I know it’s Easter week-end, but if you’re trying to get out of debt, there’s a good chance you need to get control over the outflow of money at Christmas, and now is the time to get your strategy in place. I’m on a steep learning curve when it comes to economy over the holiday season, but there is one cost-cutting method that I’m qualified to share: the gift game.
In my family, besides my husband and our three daughters, I have my mother, four siblings, four siblings-in-law, eight adult nieces and nephews, and several children under the age of eighteen to consider at Christmas-time. It used to be that we’d each buy gifts for everyone, but as the children grew older, it became more difficult to choose presents for them – not to mention more expensive. So about eight years ago, my siblings and I decided to make a change. We wouldn’t buy gifts for anyone over the age of eighteen, with the exception of our mom and those in our respective immediate families. Instead, we would play the gift game.
1. Everyone who is eighteen years old and older – there are twenty-one of us this year – buys a gift priced somewhere around $20 – $30.
2. We all get together a couple of days before Christmas, usually at my sister’s house, our gifts wrapped but with no “to:/from:” label on them.
3. From a hat or a bowl, each person takes a folded piece of paper that has a number on it from 1 to 21 (if all twenty-one of us manage to make it).
4. All gifts are laid out on a table, and the choosing begins. The person who has drawn number 1 goes first.
5. The person who has drawn number 2 can either choose another wrapped gift OR steal number 1’s gift – in which case number 1 has to select another wrapped gift.
6. As the numbers get bigger, the choices get more interesting. Number 15, for instance, can either open up one of the few remaining wrapped gifts, or else steal any of the fourteen gifts already opened. Let’s say number 15 steals from number 8. Number 8 can then either choose a wrapped gift or steal from someone else. And on and on it goes – the only limitation being that you can’t steal what someone else has stolen from you in any given turn.
7. The game ends when the final gift has been opened.
Hysteria builds as we play the gift game. There are always a few presents that end up being more coveted than the rest, and the pleading, bargaining, stealth, surprise betrayals, and well-fought victories unfold to yelling, groans, screams, and laughter. Combined with pot-luck finger-food and drinks, the gift game has become one of the best times of our extended family’s Christmas season. When we started eight years ago, the nieces and nephews who were eighteen and older felt they were losing something – gifts from all of their aunts and uncles. Now, it’s become a privilege – a rite of passage into adulthood. The younger children look on eagerly and absorb the event as they await the year when they too will join in the gift game.
If you have other strategies to avoid overspending at Christmas, I’d love to hear about them. Some things have to be planned out and agreed upon well in advance – when it can be difficult to muster up interest. But what a difference it can make! If I bought a $20-$30 gift for every sibling, every sibling-in-law, and every adult niece/nephew in my family, I’d be out by about $400. Instead, I buy one gift as part of a Christmas tradition that has turned out to be so rich.
DH = Dear Husband
Wednesday evening, I watched Maxed Out, a documentary produced in 2006 that exposes the manipulative practices of financial institutions and credit card companies. Thursday, I cut my credit card.
It wasn’t actually a decision I made overnight. I’d gradually warmed up to the idea over a period of almost two years. DH and I are not on the same page when it comes to this issue, so I’m only speaking for myself:
– DH and I started our journey out of debt at the beginning of June 2012 after reading Dave Ramsey’s book The Total Money Makeover. Ramsey encourages people to cut their credit cards as part of their escape from debt, but DH and I didn’t think that advice applied to us. We paid off our Visa balance every month. Our problem debts consisted of lines of credit and a mortgage. Credit card debt was not an issue for us.
Higher Spending with CCs
– On the other hand, I learned that people spend more when they use credit cards than when they use cash. A study published in 2011 in the Journal of Consumer Research indicates that shoppers buy more expensive items when they pay with credit cards because they aren’t as concerned about price as are those who pay with cash. Moreover, credit card users tend not to track their purchases as carefully as those using cash, making them less current in their personal finances. For me, this study provided an argument against the siren call of credit card rewards points: Those who cut their credit cards actually save in real cash far more than they could ever earn in terms of points.
– Furthermore, as the months went by, I developed a greater awareness of “the Debt Matrix” – the normalizing of debt created by banks, credit card companies, and advertisers. I became annoyed with campaigns like “smallenfreuden” (see our “cuttenfreuden” response). I became suspicious of the aggression used to market debt – especially credit cards, so widely available and so frequently on offer at stores and through the mail. I would catch my own longings to buy and recognize those longings as a product of pervasive advertising. It’s generally accepted that we’re each exposed to 5,000 ads per day. That kind of bombardment has more influence than most of us realize, and I came to resent it.
