July 31, 2012

Love and Marriage (and Finances)

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You know that game everybody makes you play at weddings and showers where you give couples marriage advice? I’ve contributed advice on several occasions, and in fact, my wife and I asked others to pass on their relationship wisdom to us at one of our wedding showers. Either way, I’d say the most frequent tidbit is probably “Don’t go to bed mad.” While I often try to follow that piece of advice, I must say that occasionally going to bed mad might help prevent an "ant hill" from becoming a "mountain," if you know what I mean. In the end, though, I think the best piece of advice I was given was “When you’re wrong, say you’re sorry; when she’s wrong, say you’re sorry.”

All kidding aside, I’m a very happily married man for many reasons. Part of this has to do with my wife’s Toll House Pie, but part of this also has to do with the way my wife and I handle our finances. According to divorceguide.com, “Money” is the #2 reason for divorce, so today I thought I’d share 5 tidbits that might help your wallet or purse, while also strengthening your relationship with your spouse.
  1. Communicate. Communication is actually the #1 reason for divorce, and I’d be willing to bet that a lot of those communication problems had to do with communicating about money! When you get married, your separate assets will most likely become commingled with your spouse’s separate assets, whether you like it or not. From that point forward, it’s important for both spouses to realize that there is “yours,” “mine,” and “ours.” If both of you take the time to define and enforce these boundaries, you will likely save yourself and your spouse a lot of unpleasant emotional and financial surprises.
  2. Set a mutual spending limit. You may think that’s crazy, but I have personally seen this work in my marriage and with many of my friends. There is no discussion needed for our utility payments, car maintenance expenses, or grocery bills, but my wife and I have a $50 discretionary limit. If I want Braves tickets, we discuss it before I order tickets behind home plate. If she wants a new pair of shoes, we discuss it before she goes on a shopping spree. We trust each other when it comes to gifts for one another, and we don’t wage war when the $75 expenditure that one of us couldn’t pass up occasionally happens, but we usually talk first. $50 may not be the right value for you, but the limit amount isn't what matters - the working together does.
  3. Talk about vacations. I can tell you that you will have a more relaxing vacation if you are spending money you both saved in advance as opposed to worrying about how hard you are going to have to work when you get back home to pay off the trip. I would also advise you to make sure you’re not always forgetting about a destination your spouse really wants to go or likes going. Expectations of how great things are going to be when you’re vacationing are already sky-high without risking financial arguments. If you agree on how much you can afford to spend on vacation, how you are going to save up for vacation, and where you are going, you’ll have it made in the shade (or sun).
  4. Decide who does what. Who pays the bills? Who keeps the checkbook? Once you have decided, stick to it. If someone is consistently responsible for managing a part of your finances there is less of a chance of a bill falling through the cracks. If you make a mistake doing your task, admit it, and if your spouse asks you a question about something you are “managing,” respond openly and fully. This way you are a smooth-operating financial household. Your spouse may even gain additional trust and confidence in you and be appreciative of your efforts in the process.
  5. Agree on what retirement looks like. This vision may change abruptly, slowly, or stay the same depending on how your life plays out, but you at least need a plan. If both of you feel as if you are working towards a mutual finish line, the pain of extra hours or stashing away additional savings so you can meet your retirement goals won’t hurt so badly. Maybe even set aside some time with each other to discuss your current financial situation and where you stand versus your finish line. If everyone is on the same page and everyone is on board, there won’t be very much room for fear or blame in your finances or your marriage.
I have a lot left to learn about finances. I have even more to learn about marriage. However, I can tell you that successful marriages more often than not have their financial houses in order.

I hope these tips will help you and your spouse financially and in your relationship. Believe me, I can get in enough trouble on my own for zoning out and not listening when I’m watching “the game” without bringing finances into it!


July 24, 2012

Being "Rich" in Life

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A few weeks ago I got to spend a fun evening with my wife and her family attending the “Brothers of the Sun" concert tour at the Georgia Dome, featuring Kenny Chesney and Tim McGraw. While I wouldn’t say I’m a country music enthusiast, I must admit that I do enjoy listening to the genre from time to time when I’m driving, camping, or having a rough day. One of my favorite country songs (that Tim McGraw was kind enough to perform during the show) is "Live Like You Were Dying."

"Live Like You Were Dying" is a former number one that was released in 2004. The song focuses on the relationship between Tim McGraw and his father, former baseball player Tug McGraw, after Tug was diagnosed with brain cancer. I’d like to share a brief excerpt of the lyrics below:

I went sky divin',
I went rocky mountain climbin',
I went 2.7 seconds on a bull named Fu Manchu.
And I loved deeper,
And I spoke sweeter,
And I gave forgiveness I've been denying,
And he said someday I hope you get the chance,
To live like you were dyin'.

Now, I by no means am recommending that you sky dive or ride a bull named after facial hair, but I do want to take a break from repeatedly telling you to spend less and save more, and offer a few thoughts on making sure you are being "rich" in life.

