GUEST POST: Don’t Reach For The Middle

August 1, 2011

We found someone who wasn’t intimidated by our guest post guidelines. Nelson Smith, who blogs over at Financial Uproar. He’s one of the very few personal finance bloggers who can actually write. And he’s hilarious. And we agree with almost all of what he has to say. If you like this post, then he’d love for you to come check out his blog.

Few people notice how roomy it is on the right side of the curve.

I’m friends with a married couple, even though I’m single. Yeah, it’s a little weird.

This married couple is just like so many others. They’re both gainfully employed, combined they probably make close to $90k per year. They have reasonable housing costs and reasonable vehicle costs too, since they’re both smart enough to drive fully-paid-for used cars. They don’t spend excessive money on wants. They probably go out a little more than they should, but that’s fairly common for young people. Hell, I go out more often than I should, and I’m probably the third cheapest bastard on the whole internet.

On the surface, they don’t seem to be in bad financial shape. There’s no obvious place where they overspend. Yet, like so many others, they struggle to make ends meet every month. Are they morons? Well… yes. But they’ve got numbers on their side.

If this couple complains to me about their finances one more time, I’ll strangle their puppy. They easily make enough to pay for bills and to save for a rainy day. This shouldn’t be that hard. Why are they struggling so much? Here’s a snapshot of some of the excess in their lives:

– an alarm system ($40 per month)
– unlimited long distance ($20 per month)
– movie rental subscriptions ($25 per month)
– overdraft charges ($40 per month)
– new shoes from some website ($40 per month)
– a dog (>$50 per month)

Chances are, you’re practically blinded with outrage right now. What morons! Who gets a perpetual liability (that’s the dog) when they can barely afford to make ends meet? Who needs new shoes every month? They literally go to work and leave the house unlocked, yet pay for an alarm system. There’s hundreds of dollars more that they could cut from their budget tomorrow if they were serious about cutting. It doesn’t take a financial genius to figure out they’re wasting money. Why don’t they just do it?

Because they don’t care.

Most people sit in kind of a financial purgatory. They don’t get themselves in too much trouble, yet they never bother to get ahead. Every month they essentially break even. Because they have no financial sense, they pat themselves on the back for not getting any further in the hole. They slowly make progress on their student loans or credit cards, even eventually paying them off. Once they do, they decide they can now afford another payment, so they buy a new car. They rinse and repeat until sweet, sweet death saves them from their never-ending avalanche of payments.

Okay, not really. But they don’t get wealthy, that’s for sure.

As the writers here at Control Your Cash advocate tirelessly, the key to wealth is quite simple. Buy assets. Sell liabilities. Keep doing these things until you become wealthy. I guarantee if my friends read that golden rule, they’d understand it. Yet they have just about zero hope of ever implementing it. They’re just not PFers.

For those of you unfamiliar with the term, a PFer is a personal finance geek. PFers check their bank balances more than once a week. PFers constantly look for ways to trim the excess from their budgets. PFers spend more time on their budgets than their sex lives. PFers… well, you get the idea.

Most of the people who’ll ever regularly read this blog are PFers. Some just stumbled here looking for really snarky posts on the lottery or something. Most of us are people trying to move in one direction- toward wealth. And since we hang around each other so much, we often forget just how different we are than most other people.

What I’m going to propose just might shock and appall you, but that’s kind of what I do. After all, my blog is called Financial Uproar. It isn’t called Sunshine Flowers Puppy Personal Finance Hug Hour. I try to tell it like it is, just like the fine folks here at Control Your Cash. And that’s why we’ll be friends forever. Well, that and our friendship bracelets. You did get my friendship bracelet, right Greg? (Ed. note: No.)

What was I talking about again? Right. Here’s what you should do about your friends’ bad financial habits – absolutely nothing. You should give no advice. You should avoid bringing up money topics. They’ll complain about how their financial life sucks, but you should offer no advice past the most simple of concepts. Do not get involved in their finances one bit. And for the love of God, never lend them a dime.

No matter what the accomplishment, the impetus for change has to come from within. If your friends are going to improve their finances, they have to do it. No amount of prodding or helping on your part will get them to change. They have to get to whatever their breaking point is. Your help won’t do squat, as much as you think it might.

Most people will never reach that point. They’ll have a mortgage payment for most of their adult lives. They’ll cash out equity from their house to take vacations and buy cars and pay for their kids’ weddings, because they’re morons. They’ll think they’re doing well because they’ll compare themselves to the masses instead of comparing themselves to the wealthy. 

