Beyond Paycheck to Paycheck

at June 30, 2008 in Ranting and Tax. 8 Comments

Last week, Nickel of 5centnickel wrote of Some Stimulus Payments Diverted to Pay Outstanding Debts.

This got me to thinking about my own personal experience with the stimulus, which I posted on that blog and have provided below:

Whatever you do, just don’t count on knowing when or how you’ll get your money. Since the stimulus was announced, I (and presumably millions of others) have been told:

Although I owed money with my 1040, I’ll receive my stimulus payment in early May via direct deposit, so long as I indicate my direct deposit info on my 1040. (I have a very “low” last two digits of my SSN.)
Early May comes and goes and I get a letter (this one from my Congresswoman; the first was from the IRS) telling me how wonderful it is that I am getting a stimulus. How much did this mailing cost? More or less than the first? How about the check and less self-congratulations about sending me my own money back.
I get another letter last Friday saying that–no matter that I had indicated my direct deposit info on my 1040–since I owed taxes on my 1040, I would be receiving my stimulus via check in about 6 weeks. Thank you for this additional unsolicited letter at a cost to the government, ahem, me, of how much?
My entire stimulus payment is direct deposited into my account earlier this week.

I’m thrilled I never called to ask the IRS what was going on (although it was nearly two months late according to the schedule they voluntarily published.)

Does anybody really believe someone would have told me the answer and be doing anything other than guessing? And my situation is about as straightforward as they come. No liens, no moves, no new accounts, on-time tax filing.

# # #

What’s been your experience with the stimulus payment so far? Get it? Still waiting? How does it compare to what you were told to expect? Did your Congressperson rent a hot air balloon to tout his/her “accomplishment?”

"financial education"

Graduation Speech Part 6: Use Protection

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at June 27, 2008 in Graduation Speech and Insurance. 0 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 6. To see the entire speech released so far, click here and read from the bottom up.

Rule 5. Use Protection

Was it Mom, Dad, an older sibling, or perhaps Kenny at sleep-away camp? Who first taught you about the birds and the bees? Whoever it was, they probably told you about the importance of protection as part of that same conversation. At least I hope so. If you don’t know what I’m talking about, well, let’s just say I don’t believe you.

Protection is important in the real world, and not just the kind they sell at the truck stop restrooms. No, I’m talking about insurance.

Insurance can be made to be very confusing, but it boils down to one simple rule: never risk a lot for a little. For the newly graduated, that means getting health insurance (even if you get a plan that covers little more than a catastrophe). Get renter’s insurance too since, for a couple hundred dollars a year, you protect everything you own, including the CDs you don’t use anymore thanks to Mr. Jobs and his partially eaten fruit.

And, despite what some people would have you to believe, life insurance will likely be important one day in the future when you have a kid or two who depend on your income. However, when the most dramatic financial impact felt by your untimely demise would not be your spouse or child, but rather by the owner of the convenience store where you get your midnight fix, you don’t need life insurance.

[To be continued]

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That time of the month? You know, for spending?

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at June 26, 2008 in Carnivals and Saving Strategies. 0 Comments

This week’s Carnival of Personal Finance, hosted by Mrs. Micah, featured dozens of useful articles including a section of my hypothetical graduation speech.

Continuing my weekly theme of brevity and usefulness, if you’ve got time for just one additional article this week, I strongly recommend Patience Will Keep Us from Spending Unnecessary Money by Money Ning. This article throws some interesting ideas about ways to control impulse spending. While $75 and 7 days works for Money Ning, your numbers might be different. No matter, the point is to put some program in place if you’re finding yourself short of money and long on stuff you don’t really need.

"financial education"

Generation X Finance blog reviews Beyond Paycheck to Paycheck

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at June 25, 2008 in Media. 0 Comments

Jeremy, the author of the popular Generation X Finance blog, reviewed Beyond Paycheck to Paycheck on Monday.

