Year: 2011

I believe you have misinterpreted what your well-meaning parents told you when you were three. You cannot have it all. You have to choose and every choice you make has a consequence.

For quite some time, my friends and family have accused me of being the fun police, it is not that I hate fun it’s just I do not think they (or you) should finance their fun. Do you want to go on vacation? Save your money and go. Go wherever you want, go exotic or mundane; do whatever you want, have a ball—just don’t borrow money to do it.

I have also started to develop this reputation of being a doomsayer. I predict you will die and if you have dependents, I think you need a term life policy. I also predict that someday you will quit, retire, or be fired from your current job. You need to have a transition plan in place.

The truth is I am neither pessimistic nor universally frugal. The truth is I now try and make every choice intentionally, measuring the benefit of the choice against it’s cost. I now try and consider the worst case scenarios for decisions, as opposed to the old way of thinking that bad things won’t happen to me. This doesn’t make me a pessimist, it makes me a realist.

I  spend on the things I care about (within my means) while relentlessly beating down the expenses that don’t bring me comfort or joy.

I conserve my gas budget by riding my bike, sharing rides and bunching my errands just so I can spend a ridiculous amount of money on gas for our 454 hp ski boat.

I do not eat out much, but that allows me to very happily to triple our grocery budget when we have boys in the house.

I have some expensive toys (like the aforementioned boat) but our cars are old, we don’t take expensive vacations and we don’t have cable.

We didn’t always live this way. There was a time that when I wanted something I bought it with little or no attention paid to the consequence of that choice. This is exactly how most of us find ourselves stuck. Stuck in a job we don’t want, stuck in a city we hate, stuck in relationships that don’t work. Debt robs us of our freedom and for what? Most of the time we can’t even remember.

There is nothing wrong with wanting something, even something frivolous or expensive. There is nothing wrong with occasionally (within in your means) giving into those desires. The danger lies in indulging every want.

Sometimes $1000 will rock your world and once you get your mind right, it is not that hard to come by.

Get over yourself

On the face of it, many of the ways to get a fast grand or a steady $1000 extra a month, will not make you the envy of the neighborhood. If you are living an average middle class life, your friends and neighbors might think it strange that you swap your suit for a pizza delivery guy shirt at 7 pm everyday or that you get up at 3 am to deliver papers. Get over it. The sooner the better. If you need to supplement your income to pay down debt, keep you afloat until you land your “real job” or stack up cash for an upcoming need, set aside your silly pride.

Realize its not forever

The idea here is get cash coming in quick. We don’t need to find a job that will lead to a lucrative career; we need something we can start NOW.

Many “Cash Now” opportunities are not advertised. They are off the books, word of mouth gigs. Can you cut grass, babysit, paint, tutor or clean? Drive, walk dogs or sew? Pick something you can do well. Print up some flyers and get after it. Check craigslist, the local paper, ask your friends and neighbors. Cut your hair, tuck in your shirt and answer the phone when people call – you’re ahead of 95% of the odd jobbers out there already.

Part-Time Job

If you just need $1000 this month, an odd job or a gig might be all you are looking for. With a gig, there is no obligation on your part or your customers to continue past the completion of the agreed upon task. If you need additional money for a longer stretch of time, there are many part-time opportunities out there – from Waiting Tables to UPS package sorter, Bartender, Delivery Driver – check out SnagAJob for some ideas.

Sell Something

Look around, what can you unload? You do not need to make your $1000 in one sale, 200 $5 sales at your big garage sale will get you there. If you are not actively using something and it has value – sell it!

Start

To get this thing started you need to do something. Quit looking for the prefect work from home, make a million on line, opportunity and get your hands dirty. The goal is to make an extra $1000 in the next 30 days.

What have you done to bring in the cash?

Normally, I share with you articles or blog posts that I find informative or that say something I have tried to say in a new and better way. Today, I am sharing a blog post that I really disagreed with.

