The State of Things (Logan Has $138.95, Mike Has Some Stress)

Mike Dang: Logan, how are you doing since our chat from a week ago?

Logan Sachon: I’m doing great! I spent a week in a friend’s house in the country, which was totally awesome. I ate a lot of ice cream, which was also awesome. I got to see some good friends (awesome). But: You mean with moneyyyy. Last week I said I would call those non-profit debt counselor folks to talk to someone about options for consolidating my debt. I did not do that. I was on kind-of vacation! It felt like a boring thing to do on vacation. I also said I would figure out how much money I had to spend. I did do that … about twenty minutes ago.

M: And is it good news or bad news?

L: Taking into account all bills that will be paid, I have $138.95 until whenever I get another check. Which will be some days after the 15th! So I’m going to have to “budget.” Which I don’t really do. In fact, I detest the word!

M: Well, it’s okay, I don’t budget either. But I am aware of how much I’m spending each day. So start with that. You didn’t look at your account and figure out how much money you had to spend until a few hours ago. Check it once a day so you can get a sense of how much you’re spending. That way, you’ll know you’re running out of money before you actually run out of money.

L: Ha, Mike. MIKE. That has never ever ever worked for me! Before I went to the country, I took out $100 and said to myself: “This will be the money I will spend in the country!” And then somehow three days later it was gone. So I took out another $100 and said: “This will be the money I will spend in the country!” It disappeared, too. And then there was just some finger-crossing going on. So I feel rather lucky that it’s all worked out. 

M: Well, it seems like you were actually trying to budget there! And it looks like budgeting doesn’t work for you. What I’m saying is that if you look at your account every day, at least you know how much money you have on a daily basis, and what you’ll have for the next day. So you know that today you have $138.95. Check again tomorrow and see what you have. If it’s zero dollars, at least you know you’ve run out of money instead of being surprised. I think by taking out money and spending it, you’re not actually aware of how much you’re spending, and how much you have left. It just disappears like magic.

L: See the reason that doesn’t really work for me is that my account actually has $1,091.95 in it. I had to do some spreadsheeting to figure out that I don’t actually have $1K, you know? Plus logging into the bank is so cumbersome. I think it will be more helpful for me to think of it as: I have $9 a day to spend until I get some more money. So I can only spend $20 on drinks  (or groceries, groan), if I don’t spend any dollars the next day. That’s how math works.

M: And these spreadsheets show how much your monthly bills are, right? So you have to subtract what you owe from the money you have in your account. So the best thing to do is to probably have two separate accounts. One for bills, and one for life. That way you don’t have to sit down and do the math every time.

L: Yeah I’m working on that, but it’s a LONG AND ARDUOUS PROCESS.

M: I will help you open another account after this chat! It will take a few minutes, I promise. The goal is to get you to be aware of how much money you have. At any given time, it doesn’t seem like you know.

L: No, I don’t need your help! I DID IT ON MY OWN! It just is taking me some time to get it set up because everything is hard and nothing is easy. (Haha I sounded like a toddler there. “I CAN DO IT MYSELF!”)

M: It’s totally okay to have help. That’s the whole point of our site, right? You are not alone on this! And the reason why an organization like the NFCC exists. You are doing yourself a favor by asking for help. And also, I don’t mind helping. I like helping! But if you don’t want me to help, I get that too. So: Up to you!

L: Haha, you are helping! I gave you my credit cards and you are keeping me from using them. DELIGHTFUL. A DREAM. So here’s a question I’ve been debating. I had overdraft protection for a long time that went to my credit card. And then I cancelled it. But now I’m wondering if I should reinstate it. NOT TO USE AS A CRUTCH. But just in case?

M: Well, how many times has overdraft protection gone into action for you?

L: Well, I used to use it on purpose. I knew i could spend all my money because the bills would be covered by the card. Dum de dum.

M: Okay, so it was a crutch before. It’s probably not a good idea to have it then. It might be good for you to get declined at the register.

L: Oh you still get declined at the register if you have overdraft protection. Haha Mike dont you know anything about not having money? It only works for Billpay and checks you’ve written, not for purchases.

M: So why did you cancel it?

L: Hah. WELL it actually cancelled itself after I lost my card (dlsajfkd), but the dude sent me the form to sign and send back and I’ve had that in my possession for several months? Maybe a year. I mostly didn’t send it back though because I know how I use it, and it’s a bad way.

M: I think you have your answer then.

L: Well, and also, the signing and mailing of things is not a favorite hobby.

M: You haven’t had it for an extended period of time, and you haven’t needed it, so that’s good.

L: I DIDN’T THINK OF IT LIKE THAT. You’re right. I’m a financial genius. Moving on. Can we talk about something hilarious you said to me this weekend?

