Slaughtering the Sacred Cow

Slaughter a Sacred Cow - and live a happier life!

If you are in debt and can see no way out, perhaps it is time to slaughter a few sacred cows.

On the get out of debt website, is this chilling plea:

"Been a good provider for the home, but I ran up debt supposing to get an inheritance that would pay for it. I have been struggling with depression for three years and it is getting worse along with my finances. I have been hospitalized once for suicidal ideations...."

"I have credit card debt and a second, we are struggling to make the minimum payments and emotionally I am ruining my marriage, job and life overall. Although everything is current, is it appropriate to declare bankrupcy (our savings is being depleted to nothing to stay current). I had a couple of pay cuts and I am really not in a place to handle life emotionally. Thought about suicide but I have a wife and four children. Can’t stand the thought of a lifestyle change I guess."

Yes, suicide is the ultimate "lifestyle change" - but I don't think that is what he is talking about.

What people are reluctant to do, when faced with credit card debts, is to cut back on living expenses and the perks of their lifestyle.  They want a way to get out of debt, with no pain, no sacrifice, no difficulties.  They are looking for the secret button to push which will make all their problems go away.

In a way, it is like a posting I made on a Fiat website once, where a person complained that their Fiat was giving them problems (clearly a person not familiar with Fiats!) and how they could easily fix it.

I told them, somewhat sarcastically, that what had happened was that they had bumped the reliability switch, which is under the dashboard on a Fiat, from the "reliable" to "unreliable" position, which then caused all sorts of problems.  All they had to do,  was find this switch, and then push it back into the "reliable" position, and all would be well.

That response garnered some laughter, but it illustrates how people want simple solutions ("lower my taxes!") to complex problems.  No one wants to do hard things.  Because hard things are hard to do.

So, we have a fine Christian fellow contemplating suicide rather than make "lifestyle changes" - when lifestyle changes are actually so easy to make.

And yet, we all resist this.  I want to get rid of my credit card debt, but I don't want to give up Cable TV, or my smart phone, and I certainly am not going to sell the Harley! (Live to ride, and all....).  And Boy's night out at Hooters is not even on the menu!  No, no, we'll save somewhere else, perhaps by eating raman noodles, or getting discount orthodontia for the kids.

But of course, those "plans" never work out, as there are no real savings, just vague plans to "pay off our debts" somehow - sometime - using vague means.

If you are faced with a debt problem (and that is to say, having debt, which is a problem) the first thing to do is to slaughter sacred cows.

How do you know which cows are the sacred cows?  It is simple.  Just write down the five or ten things that are "not on the table" for cuts in your budget, and then get rid of those.  The things you cling most closely to, are most likely to be what is killing you, financially.

So, for example, Ted has a credit card problem.  He is $5000 in debt, paying hundreds of dollars a month in interest (at 25%) and can't seem to get this credit monkey off his back.  And worse yet, his credit card debts keep increasing over time.  He has tried all he can to pay this off.  Well, he hasn't tried much, really, because at the top of his "Not on the Table" list is his new bass boat.  No way is he selling that!  It is not even up for discussion!

Bingo!  Ted just found his sacred cow.  Kill it, and the debt problem goes away.  The monthly payments on the boat would pay off the credit card within two years.  Throw in the gas and oil and maintenance on the boat, and we are down to 18 months.  Throw in the trailer registration and insurance, and we knock off another month.

Yea, he won't have a boat then, but then again , he won't be miserable with credit card debt.  And once he is out of debt, he can start saving money toward a used boat, which might not be as shiny and nice as a new one, but will be paid-for and not cause him financial harm.

Of course, it is just possible that Ted is upside-down on his boat, in which case he has been exceptionally foolish and is properly screwed, big-time.

But assuming he isn't, getting rid of the albatross is one way to get rid of all that stress.  And it might not be a boat - it could be a hobby car, a motorcycle, or some other motorized, depreciating "toy" that costs a lot, generates a few hours a week of fun, but drags you down financially.  No toy is worth that sort of stress.

So why do we avoid slaughtering Sacred Cows?  No one wants to be seen as "giving up" on something.  If you sell your boat, what will all your fishing buddies say?  If you sell your Harley, what will your biker buddies say?  If you don't have Cable TV or a Smart Phone, what will the neighbors say?

Funny  how people are more concerned about what strangers think, than what their own family thinks.  What others think of you is far less important than what you think of yourself.

It is sort of funny, but I run into this scenario all the time in this blog.  People say, "Gee, I have all this debt, how do I get out of it?"  And I say things like, "Call the cable company and disconnect - there's $1200 a year, right there!"  And usually, they respond with, "Well, I mean, what else can I do?"

But if you have Sacred Cows that are "not on the table" for discussion, there is little else you can do.  Once you have marked-off areas of your life that you feel are "entitlements" and not subject to fiscal responsibility, your financial well-being is basically shot.

