Money Obedience

My wife recently wrote a post about budgeting money in which I played a role, too. I think I need to respond with my own post. One has got to set the record straight, right? And, what better way to do it than in a public post?

I know that you are all salivating for a public tit-for-tat between my wife and me, but I have to disappoint you. There will be no dirty laundry aired out in this post. For one, I can’t think of anything I would like to air out. Second, if there was something I could think of, I think common human decency would dictate that most private things should stay private. That’s why they are called “private” or “personal” and not “public”.

Ok, back to the topic. It is true that I am not a big impulse shopper myself. I don’t like going to the store to buy something and then to end up buying something else. I know too much about the various marketing ploys and sales techniques that store owners use, and I am highly suspicious of anything being pushed on me that I don’t really set out to buy. While I cannot avoid being a victim of shrewd advertising or clever positioning of certain goods, I try to fight these unknown yet effective sales techniques. That said, I am least successful in a good food or wine store. I just love tickling my taste buds with tasty things.

My wife wrote her post about an impulse buy of two little umbrellas for our little boys. True, on principle, I do not like the idea of impulse buying. I would have never bought these things! At the time we were shopping, I did not even see them, since we were looking for adult umbrellas and not kids’ umbrellas. My eyes and brains are just scanning the sales floor for adult umbrellas, nothing else. As it turns out, our little boys really enjoy these umbrellas and the little bit of money we spent on an impulse buy was well worth it. How often can you make another human that happy with an expense of only $5.99? (At this point, vilkri-she is reading this and saying to herself “What? Is he actually saying I’m right?”)

Let me relate this to our budget and personal finances now. In our household budget we actually have line items for “Miscellaneous” and “Gifts” to which we allocate monthly spending for exactly such a purchase. Thus, this purchase did not break the bank or even stretch the budget. It is part of our financial plan if you will. Not that we have such a small expense penciled into our financial plan, but we allow for such expenses generally. After all, such expenses are part of what makes life worth living. We could have never brought that much joy to our little boys had my wife not bough these umbrellas on an impulse. They truly do love to use them, and with the constant rain we’re having in the northeast U.S., they are getting a lot of enjoyment from owning and using them.

Many of you have read that trying to negotiate with creditors and others with whom you do business can save you money. Quite often credit card companies, banks, phone companies, cable companies, etc. are willing to give you a break these days to retain you as a customer. The impact on your monthly budget may not be much in each case, but it all adds up. Besides, why not try to get a break if you can?

In my case, I have been feeling extremely guilty that I have not made a call to my cable company anytime I was reading a blog post or an article that talked about lowering your service fees. There I am, thinking that I had a good handle on my personal finance and I am overpaying for a service month after month. And all I needed to do was to call the cable company.

My cable company had given me a break when I switched back to them after having left for a competitor briefly. But sure enough, that teaser price ran out and I got bumped back up to the full amount – a whopping 50% more! I knew that they could give me the service for less.

My wife and I were also thinking about canceling two of the three services we are getting from our cable company. Who really needs a land phone line when we both have a cell phone? Who needs TV when we only watch a few shows that we can also watch on DVD from netflix.com, or recorded on hulu.com? It is not like we are the types who need to discuss with friends and co-workers what was happening on “30 Rock” the night before. Heck, we hardly ever watch these TV shows when they first come on anyway. We watch them days or even weeks later most of the time.

We were finally ready to cancel cable and phone yesterday unless the cable company gave us a break – and guess what, they did! We are still not sure that we want to stay with all three services going forward, but at least it is not as expensive anymore. The good news is that I am not locked into a longer contract with the cable company. On top of this, they gave us a break on price, and they did it for only one reason: I made the call. Take it from me. It is worth picking up the phone. The worst that can happen is that you don’t get a price break, but picking up the phone and calling your cable company is not costing you much more than a little time. It is worth giving it a try.

When you use a retirement planning calculator you need to think about how many years you plan to spend in retirement. This thought makes me chuckle. How are we supposed to know how many years we’ll live after we actually stop working?

Think about all the uncertainties surrounding our retirement planning in the first place. How much can we save each month? What if unforeseen expenses hit us? How do we invest our savings? How will our savings grow? What do we do if we face a decline in our investments as most of us have recently? – The answers to these questions depend on so many different things some of which we can control, but some of which we cannot control.

