The Free Financial Advisor

You are here: Home / Archives for Joe Saul-Sehy

Joe is a former financial advisor and media representative for American Express and Ameriprise. He was the “Money Man” at Detroit television WXYZ-TV, appearing twice weekly. He’s also appeared in Bride, Best Life, and Child magazines, the Los Angeles Times, Chicago Sun-Times, Detroit News and Baltimore Sun newspapers and numerous other media outlets.  Joe holds B.A Degrees from The Citadel and Michigan State University. 

So You Want to Manage Your Own Money?

by 29 Comments

A friend texted me this morning.

“We should talk soon. Julie is coming around to the idea of us managing our own money.”

It seems easy, right? My initial reaction to my friend was, “That’s awesome!” because it is. There are few things more satisfying than achieving your financial dreams and knowing that you climbed the money management mountain yourself.

No “money-god” came down and did it for you.

You didn’t need the Powerball numbers.

You actually plotted a financial course and landed safely at your destination.

For my friend, and for you if you’re about to embark on this journey, there’s good news and bad news: the good news is that it isn’t difficult to manage your own money.

The bad news is that to effectively manage your own money you’ll need to be ready to face some fairly difficult tasks.

 

Two Types of People

 

When I was a professional advisor, I’d meet some smart people who wanted to jump into their own money management and wanted an expert with an opinion to look over their shoulder, hold them accountable, and make sure they didn’t miss any “I” dotting or “T” crossing.

…and then there were other, often equally-smart people who wanted to hand it over to me and have someone else take care of it for them.

Believe it or not, most advisors I knew preferred the latter type of client and loathed the first one. Someone questioning their motives? Someone asking “why are we doing it this way?” all the time? That’s preposterous!

But if you’re going to ever learn how to manage your own money, you’ll need to be the first type, not the latter.

The steps aren’t difficult:

 

The Steps to Managing Your Own Money

 

My kids are reading myths in school. In the story of Hercules, he faces a series of challenges to achieve is goal.

I look remarkably like the guy on top, but I’m a little paler and not quite as naked. And I have less hair.

You’ll have a series of gauntlets in your way too, if you want to manage your own money.

1) Write out your goals. I’m not talking about writing:

Retirement

College

New Boat

Fall Deeper in Love

Real goal writing has a specific time, dollar amount and vision attached.

I want to be able to live on $65,000 per year (in today’s dollars) by age 65 without having to work every day. With this money I’d like to: (here you write your bucket list, which should include visiting every NASCAR track in the country).

That’s a goal you can shoot for and be excited about (except for visiting the track at Pocono, which I thought was pretty overrated).

2) Next, you write out all the hurdles in your way.

– I have $25,000 in credit card debt (separate by interest rate, term, amount)

– I have to put two children through college

– I know nothing about money management

3) Then, you find one of the nearly bazillion financial calculators online (you can use our powerful little PlanWise calculator here on the site!) and figure out how much you need to save to reach your goal.

– I need to save $250 per month to reach my dream if I achieve an 8% return.

Armed with your money management return information, now you figure out how to come up with $250 per month.

– Tweak your budget

– Pay down debt

– Take on more work

4) Before investing, though, you have a big problem. You have to insure yourself against some of the huge “what if’s” out there for you and your family:

What if you die?

What if you are disabled?

What if you have a car accident?

You’ll need to create a will and evaluate insurances.

5) Finally, you begin the heavy task of research to find investments that have historically achieved 8%.

 

No Step is Difficult, You Just Shouldn’t Miss One

 

As you can see, when you take on the hard task and decide to manage your own money, getting it right will be difficult. Each area demands time and energy:

– Planning, milestones and tracking

– Budget, income advancement and debt reduction

– Insurance need projection and comparison analysis

– Estate planning

– Investment allocation, picking and monitoring

These are five basic money management steps, but each packs a punch!

 

I Don’t Mean To Imply You Can’t Do It

 

As soon as I finish this piece I’m calling my buddy and talking him through these points. Before he takes on the task, he should know how long the financial security road really is. Going in with your eyes wide open is half the battle if you plan to win the “manage your own money” game.

He can do it, and so can you!

Enhanced by Zemanta

2 Guys & Your Money Episode 9: NerdWallet, Buying a House, Insurance Costs & Combining Family Finances

by 8 Comments

Never listened to a podcast before? You can tap the button above to enjoy the show on your computer, use iTunes to subscribe for free (new shows will load automatically!), or listen through Stitcher.

For information on how to subscribe through iTunes.

For information on how to listen through Stitcher.

 

Holy Ton of Topics, Batman!

On this special Labor Day edition of the podcast, we introduce a new reality show coming via NerdWallet, Kathleen from Frugal Portland joins the roundtable team for a rousing discussion of couple’s finances, and PK tells you why your insurance premiums are high (and of course, draws the correlation to “too big to fail”…always the overachiever).

 

Show Notes

<Open> Hello, Stitcher listeners!

