Archive for March, 2009

Needs vs. Wants

Saturday, March 7th, 2009

What is the difference between a Need and a Want?

A Need is a service or purchase that you must make in order to get food, shelter, clothing, medical care, and maintain a job.

A Want is anything that is not a Need.

Here’s a somewhat edited picture of our monthly expenses, Circa 2007, broken down into Needs and Wants:

Needs:
House Mortgage/Rent $800
House Maintenance $ 70
Electricity $120
Water $ 40
Sewer $ 15
Car Repair/Maintenance $ 50
Car Gas $200
Medical $100
Food $250
Eating Out (Work) $120
Retirement $400
===============================
Total $2165

Wants:
Cable TV $ 90
Movies $ 32
Entertainment, other $ 45
Eating Out $ 60
Internet Access $ 30
Charity $ 50
Family Assistance $250
Miscellaneous Expenses $150
================================
Total $707

Needs $2165
Wants $ 707
======================================================================
Grand Total Per Month: $2872

Notice those totals? That’s right: If we really want to get ahead, the first place to start cutting is the Wants.

Notice under the Needs column that there’s a $120 entry for Eating Out (Work)? That’s right – it’s a Want. Drag it over into the Wants column. Now our Needs are down to $2045/month, and our Wants are up to $872/month.

(I put Retirement in the Needs column because, in my opinion, making sure that you don’t become a burden – or at least that you are less of a burden – to your children in your old age or infirmity is a very good idea. Certain financial experts will probably disagree with me, notably Dave Ramsey. But I think planning ahead, even if it is a short-term loss, is a critical need when you are in debt.)

This is the difference between Needs and Wants: Needs are services and purchases that you *must* make in order to have food, shelter, clothing, medical care, and maintain a job. If a Need is not ABSOLUTELY NECESSARY to maintain food, shelter, clothing, medical care, and a job, then IT IS NOT A NEED.

Notice the Charity and Family Assistance entries? Many people tithe a percentage of their income to a religious or charitable organization. Others also have family dependents – such as elderly or infirm relatives, or are financially supporting children through college or tough times.

Here’s Lesson #1 from this post: If you don’t take care of yourself first, you won’t be able to help anyone else.

Tithing to religious or charitable organizations: You will end up broke if you keep donating while you are in debt. You do not want to end up as someone receiving religious or charitable assistance. It defeats the purpose of making the donations in the first place.

Elderly or infirm relatives: You need to find one of those religious or charitable organizations to help defray the cost while you get out of debt.

Financial support for children: Young Master or Young Miss *must* start working part-time (at least, and if old enough in your state) to help reduce the cost. If they’ve already graduated from college, then it’s time to cut the umbilical cord. Stop. Giving. Them. Money. If they are living with you, put them to work taking care of that elderly or infirm family member to take the strain off of you. Or, put them to work donating their time in the local food bank, soup kitchen, or other charitable organization. Assign chores. If they don’t do them, evict them. If they live elsewhere, and are receiving “help” with their mortgage, make it a requirement that you get copies of all receipts and bank statements, or you’ll have to cut them off. I know, they’re your children, and you love them. This isn’t love. This is what you Want to do.

Supporting family members who are not incapacitated (mentally or physically) is a Want.

In the above example, cutting out the Wants not only reduces the financial bleeding, but puts up to $872 PER MONTH towards reducing debts. That is up to $9,000+ PER YEAR towards paying debts.

“You’re lucky you don’t have debts like me.”

Thursday, March 5th, 2009

Yeah. Real lucky.

* While you took out a 5-6 year loan to get that $22,000 new econo car, that you’ll end up paying $28,000 for, I saved up my money and drove a junker so I could pay cash for my new used car.

* While you were driving your new, $22,000 car to games on the weekend, I was going to used car dealerships checking on the makes and models I researched, or working overtime to save up money.

* While you were skimping on routine maintenance so you could afford the monthly payments, I paid $5300 cash for my gas efficient, low-cost maintenance, butt-ugly, 8-9 year old used beater.

* While you are sitting in my car complaining about your debts because your new $22,000 car is in the shop for major repairs, I’m driving carefully and incorporating my shopping into the trip to save on gas. Then I’m taking the money saved and putting it into a high-interest online account to save up for my next car purchase – planned for 7-8 years from now.

