Ozark and The Meaning of Money

It’s rare for a pop culture show to get to the heart of a financial issue better than the vast majority of so-called financial experts. And at the beginning of the first episode of the Netflix show, Ozark, which revolves around a financial planner caught up in a money-laundering scheme gone bad, that’s exactly what happened.

Now, I’m not here to tout the show (full disclosure: I’ve watched only one episode and I’m hooked) but you may want to watch at least the first three minutes of the opening episode. This is when the lead character, Marty, played by Jason Bateman, launches into a narrative that goes something like this:

“50% of all American adults have more credit card debt than savings.

25% have no savings at all.

15% are on track to fund only one year of retirement.

Is the American Dream dead?”

If these statistics are not entirely accurate, I’d say they’re definitely in the ballpark. For most Americans (and increasingly, Canadians), I’d say the dream of material wealth, of being comfortably middle class, is on life support, if not dead.

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Marty’s Take On The Meaning Of Money

Marty goes on to say that most people have a fundamentally flawed view of money. Contrary to conventional wisdom, Marty says that money does not represent security, happiness or peace of mind. Nor is it a unit of exchange whereby we exchange money for a good or service.

I listen to this and I’m thinking, where is this going? What is money if not a unit of exchange or source of security? Marty continues:

“At its essence, money is the measure of your choices.

Meaning, how much we accumulate, whether in debt or savings, is a direct function of our work ethic. And work ethic refers to our willingness to invest in our future, our family’s future, by employing patience, frugality and sacrifice.”

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Responsible Choices Leads To Freedom

Whether Marty’s discourse rings true for you or not, I’m completely on board with the idea that we may be measured by our choices. And in the money management universe, if our course of action is irresponsible, if we let impulse, emotion, envy and greed steer decision-making, then we pay a price.

Maybe that price is a life of financial struggle and attendant stress. Maybe the price involves never feeling fully independent owing to debt. Maybe the price is delaying retirement indefinitely because our savings are inadequate or non-existent, and we just won’t be able to get by if we stop working. Maybe the price is not being able to give our kids as much help as we would like when it comes to higher education. Whatever the price may be, it’s a cost to our self and/or our loved ones.

I’m not trying to go all doom and gloom here. Rather, I’m pointing out what you could say is the in-your-face-obvious: our choices matter. And too many people choose to charge it, to run up credit card bills because ‘hey, this is a free country, I’m entitled to buy what I want, I’m entitled to have the same stuff as my neighbor’.

Well sure, you can make that choice, you can load up as many credit cards as financial institutions are willing to offer. And if you do so, know the consequences of spending beyond your means: financial holes resulting in stress, relationship damage, impaired self-esteem, to name a few. These are the result of irresponsible choices. Choices that do not lead to any sort of freedom.

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Cut The Card

I was in my early twenties when I was approved for my first credit card. And wow, was I excited. I had achieved another adult marker. Pay for stuff with a plastic card. How cool is that?! Oh, and a few years later, when I got myself a Gold card, well, look at me and my newfound status! Oh, oh, oh, right … and when I received a statement showing the interest I was obligated to pay because I had not paid off the balance in full … um, uh, that’s what it took to get me to stop and think that I’d been hoodwinked, or maybe I just didn’t bother to fully inform myself about the pros and cons of the uses of plastic.

Look, a credit card is a convenient way to pay for stuff. Nothing more. Forget about the airline miles, the cash back, and any other perk peddled by financial institutions. Ignore the gold, silver and platinum marketing pitches appealing to status, ego, and an illusory sense of belonging.

Most people can’t handle the temptation to spend more than they have. And financial institutions know this. They know that plastic doesn’t really feel like money so you’re more apt to use a card than to spend the $20 in cash in your pocket. And they really don’t care. They make money from you; that’s their sole purpose. Your debt is your problem.

So here’s what you do: you choose to change your spending habits. You choose to pay via debit card, cash or PayPal (online) whenever possible. This will minimize, with the goal being to eliminate, all credit card interest. Know how else you’ll benefit? Impulse buys will go way down, you’ll spend less and save more.

To give your self a hand, cut all your cards but one. That’s right, hold only one card, a Visa or Mastercard. You don’t need anything more. And get one of the cards that doesn’t charge an annual fee. Sure, no fee cards don’t offer rewards but so what? Rewards exist to charm you into unnecessary spending. Life will go on just fine without counting any kind of credit card rewards.

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What’s The Problem?

To effectively tackle the credit card problem, to permanently relegate overspending and interest payments to the proverbial dust bin, take a look in the mirror. Review your total spending during the past six months and review credit card charges. In other words, look at where your money is being spent.

What can you cut? What was frivolous? Did you spend too much on one or more items and, if so, why? Was the purchase worth it? If so, why? What’s the cost other than financial? How does your spending impact short term paying the bills each month and long term planning for a life of financial freedom? What charges could you pay with via cash or debit card?

Look at these issues. Wrestle with them. Find answers. Don’t ignore, don’t minimize the importance, don’t stick your head in the sand and complain. This is simply not the BuddhaMoney way. Instead, recognize overspending, recognize mistakes, take responsibility, and make it different going forward. Make the choice to manage your money more effectively, in a way that bolsters your current assets and your long term plan to have your money work for you one day (through investments) rather than you working for the money.

