Archive for the ‘Retirement’ category

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Have You Considered No Retirement?

April 28th, 2009

I just finished listening to the latest Wine Library TV episode (#665) and Gary and Tim Ferriss close by asking people about not retiring.  I don’t want to retire for various reasons.  I may want to slow down, but my grandpa who is in his mid-eighties, and just had a triple bypass heart surgery, is still working.  For money, as a consultant, doing things that I’m excited about.

Don’t retire.  Be prepared if you are forced to slow down due to medical reasons, but don’t retire.  Don’t quit.  Its part of the American Scream and you don’t have to buy in.  Take it to the next level and work into your golden years.  I bet that people who don’t retire don’t get Alzheimers as often, the never find that statistic that people who retire tend to die within 5 years of retirement, and they also make time to enjoy life outside of retirement in their whole life.

What do you think?  Am I smoking crack?  I bet I get a lot of disagreement on this post.

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Posted in Outside the Box, Retirement

Hard Pressed with Extra Starch

October 14th, 2008

I grew up hearing stories of my dad’s college days.  One such story included an acquaintance that owned a pair of pants that he did not wash until they were told to have disentigrated.  The pants at one point in time could stand up in a corner on their own from all of the materials that had been collected in the fibers of the fabric.  My personal hygiene alarm goes off every time that story comes to mind.  My skin crawls with the imaginary microbes, bacteria and germs that those pants must have harbored.  The pants were not standing up because they were filled with something, namely legs, but instead they were standing up because of external influences.

I had a realization this week as I was pondering the significance of the numbers of trillions of dollars that have been lost globally in various financial markets.  The realization was not one that I should have had to wait until 31 to have and I wanted to pass it along in case others had not been exposed to it: The stocks in the market may very well need a good washing because there are not always legs holding up their pants.  Each stock is not worth the value that is given to it on the market that day, it is worth the value the people (thankfully not germs) put on it and built into the fibers of the stock the minutes, hours, days, weeks, months, or years before.  But unless the companies behind the stocks are actually doing amazingly good things and you’re owning a piece of a real company that is worthy of ownership, you could be buying extra crunchy pants.

You could be hard pressed to find a company that is worth the esteemed value of the stock, but it is important to remember that not each person who owns a $132/share stock paid $132 per share.  They might have paid $32.00/share and others after them paid more than that.  Obviously that’s why the investor makes money if they buy at $32.00 and sell at $132.00, but when the market tumbles and share values drop its not a loss of actual wealth, its the loss of unrealized wealth.  There’s a BIG difference.  Its not that the estimated value doesn’t matter, but instead it is important to have the principles of the theory behind the market in mind as you’re looking at the numbers.  If I buy a stock at $32.00 and sell it at $30.00 I very literally lose $2.00 per share (plus any trading fees to buy the stock and to sell the stock).  What you need to realize is that as an investor I may have also missed the unrealized reward of the stock jumping to $64.00 per share and in an attempt to ‘hold out for more’ the stock reversed and dropped me down to where I realized the stock was going to go down to less than I paid for it and by the time I could find a buyer, it had devalued to less than my original buying price.  Realized and unrealized wealth are two different things and when the media or overly dramatic persons speak about trillions of dollars in wealth disappearing, it isn’t all like real dollars going up into real smoke (we’ll ignore the carbon footprint of that smoke & money fire), it is some real smoke and some real fire shot from an impressive camera angle that makes the pants look taller than they are.  They’re standing in the corner, looking tall and legless, but they’re still pants, and they still need to be estimated at a reasonable value that reflects the worth of the company – much like pants that really, really should have been washed so that I never, ever had to hear stories of my dad’s friend’s pants that probably smelled foul.

Ewwwwww.

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Posted in Foundations, General, Lesson Learned, Retirement, Tips'n'Tricks

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Change Your Future, Make a Decision

October 25th, 2007

I was just thinking about something: Much of my financial goals are based on the idea that I have lots of time until I retire.  Some of them are rational, some of them are just pipe dreams.  I need to let go of the dream mentality and focus in on actual and practical solutions to the goals and the problems that might get in the way.  For example, if I want to become a millionaire before I retire (which will be required for me to retire) I have to make a decision: how much will I save to attempt a guaranteed millionaire goal?

