16:
Being debt free is an important component to my vision of the Carry On Life. Being burdened with payments severely limits my options. I can’t decide to take off and backpack for a couple months when my lease is up, career change is more difficult, being sick for a week is hardly an option, the list goes on and on. Basically, I have no choice but to make sure I am able to make my payments every month, and every impediment to drawing income can become a crisis if I’m unable to pay. This adds a lot of weight to my proverbial backpack. Not to mention, it’s not only draining me of my current resources and energy; with interest, it’s already siphoning away at my future.
The Problem
My relationship with debt started just before going on a trip to Europe in the fall of ’06. I had attended two classes during the summer semester and then decided not to continue school at the time. I failed to pay my tuition and flouted bills they kept sending that grew more and more stern each time. When I got home the following winter, my mom told me that a collection agency had been calling for me. This was the first time I’d ever actually dealt with owing anyone a large amount of money. And worse, I had no job.
For a couple months, I kept the collection calls at bay. When I finally got a job, I cracked and let the setup an automatic bank draft, sparing myself from any credit damage. It was anything but a pleasant experience. I worked, and made sure to keep enough cash in my account to cover the automatic drafts until the tuition bill of almost $1,000 was paid off and then took off for another trip, this time to Ecuador in the fall of ’07.
The Credit Card
I managed to not acquire any debt since my college bill until the Spring of ’08, when I found myself out of work (the inspiration for Job Loss on the Slim). I had a credit card with a $500 spending limit that I’d had since I was 18 and had never carried a balance on it. Up until then, I’d used it like a debit card and then transfered funds to it every week to pay it off entirely. I just thought it was a good way to show I can use credit and build a good score. However, when the income stopped, that $500 became tempting to use at very stressed points. I’m not sure where all of it went, some was reasonable (gas for getting to a job interview) some was wasteful. Regardless, by the time I found work, edging into fall, I had maxed it out and missed at least two month’s worth of payments.
It took me a while once I was working to get it paid down, but I did eventually do it. However, I failed to keep it that way. The same credit card that has plagued me since ’08 presently has a balance of $321.42, which I accumulated in relation to a wreck I was in a few months ago. The rental agency wanted a major card on file, so I warily pulled it from my wallet and handed it over, saying goodbye to my $0 balance. However, I expected to be reimbursed in full by the other driver’s insurance agency, so I wasn’t too worried. Ahh, in a perfect world… Long story short, they did not fully cover my rental costs, and the car I rented came back with a small ding in the top of the trunk that seemed to be caused by a rogue golfball, tacking on an unexpected $250!
The Car
I’m almost embarrassed to talk about the car. I’ve heard it over and over, “buying a car on a loan was the worst thing I’ve ever done!’ and it’s true. I’ve bought plenty of cars from individuals (we’re talking somewhere around 5-7 beater cars I’ve been through), and it’s almost a pleasure each time: negotiating a price in a neighborly manner, when the amount in question is only going to fluctuate a couple hundred either way. Car dealers are f’ing sharks. Not to offend any sharks reading, but it’s true. You get sized up the second you walk in. They do it for a living, and are thus expert at estimating your knowledge of price, interest, even how well you’ll negotiate.
I was in a bad spot. I was desperate to get a car, as my last beater had just died and I had pizza to deliver that week. I went to a buy-here-pay-here rip off lot without a thorough plan or anything. The most preparation I put into it was looking up the car in question’s Kelly Blue Book value via iPhone. Even after that, I blundered horribly. I had planned to talk tough and squeeze the price down and all that, but when it came time to talk, I somehow found myself feeling like the dealer was doing me a huge favor by giving me a chance even with my lack of credit history and modest income. My instinct was to not push my luck by bargaining. Looking back now I wonder how I was enchanted so severely that I agreed to a 25.9% APR loan for five years! I’m absolutely ashamed that I did such a thing, and it hurts to admit it publicly.
However, I’ve blundered and it’s a fact of the past that can’t be changed, only corrected from this point onward.
The Solution
As it stands, I have the above mentioned $321.42 on my credit card with an APR of 22.9% and today I called my auto loan people and asked the exact payoff amount, which is $11,514.66 at 25.9% (cringe) and $5,566 in student loans. Most of that is deferred until I graduate, however I have racked up $66 worth of interest on them in the past year.
The smartest way to tackle this would be to pay them one by one, highest interest loan first. That would result in saving the most money. However, I’m going to take J.D. from Get Rich Slowly’s advice. He suggests the debt snowball approach, attack debts in order of balance, smallest to greatest. The reason behind doing it this way is to give yourself the psychological boost every time you conquer another debt. However, considering I only have three sources of debt, I’m going to compromise between the two.
