Thursday, December 24, 2009

I'm Having a Semi-Stressed Christmas, How About You?

First of all, I was baptized and raised as a Christian, so I call it Christmas and always will think of it as Christmas. It’s not “the holidays” to me. It’s the season for Christmas lights and Christmas decorations and a Christmas tree and even some Christmas carols. Including “Adeste Fideles.” That’s my personal heritage.

However, more and more, Christmas is simply a time of year when I try to do the minimum that is socially acceptable, and bag the rest of it. Our family situation is that none of us gives gifts anymore. Lack of vast amounts of money to waste, lack of lots of young children who hope for presents, and also, lack of false pride. I am proud to say that my family members (and friends) don’t try to front with each other, or pressure each other into a spiral of unwise spending. Some of us give a gift or two informally, but these are all modest (under $15) and casually delivered at random moments. A book, a calendar, that sort of thing. There is no more presents-under-the-tree ceremony. I’ll miss it. I was the last holdout, for years carefully shopping and then going into orgies of wrapping. But no more. I didn’t buy any gift wrap in 2009 and I’ve got plenty left from prior years. Only there’s nothing to wrap. It’s over, and I’m not fighting reality.

My major stress originates with the traditional holiday baking. I’m still baking cookies and pies and tarts (yes, of course I make all these from scratch). But it’s a struggle against reality. Everybody I know is dieting or else does not want to eat officially unhealthy foods (white flour, white and brown sugar, real butter). So who is there left to bake for? And as for ingredients, I’ve tried whole wheat flour in several incarnations and it makes a lousy cookie. I’ve experimented with cutting sugar and fats, replacing them with nothing or with applesauce or whatever, and that produces a lousy brownie with the heft of a chiffon cake. (Never heard of a chiffon cake? Too bad you missed the 1950s. They had desserts then. With frosting.) And there is the hassle of replacing sugar with supposedly safe substitutes only to discover that there isn’t a substitute that someone on the Web isn’t claiming is toxic. And don’t get me started on baking with substitutes for wheat flour. There’s not much joy left in this traditional Christmas endeavor except the physical pleasure of handling the ingredients and making something edible out of them. Which no one wants to eat. In the next few years, I may finally stop baking entirely.

But even though I am not buying Christmas presents, and the baking is tailing off, I am still spending money regardless of my cash flow, and that of course causes stress. I bought a new lawn tractor this week. My 20-year-old Craftsman tractor was pronounced dead at last. So now I have a new one. Brakes that work! An engine that doesn’t smoke! A mower deck that doesn’t drag on the ground! This winter will be fun. I use the tractor all season to haul wood, so that’s why I bought it now.

Unfortunately, a lawn tractor is expensive. Start at $1,000 and go up, way up. I didn’t. Go up, that is. My John Deere dreams are fated to remain fantasies, I fear. I went for low-end practical and no frills. And yet another credit card balance transfer in my future again, I expect. This is not my ideal way of paying for major purchases, but in this economy, considering my cash flow (and those still locked-up CDs I won’t be able to and am not willing to touch for months) it is practical. What I find humorous about it this time around is that Sears was not offering a six-month or one-year payment plan as they often do, and which their employees told me is offered through Citibank. So when I get the bill and I balance transfer this to one of my credit cards, Citibank won’t be in the running. (Because it would be in effect a Citi-to-Citi transfer, and they don’t allow them.) Citi’s rivals will get my balance transfer fee. It would have been smarter for Citibank to offer that six-month deal directly through Sears, but huge corporations aren’t very flexible even when there is an easy profit to be made. They are massive and I am not, and they won’t make any adjustments for me.

That’s why I am content to work this system in my favor as I can, and will feel no sadness or guilt when our government finally, years from now, allows Citibank and its ilk to die. Or Sears goes the way of other classic American corporations. Compare them to ocean liners if you will. Eventually too big to move with agility. Hard to slow down or turn around. A dying breed, or rather, a product that was once cutting edge and now is merely specialized (cruise ships, oil tankers, and container ships). Even though I still do use credit, I can see our mammoth credit systems coming to a natural end of their cycle and with it their ruthless hegemony over us. What comes next I can’t guess. But something will, and I won’t shed a single tear when it happens.

I’m much more likely to sigh over not baking apple pies anymore.

Thursday, December 3, 2009

The Money Rehab Spa

Wouldn't it be great? You'd sign up for a stay at the money rehab spa, and trainers would teach you how to deal with your money. All aspects. You'd get lessons on making your paycheck last. Lessons on not letting your cash drain away on frivolous daily extras. Lessons on how to properly use ATMs so you still have the rent money by the end of the month.

They'd bring in experts to explain exactly how behavioral psychologists play on your feelings to get you to buy bigger houses, cars, and wardrobes than you need. Fashion professionals would let you in on the secrets behind making your clothes look "so last year." Electronics nerds would teach you how not to get suckered into constantly upgrading your equipment.

And then you'd role play so you'd gain the confidence to go shopping for the things you need without getting ambushed by tempting marketing tricks. You'd also practice telling relatives that you won’t attend their ruinously expensive destination weddings, as well as turning down other social occasions designed to part you from a huge chunk of your money, like rent parties or showers where you pay for everything. You'd get tips on how to politely say no to your best friend's network marketing sales pitch or wonderful stock market tip--without wrecking the friendship. As a bonus, you'd be coached to negotiate buying a car and getting a fair price.

After a long day of learning all the dos and don'ts about your money, you'd relax in the evening secure in the knowledge that no bill collectors would call, no shifty friends or relatives would press you to loan them money, and you would be totally safe from any retail marketing ploys. Heaven!

The next day, you'd get up and do more of the same, until it becomes second nature to save your money, spend it wisely, and resist pressures by others to part with it foolishly. It all sounds so wonderful.

And nonexistent, alas. We don’t have money rehab spas. But we should. If you would like to be in control of your finances instead of feeling confused, helpless, or under attack, you can create your own personal version of a money rehab spa. Start by determining a time frame between one week and one month. Experts say it takes a few weeks to learn a new habit. Internet challenges often run for a month, and you might want to find some online buddies to whom you can report your successes and insights during your home rehab spa stay. Or get them to join you. Or you could start a journal or blog. You probably won’t have the luxury of getting away from your usual work or family responsibilities, but you can decide that all of your slender spare time for two weeks or even a month will go to your money rehab.

Next, outline your rehab program and gather your supporting materials. Because I am a reader and a writer, naturally I am going to suggest that you borrow a stack of books on personal finance from your local library or your friends. Then there are the television and radio programs that address personal finance issues. Record a batch. If you are lucky enough to have some regular programming on this topic, consider writing it into your rehab plan: “Saturday night, watch Suze Orman,” for instance, or “Monday night, watch Hoarders.” If crashing the Internet looking for frugal websites and money tips sounds more appealing, then put that on the agenda instead. Not every resource you collect for your money rehab will speak to you. Some will be disappointing, or concentrate on people whose circumstances are too different. That’s why it’s best to stockpile more than you can get through in the time you have set aside. If a resource annoys you, you can drop it and go on to the next.

Then you begin. Even if you only have one hour in a day to spare for your money rehab, put that hour to studying personal finance in whatever medium works best for you. Vary them. Read a chapter of a book in the morning, grab a few minutes of a television show late in the evening, and snatch some Internet time at lunch. If you can catch a few more minutes to listen or read during the day, so much the better.

Advice is not one-size-fits-all (the late great Erma Bombeck said that was the biggest lie ever invented). As you review the many excellent attempts to teach you about personal finance, slowly but surely you will gain a sense of what changes might fit your specific circumstances. There is no one right way to run your own personal economy. But there is a general direction in which you want to head, and that direction is financial control. This does not mean that you will never have any money worries; life happens. But you will have gained valuable knowledge and tools to help you chart your own course through the often confusing mishmash that is the American financial system.

Sadly, your self-made money rehab spa won’t have mud baths and massages. Even so, you will emerge from your self-made spa experience invigorated, better able to cope, and with luck, on the road to shaking your addiction to random spending. And that’s what rehab is all about, isn’t it? Breaking addictions and showing people a better way to live.

Spa time, anyone?

Tuesday, November 24, 2009

Being a Health-care Advocate is a Hellish Job

Recently, I got pulled into being a health-care advocate for a relative. I’ve done it before, and I know that I can succeed at it. But it’s tremendously time-consuming plus it requires loads of psychic energy. That’s why I haven’t posted about it until today. It started with a phone call about some ominous symptoms, casually described. It took a few more phone calls to determine just how ominous the symptoms were. That was when I went into health advocate mode.

First, to locate the right doctor. Numerous calls to a prestigious medical center, but no assurances that the right doctor was there with the right specialty. Then, more calls to the billing department to determine what, if anything, it would do for a patient who has no health insurance. Finally, a price quote that left me gasping—and that was strictly for the initial examination. I was told by a helpful person that once the patient had been rejected by state Medicaid, the medical center would consider giving some kind of discount. But meanwhile, the most eminent doctor, recruited after a worldwide search, was still in visa limbo. And it would take at least three months to be rejected by Medicaid.

We did not have time. Another doctor at the medical center couldn’t see my relative for several months. No good.

I went back to doctors we had seen 20 years ago, before we had graduated to the eminent medical center. The generalist still recommended the same specialist. The specialist could see my relative immediately. But my relative would be treated as a new patient, and there was no upper limit on how much would be charged at the initial examination. My relative could not even get in to see the doctor without authorizing a credit card payment in advance.