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Make The Right Choice

The right choice means using credit cards only when absolutely necessary. And it means paying off credit card debt. It means figuring out a realistic plan for eliminating debt, whether you owe $500 or $5,000 or more.

Usually, the most effective, most realistic way to pay off debt is little by little, step by step. Of course, in doing so, debt won’t disappear overnight. And that’s just fine. That’s reflective of this little thing called patience. Together with frugality and sacrifice, this is what it takes to forge a winning path forward, one that does NOT include you among the 50% who have more credit card debt than savings; one that does NOT include you among the 25% who have no savings at all.

Instead, it’s a responsible plan, one that takes into account todays needs, and sacrifices some of todays wants, all so you can live with a little more freedom today (i.e., less spending = less debt = less stress), and a lot more freedom for the future you.

 

 

Millennials Money Mistakes

Mistakes. We all make them. To err is human … and all that jazz. And when your perspective includes understanding that ‘mistakes’ are not failure by any means, rather an opportunity to learn, then you dust your self off, pick your self up, and continue tweaking your approach until desired results are achieved.

Just ask Confucius, who said that, ‘our greatest glory is not in never failing but in rising every time we fail.’

More contemporary example? How about Michael Jordan, the phenomenal basketball magician: ‘I’ve missed more than 9000 shots in my career.
I’ve lost almost 300 games. 26 times I’ve been trusted to take the game winning shot … and missed. I’ve failed over and over and over again in my life. That is why I succeed.’


Learning To Crawl

As they continue to shape our world, Millennials (folks who arrived on this planet sometime in the 1980s and 1990s) are manufacturing their fair share of mistakes, no different than past generations.

Consider my Twenty-Something Nieces: independent, ambitious, career oriented, single (with doe eyed beau in tow), no kids, no car, renting, socking away some earnings into savings, and tackling whatever life throws their way. Except personal finances. In this category, they’re somewhat at sea. Not that it will make The Nieces feel any better, but there’s a whole lot of other Millennials who are also scrounging around to find solid financial ground.


Don’ts and Do’s For TwentySomethings

I’m not pointing my finger or tsk tsk-ing the Millennial crowd for their general lack of financial savvy. There’s a learning curve for whatever we do in life. But I am saying, hey, it’s helpful to take stock, assess the current state of your finances, and consider how to improve.

For starters, there are some basic actions you can take to boost your balances for today and tomorrow. These actions (listed below) will not only make you ‘feel’ more financially stable, but will actually improve your net worth.


  1. Budgets Are SO Boring!

A budget is a roadmap, a guide, a friendly reminder as to what you may afford. Without a budget, spending is less disciplined and debt is more likely.

Sure, drafting a budget is not uno numero on your list of things to do on a sunny Saturday afternoon. Or any day for that matter. But I’m guessing that having a positive balance, and growing net worth, ranks high on the list of life goals. If yes, then set aside next Saturday for the boring task of budget drafting.

  1. Blind Eye To Debt

You carry debt. Okay, fine. Now, what are you going to do about it?

Whatever you do, don’t make believe that the debt does not exist. I bring this up because there are some folks who abstain from reality, choosing instead to live under clouds of illusion. Debt can be a tough issue to manage. I get it. But avoiding the issue only makes your situation worse and lessens the likelihood that you’ll achieve good financial health.

Figuring out a plan to pay off your debt, that’s what is necessary. Include this plan in your budget (oh, look, the budget is already coming in handy), and determine the monthly amount to be paid toward debt reduction. Sure, the faster you can pay down debt the better. But even if you’re paying a only small amount each month, that’s something. It’s building constructive financial habits. And as long as you keep on chipping away at debt, eventually it does disappear and you won’t regret it. No one regrets paying off debt.

  1. Sneaky Plastic

Airline Miles! $500 Cash Back! Free Hotel Night!

Financial institutions trip over themselves to offer an array of enticing credit card inducements. Why? Because they earn outrageous sums of money from interest charges.

As for you, the consumer, fact is that unless you pay the balance owing by the due date, you’ll be accumulating debt. Fast. And making financial institutions richer.

Plastic makes it too easy to give in to temptation, to buy something because you WANT it NOW. Financial institutions know this, they employ experts advising on human behaviour. And they know that there are millions of folks who have a terrible time trying to exercise self-discipline. And these folks buy STUFF they can’t afford, and they rationalize that they’ll be able to pay off the purchase before the bill arrives, and they get the bill and stick their head in the sand by making the minimum payment of ten dollars or so each month, and then incurring exorbitant interest charges.

Oy! Under NO circumstances is credit card debt a smart play.

Am I going too heavy on the chicken little act? I don’t think so. This is an issue that only seems to get bigger and bigger. Credit card debt, debt of any kind, can be a hefty psychological burden. Of course, financial too. And given enough time with too few payments, it bankrupts people.

So unless it’s absolutely essential to use plastic AND you know the full balance may be paid by due date, avoid credit cards. Instead, use a bank debit card, or a Visa / Mastercard debit card. This way, you spend only what you have since payment is debited directly from your bank account. And for you old-fashioned types, last time I checked, there’s no chance of going into debt when you pay with cash.

