Ok then, if I cannot talk you out of moving, here are a few tips to make it a little easier. These tips are the product of 8 moves in a dozen years, five of which occurred in four consecutive years. In Arizona. In the summer. But I digress.

Color code your boxes

Take a minute to think about your new home. How many floors are there? How many rooms will you need boxes placed in? For example, you may want all of the kitchen, living room and dining room stuff put in the living room temporarily. Or you may want all of the bedroom stuff put in the spare bedroom down the hall so you can have room to sleep. Write down a list of the places you want boxes dropped off. We decided to have one color for each floor, so my list was:

1. First floor (kitchen, living room, dining room)
2. Master Bedroom & wife’s office
3. My office and den
4. Basement

For each drop off location, I assigned a color that made some kind on mnemonic:

1. First floor (kitchen, living room, dining room): Green (ground floor)
2. Master Bedroom & wife’s office: Blue (blue for two)
3. My office and den: Red (for danger, it’s a 3rd floor walk-up)
4. Basement (Black for basement)

Calculate roughly how many boxes you will need and then go to FindTape.com and order at least a dozen rolls of colored packing tape (3 of each color, or 2 of some, 4 of others, depending on how many boxes you estimate. Whatever you have for the kitchen, double it). It’s about as cheap as regular packing tape, and it comes in a few days. It’s better to over-order than under–at least you’re saving on shipping, and colored tape will find uses after your move. You should also buy about a dozen rolls of clear packing tape and at least two packing guns ($9 each at Home Depot).

When you start packing, load one tape gun with clear tape and the other with the color of the drop off location you are packing for. Create a box using clear tape (see below). Fill the box and tape it shut using the colored tape. Roll a line of colored tape around all four sides of the top of the box. Write with a permanent marker on the colored tape the room it’s going to and briefly, what’s in it. (If you don’t write on the box, you can resell the boxes or give them to a friend).

On moving day, you will have a color-coded stack of boxes that you or your movers will know instantly what is in them and where they should go.

Hire movers
If you can afford to hire professional movers, you should. If you cannot afford to, wait until you can. Movers, if they are professional, know what they are doing and can move heavy and bulky items in a fraction of the time you can. Moreover, most movers are motivated to get out quickly even if they’re paid by the hour. A few tips on hiring and using movers:

1. Don’t go with bargain basement movers. Get a mover whose cost is in line with the value of your possessions. If you’re still living with mostly IKEA, like I am, you can probably hire mid-range movers for $1200 to $1800 for a 2-3 bedroom move. If you have anything whose name includes reference to a French King, go for the top-end movers.
2. Insurance: if you have homeowners or renters insurance at either location, ask your insurance company if your move is covered. It probably is, as most policies cover your possessions wherever they are on the planet. Provided your move date is within one of your policies’ coverage period, there is no reason to pay for additional insurance from the movers.
3. Treat the movers right. Make sure you have a case of bottled water at the old and new location. If the move starts early, pick up a box of joe and some donuts ahead of time. And talk to the foreman about what they want for lunch and/or dinner. You may spend a $100 or $200 on these niceties, but the respect you show will be returned. No one wants to break the stuff of a guy they like. Cheapy McNoTip, however, somehow always finds a puzzle where his plates were.
4. Don’t forget to tip. Movers generally do not get a lot for the move, and a tip at the end of the job ($50-$100 per guy depending on the work and how well it was done) is more than appropriate.
5. Don’t rely on the estimator. Moving companies like to hire professional liars to conduct estimates. If they say 9:00, and you ask for an “early start,” they will agree, but the guys will show up at 9:00. Same too if you say five guys when they only offered four. Four guys will show up. At 9:00. When making your decision, think about any special treatment you’ve asked for, and see if you would still pick those movers without it.
6. Check the house after the truck is loaded, and check the truck after it is unloaded. Movers are just as honest (and dishonest) as the next guy, but mistakes can be made by anyone. I’m still pining for baking supplies I lost two moves ago.

Get organized about address changes
If you have a few weeks before your move, collect a list of your non-junk mail as it comes in. Add to that all the companies or government agencies that you know will need an address change notification. You will work off of this master list later, when the move is done and you make the address change. My basic list includes:

• DMV of new and old location
• You and your wife’s employers
• Gas, electric and oil companies
• Telephone companies
• Credit cards and banks (remember that your zip has changed, so when you enter it at a gas station or online, you need to use the new zip)
• Professional boards (bar association, medical association)
• Magazines
• Amazon or any other site you order from frequently

Bolster that with a forwarding request online, and you should not miss a package or letter (or bill). Keep in mind, even if you’ve signed up for e-billing, your credit card and bank addresses have changed. The credit card will likely be rejected if the billing address is out of date.

Don’t spend a lot of money on boxes
There is nothing so costly for the time you use it as moving boxes. Okay, maybe aluminum foil, but moving boxes are up there. The best way to get moving boxes is to have a friend who moved recently give you theirs. You can also get decent boxes from a local store (we had a GNC in our neighborhood that threw out more boxes than we could handle).

