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Tuesday, January 12, 2010

The Other Side Of The Spending Fence

"Decide what's important to you. Give yourself permission to spend on these things. Pinch pennies on everything else." That's a pretty spot-on definition, in my opinion.

The more I thought about it, though, the more I realized that it speaks to the problems that both over spenders and cheapskates have.
Dollar diary: tracking your spending habits helps keep you out of debt.(your money): An article from: Scholastic Choices

Over spenders?
In most situations, it is easily possible for a person to spend substantially less than they earn. So what causes a person to spend more than they earn?

The answer is hidden in that phrase. Over spenders stretch their definition of what's important to them to cover a lot of things.

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I'll use myself as an example. Back in my overspending days, there were a lot of optional things in my life that I defined as being important enough to throw my money at. I went golfing a lot. I bought gadgets by the truckload. I bought more video games than I could ever possibly play. I bought carts full of books.

The end result was twofold. First, I often didn't have time to actually enjoy all of the stuff I had bought. Second, because of all of the spending, my life was in a rough place.

My definition of what was important in my life was skewed. I had elevated too many things to the threshold of "permission to spend freely." Because of that, I spent much more than I needed to spend, but I had too many things in my life to actually thoroughly enjoy the things I was spending money on.

The solution? Cut back. Ask yourself what things you most enjoy doing and toss the rest of it. Look for ways of minimizing the costs of the things you do enjoy.

Frugality is often said to be miserable because you have to give up so much. In reality, frugality means not giving up the things that are actually important to you. The trick is stepping back, looking at your life, and figuring out what things are important and what things are not.

On the other side of the coin are cheapskates, a role that I've almost fallen into a time or two over the past few years.

Cheapskates apply principles of penny-pinching to every aspect of their life, even the important ones. Although they have financial stability in their lives, they do it at the expense of other elements of their life that could add a great deal of value.

Here's an example from my own life. I love to read books. I read several books a month beyond what I review on Being Broke Sucks.

For the better part of a year, I refused to buy a single book. Instead, I just reserved books that interested me at my local library and patiently waited for them.

Several titles came out that I was eagerly anticipating. I was able to read some of them fairly quickly (within three months) of their release. Others? I'm still waiting.

Even more noteworthy is that at least two of the books I checked out and read during that period were books that I strongly fell in love with and wanted to read again (and I was quite sure I would read them many times in the future, as I love returning to books that really make me think).

But I was cheap. I didn't buy these books. I resolved to just check them out at the library when they became available again.

One Saturday afternoon, I was sitting at home, having just finished a book. I looked at my unread books and realized that the book I most wanted to read wasn't there – a book I had read before and returned to the library after thoroughly enjoying it. The library didn't have it, either. I checked on Amazon and realized I could have the book for just $7. And I talked myself out of buying it.

That's when I realized I was being a cheapskate. I was avoiding spending $7 on something that I knew would give me many hours of enjoyment now and quite a few hours of enjoyment later on, plus it would be a book that I could recommend to friends and loan to them while they loaned me books as well. To not spend $7 on something I cared so deeply about – and it was a $7 I could easily afford – was pure cheapness.

It's okay to spend money on things that are truly important to you. In fact, it's good, because spending money specifically on things truly important in your life directly raises your quality of life much more than any other way you could spend your money.

Reading is important to me, so I'm no longer afraid to spend money on it. Yes, if I see a book I want to read, I'll check to see if the library has it and read it from them first. Yes, I use PaperBackSwap religiously. But if those outlets don't connect me with a book I'm passionate about, I'm no longer scared to go to the bookstore and pick up that book that I want. Doing so raises my quality of life quite a lot.

The Winners Are in the Middle
The best place to be is at that place between the overspenders and the cheapskates. People who know what's truly important to them and aren't afraid to spend money on it enjoy a higher quality of life than people who spend themselves into debt (adding a lot of stress and challenge to their lives) and people who never spend a dime (missing out on things that they truly value in life).

What are your central values? What's really, truly important to you? Give yourself some permission to spend in those areas without worry – but then lock down the ship in the other areas of your life.

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

Monday, January 11, 2010

Is Preschool Worth It?

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Another reader "Marjorie" writes in with a very interesting question:

I'm a single mom with a four year old daughter. Each weekday, I take my daughter to stay with one of my aunts so that I can work to earn a living and keep food on the table. After Christmas, my mom sat down with my aunt and I and gave us a bunch of information about a few great preschools in the area. My aunt told me later on that she's supportive, no matter what I choose. So, for me, the real question is whether or not my daughter would get enough benefit from preschool compared to days with my aunt to make the extra costs worthwhile.

I'm a single father and time and time again I have been forced into making difficult choices about the devoted time spent with my son. Do I make a nutritious home-cooked meal or do I spend an extra half an hour with my son? Do I spend some time outside watching his skateboard tricks or do I get some of the never-ending household chores taken care of? This comes in on top of the prerequisite day of work for a single parent, after which they're exhausted but also often wanting a strong connection with their children. On top of that, there's the money concerns – a single income household in the modern world is never easy.

