Tag Archives: credit

Coffers and Coffee

Once you start the journey to financial independence, you realize that every dollar counts. And that every dollar saved means you are one step closer to financial independence. It’s not even a one-to-one ratio (i.e., a dollar saved is a dollar earned). When you factor in compounded interest, every dollar saved is more than a dollar earned. At least… this is what responsible people would say. Me… I still like nice things. And if I didn’t have a latte every once in a while, I would have brittle bones since I don’t otherwise drink milk. But, before you criticize my latte habit, please know I consider lattes a luxury–not an everyday indulgence (though arguably it’s a slippery slope, going from “I deserve this latte” to “I deserve a week at a luxury spa” (though I really do!)) Without a little luxury every once in a while, waiting for financial independence becomes mundane and intolerable. You can’t just cut out everything you enjoy. Besides, I eat plenty of rice and beans to “make up” for it. However, the virtues of life’s little luxuries and how they fit into the goal of becoming finacially independant is not actually what this post is about. Not completely. This post is about using those little luxuries as motivating factors in how you decide if your efforts at some form of saving are “worth it.”

I am going to buy a latte every once in a while. Probably once a week. It’s just something that is going to happen. But it doesn’t mean I have to be mindless about it. For some time now, I have used lattes as my gauge for the value of savings I can seek. What I mean is that I tend to think of every dollar, or portion thereof, saved as worth saving because the value to me is tangible. A lot of people don’t bother, for example, questioning a grocery receipt for the $1.34 they were over charged on veggie burgers, or returning a screw from the hardware store that is worth fifteen cents. They think it’s not worth their time and energy. But I disagree. See, these things add up. I can put forth a small effort and, very quickly, get the equivalent of a latte–something that I consider a luxury, remember? This is not to say that every time I can eek out a savings of a two to three dollars I immediately go buy a latte. Rather, it means that at that moment when I’m about to walk out of a store and ask myself, “should I bother to go back inside and get the price difference,” the answer is always yes.

This moment when you question the value of your time happens far more often than in the grocery store. It occurs in late fees, service fees, price quotes, being unsatisfied with a product…etc. In my estimation, no fee is too small to not bother making a phone call to request a reversal. No overcharge is not worth your time to question. A discount is always worth seeking. Because, small amounts add up to big amounts.

Admittedly, it is hard to see the big picture. In fact, the big picture may not even help. For example, if all the small efforts you made made a difference of $86 for a year and you took this money and invested it at 5% interest with compound interest, in like 10 years, it’s still only worth about $140. You may just find that it is not really worth it to hang onto that $86 dollars for ten years. But if you think of the fact that this $86 dollars for which you spent some effort to search out savings or refunds gets you about 30 lattes… that become a tangible value that you see as worthwhile. At least I do.

What is your vice and how do you go out of your way to make it work in your savings goals? As always, your input is encouraged.

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Shedding Light on the LightBulb Moment

Recently I had an article published on the website GetRichSlowly.org. This was an article similar to one published on my blog. Both were titled “Lightbulb Moment.” Not too surprisingly, GetRichSlowly.org had many, many more visitors and followers than LifeImproved.Org (for the moment) and many of those readers felt compelled to post comments. For the most part, people were kind, enthusiastic, and supportive. However, there were some comments that were irritated that I did not give more financial details, or that opined that since I admitted that we had healthy salaries that whatever accomplishments we shared were less than impressive. I get the sentiment. I mean, it’s a much more moving story when a single mother, working three jobs, making $30,000 a year claws her way out of crippling debt left by the death of her spouse. And her beloved poodle. Yeah. I, too, would be very moved by the story. We all love an underdog. Heck, we make movies and write stories about them all the time (See David and Goliath). And there is also something fascinating about peering into the minute details of someone’s life, especially if those details reveal something savory. The problem some people had with my article was that it was too… ordinary, I guess. But these people that wanted more juiciness missed the point of the article and the pulse of my message.

You see, when my husband and I first started our journey, we were nothing special. We were another couple, working on our careers, living in suburbia. We had purchased a house and new vehicles within the previous five years. These things we had “upgraded” as circumstances allowed, moving from our 1000 square foot town home to our 2000 square foot home and trading in our used, cheap cars that we had as graduate students to our new cars befitting our careers. We were moving on up, financing home improvement projects and furniture to fill our bigger home without giving it much thought. We weren’t out of the ordinary. In fact we were extremely normal. Every body was doing it. My generation and the generations around mine were expected to go out into the world and flex the power of our credit. We did not save up $15,000 to buy a decent car. We purchased a $35,000 car with no money down. And even when we could easily pay for a roomful of furniture by waiting and conscientiously saving for a couple of months, we were lured by 12 months free financing. As I have mentioned before, my husband and I always felt very responsible about our decisions because we never borrowed as much as we could have. We were somewhere between Ikea and Crate and Barrel and way south of the neighborhood of BMW and Mercedes. So it was kind of a shock to finally see with clarity that even though we didn’t borrow as much as we could have, that our were not very good financial decisions. By the time we went to see the financial planner in 2009, our debt to income ratio was almost 3 to 1–but our credit was outstanding!

I keep seeing this commercial for a certain large financial services company whose message is that seeing one of their bankers can make your life so much better. In the commercial, a couple is sitting in front of the banker and he asks them what they would like to do with some extra money. The husband immediately responds that he wants a motorcycle and the wife that she wants a remodel. This commercial is interesting for a couple of different reasons. First, the couple has no idea what they want, they just want to borrow more money to buy more stuff. And second, the commercial implies that the banker will help them each purchase both of the things that they desire, they just need to ask.

This brings me back to discuss the point of my article on GetRichSlowly.org. Taking on debt has become entirely too normal. And not just debt for the big, once-in-a-life-time things, like the house or your good family car. We finance dishwashers, and vacations and new cars before the other new car even has any equity. We worry more about our credit scores than we do about our ability to repay debt if anything changes in the precarious cash-flow game so many of us play. So that’s the heart of my story. It wasn’t an amazing feat that my husband and I paid off all of our debt. What was difficult was getting the point that we recognized that we were headed down the wrong road. We didn’t need to get to the point that we lost everything first and hit rock bottom in order swear off debt–though I agree that I probably could have written a tear-jerker of a story about it. I don’t need to see anyone else hit rock-bottom before starting to climb up, either. I will be impressed if you have a healthy relationship with debt and spend less than you earn. And I think that these kinds of stories need to be put out into the universe in order to encourage other people just like us to change their approach to debt so that they can really change the course of their lives.