The Writers Coin

When I was a kid, I watched adults pay for stuff with credit cards and my tiny, undeveloped brain just couldn’t get around how this worked. Swiping plastic in exchange for lunch or a new jacket? It was right up there with Santa Clause coming down the chimney—there was something fishy about it.

Since I was so confused that a piece of plastic could be used to pay for something instead of cash, I asked my dad, sometimes used his card.

Me: Dad, how do credit cards work?

Dad: Well, there are companies that will give you credit if you promise to pay them back later.

Me: But why would they do that?

Dad: Well, in exchange for “lending” you money like that, they’ll charge you a little bit of interest.

Me: But if you’re paying interest, then why would you want to use a credit card? Why not just pay with cash? Or a check?

Dad: Well, there are some people that want to buy things but they don’t have the money right away. So they use a credit card.

Me: Why don’t they just wait until they have the money?

Dad: It’s past your bed time son, go brush your teeth.

Well, I’ve grown up and—while I have a better understanding of credit cards—I still don’t “get it.” As someone who was raised in a very frugal and sensible environment, paying more for something instead of waiting and paying the actual price is ludicrous.

I got to thinking about this after reading James Surowiecki’s (always) excellent article in the New Yorker: House of Cards. He discusses the different types of customers credit-card companies want and what their ideal customer is like: someone that will get into debt, only pay the minimum every month, but never go bust.

It’s a delicate balance, one that is getting shot to hell in the current climate. Credit-card companies are trying to deleverage—as are customers—and that is going to negatively affect the economy. That’s a good thing for both sides, it’s just not going to be pretty.

On top of that, current customers that are locked in with heavy credit-card debt are at the mercy of the credit-card companies—they can jack up their interest rates whenever they want. Surowiecki puts it as so: “Effectively, they’re captive customers.”

Here’s the thing: we did it to ourselves. I look back at the past few years of crazy spending and the massive amount of credit-card offers we all got and I remember having that feeling again that kept me so confused about Santa and credit cards when I was a kid.

How did we let this happen? No rational being could expect that to go on like that.

And here we are.

The New Yorker article closes out perfectly:

The end of the credit-card boom isn’t going to wreak as much havoc as the end of the housing boom. But it is helping to put a brake on our spending. And, at this point, every little bit hurts.

Amen.

Photo by Andres Rueda

Lots of people think that if you write about personal finance then that makes you a responsible shopper that isn’t tempted by shiny new gadgets and useless tchochkes.

I wish it were true.

One of the big things PF bloggers write about is how they overcome the urge to buy stuff. JD had a great post yesterday on some of the techniques he uses to beat the voices inside seducing him to buy, buy, buy!

I went through this when I bought my Android G1 phone (which is great) and our new TV (even though it was a gift)—spending big bucks is hard for me (especially because I usually don’t have the money). And the Nintendo Wii was not an easy purchase either—I debated it A LOT.

And now I’m wondering whether or not I made the right decision. The Wii is quietly sitting in the corner like a lonely pet that hasn’t been played with in a LONG time. Poor guy, I haven’t fired it up for a quick game of Guitar Hero or even a go at Wii Bowling in so long. Even the newest game I bought, Pro Evolution Soccer, has been neglected.

And the less I use it, the more I feel like it was a bad buy and that I messed up.

At the time I bought it, I was obsessed. Being obsessed can be a good thing—you’ll get a better deal and do your due diligence when it comes to research. But if you aren’t using it regularly, that’s a bad sign.

I keep asking myself one question: Have I gotten “enough” out of the system if I were to stop playing it as of today? If so, then it was worth it. If not, I made a big mistake.

But as they like to say in the stock market, things are forward looking—there’s nothing we can do about what happened in the past. So I’ve had the itch to sell the system and get some cash for it. At the same time, I just got a $50 gift card for my birthday and part of me wants to buy another game.

Regardless of whether or not I sell the system (I’d have to check with M first—I doubt it would fly), I know buying a game is a terrible idea for a few reasons:

• I don’t play enough as it is because of a lack of time.
• Buying something that will take up time from things like writing is not something I want to put myself in the position to do.
• Guilt: always in the equation.

The Wii is one of those things you go in and out of playing. One day we’ll come home and get the itch to play and we will. Other times people will come over and we’ll break it out to play some bowling or something. But unless they come out with a Wii version of MLB ’09 The Show (which looks awesome), then I won’t be playing too much.

