Aug 31, 2009

Saving & Investing: Rule of 72

Remember when you were in 3rd grade, and you learned all those times tables? There was a reason for that. It was so that when you grow up, you can understand the rule of 72, which Einstein called the 8th wonder of the world. It's really cool. Ready?

What are the factors of 72? 1, 2, 3, 4, 6, 8, 9, 12, 18, 24, 36, and 72. There are a lot of them.

Use the Rule of 72 to figure out, when investing, how many years it will take you to double your money. If you are earning 2% on your savings account, divide 72 by 2. It will take you 36 years to double your money. If you borrow at a mere 24% annually from your local kneewhacker, or a cash advance on the credit card (Danger Will Robinson!!!) it will only take you 3 years to double the amount you now owe. Ouch.

Divide 72 by the interest rate. Use a calculator; it's ok. (If your money is in the mattress, don't try this trick at home. You can't divide by zero.)

How many years will it take you to double your money where you currently have it? It might be time for rearranging.

Aug 30, 2009

Smart Consumer: The Soapmakers

The first rule of being a "Smart Consumer" (as opposed to one who mindlessly buys whatever appeals to him at that moment...) is this:

Don't let the soap makers tell you how much soap to use.

Yeah, the soap makers are going to hate me for this, but it's true. Think about it. On the shampoo bottle it says "Lather. Rinse. Repeat." Repeat? Repeat? With one word the guy who came up with those directions doubled sales overnight. Ok, maybe everyone doesn't wash their hair twice at each shampooing. Perhaps that advice made sense when people used to wash their hair once a week or less. The point is, of course the shampoo maker wants you to wash your hair twice. The real question is, why are you letting them tell you how much to use?

When you do laundry, look at the levels on the detergent scoop: Medium Large Extra Large. Are we in BooksAMillion buying a coffee now? There is no small? What's up with that? Ignore the levels on the scoop and you discover for yourself how little it takes to get your clothes clean. If you stuff your washer too full, the soap doesn't rinse out well, and you can have skin problems. If you use too much soap, it's a waste. Wasting money is not smart. So stop letting them tell you. Use their advice as you would a paid consultant. "Thank you for your advice, Sir; now I'll do what I believe is best for the success of my family." It's a sensible approach and saves money, too. Can't beat that.

Who are you going to take under advisement today?

Aug 28, 2009

Write it Down - Quick!

What if Marco Polo, who told his tales of travel to a fellow inmate, who was a writer, told them instead to a guy who replied, "Oh, that's nice"? The Travels of Marco Polo would not exist.

If you don't write it down, it didn't happen.

What if your child makes the chess team at middle school, and practices are weekly, county meets are monthly, and tournaments are TBA? How do you keep your child's calendar straight along with your own? Write it down. Get a date book, and live by your date book. Make it big enough to record events that require your presence/preparation/driver's license, and then carry a purse that is big enough to carry your date book. If you leave the date book home, you'll double book yourself, because you cannot remember every detail. No you can't. Don't let your children fall into the bad habit of thinking that their mere mention of a future event transfers all responsibility on you to "make it happen." Give it back to them saying, "I'm driving right now. Tell me about it again when I have my date book out."

At my house, we have a rule: If it isn't written down, it doesn't happen.

I bought several things when my babies were born. One of them was a journal. I recorded things like height, weight, and first words, but the hilarious things were some of the other words that came at age three, four, and five, like "If I go away to college, who will wash my hair?" I'd record excerpts of our conversation, let them tell me about their favorite food, toys, and tv shows, while I wrote it all down with the date. When the moment is cute and adorable, you tend to think "Oh, I'll always remember this!" You WON'T. Write it down. I'll go back and read some of the hilarious comments my kids said and I find myself rolling on the floor. Literally. You don't want to miss out on that joy.

If you didn't write it down, it didn't happen.

What are you going to write today?

Aug 27, 2009

What Happened to the Middle Class?

A friend of mine went to visit a friend in Brazil. He returned and told me what he'd seen. "Connie," he said, "there is no middle class. Everyone lives on one side or the other of the iron gates." The unions built the middle class in this country. Without union manufacturing jobs and unionization of textile workers and farm workers, we'd have been like Brazil from the get-go.

The plantation mentality is alive and well in Alabama in the year 2009. The haves and the have-nots. It's not pretty. The gap is widening between the rich & poor. The unions are trying to preserve the manufacturing jobs, but the jobs they're trying to preserve will eventually cease to exist. How many punch key operators or elevator operators do you see working today? Technology causes job evolution. New jobs are created. Old jobs fade away.

