Why we’re all so weird about money

By Caitlin Kelly

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Few issues are as fraught with emotion as how we get, spend, save or give away our money.

If you don’t have enough to survive, every day becomes an emotionally and physically exhausting battle.

And when you live in a country devoted to bare-knuckled capitalism like the United States, if you don’t have enough, the social safety net is weak and thin.

The federal minimum wage is still an absurd $7.25 an hour — I’ve never paid any of my part-time assistants less than $12 an hour, even 15 years ago.

American unions now have the lowest membership in a century, even as one third of American workers lurch into what’s now widely and risibly called the “gig economy”, a jaunty and inaccurate euphemism for fiscal insecurity.

This week Richard Thaler just won the Nobel Prize for Economics.

From The New York Times:

 

Professor Thaler’s academic work can be summarized as a long series of demonstrations that standard economic theories do not describe actual human behavior.

For example, he showed that people do not regard all money as created equal. When gas prices decline, standard economic theory predicts that people will use the savings for whatever they need most, which is probably not additional gasoline. In reality, people still spend much of the money on gas. They buy premium gas even if it is bad for their car. In other words: They treat a certain slice of their budget as gas money.

He also showed that people place a higher value on their own possessions. In a famous experiment, he and two co-authors distributed coffee mugs to half of the students in a classroom, and then opened a market in mugs. Students randomly given a mug regarded it as twice as valuable as did the students who were not given a mug.

This “endowment effect” has since been demonstrated in a wide range of situations. It helps to explain why real markets do not work as well as chalkboard models.

Money is so often a proxy for other, often deeper, darker issues: power, control, status, humiliation, (why Hollywood power broker Harvey Weinstein could be a sexual predator and so many people who relied on his goodwill to help them get or stay rich remained silent for so long.)

I’ve been fairly obsessed with money for a long time.

It’s caused no end of drama within my family and I’ve been handling my finances alone since I was 19 and moved out of my father’s home to live alone in a large city and pay for university from my earnings as a writer and photographer, with a small monthly income from a grandmother.

It taught me very early to know my worth and to bargain hard for it. I still remember the joy of earning 18 percent on a Canada Savings Bond, whose value quickly doubled.

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One place I do spend money freely — travel

 

I also remember vividly being so strapped then that it took me months to save the $30 I needed to buy tights and slippers so I could attend a free ballet class.

My living expenses were phone/rent/tuition/books/clothes/groceries/answering machine.

No car. No TV. No cable.

My family has plenty of dough, but made clear to me to never ask for a penny of it, nor ever expect to run home for help. I inherited some money from my grandmother in my mid-20s, which helped me to to buy an apartment, a security for which I’m very grateful as I’ve bounced in and out of the job market, survived three recessions and work as a full-time freelance journalist — an industry now in complete chaos.

I break into a sweat when spending money on more than the basics; (except for making our home lovely and travel.)

My cellphone and computer are probably four or five years old, (no big deal.)

But our Subaru has 180,000 miles on it, is 16 years old and cost us $1,800 in repairs in recent months — so we’re finally about to lease a gorgeous luxury vehicle.

The thought of committing to anything beyond our monthly health insurance and mortgage payments is scary even though we have the cash, (money we’ve saved for years), and emergency savings, so this is not — as Thaler would nod knowingly — 100 percent rational thinking.

 

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Airfares? I’ll splurge on those…

 

Some of the financial challenges I see so many women struggling with:

1) being scared to ask for more (i.e. raises, bonuses, negotiating a higher salary or fees)

2) giving money and gifts to children and grand-children to their own financial detriment

3) under-earning because of sexism, racism or other institutional barriers

4) under-earning while taking time away from paid work to care for children and/or others

5) failing to understand the devastating financial impact of divorce and planning for that. I had a prenuptial agreement in my first marriage and could have ended up in very dire straits without it.

 

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Does handling and managing your money cause you anxiety?


 

Money: getting/spending/saving it

By Caitlin Kelly

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One of my pleasures is enjoying culture — and yes, it costs money!

A friend recently saw an ATM receipt that left her gobsmacked — $139,000 — in the hands of a young woman, maybe in her 20s.

My friend is a single mother who works in a creative field, frustrated that she has yet to hit the level of income she craves, deeply envious of the stranger with so much more than she.

I get it — when I found out that a friend of ours, someone our age, earns $500,000 a year, I was stunned.

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The level of poverty in the U.S. is deeply shocking — given the astonishing wealth here

My husband and I are both working full-time freelance, with a mortgage that won’t be finished for another five years unless, somehow, we make a lot more money and can pay it off sooner.

What’s currently killing our ability to save — or enjoy much beyond basics — is $1,800 month in health insurance costs; his, heavily subsidized by his former employer as a retiree while they soak me the full price.

Yes, there is cheaper insurance, but it all comes with huge deductibles and co-pays.

The getting and spending, (and saving and investing, ideally), of money is often a lifelong challenge for all but the very wealthy.

But it comes down to basic economics: if you’re always broke, you’re under-earning or living beyond your means.

