Saturday, February 28

Everything's amazing and nobody's happy

Many of you have probably already seen this clip -- whether on TV, on Brunette on a Budget, or as it skyrocketed to Digg fame.

But I wanted to show it again to those of you who might of missed its other incarnations. For a couple of reasons.

Reason #1: This is the fourth or fifth time I've watched it (had to sit a couple different people down to be sure they actually watched it) and I'm still giggling maniacally. Reason#2: It is actually excellent food for thought.

Before I get into that, though, I'll go ahead and let you check out the clip.

Okay, are we all on the same page now? Excellent.

The fact is that Mr. CK is absolutely correct. Yes, the economy is terrible. We're living in scary times. But, really, we are living with amazing, mind-blowing innovations that keep getting better all the time.

Whether or not you think we consume too much (we do) and are overly encouraged to live outside our means (we are), you have to admit that these are fascinating times.

We have absolutely awesome technology at our fingertips. And we take most of it for granted.

This was a good nudge for me because Tim and I have been in a funk for a week or so now. You probably noticed I haven't been posting as much as usual. I have a few ideas in my head, but writing anything halfway decent has felt like a painful extraction.

We have some good reasons for being in a funk. The student loan debacle is continuing to be a blow. The last couple of weeks, we haven't been able to make any dent in our credit card debt. And, Tim got the news that he may be bipolar.

That one has been big. It obviously sounds pretty ominous. Really, it's a different form of depression, more prone to cycles. For Tim it mainly shows up in impulsivity -- sometimes he's fine, other times it's all I can do to keep him from storming out the door on a mission -- and sleep -- he'll sleep whenever possible, then will barely get any rest.

But Tim's also dealing with all the feelings that come with a new diagnosis for old symptoms: Why didn't someone see this earlier; why couldn't everyone see I wasn't getting better?

Of course, the answer is that ADD was still a brand new idea -- when he was diagnosed, ADHD wasn't even known about. And when Ritalin didn't work, they just shrugged and got him in a program where, luckily, there was a very patient teacher who taught him to block out all the excess noise that distracted him. That helped to an extent, but he self-medicated through most of his youth, and his parents just kept insisting he was smarter than the grades he was getting. Overall, pretty demoralizing.

So, Tim's caseworker over at the Dept of Vocational Rehab has told us we need to focus on getting him on an even keel. That means finding a psychiatrist (or psychiatric nurse) that Tim is comfortable with. Then we can find out for sure whether he's bipolar. After that, they'll explore medication options.

All that will probably take awhile, which was something of a hit for us. We had been exploring some options that would at least let Tim do some phone work from home. It wouldn't make us rich by any stretch of the imagination, but he was kind of looking forward to earning a paycheck.

In the meantime, we have about 9 weeks left before his unemployment runs out. There is a chance he'll qualify for one more extension, which would give us an extra 13 weeks of breathing room. If that doesn't happen, we can make do, but it will be somewhat tight.

Because of all this, we've been just barely scraping by, physically and emotionally. We're completely sapped by the most basic chores. We're both sleeping more. Essentially, we're just trying to make it through. Like I said, things have been kind of hard.

And so I saw this clip. And I laughed. That, in and of itself, is such a big deal. But it also reminded me that we need to remember the good in and among the bad.

This is a big, scary, uncertain time for us -- and for the nation in general. We don't know what the future holds (other than some psychiatist visits) or when Tim will be able to work again. It's worrying.


We also have an amazing support system. Our families will always welcome us with open arms. They will always do everything they can to help. My mom has and will help us financially, though we hope we can avoid future borrowing. And if it ever became necessary, we could move in with Tim's parents.

Again, that's a worst-case scenario. But we won't ever be homeless. That's a pretty big load off our minds.

More immediately, seeing a psychiatrist will help Tim get some answers. Uncertainty can be hugely unsettling. So, no matter what the answer, just knowing will be a good start to making life easier.

Once he has an official diagnosis, Tim can also start getting properly medicated. As a depressive, I can attest to what a difference the right prescription can make. Life becomes less of a struggle. He may also have fewer swings in mood and behavior, which will make things easier for both of us.

The right medication may also help Tim's stress tolerance. Right now, it's pretty low, and so his skin flares up in reaction to difficulties and uncertainties. If he can tolerate more stress, his skin may calm down more. That could make it easier for him to find sustainable work opportunities.

We're not expecting miracles. We are prepared for the idea that Tim may never work full-time. He'll probably need to be eased into part-time employment. But it would be a measurable improvement. It would give him options.

So, yeah, there's a lot of bad things looming on the horizon. But that's only half of the picture. We have at least as many good possibilities as bad.

Most of us -- myself very much included -- tend to be overwhelmed by worry and uncertainty. We forget all of the modern marvels around us. And that makes the world pretty small. So I say, let's stop and just marvel at a few things that we all take for granted.

  • We can get water from a faucet -- no going to the river with some buckets
  • We don't have to build our own homes or make our own clothes
  • We have machines to take us quickly from one location to another. By and large, walking is a choice in this society
  • We can contact people simply by punching a few buttons -- either on a keyboard or phone
  • We can talk to people around the world at near-instant speed
  • We "post" thoughts on technology that most of us can't begin to understand: Can any of you explain what the web is, exactly, and how we can all access it, leave information on it, etc?
  • We can get paid and pay our creditors without touching any money
  • We can find information and entertainment practically instantly
  • And (as a nod to Louis CK) we have made machines that defy gravity. Metal machines.

What about you guys? What stuff have you been struggling with? What small miracles (of technology or society) have you been overlooking?

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Thursday, February 26

I'll scrub your back, if you scrub mine

J Money over at Budgets are Sexy wrote a hilarious lil piece about whether showering together saves money.

As funny as his piece is, I have to disagree. Tim and I save a ton of water showering together. In fact, I now schedule my showers to coincide with Tim's, so as to better save that precious agua.

Of course, our water-saving superpower is made more possible by Tim's two daily showers. He takes a lot of showers to numb his itchy skin. It used to be three or four a day, so clearly I'm rubbing off on him. (In a non-dirty way, J Money, so get your mind out of the gutter! Eh, actually, leave it in there. Probably more fun.)

But it's also made possible by my own superpower: I am Split-Second Shower Girl!

It all began in my youth in Anchorage, AK. My frugal-minded parents turned the heat all the way down at night. After all, they reasoned in their evil-genius way, you don't need heat if you're tucked under the blankets.

Alas, starting in junior high and high school, I was the first one up. And so I would trudge, shivering, down the hallway to lift the thermostat to something approaching life-sustaining temperatures. But of course, it takes time for the place to heat up -- and the hot water tank was a tad sluggish, too.

So I would stand, slightly huddled for warmth, cursing both our hot water tank and our heating system. Once the water was non-hypothermia-inducing, I would jump in -- only to remember that we had terrible water pressure.

So showers weren't really the core-temperature-raising experiences other people seemed to enjoy.

Hence, I became Split-Second Shower Girl. Easily done showering in 3-5 minutes! Bewildered by people who could enjoy a long, hot shower or bath!

Yeah, this particular superpower really didn't come with any cool abilities, like invisibility or x-ray vision. Or flying. I'd kill to get flying. But it did come in handy when I started living with Tim, who has been known to drain entire hot water tanks.

And so, since he's using all that water anyway, it's more efficient if I simply jump on in with him.

