Making Your Own Luck
September 22, 2011 by admin · Leave a Comment
“What’s your goal?” My husband’s question was simple, but I didn’t know if I should bother to share my complete answer, because it seemed unreasonable.
We hadn’t started our family yet, which was a goal of ours. But I wondered if winning Lotto was the only ticket to my other dream: to be able to stay home with our kids for as long (or short a time) as I wanted. Back then, my earnings were almost five times his salary and I doubted we could sustain ourselves on his take home pay alone, especially with the added costs of a baby. Sharing this thought with him might have made him feel badly; instead it motivated him.
”That’s it? That’s the goal?” Tony said, as if he had known it all along. “OK, give me some time, I’ll figure it out.”
I had it drummed into my head from friends and colleagues around me, who were enslaved to the double-income household: “There’s no way you can live on one salary – especially a teacher’s salary.”
Quietly I worried that I had given him a goal that was not within reach. I thought, maybe I could stay home for a year at most. I even started to accept that option, if it came to that. Thankfully, it never did. The more naysayers there were, the more determined he was to make a viable plan.
Stock piling became the first part of the strategy; generating investment income was the other component. We lived as if his salary was the only income we had, and aggressively saved and invested my salary and bonus. That is not to say that we didn’t enjoy ourselves. We made time for some travel; we ate out at restaurants within reason – but the savings/investing came first; what was left over was ours to play with. We put off starting a family until we felt we were on solid ground.
An interesting thing happened along the way. We had the opportunity to buy a small cabin in New England for a great price; it was very tempting and we came close to doing it. It was affordable based on our total income; but ultimately it would have taken us off our goal. When another opportunity presented itself — to move farther from New York City (where I worked) to an area we loved and where we wanted to raise our family– we struggled with the idea. I didn’t want all our savings/investing to dry up because this house was more expensive than the one we were living in. After careful consideration of all the numbers, Tony figured we could swing it, provided I was still willing to commute an extra 2 hours each day until we started our family. With trepidation, I agreed.
Then we faced a series of unexpected events. For starters I became pregnant and soon we found out we were expecting twins. Almost immediately, I ended up on bed rest. Short-term disability gave way to long-term disability, which was less than my salary (although I wasn’t spending any money commuting). When our sons arrived a full two months early, we were stunned. After more than two weeks in the neonatal intensive care unit, they were released to come home – but with all sorts of equipment (like an apnea monitor to detect the cessation of heart beats or breathing and caffeine to keep the heart beat rate up). To add to all this tension, I had used up all my leave and was due back almost as soon as the boys came home from the hospital. I still can’t say how I would have been able to leave my babies under those circumstances – or who we would have asked to take on such a grave responsibility. I am just so thankful that Tony thought to ask the question about my goals – and that I dared to utter it out loud. Otherwise, our backs would have been against the wall.
Many times, there isn’t one right way to reaching a financial goal. Sacrifices, compromises, and non-negotiable items differ by household. The point is the goal kept us focused and shaped all the decisions we made – we passed up opportunities to spend our money in favor of getting us closer to what was our top goal. Most important, had we not planned this out, I would have been headed back to my four-hour roundtrip commute; our preemie babies occupying my every thought. Some call it luck – but I know Tony’s careful planning and our commitment to reaching our (seemingly unreachable) goal had a lot to do with the blessings that came our way.
The financial wisdom I would like to impart is: Don’t be afraid to look at your dreams – even if they seem impossible to reach. Instead of thinking about why you can’t get where you want to go, ask how you might get there. Do this, and down the road, you may find yourself being referred to as the “lucky one”.
School Year’s Resolutions
September 8, 2011 by admin · Leave a Comment
September may be the ninth month, but for anyone with children, it feels like the start of school marks the beginning of the year. Why wait until January to make resolutions that you know will benefit you and your family right now? An added bonus is that you can get the kids on track by setting a good example. While each family has its own challenges, there is a common theme that most families struggle with: planning and organization. These two issues permeate every aspect of our lives and also greatly impact personal finances and household budgets. By taking steps in the right direction, you can start to feel more in control which begets calmness. Isn’t that a wonderful way to start the school year? Below are some of the most common School Year’s Resolutions and tips on how you can take steps in achieving these goals.
Eat Healthier.
Getting dinner on the table while juggling extra-curricular activities and homework can often lead to poor choices (as in unhealthy and expensive take-out). TIP: The simple act of meal planning before you shop for groceries can greatly decrease what you will buy and what you will spend. Using the local flyer as your guide for sale items, make up a week’s worth of healthy dinners and lunches. Shopping with Pea Pod and other delivery chains may also save time and money, as old shopping lists are saved and a running tally of the grocery bill is ever-present. There will be time to gather your coupons, further reducing the bill. Whether you order on-line or physically go to the store, the one simple step of meal planning with the flyer will ensure you buy the best-priced items and will have ample food for all your meals. Furthermore, when you have a menu pre-set, you are less likely to pick up a pizza.
