Balance Your Borked Budget

You’ve got a budget worked out to the penny.¬† You know every dollar that comes in and every dime that you spend.¬†¬†¬† All of your bills are getting paid on time.¬† Then, one day, it all comes crashing down. Your budget is no longer even a reasonable approximation of your cash flow.¬† You’ve got no idea what’s coming in or going out.¬†¬† Bills are piling up and fees are digging you deeper in debt.

What happened?  More importantly, how do you get back on track?

The first thing you need to do is identify the problem. What, exactly, went wrong?¬† Did you lose your job or need a surprise botox injection?¬† Your car died or your kid developed a hockey habit?¬† Sports car or shoe sale?¬† Whatever the cause, if you can’t identify it, you can’t deal with it.¬† Some of the possible problems may be things that can get clubbed and buried in the backyard, while other things may be expenses that won’t be going away.¬†¬†¬† If it’s a one-time expense, you can simply refocus your debt repayment to take it into account.¬† If it’s an ongoing expense, you will need to adjust your other expenses, possibly in a drastic manner, to make ends meet.¬† You can’t know which way to go without knowing what caused the problem.

Next, commit to to making it right. Don’t leave it at a mere commitment.¬† Actually commit and actually do it right. Future-you is counting on you to fix the problem before he gets screwed.¬†¬† This is important.¬† Without firm–and real–commitment, nothing else will matter.¬† At best, you will be treading water.¬† At worst, you will drown yourself in unanticipated bills.

Cut everything extra.¬†¬† Every expense–whether it’s your mortgage or your maid–is a rock in your pocket, one hundred miles from shore.¬† How much can you carry and stay afloat?¬† This isn’t the time to keep paying something because you enjoy it.¬† If it isn’t absolutely necessary, it’s got to go.¬† Cut your internet, cancel Netflix, learn to shut off the lights when you aren’t using them.¬†¬† Is the early termination fee less than 6 months of your cable bill, your satellite bill?¬† Cancel it.¬†¬†¬† You can always sign up again later.¬† This is the time to be ruthless.

Is there a way to bring in some extra cash?¬† Can you pick up a second job, or land a freelancing gig?¬† If you’ve suddenly found yourself unemployed, can you spend some time on being a Mechanical Turk?¬† Sell all of the things you don’t use anymore, or, more likely, never should have bought in the first place?¬† Do you have a spare kidney?

Remember, this is a drastic situation calling for drastic measures.¬† Your future is depending on you.¬† Don’t make him come back and kick your butt.

Update:  This post has been included in the Carnival of Personal Finance.

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What D&D Taught Me About Finance

I admit it: I’m a geek. I’m not a hobby geek who only geeks on the weekends. I’m a full-fledged, licensed and certified geek. I am a geek about so many wondrous things that it’s hard to list them all. My wife knows, my kids know. It’s not much of a secret. One of my many geek qualifications is my sordid history of gaming. Role-playing, tabletop only. If that’s gibberish, it’s okay. Nobody needs to understand my geekitude but me.

I started playing Dungeons and Dragons more than 15 years ago. There were no live chickens or human sacrifice. Just a small group of geeks, proto-geeks, pseudo-geeks, and the occasional nerd playing DnD in a poorly lit room for several hours. We laughed, we cried, we fought evil, saved the world, and raised the stock price of an assortment of caffeinated beverage companies.

As the man said, I told you that, so I could tell you this:

DnD taught me many things.¬† It taught me THAC0 calculation, dice-identification, and the fact that no woman, anywhere, considers tabletop roleplaying to be an alpha-male trait.¬† “I’m a level 73 kinder warrior-mage-thief” is not a pickup line anywhere in the world, even Gen-Con.¬† Remember that.¬† Also remember, the singular of dice is die.¬† If your are talking about one, it’s a die.¬† Get it wrong and I will throw a bag full of dice at you and make you dig out the purple, sparkles-like-a-vampire, 27-sided die from among the hundreds of other dice.

