Archive for the ‘General’ Category

Perspective & Priorities

I read a lot of Personal Finance blogs these days and the current vogue seems to fit the “X ways to do Y affordably” or the “X things you can do to save money” mold. You get the picture. Most of the posts contain fantastic advice, like this one, but what troubles me is the lack of focus on what really matters at the end of the day.

In times of economic crisis, what could be more crucial than money? Well, I’m right there with you, or at least I was until Monday morning when my three year old daughter taught me a lesson I hope never to forget. I’ll warn you though, if you have a low tolerance for cuteness then you may wish to skip the post.

Having a father that works two full-time jobs takes its toll on a family. Like most days, my daughter hates to see me gather my things just before I head out the door to work each morning. “Daddy, I want you to stay and play with me,” she said Monday as she often does. “Daddy has to go to work to earn money to pay for food and to keep the house warm,” I replied trying to create one of those “teachable moments” as they say, only I thought I was the teacher until my daughter proved me wrong. “If you’re cold, I will give you my blanket and you can stay with me and play,” came her reply.

Did you catch it? I sure did. I received the message loud and clear, delivered via the crystal clear, conscience of a child. There are more important things in this world than money, even in these troubling times. That may be hard for some to believe perhaps but the sentiment is the same at the other end of life where it has been said that no one ever confesses on their death bed, “I wish I had worked more.”

Yes, I still kissed my daughter good-bye Monday morning, and promised her like I do every day that she and daddy would play as soon as daddy got home later in the day. I also hugged her a little tighter than most days perhaps and I whispered “Thank you,” although she thought I was thanking her for the hug and kiss.

After hearing this story my colleague Dewayne commented that, “People need to be more conscious of the decisions they have been forced to make by an economy founded upon consumption. The choice,” he continued “is between making two cars payments, countless credit card payments, cable or satellite bill, and high speed Internet access OR sell the cars, buy two clunkers, sell some stuff, and spend more time with your family.”

In case you’re wondering, both Dewayne and I fall into the latter category. We both understand sacrifice but there are some we refuse to make and that is to sacrifice time best spent with those we love. They say, “Stuff comes and stuff goes,” but what remains, especially in times like these, are our loved ones who will be there through thick AND thin.

If you don’t get it, this blog post can’t help you and the most you can hope to take from it is a cute kid story. If you do get it and you’re ready to make a change, a great place to start is by making a plan. We think BudgetSketch is a great place to get started. Regardless, the proper perspective will reveal priorities. All you need to do is find a way to honor them.

Credit Free Life?!

The other night I was up late not feeling well, just surfing through the channels half conscious when this commercial came on that grabbed my attention. I saw a nice, low-key gentleman begin talking to me about all of the financial issues facing American families today. He talked about foreclosures, lost jobs, and the fear some are feeling about their futures. He began talking about living a credit free life and how you can make it through this world without the need for credit. By this time I was sitting on the edge of the couch, and with full awareness and attention, I started to think, “Hey this guy gets it!” I even started to feel motivated that there are others out there that are trying to offer solutions to their neighbors in time of need… but then he dropped the bomb.

I should have known. After all, no matter the circumstance, no matter the conditions, there is always room for an angle… room for profit at the expense of another. This humble-looking gentleman then introduced himself… “Hello, my name is Mark Speese, CEO of Rent-A-Center”. He continues… “Rent-A-Center has allowed millions of American’s to buy name brand merchandise without credit for more than 30 years, and what I believe makes a whole lot of sense, for a whole lot of folks, especially at times like these.” “No matter your credit standing, one things for sure, your family is always going to need things… folks still need washer and dryers, kids still out grow their beds, and those same kids are wearing you down about that new TV they’ve been wanting.” (insert slight wink) “Enjoy the things your family wants and needs without the burden of credit.”

He goes on to say that you can learn how to live a credit free life by going to their website, creditfreelife.com. I know we are consumers, I mean that’s our job right? We are told each day on the radio, on TV, and in newspapers that if the “consumer” quits spending altogether, our economy will collapse! I guess if that’s true, Mr. Speese would be a hero, no?

Let’s examine the facts.

