The Amateur Financier

Hello, My Appreciated Readers,

I’m going to make this short and sweet, particularly as you may not be able to see it until tonight when things wrap up.  If you spend much time online, as I do as a personal finance blogger, you might have heard about the Stop Online Piracy Act (SOPA) in the United States House of Representatives (and its companion bill in the Senate, Protect IP Act (PIPA)).  In case you haven’t, or want more information about what these bills are and why they have so many people riled up, check out this story to determine just what is happening.

To protest these bills, numerous sites are going to be blacked out today, from Wikipedia and Reddit, massive sites that dominate the internet, to much smaller sites, including, well, me.  Yes, I will going offline at eight a.m. EST today, and will not be coming back until eight p.m. tonight (assuming that my sometimes not the best understanding of my blog allows me to do so successfully…).  My participation is because, well, I can see how these laws, although I believe they are well-intentioned as laws tend to be, could be misused by future (or even present) Justice Department officials to censor parts of the Internet, regardless of whether they are directly doing anything wrong, opening up the possibility of wide-spread censoring and legal actions that could drive new websites out of business.

So, for the next twelve hours, my blog will be down.  Hold back your tears, I will be coming back soon, and when I do, here’s hoping that it will be to a world that is more willing to consider the side effects of legislation being considered.  Have a safe SOPA blackout day!

Roger Raby

Let me start out by saying that for the most part, I am happy to be a grad student.  I like being able to learn more on a daily basis, being able to expand my mind and add more knowledge to the ol’ noggin.  I like the classes I’m taking, I love being able to teach students, and as frustrating as my research has been at times (if I had a dollar for every time I’ve run into some sort of problem with my research, I’d probably double my grad student income), I do enjoy being able to add to the sum of human knowledge, if only in some small way.  All in all, I like my position as a grad student.

That said, it does have its downsides, as well.  Research alone could be a full time job, as I frequently have to stay late to get everything done.  My studying and teaching duties, which add up to more than twenty hours a week, even a slow week, mean that I’m frequently putting in sixty hour weeks.  When it’s time for tests to come around, as they have this week (I am only taking two classes (one with a six hour a week lab session included), but they have their tests only a day or two apart), I can frequently find myself with barely enough time to sleep, let alone finishing all of my ‘side hack’ work here on this very blog, amongst other places.

All of this is my roundabout way of saying, at the moment, I’m finding myself more than a little bit stretched on time.  I have no intention of stopping publication here on The Amateur Financier, but for the next eight months or so, until I graduate with a shiny new Masters’ Degree, I am likely to be (even more) scattershot in my publication than ever before.  I ask that you please bear with me, as I am quite devoted to rebuilding (and building up) my blog, and I hope that you are willing to stick it out with me.  As the expression goes, the best is yet to come.  Thank you to all my loyal readers, and here’s to a fine future together!

P.S. If you’d to learn more about the pain in the rump that is the life of a grad student (and have a good laugh at those of us who do this voluntarily), please check out PhD Comics.  While I’m not technically a PhD student, trust me when I say that the comic is more correct than incorrect, even for us humble Masters’ students.  (I’m particularly struck by how well Jorge articulates the joy of the days spent in research, going from before sun up to after sunset.  I have gone days without seeing the sun, I’m sad to say.)

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I like to think of myself as pretty knowledgeable about money.  After two and half years writing this blog, and even more time spent following other blogs, reading personal finance books and magazines, and generally keeping myself pretty well educated in the ways of money, I think my financial knowledge level is well above that of the typical American (given how little the average American seems to know about money, that’s not saying much, but I’ll still take it).

The problem is that, no matter how much you THINK you know, it’s still possible to make some foolish money decisions.  This has been the case for me throughout this summer.  If you check my Net Worth Updates for the past several months (as I just did), you can see a rather depressing pattern.

Yes, this blog entry's only going to get sadder from here.

In May, I was doing pretty good, cutting down my credit card debt and generally doing pretty well financially.  June was less successful, as I started to add on more credit card debt, and July was more of the same, as I added nearly five thousand dollars in credit card debt.  By the start of this August, I had nearly maxed out both of my credit cards, and have been doing pretty badly at cutting down the amount owed.

How Did This Happen?

Well, I’ve mentioned at various points (usually during the above mentioned Net Worth Updates), it’s been a surprisingly expensive summer; between helping my fiancee pay for her dental work and trying to get the air conditioning in my car back in working order, I’ve spent thousands more than I would have otherwise.  Add in the lower pay I’ve been making over the summer months (and graduate student pay rates aren’t exactly fantastic in the first place), and it’s been tough to keep my head above water, let alone make progress in getting my finances in order.

But the real fault lies with me.  While there were plenty of unavoidable expenses (or at least expenses that were quite tricky), there were also plenty of spending that I could have gotten under control if I wanted.  I have gone out to dinner quite often this summer, I’ve taken several trips (even if most were only for a night or two), and I haven’t been very frugal with my food and other general spending.  I told myself, ‘Well, I’m adding to my credit card debt, but I will be getting student loans at the end of the summer (August 19th, to be exact), and then I can pay off most of my (student-related) credit card debt.  Everything will be fine in the end.’

As I’m sure most of my regular readers are probably already assuming, the 19th has come and gone, and I still do not have any student loan money.  You see, the faculty at YSU (my graduate school) are in discussions about their pay (and may strike), and until the university knows for certain whether there will be a Fall 2011 semester (or at least, when it will start), they maintain that the US Department of Education won’t allow them to release the student loan money to me, or any other students.  (I will admit, I do wonder whether that’s really the case, or whether the university is withholding student loans as a way of adding pressure to the professors in the form of students begging them to resolve their issues.  Since I’m not getting student loan funds until the issue is resolved, regardless, I suppose it’s a moot point, though.)

