Friday, November 30, 2007

Inflation: having its way with your finances

Unless you've been living under a rock, you've probably noticed the jump in gas prices this year. The trend over time up until May is represented in this neat little graph from If you take a look at the graph, you'll see that we haven't yet reached 1980's all-time high (when measured in today's dollars), but we're getting perilously close.

Aside from the immediate effect of making car trips more expensive, the problem with this kind of sector-specific inflation is that it bleeds over into other parts of the economy. You might have noticed that food prices shot up this year as well. Part of that is driven by the increase in gas prices: increased transportation costs of getting food from place to place means higher prices. The same holds true for pretty much any other consumer good, especially those manufactured abroad. For a nifty double whammy, the sinking dollar is also currently pushing up the cost of imports. I think many companies are trying to absorb the blow to some extent by lowering their profit margins, but that's no more than a short-term panacea. The heart of the matter is that your dollar is worth less today than it was yesterday, and tomorrow it'll be worth less than it is today.

So, what's a dollar going to be worth in twenty years?

I think a good proxy for figuring out the effects of inflation over time is to use a future value calculation. Here's a look at how I expect inflation to bite my bottom line in the next twenty years:

1. I set up two variables, the value of a dollar today (which will be a dollar, represented as 1) and the number of years I'm projecting ahead.

2. I plugged in the following formula: Rate represents the inflation rate over time. 3% is the common benchmark. I'm conservative, so I used 4%, represented as .04. Nper is the number of periods. I'm not compounding on more than a yearly basis, so this is just the number of years. That's B4. Pmt is blank because we're just measuring the change over time. Pv is the present value (what a dollar is worth today, represented in A4), set to a negative. (Setting Pv to a negative value is always necessary in future value calculations if you want the end result to be returned as a positive figure.)

3. This is the end result: using a 4% inflation rate, we can estimate that anything that costs a dollar today will cost $2.19 twenty years from now. In other words, a dollar today will be worth only 46 cents in twenty years (1 divided by 2.19).

Using this baseline estimate, if you multiply your current cost of living by 2.19, you'll get a pretty good idea of what it'll cost to maintain your standard of living twenty years from now. Don't know about you, but I find those numbers a little scary.

Inflation, folks. Factor it in when you're planning your retirement. Otherwise, it'll rob you blind.

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Tuesday, November 27, 2007

What's your backup plan?

The stock market sailed upwards today, but I think we're facing a great deal more pain before the current correction is finished. I'm not confident that we're going to avoid a recession, and that means it's time for me to start thinking about Plan B.

My budget is about as tight as it can get without either massively changing my living circumstances or getting into some serious personal deprivation. My defense game is in pretty good shape, so Plan B is all about playing good offense. Here are some of the things I've started doing:

1. Tidying up my resume
I hope I don't need to start whipping it around to different employers, but it'll be ready if I need it.

2. Looking for the weakest link
Smart employers target the lowest performers when they start laying people off. I work for a smart employer. If I can't clearly spot lesser-performing peers, that means that the weakest link might be me.

3. Making myself indispensable.
No one is really indispensable, but I've managed to get myself into a management position in an area that's hard to outsource. That alone isn't enough; I also have to be on top of my game, all the time.

4. Networking
It's always good to make friends on a professional basis, both in the office and outside.

5. Seeing what else is out there and are good places to start. So are my company's direct competitors.

6. Re-evaluating my financial plan
This is the time to make sure the emergency fund is fat and sassy. Unless my washing machine or something undergoes a catastrophic failure, major purchases need to wait. If things look bad next year, I might not pay off my mortgage as early as planned. In addition, instead of dumping money into my IRA on January 2, I might hold off for a couple of months. In a genuine worst-case scenario, I'll hold off on the IRA indefinitely and stop making extra payments on my mortgage principal altogether. I've already knocked my mortgage down enough that if I stopped making extra payments today, it'll be gone in two years anyway.

7. Figuring out what I want to do when I grow up
Adversity breeds opportunity; I strongly believe that. If my job goes down the proverbial rathole, I'd like to have a clear idea of what I want to do next, since it won't necessarily have any resemblance to what I do today.

Of course, I'm 38 and haven't figured out what I really want to do yet, so I'll have to get back to you on that one.

I may not be able to save my job if hard times come to pass, but doing the groundwork to be able to make a significant change makes me feel like I'm not stark raving naked and powerless. On the contrary, I'm planning to be ready to regroup in the face of anything that happens.

How about you? What's your backup plan?


Monday, November 26, 2007

Apartment shopping in my building

Last week, I went apartment shopping in my building. Two apartments are currently up for sale: one has three bedrooms, two bathrooms, and a private terrace; the other is the same configuration as mine (one bedroom, one bathroom), but without the extensive renovations that the prior owner in my building did. Both had open houses last weekend, so I went to both.