Obstacles to Card-Cutting
Two obstacles held me back from actually cutting my credit card:
1. I knew that a Visa debit card would allow me to do things like shop online, but I also knew that there were limits to its use – especially in Canada. I didn’t want to end up stranded without a credit card.
2. PC Financial, the bank we chose because it has no fees, doesn’t issue Visa debit cards. In order to get one, I’d have to open an account at one of the major banks and either maintain a balance of $1,000 or pay fees. I despise bank fees. Since I’d be doing this without DH, I would have to save $1,000 from my discretionary fund. A challenge for me.
When I watched Maxed Out, the obstacles to my card-cutting intention became less daunting. What struck me most from the documentary was its exposure of the blatant strategy of financial institutions to profit from debtors who are least likely able to pay back. It all came across as sinister: credit card companies’ brazen targeting of college students; collectors exploiting access to personal information and hounding debtors with shaming tactics; peddlers of debt convincing debtors to borrow more. And the result? Brokenness; rattling stress; depression; suicide.
Elizabeth Warren, a professor of law at Harvard when Maxed Out was produced (now a Massachusetts Senator), speaks in the documentary about a seminar she presented for Citigroup, an American multinational financial services corporation. “If you would screen the weakest customers, those who are overloaded on debt and the least likely to pay, you could cut your bankruptcy losses by 50%,” she told the representatives of the company. In the discussion that followed, a man who clearly had power spoke up – a hush fell over the room when he did so – and he explained that such screening could not take place because Citigroup made most of its profits from the people who would be disqualified as a result of it. “If you cut out the people who are least likely to be able to pay,” Warren reiterates, “if you cut out the most marginal borrowers, the ones who are deepest in trouble, then you’re cutting out the heart of our profits because that’s where we make most of our money.”
“Consumer lending is obscenely profitable,” says Warren. The Debt Matrix is financed by people who can just barely manage to make their minimum payments. And the profit margin is so huge that it’s worth it for financial institutions to absorb the costs of bankruptcies that are a hazard of the industry. “They will owe those debts until they die,” says Warren of those caught in the perpetual debt cycle of minimum payments. “Death will be the only form of debt discharge that they will ever see.”
I’m still not convinced that I can manage without a credit card, but I am convinced that I want to give it a try. I don’t have a balance of $1,000 in my new account, but I plan to have it before too long – and the representative at the bank did say that my first six months would be free of fees. I’m not sure if my new Visa debit card will see me through all situations, but I’ll risk it. I cut my credit card for many reasons: I believe I’ll spend less without it. I believe it will help me in my efforts to disengage from the pervasive influence of the Debt Matrix. And I believe it’s worthwhile to take a stand against an industry that markets life-sucking debt and that profits from those least likely to pay it back.
John (not his real name) = older brother of a strong-willed sister
An ugly inheritance story
I know someone whose mother died a few years ago, and over the months, he has told me bits and pieces of an ugly inheritance story. I’ve heard quite a few bitter complaints from members of different families over the years – about wills, executors, estates lawyers, and sibling power plays – but nothing tops this one. My friend – I will call him John (not his real name) – gave me permission to write about his experience.
John grew up as part of a large family. One brother after another was delivered into the household until the youngest child, a sister, was born. John can’t remember any hints of what was to come from his sister’s early childhood, but it’s not hard to imagine that she was pampered by mom and dad – both thrilled to have a daughter at last – and that she was alternately teased and protected by a brood of brothers who would be blamed for anything that went wrong.
A pattern of indulgence
A string of incidents with a common theme became evident to John once his sister hit adolescence. She attended a middle school that was located half a block from the family home, and part way through her final year, an administrator informed her parents that she had been late 100 times. The consequence in those days for such chronic tardiness was an automatic failure, meaning she would have to repeat grade eight. John remembers the commotion caused by the news, and his parents’ involvement with the school’s administration. Their rescue effort was successful, and his sister went to high school the following year. She hadn’t learned to be punctual, but she had learned that her parents would protect her from the consequences of her actions.
Years later, still living at home, John’s sister had a job. She had carried her habit of being late into the world of work – where she wasn’t getting away with it – and one early morning, in a panic, she realized she wouldn’t make it to work on time if she took the bus. Her solution? She drove her dad’s car. When her father got up to get ready for work, he realized his car was missing and thought it had been stolen. He called people at his office to explain why he was late and took steps to report the theft before finding out that his daughter had taken the car. How would you respond to a situation like this? “I’d kick her out of the house,” said a colleague of John’s when he told her about it years later. But not these parents. They agreed that John’s father would get up extra early so that his daughter could drop him off at work on her way to her job. You can guess who had to take the bus when there was a change in schedule. “It was my mom,” John said to me. “My dad would always appease her by giving my sister what she demanded.”
