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Friday, March 8, 2013

Shunning Standard Financial Advice

My last post bitched about the joys of being back in credit card and car debt. So much fun! Really. Just like having a rousing case of hemorrhoids. And what girl doesn't love a good 'roid fest?

Many moons ago, I used to coach folks about getting out of debt. I supported all the standard notions: cut everything non-essential out; budget like a frugal ninja; tell friends and family to learn to like hugs over gifts, etc. We've all been there, done that, right? It works. It's fabulous. Which is why I'm not following the standard advice this time around.

Wait, that didn't sound right. But yeah, I'm changing the game a bit, simply because I'm old and tired. If I were going over my budget and gave the standard advice, I would tell myself to cut out charitable giving, sending stuff to military folks via Adopt a Platoon, and eliminate eating out. No new clothes. No trips. Cut, cut, cut until that debt beast is dead and preferably as quickly as possible.

After having a health scare, I'm a bit more selfish these days. The things that bring me the most joy in my life revolve around sending my soldiers random crap, being generous to charitable causes, and hanging out with my friends, which often involves meals out. I'm not going to cut those things out in service to debt. However, I am going to be smarter about it all. This means I will take close to two years to get out from under instead of one and will pay a bit more in interest. So be it.

So, here's how I'm doing the "wrong" thing a bit smarter:

1. I stopped using coupons eons ago, because I rarely, if ever, buy heavily processed packaged foods and my toiletry consumption is minimal (not to mention the fact that I often use products that simply don't offer coupons). But I have to buy that crap for my soldiers, because real food would mold prior to getting there, and I'm not sure some dude out in the desert is going to appreciate my homemade oil facial cleanser. So, a couponing I will go! I also signed up for a Target debit card, so that I'll get 5% off every time I shop there, which is where I get most of my soldier stuff. (Note: debit, not credit. Comes straight out of my bank account. I am trying not to wig about privacy issues.)

2. I cut back on some of my charitable giving, but not all. I'm still supporting the African Well Fund and the Worldwide Fistula Fund and random one-off gifts. Previously, I did not consider my volunteer work through Adopt a Platoon as a "charitable" act, because service members aren't "charity cases." They're trained professionals doing rough jobs in rough places. But now that Mama has debt? Yeah. Consider yourself a charity, boys! So, I'm still at the same percentage of giving, just packaged differently. The world continues to spin, oblivious.

3. I'm cutting back on eating out by mastering some recipes and having friends over for dinner. By "mastering recipes" I mean screwing things up beyond repair and forcing people to eat it anyway, lest we waste precious grub.

4. Since I've changed the way I live, my body is changing as well, which requires new and/or altered clothes. (Isn't it super great how 99.9% of all weight loss comes from the boobs and won't budge from anywhere else? Yay! My tatas are now sad remnants of their former glory. Thanks, nature. Thanks a lot.) A friend graciously gave me her sewing machine, which I am learning to use so that I can alter what I currently own, thus lessening the need to buy new goodies. My ultimate goal is to learn how to make dresses for myself. Feel free to swing by with a hands-on demo. I took a class once. I was the "special needs" student who sucked horribly at it. This will not deter me, however, because I excel and being a shitty, shitty beginner.

Next up? Ways in which I am following the old school advice. But I'm curious, is there anything that you do that's against the standard advice?


Rachel said...

I'm a bit late saying this, but welcome back! It's good to see you here again, but very shitty news about the debt. I didn't say anything on your previous post because I was reeling in horror at the idea of illness having big financial implications. Maybe I should wake up and start shouting about what our current government is doing to our precious NHS, instead of putting my fingers in my ears and going, "La, la, la," until they go away.

Anyway - non-standard financial decisions: It may not relate to debt-reduction, but conventional wisdom advises buying the most expensive house you can get a mortgage for, so as to work your way up the housing ladder. Five years ago I moved house and took a step down the ladder in order to pay off my mortgage completely. That was one of my better decisions.

EcoCatLady said...