If you’re mired in poverty — with little education and/or weak job skills, multiple dependents and/or health issues — it can feel, and be, almost impossible to climb out.

And I know far too many women, of any age, who remain somehow terrified of money — especially when asking for it or more of it, (i.e. negotiating an initial salary, asking for raises/bonuses/commissions/better freelance rates), and handling their finances confidently and intelligently.

As if, for some reason, we don’t deserve it.

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It does mean taking charge.

It does (gulp) carry consequences, no matter how much action (or inaction) you choose.

I once attended an information session at the U.S. firm where I keep my retirement money.

It was laughable.

As in laughably bad, full of jargon and weird, arcane advice possibly of value to people with millions to manage — or waste.

Not me!

Selfishly, as a journalist, I get paid to learn, and, in writing about personal finance for the Times and Reuters and others, have learned (and taught readers!) a lot about handling money.

I also read the financial pages of two newspapers daily and read several business magazines to keep abreast of what’s happening in the domestic and global economy.

If you don’t know the word fiduciary, learn it and make sure anyone going near your money professionally is one.

One of my favorite people, and bloggers, is writing candidly about getting smarter about money. I admire her for being forthright and questioning her decisions publicly.

People rarely do.

I urge anyone thinking about how to better handle their finances to read this fantastic book, (which I reviewed in The New York Times, and am now friends with its author), Pound Foolish. It’s not a how-to, but a smart and insightful overview of the personal finance world.

She also writes a smart and helpful advice column for Slate.

My other favorite money columnist is Michelle Singletary, with the Washington Post.

ALL IMAGES COPYRIGHT CAITLIN KELLY 2013.
Still there, since 1927, the Monte Vista Hotel in Flagstaff, Arizona — travel has always been a priority for me

Jose and I were were lucky to both have attended and graduated from college debt-free; he on full-ride scholarships, I attending Canada’s best university for $660 a year. (No, there’s no missing zero.) Neither of us attended (or needed) graduate or professional school.

Nor did we have children, saving us an estimated $200,000+ per child to raise.

Nor do we have dependent relatives.

My priorities have been travel and retirement.

But I admit it — it really did feel useless and annoying to keep putting money away year after year after year for what I hoped would one day help fund a retirement, denying myself so many purchases, (newer car, nicer clothes) and pleasures in order to do so — until that sum finally grew to six figures and I thought, with relief and pride: I did that!

And, yes, for many reasons, saving money is difficult for some people, and impossible for those who don’t earn enough to get past subsistence.

But it’s also urgent (and tedious!) to distinguish between wants and needs, between what everyone around you may boastfully own, often on credit, (new phone, new car, huge and lavish wedding, bigger house, etc.), and what fits your financial priorities.

Peer pressure to keep up — i.e. spending! — will kill you and your financial future.

It’s one reason I constantly urge women, especially, who earn less and live longer, to always, always ask for more — and to read this book that tells them how to do it.

Do you find handling money frightening or intimidating?

Any great tips to share?

Would you rather buy more stuff — or have more fun?

By Caitlin Kelly

This piece in The New York Times piqued my interest:

American consumers are putting what little extra money they do have to spend each month into eating out, upgrading their cars or fixing up their homes, as well as spending on sports gear, health and beauty. Spending at restaurants and bars has jumped more than 9 percent this year through July compared with the same period last year, and on autos by more than 7 percent, according to the agency.

Analysts say a wider shift is afoot in the mind of the American consumer, spurred by the popularity of a growing body of scientific studies that appear to show that experiences, not objects, bring the most happiness. The Internet is bursting with the “Buy Experiences, Not Things” type of stories that could give retailing executives nightmares.

Millennials — the 20- and 30-something consumers whom marketers covet — would rather spend their hard-won cash on out-of-town vacations, meals with friends, gym memberships and, of course, their smartphones, many surveys suggest.

More stuff!
More stuff!

I’ve been thinking about this a lot as we’re finally, gratefully, at a point in our lives we need very little additional stuff. We’ve renovated two rooms of our apartment and own an array of sports gear, art supplies, camera equipment, the things we use for pleasure and for work. (We do need to replace our old car.)

It’s a huge relief.

I’ve never been a mall rat, the sort of person whose favorite activity is shopping. I enjoy it and sometimes take an entire day to do it, but rarely come home with more than one or two things, and usually nothing huge or expensive.

Like everyone, I have specific weaknesses — anything seriously antique, jewelry and lovely things for setting a pretty table.

One of the most fun things you can possibly do -- dance at 7am! Daybreaker, in NYC
One of the most fun things you can possibly do — dance at 7am! Daybreaker, in NYC

We’ve also saved really hard for years for our retirement, so can now release a bit more of our income for pleasure; saving 15 per cent a year is no fun, but — yes, really — it adds up.

I’m more eager now to spend what extra money we earn on travel, dining out, enjoying the many plays, concerts, dance performances and conferences available to us in and near New York City. We do not have children or grandchildren, nor, as many of our younger friends do, huge student debts to discharge. Frankly, we feel like outliers — we are very far from 1%ers but we’re not panicked about money the way many people are; the average American has saved stunningly little for retirement.

