Wednesday, September 30, 2009

An Example of "Life Energy"

Over the weekend, I realized I needed my car washed, I needed the inside vacuumed and cleaned, and I needed my lawn mowed.

A car wash is $5. Having the inside cleaned is $15. I pay my neighbor across the street $20 to mow my lawn. This is a total of $40.

I decided to mow my own lawn and clean and vacuum my own car. It took me approximately 1 hour.

If I had chosen to pay someone else to do those things, I would have had to work approximately 4 hours to earn the money to pay them.

This was my sudden "real life" realization of the appropriate expenditure of life energy, as outlined by Joe Dominguez and Vickie Robin in their book Your Money or Your Life. In one situation, I'm spending 4 hours of my life at my desk in order to "save" myself 1 hour of my life in the yard/driveway. By doing the work myself, I spent only 1 hour of my life energy.

I used to spend about $100 a month on my cell phone plan, and probably a total of 10 hours a month using the phone for texting, pictures, etc. In other words, a total of 20 hours of life energy OR more than an entire week's worth of work for me (I work 15 hours a week).

Now with my Tracfone, I spend $20 a month, approximately, and perhaps 2 hours a month using it. Therefore, approximately 4 hours of life energy.


I've found so many times that I make money and spending decisions based on comparison rather than on the actual amount of money I have. $100 a month isn't really a lot of money considering what some people spend on cell phones....ergo, it's probably appropriate for me to spend that much on a cell phone. Um, NO!!!!!

If I find a total steal of a Kate Spade bag for $30, when it usually costs $350, sure it's a great bargain compared to retail price. But that doesn't mean I have $30 to spend on a purse, great deal or not!!!!


In order to rein in spending, we (the general we) need to examine how much money we actually personally have, not how much we think we have or expect to have or wish we had or feel we should have, how much we ACTUALLY HAVE. And then we need to make our purchasing decisions on real, actual needs and wants---is this worth the hours of my life I'm spending to purchase it? If my boss said "Come in next week and we'll give you this handbag at the end of the week rather than your paycheck" would I take him/her up on it? Not whether our friends have it, or whether it's on sale, or whether we're feeling low or feeling happy. Not based on how long ago we last bought one of these. So what if we haven't had a new coat for 4 years, if our current one is still in good shape, why not wear it and save ourselves the money?

Why indeed. Why is this concept so hard for me and millions of other people? It seems so easy yet it's so hard to internalize.

Friday, September 25, 2009

Oddly Enough....

When you aren't raiding your savings account on a monthly basis to pay off "just one more bill", the money in there adds up rather fast. Who would think?

Monday, September 21, 2009

How Money is Annoying

What bothers me about going from overspending to spending just what we have, is "saving" money doesn't feel like "saving" money.

For example, I was planning to buy a mattress. It was about $250. I got Grandpa's spare bedroom mattress instead. This should, in my eyes, mean I have an extra $250 lying around. But it doesn't! It's just $250 that I didn't have that I didn't spend, so instead of being -$250 I am still at $0.

That's not fair!

Wednesday, September 09, 2009

Turning the Titanic Around

My friend Jackie says that it only takes one month to get behind on your bills, and 6 months or more to recover from it. She's right.

For 8 years I had been merrily going along using my budgeted money for reliable expenses, and then using my credit card for anything else that I could make a good excuse for "needing" and also for any surprises like car repairs. (Poor cars, they always get the bad rap on budget problems! Sorry Maxxine!). I would then use my savings account to pay off the credit card.

It took 8 whole years, but I finally drained my savings account and was left with a $750 insurance bill, a $3,000 invoice on my new driveway, PLUS all my regular bills.....and not enough money. I guess I honestly thought it wouldn't happen--the savings account frankly seemed bottomless, and damn it we NEEDED all those things!

During that 8 years, I've periodically tried to work within my actual budget rather than my fantasy budget, but every time I've given up, because it seems like the dollars just don't stretch far enough. It took 8 long years and many failed attempts to admit that I need to change the way I SPEND.

The first step was, unfortunately, defining "needs". Although it could be argued no one "needs" a cell phone, I am out and about with a small child a lot of the time, and I feel it's important for my safety and sanity to have one. I did not, however, NEED a $90/month Blackberry. And it took some serious thinking-outside-the-box to realize that just paying the dreaded "early termination fee" only amounted to 1.5 extra months worth of service, while paying out the rest of the contract was going to be 6 times that amount.

Another "need" was a new mattress for our guest room. Again, maybe I don't truly NEED a spare bed that only gets slept in once in a while, but I like having it for unexpected guests, or for if one of us is sick. I have a bed frame in there, which was free (took it from my parents house), but was facing at least $200 to purchase a mattress. Having a set-up bed frame without a mattress means I have a "hole" in the room--the linens and the stuff that sits on the bed is scattered throughout the room, and my toddler is having a field day hopping between the rails of the empty frame. Many times I was tempted to just buy the mattress on my credit card, as it was annoying me a lot!


I have a seemingly benign purchase, I don't want to wait, I don't have the money, so I use the credit card and figure the money will appear by the time the bill comes.


The only thing that happens is the seemingly benign purchase is now off my mind, forgotten, and before long, another comes along, and makes its way onto the card, and pretty soon I have a $800 bill that I can't pay.

So I got to thinking creatively. I could save up the money for the mattress, but I have other things I want more. I made a list of the things I wanted to purchase. I realized I didn't really want to take any money away from other things to buy the mattress. And simultaneously recalled that there was a twin mattress at grandpa's house not in use. So I asked Mom if I could take it, and she said yes. So the problem was solved, and I didn't have to pay a cent (but I'm going to bring Gramps one of his favorite chicken sandwiches in thanks).

It was here I realized I am really on my way to having this long-standing budget problem truly solved. I ended the Blackberry service, saving myself $70 a month (my new cell phone costs $20/month at the rate I use it, but I am able to cut back also if I need to). I realized I didn't want to pay "real money" for a mattress, a new winter coat, or a score of other things. So I figured out a way to make what I have work.

As simple as it sounds, when I look in my wallet and there isn't money there, the answer isn't "find a different method of payment". The answer is "don't buy."