Year 5 with no credit cards

I haven’t put out an update on this in a few years. Yes, Courtney and I are now officially entering year 5 without having a credit card.

And it feels wonderful.

We still are largely a cash only family, but we do use the debit card on occasion for things that just are too big of a pain to buy with cash (gas, online stuff, recurring bills, etc.).

If you are still debating whether to make the jump to the no credit card lifestyle, just remember: Adding debt to a crisis is NOT solving the crisis.

This still stands as one of the hardest decisions we’ve ever made (stressful might be a better word) if only because so many people predicted doom and gloom. And yes, we did ditch our cards right at the start of the Great Recession. While correlation does not necessarily mean causation, I find it very interesting that the time frame of the Great Recession is also the time frame of the greatest financial growth for us. Surely much of that comes from the general changes we made, but I do give at least some credit to the behavior changes not having credit cards force on you (and don’t call me Shirley).

If you can’t do it yet, work toward it. It has been so utterly freeing.

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Our Current Situation

Here’s a great article that very accurately puts to rest one myth and paints a solid picture of our current situation.

Click here.

My only complaint is that the author failed to give credit to the devaluation of the Pound around 1950, which I discussed here. You have to consider both arguments together to realize just how precarious it is becoming for us.

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Pass It Around: The Love Drawer

I got a semi-sobering e-mail from my dad the other day. It included a list of his insurance policies and accounts so that I and my oldest sister could have that should they, as he put it, “head off on that long cruise.”

I don’t like to think of life without my parents. I’m at a point in my own life where I don’t need them, of course, but… I still need them. Maybe a more accurate way to put it is that I still want them. My dad is still the very first person I look for when I just need to talk. My mom is simply a treasure. And my kids simply adore them.

So getting that e-mail was a reminder that they–heck, any of us–won’t be around forever, and that there is surely a reason to spend some of your life living now and enjoying those you love.

But that is not the purpose of this post….

Getting that e-mail from my dad was very comforting because it proves how much he loves me and my siblings. It shows that he loves us enough to take the trouble now to put his own life in order in a way that allows us to handle his passing easily at least from that financial side of life.

I have a good friend at work whose dad recently died, and I’ve watched him over the last six months as they’ve tried again and again to figure out where this account is, who owns that, where’s the mortgage, where’s the car payment, who has the life insurance, who are the beneficiaries. Such a burden took away his ability to grieve and celebrate his dad. I’m glad that my own dad won’t leave me with those burdens.

If you haven’t yet, create what Dave Ramsey calls a Love Drawer. It’s a drawer or file or something that has in it all of the important documents, accounts, passwords, and so on that someone would need to handle your estate should something happen. The Love Drawer I have started for my wife even includes some brief instructions. If I were to die, Courtney is going to cash our main life insurance policy, take some of it to live on, put the rest in a short-term CD so that she doesn’t make a grief-based decision, and turn her financial life for the next six months over to one of our best friends and a man who is completely capable of handling our estate as I would have.

After six months, Courtney will be in a much better place to handle life going forward, and she’ll have the wise counsel of that good friend to help her. If that ever happened, it’d be the last gift I gave to her, and it’d be a good one.

If you haven’t yet, make your love drawer, and tell your spouse. Tell your dad. Tell your best friend. Find someone you trust above all else and give them access to the file. Make sure that should the worst come to pass, your family and those you love have the means to immediately pick up the pieces. And most of all, don’t leave them scrambling around for months trying to  track down things that only you knew.

One more thing…. get your will done. Today. And get it notarized. A non-notarized will is just a piece of paper, and it will not stand in court. No chance. Once you get your notarized will (and get several official copies while you’re at it), distribute them as you deem fit. Many cities and counties will record your will in their archives if you desire where it will be safe and secure until it is needed.

Trust me: It’s might be morbid and uncomfortable to think about, but making your will and your love drawer is the single greatest gift you can give your loved ones should you die.

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Thoughts on the Debt Limit

I’ve held off commenting on this one so far because I’m still considering how it might affect all of us. On the one hand, I fully recognize the dangers of not increasing the debt limit. On the other, I fully recognize the dangers of letting debt continue as a policy for this nation.

