Must Read from NYT: Without Cafteria Trays, Colleges Find Savings

Without Cafeteria Trays, Colleges Find Savings in today's New York Times highlights the synergies between economic and environmental good sense. "Schools are shelving the once-ubiquitous trays in the hopes of conserving water, cutting food waste, softening the ambiance and saving money." The savings on both water and wasted food are significant, not to mention potentially avoiding the dreaded "Freshman 10". No more loading up the tray with extra items that end up in the trash (remember: Enough is as Good as a Feast), but what are they going to use for sleds? Read more...

Reading is Fundamental

My children love to tease me about discussing what I read in the Wall Street Journal at the dinner table, but guess what; the dinner table is one of the places I got key pieces of my education, so I'm paying it forward. This is just one example of reading and talking about what you read. The more you read, the more various pieces of what you've read start to interconnect. Reading isn't just about reading books, magazines and newspapers though. It's about reading labels, reading advertisements, reading the fine print, reading disclosures, reading the unit pricing at the supermarket, and thinking critically about what you've read. In order to make informed decisions in your daily life, Reading is Fundamental.

I remember watching television as a child, and commercials would come on advertising something as new and improved or 25% better or 20% bigger. My father would say "25% better than what?" Over and over he said this about claims on cereal boxes and laundry detergent, and as commercials came across the TV screen. He taught me that you had to read the label to find out, and that usually the answer was not what you were expecting.

The supermarket is chock full of reading material that is often surprising. Teaching your children how to read labels, how to read unit pricing and decipher the best deal, and how to read through marketing claims is a terrific life lesson. It prepares them for critical reading, thinking and decision making later in life.

My key point here is not that critical reading helps you be a good supermarket shopper (although this is a good life skill). My point is that taking the time to read the details is essential to making informed decisions, and informed decisions are at the heart of making economic sense in a world of seductive marketing and invisible money. Here are some other examples where reading is fundamental:

• Pre-approved Credit Card Solicitations
• Free Credit Report Offers
• Any Offer of "3 free months of membership"
• Mortgage Terms
• CD and Money Market Account Rates

These are only a few, but I think you get the point. Like my Dad used to tell me: "don't focus on the big print they want you to read, read the fine print next to the asterisk".

Note: Since I talk about commercials in this piece, I have to give credit where it's due. As these ideas came together I remembered the little voice from TV commercials of my childhood saying: "Reading, It's Fundamental".

Founded in 1966, RIF is the oldest and largest children's and family nonprofit literacy organization in the United States. RIF’s highest priority is reaching underserved children from birth to age 8. Through community volunteers in every state and U.S. territory, RIF provides 4.5 million children with 16 million new, free books and literacy resources each year.

In 1966, former teacher Margaret McNamara brought a bag of used books to four boys in Washington, D.C., whom she tutored in reading. When she told the children they could each pick out a book to keep, their astonishment and delight led her to discover that these children, and many of their classmates, had never owned any books.

By that summer, Mrs. McNamara had gathered a group of school volunteers, and on November 3, 1966, they launched the book distribution and reading motivation program they called Reading Is Fundamental.

From November 1966 through the early 1970s, RIF expanded from a pilot project at three elementary schools in Washington, D.C., to a program reaching children in 60 of the city's public schools. More about RIF...

In the News: Are Teenagers Discovering the Difference Between What They Want and What They Need?

I had to come back to my post Enough is as Good as a Feast to add this link to an article in today's New York Times entitled "Losing Its Cool at the Mall" http://tinyurl.com/c7wblw, a very interesting piece on the changing spending habits of teens (reported to be down 14%). Although this is bad news for some retailers, particularly Abercrombie & Fitch which is featured in the article, it's good news in terms of growing economic common sense in the teenage population. Is it fleeting?

Lights, Camera, Distraction!

"17 Again" debuted at No. 1 at the box office, pulling in an estimated $24.1 million. I have to admit, I kind of want to see this one. Looks like "It's a Wonderful Life" meets "Back to the Future". Still, I'm pretty much of a cheapskate (big surprise) when it comes to going to the movies. Just ask my kids. There isn't a lot playing that motivates me to spend close to $30 (that's for me, and only one child to watch, and a Jumbo Popcorn). Bring the whole family? You must be kidding! I'll wait for the DVD, or maybe if it's free movie day for Optimum Rewards customers, I'll take a kid or two and go.