  1. Dormant Dough

THE NIECES, they’re accumulating savings but they’re either not investing or investing wayyyyy too conservatively. This is a problem. And this absence of risk tolerance is unique to this generation. Some researchers posit that it’s related to the deep recession of 2007-2009, and the resulting stock market meltdown.

Whatever the reason, Millennials would be wise to loosen up. I’m not saying to roll the dice on high-risk investments. But I am saying that the 0.25% savings rate offered by your local bank isn’t going to contribute much, if any, to your financial independence.

And you would be wise to consider the stock market. Yes, it’s a volatile venue. But volatility doesn’t necessarily mean you’re walking on the wild side of risk. Especially if you’re a BuddhaMoney wise investor who doesn’t pay much attention to daily financial news headlines. Instead, focus is on the long term (5+ years), knowing that stock market returns historically beat other asset classes.

Consider that, during the past 40 years, the S&P 500 index has averaged total returns (capital gains and dividends) of close to ten per cent. Let’s say the index returns about the same for the next forty years. If so, and you invest $100 / month, in forty years your account will be worth close to $600,000.

How do you get that $100 / month? You plan for it in your Budget (see, it’s a handy little document). It doesn’t matter if it’s $25, $50, $100, or $1,000 investment account contribution. Every dollar adds up. And the thirty-something YOU, the forty-something YOU, etc, will thank twenty-something YOU for being so wise and planning for your future.

For those who do not have the time or inclination to operate a discount broker investment account, find yourself a Robo-Advisor or skilled financial advisor (not all financial advisors are cut from the same pin-striped cloth) to help manage your investments. And definitely place a healthy portion of your investment dollars in equity based Index funds, such as the Vanguard 500 Index Investor for US investors, and the Blackrock S&P/TSX 60 Index for Canadian investors.

  1. High On Spending

In your 20s, you’re likely to start earning real money. And maybe you’re salivating at all the STUFF you can buy knowing it’s within reach: a new car, luxury condo, designer clothes. Right. But within reach doesn’t mean you may afford to buy the luxury condo.

Rather, it likely means you’re the lucky winner of a whopper of a mortgage, get to stress over making monthly payments, and go light on furniture because daily spending is tight now that housing costs eat up more than half your take home pay. Sure, you want a materially comfortable home like your parents. But you’re forgetting that your parents likely worked five, ten or twenty years before being able to afford all the cozy extras.

So for all you Impulsive Izzys, slow it down. Bring Patience into the mix. Only buy what you can afford without taking on unmanageable debt. And when you get that raise at work, this doesn’t mean you should go all ga ga and run out and buy more STUFF, or more expensive STUFF.

Instead, it means it’s time to review your Budget, allocate more money to debt reduction and investing, and then determine how best to spend discretionary funds. This is a Balanced approach to finances, one that reduces debt, increases net worth, and lets the shine sun on your financial health.


 

unknownEnter Buddha

A jug is filled with water drop by drop. There is no other way.

Blissful Money Rules

Last week, my 27 year-old Niece called me.

“Hey! BuddhaMoneyLama, I have a problem I’d like to talk about.”

“Sure, kiddo.”

“Well, with my new job, I’m finally making decent money. I mean, after paying for rent, food, utilities and other necessities, I actually have money left over.”

“Too much money? This is a problem?”

“Ha ha, you’re so funny. The problem is that I don’t know what to do with my money. No one ever taught me and I feel like I don’t even know the basics.

“So you called me? Such a sweetheart!”

“Can you help?

“Are you kidding? BuddhaMoneyLama lives for these situations!”

“So, where do we start?”

“Where would you like to start?”

“That’s the thing; I don’t know. All I know is that I want to buy a house one day. But I don’t know how to get myself to a place where I’ll have enough money to afford a down payment and all the other costs that go along with home ownership.”

“How about we start with talking about the Blissful Money Rules.”

“Uh, okay?”

“These are Rules that you absolutely, positively, unequivocally need to know to empower yourself, and get your self walking on the path toward home ownership and greater wealth.”


Blissful Money Rule #1 … What’s The Plan, Stan?

Some folks prefer to surf on a hope and a prayer when it comes to money issues. Not BuddhaMoney. Instead, we favor creating a detailed plan for your self. Because a Money Plan plots your best path for taking control of spending and saving. Do this and you’re halfway to reaching your financial goals.

“I’ve never written a Money Plan. Help?”

“What do you say we walk this path together, step by step.”

  • Goals. Write them down. When you know what your goals are, saving is easier. For you, dear Niece, your medium term goal is to buy a home. Keep this in mind every day when you’re spending money. Because every dollar you spend somewhere else is a dollar that’s not saved toward your dream home.
  • Expenses. Once you know your goals, write down all of your expenses and figure out which ones may be reduced or cut out altogether. And the beauty of cutting spending? Reduced expenditures automatically translates into more money in your pocket. Obvious? Sure. But some folks need to be reminded, to stay focused on their goals.

Here are some examples for you to chew on:

Cable. Cut the cord. Who needs to pay for cable? Really, who needs television at all? For all those who haven’t completely abandoned television, there’s Netflix at about $10/month, and other free and inexpensive viewing services available online.