But first, a history lesson….

Without getting technically boring and overbearing, the debt ceiling was a modern invention designed to allow the United States to handle its finances in a way more inline with how things are done today. Well, back then. This is the first half of the last century we are talking about, after all. Prior to that time, debt was issued individually under the approval of Congress. I’m sure we can all agree that making individual requests from Congress is much more time consuming that simply having a pre-set debt limit within which the Treasury could work.

Now that you understand that, can you see how the debt limit (debt ceiling if you want to call it that) was never really intended as a maximum cap for the nation’s debt? More than anything, the debt limit was designed as the boundaries of a sandbox for the Treasury.

At least that was the intent.

As the nation’s debt grew, the original purpose of the debt limit (allowing the Treasury to act as it best saw fit within a defined limit) has become a bit confused with the idea that it was intended to be a true cap on spending, a protection from rampant deficits and debt. If that were ever the case, it has obviously failed.

Now with that history under your belt, can you see why it’s a little difficult for the Republican party to try to use the debt limit as a tool to force mandatory caps on spending? At the same time, can you see how it is difficult for the Democrats to argue that the debt limit must be raised for the  government to function? Basically both parties are shifting the original intent and design of the debt limit to meet a specific goal and need that they see as valuable.

So on to the debt limit today….

Treasury Secretary Timothy Geithner is firmly of the belief that hitting the debt limit, which we already have by the way, is a dangerous move. Right now, he is using a system of fund shifting to balance the budget. In particular, he is pulling money from future-funded accounts to pay bills today. In his opinion, he can continue to do so until early August, at which point the government will not have the funds necessary to pay contractors AND cover the interest on the debt.

And he’s right.

Should we arrive at that August morning without the ability to pay our debt obligations, we will default on the national debt. And I’ll talk about what that does to us in a moment.

The opposition to Sec. Geithner points out that we have another option to default, and that is to issue IOUs to the numerous contractors, programmers, and other creditors. This is very similar to what was done in California some years ago. While certainly an option, it also has consequences, which I will also address later on.

So what happens if we default?

Well, what happens if you don’t pay your car payment or your house payment? In the grand scheme of things, a default on the national debt is at least a little similar to a personal default. Does the world end immediately? No. But do the creditors start calling all day long? Yes. Do you lose a bit of control over your life? Yes. Does the cost of new debt go up? Yes, and significantly so. Does the debt go away? No.

Maybe the most important question is if we’ve done ourselves any favors, and that’s a clear no.

So the U.S. defaults on the debt. One of the first things that will happen is that we will lose access to the debt markets. In short, we won’t be able to get new debt for a time. Another early event is that we’ll lose our credit rating, meaning that any new debt will be issued at significantly higher rates. Much like you do when you refinance your house to a lower rate, the Feds have made it a practice of shifting debt from interest rate to interest rate, and that option will pretty much die in the event of a default. As long as we have good rates, no problem, right? But some of our higher interest debt will likely lock in at the higher rate, and any refinancing we do in the future will definitely have a higher rate.

The big issue here is that our long-term ability to manage our debt–meaning pay the interest on it–will be severely limited. As is, we will have significant difficulty paying the interest on the debt we already have. If we default, expect the interest on our debt to rise, potentially significantly.

In a nutshell, a default will cost this nation the ability to grow and expand. It will increase our expenses and limit our ability to provide services. To put it in to perspective, it’d be similar to you having to sell your second car and put that vacation on hold. It means no more trips to the movies, taking a second job, and probably cutting out the private school and sports for junior until you’re back on track.

Make sense? It’s bad, not fun, and uncomfortable.

So what happens if we just stop paying contractors?

Well, this is admittedly less disastrous than an outright default, but the complications are similar. Again, let’s put this into context of your own life. Suppose you’ve hired a contractor to build a new addition on your house. You’ve promised him $50,000, paid him $10,000 up front with four installments of $10,000 each promised over the next four months. In month 2, when he’s 40% done with the work, you don’t pay him. Do you think he shows up to work tomorrow? The week after? Ever?

