What Do You Mean "The Bank's Empty?"

One of my joyous duties as Head of Household is monitoring our monthly budget and paying bills.  I'd rank the duty right up there with, oh, plunging clogged toilets.  But it has to get done so I do it.

As I was balancing the books, as they say, late last night I noticed a little discrepancy.  An $800 discrepancy which left me broke a$$ until payday.  The good news is that payday is two days away.  The bad news is I have a mandatory car loan and second mortgage payment due before payday...to the tune of $730...and my bank is empty!

Let the games begin!  Once I figured out where MY error was, and I take full responsibility, it was time to figure out where I was going to get $730 in less under 12 hours.  Having lived paycheck to paycheck for several years while going to school, I had become quite skilled at robbing Peter to pay Paul.

So aside from the embarrassment of being a financial dolt, I'll share with you the thoughts that went through my head on how to come up with a sizeable chunk of money quickly, as many people often have to do.

1- Flat out borrow the money from friends or family.  This could be an option for some...not an option for me.  My pride mainly but I've done it in the past and it just doesn't feel good to me.  If it works for you, more power to you.  There's no shame in asking for help.

2- 24 hour loan sharks or Payday stores.  I've done this before too.  I borrowed $500 at 20% interest from a brick and mortar money-to-loan type place.  Obviously I don't recommend this because the interest is WAY too high but if you are in a tight enough squeeze, it might be your only option.  I had to show proper ID and two recent pay stubs. Be aware, if you are late on payment they will also add fees to the ridiculously high interest rate.

3- Cash in your precious metals.  I thought I would have to do this today.  I have a handful of silver coins and bars that I could sell.  I've never sold precious metals and I am really interested in how it works.  I mean, I understand the whole "buy it and hold it" strategy but if the economy takes a turn for the worst and we have to start using our silver, how much will we REALLY get for it?  I was interested to see if I could sell the silver coins I bought for $18/oz for $40 to a currency exchange place.  Obviously pawn shops will pay as little as you will accept.  I could have tried CraigsList but I needed cash in 12 hours.  Fortunately, I didn't end up going this route.

4- Start scrounging through the house.  I have half dollars and coins that I purchased from banks in hopes they were silver.  Some were, some weren't and the ones that were NOT silver might as well be spent.  I have several rolls of half dollars like this.  I also bought several Presidential and Sacajawea gold colored coins just because the kids and me think they look cool.  There's always change in dresser drawers, couches, car ash trays, kitchen counters, etc.

5- Have you noticed aluminum is up to $0.85 per pound lately?  We have bags of aluminum cans in our garage waiting to be recycled. It takes about 31-35 cans to get one pound.  You won't get rich quick but as any frugal person knows, it all adds up.

6- There's the old handwritten shell game with checks called "check floating" which used to be fairly common years ago.  Here's how the game worked: I owed a payment to a credit union due by 5pm today.  I could write a check for that debt on say, a Bank of America check and turn it in at 4:45pm.  The credit union debt would be satisfied on time but the check from BofA wouldn't hit BofA until the NEXT business day or later.  Years ago, the float time was 2-4 days between when a check was deposited at Bank A and withdrawn or transferred from Bank B.  These days, float times are usually 24 hours or less.  In my case, I had a bill due today (Wed) by 5pm but wasn't getting my paycheck until Friday.  It could still be done but you'd have to use three banks.  The downside: you risk the bank beating your deposit and you get an NSF fee (usually $35) for each bounced check AND your debt payment would be deemed as late after all that work.

7- Use bank fees to your advantage.  I have had scenarios in the past where I ran out of money but still had a bill left to pay before payday.  There was still money sitting in my account but my checkbook register told me that the money was already spoken for via a "pending" or "outstanding" payment I had already made.  I weighed the costs of borrowing from a Payday Loan place (20% interest or higher) versus an NSF fee from my bank (usually a flat $35).  Let's say I had $400 in the bank.  I had paid a bill for $400 but it hadn't been cashed yet and could take up to a week to process depending on where the receiver is located.  Our old timeshare company was like that.  They would take ten days to process a payment. I have another bill due for $300 in the next two days for my electric bill but payday is three days away.   If I borrowed $300 from a loan shark, I would pay $60 in fees to the shark or I could withdraw my $300 and pay the electric bill and try to get cash back into the bank before the timeshare check was cashed (a slight variation on the "float".)  If the timeshare attempted to withdraw before I got the money back in, the check would bounce and I would get a $35 NSF fee from my bank.  I would call the timeshare company and apologize, then offer to send a money order asap.  A $35 NSF fee is better than $60 to a loan shark.  Banks will give you ONE reversal of an NSF fee per year too.  If you keep track of when your checks clear and when you wrote them, you'll learn how long everyone takes to cash them.

