Catch up post and a bit more talk about the psychology of money

[jamethiel]

Hello everyone! How did your weeks go? Did you succeed in not eating out?

I didn't. I got sick (again. Or still. Stupid ears) and that led to me just being too damn tired to make the right choices. I did have dinner at home every night but that was mostly cooked for me and sometimes consisted of canned soup.

Lunch was where I really fell over. I am craving take-away food like there's no tomorrow. High fat, high salt, high in chilli. I bought lunch probably six times over the past two weeks.

But, it happens. With the ferocity I was craving stuff, I decided to go with it. It's not the best decision in the world, but it's not the worst either. Stuff happens and you deal the best you can.

I really debated whether to make this a separate post or not, but I guess I'll stick it under a cut tag at the end so as not to spam your reading lists.

I am two months away from getting out of credit card debt.

I also have enough RIGHT NOW to buy a yearly public transport ticket.

I've actually had to weigh up whether it is more advantageous financially and psychologically. On one hand, the money that is for the ticket could completely wipe out my credit card debt. That would certainly free up a significant monthly expense. Also, I am so committed to getting this debt gone it would be a huge psychological relief. However, doing that would only save me... well. By now, about $5 in interest charges, if the debt goes by the time I expect it to.

Buying the yearly ticket will save me approximately $8 a month. So there's a point right there in the financial column. It will also free up a portion of my monthly expenses--not as much as the credit card, as I have to plan ahead and save for next year's monthly ticket. But it would give me a little bit of wiggle room. It's an expense that I have to pay anyway--I can just choose to pay more by the month, or all of it upfront and save. I travel to and from work every day and into the city on weekends by public transport and this is not going to change in the next year.

I've wanted a yearly ticket for ages, but saving up little bit by little bit, things happen and my savings get chipped away. This month I am due to have three paychecks, and for the first time I have the money right there.

If I use the money to wipe out my debt, it will take me three months to save it up again, using the extra funds saved up by getting rid of the credit card payment. That's assuming nothing else happens, which it always does.

I may have talked about this before, but it's a direct application of Samuel Vimes' Boots Theory of Economic injustice, which runs as follows:

At the time of Men at Arms, Samuel Vimes earnt thirty-eight dollars a month as a Captain of the Watch, plus allowances. A really good pair of leather boots, the sort that would last years and years, cost fifty dollars. This was beyond his pocket and the most he, Vimes, could hope for was an affordable pair of boots costing ten dollars, which might with luck last a year or so before he, Vimes, would need to resort to makeshift cardboard insoles so as to prolong the moment of shelling out another ten dollars.

Therefore over a period of ten years, he, Vimes, might have paid out a hundred dollars on boots, twice as much as the man who could afford fifty dollars up front ten years before. And he would still have wet feet.

Without any especial rancour, Vimes stretched this theory to explain why Sybil Ramkin lived twice as comfortably as he did by spending about half as much every month.

So. When your finances are stretched and you DON'T have enough money to take advantage of bulk deals, you spend less in the short term but more in the longterm. And saving up money for a long-term goal is HARD when finances are tight and when you have your rat brain going "But it's only one DVD!"

I've had to put aside my emotional commitment to paying off my credit card debt and say "Paying off my credit card now saves me $5 over the next two months. Buying a yearly ticket saves me $95.80 (compared to the cost of 12 monthly tickets) over the next year (which I had in my budget anyway) not to mention if I put the money aside and it stays in an interest bearing account. Which works out as an extra $152.10, at a lower interest than I'm currently getting. So that's an overall gain of $247.90"

So, I went with the option that made financial sense over the one that is giving me more emotional satisfaction. And I'm proud of myself for doing so. Of course, both options here are good, so it was really a no lose option.

What are the areas where your emotional involvements take over past financial gain?

Comments

[beatrice_otter]

I am, by nature, a very frugal person. I don't like spending money unless I really have to and find it relatively easy to save even on a small income for that reason, because I can tell myself I'm on a small income now, and once I am settled (i.e. out of grad school with an actual job paying back my loans, instead of taking out more loans each semester), I will have the money for the little indulgences, and I'd rather go into as little debt as I can now.