It was a very favorable review (obviously not a shock, since I’m posting a link to it from my blog). My favorite part is:

What really stands out is the conversational approach. You almost get the feeling that you’re sitting down and talking with Michael directly. I think this approach has many advantages over more conventional books that can come off as a bit preachy. I think this goes a long way in making sure that people who read it actually go on to take action.

Amen, Jeremy!

While of course many of you have already read the book Beyond Paycheck to Paycheck–

You: There’s a book too? I thought this was a blog.

I guess I should be less subtle. But I won’t be.

You: Who should read the review?

Those who have not yet read Beyond Paycheck to Paycheck.
Folks wishing to recommend Beyond Paycheck to Paycheck to a friend or loved one who have not yet found the way to broach the topic.
People who have already mentioned it once or twice to that guy who really needs it, but find that your “special” friend needs multiple reminders from multiple sources.

If any of those sound familiar, check out the review. Then, send you-know-who over there to read the review too. One day, you’ll be thanked.

"financial education"

Graduation Speech Part 5: Taxes are taxing

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at June 24, 2008 in Graduation Speech and Tax. 2 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 5. To see the entire speech released so far, click here and read from the bottom up.

Rule 4: Taxes on taxes are taxing

In the real world, you’re going to pay real taxes. You may have already paid some taxes, but you probably haven’t paid real taxes. You will pay far more taxes than you ever expected. It doesn’t matter how much money you make. Even those making way less than the class average; if it’s the first time you’ve had a job, you’ll be shocked at how much you will pay. Of course, the more you make, the more you pay; yet the initial shock still won’t go away.

There’s no incredible lesson here, so quit waiting for it. Sure there are strategies available to legally lower the impact of taxes, but quite honestly the most important thing for you, a new graduate, to understand about taxes is that you will pay them.

So when you’re shopping for a new car or apartment and you think about how much money you’ll be making once your job starts, be careful. If your salary is to be $36,000 a year, you won’t have three grand a month available to you. Not even close. It will be more like two grand. Crazy, but true. Far better to go in with your eyes wide open than to make the all-too-common mistake of a major irreversible financial commitment during that first summer only to find yourself struggling as your new debt starts to really suck . . . your money away from you. All this while despite you’re successfully keeping your day-to-day spending in check. Taxes are real and they can be very taxing, especially if you’re not prepared.

See, number four was quick. Not too much longer until you can throw your cap in the air and catch someone else’s

[To be continued]

"financial education"

Graduation Speech Part 4: Debt sucks (your money away)

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at June 19, 2008 in Debt management and Graduation Speech. 2 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 4. To see the entire speech released so far, click here and read from the bottom up.

Rule 3: Debt Sucks (your money away)

It turns out there really isn’t such a thing as free lunch: if something looks too good to be true, it probably is. So when the credit card company “gave” you the tee shirt or pizza along with the card with their logo on it, they weren’t being generous – they were being greedy.

Bummer.

Turns out that credit card is really expensive. That debt? You do have to pay it back. APR isn’t an abbreviation for “Any Particular Reason,” so you can’t say “I was going to pay for it later” and hope the bills will simply go away. As you will learn, the bills will quite simply go away when you quite simply just pay them off.

And the sooner the better. Every day you continue to owe that expensive debt is another day’s worth of interest you owe. It gets more difficult, not less, to pay back expensive debt, because it adds to itself. This is compounding interest in its evil form. You know pure evil, right? You’ve seen your arch-rival dance on your emblem at midfield or, worse, steal your girlfriend or boyfriend. Compounding interest is a wonderful thing when it’s working for you, but against you can be devastating. Choose to have it work for you. The less debt you have, the less it sucks.

[To be continued]

"financial education"

A Carnivalistic IQ Test

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at June 18, 2008 in Carnivals. 0 Comments

This week’s Carnival of Personal Finance was prepared by Consumerism Commentary. It is the third anniversary of the carnival and featured my post Graduation Speech Part 1: You’re even. Now.

