Reality Stick Smackdown: What Does It Take?

I don’t understand some people’s ideas about money.

They think once they’ve accounted for all the things they know they have to pay for, they’re done worrying. No unexpected or unaccounted-for things could possibly happen to them that could mean the difference between having a balanced budget that month and suddenly scrambling to pay basics like rent and groceries.

I’ve written about a finance board I post on, and one poster in particular, who refuses to give up, change or compromise anything she wants or likes, in order to make living without debt a reality. I should add that she comes from a well-to-do background, and the Bank of Mom and Dad is still probably bailing out her more stupid moves. To make matters more compelling, she is raising children to live this way; buy whatever, spend whatever and don’t worry too much, so long as the income and outgo kinda sorta match up at the end of the month. After all %$!* doesn’t happen here, not to us.

Do tell.

I’ve lived long enough to lose track of the number of  “Oh %$!*” moments in my life. From feline bowel blockages to a husband who breaks a leg on vacation, to an overflowing commode that ruins a bathroom floor, to a sick parent, they never end. Sure, you can break out the plastic, or borrow from family, but isn’t it better to have some funds to fight back with when the reality stick hits you and knocks the wind out of you? Bad enough you have to think fast and react faster; having some money available to pay for extra food, medicine, a plumber, vet, a much-needed adult beverage  is vital to your sanity.

And yes, you can make room in your budget for an emergency fund. We’re talking about a few dollars set aside a week. Give up a treat or two, or put the money aside when you save money couponing and rebating. Try what I do: set aside a small sum every time you do laundry. It’s asking a lot in already lean times to do this. But the next time life wields the reality stick over your head, you’ll at least have a protective shield at the ready.

And an update: All the kind thoughts are appreciated. Mom isn’t doing well, but we are hoping for the best, whatever the outcome will be.

A Friend in Need: Love and a Financial Lesson

Someone I know is in serious debt. We’re talking to the tune of $150,000 or so.

It doesn’t sound like a lot at first glance. When you consider a house can cost three or four times that, owing that much on a mortgage might not be so bad. But this debt is the result of student loans, credit cards, mortgage and boat payments. My friend works, as does her husband. They have children, and the usual expenses that come with raising them: daycare, school activities, entertainment, plus food, clothing and medical care. It hit her quite hard recently that things are not good financially. At one point, they had debt of under $10,000. As my friend put it, “We aren’t behind, but our income isn’t going to support this for very long.”  

What happened?

Life happens, certainly. Emergencies appear, responsibilities happen, obligations must be met. Many homeowners are in the position of owing more on their homes than they are worth, or getting stuck with more house than they need. But where does emergency, responsibility and obligation cross the line, taking your budget with it into the pitfalls of Want-This-Want-That-Gotta-Have-It-Now territory? For my friend, was it the student loans, taken out at a time when borrowed money seemed cheap? Was it the boat, bought for a spouse who assured her that this was “all the vacation he would ever need,” until he found out that a boat without fishing gear, life vests, maintenance tools, etc., isn’t fun or safe to operate.

For the record, my friend is deeply upset by this debt. Is she upset enough to do what she has to do: 

• Chip away at the amount by cutting her budget in a lot of small ways, or
• She and her spouse each finding second jobs, or
• The painfully obvious: lose the boat and the credit cards and rethink her budget

I don’t have a good answer for her. I’ve been down the dreaded debt highway myself, though not to the tune of $150,000. I found a combination of several methods worked for me, but first I had to own up to the fact that there was no easy way out. No money magician, no gelt godfather, no sultan of the cash stash waiting around with a miracle. Clearing my life of money misery was actually my very first step towards My Next Life. I can only support her and offer my experiences, and hope she gets something from it.

Starting on a shoestring

shoe*string: noun – 1. shoelace 2. a small sum of money; capital that is barely adequate.

People are talking, dreaming and some are even doing it, despite (or perhaps because of) difficult times: they are starting their own businesses. The survival rate for small businesses is about 70 percent after the first 2 years, but drops to just over 40 percent after 4 years, according to the Small Business Administration. That’s a better rate than the previously-held belief that 50 percent failed in the first year and 95 percent fail within five years. Regardless of where the numbers of succcess versus failure fall, insufficient capital is one of the top three reasons small business fail, according to the SBA.

Starting one’s own business has long held some very romantic, Horatio Alger-esque notions: dump the corporate world and parlay that little bankroll into a million-dollar deal, or at least enough security and peace of mind to turn one’s back on nine-to-five society. Start humble, work a little, be a lot lucky, get discovered…you know the rest of this Hollywood script.

Now for the reality of saving up that little bankroll: it’s a combination of nickels, dimes, pennies and work:

*  I save my change every day. It goes into change jars, and goes to my savings account when the jars are full.

* I pay myself $2 per load of laundry and save that money.

* Any money I save from coupons, rebates, sales, BOGOs (Buy One, Get One) is saved. Darn right I clip coupons. It takes about an hour a week to clip, sort and go through the week’s ads to make up grocery lists. Average savings: about $70.00 per week.

* “Street Money” (literally found on the street) is saved.

* Tax refunds and stimulus checks: saved.

* My savings account for My Next Life is a one-way street, meaning I have no debit card or checking account for it. Money goes in automatically and stays there. 

* I like store loyalty cards, and I use them. But compare and shop the local and online ads. There are dozens of deal sites on the Internet. Some of them will even send you alerts if you sign up for them.

* I believe in multiple streams of income. Not everyone can handle part time work on a regular basis. Irregular part time income adds up, too. Look at your abilities and skills and let your friends and family know that you are available. Print your own cards, signs and flyers to advertise. Consider bartering your work.

* I believe in rethinking and retraining: rethink what stuff is important to you, and question every purchase. Retraining means expanding your job skills, or improving the ones you have, in a cost-effective way. Try a community college or adult ed instead of expensive four-year college or technical specialty school. Check out classes given by local merchants: I took a 12-week cake decorating class at a bakery for a fraction of what it would have cost at a local cooking school.

This list is just an outline of what I’ve been doing to build a financial bridge that will be stronger than a shoestring.  In my next post, I will introduce you to a hero of mine; someone who has lived her last few years dangling on the end of the shoestring – and used it to climb right back up to the top.