Monday, November 3, 2008

Plastic Attack

Principle #2: Use Cash

I know what you're saying: cash is old-fashioned. You get points and rewards and all kinds of cool stuff when you use your credit cards. Someone might even steal your cash. Television commericials actually try to convince you that you can hold up entire lines of people when you don't use your cool, modern, swipeable plastic cards.

But what does it really cost you to use plastic?

If you're like me, you used your credit cards responsibly for awhile. You paid off the balance in full and on time. This, I eventually realized, made me a lousy customer in the eyes of my creditors. They kept extending my credit lines. It didn't matter that my job situation hadn't changed--I was still making the same $20,000 a year as always. But suddenly it wasn't $2,000 of credit I had, it was $5,000. Then $10,000. I hadn't even asked for it. (This was in the early 1990s. Now they probably wouldn't even care whether I had a job or not.)

Yay, me! So much credit! And then...something happened. I started using that credit--more than I could pay back in a month. Now I was a good customer for those credit card companies, because suddenly those low introductory rates vanished, my interest was high, and I could barely pay the minimum I owed each month. Now they were making some money on me.

The more I owed, the more I despaired. And the more I spent. Once I owed more on my cards than I could imagine paying back, it didn't matter to me anymore how much I spent. I had lost control, seemingly without even realizing it. So I maxed out one card. And then another. Eventually, I owed more than I made in a year. Quickly it became an absolute financial and emotional disaster.

I didn't stop using my credit cards by choice. In 1996 I was forced (as you might imagine) to stop using credit altogether. (In another post I'll talk about what I had to do about all the debt I was in.) And I suddenly found myself terrified to go out of the house without the plastic. I mean--what if there was an emergency?

In thirteen years, I can assure you that I have never had an emergency that required a credit card. Never. Not in a car, not on public transportation, not in the city, not in the country. Not while driving or walking or travelling at home or abroad. Not once.

I'm also more cautious with cash than with credit (or even my debit) cards. Somehow, I think more carefully before spending actual dollars than I ever did swiping that card and just signing on the dotted line.

So what to do about the Plastic Attack?

1. Leave the plastic at home. ALL of it--every single credit card, and your debit cards, too.

2. Use cash. Only cash, every time, all the time. You'll never spend more than you have, and you'll more carefully consider how you spend it.

3. Make a list, and take only the cash you need for what's on the list for your daily shopping. If you worry about carrying too much cash on you, this is also the best strategy.

4. "What if there's an emergency?" In my personal experience, the "possible emergency" is no excuse to carry plastic. (Be honest with yourself. What emergency are you worried about--an amazing bargain you can't resist?) In this age of cell phones, this seems an even flimsier argument. But if you're really panic-stricken, put an envelope in your car with just enough money (or a pre-paid debit card) for a tow in it (say, $100) and leave it there. Now forget about it. It is for Emergencies Only.

5. Consider cutting up your credit cards. Yes, really. And don't forget to delete your info from all the places on the internet that also have your credit card information--Amazon, eBay, that amazing yarn shop you like to order from--to name a possible few. You don't get to keep using the card number after you cut up the physical card!

As ozkatt mentioned on October 25, a good financial advisor suggested cutting up her credit cards--and she did, even though it was painful. This makes sound financial sense. If you don't have it, don't spend it--which is really the whole point of this blog. And one of the best ways to do this is to leave the plastic behind and use cold, hard cash.

Sunday, October 26, 2008

Therapy for Retail Therapy

Knowing Your Poison, Part 2

Not everyone has an addictive personality. Sometimes it’s just a bit of a weakness for, say, shoes, handbags, or bargain-hunting. But whatever it is, it’s healthy to be aware of it.

If, however, you do find you’re spending in an addictive way in an unhealthy area and you want to look into getting some help, I myself found one particular 12-step program to be invaluable--and free! Here’s a list of 12-step groups, and there are said to be over 100 different ones now.

There’s even a Debtor’s Anonymous which helped friends of mine tremendously. I feel like I’d be remiss not to mention these programs, because I found support, solace, and community there. You probably don’t need one, but if you ever do, just know that they are there. Look them up online or in your phone book and reach out.

A Bit of Therapy for Retail Therapy

Now, on to Retail Therapy, which can feel quite therapeutic at the time but isn’t really therapy, and can ultimately cost way more than therapy.

I found that even though I never had much disposable income I did three rather compulsive things when shopping.

1. One-for-you, two-for-me. If I was buying gifts, for Christmas or whatever, and I was in a store spending money, I’d have my credit card out and I’d buy one for you and two (or three...) for me. It was as if once I got started, I couldn’t stop.

2. The bargain-binge. I’d buy stuff just because it was cheap. Even if it didn’t fit particularly well or I didn’t like the colour—hey, it was a bargain.

3. The grocery-grab-all. I couldn’t buy only one of something, especially if it was on sale. If one box of Cheerios was 10 cents off, I’d snatch up two or three of them, even if I couldn’t possibly use them all before the expiration dates.

