Archive for the ‘financial responsibility’ Category

Truth or Consequences

May 15, 2008

I’ve been quiet. We took a break from the blog and guess what? Yes, our debt went up again. The husband and I were marvelling at how close we got to kicking the debt back in September. When I think back to the months between September and May I can’t easily explain how our debt shot up by 13K. I want to be shocked and yet I am not. *Sigh* Who would read the blog of two people who came so close to their goal and then lost sight of what they were doing? Is this delusional blogging? Don’t answer that. For now I can only hope that the blog serves as a way to help the husband and I focus on our debt elimination again. For now this is our tool to jumpstart our financial awareness.

I could spend a bunch of time trying to account for why we lost track of our goal and how we racked up more debt. But I’m guessing that’s a bit boring. And yet, I wonder from a psychological standpoint, is it helpful to review the past in great detail? Will this truly help us or prevent us from moving forward? Hmmmm….I suppose there’s not a straightforward answer to that question. Shrink husband, what say you?

To tackle our debts we clearly need to look back to understand how we have spent our money and what our pitfalls were. In looking for patterns we can identify areas for improvement. But what does it take to move beyond the past and really take control of our financial decisions? Here are some suggestions:

1.) Look at past spending — If you have been using Quicken or Liquid Ledger run some reports to see how you’ve spent your money for the past 12 months. You may be surprised at what you find.

2.) Identify areas for improvement — Be realistic. Don’t go from eating lunch out everyday to packing a lunch every day and never eating out. Being absolute is a surefire recipe for failure.

3.) Remember that every decision you make about how to spend your money is a choice. — Don’t fall into the trap of thinking you need something or that you are entitled to it. Remember that you are in charge of financial choices and every choice has options and consequences.


Pissing On American Express, or, Hot Air into Action

August 31, 2007

The hair that broke.
Oh, I meant pissing off. So sorry. Do I sound angry, bitter, resentful? I am and have been all those things, but the overriding mood is one of sweet, unalloyed triumph. As I mentioned early in August, American Express really pissed us off. I don’t know why. We should really not be so naive. They simply pulled the old bait and switch tactic, 0% followed by two late payments and then whack! 30%. Will we ever learn?! So I wrote of drastic measures. I even mentioned Thunderbirds.

Napalm for debt. Napalm for Chase. Napalm for Amex.
In any case, we converted some of this hot air into some active warfare. We liquidated an asset. We are sad about this. This was not part of the dream. But, as John Lennon sang, the dream is over, time to move on.

Recent payments, made August 3o:

United Mileage: $3207.32

Chase/ Amazon: $5999.24

American Express: $15,770.15

I am ecstatic that we have the resources to do this. Amazingly, we still have a couple grand of debt. But the bulk is paid off. I’m delighted that we didn’t take out a home loan thereby prolonging, and multiplying our debt for 30 years.

Not doing it again!
Now the trick is not getting back into a debt that even remotely resembles this morass. Since canceling credit cards hurts your credit rating we are pondering what do with the couple we won’t ever use again. I said never. Shame on me. Freezing them is not enough. How about preserving them in plexiglass? Or amber, maybe. Another idea is cutting them up and burying them in the back yard. Admittedly, these solutions are more based in poetic justice than any real contingency.

The morass.
This last bit about not doing it again is very serious. We still want to maintain a credit card for airline fares, that sort of thing. But we really need to get into a mindset where that card is literally frozen, is treated like a hand grenade, is kept under lock-and-key, sort of like a firearm that you wouldn’t want your kids to get their hands on. This will be the challenge. I’m hoping we’ll be more than up to it.

The addiction model — a little psychology.
I think debt is a little like addiction. It is, after all, largely a result of compulsive behavior. It creeps up on you. Little mindless impulse purchases, CDs, video rentals, trips to Vegas and then — kablooey — $20,000 in the hole. (I realize this scenario is not as common as some people would like us to believe, thus normalizing large debts. But it is fairly common, nevertheless.) So back to the addiction model. In Alcoholics Anonymous addiction is viewed as a disease. On a charitable day I view this as wrong-headed, perhaps even dangerous.