The risk of sending IOUs to our contractors is that the infrastructure of the United States could grind to a halt. We have obligations, and we’ve agreed to those obligations. Sending IOUs creates a trust problem. Of particular concern would be the foreign investments that would recognize that trust problem and perhaps take business elsewhere. After all, do you think you could find a second contractor to pick up where the first one left off, especially if he knew what happened to the first?

Not a chance.

In a nutshell, sending IOUs stops the economy of this country in its tracks. I feel very comfortable stating that IOUs sends this nation straight back into a recession.

And what would I do?

Such a hard question…. On the surface, I am morally opposed to debt. I hate debt. Debt is bondage, and the current debt loads of this nation are such that we’ve sold our grand children into slavery.

On the other hand, defaulting on the debt or issuing IOUs will be equally destructive.

As much as it pains me to say it, the debt limit must be raised. It must. Any other action is immediately negative for our country. Having said that, though, I sincerely hope that our politicians recognize that not getting the debt under control is a long-term negative for our country.

Raising the debt limit is a must for right now. It must happen, but I also believe that it must come in conjunction with firmer controls on spending, a strong mandate to restore the debt limit to its original intention, and a legitimate plan for paying down our debt (not just limiting the deficit).

So much of what I’ve talked about in this post has tried to make things personally applicable to us. If I may one more time…. Take ten seconds and quickly add up all of your monthly outflows for debt purchases. That would be your car payment, your mortgage, student loans, credit cards, and so on. Got it? That number right there would be a rough equivalent of extra cash you would have today if you were debt free. What could you do with that? Sit back and imagine your life with that extra money every month. Pretty nice isn’t it?

Now realize that the United States through the month of May has spent $275,000,000,000 (that’s billion in case you’re wondering) on interest payments this year. That’s not paying down the debt, that’s just maintaining the debt we already have. By the end of the year, that number will cross the $600BB mark. By the end of the decade, that number will be over $1,000,000,000,000 (that’s a trillion). Annually.

You want to see stimulus? You want to see a bailout? Just imagine what having that burden taken off your shoulders would feel like. Just imagine what this nation could do and become if we didn’t have that debt load.

Now are you ready for the big number? If the U.S. could refund only the interest payments that it will spend on debt this year to you, you would get a check for roughly $1,929.

Think about it.

So yes, the debt limit must be raised. And yes, we have got to get it under control before we have all control taken from us.

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Devaluing the Dollar: a Warning

This has been on my mind quite heavily for some time, and I’ve come to a stark and simple conclusion: The days of the U.S. Dollar are growing increasingly shorter. And perhaps scarier than that is that most of us have no clue why that is such a bad thing.

Let me explain….

The U.S. Dollar is currently the world’s reserve currency, meaning that most nations hold Dollars in their foreign exchange reserves. These funds are used, in part, to offset liabilities, handle international trade, and, most particularly, to trade exchangeable commodities such as oil, gold, and even food. As you well know, most commodities are priced in Dollars, and this has a couple of effects, both good and bad. One of the principle effects is that the world economy largely hinges on the rise and fall of the Dollar.

For example, if oil is priced at $100 a barrel and rises to $110, you might be tempted to think that that only really bothers us. However, because oil is bought and sold only in Dollars, an importer such as China must first purchase Dollars and then purchase oil. Now assume that the Dollar suddenly loses value. Not only does China pay for the cost of increased oil, but it also eats the cost of the lost value of the Dollar. The same would be true if the Dollar suddenly rose in value. China would be on the hook to pay more money if it had to buy more Dollars, which is one reason why many countries keep such large reserves in the first place. It’s a hedge against the rise and fall of the Dollar. In essence, while the rise and the fall of the Dollar has an impact on us, it has greater impact on other countries.

For the last sixty years or so, the Dollar has been a bulwark of stability. It is because of this stability that the Dollar rose to replace the British Pound as the reserve currency, a position the Pound had held for, literally, centuries. And what happened from that shift? Well, England collapsed. In fact, around 1950, England was so close to outright default that only a bridge loan from the U.S. kept the country from collapsing fiscally. Around the same time, England was forced to devalue the Pound in order to meet their rapidly increasing debts. That single act caused the value of the Pound and the wealth of the entire country to collapse 25% virtually over night. It also solidly moved England from a position of being a super power to an also ran.

