Beyond Paycheck to Paycheck

at June 24, 2009 in Balance and Guest Posts. 0 Comments

This is a guest post by Kathryn Marion, author of Grads: Take Charge of Your First Year After College. Last week, I posted Transitioning to the Real world and asked for questions for Kathryn. Today, Kathyrn provides her answers:

I know that saving money is important, but I also love traveling/vacationing which gets expensive. Some friends tell me to save all that I can and have fun later, while some other friends tell me to have fun now and that I’ll make money later in life. What’s a good balance of saving vs. spending when I’m just starting out and not making a lot? — Diana

That’s a great question, Diana! Both sets of friends have good points. Most financial advisors would probably side with the save-now-travel-later approach. More free-wheeling types would definitely lean toward the travel-now-make-up-for-it-later strategy. But my first inclination is to ask: do you really have to choose? I don’t, necessarily, see this as an either-or proposition. Take a close look at your skills (both technical and functional) and see if you can create a way to combine your love of travel with paid work.

The possibilities are virtually endless-it just takes a creative person to get the two interests to dovetail. Here are just a few possibilities that come to mind:

teach English in another country, or even more than one! Check out www.TeachAbroad.com or CIEE’s site for information and opportunities;
teach anything you’re good at (cooking, crafts, music, sports) through schools, non-profits, Chambers of Commerce or their equivalents-around the US, the continent, or the world;
exchanging a few hours’ work per day for room and board through www.WorkAway.info or www.GoNomad.com (see their article on Short-Term Vacation Work Abroad);
making a name for yourself in a field like photography, writing (including blogging), or speaking, then finding a way to sell your services along the way or even get a company to sponsor trips.

You sound like a good candidate to get Tim Ferriss’ book, The Four-Hour Work Week. Tim’s approach is a little different: he created a business that runs so automatically that he spends little time on it each week while he travels the world doing all the fun things he wants, but many of the strategies he lays out are very applicable to your situation. I’m sure you would find some good ideas in the book.

It’s easy to paint an exciting or romantic picture of this kind of lifestyle. Many people may think they want to live that way, but in reality few are probably well suited for it. There is little feeling of financial security because no one ‘gig’ lasts for long or pays a large lump sum to cover expenses during gaps between jobs. I think it takes an entrepreneurial spirit as well as a true sense of adventure and a high comfort level for risk to make a successful go of it.

All that being said, I would recommend that you not jump either way too quickly. If you think you can stomach the lifestyle (even get energized by it), find and talk to as many people who travel in their work as you possibly can. Find out how they created a way to get paid and travel at the same time. Write down what you would like to do (and where). Then set goals, figure out what you need to do to make it happen (such as save a minimum amount of cash or polish up an important skill), and work your plan.

The most important piece of this process is the self assessment-be honest and realistic about what you can, and want to, handle as far as risk and adventure. When you’ve made your decision, commit to it and throw yourself full force into making it a success.

My brother in law recently graduated with a degree in accounting and finance and, with the job market being what it is, he is thinking about staying in school to get an MBA.

From what I’ve heard recently, an MBA doesn’t necessarily open any more doors for people anymore because they are a-dime-a-dozen these days. His parents think he should get the MBA, because his father did and it really helped to spark his career, but that was a different time when not everyone had MBAs and also his father’s company paid for him to get it. My brother in law will be paying out of his own pocket.

He has a steady job (blue collar) that pays sufficiently that I recommend he stick with and keep applying for accounting jobs, and then when he does get one, see if they will pay for the MBA.

Any insights into this would be much appreciated. — Jeffrey

You’re a good brother-in-law, Jeffrey, and I commend you on trying to help. I also like the way you think. You’re right that an MBA does not automatically spell more opportunities or higher salaries these days. And not all MBA degrees are equally valuable, either. Spending two or more years out of the job market, paying tuition at a second-rate grad school, is more likely to land someone in the unemployment line with a load of new debt. If your brother-in-law wants to pursue that degree, he needs to get into the best program possible-which, of course, is going to be more expensive. Not to mention that while in school full-time he will likely not be covered under a health insurance plan-what will happen to his finances if the unexpected were to happen during that time?

There’s something else to consider as well: entering an MBA program right on the heels of earning an undergraduate degree is not an ideal plan. He will get much more from the program after he has at least two years of related work under his belt. His experiences, coupled with the coursework, are what will make him a more valuable candidate upon graduation.