Well, I think you're taking a very sensible approach. I think you've gotta look at debt sorta like losing weight. If you try to lose it all at once you run the risk of making yourself so miserable that you'll just feel resentful and crappy, and it will most likely backfire in the long run.

I probably could have had the mortgage paid off years ago if I'd worked at it. But then I wouldn't have been able to build up a nice cushion of money in the bank, and I would have also stressed myself out to the point that I really would have gone crazy! As it is I'm only sorta crazy. :)

Besides, it would have deprived my father of the opportunity to play Daddy Warbucks with his social security money. (Thanks Dad.)

Ultimately your health, both mental and physical is vastly more important than paying off the debt as quickly as possible.

FreshGreen Kim said...

As an aside to coupon hunting/gathering... IF you print them out, the site will donate a percentage of the coupons to a non-profit of your choosing.

Best wishes on your goals.

Elizabeth said...

Conventional wisdom suggests that we should always worry about our credit scores. Having worked in that field, I know that the scores are continually manipulated, regardless of all the advice out there. So I stopped living in fear of it years ago. I recently did Dave Ramsey's Financial Peace course and he expressed it so well. A credit score simply reflects how you manage debt. So a really good score usually means you have a lot of debt. No thanks!

I also stopped feeling bad about having debt. It has made a world of difference in getting myself out from the mountain of it that I had. I still have some, but it has gone from a mountain to a hill.

Elizabeth said...

I should add... The reason I don't feel bad about my debt any longer is that when I attach bad feelings to things, I seem to be unable to deal logically with the issues. Removing the attachment, allows me to focus on what needs to be done instead of "woe is me, I am such an idiot, blah, blah, blah"

J.N. Urbanski said...

Sometimes you just need a break from being frugal to enjoy life before it passes before your eyes. Times goes so quickly. You could apply the 80/20 rule: be frugal most of the time and then give yourself a break, literally.

Janeen said...

Your approach is very sound. I can relate -- after having my own health scare in 2012 (all is well now), which was my first, you start to realize that life is a finite thing. Of course I knew this intellectually, but emotionally it sometimes takes a scare to change course.

I can relate to your charitable giving strategy - I still give roughly the same amount. I have, however, dwindled the list of charities I give to to just a few that are near and dear to me. I'd rather stretch my bucks further.

I think a person can still buck the norm (massive consumption) and moderate their own habits quite a bit. I think that if friends like going out and that involves meals, you don't want to be the one to stay home. I'm a big fan of the small plate/happy hour (free snack mix-YAY!), BYOB appetizer parties at my house, and "chick flicks" movie nights (usually combined with the BYOB party).

I think JN Urbanski's 80/20 rule is great advice -- it allows you to be human. (Being perfectionist about it is stressful!)

Just a practical tip -- and I know all wouldn't agree with me -- but I've recently become a devotee of Costco. A good deal of their food is healthful and when I stick to the things I really use or buy their store brands (washing detergent, TP, etc.) I save loads of money. I don't mind having to throw stuff on my basement storage shelves, because it just means fewer trips to the store (I live in a small town, so it's not convenient) and it saves me from Wal Mart (not a fan, but sometimes necessary in a small town.)

I'm a big fan of the Target card too.

Janeen said...

Don't mean to hi-jack your blog (but I haven't been here for awhile:-)

Consistent with my great revelation in 2012 that life is short, I've begun thinking how to conserve my time for things that I enjoy and/or that are good for me (running, biking, traveling, reading...) Many extreme measures in frugality can be time consuming.

For awhile I was trying to do couponing, keeping a price book and all that sort of stuff, then I realized how obsessed I'd become and how it was taking more time than I had to give. I don't think I saved much money.

Also, I try to take the "big view" on saving a buck. This is why I don't run all over yonder looking for "deals." Also, I shop a lot at Trader Joe's and Costco because they stand behind what they sell. I've never had trouble getting refunds on products not up to snuff -- including produce. This "insurance" when I lay out my cold hard cash makes a big difference to me.

Demandra said...