8- Always call the debtor and ask if you can get an extension.  I happen to know this credit union very well and there is NO extensions on anything.  I can honestly say this is the WORST bank I have ever dealt with.  I made it in there today to make my payments and just like always, they screwed it up and I ended up sitting there for an hour.  They still couldn't fix their screw up even with the assistance of a manager.  Maybe I'll share that story another day.  What a nightmare this bank is.  Anyway, my electric service, internet, gas, water, cell phone are all very good about extending a deadline. Heck, even my mortgage company will do it.  But don't ask a bank, oh no.  They give no breaks.  You know, cause they don't get any breaks...right.  Bailout anyone?

9- Ask if you can move a due date.  Don't mention you can't make the payment up front, just explain how the due date is close to another large payment you make (mortgage, auto) and explain it puts a pinch on you at that particular time of the month.  I've had companies move the date forward as much as two weeks.

How I feel about MY credit union.

10- Return some recent purchases.  We usually have items we purchased that can be returned for cash.  Just recently, Wifey had to go buy bras for three daughters and guess the sizes.  Two of the three were wrong and can be returned for cash with the receipt.  Did you just buy an expensive item a week ago before the checkbook snafu?  We recently bought a juicer from Walmart for $99.  There's a 30 return policy at Walmart.  If we had to, we could return the juicer for the $99 and go back for another one when we could afford it again.  It's important to keep your receipts.

11- Collect on your debtors.  Does Jim Bob owe you $200?  Offer to let him off the hook for $175 if you can drive by and pick it up in the next two hours.  Explain that you're in a bit of a pinch and, after all, you helped him, right?  You get quick cash and he saves a little dough.

12- Request an early paycheck.  My hospital did this for me one time, years ago.  I don't remember why I asked for it but I simply called the payroll department and asked if I could pick up my check a day early.  They complied and I got my paycheck one day early.  Doesn't hurt to ask.

13- Sell your stuff to a second hand store.  We have a clothing store in town that will buy used clothing for pennies on the dollar.  In college, I would take last years out-of-fashion clothing there and get some spare cash for it.  They will inspect it and make you an offer.  They won't want things that you think are awesome and they'll offer you chump change for stuff you paid $100 for, but you get the idea.  It is one more way to turn stuff lying around the house into cash the same day.  I've left that store with as much as $40 in cash.  Of course, that was 1994.

That's all I can think of for now.  Suffice it to say, I pulled it off.  Even though the bank screwed it all up, at least I did my part and held up my end of the obligation.  After I got back home and hinted that we might be having Ramen noodles for dinner, a neighbor whom my wife has been babysitting for lately showed up and gave her $60.

Anyway we look at life...we're blessed.  Hope you are too.

~OJD

Money Saving Idea Worth Repeating

Cheapest price per lb sliced.

I stopped by the grocery store this morning after work to grab some fresh fruits and veggies for juicing (link to last juicing post).  As is customary, I text Wifey to make sure there wasn't anything she needed before I left.  There's nothing worse than the dreaded "...wish I had known you were going, I needed some xyz..."

She replied we needed some sandwich meat for the kids school lunches so I headed over to the lunch meat section.  The average price for ONE pound of pre-sliced ham was $3.38-$4.50 depending on brand.  I've posted in the past about how we bought a meat slicer we found on CraigsList and slice our own meats to save money.

$7.98 for 5lbs whole.

I headed over to the meat counter and checked on the price of a whole ham.  A 5 lb whole ham was $7.98.  So 5lbs for $8 and I slice it or 5lb for $20 (averaged at $4/lb) and it's pre-sliced.  Wow.  Talk about paying for convenience.  I chuckled to myself and tossed a whole ham into my basket.

If you're looking to save money, and in this economy I don't know who isn't, consider slicing your own meats to save some serious cash.

Money Seeds and Anti-Banking Fertilizer

Bella's first day of Kindergarten.

A full day of sleep yesterday afforded me the ability to stay wide awake for my entire night shift and into the mid-morning hours.  Usually I get home a little after 7am and drag myself out of my Jeep and limp towards the front door of my house.  Working the night shift gets old after a while...or maybe I'm getting old.  But today I felt fully charged when I drove up the driveway.

