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The no-pants guide to spending, saving, and thriving in the real world.

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Don’t Screw Future-You

Finance, Life

A conversation between me and my temporally displaced self.
Future Me: Excuse me, Jason?
Me: Yes?
FMe: <Slap!>
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: <Slap!>  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: <Slap!>  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: <Slap!>
Me: Really?  Again?
FMe: <Slap!>  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?

 

Teaching My Child about Money in a Way I Was Not Taught

Finance

When I was in high school and working 15 to 20 hours a week, my mom gave me free rein to use the money I earned as I would like.  Actually, she said nothing to me about saving for college or putting some money into savings.

When I had friends who complained that they had to put away some of their earnings, I commiserated with them.  How unfair of their parents to make them save some of their money!  They worked hard for their money, often at crappy part-time jobs.  They deserved to spend the money any way they saw fit.

The way I saw it, why save for college?  According to financial aid rules, if the student has any savings, she would have to use the majority of it to pay for college.  How unfair.  To add insult to injury, if prospective college students have some savings, they would qualify for less financial aid, which often meant fewer student loans.

The injustice. 

Yes, it was better to spend my hard earned money than save it and be penalized.

No one told me differently.  In fact, many people in my family agreed with me and encouraged me to buy a used car to get to and from my job.   Of course, I paid the loan payments for the car, the gas I used and my insurance out of money from my job.  That was a responsible use of money, but I also went out to eat with friends, a lot.  At 16, I was going out to eat with my friends twice a week at least.

However, my plan worked perfectly.  When I went to college, I didn’t have to use any of my hard earned cash.  No, not me, because I hadn’t saved anything.  Instead, I left college with nearly $20,000 in student loan debt.  I took two years off and paid down as much student loan debt as I could, getting it down to about $8,000, but then I went to graduate school and took on more student loan debt.  I graduated with nearly $25,000 in debt total.  I am still paying on it today, 13 years later.

Now that I am the parent, I am one of those “awful” parents who makes her kids save.  My son knows when he gets his allowance, some goes to save, some goes to donate, and some goes to spend.  True, it makes me cringe when he uses his spend money on little trinkets like temporary tattoos, stickers, and gum, but I keep silent.  He did the work to earn the money, and he can spend it as he likes.  However, I am inflexible with saving; that money must be set aside.  When he goes to college, I expect that he will have to use the majority of that money.  Rather than seeing it as a waste, I see it as an important component of his financial education.  Spending his money to pay a portion of his college education will hopefully make him take college more seriously.

Meanwhile, I have already begun having chats with him about money, spending, and budgeting.  He watches his dad and I work hard to pay down our debt with gazelle intensity.  He sees me use a calculator at the grocery store to see how much our groceries will be.

Ultimately, he will make his own financial decisions as he grows up, but I plan to teach him throughout these important years so that even if he turns into a spendthrift, he will have a firm financial understanding to revert to as he ages.  While my mom taught me how to stretch money further, she never taught me how to save; I hope saving is a lesson my son takes with him throughout his adulthood.

How do you teach your kids about money management?

Melissa writes at Fiscal Phoenix where she encourages people to rise from the ashes of their financial mistakes as she and her husband are doing.

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Christmas for the Destitute

Finance, Parenting

First, my disclaimer:  I’m not destitute.

However, I’m trying to spend Christmas acting like I am a pauper.

Why, with small children and beautiful-and-more-than-deserving wife, would I want to deprive my family of a bountiful holiday?

Before we get into the reasons for being a horrible grinch bent on depriving my children of their god-given right to rampant consumerism, let’s look at the Philosophy of Destitution.

The primary reason to pull back and tone it down is basic frugality.  Excessive anything is not frugal. I am training my children–and for that matter, my wife and my self–in the finer arts of personal responsibility and frugality.   Accumulating debt for a fleeting holiday is insane.  If we can’t afford to buy it, we certainly can’t afford to give it.   Anything else would be setting a bad example and children learn best by example.

Another piece of the Philosophy of Destitution(when I read this word, I hear a deep, booming voice in my head, like a 30s radio superhero voiceover)  is “green”.    I consider myself a conservationalist rather than an environmentalist, so don’t read too much into that color.  I try to be responsible, instead of destructive and I try to avoid being wasteful.  Toys that won’t be played with are wasteful. A garbage can full of packaging for those same toys costs money.  It is much cheaper to avoid the landfill here.

