Monday, May 30, 2011

How to decipher whether it's really a deal

When perusing any of the popular “deal” websites or eyeing the product being sold as two for one, trying to decide whether or not to pull the trigger, ask yourself three questions:

1.     Were you already thinking about buying it?
If you have been meaning to replace your circa-1980 coffeepot, maybe that snazzy new one on sale for half price makes sense. If, however, you stumble upon something you had no intention of buying, you’re spending money that you otherwise wouldn’t have and most likely consuming more than you really want or need. So even if you get a $400 pair of shoes for $80, that’s $80 you would’ve otherwise retained, for a pair of shoes you were otherwise unaware of.

2.     Would you have paid full price for it?
We all get caught up in the “budget” mindset. “It’s not amazing," we tell ourselves, "but it’s only $10. I’d be stupid not to buy it at that price.” If it doesn’t fit you or doesn’t fit the need well enough that you’d pay full price for it, you’ll wind up filling your home with stuff that's just “okay” – a closet full of mediocre clothes and a couch that’s “good enough” – rather than holding out for a few things you love (and perhaps waiting for those few things to go on sale.) While some purchases make sense – you’ll likely go through several couches in your life as your earning capacity increases and, until you can have the great couch, you still need a place to sit that doesn’t cost three grand. Other things, though – like a cashmere sweater – are worth discernment. Don’t buy three “so-so” sweaters off the sales rack; you can land yourself a fantastic one when it’s finally marked down.

3.     Is there a real reason it’s on sale?
Sometimes things are on sale because, quite simply, they didn’t sell. And usually they didn’t sell because something is wrong with them. If you find the same shirt in every size on the sale rack, skip it. If it seems too good to be true, chances are it is.

5 strikes against homes

1.     They cost more
Once you buy the home, you have to buy the furniture. And after you’ve moved in with all your furniture, you have to take care of the place. The sprinklers need to be blown out, the carpets need to be deep-cleaned, the 4.5 bathrooms all need to be stocked. All of this before the taxes you’ll have to pay come April.

2.     They take more time to maintain
You buy a home, and suddenly a big part of your weekends are spent hovering over the couches at Pottery Barn and envisioning how to best furnish the living room. You have to mow the lawn. You have to dust and deep-clean all that square footage. Maybe you genuinely enjoy catering to the whims of a home more than you enjoy doing anything else, and that’s okay. If not, though, there are likely many other ways to spend your time that would make you happier.  

3.     They permit you to accumulate stuff
You buy more square footage, you buy more stuff to fill it. Suddenly you own four couches, six televisions, and art for walls you never look at. You own clothes you don’t remember buying and you’re up to your eyes in knick-knacks for all the nooks. And when you move, you’ll be faced with the daunting task of packing it all up in boxes. Or paying someone to do it. (See #1.)   

4.     Quality is often compromised in pursuit of quantity
The only way developers can give you more square footage for the same price is to cut back on finishes. So, while you have a bigger home, the details are amiss. It's two pounds of flank steak rather than one filet mignon.

5.     Function is often compromised in pursuit of form
The odd thing about many new homes is that as they become increasingly disproportionate to us, so do their details. People want a grand stairway, which requires a massive foyer, which empties into a living room only two-thirds as big. Things just get awkward.

5 reasons frugality is sexy

1.     You haven’t spent all your money, so you have resources for other things
Any Joe Schmoe can spend his entire paycheck in two weeks. There’s nothing special about that. What is significant, however, is when someone has saved up the money to do something different – retire at 50, travel the world for two years, save a species of whales…

2.     You’re disciplined
... which is the opposite of reckless. Chances are, if you don’t spend recklessly, it’s probable that you may also refrain from carelessness in your eating habits, irresponsibility in your love life, or rashness in any other habits, without first giving the necessary consideration for the outcomes.   

3.     You’re a critical thinker
You don’t accept things at face value and that makes you a genuine individual. You sift through the onslaught of advertising and social messages and rather than scramble to acquire everything, you take the time to figure out what you really need. Chances are, you’re also more satisfied with what you own as a result.

4.     You’re not compensating for anything
From my experience, the more materialistic someone is, the less stable their underlying self-assurance. Maybe there are exceptions to this rule, but I can’t help but cringe each time I hear someone boast that they own four iPods, store their clothes in two closets, or joyride in their boss’s Maserati.