If you take odd or used boxes, first make sure they are still serviceable. You should not see any of the corrugation, and they should be able to hold their form against gravity (no flopping). It’s mostly the tape that keeps the stuff together, so a little wear and tear won’t hurt (provided you tape properly). Second, try to find boxes that are all the same size; or at least 4-5 of each size. Stacking uneven boxes is dangerous for you and your stuff.

You should also discuss with your mover how many and what type of boxes they will provide. Most movers will include several wardrobe boxes (the most valuable type of moving box) and an assortment of china, linen and book boxes. If you have a lot of heavy things, including books, shift the balance to book boxes. If you have lots of pillows and small appliances, shift towards the larger boxes. Finally, for last minute boxes, try Home Depot or Lowes. U-haul and UPS charge over $2.00 for simple boxes. Home Depot has book boxes for $.67 each. Find the moving section of your local store and stock up.

Learn how to tape a box
Here is my method. It may use some tape, but it won’t let you (or your stuff) down:

1. Turn the box over, push the inner flaps in and align the outer flap seams.
2. Using a tape gun, pull a length of tape from one side of the box, perpendicular to the seam, to the other side. There should be about a hand’s width of tape on both sides of the box. This perpendicular strip will keep the flaps aligned as you tape the seam.
3. Again, starting about a hand’s width from the bottom of the box, pull a length of tape tightly across the seam and cut it so there is another hand’s length on the other side.
4. If the boxes are not going to be stored long and there’s no risk of water getting to them, run two lengths of tape perpendicular to the seam at two spots, both midway between the first perpendicular strip and either end of the box. You should now have three roughly evenly spaced strips of tape going across the seam and one longer strip covering the seam. If you have particularly heavy things, or particularly weak boxes, you can run a long piece of tape along the perimeter of the sides, covering the hand’s width pieces of tape. This will create a tape basket that, even if the box breaks, should keep your stuff from falling out.
5. If the boxes will be stored a while or water (or bugs) might get to them, instead of running the two strips of tape above, run one long strip around the perimeter of the box so that half the tape is on the side and the other half is below the bottom of the box. Once you complete a perimeter around the box, cut the tape and fold it so that the dangling half sticks to the bottom of the box (the turns will become triangles that overlap at the corner). This will seal the box, so that bugs, water and everything else will need to get through cardboard before surprising you in your new house.
6. Flip the box over and fold the top flaps down (outside of the box, not inside). Take two short lengths of tape and join the flaps on diagonal sides. (For example, the right flap and the front flap are taped to each other on the near right corner, and the left flap and rear flap are taped at the far left corner). A small (1-2″) piece of tape will suffice to keep the flaps down while you load the box.
7. After you’ve filled the box, remove the small tape strips and switch to your colored tape gun.
8. Run a length of colored tape tightly across the top seam, sealing the box. If you stand next to the box so that the seam runs towards your stomach, you can pull the box in to insure it is well aligned as you tape it. (The boxes will be a bit wonky if you do not square them as they are taped. You should not see any cardboard overlapping the top flaps.)
9. Run a second length around the perimeter of the sides, so that the color is visible no matter how you stack the boxes.
10. Use a thick permanent marker to briefly note the contents (or at least something that will tell you what’s in it) and the target room in the new location.

Good luck, and congratulations on your new home!

The conversation started over why, as Jon Stewart so eloquently pointed out (start at the 7:00 mark), that every President since before I was born has tried to solve our foreign oil problem, and yet, it keeps getting worse.  The problem, I explained, was that the government cannot mandate ingenuity.

Obama’s plan, as all “green” projects in the past have, is to shove money at the problem and naively Hope™ that bureaucrats and politicians can pick a winner from primitive, undeveloped versions of future technologies.  Of course, these people have their own biases, and often find that the only projects that will work are ones in their own district or ones from which they or their union friends will personally benefit.  Even assuming you can level the playing field, you are asking people with little or no background in physics, engineering or astrology to decide which technology will, after billions of dollars and decades of false starts, be the one that pays off.  This is a lot like asking a 2 month old infant to pick your mutual fund–it may work out, but chances are you’re just pissing money away.

This is a lot like asking an infant to pick your mutual fund–it may work out, but chances are you’re just pissing money away.

The stick in all of this, of course, is that the government will fund this bad idea on the backs of taxpayers and energy consumers.  Just as they did in Spain, Germany and Denmark, “green” initiatives will increase the cost of energy, including low cost existing sources like oil, coal and natural gas.  A cap and trade program is a way to mandate an increase in the cost of existing fuel.  Even Obama admits that his policies would “bankrupt” the coal industry.

So I began to think what a carrot would look like.  By far, the most palatable incentive for free market types is a tax break–but “green” policies already provide tax incentives to “go green.”  In the context of our current energy issues, this is very much like giving a $5 off coupon for brass polish to the captain of the Titanic.  What is needed is an incentive to innovate that cannot be turned down.

