Beyond Paycheck to Paycheck

at December 3, 2008 in Car. 0 Comments

I realized something while eating too many sweet potatoes last week.

You: That they need to be cooked first?

Something even more insightful: cars are way underrated.

You: This coming from a man who in his entire life has only owned a Neon and a Saturn? Don’t you mean that cars are overrated?

Nope. So when it occurred to me that cars were actually underrated, I was quite taken aback.

You: Sure it’s not sweet potato # 12 talking?

Pretty sure.

You: Buy an expensive car last week and now have buyer’s remorse?

Nope.

You: Then what’s going on here?

Cars are underrated in terms of their importance to your financial well-being. Seriously. I believe many folks have come to believe that cars do matter financially, but most don’t genuinely understand the size of their impact to your fiscal well-being.

And when I’m talking about cars, I am - at least for today - talking about:

The Cost of Your Car - Not only does the price of the car you use impact your monthly payment, but it also affects the cost of your auto insurance and maintenance expenses.

Leasing vs. Owning - Another post for another day, but suffice it to say that with leasing you guarantee yourself non-stop monthly payments. You never get to the promised-land of looking in your driveway and seeing your car while looking at your bills and not seeing a car payment. Guess when it’s easier to save?

Your Car Replacement Rate - Get a new car every three years? That means, on average, you need to pay for a new car every three years. Guess what happens if you can hold on to your car for six years?

You: You need to pay for a new car every six years?

Yup.

You: Meaning that you could expect payments to be half as much.

Or half as long, assuming you get the same car.

You: And that’s a big difference.

Even bigger than you think. Next time you wonder why it is that someone else can afford something, look at the car they drive. You just might be unimpressed.

You: By the car?

Yes, if you’re a car person. Of course, if you’re a car person, there’s nothing wrong with driving nicer, newer cars - provided you can afford it. But remember there are few people who can afford unlimited discretionary spending, and readers of Beyond Paycheck to Paycheck are not among them.

So maybe you should be impressed by the car; not for how it drives but for what it allows elsewhere in that person’s life: priorities.

Your thoughts on cars? Underrated? Overrated?

"financial education"

Turkey Carnival

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at November 25, 2008 in Carnivals. 0 Comments

I’ve just arrived in Florida for some time with the extended family en route to another large Turkey-day dinner. While here, I was excited to see my post from last week titled Traffic and Spending together on the Ones was named an editor’s pick in this week’s Carnival of Personal Finance hosted by Living Almost Large.

My favorite other article from the carnival is one that makes you laugh while you cry: The 12 Days of Christmas During a Recession. I’ve always enjoyed well-crafted parodies. Hope you like it too.

Also, check out this article about student loans at the Wall Street Journal. Anybody else think that Vegas is the answer to big education debt?

Finally, saving your third helping for lunch Friday is not the missing 11th Saving Strategy. As a reminder, here are numbers one through ten.

"financial education"

Traffic and Spending Together on the Ones

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at November 21, 2008 in Cash Flow and Saving Strategies. 0 Comments

After a week in Hawaii and a couple of days in Los Angeles, I am glad to be home in NH, even though the temperature is about 55 degrees colder here.

You: Tired?

Exhausted. Two red-eyes in three days is quite enough. Nonetheless, I have some sleep-deprived observations from my trip to share.

I’ll start with LA.

“Los Angeles,” when translated from Spanish means “The land of heavenly traffic if heaven were one million degrees.” Seriously, the traffic there is simply ridiculous. Many southern Californians realize this, although, I have found, not all. More and more residents simply deny that traffic is as bad as it is and/or simply have gotten so used to it that they don’t realize how much worse it is in southern California than anywhere else.

Partially, that attitude is healthy because there isn’t much one can do about the traffic anyway. But it’s also partially nuts because there are people spending hours a day in their car - and many of them aren’t actually moving - I have observed this. The opening scene from “Office Space” is not pure fiction.

I was in my rental car before 6AM (there’s that red-eye reference again) for the drive from LAX to Santa Monica and I hit heavy traffic. I visit a radio station for an interview 10 miles away and leave at noon for a 1PM meeting - cutting it very close thanks to . . . traffic. I could go on and on about how it took me 10 minutes to make a left turn at 7:30 PM, but I won’t.

You: What’s this got to do with personal finance?

