One Awesome Baby Gift

Credit: Marcus

More and more of my friends are having babies. Some are on number two (or even three)! It certainly is exciting, and one of these days I hope to be a dad myself, but all of these baby pictures, registries, and showers are something else. My wife and I usually try to give an awesome toy or something we know the proud parents have said they really need, but if I were Bill Gates, there is one awesome baby gift I really wish we could give. It’s not financially viable for us to give (especially since the storks have been so busy), but perhaps I can give you a few more details about one of the most awesome gifts you can give to a newborn and their parents: a 529 Plan.

A 529 plan is a college savings plan designed to help address future college costs including tuition, books, and other education-related expenses at most public (and some private) institutions of higher learning in the United States. 529 plans, also known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions, and come with many favorable tax benefits authorized by Section 529 of the Internal Revenue Code. Essentially, all of the money contributed, as well as any money earned while invested in a 529 plan, is allowed to be distributed free of federal income tax (and most state income tax) as long as it is withdrawn for qualified educational expenses. That means by setting up and contributing to a 529 Plan for a new baby, you are helping the baby (and his or her parents) pay for college and giving the stock market around eighteen years to have a chance to generate some significant, tax-free appreciation.

There are lots of technical questions to consider, like whether to go with a pre-paid tuition 529 plan or a college savings 529 plan (I’d go with the college savings plan because it gives the beneficiary more flexibility to choose more colleges in different states). You’ll need to select an initial investment allocation, but I usually propose an age-based portfolio that automatically addresses investment allocation going forward and reduces more-aggressive stock exposure as the beneficiary gets closer to college age. There are also limits on how much you can give a new baby in a 529 plan, but unless you are a pretty financially blessed parent or grandparent, these probably won’t come into play. Still, be sure to talk to your CPA or financial advisor before you proceed.

My point is that you really can give the gift of a 529 Plan because many plans and many states have relatively low minimum contributions ($25 or less in many cases) to set up a 529 Plan. Besides, even without the small initial contribution gift, by simply informing new parents about the huge potential tax benefits of a 529 Plan and giving them a mechanism to go ahead and start saving for college sooner rather than later, you are already doing a whole lot! Cute, little shoes are great, onesies are adorable, and dangling crib mobiles can be amusing, but I really am sold on the potential benefits of 529 Plans. Shoes, outfits, and toys are necessary and address a definite, immediate need, but helping a child (and their parents) graduate from college with less debt, or even no debt, is a pretty swell gift, too.

My wife and I haven’t yet given a 529 Plan to any of our friends or family members’ newborns, but we’ve told people about them. If you can give a little one you care about a 529 Plan, I encourage you to do so, but even if you don’t, you can give two baby gifts: a super-cute one and this very valuable information.

-Tom

Lessons from Black Friday

Credit: imagerymajestic

A couple of years ago my wife and I agreed to add two holidays to our calendar: Husband’s Day and Wife’s Day. On Husband’s Day, I can create a day where we do whatever I want (within reason), and on Wife’s Day, the day is hers. In 2013, we decided to celebrate Husband’s Day in June (it’s a floating holiday), and it was truly glorious. The highlights included trips with my wife to the driving range, the bowling alley, the shooting range, and a golf superstore, with guy movies and greasy hamburgers intermixed. Wife’s Day, on the other hand, seems to have become more of a “fixed” holiday, as once again my sly wife somehow settled on Black Friday. Being one that is always happy with bargains and sales, and already in my wife’s debt for her participation in Husband’s Day, I hesitantly agreed to enter the land of competitive shoppers and “door busters.”

This year was my second Black Friday experience, but I still don’t consider myself a veteran - I consider myself a survivor. However, Black Friday isn’t all bad. There are a few things you can do to help make sure your future Black Fridays are successes and not financial burdens you’ll carry into the New Year. 

First, make a list of stores you want to visit. My wife took the time to make a list of stores she wanted to visit in a relative order of importance, while also considering their locations relative to each other and our home. I’m a lucky man for many reasons, but the fact that my wife took the time to have an efficient game plan on Black Friday is certainly another one. It saved us time, it saved us gas, and it kept us from shopping more than we needed to (or I could stand). Sure, we walked in a couple of stores to see something cool we saw from the window, but we primarily stuck to the plan. Sticking to your list of stores is a simple way to prevent overspending.