Here is my two part proposal:

First, drill, baby, drill.  Access all of our natural resources domestically until that Texas tea cannot be found anywhere under American feet or swimsuits.  Start an immediate program to bring to market every ounce of oil under American control, shale, natural gas, ANWR–everything.  As Krauthammer pointed out last month, we are only drilling in deep water because environmentalists won’t let us drill where it is safe.  This is absurd and self defeating and needs to stop.  Cut the red tape, bar the law suits and start drilling.

Second, for the carrot–call it the federal X-prize: the first company (or individual) who patents and brings to market either of the “new energy technologies” listed below will not have to pay federal taxes for the next 25 years.  The President will, in his infinite wisdom, set out the basic objective criteria for a “new energy technologies” in direct power and power generation.  The criteria must be vague enough to allow for unforeseen solutions, and specific enough to be used to determine success objectively.  My suggestion for the direct power criteria are;

1. A source of energy (e.g. a battery or a motor) that can power a standard size SUV for 300 miles at highway speed without stopping to refuel.
2. Weighs less than 25 gallons of gasoline or provides sufficient additional power to compensate.
3. Is renewable or reusable (a battery or a primary source).
4. Is non toxic to the environment and its users.
5. Is marketable (price point without subsidies) to ordinary consumers.

The argument, of course, will be on the definitions for the above.  For power generation, I suggest the following criteria:

1. A source of energy that can provide energy on a large scale (at least 500 MW) at or below the national average cost per kWh (currently, about $.15 per kWh) with the builder recouping construction costs.
2. Is renewable or reusable.
3. Is non toxic to the environment and its users.
4. Is capable of mass production and use in large and small markets.

So these are the product criteria.  If you bring a product to market, you won’t owe Uncle Sam a dime for the next quarter century.

This would spark a search like none other since the Holy Grail.  Every company in the world, technology companies, aerospace companies, oil companies, credit card companies, would make massive investments to win the brass ring: a 60-70% increase of after tax profits for 25 years.  [For the math inclined, a corporation pays roughly 35% in federal taxes out of a total tax burden of 40-50% for most companies.  If you take off the 35% federal tax, after tax profits (the percentage the company keeps) will go from 50-60% to 85-95%.  85%/50% = 170%; 95%/60% = 158%.]

To give this some real world numbers, Exxon, the largest U.S. company by revenue, pays about $5-7 billion in federal taxes each year.  So at the maximum, this would be about a $175 billion “investment” over 25 years.  Of course, unlike Obama’s $50 billion plan, not a penny of this would be wasted–we would only make the “investment” after the goods were delivered.

For perspective, all of the world governments combined spend $500 billion per year on “green” subsidies that are largely a waste of money.  So for a maximum of 1% of that price, the United States could revolutionize the energy industry and solve our foreign oil problem.

Looking at it a different way, the U.S. imports 9.73 million barrels of oil per day.  That’s about $980 million per day going to stalwart allies like Saudi Arabia, Yemen and Venezuela.  That’s $357 billion of American money exported per year.  I know liberals hate the idea of even one corporation not paying taxes, but we get very little tax revenue from the $357 billion we send over seas.

This idea may seem extreme, but (1) no government subsidy has ever worked to move the needle for oil consumption and (2) it is completely cost free if it works.  Moreover, it is not unprecedented.  Many countries provide low or zero tax agreements to companies in order to spur local economic growth.  Singapore and Dubai, for example, have economic development councils that encourage multinational corporations to build their regional business there.  The company gets a massive tax break and the host country gets higher employment, ancillary economic growth (workers need food, lodging and entertainment) and bragging rights.

Under my plan, companies would be given the incentive to expand their R&D departments, hire more employees and develop technologies that, even if they do not win the prize, will at least be taking us in the right direction.  (We might not have digital thermometers or cordless tools if not for the space program.)  If the research resulting in a dead-end, the cost is borne by the private company, not the taxpayer.  And no technology would have a defacto advantage through bureaucratic endorsement.  The government would be encouraging risk and innovation, rather than underwriting it, or worse, stifling it.

