Archive for the ‘financial philosophy’ Category

30 second video: protect your emergency cash like a chess match queen
May 22, 2008

New shoes, new iMac, & old cash worries:
It’s fun spending cash reserved for emergencies.

Even more than fun – it’s bloody easy!

It’s easy to break discipline & access those dollars meant to protect from rainy days. But since that approach has made my family more vulnerable financially, it’s time to rethink. The short-term benefits of a change are clear.

Emergency cash reserves & chess: create the pawns

After 7.5 years of marriage, these prove true:

  • if we have only one stash of cash, we’ll spend it. It matters not if it’s reserved for emergencies. We’ll spend it on non-urgent desires. Do these desires help us be more effective sometimes? You bet. But occasionally our compulsion runs rampant.
  • it’s time to view emergency reserves like a chess queen and find ways to protect her.
  • thus it’s time to create the ‘chess pawns’ in our personal finance life.

The Pawns are the soul of the game. -Francois Philidor

For the past few months, I’ve tested a new strategy. And it’s producing positive results for Sean and me. The goals are two-fold: truly learn to reserve emergency funds for unforeseen, urgent cases; and next, create a system to enable that habit.

Here’s what we did:

  • set-up (10) online sub-savings accounts via ING Direct, in addition to our main emergency cash reserves account. These are metaphorically ‘chess pawns’ protecting the emergency cash ‘queen’. In the past, we dipped into cash reserves for these reasons; so we decided to designate sub-accounts to ideally prevent future dipping.
  • each month, monies direct to these sub-accounts i.e. medical/dental; clothes/dry cleaning; annual visit to parents; pet care; computer/tech; family gifts; books/education; condo; Alaskan trip for parents by 2012; relocation expenses.
  • each pay cycle, 12% auto-deposits into emergency cash savings with app. 3% funneling to the sub-account buckets. And so far for one business quarter, the emergency bucket has stabilized and steadily increased since we use those other sub-accounts for spending choices. Hooray!
  • Note: at least so far, we don’t necessarily spend monies each month that were allocated to those sub-accounts. Yet if for example my husband needs Ruby on Rails books for his coding library, he has accessible, dedicated funds for that decision.

Pawns, marriage partners, & the psycho-summary:
It’s just another way to budget. But the tangible existence of these ‘pawn’ sub-accounts has helped us stay on track with building emergency cash. And it’s helped to clarify spending priorities.

It’s working too from a psychological perspective aka it’s less stressful in the guilt department. In the past, I’d mentally beat up on my husband and me for dipping into emergency reserves for play or even basic needs like new shoes (…to replace that broken heel). Footnote: guilt drains marital trust and fun for sure!

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my husband, me, & our financial habits make front page of business section in washington post
February 10, 2008

wash post photo jill sean
photo by Lois Raimondo, Washington Post, 2/10/08

What a blast!

It was published today, in the Washington Post’s business section — with our happy mugs below the fold (& as the second photo in the online slideshow).

Talking with Post reporter Nancy Trejos was a comfortable, positive experience. She expressed a lot of interest in different facets of family finance, especially in the face of a slowing economy & home sales.

Thanks Shashi Bellamkonda for connecting Nancy, Sean, & me.

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sin stocks are hopeful bets … but what do your morals say?
February 5, 2008

The history of sin stocks shows consistent or even strong performance in downturned stock markets.

I grow more and more willing to embrace imperfection & inconsistency, especially when it relates to my own character (& the stock market). 🙂 But heck, I don’t know if my moral code – whatever the heck it is – can bank on humanity’s weakness.

And that type of hesitancy can make those more willing some big bucks.

Where do you stand on investing in people’s vices?

More from:

  • Science Daily’s take on sin stocks & moral judgment;
  • Kiplinger & their insight into how vice stocks can be virtuous in a very bear market.
  • $5million & your piggy bank: financial planners’ standard target for retirement
    January 14, 2008

    “Mrs. Foster, you & your husband should save at least $5million for retirement…at least!”

    [THUNK]

    That’s my psychological (& literal) piggy bank passing out from that advice. Most all financial planners I met with last year suggested $5million be our retirement savings target (east coast).

