Do You Have Financial Etiquette?

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Many years ago when I was a young lad my parents would take me and my siblings out to dinner. When the check came I would ask how much the bill was. Dad proceeded to hand me the check and told me to pay. He explained to me how talking about money was not done when it wasn't your business. It was a lesson we were all taught that there was a privacy issue when talking about others finances. It's a facet of American culture that you don't ask what someone earns, their religious views or how they vote. 
 
What happens when someone crosses these cultural boundaries it throws you off and I don't know how to respond - usually I say the wrong thing. What I did was go to the source for expert advice on etiquette. I went to Mary Mitchell. She is an author of many books and president of The Mitchell Organization, she's made a career out of coaching people in relational situations. 
 
You probably can't get out of talking about money with a spouse or a parent who's participating in your finances, you can with a friend or acquaintance who crosses the line and asks you something better left private. Mitchell suggests saying " it's raining outside". This is the same tone of voice you should use when responding to someone who asks an inappropriate financial question. No emotion, no judgement. If someone gets aggressive, you can smile and say,"Why would you ask a question like that?" or "If you will forgive me for not answering that question, I will forgive you for asking it. " 

 
Here's a list of the top ten uncomfortable money situations: 
 
1. Your friends make more money than you, and they treat you like a charity case. 
 
2. Someone asks how much your spouse makes. 
 
3. A friend borrowed money from you and they haven't paid it back or even mentioned it. 
 
4. You go out with a group of people and order a salad and water, everyone else orders wine and lots of appetizers. At the end someone says let's split the check. 
 
5. Someone asks how much an item of clothing costs, like shoes or a purse. 
 
6. A good friend is having hard financial times. How do you approach them and offer to pay for them. 
 
7. You're with an old friend and their credit card gets declined. 
 
8. An acquaintance criticizes your spending habits. 

 
9. A friend or family member always thinks your going to pay for them. 
 
10. Someone asks how much debt you have. 
 
In all these situations it's always best to approach your answer with a calm tone and politeness. When your responding to the comment or situation is the the time when you, or both of you will feel awkward. Remember these people are not trying to be unkind. They are just overstepping in a social situation. Try to respond calmly and then change the subject. Saving embarrassment for both you and your friend. 

Are You Afraid Of Starting Your Own Business?

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Starting a new business can feel like jumping off a cliff. No amount of job skill, education, supporting friends or degrees can stop this fear. Fear is that doubt, that little voice in your head that questions every decision and goal. I don't know where it came from, but I know I've had it. 



 
Now let's get our hands dirty and tackle the most debilitating fears: 
 
I don't have the proper skills. This fear surfaces because when your first start your business, your on your own. You have to do a lot more than you ever did before. Now you have to promote, do the bookkeeping, network, and still do the work. Your unsure more than ever because it's all on your shoulder now. You have to realize you can't do it all, your going to have to get some help. 
 
Don't have the self confidence. This is a fear of the unknown. Once you have some successes this fear will go away. You have to keep plugging till your self confidence builds up. 
 
Don't have any ideas. You may not need them. Your business may just need you to find out what your customers need. You don't need to reinvent the wheel, just how to make it a little better. 
 
Don't have the money. Here, maybe you should be afraid. But you shouldn't because if you start small enough, bit by bit your customers will increase and you will grow. Don't borrow and bet the farm on your business. Take it slow and pay as you go. 
 
Can't Handle failure. Who can? Sure it's disappointing to not succeed, but you have to keep trying. When your idea fails there will always be another one to try. Failure is just helps you focus better, it steers you a little more accurately to the prize. 
 
Don't know the right process. Sometimes we can't know everything. Others have gone before you, you need to ask for help. I sought out people who have been doing what I have been doing way before I started to do it. Some business people who have retired are a wealth of knowledge and would be happy to talk to a new business owner and share their wisdom 
 
Don't have the time. If you want to have your own business your going to have to make the time. Having a business is not a 40 hour work week. It could be 12 hour days seven days a week. If you can't make that kind of commitment, stay at your job. 
 
Being out there alone. You don't have to let it be like that. You can reach out to like minded people. There are associations, clubs and places where you can find people in your business. You'll meet people that's on the same path as you are. You need to find these outlets so you don't feel isolated. 
 
Let's face it, to succeed you'll have to go through a lot. It's not going to be easy. Your going to have many failures and many successes. You'll have stresses and exhilaration's. It's part of life's journey. Like a roller coaster, you can only get hurt if you jump off. Enjoy the ride. 

Can Your Kids Have Roth IRAs?

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With the past summer and the holiday season coming up many kids our working and earning money. Is it possible for them to put their money in Roth IRAs? 
 
The only requirement to have a Roth IRA is earned income for the year. Age doesn't enter into it. So if your kid earns money, they are entitled to make a Roth IRA contribution. For the year 2010 the rule is the contribution can be the total amount of income or up to $5000. This contribution amount is for a Roth or traditional IRA. 
 
Is the Roth IRA better than the traditional IRA? 
 
One way it is better than a traditional IRA is that you can withdraw all or part of it without any income tax or penalty to pay for college or any other reason. But rule is you cannot withdraw the earnings tax free till age 59 1/2. 
 