M: About zombies?

L: You said: “I am so stressed out.” And I said: “About what?” And you said: “About my credit card!” And then I laughed, which was mean. And also stupid. Since comparing debt is dumb dumb dumb. But you did ask me how I wasn’t stressed out all the time, and I’ve been thinking about that.

M: So for context, I had to buy a new laptop because I was actually using one that belonged to my old company, and they finally asked for it back. And as we know, laptops are expensive! And I put that on my credit card, and that stressed me out. I mean, I’m going to pay it off, but still. For me, the idea that I owe money that isn’t mine, and that can potentially compound a bunch of interest is stressful to me. I’ve made peace with my student loan debt, but consumer debt is another beast. A beast that stresses me out. So you’ve been thinking about why that beast doesn’t stress you out. Why is that?

L: I guess the same way your student loan debt doesn’t stress you out: I’ve made peace with it. Plus the fact that it’s not a secret anymore really helps. It used to be this huge secret, and there were only a few people I talked about it with, and when we did talk about it, it was mostly about just how fucked we were. But now everyone knows. My parents know. I’m taking some steps to deal with it, other than that, there’s nothing I can do. Right now I’m not even making any headway on paying it off, because I’m just not making enough money. But even that doesn’t really stress me out, because I know I’ll start making more money slowly. It’s going to have to be this slow chipping away and not the one-huge-payment-and-it’s-gone solution I was hoping for/counting on/deluding myself about.

M: But since this is a check-in, we should point out that you’ve been able to secure a couple of freelance things you didn’t have the last time you checked in. So: progress!

L: Yes, well, Things Are Starting to Happen. And hopefully they will Continue to Happen. Logan OUT.

M: Until next time!

 

Previously: Week End Check In (Logan’s Trying Kind of, And Mike’s Still the Nicest)

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21 Comments / Post A Comment

I had separate Life/Bills accounts for years, but I would end up overdrafting or holding up checkout lines while I transferred bill money into the life money account via phone. (I called this the Titanic Model of Finance, as the frigid water of pennilessness spilled from one bank compartment into another until I finally went down.) Ultimately I ended up with four accounts with near zero balances, and closed them this year. I feel more whole now.

Also, I agree that the signing and mailing of things is the WORST.

“more whole”…is that possible?

bibliostitute (#285)

@Scarlton Banks it is in hebrew! why not in english!?

I’m also trying the separate bills/life account thing. I have a bank account that charges $10 if you don’t keep $2000 minimum in (fuuuuuck this)

but uh, sometimes i don’t have enough money in the life account so I spend money from the bills acount. Whoops.

Also I think the $9 a day thing would be a really good way to budget money for me! Because sometimes it is possible to have a day where you don’t spend any money. So if you have $9/day which isn’t very much, it’s a motivational tool to incur more “no money” days in order to have $20 drink days!

Except that, I would incur “no money” days in order to spend $9 on a mickey of tequila and make my own very strong drinks before the bar. So that I could spend more money on overpriced burritos which is like, my main money drain.

I am — like Logan, I suspect — very, very good at MAKING budgets, but terrible at following them. My new strategy for the next paycheck is to give myself a weekly cash budget for the things I shouldn’t be spending money on (drinking and buying lunch), since that seems to be my main money drain.

In other news, where are you people going for “$20 drink days”? That’s like, one cocktail, a beer, and tip for me.

@stuffisthings are you saying $20 is a small amount to pay at a bar? if I’m drinking on a week night … two drinks would do me! plus there are usually happy hour deals like $4 pints (at least in toronto).

On weekends, owing to my cheapness, I’ll usually have a drink or two before the bar. I’m so cool I know.

@redheaded&crazy Well, I’m the kind of drinker who will stop for a beer and a shot (or 2 beers and 2 shots) on the way to the first bar. Hence the whole cash budget thing…

@stuffisthings got it! the cash budget works well for me. I split it up into during the week, and weekends. my goal is always to have some leftover so i can splurge on fancy coffee the next week or nail polish or something. this sometimes happens.

Sarah H. (#408)

@stuffisthings I keep trying the cash budget for incidentals thing, but it just never works. I was talking with some friends this weekend, and coined the term “soda tickets” for dollar bills, because that’s what they are. If I have a dollar bill, I will put it in a vending machine. Dammit.

@Sarah H. Yeah, cash does seem to evaporate on you, but I think I have the discipline for it. Usually when I’m down to my last $40 or $60 and payday is a few days away, I just withdraw it all. Makes you think HARD about what you’re buying, and also, no possibility of an overdraft unless some bill or something comes through.

But Mike! Credit isn’t necessarily evil, it’s a tool. It can be misused for instant gratification but in this case it helped you get something you couldn’t do without.

