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July 2013


Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

Calvin is in his early 40s, earning a salary of $120,000 plus bonus as an IT project manager in New Jersey. He has recently finalized a divorce and has a teenage child. Read his bio here. Calvin is on Team Sara, with Certified Financial Planner Sara Stanich.

The net worth report below and following commentary refer to the last full month, June 2013. Last month’s report analyzed Calvin’s progress during the month of May. Continue reading this article to see Calvin’s latest net worth report including his own analysis. These are followed by Sara’s feedback and advice as well as thoughts from budgeting expert Jacob Wade from iHeartBudgets.

Sara Stanich, CFP appears courtesy of Stanich Group and Cultivating Wealth.

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Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

Kathleen is thirty-one years old, single, and living in Portland, Oregon. She loves her job, even if it isn’t very lucrative. With her $33,000 income last year, she’s looking to make more money from “side hustles” this year, such as her blog, Frugal Portland. To learn more about Kathleen, read her bio here. Kathleen is on Team Sara, with Certified Financial Planner Sara Stanich.

Kathleen’s report this month, below, includes Kathleen’s progress over the three months leading up to the end of June 2013. Following Kathleen’s own self-analysis, Sara Stanich will offer thoughts from her perspective.

Sara Stanich, CFP appears courtesy of Stanich Group and Cultivating Wealth.

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Earlier today, Naked With Cash participant Anonymous S offered his latest financial update. He noted in June how after moving into a new apartment, he increased his credit card spending to pay for new household furnishings. He’s been calling this spending an “investment.” Our Certified Financial Planner, Roger Wohlner, offered the same feedback I would have given: calling expenditures “investments” can set a dangerous precedent and affects the way you view your finances.

The words you choose when describing yourself or your actions communicate how you think of yourself or your actions. For example, someone who refers to a problem as a habit rather than addiction when it is in fact an addition could be masking the severity of a problem.

There’s nothing wrong with what Anonymous S did last month. He spent more than he had on hand to furnish his apartment, accepting the cost of interest in return for furnishing the apartment immediately instead of waiting over the course of the next few months. Through his actions, he also indicated he was not willing to satisfy with inferior furnishings that he might have been able to find for less money.

As long as you weigh the consequences of using credit cards to supplement your income and using them isn’t part of an unhealthy pattern, I see little problem in taking advantage of the credit afforded to you. Others may see this differently, and might criticize the use of credit cards in any situation, or in any situation that doesn’t involve being able to pay off the balance in full each month. I’m more of a realist, and I can accept that although credit cards come with a cost, it’s a cost that can be avoided or taken into account. I can also accept that different households have different needs and priorities, and that households in healthy financial situations can handle the occasional interest charge if the trade-off is simplifying life for a short period of time.

It’s not the use of a credit card that worries me in this case, it’s the use of the word investment. Any particular word can have more than one meaning, and dictionaries don’t do a good job of describing the subtle differences between the inferences or senses of a word. To a financial planner, the word investment might have a specific meaning that is tied to a trade of money for some sort of asset that is expected to increase in value, with the idea that some day, that asset can be divested or liquidated, and the investor can walk away with more money than he or she started with. And the word investment might also imply there is some level of risk involved.

But when used by non-professionals, a broader definition might apply. An investment could be anything purchased of value or the process of purchasing anything of value. This is so broad that practically anything can be considered an investment. When I was working at a non-profit organization in my early twenties, I needed to earn extra money using whatever time I had left to myself after 80-hour weeks plus long commutes. I “invested” in a new computer to replace the one I had for nearly five years. In those intermediate five years, the World Wide Web had become mainstream and I needed a new machine to keep up with the latest technological needs for web development. I had no money, but I considered the new computer an investment in my future.

When it comes to building human capital, education is a large part of increasing the worth of your abilities, from specific job-related skills to cognitive flexibility, to yourself and to others. I consider the expense of a college degree as an investment because of the increase in lifetime earning potential that college graduates have over those without degrees. It’s an investment that’s expected to pay off in some form over the course of one’s life, even though recent economic troubles like unemployment make that difficult to see in immediate terms.