Cell Phone. Check out discount carriers and do not sign up for a large data plan. If you need some data, go for the minimum. Because you just don’t NEED to be constantly surfing the web on your phone. It’s a bad habit for too many of us. Your time would be better spent daydreaming or, Buddha forbid, reading a book, or tuning out and just being quiet. You’ll be amazed at how quiet time recharges energy and lifts spirits.

Home and Car Insurance. Shop around and compare prices. All the insurance companies offer the same coverage but prices may vary a fair bit. Be sure you’re not overpaying.

Coffee/Tea. Drop $5/day getting your coffee on the outside, multiply by 365 days, and that’s $1,825/year. Yikes! Is it worth it?

Fuel. Fill up your gas tank once a week at $50/pop and that’s $2600/year – compared to paying nothing for riding a bike to get around town (other than initial bike cost) or much less for car sharing or public transit.

Restaurants. Watch this one. It’s too easy to drop big dollars when eating out. Allow yourself a certain amount each month and stick to your budget.

  • Track Money Flow. Once you’ve listed all of your expenses, and considered what to eliminate and what to reduce, it sure helps if you track your spending. Do this the old-fashioned way using pen and paper, a journal is a good idea, or use an app of your choice; here’s a few worth checking out:

https://www.levelmoney.com

https://www.mint.com

http://www.dollarbird.co

  • Bottom Line. Really, it comes down to a matter of priorities. If purchasing a new home is your priority then you’ll start making a habit of cutting spending.

Blissful Money Rule #2 … Save, Save, Minimize Spending, and Save Some More

You’ve heard it so often that maybe you’ve tuned out. Well, BuddhaMoney is here to tune you back in: save your money. Make saving a habit. Because you need savings to achieve financial freedom.

How much should you save? Calculate savings as a percentage of your net your income, after deducting expenses. Ballpark number for savings: 10%. If you can save more, good for you; you’ll achieve your goals that much sooner.

And once you commit to a percentage, stick with it! No creative rationalizing (i.e., but I really need to drop five grand on a vacation to Mexico and I swear I’ll make up the lost savings soon), and no inventive, trivial justifications (i.e., it was a once in a lifetime sale and, really, the more I spent, the more I saved).

Of course, if you spend less than you earn, then staying disciplined about savings is that much easier. If you spend more than you earn, well, you’ve got work to do because at this rate there will not be any savings, and financial freedom is a fantasy.

No matter what you earn, you can save when you cut down expenses. Sure, you may have to ditch old habits and establish new ones, but it will be well worth it. Every step closer you walk toward your savings goal or eliminating debt will feel, well, quite excellent, and will reinforce your desire to continue saving, largely because you’ll know that you’re taking control of your finances and your life. And that feels right and it feels good.


Blissful Money Rule #3 … You Do NOT Want Debt

The blissful truth: there’s no freedom in carrying debt. And your goal should be financial freedom, which translates into minimal money related stress and headaches.

That said, not all debt is created equally.

Mortgage debt for example, serves a worthwhile purpose. Homes cost a fair chunk of change, and few people are able to pay all cash for their home. So, you borrow from a financial institution. Okay, this is all good as long as you can afford the mortgage payments. Because as long as you have the mortgage, yes, you’re building equity. Kudos. But you’re also paying interest. Drag on your savings. So, before you sign up with your friendly neighborhood banker for that big ticket mortgage, draft your self a mortgage repayment plan, and be sure this is a plan you can follow through on.

As for credit cards, the goal is to NEVER pay a cent of interest for credit cards. If you cannot afford to pay the balance owing each month in full, then don’t use a card. Carry interest and you’ll be paying an annualized rate of close to 30%. Robbery? Yes. Legal? Yes. Why do you think Visa (NYSE: V) and Mastercard (NYSE: MA) are massive companies each with a stock market value north of $100 Billion? Charging interest is a wonderful game to play when you’re the lender.

So what do you do? Toss all credit cards from your wallet except one. Suggest keeping a Visa or Mastercard as these are accepted by most every merchant. Use the card only when necessary (other than Sweden, most countries remain on board with coin and paper currency – http://www.newyorker.com/magazine/2016/10/10/imagining-a-cashless-world).


Blissful Money Rule #4 … Invest Your Dough

Don’t leave your savings in a bank account earning practically nothing. Invest your money. When you invest, your money is going to work, not you. This is what you want. The more you can afford to invest the better. And, similar to being disciplined about savings, be disciplined about building your investments. Set aside a certain amount each month that makes its way directly to the investment account.

Here’s a nut and bolts illustration that may whet your investing appetite: if you invest $10,000 at a 5% annual return, you will earn $500 in one year. In year 2, the $10,500 will generate $525, for a grand total after two years of 11,025. After 20 years, the $10k turns into $26,532.98. This is the power of compounding returns and a long-term investment horizon.


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Enter Buddha

The second Noble Truth teaches that trishna (thirst or craving)  causes stress or suffering. Wanting to own a home, wanting to be financially secure is perfectly fine and good. The challenge is to avoid clinging to these wants such that wants become obsessive cravings and we forget what’s important: to be grateful for our life, for who is in our life, and for what we have.