When it comes to a choice between preschool and other child care options, I don't think there's a simple cut-and-dried answer to this because there are so many factors involved.

The first one – and the most important one – is your child. Is your child outgoing around others her age? Is she intellectually on par with other children her age – meaning is she capable of holding a writing utensil? Can she count to twenty or so? Is she curious about the world around her? If these things are all true, preschool likely doesn't have a great deal of value for your daughter.

When things get murkier – in my opinion – is when several of those questions have negative answers. This can indicate a lot of things, from something as simple as social anxiety to a learning disorder or simply more focused one-on-one time. If you're witnessing these issues and you genuinely feel concern about your daughter's intellectual growth, I would lean more towards preschool. If not, I would lean more towards maintaining the care giving situation with your aunt.

What about the money, though? Is the extra cost of a good preschool worth it when compared to a normal daycare if your child is socially thriving and developmentally on pace?

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In a word – in my opinion – it's not, unless the difference in cost makes no difference in your life. Here's why.

If you spend that extra money to send your child to a top preschool, you're putting an extra financial burden on yourself. This has several effects on your life. You're more tied to your job than ever before because you can no longer afford to lose it, which means your boss has more power than before and your job is more stressful. You also have less money to spread around in other areas of your life, like an emergency fund or on something as simple as a stop at the ice cream shop with your child. On some level, these things are given up to afford that high-quality preschool – and these things have a negative impact on your child's home life.

This basic idea is true no matter what you're looking at in life. When you bump up the financial cost for something of higher quality, you're paying an additional price beyond the dollars and cents. You pay the personal costs that go along with maintaining that higher level of income. If you can't see the benefit in doing so, don't do it.

To me, that's an exchange not worth making unless there's a clear and dramatic benefit from the higher-cost preschool. Never forget that early on, you're the biggest impact and influence on your child, and if sending your child to the higher-cost preschool will put stressful burdens on you to disrupt that in any way, there had better be a big reward. If your child is doing fine, then I don't see the benefit there.

No matter what you choose, however, do not let others make you feel guilty about it. Simply by asking questions like this and seriously considering the answer, you're looking at the unique situations, gifts, and opportunities in your life to make the right decision for your daughter. You obviously love her. You obviously want what's best for her. Never let other people attempt to use guilt or shame or other tactics to guide your choice.

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

Should an Entrepreneurial High Schooler Go to College?

A reader recently emailed me… "Andy" writes in (I touched up his grammar just a bit):

I'm a high school senior. Over the last two years, I've built a very successful lawn care business in my neighborhood that filled up my entire summer this year. I will make about $35K this year and I can make a lot more once I graduate. My grades are good and I got good scores on the ACT and SAT. I applied to a few colleges and got accepted to all of them, but I only applied because my mom pushed me. What I really want to do is build my lawn care business after I graduate. My dad sort of agrees with me but my mom demands that I go to college. What do you think I should do?

This is one of those situations where you're going to have loud, strong proponents on both sides of the decision. Some people believe ardently in the value of a college education – others see the value in a strong entrepreneurial opportunity.

Let's look at each case. - cheap textbooks

Build That Business!
Successful businesses require a mix of drive, talent, and luck. Andy already has all three.

Drive Andy wanted to build his own business and had the drive and desire to actually get up off the couch and do it. While his friends were busy with their X-Box 360s, Andy was building a $35K business – that takes initiative.

Luck In order to make $35K from a part time lawn care business, Andy must have stumbled upon a niche and filled it well. That's a business opportunity that doesn't come along all that often. 

Talent Every day, as a small business owner, you're called upon to make difficult choices. It takes raw talent to consistently make the right ones and build business. Andy's obviously got that talent.

Andy has the natural drive to start his own business, the luck to stumble upon a niche that needed filling, and the talent to grow that business into something impressive. That's a combination of factors that doesn't come along that often, and Andy needs to take advantage of the situation.

Go To School!
I'm not speaking from experience here but I believe college is a life-transforming experience. It is truly an opportunity for you to figure out your beliefs, learn new things, have countless compelling experiences that are almost impossible to replicate outside of college, and get an education in an area you're compassionate about. Not only that, it comes at a point where your mind is most open to such diverse experiences – early adulthood.

Andy shouldn't let that opportunity pass him by. He can always return and get an education later on, but the full growing experience won't be as open to him.

He has the seed of a small business in place, sure, but he can keep that business going during the summer while attending school, plus he can use the business income to pay for his degree.

Plus, if Andy chooses to major in business, he might find yourself walking out of school with a brilliant plan for transforming you're the mowing business into something truly amazing. College doesn't have to mean giving up that dream.

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My Thoughts
I think the real answer resides within Andy himself. Andy, are you truly happy mowing cemetery lawns, fixing lawnmowers, handling invoices, and so on? Do you have a desire to keep pushing the pedal to the floor, growing the business, eventually hiring employees and advertising to build a bigger and bigger client list?

Either these thoughts will excite you or they will fill you with unease. Be truly honest with yourself. This is one of the biggest professional choices you'll probably ever make.