Second, make a list of the items you’re looking for. We still needed a few Christmas gifts, and my wife and I were both looking for some things for ourselves that we knew could be discounted on Black Friday, so we made a master list of what we were looking for. My wife walked away with a beautiful jacket (that was even more beautiful on sale), but outside of that one, unplanned bargain purchase, we stuck to our list. Limiting your shopping to a single list of items can also be critical in keeping you from overspending.

My third suggestion for you is to have a hard purchase limit. We had a couple of gift cards from birthdays and previous holidays, but we also had a dollar cap in the back of our minds. It doesn’t matter how cute the purse is, how real the leather boots are, or how soft the sweater is, what matters is how far below the “Black Friday cap” you are. My wife and I are careful, thrifty, picky shoppers, and I’m proud to say we got almost everything on our list without coming anywhere close to our self-imposed limit.

Finally, do not open any store-specific credit cards, regardless of how sweet they make the offer. There may be a couple of stores that have decent-enough perks if you are a frequent visitor, but for the most part, just say no. The additional credit inquiries you’ll generate and constant mailings and emails you’ll receive are bad enough, but the main reason for my stance is that I don’t believe people need any more temptation (or capability) to go into short-term debt than absolutely necessary. I’m not one of those screaming debt management gurus who is going to tell you to cut up all of your credit cards, but I am going to tell you to cut up the mostly useless ones, or better yet, don’t even sign up for the mostly useless ones. When my wife and I visited Old Navy on Black Friday, they opened an express checkout line for people willing to apply for an Old Navy credit card, and you should have seen the masses flock. That was dirty, and very well-played by Old Navy, but I waited in the longer line instead of taking the bait. The new card holders may have saved a few minutes, but at least I don't have a new, tempting line of credit!

Black Friday is not all bad, and it does offer a lot of great deals, so fighting the crowds can help you get a bigger bang for your buck. Just remember, 30% off of something you don’t really need is NOT savings – it’s a 70% expenditure you weren’t planning for! If I were a betting man, I bet I’ll get to do Black Friday again on Wife’s Day 2014, but I’ll be ready. Don’t tell my wife or my very manly friends, but I’m beginning to look forward to it.

-Tom

Prudent Presents

Credit: phanlop88

Remember when you were a kid and you’d wake up on Christmas morning and excitedly run down the stairs or hallway to see what Santa Claus had left behind? Think about the excitement you felt the year you got that long-awaited and coveted basketball goal, dollhouse, or bicycle. Don’t get me wrong, I do believe it is more blessed to give than receive, but let’s be honest; there is probably at least one occasion you can think of where you received a gift that was pretty, epically awesome.

Fast forward to now. Batman and Teenage Mutant Ninja Turtle figurines don’t quite mean to me what they used to, and for me at least, I’ve seriously got enough clothes. I’m still genuinely appreciative and always happy with any gift I receive for any occasion (well, most of the time…), but somehow, receiving presents usually isn’t quite the same as it was when I was a kid. Occasionally though, a moment like those times from childhood Christmases and birthdays of yesteryear repeats, and a glorious gift breaks through. Based on some recent conversations I’ve had with a few friends and co-workers, I’ve concluded that glorious, break-through gifts don’t have to be expensive, and quite frequently, are less expensive than standard gifts. What if on the next occasion you gave…

