Those of us of the Gen X generation and older often pass judgment on the teens of today with statements like these:
They have it so easy.
They don’t know what hard work is.
Where’s the work ethic?
I’ve been guilty of the same sort of prejudices.
Recently, my teenage daughter turned that all around for me. Less than one week after her 17th birthday, she reported to work for her first job: at 5 a.m. – on a school day! She’s lifeguarding at the neighborhood Y. The pool is outdoors. It’s January. We live in Phoenix. But still, it’s chilly in the morning, and on this morning it happens to be raining.
“Lifeguarding is not work,” some would say. “All they do is stand around and twirl a whistle.”
Having seen the effort she has put into it, I can now contest the previous statement. Lifeguarding is skilled labor at a minimum. Prior to even being granted an interview, she was required to give up two full weekends and two weeknights for the prerequisite training. She now knows every aspect of keeping others safe at the pool: first aid, CPR, dealing with panic, hypothermia and more. She paid a handsome sum out of her own pocket for the training with no hint of being reimbursed. She passed a series of in-class quizzes, plus two water tests, and a grilling of an interview with both her manager and the manager’s manager.
Today was her first day on the job. I was awakened at 4:15 a.m. by the sound of her getting ready. Although she’s pretty self sufficient, I got up to see if she needed any last minute help so she could scoot out the door on time. She was good. She had prepared everything she needed the night before: Clothes for work, clothes for school, her lunch, and gear for swim practice after school.
To say I am proud of her would be an understatement. But, the purpose of this post is not to brag about my daughter, although I could do so all day long. My hope is that you will join me in looking a little deeper into the plight of today’s youth. In many ways, they face far more challenges and obstacles than many of us did when we were growing up. Let’s show them our respect with words of encouragement and gratitude. Thank you!
We’re on a tight budget these days but determined to do something fun out of town with the kiddos for Spring Break. Since we’re new to Phoenix and only a six hour drive from the LA/Hollywood area, my wife and I decided we could work a thrifty road trip into the budget.
So we put some dates on the calendar and began to plan. The trouble with searching the web for things to do is that most of the search results include options that cost money. I knew if I could talk to some locals I could find some cheap or free ways to entertain our tween-aged daughters.
Since we don’t know anyone who lives in LA, I posted this plea for help in the “Frugal” message board on Craigslist/LA:
Looking for help from locals. We’re hoping to find a studio tour or filming of some sort to experience that is free or cheap. Any tips?
The crowd came through in a big way. Here are the responses I received in just the first 48 hours:
Google free tv tickets Los Angeles. We saw the Jimmy Kimmel show and Jeopardy. The Science Museum in Exposition Park is free. Natural History Museum is cheap. Ride the Blue Line to Long Beach. Take the Red Line to Union Station, walk to Olvera Street and Chinatown. Red Line also to Hollywood Blvd. Gold Line to Pasadena.
Call the Burbank studios to get tickets to Leno.
Universal has a theme park tour, but I think it costs.
Google free tv tickets Los Angeles. We saw the Jimmy Kimmel show and Jeopardy.
The Science Museum in Exposition Park is free.
Natural History Museum is cheap.
Universal city walk – it’s a few miles north of downtown LA (on the subway too) its free to walk around the stores and browse. the biggest cost is parking. but its about $80 a person to enter Universal City theme park next to it.
Drive to Santa Monica beach. You have to see the ocean plus the Santa Monica pier is a boardwalk classic the main cost is finding parking at the end of the 10 freeway.
Walk around Hollywood & Vine. See the stars in the sidewalk with Grummans theater handprints, and Kodak theater walk into souvenir stores see all the hucksters on the sidewalks, some impersonating stars.
Drive up to Griffith Observatory. That’s where they film lots of movies you’ll have a good view of downtown L.A. and the Hollywood sign nice science museum there too; parts are free.
Dream with me for a minute. Imagine that you woke up this morning and realized that the quick pick numbers on the Powerball ticket you bought at the convenient store the other day matched all six balls in last night’s drawing.
Lump sum or annuity?
Among the many important decisions you’ll have to make is weather you want a lump sum or series of payments over twenty years. If you were to choose the series of payments, you’re opting for what we call in the financial planning world an annuity.
Now you know what an annuity is in it’s simplest form. Unfortunately, the insurance industry has added so many bells and whistles to annuity products that they’re far from simple.
When I used to teach my financial consultant trainees about annuities, I always found it helped them understand the concept better if we put them into categories. Most annuity products can be categorized as either a fixed annuity or variable annuity and again as immediate or deferred.