I can see how Anonymous S feels vindicated in calling household expenses investments. I know I’d probably be in a similar situation when I decide to buy a house. I wouldn’t want to leave the house empty for too long, and the furniture I could move from my apartment might do only a partial job in furnishing the house, and that’s even if I wanted to keep the same furnishings. With a new house, I’d want to quickly set my living space up to be exactly what I’ve pictured, and if I were unable to save up for the furniture in advance in addition to all the other expenses that come with purchasing a house, I would consider credit cards a valid option if I knew I’d be able to afford the expenses over a short period of time. I would only use credit cards if I didn’t think I wouldn’t be able to control my spending.

But I’d probably stop short of calling the purchases investments. I can see how spending $5,000 plus interest today might decrease my need to spend $5,000 in three months, but unless what I plan to buy is some sort of collectible item that has the possibility of increasing in value, it wouldn’t be an investment to me. And to call an expense an investment might do nothing more than to make me feel better about parting with the money. Personally, I have no need to fool myself into thinking something potentially harmful — spending more than I’ve saved — is potentially positive. For those that do try to present purchases to the world as investments might be setting themselves up for ignoring other negative aspects of their financial condition, and I believe that’s why Roger Wohlner, the CFP who comments each month on the financial progress of Naked With Cash participant Anonymous S, is not fond of the terminology choice.

You can use word choice to affect how you think about your situation. This can turn something that should be negative into a positive feeling or vice versa. Word choice can save you or it can prevent you from achieving your goals. In politics, this process is called “spin.” In marketing, the process is called “marketing.” In some cases, when word choice is used to intentionally deceive others, it’s called “lying.”

When you say that buying a new 72-inch television when your 42-inch will do and you don’t have the money is “investing in your happiness,” it’s just a way of hiding the fact you know it’s a bad financial decision.

Have you ever lied to yourself about the quality of your financial decisions by changing the words you use to describe that decision?

Photo: Flickr

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Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series.

Anonymous S is a 24-year-old engineer earning $67,000 a year plus bonus. He also builds websites on the side for an hourly fee of $20 to $35. Read his bio here. Anonymous S is on Team Roger, with Certified Financial Planner Roger Wohlner.

Keep reading to see how Anonymous S progressed throughout the month of June. Following his net worth report own analysis, Anonymous S will be able to read feedback from Roger and from budgeting expert Jacob Wade from iHeartBudgets.

Roger Wohlner, CFP appears courtesy of The Chicago Financial Planner.

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Replace the Dollar Bill With the Dollar Coin: The COINS Act

by Luke Landes
Dollar coins

A proposal has been floating around Congress for the past few years, and it should save taxpayers $4.4 billion over the next thirty years. The Currency Optimization, Innovation, and National Savings (COINS) Act would replace the $1 bill with the $1 coin. The $1 coin has been in production and circulation since 2000, with an ... Continue reading this article…

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SteveDH, June 2013 Net Worth

by Luke Landes
SteveDH Net Worth, June 2013, Naked With Cash

Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series. SteveDH is retired, and he and his wife have two grown ... Continue reading this article…

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Anne and Matt, June 2013 Net Worth

by Luke Landes
Anne and Matt, June 2013

In the series Naked With Cash, seven Consumerism Commentary readers share their financial progress on a monthly basis. They are joined by Certified Financial Planners who provide feedback on their journey. Read this introduction to learn more about the series. Anne and Matt are twenty-seven years old, living in the Midwest, with two children. Read ... Continue reading this article…

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PNC Offers Videos and Interaction With Financial Advice

by Luke Landes
PNC Achievement Sessions

Last week, I criticized the McDonald’s corporation for producing a website and a toolkit, aimed at their employees, designed to help those employees tackle the financial obstacles they are most likely to face. My first point was that financial literacy education hasn’t been proven to help the most needy, and in some studies, has been ... Continue reading this article…

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LastDollar, June 2013 Net Worth

by Luke Landes
LastDollar Net Worth, June 2013

Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. Read this introduction to learn more about the series. LastDollar’s update this month includes her net worth as of the ... Continue reading this article…