It's easy to blame unions for GM's fall, but did they have to keep producing cars nobody wants to buy? Is it the machinist's decision or the electrician's as to which cars are produced? I am reminded of this tongue-in-cheek prediction: Factories in the future will have only a machine, a man, and a dog. The man will feed the dog, and the dog will bite the man if he touches the machine.

Honda and Hyundai are doing well in Alabama because they manufacture cars that people want, and because there are no unions. Slave wages for workers keep car costs down and employees perpetually defeated. WalMart has people whose full time job is to bust unions. If they had to provide for their workers insurance and a living wage, the Walton family might not make the Forbes list of richest people ($75,500,000,000 as of March 09 - no question which side of the gates they're on...) Why can't companies both create popular products AND treat their people right? Greed. If money is your god, there is never enough.

When we lost the middle class, we lost the war, say the goldbugs.

What can you do? Prepare to live frugally, and/or work your hiney off to create & build a business that prospers, so that when you reach the big time, you can live on the "right" side of the gate. Do us a favor when you get there, though. Don't forget where you came from.

Who are you going to treat right today?

Aug 26, 2009

Being Disorganized Costs You Money

Remember that time you were unable to find something you knew you had - somewhere - was it duct tape, or??? What was that thing? And you bought another one, and then found the first one? Now you got two. Yeah, that happens to all of us, I think. Being disorganized costs you money.

Remember that time you picked up the mail, and had it in your purse, or was it on the floor of your car, and that gas bill came due, and, where DID I put that thing? Late bills = late fees. Being disorganized costs you money.

And then there was the time you had the late video to return t0 Blockbuster. Remember that? How about the overdue library books? Yeah, those too. Late returns = late fees. Being disorganized costs you money.

Hey, what about that time you needed cash right now, even though the ATM there wasn't on your network? You knew it was going to ding you for $3 or $7 in ATM fees, but hey, this is an emergency right? I need this Red Bull from the C-Store to finish my paper that's due tomorrow. Being disorganized costs you money.

Remember that time you were registering your child for camp, and the fee was one price before a certain date, and add ten dollars for late registration? And remember how you meant to register on time? You thought about it again and again, and said, "Yeah, I gotta do that real soon" - and then another day went by and you didn't get it done, and, ooops - there you are, sheepish grin on your face, paying the "late registration" fee. Being disorganized costs you money.

How to save money? Easy? Organize. Find ONE place where bills go. Find ONE place where duct tape goes. Find ONE place where library books & videos go. Live & die by your date book. Write it down, look at it often. Set an alarm on your cell phone. When it becomes important to you, you will do it. I promise.

Don't do everything at once. Organize one thing: your silverware drawer. Now, armed with that victory, stay on top of it and add one more thing: that pile of papers on your desk. Tackle one thing at a time, until you feel confident that everything due is current. Take a deep breath. Isn't that a great feeling?

What are you going to organize today?

Aug 23, 2009

Insurance - Bet You Won't!

I find it hilarious that states, like my beloved Alabama, that won't allow gambling (except dog tracks) allow insurance companies to operate. What do you think insurance is? Gambling. You say, (as you pay your premium) "I bet I'm going to die this month!" The Company says, "Bet you won't!" You're still alive - you lose! Next month rolls around and you whip out your checkbook saying, "Bet I'm going to die..."

If you have life insurance, keep in mind the reason you bought it. You have a spouse or children who will face severe hardship without your income. If you have no spouse or children, why do you have insurance? If you are single, you do not need more than maybe a tiny little term policy to pay for your burial, which does not have to be elaborate.

If you are saving for retirement, again, a whole life policy might be wise. But refrain from over-insuring yourself. Don't get caught up in policies for specific diseases or conditions: cancer, aids, nursing home. It's a sucker's bet - the odds are so slim that you will ever cash in on these. Why do you think the insurance companies hire the math majors to work their actuarial tables. They know what the odds are, believe me. Do you?

Balance prudence for your family's finances with faith in God and His provision.

Who are you going to trust today?

Aug 22, 2009

College Degrees vs. Starting Pay

CBS moneywatch has an interesting article titled The Best & Worst College Degrees by Salary.
How predictable: Social Work, Elementary Ed, and Theology scored at the bottom, while Chemical Engineering scored at the top. The things that reap big profits for corporations pay well; the things that nurture our soul pay poorly. I should say, they pay poorly in material wealth. There is a lot of satisfaction, however, in making an impact on the lives of others. Have you ever taught a child to read? Taught her how to tie her shoe? Having been there, let me tell you it was so much more meaningful than sitting in a windowless office making rich people richer.