This is the danger that we are facing, and this is why what we are facing is so dangerous.

If you read and understanding nothing else from this entire post, understand this: the devaluation of the U.S. Dollar will lead to the end of the Dollar as the world’s reserve currency, and that simple act will immediately erase 25% of the value of this country. You thought the Great Recession was bad? The devaluation of the U.S. Dollar will plunge this nation into a financial crisis on par, if not significantly worse than, the Great Depression.

It is financial Armageddon.

So how is this going to happen? It’s already underway, and it’s caused by the incredible deficits and debts we hold as a nation. But let’s back up a bit: what is it that makes currency viable in the first place? Trust. The only thing that makes a bank accept a piece of paper from you as legal tender is trust. If the banks no longer trusted that the paper was worth anything, they wouldn’t accept it. In a similar way, the world has used Dollars as a means of banking (remember the Foreign Exchange Reserves we discussed earlier?). What happens when the world no longer believes that the Dollar is worth anything? Think about it.

Currently, China holds roughly $1.8 TT U.S. Dollars in foreign reserves. Japan holds $900 BB. What would happen if China and Japan no longer believed the U.S. could sustain and support those funds? Imagine how you would react if you had $1,000 invested in a company that was unable to pay you back. Would you keep your money there, or would you run? What will China and Japan do, then?

Now imagine that your $1,000 represents a significant portion of all the money in your city, say 10%. What happens if you suddenly decide that your $1,000 is no longer worth keeping in Dollars, and you decided to completely abandon that money in favor of, say, the Mexican Peso. So you go exchange your money. And because you control 10% of the city’s money, everyone notices. Many follow. What happens to the overall value of the Dollar in this case? Think of what that one change would do to the pricing of all products produced by that city, to trade in that city?

That’s exactly what’s going to happen.

Our debt loads are so great, that someday soon, someone in D.C. is going to realize that we have printers. And because all of our debt and the debt of most of the world is valued in Dollars, they are going to realize that we are the only country who can legally and literally print our way out of debt. And they are going to do so. They’ll do it knowing full well that they are going to devalue the Dollar, but they’ll do it because devaluing the Dollar is still better than defaulting on our debts. And the minute they do it, China, Japan, and all the other nations who hold our currency are going to abandon the Dollar. And the minute they abandon the Dollar, they’ll fled the market with Trillions of Dollars that no one wants. And what happens to the value of something that no one wants?

One day we’ll wake up realizing that our money is worthless. There will be no warning because any warning from the government would have the effect of destabilizing the Dollar before the government is ready to do so. You’ll just wake up to that disaster.

And many people still don’t understand why that is bad, so let’s move on from the devaluation….

Once the Dollar is devalued, the world will flee from it and replace it with, in my opinion, a basket of currencies pegged to several major economic powerhouses. The U.S. will likely be one of them, but only one of a basket of ten or more currencies. The IMF will be the backer of this currency, and the currency will probably be SDRs or a form of SDRs, a currency that already exists and is used by the IMF for international loans.

When the Dollar is no longer the reserve currency, the U.S. will no longer control its own destiny in regards to debt management. Currently we can pretty much print what we want, sell it, and find a buyer because everyone needs Dollars to conduct their Foreign Exchange. But when the Dollar is replaced by SDRs or another global currency, that demand will dry up instantly. In other words, we’ll go to sell our debt, and there won’t be any buyers. And when no one will by the debt, you don’t get to go in debt any more. At all. Kind of like when the bank turns you down for a loan.

The result will be one of two things: default or austerity. Both will have the immediate effect of trimming the national budget by several trillion Dollars. Social Security will disappear because the debt that is currently used to fund it will disappear. Our welfare programs, national defense budgets, health  care budgets, and pretty much everything else will disappear over night because we won’t be able to finance them. Our debt situation is so dire that within the next ten years, our forecasted tax receipts will not be enough to even sustain our current debt load. The interest on our debt will be greater than the tax receipts we pull in. And that doesn’t even count our actual obligations to Social Security, Medicare, and so on.

