Alright. So here we are. Square one. As I've already established, my family and I are broke. So what do we do now?
I hear from pretty much anyone who knows a quote that those who don't remember the past are doomed to repeat it. Sound advice, and exactly the right amount of ominous. Now, I know the circumstantial stuff that led to us being here, but what could we as a family have done better?
Here's a neat trick: up the average American's salary at a rate that outpaces inflation, and more than likely that American isn't going to change her savings plan even the teensiest bit. Why is that? Why doesn't every worker contribute enough to his 401k to maximize company matching?
Simply put, we're consumerist morons.
Come to my apartment complex and you'll see college students getting more hyped up about our local grocery stores' "Case Lot Sales" than most people get about the superbowl (unless Green Bay is playing, in which case, who can blame them?) These same students will unpack annual supplies of canned veggies, soups, mixes, and ramen noodles which must then be creatively stashed in our pantry-free, 650 sq. ft. apartments, then return to their 2008 toyotas to grab the black beans and spaghetti sauce that didn't make it inside with the first load. Really? You can't afford to buy regular-priced green chilies but you can afford a car better than most middle-class Americans drive?
Since my husband and I aren't made up of stone (or ramen noodles), we've done our fair share of keeping up with the Joneses, which has to be the single most unhealthy financial habit in America today. It is also, sadly, one of the most gratifying in the short-term. Step into our home and you'll find a slick new computer (which, to be fair, we built ourselves to save money), an unholy amount of baby clothes that our son fit into for all of two weeks, high-tech cell phones, and kitchen appliances that are more often used as toys than ice-cream makers. We're not any more immune than our neighbors, we just happen to have lucked out in terms of interest. Neither my husband nor I particularly care about our ride, which is a 99 chevy venture nearing the 200k mile mark. I'm not particularly interested in home decor, especially given that the lifespan on our current apartment is only another 18 months anyway. But I do love to cook, so I have kitchen toys. Eric loves to play with electronic gadgets. The only advantage we have over our less-frugal neighbors is that our interests don't happen to include many big-ticket items.
But the itch to spend is still there. It's difficult not to feel at times like we're trapped in our position in life, especially since both of us grew up in solid middle and upper-middle class families. I have a set of skis, which I own, jammed into the back of the closet, where they've been collecting dust since we moved here. Every once in a while, I think of how much I love to ski, and am seriously tempted to fork $40 over to a ski resort in exchange for a lift pass. I never have, but that temptation is frequently there.
What I've come to realize is that purchases like these are so inappropriate, not because of their inherent expense (after all, how much was that fondue pot I never use? Forty bucks? We're not talking about a bank-buster, here.) The problem is all in the relative expense. Let's suppose that my family's annual income is $20,000. That fondue pot then costs .2% of my total annual income. In other words, if I were to buy nothing but fondue pots, I could buy 500, and that would be my entire income for the year, gone. But now let's suppose that I live in an apartment that costs $600 a month. 600 x 12 is 7200. Utilities, clothing, gas, toiletries, car insurance, and other essentials total...let's say $300 a month, or $3600 a year. I'm not even going to count in food and health insurance, since, as you know, we get Medicaid and food stamps. If we never had a single other expense--if there were no unexpected car problems, no frivolities such as haircuts or eating out, no movie rentals or visits to out-of-town relatives--our total remaining income would be $9200. Our total purchasing power for the year would be 230 fondue pots.
But if someone with $40,000 were to buy nothing but fondue pots, they could buy 1,000. The relative price of the fondue pot is four times cheaper. Or, in another way of looking at it, if the person with $40,000 were to split their income into 230 equal purchases, they would be looking at an item with a $173 ticket. Our fondue pot is four times more expensive to us than it would be to this other person, even though on the shelves the two items are identically priced.
So, the first step in the process is to recognize that purchases, even little purchases, are more expensive to me as a sub-average incomer than they would be for someone else. That applies to everything from cars to ramen noodles. Therefore, the scope of purchases that we can make without thinking about is much narrower. You've heard the expression, "penny-wise and pound-foolish", right? Well, I feel that what constitutes "pennies" varies for each person. Have you heard the idea that it isn't time efficient for Bill Gates to stop to pick up a dropped $1000 bill, since in the amount of time it would take him he would have earned the money back already? Meanwhile, for me, it is very time efficient to spend hours a month plotting out which ingredients to buy at which grocery stores, based on weekly ads. Don't be fooled into thinking that you're only being "penny-wise" when the annual savings of buying on coupons account for 2% of your annual income.
All of that, though, means nothing if your attitude isn't in the right place. Have you ever tried to diet, only to fall prey to a night of binging on ice cream or french fries? Living grudgingly within your means is like that. Every time Ideny yourself an expensive purchase, it feels like a victory. I'll pass on the ski pass, I'll resist the siren's call of new speakers, or I'll will myself to buy extra-cheap shampoo. I'm doing great! And then...there's a fondue pot. Game over. Thanks for playing. All that self-discipline only served to build up my resentment for the spending diet, and I ended up buying something I might never have given a second thought to in the first place.
So if I'm going to break out of a spending mentality that's brought down a lot of better people than me, my first step has got to be accepting my station in life. I'm poor! Yep! That is a fact. I don't have to make apologies for it, or go crazy trying to make my life into something it isn't. If those crazies with their nice new cars want to whittle away their futures that way, that's their problem, not something for me to be envious of.
...In theory.
We'll see if that translates in practice over the next couple of weeks. I'll post a list of poor-in-cost, rich-in-feeling activities I've found help with the need to spend next Thursday.
Wish me luck!
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