The three-bedroom apartment is a dream. It's only on the second floor, but the private terrace is enclosed and hanging out there feels like being in a garden. The owner did extensive renovations, so there's a gorgeous kitchen, stunning wood floors, and all kinds of built-in efficiencies.

The cost? $1.6 million. Monthly taxes and maintenance fees are about $1500.

The second apartment is on the ninth floor. It has good lighting, but the view is straight into another building. The apartment itself hasn't undergone any significant renovation since 1987, so the appliances are all out of date. The kitchen is narrow, fully enclosed, and claustrophobic, with very little counter space.

The price on this one is $515,000. That's more than twice what my apartment with the same basic configuration cost in 2001. Mine is on a lower floor and the lighting isn't very good, but it was remodeled by the previous owner into something of a minor showpiece. The bathroom needs to be redone since the renovation work hasn't held up too well, but the major structural changes that give the apartment a lot of character are already in place.

Seeing the price on the second apartment made me extremely happy, because it gives me something of a benchmark for measuring appreciation in my own place.

The three-bedroom apartment really grabbed me, though. I came home and punched the numbers into my financial calculator, reckoning what it would cost me if I got top dollar for my place and dumped all of it into a down payment.

An hour later, I finally gave up. I can't make the numbers work.

Even with a fixed-rate mortgage, the carrying costs for a fifteen-year committment are more than my monthly net pay. The only way I could swing it would be to stop investing in my 401(k) and IRA, get a thirty-year mortgage, give up my dream of paying off the mortgage early, and hope that nothing ever happens to my job until I'm well past 65.

Those costs are much more than I'm willing to bear.

I put down the calculator and toured my 577 square feet again. (This didn't take long.) It's not perfect: it's small, the bathroom needs a redo, I don't have a terrace, and the light is bad. On the other hand, I don't have much stuff and I can clean the whole place in an hour, I've already put the bathroom reno in the financial plan for 2010 or 2011, I'm a known plant-killer anyway, and the lack of natural light rarely bothers me. On top of that, I have a wonderful kitchen with beautiful cabinets and all the counter space I need, and the monthly charges are unusually low for a doorman building. Neighbors seem to have heard about my apartment; once in a while when I'm getting the mail, someone stops me and says they've heard I have a cool apartment and would like to come in and see it.

All in all, I'm happy. This may not be where I'd choose to live in a world of unlimited resources, but I'm less than a year from owning the place outright, and I'm on track to early retirement.

I feel better already.

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Sunday, November 25, 2007

Black Friday aftermath

Was it as crazy as you thought it was going to be?

I spent Black Friday like this: I got up when I woke up (8:30), drank coffee, and read the newspaper. Then I walked down to the Salvation Army to donate some stuff (was closed) and took a walk around the neighborhood. I cleaned my apartment, did the laundry, and catnapped. I peeked in on from time to time to see what the news was, and I read a few blogs. I also got caught up on the New Yorker and Bon Appetit. In the evening, I talked on the phone and drank two glasses of Three Buck Chuck.

All in all, it was great. No complaints whatsoever. I had dinner in Soho yesterday and the sales are still on, so the place was a zoo. I didn't regret missing it on Friday.

Did you go shopping on Black Friday? If so, what did you buy and why? If not, what did you do instead?


Friday, November 23, 2007

Love song for Trader Joe's

Trader Joe's opened in New York a year or two ago and Ive been having a torrid love affair with it ever since.

Like any relationship, at first I saw only the good: vegetables, chicken, peanut butter, and other staples are cheaper at Trader Joe's than anywhere else I've been in Manhattan. Trader Joe's' bottled curry sauce is pretty similar to mine, but it doesn't take half a day to make like mine does. Crystallized ginger (hitherto a rare treat) abounds at low prices, and they do a chocolate-covered English toffee that would make my dentist shudder but which makes my blood sugar sing. The long lines were nothing in comparison; the employees are friendly, and the lines are structured to move fast. I went down there once every two weeks, gaily filling up my basket with all kinds of things I never ordinarily buy for myself.

Gradually, the honeymoon ended and reality set in. I denied it for as long as I could, but after a few months it was clear: thanks to Trader Joe's, I was spending more money on groceries than I did shopping in my neighborhood.

Even more ominously, thanks to an overabundance of English toffee, crystallized ginger, blueberry scones, and organic convenience foods, my pants were starting to get distressingly tight.

After that, nothing Trader Joe's could do was right in my eyes. The long lines were starting to annoy me. The crowds reminded me of howler monkeys on crack. The employees were friendly, but commenting on everything I bought as they rang it up was a little too friendly for my liking. More than once, I thought about leaving Trader Joe's and going back to giving my all to the much more expensive neighborhood shops.