And now we even have to think about how many years we plan to spend in retirement? Now, the answer to this question largely depends on our life expectancy. If we retire too soon and live too long, we may run out of money. If we retire late and die shortly after retirement, we kind of got cheated out of our golden years. Obviously the safest thing is to retire later because you don’t want to run out of money at 88 if you are blessed with a long life after age 65 (when most people think of retiring). If that happens to you, just think how hard it could be to get a new income source at that age. What should be done then?

Well, I don’t really have an exact answer. As is the case in most things “finance” there are many different ways to handle risk and uncertainty. So, I will tell you what I did. I used a few of the life expectancy calculators listed on the page “Life Expectancy”. Funny enough they all came within a couple of years of each other – and can you believe that they all tell me that I will hit 90?

Just to be on the safe side, I added a few more years when I plugged my life expectancy into the retirement planning calculator. (I took an average of all the ages given to me by the life expectancy calculators I used, and then I added 7 years.) I have two reasons why I want to add a few years “just in case”. First, as I said above I don’t really want to run out of money when I will be too old to find work. Second, my yearly health check-up revealed yet again another good surprise. My pulse, my blood pressure, and my cholesterol are even lower now than they have been in the past several years. (Did you know that an annual health check-up itself increases your life expectancy?) I would imagine that my body may hold out even longer than what the life expectancy calculators suggest.

Be aware that there are, of course, no guarantees. Life expectancy calculators only work with averages – they don’t tailor to individuals. But we are all individuals and none of us is really the “average.” Only as a group can we make up an average. Life expectancy calculators can only be used as a very rough guidance about how any given individual might live. Even though I do not treat the result as hard facts, I still enjoyed filling out the questionnaire on these life expectancy calculators – especially since they gave me such a good forecast!

This week my husband and I were shopping for something in particular, but while we’re in the store, I see teeny umbrellas for teeny fellas, and I decide to get a couple. One guy in my house is loving him some Elmo, and the other – more into movies – loves all things from the film “Cars.” I pick up one Car umbrella and one Elmo umbrella. You have to know that it’s been raining like nobody’s business in the New York area, so I figured that since these little guys can’t go to the playground or the town pool they can go in the yard and in and out of the preschool with these babies. They’d make for a great surprise. Meanwhile, my husband is thinking up a wise remark about this purchase while I’m waiting to check out. He does finally say it while we’re leaving the store, something about my “luck” in being able to make a spontaneous purchase like that…

Okay, in a way he’s right – this was not a necessity. What 2 and 3.5 year olds need umbrellas? Yet, I think it was a brilliant purchase. Look at it this way – they got the umbrellas Friday, and they’ve been using them every single day since, and they are sad if they don’t need them. The umbrellas cost a total $5.99 each. D’ya know how much a McDonald’s Happy Meal costs? These umbrellas have already lasted longer than the tastiest and happiest Happy Meal, and the cost is not all that much different.

I had a similar experience myself this week. You may know that I’m taking a class this summer on landscape painting. The materials for this course are not cheap. For example, a pack of 12 gessoed 8” by 10” masonite panels list for $30.60, although you can find sale prices if you look around a bit. Instead of buying these, however, I went to Home Depot, and bought a sheet of masonite board. It was $6.47 for the whole board, from which I got about 30 8” by 10” boards, plus some smaller ones to boot. This afternoon, I gessoed them all. True, it is not cheap to pay tuition for such a class and buy all the materials. However, when I can, I look for the bargain – I’m taking a painting class, and saving by comparison to the others in the class who don’t prepare their own boards and canvasses.

So, even if the purchase I make seems like an extravagance from one angle, I think it can look fairly frugal from another angle. My husband always asks me “Explain this to me again. How do you save money by spending it?” I do get what he’s saying, but can you see my why I think that <>b>the relative savings from making a smart purchase is worth noting?

P.S. We know that “Living Large on a Small Budget” is the tagline for one of our favorite blogs called “WISEBREAD”. We used this line in our title today because it describes our blog post so well. (Copying is the best form of flattery.) But if you are interested in reading another great blog besides ours, please consider subscribing to WISEBREAD – Living large on a small budget !