Happy Birthday Social Security

Image via Wikipedia

Social Security becomes 75 this month and it time for it to retire. You have the baby boomers starting to access benefits and some say this will crash the whole system.  
All my life there has been the doom and gloomers predicting the last breaths of this antiquated system. Crisis of insolvency have been heard around Washington DC for years. With good reason, every year the Social Security Board of Trustees issues it yearly report. The report is usually bad. This year their report states that social security will be broke by the year 2037. According to Kiplinger.com this year costs will exceed revenues. In the year 2037 if benefits are reduced to 75% the money can go all the way to 2084. 
 
The accuracy of these estimates are determined by social security administration. It's probably the only federal institution that plans things out that far. According to the Social Security Administration they have to project out this far so minor adjustments can be made so that payments can continue to flow. 
 
Supposedly they actually have been planning for the retirement of the baby boomers since 1955 when they noticed fertility rates increasing in 1946. They have been watching all these years and waiting. They do lots of preparation as do life insurance company's. They know if Congress doesn't act to fix Social Security they are able to pay benefits in full for the next 27 years and pay benefits of 75% from then on. 
 
The only ideas to fix social security they have, are only ones that are consisting of more taxes. Another is raising the retirement age to 70 years old. Both options would face resistance by the American people. The American people want to keep Social Security the way it is and not be worrying about it. 
 
Other ideas our that retirement age should be raised to 70 years old. Also phase out people 45 years old and younger completely. People 46 years old and up will get complete benefits. Those younger will take their social security contribution and put in a brokerage account like an IRA with mandatory contributions. Supposedly this account would appreciate and produce comparable payouts upon retirement at 70 years old. 
 
A rebooting of Social Security is called for. Many a multi plan solution consisting of many different ideas could be initiated. But the final solution in the years to come would be a total dismantling of it completely. The original safety net has grown unwieldy. We can't afford it and can't manage it.  

Book Review: The Elements of Investing

Image by Christopher Chan via Flickr

When reading a good book on investing you try to find some thing new you didn't know or understand before. Many of us that read a lot of person finance or investing books find the information repetitive. So finding these treasures, is the fun of reading, to find that little jewel that makes you look up and take notice. For me I have gotten a lot of info and enjoyment from reading a book called "The Elements Of Investing" by Dr. Burton Malkiel and Charles Ellis. 
 
They have written other books on investing notably "A Random Walk Down Wall Street". That book was a hefty read at 400-500 pages. They have written this new book, which is a boiled down version of just the best stuff. In 176 pages they give just the best advice on investing, saving and how to do it. They write about the different types of investing accounts and what type of investments to put in them. 
 
They describe a wide variety of scenarios and stories of investing and how it works into your life. One of the jewels of this book is their discussion on Asset Allocation. It's explained in a clear and concise way. They write how it's not just important but it's importance is paramount to your success in investing. 
 
What they write about in asset allocation is that whatever your ratio of equities to bonds are, it must be one that you will be able to live with when the market is volatile. If it is wrong you may sell at the wrong time totally destroying your hopes for making a growing portfolio. 
 
Another key technique of good investing is re-balancing your account every year. The first of the year would be a good time to do this. The importance of this is if your 50/50, 60/40 or whatever your equities to bond ratio is, if it goes out of balance, you should sell and buy to get it back in balance. The jewel in this strategy is your selling an asset that has appreciated and buying one that is at a low price. Selling high and buying low at a predetermined time. This technique forces you to take profits and buy low. It restricts you to never buy at the top. It makes a contrarian out of you and increases you rate of return. 

Malkiel and Ellis take on the prognosticators who make a living telling us what to do. They denounce the nonsense they try to tell us. While saying they all get it wrong, in fairness they write about a few who called it right. They go on to say there were a few to get it right but so far in advance that following their advice would have been counter productive. 

The good advice kept coming when they said that it was important to have some fixed income in your portfolio to see you through the time of equity turmoil. It will keep you calm until the roller coaster slows down. 