1. At least act as if it is, indeed, an emergency.  Cancel unrelated public appearances once in a while, it’s okay, we can get along without seeing you glad-handing athletes and celebrities for a day or two.  This is important for two reasons: first, it tells those who might not know (such as BP), that you take this seriously; second, it might actually give you time to think of things you could be doing about the crisis.  Woody Allen was right, 80% of success is just showing up.  Show up, physically, emotionally and as a leader.  In any crisis, 10% of the people lead, 10% freak out and 80% freeze up and wait for instructions.  Being President means you have to be in the first 10%, not the 80%, even when you didn’t ask for this particular crisis.
2. Seize control. You may not have the technology or know-how that BP does, but supervizing is not the same as taking charge.  Thad Allen should be calling the shots, not BP.  BP has their own ass to think about (hint, theirs is one of the ones you should be kicking, champ), and may not be taking every step in the best interest of the environment and the economy.  This is especially true after your genius Attorney General has announced criminal proceedings.  Put your people in charge and let BP sit in the passenger’s seat.  It’s already been alleged that BP underestimated the amount of oil coming out of the broken well.  That is a critical factor in determining how to respond.  The United States has the most powerful Navy and the largest science budget in the world.  BP is the third largest oil company.  Whose resources should the American people have faith in?
3. Commandeer Resources. The government has the power, in times of emergency, to commandeer private property.  Every boat, boom, dispersant and bulldozer within 1,000 miles of the Deepwater Horizon could have been commandeered to create concentric boom rings to gather the oil.  If we run out of booms, order the companies that make them to make more.  None of this runs afoul of the Constitution or Youngstown and  BP, as the responsible party, will be made to pay compensation for the takings.
4. Kill the bureaucracy. Bobby Jindahl and the other regional governors should not have to go through the federal government to protect their wetlands, especially in a time of crisis.  Fire any bureaucrat who gets in the way.  As it is, you have dozens of federal idiocrats arguing about the environmental impact of sand barges while pelicans are drowning in oil.
5. Actually talk to the CEOs of BP and TransOcean.  First, give them the grief they deserve.  They skirted safety regulations and best practices and caused an environmental disaster.  Even on the day of the blast, they were cutting corners.  Make it clear that, if they fail to do as they are told or in any way drag their feet, neither will do any business within or around the United States.  No drilling, no new facilities, nothing.  Scare the bejesus out of them, so when they think they may be better off playing it safe, they will have to think about a giant boomstick coming down on them.  Second, make them tell you what they plan to do to help, and get assurances that they will pay for the clean up, even beyond what is legally required and they won’t hide in bankruptcy.  It may not hold up legally, but some people still honor their word.

Professor Cavanagh’s story (too long ago to remember and too good to check) was about a group of executives on a dais at an industry conference. These executives were on a panel to discuss topics relevant to the industry, but during the Q&A, they were led astray and began to discuss price. Future price. One of the executives–and this is the bit a young corporate lawyer remembers–one of the executives stood up, dumped a pitcher of ice water all over the table, and shouted “you people are talking price, it is illegal, and I am leaving.”

That caused one hell of a scene. When the murmuring quieted down, the Q&A discussion continued without that executive. Several years later, however, as the Department of Justice Antitrust Division’s case was being made, all of the corporations were named in a price fixing scheme–all but one. There were literally hundreds of witnesses who remembered crazy Charlie, who dumped the pitcher of ice water, shouted about price fixing, and left the room.

Notwithstanding Maureen Dowd’s fantasies, which involve sipping mint juleps on her plantation while bossing around her slaves, Joe Wilson’s outburst was not racist.

For obvious reasons, undignified outbursts have been on my mind lately. Notwithstanding Maureen Dowd’s personal power fantasies (which apparently involve sipping mint juleps on her plantation while bossing around her slaves–Maureen, it’s called projection, see a professional, get help), Joe Wilson’s outburst was not racist.  The Obama administration was lying to the public, and was calling Republicans liars for exposing the lie.  Faced with this hypocrisy, Wilson lost his temper and his composure and shouted in rejection.

Now, I am not suggesting that Wilson was correct or that he need not apologize.  What he did was inappropriate, but not necessarily wrong.  First, he had a duty to his constituents to protect them and their property from what he saw as a threat (the taking of their money to pay for healthcare for illegals).  His outburst was successful in a way no civil discourse was.  The Obama administration was forced to agree to a provision it had previously rejected, mandating that illegal aliens not be covered by ObamaCare.  I am reminded about the French proverb about a small carafe of wine being illogical, immoral, and inadequate.  In some circumstances, doing the impolite thing is the only way to do the right thing.

Not only is this normal, it is healthy and far too infrequent.  In one of my favorite, life-changing books,  The Wisdom of Crowds, James Suroweicki describes conformity and peer pressure experiments first conducted by Solomon Asch.  In the basic experiment, the scientist places between 4 and 20 subjects in a room and shows each subject a note card with a straight line on it.  The scientist then projects an image with three lines, labeled A, B and C of varying lengths, and asks each subject which of the labeled lines is the same length as the one on the note card.  The process is repeated with different note cards and new projected images.

The trick is that only one of the “subjects” is actually a subject.  The others are all actors who are told that after the third or fourth note card, they are all to intentionally and unanimously pick the same wrong line.  The real test is to see whether the actual subject (who always picks last) will go along with the group, who is obviously wrong.  The fascinating conclusion of these experiments is that, to a large degree, people will go along with a group they know to be wrong, simply because no one else will speak up.  The implied (or explicit) consensus of the group acts to silence dissent.