If you make a goal to be a millionaire and you’re starting at 25 with a projected interest rate of 8% it will take you $8,000.00 a year and 31 years to reach that goal.  But if you’re in my shoes and starting later than that you will have to save $20,000.00 for 20 years to reach that number.  The fortunate part is that in ten more years (reaching sixty-five), without adding any more money to it, you will become a 2.3 millionaire.

However, you have to decide that you’re going to reach your goal and that you’re willing to set aside the money required to reach that goal!  You can’t sit around hoping it comes to you – you have to call the shots, execute the plan, and stay focused.  The consequences for my actions are long term – each $5.00 trip to the coffee house, each $20.00 quick lunch for myself and my wife and kids is a cut into that future life I have as a goal.  I need to make those decisions now and follow through.

Everything else is just dreams, dumb luck and tom-foolery.

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Posted in Foundations, Investing, Lesson Learned, Retirement, Tips'n'Tricks

Ten Tips To Prepare for Getting Married

October 15th, 2007

I have tried to encourage a few young couples to get married who were holding out due to money concerns. Their love was genuine, their relationship was solid, yet their finances had them on edge. Here are ten things that a young couple can do to help prepare for marriage. Some of these are geared towards young in age, and some will be applicable to all couples preparing for marriage.

1. Have Each Person Do An Honest Evaluation of Their Finances – when a couple comes together they need to recognize that they both bring a financial life into their new married life. Marriage is about being one and you’re not going to find that oneness easy in various areas just due to personality differences and personal preference. That being said you need to both evaluate your finances because you need to know what you are bringing to the marriage. Your own knowledge of the scenario is going to be critical because you have to own your victories and failures. Know all of your debts and all of your assets. What student loans do you have? How much did you bring home last year after taxes?

2) Talk About Those Financial Evaluations – After you’ve figured out where each of you stand financially you need to come together and lay down all of your (credit) cards. You need to know where you both stand because those two financial lives will collectively come together into one new financial life that is going to be the sum of the two, or in some cases the debt hole of the two. If a penny pincher and a spender come together the surprises that could be seen after the marriage could be tough. Get this knowledge out in the open now.

3) Figure Out the Expenses That Your Household Will Have – If you both don’t have bills and a monthly expense budget then you will need to discover what your expenses will be as close as possible. Talk to others in your area about electricity costs. Find out how much an apartment or rental property will cost (unless you miraculously have money for a house) and figure out how much utlities will be on average. Be prepared to pay more than your estimates. Those estimates could be higher than you end up paying, but then could also be lower and you don’t want to be unprepared. If living together means a longer drive for one of you then you need to also estimate things like gasoline costs.

4) Figure Out How You will Budget – Read a book such as The Total Money Makeover or another good personal finance book together. Get on the same page about financial planning. Make a budget together that takes into account all of your expenses and expectations. The budget at the back of The Total Money Makeover is pretty thorough and you should find yourself pretty well prepared for your monthly expenses due to that.

5) Figure Out How You Will Jointly Work Out the Actual Execution of Your Budget – Take on responsibility of the budget: together. Don’t let it be one person’s job. Keep each other abreast of the situation as you spend money on various things. Don’t let a surprise happen because of lack of communication or commitment. One person may be in charge of paying the bills, but they don’t let the other person be unaware of those bills and that the checks have been sent!

6) Plan Out Your Savings Goals to Get a House – If you don’t have a house to move into together (which some people do) you will want to make that a savings goal in many cases. If the two of you decide to not get a house – ever – then you can skip this. But I would recommend keeping this on the radar.
7) Plan Out Your Retirement Goals and Needs – How much will you need to retire? How much will you need to invest yearly to meet those retirement goals? You need to have a plan and you should never expect to be lucky and just fall into money. Accidental money is rarely going to fix your financial woes, planning will give you confidence and will allow you to watch your wealth grow.