There was something about Trader Joe's that I just couldn't let go, though. Knowing Trader Joe's as well as I did at that point, I decided that I had the information I needed to work through our problems. I took a pen and paper and started to scribble out some thoughts, and here's what I came up with:

I'm spending too much damn money at Trader Joe's
That was really the heart of the problem. The other issues were petty annoyances that burst into full-blown aggravation because of this core truth. As a result, I decided that my plan of attack should be to figure out how to cut back my spending without giving up TJ's altogether.

With that approach in mind, I pulled together a few ground rules for our relationship:

1. If I don't buy it at other places, I don't buy it at Trader Joe's
I really enjoy scones and toffee and ginger, but I have a serious and ongoing sugar jones. As a result, I know full well that I can't keep sweets in the house. That meant striking toffee, ginger, and scones off of my shopping list. I don't buy convenience foods at other places, so I decided that I'd better not do it there either.

This all-or-nothing approach proved to be too draconian, so I modified it to the following:

1. For food I wouldn't buy elsewhere, stick to preset limits
These limits are: one convenience food (pizza or burritos) and one sweet (one packet of ginger or one package of toffee). That's proven to be satisfying without exposing myself to too many additional calories and too much excess sugar.

2. Plan ahead
I make a shopping list and stick to it. While I only plan meals a week or so in advance, I have a good idea of what I use consistently. That makes planning shopping easier.

3. Limit visits
Absence makes the heart grow fonder. For me and Trader Joe's, that means buying staples in bulk, often in fours. Chicken breasts work out to $2/pound, so I usually buy four 2.5 pound bags. Peanut butter is $1.69 a jar for the natural unsalted stuff, so I buy four jars at a shot. High-fiber bread is $2.29 a loaf, and I can usually cram four into the freezer at any given time. On the occasions I buy three-buck Chuck wine, I buy somewhere between three or four bottles or a full case (which is interesting to transport home by subway). I also buy bulk vegetables as they fit into the week's meal plan. It means a fairly big bite per visit at the checkout stand, but it also means only one trip every six to eight weeks, which is a huge savings in both money and time.

4. Go early
I usually get there by 9:30 or 10:00, when it's less of a zoo. That makes it easier to stick to my plan without getting rattled.

5. Not everything at Trader Joe's is a better deal
It's a little surprising, but true: there is a better selection of produce at the shops in my neighborhood, and I can often get a better deal there as a result. I remind myself of this frequently while buzzing through the aisles at TJ's.

These ground rules are pretty basic, but they've really helped me get a handle on my relationship with Trader Joe's. We continue to have our ups and downs from time to time, but I've gotten to a point where I can focus on the positive and let go of the negative while staying true to my own needs and priorities. We've reached a point, Trader Joe's and I, where on the whole we're good for each other, and that's a good place to be in a relationship.

I think this one is going to last.


Thursday, November 22, 2007

Happy Thanksgiving, and a special welcome to all the new subscribers

As the autumn holiday season comes to a close and Christmas-Hanukkah-Kwanzaa-whatever shopping mania officially kicks off, the f.z. extends her warmest wishes for a tranquil and happy holiday season to one and all.

While Black Friday, that magical biggest shopping day of the year dawns bright and early with door-buster sales tomorrow, people that choose a different path are encouraged to observe an even more magical event: Buy Nothing Day.

It's not much, but it's a good way to avoid getting stomped on at the mall tomorrow.

Now if you'll excuse me, the stuffing is made, the disaster in the kitchen is cleaned up, and I'm soon off to a nice holiday dinner with friends. I hope you have as much to be thankful for as I do.


Sunday, November 18, 2007

I needed it like I needed a hole in the head, but still. . .

Shopping at pharmacies in New York isn't generally a fun experience. Cashiers don't really smile on the whole, and they seldom say anything other than NEXXXXT! It's not what you'd call a friendly experience. The drugstores in my neighborhood are not all that well-maintained, either. Aisles are often cluttered and messy, and it can be really hard to find what I'm looking for without feeling my blood pressure climb a couple of points.

Today, however, I had a pretty good customer service experience at Rite Aid. I was in line to pay for some stuff and I spotted a tag advertising buy one, get one free on Altoids, regularly priced at $1.99.

I don't succumb to impulse purchases too terribly often, but 99 cents is exactly the maximum price I'll pay for a tin of Altoids, and I'm fond of them once in a while. I picked up two tins and tossed them in with the rest of the items I was buying.

