DebtFREE-Revolution

Today my teenage son made an earth-shattering discovery about life here in America: “A gallon of milk costs more than even a gallon of gas!”  This epiphany came swiftly on the heels of his realization of just how much milk he consumes on his own.  As y’all may recall, last night at the grocery store he only bought a half gallon of milk for himself (details of the teenager’s first shopping trip on his own personal food budget here) and I wondered just how long that half gallon would last him.

Apparently, he realized this morning a half a gallon of milk will not last him long at all.  He poured himself about 6 ounces in a glass, then filled his super-sized cereal bowl up just as he usually does.  He now only has a quarter of a gallon left!  That’s right: his half gallon carton of milk is now half empty.  For those feeling witty, the teenager will not be persuaded it is actually half-full.

It was an interesting (and for me, amusing) conversation as he held the milk carton up for me to see.  I think he is beginning to understand why I was so strict about how much milk he could drink when we all shared a gallon.

“I didn’t think I drank THAT much milk by myself!  I thought you two were drinking it too!”

“No, son, I usually don’t get any milk to drink.  If I am lucky there will be some left for cooking most weeks.”

“This isn’t good, Mom … a gallon of milk costs more than a gallon of gas…” (pausing for thought) “…and I ain’t getting any more grocery money til next week, right?”

I think the first lesson of this experiment just hit home!  After months and months of trying to tell the boy about how grocery prices are rising and how he just can’t eat everything in the pantry and refrigerator unrestrained, I think he has learned the concept on his own in less than 16 hours.  I think he will no longer fill the super-sized cereal bowl to the rim with milk (these cereal bowls are barely smaller than mixcing bowls - only because I refuse to let him use the small mixing bowl for cereal).  I think the tall glasses of milk for each meal and every snack in between may fall by the wayside as well.

I also predict next week the teenager will buy a full gallon, and keep about $5 back from his grocery budget for a midweek milk run.  Of course, I also think my hubby will pour some of our milk into the teenager’s half gallon carton when I’m not looking … but as long as it’s only this week I won’t fuss about it.

This experiment is working out better than I dared to hope!

Related posts about my teenage son and just how much he eats:

• My decision to put the teenager on his own food budget (and why)
• The economics of feeding a teenage boy (be sure to read the comments on this one!)

Someone on a blogging board made the comment this morning that he has been trying to get through to his son about credit card use and how the son will get nowhere fast making only minimum payments on the balance.  Yes, I cringed at the thought of a young adult making only minimum payments and still using a credit card … mainly because I have been there and done that and had the credit report to prove it.  I blogged about how credit cards were my biggest money mistake when I was that age yesterday.

The thought has also occurred to me that if this person is making only the minimum payment while still using the credit card, he is not just spinning his wheels.  He is going BACKWARDS financially, digging himself deeper into the debt hole each and every month.

I remember last year before I had managed to get hubby to promise not to use the credit cards anymore.  We had made double the minimum payment that month, and hubby used the card to purchase a calling card while in Korea so he could call home and talk to me at zero-dark-stupid in the morning.  When we got the next month’s statement, the balance had actually gone UP.  We had paid about $60 on the balance, and the calling card hubby bought was under $25.  It was the interest and the “currency exchange fee” that made us go backwards.  If we had only made the minimum payment, we would have gone much further in the hole than just $5, but that was enough to get hubby good and mad.  In fact, that was what finally convinced hubby to stop using the credit cards.  (Name and shame: it was American Express Blue card.)

Those of y’all who still have credit cards you are working to pay off:  break out the monthly statements!  I’m not asking for any figures to the penny (although you can be exact if you wish) I want to know about minimum payments versus interest charges.  How much actual principle are you paying when you only pay the minimum payment?  For the math nerds among us: how long will it take to pay off the balance if you ONLY pay minimum payments?

Maybe we can get this dad’s message delivered to his son in a way a young man will listen.  As the mom of a headstrong teenage boy, I know sometimes they will listen to others before they listen to parents.

Y’all asked me to post about how my experiment with putting my teenage son on his own food budget is going.  Tonight was our first stab at it, and the testing ground was perhaps the most challenging of all: Wal-Mart.  Yes, I turned my 14yo son loose  on a Wal-Mart with $35 and his own shopping cart!

I would call tonight’s shopping expedition a smashing success.  I fussed at the teenager to make a list, informed him he had to buy his own milk, juice, fruit, pasta, and what-not.  I figure I can cover him on things like condiments and margarine, but he is *SO* on his own with the milk.  Yes, he objected to the milk idea, but I held my ground then pointed out an obvious benefit: with his own milk he won’t hear me throw a fit when he decides to drink a tall glass of it at every single meal and snack time.  I guess it was a huge eye-opening experience for him in the dairy case, since he only bought himself a half-gallon instead of a full gallon!