Fast forward several more years. John’s parents were now retired, enjoying their winters in Florida, planning to buy a condo there. His sister had married, had two children – and then divorced. To avoid having his daughter move back into the family home, as his wife wanted, John’s father bought her a townhouse a few blocks away. They stipulated an amount that she would “pay” as rent with the understanding that she would never actually give over a cent. John’s parents became their grandchildren’s “volunteer” daycare providers. No more winters in Florida. To top it off, John’s sister was audited one year and taken to court – having claimed higher rental payments on her income tax than the agreed-upon phony amount. Guess who bailed her out of that one.
Fast forward again. John’s father was dying. On a Saturday morning, he breathed his last, and by Saturday evening, John’s sister, along with her children, had moved in with her widowed mother and taken over the family home. (It was left to one of her brothers to fix up and sell the townhouse.) In the months ahead, she would change the locks on the doors of the house. She would cut communications with her mother’s friends and family. Letters and calls would go unanswered. John, who lived in a city five hours away, heard sporadic rumours about his mother’s injuries and bruising. “We were in denial,” John explained. “We didn’t want to believe what was clearly happening.” He was eventually to find out that his mother, well into the stages of Alzheimer’s, had visited her lawyer to change her will – accompanied by her daughter. In the end, everything went to John’s sister. The lawyer had noticed bruising too.
“Was there mental illness there?” John asked rhetorically before answering the question himself. “I don’t know.” If there was, I can’t help but think that it took on its grotesque form through the enabling, denial, lies, and foolish choices to sacrifice that mark this story. How common is this sort of situation? Are there other tyrannical adult children out there running their parents’ lives and squandering their wealth? I can’t help but wonder how things would have turned out if John’s parents had gone ahead and bought that condo in Florida. Or if they had kicked his sister out of the house when she took the car without asking. Or if they had let her repeat her grade eight year. When I hear what happened with John’s sister, I for one am motivated to stand my ground, look my child in the eye, boundaries firmly established, and with a resolute will born of love say “No.”
DH = Dear Husband
I’m reading Stephen Covey’s The 7 Habits of Highly Effective People for the first time. It was published twenty-five years ago, and I’ve been meaning to read it ever since. I got a little push towards opening it after learning of the book’s significance to Mr. Money Moustache. And I find myself wishing I had read it twenty-five years ago.
The Social Mirror
Habit #1 is “Be Proactive”, and while it applies to all areas of life, I will focus upon how it applies to debt-reduction. “If the only vision we have of ourselves comes from the social mirror – from the current social paradigm and from the opinions, perceptions, and paradigms of the people around us – our view of ourselves is like the reflection in the crazy mirror room at the carnival . . . These visions are disjointed and out of proportion” (Covey, p. 67).
The “social mirror” of personal finance is certainly disjointed. We are bombarded by mixed messages:
“You’ll be happy once you own this.”
“Keep up with the Joneses.”
“Start saving for retirement.”
“Don’t be so cheap.”
“It’s a great time to borrow with interest rates so low.”
“Give to charity.”
“Credit card rewards points are such a bonus!”
“Think of your future.”
“You only live once.”
Most of us have navigated our financial pathways with more reference to this disjointed social mirror than we might realize. And most of us are in far too much debt.
Proactive or Reactive?
“Highly proactive people . . . do not blame circumstances, conditions, or conditioning for their behavior. Their behavior is a product of their own conscious choice, based on values, rather than a product of their conditions, based on feeling” (Covey, p. 71). Recently, I’ve been annoyed by a radio ad for a debt consolidation company that essentially says, “You’re not in debt because of poor money-management. You have faced unexpected expenses, and family members have needed your financial help. (You are so caring.) You’re in debt because of circumstances beyond your control.” There is a soothing element to this message, and most of us can tap into it. In our case, we lost our primary source of income with the hi-tech bust early in the millennium. DH floundered in his career for six years before going the route of self-employment – which involved a huge business loan. There were circumstances beyond our control.
“By saying I’m not responsible, I make myself a powerless victim . . . My ability to positively impact the situation withers and dies” (Covey, p. 90). The concept of responsibility as “response-ability” – the ability and freedom to choose our response to circumstances (Covey, p. 71) – has to be applied with sensitivity to the different margins of power that each one of us possesses. I do hear of situations that strike me as impossible. The single mom who loses her job and whose ex-husband is pursuing crippling legal action . . . I’m not about to tell her, “You are not a victim. You have the power to choose your response to these circumstances.” Her margin of power is actually very limited. But if I consider ours, it’s not so limited. Yes, we suffered a loss of income that was beyond our control. And yes, there are all kinds of difficulties involved in forging a new career. But why hadn’t we saved for a rainy day? And why had we taken on so much debt when the going was good? The concepts of responsibility and response-ability apply strongly to us – and that’s a fortunate thing.