Blissful Money Rule #5 … It’s All About You

Here, I’m talking about stepping up and taking responsibility. No one will walk the path for you (although BuddhaMoney sure will guide you in the right direction). It’s your decision whether or not to empower yourself, take control of your finances, and eventually achieve financial freedom.

 

 

Millennials: Beat Debt, Get Wealthy

It took me several hours to write this post. Once the final draft was complete, I was reviewing for edits when,…

Bear with me here … I’m going to share a short story with you before getting to the feature article.


It took me several hours to write this post. Once the final draft was complete, I was reviewing for edits when, before my eyes, the characters instantly morphed into gibberish. My first thought: what the *@%?

Initially calm, I checked other files for infection. Thankfully, all was fine. So I ruled out a virus as the cause and focused on fixing the one corrupt file. An hour later, the file remained corrupt.

As calm dissipated and frustration grew at the thought of losing my work, I took a break, heading to yoga class with the intent to regain my balance. Driving to the studio, I obsessed, my head looping the same story over and over: How could this happen? Hours worth of work gone. And it was a damn good piece! Now what I am going to do? I’ll take my laptop in for repair; maybe someone else can figure out how to recover the file. But what if they can’t? What then? … blah, blah, blah, whine, whine, whine, me, me, me.

Arriving at the yoga studio, totally self-absorbed in my earth shattering problem, I was anything but balanced. After checking in with reception and removing my socks and shoes, I looked at the wall in front of me and saw an 8×10 photo with a caption written underneath. In the photo was a woman with her two young children. I recognized the woman, she teaches yoga at the studio. One of her children, a nine-year old girl, was recently diagnosed with brain cancer and is undergoing intensive chemotherapy. By way of the photo, the yoga teacher was asking her fellow yogis to share positive energy and, if so inclined, supportive donations.

Smacking myself in the forehead, my eyes finally opened. I realized the absurd insignificance of my concern. Here I am complaining about losing a teeny, tiny creation in the form of a written article, and here’s this gentle woman justifiably anxious, to say the least, about losing her daughter. Her beautiful daughter.

Whoa. I check in with my inner Buddha as I’m about to enter class. I remember that we are most out of balance when too focused on our self. Only when we practice gratefulness, when we shine light on all our good fortune, and extend compassion to those who are truly suffering, do we regain balance, and tap into our sense of generosity toward others, and our self.


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Niece One and Niece Two

My lovely sister blessed planet Earth with two daughters, my nieces, otherwise known as Niece One and Niece Two. Both are twenty-something Millennials (i.e., born between 1982-2000, or thereabouts). Both are university graduates. Both are industrious. Both want a meaningful life. Both want to make use of their unique talents and contribute to society. And both are concerned that the deck is stacked against them and their fellow Millennials.

Niece One lives in Toronto (Canada’s claim to a ‘world class’ city for those who like to compare and rate and judge … oops, I just judged the judgers). Following graduation, she spent more than six months searching for work in her field of expertise. Eventually, she landed a job with a non-profit organization. She was thrilled. The position allowed Niece One to put her skills to use and learn alongside an eclectic, stimulating mix of co-workers. The downside was salary. Niece One was paid enough to rent a small apartment with a roommate, buy groceries, slowly pay down her student loan, and go out on the town once a week.

A few years younger, Niece Two opted to stay in her home town of Ottawa, Canada’s capital city, after graduating. She would love to live with big sister in Toronto but, more practical minded, the thinking was that Toronto is too expensive.

Niece Two endured about eighteen months of hunting for a permanent job. During this time, she worked a variety of odd jobs, including part-time waitressing, a position that, to my knowledge, does not require a university degree. And, until recently, she lived at home with Mom and Dad (members of the baby boom generation, through no fault of their own), because she couldn’t afford to move out. Today, at age 25, she and a roommate rent an apartment.

That Was Then

She didn’t move out of Parent’s Home until age 25? Well, Niece Two is far from unusual in this regard. Get this: in the U.S., about one-third of all Millennials live with their parents. It’s the first time that living with Mom and Dad has outpaced living with a spouse for this age group since The People Who Are Charged With Recording These Statistics began keeping score in 1880.

Okay, it’s time to inject more perspective here. Just for fun, let’s time travel to a not too distant past. A time when our society looked different, and was different from many perspectives, including economically.

My father started his career in the early 1950s. Having graduated from university in his early twenties, he was courted by several employers because, hey, this was the Golden Age. This was a decade in which annual economic growth registered above 7% four times, and above 5% twice. If you wanted to work, be it white collar, blue collar or any other category, opportunities were there for the taking.

So he gets his first job and moves out on his own almost immediately after graduating. Within two years, he finds another job that pays better and offers more responsibility, becomes engaged to marry, buys a house, and is nine months away from pushing baby in a stroller. Oh … and no debt after graduation. What’s that, you say, no debt?! How is this possible?

Two reasons. First, government assumed responsibility for the bulk of education financing, rightly rationalizing that an educated workforce was beneficial on many fronts for society. The result being that tuition fees were a token amount, i.e., a few hundred dollars. Second, students were able to finance education costs with summer jobs, which were plentiful.

