But, my question is, “What have we learned as individuals?”  Basically, the way I see it, we’ve got two problems going on, what the government has done to us economically, and what we’ve done to ourselves.

In this last year, many of our own budgets have been cut, due to tanking investments, job loss or benefit reduction. Permanent personal recovery will take time and effort for a lot of folks. It will also take a change in behavior on the parts of consumers.

I happen to agree with David Walker’s take on the world. In case you were sleeping in a cave these last few years, Mr. Walker was one of the original harbingers of economic doom clear back in the Bush years. I call him a prophet. As former Head of the U.S. Government Accountability Office (GAO), he predicted the very situation we’ve been facing in 2009, including the health care crisis, over spending, the near demise of the value of our dollar, etc.

When I’ve listened to David Walker, I see many correlations in the federal crisis and in our own financial situations. Nearly every issue the country has faced or is facing fiscally is similar to our personal cash crunch.

That’s why I reiterate the question, “What have we personally discovered from the economic crisis?” The adage, “Those who do not learn from history are destined to repeat it,” comes to mind.

Here’s what I think we should have learned by 2009’s brush with fiscal death:

Our personal spending habits need to change. Let me give you an example: I’ve got a friend whose husband currently nets a salary of over 65K as a professional. She’s working as a nurse full time and as a QMA part time. With a combined income of over 100K annually, they’re considering filing bankruptcy. My friend’s had no major medical issues, or giant fiscal shift, except for a freeze on commission bonuses for the last year at her husband’s work. Maybe I’m crazy, but if you can’t live on a 100K a year, in my book, you don’t deserve that kind of money. Or you need to go to a financial boot camp to be re-educated. In spite of my friends’ economic issues, they have a skiing trip planned and are forever remodeling. They’re still spending furiously,(but now on credit, without paying it off in full). Every purchase is “the last big one” and every month it continues. It’s hard watching a friend do this to herself. I’m fighting the urge to have an intervention on her behalf. This case is not isolated, by the way. According to prophet, David Walker, “Americans are living beyond their means.” It’s true. If all we learned from this last two years was to put our purchases on credit cards and take out extra loans, then we’ve learned nothing.

Americans need to proportion their spending in line with their budget. In spite of how tempting “Cash for Clunkers” or how attractive the current mortgage rates are, we still need to hang onto our money or make best use of it. Buy a used car in cash, the old fashioned way. Take advantage of the mortgage rates, but buy down from what you think you can afford, to what you know you can easily afford (including renovations, insurance, taxes and utility bills for said home). Like the government, endlessly spending (albeit even for some very altruistic programs)- if you can’t afford it, you don’t do it.

Credit and lenders are not the devil. Our own impulses are. It’s not the banks that got us in trouble. And it’s not the credit cards. It’s our misuse of them. Had we turned down banking offers to re-finance or dampened our spending, much of the fiscal damage that occurred in these 2 years would have been a tremor to the economy instead of a giant earthquake. I know many people who don’t abuse credit cards and actually make money using them, via rewards and cash back programs. My own paternal grandpa was a banker and a farmer. He’s in his late 80’s, and has a very modest home. I’m guessing at one time he could have made a shift to an upscale place, but he didn’t. I think his furniture is dated, circa 1970. Grandpa’s made good choices, curbed fiscal impulses and along the way, even had opportunity to help others.

 Place less value in stocks and more value in savings. I’m going to get dragged outside the city gates and stoned for this one. But, none-the-less, I believe it to be true. The thing is, we want our money to grow. We all desire a retirement nest egg, right? So stocks seemed like the easy way to keep spending, while still acquiring that nest egg.However, if you’ve got cash, you’ve got cash. Ain’t no one gonna take it away. Let the economy fall to its knees, and you’ll go on. The reality is, interest rates in savings accounts are barely existent.  Even the online banks, who offer “great rates” aren’t too impressive. So to save for retirement, in a traditional means, is to truly cut spending today. Your money won’t quadruple in four years, like some stocks have in the past. You’ll have to save more. But money in the bank also won’t collapse, costing your home and leaving you penniless for retirement, either. (At least there’s a federal guarantee if the bank goes belly up). I’m not saying stocks and money market funds are a totally bad idea.  I’m just commenting that we need to curtail how much value we place in a risky business, compared to good old fashioned savings. If the money fairy ever blesses me with extra cash, I’d be open to a few stocks. But I’d be sure to have savings built up first. Stock investing would be money I’d be open to lose if it came to it. (I think I’d rather invest in a good pair of Italian shoes, actually. At least those won’t lose their rich Corinthian Leather smell).  

Say “NO,” wait on purchases, be frugal as a permanent way of living. Some folks have learned this year. Their fiscally penitent at the moment, taking the pledge to never overspend again. But I wonder how this will look in four or five years? Are these same individuals going to go nuts with spending again? Let coupon shopping, buying bargains, and being frugal with fuel, utilities and expenses be a way of life, not a temporary fix. It also means saying, “No” to purchases. Or waiting on them. You’re offered a “free” upgrade on a cell phone, which actually costs you another hundred bucks? Say “no” unless your phone breaks and you’re S.O.L without it. Don’t just buy because it’s on sale, buy because you need it. And when you do have to purchase, shop for a great bargain. 

 Make your kids wait on stuff too. It’s ok that “all their friends” have something they don’t. If you’ll be strapped to purchase it, make kids wait. Trust me. I’ve got five kids who’ve waited all their lives for some luxuries. My very youngest a couple of years ago, (age 12) desperately wanted a Nintendo DS. As a parent, I’d loved to have bought one. She’s a good kid. But I couldn’t afford it. I already pay for struggling college kids’ car insurance and had just put braces on another child. My daughter took her Christmas money, from aunts and cousins, to Wal-Mart and bought a Nintendo on sale after the holidays. She’s treasured it since. She didn’t die because she waited almost two years after her friends had one. Your kids won’t die either.  

 Food for thought, while in the pre-recovery mode. I’ll leave you with David Walker’s words. In my opinion, greed, lack of fiscal accountablity, poor budgeting and spending beyond our means, are common demonimators we’ve shared with the government.  I know at one point, I’ve been guilty of all of them. But I’m trying to recover and relearn my own spending.  Let’s recover in the grassroots as well as federally.

 

 

 

 

There’s another MSN Smart Money Blog I’d like to share with you today. It was pointed out to me by a reader. I, in turn, would like to share it with you.

Jim Wang, from blog site, “Bargaineering”, guest posted on MSN’s Smart Money Blog, June 17, 2009, his inflammatory blog, “Devil’s advocate: Don’t donate money to charity.” He then proceeds to list four reasons why it’s fiscally unwise to give additional “hard earned tax dollars” to these organizations when your tax dollars are already sneaking in the back door through subsidies.

Also with all respect to Mr. Wang, is his belief that these charities do not “teach a man to fish”, but instead cause the lazy to suck money out of the system by lingering in homeless shelters and soup kitchens. He suggests one alternative is to withhold money, thus forcing the homeless to find another option, (like work). (Why do I feel like I am in a Dickens novel when I look at those words?)

Two other reasons not to donate to a charity, according to Jim Wang are high administrative costs and the ease with which people give money versus physical help. Jim states, “Money is too easy.” Rather, he asserts, charitable organizations would rather have our time and effort, in lieu of money. ( I am sure he’s polled the charities of his choice for this answer).

I have a fair amount of respect for charitable organizations, having been helped by their generosity in the not so distant past, having been a volunteer myself, a financial donor, and also for producing several charitable activist children.

Here is my Angels Answer response to the Devil’s Advocate.

Angels Answer: Why donating to a charity makes sense even in a tight economy:

Subsidies from the federal government are not enough to fund all costs. Please see the recent Johns Hopkins University study, of over 360 not for profits, released June 29, 2009. “Contributing to this stress has been a perfect storm of impacts including declining revenues (51 percent of organizations); increased costs, particularly for health benefits; declining endowments; and decreased cash flow as a result of restricted credit and government payment delays”.  The full study is attached via link below. Basically, expenses are up, donations are down, and the numbers needing assistance are skyrocketing, beyond federal budget subsidies. These organizations can make it, but they do need our assistance bridging the gap.

 Teach a man to fish? Many not for profits and charitable organizations do just that by employing those they assist. The South Bend, Indiana, Homeless Shelter is a model for this, by having a step by step model for individuals to work or educate themselves out of the program. Also, most Salvation Armies, Unemployment offices, domestic violence centers, and other not for profits do employ their clients. Give a man to fish, does not mean throwing him to the wolves while clutching his fish. It means assisting him or her over a period of time, which these organizations need money to do. If we feed the homeless in soup kitchens, but never teach them life skills, we are shorting humanity itself. And teaching job skills IS what many of these organizations are doing.

 Administrative costs are necessary. How many pastors could preach and feed their families without a salary? Would you like to run a crisis pregnancy center or a homeless shelter with no pay?  It’s my guess that these salaries are for the most part, significantly low already, without a fiscal ax being implemented by the public. These are to a degree businesses. They are in the business of helping others. As such, they do have operating costs, like it or not.

 Helping hands don’t take care of  all expenses. Mr. Wang asserts that helping is more needed by these organizations than dollars. “Money is too easy.” I attest charities need both. My local Boys and Girls Club purchases over a thousand book bags, complete with supplies at school time. By purchasing in bulk, the BGC makes the donation money stretch further. These organizations need both cash and helping hands. Frankly most organizations these days probably need mass quantities of each.

 Give how you can, folks. Whether it’s your time or your money, but realize the impact you have in generosity. There are many times I embrace the inner tightwad. Donations to charities are not included in that thought process. Sorry Mr. Wang. I’ll back you on bargaining and being thrifty, but not in this “revisitation of Scrooge” venture.

You can read the Devils Advocate by following this link:

 http://blogs.moneycentral.msn.com/smartspending/archive/2009/06/17/devil-s-advocate-don-t-donate-money-to-charity.aspx

“Perfect Storm” of Fiscal Stress Hits Nonprofits

 http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=922

This week, I’d like to take you on a walk in the shoes of those who have no health care. I am one of those huddled masses. I grow weary of hearing Washington give their advice on a topic few of them have experienced. Walk in my shoes for a decade without health care and you can offer an informed opinion.

In light of recent health care reform legislation, I thought I’d give my side of this, or rather that of the estimated 46 million Americans who do not have insurance. I am not a politician. Likewise, I’m not sure America needs my humble opinion how to fix the problem. 

But there is a health care crisis.  And a very real problem exists. I am pretty sure we all agree on some varient of that.

This site, by virtue of its name, is a budgeting spot. Medical bills play an important part in debt management. If you are blessed to have health insurance, this may give you a bit of insight into a topic congress and CNN are force feeding the public.

How did I become uninsured?

About a decade ago, our family business went under. I was in the process of chemo and radiation. When the company died a slow and painful death, it took with it my insurance coverage. (For a better synapse, read the tab here, “Who is Mrs. Bankrupt?”).

Post divorce, based on my child support of $1000.00 a month, and the work I picked up cleaning offices while I went to college, I made too much for Medicaid, and too little for being able to afford insurance. Nearly all the unenlightened told me about the “can’t turn you down” program my state offered. Based on two kinds of cancer, two life threatening blood clots, and a latent heart problem, my “Can’t-Turn-You-Down” premium was $774.00 a month AND covered NO preventative care (like the very scans I needed to track any reoccurrences).

No folks, the insurance company didn’t turn me down, they just made it so that no one but Donald Trump could afford the premium. 

By the way, Medicaid’s income threshold today for a family of two is that you must not exceed $19,378.00.  At that time, and always through this decade, I have been above their guidelines. You’d about have to be just to put a roof over your head and those of your family.

 In other not so nice words, “You’re screwed if you work and want Medicaid.” 

And, if you have any medical history at all, it’s likely you can’t afford the premiums from insurance. 

See the lovely paragraph below, copied straight from Medicaid’s website-

“There are many people who are poor, with incomes below the poverty level, who do not meet Medicaid requirements because they do not fit within the designated eligibility groups.  

  Based on 2009 Federal Poverty Guidelines, a family of two would need an income less than $19, 378 to qualify for Medicaid assistance”. DID YOU CATCH THAT? “THERE ARE MANY POOR PEOPLE WHO DON’T QUALIFY?”

 We have a crisis born of inflated medications, overpriced services and doctors who have been forced to sell their souls in order to practice. 

 

Why didn’t I just get a normal job that offered insurance?

There were numerous reasons. With five small kids still at home, childcare would have eaten up my wages. (At a ten dollar an hour job, I would have netted roughly $360.00. Childcare for five kids in community was around 200.00 plus dollars a week, back then. I was reasonably certain we could not live on $160.00 a week and child support).

Without a degree, and having my only work experience being with a now defunct company, my income prospects were poor.  I started my own office and new construction cleaning service because it allowed me to be with the children much of the time and work flexible hours so I could attend college. Cleaning paid better than any other job I could find at that time. A lot better. 

I was no slug, feeding off the system, folks.

But damn, did I feel it when I had to go to the doctor.  

 Tomorrow and throughout this week, I’d like to talk about what it’s like to not be able to get medical treatment, what it cost me in the way of finances & why I lost a house  over medical bills.

 I want to hear from you this week if you have input on health care. (or lack of it).

You’ve shelled out a small fortune via applications and testing and mandatory fees. Now it seems that there should be some sort of break for parents. (Like a free spa day where muscular, non-verbal men bring us mineral water and massage our weary carcasses). Alas, after you’ve gotten the kid accepted, it becomes time to dish out yet more money outfitting the dorm.  With three kids already experiencing higher education, I want a punch card that prohibits me from this process for the rest of my life.  

Here’s a rundown on what you need to consider:

Your kiddo will probably need a mini refrigerator, microwave, dishes, flatware, cups, television, blankets, pillows, towels, a fan, computer, (most schools are encouraging laptops these days) and a printer.  Don’t forget paper for printer, power strips, extra ink cartridges, etc.

Purchase personal items like soap, shampoo & conditioner, toothpaste, medicine, dish soap, towels, shaving items, Kleenex.  Send food that can be prepared in the dorm such as; soups, instant foods, granola bars, trail mix, oatmeal, cereal & canned ravioli are great items for late/night early morning munchies.

Dorm rooms often are often equipped with extra long beds. It pains the tightwad in me to have to buy sheets, when I have a linen closet that rivals Martha Stewart’s. Most dorm rooms are NOT carpeted. It is suggested to purchase an area rug to avoid the hospital ward look. 

So looking at this list, comes the vital question, “How can I save money?”

Here’s what I recommend:

1. Get to know the child’s roommate ASAP. Most colleges provide this information. Contact the student’s parents and see what they are providing.  Typically, the other parent is relieved to split expense. One of my kiddos had a roommate whose parents sent a fridge. We in turn, provided a microwave.
2. Armed with this knowledge, start looking on Craig’s List or in garage sales NOW for the future. Even if your kiddo is a senior in high school this year, it’s time to stockpile dorm stuff.  Our family saves about half doing so in advance.
3. See if there is a school posting from graduating students who want to unload a ton of their stuff cheap. Call the school for recommendations.
4. Go online for bedding. The best time to buy bedding is in the spring. Prices go up in the late summer/early fall, but watch for sales.
5. To save computer expense, find a good rebuilt one from a reputable dealer. It is possible to find a new one for cheap on sale- just be sure it’s equipped with software and has lots of memory.
6. Pick up food in pieces, rather than in one giant shopping trip pre-college. It’s easier on the budget to add a few items a week. I buy, starting early summer, non-perishables every grocery visit till the week of college.
7. Garage sales and discount stores such as Dollar General have great finds on dishes, flatware and drinking cups.
8. You will want to pick up medicine the same as groceries, weekly. My suggestions for a “first aid” kit are pain relievers, band aids, Tums, hand sanitizer, cough medicine, decongestant, cough drops, anti-biotic cream.  Do NOT forget a thermometer!  The worst calls I get are from my college kids, “I’m sick.” “I think I have high fever.”  Ugh! A temp of a 104.9 might mean my advice is, “Do not pass Go. Proceed immediately to the ER.” Versus a temp of 99 that may allow waiting till the free clinic is open.
9. Go to an outlet for carpet scraps.  

 It takes time to forage for these discounts and sales. But when I am prepared, it saves a bundle.  I’m in the habit now of continuous college prep for my kids. I’m not sure what I will do when I don’t need mass quantities of canned raviolis stacked up, awaiting a child’s college experience.  Perhaps then I can actually take that spa day, huh?  Send me your ideas on saving and surviving College Prep 101.

August looms a mere eight weeks away, bringing with it the giant sucking sound of your cash being drained away as your child leaves for college. Maybe you have a high school student with college aspirations and want to start saving. How much do you budget? A touch of preparation saves a ton of dough and much Zanax, folks- trust this mother of five.  What are these costs?

Almost all parents with college bound kiddos can quote tuition fees, (around 15K annual room and board & tuition for state schools). I, too, knew these statistics, but breathed a heavy sigh of relief when there were ample grants, scholarships, and student loans to get my child’s foot in the door of the University of her choice. Whew! That fiscal hurdle was crossed.  I thought. I mean, the tuition covers room and board, how much more could they need, right?

That was about six years ago. I am far smarter these days, having three children with college experiences.

For starters, let’s talk getting them there. Pre-college there are SAT’s, which many students take two or more times and keep their best score.  You can plan on spending about $30-$50.00 each for these.

Application Fees: Applying for colleges takes in many cases, non-refundable application costs, which can range from $25-$200.00 or more, depending on the school.  Most kids apply for four or more schools.

 Then the “Letter of Acceptance “comes. This is the day you celebrate with joy, (and you should, because it is quickly followed by several other letters asking for fees, one upon the other). 

Yet More Fees: There will most likely be a student fee and a housing fee. Countless letters will ask for cash in a myriad of ways, some required, some merely sales pitches. There will be an orientation, which is typically mandatory for freshmen and usually comes with a price.  And F.Y.I, even if your son or daughter are on a full grant or scholarship, these upfront fees may not apply to the “free ride” and most often are still out of pocket.

Crazy Mandatory Fees: This week, I took child number three to Ball State University for her mandatory orientation. After coughing up something like $225.00 already to BSU for above costs, I become very crabby over additional fees. I know that an education is worth every penny, I just hate parting with yet more of my money.  It’s primeval in me, I know. I become ugly.

At this recent event, the required cost of eating there was around fifty bucks for a day and a half (two lunches, one dinner, and a breakfast). Granted it was for my daughter and I, but still this is for a family of people who eat a yogurt and a granola bar for breakfast and consume ramen noodles as a staple food group. We’re cheap.

Me: What if I don’t eat that much? Do I get a rebate?

Orientation Leader:  You will find that money will go quickly, given the cost of our food.

Me: If it’s expensive, I would be happy to look at ways to reduce your budget, I do that for a living.

Orientation Leader:  Umm.

Me: Hey, I am on a restricted diet.

Orientation Leader: We have a variety of ways to suit your diet. What are your restrictions?

Me: My daughter and I only eat things that cost a dollar, it’s genetic.

Orientation Leader: That will be $50.00. We take cash, check or credit card.

If you stay with your kiddo at these orientation gatherings, you will most likely be charged a fee to sleep in an un-air conditioned dorm, where you will make your own bed and sleep on a rubber mattress coated with the DNA of countless college students.  This is not to mention the cost of road trips to drive there.  (Nor the parking costs often charged to park while paying for the orientation experience).

Then there are lab fees, student parking passes, etc.  Health exams, vaccinations, sports fees. You are also “encouraged” to visit the bookstore, where fifty dollar sweat shirts beg to be purchased.

What I suggest to counter these unexpected fiscal gems is to be aware in advance and to start saving if you have a high school student. I anticipate spending from high school senior year to college entry around $500.00, for SAT’s, applying to colleges and required entry fees.

Then I plan on another $200.00-$300.00 for added costs, such as orientations, fuel to get there, student ID’s, parking passes for students, and up front lab fees.

Also, a rule of thumb regarding books and financial aid- typically financial aid is not released to the school until a few weeks after the semester starts, so plan on having cash to buy books each semester. This is around $300.00- $500.00. I have never lucked out paying less, given a combined eight years of college for my kids thus far.

If you know there are a couple of colleges your kiddo is aiming toward, try contacting the schools and ask for these costs. Or search websites for info.  Bottom line:my budget just to get the critters off to college- $1,300.00 (without dorm expense).  You may adjust yours as needed.

Got a college student? I would love to have your input on budgeting!

Next blog stop on the money train, “Dorm-land”.

They weren’t in the car yet, but I girded my loins to prepare for battle. Brightly colored papers clutched in my youngest daughter’s hands bore evidence of impending drama.  Extracting one she proclaimed, “Mom!” “There’s a gymnastic camp right here in town!” “It’s only $200.00!”  

From middle daughter, aka, the “Cool Teen”, a more stealthy approach: “Hey Ma, can I hang out with my friends this Friday?”  It took some pushing on “Cool Teen” to discover “hanging out” was at an amusement park, (estimated cost, $70.00 for admission plus food).

A third country in the Allegiance of “Spend Mother’s Money Faster Then She Earns It” was heard from later that day.  “Like, there’s like, a Warp Concert Tour, like, next weekend!”  (Tickets for this hard core, head banging, extravaganza were, “like,” $50.00)

It was 4:10 p.m.  If I calculated correctly, my children had designs on $320.00 of my money that day alone.  Calgon take me away!

 I happen to love summer vacation. It’s an opportunity to spend time with my kids, not live by a schedule and be carefree. But there’s one seasonal area, I have come to dread- the fiscal drain.

Why do parents feel compelled to shell out so much money for kids?

 Because we don’t have backbone, that’s why!

 Think back to your childhood, do you remember being bored if you weren’t entertained?

 Boredom? What the heck was that?

How do we escape with sanity and our budget intact?  Often it’s not the big purchases, like a pricey camp, that do us in- it’s the nickel and diming of summer time-ice cream, movies, arts and crafts, etc.

My advice is two-fold:

First- budget! Second- be fair, but strong.

Here’s what I do:

If my income allows, I permit each child to pick one “big” ticket item such as a camp experience, for the whole summer.  This means I don’t have to work continuously to provide constant “fun”. And it teaches them about choices.  As adults, what gets us in trouble fiscally is feeling like we deserve it all. Why not teach kids that financial planning means choices?

 I also budget an extra $21.00 per week for small extras, split between all three girls.

Yeah, this sounds like I am being a tight wad. $7 a kid a week?

What will seven bucks buy?

A regular movie ticket (or a matinee plus small popcorn)

One round of miniature golf

Roller skating (skate rental plus admission)

“The Works” fast food combo meal at most chains

Bowling (two games plus shoe rental)

It’s what I can afford without breaking the bank.  If the kids do not use this amount, it carries into the next week and so on.  Hence, they need to (gasp) work for extra, save, or find “free things” to do.  I still have to remind them of this every summer. They grumble, but fall in place eventually.  

I do not “give it” to them as an allowance, as we also may elect to use this money for family purchases such as zoo or water park visits.

This helps me stay in budget and also gives them a medley of things to do, without feeling deprived.

 Parents, embrace your inner tightwad!

Don’t give your budget a summer vacation. Use this time to teach kids about money management.

Got a summer budget strategy to share with the class? I’d love to hear it!