Thought on the Six Truths of Personal Finance
Welcome back!
I picked this up off the Consumerist today. They featured an article from The Street, which featured the 6 Unpleasant Truths about Personal Finance.
From the Article in summary they are:
1. You can’t have everything you want.
2. Financial institutions are not your friends.
3. Nobody is going to teach you personal finance.
4. You are your own worst enemy.
5. You need to stop watching TV.
6. Personal finance is easy.
These are some very insightful comments and many of them are some of the main philosophies behind this blog.
My wife and I have learned many of these together, probably the harshest reality of them all is discovering financial institutions are not your friend. It was difficult to wrap logic around the idea that they can treat their customers, the very people they rely on to exist, like such garbage.
I am definitely my own worst enemy and have succumbed to many materialistic sins in my day. After all, I own expensive Apple products and drive a newer car (worst mistake I ever made). But, after hitting ‘financial rock bottom‘ this past year, I realized what really mattered in life and how to take financial control of it. We are probably a month away from having the ship completely righted.
I would, perhaps add a couple items to the list of ‘harsh financial realities.’
7. You can live without it
8. Only worry about it if it will matter in 20 years
9. Credit Cards are, by nature, Evil.
10. Never by a brand new car. Ever.
11. You need a second job or second source of income
12. Don’t attempt to have kids unless you have maternity insurance and money put away.
Do you guys have any you ideas of what you think should be on the list of harsh financial truths?
Just Say No to Credit Cards
According to a recent story in US News, Americans are starting to turn their back on credit cards. Many are forsaking the plastic god that has been sustaining them and are beginning to draw down the rampant consumerism that has created the situation we’re in now.
It’s a shame that the credit crunch was needed at all to teach us that our habits were going to destroy us. Millions have had to suffer unnecessarily.
We’re pretty much against credit cards here at Austerity blog. Though, we aren’t opposed to all forms of debt. We have long believed, and have experienced for ourselves, that the credit card companies are not your friend.
They want you to spend as much money as possible and the minute you slip up, they have your balls in a vice. They laugh all the way to bank as you write that check that seems to get bigger and bigger every month.
While this contraction in spending and reduction in credit usage will, and is, harming the economy, I think that in the long run, the economy will be stronger. This entire society is based on debt and that is unsustainable as an economic system. The recent problems are proving that.
So, what’s the hapless consumer to do? Be responsible and always be prepared for an economic downturn. If you apply the principles of austerity during times of plenty, you’ll be prepared for the downtimes and the downtimes won’t seem so bad, because you are already used to living austerely.
Just Say No to Credit Cards.
That’s our official advice to everyone. I don’t care if you are one of those people that think they are using them responsibly and taking advantage of the credit card companies by their rewards systems. They are taking advantage of you. And when you slip up, they won’t hesitate to punish you.
Like most vices in life, credit cards should generally be avoided.
Austere Yet Fashionable – Yes, it’s possible
Editor’s Note: This is a new, ongoing column written by my wife Jackie.
When my husband met me, he thought I was rich by the way I dressed. The joke was on him, I was and still am a resale shop junkie. I wear designer clothing and the latest fashions, I just refuse to pay full price.
There really is no need to pay outrageous prices for clothing because when you really think about it, it’s really only clothing. So here are some of my best tricks for being truly fashionable on a budget and, yes, it can be done!
First of all, get to know your local resale shops. I live in the Chicagoland area and I really like the Unique chain for resale shops. Don’t be afraid to go in, there are always treasures to be found in there. The local Goodwill or Salvation army are good places to find deals but they can tend to be on the more pricey so. So, wait for their usual discount days. Also, consignments are usually not a good place to find deals.
The cardinal rule of thrifty clothes shopping is to assess what you really need BEFORE you get to the store. If you need a new blouse, go directly to that section of the store. If you need pants, only look at pants. While in the section of clothing that you’re looking for, look at the labels in the collar, you may be surprised what you find. But one thing I must stress is to look for a good fit as well as quality.
When picking an item out of a resale shop, make sure to check the garment thoroughly for stains, tears, or anything that would make the item unwearable. However, if there is a small tear or it’s missing a button don’t pass it up because that can be easily mended. In most cases it costs less to buy a garment at a resale shop and have alterations done than it would cost to buy new from the mall.
Now, there are certain items that I do not go to the resale shop for. I never buy undergarments or hats at the resale shop. I do on occasion, go to the mall or non-resale shops for those things. When I go to other stores besides the resale shop, this is an opppturnity to study the latest fashions, that can be recreated at a fraction of the cost.
When I do go to the mall, I have one word in mind, SALE. When I walk into a store, I go straight for the sale racks. Don’t be embarrassed that you’re looking for a deal and for your dollar to stretch further. The standard practice in retail is to put the clearance at the back of the store, forcing you to walk through all the pricier items. Resist the urge to browse the new racks, eventually you’ll develop tunnel vision.
The trick is to buy summer clothes in the fall (or end of summer) and winter clothes in the spring (before the summer fashions come out). Last week I made a trip to the mall and did wonderfully with just $20.00. Last but not least, make sure to check your receipt and make sure you got the sales price no matter where you shop. Don’t be afraid to confront cashiers over price discrepancies.
Don’t worry though, it’s all right to occasionally splurge on a pricier item if it’s it a really special and a good value (i.e. a pair of shoes you’ll wear often). Keep these tips in mind and you’ll be able to stay fashionable on a budget.
Check out below for some examples of recent deals I found.
