I wish I could recall how I learned about this movie, but I heard it was a must-see indie film. Since my interest is in finance, and my family is following the “Total Money Makeover” plan to get out of debt and live life without it, I decided to take a look.

This independent documentary about the credit business knocked my socks off. It was amazing. I found it through the library, but it’s also available for purchase or via Netflix or Amazon video on Demand.

The film hit home in many ways–about how credit cards prey on people (in ways I’d never imagined) and about how people fall victim to various credit ploys. I’m not quite in the “all credit is evil” camp, because I choose to live without it, but certainly this painted some shocking pictures–including of one credit card company that was shredding checks upon receipt and then billing customers interest and late fees because their checks were lost in the mail.

It told the story of a woman who committed suicide after leading a double-life with a spending-addiction and of college students so maxed out on credit cards that they choose to end their lives over a $12,000 credit card balance.

After watching this film, I tracked down my high school civics teacher on Facebook and requested that he show this film to all of his students every year-I hope that he’ll consider if he hasn’t already. The stories of these college students, as told by their parents was heart-wrenching.

There’s a number of great guests on the documentary–from specialists in credit and bankruptcy statistics to Dave Ramsey himself, Jimmy Carter, and that guy from Lifestyles of the Rich and Famous. Debt collectors and agents are also interviewed. All together it was a well-rounded and informative view of the industry. “Maxed Out” was passionate and informative and energetic and earns four stars from me.

If I were to offer any criticism at all, it would be my most common criticism of indie films–that the volume is inconsistent throughout the film, leaving me holding on to the remote for dear life to keep it somewhere between too loud and too quiet.

It makes sense at first glance to pay off your credit cards at 10% with a home equity loan at 6 or 7 percent. Especially if you’re in really deep. And after all, you’ve got all that home equity just sitting there.

First off, does your house look like a piggy bank?

Second, a credit card has a higher interest rate becaues the debt is not secured. That means there’s no collatoral. If you don ‘t pay, they can’t come take something to pay back the debt, like with a home or auto loan. You’re paying the higher rate in exchange for the lender’s higher risk.

If you borrow against your home to pay off un-secured debt, your buying your way out of debt by putting your home at risk. YIKES!

In the event of a real estate collapse like this one, if you lost your job and had to sell your house, the sum of your home equity loan and mortgage balance could end up being worth more than your house can sell for. A term also called being “under water.”

Think about this if you’re being tempted by the lower rates on secured loans right now. Borrowing your way out debt doesn’t work. I heard Dave Ramsey on TV last night say that nobody has ever dug their way out of a deep hole. Makes sense to me. Hard work, cost cutting and serious budgeting is still the way to get out of debt.

Just my $.02 for today.

We’re halfway through our special month on financial litercay. Do you have topics that we should feature? I’ll do the research and the legwork and offer a completely unqualified but “if I were in that position” opinion, followed by my usual disclaimer that for financial advice you should seek out the paid advice of a qualified professional. But I always enjoy the learning experience!

Motley Fool provides excellent communities and message boards, and some affordable financial literacy classes (at least they have, I’m not sure if they’re still available).

I learned about Mint.com from Motley Fool.

They also have excellent tax-planning resources!

The site is free with a free membership but there’s a premium membership as well. I’ve never explored this, as I’ve found everything I’ve needed in their free pages.

My only word of caution is “beware the ads.” Their advertising borders on oppressive. It also frequently has a doomsday or get-rich-quick tone that I tire of. There is email “why the oil boom is coming SOON” and the site is covered with ads. Sometimes it can be hard to tell the content from the ads.

They also have so many Fool-branded affiliate relationships that I can’t always tell what all they’re endorsing, or what is going to get me to sign up for some fund or stock newsletter. I find myself only reading the first 1/2 of all their pages and never the sidebars because of the advertisements.

That said, the message boards are excellent resources, as are their tip articles like “60 seconds to get out of debt.”

If you’re new to personal finance or trying to learn something new–check them out, but beware the ads–here there by dragons.

Here’s a brief list of what we’ve done so far, and where it’s getting us. Remember, my layoff was December 7th, and today is April 2nd.

