March 2011 - Posts - The Dollar Stretcher
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The Dollar Stretcher

The Dollar Stretcher blog will explore people and money.

March 2011 - Posts

  • I Owe You

    Did you ever notice that people who don't like debt often don't like to ask for favors? I'm probably one of them. For years I always felt that if someone did me a favor I was indebted to them. (only recently have I begun to understand that by feeling indebted I was robbing them of the blessing of doing me that favor)

    So I'm about to do something that's a little new to me. I'm about to ask you to do me a favor.

    We just added a button to our article pages that allows readers to "like" us on their Facebook page. Our hope is that more people will learn about The Dollar Stretcher and the things that we do here.

    So if you're active in Facebook and think that one of our articles is helpful, please feel free to 'like' it. You could be helping those who see the link on your wall and your friends at The Dollar Stretcher, too!

    Keep on Stretching those Dollars!


  • The Things We Do Well

    Recently I became aware of something that I'd overlooked for years. It's one of those little things that aren't earth shaking, but can make a difference in how we live our lives.

    It began when I noticed that we all like to do the things that we do well. I'm not a golfer, but I understand that some are better at the long drive and others excel at putting. If golfers are human (and, with the exception of golf widows, most of us think they are), then the ones who are good at driving probably enjoy going to the driving range. Those who are better at putting would rather spend time practicing that eight footer. And, that's only natural.

    Success feels good. It makes our efforts seem worthwhile. Makes us feel a little superior. Gives others an opportunity to praise us. Generally does things that feel good to us. So it's not surprising that we like spending time at the things that we do well. The opposite is true, too. Our friendly golfer probably doesn't like practicing his puts. Especially if he struggles in his short game. It's frustrating to keep trying to do something that you're not particularly good at. Embarrassing, too, as others see you fail repeatedly. Tough on the ego. The natural inclination is to spend our time at the driving range. Not struggling on the practice putting green.

    The same is true of our home life and finances. There are some things that we seem to do well. And other tasks are likely to cause us problems.

    How does that play out at home? Let's look at a couple of examples.

    Some of us are very good at planning things. It just comes naturally. Almost without effort. Doing a weekly menu plan is a breeze. And, planning for a vacation is something to look forward to.

    Unfortunately, that's not true for everyone. Others among us struggle to plan the simplest things. Like what we'll have for dinner tonight. We tried creating a meal plan. It was a pain to put together and didn't work very well. We decided it was not worth the effort involved.

    How about a financial example? Some of us relish the details of our finances. We enjoy checking our credit card bill each month. Keeping track of our investments is a pleasure.

    But, for others the opposite is true. Our minds numb at lists of figures. Details drive us crazy. We can't stand them. So our monthly statements stack up on a pile that we intend to go through 'someday' in the future.

    So what can we learn from this that will make our lives and our finances better? First, we can take advantage of the things that we do well. Our planning friend would be wise to make weekly menu plans. They'll reduce their grocery bill with a minimum of effort. In fact, the effort will feel like play, not work.

    Same thing for our detail person. Look for opportunities to use that detail orientation to your advantage. You're a natural for comparison shopping. Also gifted in finding errors in your various statements and accounts.

    Second, we need to make provisions for the things that we don't do well. Either by getting better or finding an alternative. Take our 'planning challenged' friend. Doing a weekly menuplan will not come easy to them. They'll probably need help to do the job properly. Perhaps prepared forms or even a proceedure for creating a meal plan would help. If even that's not enough, our friend might want to seek out plans that they can purchase.

    Or the person who can't stand details. Letting their statements stack up is not a wise move. Either find a step-by-step process to walk you through the statement or find someone to help you.

    Recognizing that you have a weakness and compensating for it is the wise move. If you're nearsighted, it's smart to get glasses or contacts. No reason not to do the same with your household or financial affairs.

    Often you'll find that your partner complements your strengths. Use that to your advantage. There's nothing that says that the person who cooks needs to do the menu planning. A wise couple works together.

    Much as we'd all like to be special, no one person is naturally gifted in all things. But, we can learn to identify where our talents are. Then learn to use them well. And, finally accomodating the things that don't come naturally to us.

  • The Primary Balance Budget

    Hello to all my Frugal Friends!

    I've always enjoyed words. Even when I was in school I was fascinated by the origin of various words. I still remember when I learned about the Oxford English Dictionary. If you're not familiar with it, it traces today's words through history to other languages. Almost like the ancestry of a word. Their website is pricey ($295 per year), but you may find the print edition in your library.

    My love of language causes me to listen to new phrases and think about what they mean. I heard an interesting one the other day. Seems that the White House is saying that their budget proposal is in "primary balance." By that they mean that what we're spending is balanced with our income - if we ignore the interest on the money that we've already borrowed. BTW that interest will cost us $207 billion this year alone!

    My guess is that many of you would like to work under a "primary balance" budget. No more mortgage or car payments. Forget about paying off those credit card balances. Just ignore all the money that you've already borrowed.