    What the SAM HECK do we need to save that amount for?! I’ll calm my drama-momma attitude … & attempt to answer with some calm. Feel free adding ideas to this list:

    • Longevity (age 100 to be commonplace)
    • Health care (allocate $150k-200k for health care costs excluding long term care)
    • Inflation
    • Housing (assuming a paid-in-full home, consider property tax per US Treasury)
    • Food
    • Fun (one trip annually)
    • With above factored in the equation — leaving $1k/mo for health care costs during retirement — our current retirement savings quest is $2.5million. It makes financial planners smirk but, although hefty it’s an aggressive goal that doesn’t leave my mental or literal piggy bank in shock.

      More from:
      FreeMoneyFinance writes on the $5million topic with an active discussion thread;

    $1million by 2012: dream it, plan it, live it
    October 13, 2007

    So it’s time to take ownership & aim big.

    I remember once being fearless in the face of challenges and dreams — going after them was the fun rush of life. Then on the financial front – I learned how much it costs to retire, to retire with decent health care protection, to raise children and their education, to run one’s own business, and more …. my momentum to achieve sobered-up.

    Why is that? Maybe it’s just looking at too much at once -vs- one step at a time. Maybe it’s taking one’s self too seriously. Maybe dreams were too high with resources & energy too low. Is it even possible to have dreams too high?

    …a mix of all likely but here’s the sitch: family members need our help. They’d never, ever ask for financial support. But bottom line, their situations are precarious & their means too small to evoke stability on their own. My judgment could be off but after reviewing all up, down, and sideways my husband and I agree taking action helps more than fretting.

    And results just don’t fall from the sky. So can we realistically help? yes. Can we preserve our basic needs & personal savings plan too? yes. So is it time for a plan?

    Yes and here it is:

    $1million by 2012 (that’s $1million in overall paper value vs net).

    It makes my stomach tight writing this out, tight as in nervous. But Jonny Goldstein just published his big dream. And his resolve and zeal are contagious.

    So here it is:

    Summary of Intent:

    We are millionaires by 2012. By that year, we will have built our financial wealth to at least $1million through dedicated & united partnership to include: multiple income streams, property ownership in secondary cities, tax control, & wealth protection. Our love of life motivates this intent – and our family, whom we most dearly want to help.

    It’s posted at our desks.

    …along with the plan, the numbers, the benchmarks, a list of mentors (…need to contact them), & somewhere deep down is something that feels like resolve.

    More from:

    beckoning budgets & cursing like a turk
    September 24, 2007

    Yikes it was a tough call — listening to that inner budgetary voice vs the call to wander lust.

    For a few weeks, I planned on going with Sean to Istanbul and producing a few live Web shows like Jonny Goldstein does each week.

    Yet the truth is, we already savored Hawaii this summer – an opportunity brought about through Sean’s work as well. My expenses for that were out of pocket too, like Istanbul would’ve been.

    I’m not sure what tipped the final call not to go…except going to Istanbul felt like it would undermine this year’s financial goals. And the husband doesn’t need the wife going everywhere with ’em, eh?!

    Ah but we’ve tested the Web cams for live overseas chats during his trip!

    More from:
    Get Rich Slowly offers an encouraging post on living debt-free (…a key reason why Istanbul was let go; wow could I sound more pathetic?!);

    financial roots: your fiscal beliefs, fears, confidence must come from … where?
    September 5, 2007

    In preparing for another financial planner interview this week, I imagined how a certain discussion could play-out regarding our debt:

    Planner to me: So do you have credit card debt?

    Me: Sure do.

    Planner: So why don’t you pay it off right now or at least increase your payments?

    Me: Because the thought of having zero dinero in our emergency reserves makes me vomit.

    For my family right now, it comes down to rebuilding habit.

    For a while, it’s been ‘pay off the card’. Then a perceived emergency that warrants use of it occurs again (we wouldn’t have much in emergency reserves since we focused on debt pay-off).

    And the cycle played out many times in our lives.

    So I shared this tact with husband Sean – to which he concurred on changing focus. He was creeped-out by the card balance (predominantly tax payments) but appreciated the underlying philosophy: build up cash reserves to prevent credit card usage in emergencies.

    Then comes the self-reflection:
    What has the most impact on one’s financial beliefs? Is it more than just live-and-learn as an adult?