I know y’all are dying to hear how the kid did: he came in a little better than two dollars under budget for his food!  In fact, before we left he ran and fetched his calculator out of his backpack, with no prompting from me.  After we got back home, he even put his own food away.

If every week is this easy, this may end up being the singly most brilliant idea I have ever had in my entire life!  This shopping trip was free of stress and - dare I say it? - even enjoyable (well, about as enjoyable as a trip to Wal-Mart can be).  I didn’t have to guard my cart against packages “jumping” into the cart.  I didn’t have to listen to “Mom I want…”  And I didn’t have to spend half the time in the store saying “No, no no!”

Hubby is still a bit unsure of the amount of money I am budgeting for the boy’s groceries.  I am trying to reassure hubby that $140 for a month is about the same amount I was spending on feeding the teenager (when I could keep things from jumping into the cart, that is) and is about the same I spend on the two of us adults to eat as well.  I don’t expect my son to be a natural bargain-hunting coupon-clipping frugal shopping machine … at least not immediately LOL so I tried to figure in a bit of “wiggle room” in the amount of money.  I just don’t plan to up it any time soon, so if inflation kicks in the teen will have to learn how to really do some aggressive shopping.

There it is, folks.  Week one of the teenage boy doing his own grocery shopping on $35 per week.  I have to admit, I am pretty proud of him.  When I asked son how he liked the experience, he said he definitely likes this plan.  Now he won’t get any more grocery money until next week … so it should be interesting to see just how long that little half-gallon of milk lasts!

Millionaire Money Habits has just started up a new contest on his blog called “What’s your biggest money mistake?” and y’all probably know where I am going with this one … CREDIT CARDS!  I know I am in good company with this hideous money misstep.  Credit card companies are expert marketers and have managed to snare so many people …

I’ve blogged about this before, for those of y’all who were reading back at the beginning of the year for my great credit card debate.  For me, the big money mistake started when I was a naive 18 year old college freshman with only a minimum wage part time job at Taco (H)Bell on the weekends.  Citibank, that notorious campus predator, snared me young.  With a 21% interest rate, I ended up working more than just the weekends, since I had very poor money handlng skills … well let’s be honest, I was simply clueless and easy prey.  And it only took one missed payment for my interest rate to get jacked up to 29.9%.

You might think I learned my lesson with my Citibank experience, but I had dug in and fortified my position in the Land of Stupid by getting another credit card, and with this second one “only” having an 18% interest rate I actually thought it was a “good deal.”  Of course, that was the credit card that my ex and I used to buy a horse (no, I am not kidding!) and of course we didn’t read the fine print that said cash advances on the credit card had a 26% interest rate.

Let’s not forget the Bealls card for my 19th birthday, the JC Penney card, and of course the Sears card that I never had the opportunity to use since it always had tires or tools charged to it.  Those store credit cards all start at 21% interest, and it just gets uglier from there if you miss a payment, which we did due to disorganization and inattention (and not having a budget!).

The ironic thing about all this is my grades and IQ tests all claim I am highly intelligent.  When it came to money, I was completely uneducated and DUMB DUMB DUMB!  I was lost in the Land of Stupid and making just about every money mistake in the book.  I didn’t like what was happening with the credit cards, but I had no idea how to fix it.  I finally stopped using those insidious little pieces of plastic, but the bills lingered for another EIGHT YEARS because I was still quite ignorant about how to handle money.

Once the old credit card bills were paid off, I still wandered through life clueless about how to suceed with money.  I didn’t get any new credit cards, but six years later I did something TRULY STUPID: I urged hubby to get a couple credit cards to “build his credit score.”  I wince just typing that.  I didn’t want the things myself, but thought it was a good idea for hubby …  I’m sure I could write a whole ‘nother post on that alone.  But, that was how we got back into credit card debt hell.  It was my idea (and yes I am ashamed of myself, even though I hadn’t found a better way by that time).

Then about ten months into doing another stupid money mistake, I found out about Dave Ramsey.  THIS was what I had been looking for!  This was what I had been needing for fifteen years as I wandered through life making money mistake after dumb money mistake.  I got busy, got myself on a budget, and paid the three credit cards we had off in pretty good time.

I’m never going back into that particular Land of Stupid.  I am never again paying stupid tax in the form of credit card interest or fees.  And just in case anyone hasn’t figured it out yet, I will use this blog to try to prevent others from making the colossal money mistake of using credit cards!

I was driving around last night delivering to some of the truly nicer neighborhoods in our delivery area and a thought occurred to me:  The reason I am so jazzed about the gift ink pen is it makes me feel “rich” to have something like this.  Seriously.  It may sound funny to some of y’all, but the only ink pens I have bought came in ten-packs that cost less than a dollar (usually Bic or Papermate brands on back-to-school sales).

