Time, Money, and Agency

Earth-apollo10

Are you old enough to remember the Whole Earth Catalog? It was an amazingly romantic document. You could entertain yourself for days fantasizing about all the things you could learn to do (many of which you had never heard of) and how utterly self-sufficient you could become.

Another book that came out about that time was Living Poor with Style, by Ernest Callenbach. Would anyone buy that book nowadays? Yet, it was a masterpiece of rethinking consumerism, with the proposition that less stuff and more self-sufficiency was the way to happiness. It’s hard to believe that these books were part of the same baby boom generation that survives now.  We went a totally opposite way—tons more stuff and almost no self-sufficiency. Building a brick oven has morphed into turning on a microwave. Not only do we not cook, but even cooking shows have become competitions, not instructions. Do any of us believe we could actually make, ourselves, what we see on Cake Boss or Iron Chef?

We baby boomers have somehow come to the conclusion that we’d rather work long hours with no vacations so we can pay someone else to, well, handle our lives. Right now I’m reading Michael Pollan’s book Cooked, where he argues that our lack of being able to make things narrows our lives—we spend our time in increasingly narrow and isolating specialties (for which we may be paid quite well), but without the agency—the ability, control, and perspective that comes from being able to accomplish something fundamental, particularly in a creative way. We also lose the cooperation and connection that shared meals, purchasing raw materials from growers, and perhaps even cooperating with neighbors to share skills and tools, used to bring. And our children? Well, if we’re lucky they’re quite proficient at scoring high on the SAT.

For many things, if you want to learn how to do a craft, you won’t even be able to find a local teacher. The Craftsy platform has made a serious go of it by promising video instruction, the ability to contact a live teacher, and a chat room to share creations and discuss with “classmates”. Not at all the same thing as sitting with my aunt and sewing my finger with the machine, but about as good as it gets nowadays when mom, dad,  and grandmother may have never learned the basics.

And why is this? Because none of us have any TIME anymore. Callenbach argued that, given enough time, you could save money by re-soling your own shoes. That’s too far for even a do-it-yourselfer like me, but I have discovered over the years that I can do practically anything a handyman can do if I watch enough Youtube videos (the modern alternative to hands-on instruction). And the issue of time makes me laugh—we all seem to have enough time to cruise Facebook, forward cute kitten videos, keep up with Game of Thrones, and keep the computer gaming industry going strong. And then there’s shopping…

If you spend your time, you will save your money, usually.  I have my doubts about sewing clothing, since so much cheap stuff is available, and some hobbies (knitting being another) encourage some of us to hoard wonderful stuff rather than actually use it. Still, what you actually take care in making is often far, far better than what you can buy already finished. But what I am arguing is not so much saving money (although I like that), but the satisfaction and control over your life—the POWER—that being able to make things and understand methods delivers. Making things can slow down consumption—besides the time invested, one fine thing can be much more satisfying than a lot of purchased crap.

Give yourself the gift of pride, power, and uniqueness. Do it yourself. Really, it beats scrolling through Facebook from your cubicle (or corner office).

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Updating the envelope system for financial planning

 

envelopes!

(Photo credit: Sarabbit)

I love the old envelope system. In case your mom never taught you about this, you decide how much you’re going to spend for food, housing, clothes, etc. and you put that amount in each marked envelope every time you get paid. When the envelope is empty, you’re out of business. (Actually, my mom never taught me this—her approach was basically to just save everything, and not spend at all until they pried it loose from her fingers.) Unfortunately, just don’t use cash anymore.

Nevertheless, it works. If you are really in debt, I do recommend that you move your spending to cash as much as possible. Freeze those credit cards in a block of ice and don’t use them until they defrost (seriously). Give yourself, your partner, and your kids a specific amount of spending money and when it’s gone, it’s gone. Renew when you get paid.

But since we live in a modern plastic and virtual world, can we create a virtual envelope system? Well, sort of, and it would help many of us to better money management.

First, set up a budget. OK I can hear the groans already. Don’t make this too complicated—savings, required expenses and spending money might be enough. Most people find it easier to do a percentage of income rather than a fixed amount. That way, you know what to do with any “found” money, pay raises, or freelance income.

Next, put the required living expenses (rent, insurance, utilities, etc.) in your checking account. In general, it’s best not to carry your checkbook around with you—you probably pay these expenses at home at your desk and not having the checkbook removes some temptation.  If possible, have your paycheck sent directly to this account.

Set up auto-pay and auto-withdrawals. You can either authorize the payees, such as credit card companies, to automatically withdraw from this account, or you can set up payments from the checking account to payees such as utilities. Don’t pay extra for this (some utilities are really dumb on this one).