Sigh…. I could go on.

The evidence is there in plain sight, but most people don’t care to look or understand. Fortunately not all is hopeless. The truth is that we could save ourselves by voluntarily going into austerity now. But we won’t. The courage and power that made this nation great is lacking among us now in sufficient numbers to make the change. Too many of us are more worried about our own hand outs. We’re all willing to see other people give things up, but touch our benefits!?!? No you don’t!

And it’ll ruin us in the end.

My timeline? I think we’ve got two to three years. Five max. Can we be saved? Yes, but it takes serious leadership, sacrifice, and a willingness to do with out. It takes substantially more reduction and fiscal control than either the President or any other member of government has proposed to date.

Do I think we will pull up in time?

No.

I do not.

I think we are near universally blind in our optimism of it never happening to us. I think we are too trusting of a government who will not have a choice when that day comes. I think we are entirely too trusting in the arm of flesh and especially in the “almighty Dollar.”

Did you know that in post-WWI Europe, people used their money to wallpaper their houses because it was cheaper to use money than it was to buy wallpaper? That it took a wheelbarrow of bills to buy a loaf of bread? That businesses actually refused payment in the national currency because they couldn’t spend it fast enough before inflation would literally wipe it out?

You’d be surprised that I’m not a pessimist on the Dollar or this nation. It’s true; I’m a realist. And the reality is starring us blankly in the face.

So what options do you have? Many financial advisers, which I’m not one, would tell you to run to foreign stocks, to buy gold, silver, and other commodities. I look at that, and I see those people fleeing, as the scriptures say, from place to place. “Lo here, Lo there.” I see this type of person as someone hopelessly looking for financial truth, and I have to ask, “Why is money so important to you?”

Money matters only in as much as it makes possible the true joys of life and sustains us, but most of the true joys are free and most of us could be sustained on much less. Don’t waste your precious years chasing after lucre that, in the blink of an eye, collapses or fades. There’s so much more that is better, more valuable, more tangible, and more lasting.

In all that is coming, I come back consistently to the hope and preparation talked about in the scriptures. The prophets, both ancient and modern, taught us exactly how to be prepared for whatever the world would throw our way. If I were you, I would spend my time building and preparing as they’ve instructed us.

As President Woodruff once said in reference to the Second Coming and all its associated calamities, “I would live as if it were to be tomorrow–but I am still planting cherry trees!” The point is that many cherry trees take upwards of five to seven years to bear fruit.

If we would be happy then, we would prepare now. And while I still desperately hope that this nation pulls up from our coming fiscal crisis, I simply cannot believe that we will.

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Four steps to avoid being one of six….

CNN reported recently that 1 in 6 Americans rely on some form of assistance from the government. In case you are keeping track, that is 16.67% or roughly 51.8 MILLION people.

While I could certainly talk about how that kind of support is unsustainable and especially how that kind of support will kill the economic and fiscal viability of any nation, I think it is more important right now to figure out how to not be part of the one.

The national debt and our current situation certainly seems hopeless, and it especially seems impossible for any one person to combat and make a difference. However, there is one thing you can do: Be one of the five in six who do not rely on that assistance.

To be clear, I’m not attacking those on assistance. I’m not saying that there is no valid reason to be on assistance. Those programs exist, like it or not, for a reason, and despite the obvious abuse that does happen, I believe many people use them as they should be used. My own family has used some programs in the past when our real needs were outside the realm of our ability to handle them. That’s what they are there for. However, all of that being said, I am criticizing people who live in ways that demand that lifeline. I am criticizing people who chose to actively engage in lifestyles, choices, and other decisions that drive them to being one of six. There’s a real difference between having no choice to be one of six and choosing to be one of six. If you are choosing to be one of six… get off your butt.