A fancy ink pen, especially a handcrafted and unique one, has always represented “luxury” in my mind.  It’s always been one of those “If I ever win the lottery” type luxuries, one I have never considered indulging myself with before.

This realization hit me as I pulled into a semi-circular diveway to deliver a pizza.  Why?  Because a paved semi-circular or circular driveway is another thing I tend to associate with luxury.  Of course, it simply must be right in front of a large porch, preferrably with columns (or are they pillars?) and an ornate oversized wooden door with stained glass for windows and fluer-de-lis carved into it.  LOL  Hey, it’s my little fantasy of rich and luxury (and of course was what I was looking at as I waited for the customer to open the door to complete the delivery).

After exchanging the pizzas for money, as I climbed back into my trusty little Pizza Taxi, another thought hit me: This is no longer limited to fantasy.  I’ve been doing a bit of neighborhood hunting to get a feel for how much of a down payment to save over the next 3-5 years.  This is now something I can PLAN for and -better yet- ACCOMPLISH!

There is a huge shift in mindset when I realized I have gone from dreaming to planning, from wishing to long-term goal-setting.  It’s almost as drastic as transitioning from the “paycheck to paycheck” mindset to the “budget, plan, and save up” mentality.  It’s a huge hopeful world out there when you have goals and plans for the next several years, and know you can achieve them.

So, all it really took to make me feel rich was a very beautiful handcrafted ink pen.  Give me five years and I should have the semi-circular driveway and if I can find a good deal a carved wooden door on the house.  I might still be driving the Pizza Taxi LOL and that will probably be a sight parked in the driveway!  Now, your turn: what would (or did) make you feel rich?

PS-Still not sure who got it for me, but I know someone out there is probably smiling very big to him/herself right now…

I’m going to tackle the daunting task of explaining stagflation today, not only because it is in the news quite a bit recently, but also because it can really mess with the beginning investor.  First, the definition courtesy of wikipedia:

a period of inflation combined with stagnation (that is, slow economic growth and rising unemployment, possibly including recession) … First, stagflation can occur when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country … Second, both stagnation (recession) and inflation can be caused by inappropriate macroeconomic policies …

OK, enough with the economic jargon, let’s break this puppy down into terms the normal person can understand.  Since stagflation is most commonly associated with the 70s here in America, start up some appropriate background music LOL like disco or funk or classic rock.

• Stagnation:  This is pretty easy to get a handle on.  It means the economy isn’t moving forward.  Another common term popping up in the news today is recession.  The stock market will look BLAH and the unemployment rate will increase.  At the very end of the 70s and very beginning of the 80s, the unemployment rate hit over 10% which is at least double what we have now.
• Inflation: Where the price of normal every day necessary items like food and gasoline increase sharply; that is, they inflate like a ballooon.  Inflation in the 70s was spurred by the two Oil Shocks here in America (1973 and 1979).
• Inappropriate macroeconomic policies: Translation of this one is the central banks fumble the economic football.  Umm, gee, haven’t I (and others) been accusing the Fed of this one recently?  Granted, I am just an overeducated pizza delivery driver with a blog and a lot of opinion LOL but I am starting to see real economists and TWO of the ten voting memebers at the Fed saying this.

I found this interesting little tidbit buried deeper in the wikipedia page:

The way this plays out is that after supply shock occurs, the economy will first try to maintain momentum - That is, consumers and businesses will begin paying higher prices in order to maintain their current level of demand. The central bank may exacerbate this by increasing the money supply in an effort to combat a recession. For example, by lowering interest rates. The increased money supply props up the demand for goods and services when it would normally drop during a recession.

So, with a basic stripped down definition and a lot of opinion, do I think we are headed for stagflation?  I sure hope not!  If we bring back stagflation, people may start wearing those hideous polyester leisure suits and playing disco again!  Ewwww! 

Not only that, but stagflation helped keep the stock markets stagnant for a decent portion of the 70s, to the point that people were saying equity investing was dead.  Of course, the ones who stayed in the stock markets made out like bandits when it recovered by the mid-80s.

The problem I see is the Fed slashing the interest rates is sounding way too much like the wikipedia version of “how to bungle inflation and stagflation.”  I sincerely hope things don’t get to the point where it can’t be fixed, because my parents hated the 70s and early 80s for the economic misery and their vitriolic opinions about Richard Nixon, Gerald Ford, and Jimmy Carter could peel paint off the walls.  Just about every Baby Boomer I’ve met has the same low opinion of those three presidents and that time period.  Which reminds me, most Baby Boomers’ retirement funds would be hard-pressed to survive another round of stagflation.

OK, stagflation survivors: here’s your chance to weigh in, correct this Gen X “kid” or just give your predition from those who have seen it before.  Are we heading into another round of stagflation?