The author doesn’t really tell us a lot about herself other than “This is a tale of our journey about climbing out of debt by tightening our money belt, letting go of the idealities of a consumeristic society, and finding what it means to live a great frugal life.” Well good for her, I can have no argument with that.

The post I disagree with is Adult Children Living at Home – 5 Reasons to Live with your Parents Longer.

Here are some of Money Funk’s reasons for staying in your parent’s home and why they make me crazy:

Can you really afford a home that offers all the amenities and features you have come to rely upon?

HUGE RED FLAG If you have this attitude or are have encouraged this attitude in  your children;  STOP and think while there is still time. This attitude of entitlement may be the single most common denominator in people who fail to win with their money.  It is no surprise that your parents can (after 20+ years of work) afford to live better than you can. You are not entitled to what they have. Do I really expect you as a young adult to live in a tiny dumpy apartment and drive an old crappy car? If that is what you can afford on your starter salary, then not only do I expect that, I expect you to do it joyfully. Take great pride in your ability to do it – all by yourself.

Maintain relationships with your parents and anybody else (siblings, extended family) living in the home.

Independence does not need to weaken relationships. Healthy parent-child relations do grow and the day an adult child’s becomes completely self–reliant is a remarkable milestone in this evolution. Not living in the same home is no reason for a loss of intimacy. Many adult children speak to their parents frequently. They are as interested and involved in their parents lives as their parents’ are in theirs.

Focus on advancing your career or education

I am good with the education thing. For many college age kids living away from home in a dorm is an important component of the maturation process. However, for some kids living at home while attending college is a better fit for their personality or financial situation.

The idea of staying in your parents home so you can focus on advancing your career is a bit harder for me to embrace. My thinking is the minute you are making enough money to be self reliant, you should want to stand on your own. Someday you will need to manage your career AND do your own laundry. You might as well start today.

Is it ever ok to move back home?

Of course it is. Family is all about being there for each other. In times of illness or job loss or transition, it is comforting to know you can always go home.  I love my parents.  I know I could always go home and they would do everything in their power to make things right so that I could be independent again.  I love my son and he is always welcome in our home. Someday, I may need his help in a big way or he may need mine. As independent adults, I know we are both willing and able to handle the responsibility that comes from loving someone.

Maybe it is time to have the discussion in your house. When is it ok for adult children to move home?

When we think of ways to improve our financial situation, we know we can earn more or spend less. But are both approaches equal? Although on the surface it would seem so; on closer examination it is clear there is a large disparity between the two.

Exiting the consumer rat race has a far bigger impact on your ability to achieve financial freedom than does increasing your earnings.

The reason for this is twofold:

1) Earnings are taxed; heavily.

2) Earning increases influence your wealth only while you are earning. Once you quit or retire the affect stops. Learning to be happily frugal has benefits that extend for the rest of your life.

Allan Roth’s article, Financial Wealth – It’s Time not Money explores this concept.  Roth gives the following example of a 50 year old that can reduce spending by $10,000 for the rest of her life or increase earnings for the balance of her career.

A 50-year-old woman can make $10,000 a year more and will retire in 15 years, which translates to $150,000. But if a third goes to taxes, she is only left with an additional $100,000. On the other hand, if she spends $10,000 a year less and has a 33 year life expectancy, that translates to $330,000 in savings.

A dollar saved is $3.30 earned

So in the above example, lowering annual expenditures by $10,000 had about a 3.3 fold benefit over earning $10,000 more. That means a dollar saved is worth far more than a dollar earned – in the above example it equaled approximately $3.30.

Many of us try to out-earn our past or present spending habits. This seems particularly true of high earners. The problem is the more we earn the more we spend. If you are currently earning at least average wages, focus the majority of your early efforts on reducing your expenses in order to win.

Plugging the hole in your bucket before filling it with earnings is so much more effective than the alternative.

You’ve cut the cable and the lattes. You haven’t been to the mall or a restaurant or to a movie theater since – you can’t remember when. But still there is no way you can afford your health insurance.

If you are self-employed, unemployed or your employer does not offer benefits; you may be facing this dilemma. What can you do?

