When to Splurge???

Notice the asymmetric design?

Sometimes you can be too good at saving.  In fact, you start to reach a point where you get so fed up with your saving that you need to spend it on something.  This phenomena called "the splurge" is usually used as a destructive term and can do havoc in your finances if you are not careful.

Before we get into the concept of what's a "good splurge", we should first realize what the point of money is.  By itself, money is essentially useless, but it is purely a means of acquiring something else.  With that in mind, the use of money should have some goal behind it just like saving money should come with some goal.  Recently for me, my car needed new tires; in fact it just barely passed the state inspection because of this issue.  Tires for me are my splurge, and I've always been good at saving so that I can 1.) Retire early, and 2.) buy things that provide safety for my family (like good tires).

For me, a good set of all weather tires can revolutionize your car driving experience.  My personal brand of choice is Nokian, but a high quality Firestone, etc... is probably also good.  Let me tell you, those tires came in handy over the long weekend!  I had a wedding to go to, and it was over 400 miles of solid rain driving.  It even snowed on the wedding day in May!  Thanks to my new Nokian tires, I never had a problem with stability or felt like my family was at all in danger.  Safety is one of my chief concerns, and splurging on quality tires is a "good splurge".

What's important to you, and what is the goal for you to use your hard earned money?

Wonderful Moment of the Day: Happy Memorial Day!

Benefits of a Hard Day's Work

It's that time of year again; as the sun stays out longer and the days get warmer, Spring temperatures and the labor that comes with it are in full circle.  Whether it's Spring cleaning, yard work, or construction projects, you're sure to be doing more physical labor in the coming months than you probably did over the winter.  With that in mind, I wanted to examine for a little while the benefits of a hard day's labor.

The first benefit to a hard day's labor is the sense of accomplishment after its all over.  Recently, over the weekend, I spent about 8 hours doing yard work from planting this year's garden to mowing, and laying 24 bags of mulch.  After it was all over, the property looked really nice and I was rather proud of the work I did.  You might not be getting too many sources of accomplishment in your own job or daily routine, so a hard day's labor can be a welcome opportunity to really receive some positive reinforcement.

After your sense of accomplishment, you can be reassured that your results are physical proof of your hard labor.  I like to think about this as if I were a construction worker, the epitome of hard labor.  After all those rough weather days and hard labor, I can look up at the building my team just constructed and feel good knowing that we created something great.  The same thing can be said for a day's labor.  You will see the result, and if done with passion, can be quite proud of it.

Physical labor can also be considered great exercise.  You have to be careful here though that you aren't breaking your back over the labor.  Lifting improperly can put a damper on your future quality of life, but if you're just moving around all day you will definitely get your daily exercise.  That mild soreness you get the day after working hard can almost be pleasurable at times.

Working out on a job doing hard labor can change your perspective on things.  You might hate your cubicle job, but after a day outside doing tough work, you might appreciate not having to do that every day for the rest of your life.  Also, I usually find hard monotonous work soothing since I can let my mind wander and think about anything that's going on in my life.  Your brain needs time to process and analyze things in your life; what better time than when you are mowing.

Finally, I think one of the often overlooked qualities of hard labor is that you will genuinely feel discomfort and that's a good thing.  This may sound strange, but in today's comfort driven lifestyle, we try to ameliorate anything that might cause us a little pain.  By experiencing this pain every once and awhile, we can be reminded of how good we have it and appreciate even more the comfortable times.

I wouldn't want to make a career out of it, but every now and then a little hard work is good for the mind, body, and spirit.  It's a humbling task that can allow you to explore other aspects of your life.  If you're feeling a little lost, why not let your mind wander and do a project?

Wonderful Moment of the Day: Got all my Spring yard projects complete!

Hope for Millennials?

I was recently inspired by this article highlighting the future planning tendencies of the millennial generation, a generation in which I find myself in towards the upper echelon.  The article explains how the millennial generation is turning out to be much more forward thinking in terms of finances than their parents, and are at least planning for retirement now.  With all the hate from TIME Magazine, it’s nice to see some bright spots about my peers. 

Some encouraging stats from this article indicate that a full 91% of millennials with jobs earning at least $50k contribute to their employer’s 401k plan.  Since this is essentially free money, I was shocked to think that 9% don’t.  What is even more shocking is at that age and demographic, only 40% of Baby Boomers were contributing to their 401k!

