Financial Freak Show

I was out at a night spot sometime ago with some friends and some friends of friends, some I knew quite well and ac couple I had only met that night. Myself and a couple others bellied up to the bar to order the first round. As we grabbed our drinks one of the guys I just met said “I got this one” and waved us of. So being a gentleman and a budget minded FinancialFreak I decided to allow him the pleasure of paying for the drinks. He then reached in his pocket and pulled a roll of cash with a rubber band around it and proceeded to flip off a couple bills so fast he looked like Al Capone paying off the cops. Now I already knew this guy had some really nice shoes on but I never guessed him to have several grand rolled up in his front pocket!

Now, I always have some cash in my pocket, especially since I refuse to use credit cards anymore, but I sure as heck don’t have $3000 in my pocket very often. Since the thought of having my very own fist full of $100’s sounded so exhilerating I figured I’d give this big shot technique a try and see how it worked for me. This sounded like a logical experiment so shortly after meeting Fist-full-of-100’s Guy I withdrew my entire starter emergency fund of just over $1500.00 rolled it up and stuffed it in my front pocket. After leaving the ATM I headed over to Starbucks to meet up with a friend.  I was excited just thinking about the moment I’d get to whip that wad out of my pocket and say “I got this one.” Just like Fist-full-of-100’s Guy had done a few nights before.  So without hesitation as soon as he placed his order BAMM! The fat wad was out of my pocket and a smile was on my face. The only problem was I looked like a complete idiot bustin’ out $1500 to buy two cups of coffee. 

And sure enough the barista saw right through me. With a smirk on her face and a smart little attitude she said “Is that all you have?” Ouch! I was busted by a 17 year old coffee pusher! 

So I did my best to play it off all FinancialFreak cool and said “Why, how much do the other guys usually tip?”

All in all it was a lame experiment to roll like a big-shot but in the end I came out looking more like Al Bundy than Al Capone

How much cash do you usually carry in your pockets?

Young people knows how to run fast but old people knows the way   -unknown

A survey of over a of over 1100 people ages 62-75 were posed a retirement question that only they have the experience necessary to answer. No matter how many finance blogs or books you’ve read, and no matter how many classes you’ve taken…nothing you have done to date, unless you‘re retired, will give you the experience and life lessons required to answer the following question:

If you could turn back time how would you have planned differently for retirement?

56% would have started saving earlier  

39% would have allocated more money towards retirement

27% would put money into safer investments

7% would put more into riskier investments

5% would have used a professional advisor

I found the results interesting because the two biggest I shoulda’s were behavior based mistakes and not really what I’d call investment mistakes. The two biggest mulligans they would take had little to nothing to do with investment proficiency and everything to do with the actual task of just getting the retirement savings in place and growing. So I’m thinking no matter what your situation may be right now it’s a good time to get about the business of putting yourself into a position where you can take the advice of these old timers and get things moving for your future. Imagine if you not only were able to run fast but you also knew the way.

So now that you know what the people “living the dream” have to say about their retirement savings what steps are you going to take to heed their advice? Or are you going to look back in a few years and repeat these same survey answers to the next crowd?  

Source: Harris Interactive and Financial Freedom Senior Funding survey of 1,140 seniors age 62-75

Enjoy this article I wrote at Hobostudent.com:

3 jobs that will keep you paid and cool

and no…that’s not me in the maid’s outfit

Another financial blog caught my attention recently (the name’s withheld because its a pretty good blog with a only a few questionable posts) The post I’m writing about was regarding the purchase of a new “quality” BBQ vs. buying a less expensive model. As a FinancialFreak that thinks long term this makes obvious sense to me as quality is often worth the extra price if you plan to use the item to its fullest. Buying quality may not be a responsible option though if you’re not in the proper financial situation to pay for it. 

