And by new car of course I mean “new to me.” Because anyone who knows me knows I am a major cheap-ass, and have a really hard time spending money on an asset that will be worth 10% less in six months.  I will dump money into my house, but cars not so much.

So back to financing my car. I wanted something a little bigger to haul stuff around for the house, and four wheel drive seemed like it would be worth having. So I purchased a 2005 trailblazer. It was a fine car; it met most of my needs. The problem was it cost $12,000 and I financed about half of it over 48 months. Payments were around $170 a month which is completely reasonable.

Anyone who is reading this is thinking “Hey $170 a month for a car is nothing!” and you would be right. However I am slightly crazy and hate owing people money. The only thing that is worse then owing someone money is not knowing how much you owe them!

The bank that the dealer did my loan with was some fly by night organization located in a one stoplight town. This bank was so advanced they did not have online account access, and their website only contained their contact information. This bank also did not bother sending out statements. The only thing they did send out was a coupon book. A coupon book? What year is it 1976?! So needless to say this bank was useless and I blindly threw money at the loan for about a year.

After that the loan stressed me out enough that I decided to pay the loan off, they sent me a statement after I requested it. I think it was from one of those printers we had in grade school where you have to tear the holes off both sides.  I finally figured out how much I owed and paid the dang thing off.

So moral of the story for me is: Borrowing money to buy things you cannot currently afford is not worth the irritation that I feel from owing money on that particular item.

I say this because I have been car shopping. I say this because cars are nothing but a depreciating asset at best, or a terrible liability at worst.  I say this because I liken spending money on a car to the feds propping up Fannie Mae, it’s just a waste!

I have been looking at bigger cars. I have a small car and it drives me nuts. Two doors are incontinent and pretty bad at hauling around people, groceries, and definitely no good for moving 2×4’s.  I have been looking at 4 door sedans and the medium sized SUV’s. I like the American models, not because they claim to be built in the USA (they often are not) but because the “imports” (built in the south without union help) cost alot more due to their slower depreciation.

I think I am going to finance about half of it. In doing the math my total finance charges would be around $200 so that is well worth being allowed to hang onto my cash in case I need it at some point in the future.  That way I will still maintain a large amount of liquidity for my emergency fund.

So I will keep you posted.

Moral of the story: If cars were not so cool, I would drive a clunker forever.

            Usually in the past we pay off our debt by simply printing extra money and just use to pay the debt down. I assume that is exactly what whoever is in Washington over the next 10 years will try to do (Democrats and Republicans have both proved unable to fix this problem). Except that this time I am not sure that it will work. Those fine folks in Washington I recently mentioned also promised extensive benefits to many, many, MANY of the people who vote for them. They don’t just promise them an amount; they promise them an amount that is indexed to inflation.

            What that means if Joe Retiree got $100 a month in social security in 1980, he would get $100 * (1 + inflation) today. This is not good; this ensures that no matter what inflation does Joe Retiree will still get his share. The head of the Federal Reserve Mr. Bernanke recently stated this fact publicly, monetizing the debt will do nothing to reduce it and just destroy the savings of the middle class.

“Given the structure of our debt, [inflation] wouldn’t even help reduce the debt … given that so many of our obligations are indexed.”

-B. Bernanke

So what’s next, Taxes? Reduced benefits? Cut back on social security and Medicare? Oh the horror? AARP would (slowly) march on Washington! I think that these situations are about as likely to happen as me winning the lottery without buying a ticket.

Moral of the story: be prepared for inflation with assets such as precious metals, real estate, or other hard assets.

            Oh not any phone, I must have a smart phone. Oh not any smart phone I must the most expensive and most advanced phone out there. I must have the Iphone.

         The Iphone is of course the culmination of everything that Apple does well; it’s a computer, Ipod, and phone all tucked into a tiny device that actually works quite well. You can surf, listen, or talk on this  expensive device.

          Now I am pretty responsible and I have been hearing lots about prepaid cell phones in the blogosphere. They are cheap to purchase and easily replaceable.  They require no contract, are pay as you go, and really only make calls. I would highly suggest this type of phone for my grandparents or someone who has limited monthly usage.

So let’s do some cost comparison here:

                        Cost           Monthly cost           Termination cost.

Iphone              $200                $90                              $250

Prepaid            $40                  $40                              $0

So over a 2 year period:

Prepaid cost: $1000

Iphone cost:  $2360

            That is actually not as bad I was expecting, the Iphone would cost around 2.5 times more then a prepaid barebones phone would over the 2 year contract period. Figuring in the benefit of web-browsing, email, texting I would say that the value received by those extra services probably about equals the cost difference of these phones.