I think there is a couple things going on here that might explain this situation.  The article touches on one of them, and that’s that this generation has lived through 2 big economic crashes which leaves a lasting impression on individuals just entering the job market.  Watching their parents go through some despondent times can make one want to be a little more careful with their hard-earned funds.  The second theory I have is that Baby Boomers were always lead on to believe that their company’s pensions would take care of them just like their parents.  As globalism kicked into full steam, many were shocked and horrified to see their pension plans dissolve.  Millennials were never brought up in a world where a pension was even an option.  On top of all that, social security might not even be available, or at least not in the robustness it currently stands at.  Millennials therefore have to save on their own if they are going to have any sort of future retirement. 

A healthy savings rate is crucial to the stability of any economy.  I hope that if you are currently not participating in your employer’s 401k plan that you would reshuffle your budget and start contributing now.  You are leaving free money on the table.

Overall, this article left me hopeful for the future, and I hope it did for you too.

Wonderful Moment of the Day: Lying in the grass.

Rolling with the Punches and Dealing with Stress

What stress’s you out? When you think about your life, and all your experiences, what is the one or many instances in which you were so stressed, that you wanted to scream at the top of your lungs?  Some people might list such events as fighting with your spouse, kids, getting into a car crash, or especially having to call the cable company.  Whatever it might be, learning what stresses you and how to deal with it is a skill that is easy to learn but takes a lifetime to master.

It’s funny how my Wife and I have such different ideas of what makes us stressed out.  For her, it’s the big things in life.  A few years back, she was side-swiped in a car accident which caused her some very stressful nights.  Other things include paying the bills and financial management.  Luckily, I don’t mind most of this stuff and gladly manage it for our family.  It’s these large (and hopefully rare) disasters which stress her out the most.  I can totally understand where this is coming from, but for some reason, I don’t usually get too bothered by these.  She has even commented to me in the past “Why are you so calm about this?”  In my mind, these type of disasters are largely unavoidable; there is nothing you could have done to not have this situation happen.  For me, stress is all about woulda, shoulda, and coulda.  I could have studied a little harder for the test.  I should have cut that tree branch down before it fell on the house, etc…  In cases like a car crash, there is very little you could have done to make the situation safer and change the other driver’s habit. 

What stresses me out to no end are the little things in life like leaving the kitchen counter dirty.  These things just grind at your soul and are completely avoidable; there is no reason to ever have to worry about this stuff.  All this is a character flaw of myself and I acknowledge it.  What is important is that I don’t lose perspective in these situations.  What you are complaining and raging about is really a minor problem in the scheme of life.  Bumps and hiccups will come along the road of life, and what truly defines you as a person is what you do and how you handle yourself in these difficult situations. 

Whenever you are stressed to no end, take a mental step back and look at the big picture.  Does your problem seem that important now? 

Wonderful Moment of the Day: Happy Graduation Weekend to all you college graduates out there!

Getting Focused

With all the possibilities that life holds for you in your future, one of your biggest enemies in your quest for greatness is closer to home than you may think.  Procrastination is a terrible problem that if left unchecked will deny you from living to your potential; promotions will be passed over you, and opportunities will be missed.  With that in mind, here are some ways I've managed to maintain focus in my own career.

1.) Vary the assignments: You've been working on this big report for the past two hours and now feel drained.  For some reason, you just can't seem to get around to finishing it.  It's quite possible that you're just bored from working on the same thing for so long.  Instead, try mixing things up for a bit and work on another assignment for 30 minutes or so.  This will allow your brain to switch gears and hopefully get that much needed kick start so that you can return to your original assignment with verve and vigor.

2.) Get up and stretch: If you have the privilege of working in a sedentary job, then you might be forced to sit at a cube all day.  May sure you get up and stretch at least once every hour.  You need to get blood flowing back into your legs and other extremities, otherwise over time you could develop blood clots.  One way to give yourself an excuse to get up is to drink a whole bunch of water which will make you go to the bathroom.  Hopefully your bathroom is on the other side of the building.

3.) Listen to some music:  Sometimes your work environment can be distracting with the noise of multiple conversations, computers humming, printers printing, and telephones ringing.  This can cause a type of dissonance in your mind which may be very distracting.  Try listening to some music (preferably via headphones).  Music will not only cut out the cacophony, but will allow you to focus more on just one noise.  This often clears my mind and lets me focus on the task at hand.