Here's the average shower run-down. (If you're the prone-to-mental-images-yet-still-prudish sort, just picture lil censored signs in the appropriate locales.) :

  • Tim turns on the shower and gets in.
  • While I'm taking my meds, he finds a comfortable median between his desired water temp (approximately akin to molten lava) and what I can stand.
  • He gives the word and I climb in.
  • He stands out of the water spray long enough for me to dampen my skin to lather-appropriate levels.
  • He then stands back in the spray while I soap up.
  • He ducks back again for the half-minute it takes me to, for lack of a better term, hose down.
  • We do each others' backs (the absolute best reason to shower together -- forget the environment, I want a nice, exfoliated/non-itchy back!)
  • He gets out of the way while I wet my hair.
  • I shampoo away, while he enjoys some more of that hot water.
  • I rinse, and he inevitably tells me I've missed a spot (another perk to showering together -- but nothing compared to a nice clean back)
  • I jump out, and Tim is free to take things back to inside-an-active-volcano conditions

My time in the shower? About 3 to 4 minutes. A clean back and non-soapy hair? Priceless.

But even more water is saved the two or three times a week that I have to shave. (Or, as I like to think of it: When my legs start looking alarmingly like cacti.)

Okay, okay, it's not a palatable topic for you men out there, I know. But you know what? Women have hair. And longer-lasting solutions are ridiculously expensive. (Unless you don't mind torturing yourself at home with hot wax. Not my scene.) So just deal with it. And be glad we care enough to bother with hair removal at all.

Point is, I shave my legs in the shower. Even working quickly, shaving about doubles the time I'm in the shower. I do use this time to also put conditioner in my hair -- since I'll be out of the water anyway, might as well kill two birds with the one stone. Still, I always hate how much water gets wasted while I'm assiduously depilating.

With Tim around, he is more than happy to use the water. Plus, when I need to clear the razor of foam, he scoots just a little to the left and the water instantly washes it away. It's practically magical!

And as a bonus, apartment/condo dwellers should take note here, leaving the bathroom door open during shower-time heats up the place nicely. (Obviously, if you have kids or pets to keep out, this isn't a method you can practice.) In fact, we've barely used the thermostat at all this winter -- and it's been a relatively cold one for the Seattle region.

Of course, it should be noted that all these water/heat savings are only true if one of the two of you is already inclined to linger in the shower. While these days Tim keeps his showers down to around 10 minutes, compared to my quickie showers, that's practically a Homerian epic.

It should also be noted that we are lucky enough to live in a building where we don't pay water/sewer/garbage. And I sacrifice a utility bill on a little pyre each week, to keep the gods appeased.

So while we may, yet again, have a slightly unique thing going, what with Tim's shower-love, I feel certain that there are folks out there who save water by dual showering. Let's hear some of your ideas/stories.

We can prove the raunchy-minded J. Money wrong! (Clearly, he's never tried to "talk" in the shower. Even assuming some non-slip shower decals, that could lead to hospital bills more quickly than babies.)

Quick note: While I welcome feedback, I will state here and now that I refuse to publish any ideas with the words "yellow" and "mellow" in it, thankyouverymuch. There's nothing wrong with it, as suggestions go. But we all know it and a gal's gotta draw the line somewhere!

Tuesday, February 24

What does 'budget' mean to you?

Free From Broke posted recently with "Excuse Busters for Not Having a Budget." FFB then asked what other excuses we could think of. Being my opinionated lil' self, I chimed right in.

I explained our current situation and said it was simply not possible to budget for the problems that crop up between the two of us and our health conditions.

I said that the closest we got to an actual budget was:

  • My disability check to cover our rent
  • Making sure there was $500 in checking on the first Friday of each month, for Tim's insurance.
  • Each week, keeping $220 in the bank -- $20 for our IRA, $65 for therapists kind enough to work on a sliding scale, the rest for groceries and other incidentals -- and throwing the rest at the credit card debt.

In fact, I ended up emailing with FFB to discuss this a little further. I explained just how many unexpected expenses come up, making it very very difficult for any real concept of budget.

Then again, I added, I suppose it depended on your definition of "budget."

FFB agreed with me. He wrote back:

I still see a budget as valuable so you can more accurately track your expenses ans spending. A budget doesn't have to be concrete, it can float. Unexpected expenses always come up and if you have a good budget then you can re-work it to free up money for the new expenses. Or at least know how you are going to pay for it.

By these sketchy outlines, Tim and I do have a budget. As expenses come up, we divert some money from credit card payments. Other times, we put it on a credit card (which we make sure to pay in full each month, to avoid interest) and then pay that down before any other credit card. Either way, our system does fall under FFB's description of why a budget is useful.

So do we have a budget?

My opinion is no. I think we have a frugal lifestyle.

We try to keep grocery costs down. But I don't have the energy to record all receipts from groceries. And when I am on Quicken, I use my time to be sure we're not going to bounce -- not to go through and find transactions from any of the four stores we might have visited.

We make sure there's enough money in the bank for the EFT from Tim's insurance. But that comes about only through careful planning of money allocation 10 or so days beforehand.

We don't buy many things on a whim. But we also don't rationalize that it's "not in the budget." We ask ourselves (or each other, depending on the situation) if we really need it. Especially in light of our current financial situation. Usually the answer is no.

And while I try to limit the amount spent on dining out (or ordering in), it's hit and miss. My goal is about once a week, or a total of $30. Some weeks, we do great and have no trouble providing food for ourselves. Other weeks, we're both feeling completely rundown -- whether from chronic fatigue/depression (me) or eczema/painful MRSA infection (Tim). Those weeks, we'll probably do very little cooking. I'll eat PBJs, Tim will scrounge for food. But at least twice, we'll give up and order a pizza.

About the only things we truly budget for are:

  • Checks to therapists
  • IRA contribution
  • $10 each per week to do with as we please

On the whole, I'd have to say that, if our plan is a budget, it's a pretty terrible one that only sometimes gets followed.

Of course, perhaps I'm putting the cart before the horse. Just because we don't follow a budget, that doesn't mean we don't have one. Perhaps I'm being too strict in my definition of "budget."

To me, a budget is a plan that, while fluid, is something that you can generally stick to. It's something that has goal numbers for each sector: groceries, utilities, fun, dining out, etc. It has to be somewhat changeable, since life is hard to plan for.

But can you really have a budget if you don't have the energy to track each penny? Can you really have a budget if it only works about half of the time?

I'll put it to you readers: What is your definition of a 'budget'? How does yours work? How often do you not meet the goals you set out?

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Monday, February 23

A shout-out for carnival love

Thanks to Mr. Credit Card, host of this week's Carnival of Debt Reduction, for picking my piece "How to deal with debt collectors" as one of his editor's choice.

There were tons of good-looking posts linked in this edition -- as well as a very aesthetically pleasing presentation style by Mr. Credit Card -- so definitely check it out. Beyond the PF posts, there Mr. CC has included a lot of cool quotes about debt. It was edifying!

Also, check out the Carnival of Everything Money and Rich Life Carnival, which were kind enough to include my "Their math vs your math."

And don't forget the Festival of Frugality #166, which also used my piece on dealing with debt collectors.

Saturday, February 21

How to deal with debt collectors

This article had to be revamped big time.

Don't get me wrong, it wasn't terrible. It actually had what I consider to be a nice lead-in, with good segues to the major points of debt collection. It was a very soft-peddle approach.

