Living On The Card

The Wall Street Journal reports that, sometime this year, the collective credit card balances for Americans will hit $1 trillion.  That’s just shy of the all-time record — $1.02 trillion — that was reached in July 2008.

We all remember what happened after July 2008, don’t we?  Subprime mortgage defaults soared, the housing market crashed, Wall Street firms toppled, and the American economy stood on the brink on catastrophe.  Credit card debt wasn’t a primary cause of the Great Recession, but in those tough times many American families recognized that owing too much money wasn’t particularly prudent and they needed to change their ways.

antandgrasshopperOver the next few years, our collective credit card balances declined steadily, and then stayed flat for a while.  Lately, however, they’ve been moving up again, and the trend lines are unmistakable — people are using their credit cards more and are carrying larger balances on them.  Auto loan balances, too, are at record levels.  The WSJ reports that much of the growth in collective credit card balances has come because banks have been reaching out and marketing their cards to subprime borrowers.  (There’s that troubling subprime word again.)

Any financial advisor will tell you that racking up substantial, long-term credit card debt isn’t a good practice, and that people would do better to set budgets, establish personal savings to provide a cushion against unexpected costs, and live within their means rather than borrowing for nonessentials.  Americans aren’t very good at that, however, and they’ve got short memories.  When you combine the mounting credit card debt with the declining savings rate in America, and then you read stories about how almost two-thirds of American families couldn’t handle an unexpected $500 car bill or a $1,000 hospital bill, it makes you wonder whether we’re on the brink of another big economic problem.

Why are Americans like the grasshopper in the tale of the ant and the grasshopper?  One of my retired friends who enjoys light reading about behavioral economics says that discipline views it as a combination of a desire for immediate gratification and a kind of paralysis in the face of potential financial problems.  He notes that even when Americans take courses on basic personal financial concepts and thoughtful planning, the lessons just don’t sink in, and the old bad habits remain.

At some point, however, the piper needs to be paid.  People who live from hand to mouth, with maxed-out credit cards that require large monthly payments,  might avoid complete disaster and make it to retirement, but with it’s not going to be the retirement of their dreams.  Without any personal savings, and with only Social Security to fall back on, they’re looking at “golden years” that are distinctly grim.  There’s a reason the grasshopper in the tale usually ends up in a threadbare coat, begging for a handout.

Hotel Shampoo Economics

It’s been, literally, years since I have paid for a bottle of shampoo.

WhyIMG_20140608_080658?  Because I have to travel regularly for my job, and I always use hotel shampoo when I am on the road.  I long ago realized that hotel shampoo does a perfectly satisfactory job of cleaning my hair.  If it does a perfectly capable job on the road, why not use it at home?  So, for years, I have taken a plastic bag with me when I travel, keep the used shampoo — because I never need more than a fifth of the little bottle — and bring it home.  Now we’ve got a drawer in our bathroom that is full of little bottles of shampoo, conditioner, and hand lotion.  I’ll take this bottle with me when we leave the Fairlawn Hilton today and add it to the collection.

For me, shampoo is a generic, wholly fungible product.  I don’t have any special shampoo needs.  So if I can avoid buying shampoo, why not save the money I would spend on a product that I can otherwise get for free?  Not buying one bottle of shampoo might not be a huge amount of savings, but over the years it adds up — and in any case I’d rather keep the money than needlessly give it to some large corporation.

Shampoo is a good example of ways in which people can exercise discipline over their personal finances.  Are there products that you buy that you really don’t need (or don’t even use)?  Would a generic product serve just as well?  Do you really read the magazines or newspapers you subscribe to, or have to have a landline phone?

Personal economic freedom is the product of many such little decisions.

The Value Of A Buddy

This morning I will drive in to work, as I always do, and park in my spot in my parking garage, as I always do.  My “parking buddy,” the Yankee Cavalier, will do the same.  We both park in the same, elongated parking spot in the same garage.

Our parking garage is a throwback.  Unlike more modern structures that have only individual parking spaces, our aging garage has “buddy spaces” — spaces big enough to accommodate two cars.  Buddy space parkers give each other the spare set of keys to their cars.  If I get to the spot first, I’ll back all the way in, and then the Y.C. will park in front of me.  If I have to leave before he does, I’ll need to use that spare key to move his car, pull my car out, and then back his car into our joint space.

The Y.C. and I have been buddy parking for more than 20 years — longer than some marriages.  The garage has been sold from one conglomerate to another, and still our buddy arrangement prevails.  We’ve exchanged the keys for a number of new cars and alternative cars, and I’ve sat in the driver’s seat of Y.C.’s rig, moving it just a few feet and then backing it up again, countless times.

Sure, it’s not perfectly convenient, but a buddy space is cheaper than a single-car space, and those savings have added up.  During our 20-plus years of buddy parking, I’ve saved about $5,000 that otherwise would have gone into the coffers of some impersonal company.  For that kind of savings, I can endure a little inconvenience — and I also appreciate the useful reminder that even small monthly savings can, over the course of a career, accumulate to a significant sum.

Yes, the Y.C. has been a very good buddy to have.

The Buttoneer Challenge

A few days ago the button on my shorts — after gamely attempting to deal with the enormous tensile strain caused by my middle-aged spread — abruptly fell off.  I immediately thought of the crucial line of a ’70s commercial for a product called The Buttoneer that claimed to securely fasten buttons.  As the ad showed footage of buttons dangerously exploding away from pants, shirts, and other articles of clothing, an announcer grimly, and repeatedly, intoned:  “The problem with buttons is they always fall off!”

With times being tough, it would be dumb to pay a professional to do something I should be able to do.  So, I decided to re-anchor the button myself, using one of those tiny sewing kits you get at some hotels.  Although I had never used a needle and thread before, I was acquainted with the basics.  You thread the needle, tie a knot in one end of the thread, and then insert the needle in and through the fabric, pulling the thread through and working through each of the the four holes in the button until it is snug against the garment.  Fortunately, the needle was already threaded, and I didn’t stab myself in the thumb more than once or twice.  Admittedly, it’s not  a professional looking job, but the button is back on and functional.  And when my sewing exercise was done, I felt a pleasant sense of accomplishment.

As I was moving the needle back and forth, I idly wondered what I had missed by not taking home economics during high school.  In my school, that really wasn’t an option.  Boys took shop, girls took home ec.  These days, though, being able to cook and create and repair clothing seems a heck of a lot more useful that being able to create a candlestick on any lathe that might be nearby.