5.     You’ve based your identity on something else
If you’re not identifying yourself simply as a “Lexus driver” or a “Starbucks drinker” or a “Tiffany’s girl,” then you’re probably instead identifying yourself by your thoughts on the fairness of FASB 157 or the use of the Oxford comma or the rationale of the NFL draft.

On Beauty

A professional makeup artist recently told me: “every woman asks me how to do smoky eyes. I think smoky eyes have a time and place, but I think playing up a natural, glowy look is a lot harder but looks more beautiful. Most women don’t realize that.”

And so it is with most things beautiful.

We identify something in its simplified state, and then exhaust our resources trying to amplify its appeal. In doing so, we cheapen it. Things like the subtlety of the Tuscan landscape, when replicated in our own American homes, become a movie-set version that exploits the allure and guts the real beauty. The tranquility of the Caribbean beach is disrupted when mimicked in bright turquoise bathrooms and stenciled seashells. And the female form and face becomes a sort of Frankenstein version of itself when too much of it is augmented.

The beauty is often in the quiet honesty of simplicity, and we would better appreciate the beautiful things in our lives if we learn to tame our temptation to intensify their every detail, and let things speak for themselves more articulately.

Tuesday, May 24, 2011

Tame your cravings

Women's Health wrote an article on the most common root causes of cravings and how to tame them:

• Out of control hunger – eat smaller meals more often

• Distraction – eat with your other hand

• Losing sight of your goal – weigh yourself regularly

• Emotional eating – lift your spirits

What does this have to do with personal finance? Well, if unhealthy eating habits are rooted in our psyche, so too are habits that sabotage our finances. If you can identify your weaknesses in other areas – say, eating – then chances are you can tackle those same issues in spending.

• Out of control spending – unlike eating, you do not have to spend money. If you’re playing pimp to your credit card more than you’d like, put it somewhere where you can’t use it for one week. Some people freeze it in a bowl of water. Others just leave it on their nightstand when they head out.

• Distraction – make a list of items you are shopping for, and take it out periodically when you're running errands. If you’re headed to Nordstrom to buy a new pair of shoes, don’t let yourself get sidetracked by the cute shorts in Forever 21’s window.

• Losing sight of your goal – instead of perusing the sale on your favorite retailer’s website, instead log into online banking or your investment account and see how the balances are growing. If you’re saving up for your wedding or a big trip, get on one of those sites.

• Emotional spending – you gotta find yourself a buddy! Maybe someone who’s in the same boat, so you can call him or her each time you find yourself pacing your apartment. Emotional spending is often the result of self-esteem issues; try checking out the self help section of your favorite book store – without your wallet. (Ironically, for emotional eating, they suggested buying yourself the cute top you’ve been eyeing. Maybe if you’re emotionally shopping, you should just eat a cupcake?)

With any spending problem, I highly recommend an online budget tool like or

5 worst foods for single & broke folks

1.     Gallons of ice cream – we both know that you’re gonna eat that whole thing. Probably in one or two sittings.

2.     Loaves of bread – unless you really do eat a sandwich every day – and some people do – this usually starts out as a grilled cheese craving, and may even result in a toast compromise the next morning. Generally, however, at least a few slices go wasted.

3.     Bags of chips or cookies – see “gallons of ice cream”

4.     Fresh chicken or fish – if you’re anything like me, you come home, stand in front of the fridge with the door open staring at that raw slab of meat smiling up at you through the cellophane, and realize that the last thing you want to do is whip out the frying pan when you could go to Chipotle. This goes on for enough days, and you end up giving yourself permission to just throw it away.

5.   Ramen Noodles – let’s be honest: you're not doing yourself any favors with that.

5 best foods for single & broke folks

1.     Eggs – you can eat one. Or you can eat seven. You can scramble them at home. You can boil them and take them along. And at about $3 a carton at my grocery store, each egg will run you about 25 cents.

2.     Apples – they are by far the most enduring fruit; not only are they highly portable, but they stay fresh for at least a week

3.     Granola or oatmeal – oatmeal is great because they measure out a serving for you in a neat little package and keep the rest fresh.

4.     Whole wheat pasta – as long as you make yourself one serving and not the whole box. The only issue that arises is the dilemma of pasta sauce inexplicably coming in family-size jars.

5.     Canned tuna – they keep forever, cost less than a dollar each, and are conveniently sized as one serving. The only stipulation is that you have to actually like canned tuna, and some people don’t.