4.) Take a walk: Finally, when all else fails, I need to take a walk.  A walk is a chance to literally and figuratively take your mind away from the situation at hand.  It gives you a chance to contemplate your problems before you and explore solutions that you might have not otherwise thought of.

Don't let procrastination rule your life.  Try some of the above tactics next time your having problems with getting things done.

Wonderful Moment of the Day: Playing with my cat in the yard.

Causes of Trouble When Starting a Business

If you ever think about starting your own business, well then I salute you good sir, because you are an enterprising individual!  Often times, entrepreneurs don't understand the common causes that may give them trouble in the near future.  When assessing your opportunity for a future business, it helps to know the issues that could cause problems in the future.  With that said, here's a pretty exhaustive list of potential ways entrepreneurs can get in trouble:

Strategic Issues:
1.) Misunderstand market niche
2.) Mismanaged relationships with suppliers and customers
3.) Diversification into an unrelated business area
4.) Mousetrap myopia: Starting a firm around an idea instead of an opportunity
5.) The big project: Company gears up for a big project without first examining the cash flows of the initiative
6.) Lack of contingency planning

Leadership Issues:
1.) Lack of leadership skills, experience, and know-how
2.) Weak finance function
3.) Turnover in key management personnel
4.) Big-company influence in accounting: focus on accruals instead of cash

Poor Planning, and Financial Controls:
1.) Poor pricing, and over-extension of credit
2.) Poor cash management
3.) Poor management reporting
4.) Lack of standard costing

As a potential business starter, its important for you to foresee these issues and approach them head-on.  If you do, your enterprise is far more likely to succeed and may even thrive.

Wonderful Moment of the Day: Spring tulips

Sell in May and Go Away

The old stock market adage of "Sell in May and Go Away" has its roots in the idea that many wall street traders and other money managers will usually take a vacation in the Spring/Summer months and therefre returns are far less in that time frame than the November to April returns.  With the advent of automated trading and discount online brokerages, this saying is far less true, but there are some aspects that should "go away".

One way to approach the concept of May is to "Go Away" from all the investing and financial planning you ususally do.  What I mean by this, is that you should pretty much have your retirement planning on autopilot, and shouldn't have to do much in this regards besides the occasional portfolio rebalancing.  With that in mind, it is definitely harder to stay indoors when the weather is nice out.  So, wait until November to rebalance your portfolio or make a bulk contribution to your IRA. 

All work and no play will leave you drained.  Everyone tries to take a vacation when the weather is nice, but intead of asking yourself where you want to go, think of a vacation that will provide the least amount of stress.  Booking airfare, traveling, and seeing family can all be great sources of stress to different people.  If you are living an active and busy life, finding time to unwind and de-stress is a rare opportunity.  Instead, think of a vacation that will leave you reenergized and ready to come back. 

Summer time is also the perfect time for our teenager or child to start to learn about the working world.  Many times, parents will leave their teenager to their own devices to find a summer job.  These kids have never had to find a job, and usually don't know the first thing on whether there are good opportunities out there.  You should take the time to help your child find a good job or internship.  It my seem like a mild source of improvement now, but it will pay off later in life.

Whether you go away in may literally, financially, or even mentally, the late Spring and Summer weather gives plenty of opportunities to reenergize your life.  Think smart, focus on a couple, and improve your life!

Wonderul Moment of the Day: Just bought a rope chain saw, and am excited to cut down some high over-hanging branches.

Things to do Instead of Spending Money

If you're trying to keep a strict budget, one of the chief problems that can throw your whole life out of balance is that of boredom.  You might be saying to yourself "that's not such a bad problem".  In fact, some people might even consider the lack of having to do anything as a major luxury.  In our fast paced and busy world we live in, this can often be true, but if you are bored too often, this could spell a disaster for your finances.

Let me elaborate:

Often times, boredom is a rather unpleasant state we find ourselves in.  We try to find ways to avoid being bored, and we usually have "go to" methods for at least doing something.  If you're not careful, your "go to" boredom fix could be something very expensive such as eating out, going shopping, or other entertainment venues.  Before you know it, you find yourself spending way more money than you should have.  So how do we relieve our boredom in a fugal way?  If you're a home owner like myself, there are always an innumerable amount of tasks that should be done, but sometimes I like a little spice in my life.