 The blogger posts about how he wanted to buy the Weber E-310 BBQ which sells for close to $800 – a pretty sweet BBQ which he’d been saving for. He then goes on to say he made a better purchase and settled for a Char-Broil BBQ for a little less than $400 – again good job, you did some homework and saved some cash.

Here is what made me say what you were thinking…

The next post on the blog was titled “Housing Update: Short Sale, Foreclosure, etc.” I assumed this was a post about his opinions about the complicated housing market. Turns out this blogger has been trying to sell his house for more than 16 months and is currently on the verge of a foreclosure. Here’s a quote from his post:

Our savings is gone, our emergency fund is nil and I have cashed in about half of what little retirement we had put away. I am earning as much side income as I have time for and my wife babysits anywhere from one to five children (beside our own) everyday in order to make ends meet. At the moment, our credit is good and God has provided for our needs, but we are at the point where we are starting to incur major debt on behalf of this house.

So let me summarize here. He’s earning as much side income as he can, his wife is babysitting extra kids for money, he used his emergency and retirement funds to help weather the storm. If I were counseling this couple on their finances my advice to them would unquestionably be to spend the money they saved and invest in a new $400 BBQ. This is really the only option they have left to help prevent their family from being foreclosed on. If we were on the verge of foreclosure and I came home with a new $400 BBQ it would not be a pleasant conversation over freshly grilled steaks with my wife – who knows it might even be the last convesation we have as a couple!

My thoughts do go out to this family as nobody wants to go through a foreclosure….then my FinancialFreak mind kicked in and my thoughts quickly changed to “I wonder what sort of deal this guy will give me next month on his almost brand new $400 BBQ?” I better go back and bookmark that post!

To clean up our financial mess the first big step I took was to come together with my wife and get on the same page regarding our money (now doesn’t that sound like a fun discussion?)  From my experience this is often one of the hardest steps to actually accomplish for most couples. In many cases one person takes on the responsibility of the household finances for one reason or another and the other person is sort of along for the ride. Maybe one person likes to be in control, maybe one person doesn’t want the responsibility or the stress, maybe one thinks they’re smarter, or maybe one’s a nerd and gets off on this stuff, or maybe it was never even talked about previously and this is just the way chips hit the table. Either way unless you’re on the same page with your spouse it’s likely your household finances will not be in good order over the long term. Remember the preacher-man said “and now you are one” remember that line? Note what the preacher-man didn’t say…. “and now you are one except for the money part only one of you will need to pay the bills and carry the stress of the finances until death do you part”  (In other words you take care of it until one of you kills the other!)

Merge your money or separate the accounts – His money & Her money. This takes place, when for one reason or another, when a couple operates their finances separately from each other. In many of the cases where I’ve seen this I’ve noticed it is usually due to one of the people not wanting to bare themselves financially to the other person. They keep their money almost a secret from the other person. According to a USA Today article the FPA’s survey of financial planners nearly 55% of couples hide financial assets from one another. Hmm, I wonder what other secrets they might be keeping. (more…)

I was walking out of Starbuck’s $4.00 lighter in the wallet, I noticed a new sexy black sedan next to me. Now those of you that know me know that I love black cars (notice that black is the one color that every car comes in). Also those of you that know me probably wouldn’t call me a sedan kind of guy. Though with the addition of our daughter a while back maybe my tastes have changed a bit. After I saw this car I now know for a fact I’m now a sedan guy, I’m not sure why….it may have been the safety and comfort of this particular car that changed my mind or more likely it was the shiny Maserati badge on the grill that got me all worked up.

Big and inexpressibly masculine, broad and low, with a rising rhythm from nose to tail and perfect isometric tension, the QP has a self-possession and – that makes its six-figure, four-door competitors – Mercedes-Benz AMG S-class, Audi S8, BMW 760Li – look like prison dentistry.

