Waste Watchers

A few days ago, I wrote about how I got out of debt and some of the happy-accident side effects of that process (like absolutely deadened desire to spend money). What I call Waste Watching was another one: When I realized where I was wasting money, I became much more conscious of waste in general – garbage or paper packaging I didn’t need, for example. Once you’re watching monetary waste, other waste awareness isn’t far behind.

Just as I’d always considered myself frugal, I’d also considered myself green. Just like I had lots of room for improvement in the frugal department, so I had room for improvement in the green department. For example:

• When I calculated my Latte Factor, I also realized how many paper cups and plastic tops I wasted. My home brew is carried in a $3 stainless steel mug (probably made in a slave labor camp, I know) so this is a win in two ways.
• Same goes for eating lunch out. Unless you’re dining in, that carry out comes in a container, with wax paper wrappings and napkins in a paper bag. All those raw materials to accompany me for… five blocks. What a waste. Fortunately, some carry out comes in compostable containers like those from Michigan Green Safe. The only catch is you actually have to… compost them.
• We signed up with 41pounds.org. When you’re trying to get out of debt, junk mail brings catalogs containing lots of luxe you just don’t need. The spring sweaters from J.Crew in Wizard-of-Oz technicolor, the cough-drop polished-pebble looking Crate & Barrel bowls – you don’t need that in your face when you’re $10k under, no way! It’s also a huge waste of paper. I can testify that 41pounds.org has worked wonders at our house and highly recommend it.
• I’m a compost freak now. I see the tops of strawberries, for example, and get kind of giddy because I can add them to the compost. San Francisco makes it easy on us because they pick up compost with the trash, but it’s not too difficult to compost at home. I swear up and down, between recycling and compost we throw out one bag of garbage every 3-4 weeks now.

If I may, a brief diversion on composting…

Right now, identifying another item suitable for the compost bin is like the feeling you get when you use a double coupon or get something you want and actually use for free – that feeling like you’re winning a challenge? The challenge is “How little garbage can we create?” because hey, when you’re out of debt you’ve got to have a new challenge waiting! I think Man might leave me if I don’t stop pointing at paper towels and pistachio shells and saying only “Compost!” It’s getting pretty bad but, oh well – debt is worse!

Update: The Story of My Friend Foreclosure

About a month ago, I posted an entry on a friend who has decided to walk away from his condo. I’m calling him My Friend Foreclosure for fun.

To be clear: I am not walking away from my condo, which is happily rented right now.

June 1 will actually mark the third month that my friend will not pay his mortgage. What happens if you don’t pay your mortgage for a few months these days?

Not much, it turns out. The bank has called twice (only twice?!) in a nearly three-month period saying “Please call us, you are behind in your mortgage payments.”

This week, he also received a letter from the bank (the first written correspondence of any kind) saying that he needs to pay but, in the same breath, that they’re willing to explore a deed in lieu of foreclosure.

I’d never heard of a deed in lieu of foreclosure before, and I didn’t find the Wikipedia entry very helpful. Here’s what I can deduce.

• I found several places online (including www.mortgagefit.com) that say some variant of the following: A Deed in lieu of foreclosure can “protect your property from being taken away by the lender on account of non-payment of your mortgage.” But that’s not really accurate.
• The deed-in-lieu process, according to my friend, is actually quite similar to a foreclosure in most respects. The bank takes the property and sells it, they just don’t foreclose on it. This is where legal subtleties enter, since I thought that a bank taking property and selling (or do whatever else) with it was the very definition of foreclosure.
• So what’s the difference between the two? The impact on your credit report, says my friend. But is that true?
• Not according to what I could find online, most of which amounted to some version of: “The credit report will still show that a large secured loan went into arrears. It will count the number of months that the lender is late, and then it will show that the creditor closed the account. This is basically what you get with a foreclosure.”
• I related this to my friend, who was surprised. “That’s not what the bank told me.” I would hope by now that we’ve all learned not to simply accept what mortgage lenders tell us (you know, like how they told me to take all of my money out of retirement and use it for a down payment on a house). Your credit score is not in the lenders’ best interests.
  
• It also appears that there are specific conditions under which the lender may accept a DIL. Two of these are that “the debtor has exhausted all efforts to sell the home at a fair market value” and that “the debtor doesn’t have the ability to make the monthly payments.” Neither of these is true of my friend.
  
