I had a reader write in with a  story that happens all too often…I myself have been guilty of it at one point.  Its a little thing I like to call “good intentions gone bad.”  So what exactly am I talking about?  Consolidation loans.  Particularly consolidation loans as they relate to budgeting and money habits.  Ive had a few emails along these lines but never someone with so much debt….and so much income.  Here is the reader’s letter:

“Hi Jesse,
I admit I feel kind of weird writing to a guy on the internet that I dont know (but I know a lot about your life at least, does that count?) but I feel like I need to.  I have been reading financial websites for a while and I find you to be the most down to earth and real of most sites.  Some of “huge” financial sites seem sort of idealistic.  Anyway whatever.  I am writing because my wife and I are in a very difficult situation that we take full responsibility for but we do not know what to do from here.   We are both in our early 30s and we both make about 90k per year, so you would think that we are living large, but quite the opposite, we can’t even afford groceries.  See, a few years ago when we both were promoted.  We bought a house here in California for 600k.  Its by no means a mansion, housing is just very expensive here.  Then we went on a vacation that cost about 8k, which we put on credit cards.  It just spiraled out of control from there and we found ourselves with 40k in debt + 30k in student loans.  We did a consolidation loan and got one fixed payment on the 40k at a good rate.  The problem is, we have charged our credit cards back up to about 10k.  Should we get another consolidation loan?  You have everything, houses, a nice car, and now a baby.  We make a lot of money but our minimum payments take up most of our income!  I called some hot line and ended up hanging up because first I felt stupid then after sitting through a fairly humiliating interview they told me they could help at a cost of $20 an hour!  How is that helping, I need $20 for food and gas right now.  We would like to sell our house to get rid of that but housing prices have dropped it I don’t even think we can get out of it what we bought it for.  I have to tell you, Im hopeless right now.  My wife and I fight about money every day.

Thank you for your website, I am depressed when I see your stock picks because I know I will probably never be out of this debt to even try investing in any of them.  But I appreciate it anyway.

Thanks,
Grant

PS you can publish this if you want, I know sometimes you tell reader stories.  I guess I can be what not to do.

Before I respond I am going to give a little bit of a primer for anyone who needs it:

Consolidation loans are loans that are supposed to work like this: Take one of these loans out. Pay all of your different credit card debt and other debt down with the loan. Pay one monthly payment with a lower interest than what you were paying before. Its all good then, right?

It’s only a good deal if you create a budget and stop spending. Grant has fallen into the most common trap in with consolidation loans: consolidating and then spending like its business as usual and running the credit cards back up. So now they have their new credit card debt AND their consolidation loan debt.

Getting back on track, here was my response to Grant:

Grant,

Thanks for writing, I appreciate you taking the time to write in.  There is no shame in talking about money issues, money is still a huge worry for me, especially with all of the things I have going on that you mentioned.  I appreciate the compliments, but Im sure my fiance would tell you I do not always have everything together :)  That being said, there are people that subsist on 1/10 of your income so I am glad you realize that this is your responsibility to take care of.

You have one major problem:

You HAVE to alter your spending habits.  That is the only way that anything will change.  Trust me, I know how hard it is.  I still have problems locking down to a budget.  It’s a tough thing to do but it is necessary, especially in your case.  Thats #1.  Cut up every one of those credit cards, right now.  Every consolidation loan in the world can’t stop you from spending more than you earn.  That is your job, and your job alone.

Next step: time for some drastic measures.  The absolute first thing to do is to pay down that credit card balance.  Do you have anything you can sell?  Time to start.  You mentioned gas money, well, when you are in that big of a hole, its time to stop driving if its possible.  You are in “bike 10 miles to work” territory…or public transportation if possible.  Since you do not have kids to worry about yet, you need to go to some extreme measures to get that debt down, especially if you can barely afford groceries.  If you have to get a second job on the weekend doing manual labor even, do it.  I assure you, being burned out from working all the time will be a much better fate than defaulting or filing for bankruptcy.

I want to stress something else too: you sound pretty hopeless, and let me tell you, there is hope.  If there is one thing I have learned in life its that things always get better and there is always hope.  The key is taking charge of your situation and doing whatever is necessary to get the problem fixed.  You can do it.  In fact, send me your paypal address and I will buy you 1 share of stock in one of my picks.

