Tuesday, January 26, 2010

Do something about the debt of the U.S. government - pay it down, like I just did

Everybody is whining and complaining about the ballooning debt of the U.S. government, but who is actually doing anything about it? Well, for starters, ME! Yes, that's right, I, Jack Krupansky, just did something to reduce the U.S. government debt. Really. No kidding. I actually paid down a small slice of this debt. Granted, it was a rather small slice, but a slice nonetheless. Okay, sure, it was only $20, but the point is that at least I am one of the very few people willing to stand up and DO something about the problem, rather than be one of the whiners and complainers who refuse to acknowledge that it is their debt and their problem, not just the fault of mindless politicians in Washington, D.C. After all, every politician ultimately answers to voters and most of the so-called wasteful spending of the U.S. government is simply politicians responding to the demands of their consistituents (voters.) Maybe my one small contribution to paying down the debt won't really make any difference to any of those whiners and complainers, but for me it is a matter of principle. I consciously choose action rather than the inaction of the whiners and complainers.

If you have any sense of principle, you too can pay down a slice of the U.S. government debt yourself at Pay.gov. You can pay via credit card or ACH transfer from a bank account.

So do the right thing and show all those whiners and complainers how mindless and spineless they really are. PAY DOWN THE DEBT! And that has to start at the grass roots with us individuals before politicians will ever pick up the lead.

-- Jack Krupansky

Wednesday, January 06, 2010

Added a new Lending Club investment loan purely from recent cashflow

My experiment with investing in consumer loans through Lending Club continues with good success. My Net Annualized Return is now at 14.02% with no delinquencies. This morning I just invested in another loan using purely cash from recent cashflow over the past six weeks. Payments include both interest and return of principle.

Actually, I selected a loan and placed an order for it. It is currently in funding and 75% funded. It still has 11 more days to get fully funded, which appears to be plenty of time (11 days out of the 14-day funding period.) The interest rate on this loan is 17.39%. It is for debt consolidation. The loan grade is E4, which is a mediocre quality, but the person has good, verified employment. The Lending Club screen says that loans at this grade historically have a 4% default rate, so the net expected return is about 12%.

My experiment is going well and I would like to put more of my idle cash into Lending Club, but I need to get a bit more stability in my own work income and rebuild my rainy-day fund a bit more before I have much in the way of risk capital to invest. If my work prospects seem reasonably bright in a few weeks, I will likely at least boost my experiment a bit. I actually do have money earmarked for a somewhat larger experiment, but since there is risk involved, I intend to proceed cautiously. I could probably expand this experiment by six to seven times before it would even show up on my radar as even a minor investment. As an experiment, by definition, I am prepared to lose the entire investment.

-- Jack Krupansky

Friday, January 01, 2010

My Lost Decade

That's the new hot phrase these days, referring to the past ten years as "The Lost Decade." All I can say is that it certainly was that for me personally.

Early 2000 was still the peak of the dot-com boom. Even as late as July 2000 the financial picture (for me) was looking very good. But, from late July onwards it was all downhill for me, for the rest of the entire decade. Definitely it was a "Lost Decade" for me. Actually, my decline bottomed by the end of 2005, but my recovery since then certainly has not compensated for the decline earlier in the decade.

In 2000 I was officially "semi-retired" (as of spring 1999) and comfortably living off of my profits from the boom. But by the middle of 2002 it was painfully clear that my semi-retirement was coming to an end too quickly.

I had always figured that in my worst case scenario I would simply go "back to work". I started making inquiries in mid-2002, but was surprised to find... nothing. Well, it wasn't a complete surprise, after all, technology companies had been laying off people in droves for two straight years. As a freelance consultant and contractor my forte was the "extra" projects that management wanted to do that their in-house staff were too busy to do. But by 2002, "extra" projects were "gone with the wind" as management struggled to even get approval for projects for a bare-bones staff.

Still, I figured that the "drought" was temporary and eventually things would loosen up. Well, I was in fact correct about that, but my timing was a bit off. From the middle of 2002, it was not until the middle of 2004 that I was getting some serious work.

By late 2002 I had exhausted all of my retirement savings and started to lean on credit cards for all of my expenses. In early 2003 I remember saying to myself that the odds are that I will find something within the next six months. Nope, it didn't happen.

By late 2003 I had exhausted even my credit cards and I missed a couple of rent payments in early 2004.

Finally, I borrowed some money from my parents (yeah, I know). I did that for a few months, paying only my rent, minimal expenses, and a token payment on my mountain of credit card debt.

Then, magically, in April 2004 I was finally able to line up some part-time work. It wasn't enough to pay my credit card bills, but enough to pay rent and expenses and at least token payments on the credit cards.

Unfortunately, that work in the spring and summer of 2004 paid only a portion as I worked and most of the income was deferred until October 2004. That was a lot of months of delinquent payments and accounts starting to go to collections.

Then when I received all of that deferred pay in October 2004 I had a field day, coming back up to "current" on must of my debt.