Plenty. I see many people get in the same rut of traffic with their spending. Denial is a powerful force, but so is acceptance. Denial that they are part of the problem and acceptance that they, therefore, must struggle.

For example, one of the people who attended my seminar the first night at the LA ING DIRECT cafe came up to me privately and explained that her income was about 40% of what it was several years ago. In the interim, she had basically depleted her lifetime of savings. She didn’t want to touch her retirement account, but was afraid she might. “What should I do?” she asked.

I knew she knew the answer. But she didn’t want to say it, because knowing and not doing is plain stubborn. No one likes to consider themselves stubborn. Feeling powerless to change the situation, in a way, is perversely more tolerable - we don’t have to look inward. But that is the wrong answer.

“You know the answer,” I told her. You have a firm handle on your finances and you are aware of what you are doing. You can’t live on a $100,000 salary if you are confident you are going to make $40,000 for the next part of your career.

She disclosed she had until very recently two cars in her one-person family.

[Now I am thinking this is part of aforementioned traffic problem, but I don't say this to her.]

The necessity of reducing her spending was hard for her to accept, but short of increasing her income, which she was confident she was unable to do, this is her new reality. People have grown to accept that they must leave early enough to get around the traffic in order make it to work on time, why is it that they won’t accept that they must spend little enough to be able to save? Unless you have a helicopter, you’re not going to get around the traffic. And if you have a helicopter, you’re hopefully got a lot saved already. But even you could be living paycheck to paycheck.

How do we get people past denial faster? And is traffic really lighter in LA at 4AM?

"financial education"

Carnival, US News

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at November 12, 2008 in Carnivals and Media. 1 Comment

Aloha from Hawaii. Just reading through this week’s carnival of personal finance.

You: From Hawaii? Pathetic.

Not arguing. Nonetheless, I was excited to see that my post Toilet Paper as an Economic Indicator was there. Also, an interview I did with Kimberly Palmer at her US News Alpha Consumer blog was posted last night. In it, I speak extensively about writing Beyond Paycheck to Paycheck, the importance of emotional connetion, and ways to enjoy free stuff. It’s a good read - check it out.

"financial education"

What have you changed?

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at November 10, 2008 in Cash Flow and Retirement. 0 Comments

As I flew across the country yesterday, I sat next to a woman who was heading to Tahiti. She explained to me that this was supposed to be a retirement trip, but with the market’s recent slide, she decided to work another six months. Still, she was going to take the trip because much of it was already paid for. Clearly, I don’t know her entire financial situation, but I thought it was a bit odd.

I mean if you really got hurt badly by the correction, then six months of additional pay probably isn’t going to matter, especially after subtracting the costs of what I can imagine to be a rather expensive vacation to Tahiti (nice lady, but she and her husband spent over $30 on airplane liquor by the time we got to South Dakota).

But the brief exchange did get me to thinking, what have you changed, if anything, since the recent worldwide realization of slower growth, a recession and a market crash? All answers are acceptable, including buying less branded groceries, smaller packets of toilet paper, no change at all, even delaying your retirement for six months!

P.S. I am in Hawaii this week delivering several seminars at the ING DIRECT cafe grand opening there. As a result, I may be a little less active on the blog this week.

Aloha and mahalo!

"financial education"

Toilet Paper As an Economic Indicator

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at November 7, 2008 in Cash Flow. 2 Comments

I just finished reading At the Supermarket Checkout, Frugality Trumps Brand Loyalty. Fascinating excerpt:

Shoppers are even buying toilet paper differently. “When they get to the end of the month, and they’re out of paycheck, they may buy a smaller-count pack,” Mr. Falk said. “You’re seeing that shift in consumer behavior during a pay-period cycle more than we maybe have in the past.”

I think this point shows us two things:

The economy really is in the toilet. (Yes, there’s an intended pun there.)

When you’re living paycheck to paycheck, you can be forced to make additional decisions that are ultimately not in your best long-term financial interest.

I say this because the shelf life of toilet paper approaches infinity. Unlike the strawberries I bought just three days ago, toilet paper never goes bad unexpectedly. And, unless there are some serious medical issues, you are pretty much eventually going to use all the toilet paper you purchase.

Since, when you buy toilet paper in bulk, you pay less per roll, it’s better to buy large quantities of toilet paper.

Yet when you get to the store and you don’t have the $3.99 for the 24-pack only have $0.99 for the 4-pack, you pay more per roll. You can’t wait until tomorrow for payday to get the more cost-effective 24-pack. You’ve got to go today.