Biological determinism.
I am familiar with the brain science. Much of it is compelling. But I’m still not convinced that it fits the disease model. And as with much biological deterministic thinking there is the chicken-egg problem. What causes these mechanisms in the brain to activate? Another side to the disease model is that there is a high genetic component to alcoholism. This is undeniably true. But why is it that some become alcoholics and others don’t? What is the mechanism that activates the gene? My point is: We are not doomed to fulfill all the scenarios scripted in our genes. This makes for hopelessness and a willingness to shirk off responsibility.

In Marlatt’s relapse model relapse (in our case, think Doctor Debt shows up at the doorstep, “Damn, you again?”), relapse is viewed as inevitable. This is not fatalistic. It is just viewed as part of a process. Relapse is part of the process. It is not looked upon as being shameful. When it is viewed in this way, it is easier to pick oneself up and get back on track (hey, two cliches in a row!). You are not a failure! Your life is not over. You can be debt-free again. One does not have to return as a newbie and start all over again. Time and again I’ve heard from relapsed AA members that this can be a very shameful, even shaming experience. When relapse is a process it is treated matter-of-factly. And it is dealt with accordingly.

Making it official.
Once the transactions clear I’ll update our debt meter. But I want it to be all, like, official.

A Debt Reduction Carnival

August 6, 2007

Our First Carnival.
Warning: Many exclamatory statements ahead. I guess we’re just excited, excited, excited about hosting our first ever debt reduction carnival. It certainly has been inspirational to be a part of the debt reduction community, really.

Would You Consider Helping Another PF Blogger?
We’ve learned a lot. So, sit back and click. Would you mind? The pf community is a great place for otherwise scarce information about debt reduction. Pf bloggers are making a public commitment to debt reduction — a powerful motivator. Perhaps you will post something to the next carnival, respond in kind? Since you’re reading this, it only makes sense.

[If the previous paragraph reads like utter dross — please pardon, there’s a reason, to be explained in a later post about marketing that exploits our deepest, largely unconscious needs. Look for it on Wednesday, most likely.]

For the record, these are in absolutely no particular order! Enjoy.

Two Investment Mistakes:
I’m partial to this post, perhaps because it looks into two mindsets, cognitive rules of thumb, heuristics, that can get us into trouble when investing. That’s psychology folks. So read on… It’s hard not to want to spur someone on that has just started a pf blog, whatever the focus — debt reduction, money management, frugality, investment. Check it out!

Building A Better Snowball:
Is it possible to resist such a title. This is an awesome post. If you haven’t read it yet, get thee to consumerism commentary and check it out. It’s got Pink Floyd, it’s got a killer financial plan for getting out of debt, it’s got a credit reduction calculator, did I mention it’s got a plan. For my money, setting up the emergency fund is key, this message cannot be crowed off the rooftops enough. Check it out!

When You Put Your Mind to It:
Clever Dude is not kidding. He shares his method for destroying $58,000 in debt. There’s hints galore for even the most world-weary debt gladiator. One of my favorites is “We Fix Things Ourselves.” It doesn’t take much — not that I’ve done it — to change the oil in your car, does it? Check it out!

Free Credit Reports, A Cornucopia:
Hustlerama offers no less than 15 ways to get a free credit report. Not that I’ve actually ever done this, but this could be the inspiration that finally puts me over the edge. I’m actually kind of worried that some of our behavior has led to some nasty credit comments. Maybe not. An important step in reducing debt: Know where you are, financially. (And for the not-faint-of-heart, scroll down about halfway down his homepage and look in the left gutter — something to roil the emotions of any debt reductionist.) Check it out!

Alternate Income Streams:
I’ve ventured into this area, but think it is underutilized. An occasional CD sold on amazon has bought me the occasional lunch. At businesscreditcards, the focus is New Media Ways to Raise Capital. Some tips you’ve probably not considered. If you’ve got a little time, these could really pay off! Check it out.

David On Finance:
Has got some well considered thoughts on when to consolidate debt. He also uses the phrase “raw power”, which I think is highly under-used in the pf world. If it was good enough for Iggy… David makes some excellent points about credit unions (not always…) and extra payments (ah, the power!). Check it out!

