In Case Of Emergency, Count Your Balance

January 9, 2013

 

Our species has gotten so fat, these days we couldn't fit our fingers in the holes anyway

Our species has gotten so fat, these days we couldn’t fit our fingers in the holes anyway

 

God, we humans are dreadful at assessing risk. And you don’t need to do the ball exercise to prove it. Just ask anyone who

  • Sweats more when flying 2000 miles than driving that far.
  • Won’t let Caleb and Dakota play at the house of that neighbor who owns guns (“because I’m a good mother”) but encourages them to play at the house of the other neighbor, the one with that unforgiving deathtrap called a swimming pool.
  • Figures that the 100% chance of getting a buzz off a few drinks is worth the smaller but still statistically significant chances of getting a hangover, getting a DUI, mouthing off to a stranger, getting in a fight, mouthing off to a friend, vomiting in public, making out with someone you’d normally avoid, losing your wallet or an article of clothing, sending a regrettable text (“U AND I WERRRE MEANT TO BE TOGEHTER!!!!! I SORY ABOUT EVERTHING BUT I LOVE U SO MUH!”) having to find your car the next morning, handing a day’s wages over to a cab driver, or performing one of the other quadrillion regrettable acts that we could have included in this paragraph.
  • Buys lottery tickets. (The chance of a masked criminal entering the convenience store and shooting you while you wait for a ticket is greater than the chance of you winning. Heck, the chance of a 7-Eleven roof panel falling on your head and permanently incapacitating you isn’t far behind.)

People love to worry about and prepare for stuff that’s not going to happen, even if it means

  • throwing away real money in the process
  • guarding against a “disaster” that’s really more of an inconvenience.

In fact, for many of said people the idea of spending money on the unlikely event is a positive. To them, no price really is too high if it means being safe. But there are degrees of safe, and there are degrees of sorry. They can even overlap. To cite an example, one that could save you legitimate money:

For the 70% of you out there who STILL have landlines, one question: Are the customer service people at CenturyLink really that smooth that you can’t cut them out of your life? (“Para español, oprima numero dos.”)

$540 a year so you can make phone calls from the inconvenience of home (and perhaps a 50’-wide zone around your home, depending on how big the antenna on your cordless set is.) You know, as opposed to the full portability of a mobile phone. Which you have anyway.

Even the lists of features sound laughably old. Why, with landline service you can “Add popular calling features such as caller Id, voicemail, call forwarding”

Where to begin here? Voicemail has been around for 25 years. It’s a “popular calling feature” in the same way that a lettuce crisper is a popular storage feature if you happen to be in the market for a fridge. And again, all these features come standard on a cell phone. Which costs a little more, $80 or so a month, but that we can mostly agree is worth the convenience.

Note: The opportunities lost and time wasted in the exclusively-landline era are incalculable. It wasn’t that many years ago that arranging to meet people at a predetermined time and place was a crapshoot. Having to change plans at the last minute was either impossible, or more trouble than it was worth. We’re not the first people to point out that the plot of most every Seinfeld episode would have been destroyed if the characters owned cell phones, but that’s not the half of it. Popular songs were written about the simple but devastating misfortune of missing a hookup because the 2 parties in question spent undue time standing 1/8 of a mile apart. (Read the lyrics to Led Zeppelin’s “Fool in the Rain” or Genesis’s “Misunderstanding”.)

No way. I’m never giving up my landline. I need it for emergencies.

What emergencies? You will never have to call 911. And if you do, you can use your cell phone. Yes, there’s a chance you might get put through to the wrong dispatcher. Tell her when she answers, and she can fix it in 4 seconds.

But if there’s an intruder in my house, those 4 seconds are precious.

First, you should have bought a gun by now. Second, we’re now arguing about the infinitesimally unlikely. At this point you might as well ask your local landline provider if they can offer early asteroid detection for an extra $200 a month. Hey, better safe than sorry.

The chance of your visiting aunt suffering a grievous head wound and you somehow being unable to call a local ambulance is tiny. But the cost of that landline is certain and large. Quit paying it.

Seriously, though. What if the power goes out?

Then start a fire and tell ghost stories. On the North American grid, the power doesn’t go out frequently enough, nor for long enough periods, to justify that $540 expense.

And what if the power goes out? Who are you going to need to call? Do you pay the annual $540 in the event of that one instance every 20 years when the power does go out, your mother who lives on the other side of the country hears about it, and then she calls to make sure you’re “OK”, but she can’t get through? Not sure what that’s worth to you, but it’s worth less than $10,800 to us. Besides, she’s going to be dead by the time the power goes out again anyway.

Worrying about these unforeseeable events is the equivalent of the loopy financial pundits who insist that you create an “emergency fund”. Why do they do this, aside from the obvious reason (in case there’s an emergency)? Because it’s easy and pointless, like most things in life. Throw a dead cat and you’ll hit 8 personal finance bloggers who are proud of their $1000 emergency funds, on which they’re ready to break the glass on should it come to that. Even though they’re carrying several times that amount in credit card debt.