Step 1–Control Your Debt

I thought about calling it “get out of debt,” but I realize there are some I’ll never convince about debt. I just won’t. I also recognize that despite my own personal feelings on debt, and especially credit cards, not all feel the same. So instead, control it. Learn to live within your means. Learn to delay self-gratification by building a plan and following through. Learn maturity. Dave Ramsey says that delaying gratification is a sign of maturity. It shows that you are thinking logically about your life and your situation and doing things in a manner that doesn’t compromise your future in favor of the now.

In regards to retirement, Dave Ramsey also says that living in the now is a key dysfunction in our ability to actually save for retirement because we forget the future. I’d add to that by saying that living in the now is a key way to forget that you have a future, that what you do today does impact tomorrow.

So control your debt. Eliminate what you can, don’t go into needless debt, and especially don’t expect others to bail you out when you play stupid with debt. Doing this one step alone can generally virtually guarantee you always stay on the side of the five in six in all but the most significant emergencies.

Step 2–Get an Emergency Fund

While controlling your debt is a great start and will provide peace of mind and financial security in most situations, getting an emergency fund is the rest of the equation.

I have gone through two periods of unemployment, the first lasting roughly five weeks, the second lasting roughly ten weeks. The difference in the two is marked mostly by the difference in our emergency fund. The first period of unemployment was somewhat unexpected, and we were largely unprepared. We had managed to save about two months living expenses, and although we didn’t have any major expenses on the horizon, those five weeks still stand out as particularly stressful. I worried daily about how I would feed my family, how we would pay our mortgage, and how I would accomplish even the most basic tasks.

The second period of unemployment was twice as long AND it included the birth of my youngest son PLUS a major roof repair. It was also completely out of the blue. You’d think that the second time would have been even more stressful than the first, wouldn’t you? And you’d be wrong. Those ten weeks still stand out as some of the most enjoyable in recent memory. Sure I was stressed and worried, but nowhere near as stressed and worried as the first time. I found those ten weeks enjoyable. I played with my oldest child, went for long walks, planted a garden, canned the tomatoes from the garden, worked on several hobbies, and generally relaxed and had a good time while searching for work.

The difference between the two experiences? Our emergency fund. The first time, we had a nascent emergency fund. The second time? We had a full six months.

Emergency funds act as insurance for those times when you may not be able to pay for life. They stand between you and the storms that come, kind of like an umbrella. Dave Ramsey talks about how the average family will experience a $5,000 emergency at least once every ten years. My family sees that annually. Well, at least we have seen it annually for the last five years. That’s $25,000. For many, that would be a crushing experience financially, emotionally, and even spiritually.

For us, we just wrote a check and then spent the next year rebuilding our emergency fund.

Having an emergency fund is a sign of maturity and personal responsibility. And more than that it is a really warm blanket for the winds blow and the storms rage.

One final note on emergency funds: Credit cards are not emergency funds. Think of it this way: You have a $5,000 emergency, and your answer to that emergency is to put $5,000 on a credit card and pay interest on it? Talk about trying to put out a fire with gasoline. Not only will that extend your emergency for potentially years and years, but you’ll add to the originally emergency exponentially with interest payments. Yep… that sounds brilliant.

Step 3–Budget, Budget, Budget

Avoiding debt and having money set aside for a rainy day (three to six months preferably), is the goal. Those two alone will get you 90% of the way to helping guarantee that you are not one of the 51.8 MM people who do rely on welfare.

Effective budgeting does most of the rest.

Some basic tips:

• Budgeting is not a process of restricting spending. Budgeting is a process of identifying spending. As long as you think of budgeting as a restriction, you will not succeed. If, however, you see budgeting as merely identifying and organizing your spending, you’ll find it remarkably freeing and liberating. My wife is a perfect example: She originally fought budgeting. We’d agree to a plan, and then she’d go out and torpedo it with the first trip to the grocery store. It wasn’t intentional on her part, but it still happened and it did nothing but lead to money fights.
  When we reinterpreted budgeting as identifying and organizing spending, we both learned rather quickly that it meant that she could go and spend that money because we had decided that that is how it would be spent. She found herself with more money than ever, no fights because it was being spent as we both decided, and increased control and harmony.
• Budgeting requires buy-in from both of you, and one person can’t force the budget on the other. Dave Ramsey’s budgeting lesson (look it up in one of his books) is a classic ideal for budgeting.
• If you don’t give every dollar a name on paper before it hits your bank account, you’re going to lose the money.