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JW, June 2013 Net Worth

by Luke Landes
JW Net Worth, June 2013, Naked With Cash

In Naked With Cash, seven anonymous Consumerism Commentary readers publicly track and analyze their finances on a monthly basis. For almost a decade, I tracked my own finances on Consumerism Commentary; now I’m sharing the benefits of public accountability with the participants. I’ve partnered with financial planners who will offer some guidance along the way. ... Continue reading this article…

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Don’t Take Budgeting Advice From McDonald’s

by Luke Landes
McDonald's ridiculous budget worksheet

I had planned to write about McDonald’s ridiculous budgeting tips for employees when I first saw the news circulating through social media. I’m so far behind with my editorial plan that every last Consumerism Commentary reader has probably heard about this latest manifestation of corporate ignorance of reality by now. Writers of all stripes and ... Continue reading this article…

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IRA Balances At Five-Year Highs: Time for a Retirement Check-Up

by Luke Landes
IRA balances at an all-time high

Thanks to the stock market’s upward trend since the recession (if the trend hadn’t been upward, we couldn’t say “since the recession”), policy changes that allow investors to convert traditional IRAs to Roth IRAs without limit other than the income tax bill, and perhaps even younger savers inspired to plan for their retirement by saving ... Continue reading this article…

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Variable Annuities Customers Facing Benefit Reductions

by Luke Landes
Money - Variable Annuities

When people find out I’ve been writing a blog about personal finance for ten years — yes, it seems crazy, but the tenth anniversary of Consumerism Commentary is Tuesday — they recognize it is an opportunity to share their financial troubles and triumphs. I’m a good listener. For the most part, I am happy to ... Continue reading this article…

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Debit Card Pay: Extra Fees or Money-Saving Opportunity?

by Luke Landes
McDonald's Pay Via Debit Cards

Last month, a McDonald’s employee in Pennsylvania sued her employer to receive all of her rightful wages. This was a class-action lawsuit for the benefit of all employees now faced with an annoying trend. Employers are forgoing paychecks and direct deposit in favor of distributing wages on prepaid debit cards. Here’s how it works. When ... Continue reading this article…

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Can Free College Education Work in Oregon or Anywhere Else?

by Luke Landes
Tuition-Free Education in Oregon

While in Portland, Oregon the past few days, I was struck by the news that the state’s legislature passed a bill to “Pay It Forward, Pay It Back,” allowing students to attend college for free initially, then paying tuition as a percentage of their income for a set number of years. Many of the national ... Continue reading this article…

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Responsibility Without Authority

by Luke Landes
Soldiers

A past employer had a hard time keeping his employees from running away within three years of starting their jobs; for this small organization, the turnover rate was high, and without consistency, the organization compromised the service it intended to provide and the mission that was its essence. There is nothing unique to this situation; ... Continue reading this article…

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I’m a Landlord, Budget Stress, and Retirement Plans

by Lance

Editor’s note: A few times a month, Lance from Money Life and More will stop by to share some of the best articles from across a variety of publications, including other blogs and mainstream media. I (Luke) am currently in Portland, Oregon, attending the World Domination Summit, a conference that is not as politically disruptive as the ... Continue reading this article…

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Income-Based Repayment Student Loan Plans

by Luke Landes
College Graduate

In his latest Naked With Cash update, participant JW discussed his student loans. Due to his income, which happens to be at a low level, the amount he owes each month to pay back his education loan is zero. How is this possible? He enrolled in a feature for low-income households with certain types of ... Continue reading this article…

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Get Motivated Out of a Business Slump

by Tom Drake
Get out of a slump

This is a guest article by Tom Drake, the founder of Online Money, where he writes about his online business techniques. Tom is helping me (Luke Landes) organize this year’s Plutus Awards, an award ceremony honoring the best financial blogs, bloggers, products and services, which will be featured at this coming October’s Financial Blogger Conference. ... Continue reading this article…

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Capital One 360 Independence Day Sale

by Luke Landes
Capital One 360 Account Overview

Capital One 360, the online bank formerly known as ING Direct, is offering special deals for new customers. I’m a long-time customer, and I opened my account when ING Direct was offering one of the best interest rates available among online savings accounts. The interest rate, like all interest rates, has shrunk over the course ... Continue reading this article…

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