• My friend isn’t the slightest bit concerned. He just plans to lie, to say he posted the condo on Craigslist and couldn’t sell it, and to say he can’t pay his mortgage – even though, since he first stopped making payments, he’s gotten a new job and a raise.

Will the bank care about whether or not My Friend Foreclosure actually meets conditions for DIL? Will the bank be more stringent about meeting DIL conditions than they were about giving out all kinds of bad loans? Will they check to see if he’s tried to sell or his house, or ask for proof that he’s lost a job or experienced a reduction in income? My guess is no. We’ll see if I’m right.

Will the bank continue to contact him? How long will My Friend Foreclosure get to live in his condo without paying for it? What will be the true and final impact to his credit report?

All in future installments of My Friend Foreclosure.

Get Out and Stay Out

I started this blog to keep myself honest and on track with paying down $10,000+ of credit card debt. I was in a position (single, no kids, high income) that enabled me to tackle it aggressively and pay it off quickly, in about a year.

The side effect of paying off debt is that I’m left with potentially less interesting things to write about. Documenting the struggle to get out of debt can be helpful and, yes, fascinating to others who are trying to do the same (at least, it has been to me – don’t know what I’d do without inspiration from Tricia at BloggingAwayDebt or StopBuyingCrap).

What do we get-out-and-stay-out (of debt) bloggers write about once we’re out?

We can write about how we did it. I’ll start with that, in one cohesive post.

In my case, it was pretty simple, if not easy. I rent my condo for just under $1,400/month. I decided to live within-or-below my means, using only my paychecks to cover my expenses. I threw every rent check at my debt until it was gone (about 12 rent checks, since I also owed my ex some money – feel free to scan my About section for details).

I admit to using a few hundred dollars from rent checks to pay for things like homeowners insurance ($400/year) and plane tickets home to visit my family (two tickets at about $400 each over the course of a year). I thought then, and still do, that occasionally using part of a rent check was OK since it prevented me from charging it and adding to my balance. This is how I paid off my credit card debt in about one year.

After I reached Balance Zero I started putting rent checks into savings to start an emergency savings account. Between rent checks and a tax refund for 2007, I now have $12,000 ($3,000 in a new Roth IRA, $2,300 in one savings account, and $6,700 in another) in savings that I didn’t have one year ago. I call this my $22,000 improvement – $10,000 that paid off credit card debt, $12,000 in savings.

It sounds great now, but it wasn’t always easy or fun. I’d always thought of myself as frugal, but upon examination (via Mint.com and cash tracking) I found a lot of room for improvement. I promise, it was worth it, all of this did add up, but it was extremely uncomfortable at first. This included:

• Using the library instead of Amazon.com (a recent improvement but one that will save me a few hundred dollars every year) – and never returning them late, because it’s $1/day per book.
• Canceling Netflix (I honestly wasn’t using it much, and the library, friends, or coworkers usually have anything I want).
• Going to local beauty schools for hair color and cuts, and general girly maintenance.
• Occasionally coloring my hair at home, and doing at home eyebrow maintenance, manicures, and pedicures.
• Doing laundry at home instead of being lazy and dropping off a big old bag at the wash-n’-fold for $20 a trip.
• Selling used clothes, books, and other household items to resale stores or on Craigslist. It can be a hassle, but it helped.
• Ditching my PDA (and the constant stream of email and distraction that came with it) and dropping the data/Internet plan it had to switch to a regular phone and cheaper plan.
• Paying attention to how many cell minutes I used every month and realizing I didn’t have to change much to switch to a cheaper plan.
• Using Skype to make more of my calls, which will hopefully make it easier for me to switch to a still cheaper cell plan (soon!). Since March 1, I have used $5 to make three hours worth of calls to Japan and England. Nice!
• Moving in with Mans, which cut down on my housing costs.
• Forgiving myself for falling off the shopping wagon by sending or taking things back, and refusing to feel embarrassed about it.
• Not buying coffee in the mornings (except on Fridays, and I stand by this Friday treat technique!) but making it at home (and allowing myself to buy slightly better coffee for doing so, which is still a lot cheaper). I also produce a lot less garbage this way: no paper cups!
• Gettin’ crazy with beans: garbanzo bean salads for lunch, split pea soup, lentil soup, black bean soup, and so on. We’re talking $3-$5 for four or five lunches here, people. It doesn’t get much cheaper than this.
• Being frugal about things that make people call me Great Depression Lady (like salvaging slightly moldy and rusty clothespins by soaking them in bleach water and drying them in the sun, and not buying new ones for a few dollars).
• Filling out expense reports IMMEDIATELY – and I mean this literally. Like immediately after a meal (as soon as I sit down at my desk), and immediately after a trip (meaning on the plane home).
• Throwing out catalogs as soon as they arrive without opening them (this still requires tremendous willpower on certain days, because hey, I have an emergency fund and no credit card debt, so why not? I’ll just order one or two lovely things… and yeah… no. Best to recycle immediately.)
• Focusing on hobbies (knitting is my new one) and doing things (like running and yoga) that have nothing to do with shopping.
• Reading personal finance blog feeds FIRST before going anywhere else online. This sets the frugal tone for the rest of my clickety clacking with the browser.