I’m going to tackle the credit card first, which would be J.D.’s way, just to give myself that quick boost. Not to mention, it’s not going to really take any time at all. I already have an automatic payment set to dump the entire $321.42 on it on the 20th. No more credit card. This leaves me with my student loan and my car.
I’m opting to pay off the car before the student loans. The student loans are mostly subsidized, and at this rate I’ll probably have racked up less than $600 of interest by the time I graduate. My car however, I’ve made $350 monthly payments for almost a year and have chiseled a mere $959.47 off the principal! Holy crap! Not to mention, the $218.33 per month full coverage insurance required per my loan terms makes this debt all the more costly.
Oh yeah, another thing before anyone starts to make suggestions: I’ve already considered selling the car, taking the loss and paying the rest of the loan off. A week after I stared to seriously think about doing this, someone pulled out in front of me causing more damage than the car is worth. Their insurance fixed it, but the resale value is kaput.
Using some calculators I found online, a few spreadsheet templates, etc., I’ve estimated that about $1060 per month on the car would have it paid off by next summer. I’m going to look at refinancing next month, because I’ll have made a year of faithful payments and I think my credit should be good enough to get me a decent loan now, but either way, it’s getting paid off. This is a lofty goal If I limit my spending very carefully and continue to seek out better income, I can definitely do it. So here’s my goal. By the time fall semester 2011 starts, I want to be free of my car loan by any means necessary.
So, here goes a fun year of slinging all my cash at debt and living cheap.
13:
This is the second part to my guide on coping with joblessness with no backup plan. If you haven’t read the first part, you should go do that first. It deals with stopping the free fall and making sure you are set to correct course. This installment is going to be focused on using the tools you acquired to make sure your unemployment stent is as productive as possible. It shouldn’t be a period of high stress and a frantic search for work. Think of it as an unexpected vacation–except that you still need to be active.
So, you’ve got yourself a Google Voice account, a place to rest your head and enough peanut butter and bananas to last you for the first week, right? Let’s get ready to find some income.
Your Friends Have Jobs!
Right? Well, some of them should. A friend is much more likely to get you a job than classifieds and résumés (not to say those aren’t an important part of your strategy). If you have a friend that bartends, waits tables or cooks at a restaurant, they’re going to know about a job opening right away, and if they know you’re looking for a job, they can chime in with an immediate, “I’ve got a friend looking for a job,” when someone quits or gets fired. Hey, this probably happened to your old position!
Don’t be ashamed to be out of work, and let your friends know about your situation in a non-gloomy manner. Finding work for friends is great. You generate a little social capital, improve the likelihood that a friend will help you when in need and you get to work with someone you like.
Fix Your Résumé
I know, it seems silly to have one when you’re target is every pizza joint and coffee shop within walking distance, but it does help. For one, you can print up 50 of these things relatively easily and instead of writing your info down on applications 50 times over with a borrowed pen that hardly writes, you just introduce yourself and give them your résumé. Kind of. You might want to do more than that, but we’ll get to it in a minute.
You should know how to make a résumé, but if not, you can find a million templates online. Try to make it clean and professional, and since you’re not going to be giving to any fortune 500 companies, you don’t really need to focus on adding “pop” words. The local bar manager isn’t going to be impressed that you synergized the towel folding operation at the car wash you worked at when you were sixteen. If anything, it will make you sound worse.
Demonstrate that you can communicate well in writing, that you have a goal in mind and a sense of structure and you’ll be fine.
Check The Listings
Craigslist is king for job listings. You get to wade waist high in spam and crap listings for the few good ones every day, but it’s a great place to look. A great way to use Craigslist is in conjunction with Google Reader. you can import a feed from a specific section, like jobs, or more specifically the “food / bev / hosp” page, for example. You can also import the feed from a search. This is great. Custom tailor what you’re looking for with keywords like “web designer” and even exclude listings including certain words with a minus sign like so: “-advertising.” Play with the search until you start getting just the results you want, and then import the feed into Reader using the “RSS” link at the bottom of the page.
Instead of clicking through all of them, you now get all the listings streamlined and you can just flick through them, star the ones you like and then go to your starred folder and contact the poster.
Get the local classifieds paper and circle the likely candidates and make a list of places to visit or call. This is nowhere near as effective as the friends approach or even Craigslist, but it may yield some results.
Hit The Streets
It might sound wrong to use the term “mass apply,” but that’s certainly a good method. I don’t mean to go drop a résumé on the counter in every restaurant and walk onward, but you do need to look up every establishment around within your target industries and try to pick five or so at a time in close proximity to one another and hit them all in a day.
