Ctrl-Alt-Delete! or: Undoing an Impulse Buy

My cell phone went completely haywire last night. The keypad was ignoring me, whenever the keypad would finally begin to respond - it would be interupted by an insistent prompt for me to speak a voicedial (I don't even use voice dial!). A creepy clickclickclickclick was coming from the speakers, punctuated by a prolonged beeeeeeeeeeeeep every minute or so.

I powered it on and off, removed the battery and replaced it, removed the SIM card and replaced it, left the phone alone for ten minutes, sang it a song, every quick fix I could think of. The phone remained posessed. Off to the the Cell Phone Provider Store I went.

Over the years, I've slowly upgraded my phones. The idea of downgrading is appalling to me, because I'm 23 and addicted to gadgets. I don't mine replacing my current model with another of the same, but I don't like to give up features I've become accustomed to. A weakness to be sure, but it's a weakness that only costs me every two years or so.

$121.62 later, I had one of those new-fangled music playin' phones. A Nokia whatever with red stripes and mp3 playing capability. Not all of my phone numbers were on my SIM card, so in what I thought was an exercise in futility, I put my SIM card back in my old phone, hoping the keypad would like me long enough for me to at least copy the numbers by hand. The keypad worked. It kept working. It's still working. Old Cell Phone is working just fine now.

Luckily I live in California and have thirty days to return the new phone. And to be honest, before I'd even attempted to use the seemingly broken Old Phone, it occurred to me that I'd really rather have $121.62, and that I should pop my SIM card into an Even Older Phone, and return the shiny new toy. Hopefully whatever technodemon posessed my old phone has been driven away for good- or at least until my contract's up and I qualify for a free phone. While I might try to rationalize the cool red stripey phone into a necessary purchase, it is NOT.

Dangit.

So how do I console myself, knowing that the shiny new toy is going back? Well:
$121.62 is enough to pay my cell phone bill. Twice.
$121.62 is about two and a half month's worth of car insurance.
Three tanks of gas.
About three guests at the wedding.
One month's energy bill.
Two month's groceries.

and the kicker?

Ten and a half hours of work. Before taxes.

Yeah, that thing is going back.

My Monthly Trade-Off: Extreme Frugality in One Area, Overspending in Another

Every month, after most of my bills are paid, the groceries are bought and the last thing that I must pay for before the month ends is a tank of gas, I start reviewing my income and spending. It seems that every month I manage to scrimp and save in one area while I spend more in another. In April, I spent very little on food, but a ton on leisure and entertainment. In May so far, I've spent very little on leisure, more on food than usual, and quite a bit on travel (a weekend in San Diego for Fiance's birthday.)

I already save about 10% of my wages, and by month's end I've usually got some extra income that I can also throw into savings - I'm doing very well in that regard. If I exercised some serious self-discipline, I could easily be saving another two to three hundred a month. Most of my friends consider my ability to hang on to my money something of a feat, but I still look at my ledgers at the end of the month and think "Damn! I really shouldn't have spent $X on Y!"

At the end of the day where I spend and where I save in any given month comes down to a value judgement. In May it was "Do I want beers out at the bar & a bunch of new books or do I want to spend a nice weekend with my boyfriend in San Diego?" I chose San Diego, which turned out to be a great idea. In June, I'll be paying for my share of Fiance & I's plane tickets to North Carolina. I'm a displaced Southerner who hasn't been home in four years, so obviously my $266 round trip ticket is well worth drastically curbing my spending in another area.

As the trip to Carolina, the wedding, and eventually married life come closer, I'm sure I'll need to start exercising the willpower to be mega-frugal in more than one category at a time. So here's my game plan:

(1) Leave my debit and credit cards at home. I already leave my credit card at home most of the time, but unless I need to buy gas I really don't need to bring my debit card to work with me. Sometimes the Starbucks across the parking lot calls my name a little too loudly, especially on my morning shifts.