Self-Awareness: A Humbling Exercise
“But because of our unique human endowments, we can write new programs for ourselves totally apart from our instincts and training” (Covey, p. 70). First among these endowments, according to Covey, is self-awareness. If DH and I take an honest look at ourselves, there are a few unpleasant truths about our money-management that emerge: I got comfortable in the role of cute financial ditz. He got into cycles of worry about money, getting things in balance, and then splurging so that he could worry again. We let the forces of materialism and the pressure of keeping up with the Jonses impact us. “It is our willing permission, our consent to what happens to us, that hurts us far more than what happens to us in the first place” (Covey 72). Self-awareness is a humbling exercise, but it allows for a change of direction. No longer a helpless cutie lost in the chaos of personal finance, I track receipts and operate according to a budget. DH’s cycles of financial worry have been trumped by a steady discipline. We get way more excited about putting a payment against our debt than we do about any purchase we make. And as for keeping up with the Jonses, we’ve disengaged from that race. We’re proud of our 15-year-old van. We’re rather smug about our worn carpet and furniture.
“It is inspiring to realize that in choosing our response to circumstance, we powerfully affect our circumstance” (Covey, p. 86). I can’t do justice to all that Covey says about habit #1, but I can confirm this statement about affecting circumstance. In June 2012, DH and I decided to get proactive about our debt, and as we’ve used our margin of power to respond in new ways to our circumstance, it has changed significantly. Our debt is down by almost $75,000. Our levels of conflict and worry are down too. I’ll be taking in Covey’s 7 Habits over the next while in my efforts to stay on the right track. The social mirror is powerful and disorienting. I want to navigate this journey out of debt with reference to clear and accurate reflections of the pathways available in our landscape.
DH = Dear Husband
DH has had better-than-expected business revenue this month. A welcome state of affairs as we near the second anniversary of our journey out of debt. But last week, DH’s accountant offered some advice towards setting up for retirement, and it means that once again, we will not be able to pay anything extra off of our debt this month – or likely even next month.
A Year of Obstacles to Debt-Reduction
At first, I was more angry about it than I care to admit. For seven of the last twelve months, we’ve had to settle for $0 in debt-reduction, apart from our regular mortgage payments:
- March and April 2013 – slow business.
- June, July, August, and September 2013 – saving for new roof, vet bills, and tree removal.
- January 2014 – more vet bills.
And now – an accountant’s retirement advice.
It can be hard to maintain motivation when one discouragement is followed by another – and another. But what was I expecting? A smooth ride? Steady progress? Not likely. At the end of last May, the first year anniversary of our journey out of debt, I was so happy with our numbers. Our total debt of $257,000 had come down by $50,000. For our second year, we’ll be lucky if we manage half that amount. What a difference!
I vented my frustration to a close friend. “$75,000 in two years?” she said. “That’s what I earn!” My attitude dissolved immediately as I took in her perspective. And since I’ve stepped back, frustration has given way to a sober confidence. I can honestly say that our effort through year two has been just as strong as it was for year one. I can also say that although $25,000 is a lot less than $50,000, it’s still way more than what we used to pay off before we started our journey out of debt. Furthermore, I’m glad DH’s accountant directed him as he did. “Our goal isn’t just to get out of debt,” DH reminded me. “It’s to get on solid financial ground.”
I think that part of my initial anger was caused by an expectation I adopted as we started our debt-reduction almost two years ago. We’ll be debt-free in five years, I thought. I don’t know why I decided it would take five years, but that time span became foundational to my vision. And if I face the facts now, I have to let that foundation crumble. According to Dave Ramsey, whose book The Total Money Makeover we follow, it takes the average household seven years to become debt-free. My adjusted vision puts us at average. If we’re lucky. And that’s just fine.
Goals: Double-Edged Sword
Goals are double-edged swords, and it takes a delicate skill to handle them effectively. On the one hand, they harness energy, focus effort, and channel both in a constructive direction. On the other hand, our goals foster expectations that can hold us hostage if we’re too attached to them – especially when forces outside our control make them impossible to meet.
So I’m trying to handle my goals effectively. I won’t be held hostage to rigid expectations, but while I’m letting go of that five-year plan, I’m not letting go of monthly budgets, financial spreadsheets, tracking receipts . . . We’re still making our way toward solid financial ground. We’re still on our journey to debt-freedom.
