Goodbye For Now

The Money Maiden has been struggling to keep up with all of the demands on her time. Therefore this blog will go (fully) inactive for some time. The posts have been few and far between but the item on the task list has been great for guilt-induction. Therefore it's been removed from the task list and The Money Maiden will focus on balancing life in addition to the checkbook.

The blog will remain up for the day when life's demands lessen some (maybe retirement!?).

Thanks for reading and goodbye for now!

Savings and Debt

How do you actually save for a special item or get out of debt? Of course you’re already putting regular money into savings. This is referring to that trip or expensive new item you need.

Step 1: Determine how much money you need.
If you’re working on getting out of debt, don’t forget to factor in interest payments.

Step 2: Determine how long you have to save, or how soon you’d like to be out of debt.

Step 3: Divide the total needed by the number of months to figure out how much money you need to set aside each month or pay to your creditors.

This also works for Christmas. Yes it just recently ended, but now is the best time to think about how much money you’ll need next December and start setting aside a monthly allowance.

Here's a link to a wonderful story about a family that paid down over $90,000 in debt in a very short time. You might find it inspirational!

You Still Have To Save

I wear corrective vision lenses. My vision started to decline when I was in college, so I got glasses. At first I only had to wear them when I was sitting in the back of a lecture hall or driving at night so it wasn’t that inconvenient. Over a very short period of time, my vision deteriorated to the point where I needed to wear the glasses all the time. I was finally convinced that I needed to move to contacts when I realized how problematic the glasses could be. I know lots of people wear glasses with no problems, but I wasn’t one of those people.

I tried out ROTC one semester in college. I decided not to enlist when I was offered a full-ride scholarship for the rest of college. I know, it doesn’t sound like it makes much financial sense, but I wouldn’t have been able to be in the reserves if I accepted that scholarship, I would have had to have gone active duty once I graduated, and I just didn’t want to do that. But for that semester, I had PT (physical training) every weekday morning at 5 AM. It was really cold most mornings, so we’d come in from running and my glasses would fog up. So I’d take them off while we were doing the floor exercises like sit-ups and push-ups. One morning I had to miss my classes for the rest of the day because my glasses got stepped on while they were lying next to me. That did it for me, well that and vanity. I ordered contacts that night when I got my glasses repaired.

I’ve never really been comfortable with contacts either though. I get dull headaches on a pretty regular basis. Of course it doesn’t help that I wear them from about 5 in the morning until almost 10 at night. So I decided that I wanted to look into corrective vision surgery. I am slightly nervous about it, after all there are risks associated with any surgery, and other than inconvenience, there aren’t any real risks with glasses or contacts. But my eye doctor was one of the first to start doing the surgeries in the area and so has tons of experience and a really good track record. The next obstacle was of course the money. It’s a fairly expensive procedure, but other than having to pay for it all at once, it’s actually cheaper long-term than purchasing contacts over my life-time.

After deciding that I wanted to pursue this option, I made an appointment to find out if I was a good candidate for the surgery and exactly how much it costs. I am fortunately a good candidate for the surgery, and after saving money for nearly two years I now have enough money to pay for the surgery.

I’ve had several people at work say to me, “Just use your flex account.” They are referring to the IRS-approved flexible spending account program that allows us to set aside tax-free money to spend on eligible medical expenses. This is a great option to save a little money, and I will be using it. However, because I live on a budget and my checks will be smaller after the money is withheld for the account, I still had to save for it.

I’ve written about saving up and delayed gratification before here. Even if you can find an alternate financing method, whether it’s a flexible spending account or a line of credit, it’s still a good idea to save first for anything that isn’t an emergency need. This coming fall I’ll be getting the surgery done and will know that it’s paid in full when it happens.

Money Management and De-Stressing

I don't post on this blog as often as I'd like to. I get caught up with parenting, work, household chores, and sometimes with feeling like I haven't got anything new to say. I am going to keep the blog up and continue to post as I'm able though. I'm good at budgeting; and the couple of times I had to take on debt, I was good at getting quickly back out of debt.

So I'll keep writing because my stress level is much lower than other's because of the way I manage my finances. If I can help just one other person to get control of their financial situation and decrease their stress, it will be worth the effort.

Financial Education in School

Time Magazine recently published an article titled How to Teach Kids About Money. The article stated that kids aren’t receiving enough information about money management and even more startling, that financial education programs don’t always work. I think it’s wonderful that schools are trying to teach children about how to properly use money, it’s an invaluable life skill and is as important as learning to work with people who are different than you are. But no one should be surprised that financial education in school isn’t enough. Children don’t perform as well in any of their subjects if they are lacking support at home for whatever reason. Parents cannot abdicate their responsibility to educate their own children in any area of academics, including financial literacy.