The folks over at PIRG (Public Interest Research Groups) seem to have a different view of Rent-A-Center than the almost philanthropic message of Mark Speese. Judge for yourself:

http://www.pirg.org/consumer/rtoloan.htm

Problem: The predatory rent-to-own industry promises consumers the American dream of ownership. “For only 78 weekly payments of $10, you, too, can own this television.” The industry doesn’t tell you that the that the effective interest rate on that loan, however, is 220%APR with $560 in interest and finance charges.

Many states have enacted industry-friendly laws that allow the rent-to-own industry to deceive consumers by disguising their loans as rentals. But a few states enforce tough consumer protection laws. New Jersey PIRG has helped defend its strong law for years.

Unable to win in the state legislatures, the RTO industry has asked Congress to preempt, or over-ride, those strong state consumer protection laws and replace them with a weak industry-friendly federal law.

Background: The multi-billion dollar rent-to-own industry (Rent-A-Center, Rentway and others) sells televisions, appliances, computers, jewelry and furniture by making consumers loans payable on a weekly or a monthly basis. A television with a market value of $220 typically requires 78 weekly payments of ten dollars, or a total of $780. A customer who rents-to-own, or purchases, that television has paid $560 of finance charges at an imputed annual percentage rate (APR) of 220%. But the industry contends it does not sell. It claims it only rents, because if a consumer wants to stop making payments, he or she can do so and return the goods without further payments. RTO stores generally refuse to comply with state usury ceilings or interest rate disclosure laws such as the Truth In Lending Act. The industry, over the years, has also been accused of selling used goods as new, tacking on deceptive add-on fees and worse, bullying and sometimes illegal tactics when consumers are late with payments.

Over ten years ago, RTO operators convinced about 45 states to enact weak legislation that treats rent-to-own as a lease. Yet, several states — backed by consumer groups — insist on treating rent-to-own sales as small loans, requiring compliance with usury ceilings (New Jersey), APR disclosures (Vermont), or other consumer protection provisions (Minnesota, Wisconsin, North Carolina).

I urge you to recognize the real problem so that the real solution may present itself. Mark Speese is disguising the real problem behind a fake solution at your expense. Living a credit free life is not changing your habits from buying things with credit to buying things without credit! Living a credit free life involves buying only what you need with cash and leaving credit alone completely. I can assure you, those living in the US today without credit card debt are not nearly as worried about their personal financial situation as the average consumer in this country.

Everything begins with recognizing that we need to break our dependency on credit and spend less and save more. Rent-A-Center is just another shameless company eager to release you of your hard earned money by employing a despicable diversionary tactic with creditfreelife.com.

I urge you to take control of your own situation. Be smart. If you are in debt, ask yourself why? In most cases, if you honestly answer that question, the solution will become clear.

There is no substitute for personal responsibility and hard work, and there are many people, including myself, that are with you every step of the way!

Budgeting is hard? Really?!

Don’t get me wrong. The folks who created Wesabe are a very intelligent bunch but when I read a recent post on their blog, “Budgeting is hard. Don’t bother!” I have to wonder how much confidence they have in the intelligence of their user base. To be fair, the folks over at Wesabe are attempting to leverage what we believe is a flawed perception to attract new users and there is nothing wrong with that, EXCEPT that part about the “flawed perception.”

We certainly hope there is a flawed perception about budgeting being hard because we’ve built a business on the premise that budgeting need not be hard! In fact, if you give BudgetSketch a try we think you’ll find that budgeting is quite easy, almost trivial, and believe me, if I can create a budget, anyone can!

So, why do those bright folks over at Wesabe think that budgeting is hard? We believe they’re misinterpreting what budgeting is. In fact, this is the chief obstacle we’ve faced introducing our product to the general public. Most folks, even the learned ones, seem to confuse budgeting with accounting. We’ll give you the fact that accounting can be hard but budgeting? Really?!

To quote the blog post and their definition of budgeting, “you’re being asked to give a precise, to-the-penny guess for your lunch spending for each of the next 12 months”. Well, if you think budgeting is what the folks at Wasabe call budgeting, then have we got good news for you! Budgeting is about intent, not fact. Your budget should reflect what you intend to spend. Your budget will never tell you exactly what you are going to spend on bubble gum 12 months from now. Your checkbook will tell you what you actually spent. How hard is that?

