Monthly Archives: February 2016

images (14)Charlie Linville lives here in Boise. He is a US Marine Corps veteran who lost his right leg in 2012 when he stepped on an IED in Afghanistan. He returned home last night after becoming the first combat amputee to climb to the top of Mount Everest.

This was his THIRD attempt to scale the mountain. An avalanche shut down his attempt in 2014. An earthquake shut the mountain down in 2015.

He succeeded this time, but still had to fight the battler against freezing temperatures and 60 mph winds.

Mr. Linville did not just wake up one morning, catch a plane to Nepal, throw a backpack on and start hiking. His successful ascent in 2016 took him away from his family for FOUR MONTHS. So on top of all the training he did here in the USA before leaving, he had to plan, adapt, change plans, etc to complete his dream. It was not a one day shot!

When we look at a mountain of debt in front of us, it can appear to be as tall as Mount Everest. Most people believe they have to climb it in one straight shot. So few start the climb and even fewer make it to the top. The majority quit after a short time.

You have my permission to take your time to climb your debt mountain! Making it to the top is infinitely more important than how you get to the top. We all have different paths to get to the top.

Each of us has unique circumstances to work with. Single or married. Kids or no kids. Where you live and the cost of living. So making a statement like "spend less than you earn" is meaningless without putting it into the context of your life.

I have two "tools" for you to put into your climbing backpack. These are the compass and map for you to use on your ascent. Without these you may fall into a crevasse!

Get a copy of your credit report

You cannot climb without a map or a guide. Your credit report will show you what debts are delinquent, which are in collections, if you have any judgments against you and if you have any errors reporting which need to be fixed.

Order one free report from Free Annual Credit Report. You get one from each credit bureau free annually so I would save the other two freebies for later in case you need them.

The credit report will also show you your delinquency dates which you will need for your next tool.

Determine your state's statute of limitations

If you have some old debts, they might be too old for you to be taken to court for. This is where the statute of limitations comes in. Your debts are always collectible but each state has a law setting the maximum time for which you can be sued over them.

Go to NerdWallet and see what your state's SOL is.

A compass tells you which direction you are heading. If a debt is too old to go to court, you may direct your attention to pay a newer one first. You have control over your plan!

Once you have these two tools, then you can create your plan and timetable to pay off those debts. You will know how to allocate your income and determine if you can trim any expenses.

Retired Staff Sergeant Linville demonstrated the awesome task of climbing Mount Everest could be accomplished despite numerous setbacks and months away from home. You can successfully conquer your debt mountain if you climb it one planned step at a time.

images (13)Have you ever been to a grocery store or farmer's stand where free samples of food are available? It is great to work your way from one end of the samples to the other. But afterwards, did you buy any of those products?

My wife and I just returned from a trip to the Idaho panhandle. One our stops was a fruit and vegetable stand where lots of free samples of homemade jams were available. As I was looking at the samples, I remembered an old study I had read about offering so many free samples that people did not buy anything. While we drove back home I mulled over how this relates to people wanting to get out of debt but never truly starting their plans.

"The jam study" was done in 1995 by Sheena Iyengar, a professor of business at Columbia University. She set up a booth at a gourmet market and sold jams with free samples offered. She alternated every couple of hours between offering samples of six jams and 24 jams. She noted the number of samples each customer tried and how many purchases were made.

On average each customer sampled two jams. Regardless if 6 types were on the table or 24. So more samples did not lead to more taste testing.

The key finding in the study was that more people bought jams when only six samples were on the table. Professor Iyengar's conclusion was that "the presence of choice might be appealing as a theory but in reality, people might find more and more choice to actually be debilitating."

Are the number of choices and options out there preventing you from starting your plan to get out of debt? Look at just two fundamental parts of your debt plan and the number of choices which are available:

Creating an emergency fund:

  • What type of account should I use? Checking, savings, money market, CDs?
  • Do I use a physical bank or an online account?
  • How much should I put in my emergency fund? One person says $1,000. Another says $2,000. Someone else says three months of expenses.

Determining the order of paying off debts:

  • One person says pay off the smallest balance first Others say I will save more money if I pay off the highest interest rate first.
  • Do I apply for a 0% APR credit card and consolidate my other credit cards onto this one?
  • Then which card do I choose? How much balance transfer fee is there? How long does the 0% promotion period last?

We spend lots of time analyzing each of these options, trying to figure out "the best" plan. Unfortunately we spend all of our time doing the research and never actually START the plan.

We study and study but never take the first step forward. This has been termed the "paralysis of analysis."

If you want to move forward to get out of debt, then make a decision and implement it. There is no perfect method! If you decide that $600 is what you want in your emergency fund and later decide $1,000 is better, then make that change. But if you do not start saving for the $600, you will never get to $1,000. So do not worry about having to choose the "perfect" amount. Decide on an amount and get started.

Remember that you can always change your plan. And that no plan is ever perfect! Don't be afraid to make a mistake, other than the mistake of not starting your plan.

