Friday, December 16, 2011

Stuff, stuff and more stuff

NOTE: The Financial Tip will be on break while the University of Missouri is on break. The next scheduled Financial Tip will be January 20, 2012.


Stuff.  Most of us have it—tools, toys, knick knacks, collections, clothes, files, school papers, tech gadgets, appliances, etc.  Many of us save and collect items.  Some of it was given to us as a gift, some was inherited, some bought and other stuff seems to just miraculously appear.    According to Sartre “to have” is one of three basic forms of what we do as humans (the other two are “to do” and “to be”). 


What do we do with it all?  Sometimes we keep it, try to organize it, store it somewhere else or sometimes the stuff piles up in a room, on a desk or in a drawer.  Regardless, taking care of items (even ignoring the stuff) requires our resources of money, time and energy.  These resources can be better spent in many other areas of our lives.


If the stuff becomes clutter or becomes overwhelming, it can add stress to our families or work situations.  People often set new goals during this time of year, including getting rid of things or getting organized.  A search on Google for “cleaning clutter” gives over 9 million results and “organizing” brings up 125 million hits.  Stuff is obviously on our minds and many consultants and companies make a living helping others take care of what they have.


Organizing and cleaning out make a big difference.  Sometimes we fix a space only to have it fill up again.  In order to get rid of things, it is a helpful to understand why we keep what we do and questions to help us deal with the items.


I got this as a gift or it was inherited

“I can’t get rid of this; my friend gave it to me.”  We often feel like we have to keep a gift to be respectful to the person or out of obligation.  Even if we don’t like the item, we hang on to it.  One way to let go of the object is to shift the focus from the object itself to what your friend or family member wanted for you. 


Focus on the kindness and what the friend wanted for you.  “That was so nice of her to give me that vase.  She wanted me to have somewhere to show off my garden flowers.”  The focus becomes gratitude toward your friend and remembering good things about the relationship.  You can take a picture of the object if you want to “keep” it. 


·         Does this bring me happiness or truly serve a purpose?  If not, find someone else who would really like it, or donate or sell it.


This can be even harder to do with heirlooms (furniture, dishes, etc) given to you by a family member.  For that family person, that object meant something—it was tied to a memory or to another person.  You, however, may not have that connection or that item does not bring you happiness or a special memory.  Once again, you might use the strategy of thinking about what this meant to the family member and how that family member wanted you to have the same type of feeling. 

·         Does this bring me happiness or truly serve a purpose?  If not, find someone else who would really like it, or donate or sell it.  Or choose one piece (if it’s a set of something) and donate the others.  You might decide you do want to keep it, but you do not want to display the item in your home.  You can also see if a different family member would like the piece.


I spent money on it—I have to keep this to get my money’s worth.

You spent your money on something—and often the more expensive the item, the harder it is to get rid of it.  For example, you bought a high tech toaster oven.  It takes up a lot of counter space and takes longer to toast bread than you thought it would.  You haven’t really made other recipes in it, either.  But, you spent $89.99 on it and don’t feel like you can get rid of it. 


You are holding on to the item because of a sunk cost.  In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. (  You spent the money and that is done.  But you might look at the other costs that are involved—what is this toaster oven costing you by keeping it?


What happens every morning when you see the toaster oven?  How much time do you spend thinking about how much you don’t like it and how you wish you would have spent your money on something else?  You spend energy and time that takes away from other experiences.  Maybe you could brainstorm your presentation for work.  Or be more present with your family, instead of thinking about this toaster oven.


Is the frustration worth it?  Are these other costs worth keeping the item? Ask if anyone wants to buy it, give it to someone who wants it, or donate or sell it.


I’ll save this for when I get older or when I am retired or when I….

In The Clutter Cure, Judi Culbertson writes about a time when she was waiting in line at a store.  An elderly man in front of her was talking with the clerk (obviously enjoying life by his conversation) and then hefted a propane cylinder to take with him.  The author had the thought that he probably wasn’t going home to read old Christmas cards like the ones she kept at home.  He was living his life. 


