Ready for Zero (YC S10) wants to help Americans get out of debt.
techcrunch.com
techcrunch.com
Here's a little plan I came up with for someone, not quite 100% applicable but it worked pretty good:
(1) cut up your cards
Tough ? Yes, absolutely, very tough. But step one of getting out of a hole is to stop digging, so stop spending money that you don't have.
(2) cancel: cable, newspapers, any and all subscriptions, internet and cell phone included if you don't need them for your job. If you do need internet see if you can make a deal with a neighbour, especially easy if you have a laptop with wifi.
These are not essentials in your life, you can do without them until you can afford them.
(3) stop smoking, stop drinking
Besides making you unhealthy this stuff is habit forming and costs you a bundle, even if you don't really notice because it's only a few bucks at the time.
(4) if you've bought stuff that you don't actually need, sell it. Liquidate it, set a price on what you realistically think it is worth and try to raise that money by selling it for cash.
(5) stop eating and drinking outdoors. Restaurants and coffee shops make a profit, that means that you can cook for yourself and make your own beverages cheaper. Sure, it may not be that luxury latte that you've come to depend on but it adds up.
(6) pursue ways in which you can earn more than you do today (this can be hard, it did not work out for my friend, maybe you have more luck)
(7) list each and every expense you make, look at the list at the end of the week and be critical, could you have saved on any of them? If you could do not repeat that spending in the next week!
All these steps together should give you a bit of money on a repetitive basis that should go towards paying off your debt.
That's cumulative, any money that you spend over and beyond the required interest payments will come back the next month as a further reduction in interest to be paid. So next month you can pay back more on the principal and so on.
Do not fall back in to old habits, be strong and look at your debt decreasing as a motivator.
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I'm really happy that the 'readyforzero' people built this. That's one of the nicest start-ups ever to come out of YC, in terms of the 'change the world' attitude.
Sure, going to Starbucks is not a good use of your cash if you can't afford it, but where I am some of the cheaper restaurants can give me a decent meal for around the same as if I cooked it myself. They get their ingredients cheaper than I could and they make their money from the wine that I buy to go with it.
Making food requires less in outlay than it does to buy ready made food.
> where I am some of the cheaper restaurants can give me a decent meal for around the same as if I cooked it myself.
Ok, that's different from where I live. Here eating out would easily cost 3 to 4 times as much per person as it does to home-cook.
Also, you have to factor in the cost of transportation if you do not have a cheap restaurant nearby.
> They get their ingredients cheaper than I could and they make their money from the wine that I buy to go with it.
The restaurant slogan is 'they eat you poor, they drink you rich'.
I haven't read "never eat alone", but suppose every occasion of eating out could be turned into an interesting meeting, it would be even more worthwhile.
Then you are most likely not in debt in the first place!
But yes, 'time is money' and all that, but when you have more time than money that changes the value of time.
I got a roommate which saves me 600$ a month and I should be out of high interest debt within 9 months. (Still going to owe 6k @ 4.9% and 9k @ 2.9% but there is little point in paying those off early.)
Edit: Also if you keep one high balance CC you can reduce the amount of savings you need to keep liquid in case of emergency. AKA 2k in your checking account is a great idea, unless your also paying 12% interest on credit card debt.
oh wait, sounds like future advisor ;)
I see lots of people spend way too much money on their marriage (1 day...) only to be in trouble for a year or more afterwards, which, surprise, puts a huge stress on their marriage.
There is some kind of peer-pressure going on there that makes people spend way more than is smart and I'd like to understand better how that happens.
It's small things that rack up. It's small things that don't get easily factored into budgets: flowers for the groomsmen, that case of soda you forgot, lighting for the venue.
All of the predictable stuff like catering, venue hire etc. was absorbed by our (wonderful) parents. Day to day stuff was me. Now I need to figure out what to do.
It's easy to talk about not going into debt when you have a decent job. I never had a problem when I was working. Now I'm a student on what amounts to subsistence wages in CA. That's when it gets tricky.
It turns out that (7) is more than sufficient for the vast majority of people. In fact, most don't even have to look at the list - they can throw it away, unread, each night.
There's something about writing down each transaction that gets people to spend far more wisely.
FWIW, the same applies to eating as well. Want to lose weight and/or eat better? Write down everything that gets to your stomach that isn't water. (Yes, even diet soda and unsweetened tea/coffee.)
I do wonder if this site can really reach the market it's after. In my anecdotal experience, the people that are in massive debt don't really have the discipline or organization to get out of it, even with a great tool to help them. If they did, they probably wouldn't be in as much debt to begin with.
I think this is the big question. I really love this idea, because too many people are struggling unnecessarily because they don't realise the true impact of credit card debt. Having something that clearly shows them this impact is a great idea. But I find it hard to believe they will seek something like this out, so it's going to be tricky to reach them.
I was thinking about the very problem yesterday, and wondered if it would be worthwhile requiring information like this to appear on all credit card statements. Instead of just highlighting a minimum payment, what if the statements also had to outline the impact of higher payments somehow? It could be the only reliable way to get the information to the people that could benefit most.
"Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest." (http://www.creditcards.com/credit-card-news/help/what-the-ne...)
I had a neighbor who had simple, yet fantastic advice: if you can't afford to pay for it cash, don't buy it. This guy was your average American, with a middle class job, but during his retirement years I noticed he bought a new porsche and humongous RV. I have to wonder if he bought those cash too, but I wouldn't be surprised. He had rental property, all his debts paid off I'm pretty sure, and all because of simple yet powerful financial common sense.
It actually angers me to see some of the interest rate schemes and fees banks deliberately put in place to take advantage of unsuspecting debtors. A site like ReadyForZero is timely in the midst of the worst economic crisis since the Great Depression. If 70% of our economy is based on consumer spending, it make sense to strive to keep Americans in a position to spend comfortably.
Right.
After looking over the documentation I found the clause they were referring to, it was 'no obligation to pay interest for the first 5 years'. The debt had increased to about 30% more than it was initially (4 years had already passed). So much for it being 'interest free'.
Wow, I'm only 26 but this makes me feel old. "Home Ec" was a pretty well-known course when I went to school.
So the cumulative effect of interest on interest for debt is much higher than it is for credit.
The 29% is pure usury.
Also I can't help but notice that techcrunch is basically an advertising platform for pretty much anything YC funded.
It's like if you get funded, you get something that floats, boom, you're on techcrunch.
I'd even say that a feature article on TC would help more than the original funding...
The pie-in-the-sky fantasy land of future low interest credit card leads [which is the exact opposite of the sort of offers such a site would get. The best would be predatory, secured credit-card type offers] and automatic...something...it just has the aroma of failure. It could as easily be a "lose weight today" website where you enter your desired weight and it tells you to eat less daily. Which...if such a site existed...I think we would all laugh at.
As for weight loss, there pretty much are sites like that. fitday.com, livestrong.com, etc. None of them are magic pills, just like ready for zero won't be. All sites like this require a user who is determined and willing to make the change. But these sites can help the person who really is looking to make that change and increase their chance at success.
They'll have to make it super easy to use though.
As an aside, while this demographic has less total buying power than that of responsible consumers, it's also a hell of a lot more likely to buy stuff. Possible net positive?
I think its popularity indicates a good opportunity.