Many times they told how diversity was key to long term profits. Investing in value and growth equities was important for for a well rounded portfolio. Broad diversity also abroad with investing in fast growing economy's like China, India and Brazil. 

They don't recommend SPDR's or Large-Cap funds, they suggest Total Stock Market Funds that include broad array of stocks like one that follows the Wilshire 5000. Large, Mid and Small-Cap stocks all together. Of course they recommend you do all this investing using only Index funds.

I really enjoyed this book. Its a quick read with a good conversational style. I know I'll keep it and reference again.

The Strangest Secret

Back in 1950's there was a motivational speaker called Earl Nightingale. He was working in the radio industry. He had an insurance company and gave motivational talks. In 1956 he gave his most famous talk. It was recorded on vinyl and won a gold record for 1 million copies sold. It was called "The Strangest Secret".  
It's only a 30 minute recording but carries a lot of good ideas. He talks about the reasons some people have success and some fail. He states out of 100 people only 5 will be financially independent. With people living in a country of abundant opportunity, why is there so much failure? 
 
He says what is the definition of success? It's the "Progressive realization of a worthy ideal". Men fail and they do not know why. They even don't know why they go to work everyday. That by their own choice they conform to what everybody else is doing. There is no success in showing up for a job. A true success is "Doing the job you choose to do deliberately". If you chose a job and educate yourself, you are a success. 
 
He says we live today in a world with a plateau of security. Most everything is available to us, we just have to show up to get it. Just having a job is not success. We have no goals and we don't use are minds and think. 
 
He says the key to success is that "We become what we think". You are what your thoughts are. If you think negatively, you will be negative. If you think good you will be good. You have to believe you will succeed then you will. If you can't find the right circumstances then make them. If you think about frustration, fear and anxiety that's what you will become. If you think about nothing you will have nothing. 
 
The trouble with today's economy is it moves at the speed of it's weakest link. It all up to each individual. We have to use are minds and think. 
 
He states that our minds are the most powerful tool we have. What we put in it is what our lives will become. Our minds are like fertile ground. Our minds like the ground doesn't care what we put in it. It will only return what we put in it. Like the ground, if we plant corn we will get an abundance of corn. If we plant a poisonous plant we will get an abundance of poison. Our minds are the same. He says it a law that we cannot change. 
 
We are the sum total of our thoughts. We have a choice, we can put good things in our mind and live successfully or put bad things in our mind and live in the gutter. 
 
I like a lot of what he has to say. It's interesting that these motivational speakers go back this far and the talks are recorded. I found this on YouTube. 
 
He calls this way of living "The Strangest Secret" because it's been known for thousands of years but very few put it into practice. 
 
I can see if you focus on what your doing and have good goals you will be successful. The most interesting item I thought was when he said if you can't find the right circumstances to succeed then make them. That is very important because we blame the circumstances when we fail at something. We blame other people, place and things. Then we quit and are perfectly happy to say we tried. How many times have you heard that or said that yourself. I have done that myself. Did it occur to anyone to go and make their own circumstances. 
 
Earl Nightingale was a famous motivational speaker in his day and probably helped many people. I'm glad I came across his recordings. He made me think in a different way. Maybe that is the way successful people think. If you ever hear successful people who have built large companies from scratch, this is the way they talk. It's different from the rest of 

us. Earl Nightingale says "You have to act like failure doesn't exist". 

Deep In Debt

Image by DavidDMuir via Flickr

How do you help a friend in who is in financial trouble? A friend had his car repossessed. He works with me, he has a good job and is paid well. But he has a problem with handling money. There have been times he would want me to loan him money. I don't loan money and it kind of upset him. 
 
I would talk to him about how I take care of my finances. I told him what satisfaction and peace I had by being organized. I explained how he could apply it to his life. He listened but never took my advice. I tried to keep our conversation on a pleasant level but it got frustrating when he would never follow thru. 
 
Now with the car repoed this was where my patience became lacking. I told him he had to do something different or it would get worse. I said that I cared about him and his family's problems. I said I see you doing things wrong with money. I don't want to butt in, but you need help. What is it going to take to wake you up?
 