Here are a few remedies I use now for each of these:

1. One-for-you. When buying gifts, make a list of exactly what you’re going to look for and note what you’ll spend for each item. Leave the credit (and debit) cards at home and take only the amount of cash you need. If you can afford it, allow yourself a few extra dollars to buy yourself something, or, move on to number two…

2. The tuck-away. It never occurred to me that if I’d avoided doing the bargain-binge a few times, I actually could’ve saved up to buy myself something nice, something I actually wanted or needed. Take an envelope and put $5 or $10 in it each week. Save that money for a few months and then buy yourself a quality item you really do want.

3. Get a plan. Make a grocery list and stick to it. Don’t impulse buy and don’t shop when you’re hungry. Again, leave your credit and debit cards at home and take only the cash you need to do your shopping. If you reach for more than one of an item, evaluate to make sure you really need more than one.

Next time: Overcoming the fear of leaving the plastic behind.

Saturday, October 25, 2008

Principle #1: Know Your Poison

Know Your Poison

I have an addictive personality. When I sought help for this problem back in 1996, I was told that addiction is "a disease of more." For a lot of us, there is something that always leaves us wanting more, whether it's chocolate, alcohol, gambling, sex, playing the lotto, online gaming, pills, drugs, online chatrooms, Blythe dolls, driving too fast, shoes, Häagen-Dazs or plain old shopping.

You know the thing -- you get excited thinking about doing the thing, and during the preparation for the thing. It gets your endorphins going a bit, and doing the thing itself helps you let go of the worries, concerns, and anxieties of your day-to-day life. You lose yourself in it for awhile--just a little while.

Whether the thing is a healthy escape (or at least not terribly harmful) is usually apparent afterward, when it's possible for guilt, shame and remorse to set in.

Not sure? Ask yourself these questions (yes, they are hard!) and answer honestly.

1. Does the thing impact your mental, emotional, physical, or financial health in negative ways?
3. Do you ever hide the extent of this activity from other people?
2. Is it making your life unmanageable?

I anticipate that as economic times get harder, more and more of us are going to turn to our activities of choice for comfort, to dull the pain of economic reality and the hard times we're facing. Of course, this will likely make our own economic realities harder.

I know, because I've done it. Back in 1995 I had buried myself in a 'drug of choice' hole that was so deep -- financially, emotionally, mentally, and physically -- that it was unimaginable that I'd ever be able to crawl (much less climb) out of it.

Hence we begin the journey of this blog. Most importantly, today:
1. I keep "the disease of more" at bay,
2. I live within my means, and
3. I am free of the fear of financial insecurity.

Next I'll begin sharing with you the concrete things I've done to achieve those three vital accomplishments.

Don't worry, this isn't a blog just for addicts, alcoholics, shopoholics, or any other kind of -ics! It's just good to know what your weakness(es) are when you begin to look at your spending patterns--if you have any weaknesses, and I'm certainly not suggesting that all of us do. But remember that when it comes to money, it's not just what you spend your money on, but when and how you spend, because many of us can be emotionally-driven spenders, at times, without even realizing it. Much more on this to come!

Next time: Therapy for retail therapy.

Friday, October 24, 2008

Welcome to the Money Shot

Many of you know me as Obsidian Kitten, and I now welcome you to this side project, which I have decided to call The Money Shot. With the rollercoastering economy (what, you hadn't noticed?) it occurs to me to share some of my experiences (for better and for worse) garnered during twenty years of living on a financial shoestring.

Look. I graduated magna cum laude from Yale, so you'd think I'd have top-notch earning potential. What I seem to have instead is top-notch resourcefulness potential. (Here's a list of jobs I've had, just to dazzle you with the bizarre variety of ways I've earned money.)

The past two decades have involved a great deal of trial and error (probably more of the latter) but a few lessons learned -- because somehow I've managed to survive the NYC economy with jobs primarily in the non-profit sector, earning on average (I'd guess) about $20,000/year
(15 870 Euros). Currently that's an unbelievable margin of nearly 150% over the 2008 US poverty threshold. (As if 2 people could live on $14,ooo a year.)

Anyway, I will discuss topics such as:
~ the liklihood of living in a box over a steam grate
~ where to get totally free prescriptions
~ how I learned to curb my shopping compulsions ("but it's on sale!" and "surely three are better than one!")
~ what it was like to apply for food stamps
~ where I've found delectable and occassionally designer garb super-cheap
~ ways I save cash without exerting much energy (I'm lazy, so no coupon -clipping here)
~ and much, much more.

So please tune in again as we begin our journey with a crash course in how I landed in NYC making $225/week at a major Manhattan Museum--hey, I work on Madison Avenue, y'all!--and trying to pay rent on a nice Hoboken apartment. (Well, it was a very nice apartment, just not on the nice side of Hoboken...)