When the cashier rang up the total, it came out to be about two dollars more than I was expecting. I paid her and glanced at the reciept quickly, noticing that the Altoids had rung up at $1.99 each instead of $1.99 for two. I politely pointed this out, so she took out one of the tins and scanned it.


Well, I hate getting overcharged.

I reached down and pulled off the tag advertising two for one off of the shelf and handed it to the cashier, politely pointing out the discrepancy between the ad and the price she charged me. She muttered something that sounded uncomplimentary in a different language and called for the manager.

The cashier and the manager spoke in a different language (I think it was Spanish) for a moment, and the manager entered a code onto the terminal. The cashier pulled out a reimbursement slip and gave it to me to sign. Then, she refunded me not $1.99 plus tax, but $3.98 plus tax.

Yup. Rite Aid actually decided that in addition to correcting their $1.99 error, they would just give me the Altoids gratis.

I can't say I love Rite Aid, but I do appreciate the fact that they went beyond correcting an overcharge in this case. That was good customer service, and it makes me inclined to go back.

The Altoids are good, too.


Sometimes things don't turn out the way they're supposed to

Today's New York Times had an interesting article about one of Norman Mailer's ex-wives, Adele. As Norman Mailer's wife, Adele shared in his prosperity and riotous lifestyle in the 1950's. After an attack with a knife and a divorce nearly fifty years ago, Adele, now 84 years old, lives in decrepit, rent-stabilized poverty on the upper East side.

I've said it before and I'll say it again: failing to plan is planning to fail, and this is especially true when it comes to personal finance. The propsect of poverty in old age is terrifying, and I'll do whatever I have to do to make sure it doesn't happen to me. I hope you'll do the same.


Thursday, November 15, 2007

Giving it up for God

This topic is probably going to get me into hot water, but hear me out. I'm asking because I genuinely don't know:

I don't get tithing. I really don't.

If you're already categorizing me among the religiously retarded, you're right. I wasn't brought up with religion, and I usually vacillate between agnostic and atheist depending on what kind of day I had. If I were anything, I'd probably be Buddhist; then again, I have some doubts about that as well.

Anyway, tithing. I can certainly understand how people who are financially comfortable might find it spiritually rewarding to give money to support their religious beliefs. What puzzles me is that there seem to be a lot of people in desperate financial straits who tithe, knowing full well that it will mean less debt repayment and/or painful and stringent budget cuts.

Why do people who can't afford to tithe do it?

Why do religious organizations accept money from people who clearly can't afford it?

Is there such a thing as non-monetary tithing, like donating time or labor for projects or other volunteer work?

Is tithing required in some religious organizations, or just strongly encouraged?

What do religious organizations do with the money?

If someone (preferably a bunch of someones) can explain this to me, I'd be most appreciatve. Don't bother trying to convert me or tell me I'm going to hell, though. I get that from the loonies in the Times Square subway station every day and they don't impress me either.

In case you're also unsure of where you fall in the religious spectrum, you might be interested in Beliefnet's Belief-O-Matic. If you can ignore the slightly disturbing Hoodia ads, there's an interesing analysis of where your personal beliefs place you on the religion spectrum. Not surprisingly, I scored a 100% match with Secular Humanism. More surprisingly, I also scored a 100% match with Unitarian Universalism, a 90% match with Liberal Quakers, and an 84% match with Theravada Buddhism. I don't know if the questions are weighted to direct people to particular outcomes, but in the interests of enlightened skepticism, I'd suggest that you take the whole thing with about a pound of salt.

And last but not least, thanks to the good people at The Issue, who selected my Deep dive into Prosper article as one of their leads in today's Business section. I didn't ask them to do it; it just kind of happened, and that's always music to my, um, eyes. Thanks, guys and dolls!


Tuesday, November 13, 2007

Deep dive into Prosper

A couple of months ago, I took a look at to see what that was all about, and I wrote a post about what I found. I spent a little more time looking at Prosper again over the past couple of days. This time, instead of looking at it holistically, I only looked at the loan requests in which the borrowers were categorized as HR, or High Risk. The reason I was specifically interested in HR applications was because I wanted to see what the drivers were for borrowing money when the borrowers' credit rating had already gone down the tubes.

There were something like sixteen pages of HR listings. I didn't look at each entry and this time I didn't make an attempt to randomize the listings I looked at, but while I was poking around a few common themes jumped out at me. I thought the things I noticed were interesting enough to share, and I'm also adding a few comments that came to mind as I collated them.

1. Loss of home
I saw a few different posts where either a medical crisis or an adjustible rate mortgage that reset caused the borrower to fall behind on payments. Some posters also wrote about imminent evictions from rental homes because of a medical crisis, job loss, or some other calamity.
f.z. says: If it's not possible to pay for everything at once, pay for housing first! I can't think of anything scarier than suddenly facing homelessness, and in some ways these desperate-sounding posts are the hardest to read. These situations also underscore the criticality of understanding the terms of a contract (e.g. mortgage), buying less home than the bank says you can afford (thus incurring less debt and ending up with potentially lower payments), getting the best medical insurance you can, and bulding up an emergency fund.

