Category Archives: Savings

An element of the Financial area devoted to building your financial reserves for greater security and to further increase your available resources.

And I’m back. Almost.

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It’s been a while. I issued a pre-emptive mea culpa a while back in anticipation of some surgery I had coming up and suggested I might not be posting until it was all in the rear-view mirror. Well, it’s all nearly in the rear view mirror now, and I’m trying to gear up to come back.

So, what have I learned over the past couple months? Well, for one, to quote Count Rugen from “The Princess Bride,” “If you haven’t got your health, then you haven’t got anything.” Knowing for the past couple years that this surgery was possible I’ve made a conscious effort to exercise more, eat a little less, and generally be in better health. I’m fortunate in that my health has never been that bad to begin with, but good health with really helps when facing major surgery. The average hospital stay in my state for the type of surgery I had is six days. I was there four. It may be that I was just so ornery they wanted to get rid of me, but I’ll claim a victory for exercise and eating right.

But even then, once out of the hospital I was under significant restrictions on my physical activity. I wasn’t allowed to drive (not a big deal right now, as I seldom go anywhere anyway), lift anything over ten pounds, and had to avoid reaching very far from my body. Just those few restrictions were frustrating. It’s amazing how much of my normal activity violates at least one of those last two restrictions. I’m fortunate enough to have a desk job that I was already doing from home, so I could get back to work only a week after returning home, but so many other things I wanted to do, or felt I should do just weren’t allowed. I’ll admit I’ve felt pretty useless.

So I can only imagine what it’s like to be someone whose health in general places restrictions on their activity. Value what health you have, and do what you can to maintain it, even improve it. It’s difficult to be self-reliant without good health.

On a similar note, I’ve learned that monitoring your health is important, too, for other reasons. Because I’ve known this was coming I was able to be prepared. As a contractor, I’m on a high-deductible insurance plan. But since I knew this surgery was coming I’ve spent the past couple years saving up enough to cover it.

By contrast, during my recovery period my son crashed while mountain biking and ended up in the emergency room. Frankly, that’s something I should have predicted and tried to save up more money for, but I didn’t. I wasn’t quite so prepared for that one. But thanks to this gentle reminder (which could have been much worse), I intend to be next time (knock on wood, spit three times over my shoulder).

Lesson three was the gentle reminder that sometimes we just can’t be self-reliant. I’m grateful for the wonderful medical staff who took such good care of me. I forgive you for waking me up every two hours; it was your job to make sure nothing was going wrong. Aside from than that, you guys totally rocked! Thank you! And thanks to my wife and my two boys at home who picked up the slack for all I couldn’t do. And also for all those who offered their help. As grateful as I am there wasn’t much my family couldn’t handle, I’m glad to have more family and friends gladly standing by to help.

This week I’m scheduled to see my surgeon. If all has gone well, my restrictions will be removed and I can start getting back to normal. I’ll still have to take some things easy and work my way back, but I’ll get there. One of the first things I need to do is get back on track with our self-reliance plans. And hopefully that means more posts in the works.

Who is this really for?

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I recently came across an address by Robert D. Hales that shared valuable insights into money and how we perceive it. I thought I’d share some of it here.

All of us are responsible to provide for ourselves and our families in both temporal and spiritual ways. To provide providently, we must practice the principles of provident living: joyfully living within our means, being content with what we have, avoiding excessive debt, and diligently saving and preparing for rainy-day emergencies.

…

How then do we avoid and overcome the patterns of debt and addiction to temporal, worldly things? May I share with you two lessons in provident living that can help each of us. These lessons, along with many other important lessons of my life, were taught to me by my wife and eternal companion. These lessons were learned at two different times in our marriage—both on occasions when I wanted to buy her a special gift.

The first lesson was learned when we were newly married and had very little money. I was in the air force, and we had missed Christmas together. I was on assignment overseas. When I got home, I saw a beautiful dress in a store window and suggested to my wife that if she liked it, we would buy it. Mary went into the dressing room of the store. After a moment the salesclerk came out, brushed by me, and returned the dress to its place in the store window. As we left the store, I asked, “What happened?” She replied, “It was a beautiful dress, but we can’t afford it!” Those words went straight to my heart. I have learned that the three most loving words are “I love you,” and the four most caring words for those we love are “We can’t afford it.”