As far as the credit counseling goes, remember, credit counseling is code for “fraud” and is just another thing to siphon money.  Good luck man, if there is anything I can do to help, let me know and keep me updated.  Im sure readers will appreciate your story so I am going to post it, not as an example of what not to do, but to show what can be done.

Jesse

As most of you know, I am very selective about doing stock reviews. Whenever I am not sure what stock to investigate I always go back to one thing: what is something or somewhere that I shop at, buy, or find useful. I also will only write a review on something that I have watched for sometime. Lately however, even everyday stocks have are getting slaughtered. Especially bad are the numbers for fashion retailers. On a whim I decided to check out where I got my last pair of jeans, a little store I like to call The Buckle. Ok so they call it themselves The Buckle as well (BKE). They are a retailer of medium priced but higher quality clothes. They have been managing to eke out profits while everyone else is tanking or hurting, and guess what? Its the end of summer, pretty soon people are going to be buying fall/winter clothes.

Some things I like about The Buckle:

-A look at executive transactions reveals that in the past 8 months, excluding the CEO Dennis Nelson who is fairly steadily income-selling, shows that the Buckle execs have actually acquired more than they have sold. In fact there is a whole sheet of people exercising their stock options…including Dennis Nelson.

-Royce Funds own 100 million in stock. This fund family has one of the better rates of return over the past few years.

-Insiders own 47% of outstanding shares in the company including massive portions by Daniel Hirschfeld, the son of the founder of The Buckle.

-Company has zero debt. Imagine that.

-The average sales per square foot grew 2% annually over the past 5 years.

-They promote store managers from within. The average district manager has been with the company 20 years.

-The company has bought back company stock (always a good sign).

-They pay one of the highest dividends in apparel retailing with the current yield around 1.8 percent.

Buckle is a company that makes money year in, year out no matter the economic conditions. They aren’t the store you necessarily when you think of fashion but they are solid. Senior management, all experienced retailers, is committed to growing the business. They have redesigned their website, and have a great marketing curve.

This all adds up to a very solid business and as I said before, we are just coming into a new clothes buying season which means the short term looks great….and considering all of the above, the long term looks even better.

So for fun, here are the opposites of yesterdays post…things you absolutely don’t want to buy from a thrift shop:

1) Underwear. Buying used underwear from a thrift store is like….right here is where you insert a gross metaphor. Seeing as I try to keep this blog PG I am going to let you use your imagination. Whats sick is my brother swears that he has seen a lot of older ladies buying used undergarments from the salvation army. If you are so down on your luck that you are feeling the need to go out and buy underwear second hand send me an email and I will give you a $1.06 gift card to target to buy a pack of bargain bin undies. Dear Lord.

2) Mattresses. This one might be more tempting than the underwear just because matresses are more expensive but it is even more gross than underwear. Good luck throwing a mattress into the washer with a bunch of bleach. Ill leave it to your imagination to think about all the fun screts a second hand mattress can hide. Oh and then theres bed bugs. Which feed at night. On people.

3) Swimsuits. See underwear, except worse. Plus you can’t bleach them.

4) Cosmetics. This one might be unusual but there wouldn’t be a cosmetic section if no one bought the cosmetics. Just think of all the bacteria and viruses that might be festering in there. Blehck.

5) Stuffed Animals. What says “I love you son” like buying him a used stuffed animal infected with disease, coated with other kids snot, and full of lice? In all honesty, its just not a good idea even if you wash and bleach them.

As a general rule I have always avoided so called “thrift stores” like the plague.  Lets be honest, there is a certain stigma surrounding thrift stores…some of them for good reason.  On the other hand I didn’t realize just what a great resource they can be for some things.  I was talking to my brother the other day and he had just gotten done going to what he called a “red tag” sale.  He was super excited about it, and he is a 21 year old wildman, so I was fairly skeptical.  I figured it had something to do with discount liquor, or possibly another one of he and his friends bizzare outings (like the time they picked up 20 free gallons of iced tea from someones back yard….or the time they left a 70s hot tub in my front yard…or the time they tried to get bronze scrap metal out of an old broken piano…).  He was actually referring to a thrift store sale.

