Friday, January 16, 2009

Temptation, the bane of January

I had a close encounter with temptation today. Ordinarily, I’m not an aimless shopper, out to tempt myself by just wandering through stores. But I walked through a grocery store this morning, not to shop, but to get warm. The power went out in our neighborhood on the coldest day of the year. We had work to do, so we grabbed our laptops and headed for the free wifi at the store. Which they must keep at 60 degrees so the fruit doesn’t rot. After a few minutes inside, I was freezing. When I couldn’t stand it anymore, I took a hike around the inside of the store. I wandered down one aisle and saw all the candies for Valentine’s Day, which is nearly one month away. But like most Americans in the middle of January, I am on a diet at the moment. Which I could blow by buying this supposedly seasonal candy. Because there’s a holiday in every month. There’s always an excuse to overindulge.

It’s the same with electronics. There’s always a sale on at Best Buy. Apple always has some wonderful new product I could purchase. Or maybe it’s time to get a satellite radio. Or perhaps I’ll go to the home improvement barn and decide that now is the time to replace my completely functional but old-fashioned-looking powder room sink and faucet. Heaven help me if I get caught looking at those new washing machines and dryers. Or maybe I’ll take that key the car dealership mailed me, and pop in and see if it starts the car they’re giving away. Of course sales people will surround me like flies, and try to tempt me to take advantage of the deals on cars available these days. Still, this is probably the best moment since the 1973 oil crisis to negotiate an automobile purchase.

We live in a land of plenty. We have a monetary system that makes it possible to eat and keep a roof over our heads even if we’re in debt. We can buy comfortable personal transportation with mere pennies down, all borrowed money. We can throw out functioning appliances and essential home furnishings just because they’re not this year’s style or color. But can we afford to? Not merely in money spent or debt piled up, but in closed off possibilities because we ignored important goals in favor of futile, fleeting pleasures. After all, Valentine’s Day chocolates are just everyday candy in a red wrapper. A new car is only new for a year. And for every electronic must-have of today, there are a half-dozen passé pieces that each of us has relegated to a drawer: pagers, cell phones, PDAs, and more. We could have financed tuition for college, a trip to an exotic land, or a reunion with far-flung family for what we have frittered away on temptations large and small.

In the world of commerce, it is always time to feast. But buying simply because we want something, because some other entity has decided we should feast, is not a good idea. It’s up to each of us to shape our own future irrespective of all the commercial pressures to buy, buy, buy. Did I get any Valentine’s Day candy? No. And I’m not going to rip out my sink this month, either, or get a new car. Once the power came back on, I was glad to go home and leave temptation behind. If you don’t want to lose your focus on your own goals, try not to be around temptation any more than necessary.

Sunday, January 11, 2009

Listen to Suze Orman. And Me

When I first encountered Suze Orman, it was on a PBS program, where she was almost-desperately trying to convince us that we needed durable powers of attorney and other legal documents, especially living trusts instead of wills. Her sense of mission hasn’t visibly lessened in the years since then. By now she has published many books and has a long-running show on CNBC. In which she acts like a caricature of herself, but that’s another story, and she still dispenses sound financial advice.

But that’s not enough for Suze. She obviously doesn’t want to talk only to the converted. She has made outreach efforts with younger generations, and with women. After her previous book had been out for some months, she offered it as a free download via Oprah’s site, and it was so successful that the hardcover book shot back to the bestseller list. She has once again teamed up with Oprah to offer a free download of her latest book, Suze Orman's 2009 Action Plan, available on Oprah's site for only a few more days.

I read it this morning. As usual, her advice is dead on. She gives one of the clearer explanations of the origins of the financial meltdown I've seen, with enough details but not too many. She tries very hard to impress upon us that the banks to whom we owe so many thousands of dollars in credit card and mortgage debt are getting ever tougher. So we need to clean up our act now, or face the inconvenience and extra expense of dealing with punitive interest rates, account closures, housing foreclosures, and more. It’s very logical and reasonable advice, and we should all take it to heart. And then act on it.

But another book I am reading, Buyology, by Martin Lindstrom, says that scientific experiments show that people behave more and more irrationally the more fearful they are. So the warnings to be ultra-careful about money just now are fueling our drive to be crazy with it instead. Is it possible that Suze's well-meant warnings might actually send people running to the mall? Or, taking it a step further, that all the talk about the obesity epidemic is just making us eat more? Because according to the research Lindstrom cites, people actually smoke more after seeing the cancer warnings on cigarette packs. What are we, nuts?

