Beating Broke

Taking Financial Ownership

September 16, 2011 By Shane Ede 16 Comments

I was reading a story somewhere where a person was being interviewed about their debt. In the interview, the person was speaking about how they had this credit card debt and how they just couldn’t get out from under it because of all the interest, fees, and other ways that the credit card company throws on the heap each month. They went on to talk about how they were in fear of having their car and house repossessed because they were falling behind. With each new problem, they were quick to point out the things that were keeping them back and causing their slide into bankruptcy.

Something occurred to me, then. They were taking no ownership in their finances. No matter what the financial woe was, it was always someone elses fault. The credit card companies were tacking on interest and fees. The bank was adding late charges onto their car loan and mortgages. Not once did they take any ownership of their situation. Not once did they say, “we shouldn’t have charged so much on the credit cards”, or “we bought more house than we could afford”. The blame was always on the other guy.

If there’s one thing I’ve learned in my journey towards beating broke, it’s that it’s all my fault. I signed that credit slip. I signed that mortgage. I signed the loan papers. Yes, some of the credit card companies have interest rates and policies that border on predatory. Yes, the banks will allow you to borrow right up to a point where you’re living paycheck to paycheck. But, I signed on the dotted line. Along the way, I discovered all of that, and I took financial ownership. And, in doing so, I took control.

Through financial ownership, I have control over where my money goes. I have control over which debt gets paid off first. I have control of how tightly the purse-strings are held. And, most importantly, I have control of my financial future. A future that I plan to make as financially independent as possible. Not at the whim and mercy of any bank, but a future where I can plan to buy things, and save money towards retirement.

My journey isn’t over, but I am beating broke. I’m taking financial ownership and making my future one that is free from broke.

I want you be able to say the same thing. It’s one of my goals for this site to help you beat broke. Beating broke is the first step in your financial journey towards a life free from concerns over where next months bills are coming from. You can do it. But, you’ve got to take financial ownership. You got yourself in the situation you’re in, and only you can get yourself out. Do it today. Accept that you are the only one that can take ownership of your financial situation, and you are the only one with the power to fix it. Take that step.

photo credit: woodleywonderworks

Are You Suffering from Optimistic Financial Denial?

September 14, 2011 By MelissaB 9 Comments

Some people suffer from a certain form of optimistic financial denial. They look at part of someone else’s circumstances and use that to justify their own way of life, without considering the entire picture. Take, for example, a relative I have that I will call Stacey (not her real name). Stacey is nearing retirement, and she doesn’t have quite as much socked away for retirement as she would like because finances were very tight when she was young and she and her husband just didn’t have the extra to put away. Her husband died young, and she entered the full-time work force in her early 40s, which is when she began putting away for retirement in earnest.

Stacey isn’t one to worry. She tells herself that she should be able to get by just fine with the money she will have in retirement and uses the rationale first, that you never know how long you will live, and second, that her parents did just fine on a limited retirement. She is firm about retiring at 62 and cannot be persuaded otherwise; she is not interested in working part-time early in her retirement.

Regarding Stacey’s first point, it is true that you never know how long you will live. I have, unfortunately, known plenty of people who retired and died within a year or two. Others died before they were even able to retire. However, Stacey’s parents lived to be 88 and 90, respectively, so if she takes care of herself, there is a good chance she will live well into old age.

Second, her parents did retire on a relatively small retirement savings, but they made some serious adjustments to their lifestyle. Here are some of the smart financial moves they made to make sure their retirement nest egg stretched:

they immediately sold their paid for house, freeing themselves from the expense of upkeep, property taxes, and heating and cooling a large home
they took some of the money from the house to buy a fifth wheel trailer, and they lived there during the summer months on their children’s property
they took some of the money and bought a trailer in a retirement trailer park in Florida. They were then only responsible for monthly trailer park fees and heating and cooling
they took the rest of the money and invested it
they only went out to eat occasionally, usually when their children were visiting them in Florida
they sent each of their 38 grandchild a crisp dollar bill for their birthday and at Christmas