But the beauty of this is this:  Usually, it is these "Sacred Cows" that are indeed the problem, and going after those first is the easiest way to target areas for savings.  Take whatever you say cannot be cut, and then cut it.  Simple as that!

Our Federal Budget is the same way.  The sacred cows are defense, Social Security, Medicare, and Welfare.  We instantly say, "Cut the Federal Budget, but don't touch these Sacred Cows!"  But guess what?  Combined, those four items make up 3/4 of the Federal Budget.  You can't really cut the budget significantly, without touching these "Sacred Cows" at least a bit.

Again, the solution to the problem is simple:  You take what is "not on the table" for discussion, and go after that, FIRST  - as painful as it might seem.

In my personal life, I had a lot of sacred cows, and I have largely slaughtered them all, and will likely slaughter the remainder, soon.  Cars have always been my weakness, and I have thrown thousands of dollars at old cars - and new ones - over the years.

And when money got tight, I thought, "Well, selling the car is not on the table!"  But if you have a car, particularly a hobby car, and also have 25% interest rate credit card debt, well, you are basically financing that car at 25% interest.   And even a modest car that is "paid for" can cost thousands of dollars a year to own and operate.

Pride goeth before the fall, and sometimes you have to swallow your pride, sell off "things" and move on, before they bankrupt you.

We had a boat that I did not want to sell, but when I sat down and figured it out, it was costing me $3000 a year, just in storage fees and insurance.   And yea, that is a lot of money, even for someone making over $100,000 a year.

Do I miss the boat?  Well, not really.  It was fun, when it worked properly.  But it always seemed that something expensive needed fixing, and I never felt comfortable with its reliability.  Plus, a motor boat uses a staggering amount of fuel.  On one trip alone, we went through $3000 in gas.  That was just not economically feasible.

Plus, there is the "been there, done that" effect.  Once you have done something, a dozen times or more, it does not get better with more repetition.  Only feeble-minded people find the same experiences satisfying, again and again.  Only the stupidest of folks find jet-skiing interesting for more than an hour, tops.

Better to sell off and move on.  Better yet to just rent things like that and get it out of your system.  My neighbor just did that - renting a motorhome for a trip across America.  They were gone a week and came back.  Turns out they hated it.  Good thing they rented!  I've seen a lot of people BUY expensive boats and motor-homes, motorcycles, etc. and decide they don't like them.  And they lose their shirt on the item - or are so upside-down they have to keep making payments forever.

Slaughtering Sacred Cows is the hardest thing to do, for most people, as they are so ingrained into our consumer culture that the idea of living without things is completely alien to them.  On NPR this morning, was a story that had an offhand comment which typically illustrates the problem.  The interviewee, predictably hawking a book, tells of how he spent time with various religions, including a time with some Franciscan Friars, who have taken a vow of poverty.

The interviewer, Steve Inskeep, an NPR intellectual lightweight if there ever was one, says something stupid like, "Don't you just ever wonder if those monks wake up every morning just wanting a new iPhone 4? Tee-Hee-Hee!"

Hey, Steve, first of all, they are Friars, not Monks.  Second, no, there are a lot of people who don't want to consume and don't feel the need to own things as an indicia of their self-worth.  NPR airheads, of course, are not among them.

But the comment illustrates the problem.  To the typical person living in Alexandria, Virginia, the idea of not having a smart phone, cable-TV and a luxury SUV is alien.  The idea of not wanting these things is even more so.  Everyone wants consumer goods and services, right?  To even suggest otherwise is disturbing to them.

In my own life's journey, I realized that owning a lot of stuff had some positive emotional values, at least initially.  There is a rush to buying something and owning it.  But it is a rush that wears off, over time.  And even though owning things might be "affordable" the cumulative costs are staggering.

For several years, we owned a vacation home on a lake.  It was fun, and going there every year was kind of a rush, initially.  "Gee, we own this nice house!  What fun!"   But after several years, the reality of the staggering workload needed to maintain two homes (and cars, and boats, etc.) became evident.  And the amount of money needed to keep it all afloat was pretty staggering.  "Affordable" in terms of income-stream, yes, but also a lot of debt load.

I realized that what I wanted in life was not a lot of "stuff" but the opportunity to get out of debt - utterly and completely.  To have options in life, rather than be chained to a money-making machine so I could make loan payments.

But to give up all that stuff?  No way!  Sacred Cows!

And when I slaughtered all the Sacred Cows, it was a complete and utter and total relief.  Because now  did not have to work to maintain all of that, and to work to pay for all of that.  I could relax and unwind, for the first time in my life.

And that is probably another aspect of it - age.  Owning things sounds great when you are 20 or 30.  It may seem a status thing at 40.  But by age 50, it starts to get to be old hat - and a lot of work.