That Was After Then

Close to forty years later, the cost of education had changed but not a whole lot when you factor in inflation. When I graduated from a public university law school in 1990, my final year tuition fee was $1,750. And I marvel at the fact that I was able to live the entire academic year, from September through April, on less than $10,000; this included tuition, rent, food, clothing, bus pass, beer, pizza, you know, the usual university expenses. Sure, I borrowed some money to pay for school and that money was repaid after graduation. But most of my expenses were paid for with wages earned from summer employment. Lucky me.

This Is Now

Today, in 2017, I have three family friendly words for you about the cost of education: Oh … My … Goodness!

The same law school I attended, offering the same degree within the same time frame, now charges tuition of close to $22,000 per year. That’s just tuition! Add on the usual living expenses and you’ll see a final annual tally of between 30-40k. What about undergraduate tuition costs, you ask? In the mid-1980s, I paid $880 annual tuition to attend a well regarded public university. Today, the same school charges more than $5,000.

How, in the name of BuddhaMoney, could anyone who does not have a parent bank rolling their education complete their course of studies without racking up serious debt in the form of student loans?

As for getting a job to help pay for school costs, of course this is an option. But even if you could find work during the school year and/or summer break, the going rate is likely minimum wage which, while helpful, would not relieve you of the need to borrow big against your future. That said, finding work may be easier said than done as the economy simply doesn’t grow anywhere near as fast as it once did. And jobs, especially well paying jobs, are fewer and farther between.

Consider This: The year 2000 was the last year the U.S.economy achieved +4% growth (compare this to the 1950s growth rate, previously mentioned, or even the 1990s where 4% growth was achieved four times). Wait, it gets more troubling. In the aughts, the economy surpassed 3% growth only twice, in 2004 and 2005, before the so-called Great Recession. Since then, we’ve been mired in a slow growth, low interest rate, low inflation world where economic growth in our part of the world has not exceeded 2.5%. This isn’t good for jobs, for wage growth, or for future generations.

Albatross

In the The Rime of the Ancient Mariner, a poem by Samuel Taylor Coleridge, a sailor shoots a friendly albatross. As punishment, the sailor is forced to wear its carcass around his neck.

Well, I’m guessing there’s not too many students sporting a bird’s carcass around their neck but, today, the albatross that students wear is a lengthy debt sentence. And while past generations of college/university graduates didn’t have to contend with debt, or at least the kind of debt that slows the spring in your step, Millennials have no choice.

Because tuition costs are not getting any lower. In fact, they keep going higher. And governments have no plans to resume financial responsibility for higher education, graciously preferring to allow private citizens to shoulder more and more financial burdens.

So, what’s the consequence of loading down students, future taxpayers I might add, with excessive debt? Coupled with an economy that doesn’t generate enough well paying jobs?

A generation that rightfully believes the deck is stacked against them. A generation (we’re talking 83 million Americans and close to 10 million Canadians; a larger group than the Boomers) that puts off, maybe permanently, starting a family or buying a home because the overriding concern is paying their bills at month end. When that’s your predicament, guess what else gets kicked down the road? Building savings and investments, putting away enough for a rainy day, and contributing to retirement accounts.

Even if you, a Millennial, do pull down a good size salary, you’re still likely to start down the path of wealth building at a comparative disadvantage. Because if you’re carrying a burdensome debt load straight out of school, income must be diverted to debt payments. The result being that savings contributions are delayed until a later date or are less than what they would have been if the debt load was lighter.

Add to this a low interest rate environment that leaves banks paying next to nothing on savings accounts and high rated bonds dribbling out meager interest payments and, unlike past generations, building wealth is a more complicated process. It now involves learning about stock market investing if you want to generate any sort of meaningful return on your money.

Get Smart

Oh … I’ve painted a grim picture haven’t I? Okay, first, let me say that when it comes to getting a handle on your financial situation, its best to know your starting point. Fact is, Millennials have it tougher than the past few generations. No question.

Still, while this generation faces a tougher slog than their parents and grandparents, this doesn’t mean financial success is out of reach. Not at all! When I said something along these lines to Niece One, she shot me a bewildered look.

“Then … what do we do? I mean, I know there’s no turning back the clock and complaining is a useless exercise. But how do we make the system work for us? I hardly know anything about money management. As for investing, forget it. I wouldn’t know where to start so I just keep my money in a bank savings account.”

Bingo! (uh oh, showing my age … do people under 30 even know what bingo is?) Um, look, this is huge. I mean, money issues are with you your entire adult life. If money smarts aren’t taught at home and, unfortunately, they’re certainly not taught to any depth, or at all, in primary and secondary school, then how do you learn? Well, once the school bell has rung for the final time, you’re on your own. If you want financial knowledge, you have to go looking for information.

If you’re hungry to learn fast, then there are soooo many resources out there, from personal finance websites to books to meet up groups. For beginners, here’s a few good financial knowledge primers to snuggle up with on a Saturday night:

  1. Cary Siegel’s, Why Didn’t They Teach Me This in School?: 99 Personal Money Management Principles to Live By.
  1. Ruth Soukup’s, Living Well Spending Less: 12 Secrets of the Good Life.

