The Year of the Ox
Posted by Gail | Filed under Debt Traps, Saving
Gung Hay Fat Choy! Today marks the beginning of the Chinese New Year and ushers in the Ox. The Ox is all about prosperity through hard work, modesty, and unswerving patience. How fitting. With the much of the world’s economy in a major slump and people hunkering down to preserve what they have left, the Ox seems like a sign of the times.
So, are people finally getting the message that we have to live within our means, and that we have to save sumthun? I dunno. People are always giving me their excuses for why they DON’T save.
- “I don’t make enough to save anything.”
- “I’ve got a lot of debt and I need to get that paid off first.”
- “I’m too young to worry about retirement now.”
- “What’s the point? The economy is in the trash and my money won’t be worth anything.”
- “You have to live for today, man.”
- “I don’t make enough to save anything.”
- “I’ve got a lot of debt and I need to get that paid off first.”
- “I’m too young to worry about retirement now.”
- “What’s the point? The economy is in the trash and my money won’t be worth anything.”
- “You have to live for today, man.”
I’m all for living for today, but not at the expense of Taking Care of Business. Over and over I meet, work with or hear from people who have hit a wall. With no savings in hand, they can’t bounce back. With nothing set aside, just in case, they’re at a loss for how to cope.
So is it simply that people don’t know they’re supposed to save for a rainy day? Have we bought that line of crap we’ve been sold about credit being an acceptable source for an emergency fund? And do we think that bad things can’t happen to good people?
Or is it simply that we don’t give a rat’s butt? We’re completely content to spend every cent we make – more, if we’re using credit – and we’ll just declare bankruptcy or leave the other guy holding the bag when we default on payment.
Are we ignorant, or apathetic?
I think it’s both. I think that the value of saving has been undermined by easy access to credit. We don’t have to set aside money for that new… whatever… we want to buy, we can simply use credit and we’ll have it in our hot little hands. We don’t have to worry about having enough insurance, because we can always use credit to fix the problem. We don’t have to accumulate an emergency fund because that’s what a line of credit is for.
We’ve been convinced that “interest” is an acceptable expense, and we’ve been conditioned to believe that being in debt is a natural state of being. It’s not. It’s unhealthy and we’re seeing the implications of spending money we haven’t yet earned right now in our economy.
As for the apathy, that’s the result of our sense of entitlement. We work hard so we deserve to be able to buy whatever we want whenever we want it. We think we’re make loads of money because we’re thinking in gross dollars and never considering what it costs us to keep body and soul together.
People, while it’s a happy message, la, la, la, you’re NOT richer than you think. If you owe so much as a penny on your credit card, line of credit, student loan, whatever… you’re poorer! It’s time to stop living in an unrealistic haze and face up to the mess. More credit won’t solve the problem. Not spending more money than you make will.
Saving isn’t a nice-to-do and we have to stop treating it that way. Saving is a must do. Having money at hand is what gives the flexibility to cope with the crap that inevitably comes up in life. Money gives us options. No money… no options. Sad life.
And as our apathy, we had best face up to the reality that our homes no longer qualify as our combined savings and pension plans. Residential property is an asset class, just like stocks and bonds. The values can rise and fall. So putting all your eggs in one basket just means you’ll be scrambling when values fall and you need money. And if you think turning to a line of credit is an acceptable emergency fund, then answer me this: once you emergency is over, and you’re thousands into your line of credit, how will you cope with THAT emergency?
Time to make like an Ox and do the hard stuff to fix what’s broke. According to some interpretations, the Year of the Ox doesn’t bring stellar anything. It’s a year for ploughing, laying the groundwork, getting things ready to take advantage of future fortune. Seems like a good plan to me.
January 26, 2009 at 8:05 am
Thanks very much for that Gail! I appreciate that. I think we all benefit from a reality check often, as you posted.