So perhaps I am shouting into the wind here.  A 25-year-old will say, "I want a new Camaro, and I don't care if I have to pay more in insurance premiums than car payments!"  To them, having the thing is the big deal, and the overall cost, financially, physically, and emotionally, is second.  From a younger man's point of view, fiscal, physical, and emotional resources are limitless.

But, after owning lots of stuff and paying for lots of services, if you find yourself unhappy and in debt, look at those "Sacred Cows" and ask yourself if they are really making you happy, or are not in fact the source of your troubles.  And ask yourself if you are hanging on to them out of pride - out of concern of what other people think.

Because, when it gets down to it, being debt-free and financially secure is far more satisfying than having "things" - even if financial security isn't something that can be shown off.

Slaughter the sacred cow!

Examples of Personal Credit Card Crisis

I believe most Americans get into a Credit Card Crisis at one time of their life or another - and that the Credit Card industry counts on this - it makes them a LOT of money!

Credit Cards are the crack cocaine of the finance industry - or perhaps the methamphetamine.   The nature of meth or cocaine is to make you feel invincible, and of course, you feel you have the drug habit "under control".  Why not?  You're as high as a kite!

Credit Cards work the same way.  A person with encroaching credit card debt will never admit to the problem.  Or if they even do, they will say it was a one-time deal and not a symptom of a more chronic condition.  It seems we all live in denial.

As I have noted before, surveys show that 70% of Americans claim to pay off their credit cards every month.  And yet, 70% of Americans carry a balance - according to the Credit Card industry, which has the computer data to back this up.  As Americans, we lie to ourselves - a lot - and this self-deception is the root cause of most of our financial difficulties.

Getting a Credit Card is not hard to do in this country.  Offers are made to family pets and the dead, on a regular basis.  And until fairly recently, college students were targeted for Credit Cards.  As a young adult, starting out with that first good-paying job, you may be pleased to get a letter in the mail saying, "Congratulations!  You have been pre-approved for a new VISA card!"  And you may think to yourself that this is validation of your success as a 25-year-old.

And of  course, at that age, it is all too easy to fall into the first trap they set - that you are "lucky" to get a credit card and that getting one is some sort of privilege - based on the mysterious workings of the almighty Credit Score, a holy number kept by the high priests and priestesses of TransUnion, Exquifax, and Experion.  They get you to buy into the idea that they are calling the shots, and that you are fortunate to have been chosen to be pre-approved for a gold card.

Of course, as you get older, you might switch your allegiances to a rewards card - giving airline miles, hotel stays, or cash back.  And you may start to think you are in control of things - calling the shots - as you are snookering "free" rewards out of those stupid Credit Card companies who are foolish enough to give them to you.

But eventually - and perhaps on more than one occasion, you get in over your head with Credit Cards.  And it isn't hard to do - and many, if not most people do it.  And once in, it is very hard to get out.

1.  Brad was offered a credit card in College.  It was a basic VISA card with a $2000 limit.  Going away to school was a great time for Brad, as he was finally able to do all the things he wanted to do in life - things that his parents said "No" to, or that he couldn't afford.  Drinking beer, smoking pot, staying out all night, having sex - it was like being a real adult for the first time in his life, without all that messy responsibility attached.

Getting the Credit Card was just another rush.  When he went out to a pizza place with his friends, he impressed them by paying with his credit card.  He bought dinner for everyone.  And later on, they went shopping at the mall, where he bought clothes, and a new game station, as well as a host of new CDs and other items.  It was so easy - he just whipped out the credit card and bought what he wanted to, just as he had seen his parents do.

He didn't worry about the payments.  His parents gave him an allowance for college to pay for books and other incidentals.  He figured he could make the monthly payments out of that.  But the first month's bill was a shocker.  He had ran up more than half the credit limit and the monthly payment of $100 was all his disposable income for the month.

So, of course, he used the card to buy books and other necessary supplies, the next month.  Now, of course, interest was kicking in, at the 22.5% rate that didn't seem like such a big deal when he signed the papers at the card table in front of the student center two months earlier.

The next month, things got worse.  The balance kept creeping up toward the limit, and he could barely make the monthly payment.  On the third month, he was late with a payments.  The fourth month, he was over the limit.

The credit card company jacked his rate to the "penalty" rate of 30% and since he was over his limit, he could not charge any more on the card.  It has been only 12 months, now, and he is now in serious trouble.  He was now broke most of the time, as his monthly allowance was barely enough to make the monthly minimum payment.  At this point,  it would take years for him to pay off the card.

In tears, he calls his parents and tells them what happened.  His parents, after much shouting and after many angry words, agree to pay off the card.  The credit card companies have won this first round, collecting hundreds of dollars in interest payments - as well as the 2-5% on each purchase - as well as over-limit and late fees.  They have made a lot of money off of one kid's youthful indiscretion.

