Speeding Tickets and Other Errors in Financial Judgment...

I had to pay a speeding ticket today. A very expensive speeding ticket. And it got me thinking about money.

Okay...so maybe I was already thinking about money. I was thinking about how debt is the other enemy of originality. And not just debt--sometimes spending in general can be the antagonist.

What I mean is that the most common obstacle standing in the way of living differently is money. How many of us would make different choices with our time if money were no object? Probably about 99% of us.

Money, of course, is an object. A very important one. And we can't just ignore it. But there are two errors in judgment I often see people make when it comes to their money--errors that prevent them from even having the option of making original choices.

The first error is an obvious one: outspending your income. Otherwise known as debt. Debt is not just terrible because it costs you A Lot of extra money over time via high interest rates. And causes stress. And damages relationships.

Debt is also terrible because it places harsh limits on your choices. Like forcing you to work in a job you hate--or for more hours than you'd like--because you need the income to pay bills.

Debt is bad. You get it, I know.

The other error is sneakier. Because it is not about overspending your income, which is fairly easy to diagnose. It is about overspending your goals. Maybe you have plenty of cash to pay your bills from month to month, which is good. But you are also spending a lot of money on things you don't necessarily need. This isn't bad per se, except when that money could open up doors instead.

What I mean is that if you have the goal of staying home someday with your kids--your kids who aren't even born yet because you're twenty three and just out of college--and you are spending your money today with no mind to that goal, you're overspending. It seems harsh to say, but it's true. If a goal is really important to you, but you don't factor it into your spending and saving plan NOW...chances are good that when the time comes to achieve that goal, you won't have the cash.

The bottom line is that living originally usually means making unconventional choices. And those choices often require financial strategy and planning. Because if you don't plan to be unique, your budget will make the decision for you--and it will almost always choose the status quo.

And finally, if you don't pay attention to street signs and happen to get snagged by the police while driving your bright yellow car at twice the speed limit...well then you've also made an error in financial judgment.

A big one.

Crap.

Three Contingency Plans

Being prepared to weather emergencies--or even just an unexpected guest--by having supplies on hand at home can sometimes make all the difference between panic and calm. But good preparation doesn’t just start and end with the pantry and linen closet. Sometimes preparation is less about supplies and more about planning.

Contingencies
For instance, I’m doomed if I head into Target without preparing a list. Without a written reminder of why I’m there, I end up getting lost in the bedding aisles and coming home with a new duvet. Or a sweater. Or a pair of sunglasses. (Perhaps I should write a Recessionista post about how I’m simply not allowed into Target during this economy!)

Of course, having a contingency plan for every errand and event in life is going a bit overboard. I barely have time to blow dry my hair in the morning, much less copy the contents of my wallet in case it gets stolen, or label the expiration dates on my makeup so I don’t poison myself, or do any of those other crazy things the people at Real Simple suggest!

Drawing the Line at Three Things:
So where to draw the line? Well, considering the pace of my lifestyle lately, I’m drawing it close to my ankles so I don’t have to go very far. In other words, I’m keeping my plans simple and focusing on three things that I consider important. Certainly there are other areas worth planning, but these are currently the top on my list. They are:

* Meal planning. With all of our technology and fast-passed living, it is easy to forget that eating is still one of the most basic and routine things we do. And when we don’t take the time to be intentional about this biological necessity, we tend to a) spend a lot of money and b) compromise our health. Meal planning can help drastically in both these areas. Even planning out a week’s worth of McDonald’s dinners (the healthy options, of course!) is better than just waltzing into the place and ordering off the cuff. And yes it takes time to plan. But what could be more important--or more simple--than eating?

* Financial planning. Specifically I mean prioritizing freedom from debt. Beyond just having a monthly budget, I want us Recessionistas to proactively diminish the debt in our lives, be it credit card balances, mortgages, cars, education, etc. Because without proactivity, debt tends to linger. And yes--retirement planning is important too. But since less money owed means less money needed in retirement, the two go hand-in-hand.

* Emergency planning. I’ve already covered the importance of having emergency supplies on hand, which is crucial. But additionally, I’ve been feeling more and more convicted that knowing basic first aid is something I need to prioritize. Because someday my friend or neighbor or family member might need me to administer CPR, or create a tourniquet, or stop a fever from rising. And I had better know how to do those things!

Needless to say, even though my list is short, I do have some work to do. But this type of preparation seems manageable to me.

My mascara and lip gloss expiration dates, however, will just have to wait.

What about you?
What are the priorities on your list? Maybe you're debt free and a first aid whiz--what next? If you had 15 extra minutes today to create a plan for something, what would it be? Share your comments below!