Has your brother-in-law looked into making a change right inside his current company to a finance or accounting position? Or would his current employer be willing to let him spend some time in the accounting department on top of his normal hours as a sort of trial period or on-the-job training before making a switch? It would be longer hours, but the experience would be valuable, no matter what the outcome.

Alternatively, he could offer to work for free for a limited time at another company in their finance or accounting department as a way of getting his foot in the door. If he did his research and made this offer to companies that provide education benefits to their employees, so much the better, since he could then pursue the MBA if he got the job.

If those options don’t work out, your brother-in-law’s father has to realize that the world of work is very different than it was when he was in his twenties-his son has to deal with the reality of today’s market. Sticking with the steady, blue-collar job while searching for other opportunities is the wisest course of action. If he still wants to work on an MBA, that can always come later, either full- or part-time, if it’s really needed to move up in his chosen field.

"financial education"

America’s increasingly frugal habits

Published by

at May 15, 2009 in Balance and Cash Flow. 4 Comments

A recent Time magazine cover story, Thrift Nation, demonstrates “The New Frugality” of Americans. Nearly everyone will recognize someone familiar, be it an ER doctor, a blackjack dealer, an autoworker, restaurant owner, or the unemployed; each is profiled in this thought-provoking piece that attempts to demonstrate how truly broad the impact is of our current recession.

Here are some of the statistics from the story I found most interesting:

Although people are spending 27% less on health clubs, they are spending 29% more time exercising.

Could it be that unemployed people workout more? Let’s hope that’s only one part of the equation. I know that the more I have to do, the more I get done and have often found the opposite to be true.

Less than 40% of Americans think the economy will start to recover within one year.

That’s uncharacteristically negative for the typically overly optimistic (financially-speaking) American. I love to play the contrarian, so I might be more aggressive simply in response to this survey. Clearly, no one knows when this ship will turn around. That includes me and the 60% who say more than one year. Still, if I were a betting man, I’d say we’ll at least see the beginning of a turnaround before another year is out. Heck, the WSJ reported that Fed Chairman Ben Bernanke last Tuesday said that the U.S. recession appears to be losing steam, with growth likely to resume later this year on the back of firmer household spending, a bottoming housing market and an end to inventory liquidation.

36% of people are spending less on newspapers and magazines.

Okay, c’mon. As shocking of a statistic as that is, how much of it is due to the economy vs. what’s going on in that industry due to the enormous technological shift in the way we receive media (i.e., free via the web)?

What do you think of the new frugality? Is it real in your life? Is it temporary or will it be long-lasting?

"financial education"

When Suze Orman irritates a blogger . . .

Published by

at April 20, 2009 in Balance and Carnivals. 1 Comment

You: Did she irritate you?

Actually, she really irritated MoneyMonk, as she writes about in her recent post Can I afford it: Suze Orman, I’m mad at you!, which, like my review of Upromise (Upromise Underdelivers) is featured in this week’s Carnival of Personal Finance.

As you may already be aware, one of the most popular segments of the Suze Orman Show is when she answers people’s questions about whether they can afford to buy things or make certain financial decisions they are considering. According to MoneyMonk, a man asked Suze Orman her opinion on his proposed purchase of a $30,000 round-the-world trip for his 40th anniversary. He has a net worth of nearly $300,000, is retired and is debt-free.

You: What did Suze say?

She denied him.

You: And this irritated the blogger?

Yes, and nearly everyone who commented, including me. Read the article for the reasons why. It’s a good reminder for the importance of balance and understanding both life’s and one’s financial “big picture”. (A difficult task to be sure for anyone to accomplish in a few minutes on a TV or radio talk show.)

"financial education"

Do your friends tell you how much to spend?

Published by

at April 13, 2009 in Balance and Carnivals. 0 Comments

You: No, they don’t.

But they do influence your spending.

You: Sometimes, I guess. I hadn’t really given it much thought.

I haven’t written about it in a while. But entertainment spending irrefutably is tremendously impacted by those you go out with. For others, the amount they spend is also influenced by who they are with for other expense categories, such as clothing and other mall-type retail stores.

In reviewing this week’s Carnival of Personal Finance, which featured my article Friday Q & A: First Time Home Buyer Tax Credit, I noted Broke Grad Student’s How Friends Influence Your Spending Habits.