A ticket to the theater is a joy --- and privilege
A ticket to the theater is a joy — and privilege

In the next few months, we’ll attend a weekend workshop (for business purposes); travel back to Canada (by car), attend a few shows and concerts. We hope to be back in Europe after Christmas for several weeks.

My Dad heads off soon for a month sailing with a friend in Greece; at 86, with a new hip, he’s lucky enough to have the good health, strength and finances to keep enjoying his life. In this regard, he’s very much a role model.

How many things do you want to own? How many experiences would you like to enjoy?

Unless you’re wealthy, every expenditure of money means making a choice — the time needed to invest in earning the taxable income to buy the stuff, store the stuff, clean and polish and upgrade the stuff — or an amazing afternoon/evening/week/month/year creating indelible memories.

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We spent a recent Sunday in Manhattan (a 40 minute trip into the city from our home) seeing a show, On The Town, on Broadway, and splurged on box seats, at $101 each. I felt like royalty — they offered amazing sightlines and no squished knees; we sat in comfortable elegant Louis XIV-style armchairs. Before the show, we stopped in at Sardi’s, the classic, old-school bar and restaurant, for a Bloody Mary and a snack.

What a lovely, lovely day, creating memories we’ll cherish for years to come.

I’ve never once regretted any of the money I’ve spent on travel or meals or a day of skiing or a game of golf. But I’ve deeply regretted the money I’ve wasted on a pair of too-high heels (worn once!), clothing that just looked like hell or a really boring book that was, after all, a best-seller.

Sunrise from our friend's bedroom window in Maine
Sunrise from our friend’s bedroom window in Maine

Nothing that arrives in a box or bag is ever as pleasurable and satisfying to me as walking down a Paris street or having tea with a friend in London or catching up face to face with my sister-in-law in Toronto over a very long lunch.

How about you?

What makes you happier — stuff or experiences?

Any good ones you can share?

Which habits are you trying to break?

By Caitlin Kelly

Sunset in Donegal -- at 10:15 pm
Sunset in Donegal — at 10:15 pm

One of the best things about taking vacation — and the longer, the better — is shedding some bad habits (ideally!) while savoring the pleasures and challenges of a new or different environment.

So much easier to do when I’m not triggered by the same old patterns into the same tired behaviors.

For example:

I’ve been working alone at home in an apartment in the suburbs of New York for nine years. It’s lonely!

Hence a growing reliance upon social media for interaction that doesn’t require me to get dressed, get into a car, drive somewhere and….enjoy my life.

It’s become, as they say, thin gruel.

It’s too easy, too time-consuming and, most of all, increasingly frustrating because it doesn’t, at least for me, deepen intimacy, which is one of my joys in life.

Habits do make life easier; we don’t have to stop and think through why we’re making a specific decision. We just do it.

It was a great break for a week in Ireland to rent a cottage with no wifi or cellphone access. I didn’t miss it a bit! Badly burned by a huge data-usage bill from social media use when in Canada, I left my phone at home in New York this time. Jose dropped and broke his.

Instead we read, slept, took photos, drew, went for walks, talked at length to one another. Connected, with friends and with nature and with ourselves.

When we did have access to wifi by going to a nearby pub, we limited it to an hour or so a day to catch up on email, (some of it for work as we’re both freelance), and social media.

But it provoked some self-reflection on my part to realize how much time I’ve been wasting on “connecting” with others through social media, not face to face.

In fact, social media offers an easy way to procrastinate. It does almost nothing for my income. It rarely makes me much happier.

One habit I intend to keep -- a daily pot of tea
One habit I intend to keep — a daily pot of tea

The question?

What new and healthier habit can I — must I — now create to replace it?

Another habitual behavior of mine, is a default position of feeling anxious. It’s wearying and no fun and it’s been a habit of thought for decades. It comes from a very real place — when you work freelance, your income is precarious!

But it’s also exhausting.

As one wise friend says, “Don’t borrow trouble.”

My media habits need a shake-up as well, so I recently signed up (yes, on Twitter) to follow a French magazine and a Spanish newspaper, both to find story ideas and to expand my worldview far beyond the terribly limited one offered by American media.

On vacation, between jet lag and different light, we were up both much later and much earlier than usual — the summer sky was full light by 4:30 a.m. and remained light until 11:30. I took some of my best photos, walking barefoot on gravel in my nightgown, at 6:00 a.m., catching the light on dew in thick spiderwebs, a sight I never see at home because I never get up that early.

And yet I saw one just like it the other day on our front lawn. Why not start getting up early here?

Habit.

I need to broaden my horizons at home, not only when traveling.

Like…when I have a free day, I’d normally stick at home or head into Manhattan.

Habit.

Last night I behaved as though I were still on vacation — i.e. adventurous enough to try something I’d never done at home before. (Why is that?)

I went to our commuter train station and bought a ticket heading north an hour to a renowned concert venue to hear Cherish The Ladies, a terrific all-female band playing traditional Irish music.

