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.

Mark Cuban Lays it Out

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If you’ve been reading Mark Cuban’s blog lately, you’ve likely noticed that he’s been talking alot about the current economic situation and also about how a person should handle his/her money.

Today is no different.  In a post entitled “Where to Put your Money Right Now“, Mr. Cuban gives some advice in a manner that only he can.

So in a nutshell, while the interest rate on your credit cards is going up, the return on your investments has been going down. You know what they call someone who keeps on giving money to their stockbroker, mutual fund or 401k, but doesn’t pay off their credit card balance in full every month, BROKE AND STUPID !

The first thing you do with your money is if you have money market funds, you take the money out and pay down your credit card debt.

A little brutal and not even close to politically correct.  I love it!  I think it’s statements like this that have drawn me to people like Mr. Cuban and Dave Ramsey.  They aren’t afraid to tell you when you’ve made a complete buffoon of yourself.

I would strongly encourage you to read the rest of Cuban’s article.  It’s a little long, but it is most certainly not short on good advice and sound instruction.