Archive results for “January 2007f 2007”
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The No Credit Needed Podcast is the host of the Carnival of Debt Reduction.
Five Cent Nickel is the host of the Carnival of Personal Finance.
Thank you to the hosts this week!
Enjoy! 
A few days ago I talked about those darn bumps in the road. I thought about a few things that can happen once you hit that bump and fall off your bike.
The one I tend to do now is get back on my bike and carry on my way. What I think I would like to start doing is trying to level out that bump and then get on my bike and carry on my way.
Thinking about the roadbumps we have hit during our debt reduction journey, two stick out in my mind: my husband losing his job and our cash flow crunches. If I decide to get back on that bike after hitting the bump after those things happening, I’m not fixing the problem at hand. I can hit that bump again.
But how could I level out those bumps?
For problems with income, there are a few things I thought of:
1.) Diversify streams of income. Instead of having two main sources of income, it is time to look into having other streams coming in. Perhaps even have some of those streams be passive income. Not sure how to do that yet, but diversifying income streams sounds like a good idea and something that I should look into.
2.) Insure our income with life and disability insurance. Right now, I am the income earner and I do not have either of those types of insurance. That’s risky. When I take some time off shortly I will be shopping for insurance. I don’t like the idea of spending more money, but I need to protect what we do have!
3.) Increasing knowledge. This step may get you a raise at your current job, and it can help you find a new job if you happen to lose the one you current have. Also, seriously think about having your own business someday and learn about what you need to do to make that happen. I’m a believer that knowledge = power.
For problems with cash flow crunches, here’s what I came up with:
1.) Build up a reserve. This is money stashed away that would cover at least a month’s worth of income. After a while, build that up to 3 months…then 6 months. I would love to extend that to one year, if possible. When things get tight I can “borrow” from the reserve fund.
2.) Don’t run the checking account so low. I have had a problem with this for as long as I can remember. One could think that I am allergic to having a balance greater than $100 in my checking account. While not allergic, it really does bother me. I think it’s because I’m afraid if the money is there is may get spent frivolously. I really should have a better buffer in our checking account.
Basically what this has turned out to be is ways to protect the income that you do have. I think sometimes it’s easy to forget that our biggest asset that we have is our ability to bring in income.
As for smoothing out the bumps for others, I hope I am doing that with my blog. I hope by documenting our journey, you may find a little bit of inspiration and even learn from our mistakes. Just a note, though, the last thing I would want anyone to do is to follow what we are doing step by step. That’s sort of why I don’t write articles with the tone of “Do this…Do that.”
It’s not in my nature to tell others what they have to do. Everyone’s financial lives are different. A certain success story comes to mind of someone who will remain anonymous. He contacted me letting me know that he’s applied things he’s read from various bloggers and devised a plan for himself. So far, he is hitting it out of the park and doing great. That’s awesome.
That’s what I’ve been doing. I’ve been taking a little bit of this, doing a little bit of that and making a plan that can work for us.
This caught my eye this morning over at Yahoo. Brian Emmett won a trip to outer space, but because the IRS requires winnings from lottery drawings, TV game shows and other contests to be reported as taxable income, Emmet would have to foot a $25,000 tax bill.
From the article:
“After some number-crunching, Emmett realized he would have to report the $138,000 galactic joy ride as income and owe $25,000 in taxes. Unwilling to sink into debt, the 31-year-old software consultant from the San Francisco Bay area gave up his seat.” (I added the emphasis).
Brian Emmett is someone that all of us in debt should look up to. It took a lot for him to decline his prize.
I’m not so sure I could have done that. What about you?
Prosper.com launched early 2006 as a place where everyday people could go to borrow and lend money. Some refer to it as the “eBay of personal loans.” I am fascinated with the Lending side of things, although I am a borrower there. I decided to ask the person with the most money invested in Prosper for an interview. He goes by the name pensioner and he was very kind and answered a few of my questions via email.
Without further ado, here is my interview with pensioner…
You joined the Prosper community in July of 2006. What made you decide to join Prosper?
Prosper listed 1000 loans that could be had for rates up to 29%. I was intrigued to see if I could lend money at more than 20% to folks that would pay me back 95% of the time.
You have invested $750,000 in Prosper. When you first started lending at Propser, what were your expectations as to how much you would lend? If it has changed from when you first started, why did it change?