You'd think that now that times are tough, movies would be hurting, right? Nope, just the opposite. Overall box office receipts were up for the fourth straight weekend, surging 21 percent over this same weekend last year. So where's the recession? It turns out the recession is helping drive box office results. Why? Because when times are tough, people love distraction.

The surging box office results remind me of a story my father told me when I was a little girl. As I've mentioned before, my family owned a small department store started by my great grandfather. I never met him, but he was a very good business man. Anyway, one day a mother and daughter came into the store. The little girl pointed out to the mother that her socks were full of holes, and she needed a new pair. The mother scolded the little girl and said "you know we only have enough money for the train and the movie!" (Back then there was no movie theatre in town, and you had to take the train a few towns away to watch a movie). This said a lot to my great grandfather about priorities, if people would spend for movies over socks for their children. So, he opened a movie theatre in town. Great business sense! Pretty sad story about how people prioritize expenditures.

The desire for distraction plays out in many ways in a down economy. I read recently that sales of romance novels (like the harlequin kind), and fantasy/sci novels are way up. Even libraries are seeing increased demand for these titles. Disney DVD sales are down, and Netflix rentals are up.

Distraction is not a bad thing. A little escapism in a good book (okay, my definition isn't a harlequin romance, but whatever works) or movie is a nice reprieve from the realities of today's economic crisis. Here are a few thoughts and suggestions on employing some economic sense to your escapism:

• Reacquaint yourself and your children with the public library. Not only are the books free, but the trip gives you a free mini-outing together. Libraries are open pretty late, and on weekends so you can squeeze it in during non-working hours. The library frequently has a fund raising book sale where you can buy books for about $2. This is a great deal, especially if you don't want to deal with deadlines.
  
• If the library really isn't an option, buy your books at a discount store like Sam's, online from Amazon, or used from Half.com. I used to cherish my books (and still do, some great ones I wont part with), but realistically do you really need to own all of them? As one of my bosses used to say, if the square footage to store the books is worth more than the books you're storing, you need to rethink. Consider reselling the titles you don't want to keep on eBay (or their site half.com), or you can resell on Amazon. No time? Donate them to the library or a local hospital.
• Use the current economic hard times as a teaching moment for your children. Were there books you loved as a child? Read them together. When I think back, I actually read a lot of books as a child that taught good economic sense, self-reliance, and how to deal with hard times. I'll talk about some of these books in a future post, but I'm sure you can think of some that you read as a child.
  
• Rent DVD's from Netflix (if there are other subscription services out there fine, but Netflix is what I know and love). They have plans that are less than $10/month, and you can take your time watching the movies if you're busy. They also have thousands of titles you can watch online. Same as books, how many DVD's do you really need to own? Even titles from the $5 bin at Walmart (another good source) aren't necessarily keepers, and just clutter up your house. Again, sell them online or donate them to the library or a local hospital (keep track of what you donate and take a tax deduction). I especially like the hospital option. Many children's floors have DVD or VHS players in the rooms, and a library of movies for borrowing/viewing. If you've ever been in the hospital with a sick child, these are a real blessing.
• If you really want to go to the movies, check out the schedule for the bargain matinee (at least you'll save a couple of bucks), or if you're a Cablevision customer, get an Optimum Rewards card so you can see movies for free on Tuesdays at Clearview Cinemas. I feel a lot better about a $7 tub of popcorn, when my ticket is free.

So, go ahead and enjoy some escapism. Just don't get distracted from economic sense. Socks without holes really should be more important than an afternoon at the movies, but if you want to strike a balance try buying the socks (or whatever that boring, but necessary item is) and renting the movie.

I'm putting together a list of great books I read as a child for a future post. If you've got suggestions about memorable books from your childhood, I'd love to hear them.