Turns out he was actually on to something.  He came back with some pretty cool stuff.  There are some tshirts for things from the 90s that I was pretty enamored with.  He managed to get a jersey from one of the CSU players from the late 90s.  Seeing as old jerseys are hard to come by, its a great find.  He also managed to grab some workout shirts that are nothing less than awesome… some to be worn as tshirts and some to be cut up into workout shirts.  His tshirt of choice to make into a workout shirt is old American flag tshirts.  I found that I long ago went through my old tshirts for ones I wanted to cut off into lifting shirts so the idea of a huge selection of $2 shirts out there all begging to be worn sounds great.  For the nostalgic among us there are great old cartoon tshirts (mighty mouse anyone?  How about teenage mutant ninja turtles?  )  Not bad for a fun tshirt.  Good luck finding anything new that has quite the fun nostalgic value.

This got me thinking, what things are BETTER from a thrift store than they are brand new?

1) Workout shirts - see above.  Teenage mutant ninja turtles tshirt for lifting in? Priceless.

2) Nostalgic tshirts - see above as well.

3) rags/towels - I need some new shop towels.  I certainly am not going to steal Lauren’s towels and I am sure there are some big ones that would be perfect.

4) Resellable antiques or cool antiques - sometimes gems slip through the cracks.  You never know what you might find.  Can’t buy antiques new now, can ya?

5) Halloween costumes - What better place to find things for crazy Halloween costumes.  Want to be a little old lady? sold.  Crazy costumes? sold. Karate kid? sold.

Heres what I came up with as far as “free” ways to keep cool:

1) Make sure your house is well insulated - Insulation is not free per say, but its not very expensive, and you can get do it yourself home kits to blow in cellulose insulation. Insulating your calls will make a world of difference in the heat (and the cold when you get to winter)

2) Keep the ceiling fans on - not entirely free but certainly not that expensive

3) Open the fridge or freezer for a few seconds and stand in front of it - this one may sound kind of funny but when I was helping Lauren’s family do some interior decorating (she and her mom do it on the side) there was a house that the air conditioning wasn’t working. I was doing a lot of moving stuff around and really getting hot so every once in a while Id go over to the freezer, open it up and stand there. It actually helped a lot.

4) Use evaporation - When I was younger my family didn’t have AC so I used to take a spray bottle and spray my self with water…especially my feet which for some reason are always hot. I know some people like to put on wet bandannas.

5) Go to the basement - If you have one, even if its unfinished, use it. Its always going to be cooler in the basement so when it gets super hot, head on down.

Bonus: Come to my (or to a friend’s) house that has AC. As long as you bring beer, of course…

So good news: they accepted our counter offer on Lauren’s house.  This has been one of the biggest stress points for us over the past few months.  We were afraid that with the market as it is we wouldn’t be able to sell, or at least that we wouldn’t be able to sell in time for the baby.   One thing down!

Unfortunately, it’s been a bittersweet week though because we found out that Lauren does not get partially paid maternity leave as we had thought.  In fact, its slightly ridiculous because the company does have paid maternity leave but we are missing out because of a small technicality on insurance enrollment dates.

I understand and love our capitalist system but using small loop holes and technicalities to cut people off unexpectedly strikes me as unnecessarily harsh.

As you all know we have been in the ultra fun *cough* house selling market for a few months now. I would say about half of all the showings we have had have been in the middle of the workday. Obviously its a little bit less than ideal peacing out in the middle of the workday to go get a house ready for a showing, and I am always skeptical when someone is looking at houses during the workday. So this Saturday we had a showing that was setup a few days in advance; a real rarity compared to the usual “Hey people are coming to look in half an hour.” So this kind of gave us hope since they were obviously interested in the house to plan ahead to come look at it. As it turns out they they came over and stayed in the house for about 20 minutes. Thats a good sign. Then they wanted to come back and look again on Sunday. Even better sign. They brought a ton of people with them this time and stayed in the house for 30 minutes. Awesome. So last night we’re at my parents house for my sisters birthday and the phone rings: we got an offer. At this point we’re both super excited until we hear the offer details and it gets a little harder:

They want:
-Over 5% off the asking price, which is over 10% off the true value of the house.
-The excluded appliances including brand new stainless steel fridge and the washer and dryer
-The curtains
-Broncos season tickets

Ok, just kidding about the season tickets (got my own wants mixed up there) but they really did ask for the curtains.

