Tuesday, April 8, 2008

Money Talk Tuesday

You know what time it is!

First, you can review the final poll results to your left. What I find most interesting is that not ONE single person (who stated their partner was responsible for their finances) thought that their partner was maybe a little shady with their finances... yet several people profess to being shady themselves. Just something that made me go "Hmm". (Oh and a shout out to the one brave & honest soul who marked themselves as "clueless"!)

Second.... the meat and potatoes of this week's financial post...

Why are so many smart, educated, people living their lives completely uninformed about their personal finances?
I'm one of you and I'm the first to admit it. Why does it seem complicated? Why so daunting? It isn't really... is it? The truth. The absolute real truth is that it's not. It is no more complicated than any other cause and effect type relationship. And it isn't any different (on many fronts) as, say, a diet and exercise plan.

And yet both of these things... things that require discipline and follow through... are easy to write off as complicated. Why?... because we want them to be. Because if they are then we can't be expected to do them.

Well I'm doing it. I'm really doing it. I don't know what I'm doing but I'm learning. It is time. We are all, clearly, smart enough to figure this out. This is not our accountant's job, or our financial advisor's job, or our partner's job. This is really life. This is our job. I'm doing it.

And I expect you to do it.


Haley said...

You're so right -- taking control of your finances is very similar to taking control of your health. It's all about being accountable to yourself, and literally counting everything in both cases...dollars, interest rates, calories, cupcakes...

I went through a phase (which maybe I should revisit) when I tried to learn one new financial thing a week...the difference between traditional and roth IRA's...what an index fund is...whatever.

Totally empowering -- just like finally accepting that what I put in my mouth really was the reason my jeans were tight. :)

G in Berlin said...

I have an MBA in finance and all around me I see people acting in the most amazingly silly ways with money. One doesn't need a degree to be sensible. But whenever I (very carefully) try to give advice (especially on real estate, as I also have a license and a real estate degree) folks do the exact opposite. Remeinds me of my dad and his ability to burn a bolied egg: one stops feeling sympathy and starts feeling it's deliberate (cf my mom and her inability to program the VCR or get TiVO if the the former is too hard).But- I need to get going on my diet and join a gym this week;-)

Jim Purdy said...

I'm trying to cut back on my spending, but I've developed a serious habit of buying books, books, and more books from Amazon.

Yeah, diet books. And then I snack while I read my diet books.

My book and food expenses kind of add up,both in dollars out and calories in.

Marie said...

I think its easier to live in denial than face the truth. I know when DH hands me a big wad of reciepts that he "forgot" to give me before I did the bills, I will put off doing them for DAYS! Its like if I don't put them in the registry, then that money hasn't really been spent away, and I can continue to live in my happy little denial bubble a little longer. Now, these times aren't
"breaking the bank" but they ARE still hard to deal with, especially when I figured out that if we spend xxx extra dollars to the car payment, then we could be paid off by fall (YAY!), and then DH spends that extra money (unintentionally...he doesn't deal with the money...little bit of denial there too).

And I DO feel better once I've put them in and dealt with it and know where we really stand. It's like a weight is lifted off of me, no matter how bad it is. But next time, I will still put it off even though I KNOW I'll feel better after I do it.


Feener said...

i think EVEN if you are smart and educated, no one except people in the business are 100% confident about investing. Yes, I think one feels foolish to have to pay someone to tell them what to do with their money.
common sense is save your money, save for college, 6 month emergency fund, retirement. don't have credit card debt. but what isn't common sense is...what is the best way to save for college - a 529 ? should you save for college first or retirement (if you have to choose). is it better to buy a car or lease ? how much will i need for retirment and what funds should i investing in. i don't feel like those are common sense and only someone who works in the field would know. i think educated people feel funny that they don't know it all.

emmyjw said...

Ouch...guilty as charged. I am like you, I pay all of the bills, but I really don't know how much or where it all goes. I am trying to get Nolan on board...man that ADD is killing me.