8 ) Develop an Insurance Plan to Handle Emergencies – You will more than likely want to get life and disability insurance policies on both of you. If you talk to a good insurance agent they will be able to save you a lot of money on insurance policies. Don’t hesitate to shop around and find the best rates. There is nothing wrong with getting the best deal on your insurance as long as the company is reputable and the agents are honest.

9) Plan For Dates – Make dates out together (or even in together to save money) a priority. Don’t let yourself get bogged down in daily busyness. Instead make time for one another, and make money for some special times so that you can maximize that time. You will need this time to take a break from your hectic schedules.

10) Make Your Marriage Your Number One Earthly Priority – Don’t let money, work, family or anything else come between the two of you. I know this isn’t directly about money, but you need to come into your marriage with that as a priority! Don’t let in-laws sway you based on emotion. Don’t let work take away the quality of your marriage. No amount of income will make your marriage solid. Time together and talking together will make your marriage solid. Make your marriage your number one earthly priority.

After you’ve looked at these think about other areas that you can tackle together. Think ahead. Plan ahead. Live as one.

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Posted in Foundations, Retirement, Tips'n'Tricks

Declutter When You Retire

October 7th, 2007

Today after church I got the opportunity to talk to another fellow at church who is older than me and I asked what he was up to.  He said he was cleaning out his house before he dies.  This was a little disconcerting in that you usually don’t hear of people preparing to die.  However, as he went on to explain his thinking I was both impressed and I thought, “I will need to do that, and I want to tell others about this great mindset.”  You see my friend has had to clean up after three older relatives who died.

He had to go into the houses of people who have collected things their whole lives and,  with the help of others who were appropriately involved, attempt to throw out the unwanted, pass out the sentimental things, and give away or sell things of value that are still not wanted by others.  He said he’s just trying to do some of these things before he gets so old that he can’t do them.  He’s thinking of his son and daughter who are not in need of that burden, but would much rather go through the grieving process being able to focus on the good memories of their parents rather than sifting through stuff.

If you have parents who are getting old take a moment to discuss this idea with them.  You might choose to pick up the book ‘It’s All Too Much!‘ so that they have some good motivation. The idea is not to get rid of everything, but to get rid of any clutter or excess items that are not going to be valuable to family members.  I recently had another friend tell me that they moved their parents across town and they had several weeks of garage sales to get rid of stuff as well as finding things like fifty gallon drums that were empty but there because at some point in time they’d been ‘left’ there… nobody needed them, nobody wanted them, but they’d been collected and forgotten.  Take the time now to go through those things while everyone is hopefully cognizant, and get ahead of the potential stress.  You may enjoy the memories reminisced now together rather than having more reminders of past times later, but diminished by the distraction of ‘junk.’

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Posted in Lesson Learned, Outside the Box, Retirement, Taboo & Money (religion, sex, and politics), Tips'n'Tricks

Guarding Against Identity Theft

September 28th, 2007

One of the best ways to block identity theft according to the Discover Card mailing I got is to pay them $12.99 a month (sure glad I could keep the penny out of the thirteen dollars).  However, I’ve got another theory: dump the cards.  Once I pay off this credit card I’m going to dump it.  Gone.  I’m hoping, like Dave Ramsey, to have a credit score of 0 (zero, zilch, nada, nothing).  I’d rather pay with cash.

I’d love to seem them steal the identity of George Washington, Thomas Jefferson or Benjamin Franklin [I actually know a guy named Benjamin Franklin, so technically I guess they could take his ID, but it wouldn't be the guy with his face on money - at least yet].  If you pay Discover $12.99 a month for a year you will have spent $155.88.  That would be enough money to go have a nice dinner with my wife.  That would be enough money to sock away for 20 years in a moderate investment (returning 8%) and get $8,430.59 saved up.  If you could get more interest and save longer you’d really have something.  Say for example that you got 12% interest for 30 years: $46,803.36.  You know that Discover/Novus is going to be using your money for investing while you don’t have an ID theft issue.
I’m going to side with me making money and not risking identity theft by using cash on the off chance that my children want an inheritance.