You guessed it, he didn't take it all to well. He was quite angry and defensive. He gave me lots of excuses for his behavior. He said it's so bad he can't do anything about it. That he doesn't have the money to work it out. 
 
He was so adamant and entrenched in his opinion. I was afraid this could end our friendship. This had been going on for many years but now it was coming to a head. I thought who am I to to be telling him what to do. I don't have this money thing down perfectly yet. I make mistakes to and I'm still learning. Maybe I should just back off. But as a parent I am not perfect , yet I still correct my children. 

I can see there is a hopelessness he feels about his situation. A comfort zone that is hard to move out of. When finances should be a matter of arithmetic, its mostly becomes a mix of behavior and emotion. 

I'll keep trying to help him. But he's on a progressively downward slope. It's seems the behavior resembles someone that drinks or is on drugs. They don't admit there is a problem.  Then hopefully someday they admit they have a problem and ask for help. All you can do in a situation like this is be patient. You have to realize their success or failure is in their own hands no yours.

Larry Burkett said,"debt is not the problem; it's the symptom." I believe failures with controlling your money is a behavior problem. You have to change behavior. The behavior that can wreck your finances is lack of planning. Planning for today and the future.

Related articles by Zemanta

• Whatever Happened to the American Dream (codybateman.org)

College Students Dont Need Credit Cards

Image via Wikipedia

We have a child heading off to college this week. We are not giving him a credit card to take with him. Most parents equip their child with one. If you do, it would be considered normal. Students are told that the card is only for emergencies. But to a student an emergency is a lack of donuts. You probably are thinking credit cards and students don't mix. Your right, the chance of abuse or immaturity is high. 
 
On campus they are exposed to the wiles of credit card applications. They're offered hats and t-shirts for a filled out credit card application. It's hard to say no to a nice hat. As a good parent it's our job to teach them about credit and making choices about staying out of debt when they have no income. But thankfully there is a new law that says you have to be 21 years old to open a credit card or get an adult co-signer. 
 
Parents hopefully realize co-signing makes you fully responsible if junior defaults on his account. Also if you co-sign you can monitor and keep restrictions on the account. On the other hand if junior doesn't pay, it will reflect on your credit score. 
 
Helping your child is good but doing everything for them is very bad. Sure they need to be educated about the responsibility of credit and debts. Having a credit card without a job is foolish. Having a credit card while in college is not necessary. 
 
Take this opportunity and use this experience to teach them to not use credit like it was cash. Teach them to use cash for purchases. For convenience using a debit card instead of a credit card. Teachable moments like this are great. 
 
Our son worked all summer and put money in the bank to use at school. Mom will be able to monitor this joint account and deposit money to cover expenses. Staying away from credit cards, saving money and living on less than you make is taught in our home. 
 
We won't participate in teaching our children to use credit cards as a crutch because of a lack of planning. The semester ahead has been anticipated and planned for. 

Related articles by Zemanta

• Credit-card limits mean students may need new source of funds (seattletimes.nwsource.com)
• Get Out of Credit Card Debt Once and for All (financialplan.about.com)
• Switching from Credit to Cash/Debit (mytotalmoneymakeover.com)
• Reasons You Shouldn't Co-Sign for a Credit Card (applyforacreditcard.com)

Book Review: Dave Ramsey's The Total Money Makeover

Cover via Amazon

Financial Guru Dave Ramsey has made financial fitness cool. Between his radio program, web site and Money Makeover Live Events he 's making new in roads to the main stream culture. I was first exposed to him on his web site when I was looking for some debt help. I believed he was some cult leader trying to sell a book. But under further scrutiny I've been sucked into drinking the Ramsey kool-aid big time. His latest book titled "Dave Ramsey's Total Money Makeover", now updated for 2010, is on bookshelves now.