But in light of recent events, it all just seemed hokey -- not to mention disheartening. So I say we break things down to the brass tacks, eh?

These days, it seems like "debt collection" doesn't have the same gravitas as when I was younger. Perhaps it's nostalgia, where some things loom larger than life. Perhaps it speaks to my comfortably middle-class upbringing -- not paying one's debts was simply unthinkable -- or maybe people were already too comfortable with living above their means, even before the current economic crisis. Whatever the reason, the term that used to seem ominous has apparently become rather commonplace. It's lost its power.

Part of this has to do with a surge in the number of collections agencies. New companies have cropped up over the last few years, which is also where a lot of the problems come from.

Let's start with one of the biggest ones: They're chasing after a debt that isn't yours.

This happens more often than you might think. There are plenty of tales of people having their credit ruined by over-zealous collectors with the wrong leads, wrong names or just wrong information.

Perhaps the worst part about this problem is that it's often so easy to see there has been a mistake. I remember one anecdote: A company was harassing a woman over a small business loan taken out in another state. Except that she had never left her home state and had been steadily employed as a teacher while this debt was incurred. But the company claimed she had to prove it wasn't hers. (Not true.)

So, just in case some of you haven't actually dealt with collections before, let's go over some basic rules.

First a quick primer on debt

Once you incur debt, most companies will wait at least 60 days -- more often 90 or more -- before sending an account to collections. At the 60 day mark, the company will contact you (and, often, the credit bureaus), reminding you that it hasn't received a payment and threatening collections.

The representative will tell you that the account is about to be "charged off." This sounds pretty scary, but actually it means the company is officially giving up on you. The good news: It won't hassle you anymore. The bad news: The credit bureaus have already been notified. The collections agencies will start contacting you.

Some agencies will contact you first by letter. Legally, they must send you a letter within five days of contacting you by phone. But some companies ignore this rule. After all, if you don't have a letter, it's harder to complain about a specific company's harassment. (Many of the less scrupulous will avoid saying the name of the company when they call.)

Rule 1: Never accept responsibility

Much like a car accident, you should never, ever admit fault. As soon as you accept a debt as your own, the company has a good basis for asserting the legitimacy of its efforts.

This rule can be one of the hardest to remember. Often, you're dealing with debts you incurred years before. The company has exact figures on its side. It has your social security number. And the agent just sounds so sure. How can it not be true?

Pressure doesn't help memory. We all know that. So just flat out refuse to accept the debt as your own until the agency provides proof. Once you've had a few hours to think about it, you may remember details that prove the debt isn't yours.

But chances are, none of those facts will line up in your head while some guy is telling you all sorts of dire consequences. So just air on the side of caution, and don't admit to any responsibility.

Remember, these guys do this for a living. They have encountered all sorts of counter-arguments. They're prepared. You're not.

Instead, tell the agent you need to see proof that this is your debt. Until you see the evidence you requested, legally the company cannot take action. If it does, it's opening itself up to some nasty lawsuits.

Rule 2: Never make a payment

Unless you are 100% certain that this is a debt you created, do not -- under any circumstances -- agree to a payment. Even if it's just a few dollars. Even if it's one dollar.

One of the oldest tricks in the book is to offer you a very enticing settlement, either in writing or on the phone. Often, these communications offer to take up to 60% off the amount owed. This could be tempting, especially if you're pretty sure the debt is yours.

Other times, the agent will offer to let you just make a small payment -- a show of good faith, then he'll leave you alone. If you're tired, distracted or stressed, this can seem pretty appealing.

Do. not. take. the bait.

Because that's exactly what it is. The agent uses these offers to hook you. Getting you to make a payment -- even $1 -- accomplishes that.

Why? Because any payment on a debt restarts the clock on the statute of limitations.

Each state has a statute of limitations on debt. Usually between 4-6 years, the statute means you cannot legally be forced to pay debts beyond this point. (The notable exception to this is a federal student loan or an IRS debt. Those almost never go away.) So once the 3-6 years is up, you are no longer responsible for paying back the debt.

Unless, of course, you make a payment. Then, you're on the hook again for another 3-6 years.

So how do you know if it's past the statute of limitations? Well, first, check find out what your state's magic number is.

But there is another good way to sniff out a soon-to-elapse debt. When a collections company suddenly starts contacting you with promises of severely reduced amounts, it's a good guess that they're desperate to collect before time runs out.

See, collections agencies pay pennies on the dollar for the charged off accounts. And their people work mostly, if not completely, on commission. So if they're suddenly willing to take thousands of dollars less than what you owe, it's usually their last shot at payment.

An aside:

Let me just say, I firmly believe that people should pay off the debts they create. I think this nation would be in much better financial shape if this were the guiding principle. Instead, I see an awful lot of Americans talk about bankruptcy as casually as a dentist appoint: Not something they love to do, but easy and relatively harmless.

So, please, don't use the statute of limitations on debt for evil. If you can afford to pay off your debt, do it.

But if you are in a financially tight situation -- and that means no savings, no lattes, no nothing -- then you should check your state's law before making any kind of deal with a debt collector.

Rule 3: Don't assume being innocent will protect you

So you get a letter from a debt collection company. You know it's not your debt. You weren't even in the state when this happened! So you can just toss the letter and go on about your merry way, right?


Ignoring a debt collections letter is as good as giving the agency a green light. You have to refute your responsibility in writing. You need to put in a letter that this debt is not your debt and you will not accept responsibility for it.

Once the company receives this notice, it may not contact you further about the debt until it has furnished proof -- usually in the form of a debt report.

When you send the letter, it's a good idea to use tracking confirmation and/or return-receipt request. This way, you have evidence that the letter was, in fact, received by the company.

Rule 4: Don't assume that having paid off/refuted a debt will protect you

Liz Pulliam Weston talks a lot about zombie debt. This is debt that won't die. You can pay it off, or even successfully refute that it's yours, but you'll probably hear about it again.

If you know this isn't your debt or that the statute of limitations is up, it may be in your best interest to hang up. At most, you should state that the statute of limitations is over/the debt is not yours/you have paid that debt. But, really, if you say nothing, then the company has nothing to use against you.

Should the company keep contacting you, it's a good idea to go ahead and send a letter again, asking for the collections attempt to cease and desist.

Rule 5: Know your rights

You have rights under the Fair Debt Collection Practices Act. It's important that you know what they are.

For example, a debt collector may not use profanity or threats. This happens more often than you might expect. I suppose it's the idea of obedience through fear. It's yet another reason that some agents avoid mentioning their company name. You can't report them if you don't know who called you.

Debt collectors cannot contact you at obviously inconvenient times, such as before 8 a.m. and after 9 p.m. They must also stop calling at work if you make it clear that your employer disapproves of your receiving calls there.

They may not threaten to have you arrested, exaggerate the amount owed, or otherwise make false statements.

Because these practices do happen, it's important to keep a log as soon as a debt collector contacts you. Be sure to get the name of the company and the agent. Note the date and time, as well as contact method. Summarize what was communicated to you, along with any response you make.

If the agency continues to abuse your rights after you've asserted them, contact your state's Attorney General and/or the FTC. These entities can give you a better idea of how to proceed, including whether you should engage a lawyer. (If you win a lawsuit, you are entitled to damages and up to $1,000. The Act does not specify, but in some cases, the plaintiff has been awarded $1,000 per contact that is in violation.)

