Archive for the ‘money’ Category

Lessons from the Great Depression

January 19, 2009

As we prepare for the historic inauguration of our 44th president, another moment from history weighs heavily on the minds of many Americans.  Although few predict a downturn whose magnitude rivals that of the Great Depression, there exists great uncertainty over just how much deeper the crisis will plunge before it bottoms out.  The Great Depression saw unemployment rates of 1 in 3, the demise of numerous businesses small and large, economic scarcity.  It was a time of frugality and thrift, imparting lessons the generation of the 30’s carried with them for the rest of their lives.

Today’s young people are several generations removed from the lessons of the Great Depression.  We’ve never experienced a major economic downturn, never known what it means to be thrifty or frugal.  Growing up, “thrift” and “frugality” were negative terms associated with poverty or with being a cheapskate.  The cultural landscape had changed much in the intervening decades, and we missed out on the lessons from our grandparents so that even if we thought we knew what “frugality” meant, it meant nothing to us compared to it they meant to those borne in times of true economic hardship.  I may willingly cut back on dinners out with friends and beef up my cooking repertoire to save money, but how can that compare to my grandmother at twelve in wartime China, shelling peanuts to support herself, her mother and her cousin?

Many of the tips that helped our grandparents survive the depression are strikingly relevant today.  In fact, they are universally relevant, in both prosperity and in malaise.  And so, as I anticipate tomorrow’s inauguration I take a moment to reflect on some of these universal principles.

Spend less than you earn.  It may seem so basic it isn’t worth mentioning, but with the average American household in roughly $8,000 of credit card debt, as a nation we haven’t been doing very well with this.  The glut of cheap credit in the past two decades has certainly contributed to the rise in living beyond our means, but so too has a shift away from savings and buying on credit.  The concept of saving up for a major purchase seems almost foreign in the current cultural landscape; so much easier to just put it on plastic and worry about it later.

The difference, though, is that putting it on plastic means racking up 20% or more interest, which creates a snowball effect of debt.  Down the road as the interest from the initial debt causes the debt to grow faster and faster, mounting debt payments mean even less money left over to cover basic necessities, let alone emergencies or other major purchases.  Thus even as the original debt accumulates interest, we are forced to take on even more debt to cover daily needs.

Saving up for major purchases solves this problem of snowballing credit debt.  It also creates a cooling off period that tempers the impulse purchase, allows us to search for a true bargain, and avoids buyers remorse.  Without this, we have become an instant gratification culture, and one that pays through the nose for the privilege of instant gratification at that.

Some argue that credit card debt has become necessary to deal with the great economic pressures on the middle class.  Car payments, school loans, personal computers, iPods, fancy cell phones and cable TV deals … never before has the definition of “middle class” included so many material possessions.  Items once deemed luxuries became inflated to necessities, and we’ve had to work harder than ever to spin our hamster wheels and stay afloat.  Yet this, too, is symptomatic of an entire nation that has lived beyond its means, if the material definition of “middle class” is truly beyond the reach of those it is supposed to encompass.

Part of the scope of this problem lies in larger societal forces that are invested in the creation and propagation of a nation of consumers.  Part of the solution lies in individuals taking a stance to living within our means, as generations before us once did.  To paraphrase my dad (a quote worthy source if I ever saw one), the difference between spending $1 less than you earn and $1 more than you earn is peace of mind.

Improvisation. Growing up, my favorite books included the Little House on the Prairie series, in part due to the descriptions of the household items built by hand.  These days when we need something we go out and buy it; in Laura Ingalls Wilder’s time and through the first half of the 20th Century, the first instinct to fill a need was to make an item or to improvise a solution.  Creativity comes not just from artists, musicians, or the “go to idea guy” at work; the word “create” lies at the root of “creativity.”  To create is to stimulate both hemispheres of the mind, to improvise is to meet the challenge of filling a need by alternative means.  Our economy may have evolved to the point of filling wants more than filling needs, but constant engagement in this challenge of creation keeps life fun, exciting, and produces amusing results.

Self-worth is not solely defined by material possessions.  This point is thrown into sharper relief during a time of economic scarcity, but it bears constant reminding that there are multiple ways to define worth: both self-worth and worthwhile pursuits in life, in both career and leisure.  In the last century we have created entire new industries.  As a result, the sheer breadth of career and leisure options are wider than ever, yet we’ve narrowed the scope of our leisure activities and measures of self-worth.  A job has become a major marker of identity, leisure activities are primarily dominated by the entertainment industry to the detriment of civic engagement, reading, interpersonal relationships, pursuit of personal interests.