Even more fascinating is that, no matter how many wrongheaded people there are making up the groupthink bubble, that bubble will burst when just one actor speaks up.  In other words, if “A” is the correct answer, and there are 10 “subjects” (9 actors and 1 actual subject), even though 8 actors (wrongly) say the right answer is “B”, but the ninth says “A”, suddenly the subject is liberated.  The peer pressure vanishes and the subject is free to speak their mind.  What is even more fascinating is that, even if the ninth subject says “C”, the other wrong answer, the effect is the same.  The subject is still liberated simply by the bubble bursting–even if it’s by a wrong answer.

Whether for the sake of comity, job security or apathy, we do not speak up when others tell tall tales or plan our or their own downfall.

This is the theory behind the centuries old Catholic practice of the Devil’s Advocate.  When a person is considered for sainthood, the Church will appoint an expert in canon law (yes, there are attorneys who are allowed in church) to argue against canonization.  Although the Devil’s Advocate will of course raise valid points, he will also allow others who have doubts to be free to raise them without feeling peer pressure.  The Church, in 1587, codified an anti-groupthink process that is only now becoming mainstream.  (Sometimes tradition is ahead of the times.)

Too often, in our personal, professional and political lives, we  let things slide.  We hear lies, half truths and hypocrisy and we don’t call each other on it.  Whether for the sake of comity, job security or apathy, we do not speak up when others tell tall tales or plan our or their own downfall.  That failure to speak up–to dump a pitcher of ice water on a table once in a while–happens every day in small, but important ways.  Ordinary Americans are starting to fight against Hope·ocrisy, and we need to do more.

We need to keep speaking up.  At work, at home, and everywhere else, when you hear lies, hypocrisy, and things that just don’t sound right, challenge them openly.  Be that dissenting voice and know that, when you speak, you will be bursting the bubble for millions of others–even if you don’t have all the right answers.  When someone brings up Global Warming™, don’t politely change the subject, challenge them, even if you don’t have an advanced degree in climatology (they don’t either).  Opening a dialogue is the point.  Challenging the “consensus” is all you need to do, someone else may hear you and that alone will be enough to make them question the status quo.

We also need to encourage those who speak out against Obama, Reid and Pelosi, (and, for that matter, Michael Steel, John McCain, Mitch McConnell, Rush Limbaugh, Glenn Beck, and everyone else in a position to direct public opinion and policy)–even if we disagree with those who speak up.  Their dissenting voices help to burst the groupthink bubble–even if they don’t have the right answers.  The mere fact that they speak up is enough to burst the bubble.

This weekend, nearly 2 million Americans poured a pitcher of ice water on Washington D.C.  The bubble is already bursting.

We have crossed the debt Rubicon.

I tell you all this because, as Americans, we have crossed the debt Rubicon. We have to begin to face our consumerism and our debt issues openly and honestly. This is as true of our personal debt as it is of our public debt. The first step in that process is admitting that you have a problem. I am happy to report that, after about three years of focusing and firm, but not psychotic discipline, my wife and I have weened our consumer debt back down to nearly four figures and expect to pay it off in the next six months. The purpose of this article is to provide generalized guidance on how you can do the same.

First, some emotional advice: take a deep breath and relax. This is a marathon, not a sprint. Nothing is going to change overnight. Just like it took years to get this far into debt, it will take years to get out of it. Don’t dwell on the money or the depression. Don’t think about what you can’t have. Think about how much money you’re paying off each month, and then think about what you can do with that money when you’re free from debt. It will make your heart sing, trust me.

Second, a few disclaimers: this is not for people who are truly insolvent. If you are unable to make the minimum payment on your loans and credit cards, you need to seek protection, possibly in bankruptcy. This post is meant for people who have a lot of debt and are feeling overwhelmed.  If you’re beyond that and are already defaulting on debt and receiving calls from collection agencies, you should get help elsewhere.  There are places you can go for that guidance, some starting points are listed below. Everyone’s tolerance and preferences are different. Saving money is like dieting. Some people can go cold turkey and make drastic changes and stick with them. Dave Ramsey is the guy for you. Other people need to live by the 80/20 rule: live within the lines 80% of the time and relax and have the chocolate cake 20% of the time. If that sounds like you, this may help.  A word about credit counseling: anyone who tells you to stop paying your credit card companies is a scam artist, drop them like a hot rock.  A legitimate credit counseling agency would not put you at risk of default, but would negotiate better terms while you repay your credit cards.

This is the Law of Unintended Consequences once again slapping Congress in the face, but consumers are the ones feeling the sting.

Third, some lay of the land: as I have already mentioned here, and here, I am not a fan of the newly passed Credit Cardholders Bill of Rights. I work in the industry, so I suppose I am biased, but even so the unintended consequences should have been obvious. Although the credit card companies have made some egregious errors in judgment and there are clear systemic problems, these laws create massively perverse incentives against consumer interests. Banks will not lose money.  They will always find a way to protect their financial interest within the rules of the game.  As you may already know, credit card companies are reducing cardholders credit lines, changing grace periods,  and increasing their base interest rates. Many industry experts predict that 0% interest teaser rates and some rewards plans may also go away. This is the Law of Unintended Consequences once again slapping Congress in the face, but consumers are the ones feeling the sting.