I hope that answers some questions about debt collections. Feel free to chime in with your own advice and/or experience with debt collectors. If there's something I left out, feel free to ask!

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Tuesday, February 17

Do you hear that big, cosmic chortle?

One of the axioms I find myself repeating a lot lately is "If you want to make God laugh, tell Him your plans."

I've talked before about how easily a budget can be upset by unexpected expenses. In fact, the tighter the budget, the more easily a small item can completely turn your plans upside down. So it should come as no surprise that Tim and I are constantly revamping our outlook. We try to roll with the punches as best we can -- because the punches they keep a'comin'.

So why am I talking about this now?

Well, just the other day, Tim got a call from a debt collection agency. It's not an uncommon occurrence. Companies get some information -- sometimes outdated -- and go to work on the folks most likely to pay up.

It was an excellent reminder to do a piece about dealing with debt collectors. Some people have problems with harassing phone calls regarding past-due accounts. Others are bewildered by the same calls, but about debts that they didn't incur.

And so, in starting a post about that very subject, I seemed to have set in motion some epic, Rube-Goldberg-style mechanism. Witness the marble slide down the chute, knock over some dominoes, which push down a lever... You get the idea.

The end result was a letter from the IRS, received today, informing us that our refund was being withheld. It would be used as an offset against Tim's defaulted student loan.

Fascinating, since we finished paying the suckers off in early October.

So we called the Department of Education. It took several tries to figure out the right combination to get to an actual operator.

Apparently, we only paid off 2 out of 3 loans that Tim took out. The loan was assigned to the wrong Social Security number. Which means that, when we called two years ago and said we wanted to rehabilitate Tim's loans, there were only two on record. Those two got rehabbed.

Meanwhile, whoever got assigned Tim's third loan went through a dispute with the Dept of Education. An investigation was started, and they eventually concluded it was Tim's. So they assigned it to his social security number.

But by this point, his account was in good standing with the other two loans having been rehabbed. And the people who send out the ominous letters about defaulted loans don't check accounts in good standing.

So when we paid off the loans, apparently we finally -- in the last five months -- came to the attention of the Department of Education once more. But since it was so long defaulted (Tim went to school in 1999, graduated in 2000) no letters were sent, no calls made. We were just sent to collections.

As you can imagine, this kind of mind-boggling bureaucracy gave us both headaches. But the operator saw nothing strange about this cycle. I argued that we had made a good-faith effort to deal with Tim's outstanding debts, yet we were being penalized. Mainly for taking the government at its word. The guy simply replied that in each promissory note, the lender agrees to keep track of his/her own debts. Essentially, the operator said, it's not the government's responsibility to notify us about these things.

On the one hand, I agree -- if you take out debts, you need to be responsible and pay them back. And that means knowing what (and who) you owe.

On the other hand, it seems like the government does keep pretty detailed tabs on the status of various loans. It's certainly pretty active in sending updates/bills/declarations of defaults to most of the people who owe the department money. Which leads me to think it really just has that clause in promissory notes to give itself a loophole in situations like this.

So essentially the message is: "We will follow you closely to be sure we get our money back. We'll send you monthly bills and updates on your payments -- including how much is applied to principal vs interest. But just in case we're wrong and have been attempting to collect from some poor American who doesn't owe us money, we reserve the right to blame you and charge you interest for that entire time that we thought the loan was someone else's."

It seems like a pretty ridiculous set of circumstances, made worse by the dueling opinions in my head.

One side points out that taking on a debt should be a bigger deal in this country -- and it's a little ridiculous how many people owe money and don't even know it. Just because it's my husband, shouldn't excuse the fact that we should know exactly what he had taken out.

The other side says, sure that's true. But...

  1. When the entity you owe money to states that you owe it $X, it's pretty reasonable to then assume you don't owe them $X plus $Y that it's forgetting about. Especially when the entity has a vast, computerized database.
  2. Even if we had known about the third loan, wouldn't we have just assumed it was somehow lumped into one of the two other numbers -- because, again, the government would know what we owe it better than we do?
  3. Even if we figured out the government had forgotten about it, what are the chances we would have wanted to risk asking about the loan? (I'm not saying it's right, but more than likely we would have just crossed our fingers and hoped we'd heard the last of it.)
  4. Should we really have to pay interest on the last 2 years, when the loan wasn't technically on Tim's account or even tied to his social security number?
  5. Once the account went from good standing/paid off to default/not goodstanding, shouldn't the Dept of Education have bothered to -- oh, I don't know -- inform us that the status had changed and give us time to respond before sending us to collections?
  6. If a loan has been erroneously assigned to someone else, shouldn't the investigators just take a few minutes to type up a letter to the original borrower? If it wasn't tied to his social security number, after all, there's no way for him to make a payment. Ergo, he'd need to be notified, right?

But the other side just keeps repeating that it really is the borrower's responsibility to keep track of what he has borrowed.

So I don't quite know what to think. I'm disheartened and Tim is pretty devastated. He felt so free finally putting those student loans behind him. They had loomed so large for so many years, while he struggled to keep any job around his health problems.

And there's not a whole lot we can do. I asked the operator for a copy of the promissory note. That will take 2-3 weeks to get here. (I searched through Tim's papers and found a Direct Loan document that appears to match up with the alleged loan, but I want to see his signature on that piece of paper.)

I also touched base with the collections agency. I explained that we had just received all this news today, were pretty upset and generally confused. As far as we knew, we had completely paid off Tim's loans. My blood sugar was low and I was a little emotionally punch-drunk, so I spilled out our sob story -- combined monthly income of $3,100, rent of $700, insurance of $500, and credit card debt (mostly from medical-type expenses) of $8,000.

I made sure to mention that we could not acknowledge this debt as belonging to Tim until we had a copy of the promissory note in hand. But I wanted to know, if this proved to be a valid debt, what sort of plan we were expected to adhere to.

The agent was actually very kind (of course, most are to crying females but it's still nice) and took all this information into account. He agreed that any payment could wait until we had proof that this was Tim's loan. Additionally, he gave us the lowest payment option -- $51/month for 9 months. After that point, the loan would be considered rehabilitated and the collection fees would be dropped.

So this is more of a emotional than financial blow.

We don't have the money sitting around, obviously. But it was relatively small as student loans go: $2,625 at 6.96% became $4692.21 over the last 10 years. Once our withheld tax return gets applied, it'll be just about $4100. The 9 monthly payments will take it down to about $3650. Then the collection fees ($917) will be dropped, taking it down to just about $2700. Or about the amount Tim borrowed... allegedly.

Still, the emotional impact was pretty big. We thought we had closed the book on one section of our debt. We thought we were on track to just pay down this credit card debt, after which we'd be done with interest-bearing loans.

But, besides calling and arguing the case (probably without any results) with the Department of Education, what can we do?

We can suck it up and pay it down. We can use this as an object lesson in organization and thorough research. We can realize that it's definitely a step backward, but that we're still making good progress.

We can remind ourselves that this sort of thing is why we always have to be careful -- with our money and the plans for our money. Relying on a smooth ride is generally the best way to find yourself with a flat tire -- and no spare in the trunk.

And finally, we can hope that God (or fate or whatever entity you believe in) got a nice, deep guffaw out of this one. Because if we can't keep our deities entertained, really what's the point?