As for the, “I’ve got a lot of debt and I need to get that paid off first”, my initial thought years ago was that it was only logical to pay your debt first. It’s the priority….not! Many years back, I was watching television and was listening to Kendra Todd, the winner of The Apprentice season 2 and she said that when having debt, it’s vital to pay your debt off and save at the same time. If you put all your money towards the debt, not only won’t you have any funds saved for an emergency, but you’ll be left with zero at the end and during the process of paying your original debt, you’ll be very unmotivated, because you’ll have no money to yourself. An energy efficient light bulb went on in my head when I heard that!
Now, I’ve been paying off my student loan of 12,000 slowly and saving at the same time. It feels pretty good! Now, what to do with the 6% interest? I get charged about 1.91 a day. My credit is poor, because of claiming bankruptcy, but I could get a lower interest loan co-signed from my partner. Are there loans out there significantly less than 6%? What should I be doing Gail? Or anyone else, please.
Respectfully,
Josef
January 26, 2009 at 8:08 am
Great essay Gail! Very timely, and spot on. I completely agree with you- people have gotten used to a standard of living that they can’t afford, have been subsidising it with credit and now that credit is likely going to be harder to come by, they are in deep trouble. Hopefully the economy will give us the wake up we need. Life shouldn’t be about mindless consumer consumption- lets focus on what really matters…our relationships with others.
January 26, 2009 at 8:08 am
I really enjoyed this post Gail. I gave it some thought and wanted to post something worth while. I did a little more reseach on The Ox and here’s what I found:
The Ox, or the Buffalo sign symbolizes prosperity through fortitude and hard work. Ox people work hard without complaints at work or at home. They know that they will succeed through hard work and sustained efforts, and do not believe in get-rich-quick schemes.
Most interesting, some of the people born under this sign are Barack Obama & Margaret Thatcher. I think we all could focus on being a little more strong minded like the Ox and focus on hard work & dedication to ourselves this year. Let’s make this the year to establish savings, spend less, and pay off those debts. Slow down, enjoy your home and nature. Read, paint, go hiking, play with your kids & pets instead of shopping for entertainment. Recognize needs verses wants.
In 2008 the best thing I did for myself was set up automatic savings plans to my ING accounts. I think of those savings as a bi-weekly bill and I’m so proud of myself when I check my account balances. One is used for small home renos and the other is long term savings. This coming pay I will start a contribution to my tax-free savings to build a secondary emergency fund. I earned a small raise and the difference will now go to savings.
Gung Hay Fat Choy!
January 26, 2009 at 8:10 am
Josef, as someone who works for FI, the chances of getting a personal loan at less than 6% unsecured is unlikely. Especially with a prior bankruptcy. I would leave it where it is and perhaps round up your payments to help pay it off faster. Good luck!
January 26, 2009 at 8:24 am
Well said! Gung Hay Fat Choy
January 26, 2009 at 9:37 am
This post hits home for me. I used to think that LOC is OK as an emergency fund so we could concentrate in paying off debt. But then I quickly realized that going that path will just put us back in debt.. the exact same evil we’re trying to get away from! Duh!
So now, we are paying down our debt and saving as the same time. And it helps me sleep better at night for sure.
January 26, 2009 at 10:20 am
…apathetic or pathetic?…I wonder. When I hear some things I could just shake my head. Great one today, Gail. Your posts always give me a boost to push through my day just a little harder. And I agree that this year will be a good one for everyone, maybe this is the wake-up call everyone needed!! Money doesn’t grow on trees, and is not a never-ending resource, and should not be abused, but treated with respect. And I’m not sure what that saying means but I’m sure it’s good, so ditto (ha ha)!
January 26, 2009 at 10:57 am
Great post! I recently talked to a financial advisor telling him about my plan of saving WHILE paying off debt. He kinda fluffed it off saying that I should pay all my debt first before saving anything and that my credit card or LOC could be my emergency fund… I couldn’t believe my ears… I wasn’t impressed to say the least. I’ll be finished paying all debt this year but have been saving every month also (now in TFSA) and I feel really great about that. I agree that it’s a great motivator to see that savings building up! I’ll have more to contribute to RRSPs later this year but I certainly won’t be using that financial advisor! Gung Hay Fat Choy to all
January 26, 2009 at 11:01 am
Last year, my husband and I were in a bit of a pickle. He’d just finished college and couldn’t find a job. I was the only one with an income and I did NOT have a well paying job. I made 1400 dollars a month and everything came from that. We had insurance, gas, hydro, the whole everything coming from that 1400. Rent was a very reasonable 675 (for the area we were in, for a one bedroom, it was an AMAZING deal. We couldn’t have had a bachlor anywhere in the city for less then 700).
