I have talked to a lot of people trying to get out of debt. They try to find ways around debt, sometimes doing the right thing…many times not. Other times, people try to ignore the problems, hoping they will simply go away. Ignoring debt and credit problems is not a solution. Instead, it is important to prevent problems by understanding how loans and credit work.

When you borrow money, from either a bank or a credit card lender, there are two ways to do so. The first way is known as a secured loan which is when you put down collateral for your debt. If you fail to pay this loan, your collateral, often your home or car, is taken from you. The other loan type is known as an unsecured loan. For this type of loan, there is no collateral securing the debt. The most common type of unsecured loan is credit card debt. Credit card companies offer loans of a certain amount of money made available to the lendee. The lendee takes advantage of this loan by using the card issued by the company to charge against a set credit amount issued. If the lendee fails to make payment on the loan, the credit card company has a few options when trying to collect. They will raise interest rates, lower the lendee’s credit rating and, in extreme cases, send a collection agency after the lendee or take him or her to court in order to collect the money owed.

Which loan type is better?
It depends on the need. A secure loan will have lower interest rates, and the lendee pay less money over the course of the debt. Credit cards and other unsecured debt tend have very high interest rates. Unsecured debt can lead to problems as a lendee does not always have to prove they can pay the full amount before making use of it. The lendee can then spend years paying back the cost under higher interest rates. Unsecured loans will also often have variable interest rates instead of the lower, fixed interest rates offered by secured loans.

Why would anyone take an unsecured loan?
Generally people with no collateral or who have poor credit histories have no choice other than unsecured debt and loans. If someone does not have the collateral to secure a loan they are going to have no choice other than to pay for an unsecured debt. The good news is, paying back the debt in a timely manner will help restore a potentially poor credit history and help with potential future loans.

Secured loans are an easy way to put the equity to work. They are also common for car purchases or for purchasing a home. For these more expensive purchases, it is unlikely a buyer will be able to make the purchase of the full amount without the loan. A secured loan will have a lower interest rate and better payment terms than an unsecured loan. The downside is if the loan is not paid back in a prompt manner, the collateral can be lost. If the loan is for a risky venture, then it might be better to take unsecured debt.

There are pros and cons to both types of loan, and which type is best relies on many factors personal to the potential lendee. Whichever type of loan is chosen ought to be done with due diligence. Taking any kind of debt which can not ultimately be repaid will have negative effects on credit histories. As such, it is important to be careful when taking out any sort of potentially unnecessary loan. Even credit card purchases should be considered carefully. If credit card payments are not affordable, then perhaps that new television is not as necessary as first thought.

I was thinking to myself I would like to recognize the blogs that helped me get to where I am at.  Not coincidentally everyone on the list are blogs that I read daily and most are people I talk with often.  My top referrers of all time are as follows:

1) Five Cent Nickel

2) My Money Blog

3) Blogging Away Debt

4) Consumerism Commentary

5) Mrs Micah

6) Prime Time Money

7) Suns Financial Diary

Being Frugal

9) Lazy Man and Money

10) Cash Money Life

The following is the first post from my beautiful and brilliant fiance Lauren about our ongoing battle to sell her house so that we can get into our new house that we are building:

Selling a house in a bad market

So Jesse and I are doing something I don’t recommend to most of you right now (but if not us, then who would you get advice from what not to do on?). Buying high and selling low. We each owned houses before we got engaged and decided his was in a great location to be a college rental, but mine was newer and not in a college area and therefore decided to sell mine to finance a down payment for our new house that we are building. Very risky idea especially in the current market conditions.

My house has been on the market for 90 days. I have had about 15 showings and 1 open house. All the feedback we have received is “such a beautiful well maintained house”, “immaculate house”, “beautiful decorations”, only to lead to let downs of, “we don’t like the area”. Unfortunately, 1 year ago when I bought my house, I was looking for a new house and settled on one that was 15 minutes out of the way. For me, that was okay, but I didn’t consider I would be selling it in a year and that other buyers might not be that flexible.