For those of you still interested in the "how to" of dealing with debt collections, the post will be out on Thursday.

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Monday, February 16

Sweet treat time

Jelly Belly is having its
Belly Flop Sale event!

For those of you not in the "sugar know," Belly Flops are the misshapen Jelly Belly beans. Weird shape, same great taste -- much better price!

The fab specials?

  • Order 3 bags and get 2 more free. (You have to add a total of 5 to your cart, and the system will make two of the bags free.)
  • Buy a 12-count box for $50 -- that's nearly half off! (Normally $97.50) Plus you'll get free shipping when your order is over $50.


Saturday, February 14

Romance, spending & the economic crisis: Some Vday-induced thoughts

Blah, blah, "love"

Blah, blah, "cherish"

Blah, blah, "chocolate"

Hey, wait! Chocolate? Now you've got my attention!

Actually, last night, I talked myself out of buying some chocolate because it seemed ridiculous to pay $3 a bag now when, in two days, I could get it at least 50% off.

So while I bide my time waiting for chocolate prices to plunge -- if only the stock market's prices were as reliable as grocery stock prices -- here are a few things to consider:

To quote my blogging buddy Brunette on a Budget,

"According to the Washington Post, the National Retail Federation's spending survey found that Americans plan to put up a total of $15 billion in the name of Cupid this year, or $103 per person. Granted, that's $20 less than last year, but it's still a far cry from macaroni-necklace territory, the paper says."

To me, this is once again proof that either Americans are even more short-sighted than we have ever given them credit for, or the average American is still doing a lot better than most media would have us believe.

Yes, it's much lower than retailers were hoping for. We were in a boom, now we're moving toward the "bust" end of the cycle. Businesses are experiencing the pain of financial contraction. In good times, businesses expand and hire a lot of people. In bad times, they have to pare back down to essentials. That means layoffs.

I'm not trying to be crass or flippant. Of course these layoffs have huge ripple effects across the economy. Of course people's lives are changed by this, rarely in a good way.

But I've always thought of economics as a cycle. As the old adage, "What goes up must come down." In terms of the human existence, the effect is far more nuanced and important. But the simple fact that something has tragic consequences rarely keeps it from happening.

And given all this potential tragedy, all this nervousness about job security and our shared economic future, what does it say about us that we are still willing to fork out $15 billion for a single day? (I try not to think about the total for more popular holidays like Christmas and Hannukah.)

Well, it either says either:

  • We are the kind of patriotic saps -- er, Americans -- that are spending to keep the economy afloat, just as our politicians, economists and investment bloggers vehemently implore us to do
  • For all our new-found frugality and housing-bubble-induced wisdom, we're still mainly a myopic, instant-gratification oriented group of people who will never truly learn to put our future security above a nice dinner and some overpriced flowers.

Honestly, I'm not sure which interpretation is worse.

And on that cheery thought I am off to eat some breakfast and prepare for our unValentine's Day. The boys have decided to see Friday the 13th. (My mom replied that gory movies aptly mirror a lot of romance: Someone delights in ripping someone else's heart out. I guess you see where I get my romantic sensibilities from.) After that, it's some greasy fast food and then home to have a few drinks and probably watch Christopher Titus's special "Love is Evil" along, perhaps, with some cheesy movies that we can heckle.

FYI, before you chide me for spending after that tirade, the movie will be seen with free passes thanks to Mom's MyCokeRewards account. The fast food will be out of pocket, but, hey, it's a holiday, folks!

And what better way to spend a holiday than at the carnival(s)? So here are a few blog carnivals that have been good enough to include me in their ranks. Read up while you wait for your discounted chocolate!

The Carnival of Investing Strategies

The Carnival of Debt Reduction

The Festival of Frugality

The Personal Finance News Blog Carnival

The Carnival of Everything Money

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Thursday, February 12

Their math vs your math

When I was shopping for cell phones, I briefly considered AT&T's early nights feature. According to the website, I could start my unlimited nighttime minutes at 7 p.m. And it was only 30 cents a day.

Given that 9 p.m. is a little late to get started on your major calls, this was initially very appealing. After all, who can't spare 30 cents a day, right?

Then I wondered, how did AT&T arrive at 30 cents? Sure enough, a little math showed me that the company was averaging the $8.99 monthly fee over the course of a 30-day month.

But, really, this feature doesn't apply to weekends, which already have unlimited minutes. So why count them?

Instead, I divided the $8.99 by 22 days of actual use. (Assuming an average of 8 Saturdays and Sundays in any given month.) The cost was still only 40 cents per day. Still a pretty good price, right?

But, really, the feature doesn't apply to the whole day. It is really just for two hours -- from 7 p.m. to 9 p.m. After that, my minutes would be unlimited anyway. So why stretch the cost over a whole day? Instead of 40 cents a day, it would be 40 cents for the two hours -- or 20 cents per hour.

Granted, the rate is only 20 cents/hour if you use the phone between 7 and 0 p.m., Monday through Friday. Otherwise, the cost per use is going to go up -- maybe closer to $1 an hour.

Technically, this cost is also only true if you also use every minute of your cell plan. If you routinely have time left over in your plan, the early evening/weekend minutes are at least partially redundant. And the more minutes you have left over, the less you really needed to pay that $8.99 for the month.

And, hey, there's every chance that you use most of your minutes and consistently get on the phone in the evenings. There's every chance that 20 cents an hour -- or 40 or 60 -- is worth it for you.

But what you have to remember is that AT&T marketed this feature as 30 cents a day. By my calculation, the best you can get is 20 cents per usable hour.

That's quite the disparity. Even more startling, both numbers are correct.

It's a good reminder that numbers are mutable. They can be massaged, toyed with, and just generally manipulated. And that's exactly what most retailers do.

We already know that it's in their best interests to sell. That means they are intent on giving you the most attractive terms, not necessarily the most accurate. It's their job to sell; it's your job to do the math as it pertains to you.

Monday, February 9

Last minute reminder...

... For those of you who haven't already entered, Lazy Man and Money is having a contest for good ideas on having a frugal Valentine's Day.

He's rewarding the winner (chosen at random) with a $20 eBay or Amazon GC -- the winner gets to choose.

C'mon, folks. I know you're just DYING to share your wisdom with others!

And if you don't have any sage advice, you can at least go and read others' ideas, which Lazy Man has conveniently compiled in a single post. Perhaps you'll find inspiration, dazzle your loved one and take all the credit!

Contest ends at 11:59 p.m. pacific.

Also, while I've got your attention, the Carnival of Debt Reduction was good enough to publish one of my posts. Obviously, as you are all avid readers that gobble up my every word, that post will be old news... But there are a bunch of good-looking pieces. So get on over there and get some fabulous financial advice.

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Never-never (save) land

We were down visiting Tim's parents this week. Whenever we're in the area, we also drop by Tacoma (about a 15-minute drive) and see some of the people he grew up with.

As always, it's a bit of a culture shock for me.

It's not that Tacoma is some foreign land, but there are definitely different norms when you grow up there. Kids come earlier, marriage comes later (if at all), and financial considerations pretty much have no role in either. Most of them don't have credit cards, some don't even have bank accounts. Nobody bats an eye when someone talks about paying a check-cashing fee.

I want to stress, making bad financial decisions is very, very different from being a bad person. They have been nothing but friendly and welcoming to me, despite the fact that Tim is about the only thing we have in common.

