Archive for the ‘Money Management’ category

Not Seeing the Soccer

March 8th, 2008

Soccer balls - Edited from Creative Commons: http://flickr.com/photos/hjl/37823927/sizes/l/Pardon my American term of soccer those of you who call it football. I blame my parents, they called it that because football was an awkward game with very large men attempting to damage one another while not getting damaged themselves. Its like politics only with more distinguishable words that the common man feels comfortable with. You see, my wife wants to sign up the girls for soccer [read: football/futball]. I want to sign them up, too. Just not for a combined total of $270.00. I’m going to declare that watching them play it is fun (we went to a free day where they could practice with a coach so as to hook us into the program). Its greater fun than watching the politicians for sure.

Our getting out of debt budget simply doesn’t have a $270.00 gap in it. Maybe if we saved up for a few months we’d have enough, but that would be money we’d be taking out of debt deduction instead of money going into the debt reduction process. In short we’d be paying our way out of debt for several months longer (or to put it in my wife’s terms: delaying our cash-only anniversary trip). In my mind its not worth it. I’m more than willing to do it once the debt is gone, but at present putting the debt as a lower priority feels like a violation of all that is mostly good (except for the politicians who are mostly not good).

So we’re going to have to discuss this because while we could eek it out of the zero budget, its not my first choice.  We love our girls, we love to see them get exercise and fun, we love to see them get the opportunity to dominate spheres and cause mild pain and suffering in (non-competitive youth) soccer, but this may just have to wait for one more year to go by.  We think next year we may just have all or most of our debt paid off.  Maybe we can buy a soccer ball and kick it in the backyard.  I know it isn’t the same, but neither is American Soccer and Football.  I blame the politicians.

Middle Class Now Means “Spends All Of Their Money”

January 10th, 2008

Apparently MSN thinks that spending all of your income means you’re middle-class.  Or at least that is the picture painted in this piece of journalism.  My sister sent me that link and she was aghast at the stupidity of the content there.  Watch the video, if you can stomach it.  There is such a prevalent mindset that ‘having’ is middle-class.  Instead lets ditch the class system and go for accountability.  Class is about stuff, but we’re not concerned with stuff.  If you read various books like “Millionaire Mindset” you’ll see that there are plenty of ‘middle-class’ looking folks who are actually very, very wealthy, they’ve just figured out how to be wealthy by spending less than they make and investing the rest wisely.

Don’t spend as much or more than you make, making more later will just be more to spend.  Instead, start early, start often, and start saving.  I don’t watch Oprah regularly, but I do remember an interview of her where she said that her dad told her to save half of her income… and she has.  And now she’s a multi-billionaire.  You don’t get there from spending, you get there from saving.  Save the ‘middle class’ by saving, not spending.

High Interest Savings Account: $90.38

January 3rd, 2008

This last year, for half of the year, we had a high interest savings account with WaMu.  That account held quarterly tax money for us while we waited for the payment cycle to kick in.  In the past that money sat in a savings account earning us nearly nothing.  That’s the power of letting money work for you while you work on something else.

The amount of money that fluctuated in that account was pretty substantial.  The account would go to almost zero every time we’d pay taxes, but then over several months time it would climb back up to make us more money each month.  This up coming year, assuming we’re able to have the whole year instead of half the year we should be good for closer to $180… at least in theory.

If you have money sitting in a ‘regular’ savings account I strongly recommend you find a higher interest account or a money market account.  It could mean the difference between $1.00 and $100.00.

The Ultimate Money Maker

December 27th, 2007

Part one of what will probably be a multi-part series on The Ultimate Money Maker. This is probably a mythical concept for the average person if they are looking for someone else’s ideas. The Ultimate Money Maker is about 3 megabytes.

What do you believe about this topic?

If You Are Employed You’ll Want to Read This Post

November 14th, 2007

Creative Commons http://flickr.com/photos/rightee/4428308/If you have ever managed people then the manager-tools.com podcast series is for you. Why does this relate to money management? Because if you’re looking to get ahead to increase your income then you will need to be a better communicator and more than likely a manager of people as well as finances. The advice on that site is free (with for-money advice also available), the advice is practical, and it is sure to at least begin to prepare you for life in the wide-weird-world of management.

If you’re currently just an employee then you’ll want to listen to this stuff simply to learn how your manager may be trying to communicate to you. Sometimes managers don’t know that they’re doing a bad job of communicating and you may learn from these audio lessons how to help your manager manage better – heck, you may even want to pass them along to your manager.

If you’re a parent these are valuable because they even apply some things to rearing a child. And let me tell you: rears of children should always be managed. If you’re a manager you should listen to these because odds are you’ve never been trained to be a manager, you’ve just been thrown into it. I have recently been chucked in front of the wheels of an oncoming management train myself and this sort of thing is going to be handy.