Teaching is not for everyone. It really is a calling. You have to have such a passion for it that you are willing to disconnect from "stuff" and learn to live frugally. You have to understand that the best things in life are not things. Money is nice. I enjoy being able to pay the bills. But, as Bob the Tomato said in Veggie Tales' video Madame Blueberry, "How much stuff do you need to be happy?"

On whose life are you making an impact today?

Aug 21, 2009

Don't Get Ripped Off!

There is nothing good about getting ripped off. Whether it's an outright robber with a gun to your back, or a slick unknown giving a sad tale on the end of a phone wire, there is nothing good about being deceived by those who want your money.

The ugly truth is, everyone wants your money. What can you do about that?

1. Be very tight-lipped about your money. If you have cash in your house, keep your mouth shut. If people know you have it, they'll try to take it or cheat you out of it. There are neighborhoods where whitewall tires are mounted with the white part facing in, so as not to show off that the tires are new. If you don't flaunt your wealth, if you don't dress as if you have money, you won't call attention of burglars, thieves, and others who want what they think you have. This takes resistance to peer pressure. who doesn't like showing up for church wearing a new dress? Wear the old one a little longer, and hang onto your cash. You don't know when it might come in handy if your washing machine goes out or you need new tires. Mount them the way that works for your neighborhood, ok?

2. Be aware of some of the current scams, so that your "BS detectors" will go off when one of them comes to call. Never Never NEVER give out information (social security numbers, credit card, bank account information) over the phone! I don't care who they say they are. You just don't know. If someone calls to sell you something, even if it sounds good, the best way to shut him up is to tell him "Send me something in writing, and then I will make a decision." I've been saying this for years, and no one has ever sent me information in the mail. H'mmm. Wonder why?

Don't be swayed by the salesman who said the offer is ONLY GOOD NOW, and you must make a decision RIGHT NOW. I have noticed one thing about sales, whether groceries, garters, or gold: If the seller had it on sale once, he'll have it on sale again. You can wait. He's the one who's frantic. You're in control, and you only make purchasing decisions after you've read the fine print. Suppose they're not selling anything. Suppose you are told that someone you know is in jail, or they've found your lost puppy, and you have to give them bank account information to reimburse the retrieval your beloved, DON'T! It's a scam. Don't fall for it. Sure you want your puppy back, but the creep asking for your bank account info doesn't have your puppy. Make sure he doesn't have a sucker, either.

Here is a good list of Telemarketing Scams put out by (no relation to this author, and no endorsement assumed or implied.) Still, an informative list:

Top 10 Telemarketing Scams

1. Credit Card Offers - false promises of credit cards, even if credit is bad, for an upfront fee.
2. Prizes/Sweepstakes - request for payment based on promis of cash or valuable prizes that never materialize.
3. Work at home plans - kits sold on false promise of big profits from working at home.
4. Magazine Sales - con artists misrepresent the cost of subscriptions or pretend to be the publisher calling about renewals.
5. Advanced Fee Loans - false promises of business or personal loans, even if credit is bad, for an upfront fee.
6. Lotteries/Lottery Clubs - false claims that consumers have won, or can get help to win a lottery, often in a foreign country.
7. Buyers' Clubs - memberships in discount buying clubs consumers never agreed to join or through free trial offers.
8. Travel/Vacations - offers free or discount travel that never materializes.
9. Business Opportunities/Franchises - offers to help you start your own business with claims of high earnings with little effort.
10. Telephone Slamming - switching consumers' phone service to another carrier without consent.

We will visit the subject of rip-offs again, believe me. For now, be clever, and hang tough.

Whom will you challenge with the truth today?

Aug 20, 2009

What's the Deal With the Housing Market???

In simplest terms, the deal with the housing market is we are reaping a whirlwind. What that means is, a lot of people made poor decisions a few years back, and now the consequences are settling in.