• For a Wife’s Birthday: An IOU - Cook her dinner, fix her breakfast in bed, or take her to a chick-flick and promise not to complain. The list of possibilities is endless, and she can look forward to cashing in when she wants to.
• For a Wife’s Anniversary: A couple’s massage - I wouldn’t have been caught dead getting one of these until a few years ago, but look for a coupon, go for a basic treatment offer, and enjoy the rain forest and ocean waves sounds. It's still a gift for her, but it's not too bad for you either!
• For a Wife’s Christmas: Flowers for a year - I’m not talking about three dozen roses every day, but what about a $9.99 bouquet every month?
• For a Husband’s Birthday: Cheap tickets to a sporting event - There’s no shame in being in the upper deck and watching your favorite team steamroll a “cream puff” opponent.
• For a Husband’s Anniversary: Make his favorite inexpensive meal, favorite dessert, and serve it with his beverage of choice - With many of the guys I know, there is a little something to be said for the notion that one of the ways to a man’s heart is through his stomach!
• For a Husband’s Christmas: A few lottery tickets, a pocket knife, or a quality watch that happened to be on a sale are all good choices - Guys like excitement, gadgets, and gifts they are comfortable telling their buds about. Most men, me included, are fairly simple creatures; we don’t want that tight-fitting, maroon turtleneck that some of you females out there think looks chic!
• For Mother’s Day: Cook her brunch perhaps, but mainly, just spend most of the day with her - Most moms will treasure your time more than another gift!
• For a Mom’s Birthday: Take her out to dinner somewhere reasonable that she has never been - It gives her something to look forward to and tell her friends about, and it gives her a night off if she’s the main chef of the household. The restaurant doesn’t have to come with a wine list or require a reservation, but the lasting memory of quality time together doing something new, exciting, and different will outlast any flowery knick knack.
• For a Mom’s Christmas: Get her something she wants, but won’t get herself - Maybe it’s that new book she keeps mentioning on the phone, that movie she didn’t get to go see, or that stylish bracelet she always looks at that just happens to be on sale.
• For Father’s Day: In line with Mother’s Day, grill out - Most guys love being outside and breathing in the faint aroma of charbroiled beef. Dads can beam with pride as they get to make their famous burgers again for their family, or if they prefer, they can watch their children make the burgers just like they taught them!
• For a Dad’s Birthday: An expanded sports package for the television, an outdoorsmen magazine subscription, or even an XM Radio subscription are all possibilities if you can get a good deal, and if you keep your eye out far enough in advance, you probably can! As they say, “Boy’s don’t grow up; their toys just become bigger!”
• For a Dad’s Christmas: A box set of an old, favorite television show or movie series with a nice pair of slippers - It’s kind of a cool combo and can be purchased for a reasonable price, and your old man will be appreciative every time he slides into his chair for a little nod...I mean television, while he "rests his eyes."
• For a Grandmother’s Birthday: Family pictures - Whether it’s pictures of you and her, pictures of you and your parents, or pictures of you, proud grandmas love having new photos to show off. Get one of those nifty family tree things where you can slide in pictures, get a fridge magnet picture frame for one really good photo, or take the time to make her a small, old-fashioned album. It won’t cost a lot, and she’ll love it!
• For a Grandmother’s Christmas: Cookies in a jar - I’ve come across these several times and have enjoyed seeing them and eating their contents. Basically, you take all of the ingredients needed to make a certain type of cookie and pour them artistically into a big glass jar. If you and your grandmother ever baked something sweet together over the years, what a sentimental, useful, and frugal way to give a gift that will almost certainly generate a smile and a laugh!
• For a Grandfather’s Birthday: Afternoon Fishing - Your granddad probably likes to fish, garden, walk, or hunt. Depending on the weather and his health, see what you can do to give him one of these experiences. The two of you will enjoy it, and it probably won’t cost you much more than some time and insect repellent.
• For a Grandfather’s Christmas: Several of the people I talked to mentioned this as good clothing territory, so why not see if you can’t find your granddad a nice, crisp, new dress shirt, a tie that doesn’t remember the 70s, or maybe even a sporty-looking baseball cap that’s at a reasonable price? Who says grandparents can’t dress super swank?
• For a Girl’s Birthday/Christmas: This is the category I have the least personal experience with, so according to the people surveyed and based on some Internet research, I’d recommend art supplies, board games, and stuffed animals. Be careful not to get drawn into pricy clothes that will be outgrown and expensive jewelry meant for a slightly older princess.
• For a Boy’s Birthday/Christmas: Baseball equipment or a football - One of my all-time favorite activities growing up was playing toss with my dad, and I’d still be up for a game right now, come to think of it! When I think of a football that will generate good times for years, it sounds more like an investment than an expense.   

 

In my book, there are two kinds of gifts: good gifts and nice intentions. Gifts also have two costs: expensive and practical. If it’s a big anniversary, a birthday that ends in “0,” or you truly have one of those rare, “perfect” gift ideas, I say go for it as long as it won’t inhibit next month’s mortgage payment. If it’s just another overpriced item that has her favorite label on it, a golf club that will still, somehow hit all golf balls to the right, or a pair of argyle socks, I say you can do better. Some of the above gifts have actually worked well for me and people I know whether we were the givers or the recipients. The next time you are struggling to cook up a good gift idea for a friend or family member, I hope you’ll think of this list. At best, they will be glorious, break-through gifts; at worst, they will be prudent presents.

 

-Tom