Cara said...

I am on top of it as much as possible. I try to not deal with it though when I am overwhelmed, and tell myself i can come up with a solution the moment I make more money. Bad way, but I bet other people do that. Hmm. Right now I am dealing with it, but am close to overwhelmed.

Mrs Furious said...

You can learn this stuff.
Now I'm not going to start picking out my own stocks or figuring out which mutual fund is better... that I will leave to a professional. But you really can find out about the college and retirement. And some of that is probably going to be a personal preference.

We have our state's 529s for the girls. Our state offers a tax right off for the amount we invest every year (up to a certain amount) not just tax free withdrawals. Kind of like a Roth IRA. Our Financial guy recommended we do that and do it for the taxes purposes for us (always a big deal around here) and ... "you can't save enough for college" were his exact words.

Most people say put retirement savings over college, that their are student loans for college and no retirement loans. That makes sense.. but sending my kids to school is a priority for me and I want to offer my kids the same opportunities that I had (in choosing an out of state private University).

Mrs Furious said...

I like the once a week topic idea. It is very easy to go a little over board and then feel overwhelmed...

"Yeah, diet books. And then I snack while I read my diet books."
LOL! I've been there.

G in Berlin,
Oh people always need to thumb their nose at the authority. So stupid. And yet I'm guilty of that myself...

I can't remember... are you guys all cash? I'm thinking of switching to some cash but I'm nervous about it. We don't have credit card debt so I was trying to get as much reward (529 contribution) for what we buy... but I think we would buy less with cash. Hmm... I need to experiment.

"Right now I am dealing with it, but am close to overwhelmed"
LOL... yes I spend most of time in that state!

G in Berlin said...

Actually, I am a professional (on hiatus with the kids;-)) and some of this stuff is really easy.
1st (and I don't have any connection to them) subscribe to/get from the library Money magazine. It is really readable to the layperson. It will tell you (through charts, then you make your own choices) things like what fund to buy, what type of allocations to use, and it has great explanations of finance pointed to the normal, non-finance person.
2nd. Save for retirement to your maximum, then for college. This is a no-brainer (and by the previous I mean in 401ks, 403bs, 457hs,IRAs, Roth IRAs, etc) because themoney that you have in those will not be used to decrease the financial aid given to your kids. then max the 529s in a state plan that has good management- they have justr passed a law saying 529s will also not be counted as a students assets interms of financial aid.
You can always get a loan on your house (deductible) to pay for the kids' schooling, you can't do the same to fund your retirement savings and have themcompound interest for 20 years.
If you can afford both, of course do both.
And don't be tense about finance- it's a lot of fun.

Mrs Furious said...

G in Berlin,
Ooooh thanks! So the money we have in retirement funds and the 529s will NOT be counted as "assets" when assessing financial aid. That's what you said right? Good to know.
Now let me ask you (hope you don't mind... you said it was fun...) Mr F is contributing to his 401K to the maximum matching. Hi employer actually matches times 3. But they cap the match at 3%. So he's doing 3% their doing 12%. Should he contribute more than their matching cap?
I do have a financial advisor ... but let's just say I'm a really small fish in this guy's pond and I need to switch to someone who I feel is more of a "peer".

Feener said...

my question is do you pay your financial advisor ? what is the best way to find one ?

Mrs Furious said...

Yes. I have a fee based advisor. So you pay based on your portfolio size... not per transaction. I'm pretty sure that is the way to go. Suze Ormon said that on an Oprah once...
I got my guy when I was in college, he was my father's at that time. My dad has since left. I want to as well... not because my money isn't being managed well but really because he is my Dad's age and I just don't feel comfortable asking him my regular old questions. Which is dumb because I'm paying him either way. I haven't switched (he's from out East) because we kept thinking we might move back. Now I just wish we had a local person... but I'm scared to choose someone new... how do you know if they are any good?
This is my mission for this year. To meet with people and feel like I have a comfortable connection with someone.
I feel like I've grown up but my relationship with my advisor hasn't changed since I met him.