The One Week Rule

During my last year at college, we all talked about getting our first real apartments (as opposed to the ones we had while we were at school). The apartments we were going to pay for with the salary from our first real (translate as "career") job. We all knew you had to follow the one week rule. Looking back, I'm fascinated that we all knew this rule, but in retrospect we don't know where we learned it. It was just there. Passed along by word of mouth, and somehow taken in by osmosis. It's that actual teaching process that now interests me, as I'd like to make sure we restore it.

What is the one week rule? Basically, it's this: your monthly rent should not exceed one week's salary. That's it. If you make $500 a week, you can afford a $500 a month apartment. This is very simplistic, but for any good rule of thumb to work, it needs to be very simple.

The one week rule works equally well for determining how much house you can afford. Actually, the one week rule it turns out, is what lenders call the front-end ratio. The front-end ratio is the percentage of your income used to make mortgage payments. It's calculated by dividing your monthly housing expenses (principal, interest, taxes and insurance or "PITI") by your monthly gross income. So, going back to the one week rule, this should be about 25% of your monthly income.

This is all pretty simplistic. There are other factors out there, like car payments, credit card payments, etc. that have to be considered (these make up what lenders call the back-end ratio). Ever see the episode of the Cosby Show where Cliff pretends to be the landlord to teach Theo a lesson about money? In short, you can't spend your whole paycheck on rent. Anyway, simple as it is, I think the one week rule is a very good starting point for deciding how much you can afford to spend on housing.

Here's my question, how did we all magically learn the one week rule? When did people stop learning it? How do we get back on track, and start passing it on to our children? If you learned a rule of thumb similar to my one week rule, what was it, and where did you learn it? I'd to love to hear about it and share it.

Til Debt Do Us Part

Over the past couple of days, I've encountered several articles about weddings. Topics range from how to let your guests know you want cash a a gift http://tinyurl.com/d7spze, to how to save on wedding expenditures http://tinyurl.com/cghrqn. Couples are expected to spend 6.49% less on weddings in 2009 than in 2008, according to The Wedding Report, an industry tracker. I think that percentage should be much bigger. Somewhere along the line, the wedding industry, and the overall concept of what a wedding should be, got out of control. This applies to parties related to other milestones as well (i.e., Sweet Sixteens, Bar Mitzvahs, Baby and Bridal Showers, etc.). A wedding is about getting married, and celebrating that with your friends and family. It shouldn't be a reason to get into debt, and it shouldn't rely on the checks from your guests to help you break even. You don't have to resort to wine and sponge cake like my mother used to threaten me with, but do you really need a sushi station and a flaming Viennese table?

A long time ago, a colleague of mine told me a story about her own wedding. Her father gave her a choice. He said she could either have a $25K wedding (I think that was the number, but not important), or she could use the $25K to put down on a house and have a small informal gathering with family and friends. She took the money, and never regretted it. Close family and friends had a golf outing and a barbecue when she and her husband returned from their honeymoon. This option is not for everyone, but think about it, a house is a place to live for years to come, a party lasts for a few hours.

By now you're thinking I'm just a Grinch. Not at all. If you want a fancy wedding, or a fancy sweet sixteen for your daughter (I won't go into how sexist and outdated I think these are) go for it. But, please save up for it first. Think about what's important to you versus what you think will impress others. Don't get sucked in by the reality TV shows, these are not most people's reality. Remember, if you can't afford to pay cash for it, you can't afford it.

If your marriage is meant to last, it won't make a difference how many guests you had at your wedding, whether you gave away Lenox swans or some other piece of clutter people end up feeling bad about throwing away, or whether you (heaven forbid) rose up out of the dance floor surrounded by dry ice smoke. Why start out your life together in debt? Like I've said before, enough is as good as a feast.

Just one thing. If you can't afford an open bar, either don't serve liquor or put wine on the table. A cash bar at any family occasion is just plain tacky.

Did you have a great wedding or other family event without going into debt? I'd love to hear your story.

Enough is as Good as a Feast

This is my favorite line from "Mary Poppins". Sometimes we glean wisdom from the strangest places, but good economic sense rings true wherever we find it. How much is enough? From a career perspective, it's always current compensation + n. At least in my industry, but that's not the focus of this post.