(2) Make sure I'm setting aside time to pre-cook meals and snacks. For the most part I'm pretty good about this, but this summer I'll be in one pretty intense 4 hours four days a week class, an online class, working full time, and planning a wedding. I won't be able to just throw something together when I feel like it. Also, I'm likely to be pretty stressed out. When I'm stressed I either stop eating altogether, or I overeat. If I've got healthy food readily available, I'll be less likely to cave and make a beeline for Chick-fil-a.

(3) Write notes to myself. For example "If you spend $30, you have to cross out one wedding guest!" or "You need this for RENT!" I'm so disciplined most of the time that I generally have $5-$25 to burn if I feel like it. I can sometimes be flippant about spending a little here and there. Most of the time I fight the urge off, but sometimes I fail. Hopefully having visual reminders in my purse, checkbook, and taped to my debit/credit cards will help.

(4) Keep Fiance in the Loop. The fact that he & I are fairly minimalist frugal mostly-vegetarians bodes well for our marriage. The more in the loop I keep him, the more he can help out by saying, "Ummm, honey are you sure you need ANOTHER wedding planning book?"

(5) Stay home more often. Just walking out of the door and starting up the car is spending money. If I stay home I can cook, keep my room organized, post to BurnFive, do surveys, tons of productive stuff- most of which will save or bring in money, as opposed to spending it.

Hopefully in June I'll be able to keep all unnecessary spending to a minimum, instead of just some of it.

The Battle of the Air Conditioner, or 5 Ways to Beat the Heat

If you live in Southern California, the most painful bill to pay in the summer is the electricity bill- the dry heat out here is awful. The other day one of my roommates and I had the on/off battle of the air conditioner. She kept turning it on, I kept turning it off. To be fair, her room is on the second floor, covered in windows and has a ceiling fan way too high to actually circulate air around the room, it's pretty much a solar oven up there. But we live on a lake, so once you get the windows open and a fan that actually moves the air around, not so awful. What we really need are fans that will fit in the windows, especially in her room.

What struck me the most about our air conditioner battle (and I use the term battle loosely, we weren't really fighting), was that when we finally crossed paths I pointed out that running the AC would add up - our energy bill could easily be $100+ higher than the $120-$150 we've been cruising at for the past three months (for a four bedroom house with three adults and a kid in Southern California, mind you). Her response was "It's so hot, I don't care how much it costs!" She wasn't being a baby or anything, it was terribly hot yesterday- but because the rest of us are content to put on a tank top, open the windows and turn on a fan, we'd have been pretty bitter about that extra $100 on the power bill. I handed her the biggest fan in the house and sent her back upstairs with instructions to open her windows and crank the fans.

To be sure, there was a time in my life (about three apartments ago) when the cost of running an air conditioner didn't matter to me. Utility bills are one of the easiest ways to bleed money: running the AC at full blast because it's hot, using the dryer instead of hang drying clothing, running the dishwasher instead of just washing dishes by hand - it is very easy to disconnect from the actual cost of running an appliance if it makes our life easier.

I don't know about the rest of the world, but I'd rather keep the money in my pocket and take ten minutes to hang dry my clothes or three seconds to turn on a fan or open a window than pay an extra $100 a month in bills. To that end, here are a few tips to on keeping cool:

(1) Open your windows! When air can circulate through the house, it stays cooler. Use fans to help it along.
(2) Drink water! The more hydrated you are, the less hot you'll feel.
(3) Fill a spray bottle with water and keep it in the fridge. Every now and then, spritz yourself. This might actually be better than air conditioning.
(4) Fill up some water guns and go outside. Try not to run up your water bill too much, but having a water fight will cool you off considerably. The water bill will almost always be less than the power bill, even if you set up a Crocodile Mile for an afternoon.
(5) Wear less. Tank tops and shorts are your friends. Even if you're alabaster white like me, who cares? The fashion police probably won't beat down my door for wearing cut offs and a tank top around my home when it's 90+ degress outside. And who cares if they do?

You're NOT Homeless!