This is a chart representing the amount of debt that the Federal Government of the United States of America is responsible for. This number just under 13 Trillion dollars! To most people trillion is not a word that we say very often, it even sounds a little made up. “I am so hungry I could eat a trillion hotdogs!”  see this is funny stuff.

To break it down a little bit more this debt is held by the U.S. Government and therefore by the taxpayers of the Untied States. So if we do that math of 13 Trillion divided by 300 million or so Americans, your share comes out to be around $43,000!

What would you do with $40,000 in debt? That is a serious chunk of change. I probably would be on a diet of Ramen noodles and Water for the next 10 years or so. This enormous debt held by the federal government is starting to worry me.

Inflation

Does anyone realize what (serious) inflation can do? It can wipe out 30 years of hard earned savings in a year or less. To me it would feel like someone robbed my bank and took all my money. Say you have $40,000 in the bank but the government starts printing money to fulfill its debt obligations. All that is going to happen is cause dollars to be worth less and less. Maybe in one year your 40,000 could only buy what 20,000 could a year ago. Then the year after that 10,000, then maybe only 5,000;

So after a while all the cash you had is pretty much worthless and the government introduces a new type of dollar bill:

 (This is a real note, and the direct result of what happens when governments print money)

Inflation on this scale is a scary and very real possibility. I worry that our government (democrat and republican) is unwilling to stop its spending binge, and some painful inflation is all but inevitable. I would encourage everyone to hedge against inflation. The best way to do this is to buy “hard” assets such as gold and oil, foreign currencies like pounds, yen, or Euros even stocks and real-estate offer some protection against inflation.

I have been emailing them and calling them and it is getting to the point where it might not be worth it to fight them a whole lot more over $39 bucks. But I figured with my current success with negotiating with my plumber I figured I would give it a try.

They only will accept disputes via snail mail or fax.  So here is my letter.

Subject: Disputed Returned Payment Fee

To Whom It May Concern:

As stated above I would like to dispute the $39 fee added to my account on June 22^nd 2009 due to a returned payment.

The reason I am disputing this fee is because I do not believe that it is a fair charge. I simply made an error while entering my banking information on the Chase’s website. I feel that this is a very easy mistake to make, and I should not be penalized for trying to make payments online that are easier for me to send and you to receive.

Please remove this charge from my account, if you do not I see no reason for me to continue to do business with Chase Bank.

Thank you

-Jon Bon

We will have to wait and see what happens. I am pretty positive that after I pay off this 0% credit card that I will cease all business with Chase. If they choose to treat me poorly I am free not to give them my business.

          Andy, a wrongly convicted man goes to jail in the 1940’s and gets to experience all the wonderful things about prison. He eventually ends up running a scam for the warden, and then escaping thought the use of his rock hammer. His rock ‘hammer’ probably would fit in the palm of your hand, and it takes him 20 years to tunnel thru his wall to freedom. The way he did it was slowly and meticulously. There are very few things that I have be doing for 20 years other then eating and sleeping. I can not imagine being focused on something that intensely for that long.

          Tunneling out of Shawshank is of course my metaphor for paying off my newly acquired mortgage. I owe somewhere in-between 100-200k on my house. This in itself is not remarkable at all, actually it’s probably very low compared to a lot of people. Why this is a big deal to me is the way that I am paying it off.

          I got an excellent mortgage rate (less then 5.5%) and a relatively affordable house. So guess how much I pay down on that mortgage per month?

Around $150.

          No I did not forget a zero, or move a decimal. I pay the same for my house per month that I do for my cable TV! The reason for this has to do with the way mortgages work. If you don’t know I highly suggest you look it up. But the short version goes like this:

          Early in the life of the loan the payments are 80% interest 20% principal. As you pay down the principal the interested earned by the bank per month becomes lower so after a year maybe your 79/21, after two year your 77/23, after three years 74/26. You notice how the amount paid to interests is lower every year 80, 79, 77. 74? That is the “power of compounding” you can see this power demonstrated dramatically in putting extra towards your payment. If you had a 30 year 150k mortgage at 7% simply paying $100 extra per payment pay your house of seven YEARS earlier.