And now, of course, Brad's Credit Score is negatively affected, which affects his ability to get loans out of college or even jobs.  Brad is lucky that his parents are wealthy enough to pay off the card.  Others are not as fortunate.  They cannot pay off the card and end up with a ruined Credit Score (showing months and months of unpaid debt) and find that getting a job out of college is far more difficult.  And getting that first apartment, more so.  And getting that first car loan, impossible.

I know more than a few Brads.  I rented apartments to Brad (not his real name) once he married and settled down.  Even though his credit card fiasco was years in the past, his credit score was such that he and his wife found it hard to rent in the trendy hi-rise apartments that his co-workers lived in.  And as much as he and his wife wanted to buy a house, they found they could not qualify for anything other than sub-prime rates.

Ah, sub-prime lending!  How did that happen again?  Yup, people took those crappy mortgages because they couldn't qualify for anything else.  Why couldn't they qualify?  In many, if not most cases, it was because they had screwed up their credit records by getting into credit card debt problems.

2. Tim managed to avoid the college credit card trap.  But as a young divorcee, he had to make child support payments for his three kids.  But at the same time, he liked to hang out with his 20-something friends, going to clubs, buying clothes at the mall and doing all the same things they did, which appeared to him to be normal things people in his group did.

Problem was, he couldn't afford it.  The child support pretty much tapped out his income, and as a parent, he should have been buckling down to pay for raising children, even if his wife has custody.  Instead, he tried to live the life of a single person, dating women, going out to fancy restaurants, and buying lots of trendy clothes.

Each month, the balance on his credit cards climbed steadily.  Very quickly, he started making only the minimum monthly payments on each of his five cards - promising himself that "next month" he would get ahead of the game.  Next month never came.

The minimum monthly payments continued to rise with the balances, and at the high interest rates he had on his cards, he would never pay these debts off, at the minimum monthly rate.  Compounding this, the payments took up much of his disposable income, so he would charge more on the cards to pay for his daily living expenses.  This is how the snowball effect takes off with credit cards.  Once you are on the hook with the card, you don't have any cash left after you make your payments - so you use the card more and more, rather than less and less.  And the only way to pay off these cards is to stop using them.

But since you can't pay off the cards and put food on the table, you use the cards more.  It is a vicious circle, and it ends, often years later, when the card limits are finally reached, the "penalty" interest rates kick in, payments are missed, late payments and over-limit charges are assessed, and the credit card companies and collection agencies start making nasty phone calls.

Finally, Tim calls a bankruptcy lawyer.  The lawyer charges him $500 for a bankruptcy proceeding.  But thanks to new laws on the books, Tim can't get all the debt discharged, but merely have a payment plan worked out, over time.  As a result, the interest might be waived, but the balance is still due - and Tim will spend the next five years paying it off.

The credit card companies win again.  Tim has paid nearly as much as he has charged already, in terms of interest payments, late payment fees, over-limit fees, annual fees, and the like - plus they get the 2-5% on every charge from the merchant.  Now they get the original amount back on top of that - nearly doubling their money.  Sweet deal - for the Credit Card companies.

And now, Tim has a bankruptcy on his credit report, meaning he can't get any sort of loan for several years, and even after that, on onerous terms.  They have him right where they want him.

(Actually, Tim can get loans, even after bankruptcy, but at very high interest rates.  And he can't declare bankruptcy for another seven years, if he defaults on that loan).

3.  Joe is a suburban homeowner who thinks he is pretty sophisticated.   After all he has a high-paying job making close to six figures, a nice house in the suburbs, two new cars in the driveway, and a wallet full of credit cards.  He and his wife Suzie use the credit cards for everything - to buy gas, pay for groceries, and of course to go to dinner several nights a week.

Why not?  For every dollar they spend, they get airline miles!  So they will be able to fly to Florida (or at least one of them will be able to) after they charge $50,000 on the credit card.  The cards have high interest rates of 20% or more, but they don't worry about that - after all, they pay off the balance every month - or nearly every month - so they don't pay interest.  Or much interest, anyway.  What's $100?  You can spend that on Dinner!

The problem comes when a small crisis intervenes in their lives.  They are spending more than they are making and not funding their retirement properly.  While they are making good money, they are spending even more, convinced that since their neighbors have a lot of neat stuff and services, they should, too.  A new cell phone plan, a cable TV plan with all the sports channels, a new flat-screen TV - all paid for on credit cards.

The balances on the cards are creeping up, but don't seem very worrisome.  After all, what is $10,000 on a credit card, when you make $100,000 a year?  But there are several credit cards, and the balances are climbing, ever so slowly.  And the interest charges are increasing as well.

They discover that their home needs a new furnace, and they decide to put that on a credit card, since winter is coming.  $5000 is added to the balance.  Now, it gets really hard to pay this down, and the interest is pretty staggering.