Details on listening to the show through Stitcher: www.stitcher.com

Thanks to ING Direct for the show sponsorship. $50 off to open an account, details here.

Home Ownership: Is now the time? Here’s the FRED chart that spurred this discussion.

<> PK’s Fractional Sense: Insurance premiums & Too Big To Fail

<> Let’s Give Something Away. Congrats to our winner, John @ Married (With Debt).

To enter the September drawing for a copy of the board game The Settlers of Catan;, guess the voice in the show and send your answer to joe (at) the free financial advisor (dot) com. We’ll choose from the correct answers one winner on the last day of September.

Will Weaton’s TableTop show episode featuring Settlers of Catan:

 

<> Roundtable: Thanks to Kathleen from FrugalPortland for joining us this week.

Our topic: Married couples: should they combine finances?

The ClubThrifty Posts that spurred this discussion: Greg’s Article & Holly’s Article.

<> Interview withAmelia Granger: Nerdwallet.

<> End Show: Joe saw The Campaign (wait for DVD), watching on Netflix:Louie: Season One; w/ comedian Louis C.K. (likes a lot, but you have to be comfortable w/ rated R situations and humor)

 

And then, a link you may-or-my-not need for this show: Sri Lanka referenced article in the-segment-that-shall-not-be-named

 

For more information on our weekly contributors: PK, Carrie Smith, Dominique Brown, Len Penzo and Dr. Dean, here’s their bio page.

Would you like to be on the show? Have a topic for the show? Like to advertise on the show? Write to Joe (at) thefreefinancialadvisor.com.

Speaking of advertisers, if you’d like to take advantage of the ING $50 sign up bonus, visit www.thefreefinancialadvisor.com/ING50.

Enjoy the show!

Enhanced by Zemanta

You Have No Idea What I Paid For This Room

by 63 Comments

Welcome to another installment in a series of posts about an Average  Joe trying to just get along…and finding new and funnier ways to fail at it.

For past posts in the series, catch:

There’s Something Wrong With The Car

Networking 101: Meeting Basketball Insiders (a How Not To Manual)

I’m Not an Expert on Everything

I Miss Checkbooks

Sprint Teaches Me Geography

Blog Post of the Week! by Money Beagle (intro section)

Sometime The Grass Isn’t Close to Green On The Other Side Of The Fence 

 

Our Story

 

I couldn’t believe a girl this HOT liked me. Cheryl was smart AND beautiful AND (the best part!) dating me.

Realizing that sooner or later she’d wake up and actually look at the guy she’d decided to hang out with, I knew I had to impress her fast. Time for some decisive action…something that would really WOW her. …something she’d remember in the middle of the night when she wondered “What am I doing with this dork?” I needed something to counteract that inevitable occurrence…something spectacular and romantic.

I had it: we’d take a long weekend getaway to Chicago.

Checking a few quick travel guides I stumbled on a bonus: there was a boutique hotel called the Claridge just north of the corner of Rush and Division (home of many bars and nightclubs!). Reviewer after reviewer said this place was a hidden gem, nestled among brownstones in a nice neighborhood.

We were college students. I was paying my own way through school, working three jobs: building radiation walls (crappy work), as a telemarketer (even more crappy work), and as a DJ at frat parties and weddings (awesome work, but with horrible hours). Somehow I scrounged up $250 for two nights at the Claridge (now a boutique Hotel Indigo…here is the website), enough for gas to get from Detroit there and back, and a little more for food and spending money.

Out the driveway in Detroit, the trip was immediately a success. We laughed the whole way to Chicago, listening to music. Holding hands. I thought, “It can’t get any better than this.”

 

Oh, it did.

 

A room at Hotel Indigo (The Claridge when we were there)

My hotel choice was freakin’ awesome. The neighborhood was gorgeous, and sure enough, among the quiet brownstones, a little narrow hotel rose into the sky. Although the place was old, it had been recently renovated and had an old city charm. You would never know, with all the greenery and the families strolling outside, that some of the busiest bars in the city were only three blocks away.

We parked the car ($20 a day in 1992. Are you kiddin’ me?). Valets carried our bags and I made my way to the reception desk. Seconds later I had my key and we were on the elevator upstairs.

We opened the door to our room.

There wasn’t a view of the city, but who cared. We had a carefully appointed room with classic prints on the walls, a big beautiful bed and nice little bathroom.

I’m from the country. This farm boy had never seen anything so upscale.

Get this: there were even terrycloth robes in the closet! Terrycloth robes!

I put one on. Cheryl snapped a picture of me in it.

She went into the bathroom to freshen up, and I flipped on the television.

That’s when I noticed it.

There was a fridge in the room.

This wasn’t like a spring break fridge next to the scary kitchenette. Nope. This was a high end hotel.

This was a FULLY STOCKED refrigerator.

Nuts, beers, chips, those little Jack Daniels and Schnapps bottles, and more. I grabbed a beer, some macadamia nuts, and settled into a football game.

I’d worked my way into the peanut M&M’s when Cheryl appeared in the bathroom doorway.

“I think you have to pay for those,” she said.