So now that I’ve tried to give a really long-winded answer to my question (without succeeding), I put it to you, my trusty reader, to tell me what you think: was the Wii a bad buy in my case?

This post was included in the Festival of Frugality over at MoneyNing.

While I was away on vacation, I had a guest post go up over at Five Cent Nickel. It’s all about Unorthodox Ways of Making Money and it’s based off an article from Time Out Chicago.

Make sure to check it out and scope out the comments section—lots of people are offended that so many of the “ideas” are sex-related. There is nude modeling, “novelty-toy” delivery services, and phone sex operators.

Hey, some are weird and some are a bit off, but in these tough times beggars can’t be choosers. And most of them are pretty creative…that’s for sure!

Photo by stopnlook

I’m on vacation this week in Costa Rica, so instead of being prudent and writing ahead, I’ve decided to highlight some old posts that I really like. I think they are good and didn’t get seen by many people, so here they are!

I love to travel and I love to take pictures. To me, the two are closely related. When I travel, taking a lot of pictures is how I capture the moments and take them home with me (I also just plain enjoy the act of taking them, which helps). It’s also how I share my trip with other people and whenever I want to relive some of those great times, I can just whip open my photo album and reminisce.

Taking pictures is also a creative activity — something that I like to do and also gives me another way to express myself. But did you know it’s also a great frugal alternative to some other, more expensive hobbies?

Pictures are all I need

When I go on vacation, I rarely buy anything more than a t-shirt with the name of the place on it (I haven’t nailed down all my vanity quite yet). A lot of times when I get back home it hits me that I didn’t buy anything — then I download my pictures to my computer and that guilty feeling goes away. All I really need from a vacation to feel like it was worth it is my pictures. No need to spend money on anything else.

Aren’t cameras expensive though?

Right now is a great time to buy a new camera — the prices are just ridiculous. What used to cost hundreds of dollars is now affordable. I recommend that you put a little money into this and buy a good camera that will last. I have a Cannon G2, a relic of a camera by today’s standards. But when I bought it (around seven years ago), I paid $600 and it was a sweet little piece of technology. I saved all the money I had made that summer and spent it on this camera. You have no idea how hard that was for me to do — I even kept it in its original box for the first few months, wrapping it in it’s packaging after every use. That was my baby!

Seven years later, it’s one of the best purchases I’ve ever made. It has cool features I actually use, takes very nice pictures and is very durable. My only problem is that it’s a little big, but back then they didn’t come all super sleek and thin the way they do now (unless you wanted to sacrifice megapixels, which I didn’t).

As for megapixels (which basically tells you the quality of the picture it takes), the camera stands at 4MPs. Today’s models are up around 12 and are much smaller than my camera. But you know what? It doesn’t matter. My camera still takes great pictures, I’m familiar with most of the features (which means I know how to use them by now), and the size hasn’t really stopped me from taking pictures when I go somewhere (or am at home on a weekend). I gave M a smaller digital camera for her birthday that is much more convenient to record things like family events and such. I mostly use my camera for vacations or taking more creative (read: no people) shots.

But $600 is a lot of money!

It is, but not when you buy a camera that lasts this long. Plus there are all kinds of ways you can have your pictures make some of that money back:

• Sell your pictures online: There are several stock photography sites out there that let you upload your pictures (provided they are “good” enough). That’s passive income right there!
• Use your pictures to decorate your home/apartment: This one I love. When people ask “oh where is this/who took this?” and you tell them you did, it makes you feel like a regular Annie Liebovitz (or a sketchy paparazzi). Put your work in a nice frame and that’s it, you’re good to go.
• Make it a hobby: Take your camera with you and take a walk around your neighborhood for three hours. Take as many pictures as you can and when you get back, sift through your shots and see if you got anything good. Download free editing software like Gimp and you’re all set. Right there you have a full day of spending no money while having fun and doing something creative.

Sure, you could go nuts and get all kinds of accessories and other things that could make this a more expensive hobby. And that’s OK if you really get into it and use everything. But you don’t have to. You can even go online to read up on photography basics and that won’t cost you a dime. My advice? Practice — it’s the best way to learn and get better.

Next time you go on a trip, think about what you really want to take away from the place. You could shop all day long and still not capture the essence of the place the way you can with a simple picture. And even when you’re not on vacation, taking pictures can make the everyday seem unique and interesting. And don’t let anyone out there tell you only pros take good pictures — they are wrong!

And you can bet I’m taking tons of pictures on my current vacation!