It required a taxi to and from the station and a change of trains — would any of that be possible at 11:00 after the show? Fingers crossed!

Instead, I said hello to the pianist we’d met in Dungloe in a pub; she dedicated a song to me from the stage and mentioned my town and a dancer with them drove me home — as he turned out to be a next door neighbor.

Talk about positive reinforcement for breaking a habit!

Loved this recent story about a young Vancouver woman, and blogger, who declared a ban on shopping for a year — and lived well on 51 percent of her income. She’s eloquent and inspiring on how much of her shopping was habitual and, in some ways, mindless.

Now it’s gotten to a weird place where I feel not only uncomfortable spending money but I had to go into a mall to buy a baby present in a mall recently, and I felt almost sick in there because I was surrounded by ads. I felt overstimulated from being inside the mall. I don’t like the energy in there.

I felt this way in the Dublin airport when we were leaving to return to New York, surrounded by shops selling liquor and cosmetics and clothing and electronics….too much stuff! Overwhelmed, and grateful for the things I already own, I bought nothing — maybe a pre-flight first for me.

I loved seeing these gorgeous shawls -- so much better to take a photograph than buy and regret...
I loved seeing these gorgeous shawls — so much better to take a photograph than buy and regret…

Being mindful about what we do, how often and why takes some serious reflection.

It can be painful, and some of our habits, of thought and behavior, can be deeply rooted in emotions we don’t especially want to face or change.

Do you read Seth Godin’s blog? Loved this one:

Stop rehearsing the easy fears that have become habits.

Do you have a habit, or several, you’re also trying to break or shed?

When — if ever — do we just stop shopping?

By Caitlin Kelly

Every day, my email in-box (guilty!) fills up with notifications of sales from flash-sites like Gilt and One King’s Lane and Ideeli or from retailers I’ve purchased from before.

I delete almost every single one.

Every weekend, (yes, we still read some of our newspapers in print), a thick, glossy pile of flyers tumbles in a nasty tree-wasting avalanche from within the folds of the Times, each imploring us to spendspendspendbuybuybuybuybuybuy!

Consumer Spending
Consumer Spending (Photo credit: 401(K) 2013)

Between the easy availabilty of on-line shopping — a boon to the home-bound or retail-underserved — and a consumer-driven culture urging us to buy everything we see, right now, it’s an ongoing challenge not to spend money. Not to buy even more stuff.

The U.S. economy, a statistic that always somewhat horrifies me in its implications of rampant consumption, is based 70 percent on consumer spending — gas, food, diapers, gum, Manolos, trucks, Ipads, whatever.

So if we actually stop shopping, or slow down our spending on consumer goods, the economy slows. If you live in the U.S., and have any disposable income (such a bizarre phrase!) it can feel like some civic or patriotic duty to go spend some more money.

When I worked retail for 2.5 years in an upscale suburban New York mall, I saw the insanity — truly — of holiday shopping firsthand. People staggered into our store already so loaded with bags they looked like pontoons. They pawed through the racks, threw our stock onto the floor and shouted with anger when we didn’t have exactly what we needed when they needed it.

Ugly!

And yet very few Americans, even those with decades of earned income, have saved enough money to ever stop working.

In October 2013, USA Today reported:

A new report paints a rather grim assessment of how prepared we are for retirement. “The Retirement Savings Crisis: Is it Worse Than We Think?” from the Washington, D.C.-based National Institute on Retirement Security, says the typical American family has only “a few thousand dollars” saved for retirement.

“We have millions of Americans who have nothing saved for retirement,” says Diane Oakley, executive director of the NIRS. “We have 38 million working-age households who do not have any retirement assets.”

For people 10 years away from retirement, the median savings is $12,000. “Of the people between 55 and 64, one third haven’t saved anything for retirement,” Oakley says.

I read those statistics and wonder what is going to become of them; not everyone has children able or willing to rescue them.

Fortunately, (partly because we never assumed the costs of raising children), we’re way ahead of that $12,000 figure. We drive a 13-year-old vehicle and live in a one-bedroom apartment and I set aside the maximum for my IRA, even when I’d really prefer to spend that money on a long and fantastic overseas vacation, or some gorgeous new clothes or to take in all the shows, plays and concerts that Manhattan offers us.

Having significant savings is, for me, a much deeper comfort than anything I could buy.

Here, from Harvard Business School, why buying an experience (if you must buy anything at all) wins:

Conventional wisdom says that money can’t buy happiness. Behavioral science begs to differ. In fact, research shows that money can make us happier—but only if we spend it in particular ways.

In their book Happy Money: The Science of Smarter Spending, authors Elizabeth Dunn and Michael Norton draw on years of quantitative and qualitative research to explain how we can turn cash into contentment.

The key lies in adhering to five key principles: Buy Experiences (research shows that material purchases are less satisfying than vacations or concerts); Make it a Treat (limiting access to our favorite things will make us keep appreciating them); Buy Time (focusing on time over money yields wiser purchases); Pay Now, Consume Later (delayed consumption leads to increased enjoyment); and Invest in Others (spending money on other people makes us happier than spending it on ourselves).