Instead of longing for the comforts of my bed, I was energetic enough to take my kids to school.  Only two have started: my 5th grader and kindergartner.  It's always heartwarming to take a child to their first day of school.  The thoughts of the new friends they'll make as they embark on their new lifelong journey of learning.  Wifey and I are blessed in that we have found an elementary school that does a terrific job.  As much as we like the idea of homeschooling, we have seen tremendous work done with our children at this school.  It's junior high and high school that we haven't found what we're looking for but that was already blogged about here.

Anyway, as I was driving my girls to school this morning my 10 year old asked "Dad, why didn't we buy the Erecksons' house?"  We had received a call from some good friends in our church who informed us they would be moving in about six months.  We had always admired their house and the work they had done with it.  It was a beautiful two story house probably close to 3500 square feet.  Mr Ereckson discovered he had quite the knack for woodworking and over the years added beautiful wooden accents throughout the house.  Large hand carved wooden beams bordered the entrance to the main living area.  A cozy wooden kitchen nook brandished a hand made wooden bench seat stained a dark cherry with what had to be so many layers of gloss that it looked wet every time I saw it.  He took months laying flagstone around the pool in just the right patterns.  Yes sir, this house had character and comfort.  A man could be proud of that home.

I began to explain to my pre-teen that unless you have lots of money in your pocket, which most people don't have, you have to borrow money from a bank to buy expensive things like houses and cars.  Right now, in our recession, banks just aren't lending much money to average people.  I shared with her that our house cost about $140,000 when we bought it ten years ago.  Since we didn't have $140,000 in cash, we had to borrow it from a bank and in turn, pay the money back over time.  Then I briefly explained interest and how the bank makes a profit from loaning money, careful not to get too deep into the boring stuff.

She's starting to understand that we need money to pay bills and that is why Dad goes to work.  This is where I started planting seeds.  I told her that if I had it to do all over again, I would have done things differently.  I impressed upon her that she should do business with banks as little as possible.  "They are a business", I told her. "Their sole purpose is to make money...off of you and you're hard work."  I explained how the Jeep we were riding in cost me around $24,000 when we bought in five years ago. Since I didn't have that much in savings, I had to borrow it from the bank. Now I have to pay $430 every month just to drive it.  Her eyes got big and she asked "How long do you have to pay them Daddy?"  I could see that she was understanding the debt obligation and it's longevity.

Out with the old (beige Yukon), in with the new (white, Suburban)
Goodbye $24,000 debt, hello 100% Ownership for $7.600.

I told her that if I could do it all over again, I would buy an older Jeep for much less money reducing the amount I would owe the bank considerably.  I reminded her of the 2001 GMC Yukon that we had last year.  "The one Mommy totalled?", she asked.  "Yup, good thing too", I replied.  In a strange twist of fate, Wifey was t-boned in an intersection when the driver of a PT Cruiser decided he wasn't going to turn after all.  He may have been in a turn only lane...with his blinker on...but he decided to change lanes and drive straight after Wifey had pulled out into the intersection. She got her first ever ticket and it was for failure to yield. 

Our Yukon was worth about $8000 at the time.  Since we didn't have much cash in savings, we financed that vehicle for $23,000 for our local blood sucker, I mean, banker.  The world of buying cars still amazes me to this day.  A car can be worth $8,000 "wholesale" but have a lending value or "retail value" of $23,000.  Of course, our bank had no problems whatsoever loaning us $23,000 on the vehicle worth only $8,000.  Here's the strange twist of fate.  I was smart enough to add GAP insurance to the vehicle when I bought it.  GAP insurance means that if the vehicle is totalled or wrecked beyond repair, if there is any loan amount NOT covered by the auto insurance company, the GAP insurance company covered the balance so you wouldn't be left owing money on a car you no longer possessed.  So, the $23,000 Yukon was paid off almost completely.  The insurance I had at the time (Geico) paid $12,000 to the bank as that was the estimated value of the vehicle.  Another $10,000 was paid by the GAP insurance leaving me with about $1000 which I settled with the bank for $500. (I pitched a HUGE fit about them lending so much money that auto insurance AND gap insurance wouldn't even cover the balance. Greedy turds.)

So I tied this all together for my daughter by explaining that after we got rid of the big bank loan for the Yukon which cost us about $450 a month, we had enough cash to go and buy our 2001 Suburban (almost the EXACT same vehicle but with less miles) for $7,600.  Now we OWNED the vehicle because we were able to pay cash instead of borrowing money from the bank.  We'd never have to make another payment on our Suburban, we owned it 100%.  She smiled and it made me smile.