My wife and I have been budgeting since day one of our marriage, but we’ve only effectively budgeted for the last three years. The difference is obvious.

Another benefit to budgeting? Your results will be different, but for Courtney and I, budgeting helped us identify errors and places of waste to the tune of almost $1,000 a month. That’s basically like getting a $12,000 raise except that it is post-tax money. That’s straight to your pocket.

If you’re having trouble figuring out how to control your debt and build an emergency fund, do a budget.

Step 4–Give Charitably

Last but not least, give some of it away. Being one of the five of six Americans who do not rely on welfare assistance is nice, but it’s infinitely nicer when you do good things with that money.

I’ve already expounded on all of that, so….

The point is this: We all have a personal responsibility to each other to do good and do right. Part of that is the personal responsibility to provide for yourself. Like I said, there are valid reasons to need help, and I have no issue with that (although I strongly disagree with the manner in which that is done… another blog for later). But if we are able, and almost all of us are, we have the personal responsibility to do our part, carry our own load, and, if we are blessed to do so, provide additional support for others.

The fiscal problem facing this nation can be summed up simply by saying that too many people are greedy (both people who hoard their bounty and people who demand that others share with them), too many people lack personal responsibility, and too many people are losing sight of that vision. The end result can be nothing other than fiscal breakdown where everyone loses. Not just the poor, not just the wealthy, and not just you and I.

You can make even a small difference by not being one of six and being a responsible member of the other five.

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Money can’t buy you happiness

We all knew it was true all along, but now we really do know it.

A recent study (I’m still looking in vain for the article…) showed an interesting attitude about money. The researchers took a large sampling of test subjects where half the subjects were self-declared wealthy and the other half were not. The participants were then exposed to simple sensations that could be called pleasurable.

What the study found was that the self-declared wealthy group took less satisfaction in the pleasurable experiences than the “poor” group. The study then took the poor group, divided it in half, and repeated the experiment with just that group. The first half of the poor group was shown an image of a pile of money before being stimulated and the second half was shown the same image but it had been blurred to the point of being unrecognizable. Interestingly, the results showed that the first half that saw the pile of money had a reduced perception of satisfaction and mirrored the results of the wealthy group, while the second half who saw only the blurred image mirrored the results of the original poor group.

So what does that mean? Well, the correlation that the researchers pulled was that money, and even thinking about or dwelling on money, had the effect of dulling our ability to enjoy the simple pleasures of life.

My opinion of the personal application is that we’ll be much happier in life if we allow money and the accumulation thereof to be the result of our lives and not the purpose of our lives. I think, in many ways, that the Book of Mormon supports this idea well when it says in Jacob 2:18 -19:

But before ye seek for riches, seek ye for the kingdom of God.

And after ye have obtained a hope in Christ ye shall obtain riches, if ye seek them; and ye will seek them for the intent to do good—to clothe the naked, and to feed the hungry, and to liberate the captive, and administer relief to the sick and the afflicted.

Surely a person who approaches life and wealth in this way will be infinitely happier than the inverse.

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Releasing Pressure

Courtney and I had an interesting conversation yesterday that led to some new insights into our relationship with each other and even with money. We’ve been Dave Ramsey fans for about three years now, and in that time, we’ve done a lot of incredible things. The biggest success is that we’ve paid down over $40,000 of debt to the point that all we really have left is the mortgage. That, more than anything, is what has made life imminently possible for us during the recent recession. In fact, we’ve thrived when many have not.

In short, Dave Ramsey has been good for us.

On the other hand, though, we realized that we’ve gone too far in some ways. We’ve been so focused on getting out of debt and being responsible with our money that we’ve largely forgotten how to have fun. How to live life. I don’t blame Dave Ramsey for that; rather, I blame the over-zealousness that both Courtney and I have had to be debt free and past all this.

