Shannon Christman

You Need More Than Money To Join the Upper Class

October 19, 2018 By Shannon Christman 32 Comments

I used to think that social class was directly tied to wealth — if you were rich, you were upper class; if you were poor, you were lower class. If you were neither rich nor poor, you were middle class. Of course, even then I had a sense that because “rich” and “poor” are such relative terms — a rich person has more money than I do, a poor person has less — that most of us think of ourselves as middle class even if we’re not.

My parents own a home in a retirement community in Florida. The people there dress down, get involved in all kinds of activities — everything from a kitchen band (whose members play utensils like instruments) to a rowing crew — and are generally pretty friendly. Most would be considered middle class, but many have accumulated more wealth than the average American, and they maintain two homes — one in Florida and one up north.

Once when we visited my parents, my husband and I drove to a nearby community (also inhabited mostly by retirees) for dinner. The entire atmosphere there was different — everything about the neighborhood shouted, “Upper class!” The buildings were fancier, the clothes dressier, the people not as friendly. My parents’ neighborhood has several athletic courts, a community building, and boat docks; the other community boasts several blocks of restaurants and boutique shops. As we strolled down the streets, where I felt a bit uncomfortable in my middle-class clothes, it struck me that many of the people who lived there could have a lower net worth than my parents and their neighbors do. They might be upper class, but they are not necessarily wealthy — in fact, they could be deep in debt.

Social Class is More Than Just Your Net Worth

I finally realized that social class is not just about how much money you have, but also about how you spend your money and how you present yourself. Earning a high salary is not enough to break the bonds of social class, nor is winning the lottery. Those who are born to the upper class have the advantages of being taught from infancy upper-class social skills and vocabulary and of being surrounded by the things (clothes, furnishings, etc.) that signify good taste. Anyone who wants to be a part of the upper class, but is born in a lower class, must be a sharp observer who can understand and imitate the social graces of the upper classes. (Incidentally, those of us in the middle and lower classes are also taught the social skills, vocabulary, and tastes of our respective classes, but few people try to imitate us.)

Class and wealth are closely related, and it’s unlikely that someone in the upper class is broke or that someone in the lower class is a millionaire. If you knew that Bill had $10 million net worth and Bob had $10 net worth, you could probably guess which class each belonged to. However, Bill might wear his hair in a mullet, decorate his home with velvet Elvises, and invite all his friends over for NASCAR parties, while Bob makes a high salary but spends it immediately to pay the mortgages on three homes, vacation in Europe, and buy new Dolce & Gabbana suits.

A reader commented that looking poor may prevent you from socializing with wealthy people, who can help you increase your own wealth. This argument has some merit — appearances and actions do mark us as members of a particular social class and, in some sense, actually make us part of one class or another. However, not all wealthy people are part of the upper class, and not all upper-class wealthy people will refuse to socialize with you just because you are not wealthy or upper-class, as well.

Many middle-class people and even some lower-class people have accumulated a great deal of wealth. Socializing with wealthy people of the class in which you feel comfortable can be of more benefit to you than trying to fit in with a group of people who not only make more, but also spend more, than you do. Middle-class wealthy people have contacts who can help you find a better job; they also know how to save and invest the money they do earn. Advice from them could be even more valuable than advice from someone whose income is quickly spent on all the trappings of the upper class.

I often wonder why so many people think upward mobility is a goal worth the effort. To fit in with the upper class, not only would I have to learn how to act differently from the way I was raised, but I would also have to spend a lot of money on the right clothes, the right car, the right home and the right education. And even if I do learn to fit in with members of the upper class and benefit from their wealth-gaining insight, I still might not be able to increase my income enough to cover the extra expenses.

Why Do People Overspend On Upward Mobility?

Juliet B. Schor, in her book The Overspent American, argues that we spend more money on socially visible goods, largely because we fear “falling down” to a lower class. Ironically, overspending almost guarantees that we will fall if we lose our source of income — if we already spent all our money to buy prestige, we would have nothing left to buy necessities. I wonder why we don’t fear climbing up the social ladder instead. After all, it costs a lot to live like someone in the upper class. Plus, moving into a new social class requires a new way of presenting ourselves — and when that happens, there’s no guarantee that we will still feel comfortable with our old friends in the social class where we used to be at home.

I’m not arguing for a caste system — I certainly believe we should be free to move from one social class to another, and I enjoy interacting with people from all social classes. I also have nothing against anyone whose goal is to be part of the upper class. But I, for one, am happy in the middle class. I’d rather maintain my position here, where I already feel comfortable being myself, and maybe one day I will have enough money to retire to a nice, middle-class retirement community in Florida.

