Beating Broke

Personal Finance from the Broke Perspective

Are Good Deals Putting You in Debt?

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We all love a good deal, right?  There’s nothing better than paying $2.40 for a pair of kids’ shorts that retail for $16 or paying $0.25 for Christmas wrapping paper at an after Christmas sale when it would cost you $2 or more to buy it new.

After all, buying things on clearance is what savvy shoppers do, right?  This is an excellent strategy for being frugal with your money, right?

Well, yes. . .and no. Are those good deals putting you in debt? Ask yourself these questions and decide if you really need that good deal.

Do You Buy More Than You Need?

Good Deals DebtWhen something is on clearance 80% off, it’s tempting to buy alot. . .more than you need.  After all, why buy one sweater at $5.00 on clearance when you could buy 8 for the cost of what just one would cost retail?  Besides, you’re not paying any more than it would cost to buy a $40 sweater brand new, and you’re getting 8.  What a deal!

But do you NEED 8 sweaters?  Will some of them languish in the back of your closet, with the tags still on, until you decide to purge your closet and give them away or try to sell them at a garage sale?

Can You Afford It?

Sometimes, you need to pass up good deals.  If you can’t afford the deal and put it on credit card, are you really saving money?  By the time you figure in the interest you’ll pay, that clearance sweater may end up costing you nearly as much as it would cost retail, or, if you pay only the minimum payment on your cards, even more!

Some people have gone in debt in pursuit of good deals.  Kristine Rogers, who was featured in Money magazine, explains that she went in debt buying children’s clothes on clearance: “Gymboree held a clearance sale in which every item was priced at $7.99. ‘I grabbed clothes my daughter didn’t need.  I bought four of the same coat in different colors.’  By the end of the day, Rogers’ compulsion had cost her $800.”  Rogers developed a full blown shopping addiction in the pursuit of sales and ended up with $50,000 in credit card debt!  Sure, she got good deals, but in the end, after interest, she likely paid much more than she would have if she’d bought the items at retail.

Are You Tying Up Current Cash Flow?

Assuming you don’t go into debt to buy good deals, you may still be tying up your cash flow.  If you spend $40 on 8 sweaters that you buy in May but won’t wear until November, you’re tying up cash flow.  If you don’t wear some of those sweaters at all, you’ve wasted money despite the good deal.

Be More with Less explains, “If you buy wrapping paper on December 26th and stock up on sale items year round, you are spending more than you would if you just bought what you needed.  Don’t be fooled by the cashier that tells you, ‘you just saved $22.00’ when you just spent $300.”

What do you think?  Is it worthwhile to pursue good deals, or can it be a slippery slope to overspending and debt?

Do you buy items on clearance?  Do you always use all of the items, or do you accidentally buy too much?

Living on What You Earn Can Make You Feel Broke, and That’s a Good Thing!

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Living on what you earn can be a difficult thing.  For many, it seems like a little like a foreign language; difficult to learn to do, and backwards.  But, if you can learn it, and transform your life into one where you’re living on what you earn, it can make a whole lot of difference.  You’ve got to start somewhere, though.  I, like you, haven’t always lived on what I earned.

Almost all of my life, I’ve owed someone something.  When I was 19, I needed a car.  My parents, tired of having me call them late at night after my old, beater car had broken down—AGAIN!—, decided I should buy a new car.

I didn’t qualify for a loan yet, so my grandpa lent me the money, and I paid him back with a small amount of interest, which was less than I’d pay borrowing from the bank and more than he’d make in a safe investment.

Soon after, I went away to college and took out student loans and started running a balance on my credit cards.

By the time I finally paid off my student loans a few years ago, my husband had his own loans that we had to pay.

Can you see me, just like the proverbial hamster running on the hamster wheel?

Living on What you EarnI owe, I owe, it’s off to work I go.

Until one day, I said, “Enough!”

No more.

Time to live on what we make.

Time to stop borrowing.

Time to start saving.

And that’s when the real challenge began.

Our society is built on borrowing.  Borrow for school, borrow for a car, borrow for a house, rent to own, pay in 10 easy installment plans.

I’m done living that lifestyle, but in turn, I’ve picked a much more challenging lifestyle—living on what we earn.

Cutting Until There’s No Room Left to Cut

The first thing I did was develop a frugal, written budget.  That meant taming our grocery budget from $700 to $1,000 a month to $500 a month to feed our family of 5 with gluten, dairy and corn intolerances.  It isn’t easy, but we’re doing it.

The next step was to keep a record of everything we spend.  Honestly, I hate keeping this record, so that alone is incentive to spend less.

I spend an hour or so every week, reconciling the budget and making sure we’re on track.

I also started regularly saving for irregular expenses.  Every other week, I put $120 in an account earmarked for utilities.  In the winter, our utilities fall far below that, but I still keep saving the money for the expensive summer months.  This way our utility costs are the same all year long.

Handling Unexpected Expenses

While the new budget can feel somewhat restrictive, what I find most difficult are the unexpected expenses.  Just recently, I found that two of my kids have cavities (quite a few!), and the price for fixing them is around $400.  I have money set aside in a medical fund, but filling the cavities will just about wipe that money out.

The problem is that we have many other medical expenses–$188 for my son to get new glasses and an eye exam and a pending $3,300 expense for him to get braces.  I could put his braces on an interest free payment plan, but we don’t do payment plans anymore, interest free or not.

Instead, we had to make hard decisions like canceling our trip to see family this summer.

Living on cash is definitely not easy, but I know once we get through the next couple of years, as our income increases, it will get easier.

We are, as Dave Ramsey says, “Living like no one else so later we can LIVE like no one else.”

Do you eschew debts and payment plans, or do you use them in moderation to meet your goals?

No One is Going to Save You

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I have some bad news for you. If you’re waiting on someone to show up at your door ala Publisher’s Clearinghouse and hand you a big cardboard check that will solve all of your financial problems it’s not going to happen.  No one is going to save you from your financial woes.  No one is going to suddenly decide that you, and you alone, are worth pulling from the depths of your financial hole, pay all your bills and set you up for life.  No one but you.

In truth, I’m writing this post as much for me as I am for you.  I need to hear that message occasionally, just as you do.  It’s nice to daydream about winning the lottery, or some sweepstakes and having some of your problems solved.  It really is.  But, if you, like me, find yourself lingering in those daydreams a little too much, too often, you need to hear those words.

You and you alone can be the savior of your finances.

Savior of your Finances

You (and I) are the best prepared, and the most willing (without fees), to take on the ratted nest of bills and accounts that we call our finances.  You (and I) are the most able to figure out how to sort out where our money is coming from and where it has gone.  You (and I) are the only ones that can drum up the willpower to make the changes necessary to begin telling our money where to go that it will be most helpful to our finances. No one else is going to do it for you.

No one but you.

If you (and I) don’t do it, do you know what happens?  Nothing but the same.  Your paycheck comes in (maybe on time, maybe not), your paycheck goes out.  At the end of the month, maybe we ask “where did it all go?”.  And if we do nothing about it, we’ll never really know.  We’ll just continue the pattern; wondering why we aren’t paid more, and wondering why what we are paid never seems to be enough.

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You can make a difference in your finances though.

Uniquely.  No one but you.

You can budget your money and tell it where it belongs.  You can know where your money is going, and control how it works for you.  If you actively manage your money, it can no longer control you.  Create a budget, track your income and spending, then take back your financial life.

Put your finances in order; be free.  Be debt free.  Be free to spend as you choose.  Be free to earn as you choose.

What are you doing today to break old financial habits and take control of your money?