But no one in this community thinks very far ahead in the financial future. Decisions are made based on today. They don't expect to ever be financially stable, so it becomes a self-fulfilling prophecy.

Two of Tim's friends, let's call them Tom and Deanna, will probably never get their financial feet under them. Until 6 months ago, they were living in a one-bedroom house with their two sons, 3 and 7. If not for some very tragic turns of fate, they would have three more children.

Now they have moved into a rental house (owned by Tom's mom) so everyone has room to breathe.

Tom works in construction, mainly drywall. He gets paid very well for what he does, but the work comes in fits and starts. This year was a particularly bad year and he spent most of the last 6 or so months out of work.

Deanna didn't work much this year, for a combination of reasons (some good, some specious). Around September, she got a $10/hr job. By the time she started, they were quite literally on their last few dollars. They had to use vouchers from the state so that they could have interview attire and things like razors, so that Tom could be clean shaven for interviews.

Tom is doing more work now, and so Deanna was able to quit her job, which was requiring her to work 6 p.m. to 4 a.m. -- and had just informed her that her pay was about to decrease.

Despite finances being a little less irregular now, they're still living precariously. They were counting on Tom's tax return having come in by now. (H&R Block promised his card would be loaded in 8 to 15 days. That was on January 15.)Because they still aren't married, Tom was able to claim the kids and is getting over $8000 back -- after the $239 H&R Block fee.

But the tax money still hasn't come through -- according to the IRS the payment is due by Feb 24th, delayed because of processing difficulties.

Deanna told me she didn't have enough for rent. She received a second notice for her water/sewer/garbage. The next stage is having the utilities shut off. Things were so tight, she said, that they were selling some pain pills from a recent surgery. She hastened to add that they didn't usually do that sort of thing, but the cash was kind of important.

This all came about an hour after she'd convinced us to try out a Chinese buffet with them that night. She had a 15%-off coupon and a punch card that, with four people eating, would give them a free meal. When I asked how much it was, she said it was "only" about $10 a person. (The free meal would have lessened the cost, at least for her, but the restaurant wouldn't combine the coupons. The total was $23 a couple. Not bad, but more than I had planned to spend on a single meal.)

By dinnertime, things were pretty relaxed. Tom's boss finally stopped by with $200 from a job Tom did in early December. Tom said they should go out to the casino, now that they had the money. Deanna reminded him we were going to dinner.

Tim added that we probably couldn't afford to go a casino anyway. Though, he said, he'd check with me. Tom said he'd give us $20 to help ease the cost. A nice offer but we couldn't afford both dinner and the casino. And it's harder to get carried away and overspend at dinner.

After dinner, and back at their house, I got on the computer to show Deanna the Bank of America settlement website so that they could apply. It went quite quickly thanks to their cable modem.

Also, while we were there, I discovered they have cable. Based on the channels they mentioned, their package costs $55.75 a month, though they would get a $10/month discount on their cable modem for having multiple services. And if they bundled their phone in, they could be paying $33 for each of the three services.

Still, I have to wonder how useful cable internet is if your water gets shut off.

And just in case my judgmental-alarm wasn't already blaring away, Deanna casually mentioned that she's considering declaring bankruptcy. Given that she has no credit cards or bank accounts, I was quite curious as to why she'd do that.

Her student loans. She kept deferring them, she said, but they'll never have enough money to pay them off.

How much do you owe, I asked. She looked solemn and slightly wide-eyed when she said they were over $10,000.

I suggested she start with $50 a month for now, increasing when she becomes employed again. "They don't want $50 a month," she told me. I tried to explain that all she had to do was call and say it was $50 or nothing -- assuring her that the government would take the former.

That's when she and Tom told me they don't think they should have to pay the loans back anyway. She had to stop her schooling because of complications with a pregnancy. She never went back. And they were only teaching her things that she learned in high school, anyway.

Despite my better judgment, I argued (as politely as possible) that it was a shame the school was sub-par, but wasn't that her responsibility to check out before taking out the loans? They both maintained that since the college didn't help her get or find a job -- and since the education was mostly things she already knew -- they shouldn't have to pay the money.

Deanna did add that the school is closed and there are lawsuits pending. My advice was to hold off on any decisions until something came from that, but she's doubtful that it will get resolved ever.

I guess it didn't register with them that we'd be a bad audience for that kind dismissive attitude. After all, we just in November finished paying off Tim's $15,000 of student loans -- also to a school with slightly shady practices.

I guess it also didn't occur to them that the $8,500 Tom is getting back would make an excellent initial payment against those debts. Much better that her son gets his Lightning McQueen race-car bed, about $250 in stores.

The thing is, no matter how much of a headache it gives me, Tom and Deanna's situation and attitude toward money are totally common in this area. Like I said, no one expects to get ahead financially. People routinely move back in with parents in between jobs. Some don't even bother leaving while employed, spending the funds on girlfriends, food out and hobbies. They spend their entire paycheck and then wonder how they'll make it for the next 10 days.

They expect to forever be fighting to make ends meet, which means they had better enjoy what reprieves they get. So when a little money comes in, they go out to eat, even if they can't pay their rent or their water. They firmly believe that it's easier to not have a bank account, but instead to pay check-cashing fees. Not being able to afford the kids they have, they don't see much point in consistently guarding against future pregnancies.

In essence, they live in a nearly pure state of reaction. They If they get pregnant, that's just the way it is. They don't make plans. They simply try to keep their heads above water as life happens to them. Unemployment means difficulty in looking for work, because someone has to stay home with the kids. They don't look into state assistance for daycare costs. They live for the today, because they know tomorrow will be another money struggle. And, in living that way, they ensure that that is exactly what will happen.

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Thursday, February 5

February 15th: The frugalist's Valentine's Day

One of the biggest complaints about Valentine's Day is that romance shouldn't be forced and it definitely shouldn't all be squeezed into one day a year.

Have Vday your way

So why not schedule Valentine's Day for more convenience (and affordability)?
This year, Tim and I are celebrating on February 15th. It will make things eminently more affordable:

  • The candy will be half price.

  • Vday cards will be remaindered cheaply. (While you're at it, stock up for next year!)

  • Vday-themed gifts (jewelry, trinkets, lingerie, lotion sets, etc) will be clearanced.

  • Flowers will be back to their normal prices.

  • Restaurants won't require reservations weeks in advance.

  • It will be more intimate. Since so many ate out the night before, crowds should be nearly non-existent.

  • If we want to see something romantic, we won't be in a packed movie theater.

What's not to love?

Actually, this idea was a practical solution for Tim and I. He likes to celebrate the holiday. (There is part of me that does, too. But the practical -- aka miser -- side of me thinks it's silly to put so much emphasis -- and money -- into one day.)

In addition, one of Tim's good friends is in a newly long-distance relationship. Tim wanted to celebrate with me, but also wanted to keep his friend distracted. This way, we get the best of both worlds: We're supportive friends, I still get to disregard a lot of the Valetine's hype, and then we still do something (affordably) romantic.

We will exchange gifts, but we have agreed to keep them small. I'd tell you the gift, but my guy is a faithful reader of the blog. And I'm all about surprise. (Okay, that and I'm still not completely decided.)

A very merry unValentine's Day to you

For any of you who are actually actively anti-Valentine's Day, I will also use this post as a time to make some suggestions. I have had a few different unValentine's Days. They can be quite fun.