We really need this deal to work out so we are negotiating with both sides. Lauren and I had a rough plan outlined for what to do in case we needed to bargain but Lauren and our realtor Vicki Lairson, who has been excellent, came up with a specific plan to get what we need by giving both sides enough incentive to close the deal. Hopefully it will go down as follows:

We offer our buyers:
-The extras they asked for
-Meet halfway on price

Try to get from builder:
-The appliances that we are now out
-A small amount more off the price

This gets everyone what they need. Our buyers get a smokin deal: the house for basically what Lauren bought it for plus appliances, a huge patio, beautiful landscaping including a fountain, central A/C, garage door opener, and all the other work we’ve put into the house (which is a ton). We get the amount we need for down payment, the payment we are comfortable with, and the appliances. The builder gets to close a deal and have our house off their hands and into ours…and they still get to make money. Its impossible to say for sure but several people we know that are in the building industry we have talked to have given us good ballpark figures of what it costs the builder so by those estimates they still get to make decent money. Its a win-win-win for everyone.

So now we just have to hope it all goes down. Ill let everyone know. But now I know some of you are wondering
“Well, what do I do if I get a low ball offer on my house, and Im just trying to sell and I don’t have somewhere else to make up that money?”

Glad you asked.

Be as informed as possible.

The best way to deal with these kind of offers is to know your facts like Bo knows football. The real trick is understanding the market as a whole, the market as it pertains to your area, and how your property fits into the bigger picture. In bad market times like we are in right now it may be that the low ball is really not a low ball at all: its a fair offer considering the market. It all depends. The real truth is that the more information you have, the easier it will be to negotiate on your terms.

Low offers are very common in real estate and its not something to take personally. That is the biggest mistake a lot of people make is to take it personally. If you have done your research and you know that the offer is nowhere near market value make your counter offer near your original price or simply do not even counter. There is no reason to work with a buyer until they are working with you. The less informed you are, the more likely you are to take a low offer.

One of the candidates for president has a plan for more economic stimulus. Mr Obama has a plan that is outlined as follows:

1. Forcing big oil companies to take a reasonable share of their record breaking windfall profits and use it to help struggling families with direct relief worth $500 for an individual and $1,000 for a married couple. The relief would be delivered as quickly as possible to help families cope with the rising price of gasoline, food and other necessities. The rebates would be fully paid for with five years of a windfall profits tax on record oil company profits. This relief would be a down payment on Obama’s long-term plan to provide middle-class families with at least $1000 per year in permanent tax relief.

2. $50 billion in immediate measures to turn our economy around and help prevent more than 1 million Americans from losing their jobs:

• $25 billion in a State Growth Fund to prevent state and local cuts in health, education and housing assistance or counterproductive increases in property taxes, tolls or fees. The fund will also ensure sufficient funding for home heating and weatherization assistance as we move into the fall and winter months.
• $25 billion in a Jobs and Growth Fund to replenish the highway trust fund; prevent cutbacks in road and bridge maintenance and fund new, fast-tracked projects to repair schools – all to save more than 1 million jobs in danger of being cut.

For those of you who are unaware (which I would doubt is many of my readers) this is terrible economic policy. I guess neither party realizes what out of control spending will mean for our country long term.

How is this going to be paid back?

Supposedly with taxes. There is just one problem with this. Tax revenue is NOT proportional to tax rates. Tax revenue is and has been for the last 100 years DIRECTLY proportional to GDP.

I encourage open mic on this because this is a non-partisan blog, but part of being non partisan is recognizing what is best for the country and more handouts is not good for anyone.

Apparently I do not have the assembly skills of an eight months pregnant woman.  I assembled our changing table and it took me 4 hours.  Assembly time: 3 hours and women were saying they managed to do it 8 months pregnant on the reviews.  This has led severe depression and inability to write an article today.  Instead I am going to impart others wisdom on you.

First up My Money Blogs article on focusing on your financial sphere of influence.  This is a big thing to me because worrying about money is something that can absolutely wrack you with stress.  Its important to really focus on the things that you can change vs the things you cannot change.  This goes for all areas of your life, not just financial.