The second lesson was learned several years later when we were more financially secure. Our wedding anniversary was approaching, and I wanted to buy Mary a fancy coat to show my love and appreciation for our many happy years together. When I asked what she thought of the coat I had in mind, she replied with words that again penetrated my heart and mind. “Where would I wear it?” she asked. (At the time she was a ward Relief Society president [ed. leader of the church’s women’s charity auxiliary] helping to minister to needy families.)

Then she taught me an unforgettable lesson. She looked me in the eyes and sweetly asked, “Are you buying this for me or for you?” In other words, she was asking, “Is the purpose of this gift to show your love for me or to show me that you are a good provider or to prove something to the world?” I pondered her question and realized I was thinking less about her and our family and more about me.

After that we had a serious, life-changing discussion about provident living, and both of us agreed that our money would be better spent in paying down our home mortgage and adding to our children’s education fund.

These two lessons are the essence of provident living. When faced with the choice to buy, consume, or engage in worldly things and activities, we all need to learn to say to one another, “We can’t afford it, even though we want it!” or “We can afford it, but we don’t need it—and we really don’t even want it!”

My wife has often been my backstop on financial issues, questioning the criticality of some of my desired purchases. I may not always have appreciated it at the time, but I do appreciate her keeping me grounded. I’m grateful for the partnership we’ve built through the years around managing our money. I do the bulk of the management and bill-paying, and she the bulk of the household shopping. This works well primarily because we share the same goals and we continually communicate.

Of course you don’t need a significant other to establish and maintain financial discipline. One of the key skills is to learn to distinguish between needs and wants, and when considering wants, understanding the root of that want. Developing the ability to police yourself and say, “I may not want this thing for the right reasons” is invaluable.

The bottom line with money is that either we learn to master it, or our money will become our master–or rather, those to whom we end up owing money. The more control we gain over our finances the greater freedom we will enjoy.

Your money or your life? It’s not that simple

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About a month ago I began discussing an article from Wikihow.com on “4 Ways to Be Self Reliant,” by Trudi Griffin, LPC, MS. The article is more about relationships than what I would consider self-reliance, but she still makes some valid points. Today I want to look at her second point, managing money independently. She breaks money management down into six areas:

  1. Learn how to manage money
  2. Get out of debt
  3. Pay cash instead of using your credit card
  4. Keep cash on hand at all times
  5. Own a home
  6. Live within your means

To begin with Griffin warns against allowing others to manage your money. I agree with her basic premise, that you can lose your independence if you lost control of your money, but that depends on the nature of your relationship with that person. In most marriages one of the two usually assumes responsibility for managing the money. If you are good at communicating, have compatible financial goals, and trust one another it’s actually easier to have one partner take primary responsibility and keep the other informed. Her second concern is more valid: if the primary money manager is unable to continue in that role it may be very difficult for the other partner to step in. Even if you are not the money manager in your relationship, make sure you know how to access everything and are comfortable managing money yourself.

Griffin also encourages everyone to get out of debt, though what she really focuses on is keeping your debt manageable. According to her, your total long-term debt payments (mortgage, auto and school loans, and credit card debt) shouldn’t exceed 36% of your monthly income. If your debt payments exceed this level you should make every effort to get that debt load paid down as quickly as possible.

As a corollary to that, Griffin also advocates paying cash for everything, and to keep cash on hand (and in savings) at all times. This seems primarily to be to keep your credit card debt low, and I somewhat agree with this. If you have difficulty paying off your credit cards, or can’t resist charging more money on them, then by all means you should avoid using those credit cards. But if you have developed financial discipline and never miss making your payments because you’re able to set money aside to make those payments, there may be a way to make your credit cards work for you.

I recently read I Will Teach You To Be Rich, by Ramit Sethi. The man has some good ideas about acquiring, building, and managing wealth–and some ideas I’m less keen on. But one suggestion he makes is to put your regular expenses, as much as possible, on your credit cards and then set that money aside to pay the bill off quickly. If you get the right credit card you can earn travel miles or cash back rewards that amount to free money. I’m disciplined with managing my budget, and so I decided to try it. I haven’t put as much on my card as I could, but already within the past several months I’ve picked up nearly $250 of cash back rewards. It’s free money. But if you’re not so good at managing your credit card debt and paying off your account monthly, it’s best to follow Griffin’s advice and avoid credit cards altogether.

Griffin’s next suggestion is to own a home. I’m not as sure about this one as I once was. Right now interest rates are low, so you may only pay about 50% more than the cost of your house in repaying the loan. Depending on how long you live there, the value of the home may increase well beyond that. Our first house did just that. But you don’t always control how long you live somewhere these days. We had to move when I lost my job ten years ago, and the timing was terrible–the housing market had collapsed and I owed considerably more on that house than I could sell it for.