Previous Related Posts:
Creating a Little Cushion
The Sky is Falling & I'm Stuck in the Sand!
Homegrown Resilience

Smarty Pants: Visualizing a Trillion Dollars

No series on the recession can be complete without some chatter on the tremendous amount of money that is being tossed around these days. The billions are quickly approaching the trillions, which is an extremely difficult number to comprehend.

So, for comprehension aid, my friends over at Mint.com (read how I love Mint.com here) have created this little ditty on the value of a trillion dollars.

It is shocking to say the least. Thank goodness there's a silver "Recessionista" lining!

Previous Smarty Pants posts:

In a Time of Economic Proposals, Here's Mine

The Federal Debt

Smarty Pants: the Federal Debt

Last week I wrote that I was about to embark on a quest to educate myself about the current economic situation so that I would be able to at least comprehend what a trillion dollar stimulus means, and what an educated response to the economy in general should be.  Now, admittedly that goal is ambitious--if world-class economists can't agree on the appropriate approach, what makes me think that I can hone in on an opinion?  Nevertheless, as promised, I started reading up.

Well, several days later I haven't gotten that far.  Not because I think it's boring (although I will confess that my latest knitting binge has kept me otherwise occupied), but because there is so much information to process--so much to learn--especially for an economic novice like myself.  

So I don't have much yet to share, except this--you might have noticed on the sidebar that I have added, just for today, the National Debt ticker on the above left.  My reading, as you might be able to tell, started with budget deficits and the federal debt, hence the rather alarming clock.

Here are some of my initial comments:

1.  I had a physical reaction when I visited the debt clock for the first time yesterday.  A sort of rising panic in my stomach.  Seeing all of those zeroes, and the millions adding up so quickly, made me want to check my own bank account!  Which leads me to say that..

2.  ...it is so easy to hear the words "billion" and "trillion" and relegate them to some abstract concept of monetary value.  But seeing the numbers scroll by like that made it seem a little more real to me.  Not completely real, but a little more real.

3.  The basic fundamental truth behind the federal debt is that the government is spending a lot more than it is drawing into it's General Fund (funded by our income and corporate tax dollars).  And these numbers don't even include the stimulus package currently being debated in Congress!

4.  The government borrows money from the Social Security and Medicare trust funds to help offset this debt, but that money only covers about half, which still leaves the country about $5 Trillion in the hole...

5.  ...and where does the rest come from to fill in the gap?  Foreign countries.  Like China, for instance, and the United Arab Emirates.  And they are charging interest.  Let's hope they don't come calling to collect anytime soon!

I read recently that people tend to dismiss things they don't understand.  Well, I certainly don't understand the complexities of our modern global economy.  But what I do understand is that spending more than you make year after year leads to one inevitable end: bankruptcy.  And I have no idea what bankruptcy would do to our nation, but I can't imagine that it would be pretty.  

I hope I haven't frightened you all into never returning.  I promise I'll take the clock down tonight (mainly because I can't stand watching it for too long).  But I also promise that I will keep routinely writing on this issue of the economy, because it is too important to ignore.  And I can't in good conscience write day in and out about the home economy and entrepreneurialism, or even spending money on swing-arm sconces, without paying mind to some of these bigger issues.  

note: Smarty Pants posts are my routine reflections on current events.  My hope is that we will all become smarty pants.

For Previous Smarty Pants posts on the economy, read below:

Econ 101

the Bailout

Election Exercise: Tabulating my Taxes

Smarty Pants: Econ 101

It's been an eventful week so far in the nation, what with the inaugaration of President Obama and all.  But while the celebration and fanfare has been roaring, the economy has been tanking.  Again.  Or, at least a slew of major financial institutions have reported disappointing--if not alarming--numbers, and the sensitive stock market has had yet another hiccup upon hearing the news.

Since the economy is Numbero Uno on the new President's list of priorities, and recent talks about possible remedies involved trillions (yes--that's Trillion with a T), I thought that perhaps it was high time that I devoted a little time to the subject.

Now, I don't mean that I'm going to brush up on my macroeconomic theory (brush up!  hah!  I don't know any macroeconomic theory to begin with!).  But I am going to check out some books I recently received over the holidays (no--not the craft books I mentioned on Monday, or the business resources I mentioned last week....are you getting the idea that I like books?).  Books like Common Cents and I.O.U.S.A.--both recently published on the subject of the economy, and both conveniently sitting on my bookshelf.

And I will probably get around to reading some magazine and newspaper commentaries and articles on the subject of the new stimulus and the banking malaise as well, because certainly those writers know a lot more about it than I do.

And I will be doing this because a) a Trillion dollars, not to mention several trillion dollars, is a Huge amount of money for me to ignore, b) I think that global economics and home economics are inseparably linked, and c) I want to impress people at parties with my super cool knowledge on the subject (naturally).

