Sunday, October 14, 2007

My Personal Finance Success Story

Okay, so I started this blog back in July with all kinds of good intentions, then got busy and forgot about it. Too many competing priorities, I guess.

But today I have a reason to post: J.D. at Get Rich Slowly is sponsoring a contest for a Nintendo Wii, and to enter I need to write about my financial success story and post a link on his site. Seeing as (a) I love writing contests (even though this one is really a drawing from among the entrants) and (b) I've been mulling over whether to get the kids a Wii for Christmas this year, this seems like a great way for me to get writing on here again.

So, my financial success story... where to begin?

I learned some of my best financial habits from my father. Unfortunately, I also learned some of my worst from him too - and it took me a long time to be able to recognize that, just because Daddy did it that way, it wasn't necessarily a smart thing to do.

Good habits he taught me? How to balance my checkbook and how to save for retirement. My dad was an early proponent of Individual Retirement Accounts. The summer I got my first "real" job, he had me put $2000 of my earnings into an IRA. I was probably the only freshman in the country who was already saving for retirement!

But as part of that good habit, he taught me a bad one - and one that later bit me, hard. Throughout my childhood, my dad had gifted stock acquired through his employee stock purchase plan to me. By 18, I had 110 shares of IBM worth about $20,000. My dad suggested that I take a loan out against the stock to fund my IRA. I didn't even know what this meant, but since doing this meant I did not actually lose the use of the $2000 I was contributing (i.e., I could spend it on clothes), I gladly did it. The next summer I did the same thing - and eventually I realized that my checking account (which was linked to the stock loan) would take automatic stock loans out when I overdrafted it. Wow, no bounced checks and I could do almost anything I wanted!

Over the next three or four years, as the value of the stock rose during the "greed is good" 80's, I managed to borrow almost $25,000 against this collateralized loan. Some of it still went to my IRA's but substantially more just got frittered away.

Then came Black Monday - October 19, 1987. I remember listening in horror to the radio as reports of the 508 point stock market crash came through. I didn't fully realize what that meant for me, however, until I received a letter from the credit union a few days later, requesting that I either post additional shares of stock as collateral for my loan, or make up the $8,000 shortfall with cash. If I did neither, then the credit union would sell my stock.

Since I had no more shares of stock - and $8,000 was more than I'd ever earned - I had to let the stock get sold, at very reduced prices from the highs of only a few weeks earlier. But the real pain was still to come, because the sale of the stock did not cover the amount I'd borrowed, so I was liable for the balance as an unsecured loan!

Thankfully I had just started a new job when all this occurred, and because the job involved a lot of employer-paid travel, my living costs were very low. After a year or so I was able to pay off the unsecured loan to the credit union.

This experience, unpleasant as it was, caused me to become interested for the first time in financial matters. I found a workbook about personal financial planning in a bookstore and started reading it. I started listening to the Dolans on the radio and realized that I should move my IRA from a money market account into the Vanguard Index 500 fund. I invested 15% of my income in my company's 401K. I paid all my credit cards on time. I even paid off my car (by taking a loan against the cash value of my whole life policy - another Dad investing strategy) so I could save on insurance premiums.

Then after I met and married my husband, I became a Frugal Zealot a la Amy Dacyczyn's Tightwad Gazette. We washed baggies and cooked big pots of beans for dinner. I started buying thrift store clothes almost exclusively. Our income was modest but so was our lifestyle. We bought a small house and a couple small cars, and started a small family. It was tough to make ends meet on our small salaries (he was a teacher and I was a secretary) but we managed somehow.

Now, about 15 years later, we're doing much better income-wise - but we still follow a relatively frugal lifestyle. Still, we always managed to spend almost all of what we made, minus contributions to retirement and a small savings account. We had debts, but I considered them all good debts - a large mortgage, a home-equity loan, a car payment, and a $6000 0% Lowe's credit card for new windows on the house. In my mind we were doing very well, overall.

Then my brother gave me Dave Ramsey's Total Money Makeover for Christmas last year, and I decided after reading it that doing very well was not good enough. Since January 1, 2007, we have paid off over $30,000 of the $65,000 we owed in non-first-mortgage debt, and are on track to be debt-free by November 2008.

So that's my financial success story... an early start on retirement savings, one really expensive dumb mistake, living a basically modest lifestyle even once we achieved a good income, and now paying off even the "good" debts we had accumulated. I'm happy with where my family is headed!

Monday, July 30, 2007

The Grocery Game

Buying groceries should be easy, right? Make a list, go to the store, pick out the items that look best to you, and pay. How hard can it be?

But for me, buying groceries can be a very complex matter of sifting through various priorities. That's because I try to make purchases that reflect my values.

What are those values and why are they important to me? In approximate order of importance, they are:
  • Grown, made and/or sold locally - to support local businesses and to reduce the fuel for transportation. I have a special preference for patronizing our local food co-op when possible.
  • Organically produced - to reduce potential damage to my family's bodies and to help create a profitable market for methods that do the least harm to the environment.
  • Fair Trade - As a Catholic, I believe it is important to show solidarity with workers by purchasing items for which a fair price has been paid.
  • Not a "Red" company - I don't want to support any company that supports the Bush administration.
  • Inexpensive - My family and I are following the Dave Ramsey plan to eliminate our debt, so I try to choose items that are good values and keep us within our budget.
  • Low-carb - After losing 40 lbs on a low-carb diet several years ago, I look for items that will help me maintain that weight loss.
With all these filters to apply, shopping can be rather tricky! Say I'm at the co-op and I pick up a can of diced tomatoes from Muir Glen. Locally made - no. Locally sold - yes. Organic - yes. Fair trade - no. Red company - yes (Muir Glen is owned by General Mills). Inexpensive - not particularly. Low-carb - yes. So what do I do? In this case, I put it back and pick up a box of diced tomatoes from Pacific Natural Foods instead. Everything is the same except the company is an independent with no history of political donations.

Why do I go to so much thought and trouble for what I buy? Because I realized that in our society, the power of the purse is one of the greatest powers that I as a consumer can wield. Money really does talk, and retailers really do listen. I believe it is no coincidence that the organic market has exploded over the past few years, since about the time I started choosing organic. I alone am not responsible for that, of course, but I am convinced that people like me - ordinary consumers making thoughtful, thought-out choices - are moving the market in the direction we want it to go.

Sunday, July 29, 2007


This blog is dedicated to those who attempt, however fruitlessly, to strike a comfortable balance between many possible alternatives.

In my life, I struggle to find that comfortable balance. Convenience versus conservation? Frugality versus fair trade? Prosperity versus politics? Every dollar I spend, every decision I make, seems to reflect on who I am and what I believe. If I am the sum total of my choices in life, then what choices must I make to produce a life of which I can be proud?

In this space, I will explore some of those choices and consider what these competing priorities might mean to me and to others. I welcome your contributions and your insights.