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Posted in Debt, Foundations, Investing, Retirement, Savings Opportunities, Tips'n'Tricks

Tell a Young Person

September 16th, 2007

Today I called back a younger guy whom I have discipled in the past at a church I used to attend in Texas.  He asked, “Randy, what do you think about mutual funds?”  And that started off a long 109 minutes of conversation about finances.  A really, really good conversation that was full of his questions and my past mistakes.  You see I wanted to warn a younger person about the mistakes I’d made and give him the chance to be well grounded from the get-go.  The few things I want to communicate about include debt, investing with interest, and planning for the future.

Debt

I warned the young man about the dangers of debt and how debt steels your money from you in the future even if the present you gets something with instant gratification.  I also warned him that a good emergency fund could help reduce the chances of you needing to be in debt due to an emergency.  Debt being what it is he got the idea to ask me if he were to get married should they try to live on one income and save the other.  I told him that’s exactly the idea!  Save up money for the future needs you’ll have as well as the opportunities that you will to invest.

Investing with Interesting

We spent some time with him asking me about various investing opportunities and what the long term gain would be.  We started with the lower investment returns such as 5% so that he could see that even a lower return can build up over time.  Then we moved onto evaluating what higher interest rates would bring.  He was excited to think that even if he didn’t have huge amounts of money to put into things in the near term that long term his wealth could grow.

Planning for the Future

I suggested that he figure out what future goals he have and save up for a good house down payment, save up cash to buy (used) cars ahead of time.  By looking at the future and planning for it this young man can be way ahead of most of the people his age no matter their income.  He’ll be prepared.  Retirement won’t be a mystery, it’ll be a plan.  All of the elements that distract the indebted individual will just not be part of his life.
What would you warn younger people?

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Posted in Debt, Foundations, Retirement, Savings Opportunities, Tips'n'Tricks

“If It Was That Easy, I Figure Everybody Would Be Doing It”

August 30th, 2007

I just heard a gal who had called in on the Dave Ramsey Show talking about the concept of borrowing money from a home loan/home equity loan as being a bad idea.  She had been chastised by her family member for being so brash as to not maximize her dollars to make money on the stock market.  She told Dave, “If it was that easy, I figure everybody would be doing it.”  This common sense thinking is so rare in the financial world.  Dave’s mathematical discussion of the issue also was an interesting discussion.

If you take out a loan at six percent, make twelve percent on the stock market do you ‘make’ six percent on your investment?  The answer is no for several reasons.  The first reason is that you’ll pay some sort of brokerage fee somewhere, or a trading fee of some sort.  Then you pay taxes on that money, the percentage may vary depending on what you have going on in your life, but then another chunk just simply vanishes with inflation.  The money that you make could be no money at all or you could lose money.  Yes, some people may make money, but will it be enough?  Not really.  Figure that if you paid off your home mortgage and all debts and then invested heavily in some sort of safe investment with continual amounts of money, with less risk than debt, then you’d come out ahead with greater certainty.  If you get into debt, pour your resources into investing but get injured, get fired or get demoted your house payments are wrapped up in an investment that you’ll be penalized for taking out and living off of.

In short: get rid of debt.

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Posted in Debt Redux, Retirement, Taxes

What Will You Be Doing in Five Months?

August 10th, 2007

A question that I have begun asking myself the last five or so years is the following:

“What will I be doing in five minutes, five hours, five days, five months, five years, fifteen years, fifty years and one hundred years?”

I haven’t always answered that question well, but its something I try to ask myself regularly.  This sort of mindset will be critical to evaluating life while you’re awake, and even when you’re not awake.

Five Minutes

What you’re doing in five minutes may not seem like it matters very often, but its important to sometimes take a good look at what you’re going to be doing in the very short term.  That could mean making lunch plans to keep a relationship healthy.  It could mean finding a break in your work day to check your bank account.  It could mean taking a break to check investments.  Five minutes is a good short time from now to know what you have to get done between now and then.

Five Hours

There are times when five hours from now you plan on being asleep.  Other times five hours from now you need to have a project done.  What you’re doing in five hours may be checking the closing numbers from the stock market, tucking children into bed, or relaxing.  Thinking five hours ahead will give you some perspective if right now you’re stressed out and need some clarity of thought.