This blog here suggests at least 56 things you can do that cost very little to nothing.  Most of them are pretty good ideas, however I would argue that they are not all cheap.  Entertaining friends can be pretty expensive if you're not careful.  That said, it's at least a good start to having you think outside of the "proverbial box" and come up with some different ideas.  For me, writing this here blog is often a nice hobby and keeps me thinking.  If I was a better writer, it could even be a source of income.  Either way, look to your own environment for some entertainment, and you'll be surprised at what you find.

Wonderful Moment of the Day: My impatiens seedlings have all sprouted and will be ready to plant soon enough!

6 Words of Advice on Investing

Over the course of my reading and analysis of different financial techniques, I've found 6 easy pieces of advice that will convey the heart of investment wisdom.  They are as follows:

On Earnings: Never depend on a single income source.  Make investments to create a second source.

This is the concept of diversifying.  You increase your potential returns while also reducing your overall risk.

On Spending: If you buy things you do not need, soon you will have to sell things you do need.

Keep a budget, and stick to it.  Do not go over your means.  This is the fundamental step towards wealth accumulation.

On Savings: Do not save what is left after spending, but spend what is left after saving.

In other words, pay yourself before you pay the bills.  If you make a habit of saving first, your expenses will fall in line.

On Taking Risk: Never test the depth of a river with both feet.

This concept has you understanding how much risk is involved with an investment.  Don't go all in, and if you are investing in new territory, consider testing the waters before committing.

On Investment: Do not put all your eggs in one basket.

Once again, this is all about diversifying your investment across asset classes and also within asset classes.

On Expectations: Honesty is a very expensive gift.  Do not expect it from cheap people.

One could interpret this along the lines of you pay for what you get. 

What bits of advice could you provide a future investor?  Often times when you think about it in terms of you teaching someone, you'll better understand your own deficiencies.

Wonderful Moment of the Day:  I'll leave you with this bit of wisdom "At the end of the game, the King and Pawn are placed in the same box".

Traveling Where the Water Might Not Be Good

An example of a Grand Tour

If you are lucky enough to have been born in a country with clean, running water, then you already have a better life than at least half of the rest of the world.  My Wife is coming back tomorrow from a 16 day  medical mission trip in Southern Egypt.  Whereas, there are far worse places in the world, this trip has served a purpose of exposing her to how most of the people on the planet live.  Clean water is not guaranteed, so it can make life pretty hard at times.

Back when I was in college, I approached my guidance counselor about the chance to study abroad for a semester.  When she asked me where I wanted to go, I mentioned maybe England or Australia, because I lacked the foreign language skills.  She gave me one look and said "Absolutely not"!  I'll never forget how shocked I was at this statement.  I pressed the issue and she explained to me that a study abroad trip is a once in a lifetime experience, and you need to go somewhere were the water isn't clean to see how the other half live.  I'd have plenty of time in my life visit these other places, but I needed to be exposed to some harsh advice.

Well, she was not wrong, and I thank her for her stern advise.  Since one of my majors was European studies, I found a way to go to Southeast Europe.  The experience was eye-opening, and I would not trade it for anything.  I did come home with a new-found respect for all the things I had.

They used to have something like this back in the 1600-Late 1800's called the Grand Tour.  It served as a right of passage for a young man to experience the rest of Europe.  Well, in today's world, travel is easier, and there are many more places to see.  If you have the ability, I highly suggest you go somewhere were the water isn't always clean and take it all in.  You'll find that it does change you.

Wonderful Moment of the Day: Only 1 more day until my Wife comes back!

It's Easier to Save as you Get Older

We all know that saving for retirement is an important part of life, and that the slow wealth-building tactic of investing a small amount of money each month is a great way to accomplish this task over time.  If you're just starting out of school or college and find saving and investing very difficult, I'm here to tell you that it does get easier with time.  Here are a few reasons why I believe this:

1.) Less 1 Time Expenses - Think of all the money you had to spend when you first started out on your own.  You had to buy a bed, TV, kitchen supplies, a car, or even a new couch.  Chances are, when you hit your 30's you will not have nearly as many of these expenses. 