At the heart of our current economic woes is leverage. Using leverage to spend more than we earn, and losing sight of the difference between what we want and what we need.

So, how much is enough? This question can be applied to so many aspects of our day to day life. How big should a restaurant portion be (seriously, does anyone need a half pound burger?)? How many game systems does a kid need? How many pairs of jeans? How big a house? How fancy or big a car?

I made my children wait a very long time before I finally bought them a PS2 a few years ago. They have a few games. Maybe they get one at Christmas, but that's about it. Until they were teenagers, I refused to buy anything rated "mature". No one became a gaming addict. I was shocked to learn from my boys, that a lot of their friends had all the systems. Why? No wonder they spent all their time playing video games! How much is enough? How can a child learn about making choices or deferred gratification if they've been taught that they can have one of every flavor?

How many pairs of jeans, or handbags, or shoes are enough, and what kind? Does a kid really need 5 pairs of jeans, one for every day of the school week? Will they suffer permanent social outcast status if, heaven forbid, they wear the same pair twice in the same week to school? My family owned a clothing store, so I never wanted for nice clothes. Still, my parents impressed upon me that they still had to pay wholesale to the business for our clothes, so I got what I needed rather than anything I wanted. My father grew up during the depression, and while the family owned a business and was in good financial shape for the times, he wore the faded clothes from the store window. I cringe when I hear about people charging clothes on credit cards, and paying them off over time. Much too much focus on who has what kind of clothes! Don't get me wrong, I love fashion as much as the next person, but I couldn't sleep at night if I was in debt for it. Like my mother used to say: "if it's clean and paid for, it's no body's business".

No discussion of today's economic troubles can skip the how big a house question. This question really has a few parts. How big? What needs to be in it? Is owning always better than renting? Again, how much is enough? A few decades ago, families were frequently larger than is typical today, but they often managed to live in much smaller houses. I've met people who were one of 8 or 9 kids who grew up in modest Cape Cod houses with one bathroom. They turned out fine, and I don't think anyone went dirty. They learned to share, and how to wait their turn. Both excellent attributes. Over the past decade, there has been an explosion of home decorating shows on TV. They've raised the bar to a whole new level in terms of what amenities a house should have. Granite countertops, stainless steel appliances, marble bathrooms, all "necessary" if you want to maintain your home's resale value. Do you need these things? Really? These things are nice, and you might enjoy living in your home with them, but if you can't afford to pay cash for them then you can't afford them. So then save up for them, right? Unfortunately, that's not what happened. Deferred gratification went out the window. Enter the Home Equity Line of Credit (HELOC), and the Mortgage Refinancing with Cash out. Take out a second mortgage on your house? Sounds scary, but that's essentially what a HELOC is, just sugar coated. Refinance your mortgage, and take out your equity to spend on home decorating? I refinanced my mortgage twice, once from 30 years to 20 at a lower rate, and then again from 20 to 15 years at an even lower rate (always fixed rates!). It never occurred to me to sign up to pay more for longer! This of course explains why there are now so many people who once upon a time bought houses they could afford, but now have much bigger (now underwater) mortgages and are in deep trouble. They do, however, in many cases, now have granite counter-tops, wall mounted flat panel TV's, and restaurant grade appliances. None of these will be much consolation if they lose their house. I'll save "should everyone own?" for a future post.

I'll return to my basic premise that you can't spend more than you earn. HELOC's and Refi/Cash-outs are just another example of invisible money. Money, whether visible or invisible, still has to be counted. Borrowing more than you can afford to pay back on a bet that the collateral you put up will keep rapidly increasing in value is just what it sounds like: gambling. This makes a lot of Main Street an awful lot like many on Wall Street. Think about it.

Bottom line, Mary Poppins had it right. Enough is as good as a feast.

Postscript: I had to come back to this article and post this link to an article in today's New York Times entitled "Losing Its Cool at the Mall" http://tinyurl.com/c7wblw, a very interesting piece on the changing spending habits of teens (reported to be down 14%). Although this is bad news for some retailers, particularly Abercrombie & Fitch which is featured in the article, it's good news in terms of growing economic common sense in the teenage population. Is it fleeting?