Did I mention that I don’t live anywhere near this relative? That the doctor’s office would not take my credit card over the phone to pay for the visit? That my relative might not have enough funds to pay for that visit? And every group of phone calls I made to doctors’ offices had to be followed up with another call to consult with my relative?

The appointment was made, and the doctor relieved everyone with a relatively benign diagnosis, consisting mostly of “WTF” and “looks okay, but strange, so go see this other specialist.”

Then the office told my relative the charge was $1,100, but their credit card machine was down that day, and so my relative would not be charged. Instead, a bill would be mailed. I called later that day and heard the same thing from the office, which again refused to take my own credit card information, saying they couldn’t be responsible for it.

A few days later, as I was beginning to make the next round of phone calls to try to determine the costs of the unique exam the other specialist was to give, my relative received what looked like a bill for $736. Huh? A discounted charge, perhaps? When my spouse saw the piece of paper, he immediately recognized it as a credit card payment receipt. Despite what they had told my relative, and told me later, the doctor’s office had gone ahead and done the credit card payment after all.

So it was back to calling the first doctor’s office, to find out what had happened. But no, I had to call the billing office. Did that. The billing person handling that doctor was gone for the day. Next day, out that day. Next day, not the right person after all. I must call the office manager at the doctor’s office. The office manager was busy. The office manager would call me back. And so on. Finally, we had our chat, and the office manager promised to look into the billing. Turned out that $736 was a mistaken amount charged accord to a four-years-out-of-date billing schedule. It wasn’t a discount on purpose. But the doctor’s office had accepted that amount as full payment. Any further discount would have to be discussed directly with the doctor. At that point, I decided that a 33% discount was good enough. Especially because it had already been paid. The time to argue that you don’t have the money to pay a medical bill is before you pay it.

Meanwhile, I had put in numerous calls to both offices to determine the correct name of the exam to be done by the second doctor, its likely price, and to ask for a discount in advance. To my very great astonishment, the second specialist agreed to take about one-tenth of the usual charge, a mere $75 for what usually cost $700. Fist in the air for a big win. That win only took about six phone calls over several days.

We’ve already done the pro forma application to Medicaid, including a depressing personal interview, and have been told that my relative will likely be rejected. So when the eminent foreign doctor finally gets that visa, we can go back to the prestigious medical center, where we’ll be lucky if the doctor does not want to re-run all the same emergency tests just taken. Hopefully, by then we can get a discount.

There is more to this story, but I don’t imagine that this kind of tale makes particularly entertaining reading. This is what medical advocating is all about. Endless phone calls. Endless quests for information, for recommendations, for discounts, for getting strangers to see your side of a difficult situation and cut you a break. Wouldn’t universal health care be a lot easier? Yes. Because then, the people who get paid to do medical billing do all the work. Not the patients or their advocates.

Sunday, October 18, 2009

Why You Never Bought My Personal Finance Book

Five years ago, I wrote a book on personal finance. You haven’t seen it at the stores? You didn’t buy a copy to support me? No prob. I never bothered to send it to an agent, let alone a publisher.

Do you know why? Because, silly me, I thought that my adventures in credit card debt would not be of interest to most people, because I did not resolve them in the conventional manner (getting a second job, contracting with a credit card counseling company, etc.). What loosened the grip of the credit card companies was a deus ex machina: a big fat wad of unexpected cash that arrived through a piece of extreme good luck (which was the result of hard work and sheer talent, but that’s another tale).

I came to some striking conclusions while writing my book. Chief among them was that we should never have bought our first house. Daringly, I concluded that most people’s money problems (if not related to the obscene costs of health care) could be solved by downsizing their lifestyles. And the most effective way to do that would be to sell the house and move into a cheaper one.

Really. I wrote this five years ago, as the real estate bubble was near its zenith. Sell the big house, get a smaller house, and everything else gets cheaper, and you can breathe. Am I prescient or what? Yes, I am prescient.

Last night I was reading a money book written in the middle 1990s. Ordinarily I would not bother. There’s hardly any point in reading a book about personal finance that does not take note of the amazing crash of our economic system last year. But this book was by Andrew Tobias, a writer I’ve always liked, so I was willing to read it. How dated it already seems, like a trip back in time. What was true then is not true now. Both for him and for me. Except for his basic message about making safe investments versus taking stupid risks.

So I am a little more at peace with the thought that I missed the boat with my personal finance book manuscript. In 2004, no one would have listened; they were firmly in the grip of maxing out all possible legal and shady sources of credit. And by now, 2009, everybody knows better. They don’t need me to tell them what to do. Or do they?

I still hear of people trying to game the system and buy housing with nothing down, or maybe only a 3% down payment. If that’s all the cash you can lay hands on, you should not be buying a home. You should be renting somewhere cheap and saving up your cash. And you know it. But you aren’t listening, are you? Please, listen. Being broke for a decade in order to eventually make a handsome capital gain is a lousy way to live. You can have a much nicer life if you live within your means. Take it from one who has lived it both ways: not being in nasty debt is better. Having a few dollars to play with is a lot more pleasant than always worrying where the money for the next payment is coming from.

Right now, a lot of us are experiencing the double catastrophe of reduced income because of unemployment and the inability to downsize our lives by selling our homes. My best answers to deal with this kind of crisis are:

1. Get more income; everyone in the family who can work should. In the Depression, kids got jobs to help put food on the table. They can do so now, too. Pool all family income to buy necessities; don’t treat the income of a dependent child (even a returned college graduate) as merely their personal money. It’s okay for each member to get an allowance according to their contributions, though.

2. Consider doubling up with other family members or friends in one house, to cut overhead. We’re not used to this anymore, but it was common years ago, and it works. Yes, there can be problems, but you can draw up leases and make sure that responsibilities are shared and rent is paid.

3. Sell as many possessions as possible to generate cash. Do not fret that you bought these things for X dollars and can only sell them for Y dollars. That is a constant in life.

4. Do not buy more possessions. Most of us have far more than we need. If you have a working washing machine, you don’t need two weeks’ worth of clothes. (The only exception is if you work in an office and have to front.) Similarly with electronics. You’re going to be working for money or to keep your home going; how much time will you have for toys anyway?

5. Follow anybody’s and everybody’s economizing tips that you can bear to. Examine your feelings about the ones that stick in your craw. Can you change your mind about them? Try it and find out.

And that’s it. I wonder if five or ten years from now these suggestions will feel completely outdated? I hope not. Some ways of approaching life should never go out of style: Spend less than you earn. Don’t waste. Everybody works for the common family goal. If you are single, that family goal means your personal goal to be financially secure.

Maybe I’ll write a book about this someday.

Wednesday, October 14, 2009

Sunk Cost vs. Pricing Tough Love

“Sunk cost” relates to “throwing good money after bad.” We’ve invested in a course of action and it has not paid off, but do we stop? No. We keep doing it. “In for a penny, in for a pound” is another adage that demonstrates how people feel and act. When we commit to something, we do it wholeheartedly. That’s a good trait. But when we are doggedly loyal to our mistakes, such commitment is not to our advantage.

A lot of people still have not fully accepted the reality that their houses are not worth what they paid for them only a few years ago. Many people are trying to sell, either because they are overextended financially, or they have lost their jobs, or they have changed their plan to live in that house and want to move elsewhere. Having good reasons to sell is fine, but it does not make the market any better. It does not mean you will break even on the investment, let alone make a profit.

How do we change our stubborn feelings that this item was worth X yesterday and still should be worth X today, even when everything around us says it is not? One way is to gather lots of information. If you’re planning to sell your house, look at the MLS, the multiple listings of homes for sale, and see what the sale prices are for homes in your neighborhood with and without your amenities. And then forget the fact that you like your home better. A buyer might not care about your wallpaper or your granite, and instead will consider your distance from a busy street, or whether you have a fenced yard as more significant. That’s why the next step is a talk with a real estate agent who knows your area and can tell you what the final sales prices were nearby. Real estate agents know what the average sales prices are, regardless of personal style, and you’d be wise to heed their estimates.

(By the way, some people think that they can break even by selling their homes without paying an agent. This is usually a mistake, because your house does not get on the MLS, and many buyers will not deal directly with a seller. You always want the biggest pool of potential buyers, not just the ones who happen to drive down your street and see your homemade sign.)

If you want to sell personal possessions on eBay, Craigslist, through a classified ad, or at a yard sale, check out the prices other people assign to similar items. And what they sold for, if they sold at all. Then, think about what it is worth to you to be rid of your clutter or that clunky old car. Does it really matter what you paid for it, if keeping it means that you must keep paying for it? It shouldn’t. And yes, you bought that lamp for $50, but nobody is going to buy your used lamp for $50; you need to remember that possessions depreciate. Too many of us are paying for storage of possessions that aren’t worth the monthly rent. Purge them.

I recognize that it is hard to think realistically about our possessions. That’s why so many people lose out in the stock market. They buy too high, see the stock tumbling, and keep holding on in hopes of recouping their original investment. It does not work that way. Take the loss and go on to better prospects.

Thinking strategically is another way to deal with hard-to-swallow realities. If you and your family invested $100,000 in your college education, in a down economy you might be forced to take a job that only pays $10 an hour. A job that you could have had without all the years at school and all that tuition money. But if taking that job means the difference between being able to make ends meet and not, obviously, you take the job while looking for a better one. But don't just sign on for any old job. Try to pick the employment that also offers some advantage related to your preferred career. Pay attention to the business model of the company. Actively seek to learn on the job. Think of it as an internship, and you might produce less stomach bile during the months you have to hold on while still searching for something with more promise that relates to your career interests. And remember, many people have ended up with successful careers doing things they never trained for in school.