I try to adhere to all five of these principles:

Paris - Île St. Louis: Berthillon
Paris – Île St. Louis: Berthillon (Photo credit: wallyg)

— I can still taste the salted caramel ice cream we savored at Berthillon on the Ile St Louis in Paris five years ago.

English: Ile St-Louis - Paris Français : Ile S...
English: Ile St-Louis – Paris Français : Ile Saint-Louis – Paris IV (Photo credit: Wikipedia)

— I’ve chosen to work fewer hours, (which restricts my ability to shop, given that I save 15 percent of my pre-tax income every year as well), to better enjoy my free time and have experiences I value more than buying more things — to take a long walk mid-day or have coffee with a friend or read a book instead of flogging myself into another 10 or 15 hours’ paid work. I ended up in the hospital in 2007 for three days with pneumonia after chasing money too hard, too fast. Never again.

— I tend to hoard gift cards for as long as a year before finally using them, as I did recently with a Christmas 2012 gift card from my husband, (it bought two great pairs of shoes on sale.)

— I splurge on small surprises for Jose whenever I can, whether a book or a pair of colorful socks or a dinner out.

In a season where so many of us are rushing about madly shopshopshopping, it’s easy to forget that a more valuable gift can be as small and essential as a hug, a night or two of babysitting for a weary friend, making a meal for an elderly or ill neighbor.

It doesn’t have to come in a shiny Apple-designed, (cheap Chinese labor made), plastic shell or turquoise Tiffany box, no matter what their ads insist.

 Are you sick and tired of shopping?

Dressing like a French woman — and shopping less

By Caitlin Kelly

Clothing in history
Clothing in history (Photo credit: Wikipedia)

As the air gets chilly here in New York — and much of the Northern Hemisphere — we’re pulling out our sweaters and scarves, putting on wool and leather (or not, if you’re vegan.)

For some of us, that also means pulling out the same garments, shoes and accessories we’ve been wearing for years, maybe even a decade or more.

I loved this recent piece in The Guardian, by British designer Margaret Howell:

I think for someone to make something that’s going to last, there is undoubtedly an amount of love as well as skill that goes into that. And things that last are important. I’m happy to pay more for something if I see it as an investment. I would rather spend £80 on a saucepan if it means that I’ll be buying one that lasts. I’ve always felt that about things, rather than thinking something is too expensive. I’ve noticed that the French think like that about clothes – they’ll have fewer but better quality.

I agree with her.

I’m grateful for having grown up in Canada, a country whose consumer market was small enough that going shopping meant limited choice, (no Internet then). Canadians generally earn lower salaries and pay higher taxes than in the U.S., (where I now live,) so the whole notion of shopping-as-recreation never made much sense to me.

I also spent a year living in Paris when I was 25. That, and many visits back since then, also shaped how I view the buying/keeping/mending of my wardrobe.

I love beautiful things, (and have expensive taste), which de facto limits how much I can acquire. Keeping good things longer also lowers the CPW, (cost-per-wearing), a wiser use of limited funds. The CPW calculation essentially amortizes the cost of acquisition as the more you wear/use something, the less it costs you in the long run — if you buy a $30 pair of shoes that last six months, and have to go buy another pair — you’ve spent $60.

I’d rather find a $200 pair on sale for $120 and get many more seasons from them instead. I have limited time, energy and patience for shopping as well.

(Which is also why blowing $$$$$$$$$ on a white satin wedding gown you’ll wear only once is a crazy use of hard-earned coin.)

Like Howell, I’d much rather have one or two thick cashmere sweaters, (found in thrift or consignment shops for a fraction of their original prices), than a dozen cheaper ones that will probably shrink, pill or date.

Here’s one of my go-to high-end finds, found in a consignment shop, still cosy and warm after…five? years.

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Like Howell, like French women, I prefer to buy fewer things and keep them in good shape for years.

— It saves money

— It saves time

— It helps the environment

— It’s a good practice to consistently care for your things — polishing your shoes and boots; using shoe trees to keep their shape; making sure your footwear has new heels and lifts so you don’t wear them out; mending your clothes; tailoring things to fit you properly. The idea of simply throwing something away because it needs a little work? Bizarre and wasteful.

— If you can make/mend your own items, even better!

— Doing so also employs skilled experts, like tailors and shoe repair shops

— It re-focuses our attention away from the hamster wheel of get-spend-get-spend-getmorenow!

— It reminds us to focus on what we have, and to savor it, not simply to greedily rush to the next acquisition

— Wearing vintage, thrift or consignment shop clothing is a smart and frugal way to recycle

— Vintage clothes are often better-made of finer materials like silk, cashmere or wool

— We tend to care more for things we plan to keep for many years, so shoe trees/polish/suede brush and a good sewing kit, lint roller and steamer, good-quality hangers and storage options all matter

I admit, I’m also enjoying a few new purchases as well: a thick new Patagonia fleece (half-price), a long black four-season dress and two cotton midi-skirts.

