Published: January 02, 2009 09:34 pm         

Myths about money

Christmas bills are flowing in and the credit cards may be limp from friction, and we find that whoever said that the road to good intentions does indeed lead to hell was right. Our pants are too tight, our budgets are tighter and the biggest rub is that we knew better and ignored our better judgment. It’s time to debunk the bunk that barrages us this time of year.

Financial advisers may ask, “What is your time worth?” The horrid, truthful answer is that it’s worth very little if the alternative isn’t earning lots of money doing something else. Sometimes our thinking is warped by past earning power. We think that since we earn a certain rate per hour, that anything that saves less than that is not worth doing ourselves. I’m usually too polite to point out that overvaluing time is a subtle way of justifying laziness or living beyond our means. (I make an exception today and will state the rude truth.)

I think it was Benjamin Franklin who coined the phrase “penny wise and pound foolish.” This means that we waste a lot of money, (pounds) to save a little. It is the essential question in figuring out how we can make our dollars work at maximum power all the time.

It has nothing to do with how much we can earn at other times, but what is the best way to distribute resources at this moment in time. It’s wise to make these decisions at a time when temptation is low (soaking in a bathtub) and/or motivation is high (balancing the check book).

It takes a bit of discernment when you’re addressing the button on the pants that is threatening to launch itself into the nether reaches of the closet. Most gyms require a year contract because they know your ardor will wear off by March, when you still don’t have any modeling contracts stuffing your mailbox. It makes more sense for some people to buy a good piece of exercise equipment that can be placed near a TV. Then when the flab ceases to offend, the treadmill will wait quietly until the pants absolutely won’t button again, and you won’t have to pay twice. I also have an easier time adding a little exercise than a lot. When I’m tired and busy, I am much more prone to go up for a slow 15 minute walk on a treadmill that will be better than nothing than dress and drive to a gym where I feel social pressure to spend at least 45 minutes.

Another way we are sometimes penny wise and pound foolish is purchasing extended warranties. I have recently been offered limited warranties on items that were on sale and the warranty amounted to more than 50 percent of the purchase price. The parts warranted are often limited to “things unlikely to happen” so the chances of it being worth the cost are not high.

The most efficiently used dollars I spend are for a subscription to Consumer Reports Magazine. I buy the online version, so that I know what the best buy for my money is in every case. I feel the same way about Carfax when I want to buy a used car. It pinches to pay for the subscription or the car history, but that fee seems tiny compared with the money I’ve saved by knowing what I was getting myself into.

The biggest controllable money sucker for most families is the food budget. As an example, I can cook dried beans for a cost of about three cents to make enough to fill a burrito. If I buy them canned, the identical beans cost about a dime. If I buy the identical beans from a fast food restaurant, they cost about 65 cents. If I buy them from a sit down restaurant, they cost about $1.20. The same equation works for meats, potatoes and many other foods. We are much more pound wise if we invest in the tools to prepare food easily. The Internet is an endless source of good recipes, and I can usually feed my family more quickly from my home pantry than I can by driving to a restaurant.

Couponing is another trap for being pennywise. You must be extremely disciplined to buy only what you need and want to make your coupon a true savings.

Remember that human necessities are food, water, shelter, clothing and love. Everything else falls into the realm of luxury, and luxury purchases are in our control.

BETH STEPHENSON is an Edmond resident.

     

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