That passage truly resonated with me.  That’s me trying to capture and save memories to relive at some later point.  What am I missing in the here and now by putting so much energy into those papers and pictures?  The author asks the reader to think about future moments.  Won’t we always want to live in the moment and keep on having new moments, instead of looking back through boxes?


Do I really need all of those papers and scraps?  How can I live in the here and now?


I might need this one day

We hear messages daily to reuse items, recycle and not be wasteful.  In our “consumer” culture, this can be overwhelming.  Think about all of the number of items that we come in contact with on a daily basis—yogurt, milk and food containers; school papers; mail; e-mails; packaging, scraps of metal or fabric.  We might have gifts, toys, fans, books, fixtures and decorations that we keep for that future need.  And that’s what is so difficult—we don’t really know what we will need. 


·         Set a limit for what you can keep (e.g., 10 food containers and recycle or throw out the rest, 4 packages of nails and give the rest to a local charity or vocational school). 

·         Focus on using what you have at home and not buying more of that (e.g., craft materials)

·         Remind yourself that if you do need something in the future, you can figure it out (either using something you already have on hand or getting something from a neighbor for example)—you do not have to keep everything



Questions to ask yourself as you go through your stuff:

·         Can I live without this?

·         If this thing were destroyed by a fire or flood, would you replace it? (From Culbertson; if the answer is “no” then you do not need to keep it)

·         What do I want for myself or my family? 


These points are a starting place for dealing with “stuff.”  There are many web sites, books and places to help you with the process.  I wish you peace, calm and positive energy in the new year!  I hope you find ways to use your resources in ways that you and your family want and to help you be in a better place.


Note about hoarding

For someone who is a true hoarder of stuff and clutter, there are many other issues involved.  Many do not hoard because they did not have things growing up—many grew up having things and food in their homes.  They are just not able to get rid of things.  Many are not able to discern between items (e.g. a family picture and a scrap of paper hold the same amount of meaning).  Furthermore, forced clean-outs do not work.  Finding counselors who specialize in hoarding can be very helpful for the person or for family members.


Drs. Steketee and Frost offer insights and research into compulsive hoarding.  You can find an overview, questions and answers with the authors and pictures of degrees of hoarding on the following web site:


Lucy Schrader
HES Associate State Specialist and
Building Strong Families Program Coordinator
University of Missouri Extension
162 Stanley Hall
Columbia, MO  65211





Culbertons, J. (2007). The clutter cure: Three steps to letting go of stuff, organizing your space, & creating the home of your dreams. McGraw-Hill.


Steketee, G. and Frost, R. (2011). Stuff: Compulsive hoarding and the meaning of things. Mariner Books.

Overview; Q&A with authors; pictures of degrees of “hoarding”


Monday, December 5, 2011

A Little (More) Economics Goes a Long Way

Back in April 2010, we published a piece on Mr. Antoine Cournot, a 19th Century French economist, mathematician, and philosopher.  Specifically, we used Cournot aggregation, to make the point that the more you spend on a good, the greater price increases in that good will reduce your consumption.  Similarly, price decreases will increase your average consumption by more, the more you spend on that good.


The following is a table of the rate of price changes for broad categories of goods that we purchase (for more information: Bureau of Labor Statistics).  The second column is the percentage change in prices between March 2008 and March 2009, the third column is the percentage change in prices between March 2009 and March 2010, the fourth is the change in prices between March 2010 and March 2011, while the fifth column is the combined rate of inflation over the three years 2008-2011.  We have taken the liberty to highlight double-digit increases in prices in blue and any decrease in prices in red.  As you can see, the price changes are not uniform across categories.  Take, for example, prices, from 2008 to 2011, for “Other Recreation Goods” went down every year, while “Motor Fuel”, on average went up 8.83% across the three years.  What is starling is that these changes were wide with prices decreasing by nearly 40%, in 2008-09, while increasing by 41% and 28% in 2009-10 and 2010-11, respectively.  Yet, in total, prices of “All Goods” increased a mere 4.64% over this thirty-six month period.


