What Candidate Will Be The Best For Your Finances?
Posted on January 27, 2008
With primaries and caucuses in full swing and a new president on the horizon, I thought it might be helpful to start some discussion on who will be the best for our finances. This isn’t about who you like the best, or even who you want to vote for, but who will be the best for your personal finances. This includes things like job availability, income rates, interest rates, mortgage rates, taxes, and other related issues.
For me, I think the biggest issue affecting my personal finances is taxes. From 7% sales tax in NJ, to income tax, to having to pay both sides of social security taxes on The Rockette’s income, capital gains taxes, tolls, and on and on, I can’t thing of a bigger drain on my money. This is especially true, since I have no choice in the matter. With anything we consume(housing, autos, gas, food), we have choices. Not so with taxes. The more you make the more they take. To change taxes you need an administration that is focused on fiscal responsibility, smaller government, and giving the people more control not less. Even though I voted for Bush in 2004, this administration has failed me horribly. Government has gotten bigger and exerted more control, and spending has gone crazy.
I personally don’t think the lot of Democrats will move the US towards a place that will tackle these finance questions for me with the exception of more fiscal responsibility and less war. It also doesn’t seem like the front running Republicans are touting platforms that would affect these financial issues. Huckabee and the Fair Tax has some potential or is at least an attempt. So, who else is left? Ron Paul. Yes, he is quirky, but his ideas and his record shows he genuinely wants a smaller government, less spending, and to return the power to the US residents. These goals would totally support my major financial goals. The media doesn’t give him much coverage, but he does have a great website if you want to check out his positions.
I know that I am not focusing on a lot of issues that may be important for others, but those are my issues. There is plenty of room for debate. What is your focus, and who best supports your financial goals.
Which 2008 Presidential Canidate will be the best for your personal savings, spending, and earnings? Note: This could be different than the canidate that you endorse.
» Filed Under Personal Finance
Why Personal Finance is Personal
Posted on October 24, 2007
The reason they call it personal finance is because there aren’t any right answers. That’s right, no right answers. If there were right answers, we could call it something like personal financial decision science. Everyone would be doing the same 20 step program and trying to achieve similar goals.
That isn’t how it works. It is our money. We are all different. We all have our own quirks, goals, personalities, and dreams. Personal finance can not escape that fact that it has to deal with humans, and that is where the personal side of equation comes into play.
Consider two families who just went through their house and de-cluttered. They are both left with a pile of junk, but they decide to do something different with that stuff. One family sells the items through eBay and Craigslist, while the other donates the items to the local children’s shelter. Did either family make a wrong decision? No, they both chose according to their own goals, desires, and values. One was willing to sacrifice income while the other willingly sacrificed the benefits of altruism. One of the tricks to learn to be aware of what our decisions are really costing us.
Sure, maybe the family who sold the stuff will have more money, but that isn’t the goal of personal finance, is it? If it were, we could move closer to a finance science since we have an empirical goal by which to judge all actions. The fact is our money goals are very personal and cover a broad range of topics.
Does that mean some choices aren’t better than others? Of course not. It is still possible to judge the value or helpfulness of a given choice, but it is hard to do without having some understanding of the personal and situational context within which the decision was made.
Ok, so why do I mention this? I honestly feel that we will only cause ourselves trouble without truly understanding the realm in which personal finance decisions are made. In order to make the best decisions and help others make wise decisions, we must be honest about imperfect nature of personal finance. We must be willing to judge actions by not only outside empirical evidence, but also how the decision relates to our goals, personality, and values.
» Filed Under Favorites, Personal Finance, Psychology of Debt, Psychology of Spending
Delayed Gratification Will Save You Money
Posted on June 12, 2007
Remember the ‘Marshmallow Test‘? It was a study from the 1960’s which found that preschoolers who were able to delay gratification at four years old were more likely to be socially competent, assertive, trustworthy, dependable, able to cope, and likely to embrace challenge. The ability to control our impulses will encourage success in most areas of our lives. Our relationships, careers, money, and wealth will all be positively affected by being able to delay our gratification.
As an example let’s look at two similar families who want to own their $300,000 dream home. They both have a $60,000 down payment ready, and the ability to handle $1,438 a month. Family 1 decides to purchase their dream home right away. They take out a 30 year mortgage at 6.0% interest. With a $60,000 down payment and minimum payments of $1,438, they completely own their house in 2037.