Alas, that work in summer 2004 came to an end and I ended up moving to Colorado for some part-time work out there. Actually, I had been offered a full-time position in August but turned it down since I was still a diehard freelancer at heart.

I was actually starting to make a little headway in late 2004 and early 2005, with some extra hours for awhile. But, by April 2005 the prospect of enough hours to keep up with my mountain of credit card debt on part-time work was looking very, very grim.

So, in May 2005, as it became clear that I was going to be working only part-time for the indefinite future and that would not permit me to keep my head above water with that credit card debt, I finally bit the bullet and started looking into bankruptcy. I talked with my accountant, and he agreed that I really had no other choice.

So, in June 2005 I met with a bankruptcy attorney recommended by my accountant and got the ball rolling. My paperwork was officially filed in August and my Chapter 7 personal bankruptcy was officially discharged at the end of November 2005.

Alas, I had made one big blunder in October 2004 when I got that mountain of income. I was too aggressive at catching up with back credit card payments and neglected to put aside money for my estimated taxes. That was a very bad move because all of the credit card debt was discharged in bankruptcy, but recent taxes are not. I was already on an IRS installment plan for taxes due in 2003. None of that was discharged in bankruptcy. So, I entered 2006 without the credit card debt, but with only part-time work and this tax debt.

I managed to limp along for the first couple of months of 2006, but then I got notice that my client no longer needed my services by the end of March. Ouch.

I frantically looked around and was once again coming up empty. Double-ouch.

Finally, in the middle of April 2006 I responded to a Microsoft ad on Craigslist. I wasn't terribly thrilled at the prospect of giving up my freelance status, but full-time employee definitely trumps many months of no work. I started work at Microsoft out in Redmond in the middle of May 2006. Luckily, I had started a modest savings plan the minute I was out of bankruptcy, which just barely covered my expenses until I got my first paycheck from Microsoft.

I only lasted at Microsoft until early 2008, about 22 months, but I kept my expenses down and saved a huge chunk of my paycheck in retirement contributions, the employee stock purchase plan, and additional savings. By early 2008 I had even paid off the remainder of my back taxes, finally getting my head completely above water.

I wasn't doing terribly well at Microsoft anyway (mediocre performance reviews and little prospect of much improvement in my career outlook there), when a freelance opportunity popped up in February 2008 with an open-source software startup with a guy I had worked with back in 1998 before the dot-com boom really took off. I had wanted to do the freelance work as "moonlighting" on the side, but management at Microsoft said "No." I said goodbye. I guess that is testament to how improved my financial situation had gotten. Personally, I would have preferred to stay at Microsoft for at least five years and it was great working with a lot of really smart people, but I just had not figured out how to deal with a lot of management and organizational turmoil that was out of my control.

Not that the road has been so wonderful since. I did okay until September 2008 when my client read the writing on the wall and cut my hours to... zero. I did a little more work, but even that dried up my November 2008. I went from then until September 2009 with no work. Zero. I spent a lot of time checking and responding to job listings, but no luck. Besides, I just knew that somehow the whole "crisis" would eventually resolve itself and work would flow again. I was right about that, but once again my timing was off. Luckily, I had enough savings to cover that entire period, and more. I had learned something from those hard lessons earlier in "My Lost Decade."

My old client finally had some work for me in September. The hours vary from month to month, but have averaged half-time. The good news is that with absolutely zero debt, half-time is actually very workable for me.

Going forward, I have work for the next couple of weeks and then I may go back into a slow period, waiting for the next assignment to materialize. Once again, the good news is that I am prepared for that with savings from those times when the "good" money was flowing in. And, lucky for me, the economy is finally in "recovery" mode.

I am certainly not back to the financial "health" that I had in early 2000, but I am clearly recovered from my financial gloom of the fall of 2003 through the fall of 2005 (two, whole, very long, very gloomy years, and 2002 was rather gloomy as well.)

In truth, my situation has improved steadily (well, with some big bumps) for the past four years, so I would not call those four years as "lost" per se. Still, my financial situation has not recovered to where I was in late 2001 and early 2002 or even back in 1998, so I really do still have to say that my past four years were a part of "My Lost Decade."

The coming decade? Hah! I have no clue. I did not have a clue at the start of the last decade either.

On the non-career, non-financial side, the past ten years have been much better for me. I have done a lot more reading (mostly online), done a lot of writing online (my web sites, in addition to blogs), spent a lot of time poking around Washington, D.C., especially before and after 9/11, and been involved in a couple of philosophy discussion groups. So, I am definitely much better prepared for whatever the world has to throw at me. I am still quite "fragile" on the financial side, but on the non-financial side I feel much more confident.

On the negative side, both of my parents died in this decade, as well as five of my uncles, so I am definitely entering the new decade as "my" decade, with many fewer of the "older" generation to blame for what happens in the world, or to lean on for moral support in tough times.

New Year's resolutions? Hah! That's way down on my priority list. Maybe by the end of the year (or decade) I'll get to it.

-- Jack Krupansky