Category of Expenditure

Rate of Change March 2008 – March 2009

Rate of Change March 2009 – March 2010

Rate of Change March 2010 – March 2011

Rate of Change March 2008 – March 2011

All Goods





Food and Beverages










Food at Home





Food away from Home








Alcoholic Beverages













Fuels and Utilities





Household furnishings



















Private Transportation








Motor Fuel





Public Transportation









Medical Care










Sporting Goods





Other Recreation Goods








Recreation Services










College Tuition










Other Goods & Services













Personal Care






Now, look at what happened to motor fuel prices and public transportation between 2010 and 2011.  You will note that while prices for fuel fell from March 2008 to 2009, it increased from 2009 to 2010 and from 2010 to 2011, resulting in motor fuel costing 8.83% more in 2011 than in 2008.  (Here’s the math: If gas cost a $1 in 2008, it would fall to $0.604 in 2009, with a 39.6% decrease.  Then, if the $0.604 price increases by 41.1%, we have $0.852.  If the $0.852 increases by 27.7% between 2010 and 2011, the gallon of gas now costs $1.0883.)  The change has been erratic and we can’t help but think that some consumers, who bought gas guzzling cars after witnessing the near 40% decrease in fuel prices in 2008 through 2009, are feeling the pain of motor fuel price increase of 80.1% from the 2009 price of $0.604 in our example!


Another case to consider is the case of college students.  They are often large consumers of tuition, education, public transportation, and food.  Each of these increased in price by more than the rate of inflation of “All Goods”, across the period.  We don’t need to remind them of the costs and consumption sacrifices they are making while they are investing in themselves for our futures.


Look back at the Financial Tip from the last week of January 2010: Are You Middle Class?.  In it you will see the proportion of the average household budget spent on various categories of goods.  The table tells us that housing takes up the largest proportion of the average budget.  Thus, when the price of housing decreases, assuming you didn’t previously purchase the now over-priced home, the total effect on you is an increase in consumption of other goods, including savings.  On the other hand, if you are working part-time while you are going to school and much of your income purchases college tuition, you notice the decrease in your consumption of everything else, as college tuition rose, on average, by 17.19% over the past three years.  Interestingly, the increase in the price of tobacco, 44.4% over the three years, did not matter to you if you do not smoke as the average effect is 0, if you don’t purchase tobacco.


The lesson of 2010 bears repeating in 2011.  The lesson is simple and not widely practiced. Moreover, it is difficult to practice during the “gift” season.  The lesson is to encourage you to be modest in your expenditures and maintain them at a reasonable level, relative to your income.  Save 10% of your income and have adequate reserves to provide liquidity in the case of an emergency.  If you do these, you are a financial success. 


Happy Holidays!


Thursday, December 1, 2011

13 Smart Things for Students to do During the Winter Break

I was recently reading the article “13 smart things to do before year-end” by Stacy Johnson on MSN Money[i] and thought she had some great tips. Utilizing some of her tips and adding some of my own I am calling my article “13 Smart Things for Students to do During the Winter Break”.

1.       Review your credit report. We’ve talked about this a number of times on the Financial  Tip of the Week, but reviewing your credit on a regular basis is an important financial step. Up to 25% of all credit reports contain errors serious enough that you would be denied credit. At you can get a free copy of your credit report from each of the three major reporting agencies. If you find any errors go to the website of the credit reporting agency and search for their dispute form. They are required to research and correct any errors.

2.       Put a credit or security freeze on your credit reports. A credit freeze stops thieves from being able to open new credit in your name. Here is a statement from the Equifax website: “A security freeze is designed to prevent the information in your credit file from being reported to others, such as credit grantors and other companies, except those exempted by law or those for whom you contacted us and requested that we temporarily lift the security freeze or those that access during a period of time when you requested we temporarily lift the security freeze.” What this means is that if a thief does steal your identity they can’t open new credit because your record is frozen. This will also prevent you from opening new credit unless you plan ahead and “unthaw” your credit report for a period of time. Credit freezes and unthaws do cost money, but think of the money spent like an insurance policy. In Missouri it is just $5 for each freeze. Here are the websites to freeze your credit report:

3.       Clear the clutter. A number of students are required to move out during the Winter break, so this would be a great time to turn some of your clutter into cash, or perhaps a tax deduction. Spend some time each day (after finals, of course) getting rid of stuff you aren’t using anymore. Do this in your college dorm as well as your old bedroom back home. If it’s junk, throw it out.  If it's easily sold, sell it online. If you'd rather help someone less fortunate, donate it. You might even find some potential gifts among your stuff!