5 things worth spending more

1.     Better shoes – now, I don’t mean Jimmy Choo. I mean good, solid, leather shoes with a bit of support under the arch or the ball of the foot (depending on the style.) You spend a lot of time in your shoes, and your whole body is affected by what your feet are feeling. Treat them well, and your body will show it.  

2.     Higher quality dog food – have you ever looked into what actually goes into most dog food? It’s pretty repulsive – it’s the sort of stuff even the most lowly fast food joints turn down. Imagine what our health would be like if, for every meal for our whole lives, we ate the dodgiest fast food we could find. This is what happens when you feed your dog whatever’s on sale at Petsmart. Your dog’s entire diet is based on the food you feed him, and his vet bills at age 11 will reflect what you’ve invested. (For starters, the first ingredient should be meat. For good brands, try here)

3.     Better food for yourself – while you’re upgrading your pet, why not upgrade yourself? You don’t have to indulge in caviar and filet mignons – just make sure you’re getting more substantial nutrition and fewer processed foods. Find a vegetable or two (besides potatoes and corn) that you can enjoy. Eat them more.

4.     Mother’s Day flowers – or the Father’s Day tie, or the engagement ring for the girl of your dreams. Point is, when you’re giving a gift that’s meant to mean something, make it count.  

5.     Your interview suit – ideally, the quality of this suit will evolve as you go through your career. When you’re looking for the suit you’ll be wearing when what could be the boss at your dream job is meeting you for the first time, stretch your comfort level just a little. And then pay to get it tailored. Always.

5 things you actually don't need

1.     Gym membership – nobody has to give you permission to move your body around enough to sweat. You can do this in the park, in your own apartment, or on your way to work for free. Yea, the perks are great – you can get caught up on your favorite Real Housewives while climbing stationary stairs or you can get a massage at half the market price – but if you’re watching your cash flow, this is an easy thing to cut out.

2.     New clothes each season – chances are you were around last year when this season rolled around. What did you wear then?

3.     Another fancy drink – it gets to that point in the night where you’re starting to cross the line from “having a good time” to “having too good of a time,” and you’re trying to fit just one more $15 martini in before heading home. You’ll thank yourself tomorrow if you skip it.

4.     Movies in theatre – my mom and I recently paid over $20 to see one of the new chick flicks in theatre. Funny thing about it is that it will be the exact same movie when one of my roommates ultimately pays $1 to bring home the Red Box version in a couple of months.

5.     Almost anything from Target.  

Monday, May 23, 2011

How to survive with student loans

I graduated with $100,000 in student loan debt.
I have many peers who are in the same boat.
I still save money each month.
They do too.

It is possible to put money away on even an average income and even with monstrous monthly student loan payments.

The secret? Add your student loan payment into your “housing” or “fixed costs” budget. (Fixed costs not only include housing, but also a car payment, if applicable, as well as health insurance, your cell phone bill, and basic food staples – basically anything you wouldn’t be able to get away with foregoing for a month. Personal finance experts dictate all of your fixed costs together should total less than 50% of your take-home pay.)

If your take-home pay is $3,000, roughly $1,000 (one third) could be, according to personal finance rules, allocating to your rent.
If your student loans are $400, find an apartment that’s $600.
No one-bedrooms at that market rate? Probably not.
So then you find roommates.

When I first graduated, my student loans and rent combined did indeed tip the scale just a smidge beyond 1/3 of my modest "first-year-out-of-school" income. A year and a half later, though, the total for both is just under it. Because I budgeted rent against the student loans - and withheld from buying a car - writing the check for my student loans each month has never felt particularly painful.    

Sunday, May 22, 2011

The value of maiden names

A recent study (discussed in the likes of “Smart Money,” “Daily Finance” and MSN Money) suggests that women who kept their maiden name obtained higher education levels, had fewer children, more successful careers and higher salaries. The value of the maiden name, the study concludes, is about $500,000.

And so we’re invited to conclude: if you want to make half a million dollars more during your life, just keep your last name. Women who do have higher incomes.

And while I was intrigued by this concept, being a gal who decided back in high school that I would probably retain my maiden name (I see adopting someone else's last name as unnecessary and archaic) I was humored by the suggestion that keeping your name makes you earn more.

Because here’s the thing: for me, having a good career is far more important than keeping my name. I give a lot more consideration to what I should do with my life than I do arguing with people on the virtue of to whom my mail is addressed. And if I end up making $500,000 more than the average bear, I'll probably chalk it up as ambition rather than holding out on a name change.

I think you can make $500,000 with your last name, his last name, or the last name "Poobehr." I don't think it matters nearly as much as where you've set your sights.

And so this article prompted me to make the following suggestion: isn’t it far more likely that women who pursue higher education and boast high incomes incidentally choose to keep their last name – that perhaps when women are working hard and making bank, they’re less likely to worry about taking someone else’s? It seems a bit more likely than the possibility of simply keeping one’s last name as insurance for a future of fortunes.

I feel like this article proudly asserted: being fat makes you eat more fast food!
And I’m left questioning the obvious discrepancy in the logic.

Knicks-knacks aren't investments

Marketing is a funny thing. It can convince people to buy things before they even realize they don’t want them, and, perhaps worse, it can lead people to believe that something barely worth what they pay is an “investment.”  

Americans, especially, have been caught up in these marketing schemes for knick-knacks and “collectibles;” we have bought into the concept of buying these things as “investments” with the expectation that we will someday sell them for a profit.

The worst culprits, according an article from “The Street” fittingly titled “9 Completely Worthless Collectibles,” include well-known (and perhaps beloved) items like Precious Moments, Beanie Babies, Cabbage Patch Kids, Thomas Kinkade prints, Norman Rockwell plates and Lladro statues – mostly items that have now come to symbolism “American kitsch.” I think all of us have been caught up in at least one of these brands, holding on to it with the belief that it was worth something. Even one purchase made with this assumption, however, is too much.

Many of these things are barely worth the packaging they came in, which happened because, when popularity increased, so did the producers’ appetite for income and thus so did production levels. I’m not sure if these companies lack a basic understanding of economics, but many of them drove themselves out of business. Stuff peddled as “limited edition” was, in actuality, the result of “unlimited” production. And, as our first economics class taught us, supply and demand dictates that as supply increases, the market value of demand does the opposite.

The moral of the story? Don’t put your money on something that isn’t a proven investment. Don’t take everybody else's word for it, and don’t buy into something just because your aunt owns a huge collection, you’re lured in by its doe eyes, or you like the catchy slogan (like Kinkade’s self-proclaimed status as the “Painter of Light.” He’s bankrupt now, by the way.)

Always do your research. And if you are going to buy yourself some kitsch to proudly display in your glass-faced cabinet, at least do it with the honest understanding that it’s probably not worth what you paid, and very unlikely worth more.

Myers Briggs yourself

Myers Briggs is one of the leading personality assessments and is not only one of the most reliable indicators of your unique perspectives, values, ideals, and objectives, but is also very effective at guiding individuals in establishing a lifestyle more ideally-suited to them. You feel like something is just ever-so-slightly amiss in your life? Maybe you never knew that you actually need to help people rather than simply sell them things. Or maybe you’re anxious because you recharge your batteries alone rather than with others.

And just maybe you’re making six digits but still feel unhappy because you desire to study philosophy on Saturday mornings rather than buy another pair of shoes.

Myers Briggs can not only help you identify ideal career paths, but can also help you make decisions that will establish a better lifestyle for you. If you drill down to determine that you value travel over security, you know that you’ll be happier taking a trip to Hawaii than you will buying that Pottery Barn couch.

There are countless assessments that help you identify your Myers-Briggs type. Take several and read the results – they may differ depending on the questions asked – but ultimately a pattern will become apparent. Then read careers, values and needs associated with that type. Then pursue those and ignore the rest.

Take one here:

Your shopping style

Our shopping habits are defined by far more than our budgets. The vast majority of our purchases are “wants” rather than “needs” (despite our proclamation, before heading out, of: “I need to run by Banana Republic; I need a couple of new cardigans”) and, with this in mind, our shopping habits are dictated by how we define what we want – our overall objectives (which may or may not have anything to do with shopping), our attitudes, and our self-perception.

I was recently reading an (unrelated) book that put shoppers into five categories:

• The browser: window shops for amusement, but rarely gets their wallet out and pulls the trigger. They may troll travel websites, determine that their dream trip is Argentina, but then never go.

• The impulse buyer: buys without a lot of analysis; they always end up with extra things in their grocery cart, and big sales are minefields for them. As soon as they identify an open week or two, they’ll buy a plane ticket on a whim at 2 am.

• The loyalist: has a wallet full of store credit cards (with balances), will wear anything their favorite designer sells, and will never drive anything but Lexus/BMW/Chevy. They found their ideal vacation spot a decade ago, and would love to visit the same one every year.

The comparison shopper: spends an inordinate amount of time identifying the right purchase and ensuring the lowest price. The opposite of the impulse shopper, it may take them three months to pick their perfect winter coat. Christmas gift-giving is especially time-consuming. They rarely suffer buyer’s remorse.

The “cost is no object” shopper: their matra is “you get what you pay for” or perhaps “go big or go home.” When they travel, they do it in five-star hotels.

I am the "comparison shopper" through and through. Servers often have to come back three times before I have decided what I want to order, and there may never be a house that seems better than any other and great enough to buy. Someone else in my life is the "impulse buyer" - though he rarely shops, he comes home with something when he does. We always end up with unexpected chips, crackers and cookies in our basket at the grocery store, and he can pull the trigger on major purchases within a single day.

Which are you?  

Your money attitude

How do you perceive money? What’s your relationship with it?

According to a recent study highlighted by the New York Times, you fit into one of four categories, and your lifelong spending habits, savings success, and even self-worth is dictated by that attitude.

The four categories, as labeled by an msn article, are:

• Money avoiders: these folks dodge the very concept of money, and tend not to think about it. They are often young, and figure that their income and spending will “just work out." As a result, they tend to be low income, low net worth, and may abuse credit cards.

• Money worshippers: believe that money is the answer to almost everything. They use money as a barometer for their self-worth and the worth of others, and are in constant pursuit of status symbols. As a result, they often drive themselves into debt chasing a status that will impress others. They often believe just a little more income – or winning the lottery – will solve everything. Unfortunately, most Americans fall into this category.

• Money worriers: individuals in this category spend an inordinate amount of time stressing over money. They have a direct link between their net worth and their self-worth.

•Money guardians: these folks get more enjoyment from saving than spending, and tend to be very effective at managing their cashflow. The only downside associated with this category is that they spend their entire lives saving, they may not experience all that that money could buy.

I would call myself mostly a "guardian" with perhaps some "worrier" tendencies.
What style are you? 
Here’s the original New York Times article:

And here’s a great summary of the piece, by msn:

Challenge the "one-third" rule

Once we land ourselves a suitable job, most of us begin to get the itch to shop for homes – not just any home but, more specifically, we tell ourselves we’re looking for “the first home.” The starter kit to get us headed on the right path of adulthood, to set us up to just maybe buy the “dream home” later on.

So we start home shopping on the weekends. We get up, go to Starbucks – a skim latte for him, a half-caff for me – and then we hop into the car together and start touring these open houses like we know what we’re supposed to be looking for. (Granite countertops and oak cabinets? That’s good enough for me!)

And when we start finding homes we like – maybe even a home or two that we love – the next thing we all want to know is: how much can I spend? What’s the most I can comfortably afford for a mortgage?

And the “rule of thumb” response is: one third of your paycheck.

So that’s what many of us do.

And every month, we sign away a third of our earnings to live in the home we chose, and then we only have two-thirds left for food, transportation, debt repayment, new clothes, dry cleaning our clothes, entertainment, the newest issue of our favorite magazine, and savings. 

When did housing become so entitled?
The reality is: when we let it.
Neither physics nor calculus dictated that housing had to cost us a third of our earnings. We did.

When? At the beginning of the 20th Century, when brokers and architects were selling what they called “pattern homes” to the middle class: they would market a book of half a dozen designs for the consumer to choose from, peddling the virtues of home ownership – respectability, social status, and financial comfort. And when they were asked, by the customer, how much they should spend, they astutely responded: "one-third of your earnings."

It was, perhaps, the most they could get away with before putting homeowners into financial hardship. And why wouldn’t they? Over the course of 30 years, you’ll likely pay twice the price of a home in mortgage payments, half of which is actually for your home, and the other half of which goes straight to your bank.

What if, however, we budgeted one-fifth instead of one-third? 20% instead of 33%? And what if the extra 10% was allocated to that savings target we never seem to hit each month? And what if we spent our careers building our own wealth – rather than that of our banks and brokers?

Saturday, May 21, 2011

What our parents teach us

We learn a lot of our personal finance skills from our parents. From our first few dollars of allowance to the budget we’re given for prom; from the quarter the tooth-fairy gives us (I hear it’s a five-spot nowadays) to the birthday money that arrives in the mail - which often passes our hands only briefly on the way to our baby saving account - our foundation of money-management skills is laid early on.

There are lessons we learn directly – like while shopping sales at the big department stores as a child, my mom would sometimes agree to buy me something only if I could correctly calculate the sales price at 20% off. She often turned down my requests for the “latest and greatest” trendy item, and pushed me to choose a career that would set me up for stable income. When I asked my parents why we didn’t live in the slightly nicer neighborhood adjacent to ours, my parents responded, simply: “we could have!" And when I had my first job and began stock-piling new CD’s and American Eagle bags in my room, justifying the purchases by assuring her “it was only $20,” Mom would gently remind me: “$20 five times is a hundred.”

The bigger lessons, though, were the ones that went unsaid. There were the nights, once a month, when my parents would sit down at the kitchen table together, after dinner, and go over their bills, delegating responsibility like Fantasy football picks. My parents rarely bought themselves new clothing, but remodeled the kitchen at least three times in the last twenty years. I watched as my mom stressed over several lay-offs and career changes and I watched as my dad quietly brought home the bacon and dutifully allocated it to the home and the family, rather than buying himself one of the 1960’s muscle cars he yearns to own.  

From them, I learned to choose a career wisely and work hard. I learned to make sacrifices to meet my goals. I learned that, if you avoid impulse purchases, chances are you will forget all about it in a week. I learned that I want financial stability – and the ability to pay my monthly bills with ease – more than I want a car or a pair of Jimmy Choos or a ping pong table.

What did your parents teach you?

The 50-30-20 Budget

The beauty is in its simplicity: you divide your income into three easily-remembered chunks, and you can manage it easier. It goes like this: you allocate 50% of your income to your needs, 30% to your wants, and 20% to savings. Now, obviously things get a little tricky – “food” is a need, but “martinis and tapas on Friday night” aren’t. But, that aside, the real objective is obviously keeping your “obligatory” expenses (like your car payment and your mortgage) under 50% of your income, and tucking 20% away in savings.

Here’s a quick calculator for you to calculate yours:

And here's a good article on the concept:

Okay, so I'm always drawn to a good simple metric, and I love how straight-forward this pie chart is. Though it delighted me, however, it left me with a big question: what if we rotated the labels of the pie chart sections and their percentages?

What if we kept the 50-30-20, but rather than assigning “savings” the lowest piece of the pie (and, incidentally, lowest priority) we instead promoted it to the biggest piece and made it the top priority? What if we aimed to save 50%, making the pie look a little more like: 50% for savings, 30% needs, and 20% wants?

The answer? It would demand that we exercise even tighter management and discipline, but it would also promise a bit more reward for double the contribution to savings in the long run.

Is it possible? Absolutely it is.

We are misled

This is what we’re told:

This is what we’re served

There’s an obvious disconnect here.

As people, we seek guidance in our life decisions. We fundamentally want to trust someone to give us a framework with which to make choices, and we want to believe that that guidance is legitimate. We buy into the food pyramid. And we also want to put our trust into restaurants and think that they're using a degree of integrity in the food we're served.

But what happens when the nutritionists say one thing and then the companies that are in the business of feeding us do another? What happens when restaurants knowingly design entrees that have twice the calorie count for our entire day?

It necessitates that we use discretion. That we operate with a degree of skepticism with regard to things around us, and make decisions using critical analysis. We know that the food pyramid instructs us to eat more vegetables than meat, and yet we have adopted a culture of defining our food not by the veggies but by the meat that it features as the central focal point. (You would never order your meal at a restaurant by identifying it as “the spinach.” No, we identify it as “the salmon” or “the chicken.”)

This is not the only conflict like this in our society.
Good decisions require that we identify and challenge the contradictions in things we’re led to believe.

On the lottery

I am opposed to the lottery.

This perspective is rooted in both financial and moral reasons and, though my moral reasons are the stronger drivers, the financial ones are much easier to discuss. Sociologically and psychologically, I understand why the lottery exists – who wouldn’t turn down a chance to end all their money woes for a few bucks - but I also feel that the numbers aren't given nearly the attention they deserves.