On the other hand, here is where Stacey is:

she still owes $70,000 on her 1,600 square foot home
she has no immediate plans to sell, which means she is paying thousands of dollars a year on property tax, maintenance, and heating and cooling costs
she goes out to eat several times a week and plans to continue doing so when she retires as that is her main way to socialize
she only has 3 grand-kids, but she spends $100 to $125 per child per year for Christmas and birthday presents
she would like to travel, including traveling internationally, when she retires

While Stacey is right that her parents did not have a large, comfortable retirement, she is only looking at part of their financial picture. Her parents were willing to make significant changes to downsize their expenses so they could live comfortably on the retirement they did have. In fact, when her last parent died at 90, there was still enough left over to give a small inheritance to each of their 9 children. To have a comfortable retirement of her own, Stacey should also downsize her lifestyle. It is the only way to make the money stretch as her parents did.

When it comes to your own retirement, or financial planning in general, it does little good to compare your finances to others. Ultimately, it can lead to a form of optimistic denial that can lead to considerable financial stress in the future.

Do you know anyone who suffers from financial optimistic denial?

photo credit: robynejay

Car Trouble Part 5: Finale

September 12, 2011 By Shane Ede 8 Comments

It’s been a couple of months since I last updated this series. You can go back and read the preceding 4 parts if you like. (part 1 | part 2 | part 3 | part 4) The basic summary is this. One of our cars blew it’s timing belt and royally messed up the inside of the engine. We decided to rebuild the engine, and amongst all that fun, we bought another car and were left with a third car that we really, really, didn’t need any longer. When I ended part 4, I enthusiastically wrote that we might soon be done with the whole fiasco. Boy was that wishful thinking. Here’s how it all wrapped up.

The folks that had looked at it and were excited about buying it couldn’t. Terrible credit would be my guess. (All the more reason to brush up on improving your credit score.) In any case, we never heard back from them. According to the research I’d done, the car was worth about $4100, and we had it listed at what we thought was a fair price of $3500. Not a premium, but what we thought was enough of a discount to make it attractive. Unfortunately, that wasn’t necessarily true.

We got plenty of calls by just parking the car in a well traffic-ed lot and even a few offers. The best of them was $2800. We just weren’t ready to let it go for that price. We owned the car, so we weren’t paying a dime to keep it, besides registration, and insurance. Registration is fixed, and the car was older. We’ve been around the insurance bit before and made sure to get a good insurance quote comparison. So, neither is very expensive. So we had the numbers on our side to hold on to it and not let it go for a ridiculous amount. The best, in a funny-ha-ha sense, offer we got was to trade the car for two snowmobiles. It probably wasn’t a terrible deal, but what am I going to do with two snowmobiles?

So, the car sat. And sat. And sat. For four months, it sat. And, to be completely honest, I was ready to get rid of it. It was just one more thing that was floating around out there that needed to be finished off. So, I expanded the net. I posted the car on a couple of free internet classifieds sites. A couple of weeks later, I got a couple of phone calls. And, some wheeling and dealing later, some folks came down and bought the car for their daughter in college.

We ended up taking $3000 for it. Much less than we would have liked, but our desire to get it off of our books overrode our desire to get that extra bit of money out of it. We could have probably held out for the larger amount and maybe gotten it if we had wanted to hold on to the car for a longer period of time. We were on the verge of a storage issue though. Whether we like it or not, it’s going to eventually snow, and then it would have to be moved from where it was parked and brought back home. Where we would have to move it as often as it snowed so that the plows could come through to plow the road. Inconvenient to say the least.

We’re glad to have it gone. We’ll use the money from it to pay off the loan we had to take to pay for the rebuilding of the engine on the other car. That’ll take care of that payment and get us back on track with our debt repayment. Even with our less than aggressive plan that we’ll be going back to, the numbers look good. We’ll be debt free with the exception of Mortgage and student loans sometime in 2013. Two years seems like a long time, but considering we started this journey over 5 years ago, it’s just a drop in the bucket.

Here’s to hoping that wraps up the car trouble for the immediate future!

photo credit: Brian Johhnson