How To Give Yourself A Financial Fighting Chance

Despite our government’s attempts at self sabotage , it’s looking like the recession must be on its way to being over. Because wouldn’t you know it, some folks are back to making what I would consider questionable financial decisions.

Nothing major, really. Individuals I know are just taking out small (sarcasm) loans and financing a vehicle for nothing less than forty thousand dollars. Not bad, right?

No, not bad if this loan was going to a CEO, an attorney, or a chemical engineer. You know, where that type of vehicle is affordable and not a budget stretching extravagance. But actually, this car was being purchased by an “average joe” like you and me. A member of the working middle class.

And to make matters really sound stupid, this working class dog makes a landlord rich by making rent payments, and carries large credit card balances with interest attached. The type of person that when they decide to attempt to straighten out their finances, they focus on minutiae like clipping coupons and skipping one Starbucks trip a week.

Genius. Apparently, no one read my post about the myth of our American Dream.

To give yourself a fighting chance financially, you have to focus on making smart choices concerning major money decisions. Like maybe not buying a car that you suddenly have to live in because your landlord put you on the street for non-payment. Or making your college choice that will force you to take the loan with the most zeroes at the end of it.

I’ve made my financial gaffes. They are mistakes that I will share with my kids to ensure that they don’t do the same thing and put themselves in a debt filled hole. But I can say that I’ve never laid out 40K for my commuter car.

Remember, people!! Concentrate on the big stuff!

Big Ones

Home Sweet Home – 18 years ago, my wife and I bought a small colonial style home on a main street in our town. Our family has grown (and grown up) in about 1200 square feet of living space. People will get a puzzled look on their faces, wondering how four people can possible co-exist in such a small area. Honestly, I could never see what the big deal is.

Have I been tempted to upgrade my house at times? You bet. But in the end, more space is not required. We have a large deck on the back of the house, which greatly expands our living area for three seasons. And we initially bought the house for the big back yard, which we knew our kids would love to play in.

Speaking of love, I mostly like my home for the miniscule tax bill, and the miniscule mortgage that goes along with it. When it comes to house loans, small is better.

Whoa, Sweet Ride – 40K? Really?? Sure, buy a $40,000 car or SUV – if you have a half million in investment accounts or cash. Or you’re a neurosurgeon. Otherwise, you can’t afford it! Didn’t your parents tell you this stuff?

And what’s with the trading in of a practically brand new vehicle for the latest model? Why don’t you just light a couple thousand greenbacks on fire before your new spirit crushing car loan comes in??

This is probably the poorest financial decision most people make. It’s a hunk of metal, for God’s sake. You’re already going to spend a boatload on commuting, gas, tires, maintenance… is a payment necessary? And if it is, does it need to be $800 a month??

My broken financial rule - charging a beach vacation
My broken financial rule – charging a beach vacation

Destination: Beach! – Let me tell you a story of how I was stupid, as in young and stupid. I liked credit cards. I liked the idea of using them instead of cash, enough where the honeymoon trip to Mexico for the wife and I was mostly paid for via the plastic. Among other things.

That trip was incredible. Ever been to Cancun? What a place. It’s the spot to go for super authentic tortilla soup, scorching sunlight, fancy cocktails, and learning to evade drinking water that doesn’t come in a sealed bottle.

What can I say? I was in love. Using Visa to pay for what is now memories seemed like a no-brainer!

My wife and I have been married for almost 20 years, and that card balance hung around at 12K for the longest time. Instead of being smart and paying it down as soon as possible, I made the minimum payments (cringe worthy, I know). I eventually got tired of looking at that balance. Earlier this year, with $3,000 left, I blew it up and paid it off.

Yup. Your math is correct. That’s almost 20 years of making interest payments. Totally brilliant.

Which will show you that even those who know what to do are still capable of doing stupid things. Hopefully, your mistakes increase your intelligence and awareness. Then, when someone tells you they just bought a $40,000 vehicle, instead of saying “nice, sweet ride”, you exclaim:

“Perfect! Now you can apply for the food stamps you’ll need.”

The Takeaway?

For my kids, it’s this: forget about the 4,000 square foot house, the 400 horsepower car, and life events that suck all of your money into a debt riddled vortex.