Effective sales people know that selling is compromise. Each side has to give up something and must get something. In a depressed market, what you might give up is a high dollar sales price for your house or other possessions, or a high dollar income that is consonant with your training and experience. But what you’d get is some peace of mind, and often that is well worth the compromise. And your feelings about sunk cost won't sink you.

Monday, September 28, 2009

We the Cattle

It used to be that the study of man’s foibles was the province of philosophers and religious theorists. By and large, those people wanted to understand us to improve our lot, whether on earth or in heaven. Now, we are the constant subjects of randomized double blind experiments with control groups. Of surveys. Or marketing data collection. And sociologists and behavioral economists are delving deep into the psychology of our behavior, but not out of concern for our souls, or even for the general state of mankind. They want to know what we do and why so they can tell professionals of all kinds how to deal with us. Manipulate us. Gain our support. Con us into buying stuff we shouldn’t, whether it’s political nonsense like death panels or physical garbage-to-be like huge entertainment devices.

I’ve recently been reading a book on public administration, which is a fancy term for the nuts and bolts of government. Because I have led my life on the creative, artistic side, I was surprised to learn just how codified and studied are all the behaviors that go into the running of our systems, whether public or private. And right along with that is the constant study of we the people, since we are either the clients or the customers of such organizations. It’s not enough that every bit of our buying habits that can be pulled from store discount/loyalty programs is marketed in hopes of piercing the truth of our grocery buying habits. It’s that today there is a specialty within economics that is all about every aspect of our behavior.

This idea can give you the creeps. Malcolm Gladwell has made the study of people and their snap judgments into a bestselling book, Blink, which is fascinating reading. He tries to come off like a scientist, and technically perhaps he is. But he undertook all those studies for commercial clients who wanted to sell us stuff.

Which leads me back to the real life of people who act without any self-consciousness that they are following a herd mentality—other than that they want to be fashionable, which is to be in the herd, after all. To be like the others. These people begin to ache to own iPhones and plasma TVs and blu-ray because well-educated marketers have used all their behavioral data to shape the hype. Which then enmeshes us in an ever-escalating series of created (rather than innate) desires, most of which are for ephemeral crap. The televisions of yesterday, which still operate, cannot even be given away today—despite the fact that anyone with cable can hook them up easily and receive all the channels with no problems. Why? Because thousands, if not millions of us have decided to “upgrade” our televisions. Without marketing, we wouldn’t be thinking this at all. We are treated as cattle to be herded first this way and then that. And without deliberate marketing, no one would be wasting a moment on mythical death panels, either. Someone is selling and deliberately pushing our emotional buttons to make us buy.

And the kicker in all this is that we, the cattle, get blamed for following what others have pushed upon us. The media says we spend too much, that it’s our fault that we buy too much. We listen and believe too much, too. Yet at the same time, the lingering recession is our fault because we’re spending too little. And we don’t listen and retrain ourselves into employees-to-be of towering technical skills. (Talk about satori!) Forget the fact that people aren’t spending because they don’t have jobs and don’t have money. Or that they can be very highly skilled professionals, but still be undercut by talent elsewhere on the globe because of the financial rate of exchange. After years of criticism because we as a nation don’t save, our savings rate has gone up dramatically. But we still get the tsk-tsks. Spend, cattle, spend. And tell me exactly why you buy, so I can pitch something new (and unnecessary) to you with deadly accuracy. And blame you in almost the same breath.

I don’t want to carry this cattle analogy to extremes, but herding people is a frightening concept. Yet, every day, some interest or other is trying to do exactly that.

Thursday, September 17, 2009

Craigslist Junkie

A month or so ago, we bought an expensive mattress and springs. Today on Craigslist, in the Free section, I have so far counted listings for three queen mattress sets, one twin set and one twin springs, and one unspecified set that is probably a full size. That’s a lot of free mattresses on a weekday, and the night is young.

The homemade pictures look okay. Out of five mattress sets, probably at least one is quite acceptable and has substantial life left in it. And these are just the free ones. Over in the Household section, somebody wants $750 for a king size mattress only. I don’t think he’ll get it, but you never know. Somebody else is selling a twin mattress, springs, and frame for $60. Now that’s more like it. Another person is selling a twin mattress only, for $25. The deals keep on coming.

Yes, I have become a Craigslist junkie. This is my latest Internet addiction, and it’s totally free. I check to see what people are selling and giving away. Luckily for me, I live so far from where all this personal retail activity is taking place that it is not practical for me to rush out and get one of these deals. Gas costs too much. But I can see what fun it would be to be a young man out to furnish a new apartment cheap with his buddies: All they need is a truck or van, some rope and old blankets, and their healthy young backs. They can totally get everything free. There are so many free couches and recliners that no self-respecting young person should even consider buying one. Free TVs. Free bedding. Free dishes and kitchen implements. Free everything. Makes me want to hop in the car and start collecting things.

There even are dirt cheap recycled wedding gifts floating around, in case one is invited to events. “Unopened, in original box” is a common theme in the descriptions. From the photos, it looks as if Mikasa, Lennox, and other well-known manufacturers are creating these items—overdone vases, serving bowls, large decorative platters, and more hideous stuff—just for the wedding gift crowd. Which apparently does not like them. So why buy one on Craigslist? Because they are decorative, they are giftlike, and you can get them at a fraction of retail. Just be careful to know the true retail price (after sales events and discounts) of these items. It often is substantially less than what the Craigslister claims. Also, a lot of glassware is described as crystal on Craigslist. Dream on, ignorant ones.

The real crystal and objects d’art in the Antiques and Collectibles sections do tempt me, and their prices are often substantial, though fair. But then I remember that I have nowhere to put anything new—first, I’d have to buy one of those handsome china cabinets that are also on the list. There’s a time in life for acquiring, and a time for reducing the load. Right now I am edging into the second period. The serious one, not mere de-cluttering but giving away or selling or otherwise getting rid of high-quality belongings. Downsizing for real. I’m not quite there yet. Meanwhile, I get a lot of fun out of seeing everyone else either at the beginning or at the end of the same cycle. The Recycle of Life, if you will.

Wednesday, August 26, 2009

It's All About the Coins

I performed that old familiar money ritual again. I opened my Superman bank (Motto: “Saving money is Powerful!”) and counted the coins. This is the ritual that so many of us find ourselves performing when our finances are suddenly uncomfortable. We check under the couch cushions, in the crevices of the car, and of course, we eye that huge bottle, jar, or actual pig-shaped container into which we usually throw all our change.

We put change in these banks for two reasons: 1. It is not cool to pay with exact change. Supposedly, only fussy old ladies do it, and no matter how fussy we secretly are, we don’t want to look fussy. We want to look cool and careless with money. 2. We formed the habit as children of keeping our extra cash in a container we could look at to see our wealth increasing, or shake to hear the lovely sound of coins clanging against each other. Reason #3 is a guy thing, but it’s actually just a subset of #1: Not wanting to ruin pants pockets fast by constantly loading them with change. Which cycles back to reason #1 again, because they sell change purses for men, those half-moon-shaped leather things that unfold with a little tray for your coins to be displayed. But supposedly, only fussy men, men who probably wear socks with sandals, carry those. Catch-22.

Anyway. A somewhat large, unexpected expense came up recently. (I should be expecting these by now, shouldn’t I? Didn’t I have an unexpected expense about a year ago?) Unfortunately, I find that cash is a bit tight this month (welcome to the club, right?), but I need to spend this money immediately. Even more unfortunately, I discovered that my rainy day savings, carefully laddered as the finance gurus have suggested, are months from being available without taking a major penalty hit. Ouch. When those CDs open, I’m going to change my strategy. Meanwhile, no way am I going to take a penalty to get my own money. I’d rather pay (less) to use someone else’s.

So I have been searching for the best option. Take money from an IRA? That adds to my taxable income for the year (and for some people would also mean an automatic 10% penalty), and I would rather not. Plus, anything I have invested in stocks, while certainly more liquid than a bank CD, I prefer to keep in the recovering market. It’s nice to see the values of stocks going up, but they aren’t back to where they were last year. No, I plan to leave my stocks alone.

Credit cards? Not the best time to be playing with them, but still, better than getting an unsecured bank loan at 15% or more. Or going through all the rigmarole to open a home equity line of credit, when there are penalties for not using at least $30,000 of it. That’s way too rich for my blood, and completely unnecessary when the issue is cash flow, not lack of funds. (Even as I write this, I have contracted to do a freelance gig that will more than pay for the loan I need to take out. It’s all a matter of timing.)

I was disappointed to learn that Chase has decided not to do those lovely, cheap wire transfer loans anymore such as I took out last year for a mere 3% fee and once before, entirely free. Everybody’s cash advances seemed to be at 19.99%. Yikes. I ended up examining the credit card statement junk inserts that arrive each month, comparing the language and the fine print on the offers accompanying “convenience checks” and “balance transfer checks.” And trying to figure out if they are one and the same thing. Which it turns out they are not. A convenience check, unless it is otherwise stated, is a regular cash advance, and thus is going to incur a cash advance finance charge rate (in this case, 19.99%) and might also include a transaction fee of several percent (in this case, 4%). Not what I want. Eventually, I found a good enough deal from Citi, a balance transfer with a 1.99% finance charge plus a 3% transaction fee. It also has the advantage of not involving me in excess transactions such as starting a new credit card account just to get a super low rate. I only need the loan for a very short term. (I could have tried a loan shark, but the rates wouldn’t be good. And I couldn’t do a payday loan, lousy as their rates are, because I am not an employee. I wouldn’t even consider a car title loan; again, lousy rates. Even as volatile as credit cards currently are, they remain less dicey than these choices.)