The first time was my freshman year. A friend and I were both single. So we had dinner (at TGIFriday's -- and only appetizers and dessert, no entree) then saw the least romantic movie we could find (the updated Star Wars Episode IV) and went to a club where everyone was dancing by themselves.

More recently (and on more of a budget), I finally got around to renting Saw, though any scary flick will do. I made spaghetti for dinner, so that the red sauce would be in keeping with both the Vday and bloodfest theme.

This year, I think we've decided that we'll take Tim's friend out a bit. We'll eat only at fast food restaurants (nothing romantic about those) and then go see some action or slasher flick. After that, we'll come back home. We'll do some drinking while watching and heckling particularly bad movies. At the end of the night, he'll crash out on our couch and we'll have had a successful unValentine's Day.

If you have your own Valentine's Day traditions -- whether they're about rebelling against the day or celebrating it affordably -- I would love to hear about them!

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Tuesday, February 3

Traditional IRA or Roth?

Readers: This is the second part of a two-part article. The first piece, Retirement on $20 a week, is a guest post featured over at Ms. Money Savvy.

The words IRA make a lot of people freeze up. In fact, they're not nearly as intimidating as you might think. Here, we'll cover the basics of the two main type of IRAS -- traditional and Roth. Then we'll take a look at what these differences mean for people in terms of their goals. That will help you figure out which one will work best for you.

So, since we're reviewing the whole subject, I'd like to start with the most basic item. Most of you probably know it already, but why not cover all our bases?

The basic basics

What does IRA stand for?

C'mon... You know this.

The answer was "Individual Retirement Account." (We would also have accepted "Individual Retirement Arrangement.")

We all know vaguely that IRAs are for retirement. But what are they, exactly?

You might think of a deduction from your paycheck, which is actually only for traditional IRAs. You might know vaguely that some tax benefits are involved. Mostly, though, the majority of us just create the account, throw money into it and hope that the fund managers know what they're doing.

It's actually not that bad. There are a few things you should know about IRAs in general:

• The soonest you can withdraw money free of penalty is age 59 ½
• There is a 10% tax penalty for early withdrawal
• The current limit is $5,000 for individuals under 50
• People 50 and over can deposit up to $6,000

Getting started

The problem with a lot of IRA explanations is that they focus mainly on the end product. That's important, obviously. But most people are scared of the stuff that comes at the beginning.

You might start to sweat when you think about visiting various brokerage firms. Or perhaps you get a headache just thinking about reading a prospectus.

Breathe deeply. It will be okay.

If you go with a traditional IRA, your company will already have a brokerage firm selected. That is certainly one benefit. Otherwise, you are on your own to a certain extent. But always feel free to ask friends and family who they use and how their experiences have been.

Also, remember that you can get your IRA through your bank. That's what my husband and I did. It was relatively simple. There was a lot of paperwork to sign, but it was pretty standard. And we were out the door no more than a half hour after we sat down.

It is true, we should have done more homework, read a prospectus or two. But we needed to get our feet wet, and we had a lot of other stuff on our plate. Sometimes there is value in keeping things simple, just to get started. If you're very panicky about IRAs, this is something to bear in mind.

So, once you're seated in the bank or brokerage firm, now what? Now you'll sign a lot of paperwork. But first you have to decide what level of risk you are comfortable with. You can specify, you see. And in this sort of economy, it is vital that you do. Younger people tend to be more comfortable with higher risk, since they can afford some reversals of fortune along the way. Tim and I, however, have an uncertain future when it comes to earnings. So we will probably stay with low risk, since we might be more affected by losses.

Whatever you choose is okay, and the broker will help you decide. Just be sure you don't get pressured into something you aren't comfortable with. Once you've invested, switching to a higher- or lower-risk fun will involve trading fees.

Okay, now there's just the main question: Traditional IRA or Roth?

Everything you ever wanted to know about IRAs (but were afraid to ask)

You can't know which is right for you without knowing what each has going for it. So I've made a nice, simple, bulleted overview. (You'll probably notice that these are very different. They are made to appeal to different situations, different populations. It actually makes choosing much easier.)

Highlights of a traditional IRA:

• Taken out pre-tax
• Contributions may be tax deductible
• Cannot contribute past age 70 ½
• Taxes are paid at the time of withdrawal
• Must start to withdraw by age 70 ½
• You must withdraw a certain amount, as dictated by the IRS.

Highlights of a Roth IRA:

• Taken out post-tax
• Contributions are never tax deductible
• No taxes paid upon withdrawal
• No mandatory withdrawal age
• Contributions are allowed throughout your life
• Principal can be withdrawn without penalty

Which one is right for you?

Okay, you read the bulleted stuff. And you still have no idea what that means for you. Don't feel bad. I had to have this stuff explained and re-explained to me.

Let's look at the implications of the IRAs' characteristics:

Traditional IRAs

Traditional IRAs have more restrictions than a Roth: an RMD (required minimum disbursement), which you have to start taking by age 70 ½, and past that age, you can no longer make contributions. (It’s worth noting that Congress suspended the mandatory withdrawal rule for 2009, given the depressed stock market.)

The finite window on contributions means that traditional IRAs probably won’t work for people who are getting a late start on saving for retirement.

Similarly, if you plan on working past age 70 ½, a traditional IRA may be a problem. It would mean you are still drawing an income when you start to receive IRA funds. This will probably raise your tax bracket to a much higher level -- which is a problem since traditional IRAs are taxed at the time of withdrawal.

I mentioned RMD before, but it’s important that you understand how it is calculated. The IRS takes the value of your IRA on the last day of the year, divided it by the number of years left, based on life expectancy tables.

Why does this matter? Well, if people in your family tend to live long lives, this IRA may not be for you. Since life expectancy is calculated with averages, you may outlive the agency’s expectation. In that case, your funds will be gone.

So those are the drawbacks to traditional IRAs. But this type of plan can have plenty of benefits for middle- and upper-class workers – especially those without many tax deductions.

Workers who don’t have many deductions to lower their taxable incomes can rely on traditional IRAs to do this. When the contributions are taken out of pay, they are removed before taxes are applied. This means that your contributions to a traditional IRA lower your taxable income. Depending on your income, you may also qualify for a tax deduction, lowering that amount further.

The real value, though, comes in retirement. If the money hadn’t been taken out as contributions, it would have been taxed at your current tax rates. But with traditional IRAs, you don’t receive the funds until you’re retired and, presumably, in a lower tax bracket. So, while you pay taxes on the profits, you're also paying a much lower rate on the original funds than if you had received them in a normal paycheck.

All in all, traditional IRAs will work best for people who:

• Plan on retiring before age 70 ½
• Don’t plan on working after retirement
• Can get a timely start on IRA contributions
• Are currently in higher tax brackets
• Need the tax deductions

Roth IRAs

Roth IRAs, on the other hand, are more lax. You can contribute for as long as you like, and you don’t have to touch a cent until you want to. When you do dip into the funds, there are no rules about how much you have to take. So if you’re not sure how late in life you’ll need to work, a Roth IRA may be best for you.

A Roth IRA is also best for people who plan on having alternate streams of income, such as pensions or real estate investments. They can dip into the funds as necessary, or keep the money earning interest in the IRA.