4.       Work on your budget. If you haven’t done so already spend some time on a budget over the holiday break. Write down your income, including money from a job, money you receive from parents or others on a regular basis, student loans, etc. Next, write out your monthly expenses – start with your needs then move on to your wants. Put a dollar amount next to each item. Minus your expenses from your income, and the final number either needs to be a zero or a positive number (meaning you are making more than you spend). You will need to review your budget on a regular basis, but getting a jump on it in December can help make the process smoother in 2012.

5.       Digitize documents. If you're buried in paper, maybe it's time to invest in a scanner. You can get a decent one for $50 and start transferring the contents of your filing cabinets and drawers to your computer. Just make sure to keep backups. The June 3, 2010 Financial Tip[ii] discusses how long to keep documents.

6.       Make a plan to get out of debt. I talked about this item in great detail in the Financial Tip of the Week on March 4, 2010.[iii] Review that Tip and make a plan, using free PowerPay software, to get out of debt.

7.       Make a will. Yes, even students should have a simple will. Most of you won’t need a lawyer to do so. You can find a number of do-it-yourself software packages for less than $50 and you can do it in less than an hour.

8.       Make a living will and health care power of attorney. These are things that none of us like to talk about, but you should discuss with your loved ones what your wishes would be in you were seriously injured and were being kept alive by life support systems only. Also, who would make your healthcare decisions if you were hurt and couldn’t make them yourself? If you are a minor then your guardians will make these decisions for you, but you should take some time to draw up a living will and health care power of attorney and discuss your wishes with your loved ones. Just take a day and get your will, living will and health care power of attorney knocked out in one day. Then go out and do something really fun to take your mind off of it!

9.       Review your insurance coverage. Are you paying your own insurance? If so, take some time over the break to review it. Are you getting the best deal possible on your car and renters insurance? Have you reviewed your life insurance coverage lately? Call up your agent and schedule an appointment.

10.    Review your cell phone plan. A lot of people never check to see if they can get a cheaper cell phone plan, but it may be worth looking into. For example, Wal-mart sells a plan called Straight Talk that is unlimited text, talking and internet for $45 a month. Republic Wireless sells an unlimited plan for $19 a month. If it makes sense to switch you could potentially save a lot of money. Be sure to check your contract, though. Often getting out of your contract early will cost you a lot of money, so you may have to wait to switch until your current contract is up.

11.    Check your student loan status. At you can review all of your federal financial aid. It’s a good idea to check in regularly to know where you are. Your private loans won’t be on here – but you can find them on your credit report. To access the NSLDS website you need a Federal Pin Number. If you don’t have one yet you can request one at

12.    Read a book. What – read over the holidays? When it’s not assigned? YES! If you want to be really crazy, read a financial book! I really like The Millionaire Next Door by Dr Stanley and Dr. Danko. I also like Rich Dad, Poor Dad by Robert Kiyosaki. A few classics are George Clason’s The Richest Man in Babylon, James Allen’s As a Man Thinketh and Russell Conwell’s Acres of Diamonds.

13.    RELAX and enjoy your family and friends. While I recommend you do a few of these items over the break, it’s even more important to relax and enjoy time with family and friends. Most of us are truly blessed and have many things to be grateful for – topping the list for most people are their family and friends. Be sure to enjoy this time with them.

Ryan H. Law, M.S., AFC


Personal Financial Planning Department

Office for Financial Success Director

University of Missouri Center on Economic Education Director


239E Stanley Hall

University of Missouri

Columbia, MO 65211


573.882.9211 (office)

573.884.8389 (fax)