• Called all lenders and negotiated lower interest rates. Followed up by shredding all credit cards. Value: Priceless!
• Learned to cost-cut around the house: home-made laundry detergent. Saves $7/mo.
• Budget and track all expenses with Mint.com.
• Renegotiated and repriced insurance, dropped the gap coverage on our paid-off/high-mileage cars. Saves $4/mo.
• Used the library more. Estimated savings $20/mo
• Developed passive income streams (adding advertising on this web site and others, as well as Lending Club interest). Earns $1.10/mo.
• Rolled-over my fee-intensive 401K into a more affordable IRA Savings TBD
• Found tax advantages to starting my mobile-notary and freelance writing business.
• “Re bundled” our cable-TV package to the same service and same company at a lower introductory price. Saves $25/mo.
• Received our tax refund and paid off an adoption loan ($150/mo, a credit card $100/mo and a student loan $110/mo). We have just one credit card left. Saves $360/mo in debt payments.
• Refinanced our 30-year fixed mortgage, and rolled in our home equity loan ($329/mo). We put both into a 15-year fixed mortgage and will be paying just $89 more than we were paying on our old mortgage payment. (We used Smarthippo.com to find a better rate). Saves $240 per month and 15 years off the life of our mortgage.
• Testing out some meat-free recipes for dinner. Last night the kids loved eggplant parmesan (they thought it was pizza!). Saves $24/mo.
• Renegotiated cell-phone plan (due to new business). Saves $100/mo.
• The layoff reduced our household’s commuting cost. Saves $200/mo in fuel.

  These tricks save us $981.10 per month, but we’ve noticed that now that all expenses are tracked, our household expenses have been reduced by about $1300 per month.

Here’s a few things that we’re not doing.

• Working more than 45-50 hours per week.
• Missing out on time with our kids.
• Cutting our daughter’s preschool (we may do this to ‘snowball’ an extra $660 per month, but she’s having so much fun, we’re having her stay for now).
• Clipping coupons.
• Stuffing envelopes or participating in “get rich quick schemes” and “pyramid sales.”

Our house won’t be underwater, and we’ll still have plenty of equity. Also, we’ll be building equity like crazy, with more than half of our monthly payment landing in equity–not interest.

One surprise in this process was that so many of the companies we talked to wouldn’t recommend their mortgage accelerator program–because it was administered by another company and you had to pay a fee to enroll, essentialy the other company works like a payday lender and loans the mortgage the difference between the two payments. We searched out the right accelerator program with the same zeal that we searched out interest rates.

Another interesting surprise was that because of our recent debt-busting efforts (two credit cards and two vehicles and an adoption loan paid off) we were able to qualify for our refinance based ONLY on my husabnd’s income. This we’re told was because of our excellent credit scores and our low debt-to-income ratio. The mortgage consultant said adding the verification process of my self-employment income wouldn’t get us a lower rate as we already qualified for the lowest available rate. Saves us a lot of headache, and provides a lot of peace of mind.

Lending Club is a peer to peer lending platform, where investors like me can put out little loans to others (lots of little loans from investors makes one large loan to a borrower). I’ve bought four loans at $25 each, and they’re doing quite well. I earn interest on them every day and it’s fun to take a look at the interest accruing. I’m just one month in to my investment and I’ve already earned $1.18. More principal payments are due in the next week or two, so I should be getting a little more income this way. I’m helping someone else out (I think all of the loans I purchased are debt-consolidation loans), and I’m making a little residual income.

It’s fun to browse through the borrowers and choose the person you’re willing to fund (you can ask questions if you want to know exactly how they’re planning to pay you back!). Remember, these are loans, just like if you were to spot me a $20 for lunch. There’s always the risk that the borrower won’t repay, but unlike loaning a friend a few bucks for lunch, Lending Club has an excellent debt-collection team, so you can be assured they’ll track your borrowers down for you. Also, they’re invested in their loans too–so A: they think it’s a good investment and B: They’re on the hook as much as you if the loan goes sour.

In a further vote of confidence, Lending Club announced this morning that they’ve just received their 2nd round of VC funding, which is great news! They’ve just received another $12million in capital to keep up their growth.

Here’s a cute video about how it works:

I’m working on an article for the Prosper Lending Review, which profiles a financial startup called SmartHippo Don’t confuse this with SmartyPig, another brilliant-banking-mammal.

SmartHippo.com does for mortgage shopping what Travelocity does for vacation planning. This clever Web site allows banks to post their mortgage rates, but also crawls the web for rates. Finally, it lets users add the rates that they got–and also invites feedback and comments on lenders. Talk about transparency!

I took it for a test drive this week and it helped me come to some decisions regarding if we refinance our condo or not. Here’s what I found helpful:
First, it allowed me to “window shop” mortgages anonymously. This means your FICO score won’t be pinged by a prospective lender.