This is when the clothes you scrapped together come in handy. Look clean and cheerful. Every place you go to, try to talk to a manager. If you can’t get to them, ask whoever is there if they are hiring. Explain what you’re looking for and why you’d be good for it. Don’t complain about how awful your last job was, even if it truly was. A hiring manager isn’t going to take your side of the story at face value and believe that your last boss was really an unreasonable dick. It’s just going to make you sound like you had a bad attitude, poor work ethic, etc.
Even if the place isn’t hiring, ask if they’ll take your résumé and give you a call if something opens up.
Hustle in the Meantime
Transferable skills can come in handy. For example, I earned a little cash to live on doing things as simple as formatting harddrives and reinstalling Windows, despywareing and even implementing Google Checkout in some dude’s shopping cart site. If you have any skills at all, try to use them. They might not be enough to “make a living” with, but when you’re making nothing, $50 is a lot for a week.
Craigslist is great for this; check out the gigs section. There’s all kinds of easy-to-do stuff that someone will pay for. Jailbreak an iPhone, edit a paper, you might even be able to get stuff on the free section and sell it, or buy stuff and resell it on eBay for a bit of profit. Be creative.
Odd jobs are key. The little bits of money here and there help a lot. You can probably make enough to eat and still have some to offer the person providing you a couch utilities or a bit of rent.
I hope this second part helped you with the job hunt. With some persistence, you will eventually get an interview and land a job, even if it’s not one you want, you can keep searching for the one you do want without starving.
In the next section, I’ll be writing on a nicer topic: enjoying the vacation. How to be personally productive, relax, have fun and not put your life on hold just because you’re out of work–living on the cheap or free.
05:
There’s plenty of material out there for dealing with job loss, but most of it applies to somewhat established folk. Building an emergency fund, reducing debts and having an “oh, shit” plan are great ideas, but not everyone has learned those lessons when the time comes. These are a few of the lessons I learned when I found myself out of work and couldn’t just move back in with the ‘rents. My experience was in the city, and from my perspective, that made it much better than it would have been in the suburbs or a smaller town. This first part will deal with the immediate response: stopping the flow of spending and securing the tools you need to recover.
So, you’re in the post high school years living check to check, soaking up the roomies experience and having lots of fun, maybe going to school and definitely not planning for the worst. What happens when you suddenly find yourself out of work? Whether it’s because your boss was a total dick, you were too ethical to continue working for an establishment that committed horrendous atrocities or your power went out in the middle of the night causing your alarm clock to fail you, you’re out of work now, you’ve got 20 bucks in your wallet and maybe your last $150 paycheck next week. What now?
Don’t panic! The last thing you need to do is stress yourself out. Depending on the season and the state of the economy, you could be out of work for a weekend or a few months, and you’re going to need all the focus you can muster to keep it together. Calm yourself and start to take a mental inventory of everything you can use to get yourself back on your feet.
Stop the Money-Out Process
You don’t need Netflix. Hell, it looks like you might not even be able to pay your utilities this month. Cancel every expense possible, even your cellphone. If you’re on a contract this might be difficult, but if you can pay this month and then be forced to break it next, what’s the point? Go ahead and ditch your carrier if you’re comfortable doing that (credit damage, disclaimer, etc.). You’ll be fine without it, I promise. There’s a cheaper way to keep in touch with potential job contacts, family and friends. Give your roommates or landlord as much notice as possible, and offer to pay what rent you can. If they’re your friends, they’ll understand that they can’t squeeze from you what isn’t there. They may even agree to let you stay for another month. Either way, use what time you have left in your place to sell your stuff.
Slim Down and Hock Your Shit
“You gotta have a place for your stuff. Everybody’s gotta have a place for their stuff.” -George Carlin
That last $170 probably isn’t going to cover rent next month. If you’re not going to have a place for your stuff, suddenly that stuff is going to become a burden.
This may seem sad at first. Really, who wants to part with their Minor Threat 7″, books, Nintendo DS or whatever else it is you have to ditch? It may feel like you lose a little piece of yourself every time you let something go, but don’t fret. After sweeping away all your possessions, you may find that you feel much better. You’re no longer defined by the things you have, and you can have a fresh place to start just being you.
Craiglist is the quick’n'dirty. Take a picture or two, post it up and make the exchange. eBay is a bit more involved. You need to have a bank account (not really, but not having PayPal is a pain) and will most likely require a trip to UPS, but you usually get a better return. If you’re selling your Xbox 360, it’s probably worth the extra effort to get more for it, but that old cell phone that you don’t need anymore is perfect for Craigslist.
