Frugaling

Why Dave Ramsey’s Advice Won’t Work With Millennials

The Times Are Changing

The world is phasing out paper currencies for digital, plastic forms. Credit, debit, and secured cards are increasingly occupying wallets. Despite recent declines in the 18 to 21-year-old demographic (due to the CARD Act), 78 percent of Americans have credit cards (Link). We have voted against the greenback, and replaced it with digitized numbers that represent the possibility to spend. But, this is placing us at risk for increased debt and instability.

Various financial counselors recommend cutting up your beloved cards to control spending. These advocates argue for a cash-based budgeting system. Usually, a series of envelopes represents the different domains of life (rent, car payment, groceries, etc.).

Dave Ramsey is the largest proponent of “cash flow” systems to managing your debt and money:

Grandma’s way to handle money still works. People used to always use cash envelopes to control their monthly spending, but very few do in today’s card-swiping culture. (Link)

Scientific research supports this system:

Credit helps to anesthetize the pain of paying, and it caused tightwads to nearly catch up to the spending levels of spendthrifts. (Link)

Their study found that subjects paid more when they were instructed to use a credit card rather than cash. In fact, they found that they were willing to spend up to 100% more with plastic. (Link)

Carefree & Cashless

The reality is that cash is slowly being phased out. Even if cash currencies still exist, the availability and acceptability may shrink. Businesses and consumers generally prefer the streamlined approach to cashless transactions.

Starbucks is a perfect example. Whether you have a credit or gift card, Starbucks’ iPhone app allows you to store your card information for purchases. All you have to do is swipe your phone and that steaming beverage is yours.

The ease of the cashless world is both tantalizing and horrifying. We can minimally travel, without bulky cash filling our pockets. A thin card gives us all the purchasing power we need. But we also risk spending more, going into debt, and suffering usury interest rates as punishment (try 25% or more penalty rates).

Unfortunately, the current financial gurus may be behind the technological times. The younger generations demand fungible, diverse transaction assistance (e.g., Bitcoin to PayPal to the iPhone’s Passbook). As noted, cash is dying. The old advice is dying. The conflation could be destructive to us all.

What’s The Solution?

Opinions are cheap; mine included. But, as a Millennial, credit card user, and cashless-cabin-aficionado, I believe we need to begin searching for viable solutions. As the masses segue to destructive spending patterns and digitized spending that distances us from the dollars depleting, we will suffer.

Forced spending control and scheduled punishments for poor purchases may be the last viable solution. Whatever happens, I hope we act before this bubble bursts.

Need For Spend: The Secret To Stop Shopping

By Frugaling 2 Comments

Born, Bred to Buy

My grandmothers read continuously. One purchased books and the other went to public libraries. I have fond memories walking to the public library with that grandmother. Entering the large buildings of books, magazines, and computers made it fun. I would scour the shelves for new reads and sometimes checkout books I could never finish. I brought my nose to the pages and smelled the well-read scent. I loved that it only required a library card.

As I grew older, that lust for the library vanished. The plastic wrapped books felt lesser than. I wanted my own books. I wanted to feel crisp bindings and stock a shelf full of my own books. To hold, cherish, and covet my collection was important. The bound pages were a representation of me – an identity. My bookshelf consistently grew year after year, causing the slat to become concave under the pressure.

The books followed my every move. I packed a couple big boxes each time, until I purchased a Kindle. The lightweight, 30-day-battery device was this terrific space saver. When I moved to the Midwest last year, I had 5 books and hundreds on my Kindle. Suddenly, I was free from the physical clutter, but still buying new Kindle-version books for about $9.99 a piece.

This was just one of my many spending problems. Put me in a mall – before I was frugal – and I had to spend my money on something. I felt an undeniable energy from start to charge.

The Shopper’s High

Malls glisten with an unnaturally bright sheen and stage-like lights that beat down on its entrants. Shopping centers catalyze a rush of heightened smiles and joy – its a kind of high. These bastions for consumerism test the very foundations of frugality.

Research suggests that the longer you spend in a store, the more you spend. Places like Barnes & Noble play comfortable background music, keep a temperate climate, and often have Starbucks coffee shops in tow. The aura suggests escaping from the world while you find the perfect book. You can finally find peace and happiness in purchase.

Marketers prey off of three psychological emotions: sex, fear, and happiness. Consumer research and psychological studies continually show that advertising that amalgamates these factors, wins.

Apple’s store openings are filled with a rousing cheer from an audience of employees. Attendees (shoppers) raise their newly-purchased electronics like Rafiki held Simba. Jubilance. This is where you’re supposed to have fun. And an ingenious staff bolsters the moral of many who outspend their budgets and follow into income/debt traps.

