March 17, 2009

We haven’t had a lot of snow this winter.  Experts are predicting a dry summer.  Dry spells aren’t any fun.  You water as much as necessary to keep things alive, but you don’t water everything because water is limited and expensive, and you don’t want to waste it.  What lessons can a drought teach us about our finances, in a time when we feel like our money is drying up?

Water what’s necessary

Just as you provide water to your best plants or trees during a drought, you’ll need to do some careful watering of your money, too.  You want to make sure you’re paying all your bills.  Don’t neglect to pay for the electricity, water, gas, and phones.  Food is fairly important; make sure there’s always some of it to put on the table.  You also need to keep up with basic maintenance on your home and car.  Repairs that seem expensive now might break the bank later, after you’ve allowed them to get worse.

Don’t water everything

On the other hand, there are some things that don’t make sense to spend money on right now.  Now is probably not the best time to sign up for cable or satellite TV.  You may not need the best new cell phone or the best new laptop.  A new car or an addition on the house also don’t make sense if you have other goals that are more important, or if you’re worrying about running out of money.

Once we’re through this financial drought, times will be better.  It may take us a while; it might be this year, or it might be many years from now.  Keep being sensible about spending, keep searching for a job, don’t leave a job without another one lined up.  Keep the dinners out and the new iPhones to a minimum.  And imagine the green garden waiting for us on the other side!

This article originally appeared in the March 11, 2009, edition of the Greenhorn Valley View.


March 6, 2009

Here’s a cool idea for getting by in a down economy: bartering.  If you’re like me, the last time you thought about bartering was in the ancient middle east unit in world history class in high school.  But don’t write it off just yet; there are a lot of advantages to bartering.

You don’t have to be the best at everything

If you’re really good at handy-man type repairs, you could trade it for some computer work.  If you have a freezer full of beef, you could trade some of it for lawn work.  If you’re fluent in French, you could teach someone else in exchange for car repairs.  If there is something you can do, you can probably trade it for something you suck at.  If you have something, you can probably trade it for something you don’t have.

No sales tax

Quick math problem: at 6%, how much sales tax would you have to pay on that one-hour French lesson?  None, right?  Just about any good or service you buy in a store or through a service provider will require that you pay sales tax.  But with bartering, no money has changed hands, so there isn’t anything to tax.  The more you barter, the more sales tax you don’t pay.  This is not true with regard to income tax, however.  You are legally required to report bartering activity to the IRS.

Strengthened relationships

The benefit to bartering that is the most difficult to quantify is the effect on the relationship between the two parties.  And being difficult to measure makes the benefit immeasurable.  If you’re known as the guy that can get a dead car running in the middle of winter, people will want to keep you around.  If you’re known as the guy that can thaw a frozen computer and retrieve thousands of dollars in invoices, people will be glad to get to know you.  These kinds of bonds help to form a tight support network that is difficult to fall through.

So think about things you can do or make, or things you have stockpiled, that other people might want.  You may find yourself saving some coin, and also becoming an integral member of the community.

This article originally appeared in the March 4, 2009, edition of the Greenhorn Valley View.

financial resolutions

December 31, 2008

Is one of your resolutions this year to “spend less money?” I’ve made this resolution before, and I know many people have made similar resolutions. The resolution is kind of fun, for a while. You can trim every last expense and be left with some money at the end of the month. But before too long, the discipline required to make it work begins to take its toll. Your defenses are weak and you give in and spend more money than you wanted to. By the time the spring thaw arrives, your resolution is stone cold.

Here are some tips to make your resolution to “spend less money” stick. First, take baby steps. Take one small expense, and try to cut it down. Do you by a new DVD every week, buy new clothes too often, or eating out too much? Try cutting out just the DVDs. You don’t need so many anyway. With the time you save by not watching movies, take up a hobby. With the money you save by not watching movies, you can pay for that hobby, or just save it. After you’ve adjusted to life without the new DVD every week (and this might take a couple months), you can tackle one of the clothes, or the meals out. Just remember to do them one at a time.

The second tip is to use buckets to plan for your spending. If your car insurance comes due every six months, divide your total insurance bill by the number of paychecks between now and when the bill is due, and put that much money in your car insurance bucket every time you get paid. Then, when the insurance is due, just empty the bucket. If you use the bucket system with all of your major expenses, then you know you’ll be able to pay all your bills when you need to. Now you can breath a sigh of relief, because all of the money that’s not in a bucket is available to spend. Spend away! As long as you don’t spend more than you have available, you haven’t broken your resolution and you don’t need to feel guilty.

