, and so on and so forth.

When does it end?  Are we supposed to become a nation of renters because if things kept going and going, that’s the end game.

I think I’ll pass on that one, thanks.

If we want this real estate mess to stop, there has to be personal responsibility.  There has to be sacrifice in order for this cycle to stop and for us to start the process of stabilizing the real estate market for good.  It amazes me when I see blog posts and news stories like David’s who either want to delay this process, or want to make it someone else’s problem.  In the end, that’s all it’s doing every time someone walks away is making it someone else’s problem.

Let me put a disclaimer or clarification on all this.  If there are circumstances where you can’t afford your house, say you lost your job or you have a medical expense, or something else that’s put your finances in the tank, none of what I said applies to you.  I understand there are thousands of people who had to walk away from their homes because they had no other choice.  I’m not chastising you in this article.  What my comments and my anger are centered around are those people who still have their jobs, who can still afford the payments, but choose to consider not making them simply because things didn’t work out like they planned.

One of my favorite bloggers is Funny About Money.  Funny lives in Arizona and until the end of 2009, she worked for Arizona State University, but found herself out of a job due to budget cuts, and is now effectively retired.  She now lives on her banked time and unemployment, and will soon be living on Social Security and a small-to-modest retirement account.  She will be scraping by.

She also has a house that is worth a lot less than she paid for it a few years ago.  Yet, she plans on staying there and in all the months that I’ve read her blog, she’s never once seriously considered walking away.  It would be the easy thing to do.  It would probably help her out.  But, she’s never considered it because she knows it would be the wrong thing to do.  I feel bad because she’s definitely feeling a big impact in her life as a result of the real estate declines.  But, I’m proud of her because she makes the right choice, even if it’s the difficult one.

If someone in her position can make the right decision, even though it puts her in a tough circumstance, why is it so hard for others to comprehend doing the right thing even if it means sacrificing?  People in generations past made a lot of sacrifices that, while they were tough, led to opportunity.  Now, people want the opportunity without the sacrifice, and there are way too many people encouraging this mentality.

So, please, can we stop already with the sympathy to those who choose to walk away from their mortgages even though they can afford them? OK?  It’s baloney!

Loving Store Brand Yogurt

One of the bigger ways that more people have come around to over the past couple of years is purchasing store brand items instead of the national brand items.  In many cases, the store brand items are just as good as the national brand, and it’s also been shown that many times, they’re the exact same product just in different packaging.

One item that we purchase regularly are yogurt cups.  Both my wife and I eat at least one yogurt cup per day, so we tend to purchase quite a few.  Our local store, Meijer, usually carried three brands that we varied between:

  • Yoplait – Very good in taste and there were often coupons which made it a very good deal.
  • Dannon – Our least favorite taste so we would usually only buy this when the sales were too good to pass up.
  • Meijer (store) brand – Was pretty good price and they also gave you two extra ounces (8 oz total) versus the national brands.  The taste was OK, maybe a tad preferrable to Dannon but nowhere near Yoplait.

Then, a couple of weeks ago, everything changed.

My wife noted that Meijer had shrunk their containers to the same six ounce size as the national brands.  I immediately rolled my eyes thinking that they were effectively raising their prices by shrinking the packaging size.  Still, since they were basically matching the size of the national brand, I couldn’t begrudge them too much, and that I wouldn’t miss the extra couple of ounces anyways.

I figured that the purchase habits would be about the same, but then my wife got some and we both noticed that….

The taste had gotten better.  A lot better, in fact.

The Meijer brand containers now have yogurt that I think is tastier than even Yoplait.  I’ve let my wife know that unless Yoplait is on sale and can be purchased cheaper, to just get me the Meijer brand as often as possible.

It’s that good to me.

So, even though they did effectively raise the price by lowering their packaging size, they also seemed to have improved their flavor.  Was the trade off worth it?

Absolutely.

Anybody that has Meijer stores near them (I think it’s mainly Michigan and Illinois) and happens to like yogurt, I would highly recommend that you give their smaller sized but improved tasting yogurt a try!