The credit card payments eat up their monthly disposable income, which they compensate for by using the credit cards more.  Pretty soon, they have gone around that knee-curve bend where it becomes impossible to pay back the loan at the 22.5% interest rates.  Joe and Suzie are in a Credit Card Crisis.

But, it is the year 2005, and you can refinance your house and take out money!  And since the interest rates are lower, your effective monthly payment is the same - if not less!  So they do it, and add tens of thousands of dollars to the balance of their mortgage, including several thousand in closing costs and junk fees.  But their credit cards are paid off in full and their monthly mortgage is about the same.

They congratulate themselves on being financial geniuses and go right back to their old habits with renewed vigor.  Why not?  They have been rewarded for poor financial behavior.  They become "serial refinancers" and make light of it.  Why not?  Everyone else in Foreclosure Mews Estates talks about refinancing in the same way, at the cocktail parties they attend.

But of course, we know what happened to Joe and Suzie.  Their apparent wealth evaporated in 2008, when the value of their home collapsed and their 401(k), such as it was, took a hit.  And their newly racked-up credit card debt had no where to go.

* * *

OK, you say, these people are idiots.  Only a fool would do things like live beyond their means.  But it happened to a lot of people, not only during the last recession, but over the years.   It happened to me.   How does it happen?  We've outlined that above.  Why does that happen?  Weakness, poor normative cues, peer pressure.  How you can you avoid it?  Let's look at this one bit at a time.

As for the Why, we also sort of addressed that above.  When it seems "normal" to use credit cards and to buy lots of stuff - like your friends at neighbors are doing - it is easy to get into trouble.

Peer pressure is strong.  Kids in college are mocked if they say they can't afford to keep up with their peers' spending.  Even 20-something kids feel the need to 'fit in' with their friends.  And yes, even 30-50 year-olds will succumb to the pressure of the cul-de-sac and spend themselves into poverty trying to keep up with the Jones next door.

Cute ad, but the answer to crippling debt isn't more debt, it's spending less.  Golf club membership?  Really?

Poor Normative Cues - usually from the television - are also to blame.  During the height of the Real Estate madness, there was an ad on TeeVee from Lending Tree where a man extols the virtues of the suburban upper-middle-class lifestyle.  The tag line is, "I'm in debt up to my eyeballs!  Someone please help me!"  The solution?  A home equity loan, of course, courtesy of Lending Tree!  There, in a nutshell, is the fiscal crisis of 2008, boiled down to a 60-second commercial.

And yet, many of felt that way back then - in debt up to our eyeballs - and wondering what to do.  And many of us used the home equity loan or refinance as a "way out" of our troubles.  A way out, it turns out, that did not solve much.

A lot has changed since then.  A lot, except that human nature is about the same and we are all prone to weakness.  And today, you can't get-out-of-jail-free by taking equity out of your home.  You have to pay up, or declare bankruptcy.  And people still go bankrupt today, over credit card debt.

How can you avoid this problem?  It isn't easy.  But it is a problem worth avoiding, just as it is worthwhile NOT to drive off a cliff.  Here are some steps you can take to avoid the pitfalls of Credit Card debt:

1.  Realize the serious nature of the problem:  A $5000 credit card debt may sound insignificant when compared to your overall wealth or income, but it can creep up, over time, particularly when multiple credit cards are involved and they increase your line of credit.  Take this seriously - that is the first step.

2.  Recognize your weakness:  We are all "at risk" to becoming drug addicts, alcoholics, criminals, or whatever - given the right circumstances.  None of us are Supermen, and if that is your plan on avoiding these sort of compulsive-addictive behaviors (being a Superman) then you are even more likely to fall into the trap.  The human mind is weak, and temptation is strong.  This message should be familiar to you, after all it is the basis of most of the world's basic religions.

3.  Use Credit Cards sparingly:  Debit cards never rack up debt.  You can't spend cash you don't have.  Writing checks is even safer.

4.  Avoid the Rewards:  Frequent flyer miles and cash-back rewards are the BAIT they put in the TRAP.  Which part of TRAP did you not understand?  Only a fool mouse goes for the cheese, when it is baiting a deadly trap.  The same is true for "rewards cards" and their staggeringly high interest rates.

5.  Get as few cards if possible, if any:  A debit card may serve your needs just fine.  You may need a credit card for business, if you have to wait to get reimbursed for expenses or charges.  Or, if you need to rent a car, they can be handy.  Having five or six cards, however, is never a good idea.

6.  Get the lowest RATE possible:  There are cards out there with rates approaching mortgage levels - 6-7% or so.  Get a low-rate card and keep it.  If you do charge up a lot, you at least have a fighting chance of paying it off.