The best part of this 18-month-long experiment, however, is that I truly have no desire to spend money. If I could pay off $10,000 of credit card debt and save $22,000 in one year, how much can I save in a year when I don’t have debt to pay off? THAT is my new challenge – I just have to find ways to make it interesting for others to read about.

I am so happy to report that there is nothing I want. I don’t enjoy spending money. I don’t mind spending it on things I need, or on things for others (charitable donations, gifts, flights home to see family), but the joy comes from just not wanting much. I see a lot of pretty things I could buy, but really don’t want enough to spend the money. It took a few months, but now this is a habit, and it’s wonderful.

NPR: The Global Pool of Money

Quite possibly the best, most concise, most honest story on the housing market, bubble, Wall Street, mortgage-backed security melee ever (on All Things Considered).
The Global Money Pool Got Too Hungry

The hour-long story recently aired on This American Life:
#355: The Giant Pool of Money

It’s not available for free, full download yet because it’s so new, but it will be soon.

I’m not sure what my favorite part is yet.  I love how much dirty laundry they air.  It’s also the first story that really convinces me that yes, the banks and Wall Street deserve everything they get.  In order to trade mortgage-backed securities, Wall Street needed… more mortgages.  And there weren’t enough of those.  So Wall Street lowered the standards, month after month after month.

You’ll definitely enjoy hearing from the guy who makes $45,000/year and works irregularly, at best.  He got a loan for $540,000.  This American Life asks, “Would you have given you $540,000?”  Oh no, he wouldn’t have.

Do give these a listen.

Love’s Lentil’s Lost

Lately, I’ve made a LOT of bean soup for our weekday lunches. It’s usually lentil, alternating from red lentil to green lentil for “variety.” But I can’t bring myself to do it this week. I am lentiled-and-legumed out. This morning, hugging Man from behind while he finished our pancake breakfast, I glowered at the remaining three pounds of red lentils (one pound of which would normally be cooked today, Sunday, for soup for the week) and hid them behind the coffee beans.

Today, I went to Safeway to break the bean monotony, my first trip there in about two months. Though I’ve read all about it, I was shocked at how much grocery prices have gone up. The organic frozen lunches I like (from Amy’s) are all about $1.50-$2 more than they were before. Cereal, already crazy expensive, costs even more (I saw, with my own eyes, a single box that cost almost $6). Thanks for those ethanol subsidies, big government.

We don’t eat any processed food, which means we can’t take advantage of a lot of coupons. We’re not big on big chain grocery stores, either, for logistic more than philosophic reasons. First, we don’t own a car, which means we’re on foot most of the time and can’t buy more than we can comfortably carry for at least a half mile or so. We get a local, organic produce box delivered from Capay every Tuesday, which takes care of most of our produce needs for $29/week (and is a lot less expensive than the equivalent would be at Whole Paycheck). If we need something specific during the week we get it from the small market on the corner, and we usually pick up a few things at the farmers market on Saturday.

We buy bulk food and other staples from Other Avenues, a local food co-op, and we bake our own bread (having finally gotten a viable San Francisco sourdough starter going!). We’re doing OK as far as grocery costs go.