Family 2 decides to ease into homeownership and purchase a starter home for $150,000. They take out a 30 year mortgage with a down payment of $60,000. They make minimum payments of $539 and put another $900 towards principal. The first house is paid off in a little over 6 years. Assuming a conservative annual rate of return of 3% on real estate and subtracting selling fees, they have a down payment of $173,413. Finally, they take out a mortgage (20 years @ 5.7%) on their now $358,000 dream home. Their dream home is paid of in 16 years. Family 2 owns their dream home in 2029, eight years earlier. If they save the $1,438 in a high yield account to finish out thirty years they will not only own their home, but also have about $144,000 cash in the bank. The numbers get even more exaggerated if they keep saving and you run the numbers out 20 more years. Family 1 will have $540,000+ in the bank, while Family 2 has $1,000,000. Delayed gratification and compounding with time are quite helpful.
I kept the example simple, but it shows how much delayed gratification can influence positive results in our lives and our money.
» Filed Under Favorites, Materialism, Personal Finance, Psychology of Debt
My Get Out Of Debt Success Story - $70,000 In Four Years
Posted on May 15, 2007
The title of the site mentions gaining freedom through personal finance, so it is about time that I share some of our journey. The family’s finances are now on auto pilot, but that is only after 4 years of blood, sweat, and tears. The idea is to not only share the overview of the last 4 years, but also highlight the key concepts that we encountered while paying off over $70,000 in debt.
Evaluate Your Relationship with Money - During many long conversations, we explored what we learned in our family of origins about money, how we currently operated, and what we thought money would look like when we were married. Our eyes were opened and we felt like we could have power over money and not let our finances control us. With my brief sordid history with debt and my wife’s loathing of credit cards, we were encouraging each other to despise debt(Step 2)
Despise Debt - Shortly after we were married in October of 2002(paid with $10,000 CASH), we had about $72,000 in debt. 70% school loans and about 30% in cars. We rented a reasonable apartment for a year, but were still feeling the bondage of the debt on our life and relationship. Frustrated, we started randomly attacking our debt with extra payments. This is where I came across Dave Ramsey, and was inspired to learn as much as possible to help us out.(Step 3).
Get Knowledgeable - Dave Ramsey’s book launched me into the world of personal finance. I checked out arm loads of books from the library, and devoured anything and everything I could find on the subject. I eventually returned to the Ramsey Snowball method. It suited me and I enjoyed the motivation his free streaming radio show provided. The best part was the simplicity of the plan and the ease at which my wife to climbed on board. With the new found plan, and all of the other information I was soaking up we began to take control of our finances(Step 4).
Take Control of Your Finances - We were renting DINKS(Dual Income No Kids) armed with a pretty shovel to dig out of debt. We watched our spending, trimmed our expenses, and put every extra penny towards debt. We learned how to plan, save, and spend CASH on larger items. We set up Microsoft money, created a budget, and communicated about how we were spending our money. The growth of control bred more motivation and energy. We sold our junk on eBay, and were able to put a $1,000+ towards debt each month. The debts began to fall, and with each one we became more focused. We even saved for a small down payment on a condo. An amazing thing happened when we got down to under $30,000 in debt…a world of options started to open up. We could envision a great future, and it seemed attainable. Things like working for myself, pursuing jobs we wanted, and having a family were definitely things that were within our grasp. Now that we were in control, we could have perspective on our life(Step 5).
Gain Perspective - In about three years, we were debt free; $24,000 a year towards debt!! As our money became our own and not the banks, we talked a lot about were we wanted to go in our lives. It was a wonderful feeling to realize that we could seek things that we truly valued in life. We saved $10,000 for the adoption of our son, increased our giving, and started building an emergency fund. In about 4 years our lives, finances, and marriage had been transformed. What an amazing ride it was, and journey is just beginning. As Dave Ramsey says : “We changed our family tree”. Our lives and the lives of our children will feel the effects of the last few years for a long time.
» Filed Under About Me, Debt Elimination, Favorites, Personal Finance
How to move a rock! Part 3
Posted on April 28, 2007
Financial Peace: Restoring Financial Hope to You and Your Family
Out of my growing desire for personal freedom, I had already started the journey towards being debt free. I stumbled upon a copy of this book in the local library and thought it aligned with my current focus.
Dave Ramsey is a personal finance talk show host with Christian flavor. More motivational speaker than finance expert, although I found that helpful at the time. My wife and I had 70,000$ in debt, so his energy was refreshing. We had a big hole to dig out of, but as degreed DINKS we had a pretty large shovel. Dave keeps things simple, and his get out of debt plan is based on easy to comprehend ‘baby steps’ geared towards changing the behaviors that got you into debt. Dave will deserve some more coverage in a later post.
With each creditor that we crossed off our list, I could feel my ability to envision and accomplish my goals grow. It was a great feeling. After about three years, the debt was gone! Although was by no means the end of the journey, I did get a taste of FREEDOM!!!
» Filed Under Favorite Books, Personal Finance
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