Imagine my surprise when, having gone through all my options, researched the details, and settled on a satisfactory plan, I suddenly found myself wanting to count the money in my Superman bank. I even got out my stash of coin wrappers and packaged up the coins. And then put them back in the bank. There is just something about cash. To the visceral child in me, coins represent cash even more strongly than bills do. Asking myself why, I realized that as a child, I seldom had any dollar bills in my possession. A nickel, dime, or quarter was exciting. On some level, this childhood valuation of money still has resonance, still connects to my financial life as an adult. And maybe I’m not alone. Maybe that is the real reason #3, why so many of us keep jars, bottles, pigs, and even superheroes filled with coins. Coins symbolize wealth. They have heft and character. They shine. They clang. I know that for some people it’s all about the Benjamins. But to me, it’s all about the coins.

Tuesday, August 11, 2009

More Money, Fewer Problems?

Why does every problem (mine and yours) seem really complicated only because there is no extra money to throw at it? Recently I heard someone say that throwing money at problems does not solve them. But I can readily think of at least half a dozen people whose lives would not seem to be messy failures if they just had more money.

For instance, the young man who lives with his grandmother, and is decried by older family members for not having a life, etc. All he needs is enough income to rent an apartment (or share one), and instantly, his status in the family will improve. He will no longer be viewed as a problem. Aunts and grandmothers will no longer call his mother and harangue her about him. And outside the family, his new independence will make him more attractive to others. Girls will date him. Boys will date him. Whatever. He might actually start to have a life.

Or what about the elderly single lady (and most elderly people are women, and most of them are single, because you men are fragile beings who die young) who never had much income, and now must live with other family members to pool meager resources? If she had more money coming in, she could have the dignity of her own home, or better respect in the shared home because she could stay there out of family togetherness, not dire need. And she could afford to go off on a vacation away from her family members, thus reducing the stress of litter-mates returning to a shared nest after a lifetime of making their own choices: Brillo versus S.O.S. Miracle Whip versus Hellmans’. Oreos versus Hydrox. You get the picture. There’s even the way the paper towels and toilet paper rolls are hung to bicker over. A bit more money, and they’d be able to laugh at their different tastes and habits.

It works similarly in other relationships, though perhaps not as tidily. The spouse who seems to constantly be buying new clothes would not be criticized at home if there was an obvious cause and effect of wearing new clothes to work and staying employed or getting promoted. My friend who keeps buying the latest little technology gadgets is forgiven if the tweets he generates land him a media deal. The person who contributes to a 401(k) even though she is in serious credit card debt would be told she has foresight—if only she wasn’t in debt. These are indirect benefits, sometimes long-term benefits, and when money is tight, personal choices and stylistic differences cause relationship friction. If there’s plenty of money, only control freaks still care.

And yet...we all know that most people claim they’d be well set if they just had a little more income. But studies show that when someone gets a raise in income, the tendency is to increase spending on all fronts. The person now earns more but owes more, too, whether in additional debt or in new obligations. So, according to the behavioral scientists, I’m dead wrong about money solving any problems. After all, the kid living in his grandmother’s basement needs to put down the video game controller and leave the house and find a job. Giving him the money to launch a future does not automatically give him the courage to live his life.

But I still am teased by the idea that with just a little more money, so many thorny relationship issues would be smoothed out.

Friday, July 31, 2009

A Good Time to Save for the Future

A friend just lost a job, and the spouse’s work hours also got cut to almost nothing. They worked at the same company. This is not exactly the best plan, to double up in such a manner, but initially, the one spouse used the job connections to bring the other spouse on board. So you can understand why they both worked at the same place.

Now what happens to them? I don’t know. They’re really hurting from the psychological blow, and they had just spent big money on a home improvement, thinking that their jobs were fine. They’ll have a couple of months of severance as a cushion, but then what? Can they find new jobs in this economy? Will they get rehired if their former employer’s situation improves? I hope they have family who can help. I think they do.

What about you? And me? I’m doing as much work as I can find. So far, my spouse has a job and we have no financial issues. But just in case, we’re selling some items to build up savings for our next vacation. (I know, it sounds obscene to talk of a vacation in the same breath as a double job loss. But our situations are different--today, at least.) Still, we are being cautious. Instead of charging the trip and planning to pay it off with future income, we’ll put the money in the bank in advance. And if between now and then we do lose our main source of income, well, at least our savings will be that much greater for having built them up.

Are we that perfect on all fronts? Of course not. We just bought a new mattress set and a car warranty insurance policy. Those put us thousands in the hole, even though both purchases are for the express purpose of being able to sleep better at night. They could take a year or more to pay off. Thus it would be nice to continue to have income so we can do exactly that. But if we don’t, will we be okay? Yes. Will we still have our current income a year from now? There’s no way of knowing.

Life’s like that. For a while now I have been aware that our current personal situation of financial peace is likely to be temporary. There will be a family crisis. Or we will have a crisis. Or both. Is there any way to avoid these possibilities? Nope.

So meanwhile, we save a large chunk of money regularly, and then we spend the rest. We are cautious about it, of course. We learned how not to fritter money away in a very hard school. Someone else is spending our national average for eating out or buying fast food meals. Someone else is buying our share of the national average for clothing, and shoes, and cars, just as for decades, someone else has been spending our share of the national average of liquor, cigarettes, and drugs. Are we alone in being savers and careful spenders? No. Plenty of Americans are saving these days. It’s fascinating that the U.S. has gone from a 0% savings rate to 7% in a mere matter of months. People are saving like crazy. They aren’t spending. That makes the economy bad, but it keeps them sleeping at night. Until a job loss, that is.

I like sleeping at night. Which is why I push myself to keep working hard every day, trying to create future income and bring in current revenue, too. I’m not going to let the future take care of itself. My spouse is the same way. That’s why, when we take our vacation, we will feel entitled to it; we’ll have earned it.

What are the rest of you doing? Every day I ask myself if I can or should do more. Are you asking yourself the same question? If there is anything you can do, from turning clutter into cash, to reducing waste and improving the comfort of your home, why not think about taking action? Not all contributions to your happy life need be in cash, after all. And if you create more peace, pleasure, and health through careful management of your current resources, you won’t necessarily need so much cash as you might imagine. Today is a good time to save for the future. Whatever the future turns out to be.

Monday, July 20, 2009

Collectors and Collections

A recent article about baby boomers who grew up playing with certain toys and now as adults feel entitled to expensive toys of a similar nature reminded me of the sad demise of each generation’s hobbies. Just as today’s middle-agers collected Star Trek toys as kids, so today’s nonagenarians as children collected first day airmail covers from all over the world. Back then, the airlines were beginning to establish the routes that exist today, and sometimes, such flights were fraught with dangers. Some of my mom’s airmail covers have scorch marks because the plane went down and most of the mail on it burned.

At one time, about when my mother was middle-aged, those airmail covers were worth a lot of money. The kids who had collected them or yearned for them were middle-aged themselves, and some of them had money to buy their childhood desires at last. I remember my mother selling a few Graf Zeppelin first day covers for hundreds of dollars. And I remember how angry she was that she needed the money and had to break up her collection. Now, at nearly 95, she is too far gone into the twilight of dementia to care. But the people who might have bought the rest of her collection with great enthusiasm are mostly dead. Or at the disposal point in their own lives.

Which got me thinking about my comic books. When people come to my house and see them, they always comment on how valuable my comics must be. I put them straight: I don’t have old Marvel comics. I have Superman DC comics, and most of them are in so-so shape. I read them over and over, or I bought them from other kids, or they were subscription copies that were mailed folded. In other words, these comics are pretty near worthless as collectibles. The good thing about it is that I can enjoy them with a clear conscience instead of feeling that I ought to sell them for big bucks right now.

My mother, who did not like parting with her Graf Zeppelin covers, did not sell her collection when it was worth the most money. She loved her collection and did not want to sell it for ten cents on the dollar to a dealer. And back then, that would have been her most likely option. Now, despite eBay, the value of airmail covers and stamps in general has plummeted. EBay and other online options make it easy for buyers to find sellers and for sellers to compete with each other. This forces prices down if there is more supply than demand. You can buy dozens of such covers for under $100, easily. And stamps, too. And old paper money. And old coins not made of precious metals.

In other words, collectibles have a bust and boom cycle based largely on who cares about them. True, some kids who have seen the recent Spider-Man movies might become deep fans and want the first issue of the comic in which he originally appeared, Amazing Fantasy 15. That comic, which sold on newsstands in 1962 for twelve cents, is currently worth many thousands of dollars. But the majority of the fans who care about that specific comic and want to own it are the ones who were kids when it came out, and who are nearing or at retirement age now. And most of them can only afford to buy an expensive comic (between $500 and $250,000 depending on condition) while they are still working.

So...what does this mean for you and your collectibles? Probably the same thing: that your generation will always value them, but once your generation starts retiring or dying off, the value will plummet because the demand versus the supply will slacken. If you want to get the most money from your collectibles, you have to sell them while they are still valuable.