Many of my friends, readers, and clients are becoming financially stronger at a very impressive rate as they save more and more. They are saving for retirement, planning their children’s education, and growing their checking accounts and nest eggs. I am very happy for them and very proud of them, but in some cases, I believe it is possible to save too much and too fast. By that, I mean if you are too focused on saving a certain amount, paying off a large debt quickly, or maintaining a certain net worth, you could miss out on that dream vacation with your spouse, the World Series game your college friends invited you to, or the chance to play golf at that one course you’ve always wanted to play while you still have your best swing. You are mortal. We are all eventually going to die. You should keep your financial house in order, and always save whenever you can, but live your life like you know it will not last forever. Don't fall into this category of saving too much and living too little.

On the other hand, some of my friends, readers, and clients, who I am trying to help, are spending everything and saving nothing. They are living like they are currently dying. In the long run (assuming they continue to live), that financial strategy is not going to work for them, or their loved ones. Taking exotic vacations, buying 4-figure watches or purses, and purchasing the latest and greatest electronics are fun to do from time to time, but expenses like these should not be the norm if you are not substantially saving. Don't fall into this category of living too much and saving too little.

Finally, some of my friends, readers, and clients, who I am desperately trying to help, are quickly using up what they have previously saved and are living at a higher standard of living than they can afford. The financial strategy they are employing could very well be equated to financial and future quality-of-life suicide. They simply don’t realize that leaving a little to your heirs is a lot better than running out of money while you're still alive. Don't fall into this category of spending your savings too fast.

I assure you that I will be back to my old self soon with more reasons to save, financial planning ideas, and investment tips, but I felt like I needed to share with you why I believe that if you can afford it, precious life opportunities should sometimes, and within reason, trump financial implications. As the great American showman P.T. Barnum once said, “Money is good for nothing unless you know the value of it by experience.”

Keep saving all you can. Just make sure you are becoming “rich” in your life experiences - not just dollars.


July 18, 2012

A Fair Look at the Fair Tax

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In July of 1999, Georgia Congressman John Linder introduced a little something called the Fair Tax Act to the U.S. Congress. Since then, the legislation has been introduced to every subsequent session of Congress, sometimes by Republicans and sometimes by Democrats. Perhaps you are more familiar with the Fair Tax because of the publicity generated by talk radio personality, Neal Boortz, or perhaps you’ve seen the T-shirts and bumper stickers. Whether you’ve memorized The Fair Tax Book written by John Linder in 2005 or this is your very first taste, I think this Fair Tax idea has become popular enough to take the time to evaluate.

A few weeks ago, one of my readers asked me if the Fair Tax was actually fair. I could tell you my thoughts, but why don’t you decide for yourself…

The Fair Tax is a single-rate federal sales tax. The tax would be added to the price of new goods (not used) and services upon purchase. All U.S. residents would receive a monthly payment from the government equal to the amount of tax that would have been paid for essential goods and services at the poverty level. The tax would eliminate individual, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.

Sounds great, but what’s the rate? The proposed rate is the rate that would be needed to roughly generate the tax revenues that would be lost by the elimination of all the taxes mentioned above. Some sources will tell you that rate is 23%. Some sources will tell you 30%. It depends on how you look at it. Let me explain:
  • Suppose you want to purchase a $100 widget. That seller clearly wants $100 because that’s the price, but the 23% Fair Tax has now become law. What’s the seller going to charge you now - $77 ($100-$23), and eat the taxes for you? I think not. The seller still wants his money and wants to pass the new 23% tax on to you, so the seller is going to have to charge you $130 (because 23% of $130 = $30 worth of tax) in order to get his $100. See why mischievous proponents of the Fair Tax say 23% and misleading opponents of the Fair Tax say 30%?
Whatever the rate, what are the pros of a Fair Tax system? Well for starters, a sales tax on consumption is a lot simpler than the Internal Revenue Code. With the Fair Tax, you wouldn’t have to worry about preparing your taxes or having the Internal Revenue Service on your back. There would be no taxes on investments, so potentially more people could choose to invest in markets. Illegal immigrants would get to pay their share of taxes, and black market funds, such as the proceeds from an illegal drug sale, would also face taxation as soon as their owner bought anything. The Fair Tax might even help sustain financially-struggling government programs like Social Security and Medicare, as they could now be funded by everyone’s consumption on American soil - not just by taxes on the current workforce.   

What about the cons of a Fair Tax system? As recently as 2009, more than half of American households paid no income tax, so would it be good for those households to start paying taxes now? 23%/30% is also a fairly hefty tax rate for most people to swallow, and it might be just enough to deter some from buying goods and services. Can you imagine how it would feel for everything to cost 23%/30% more over night? What would that even do to our economy? A Fair Tax system might also spawn more underground markets as our friend, the seller, would have the incentive to illegally sell that pre-Fair Tax $100 widget to you for $105, keep the change, and never report the sale or remit the taxes to the government.

