The Joneses Are Broke

Food For Thought - Legacy ~

2013-06-28T18:24:00.000-07:00

"Unless you're a billionaire, no one is going to remember you for your money. Your spirit is the currency that lasts."

~ Craig Matters, Managing Editor Money magazine

So true. I'd also argue that even if I was a billionaire, I'd want my legacy to be something above and beyond my money.

Currently, my spirit seems to be speaking in more of a whisper than a shout, and I'm trying hard to listen attentively to what it is saying. Or maybe the summertime volume of the kids is drowning my "spirit voice" out, crushing said spirit and reducing my legacy to a few lucid high points in my youth. Six of one...

What is your spirit saying to you? What do you want your legacy to look like?

Food For Thought - Mess With the Bull ~

2013-06-07T07:37:00.000-07:00

"Trying to chase down a bull is just asking to be gored."
~ Craig Matters, Managing Editor, Money magazine

Yes! Yes! Yes! I know, it's tempting, not to mention very, very easy to get swept along with the herd. Hold your ground, though. Too many times market-chasing ends badly and can have long-term negative effects on your financial health. Go grab a coffee and just be a spectator, watching the other "daredevils" run for their financial lives.

Chew on this: if it were that easy to chase down a bull market there would be many, many more millionaires and billionaires.

Action...and Scene ~

2013-06-05T12:21:00.002-07:00

FADE IN:

INT. CONFERENCE ROOM - MORNING

YOUR EMPLOYER

So, we'd like to give you some extra money.

YOU

Sweet. What do I need to do? Work more hours?

YOUR EMPLOYER

Nope. You just need to save some of your money for your own retirement. Oh, and you'll get some cool tax benefits too.

YOU

Nah. I'm good.

If your employer offers a 401(k) match and you are not taking advantage of it it is as if you are having this conversation with them.

D'OH!

Don't Be a Bob ~

2013-06-04T15:20:00.000-07:00

"Bob works in architecture. At his current pace, Bob will retire when he's 153, which would be fine if Bob were a vampire. But he's not."

Well played, TD Ameritrade. Well played. This commercial makes me laugh every time, mainly due to the deadpan nature with which the narrator delivers this message.

Don't be Bob. No matter what your age, take retirement planning seriously and make sure that you are putting your retirement savings at or near the top of your priorities list.

Come ON ~

2013-06-02T16:17:00.000-07:00

I nearly spit out my coffee...

Saw this in a magazine this morning. Just stop. I would argue that, in fact, a girl does not have to be married in Manolos (funny coincidence that Suri heard that as "money"...or is it?). Aren't brides under enough pressure to have "the perfect" wedding? Now we're telling them that they have to wear shoes more expensive than some people's cars in order to accomplish that? What do Manolos have to do with a marriage? Beautiful shoes and lovely with a wedding dress, yes, but the message stinks. Nice shoes if you can swing it, but as a have to on your wedding day...N.O.

In the interest of fully disclosing sources, I will say that the photo that I took a picture of above is by Jessamyn Photography and was featured in an advertising section of Diablo magazine.

Marrying Rich: Not a Financial Plan ~

2013-05-31T07:27:00.000-07:00

Marrying rich is not a financial plan. Unfortunately, I think this concept escapes too many women, and we pass that along to our daughters. Last month, I helped some Brownies earn their money manager badge. First step: rework the suggested outline so that the ENTIRE focus of the badge was not about shopping and spending money wisely. Sure, that's a piece of it. But, where's the concept of saving? Investing? Giving? Why do we focus on shopping just because they are girls? Seriously?!

This circles back to one of my pet peeves: the assumption that all of the financial decisions in a household are handled by a man. At least a good 80% of the financial material that makes its way into our mailbox is addressed to my husband, despite the fact that he happily (really!) hands those reins over to me. Society in general does a bang-up job of subtly communicating to women that investment and money management is a man's job and not something they have the prowess to take on. Somebody get me a shovel.

Those of us who are mothers are already shouldering far too much self-imposed guilt. I feel it too, so it is not lightly that I say that we have an integral part to play in countering this stereotype. Too many mothers do not make learning these life skills a priority for themselves, let alone their daughters. And to them (if you think I'm talking to you, then I probably am) I would like to say that you are doing yourself and your daughter (and sons too) a disservice. Not only can you learn and get more involved in the financial areas of your life but it is important that you do so.

