Life is a succession of lessons, which must be lived to be understood.

Ralph Waldo Emerson

Ralph Waldo Emerson was a pretty wise guy. He gets quoted all the time by people trying to sound like they know what they are talking about, so when he says something (from beyond the grave!) I listen. But not only do I listen, I take his message to the max. So when I was dropping some bombs at work the other day my mind started clicking with all the ways that making a stinky relates to the good ol’ personal finance. The products of my porcelain pontifications are as follows:

Not all crap looks the same, but it is still crap - Ka-ka, da-poop, rabbit droppings, Lincoln logs, doo doo, Montezuma’s revenge, scat - we have many names for feces, but when it gets down to brass tacks we are still talking about the stuff that comes out of your butt. Financially speaking it seems to me like we have the same type of thing going on; we have a multitude of names describing the same basic financial phenomenon - human waste. Unnecessary consumption and wasted life saps our earning power, adds stress to our lives, sends the wrong message about life’s meaning, and adds to our collective destruction. We call these things consumer debt, impulse spending, lazy investing, slacking off, gambling, not keeping a budget, and cable television (just to name a few), but they are all just a big, steaming pile of poop when you think about it.

Getting rid of crap is a biological inevitability … or else you will die - Have you ever felt as though your sphincter was about to give way to a cavalcade of ka-ka? I know I have. It happens when I’m hyper productive and can’t pull myself away until the fear and discomfort are too much to bear. A mad dash ensues until finally the pressure is released. If I didn’t open the valve I’m sure my intestines would explode on the inside or at the very least I would suffer some painful and unsightly consequence. This should sound really familiar to anyone who has been over their head in debt or to people who want to retire but find that their consumption has outpaced their savings. The pressure of poor financial practices can press on you, urging you to purge the waste … -ful behavior. Until you do, the problem will only get worse until you finally change or are forced to action. Declaring bankruptcy or working at the supermarket bagging groceries when your 65 so you can eat could be examples of a load that has been held on for far too long. You might considered these circumstances a form of financial colonoscopy - really gross, but unfortunately life-savingly necessary.

Your crap is what you eat, minus all the good stuff - Scatology is the study of poop and it can tell you all sorts of interesting things about the person whose poop it is you are looking at - what they ate, how healthy they are, their middle name. In the same way, our financial crap can tell us a lot about ourselves. Massive credit card debt could point to a system of belief that values the comfort of things. Or it could be a sign that we need to earn more because the cost of things that we need to survive vastly outpaces our ability to earn (as is sometimes the case). Either way, there is a deeper message we can learn from peering into the toilet bowl of our finances and seeing just what’s floating there. Why don’t you take a look, no one will think you’re creepy as long as you keep the door closed.

Focusing too much energy on emancipating your colon causes hemorrhoids - Prolonged sessions on the John combined with over exertion can result in painful hemorrhoids. Very unpleasant. When going poop, patience and a careful regard for your limits is the key to safe and successful excretion. Dealing with your financial crap is no different. Spending ALL your time working on a debt repayment plan, working too much, obsessing over frugal decisions, or checking your buy and hold portfolio 50 times a day is only going to burn you out and make you miserable. Sometimes it is a good idea to bear down and frog a log, but doing it every time will end up hurting you in the end. Know yourself and your emotional/psychological limits before you begin any extensive fecal secretions. And consult a doctor.

Some crap leaves easily while other crap takes a lot out of you - Sometimes when I’m sitting in a Chevy and I feel something heavy it can have one of two outcomes: a painful pushing or a relaxing release. Some leave me as though they were never there, gliding effortlessly past my watchful sphincter. Others are like an epic struggle between Herakles and Antaeus , giant and demigod locked in mortal combat. Our financial failings follow a similar purging paradigm - some go easy and others show our ability to endure. But I think the main point here is that you really don’t know what you are going to get when you begin to pass judgment on your porcelain throne. Your diet certainly helps you manage the consistency and ease of your doo-doo, but even the healthiest eaters in the world get hit with food poisoning or the flu. Always be prepared for the worst with candles, air freshener, and some light entertainment to make it through.

It’s such a relief when it’s finally gone - I seriously think that there is a flood of warm fuzzy chemicals that your brain releases when you drop bombs. I’m no scientist - heck, I’m not even an empiricist - and I know from experience that this is true. Now I’ve never been in so much financial feces that I’ve had to wade through it - but I’ve read people who have. If you are interested in the down and dirty check out some of the harrowing and sad stories of debt diarrhea:

• Trent from The Simple Dollar outlines his problems in The Road To Financial Armageddon
• Debt Kid spills it all in My Story
• Amanda from Me vs. Debt tells her story in My Dumbest Purchase Ever … Debt Reduction Scam

The relief that I can read in blogs with this type of story is as clear as the sky after a good rain. All I can say to people who suffer in this way is to make every effort to end the agony and latch on to those that you love because in the end that is all that really matters.