The Wesabe post was meant to trumpet improvements to their features called “spending targets”, which is about as close as Wesabe comes to actual budgeting. I suppose you could create a budget within Wesabe so long as all your spending, every month, fell into one spending target or another but as we all know, budgets change from one month to the next and a target isn’t something you’ll want to move too much.

Using BudgetSketch you can create and maintain a detailed, monthly spending plan (AKA “a budget”) in ten minutes, and BudgetSketch will soon be introducing a goals system that will permit you to assign surplus income to specific financial goals, such as “Buy a new washer & dryer” or “Save for the Emergency Fund”. Hey, don’t take our word for it. Try BudgetSketch and prove to yourself just how easy budgeting can be.

“When life was simple.”

Mr. Robert Miller (87), Ms. Queen Esther Woodard (96), and Ms. Lillie Deloatch (88) have an interesting perspective on life living through the Great Depression.  I fondly remember listening to similar stories from my Grandfather and Grandmother (also known as Papa & Mama), tales of hardship and simplicity, love and hard work.

It shouldn’t take you long to find the common theme in the following stories.  Our society has moved from having very little and being happy, to having much and being unhappy.  Somehow we have found ourselves in a self-made prison, whose walls are made of debt, struggling to find that simplicity we left long ago.  Working harder and harder to keep up with a life that is quickly getting out of our control.  Many people don’t see the problem yet, while others are keenly aware and looking for answers.

Our parents, grandparents, and great grandparents were providers.  They produced what they needed for their families, and what they couldn’t produce, they went without.  Today we have been programmed to consume, and the message is… “Why go without?”  Instant gratification is the slogan, and with one swipe of the credit card, you can be on your way home with your newest treasure.  Those who make money on this slogan are good at it.

There is no doubt the hardships that these wonderful people endured were extreme, but somewhere between their life of hardships and the one we have created for ourselves today (a different kind of hardship), there must be a place where happiness is real and hardships are lighter.

The road to this place begins with each of us.  We are responsible for our own.  Eliminate debt.  As Mr. Miller will tell you, save your money, “You’re gonna need it one day.”  Learn it’s okay to go without.  Taking control of your finances and your life in this manner will bring happiness in spades.

http://www.washingtontimes.com/news/2008/dec/29/witnesses-to-the-great-depression-remember/

Robert E. Miller, 87.

Born in 1921 at Columbia Hospital in the District , Mr. Miller spent the Depression years as a child in the nation’s capital.

Growing up in a home at 23rd and P streets on top of Rock Creek Park, Mr. Miller had two sisters, three brothers and a big German police dog – “and that was all that boys want, a brother and police dog.”

His father worked as a night watchman from 7 at night until 7 the next morning, all for $75 a month. “We lived off that, and I don’t know how you could say it, but we were a very happy family, eatin’ with what we could get, your bread. … A loaf of bread, white bread, cost five cents,” he said.

“You didn’t have any electric lights in your house. You had what they call coal oil lamps,” he recalled. “We had no electricity at all … no running water … had to go down to the corner, pump’s on the corner, just mash on the top and the water would come out. You take your bucket and go down there and pump, get your water, come back to the house, and that’s the way you got your water.”

In the winter time, Mr. Miller and his siblings had only one over coat to share among them. On the way to school, whoever got dressed first got to wear the coat. “The rest didn’t have any, so we just walk with shirt sleeves, sweater, no sweater, and we’d walk [24 blocks] to Dunbar [High School]. We would walk that, rain, snow, whatever. . . . Get to school the best way you could, and still we managed to be happy, jovial, playin’ all the time, never any fightin’ anything,” as he tells it.

He and his siblings would wear their shoes until the soles were completely worn out, using newspaper to cover the holes.

“But it was a tough time, I remember. I guess that was the recession then. People didn’t have any jobs; they would stand on the corner and sell apples, nickel apiece. They were unemployed, they didn’t have nothing else to do,” he remembered. “That’s the way they made their living.”