"Avoid the banks as best you can", I told her.  Not many people will be able to buy a house without a bank loan though.  The trick there is to buy what you can afford.  You don't want to be "house poor" which was a term I hadn't heard until the last decade.  I told her my folks and Momma's folks didn't warn us about the banks.  We grew up thinking that when you needed a car or a house, it was normal to go borrow money.  Then that led to getting credit cards when we needed more money.  "Stay away from all that sweetie", I said.  Only pay cash for the things you need.  Make what you can for yourself.  Like the way you've learned to knit scarves and stocking hats. 

She stared off into the distance digesting what I said as we bumped along in the unforgiving suspension that Jeeps are built with.  I had planted a field of money seeds and anti-banking fertilizer in the garden of my daughter's mind.  When she grows into her twenties and thirties and experiences the natural yearning for nice homes and automobiles, I hope she remembers this talk and avoids the debt trap that ensnared my entire generation.  Of course, I'll continue planting with every chance that the good Lord gives me.

As my cousin Stephen would say: "Can I get an Amen?!"

~OJD

How To Buy A Car Without Getting Scammed

Business is business, some might say. If people are dumb enough to pay too much for a car then why shouldn't a dealership make a profit on them?  In my opinion, this is taking advantage of a person's lack of knowledge in a particular area and certainly doesn't mean they can afford to be taken advantage of. There will always be greedy people, I just hope this helps someone buying a car to navigate the transaction.

I was in need of a job near the end of my twenties and I had not yet acquired the many healthcare skills I now possess. Having grown up with a family steeped in the automotive industry, I was drawn by a newspaper job advertisement to seek employment with a local Toyota dealership.

I had no previous car sales knowledge but was willing to learn. The dealership sent new recruits to training seminars where I learned basic salesmanship. Keep track of everyone you talk to. Call them until they "buy or die." Cold call sales and friends/family referrals were pushed as potential buyers. The standard sales tips and tricks found in most "How-to sell" type books.

What I didn't learn until I got knee deep into car sales was how greedy and unethical this business truly was. And these unethical behaviors came from top management. It wasn't just lowly snake oil salesman trying to eek out a living. Our General Sales Manager was advocating this garbage.

I'll list these in the order that the scam goes down. First, note that cars which have been on the lot too long tend to have a sales BONUS. In order for a Sales Manager to encourage his sales team to push the not-so-appealing cars, he pays out an additional cash bonus to the team member that sells the unwanted. So the sales team is skewed from the get-go...meaning THEY want to sell you a specific group of cars, not necessarily the cars YOU want.

The Price Negotiations Scam
Let's say you've finally picked a car you want to buy. The people you are doing business with have NO idea what kind of intelligence you have. Just in case you are a complete moron, they are first and foremost going to offer you a price that is rediculously high just on the off-chance that you take the first offer handed to you. I actually saw this personally happen ONCE during my time as a car salesman. I offered full sticker price on a Toyota SUV. The lady turned to her 16 year old son and said "Do you want this one?" He emphatically said yes and she bought it. No haggling at all. Needless to say, I sat there stunned. When I went back to the sales desk to tell my sales manager (thinking I had done a great job), he mumbled that we should have offered a higher price. These guys weren't happy until they stripped every last red cent out of a customer. And this is just the first part of the negotiations.

In the event that you don't accept the first offer, the salesman parades back and forth between buyer and Manager. The salesman returns to the table, says the boss likes the way you negotiate and with a big, fat permanent marker writes the latest "these are the best we can do" numbers on paper. If you say the sales price is too high, they lower it but raise the monthly payments. If you can't afford those monthly payments, they lower the monthly but raise the total. When that doesn't work, they say you must raise the down payment. This can go on for hours. If you don't settle on some numbers and attempt to leave the negotiations, they send in a Closer.

A Closer is usually a veteran car salesman. He has negotiated deals long enough to know the key phrases and successful rebuttals to turn NO's into YES's. He slowly works you back to the negotiating table and tries to close the deal. I remember being a noob and letting a customer leave the lot. I was chastized for not "turning the customer" or telling management that the customer was losing interest so they could sick a Closer on the customer. To me, these inital stages of negotiations seemed to last unnecessarily long and appeared to keep many customers hostage long enough that hunger became an issue. Once the customer became hungry and was tired of negotiating, they began to give in to the deal presented before them.

The High Interest Rate Scam
After a sales price is agreed upon, the buyer is turned over from the Sales Team to the Finance Team. Now, I had bought several vehicles in my time. I had always thought that once I made it past the sale and onto the financing, it was all just routine paperwork. Did I want a warranty? Did I want a plain detail package or chrome lettering, leather seats versus cloth, etc?  Little did I know, this was just another step down the path of getting milked.