There’s also the maintenance costs and hassle of a house to consider. So far since moving into our house nine years ago we’ve replaced the roof, replaced the furnace, air conditioner, and water heater, and bought high-efficiency windows. Granted, that last purchase was voluntary, but that was easily an additional 30-40% the cost of the house we had to find within the first six years of buying it. That, on top of a myriad of other maintenance expenses through the years. If you don’t like or can’t afford doing your own maintenance, or if you can’t be sure how long you’ll be staying where you live, a house may not be the best option. Everyone needs to evaluate their priorities themselves in this area.

Last, but by no means least, we should live within our means. That usually means several things that have to happen. First, you need to know (or learn) exactly how much money you spend each month and where it goes. Second, where at all possible, and perhaps not matter what the sacrifice, you need to adjust your spending to where it is less than what you earn. Third, you need to continually monitor your spending and your justifications for spending and see how you measure up against your budget. You need to be willing and able to adjust your spending to remain below your means–and save the difference religiously.

Frankly, learning how to budget and how to stick to that budget is one of the most important skills one can develop for self-reliance. That’s pretty much the key to achieving financial independence and taking care of “future you.” Or perhaps your spouse and children after you’re gone. Usually in life there are only two choices: either your master your money or your money masters you. Money is seldom a kind master, but it can be a real friend when you learn to master it. Mastering your finances is a key step toward true self-reliance.

COVID Confusion

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I found this in our local monthly/marketing newspaper in a humor piece of things the author learned from social media during the COVID-19 quarantine:

In effort not to get sick we should eat well, but we should not go out to get healthy fresh food when we run out and eat whatever pre-packaged food we have on hand instead. However, we should order out at our local restaurants to help keep them in business. Then it’s okay to go out to pick up the food. Your food might be prepared by someone sick that doesn’t know they are sick, but that’s okay if you pay by credit card and take the food out of the container. However, you should avoid going to the grocery store at all costs because you might get sick.

Joani Taylor, “The Social Media Scandal – What I Learned During Quarantine”, Sandy City Journal

If there is anyone left out there who still believes there’s a perfect response to a pandemic, especially one where the details about the virus aren’t really known…well, they’re probably on social media telling the rest of us what we should be doing. I’ve been fortunate enough to live in a state that took a somewhat moderate approach, while managing to keep the death rate fairly low, but the nags and scolds have been everywhere all the same.

Sure, I get it. People are scared, and fear makes people thrash about desperately in search of some way to feel in control. For many people that means lecturing everyone else. But the rest of us, when faced with conflicting information, reach a point where we just have to decide for ourselves which advice we can keep and what risks we are willing to take. Here are a few of the things I’ve learned (or re-learned) from all of this:

  • Preparation buys time. We were not as prepared as we wish we’d been, but we still had at least several weeks worth of all essential items. Even though we weren’t sure how long our toilet paper supply would last, we had enough to hang in there until more started appearing. We didn’t need to panic, spend exorbitant amounts of money to secure the essentials, and could put off even shopping for groceries until things calmed down.
  • People don’t want or can’t handle fresh. When we did go shopping we had no trouble finding fresh fruits and vegetables. Do people just not buy the more perishable items in an emergency? It’s not like we were without power. Veggies keep for weeks in the fridge. Or do people just not know how to prepare fruits and vegetables anymore? Not that I’m complaining. We’ve been able to eat healthy while everyone else, from the look of the store shelves, are existing on flour, pasta and beans.
  • Savings are essential. I am one of the fortunate people who can work from home, even if it’s not my preferred way to work. But even I had been furloughed or laid off we would have had savings to get through this.
  • Flexibility and resilience help. When things like this happen we can sit back and complain over every inconvenience or difficulty, or we can relax, take a deep breath (or two or three), and deal with everything one step at a time. This is easier to do if you’re not worried about basic survival.
  • Cut everyone some slack, including yourself. I’ve had to continually remind myself that people are experiencing widely varying levels of stress right now. On the other hand, if there were people whose stress was causing me stress, I’m not obligated to keep absorbing their stress. There are some where I hit the “social media snooze button” so I wouldn’t have to deal with them until things calm down again. For the most part people have been keeping things on an even keel, and when they aren’t I would try to be kind and remember where they’re coming from.
  • Even introverts need people. While introverts across the world have been cheering about this being the moment they were born for, the truth is, introversion does not mean we don’t need anyone else. Introversion/Extroversion is more a matter of where we get our energy from. Extroverts get their energy from being with others. Introverts get theirs from being somewhat isolated and quiet. We can enjoy social interactions, and even get some energy from particularly enjoyable ones, but most drain energy from us, and sooner or later we need to get away and recharge. Being shut up at home hasn’t been particularly difficult for me, but after a couple weeks I found myself reaching out to people much more than I usually do. I miss the depth, breadth and variety of my normal interactions.
  • Focus on what you can do. This crisis quickly revealed where our family is not as prepared as we should be. The problem is that some of that just can’t–and perhaps shouldn’t–be fixed right now. We found we were least prepared in our supplies of paper products, baking supplies, and a few other food categories. And yet if we’ve learned anything about shortages, it’s that running out and stocking up just make things worse for everyone, so we’ve had to resist that urge. Instead, we identified some things we can procure right now, and we’ve focused on that. We have a much better water storage now, and we’re better prepared for the next power outage (and in our area, there will be one). I feel satisfaction and accomplishment at having done something useful, even if I can’t solve all of the problem just yet.
  • Have a plan for the rest. As I said above, there are some preparedness deficiencies we can’t fix yet. But I’ve learned from sad experience that if I don’t have a plan in place for when we get back to normal-enough I’ll likely forget to do anything at all. I can take this time now to at least come up with a plan so that I know the next steps to take once we can take them.
  • It’s difficult to be prepared for everything. I’ve been a homeowner for over twenty years. In this part of the world we have to be on guard against mice. Right before our state went into quarantine we discovered something entirely new: rats. Mice we could have dealt with. Nothing we had worked on rats. And even after some online research and a curbside pickup purchase it took a long time to figure out what would work.

I could probably go on, but I’m hearing too many heads hitting keyboards already, so I’l spare you. This quarantine experience has certainly given us a lot to think about, and a lot of time in which to think about it. Right now the biggest question we should all ask is, “What do I do about it?” What are we going to change as a result of our experiences? Set a goal, make a plan, and get it done.

Friends don’t let friends retire broke

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The title of this post is the slogan of my financial adviser. I’ve had a financial adviser for close to ten years now, and for me it’s a good thing. I won’t go so far as to say everyone needs a financial adviser, though. Like most things, that really depends. But what you can’t afford to do is not plan for your financial future at all. Even if you can’t currently afford to save, you really should have a plan to get to where you can.

With that in mind, you have two options in planning for your financial future. You can work with a financial adviser, or you can do it yourself. Doing it yourself is possible, if you’re willing to do the legwork and homework. I tried it for about a year while my first financial adviser forgot I was still a client. I went to MotleyFool.com like my brother recommended and read up on their approach. And I tried it for awhile using fake money.

What I found is that I lack both the patience and cool-headed-ness necessary to be my own financial adviser. I manage my money pretty well, but I don’t do so well at researching stocks and funds (which is unusual for me–I’m a professional researcher), and I do terribly at thinking long-term in my investing. If something starts to do poorly I start to panic.

So in my case a financial adviser is necessary. And I found him. Or rather he found me. Paul was going door to door, as required by the company he works for, and spoke with my wife. Knowing that I’m interested in such things she recommended he call sometime when I was home. He called, but it was a bad time and I put him off. It was bad timing the next two or three times as well. But he persisted and that alone, if nothing else, convinced me he might be a good replacement for my previous adviser, who I hadn’t heard from in over a year. Anyone willing to try that many times for a chance to talk with me would probably not let me sit so long without contact once a customer.

And Paul has been great. His company’s investing style matches my own. He knows his stuff, and has been conscientious about not racking up unnecessary fees. He took time to find out what my life goals are and, without being judgmental, devised a strategy to help us get there. He encouraged us to save as much as we could, while leaving money for financial difficulties.

During my extended unemployment is where he has shown the most. I’ve not been able to save anything during this time, obviously. I can’t be making him much money. But he’s been there, regularly checking in to keep tabs on our situation, help us find the best way to draw on our savings when necessary, and to offer suggestions and encouragement. He’s even offered to put in a recommendation for me if I decided to apply with his company–which I have seriously considered, seeing as I love their approach, products, and personnel so much.

I can’t wait to get back into the black income-wise and start saving again. But in the mean time, I rest a little more comfortably knowing that I’ve got Paul on my side. Any money he’s made off me he’s earned in spades.

As I’ve said, not everyone needs a financial adviser. But unless you have the discipline and the know-how, you may want to consider it.