In 2005 when the housing market was at a peak, too many people, watching HGTV for inspiration no doubt, bought more house than they could really afford. They figured the value would keep appreciating, as it had been doing for years, and they'd live happily ever after. Meantime, the mortgage banks lent too much money to people who were ill-equipped to pay it back, thinking oh hey, I can't discriminate based on low income or lousy credit history - that would be politically incorrect. Banks earned money on loan origination fees as well as interest. Appraisers produced appraisals with the "necessary" values to get a loan approved, so that banks would send them more appraisal business, wink wink. Housewives became real estate agents, and real estate agents came out of the woodwork, churning sales for commissions. Builders bought up farmland and built subdivisions of McMansions. Everyone was happy when the mortgage banks made all these low-teaser-rate adjustable rate loans. Happy happy happy.

Well, the party's over and it's hangover time. The teaser rates have expired. The 3-year adjustable rate is not a low teaser any more. Higher interest rates on home loans kicked in. House payments went up. [It was a double whammy - interest and insurance - for those who lived near the water; homeowner insurance rates doubled and tripled - even for those who live 10 miles from the water and never filed a claim.] Home owners couldn't afford the new higher payments. Many just walked away. Some trashed the house and then walked away. Some left starving dogs behind and walked away. Some stayed on, as squatters, until the sheriff was called.

As house after house foreclosed (defaulted on the debt that was owed) the price of houses dropped. Too many houses for sale means that you have to lower your price in order to compete. Housing prices go down down down. Everyone is selling. Hardly anyone is buying. Real Estate agents had to find another job. St. Joseph is buried all over town...

Another domino to come tumbling down in this scenario is the public school system. In areas where the housing market had been going up up up, the school system was reaping large amounts of money in property tax, which is based on the value of your house, as determined by appraisers who work for the county. If property values were now falling, where would the school get its funds? Uh - oh, better fire the cafeteria ladies and janitors to trim the budget! (How insane is this???)

Here's your plan for creating a successful family:

One, don't fall for teaser rates. It's a trap. Lock in a 20 or 30 year fixed loan for a house, and see how much you can really afford. Why does a family of 3 need 4,000 square feet? Assess what you can realistically pay each month, given your downpayment (include principal, interest, property taxes, and homeowner's insurance) and DO NOT buy a house that costs more. Don't count on your income going up in future years - you don't know that it will. You don't know what may happen, so leave yourself the cushion of peace. You will be amazed how little you really need. Don't be swayed by glamour baths and crown moulding. Shelter is shelter, whether hovel or highrise.

Two, don't default on a loan. Loans are moral obligations, not just legal ones. Signing a contract and not honoring it brings dishonor to your family. It's going back on your word. This is not the path to family success that you seek. If you have a hardship, lost job, whatever, CALL THE LENDER. Talk to a human (this could take persistence, but don't give up - keep going up the line until you are speaking with someone who has the authority to make a decision) and work out a payment plan. Defaulting is for quitters and losers, which you are NOT.

We are winners. Let's act like it.

Aug 19, 2009

Reading, Writing, and Whuh....?

Arithmetic is the simplest part of mathematics. A preschooler learns to count things. She eventually grasps the concept of "more," as in, "Which pile has more?" or "Would you like some more?" Kids have to understand that the squiggly lines called numerals have values we call numbers. The squiggly numeral 4 has a value that's one bigger than the squiggly numeral 3. 4>3 and so on. Once you understand the values, you manipulate them, with operations like addition, subtraction, multiplication, and division. Why?

Because manipulating the values represents higher level thinking. This is what education is about. You start at the basics and progress. You can't skip a step, not in math. What you learn is built upon what you already know.

What good is it to know it, if you can't do anything with it? So we memorize math facts. 1+1=2 and so on. Wait a minute - memorization is higher level thinking? Yes and no. You understand the concept of "mom gave me one, and then one more = now I have twice as many cookies to eat" before you start to memorize. You KNOW the concept. You MEMORIZE the facts.

Memorization is not "old school." It's tried & true. I hope that next time a surgeon operates on me, he has memorized every bone and muscle in the human body. That information will come in handy as he uses his higher learning knowledge to proceed with the surgery - I don't want him Googling locations of body parts on his iPhone while the scalpel is in his other hand.

Memorizing is simple and necessary, from toddler on up. For school age kids who need to learn facts such as the times tables, I recommend flash cards. Yes, flash cards. These wonderful little pieces of paper (homemade) or full-color card stock (store bought) should sit on the table closest to the tv. What? Yeah, bear with me...