His book describes a plan for becoming financially fit. Whether your a beginner or on track, this book can help you. Early in the book he describes his financial life. Starting poor and becoming a millionaire in real estate. Losing it all and declaring bankruptcy. He started a  journey to learn the right way to become wealthy. He talked to many people especially millionaire's learning how they made it and how they kept it. He has a heart for people who have lost everything like he did. Even the day they repossessed his child's furniture. His car was also repossessed and electric shut off. He eventually paid of his debts and began to build wealth. Also a career teaching others how to do it right. His book explains this plan with something called the " 7 Baby Steps".

The 7 Baby Steps are:

1. Save up a $1000 baby emergency fund for a rainy day. Cut up all your credit cards and set up a budget. Also never use credit again.
2. Begin the "Debt Snowball Plan" by paying only the minimums on your debts. Writing down your debts smallest to largest. Paying the smallest with all the extra money you can. After that one is done rolling that money and more into the second one. Thus making the snowball bigger. With that ones done, roll that one into the third. By then your making huge payments and accelerating your debt payoff plan.
3. Finish your Emergency Fund by making it 3 to 6 months of expenses in savings.
4. Invest 15% of your income in retirement accounts.
5. Setup college funding for children with Educational Savings account invested in good Mutual Funds.
6. Now work hard to pay off your home with large principle payments till is paid off.
7. Build Wealth and Give.

As he describes his plan, snippets of real peoples testamonials are interspersed throughout the book. Included in the back of the book are budget, debt and planning forms for the reader to use. Dave Ramsey says its how he got to where he is today and it can work for you.  The book is written on a 6th grade level so its easy to understand by anyone. This book takes you by the hand and leads you down the road to success.

From my point of view,I am someone closer to retirement than just starting, I could see it working. Lots of books on personal finance look good on paper, but don't translate well to real life. In writing a book its hard to explain a plan that could apply to everyones situation. This one is so simple it could just work. I reccomend this book its a good read. I have enjoyed the testimonials I can see how they could be inspiring. What didn't I like about this book is baby step 2. Saving 3 to 6 months expenses in savings could be a waste. You could be using it to pay off your house or invest. He also says you should be getting an average of 12 % on your investments. Its doubtful anyone could average that. I wish he would reveal these great Mutual Funds that produce 12%. Always when reading books you take from it the best information. You apply it where appropriate.

There is something about Dave Ramsey's plan that is different from all the other plans. It's the way people talk about it. People will say "I'm on the Dave Ramsey plan." and  "Dave Ramsey got me out of debt". Do you ever hear anyone saying that about Suze Orman.

Related articles by Zemanta

• Top Money Lessons Learned From Dad (daveramsey.com)
• Celebrate the Cut-Up Credit Cards! (daveramsey.com)
• Break on through to Baby Step 7 (daveramsey.com)

Pay Off House Or Invest?

Image by blmurch via Flickr

Pay off your house first or invest. I am trying to figure out what would be best. I've been doing the math on this problem and I have the figures. I have started with just adding $100 to my principle every month. If I do that it takes 5 years off my 30 year mortgage. If I add $200 it takes 9 years off. If I add $300 it takes 11 years off. That's some great results but that's still 19 years away at best. The $300 would be the the money I would have used to invest. So in 19 years I would have a paid off house and no retirement. 
 
Now here's where real life enters the situation. I have a plan to sell my house in 10 years. All the kids will be gone and I can downsize. So wouldn't it be better to use the extra $300 payment and invest it? I did the math and found that the $300 @ 8% would be over $50,000 at the ten year point. This would make sense for me because I have very little saved. If I had a decent amount in retirement then paying it off would make sense. 
 
Generally the results of paying extra on mortgage: 
 

• Less Stress
• No debt
• Money free to invest
• Security
• Never be foreclosed
• Lose tax deduction
• Cash poor
• Less risk

 
To put the money toward investing: 
 

• Always have the cash to access in emergency 
• Greater tax deduction 
• Market may crash and you would lose the investment 
• You could lose your house to foreclosure 
• More risk 

 
There are so many factors to consider. Its not just the math deciding what to do. The math works either way. The decision must go along with your goals. It also depends on where you are in life. Your income either rising or declining. Your age and how much savings you have. 