Lazy Man writes about putting a price on being healthy.  This is something I feel pretty strongly about.  I will spend what it takes for me to be successfully healthy.  For me that means buying protein powder, creatine and the like.

Next Flexo busts out some frugality with Can you save an extra $500 a month

PT Money raps.  Literally.  There is nothing to learn here, its just awesome.

I Will Teach you to be rich talks about buying stuff outside the country to save money.

For those of you who are interested in ETFs, Sun has a great article on setting up a virtual ETF portfolio 

Five Cent Nickel explains what happens to your CD if your bank fails.  I had no idea before reading the article.

Patrick from Cash Money Life wrote a series about a possible second economic stimulus check that started a debate that I, of course, had to jump right into.

No credit needed talks about how awesome it is to be debt free.  Pretty damn inspiring.

Free Money Finance talks about being a Money Manager This is huge to me because I just plain am naturally bad at organization.

The Simple Dollar takes on save for retirement or get rid of debt?  I think most Americans struggle with this at some point in their lives.

Jeremy at Gen X finance talks about something that hits home for me: how has the value of your house held up?  Ive had my house swing about 40k total in worth in the past few years.  First way up then way down, then back to the middle.

Mighty Bargain Hunter doesn’t care about how much exxon makes.  Any Neither do I but I like the article.

My Two Dollars has a nice gardening guide which is cool cause I have been ranting about my garden all summer.

There was a bunch more I liked this week, but maybe Ill save them for later.

There was a government study a while back that showed that less than half of American adults can correctly calculate the most economical size of packaged rice to buy at their local grocery store. How scary is that? The majority assumed the biggest bag of rice was the best buy. In the same study only 20% of adults could calculate a taxi fare trip correctly.

Lets do a little math test. Lets make a margarita. It calls for varying amounts of lime juice, grand marnier, and tequila. You need twice as much tequila as grand marnier lime juice. The ratio is 2:1:1

Now, how many pints of each do you need to make a gallon of this margarita?

Measures:

8 ounces (oz.) = 1 cup
2 cups = 1 pint
2 pints = 1 quart
4 quarts = 1 gallon

So whats the answer?

I will tell you at the end of the article.

So I want you to stop for a minute and think about how much money could possibly be going down the drain by not really paying close attention to economics at the grocery store. Here is a great example that I can think of. When I was in college I lived in a house with 5 guys. Yeah, 5 guys. We had a pool of house money for things like milk, bread, and toilet paper. When there are 5 guys living in a house, they go through a lot of toilet paper. One of the roommates downstairs’ girlfriend basically lived at our house and so we essentially had 6 people in the house. One day my roommate who normally did the shopping and I went to king soopers and in the TP aisle he grabbed the huge pack of the TP we normally bought. It was 16 rolls for $6.50 ish. Well as it turns out for this particular brand of toilet paper King’s has a special on their 4 packs that makes them almost perpetually $1.00 per 4 pack with soopercard. I of course smacked him and so we started throwing packs of toilet paper at each other back and forth in the aisle. Im sure KS management appreciated that.

The moral of the story is that is $2.50 that we could have been wasting every week for a year (I honestly can’t remember, nor would I expect to remember the specifics of what TP package we had at any given time). Thats $130/year. Assuming you make similar mistakes with milk and other products even with smaller margins and you are talking hundreds(thousands even if you’re a name brand buyer) of dollars every year.

There is some good news

Most supermarkets have a “price per ounce” little marker in super small print on their tags. Voila, they do the hard work for you! Failure to look at these crosses the line over into lazy. So what excuse do you have now?

…But Jesse, Im in a hurry
Seeing as you could save $2 by spending 30 seconds looking at prices that comes out to $240/hr return on your time. That good enough for you?

…But Jesse you said yourself that you don’t buy cheap toilet paper
I didnt say buy the cheapest toilet paper, I said buy the most economical size for whatever you like.

…But Jesse, Name brands are better
When it comes to most things, check the ingredients. Are the ingredients the same? Ok then its not better.

…But Jesse, bulk is just easier to deal with than a bunch of individual packages
Terrible excuse

And now for the answer you’ve all been looking for:
4 Pints tequila, 2 pints grand marnier, 2 pints lime juice

You got it right, right?