Three things. House, car, consumer debt. Get them right and you’re golden.

What say you? Are the “Big Three” enough to turn you into a financial shining star? What would you add to take it further? Let me know with your comment!

Blowing Up The Fallacy Of The “American Dream” – Old School Style

Our nation has a happiness fetish…much of economic misery we see today is due to the unbridled pursuit of bigger houses, fancier cars, and more exorbitant trips. The lure of consumer culture and an obsession with more is precisely what keeps so many from contentment – Alexander Green, Beyond Wealth.

In the last post, I spent time imploring my kids to cut their own path. To not mindlessly follow the siren song of excessive consumerism – which is an advanced skill for many Americans. But how, you may say. How do we go without the necessities of life?

Well, you can start with the realization that they’re really not necessities at all. Just part of this overly comfy, cozy world that you’ve grown accustomed to.

I stated that my grandparents’ generation had it far tougher than we do presently, and they “made do”. Our country is far richer and loaded with more opportunity now than in their day. That statement proved to be a lightning rod, prompting one commenter to label my post propaganda and a “total load of crap”.

Here’s the real propaganda: Marketing geniuses are at work 24/7 to separate you from ALL of your money, to convince you that happiness is found with things, and not with people or shared experience.

I will, no doubt, be taken to task for comparing the sophisticated modern American to Depression era immigrants in taste and consumption. That’s the way it goes. I grew up observing these amazing people as happy and satisfied, and not deprived. I figure if they can do it, we can to.

Don't they look happy? My grandparents at our wedding, with my Uncle Mario (standing). Exemplified success without needless luxury.
Don’t they look happy? My grandparents at our wedding, with my Uncle Mario (standing). Exemplified success without needless luxury.

So, kids, if I haven’t lost you yet, put down the iPod, and read along. I have a list for you (it’s the format web readers like the most) that you will enjoy looking at.

Disclaimer: First and foremost, nobody’s perfect. We’re human. I can still be tempted by the latest and greatest, just like everybody else. And I am not deprived by any definition. In my house there is an opulent new (albeit small) kitchen. I like expensive beer/wine, typically spend summer weekends in a boat on a lake, and I’ve grown enamored with the heated leather seats in my wife’s VW. Yes, I’m a little fancy.

With that said, here’s a few things that your average neighbor deems absolutely necessary, but your great grandparents’ generation would see as frivolous and pointless:

1. Oversized House / Oversized Mortgage – This may not be much of an issue, as it seems more and more people are smartening up and realizing they don’t need a 4000 square foot house with 2 fireplaces and a hot tub. And you have the great experience of growing up in 1,200 square feet and being creative with your space. You also spent time growing up in your great grandparents’ house, a modest brick ranch that they built and (gasp!) paid cash for. While it’s not entirely possible to pay cash for a house these days, you can still do yourself a favor by thinking “small house/big down payment”. You’ll thank yourself when you’re sending a tiny payment to the bank each month, instead of taking out a loan to pay down your loan.

2. Luxury Car. Or A Massive Car Payment – My grandparents were immigrants with little education. But they never drove or owned a car, preferring to take public transportation or, believe this, actually WALKING to get to where they had to go. I know, crazy right? But think of the thousands of dollars they saved never paying for gas, insurance, maintenance, or a ridiculous monthly obligation to the bank. Looking smart now, aren’t they?

In this life, massive car payments are NOT a requirement, despite what you’ll hear. At 18, I bought my first car with $1,000 cash, and although I’ve done the payment thing since then, the trick is to keep it small and then keep driving your car without the payment.

And those BMWs and Mercedes that everyone is fooled into thinking are the best cars? Mostly bought on credit by people that can’t afford them. Trust your Dad on this one. The Chevy, Honda or Ford does most of the same things. Cars = transportation (not status). Period. Point A to Point B.

3. Gigantic TV with 10,000 Premium Cable Channels – One of the advantages to owning a small house is the lack of room to squeeze a 92 inch television screen. Which to me, is a good thing. Do I really need any more incentive to sit on my lazy ass?

Again, this is American over consumption at its finest. Kids, its totally unnecessary to own a TV that can crush and kill you if it tips over at an inopportune time. Don’t bother. And that $200 monthly to the cable company for the privilege of watching multiple channels filled with garbage? If you must have cable, at the very least don’t subscribe to 300 channels and become a couch crashing sloth. The “premium” service is a premium rip-off.