Of course there are many parents out there who didn’t understand how to manage their own money as evidenced by the amount of mortgages that people couldn’t afford long-term. To be fair, some people purchased responsible mortgages then lost their source of income; but there were also those who purchased ARMs or other risky mortgages and found themselves in over their heads.

There are scores of people today who are learning how to manage their money because they have no other choice. This is a golden opportunity to teach our children by allowing them to understand how and why we’re making the decisions we are about our money. If they hear us talking about saving for a big purchase rather than buying on credit, or making value decisions about what we need and what we want, they’ll learn to make responsible decisions with their money. Of course the kids will make their own money mistakes and mistakes can often be the best teacher, but giving them a solid foundation could help those mistakes to be less catastrophic.

Spending Money We Don't Have

I’ve been a bit reticent in my posting lately because sometimes life just gets in the way! However, I recently ran across a story on NPR that I just had to chime in about though. Consumer Spending Up, Incomes Lag talks about the increase in spending that resulted from programs such as Cash for Clunkers while income growth continued to be just about flat.

As a proponent of good debt only, this story scares me a bit. If we’re not making more money, we shouldn’t be spending more money. The statistic offered about the falling savings rate was also a bit disconcerting, but did have some good news when compared to savings rates last year.

“The big jump in spending and much weaker gain in incomes translated into a big drop in the savings rate. Personal savings in August fell to 3 percent of after-tax incomes, down from 4 percent in July. That was still nearly double the savings rate of a year ago. Economists say the savings rate will keep trending higher as households try to repair investment savings shredded by the recession.”

We all want the economy to recover, especially so people can get back to work. But a recovery based on additional debt won’t be a long-term permanent recovery, it would just put us back on the precarious house of cards that our economy was built on before the recession occurred. So the Money Maiden’s advice is to keep putting that money into savings so that we can all benefit from a stable economic recovery.

How The Recession Can Help Us

Back when I first started this blog and before the recession had really taken hold, I posted a link to a very good article by Liz Pulliam Weston. She talked about the impact it would have if we all started to increase our savings and use our money more wisely. She predicted that the short-term impact would be a global economic recession since our economy was so dependent upon consumers. But she thought it would be good in the long-run because of the positive impacts to both individuals and the broader economy.

I remember at the time thinking that managing our money and living within our means was still the right thing to do, but that it might be hard to convince people to do this because of the pain of going through a recession. Well folks, the recession happened, whether or not we wanted it to. So if we have to go through this, it’s encouraging to me to hear that savings rates are going back up (although no where near the high of 14.6% we saw in 1975). More people are starting to live within their means now. So maybe we’ll get the long-term benefits the article listed even though this wasn’t an entirely voluntary decision.

When to Start Allowance

I received a question from a reader in a comment that seemed worthy of its own blog post.

What a great blog Darcy! My son is just getting an interest in money and saving. When did you start a weekly allowance w/ the kids and how much do the kids earn? We are trying to figure out when and how much to start our son out at, and what parameters to tie it to....there are only so many chores a 4 year old can do! :)

Obviously you have to do what works in your family, but here's what we do with our kids: We started the allowance when our kids turned 4 years old, and they get $1 per week for each year old they are. So my 8-year old gets $8 per week. We don't explicitly tie the allowance to chores, although they do have chores and we add more each year. So I guess it's more like a salary for them, they get it as long as there aren't serious deficits in getting their chores done.

I don't like to tie allowance directly to chores because I don't want to send the message that the kids will get paid for doing things that are a part of their job in the family (and no one pays me when I do the dinner dishes or the laundry!) But we have docked their allowance in the past if the kids didn't do their chores in a particular week.

Our kids are expected to keep their rooms picked up, including making the bed every day. They have to get their clothes into the hamper and their dinner dishes into the sink every evening. The 8-year old also has to sweep under the table after dinner and clean the toilets once per week.

I think 4 years old is a great time to start allowance for the exact reason listed above, they start to get interested. In my humble opinion, one of the best things we can teach our kids about money is that you have to earn and save money before you can buy the things that you want.

Good luck implementing the allowance, let me know how it goes!

"Going American"

My family recently hosted a wonderful young man from France through a foreign exchange program. Although we don't speak any French so we occasionally had to try more than once to understand each other, we made it work; and the cultural exchange of information along with a new friendship were well worth the effort.