This is a small, very small, sampling of why I don’t like listening to you. Luck had nothing to do with it. I worked hard for what I have. I admitted my mistakes. I learned from my mistakes. I swallowed my shame and swore to do better. I changed my behavior. I did without all the cool stuff that you bought on credit. And now I put up with your whining about the bill collectors coming after you. I got hit by medical emergencies, car emergencies, job emergencies, and family emergencies just like you. I even bummed rides off friends when I had to, thanked them for it, and bought gas and dinner for them by way of thanks. Only I saved up for those emergencies, just in case they happened. You didn’t.

So you can do something about your situation, or not.

But at least be gracious about the help I’m giving you and quit whining while riding in my car.

Frugal Ideas – Get A Freezer Chest

Tuesday, March 3rd, 2009

Get a stand-alone freezer chest. Seriously! A new one will run several hundred dollars, and increase your electric bill. But the savings from buying food in bulk, cooking in bulk, and freezing in bulk — combined with a microwave oven — will usually pay for itself in less than 2 years (the increase in electric bill can kill some of the cost savings). Just remember to give it annual maintenance – cleaning the coils, vacuuming behind it, and defrosting/cleaning the interior. The ability to just pop a single serving-size, reusable container filled with frozen, home-cooked goodness into the microwave when you first get home from work will more than pay for itself in the time saved. The more often you can do this, the more the time savings adds up during the week. That means more time to work on other things.

Like scritching Pookah’s chin.

The initial cost is going to be around $200 – $300. However, it allows you to purchase (and keep) larger quantities of food – especially when it is on sale, cook even larger quantities of food, and (most importantly) store that food for later use. Estimated Savings (based on eating 3 meals/week this way, including being able to use sales even more to your advantage, plus a guesstimate of an additional $20 in your electric bill): $20 – $40/month.

Ask Pookah – February

Sunday, March 1st, 2009

Once a month at Life of Pookah, we ask Pookah a question. Questions can be about any topic. Pookah can answer however she wishes.

So, Pookah: I’ve got a little extra money. Should I pay more towards my high-interest debt, or put it into my emergency fund to get it back to 6 months of living expenses?

I am a cat. Not an accountant.

Errhhmmm… Let me rephrase that. You have a pile of catnip….

YAAAYYYY!!!

You have a pile of catnip, but you owe catnip to another cat. So do you store your catnip to use later, or do you give it to the other cat?

Why would I give catnip to another cat when I can keep it all for myself?

Well, that other cat gave you some food when you were hungry.

So?

The deal was that you’d give that other cat some catnip every month, until the debt was repaid.

But it’s MY catnip!!!

You made a deal. The other cat gave you something, you used it, now you owe the other cat what you agreed to pay.

How is that other cat going to make me give him MY catnip?!?! I’ll bite his ears and claw his face if he tries! MY TAIL PUFFS UP BIGGER THAN HIS!!!

Next you’ll tell me he’d have to take you to court to make you give him the catnip. Heh!

This “court”… it is a human thing, yes?

Yes. To continue our example, the other cat would have to give away some more of HIS catnip to the court, then a …. cat-sub-queen – the judge – would look at what everyone agreed to, and make a decision. Then the judge would send several cats to take your catnip and give it to the other cat.

???

You are very confused. That is not how cats do it.

Oh?

Cats take what they need, and fight to keep what they need. The stronger cat gets to keep the most that she needs. Pookah is a VERY strong cat!

But… what if you are starving and the other cat has food to spare?

That is why cats are good hunters… and why we adopted humans, and allow you to worship us. Cats that cannot catch their own food or get humans to give it to them will die. That is the way it is.

Pookah, real life doesn’t work that way. Human civilization has evolved these other constructs to share goods so that more humans – and cats – can benefit from them.

Oh really? Tell me then, human, how long did the noble, cat-worshipping, apex of human civilization known as Pharoahic Egypt last for?

There was more to it than that.

I rest my case. Our way is better for cats and humans.

But you haven’t answered the question!

I am purring, and my ears need rubbed.

Right. I’ll just put down, put the money to your emergency fund. You can always continue the payments out of your emergency fund. You can’t cook and eat the debt.

Whatever. A little to the left, now…