Maybe so. We’re certainly far from rational beings. Lindstrom says he wrote his book, the result of work he has collected to help clients target their advertising campaigns effectively, to tell the rest of us what weapons are now available in the marketers’ arsenal. And presumably, what we can do to combat them and our own self-defeating instincts. He claims his purpose is noble, and maybe it is. Regardless, because of him, I am rethinking the good advice I have handed out over the years, attempting to scare straight the friends and relatives whom I thought were behaving like the feckless grasshopper in the fable. The truth is that often people have such huge financial problems that all the best-meant advice in the world won’t solve them. So why attempt to terrify these poor folks who already suspect, deep down, that they are just one or two missed payments away from living on the street? Maybe it’s no kindness.

Yet people constantly ask others for advice, for help. People beg Dave Ramsey and Suze Orman, and Carmen Wong Ulrich, and anyone else who will take their calls. They describe their financial bad luck, and their willful financial follies, and they ask for help. So what is the financial guru to do? Obviously, dispense advice. Although I am no guru, some things in life have come easily to me. Such as being efficient and consistent in paying bills. When I had plenty of money, I paid my bills on time. When I didn’t, I also paid them on time, which resulted in being able to keep rather large credit lines open despite low income and high debt at one point. I feel sure that others can learn these same efficiencies, and that I can teach them. Maybe that is the hubris of all teachers, whether we are financial gurus or just plain folks.

It took many years to lure Americans into conducting all their transactions via credit cards. It will take many years to undo that mentality, if indeed it can be undone at all. Plenty of companies refuse to accept cash payments. Even some toll highway exits don’t. In the meantime, what are we to do? We can’t go wrong if we follow basic advice: Pay with cash as much as possible. Don’t overextend. Don’t live on your credit cards. Don’t run up your credit cards to try to stave off your house being foreclosed. And don’t take equity from your house to pay off your credit debt.

Suze Orman sometimes looks very concerned when she has to tell advice seekers the errors of their ways. Dave Ramsey also looks sympathetic. But they’re both tough, too. Carmen Wong Ulrich takes the reportorial approach, not really offering a strong personal line of advice. She gathers advice from experts and relays it to people who call or write in. But I think she cares as much as Orman and Ramsey do. I care, too. I wouldn’t be spending my free moments sending essays on financial sense into the Internet ether if I didn’t hope very much that you all, whoever you are, can escape the misery of being in debt. We’re not trying to scare you. We’re trying to get you to activate your own good sense and learn how to keep your personal financial house in order.

Tuesday, January 6, 2009

Want More Money? Sell Your Stuff

At this time of the year, most people are feeling some regret after holiday splurges. We’re trying to shed bad habits. We’re also trying to relieve the financial pressure we feel as bills are coming due. When there isn’t enough money coming in, one way to rid ourselves of debt is to sell things. These could be items we don’t need, or use, or even like. Or they could be items of a size or magnificence that does not suit our current lifestyle and income. The classic method of selling one’s used stuff is to hold a yard sale, except this is not the weather for it in most states. So we turn to other methods.

We all know about eBay, but most of us don’t use it. And we shouldn’t just jump in, because amateurs never get the best prices. But if you have a collectible possession that you would like to turn into cash, eBay (and other auctions of its ilk) is your best bet for getting the attention of a huge pool of potential buyers. And, more important, for selling your item at somewhere near its full retail value.

The sad fact is that most of the time we can’t re-sell a possession for anywhere near the full price we paid for it. The big exception is a house, but right now, with the housing market in freefall, a lot of people can’t recover the price they paid for their houses. Housing prices will recover. A car, or television, or article of clothing will likely never gain in value as the years go by. Unless they become collectibles. Ordinarily, if you sell something to a dealer, you will be lucky to get 10% to 25% of it current retail value. And that value may be substantially less than its original purchase price. Selling your possession directly is the only way to up your percentage.

You can put an ad in your local newspaper or on Craigslist, or on eBay. In some cases, the ads will be free. Take advantage of the free ones, and see if you get any responses. If not, then it’s on to other venues or to lowering your asking price. You can sell your item through an auction house, although the auction company may take a very large bite as a commission. We’ve all heard about auctions that garner millions of dollars for genuinely valuable items, so an auction house for old paintings, seriously valuable sterling silver, collectible comic book original art, or antique furniture is often the right choice.

You also can place your item in a consignment shop, but these stores take a fairly high cut, so you need to be willing to accept a low dollar figure as your eventual net. And some items just don’t sell, because the stores depend on foot traffic only.

