To all those who celebrate, have a successful Festivus. I’ve come to be a fan of this secular “holiday,” celebrated every year on December 23 following its mass introduction to the public through an episode of Seinfeld. At its core is a non-commercial, non-religious approach to the season. While I do enjoy gift exchanges with friends and family and everything else that goes along with the holiday season, the traditions of Festivus are interesting and applicable to everyone.

Before Seinfeld, Festivus was but one family’s tradition. This family produced a comedy writer, Daniel O’Keefe — how could it not? — who incorporated some of the aspects of the holiday into the television show in 1997. The episode aired thirty years after the first familial Festivus celebration. The primary symbol of the holiday is the aluminum Festivus pole with a “very high strength-to-weight ratio.” Two primary holiday practices have entered the public from the holiday: the airing of grievances and the feats of strength.

The airing of grievances

In dealing with personal finances, everyone can relate to these traditions. In today’s modern world, any individual who pays attention to his or her own financial situation can have grievances to air. In the typical manner of Festivus, celebrants air grievances against each other. For our purposes, it will be more constructive or cathartic to air grievances against the companies that charged us extra fees, salespeople who stretched the truth or lied to encourage us to buy something, and reflect on the mistakes we made with money throughout the past year.

Here’s my grievance from a recent encounter. I purchased a used camera from a local shop a few weeks ago. I like buying from local shops rather than from the internet in some cases, because if local shops aren’t supported, they’ll eventually disappear. I found a great deal and wanted to take advantage of it. One of my concerns with used cameras is the shutter actuation count; if a camera has been used too much, as it might be if it were used by a professional, the shutter mechanism wears down and will eventually need to be replaced, if the value of the camera warrants part replacement rather than full replacement.

I was mostly sure that this model would not indicate the true shutter count unless brought into a Canon shop, but the store owner convinced me the shutter count was readable, just like the older models. The information he pulled up on the camera showed a very low shutter count; a count I thought would be too low considering the wear on the camera’s grip. I took his word as the expert, and after trying out the camera in the store, bought it for the great price we negotiated. I probably should have waited to research the model at home to confirm my belief — that the shutter actuation count was not readable by the user. I will eventually take the camera to the Canon service center near my house to determine the true shutter count. Even if the number is high, I still got a great deal. Even if I end up paying to replace the shutter, the total I will have paid is still less than I figured I’d be paying for the camera.

I don’t think the owner was intentionally lying to me in order to make the sale, as his opinion is probably a common misconception about this camera model. I should have taken my time, though, and I should go back and let him know what the true shutter count is when I am able to retrieve that information.

What are your grievances? Here are some examples to get you started:

• Unexpected bank fees
• Hassles when returning purchased items to a store
• Confrontations with your boss
• Tenants who don’t pay their rent on time

The feats of strength

In Seinfeld, Festivus celebrants displayed feats of strength by challenging each other to a wrestling match. Rather than physical strength, I think it’s fair for Consumerism Commentary readers to focus on financial strength. While I review my finances and look for positive trends at the end of every month, this isn’t enough for the holiday. Most successes that I’ve seen so far are ordinary financial feats of strength. A brave decision with money is a the type of strength that would be appropriate to celebrate for Festivus.

This year, my biggest financial feat of strength might be obvious. It is my decision to leave my day-job salary and benefits behind and pursue with greater vigor what I had already been doing. Consumerism Commentary is now the bulk of what financially sustains me, and without the relative security of a pay check, that was a difficult decision to make. In fact, it took several years for me to have enough faith in the long-term sustainability of this income to be willing to make the leap.

For your feats of strength, here are some examples to get you thinking:

• A promotion at work
• Finding a treasure of coins in the couch you bought used
• Getting out of debt

Air your grievances and share your feats of strength from the past year. The comments on this article are open for anyone who has a grievance or feat of strength. Which banks gave you problems? Did you make any mistakes with your investments? What were your successes and strengths in 2011?

Editor’s note: This article ran originally last year, but I’m bringing it back for 2011.