Image courtesy of caribb

The Best Time to Pay Bills

July 25, 2008 By Shannon Christman 18 Comments

We still pay most of our bills manually, by which I mean we don’t have automatic payments set up. While I recognize the advantages of automatic bill pay (no postage, time saved in writing out checks, etc.), I actually enjoy the task of paying bills the old-fashioned way. I like writing out checks and recording the bills by hand; it helps me better monitor our family’s spending.

I generally pay bills the day I receive them. Due dates seem to be getting closer and closer to the date of receipt, and I don’t want to risk having to pay a late fee because the post office was slow in delivering my checks. By paying bills as soon as I get them, I break one of the personal finance rules my parents taught me – wait as long as possible to pay bills so that you can collect the interest on the money.

Is it better to wait or pay bills immediately? The question is moot if you don’t have the money available, but when you have it, the risk of late fees has to be weighed against the potential loss of income. For payment on loans, of course, it’s usually best to pay right away because your debtors will be collecting less interest on your money, but what about when the cost is the same no matter when you pay?

This week, the question of when to pay came up when I got a property tax bill for $2,700, which was not due for two months. If I had that money in a savings account earning 0.25%, I would earn just over $1.00 in interest. While I have been known to take advantage of opportunities to save $1.00, I wouldn’t risk forgetting the bill and losing the early-payment discount rate for that amount. My money market account, however, pays somewhat better – over two months, I could earn about $10, an amount I consider worth waiting to pay a bill for.

Even more significantly, by paying the bill early, I would lose out on the opportunity to make even more on that $2,700 through investments. Last week, my husband made $100 on a similar amount of money through a short-term stock market trade. Our $2,700 could earn a lot in the stock market in two months, but we could also wind up with a loss if we have to sell a stock that’s down when the bill comes due.

We have already used this tax money to our advantage by getting it out of escrow several years ago. When we received a notice that our tax authority had no record of receiving a check from our escrow account, we called the mortgage company and discovered that our responsible payment record and level of equity had earned us the right to close the escrow account and pay our own taxes – not only is that money now ours to invest until the tax bill comes each year, but our mortgage is also $200 lower each month!

I probably should have held the tax bill for a while before paying it, but I didn’t. Yes, I lost some money, but I gained some psychological advantages – a sense that I had one less thing on my to-do list, and one less payment to consider when figuring out what money we will need available in the upcoming months. I paid the bill within a week of receiving it – but I dropped it off at the tax collector’s office, which I passed on my way to the doctor’s office, so that I could save $0.84 in stamps.

Image courtesy of Aunt Owwee

Managing Subscription Costs

July 18, 2008 By Shannon Christman 5 Comments

How many subscriptions do you pay for? Be sure to count not just magazines and newspapers but also services (warranties, computer virus protection, cell phone contract, ISP, etc.), memberships (gyms, fan clubs, business associations), and entertainment packages (Netflix, cable or satellite, online game sites, etc.) Count anything for which you are billed on a regular basis, other than housing and utilities. The number might be higher than you think. And it’s likely that the total cost is higher than you think, too, especially if you make automatic payments. If subscriptions are costing more than you would like, consider these methods for determining which ones to cut out when you cut costs:

First, consider whether the subscription actually makes you more money than what you spend on it. My weekend newspaper subscription does, because I clip and use a lot of coupons. So does my high-speed Internet access, which I use for earning money. Some magazines offer free subscriptions; others offer enough coupons and money-making/money-saving ideas that they pay for themselves. Does your specialty business magazine keep you updated on news in your industry? Acting on that information may help you increase your earning potential.

Be careful about counting service contracts as money savers. As with many warranties, you may be better self-insuring. Yes, you could save hundreds – even thousands – on an emergency repair if you have a service contract, but you are more likely to go several months or even years without needing the service. (Companies wouldn’t offer service contracts if they didn’t make money on the regular payers who never use the service.) Find out if you can pay a per-use fee for repairs or technical service; if you can, it might be better than keeping up a “subscription” you may never use.

Talk with members of your household and nearby friends you to be sure you aren’t duplicating subscriptions. A friend recently told me that her household subscribes to more than a dozen magazines and that they get two subscriptions to their favorites so that more than one person can read them at the same time. I know that periodicals can become outdated quickly, but not so quickly that you can’t wait a few hours until someone else reads them! The same goes for online services – if you can share one subscription among family members, do so.

Consider eliminating subscriptions with similar content. When I had my first baby, I signed up for two or three free baby magazines. They were so much alike that I still can’t tell you which one was which. Had I been paying for them, I would have cancelled all but one. If you find some of your subscriptions starting to look too much alike, choose your favorite and cancel the rest. You can always buy a single issue of the newspaper if your son’s picture appears in the one you don’t get or pick up a single magazine at the grocery store checkout if it has a particularly interesting feature.

