Archive for the ‘Finances 101’ Category

Credit Card Interest Rates Increasing

Tuesday, August 18th, 2009

Many of us have already or will soon receive notice with our monthly credit card statements that the interest rates will soon increase.

For those of us at Pookah Finances 101, this creates a problem, as we are carrying a balance from month-to-month while we work ourselves out of debt.

For those of us at Pookah Finances 201 (and 301), we don’t care. We pay off our interest-bearing credit card bills in full every month, thereby avoiding the interest fees. In addition, we have the ready cash available in a high-interest savings account to pay off the full amount of our efforts with credit card arbitrage.

Needless to say, Pookah Finances 201 (or better) is a great place to be in this economy.

But as for those of us at Pookah Finances 101 (or lower), we now have a problem.
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Credit Card Companies Threaten To Be Mean

Saturday, May 23rd, 2009

In recent news, our federal legislature has passed bills restricting the bad behavior of a certain class of financial institution: The Credit Card Company. Under the new legislation (if signed into law), all credit card companies will have to follow certain rules and regulations. Not least of which:

* No More Universal Default. Previously, if you were late paying your water bill, the financial institutions could jack up all your credit card interest rates to 20%, 30%, or more.
* Interest rate increases are no longer retroactive. In other words, if they do increase your interest rate, they can do it only for new expenses, not back-date it to the amount that you’re paying down.
* Reasonable notification of increased interest rates for missing a payment – 45 days notice (depending on which story you listen to) – AND if you make a minimum payment in that time, the interest rate goes back down to normal.

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Religion and Finances

Thursday, May 14th, 2009

Pookah now takes the opportunity to remind all humans of the divinity of cats. Offerings of small tasty birds and delicious fishes will be accepted between the hours of 12:00am and 11:59pm.

Many religious works contain advice about finances. Much of it, from what I have read, is quite sound and good advice that will serve anyone well. Religion, however, is one of “those” subjects that can raise quite violent feelings in faithful and non-faithful adherents alike.

I’m not going to advise you on what aspects of your religious obligations are good, bad, or other. It’s not my place. It’s between you and your religion.

What I will advise on is how to get out of debt (Pookah Finances 101) and how to pave the road to your own financial success (Pookah Finances 201). So please bear this in mind: You are free to use or ignore this advice as you see fit.

Tithing/Donations: Cut the cash outflow. If you’re in debt, you can’t afford it. Ending up needing financial support from your religious organization harms you, your religion, and the people relying on your religion’s collective efforts. If you really *must* give, donate your time. Help out some of your fellow faithful with home maintenance, car repairs, yard care, or babysitting. Donate some time to helping keep up your religious sites, temple, church, altar, other place of worship.

Religious Subscriptions: Many local (and national) religious organizations distribute publications – what’s happening in your faith. These are important so that you can stay connected with your fellow faithful both locally and abroad. They also tend to come with a subscription cost that you are expected to pay. However, if you are in debt (Pookah Finances 101), this is a drain on your resources. You can’t eat the subscription, use it to clothe your family, and it sucks as shelter. See if you can trade in your services – perhaps as an editor or proofreader – in exchange for a few months off the subscription fee. If you have children, see if they can help with packaging and distribution. It might even serve well as a family Saturday event. The goal is to reduce the monetary outflow so that you can get out of debt. When you reach Pookah Finances 201, you can *consider* going back to funding a monetary subscription.

Sunday Clothes: Okay, I’m showing what religions I’m familiar with. Many faiths expect you to wear certain types of clothes – usually of a nicer variety – during attendance of ceremonies. If you are handy with needle and thread, or a sewing machine, you have here an opportunity: Donate some of your sewing efforts to maintaining the ceremonial attire of your priests, singers, or other uniformed attendees. If you need appropriate attire, try shopping around thrift stores, or even ask your local religious authorities for advice on where to acquire appropriate attire.

