Beating Broke

Personal Finance from the Broke Perspective

How Much is It Worth to You?

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In every purchase we make, we should ask ourselves how much is it worth to me?  It’s a very simple question, but in many cases, the answer may surprise you.  And it applies to much more than items.

Let’s try a few examples.

I’ve been keeping my eye on LCD HD receiver televisions.  With the big switchover in February and all the fear marketing going on about the loss of signals, my family may need a new television.  We don’t currently subscribe to a cable service, so we get our tv over the airwaves and will need a HD tv or a subscription to cable.  The tv’s that I’ve been looking at are in the $500 range.  Not a huge amount for tv’s nowadays, but quite a bit for my debt averse family.  Each time I look at them, I have to ask myself if having television is worth $500 to me.  We currently don’t have cable and we only receive one channel over the air.  And to be honest, it wouldn’t be a huge loss to us.  Except.  Except that I like to watch Football in the fall.  Except that my wife is addicted to COPS.  Except.  Except.  Except.  With each exception, the TV or cable subscription becomes more and more worth it to me.  I become more willing to spend the money to get the TV or Cable because of them.

Much like cable, there are some services that demand the question too.  In my hometown, there is only one full service gas station.  All the rest are self service.  The full service station charges $0.02/gallon more for their gas.  This is a non-question for me.  I don’t mind filling my tank up.  I only end up filling up about once a month, so it isn’t a big deal if I have to stand and pump gas for a few minutes.  However, with temperatures falling (it’s about 30 here today) I can certainly see why there might be some people who are asking themselves if the extra $0.02 per gallon is worth staying in the warmth of their car while someone else fills the tank.

The more my wife and I budget and track our money, the more often I find myself asking this question.  Is this service or that item worth the extra money?  Is the convenience worth paying more for or am I just being lazy?  More and more, I find that the answer is No.  In many cases, the convenience isn’t worth a little more slavery to debt.  Each penny that I spend on that convenience is another penny that I cannot use to pay down debt.  Maybe my answers will change when we get rid of our debt, but I think by then our lifestyles and attitudes will have changed significantly enough that the answer will often still be no.

Financial Steps for After the Election

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Up until now, we’ve all heard about the various ramifications of one Presidential candidate over the other.  We’ve heard about what differences will be made to the tax system and how it will affect you.  And sometime after midnight tonight, we’ll know which set of changes might take effect.

So, now what?  Regardless of who wins, if you put yourself in a position for it to not make a huge difference to you, you won’t have to worry.

Following a few principles we call the Beating Broke rules, we can set ourselves up financially such that changes to the tax code and other programs like Social Security and Medicaid have a very minimal impact on us.

Begin by paying off all of your debt.  Most debt is bad debt anyways.  Pay it off and you can afford to pay a little extra in taxes if you have to.  Nobody likes taxes, but the law is the law and there is very little that you can do about that.  Having fewer bills to pay frees up some money to compensate without having to take the money from another place like food or rent.  While we’re at it.  Stop acquiring more debt.  Get debt free and stay that way.

Start Saving.  Begin with an emergency fund and go from there.  Once you have an emergency fund set up, start saving for retirement, college, and that new car and house.  If you can pay cash for all those things, you don’t need to care whether social security or welfare or medicare or any other social program they put in place will still be available to you when you need it.  Financial independence from those programs frees you to worry less about those policies and worry more about where you’re going to vacation this year.

With those two steps, you can make yourself nearly financially independent from the policies of our political leaders.  They won’t help you much with their policies on foreign war, foreign relations, immigration, or many of the other policies.  You’ve still got to decide on a candidate for those things.  But if you can relieve yourself of worrying about their fiscal policies, you can focus more intently on their other policies.

Start now.  The next election is in only 4 years.

We The Savers; Savings Declaration from ING Direct

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If you’re a customer of ING Direct, you’ve likely received an email about this, but for those of you who aren’t or haven’t, I thought I’d share it.  They’ve put together a Declaration of Financial Independence that they suggest we read and, if we like, sign on.  It’s a pretty good document really.

1. We will spend less than we earn. Saving a little out of every dollar we bring home is the
foundation of independence. Without it, we can’t build equity in our home, we can’t invest for the future, and we can’t be ready for challenging times. We promise to pay ourselves first, always.
2. We will use our home as a savings account. Besides shelter and comfort for our family,
the role of a house in our financial life is to build equity. We will have a healthy down payment when we buy. We’ll choose the mortgage that lets us pay down the principal fastest. And then we’ll leave that equity safe where it is instead of spending it on things that don’t last.
3. We will take care of our money. It’s not enough to have money in a bank. We will put it where it will grow. We’ll keep track of it. And we’ll check every account we have every year to protect ourselves against fraud or escheatment.
4. We will defend our credit worthiness. Good credit is going to be precious in the years to come. We will pay our bills on time. We’ll borrow only when we need to and in amounts we can comfortably pay back. And then we’ll do just that.
5. We will ignore unsolicited credit card marketing. We decide when we need a credit
card, not some marketer. And mostly, we probably don’t need another one at all. We won’t even open those solicitations. We’ll shred them.
6. We will know the cost of borrowing. The interest lenders charge us is real money, too.
When we buy a mortgage or finance a purchase, we’ll figure out what that interest is really going to cost in dollars, add it to the purchase price, and ask ourselves if it’s still worth it.
7. We will invest for the long term. Futures are built out of patience and prudence, not luck. We will not put off being a saver because we think there’s a lottery win in our future, in Vegas or on Wall Street.
8. We will take care of the things we have. We work hard for our money, and it’s disrespectful to waste it – or the planet – by treating our possessions as disposable.
9. We will remember what matters. We are not the things we own. If we have to spend and
spend on bigger, more impressive things to keep up with our friends, then they are not our friends at all.
10. We will be heard. Our representatives in government and the corporations we deal with need to know that we are paying attention. If we’re silent, we’re accepting the status quo, and the business practices that got our country into this situation will continue. We are not going to accept that.

Some very sound advice and a declaration that I can get behind.  Take the time to read it through and consider trying to hold yourself to it.

ING Direct has been surprising me a little lately.  Instead of doing what many of the other national banks are doing and tucking their heads in the sand, they’ve openly come out with encouragement to continue to save and build personal wealth.  I like that and that is partially why I won’t be moving my money elsewhere for a higher rate.