Yes, it is true that some items will still have residual value as rarities, but remember that online auctions make rarity less likely. Any mass-produced collectible could be competing with thousands more just like it. I once knew a girl who kept the historic issue of Sports Illustrated that had Sammy Sosa on the cover because he broke the record for home runs. But millions of copies were printed, and millions of people kept that issue, thus making the eventual value of it very low indeed. If there are many sellers, it becomes a buyer’s market and prices go down.

There is a time in everyone’s life when they acquire, and rightly so. And there is a time when they should be letting go of things. If you have a large collection of Star Trek or Star Wars memorabilia, this could be the right time to sell most of it. And by the way, don’t be swayed by dealers who want you to part with whole sets. Keep and display just one representative item if that’s what you want to do. But don’t imagine that your collection will send your children to college, because it won’t. Most collections are of items that were produced in the millions. China and silver, too, as so many people have discovered, although with precious metals there is always the option of selling them by weight, with no regard to the artistry of the piece itself. Original works of art are a different story, since they are unique, but they too suffer the vagaries of fashion. If the artist or style of art is hot, you may get an enormous price for yours. If not, the final figure might be disappointing.

Another sad fact about selling collectibles is that unless you personally have the time and energy to sell your collectibles on an auction site, you will only receive the wholesale, dealer’s price for them. Depending on the market, that price could be as little as 10% of the current retail price. Yes, only 10%. If dealers in your kind of collectible all offer you around the same percentage, you know you won’t get a better cut no matter how many more dealers you contact. For many collectibles, 25-33% of the current retail value is considered very good. The cut is different with auction houses, but the principle is the same. The moment you decide not to be the retailer yourself, you lose the majority of the profit on the item because you have to assign it to the middleman who actually makes the sale.

People who resell their used books that are not collectibles already know this. The resale prices they get are extremely low. For a book that originally cost $5.99 at a bookstore, and might have been discounted 10% but then been subject to sales tax, the 17 cents a used bookstore will offer for it is about 3% of the original cost. Three percent! It might make more sense to give the book to a charity and claim the thrift store price as a tax deduction. It is bound to be higher than 17 cents per book. Can you do better on an auction site trying to sell a mass-produced book? No, not if you take into account your time and trouble to market each one individually.

Am I back to exploding the eBay myth? Yes. Although I know people who make good money selling collectibles on this or other auction sites, they are retired and have no other responsibilities. And eBay’s new rules have sent some of them scurrying to collectibles shows to sell their items directly to the public. But that’s a major devotion of time and personal effort. If the object is to get cash no matter how much time it takes, fine. But for most of us, that is not the preferred situation.

Much as we love our possessions, eventually, they must all be disposed of. The ideal is that they go to good homes, to people who will cherish them, either relatives or friends, or even strangers. The next best scenario is that they sell for huge prices, thus justifying the collector’s effort in originally obtaining and then storing them carefully for many years. But the sad reality for most of us is that the items we or our relatives prized simply go to the first dealer who offers a fair price. Or to the junk dealer. Or to the dumpster, if their value is not recognized or has been lost to the vagaries of time. This is what makes the television show, Antiques Roadshow so interesting. At any moment, some odd item that has been taking up space in an attic will be identified as worth a lot of money. Which the owner will not be able to sell it for, alas.

Tuesday, July 7, 2009

Stop Whining about Getting Organized

I don’t know about you, but I am tired of all the whining. People are whining everywhere, about everything. Legitimate beefs, such as lack of a job, lack of a home, lack of a spouse, lack of health care. And stupid complaints, which can be lumped as one big general whine about lacking a mommy to tidy up their messy lives for them.

Have I been overdosing on Clean House, the TV show that finds people who like to buy and hold onto cubic tons of worthless possessions, which they seem to throw up in the air and let lie where they drop, and then live amongst like pigs? Probably. I can (just barely) understand buying too much stuff. I will never understand tossing it about like a burglar and then sitting in the same room with it for years, never cleaning it up.

But it’s not just these crazy people who are addicted to buying and to lazing about who are getting on my nerves. It’s the other people, the smarter people, if you will. Only they don’t act smart. They keep telling me that all they need to do is get organized. They feel overwhelmed, they say. They are looking for a system that will finally help them address their messes. And even more annoying, they keep finding such systems, and claiming that everything will now change. But of course it doesn’t.

Just yesterday I read a NYTimes piece by Ron Lieber about how he had taken a financial health day and finished many of his undone financial tasks. He finally spent some serious time on a long laundry list of unfinished money-related chores. He even claims, as you can read if you follow the link, that he saved a couple of thousand dollars by this day of attention to his finances. But to my mind, he missed the boat completely.

Here’s where I’ll probably start sounding like Suze Orman. Her most potent message has always been to protect you and your loved ones from catastrophe. And this NYTimes reporter freely mentions that he does not have a will even though he has a very young child. He gives himself props for finally (during his day of financial attention) investigating a few lawyer choices to make a will. But he does not finish the day as a man who has a will. He finishes it by rewarding himself with more stuff. He uses up a gift card and buys (overpriced) socks. Great move, Ron. What if you die tomorrow, and your kid’s guardianship has to be determined by a court? Everything gets messy. For the same $15, Lieber could have bought a will via the Internet that would have assigned the guardianship of his child. A simple trip to his bank, and it would be notarized. Done. The kid is safe. But no, the man goes shopping for socks, even though the most important task of his financial day remains undone.

Of course I understand that a will is a complex document, but covering the basics should not be put off because you haven’t got a trust yet, or you’re not sure how to include your spouse’s interests, or whatever picky little details you’re indecisive about. Lieber can always write another will, after lengthy consultation with a high-priced attorney. But in his drive for perfection, he leaves the critical task undone, that of protecting his child.

And that’s the same as what happens with all the whiners who claim that if they could just find the right system to organize their stuff (and of course, the time to do it), all their issues would be resolved. No, they won’t be. It’s not organizing the chaos of your life that is important, it is separating the important from the unimportant. And then doing what is important.

Too many people don’t get this. Their lives feel empty so they fill their physical spaces with clutter, or they act out with addictions and crazy behavior. Which does not get the basic job done, of dealing with the important issues. So stop whining, will you? Look around and identify your most important tasks, the ones that affect the core of your life. And then do them.

Friday, July 3, 2009

The U.S. Debt is No Big Deal

I checked out someone’s blog today and ran across the idea of looking at the U.S. debt clock, which increases as fast as a clock moves in a cartoon. We’re supposed to be scared by this. But it’s all hooey.

The national debt is up. So what? Millions of people have lost jobs, and as a result, are paying no or lower taxes. Some businesses have shut, and are paying no taxes. Others are suffering very low sales, let alone profits, and as a result are paying very little in taxes, too. But when this whole foreclosure-fueled mess clears up, there will be more employment, thus more individuals paying higher taxes. And there will be increased consumerism, thus more companies paying higher taxes.

Isn’t this just going to get worse and worse? No. Why I am so confident? The stock market crumble is based on phony values of cheesy financial instruments finally falling apart. That means that certain of these instruments can eventually be determined to have zero value. It’s paper money; it gets assigned a value.

But the real estate bubble that popped has a big silver lining. “Real estate” is called that because it is based on land, on buildings, on items you can see and touch that have intrinsic value. And guess what? Even as we speak, the millions of people who have some extra money saved up are nosing around the many houses and condos and businesses for sale, looking for bargains. They will eventually buy all the real estate that isn’t totally cursed (such as, with a stream running through the basement and a freeway easement through the front yard). Even bad real estate will eventually be sold, too. Haven’t you ever driven or walked through a city where even the meanest little crooked lot has a building on it...with a business on the first floor and apartments upstairs? Of course you have. Even condemned, tumbledown houses get purchased, to be cleared away for new building.

Yes, overpriced real estate will eventually sell at bargain prices, and someone will take a financial loss on it. But as stupid as the banks have been about going ahead with foreclosures when they should have compromised (it always profits them more to keep the homeowner in the home), the foreclosed houses are selling. Some are even selling like hotcakes. Eventually, this new money in flow will get to individuals who used to have jobs, and they will work again. And then they can go shopping again. Maybe we won’t all be able to spend like drunken sailors anymore. But spending will increase. And then jobs will increase again. And then the tax money will pour into the U.S. government, and the national debt can be brought down.

So here’s the reality: All this country needs for the national debt to get paid down very quickly is more people with good jobs and more businesses making a profit. If we earn more money, we pay more taxes. Thus the national debt gets wiped out. End of story.

Wednesday, July 1, 2009

Limping Along when You Have No Money

Somebody I know does not earn enough money. Period. The ordinary expenses of month-to-month living add up to more than this person earns. Every single unexpected expense is a crisis. It’s a heck of a way to live. Been there, done that. I hope I never have to experience it firsthand again, but life is uncertain. I might be in this same fix myself . Again.

What did I learn from that experience that might help my friend, or might help you? Make the credit card payments on time. Always keep an eye out for a lower finance charge rate. Dispute immediately any erroneous or late charges; the company will usually remove or reduce them if you are an on-time payer. Keep extremely organized about what bills are coming in and what money is expected and on what day, so nothing is wasted and no bill due dates are missed. Ask for discounts whenever you buy anything; most store personnel are authorized to give you a 10 percent discount without a fuss, and some managers will do more. Always look for ways to cut unnecessary expenses, and be ruthless about your own personal extravagances. Your purpose is survival, after all.