Let's be real. Husbands can leave. Husbands often die before their wives. Husbands can mismanage your collective money to the poorhouse. Then where are you? Our daughters may not get married until well into adulthood. Or at all. What are we teaching them about becoming knowledgeable, financially solid members of society? Would you want them to mirror your financial behavior as they get older? It's not too late to turn that train around. Start with honesty and build a better foundation from there.

As a side note, I'd like to tell CNBC that not all of your viewers have erectile disfunction and in fact, it is a biological impossibility for some (go figure). We can probably slip a different commercial into the mix every now and then. Thanks.

Food For Thought - Life is Not a Competition ~

2013-05-10T08:10:00.000-07:00

If you are living your life as a competition, you are not truly living YOUR life - the one you were meant to live. I see too much of the competitive other version swirling around me lately.

My hope for everyone this weekend is that you will take a moment to be still, accept the silence that comes, and really ask yourself: What do I want? Is it really all that stuff that everyone else seems to have/do/want/chase? Or is it something more meaningful to me?

Food For Thought - Foresight ~

2013-04-05T08:00:00.000-07:00

"It's dangerous to make long-term decisions based on short-term emotions"
~ George Loewenstein, professor of economics and psychology at Carnegie Mellon

Unfortunately, too many of us let our emotions, generally fear but also often greed, steer our decision making where investments are concerned. What might feel right in the short term, though, is less so when looking at the longer-term impact. Hard as it may be, try to quell your short-term emotions when making investment decisions. Or at least recognize them for the alarmist liars that they can tend to be.

Bond(age) ~

2013-04-03T07:30:00.000-07:00

"45 percent of bond investors in a recent survey conducted by Schwab did not realize their bond fund could lose money if interest rates rose. In a rising interest rate environment, boring old bonds are anything but safe."
~ John Mauldin, The Little Book of Bull's Eye Investing

Simple rule: bond prices fall as interest rates rise

This makes sense, if you think about it. Say you have a bond worth $1,000 paying 2%. Interest rates rise, and you want to sell me your bond. Well, now I can go out and buy a newly issued bond for $1,000 paying 3% (because rates have risen). Why would I give you $1,000 to earn 2% when I can give $1,000 to someone else to earn 3%? That's not a trick question. I wouldn't. Even though you're cute.

So, what do you have to do to make your 2% bond attractive? You have to put it on sale. You offer it, not for $1,000, but for something less than $1,000. And, ta-dah! Suddenly, your 2% bond is more attractive (like that rainbow-striped sweater that's marked down to $4 from $50).

And for those of you anticipating some type of 50 Shades of Grey post based on the title, sorry to disappoint. Also, get your mind out of the gutter.

Food For Thought - Game On ~

2013-03-22T08:00:00.000-07:00

If you're a former Jones trying to change your spendthrift ways, chances are you have a competitive streak that contributed to your situation. I say, turn the tables on it. That's right. I just threw down a challenge. Booyah.

Use that competitive nature to your advantage. Most of us have heard about people who use this competitiveness to motivate them when trying to lose weight but why limit ourselves to just that? Find a like-minded group of friends and acquaintances and create a little friendly and mutually-beneficial competition. See who can save the most during a specific time frame. Who can pay down a bigger percentage of their debt? Put it all on the table, and let the games begin!

Yippee ki yay party people.

Meaningful ~

2013-03-18T13:31:00.000-07:00

Resurfacing. These last few months have been a necessary break. Issues, both good and bad, have pulled me away and demanded my attention. An increase in work hours and time dedicated to my children's school has stolen time from other areas of my life. The challenge of my son and his multiple food allergies starting kindergarten has been a drain both on my time and my emotions. And I felt quiet. I'm not about filling space here just to fill it. I have to feel like I have something to say, and for a while, I did not.

For the last few days I have been giving a lot of thought to the meaningfulness of money. Some people see money as the goal itself. They want money. Lots of it. But there's no specific need or goal that they are reaching for. The money is the goal. That is a recipe for disaster. What happens when you get it? And how much is enough? It's a little like the person who wants a wedding, then doesn't know what to do with the marriage that comes after and feels let down.

Others think money will buy respect (nope - you gotta earn that), friends (perhaps, but not the true friendships you're looking for), things (okay, I'll give you that one), happiness (fleeting), or any number of other things.