DH = Dear Husband
DD1 = Dear First Daughter
DD2 = Dear Second Daughter
DD3 = Dear Third Daughter
March Break Snow Storm – March Break Shopping
This past week was the March Break, and Wednesday afternoon, in the middle of a snow storm, DD3 asked if I would drive her to the mall with her friend. I made a plan: I would use the time to do some Christmas shopping.
Let me just state how radical this plan was for me. Never before in my life had I ever bought Christmas gifts before October. The vast majority of my holiday shopping has always been carried out against the backdrop of a late December rush. So what inspired the change? An anonymous comment on a post I wrote in December, In Debt& On A Christmas Budget: “I think the best time to set-up a budget for Christmas is on January 2nd and start saving right away,” somebody wrote. “Just going by your numbers, it would be easier to put aside $150/month starting in January than trying to scrounge $1600 at the beginning of December (or, heaven forbid, put it on a credit card). If you have some money aside, you can track your recipients’ wants/desires throughout the year and pick up gifts when they go on sale.” In my response to this wise person, I committed to buying at least a few gifts on sale early in the year.
And I’ve done it. I drove DD3 and her friend to the mall, arranged a time and place to meet two hours later, and started on my mission. Clothing is a popular item on my daughters’ Christmas wish lists, so I was in a good place to make it all happen. Despite the snow storm, I knew that winter clothing would be on sale. There’s a rumour spreading around here that spring is going to happen soon, and although it’s completely unsubstantiated, every storefront window featured breezy spring attire. People who arrange the layout of merchandise in stores have me figured out. They put the most expensive items on display at the entrance, leaving plenty of space for customers to stand there mesmerized. Items on sale are crowded into some back corner in an untended sloppiness devoid of appeal. And who wants to look at winter clothing at this point anyway?
I started with a store that both DD1 and DD2 really like, only to find out that their sale had just ended. There wouldn’t be another one until June. No problem. I’d be back in three months’ time. So I went to DD3’s favourite store – a calculated risk since I might actually bump into her there. “Do you have anything on sale?” I asked the friendly clerk. “Yes,” she said, “just along the back wall and up the side a bit.” I looked. “Right under the big yellow signs that say ‘SALE’?” I smiled. She nodded graciously, and off I went. True to form, the sales racks held a mish-mash of items, but I worked my way through them, sought advice, and came up with four items to put under the tree for DD3. If I had made the purchase in December, I would have spent $127. Buying the clothing on sale in March, my bill came out to $51.
My job now will be to keep track. The Christmas budget we put together in December designated $300 in gifts for each of our children, and the way I see it, we’ve bought $127 of that total for DD3 already. My sister told me a cautionary tale of her own “smart Christmas shopping”. Not only does she buy gifts throughout the year; she also wraps them well in advance. Two years ago, her young adult son had plans to go north to find work, and in the months leading up to Christmas that year, my sister’s maternal worry worked fiercely upon her. On the morning of December 25th, my nephew opened up eight pairs of mittens. The first two or three were taken in stride, but by the time he got to pair number five, all he could say was, “Mom . . . It’s another pair of mitts.” Numbers six, seven, and eight brought on great laughter – always a good thing at Christmas. My sister hadn’t kept track, and since she had wrapped each pair after purchasing, she was as surprised as everyone else at all the mittens under the tree. Subconscious forces had turned her into a magnet for sales of outdoor winter clothing, and she had bought and spent far too much. But her son is now gainfully employed in the far north. And his hands are warm.
I felt remarkably clever after my March Christmas shopping. The snow storm eventually stopped Wednesday night, and Thursday morning, still feeling high on an unaccustomed sense of competence, I woke up early with DH to shovel the driveway. Winter always looks best after a fresh snowfall under a bright sun, and there wasn’t a cloud in the sky. It was beautiful. Just like Christmas.
DH = Dear Husband
Eighteen-Year-Old Sues Parents
In case you haven’t already heard about it, Rachel Canning, an eighteen-year-old from New Jersey, is suing her mother and father for living expenses and college fees. She left home because she didn’t want to live by the rules set by her parents after she had skipped school too many times. Canning lost her car privileges. (Her parents had paid for the car.) She had to abide by a curfew. She was not to see her boyfriend (apparently a bad influence). And she was not to skip school. Canning is now living with a friend, and the parents of this friend are footing the bill for her legal expenses.