Rachel--I'm horrified to see that countries with strong NHS are slowly trying to phase them out. WTF? Insane! The US should be an example of how very wrong it is not to have a strong NHS. Ug.

ANYHOO, thanks for the welcome back! And I totally agree with you on the housing note. I'm still in my little studio apartment and will be until I move out of this city. No way, no how, I'm going to take on more rent/mortgage/space than I need. It's just senseless.

ECL--thanks and agreed! xoxo

Thanks for the link, Kim!

E--I'm not at a point where I don't feel bad or feel like an idiot about my debt, but I'll get there. Forgiveness is golden. And dude, the b.s. around credit scores infuriates me. When I paid off all my credit card debt like a responsible person? My score went DOWN. When I got a loan for my car? It went UP. WTF? Seriously? Here, let us reward you for having more debt and penalize you for paying it off. Oh, suck it, you fucksticks.

J.N.--dude, I use the 80/20 rule with food (ok, so sometimes it's more 60/40) and music (I will only allow myself so much crap). Duh! Why didn't I think of it for money as well? Le genius.

Janeen! So good to hear from you! Yay! So glad to hear all is well in your health these days. 2012 was a helluva year, eh?

Love your suggestions on grub with friends. And I do still shop in bulk, even with my tiny apartment, but I've gotten over the need for a pricebook, etc., much as you have. I shop at my garden, farmers market, Trader Joe's and Whole Foods. Occasionally, I'll get stuff from Costco when a friend goes, but I haven't found it to be much cheaper than stuff from TJs. Maybe that's just out here? But it's just not worth it to me to run all over town to save $5. Perhaps if I didn't commute so much, the driving wouldn't drive me nuts, but it's just not worth it. I'm able to use savings techniques with the way I shop now, and TJs is usually cheaper than most other stores.

That was a really long-winded way of saying "me too." And hijack all you want! It's always great to read your insights. :)

EcoCatLady said...

With a few exceptions I haven't found Costco to be all that much cheaper than the regular grocery store - but I do still shop there on occasion. Not sure I would if I had to pay for the membership, but since my parents included me on theirs it works.

But speaking of Costco, here's one crazy technique that does work for me. When I'm feeling like I need a diet adjustment (ie when I've been eating too much crap and need to get back to to eating more fruits & veggies,) I'll buy my produce at Costco and challenge myself to eat it all before it goes bad.

It's a silly game, I know, but it seems to work for me. It gives me a fun way to get my eating back on track without all of the guilt and recriminations that I usually associate with dietary choices. It's especially fun when cherries are in season! :-)

I realize that was totally not related to the topic of this post at all, but I fear my brain just goes where it goes...

p.s. Janeen, it's good to "hear" from you. I've been wondering what happened to you and if you were OK. I'm so glad that your health scare turned out OK. Hugs...

Jen Etic (Heathre) said...

What is the 80/20 rule? I've heard of 80/10/10 with food, but I'm assuming not the same.

I want to contribute to the comments, but I'm not sure if I (or my s.o.) go against standard advice.

"Ultimately your health, both mental and physical is vastly more important than paying off the debt as quickly as possible." Agreed. People(including myself) spend more time on perfection rather than being realistic. If I can't do something perfect or am overwhelmed, then its easier to not do it, rather than pick something and go from there.

Have you read Jeff Yeagers books?

Elizabeth, can you talk more about credit scores?

Monday's Child said...

Random comments:
I have an excellent credit score. And it isn't from having a lot of debt. It's from having a lot of available (and unused) credit. And from paying my bills on time, every time, without fail, for years, even if it means shuffling stuff around. I agree that doing stuff for the sake of a credit score is silly. If you take care of the money, the credit score takes care of itself. I also know that many companies are perfectly aware that medical bills can screw people up; so if the only negatives on your report are medical expense stuff, many companies will ignore that.

Honey, I'll be happy to teach you to sew dresses on your sewing machine. I'll even teach you the cheating shortcuts I've learned over the years because I'm lazy as hell.