I would recommend starting at the bottom of the page and working your way up so that you can get a feel for their methodology. Its not difficult to listen to and you’ll want to keep a pencil & paper or a word processor open to take notes. I have a page of notes from one podcast already and am just starting my second. This stuff is dynamite strapped to the body of a dead manager – go ahead and light the fuse… its attached to you.

Ten Qualities a Good Money Manager Needs Most

October 31st, 2007

I have not done the best job of being a financial manager throughout my adult life. If you’re like me you probably have plenty of excuses, some legit, some are just an attempt to cover character flaws, and others are things you were simply ignorant about. In the end I’ve been thinking about the idea of most important things. Here’s a list that I cam up with, what would you add or change?

Self Discipline
Self Discipline http://flickr.com/photos/ayier/484760630/Self discipline is like the super drug of the bunch. There’s really nothing you can do if you’re lacking self discipline. Some suggest things like the automatic millionaire’s principle of automated systems, but the truth of the matter is that those can still be foiled if you don’t have discipline. I lack this sometimes. When my stomach gets in the way, when my greed kicks it up a notch. I really struggle with this at times. Sure, there are other times when I’m dogmatic about things, but not enough to be 100% consistant.
Planning Skills
Planning with a map http://flickr.com/photos/anniemole/84822574/Lewis & Clark set across the United States with very little information and had to create a map. They had to plan with what little they knew and make up the rest. Good financial management is going to require a little bit of this mindset as well. You have to plan for what you do know, but be prepared to shift courses as needed (more on that later). Planning is like a giant black hole for some. They never feel like they have enough information or their tolerance for risk is so low that they can’t plan anything grandiose because they’re certain that they will fail. So they go back to the drawing board. And again come back looking for more data and then go back to the drawing board. Rinse. Repeat.I tend to take the mindset that I will plan for what I hope tomorrow has, plan for next year, plan for five years and get my focus set in just such a way so that I can adapt as new things arrive on the horizon or show up on the radar – seconds before impact. If you don’t make a plan with what you know you’re not going to get anywhere because you’re lacking the goals you need to succeed.
An Eye for Opportunity
Opportunity http://flickr.com/photos/kamalsell/413793561/Opportunity knocks just about a hundred times – you need to recognize a good opportunity verses a bad one. I have had opportunities that I have taken and they’ve gone horribly wrong because I didn’t have the instinct to guess right or the discipline to carefully evaluate them. Taking on every opportunity is foolish, ignoring them all is just as dumb. Right now the housing market could be a bad choice, so what else is out there? What investment areas are just unexploited and need your money to grow and leave you living high on the hog?
A United Front
Discord topples the dominoes http://flickr.com/photos/14516334@N00/297237720/If you’re married then you best be united and not untied. I have mentioned on multiple occasions that my wife really keeps her 100% of the finances on track as much as possible. We make unified decisions. In the Millionaire Mindset it is recorded that wealthy families are not tied to just one of the people in the relationship, its usually both working as a team. For an example of humor and failure read this funny article about a woman who brings only looks into a relationship.
Patience
A patient spider http://flickr.com/photos/14516334@N00/297933166/in/set-72157594342849895Patience, with determination, will often bring long term rewards. If your plan is to be a millionaire by some date you need to be focused on success but patient for the fulfillment at a potentially later date. I personally don’t know how I’ve endured some of the things I’ve endured, but money comes and money goes and so I am patient. Had I planned better I’d have probably had a lot less go, but patience is waiting for a good opportunity, waiting for the market to turn around, or waiting to not say anything when someone else is not as well off as you are. Patience is a virtue – do you have patience?
A Voracious Reading Habit
reading http://flickr.com/photos/ckaroli/1688897198/Reading with the purpose of education is invaluable. Be ready to read. Right now I have a book on programming, some theology books, and two books on finances going in my rotation. I make time for each. I also read many blogs faithfully every day so that I can manage everything and continue to feed the most valuable asset I have: my mind. Many of the things I’ve mentioned before are growing and fed by my constant attitude of learning. This blog is designed to help me share what I’m learning and I’m hoping it keeps growing because I keep learning.
Self Confidence
Confidence http://flickr.com/photos/gerriet/233716701/Not relying on others for value or esteem will help you endure the times when you go without. I don’t have a large screen TV. I don’t have a Nintendo Wii. We’re not buying those or an iMac (which would be nice for the family over our older HP desktop machine with CRT monitor). Our value is not in our stuff and our stuff doesn’t prove wealth anyway! Self confidence is what lets us live in a neighborhood that isn’t at the high end of the spectrum, but instead in an older, but established neighborhood. We’ve done lots of thinking, but it hasn’t been about what others think of us.
A Marathon Runner’s Mind
A marathon RACER http://flickr.com/photos/infomatique/1799830615/A mind that understands the long term reasons to not spend money now so you can spend money later [see: a ton of bricks]. A marathon runner knows that starting off with a sprint will more than likely mean failure, cramps, or injury later on. Instead the marathon runner paces himself or herself so that they can reach their goal and achieve the mile marker achievements. Debt repayment may be one, but you have to endure and be patient and paced. Your first $20,000.00 may be another. As you see the mile markers pass you start to realize you’re closer to the finish line than you are to the starting line (unless you’re running a circuit).
A Communicating Team
Communication http://flickr.com/photos/icathing/29588169/Odds are that you are not keeping all of your money in your home and in a secret hole in your back yard. In that case you need to have great, clear communication with your financial companies, as well as with anyone else you’re doing business. Make sure that you make communication a priority. Today I called one of my credit card companies and discussed my interest rate with them. I wanted to make sure I knew what I was getting and what they were charging me. When you trade mutual funds you need to be aware of what the funds are doing and where your fund is heading. Your broker will be able to get that info to you online, or you may need to call certain people to keep up to date on things.
I use wesabe.com because it allows me to manage much of my financial information in one place. Its communication simplified. If you’re not using a tool of some sort to manage your finances you should consider it because its part of the communication process.
An Inexpensive, Enjoyable Hobby
A giant guitar http://flickr.com/photos/garryknight/899560708/You need to be able to unwind at times in life and its handy if there is a hobby that can let you do so without breaking the bank. My wife can scrapbook with the best of them but much of what she’s got was in gifts. She can spend some money now and it allows her to be creative, relax, enjoy memories and spend relatively little now that she’s got so many tools to use. I have musical instruments, many of which are older or used, but they let me play and have fun. Some people enjoy walking. Some people enjoy window shopping (without cash to blow), and some people enjoy fishing. Whatever your hobby, consider the long term costs and make sure that you give yourself some time to relax because it will help keep your life balanced.

