Saturday, April 11, 2015

Variety is the Spouse of Life

When I first got married, many moons ago, my husband said something that, had I been a lot smarter, would have set off alarm bells in my head.

We had been married only a few months when we determined that both of us couldn't have pickup trucks. Since his was bigger and in much better shape than mine, we decided that I would trade mine in and get a practical 4-door car. As we were driving off the lot with it, my dear one turned to me and said, "I think we will always have a car payment".

What frightened me about this was that he said it like it was a good thing. He was smiling - actually smiling! Did he mean that being in debt is a good thing? How can that be? What kind of monster did I marry?

This left me highly confused, and it took me a long time to understand what he really meant.

See, my dear one and I came from very different backgrounds. I came from a family of educated liberals who consider thrift a virtue. My dad may pay cash for cars, but you'll never see him drive anything more luxurious than a Toyota. On the other hand, my dear one grew up very, very poor in Appalachia. Like food stamp, clothing from the church donation bin kind of poor. He managed to rise up to the middle class through a combination of the U.S. Army and the G.I. Bill, and the idea of actually buying a brand new car off the lot was, at the time, a measure of success for him. He knew how to make a great dinner for three bucks, but he didn't understand that debt is not a good thing.

I mention this because it took a very long time - about 15 years - before we got to a point where my desire to be debt free and his desire to have nice, new cars all the time found a balance. In reality, the balance is that he lets me manage the finances, and whenever we take on a debt, I pay it off immediately. I don't allow him to keep a rolling balance on a credit card and I don't tolerate store cards at all. But I know that if it were up to him, we'd be back up to our eyeballs in debt in no time flat.

Why am I going on painting my dear one in such an unflattering light? Because our marriage is a good example of how, in spite of our best intentions, having our finances combined with someone with different spending habits can lead you in to money habits that we wouldn't have if it were just us on our own.

In my case, we have been in and out of debt for most of our 20 years together, but it hasn't been disastrous debt. We've gotten underwater on credit cards a few times, made a lot of car payments, and never seem to get that damn student loan paid off, but I've seen much worse. Ever see someone married to a spouse who shops for entertainment? The wife who thinks it's funny that she has so many shoes that she hasn't worn them all, or the husband who isn't a real man if he doesn't drive a Porsche?

I'm not saying that if your soul mate doesn't have the same money values you do, you should give them a toss. If it's just an imbalance, and they're willing to work with you on it and compromise, then you can make it work. Just remember to keep paying yourself first, even if you're doing it from a joint bank account.

Thursday, April 9, 2015

The Latte Factor and how it can help you pay yourself first

If you're still reading after that last post, good for you...and thank you! I say that because a lot of people stop right there. I mean, here I am telling you that even though you finish up every month totally broke, you're supposed to take money out of your already limited bank account. How is that supposed to work?

I mean, look at my last example. By the end of the month, you have less than twenty bucks left. Where's that savings supposed to come from? It's not like extra money is going to magically appear from the ether.  So I'll tell you that my last post was the easy part. Now it gets just a little bit harder. 

Before I get into the hard part, though, I want to go back to the very beginning of this blog, where I say that I'm hoping you are someone who's pretty sure you make enough money, but there just never seems to be enough left each month. So what I want to talk about now is how you can actually make sure that putting aside a couple of hundred dollars each month won't leave you overdrawn.

My old friend David Bach has something he calls the Latte Factor. Basically, the Latte Factor means that doing without a daily latte will save you enough money to put away a tidy little nest egg.  I hesitate to use this term, since you can find me in line at Starbucks every morning myself, and I don't want to sound like I'm judging you for doing the same. I mean, we all need what we need, right? But his point isn't that you shouldn't drink lattes. His point is that most of us tend to fritter away a huge amount of money each month on very small purchases, and if we want to save money, the easiest way to do it is to identify a couple of things we spend money on not because it really makes our lives better, but because it's such a small amount of money we just don't care.

Back when I was always broke, we used to have a food truck pull up to my employer's building every morning at about 10 AM. At first, it was kind of a luxury; we could step outside and for only a couple of dollars, we could get a hot breakfast burrito or toasted bagel instead of trying to make do with whatever was in the snack machine. After a while, though, I found that I had stopped eating breakfast at home at all, knowing that I could get something during the break. A few months in, by the time the food truck rolled around, I was salivating like Pavlov's dog. At five dollars a breakfast, I was spending 25 dollars a week.

If my kitchen suddenly and tragically exploded one morning and left me with no way to pour a bowl of cereal before I left for work, then five bucks isn't much for a quick breakfast. But for a 25 year old trying to live in Silicon Valley on $24 grand a year, that tiny little amount was starting to add up. I mean, do the math: $25 a week is $100 a month, money I could be putting away. 

I'd like to say that I caught myself in time, but remember that I was even more of a dummy then than I am now. The only difference is that now I make enough money to both pick up a latte each morning and contribute to my growing nest egg.

But I hope that you'll learn from my mistake. For just one week...actually, for just one day...keep track of every dollar you spend. At the end of the day, look back and see if there's a small change or two that you can make. Maybe instead of buying breakfast, you can make it at home. Or if you get the 3 PM munchies (I sure do!) and can't help visiting the snack machine, keep a stash of snacks in your drawer, purse or backpack. Then, keep on paying yourself first.