Sell stuff you don’t need. If you have the time, be creative about finding ways to sell it. If not, just sell it and use the money to keep going. Buy stuff you need at yard sales or discount stores. But never go around such stores with a shopping cart. Trust me, you don’t need that much stuff, and it’s just too easy to toss in yet another bargain item if you’re pushing a huge cart. Never go shopping aimlessly; stay away from malls and other retail (or etail) establishments whose only purpose is to get you to spend. Of course go shopping for essentials with a list, and stick to the list. As for mall walking, find a new place to get some exercise, so you don’t expose yourself to constant retail temptation. The same goes for etail: Get an adblocker on your computer, so you don’t get distracted by all the temping ads on your favorite sites. Focus on not letting good marketing separate you from your money.

Maintain what you own. Wind up the garden hose and put it in its proper place. Mow the lawn promptly. Wash your windows. Change the oil on your car on schedule, and wash the car, too. That includes vacuuming the inside. Remove that pizza stain from your shirt. Iron your clothes. Change the sheets. Keep your living space clean and uncluttered. Establish a regular housecleaning routine and stick with it, or just make a point of checking on certain dirt indicators and dealing with them promptly. It’s depressing to be broke, look like a slob, and live in a dump. So don’t turn yourself or your space into a mess. Treat your possessions and yourself with respect.

Get more money. No, I’m not kidding. Find another job, a part-time thing, a fill-in for a few hours, do some freelance, or whatever. Being careful with your money, not buying what you don’t need, selling things you don’t need, and maintaining what you have all will help. But they will not solve the basic problem, that you do not earn enough money. The only solution to that is to earn more. Yes, for some people, being foreclosed and having to move to a much smaller place, plus having to sell off their stuff and then not being able to pay for expensive schools, clubs, or pampering services has meant that they in effect earn more. But until and unless you make such a drastic lifestyle change, one that reduces your day-to-day living expenses radically, the only real answer is to earn more money. You won’t do it sitting in front of a television or listening to an iPod or even wandering the net looking for entertainment. You have to make connections with other humans. Get out there and try. An amazing number of people simply don’t have the courage to ask others for work. Don’t be one of those people. Keep asking until you find the work that will finally allow you to live in dignity and with peace of mind.

Monday, June 29, 2009

Go to College

My mother told me that back in the Depression, the boys who usually quit high school without graduating to go work in the steel mills of Chicago got the word from the mills to stay in school. Their fathers were having a tough enough time holding onto their jobs, and there was no room for newcomers. So a generation of boys who might have ended their education with the 10th grade graduated from high school instead. Thus paving the way, once military service was over, for that same generation of boys to go to college on Uncle Sam’s nickel, and move up in the world to white-collar work. Some of them undoubtedly ended up running the very factories in which their fathers had spent their whole lives laboring.

Today, a lot of people question whether bothering with college is worth the effort, since so many recent graduates are not finding wonderful, high-paying jobs the moment they graduate. (Not that this is unusual. That was the situation when I graduated from college, too. Every job I applied for got thousands of resumes. Still, eventually, I found interesting, well-paid work that related to my degree.) Right now, many more college graduates are being let go from good jobs. Is college a good investment in the future?

My answer is a resounding yes. The U.S. Department of Labor issues statistics on the lifetime earnings of persons who have attained various levels of education, and as you can see the more college a person gets, the higher the person’s income is likely to be. And a person with a college degree earns twice as much over a lifetime as a person with only a high school diploma. Sure, these are averages, and this chart is in ten-year-old dollars. But the nature of these differences holds steady. And, although we still have serious gender and racial differences in earnings, the way people leap over those barriers is through education. The statistics plainly support that fact, too, although I haven’t found that chart on the Bureau of Labor Statistics site this time around.

Nothing is certain in life beyond death and taxes, but education is the gift that keeps on giving. Thousands of manufacturing jobs that required little prior education have been lost to this country and will never return. Education at the college level prepares people to enter a fluid job market. As much as anything can, and that’s a big caveat. We are now supposed to be the CEOs of Me, Inc., and plan our futures ourselves, not expect some paternalistic company to give us lifetime employment. How well is that going? It’s too early to tell, because of the massive displacements of workers from outsourcing and globalization, plus the wretched downturn in the economy. But the basic idea, to navigate your own ship of lifetime work, makes sense. And college can give you the skills to do it. For the rare individual, high school is enough of a launching pad. But statistically, the more schooling you have, the better off you will be financially.

Not everybody should go to the same kind of college or major in the same kinds of subjects, but nothing helps if there are no jobs, which is the general situation right now. America has an abundance of highly educated, versatile workers, and not enough jobs for us. It also has an abundance of highly skilled, non-versatile workers, and not enough jobs for them, either. So what can we do? Stay in school. It’s the only occupation at which it is entirely respectable to be broke, to wear shabby clothes and not have a car and live in a dump. Granted, there are a lot of college students financing an affluent college experience through credit cards, but by and large, being of modest means while a student is the norm. College is a good place to hide out during an economic storm. And, duh, you could learn something that leads to a career.

Unlike the ads you see and hear, college is a not a scam. Paying tuition to a trade school for a "highly-paid job in the computer industry" or for a "highly-paid career in home staging" is a scam. So is being a network marketer or a phone sales person, usually. (See my recent post for why you don’t want to become a network marketer.) Training to be a hairdresser often is a scam; it's a common fallback of indifferent students, and then they discover they're no good at that, even though they love to fool with their own hair. And the jobs aren't out there. And the tuition does not even qualify for the Hope Credit. Training to be a plumber requires pull to even get an apprenticeship; you usually have to be somebody's relative. (I have never met a plumber’s assistant yet who wasn’t somebody’s nephew.) And the world only needs so many plumbers, plus you can get killed doing it. The same goes for electrical work. Or cleaning gutters. It doesn’t take a degree to clean gutters, but one misstep could leave you unable to stand, sit, or walk, let alone work. That’s another reason that people go to college, to aim for employment that will not kill them. Coal mining can kill you. Factory work can kill you. Pushing papers and spending all day on a computer at most can give you paper cuts and wrist trouble. But it will not give you black lung, cancer, or asbestosis. The biggest physical risk at a white-collar job is obesity.

There will always be more workers than managers in any organization, but the most skilled navigate to the top. For white-collar workers, the risk of not proceeding to a managerial job is chiefly to income. And that can be remedied through job change, more education, career change, etc. College gives people the opportunity to gain the basic and some of the advanced skills to become a boss instead of just a worker. Of course the reality is that few will become bosses. But it's still better to aim for the top than for the bottom. And college is also the stepping stone to a wealth of interesting careers. The fact that none of them appear to have any vacancies at the moment should not deter anyone from entering or completing college. There always are times when the supply of educated workers in any field is higher than the demand. But everyone does eventually get absorbed into the economy. And having a college education simply gives you better odds for a better level of integration. Not to mention many networking opportunities.

What about majoring in fields that have few job prospects? Like medieval literature, or archeology, or philosophy? Is that wasted time? No, because college is not trade school. An education is more than a collection of specific job skills. It is the basis for lifelong learning. And there will be a few people who do follow their interest in philosophy, say, into a lifelong career. Will you be one of them? First you have to go to college.

Sick of school? Plan to take a year off. The gap year is an established tradition in other countries. Young people explore volunteer opportunities, work on farms, travel, or whatever. And then, having tasted a bit of the world, they go to college to get ready to take a place in it. Been out of school for decades? Go back. We all know people who have returned to college in middle age. By then, your focus may have sharpened and you’ll have a good grasp of what you want college to do for you, and how much effort you’re willing to put in. As we get older, many people allow their lives to narrow. Education can expand your horizons just at a time when you think there is nothing new to be learned.

You might well ask where the money comes from to finance a college education. We have all heard of people stuck with enormous college loans who could never find work that would pay the loans off. But plenty of people finance college without that issue, often by picking schools with modest tuition, or by getting creative about financing. There are grants and scholarships that some students obtain, and work study programs, and employer funding of career-related courses, plus part-time, evening, and weekend classes specifically aimed at adults who already have jobs. The possibilities are endless.

And that’s really the bottom line on education: the possibilities are endless. So what are you waiting for? Look around you and sign up for a class today.

Monday, June 15, 2009

Cash for Clunkers Redux

It looks as if this idea—turning in older, less fuel-efficient cars and getting a government rebate with which to help finance a new one—might be passed into law. Conceived to clean up the air by removing old cars with bad emissions from the roads, this idea has now been transformed into a method of helping the failing American auto industry. But will it help Americans? Is what’s good for General Motors still good for the USA?

I’ve already considered this issue as a theory (see my post “Old Cars for New Debt” from August 19, 2008), but now I get to check it out as a reality. A friend of mine has a ten-year-old American-made car (paid for) with 130,000 miles on it. My friend has to use premium gasoline to run it (ouch). And my friend has just had some repairs done that weren’t cheap. But all the recent repairs don’t add up to anything like an average new car payment.

That’s the problem. My friend could benefit from this new law—in theory. But my friend does not have the income to make a monthly car payment. Not this year, and certainly not for four years or more. Another issue is that my friend’s car already gets around 20 miles to the gallon, even though it is a station wagon. To get substantially higher mileage per gallon without going to a luxury vehicle, my friend would have to get a much smaller car. Which would not fulfill my friend’s needs for transportation. My friend routinely hauls a lot of stuff around in the car. But there’s still the problem of not being able to make a monthly car payment.

What about going down to a compact car and not hauling anything? Inconvenient, but a much cheaper car. The Chevy Cobalt and the Ford Focus (both 30+ mpg) are two American brands to consider, and maybe, with incentives, could be purchased at around $15,000. But even with 0% financing on a five-year car loan, the car would cost $250 a month. My friend does not have an extra $250 a month; luckily, car repairs are running much less than that.