So why can’t my house sell if it is immaculate!?
In our case, it is because of the area. My realtor at the time oversold me on many features in the neighborhood that have since either not been funded or were just pure lies to get me in to the house. So, what am I doing to compensate for “location, location, location” (the biggest factor for most buyers )? DECORATE DECORATE DECORATE! I have to admit, it has become somewhat of my hobby keeping my house in order and buying nice decorations and accents, but never did I imagine it would all pay off someday (well hopefully). Of the potential buyers we have had, my house is always at the top of the list because it looks like a model home and buyers can imagine themselves living in it. I am convinced after doing some “market research” that my house beats the competition in my area within the same price point hands down. Here are a few tips for getting your house model home ready if you are as crazy as Jesse and I are right now:

1) Clean Your House and Remove all Clutter!
I mean, spotless, you don’t want a water spot anywhere. I know it sounds excessive, but buyers will notice . It might take a weekend to do, but it’s worth it. If your realtor is listing your house online, make sure there is no clutter for the pictures. When I say clutter I mean TV remote controls, magazines, dog/kid toys.

2) Maximize the Amount of Livable Area
Maximize the amount of room/space each room has to offer especially kitchen counter tops and bedrooms. You want buyers to imagine their personal belongings in these areas, not how they can work around your mess.

3) First Impressions Matter!
If your front yard doesn’t match the inside, buyers won’t even consider stopping in. Make sure your lawn has been perfectly manicured and if you have plants make sure they aren’t looking dead. Just a quick cleanup can add to your curb appeal. On that note, make sure that your neighbors have curb appeal too. Most communities are protected by HOAs and therefore you have the right to make your neighbors get their act together as well.

4) Design on a Dime (it’s a good show on HGTV)
I get a lot of my decorating ideas from HGTV and my mom. You would be surprised at how inexpensive a lot of decorating ideas are. You don’t have to empty your wallets to get your house model home ready.

5) Treat every showing as your one shot to sell
It has become quite tedious keeping the house in order constantly (you can’t help rushing out of the house without making your bed sometimes), but realtors will sometimes only give you 20 minutes notice that they would like to show your house! Typically they will give you about 2 hours, but when the conditions are as bad as they are, you cannot say no! My advice is making sure that your house is in order the night before or before you leave for the day. I am lucky that I have a flexible job that allows me to leave on a moment’s notice, but if you do not have that luxury, you will want to make sure the house is spotless.

These are just a few tips that have helped me get an edge on the competition. I am not a professional realtor but I am a professional marketer, so I know how important it is to beat the competition. We just found out today that we might (fingers crossed) have a potential buyer. I will keep you all informed on that!

On the news yesterday they said its a record how many days we have had in a row over 90 degrees in good ol sunny Colorado. Along with the heat which I do not mind so much is the skyrocketing water bill, which I do mind. If the grass doesn’t get water daily, it immediately starts to brown up. Since here in colorado we get roughly as much rain as kapiti plain that means having to run the sprinklers daily. Joy. Before I get into some tips here is a question you might ask…

Why dont you just stop watering your lawn/garden?
We like our lawn and we’ve worked our butts off to make it nice. As far as the garden its been producing like mad and we literally are getting to the point where we have enough tomatoes and jalapeños for salsa every night and enough cucumbers for a cucumber salad every night. That is of course if the grasshoppers don’t eat everything first…I’m almost read to go inorganic and spray the damn things. Its not quite to the biblical locust storm proportions but its getting there.

So what can be done about the huge water bill? Here are some ideas…

1) Water the lawn at night
This is multipurpose, first of all you don’t lose a lot of water to evaporation and secondly you dont want your grass to burn.

2) Make sure your sprinklers are all aligned and adjusted
Why waste water watering the driveway or street or neighbors yard?

3) Buy some drought resistant shrubs
Instead of regular shrubs we bought some drought resistant rose bushes and they are doing really well. Plus they look great.

4) Use a bucket to wash your car instead of letting the hose run

5) Use a broom to sweet the patio instead of spraying it off with the hose

6) Don’t cut grass too short, the shorter the grass, the faster it dries out

Inside

1) Take shorter showers

2) Dont leave the water running while you brush your teeth

3) Make sure dishwasher loads are full loads
4) Repair leaky faucets, toilets and pipes

5) Do full loads of laundry

6) Keep some water or tea in the fridge instead of running the water for a long time waiting for it to get cold

I have a cousin who is one of those guys who is always doing some sort of crazy project so when he told me recently that he was going to run a car on vegetable oil I thought he was insane. Turns out he’s crazy for sure, crazy like a fox (ok ok no more cliches).