I smiled at the silly, silly girl.

“You have no idea what I paid for this room.”

She smiled, said, “Really? Cool!” and grabbed a little single serving wine bottle and the Toblerone.

After our on-the-house snack we hit the town hard. A little shopping on Michigan Avenue, Pizza at Gino’s East. Dancing at Mothers on Division.

Imagine our delight to find chocolates on our pillows and the bed was turned down. This place was awesome.

Even more awesome?

Someone had completely restocked everything we’d eaten from the fridge.

 

Day Two

 

Make sure you visit Shedd Aquarium when visiting Chicago

The next day we were up early. After a morning at the Art Institute we had Chicago-style hot dogs off a cart in Grant Park. Then we toured the shark and penguin tanks, among others, at Shedd Aquarium. On the way back to the hotel we stopped at a steak place on Rush Street and then listened to some sultry sounds at a jazz bar. We were both tired from the day out and headed back to the hotel.

Fridge? You guessed it. Restocked again.

I loved this hotel.

I immediately grabbed us a nightcap from our now-personal supply. We’d be leaving in the morning and I wanted to get my $125 per night worth. M&Ms, chips and wine up late talking with the hottest girl I’d ever dated.

This was the life.

 

Leaving

 

The next morning we packed early. Cheryl and I both had busy days coming up, so it was an early start, but I was sad to go. We left the room and were halfway to the elevator when I realized: the fridge.

“Where are you going?” she said as I turned and marched back to the room.

“Just meet me in the lobby.” I opened the door, crossed the room and laid my suitcase in front of it.

Why hadn’t I thought of this before? This room was expensive as all get-out. I couldn’t leave these riches to waste. I’d already remembered to swipe the shampoo and conditioner. I’d stayed at a Days Inn before. This was just a Days Inn on a much grander scale, and I needed to take full advantage.

In fairness to me, our minibar didn’t have the pressure pads OR warning this one is equipped with.

I opened the fridge door, took my hand and in one motion swiped everything from each shelf into my suitcase. Then I grabbed the drinks from the side holders and carefully placed those among the other treats. At the very least, this would help subsidize the trip and give us some snack food on the drive home.

There was so much, we might not even have to stop for lunch. Bonus!

This was before quick checkout procedures were popular, so I stood in the world’s longest line just to hand over my keys and grab the receipt. By the time I reached the desk, there was still a monster line behind me. Like I had with the people before me, I’m sure they were hoping I’d get out of the way quickly.

The front desk person smiled and said, “How was your stay?”

I handed her the keys. “This hotel is incredible. We had a wonderful time.”

“I’m glad to hear it, sir,” she said as she typed in my information. “Did you enjoy the mini bar?”

What difference is it to you? I thought. But, she was being pleasant, probably passing time while she looked up my record.

“Yes, we enjoyed it very much. It was great.”

She reached below the counter and produced a piece of paper. “We have the record of the first two nights, but if you could just mark anything you had since seven o’clock last night, I’d appreciate it.”

 

The List

 

I was shocked.

Those macadamia nuts? $5.25. Each beer? $6.00. The Toblerone? I was in shock and don’t remember exactly, but I think it was around $1,245,435.09.

I glanced at my suitcase full of treats and then back behind me. The line now stretched across the entire little reception area.

“Sir? Is everything okay?”

I glanced up at her, looked down at my bag again and across at Cheryl waiting patiently across the lobby.

There was truly only one thought going through my head:

I’m the world’s biggest dumbass.

I looked back up at her. “Everything is fine. What did you say?”

She appeared confused. “Just mark everything you had since we restocked the bar last evening, and we’ll put it on your card. Is that okay?”

I looked at her, trying to keep the pained look off my face. The keys to the room were still sitting in front of me. All I had to do was grab them and run for the elevator. I’d put it all back.

The guy behind me grunted, a little impolitely, and I glanced over my shoulder again. Cheryl was staring at me from across the room and pushed up her shoulders as if to say, “What’s going on?”

I made my decision. I looked back at the woman.

“I had all of it.”

She leaned forward. “Excuse me sir?”

I tried not to glance at my suitcase.

“I had all of it.”

This woman was a true professional. The corners of her mouth only rose slightly before she said, “Very good, sir. Just sign at the bottom. Should I put it on this American Express card?”

I’d brought the AmEx card only because I needed something for incidentals. I had no intention of using it.

“Sure.”

“I hope you enjoyed your stay.”

I tried to smile over my shoulder, not sure how I’d pay this huge amount off my card. “You have no idea.”

 

Photos: Chicago: Bert Kaufman; Hotel Indigo: Jim Moore; Shedd Aquarium: JohnCarlJohnson; minibar: James Fraleigh

 

Any good hotel stories to share? Let’s keep the idiocy rolling in the comment section!

Enhanced by Zemanta

Lifestyle Carnival – “I Hosted the Carnival and All I Got Was This Tee-Shirt” edition

by 13 Comments

Happy Monday, everyone!

