Monday, February 08, 2010

The Card Game

I watched The Card Game on Netflix Watch Now last night. If you do not subscribe to Netflix, you should! Subscribe to their lowest tier and you get access to thousands of movies (and growing) that is available to stream directly to your computer.

Want to watch it on your TV? Then pick up a Roku Movie Player.

The Documentary

This past week, we had our “Dumping Debt” lesson in FPU, so this documentary really had resonance.  Here are some things you may not know about banking practices:

1. Free Checking – Once upon a time, you paid for checking. Then, they came up with the idea of “Free Checking.” By now, you should realize that nothing is “Free” – they moved the fee. Where did it go? Over draft fees. Before “Free Checking” if you bounced a check, you not only paid the bounced check fee, but you had to go contact the merchant and clear everything up. With Over Draft protection, they will cover you up to three of five hundred dollars. This “loan” is not labeled a loan, but a convenience – therefore it does not fall under the truth in lending terms. The rate on the overdraft convenience is 460%. Very competitive with Pay Day Loans.

2. Over Draft Protection – Was the banks response to Pay Day Loan industry, whom they were failing to compete with.

3. Prioritized Clearance – The bank uses sophisticated software that will clear high charges first in order to drain your account. If you go into overdraft, that same software will start to clear out the lesser charges next. This way, you can pay $50.00 for a $4.00 coffee.

4. 0% Credit Cards – Like Free Checking, 0% Credit Cards and No Annual Fees is another gimmick. However, Credit Cards are far less regulated than banks. They simply moved the annual fee to another fee structure.

4. What is my Interest – The founder of Providian, when presented with a credit card offer, admitted that he could not tell what his actual interest rating would be after the introductory period.

5. Universal Default – If you are late on a bill unrelated to your credit card, your credit card holder can raise your rates. Its called Universal Default.

6. Adjusting Loan Limits – Credit Card Companies can adjust your credit card limits and reset their terms – just because.

7. It hurts the poor – This really got me – those who are able to take advantage of credit cards are doing so at the expense of those living close to the edge. The reason that the product exists is to make money for the company. Those who are poor or living close to the edge are being raped by these companies. I agree, they should not be using them, but, that’s another subject. I might write more about this.

8. Congress’ Legislation did not go far enough – To put it bluntly, I side with Chris Dodd on this one –The Obama Administration did not want to do anything that would hurt the soundness of the banking industry. The banking industry is built on top of fees and until that is regulated that industry will continue to screw the consumer.

9. Housing – The reason that we are in the economic situation has a lot to do with the housing market. Did you know that people were refinancing their homes with sub-prime mortgages to pay off their credit cards just to go and run them up again?

But What about the Free Market?

I believe in the free market and capitalism and generally think that regulation is a bad thing. Most of the times, the Market will adjust and drive out the things that are harmful.

Not so in this case. In this case, the banks have done a good job at marketing their product. What other product do you approach with bended knee? Oh please, please give me credit.

The component of Capitalism that is missing from this formula is Moral Restraint (again, I need to write on this too).

This American Way of using Debt is unsustainable by the consumer. At least, that’s what I found to be true for me.

That’s why I quit. I am out. It’s not a win-win game, and don’t tell me about your Free Points and Air Miles that you get.

It’s a game of they win, you loose. I am not going to play their game. I quit. I am out.

The borrower is slave to the lender. – Proverbs 22:7.

Creating a Budget, Part 3

This is a series for creating a budget using Google Docs. Part One and Part Two describe creating a basic budget form.

In Part Two, we completed our Google Document Budget Spreadsheet. Now, you should test out the formulas that we entered and make sure that everything is working.

Go ahead, take some time to fill in the numbers. Don’t worry, if this is your first budget, it will not be accurate for about the first three months. After that, budgeting becomes second nature.

Allocating Your Income

Congratulations! You have just completed your first Zero Based Budget! You have spent EVERY penny on paper, on purpose before the month has begun. You want to do this every month. Cindy and I recommend that you start about mid-month so that you can forecast all of the monthly variables (such as Valentine’s Days, birthdays and kids needing clothing).

Next, we want to allocate your income over the next month. Life would be simple if we could get one paycheck at the start of the month and we could execute on the budget, but most of us get paid on a varying cycle.

In my household, we have only one regular income, which occurs bi-weekly. The biggest category on my budget is the mortgage. If I pay for my mortgage out of one paycheck, it will leave very little left over for other necessities, so, I am going to take half out of each paycheck.

With your Spreadsheet open, we are going to add to our column headers:


I have added a Pay Date, an Income and an Allocated Column. The Income Column and the Allocated Column are going to save the same purposes as cells B2 and C2.

Next, just like in the budget side, we are going to merge cells. However, instead of two columns, we are going to merge three:


Finally, we are going to add a formula to the allocated cell at F2: E2 -SUM(D3:D26).

Note: When you merge cells, you address the values in formulas using the left most cell. That is why we use SUM(D3:D26) instead of SUM(F3:F26).

Complete the new columns by adding formatting to the headers. If you have any other income that occurs on other dates, add another set of columns.


I copied and pasted the columns from D – F, but I had to re-enter the formula because the cell references where not correct. Make sure you enter some values to test that the Allocated values are working correctly.

Making Sure it all Adds Up

The last thing that I want to add to this are columns that will help me to determine that I have allocated everything correctly.

The formula for the first row is as follows: =B3-SUM(D3:G3). To translate what this is doing: subtract the value of cell B3 from the Sum of Cells D3 and G3 (technically, this says to sum all cells between D3 and G3). I am going to place this formula into cell J3 and then will copy this all the way down to my last category:


I’ve also created a header.

Now the completed spreadsheet looks like this:


Just a note – I do not use Google Docs for my spreadsheet – I use Excel. I have found that entering formulas into Google and copying cells is not as forgiving as Excel, but, as a free alternative, Google Docs is pretty good.

I hope that this series helps you get a very simple way of creating a zero based budget and allocation plan.