Sure enough, last week we went up wakeboarding with him, his brother and our significant others he showed up with a new Mercedes Benz. Now, when I say new, I mean new to him. It is without a doubt the ugliest mercedes I have seen since I saw a mercedes garbage truck in Europe. As I approached the car I got a nice whiff of something frying. Not the pleasant french fry smell you get from those biodiesel buses but something that smelled like a kitchen fire. In any case, he did it and is now paying absolutely ZERO for gas…and here is how it works:

Step 1) He bought an old diesel engine car. In this case a mercedes benz from the mid 80s that was beat all to hell. Any diesel engine will do, though apparently you should avoid buying one that has rubber in the fuel system because vegetable oil tends to corrode it after a while. Total Cost: $1500
Step 2) Build a centrifuge. He build one in his garage out of an old riding lawnmower engine and spare metal parts from a junkyard. More on this later. Total cost $350.

Step 3) Find restaurants to give you used fryer grease. Total cost $0.00

How it all works:

As it turns out good old Rudolf Diesel introduced his signature engine at the 1900 Paris Exposition, he said his new engine ran on, get this, Peanut oil. He’d designed his engine so farmers could grow their own fuel. Most diesel engines were indeed run on vegetable oil until the 1920s, when it was disovered that the byproduct of gasoline (what we call Diesel) could be used instead. The irony being that now with clean air laws, diesel is actually MORE costly to produce than gasoline…but I digress.

The fryer oil is brought home and put in the centrifuge. There is a hole in the top that the oil runs out of and into a holding cell, while the dirt particles collect in the sides. It is then poured through a filter and into his gas tank. Pretty simple.

Ill try and get some pictures and write more on it later.

Where has Jesse been?
I didn’t want to write an entire article on it, but the truth of the matter is that I have been simple to busy to blog. I apologize to my regular readers and to everyone else stumbling on my page. Rest assured I am rested, work has died down a bit, and Im dedicated to bringing back TPS better than ever.

Before we talk about anything else remember this one thing: price of crude oil is directly related to price of gas.  So from now on when I talk about the price of crude oil, you know exactly what it means to you.

A few months back there was a big whoopee about the first person to trade oil at over $100/barrel.  As the price of a barrel of crude oil continues to rise unrelentingly past $135 a barrel, one begins to wonder, Is the price of oil primarily rising due to the strong global demand for oil, or due to the U.S. Dollar (USD) falling so much in value?

One way to solve this riddle is to travel back in time to the 20th Century when after World War II the USD was considered ‘as good as gold’ because the exchange rate between the USD and gold was fixed by U.S. federal law at 1 USD = 1/35th of an ounce of gold; that is, until President Richard M. Nixon shocked the world by unexpectedly yanking the USD off the gold standard on August 15, 1971. Or, travel even further back to a time centuries ago when men and women the world over used gold as a medium of exchange, a store of value, and a unit of account. Back then, prices of almost all goods and services were quoted in units of gold. Looking at the price of oil from this historical perspective, a new question arises: Would the price of crude oil be rising so much if the world were paying for a barrel of oil with ounces of gold instead of the currently ‘goldless’ USD?

Thankfully, we can use readily available historical data on gold, oil, and the U.S. Dollar to answer that question. The key is to transform the data — and our thinking — such that one ounce of gold becomes the currency (or, unit of exchange) that anyone could use to buy and sell a barrel of crude oil or to buy and sell the currently ‘goldless’ U.S. Dollar. Applying this data transformation and then using 1991 as a normalized index point (January 1, 1991 = 100) for both oil and the USD, there is a hidden truth: starting in late 2001 — around the time of the September 11 terrorist attacks on the U.S. — anyone could use one ounce of gold to buy an ever-increasing number of U.S. Dollars, or anyone could use one ounce of gold to buy an ever-decreasing number of barrels of crude oil.

An American today is having to spend 3 times the number of U.S. Dollars he had to spend back in 1991 to buy a single ounce of gold (May 7, 2008 = 242). This is confirmed by comparing the USD prices of one ounce of gold in 1991 and today: $362 and $1000+, respectively.