4. All The Latest Gadgets – Yup, I know you love your iPods and the laptop (both of which are becoming old-school themselves). But when the iPad 10 comes out and dopes are standing in line at midnight to get one, I know you won’t be one of them, because you will have read this. The new will be obsolete in no time at all. Repeat after me: The latest and greatest is a scam. I can be perfectly happy paying much less money for last year’s model.

There. That felt good, didn’t it?

5. Restaurant Take Out – Here’s another disclaimer: I love restaurants. My grandparents’ owned two, and I grew up and worked in one for decades. I like going to restaurants now. But what I can’t fathom is getting lunch at a restaurant every day. That’s at least a couple thousand dollars out of your pocket at year’s end. Sweet!

At my office, I garnered the nickname “Joey Leftovers”. You probably know why. Because I was bringing my lunch from home. Every. Single. Day. Will I occasionally take a trip to my favorite import store to grab a nice Italian American lunch? Absolutely! However, it’s a treat. Not a daily requirement.

Starbucks_Logo
Give me all your money

6. Fancy Coffee – This one could fall under restaurant take-out, but I feel it deserves its own category. Again, I like fancy coffee. My grandmother always made it. But she would have keeled over if she ever had to go to Starbucks and pay $7 a cup for it! I highlight this just to show you how ridiculous that price looks. Starbucks has great product. It’s not that good.

You can make great coffee at home for pennies a cup. You don’t need a mortgage to support your caffeine habit. Baristas should be lonely once in a while. Make your coffee at home!!!!

7. Outrageous Vacations – After sending my daughter on a school trip to Italy, I had second thoughts on including this one. However, that trip was a deal (and an opportunity) that could not be passed up. In the age of Facebook, it certainly seems that we are all trying to “one up” each other when it comes to our luxury vacations. That’s where things get dangerous. The keeping up with the Joneses mentality.

Kids, I think you should travel. See as much of the world as you can. And keep going to your favorite beaches long after your parents prefer to stay home in the rocking chair.

But here’s something to think about. Nonna and Pop went back to Italy – once. As far as I know, it may have been their only vacation in 60 years. And I don’t think the lack of vacations really mattered to them. Do travel, but know it is a luxury and a privilege when you do so.

8. Convenience – There are many other facets of luxury that your great grandparents had no or little use for. They worked their asses off, so a gym membership wasn’t required. Nonna used the clothes dryer more as an end table than a dryer (she preferred drying racks). And there was no recreational shopping. Unless it was at the aforementioned import store and she decided to splurge on cheese.

There were a myriad of ways they shunned convenience, and that’s not necessarily a bad thing. Making a practice of that will save you money, keep things simple, and make you happy. Advancements are cool in terms of medicine and technology, but don’t make your life so convenient that you never have to actually move to change a channel or turn off a light.

They did many things the hard way. Once upon a time, that’s what the American dream was all about.

OK, fire away. I know I’ve pushed some buttons here, especially if you’re what I like to call a “new-schooler”. Am I right? Have we become too fancy and accustomed to luxury? Or am I stuck in the Dark Ages, with not the sharpest torch in the shed? Start a conversation in the comments section.

Celebrating the Holidays, Old-School Style

xmastree_As Charlie Brown lamented so many years ago, I also wish for a time when the holidays weren’t represented as being crass and overly commercial. I’m not going to say I didn’t open more than my fair share of gifts when I was younger, ’cause you know I did.

But there is a craziness that surrounds the holidays now that didn’t seem to be there when I was a kid. Yes, our family tree had plenty of presents around it. I remember getting the toys I wanted as a boy, and the record albums on my list when I was a teen (“Frampton Comes Alive!“), but it didn’t seem gifts were all that expensive back then.

Nowadays your toys – electronics and gaming systems – can run into several hundred dollars a shot. For one gift. Talk about your financial pressure.

For those of you that would like Christmas suggestions that tend to lean old-school (what, no Lexus or Mercedes tied up with a big red bow?), I offer up the following:

Make the Holiday a No Shopping Zone – Although Black Friday isn’t something I participate in anyway, is it really necessary for those who do to push it up into Thanksgiving? I know it’s old-school thinking, but no one needs to shop on a holiday. Let the retail workers have time with their families. And give the tryptophan pumped bodies of potential shoppers a little more time to recuperate from that second piece of pecan pie.