So how to navigate this new morass, and get rid of your debt while keeping your sanity.  The general plan is to payoff the credit cards as fast as possible.  The way to do this is to get the lowest interest rate possible, so that your payments go towards principal, rather than interest.  The best way to ensure you’re getting the best interest rate is to know and improve your FICO score and your credit history.  Here are some simple steps to do that, and more importantly, why:

1. FICO Score: The first thing you need to do is obtain and monitor your FICO score and at least one credit report.  I use MyFICO.com, but FreeCreditReport.com and others are just as good.  You should check your FICO score and your credit report at least once per year under normal circumstances.  If you’re looking to make a major purchase (like buying  a house or a car), just paid down a large amount of debt or made other changes, you should check more frequently.  I subscribe to MyFICO’s monitoring service, which notifies me when my score fluctuates by more than a set amount.  I recommend that service, which costs about $85 per year.  Why? Credit card companies and most financial institutions base most of their decisions on your FICO score.  It may be unfair, but so is life.  If you know your score, you will know your chances of being approved for a 0% interest credit card, a mortgage loan or any other loan or insurance policy.  Knowing is half the battle.  The rest involves objective setting and TPS reports.

Knowing is half the battle.  The rest involves objective setting and TPS reports.

2. Use Your Credit Cards More: This may seem counter-intuitive, but you need to use your credit cards–or at least one of them–more often.  Credit cards are a financial tool (said the guy who works in the industry).  When used properly, they allow you to stretch your purchasing power, keep better control of your expenses, avoid carrying cash and checks, and a whole host of other benefits.  If you use them properly, there is no reason you will have to go into debt.  BUT, YOU MUST PAYOFF THE NEW AMOUNT EVERY MONTH. If you don’t do this, you will only be making things worse.  Pick the card that meets the following criteria: (i) a good rewards program that you can actually use (points for air miles are great, but if you don’t travel a lot, what good does it do you?  And should you really be traveling a lot if you’re trying to pay down $60,000 in debt? I’ve picked one with retail gift cards to give me more flexibility.); (ii) enough credit limit remaining to provide you with 1.5 months of recurring expenses (more on this later) and (iii) a reasonably low interest rate (this is only important if you need to carry a balance on this card–if you are starting from zero, the interest rate is irrelevant).  Then take this card, your new utility card, and do three things (a) use it for your recurring payments (more on that in a minute); (b) move it to the front of your wallet for groceries, gasoline and all the other expenses your now paying in cash or debit and (c) if possible, move any balance you have off of that card (it’s best to start with a brand new card with no balance, but if your credit isn’t great, this may not be possible).  Recurring expenses are monthly payments like your cable bill, your phone bill and your mobile phone.  Contact all of these companies and put them on auto-pay with your credit card.  Most companies will be happy to have the certainty of a credit card on file.  Some utilities, however, (like Con Ed) will charge a “convenience fee” for accepting credit cards.  Don’t pay this, it’s a waste of money.  Just keep paying them by check until they join the 20th century.  (That wasn’t a typo).  Why? This will do several things:
   1. Rehab. Most importantly, this will rehabilitate your credit.  When you pay your bill, credit card companies generally put you into one of three categories: (a) paid less than the minimum; (b) paid the minimum; or (c) paid more than the minimum.  Most companies will put you in the last category even if you pay a dollar more than the minimum.  If you put recurring payments and ordinary expenses on your credit card and pay off the entire amount every month, your credit history, and eventually, your FICO score, will improve.
   2. Affluency. Charging these amounts (and paying them off every month) will make you a medium to high-spend customer–your bank’s favorite friend.  If you’re like me, a family of two, you spend about $450 per month on cable, telephone, internet, mobile phone, NetFlix and other assorted recurring bills.  Groceries add another $1,200-$1,300 per month and gas adds another $250.  That’s $2,000 per month in expenses or $24,000 per year.  Keep in mind, this is money that you are already spending.  Banks earn money every time you use the card, even if you pay it off without paying interest.  (See my post here for more on interchange).  The bank will love you and it will treat you very differently than a customer that keeps a few thousand dollars and pays the minimum every month.  You will get more and better offers (and if you’re not a platinum cardholder, you probably will be soon) and when you call to negotiate a new rate, your spending habits will be taken into account.
   3. Simplicity. This will uncomplicate your life.  The utilities and other expenses you have to pay every month are to about 5-10 different companies.  This will make all those payments into one company at one time each month.  You can schedule this payment to coincide with the paycheck opposite your rent or mortgage payment.  (Banks will work with you to reschedule your due date.)