    You get the point. It's an absurd way to look at a budget. Ignoring past debts and the interest that you owe on loans isn't allowed in the real world. Even in the sometimes pretend world of government finances.

    So if you hear any of our elected representatives saying that they're proposing a budget that's in "primary balance" call them on it. Tell them that you live in the real world and won't buy their fancy words. You understand that they're really proposing a budget that does NOT balance. And, that it's time for them to quit spending money that you and your children cannot afford to pay.

    Keep on Stretching those Dollars!


  • 3 Secrets to a Frugal Life

    Recently, two events came together in an interesting way. Just the other day my wife was teasing me. On our way into work, I suggested that we stop at Starbucks for a cup of coffee. We needed some uninterrupted time to go over some family and business matters. And, our local coffeehouse seemed like a good place to do it.

    When we got there I ordered a cup of black coffee. She ordered something that was related to coffee, but probably had more in common with milk, whipped cream and other ingredients!

    Normally when we go out I pay our restraurant bill. But she has a Starbucks card. So it makes sense for her to pay (at least that's what I'm told). She brandished her Starbucks card, teasingly telling me that it's a "gold" card. And that makes her a special customer. I reply (only half in jest) that the gold card makes a special sucker.

    Before I go on, let me point out that my wife is frugal. I'm not trying to paint her as a spendthrift. If she were we would have found it impossible to live with each other 30 years ago. But, like all of us, if we can afford it we have one or two areas that we like to treat ourselves. Coffee happens to be her's. (we'll keep mine a secret...)

    But, it does occur to me that the things that provide us with status are often the very things that ruin our budgets. The designer clothes and sunglasses, prestige autos and watches - these are the things that often seem irresistable before we purchase them, but wreak havoc with our credit card bills later. Fortunately for us, my wife and I can tease about the Starbucks card. It's not a significant expense. Rather it's a little luxury that she deserves.

    A few days later I was being interviewed by Marty Nemko. He hosts a show on the public radio station in San Francisco. We we discussing what we can pass along to succeeding generations about money. We spoke on how much pressure there was on young adults to conform to the purchasing habits of their friends.

    I remarked that the concept of a 'starter home' had disappeared. Most 20-somethings expect that their first house will be much like their parents' existing home. They assume that they can start the financial journey in the same place that took their parents 20 or 30 years to reach. If you look at that assumption you'd say it was false. Their parents have been building equity for decades to make their mortgage payment affordable. Their kids don't have that downpayment and the mortgage payments will be too expensive for them. They need to start the financial journey at the start. Not the middle.

    As we continued the discussion Marty asked me what was the most important thing that we could teach young adults. It seems to me that there are two things that will make a huge difference in their financial future.

    First, learning to live without status symbols is freeing. It's a hard life when you let others define your worth based on the things you own. If my self-worth is tied up in a new car, I'll be forced to buy one every few years. And, that will get expensive. I'll be much happier if I decide that my self-worth has nothing to do with my possessions. That buying (or not buying) an expensive new watch will make no difference in who I am and what I'm really worth. That's very liberating.

    Second, all young adults would be wise to learn about the value of compound interest. It's a double edged sword that can make or break your finances. The idea is really simple. If you save a few dollars every month and put them in a bank, IRA or invest them, over time they'll grow. You won't have to work hard to make that happen. Once you've saved the money the hard work is done. Time and a little monitoring will do the rest. And, as the years progress those savings can become significant.

    But, if you spend a few dollars more than you make each month, the same compound interest will become an ever heavier burden to carry. That's because the money that you owe will will accumulate interest and the debt will grow a little bit each month. So you'll continue to pay more and more for something that you bought years ago.

    The concepts are simple. No MBA needed to understand them. Look at prestige goods for what they are. A way to separate you from your money. Learning to live without them is actually very freeing emotionally. And, compound interest can make or break you financially depending on whether you save a little each month or spend a little too much. So I'd ask one question. What gold cards do you have in your wallet?

    Keep on Stretching those Dollars!


  • Your Frugal Financial Habits

    I don't know about you, but I'm a creature of habit. I get up at the same time each day. Pretty much follow the same routine. And, it's not just my 'getting up' habits. I find that reducing things to a familiar pattern often makes life easier. Taking energy to decide whether I should brush my teeth or shave first is wasteful. Non-productive. Doing it the same way every day allows me to focus on things that are more important. I've noticed something. Since habits are generally good, I tend to form them. Find ways to make things automatic. Or at least as simple as possible. Normally that's good. But, it pays to take a look at your habits from time to time. For instance, what do you do about weekday lunches? Are you eating the same stuff every day? Is it healthy? Affordable? Would other choices be better? Or what about your shopping habits. If you've been shopping at the same grocery store for years, try another store just to see how their prices compare. You might be surprised to find your regular store lacking in some areas. Or have you looked at your retirement plan investment options recently? It's great to be saving money every month. But, perhaps you need to change where your new money is being invested. The point is to look at your habits periodically. You might find that what you're doing just doesn't make sense anymore. Who knows...I might just find that it makes sense for me to shave before brushing my teeth!

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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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