A classmate once said to me, “‘Hobbies’ sounds so 50’s.”  I beg to differ; I love my hobbies far more than all combined products of the entertainment industry (and yes, you may include video games in that category as well).  Among other benefits, they allow me to define multiple parts of myself, so that I am not just a “student” but also a “crafter,” “baker,” “runner,” “reader,” “occasional writer,” “photographer,” one who loves to invite friends over to make a meal and share in the fruits of our labor.  Many of these pursuits have fallen by the wayside in favor of entertainment that must be consumed with hard-earned dollars.  In the process, we limit the avenues by which to create a sense of self and procur a feeling of accomplishment.

The tangible and intangible lessons of the Great Depression are many.  For me, wellness means bringing balance through development of multiple areas of our lives.  Money shortcuts this process by buying a product we might otherwise be forced to make or to improvise.  And yet often it is the process, more than the end result, that creates the greatest lasting impact on our selves and our personal well being.


Goal-setting and planning ahead

January 16, 2009

I’m starting to wish I’d planned this out a little better.  Don’t get me wrong; for the most part I’ve been able to anticipate what I might need in January and to arrange to have them on hand.  I live alone, so staying stocked on daily necessities like toilet paper isn’t too difficult.  Of course, the minute I returned to my apartment January 2nd I took one look at my sponge and realized I should get a new one for the spring semester, but the situation isn’t dire yet.  I’ll just, you know, let the dishes pile up for a month.

On the other hand, I’m going to be on the road for several weeks this month, and there are times when my fingers itch for something to do.  I love a good book as much as the next person, but there are times when it doesn’t quite hit the spot.  I’m a crafter, and small handcrafting projects usually fit the bill perfectly.  Embroidery, knitting, crocheting, hand sewing all fall under the category of light, portable, little equipment, and projects that can be worked for a few minutes or a few hours.  As a crafter whose love affair with knitting has warmed and cooled through the years, several months ago I decided I was done with knitting and donated all my yarn to a thrift shop.  I was going to simplify all areas of my life including my hobbies.  Unfortunately, the handcraft I now long for more than anything is knitting, and there is this small problem of a self-imposed ban on buying yarn until the month of February.

I admit I’ve been tempted to break the challenge for yarn.  “But its just yarn!  I don’t have to include hobby supplies on the banned list!” or “Well, spring is coming soon anyways, so unless I get a start on my knitting now nothing I wear will be usable for long.”  But just as with my pinging experience, I know this is a slippery slope to travel down, one little infraction becomes two, then three, and wipes out the entire spirit of the challenge.

This also holds several lessons for myself.  Keep a backup on hand just in case.  Improvise – I brought some embroidery instead, and am making do without a hoop and without a pattern to follow.  I never knew doodling with thread could be so much fun.  Test your impulses with a cooling off period.  We’ll see if I’m still hot on knitting the five billion projects in my queue once this month is over.  If not, well, I’ll have saved myself a bunch of half-started projects, not to mention balls of yarn falling out of bins all around the apartment that I eventually tire of and purge in the name of simplifying my life.  Some poor thrift shop loving yarn addict out there will just have to count on another source of yarn.

Tips for buying used goods

January 13, 2009

You’re convinced of the advantages of buying used.  You’re chomping at the bit to get started.  But where to look?

In this pick-your-own-adventure book, my friends, you have the following options:

-To spread the word to friends for free gifts, to hear about swaps, or to start wandering the streets looking for Free! Signs on sidewalks, turn to p. 17
-To start devoting weekends to garage sales, turn to p. 143
-To seek out neighborhood thrift shops within walking distance of home, turn to p. 31
-To develop a friendly relationship with the owner of your town’s consignment store for business clothing, turn to p. 59
-To spend your time in the office scouring online listing sites like eBay or Craigslist instead of working on the report for your boss, turn to p. 101

For the most part the prices, variety and quality all increase as you go down the list.  There are still some great deals to be found on the online listing sites but they require more sifting and time to stay on top of bargains.  Do note that those sites also list thousands of new items daily, often at a discounted price.

A couple thoughts on adventures into land of the used purchase:

·    You may not always find what you’re looking for at that moment, but you may walk out without something unexpected instead.  Most of my favorite purchases were unexpected ones.

·    Examine all items carefully for rips, stains, tears, and discolorations.  If something is really cheap it may be worth tinkering with or compromising on.  If a couch has a couple dirt marks it is still cheaper to replace the pillows, turn the cushions around, or drape a blanket over the couch, than it is to buy a new one.

·    Clothing sizes vary widely between manufacturers and through the decades, so don’t just pay attention to sizing.  Learn to eyeball which clothes will fit, bring a tape measure, or don’t be afraid to hold items up to your body to gauge fit.