Kids do not learn to speak by having formal 2-hour lessons thrice weekly. No. They picked up vocabulary a little at a time, in tiny daily doses. So don't make them sit through 2-hour sessions of math facts. Ugh. Put the flashcards next to the tv remote. When Junior is watching cartoons, and a commercial comes on, he picks up the remote, mutes the sound, and picks up the flashcards. How many can [he/you & he] go through during the commercial break? Show back on? Put the cards down and let him go back to the show.

You can do flashcards at breakfast, in between bites of oatmeal. You can go through them after school, or have him review them while he's in the car or bus on his way home from school. Review them during tv commercials, and again at bedtime. It will be a matter of mere weeks before he has them down pat. Seriously.

He'll build on what he knows about squiggly numerals when he learns about the values of coins and bills later on. And everyone needs to know that.

What old or new techniques are you trying today?

What's Honor Got to do With It?

Honor thy father and thy mother. This is ancient wisdom, and best heeded. It goes beyond Mom & Dad, however. In Chinese and other Asian cultures, age and wisdom are revered. The elderly are treated with more respect than they seem to be treated in Western culture. Honor is a big deal. Guess what? It IS big here, whether you know it or not. Honoring your parents means more than obeying them as a kid. It's more than providing for their needs in their old age/infirmary.

Honoring your parents means bringing honor to your family.

What is your "Family" name? It's your last name. My first name is Connie. My family name is Kennedy. I bring honor to my family by the way that I act in my community. Everyone "knows" that we Kennedys are nice people. How did we get this reputation? By being nice to people. We are known for being dependable, honest, and trustworthy. This reputation is built small deed by small deed, day by day. When my children are out in public, they represent our family. When they are in school, they represent our family. Teach your children to be good ambassadors of your family. It's not just about "breaking a commandment," it's about building and maintaining positive relationships, inside and outside your family.

How are you representing your family today?

Who Leads Your Family?

If you ask anyone who leads their family, they'll say "Mom" or "Dad" or "Mom & Dad." But an outsider, observing their behavior and family dynamics for only a short while, can see who really leads the family. I could probably tell in a minute or less, just by looking at your checkbook and receipts. The leader controls where the money goes. If you keep the plastics industry in China running at full tilt, and every other item in your home has a Disney logo, you are not leading your family. If your pantry is full of gummy fruit snacks but fresh fruit is nowhere to be found, you are not leading. If you haven't had a haircut since 9/11 but your daughter has enough dresses to outfit the Miss Toddler USA pageant, don't bother looking behind you - you're not in front.

I said that not to make you feel bad, but to point out that the grownups are supposed to lead. There is a reason why God put parents in charge of the children, and not the other way around. Parents have wisdom that children don't have. Wisdom comes from experience. No matter how smart my children are, they will never be wiser than I am. I have years of experience that they have learned to respect.

This article is about discovering who leads your family, so that if you're leading, we can proceed to talk about money and relationships. If you're not leading, make a decision today, and do not back down, that YOU (and your spouse) will be the head and not the tail, above and not beneath. You first lead by modeling the behavior you want to see. Your children learn to speak English by modeling your speech. They learn to eat with a fork by imitating you. They learn to love reading because they see you reading every day and they love to sit in your lap while you read to them.

As your family's leader, what behavior are you modeling?

I'm Glad You're Here!

This blog is to help and encourage families to achieve success - however you define it. If you run your family like a profitable business, you will reach your goals. How do you run it like a business? By leading the areas that need to be led, and managing the areas that need to be managed.

Help is here for your finances, with information about what is going on in the economy, job tips, investment information, how to teach your children about money, what your money says about you...

Help is here for your relationships. Mrs. Kennedy is called by some "the groovy lady with two and a half rules" for a reason: I only have two and a half rules. Why? Because I can remember that many. Rule one is "We will respect each other." Respect is so lacking in society today. Rooted in pride, people behave as though their time is more valuable than your time - ever get cut off in traffic? See my point? Do you have a friend or spouse who keeps you waiting? Same thing. You can't change other people, but you can be the change you want to see in the world, as Ghandi said, and you can teach your children how to act.

Help is here for yourself! Remember when you were on the plane and the Flight Attendant said, "place the mask over your own face before placing it on your children." There's a reason for that! You can't give what you don't have. You must have peace before you can give peace. You must have joy before you can share joy. Here a place to come for encouragement to be the best you can be - and when you're raising a family, you need some encouragement.

There will be other topics, as we go along. Feel free to search the blog for subjects of particular interest, and be sure to follow me on Twitter ( @ConnieKennedy ) and share this page with your friends. Let's lead our families, shall we?

Who are you going to lead today?