If you maintain a subscription for certain times of the year – for example, keeping expanded cable only to watch the NFL Channel during football season- it might be worth the disconnect/reconnect fees to subscribe only during that time. If you can, choose shorter subscription lengths for subscriptions of seasonal interest; the lower rates for longer time periods are beneficial only if you are sure you will still want the same subscription continuously for the next several years.

You may also get more enjoyment out of your subscriptions if you cut down on the number of them. For example, simultaneous membership to several online game sites might give you access to more games, but you still have only a set amount of time to play each month. Consider subscribing to one at a time and getting as much play value out of each site before you move on to another site with different games.

Before buying a higher level of subscription, look closely at what additional benefits you receive. Will you really read all those personalized reports or go to those VIP events? If not, keep your regular subscription. If you’re not sure, give yourself a set amount of time to try out the extras. At the end of your trial, be honest with yourself about whether you have used and truly enjoyed the extra benefits. Ask if they’re worth the extra expense. If not, return to a regular subscription.

Finally, if you really want to cut back on your subscription expenses but don’t want to cut out any of your favorite subscriptions, consider asking for a renewal as a gift. It’s possible that your loved ones already considered giving you a subscription but changed their minds because they don’t know what you already receive or whether you have renewed your subscription recently.

Subscriptions you purchase should be something you enjoy and use regularly. If you find that they have become yet another obligation, it’s definitely time to cut down on them. You shouldn’t have to keep on paying for something if you no longer find it interesting or helpful.

Image courtesy of Eric Rice

The Secret of Personal Finances Revealed

July 9, 2008 By Shannon Christman 4 Comments

“Is it getting dark outside? Are you having trouble seeing? Turn the lights on!” is the gist of one “Wiggles Tips” segment on The Wiggles television show. These segments introduce the show’s preschool audience to a bit of humor – even they are old enough to know to turn on the lights when it’s dark out.

Newspapers and other media often have the adult version of Wiggles Tips when headlines like “People Are Upset about Gas Prices” appear on the front pages. Why is that news? I often ask myself, thinking back to the criteria for newsworthiness I learned in Journalism 101. Others might say, “That’s stating the obvious.” And we personal finance writers are some of the worst offenders. Personal finance books and articles often state the same obvious ideas over and over, elaborating in different ways:

Don’t spend money you don’t have

The prevalence of credit has complicated this simple advice, but every purchase is still a simple exchange of one thing for another, and those who have nothing to exchange can’t make a purchase. Bobby can’t trade his salami sandwich for Jimmy’s chocolate chip cookie if he doesn’t have a sandwich in his lunch. He might promise Jimmy tomorrow’s sandwich for today’s cookie, but eventually he has to pay up or he loses all bargaining power. He can’t trade food he doesn’t have. Yet many of us are spending money we don’t yet have, promising tomorrow’s sandwich and banana tomorrow for today’s cookie.

Cash doesn’t expire

If you don’t use all your money now, you can save it for later. Yet, our spending often increases to match our income, and we tend to forget that we may have higher expenses and/or lower incomes in the future. Sometimes we do act as though we have to spend all we earn right now or the money will go bad. It doesn’t, of course. Yes, you may lose some buying power due to inflation or risky investments, and yes, you might not live long enough to spend all you save, but in most cases, the money you save now will benefit you in the future.

When offered a choice between two things of equal value, choose the one with the lower price

Companies spend a lot of time and money to convince us that their products are far superior to their competitors’. Sometimes we believe in this superiority even when it isn’t really there; we pay more for products without getting more value. Additionally, limited-time discount opportunities – coupons, rebates, sales – can convince us that we are paying less for something of equal value when we could actually pay less for a product (or at a store) with no special discount. Other times, those discounts do save us a good deal of money. The simple, obvious task of paying less for the same thing can become complicated; another person’s perspective can help us distinguish between real and fake bargains.

You can improve your financial situation in two ways: spending less and earning more

A lot of people want to improve their finances without changing their habits, but unless you can convince your boss to give you a raise without adding to your workload, I don’t know how that’s possible. Either you have to change the way you spend (or don’t spend) money or give up some leisure time to earn more. You can buy less, pay less for what you buy, work more, or find a higher-paying job, but something has to change, and it all boils down to spending less or earning more. All the financial advice I’ve ever heard is some variation on one of these two obvious basics: spend less or earn more.

Buy low, sell high

This proverbial advice for success in the stock market may be the most obvious statement of all, but thousands of people earn a living by trying to figure out how to follow that advice. As with most obvious personal finance advice, there is always room for some elaboration and some disagreements over the best methods of improvement. Even the obvious isn’t always obvious.