As Professor Iyengar learned with jams, more choices lead to fewer decisions. Use the lesson from her jam study to start getting out of debt. Don't succumb to the paralysis of analysis.


download (14)You are late on a credit card. Months late. The bank which issued you the credit card is calling you every couple of days and sending you notice after notice in the mail to get you to send in a payment. But you can't. Maybe you got laid off or lost your job. Or you have lots of other bills and you cannot afford to pay this bill.

After six months of no payments, the credit card issuer has to "clean up its books". So it performs an accounting function and "charges off" your debt. The assumption is that, after six months of no payments, you are probably not going to pay this debt. So this loan needs to be removed from the bank's assets. This is a charge off.

Charge off definitely does not mean that your debt has been wiped out, forgiven and no longer exists. To the contrary, it means your financial life is about to get worse.

Once the credit card issuer charges off your debt, it most likely will be transferred to a collection agency. It does not matter if the bank transferred the debt to the collection agency or sold it to the collection agency. In either case the collection agency is now in charge of your debt. Calling the bank to work something out is now a moot point. You no longer exist in the bank's view!

The debt collector has to work within the law; the Fair Debt Collection Practices Act. The debt collector is allowed to call you and write you to collect the debt. After all, you still owe it! You can tell the collector to stop calling and stop writing. But that does not mean the collection agency is not working behind the scenes to determine if you have a paycheck or assets to go after. Your charged off debt is always valid to purse until you pay it off.

Your credit report has already taken a hit. Your credit score dropped at 30 days late, 60 days, 90 days and 120 days. Once you reach the 180 day mark and your debt is charged off, the debt becomes reported as "Charged Off." This notation remains on your credit report for seven years from the first missed payment's due date.

According to, approximately 35% of a credit score is based upon payment history. So having a charge off appear on our credit reports has a major impact on our credit score for years and years!

If you do pay off a charged off debt, your credit report will show "Charged Off - Paid". Obviously this looks better than just showing as charged off. But this still remains on your credit report for seven years from the first delinquency.

I hope this clears up the confusion out there about what a charged off debt is. It is not forgiven. It is still a valid debt. It can be collected. And it will impact your credit score for many years. "Charge Off" is not a pleasant phrase!


images (12)This headline has got to be a typo. How can you spend your way out of a money problem? Am I in charge of a federal government program?

When you find yourself in a hole, the first step to get out of the hole is to stop digging. So how can you spend your way out of debt? I will explain how.

Google "how do I get out of debt" and scroll down past the paid ads. Just about every result from your search will give you some iteration of the following advice items:

  • Get your bills organized so you can see what you are working with
  • Create a spreadsheet of your income and expenses (either on paper or using a computer program/app)
  • Add up your expenses and add up your income. Do you have more expenses than income?
  • Get another job.
  • Eliminate every expense that you can. You can keep electricity, housing and food but not much more.
  • Live this lifestyle until every debt is paid off.

Alright I am getting a little facetious here. But I do not believe that I am exaggerating much. The idea touted is to live as spartan a lifestyle as possible and maximize the amount of money that you pay towards your debts.

The common theme here is that to get out of debt, you must eliminate everything from your lifestyle and use that money to pay towards your debts.

How long do you think you can live like this? Two weeks? One month?

If you are single then this lifestyle may last longer because you have no one else to worry about. But when there is a spouse, the two of you must live like this. The plan just got much more complicated.

Add children to the scenario and the complication just increased exponentially. A five year old does not understand debt. All he knows is the cable TV is no longer there.

My suggestion is to build in some spending on some "unnecessary" expenses. Allow yourself to do something more than work, work and come home. This will be different for everyone. In my case, we went out to dinner once a week. A nice restaurant, not a fast food joint. It was something to look forward to each week.

We also maintained our Dish TV. No movie channels. This made staying at home instead of going out to restaurants and movies easier to do. We came out money ahead.

We began our plan in 2010. Our 25th wedding anniversary was in 2012 and we had talked about taking a cruise for years. So we also budgeted for this and saved a little every month.

In theory this "frivolous" spending makes the debt pay off slower. But if this tiny bit of fun keeps you on your payoff plan, then you will reach your goal. Living spartan for a month and then giving up does not get you to your goal!

Think of it like trying to lose weight. If your plan is to eliminate everything except kale and celery, you will probably lose a bunch of weight at first but give up in a week or two. The thought of a slice of pizza will become so overwhelming that you'll go overboard and eat an entire pizza, then feel guilty and quit the plan. But if you eat in moderation through portion control and watching your calories, you will allow yourself to eat a little bit of pizza and still lose weight. It will be a slower weight loss but you will stick with your weight loss plan because you are not completely depriving yourself of "forbidden" foods.

Naturally your likes and budget will determine what you can do with your spending. Maybe you can only afford to go out for a meal once or twice a month. Will this "reward" keep you on your plan to get out of debt? It did for me!

Should you get out of debt? Absolutely! But in order to achieve success, I believe you must build some fun spending into your budget. This may postpone your end date on paper, but your chance of success will be infinitely better than living on dog food and reading by candles!