A Horse Named Government

Image via Wikipedia I was reading thru a news article about the Gubernatorial race in Maine. On a local newspaper website called the  "Kennebec Journal" (http://www.kjonline.com/)  in  Kennebec County Maine including Augusta, Maine I saw in the opinion section this letter to the editor: 


There once was a farmer, who, like all farmers, lived off his land with little or no help from anyone else. He was never hungry, fed and clothed his family, and sold some of his extra products to his neighbors.

One day, the farmer was given a horse named Government. He was told that he would be able to do so much more with Government in his life, that he would be able to produce more and have more time for leisure. 

Nobody told him that Government required care and feeding and sometimes got sick and didn’t work very well. He had to grow extra crops to feed Government, and so actually needed Government to help support itself. Government also left large piles of mess that the farmer had to, periodically, clean out of his barn. The more the farmer used Government, the more he thought he needed it.

At some point in time, the farmer realized that, if he had just been left alone, he would be just fine without Government, but what should he do with Government?

Give him to another farmer? That didn’t seem ethical, knowing what had happened to him. It seemed as though he was stuck with Government and all its good and bad attributes.



David Kahl

Manchester

I hope in the next election people cast their vote with the sentiments of this gentleman in Maine. The Founding Fathers had a healthy fear of an all to powerful government we should keep that in mind.

Are You Financially Responsible?

Cover of The Richest Man in Babylon

  
Financial responsible simply means to live within your means. That means you spend less than you make. 
 
Credit Cards and Debt 
 
Being able to make you credit card payment is not what I'm talking about. If you have a credit card payment and aren't able to pay it of it shows you spend more than you earn. Paying off your credit card balance on your account every month means you are financially responsible. 
Credit cards should be used as a convenience and for an emergency, not to make ends meet. 
 
The same goes for recurring payments that have interest. Paying interest means your paying extra for your purchase, is that being responsible? But with big ticket items like homes and vehicles it's impossible to avoid paying interest. In those situations try to minimize the purchase price. 
 
It's very doable to avoid credit card debt but those big ticket items like your home or car are a fact of life and are tougher to get under control. So the only way to make them manageable is to not to buy a luxury car but get the minimal needed to get the job done, even getting a used car. With the house, you don't need a mansion, get the house that will suit your needs. The problem with these purchases is we don't see the difference between necessities and luxuries. When we purchase a home we probably qualify for a mortgage much higher than we need. Irresponsibility is the taking the largest mortgage we qualify for, not thinking if we can afford it over the long run. It's the difference between wants and needs. Th rule of thumb is your mortgage payment should not be more than 25 to 30 percent of your monthly income. If this is not the case it's better to rent till your able to afford it. 
 
Are you paying your self first? 
In the book "The Richest Man In Babylon" one of the main lessons are you must pay yourself first. Every week take 10% and put it into savings. This money is for your future when you retire. To not have savings and a plan for your later years is irresponsible. Make sure you invest it in something that allows your money to grow and work for you. 
 
Emergency Fund 
This item is separate from your 10% weekly savings. It's money set aside for the rainy days that are sure to come. This fund allows you to stay out of debt when trouble comes. It's your insurance policy against going back into debt when there's a problem. We must be prepared for the unexpected. This is being financially responsible. 
 
Don't Try to keep up with the Jones's. 
Your job is to take care of your family. Keep your eye on the needs of your family, present and future. Their wasteful habits shouldn't throw you off track. Don't let them set the bar for your standard of living. 
 
Budgeting 
What? Don't tell me you don't have a budget? A budget is one of the core pillars of financial responsibility you should know where your money is going. Being organized with your money allows you to save more, plan better and be more content in your life. 
 
The bottom line to all this financial responsibility is spending less than you make. It's not about being a miser with yourself and family. It's about being prepared for today's and future purchases. It doesn't mean doing without lifes pleasures, it's about purchasing them the right way. Do you want to go thru your life with the peace and satisfaction that comes with financial responsibility or the anxiety and fear of seeing a mailbox full of credit card bills and debt collection letters. Make the choice today to do it the right way and enjoy the piece of mind that comes with it. 