Of course, the stylish Cadence, author of Small Dog Syndrome blog — recently relocated to London — just posted about an amazing vintage shop she discovered there:

One of best aspects of quality vintage clothing is how well some of it holds up. I peered through riding boots that are decades old but look and feel more solid and better than half of what I could find new at a store for the same price.

If you haven’t read this book, it’s worth considering what an addiction to trendy/cheap/fast fashion really costs.

Here are her 10 simple tips to shop more frugally and mindfully.

And here’s a fun book I own on Paris street style.

Men Shopping for Clothing Accessories
Men Shopping for Clothing Accessories (Photo credit: epSos.de)

Are you a big shopper?

What’s the oldest item you’re still wearing and enjoying?

Ditch Your Stuff!

my own picture, to be added to cookware and ba...
Image via Wikipedia

We recently spent three eight-hour days doing the job we had put off for a decade — clearing out our rented storage locker. (Confession: some of it went into a smaller space, the rest of it into the garage. And, yes, there are four small lockers with other stuff — out of season sports gear and clothing, suitcases, etc.)

In so doing, we immediately saved $150 a month in rental fees, plus the $350 we netted for selling 24 boxes of books.

Here’s a thoughtful New York Times piece about what museums, so politely call, de-accessioning:

A two-bedroom apartment. Two cars. Enough wedding china to serve two dozen people.

Yet Tammy Strobel wasn’t happy. Working as a project manager with an investment management firm in Davis, Calif., and making about $40,000 a year, she was, as she put it, caught in the “work-spend treadmill.”

So one day she stepped off.

Inspired by books and blog entries about living simply, Ms. Strobel and her husband, Logan Smith, both 31, began donating some of their belongings to charity. As the months passed, out went stacks of sweaters, shoes, books, pots and pans, even the television after a trial separation during which it was relegated to a closet. Eventually, they got rid of their cars, too. Emboldened by a Web site that challenges consumers to live with just 100 personal items, Ms. Strobel winnowed down her wardrobe and toiletries to precisely that number.

Now the couple, debt-free, lives on $24,000 a year.

It’s not a new idea, living on less, although it’s rapidly gaining currency. In a 1992 book, “Your Money Or Your Life”, Joe Dominguez and Vicky Robin pointed out you’re spending time or you’re spending money. Save one, and you save the other.

I’ve chosen, deliberately, to stay in a one bedroom apartment for 20 years. In flush years, I could have traded up to something bigger, maybe even a house. I didn’t want to. I didn’t want: to buy a lot of stuff to fill it with; maintain and clean all that stuff; clean gutters and shovel sidewalks or mow a lawn; the daily anxiety that, if I lost that job or income or client(s), I’d lose it all. Even in the leanest times, and they have gotten lean, I could manage to stay in my home, building equity.

I loathe debt.

We drive a nine-year-old car, paid for.  We are trying hard to find new and better ways to earn and save in order to pay down the mortgage as soon as possible. In line with popular sentiment, we’re now much more focused on experiences over stuff. We threw a party and invited friends to celebrate the completion of my book. The money we spent for food and drink that night might have bought two of three pairs of shoes or 10 new or 20 used books or CDs or…more stuff.

These days, I want more life and less stuff in my life.

And yet, and yet…how does one turn a blind eye to all those delicious temptations?

Have you downsized? Plan to? How has this changed your life?

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Five (Fun) Ways To Save Money

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We recently cleared out our storage locker — and cashed in $350 for 16 boxes of books we’d been paying a fortune to store. Score!

As someone whose income fell by 50 percent after losing my newspaper job four years ago — and still working in a struggling industry — I’ve gotten better at shaving costs to the bone. Turns out I’m not alone.

Today’s New York Post reports that nearly half of young women, 18 to 39, are saving and investing more than they did a year ago. More than 60 percent are also planning to reduce their debt within six months. The study interviewed 2,002 women.

Compared to guys, women, regardless of age group, are more conservative about future spending. Women — 72 percent — are more likely than men — 65 percent — to say if they come into extra dough, they would save it or put it toward bills, the survey found….

But young women feel they have to be more self-reliant in these dire economic times, said financial planner Eleanore Szymanski.

“They used to be planning for immediate things and retirement is far away for them, but this recent downturn has been a good wakeup call. They are scared they are not going to be taken care of,” said Szymanski of EKS Associates in Princeton, NJ.

Szymanski said she’s seen a 50 percent increase in young women attending her financial planning classes.

“I have seen more college people in this class than ever before. It’s a general feeling, ‘It’s up to me, I am going to take care of myself in this recession,’ ” she told The Post.

1) Barter. Not everyone will go for it, but you never know until you ask. Maybe you’re a great cook and can teach a new grad in return for tech skills or — as I have — trade writing/editing skills with my massage therapist.

2) Ask for price breaks when possible. Don’t be a nasty jerk about it — “So, what can you do for me?” —  as many are now demanding at major retail outlets. But there are times and places there is some wiggle room. I finally bit the bullet and asked my local YMCA if they had reduced fee for their services. I had to show my tax return, which made me cringe, but it allowed me to stay healthy and not break the bank. When I needed major dental work, I paid my dentist every month (on time), without interest.