   4. Interest Free Loans. Credit cards give you a 20-28 day grace period (but the calculation of interest on the grace period often depends on whether you carry a balance, which is why its best to start with a blank slate).  By using the grace period, you’re stretching your money and taking a 20-28 day interest free.  Although your cable bill gets paid on the 1st, you might not pay off your credit card until the 20th.  For 19 days, that money sits in your checking, money market or savings account earning interest.  It may not seem like a lot, but $24,000 earning interest over the course of a year adds up.  And its money your giving away today.
   5. Rewards. Rewards points will accumulate fast.  If you’ve selected a card with a rewards program that works for you, you will see the effects almost immediately.  We use a Citi card with the Thank You Points program and redeem the points for retail gift cards.  6,000 points equate to a $50 card, so about every 2-3 months we can get a $50 gift card for Best Buy or Bed Bath and Beyond or somewhere else and either buy something we need or something we want, but wouldn’t otherwise be able to afford.
   6. Protection. When you buy things with your credit card, depending on the brand and type of card, you will probably be getting price, warranty and theft protection under your card agreement.  This may not help for your weekly arugula salad, but it will help when you buy something at the drug store or supermarket that’s meant to last past dinner time.
3. Zero Percent Interest. This is the key to a speedy payoff: getting and manipulating zero or low-interest cards.  First, you should not apply for new zero percent credit cards if your FICO score is well below 700.  The market is still adjusting, but if your credit score is at 650 (the old “good credit”) you may want to try.  If you’ve rehabilitated your credit and you’re ready to start looking, try www.creditcards.com.  They provide a list of credit cards by type (zero interest, balance transfer cards, rewards, etc.)  The risk in applying and getting turned down, of course, is that by merely applying for a new credit card, your FICO score may go down.  (Your FICO score, among other things, is based in part on the number of times banks have looked into your credit history in the past six months.  So requesting a new credit card, asking for a higher credit line or applying for a loan are all things that should be done sparingly.)  The second option is to use what you already have.  If banks are not already, as you repair your credit, your existing banks will begin sending you balance transfer offers.  These rates are calculated based on your FICO score and credit history.  The better your history, the better your rate.  Here are some suggestions on how to use the zero percent or low interest rate cards:
   1. One Basket. Do your best to pick one card per year (most offers are good for 12 months) and load up only this card with all of the debt you are carrying.  This may not be possible at first, but work towards it as your goal.  This will do two things: (a) it puts all your eggs in one basket; you only need to make one payment per month and you will know how much you owe at any moment; (b) when it comes time to transfer the balance, when you get another card with a limited balance transfer fee (these are becoming more rare), you will only pay it once.  For example, let’s say you owe a total of $30,000.  If Capital One is offering 0% for 12 months with a 3% fee up to $75 per transfer; you would pay $75 to transfer one balance from, say a Chase card.  If, however, that $30,000 was split over 4 cards, you would need to do 4 separate transfers and the fee would cost you $300.  That $225 difference is a monthly payment.
   2. Flip it. As the offers expire, go to the next card or cards in your inventory and transfer the remaining balance to those new cards.  This will not be free.  As mentioned above, most cards have a balance transfer fee of about 3%, but some still cap this fee at a fixed amount ($75-$150).  The offers come out on a monthly basis, usually at the beginning of the month.  When you flip, be sure that you don’t miss a payment on the outgoing card.
   3. Don’t cancel the cards. This may seem counter-intuitive.  Part of your FICO score is based on the length of your credit history and the utilization of your available credit.  If you drop an existing credit card, your total available credit will go down and you will eventually only have a very short period of credit history with a handful of banks.  Moreover, as you accumulate cards, you will get offers on cards that have no balance.  Of course, use your judgment.  When your debt stabilizes, if you have 10 credit cards and only need three and six of them have a credit limit of $1,000, feel free to cancel those six.
   4. Keep the Utility Card Separate. Whether you have zero or low interest cards, do your best to keep them separate from the card you are using above for recurring and ordinary expenses.  If you are paying that off every month (and you had better be), the interest rate on that card is irrelevant, so don’t waste a zero percent balance transfer offer on that card.  (If that bank makes an offer and you need room, do take advantage, but things get complicated as the rules for which balances get paid down vary based on the bank and the new legislation).