Far better to make a conscious effort to reduce spending as appropriate then spending less in the short-term knowing all the while that in the long-term it will cost more. Yet another advantage of living Beyond Paycheck to Paycheck.

Now, if you’ll excuse me, I have to go to the bathroom.

# # #

How have you shopped differently? Feel free to talk about non-bathroom related products.

"financial education"

Do you believe in change?

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at November 5, 2008 in Cash Flow. 8 Comments

This won’t be political.

You: Really?

Nope. This remains an apolitical blog.

You: But what’s with the title then, especially the morning after the election?

It’s to get your attention. Now, to today’s topic: Change. What do you do with yours? I’ll admit, I am terrible at managing my change. I have a huge cup (now two cups) full of change at home. I never seem to remember to put change in my pocket when leaving for the day, so when I spend cash and something costs $2.08, I walk home with 92 more cents to put into the overflowing cup.

So I’m wondering, do you have that problem? How many people are sitting out there with a ton of change? Could you give a rough estimate of your change? And what are your plans for your change? State your gender too, because I have a theory I’d like to test out that I’ll share in a future comment. This is an easy blog posting to participate in.

"financial education"

Quitting takes a cushion

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at November 3, 2008 in Carnivals. 1 Comment

I’m lucky. I have the greatest job in the world.

You: Seriously?

Okay, I can’t prove it, but that’s how it feels most days. I spend all my waking business time helping people help themselves through financial literacy. It’s truly a great field to be in. So, while I was breezing through this week’s Carnival of Personal Finance, I was intrigued by an article titled Now May Be a Good Time to Quit Your Job. After all, I’ve quit jobs before.

What a great read!

You: That’s a pretty enthusiastic response. Are you quitting?

Heck no. But it was a good reminder of why I love what I’m doing and that, if I no longer felt that way, I’d probably stop. Take a look at that article, but remember, as I commented on the post, one’s ability to keep in balance in his/her non-financial life is only made possible by having the savings cushion necessary to take a time-out.

# # #

Today, I have something else I want to share. Although I typically limit my suggested articles to a grand total of one, this week I want to share a second, very short, very poignant posting titled Being poor is a state of mind. This post could have just as easily been titled Being Rich is a State of Mind, and it serves as a good reminder for anyone feeling sorry for themselves because of the recent increased financial pressure we are all feeling.

Of course, if you missed my post Pay less for the same, that too is featured in this week’s carnival, so take a look.

"financial education"

Second economic stimulus?

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at October 31, 2008 in Tax. 1 Comment

You: Wasn’t the first economic stimulus a failure?

Well, some people feel it did help the economy.

You: What? The economy’s in the crapp toilet.

Still, some people feel the economy would have been even worse earlier if not for the first stimulus package. That said, the administration of the economic stimulus is still causing pain, evidenced by my earlier blog posting (and the fact that people are still commenting on it months later).

But today, I am going to ask you a question. Actually two questions:

Do you think we should get another economic stimulus?
Do you think we will get another economic stimulus?

Where do Beyond Paycheck to Paycheck readers stand on these questions?

"financial education"

Money, taxes, relationships

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at October 29, 2008 in Uncategorized. 0 Comments

Having just read through this week’s Carnival of Personal Finance, I’m happy to provide you with the number one article of the week: Is the credit crunch threatening your relationship? What a shame that the question has to be asked and I’m hopeful that Beyond Paycheck to Paycheck readers can confidently answer “No.” But the truth is that, at least in the U.K., the answer is an undeniable yes, as divorce inquiries there are through the roof.

Just last week I wrote about Personal finance and your spouse, stressing the importance of getting on the same page as your life partner. I hope each of you did (or already were ). Although this financial turmoil should prove temporary (as every other previous storm has), all of our emotions are heightened. I believe this is due to some sort of fight of flight instinct taking over because we can’t control much of what is going on around us.

However, we can each control the most important part of the economic situation - how we react to it. I, for one, know that this will have little to no impact on any of my relationships. It may cause me to talk to some people more about money than in a normal situation - usually in the form of answering questions, but on the whole, money is not the primary focus on my interaction with the key people in my life.

I do enough of that during normal business hours!

If you missed it, my post Why you’ll pay tax on losing investments was also featured in this week’s carnival.