3) Review every credit card’s APR and ask for a lower rate. Ideally, you should have only one, maybe two, and, ideally, pay off the balance every month in full. American Express has been my card of choice for decades but last year jacked my rate from 9.9% fixed to 15% variable. I recently got that rate down by 1 percent — because I asked. (An excellent FICO score is your leverage.)

4) Consignment shops. It gets really boring never buying anything fun or stylish. Seriously. It doesn’t have to be brand-new, just new to you; if a fab pair of shoes or a jacket is $20 or $40 — not two or three times that — a splurge is manageable. I have several secret sources where I’ve scored triple-ply Neiman-Marcus cashmere and never-worn Prada and Sigerson-Morrison sandals for $60. My wardrobe contains Clergerie and Ferragamo shoes, but I didn’t cough up the $400+ per pair at retail. Decide you don’t love it? Sell it to another consignment shop.

5) Eat (and entertain) at home. Zzzzzzz. Not if you know how to cook and have a basic batterie de cuisine: a few sharp knives (and sharpener), colander, saute pan. You can borrow cookbooks from the library or download recipes off the Internet. We eat so well at home, thanks to our culinary skills, it takes a lot to woo us away from our own kitchen and dining table. We use linen or cotton napkins (cheaper and prettier than nasty paper and they last for many years), and light candles and play music and enjoy conversation. I collect pretty tableware on sale and at flea markets and antique shows, so setting a lovely table is easy and fun.

Any tips you can share?

Women And Money: We Earn Less And Invest Poorly (If At All)

Today’s New York Times offers a helpful look at several new books and a website, LearnVest.com I blogged about a few weeks back, all designed to help women better invest and manage their earnings:

The real issue, experts say, is that many women, despite strides in education and in the workplace, simply aren’t as confident and knowledgeable about financial matters as men. This problem persists even as women handle many of their families’ routine money management duties, like paying bills and making many purchasing decisions.

“Research has shown that women, even professional women with good jobs and successful careers, tend to be less financially literate than men,” said Annamaria Lusardi, an economics professor at Dartmouth College who has studied the issue. “The gap in financial literacy between women and men is large not only among older people, or those 50 and older, but also among young adults, an age group where women are more likely to have a college degree than men.”

That’s similar to what Eleanor Blayney, a financial planner who focuses on middle-age women, said she found when she gave a speech to her fellow alumnae at Mount Holyoke College a few years ago. “At the end, the hands went up, and they were all stuck at the very beginning of my speech,” said Ms. Blayney, who has a new book on the subject, “Women’s Worth: Finding Your Financial Confidence” (Directions). “They were scientists, professors, municipal elected officials. These were women with brains and jobs, and they were just at a loss to even know where to begin.”

Not all women lack financial skills, of course, and many may simply lack time. But studies show that women don’t find money and investing as interesting as men. Women also prefer to learn about money in person or in groups with others in their situation, as opposed to curling up with a book (the jury is out on whether pink covers help).

According to a 2007 study on gender differences by Tahira Hira of Iowa State University and Cäzilia Loibl of Ohio State University, women are still less likely to be socialized in financial matters, and they are more likely than men to find investment decisions stressful, difficult and time consuming. The study also found that it often takes a life event, like getting married, to prompt women to save and invest, whereas men were more likely to start investing gradually.

I evangelize on this subject — likely to a boring degree — because it is essential. Women work hard for their incomes and trying to park their savings safely means wading into an intimidating, unfamiliar  sea of acronyms, ADRs, ETFs, NASDAQ, CDOs (oh, them, the most toxic of all!) It all too quickly feels like we’re being pulled by a vicious riptide, whether too-high management fees or “money managers” who speak to us very slowly in words of one syllable and just piss us off.

The last time I sat with an advisor from my investment company, I suggested she look at RIM, which anyone anywhere in that business should know immediately is the (very successful) Canadian company that makes the Blackberry. She did not recognize the name.

Not very confidence inspiring.

I once simply gave up on an investment my ex-husband had made for me, an annuity that withdrew every month from my paycheck to save for it, because I didn’t understand it. I’m not stupid or lazy. The financial advisor who’d sold it to my ex was an arrogant jerk who spoke to me with condescension every time I called to ask “What is this thing?” After I lost a job I did not realize that they simply kept funding the thing using my own savings, in effect cannibalizing my own savings to “save.”

What a scam.

I had stopped opening their envelopes because I knew it was bad (and, yes I was a moron) didn’t want to know how bad. I had lost a ton. Not even enough to buy a cheap new car, but my damn money.

Finally, I closed it, took the hit. Never again!

I survived the last Wall Street meltdown because I was mostly in cash. I have read many personal finance books, even those so highly recommended, and they still make my eyes glaze over. I need to fully understand P/E ratios and a bunch of other metrics before I wade in. I read three business sections every day and I also read many financial/money magazines. It doesn’t, frankly, make me any more eager to risk my money.