Second, once I entered my info (Refi, what the property is worth, what amount to refi and what loan term I want) it spat back dozens of very attractive options. In order to sort them I had two handy little slider tools that allowed me to narrow my closing costs range and my interest rate range to what looked attractive to me.

In my mental calculations of if I should refinance or not, I’d underestimated closing costs by a lot. Until I can get a rate .25% lower than what I was seeing this week, I’m going to stay put. However, SmartHippo saved me the FICO inquiry for later–when I decide if I want to sell my condo or refinance it into a shorter-term-loan.

I’m making a note on my calendar to visit SmartHippo once a month for a while and keep an eye out for that slightly-better rate. I hope you’ll give it a try.

If you want to follow SmartHippo news, they’re on Twitter as @SmartHippo.
If you want my latest info and updates, I’m on Twitter as @Jessc098.

I suggested, why not attack his mortgage from both ends? Rob and I have been doing this as we’ve been able. Now that we’re a few years into our mortgage, it’s a little harder to do, but we’ve definetly seen a substantial difference and saved a lot of money. I suggest that if you’ve got a little extra cash, your house is a good place to store up some equity and bust that debt a little sooner.

Here’s how you do it:

Picture a taper candle laying on its side. The wax is your debt. Now, light both ends and watch it burn. In year 15, you’ll be mortgage-debt free.

Each month you get a mortgage statement and it’s usually broken out between principal and interest, and escrow and sometimes Private Mortgage Insurance (PMI).
All you have to do is double the amount of principal paid. You usually have to write this specifically, or even a 2nd check if this isn’t the option (with the memo: apply to principal), otherwise they’ll allocate it to escrow.

As an example, our first year in our house the mortgage payment was about $1,150 per month, with just $150 going towards principal, another $150 going to PMI. PMI doesn’t benefit us–it just protects our lender–but we still had to pay it until we prooved credit-worthy and built up some equity in our home, either with cash or real estate appreciation.

Every month we paid our mortgage payment and an additional $150 or so on the principal balance. This essentially erased the current payment, and the last payment in 30 years. The next month it shortened the term of our loan also by two months. Add up that $150 multiplied by 30 years of compound interest at 4.5% and you’ll see we’ve made some substantial savings with a very small investment!

Because you’re erasing interest, your principal amounts will go up each month and your interest will go down. The earlier you are in your loan, the easier this system will be.

One or two years into following this system (or three years after you start your loan) you should call your lender and see if they’ll let you drop your PMI. We paid $300 for an appraisal and were allowed to drop our PMI at 2 years. If after dropping PMI, you also put the PMI also towards your principal (3 principal payments per month), you’ll be “in the money” in no time at all!

Side note: if you count on mortgage interest as being a great big tax-deduction for you, this may not help you–remember, it reduces the amount of interest. I personally would rather have cash than a tax deduction anyday, but talk to a financial professional if this may drastically affect your personal finances.

Just my $.02 for today. I hope it helps you out. It’s sure saved us a bundle.

One of the things I’ve decided to tackle is households’ financial situation. This was especially critical now in the face of my less-than-reliable income and a new business startup. As an “under-30” family of four, we have some debt. A couple of college educations, a mortgage, two adoptions that zapped our finances but filled our hearts. We were not in financial peril, but we sure could have been uncomfortable if we had not been paying attention when the layoff hit.

The surprise in this project was how we were able to cut our household expenditures by one-third without really trying (or even noticing, for that matter).

Armed with this new information (and cash as a result!), we rushed forth and started getting out of debt. Using only free resources from the Web and strict budgeting, we’ve paid off two of three credit cards, one adoption loan and all of the college loan. Woot! Not bad for three months, huh?

Recognizing that not everyone was so lucky as I to be laid off, I thought I’d share some time-saving and free tips to financial freedom. No scams, no catches, no hidden spam-engine. And you don’t have to download my free e-book. I don’t even have one.

Have fun, save money, spend less, retire early, and get out of debt. It’s working for us. Unless you email me, you’ll never even hear from me again. (Unless we’re friends or family of course). For the sake of easy reading, I’m breaking this into several posts. Follow the hyperlinks for a free and easy journey to financial freedom.

But please do me one favor. If you like this list, please pass it on.

Now, my family’s first five free steps to financial freedom.
1. Expense tracking
2. Budgeting/Cost cutting
3. Saving
4. Alternative Investements
5. Paying down debt (fast!)