Even though contributions can be withdrawn anytime without tax or penalty consequences it's best to leave it in the account to grow tax free till retirement. If it's in a traditional IRA, all distributions will be taxed and there is a 10% penalty, unless their money is used for college costs. 
 
What about tax deductions? 
 
If your contributing to a Roth IRA there are no tax deductions. If your contributing to a traditional IRA the tax deductions are negligible to none. It would make sense only if your child makes a significant amount of money. 
 
Teaching our children to save is one of the greatest gifts we can give them. Also instructing them to invest in a Roth IRA is a great way to teach them to save. And with the tax advantage it's even better. Your is never to young to learn about the ways to save and minimize taxes or avoid them. 

When Is It To Late To Prepare For Retirement?

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For you procrastinators, this question is for you. For those who have been working hard and long to prepare for those later years. Good work. I wish I was you! 
 
The statistics show most of us have little or no retirement savings. Most of us don't even have any savings. Most of us would be in real trouble if we even missed one paycheck. 
 
But midlife arrives and reality sets in. It's interesting that you spend your whole life not worried about retirement then all of a sudden you hit 50 and it hits you like a ton of bricks. All along you know you should be saving but it all takes a back seat to vacations, life and lifestyle choices. 
 
Maybe it's just me but the traditional retirement model of working to 65, then living off your retirement savings has a few flaws. Even the folks who did prepare are postponing retirement because of massive losses in retirement accounts. Also factor the historical low interest environment on investments and you will see I am not the only one in a pickle. 
 
So where does that leave us. Two things we need to do are save more and earn more. In your 50's your still young enough to start a new business or new career. Your healthy enough to do the work and wise enough to not make too many mistakes. 
 
Face it people this is the new retirement. For me, I'm self-employed in the construction business. We have a nice amount of rental property that generates a good income. With social security, retirement accounts and rental property I'll be OK. I have the rental property work to keep me very busy for the rest of my life. I'm lucky. 
 
For those of you that don't have a plan let's sort things out. Your job is only going to last just for so long. Your going to have to replace it with another eventually so let's get to looking for it. Maybe you'll be able to start a business that is related to what your doing now. You need to get out there and start knocking on doors. There has to be a way to take a seed from what your doing now and plant it in another way. An interest or hobby you do now that could be notched up to make some money. This is not going to be easy, but it must be done. 
 
To answer my own question. It's never to late to do something about your situation. But a lot of work and action is going to be needed to make it happen. 

Here are a few past posts that show my personal journey :

• Am I to Late?

• GOALS, GOALS, GOALS
• Can You Start At 50+? Part 1
• Can You Start At 50+? Part 2

Happy Anniversery Crash Of 1987

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Did you ever forget your anniversary? Well here's one we all would like to forget. The stock market crash of '87. It was October 19, 1987 when The Dow Jones Industrial Average dropped 508 points. This day has become known as "Black Monday". It was 23 years ago when this frightening day happened. 
 
We look back and think that it fell only 508 points, no big deal when we just had the recent drop on May 6 of 998.50 points. Only remember in 1987 that drop was a 22.6% of a Dow of only 1,738. The May 6 drop was only a 10%. If you had a 22.6% drop of today's Dow of 11,147, you would have a drop of 2519 points. They would be jumping out the windows on Wall Street. 
 
Could something like the 1987 drop ever happen again? According to expert finance professor Xavier Gabaix, of New York University, plunges as big as 1987's Black Monday while rare are an inherent part of the investing landscape. ( I only cringe more when I hear an economics professor.) 
 
Professor Gabaix discovered that the frequency of these huge plunges follows the known tendency of "Zipf's Law". A crash like 1987's will occur once every 75 years. With human longevity ever increasing this is not good news. I may live to see another 1987 crash. Naturally the law doesn't tell us when the crash may occur.   

Are You Responsible For Your Husband Or Wife's Debt?

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In short the answer is yes and no. Most people before marriage have some kind of debt be it credit card or student loans. This debt acquired before marriage is not the responsibility of the other spouse. It's debt you take on jointly is your responsibility. 
 
There are ways you can take on the responsibility of pre-marriage debt. On credit cards you can become a joint account holder. On the good side you get all the benefits of your spouses good credit history. On down side whatever debts they have are now your legal responsibility, too. 
 
What if your spouse takes on debt, be it mortgage or credit card, after your married. Is the other spouse responsible? The bad news is yes. What ever you do when your married reflects on the other spouse. 
 
What happens to the individual debts your spouse has upon their death? Joint debt is the responsibility of the surviving spouse. The individual debt most be paid off by the estate left by the spouse. If the late spouse owns anything it must be sold to pay off the debts outstanding. Anything left over goes to the surviving spouse or whoever the the will indicates. Of course it's best to consult a lawyer in the state you reside in to do this process legally. 
 
If your spouse does have previous debt before marriage, morally it becomes yours. If you want to marry the person, you take the good with the bad. Their debt is now your debt. To build a strong marriage you help each other in many ways, why not with the debt. Cleaning up the debt will only strengthen the financial foundation of the marriage. When it's paid off you have more money to put towards both your futures.