The Almighty Dollar

Pressing your luck could cost you

2006-04-28T11:32:00.000-04:00

In this wide world of passwords and PINs, keeping track of your car's permit expiration dates seems like such a hassle. As my friend just learned the hard way, putting off a renewal could cost you double or even triple the original amount.

His tags and parking permit expired four months ago, but until this week, he had been driving and parking on DC roads without incident. I guess you can say he's been lucky. Well, his luck ran out on Monday when his car got towed.

Sometimes he can be a bit flighty, but the bottom line is he didn't want to pay the $87 to renew his permits. Now it appears he will have to pay more than triple that amount to get his car back up and legally running. Here is the breakdown of costs:

Registration renewal = $72
Zone permit = $15
Car tow = $100
Tow storage ($20/day) = $80 (he picked it up yesterday)
Taxi to towing lot = $20

Whopping total = $287

Not to mention all the time he's spent trying to clear up this mess. His friend took him to the towing lot twice, and both times left without the car. First time the lot was closed. Second time they refused to let the car off the lot without proof of registration payment. At the DMV, he waited in line (of course!) to learn that his safety inspection had also expired, therefore, he could only get a temporary permit for his car. Since the towing lot is open during work hours, he cabbed it to the lot during lunch, and finally got his car.

Phew! And that doesn't include the horror he'll face at the safety inspection station...

(P.S. My husband points out that this presumes his car indeed passes inspection and no additional service work is needed!)

Re-evaluating our portfolio

2006-04-27T15:50:00.000-04:00

Although I've been absent from blogging, this past week has been quite important for me PF-speaking...

My husband and I have spent most of last weekend and early this week re-evaluating our retirement portfolio. It's been an encouraging experience overall, seeing how much it has grown due to healthy returns and diligent saving on our part.

We are in our early 30s (I'm 30, he's 32) and didn't really begin socking away money for retirement until a few years ago. Before that, we focused on saving as much as we could for our wedding and a home down payment. While things worked out okay, I still wish we had put more aside in our IRAs back then.

What frustrates us most is having our retirement savings spread out in multiple accounts: brokerage, traditional and roth IRAs, SEPs, and recently a self 401K. To reduce our taxable income, we focus first on maxing out our tax-deferred accounts. However, since the maximum contributions in IRAs are so small (only $4000), it's hard to build a portfolio in these accounts when the required minimum fund purchase is often $2500. So we really have to focus on the bigger picture and not get bogged down in each individual account.

I think it's wise to regularly monitor your investments. Make sure you like what you have, dump what you don't, and look for something new. Markets and industries change, and your portfolio should be smartly balanced for the times. When we started out, it was difficult to build a diversified portfolio with our small holdings. We did our own research and bought a handful of mutual funds in different categories. Over time, we dumped a couple that were underperforming and bought new ones, all with a longer-term outlook in mind.

Now that our portfolio is over $100,000, we wanted to examine our investments and make sure we were spread out enough. We felt that we were not well-balanced. Basically, we were heavy on a medical/health fund and were lacking in small-cap exposure. Also, our large cap fund has ballooned and was recently closed to new investors. While it's performed admirably, we are beginning to look into other large cap funds that are smaller and more nimble.

With these changes, we feel more secure about the way ahead.

Know of a truly accurate retirement calculator?

2006-04-21T14:46:00.000-04:00

Every once in a while, either myself or my husband will plug our numbers into online retirement calculators to see how we are doing. This exercise helps us to stay focused on our goals, motivates us to continue socking away money, and to be honest, we find it pretty exciting (I know, we're nerds).

However, I have yet to find a comprehensive calculator that takes into account both tax-deferred (401Ks, Traditional IRAs) AND non tax-deferred savings (Roth IRAs). Can you point me to an online calculator like this? Surprisingly, I can't seem to locate one, although it seems easy to make one up. If I knew how to create it, I would.

Mom and Dad to the rescue

2006-04-20T10:48:00.000-04:00

The New York Times highlights the increasing burden of parents supplying financial assistance to kids (can I say adults?) into their 30s.