If you want to go a bit slower, you know, mellow out in BuddhaMoney time, then that’s what we’re here for: to empower you about money issues and help you become wealthy in every sense of the word. And we do recommend that you visit often, not only because we love visitors but also because you get to discuss money issues with your BuddhaMoney enthusiasts at our community Forum.

Now that we’re done promoting our self in our own low key way, have a read through the following section, and learn what you can do right now to improve your financial situation.

Why You’re Reading This Post … To Learn How to Become Wealthy

  • The Basic Rule. Here’s what hasn’t changed since your grandparents day: spend more than you earn, and you’ll suffer from debt. Save more than you earn, and you’ll build a solid foundation toward financial freedom.
  • Freedom Plan. You gotta have a plan. A savings plan, spending plan, investment plan, debt plan, buying a home plan, retirement plan … whatever your goals, you have to draw a roadmap detailing how you’re going to get to where you want to go.

Why? Plans lay the ground work for direction. Plans set boundaries for saving, spending and investing. If you don’t plan your finances, money is so much more likely to go wayward and just … disappear. Or it will seem that way. In this regard, here’s a wise quote to chew on:

“Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation), there is one elementary truth, the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one’s favor all manner of unforeseen incidents and meetings and material assistance, which no one could have dreamt would have come their way.”

William Hutchison Murray

  • Rainy Day Fund. Life is uncertain. Things happen. We can’t plan for everything. Common refrains, yes? And true. So as a form of self-insurance, do your self a favor and open a separate account that holds enough funds to cover 3-6 months of living expenses. If you can’t afford to do this right away, not a problem. What’s important is that you open the account and start contributing whatever you can afford today. Set a goal, say 5% of your monthly income. And keep contributing until you’ve built enough of a cushion to cover 3-6 months of living expenses.
  • Slay Evil Debt. Set aside a percentage of money from each pay check that goes towards paying down debt. If you owe money to more than one creditor, be sure to prioritize debt payments. The creditor charging the highest interest rate should be paid first. And if you don’t have debt, then the general rule is not to volunteer to take on debt. I say ‘general rule’ because you’ll likely take on debt to finance big ticket purchases such as a home. That’s all fine and good as long as you’ve worked out a budget detailing how you will afford to make mortgage payments and pay home related expenses.
  • Credit Cards. One credit card is all you need. A no-fee, boring, void of bells and whistles, status-less Visa or Mastercard with a reasonable credit limit. And don’t even think about using the card unless you have funds to pay off the full balance by the due date. If you can’t pay the balance in full, then you’ll be charged interest bordering on criminal … and you’ll be throwing money away. By the way, throwing money away is not part of any good plan.
  • Savings. If you sign up for the Freedom Plan, you absolutely have to save. If being disciplined is a challenge, set some ground rules for yourself, such as taking 10% of every pay check and depositing it into an investment account. And cut spending. Absolutely cut spending. Especially  the non-essentials. Like the daily $5 coffee or tea concoction you buy at a trendy cafe (do the math: at $5/day, that’s $35/week or $1,825/year!); pack your lunch; buy clothes on sale, buy anything you can on sale. The more spending you cut, the more you save, the closer you travel toward your goals, your freedom to do as you please, in a money wise sense.
  • Put Money to Work. When you invest money, your money is going to work, not you. This is what you want. Sure, it takes money to earn money. Still, even if funds are tight, if you’re earning a pay check, put some of that money to work for you so one day you don’t have to work for money. The more you can afford to invest the better. And, similar to being disciplined about contributing to savings, be disciplined about building your investments. Set aside a certain amount each month that makes its way directly to the investment account.
  • How To Invest. Niece Two said to me, “I’m making a good salary for the first time ever and I have extra money each month. I want to invest it but … help?”

Right. So, step 1 is getting the money to invest. Niece Two has done that.

Step 2 is setting up an investment account. You could do this with your bank, and they would then put your money to work in mutual funds owned by the same bank. Generally speaking, not being a fan of mutual funds because of their high fees, I wouldn’t pursue this option. That said, close to 70% of investors do choose this option. Why? Not even Buddha knows. But the wise guess is that they trust the bank and they don’t know any better.

Best option: if you’re a beginning investor, set up an investment account with a financial institution that offers a Robo-Advisor.

Um, what?

Having seen its popularity grow in the last five years, the Robo-Advisor simply refers to a way to automate how your investments are chosen. Just like a flesh and blood financial advisor, the Robo-Advisor plugs in your relevant information (i.e., risk tolerance, goals, time horizon for investing) then chooses investments that best suit you. Typically, your money is placed in low fee Index Funds. And unlike a human financial advisor, you’ll pay a whole lot less in management fees.

To point you in the right direction, Canadians should check out the Robo-Advisor service at Bank of Montreal: https://www.bmo.com/smartfolio/?icid=bd-FEAT752IL4-AJBMO16.

For American residents, take a look at Charles Schwab: https://intelligent.schwab.com.

In an upcoming post, I’ll be talking til’ the cows come home about the benefits of investing with Robo Advisors. Until then, give a good pondering to this information and if you have questions, well, post on the BuddhaMoney Forum and bat around ideas with other BuddhaMoney enthusiasts, or send me a message and I’ll do my best to answer.