My initial thought was to put in $10,000 as a test, to see if I could lend at high rates to people that were likely to pay me back. I was thinking that I could put in several hundred thousand or more. I quickly decided to put in about a half million, then decide where to go from there. Within a couple of months I put in another quarter million. I now have $750K in (which has grown to $812K). I think I am at the right level now.
Most lenders lend smaller amounts over many loans. Propser even recommends this on their website. You have gone against the convention and frequently lend large amounts (you have even lent $24,950 on a single loan). Why?
So many lenders think that if diversification is good, more diversification is better. But diversification has a cost. More money can be made by selecting a small number of great loans, instead of a mix of good and great loans. Diversification should be measured broadly, considering all assets. It is not necessary to diversify each asset class, such as Prosper.
Part of the appeal of Prosper to some lenders is the personal aspect of it. How personal are you with borrowers?
Not very. I enjoy getting a “thank you†when I fund 90% or 100% of a loan. I sometimes respond with a few pleasantries and share a bit of information about things that we have in common. I sometimes use the opportunity to show borrowers that they are dealing with a real person, not an impersonal institution…hoping that they will consider the effects of not paying me back.
Prosper has the option of creating standing orders. The computer will bid on your behalf if a loan listing meets certain conditions (interest rate, credit grade, # of delinquencies, etc.). What are your thoughts on standing orders?
I don’t like them. I want to take a minute to see if the borrower has a reasonable story. If I were making $50 bids, I would not have enough time to read listings, but I typically bid several thousand. I have, at times, spent as little as 15 seconds reading a listing before bidding, but I always spend at least a little time reading their story.
Your current estimated risk adjusted ROI at Eric’s Credit Community is 18.7%. Now that you have been around Prosper for a while, do you feel that number may be accurate? What ROI would make you pleased with your Prosper experience?
Originally, I expected returns of 18% to 20%. I now think my returns will be more like 15%. I am happy with 15%. If my returns drop to 11% or 12%, I’ll start moving money back into stocks and mutual funds.
Is there anything else that you would like to share about your Prosper experience?
Some days I feel badly that most people with low credit scores cannot get funded on Prosper, but on other days it seems like most people are where they are through their own choices.
Lastly, wondering minds are probably curious about this one. Do you get any special “perks” from Prosper for being the leading investor? If so, can you share with us what they are?
I have not received any discounts or other perks that translate to money in my pocket. I was taken out to lunch by the CEO, Chris Larsen, and the VP for development, Karen Appleton; and I did get a nice tour of the Prosper headquarters in San Francisco. They have a nice place on the top (33rd) floor where NBC Broadcasting used to be.
Thank you pensioner for the interview
To read more about Prosper, including more interviews with lenders as well as my own borrowing experience, please visit my Prosper.com archived articles.
NOTE: I also asked pensioner one other question unrelated to Prosper, and I will be writing about that later this week 
Our electric bill arrived and I was whisked away to my childhood. Bills coming in the mail was never a joyous occasion growing up. My dad would see the total and start saying things like, “Why is this bill so high?” “What, do you think we have stock in the electric company?”
Our bill this month was for $91.00! That is the highest electric bill we have EVER had. My mouth dropped when I saw it, and all I could say is “Oh my…”
My husband was in the other room, and he yelled, “What…what…” He thought something was terribly wrong. To me, it was. I wanted to start saying things like my dad used to say way back when. I didn’t understand his words then, but I sure do now!
All I could muster saying was that our electic bill was over $91.00. As I sit here writing, I am still amazed. My husband was the voice of reason and said that perhaps the cost for the electricity has gone up and that’s why our bill is so high. A quick look at the bill shows that we used over 100 kilowatt hours more than the same period last year!
Can we pay $91/month for electricity? Technically, we could probably handle it. Do I want to? Heck no!!
So far, we were planning on doing the following:
1.) Shutting off power strips and unplugging things when not in use. Some electronic items draw power when they are turned off and that adds up.
2.) Drying clothes by hanging them and using our electric dryer very little.
3.) Buying those energy efficient bulbs.
We’ve started doing all three. A few days ago, we went out and purchased some spiral compact fluorescent bulbs (<- affiliate link) from our local department store. The ones we purchased were by General Electric and it ran $9.99 for 3 of them. We purchased 9 total which took care of almost all of the lights in our house. These bulbs are guaranteed to last 5 years and they only use 15 watts to output a greater amount of light than a 60 watt bulb.