It’s “back to school” day at our house. That means less travel, entertainment, wealth and retirement thoughts, but more health and fashion talk. But there’s good news: we’ll bring you every category as usual for today’s list of fun, along with some of the tee shirts I could have received for hosting, had that requirement been in place. (Where’s the suggestion box for this carnival?)

Here is the 17th edition of the Lifestyle Carnival! Submit your blog article to the next edition using our carnival submission form.

 

TRAVEL

A wonderful place to buy a travel tee shirt. I recommend going as soon as you get a chance.


Jeremy @ Modest Money writes Vehicle Insurance Better Safe Than Sorry – I am sure none of you are guilty of this, but amazingly some people take the risk of driving without insurance. Here in BC that is illegal and a pretty dumb risk regardless where you live.

Steve @ Canadian Personal Finance writes Is it OK to get a discount if you are good looking? – Would you turn down a discount because you were good looking? A customer received a discount for being good looking. This was simply a joke by the server but honestly it brings up a good question, do good looking people get discounts?

J Wayne @ All Things Finance writes The True Cost of Car Ownership – Car ownership costs much more than people think. It’s not just a matter of what you pay each month, but many more factors such as depreciation, insurance, fuel, interest and taxes.

 

 

FASHION


Julie @ FashionSmart writes Fashion Smart – For those who love to get inspired and inspire others. Share fashion via photographs. Share/respond with your own style via comments section; thereby, bringing diversity of style into one place. Everybody is welcome to join my blog, and share fashion ideas. FashionSmart22.blogspot.com

 

HEALTH


I feel this way every single time.

Jessica Moorhouse @ Mo’ Money Mo’ Houses writes I’ll Take Chipmunk Cheeks for $2,000 Alex – After comparing the pros and cons to taking out $2,000 from my emergency fund to pay for a dental procedure, I decided that my health is worth more than any amount of money.

Cash Flow Mantra @ Cash Flow Mantra writes Having a Daughter Changes Everything – After having started to read Strong Fathers, Strong Daughters, I realize that there is so much I didn’t know about what goes on inside the head of a little girl. I am very glad that this book came as such a high recommendation by Dave Ramsey. There are tons of daddy/daughter books out there, and I’m sure I will read more over the years. But I’m grateful that I got this one first, to start a solid foundation for being the best father possible to my new daughter.

 

ENTERTAINMENT

Might be my favorite tee shirt of all time. My wife said this wouldn't ever leave the house on my body if I bought it.


Jason @ Live Real, Now writes Letterboxing – This week, I’ve been taking my kids letterboxing. We go to a letterboxing site(either LBNA or Atlas Quest), choose a letterbox, then follow the clues. When we find the letterbox, we stamp our letterbox journal with the stamp we find there and stamp the book we find with our stamp. It’s similar to geocaching, but without a gps.

 

WEALTH AND RETIREMENT

Consult with your mom before wearing this one to the prom.

John @ Calling the Puts writes Save Money by Learning to Spend Wisely – The first step to investing is saving, and the key to saving money is learning how to spend it properly.

harry campbell @ Your Personal Finance Pro writes Why Borrowing From Your 401k is a Bad Idea – here aren’t many loans out there that allow you to borrow without a credit check and pay yourself interest, but that’s what a 401k loan does. Sounds pretty awesome right? Well it isn’t all good, and although pundits argue that 401k loans are a good alternative to commercial loans and definitely a better choice than an outright distribution, a 401k loan goes against the whole principle of retirement investing.

Little House @ Little House in the Valley writes Tiny House Design Plan Book – Downsizing has been a hot trend during this recession (or recession as of late if you think it’s over) and one way some people are downsizing is in their everyday abode. From Tiny Tumbleweeds to small eco-footprints, small is the new “in.” And small sometimes becomes tiny – tiny can be linked to freedom in some ways; freedom from too much stuff, too much debt, or just too much of everything.

Paul Vachon @ The Frugal Toad writes Deciding When to Retire – Deciding when to retire can be a difficult decision to make. Will I have enough income from my retirement accounts, pension, and social security to live comfortably in retirement?

Teacher Man @ My University Money writes Investing In Yourself Doesn’t Have To Be Expensive – There is plenty of buzz out there these days about “investing in yourself”. Usually it is in reference to some magical product that you should buy. The logic is that by investing in what they have to offer, you are really just spending the money to improve themselves, and really, who doesn’t want that?

Boomer @ Boomer & Echo writes Are You Counting On An Inheritance? – Many boomers are not well prepared for their own retirements and are expecting an inheritance windfall to reduce their debts and provide an income.

 

HOBBIES


MMD @ My Money Design writes Blogging Tips from All the Dumb Mistakes I Made My First Year – I made a lot of mistakes within the first year of my blog. Here’s a look back at them and my blogging tips for doing things the right way!

Grand Per Month @ Grand Per Month writes Make a Grand Per Month Writing Resumes – While the economy is rebounding, many are still looking for a job, which makes it a great time to create a side gig writing resumes. (Even in a strong economy, resume writers are generally in demand because resume writing seems to be a dying art form.)