Plus there’s the fuel economy issue if my friend tries to stay with a car big enough to haul. The Ford Flex, a big station wagon costing around $30,000, gets 17 miles per gallon in city driving, the only kind of driving my friend does. The Pontiac Vibe, at closer to $20,000, gets only 27-29 miles per gallon, an improvement, but a 0% five-year car loan for that would mean a monthly payment of $333. Even more out of reach for my money-starved friend.

Do I seem to be going around in circles? That’s because people don’t drive ten-year-old cars just for the fun of it. They drive them because they cannot afford to buy newer and more expensive vehicles. I’m not against a government discount. But the people who will benefit most from this are the ones who have a second or third car hanging around the driveway that they seldom use, who can afford to buy a brand new car. Not my friend’s situation, and perhaps not yours, either.

Sunday, May 31, 2009

Don't Become A Network Marketer. Please.

Last night I saw a TV commercial pushing women to become Avon ladies, claiming that in this economy it would be a really good deal and you’d be your own boss. That is, you would make money and no one could fire you. An Avon lady is a network marketer. Network marketers are usually women who mine their friendship and acquaintance connections with other women to sell them things. Things that most of them don’t need and some of them can’t afford. Things like Mary Kay cosmetics, Tupperware, Pampered Chef kitchenware, and many other categories including candles, statuary, lingerie, and more.

How does network marketing work? Friends are invited and encouraged to bring their friends to a party in the marketer’s home. Most people who attend feel obligated to buy something, even though they are always told that there is no obligation to buy anything. It doesn’t feel nice not to buy, so they buy. The marketer makes a commission on these obligation sales. A few people actively want to buy the products, and the marketer may then convince these women to become salespeople themselves, so they can buy the many items they want at extra discounts. The marketer gets a rakeoff on the sales of every customer converted to a saleswoman.

As a volunteer tax preparer, I shuddered at that ad. I’m looking ahead to next year, when a lot of hapless and confused women will come in to have their taxes done, and only then discover that they have been running a home business at a loss instead of at a profit. This is what easily can happen when you are a network marketer. Why? Because you buy inventory from the parent company, and then you have to sell it. If you don’t sell it, you’re stuck with the stock. Sometimes, by the time you have bought the inventory and tried to sell it, the parent company had decided to no longer support that inventory with brochures or other sales devices. So you end up stuck with last year’s catalogue of unsellable inventory.

None of this is illegal. I wouldn’t even call it unethical except that I end up seeing too many confused people who clearly never have understood the network marketing business in which they have engaged. A basic rule of inventory is what’s called turn. In retail stores, inventory is carefully followed to ensure that it sells out, thus turns, in a given period of time. If it doesn’t, the retailer gets rid of it in favor of some other item that will turn faster. So one principle that network marketers often don’t understand is that they must sell out all their inventory, turn it, quickly. A second reason for quick turn in the case of cosmetics is that the products themselves age and become unsellable or unsafe. You don’t want to put eyeliner on that’s over a year old, do you? Not a good idea. The chemicals deteriorate.

So here the poor woman is, having bought sometimes thousands of dollars worth of stuff that she didn’t sell. Why? Maybe she got caught up in the excitement of it all, and ordered too much inventory. A mistake. Retailers keep their shelves full but their back rooms empty, and they get customers all day long, every day of the week. Network marketers, who are usually part-timers, should keep as little stock as possible, and put everything on order. Let the customer wait for the order to come in. The delayed delivery gives the marketer a second opportunity to sell to the customer, anyway.

Another reason the marketer might have too much inventory is that the parent company is insisting on volume buying, or encouraging it with discounts. Discounts are a funny thing. One has to look no farther than the hilarious explanation of how the mother saved money on a hat in the movie “Life with Father,” or one of Gracie Allen’s killer routines, to realize that many women still believe that spending $20 instead of $40 is saving money, when the truth is that spending $0 is the only way to save money. It’s a neat trick, and these network marketer babes-in-the-woods get caught by it again and again.

A third reason a network marketer might get stuck with too much unsellable inventory is that she is not a good saleswoman after all. She might like the social aspect of the business, but she might not be good at pushing the products. This is especially true because it’s typically a part-time business capitalized by other income and thus not truly at risk. What do I mean by that? Most women who become network marketers don’t go to a bank to get a business loan to buy inventory, so they don’t have loan payments looming to push them to succeed at selling. Instead, to capitalize the business, they simply open their personal check books or flash their credit cards, and divert family money. This may or may not be true discretionary income, but the marketer acts as if it is. She does not hold herself strictly accountable to repay the family for every dollar she spends on the network marketing business. And without the incentive of a business loan to repay, it’s easy for the network marketer to lose track of the profit concept. She’s having a good time, or she’s not having one after all, and well...

I’ve bought goods from network marketers, and there was nothing wrong with the products or the prices, or the service for that matter. I even enjoyed the network marketing parties I attended. But I am ethically opposed to network marketing because it preys on the bonds of friendship, it cynically uses the ancient rites of hospitality, and it too-often leaves the network marketer herself under water financially. Anybody considering doing it ought to think very carefully about sales as a career, because the most successful salespeople are always the people who enjoy selling. Anything less, and you could wind up being another unhappy victim of network marketing fever, with a garage full of useless stuff, and a hole in your bank account.

Sunday, May 24, 2009

Savings Accounts. Use Them.

I did something wild this week. I took money that I had in my checking account and put it in my savings account. This is earmarked money. Half of it is money I have already spent. I ordered some flower bulbs, but the company isn’t going to bill me until they send the bulbs in the late fall. So I need to make sure that when I get the bill I’ll have the cash to pay my credit card company. The other half of the money was for a writers conference I attend every year. The entrance fee is something over $200. So I put away $200 so I can pay the fee the moment registration opens. These two expenses are definite later this year. It made sense to sock the money away in a savings account, because freelancers don’t have a steady stream of income and it’s important to earmark the cash that comes in.

I am experiencing a strange byproduct of having done it. Without that money sitting in my checking account, I’m feeling a bit broke. Not willing to spend like a drunken sailor. More careful about my immediate expenses. This is as it should be, considering that these two purchases are definite. But it brings home a lesson that many personal finance books have tried (and failed) to teach me before: You can’t just let money sit in your regular account, because having it there will give you the sense that you are wealthy, even though that might be far from the truth. And when you think you’re fine financially, that’s when you will spend more money. If you make plans for your money and segregate it in different accounts, you’ll have the money you need for the things you really want. In my case, for flower bulbs and a writers conference, but in your case it could be for an HD TV, or a discounted Coach handbag, or whatever.

This isn’t pure savings. I’m not just siphoning off extra cash I just had lying around to indeterminate savings. This is planning ahead. Maybe when the time comes to pay the two bills I’ll have cash available that isn’t earmarked for anything else, and I won’t have to use the money in my savings account. Then, that money becomes pure savings. Until I designate it for some other future purpose.

It always amazes me that I can understand the benefit of an action intellectually, but I don’t understand it emotionally until I experience it myself. I am so glad I took this action. I recommend it.

Sunday, May 17, 2009

Is Lowering My Credit Card Limit Bad?

It finally happened. Friends have reported this happening to them, but now it has happened to me. One of my credit card companies, Fidelity, has cut my card limit almost in half.

I am not sure what to think about this. Did I need a card limit of $23,000? Will my new limit of $12,000 be enough? Enough for what? Another driveway pave? Unnecessary. A home improvement? I’d rather get a conventional loan or do without the improvement. No more loans whose terms can be changed unilaterally by the credit card companies, thank you very much. Been there. Done that. Would $12,000 be enough to pay for a trip to Australia? No worries. But that’s not how my next trip to Australia will be financed.

By my calculations, which admittedly are extremely simple, I have never, ever made so many purchases on this credit card to warrant even a $12,000 limit. And if an emergency situation arose where I’d be looking for $23,000 in cash, I wouldn’t go to a credit card company for it. I’d go to rainy day savings. Or my IRAs.

Is this going to affect my FICO score? I suppose. But what do I care? I’m not getting a mortgage or buying a car. Or a yacht. How many points on the scale do I slip when I owe nothing anyway?

A friend’s story is different. This person is mired in credit card debt, so cutting the limit put a damper on the possibility of making new purchases. But isn’t that a good thing, if you can’t pay off the purchases you’ve already made? Ah, but we’re all stuck on the treadmill. This is our lifestyle, and nothing in it shall change, even if we have to finance the lifestyle through unsecured loans from credit card companies.

Face it, few of us have assets that anyone, even a loan shark, would accept to secure a loan. It’s not as if we have large diamonds to hock. Our houses? Forget it. Cars? Doubtful, but maybe the used car market is in better shape than the new car business. Objets d’art? We don’t own them. Try to sell a plasma TV for anything like what you paid for it. Yeah, I thought so. Not happening. Maybe on Craigslist you could find someone, but all I see are unrealistic prices and no buyers. Most buyers would rather have the factory warranty, anyway. So, yes, most of us use unsecured loans to raise cash if we don't have other resources.

What happens if six months from now this same credit card company again cuts my limit in half, and I’m down to a $6,000 limit? Still enough to finance a trip to Australia. But taking trips is not what I use this credit card for. I buy gas, I buy groceries, and I go to various stores for random household and hardware items. Do I need even a $6,000 limit for those shopping habits? No. What about my online purchases? Opera tickets? Books? Flower bulbs? Those can add up, but still, about $1,000 would be fine. Make it $2,000 in case I decide on the spur of the moment to fly to California for a weekend.