One day he and my husband were discussing debt and he told my husband that in France the only debt people take on is for big items like cars and houses. (Sounds awfully familiar.) He said that it would never cross his mind to take out a loan for something small like a TV. He actually said that if someone ever talks about taking out a loan for a small item they call it "Going American." I don't know that it's such a great thing to have our country associated with frivolous debt. I can only hope that over time if more and more people are smart about debt that phrase will lose it's meaning and go out of vogue.

Where We Do Need To Spend Money

I realize that I'm a bit behind the times, but I recently watched An Inconvenient Truth and was pleasantly surprised by the movie. Although the information about global warming was depressing; Al Gore did a good job of leaving you with hope that if we make some changes we can reverse the effects of global warming. I live in Colorado and every time we go into the mountains we see the effects of global warming first hand. The pine trees are all turning brown and dying because our winters no longer get cold enough to kill off the larvae. This is a problem that all of North America is experiencing according to a recent article by the BBC.

As much as I preach money management, there are things that we must spend money on. I firmly believe that spending money on alternative energy, more fuel-efficient cars, recycling, and other items that will help stop and perhaps reverse global warming is very necessary. We don't all have the money to make the changes immediately, but if we start making small changes now, eventually they'll all add up. This is just another reason why it's important to manage our money; so that we have money to spend on the important things.

Responsible Spending Habits Slow Economic Recovery

Sarah Lockyer recently penned an article in Nations Restaurant News about decreased spending by consumers due to fears of unemployment. The article is based on research by Technomic Inc. which indicates that an economic turnaround will take longer because consumer spending is slower. From the article:

"The current broad unemployment rate, which includes not only those who have lost their jobs, but also workers who are underemployed or discouraged, has reached 15.8 percent and is rising, according to a July Technomic report from the firm’s consulting economist, Arjun Chakravarti. The prolonged climb of unemployment in the United States has not only affected the spending habits of those without jobs, but also has changed the spending habits of those who remain employed “by spreading psychological uncertainty across all workers in the economy,” Chakravarti said".

Although it would be nice if the economy would recover quicker, it will come back stronger and more stable if everyone increases their savings rate. I know that economists would be happy with a quick turnaround, but I for one am pleased to hear that people are developing more responsible spending habits.

Debt Load

There was an interesting article in this week's edition of Time Magazine about what our economic recovery will look like. One of the sections in particular caught my attention.


[Frugality] is an extremely fashionable topic at the moment. Some cultural observers even think Americans are due for a prolonged shift away from the consumption obsession of the post-World War II era. That strikes me as an iffy bet, but it is clear that the debt-fueled consumer spending binge of the past couple of decades is over. The household debt-to-income percentage more than doubled, from 65%in 1982 to 135% in 2007. That turned out to be way too much for us to handle, and now the leveraging process has gone into reverse. The latest household debt-load reading from the Federal Reserve is 128%, and while nobody knows exactly where the percentage will end up, a lot lower seems like a safe prediction. Which means that for years to come, American households will be spending less than they take in.

Huh, over 100% debt-to-income was too much to handle, does this seriously surprise anyone? I’m definitely not the first person to ever say “live within your means.” How do you prepare for retirement if you’re not only not saving, but spending more money than you’re making? I hope that the cultural observers are right in that we all move away from all that consumption and start trying to build on our wealth by saving some of the money that we earn, and that we’re all in it for the long-term.

Money Isn't The Only Thing You Have To Budget

It's imperative to budget your money if you want to properly manage it, and it's equally important to budget your time if you want to have enough. Most of us have very busy schedules. If you work full-time, have a house to maintain, kids to raise and spend time with, a significant other who you'd like to be more than just a roommate, and exercise to remain healthy to do all of that; it can be hard to fit everything in.

My husband and I got a rare date night tonight, and while we were walking together, we talked about things we'd like to do with our time (like post on this blog on a more regular basis), and how hard it is to find the time for everything. But then we starting talking about how if we actually sat down and looked at how we were spending our time every day, we might be surprised at how we could fit in a few more of the important things. I started thinking about how our time is much like our money, most of us don't have enough for everything we need or want, and we have to decide when and how we're going to use it, and prioritize and make sacrifices when necessary. Wouldn't it be great if we all won the lottery and had clocks that could stop time? Since that's not reality, I guess the Money Maiden will have to be as diligent with her time as she is with her money.

Another Benefit of Delayed Gratification

Practicing delayed gratification is one of the most important tools to assist you with successful money management. By saving up in advance so that you have the money for the things you need before you purchase them, you keep yourself out of bad (unnecessary and providing no long-term gain) debt. The other thing that delayed gratification does for you is to allow you time to cool off. I’ve found that there are times that I’ve decided I really want something, but by the time I’ve saved up for it I realize that I’ve gotten along this far without it and don’t really need it.