Dave Ramsey: Our Debt-Reduction Guru
It’s a bizarre story – extreme in exposing the entitlement of youth in our society – and it has drawn diatribes of outrage from far and wide. Dave Ramsey has offered one such rant. Ramsey is our debt-reduction guru. It was only after reading his book The Total Money Makeover that DH and I got onto the same page financially and started to attack our debt. In twenty-one months, we’ve paid off over $70,000 of a $257,000 grand total, and we acknowledge Ramsey as the inspiration behind our progress.
There was a time when I would have dismissed him. A quintessential conservative from the American south, Ramsey’s wry, say-it-like-it-is style, his opinionated confidence, and his defiant disregard for political correctness would have made me disagree with him before even knowing what he had to say. Functioning in my prejudice, I would have written him off as a “right wing redneck”. I’m older and wiser now, and very glad that I paid attention to Ramsey’s message about debt.
Confessions of a “Wus” Parent
But how about his message regarding parenting? Ramsey speaks with utter contempt about “wus” parents who allow their children to take over. He expresses disgust over a society that has become so “kid-centric” that we’ve abdicated our adult authority and responsibility. Essentially I agree with him, so why did I feel sheepish after I had listened to him? Perhaps it was the shock-value of his language. Or his unequivocal outrage. More likely, it was the realization that in practice, I fall short in the business of asserting strong parental leadership.
Let me insert here – not a defence – but an understanding of parents who have gone too far in the trend of enabling their children. I can identify at least three influences that have made me “soft”:
- Some people are wired to confront and take charge, but some of us are genetically peace-loving. It is in our DNA to accommodate others and to avoid conflict.
- As the youngest of five children, I learned to fall in line with the agenda of my older siblings. That strategy worked for me as a child, and it became my default modus operendi.
- In the ‘80s, a prominent brand of parenting literature was all about removing constraints and giving freedom to children. They were not to be stifled, and the concept of asserting boundaries was overshadowed by the importance of fostering “self-esteem”. I entered young adulthood in the ‘80s, and I adopted this philosophy of parenting.
Peace-loving, accommodating, accepting . . . these are not bad qualities. In measured doses and in the right situations, they can be fabulous. But like all characteristics, they have their negative manifestations. I know that they have at times combined to make me, as a parent, wishy-washy in making decisions, often compromising too much, and uncertain in establishing parameters. DH does not share these traits with me, and it’s been a chronic source of parenting conflict for us. I’m willing to bet that there are other moms and dads out there who can relate to this.
I told DH about Ramsey’s rant, and he was keen to listen to it. DH gets a real kick out of people who are characters, and I watched him light up as the segment started. Chuckling at the language and the in-your-face absence of political correctness, DH had a few cathartic moments listening to Ramsey. “Amen!” he said at least three times throughout the eight-minute clip. “Yes!” “Dave is the man!”
Debt and Backbone
And how is this all connected to debt? One of the biggest difficulties people face as they try to reduce their debt is the need to say “No” to their children on occasion and to make them accountable. “No, I won’t pay for that concert ticket.” “No, I won’t give you money to see a movie with your friends just because you’ve already spent all of your allowance.” “If you want a cell phone, you’ll have to get a job so that you can pay for it.” The backlash can be intense, as Rachel Canning’s lawsuit shows. But we do our children a disservice every time we cave in.
Ramsey, in his book The Total Money Makeover, writes with understanding about bad money management. As a young man, he had to file for bankruptcy. But humbled, and with the desire to make things better, he studied, sought advice, confronted unhealthy attitudes, adopted new habits – and changed. In his rant about “wus” parents, however, he speaks with no understanding of weak parental authority. He has no experience in this area. But I do. And I hereby declare that we too can humbly acknowledge our need to step up; we too can seek advice, get clarity on boundaries, confront unhealthy patterns, develop a backbone in ourselves, and foster resilience in our children. We too can change. There is hope for “wus” parents just as there is hope for a bankrupt debtor.
FFF = Financially Free Friend
I can almost set my watch by it – the sense of depletion and resignation that settles in at this time of year. Although March has arrived, it has ushered in no signs of spring. The world is in deep freeze, and all the charms of life with it. “I want to open a coffee shop,” a colleague said to me yesterday. People’s fantasies of escape become more powerful as the winter blues take hold. You wouldn’t believe how lovely a trip south seems to me now!
Financial Freedom: The Pinnacle Point
I know someone who has the freedom to take a trip in any direction she chooses at any season. She and her husband have been living past what Dave Ramsey calls “the Pinnacle Point” for several years now. “When your money makes more than you do, you are officially wealthy,” says Ramsey in The Total Money Makeover. “When you can comfortably live on your investment income, you are financially secure . . . You have reached the Pinnacle Point when you can live off 8 percent of your nest egg” (Ramsey, p. 212).