At the time, I said we couldn’t possibly save anything because at the end of the month, we literally had a couple dollars left. Then I started watching Gail’s show… It was so funny to watch couples be shocked with their hundred dollars a week when my husband and I were on about a hundred dollars a month! We ate at my parents once or twice a month and my mom would send the leftovers home with me or pick up a bag of groceries. When we went shopping, we got very friendly with soup and peanut butter sandwiches.
Finally we decided we’d had enough. His student loan was going to have payments coming out soon ($400 a month. Not affordable in our situation at all.) We were going to move out with my inlaws (who’d generously offered us a room) and we’d find jobs out here. But we had very little savings! So we set a date and I started cutting back.
We had about 2000 dollars in savings when we started (from wedding gifts). When we moved (about six months later) we had 4500 dollars stashed away. I still really don’t know how I did it.
Anyways, sorry to go on and on… But I’m really happy about how we did.
January 26, 2009 at 11:07 am
To all those out there who think that the $5 or $10 hanging about is not enough to save~STOP IT. I used to be like that, and after reading on Gail’s sight about the discipline of saving, I just started to take what I had, no matter how small it seemed at the time, and put it away. I didn’t judge the amount as “too little” I just did it.
You will find that it develops the discipline of saving and the day that you have an emergency, or need extra cash and even a part of it is there you’ll feel better and over time the amounts you save will grow and so will you’re peace of mind.
January 26, 2009 at 11:27 am
Make the year of the Ox an inspiration for you!
Cathy, I agree. If you can get into debt at $5 a pop, you can save at $5 a pop!
January 26, 2009 at 11:36 am
Sigh, I’ll be going on my first vacation in a decade and a half of working. I’m wondering whether I shouldn’t be putting the money toward my mortgage, but I have the opportunity to go with a friend.
I won’t be using credit and I already double-up on the mortgage, and I have a modest emergency fund that would last a few months.
But it’s a strange feeling spending money when I’m not used to doing so. Habits work both ways!
January 26, 2009 at 11:42 am
…Marie, well put!!!
…Jay, if everything is in order – I say enjoy yourself. You will come back feeling refreshed and ready to go back at it. That’s my opinion.
January 26, 2009 at 11:50 am
I agree with you Gail, I think the primary reason is that people have gotten so used to the availability of credit that we’ve starting assuming that it’s a perfectly reasonable emergency fund. I also think that we’ve been oversold on the value of ‘having it now’ and taught that waiting is a form of self-deprivation, or self-harm.
Kim U – that’s an amazing story. It just proves that no matter your situation, you can make sacrifices to get to where you want to be.
Didi – isn’t it scary to get advice from financial advisors that seems so WRONG? I can’t tell you how thankful I am to have this blog where we can ask questions to such a smart woman who will give us practical, HONEST advice. Thanks Gail!
January 26, 2009 at 12:55 pm
I was at a party this weekend for one of those in-home sales, multi-level-marketing dealies. The presenter actually stated that if you wanted to spread your purchases out to hide it from your husband that she would help you. My eyes bugged out! Most of the other ladies just smiled and nodded.
I understand that she’s trying to sell a product, but the idea that this sort of thing is acceptable or possibly even laudable is pretty horrifying. And it’s an example of why people don’t have savings. Because they’d rather acquire stuff, even at the expense of their spouse, than exercise sound judgment.