Don’t Break the Bank – Americans plan to spend an average of $846.00 this year for Christmas gifts, up 14% from the previous year (credit: Experian). I know, I know…what bad economy? For all of the hyperbole of our country sliding into the shitter, our citizens seem to be taking a lot of trips to Wal Mart. I’m hoping to spend less than the average this year myself. I’m thinking most of that $854 per household is getting spent with a sliding credit card. Not good.

Celebrate with Cash – Don’t want to run that insane gauntlet of gift purchases, whether on-line or brick and mortar? Don’t bother. Do what my grandmother did, and give out bank envelopes with cash!

  • Everybody loves cash
  • You save the time you would have spent shopping (win!!)
  • You may save money as well. You know you would have spent more on a gift – slip your loved ones a nice crisp $20 bill instead.

Make Meals a Holiday Centerpiece – This is one aspect of holiday celebrating that isn’t too difficult to pull off. Everybody loves the holiday meal! The Thanksgiving turkey and stuffing are ubiquitous, but Christmas is also a great opportunity to pack on major calories as well! From the Christmas ham with all the trimmings – and by trimmings, I mean trays lined with manicotti and lasagna – to our old fashioned Christmas Eve fishes, the main holiday attraction for many of us remains the food.

Leave the Stress Behind – Holiday stress factors cited in recent research are lack of time (up to 69%), lack of money (up to 69%), and pressure to give or get gifts (up to 51%). Sounds to me like some folks could use reacquainting with the original idea of Christmas – the birth of Christ, remember? – and forget about the materialism for awhile and approach from a different perspective.

On December 26th, all that anxiety about gift giving seems a little silly, doesn’t it?

  • Hug a friend or loved one
  • Listen to Christmas music
  • Decorate the tree together
  • Say a prayer for the troops
  • Go to church
  • And by all means, say “Merry Christmas”!

Look at the title at the top, and take out the key word: Celebrate. You only have so many opportunities to do so.

6 Nuggets Of Financial Wisdom From The Old School

My grandfather, young and handsome!

My grandparents could not take advantage of much education when they came to America as they had to go to work at a young age. But in many respects, my grandparents managed to acquire more financial intelligence than most of us, including me and you.

Makes little sense, right? How can someone’s grandparents possibly be smarter than they are? The older generation did not have access to all that we do. This is the information age. We have Google and Bing to search at the speed of light, and Twitter and Facebook to share any piece of information that we have in real time.

Most of us would also have an edge in education, as well. My grandparents never attended college. They went to work as soon as they possibly could, to aid in the support of their family. So, naturally, our intelligence must be more advanced too, right?

Look at me now, typing away, publishing my words on-line and competently stringing a few sentences together. You might say this talent makes me a little smarter than, say, my grandmother.

We may be able to gather information more quickly, that’s a given. More intelligent? The jury’s out on that one. As far as being common sense smart, the previous generations might have it all over us. I’d like to offer some of their “money handling” examples:

They spent their money wisely – Yeah, at times my grandfather would splurge on a lottery ticket (or two). And yes, my Nonna liked to buy a surplus of imported cheese that was fifteen dollars a pound. But most times, they were not crazy with their money. They went to stores infrequently, shopped sales when they did go, and they didn’t have any expensive hobbies like golf, boating, or weekends in Las Vegas. Things were pretty simple. And when your needs are simple, you tend to not spend money.

They saved the same way – Since there wasn’t a lot of spending going on, they saved a lot of money. As they worked hard and built their business, they were also able to build a house in 1969 without taking on a mortgage (that one still amazes me). They purchased another restaurant after operating their first one for several years. You’re able to do that by saving- not dropping all your cash.

Their house was not an investment – Very simply, they bought their house to live in. Period. They weren’t concerned about the house’s market value, if they could tap it for equity, or if they could retire if it was sold. They lived there. It was their home – not a piece of an investment portfolio.