As the weather begins to warm up around the country, (not so much really here, but soon enough) it’s a good reminder to spend on and when it matters to you, not just because some of your peers are. While you never genuinely know what another person can actually afford, you should take the time to self-reflect; to truly understand when and how you wish to spend your finite resources.
What would you discover about yourself if you took the time to do so?

"financial education"

Spending on what matters . . . to you

Published by

at April 6, 2009 in Balance. 3 Comments

Glad to be back at it today after a good mental break yesterday. You know something? Fish will do that for you.

You: You went fishing?

Sort of. I went to look at fish. Also saw some penguins, sharks, and giant sea turtles. I visited the New England Aquarium with my wife and two daughters. Total cost outside of gas in a high mileage car: $0.

You: How did you do that?

Simple, my tickets were free because we’re become a family that is fiscally responsible, not cheap. We buy local memberships.

You: Okay, but free parking in Boston?

That’s easy too. Just make sure you’re saving money while you’re spending it. Sure it takes a little effort, but if you’re willing to drive around the block a few times and walk a quarter-mile, you shouldn’t have to pay parking in Boston on a Sunday morning.

Later on yesterday afternoon, we went to a playground that my eldest called “HUGE!”

You: And that cost - ?

Nothing, of course. It’s a playground.

You: So did you spend any money in Boston?

Sure, we had a great lunch at an authentic local eatery - the kind of food we haven’t yet been able to find where we live in New Hampshire.

You: You realize that you could have brought food with you and ate it at the playground.

I know that.

You: So why didn’t you?

Because the point of the day was NOT to spend NO money. The point, financially speaking, is to spend only on the things I value. I do not value parking. I do not value paying more for admission tickets than I have to. I do not value overpriced museum hamburgers. But a good meal I can’t get at home? Totally worth it.

Living Beyond Paycheck to Paycheck has always been and always will be about balance.

"financial education"

Could you get by on half a million a year?

Published by

at February 10, 2009 in Balance and Ranting. 5 Comments

The New York Times recently published You Try to Live on 500K in This Town in an attempt to explain why half a million dollars a year may not be adequate to live on in New York City.

You: Why half a million?

That’s the new proposed salary limit from President Obama for executives working for companies that receive significant governmental assistance.

You: Why New York City?

Many potentially affected executives work in New York.

You: Half a million a year seems like a lot, even in New York.

It is. While it’s clear to me that half a million doesn’t go nearly as far in New York City or even the close exclusive suburbs of New Jersey, Long Island, Westchester, or New Jersey, as it does in the rest of the America, earning $500,000 a year is more than survivable.

Yet the article paints a very different picture:

A modest three-bedroom apartment . . . which was purchased for $1.5 million, not the top of the market at all, carries a monthly mortgage of about $8,000 and a co-op maintenance fee of $8,000 a month. Total cost: $192,000. A summer house in Southampton that cost $4 million, again not the top of the market, carries annual mortgage payments of $240,000.

Hello? Who says you’re entitled to a second home valued at eight times your annual income? Does it matter if it isn’t “top of the market.” Are you implying this is frugal or even modest living? And who is defining “top of the market” in the first place? Of course you’re going to struggle on annual mortgage payments of $240,000. But this isn’t poverty. This isn’t even struggling. Let’s be clear: we’re talking about a second home in one of the world’s most exclusive neighborhoods, (even if their neighbor’s house (owned by Mr. and Mrs. Jones) is worth $6 million.)

It gets worse:

A chauffeur’s pay is between $75,000 and $125,000 a year.

Oh please. Take a taxi. At one point in your life, a taxi was a luxury over taking the subway (as most mortals do proudly.) A taxi is point to point transportation and (absent the rain), there’s little waiting.

Truth be known, in the early part of the article, the problem was well stated:

As hard as it is to believe, bankers who are living on the Upper East Side making $2 or $3 million a year have set up a life for themselves in which they are also at zero at the end of the year with credit cards and mortgage bills that are inescapable,” said Holly Peterson, the author of an Upper East Side novel of manners, “The Manny,” . . .

So there you have it. Proof positive of what I’ve been telling everyone for many years: if you spend everything you make, you’re living paycheck to paycheck. With a slight hiccup, you’ll struggle to maintain your lifestyle - especially on a measly $500,000 a year.