·    If you prefer certain brands keep an eye out for them!  Banana Republic clothing fits my body really well and breaks my budget every time I purchase something from their store, but is quite affordable on the used market.

·    Used is a great source of high quality classics at a reasonable price.

·    It is also a great source of outlandish, funky, bold accessories for the home and body.  If you turn these over frequently there is less guilt over the price paid.

Of course, buying used has its pitfalls too.  A wool sweater for $5?  Never mind that it is slightly too long and too boxy, and so it just sits in the closet for months on end, maybe worn once or twice.  That still isn’t a good investment because it creates clutter.

Tempting as the low prices may be, it is important to stop and think if the item is really worth the money spent.  A good rule of thumb is to ask yourself the following questions when making a purchase:

·    Would I pay twice as much for this object? This helps ward off the “but it was a bargain!” purchases that you may regret later

·    Do I have an immediate use for this? Can I see exactly where it will go, how I will use it, what clothing I will pair it with?  If you cannot answer this question within 10 seconds, chances are the purchase will create clutter and is therefore not a bargain.

·    How much do I really need this? Have I been getting along without it, or will it regularly save me time, money, convenience?  My $5 used blender saves me time and money by making it much easier to make winter squash soups that I cook up in large quantities and freeze; without one I wouldn’t make these cheap meals nearly as often.  A food processor would also save me time, but the monetary investment is so great that the tradeoff isn’t worthwhile.

So start exploring your neighborhood for sources of new-to-you items!  You never know what you’ll come across.  It isn’t every day that the opportunity for a treasure hunt AND a bargain show up in the same place.

The loophole in my plan; advantages of buying used goods

January 12, 2009

I haven’t mentioned it until now, but I left myself a gaping loophole in creating this January challenge.  Notice that I haven’t banned myself from purchasing anything for the entire month (aside from food, that is).  I’ve just banned myself from purchasing anything new.  This leaves the entire market of used goods still in play.  Granted, January is an odd time to take upon this challenge: not only am I missing out on after-Christmas sales, but garage sale season is in summer.  Still, given the root causes that I am attempting to address it seemed a fair tradeoff.  And to be honest, I really don’t need anything that is on sale in the stores.  I don’t anticipate a mad rush to the mall in February to make up for lost time, so this truly is a recalibration instead of mere delay tactics.

To be honest, the used goods loophole was more applicable the last time I took up this challenge.  Two years ago I was living at home and a mere 10 minute walk from one of my favorite thrift shops.  Call me weak, but I left myself a bit of a loophole, just in case.  Even then I didn’t go crazy buying used, and certainly spent less that month than normal.

Fast forward to 2009.  Even though I’ve lived here for four months now I’ve only checked out one thrift shop and it isn’t terribly convenient from where I live, so I do not anticipate using the loophole very much this time around.  Still, I thought I’d take some time to plug one of my favorite sources of clothing, furniture, household goods, books and crafting supplies.

Otherwise referred to as “thrifting,” tapping into the used market offers a number of advantages.

1)    Used goods are almost always cheaper than retail.
2)    Vintage goods are better constructed and made of higher quality materials.  Furniture, clothing and toys used to be built to last.  These days companies expect consumers to tire of their products in a season or two, and it shows in the manufacturing quality.
3)    Higher quality goods are available at lower prices than their discount store counterparts.  One of my favorite sweaters is a black v-neck 100% Italian merino wool sweater that I thrifted for $5.  No matter how great the sale, I’ll never be able to find the same quality sweater at that price at Walmart or Target.
4)    It is eco-friendly.  We rarely use things all the way through before we get rid of them, which means that perfectly good items are sent to the landfill all the time.  Why not rescue our landfills by giving items a second home?
5)    If you have a favorite brand, style, or consumer good that has been discontinued, you can still find it on the used market.  Hate low-rise or skinny jeans?  Since thrifted goods tend to lag fashion trends, you can still find high-waisted (or reasonably-waisted) jeans if you know where to look.
6)    You never know when you’ll stumble upon something really unique.  Garage sales and thrift shops are filled with all sorts of eclectic, quirky, offbeat finds.
7)    Mistakes come cheap.  We rarely nail our purchases 100% of the time, but the learning curve is less expensive with used goods.  Maybe you’re not a cardigan person or the coffee table just doesn’t work with your living room.  Used provides a low-stakes test run.
8)    For those who love the thrill of a bargain, there’s no better place to find them!
9)    How well an item looks at a garage sale or in the thrift store provides clues to its’ durability.