Chances are that if they’re not already on the path of wealth, they’ll never become any higher than middle-class. No matter how much you want to help, it’ll ultimately fall on deaf ears. You can’t help somebody who doesn’t want to help themselves. Or, more accurately, you can’t help someone who doesn’t think they have a problem.

**This article is featured in the Yakezie Carnival -Newbie Edition**


**This article is featured in the Totally Money Carnival #32-A Flood of Great Articles**

 

Filed Under: Bad Examples, Estate Planning, Finance, Healthy Living, Making Smart Choices, Role Model Tagged With: , , , ,

So just why should I buy your book, anyway?

June 27, 2010

That’s the one most common objection, from people who stumbled across one of our guest posts at Free From Broke, or Money Funk, or Len Penzo, or Credit Card Chaser, or 20sMoney, or Planting Dollars, or My Journey To Millions, or one of the other myriad places that’s been gracious enough to let us beat our chests with our unnuanced approach to building wealth. Yeah, sure, Greg McFarlane can turn a phrase and make me giggle, but why should I trust Betty Kincaid and him to advise me when Dave Ramsey is so earnest and reputable? And Suze Orman so brassy? And Clark Howard so breathtakingly sexy?

If you’re in your early 20s, have negative net worth, and have adopted the belief that debt is just an inevitable fact of life for your remaining decades, you need the book. If you’re adult enough to admit that you don’t know a blessed thing about money, you need the book. If you let someone else do your taxes every year, and isn’t because your finances are so ensconced in LLCs and S corporations that if takes a CPA to decipher your ability to maximize deductions and credits, you need the book. (You also need to start doing your own taxes, at least once.) If you work on Wall Street, dealing in conditional variance swaps and measuring third-order derivatives of the option value to volatility, you can probably skip the chapter on securities and head straight for the chapter on how to buy a car.

We wrote the book to eliminate guesswork for people who can’t be bothered to learn every nuance of someone else’s field of endeavor. Escrow, for instance. Say you’re about to close on a house. If you’re sitting across from an escrow officer who’s talking about proration schedules and title search indemnity, and you nod your head for fear of seeming clueless or unsophisticated, your pride will cost you money. Possibly lots of it.

If you reach that point, in that scenario, your only other option is to admit your ignorance and sit there as the escrow officer goes through every line from every one of the dozens of documents you have to sign. The proceedings will slow to the speed of evolution. It’ll take 5 or 6 hours to go through every contingency, and there’s no way you’ll be disciplined enough to sit through it all anyway.
Or, you can spend $10 or $14 (prices vary, usually downward) on the book. Then you’d know what to have asked the real estate agent and the mortgage lender weeks before you’d gotten to this point.

Tell us, right now: where do the deductions from your paycheck go? (Don’t say “the government”, that’s a D- answer.) How much goes to where? Does any of it ever get returned to you? And if so, then why did the government confiscate it from you in the first place?

Admit it: you probably don’t know. You don’t know what the acronyms stand for (FICA? COBRA?), nor do you know what percentage of your money you’re losing before you even get to touch it.

Are you the least bit interested in minimizing those deductions? In taking home a larger piece of what was yours to begin with? Then you need the book. Control Your Cash isn’t just a memorable and semi-mellifluous title. It’s, as the advertising drones say, a call-to-action. Put it this way: someone’s going to control your cash. If you’d rather it be someone other than you, you’re either a child or retarded.

We wrote the book because we couldn’t find all this stuff – bank accounts, credit scores, home buying, entrepreneurship – in one volume. In the words of Alan Schwarz, author of The Numbers Game and probably not the first author to articulate this thought, “This is the book I wanted to read, but no one had written it. So I did.”

And thus, a book that breaks down your 1040 form line-by-line without boring you into catatonia. A book that teaches you how to walk into a car dealership and treat that tobacco-stained salesman in the Men’s Wearhouse shirt and tie like the petty thief he is. A book that explains how, when and why to invest.

But not what and where to invest. Control Your Cash: Making Money Make Sense doesn’t recommend particular places to put your money. It just explains what those places are, because most people can’t begin to guess. The book teaches you how all the particular investment classes work, and what their potential pluses and minuses are. But what securities, real estate or bank instruments you choose to build your fortune with are your business.

We’ll teach you to drive. Whether you become Dario Franchitti or Chris Waffle is up to you and chance. But you don’t need to be the former to get where you want to go quickly and safely.