Young @ Young And Thrifty writes How Far Would You Go to Score a Deal? – This is my journey to get myself 16,500 free Aeroplan points. It took a while, but in the end I was able to take a mini vacation!

 

GOOD EATS

And finally, when wearing the tee shirt didn't share your love of fruit nearly enough....

Miss T. @ Prairie Eco Thrifter writes Peach Tree Battle – Don’t fight the peach tree battle. Plant blueberries instead! We’ve had banner crops from two bushes for 4 years since planting them 5 years ago!

Alicia Sher @ wholesomehealthyhearts writes Running and Cooking and Baking, Oh My! – A post about running, eating healthy, and includes 2 recipes.

Linsey @ Lille Punkin writes My Recipe for Easy Pecan Crusted Chicken Fingers – Pecan crusted chicken is one of those dishes you probably think would be difficult to make at home; I would’ve agreed, had it not been for my accidental experiment in the kitchen that produced a beautiful version of pecan crusted chicken that even my kids enjoyed. This crispy and delicious meal takes just minutes to prepare, and it really does taste phenomenal.

Melissa @ Mom’s Plans writes Have a Bumper Crop of Cherry Tomatoes? Here Are Some Delicious Dairy Free Cherry Tomato Recipes – Our one little cherry tomato plant has been a prolific producer, already giving us 375 cherry tomatoes. The plant is still full of green tomatoes, and there are more blossoms. One of our CSAs is also experiencing cherry tomato overload, so every week for the last few weeks, we have been eating several meals created around cherry tomatoes.

 

Photos: Austin: The SeaFarer; Skull: antjeverana; Running: Sierrafit; Dollar: Demi-Brooke; Making Shirt: …love Maegan; beckett: Kripptic

Enhanced by Zemanta

2 Guys and Your Money Episode #8: Top 5 Ways to Save For College

by 1 Comment

We joke in this episode that when either OG or I have given college planning seminars at preschools, nobody shows up. But guess how many come when we speak at a high school to parents of juniors and seniors? Usually we’d have around 150 – 250 people. Packed house.

Let’s review: nobody comes when it was be easier to plan for college. Everyone shows up when you have few choices.

This week, we help you avoid the last minute “financial planner-at-high school seminar” with our favorite ways to save for junior’s education. On second thought, why stop at junior? How about YOUR education?

Dr. Dean leads the roundtable this week through a cool discussion of how different health insurances work. You’ll love the 101 style of this talk. If you don’t know the difference between an HMO, PPO and deductible, you’re in luck.

PK brings it this week with his second discussion on innumeracy…you’ve heard of not being able to read before (illiteracy). He’s back with a vengence on people not being able to do math.

Finally, we’re high fiving Dave Ramsey this week, as well as giving you one last chance to “guess the voice” and enter our drawing for Ramsey’s Total Money Makeover.

Enjoy the show!

 

Show Notes

<open> The snowball method…

<> PK’s Fractional Sense: Innumeracy

<> Let’s Give Something Away: Dave Ramsey’s Total Money Makeover

<> Roundtable: Health Insurance Options

<> Top 5 Ways to Save For College

<> End Show

Life Insurance: It’s Not Just for Breakfast Anymore

by 25 Comments

I wouldn’t call Life Insurance an “underrated” financial tool, but I would call it misundastood (to quote P!nk). When I first got into the biz of financial planning, I’d heard heaps of rules about life insurance: how much you should buy, what type you should have, and most importantly: Who To Avoid When Buying Life Insurance.

Specifically, I heard this: avoid life insurance salesmen.

To many people, the above phrase translates to: avoid anyone with a clue about how insurance works because you don’t know who to trust.

Imagine my surprise when I began studying life insurance during my quest to become a licensed advisor. There were tons of policy types AND uses for term, universal and whole life insurance policies. I was amazed at how versatile a weapon both term and whole life insurance could be: among a gazillion other things, you could use it to cover income streams, save for your kid’s college or protect an estate.

 

3 Cases of Mistaken Identity With Life Insurance

 

Here are some of my favorite misconceptions.

1) The only good policy type is term life insurance. If term is the only good one, why do universal and whole life insurance even exist? Are there that many rip off artists out there to support these huge insurance companies? I doubt it. Here’s another theory:

While I’ll wholeheartedly agree that the other types (whole life and universal) are grossly oversold by people who aren’t paying attention to their client’s best interest, these products were each created for some good reasons.

Whole life insurance, for example…how great is this: you pay your premium and you know it’ll be there FOREVER. No worrying about whether you’ll still need it when your term runs out.

…and how about universal life? It lasts forever, but you can change the death benefit to match your lifestyle. Check this out:

 

Uncle Joe’s Universal Life Story

 

Sally, our horse racing fan from the last story, has three boys: Larry, Curly and Morris (she nicknames him, surprisingly, “Moe” for short). As each boy leaves the house at 18 to become a real-life superhero, Sally now needs less insurance and lays off the vodka a little more. She calls her insurance company and sinks the death benefit down to reflect her new need. Now she can pay less money each week OR have more of her premium go into the cash value (money inside the policy) so that she can stop paying for the policy early and enjoy more retirement dollars without a life insurance payment. That’ll give her more money for the ponies. Win!