Photo: M. Keefe

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This is a guest article by Jon the Saver, a personal finance blogger at Free Money Wisdom. His mission is to spread financial wisdom and help people get their financial lives under control. In his down time he loves a mean game of Scrabble and spending quality time with his fiancee.

I’m probably the only personal financial blogger who works in the construction industry. It may sound like a strange combination, but it actually makes sense. There are so many financial aspects to construction, it blows my mind.

To give you some background, I currently work for a Fortune 500 general contractor in the heavy civil industry. We work on large scale projects like highways, bridges, and power plants. I graduated college with a degree in Construction Management and love what I do. How many people do you know can say that? Well, I can and I’m proud of it! I love the ability to go out on a project site and then be able to come back indoors. I would hate cubicle life and feel like I’m wired for construction.

To say that the construction industry has revolutionized my personal finances is pretty bold. As bold as it may be, it’s true. I have always had big picture personal finance principles as my foundation, but construction has really taught me a lot about personal finance, some of it from studying long hours in college and some of it from getting my work boots dirty in the field.

Let’s dig our boots in and explore this revolution.

1. Execution without planning will result in failure

You can try to execute, but if you don’t have proper planning, it’s doomed to fail. In construction this happens when someone doesn’t do his job and forgets to plan accordingly. This could be as simple as a missing checklist or as serious as not ordering enough concrete. Another big one is planning for safety. You never want injuries on your job site. If you don’t engineer out the risks of an operation, how can you be confident in your execution?

Effect on finances: This is everything from proper retirement planning to education on personal finances. I mean, why do you read this blog? Probably because you want to plan for your future. Planning is everything. If you have a good plan, you’re destined for success.

2. 80/20 rule applies to your finances

I’m a huge believer in the 80/20 rule, also known as the Pareto Principle. I first heard of this rule from a professor in college. The basic idea is that 80% of your results come from 20% of your work. More and more I’m finding this to be true. There are only a handful of decisions that are really going to affect you on a construction job. Things like a concrete pour are extremely critical, whereas a meeting on the door paint may be pushed to another week.

Effect on finances: Very few of your decisions will really have a big effect on your finances. I would say the top two decisions that fall into the 80/20 rule are living a debt-free life and saving 15 to 25 percent of your income for retirement. Now, there are others, but those two come to mind right now. Take the 80/20 rule and apply it to your financial life. You might even start to feel less stressed.

3. Where are you headed without a schedule?

A construction project is 100 percent schedule-driven. Without an organized schedule, how will you know what will be happening the next week? How will you know when to mobilize big equipment? These issues are solved by keeping an in-depth schedule and maintaining it. Most of our meetings on a job site are schedule-related, and there is good reason for that.

Effect on finances: Your retirement timeline will determine what your savings goals and personal schedule looks like. Knowing this timeline will also tell you what percentages you want to be in various asset classes for stocks and bonds. For example, a 20 year old should be invested in 20 percent bonds and 80 percent stocks. Now, take a 50 year old. This person would want to be invested in 50 percent bonds and 50 percent stocks. Knowing your schedule has a huge impact on your investment decisions.

4. Know your costs

On a construction project, knowing your costs will make or break your bottom line. Everything down to the office supplies need to be accounted for. Not only is this a good practice for keeping good records, but it ensures that you get paid by the owner. Without a record of your costs, your boat is going to sink and sink fast.

Effect on finances: When you relate this concept to your finances, this means keeping track of all expenses and where your money is going. Knowing where your money is going is crucial to saving effectively and ensuring you don’t fall into the trap of debt. If you don’t know where to start for tracking your costs, I recommend Mint.com.

5. Protect your assets

As a general contractor, we own much of our heavy equipment, everything from bulldozers to mobile cranes. Part of the responsibility of owning these pieces of equipment is to protect our assets. We maintain this equipment and always keep the moving parts up to date. A broken bulldozer is useless in the eyes of a general contractor.

Effect on finances: This one is more human related. Part of personal finances is keeping your body and mind healthy so you can enjoy your retirement or enjoy your hard earned money now! I’m always trying to explain this to people. Your body is your greatest asset. Without it, you’re in for some serious repercussions. Eat healthy and exercise on a weekly basis. You want to enjoy your “glory years” right?