I did pretty well at Safeway today, though, and spent $25.24 on:

• Two lunches for Man and I tomorrow (tuna salad sandwiches, because we baked bread yesterday and have to use it)
• Two breakfasts for me (yogurt with fruit we already have and need to use before it spoils)
• Two more lunches for me (adapted from the English Major’s Late-to-Work Chickpea Salad), comprised of canned organic chickpeas, red onion, parsley, feta, and a bit of olive oil and lemon juice
• Guacamole fixins for Man
• Lettuce enough for sandwich toppings and side salads (we’re having BLTs tomorrow night for dinner, to use the rest of the bread, and because BLTs make me literally SWOON over Man every time he makes them, they are so incredible, so he makes them on purpose now)
• Soup onion, celery, and carrots (for whatever lentil soup alternative I come up with)
• One big treat lunch for me: Organic frozen black bean and tofu enchiladas for $2.50 ($.45 off with my Safeway card

I know others have done better for $25.24, but it’s not bad for seven meals and change with grocery prices being what they are.

Also, in keeping with the recession spirit, my library-not-buying books goal is coming along. I’ve now borrowed, rather than bought, three books, none of which have been subject to late fines. I’ve saved $38 so far, which is what these books would have cost if I’d bought them from Amazon.

Good Riddance, Bad Data: Sallie Mae

Do you have student loans with Sallie Mae? Are you on a graduated repayment plan? Check your FICO score. Sallie Mae’s been reporting some bad data:

Lender’s Goof Slams Credit Scores

I love the language MSN uses to downplay this – a “goof,” they call this. I call it lazy and inexcusable. As long as bad data makes it way into your life, and you’re the one left to clean it up (yes, Sallie Mae is “fixing it,” but how long will it take to really be fixed with the credit reporting agencies?), it’s inexcusable.

I admit I’m not a big fan of Sallie Mae anyway. My student loans, with a fantastic lender and manager, were sold to Sallie Mae last year. Since then, I’ve gotten a storm of email spam that I can’t unsubscribe from because, as Sallie Mae as told me, “It’s all one list.” If I unsubscribe from their email updates, I don’t get email updates about my account. With the account update email I must take the twice-or-more weekly spam. Hate Sallie Mae. Dead to me.

I also learned that I don’t qualify for any Bush Bucks. I knew he hated me this whole time, and now I have proof.

I’m not paying my mortgage today.

So said a friend of mine today, who has decided to stop making his mortgage payments, let the bank foreclose on his condo, and just walk away.  Mortgage payments for May are made today, and he’s not making his.  He is the first person I know to do this, so I’ll keep you posted on what happens.

I’m surprised that he, of all my friends, is the one taking this route.  In early 2007, he bought a two-bedroom condo in Chicago (in Uptown) for about $320,000 (one deeded parking spot included).  He was in love with it.  He drove me past it several times.  He got a great roommate to help him cover the mortgage payment, which meant that his share of the payment was less than rent would be for a comparable place, at the time.

Then, like me, the taxes bit him.  Like mine, the conniving real estate and mortgage folks assured him taxes would be “about $2,000.”  Instead, they’re more than $4,000/year.  Because of the way Cook County tax assessment works, he (like me) is paying 2007 back taxes AND 2008 tax installments at the same time.  This means his monthly payment skyrocketed to $2,800/month.

In addition, a new Target slated to open one block away and reinvigorate the somewhat blighted, er, up and coming Uptown neighborhood will not be opening, due to the useless alderman (Helen Schiller) the neighborhood couldn’t quite get rid of last year (they almost did).  Uptown violence is also escalating.  My friend now hears gunshots near his condo.  Like so many alderman, Helen Schiller seems more interested in homeless people and gang members, and their votes, to the exclusion of all else.  But I digress.

Last week, my friend had his condo reappraised.  It has lost $40,000 in value in one year.  Obviously, there is no incentive to pay a mortgage for a penny more than the new price.  It’s logical.

My friend has a degree from a prestigious Midwestern university and an MBA.  He works in finance.  He makes almost $100,000 per year (excluding bonuses).  He drives a brand new Cadillac.  He has the support of family and friends, all of whom agree that it’s senseless to pay a mortgage larger than the value of your home.  He knows what he’s doing.  He’s already hidden his cash; on paper, he’s broke.  He may be able to live in his condo for quite some time before the foreclosure process starts and forces him to move out.

I’ll let you know what happens…