Of course, used goods are not panacea.  Buying used does have some disadvantages, including:

1)    Most finds present a one-off opportunity.  That means there isn’t the same range of color and size options that are available at retail.
2)    Low prices increase the temptation to come home with more than you need.
3)    Due to variable selection it can take longer to find what you’re looking for.
4)    Often you’ll have to wade through a lot of junk to find a few treasures, so if you’re in a hurry or dislike browsing, it may not be the approach for you.
5)    Some people feel a stigma attached with buying used.  That’s silly since other people can’t tell anyways.  After all, other people tried on those shoes you decided to buy.

Even with all these disadvantages, thrifting remains an excellent source of inexpensive, high quality, one-of-a-kind goods.  And there are ways to work around these advantages, so stay tuned!

Prioritizing wellness by recalibrating the budget

January 8, 2009

Money affects wellness beyond the scope of “retail therapy” and my January challenge.  After all, our society is built upon money.  It lubricates the cogs of the economic system.  And so it is impossible to consider wellness without considering the impact of money on wellness, and vice versa.

At its core, the most fundamental use for money is to ensure access to basic survival needs.  Anything beyond that is, in the strictest sense, a luxury.  Before we can be picky about what type of food we eat, we must first ensure that we have enough food to make it to tomorrow.  If we cannot meet our basic needs, or if we have other costs that detract from the wellness category, then money stands as an obstacle to achieving greater quality of life.

Thus the second reason for the buy nothing new challenge is to address these larger scale connections between money and wellness.  With no books, magazines, clothing, hobby supplies in the budget, my discretionary spending should go down significantly.  This frees up money to put towards wellness-related activities.  One of the main reasons I never joined the Y or a community pool was that it cost money.  I would constantly spout off to friends about the importance of health and exercise, yet here I was, unwilling to commit to a monthly exercise bill because I felt it cost too much.  And while it’s true that monthly fees can add up, if paying for access to a facility is the difference between exercising regularly and having EXERCISE top the new years resolutions list for four years running – well, that is what I would call money well spent.

That’s the flip side of the money/wellness coin.  Just as a lack of money stands as an obstacle, so too can proper budgeting enable a happier, healthier lifestyle.  If there is a bit left over at the end of the month – if there is room to reshuffle monthly expenses and increase funds in the wellness category – then we have the power to build greater wellness into our lives.  This is not an excuse to buy that shiny new flat screen TV to “put into the exercise room,” only to never use it.  But one or two key investments can make a big difference, like replacing a worn out pair of running shoes with a high quality pair.

One H&M shirt is one yoga lesson.  It is three sessions at the community pool, a student discount play with friends, three 5-pound bags of organic potatoes, an afternoon in the ice skating rink with friends.  In theory I can wear the H&M shirt over and over again, but let’s be honest.  I already have a closet full of shirts, and H&M clothing is not exactly built to last.  On the other hand, an afternoon with friends can be the difference between feeling isolated and depressed and feeling connected to others.  It may be the starting point for a new friendship.  Swimming or yoga is the difference between feeling stressed beyond belief and surfing the endorphin rush towards productivity and a sense of accomplishment.  And three 5-pound bags of organic potatoes?  Well, that certainly makes a ton of mashed potatoes for a potluck, which is a two-for-one, really, since dinner parties bring friends together.  At the very least, potatoes can be spun into all sorts of nutritious meals, plus they store for a long time to boot.

Or one H&M shirt may be the difference between paying off the credit card bill or carrying a balance, between peace of mind and feeling stretched too thin.  It’s true that money in of itself cannot buy happiness.  But it can provide the means to achieving intangibles that are critical to our perception of the quality of daily life, or to the “extras” that increase our sense of well being or our capacity to become the best possible versions of ourselves.

With this January challenge, my hope is to kick start a new year with a shift away from material consumption and towards developing other areas of my life.  I also want to trim the excesses from my budget and put that money towards savings or wellness-related activities and investments such as a pair of running shoes or some yoga DVDs.  Beyond the immediate impact of detoxing from the rampant consumerism of the holidays and holiday sales this challenge should create a lasting recalibration towards a lower consumption lifestyle.  If you constantly eat sweets you become used to a certain level of sugar, and it takes higher and higher levels of sugar to satisfy the same craving.  The counterbalance to this is to eat sweets less frequently.  It’s all about readjusting norms and setting the bar for “normal” a little lower.  It’s the same principle behind the idea that it takes 30 days to form a new habit.  Do anything for long enough and you’ll get used to it; consume less for long enough and you’ll adjust your expectations accordingly.

Detox, recalibration, reorientation, all packaged into one succinct challenge to buy nothing new for 31 days. Now there’s a S.M.A.R.T. foundation.