Are you carrying your worldly possessions around in plastic bags, sleeping in parks and begging for money? Probably not, but a lot of twentysomethings seem obsessed with the romance of feeling like they're one missed paycheck from poverty.

Nearly everyone I talk to about saving money insists that they just "can't!" Apparently, quite a few of my peers believe they are so destitute that every cent of every paycheck must go to their bills and basic survival costs. But if you're eating out more than once a week (I try to only eat out once a month!) or if you're not finding ways to save on your groceries, or if you're throwing money out into the ether that ought to be going toward your bills...well you're not living to paycheck to paycheck because you're poor. You're living paycheck to paycheck because you have no control over your money. Even if you're trying to control your spending in little ways, unless you're looking at the big picture, you've probably sprung a leak somewhere in your finances and you can't plug it because you don't know where it is.

Here's the thing about being in our twenties, we've got time on our side. I make $1400 a month in wages (and that's if I'm working myself like a dog), but I'm putting at least some of that away. I may not have loads of cool stuff or a fancy car, but in a few years when I want to buy a house I'm going to be better off than a 35 year old making six figures a year, who has saved nothing because he's 'poor.'

Very few of us are actually poor. We could easily start socking away $20 or less a month. When it comes to saving, just putting yourself in the habit of putting something away is more important than how much you put away. Many of us are unhealthily attached to the martyrdom of "I'm so BROKE!" We see it almost as a badge of honor and we actually want to cling to that. It's our best excuse to not do better for ourselves.

Feeling like a financial martyr means that you don't have to really work at saving money, because broke is what you do. In fact, it's what you are. But who wants to be a charity case? I truly believe that unless you are honestly destitute, you can find $10-$20 a month to put in a savings account. Many will argue that there's no point to putting such a small amount away, and many others will have a hard time leaving the money alone, but as with any other behavior that requires self discipline to implement, starting small is the easiest way to start.

Financial Doublethink: A Rambling Rant

From the Irvine Housing Blog (not as boring as it sounds, I swear!):
Southern California's Cultural Pathology

I read this article about a year ago, and while I'm not in the housing market at the moment (and very few people my age are) - the basic premise that consumers are convinced that opposing ideas about money are true most definitely applies to young people.

While we're not overextending ourselves on mortgages, we are overextending ourselves in other ways. In Southern California, it's not uncommon to see a 22 year old driving a new BMW. Some of those kids are driving a gift from their parents, but most of them put that machine on credit. I don't presume to know the income of every 22 year old in a BMW, but I'd place a pretty hefty bet that quite a few of them are slaves to their car payment and wish they'd bought a Toyota. I believe that the idea of cultural pathology extends to debt denial too. There are people who are literally a thousand or more dollars in debt but are raising money for massive unnecessary purchases, as opposed to pulling themselves out of debt.

I was about $600+ into overdraft three years ago. I stopped using the bank I was with at the time and began doing everything in cash. I still had a decent amount of savings in an online bank, but with no brick & mortar bank to transfer it to, I couldn't get at it very easily (thank god). I did everything in cash, and I bought $300 purses and $180 shoes and $200 jackets. I could have easily brought my bank account back into the black, but instead I blew my hard-earned money on stuff that I'd decided I deserved, dammit. Three years later, I'm back 'on the grid' so to speak, but with a NASTY dent on my credit report. And I pretty much never carry that purse.

The financial doublethink of young people never ceases to amaze me. The fact that many of us do not grow out of it and end up tens of thousands of dollars in debt completely mindboggles me. People (including me at one point) who are totally broke will buy iPhones or Disneyland passes or new laptops or daily Starbucks. And then they complain of being "too broke!" Well, of course you're broke, you just spent all your money! But the "I'm broke!" and the "I want an iPhone!" wires never seem to cross.

Having a flashy car, a fancy iPhone, 18 Coach bags, annual passes to every theme park ever, drinking Starbucks every day and a pony will NOT make you financially stable. It'll make you look like you spent a lot of money. Looking like you spent a lot of money will NOT help you if you find yourself in a an emergency situation with no savings. Nothing is more degrading than having to go around begging your friends for money when your car breaks down. Plus they're going to wonder why you can't fix it yourself, since you've obviously got a lot of money to burn...