The Lesson

I’m not writing all of this to get pity.  I’m not writing it to pull at your heartstrings.  And I’m definitely not writing it to try to get you to send me money, or anything of that nature.  No, I’m simply writing it to note that sometimes the best laid plans get thrown off for reasons well outside your control, and that it’s important to consider such events, and try to prepare for them.

How could I have prepared for this strike?  Well, I could have saved more money from my last set of student loans, so I’d have something available in an emergency fund for this situation (or any other situation where my expected cash flow was lower than I had planned).  I could have controlled my spending, particularly my credit card spending, so that I would have some credit available now.  I could have done more work in building alternate income sources (my blog is nice, but all the money I’ve earned through it to date would barely cover my expenses for a month).  Most of all, I could have made contingency plans so I wasn’t caught so off guard by this situation, and didn’t have to depend so heavily on others for my own financial needs.

All of this is to say, sometimes, life will get the best of you.  The best way to get the best out of life is to be prepared for the negatives that might affect you.

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I have plenty of bad habits.  I tend to use my credit cards without thinking of how I will pay off the debt before interest starts to be charged, I don’t keep much of an emergency fund, and I don’t shop around enough when making major purchases (or really, most any purchases).  And those are just my bad financial habits; if we get started on all my other bad habits, we’ll be here all day just listing them.

As with any bad habit, it’s hard to break bad financial habits once they get established.  When you already have a substantial amount of credit card debt, it becomes much easier to mentally justify adding even more.  If you haven’t been investing for most of your life, it’s all too easy to just keep on the same path.  Once the habit is established, it takes much more effort to break it than to keep up the habit, even if it is hurting you.

Case In Point...

All of this means that if you want to improve your life, whether that means doing more with your money, cutting down reckless spending, or otherwise getting yourself on a better financial footing, you need to put in some work to get it done.  I know, I know, it’s going to be tough; I feel your pain, particularly because I’m going through the same pain.

Luckily, there are some steps that we can take in order to change our habits, if we’re willing to put in the work.  While there is no single ‘#X-Step Plan to Defeat Your Bad Habits’ that will work for every bad habit, or even for all the bad financial habits, but there are some common steps that should help you to get your financial life back in order:

1. Define your problem: Before you can make any progress, financially or otherwise, you need to define your bad habit, and figure out how you would defeat it.  You also need to make sure that you can tell when you have accomplished your goal, by making it precise and measurable; ‘less stupid spending’ is pretty vague and unmeasurable, but ‘spending less than $100 on frivolous items each month’ is a decent goal (presuming you have a decent definition of ‘frivolous’, of course).

2. Publicize your goal: Now, by ‘publicize’, I don’t mean that you need to buy a billboard to advertise that, for example, you are deep in credit card debt.  (Particularly because doing so will only get you in more debt.)  No, you should try to share it with those close to you, your friends and family.  Assuming any of them have the same problem (and unless your habit is truly unusual, it’s likely that you have at least one or two people in your circle with the same financial problem), you’ll have a ready source of support, encouragement, and possibly even suggestions to help you deal with your problem.  (You could also consider sharing your financial issues on a blog or similar forum, at least if you comfortable doing so and trust those who are likely to read about your bad habits.)

3. Replace your bad habits with good ones: Trying to break a habit without a replacement habit is going to leave you with a feeling of emptiness, which you’ll end up trying to fill with…well, the old comforting bad habit.  To break the bad habit, you need to find something that you can do to help satisfy that urge, while being better for you (and your wallet).  If you spend too much on books (like me), for example, you can replace trips to the book store with trips to the library to get that same feeling of looking through hundreds of books you’d love to read (with the advantage that you won’t have to pay anything to take some of them home).  Trips to a new clothing store could be replaced by trips to the thrift store (preferably with a collection of your own clothes for donation).  It doesn’t take much to build up a new, healthier habit.

4. Don’t let yourself slip…: I know, it’s tough to keep up and avoid slipping up.  The problem is, if you don’t take a hard line approach, if you let yourself slip back into your bad habit ‘just this once’ or ‘only in this situation’, it’ll be that much easier to slide back into doing it more and more often, and before you know, it’s a bad habit again.  Be firm with yourself (and allow anyone helping you accomplish your goal to be even firmer), stick with your goals, and if you do slip…

5. …And figure out what happened if you do slip up: Things happen, and plans, however well intentioned and useful, get thrown awry.  Chances are, you WILL slip at some point in your attempt to defeat your bad financial habits.  When it does, though, rather than berating yourself for your failure (or worse, deciding that you just can’t do it and giving up), try to find out what went wrong.  Did you put yourself in a situation where temptation was all but unavoidable?  Was there an unusual circumstance that you didn’t foresee, and therefore, hadn’t prepared for?  (With financial bad habits, this is particularly relevant; unlike, say, smoking, there are situations where you might NEED to add on more credit card debt in order to, say, get your car fixed or handle a medical bill.)  When you see what went wrong, you’ll be able to adapt your plan to take similar circumstances into account, and avoid making the same mistake again.

There you go, a simple plan for keeping those bad habits under control.  It’ll be tough (believe me, I know how tough it can be), but if you keep up with it, you’ll end up in a much better place financially.  Good luck!

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