Home » Cash Flow / Budgeting
Category Archives: Cash Flow / Budgeting
‘Tis the season to gather and celebrate with friends and family. Each year, old traditions are remembered and new traditions are made. We reconnect with those we see often and long-lost relatives alike. Reliability has become an evasive event in the busy world we live in today. In the craziness and uncertainty of our day-to-day lives, we take solace in the certainty that some of these events provide.
In some families, it is a holiday tradition to attend church or temple together. In others, Grandma will play the piano while everyone sings along. And in others, it is a virtual certainty that everyone will get their year’s worth of invaluable wisdom from that goofy brother-in-law that goes by “Blaze”.
Celebrating with relatives is a wonderful thing, but this time of year, we must all be more conscious of the unrelenting human desire to compare ourselves and our decisions to the people and things around us. The relatives you ought to ignore are not people, but perceptions. (more…)
A recent article on CNN Money cited that “a whopping 70% of those with at least $1 million in assets that are invested or available to invest, excluding home values, don’t consider themselves to be wealthy…it’s only when they hit the $5 million mark that millionaires begin to feel ‘wealthy.'”
I would submit that our feelings of wealth are far more associated with the life decisions we make and social circles we participate in, than the numbers we see on our net worth statements. Ted Roosevelt once said, “comparison is the thief of joy.” Feeling wealthy is a function of feeling that you have enough…of wanting what you have, rather than being consumed with what you want. (more…)
The second president of the United States, John Adams, made a prediction years ago in a letter to his wife:
“The second day of July, 1776, will be the most memorable epoch in the history of America. I am apt to believe that it will be celebrated by succeeding generations as the great anniversary festival…It ought to be solemnized with pomp and parade, with shows, games, sports, guns, bonfires and illuminations, from one end of this continent to the other, from this time forward forever more.”
Make no mistake about it, John Adams painted an incredibly accurate picture of what was to come! This coming month, a mere 237 years later, our nation will celebrate its great anniversary festival by hosting parties, parades and fireworks with our neighbors, family and friends.
But focusing too heavily on the details, however, one could also argue that John Adams was wrong. After all, we celebrate our nation’s independence on the fourth of July, not the second!
In hindsight, it seems ridiculous to claim that Adams was incorrect. In the moment, however, it is easy to get distracted by minutia that has little relevance to our financial well-being. We easily become critical of ourselves and envious of others, resulting in us completely missing the big picture. (more…)
With the first quarter of 2013 rapidly coming to a close, folks have to begin to brush up on their understanding of the changes to the health insurance system that will be taking place January 1, 2014 under Obamacare.
A recent blog published at Forbes.com by physician turned financial planner, Carolyn McClanahan, provides an outstanding overview of how the new law may impact individuals and families. In my humble opinion, Carolyn is probably the foremost expert on Obamacare and how it will impact families, having read every single page of the 2,409 page bill. The link above will take you to her post.
In short, if you have individual health insurance, it is probably going to get more expensive next year. If you are on your spouse’s health care plan through their employer, it is possible you will have to find new coverage at the end of this year. And in either event, the cost of obtaining coverage under the new law may surprise you.
This is a particularly well written article by one of the foremost experts in the industry. If you are interested in following updates on the new law, be sure to follow her posts on forbes.com and twitter @carolynmcc.
I was recently quoted in an article in the Minneapolis Star Tribune about a subject near and dear to my heart – food! The article, Millenials are Becoming the Foodie Generation, is about the growing tendency of millenials to be very passionate about what and where they are eating.
While I would argue that this is far more than a generational phenomenon, millenials pay more attention to their food and dining experience (both at home and out on the town) than any generation ever has in their 20’s and 30’s. This has, in turn, led to an explosion of new restaurants promising a unique and vibrant scene, along with dozens of farmers markets and grocers that focus extensively on locally sourced and organic foods.
The danger of this lifestyle progression is that many millenials refuse to make these necessary trade-offs. A recent New York Times article titled, Younger Generations Lag Parents in Wealth Building, explains that the average millenial has less wealth accumulated than their parents did at the same age. While there are no shortage of articles about this blaming everything from mounting student loan debt, to the housing collapse, to unemployment and underemployment rates among this generation, the simple reality is that lifestyle inflation from generation to generation has greatly outpaced wage growth.
Virtually any foodie will acknowledge that healthier ingredients for cooking, or a better dining experience out on the town comes at a cost. One of the millenials interviewed for this article states that he spends as much as 20% of his income on food. While that number may seem ridiculous at first glance, the average household spends 11% on food today, but spent nearly 17% in 1984. (more…)
“The intelligent investor must focus not just on getting the analysis right. You must also ensure against loss if your analysis turns out to be wrong – as even the best analyses will be at least some of the time. The probability of making at least one mistake at some point in your investing lifetime is virtually 100%, and those odds are entirely out of your control. However, you do have control over the consequences of being wrong.” – Jason Zweig, Wall Street Journal columnist and author, Your Money and Your Brain.
Over the last several years, we are experiencing record foreclosures on homes across the country. One could argue (and very convincingly, I might add) that lenders should have never allowed people to obtain the mortgages they did leading up to this mess. However, home buyers are every bit as responsible for choosing to acquire a nearly fully leveraged asset (and more importantly, a liability) that provided no “margin of safety” in their financial life.
The conclusion these folks arrived at – that they could afford these homes (and second homes, and third homes) – was undeniably based on a wide range of assumptions. To name a few, these assumptions included (a) home prices will always increase, (b) tax rates will remain the same, (c) they will not lose their job or have to take a pay cut, and (d) that they will not experience any unexpected or “surprise” expenses like medical costs, home or car repairs, (e) cash flow will always be sufficient to meet obligations, etc. With no margin of safety in place to buffer against even one of these assumptions being incorrect, many people were caught sitting far out on an extended tree limb and had no chance of hanging on against the storm that quickly formed on the horizon. (more…)