Enter Buddha

The second Noble Truth teaches that trishna (thirst or craving) is the cause of stress of suffering. Wanting to own a home, wanting to be financially secure is perfectly fine and good. The challenge is to avoid clinging to these wants such that wants become obsessive cravings and we forget what’s important: to be grateful for our life, for who is in our life, and for what we have.

 

Avoiding Holiday Debt Hangover

Why Give Gifts During the Holidays?

Yes, we live in a consumer society. Our economy would screech to a halt if, en masse, we did not heed the marketing call of the multi-tentacled beast known as … Retail Store.

And, once called, how may we possibly resist? Especially during Christmukkah (this year, 2016, Christmas and Hanukkah overlap so, to the dismay of purists, and the delight of Retail Store, the two holidays are teaming up in an effort to generate a power boost for the economy. My sense, call me naïve, is that conspiring corporate minds are behind the scheme).

The question is not how may we resist but why would we resist? My Buddha, there are gifts to be gotten! Family members, friends, co-workers, teachers, and endless others are counting on us. Because, because, because … this is what we do for others, and what we require of our self. For religious or secular reasons, or simply because gift giving during these holidays is our custom, we do not pause to question. And what’s wrong with that? Gift giving is a self less act. An act of kindness, generosity and goodwill. At this time of year, aren’t we entitled to simply buy without restraint, and take a break from psychoanalyzing our motives?

jingle-bells


Enter Buddha

Be conscious of, and understand, your actions. Know the reasons for doing what you do. Once there is understanding, you free your self of your own, and others, expectations.


Holiday Hangover

Okay, here’s what I’m getting at: do you know how much you spend during the holidays? Can you afford all the gifts? If you answer yes, and your finances will not be worse for wear come the New Year, then good for you. But if you’re in the ‘no’ camp, or say something along the lines of, ‘that’s what credit cards are for’, then I’m here to ask you to please REMOVE YOUR HEAD FROM THE SAND at your earliest convenience.

Kindness, generosity and goodwill must extend to your Self as well as others (for those who interpret my words as meaning you should buy your self gifts, hang in there, I’m about to explain myself better). This means not spending what you cannot afford. Why? Because breaking your budget means you’ll be visited by the Angel of Suffering not too long after the pretty lights come down or the last latke is eaten (lat-ke. Noun. Potato pancake fried in way too much oil, heavily salted, yummy taste, eat too many and arteries revolt).

And to be perfectly clear, if you have to make purchases using a credit card, knowing you will not be able to pay the balance in full by the due date, then this puts you in the ranks of Cannot Afford.

Not having enough money to buy all the gifts that you want is not an issue. Rather, the issue arises when you pretend to be in the Can Afford ranks. Because when you don’t celebrate the holidays within your financial means, the merry season is bound to end gloomy. What happens then? Suffering. And this suffering typically lasts a whole lot longer than a spiked eggnog high.

Once we’ve come down from the toasty endorphin rush that accompanies buying Stuff, and are confronted with the cold reality of a large bill that must be paid in full by the due date otherwise we’ll be charged interest at the prevailing rate as set out in the government approved Credit Card Mafioso Humungous Interest Charge the Sucker Law, we kinda feel … awful.

Our self-esteem takes a hit. We get anxious. Maybe we fall into panic once we’re past the denial stage and admit to our self that our debt has gone up. Again. And we don’t know when or how we’re going to pay it off. And we feel anything but jolly and free. No, just the opposite. Debt is prison.

Middle Way

Buy now, pay later. That’s what we’re sold on, not just during the holidays but all throughout the year. Sure, spending, consuming, benefits Retail Store and the general economy, but is it good for you?

I’m not going to get into what the holidays are all about, because that would be veering too far off the BuddhaMoney path. But I can tell you this: even if the primary purpose of the holidays is gift giving, this has to be done within budgetary constraints. Your budget. And your budget cannot include borrowing to buy gifts. It cannot include falling into debt. Because you will do too much damage to your self.

Think about it this way: when you borrow, you are taking what is not yours. You are taking from your future self; throwing the shackles of debt on to your future self. Why would you do that? Because it’s the holidays and you’ve told your self a story that supports your feeling of entitlement to buy what you want? Because you’ll punt the issue a month down the road, and let future self worry about debt and the accompanying ulcer? Because spending money you don’t have is ‘normal’ during the holidays? Because everyone you know carries debt?

Listen, anyone who cares about you would never accept a gift knowing it would cause you harm. That’s what debt is, financial and spiritual harm. But if we’re not spending money on gifts during the holidays, or giving what we feel are inadequate gifts, what should we do?


Enter Buddha

You are loved for who you are. Knowing how to touch the heart of another, and be touched, is the true gift. Your possessions, your roles, your achievements, your presents, are not you; these are but props, not evidence of your worth.


Hmmm. If you cannot afford to participate in Retail Store mania, give the gift of your self, your time and positive energy. Now there’s an idea. Maybe even priceless. Or, you do what you need to limit spending within a pre-set budget. Doing so avoids the holiday hangover, the terrible stress that comes part and parcel with debt. And just maybe the holidays will be that much more enjoyable this time around.