Fiscal Therapy: Common Budget Busters

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WHAT I'M THINKING ABOUT: Record breaking trends & you

Ho ho ho: consumer spending this holiday season hit a four-year high.  Good news for the economy, right?  Perhaps, but at the same time revolving credit (think credit card debt) has hit an all-time high in the U.S., while food pantries are more packed than ever (including with people who have traditionally middle-class jobs).  

A couple takeaways:

  • If you have debt, 2018 is the year to do something about it—ideally before interest rates rise this year as expected. Check out these resources if you’re struggling to make debt payments: NFCC, Fair Credit, and NTFP (for New Yorkers).
  • People around you are struggling with debt, and it may not be who you expect. Be kind, be generous. There is always someone in close proximity with less.

Debt often results from unexpected expenses. Here are the top three areas of spending I find catch clients (and me) off guard throughout the year. Proactive and realistic planning is part of the solution.

  • Big stuff breaks or gets destroyed. If you’ve lived in this world for more than ten minutes, you have first-hand experience with the Second Law of Thermodynamics: the universe tends toward entropy.  Whether it’s a baseball bat to the TV, a baby leaning on a lamp, a computer succumbing to the blue screen of death, or an iPhone down the toilet, we should be realistic and expect the unexpected.  Solution: Earmark existing cash savings (separate from emergency savings) as available for these types of expected unexpected expenses. Or, decide on a manageable amount of money each month and created a dedicated savings account to grow this savings. When life happens, you turn to these savings. If the money is not there, get creative and possibly delay replacing the broken item.
  • Gifts for others. A few weddings and baby showers catch you off guard and suddenly you’re spending (joyfully, I hope) hundreds more dollars celebrating happy occasions. There are also the expected gifts that still seem to catch us off guard—birthdays, holidays, year-end gifts to caregivers, supers, and doormen. Solution: Think through the year ahead with some generous wiggle room for expected and unexpected giving. Make a monthly transfer into a dedicated savings account to ensure you have the cash available as you incur these expenses.
  • Fun and small conveniences. Whether it’s an Uber, coffee, the nail salon, or ordering in, these small and often mindless expenses add up much more quickly than people realize. I often see one expense in particular that is less than $10 or $20 per transaction that adds up to a meaningful amount over the course of the year. Meanwhile, these smaller expenses stand in the way of higher priority saving or spending such as student debt, travel, a home purchase, or retirement. Solution: Identify one high-priority area of spending or saving that you’d love to increase in 2018. Look at last month’s bank statements and credit cards. What small expenses come up over and over? Is there something you can cut and immediately turn into savings or spending for something you would enjoy more? Curbing your daily coffee shop purchase could quite seriously pay for a vacation this year or put a meaningful amount of savings into your kids’ college fund.


Here are two interesting articles I read this month:


"My Year of No Shopping"
By Ann Patchett, The New York Times

This article is not to be missed. There are so many beautiful and inspiring insights about the author’s “year of no shopping.” She gets the idea from a friend and decides to give it a try and stumbles into life changing perspective shifts around money. The point is not about the money saved but a pivotal shift in her relationship with money, friends, and community. Here are my favorite insights from her experience.

“I did a favor for a friend over the summer and she bought me a pair of tennis shoes. Her simple act of kindness thrilled me. Once I stopped looking for things to buy, I became tremendously grateful for the things I received. Had I been shopping this summer I would have told my friend, “You shouldn’t have,” and I would have meant it.

It doesn’t take so long for a craving to subside, be it for Winstons or gin or cupcakes. Once I got the hang of giving shopping up, it wasn’t much of a trick. The trickier part was living with the startling abundance that had become glaringly obvious when I stopped trying to get more. Once I could see what I already had, and what actually mattered, I was left with a feeling that was somewhere between sickened and humbled. When did I amass so many things, and did someone else need them?

If you stop thinking about what you might want, it’s a whole lot easier to see what other people don’t have. There’s a reason that just about every religion regards material belongings as an impediment to peace. This is why Siddhartha had to leave his palace to become the Buddha. This is why Jesus said, “Blessed are the poor.” It’s why my friend Sister Nena, an 85-year-old Catholic nun, took a vow of poverty when she entered the convent at 18.”

“The things we buy and buy and buy are like a thick coat of Vaseline smeared on glass: We can see some shapes out there, light and dark, but in our constant craving for what we may still want, we miss life’s details. It’s not as if I kept a ledger and took the money I didn’t spend on perfume and gave that money to the poor, but I came to a better understanding of money as something we earn and spend and save for the things we want and need. Once I was able to get past the want and be honest about the need, it was easier to give more of my money to people who could really use it.”


‘I could live simpler’: Floods and fires make Americans rethink their love affair with stuff
By Lisa Bonos and Jura Koncius, The Washington Post

This related article is about people and their relationship to their “stuff” and how a year like 2017 with incredible natural disasters close to home for many Americans calls us to reevaluate this relationship. Many of us were confronted by actual loss and the others experienced it vicariously. Often growth, change, and reorientation of what truly matters comes from loss, a bittersweet silver lining.