But here's what's really true. Money buys you options, and THAT is the true role of money in your life. If you understand and respect the sacredness of that, you may find that your relationship with money evolves and becomes easier and more rewarding.

October?!! ~

2012-10-16T12:13:00.001-07:00

First - a big thank you to all of you who inquired about my silence. How in the world is it OCTOBER already?! All is well in my neck of the woods. No full body casts that prevent me from moving my fingers across the keyboard. I am, however, completely over committed...in danger of possibly shedding the over part and just being committed.

Despite appearances, I don't have plans to abandon this blog. In fact, my hope is to carve out some time to migrate everything over to WordPress.

Thanks for hanging in there with me!

Food For Thought - So Emotional ~

2012-07-27T15:02:00.000-07:00

"If you haven't been feeling emotional about money lately, you must have an excellent yoga instructor."
~ September 2011 Money magazine, from an interview by David Futrelle

Namaste.

Living in the Past ~

2012-07-25T09:55:00.001-07:00

Have you heard that song by Bowling for Soup, 1985? In the song, a woman is wondering where the time went. Among other things, she wonders who the other guy is that's singing in Van Halen and when Motley Crue became classic rock. I chuckle every time I hear it. Who (other than an 18 year old) can't identify with this? Time changes in ways that we can't, don't, or won't predict.

Yesterday, I began my post with a quote from a study on why investors overreact to good news and underreact to bad news on stocks that they like. In fact, to their detriment, people tend to do just the opposite.

In general, investors are likely to make forecasts for the future that closely mirror that of the recent past. The stock that has been going up in share price for the last year? We tend to see it continuing to rise. Those that have been recently hammered? We predict they will continue to fall. There have been studies done to confirm this, and that kind of bias actually has a name. And yet...

Often it is statistically impossible for the "favored" stocks to continue to increase at the rate it has been for too much longer into the future. And that stock that was beaten down? That one may have been the opportunity that got away. We really mean it when we say past performance is no indication of future performance. Try to loosen your own grip on that bias towards the recent past.

Before you know it, boy band ~~puppies~~ members are actors and Madonna morphs into Lady Gaga.

Mr. Smarty(wet)pants ~

2012-07-24T07:30:00.000-07:00

"The extrapolation of past results well into the future and the high confidence in the precise forecast is one of the most common errors made in finance."
~ David Dreman and Eric Lufkin in their study Investor Overreaction: Evidence that Its Basis Is Psychological

So, back in my early twenties I dated this guy who got pretty drunk one night and was lying on the floor bragging about how smart he was. It went something like this: you could line up ten guys and I'd still be smarter than all of them put together. Um, yeah.

About an hour later, Einstein wet himself.

Don't worry - this isn't a post where I explore how much of an incredible doormat I was in my early twenties (huge). That conversation probably involves a couch and a co-pay not to mention that, perhaps to my husband's occasional chagrin, I am so over it. Instead I want to talk about the hazards of over confidence in your financial life.

Confidence can be a cruel, cruel mistress. Not enough of it, and you don't take the chances you probably should with your finances. You leave your money under your proverbial mattress or tucked safely in the bank falling further and further behind relative to inflation. You pull your money out of stocks at the worst times out of fear instead of relying on logic and sound decision making. Or maybe you wash your hands of your finances all together, allowing a spouse or a third-party to make all of the decisions for you.

Not good.

But, too much confidence is a sword that slices just as deep, if not deeper. Too much confidence leads you to think you are smarter than all of the other investors or professionals out there. You can do no wrong. You are the master of your financial domain and nobody can tell you you're wrong. You ignore prudence. You begin to trust in an inflated confidence in your ability to foresee the future. And your overconfidence becomes your very expensive downfall.

Food For Thought - Riveting ~

2012-07-20T07:30:00.000-07:00

"Don't make money your goal. Instead, pursue the things you love doing, and then do them so well that people can't take their eyes off you."
~ Maya Angelou

This just makes me smile. Of course, maybe being financially healthy should be at least a little part of your goal.

Financial Literacy Question #2 ~

2012-07-19T07:30:00.000-07:00

This next question is also from the Jump$tart Coalition for Personal Financial Literacy test for 12th graders.

Doug must borrow $12,000 to complete his college education. Which of the following would NOT be likely to reduce the finance charge rate?