In short, sell everything but what you need. I’ll outline a few things you’ll want to hold on in the next section. Reducing your belongings to a backpack makes you more flexible and more welcome to stay with friends. Besides, all that stuff is going to serve you better as cash right now. Also consider trades. If a friend wants something you’re giving up, you might have some use of that Polo in their closet when you go job hunting. You’re probably going to want somewhere to sleep and something to eat too. A TV or some of that Ikea furniture you’ve got might buy you a spot on a couch and lunch for a few weeks.
Acquire and Inventory Your Resources
Now is the time to inventory all your skills, social capital and possessions. You need a few things: food, somewhere to sleep, means of communication, means of transportation and a set of appropriate clothes for job hunting. This section is on procuring those. You want your last bit of cash to go as far as possible, and buying a clean shirt and a prepaid phone might be a better long term investment that spending $3 every day that you would otherwise find a way to live without.
Food and Shelter
Sleeping and eating are obviously high priority but fairly easy to figure out. Food is really not as big a problem as it would seem. Think: survival; a jar of peanut butter, some bread and a few apples can go a long way if you’re eating to keep yourself going and not to savor every meal. Think in terms of nutrition per dollar when you buy food. A bag of chips and a can of beans both cost around a dollar. What’s going to get you farther? If you play your cards right, you can eat well for a dollar a day. There’s plenty of resources for doing this. Check out PGEW and this article on GRS.
As for a place to crash, I’m going to assume you have a few friends. If not, I hope the weather is nice! I’m in no way advocating an idle lifestyle or saying that it’s okay to live off your friends, but couch surfing can be a win-win. You may have furniture that a friend could use. Perhaps they need a couch, and you need a place to put said couch so you can sleep on it. Minimize the space you take up. Don’t turn your buddy’s living room into your storage area. You should try to fit everything in a bag. Anything else, you may want to just give it to your host or sell it. While couch surfing, it’s important to provide value. You don’t want to be a burden on your friends; don’t laze around all day watching their TV. Everyone knows how to do household chores. You should be doing all of them without being asked. Perhaps you can get a free dinner every night by using those culinary skills that you wish you had time to demonstrate! Walk the dog, mow the lawn, do whatever you can to offset the free rent you’re getting.
Communication
Don’t sell that laptop unless you have an iPod Touch or something. Having an internet connection is an invaluable resource for the job hunt, and everything else in general. Sign up for a Google Voice account. You get a number that will keep working without a phone bill, voicemail and the option to forward calls to any number. Get yourself the cheapest prepaid phone you can find. Use these in combination, but be careful not to use the phone for anything unnecessary.
I pulled a similar stunt in ’08. Googe Voice wasn’t around, but I had a Gizmo5 account (which has been acquired by Google now) and a Nokia 770 Internet Tablet. The 770 kept me online with the help of neighbors’ open wifi networks and Gizmo5 gave me the option to make cheap outbound calls from the tablet, voicemail and my own phone number that I could forward to friends’ phones. I would put this number on my résumé, applications, etc. and with the permission of whomever I was hanging out with, I would set my number to forward to their cell.
Transportation
A car is a valuable asset so long as you’re not making payments. You can probably job hunt without it just fine, so find a place where you can park it, send notice that it is off the street to your tag office and cancel your insurance. Don’t drive it! You don’t need jail time or tickets right now. You’ll be saving $80-200 a month without insurance on it, but if you find a job that requires reliable transportation, you’re set. You might get a delivery job or something.
In the meantime, get around without it. Keep your bike if you have one, trade some stuff for one or borrow one from a friend. Look into public transportation and be frugal with it. Catch rides with friends if they’re going somewhere you need to be for a job application or whatnot. Living in the city is beneficial here. You should be able to walk a mile or two with no problems, if not, this is a great opportunity for you to get in shape.
Clothing
While you’re clearing out your stuff, sift through your clothes and decide what you really need. A bunch of extra clothes just means less space in your backpack and more to wash, and a laundromat means more spending. Keep your nicest pair of jeans, a few shirts, socks and underwear. If you have a button-up shirt, consider it a valuable asset and take care of it. If not, try to trade some clothes at a consignment shop to get one. A pair of slacks might help here, but as long as you look clean and presentable wearing your jeans and a decent shirt, you should be set. You just want to make sure that you don’t show up to a job interview looking like a tramp.
This first part focussed on stopping the proverbial nose-dive and getting leveled out. Hopefully, you can get your situation stable enough to sustain a few months. In the next part, I’ll talk about how to use the resources you’ve put in place to get back on your feet.
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