Cool, huh? I can hear the detractors beating on my door, pitchforks in hand. “You’re going to pay through the nose for those universal and whole life insurance benefits.” Duh. Let’s see a show of hands of people who think insurance companies give stuff away for free. Anyone? Here’s a little secret: any time insurance companies agree to sell you a guarantee you’re gonna pay for it.

2) You only need Life Insurance to cover income needs. Whole, Universal, and Term Life insurances are valuable tools for a variety of reasons:

Burial costs: If your money is in places that are locked up you might not be able to cover some of the costs quickly. Life insurance money can often be ready within a matter of a few days.

Liquidity: Some of those locked up places, like rental homes, aren’t liquid immediately. Life insurance can buy flexibility.

Business concerns: How many spouses of business owners are qualified to run the biz after the owner dies? In most cases, they aren’t. With the proper legal documents and a life insurance policy, the spouse is bought out and a capable underling, associate or competitor takes over the business. (term life insurance isn’t appropriate for this)

Estate needs: For large estates, there may be estate taxes due. These can be higher than 50% of the value of the estate. Ouch! Life insurance is an inexpensive way to cover these costs. (term life insurance isn’t appropriate for this)

3) Buy life insurance when you’re young and don’t need it because it’s cheap. Huh? Lets say there’s a special on Spam and it’s only $.05 per can. Are you going to buy 100 of them? No. Why not? Because you don’t need them. Apply that same principle to life insurance, whether it’s permanent or term life insurance . While there are a myriad of reasons why you might need insurance, don’t get caught in the “it’s cheap” trap.

 

OG and I want to thank Jeff Rose from Good Financial Cents for organizing today’s Life Insurance Movement. You can learn more about the movement on our latest 2 Guys & Your Money podcast episode, #007.

Why Getting Out of Debt Isn’t a Goal

by 50 Comments

If you’re working on climbing your own debt mountain, I’ll bet you’ve said more than once, “I wish I was out of debt” or maybe “I’d love to have no debt.” I understand those thoughts. Yesterday’s expenses are a pretty heavy weight to shoulder as you climb toward some big goals. Improving your debt ratio will give you more cash flow and flexibility. Just don’t call getting out of debt a goal. It isn’t.

Back in “the day” when I was an advisor, at the beginning of the first meeting with a potential client, I used to tell them we’d do two things: find out what their goals were and then talk about how they’re managing their money. These two parts of a financial plan should work together, but in most cases aren’t.

In many of these meetings, when I’d ask for a list of goals, a client would lean forward and say, “I want to be out of debt.”

I’d answer, “What do you want to do once you’re done getting out of debt?”

Most of the time people were so stuck on their debt problem that they’d never stopped to think: what if it wasn’t there? What should I do then?

Debt Is a Gigantic, Ugly Hurdle With Pimples

 

Did you watch the hurdles at the Olympics? Getting out of debt is a hurdle, but the world’s ugliest one. Each athlete has a series of problems in their way to find the finish line. Athletes don’t say, “Man, I’d like to get over that ugly-ass hurdle.” They say “I want to win the race.”

“Retirement” “new house” and “education” are some of the finish lines. Your debt ratio is keeping you from that goal.

 

Why It Matters

 

When you reach the summit and actually get out of debt, you shouldn’t be surprised when you bellow out a gigantic “WHAT NOW?” You have more money, more freedom and more flexibility. What do you do with it all these new resources?

Doughnuts? A sports car? Create a life-like statue of a car on a mailbox?

While those are excellent possibilities, I know what you’d do: use it to reach some goals.

You’re more likely to win if you focus on your goals. Here’s what I mean:

Anyone who listens to our Two Guys and Your Money podcast may not be surprised to learn that I’m a stutterer. They called me “The Jackhammer” in first grade. People would say over and over “stop stuttering” as my face contorted into an ugly grimace and all I could muster was “Th-Th-Th-Th-Th-Th-“. The phrase “stop stuttering” did nothing to help. In fact, if I thought about NOT STUTTERING, all I thought about WAS STUTTERING. Ironic, isn’t it?

Instead, I had to quietly think about the point of my sentence. I needed to look at the finish line. After two years of speech therapy at Western Michigan University, it’s barely apparent that I stutter. Some brilliant teachers taught me skills to make sure that you rarely know when I’m struggling to get the right words out. Mostly, this is because I was taught to focus on the end game, not on the hurdle.

It’s the same when someone says “I want to lose weight,” isn’t it? You could even substitute “I should stop eating ice cream” or “You shouldn’t pick your nose.” In itself, these only point out the negative that you SHOULDN’T focus on.

 

Why Debt Returns

 

Every once in awhile, we see a person keep the laser focus it takes when getting out of debt without real goals. Once they reached the top of debt mountain, though, they often don’t have anything to push on toward, so what happens then?