If you’re that convinced that moderate disaster is moments away, spend $2 on batteries and scour yard sales for a radio. Then you can burn your evenings waiting for a transmission from the Emergency Broadcast System, which again will never happen. Or if it does, it’ll be useless. “It’s snowing. Stay inside.” Which you couldn’t figure out by looking out your window.

Sell liabilities. Your landline is near the top of the list. (Unless you live in the white areas, in which case do what you must.)

Filed Under: Bad Examples, Making Smart Choices Tagged With: , , ,

Leave Them Behind

December 14, 2012

10th Circle, People Who Have “Emergency Funds”

 

Today, financial triage. Adopted mostly as a way to maintain the collective sanity of you people who get value out of this site.

If you’re sentient, you’ve noticed that few very humans even want to know how to control their finances. Most of us would rather ring up credit card debt, earn (and finance) useless college degrees, work for money instead of the other way around, and generally do what our intellectual superiors in Washington are doing, writ small.

What’s worse is that most of these fools are convinced they’re right. That link leads to a story about a positive if deluded woman who’s $61,000 in debt, yet uses the obfuscating phrase “32% debt-free” to describe her financial situation. Why? Because she used to be $90,000 in debt. Hey, the glass is one-third full, right? This is like a murderer who’s 16 years into a 50-year sentence bragging that he’s “32% released”, leaving open the question of whether it might have been better just to not have slashed that guy’s throat in the 1st place.

Surround yourself with enough people like this, whether in real life or online, and you’ll start to question basic assumptions that you know to be true. Maybe we’re supposed to spend our lives owing money, then die. Maybe incurring debt, then spending years attempting to pay it off, builds character that the people who didn’t incur any debt in the first place will never have the opportunity to develop.

See? That last sentence almost makes sense, doesn’t it? Even though it’s absurd. Here’s an acid test for CYC readers: if you can rationalize a lunatic statement about your finances (“I’m thousands in debt, but that didn’t stop me from getting a credit card with a $700 annual fee. YOLO!”), we’ll slow down the bus and let you jump out the window. Roll yourself into a ball before you hit the pavement, it’ll protect your organs and maybe your skull.

It’s not the stupidity that irks us, it’s the stupid people’s insistence that either a) they’re right, b) screw you, you can’t tell me how to live my life or c) both of the above.

Maybe there are credit cardholders who actually enjoy making monthly outlays to VISA, and by extension paying for things twice and 3 times over. Oh, who are we kidding by qualifying that with the word “maybe”? Of course they enjoy doing it, or they wouldn’t do it. Just like terminal lung cancer patients love hoisting their emaciated frames out of the hospice bed to look out the window. If they don’t enjoy being in that position, why are they in it?

Wait, you’re saying it’s because they spent a lifetime making dumb choices?

Thank you.

Control Your Cash exists for one reason – to teach otherwise smart people how to build legitimate and lasting wealth. “Otherwise smart” means that long before you discovered our little site, you were intelligent enough to have known that you don’t borrow money to buy garbage. Or play the lottery. Or clip coupons at an effective rate of 19¢ an hour.

To us, your authors, knowing all of the above seems about as fundamental as knowing that you don’t put your hand on a hot stove element. (Or, continuing the analogy, a stove element whose temperature you’re unsure of.)

But then what? We like to think that you folks are smart enough to understand the basics, and beyond that, inquisitive and discerning. You made it this far without destroying your financial life? Congratulations, and we’re sincere about that. It’s knowing what to do after that that’s the hard part.

Because staying at your job and getting annual 2½% raises may sound good, or at least low-maintenance, but it isn’t. Same goes for some other endeavors, too:

  • Trading in your car to a dealer? Bad idea. You can save yourself thousands if you don’t.
  • Putting your money in a certificate of deposit, because your bank advertised what sounds like a high rate? Also a bad idea, but not as bad as the previous one. There are plenty of similarly low-risk investments that offer bigger rewards.
  • Feeling trepidation over the idea of investing in the stock market yourself, instead of just letting the Ameriprise representative show up at your office and buy everyone lunch, after which you let her pick a mutual fund for your 401(k) to invest in? At best, that’s a neutral idea. You can do so much more.

If you’re curious, want to learn, have even a little ambition regarding this subject matter, and already know not to make the obvious mistakes listed above, then we can help you build wealth.

If you’re convinced that there’s a perfectly legitimate reason for incurring consumer debt, transferring credit card balances, and/or declaring bankruptcy, then we don’t need you. You’re not going to pay attention to what we have to say anyway, and besides we don’t have time to dumb it down for you.

Good. Now it’s just the smart folks in the room.

This stuff isn’t hard, but it isn’t intuitive, either. We figured it out, largely through trial and error, saving you the trouble if you’re willing to just read us. Oh, and buy our book if you’re so inclined. (Link to the right. Dividends paid almost immediately.)