Book Review: The Richest Man In Babylon

 
 
I have been wanting to read this book for quite a while. I have been hearing Dave Ramsey talk about it over the years so I thought I'd check it out. I got the kindle edition from Amazon for $3.99, the price was right. 
 
As usual, I'm the last one in the world to read this thing. There is a ton of reviews and summarys on the web, so I won't bore you with another one. So I'll just give you a few impressions of the book. 
 
When you read a self help or personal finance book, if your like me, sometimes you just want to dig out of the book that new tidbit that your trying to improve yourself with. After a while all these books ussually just repeat the same advice. They sometimes supprise, but ussually not. Then you find a book that tells a good story that draws you in and you can't put the book down. This was what this book did for me. I enjoyed the process the story takes you thru to make a point. The timeless truths that will help you win financially. This book just doesn't teach these truths, it teachs the wisdom needed to win in other facets of life, too. 
 
It's a small book, only about 150 pages, you'll have it read in no time. It tells in a parable like style the secrets of becoming wealthy. It's a book that can be read and reread. In today's world it could be considered naive and preachy. But like most books that teach in story fashion, the wisdom can only be seen with an inquisitive mind. 
 
The truths in the book are simple but eternally true : 

• Save and invest 
• Watch out for self serving middlemen 
• Use powerful investments 
• Stay away from hot tips 
• Stay within your means when buying a home 
• Do work you love and become excellent at it 
• Increase your earning potential and keep educating yourself 

 
These tools are the old fashion way to succeed. No get rich quick scheme here. These are the rules of success. Work hard and be successful. 
 
For me I'll be reading this book again. These lessons are what we should be teaching in school, but they won't be because this is about self reliance and hard work. I recommend this book for all ages especially the young adults starting in the world. Why make mistakes when you can do it right the first time. 

Insurance Coverage Changes If Your Home Is Uninhabited or Rented

Image via WikipediaIn today's times many houses are empty waiting to be sold or foreclosured on. Who's looking after your house since you moved, your neighbor? You say it's insured so what's the big deal. It may be a problem if your insurer has different rules for an unoccupied home. 
 
Standard insurance policies are designed to cover homes that are occupied. If you leave your home for a month or longer, your policy may not cover damage or losses. If someone gets hurt on your property,because your not occupying it, your insurance may not protect you from the liability. 
 
In regard to fire claims, if your home is vacant or unoccupied for 30 days, some insurers exclude coverage for fire damage. For some insurers it could be 60 days. State Farm homeowners policies won't cover vandalism if the home is unoccupied for 30 days. Also if a frozen pipe bursts when the home is vacant they won't cover it. 
 
If your home is going to be vacant for 30 days or more here's what you should do. Contact your insurer and notify them about the situation. Maybe your insurer might not be effected by your unoccupied status, but they probably will. If you are effected your agent will adjust your policy to one that covers vacant properties. If you know the length of time it will be vacant you can just purchase one that will cover that time frame. You'll probably be paying a higher premium but it's better than being on the hook for repairs or replacing your home. Maybe your insurer doesn't have policies for vacant homes so be ready to look at other companies that will. An independent insurance agent will be able to get a policy for you from a broad range of company's, so check them out. 


What if your house is rented? 
If you are able to rent your home you'll be able to get coverage to also cover the mortgage payment in case it unoccupied during the rebuilding process. Don't forget insurers consider a rented home a higher risk because renters have less interest in caring for the home. So what your getting is a landlord policy for your home and be sure your tenants have renters insurance for the contents of the home. Renters insurance is not very expensive, it usually around $150 to $200 per year. 
 
While we are at it, you also must have an increase in liability coverage in case your sued by your tenant. Whether inside or outside you can be held liable. 
 
After being a landlord for almost 30 years, running and maintaining apartments, a fire or someone getting hurt is possible, but rare. Protect yourself, get proper insurance. 

Your Kids First Car

Image by Brave Heart via FlickrThe journey we parents go through to raise kids is hard and never ending. One of our hardest tasks is the purchase of the first car. Your child is anxious and you have reservations, but you know it has to be done. 
 