Every single potential customer, in the beginning stage of the purchase negotiations, had their credit report pulled (obtained.) This credit report, as we all know, tells any lender how much of a risk is involved with this particular buyer. What I learned AFTER working in this dealership was that the Finance Team followed the same rules as the Sales Team. They don't know how stupid you are, so they immediately offer a rediculously high interest rate. There was a fair amount of people that didn't know how interest rates worked. Few, but some, accepted the first offer. They accepted 13% when they could have qualified for 3% or 5%. There's thousands of dollars hidden in finance fees that the uneducated buyer doesn't see up front because it is added as the loan progresses.

The other aspect I learned about the Finance Team was that they, at least at this dealership, learned a scripted sales pitch. The way they presented the GAP insurance, leather seats, chrome trim package with floor mats and such wasn't just a mere "Hey, you want any of this?" Oh no, this stuff was scripted and memorized in a manner that glamorizes the top tier in each category. For every tier you moved up in each category, the dealership made more and more money. GPS, On-Star packages, heated seats, moon/sun roof, dvd players etc all inflated the final price higher and higher.

The Trade-In Scam
Now if you wanted to trade a used car in, and apply the value towards your purchase, you had a whole other scam to endur. Trained professionals would test drive your car and then proceed to nit-pick every single little problem in an effort to reduce the value of your trade. I routinely saw $7000 range used vehicles get traded in for $3000 or less. Sometimes owners just didn't want the hassle of selling the car themselves. Sometimes it was owners that just really didn't know what the value of the car was or how to calculate the value. Other times it was the only means of a down payment towards the new purchase. No matter how it got devalued, I don't remember ever seeing a trade-in traded for full kelley blue book value.

The Hold Back Scam
Most manufacturers offer incentives to dealerships to move the inventory quickly. The manufacturers, in my case Toyota, offered dealerships a bonus for each new car sold. This bonus was referred to as a Hold Back. One of the common sales lines I heard when up against a savvy negotiator was "But Mr. X, we're a business. We have to MAKE money somewhere. We can't just GIVE the car away."

Actually, they can GIVE the car away. When I was selling, the Hold Back on a new Toyota was between $300-$500 on EACH car/truck. This had nothing to do with the advertised sales incentives. If a dealership advertised $1000 cash back on a purchase, this has nothing to do with the Hold Back. Typically the "cash back" was really just subtracted from the overinflated retail sales price of the vehicle. The Hold Back is never given nor offered to the public. It is only given to the dealership. So, even if a dealership sold a car to a buyer at the actual cost the dealership paid for the car (aka wholesale price), the dealership still made $300-$500 dollars. Depending on the earnings structure, the salesman would be lucky to get $100 of that (usually more like $50 per new car.)

I did see a few of these type of sales. Typically it was friends or family of the Sales Manager or Owner of the dealership. New cars sold at cost and the dealership profited on the Hold Back. The Fleet Department sort of works on this principle but I won't get in to that. Sales Managers also have monthly quotas which earn THEM additional money. The dealership Owner may offer a Sales Manager an additional $2000 if x number of cars are sold in a particular month. I noticed that Managers were more apt to make a buyer-friendly negotiation on the last day of the month in order to reach quotas.

The Car Key Scam
I'll never forget the day of a large sales event. Flyers were sent by postal mail to a large local community. The event was to encourage local community members (aka potential buyers) to come visit the car lot and have some hotdogs and hamburgers from our parking lot grill. The main reason they came to visit: each mailbox had been sent an invitation with an attached car key. The invitation read that one of the car keys mailed out to the public would start the engine of a brand new car. I believed the whole thing up until the Sales Manager handed me a car key and said "Go put this in my office, top desk drawer, in the very back of the drawer." He then explained to me that this key is the only one that will actually start the prize car. The whole thing was a scam and I was naively shocked.

Some simple things to remember:

• If you are going to buy a car from a dealership, please do your research. Car values can be found on the internet. Research the value of your trade-in AND the car you want to buy.
• You can get financing from YOUR local bank before going to the dealership. That way you know what your interest rate is BEFORE you even go to the dealership.
• Research all the features you want to add prior to shopping so the Finance Department doesn't lure you into more features at the last minute.
• The last day of the month may be the best time to shop (think quotas.)
• Set a time limit for your trip. Stick to it. If you feel pressured or bullied, just leave. There are 15 other car dealerships who want your business.