Five Days

Knowing what you’ll be doing in five days can help you plan for that fifth day.  In five days now will be the past.  Make sure that you’re keeping track of what goes on between now and then because it could help you focus on smart investing choices, smart relationship choices, or smart stress relief choices.  Five days is a work week for many people.  Think about what five days means for you.

Five Months

What will you be doing now in five months?  Will you be preparing for your holiday breaks?  Will you be preparing for taxes?  Will you be looking for ways to save for the taxes that you’ve got to pay?  Five months from now is more than half of a pregnancy term [no, we're not expecting]!  What will be happening in five months?  Should you be saving up for an expense that is five months away?  Where will your finances be then?  Do you have a five month plan?
Five Years

The five year plan is important.  It gives you a broader goal for your life, but with the expectation of adjustments between now and then to handle windfall cash, surprise expenses, or a market boom or bust that could take your investments to a new place (hopefully good because you’ve been thinking five days, weeks or months ahead somewhere between now and then).  Where will your investments, your budget or your relationships be in five years?  Think about it.

Fifteen Years

Fifteen years is a long way away.  I’ll have one daughter that will be an adult and one daughter that will almost be an adult.  That kind of freaks me out to think that far ahead but I need to have my finances in a good place then if at all possible so that I can cover any number of expenses – maybe even a wedding!  What will you be doing in fifteen years and what can you plan for it?

Fifty Years

In fifty year I may be in a retirement home, or maybe in the grave.  In fifty years I hope to be in heaven, quite honestly, because I’d like to let go of this mortal coil.  But if I’m still on this earth I need to have my finances in such a state so as to cover my financial liabilities and to hopefully leave a chunk for my children and their children, and maybe their children, too.  Thinking fifty years ahead is a big jump between five and fifteen years, but if I keep thinking five years ahead then I’m going to keep this in perspective the whole time.

One Hundred Years 

In one hundred years I surely hope to be in heaven.  I don’t expect to have the life expectancy of a human being jump by such huge numbers that I can expect to live to be one hundred thirty years old.  If I do live that long I’m going to need my investments to have done wonderfully or the government is going to have figured out welfare :)   Or my kids will have figured out how to make my money last for me.  Or if quality of life for such a life expectancy goes up I’ll be in charge of my own finances.  Why not?  Assuming I’m in heaven then the worries of life right now just don’t matter.

Conclusion

Keep this in perspective when the market goes up, down, sideways or disappears.  You simply can’t live life for now, live it now, but don’t live it for now only.  Hollywood has a way of pulling on heart strings and putting things into a romantic way, but in the end you need to focus on what matter now, what matters in five minutes or five years, but don’t lose perspective of eternity either.  The mixture of everything together will bring a huge, ginormous sense of purpose.  Don’t get overwhelmed, get over your sense of insignificance or futility and think about how much influence you have on people around you.  As a believer in Jesus Christ I need to set my mind on things above where Christ is seated in the heavenlies.  Right now, in five minutes, in five years and in one hundred years I don’t think that will matter because I’ll be with Christ.  But don’t lose perspective – it’ll cost you big time if you do!

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Posted in General, Lesson Learned, Outside the Box, Retirement

Evaluating Inflation On a Practical Level

July 31st, 2007

I just checked my bank statement and I had been given $4.16 in interest for one month’s amount put into that account.  That account gets 5% interest yearly.  What’s inflation for a year?  The nationally published inflation rate is supposedly 3%, which means that you are making $30.00 less in dollar value per thousand dollars every year.  Sure, you will hopefully get raises that deal with inflation (and hopefully more) but you’ll also need to be looking to not spend or save that amount to get ahead of the game with any new income or at least get that money into an investing tool that makes up for it.  Practically speaking a five percent return on money that is losing value at three percent means that 1,000 will get you $1018.50 in value when all is said and done.  Rinse and repeat.

Looking at inflation like that helps explain why financial advisers are always talking about investments that make 10% or various other amounts: you can’t afford to retire on a 5% interest rate and have any losses!  Take a look at your investing strategy in light of your own practical inflation and see where you can shore up any losses and keep making progress – but don’t forget about inflation because its very real and it can be very costly!

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Posted in Foundations, Investing, Retirement