Fixed or variable
A fixed annuity means that it accrues interest at a minimum guaranteed rate. The interest paid is generated by underlying investments in bonds or other securities that pay interest and the eventual return of principal. Since annuities are also insurance products, fixed annuities are typically guaranteed to pay a minimum rate plus additional earnings (or dividends) on top of the guaranteed amount.
On the other hand, a variable annuity offers no guaranteed rate. Instead, the return generated by a variable annuity depends on the performance of underlying investments – usually publicly traded stocks and other non-interest bearing securities. Variable annuities can even lose principal in the event of a drop in the stock market.
Immediate or deferred
Most annuities can also be classified as either immediate or deferred, a reference to when the payments (to you) begin. As the name implies, an immediate annuity will begin payments right away. That could be in a month, a quarter or even a year from the contract date, depending on when you request your first payment. Deferred annuities often don’t begin to pay out for several years. During that time, you can typically increase the size of the annuity principal by contributing more premiums to it.
To summarize, you could have a fixed annuity that’s immediate or deferred. Likewise, a variable annuity can be either immediate or deferred.
The connection to Powerball
Okay, so how does this lesson about annuities tie in with Powerball? Remember, if you ever win the Powerball lottery one of the most important decisions you’ll have to make is whether you want to receive your winnings as a lump sum or annuity – a series of payments.
You don’t need me to tell you that your chances of getting hit by lightning in this life are better than matching all six Powerball numbers. However, anyone can purchase an annuity contract. If you have a sizable lump sum from insurance proceeds, the sale of property or a business or what have you, you can convert that money into a series of payments with an immediate annuity. In many cases you can even roll all, or a portion of, your retirement account into an annuity. (Be sure to educate yourself on potential tax consequences if you consider this move.)
Suppose you don’t have a large sum of money. You can purchase a deferred annuity with a smaller sum of money and add to it over the years to build up your own annuity “jackpot.”
In December 2012 I called my credit union to ask about consolidating a loan we have elsewhere with a loan I already have at the credit union. The solution they offered surprised me: A cash out auto loan, whereby I send them the title for the truck I recently paid off and they loan me up to the blue book value at a very low interest rate.
Making a move like this is counter to the general advice offered by Dave Ramsey, whose wisdom my wife and I have been relying on in our pursuit of financial peace by eliminating all our debt. What I would tell Dave is that I’m not taking on more debt; I’m just changing the interest rate and to whom I’m repaying the loan. Besides, by having the loan with my credit union I can be “gazelle intense” in paying it off since I’m reminded of the debt every time I sign in to online banking and I can make extra payments with a couple mouse clicks. Truthfully, this is my real intent.
At first I was uncomfortable with giving my truck title back to the credit union since I had never heard of a loan like this. I wondered how it’s any different than an auto pawn business. In retrospect, it’s probably no different; however, the interest rate is much better than I could get with a pawn broker and I do have a lot more trust in my credit union.
Why is it that we always think the worst? “If I miss a payment, they can repossess my truck,” that voice in my head told me.
“You haven’t missed a payment on any loan for over ten years dummy; your truck won’t be repossessed,” the glass half-full voice responded.
I followed the voice of reason. As a result, I was able to borrow the same amount of money I owed on my other loan but at a much lower interest rate. The other loan was 18% interest and would have taken me another four years to pay off. The rate on my new loan is only 2.5%. The monthly payment is about five dollars more per month and if I make only the minimum payments each month, the loan will be paid off a year earlier. However, my wife and I are committed is to making double payments and paying the loan off completely by the end of 2013.
Provided we continue to be blessed with steady income and no big unforeseen expenses, I’ll have the title for my truck back in a year and we’ll be that much closer to our goal of being debt-free. Works for me!
When I bought my daughter a new phone at Verizon recently, I was asked if I wanted insurance on the phone. The insurance would offer a replacement phone in the event it was damaged beyond repair.
As I began to do the quick math in my head, that little voice of reason that I’ve been hearing from a lot more lately promptly gave me three reasons to say no.
1. Monthly Cost
The upfront cost for the insurance is $7 per month, or $84 a year. If the need arises, we can likely replace the phone with a used model from an Ebay seller for under $100. So unless she destroys the phone in the first two months, the insurance math just doesn’t add up.
In addition to the monthly premium, if we need to use the insurance, there is a $100 deductible to get a new phone.
