As I was watching television this afternoon, I watched an ad for Bisquick® Shake ‘n’ Pour™ pancakes. You buy a plastic jug that contains pancake mix, add water and shake it to make the batter. Is it possible to have anything more wasteful than this? It is wasteful in terms of excess plastic packaging that will end up in a landfill and it is wasteful in terms of money that the consumer will waste on the convenience. I confess, I do buy pancake mix, but I buy one bag weighing several kilograms. How hard is it to measure out one cup, add water and mix? My one bag, which might be equivalent to the one plastic jug, will last me several months, whereas the one Bisquick® Shake ‘n’ Pour™ jug will last only one day or two at most, and I am sure I will be paying through the nose for the convenience. How lazy and how wasteful can the modern consumer get?

Now is a good time to buy some discount cruises if you have the money and the time. You have to be careful though in that you will likely spend more money than the advertised price. MSNBC has good tips on how to cruise on a budget. The article provides a good link to a travel budget calculator. It is important to plan and budget for all the incidental costs that quickly add up and may make what you thought to be a bargain an expensive proposition.

In a previous post, I noted that I was going to  buy a scale to ensure that I would be getting the most value for my money when shipping packages by mail. I was going to buy one at Staples, but I found a better option. A friend recommended a Starfrit electronic kitchen scale.

I bought this scale for $29.99 plus taxes at Canadian Tire. It is an excellent scale that can weigh up to 5 kilos (11 pounds) and has a margin of error of 1 gram (0.5 ounces).

It is ideal for my needs. It is flat, so I can easily weigh boxes or other small packages. It can weigh both in grams and ounces. I can thus use it both for weighing packages before I mail them and the occasional task in the kitchen.

I will be gone for a week (returning January 2nd). I want to take this opportunity to wish you all the best for these holidays. May you spend some time with loved ones and may the 2009 bring you much joy and happiness. Looking back, I can say that I have learned a lot this past year and haved changed my life to become more frugally. I hope we can continue down our path together to fiscal sanity in the new year. All the best to all of you and I will be back in the new year!!!

In an earlier post, I mentioned that certain things are better in Canada, notably Canadian debit transaction. I reported that in Canada, if you do not have enough money in your account to cover a purchase, your debit transaction will be declined. You may not be able to buy that $2 bottle of Coke, but you won’t be dinged with $30+ of bank fees. It seems that American consumers want this as well. To quote another article authored by Liz Pulliam Weston:

In recent years, most banks started approving, rather than declining, debit and check transactions that exceeded what customers had in their accounts. Consumers would rather pay $34-a-pop bounce fees, banks contend, than risk embarrassment at the checkout counter.

Turns out: not so much. A survey (.pdf file) for the Center for Responsible Lending indicates a vast majority would prefer a choice in whether transactions were approved by their banks. Furthermore, most want their banks to decline the kinds of small transactions that typically trigger the fees.

The survey by Opinion Research found:

• 82% of the 2,023 adults polled wanted to choose whether bounce protection was added to their account. Bounce protection is typically instituted automatically if you don’t have true overdraft protection, which links your checking account to a savings account, credit card or line of credit.
• 72% to 74% would prefer their banks decline rather than process transactions of $5 to $40 that caused an overdraft fee. According to the center’s research, the typical debit card transaction that results in a bounce fee is for a $20 purchase. Overall, Americans paid $17.5 billion in bounce fees during 2006 to cover $15.8 billion in overdrafts.

This isn’t just an issue for the young, broke and careless, by the way. About a quarter of those overdraft fees were paid by Americans over 55, the center estimates. Low-income seniors who rely on Social Security paid about $1 billion of the total.

I do encourage all of you to watch Liz’s video. It provides useful advice to Americans as to how to avoid being gouged by banks.

I have been using The Meaning of Lila to illustrate how not to budget and how not to manage finances.

Emotional Investment in Material Goods

Living in societies founded on material consumption, we invariably define ourselves by things. They give out life meaning. Over time, this will lead to financial ruin.