January 26, 2009 at 1:32 pm
Jay, sounds like you got it everything well organized – an e-fund, doubled up mortgage payments and all cash ready to be used. After a decade and a half of working, you deserve a well-earned vacation. And yes you did earn it and deserve it. There is more to life than just paying debt – money is a tool that can help bring you happiness (note: money does not bring happiness on its own, but can be a tool that brings it). I guarentee you’ll be happy and have some great memories from the trip, ESPECIALLY since it’s your first and you worked hard for it. You’ll be that much more appreciative of the time you and your friend spend together in a foreign location. You could die in a year from now, and is all that you want from your life an asset that you can’t even collect on (because you’re dead)? Life is not about saving every day, but finding a balance between adventure, bonds with people and happiness while living within your means.
I, like yourself, find the act of spending money after squirreling it away for so long difficult, but sometimes you just need to let go when the opportunity comes and sounds like you have one. The mortgage will always be there, whether you go or not. So go for it! You can make us jealous when you come back.
Let go and have fun!
January 26, 2009 at 3:27 pm
Love this post. My DH and I set up an automatic deposit to an emergency fund a while ago. I remember that at the time neither one of us thought we could manage to put $100/month to the account. The first couple of months were hard, but then it just became like another bill. And it has saved us a couple of times for unexpected expenses like dentist bills that weren’t covered. Boy were we thankful we have the plan in place. This is our year to reorganize and set our plan in motion to build savings and decrease the debt. We’ve just gotten to a place that we’ve said “enough is enough”.
Thanks for another great reminder, Gail! I look forward to reading your stuff everyday and love to read everyone’s posts–I learn something new everytime!
January 26, 2009 at 3:41 pm
Hello! My name is Catherine and I am an ox…..yes, it’s my year…..
Great post Gail! Where were you years ago??? Pardon my moaning… I’m so glad I’ve found you now.
I’ve been dithering about a bit of extra cash I have whether to put it into our TFSA’s or pay more on the LOC….the post today tells me. Thank you!
Every day I’ve been throwing what change I have into a coffee can. I’m looking forward to rolling it all up and seeing how much I’ve saved…it will go in to the TFSA’s as well. Don’t worry Gail, I’ll be doing it frequently so my money works FOR me.
@Jay, go on your holiday. I agree you’ll be refreshed and raring to get back to saving when you return.
January 26, 2009 at 3:54 pm
Yup, time to wakey-wakey. Love this blog today. It rings out loud and clear. I use my brain now to figure out a way to make everything last longer and how to stay out of stores until absolutely necessary. I really try to be aware and more conscious on how ridiculous it is to throw away so much money(cents or big bucks) when not paying attention. (Too bad I didn’t clue in 10 years ago…)
@melaniesd- I appreciated reading that extra info, thanx for sharing.
January 26, 2009 at 3:55 pm
So, what would be the more *correct* approach to debt/savings? To pay minimums on CC and put everything else on savings? Maybe divide 50:50 the money between savings and CC? I am serioulsy considering to pay only the minimum this year on my CC ($8,000 balance) and put everything else in my ING savings account. If I keep my job (my company is very shaky this year), I can get the money later from my savings and pay my CC when I get to that amount… would that be that smart?
Thanks!
January 26, 2009 at 5:13 pm
Agatha,
Find a way to be more aggressive on your CC. I don’t know how much the minimum payment is, but the interest rates are foolishly high, so paying the minimum won’t take you very far. Do contribute to savings, but put more weight in debt repayment. As Gail’s suggested ratio is – 15% debt, 10% savings – more should be covered off on CC if possible.
As for your question, your CC interest would outweigh the interest you’d get from a savings account, so you’d actually be losing ground.
Another recommendation is look into getting a line of credit if possible. Typically, LOC have much lower interest rates than CC, so more of your payment goes towards the principle, meaning you can pay it off faster.
January 26, 2009 at 6:31 pm
Agatha: Remember Gail’s first rule: pay off your consumer debt within 3 years or less even if that means paying 25% to debt. Make it happen by reducing your variable expenses.
January 26, 2009 at 10:01 pm
Agatha:
If you choose to pay no more than the minimum, you could end up worse than before. Make sure that you pay more than the interest charged for the month. You want your net worth to increase (even if it is less negative than before).
