Beating Broke

Personal Finance from the Broke Perspective

Ethics and Morality in Personal Finance

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Personal finance isn’t all just about the best ways to save money and live frugally.  There are other things to consider; other rules that should be followed.  Some have absolutely nothing to do with saving money.Many of the posts here at Beating Broke deal with saving money, budgeting, and living frugally.  On many occasions I have drummed on the amount of debt that we all take on and the ways that we can go about budgeting to make that debt go away.  Deep in the root of that is a moral standard.  I believe we have a moral responsibility to not spend more than we earn.  And, because each dollar of debt, holds some risk of default, I believe we also have an ethical responsibility to budget so that we don’t default on our debt.

In the process of paying off our debt and saving money, many of us will be faced with a moral or ethical dilemma.  Perhaps you bought a bunch of things at a department store and the teller didn’t notice that one of the items rang up for less than it was supposed to be.  Or maybe the teller only rang up one item when there were really two.  Many of us have been faced with just such a situation.  And many of us, in our struggle to reduce our spending and debt, probably didn’t say a thing.  I know I have.  And I felt guilty about it.  Morally, and ethically, we have a responsibility to pay the correct price for an item, and to pay for the correct amount of items.  Even though I admit to not doing anything, I do try to keep myself honest.  Ill gotten gains are gains you’re likely to lose.  Call it karma, or whatever you like, you’ll feel the reverberations of your acts.

Perhaps more-so than in paying off debt and saving money, ethical and moral dilemmas can arise after we’ve paid it all off.  Suddenly, we find ourselves with an abundance of spendable money that we can save or do what we want with.  It’s not earmarked for any debt, and we’ve already paid ourselves.  The situation has changed, but we still have a moral and ethical obligation to do what is right.  If you’re investing your money, do you invest in so-called “sin stocks”?  The stocks of cigarette and alcohol and other indiscretions.  Again, I know I have.  I am still a shareholder in the parent companies of both Marlboro and Camel.  I’ve owned others in the past.  Depending on how you feel about those companies, a ethical dilemma could come up.  As a generality, those companies have rather solid stock and usually pay dividends.  If you feel that those companies are responsible for cancer and death, can you ethically allow yourself to support them by becoming a share owner of that company?

As debtors, we all despise the credit card companies who charge double digit interest rates and hide fees around every corner.  Banks too.  As someone who can now invest money rather than paying those credit card companies and banks, deciding how we feel about those rates and fees can be another dilemma.  If you’re one of the lucky ones  whose state has allowed access to the peer-to-peer lending companies, you have the ability to invest in loans that carry rates that are very much the same as what a credit card company or bank would charge.  The table has turned.  If you were against it when you were paying the rates and fees, can you ethically charge them?  Morally, should you?

I think that many of us look too closely at the technical aspects of personal finance.  We study amortizations schedules and debt snowballs.  We talk endlessly about our retirement funds and the ways that we are going to build them up.  And, while it is there as an undercurrent, we sometimes fail to see the moral and ethical currents that run in the background.  And sometimes, we allow our technical expertise and know-how overcome our moral and ethical compasses in order to make our debt snowball roll a bit faster.

If you truly want to win at personal finance, you have to find your moral and ethical limits and remain steadfast in their direction.  We all fail to do that occasionally, but, as the old saying goes, you’ve got to get back up and try again.

Adjustments to Make (Price Checking)

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I’m making this post in part to share with you, but also to make a reminder for myself of the things that I need to look into.  One of the mistakes that I and many other people make is not shopping around enough.  While you may have found the best deal when you bought something, if you are still paying for it, you might not be getting the best deal still.

The most obvious place where this could be true is with insurance.  I’ve been with my insurance company for about 10 years.  When I first purchased the insurance, I did a fair amount of shopping around and comparing and bought the insurance that was the best fit.  Since then, many things have changed.  I got married.  We’ve had two children.  We bought a house.  We both turned 25 several years ago.  All of these things could easily cause some drastic changes that really warrant a new comparison.  But, we never did that.  It’s time we did.  Over the next few weeks, I’ll be doing a bit of shopping around for better insurance rates and coverages.  In particular, our home owners insurance seems much higher than it should be, and consequently, I am now in the market to find cheap home insurance cover.

The other thing that I really need to look into (and should have a while ago) is the mortgage on our house.  We managed to buy our house when rates were good.  We’ve since added a second mortgage that is about 25% of the original mortage’s size.  The rate on that is not as favorable.  (9% ish)  So, I need to look into whether refinancing the whole thing and rolling the two together might help us out with a lower overall rate and maybe even a lower payment.

That’s just the two things that came up recently.  I’m sure there are plenty of other things that need to be checked regularly that I and others do not.  What are the things that you check regularly to save money?

Financial Gluttony

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Gluttony is all around us.  I’m as guilty of it as you likely are.  The most classical example of gluttony is the act of eating much more than you need.  It leads to obesity, which is a rampant problem in this country.  Gluttony is described as the excessive indulgence in food and drink.

But, since this is a personal finance blog, let’s expand that description a bit and talk about financial gluttony. In fact, lets get down right philosophical about it.

The excessive indulgence of money. It may not be an official one of the 7 deadly sins, but it certainly is one of the deadly sins of personal finance.  It’s the rampant consumerism that often runs wild in our society.  Especially around this time of year.  We spend and spend and only stop when our credit runs out.  We give little thought to what the resulting consequences will be of our spending.  Over spending, over extending, gluttonous use of money.

The excessive indulgences of finance.  I’m going to go out on a limb here and guess that many of you have probably not thought of this side of the argument.  What I’m talking about is the gluttonous use of financial maxims to save and perform frugal acts.  Moderation is good for all things, even the stuff that is good for us.  You’ll garner no argument from me that saving money and being frugal are good things.  But, it is possible to take it too far.  Making soup by boiling your old belts, not because you can’t afford food, but because it’ll save a buck or two is finance gluttony.  Ok, that’s a pretty extreme example, but you get the point.

What I really want to get at here is that there are extremes for everything.  If we eat too much we get fat.  If we spend too much we get broke.  If we save too much, we fail to appreciate what our money can do for us.  So, the next time you’re doing your budget or even just balancing your checkbook, take the time to think about that.  Are you being financially gluttonous?