Anyone today using an ounce of gold as a currency can buy only half as much crude oil per ounce of gold as he could in 1991 (May 7, 2008 = 50). In other words, anyone must now use twice as much gold as he could in 1991 to buy one barrel of oil.

So, a barrel of oil has doubled in price in terms of gold ounces since 1991 and, at the same time, an ounce of gold has more than doubled in price in terms of ‘goldless’ U.S. Dollars. Thus, gold solves the riddle: the price of crude oil is high and rising primarily due to the ‘goldless’ USD losing its purchasing power, and secondarily due to the strong global demand for oil. As the U.S. Dollar in his pocket becomes increasingly worthless, the average American is forced to cough up more ‘goldless’ U.S. Dollars to convince a seller of a barrel of oil to make a fair trade. Who can blame the oil seller if she believes “fair” requires ever more increasingly worthless U.S. Dollars to complete the sale of an increasingly demanded barrel of oil?

Perhaps the riddle that the average American should be trying to solve has less to do with the price of oil going up and more to do with the purchasing power of the USD going down. Perhaps the real questions that Americans should be asking are:

* Why is the USD losing so much purchasing power?

* Why are our elected representatives in Washington, D.C. failing so badly in their constitutional mandate to provide We the People with a stable currency — a currency ‘as good as gold’, or at least a currency actively managed by the Fed to within a tight range of gold prices?

* Why do We the People continue to elect representatives who think nothing of devaluing our currency through profligate printing and spending, rendering us all poorer and poorer as time goes by?

* When will We the People say ‘enough is enough’ and finally elect representatives who will honor their constitutional mandate to provide all Americans with a stable U.S. Dollar?

Until We the People take action and demand real change in our federal government — especially its monetary policy (stable dollar) and fiscal policy (balanced budget, lower debt) — we will continue to watch  in dismay as the price of oil climbs higher and higher on the world market.

I have posted a loan application on prosper for a 16% rate:  pretty sure bet considering I am putting it up on my blog as a matter of insurance for people.  Long story short the debt I collected while unemployed has been transferred around to 0% interest credit cards and opening accounts + revolving credit + inquiries (to do transfers) has hurt my credit score…down to about 700 plus score, and 678 on the lender scale.  So I need all of you guys help to get my credit score up by transferring that revolving to a fixed loan .  Sign up with the link on the left and then go here:

http://www.prosper.com/lend/listing.aspx?listingID=327147

and fund my loan.  You get free $25 just for signing up there so you get to lend me money AND get free money.   Ive got some great posts coming this week, just need the time to finish them off and post them.    Thanks for the help guys, and drop me an email if you decide to do it, Id love to see who all out there is helping!

With the new house in the works and everything going on Ive been trying to really crack down on spending habits while still eating healthy….and I have very little time each day to put towards preparing and eating.  This kind of leaves me in a rough situation at times.  Its easy to get two out of the three but the third piece is always the hardest.

-A5 B12 in the vending machine doesn’t count as healthy

-Packing a complicated lunch at home is great, but a lot of times I just don’t have the time

-Getting quick healthy food is pretty expensive and hard to find

Ive come up with a program to keep myself as satiated as possible while still taking very little time and remaining in budget.

1. Eat Breakfast
This solves way more problems than you would think.  Not only does it reduce cravings for bad food later in the day, it keeps you more full so you have less to eat later on.  I can eat a bowl of kashi in like 4 minutes and let me tell you, thats a filling bit of cereal right there.

2.  Stock up your desk
Get some healthy snacks and put them in your desk.
-Nuts
-Crackers
-Canned Tuna
-Protein Bars

3.  Stock up your fridge and freezer at work
My personal favorite is lean cuisines.  They are cheap, fast, and healthy.  Plus there are all different flavors so you don’t really get bored of eating the same things.  Buy some fruit for the week and toss that in there too.  If you don’t have a fridge at work, get a mini fridge and put it in your office or cube.  When I worked at HP I had one in my cube and I never once had anyone complain about it.  Infact, people always wanted to borrow some space - my manager included.

4) Meal shakes
I personally drink protein shakes, but you can go even further and drink entire meal replacement shakes.  They tend to be inexpensive and can be bought (and stored) in bulk.

5) Drink a lot of water
As Americans we consume way more daily calories than we need and so it wouldn’t hurt to eat a little less throughout the day.  We tend to mistake hunger sometimes for slight dehydration.  Plus drinking water is free and good for you.