 
For me the benefits to a paid off house are to far away. My timeline of selling in ten years makes it impractical. My lack of savings makes it impractical. It makes sense for me to invest the money in a retirement account. Saving for ten years then selling my home, buying a smaller home for cash makes sense. No two situations are the same. You should run the numbers first to get the the facts then decide. 
 

Related articles by Zemanta

• 6 Great Reasons for Paying off the Mortgage on Your Home (wisebread.com)
• Why Pay off the House Early? (theatlantic.com)
• Ask the Readers: Should I Sell My Home to Pay Off My Debt? (getrichslowly.org)
• Worried About Money? Your Top 12 Questions - Answered! (lifescript.com)

We Are All Self-Employed

Image via Wikipedia

As we have found out, in today's economy, there is no job security. Large companies like General Motors and Ford can close up. Many companies are going bankrupt and their employees are now looking for employment  elsewhere.  Business are on shaky ground because of the economy. Your are no longer guaranteed your job. You will eventually lose or leave your job.  But was that ever not true? .

  

 When you are employed you think that by doing your job and doing it well you are thinking you have job security. The idea that you work for an employer is an old attitude. You may find out that there is no such thing as a secure job. We are finding out the great autoworker jobs maintained by a strong union are not so secure. Even the Post Office may cut off Saturday delivery to reduce losses. Even the city and county workers in California are living with 15% wage cutbacks. 

You must reexamine the notion of you being an employee.  Don't see yourself as one. You should see yourself as a one person company, providing services to one customer. You are now self-employed. You are your own boss. This entails all the details of running a company. The first is providing a product to sell. That product is you.  The product must work correctly and provide the service need by you customer. If it doesn't fulfill the necessary requirements the customer will not continue to buy the product. You will be fired.

Second you must provide good communication with your customer. A necessary and timely interaction on the quality and delivery of the product. Is your performance in line with whats required for your work.

Third you must provide customer service. This entails follow-up on your products quality. Is it performing up to  advertised specifications. If its not your fired.

If you like you can always stay the employee. But you can also take on new challenges and think like a Boss. There is always time to express your purpose and passion for your life. Cliff Hakim in his book "We Are All Self-Employed" says "Believing that you work for an employer and acting as though by doing your work, your job will be secure - is a relic of an era long past."    

               

Related articles by Zemanta

• John Wayne Marketing: Part 1 (blogcritics.org)
• People@Work: The Growing Strains Between Employees and Employers (dailyfinance.com)
• How To Manage Yourself (psychologytoday.com)
• Working from Home: Are You an Employee or Self-Employed? (ecommerce.suite101.com)

Being Cynical Is Good

Image via Wikipedia

How can you say that? Isn't being cynical a negative character trait? Let's be sure what we are talking about. The definition of cynical is: 
 

• Believing that people are motivated in all their actions only by selfishness; denying the sincerity of peoples motives and actions, or value of living. 

 
If you are young and single you are not allowed to be cynical. Some have suffered disappointment. They may confuse cynicism with being sophisticated. They believe optimism is naive. It becomes their right to be sarcastic. They become so disillusioned cynicism follows. Get over it you don't have any wrinkles yet. 
 
Sorry people, cynicism is for us 50 plus crowd, we've earned it. We have made it into an art. We have mixed our cynicism with wisdom and experience. Something the young can't do. We know when things we here or see are unrealistic. So the definition of this new cynicism is: 
 

• Believing that "some" people are motivated in their actions only by selfishness; denying the sincerity of "some" people's motives and actions, or value of living. 

If you can remember when we were kids and we would be talking to an elderly person probably 50 plus years old. We would be telling some lie or tall tale and they would give you this look. That is the cynicism I am talking about. It wasn't negative, it was a healthy disbelief. 
 
This skill can only be attained by years and years of experience. Eventually, if your lucky, it arrives and becomes a tool to help you through life. But what can you do with it? 
 