    That must be a complex answer for everyone.

    Yet these two childhood memories stand out as canyon-wide influences on my financial beliefs:

    • family thrived with their business during the Oklahoma oil boom;
    • family sank deep into fiscal ick-ville when that boom went bust

    Don’t wanna go back there … ever.

    So what’s the first step – forming a positive vision to strive toward (vs always looking back at that which we want to avoid)?

    More from:

    • WiseBread’s Sarah Winfrey outlines those wise, internal questions that can frame what we really want. …joy? chocolate? companionship? love? a Twinkie bath? Winfrey’s reflective approach proved a useful tool to carve out purpose — financial or otherwise.
    • Request:
      Please treat yourself to Jonny Goldstein‘s above Twinkie bath clip, 3 minutes. The ribs crack from cackling every time.

    marital money mantra #2: protect what you can’t afford to lose
    August 26, 2007

    Sweet cash kitty

    We learned a lot from our own cycles of incur-credit-debt-yet-not-build-savings. We still have credit card debt (from mis-calculating last year’s tax payment); yet we’ve for the first time built a cash kitty, four months of expenses, with plans to secure one year’s worth since we function on a single steady income.

    It’s tough changing one’s perception of what is or is not a valuable financial habit or philosophy. I heard throughout life about debt-is-bad-pay-it-off but not as much insistence on building cash reserves aka rainy day protection. I realize saving philosophies have certainly been around for ages; cash reserves (and truly reserving them for emergencies vs a Mets game…) — just weren’t emphasized as much in my personal community.

    After six years of marriage, four cats, and $6k in pet surgeries it became clear viewing a credit card as an emergency cash plan lacked….prudence. Emotionally we couldn’t afford to lose the various cats & financially, we decided we couldn’t afford to personally finance continual debt cycles.

    Thus dedication to building cash reserves began as did researching pet insurance(!).

    More from:
    -ASPCA offers diverse pet insurance plans & good customer service;
    All Financial Matters says it well: Emergencies will come whether we are prepared for them or not.

    marital money mantra #1: overt & unified approach
    August 23, 2007

    HUSBAND-WIFE ROLE PLAY:

    During the first years of marriage, our conversations on spending splurges went down like this:

    The husband likes books – admirably. And sure I’m addicted to eating out with friends & travel.

    With books though, Sean’s a read-it-once-learn-it type of brain & is a strong visual learner. Books are his friend. It’s a learning style that differs heartily from my own. I love a good Edith Wharton novel & a few graphs from business books. But I just did not appreciate his relationship with books as they related to his well being.

    But more than that, his book buying irked me because deep down, I knew our family finances were shaky with our unclear financial philosophy convincingly…unclear.

    Once we took actionable steps toward more stability, my emotional freak-outs eased considerably. It helps that my husband owns a really laid-back demeanor toward home finances a.k.a. “That sounds good baby!” — his reply to many suggestions tossed out for discussion.

    Our facilitating questions on the topic:
    –Do we agree that saving for present & future is worth it? …get mutual buy in first; establish tactics later.

    –In what ways does money affect your sense of self? …sounds corny but ask. Do they want 100% control? Do they care if you do? Do you feel like a ‘less-than man or woman’ with someone else handling the bills? In what ways do you crave financial autonomy or partnership?

    –How do you like to play? e.g. books, tech, travel, hobbies

    –If saving & investing for your overall health is the driving goal, what are you/we willing to financially modify – or not – toward the play stuff?

    I’ve heard of spouses going out of town for the weekend with the other spouse staying home. Upon return, there’s a newly purchased car in the driveway. That actually happened with my parents. Yikes that was a cherished family moment in Mustang, Oklahoma; and looking back – there were power struggles & self images at work, all tied up with money.

    If at all possible, make all that overt…with some flexible conversation on what’s the healthiest, happiest shared value on money that you can agree on.

    Bottom line, if all this becomes open, then spending becomes all the more fun & relaxed. …since you’ve as a team asserted responsibility toward your driving financial goal.

    More from:
    1) Gerri Willis, clear, straight shooter;
    2) Kiplinger & financial unions;
    3) Women Today mag & couples (I like what’s said about learning what constitutes a major purchase).