Impulse Buys and Rationalization

One of the mistakes most people make is giving in to impulse buys. We decide that we NEED something, that it is a necessity. To avoid such behavior, it is important to gain some discipline. The best solution is never to buy something immediately. Always wait a day before buying anything, and the bigger the purchase, the more time you should wait. I would suggest a 1 day for each $100 rule. If you want to buy something worth $100 or less, wait one day. If you want to buy something worth $1,000 wait 10 days, if you want to buy a car, wait at least a few months. This will give you the time to think it through to see if you really need it and it will give you the time needed to do the research to see if it is a good purchase.

Knowing When to Seek Help

One of the mistakes most people make is not knowing when to seek help. I was Lila. I waited to long to see the help of credit counselling. I did not take the necessary steps to sort out my financial problems. Of course, they are discussing seeking help with debt while eating in a restaurant; spending money you do not have is the road to financial hell.

Stop Spending, Pay Down Debt

Such a simple concept, yet so hard for must of us to accept. Most people have to hit a financial wall before they take action.

Failure to Plan, Expecting Problems to Resolve Themselves

Your problems will not solve themselves. Dealing with debt requires budgets, it requires financial discipline.

Not Knowing How Much You Owe

Like Lila, I had not idea how much exactly I owed. Ignorance is not bliss. You have to face your problems, you have to acknowledge the problem.

Credit Cards and Living Beyond Your Means

Credit cards create the illusion of prosperity and allow us to live beyond our means. Cut those cards! Learn to love and respect the person you are and not the person with what you buy.

The Little Things

Lila of course loves Starbucks and spends a lot of time there. Her Starbucks closed and she is checking out the newly renovated McDonald’s. Of course, the best way to save money is to brew your own coffee. Neither Starbucks nor McDonald’s will save you money.

Getting Your Priorities Straight

Getting out of debt and resolving your financial problems requires you to get your priorities in order.

Conclusion

The only solution to debt and financial crisis it to exorcize your inner Lila. Learn to live within your means, spend less and never rely on credit cards to finance your lifestyle.

It is always fascinating to look back and to listen to those who were proven right. There is a wonderful YouTube video featuring past interviews where Peter Schiff was right. He predicted the collapse of the housing market, the decline in stocks and the coming credit crisis, including the dangers of American consumers having too much credit card debt.

In watching the video, I noted a few of Peter’s very poignant ideas. The first is that it is folly to continue borrowing to live beyond our means, both as individuals and as a country (this applies to the United States and other countries). He noted that a recession (which he also predicted as imminent) could be useful. He argued that the cure is to stop consuming and to rebuild and having consumers saving instead of spending. This will lead to some difficult times, but the end result will be a saner economy. The Penny Pincher concurs.

The following is today’s The Meaning of Lila comic strip. You can read this strip and many others for free at Comics.com.

Lila is a profligate spender who is deep in debt. Of course, she refuses to acknowledge the problem and continually finds ways of justifying her irrational spending habits.

This strips also highlights an important factor in frugality: the people around you. It is extremely difficult to go from spendthrift to frugal, and it is so much more so if your spouse or friends keep their bad spending habits. It would be the equivalent of trying to quit smoking when your husband or wife is a chain smoker and your friends keep offering you cigarettes. You cannot do it alone.

What can you do? Friends are a bit easier to deal with. You will have to tell them that you are cutting back and that you want to spend less and save more. You will also have to change the ways that you socialize. If you and your friends meet at expensive restaurants, propose having them over to your place for a dinner party. If you and your friends always meet at the mall, propose a walk in the park or activities that keep you away from the temptation of spending. Yes, you may lose some friends or others may drift away, but that may be a small price to pay to avoid your financial Armageddon.

The real problem is what to do about your spouse. Divorce is not really an option most times. They do get quite messy emotionally and quite expensive. However, you will have to talk to your husband or your wife and see if they are willing to work at it together. If you are lucky, they will understand the need for prudent financial planning. If you are less fortunate, they will refuse to change. What then?