I don’t need a lot of credit, and that’s the truth. I remember several years ago, arguing with a credit card company that insisted on raising my limit. I had called for some other reason but they were pushing giving me more credit. That was raising the limit to $5,000 or so. They won that round. Now, the credit card companies may think they have won another round, but I disagree. I think I have won. If someone steals my identity now, they can’t get away with $23,000 worth of stuff. Only $12,000.

Thanks, Fidelity. I await the next credit limit reduction with eagerness.

Monday, May 11, 2009

Banks Are Stupider Than We Are

An article in the New York Times today says that banks are bracing for taking losses on their credit card customers. The banks might have to write off some debts they realize they will never be able to collect. Nowhere in the article are the dollar amounts of actual purchases separated from the dollar amounts of expected profit from late fees, finance charges, and finance charge hikes, and the many other punitive measures banks use to raise their expected profits from credit card holders. Nowhere does the article mention the transaction fees the banks have already collected from merchants for each purchase.

I wonder what Americans really owe? Is it $8,400, as Moody’s is quoted in this article? Or $9,000, the figure that various financial writers fling about? And how much of that $8,000 or $9,000 is actual purchases, and how much is the additional punitive fees banks add on?

This is meaningful because at some point, someone has to recalibrate bank expectations of profit from credit cards. We all know that finance charges and late fees have been minting money for card issuers for decades. If they are used to making, say, 70% profit on these cards, perhaps in the future, they should expect to make only 35%. I don’t know what percentage of profit banks routinely make on credit cards because most of the articles I pull up on the net are about the losses they expect to take this year. But a little probing reveals that some quote percentages such as 71% profit and a 24% loss. Compare that to the 1% or 2% profit that the grocery store industry typically nets. Or the 6% profit that publishing used to make. That’s right. Those figures are correct. Many large businesses make huge dollar amounts but only tiny percentages in profit. The banks have been making huge percentages ever since they got deregulation of finance charges.

But, and this is interesting, in searching for the figure on bank credit card profits, I have realized something else about them. If we think that individual consumers are stupid about credit, we now have proof that banks are even more stupid. Why? Because the banks are taking a bath on credit cards right now and in the foreseeable future. It’s all over the net. And nobody seems to realize that if the banks did not charge such fantastic and unfair fees, consumers, even consumers who have lost their jobs, might be able to pay them back. Well, duh.

Which brings me back to that $9,000 average credit card debt. What if it’s only for $2,000 in purchases? It looks a lot easier to pay back, doesn’t it?

Here’s the thing. We all know how credit cards work today. And we all know that credit cards were originally only issued to people who were wealthy or whose purchases were on an expense account and would be paid for by an employer. At that time, the banks collected their profit as fees from merchants. But then the banks changed their paradigm. They decided to make credit available to more iffy customers, including college students, which enlarged their customer base enormously. This drastically increased their percentage of failures, i.e., customer defaults. And it increased the banks’ internal costs of operation, since they now had to monitor and deal with many more customers. In other words, the banks took a solid business based on people who could pay and turned it into a precarious business based on people who might pay but often could not. And now that the economy is in a significant downturn, the folly of basing a business model on such a precarious concept (overloading individuals with debt and then milking them for finance charges) is self-evident.

So, yes, another instance of the banks being even stupider than we are.

Monday, May 4, 2009

Something’s Wrong Here

Guess what my car insurance company just gave me as a free service upgrade.

Accident forgiveness? Nope.

Reduced rates with more coverage? Nope.

Pet insurance?

That’s right. In this time of worldwide financial crisis, with many people out of work and others trying to subsist on terribly reduced savings, my car insurance company has seen fit to bless me with accident insurance for my pet if the pet is injured while in the car.

And there’s no deductible.

Last time I heard, there was a deductible if I got hurt in the car, but then again, it’s likely that I don’t understand my automobile insurance policy. Maybe there’s no deductible for me, either. But I do understand this new part of my policy, because the insurer sent me a special full-color page describing it. Too bad they’ve never sent me a similar page elucidating the ins and outs of my human coverage.

Do I begrudge pets this coverage? Yes, I do, because I don’t have an option not to carry it and that means I am paying for it buried in my rates. My insurance company charges every single customer for this supposedly free coverage by raising rates it could have held steady, by not reducing rates it could have discounted, and by not expanding coverage for humans. The very humans who are the company’s paying customers, unlike Muffy and Rex.

Look, I like animals, and I would never be deliberately unkind to any that aren’t invading the sanctity of my home. (Those that try, die. Come to think of it, I pretty much hold the same view when it comes to humans.) Still, I do not believe in wasting any precious human-grade resource on animals, be it food, shelter, or medical care. I don’t think animals should be made to undergo surgeries that prolong their lives yet subject them to continued pain and confusion. I don’t think dogs should live in tiny kennels, or on chains, and I hate seeing wild animals in cages in zoos. Pets are okay, and working animals are more than okay. Guard dogs? Good. Rodent-hunting cats? I’m for them. But unless they are sources of revenue, pets should not merit better treatment than we give other humans.

People ought to look around them at all the humans who need food, shelter, and medical care, and who are going without these resources. If you’ve got extra, before you pamper your pet with super-special food or other luxuries, ask yourself if you have at least donated the equivalent to some charity or other organization that helps people. If you haven’t, then what are you doing feeding sirloin steak to a dog? Or fresh salmon to a cat?

And where’s my no-deductible insurance for when a deer runs in front of my vehicle and I can’t stop? Or simply runs into the side of the car before I even see it? (I saw that happen one afternoon. A deer ran across a suburban yard into the road and banged into the side of a car, and bounced off. They do that.) But no, such no-deductible insurance apparently doesn’t exist. If I threw the half-dead deer into the back seat and called it a pet, would my auto insurance company pay for its life-saving care? Yes. From dime one. But if the deer caused me to lose control of the car and slam into a tree, I’d still be liable for a deductible while I’m being sent to the trauma center.

Something’s wrong here.

Wednesday, April 22, 2009

Another Life Lesson?

Blogs are supposed to be short, because generations of American children raised on Dorling Kindersley pictures-and-blurbs books have no ability to concentrate on anything for more than a few seconds. We live in Attention Deficit World, it seems. But that’s not true, is it? People are quite able to concentrate for long stretches to play and win video games. People still watch entire movies; they don’t routinely walk out halfway through. They can still read long paragraphs, and follow arguments that take more than a sentence or two to develop.

So here’s my latest thought about personal finance, inspired as usual by events in my own life. Recently, I obtained some freelance work, a very encouraging thing in such a depressed year. Then I broke my ankle. The costs associated with the injury will absorb all the profit from my work, even though I have excellent insurance coverage. I could look at this with dismay and frustration, thinking that bad luck dogs me, that I can never get ahead financially, and so on. Or, I could be grateful to have extra income just at the moment when I incur involuntary extra expenses. It’s the old “the glass is half empty” versus “the glass is half full” dichotomy. How do I decide which response to choose?

Widen this question to the financial situations of millions of Americans right now. We can choose to feel completely at the mercy of random bad luck, or we can decide that we are the happy recipients of good luck. The system is corrupt, and we haven’t got a chance. Or the system is silly, and we have to make our own chance. If bad things happen, maybe they’ll be followed by good things. Someone loses a job, but gains time with the children, which strengthens previously strained and distant relationships. Or someone in the family has to take on a job who didn’t previously, and gains self-esteem. Pulling together as a team and planning finances together brings spouses closer. Ceasing idle spending sprees helps a person regain control of common sense about money. Even stopping the much-maligned latte habit gives someone a chance to learn the difference between following a fashion and fulfilling an important personal need. These are all good things: Improved relationships with other people, with oneself, and with money, plus the opportunity to decide on one’s own what is important.

Sometimes, life pulls us up short, and demands that we examine the rationale behind our choices. I wouldn’t say that breaking an ankle per se is a good opportunity to examine my financial plans. But it certainly reminds me of mortality, of the consequences of behavior, and of my constant opportunity to shape my own future. I knew, for instance, that a house with stairs wasn’t going to be practical in old age. But I bought it anyway. Now, as I struggle around on crutches, I’m getting a preview of how difficult life in this house could be in the future. Will this play a large part of my thinking about whether to stay in this house and put in ramps and an elevator, or move to another place that has no stairs? You bet. Previously, it was only theoretical, as the future always is. But since injury temporarily makes me as fragile and helpless as an elderly person, I’m getting an unexpected tryout. And a wake-up call. The next time I go looking for a house, I will treat its livability in old age as a deal-breaker.

Drag this back to the financial situation we face today. The economy has tanked to a frightening degree, as we all know. But most people have jobs and many are doing well. No matter where we are on the spectrum right now, this is our opportunity to think seriously about taking whatever steps we can to ensure that we have sufficient income to live comfortably. In my case, that means actually going looking for freelance, rather than sitting at home and hoping it will come to me like manna from heaven. Which we all tend to do when we get discouraged, when we think that no matter what we do, we can’t get ahead. Maybe I won’t get ahead of the medical bills that will soon pour in. But I’ll be even. And I will have had the benefit of the shakeup in my expectations, the confounding, if you will, of my belief in my robust good health. Stuff happens. There are steps I can take to make sure more of the same bad stuff doesn’t happen, or that the consequences are less severe, and that I will be okay regardless. Life is filled with possibility, and on the whole I believe that it’s a good thing that we’re not all just on an endless treadmill.