Expense of Ceremony: Some faiths require purchase of incense, candles, or other items used in the practice of that faith. These can get expensive, and are difficult for someone like me to advise you on. Let your local religious authority know a bit more about your situation. See if they can advise you on a good course of action. Maybe you can trade your work for some of these items, or maybe you can get a price reduction until you get back in the clear. This is a case where you are going to have to swallow your pride, smile about the taste, and ask for another serving. It sucks. I know. I’ve done it.

Here is the basic idea: Replace your money costs with goods or services. Maybe you got a really killer deal at the grocery store, and have ended up with more canned food than you could possibly use in a year. See if that extra will make an acceptable donation. Maybe some of your fellow faithful participate in Habitat for Humanity – and so can you. Extra practice building someone else a home means you will be better trained to keep your own place in good shape – which will reduce your maintenance and repair expenses. Just about anyone with two legs and two arms can serve meals and bus tables. Serving at a soup kitchen was both an eye-opening experience for me and brought home, pointedly, just how important it is to help someone else make it through another day. (Later on, when I was financially stable, I bought a $20 cookie from that soup kitchen bake sale. I knew that $20 would feed roughly 50+ people who were trying to pull themselves up out of the gutter. Best. Tasting. Cookie. Ever.)

When you get out of Pookah Finances 101, and are into Pookah Finances 201, start adding back some expenses — IF YOU WANT TO. You may find that the greater personal involvement in your faith is more fulfilling, and more useful, than simple cash expenditures.

Greater personal investment in scritching Pookah’s chin is more fulfilling.

Falling Off The Financial Schedule

Saturday, May 9th, 2009

Well, it happened.

I fell off my financial schedule, and missed an opportunity that would have netted me about $250 in interest earnings over the course of the next 12 months.

How do you deal with this?

Some people look at it as losing $250, and castigate themselves appropriately.

Some people view it as a critical failure and beat themselves into the ground over it.

Some people swear a blue streak, gripe about it for a few weeks, and move on.

What did I do?

I said, “Aw, crud!”…

DID NOT!! You made Pookah hide under the coffee table!

Then I wrote in big red letters in my calendar the due date for the next opportunity… and set it about three days ahead of the actual drop-dead date. I am now highly motivated to not miss this one, even though it will net me only $70 over the next 12 months.

See, I didn’t “lose” the $250. I never had it to start with, so why beat myself up over it? Even if that $250 would mean the difference between eating and not eating, I’d be better off spending the time fixing the problem than crippling myself mentally over it. In fact, why waste time getting all upset, when that energy would be more productively spent taking a few steps to keep it from happening again or working towards the next opportunity?

Life of Pookah: A healthy attitude is very important.

Frugal Idea – Save That Toothbrush

Thursday, May 7th, 2009

Is your toothbrush all worn out? Ready for a replacement? Do you already have a replacement ready – in one of those econopacks that you bought at a discount? Good!

Do NOT throw that old toothbrush away.

You can:

  • Use it to clean the hard-to-reach places around the kitchen or bathroom faucet.
  • Use it to clean out the crud in the kitchen sink drain.
  • Use it to clean dust off the coils of your refrigerator.
  • Use it to get those hard-to-reach spots on the pile of rocks exterior.
  • Use the handle as a soft prybar.
  • Turn it upside down and use the corner of the head to smooth out wet caulk.
  • Use the handle as a disposable stirring rod.
  • Use it to clean all the dust and insulation wrapped around an improperly installed light switch or electrical outlet (after turning the power off and testing it for no nuclear go-juice, of course).
  • Use it as a launching lever to toss kitty treats past Pookah’s nose.

BANZAI!!!!!

I keep a couple of old toothbrushes in my toolbox, another couple with the pile of rocks cleaning kit, one under the sink in each bathroom, one under the sink in the kitchen, and a few in the wash room (they’re great for cleaning lint out of the lint trap screen).

Plus, those soft or hard plastic dental tools don’t decompose very quickly in a landfill.

Why The Tough Apology?

Tuesday, May 5th, 2009

Well, I’m back. Immediate family medical issues are being dealt with. And yours truly is working on a better process for this blog – so that there are fewer critical points of interruption.