It goes without saying that I'll be reporting back on what I learn, minus the lame pie charts and stodgy acronyms, because I want you to be informed about this Trillion dollar issue too.  And so that you can be super cool at parties.

So, without further adieu, let the economic homework commence!

Previous Smarty Pants posts:

the Middle East: steps to forming an opinion

Striking my Fancy

the Bailout

We Interrupt these Messages to Check the Bank

Earlier this fall I featured a Back the Basics series where I talked about all kinds of things, from domestic life to chores to cooking and budgeting (I even spent 15 hours straight making meals!).  

The last topic, budgeting, was a big emphasis for me.  I explored my habits and my accounts and my budgets (all of which needed some work!).  And one thing I really concentrated on was trying to get my ducks in a row Before the holiday season came into full swing.  Why?  Because you probably already know that we Americans tend to dig ourselves into a bit of debt during this time of year, which eventually catches up to us come February (when the credit card statement arrives!).  

So, I thought I would take a brief opportunity to interrupt the Handmade Holiday series to revisit my bank account (don't worry--I won't go into the boring dollars and cents of it with you, I promise).  My goal for this year?  To stick to the preset budget I set for myself for gifts, festivities, etc.  So far so good...but that isn't saying much since I haven't gotten any gifts yet!

This is where my Fall find of Mint.com (a free online budgeting program) can come in handy.  It lets me set a budget, and then emails me weekly reports of how close I'm getting to the max.  I can even split my receipts so that if I bought a gift at Wal-Mart along with a whole week's worth of groceries, I can categorize the gift separately (something my old version of Quicken doesn't let me do!).  

I bring this up as a reminder to myself that I want to go into the new year in the black, not the red.  This is no time in history, with the way the economy is looking, to play catch up!  I also bring it up to encourage you to take a minute to look at your bank account, even if you're busy.  Join me in staying out of holiday debt this year!

Share with me your holiday budget tricks by emailing me or posting your comments here.  Also, check back in tomorrow to read about a group of people who approach holiday spending with an entirely different perspective! (hint: it involves a Compact)

Is it Wrong to Make a Profit? Part 1

I know I've said this recently before, but reading the news lately can be a bit alarming.  I particularly find the economic situation to be distressing, especially when I read about families that are struggling under a lot of debt, and about people in other countries struggling to find food.  

Of course, while I'm reading these headlines and hearing these reports, I'm also busy trying to get my fall collection together for the beAdornable boutique (my online store).  Here I am making throw pillows and accessories--frivolous items in the grand scheme of things--and trying to sell them during a time when people are losing their homes.  I had to ask myself: is it wrong to try to make a profit on pretty things during these economic times?

I feel like it is important to wrestle with this question.  After all, I'm encouraging us as women to support micro-businesses in our community.  And A Lot of micro-business is providing goods and services that aren't "necessary for life," like cosmetics, clothing, consulting, tutoring, and the like.  Can we in good conscience promote our products, or are we being irresponsible for asking people to spend money on stuff they don't need?  I'll start with the economics today, and finish up next time with culture.

As for economics, on the one hand, we are being strongly encouraged to spend right now.  That was, after all, the whole point of that government stimulus check we all received.  The word on the streets is that if we quit spending our money, the bottom really will drop out of the economy.  Businesses would be hurt, people would lose jobs, and recession would no longer be a debate.  So, by encouraging spending of any kind (bonus if it supports micro-business), we are supporting economic growth during this slump.  Right?

Right.  Communities need people to keep spending money.  Businesses of all sizes need to continue to make a profit so that we can collectively keep our jobs and keep paying our bills.  And now, maybe more than ever, we need micro-business owners to be successful in the marketplace.  So selling during these times is a good thing.

The other side?  Well, selling and buying is a good thing, up to a certain point.  And what is that point?  Right now I'd say it is the line between cash and credit.  Even though banks and lenders are telling us that we need to keep spending, what they really mean is that we need to keep spending money we don't have.  Their financial survival, unfortunately, depends partly (if not completely) on us borrowing from them.  And that is not a good thing.  

It is a common selling strategy to convince people that they deserve something new--that they've earned it, or that they can't live without it.  As a good retailer, I would probably be wise to adopt that strategy.  Especially since spending is the new patriotism.  But the truth is that people don't need my boutique items, at least not the way they need food and gas.  And I hope that those who need the money for food and gas won't spend it instead in my boutique.  I never want my boutique items to be a part of the reason women are stressed about getting their credit card statement in the mail.  Sure, I'd love to see my pillow on their sofa, but not if it means that collection agencies are going to call them everyday for the money they used to buy that pillow.

So, am I irresponsible for selling boutique items during this economy?  No, of course not.  We all have to make a living.  But I am being irresponsible if I tell you to "just put it on your credit card" if you can't afford it right now, or if I tell you that you've earned a splurge you can't really afford.