2. Payday loans and credit card debt
There were quite a few posts where people were trying to consolidate or clean up past credit card debt and get rid of payday loans. In some cases, the borrowers didn't realize what they were getting into; in others, they felt that they had no choice because of emergency situations (usually medical).
f.z. says: Yippee for people taking steps to clean up their credit. This is totally admirable. In these situations, it's important not only to get out of debt, but also to eliminate the conditions that caused the debt in the first place. For many people, it means modifying consumer expectations and buying habits, but it also includes the points I mentioned above about medical insurance and building up an emergency fund.

3. Weddings
I saw five or six posts from people who either wanted to buy engagement rings, pay for an upcoming wedding, pay debts incurred by a wedding, or pay for a son's or daughter's wedding.
f.z. says: To what extent are wedding expectations formed by organizations or institutions that make money out of the wedding industry? My favorite example is this: the brilliant people who came up with that garbage about spending two months' salary on an engagement ring were none other than (drumroll). . . the diamond industry! Starting out a life together with a partner is a wonderful thing, but getting in debt doing it isn't exactly setting the marriage up for success. Give yourselves peace of mind and scale back the wedding to what you can afford to pay up front.

4. Divorces
There were quite a few posts where the poster was financially devastated by the outcome of a divorce. In some cases, the poster was trying to keep a house for children; in others, the poster had assumed a large existing debt burden as part of the divorce settlement.
f.z. says: I have a lot of empathy for this one because divorce is absolutely devastating financially, and it often comes unexpected - as it did in my case. This is one of those situations where the best defense is a good offense from the very beginning: Both partners should have money in their own names. Debt should be kept to an absolute minimum. Pre-nups and post-nups are not a bad idea, especially for couples who have each managed to build up substantial assets prior to the marriage. A house doesn't make a home; sometimes the smart thing to do is to sell it and move into a cheaper place. Mediation can help keep the process civil and prevent the lawyers from walking away with most of the assets. And finally, one I learned personally: at $250 an hour (which is what I paid), sometimes it's cheaper to just give the other party what he or she wants instead of shelling out thousands of dollars to fight.

5. Medical bills
Debt incurred by medical bills ran the gamut from birth defects to major accidents, cancer, heart attacks, and just about everything in between. The posts I'm including in this category are ones in which the medical event was the direct cause of debt, but in many of the other categories, medical bills contributed heavily to payday loan use, credit card use, and in some cases divorce and the imminent loss of a home.
f.z. says: Put the chips down and move your butt: fitness is really and truly the fountain of youth. Done properly and consistently, it'll lower your risk for all kinds of ailments later in life. Fitness alone isn't enough, though. Make sure you get the best medical insurance you can and hang onto it. (There's no one-size-fits-all solution: healthy people who seldom get sick can often make do with a high deductible and an HMO. I'm healthy, but I have several long-term medical conditions that require ongoing management and some clear risk factors for bigger problems down the road. That's all meaningful enough to me that I voluntarily pay more out of pocket for a PPO plan instead.)

6. The holidays
The desire to have a nice Christmas was specifically indicated as a core driving factor for a surprising number of loan requests.
This is a tough one, especially with kids. I really liked what commenter ellen said on my last post about making memories with the kids in her family instead of reinforcing consumerism during the holidays. I don't know that there are any easy answers, but between turning off the television and volunteering for people who have even less at this time of year, the holidays can be a good opportuntiy to teach a set of values other than the ones that Madison Avenue espouses. At the very least, a debt-ridden Christmas doesn't make for a very happy new year.

7. Business start-up, business expansion, or school
f.z. says: Applause all around. Wearing my lender hat, however, I'd like to know that the businessfolk have maximized their chances of success through demonstrated market research, careful business planning, and plenty of hard work. For the students, I'd like to see grades and a writing sample, and hear about their future plans. Special note to the college student with the really nice Coach handbag in her photo: I've never felt like I can afford a Coach handbag and honor all of my other responsibilities the right way, so if you have one and are trying to borrow money for school, I'm inclined to think that your priorities aren't in the right order. That's a little snarky and not necessarily fair (it could have been a gift), but it was still my first reaction.

One thing that jumped out at me from the vast majority of posts I looked at was a list of monthly expenses, with a notation that that the delta between income and outflow would all go to Prosper. That works, but only as long as nothing goes wrong. My last bit of advice to a borrower of any kind would be to not make the budget so tight that it's not possible to set some money aside on a monthly basis for emergencies. Making one's financial circumstance better is a wonderful thing, but a large part of climbing out of a hole is staying out of it.