If you can't imagine anything better than building this business you've started, then go for it. Throw all your gusto into that business and make it grow. Along the way, save most of what you earn – put it away so you can walk away from the business at a fairly young age. If you've built the business into something large and successful and sell the whole thing at age thirty, you can go to college then if you want to.

On the other hand, if growing the business doesn't excite you and you just want to mow lawns, go to school

You can still spend your summers (and lazy weekends in the spring and fall) mowing lawns and maintaining your business as it is. You can use that income to pay for your education and when you graduate, you'll still have your small side business to do with what you wish, plus a paid-for college degree.

You already know the answer, Andy. It's inside of you. Ask yourself that honest question: is building this business the thing you really dream about? Let your answer guide you.

One final point of advice: if you do decide to go with the business, save your money. Spend as little as possible and sock the rest in the bank for later. If you decide in two years that you want to go to college instead, it'll be quite easy if you've been banking your cash.

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Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

Wednesday, January 6, 2010

Have you checked out Bitches On a Budget?

 A Sample of the reviews.... Hilarious!
Thoroughly entertaining, incredibly useful!,
So glad I found this book!!

It seems that Bitches on a Budget: Sage Advice for Surviving Tough Times in Style
  Is taking the world by Storm!!! Pick it up today Bitches on a Budget: Sage Advice for Surviving Tough Times in Style

Thanks Ms Dukes for recommending it

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

Banks Taking revenge because of new laws

Happy new year. Now pay up.

That's the message from our friends in the banking industry, who are introducing all sorts of fees and changes as a slew of regulations take effect designed to make financial heavyweights friendlier to customers.

From costlier checking accounts to higher credit card fees, banks are scrambling to find ways to compensate for as much as $50 billion in annual revenue that could be lost because of the tougher rules and requirements.

"This isn't about a money grab," said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, an industry group. "This is about covering operating costs and risks related to transactions."

For instance, he said, banks will now be required to disclose contract terms more clearly and to notify customers in advance of changes to credit card terms.

"That means they'll have to send out more letters, which has a cost," Talbott observed.

And because banks will no longer be able to jack up people's credit card rates willy-nilly, he said, that will expose issuers to more risk, thus creating more costs.

That's one way of looking at it. Another is that banks are cheesed because lawmakers are showing some uncharacteristic backbone when it comes to consumer protection, and they're turning the screws because, well, they can.

Never mind that just about all the big guys in the banking world are still on their feet primarily because taxpayers stepped in with billions of dollars in bailout cash. That's ancient history. 70% on tickets.

Now it's all about making up for the money that used to spill into bankers' pockets from arbitrary rate increases and practices such as automatically signing people up for overdraft protection -- and then nailing them with fees whenever a transaction went over the limit.

Some new regulations, such as requiring 45 days' notice for any significant credit card changes, were introduced last year. Others, including limits on rate increases and new disclosure requirements, take effect next month.

In response, many banks have been lowering the credit limits of millions of customers and raising rates. They've also been switching fixed-rate cards to variable rates that won't be subject to the new rules and imposing "dormancy fees" for plastic that doesn't get a regular workout.

But that's not all. Talbott said consumers could look forward to even higher fees, revamped rewards programs and an end to some traditionally free services.

"The number of institutions offering free checking will decrease," he said. "The market is responding to the regulatory changes.

"Providing services isn't free. There's a cost associated with providing credit cards or checking accounts."

I love that banks are saying this is merely the free market in action. Where were all those market forces when these guys were making staggeringly reckless investments in mortgage-backed securities, or when their losses started running into the billions of dollars?

This isn't about market forces. This is about good-old-fashioned greed, and the need to keep shareholders placated as the banking industry tries to adjust to a new era of transparency and scrutiny.

"The tricks and traps that the banking industry uses to ensnare consumers is a business model that needs to change," said Sally Greenberg, executive director of the National Consumers League.

"What happened to the days when banks made an honest buck by treating people fairly?"

Did such days ever exist? Not that I can recall.

Outsourcing taxes

Speaking of money, the Internal Revenue Service said this week that it would finally require U.S. tax preparers to register with the government and meet federal standards for competency and ethics.

That's great, as far as it goes. But what about tax preparers overseas, beyond the reach of the IRS?

Tax experts say that as many as 400,000 tax returns are outsourced to workers in India and elsewhere every year, and that the practice could grow rapidly if the IRS' new rules make U.S. tax preparers more expensive.

Federal law requires that you be told in advance before your tax return is sent abroad. But not everyone who signs the authorization may realize that his or her Social Security and financial account numbers are leaving the country.

Selwyn Gerber, a Century City accountant, told me his firm experimented with outsourcing about a year and a half ago. Dozens of clients' tax returns were sent to India.

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"The work was technically OK," Gerber said. "But there was a lot of stuff the Indians couldn't cope with."

Moreover, many clients, who Gerber said include celebrities and wealthy families with recognizable names, objected to having their confidential information shipped abroad. The danger of fraud or identity theft was too great.

"I don't know how you maintain quality or privacy overseas," Gerber said. "You just can't do it."

He said his firm quickly ended the outsourcing experiment.

Just something to keep in mind when you speak with your accountant or tax preparer as April approaches.(Via LA Times)

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages and is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter