Photo by: whitetiger8370

When I say times are tough, it’s not exactly news. My family, like a lot of others in North America, is not only  frightened of investment losses and impending layoffs, we’re already feeling it. Since money is sparse, my parents and I have decided to “cancel” Christmas. No gifts!

My mother is a supervisor in a large corporation’s travel department. She oversees corporate travel and their clients include an ailing North American car manufacturer, a bailed out American bank and an investment bank that filed for bankruptcy earlier this year. Business in 2009 isn’t looking very good and there’s a real chance she’ll get laid off in the new year.

Knowing this, my parents are trying to save money just in case. Mom’s near retirement, but not quite ready for it. She doesn’t like the idea of not doing anything, especially if early retirement means less desirable health coverage.  In efforts to save money, we agreed we wouldn’t get Christmas presents for each other. While others may find this a terribly sad, I’m actually looking forward to Christmas this year—more than other years. Two less gifts to buy means less time in a crowded shopping mall. That means more time with loved ones.

Your two cents: I know we’re not the only family approaching the holidays differently. Are you and your family changing your holiday spending habits this year?

Photo by: Stopdown

Maclean’s latest cover story, “Living On Less” takes an optimistic stance on the troubled economy. The writers Colin Campbell and Jason Kirby suggest that a frugal life could very well be a healthier and happier life—especially for Generation Y.

For a younger generation, a shift of this kind may prove more painless. In fact, their values and attitudes toward money, work and the environment may be helping to drive the change. Eric Meerkamper is a partner at the youth research marketing firm Decode in Toronto. More than having a house and a nice car, he argues, young people value having balance in their lives. “They still want more but not in [terms of] accumulating things necessarily,” he says. Money is important, yes, but work is seen more as “an enabler to living a full life,” he says. Smead, the author of Don’t Trust Anyone Over Thirty, believes people in their 20s, have come to realize they won’t have the same standard of living as their parents, resulting in lower expectations. In short, he says, “they’ve got a more realistic view of the world economically.”

I found Meerkamper’s interesting since I’ve read more negative views of my generation. Those of us in our 20s are often described as materialistic, confident and although tech-savvy, we’re awfully ignorant of the world around us.

Earlier this month, The Guardian asked “The generation facing its first recession. How will they cope?” Writer Tracy McVeigh described 18 to 27-year-olds as “dream consumers” and writes:

The average Generation Y-er does not know the difference between a credit card and a debit card, according to a Bank of Scotland survey, and, while two thirds know the price of an Apple iPod Mini (£179), three quarters have no idea what a pint of milk costs. One in eight thinks that ‘in the red’ means being embarrassed. They each have 800 illegally downloaded songs, and one in 20 spends more than £100 a month on mobile phone bills. Many never read newspapers and two thirds do not vote.

If the credit crunch becomes a full-scale recession, no one will get a bigger shock to their aspirations than this pampered, techno-savvy generation.

Obviously, there are exceptions to every blanket statement. I think that despite some debts, most of my friends fit under Meerkamper’s description. We’re also folks who do our own grocery shopping, follow current events and we all voted in this month’s federal election. Unlike the young people interviewed for McVeigh’s article, we’ve all graduated from university and are employed full-time. We also have different views on money than we did five years ago. I like to think it’s just that we’re older and wiser, but is McVeigh right and we are the exception?

What do you think? Based on the 20-somethings in your life, do you think we’ve got a more realistic view of the world economy or are we about to get the biggest financial shock of our lives?

I’d like to be more like Barbara Raab. The NBC news writer temporarily traded her in her job to teach journalism at a public university. Although she took a big pay cut, she manages it in large part to her lack of stuff:

To me, having and wanting “things” just means more “stuff” to take care of, and I don’t want to be bogged down by “stuff.” Other than a second bedroom, and my own personal washer/dryer (sadly, my building does not allow the latter or I’d have it in a heartbeat), I can honestly say that I have pretty much every “thing” I want, so even though taking a giant pay cut to teach at a public university isn’t easy, I knew I could make it work for a short time without a lot of pain.

I’m in the process of moving and if my constant relocations (nine in four years) have taught me anything, it’s that I have a lot of things. This stuff is not only plentiful, but it’s also, for the most part, unused. Although I’m pretty good at avoiding the “stuff traps” at the mall, I’m still guilty of stupid souvenirs and buying too many pens. I’ve even impulsively bought records despite my lack of a record player. I am reminded of these stupid purchases every time I pack my things up and move.

Packing up and moving is a pain, but at least it forces us to stop and take stock of our belongings. We have to go through every nook and cranny of our homes and separate the things we want to lug across town/country/world from the things we don’t.This is a healthy thing. Not only do we get rid of excess in our homes, but it reminds us to think twice when we feel the impulse to buy something we don’t really need.

Stuff really weighs us down. For me, it’s an overwhelming psychological weight, the same kind of feeling I have when my apartment is so messy, I don’t want to spend time in it. It’s also an economical weight that eats away at our back accounts that has little or no return.

My goal for the rest of October and November is to get rid of stuff. So far, I’ve donated a box of kitchenware, set aside a box of books and CDs to sell or give away and freed a bag of clothing for donation. The stuff that I really hate is paper. I’ve got receipts, bills and bank statements that go back five, six, even seven years. They don’t take up much room, but when I get that organized, I’ll feel a lot lighter.

What’s weighing you down?

Photo by: FreaksAnon

It’s easy to get off track with healthy eating and exercise goals, just like it’s easy to lose sight of personal finance goals. I’ve been feeling stressed out and unfocused lately, and it’s not just because of the looming recession. I haven’t made a healthy diet and regular exercise the priority I’d like it to be.

The result is that I’ve become a less productive employee and a generally less present partner and friend. I believe that everything is related: our relationships to our mental and physical health and money matters. This is especially true when looking at how an unstable economy can have a profound affect on our health.

On Tuesday, Dr. Brian Goldman, host of CBC Radio’s White Coat, Black Art was just on Here and Now discussing the relationship between a recession and mental health. He says the suicide rate is so much related to a recession that its peaks can be seen as a way to foresee a recession.

The Irish Times also asked if ill health in the economy can make us unwell. Its article said:

Several UK studies from the 1970s and 1980s show the unemployed tend to have much poorer health than those in work. The British Regional Heart Study reported high death rates among unemployed men, while the OPCS longitudinal study found especially high levels of lung cancer, suicide, accidents and heart disease among the unemployed.

USA Today columnist Mark Siegel urged readers “don’t let the economy kill you”:

Though stress in society at large is impossible to measure, we’re already seeing anecdotal evidence suggesting that angst is spreading. In New York, calls to the Hopeline network for people with depression or suicidal thoughts increased 75% in the 11 months ending in July. And according to United Health Group, the largest U.S. health insurer, hospital admissions for psychiatric services are up 10% this year over last year. Medical illness is sure to follow.

Harvey Brenner, professor emeritus at Johns Hopkins’ Bloomberg School of Public Health, projects that an increase of 1 percentage point in the nation’s unemployment rate could cause as many as 47,000 more deaths —including 1,200 more suicides and 26,000 additional heart attacks —over the ensuing two years.

These articles just confirmed the need to live a healthier life to combat this nasty economic situation. My half an hour walks to and from work have been a good start, but I need more activity to help me with my focus and relaxation. I’m taking Seigel’s advice and start practicing yoga and meditation. In times like these, it’s easy to be bogged down by what we have less of, or don’t have at all. But to combat the stress and improve overall health, it’s best to nurture and appreciate the things we have: health, partners, friends and family.

Photo by: nromagna

I know I wasn’t the only person who read about or watched the news of Wall Street’s chaos and felt completely confused about what happened, how it happened and why it mattered to me. To be honest, I’m still getting a grasp on it. But as I hoped it would, my favourite podcast This American Life has tried to explain it in its latest episode, “Another Frightening Show About The Economy.”

In this podcast, journalists Alex Blumberg and Adam Davidson detail the financial crisis in plan English. They start with the day the market died, specifically examining the fall of the commercial paper market, which is explained as “an industrial sized I.O.U.” They also discuss credit default swaps and examine whether the $700 billion bailout bill signed last week was a good or bad deal for the average American.

This isn’t something you’ll want to listen to while grocery shopping. It deserves your attention if you’re interested in how this affects you, which it will–even if you’re a Canadian watching the situation from north of the border.

You may also be interested in listening to Alex and Adam’s older episode “The Giant Pool of Money” which examines the American housing crisis, one of the reasons Wall St. is in this mess to begin with. Download the latest podcast for free now and stream (or pay $1 to download) the archived episodes of TAL.

If you have other resources for simpletons like me, please share them in the comments.

Photo by Andrea Chiu

Some politicians will tell you that being green means spending more money. Not true if you ask me. In fact, becoming a little more environmentally-friendly is often the way to save yourself some green.

In a recent Treehugger post, Frugal Green Living: Save $1000 Using These 6 Tips, writer Colin Dunn suggests the following:

  1. Hang your laundry out to dry
  2. Eat more veggies and less meat
  3. Set your thermostat wisely
  4. Convince your boss to let you work four (slightly longer) days a week
  5. Walk or bike on one trip that’s two miles round-trip/week
  6. Make your own all-purpose cleaner

For a breakdown of how Dunn came to the $1000 figure, you’ll have to read the whole article. Obviously, not everyone will come away with the same results. If you already pack your lunch, you probably won’t save the $10/week from working four days a week. If you live in a climate like I do, winter forces you to put away your bikes and turn up the thermostat.

Commenters on the blog have also pointed out that meat is actually cheaper than many fruits and vegetables. I suggest replacing meat with beans instead of vegetables all the time. They provide protein, are filling and are much cheaper than meat.

My favourite way to be eco-friendly and economic is to carry around my Sigg water bottle. At $25, it wasn’t cheap, but I haven’t bought a single bottle of water since I got it months ago. It also stops me from buying juice or pop. I estimate this simple act has saved me $2/weekday. That’s $10/week and $40/month.

What are your favourite ways to cut costs and your carbon footprint?

Photo by: Andrea Chiu

OK, I ended up going on that vacation which is why I haven’t written a new blog entry for a few weeks.  Sorry for the lack of entries and thank you for your input on my last post. I want to continue on this topic of whether you or me deserve a vacation while in debt. As we can see with all your comments, everyone’s got an opinion and they’re pretty diverse.

I asked Gail whether she thought a girl like me deserved to go on a trip and this was her response:

For a girl who calls herself an Unspender, you’re doing a lot of shopping: there’s the trip to Hong Kong, the new laptop (yeah, I know, the ipod was free), the wedding in Calgary and now the trip to Vancouver. Only you can decide if these are worth the long-term costs. It’s your money and your life. But don’t delude yourself. If you are spending money you haven’t yet earned, you’re not going to be in a Happy Place when a crisis hits. And if you think having a 5-year-old laptop was a crisis, think again. You may think you NEED a vacation, but you WANT a vacation. You NEED a roof, enough food, and clothes to keep you warm. You NEED to be able to get to and from work. (Okay, if you work on the new laptop, it might be a NEED, but only if you couldn’t work on the old laptop.) I’m not going to tell people they shouldn’t take vacations when they have debt. I do believe you shouldn’t spend one iota on unessentials until your debt is repaid — and while your vacation is a frugal one, you seem quite resigned to being in debt for a long time. Hmmm. Little Debt Fatigue rearing it’s ugly head? Have you calculated what it’d take to be out of debt in three years? Two years? One year?

Now I don’t disagree with Gail. I know the difference between a need and a want, but I don’t agree with the idea that a person in debt should not spend any  money on any unessential things until they’re in the black. That approach may work for some people and I tip my hat off to them. Unfortunately, I don’t think it’s realistic for me to exclude occasional trips to the movie theatre or a round of drinks with friends. That just isn’t living to me and I know I would be very unhappy and overwhelmed. I think many people feel the same way.

Reader and fellow-blogger Nancy Zimmerman has an approach I agree with much more. She put it well when she left this comment:

What worked for me in the long term – and this goes against almost all financial planners – was to pay just a bit more than my minimum debt payments, and just resign myself to that as part of my life for the next several years, and at the same time, start saving up for things and start investing.

That accomplished a couple really, really important things for me:
1. My money started being FUN and INTERESTING and ENCOURAGING instead of always only about the black hole of debt
2. I discovered what it felt like to save up for something, and go on a trip, and come back without having increased my debt.

Long term, the debt went away, and I still had the savings habit plus a portfolio.

Lots of people will say: don’t do anything but pay off your debt (often said with a judgmental tone!). That makes cold financial sense, true. But even more effective: for you!

I couldn’t have said it better myself. Let me know, would you recommend Gail or Nancy’s approach to becoming debt free? Perhaps you have another way of attacking debt?

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Photo by: E-Rocks

After waiting it out, I finally booked my flight to Vancouver. In about 10 days I’ll be flying off for a week-long vacation. It’ll be the first vacation I’ve had in two years and the first since I returned from Hong Kong. Because of this, I’ve convinced myself that I deserve it. But after reading Gail’s blog entry, “How Did We Get Into Such A Mess,” I feel a little guilty. She writes:

There are also a fair number of people who feel entitled. “I work hard, I deserve a vacation.” If I had a dollar for every time someone has said this to me, I could cruise around the world…twice. People believe that just because they want something they have a right to it, regardless of whether they can afford it. That’s how Buy Now Pay Later became such a hit. “I want it. I have to have it. If I can’t pay for it, I’ll just find a way to get it without paying for it.” Then when the bill comes due at a whopping thirty-something percent, people whine about how rapacious the rates are.

Of course, we all know that Gail is right. But it’s not that I deserve a vacation less than someone who is debt-free, I just can’t afford it as much as someone else. To answer my own question, I feel like yes, I do deserve a vacation, but at what cost?

There’s a part of me that feels immensely guilty for taking a week-long vacation. Instead of spending $1,500 on a trip, I could be contributing that to my debt. But the sad fact is I won’t be out of debt for a few years still. Am I not supposed to go on vacation until I’m completely in the black?

This is when I think the “everything in moderation” belief comes to play. I’m not going to another continent and staying in expensive hotels. I’m going to British Columbia on a seat sale, staying at friends’ places/hostels and have a planned budget. If I pay everything off without paying interest, should I still feel guilty?

What would you do? Would you still go on vacation despite being in debt? Would you put your vacation money towards your debt?

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Photo by: Paul Keleher

Saving money while still in debt may seem like a silly idea. Why not put that money towards debt and lower your money paid to interest? But on my journey to debt-free living, I’ve found that almost everyone suggests setting up an emergency fund—even if you’re in a lot of debt.

The logic is that if you are unlucky enough to be laid off, have an accident or fall victim to a natural disaster, you spend your money and not a credit card, line of credit or anything else that will charge you interest. Instead of paying $800+19% interest/month to get your car fixed, you’re just paying $800.

At first, I was tempted to put $1000 into my credit card debt instead of setting up an emergency fund. But the more I read about other people’s debt, the more I realized that many of these people started out in a little bit of debt like me. But then they found themselves without a job or had a medical emergency. They didn’t have an income or an emergency fund to pay for living expenses. Instead of being in $20,000 of debt, they soon found themselves with a mountain of $100,000 or more debt to pay off.

I didn’t want fall into that trap so I deposited my tax return into a high-interest savings account at my bank. I know it’s not much and I admit I’m having difficulty following my budget these days, but It’s comforting to know that there’s money in the bank in case of emergency.

Lesson learned: No matter what, have an emergency fund for those unpredictable situations. You never know what will happen.

The news is not short of articles about debt, recession and every day financial matters. But I was surprised to see that Margaret Atwood is the latest author to tackle money matters. I’ve always respected the first lady of Canadian literature, but wouldn’t call myself a fan. Still, the idea of a talented writer philosophizing about money matters  excites me.  The acclaimed author of The Handmaid’s Tale, Alias Grace and Oryx and Crake will release her new book in October. Titled Payback: Debt and the Shadow Side of Wealth, it is described as follows:

The most prestigious and eagerly anticipated nonfiction series of the year teams up with legendary poet, novelist, and essayist Margaret Atwood to deliver a surprising look at the topic of debt – a timely subject during our current period of economic upheaval, caused by the collapse of a system of interlocking debts. In her wide ranging, entertaining, and imaginative approach to the subject, Atwood proposes that debt is like air – something we take for granted until things go wrong. And then, while gasping for breath, we become very interested in it.

Payback is not a book about practical debt management or high finance, although it does touch upon these subjects. Rather, it is an investigation into the idea of debt as an ancient and central motif in religion, literature, and the structure of human societies. By investigating how debt has informed our thinking from preliterate times to the present day through the stories we tell each other, through our concepts of “balance,” “revenge,” and “sin,” and in the way we form our social relationships, Atwood shows that the idea of what we owe one another – in other words, “debt” – is built into the human imagination and is one of its most dynamic metaphors.

CBC Radio’s Ideas will also be presenting a lecture series to go along with the release of the book. Atwood will be speaking in cities across Canada, all on the topic of debt.

I’ve already reserved my copy at the library and look forward to posting a review.

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