2.) The Benefit of Living with a Spouse - Hopefully as you age, you'll find someone you want to spend the rest of your life with.  An added bonus is that you can get an almost economies of scale experience by pooling your expenses together.  Food, living, and commuting expenses are less per person since you have 2 incomes with only marginal increases in expenses.

3.) Knowledge Increases - As you age, hopefully you'll start to better understand a whole slew of life skills.  Not only will you know how to better manage your money and savings, but you you'll most likely know how to cook more, or fix your car a little bit, or even just knowing whether you are getting a good deal.  This knowledge will help prevent far more mistakes than you made when you first started out on your own.

4.) Pay Increases - Generally speaking, as you age and become more experienced at your job/career, you'll likely have a higher pay than the inflation rate.  This will only add to your ability to save. 

5.) Good Habits Become Routine - This one only works if you made a habit out of investing when you were younger.  If you were disciplined enough to do this in your younger days, then you should be on automatic in your later years.  You'll also find that you will not miss your saved income, because you've already been living without it.

There are two things that can through all these previous points out of balance, and that's living above your means and children.  No matter how much you make, if you spend more than you take in, you'll have serious financial problems.  Likewise, depending on when you have children will also significantly impact your finances.

Sometimes you might get frustrated with your finances, and understandably so.  Just know that if you have a good head on your shoulders, and stay disciplined, it will only get easier.

Wonderful Moment of the Day - Coming home to a warm house.

Why I Only Have 1 Credit Card

Owning your own credit card is one of those milestones in any young person's life.  It creates a sense of pride in an individual.  To think that a bank would trust me enough to temporarily loan money is often one of the first experiences one has with lending.  If not managed properly, these little pieces of plastic can be quite problematic, however, if managed properly, they can provide a whole slew of benefits.  With all the credit card options on the market, and seemingly every store offering their own version, it would be enough to make anyone confused.  In this article, I talk a little bit about why I have chosen to stick with 1 credit card instead of many.

Managing Your Credit Score:
People often wonder what goes into their credit score.  Well, the newly created Consumer Financial Protection Bureau (CFPB) has a nice concise explanation.  Generally, how much credit you have, how active you are in using it, how many accounts you have recently opened, and whether you pay off those accounts are the main factors.  If I were to open many card accounts, I'd probably take a ding on my credit score.  That said, it is a little more difficult to increase your credit line with just one card which would improve your overall score.

Low Maintenance:
Keeping inventory of your many credit cards can be quite a hassle, especially if you are trying to maximize benefits.  Do I get 5% cash back at supermarkets on this card, or is it 10,000 points at gas stations if I spend $2,000 in the first 3 months on that card?  All this can get very confusing if you're not a financial pro.  The added benefits to me are simply not worth the hassle and work involved with keeping up with all these accounts.  It would seem very easy to accidentally miss a payment, and now much of the benefits you reaped or taken away in the form of late fees and increased interest.  It is just much easier to pay off your card each month through using 1 card.

Keeping Track of Spending Habits:
With multiple cards, it is much harder to keep track of your spending habits, unless you are religiously recording every transaction.  With just one card, you have all your credit spending in one place and can easily budget accordingly.  It becomes increasingly hard to know what you spent in a given month if you're looking at 3 or 4 different statements.

Potential Fees for Not Using:
Some cards have fees if not used for a certain amount of time.  Therefore, you have to keep balancing whether you used your card in 60 days or so.  This can get annoying after awhile.

There are some downsides to having only one card.  My Wife and I experienced this a little while ago when our card information was stolen and some fraudulent charges were paced on it.  It took us about a week to get a new card, which could have been a problem since we had no other credit cards.  Overall, though, I think the benefits outweigh the risks.

Wonderful Moment of the Day: Finally starting to get some Spring weather.

Maximize Your Life Through Breakfast

If you want to succeed in life and maximize your potential, then the first thing you can do immediately  is to eat a healthy breakfast.  The simple act of feeding yourself in the morning with a nutritious meal has lasting effects throughout your day, and over time, can be the difference between you succeeding and reaching your goals, or failure.

