March 22, 2009 · A new study suggests people might save some money by carrying around big bills. Priya Raghubir is the co-author of “The Denomination Effect,” a paper that will be published in an upcoming issue of the Journal of Consumer Research. Host Jacki Lyden shares some of the highlights of Raghubir’s research.

Heard this story on NPR this last week…  By carrying larger bills (1 $50 bill instead of 10 $5′s, people cut down on spending… makes sense – it’s more painful breaking a $20 than it is spending 5 one’s.

This got me thinking about cash vs. debit cards.  There are pluses and negatives to each.  In essence, the debit card gives you access to all of your money in your checking account at any given time, as opposed to cash where you can mete out how much you want access on a given spending trip.

The access to cash that debit cards provide can be convenient – and destructive.  However, the debit card has an important quality that cash doesn’t – trackability.  You  will always know where your money went, and while it may be too late for that money you’ve spent, you can start to guide your spending based on the records of where your money has been going.  I heard a saying recently in regards to tracking the effect of advertising:

“If you can’t track it, you can’t manage it.  If you can’t manage it, it is probably not worth doing.”

Same goes with personal spending.  If you are not tracking your spending closesly – believe me, it’s not worth doing.

Take a listen to the NPR story on the virtues of carrying large bills here.

Patience is the word of the day when it comes to finances – hold on, keep a long-term perspective, don’t panic.  These are good words of advice in any rhelm.  For our family, we’re having to hunker down and patiently work our way out of debt.  No big spending, no kitchen remodel (although we desperately need one!) – does this mean no fun?  NO WAY.  Take this last weekend, we spent $3 on park entrance fee (Reoding Park) and $2 for snow cones and had hours of fun running around, climbing the rock walls, throwing the frisbee.  These days we are learning that fun doesn’t depend on money… but I digress, back to Patience.

I’m reading lots of Covey these days – you know the 7 Habits guy… in his book “The 7 habits of Highly Effective Families” he tells the analogy of the Chinese Bamboo.  For the first 4 years the bamboo is nothing but a tiny shoot.  But in the 5th year it shoots up to 80 feet high.  What happens is for the first 4 years, although the plant above-ground is small, the root system below-ground is reaching out in every direction. 

Seems like there are a lot of things in life that are like the Chinese Bamboo – with patience their roots grow strong until the right moment arrives and they shoot up.  Relationships are like this – it can take years of cultivating a relationship for it to bear fruit.  When we start to get impatient we need to remind ourselves that beneath our feet, roots are growing and even when we can’t see results… that 5th year is a-comin!

On the one hand there’s what’s best for the common good, which in the short term is to get money flowing again, get consumer spending back up, and keep business owners employing the masses.

On the other side of coin however is what’s best for the individual family… and right now that’s to pay down debt and save.  You hear it all the time, people are cutting out the fat – not going out to eat and making more food at home… holding off on that vacation… downgrading their bling.  So what are we to do?  What’s right for the country or what’s right for the family?

Obviously we’ve got to do what’s right for the family – family first right?

This is where the government has to step in – and do what’s right for the public good – which is spend spend spend.  And that’s just what the Obama adminstration is doing.  Now the challenge will be to make sure small businesses can capitalize off of the money that’s coming down from the feds.

So my advise is to shut off the talking heads and keep pinching those pennys for the time being.

1929.

NOT good news.

No one’s sure whether we’re looking at a lost decade ahead, or a quick getting back into the swing of things… one thing’s for sure, we’ve got to get this debt thing back under control.

It’s a lie to be living off of debt – spending money that we don’t have.  It’s one thing to borrow money to finance a business that will use it for operating capital – with a clear plan of how it intends to repay the debt.  It’s entirely another thing when we borrow money to get that new car, or that new gadget.  Credit Cards are what’s called revolving credit accounts… they don’t have a end built into them like a 30 year mortgage does, or even a car payment.

So here I am, back to the Credit Counseling.  Heard of marital counseling, most of us married folks need it… however I’d say even more need Credit Counseling.  I’ve mentioned Harbor – another great non-profit service is By Design Financial Solutions.

Once we realize that THE PROBLEM IS US.. we can start to truely solve this economic crisis.

Here’s the skinny on your credit history… nowadays if you are looking for a home loan… you will be hardpressed to get one if your score is under 680.  Many banks won’t even consider you if its under 700.  That’s out of 850…

Here is a great site that pulls what lenders are saying about specific credit scores.

How do you clean up your score?  take a look at this link:  http://www.myfico.com/CreditEducation/     There are plenty of Credit Counseling Services out there that can also help.  Make sure it is a non-profit credit counseling service that is grant funded… there are many scams as well!  The National Foundation for Credit Counseling is a good place to start.

You are entitled to 1 free credit report (NOT YOUR SCORE) from each of the 3 credit reporting agencies.  To get a free credit report go to AnnualCreditReport.com.

If you want to see what your score is MyFico.com can get your score for you from the 3 agencies for $15.95.

The film is described on the site:  In THE ASCENT OF MONEY, Ferguson traces the evolution of money and demonstrates that financial history is the essential back-story behind all history. “Everyone needs to understand the complex history of money and our relationship to it,” he says. “By learning how societies have continually created and survived financial crises, we can find solid solutions to today’s worldwide economic emergency.” As he traverses historic financial hot spots around the world, Ferguson illuminates fundamental economic concepts and speaks with leading experts in the financial world.

I definately recommend … and it’s available for FREE viewing online … view it online for free here.

Last October I enrolled in a debt management/credit counseling service called Harbor Credit Counseling Service .  I’ve been pretty wary of these services but because it was a non-profit and they seemed to be pretty legitimate I thought I’d give it a go.  Here’s the way it works:

1. I signed up using their online signup form.  This included developing a home budget which was great…
2. We closed all the credit card accounts (WOW… no more cards… very liberating!)
3. We agreed to a monthly amount that they’d take out of our checking account based on our monthly budget – including a $29 service fee.
4. I sent letters to the card companies saying Harbor Credit Counseling Service would be contacting them.  I also had to send a letter to one creditor changing the due date so I wouldn’t get hit with a late fee every month.
5. Harbor negotiated with each of the card companies.  2 companies went from 29.99% to 9.99%.   The other company (a local credit union) says they don’t renegotiate APR.
6. Harbor pays a set amount each month to each company – based on what we could afford.

In evaluating whether or not the $29 a month fee is worth it – I looked at the amount I would have been paying in interest each month vs what I’m paying now.  On the 2 cards that were reduced it’s a difference of about $110!  This means I’m saving about $80 just on those 2 cards (total debt about $7000)

This doesn’t take into account the late fees I was regularly incurring because I was tracking and paying for 4 different cards (on top of all my other monthly payments).

All told – the service is definately worth it… and best of all has been the change in my families spending.  If we don’t have it, we don’t spend it.  This is the only way to get a handle on our debt!

So here goes world… the start of yet another blog,

Jeremy