Archives for family category
20
Jul
Posted in family by Roger, the Amateur Financier |
It can be tough being an adult. You can’t play all day, you need to stay fully dressed while you’re out in public, and perhaps worst of all, you have all sorts of responsibilities. You have work, family time, house work, keeping up on the news, and occasionally, maybe even some fun. It can be exhausting.
It can also stretch your budget pretty tight. The cost of raising a child can easily reach six figures ($222,360, according to the USDA), even before you start looking at the cost of college. Building up a nest egg of your own also looks pretty daunting; to withdraw $40,000 a year at the 4% ‘safe’ withdrawal rate, you need to have a cool $1 million dollars saved when you say goodbye to your job. (And that’s assuming that you are retiring in the near future; for those of us with decades to go before we can say goodbye to the working world, inflation is likely to multiply the amount needed for even a middle-class life several-fold.) Even fun is starting to become expensive; when was the last time you went to the movies without your eyes bulging at the cost of tickets (and popcorn, and sodas…)?
Maybe the tickets wouldn't cost so much if the theaters weren't so fancy
With all these competing priorities, it can be hard to know what should take the highest ranking on your ‘To-Do List for Life’. As you might imagine, there’s quite a few different theories on the subject, as with most things important in the world. Here are some of my thoughts on the subject; while your approach might not agree completely, it should make a good starting place for prioritizing your own goals:
1. Don’t Spend All of Your Money Having Fun Now: It’s mighty tempting when you get that paycheck every two weeks (or whatever your pay schedule is) to look at it as your ‘fun money’, and want to spend it all enjoying yourself. But try to look at the big picture: You want to retire, right? Help your children pay for school? Maybe get a nice home on a beach, so you can spend all day lounging in the sun? If you want to do all these things (and any number of other dreams I don’t have time to mention), you’re going to need money, and that means you need to control yourself in the here and now. Rather than thinking of all the ways you can spend your money now, try to think about what you can do with that money (and the investment returns you can make on it) by saving and investing it.
2. Saving for Your Future Should Be a High (If Not Your Highest) Priority: There’s a reason that ‘Pay Yourself First’ is such a common piece of personal finance advice: you are increasingly in charge of your own retirement. Pensions are all but a thing of the past, and Social Security, while not likely to disappear as some have argued, will likely have to cut back payments in the future. If you hope to have a decent retirement, you’re going to need to make sure that you put saving for your future at the top of your priority list. This means cutting back on your expensive toys, your fancy trips, and possibly even saving for your children’s college; try not to worry too much about your children’s college, though…
2. Help Your Children, If Possible, But Know They Have Other Options: If you’re a parent, or even just want to be a parent in the future, you probably want to help your children build up funds for college (or other goals that they might have); I know that I do, when I have kids of my own. For many people, though, there’s simply not enough money in the budget to save for college and retirement at the same time. If that’s the case, you should always opt for your retirement first. Your children will have lots of options available to fund college (if they even decide to attend…), from scholarships and grants to yes, student loans. While it is noble to want your children to start their professional lives without student loans dogging them, it’ll be better for both you AND them if you don’t have to come to them after your retirement and beg for money. (Plus, if you teach them well, they should hopefully look at paying off their student loans as a challenge to show they are truly mature, not a burden you saddled them with.)
4. Don’t Forget to Have SOME Fun: You might think that, with everything I’ve just mentioned, that I don’t want you to spend a single dime on things for yourself during your working years. That’s not true at all; while I want you to watch your spending and not spend your money wastefully, I would never advocate skipping out on fun completely. Indeed, if you did try to become a fun teetotaler, what would most likely happen is one day, you just couldn’t take it anymore, and would end up splurging on something that likely offset most of your progress to that point. (Think of the people you know who’ve tried an extreme diet, only to end breaking it with some of the most fattening food they could find.) If you make sure to include fun into your budget planning, you’ll be much better off, and less likely to get frustrated with your budget over time.
There you are, some tips to balance your future happiness, your family obligations, and having fun, all without going bankrupt in the process.
How do you balance all of your financial obligations?
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20
Jun
Posted in education, family by Roger, the Amateur Financier |
With Father’s Day so recently past, I’ve been thinking a lot about my own (future) children. (Although, every Father’s Day that passes is one Father’s Day closer to when I will be receiving ties and home-made cards from my own offspring.) I look forward to having kids, and having the opportunity to share things with them.
I have shared before in this very blog some of the things I wish to teach my children about money, as they get old enough to gain an understanding of the concept. But money is far from the only, or even the most important, thing I hope to teach my children. So, if you’ll indulge me a bit, here are a few things that I hope I’ve properly taught to my children by the time they leave the nest (which will hopefully be closer to when they are 18 than 28, but that’s a different story):
1. How to Be Self-Reliant: There seems to be very little done in school by way of preparing students for living on their own. I realize that such skills are perhaps viewed as something best taught by parents at home, but surely there is some room for schools to do something. Let’s start by rethinking home economics and shop class; while there is little use for most of us in being able to sew a pillowcase from scratch or build a bird house, there’s plenty of need to know how to, say, cook simple yet nutritious meals or successfully task apartment or home repair. You wouldn’t even have to completely remake the courses, as a few shifts in priority here and there should do the trick. Regardless of what my children learn in school, though, I fully intend to make sure that they go off to college knowing where to find great financial management tools and take care of themselves in ways that make them financially frugal and wealth minded individuals.