The math on that is

23 years of paying $100 extra: $27000

Saves you 7 years of mortgage payments: $75000

After my first year I am going to pay more on my mortgage, and try to tunnel out of Shawshank just a little faster…

  Here is my message to Chase:  

I was setting up direct deposit to make my credit card payment and I omitted a digit. I corrected the situation right away and sent you the money again with the correct banking information. Please remove the fee due to a simple typo.

 Thank you

 -JonBon

Chase Response:

 Dear Jon,

My name is Diana, we understand your concerns regarding the return check fee on your account.

 A returned check fee is charged whenever your bank does not honor the check that you gave us to pay on your account. This can occur for a number of reasons. Please contact your bank for details regarding your check.

 This fee was assessed to your account because your payment was returned to us unpaid by your financial institution. It is a valid fee and will remain on your account.

 Thank you,

Diana

JonBon’s Rebuttal:

 Diana

Like I said before I made a typo and entered the wrong number for my account number or routing number. Of course the payment was not honored by the bank, it was not my account. I was attempting to make payments electronically which I am sure for Chase is less expensive then processing a paper check every month. I realize that it is a valid charge, but I think it is unreasonable to charge $39 for a typeo. Please remove the charge.

-JonBon

Chase Response:

 Dear Jon,

 Thank you for providing me with the opportunity to assist you today, regarding the returned payment fee.

 We previously reviewed your account and explained why we could not make the adjustment you requested. Even though you have informed us that this was a typo, the typo was not a bank error. We regret that we are unable to take further action regarding the returned payment fee reflected on your current activity.

 At this point I realize they are not going to be nice, and that I am going to have to be a little more forceful.

So I contacted the BBB, BRING IT ON CHASE!

Mrs. Newton

 I am sorry to hear that you are unwilling to fulfill my request to refund the unreasonable charges. You have left me no choice but to file a complaint with the Better Business Bureau. The complaint number is 83**** and has been filed to the BBB of Metropolitan New York.

 Thank you for your time.

 Respectfully

-JonBon

More to come kids!!

Population: JonBon

            I used to be rich, I used to be the guy with money. I used to be the person who took vacations and maxed out their Roth IRA.  I used to live in a vault like Scrouge McDuck and swim around in all my money.

But I moved.

I moved into the poor house, with most of my fellow Americans. Now you have to understand my definition of poor, and an economists definition of poor are very different. My net worth is still probably very high for my age, and technically I am doing great. I am just way less liquid then I used to be.

            I have accumulated a crazy about of debt in the past 3 months or so. Now most of this is good debt, but its still debt, and I hate debt!!

            House:

 I purchased a home with 10% down. So I have six figures of mortgage debt that I now have to pay back for 30 years at 5.45 percent.  It is a huge adjustment to have tens of thousands sitting in the bank, to tens of thousands sitting in a house. It makes the dollars a little harder to get too. I will get the $8,000 first time home buyers credit, and I will get a place to live, but it’s still hard to go from owing money to no one, to owing the bank well over $100,000! The reason that this debt is good, is becuase it went to purchase an asset that in theory can be sold for more then I paid.

            Appliances:

I spent around two grand on some pretty solid stainless steel appliances. I am happy with what I have; they look nice, and work well. These I financed over a year with 0% interest. I did this before with my enormous TV. It’s a way to keep your cash, and pay for them over time. Just a warning, do not miss a single payment, and never be late. The banks that make these uncollateralized loans (GE Money) are not very nice people. The 0% you get it just a teaser, most people do not pay them off in time, and get hit with huge penalties and interest.

            Jewelry:

I recently got engaged and financed an expensive diamond, as well as purchased a ring to put it in. I probably spent a lot more then I needed too, and got a diamond that is of much higher quality then most. She would have been happier with less, but its what I wanted her to have. I financed the ring with a zero percent interest for 12 months Chase credit card. Again a warning to you, this is a really stupid way to buy things unless you know that you can make the payments.

      Well I officially drive a “six figure car”. No that does not mean my car costs over $100k, it means that I have over one hundred thousand miles on my 2000 Mercury Cougar, and yes her name is Samantha. I still name my car, deal with it!

            Now it is not the nicest looking car out there, and yeah it has a few problems that show up with age.  But my car only costs me about $40 a month in gas, and $35 a month in insurance. Sure I have to put some money into it every now and then, but it is still loads cheaper then a $350 car payment with pricey insurance.

            I told myself that when my car hits 120k I would allow myself to buy a new one. Well with the purchase of the house, looks like that number is going to be pushed into the 150k range. So until then I will just keep on shifting and hoping that my clutch will make it another two years.