Filed Under: Bad Examples, Book Promotion Tagged With:

How To Get Broke In Just A Few Easy Steps

December 5, 2012

Inspirational photo. Details at the bottom of the post.

 

You don’t have to be a sports fan to get or appreciate this. Per a Carnival of Wealth submitter’s recommendation, we checked out the ESPN documentary Broke the other day. It’s about athletes who at one point pulled 7-digit salaries, and ended up losing it all (and then some.) The documentary was a delightful look at comeuppance, perhaps the schadenfreude, of watching people who have been excused, pampered, and allowed to slide their entire lives, finally getting pummeled by reality.

The featured subjects embodied various levels of stupidity, but the one guy who got most of our attention was Andre Rison, who holds the dubious record of scoring touchdowns for 7 NFL teams. It’s dubious because a) playing for 7 teams means he probably wore out his welcome with 6, and b) he likely played way longer than he should have. That Rison did: 4 years after that last NFL touchdown, he began a 2-year low-paying stint with the Toronto Argonauts of the Canadian Football League, the Episcopal Church of football (“Everyone welcome”.)

You don’t need to watch the documentary to imagine what happened to Rison and his contemporaries, but there was a lot of premium liquor and nightclubs involved. Premium, as in $5000 a bottle. It was important to these athletes to not merely be rich, but to let others know it. As if people would see the local All-Pro wide receiver in the club and think he’s of modest means.

He wasn’t featured in Broke, only on our site, but Floyd Mayweather likes to bet $100,000 at a time on football games. To his perverse credit, Floyd likes to tweet pictures of both his winning tickets and his losers. We’re not sure which is more offensive. Probably the latter, as the implied message is “losing $100,000 in 3 hours means so little to me that it doesn’t even embarrass me.”

Look for Floyd in Broke II: Red Tide in 2014 or so. By the way, you’d figure Floyd would be a sophisticated enough bettor to understand the concept of vig (wagering $100,000 to win $90,909.09?), but maybe we’re expecting too much from our baby mama beaters these days.

Our minds fail to wrap around this one. You’re already young, rich, famous, fawned upon, and not hurting for feminine companionship. You have to spend tens of thousands of dollars swaggering in front of passersby, too? Swagger is that valuable?

You probably don’t pull a 7-digit salary, but the lessons in Broke are applicable to everyone. Rison exercised the opposite of just about every Control Your Cash mantra, in one easy lesson:

  1. Care what other people think.
  2. Buy liabilities, sell assets.
  3. Confuse income with net worth.
  4. Date a crazy broad who sets your house on fire.

There are plenty of things worth rubbing in other people’s faces. Money, in all its precious and delicate glory, is not one of them. If it’s that important to you to look rich rather than be rich, Control Your Cash is probably not for you. Especially since those two objectives contradict each other more often than they overlap. Driving a Jaguar with 72 monthly $2,500 payments – a liability, not an asset – doesn’t prove you’re rich. It proves you’re poor.

Here’s a funny epilogue from a few months ago. Rison quit coaching his alma mater this past season. No, not Michigan State (more on that later.) Rison was the head coach at his high school. We’re not sure what the going salary is for a head coach in the civic urinal that is Flint, Michigan, but we presume Rison needed the money.

But he quit, so he could…

Return to college! As a student! We couldn’t make this up. The same moronic justification for higher education that we’ve heard myriad times before:

I promised my mother, father and grandparents that I would go back and finish my degree one day

What the hell for? So he could get an internship at a local title company, eventually work his way up to middle management?

Then again, he had a perfectly legitimate reason for leaving school TWENTY-FOUR YEARS AGO without graduating:

I just got a little tired my senior year, that’s all

That’s one hell of a nap, especially for an elite athlete who presumably gets fatigued less than the rest of us do.

Recently, we’ve noticed that almost everybody lies. Not that that’s news, but as a society we’ve decided that such lies are antiseptic, maybe even charming. What’s bad is when the actions that accompany them end up being more damaging than the lies themselves. Andre Rison didn’t get a little tired in his senior year. Nor does he have any earthly reason for getting his degree. People who decry a marriage certificate as “just a piece of paper” – exactly what do you call a diploma that’s 24 years late and won’t do a thing to advance the holder’s career?

This isn’t a trip into metaphorical nonsense. We’re the last people in the world to tell you that true riches are the smile on a child’s face, or your health, or the enlightenment that comes from reading the classics. True riches are money that you can put to work earning you more money, enough to maintain the consumer-debt-free lifestyle of your choice. The unsustainable waste and financial showmanship of the ostentatious is anything but true riches.

 

EPILOG: Oh yeah, the guy in the picture; who has nothing to do with Broke. Here’s another piece of advice we forgot to mention: make a quarter billion, live relatively modestly, don’t squander it, date an endless parade of the hottest women on Earth, and marry none of them. Heck, this works so well that eventually broke people will just start giving you tens of thousands of dollars they can ill afford.

Filed Under: Bad Examples Tagged With: , , ,
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