So now not only did I avoid going into debt, but I’ve also managed to increase my savings rate. Two for the price of one, always good in money management!

Money Mistakes from Women's Health Magazine

The June issue of Women's Health magazine offered a good article about 4 mistakes you shouldn't make with your money. Here is author Katie Arnold's list of mistakes to avoid:
1. Being financially apathetic. I've posted about this one before here. You have to know how much money you have and where it's going in order to "manage" it.
2. Waiting to save. We've all seen the charts. If you start saving when you first start working, you'll build up a much bigger nest egg than if you wait 10 years.
3. Paying off debts in the wrong order. Get rid of the credit cards debt first, then you can worry about the bigger items that I like to term "good debt."
4. Failing to negotiate. This is one that isn't a strength of mine. It's a hassle and I'm a busy woman; but it's good to keep in mind that I might be leaving money on the table.

I looked on the website but couldn't find this article there, so if you have the opportunity take a look at the magazine. It's a good article with some good, common-sense recommendations.

More Discussions About Money With the Kids

My eight-year old daughter decided she wanted a new MP3 player that was more sophisticated than the Disney version she'd gotten a few years ago that basically just has a play button. At first she had her mind set on an Ipod touch. We told her she had almost enough money and would just need to save for a little while longer.

We talk to our kids about how much money they have in their savings accounts, so her response to save for a few more weeks was, "I don't need to, I'll just take the money out of my savings account." When I explained to her that she couldn't use her savings account that way, she was pretty disgruntled. It was her money and she wanted it.

It's a bit abstract to explain to a child who's still 10 years away from it, that she can't use her money now because she'll need it for college. But we did have the discussion and she eventually resigned herself to the fact that she'd have to wait until she had saved up a bit more allowance. Although after further digging, we realized that a much less expensive MP3 player would meet her needs and she was able to purchase the player right away. So although the savings account discussion turned out to be unneccesary, I'm still glad we had it. I'm sure it will be first of many times and I imagine it'll become harder to convince her to leave that money alone as she gets older!

Another Learning Opportunity While Shopping

This weekend my kids and I visited our local craft super store to get the final item for my mother's day presents. My son was enamored with EVERYTHING in the store. He kept asking if we could buy everything that he saw. I told him that we couldn't get those things because they weren't on our shopping list. He asked why we couldn't purchase something if it wasn't on the list. So I explained to him that if you buy things that aren't on your list, you'll wind up spending money that you can't afford to spend.

I have found that shopping with my children presents the most wonderful opportunities for learning about how to manage money. Of course it's more of a hassle, but definitely worth it!

Are We Learning a Lasting Lesson From the Economy?

I was reading a blog that I enjoy the other day called Bing's Blog. He has a post about things that we've learned during this economic downturn that we should, but probably won't remember when the economy turns around. Item #5 on his list worried me a bit.

It seems that everyone is more aware of their spending habits these days, which as the Money Maiden, I think is fabulous. But he predicts that we'll all forget that unchecked consumerism and no savings were problematic, and that we'll all start doing it again. I imagine that he's not far off the mark. I look at my grandparents who grew up during the Great Depression and their lifelong frugality. Don't get my wrong, my parents are very responsible with their money (they taught me after all), but they aren't as stingy as my grandparents were. So if I were a betting woman, (I'm not, that's not responsible money management!) I'd take the bet that once the economy recovers, some of the people who had become more responsible out of necessity will go back to their old ways. But I hope that not everyone does. I hope that we as society start focusing on saving money, and producing things for others to buy, instead of trying to build our wealth from a house of cards like we did in the past.

How Hipsters Manage Their Money

Do you want to get a handle on your money, but you think an Excel spreadsheet is far too antiquated? Check out the NPR All Tech Considered blog where you can find a number of websites to help you manage your money, many that have a social networking aspect to them.

And if you need help with the psychology of your spending and not just tracking your spending, here's a helpful website: Your Money or Your Life

Retirement Savings Accounts

If you have a retirement savings account right now such as a 401(k) or IRA, you probably cringe every time you see a new statement. You look at the earnings line and it's always a significant negative number. You look at the balance and it's less that it was a year ago.

But don't panic, especially if you have a while to go until retirement. Just hold steady and know that right now you're "buying low." The markets traditionally rebound very well after significant losses like these, so you'll likely catch up to where you were fairly quickly once the recession ends. This is another reason why it's important to start investing as early as you can, so you're better able to weather the ups and downs of the market.

The chart below is a simple example of what happens when two people both invest $100 per month when they both have 30 years to go until retirement. John starts investing immediately while Steve waits 10 years. Who would you rather be: John or Steve?