The key with resolutions is to be reasonable. Tackling your financial resolutions one small step at a time is the best way to ensure success. After a whole year of continuous small financial improvements, next year you can tackle another area of your life, like dieting. Ugh.

This column originally appeared in the December 31, 2008, edition of the Greenhorn Valley View.

emergency travel

December 31, 2008

I’m writing to you this week from lovely Ohio.  OK, not too lovely.  The temperature has been below freezing, and frequently in the teens, most of the time we’ve been here.  Thick curtain-like clouds obscure the sun.  The wind blows strong, chilling to the bone.  And all this without any snow to make it pretty.

Why would someone give up the grandeur of Colorado for the grayness of Ohio?  If you’re going to spend a mid-winter week away from home, why not make it Florida or the Yucatan?

We have family in Ohio, and we were called here by a family emergency.  Because of the nature of this trip, I’ve noticed several things about traveling that I haven’t noticed before.

Out of town guests are a strain on the host family, especially if that host family has other duties due to the emergency.  While we are always welcome at our hosts’ home, our hosts’ lives must continue in spite of us.  They have jobs, and a house to keep, and a sick family member in the hospital, and all of this is only complicated by having house guests.  We have attempted to make ourselves as useful as possible, but our efforts can only go so far.  Our future emergency plans will probably include a hotel stay, for everyone’s sanity.

Pet care is more difficult.  There are basically three options for pet care when leaving town.  You can take the pet with you, you can board the pet in a kennel, or you can find a friend to take care of it.  Taking the pet with you costs you travel time, as you still have to feed it and take it to the bathroom.  Boarding the pet costs you money, plus you leave the pet with a potentially impartial care-giver.  And asking a friend to care for the pet is difficult, because, let’s face it, nobody likes your pet but you.  In our case, we brought the dog with us, and we left the cat at our house and asked a friend to come by to check on it now and then.  When we get home, we’re going to spend some time making emergency pet care plans so we’re not left scrambling in the future.

An emergency fund is absolutely essential.  No matter how you handle the details, taking a last minute trip out of town is expensive.  If you do not have an emergency fund you will sink further into debt, turning a medical emergency into a financial emergency.  This is the first time we had to use our emergency fund since we started building it.  The difference between this trip and our past trips is like night and day.  If you have any desire at all to change your financial picture, you simply must have an emergency fund.  There is no substitute.

In short, while I wouldn’t wish an emergency on anybody, they are bound to happen.  At some point you will have an emergency.  How are you preparing to handle it?

This column originally appeared in the December 24, 2008, edition of the Greenhorn Valley View.

financial crack

November 6, 2008

Crack is pretty bad.  (So I’m told.)  A refined form of cocaine that can be addictive after the first use, it requires its addicts to be in continuous search of the next high.  Because it is so addictive, a crack dealer will sometimes give a purchaser the first hit free.  The dealer knows the victim will be willing to empty his wallet when he comes back for more.  But often the next high is elusive because of the large amounts of fake crack on the streets.  So an addict will often buy much more crack than he needs, in the hope that one of the hits will give him the high.

I was driving through a shopping district the other day and saw a sign for a payday lending institution.  The sign, out by the edge of the road so all passersby could see it, said simply, “First loan free!”  I assume they meant interest free, and not that they were just going to give you a bunch of money.  But regardless, why do you suppose a store like that would give you your first loan free?

Payday lending “customers” look a lot like addicts.  The first loan doesn’t cost anything, delivers instant relief, and helps you forget about your troubles for a while.  But what happens when payday finally arrives?  So does the bill for the loan – you have to pay that loan back.  But because you have a hundred other bills and credit cards due, you’ll have to decide what doesn’t get paid this time.  Are you going to quit buying food?  Gasoline?  Will you quit paying the rent or mortgage?  No, you have to have those.  But hey, here’s a friendly offer from the payday lending store offering to roll your loan over for just another small fee.  Why, it doesn’t hardly cost anything, and it will provide another instant hit of relief and forgetfulness.

But rolling the loan over doesn’t provide quite as much satisfaction as it did just two weeks earlier.  You’ve accumulated a few more bills and a little more debt in that time, and the original amount you borrowed may not be enough.  So you borrow more.  Hopefully, you can see this vicious cycle before it happens, and not after you’re already in it.