If his parents took out an additional mortgage on their house for the loan.
If the loan was insured by the federal government.
If he went to a state college rather than a private college.
If his parents cosigned the loan.

Ready for the answer?

The answer is c) If he went to a state college rather than a private college. All of the other options would likely result in a lower interest rate on the loan. What college the student goes to? While everyone else under the sun may care that you chose UCLA over Stanford...a loan is a loan is a loan. The lender providing you the loan really doesn't care. Bummer.

Financial Literacy Question #1 ~

2012-07-17T07:30:00.000-07:00

It's always bugged me how poorly students (and even adults!) reportedly do on financial literacy tests. Okay, so we give our students a test. They do poorly. What's the follow up? Do the groups that administer the test go back through it and give the correct answers, teaching the students and educating them on the fundamentals of finance? I have no idea.

But, I do have a blog. And a different idea.

I searched the internet for sample questions on financial literacy tests...and I'll occasionally go over a question here.

Question #1 is from the Jump$tart Coalition for Personal Financial Literacy test for 12th graders. Average score on this exam? Usually hovering around 52%. Sigh.

If you had a savings account at a bank, which of the following would be correct concerning the interest that you would earn on this account?

Sales tax may be charged on the interest that you earn.
You cannot earn interest until you pass your 18th birthday.
Earnings from savings account interest may not be taxed.
Income tax may be charged on the interest if your income is high enough.

How would you answer this?

Correct answer? d) Income tax may be charged on the interest if your income is high enough.

More detailed explanation: Any interest you earn on a savings account is taxed as ordinary income, at whatever your income tax rate is. Minors, however, get a bit of a break with what's often referred to as the Kiddie Tax. For 2012, the first $950 of unearned income (like interest on a savings account) is tax free. The next $950 is taxed at the child's tax rate, likely 10%. Anything over that $1,900 will likely be taxed at the child's parents' income tax rate.

No Excuses ~

2012-07-16T15:28:00.000-07:00

Have you been thinking about starting an investment account, but putting it off because you "don't have enough money to invest?" Great news! Odds are, you have plenty to get started.

Did you know that Charles Schwab's account minimum is only $1,000? Fidelity's is a bit more but still reasonable and perhaps surprisingly low at $2,500.

So, opening an account may be easier than you think. The trickier part may be to find a mutual fund to invest in. Most mutual funds have a $2,500 minimum. ETFs (exchange traded funds) don't have minimums, generally, so they can be a good alternative if you don't meet the minimum you need for a fund, but you do have to pay to buy or sell them - generally around $8 or so at discount brokerages.

It's always good to look at what the specific offerings are with whatever brokerage you choose. For example, Schwab offers marketing tracking portfolios that have low minimum initial investments and low expense ratios (think of expense ratios as what it is going to cost you to own a particular investment. Lower is better).

I like index funds that give broad diversification for small portfolios. In theory, the broader your exposure/diversification the lass risk you take on in your portfolio. Consider what options are available to you, given how much money you have to invest.

Having trouble making a decision? Morningstar.com can help with research and allows you to compare funds that you are considering. It's a good place to start any research, for sure.

Just remember, building your emergency fund comes first and the stock market isn't a place for any money that you will need within the next 5 to 7 years.

Easier than you thought? Great - I love being the bearer of good news. No excuses! Open that account and get started saving and investing sooner rather than later.

Nags and the Nagging Naggers Who Nag Them ~

2012-07-14T19:47:00.001-07:00

I am trying to figure out when the Rock Stars of financial advice took a wrong turn and moved from frankness and a no-nonsense approach to actually being condescending. Has anyone else noticed this or is it just me? It is incredibly disappointing, to say the least. There is clearly a need for education and advice out there, and bonus points should be given to those who can accomplish this without having to provide CliffNotes to be understood. But condescension and conceit? There really should be no place for it, at least if you sincerely care about conveying information in a way that will be readily understood and embraced by the person that you are speaking with.

Also puzzling? Those personalities who refer to themselves in the third person. The Joneses are Broke doesn't understand that. The Joneses are Broke thinks that it sounds kind of pretentious. Maybe someone can explain it to The Joneses are Broke.

Food For Thought - Focus ~

2012-06-22T08:30:00.000-07:00

For the next week try to change your financial focus for the better.