# # #

What do you think about this? See it differently? While we can even discuss whether the $500,000 limit will be remotely effective or is appropriate, I’m curious as to those New Yorkers and non New Yorkers agree or disagree with the premise of the NY Times article that we should feel the potential pain of others going from what I imagine is the top 0.1% of the world to merely the top 0.5%.

This doesn’t seem like the pain most of the rest of America is feeling.

"financial education"

Skiing through positive influence of saving

Published by

at February 9, 2009 in Balance, Carnivals and Saving Strategies. 2 Comments

Last weekend, I did something I haven’t done in 12 years.

You: Play a round golf?

Nope. I still haven’t done that.

You: Oh! You watched a round of golf!

No! I don’t do golf. Last weekend, my family and I went skiing in Vermont. It was only the third time I’ve ever been skiing and it was the first time for my 3.5 year old daughter.

You: How did it go?

Fantastic! No broken bones for me and my little girl asking “Can we go on the chair lift again?” A good time was had by all. The weekend served as an excellent reminder of the importance of balance. Having had just one day off in two weeks, I was ready for a break. Spending it doing something athletic -

You: Falling down on the greens doesn’t make you an athlete.

They told me there weren’t any cameras on that mountain.

You: That was a hill.

Argh. Still, it was great to be outside, comfortably cold, enjoying a new experience with friends and family. I want to do it again soon,

You: Really? Skiing is not cheap.

No, it’s not. But like everything else, you can do it a fiscally responsible way.

You: How?

Mid-week lift tickets, for example.

You: How will you get all the way -

I live in New Hamphsire.

You: The one time it helps you!

Not quite, but I know NH is a mystery to some. Point is that there’s a lot you can do for a little when you plan ahead. Sometimes, these habits become hobbies and many hobbies can be healthy. One such example was featured in this week’s Carnival of Personal Finance: Positive Influence of Saving Money.

In that article, MoneyNing talks about a concept I’ve spoken about before: once you start saving, you actually like saving. When you enjoy getting account statements because the balances are growing and when you start to earn interest instead of endlessly paying it, your financial outlook and your financial attitude change.

Another article featured in this week’s carnival was my article on not declaring bankruptcy.

What hobby or habbit do you have that you find endlessly and positively reinforcing?

"financial education"

Financial literacy, recovery rebate credits, and living in balance

Published by

at February 2, 2009 in Balance, Carnivals, Media and Tax. 3 Comments

I had a great trip to Chicago last Friday and Saturday, keynoting a financial literacy event to a large group of students ranging in age from 16 to over 50. The best part: a most enthusiastic crowd, many of which had traveled two hours of more for the education. Talk about self-selection for success!

I’m not sure financial literacy has ever been more important than today. More people get it everyday (”It” being the importance more so than the education, unfortunately, but I am working to change that.)

# # #

Not surprisingly given what’s going on in the world, my post from several weeks ago, Economic Stimulus Payments are now Recovery Rebate Credits - will you get yours? continues to get a ton of traffic and frequent comments/questions. If you didn’t receive the maximum economic stimulus payment last year (that special check often for $600 or $1,200), find out if you’ll get it this year. You might be surprised at the answer.

# # #

I just finished reading through this week’s Carnival of Personal Finance, hosted by Funny About Money and featuring my article Roth IRA Contribution Limits: Your Earnings, Income, and Marital Status Matter - a good primer as we enter the time of year when most people make their IRA contributions.

The best “other” article of the carnival this week is by Kate at The Paycheck Chronicles, titled 5 Reasons That Not Saving Money is Saving Me Money. It’s a great reminder of the importance of not sweating all the small stuff, and, more importantly, of living in balance, a key component of living Beyond Paycheck to Paycheck.

Enjoy and have a great week!

"financial education"

Smart Financial Moves: 2008 in Review

Published by

at December 29, 2008 in Balance, Cash Flow and General Financial Planning. 1 Comment

I hope you are enjoying the holidays. Now that we’re in late December, a 2008 recap seems appropriate. Financially speaking, these were my top four financial moves of the last 12 months:

Not buying a house. Although home prices have fallen in our area, prices have only retreated to 2004 levels according to most local reports. Unless you purchased in 2006, this is hardly a major correction. Furthermore, home prices are still expensive by historical measures (e.g., ratio of sales price to rent, affordability based on median income, etc.). As such, I believe (but cannot guarantee) that home prices will continue to fall for the near future. Yet when we do buy, we expect to stick around for a while. Add that to the size of my growing family and we just might purchase before the 2010 expected bottom. Still, not buying a home during 2008 is my top financial move.
Visiting Boston during an ice storm - Like most New Hampshire residents, we lost power for at least two days earlier this month due to an ice storm. No way we were going to ride it out at home when the inside temperatures were expected to (and did) reach the thirties - we have an infant! So we planned on heading to a hotel 20 minutes away. Then my wife and I chatted: Why not make lemonade out of lemons? If we’re forced to use all these hotel points (I travel a lot for work), why not go somewhere fun? So off to Boston we went. Now we have family memories of being tourists in Boston (riding the subway, going to the Aquarium, pressing buttons to go up and down on the elevator) with two little kids instead of hanging out in the confines of a breakfast nook in Dover, NH waiting for the lights to come on back home.
Not selling any investments as a reaction to the financial crisis - Other than a swap of very similar mutual funds for tax purposes two weeks ago, we made no changes to our investments this year. Yes, we got pummeled in the market like everyone else. Yet we’re adding to our stock market investments at this fairly low point in the market. I can afford the risk as a thirty-something, knowing I have decades until retirement. Still, stomaching the downturn without selling impulsively was a top 2008 financial move.
Buying tickets to two Red Sox playoff games - Admittedly this might not have made the list had the Sox been blown out twice instead of rallying, in the bottom of the 9th, to win both playoff games I attended. This financial move serves as a reminder that money is only a tool to bring you things and experiences you desire. Money is not a thing or experience in itself. Some people would scoff at spending $150 (twice) on a ticket to a baseball game. They should. But I underpaid; each ticket was worth far more to me. Since I prioritize my spending (and limit or even eliminate it on things I don’t truly value), I can afford the rare extravagance of a $150 ticket. As a result, I have memories that will last my lifetime. I can see it now: “Yes, grandson, I was at that game when the Red Sox came back from 7-0 with two outs in the seventh . . .”

# # #

What were your best financial moves of 2008?

"financial education"

When you spend less, you get more value out of life

Published by

at December 24, 2008 in Balance, Cash Flow and Saving Strategies. 2 Comments

We received over a foot of snow last Sunday. This was on top of another foot that had finished falling less than 24 hours previously. Needless to say, it was a day that the entire family (save for my shoveling excursions) stayed inside. It could have been boring.

It wasn’t.

In fact, at the end of the day, my wife and I agreed that we would remember one thing that we had done together far longer than we’d remember the crazy snowstorm or our last dinner out with just the two of us (which has been so long I think I’ve already forgotten it).

You: What did you guys do?

We made a memory, by making dinner together. All of us.

You: Isn’t your youngest kid an infant?

Technically, yes. We made her supervisor and she monitored the situation from her high chair. But my wife, older daughter, and I made dinner, assembly line fashion with calming but festive music playing in the background.

You: iPod sound system?

No, a boombox from 1991 that still works. See, the stereo is meaningless. So was the fact that dinner’s ingredients cost less than $20 and fed us all (thanks to leftovers) for two nights. The memory was from the camaraderie and the genuine closeness of enjoyable family time, not family money.

It was the second time something like that happened in a week.

You: Something like what?

That, by spending less, I was getting far more value.

Last week, my wife and I went out to lunch. We met in the middle of the day and had lunch together.

You: I don’t need a definition of “lunch.”

True, for most people, meeting someone for lunch is routine. However, my wife and I both run small businesses so we don’t often have the time. But we decided to make the time last Thursday.

I could tell you that our little lunch rendez vous was so enjoyable because we don’t meet for lunch very often. That would be true. I could say, as I did above, that the reason we don’t meet very often is because we’re both very busy. But the truth is that we don’t go out to lunch not only because of our schedules, but also because eating out is an easily avoidable expense. Therefore, we almost always bring our lunches.

But we had such a nice time. So, I think I’m going to suggest to the Mrs. that we meet for lunch more often.

You: Increasing your spending.

For sure, but not be nearly as much as the value we received from a $10, combined, lunch.

You: That’s really cheap.

True. We also had a coupon so it won’t be that inexpensive each time. But again, it wasn’t the cost we were focused on. It was each other. When you’re focused on spending time, not spending money, you get a lot more value for your dollar.

Extra bonus: you live in balance.

What do you do for top value?