The husband and I are moving from our lovely house into a mobile home. We aren't selling the house, we're going to rent it out since our mortgage is low enough to be covered by the going rent in the neighborhood, and we do want to move back in someday. But the mobile will cut our monthly expenses (utilities, commuting costs, time wasted by commuting (which also results in more fast food)) drastically. One of the lessons I've tried to learn this year is that nearly *everything* in my life is negotiable - even the things I wouldn't previously consider, such as moving... or renting a room from friends (as I've done all year so far to save commuting). Take a step back and ask yourself what really obvious and easy changes you're overlooking because they were in your "do not consider" list.

I am a firm believer that the L in LBYM is LIVING. As long as my debt is going down regularly, I don't choose to cut my luxuries down to the bone just to get out of debt more quickly. While being out of debt would feel fantastic, the life I'd have to live to do it immediately would make me unhappy. YMMV, of course. But I choose to keep my thermostat at a level that allows me to be comfortable with no more than a lap blanket and socks, rather than a hat and sweater. I permit myself fast food breakfasts because it's better than not eating and I know I don't/won't take time to eat at home before work (though I do keep instant oatmeal in my desk to alternate with my Sausage Egg and Cheese McGriddles). Pick a level of spending reduction that doesn't make you want to slit your wrists. It might not be the level that someone else would pick, but they don't have to live in your shoes; you do. We obsessive types like to jump into everything with both feet and burn out before we're done. But slow and steady really *does* win the race.

And as my final word of rambling ranting advice: This too shall pass. The sky didn't fall, it just got a little cloudy. As Andy on reminds me: the blue sky is still there, behind those clouds, even if you can't see it right now.

Oh, and hugs. Lots of them. And don't forget your friends are always here for you. Just ask.

Demandra said...

Monday, I'll have to disagree with you on the "take care of the money" and the credit score will follow point. As I mentioned, I paid off my credit cards, which gave me a shit ton better debt to income ratio, and I was knocked for it. My score went down by 15 points. Still in the excellent/good range, but fuck that shit. The proprietary method in which credit scores are determined is bullshit. From what I've read, paying bills regularly and on time--the most significant way in which to demonstrate your responsible nature--receives the least amount of weight in the scoring process. Bullshit! I call bullshit on the whole game.

So, we'll just have to agree to disagree on that! ha!

But yeah, your point and the point of my post are the same--I'm not interested in making myself crazy in service to debt. I wish I could get to the same point you are at with the fast food though. I really get angry with myself for eating it when I do. I particularly loathe my use of Carl's Jr., since they have some of the most misogynistic ads out there.

Anyhoo, gracias on the shared experience and advice and hugs! I need to remember the "this too shall pass" line and stop being so mad at myself. Le sigh.

Heathre: Dude, I can relate to this so much! " If I can't do something perfect or am overwhelmed, then its easier to not do it, rather than pick something and go from there." Perfectionism is a beast that kills productivity and sanity. I am getting much better at embracing "good enough."

As for the 80/20 rule, from what I know, it's about being smart with your money (or whatever) 80% of the time and allowing for stupidity 20%. There's also a rule around spending 80% of your time on the 20% of stuff that really counts, but that's more of a bidness thang.

ECL--I do the same thing with greens and making my green smoothies! I get an ever-luvin' shit ton of greens every week and make myself eat through them. I feel so much better since I've been doing that. Sauteed, smoothie, I don't give a shit. As long as I get those puppies down.

Demandra said...

Also? Pardon me if I sound crabby. I think I'm hormonal or something today. I want to punch random strangers! Fun times. Fun times.

Monday's Child said...

You mean wanting to punch strangers isn't a normal part of life? Damn. I guess I'm hormonal also... for about 20 years now.

Demandra said...

ahahahahahahahahahaha!!! oohhhhh, i needed that.

also? shit. (it seems to be my favorite word.)

oilandgarlic said...

I think where I "buck the norms" is that i don't consider buying a house a good investment. It's great to own for many reasons, but I just don't see a financial reason for it in a high cost of living area. I do want to own for emotional reasons.