Organize Closets, the Garage and Pantries.
Wherever stuff lurks there is the potential to save a lot of money. How many times have you had to run to the store to buy something you know you have but couldn’t find (such as scotch tape, a hammer, a flashlight, etc.)? TIP: Group like items as you would in a store. You don’t need to spend a fortune on organizing supplies. Old shoe boxes, clear storage bags, over the door hooks and bags can all help consolidate items based on their use. Gift wrapping supplies, from scissors, tape, paper, bows, and generic cards can all be placed in one shopping bag; common household tools like measuring tape, flashlights, screw drivers and hammers can be placed in a box. Designate a space in the coat closet for umbrellas, hats, scarfs, and gloves so you are not left scrambling the first morning there is inclement weather. Don’t forget to extend this exercise to the food pantry, as well. Then you will know what you need (or don’t need) next time you food shop. When you are organized, less time and money will be spent by your household, guaranteed!
Purge Papers.
From school handouts, to artwork, to junk mail and personal files – paper piles up and things get lost. TIP: Set-up a binder book or expandable file for each child that will house the class contact list, book orders, assignments, handouts, invitations, and artwork that you want to keep (consider framing or hanging a bulletin board to post larger items). Toss junk mail as soon as it enters the house and get removed from mailing lists. Keep an eye on your financial files, as well. Here’s what to keep and what to shred:
- Keep only the current year’s payroll stubs, which can be shredded after you get your W2 and verify that your annual compensation amount is correctly reflected.
- Provided you do not need them to support income tax filings, bills and canceled checks that have already been reflected in your current bank statement can go after a year (exception: hold receipts indefinitely for warranty-items or large ticket purchases for insurance purposes).
- Bank statements. Keep the monthly statements for the year. After you file tax returns, hold on to any checks that relate to your tax preparations (housing/mortgage related expenses, payment of taxes, or business expenses) and your year-end statement. Get rid of the rest.
- Investment statements. For retirement accounts, keep records of all non-deductible IRA contributions to prove that you already paid taxes on these monies. Keep quarterly statements of all investment accounts and make sure the year-end statement matches up before disposing of the quarterly statements. Keep records of purchases and sales of securities for capital gain tax purposes.
- Taxes: Keep seven years’ worth of income tax records and supporting documents (receipts, checks, W2s, 1099s, etc.).
- Credit card receipts. Keep receipts to reconcile against your monthly bill. After verifying that the balance due is correct, shred all but those receipts you need for tax purposes.
- Housing Papers. Keep all documentations relating to the purchase or sale of property for at least six years after you no longer own it. Keep receipts pertaining to all household improvements for tax purposes.
Get in Balance.
Many parents and children are so over scheduled that life has become a series of running from one place to the next (which often results in a “drive-thru” dinner). Take an inventory of the activities and events your household participates in and decide which ones truly fit your family’s need for balance and recreation. Eliminating some may be a sanity-saver and a budget booster.
Making some small adjustments, such as these, can result in a less harried home life. When you know what you are making for dinner, and you know where everything is, there are far fewer last minute errands to the store. When the schedule isn’t jam-packed, you can actually enjoy dinner together and show your kids that down time is to be savored. When the precious commodities, time and money, are preserved, you will feel more in charge of your life and less a part of the rat race. Perhaps you’ll be inspired to stay healthy as a family, and use this found time to go for an after-dinner walk or bike ride. Your kids will function better in a calmer environment, and you’ll be more present to guide them through life’s daily challenges without all the distractions.
As they quietly learn from you, maybe, just maybe they will even be encouraged to make some resolutions of their own.
Lessons at the Lemonade Stand
July 30, 2011 by admin · Leave a Comment
When I was a young girl, summer days had their fair share of running barefoot through the sprinklers and picnic lunches, but it was at the lemonade stand where I learned about the “real world”. My best friend and I would set up the stand on the corner of our street, make the lemonade, set the price (10 cents a cup), put out our sign, and bring the cash box out. We would chant to passerbys and attract as much attention as we could. It was there I discovered a lot about myself (I liked earning money), and a lot about economics and how business works. This summer, why not encourage your kids to set up a business they care about?
Several moms I know have turned their young children’s’ interests in to businesses that they run together (one sells her own handcrafted tutu designs on-line, and the other makes and sells beaded jewelry). Having hands-on experience running a business at a young age can really inspire your child to take their hobbies and passion to the next level. Even if it becomes just a passing interest, the lessons they’ll learn at the lemonade stand (or wherever) will be invaluable. Here’s what I learned all those years ago.
