Monthly Archives: September 2009

Weekly Roundup – Patient Lottery Winner Edition

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I read an interesting story over the weekend about an Australian lottery winner who decided to hang on to his ticket for six months before cashing in so he would be “psychologically ready.” He also wanted his four kids to continue living, and working, without expecting a handout from his winnings.

How many people would be able to wait six months to cash in on a couple million dollars? It’s an interesting idea, but I could help but think he’d be better off to take that money and park it in a few $100,000 CDs earning interest! Still, at least he didn’t burn through it in six months as others have been known to do.

The Frugal Roundup

This Is Why You Are In Debt. Ever wondered how and why you are deep in debt? Chances are you have engaged in at least a few of the behaviors described in this post. (@Marc and Angel)

Money and Dating: Finding Someone With Similar Financial Goals. I recently read the results of a ground-breaking survey that revealed tightwads are attracted to free-spenders, marry them, fight about money, and divorce. Duh! (@Million Dollar Journey)

101 Restaurants Where Kids Eat Free. Nothing beats a cheap meal, and free is in even better! Here’s a great resource for those planning a night out with the kids. (@Mr. Free Stuff)

Green Living: Ways to Recycle and Buy Used. In just the past month we have purchased a sofa and love seat used, gave away our old one to a family friend in need of furniture. We have tried to adopt a strategy of only acquiring something if we are willing to give up something else. Helps keep clutter down. (@The Digerati Life)

Kitchen Compost Bucket – DIY, Easy, and Frugal. As a fellow “do-it-yourselfer,” I was very curious to learn how to make your own kitchen kitchen compost bucket for very little money. (@Debt Free Adventure)

Should You Buy Disability Insurance. Not a particularly fun topic, but one that hits close to home for me. My mom became totally and permanently disabled after a stroke at 53 years young. She is now completely dependent on income from her disability policy – a financial lifesaver. (@Generation X Finance)

How to Save for Multiple Goals.  We actually save in separate accounts for each of our goals, but since I’m looking to consolidate and streamline, I think this single-account, spreadsheet tracking model. (@My Dollar Plan)

How You Can Use 529-Plan Money. Did you know thanks to the stimulus plan you can now use 529 money to buy your college student a computer, and pay for internet access the next couple years. Other little-known uses included in this one. (@Kiplinger.com)

Best of the Rest

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Stop Allowing Fear To Guide Financial Decisions

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Do you ever stop to think how many of our decisions are based in fear? I’ve been doing it myself pretty much my entire life. While there is much to be afraid of these days, I hope to find the peace to begin making financial decisions for other reasons.

Finding that peace is an uphill battle thanks to entities like the media. I’m willing to bet none of us can go through an entire day without hearing about swine flu, a terror plot, identity theft, an airplane crash, a horrific car accident, a celebrity death, or a nefarious government conspiracy.

Traditional media does a great job of perpetuating their own motto, “If it bleeds, it leads,” but they aren’t alone. New media is getting in on the act, too. One of the hottest trends on the web the last week or so involved a website that shares death risk rankings. How inspiring.

This fixation on the negative has left us all in a constant state of worry. We live in a perpetual state of fear – of dying, of going broke, of losing our freedom, of losing a loved one, and on and on. Don’t believe me? Why do you think pharmaceutical companies, especially those with leading drugs for anxiety and depression, advertise heavily during the nightly news?

I’m not just picking on pharmaceutical companies. There are a number of industries whose main purpose is to sell consumers products that make them feel more secure. From life insurance, to identity theft protection, to those make-your-own last will and testament software providers, many companies exist to help alleviate your fears.

Those companies are not necessarily bad, and most of us in and around finances generally agree their products are a necessity (at least when it comes to insurance and wills). However, this fear bleeds into other areas of our financial lives.

How many of us are terrified of applying for a new credit card, or canceling our current credit cards, because of the impact it might have on the great FICO gods? It’s sad when we allow our behaviors to be dictated to us by some secret, highly-protected, highly-complicated algorithm dreamed up to dummy down lending decisions.

This thought occurred to me the other day as I paid off yet another old credit card account, from a company that had provided horrible customer service over the years. We had already introduced the credit card to our sharpest pair of scissors, and now I was ready to call and cancel the card.

As I’m dialing the customer no-service number I remembered the same advice I’ve given here at Frugal Dad before – don’t close your oldest credit card because length of credit history is an important factor in calculating your FICO score. Same for credit utilization, which would also be affected if I canceled this card with a high credit limit.

Thankfully, at that moment my common sense kicked in and I said out loud, “Screw FICO.” Blasphemous, I know. I’m not going to carry around this old account from a company I can’t stand just because it might affect my credit score. I’ll do business with whoever I want to, and for as long as I want to. I dialed the remaining numbers and canceled the credit card.  Good riddance!

I’ve also spent too much of my life obsessing over my finances. I’ve stayed awake at night counting credit card balances instead of sheep. I’m afraid of something happening to me, leaving my wife and kids without enough to survive. Do I have enough life insurance? Do I have enough in emergency savings? Do we have enough saved for the kids college plans? Will I ever be able to retire? The list of financial worries is endless.

At some point you just have to live your life. I’m not advocating throwing caution to the wind, burying your head in the sand, or not taking basic steps to secure you and your family’s future adequately. But I am advocating that we try to sort of put things on autopilot so we can stop worrying, and obsessing over our finances.