With friends like these, my purchases always felt justified, necessary, and right. Thankfully, I’m living and spending differently now. Every now and then I experience an undeniable urge to spend, and that’s when I try to mimic the shopper’s high for free.

The Secret to Stop Shopping: Your Local Library

I frequently purchased new clothing at name-brand retailers, electronics, and new books for my Kindle. These were black eyes to my budget. This continued until I found elation at the public library. It solved my urge to shop for clothing, electronics, and new books.

No longer do I need to own books and buoy the local Express retailer; although, I still have cravings to spend money on things I really don’t need. The trick to controlling spending is realizing the power of your public resources.

Here are the 5 secrets to stop shopping:

1. Customer Service

Shopping genuinely gives consumers a short-term high. When you’re in a crummy mood, it can fill that gap, temporarily. An outlet that can fill both the good and bad times is necessary to frivolous, discretionary spending.

The high is natural. It’s often influenced by strong, friendly customer service. A representative that is attentive, kind, and helps without reservations makes you feel special. That smile they offer you when you walk in the door is potent. The amalgamation of positivity is all designed for your comfort.

Libraries are a comparable outlet for the need for spend. Librarians are the attentive, customer service counterpart. They can guide and help with research. Their task is to help customers find, access, learn, and check-out. That dedication is important to feeling good about your experience.

2. New Release Rack

What could possibly replace Redbox and Amazon for movies and books? These companies have a focus on new releases and special offerings.

There’ also a diversity at your public library. If they don’t have it, they can usually order it from a partnered source. This can be a powerful tool when researching or just looking for a popular DVD. Each year, libraries cycle through new and old books. Tax contributions allow libraries to purchase new books with surprising regularity.

3. Digital Services

iTunes, Amazon, and various digital stores offer millions of books, music, and magazine subscriptions. They’re advertised heavily and are gotos in their respective domains. But, libraries have actually been in the business longer.

Looking for audiobooks, music, software, and eBooks? Your library may have everything on your list already; if they don’t, request it. Intricate networks and databases greatly expand the reach and can provide you with hidden gems of opportunities.

Over the years, libraries have changed immensely to meet evolving technological demands. Libraries contain books, magazines, DVDs, and powerful community resources. And nowadays, they also have eBook libraries for Kindles and Nooks. Free rental books can be wirelessly delivered to your favorite reading device.

Want to put your hands on the latest technology? Tablets and computers are popular accoutrement to any good library. Now you can browse, write, and learn in style. On top of everything else, you can also rely on the library for free Wi-Fi. Maybe you can even stop paying for Internet at home!

4. Extracurricular Activities

Even if your search takes you beyond the library’s walls and academic world, it can be a great, frugal-living resource.

Ready to check out some local attractions? Public libraries often provide access to day-passes to aquariums, parks, and museums. By checking out a pass, you can save $20-30 – sometimes more – every time you visit.

Legal troubles taking a bite out of your budget? Oftentimes, you can find legal and federal forms – free of charge – at your library. With the helpful assistance of desk staff and librarians, you might even understand your taxes this year!

5. Peace And Quiet

People pay good money to find sanctuaries around the globe. The irony is that they can be found at a local library. There’s no expectation to spend money, plenty of room to spread out, and the quiet will make you far more efficient (contrary to the popular desire for coffee shop din).

These are hubs and havens for saving. Use the resource, get rewarded, and join the new library movement.

What other places can you go to replace the need for spend?

Cost Of Car Ownership Up 1.96 Percent

By Frugaling 1 Comment

As I try unsuccessfully to sell my 2006 Honda Civic – a great car with an ugly car loan – I’m reminded and motivated of why I decided this in the first place. AAA, the always-reliable network for travelers in trouble, recently released their yearly statistics on the cost of driving. Bringing me to a crippling halt is a figure that may cause a heart attack: The true cost of car ownership for one year is $9,122.

This statistic is based off of 15,000 driven miles in an average size sedan. They calculate that with gas, maintenance, tires, insurance, and depreciation, you spend about 60.8 cents per mile.

Gas saw a 1.93% increase, which amounts to 14.45 cents per mile. Maintenance escalated a staggering 11.26%, which is about 4.97 cents per mile. Tires didn’t fluctuate is prices. Insurance rose a modest 2.76 percent. Depreciation is a silent budget killer; only increasing 0.78%, but equating to $3,571 per year in losses.

If I didn’t have reason to sell my car before, I certainly do now.

AAA Link: http://newsroom.aaa.com/2013/04/cost-of-owning-and-operating-vehicle-in-u-s-increases-nearly-two-percent-according-to-aaas-2013-your-driving-costs-study/

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