Back to “Why”. Why would I be willing to deprive my family?

[Read more…] about Christmas for the Destitute

Debt Scams

Finance

When you are up to your eyeballs in debt, praying for a step-stool, sometimes life–more accurately, con-artists–try to trip you when you are vulnerable and look for a solution.  They aren’t muggers on the street.  They come at you wearing ties, invite you to a real office, with real furniture and a real nameplate on a real desk.   They are a real company, but that doesn’t mean they aren’t trying to scam you out of the little money you have left to put towards your debt.

Yes, I am talking about debt management scams.  These scams come in 4 main varieties.

Debt Settlement companies instruct you to stop paying your bills completely and send them the money instead to be placed in a settlement fund.  When your creditors get desperate enough, they will be willing to settle for pennies on the dollar.

In theory, this can be a good strategy for some debtors.  Unfortunately, it has some drawbacks, even if the company is legitimate.   They tend to charge high fees as a percentage of your deposits.  Some take another fee when a settlement is accepted.   The entire time you are building your settlement fund, your credit rating is sinking, leaving you open to being sued or garnished.  The bad companies take the fund and run, while even the good companies can’t guarantee your creditors will play ball.

Ultimately, they aren’t doing anything you can’t easily do yourself.    If you want to go the settlement route, stop making your payments and funnel the money into a savings account that you will use to offer settlements from.  It takes discipline, but there is no upside to paying someone else for the same function.

Debt Management plans are used when you owe more than you can afford to pay. These companies work with your creditors to adjust interest rates and minimum payments and they try to get some fees waived for you.

A good company will work with you and your creditors to make sure everyone is working together towards the goal of eliminating the debt.   A bad company will tell you they are working with your creditors while ignoring any contact from the creditor.  They’ll tell you the creditor isn’t willing to negotiate while never stepping up to the negotiation table.   Another trick is to offer the creditor a set payment, with a “take it or leave it” clause.  Any input from the creditor is interpreted as a refusal to participate.   This, coupled with high fees paid by the debtor, make debt management firms a risky proposition.  Most states require the firms to be licensed.  Check to make sure they are before giving them any information.

Debt/Credit Counseling companies work with you to establish a budget and eliminate expenses; in effect, they are training you to be in control of your finances.  They are often organized as a nonprofit, but not always.

Some–the sleazy ones–lie about what they are doing, or attempt to misconstrue what you are agreeing too.   Be careful not to use your home as collateral to consolidate unsecured debt and don’t walk into a Chapter 13 bankruptcy without that being your intention.  Both of those are common debt counseling scams.  If the company isn’t able to provide all of the details of a transaction–company name, address, licensing information–or they aren’t willing to spend as much time as necessary explaining the details of the transaction, walk away.   This is your life, you are in charge of it.  Don’t let anyone bully or prod you into signing something you aren’t comfortable with.

Credit Repair is almost always a scam. There are ways to get correct bad information removed from your credit report.  If the information is correct, those methods are illegal.   There are two legal methods to repair your credit.  First, stop generating bad credit.  Make your payments on time and eventually, the bad items will fall off.   Second, write letters disputing the actual incorrect items on your credit report.  There are no quick fixes, and anybody telling you different is flirting with a jail sentence, possibly yours.

How do you avoid the scammers?

  • Be skeptical. If it looks to good to be true, it probably is.  There is no such thing as a magic wand to fix your credit and make your debt disappear.  Bankruptcy + 10 years of your life is the closest thing to magic credit repair in this world.
  • Only use a legitimate credit counselor. Verify them through the Better Business Bureau and the National Foundation for Credit Counseling (1-800-388-2227 or www.nfcc.org)
  • Check the license. Most states require credit and debt counselors to be licensed.  If they’re not, run away and report them.
  • Read the find print.   Don’t sign anything you don’t understand.  Like every other piece of your financial life, own the transaction. Know what your are doing, or don’t do it.
  • Are they willing to work with you? If they’ve got a generic plan that doesn’t account for your specific situation, they are probably a con.  At the very least, they are a worthless company and a waste of both time and money.
  • Are they willing to work with your creditors? If not, they won’t be accomplishing anything for you.
  • How much do they cost? Higher fees may not be an indicator of a scam, but call around and find out if they are in the right ballpark.  Triple or quadruple the going rate is a sign of someone who will disappear late one night, with your hopes, dreams and savings in tow.
  • Above all else, trust your gut. If it doesn’t feel right, it probably isn’t.  There is nothing a counselor can do that can’t wait a few days while you check them out.