They jump right back into debt.

In short, their debt ratio sunk because they didn’t have a real goal for their newfound wealth. There was nothing the get-out-of-debt wagon was really driving toward.

It’s the same for what we’d call “shallow goals” in our office. People who wanted to “leave work” struggle during retirement. They cope with the fact that they’re getting older and there isn’t any reason to wake up anymore.

Those people didn’t have a goal to “retire.” They just wanted out of THAT job!

 

How to Stay Clear of the Ugly Debt Monster

 

It’s been written so often that you need to write down your goals that it seems trite to repeat here, but it’s true. When you focus on buying a new house, you’ll have to eliminate the debt hurdle to get there. Instead of being flustered by your debt ratio, you’ll watch it melt away because you can’t get the new house without the debt being gone.

By following a clear set of positive goals that you’re steering toward, it’s easy to focus on paying down debt. There’s something tangible now behind it. You can pick out curtains, look at furniture, imagine landscaping. It’s real. Tangible.

You might be thinking that finance guru Dave Ramsey has helped people clear the debt hurdle by celebrating it. He sure has. He’s turned “getting out of debt” into a celebration, where people want to be able to cheer about that finish line themselves. They want to holler on the radio. Maybe this is an easier way to fight the “debt as goal” problem that America has. If people want to be able to say “I’m debt free” enough, they’ll stay motivated to reach the finish line. While it works (you turn the celebration into the finish line), I believe for most of us the easiest path to a lower debt ratio is to focus on what you really want in your life, and the debt will melt away. You’ll be cheering, too.

Photo: Alan Cleaver

Enhanced by Zemanta

2 Guys & Your Money Episode #007: Jeff Rose Interview – The Life Insurance Movement

by 6 Comments

Nearly as suave as some other 007 you may know, this episode features the one, the only: Jeff Rose from GoodFinancialCents.com. He’s leading the tsunami of financial posts coming your way Wednesday, as the Life Insurance Movement roars across the blogosphere. Jeff talks about the movement, why life insurance, and common misconceptions, tricks and tips around life insurance policies.

OG & Average Joe discuss Roshawn Watson’s post on poverty at RoshawnWatson.com. What does it mean to be poor in America?

PK from DQYDJ.NET wonders if people with more money have more leisure. You might be surprised by his findings.

We give away Dave Ramsey’s book the Total Money Makeover by answering a simple audio quiz. Who is the person in the audio segment (hint: it’s a current or former person on the show).

And, of course, we can’t forget the roundtable team of Len Penzo, Dominique Brown and Carrie Smith who answer the questions: 1) What is your idea of a good coach (financial or otherwise); and 2) What’s going on in your financial life right now? We’ll talk planning, money surprises and refinancing during this segment.

Find more information about our contributors here: Our Podcast Team

Thanks for listening, everyone!

Show Notes:

<> Open: Poverty in America, a discussion of Roshawn Watson’s Do Americans Know What Poverty Is?

<9:25> Fractional Cents w/ PK from DQYDJ.NET: The Cost of Leisure

<13:02> Let’s Give Something Away: Dave Ramsey’s classic book: The Total Money Makeover. Guess the name of the person in our soundclip. Send your answer to joe@thefreefinancialadvisor.com. One correct winner will win the book!

<18:53> Roundtable with Carrie Smith (CarefulCents.com), Dominique Brown (YourFinancesSimplified.com) and Len Penzo (Len Penzo dot Com).

Topic #1: Let’s talk financial coaches. What are the characteristics of a good coach. Are you a good coach?

Topic #2: What’s going on in your personal financial house?

<37:28> Jeff Rose from GoodFinancialCents.com interview: Life Insurance Movement

<50:10> End of Show. Movies!

OG: Caddyshack (again) (Thumb up)

Joe: Hope Springs (Thumb up), The Red Violin on Netflix (Thumb Way Up), headed to see Bourne Legacy tonight.

 

 

 

 

Enhanced by Zemanta

Hi Ho, Hi Ho, it’s off to class you go….3 Smart Money Tips for Back to School

by 23 Comments

…and we go from watching Snow White to living that famous song.

Just like a little member of the Seven Dwarfs, my oldest son will be marching off in only a couple weeks. For him it’s the first time. For me, because I work with families who go through this every year, it’s old hat. Well, not exactly old hat (it’s always different when it’s your own child heading off…where does the time go?).




Let’s talk about the financial aspects of preparing a youngster for school. As a matter of fact, my wife just emailed me this long note about the various types of backpacks. Ugh.

As a parent of a young child headed to school for the first time, I’m concerned about going overboard on all the expenses – there’s a difference between necessity and would be nice if… so let’s break down Back to School costs into a few categories.

1) Expenses associated with classwork – Markers, paper towels, pens and pencils. These are necessary and thankfully, pretty inexpensive. For my son’s schools, they’ve prepared for us a list of the five to ten things he needs to bring. The key is to not overspend or overbuy. If the teacher says “an 8 pack of crayons” you don’t need to, nor does the teacher want you to, buy the wiz-bang 64 pack with the automatic crayon sharpener. Save the money. Look for tax holidays to buy.