Problems is ... I've been living like this for so long, and it's tiring. I was in college, and then working for two years to save up money for grad school, and now I've been in grad school for four years and would be graduating this year, but due to problems during my third-year internship, I'm having to do internship over again, which pushes back graduation by a year and a half. And I just want to be able to buy the things I want without feeling guilty. And I'm starting to splurge on things that I never would have before, just because I'm reaching the point that I don't care how much debt I go into. And that's a dangerous thing.

[jamethiel]

Oh, my sympathies. I'm having to retrain myself into being a frugal person.

It IS tiring. Would setting aside a tiny little amount for rewards that don't cost much help? Something like bubblebath, or giving yourself rewards that don't cost anything? Do you think that something with a meditation component would help?

I really hope you feel better about where you are soon. Please let the comm know if we can do anything to help! I'm thinking of doing a "Weekly celebration post". It may not help, but it might!

[beatrice_otter]

Actually, mostly what it is now is that my car was in a hit and run--flat tire, so my car was sitting by the side of the road, the other car didn't see it until almost too late, swerved out around it, fishtailed, hit it, kept going. Since I don't have the other guy's info, that's a $250 deductible. I have a very very very part time job that just started that's going to tide me over until my internship starts (which will pay a comfortable stipend, and allow me some luxuries), and the deductible is going to take up the fun stuff out of that check. Blergh.

My parents taught me to save early. I got a savings account at age five, and started doing small chores for a 'paycheck,' which increased as I got older. 10% of it went for offering at church, 10% went for whatever I wanted, and the rest went in the bank. I could spend it, but I had to spend it on something big that I saved up for and that my parents approved. (They never turned me down, but it meant I couldn't blow the money on candy or something like that.) So, for example, when I was about twelve I went to Space Camp, paying my own way. (It was awesome.)

Alas, it is much easier to psych oneself to save for something like Space Camp than it is to save to reduce debt load.

[jamethiel]

You're really lucky. My parents thought it was gauche to talk about money and then I was in a relationship with a guy who was all "I WILL TAKE CARE OF IT" (and then turned out to be taking me for a ride) so I've had to teach myself at the age of 30. Still, making progress.

I hope things get more fun for you soon.

Space camp does sound awesome!

[holyschist]

We have not been doing so great with not eating out, although we're still doing better than we were. On the other hand, I'm done with my thesis and nearly done with associated doom, and I know from past experience that work alone does not wipe me out, so things should get better.

I am socking away as much money as I can for emergency (most likely: my computer kicking the bucket or requiring expensive repairs--although I'm hoping they're not too bad, once I am at a point where I can relinquish my computer for testing) and potentially living expenses if I don't get a job soon after my summer internship ends. If the job thing works out well, I'm going to throw most of that at my credit card debt next fall. Emotionally, I'd really like to do that now, but since my job future after August is so uncertain, it would be really stupid.

[jamethiel]

It's amazing how much easier it is to stick to a budget when you're not stressed, isn't it?
It's really hard when you're committed to wiping out debt but common sense tells you otherwise. But I'm sure you'll get there on the long run! I really hope the job thing works out for you.

[holyschist]

We have been managing to eat more leftovers (and in my case, canned soup), but I'm looking forward to cooking more. Pasta's getting a bit dull.

[red_trillium]

I haven't done well with the not eating out as much this year but I had been doing ok....for awhile. THen I fell flat a fortnight ago when I totally mis-calculated the budget. I had to take money back out of the savings to back it up, which is disappointing as that's our holiday money in a couple weeks. As a kind of punishment to myself I cleared most of my personal savings into our joint savings. It wasn't a lot but I felt bad that I'd messed up and it was my bills that contributed to it.

I had been doing pretty well before that though. I've managed to get my student loan under $10,000US. I still have awhile to go but it's down from about $22,000US. I've been paying it since about 1997 or 1998, maybe earlier?? It got tough at one point and they were threatening to send it to a collection agency. I stuck with it, put my loans together, took a few repayment holidays and now I'm over 1/2 through. It's a big overwhelming still knowing I've got so far to go but I'm chipping it away.