Our long-term goal is to find a way to get adequate coverage in place (we will talk about this in another post). Our goal today is to do the very best we can with what we have.

Some is better than None

You may be able to afford a high deductible, no office visit plan. Do not assume you can’t afford it based on what someone else told you. Most major companies have temporary plans if you are between jobs and almost all of them let you price plans on line — just be aware if you have pre-existing conditions or  if you are over weight, the online price or plan may not be available to you.

If you cannot cover yourself (existing conditions make you ineligible or even the high deductible plans are unaffordable), get a quote for just your spouse and kids.

Here are some Providers that offer on-line Quotes:

Cover the Kids

Most states have some type of coverage available through their welfare agency. In Florida, we have Medicaid and KidCare – for those that make too much to qualify for Medicaid. At this time, Kidcare has a sliding scale premium based on income; even if you earn more than 200% above the poverty income level, you can purchase Kidcare for the full premium. Most colleges offer Student Health Insurance and some will offer financial aid to help cover the premium.

Stay Healthy

We can all do a lot to improve our chances against future health problems. This means dump the weight; get some exercise, stop with the junk food, booze and cigarettes.

Some of the factors that raise your health care premium are within your control (weight, smoking) and some are not (pre-existing conditions). Fix the things you can. It can absolutely make the difference between qualifying for an affordable plan or being ineligible for any individual coverage.

Move On

Our healthcare system is broken. You know it, I know it, the doc’s, the government and the insurance companies know it. We have all heard the heart-breaking stories of astronomical premiums and denials of coverage. If you are without coverage, the inequities of the system cannot be your focus. Accept that the situation sucks and pour your energy into getting the best you can for your family today.

Living with debt or inadequate savings is more an indication of the lies we were sold, rather than a reflection of our character.

That is until revelation day. Revelation day happens when the bank surprisingly turns you down for additional credit or when you lose your job or the first time you cannot pay all your bills. My revelation day happened when I heard Dave Ramsey tell me I was a fool.

After that day, it is all about character. Will you stick your head back in the sand and pretend you don’t know or will you do the work required to change your behavior?

I have a very dear friend that recently achieved her totally debt free goal; a real cause for celebration. It was not long ago that she was stuck in too much house. No matter how much she cut the budget, her expenses exceeded her income. She was eating ramen, never turning on the heat, barely running the ac, just paying minimum on her debt and even then; the taxes and insurance on that beautiful pink elephant were slowly pulling her under. She spent years losing the fight against the incoming tide.

This woman is a professional; she’s bright, educated and her high heels always match her dress. Unlike me, she knows which fork to use and is totally at ease at fancy smancy social events. She is no spring chicken either, with a kid in college; she is well past the days where it’s easy to burn the candle at both ends.

Once she truly and sincerely declared war on her debt, my friend found a night job cleaning an office. Four nights a week and on Saturdays she vacuumed and dusted and mopped and scrubbed toilets – after putting in 50 hours at her regular job. And, she still ate ramen.

At first, I believe she was embarrassed to be working a second job and embarrassed that the job was cleaning. I know she had to be tired and often discouraged; nevertheless, she persevered.  She did this for seven months and the only thing the extra income allowed her do was stay afloat. But, that was enough. When the too much house finally sold, she was free to start her new debt free life.

I could not be more proud of her.

What sacrifice are you willing to make to win?

We’ve been doing some boat work around here for the past several days. It’s hot, dirty, hard work that is sometimes dangerous. When working with heavy stuff under load it’s very important to follow several safety rules:

Never exceed the safe working load of a line

Never work in the bight of a line under load

Never try to control a loaded line with your hands, take a couple of turns on a winch or cleat

Always have an exit strategy

It occurs to me that this same thinking should apply to your money.

The real heart of these safety rules is Anticipate and Plan for the Worst.

We don’t seem to have a problem doing this when it comes to our physical safety, we wear seat belts and bike helmets and tread carefully on wet floors; but when it comes to our money and our life, most people I meet are unrealistic optimists.