G in Berlin said...

Yes. To the best of your ability (after you have a relatively liquid and safe cushion of 3-6 months living expenses- depending on your sense of security and other assets) you should absolutely max out the 401k before you put the money in a 529. It's a bit of a bummer for us here in Germany, where a 401k is not deductible from the German taxes we pay (which are then applied to our American taxes, but since German taxes are higher we never need the 401k deduction there) and we still put as much as we can afford into the 401k before anything else. This year the max allowable is 15,500 (and it was the same for 2007 but too late for that now).
And unless you are active traders, don't get a financial advisor with a wrap fee: get Money magazine and Fortune's lists of top mutual funds and put yourself in something like Vanguard (no load, lowest fees, v high quality) target funds (based on the year you need the money or want it) which automatically re-allocate as time progresses. Top up with an in'tl fund.Use a no-fee Schwab account, they also have research available for free.If you need handholding, use an accountant for your taxes and get him to give you a quarterly look see with advice.And yes, I miss talking about this stuff. Even though I don't speak German, I still handle all our finances here. Thank goodness for web sites with translation!

Mrs Furious said...

Sadly (well not sad... but complicated) I have a portfolio of gifted stocks... so management is required at this point for me.

But thanks for the free advice! I"m going to get Mr F to max out his 401K contribution.

Deb said...

I don't think the intimidation is entirely about complexity or the numbers. I think financial problems revolve more around emotional maturity and insecurity than the size of one's paycheck or ability to control debt (as it related to cash in/cash out). People bring a lot of baggage into their financial lives, especially when they get married. So I think the weight analogy is a good one, but it's not always as easy as just taking control. Maybe more people should take advantage of credit counseling and advisors to get them over that fear. After all, we go to gyms, consult trainers and talk to therapists about everything else, right? (Right? That's not just me, right?)

Julie said...

Ummm, I have no money to manage nor do I really have any money to take control of :( No stocks, no trust funds, no savings, no college funds, nada, nothing.

It sounds like I am in the minority with this one. We don't have much extra after paying all of our monthly bills. But I am happy that we can pay all of our bills. Plus I do spend a lot on my coffee beans each month:) I could take that money and invest it in my kids' college, but I am shortsighted and would rather drink my good coffee:)

My husband does contribute to his 401k to the max and I know there is some kind of matching. We are hoping that when I get a job once again that my salary will go to college savings.

I could probably squeeze 50 to 100 bucks a month out of our budget to invest in something...but that's it right now. I used to get Money magazine actually...it is a good magazine and very readable. BUT it was definitely not for someone like me with no money to begin with. In fact, it used to make me feel inadequate for sure.

Mrs Furious said...

I doubt you are in the minority. Factually speaking a majority have significant debt.
If I hadn't been gifted stocks we'd have nothing. Mr F only qualified for his 401K this past Dec. So literally nothing. And that portfolio we literally try (try being important word) not to touch it since I don't make anything and Mr F is 40 next month... you do the freaking math.

Mrs Furious said...

I suppose that depends on the person. For me I am just simply intimidated by the immensity of the financial world at large and the potential ramifications of investment mistakes. I don't have a spending or debt problem and never have. I'm literally intimidated by the fact that I was never taught this critically important information and yet I'm responsible for managing my family's financial future.
Mr F definitely falls into the immature category. He just doesn't care or want to care. Period.

As for financial counseling and advise... I think much like trainers and therapist... they are luxuries and those with serious need don't have access to them.

Deb said...

Hmm... yeah, sorry, that comment wasn't as clear as I would have liked. There should have been something in there about providing services like therapists, counselors, trainers, etc. for people who need them, and my comment about me was about using financial counselors when I was in college. I swear there was a pithier version but the internet broke briefly and I lost it, then had to start over. LOL... I'm not quite the elitist that comment made me out to be -- I don't have the money.

Mrs Furious said...

you don't have to be sorry...

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