My credit cards? Still working on those. I did put a couple things on them this month, but have been much better than I have in the past. I am trying to pay more than the minimum on them to off set any spending but the last couple of months have been too tight & the exchange rate have made that hard. I've been working against some mental/emotional downs in Real Life so the temptation to just blow it all and go spending has been tough. I have put one piece of camera gear on it but broke the cost up so 1/2 went on the card and 1/2 is coming out of my personal savings (which clears that acct down to about $20). It's something I want to have for our trip and we won't be paid again before we go so I figured the compromise was better than sticking it all on the card.

And I admit that the mental/emotional issues of that rat brain you mentioned pushed me into the "buy it now" instead of being smart and waiting until I could pay cash for it all.

Another up side is that we had a bit in the savings towards the trip (and have cashed in some bonus bonds for the trip) so we've been able to use some of that for the things we've bought recently that we needed for the trip (quick dry towels & memory card for the cameras).

And a mixed bag, we've had some health problems so have paid for more dr visits, but fortunately those aren't too horrendous because of where we go (only about $17 a time instead of $40 or $50 like at some places). This has been more of a cost, but has cut back the non-prescription medication that was more pricey and has been replaced with mostly-less expensive prescription medication (except one type but that's still not bad as we went from $20 a pack to $5 for all but that one).

For the next month I want to see if I can keep our savings at decent level after our trip. That will be a challenge. I know much of the money in there is earmarked either for the trip or is from my wife's work to pay for her classes, but I want to see if we can keep it from being decimated by the trip.

So, while I feel it was a mixed bag I do think I've done better the last month than in past few months. I'm trying to stay in the savings mindset and while temptation is there, I am trying to avoid it. Kind of hard when you work in the central business district surrounded by cafes, a book/dvd store, a cd store, a gourmet chocolate shop, 2 camera shops and an electronics/computer store. And that's not counting all the restaurants! :)

[jamethiel]

yeah. I've spent around $70 on medication this month. Man, I HAVE to get that medication saving fund in place. Not getting sick would help, too. :S

I'm glad to hear you feel you're doing better! Let us know when you reach the next big milestone of getting your loans/debt down and we'll celebrate with you!

[red_trillium]

Medication and dr visits are one of those things that you just can't plan for and that tend to sap any budget. And you can't just ignore them.

Which I'm kind of doing with my teeth. I broke a front tooth and have decided to worry about getting it fixed after our trip. The flight & 1/2 accomodation were paid because my wife hit 30 yrs at work so we can't put it on hold (they've already paid). So after the trip I'll worry about it. Besides, I'm more than happy to put off that kind of spending right now!!!!!

[sporky_rat]

I'm trying to stay in the savings mindset and while temptation is there, I am trying to avoid it. Kind of hard when you work in the central business district surrounded by cafes, a book/dvd store, a cd store, a gourmet chocolate shop, 2 camera shops and an electronics/computer store. And that's not counting all the restaurants!

I've found the best way to avoid that kind of temptation is to not carry money, credit cards, debit cards or checkbook with me to work. If I can't access my money, I can't spend it on frivolous things. Of course, my idea of frivolous does sometimes go a little overboard. My husband has to remind me that no, a new pair of sneakers when there are holes in the soles is not a frivolous purchase.

[red_trillium]

Good idea, I should leave my credit cards at home at least, I carry them out of habit (and fear I will loose them, I"m good at putting things somewhere "safe" and loosing them). My wife and I have an agreed fortnightly 'budget' of $50 each that we can use for food, coffee or whatever spending. I found it has curbed some of our frivolous food purchases and smaller purchases. Mine sometimes goes towards bread/milk or prescriptions if the purchase is only a few dollars & I don't want to bother with the debit cards.

I usually end up running through my allotment in that time but maybe I should start setting aside $5 or $10 from my allotment in my kittybank just as an "when I'm really down and temptation is really high" fund. That way I can access it semi-quickly but not too quickly.

LOL, yeah. A new pair of shoes when you have holes in soles is not quite so frivolous! Good luck in your savings too.

[exhausted_pigeon]

That's a really good idea.