Over the last couple years, simplifying our financial life has been a big goal for us. We’ve consolidated accounts, set up automatic transfers where possible, put retirement savings on auto pilot. Besides periodic checks on balances or fund performance I rarely look at the “big picture” stuff. I focus on winning today, and being “present” for my kids. As long as we keep winning the daily battles with money, the “big stuff” will take care of itself in time.

5 Ways to Stay Out of Debt When Unemployed

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The following guest post was submitted by Knight Hooson. Knight was born and educated in Canada before moving to Great Britain in 2002. Now based in London, he writes for The Credit Letter where he blogs about managing credit cards and personal finance. When not working, he enjoys learning about wine and exploring France – especially at the same time.

As the old adage goes, when you find yourself in a hole, stop digging – a classic piece of advice to be heeded by those who have found themselves jobless and getting further and further into debt.

Digging myself into a deeper hole! by Coljay72

Image by Coljay72

The downturn in the global economy has struck hard, and some people are suffering from the brunt of the fall out more than others. Unemployment numbers are at their highest levels since the financial turmoil of the 1980’s, and the situation only seems to be getting worse rather than better. And because lending was totally out of control in recent years, many of those who are now unemployed have access to large sums of money on credit, which they use unwisely with no means to repay their debts. It’s a predicament that could all too easily get out of hand, further compounding the amount of debt owed.

To ensure a bad situation doesn’t get any worse, it’s important for those currently unemployed to nip their bad habits in the bud and set up a good survival strategy so their chances of incurring yet more debt are limited. Here are a few ideas that will help you escape sinking further into debt while looking for work:

1. Devise a Budget

Before you know what you can spend, you have to know what you have available. The only way to do that is to draw up a budget. It doesn’t have to be anything fancy; you could do it on the back of an envelope, if you like. Start by tallying up what money you have available (severance package, spouse’s income, savings, unemployment insurance, etc.) and then divide by six – the amount of months it may take you to find a new job. If your geographic area or industry has been badly hit, you may need to plan for longer. You will then have more of an idea of how much money you have available to spend each month.

Now tally all of your monthly outgoing expenses. Start with the most important ones – your rent or mortgage, food, and utilities. Then move down the list: travel, car expenses, health care and any outstanding loans or credit card debts. Get everything down on paper.

You are left with two numbers: one representing your income and the other your expenses. Provided the income is greater than the expenses, you should be fine, but those who are unemployed will be very unlikely to be in this position. If that’s the case you need closely scrutinize what you do with your money.

2. Make Do With Less

It’s important to take a close look at your spending habits and see what you can do without – at least temporarily, until you’re back in work. Depending on the circumstances, you may have to be quite brutal. It’s time to ask yourself what are necessities and what are luxuries. You may need to forgo the luxuries for awhile.

Do you really need deluxe cable television or satellite TV? Do you need new clothes or Starbuck’s lattes? Probably not. It might require some tough questions to fully determine what you can and can’t afford on your budget, but in the long run you’ll be better off for having made the sacrifice.

3. Look for Additional Sources of Income

While you’re job-hunting it might be useful to think about other ways you can bring in some much-needed cash to keep you going.

  • Declutter – now might be the time to sell some of your extra belongings on eBay, or in a garage sale. It will give you something to organize, help clear out some of your cupboards/closets and bring in some cash.
  • Consulting – do you have a skill or a knowledge which you can offer on a consulting basis? Can you teach someone else how to do what you do? Would someone pay for your expertise in a certain area?
  • Start your own business – is there a business idea you have always wanted to explore but never had the time? Now might be the right time to draw up a business plan and seek funding.
  • Rent a room – Do you have a spare room in your house that you could let to help pay the bills?
  • Casual jobs – don’t overlook dog walking, babysitting or doing yard work. They will get you out of the house and interacting with people, which is important for developing your network.

4. Fight Depression

It’s natural to feel depressed when you’ve lost your job, especially one you’ve had for a long time, and it’s hard to not take it personally. You must do everything you can to fight the urge to get down in the dumps. It’s all too easy to start charging everything to your credit card in an attempt to cheer yourself up, even though you know it’s the wrong thing to do. Thinking, “Oh, I’ll pay that off when I get a new job.” That will only lead down the slippery slope of debt, and the further you get into debt when unemployed, the longer it will take to get out of the red when you’re back in work.

Acknowledge that you’re experiencing a temporary set-back, adopt a positive attitude and you’ll soon get back on your feet and find another job. It’s important to keep physically active – go for a walk everyday – it doesn’t cost anything, and avoid day-time TV like the plague – it has a tendency to suck people in, keeping them from focusing on what they should be, and that’s finding a new job.

5. Ask for Help

Now is not the time to go it alone. Put your pride aside and ask your friends and family for help – whether it’s emotional support, a loan or a hot meal; their assistance will make a huge difference. There are resources in your community too which can help, whether it’s a food bank, a charity, or job search assistance.

If you’re eligible for government assistance, then be sure you apply for it. You may have to jump through some hoops, but it is better than losing your house or saddling yourself with additional debt.

And, if you’re not going to be able to meet payments on your mortgage or credit cards, then you can’t ignore the problem. You must phone them up and speak to them. Explain your situation and ask for help in finding a solution. Banks and other creditors are much more understanding than you would think. Don’t be tempted to go to debt management agencies, either. They will only charge you to do what the banks will do for free. Creditors just want to get their money back, so will help you devise a repayment plan that suits your budget.

These are trying times. Remember that what doesn’t kill us makes us stronger. Keep your focus on finding a new job and follow these tips to help you meet that goal without falling further into a hole.

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