Grad Money Matters:
He calls them myths. I call them heuristics, cognitive shortcuts, rules of thumb. Well, some of them, anyway. There’s a goldmine of good advices and links here. I particularly like what he’s done with the I’ll-never-get-out-of-debt-so-I’ll-give-up mindset. Check it out!

Mighty Bargain Hunter, Putting Things in Perspective:
This is a refreshing post that puts a little forest into the viewfinder (rather than trees). Your debt needs the context of your life. Not other people’s lives. An important thing to be reminded of, that. Check it out!

Sex for $3:
Can you beat that for a deal? Another whale of a post from one of the funniest bloggers around. If you’re not conversant with the ways of Bianca and Basil, you’re in for a treat. Check it out!

OOPS: It appears that the Bizarros have “scrapped” their blog. I’m not sure what this means, but hope it’s temporary. The link may not work. Sorry.

A Book Review. Now I Want to Read This Book.
Books are invaluable motivators for re-focusing. Get it at the library or one of those great used books sites (I kick myself when I think of all the new books I’ve bought — used books are simply no longer the coffee-stained acid-ravaged items we encountered in less-than-savory warehouses.) And of course, Trish at blogging away debt is a certified maven of personal finance. Check it out!

Another Lie About Debt:
Here’s another perspective enhancing article. (Or a link to it.) In the circle of linking, I got this one from blogging away debt. I found it so interesting I broke my goal of having 10 links for this carnival. So now we have a nice prime number. Check it out!

Am I Really Ready to Get Out of Debt?
Okay. So Let’s Make It An Even Dozen. NCN submits some interesting points, ready starting points for self-inquiry. I particularly liked the one about being ready to withstand the opinions of others. Let’s face it, turning down lunch because you don’t want to spend money is awkward, in many circles. Check it out!

We’ve enjoyed hosting this incarnation of the debt reduction carnival. If there was anything you particularly liked or disliked, we’d like to hear about it.

National Debt — Boomer Legacy?

June 21, 2007

Recently in my listening this track has struck me as being somehow related to the frugalist mindset.

Papa’s faith is people
Mama she believes in cleaning
Papa’s faith is in people
Mama she’s always cleaning
Papa brought home the sugar
Mama taught me the deeper meaning

Thoughts about this?

Since I’m not a baby boomer, I won’t list the artist, but you can check out her extraordinary fan website here. It includes tons of cool stuff like all the alternate guitar tunings for her songs, full lyrics, art, etc. As fan sites go it is stunningly competent, thorough, and useful.

Speaking of boomers — Ken Wilber (shudder?) has an interesting book called Boomeritis. One of the premises is that boomers eat their young. Highly pertinent regarding parenting we’ve observed. The book itself might be okay if it was the first of his you’ve read, but otherwise is mind-numbingly repetitive. Still, the guy obviously knows a lot and has lots of interesting ideas. Beware of New Age sentiments. To be fair, he is as critical of New Age marketing as the next skeptic.

If you’re in a reading type of mood, have bent toward social commentary, I highly recommend this book by Christopher Lasch, The Culture of Narcissism. A lot of it relates directly to spending habits, consumerism, current trends in helicopter parenting (eternal hovering). I just did a search on this site. I am dumbfounded that I’ve not mentioned this before. Dumbfounded.

My dad (depression-era generation) driving in parking lot: “Okay, here we go.”
“Look at this, crikey. It’s a very interesting phenomenon. The me-generation in action. Look at them.”
The couple in front of us are wandering through the parking lot in front of traffic, seemingly oblivious to their holding it up.
“It’s a fascinating phenomenon. Other people simply don’t exist!”

My dad is, as he likes to put it, “a trained social scientist.” So he does have a frame of reference in his observations. Not sure I’ve connected all the dots here. One thought is that when the baby boomers are gone, it’s possible that the cycle of debt slavery at the personal and national levels, if it hasn’t collapsed already, will begin to subside.

Another thought is that with the boomer parenting in evidence, living without limits and incurring debts as ways of being in the world are actually going to get worse. Bummer. Must think good thoughts!