A study by the Institute of Social Research says 34% of those aged 18 to 34 get cash from Mom and Dad every year. Parents help in other ways, giving generous presents, cars, and down payments for homes.

I know it depends on each individual's situation, but generally, I think the sooner we are able to support ourselves, the better. It's not the same when there's always a cushion to fall back on.

Not all bbq grills are created equal

2006-04-19T14:53:00.000-04:00

In anticipation of hosting guests at the end of this month, my brother had mentioned wanting to buy a new lawnmower and grill. Since they are arriving this weekend, I asked if he had bought them yet. While he still plans to get the lawnmower, he has decided to wait on the grill until next summer.

I should tell you now -- grills are a sore spot for me. My condo is on the first floor and has a beautiful, private patio perfect for outdoor dining and relaxing. Gas grills were permitted when we moved in, and we immediately got one. For a year, we savored many grilled chicken breasts and kabobs by candlelight. But, unexpectedly, the association switched to a new master insurance plan that prohibited grilling of any kind at some distance from the building. (Apparently, this is a DC law but no one complies!) So we were forced to get rid of the grill and miss it terribly.

My brother doesn't have these restrictions and certainly has the space for it. He and his fiance bought a new home last winter. They chose to forego a patio, because they planned to build a backyard deck. This project has been slated for next year.

He told me that the grill he wants is very expensive, so he doesn't want to spend the money on it now. Instead, he plans to buy it next year after they've built the deck. Since I'm in grill-denial, it seems silly to waste two summers without bbq just so he can have an ultra-lux, stainless-steel, triple-burner grill (an assumption, but knowing my brother, I'm probably right).

I said, who cares what it looks like, as long as it grills well? He said, looks matter.

Yes, you read that correctly, and we weren't talking about Dolce & Gabbana jeans. For god's sake, it's a grill.

Keeping secrets about money

2006-04-18T19:01:00.000-04:00

There are days when I miss my family so much and wish that I lived closer to them. But those feelings evaporate instantly when the topic of money comes up.

Over the phone, I was explaining to mom why my husband had to cut short the visit to his parents' house this past weekend. It's a long, complicated story, so I'll spare you the details.

Basically, he drove back to DC in order to make a last-minute IRA deposit for his parents on Monday. The contribution would give them an additional tax refund of $1400.(Later, we realized they could have mailed it, but just in case, he wanted to make the deposit in person.)

Anyway, the trip was worthwhile, because we learned a lot about his parents' financial situation. It's a relief, since they've kept us in the dark until now. We never wanted details, only a general idea of where they stood. After they talked about wanting to retire in 5 years, the numbers show that's not a realistic option. Even still, they are much better off than my parents, who are older and have almost nothing saved for retirement.

Whenever I discuss money with my mom, she gets very defensive. She says it's insulting when I mention how unprepared they are for old age. She tells me not to worry, that she is capable of working if something happened to my dad. When I say I'm being realistic, she says I am crushing her hope and optimism. Then she accuses me of expecting them to save every penny until their death -- thus never enjoying life. And predictably, she points out that we all lead different lives; she has her way, I have mine. End of conversation.

It astounds me how often I see people reject sound financial advice. Some people feel ashamed, because they know they haven't been doing the right thing. Others get defensive, because they feel stupid for being ignorant. And then there are people like myself, who are open to any advice or criticism that could help improve my life.

I think the worst thing people can do is to NOT ask questions, especially when it comes to finances.

Seeing that most of us aren't money experts, the only way to obtain information is to seek it out. That's why I value the pf blogging community. It's a give-and-take atmosphere and a great network of people from various backgrounds. Keep up the blogging and sharing!

That gym membership can help you retire

2006-04-14T10:47:00.000-04:00

Consider your gym membership to be an investment in your retirement, according to USA Today. With the ever-rising cost of health care, staying healthy could save you tons of money in the future. I mean hundreds of tons of dollars in savings -- about $200,000 per couple.

A Fidelity study reports that a couple retiring today would pay this amount towards health costs over a 15-year period, a third of which would pay for prescription drugs. What's scarier is that this number does NOT include dental or long-term care, or over-the-counter medicine costs.

Not only is being healthy good for the mind and body, it's good for your wallet -- in the long run.

