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.
Sunday, October 18, 2009
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.
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.
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.
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.
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.
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.
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.
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