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$7 New York and Company
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$7 New York and Company
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$11 Sears Entire Outfit
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$2.50 From Resale Shop
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Tag on Resale Shop Pants
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The Full Package
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SmartyPig Evil – Updated
When I first heard about SmartyPig, I was intrigued. It is a new way to have goal based saving. I’m a big proponent of setting goals and achieving them and especially tracking them.
The neat thing about SmartyPig is that is allows you to open your goal to the public and allow them to contribute to your goal. This sounds like a nice idea, if you see the world through rose colored glasses and think grass is made of sugar.
You won’t find many people out there who want friends or family to know what they are up to financially, especially if you have the type of family you need to keep that kind of information away from.
But these aren’t the true drawbacks of SmartyPig. The ultimate problem with SmartyPig is that it all it does is to promote consumerism; which is something we need to get away from.
Sure they let you save money, easily and with a high interest rate. But read the fine print. You cannot withdraw your money electronically. They give you a debit card that can be used at ATM’s and for purchases. They offer coupons for discounts at retailers when it’s time to make your purchase. That’s the only way you can access your money. ATM’s have limits. You can’t get at all your money at once. It’s not suited for an emergency fund.
I’m all for encouraging people to actually pay cash and save for the things they want. But the goal of this blog is to teach the world that you can go without. We should be saving to save money. Not to spend it.
People need to save to have a cushion for emergencies, to save for a house, to save to have kids, to save for the future. Not for a flat screen TV or the latest gadget from Apple.
So, in my opinion, SmartyPig is evil in that it encourages consumption that our society can no longer maintain.
As for saving money, I recommend ING Direct and HSBC Direct. Both are pretty good. ING Direct is by far the best.
Avoid SmartyPig in my opinion.
Updated 8-6: One of the founders of SmartyPig chimed in to let us know that SmartyPig now allows you to transfer your money out via ACH, the same way it goes in. So, you can easily get it to your bank account when the goal is finished. My wife and I want to build an emergency fund, maybe we’ll give it a try.
The Virtues of Credit Unions
Tough times call for new ways of banking.
People are starting to realize that banks aren’t on their side. Banks are mostly responsilbe for the mess we’re in now. They created the conditions for this mess to occur and watched idly by, while greed on an unprecented scale wreaked havoc on the financial foundations of our society.
It’s been made very clear that banks do not have our best interest in heart. So, it’s time to cut them out of the equation.
I’m not suggesting we return to storing our savings in the matress. We need a checking account somewhere to conduct business in this modern age.
The trick is to not particpate in the banking system while continueing to have banking services. Our economy is too electronic based to go completely without banking services. Our stance on being unbanked is that you shouldn’t do it, it will only cost you more money. Paycheck cashing places are a ripoff, as are the fees they charge to pay bills.
So, where does that leave us? It’s time for Credit Unions to become popular again.
The Return of Local Banking
Some would argue the very idea of a credit union is un-American. I disagree. One of the best movies ever made is “It’s a Wonderful Life.” Good ‘ol George Bailey ended up running the local savings and loan, which was essentially a credit union. The concept is simple, you put your savings in the bank and the bank makes loans with it. It makes loans to be people based on actually knowing them, it fosters a community of ownership.
The problem in our society is that we have removed personal banking from the banking equation. Banks don’t care about customers or customer services. You’re just a number and an equation of risk to them. They don’t give out loans based on knowing you personally. They give you loans based on a arbitrary and unfair FICO score system that you have very little say over (yes, you have a say in how you use credit but not in how score is calculated).
So, just what is a credit union?
Simply put it’s a banking organization founded by a group of people banded together. Every member owns one controlling share. Every memeber gets a say in how the credit union is run. Every member puts their money in, and by pooling their resources, the credit union can make loans to people and provide standard banking services such as checking accounts (they call them draft accounts), savings accounts, lines of credit, CD’s, investments and insurance. These services are not open to the wider public, they are only available to members.
By nature, credit unions are not-for-profit ventures. They exist solely for the benefit of their members, so you can bet that the customer service will be excellent. After all, you’re an owner. As a result, fees are either non-existent or relatively low compared to commercial banks. The interest rates they charge are also generally lower as well because profit it not the reason they loan money.
Anti – Credit Union Propoganda
There’s a lot of anti-credit union propaganda out there; mostly disseminated by banks who don’t like the competition. Credit Unions have also been traditionally closed to most segments of society, membership is usualy limited to a specific group of people. That’s changing. Most credit unions are now open to anyone who lives in a specific town or county. You’re money is as safe in a credit union as it is in a bank, they are not FDIC insured, but they have their own deposit insurance backed up by the Federal Government.
Another criticism about credit unions is that they don’t offer as great a return for you money. That’s starting to change. Many credit unions have competitive interest rates on their investment products. There are also plenty of online, direct savings banks that are great places to save money and have excellent rates. These accounts can co-exist peacefully in your portfolio with a credit union.
Conclusion
The overall goal of this blog is to teach people how to save money, go with less and make wise financial decisions to get through these tough times.
It’s time to put the local back into your banking. Establish a relationship with your credit union. I doubt you’ll regret it. And what of the banks? They’re like a whore spouse who takes you to the cleaners after divorcing you, then begs to have you back after you’ve met someone else.
One thing I encourage everyone to do is research for themselves. Here are some helpful resources that I found:
Credit Union Resources
Wikipedia Entry on Credit Unions
Locate a Local Credit Union
Federal Regulating Body – You can see the latest financial reports for your local credit unions and see their fiscal health
First Post
Welcome to Austerity Blog. The economy has taken a turn for the worst and it’s time for all of us to use our heads to get through these tough times. Tough times call for new habits and new ways of doing things. No longer can we count on continued consumption to fulfill and maintain our lives. We have to change our ways and reevaluate what really matters in our lives. Check back often.