We all know the old saying that "breakfast is the most important meal of the day", but what does this mean?  Studies have shown that eating a healthy breakfast can have the following effects:

1.) A more nutritionally complete diet
2.) Improved concentration and performance
3.) More strength and endurance
4.) Lower cholesterol levels

I would like to put a note of caution on the 4th point.  It depends on what you eat.  If you're chowing down on bacon and pancakes everyday, your cholesterol might not be too good.  Overall, eating a healthy breakfast has a whole slew of benefits that are too simple to pass up.

Another important feature of eating a good breakfast is that it gets you started in the morning with a good routine.  I know that sometimes in our life, routine can sound like a bad word, but there are reasons why it can be helpful.  Routines allow us to focus on more important parts of our lives, and the comfort they provide can allow us to focus our time and energy on other events that may not be routine. Eating a good breakfast allows your brain to process the events that will likely occur for the day.

Finally, eating a good breakfast can be a nice way to spend time with your family.  Whenever guests come over to my house and spend the night, we try to cook a big and deluxe breakfast as most families don't usually do this.  Not only is this seen as a nice treat, but it is also a great setting for spending time together.

If you're not eating a healthy breakfast everyday, maybe you should rethink your routine.  As far as quick hits go, this is so very easy, that you'd be foolish to pass up.

Wonderful Moment of the Day: Just watch this clip.  It will warm your heart!

Is it Worth Having Both Parents Work?

Every new parent goes through this same difficult question.  Should one of us stay home and raise the child or should we both go to work and pay for daycare?  It's a difficult discussion in it's own right, and it is almost entirely based on the financial rewards for such a proposition. 

I was inspired by this article from the NY Times which talks more about the tax implications of women with childcare expenses.  Basically, a person married to someone who earns much more then them will have their own income taxed at the same level as the higher parent's income.  Couple this with the high cost of childcare, and the actual take home pay might not be as enticing as once thought.

Take for example the case presented in the article.  A parent with an income of $45,000 married to someone making $90,000 will be taxed at a higher marginal tax rate of about 25%.  Their take home pay after taxes, social security,medicare, and any other withholding will most likely be around $30,000.  Now the average daycare expense in NY State for a child is $14,000 leaving the parent with $16,000.  I'd also like to add in some further expenses the article doesn't talk about.  How about having a second car ($1,000 for insurance, $2,000 gas, $750 for service, parking $1,440)?  Subtract this from your take home expense and you are now looking at a take home pay of just $10,810.  All this expense just to get you to work and have someone else take care of your child.

Now we are at the crux of the real question here; is spending your time with your child worth an additional $10,810?  Many people might make the decision that an additional 10 grand isn't really worth it, and I wouldn't blame them! 

Deciding who or both parents should work is a very personal issue, and it requires some tough critical thinking.  Make sure you do your homework, compute the math, and factor in the intangibles and you should have a much clearer picture of your decision.

Wonderful Moment of the Day: Finally starting to look like Spring.

Taking a “News” vacation

This past Easter weekend was filled with family activities, physical labor, and great memories.  Even more importantly, there was hardly any time to use a computer, check the internet, or even watch the local news.  Throughout this weekend, I realized that I did not even miss learning about what’s going on around me, and I found myself even more relaxed.  I’ve come to affectionately call this a mini news vacation.

When you think about it, the news is filled with all sorts of negative information.  After all, is it really news worthy if it doesn’t threaten me in some way?  Listening to this negative material day after day will have an effect on your mental state even if you don’t immediately realize it.  Over time, you may even start to feel afraid of the outside world.  Trouble in the Middle East, a murder on the south side, or even local neighbor disputes can give you the impression that you live in a hell hole if that is the only source of information you have about a region. 

Don’t get me wrong; the news has its place within our modern lives.  The information it provides can be very useful and if efficiently disseminates information no matter how negative that info might be.  I’m not suggesting you eliminate this information from your life completely.  What I am suggesting is for you to take a news vacation.  Cut it out of your life for at least a week once and awhile.  This includes newspapers, TV, radio, and the internet.  After experiencing this for myself, I started to feel more connected to my immediate surroundings.  After all, if you don’t hear about it, what do I care about problems in Korea when it’s nowhere near me?  Problems and obstacles in life seem far more minor and manageable. 

If you are feeling overwhelmed and facing some tough obstacles, then try cutting the news out of your life for a while.  This opportunity will give you the time and clarity to examine the more important problems in your life.