I also don't worry about my credit score. I don't have too many cards and pay it off in full. we don't owe on cars. I guess because I'm not planning to buy a home, I'm not super concerned. However, when we were looking for another house to rent, the score did become a factor. Luckily mine was still high enough to beat out other renters.

Demandra said...

O&G--I am with you on the house front. It's place to live, not an investment (imho). And out here? No way. I want to own a home someday, but I'm not paying $400K for a small box in a crappy neighborhood. I'll head back to the Midwest or the South and get something affordable. Or so I tell myself...

lizzie said...

If it is not necessary to go hard-core dont bother.
Just keep paying down what you decide and if it takes two years then that is fine.
If you get an unexpected chunk of money you can always throw that in too. It is good to be realistic and give yourself enough to do what you want and have a good life, if you spend less than you expected then that can go to debt also.
Good post, very wise.......

EcoCatLady said...

Count me in the "wants to punch random strangers" camp. Especially when they happen to be in cars, that are piled up in bumper to bumper traffic, at 1pm in the friggin' afternoon, when all you're trying to do is get to the salvage grocery store to save a few bucks on cheese!

And my advice on the fast food front is to develop a case of multiple severe food allergies. Works every time! :-)

Elizabeth said...

Jen Etic - I would be happy to answer questions regarding credit scores. Perhaps you could send your questions to Al and I can respond to them privately.

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Amy said...

If you are new to coupon use, I recommend checking out (NOTE: No, I have no affiliation with or financial stake of any kind in this site. I just think it's handy.) Basically, you tell it what state you live in, and it tells you which stores in your area are currently running sales that can be stacked with coupons from the most common coupon sources (like SmartSource and RedPlum). It also provides links to relevant online coupons. I find it saves me a lot of time; all I have to do is check the site once a week to find out where the deals are, instead of scanning the sale fliers and comparing them to the coupon inserts. And unlike many other couponing sites, it doesn't charge for membership (it's supported by ads).

@Elizabeth: Well, it isn't strictly accurate to say, "a really good score usually means you have a lot of debt." A good credit score means that you are good at *paying off* debt. This doesn't mean that you had a lot of it to start with. The things they look at are, in order of importance:
(1) How consistently you pay your debts on time. This means that to have a good score, you have to have *some* debt, or there's no data to draw on—but having a *lot* of debt won't necessarily get you a better score. On the other hand, you don't get any more credit for paying off your whole balance than you do for just meeting the minimums. However, it does affect the next item:
(2) How much of your available credit you use. In this case, you will have a better score for having *less* debt. Paying off existing balances should boost your score. (They do say that sometimes having a small balance is better than having a zero balance, but it doesn't make a huge difference.) However, having *access* to more credit will improve your score. So, for example, you will improve your score by having more credit cards--but only if you don't charge that much on any of them.
3) The length of your credit history. Again, it's not how much you've borrowed that matters; it's how long you've been borrowing and paying back. So borrowing more now (or less) will do nothing to change this.
4) Types of credit. What matters here is not the total amount that you borrow, but the number of different places you borrow from. Having two credit cards (and paying them both regularly) is better than having one; having credit cards and an installment loan is better than having just credit cards. But borrowing a large amount doesn't boost your credit any more than borrowing a small one.
5) Age of your accounts. Opening a lot of new accounts at once is a red flag--so this is a case in which borrowing more will hurt rather than help you. However, closing off old and no-longer-needed accounts will also hurt you, because it means that all the accounts you have left are newer. Older accounts are better than newer ones.

So, in sum, having "a lot of debt" isn't the key to having a good score. It's having different kinds of debt, not having too big a balance on any one account, and paying them all regularly.

Rebecca Cross said...

I think it’s best if you list down all the items that you usually buy. Then make a comparison on how frequent you need/use them. That way, you’d know which items you have to discontinue purchasing, which will help you cut those expenses from your budget. I hope that helps!

Rebecca Cross @ ADVBAC