7.  Get the lowest LIMIT that is reasonable:  A limit of more than $5000 is ridiculous.  And yet, credit card companies will give you cards with limits of $10,000, $15,000, $20,000 or more.  At one time, I had $50,000 in available credit on credit cards - enough to buy a really nice car.  That is a LOT OF DEBT to accumulate at 22% interest!  Keep your limit low and CALL THEM and tell them NOT to raise your limit automatically.

Now, a lot of you are thinking, "Well, what about the MOST OBVIOUS thing?  The one that all the TeeVee pundits tell you?  What about PAYING OFF THE BALANCE EVERY MONTH?"

Yea, the financial guru on the TeeVee says that, and it is NOT on my list, for a good reason.  Why?  What did I say at the beginning?  That 70% of all Americans carry a balance!  Telling people to pay off the balance every month is like saying "Avoid paying mortgage interest by paying off your mortgage, dummy!"

Chances are, you don't have that kind of money laying around to pay off your mortgage - am I correct?

And chances are, you don't have that kind of money laying around to pay off your credit cards, if you are carrying a balance.  So telling you to pay it off is like saying "Hey, while you are at it, invent a cure for the common cold, OK?"

Yes, you SHOULD pay off the balance every month.  And the easiest way to do this is to NOT HAVE A BALANCE AT ALL - either by not using the cards or by using them very sparingly.

But chances are, if you are reading this, you have a balance on your credit card, and it is eating away at you like a cancer.  And try as you might, you can't seem to pay it off.  How can you get a fresh start?

Well, that is what this blog is about.  The whole thing, not piecemeal parts of it.  And unfortunately, there are folks who think, "Well, I can cherry-pick some ideas here and there, cafeteria style, while not affecting my lifestyle dramatically.  After all, who can live without Cable TV and Cell Phones?"

And yet, so many people are broke, have under-funded their retirement, are telling themselves (or others) that they will "work until they are 75" or are heavily in credit card debt - while at the same time are paying hundreds of dollars a month in cell phone, cable TV, car payments, car insurance, and a whole host of unnecessary charges and expenses.

I know I was, to the tune of well over $1000 a month or more.  And in the last three years, I have managed to shave that down - and get out of debt.  But the secret was to have no "sacred cows" or "untouchable" areas of my finance.

Everything, is up for grabs.  But that is the subject of my next posting.

Tempurpedic Mattresses

Are these memory foam mattresses any good?  They are OK, but a little expensive.

Tempurpedic mattresses have grown in popularity to capture about 10% of the bedding market.  This may not sound like a lot, but even the largest bedding manufacturer has only about 14%, with the bulk of the market (nearly 50%) divided up among a multitude of small no-name manufacturers.  Tempurpedic has achieved a pretty remarkable market share in a short period of time.

We have actually owned two of these mattresses - one for our Summer home and one for our Winter home.  Of course, now we own just one.  And we have been using them for about six years now, so we have some experience with them.   We bought them because Mark has a compressed disc in his spine and is prone to back problems.  They seem to help with his back, I think.

Are they a good mattress? I would say yes.  Are they worth the money?  Maybe - that is a personal judgement call.  Are there any quality concerns, over time?  Perhaps.  But then again, nothing lasts forever.

But before we address those questions in detail, let's look at the seamy underside of the mattress business.

Mattresses are the most over-hyped and over-priced piece of furniture on the market.  If you listen to the radio or watch TeeVee at all, you will hear or see a loud, obnoxious mattress ad before long.   And chances are, even if you live in a small town, there is maybe one or two mattress stores there.  They are not hard to spot, as they are usually painted in garish colors with the words "M A T T R E S S" on the side.  Red, orange, yellow - they are painted up like a fast-food restaurant, and often have fluttering colored flags like a used car lot.  Look at these trimmings as you would Police Tape - warning of danger ahead!

Mattress stores, like used car lots, sell mattresses on installment plans, and often hike the price of these plebeian items into the stratosphere.  We are lead to believe, by a mattress salesman, that a pile of springs, some foam, and some cotton ticking is worth thousands of dollars - more than you'd pay for a solid good used car.  The markup in these things is incredible.

Avoiding this trap is simple.   First, just don't go to a mattress store.  The bigger and brassier the store is, and the louder their TeeVee and radio ads are, the worse deal you are going to get.  Any type of store where salesmen work on commission is not going to be a good bargain for you, whether it is the stereo store, the rug store, or the mattress store.  If the prices are not clearly marked, and they try to sell you "on time" - via monthly payment, just walk away.

Walking into a high-pressure sales store is never a good idea, whether it is cars, furniture, boats, rugs, mattresses, or whatever.  If you walk in with little idea of what you want, and no idea of rational pricing, you will most likely get screwed.  Shop around, be astute, don't talk to salesmen, and walk away from a place that can't put a price tag on a product, but forces you to "ask" about pricing.

