Tuesday, February 12, 2008

Financial Advice for the Dark Days of February

My purpose in inaugurating this blog is to talk about personal finance. I have plenty to say, but so do you. Use whatever pseudonym you want, but talk truth about money. The more you contribute, the more you help yourself and others achieve financial sanity. And financial sanity is my goal for all of us, at a price we all can afford: Free.

Let me start by listing a few tips that might help you right away, in the next 30 days:

1. Spend less than you earn. I know what you're thinking. Of course we've all heard this before. But we need to hear it again. We need to put it at the top of every list of financial dos and don'ts. If the check hasn't arrived, then don't spend the money. It's that simple.

2. Save a part of any tax refund you're about to receive. It's high season for tax refunds, and for people who live hand-to-mouth. I've been preparing taxes pro bono for individuals whose yearly earnings are less than what you probably spent on a vacation last year. These people are hoping to buy a cheap car or a trailer, or rent an apartment, or just get back on their feet financially with whatever refund plus earned income credit or poverty level credit they receive. Even if that's your financial situation, take some small percentage of your refund and sock it away. I don't care if it's $5. Or $1. Save something. You'll feel a whole lot better if you do. And it can be the beginning of being good to yourself financially. A person who has $5 saved is not broke.

If your financial situation is better than that, take a larger percentage of the refund you receive and save it. Maybe you think you can't afford a savings account or checking account. Yes, you can. I'll research a batch and get back to you. You do the same and let me know what you learn. If there's a free savings account out there, then we'll find it and you should be contributing to it.

Maybe you think you need every dollar just to live. Doubtful. And strangely, from meeting these people who live on almost nothing, I now understand how that can be. If your income was only $2,000 in 2007, you surely received financial help from someone. Because there's no way you could pay for your own lodgings and food and everything else--even if you just sat in your room all year--on $2,000. (If you disagree with me, send me a detailed breakdown of how this is possible. Even ramen noodles add up.) So since you had help, you aren't likely to be living on the pitiful refund you're about to receive on that income, are you? Of course not. So take some of that refund and save it. I don't care where. Just try to put it where it can't be stolen from you, okay? If you get a $30 refund, save $2. That's 6%, far higher than the national savings rate. Feeling rich? Save $5.

Let's say you don't need every dollar to live. What's your excuse not to save? Have you actually thought through every expense you're sure is a necessity? Tell me your story and I'll look for some area where you can find the beginning of your savings plan.

3. Give something to charity. No, it's not all about you all the time. It's about other people too. No matter how little you have or how bad you feel about your financial situation, if you rouse yourself to give something, anything, you will feel better. I'm not going to get all touchy-feely about it, but if you've got something you do not need, including time on your hands because you don't have a job, then share with others. Help somebody else out. You will feel as if your days on this earth are not wasted, you will have contributed to society, and you might just meet someone with whom you make a significant connection. This could be a lead for a job, a beginning of a friendship, or whatever. My point is that as little as you may think you have, there is always something you can give to someone else.

4. Give something to yourself. In addition to saving actual cash money, you should also look for ways to improve your store of useful knowledge. This can be on any topic that interests you, but the point is to learn something new. You deserve to know something more relevant than what your high school classes taught you, and more important than the headlines you read on the gossip magazine covers at the grocery store checkout.

Now, don't tell me that you hate to read. I didn't say you had to read a book, although that's not a bad idea and our public libraries have thousands of books with plenty of useful knowledge in them. If you've got access to a TV or even a radio or a CD or tape player, you can find or borrow programs that are full of interesting facts about topics you might never have thought about before. And of course, there's the Internet and about a zillion sites and blogs and whatever also chock full of information. Enrich yourself by looking for something new. Don't know how to fix a blocked drain? Find out. Don't know how many countries there are in Africa? Find out. Have no idea how an indemnity medical plan works? Find out. Knowledge is power, it's said. Add to your knowledge and you will be adding to your power. Eventually, that's going to translate to more money in your pocket.

That's it for right now. I'll be back with more ideas as the mood strikes, and you do the same.


Ronald R said...

All very good points - and appropriate for this season and the very 'soft' Economy ahead.

I would add a point - having just finished a Re-Finance: By moving debt to a different location doesn't make it go away - it is just being carried in a different place; and with ReFi - it also costs you something as well.

maryturzillo said...

Excellent advice! I noticed that in Japan credit cards are not accepted in many restaurants and shops. This means less consumer debt, and it may account for the relatively good state of the Japanese economy. I realize that some feel that consumer spending, even to the point of most Americans being very much in debt, is good for the economy, but maybe it's better to have old-fashioned balance, as you suggest.

Eilis Flynn said...

The Japanese were slow to get into credit cards, but they're getting used to it. But mostly -- don't know if it's still the case -- cash was the way. I remember visiting my aunt in Tokyo years ago, and having someone come by to collect for utilities, and that was the way they did it. Can you imagine doing it that way in the US? Think of how some people avoid kids collecting for newspaper delivery!

A useful blog, Lily.

H. E. said...

Very good! And I suspect there will be a lot of interest in this blog given the current economic economic state of affairs.

I'm just naturally a tightwad. I've always just put tax refunds and other windfalls into the bank. To me, saving money is intrinsically pleasurable.

Good luck with this project!

Anonymous said...

Don't forget about recycling. Save money and save the earth.