I'm not saying that people should never ever indulge a whim or a want. You've got to have little fun every now and then. If you're splurging on a tub of ice cream or (god forbid) a wide release new movie or even the occasional latte, you're probably not compromising your financial security too much. But if you're spending hundreds of dollars on items not necessary to your survival and ignoring your debt like it's not there, that's a purchase that could probably use some re-thinking.

Finding a Reason to Save

The biggest obstacle many young adults face financially is apathy. The second might be ignorance. Managing our finances seems big & scary, and when it comes to saving & living within our means we just don’t wanna. Checking our balance online once a week is often the most we ever do when it comes to financial planning. We make our big purchases on payday, before we can whittle our income down with stupid stuff like paying our bills or filling our gas tanks. We’re certainly not immediately concerned about ever having the money for a wedding, a house, kids, retirement or anything else. In fact, we’re often operating on this vague assumption that by the time those Major Life Events come ‘round, we’ll be working glamorous jobs and making $80,000+ a year and those expenses won’t even dent our bank accounts.

We’re just not inspired to do anything with our money other than spend it. We want (multiple) beers after work every night, iPods, dinners out, new clothes, DVDs, the latest cell phones, video games…in fact, we’re pretty much still teenagers except for the beers part. Most of my friends weren’t paying any attention to their finances until all of the sudden they found themselves crossing over into their mid (or late!) twenties. Out of nowhere, we begin to wonder if we are doomed to live with roommates our whole lives, if we’ll ever have careers instead of jobs, if we’ll have nice weddings or just go visit a justice of the peace and have it over with, or if we’ll be able to retire comfortably- the list goes on and it’s different for everyone. Whatever your reasons, they’ll hit like a ton of bricks when the time comes.

But what do you do before the What-Ifs kick in and you start caring about your long-term financial situation? How do you get inspired to take control of your finances instead of just plucking along, paycheck to paycheck, heaving a big sigh of relief when you don’t get evicted and your cell phone’s still on? I believe the answer lies in finding short-term goals to work toward. Our attention spans are short, at 18-20 ish we don’t really NEED to start planning for weddingsbabieshousesretirement just yet (though we should)- but we might just get inspired to get our butts in gear for the more nearsighted goals.

So if you’re not quite old enough to care about the Real Grown Up Stuff You Have to Pay For, sit down and make a list of goals. They should be goals you could reach in a year (maybe less!). Here’s what a few of mine might have looked like when I was 19:

• My own room! (If you live at home, this might translate into getting an apartment with friends. If you’ve already got an apartment with friends, this might translate into getting your own place, or a place with fewer roommates.)
• A trip to ______ (Fill in the blank. I think I wanted to go to Africa when I was 19. Still do. Traveling abroad or cross country is perhaps one of the best goals for younger adults. We’ve got more freedom to roam and it’s lower cost goal with a short payoff. Perfect!)
• Paying off my car loan. (Some of you might have this one too. If you went to college, this might be a student loan instead. It might be both. Maybe you just want you’re a car in the first place!)
• A laptop! (I’ve got one now, I bought an iBook G4 from a friend for $500 when I was 22. But this item might be any other gadget- a GPS, an iPhone. Of course, this assumes you’ve got the willpower to not put such an item on credit.)

Write down your goals. Whether you’re 18 and you just want an iPhone or 28 and looking to buy a house. Write them down. Be detailed. Where is your apartment? When you get to Italy, what will you see? What will you do with your laptop when you get it? Where is the dining room in your house? Put your list somewhere you’ll see it every day (taped to your computer monitor is best). Definitely look at it when you check your account balances online. Are you treating your money in a way that brings you closer to your goals? Or are you just as far away from them as ever? When the disparity between your behavior and your greatest wants can no longer be denied, it is very difficult to not begin taking at least baby steps towards financial responsibility.