If you have a spendthrift spouse, you may have to take some drastic measures including having separate bank accounts. This will result, of course, in a lot of negotiations and some give-and-take (and more than likely a few heated arguments along the way), but  you must find a way to deal with it. It may, of course, require you to do more. You should do the shopping and cook to cut waste. You will have to try and cut back on any impulse purchases your spouse makes. You will have to be vigilant as to your finances and explain continually why you should not be spending more.

Simply put, it will be difficult, very difficult. However, do you have a choice? I don’t think so. Sadly, it may lead to a divorce in the long run, but you are much better off trying to settle the family finances before that happens. The fewer financial difficulties you have before the divorce, the fewer you will have after the divorce, and the easier it will be for you to start your life over as a frugal single person.

The Financial Times has a witty piece on debt counseling in Great Britain. An excerpt:

wenty things I didn’t know before I worked as a debt counsellor

By David Gaffney. Illustration by Joe McClaren

1 You wouldn’t put all your soup in a basket, so don’t put all your debts in one

One easy payment, the ads say, as if a little light tidying were the solution to chaotic debt problems. Faced with insurmountable multiple debt, most people try to borrow their way out. This is like mending a leaking bucket by joining up all the little holes to make one big hole. Repeat this several times until you realise it doesn’t work.

2 In multiple debt land, time is geological

When I told my first client I would offer 31 pence a month off a debt of £12,000, she gasped. It would take 3,225 years to pay it off. “Don’t worry,” I said cheerfully. “Just think about it as being in debt for the rest of your life. Be positive: governments will fall, continents will shift, cities will crumble and be rebuilt, but your debts will remain standing throughout.” This, it turned out, was an insensitive way to explain the situation to my client. My bedside manner improved over the years.

3 It is legally permissible to laugh at bailiffs and drop milk bottles on their heads from upstairs

There’s case law to prove this. Bailiff law is like vampire lore. Bailiffs can come into the house only if invited over the threshold. Once inside they take an inventory of goods that they can return to remove. The courts can leave a bailiff on your premises to check you don’t move anything. This is called close possession and a bailiff has to provide his own flask and sandwiches. Bailiffs are not allowed to take away “wearing apparel in use”, so balance your plasma TV on your head and say it’s a hat. In one case, a landlord gained entry to a flat by jigsawing a hole through the floor from below. This was held to be lawful entry.

4 Debtors are expected to roll cigarettes from the hair of their dead pets

A bailiff hammering on your door doesn’t usually encourage you to stop smoking, but if you include fags in your financial statement, creditors will be as angry as if you were employing two personal pastry chefs and a private pole dancer. Creditors dislike lots of things, mainly things that you spend money on instead of giving it to them, things like pets and costly middle-class pastimes such as horse-tasting, dance-upuncture or aromabingo – anything that makes them think that you are having fun while they sit up at night writing your nightclub bills into a fat ledger.

5 The principles of debt counselling are that there are no principles

The debt counselling method is to maximise income, sort out emergencies like disconnection and eviction, then contact non-priority creditors – the credit cards, catalogues and door-to-door loan companies. Non-priority creditors don’t like debt counsellors. No one likes to be anyone’s non-priority. The technical way to describe the relationship between your client and his non-priority creditors is “F*** ’em, look after yourself, they’ll survive.”

The article continues. It is worth reading and provides a humorous look at the problem of debt on the other side of the pond.

AOL Money has an interesting post as to how you could save nearly $2,000 a year making your own espresso at home. Of course, they are also trying to have you buy an expensive espresso machine in the process, but the idea is good: you can always save money by doing it yourself. However, rather than splurging hundreds or thousands of dollars on an espresso machine, I plan on trying out a much simpler espresso maker from Stokes.

This “3 CUP ESPRESSO MAKER, 2 CUPS & SAUCERS AND FROTHER” is selling for $14.99. Yes it is not as fancy and it won’t impress my friends, but I am convinced that it will do the job that I want it to do: make very concentrated coffee which is what we call espresso.