I just saw a television show called "Til Debt Do Us Part." Two episodes, back-to-back. What amazed me, really floored me, was how casually two different young women approached their debt. They claimed they did not know why they had no money. And on salaries of $45k a year, not including their men's incomes, they felt entitled to spend on anything and everything they saw or wanted. One of them was even living rent-free, but still managed to get deeply into debt. Even after family paid off her debts, she racked them up again.
This is crazy behavior. But the frightening thing was that both of these women behaved in pretty much the same manner: as if a credit card was their license to spend. And they were unapologetic about it. There was very clear self-will at work. Both women also browbeat their husbands, keeping them from exercising any decision power over how the household money was spent. The host took the men to task for using domestic peace as the excuse for enabling their women to overspend. But in my opinion, the women were the ones who needed a sharp dose of reality.
How can people be so clueless about their own money that they do not notice they spend thousands more per month than they bring in? What part of the brain shuts off to allow this craziness? And how can we turn it back on and save these people and others from an endless cycle of debt and rescue, debt and rescue?
I’m asking because I don’t have the answer. People with chronic debt problems must wall off their fears, their shame and guilt, from their daily lives and thoughts. How else can a person with $100,000 in debt dare to charge another unnecessary $20? You’d need a powerful firewall, but more and more, it seems as if people in our society have just that. Perhaps they feel no shame at all. Perhaps they believe that they will always be rescued by others, or by new legislation, or by bankruptcy, or by windfalls. Perhaps their future plan is to win the lottery. I don’t know.
What is obvious to me is that too many people are brazenly selfish even while behaving in a self-destructive manner. What the host pointed out was that if these people continued to spend as they did, within a few years they would owe hundreds of thousands of dollars. More than a house costs, and yet they would not have a house. They are ruining their future while indulging their todays. Big time. They’re all living like the grasshopper in the fable. But winter does eventually come, and where is the preparedness we need to survive tough times?
Don’t we all have moments when we are these silly people? When we know we’re behaving foolishly with money and credit, but we do it anyway? Yes, and that’s what is scariest of all. You don’t have to be perpetually in denial as these two women were to be in scary, intractable debt. All you need to do is have flashes of ignoring your reality. A few minutes here and there, and you can throw away another few hundred or thousand dollars without even noticing.
It’s got to stop. We’re the richest country in the world, with more individuals having significant money beyond a bare subsistence living than in any civilization that ever existed. And we’re throwing our wealth away on trifles.
Sunday, January 17, 2010
Sunday, January 10, 2010
New Year, Same Old Debt
Someone I know is in credit card debt again. The person was in a similar situation several years ago. At the time, I was able to help the person get out of it. I also tried to model the habit of making the regular, on-time payments that creditors like. I stressed this as the number one rule. But it did not stick. My friend’s credit score (FICO) is very low, so a car loan has been denied—which is bad, considering those are secured loans and they could just come get the car, so what’s the risk? My friend is flummoxed. But unrepentant, I suspect.
I wonder how many of us really change our disastrous financial habits for better ones? Or, after we recover from a dangerous low period, do we limp along, much in the same manner as before, slowly but surely ramping up our mistakes? Worst of all, paying little or no attention to what others want from us? The friend is indignant about the car loan, citing having paid off a car loan from that very bank a few years ago. But that was then, and this is now. Missing scheduled payments is one of the classic signs of shaky financial stability. The bank fears that the car loan will not be paid back, and the bank does not need a car; my friend does. The bank is understandably wary of lending in this scenario.
Of course this situation would be different if my friend had a good, steady job. (Pause to laugh hysterically.) Right. Like that’s happening anytime soon. So what can be done? Does my friend even have enough money to make regular minimum payments? And assuming so, how quickly can my friend’s credit score be rebuilt—again!—in this rocky economy? Would six months of perfect, on-time payments make a difference? Or will it take a year or more to climb out of this pit? And to what lengths must my friend go to fix things? Sell something major that would be painful to part with? Live without a car for a year? Or two?
Or is this simply an organizational issue? Some adults have serious attention deficit issues. Serious. They collect too much paper and they can’t seem to open their bills promptly (or even their bank statements) and they never are able to put everything in one place neatly so they can find it again. My friend is but one of thousands, if not millions, of these people. They’re more likely to buy a new set of storage containers or get a new checking account than to put all documents in one place or balance their existing checking account. And these people, these thousands if not millions, are walking around as supposed functioning adults. They’re being allowed, even encouraged, to sink deeply into debt through systems that work for people like me (Little Miss Organized), but never work for them. Unless they are very lucky, their chronic inability to cope makes them the financial dupes of the banks and every other financial transaction.
