Unscrew Yourself

There are countless Americans in a trap today, living in more house than they can afford. They purchased their SUV (like the house) with no money down and they’re upside down and gas is four bucks. Heating the monster house is going to be a burden with heating oil at four and a half bucks and when did they last get a raise? The credit cards are maxed and the HELOC got dropped to zero.

If you are in this situation, you probably made a few bad decisions. But. Billions of dollars were spent on advertising designed to wring every penny out of your cash flow. Fight back. Technically, it’s illegal, but then so are the powers just granted to the Treasury Department to bail out Fannie Mae and Freddie Mac. Morally and ethically, this is the way to go.

Cash your paycheck. No automatic deposit, no records. Take the cash and buy groceries. That’s it. Insurance? Your call. Pay for heat and electric (buy money orders to send in). Screw the car payments, the credit cards, the cable bill and the mortgage. It’ll be a year before they can evict you, and in the mean time, you’re going to build up a pile of cash. Give the actual cash to friends or family to keep in a safe place. You’ll need to show for six months before filing for bankruptcy where the money went. The kids needed it to pay for heating oil.

Credit scores are meaningless. What matters is cold, hard cash.

Lose the Internet connection, cellphone and cable. Use the library. They have free Internet access and books are free. Times will get really tight in the next few years. You aren’t depriving your family; you’re a trend-setter. You can’t ignore taxes or student loans, but they are practically the only untouchables.

They’ll seize your SUV within sixty days of the last payment, but by then you’ve got about a months’ pay in cash. Try public transportation or carpooling. Consider a bike. If you must have a car, buy a beater. If you get crap about driving a 1995 Honda Civic with primer on the fender, ask them what the payments are on their 2007 TerminatorXL and gas mileage. Tell them you own yours. Gloat.

A year later and where are we? Probably better read and in better shape from walking or biking when possible to save on gas. The median after tax pay for an American worker is about $42,000 a year. Let’s use a generous $800 a month for food, take out the $2000 we spent on the beater and another $500 for auto insurance, and even $3000 for heating if you need it. Miscellaneous will take another $300 a month, but we’re trying to save money here, right? No Carmel Macchiatos.

So what do we have? The SUV is long gone, and the foreclosure auction is scheduled for next week. You’re going through bankruptcy proceedings at this point (chapter 7, which removes all debts, not chapter 11 or 13 which just reschedules them) and that’s where the technically illegal part happens. They’ll ask if you have any assets you haven’t declared. You’ll look the judge in the eye, and say “No” knowing that your kids, parents or friends acquired $23,300 in cash and you will soon have zero debt.

At this point, you may have technically broken a law by lying under oath (Presidents do it) but given the assembly line economic disemboweling of millions of your fellow Americans, the odds of getting caught are zip. Screw them. They’ve certainly screwed you. This act of civil disobedience is as American as apple pie. It was illegal to bail out Fannie and Freddie. Boston Tea Party anyone?

Think about the credit card offers filling your mailbox. Think about the mortgage broker who promised that real estate prices never go down, that you can always refinance and suggested you lie about your income.

Now think about going out into the world with a clean slate and $23,300 cash. Find an apartment (nothing too fancy) and pay the first month, last month and security deposit. The median price for an apartment in DC is around $700 a month, but let’s double it to $1400. To move in we’re out around $4,000. Try to find something close enough to work to walk, ride or take public transportation. Put another $1,000 on a secured credit card (only use it when absolutely necessary, like renting a car) and live within your means. Save at least 20% of your income. Shoot for more.

In a mere year, our hypothetical, yet typical American has gone from being a wage slave to a debt free saver with a decent place to live, money in the bank and, I suspect, a much better outlook on what’s important in life.

Go ahead. Unscrew yourself.