Thursday, September 25, 2008

What Not to do to Fix Your Finances

My father's favorite line is, "you may as well learn from others' mistakes, you'll never live long enough to make them all yourself." Here is one set of lessons I have learned from him.

My dad is an intelligent man, very intelligent. This post is not to make you think he is an idiot, he is just happens to be terrible with money. Here are five examples of what he does wrong, and five solutions to these conondrums.

What not to do:

1. Problem: Have no emergency fund, and instead throw every spare dime into your retirement. Now, my dad started saving for retirement at about 45 years old, so he is understandably trying to make up for lost time. However, the issue is that if something goes wrong, which in his life it very often does, he has no back up plan. He is great at earning money, but because he either spends it or puts it in his untouchable retirement accounts, he never has money for any type of dilemma or emergency.

Solution: Suspend for three months the donating of funds to the retirement account. Even late in the game at 51 and saving like mad for retirement, he needs funds to fall back on. He should be putting 10% of his income into a savings account (preferably something that pays decent interest such as INGDirect), until he has at least 3 months worth of cash to live off, should he do something silly like #2.

2. Problem: Work for an unreliable employer. My dad, if he is not working for himself, is constantly working for a company which either does not pay him, or does not pay him on time. Often my dad has to pay for all of his business expenses, and then constantly pressure his employer to reimburse him.

Solution: Find a suitable employer. One who is honest, has a good reputation and who values his emplyees. It may take more work, but in the end, it is a lot less headache and is better for financial solvency. Research who you are looking to work for. If they are not reputable, find another place to work.

3. Problem: Start multiple businesses without thinking them through fully, or having enough time to dedicate to each one. My dad has started his own freight brokerage, great right? It would be, if he were at home often enough to be able to send out invoices, do his books and keep on top of it. However, he also has a full time job (always for some goofy employer), which keeps him out of town 90% of the time. No one can keep track of all of the business they do and collect for it, if they can't keep it organized. I suspect that he wastes quite a bit of time and effort, simply because he forgets to collect on his work.

Solution: Either trade up jobs on the constantly out of town full-time position, or find a way to organize the part time business. For my dad, his full-time gig is trucking, so it would be difficult for him to stop constantly to write down who owes him what, but he could maybe use a voice recorder and each night put all of his commissions into a spreadsheet, so when he gets home, he can do his billing. Or, my dad could take a big leap of faith and do freight brokering full-time. A lot of people do it, and can be quite successful (as I suspect my dad would be if he dedicated more of his time/mental energy toward it). This would also allow him to be home more, so he could lead a more productive, organized life.

4. Problem: Paying debts late: I am going to use the example in his financial life that I am most familiar with: child support owed to my mom. I am 25 years old, 7 years past 18, when normal fathers are done dad: still paying off my mother. He has almost always been self-employed, and thus has never had his wages garnished, so he felt free to pay my mother when it was convenient for him. Well, for about 5 years, it wasn't, so he didn't. I suspect that this also has to do with his #3 problem of working for bad companies, they don't check into the fact that he is still deeply indebted to my mom. The point, however, is that the county through which his child support debt is paid, has doubled the interest rate a few times. Thus, the money he could have had paid off without any interest 7 years ago, is now growing and growing. He pays about $1000 every 6 months to a year, but at that low frequency rate, it keeps adding up and doens't go down.

Solution: When you owe a debt, pay it every month, pay as much as you can and get it over with. Not only will you save yourself quite a bit of money, but you'll save yourself the headache of having a never-ending debt. In my dad's case, this has literally cost him thousands of dollars, all due to his fiscal laziness.

5. Problem: Trusting others with your money. This goes back to not keeping track of what people owe you, working for bad employers, and for my dad, with his small businesses, he lets people whom he simply likes handle his books, because he doesn't have interest in doing it himself. This has cost him dearly over the last 5 years, at least. It is part of the reason he lost his most successful enterprise (a company which grossed over $1.5 million in its most profitable years). People will take advantage of you if you're lazy and do not keep an eye on your own money. No one else will always work for your benefit, there are a lot of people who want a portion and who will act in unrespectable manners to benefit themselves. I am not saying everyone is going to take your money, but it certainly does not make sense to not keep tabs on it.

This post helped me to understand not only my father better, but also the consequences to laziness, and to trusting others with your money. Keep tabs on your assets, your net worth and watch who you trust. It only makes sense.

Wednesday, September 24, 2008

Today's Saint: St. Pacifico of San Severino

This man, a Franciscan friar, from the 17th century lived quite the austere life. He ate soup, bread and water, always in a continual fast. He caught a disease which left him deaf, blind and crippled. Yet, through all of these trials and self-imposed hardship, he remained faithful and offered up his sufferings for others.

Wow, reading about saints, even when their sinfulness is omitted, makes it clear that I still have a long way to go toward sainthood. I am always in awe of those who give their entire lives to others. The message for me today is that I should give something up for someone else, or do some work of charity. I do not have an outside the house job, this shouldn't be too difficult.

Tuesday, September 23, 2008

Why I Started This Blog - Part II

Reason #1, improve my faith life. But, reason #2 is a pretty close second. Our finances are not in great shape. In fact, they're in bad shape. My husband makes about $60k/year, I can't find a job to save my life, and now that our first child is coming, I won't be working once he is born. So, we have $60k/year and much more debt than that.

We are also lacking in willpower, as demonstrated by our grocery bill. I cook more like Martha Stewart than Rachael Ray, so our bill is always higher than necessary. I tend to make elaborate dinners and desserts, plus I am gluten-intolerant, which makes trimming that bill difficult.

We are both college graduates, so combined, we have $80k in student loan debt, 2 late model cars and payments to go with them, and about $8k in credit card debt. Yikes, I don't even like to think about it. But, if we don't, we certainly will never own a home, have a nice retirement, or be able to travel when we're old. We're still not sure if we're going to help our kids pay for college, and if so, how much.

Thus, this blog. I am going to write about some strategies that I find, whether or not they work, and our progress toward the goal of being debt free and financially solvent.

Wish us luck!

Why I started this blog - Part 1

I am a twenty five year old homemaker. I am seven months pregnant and my husband and my financial situation has much to be desired. We are faithful Catholics, who are quite conservative and I would like to see our faith and financial situation improved.

We attend weekly Mass, and when I have time/energy, I like to go to daily Mass. We tithe (much to our checkbook's dismay) and try to remember to pray at meal times and for loved ones. Before we were married, we spent about 15 minutes a day together praying for our family, friends, faith, freedoms and anything else that seemed pertinent. Now, we pray at meals and rarely remember to pray any other time. This is not okay.

We also have dropped off of our religious reading commitments. Between January and April, I had read 4 religious books (my husband had read at least 2). I haven't read any since, neither has he. My faith has not grown much since I moved to Colorado Springs to get married. I blame this mostly on personal laziness and exhaustion from being pregnant. But still, this is not okay.

So, first and foremost, my goal is to write about something spiritual every day (Monday through Friday), and focus mostly on Catholic theology, saints, and interesting books I read. I would like to engage in theological discussions with other believing Catholics and also with non-believers and protestants. My world, faith life and depth of knowledge can only expanded and I am excited for the prospect of learning more about Catholicism and debating it with others.

I hope you'll come along for the ride.