Of course, there is much to be said about making sure my children get at least a basic education before I worry too much about teaching them subjects outside the classroom...
2. How to Get Along With People They Dislike: It might seem a bit counter-intuitive; why bother to spend time with people you don’t like, after all? But let’s be reasonable: there’s lots of people we have to deal with, sometimes on a daily basis, that we don’t really like, if not outright hate. Being able to work with such people without losing your cool, complaining about them behind their back, or simply being mean is a dying skill, one I hope to encourage in my children, if only to add a tiny bit more civility to the world.
3. How to Avoid Scams: This is a tricky one, as scams change and evolve all the time. Twenty years ago, who could have predicted the proliferation of 419 scams and similar online thievery? I don’t want to even hazard a guess as to the methods scammers will be using twenty years from now when my children are preparing to go to college. Still, there are some constants I can pass along to my little ones. Scammers will play on your emotions. They will offer you something for nothing. They will try to get you to do their dirty work, recruiting other people or engaging in illegal activities to benefit themselves. In short, if sounds too good to be true, it most likely is, and is likely a scam, to boot.
4. How to Manage Their Money: This shouldn’t come as a shock to anyone; obviously, I care enough about money and money management to be have written over 500 posts on the subject, so it’s obviously something I want my children to know about. A complete list of everything I want to expose them to would fill up a book (or at least several weeks of blog posts), but the basics are pretty simple: how to save money, how to spend money wisely, how to invest, and how to plan for the future. If they can master those skills, they’ll be in much better shape than most of their fellow classmates come college time (to say nothing of their debt-ridden former classmates come graduation).
5. How to Pursue Entrepreneurial Aspirations: I’ve discussed ways to help encourage entrepreneur children before, but as you might guess, it’s something I would definitely like to pass on to my children. There’s plenty of ways to go about doing so, from limiting their allowance and encouraging them to find a way to make up the different to offering all the help (financially and through advice) that I can when and if they want to start a business of their own. Now, I don’t want to force them into being entrepreneurs if they don’t have that desire; someone forced down any particular path in life is likely to rebel, whether that path is entrepreneurship or becoming a doctor. Instead, I want to encourage them to…
6. Follow Their Dreams (But Still Make a Good Living): It’s a rare parent who doesn’t want their child to do something that will make them happy in life and not to settle for a dull, unfulfilled life of drudgery. That said, it’s an even rarer parent who wants to watch their child go down a path as, say, a professional musician, only to wind up in their mid-thirties, broke, with no children, useful skills, or hope for the future. My goal, then, is to help my children to reach the middle ground: gaining the skills needed to hold a decent, at least semi-interesting job, while still having the time and creativity needed to pursue other interests on the side. Given the expansion of technology and the decreasing prices of just about every creative tool imaginable, it’s not hard (or unusual) to picture secretaries who write novels (hopefully not during work hours), teachers who publish their own blogs on subjects they are passionate about (hopefully, the same subjects they are teaching), or yes, doctors who rock out on the weekend. With a little creativity (something I also hope to cultivate), my children shouldn’t have a problem fulfilling their dreams while they keep their pockets full.
What do you hope to teach your children by the time they grow up? Do you think the lessons you need to pass on are much different than the ones taught to you? Any parents out there who would care to share some thoughts with this would-be parent on how best to teach some of these things to children?
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19
Jun
Posted in family, holidays by Roger, the Amateur Financier |
To all my fellow males who are now, or will one day be, fathers:
I hope you are enjoying the day specially designed to celebrate all of us men who have helped (or in my and many others’ cases, will help in the future) to bring new life into the world. Hopefully, the gifts of ties and aftershave are proving quite enjoyable. It’s always nice to be remembered. (Although, if the mother of your children seems to primarily remember how much giving birth hurt, perhaps you wish her memory wasn’t quite so sharp.)
For myself, I haven’t yet been blessed with fathering children (which is probably for the best, as I am still a graduate student and earning barely enough to keep my own expenses under control, let alone provide for those who depend on me). Which is why it caught me by surprise when my sweet, loving, wonderful fiancee handed me a Father’s Day card. It was one of the sweetest things I have ever read, not only for the wonderful sentiment expressed in the card proper, but for the wonderful statement my fiancee Sondra wrote, express her belief that when we do start having children, I will make a great father.
Hopefully, in a few years, this will be me.
It nearly brought me to tears, the support and encouragement this sweet girl provides to me. Neither of us have had the best experiences with our own fathers, and one of my greatest fears is that I will be a bad father when I start to have children. To get such encouragement from the woman I love about an issue where I have so much angst was one of the best things I could have imagined getting. So, once again, to all the fathers (past, present, and future) out there:
Happy Father’s Day!