There are many factors that go into this fun purchase. First there is deciding to get either a new or used car. I'm sure junior wants to get that new 2011 Camaro. But you know it's to expensive and it's a accident waiting to happen. Plus who's going to write a check for that. We are going to use this car purchase to teach many things like living within your means and not going into debt. Hopefully by the time the car purchase date arrives you and junior have saved money for this car. Junior should have been working and saving. Mom and Dad should also have been saving to make this a debt free purchase. It's best for the child to save an amount of money and the parents match it. But if the child has all the money he should pay all of it. When junior has some skin in the game the car is going to stay a little cleaner and driven a little better, we hope. 
 
Is this car going to be new or used? Hopefully your savings will determine that. There is no excuse to not buy a used car. The argument of there being more reliability in a new car is moot because we only have enough money for a used car. Used cars are reliable and give many years of good service. Junior's learning a lot from this experience. 
 
Now what kind of car? I think many people believe that a big car with plenty of metal to protect your kid is the way to go. A big land yacht surrounding your kid is not the right choice. A small economical car like a Honda, Toyota or Ford will do just fine. In our house the 4 children drive 3 Honda's and 1 Mitsubishi. With proper maintenance they have really done the job. 
 
We bought 2 at the used car lot and 2 private sale. For us the private sale equaled less money spent. The cars mileage when purchase were from 50,000 to 75,000. I wouldn't buy a car with higher mileage. Also the cars were 5- 6 years old. 
 
The age when they get to drive their own car can vary. Some kids are responsible some aren't, you have to decide. We have one child who is 19 and we won't let him get a car because of behavior problems. In our family the rule was you must be 18 to have a car. This rule kept them out of a car a little longer and also the car is in their name and you can't be sued in an accident. 
 
When you drive by a high school look in the parking lot and see what cars are there. I bet you will see new cars there. Handing a kid an expensive new car is teaching them the wrong values. The first car is what I call the "practice car". Let them dent, scratch and mess up a used car. 
 
A car will always be one of the biggest purchases your children will make in their lives. You must teach them the proper ways of doing it right, because hopefully this car will see them through till they graduate college. So the next car they can buy themselves. 


Here's a list of some decent used cars:

Money Does Buy Happiness

Image by tantek via Flickr
It seems there is a sweet spot in your income that determines your happiness level. That amount is $75,000. The lower your income is from the number, the more unhappy you will feel. But as you rise above that level, no matter how high you rise above it, there is no more increase in happiness. 
 
This study was conducted out of Princeton University by Nobel Laureate in economics psychologist Daniel Kahneman and economist Angus Deaton. The study draws on data from more than 450,000 Americans polled by Gallup and Healthways in 2008 and 2009. 
 
The participants were asked how they felt the previous day and how they would rate their life, from being the worst to the best. 
 
It turns out it isn't low income that saddens people; it's that less money makes them feel more ground down by other issues, like health and relationship problems. People that had health issues and a low income reported to be more unhappy about their problems. While people with the same problems but making much more income, only half the people reported to be unhappy. 
 
This effect disappears when the people make $75,000 and up. From there on up, individual temperament and life circumstances like age and education level have much more sway over how a person feels on any given day than money does. But the study doesn't explain why. Deaton concludes that there is a number where people think money is no longer an issue. Also at that income level people have enough money to do, what they want and pay for life's problems. 
 
There seems to be 2 kinds of happiness. Your day to day mood whether your stressed or happy. Then there is the overall happiness of where your life is going; that your on the right path and happy how your life is progressing. 
 
This study confirms to me a lot of my own experiences. You go through your life trying to attain money and things. There is a number of years your income is never enough. But you do reach an income level that is more than enough and that results in satisfaction. 
 
I have observed you reach a point when the car breaks, the A/C blows up and the roof leaks and you don't freak out. The reason being you have the cash to easily pay for the repair. That's what a good income does for you. 
 
They should of asked me before they did this study. I've been telling my kids this for years. My advice to them has been that no matter what problems you go through in life whether it's sickness, divorce, depression and anything that can go wrong does go wrong. If you have a good paying job and money in the bank, you may be in a fix for a period of time, but the money makes everything go a little easier.