Who knew that construction had so many lessons that you could apply to personal finances? I hope you enjoyed this post. Now you know it’s not so crazy to be in construction and love personal finance!

Photo: bucklava

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Carl Richards is one of today’s best writers focusing on personal finance. Originally keeping a great blog at behaviorgap.com, The Behavior Gap has moved to the New York Times, and early next year, Carl will release his first book. Look for The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money on January 3, 2012.

Carl’s articles on Behavior Gap and now his New York Times column tend to focus on the psychological aspects of money and are usually centered around cocktail-napkin sketches like the example below illustrating how as investors we expect trends to continue into the future.

Carl Richards is also a financial planner, and in a recent New York Times feature, he uses an example from his own life to explain how people continue to behave irrationally about money even when they know better. It’s a good indication of why a healthy approach to your finances requires much more than knowing, “spend less than you earn.” We’d like to think that building wealth is as simple as that, but if that were true, anyone who could do simple arithmetic would be financially secure over time.

While close friends and family were likely aware of Carl’s housing situation a few years ago, he’s just now sharing his experiences with the public. How could a smart financial planner lose his house in Las Vegas? How could someone strangers rely on for financial advice find himself underwater on his mortgages? It’s not such a stretch when you understand human behavior.

• We feel comfortable in crowds. When everyone else in our closest circle is behaving a certain way, we feel safe if we are taking the same approach and making the same decisions.
• We expect trends to continue (see the sketch above) even though reality often differs. In Carl’s case, he expected — and everyone around him expected — real estate prices to continue climbing.
• We trust the professionals. Carl qualified for a mortgage at more than 100 percent of his house’s purchase price, according to his mortgage broker. He wanted to believe the salesperson, despite knowing his fee was based on the loan value. Even against his better judgment, he over-borrowed.

Carl’s story also illustrates how easy it is to falsely judge someone’s financial choices from the outside. Now with clients in dire financial situations, as a financial planner Carl is less likely to judge their choices to spend money. Their continued vacations despite the lack of money in the bank could be what is saving their family — or their lives.

You can get caught up in the excitement when everyone around you seems to be making choices which look crazy on paper but seem to be resulting in short-term success. Carl’s example is the real estate frenzy in Las Vegas in 2003:

It felt a little crazy to be shopping for houses that cost half a million dollars, but my income was growing rapidly. Everywhere I looked, people were being rewarded for buying as much house as they could possibly afford, and then some. There was this excitement in the air, almost like static. I started to think that if I didn’t buy a house right then, I would never be able to afford one… We’d go to open houses for $400,000 homes and see lines of couples in their late 20s — younger than we were — waiting to get inside.

He refinanced his mortgage, choosing a low payment option that added to his loan balance each month rather than subtracted. Then the real estate market crashed in Las Vegas, and he became underwater on his mortgage. He could continue to pay but owing more on the mortgage than the house was worth, keeping the house was hurting his finances. Carl wrestled with what he perceived to be a moral obligation to continue paying his mortgage and the moral obligation to take care of his family.

After discussing the issue with other, Carl decided that what he had was not a moral obligation with the bank but a contractual obligation, and he should look at the mortgage as a business arrangement. Any business would reevaluate their financial situation, and if it was a better decision to stop paying the mortgage in order to qualify for a short sale, despite the credit score hit, that’s what he should do.

While this was the logical, mathematical choice, it only became a possibility when Carl felt better about breaking his mortgage agreement. Human behavior plays a larger role than mathematics, even in this case. Again, from the article:

The process of making financial decisions is about more than building a spreadsheet to calculate the answer, because life rarely fits cleanly into a spreadsheet. Our decisions often appear irrational until we understand the whole story.

Would you walk away from your house and your mortgage if you owed more than the house was worth, your loan balance was increasing each month, and you’d be better off financially if you just stopped? I’ve discussed this at Consumerism Commentary in the past, and the results, based on participation from readers, was mixed. Some would, some would not.

New York Times, Behavior Gap

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