First up, the exciting happy news: my ink pen that an anonymous reader has bought for me is being shipped today.  I didn’t get the exact pen I posted a pic of earlier this week, but instead I got this one:

Same fancy “Rolls Royce” wood, but more gold trim :)  since gold is my favorite metal (to wear, not to invest in LOL)  Hans has done a beautiful job from the picture!  I can’t wait to see it in person … should be by the middle of next week.

I still don’t know who did it, but whoever my mysterious benefactor (penefactor?) is, I want to once again say THANK YOU.  Hans says he is sworn to secrecy, and I won’t even be able to waterboard it out of him … perhaps I should try tickling til he cries?  Is that allowed under the Geneva Convention?  LOL  I jest.  Of course, this post simply would not be complete without a link to Hans’ site, where you can order a custom handcrafted pen from him yourself if you desire.

Only one new blog carnival has been posted since my last rambling post, this one is the brand new kids and money carnival started by Money Hacks and included my post about Putting My Teenage Son on a Budget.

I have been invited to be interviewed on a podcast by my “Featured Blog” All-American Blogger!  Wow, neato!  That will happen on Wednesday, March 26th, at 3 PM CDT if everything goes as planned.  There is even a number y’all can call in to ask me questions LOL  Duane (the podcast host) has also encouraged me to sign up for Blog Talk Radio and start my own podcast.  Right now that sounds a little intimidating, and I am not sure y’all want to hear me ramble … or do you?  Maybe y’all should hear me first.  I’ll wait and see how well the interview goes.

Finally, I am going to try my hand at this whole social bookmarking idea again, and mark all the neat blog posts I find on del.icio.us so I don’t have to keep admitting I don’t remember where I see something LOL  Hold my feet to this one, folks!  Here is my bookmarks on del.icio.us page.  It seems like it should be easier than filling up my faves folders then needing to clean them out periodically because it got too much LOL  I’ve tried reddit, but it seems everything I submit is instantly downvoted.  Maybe I just need more “friends” there?  Give me a shout out if you are on either one, because I probably need some help figuring how to use these to their full potential.

OK, enough opining for this week.  How about a useful post?  One of the common “excuses” for not doing a budget is “I never know how much money I am going to make/bring home because I am not on a set income.”  Bah!  (Fiddlesticks!)  That excuse is just weak!  If you work on commission or tips you can still make a budget.  Irregular income is no excuse, you still need a battle plan for your money.

While most of our household income is fixed (about 75% of it) I still bring home some irregular income because I work on tips.  I still need a plan for what to do with that money, or it ends  up burning a hole in my pocket and “disappearing” like unbudgeted money usually does.

When you don’t have a guaranteed income level, you need to shift to a prioritized spending plan, where you list out your expenses in the order of importance.  If you have no fixed income, then your entire budget is a list of spending priorities:

• Food:  should always come first!  This is grocery money, not restaurant money, with the absolute bare minimum amount listed.
• Housing/shelter/utilities:  You need a roof over your head and your heat and electricity and water to stay on.
• Transportation: this is where the vehicle notes, driving insurance, and gas money if you have those expenses, or a bus pass if you use public transportation.  Everyone needs a method of getting to work and back.
• Necessary clothing: Clothing required for work or growing children, and you should probably budget the bare minimum and put “wants” further down the list.
• Insurance: health, life, and disability insurances are all part of a good financial plan.
• Minimum payments for debts (if owed):  Down here is where you put the minimum payments for things like credit cards, NOT above housing!!  I have never understood why some folks will pay their credit card bills before buying groceries or paying their rent/mortgage.
• Discretionary spending: HERE is where all the fun stuff should be … below all of the necessities.  This is where eating out money and vacation spending and fun stuff belongs.

OK, so what happens when you run out of money before you run out of list items?  You draw a line where the money runs out.  Anything below that line doesn’t get paid. 

Dave Ramsey tells a very humorous story of when that happened to him, and he got a collection call for some company “below the line.”  The collector was quite shocked when Dave Ramsey explained he couldn’t pay that bill “because you’re below the line,” and what that meant.  The collector (who had been exceptionally rude at the beginning of the call) asked how he could get above the line.  Dave Ramsey quipped, “You be nicer when you call,” and hung up.

It’s a humorous story (especially with him doing the different voices) but it illustrates a very important concept.  When you make your priotized spending list, you do not deviate just because someone is trying to bully you!  The priority list is set in stone, unless an emergency comes up and YOU make the decision to change it.

In fact, with the prioritized spending list, you can break it up by pay period to better control where your money is going.  This is often easier to do than a monthly budget.  This gives you a plan of exactly where your money should go before you get paid, even if you are not sure how much you will bring home.  If it’s a really really great pay period, and you run out of list items before you run out of money, what to do then?  Rather than blow it on fun stuff, I would recommend starting on the next pay period’s list or put it into savings as a cushion for when you have a bad pay period.  But that one will be up to you.  After all, it is still YOUR money.