I was talking with a friend about how frustrated I was sometimes that life seemed to be moving so slowly and especially how it seemed like we never enjoyed anything anymore. He pointed out that he and his wife regularly and intentionally spend money in ways that, while not necessarily wasteful, are surely outside of the relative strictness of our plan. And it dawned on me that that was essential.

To be fair, Dave Ramsey has always recommended that you include a Blow Money category in your budgets. This is money that is unattached to any strings, any expectations, or any rules. It’s literally money to blow. My first understanding of the term was that it was money to blow, as in waste. Of course, Courtney and I both saw that as bad and limited our Blow Money budget to only $10 a month. And we’ve done that for over three years now.

But yesterday the light bulb went off. Blow money isn’t money to waste; it’s money to release the inevitable pressure of living a life that asks you to wait, asks you to put certain things first, and asks you to delay pleasure. Our frustration comes not from our successes, but rather the lack of celebrations. The lack of doing those things that let us step back, take a deep breath, and attack again. We’ve never been lazy with our finances, but to say that we’ve plateaued a time or two would be an understatement.

The Japan Earthquake and nuclear crisis paints a picture for me–Each reactor is surrounded by a containment vessel, which is designed to hold the radiation in. However, when the pressure in the vessel reaches a critical point, the vessel vents some of the pressure, which prevents a major disaster even if it does release a minimal amount of radiation. I see us working the same way. Our financial containment vessel is strong and has managed to hold in the pressure of what we are doing for over three years now, but we’re at the point of needing to release something. And we can do that without blowing the whole thing.

To put it all in perspective, we sat down last night and talked about how long it’s been since we’ve done things as a family:

• Go to the movies–We’ve been twice in the last three years as a family (both times in the last six months). Granted, we wouldn’t have gone anyway until Myron was old enough to enjoy it.
• Go out to eat–Four times in the last year. Granted, it’s harder with Courtney’s sugar allergy, but still.
• Go on a real vacation–Four years. Granted, Myron again, but… four years?

None of those things are essential to happiness or salvation, true, but they can be done in ways that are healthy, constructive, and beneficial for our family. Most importantly, they are a productive step back from the difficulty of what we are doing.

Last night, for the first impromptu time in three years, I loaded up the family in the car, and we went out to eat. It was fun. It cost $35. I spent half the time being annoyed at myself that we could buy half-a-week of groceries with that money and the rest of the time beating those thoughts back. But it sure was nice to release some pressure last night.

Come the new month, we’ll find a fatter, if only a little bit, Blow Money envelope. It’ll slow down some of our goals and progress a bit, but it’ll make the eventual accomplishment of the same all the more likely.

In your own financial goals and efforts, make sure you plan for you.

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End of Credit Cards!

Confession Time! All these years that I’ve been actively campaigning against credit cards, I still have one. I actually do. I haven’t used it in three years (yep, we are on year three of never using a credit card), but I also never canceled it.

To be perfectly fair, I couldn’t use it anyway. See… I even cut it up. I just never  got around to canceling it. So what to my surprise when I get a letter in the mail this week from Citibank announcing that “due to inactivity, we regret to inform you that we are going to cancel your card.” They were even kind enough to point out that no measure of activity at this point would save the credit card, and that I would need to open a new account in order to continue my relationship with Citibank.

I think I’ll pass.

I don’t know why I never canceled that card. I think a part of me is still holding on to the (false) security of the card. The idea that (false) help was just a swipe away. Oh well… I suppose I’ll get over that soon enough.

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Debt and your personal recession

I don’t agree with everything in this article, but enough of it is accurate that I felt it adequate to share.

My biggest complaint I think is that she doesn’t come down against debt so much as say that debt is why we are in trouble. She also doesn’t advocate for the abandonment of debt as much as the “proper” (whatever that is) use of debt. All of this is implied, of course.

Come on people. The only guaranteed way of avoiding financial problems is to not have debt of any kind. As long as you live in any kind of financial bondage, you are always at risk of being financially ruined, so just don’t do it.

By the way, for those of you keeping track, we are approaching the end of year three without credit cards…. Yep, still breathing and thriving.

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