So far, we are very impressed. We used to have 4 60 watt bulbs in our kitchen. With the new bulbs we only need two. Our living room is brighter and it has a nicer light. Before, we were using the cheapest bulbs possible. We are saving money on electricity AND we have better lighting in the home. It wasn’t easy to spend $30.00 on bulbs, but I believe over the next 5 years we will save that much and more. In fact, on the packaging they say you will save $36 per bulb. That will be a savings of $324 over 5 years. No, it’s not immediate savings but I will look at the purchase like an investment
That’s three things that should help us save money on our electric costs. But, there are a few other things we can do. They are more “last resort” type of things, and after seeing our bill – we are going to do them.
1.) No fans running at night. I am hooked on having a fan on when I sleep and it has rubbed off on my son as well. It’s time to break that habit. I’m not excited about it, but I don’t like our $91 bill! My husband is thrilled with this news because he likes silence at night. I’m going cold turkey, but I will wean my son off of the fan and will try a radio in it’s place.
2.) Purchase more power strips. Our VCR/sound system is plugged in at a hard to reach area (behind the couch). With purchasing a power strip, we can bring the plugs out where they can be easily turned off at night. There are a few other hard to reach plugs as well.
3.) Get rid of unnecessary things drawing power. We have an old freezer in our basement that we don’t really use. We rarely buy enough frozen foods to fill up the freezer in our fridge. So, I will unplug the old freezer. I also have two alarm clocks for our room; it’s time to go to one. I will have to get myself up when the one goes off (this should be easier now because my husband and I are both getting more sleep since he isn’t working nights).
Part of me is excited to see how low we can get our electric bill. I view it as a little side challenge since our debt reduction progress is slowing down a bit
Friday Blog Highlights
I’ve heard of Oprah’s Debt Diet programs, but haven’t had a chance to catch the shows. I was hoping to catch the show the other day because they were giving updates on the families (thanks Beverly for the tip!), but I couldn’t get off work on time. No fear! Another blogger did a nice recap. Visit Chitown at Windy City Blues to read about it.
For a recap of the previous Oprah Debt Diet shows, check out the reviews at Beachgirl’s Budget Blog: Debt Diet Part 1, Debt Diet Part 2 & Debt Diet Part 3.
FREE STUFF!
Now that I am ultra penny pinching mode, I am on the lookout for freebies! Of course, anything I find I’ll pass on to you Let’s make Friday blog highlight day and freebie day!
Free Schick Quattro Titanium Razor
Dove Advanced Color Care Line Shampoo
Viactic Flavor Glides Dietary Supplements
Enjoy!
Last year, part of the reason we were making so much is because I had one full-time job and two part-time jobs. I don’t remember how many times I almost broke down because the working became too much for me and I was planning to quit the part-time jobs.
The one job I gave notice for, and today should be my last day over there. I have been training my replacement for the last month. I am super-excited to not have that worry about that job anymore.
The other job, I tried to give notice to, but he didn’t pick up on that (I’m horrible when it comes to just saying, “I quit.”). I told him that I didn’t have time nor the skills to complete the second part of the job he wanted me to do. This job started off with a project I could do using a program I know well. The second part I became too frustrated with because it’s not my thing. He was paying me to learn the program, but I felt I wasn’t doing good enough.
Well, the second part is something my husband is good at. I pumped my husband up to my boss and my husband is going to do the project. Yay! He will be making almost two times more per hour than he was making at the job he lost and he is doing something that will build his skills AND help get his name out there for freelance work.
I no longer have to worry about completing that job, although I still am on their payroll in case my husband needs help with something – he can delegate work to me. And my husband has a job for the next month. Yay!
It is only temporary work, but it’s much better for his resume than working at the other job (which was fast food related). It’s also something that is related to his degree, which is nice.
So, for the next month, we are okay and my husband should be making MORE than he was at his old job. I’m still working on a post about leveling out those bumps in the road (sorry – I’m such a slow writer sometimes), and part of it will discuss what to do with the extra money coming in.
About This Site
My Debt
- Original Debt: $38,495.86
- Paid: $17,232.73
- Remaining: $21,2163.73
- Broken Down
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