Wonderful Moment of the Day: Roast beef leftovers

Why Banks are Sometimes Better than a Credit Union

I think we’ve all heard the news in the media on how credit unions are much better than banks when it comes to fees, rates, and motivation; however I think this depends more on your situation.  As I ever quest to be the contrarian, I often try to determine why the alternative opinion might make sense.  Also, on a personal level, I choose banks far more than a local credit union.  In short, here are my reasons why I prefer to use a bank instead of a Credit Union.  I should also disclose that I do in fact work for a regional bank, so take my advice with a grain of salt if you like.

1.)    Convenience – When it comes down to it, convenience is probably the top reason people choose banks over credit unions.  With more branches and ATMs, getting access to your money is probably far easier at banks.

2.)    Digital Functionality – Generally speaking, banks are far more likely to have the smart phone apps, or interesting websites to allow you to better manage your money.  Also, banks are far more likely to be linked to third party software such as TurboTax or Mint.com. 

3.)    Rates – Credit Unions are not always the best options when it comes to interest rates.  True, they have a significant advantage when it comes to paying taxes and general motivation to help their union members, however their operations are usually small and far more cost prohibitive.  With their larger, and usually more efficient size, banks can often make up for the advantages that credit unions have just be shear efficiencies of scale.

4.)    Diversity of Financial Products – Often times, credit unions are too small to be able to offer consumer, mortgage, commercial, and business banking loans all in the same place let alone things like insurance.  You usually only get all these items under one roof when you are dealing with a bank. 

5.)    Restrictions on Credit Union Membership – This reason has been lessoning more and more in recent years, however many credit unions have membership stipulations that could be restrictive to people in your case.  You may not even have the option to use a credit union. 

It’s up to you to decide whether these reasons fit your lifestyle.  Personally, I feel that if you are responsible, don’t rack up fees, and need a diverse array of financial products in the most easily and convenient ways to access them, then a bank is your best bet.  That all said, credit unions certainly do have their place.

Wonderful Moment of the Day: Happy Spring!

The Sorry State of Financial Education Within our Schools

Financial education has always been sort of an ancillary topic within the US education system.  Usually covered in "Economics" class or one lesson within some other class, the net effect is to downplay something that is so very important to the survival of any potential graduate.  Think about it this way, you could have a child who is a genius at Math, Science, History, or English, but none of that will be very useful if they don't know how to manage their money.  Alternatively, if your child was rather average, and achieved a decent paying job, but knew how to manage their money, they will most likely have less stress in their life and live a better more fulfilled existence.

The truth of the matter is that our education system in the US is very inadequate when it comes to teaching children the fundamentals of personal finance.  In my own experience, personal financial education consisted of making an imaginary budget and watching movies on how people became millionaires...not very helpful.  

Instead, having every high school graduate go through a course that teaches them about budgeting, saving, investing, and other important financial concepts (such as buying a house, car, or opening a credit card), would pay for itself exponentially.  The net benefit to our economy by having a whole generation of financially literate children enter the workforce would be profound.  Who needs further regulation when all your customers can recognize that a no principal, adjustable rate mortgage sounds like trouble from the get-go.  

Changing the educational culture within the US is not an easy task, but collectively you can start making an impact.  Talk to your teachers, principals, and other educators.  Vote for the necessary funds at your next school budget vote, or even volunteer to teach a lecture at your local high school.  This change won't happen on its own.  

Finally, the most important asset in your child's financial education is the time you spend with them.  Don't rely on the public schools to teach them about personal finance.  Instead, take matters into your own hands and learn the subjects yourself.  

Wonderful Moment of the Day: Family celebration for my Wife's coming mission trip for 2 weeks to Egypt.

Community Colleges Looking Better

In a recent article from CNN Money, it was reported that the average salary for a person starting out with an Associates degree is about $50,000/year, whereas the average for someone with a bachelor's degree is around $35,000.  How could this be?  Why does having 2 extra years of collegiate education warrant less money?  Something doesn't seem right here.

Upon digging into the article and reading further, you'll find out that most people who graduate with an associates degree are trained in "skills" jobs such as medical equipment technicians, dental hygienists, etc...  These middle skilled jobs have a relatively high starting salary, and there is also a need for these types of workers.

What struck me most was this paragraph in particular:

"Although these figures vary widely by profession, associate's degree recipients, on average, end up making about $500,000 more over their careers than people with only high school diplomas, but $500,000 less than people with bachelor's degrees, the Georgetown center calculates."