But don’t try any of these venues before investigating them. Talk to friends who use eBay and get tips on how to maximize your profit and minimize your risk. Read the ads on Craigslist over a period of time. Contact auction houses and ask about their typical terms and their buyers. Ask friends if they have had success with a particular consignment shop. If you have social reasons not to want to admit you are trying to resell possessions, then investigate discreet resellers. If you’re not sure that the item you want to sell will be marketable through a particular method, ask. Auction houses will be happy to tell you what they can sell and what they can’t. Talk to consignment shop employees to find out what their most popular items are, and what is the financial level of their customers. Obviously, a thrift shop located in a poor neighborhood caters to a different clientele than an upscale designer resale shop located in a more affluent area.
If you are lucky enough to be able to use the IRS itemized deduction form, Schedule A, another way of getting some financial relief is through deductions when you donate your unneeded items to charity. The catch here is that you are on your honor not to overstate the value of the items. A moldy old couch is worth nothing, so take it to the dump. A nearly-new couch might be worth at most a few hundred dollars. You have to check the price structuring of the charity you select. Some price higher than others. As a rule of thumb, expect to claim slightly higher than yard sale prices for any used item you donate to an ordinary charity. (If you are donating rare artworks to a museum, that requires an entirely different level of appraisal and bookkeeping. I’m assuming that anybody reading this is not at that financial level.) So go inside the Salvation Army store or the hospital thrift shop and look at the prices for items similar to the ones you are donating. Those are the values you must assign. In rare cases, you can donate never-worn, tags-still-on clothing to high-end shops and credit yourself the full purchase price. But you know they aren’t likely to sell for that, so don’t pull a con on the IRS. Settle on a fair price in today’s market.

Vintage items are harder to price, but the same method applies. Go to an antiques mall and find out what others are charging for their beautifully restored furniture pieces. Price your own similar piece lower if it needs some repairs or refinishing. Hundreds lower. Go online for prices on vintage garments, but remember, these prices are for attractive, cleaned, and mended garments, not the smelly, stained dress you found in the back of your late aunt’s closet.

The worst aspect of reselling is dashed expectations. You know that vase is art glass and it’s worth a lot of money. But it’s so hard to find a customer willing to pay what it is worth. It’s also a lot of trouble. If you have a house full of such items, at some point you may have to just call a junk dealer or auction house and let the pros make the profits. Your time is worth something, after all. Maybe you should go to Plan B and look for a moonlighting job. It’s a lot easier to trade your time for cash than it is to spend time trying to sell your things.

Thursday, January 1, 2009

Tips for Having a Halfway Decent January

It’s the month when we’re all ashamed of ourselves. It’s the month when we make promises to ourselves. And then promptly break them. It’s the month when the bills come due, in more ways than one, for the excesses of the previous month.

Did you step on the scale and run shrieking from the bathroom? Did you add up the total of the bills soon to arrive, and want to run shrieking from being the adult in charge of your financial life? Did you look around at all the junk you have accumulated in the past month, or the past year, and wonder what kind of drugs you’ve been doing?

Here’s the way to start undoing the glum mood threatening you on January 1st. Begin with something really small and simple:

1. Pretend you have guests coming over, and do a hasty pickup of your living space. No, do not promise yourself to vacuum the whole place and get down on your hands and knees and wash those kitchen baseboards with a toothbrush. It’s the wrong tool and that’s far too extravagant a goal for the beginning of January. Just take 15 minutes and neaten up your space, so you can bear to live in it.

2. Pretend it’ll be tax time soon (it will), and get all your financial documents in one spot, and then make a grand gesture and organize them. Don’t write them all down or tediously enter them into some stupid computer program. Just organize them. For most of us, that means tossing them in the correct file.

3. Look around at any unfinished projects that have been hanging over you and making you gloomy. Mentally calculate how much time each will take. Do not write them down; that would depress you. Instead, pick the one that will take the least time, and do it. Sew on a button, re-string a blind cord, varnish the rake handle.

4. Take down the Christmas lights. Sure, it’s cold outside. But unless you’re a believer in celebrating the entire twelve nights, it’s about time to kiss that extra strain on your power bill goodbye for another year. Declare to the rest of the world that you can handle your life. Front.

5. Return something to a store next week. Not this week; are you crazy? But next week. There is probably at least one item that you bought foolishly that you regret. Put it in a bag by the door. If you’re too macho to return it, then give it to someone immediately. Get the bad karma out of your house. You don’t want to spend the rest of the year staring at your mistake.

6. Apply for that television converter box coupon, even if you don’t need it yourself. You know you have at least one friend or relative lame enough not to get around to it. You’ll be doing them a favor and building up your good karma.

7. Create some kind of piggy bank and put a dollar in it. You’re not broke if you have savings.

Feel a little better? These are things that won’t take you much time, don’t cost you money, and are not fattening. As the man on the TV commercial says, “Guys, you can do this.”