Also to justify the potential interest paid and make peace with it, think of the opportunity cost vs the interest. What would you not be able to do if you put off the laptop purchase until you could pay cash for it? Compare that to the interest you’ll end up paying and you’ll probably find it’s more than worth it. (Just don’t go justifying opportunity costs of jet skis unless you’re running a jet ski rental company.)

@forget it i quit There’s an exercise that economics/finance teachers do to explain the concept of net present value and discount rates. Basically, the game is: would you rather have $100 today, or $110 in a year? $120? $130?

Whatever that amount ends up being is your personal discount rate — often much higher than what an institution, company, or government would use (people like Logan and myself are sometimes said to suffer from “hyperbolic discounting” where the discount rate increases with the length of the delay). If you can get an interest rate less than that, and you can afford to make the payments, then borrowing “makes sense” for you.

The most intuitive example is buying a house: for people who want to own a home, getting a mortgage at a low interest rate almost always makes more sense than spending 30 years to save up the cash price of the house. Likewise, as bad as student loans are, it would probably be silly to try to save up four years of college tuition by working at McDonalds, only to graduate debt-free when you are 40 (especially with costs increasing as they are).

Sarah H. (#408)

Separate accounts! Separate accounts! I just did this about a month ago, and it has been SO helpful for being able to visualize my balance and available money. You don’t have to do a bunch of math in your head about what bills come out this week and blah blah, you just look directly at your Life money account and that’s your number, period.

It was also surprisingly easy to set up, I don’t know if it will be for you, too – I called my bank, asked to open another free checking account, and about five minutes later it was done, new debit card in the mail. I think I had to put $25 in it to start out, but they just transferred that over from my other checking account. Can’t hurt to try!

Sarah H. (#408)

@Sarah H. Also, for the love of god, HIDE THE DEBIT CARD FOR THE BILLS ACCOUNT. Mostly so you don’t mix the two up (mine look exactly the same), but also so you aren’t tempted to go “oh, I can just put this one thing on it, it won’t be that bad…”

I actually do keep that card in my purse just in case (for example, to pay the copay at a doctor appointment since I factor those into bills), but it’s deep within a zippered compartment.

@Sarah H. Yes! Agree with hiding the card! This is what I do most of the time. A while back I accidentally put all my money into my bills account and then had nothing left for my life account so things got a bit wonky. And as you say it’s good to have on hand for emergencies, but keeping it out of sight is a very good idea.

Megano! (#124)

What I do is keep all my bill money in savings, and know how much I have to spend on groceries and stuff, and that goes in a separate savings account. Usually bills get paid off at the beginning of the month regardless of when the due date is, because that’s when I have the money to pay it.
If I want to actually use the money, I have to transfer it into chequeing, which takes a day. I almost never have more in chequeing than I plan on using. That way I always know what’s going in and out, and I have to think about it before I transfer it. Plus if there’s no money in chequeing, nothing I can do about it until the next day.
Also I have said it before, but I treat my CC as cash. My full balance comes out of my monthly budget, and if I need more money on the card to buy like furniture or something online, I put more on. I have only ever paid interest once, and it like 20 cents or something.

@Megano! I think I’m going to adopt your strategy of paying off bills at the beginning of the month regardless of due date. It drives me up the wall that bills all have different due dates.

@Megano! I would always keep my rent money in savings. As soon as I got one of my two paychecks for the month, I’d pull out 1/2-2/3 of what my rent is and put it in the savings account. When my second paycheck got deposited shortly before rent was due, I’d pay all my other bills and then transfer whatever I needed to cover rent from the savings account. Usually it ended up with a little leftover in savings – to be applied to a Future Scooter Purchase.

….I have no idea how this will work now that I’m only getting one paycheck at the end of the month.

Katzen-party (#219)

@Megano! YES! I don’t know why more people don’t treat their credit card as cash. It has worked so well for me, I can’t recommend it enough. I guess I’m really old-fashioned in that I balance my checkbook religiously (I feel like I haven’t seen anyone talk about a checkbook on this site, but I’ve had such success using mine!)–every debit transaction, ATM withdrawal, deposit, and now credit card transaction goes into it so I know EXACTLY how much money I have available. I practically never pay interest on my credit card (I once carried a balance for about three months, five or six years ago because something ended up costing me more than I thought, but otherwise that’s it!).

Remembering that I ACTUALLY have X amount of money instead of Y amount because my landlord hasn’t deposited my rent check yet has been one of my biggest money pitfalls for years. I have a budget spreadsheet, but I seem to have graduated from “never check my bank balance” to “monitor my bank balance, but avoid my budget spreadsheet like looking at it will turn me to stone”. Progress?

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