1. Make sure you like and trust your partner. Fighting can kill desire (and profit).
2. Find a partner with skills that compliment your own. My friend was good at promotions. The sign was pretty; she had a good personality and knew a lot of people. I was better at the business side of things, making sure that the lemonade and the cups never ran out.
3. Pay attention to outside forces working for and against you. The weather had to be right — if it was too cold or too hot then no one was out to buy. The rain killed business altogether. Obviously, things sell when there is a demand for it. Cold lemonade near a soccer field where there were games going on meant lots of sales.
4. Make sure your “lemonade” can hold its own with the competition. If you price it too high (and there’s nothing special or different about it) prospects will go elsewhere.
5. Know what you need to sell to break even. Setting a competitive, realistic price means first knowing what you need to make to pay for the entire inventory. If making a profit would mean pricing the item well above what people will pay for the good, then don’t bother selling it.
6. You can do it! The most valuable lesson of all was that I (at age eight) was capable of earning money on my own. Nothing felt better than that! It gave me such a rush of confidence that I was eager to go out and earn more money.
Make sure your kids get a taste of starting something up themselves and earning money from it, and they’ll reap rewards long after the “lemonade stand” has closed up shop.
Power to Your Little People
July 1, 2011 by admin · Leave a Comment
Growing up in a large family, my basic financial needs were always taken care of but as for the extras — it was like a bakery: “Take a number and get in line.” It annoyed me and, at times, it embarrassed me when a friend had the latest and greatest gizmo and I did not. But, it also motivated me to find a way.
I remember getting my older brother to let me clean his room for money, I took local babysitting jobs, and the moment I was old enough to put in for my working papers, I did. Now my first job paid peanuts, because it was a “seasonal” job and didn’t have to pay minimum wage. So for $2.75 an hour, I worked at the local pool; but I was happy as a clam, because I was earning my own dough.
When I left for college, my parents paid the lion’s share and I took out the standard $2,500 government loan and paid all my expenses: books, entertainment, clothes, etc. A funny thing happened. Because I had earned money in the past, I wanted to earn again, and I did not want to have to ask anyone (even my parents) for money. So, I started tutoring for $10 an hour (nice pay raise)! And just as I was getting comfortable and into the groove the boom was lowered: my Dad was retiring and we were moving to Florida. He wanted me to transfer to a state school there. Immediately I knew I had to do something to stop this. I didn’t want to leave, but what could I do? That’s when I learned about becoming a Resident Advisor or “Den Mother.” This job would single-handedly pay my Room and Board and pay me a stipend, and provide me with a phone. Thankfully, I got the job — now I had to sell it to my folks. My father’s reaction was not at all what I was expecting. I thought he might be angry at the lengths I had gone to, to foil his plan. Instead he said that I had thought it through well, had planned it well, and clearly it meant a lot to me to stay where I was. I will never forget the look on his face: it was one of satisfaction. He had done his job well.
Tips for Raising Do-It Yourself Kids
1. Let them have skin in the game. If they want something big, let that be a motivator for them to earn and save their money. You can help them out, but let them “own” a piece of it. It builds confidence, pride, and encourages a work ethic.
2. Don’t let them think that you will always step in. If you practice the law of natural consequences, they will learn very quickly that their actions (or inactions) produce results (good and bad). If they know that they will have to live with these consequences they will tend to be less impulsive and make better choices.
3. Guide them out of the box. Give them creative ideas on how they can achieve their goal, whether it be how to earn extra cash, or how to find something at a better price. Show them how they can “make” their own solution.
4. Clap hands. When they rise up to the task, let them know how proud you are and how proud they should be.
5. Let their youth be an asset. Enthusiasm and energy are great attributes of youngsters. Harness it and direct it toward a goal and watch them accomplish wonderful things. Don’t discourage them with words like, “You’re not old enough.”
6. Build confidence. Let them know that if they want something badly enough they have the power to make it happen for themselves.
Math that All Kids Will Love
June 9, 2010 by admin · Leave a Comment
Do you want to get your child’s attention and encourage them to save money? A little basic math will show them how they might become millionaires – if they start investing early.
Consider this hypothetical example: A teenager has a part-time job and puts $2,000 of her earnings into a Roth IRA every year starting at age 16 and ending at age 20. Then, she leaves that $8,000 total investment to compound for 47 years at an average rate of 10.7%. Even though no additional money is added to the account, at the end of 47 years the $8,000 investment grows to $1,114,423. Now, even though the average return may seem high, that is not the return the account earns every year but rather the average return earned over the 47 years. Of course results do not indicate past or future results of any investment.
The point of this simple example is to show kids how building wealth is not determined by luck (like all those losing lottery tickets out there), but by making regular, consistent investments, and by starting early. In fact, the power of time is the greatest advantage of our youth because it can help assets compound. Show your kids this example and then, as they receive gift money or begin earning their own money, encourage them to put away some of it. Getting them started early means they will take advantage of time to secure their financial future.
