Monday, December 5, 2011

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!