Like a knife it cuts through the BS. It slices away the lies and deception brought to us in our daily life. If you have this skill you have great power. People will underestimate you. Your able to make accurate judgements about politicians and your financial advisers. Your able to understand people more and in result interact with them better. 
 
This ability not only sees the bad; it also sees the good in people. It as if you have x-ray vision to see their true heart. It can point out to you what person or problem is being injured in a particular circumstance. Knowing the problem it can help you pinpoint you efforts to solve problems. You see reality more clearer and so are able to proceed to deal with it. 

Take pride in your cynicism. Its a helpful tool that will see you through all your life. 

Related articles by Zemanta

• Learn How Your Inner Cynic Can Help You Create The Life You Want (dumblittleman.com)

Teaching Kids About Work and Money

Image via Wikipedia
Kids are dumb. You have to teach them everything. Except to eat and watch TV. We have to teach them many things in life and one of the most important things is to work. Teaching your kids to work and having a work ethic is not easy. We had 6 kids in the house at one time. Giving them all chores to do was a time consuming task. Some did there chores well and when they were supposed to and some didn't. It was a job to keep on top of them.

Some parents give ther children an allowance. But in our case it wasn't practical. Handing out money to six kids would force us to get a bookeeper to keep track. We figured they had all they needed so no allowance. They didn't seem to suffer because of it or ever complain. It just wasn't done. You may decide to give your children an allowance yet it seems unnecessary. When I was young we never got one either. We didn't miss it.

Now when they were older their chores increased. Now they started to look for money. They also wanted cell phones. It was starting to get expensive. My Wife and I decided they needed to get jobs. It took some time but they did. Now they paid for there own cell phones with their money. The jobs also filled their time and kept them out of our hair. But don't forget they had to be taken to and from work. More time spent on our part.

They were taught how to spend and where to spend their money. Teaching how to buy things always looking for getting the most value for there money. They also learn the idea of preparedness. Getting somewhere on time. Preparing there clothing and seeing their uniforms or clothes are washed and ready for work. If your kids learn anything, I hope the one thing they learn is Work = Money. My Father always says "You don't work you don't eat."

Todays kids Have many bad examples of people on television, having plenty money and things, but you never see them going to work. They see people just having money. To see on TV an example of someone working hard is rare. If you don't teach your children good habits who will.

Related articles by Zemanta

• Teens and Money - What about Allowance? (connectwithyourteens.blogspot.com)
• 'How Much Allowance Should a Child Get?' (online.wsj.com)
• Best Money Habits to Teach Your Kids (brighthub.com)
• Adjusting Financial Attitudes: Lessons for Parents and their Children (wisebread.com)

Prepaid College or Educational Savings Account. Which is Best?

For the past 10 years I have been paying into a prepaid college plan. Every month I have been sending in $61.38. Saving for college for your children is a necessary expense I am glad to do. But I have thought if  I have been doing it the best way. What are the options for saving for college?

1. Prepaid College Plan.
2. Educational Savings Account or 529 Plan.
3. Scholarships 
4. Loans
5. Win the Lottery.

On examination Prepaid college seems the safest of all the plans. You pay a small amount every month and your guaranteed a 4 year college education. I sleep very well knowing its taken care of. The math works out that I pay $61.38 for 216 months. Which is a total of $13,258.00. That monthly amount was 10 years ago. Today's payment is $125 for the same thing. The tuition covers classes in a 4 year state college. It doesn't cover books, room and board. I have one in college now, I know I'll be able to cash flow those expenses in 8 more years. 

The 529 plans is the second option. It consists of making monthly or lump sum payments into a state run account which contains a basket of mutual funds as an investment. The idea is to make around 8% on average and just let your money grow. Here we have risk entering into the mix. This keeps me up at night. Will the investments make the 8%? What if there is a market turn down and your balance is reduced by 1/3. Scary. But on the other hand what if it makes the 8%, then your golden. If I took the same $61.00 and invested for 18 years, how would I do? 