So those are some areas that I think you and I as money managers need to be honed in on. What am I missing? Do you agree with me? I’d like to invite your comments or blog post responses. I’ve got to work on several of these areas, but I think they’re key to my financial success.

All pictures are creative commons and you can click on them to see them on Flickr.com.

October’s Envelope System Almost Happened

October 27th, 2007

One of my favorite lyrics from a band called “Model Engine” are from a song called “Scarred but Smarter”

If its all true
the only time you fail is the last time you try
if I concede defeat will I
be complete in this failure
am I incomplete and a complete failure

As the of the song indicates the ‘failure’ was a lesson learned.  As the title of this post indicates we didn’t quite get our envelope system off the ground.  The failure to complete the process fell completely on my shoulders.  I simply didn’t push through my busy schedule and get things set up like they should have been.  This post contains some lessons learned from my failure so that I don’t do it again and so that you don’t have to go what I went through should you choose to adopt the envelope system for your own household.

Banks Limit ATM Withdrawals – Part of why I didn’t complete my envelope system was the realization that I couldn’t withdraw as much from the ATM as I had planned and therefore my scheduled envelope stuffing wasn’t going to work, but I didn’t take time out from being busy to step into a branch and withdraw the amount we needed to fulfill this role.  There is very little work that can be done from the envelopes if the envelopes are empty.

Almost isn’t good if you’re on the receiving end of a handgrenade or a horseshoe – Almost going to the bank and almost withdrawing the cash almost worked.  If you’re on the receiving end of failure then being so close to safety (the envelope system) isn’t going to help you.  You want to have completed the system setup rather than have bombed out of the system by blowing it.

Debit Cards can at least Track Spending, sort of – The upside of this is that we still came really close with groceries and we can track things using our debit card.  It didn’t work like the envelope system but it did at least show us where we blew it.  I could have started in after the beginning of the month and used the recorded expenditures to help me pick up from the post-first starting point.

I’m a Lazy Bum -  I am not lazy in some areas, but for some reason this simple task of going to the bank and into the bank and getting the money out put my brain into a delayed shift where I could come up with any number of things to do before getting the money out.  I could have gone to the bank on the way to another errand.  I could have withdrawn money several days in a row after my banks regular hours to achieve the same amount withdrawn.  Other options existed by I was simply lazy.

So, now November will be the first envelope system and we’ll get it done because I’m determined to not let this be the last time I try.   Failure is not an option.

Save Money on Christmas Gifts: Plan Ahead

October 17th, 2007

In our house we have a few things that we’re trying to do to help manage Christmas’ big expenses and turn them into moderate and or tiny expenses.  As the title implies you’ll want to plan ahead for Christmas expenses, holiday travel expenses and of course stay away from credit cards where the bills come later after the kids have played with the empty boxes and wrapping paper and left the toys for the dog to chew up.