Behavioral Economics: What’s Your Diagnosis?

June 13, 2007

Check out’s article “The 7 Money Mistakes to Avoid.”

Which financial mistakes have you made? I think I’m most guilty of the following:

 #1 — Saving with the right hand and spending with the left
#3 — Looking into a cloudy crystal ball
This mistake is all about underestimating risk. I think of myself is very risk adverse but this article mentions how many people underestimate the need for disability insurance. Should I have disability insurance? I don’t know anything about that….I pay for my own life insurance but I always assumed that if I became disabled my company’s insurance would kick in and cover me. I’m going to have to check on this. 

I looked up “disability insurance” and found the following article:

The article shares the following info:

Five states require employers to provide short-term disability. Hawaii, New Jersey, New York, and Rhode Island mandate most employers provide 26 weeks of coverage. In California, employers are obligated to offer 52 weeks.Long-term disability insurance kicks in once your short-term disability benefits run out. Unfortunately, there are no state laws that require employers to provide long-term disability, but it’s estimated that half of all midsized to large firms do provide at least some insurance.If you do decide to buy an individual long-term disability plan or to supplement your employer-based insurance, be sure to find out how much short-term disability coverage you have. There’s no reason to pay a premium for a long-term disability policy with a short elimination period of, say, 60 days when you have short-term coverage for six months.

The article which was published in 2005 then goes on to say:

How much does coverage cost? Here’s one example from MetLife: A 40-year-old male non-smoking business executive would pay $1,150 in annual premiums for $3,500 per month in benefits delivered up to age 65 with a 90-day waiting period.

More articles/resources:

Ostrich Frugality

May 23, 2007

I’m starting to hate the word frugal. It’s just too close to frumpy, and has a kind of constricted back-of-the-throat quality. Given that, I’ve changed the focus to finance psychology, rather than frugal psychology. For starters, finance is a much more searched engine friendly word. And there’s the frump factor.

Some of us need to stick our heads in the sand frequently, just for survival. We make an impulse purchase — in my case it was pecans at Ralph’s — and just hope for the best. Now Ralph’s doesn’t strike me as a particularly risky venture, but pecans are another matter altogether. The pecan is a stealthy and vicious beast. An innocuous little bag, can, in some neighborhoods, end up dinging you $8.99.

That’s a lot of beans. By comparison I found a great deal for domain hosting. Thinking about getting a domain? Want your URL to look nice and clean? I am. $1.99 domains!

I am off to that expensive pecan neighborhood today — the Beverly Hills-adjacent Pico Blvd district. Off to my psychoanalytic training world. Only one seminar today, but it’s a 12-hour day. Better fix lunch.

How Can I Reinforce My Frugal Lifestyle?

May 21, 2007

How to maintain what can be at times a dismal proposition? Of course there’s attitude. Most of us agree that is tantamount. Back in the ’50s there were a group of psychologists called behaviorists who would have tut-tutted the whole idea. “It’s just a matter of reinforcement.” It could be positive. It could be negative.

Regardless, you want to find the right schedule of reinforcement for your frugal lifestyle. Most likely you’re going to need rewards. The most effective (least prone to extinction) schedule of reinforcement is variable ratio. In English, this means that from time-to-time you are reinforced positively. Perhaps with a gelato. Your gelato should be fairly randomly applied. If you have gelato every Friday then that’s less reinforcing.

(That’s why they give people opiates in the hospital on a predictable schedule, say every 4 hours. People in the hospital are much less prone to becoming addicted to opiates. Unless they were addicts to begin with, of course.)

You could also punish yourself each time you moved way out of the financially responsible zone. But I’m not sure that’s a good model.

If you are just beginning a program of debt reduction, frugality, reining in the finances, whatever you choose to call it, you might want to institute a continuous schedule of reinforcement.

In English, this means you find some way to reward yourself for each and every act of financial responsibility. This is good for initiating reinforcement in the short term. It will quickly become ineffective as you get used to the rewards. After a week or so switch to randomly timed rewards.

Research supports the idea that punishment is not very effective in reducing behavior. It is a temporary measure. So reward yourself. The question is how. It’s up to you. More on this.