The addiction-like qualities of payday lending aren’t its only problem.  There’s also the high cost. You could borrow $100 for two weeks and pay only $15 for the privilege.  That doesn’t sound too bad, and most lenders count on customers thinking that fee is OK.  But quick math tells you that works out to 15% interest.  15% is pretty high, compared to other sources of credit, but it’s even higher when you consider that rate is for a two week loan.  If you kept rolling the loan over for an entire year, turning the two week rate into an annual rate, you would be paying 391% interest on that $100 loan.

Just like crack, payday lending can ruin you.  Don’t let it.  Stay far away.  Don’t do crack.


This article originally appeared in the November 5, 2008, edition of the Greenhorn Valley View.

a few of my favorite things

November 4, 2008

401k’s with full-vested matching
Annuity payments are really quite catching
Nice birthday cards with ten-dollar bills
These are a few of my favorite thrills
Three months of savings so I am protected
in case from my job I find myself ejected
Credit card offers filling landfills
These are a few of my favorite thrills

When my stocks sink
When my job stinks
When I’m feeling poor
I simply remember my favorite thrills
And I don’t feel poor no more

Home-bound after a week of hard travel
Wife at the door with kisses and hugs
Children excited to see their Daddy
These are a few of my favorite thrills

Family meetings, buffet dinners
Best investment I’ve made ever
Rambunctious sons, daughters who sing
These are a few of my favorite things

When my stocks sink
When my job stinks
When I’m feeling poor
I simply remember my favorite thrills
And I don’t feel poor no more

With hotel reward plans I travel in style
Frequently flying I rack up the miles
Expensing my Starbucks for breakfast’s a thrill
These are a few of my favorite thrills.

Freezer stocked full of good food for the winter
Pallets of pellets and all without splinters!
Pellet stove warming to fight off those chills
These are a few of my favorite thrills

When my stocks sink
When my job stinks
When I’m feeling poor
I simply remember my favorite thrills
And I don’t feel poor no more

This article originally appeared in the October 29, 2008, edition of the Greenhorn Valley View.

how to buy happiness

November 4, 2008

Making smart choices with your money frequently gets a bad rap.  Purchasing things brings happiness, but frugal sounds like a noise you make when you’re hit by a linebacker.  Let’s face it, nobody likes to put off a purchase of something they want – it ruins the fun and maybe even brings a little sadness.

Coming to grips with your money, or lack of it, is a herculean chore similar to loosing weight or quitting smoking.  If you don’t want it really bad, it’s just not going to happen.  You gain an awful lot, however, by coming to grips with your money.  So rather than focusing on the small things that we can’t have right now, let’s focus on the big things that we CAN have by being smarter about money.

The happiness we gain by giving up something immediate is happiness in the form of freedom.  Many of us HAVE to go to work because we have to have the income to support our chosen standard of living.  And we’ve chosen our standard of living largely based on the income we can bring in.  So if we wanted to take a lower paying, but more personally fulfilling, job, we’re stuck.  We can’t get out of our chosen lifestyle and so we remain in a job just for the money.  Imagine the freedom that would come from not having to work.

Many of us have a huge mortgage that consumes an inordinate amount of our income.  We have this mortgage so that we can have someplace to sleep after we spend all day working hard to pay the mortgage.  Imagine the freedom that would come from not having a mortgage.

The Joneses.  Oh how we hate the Joneses.  The Joneses just got a new car, fresh landscaping, and are going to St. Thomas – again – for a family vacation.  But they rely on credit cards and home equity to maintain this veneer of wealth.  If we didn’t have to keep buying things just because the Joneses do, how much better off would we be?  No new debt, rapidly paying off existing debt, rapidly building real wealth – the kind without the veneer – that will lead to real freedom.  Imagine the freedom that would come from not having to keep up with the Joneses.  (My apologies if your name happens to be Jones.  Nothing personal, you understand.)

So contrary to commonly heard advice, I think money CAN buy happiness.  Instead of buying the happiness that comes with a dinner out, or an iPod, or a tropical vacation, let’s focus on the happiness that comes from a big bank account, a house that belongs to us, not the mortgage company, or a job that offers more than a paycheck.  Our future selves will be a lot happier with real wealth than with the appearance of it.

This article originally appeared in the October 22, 2008, edition of the Greenhorn Valley View.