Your personal finances lose
Lotteries are marketed towards the low-income demographics, and there’s a reason for it: they are for people who are bad at math. An education in statistics often dissuades an individual from playing the lottery – the odds of winning the Colorado Powerball are, as of today, 1 in 196 million. (That is, according to an article from the New York Times, about the same probability of being eaten by a shark and a tiger in the same day. Sounds ridiculous, right? I agree.) And yet we struggle to conceptualize those preposterous odds when buying our lottery tickets, because we fail to translate the odds into context we can understand. Even worse, though, are the folks who buy two tickets. Their new odds of winning? Essentially the same.

The lack of that statistics comprehension, combined with a state of economic desperation, makes the lottery seem like an easy bet. "I might not win" we challenge: "but for a dollar, just maybe I could get out of this trailer forever."

Consider this, though: our odds of not winning the lottery are almost 100%. So if you buy a lottery ticket once per week for 40 years (and I understand that many of us who “dabble” don’t do that, but there are also many, many people who do), you would end up spending $2,000 over that time for a 1 in 196 million chance at winning. If you put this in a savings account instead, you would absolutely have a balance of $4,000 at the end of those 40 years. Versus the very likely balance of $0.

Even the winners lose
When people discover they are the proud new owners of such large sums of money, they also have the unfortunate fate of having acquired it without first developing an understanding of it. Few of us would argue that managing our finances takes at least some basic skills – memory of our latest transactions, a quick guestimation of our account balance, some percentage calculations in determining tips, etc. – and many of us would likely agree that, when you increase the amount of money so dramatically in such a short period of time, it’s unlikely that your skill set will sufficiently evolve in the same timeframe.

The sad reality is that many lottery winners end up bankrupt for this reason – about one third file within a few years of winning.

The answer to all our problems and our ticket to happiness is not being handed a lump sum of more money than we can even wrap our mind around. Playing the lottery is more likely to instill in us feelings of desperation and disappointment over something that, statistically, was never meant to deliver on our hopes. In this sense, the lottery is more successful at cementing our economic and social state than facilitating our escape from it. It would behoove us to direct our mindspace at achieving our own means of transcending it than wallowing in turmoil over not winning the big one.

Monday, May 16, 2011

Read the fine print

You have two options for breakfast: a Clif Bar or Pop Tarts

Which do you choose?

Maybe you’re thinking: “oh, man! Pop Tarts?! I haven’t had those since I was a kid! I’m definitely gonna have me some of those!”

But, on the other hand, just maybe you’re thinking: “Oh, I like to eat healthy. I’m gonna go for the Clif Bar.”

And I share that logic. It makes sense. Because here’s the thing: Clif Bars are marketed to health-conscious consumers, wouldn’t you agree? I mean, they sell them at Vitamin Cottage, right there alongside the “vegan-barley-soynut-antioxidant-immortality granola.” The package has an image of a mountain climber, for Pete’s sake, as well as a really compelling story of how a cyclist founded the company. Guys, this stuff is for outdoorsy people. For athletes. For people who are in shape. And healthy.
That’s what I want to be, too.

Flip the packages over, however, and you see this:
Pop-tarts:                     Clif Bar:
Calories: 200                 Calories: 245
Total Fat: 5 grams         Total Fat: 5 grams
Sugar: 16 grams            Sugar: 22 grams
Carbs: 38 grams            Carbs: 42 grams

But what about the protein, KG? It’s a protein bar.
And you’re right. A Clif Bar has a whole 11 grams.
If protein is what you’re after, though, you’re better off having cheese sticks – two of them have more protein (12 grams) for about half the calories (120) and only two more grams of fat.

(“But wait, KG,” you might remind me, “this is for breakfast. Nobody eats cheese sticks for breakfast!” To which I might say, “well, actually, there’s no rule against it – I’m sure people do – but I see your point. In that case, if you’ve got some time on your hands and are feeling a little crafty, you could hard boil three eggs and eat the whites. They’ve got the same 12 grams of protein but with much fewer calories (about 50 calories for all three) with 0 grams of fat. Better?”)  

In any case, the Clif Bar remains the least healthy of your options.
And I can't even begin to guess how many Clif Bars I ate before I thought to compare them to Pop Tarts.  

There are a lot of things in life like this – things that are presented as one thing but then fail to deliver on the subliminal expectations. But few of us take the time to read the fine print – to pick it apart and figure out if it actually is what we are led to believe it is.