Personal Finance: Lent Begins Today

As part of Lent, I am reflecting on my previous writings a little more, and this little chestnut was from 5 years ago, however, I have done some judicious editing  as well.

Mardi Gras was on Tuesday, so that means that Lent begins today and this is a perfect opportunity for folks to start something new with their Personal Finances (and their spiritual life, if they wish as well). Easter is a time for new beginnings or restarting something you need to resume, however, most people view Lent as a time to “find something to give up”. That is one way of viewing your Lenten journey, but another way is to look for something to Enrich your life for the 40 days of Lent (leading up to Good Friday and Easter).

Financial Lenten Journey

What areas of your personal finances could use either Enrichment or Better still a sacrifice that might help your financial well being? There are some very simple ones that I think about every year (and have done a few of them):

  • The Latte withdrawal penance. Cut out buying coffee for the 40 days of Lent and put that money aside, to either save, give to charity or pay down your debt. Keep track of this and see how much money you might be saving here, it’s worthwhile finding out where this discretionary money is going.
  • Read 4 Personal Finance books over the 40 days to enrich your understanding of your personal finances or your investing adventures. Building up your expertise over Lent is a good thing.
  • Brown bag it for 40 days, give up buying lunch at work, and bring your lunch instead. Another way to find out where your discretionary spending is going.
  • Take the bus to work for Lent. Leave the car at home, buy a bus pass and take the Bus to work. Yes gas is cheaper right now, but not driving might have other benefits for you (less stress, more exercise, etc.,).
  • Live on cash for 40 days and get rid of your credit cards. Freeze them in your freezer, lock them in your safety deposit box, or cut them up, but live on CASH only (no debit either) and see if you can do it, does it change your spending habits?

Think about these or suggest others, I am open to suggestions myself.


Best of: Debt IS like fat!

Given I am starting to pack pounds back on (slowly, but I am now about 30 lbs. above my ideal weight and it is rising), I read over one of my favorite posts from the past Debt is Like Fat. I am doing better with my debt, but now not as well with my fat.

Debt is Like Fat

I was telling my daughter that comment and she looked at me like I had five heads. I tried to explain that building up debt rarely happens overnight, just like building up your body mass is not done overnight, and I think it is true.

I was so fat I was a Human Cannonball

I was so fat I was a Human Cannonball

When I had my weight gain it happened over about a 14 year period, and it was slow, but by the time I finally did something about it, it was significant. It was a compounding of eating the wrong things, in the wrong quantities at the wrong time, and a complete lack of physical exertion, luckily I have taken the weight off and am keeping it off (mostly).

Debt build up is the same way, usually (unless you make some gruesome investments, an incredible blunder or you are a victim of a fraud), slowly without you noticing you are doing it. Buying your lunch every day isn’t going to put you into debt, neither is leasing your car, vacationing in Las Vegas, or buying lottery tickets either, however, start adding these together with spending more than you make and suddenly you are building up debt, instead of equity. Keep doing this over a long period of time, and suddenly you have a debt load that you cannot afford and you are just not sure how the heck you did it. It was done one small step at a time.

Unfortunately, or fortunately, debt reduction is accomplished in the same way. Unless it rains money, getting out of debt is done slowly and one month at a time, using a plan and self-control and a wililngness to change your lifestyle (because losing weight and debt reduction are BOTH lifestyle changes, not just a quick fix that allows you to go back to your old habits).

Losing the financial bad habits is the key to debt reduction, keep that in mind.


What is in it for me?

One of the nice things about having written over 2000 posts and being on the job for over 8 years now, is the fact that you have a massive back-log of stuff that my current readers may not have read, so here I give you a post that didn’t really get much notice back 7 years ago, note the style of writing.

Dear Reader,

So as you can tell I am a mercenary blogger and will do many things to make an extra buck or two (witness the ads plastered all over this BLOG if you are unsure of this), so let’s ask ourselves how we can put a few extra bucks in our pockets (and review a few of my initial rants), What’s in it for us?

  1. Stop paying those ridiculously high banking charges (remember?)
  2. Use some coupons when you shop (hey a couple of extra bucks is nothing to sneeze at)
  3. Get a Credit Card that pays you to use it. PC Financial has a nice one (if you like shopping at Loblaws that is), and gives you cash. AMEX and Costco have one that pays cash as well. For heaven’s sake don’t pay to get money back or points (like that CIBC Aeroplan Gold, only if you are a traveling salesman would that work).
  4. Join Petropoints or whatever other “I give you points for shopping here” program you can find (as long as it is free). I also am a member of the CAA, so I get money back for buying gas at PetroCanada
  5. Stop buying those bloody “Lattes” will ya? What’s wrong with the free coffee at work!

OK, so that is the rant for the day, put your money in your pockets!


The Problem with Some Folks Who Are in Debt

First, let me preface this with the following soothing words: If you are in debt, you should ask for help if you feel you are drowning and you have nowhere to turn. There are many good community based help groups for your debt issues, so there is help for you, and if you feel you are at wit’s end, ask for help (i.e. this post is not about you).