Having had to furnish two homes and two rental units recently, we found that traditional furniture stores were much better bargains, at least for us.  To them, the sale of the mattress was incidental to the sale of the furniture, not the whole enchilada.  One of the best mattresses we ever bought was a mattress from a rattan and wicker store in Pompano Beach, Florida.  We ordered a king-size mattress in extra, extra firm, and it was so comfortable.  As I recall, I think it was about $500, for a king-sized bed, too.

Most people go the other route - ordering super-soft mattresses, assuming that softer is more comfortable, when in fact, it just bends your spine.  If you lay on your back on a soft mattress, your butt sinks in while your head and feet do not.  What ends up happening, is your body assumes a bent position, like a jack-knife, which rotates your pelvis relative to your spine.  Back pain results.

The ordinary no-name $500 mattress, in extra firm, is one of the more comfortable mattress - and least expensive - I have ever owned.  And over the last 50 years, I calculate that I have owned about 10.

This is not to say the Tempurpedic is bad, only that an ordinary mattress, which is far less costly, can be just as good, if not better.  How costly?  We paid about $2000 for each king-size set (king-sized mattress and two box springs).  That is a lot of money for a mattress, although the construction of the mattress is arguably more expensive than a traditional coil spring mattress.

Are they comfortable?  Yes, although the experience can be a bit disturbing at first.  I liken the experience to a foam lined camera case.   You put your camera in one of those and close it, and when you open the case again, the camera is still there, in the exact same position.  A memory mattress can be the same way, at first.   You lie on it and fall asleep and the next day, you wake up in the same position.  It is more like being in a stasis chamber than sleeping in a bed.

Are they durable?  Yes and no.  One problem we have had with both beds is that the box springs squeak.  I traced the problem to the staples holding the ticking cover on the box spring.  After a while, they work loose, and the plastic edge covers slide, so when you get in and out of bed, the box spring creaks and moans.  Not a big deal, and rotating the box spring 180 degrees eliminates the problem - for a while.

Does the memory foam last a long time?  Yes and no.  After six years, I notice that the mattress on my side is starting to make a bit of a permanent dent where I sleep.  In other words, it is like most mattresses, over time.  They sag.

Can you really dance on the bed with a glass of wine balanced on the other side, like in the commercials?  Yes, but for the life of me, I don't know why you'd want to do that.

What about the Tempurpedic Pillows?  We did get two of these.  Mark likes his, I can't stand them.  They make my neck hurt.  Badly.  And I have a compressed disc in my neck.

My overall verdict?  They are a good product, but a rather expensive one.  I think a quality firm mattress would work as well, for about 1/4 the cost.  Tempurpedic is not a rip-off, but not a screaming bargain, either.

What prompted me to write this was the fact that I get a lot of Tempurpedic junk mail, nearly every week - a cardboard mailer telling me of the advantages of the Tempurpedic mattress and pillow.  They certainly are marking the snot out of it.  I think they have a good product, but it isn't cheap!

Squandering Wealth - One Penny At A Time

When I look back at my career over the last 30 years, I realize I burned through a boatload of money.  Some of it was on big ticket items like cars and boats and houses.  They can use up hundreds of thousands of dollars of your earnings and often return little, other than a toy to play with and a place to sleep.

But what really ate up most of my earnings was paying money for little things that seemed small at the time.  After all, $100 for cable isn't much, right?  And I get to watch all those great TeeVee shows that tell me to buy a big SUV and get a smart phone and a rewards credit card!  It is a propaganda machine that sells you the idea that you NEED to consume.

And pretty soon, if you follow the mass media, you've convinced yourself that various little sins that are frittering away your long-term wealth are really OK, because everyone does them (the TeeVee said so) and they don't cost that much.

But in the long run, it costs you everything.  Just to have a modest retirement, you will likely need to have a million bucks in your 401(k) plan - to have $40,000 a year in income!  And forty grand isn't a lot - it is below the median income for the USA.   You want to live a larger lifestyle than that?  Better save up two million.

And some folks question this and think it is alarmist.  After all, they have $200,000 in their 401(k) and that is a "lot of money" - right?  But they fail to realize that at their current income level of $100,000 a year, that represents two year's salary.  Pretty short retirement!

And yet others will argue that they will just work forever - forgetting also that this may not be an option, as they will likely be laid off or unemployable by age 55 - at anything other than service sector jobs.

So how can you avoid this trap?  How can one possibly save up a million bucks?  It can be done, but it requires sacrifice.  Not big sacrifices like eating Raman noodles all the time, but just figuring out what you really need in life, and how you've probably (if you are a typical American) loaded up your life with lots of subscription services, small charges, and excess fees that are bleeding you to death, slowly.