   The lottery is a tax on people who can’t do statistics

4. Learn to Live Within Your Means. The first three suggestions were about what to do on a technical level.  The rest are about how to change your lifestyle.  This is one of the hardest things to do because it requires a fundamental change in your psyche.   Nonetheless, this is the most important step because without it, even if you hit the lottery tomorrow (and don’t play lotto, the lottery is a tax on people who can’t do statistics), you would eventually be back in debt.  Learning to live within your means requires  (i) an emotional detachment to money and consumerism; (ii) discipline to stick to decisions once they are made; and (iii) knowledge and know-how about finance and money.  This blog post, even at 3,700 words, won’t get you there.  What will is a lifetime of deciding to get back up when you’re knocked down.  Here are a few suggestions to start you on the path:
   1. Pay Yourself First. One of the easiest and most effective ways to learn to live within your means is to pay yourself first.  Decide on an amount of money that you can live with each month, call it an allowance, a stipend, a tin or petty cash.  Put that money aside in a separate account or withdraw it into cash in your wallet or a coffee jar.  Do not mingle it with household money or use it for groceries or gas or any “needs”  or to pay off debt.  This is a promise you’re making to yourself.  Use this money for movies, dinner, drinks, a pedicure–all of the fun stuff that make you happy and make  life worth living.  Why? Saving and dieting are like holding your breath under water.  If you go too far too long, you’re going to come up gasping.  You need to have an outlet to allow yourself life’s little pleasures on a regular basis so that you don’t snap and binge.  I take about $600 every month for personal expenses.  For me, this includes snacks, (I don’t drink coffee), dinners away from home, gifts for my wife, toys for my dog, the occasional Wii game, etc. If you’re struggling with debt, $600 is obviously a lot of money, and you need to set an amount that works for you.  But do it knowingly.  You need to add up all the Starbucks runs, all of the lunches, all of the McDonalds, all of the candy, cigarettes, skoal, and every other little personal item.  And then you need to decide, am I going to give it up or am I going to make it part of my stipend.  Either way, you are spending the money now.
   2. Situational Awareness. “Budget” is one of the scariest words for people with financial problems.  If you’re like me, it conjures up thoughts of spreadsheets, gut wrenching conversations, belt tightening and buckets of antacid.  As I note below, there are alternatives to rigorous budgets, and if you’re like me (I hate calorie counting, too), All Your Worth, is a good place to start.  But what you do absolutely need to do is figure out where you are now.  Invest in a program like Quicken or Money or use a free online program like Mint.com to keep track of your finances.  This will help you find recurring expenses, know how much you’re spending on groceries and find places to save money.  In addition, just like the journalist’s diet, just knowing how much you’re spending will help you curb unnecessary expenses.
   3. Debtor, Heal Yourself. Often, one of the hidden reasons for debt is another, related issue.  Now I hate psychobabble, so let me be clear: I am not saying you use credit cards too much because you weren’t breast fed (or you were breastfed too much).  But if you are, like I am, overweight, or if you have emotional issues like one of my friends did that meant her self-worth was tied to shopping, these are serious problems that need to be fixed.  Most healthcare plans will cover weight-loss and psychotherapy.  If you’re covered, look into your plan’s coverage and see what the options are.  If not, look at your employer’s mental health benefits.  They may have counseling that you can go to.  Why? Taking obesity as an example: I recently went on a diet and lost 30 lbs.  I feel great and am in far less danger of dying before 40.  But financially, I am also better off.  My body needs less food at every meal, instead of eggs, bacon and a snack for breakfast, I have a shake.  My snacks between meals are limited to protein bars ($2), rather than candy bars, soda, chips, etc. ($5-7).  Over a week the $3-5 adds up to $20-$30.  For lunch and dinner, I no longer go for the chicken parm hero or the extra food with my meal.  Some slices of chicken breast, some broccoli and carrots and I’m full).  I save on food, clothing and even utilities (skinny people don’t need the thermostat set at 65º–although that may have a reverse effect in February).
   4. Read. There are a few books that changed my perspective on money and made me stop chasing the Joneses.  Rich Dad, Poor Dad, by Robert Kiyosaki, Atlas Shrugged, by Ayn Rand, and All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren, Amelia Warren Tyagi.  Rich Dad, Poor Dad made me question my understanding of consumerism and whether I needed a big house, a BMW and a large screen TV.  (No, no and yes).  It will also make you realize that being an employee is not such a great bargain.  Atlas Shrugged will make you appreciate capitalism and money in a way you probably have not before.  All Your Worth provides an easy to use budget theory that you can apply to your lifestyle without being a CPA.
   5. Get support. Talk to people who are going through the same thing.  If your married, be open and honest with your spouse.  There’s nothing worse than bearing the burden of crushing debt alone, especially while your spouse unknowingly spends you both further into debt.  It’s not fair to either of you, and it will strain your marriage and only drive you deeper under.  If you’re not married, find friends who are going through the same thing and rely on them.  If you don’t, you’ll be hanging out with people for whom money is no object.  That’s what got you into this in the first place.

Reliable Resources for Credit Counseling and Financial Literacy

Start with these webstites and come back to them to check on any credit counseling agency you may be thinking about.  Keep in mind, there is no such thing as a free lunch.

• Feed the Pig Financial literacy and savings non-profit.
• MyMoney.gov Government-run website that provides information on credit counseling companies.
• National Foundation for Credit Counseling These are accredited credit counselors who will work with you to develop a debt management plan (similar to bankruptcy, but voluntary).  This will adversely effect your credit rating, so don’t do this on a whim.
• MasterCard’s Debt Know How. Financial literacy program.  Priceless (and free).