As I know Beyond Paycheck to Paycheck readers are always quite busy, I’ll once again provide you a link to the one article from the carnival I recommend ahead of the others. This week, it’s by Moolanomy who provides a fun financial IQ test that serves at least two purposes. First, it’ll show you where you are (which can give you the motivation to improve or a deserved sense of accomplishment). Second, no matter where you stand, it’s bound to give you some new ideas for ways to further improve your financial trajectory.

Enjoy.

"financial education"

Graduation Speech Part 3: Don’t be cheap, be fiscally responsible.

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at June 17, 2008 in Graduation Speech and Saving Strategies. 0 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 3. To see the entire speech released so far, click here and read from the bottom up.

Rule 2. Don’t be cheap, be fiscally responsible.

Personally, I follow 10 simple saving strategies. I recommend you learn them all one day, but you’ve got parties to get to this afternoon. So I’ll just share one saving strategy with you now: Major on the major, minor on the minor.

Many financial experts feel that the problems of the world (and especially of young people) would instantly disappear if we could only get rid of our coffee shops.

Look, if you’re going to Starbucks five times a day, spending $100+ a week there, you’ve got problems. But your money problem isn’t the first one to address. (FYI, it’s called an addiction.) Of course, most people don’t use Starbucks that way, and so what the financial talking heads miss is that nobody—not even the most coffee-addicted person you know—is going to find ten grand a year by pinching pennies at Starbucks.

Instead, you’ve got to put major focus on major expenses, like your housing and car choices. The typical underpaid twenty-something simply can’t live on the same block as the manager two levels up from her or drive the car her boss drives. Not yet. When you commit to high housing or car expenses, you pay them for a long time. Therefore, that’s where you want to put most of your financial energy and discipline. Remember: just because someone will sell you something doesn’t mean you can afford it.

Still, day-to-day spending can make a difference, so it’s important to stay emotionally connected to your money. Most working adults have no idea how much cash they have in their wallets until they find themselves at a place that has the audacity not to accept credit cards. This disconnection matters because when you’re emotionally separated from your money, you spend more. Spending cash hurts—right away. Using credit cards is painless—until you get the bill.

Use cash as your primary source of day-to-day spending. When you see two options for something you need, one at $55 which is “good enough” and another at $89 that is “better,” spending cash means you’ll likely take the one for $55. Handing over three twenties to the cashier feels a lot better than saying goodbye to five of them.

By prioritizing what really matters to you, constant budgeting isn’t required. The beauty of following the saving strategies is that you save so much you don’t need to micromanage your finances. Budgeting can limit your desire for spontaneity, making it hard to keep at it. But you can get away without budgeting entirely if you simply commit to saving. After all, if you’re putting away 15 percent of your income, what’s the difference how you spend the other 85 percent?

The key is not to begin cutting all of your discretionary spending. Instead, you need to find a way to spend on the items you value the most. If it’s coffee, pull up a chair and enjoy. But if it’s not, simply keep walking.

The kinesiology major could probably tell you that walking is good for your future anyway.

On the other hand, those who studied American Culture could tell you that many years ago, another individual speaking to a new graduate spoke of the future importance of “plastics.” Turns out he was very close, but overshot. By just one letter. The right term is “plastic.” You probably already have at least one version of those 3.5” by 2” little pieces of plastic in your wallet with one of several possible bank logos on it, the card you got for “free” along with a “free” tee-shirt or “free” pizza. Maybe Mr. McGuire knew you’d have several credit cards, not just one, so that’s why he used the plural version. But either way,
[To be continued]

"financial education"

Got Kids? Got Money? Ha!

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at June 16, 2008 in Media and Saving Strategies. 0 Comments

A couple of weeks ago I took my two daughters to Babies R Us to have their pictures taken. If you’ve got kids, you know what’s coming next: an experience. And then some. The three year old smiles on demand but is unable to sit still for even the fraction of a second required for a digital camera to get her unblurry image. My newborn smiles frequently enough but became suddenly and passionately enamored by her own hands which she desperately wanted to see if she could get all the way down her throat.

