Wednesday, June 18, 2008

Sex and The City -- Fun, or bad Finance?


I went to see the new movie Sex and the City a couple weeks ago. I thought it was lighthearted and fun, just like the HBO version. It also tied up more loose ends and had a pretty decent storyline. I came home missing the East Coast and great times with my female friends.

I didn't really think about the show in personal finance terms -- I mean, that episode, where she can't buy her apartment because she spent $40K in shoes? That one did it for me. Ten years ago when I lived in Japan, I saw a lot of articles about women there who would run up $40,000, $50,000 and even $70,000 in credit card debt to buy labels, and I knew that wasn't for me. One woman even used the oven in her kitchen to store extra handbags and coats. Watching the HBO series Sex and the City after I returned home was always somewhat shocking, but it was fascinating too; I remember well Carrie saying she would go without food in order to buy her copy of Vogue magazine. Let's just say I'm a lot more food driven than that.

Nevertheless, I did think about the financial aspect of their lives. I have always thought about "how" it can be humanly possible for a newspaper columnist to make the kind of money Carrie needed to support her lifestyle (I saw a piece about the making of the series that said the writers put the $40,000 shoes episode in to show how an author could manage to buy that many shoes and still live). Of course, her apartment was rent-controlled, but I remember her maxing her credit cards on one show and thinking, gosh, what's the limit on those?

I think that Sex in the City is fun and interesting, in a voyeuristic, what-if-I-blew-money-on-fashion sort of way. As far as personal finances go, Carrie and her group aren't pillars of frugality -- nor does Hollywood paint a fair picture. Ever.

Nonetheless, some articles about finances have erupted from the pure materialism shown in the movie. The money and business section of US News had a very nice piece about making major financial decisions as a single woman -- Sex and the City meets Personal Finance, which I thought was timely, and a way to use the movie as a segue into more sophisticated information about finances. I wish I had thought more about my finances as a young, single woman (who doesn't?)

Then there are the negative reactions. That Rude Girl calls the movie a two-hour-long advertisement, but then goes on to admit she recognized every name brand there -- including the sheets! Wow. I am soooo not aware of labels, at least not to that degree. I had to look up what a Manolo Blahnik was after I first watched the series (I watched them on DVD, as I've never been one to pay for HBO).

BostonGal goes on to say that Sex and the City just isn't her kind of fairytale, and says a SEP IRA contribution would have been a better gift than the Louis Vuitton bag Carrie gave her assistant. I love BostonGals blog, and I read it nearly every day, but the more I thought about this comment, the more it fell into my "why young people ignore personal finance" bag. To give someone a gift like that is immensely practical, but for a woman in her twenties who loves fashion it would be like wrapping up a pair of practical wool socks as a gift -- nice, but not endearing. Nor would the gift of an IRA contribution teach the most essential skill -- contributing to the IRA oneself.

It's easy to look back and say, I shouldn't have done it this way. I spent $12,000 I didn't have in order to go abroad in college when I was 21 years old. Do I regret this? Yes, in a "I wish I didn't have to pay that money back" kind of way. But that trip sent ripples through my future that I simply can't regret -- it sent me to Japan, where I met my husband, changed my career path, and changed my life. You can't put a price on that.

In the quest for financial liberty, it's easy to lose balance. Sometimes a grand gesture is worth the money. Sometimes you have to take a vacation, or visit a sick friend or spend the money to attend a special occasion. Sometimes you really need to buy something you don't need, if you get my drift. That's all a part of being balanced. If we don't occasionally use our money for things that bring us pleasure, such as a gift or a thing of beauty, then why have it? It's easy to go too far to one side or the other; Scrooge was, after all, a bad guy for a good reason. I'm becoming more and more interested in the social and behavioral aspects of good money sense.

So much guilt, and love, and need is wrapped up in our money and what we do with it. A friend of mine whom I consider the paragon of austerity told me she owned a $750 Louis Vuitton bag that her British mother-in-law bought for her on Bond Street. Maybe this gesture was one of those grand gestures -- after all, my friend and her daughter nearly died working with refugees in dire conditions overseas -- and maybe it was her mother-in-law's way of saying, "I'm glad you're alive." Whatever the intent, my friend treasures her bag, and I don't think she wishes she'd gotten an IRA instead.

Who knows? Maybe in 20 years, she'll wish she had gotten that IRA after all. Having already escaped death once at age 30, however, I can understand my friend, and I can understand young women all over who focus on the now rather than the later. Life is short, and precious, and sometimes it seems best to enjoy the bag in hand.

"Yesterday is history. Tomorrow is a mystery. And today? Today is a gift. That's why we call it the present." ~Babatunde Olatunji

~And~

"Let the credit card companies market as they will, the only thing that's priceless is Now." ~Caleb Baylor Hive, 2005


Photos by Tolate2sk8 and Princess Poochie, respectively. Photos used with permission. For shoes, shoes, and more shoes, Princess Poochie's website can be found here.

Thursday, June 5, 2008

Credit Card Companies -- They always, always win

We've been launched into summer (it's over 100 degrees in Tucson already) and our credit card debt is down to $6900. It is not the $5000 I had hoped for, but it is considerably less than the $24,000 I started at last summer. $17,100 less, to be exact.

Still, the interest we're paying on that $6900 in credit card debt is $50 a month. That's $15 for a cash withdrawal (huh? I don't even remember a cash withdrawal, but it must have been an overdraft from months and months ago) and $35 for regular interest. That's $50 we could spend on two nice items of clothing a month...or a gym membership...or we could put it aside in an IRA and have an extra $600 a year towards retirement. Oh, how the credit cards siphon money from people! From ME.

Here's an interesting article about credit card rewards:

About 85 percent of U.S. households participate in at least one rewards program, according to a study released Monday by Consumer Reports.

And though rewards do spur consumers to spend more, the study found that confusing rules and restrictions make most reward cards more trouble than they're worth.

...

And while cash back, gas and grocery rewards credit cards can offer some relief for costly essential items, they often carry higher annual percentage rates than traditional credit cards, Consumer Reports said. Looking at some of the more generous credit card rewards programs, the study found that rates varied from 9.74% to as much as 19.99%.

We've gotten caught in the "points" game before, and have learned a hard lesson from it. I racked up nearly $7000 on my American Express card trying to get cash back; the cash back I got from last year (one single purchase was over $5500 -- I just read on my own blog that I used the card to get cash back from it) equaled $118.00. $118.00? Yes, that means I put over $10,000 on my card in order to get 1% cash back, paying who knows how much in interest (my monthly interest on credit card debt used to be almost $200). Credit card companies charge daily compounding interest, but that 1% cash back is a one-time annual bonus. It's like a $30 Christmas ham for the employee who makes $20,000 a year; it's a pat on the back, not real money or real help.

Here's a tip for beating the credit card companies -- don't use your card at all. Keep it for emergencies, and when you need to use it, pay it off immediately. They've always got an ace up their sleeve, and you just can't beat them at their own game.

The only way to truly get credit card rewards is by keeping your balance at zero.