6) Forget everything you know about 3 meals a day
Its wrong and unhealthy.  Most people are surprised to know that snacking and mini meals throughout the day is healthier and will make you feel better.  Bulk healthy snacks and meals also tend to be cheaper than going out for some huge meal at lunch…not to mention it takes up much less time.

Every once in a while I decide to go and have a little look at the status of my house and check what my mortgage balance looks like.  I don’t look at it that much because, hey, Ive got 25 years left on the loan and nothing has changed much but as I look through transaction after transaction I can’t help but cringe every time I look at the !@#$ PMI payment.  It sort of reminds me of leach.  It sucks a very small amount of blood on any given day, but man is it annoying and over the course of a lifetime really leaks a lot of blood.

Whoa whoa Jesse, what the hell is PMI?

It stands for private mortgage insurance.

It’s what most lenders make you have if you don’t have 20% down payment on your house. What makes 20% the end all be all of lending? Well,mortgage companies have found that if you have less than 20% equity you are are more likely to default on the mortgage. So the good news is that PMI allows you to get into a house sooner such as in my case where I was in college and had a good paying job but not much saved up.  The bad news is that it is money going down the drain.

As it is I pay roughly $70/month in PMI and I have 15% equity in my home.  I would need an extra 15k as of right now to get to 20% equity.  At my current rate that will happen in 2012.  I did some calculations and three years of an extra $70/month would cut off an extra year, an extra $200/month would make it 2 years of paying to cut off the next two.  Thats assuming no house appreciation but at this point who knows with the housing market.  As it stands that additional money would be much better spent on other things, like high interest student loan and getting ready for the new house.  Not to mention my renters (article coming soon) pay the entire mortgage so its just plain easy to let things be.

So in my case guess the leach gets to keep on suckin.

Yes, sucks to be you Jesse, but how about if I do pass the 20% mark?

In that case then yes, you can drop your PMI.  Call your lender to find out who you need to talk to that can get it done.  A lot of times the mortgage company will not drop your PMI on its own, you have to be proactive.  Not only that, but they may try and delay you and/or tell you no.  If it comes to it there was a law passed  a while ago that says that you must be given a written statement as to when you’ll be allowed to cancel your PMI AND the lender must allow you to cancel PMI when your equity is 22% or higher.  So get out there if you’re to that point and save yourself some money!

To say that work is stressful for most people is sort of like talking about the weather. Its way overdone. Well, in my case unfortunately when my day job gets stressful and resumes its ridiculous hours The Penny Saved suffers, my health suffers, and Im moodier than Don Rickles delivering a monologue. Luckily I have a cure for all three. For #s 2 and 3, I have to exercise, its the only thing that can really effectively improve both. As for the first thing, my temporary solution for today is to write about 2 and 3.

The biggest problem with exercising during stressful times is staying motivated. So here are 10 tips that I came up with to stay motivated that I use religiously

1) Buy a bunch of protein
The first thing I do when I decide to start lifting and running again is to buy a bunch of protein powder. Not only is it great for building muscle but protein shakes WILL help you lose fat.

2) Get a portable MP3 player (if you dont have one)
How often do you see people running along the road without one? Not very often huh? Yeah, thats cause music is a motivator. It works.

3) Do a fat pinch
On your midsection, pinch between your belly button and your waistline. Thats all fat. That is enough to keep me running.

4) Join an organized sport
It gets you doing exercise without thinking of it as exercise.

5) Join a message board
There are a few that I liked. The ones I like are more geared toward weight lifting but there are message boards out there for just about every flavor of exercise. Seeing other people talk about fitness, and participating in those discussions can really motivate you. And hey, if you are reading this, you can read a message board, right?

6) Take pictures of yourself
I have historically yo-yoed a lot in my life. I have some terrible before pictures, and every time I have taken before pictures and then every month taken a new one I have stayed on course until I had great after pictures.

7) If you are dreading some workout, do another one
Why kill your motivation to do anything at all? If its not working, do something else. Running boring? Play some basketball or go swimming. You get the picture.

Plan out workout times in advance
Obviously if work is stressing you out and you are super busy, you need to schedule time. The problem is, if you are already crunched, the exercising will slip if you don’t explicitly schedule it in.