Filed Under: Book Promotion, Education Tagged With: , , , , ,

It’s only money. Tens of thousands of dollars of money.

May 13, 2010

Sasha Obama, taken the day Digging Out From Our Mess got out of the red.

We spend so much time online looking out for fellow travelers, people who encourage you to spend your money, invest it wisely, and take ownership, that we never dreamed there was an online subculture of financially irresponsible people and their enablers; people who pay nominal attention to increasing their net worth, and who think that intending to get out of debt trumps actually doing so.

We recently discovered Digging Out From Our Mess, a blog posted by the female half of a couple who have an autistic kid, a normal kid, four credit card balances, two student loans, and $71,930.29 in consumer debt. Is this cause for shame? Possibly, but not when you can brag about it!

The anonymous 30ish woman behind the blog qualifies that total, admitting that her and her husband’s cumulative debt load does not include a “retirement loan”. We’d never heard that term before, and you probably haven’t either: Google only returns 628 results. It turns out that a retirement loan is an advance on a 401(k). Yes, a woman in the prime of life is borrowing now to avoid incurring penalties on a forced retirement plan that the law prevents her from touching until she turns 59½. But if you’re going to borrow against your 401(k), why even have it in the first place? Borrowing against it defeats the purpose of “forced saving”. We’re guessing the author also carries life insurance, although she’s coy about any weekly lottery ticket budget she might have (every ticket a potential winner!)

We’ll resume attacking her in a second, but in the meantime know that if you attempt to touch your 401(k) before you turn 59½, for anything other than emergency medical expenses, you’ll pay a 10% penalty.*

Anyhow, Mystery Blogger is proud that she’s 6% of the way to getting out of debt. (There’s a graph that illustrates this on her website. DON’T VISIT IT.) This means she’s en route to getting out of debt in her early 50s. Excluding the retirement loan, of course, which she’ll have to start paying back shortly thereafter. She recently posted that she spent $1000 to send her kids to camp for the summer, and is upset that her mother, maybe mother-in-law, it’s hard to remember which, didn’t contribute.

$1000 is close to 1.4% of her family’s ostensible consumer debt total. She could have moved her debt arrow that much closer to the end of the graph. When you’re only at 6%, that $1000 makes a visible difference. Yet she chose to put her money in something fleeting instead.

Incur debt, cry about it, go public with your halfhearted attempts to reduce it, then do something that increases it, while hoping that someone else might subsidize it. In which universe does that make sense? (We’re finding out that it does make sense in the world of international finance, but that’s a different and more ominous story.)

Alright, we give you permission to visit Digging Out From Our Mess, but only to witness this exchange in which Mystery Blogger defends herself and her methods against a humble Control Your Cash sniper. Mystery Blogger is the financial equivalent of the fat woman who loses 3 pounds and is so proud of her accomplishment that she has to share it with everyone and act as an authority on the topic of weight loss, even though she needs to lose another 77. Congratulations, you went 10 minutes without a cigarette. Here’s your Medal of Honor.

Once again, and this will be far from the last time: the only way to build wealth is to buy assets and sell liabilities. It’s elegant, it’s symmetrical, it’s simple and it never fails. Your kid’s summer indulgence is a liability. You should sell (i.e., not buy) it. A 401(k) is an asset. You should buy (i.e., contribute to) it. A loan you borrow with your 401(k) as collateral is a grenade. You should throw it at the Viet Cong.

It’s at times like this that we wish Tim Berners-Lee had majored in women’s studies instead of giving people like this an outlet. Maybe the Chinese have the right idea about censoring the internet, because Digging Out From Our Mess is far more obscene than anything you’ll find on 2 Girls 1 Cup, LiveLeak or Lemon Party.

If you’re $78,000 in debt, log out of BlogSpot, back away from the keyboard and spend that time at a second job.

* If you don’t have a 401(k), and you qualify, get one. Yes, it’s something you can’t enjoy for years, but it lowers your tax obligation. It’s a way of giving the federal government a few ounces of flesh instead of the requisite pound. Plus, most employers offer matching contributions up to a certain level. If your company is willing to exploit its own tax situation by giving a few dollars to your retirement rather than a few more to Uncle Sam, let ‘em.

Note: We didn’t bash the autistic kid, we bashed the mother. Relax. If anything, she should hand the autistic kid the keys to the checkbook and the bank passwords. He couldn’t do much worse than her.

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