Tuesday, June 29, 2010

Save and buy or get 0% financing and buy?

I have been wanting to buy a Nikon D90 DSLR for nearly a year. I know that when we want something, we convince ourselves with bunch of excuses on why we want to buy. I thought about it a lot and came to a decision that I will eventually buy it. However, I didn’t want to get in more debt by buying another expensive item. So, my family suggested that I start a saving account for the camera? They even gave me some gift money to jumpstart the saving. Since I have already cut most of unnecessary expenses from budget to pay off my debt, I don’t have any major places for saving. At best, I can hope to save enough money by end of the year. However, recently I saw that Amazon has 0% one year financing for Nikon D90 DSLR. Should make sense I get it with financing (which means more debt) or should I wait (which means not being able to use it for 1 year)? Rationally, if I am going to buy something after a year, it makes sense to buy it interest free now. It also make sense to pay my debt off with money I will be using to buy the camera (since I'm paying interest). On the other side, we humans are not completely rational and I believe that if I buy now I would not save later. I also think that not buying this camera is some sort of test of my self control. I am still undecided. For time being, it’s out-of-stock in Amazon.

Monday, June 28, 2010

Debt Settlement 101

I have been advised by a quite few well wishers about reducing my (then) $30,000 debt through a debt settlement firms. Most of the debt settlement firms suggest stopping payment to credit card bills for about four months and instead divert a monthly payment to another account. After 120 days of non-payment, banks are required by the federal law to write-off the debt (so that it can’t inflate their assets). For a fee, a debt settlement firm will negotiate a settlement with your creditors using your deposited money for lower amount than you owe.

The process of negotiating with creditors for a payment schedule at a lower interest rate and/or settled debt with (lump sum) with lower amount than the total balance is known as “debt settlement” or “debt negotiation” or “debt resolution”.
Sounds too good to be true! Indeed, since this will lower your credit scores because;
  • The creditor will mark the account delinquent due to non-payment.
  • Even after debt is settled, the credit report will show "settled for less than full balance" or "legally settled for less than full balance". This will remain on your credit report for 7½ years and further lower your credit scores.
Additional reasons for not taking debt settlement route are;
  • You will also be put on the creditor’s internal black list for life.
  • There is also no 100% guarantee of a settlement. Creditor can get a legal judgment against you or sell/assign the debt to a collection agent. In that case, the creditor/agent has the right to collect the entire balance with interest.
Debt settlement sounds like a nice idea before I got the facts. Even if the debt settlement is successful, I will still end up paying the price with a lower credit score. So, unless you want to ruin your credit, I don’t suggest you to take this route of “debt settlement” or “debt negotiation” or “debt resolution” or whatever they call it.

Thursday, June 24, 2010

Disciplined debt payment and blogging

I have noticed that since I stopped regularly writing about my debt or issue concerning debt on my blog, my spending went up gradually. I have blogged very less about money and debt last three months. In the same time period, I got more over-budget notification from Mint.com (see review here) than entire last year. I believe blogging about my debt and related financial issues has served me as a reminder to be cautious about my financial decision.

Indeed, one of the most popular and oldest therapeutic self-help is keeping a daily journal/diary. The act of writing gives an individual benefit of organizing and channeling out their thoughts, and over time reach some sort of resolution. Blog are evolution in that type of writing where we can share our words with (potentially) worldwide audience (all amateur therapists) and get instantaneous feedback.

I should definitely be more disciplined about my blogging if being a regular blogger could help me be more careful about my finances. Additional perk is an expressive therapy without paying a dime.

My Debt Roundup – June 2010

Apologize for late reporting on my side. My current debt as of this month is -16,211. Since my new job, I am seeing on average of $1,500 in debt reduction. Being a geeky debtor, I couldn't help but plug in my debt payment for last year and get estimate on how long it would take to pay off. According to the trend line (adjusted after taking my new job), I will be debt free somewhere around April 2011. Indeed this is all contingent upon my current income level and my financial discipline. Wish me luck.