If your career is uncertain, or you are simply worried that you may need the money later, a Roth is a good fit. With this type of IRA, you can withdraw any and all contributions without any penalties or taxes. (However, if you also withdraw the profits, they will be subject to taxes and to a 10% penalty.)

Finally – and perhaps most importantly – Roth qualified disbursements (taken out under proper conditions) are not taxable income. See, you already paid taxes on this money, before you put it into the Roth IRA. So any profits are completely tax free. This allows you to stay in a low tax bracket, even in retirement, but still have some financial help beyond Social Security.

While there are many benefits to a Roth IRA, it’s important to note one major drawback: There are no immediate tax benefits for contributing to a Roth IRA. Your taxable income won’t be lowered, and you get no tax deductions. So if you are looking to decrease your present tax burden, this is not the IRA for you.

The traditional IRA postpones taxation until the person is retired and, presumably, in a lower tax bracket. If, however, you already pay a low amount of taxes, it makes more sense for you to use a Roth IRA. You pay taxes now, and get tax-free profits later.

All in all, a Roth IRA works best for people who:

• Have lower incomes (unmarried people, single-income families)
• Have plenty of tax deductions already
• Want access to their contributions, if needed
• Want to (or have to) work later in life than 70 ½
• Start saving for retirement later in life
• Prefer to let their profits grow tax free

What did we learn today?

So which category did you fall under? Are you clear which IRA will benefit you most? If you're still not sure, review your last few tax returns (and your goals for the future) and you should have a fairly simple choice on your hands.

Once you've decided which one works best for you, go find a brokerage firm or bank and start an IRA. Now. Even if it’s only $20 a week.

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Sunday, February 1

Are you a frugal fire fighter?

Not a thrifty version of a community hero (complete with dalmatian).

I'm talking about frugal fires. The unexpected costs that constantly threaten to upset the delicate balance of a fragile budget. For most of us on a tight budget, whether from low income or debt reduction, these are what keep us up at night.

It's these "fires" that we seem to spend our lives putting out. It's what can keep us from truly getting ahead, when we feel like we're merely ping-ponging from one crisis to another. It's disheartening and exhausting.

It may also be unavoidable.

I know, I know. This is supposed to be the part where I have some brilliantly simple frugal hack. Something that, built into your life, takes all of one minute a year and saves you a boatload of stress. But I'm just not sure that exists.

The fact is that you can't plan for everything. We all know that you can plan to the last penny. Then your kid will outgrow his sneakers. Or you develop some symptom or condition requiring medication. Or your last good pair of pants has a hole.

Some people may use emergency funds as their saving grace. Money in reserve definitely lessens the crisis down to more of an annoyance. But plans still have to be changed, money shift around and, later, replenished. Even a containable fire is still a fire.

When you're on a tight budget, you're far more susceptible to these random flares. They have a bigger impact, certainly, and they therefore consume more attention. And once your attention is focused on one area, others begin to slip.

This then creates the potential for crisis in these other areas, so we rush over to deal with them, allowing other sectors to start to go awry. We're like jugglers, always having to account for at least one more item than we have hands. One thing will always be in the air, threatening to plummet down.

It can be anything. You're so busy keeping the credit card payments timely, you bounce a check. You're so focused on not bouncing a check, you run up the credit card. You're so anxious to pay down the credit card, you forget to take care of irregular bills, like that doctor's visit.

However it starts, the end result tends to be the same: We blame ourselves. Not because we put too much on our plates, but instead that we can't handle it all. Whether we fall for the illusion that everyone else seems to have it together, or whether we're simply harder on ourselves than we are on others, we tend to place the blame squarely on our own shoulders.

I'm not advocating blaming your troubles on other people, or excusing bad financial judgment. But it seems like it would be a nice change of pace for many of us if, when faced with a mistake, we were able to say, "Well, I should have gotten this done. I probably would have under different circumstances. But this came at a bad time, when I had a lot of other things going on, and I am only human."

I've mentioned this before, but studies have shown that the human brain has a finite capacity for priorities. If you have more list items than you have list space, well things will be interesting for awhile. Things will get shuffled around, which means some will inevitably get lost during it.

But those of us who are on constant watch for emergencies, we tend not to be all that forgiving. We tend to expect more out ourselves than we do others. And when we inevitably can't perform to expectation, we make ourselves try harder next time. All this basically just creates a perpetual cycle of stress, self-recrimination and exhaustion.

Really, don't we have better things to do than to sit around criticizing ourselves? I know I do. I'm personally sick of never living up to my own expectations. Perhaps the first or second time, I could rationalize that I wasn't trying hard enough. But by now, really, I think my "failure" says more about the grading system than the person being graded.

I have this theory that everyone has an idealized self. Whether it's you a few pounds thinner or more organized or more frugal, deep down you see yourself as just a step or two away from perfection in some category.

For me, it tends to be two-fold: Weight and organization. I want to be thinner, and I doubt that needs explaining, though it's also for health reasons. But organization? I have far less in my energy tank than most people, but I still want to be quick and efficient. I'm still incredibly angry with myself when I fail to hit these marks.

Here's the real kicker, though: Knowing that I shouldn't procrastinate on a chore makes me more likely to procrastinate. Because I want so badly to be organized and to not be a procrastinater, I feel guilty about the slightest instinct toward putting things off. This causes stress, which makes me not want to deal with it. And it all becomes a self-fulfilling prophesy.

Nowadays, I try to stop saying "I should" and start thinking about ways around what I will do. If I know I'm going to procrastinate, I plan for it. If I have a deadline, I plan to be done three to four days early. This gives me time to procrastinate, even though each time I try not to, and still come around to the "Just suck it up and get it done" mindset -- all without being late.

It's kind of miraculous, really: Once you take the stress out of the equation, things get easier. If you're not spending all your energy hating yourself for the way you are, you have an awful lot of it left over for actually getting something done.

And so I have to wonder how many of us frugal fire fighters are out there, blaming ourselves instead of trying to fix the problem? Sure that we can just try harder next time. Sure that the pattern isn't broken, we are.

What if we simply accept that life is unpredictable, things will be thrown our way, and we may or may not be able to handle it? What if we stopped making precise budgets, if it's likely that they'll keep being blown apart anyway? What if we stopped trying to anticipate every potential turn of events, since we're inevitably surprised by some new wrinkle anyway? What if, when things overwhelm us, we didn't blame ourselves, but rather accepted it as a consequence of being human?

Would that leave us more energy to deal with the next wave of "suprises"? Would we start to think of alternate ways to handle them?

Perhaps we would actually start to like ourselves more. Perhaps we could stop blaming ourselves for not being able to predict the unpredictable and contain the uncontainable. Perhaps we would actually give ourselves permission to be imperfect. Maybe, if we stopped reaching for perfection, we could be comfortable in who we are, rather than who we could be.

And now I'll leave you with a wonderful quote from Margaret Cho (though her tirade is about weight, I think it's pretty widely applicable to any kind of self-acceptance).

So from the age of 10, I became anorexic, and then bulimic, and then stayed that way for about twenty years, until one day I just said, Hey, what if this is it? What if this is just what I look like, and nothing I do changes that? So how much time would I save if I stopped taking that extra second every time I look in the mirror to call myself a big fat f---? How much time would I save if I just let myself walk by a plate-glass window without sucking in my gut and throwing back my shoulders? How much time would I save? And it turns out I save about 97 minutes a week. I can take a pottery class.