Archive for the ‘Money Management’ Category
Savings does not equal affordable
I’m in my car. On my way to work. Listening to the radio. And one commercial catches my attention.
A lady comes home with a shopping bag. Her husbands asks what’s in it and then exclaims, “Don’t you have enough dresses?” (Like that’s actually possible)
She replies, “But honey, they were 70 percent off”. He pauses and then replies, “That’s a lot. ”
The message closing off the commercial is, “Save money. Save on explanations”.
This strikes a chord with me on so many levels. First there are all those dresses in my closet (just kidding. I feel confident I have a reasonable number and I wear them all). What resonates with me is the fact that this is a general perception. If it’s on sale and I’m getting such a great bargain, I should buy this.
Of course we don’t know how much the dresses in the commercial cost before the sale. 70 percent off of a 500 dollar dress is still a good chunk of change.
And did she pay cash or use credit? A sale may be well and good, but if you pay for it on credit, and take several months or years (yikes) to pay for it, the total cost of the use of credit could eat up the savings.
The bottom line is, your budget should dictate what you spend, not the ultimate sale price.
We have a weekly tradition in our household. Every week, assuming they have earned it, we stop at the local convenience store, where my kids get to pick out a movie. We head to the non new-release section. Its a great deal. A 3 day rental for 2.00. The kids get an entire weekend of entertainment (assuming they have time to watch the movies. And if they don’t, it’s only 4 bucks.)
For their birthdays this year, I thought I would take them to the library to get their very own library cards. My 8-year-old daughter is an avid reader and I’m hoping my 6-year-old son will develop a taste for books. We were just getting ready to check out their books when I remember, “the library has movies too”. So off we go.
Two movies. No cost. 7 day rental. Hmmmmm. I think I will change our weekly tradition. That will save us 16.00 a month. With the monthly savings maybe we will go to the movie theatres once in awhile. =)
If you step back and look at your finances, you will find that you are in one of three stages of financial being.
The first stage is “survival mode”. This is where you are just barely getting by. There is just enough cash flow to put a roof over your head, food on the table, gas in the car. But very little room for anything else. This is a dangerous place to be as any life event – big or small – can tip the scales and start you on a downward spiral. Credit is often used as a crutch, with the best of intentions, to balance out the budget.
The next stage is the “breathing room” stage. You are here if you have enough cash flow (not including credit) to survive and to deal with things as they come up. If the car breaks down, you can get it fixed. Maybe not right away, or it may set you back and you will have to adjust to catch up. Credit can be used as a safety net but caution should be stressed to keep the credit use at a minimum and ensure you can manage the payments comfortably.
The third stage, which is where we all strive to be, is the “comfort zone”. In this stage you are surviving, you can deal with irregular expenses as they come up, and you have the flexibility to do some or all of the things you want. Often times, credit is used to “enhance” this position. A dangerous game. You should proceed with caution.
So, what stage are you in? Where do you strive to be? The first step is AWARENESS. The second step is ACTION!
Trimming your budget is a lot like trimming your waistline.
Consumers spend millions of dollars every year looking for that magic solution to losing weight. And businesses increase their bottom line while relatively few consumers decrease their bottoms/middles etc.
The same phenomenon happens in money management. We tend to look for quick fixes – consolidation loans, second mortgages, payday loans.
Neither works for the masses. Why? They do nothing to address the underlying problem – taking in more calories than you burn / spending more monthly dollars than you make.
But alas, there is a magic solution to gain control of your finances! – AWARENESS. Pay attention to the details.
1. Track where your money goes and make decisions to change your habits.
2. Seek expert advice/guidance when needed.
3. Commit to a plan of action.
That’s it. That’s the secret. 
It’s been six long months and my hands are cleaner than ever. Who would have thought I would make it this far?
I am referring to life without a dishwasher. Around mid-December, ours broke. My first reaction was sheer terror. I’m pretty sure I almost lost consciousness. Like many families struggling to make ends meet, I didn’t have any savings to buy another. The word credit kept flashing in my mind, but we were just managing what we had. I took a deep breath, pulled up my rubber gloves, and started washing.
It wasn’t so bad. “Not much more work then rinsing the dishes, loading and unloading the dishwasher”, I thought. Day 2! – It occurred to me that growing up we never had a dishwasher, we, gasp, washed and dried them – by hand. I then had a BFO (blinding flash of the obvious!). My gosh, we are raising a generation of kids who never have to wash dishes. Visions of power failures and piles of dirty dishes flashed by. I decided to start operation “Dishpan Kids”. I asked, in a way that made it sound incredibly exciting, “Who wants to learn how to wash dishes?”. It was fun. The family doing dishes together. What a concept.
I will admit, I had some setbacks. Entertaining guests poses some additional challenges (clean-up takes slighly longer than loading the dishwaher) and some surprises (during our last get-together, the guys did the dishes while the girls played cards…hmmmm…). A month or so after we began “Operation Dishpan Kids” I found out that the dishwasher actually was not broken. It’s something under the sink (that’s as intelligent as I get on that subject). It will probably take an hour and 20 bucks to fix. But you know what? I’m ok. I think I can go without. In fact, I kind of like it. I enjoy watching my family share in the responsibility and I have a really great two-level dish rack to dry my dishes on.
I, like many others, jumped on “The Secret” bandwagon. I watched the movie and began incorporating the process into my life. It wasn’t that difficult, I’m generally a positive thinker . A few years ago, my friend gave me “The Secret” calendar with a thought for each day. There is one that particularily caught my interest. It was about money. And for the past decade or so, money, or lack thereof, had been an issue for me and my family. The thought went like this…
Isn’t it wonderful? There is absolutely no reason to wait for something you can’t afford now. And the deal is much better than buying it on regular credit that has to be paid starting next month. Ah! what a wonderful consumer-driven world we live in.
It’s also dangerous. In fact, it’s a trap – a credit trap. The objective is to have you commit future income towards the purchase of something you just can’t (don’t want to) wait for. We are such an impatient society aren’t we? Wait! It gets better – you are further tempted (expected) to spend more than you normally would on the item(s) AND the gamble is that you won’t pay it off completely by the time it comes due.
I have to admit, I’ve been on the no-payment-no-interest (npni) income tax cycle for about three years. What do I mean? It’s simple – buy on a npni deal, payments are deferred for 12, 15 (or even more) months. Your plan is brilliant – when your tax refund comes in you pay it off – in full.
I had a close call a couple of years ago. My income tax refund almost did not come through in time. Whew! Side-stepped that one. Why am I sharing this you ask? Because, I’m human, I make mistakes. The key is to learn from them. I have discovered that there are some key rules to a successful npni endeavor.