When it comes to health, older folks have harder choices

2006-04-13T11:36:00.000-04:00

I have another story that reinforces my previous post about the importance of insurance. My father-in-law recently learned that he had cysts in his throat. The doctor informed him that his thyroid needed to be removed.

I know this procedure isn't that unusual. In fact, my husband's co-worker had hers taken out, and she can function perfectly fine with daily medication. However, my father-in-law is nearing 60 years old, and the risks for complications are much higher in older folks.

He had his surgery two days ago and was released from the hospital last night. Barring a few minor problems, he is recovering nicely. My husband is traveling to see his parents over the long Easter weekend (well, long for him, not for me -- I have to work).

His unexpected surgery made me recall a conversation I had earlier with my mother-in-law. When I visited the in-laws this past winter, she told me they had changed their health insurance plan to a cheaper one, hence, getting less coverage than before. They felt it was worth paying a higher deductible to save on the recurring monthly premiums. I was a bit concerned about their decision, because I felt that it was wiser to enhance, not reduce, health coverage as one gets older. At the time, their health was generally good, but by no means perfect.

People have a tendency to neglect their bodies' warning signs, until a problem becomes serious, and therefore, expensive to fix. Now I wonder if the small monthly savings was worth changing to a cheaper plan.

No tax refund for me

2006-04-11T09:36:00.000-04:00

Judging from the posts of other personal finance bloggers, it seems like I'm the only one who OWES money to the federal government come April 17th!

At last, our taxes are finally done. Bad news is we owe about $900. We don't plan on mailing in our forms until the end of this week, since I see no rush to give Uncle Sam our check until it is absolutely required. Although we may seem like procrastinators, actually, we have been working on our taxes over the past 2 months.

My husband isn't technically a contractor, but due to a complex system created by his employer, he is considered self-employed for tax purposes only. Honestly, I don't even fully understand it, so I let him deal with the taxes. My situation is very straight-forward. I am an employee and get a W-2 every January.

Before we were married, my husband paid an accountant to do his taxes. In order to qualify for an early-bird discount, he would organize his papers in advance. Still, the bill would usually come out to $200-300. I always did my own.

The first year of our marriage we used the accountant for fear that we would screw something up in our newly-merged financial state. But dishing out $500 in accountant fees, in addition to paying taxes, seemed like a waste.

Thank goodness for TurboTax Premier. We've used it for the last 2 years. Not only do we save money, but doing our own taxes has helped us understand our finances better. I now know that we had about $10,000 of unanticipated taxable income last year, which explains why we owe money. Hopefully, we will be able to come up with more accurate numbers for next year.

Do it yourself investing or hire a professional?

2006-04-07T17:28:00.000-04:00

I'm curious how many of you rely on professionals for investment advice and whether it is worth the cost.

When we were starting out, my husband and I initially considered hiring a financial planner, but then opted against it. Our then-accountant remarked that if people spent the time to do their own research, they could invest just as well as a professional and pocket the fees. At first, we were skeptical, since neither of us have a background in finance. But we hate paying people to do things we could do ourselves, so we started reading. And reading, and reading.

In this day and age, there is a vast amount of information available online. The hard part is sorting through it all and determining what details reflect a well-managed fund or company. We also decided on our investment strategy -- basically we wanted to focus on investments with a longer-term outlook. No day trading for us. Although savings and investing are priorities, we aren't willing to devote the time to watch a stock's performance on a daily basis. Our goal is to build a nest egg for our future.

The bulk of our investments are in mutual funds and ETFs. We tried to buy individual stocks, but always had bad luck with them for one reason or another. That said, we have chosen strong funds that have outperformed the Dow over time and have built a diversified portfolio that some may consider too international-heavy. We are comfortable taking slightly greater risks at our age, but by no means are we stupid.

Overall, we are very pleased with how our investments have done over the years. This makes me wonder,

For those of you who have hired a professional, are you happy with your investments? Is it worth the extra cost?

I ask, because a few of our friends who use brokers have complained about their investments. Some have bought seriously under-performing funds with high fees. Others own stocks that were purchased at inopportune times. All of these decisions were recommended by their brokers. It seemed like with simple research, it would have been obvious that these picks were unwise.

Just save -- it's that simple

2006-04-07T14:24:00.000-04:00

Bloggers, journalists, financial analysts and managers keep asking the same questions about our retirement. Are we saving enough? Are we saving too much? How do we know what is the right amount?

We can debate this topic to death, but there still won't be an answer to satisfy each individual's situation. In fact, I think the whole debate is silly and can be simplified into one question:

If and when you retire, would you rather have too much money or not enough?

I think it's pretty obvious that most people would prefer to have a little extra in their bank accounts than to scrimp until our last living day.

So stop talking about it. Just save as much as you can, as early as you can.

You're never too young to buy life insurance

2006-04-04T16:58:00.000-04:00

I found out one of my relative's cousins died last week from lung cancer. He was in his late 20s and never smoked. The family learned that his wife was pregnant during the same week he was diagnosed with cancer. Now three months along, she will have to go on without him.

The news broke my heart. It also made me realize how important it is to have life insurance, even for young couples. My husband and I purchased life insurance more than a year ago. We had discussed doing it right after our marriage, but laziness and home buying got in the way. Thankfully, we finally got our act together and did it. I can't tell you what peace of mind it brings to each of us.

When you are young and newly married, it is so easy to put off this task. You're healthy and have many other plans with your money. Although you vowed 'til death do you part, no one really wants to think about that!

As grim as it may sound, buying life insurance is one of the most thoughtful things you can do for your loved ones. Neither of my parents has life insurance, and that freaks me out. I try not to think about it and trust that we will be able to cope with the situation when it comes. They are just too old (and have pre-existing heath conditions) to consider buying any insurance now.

My brother and his wife have a small amount provided through her company, but it's certainly not enough to cover a big mortgage and daily expenses. He tells me that if something were to happen to either of them, the house would be sold and life would go on. If they have kids, he said he would reconsider.

Even though we don't have children, my husband thought of it differently. He said having life insurance brings him a sense of security, knowing that if he were to die, I wouldn't have to struggle with money while in mourning. He wanted me to have the option to pay our mortgage in full. Of course, I want the same things for him as well.

I don't know if my relative's cousin had life insurance. Considering their young ages, it's likely they didn't. Now with a baby on the way, my warmest thoughts are with the mother.

Trust me, we are not poor

2006-03-31T09:33:00.000-05:00

Lately a number of bloggers have written about feeling poor. My Open Wallet's post garnered dozens of comments, and NYC Money described a recent conversation she had with her husband about this topic. Boston Gal's Open Wallet drew our attention to a site that calculates how rich you are based on salary compared to the rest of the world.

Some people wrote that not being able to pay the bills or being unable to afford a house made them feel poor. Others described feeling poor as a child growing up in a financially tight household, but less so once they were working and became independent. I was struck by the honesty and emotion behind these words.

But the comments also showed me how our perception of being poor is relative to the environment and people around us. And, boy, what a small world it is that we live in.

My family has always struggled financially, as do countless other lower and middle income households across the country. It's pretty easy to come up with instances that make you feel poorer than the next person. Someone has a nicer or newer shirt than you. The latest basketball shoes. A walkman when you only had a radio. Even the rich could probably come up with an example.

I still resent my parents for always pointing out ways they were unable to provide for me. Things like clothes, books, tapes, and cars that all of my peers had, but I didn't. I know it was partly because they felt guilty. They wanted me to have the best of everything. Since they couldn't give me that, it made them feel inadequate as parents.

Growing up, I believed I was extremely poor -- until I travelled to a third world country for the first time. Then I realized that I was rich. I apologize for the cliche, but that trip changed my life.

A salary calculator can compute how much wealthier you are in numbers, but there's nothing better than first-hand experience. Expand your world. Widen your vision. See how others survive on much less, but are easily the most generous people you will ever meet.

I think it's unhealthy to dwell too much on being poor. Some people can use these feelings to create better lives, but most are left feeling hard, unsatisfied, and especially bitter. It's natural for us to feel unfulfilled in some way or another, but I guarantee there is someone in this world who would love to have what you have.

Admiration for young parents

2006-03-29T16:39:00.000-05:00

Tonight after work, I'm heading over to our friends' house to babysit their two young children for the evening. Honestly, they never would have asked me if their normal babysitter hadn't cancelled at the last minute. I admit, I'm hopeless with kids and never know what to say or do around them! It just doesn't come naturally to me. Anyway, their kids are sweet, so I was happy to do it.

This gesture will also save my friends a bundle of money, since they normally have to dish out $75 for a babysitter before spending anything else for the night. I am amazed and always wonder how young parents do it. It makes me appreciate how my husband and I can go out to a restaurant for dinner on a whim, not have to make arrangements beforehand, without starting out the night in the hole.

A few weeks ago we invited these friends over to our house for a drink and then dinner at a nearby place. The dinner was reasonably priced, but with drinks and tip, it came out to atleast $75 per couple. But for our friends, the night was more even more expensive. They had to pay that amount just to leave the house for a few hours, plus the added cost of entertainment.

They tell me it's worth it, just so they can have a life and feel like adults once in a while. If I were in their situation, I'm sure I would do the same.

More outrage about cars

2006-03-28T12:01:00.000-05:00

I hate to harp on this subject again, but I really need your help to figure out why people care so much about their cars.

"It's a form of transportation to get you from point A to point B," my husband remarked last night. I agree with him. I take a crappy, run-down metrobus to and from work everyday. I could care less what the bus looks like, but I'm relieved that it allows me to stare out the window and veg first thing in the morning.

Why do people spend huge amounts of money on cars, even paying extra for personalized plates and such, for what is essentially a heap of metal and plastic painted in pretty colors?

Since my brother places a scary priority on what he drives, I asked him numerous times why his car is so important to him. His answer never satisfies me. He tells me that everyone cares about different things, and cars are important to him because he spends a lot of time in them. That's true, he lives in the 'burbs and has to drive everywhere.

I think his response is a bit dishonest. Plain and simple, the car represents his financial success. When he pulls up to a family function in his fancy car, he is seeking the wow factor and an opportunity to brag a little. And for some unexplicable reason, people are in awe of it.

Aren't we smart enough to know that many people carry upside-down loans or lease their cars? Most people don't really own their luxury wheels, and it's likely their net worth is not a source of pride, but one of concern.

It all seems superficial to me, and frankly, immature.

Your clunker is my treasure

2006-03-27T16:13:00.000-05:00

In my family, it all comes back to The Car. I've written about it before, but here I go again...

Last week, my brother declared Mom's 5-year-old Volvo a "piece of junk." The culprit this time was the check engine light. Well, it lit up. The mechanic quoted them a few thousand dollars to repair whatever he deemed was wrong with it. When I asked my brother what the exact problem was, he didn't know. But he said the car's suspension system was shot anyway, and that it was time to replace the clunker.

Clunker? Piece of junk? My Honda was 5 years old when I bought it, and I was thrilled to find it still on the lot. It was in good condition and had low mileage. Driving it, I finally felt like an adult. Before that, I had a 15-year-old car that despite its age, drove smoothly. In fact, I killed it by letting the oil run dry.

Since my parents paid off the car only 6 months ago, they were hesitant to take on new payments. This is actually a wise decision, considering how my parents are already overextended financially. My brother's solution was to lease a new car for 3 years and make the payments himself.

Now I suppose he just wants to do something nice for my parents, and that's thoughtful. But I wish he would help them out with something that seems more fiscally responsible. Perhaps pay for the repairs himself or shop for a reasonably-priced used car. By leasing a fancy car they cannot afford to buy just smacks of Keeping up with the Jones'. It's like playing pretend for the next 36 months.

I'm back

2006-03-26T18:35:00.000-05:00

Phew, it's been a busy week! I was called out of town on short notice, but I'm back and ready to blog some more.

Don't blow that extra paycheck

2006-03-19T17:46:00.000-05:00

Last night, I celebrated my friend's good news. He had accepted a great job offer -- and with it, a higher salary. The pay difference isn't huge, but it is significant considering my friend's financials.

He is single and makes good money. Despite that, he lives paycheck to paycheck, saves little, and can't seem to get rid of a few thousand dollars in credit card debt. He told me how his poor state has taken a toll on his self-esteem and confidence, particularly among his peers.

Knowing all of this, I was surprised to hear him announce that as a gift to himself, he was going to use the extra money towards guitar lessons. (I was relieved to know he already has a guitar and won't have to buy one.)

Now, I am all for learning new languages, pursuing hobbies, doing what makes you happy. But in my friend's case, I think he is being foolish for not paying off his debts first. The lessons should come later.

By enrolling in these classes, he wouldn't be lowering his debt burden, but rather, adding to it. Although he's avoided the expense of buying a new guitar, other things are required in order to play seriously. For starters, he mentioned needing to purchase a tuner. The list goes on and on.

It is decisions like his that make me unsympathetic to people who say, if they only made a bit more money, then they'd pay off the debt. Let's be honest here -- that's just an excuse. How you spend every dollar counts.

Treating family -- when to say enough is enough

2006-03-18T11:47:00.000-05:00

Consider me old-fashioned, but I think it's a matter of common courtesy to say thanks when someone is thoughtful enough to treat you, whether it be to a meal, a beer or a coffee. The more considerate among us will usually reciprocate the gesture at some point. But when it comes to family, are the rules the same?

For years, my husband and I had treated my brother and his fiance (now wife) to numerous lunches, dinners, and drinks. Since we live in different states, these instances would occur either when we were visiting family or when they came and stayed with us. Usually what happened was we would invite my parents to dinner, my brother and his fiance would join us, and we would end up footing the entire bill.

I enjoy treating my family and friends. I do it often, and they consider me to be quite generous. What bothered me was how my brother and his fiance always sat still when the bill came, never offered to pay even their share, nor offered to get it next time. And they never said thank you.

The last straw came during a visit over Thanksgiving, when my brother and fiance stayed with us for 4 days. We stocked the fridge, treated them at a nice restaurant upon arrival, cooked a masterful turkey dinner with all the fixin's, and had lined up plenty of fun things to do while they were here. One day, I ended up lunching and museum-hopping with his fiance, while the boys went to the hardware store for some home repair equipment. We went to a casual eatery, the kind of place where you order upfront, pay the cashier, and wait at a table until your number is called. After we each placed our orders, I was taking out my wallet and saw that my brother's fiance had already sat down. She assumed that I would be paying for this lunch, too.

Needless to say, I was incredulous. My brother is less than 2 years younger than me, and is certainly not bashful about his high salary (it's double what I make). His fiance does well, too. So we're not talking about young college grads surviving on pennies.

I held my tongue until he returned home -- and then battled with him over the phone. At first, he was defensive, stubborn, and called me cheap. But within days, he realized where I was coming from and admitted that he had been taking my generosity for granted. Now he is so insistent on paying for meals that it's become almost uncomfortable.

Ironically, my brother told me yesterday that he was having a similar problem with his sister-in-law (out of fairness, she is a recent college grad still trying to make it on her own). His wife is hesitant to say anything to her sister and hopes she will eventually come around.

I'm not so sure. I have no regrets about confronting my brother on such a sensitive matter. If I hadn't, I don't think he would have changed. It's hard to know where to draw the line, because you love 'em and they're family.

How much money you make is important

2006-03-16T17:24:00.000-05:00

There are two great posts by Financial Freedumb about revealing one's salary: why some people do it and others don't.

On The Almighty Dollar, I don't publicize any of my personal information, such as net worth, debt or income. Instead, I have written extensively about my history with money and how it has shaped my thoughts and opinions about spending.

I know there are bloggers who post all of their numbers, but then choose to keep their salaries secret. I suppose there is no harm in wanting some privacy. However, income is actually a significant factor for those who use their blogs to hold themselves accountable and to judge their progress.

Here's an example. Take two single people, both aged 30 with no debt. One makes $50K a year and has $150K in cash and retirement savings. The other makes double the salary and also has $150K in savings.

Indeed, they are both in great positions at their age. But I would be more impressed with the financial habits of the person making $50K than the one making $100K. Who do you think is doing better?

New credit scores, but still the same faulty system

2006-03-14T16:39:00.000-05:00

Our borrowing power lies in the hands of the 3 major credit bureaus. Today, they announced the creation of a new credit scoring system called VantageScore.

After reading this story, I still don't understand what the differences are:

Our scores will still be 3-digit numbers.
Our scores will still be categorized into ranges, the higher the better.

Only now, these agencies will be grading our credit histories. "A" is for the best among us, and "F" are failures. I guess I won't have to go to grad school to be a student again.

I find this announcement very frustrating, because it doesn't address the main problem with the scoring system.

My score differs by agency, because each one receives selective information about my credit. For example, some agencies have a record of one of my credit cards, but others do not. Thus, one agency has a more comprehensive picture of my credit history than another agency. So how does the new system ensure that every bureau receives all of my credit information in its entirety?

Life is too short to live with debt

2006-03-13T12:42:00.000-05:00

Last week I received an anonymous email from someone seeking non-professional advice on how to deal with a large amount of credit card debt.

Since I am not a financial expert, initially, I was reluctant to respond. But after giving it some thought, I provided my opinion about how I would handle the same situation, as I would to anyone who posted a question on a message board or a close friend in need.

What troubles me most about people struggling to become debt-free are their spending habits. I strongly emphasize taking an honest look at one's spending: Have you really cut out all non-essential costs? Are you paying more for goods that would be cheaper if you made them yourself?

A lot of debt-ridden people would admit they have not pared down spending enough.

I can't figure this one out. If you carry huge debt and feel stressed daily because of it, why aren't you doing everything possible to get rid of that stress?

If I had tons of credit card debt, I would eat peanut butter and jelly sandwiches every day. I would not go to movies or happy hours. I would not buy clothes or books. I would get rid of cable and other unimportant services. I would re-evaluate housing and auto expenses, and downsize if necessary. I would cut my spending to the bare minimum, because that is what I'd have to do to get out of debt.

Some of you might say life is too short for such extreme measures. But I think that debt-ridden folks probably feel even greater stress, because they haven't taken extreme measures. Thus, they feel helpless in their situation.

Take control of your spending, because life is too short to live with debt!

Banks suck!

2006-03-10T16:58:00.000-05:00

If any of you are fully satisfied with your bank's customer service, please tell me which bank you use.

My husband and I have multiple accounts at a local bricks-and-mortar bank and an online bank. I opened my online account years ago, mostly because I was so fed up with my local bank. The tellers were rude, they screwed up basic wire transfers (it was for my wedding, no less!), and miscellaneous service charges appeared sporadically on our statements.

At the time, I was uncomfortable moving all of my money online, especially since online banks were so new, and chose to keep my local bank account open. I only keep a minimal amount of cash in it and transfer most of my money to the online account. Still, I prefer having the option of physically walking into a bank, if necessary, but mine only has branches near work and none in our neighborhood.

This past weekend, we decided to move our accounts to a local bank that has a branch up the street from home. My husband went to the bank's Web site and saw it offered an online application. Great, that sounds easy! So he filled it out, hit submit, and received a message saying the application could not be fully processed and that a representative would call him.

Isn't the point of offering applications online so you can avoid having to speak to a person or physically go to the bank? Plus, we wanted to open a joint account, but apparently this option was not available online. The site never mentioned that.

For the next few days, my husband got annoyed at playing phone tag with the representative, and finally told him to forget about it. I guess if we want to open an account, we will have to go into the bank.

Now I'm not sure if I want to go through the hassle of changing banks, since this one seems little better than my current one. And I haven't been thrilled with my online bank either. Its Web site is fine, but could definitely use some improvements. And there are frequent technical problems, requiring me to wait for 10 minutes on the phone or 3 days by secure email, before they are addressed.

At this rate, I'm tempted just to stash my cash under the mattress!

What does $100 mean to you?

2006-03-09T17:26:00.000-05:00

To continue my examination of when money comes between friends, does each side have a rational point of view?

The Loaner's Logic:
"I casually mentioned the show to the Borrower, and he enthusiastically agreed to go together. I didn't pressure him at all. Since I would be passing by the ticket office later that day, I offered to get the tickets for us. That way, we could get the best available seats. Sure enough, ours were third row.

With each passing month, I avoided the topic of the tickets, because I did not want to make it a big deal. I know the Borrower has debt. And yes, he makes less money than me, but that doesn't mean he should get everything for free. Actually, I think it's wrong that the Borrower's friends are always treating him, just because they make more money and are aware of his credit card troubles. The Borrower is an adult, heck, we are nearly the same age. He makes a decent salary, but the main problem is his poor financial management. If friends are treating him all the time, the Borrower will never get his finances in order."

The Borrower's Defense:
"I heard great things about the show and really wanted to see it. The tickets were expensive at $100 a piece, but everyone's told me it was worth the price. I am tight on money now, but then again, when aren't I? I'm sure the Loaner won't mind if I pay him back later for the tickets. He makes way more money than I do, and it won't kill him if he doesn't get the $100 bucks immediately. The show is a few months away, and I can definitely get him the money by then.

Anyway, the Loaner knows I've been trying to be better with my money. I've already told him that I cut back on my 401K contributions to put more money towards my credit cards. He knows that I've had tons of expenses lately. I had to borrow money from my sister for that wedding, and there are three parking tickets in my inbox waiting to be paid. I'm trying hard to get rid of my debt, but I still have to live my life! Since I'm back in the dating game, I can't stay home every night. Plus, I save money in other ways, like bringing my lunch to work, going to happy hours for half-price beers, and only buying clothes on sale."

What Does $100 Mean to You?
Depending on your situation and how you value money, $100 may be a little or a lot. From my perspective, it is a lot.

As a one-time deal, I agree with It's Just Money that $100 is certainly not worth breaking up a friendship. But what if $100 becomes $1000, or one instance turns into multiple?

In all cases, it is the Borrower's responsibility to fork up the money as soon as possible. If the Borrower doesn't have it, let the Loaner know. Remember, this is your friend, not some slimy car dealer.

And for G*d's sake, do not put the Loaner in the position of having to ask for it!

I think most Loaners will agree this is the worst part about lending money to friends. The Borrower is being inconsiderate by spending money frivolously in the Loaner's company, and ignoring the loan will only foster deeper resentment.

Growing up, I turned down invitations to dinners and parties, because I didn't have the money and didn't want to borrow it. I hate feeling indebted to anyone, even if it's over a dollar. Borrowers, you can say NO.

In my adult life, I am finally in a position to loan money. I've lent small and large amounts, but do so conditionally and cautiously.

You may call me judgmental, but I have decided not to lend money to people I deem careless spenders or serial borrowers. Nor would I really want to be friends with them.

When money comes between friends

2006-03-08T13:00:00.000-05:00

To borrow or not to borrow? To lend or not to lend?

The Loaner makes good money, has saved up a sizeable emergency fund, but has put very little towards retirement.

The Borrower makes a salary that is modest but plenty for one person to live on, has credit card debt in the low thousands and no savings, but has put a significant amount towards retirement.

Both are in their early 30s, single, and sociable.

Last fall, a popular comedy show announced it was coming to town this spring, and advance tickets went on sale. My friends begged me to go, but I refused primarily for two reasons: the show didn't appeal to me, and I thought the tickets were too pricey at almost $100 per person. To get the best seats, the Loaner quickly bought tickets for the two of them, and the Borrower promised to pay him back.

Last week, they went to the show and had a fun time. But the Borrower still hasn't paid back his loan.

During the several months between purchasing the tickets and attending the show, these two friends frequented many bars and restaurants together and in groups. Yet no money for the ticket has exchanged hands.

The Borrower hasn't forgotten about the loan, but says he needs to pay off parking tickets and other debts first. The Loaner, who has since seen the Borrower spend money on social outings, is becoming increasingly annoyed by the excuses.

Surely you are shaking your heads, because at some point, we all have been the Loaner, the Borrower, or both.

Who do you think is at fault here? Is the Loaner wrong to be upset? Is the Borrower wrong for having fun instead of paying back the loan sooner?

In my next post, I want to examine the two perspectives. (Personal disclaimer: Having been burned before, I have decided not to loan money with the exception for emergencies.)