Posts tagged as:

spending

Are You A Sneetch?

by Jaime Thompson on October 1, 2010

The SneetchesA quick tour of my house and it’s no secret I’m a Dr. Seuss fan. I love his creativity and the life lessons he always manages to sneak into the story regardless of how zany the words and characters may be. One of my all time favorites is The Sneetches, a story about a group of silly looking yellow creatures, some with green stars on their bellies and some without. Those with the green stars are deemed “the cool crowd” and those without are sad and desperate to be included. One day a “fix-it-up-chappie” by the quirky name of Sylvester McMonkey McBean arrives and seeing the moping Plain Belly Sneetches, quickly sets up a star-on machine. For a mere $3 each, the Plain Belly Sneetches can take a quick ride through this machine and come out with a star on their belly, giving them the appearance of being “cool”. Well as you can imagine the original Star-Belly Sneetches are none too pleased, so Sylvester McMonkey McBean puts together his star off machine. For only $10 they can have that star removed so they can once again declare themselves to be the best kind of Sneetch on the beach. The Sneetches get so caught up in their appearance they keep running through both machines “until neither the Plain nor the Star-Bellies knew whether this one was that one or that one was this one or which one was what one or what one was who.”* While they finally came to realize they were trying to discriminate and/or impress each other based solely on physical appearance, they spent every last dollar they had doing so.

Are you trying to impress people with things and stuff? Are you living paycheck to paycheck (or worse going into debt) trying to be somebody you aren’t? Is this the life you want? Or would you rather your friends be people who love you for being you, not whether or not you have a star upon thar.

* Dr Seuss. The Sneetches and Other Stories (Random House, 1961)

(photo by B3OK)

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How Many Hours Did That Cost?

by Jaime Thompson on August 31, 2010

Timecard

Getting ready to shop the upcoming holiday weekend sales?  Maybe you’ve already been busy with back to school shopping.  Have you ever thought to calculate how many hours of work those dollars spent just cost you?  It’s a powerful tool that might make you step back and reevaluate how you shop and what you buy.  I’m sure you have an idea of your gross salary, but lets look at what you actually take home after Uncle Sam, health insurance, and your 401k among other things take their share.  Go and get your most recent pay stub.  It’s in your organized file cabinet, right?  Divide your take home pay by the number of hours the paycheck covers.  What did you come up with?

Lets say your result is $20 per working hour.  So now we’ll apply that to your purchasing power.  Your $6 a weekday morning coffee and muffin habit means you have to work an hour and a half to pay for it.  The $60 video game, 3 hours.  Those must have designer jeans at $200 a pair cost you 10 hours at work.  $460 car payment is 23 hours in the office.  That one payment is over half a week of a standard 40 hour work week and we still need a place to live and food to eat.

Want another view?  Include the hours you spend commuting to and from work and any other work related activities you do outside of the hours that paycheck covers.  Sadly, that $20 just dropped even lower.  This isn’t a way to shame you into not spending your money, just a tool that might make you think about how hard you really work to make that purchase.  Remember it’s not just a dollar amount, but your precious time spent working to earn that dollar.

Photo: Time Card by flickr user TheGoogly, used under CC license

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Termites and Economics

by Derek Sisterhen on June 8, 2010

Ever wonder why your dining out budget has a tendency of blowing up in your face? Or how that nebulous “miscellaneous” category in your budget inflates to two or three times what you planned?

Before you get to supply and demand in an economics class, there are two concepts you must understand. First, you live in a world of scarcity. That means that you have a limited set of resources to work with. Sounds like your paycheck; you have a set amount of money available to use.

Second, you live in a world of opportunity cost. That means that if you spend any money on any item at all, it not only costs you the price of that item, but it also costs you the opportunity to use the money elsewhere. Thus, if I save $100, that’s $100 I can’t use to buy groceries. If I spend $300 on groceries, that’s $300 I can’t use to go on vacation. If I spend $500 on a vacation, that’s $500 I can’t use to get out of debt (or buy groceries or save).

So, in essence, every decision I make with money has a ripple effect across all of my spending categories.

I met with a couple recently who felt so compelled to spend money on their children – because they loved to see them happy – that they weren’t making their mortgage payment. I told them they were living with financial termites: to the kids everything appears just fine, but the insides are rotting to the core. There would come a day when the money for “happiness” would run out and they wouldn’t have a home.

In their case, the opportunity costs of happiness spending are keeping the roof over their heads, being able to fund emergency savings, contributing to retirement, taking a family vacation. The list goes on and on.

Ultimately, a budget is nothing more than a list of decisions we make that will have a positive impact on our financial situation. In the execution, though, we tend to forget that overspending anywhere in our budget means we must underspend elsewhere just to get back to even. The consequences of this brand of forgetfulness are quite negative.

Kind of like termites.

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You’ll Never Make Enough Money

by Derek Sisterhen on June 3, 2010

When you first began working as an adult, how much money did you think would be “enough”? How about after you were five years in?

Even I recall performance reviews from years past where I thought, “If I only made 10% more, it would be enough.”

Enough for what? What do you work for? Do you work to maintain a certain standard of living? Do you work because you absolutely love what you do?

Did you know that only a little over half of all workers are satisfied with their jobs?

Often times we think about how much money we make in the context of what we want our lives to be like. A problem quickly arises here: the more money we have, the more money we tend to spend, and the more we’ll need to spend in the future to fully satisfy the “needs” of our lives. Psychologists call it the hedonic treadmill: that our expenses will rise to meet our income, no matter how much or how little we make.

This is how someone making $300,000 a year and someone making $30,000 a year can both experience the exact same level of frustration about how much money they make. One needs a little more to pay for a family vacation to Europe; one needs a little more to buy a new television. Neither will look back and recall how they used the last increase in income.

The problem with working as hard as we can to make more money to live the life we want is that we miss out on experiencing all that our lives are offering us today. We justify the trip to Europe because “we’re making great memories with our kids,” only to be confronted with the fact that all the work that went into making a little more cost us valuable time to engage our children at home on a daily basis.

While trying to make “enough” money we’re wasting time, the ultimate non-renewable resource. And we’re probably wasting money, too.

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