My financially free friend (I’ll call her FFF), is discreet about her lifestyle. Recently, while staying in Hawaii, she sent an e-mail with a photo of the beach. Her words had an undercurrent of apology, the message essentially being, “We’re really having a great time, and I’d like to share that fact with you through some pictures, but I’m worried I’ll offend you by doing so. Is this OK?” I answered with a definitive, “Send as many photos as you like! Soak in every minute!” For many years, she and her husband have not worked, and travel has been a regular feature for them. Three weeks in Mexico. Five months in Spain. Week-ends in different North American cities to watch tennis matches . . .
Life on the home front for FFF is likewise desirable. She and her husband live in a house that is beautiful, but not showy. They stay fit with cycling, tennis, yoga, and hiking. They read. They enjoy the company of different groups of friends and family. FFF has volunteered in the community, and her children, now young adults who have flown the nest, often visit with friends in tow. These are things that many of us do before we reach the Pinnacle Point, but I suspect I’m not alone in finding I have to squeeze them in. Grab twenty minutes at the gym between work and making supper. Read three pages before dropping off to sleep at night. Scramble to clean the house and cook a meal before the guests arrive. Financial freedom offers a buffer of time to ease the pace of life.
It isn’t all roses for FFF. She has a significant health challenge to deal with. But even in times of difficulty, financial freedom is a real bonus. FFF has the resources and time to pursue different treatments, to seek out specialists, and to rest. Shocks hit us all, rich or poor, at one time or another. But there is shock absorption at the Pinnacle Point, and it offers at least some relief.
I was surprised by a recent e-mail from FFF. Her husband has taken on part ownership of a local bicycle shop, and she has enrolled in an online course to become qualified to start a new career in translating. These job choices are not in line with the respective careers that each had before. “That’s called self-actualization,” said a colleague at work when I told him about it.
When I think of financial freedom now, entrenched as I am in snow, ice, the winter blues, and mild cabin fever, visions of escape come to mind: sunshine, travel, restaurants . . . But it’s so much better than that. Financial freedom, as I see it reflected in the lives of FFF and her husband, offers time for family, friends, and community. Liberty to pursue interests. Support to ease tough times. Opportunities to develop skills and to strike out in exciting new directions.
That’s a vision worth attaining. And I believe it’s within our reach, as surely as I believe the winter will pass.
I’ve had a pinched tendon in my right shoulder for about five years now, and while it doesn’t bother me too much on a day-to-day basis, it has prevented me from swimming. For a life-long camper and a former competitive swimmer, it’s not an insignificant loss. My physiotherapist sometimes uses acupuncture, and one day, when she was addressing my shoulder’s limited range of motion, she placed a needle in my shin. “Try again,” she said. To my amazement, it worked.
Most of us, when we experience a physical ailment, focus on the point of pain. But our bodies are so interconnected that treating an ankle can ease hip pain; treating the neck can solve back problems; and treating a shin can increase a shoulder’s range of motion. In the end, the biggest problem with my shoulder is poor posture. So if I want to be able to swim again, I have to work on standing up straight. Another interconnection.
Debt and de-cluttering
In our efforts to reduce our debt, DH and I have recently taken on the task of de-cluttering our home. We take on a single cupboard or drawer each week-end, and so far, we haven’t made it out of the kitchen. “What does clutter have to do with debt?” you might ask. There’s no simple answer to that question, but I’m making some discoveries as we sift through our excess stuff.
- We had 3 boxes of pancake mix. We only buy pancake mix when we go camping, so that means for the past three summers, I’ve purchased it when I didn’t need to. Why? I couldn’t even see the other boxes in our over-stuffed pantry.
- We had 4 boxes of Graham Cracker crumbs. I only buy Graham Cracker crumbs in December for Christmas baking. Same problem. I kept buying the boxes each December because I didn’t see the ones we already had.
- We have two bottles of Worchester sauce – both nearly full.
- We have more salt and pepper shakers than anybody needs.
- For some of our spices, we had a bottle full AND a box full AND a bag full.
- Packages of aging bread-making ingredients were on every shelf. DH used to make bread, but he hasn’t for years.
- We had bags of dried beans, lentils, and quinoa that I’d barely opened. Every now and then I get on a healthy diet kick and decide to eat more beans and less meat. Apparently it never lasts. (Note to self: Get ready-to-eat canned beans if this inclination ever strikes again.)
- We have some items – like containers, salt & pepper shakers, watering tubes for plants – in perfect condition, but we just don’t use them. “Throw them out,” DH said. I’ve put them aside for a garage sale.
So what have we learned? And how does it apply to debt?