So what do you think? Is the Fair Tax fair?

What I think is that the current tax system is broken. Any system’s code that is longer than War and Peace, any system that is so confusing and painful that people are willing to pay premiums to accountants to save them from having to think about it, and any system that has become so polluted by the work of lobbyists and special interest groups can be improved. On one hand, the Fair Tax seems fair if it effectively replaces all current tax revenue by taxing everyone the same way, at the same rate, and reimburses people for the essentials. On the other hand, taxing more than half of a population that is currently untaxed, taxing a majority of people at an effective tax rate much higher than they are used to, and raising prices on everyone at once doesn’t seem so equitable.

I think the Fair Tax could be fair and could work. I just don’t currently see how the U.S. could smoothly convert to a Fair Tax system, or quite frankly, how a majority of Americans would ever be in support of the Fair Tax system. What do you think?


July 03, 2012


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It seemed like a normal day. I was simply riding in an elevator. There was the stereotypical older, corporate-looking gentleman who was clearly running late and giving off a slight aroma of coffee grinds and cigarette smoke. The friendly-enough looking lady who had just finished her morning jog, but was completely engrossed in her smartphone, was also present. With these two characters to choose from, who could really blame me for going with the always-safe, silent elevator ride approach? Luckily, as we zoomed upward into the Atlanta skyline, there were some news headlines scrolling across the bottom of a small television in the elevator to save me from my momentary imprisonment. Then I saw a most disturbing headline: "Survey: 49% of Americans not saving for retirement." Say whaaaaat?

As the bell chimed and the doors to the elevator opened, this horrified financial planner raced to a computer. As much as I would like to report to you that the disastrous news in the elevator was fiction, it was not. I quickly found an article on CNNMoney titled "49% of Americans saving zilch for retirement" that seemed to confirm my fears. Not only did the article say 49% of Americans are saving zilch, but it also stated that 56% of people ages 18-34 are currently not contributing to any retirement plan. Worst of all, the article reported that almost 50% of people aren't even planning on contributing to a retirement plan. I cannot reiterate enough that in today's world, YOU CANNOT AFFORD NOT TO BE SAVING FOR RETIREMENT!

Retirement, "schmetirement" you say? Are you willing to bet that you will have a nice pension or can live off of Social Security? You'll start saving for retirement when it gets closer, right? Well that's at least what 49% of our peers are evidently saying! They don't realize that when I tell people they need to save for retirement today, it is not a polite suggestion. If people don’t save for retirement, they may never be able to retire! Simply put: If you ignore reality and do not make the necessary sacrifices to save for retirement now, you will most likely die working, because you will have to.

It's because of these strong feelings and convictions that I want to share with you a high-level view of the short-term and long-term plans you need to follow in order to secure your financial future, and your retirement chair at the beach.

Short-Term Retirement Plan:
  • Start building up your savings- $25 a month, $100 a month, $500 a month… It doesn’t matter how much at first; it matters that you are starting a habit. Work towards a cash reserve of 6 months’ worth of expenses.
  • Pay off your credit cards- Make all the minimum payments on all your debts you have to in order to avoid late fees and protect your credit score, but also start hacking away at any credit card debt you may have. Once you pay off all your credit cards, make sure you keep them paid off every month.
  • Start saving for retirement- Start contributing to your employer’s retirement-savings plan. Put in what you can afford, but make sure you are taking full advantage of any company matching. If your employer doesn’t have a plan, open your own IRA with a wealth management firm or someone like TD Ameritrade or Fidelity.
Long-Term Retirement Plan:
  • Keep on saving- Replenish that 6-month cash reserve after your emergency dental surgery or car problem. Work towards 12 months’ worth of expenses.
  • Pay off debt- Look up all the interest rates on all of your student loans, car payments, house payments, home equity lines of credit, etc. Order them from highest to lowest. Make regular payments on all of your debts, but direct all of your excess cash flow at the debt with the highest interest rate. Once that debt is gone, move on to the next highest. Being debt-free lowers your living expenses and gives you a sense of security.
  • Keep saving for retirement- Prudently increase your contributions to your employer’s retirement plan. Start contributing to an IRA if you haven’t already. Think two words: nest egg.
  • Make sure you have adequate insurance- You need to have a back-up plan in case you get hit by a falling refrigerator or lose a fight with a wood chipper. See what disability benefits you have with your employer, but go ahead and ask your car insurance/homeowners insurance provider(s) about life insurance and disability insurance. You especially need to consider these unlikely and unpleasant scenarios if other family members are depending on your wages.

Please plan for retirement so you're not part of the 49%, I beg of you. Follow the short-term and long-term principles I outlined above, and I can almost promise that one day you will be well on your way to a comfortable retirement.

Finally, friends don't let friends not save for retirement. Please pass these principles on to people you know who need them.

Well I’ve got to run. After that elevator ride, I think I'll take the stairs!