DnD also taught me some surprising things about the world of personal finance, which is not a part of a planar campaign.

All the best toys cost too much. At the current exchange rate of 10 silver pieces(sp) to 1 gold piece(gp), potions of extra healing will drive you into debtor’s prison.¬† Just as a sword of extra-slaying +10 will cost you everything you earned raiding that castle for the last 6 Wednesday evenings, so will a big screen TV set you back a full month’s salary.¬† Don’t risk your life or sell your life’s energy for something fleeting, just because it’s “the best” or the newest gadget, geegaw, or artifact.

Pretty Lady

Never sell your soul for a castle or a horse. When the Baatezu come to offer you a “no money down, 0% for a year, all-expenses-paid, surrender-your-first-born” deal for a castle or the prettiest horse in the park, take a cue from the former First Lady.¬† Just say no.¬† Spending money today that you have to pay for tomorrow is almost always a bad idea.¬† Don’t spend your soul, spend your savings.¬† Don’t buy something until you can afford it.¬† A Lexus or an Arabian, a mansion or a rambler.¬† Are any of them worth auctioning your future?

Your armor isn’t stronger just because it’s shiny.¬† A suit of Full-Plate of Protection-From-the-Charms-of-Bar-Wenches +5 may look pretty, but it’s not going to help against the orcs, kobolds, or trolls unless, of course, they are wearing skirts and sitting on a bar-stool above a sawdust-covered floor.¬† Does the shiny new iPod really provide a benefit, or is it just a shiny gadget to woo the ladies?

A good sword is necessary to keep your stuff. This is a not a call to self-defense, or mugger, err, orc-slaying–though why that’s ever viewed as a negative is beyond me.¬†¬† You need to be aggressive in defending your loot.¬† Call your credit card companies and demand they turn over the booty, err, lower your rates.¬† Tell your friends to step away from the Diamond Ray of Disappearance, err, expensive outings or you will chop off their heads, err…no wait, that one can stay.¬† I think my friends may be scared of me.

[caption id="" align="alignleft" width="196" caption=" "][/caption]The promised reward for completing an adventure isn’t the only way to make money. Sure, the local duke(your boss), may be willing to pay you a chest of gems(your salary) for defending the town from the ravages of the Tarrasque(your job), but that isn’t the only way to make money.¬† You could do your job, collect your pay, and go home at night, but why?¬† Don’t forget to pick up the loot along the way.¬† If you spot the shiny penny, grab it, whether it’s abandoned gold, a new idea for a niche-blog, or a chance to turn your leisure hobbies into money.¬† There are thousands of ways to make money outside of your day job.¬† Every one will help your bottom line.

It takes cunning to slay the dragon. When tackling your debt(dragon), wading in swinging your sword may be emotionally satisfying, in the short term, but long term, it’s just a painful method of reminding yourself that you are crunchy and taste good with ketchup.¬† Make plans.¬† Have a strategy.¬† Come out a winner.¬† Then, sit down for beer and dragon steak.¬†¬† Goal-less, plan-less attacks fail in the long-term.

Update:  This post has been included in the Carnival of Personal Finance.

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Naked Money

In our house, the bills don’t get hidden. I’ve never tried to hide our finances from our children. I believe doing that is part of the reason I reached adulthood with no brakes. Growing up, finances were almost entirely invisible.¬† Now, I believe is financial transparency.

Now, as a father, I balance the checkbook and pay bills on the laptop in the living room where my children can see me. They see the stack of bills and they watch me balance the checkbook. We discuss how much things cost and how we can cut expenses while the bills are being paid.  Even the toddlers know Daddy is doing something important.

My ten-year-old son knows what sales tax is and where to find it on a receipt. He knows what property taxes are and how much they are in our neighborhood. He knows roughly what percentage of a paycheck gets withheld. I work to make my son financially aware. My girls are too young to understand the concept of money, but they will be receiving a thorough financial education as soon as they are able to grasp the concepts.