Groceries are a special case. Certain unnamed hoity-toity supermarkets don’t accept checks anymore. If you do have any budgeting problems, it’s probably better to take out grocery (and restaurant) money in advance and put it in an actual envelope. Or use a cash card like Bluebird (transfer the right amount of cash into it each month). If all else fails and you have trouble monitoring this, designate one credit card for groceries and set up alerts to warn you when you’re getting near your pre-set goal (some allow this and will text you).

Now we get to savings. Again, you can set up auto-pay and auto-withdrawals from most investing institutions. I highly recommend NOT having your savings accounts in the same place as your checking. It’s just too easy to raid it when you need extra. For this reason I like internet based banks, credit unions that are different from where you have checking (so you have to make a special trip), or the big guys like Vanguard where you have minimum requirements.

I particularly love the automated options because it removes opportunities to make bad decisions. We all tend toward inertia. Making a decision every month to save is much more likely to fail than making a decision once, having the savings going forward happen automatically, and just getting used to those withdrawals happening.

Finally, make a list of annual or intermittent expenses (insurance, tuition, property taxes, etc.). Add up what it amounts to annually, then divide it by your pay periods. That’s what you need to put away if you don’t want to be surprised when they show up.

Don’t be afraid to create multiple accounts, say, savings for intermittent expenses, checking for regular household expenses, goal savings for vacation, retirement account, etc. Some internet savings (CapitalOne 360, for example) will allow you to designate “sub-accounts” and name them for specific purposes. You make the deposit and let them know which sub-account it should be designated as.

Mind-games? Sure, but sometimes these little tricks result in big improvements.

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Why stuff is ruining your finances

 

Pile of clothes

I spent Sunday sewing on a blue suede jacket. Now, you may ask, what on earth does this have to do with financial planning? Well, sewing gives you lots of time to think and obsess about other things, and this particular jacket was a perfect launch pad. Mainly, because I realized that I purchased this fabric when my daughter was an infant, and she’s in college now. I’ve been a) hoarding it because it was expensive; b) never found the perfect use for it; and c) kinda forgot about it. And therein lay three principals for wasting a lot of money.

Hoarding

If you’re not using what you have, have no clear use for what you’ve acquired, or think something is “too good to use” (ask me about those indigo fabrics I bought in in Japan in 1998), you’ve invested a lot of money in something that has no returns. Do you own wedding china? How many sets of bed linens do you use? Any clothes with tags still on hanging in your closet?

Not only does this stuff represent tons of money invested with no return, but in many cases it costs you money—in depreciation, at least, but sometimes in storage costs (I have a fortune in plastic tubs) and maybe even in insurance. If your possessions have outgrown your house, caused you to buy a bigger house to store it all, or (the ultimate) you are paying a monthly fee for a storage locker somewhere, it’s time to de-acquisition (errrr, sounds better than de-junk).

Sell it on E-bay and put the money in your Roth where it will actually do some good. People who start down this path find that they can raise a lot of cash from stuff that will soon junk up someone else’s house. Go ahead, walk through one room and estimate the amount of money you actually spent on stuff you don’t use. Any musical instruments nobody plays? Okay, go take a pepto.

“Perfect use”

Not everything can be quantified in dollars. If you still want to keep a lot of stuff that’s precious to you, then promise me you’ll at least use it. My aunt, too, was a fabriholic and when she died, I inherited enough fabric to clothe my daughter for the first two years of her life. But that was a small fraction of what she had. A lot of it was polyester double knit (yes, it was once popular), and there was a significant amount of avocado green and harvest gold. Even once-wonderful things go out of fashion. Unless you keep them long enough to become vintage. And beat the moths and silverfish.

And if you do love it, why aren’t you using it? In a month, that blue suede will be on my back, the Japanese fabric is next up, and I’m selling the teddy bear fur from a long-ago (and misguided) business attempt as soon as dear daughter comes home for fall break and puts it up on her eBay account.

Forgot about it

Here’s a secret: don’t buy anything unless you really have time for it on the schedule. If everyone followed this principle, there would be virtually no boats sold and no one would have more than one car per person. People with hobbies (whether carpentry or knitting or computers) are particularly guilty here. I know more than one friend with a computer boxed under their desk that has never been opened. Can you work all the electronics in your home? How many tools do you have whose manual is still in the plastic baggie?

Don’t buy stuff ahead of need just in case it might come in handy one day (you’ll never be able to find it at that point), because it’s a great deal (I have perhaps 100 metal zippers my aunt bought for $1) or because you may never see it again (c’mon, this is the era of web shopping, where you can buy all the stuff someone else has stored for you all these years).

Ask yourself:

  1. when am I going to get time to use this,
  2. am I afraid to use it,
  3. where am I going to put it, and
  4. what else can I give up to make room for this?

No good answer? You’ve just saved yourself a lot of investable cash.

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