- Where there’s chaos, it’s hard to discern the details, and poor choices are made. I bought pancake mix, Graham Cracker crumbs, Worchester sauce, and spices that I didn’t need simply because I couldn’t see that we already had them. Our pantry and cupboard are now so neat and organized that we can see everything clearly. Similarly, when our finances are in chaos, we don’t know what we have or what we owe, so we spend on the premise of uncertain information, and we spend too much. To the extent that we are current with our finances – everything is out in the open and clear – we make informed decisions about spending. And not spending.
- If we’re not real about what we can take on, we accumulate things we don’t use. My dad used to make bread, and I love the idea of DH making bread, but he just hasn’t had time to do so since he started his business. So we’ve thrown out all those old ingredients. And I really would like to eat more beans, lentils, and quinoa, but until we discover easy recipes that we really like, I won’t buy bags of the stuff on inspiration. Similarly, we have to get real about our spending priorities. I would love to fly south right about now, for instance – as many of my friends are doing – but we’ve taken on debt-reduction. And we can’t have it both ways.
Eighth Slice out of Debt #3
February is typically a slower month for DH’s business. So I find it encouraging that he’s putting $3,000 against the business debt this month. Debt #3 was $80,800 when we started our journey out of debt, and now it’s down to $45,300. Such a long way to go, but I think we’re on to something. There are more cupboards and drawers to clean out in our house. And the basement. And the garage. We’ll keep tossing and re-organizing and setting things aside to sell. And hopefully our de-cluttered home will be reflected in de-cluttered finances, and our debt will go down. It’s a reasonable hope I think. A needle in my shin increased my shoulder’s range of motion, and good posture will let me swim. So why shouldn’t housecleaning help us get out of debt?
DH = Dear Husband
Personal Finance: A Taboo Topic
In the normal course of events, money-savvy is not something that people disclose. Personal finance is considered personalin our society, and very rarely does it come up in conversation. For some, it’s a taboo subject – very bad form to mention. Too often, it’s only when tough times hit that a person’s financial wisdom becomes apparent.
Loss of Income
I was speaking with a woman after church one Sunday a couple of months ago, and she told me that her husband had recently lost his job. Fortunately, he had secured a position with another company, but his pay would be significantly lower. A home-schooling, stay-at-home mother of a very large family, she was remarkably calm as she related this change in situation. “Are you going to be OK?” I asked. “You’ll be able to manage the mortgage and bills?” She looked around to make sure nobody was in ear shot. “We paid off our mortgage four years ago,” she whispered, as though confiding a dark secret. The sudden loss of income was not going to be an issue for this big family. Had they been carrying the average household debt, the job loss and lower pay would have been extremely stressful. Because they had no debt and knew how to live simply, they were able to absorb the changes without worry.
Although statistics indicate that married couples have only about a 50% chance of staying together, I’m always shocked when I learn of a marital break-up. When one seemingly rock-solid couple I knew separated a few years ago, I was more than shocked. I was deeply worried. The four children were still young, and the woman was a stay-at-home mom. But devastating as the break up was, it wasn’t followed by the usual disruptions. The family home was not sold. The woman did not seek employment or daycare provision. She continued to be a stay-at-home mom. Now navigating the challenges of raising four teen-agers, she is able to devote all of her energies to the monumental task at hand. Too many single moms are spread impossibly thin and are depleted by overwhelming financial anxiety. But this single mom isn’t. Debt-free and cushioned by years of frugal living and disciplined saving, she has been able to weather a terribly difficult time.
I know two different men who lost their wives far too early to cancer, and then lost their own incomes – one due to downsizing, and the other because of a concussion that made him unable to do his job. It’s always difficult to approach people in grief. What can be said? Especially when tragedy has been followed by more misfortune? In both men, I have been surprised to see a remarkable peace. Each is grateful for opportunities to speak about the love of his life. Each devotes himself to his teen and young adult children and to hobbies and interests that seem to find their way to people who aren’t spending their hours in an office. Each was debt-free long before tragedy struck, and for neither is grief being compounded by financial stress.
Time to Open up?
Every single one of these financially wise people I know would say that money is not everything. Not even close. But they are shining examples of what good money management can do for us when we encounter hard times. And we will encounter hard times. Each one of us. It’s a given. When DH went through six years of under-employment, we were debt-ridden, and there were times of such stress and unhappiness that I didn’t know if we’d last. The alternative is so much better: no debts; money saved for a rainy day; ready to weather the storm. Such commonplace wisdom. So rarely practiced. And so rarely discussed.
Have you seen evidence of someone’s financial wisdom in hard times? Do you think that personal finance should remain a “personal” subject? Or should we open up about it? I’d love to know your thoughts on this topic.