Many states participate in these by making back to school costs tax free. Check this Bankrate post: Sales Tax Holiday to see if your state has a tax holiday.

2) Costs to clothe your child. I recently saw an ad for Walmart regarding their back to school clothing prices and how affordable they are. I remember when I was a kid-I would never be caught dead in non-name branded clothes, and I successfully broke my parents budget every year complaining until I got what I wanted! Don’t fall for this trick! Children, especially younger ones, need quantity, not quality. Spend money on good shoes, but don’t go crazy buying up too-cute name-brand clothing. Consider Costco, Walmart, Sam’s club etc, or thrift stores, discounters or hand-me-downs. Ignore Banana Republic, Neiman Marcus, or Saks. Of the big box discount retailers, I like Costco – it has superior customer service and a terrific return policy.

Even if you don’t subscribe to the newspaper, you may save a ton of back to school money looking for coupons in the Sunday paper advertisements over the next couple of weeks. Consider the cost of the paper a good investment!

3) Finally, there are the “at school costs” like lunches, after school costs, and field trips. These things you need to start budgeting for today. Our school has a hot lunch program that we can pre-pay for substantial discount. The problem is that the food is less than nutritious, so we’ll be skipping that. But for the last 5 years, our son has been getting lunches at his daycare and we have to provide those now. The other “unknown” is the cost of the occasional field trip or afte school activity. Prepare for them now and you won’t be surprised when they show up later!

Ask older parents how much money they spent the prior year on these activities for ideas on exactly how much you should be prepared to spend.

Back to school shopping and planning can be a fun and exciting time for both parents and kids. The key is to not go overboard in your excitement!

Photo: School Bus: Cole 24_

Those are my three favorites. What are your favorite back to school tips?

My Favorite Quirky College Saving Strategy

by 28 Comments

My niece, Madeline, heads to the College of Charleston today. Good luck, Maddie!

Sometimes people don’t want to invest in a 529 college savings plan. I understand that thinking. Once college is over, the investment is gone and what does mom or dad have to show for it? Hopefully you have an educated child with a good enough job to afford a really big house. They might even let you sleep in their guest room if you’re lucky.

What if there was a way to save toward college but keep the investment AFTER junior finished graduation? Wouldn’t that be cool?

There is such a beast, but there are caveats, as there are with any investment:

First, you have to be interested in rental real estate.

Second, you have to have enough money for a down payment on a piece of property.

 

Here’s how it works:

 

Find a house near the school junior plans to attend. Make your best deal for the home. There are plenty of sites that discuss how to purchase rental real estate. I recommend you read Paula Pant’s story Is This House a Good Investment at Afford Anything.

Interest rates are low now, so this is an especially good time to jump on this strategy.

Complete the purchase and perform any needed repairs to rent it.

Ask junior if any friends would like to live in the house with him/her. If not, place an advertisement in the local newspaper and on Craig’s list. PT Money recently ran a good story about how to check the credit of your renters (read Find a Tenant: Credit Check and Screening). The kids might not have any credit, but mom or dad probably do.

Rent the house for enough to cover the mortgage costs and upkeep. Even if junior’s friends become your renters, make sure everyone pays a security deposit and signs a lease. Keep it professional.

…and here’s where it gets fun.

Hire junior to be your property manager. For this to work, JUNIOR MUST DO SOME ACTUAL LABOR. Make a list of official duties, create a pay scale, and have junior sign an employment agreement.

Pay junior a wage. You may want to hire a local payroll firm to deduct taxes and create an actual paycheck (this service costs far less than you’d imagine). If he does well, give him bonuses liberally.

Junior uses the wage to pay tuition costs.

At tax time, claim the rental house income and expenses on your taxes. This includes the cost of junior’s labor.

 

Why this works:

 

You’re receiving a huge discount on your college expenses AND collecting any excess rent plus keeping any appreciation on the property.

Junior, at best, is collecting the wage while in the 10% tax bracket. You’re probably in the 25% bracket if you’re like most people who read financial blogs. You save 15% off the cost of your college simply by paying junior to take care of your property for you, plus you have a built-in manager (no real out of pocket additional expense…you were going to have to pay that money out anyway for school costs).

Additionally, you receive MORE savings off of the education expense because you’re deducting junior’s salary as an expense from your taxes.

I need to be 100% clear here: this can’t be a tax avoidance strategy. You’re asking for an IRS audit that you’ll lose if you simply buy a house a funnel funds for junior’s college through your property costs.

Your goals should be: 1) own rental real estate; 2) make a gain on your investment by deducting all legal costs of owning property; and 3) employ junior for a fair wage as he/she heads to college. If junior uses this money for school, great.

 

If not, you’ll have other ways to make your child sorry they didn’t listen to a good parent’s advice!

 
Photo: College: 401k 2012

Enhanced by Zemanta