So, to get back on track – especially now that my legs have healed up:

It happens every so often. Pookah climbs up into my lap, making sure she doesn’t impale me too much on her built-in scythes, and asks a question:

Why do you take such a hard line with apologies? Cats are MUCH more forgiving and reasonable.

I separate Apologies from Forgiveness for one very important reason: Trust.

We give a certain amount of Trust to everyone – friends, family, strangers on the street, companies that we do business with. We Trust that strangers on the street are not going to actively harm us – it is a foundation of civilization. We Trust that the companies we do business with are not going to actively cheat us – it is a foundation of economics. Similar foundations exist in our Trust of friends and family. I’ve posted about this before, regarding Trust, but Verify.

Trust, once broken, requires significant effort to earn back. And this is as it should be.

You are making it complicated again.

Really? Okay, let’s pull some examples from your life, Pookah.

Okay. Just keep rubbing that muscle… right… there…

Would you have come up to the food I set out to trap you if I’d kicked you?

… No.

Why?

Because if you kicked Pookah once you would do it again.

Even if I said I was really, really sorry?

How could I believe you if you kicked Pookah once already?

But I have kicked you, Pookah. Even stepped on you.

That was different.

How so?

It was an accident. You did not mean to hurt Pookah.

How do you know that?

Because you immediately stopped what you were doing, apologized, and then made sure that Pookah was not seriously hurt. You went to extra effort to reassure Pookah that it was alright, you didn’t mean to. If Pookah was hurt, you did your best to help Pookah feel better. Except for that time at the V.E.T. Pookah did NOT feel better until Pookah was home!

Is that all?

Afterwards, when a cat was in the human-walkway, you used your foot to gently nudge Pookah out of the way… until Pookah learned how to avoid clumsy humans.

So you trust me because…?

Your actions, even though they are clumsy, are the same as your words.

Now this, I am proud of! Well, I’ve got to get out in the primordial scrub to… Hey, careful with the sharp pointies!

Prrrrrrrrrrrrrrrrrrrr!

Dangit.

What Is An Apology?

Tuesday, April 7th, 2009

First, you have to understand what an apology is.

An apology is:

  • A declaration that you, yourself, have done wrong.
  • A statement of remorse for violating morals and/or ethics.
  • An acknowledgement that you will accept the consequences of your actions.
  • A request to be permitted to undo as much of the harm committed as possible.
  • A declaration that you will bend every physical and mental effort to NEVER AGAIN commit this offense.
  • And finally, an apology is JUST WORDS. Until it is backed up by concerted actions over time, an apology is only hot air.

An apology IS NOT:

  • The final effort, labor, or work that you are obligated to give as compensation for the harm comitted.
  • The precursor to required forgiveness – you apologized, you are NOT forgiven until the wrongs you’ve done are fixed as best they can be. Forgiveness for the wrongs you have done requires work.
  • A free ticket out of the consequences of your actions.
  • Wiping the slate clean. Your apology may be accepted, but your actions are NOT forgotten.

What does this have to do with Finances?

Everything.

If you are heading towards, or already in, Pookah Finances 101: You have wronged yourself, at the very least. Getting this far into debt required lying to yourself, deceiving yourself, ignoring your needs, and treating yourself pretty lousy when it comes to morals and ethics. Chances are good (but not certain) that you’ve done the same to other people or organizations. Not paying debts that you owe ranks high on the list of things you need to apoligize – really apologize – for.

If you are heading into Pookah Finances 201: You are getting back into a position where you can really make good on the harm you have caused yourself and others. Don’t waste the opportunity. You can see how damaging it can become every day on the news media – and on the web. Imagine if the people responsible for the current economic mess had owned up to it, and spent some of their millions in bonus compensation undoing the harm. Don’t end up like them.

If you are heading into Pookah Finances 301: You are firmly on the road to financial success. You didn’t get there solely on your own – other people helped. Take the time to check what’s between your ears – and what’s in your chest – to make sure you are becoming the person you really want to be. If there’s nothing there reminding you about past choices, you’re in trouble. If you are carrying a lot of “I should do X”, then you have some hard decisions to make about what you should do… and what you WILL do.