Here's the graph of  saving $61.00 a month for 18 years with a 8% average rate of return. Not bad. Almost $30,000 a nice 18 years work. I would of made almost double than my prepaid college. That would pay for a lot of college. If you got this far you would want to move to a money market so you would not be exposed to market risk. 

Scholarships help pay for some or all of your college expenses. You could have a high GPA and get an academic scholarship. You could be good in sports and get a sports scholarship. Depending on your field of study many corporations and public sector entities will pay your way through school if you promise to work for them, after you graduate, for a period of time. According to Scholarships.com there are over 2.7 million scholarships from local, state and colleges available. You should apply to as many as possible till you have the money you need to go to college. 

Another way to pay for college is Sallie-Mae Student loans and private lending loans. This is when you haven't saved anything or just were planning to finance your college education. Depending on what your going to study you could be taking on debt from $20,000 to $200,000. This choice doesn't sound to good, to paying loans for many years to come, there's got to be a better way.

Saving for college has become complicated. But by the numbers the 529 seems the way to go. But risk wise prepaid college is better. There is no risk involved with that choice. I believe a combination of the 2 would be appropriate. I should start a 529 for the remaining 8 years. Saving $100 a month to cover the other college expenses.

Not bad for 8 years. This shows that I'll have enough to pay for room, board and books. About the amount as the prepaid. Should of done this 10 years ago. This plan gives me more options I feel I have more a stronger foundation to stand on. With this plan, college should be not a problem and I'll probably be able to sleep at night.

Related articles by Zemanta

• National Study from Sallie Mae, Gallup Shows Families Digging Deeper to Invest in Rising Cost of College (eon.businesswire.com)
• Investing In Your Child's College - No Matter the Market (distance-education.org)
• Education Savings 101: Ways to Save (mint.com)
• The Best Way to Save for College (brighthub.com)

Adventures in Financial Planning

Image by Dimitri N. via Flickr

I have tried to educate myself about the different facets of my financial life. Reading the advice of many different authors. Each having their various opinions. I would get behind one school of thought to only later switch to another, not really feeling satisfied in their advice. So I thought one day I would go see a professional financial planner. I had a good idea and a basic plan for myself but needed more advice on investing.

It just so happened a group of friends and myself were having lunch. As we were being seated a young man in a suit introduced himself. He said he worked for "Transamerica Financial Services" and if we would sit for a ten minute presentation he would buy are lunch. Never being able to turn down a free meal, we agreed.

He was a nice young man about 25 years old, He explained, trying to drum up some new accounts for his company. His presentation was about 10 minutes. He talked about his company and what he could do for us. He asked us a few questions trying to learn if we needed what he had. He got our names and phone numbers. We felt obligated, being he was paying the tab. Our food came he thanked us and left.
He called the next day to thank each of us and to try to set up a meeting at his office. I took the bait and made an appointment. I was going to see a pro just like I always wanted. Fate and hunger made my wish come true.

Meeting day arrived. The office was in the nicest building in town. It was like when Jed Clampet was going to go see Mr. Drysdale. I thought to myself what am I doing here I'm broke. I was escorted to a waiting area and offered a drink. Soon the young financial advisor found me and took me to a richly appointed conference room. Still thinking boy I got them fooled. The young man brought in his senior accounts manager and we began. They gave me a lot of info always asking questions. No pressure, just a nice interview. I started to feel comfortable and explained my situation. It took about an hour and then it was over. No talk about about a fee yet but I new that would soon come. I made an appointment for two weeks later and left.

Our second meeting was a little bit more easy for me. We met again in the nice conference room. The two suits entered and we began. This time they had a whole lesson to teach me about there way to invest. They said it would be good for me to invest in an IRA, Roth IRA and a cash account. There reasons made a lot of sense. Other lessons were on life insurance and disability insurance. They were spending a lot of time on me. I thought, I'm going to have to pay for their time and expensive office. Then it came, this was it. In such a nice way they told me I would be given a financial plan to reach all my goals. Wow. They also told me to write a check for $200. I thought it would be more. I wanted a professional plan and now I wash getting my wish.