– Los Angeles Times

Any car that’s “inexpressibly masculine” and can make an AMG Mercedes-Benz S-class “look like prison dentistry” is okay in my book! With a selling price of only $130k that works out that I only need to save $71.23 a day…every stinking day for the next five years and that baby is mine. That’s going to take a bit more than cutting Starbucks out of the budget. But I guess it’s one more reason to keep my finances in order so someday my family will have a proper 440 horse power grocery-getter that will deliver us to McDonald’s Play Land at 177mph!

After catching a glimpse of the world of possibilities we live in today I approached my work with a refreshed attitude and drive. So aside from a good street fight what gets your blood going?  Cars? Boats? Charity work? Respect in your field? A sweet vacation? Ladies of the night? 

Comment on why you get up in the morning and decide to put up another fight for another day.

In an earlier post titled To Whom the Accidents Happen I wrote about how some people always seem to have something “happening to them.”  The issue I want to discuss here is the money problems that always seem to “happen” to these folks. When I was deeply in debt and had no money except my paychecks it seemed that every week, or at least every month, there was some sort of an emergency in my broke crappy life. Emergencies suck and emergencies when you have no money suck even more.

I also noticed when something went wrong while I was your broke I didn’t have an emergency…I actually had two emergences. The first was the actual emergency itself and the second was the money emergency that arises from the initial emergency. In the one case of a couple I was counseling a recent accident was further compounded by several hundred dollars in overdraft and late fees that were applied by their bank. The additional expense drug the problems into the subsequent months amd magnifying the financial fun they were having. They actually incurred over $400 in late fees and overdraft fees and if I remember correctly this actually required almost as much money to clean up as the initial emergency required in the first place!

The Emergency fund is really the only way to prevent this from happening without going into some sort of debt. The Emergency fund though can only prevent problems from growing to the extent you actually have enough dough to fight the battle. True in most cases you could go into debt to resolve the problem and that’s what most people do – it seems like an easy enough answer. Since they rarely have access to much real money they pull out the plastic crutch and beg for mercy. This does work but you have now stretched this emergency into the subsequent months, and often times years, until the debt is paid. The big problem with this strategy is that now you have weakened your current financial position and will have to fight that much harder to survive the next emergency. This is especially true if the next emergency arises while you are still trying to pay for the last one(s). So now do you not only owe money (plus interest) but you still don’t have any money, I know this because if you did have any money you would have used it in the first place.

I feel building an emergency fund is crucial to any financial plan. To be honest I think it’s more important than paying your debts off completely. Though I think to build a solid financial foundation you need to do both. It’s also much easier to build your emergency fund once you have freed up the cash you were previously paying towards your debts. If you added up all the money you pay out in credit cards, student loans, and car payments how long would it really take you save up 3-6 months worth of expenses in an account? This was a major motivator for me to pay down my debts, I knew that would allow me to build a bigger financial cushion between me and life and paying away my debts would free up the money to accomplish this relatively quickly. 

The first thing I did to build to save for emergencies was create a place to keep the money I knew if I saved this money in the savings account that was tied to my checking it would wander away from me like Seahawks Super Bowl win never to be seen again! So I took steps to “idiot proof” our savings. This post tells how I worked around the issue of having the money available when needed without using debt 29% Interest? Are you Kidding Me?

Another option is a money market account. These are nice because they usually offer a higher interest rate than a typical bank checking or savings account. Many will also allow you the ability to write checks from these accounts (often 4-6 checks per month are allowed). Personally I liked having a back up debit card in my wallet in case something weird went wrong with our regular checking account and I was stranded without gas somewhere.

My plan is to use both a checking account and a money market fund for our emergency money. I know that sounds a little complicated but it gives me the best of both worlds. We can have immediate access to a couple thousand dollars to get us through a pinch which for us should cover most anything that we have to deal with on the spot (a dead car, an exploding septic tank, etc.). All the while we’re earning interest on the remaining balance. If we need access to more we can write a check or do a quick transfer and have access to more within 24 hours or so.

How much money do you feel you need to have access to sleep well at night? If you already have an Emergency fund in place what type of accounts do you use for its safe keeping?