So far outside the box you can't even see the box from here.
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Saturday, January 5, 2013
Money saving hints
There are thousands of books, articles, and web pages with money saving tips. Most of them are pretty good, with one big caveat. They only really work if you aren't too bad off to begin with.
They say things like: get a cheaper cell phone plan, take your lunch into work, brew your own coffee rather than ordering out -stuff like that. It's all good advice. The money saved can be used to pay down debt or to have some money in savings. If you are working but can't seem to get ahead, these are the sorts of little changes that can help. Information on how to do those little money saving things is everywhere.
When you are out of work and living on beans and rice, not buying an espresso won't save the day. When your mortgage is greater than your income, hints on do it yourself landscaping isn't what you need. Information on what to do then is much harder to come by. The choices are harsh and not much fun at all. Success is uncertain.
There are two different strategies, depending on circumstances. In one scenario there's a less than zero chance of your income situation improving. You think that your lay off might be temporary. (that means the company hasn't sold off all its machinery to China) Perhaps you are waiting to see you are going to qualify for retirement or disability payments. Maybe your skills are still in demand and finding another good paying job is only a matter of time.
The other scenario is one where earning enough money to pay your bills isn't going to happen. You were laid off and the company did sell off its machinery. Perhaps your skills are in a field that's disappearing. Maybe you are too sick or injured to ever be able to work full time again. If your only hope of financial solvency is winning the lottery, you are in this category.
I was in the first category. There was no way I could pay all my bills, but I had hope of winning my disability case. While we lived a pretty frugal life, but we still paid for extras. The kids had music and karate lessons, for example. We still occasionally went out to hear live music. The money saved by forgoing these things would not have saved us. While the money might be retroactive, my kid's childhoods weren't.
When you are in that sort of situation you end up keeping up credit card payments but let the house mortgage and taxes slide. Sure, eventually the house will go up for auction, but you need the credit cards in good standing so you can eat and pay for fuel. Maybe you get a really nice cell phone with a good plan, but the home landlines and Internet service is canceled. People look at you funny for getting a nice phone, but it makes sense at the time. That phone is what keeps you in contact with your lawyer or helps you find a job.
I won my bet against time, but just barely. My house was going up for auction in two weeks. My back pay brought the mortgage, taxes, and credit cards up to date. (by then, even the credit card payments could not be met.) It was a huge risk. Normally a case like mine takes about a year to settle. Mine had the bad fortune to become a test case and took four years to settle.
My situation was about to slide from the good chance of catching up latter category to the totally doomed category.
It's that second category that needs more planning. Dropping from “think you're gonna make it' to “no you ain't,” is worse than just accepting it's not ever going back the way it was.
Had my case failed, I'd have lost my house, been without savings or even a functional credit card. I did not know it at the time, but my own parents were well on their way to an eventual bankruptcy. My in-laws were 2000 miles away and had issues of their own. The family would have had to live in a tent in the woods until we could save up enough money for a rent deposit on a crappy apartment.
Here's how we could have done it differently if right from the beginning we would have accepted being in category two. That's tough to do and takes steel will. Let's say I knew right from the beginning that my funds would not recover. The first thing to do would have been to sell the house rather than wait for foreclosure. At the time I could have cleared enough money to buy an old trailer on a small lot. It' s not much, but beats living in a tent. Then paying land taxes becomes more important than keeping up the credit cards.
If I'd owed more money on the house that it was worth, then the thing to do would be to stop mortgage payments and save up cash for a deposit on a good rent. These days I'd most likely buy an old boat to live on.
One guy I knew slowly turned all his toys like motorcycles and boats into cash, which he never put in a bank. There was no paper trail that way. After everything was settled, he took that physical cash, moved to a new state and restarted his life.
Money saving tips are fine if you are basically financially sound. It's like cosmetic surgery, nice to have but not life saving. Sometimes what you need is radical life saving financial surgery. Then it's financial triage, cutting away anything not essential to life.
I live in an area of NH known as the Great North Woods. I'm in my dome-i-cile out in the county with my lovely wife and a varying number of family and friends
-part red neck, part hippie but all country. Experimenting and enjoying the adventure of life.