Saturday, November 10, 2007

frugal tips #5: frugal holiday season

The day after Halloween, I was sniffing around one of the local drugstores to see what kinds of after-Halloween candy bargains I could scoop up to soothe the savage PMS monster. The 75% off leftovers were piled at the end of a very messy area, where employees were already stapling up red and green tinsel strands and stacking plastic ornaments on a shelf. I looked at one of the employees wryly.

Getting ready for the next holiday already? I inquired.

The employee had probably heard that question a hundred times already and wasn't in the mood to talk about it with me, so I moved on.

Welcome to the holiday shopping season, folks.

According to a Gallup poll taken a few weeks ago (note: before the stock market crapped out by over 700 points this week), Americans are expected to drop an average of $909 on Christmas presents this year. That's essentially flat compared to last year's average of $907, but it still sounds like a lot of money to me. No wonder Christmas is so stressful and depressing for so many people.

About ten years ago, I started lobbying my family to stop exchanging Christmas presents. We are all adults and my parents were starting to slow down by that point, so it was getting increasingly difficult to find presents they'd really enjoy. My former (at that point, future) in-laws were pretty irresponsible with money for the most part, but their system was pretty effective: kids got one gift from everyone, and the adults all drew one name for everyone else.

Well, my family wasn't having any of it, and Christmas continued to be stressful for all of us. Everyone's thinking started to change once major health problems set in with my folks, though, and three or four years ago, we all finally agreed that we're all Christmased out. The new system we've evolved is this: My sibling and I give our parents token gift certificates for local restaurants. My dad picks up fresh-baked bread and a plate of cakes at one of the local bakeries. (I'd prefer not to have the cakes, because if they're in the house, well, I eat them. He loves doing this, though, and I'm not going to ruin it for him.) . My parents also give us calendars on Christmas day. That's it!

It's a lot cheaper, there's no stress involved, and I love it.

Boycotting presents might not be the right solution for you, but there are plenty of ways to celebrate the season on the cheap. Some possible options include:

1. Giving to charity instead of to each other
This may not be the cheapest way to go, but it helps bring a little happiness to someone else's life. I highly recommend it.

2. Giving your time instead of your money
I don't need a new sweater, but I'd love it if you gave me the gift of cleaning my apartment sometime. Maybe I can walk your dog in return. You could also plan a special (and inexpensive day out), or teach someone a new skill.

3. Giving homemade gifts
Cooks really get to shine here: homemade treats can be economical (if you pick your gift well) and almost universally welcome, unless you manage to give someone E.coli O157H along with the cookies. (I wish I were kidding about that, but it's certainly one way to lose twelve pounds in a week. The downside is that fainting at the lab caused something of a ruckus among the staff. Plus, I banged my elbow on the way down.) If you have sewing, woodworking, scrapbooking, or web development skills, you can really leverage them for Christmas as well.

4. Have people over for dinner
Yay, homemade dinner!

In short, Christmas (or whatever holiday you celebrate) can be as cheap and as creative as you want to make it, and given the shaky state of the economy, that's not a bad thing.

What are you giving or hoping to receive for the holiday season this year, and why?


Tuesday, November 6, 2007

Behold, for I say it is crap

One person's crap is another person's treasure. Crap is in the eye of the beholder. Don't count your crap before it hatches. In case today's theme isn't evident, today I'm looking at my own personal Crap-o-meter to share with you where I draw the line on what I think is worth spending my pennies on versus what qualifies as crap.

(I'm not calling your stuff crap, okay?)

--Cable TV (living in New York, there is no reception without cable; thus, I'm generalizing this to all television other than what's available for free on the internet.)
--Beauty magazines
--Books (the library's free)
--Bottled water
--DVD player
--Manicures and pedicures
--Political campaigns
--Over the counter herbal supplements
--Twenty-dollar bottles of wine
--Duty free in Europe
--Chain restaurants
--Throwing out leftovers
--Trial size
--Front loads, back loads, 12-1b fees
--Life insurance (no dependents)

Not Crap
--The New Yorker, Sunset, and the New York Times
--Good French or Italian roast coffee (from Costco in Oregon)
--Nice soap and cosmetics ($1 each at the Body Shop's twice-yearly sale)
--High-speed internet
--Gym membership
--Good running shoes (close-outs from online stores)
--Doctors Without Borders and the New York Times Neediest Cases Fund
--Legally prescribed medication
--High-quality chocolate
--Three buck Chuck
--Duty free in South America
--Organic carrots
--Locally owned restaurants
--Doggie bags
--Economy size
--Funds with low management fees and solid performance
--Homeowner's insurance
--Monthly subway pass

Do you see any overlaps with your own Crap-o-meter? Where do you think I'm full of crap?