Well, I hope you enjoyed our little stroll down Defecation Drive. Be sure to drop by again and again (as is biologically necessary of course). And remember, life often has lessons in the strangest places and if we look for them there is a lot to be learned.

Can you think of anymore ways that dookie can relate to dollars? What other crazy, stupid, juvenile, or insightful things can you compare to personal finance? Share your thoughts in the comments or write a post about it if you have a blog. Join in the Ralph Waldo Emerson fun!

This post was included in the 3rd Anniversary Edition of the Carnival of Personal Finance.

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Posted in Featured, Frugality ~ 4 Comments

This week I received a $250 check from my credit card company after redeeming $200 worth of the rewards the wife and I had accumulated since we received our card in September 2007. I got $250 even though I only redeemed $200 because Chase bets it can entice enough individuals to try and wait until they have accumulated $200 but end up never actually redeeming their rewards. Not on my watch Chase. Since $50 of that $200 was awarded to us as a sign-up bonus the actual amount we are getting back from Chase is $150. Being the curious sort, I wanted to run a couple of though experiments to find out exactly how much money we saved by using our Chase Freedom credit card.

For my thought experiment I need to accumulate some hard data to be able to calculate the percentage of our purchases that Chase is returning to us from the thousands of dollars we have spent through them. Once I have done that I will be able to see what our savings were with $100 worth of rewards and without them. I am also going to have to include the effect of a late fee and subsequent finances charges, but this will only have a minor impact on my calculations. Not only that, but I will also be able to estimate how much interest we accumlated in our savings account because we deferred payment on the goods we purchased by using a credit card instead of a debit card. Just for fun, I am also going to imagine how much we could have earned in interest if we had never spent the money at all.

In my search for the hard data I went to the place I expected to find it: my online account history. Unfortunately, they do not have my entire transaction history in this searchable (and copyable in a tab delimited format - a must for easy spreadsheet use) interface. So I wasn’t able to do a line by line analysis of every transaction I made, but I was able to get the big picture by getting into my monthly statements.

When I added it all up, we spent $10,360, an average of $1,295 a month over the eight month period. Our most charged month was December at $2,268 and our least charged month was May at $638. We averaged rewards of $20 per month with December ($32) as our largest and October ($10.36) being our smallest. This means that over the course of the entire eight months and including the sign-up bonus and the ‘patience’ bonus we saved 2.51% on all our purchases ($260.32/$10,364=.0251). If we remove the extra $100 we received we only saved 1.55% on our purchases, so the two bonuses were really significant to our return.

In terms of how much money we saved by keeping our money in the bank by deferring payment on the good that we purchase I estimate that we earned $12.93. I calculated this by assuming that the average time that a dollar stays on our credit card bill is 14 days and that our interest rate remain was what it is today throughout the whole time period (even though it didn’t and todays rate is close to 50% of what it was in November). I then used the equation for determining interest accrued (money in bank x (1 + .0325/365)^14) to determine how much I saved each month. No single month ever exceeded $3, do this strategy won’t save you lots of money unless you spend lots of money or get a really good return in your savings account.

And finally, we would have earned $138.12 if we had not spent the money at all. This has been a fun little thought experiment and here are the lessons that I have learned about our credit card rewards strategy:

1. Late fees and finances charges suck - pay the bill earlier rather than later
2. The interest you earn by using a credit card is negligible so only do this if you are disciplined
3. We should investigate ways to increase the percentage we ‘earn’ back from our purchases
4. Spreadsheets are fun!

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Posted in Banks & Credit Cards ~ No Comments

Because of the loan we so generously took from our grand children our net worth has grown at a nice little clip this month, checking in at just a hair under 10%. Our cash on hand grew by about $2,400 while our investment portfolio (locked entirely in my company’s 401(K) and my wife’s Roth IRA) grew by $211. Even if you were to take away the economic stimulus check we still would have seen a growth comparable to every other month of our financial life since being married - a solid 5% growth in net worth. This is still a far cry from some of the doom and gloom I was anticipating as recently as March of 2008 .

It appears that a strong commitment to working our family budget along with the fact that we still have a dual income has staved off some of the short term effects of the rising costs of food and gas. Despite record high prices (gas is now $4.21 in my area - 6/2/2008) we have still been able to stick to our fuel budget. In fact, we are still staying well within our budget. I don’t know how it is continuing to happen with prices rising like they are, I just know that it did happen.

Also, this month we have started the ball rolling on how we are going to handle some of the financial stress that losing my wife’s income will have on the family combined with the modest cost increase that the baby will bring. As of right now, my single income would not be enough to support my family without affecting our bank accounts. Though the impact could be relatively minor in the short term (about $200-$300 a month), our ability to save additional fund for the future would be completely annihilated. This might hurt our mobility as a family (both financially and physically) if some need were to arise. I won’t go into too much detail about this now, but let’s just say that it could turn our $200-$300 a month deficit into a $700-$800. That is a lot of extra money to be having every month.

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Posted in Net Worth ~ 1 Comment