The model of your phone will likely be obsolete by the time you need to use the insurance. Earlier this summer my daughter’s other phone gave out. Verizon didn’t have a “comparable replacement” so we ended up buying the exact model on eBay for about $60. We took it in to get the contacts transferred over and she was back in business.
There was a time when we felt it was worthwhile to pay for insurance cell phones. That was when the whole cell phone craze began and we had this fear of forking out a bunch of money just to maintain the ability to use our service. Now that cell phones are plentiful and we have been using them for a long time with no issues, I just can’t justify the cost of insuring them.
After seventeen years of marriage and countless arguments over money, my wife and I recently got serious about getting out of debt. We’ve been following the Dave RamseyTotal Money Makeover program where you take a series of steps with the ultimate goal of becoming completely debt free. First you cut out all frivolous spending and set aside $1,000 in savings. Then you start attacking all your debt from smallest loan to largest. After all your unsecured (no collateral) debt is paid off, you get aggressive with investing.
One of the keys to cutting out frivolous spending is to hold a monthly budget meeting, presumably with your spouse. It’s a good idea for domestic partners and single people too. We’re prepping for our third monthly budget meeting and are really starting to see some results – mainly in the way of fewer arguments over money.
Below are some tips that we have found help us have successful budget meetings and outcomes. If you have questions, post them in the comments and I’ll respond the best I can.
Set some ground rules
Create some simple ground rules to review at the beginning of each meeting. You should read them out loud before getting into the money discussion. We have found it’s also good to pray before starting the money talk to get our heads and hearts in the right place.
Here are the ground rules we abide by:
We’re a team and we’re doing this activity for a mutually beneficial outcome.
It’s not about judging or finding fault; it’s about being responsible stewards with the gifts God blesses us with.
Each will listen and respect the other’s feelings and opinions.
We are not perfect and we won’t do it perfectly but we must get better over time.
Have an agenda
Make the best use of your time by sitting down with specific talking points and outcomes in mind. We use the same agenda from month to month. Below I have outlined the key things we talk about.
Track progress with net worth
Having been a registered financial consultant for over a decade, I learned that the best way to measure financial progress is net worth. Net worth is a pretty simple calculation; although gathering up the numbers can be a chore.
To calculate net worth, add up all your assets (what you own) and subtract your debt (what you owe). Include everything – home, cars, timeshares, retirement accounts, etc. On the credit side include all your debt, even credit cards and no short term furniture loans, etc.
Here is what we include in our net worth calculation:
Net Worth = Assets – Liabilties Assets
Overdraft line of credit
Pulling together the net worth data takes some time, but talking about it takes only about a minute. What I do is gather up the data and have it all set to go in a one page report prior to the monthly meeting with my wife. Websites like mint.com simplify this monthly task by aggregating multiple financial accounts into one application. Many banks and credit unions now offer these online aggregation services too.
The idea is to look at your net worth on a regular basis to see if it’s increasing or decreasing. It’s sort of like using a scale to keep track of weight loss.
Wins and losses
Next, talk about what you did well last month from a budget standpoint. This can be a great opportunity to score brownie points with your partner if you approach it right. Focus on things each other did well, rather than spotlight ways where the other blew it. This doesn’t mean you should ignore obvious “withdrawals” of fiscal trust; just be careful in how you approach shortcomings on the part of each other.
Talk about things that pulled you off course. If talking about who spent how much on coffee, nails, hair, etc. is likely to start an argument, consider making the decision that each of you get a set amount of cash each month to spend as you wish. Then take that cash out at the ATM and don’t hold each other accountable to it.
What’s coming up
Once you have made it through what will likely be the most emotionally charged part of the meeting, talk about what the next month looks like in terms of money coming in and money you need to pay out. I have found it helpful to use spreadsheet and plot out every day of the coming month and what money we expect to receive or to pay out. It’s time consuming and sometimes painful, but it’s what you will do if you want to break out of a financial rut.
Finally, close the meeting by reminding yourselves of the financial goals you have in common and discuss how you’re tracking to meet them. If you haven’t established any goals, consider starting with the baby steps that millions of debt-free Dave Ramsey followers have based their success on.
How often to meet
My suggestion is to have the budget meeting once a month for starters. Sit down in a distraction free environment at least an hour and talk it out. We get together on the back patio. Stay in constant communication with each other about the budget, especially when one of you is about to spend money that wasn’t part of the last budget discussion.
Don’t put it off
The only way to fail is to not try it. Feel free to use some of the ideas that have worked for us or create your own approach. I have also found some great resources on Dave Ramsey’s website.