Those were the days before credit cards, when life was simple. But one could have credit at the corner grocery store and pay it at the end of the month.

The merchant “just had a big ledger. You come in and get $20 worth of stuff. And the end of the month he was expecting you to pay him your $20, which a lot of people didn’t do, but that’s the way you worked.”

At the time, Mr. Miller didn’t know about the Depression. As a child , that that’s just how things were. Times were hard.

“I thought that was just normal life,” he remembers. “We always had some kind of food. My father would eat opossum. We’d go to Rock Creek Park, get a opossum for him, right in the park, bring it home, he’d eat it. I wouldn’t eat any of it,” he said.

“We always had sufficient food. Meager-type food. It wasn’t the best food. We would maybe get some kind of meat, maybe neck bones or something like that. My mother would cook them, my father would eat the neck bones, and we’d eat what now would be thrown away: the greases off the neck bones, that is what we would eat, heat it up and pour it on in a plate, get some bread, and sop that, and we thought we were living good. We were happy with that.”

He said, “It was a nice childhood, but it was tough times. It never occurred to you that you were living in hardship.

“I did grow up knowing that you had to look ahead: If you get a dollar, don’t spend the whole dollar. Spend maybe 75 cents, but keep a quarter. You’re gonna need it one day. And that’s the way I lived,” he recalled. “I bought my first home like that, puttin’ away nickels and dimes.

“I live in two different worlds, the world back then and world we got now, and the world we got now I don’t think too much of it, to tell you the truth.”

Queen Esther Woodard, 96.

Born on Jan. 26, 1912, Queen Esther Woodard was 18 years old when the stock market crashed Oct. 29, 1929. She is the daughter of a sharecropper.

Sitting upright in her wheelchair, Ms. Woodard is alert and full of life in a red sweater and a blue plaid blanket that covers her lap. She is surrounded by messages of faith, posters on the walls, eight Bibles on the shelves, stuffed animals on the bed and old photographs.

The seventh of 14 children , she grew up as a child in Rocky Mount, N.C. She married Oscar Woodard, a carpenter, at age 21.

Working the fields was not just for adults. Everyone who could work did so. Ms. Woodard worked in the fields from age 11, with her brothers and sisters. In the fields for long hours even after school, their labor was needed by their father, who toiled in the fields of peanuts, cabbage, sweet potatoes, collard greens and corn.

“When I was a child, we didn’t go to school but six months out of the year, and sometimes when we get home from school, we had to change our school clothes because we didn’t have but one pair of shoes. Get them shoes off so you wouldn’t wear them out too quick and go in the field and go to work,” she recalls.

In addition to the hard times of the Depression, the country was also segregated. Her best girlfriend was white, yet they couldn’t eat together at a restaurant. “But it didn’t change the taste of the food,” she says, laughing.

Ms. Woodard said life wasn’t too hard for her and her family because her father grew everything, living off the land. Although times were extremely harsh, they were generous. Her father would kill the hogs, take the meat and give it away like he had no mouths to feed. He’d kill six hogs in November and six more in February, and that meat would last.

Taking the lessons and examples of her generous parents and strict religious upbringing during life in the Great Depression, she has given to others in need through the years. “I guess some people think I’m crazy, but you know, I don’t value my money that well. I don’t value it’s so important to me that if you’re hungry I couldn’t give you a soda and sandwich.”

Lillie Deloatch, 88.

Ms. Deloatch was born on May 8, 1920 in Branchville, Va., nearly 10 years before the stock market crash. Today she sits in her room at the Stoddard Baptist Nursing Home in the District, safe, comfortable and far from the farm where she grew up near the North Carolina border. The room is clean, the bed made.

She rests in her wheelchair, and the blinds are open to the street below, with its barren trees marking the winter season as the nation’s economy remains in crisis.

Her father was a sharecropper.

“Yes, indeed, I remember,” she says. “When Hoover was in the seat, right? And we couldn’t get good flour. … The hogs had died, and we didn’t have no meat,” she recollects. “We raised our hogs, chickens; we had cows, dogs, cats and eight children. There was a lot of love. We were poor, but a lot of love. We all went to church. We were all right.