Sunday, November 4, 2007

Work bennies

I got home from a weekend out of town earlier today, only to have a slight heart attack when I glanced at my blog: over the weekend, I lost more than 50% of subscribed readers. I didn't think that people would be that terribly put off by the Barbara Stanny interview, so I checked Feedburner's site. Looks like people subscribed through Google were thrown off of Feedburner overnight. According to the service outage report, they should be back up tonight.

In the meantime, the reason I logged onto my computer as soon as I got home was to play around with my new Blackberry, which arrived this weekend. I upgraded from a 7105 to an 8100 Pearl, which has all kinds of new whiz-bang accessories, including a camera. In case you're interested, here's a shot of yours truly. I took it while talking on my land line.

The only reason I have a Blackberry in the first place is because although I have to pay for the hardware, work pays for the entire service bill. They don't actually require that I have a Blackberry but it's part of our corporate culture, and I didn't feel great about bucking the tide. I actually find it very helpful most of the time, despite its propensity to feel like an electronic leash to some degree. It receives both work and personal email and also functions as a cell phone. Since I'm too cheap to buy a cell phone, I find the phone functionality especially helpful: I feel better if my parents can reach me in case of an emergency. We've had enough of them in the past few years to warrant my being reachable at all times.

Since our rules for use at work state that I have to buy the hardware, after my old Blackberry flipped out and started sending emails without consulting me (including three to a Nigerian scammer), I contacted our corporate account rep to see how much I was going to be stung for a new one. It was a real delight to discover that since I've had a Blackberry on the firm network for over a year, the upgrade to a new and greatly improved device wasn't going to cost me a cent. The device retails for $299, so this was a real benefit.

That got me thinking about other perks at work. Some companies offer gym membership, movie tickets, free phone service, and much, much more. In my case, the deep Blackberry discounts and free service are to encourage employees to be accessible outside of work hours. What kind of fringe benefits does your employer offer, if anything? What expectations are attached?

If you're a business owner, what benefits do you offer your employees and why?

Looking forward to hearing your answers.


Friday, November 2, 2007

Author interview with Barbara Stanny

Between me getting deathly ill in the middle of an uprising at work and personal finance author Barbara Stanny (pictured right there on the left) being busy with a proposal for a new book, it took a while to put the promised interview together. Put it together we did, though, and the questions and answers are below. The first eight questions are mine; the last two were contributed by Millionaire Artist and Educated Prole.

1. A recent story published by the New York Times states that in large, urban cities, twenty-something women are making more money than their male counterparts. How do you think this phenomenon will influence dating and relationship perceptions and trends?

I think this trend will force every one of us to dramatically shift our mindsets about gender roles and expectations…which can be very difficult for some but very liberating for most…the trend free up both sexes to be who we want to be, not who we think we should be.

2. Generation X is now in or near their 40's. [Editrix's comment: this is somewhat depressing.] What are the most significant challenges you see for this generation as they approach retirement?

They are having the exact same challenges as women of all ages are having. Every recent study has revealed the same thing: women know we need to protect ourselves financially, but we aren’t doing it!

3. In your book "Secrets of Six Figure Women," you indicated that the underearning phenomenon among women appears to be correlated with self-defeating characteristics like low self esteem, codependency, low self-confidence, and self-justification that it's more noble to be a low income earner than a high income earner. Do you think the women of Generation Y as a whole carry these traits to the same degree that earlier generations did? If so, why do you think so? If not, why not?

Of course there are gen Y women who display those characteristics. But, in my personal experience, these young women seem far more confident and focused than my boomer generation. Yet, they don’t seem as driven by money as by making a difference. I haven’t seen any research to back me up…but this is my general impression.

4. In "Secrets of Six Figure Women," you state that developing focus and intention are critical to overcoming underearning. What do you think of the reverse philosophy, which states that motivation follows action? How does it (or can it) play a role in overcoming the self-defeating characteristics described above?

One of the "most popular" ways intelligent, talented, ambitious women keep themselves underearning is by being scattered, unfocused, pulled in too many directions. They may be motivated to make money, but they don’t realize that stretching themselves too thin is an act of self sabotage.

5. In both "Secrets of Six Figure Women" and your subsequent book "Overcoming Underearning," you stress the importance of being able to negotiate for one's salary. How does a person inexperienced with negotiating learn how to do it successfully?

I’ll tell you how I’ve learned to be a better negotiator: by 1)taking classes, 2)reading books, 3)talking to people who are good at it; 4)learning from my mistakes. If I have to choose the one that’s been the most powerful, it’s #4.