Don’t be a Debt Dandy

I am lucky to be a financially comfortable person (relatively speaking), I am by no means rich like many of my other blogger brethren, however, I am OK financially. My debt load is kind of high, but it is manageable and I have a good job which pays reasonably well, so not too many complaints here.

I do however have many acquaintances and friends (who make a great deal more than I do, since most of them have Dual Incomes ) who are constantly harping on about how they have no money and how far in debt they are.

Let me give you a quick scenario which happened recently where an acquaintance was out to lunch, and started whining about how his credit card debt is so high, and it’s going to be really hard to go on vacation with his family this summer. He and his wife just felt that between the car payments, and day care costs it was just getting too much.

A Pair of Debt Dandies

OK, I’ll give you a second to read that one over again, just to get the gist of why I might be mildly irked, or peeved about the statement.

Let me dissect this simple scenario and why I wanted to stab this acquaintance with a spoon (because it would hurt more!):

  1. This acquaintance has a wife who also works in a similar job, and thus his family income is effectively twice mine
  2. We were sitting in a nice restaurant eating lunch (which was going to cost around $30 or so)
  3. He paid with his credit card
  4. There was still going to be a family vacation to a cottage, but just not a nice vacation somewhere down south with a hotel
  5. Same acquaintance “refreshes” their cars every year or two because they don’t like older cars, and they lease all of their cars

If you have twice my income and you complain you don’t have money, you really need help financially. Unless you are sending your income to your family “back home”, supporting a disabled family member or are attempting to recover from a financial catastrophe which left you in dire financial straits, you really have no real reason to be complaining you have no money (or more specifically you don’t have enough money).

If you are having problems with your cash flow and you are spending too much, stop eating in restaurants.

If you have a massive credit card debt, stop using your credit cards (completely). Do the Gail Vaz-Oxlade money jars thing, put your credit cards in the freezer, or whatever, but simply stop using your credit cards. You can’t fill a hole in that you are continuing to dig at the same time.

Vacation? What the hell is that? Mrs. C8j (my sainted wife) hasn’t been on a descent vacation (with me) for 18 years! Are we complaining? YES, but that is for another time. If you are having financial problems, vacations are the first thing to go.

Leasing cars? Replacing your car every two years? I won’t go into the numbers but you are just burning money for the sake of having a nice car (which evidently is an important part of your self-esteem I hear (I drive an 8 year old Corolla, which better last another 3 years at least, for reference purposes)).

Oh and if you want to be really picky, if you think Day Care costs a lot, why doesn’t one of you two cut back your hours? Do the math, how much is this all costing to put kids in Day Care, and “Do the Work Thing”, you might find you are actually in a losing position financially.

Sorry, haven’t ranted much lately about this kind of stuff (and no this isn’t one single person it’s a conglomeration of a few acquaintances, however, I am sure you all have friends like this too).

Oh and to clarify the title of this post:

The problem with some folks who are in debt, is that they won’t shut up about it, and wear it as a red badge of courage to almost brag about how badly off they are (when in fact it is their own fault, and if they just did something about it, they wouldn’t have these problems).

Don’t BITCH about it, DO something about it!

(or start your own blog and complain about it there)


Why is it Taking So Long (Debt reduction)

One of the more interesting analogies I like making is that Weight Loss and Debt Reduction have a great deal in common, not the least of which is that both are very hard for a lot of folks to succeed. If you have put on a lot of weight over time, it is hard to figure out how to lose it again, and it is the same thing with debt (i.e. it is rare that someone suddenly finds themselves in debt, it takes a while to build up a lot of debt to the point where you get upset about it).

A more interesting way to look at this is that losing weight and reducing debt both take a long time, but your progress with both are actually (usually) quite different.

If you try to lose weight and find a successful way to do it (via exercise, diet or a combination of those), typically you lose weight quicker at the start of the process than you do as you approach your ideal (or goal) weight. If you are trying to lose a lot of weight this is actually even more obvious, but this is what I have seen when I have lost weight as well.

Simplified Graph to show how weight and debt reduction take different paths to the same end point

With Debt Reduction, getting instant gratification is a lot harder to do, assuming that you are attempting to pay down debt because you are close to living “pay cheque to pay cheque”, so finding that extra cash to pay it down is a lot harder to find. At the start of your debt reduction plan, your debt will not be dropping quickly, however, if you persevere and remain constant with the money you are paying your debts down with (if not increasing it a little), you will actually start paying down debt at a much faster rate. This portion of most reduction schemes must be one of the reasons abandon their debt pay down plans (i.e. no real quick fix or quick gratification either).

Don’t get me wrong, I still think losing weight and Debt reduction are both really hard to do, I am simply saying that should you be trying to reduce your debt, keep in mind that at the start of your process you may get frustrated but if you stay with it things should get better quickly.