Meals were prepared at home – There were very few trips to restaurants when my gram and her sisters were around and cooking at full throttle. Dinners out were special occasion only. For them, the term “take out” meant taking out the garbage. These girls made some of the greatest lunches and dinners to ever hit a table. It never occurred to them;

“Gee, why cook? Let’s go out for dinner tonight!” or “Honey, I’m tired from my day doing piece work at the factory…can we go out?”

Ridiculous. They knew they would never get a meal of the same quality at a restaurant as one they cooked themselves at home. I feel the same way.

They brewed their own coffee – Especially in my grandmother’s house, the coffee pot was ritual. Granted, in my grandparents’ prime, the Dunkin Donuts and Starbucks of the world were not at all prevelant. But if they were around today, I’m sure they would probably think “Really?? People like paying seven dollars for a cup of coffee?” Myself, I’m not here to bash Starbucks. I love their coffee, and every six months or so, I’ll treat myself to one. But every day, like some people? Not me. That’ll really put a hole in your wallet.

And last but not least…

They were happy with what they had – Keeping up with everybody else was not in their playbook.  They didn’t give a shit about what the neighbors had. If there was ever any envy or jealousy, it was about who had a bigger fig tree or had the best spread on the Sunday dinner table. My grandmother’s one extravagance was a fur coat, and she wore it out. She wore the same dresses, and my grandfather wore the same flannel shirts, forever. And they were perfectly happy. They weren’t concerned with clothes, jewelry, fine wine, or exotic vacations. The only concern was whether or not you had enough to eat.

What say you? Should we adopt some of the financial principles of yesterday? Or should we continue guzzling Starbucks and lusting after BMWs while the economy falls further into the outhouse? Agree or disagree, comments please!

This Is Not Your Grandfather’s “Job Security”

I can’t remember the last time I had a stunning day at work, but last week I had one of those days.

The stunner was the revelation that three people I had worked with, and come to know over the last five years,  lost their jobs. Just like that. In almost “mob hit” style, one minute we were talking, and the next they were gone.

Without a word.

Having been in the job game for a long time now, I was less stunned than a lot of my workmates. But the fact that I felt this way at all showed just how complacent I’ve become.

This is not your grandfather’s world of “job security”. For all but a tiny percentage of workers, there is no longer the 40 year career at one company, leaving to collect a pension into your golden years.

Anyone that believes a corporation is going to “take care of them”, and is going to care about any more other than the concerns of its shareholders, is playing a dangerous game.

If you believe in such a thing as job security, you are doing yourself a disservice.

If you think there is a corporation, a job, that will take care of you more than you can take care of yourself, you’d better think again.

Image Courtesy of Wikipedia

My grandparents’ generation worked in factories, some their entire lives. They worked hard, and their companies rewarded them with a paycheck, a pension and job security.

My own grandparents could have retired from jobs, from working for somebody else. They decided to run their own businesses instead, drawing success from their restaurants and providing for themselves the ultimate job security: As long as the doors were open, and sales were brisk, they could never get “fired”.

I never had a job until I was 35 years old. I worked in the family business, and I would always have that work as long as I wanted it.

There is no such thing as “job security”, no matter what you may tell yourself.  If you’re someone younger than me (and lately, that’s looking like everybody :)), look at that fact as an opportunity. It’s a new world, but you can take full advantage if you’re well armed.

One of my close friends made the comment if you have a strong support group, you can worry a little less. I tend to agree with him. The more connections, the more close friends and relatives you have that can cover your back, the better.

If you suddenly find yourself out of work, then let them go to work for you. Friends love helping each other out, right?

It can help if you have other skills beside your job as well. In my past life, I was a bartender in the family business. To make extra cash over the holidays this past year, I was a part time bartender again. It’s a skill that I’ll always have, and that people are willing to pay for.

Whether you realize it or not, you have a skill like that too. It is just up to you to find out what that is.

Speaking of friends, cash in the bank is a big ally too.  A cash cushion can keep you relaxed and stress free. It doesn’t have to be huge, but you better have something. You don’t want the situation of losing an income with your savings account dry as a bone.

I have no doubt the friends that I no longer work with will be OK, and land on their feet. They are a talented bunch, and one in particular already had a side business up and running.

But if there’s a lesson they can teach, it’s always be ready. Always be looking over your shoulder. And have your options in place if you ever need them. Chances are you will.

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