What Are The Basics?

Tuesday, March 17th, 2009

I’ve posted about this before. I think it’s always helpful to have things spelled out directly.

What are the basic requirements for your life?

Here is my list:
Required for Job
Housing
Clothing
Food
Medical Care
Sleep
Transportation
Retirement

Notice that “Entertainment” is not on my list. There is a reason for that.

Take the time to read through this list and *think* about how it applies to you. Print it out or write it down.

Now add to it the basic requirements for your life.

Keep this list. You’ll need to refer to it again – at least once a month.

Congratulations. You’ve started a budget.

Do You Own Your Home?

Thursday, March 12th, 2009

Do you have a copy of the original questionaire you filled out for each of the credit cards available for easy review?

(If not, shame on you!!! Get one! Now! In the meantime, check out one of the online offers or a recent snail mail spam you received.)

Do you see where it says, Do you Rent or Own your home?

Here’s one of the tricks that got us, collectively, in trouble during the housing boom and bust.

If you have a mortgage, you do not own your home. The bank does.

The amount of equity you have built up in your home is a percentage of ownership. Until that mortgage is paid off, in full, you only own a percentage of your home. The bank holds the deed and title to the property until then.

See, by asking you an either-or question, the lender (in this case, a credit card company) is tricking you into thinking, “Hey, I’ve got a mortgage, that means I own my home!” It’s a crock.

It is very simple: If you have a mortgage, you do NOT own your home. Any offer of credit based on you owning your home is therefore a trap… UNTIL you really do own your home.

(Yes, I know that revolving debt – like credit cards – can’t normally cost you your home if you default. However, home ownership makes you a good risk, in the credit card company’s eyes, for consumer credit. Regular, on-time, mortgage payments also make you a good risk – though not as good as home ownership – for consumer credit. It seems that the credit card companies forgot this difference, along with a significant portion of U.S. citizens.)

Now, consider the recent credit, mortgage, financial crisis. Credit was given to many people (including me) on the basis that having a mortgage = owning a home. If you own your home, you have an asset of real value. If you have a mortgage, you have a debt.

Here is one instance where Pookah was definitely smarter than I am.

Pookah thought she had a home once. Pookah lost her home. Pookah survived, but fully understands that Pookah depends on her human for comfy-nest and Pookahfood. A small tasty bird would also be nice. Pookah will now purr and entertain human with cat antics.

This is my train of thought (again, overly simplified):

1. Treat a mortgage as home ownership.

2. Offer people credit based on false home ownership.

3. Encourage people to use the credit, which they do.

4. People now have a moderate credit card bill every month IN ADDITION to a moderate mortgage bill. At this point, everything’s okay until…

5. A mistake happens – late on a payment – or life intervenes with an expensive medical or car problem; OR the continuous encouragement to buy on credit turns that moderate credit card bill into a High credit card bill.

6. People default on their payments.

7. The effect cascades as soon as enough defaults start racking up.

8. When enough people have defaulted, the credit card company’s gross income shrinks to the point where they can’t generate enough profit to pay *their* bills.

9. The credit card company can’t get any loans because the same thing is happening to other financial institutions.

10. The credit card company defaults on its loans.

11. All heck breaks loose.

Here is a case where an ounce or two of prevention are worth several metric tonnes of cure.

  • Any credit card offer that doesn’t ask about your mortgage is a trap. Don’t step in any more traps.
  • If you are already in debt, think twice – no, three times – before getting a new credit card. Borrowing more money will NOT get you out of debt.
  • If you are in debt, the only sort of credit card you should even consider is a 0% balance transfer card with a maximum 3% transfer fee. If the offer does not meet these minimums, shred it.
  • If you have any authorized users on your credit cards, cut them off. Seriously. You’ll have enough problems dealing with your own mistakes without having someone else’s mistakes bite your tail. If your kids are authorized users, it’s time to cut the financial umbilical cord. If your S.O., best friend, or business partner are authorized users, it’s time for them to be responsible for themselves. This does NOT mean that you cut your S.O. off. It does mean that you MUST contain the damage before it gets worse.

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.