The hard part is explaining to my son how we screwed up our finances. I’ve shown him my paycheck and discussed our debt. I have explained to him that we were making much less money when we accumulated our doom debt, while maintaining a higher standard of living.¬† Now, when we go to the store, he doesn’t even ask if he can borrow money until we get to his bank account.¬† He has learned to dislike debt in almost all forms.¬† I’m fairly proud that my kid voluntarily practices delayed gratification.

What he doesn’t quite grasp is the idea of living within your means, even if your means are limited.¬†¬† “But, Dad, what if you don’t have much money?¬† Then you have to borrow money for nice things, right?”¬† I’m not sure how to break him of that.¬† Delayed gratification is an understandable concept for him, but the difference between wants and needs seems to be missing. ¬† Any ideas?

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Don’t Screw Future-You

A conversation between me and my temporally displaced self.
Future Me: Excuse me, Jason?
Me: Yes?
FMe:
Me: May I ask what that was for?
FMe: Of course.
Me: What was that for, jerk?
FMe: That was payback for all of the hell you have put me through.
Me: What?!? ¬†I’ve never even met you, before.
FMe: Of course you have. ¬†I am future-you, and I’m sick of getting screwed by past-me, that is, you.
Me: Huh?
FMe: Listen close. ¬†You’re not ¬†the sharpest brick in the box and I don’t want to explain this twice.
Me: ???
FMe: A long time ago, when you first met our wife, you were dumb.
Me: I don’t appreciate….
FMe: Shut up. ¬†I was dumb then, too. ¬†Remember? ¬†You…err…we bought a new truck, built an addition on our…err…your…err…whomever’s house, got married in the same year. ¬†On top of many other expensive decisions. ¬†Do your recall?
Me: Yes, I do.  So what?
FMe: If that wasn’t enough, you and your smoking-hot bride are still shopping like you’re rich. You drive a new car. ¬†Your kids wear new clothes. ¬†You’ve got a house full of new furniture. ¬†How did you pay for all of that?
Me: Naturally, I charged it.  Zero payments, zero interest for a year!  Pretty smart, huh?
FMe: What happens in a year?
Me: I don’t know. ¬†I’ve got a full year to figure that out.
FMe: ¬†I’ll tell you what happens! ¬†Future-you, that’s me, gets screwed! ¬†¬†Your raise didn’t come through. ¬†You had a baby. The truck broke down. ¬†Your wife took maternity leave. ¬†A roommate moved out. ¬†You took a loss in the stock market. ¬†You didn’t plan! ¬†You had no savings to cover any of those problems because you were too busy servicing debt to pay for your current life.
Me: How was I to know?
FMe: ¬†Life happens! ¬†You never know what is coming next. ¬†You need to plan and save for what might happen. ¬†Otherwise, you’ll just accumulate more debt to be serviced by yours-truly. ¬†That is not acceptable.
Me:  So?  What are you going to do about it?
FMe:
Me: Really?  Again?
FMe: ¬†I’m struggling to pay your debt. Your son starts college next year, but you’ve left me completely unable to help. ¬†Your daughter wants to get married in a couple of years, but the Father-of-the-Bride can’t afford a tux. ¬†My wife, your beatiful bride, wants a vacation that I can’t afford. ¬†¬†You’ve screwed me, dude.
Me: I’m sorry. ¬†What can I do to fix it?
FMe: Buy me dinner, first.
Me: Huh?!?!?
FMe: Stop the excess spending. Spend less than you make, for a change.  No credit.
Me: None?
FMe: None. ¬†Nada. ¬†Zip. ¬†Zilch. ¬†Only spend what you can afford. Budget. ¬†Pay off those nasty bills. ¬†Don’t leave me hanging.
Me: So, what you’re saying is that, if I don’t have the money, I shouldn’t buy it?
FMe: Exactly. ¬†That’s the path to wealth, freedom, and financial independence.¬† Live in the real world.
Me: Gee, thanks, Future-Me!  Now I know.
FMe: And knowing is half the battle.

What would your future-you have to say to you?

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