  • Make a set budget for the amount of money you’re going to spend
  • Make a list of people you’re going to give gifts to
  • Make a list of gifts for those people (we usually allot money per person and then try to spend under that amount on a specific item)
  • Talk to certain relatives and friends about not exchanging gifts except for the kids [if you have them], but instead plan on some time together before or after the ‘mad rush’.
  • Buy gift cards when you know that people won’t mind or when you’re not sure what to give.  This reduces the expense of shipping huge amounts of packages to different destinations
  • Attempt to spend less than the amount you planned by shopping sales

We try to not let gifts be the part of Christmas that we look forward to and instead think of the gift of Christ and the time that we have together as the important part.  Oh, and most items my sister makes for food – we definitely look forward to those things.

The Colorado Rockies, Sports and Retirement

October 1st, 2007

Only a tiny, tiny percentage of young baseball players make it into professional baseball. Our local home team is the Colorado Rockies, they’ve just now, moments ago, made their way into the playoffs vying for the position of representing their league in the World Series. What continues to amaze me in all of this is the salaries of the players. The players are signing multi-million, multi-year contracts that should allow them to retire at whatever age they choose and take up coaching, broadcasting or sitting on their backsides. I was just looking on the CBS sports site at the Rockie’s Roster and salaries for their players.

For example if Matt Holliday had no endorsements, no external cash flow from bonuses resulting from post-season playoff action, he would make $4,400.000.00 this year. With a salary that big you know he has to be paying a lot in taxes (though maybe a smaller percentage than we would think) , but after taxes he’s got money that he can put into investments that should help him clear a good chunk of interest every year until his grand-kids inherit a piece of the action. Assuming a 10% investment of that money ($440,000.00) at 12% interest for the year that would earn Matt$52,800.00 in interest. Ten years, without adding any more money to the investment (at 12%) would give Matt a compounded value of 1,366,573.21. Now, lets assume that he adds $100,000.00 to that every year between now and his retirement in ten years (which may or may not be reasonable… but we’re just playing with numbers) that would have him earning a grand total of $3,332,031.54 in his investment account. The good thing is that the number is going to continue to grow. Assuming that he makes 12% from that point forward from interest for do years, but lives off of 4% of that interest (effectively only earning 8% in compound interest) he’d end up with $15,530,456.21 at the end of 30 more years. Living off of the four percent interest the first year he’d get $133,281.26 to spend on whatever he wanted. Assuming he’s already got a paid for home and set of vehicles that’s a lot of money to do whatever you want with – and its also assuming he’s not working for a salary as a coach or as some sort of public personality.

Sports is amazing world to look into, a tiny percentage of the players make it big, a smaller percent can demand such huge salaries, but if you look at players like Alex Rodriguez who got paid $22,708,525.00 for this last season (again, just for the regular season and without any endorsements or other bonuses) it jumps to even more astronomical numbers. Ten percent of that salary is $2,270,852.50. That is to say that one tenth of A-Rod’s salary covers more than 50% of Matt Holliday’s salary. In essence the same assumptions made earlier about Holliday’s income and investment potential can be multiplied five times to represent A-Rod.

To set it all into a greater contrast evaluate this: The best paid team in the Major Leagues is the New York Yankees. They get paid a collective $189,639,045.00 a year to play professional baseball. The lowest paid team in the league is the Tampa Bay Devil Rays who get paid $24,123,500.00 collectively. One player on the Yankees gets paid almost as much as the entire team of the lowest paid players. The three best paid Yankees make a collective $67.7 million. The Devil Rays paid their top three paid players a collective 8 million dollars for the season.

All of that is to say: don’t sweat your income in contrast to others: even in the big leagues there’s a disparity. Get your job done right, get your job done well and look for opportunity. You never know when someone may be looking for a professional in your arena to pay a quarter of a billion dollars for the next ten years :)

Financially Focused Friends

October 1st, 2007

At church on Sunday I began talking with a friend who asked, “Do you know who Dave Ramsey is?”  And thus the conversation developed as we both shared brief stories of how being financially focused for the last (insert time period here) we had both discovered that we could have financial peace, and then that we could also have financial goals that were sound and methodically possible.   The conversation was good because it allowed us to bond at yet another location in our lives.  We didn’t have to discuss numbers, but instead a lifestyle of financial responsibility.

The good thing about having financially focused friends is that they’re going to understand when you don’t go out to eat.  They’re going to understand when you don’t drop ten grand on a Disney cruise vacation and instead they embrace a frugal lifestyle and understand your long term goals to become independently wealthy independent of the lottery.  They’re also great friends to get together with because as both of you discover areas to be frugal you’re more than likely going to be sharing those ideas to help each other achieve your goals faster or more efficiently!  You can’t beat that opportunity.

The other area that folks need to consider is that when you have friends that are like minded it may help you to relax in other areas and grow a deeper friendship.  A deeper friendship that will stand the test of time, finances and the sucking sound of instant gratification, pop culture and gadgetitis.