Sunday, October 31, 2010

Are you getting your personal financial advice from Yahoo?

Some may scoff at this, but my homepage is not set to Google. It is set to Yahoo. I like all the interesting news bits that they post on the page. I like the little part about "Trending Now". I welcome the outside information. However, I have to wonder, "Who is writing their personal finance section?"

Now, don't get me wrong, all of it is not bad. I like the series they have showing how people have paid down enormous amounts of debt. What I don't like is that these people usually have gone to extremes to do so. I don't know if you have to eat "old canned food" to pay off a $1,000 credit card, but if that's what you want to do, then go for it. I mean read this quote from, Debt Busters:

I can't buy clothes, no coffee out, no eating out. To save money, I've done the normal budgeting things like buying generic brands of groceries. But I've also started wearing all black and dyeing my clothes to extend the color. I've been re-gifting, growing my hair long to avoid haircuts, stuffing two loads of laundry into one and eating a lot of old canned food I've found in my cupboard.

This woman is beyond extreme.  She's wearing all black? Has she gone emo? I guess cutting out all of life's little enjoyments would depress me as well. I really want to know what is this "old canned food" that she's talking about. Was it expired and she took a chance? Was this her way of paying penance or saying, "Hey world, I lived life in the fast lane and now I'm taking a vow of poverty." I mean, what's up with that?

This woman's actions are so harsh, I wonder what she's going to do when she allows herself to start spending again. It's kind of like the Atkins diet. Don't eat any carbs! Don't even smell them! Then that one day you decide to take one bite of Aunt Betsy's birthday cake, you think, it won't kill you.  And the next thing you know you-are-in-the-late-night-take-out line-at-Dunkin' Donuts' scarfing down Munchkins and toasted coconut doughnuts.

If you want to read the rest of that article, you will see that they are taking paying off your debt to a new level. I'm just concerned that it's really not helping people. Wearing all black and reaching for the generic bin isn't going to help you survive.  Yes, you can strip away every bit of vanity or like the other family, you can start shaking down your couch for change, but will that really give you enough to make it when you retire?

When I first started reading about personal finance, I thought this was the way to go. Sacrifice! Sacrifice! Sacrifice! But you know what, I was wrong. Yes, you should make sound decisions when it comes to spending money, but you need to find a way to make the right type of investments in your future.  Hoarding change and selling your car may sound like a great idea. But what other ways can you make more money?  How can you increase your cash flow and your net worth?

One thing these articles never suggest are real ways to invest. They list stocks, bonds, and other forms of paper investments. The site even has a calculator on it to help you.  But I don't think they are really trying to help you. They have questionnaires that are supposed to help you assess your current situation, but they all seemed geared towards purchasing mutual funds, stocks, bonds, etc. I think these articles are bad examples for people who really want to increase their net worth not just pay off some bills.  

Here are some suggestions to getting out of debt without eating expired canned food and wearing all black:
1) Track your spending on an automated site. In a  previous post I mentioned that writing what you spend on paper is useless. You will either lose the paper or forget what you spent your money on.  If you automate it you can see a budget breakdown. Some programs can show you in graph form or in percentages exactly where your money is going.  You can use an iPhone ap that has been lauded as an easy to use system.  Or if you are like me and you don't own an iPhone you can try They ask you for a credit card, but you don't have to actually tell them your credit card or banking information. Just bypass that part and use the system. 

2) Once you know where your money is going, decide what is really important to you.  Why do you want to get rid of this debt? What do you plan to do after you get rid of your debt?  It's one thing to have a plan to be debt free, it's another to have a plan to be financially free. Those are two different things. I think many of us focus on the first one and then we don't have a plan for the second part.

3) Be reasonable! A vow of poverty will not get you closer to your goal.  Focus on where you want to be 6 months, 1 year, 5 years and 10 years from now.

4) As you are paying down your debt, pay yourself first! I can't tell you how this idea has helped me.  I can quickly see my money grow and I feel good knowing that I knocked away at my debt and I have something to show for it.  The first time I paid off all of my credit cards, I had nothing to really show for it. I gave everything to the invisible credit card gods.  I was relieved, but then I was like, what's next? Put something aside for yourself. You'll feel a lot better!

5) Leave some room to play! Now, if you lost your job, I wouldn't suggest spending $50 on dinner.  But I will say you need some time to enjoy life.  Eating cat food or recycling leftovers to the point that you are taking chances with your health aren't really good for you.  You want to look at this time of purging consumer debt as a growing opportunity. If you don't find ways to release your past negative habits they will appear again.

6) Learn about investing! There are all types of investments you can make. There are so many that you probably don't have time to learn them all in one year.  I believe that if you spend your time paying off your debt and learning more about money and how it works, when you are debt free you will find out how to become financially free.

Empower Yourself


uzoma said...

You mean you won't be eating a can of Spam from 1989?

Naw, I agree that some of these suggestions are pretty extreme.

Great post.

Roadless Wandering said...

Thank you!