When I started this blog, two years ago, that pretty much described ME.  I was making the six-figure salary, had lots of cars, boats, houses, toys, and the like.  And every month, a boatload of subscription services were automatically charged to my credit card.  And every month, I paid for lots of little things than, in and of themselves, seemed like small potatoes, but added up to hundreds and thousands of dollars a month.

And as I hit age 50, I realized that my career would not continue to go up, up up.  Our business is slack, as the market is slack, and as the supply of Patent Attorneys has nearly doubled while the demand has remained flat.  For the first time in my life, the idea I might make less money was rapidly becoming a reality.

Suddenly, I realized I was riding a money train.  I had set up a lifestyle which was pretty extravagant, but also required a fire-hose of money to support.  And most of the costs were for little things, like cell phones, internet services, and the like.  Most of these were WANTS and not NEEDS, although I convinced myself they were NEEDS.

What had happened to me what was what had happened to many Americans.  We made more money over time, and over time, we spent more.  Not dropping tons of dough on any one big thing.  But rather bleeding to death  - the death of 1,000 cuts - slowly, over time.

Subscription services were one thing.  Cable TV, telephone, cell phone, VoIP, alarm monitoring, and the like.   Then there were things like housecleaning, lawn service, and the like - which add up quickly.  And of course, that newly mowed lawn needed a sprinkler system, which used up more water.  And each new appliance and toy used up more electricity.

There is not enough space here to tally up all the "stuff" I bought over the last three decades.  Things that seemed so important at one time, and later on in life, seem rather silly.  And they only start to seem silly when you get older and realize you only have a few more years of income-producing left, and then you have to live on your savings.  And suddenly, spending $19.99 a month for alarm-monitoring seems like a silly waste of dough.  Or $100 a month on cable TV a horrendous waste of time and energy.

And perhaps, in this regard, I am shouting into the wind.  A 35-year-old, just promoted to Assistant General Manager and making $100,000 a year, thinks he has made the "big time" at last.  And the idea that you should save and budget seem alien to him.  No, no, now is the time to be looking at a big house and no doubt brochures for luxury SUVs are on his desk.  This is the reward for all that hard work, you know, going to college and such.

We delude ourselves into thinking this - and many of us did.  And perhaps there is no way to overcome human nature - to prevent the squandering of cash in our youth, at the expense of old age.

Perhaps there isn't.  Perhaps there is.  Because as much as I squandered, I saved, when I was younger.  While I could have saved far more, I did at least save some - quite a lot in fact.  I did without the new Lexus, and the look-at-me mini-mansion that many of my peers bought - items that are now being repossessed or foreclosed upon, as we speak.

And how I did this was to turn away from the consumerist society, to stop thinking of $50 or $100 as a trivial amount of money.  To start keeping track of expenses - down to the penny.  And to walk away from come-ons, rewards programs, and other gimmicks which are not real financial planning, but faux financial acumen - distractions from what is really important.

And some folks, reading this blog, still don't get it.  They think that because they have a good income and a little money put aside, that they can rest easy.  They've beaten the game.  They can afford a frequent flyer miles credit card and hundreds of dollars a month in subscription services.  No, no, they will be the ones to beat the new car dealer at his own game - they will win at the casino.  They will make the credit card companies look the fool!

Ahhh, if it were only so.  And we were all young once, and watched TeeVee and thought that we, too, could win at the Casino just like James Bond does.  That we would be the ones to clean up on frequent flyer miles and coupon offers - because that is what all the smart folks do - according to the ads on TeeVee.

It takes a lifetime to learn these hard lessons it seems.  And there is no way to pass these on.

We are all doomed, it seems, to make our own mistakes.  And it seems that few of us will ever own up to them when it all goes horribly wrong.  Must be the government's fault.  Perhaps Obama's.

Republicans in Debt? What a shame!

I get this invitation by e-mail.  A local GOP lawmaker is having a party at a local Country Club to raise money to retire his campaign debts.  Sorry, I can't make it that day.....

Please Join Speaker of the House David Ralston

Chairman Roger Lane

Chairman Joe Wilkinson

Senator William Ligon

Rep. Jason Spencer

for a fundraiser and campaign debt retirement for

Alex Atwood

Georgia State Representative, District 179

Wednesday, December 7th, 2011

5:30 p.m. to 7:00 p.m.

Brunswick Country Club

4041 Darien Highway

Brunswick, Ga. 31525

This illustrates how government works, though.  It is all driven by money.   If you want to "make a difference" in the world, contribute to a candidate of your choice.  And by choice, I mean pick the one with views closest to yours.  Sitting at home pouting because no one agrees with everything you think, is just being immature.

But many "Occupy" protesters think this way.  And they refuse to support Obama, on the grounds he is "too conservative".  It is the 1968 Democratic Convention all over again.

Wait until they get a taste of President Gingrich.    Pepper-spray will give way to bullets.