There is no magic bullet to kill debt.   You’re not fighting a werewolf, you’re fighting a lifetime of bad or unfortunate choices and circumstances.  It’s important to keep a realistic outcome in mind.

Update:  This post has been included in the Carnival of Debt Reduction.

Cooking Poor

Finance

Frugal cooking can be an intimidating concept.   It’s easy to turn a meal into a huge expense, but it’s not that hard to trim your grocery budget without sacrificing variety and flavor.   It just takes some planning and a few money-saving techniques.  We usually feed our family of five, often with guests, for about $100 per week.

Schedule your meals. Find or make a weekly meal planner.  I recommend this or this.  Cross out the meals you don’t need to worry about due to your schedule that week.  If you won’t be home, you don’t have to cook that meal.  Fill in the meals in the remaining slots.  Keep your schedule in mind. If you get home from work at 5:30 and have to be somewhere by 6:30, dinner needs to be something quick. Also, make sure you include every side dish you will be serving.  Now, look at the recipe for each dish in every meal.  Write down everything you need to make all of the food you plan to eat that week.   While planning your meals, think about how to use your leftovers.   If you cook chicken breasts one day, the leftovers can be chicken nuggets the next.

Take inventory.  Take your meal plan and a pen while you look through all of your cabinets and your refrigerator.  Why buy what you already have? If you already have steaks in the freezer, don’t waste your money buying more.  If you have it, cross it off of your meal plan shopping list.  Whatever is left is your shopping list.   Review it.  Is there anything that can be combined or eliminated?  Is there a key ingredient for a sauce that’s missing?

Don’t forget the staples.  If flour or sugar is on sale, stock up.  Anything you use on a regular basis is a staple, buy it when it’s cheap.

Build a shopping list from your meal plan.  When you are in the store, stick to your list.   It’s hard, but avoid impulse purchases at all costs. Don’t shop hungry, don’t buy things just because they are on sale, and don’t dawdle.  Get what you need and get out.

Avoid pre-processed food.  We slice and shred our own cheese.    Buying the pre-shredded cheese costs an extra $5 and saves just 5 minutes.  Don’t buy pre-sliced apples or anything that will only save a few minutes for several dollars of cost.

Every couple of weeks, I cook a large pot of either beans or rice and keep it in the refrigerator.  Almost every meal that we cook gets a cup or two of beans or rice added to it.  It doesn’t alter the flavor much, but it adds a few extra servings for pennies.  It’s a healthy way to stretch any meal on the cheap.

We have a large bowl in the refrigerator filled with mixed greens.   We buy whatever salad-like greens are on sale and prepare the large salad all at once.   Most meals start with a salad, which makes it easier to fill up without relying on the protein dish, which is generally the most expensive part of a meal.  As a dedicated meat-eater, it took some getting used to, but it’s a good meal–cheap and healthy.

Cook enough for at least 3 meals.  That will eliminate 2/3 of the work involved in cooking.   Plan ahead to make your meals simple and easy.

Freeze the leftovers in usable sizes.   Stock up on semi-disposable meal-sized containers.   Freeze some in single-serving sizes for work, and others in family-size servings for last minute meals at home.  Preparing for last minute meals keeps you from serving garbage or takeout when life gets in the way of your plans.

Avoid wasting leftovers.   Wasted food is wasted money.

When you are done cooking meat, take any drippings or scraps and throw them into the slow-cooker along with any vegetable scraps laying around.  Cook it overnight, then strain it into an ice cube tray.  You now have stock/broth ready to be added to any recipe.

Plan for serial meals. Chicken breast leftover from today’s meal can become chicken nuggets tomorrow, to be shredded into chicken salad the next day.

When there isn’t enough left for a full serving, we put the remains in a resealable bag in the freezer.   When we accumulate enough to fill our slow-cooker, we dump in all of the bags with a couple cups of water.    I look through the refrigerator for any leftovers that have been overlooked that week or any vegetables  getting close to being too old.  It all gets cut up and added to the cooker to cook on low all day.  I rarely add seasoning because everything going in the pot tastes good.  We never get the same meal twice and our “free soup” is never bland.

That’s how we cook cheap, without sacrificing too much time.  How do you save money cooking?

This post is a blast from the past.  Originally posted here in January 2010.