Women, for all sorts of reasons, earn less than men; these stats from Time are interesting.

If I make 77 cents to a man’s full dollar, maybe I’m 23 percent less likely to blow it in some lousy investment. I get it, no risk, no reward. Risk remains a real four-letter word to me, and to most women.

African American women make 68 cents to the dollar, and Latinas 58 percent. No wonder we clutch our wallets so tightly.

Look at Goldman Sachs and ask yourself why.

Be Thrifty – Or Else

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Being cheap is the new black, writes Daniel Akst in the Wilson Quarterly (you have to pay for on-line access), quoted in The New York Times:

To be thrifty, after all, is to save, and to save is not only to keep but to rescue. Thrift is thus a way to redeem yourself not just from the unsexy bondage of indebtedness but also from subjugation to people and efforts that are meaningless to you, or worse. Debt means staying in a pointless job, failing to support needy people or worthwhile causes, accepting the strings that come with dependence, and gritting your teeth when your boss asks you to do something unethical (instead of saying “drop dead”). Ultimately, thrift delivers not just freedom but salvation — which makes it a bargain even Jack Benny could love.

Margaret Wente, writing in The Globe and Mail, wonders how anyone — save the fortunate few with defined-benefit pensions — will actually survive retirement without a pile ‘o cash:

Because of imprudence, misfortune, a vast shift in cultural habits, or the sheer financial drain of supporting their kids until age 28, they are facing their old age with no savings, no pension and few assets. I have no idea what they’re going to do. All I know is that there are plenty of them. For the first time since we introduced old age pensions, millions of people who’ve led comfortable, middle-class lives are facing a big drop in their standard of living when they stop working. No more salmon teriyaki for them.

“A large chunk of the baby-boom generation is on the verge of retirement with only the state to depend on for a retirement period that will be, on average, the longest in Canadian history,” writes consultant Robin Sears in the magazine Policy Options. “We were pension pioneers. But we’ve lost our way.”

Whose fault is it that we don’t save like Grandma did? Is it ours, for crashing our savings rate below zero, and not being disciplined enough to resist the siren call of easy debt that’s been relentlessly marketed to us for a generation? Whose fault is it that we’re living longer than anybody has before, and screwing up the actuarial tables? Whose fault is it that the vast majority of us fail to save at least 10 per cent of our earnings starting at the age of 30, the way we’re supposed to? What about the single mom who’s put her kid through university, or the highly creative guy who is stupidly hopeless with his money, or the manager who got laid off at 57 and has to dip into his savings, or the millions of conscientious people who pay shocking fees to the investment industry to mismanage their RRSPs? Should we blame them, too?

You can see the problem here. Saving up for your old age is an individual responsibility. But helping you do it is a social one.

It would be nice if we could be more like the Chinese, who save 40 per cent of their money. That’s because they know they might starve or die from lack of health care if they don’t. The danger is that we’ll wind up like the Japanese, who suffered a huge economic hit in the ’70s and ’80s. Millions of retired folks were forced back into employment to support themselves. Former doctors took jobs as parking-lot attendants.

As someone self-employed, it’s not an issue I take lightly.

It’s a big pile of ifs: If my partner and I stay together, married or not, I’ll be OK, if his pension is still there; if Social Security pays out to us both what our statements tells us it will; if we keep saving 15% -plus percent of our incomes every single year; if our carefully chosen and diversified investments don’t tank; if , when we finally tap our accumulated capital, interest rates aren’t where they are now — a smack-in-the-face 1-2 percent on safe, secure holdings like CDs.

Now there’s a fair recompense for all that thrift!

If we bust up, it’s Friskies and a cardboard box for me! If I still own my home, and the mortgage is paid off, and if I can afford the monthly co-op maintenance fee, my only possible salvation from penury will be a reverse mortgage. Because my writing income isn’t nearly where I want it to be, and I can’t see suddenly doubling or tripling it for the next decade consistently, (believe me, I’m trying), my projected SS income wouldn’t get me through a month right now. There’s a comfy thought.

The old three-legged stool: SS, pension and savings is missing a leg — the pension — for most of us now. The second leg, savings, is a perpetual challenge when gas is $3/gallon and wages are stagnant or, in my industry falling to 1970s rates. Hey, change careers! Assume $10,000 to $75,000+ in student loan debt and cross your fingers that shiny new job market is all perky and welcoming when you graduate, competing with people willing and able to work at half the wages because they’ve still got five decades to save.

If they do save.

I recently interviewed, for my book, a single 51-year-old with a Master’s degree and $40,000 of student debt. Canned from her non-profit job a few years ago, she makes — wait for it — $7.25 an hour working retail. She couldn’t possibly save a dime and lives thanks to hand-outs from her 82-year-old mother. Her life is not quite what she planned.

One friend, 16 years my junior, is scrambling harder and harder and harder, like a hamster on a speeding wheel, to earn what she needs. Like us, she and her partner don’t even have kids. They are stylish and fun, but live very frugally.

Our “old age” is now.