If you are spending money on Baby Einstein DVD’s but do not have adequate term life coverage in place, you are an unrealistic optimist. I don’t care how bright your 4-year old is, she won’t be able to support herself should something happen to you.

If you are mindlessly accepting student loans for your private school degree in Underwater Basket Weaving, you too are an unrealistic optimist. I have no argument with the degree – only the fact that you are going into debt without any realistic plan of how you will repay it.

If you buy a house with no savings, less than 20% down, or mortgage to the hilt the home you already own; what is you exit strategy should you need to move?

If you are loading up the future you with consumer debt so you can have the latest gadget or car today, how do you know that in the future you will have the money to pay those bills?

Buying life insurance will not cause you to die. Planning for a layoff will not get you fired. It is not morbid or pessimistic to anticipate the worst; it is adult.

Is it time for you to grow up?

Sometimes it’s the same thing said just a little different that causes that light bulb to come on.

This post, The Really Obvious Thing We All Forget When Borrowing Money says it just different enough that might help flip that switch for you.

The post asks: Who is really lending you money when you borrow?

This is really important! Is it Citibank or American Express or Ford Motor Credit loaning you that money? No, they are not. These credit companies are merely the vehicle.

You are borrowing that money from your future self.

When you use credit, you are guaranteeing you will have less – later. Not only will your future self need to repay the loan, your future self will pay interest on that loan as well. This is the opposite of Dave’s, “Live like no one else so later you can live like no one else”.

You’re really sticking it to your future self by borrowing. You’ll be poorer, less able to live within your means, further from financial freedom – and probably lumbered with an old PC that needs to be replaced.

If you have had exceptionally easy life up to this point, let me clue you in. Sometime in the future, there will be hard times and when there are, it will feel like the whole word is sticking it to you. Don’t pile on. Give the future you a break by not borrowing today.

Hating “rich” people because they are rich is almost a national sport these days. Those that are not rich love to see them fall, love to hear of their misery, love to gossip of their shortcomings.

Of course, it’s ridiculous to judge someone’s character based on his or her net worth. I have known many mean, greedy people who happen to be poor; as well as many compassionate, generous people who are also wealthy – and so have you.

Are there unethical and dishonest rich people? Of course there are. But, in Thomas Stanley’s,The Millionaire Next Door: Surprising Secrets of America’s Wealthy millionaires rated integrity [being honest with all people] as the number one factor that explains their economic success, ahead of wise investing or working hard.

Paul Sullivan of the Herald –Tribune recently wrote Financial Advice Gleaned From a Day in the Hot Seat about  his opportunity to participate in a “carefrontation” hosted by the Tiger 21 club. Tiger 21 members have a net worth of at least $10 million. They meet regularly to discuss investments and encourage one another to think about everything in their lives affected by their wealth. The “carefrontations” put one member on the hot seat to defend their current financial decisions. Sullivan thought he was doing well but the group encouraged him to dump his vacation condominium saying he needed to be more liquid. “If something bad happens, it’s easy to get rid of a dog walker; it’s hard to get rid of a house in Naples.” They also beat on him about the levels of life and disability insurance he and his wife are carrying.

Let’s Recap:

• Your disdain for wealthy people will make it difficult for you to increase your wealth; so knock it off. Feel free to dislike mean people or dishonest people but don’t hate people because they are successful.

• Many Millionaires cite “honesty” as the number one factor influencing their success. You can be honest, right?

• Wealthy people deliberately set aside time to regularly review their finances, not just by themselves, but with trusted peers. You can start this today. Calculate your net worth monthly. Review your budget and investments regularly, find some like minded people to discuss money matters with.

It is time you give up your ridiculous prejudices against the rich. Most of us wish we had more money; more to give, more to help others or more to spend on travel or stuff. Resenting and demonizing the wealthy makes it nearly impossible for you to learn anything from their successes. And really, who do you want to listen to for money advice, someone who’s got some or your broke brother-in-law?