Instead of focusing on the $100 you don't have, choose to focus on the $10 you do have.

Can You Afford Your Life? ~

2012-06-21T13:24:00.000-07:00

Last year, the Wall Street Journal ran an article reporting that nearly half of all Americans are "financially fragile." The article was based on the findings of a paper published by the National Bureau of Economic Research. As part of a survey, participants were asked a simple question:

If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?

In the U.S., 24.9% of respondents answered in a manner reflecting that they would certainly be able to get the funds. 25.1% reported being probably able, 22.2% probably unable to get the funds, and 27.9% were certainly unable.

Sadly, some of the sources were payday loans and pawnshops - hardly a recipe for financial strength.

How would you answer the same question? Could you readily and easily come up with that $2,000? If your answer is no, now ask yourself why not? Are you living a life that you cannot afford?

$2,000 is not a cataclysmic event. It's a transmission in need of replacement, a broken arm, a leaking roof. It's more a matter of when not if a road bump with that price tag will show up in your financial life.

Be ready. Live a life you can afford. Live a life that leaves you financially strong, not fragile.

Too Big to Fail ~

2012-06-19T17:57:00.000-07:00

Exhaustion, single parenthood be thy name. My husband was out of the country for work for the last few weeks. Combining single parenthood with the last week of school, ballet recitals, allergic reactions, trying to work from home, and any remaining shred of sanity proved to be my match. I consider myself a pretty competent person, but there should be a Mt. Rushmore-type homage equivalent to single parents every where.

On the plus side, it went better than this same trip last year, which ended up getting extended for an additional week and involved a canceled flight, my son locking us out of one of our bathrooms (which, when I think about it, is far superior to locking us IN), and a pair of Monday underwear stuck up on the top of our TV cabinet. Apparently, even at four, Mondays are something that can just be skipped.

What was that? An emergency retaliatory financial planning caucus in Bora Bora that I must attend? If only...

Playing By the Rules ~

2012-06-06T14:39:00.000-07:00

If your local library has a copy of Money Rules by Jean Chatzky it is worth the loan. You can read this book cover-to-cover in less than an hour, but it will be worth your time. There are 94 "rules" in the book, but here are my favorites:

#26 Just because someone will lend it to you doesn't mean you should borrow it
#31 Don't borrow more [money] for college than you expect to earn the first year out of school
#65 If there's already a bandwagon, you're too late to get on it
#81 The harder the sell, the faster you should run

And, my personal favorite...

#73 Hope is not an investment strategy

Amen, Ms. Chatzky. Amen.

Status: Keep Your Pants On ~

2012-05-20T20:21:00.001-07:00

*Sigh* Friday was a bit of a frustrating day from the perspective of a financial planner. The hype surrounding Facebook's IPO made me feel like I was banging my head against that proverbial wall at times. From real life to virtual life, it seemed like the people who, well, I'll be blunt, frankly had no business making any type of investment recommendations or putting their money in such a higher-risk investment, were the ones who got the most swept up in the hype. I'm sure you heard your fair share as well.

From the people at school or work to the people, ironically, on Facebook, you couldn't sneeze without hearing someone discussing the IPO. Ask yourself, though, how many of those people do you think actually did any hard research into the fundamentals of the company? Read the balance sheet? Looked at a cash flow statement? How many of those people considered the risks of putting a certain percentage of their investment portfolio into one single stock, or how that stock related to the rest of their portfolio's holdings (does it complement it or is it more a duplicate of other investments they own)? Are these the same people who have been pulling their money out of diversified stock mutual funds over the past few years?

Listen, I'm not passing judgement on whether or not Facebook is a good investment or if the stock will perform successfully over time. That's not my point. My point is that you had Joe Schmo huffing and puffing about when to buy and when to sell. I read people reporting that they had bought such-and-such number of shares, or that they had missed out on buying shares, or that we should all dump our shares if it performs a certain way during Monday's trading. These were not, for the most part, people adding a well-researched small position to a well-diversified portfolio. This was more like people doing the financial equivalent of running naked down the street, hiding in bushes, and then mistakenly passing out in someone else's house.

The rancid icing on the cake? That would be the person who said that they bought shares of Facebook because they were trying to recover some of the losses that they have had over the last few years. * Sigh* The flight to Vegas must have been full.

I give up.

Thunk. Thunk. Thunk.