And our goal, of course, was to get them–at the same time,–to both smile and not move or eat any body parts.

Done! (after nearly three hours and a few breaks (the store was slow)). As I went around the store for lap # 3 with my three year old, I recalled that I had been interviewed by American Baby magazine about financial strategies for new parents and the newly expecting. Turns out the article was published in the newly arrived June issue.

If you’ve ever been faced with the monetary dilemma of “Now what?” after the kids arrive (or think you might get to that point one day), this article could help bring a smile back to your face.

It won’t remove the drool from your shoulder though.

"financial education"

Graduation Speech Part 2: Tell your money to go to work

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at June 13, 2008 in Graduation Speech. 5 Comments

Although I am often asked to speak to recent grads, I have never been asked to speak at any graduations. But if I were, I imagine I would deliver something along the lines of this speech.

Today is part 2. To see the entire speech released so far, click here and read from the bottom up.

Rule 1: Tell your money to go to work.

As I said, before long you’ll be in the workforce. Yes, even those graduating at the very bottom of this grand institution will eventually receive job offers. And when you start working, you’ll begin to receive a paycheck. From that point on, for the rest of your life, you’ll have two choices. And trust me, they are choices. You can choose to either spend less than you make or you can choose to spend more than you make. If you spend more than you make, you’re taking on debt. That’s a fact. Think about it. It’s definitional: if you’re spending money you don’t have, you’re borrowing it. If you borrow money, you owe money to someone. And since the real world is full of people not as nice as your parents, they’ll charge you for the right to borrow money from them. That means that you owe not only what you borrowed, but also interest.

Graduates, interest is important. It’s a bold-faced term.

Of course you can choose to receive interest instead. You go down that path by simply spending less than you make. When you do so, you’re saving. When you put your savings into a savings account, it earns interest. That interest goes to you. It’s your money, and it’s money you didn’t have to work for. It’s money you receive simply because you put some of your money to work for you.

You will spend most of the next forty years working. Most of you will work hours longer than 9 to 5, and many of you will even work more than five days a week. And you will do this not for a semester or two, not for a year or two, but for decades. Why? Hopefully because you like what you do but, for most people, you will do it for the money.

Wouldn’t it be nice to receive money other than by working for it? By having it work for you?

You can choose to pay interest or to receive it. There will be many hard choices in life. This is not one of them. Choose to have your money go to work.

The earlier you take advantage of this lesson the more important it will be, thanks to the miracle of compounding interest. Let’s say that from the time you turn 21 years old, you save just $10 a day. If so, you can reach age 65 with about $1.4 million dollars. I hope it sounds easy. It is easy. Ten bucks should be a lay-up for any employed 21 year-old. One typically with no family to support, no large home, and relatively low taxes to pay.

In fact, it will arguably never be easier for you to save than right now. Look at it this way: last year, what did you make? So little it practically rounds to or actually is zero. So even if you get a job making three-quarters of the median class average, say $25,000 a year, that’s a $25,000 raise over last year. You’re unlikely to ever see a raise that big again. Last year you got by on Ramen noodles, Faygo pop, and Lord knows what else (Milwaukee’s Best, anyone?) Want to be able to save next year? Simple: live life a lot better than you did last year, but not like you really want to. Not like they do on television either.

The time for your own apartment in the top-tier building may come, and along with it the mid-range sports car, but if you want to get started on the right financial foot, you’ve got to first live rule number one: put your money to work. And, in order to do this, you’re going to need to spend less than you make. In fact, if you do this one thing repeatedly, if you only spend less than you make, you’ll be well-off, even if you screw everything else up. Well that, and if you don’t commit any major crimes.

This doesn’t mean a life of frugality. That wouldn’t be any fun. It’s also would not be sustainable. You’ve heard of all those folks on crash diets who have all their weight back on a few months later. Someone who tries a miserly life will be annoyed, discouraged, and, more than likely, at the mall buying crap they don’t need before too long. So instead of that overly frugal path, simply follow rule number two:

[To be continued]