Friday, March 7, 2014
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Steve Kautz teaches math and personal finance at Waynflete School in Portland, where he is also advisor to the Finance Club, the LifeSmarts Team and the JA Titan Challenge Team. He serves on the board for Maine Jump$tart and was named Jump$tart Maine’s Financial Educator of the Year for 2012.
From 1995-98 Steve served as a United States Peace Corps Volunteer in the Czech Republic where he helped his Czech counterparts learn to adapt to life in a market-based economy. There he was a small business advisor with a local chamber of commerce and taught English, marketing and management at the high school and college levels.
Before the Peace Corps Steve worked in the business world for 10 years in the areas of retail, accounting, insurance, marketing, and management.
Contact Steve at email@example.com.
All that talk last week about coffee made me think about, well, coffee, so I ran out this weekend and did my part for the economic recovery by blowing a few bucks on a mocha. But it also got me thinking about another aspect of budgeting. That is, the importance of looking at expenses on an annual basis rather than just monthly. So for my colleague who mentioned her gasoline budget, this one's for you.
If Only There Were Fewer Months in a Year
One of the biggest personal finance traps in America is the "how much is it per month?" phenomena. We buy a lot of stuff based on that question. The obvious one is car payments, but there are many items in our budget that we could, and often should, be analyzing on an annual basis (or, in the case of a car, the total cost) before we decide whether we can afford them. Of course, businesses know this and appeal to our collective soft spot for monthly payments. Listen to the big, LOUD, game-show-host voice:
“Buy now and pay only $99/month, that's just $99/month with no money down! And we'll throw in a 27” flat screen TV for the first 100 customers who are gullible enough to think we'd actually give something away for free!”
I love coffee. Portland is a great place to be a coffee lover. We enjoy an incredible mix of strong franchises with cheap, weak coffee, local businesses with strong, expensive coffee, and everything in between. There are coffee shops with bagels, and bagel shops with coffee. You can even find a Euro-coffee to accompany a sweet gelato, or a coffee infused stout. All yummy.
But how does this addiction fit into or affect our finances? Over the years I have swung from spending way too much in the form of $4 lattes all the way to getting by with the cheap stuff (from a supermarket can) "brewed" in an $11 plastic Mr. Coffee. Yucky.
Some well-known financial gurus talk about the coffee habit as if it will be THE reason that we are still working at age 71. While others suggest that we shouldn't sweat the small stuff, so go out and enjoy that frothy espresso. In fact, make it a double.
Counting the Beans
Writing this blog and getting feedback from readers has triggered an avalanche of ideas to discuss in this space, and I thought today would be a good day to share just some of what's on my mind. This may look more like economics than personal finance. Well, all I can say is, love and marriage.
Are We Watching a Movie Today?
As a teacher there are some days when you plan something which is outside the typical class format. When you tell the students, "OK, today we are going to do something different," they respond immediately, in unison, by saying, "Are we watching a movie today? Oh yeah! Movie Day!" Then I remind them that there aren't too many math movies, and that my copy of The Story of 1 is completely worn out.
So, now that I am telling you "we are going to do something different today", don't break out the popcorn just yet.
During my last entry I mentioned the idea of choosing how we live (from a financial point of view) in our system. In the American version of capitalism, personal finance isn't all about managing your money so that you squeeze every possible dollar out of every situation. It's also about keeping your sanity and living without always thinking about money. When I was writing about staying away from department store credit cards, that was mostly about money. Perhaps a bigger idea is that we shouldn't necessarily try to track down every “bargain” that comes our way. There are opportunity costs out there for every decision. Some are obvious and some are sneaky little fellas. There is no one definition of financial success, or financial peace, or whatever you want to call it. On one extreme it may mean being worth a million dollars, and on the other it may mean just having a place to live and food to eat. Most of us are somewhere in the middle, and while I'll admit having more money today would be nice, I'll also say that for me, part of becoming financially literate is learning what it means to “not worry about money.”
Which brings me to El Tema del Dia (hope you don't mind if I work on my Spanish) – customer loyalty cards. They can be a huge waste of your time, and although you might save a buck or two, the opportunity costs include, at the least, a little bit of your sanity and/or your financial peace, and at the most they can distract us from real issues ** with our finances.
I'm not really talking about the local sandwich shop you frequent. Their buy 9, get the 10th free can be a nice reward for being a regular customer. I'm more focused on the overwhelming slew of big business loyalty cards that are out there. Drugstores, supermarkets, bookstores, gas stations, clothing stores...AHHHH! It seems that every time I buy something I am asked if I have a loyalty card. Where would you put all of these things!? So I ask, “what do I need to do? What do I get?” Oh, just provide an address, or email, and a phone number and you can accumulate points which can add up to … blah, blah, blah...snooze.
I'm not really sure where to go with this. A recent shopping experience inspired me to talk about this modern consumer classic; “Would you like to save 20% on your bill today by signing up for a Kohl's card?” But as I outlined my thoughts and did a little digging, I got off onto a few tangents. It's easy to make the case that using department store cards is generally a bad deal for your credit and your finances. But there is more to it than money. It's also about how you choose to live in our economic system. AH HA! An idea for a future blog entry (the there is more to it than money thing – I'm already looking forward to writing that one).
Get Back on Track, Kautz
Ok, Kohl's. As I've said before, I have no ax to grind with credit card companies, or with companies who are doing what they are supposed to do for their owners/stockholders – maximize profits. It's up to us to do what we are supposed to do to take care of our own bottom lines. So, Kohl's, I'm not here to insult you, just your credit card offer.