6. In "Overcoming Underearning," you identify feeling a lack of personal accountability for success and insufficient self-determination (e.g. seeing oneself as responding to external events instead of directing outcomes) as key internal constraints that prevent women from reaching their potential in the job market. What do you think of external constraints, such as children or family life? Are they true constraints that can prevent women from achieving their full professional potential? If so, what are some strategies you'd recommend for removing these constraints or making them more manageable? If they aren't true constraints, why do you think they aren't?

The reason I know that those external conditions are not actual constraints is that I talk to too many women, with those same constraints, who are succeeding magnificently. And then there are those who don’t have kids or a family, yet come up with all kinds of other "constraints" as reasons for not acting. More often than not, we use those "constraints" as excuses…so we don’t have to do what we’re scared to do. That’s the number one requirement for overcoming underearning…the willingness to be uncomfortable, to do what you don’t think you can do. [Editrix's comment: I really agree with this point. In my line of work, we call it working outside of one's comfort zone. It's hard as hell, but it's so critical in developing skills and leadership abilities.]

7. In both "Secrets of Six Figure Women" and "Overcoming Underearning," you refer to The Four Rules of Money (Spend Less, Save More, Invest Wisely, and Give Generously). What would you say to someone who responded to these rules with one of the following:

"I don't have time to figure out my finances." (Said to me by a man)

"I'm not going to worry about any of that until I'm married." (Said to me by a woman)

"I want to save money, but I don't want to not be able to do fun things" (Said to me by a man and by a woman, separately)

Those statements are all signs someone is in resistance. They are finding excuses not to act. I see it all the time…in fact I catch myself using a lot of those excuses myself. But at least I see it’s my resistance, and I won’t let it stop me.

8. What do you think parents can (or should) do to teach their children about personal finance effectively? How does what you taught your children and grandchildren differ from what your parents taught you?

Whenever anyone asks me 'how can I get my kids to be smart about money?', my answer is always the same. Start by getting smart yourself. The very best way (I’ve learned from experience) to teach your children good financial habits is to model them yourself. And, at the same time, talk openly to them about money. Include your kids in conversations about the family budget, paying bills, investing, saving for college, the danger of credit cards, etc. [Editrix's comment: I don't have kids, but I think this is really important. It's exactly how I learned, although it took me a little while to put it into practice.]

My daughters saw first hand the consequences of abdicating financial responsible…and I shared with them everything I did to take get back on my feet financially. Managing money was, and still is, a very common topic of conversation around our dinner table.

9: Educated Prole says, "I am a 50-year-old chronic underearner currently earning my state minimum wage in a dead-end job with no advancement path.

I have a liberal arts degree and nothing which could remotely be considered career-related experience.

Even if I were to somehow "overcome" underearning, my age and lack of career-related experience would appear to be enormous obstacles to earning a decent income.

Is there a point (age, dead-end track record, etc) at which overcoming an underearning personality will no longer be much help?

Well, I was in my 50’s when I finally overcame underearning…and I’ve interviewed women for my books that didn’t start making good money until their 60’s and 70’s. Overcoming underearning has nothing to do with age, lack of education or credentials…or anything else we think we need to make the big bucks. The only requirement necessary to overcome underearning is the willingness to do what you fear, including thinking bigger, valuing yourself, getting clear, and going outside your comfort zone.

10. Millionaire Artist says, "A supportive social network seems pretty vital when it comes to changing behaviors. This includes fiscal behaviors (overspending, underearning, etc.).

Besides blogs and online communities what does Barbara suggest for people who want to surround themselves with people of similar financial goals, or talk openly? Discussing money can be seen as crass, rude, or inappropriate. Until this changes, how can people find social circles to support their desired behavioral changes?"

I’ll tell you how I sought out people who were successful…they became my friends, role models, and Way Showers. I went to networking events, joined professional groups, went to conferences…anywhere I could find people who were like I wanted to become. I’d talk to them openly about money. It wasn’t crass…I didn’t ask how much they made, but I shared my own journey. If they were smart or successful, I’d pick their brain and find out how they did it. A lot of people wanted to learn like me, so we. formed an investment club. I notice a lot of women these days are also starting book clubs in which they only read financial books. You’d be surprised how people will respond when you are authentic and sincere about learning more.

I'm bugging out of town for the weekend sans laptop, but I'll check back in on Sunday. Barbara, thanks for taking the time to work with me on the interview. I'd welcome a second round anytime you'd like. For everyone else, see you on the flip side.


Thursday, November 1, 2007

For people with more money than brains

Words fail me.

It's jewelry. For your furniture.

I don't even know where to start with this one. Commenters, take it away.


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