“Momma made our clothes. Somehow, I don’t know, somehow we made it. My father was a huntsman. He hunted rabbits and squirrels. We ate it.”

Even though she lived on a farm, hardships were everywhere; not many were spared. On the farm, she worked in the fields picking cotton.

“It really was really a hard time. I remember my mother asked my father one day – he was taking a bail of cotton to Branchville: ‘Joe, bring me a piece of cloth [so I can] make Lillie a dress to wear to field.’ And he bought it, cotton material, and my mother cried. She said, ‘Joe, Lillie never wore anything like this in her life.’ And I liked it. It was all right for the field.”

Ms. Deloatch compared life during the Great Depression to life today. “But back then, in those days, they was good old days. Wasn’t like we hatin’ one another like they do now. There was more love, you know,” she said.

Back to School Special

We’ll cut you some slack. No lengthy post this time, on our blog anyway. However, we encourage all future and present college students, their parents, and/or their guardians to read Six sure fire ways for students to ruin their financial future.

We think all the advice is spot on except that we would council that students steer clear of all credit cards and use debit cards alone. We especially like item 1 for which we would like to recommend BudgetSketch in place of spreadsheets. BudgetSketch permits anyone to create a budget, set goals, and the best part… IT’S FREE!! Perfect for college students, and dare we say high school students as well? Also, students can grant parents and/or guardians access to their BudgetSketch account to add a measure of accountability.

OK, I know. We promised to keep it short!

Some Offer!!!

So, according to the U.S. News Rankings and Reviews site, Chrysler Improves $2.99 Gas Offer and you may be thinking, “That’s a good thing, right?” Well, let’s see if we can’t shoot a few holes in the financials of such an “offer”.

We’ll start by mentioning that the offer received some criticism when Chrysler first announced it but not for the reasons you might, or perhaps should expect. Environmental groups, whose members often exhibit signs of intelligence, suggested the focus should be on the purchase of more fuel efficient vehicles. Other, amazingly perceptive individuals noted that the cheap gas came at the expense of more lucrative purchase incentives.

But we digress, back to the financials…

So, you’ve been tooling around in the same old 2004 minivan for five years now but at least you paid it off last month. It has served you well but recently it seems a bit jerky during stops and starts. Now that you’ve got the extra $500 a month you used to pay toward the auto loan you figure you’ve got a little cash to spend on repairs. So you take it up to the dealership to have it looked at and while you wait you’re eying the 2009 minivans.

Bad news! Your minivan needs a transmission, and the service manager quotes you $2000-$2500 for a new transmission!!! Bad news travels fast, especially at car dealerships, and it isn’t long before a salesperson saunters over to see why you look so sad. Three hours later you’re ready to ink a deal in which they keep your 2004 minivan, and you drive off the lot with a brand new 2009 minivan for only $550/month for six years after a $2000 incentive, and don’t forget $2.99/gallon gasoline for the next three years!!!

Somewhere in the back of your mind commonsense is having a hissy fit. Its screaming at the top of its lungs, “DON’T DO IT!” but if you listen carefully you’ll then hear it say this, “Keep the old minivan, and for three or four months save the old payment to purchase and install a reconditioned transmission. Then bank the $500 each month (or pay off other debts), pay $20,000 for a quality used van in three years (saving $500/month at 4%) and have an additional $20,000 in cash at what would have been the end of the loan for the 2009 minivan!!!” Didn’t you hear commonsense say that? You should have!

But we forgot the cheap gas!

Eh, not really… By the numbers quoted in the U.S. News report, the average consumer will save $1200 over the course of the three year $2.99/gallon offer. If you heard and acted upon commonsense, you’ll save that in under three months and be driving a quality used minivan within three years! What’s even better is you can repeat the process every three years and upgrade your vehicle every time while paying cash, that is if you’re willing to stay the course for the next three years.

Let’s not forget our friends, the environmentalists!

Indeed, let’s not! So, how is this plan a “green” plan? We suggest that if a sufficient number of consumers would heed commonsense, landfills would fill more slowly as vehicles lifetimes were extended and natural resources would be preserved (and the pollutant by-products of production reduced) as fewer new cars would be manufactured.

So you tell us, is that some offer?!