The two weeks waiting for our next appointment went all to slow. But today was the day. When I was seated, in front of me was a beautiful binder with my life's plan in it. It included all the great things I needed to do. It was quite detailed at over 150 pages. After going through it with my account rep. I felt glad I went through all this. Some of the things that were recommended I started to do and some I will do in the future. That was 3 years ago. I still reference it from time to time.

The bottom line of all this is I received alot of education. I wasn't just sold a product. I have a written plan for my future. Now's the hard part, following through. I highly recommend we all should get a plan from a fee based financial planner. I'm glad I did.

Related articles by Zemanta

• Will Online Financial Planning Catch On? (online.wsj.com)
• Financial IQ Test: How Healthy Is Your Financial Plan? (wisebread.com)
• Should Young People See a Financial Planner? (money.usnews.com)

Loans To Your Children - Great Idea?

Image via Wikipedia

 
Is it a good idea to loan money to your children? We all have crossed this bridge one way or another. One day your child comes to you with a need for money. Maybe they screwed up and need money for college. Something is broken in their car or house. Because they have never saved for a rainy day, they come to you. But maybe it's an emergency so great and unexpected no one has the resources like Mom and Dad. Your little child is hurting and you feel bad for them. You want to help them feel better. What do you do? 
 
A family I know had this same problem. There was a family with 3 children. All grown children living on their own. By coincidence all 3 lost there jobs at the same time. Mom lent her children money for a period of 6 months. She put on credit cards almost $55,000. Dad didn't even learn about this till in was all over. Mom reached a point where she couldn't even pay the minimums. One thing led to another, she couldn't pay her mortgage. The house is in foreclosure now. 
 
What went wrong here? Mom went nuts and helped the kids in the extreme. I'm sure she didn't mean for it to go that far. This has destroyed her future as well as the children's. Also Dad is going to suffer for his ignorance too. 
 
Maybe what should of happened is Mom and Dad should of sat down with everyone, plan something that would help the children without destroying the family. Maybe a plan of non-monetary help. It reminds me of the way you help someone who is drowning. A life guard is trained to approach a drowning person from the back. Many a time a drowning victim ends up drowning his rescuer in the panic of the moment. 
 
My own sob story pertains to my daughter. She got in a fix and couldn't pay for her last year of college, she needed a place to stay and car insurance. Also she had no job. What I did was let her stay with me. She got room and board. Car insurance with repairs and tuition/books. In a period of 18 months the total came to $8500. All on a credit card. Of course I justified it at the time as an emergency, it had to be done. I had to help my kid. Like the story above. I didn't really make the the right decision. It was agreed that she would pay it all back when she got her professional job. She finally got her good paying job. Let's see when I'll be paid back, I'm sure she will. 
 
The credit card payment isn't killing me and it won't. But it's a nuisance I want out of my life. I probably wouldn't do it again this way. But when your kid is in apparent trouble your brain turns to mush. I'm alot wiser now and alot broker. You also don't look at your kids the same way when they owe you money. You look at everything in their life when they spend money as a waste, that money could have been used to pay the debt. You don't look at your kids the same way. They can feel it and it hurts the relationship. 
 
I hate to reveal this but my parents helped me to the tune of $25,000. I was getting divorced, over a year I spent this much money on lawyers and expenses. If they didn't help me I would of been screwed. This is beginning to look like a trend. That was 14 years ago. They just gave it to me. Never asked for it back. Someday I will pay them back. 
 
Have we learned anything here. Human nature is strong. Parental love is strong. Don't lend money to your kids, just give it to them if you have it. And don't let them drown you. 
 

Related articles by Zemanta

• Reader Mailbag: John Wooden (thesimpledollar.com)
• Reader Mailbag: Vacation Monday (thesimpledollar.com)
• Ten Big Mistakes #6: Children Have Huge Financial Ramifications (thesimpledollar.com)