I don’t think I’m putting myself out of work by telling you that personal finance blogs and books often state the obvious. Everyone needs to hear the obvious now and then – we see our own lives so closely that it’s helpful to have someone else point out factors we’re missing when we try to make decisions or plans. We can be so used to doing things the same way we always do them or distracted by an unrelated issue or simply focused on implementing one solution that we fail to see a more obvious solution to our problems.

The challenge for personal finance writers is rarely figuring out complex answers to financial difficulties, but rather stating simple solutions in ways that don’t make people feel embarrassed for not having seen the obvious themselves. The goal is to help people improve their own finances by offering them perspectives outside their own. I know I have learned new things from other personal finance writers, even if they do state the obvious; I hope you have, too.

Saving Advice from the 1950s: How Much Still Applies?

July 7, 2008 By Shannon Christman 11 Comments

Buried in the bottom of a box lot I recently bought at an auction was an advertising booklet from the 1950s, 1003 Household Hints and Work Savers to Help You Beat the High Cost of Living. The title caught my attention because it mentioned a “high cost of living” in an era many of us now view as a good time economically, the time when many modern conveniences became affordable for the average American household. I suppose we always see the cost of living as high.

The ad for a funeral home just inside the front cover provided another smile – the cost of living may have been high then, but the cost of dying was not (at least by today’s standards). The ad promised “a beautiful funeral service” done “with highest regard to dignity regardless of cost…whether you spend $100.00 or $1000.00.” The advertiser is no longer listed in the phone directory; I was tempted to call and ask if they still offer beautiful services for $1000 or less.

Most of the booklet focuses on household tips for housewives (and yes, the term “housewives” is used regularly). Some of the tips would save money, but some would not. Some of the advice is actually the opposite of money-saving advice common today: use an automatic dryer instead of a wash line (with the argument that it saves ironing time and wear on clothing); eat cereal because “few foods supply so much nourishment at such low cost.” (Of course, “cereal” probably did not mean the sugared, boxed-with-a-toy stuff we buy now.)

The most outdated tips, of course, were the most interesting. Tips #580-583 are devoted to filling and draining the washing machine and using the wringer. Tip #41 recommends boiling handkerchiefs with a muslin bag filled with Orris Root in order to perfume them. The title of one chapter, “

Should We Cut Out Entertainment During Difficult Financial Times?

July 2, 2008 By Shannon Christman 8 Comments

“When I get a little money I buy books, and if any is left I buy food and clothes,” Desiderius Erasmus has been quoted as saying. If he read like I do (more for fun than for education), he was budgeting for entertainment before necessities. He certainly would not be alone. Today, many people continue to buy DVDs and concert tickets even when they’re trying to cut down on spending.

Kim and Jason’s Escape Adulthood blog recently commented on our apparent need for entertainment, saying that “even in a period as tough as the Great Depression, people will spend their last nickel on FUN.” They cite P.T. Barnum getting people to pay for circus admission; other sources have used the cinema as an example. (Movie houses weren’t empty in the 1930s; on the contrary, they became more popular.)

Based on the salaries we pay big-name actors, athletes, and musicians, it’s obvious that our culture places a high value on entertainment, but is it really a necessity on par with food and clothing? Some would say yes. Historically, people who worked hard for their sustenance and had little time for frivolities (miners, farmers, shepherds/cowboys, etc.) were still known to enjoy community dances, group singing, and storytellers. They might not have spent much money on entertainment, but they made it a priority. Perhaps we do have an inherent need for some fun now and then.

In fact, entertainment sometimes becomes more important when money is tight and stress is high. It could be escapism – when life gets tough, it’s much easier to go to the movies and imagine a fairytale ending than to stay home and address problems that seem overwhelming. It could also be fatalism – people believe (often erroneously) that they can do nothing to improve their financial condition, so they might as well go out and have some fun before the money runs out: Why not go to Disneyland today if I’m going to declare bankruptcy tomorrow?

For whatever reasons we crave entertainment, leaving some room in a budget for a little fun isn’t a bad idea. Making a budget too tight can easily lead to frustration, and many abandon their plans to take care of their finances when they start thinking they can’t ever enjoy themselves. When your income is needed more for other things, however, you can find less expensive alternatives to your favorite forms of entertainment. Check out books from the library (and enjoy the free programs they offer!) instead of going to the bookstore. Watch movies on TV or rent them instead of going to the theater. Attend sporting events and performances at the local high school instead of paying for their professional counterparts. You can also find new, inexpensive ways to entertain yourself – start looking for ideas.

So, Erasmus, it’s okay to budget for entertainment. Skip a meal or two if you have to. But don’t spend it all on fun – save some for other necessities.