Some of these people are married to spouses who can handle money sensibly. Or even to spouses who can’t, but who earn enough to keep everything covered. But some people are alone and trying to deal with words on papers from financial institutions that they simply do not understand. They don’t understand the words. Or the banks. Banks don’t really care about your payment record of ten years ago. They care about your recent payment record. They’d also prefer that you have substantial income and assets—and that you do not need the loan you want. That’s right: banks prefer to lend to people who don’t actually need their money. If Warren Buffet asks for a loan, he’s going to get it. Or Bill Gates. You and me? Not so much.
The bottom line with financial hassles always comes back to paying attention. My friend will now have to enter into a penitent period of being very careful to make all scheduled payments on time. I’m sure my friend will do it, too, because the danger and excitement of this situation will be a constant reminder. For a while. And then, the ennui with paying attention to numbers will rise again. And the trouble will start all over.
I don’t know the answer to this one. Spend less money than you earn? Sure, but if you don’t pay your bills on time, that’s irrelevant. Pay cash for everything? That plan does not get the electric bill paid on time. Go off the grid? Okay, now you’re just being silly. The buy-in for going off the grid is very steep. Who has that kind of money—without getting a bank loan?
I wonder how many of us really change our disastrous financial habits for better ones? Or, after we recover from a dangerous low period, do we limp along, much in the same manner as before, slowly but surely ramping up our mistakes? Worst of all, paying little or no attention to what others want from us? The friend is indignant about the car loan, citing having paid off a car loan from that very bank a few years ago. But that was then, and this is now. Missing scheduled payments is one of the classic signs of shaky financial stability. The bank fears that the car loan will not be paid back, and the bank does not need a car; my friend does. The bank is understandably wary of lending in this scenario.
Of course this situation would be different if my friend had a good, steady job. (Pause to laugh hysterically.) Right. Like that’s happening anytime soon. So what can be done? Does my friend even have enough money to make regular minimum payments? And assuming so, how quickly can my friend’s credit score be rebuilt—again!—in this rocky economy? Would six months of perfect, on-time payments make a difference? Or will it take a year or more to climb out of this pit? And to what lengths must my friend go to fix things? Sell something major that would be painful to part with? Live without a car for a year? Or two?
Or is this simply an organizational issue? Some adults have serious attention deficit issues. Serious. They collect too much paper and they can’t seem to open their bills promptly (or even their bank statements) and they never are able to put everything in one place neatly so they can find it again. My friend is but one of thousands, if not millions, of these people. They’re more likely to buy a new set of storage containers or get a new checking account than to put all documents in one place or balance their existing checking account. And these people, these thousands if not millions, are walking around as supposed functioning adults. They’re being allowed, even encouraged, to sink deeply into debt through systems that work for people like me (Little Miss Organized), but never work for them. Unless they are very lucky, their chronic inability to cope makes them the financial dupes of the banks and every other financial transaction.
Some of these people are married to spouses who can handle money sensibly. Or even to spouses who can’t, but who earn enough to keep everything covered. But some people are alone and trying to deal with words on papers from financial institutions that they simply do not understand. They don’t understand the words. Or the banks. Banks don’t really care about your payment record of ten years ago. They care about your recent payment record. They’d also prefer that you have substantial income and assets—and that you do not need the loan you want. That’s right: banks prefer to lend to people who don’t actually need their money. If Warren Buffet asks for a loan, he’s going to get it. Or Bill Gates. You and me? Not so much.
The bottom line with financial hassles always comes back to paying attention. My friend will now have to enter into a penitent period of being very careful to make all scheduled payments on time. I’m sure my friend will do it, too, because the danger and excitement of this situation will be a constant reminder. For a while. And then, the ennui with paying attention to numbers will rise again. And the trouble will start all over.
I don’t know the answer to this one. Spend less money than you earn? Sure, but if you don’t pay your bills on time, that’s irrelevant. Pay cash for everything? That plan does not get the electric bill paid on time. Go off the grid? Okay, now you’re just being silly. The buy-in for going off the grid is very steep. Who has that kind of money—without getting a bank loan?
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.
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?
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.
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.
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.
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.
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