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2
May
Posted in family by Roger, the Amateur Financier |
One thing that every couple that is planning on getting married or is otherwise involved in a serious, long-term commitment needs to think about how they will merge their disparate finances into one united financial picture. With how many accounts many people hold today, and the increased delays many people have before they get married, the financial picture of each individual can end up being quite complicated. (Just look at my monthly updates to get an idea of how elaborate the financial situation can get, and bare in mind that I don’t list out individual bills that are owed, the sources of my income, etc.)
Relationships can be a lot like these heart balloons; beautiful, but delicate.
But, if you’re going to have a happy and harmonious relationship together, you need to deal with money issues together, as a united front. To try to do things on your own might seem easier, but can end up complicating your lives needlessly and end up leading to arguments. But it doesn’t have to be that way.
Advice on Combining Your Finances
Luckily, it’s not as hard as it might seem to combine your accounts and your financial information, so long as you’re willing to put the required work into it. You just need to follow a few simple rules, and you and your partner will be a combined financial force in no time flat. In order to go from two sets of finances down to one, you need to:
1. Be Completely Open and Honest: This might be a tough one, particularly if you are naturally shy and withdrawn person (I can relate). But your partner needs to know where you stand financially, so honesty is definitely the best policy. If you have some trouble spots in your financial past (lots of debt, a poor credit score, past spending you aren’t proud of, etc.) then it might be less than comfortable to open yourself up to such scrutiny and possible criticism. You need to do so anyway, though, if you hope to have a successful relationship (and have the same consideration shown to you in return).
2. Don’t Leave One Partner All the Work…: There is a tendency in couples to take a divide and conquer mentality. One partner will do the laundry and the dishes, the other will handle the yard work and the cooking. So it goes with finances; there is likely to be one partner in the relationship that loves to go through the books, figure out where to invest, and save for the future (in my relationship, that’s me, as you might guess from this blog), while the other partner tends not to care so much, or even actively dislike having to deal with money (my fiancee Sondra is firmly in this category). This is fine, and actually pretty normal for couples.
But, even if there is one partner who enjoys dealing with money, that doesn’t mean they shouldn’t get help or input. If your significant other is the one who does the books, you need to make sure you keep an eye on what is going on with your finances, and share your input on where the money is going. It is your money too, and helping to handle it wisely and invest it properly is not just the responsibility of your partner. You need to help out and contribute too.
3. …Or Keep One Partner in the Dark: On the other side of the coin, if you are the partner who likes to deal with money, you need to make sure that your significant other knows what’s going on with your shared money. Besides helping to keep them from making poor financial decisions that hurt you both (like buying items that you can’t afford because they think you have more money available than you do), it will also help to ensure that you are on the same page about what to do with your combined fortune. Otherwise, there can end up being tension in the future when your partner finds out that your money has been going towards goals they don’t support. Better to say on the same page, and to explain any changes you make to the money management strategy.
4. Contribute Appropriately to Household Expenses and Shared Goals: Now comes the tricky part: how do you divide up those household expenses to be fair to both partners? Well, there’s lots of theories; you could combine all your income in a joint account and pay all your bills out of that account, you could split the total for the bills right down the middle and each contribute half that amount, or you could each pick some bills that you will pay each month and handle those bills out of your individual accounts. Each of these methods can work, although they have their flaws. The first doesn’t leave any money of your own for personal spending, the second isn’t fair to the lower income partner, and the third is tricky to make fair and can result in one partner subsidizing the other’s bad spend habits. (If, for example, you make a ton of out of the country calls to your family and your partner picks up the phone bill.)
The best method I’ve come across to handle combined bills like this was from Suze Orman’s Money Book for the Young, Fabulous and Broke. In it, she recommends determining the amount of the monthly bills (I would include things like retirement account contributions and saving for a home here, although Orman didn’t due to the audience of her book), figuring out the proportion of your combined monthly income required to pay those bills, and each person contributing that amount. If your monthly expenses come to $4000 and your combined monthly income is $5000, for example, each partner contributes 80% of their income to covering the household bills, and is left with 20% of their income for their own purposes. It’s fair, it’s reasonably easy to figure out, and it doesn’t require you give up control of all your spending.
5. Keep Talking: The most important thing you can do to successfully manage your money as a couple is to keep talking. It’s easy for the lines of communication to break down, especially nowadays as everyone tends to be so busy and occupied with their own tasks. But, if you’re hoping to successfully manage your finances as a couple, you need to keep talking. Share your financial goals, your hopes, and your dreams, and make sure that you know what your partner wants. Ensure that each person knows where you stand financially, how much you have available to spend, and what that money should be spent on. Know what your partner hopes your life together looks like in ten years, and work with him or her to make that vision come true. Above all, just talk.
What do you think is the most important thing in order to successfully combine finances as a couple? How much independent control over your money should you give up to meet your goals as a couple? Are there any techniques I missed that you’ve had exceptional luck using?
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