If you were wondering whether an associates degree is a better deal than a bachelor's degree, it still appears that those with bachelor degrees end up catching up to and surpassing those with an associates.     Associates degrees are definitely a worthwhile degree to pursue, especially if you are trained in a particular skill, but the traditional 4 year bachelor's still remains on top.

Wonderful Moment of the Day:  Having my brother-in-law, sister-in-law, and their three kids drop bye for the weekend.

Net Worth Realization

I was recently reading this Forbes article on how the combined wealth of 6 of the Walton family (famous for Walmart) have more income than the bottom 30% of Americans, and it started to get me thinking about wealth distribution in the United States.  In its essence, the wealth alignment is a shame with the top 1% having more wealth than the bottom 60% of the nation, but let’s take a closer look into what’s going on here.

It’s important to understand the meaning of wealth in these circumstances.  Just like you would value a company, your own personal net worth is the summation of all your assets minus the summation of all your liabilities.  So, if you, like many Americans, have no credit card debt or any other types of debt except for an underwater mortgage, you could have a negative net worth.  In the corporate world, you would be considered bankrupt and have some more serious issues to deal with.  In the personal finance world, as long as you can keep making your monthly bill payments, you’re fine.  From a retirement perspective, you could have some serious issues in the long term, but the important point is that you recognize these issues and are making steps to rectify them. 

The quote that struck me the hardest was this little excerpt; “If you’ve no debts and have $10 in your pocket you have more wealth than 25% of Americans.”  Another way of looking at this is to think that if 25% of Americans have a negative net worth, then you have more wealth then the 25% combined!  Suddenly, I’m starting to feel a little wealthier.  Don’t weep too hard for some of these people as there is an important difference between wealth and income.  You could have a lawyer making a 6 figure salary, but do to some spending habits, student loans, and an underwater mortgage, could have a negative net worth. 

There’s an important lesson in all this talk, and that’s to think of your own personal finances from a net worth perspective.  Just because you have a salary of $30,000/year doesn’t mean you can’t be wealthier than some hot shot doctor.  Likewise, just because you have a 6 figure salary, doesn’t mean you can’t spend yourself into bankruptcy.  If you start thinking from a net worth perspective, you’ll be better prepared for retirement and have a much healthier financial situation.

Wonderful Moment of the Day: This wasn’t exactly wonderful, but it’s nice to work for an institution that allows you to have a sick day.  Not every place looks kindly on these things.

Removing Subtractive Reasoning from your Life

One of the major obstacles preventing you from becoming the best person you can be is your own mental blockade.  A great example of this is whenever you fail at something; do you think “I should have done it this way”?  This type of thinking is called subtractive reasoning, and really doesn’t serve much of a purpose for your own self-improvement.

It’s understandable why we think that way.  Imagine if you were the start basketball player in high school.  On the day of the big game, it all comes down to you making one final shot.  You aim at the basket, shoot the ball, and miss by a few fractions of an inch.  This type of loss will no doubt be played over and over again in your brain.  It is inevitable to start thinking about what you did “wrong”. 

Subtractive reasoning isn’t very helpful.  Think about it, did analyzing where you went “wrong” and mentally punishing yourself for such a failure ever make you feel better or perform better in the long run.  It essentially amounts to a life of personal negative feedback.  Why become your harshest critic? 

There is an alternative way of thinking.  Instead of focusing on how you failed, instead think of the experience as a learning opportunity and say “that way didn’t work, so I’ll try another”.  This type of reasoning is not intuitive.  Our society constantly reinforces failure as not acceptable.  In reality, we all fail at some point in our lives, and so failure should just be a natural part of the learning process.  “I couldn’t accomplish my goal using this method, so I know that method doesn’t work, and I will try a new method.” 

Life and experience do not always come as big epiphanies.  Instead, think of learning as a series of little “Ah-Ha’s!” that build into an overall lesson.  Don’t be so hard on yourself.  Understand how you could have improved the situation, learn from your failure, and move on.  This is how all humans learn.

Wonderful Moment of the Day: Watching an 18 year old kid try to get the phone number of a 28 year old woman on the subway…really cute and funny.  When asked for her number, the woman replied with “How old are you”?  I gave the kid credit for trying.