If you’re reading this blog you probably already care about your financial situation on some level, but all the blogs and tips in the world won’t help you unless the decision to take control of your finances is inspired by a personal goal you care deeply (dare I say viscerally) about reaching.

The $37 Latte

Until I was about 20, I ignored overdraft notices. My mother would call and point out the pile of matching envelopes arriving at her house (the address I still used for banking purposes for a while after I moved out), and I would shrug them off or rationalize them. The older I get, the more I realize that this phenomenon is not unique to me. Granted, not everyone racks up tons of overdraft charges, but I believe there’s a fairly significant number of the 18-25ish set who not only rack them up, but also live in complete denial of the havoc overdrafting is wreaking on their finances.

I don’t know of any hard numbers on just how many of us get into this awful habit, and I can only guess as to the reasons. Perhaps we’re embarrassed, perhaps we’re in denial. We want to seem financially solvent, even if we’re not – often we don’t care about the numbers on our bank statements as long as our debit and credit cards clear when we’re buying overpriced goods & services that we don’t actually need.

In a perfect world, the bank would just reject our attempts to purchase items that we haven’t actually got enough money for, but banks are businesses and charging fees to the financially illiterate or irresponsible is their bread & butter. We start to play beat-the-bank, thinking we’ll deposit more before the transaction clears, and we begin to believe that it’s ok to overdraft. After all, the bank let you charge whatever it was you thought you needed in the first place, right?

Let’s say you’re like I was, and you are completely in denial about the notices flooding your mailbox. Let’s say that one of them was the result of having not quite enough for the $5 latte you wanted. You have $3, and you go ahead and charge the $5 on your debit card. The bank catches this, of course, and hits you with a $35 fee. You just paid $37 for an already overpriced $5 latte.( $5-$3 you already had = $2 +$35 fee = $37). You could have made a normal cup of coffee at home for pennies on the dollar. Even more amazing, somewhere between buying that latte and getting the notice, we manage to convince ourselves that they’re unconnected.

How much are those “little” $35 charges hurting you? Let’s say you make $15 an hour. (Lucky!) and you’re getting 6 overdrafts a month. 6 x $35 = $210. Six overdrafts a month means $210 you don’t have. And $210 ÷ $15 per hour = 14 hours. $210 worth of overdraft fees is the equivalent of 14 hours of work for you, that’s almost two days of hard work- completely down the drain. Unless you are very, very lucky you probably don’t even like your job that much. And yet you have just wasted 14 hours of time there. That's fourteen! hours! you worked just to have the money float away into BankFeeLand. That $210 could easily pay almost all of your utilities if you’re living with roommates. It’s almost FIVE TANKS of gas in a compact car, if gas can be found for $3.70 a gallon anywhere near you.

So how do you kick the habit? Well for one, start actually OPENING the notices. Tack them up somewhere where you’ll see them everyday, so that they are staring you in the face. Each time you get another, add together the running total on the most recent notice. Every so often, look at that total and think about what you could be buying if you’d SAVED that $35 instead of giving it to the bank. After a while (it may take longer for some), you’ll begin to find yourself unable to deny or rationalize the money that you’re just giving away- money that you’re most likely working your butt off for. Once you’ve learned to be honest with yourself about overdrafting, start following these tips:

• Know your available balance. Don’t just have a vague idea of what you think you might have in the bank. Know what you have available to you, after deposit holds, automatic bill payments, and anything else that you might not immediately think of when you’re excited about payday. You might deposit $600, but sometimes only $100-$200 is available for spending same-day. In the era of online banking, there’s no excuse to not know your available balance.
• Don't play Beat-the-Bank. Most banks will still hit you with a fee even if you deposit money before a transaction with overdraft potential clears.
• Set up overdraft protection. Get a savings account and link it to your checking account. Put $100 in it and set up overdraft protection. Never, under ANY circumstances withdraw that $100. You might feel that $100 is a lot of money to leave in a low interest account, and you might want to use it for an impulse buy. Don’t think of that $100 as YOUR $100. Think of it as $100 you paid to your bank to never charge you an overdraft fee again.
• If all else fails- if your will power, self control, and knowledge of your account balances aren't enough to make you stop overdrafting, call your bank request that your debit card be JUST a debit card. Most debit cards can be run as credit cards- and this will allow merchants to approve many transactions that would otherwise be rejected for Not Sufficient Funds, forcing you into overdraft. If your card can only be run as a debit card, most banks will only approve transactions for which you have sufficient funds.
• And above all - Curb Your Spending. Obviously this aspect of avoiding overdrafts is bigger than this entry, but it applies – big time. If you can manage to stop, or at the very least cut massively back on, impulse buying and overspending, you’ll be gambling your bottom line less often, which means risking overdraft less often. If you find yourself with $3 in your account, get the smaller $2.85 latte if you aren’t strong enough to get out of the line and walk out of the coffee shop. But please, please don’t let yourself spend $37 on a latte ever again.

But I Only Paid $300 For This Luxury Good I Don't Need Anyway!

Note: This post is the first in a series about why young adults spend the way we do, and how to re-tool our thinking.

There are hundreds, maybe thousands, of books & blogs dedicated to personal finance, and I'm a dedicated reader of several. But while there are tons of great blogs on how to save money, how to invest, how to life-hack, how to get out of debt, and how to be a good consumer- very few blogs broach the topic of our spendthrift nature or how twentysomethings wind up in debt or if not in debt, barely scraping by paycheck to paycheck in the first place.

Most financial advice for young people is about paying off debts incurred by college expenses which, while useful for many, doesn't apply to thousands of other young folk. Everytime I crack open a book about personal finance for young adults I get about a chapter in before I realize that they're not talking to me. I don't have student loans, I don't have thousands of dollars of credit card debt, I don't have a degree that isn't helping me get the salary the career counselor promised me, and most of the post-college how-to-make-it-on-your-own advice is old news.

I do have some medical debt, a monstrously huge library fine, a utility bill I never paid off, and a charged off auto loan. But even all that adds up to less than $3000, none of which is accruing interest. And that debt exists because as I racked it up, I felt entitled to eating out most nights, buying fancy cocktails at bars, owning designer clothes, having a massive CD collection or whatever the whim of the moment was.

So why did a smart girl like me- raised by frugal parents- spend like a blithering idiot the second I moved out? I think most of us are high on freedom, whether we've escaped to apartments down the street from our parents or to dorm rooms hundreds of miles away. Whether we're living on paychecks or allowances, we're still children in many ways. Financial realities haven't quite set in yet, and most of us grew up in a culture that encourages the image of riches rather than the reality of wealth.

If we can manage to look well off, we can believe we are well off. In my case looking rich meant financing a fairly new car, buying loads of designer clothes (used, of course! I saved money!...More on that logical fallacy at a later date.), treating my friends to dinners I couldn't afford and rounds of drinks we shouldn't have been drinking anyway. Looking rich might mean different things to different folks, but the principal is the same: We end up sacrificing our needs for our wants.

Some people manage to never fall into these nasty spending habits, or are able to rely on scholarships or their parents if they do, but I think the vast majority of us spend like this at some point, even if we think we don't.

Most of my more embarrassing tales of financial idiocy revolve around buying expensive clothes. To this day I've still got a $400 purse in my closet. Granted, I bought it on sale for $320 and then got another $20 taken off because of a tiny nick on one of the handles, but I still paid (with tax) over $300 for a purse I haven't even used in over a year. My everyday purse was bought on clearance at Target for $7.98. Go figure.

What are your most embarrasing over-spending stories? What did you pay too much for and why did you do it? Post your answer in the comments. The best story gets an as yet undeclared prize. Probably from-scratch brownies or maybe my like-crack to some ginger snaps.

Next entry in this series: What makes us stop spending like idiots, and if you haven't stopped yet, reasons to change your ways.