Consider a second job to take care of the 3-months-of-expenses-emergency-fund. Revisit your budget.
January 26, 2009 at 10:29 pm
I am getting in the habit of reading Gail’s posts every day and I always enjoy them. We have been using the jars for two months now and we are saving so much money doing it. Even though we have stopped using credit, our budget is pretty maxed out without enough money for savings and emergency.
We are having a baby in two months and I have been stressing about how to survive with the cut in income and still try and save money. But the post today inspired me to get my butt in gear – I called our mortgage broker and it looks like we will be able to consolidate most of our other debt (credit card, car loan and student loan) to our mortgage at a much lower interest rate, which will means we will pay less towards debt repayment, but have more of an impact on paying the principal.
For the first time, I am feeling confident that we can get the budget balanced and cover all the bases – debt repayment, savings, emergency fund and some fun! Thanks for all the information and success stories.
January 26, 2009 at 10:39 pm
Amber – omg, isn’t that crazy? And that’s normal to a lot of people. it’s so sad to think that spending habits contribute to ruined relationships through all this secrecy…
January 27, 2009 at 11:55 am
Thanks Erran and michelle: Erran, what you’re describing is exactly what my parents have been badgering me about too. “What if you get hit by a bus before having any fun?” (Nice, dad, real nice…)
My response is usually that “I’m HAVING fun!” and “I won’t care, I’ll be dead!” But yeah, would like to see how this whole vacation thing works.
January 27, 2009 at 2:36 pm
I like the REPETITION of excuses there, Gail!
It’s the way isn’t it… excuses, justifications, all sorts of reasons the savings don’t need to be made. It makes me sick to my stomach when I see someone I love shout those excuses with their hands over their ears. You forgot one though, it goes along with “You have to live for today, man.” (AKA “I work hard so I deserve the good stuff – NOW” ) My sister’s favourite is “What’s the point, my husband is spending every penny and if he’s not worried about saving, why should I?”
(((shudder)))
January 27, 2009 at 2:58 pm
I love this post! I am saving and paying off debt. I’m building a “baby emergency fund” (Dave Ramsey’s term, not mine) of $1000 as a buffer. Then I am throwing everything at the debt until it is gone. 1 year. The yeatr of the ox, how apt
January 27, 2009 at 3:20 pm
Agatha,
I paid only the minimum on a loc and the bank was still calling me to advise me to pay more…I have changed my way of thinking about consumer debt and have really buckled down to pay it off. It seemed really slow at first, but I am now noticing the balances decreasing and the interest rates dropping (!), and interest charges decreasing, which means more going on the principle, and it can only get better. Finally a catch 22 that works FOR me!! Get that sucker paid down. Interest you’re paid on TFSA is max 3. something percent, you PAY up to 20-something percent on cc…the math is easy. That’s the way I look at it anyway. Savings will build slowly, and they are important, too. Just pay attention to what you can afford.
January 27, 2009 at 3:23 pm
…oh, and Amber…I have a customer who got me to (on a couple occasions) make 2 receipts…one for her hubby (which showed the dress at much less than what it was) and the real one, which she did not want even a copy of! Sweet lady, but I couldn’t imagine doing that!!!!!
January 31, 2009 at 12:07 am
Everyone can save money. Even if it is only $10 a week, that adds up, especially when you compound the interest. The best way to save is to pay yourself first. We are a one income household, and I have $25 a week automatically taken out of our checking account and put in a high yield savings account online. I am more reluctant to take money out of this account because it does take a few days. But I know it is there if I really do need it.
July 20, 2009 at 2:30 pm
I worked on a few income reducing scenarios this week-end, should either me or my wife lose our jobs. In calculating the amount of emergency fund required to cover the base essentials, should we consider the amount supplied by unemployment insurance? We live in Quebec. We have no kids yet but planned to within the next 1-2 years. Our monthly essentials are around 4200/month, and we bring in around 7200/month net. We are dividing extra money towards debt (75%) and savings (25%).