Buying That First Car

You shall have no other gods before Me. – Exodus 20:3

After the rather dark and distressing nature of last week’s post, I’m ready for a little levity. One of the most humorous situations occurred when I got my first car—and my second. Somewhere in here there’s a serious lesson on the value of things. And why we should always keep that in perspective.

Looks Aren’t Everything

Getting your driver’s license is a milestone in a teenager’s life, but let’s face it, the license is just a card without a car. I’d saved up my money from jobs, allowance, gifts and had everyone searching for a vehicle that fit the amount in my pocketbook.

This isn’t the exact car, hopefully it no longer exists, but this is a good replica. An eight year old 1960 Ford Falcon. Powder blue. A beauty. Since the beginning of mass-produced cars, Ford has made a lot of great vehicles, including the Falcon. This wasn’t one of them. It’s a good thing two of my brothers were mechanics because this car stayed in the shop more than on the road. photo 1 (9)

Things Quickly Lose Their Luster

A couple of more reliable cars later and with my bank account in a lot better shape, I decided to buy a new car. A Buick Lemans, gold tint, gleaming, all the bells and whistles. It purred. Everyone looked and shook their heads in wonder.

Everyone was impressed—except maybe God. That’s how I came to see it.

Less than a week after purchasing this wonderful car, we went to the movies. There were no parking places except right across the street under a huge live oak. I couldn’t parallel park, but there was plenty of space. Why had no one else taken that spot?

I found out after the movies. Apparently every bird in that part of the country used that tree to roost. My beautiful car was covered, literally, from one end to the other in bird poop. I had to scrape the window to see out.

Of course bird poop can be washed off. Then a week later, we went back to the movies. I’d make sure I didn’t park under any tree even if we had to walk a mile. No need to worry about that. We didn’t make it.

I lived out in the country and the theater was twenty miles away. On the way to the movies, I ran into a herd of black cows. No one was hurt, but the entire front end of my beautiful car was smashed in.

The car was repaired and served me for many years, but it never had the same charm after the accident. In fact, no car has appealed to me in the same way. After that one, I’ve always bought my vehicles with no other demands than they are enclosed with four wheels and get me reliably from point A to point B. Actually, all material possessions lost their appeal. I’m sure that’s save me a bundle over the years.

Keeping Things in Perspective

But a teenager has to have his wheels, so I promised my grandsons if they excelled in school and stayed out of trouble, I’d get them a car when they got their licenses. It seemed like a smart deal back when they were six and seven.photo 1 (1)

This year they claimed that promise. They are on honor roll and haven’t been in a bit of trouble, so I got the best end of the bargain. When the call went out for their first car, this is what showed up. A Rav4, four wheel drive. They like to hunt and fish.

It has over 200,000 miles on it, so it’s going to have its share of shop time, no doubt. Yes, they’ll share it. Don’t know how that’ll work out yet.

Since I think having skin in the game will make them appreciate it more, they have to pay the insurance and gas. I just hope they learn that cars, and all material possessions, are meant to fill a need, with no greater importance than to serve us.

While we serve God.

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Do Finances Cause Depression?

I called on Your name, O Lord, from the lowest pit. – Lamentations 3:55

The recent death of Robin Williams by suicide has raised the issue of depression and wealth, or lack of it. If money doesn’t cause depression, it can certainly exacerbate it. We need to think about this before we’re at the end of our rope.photo 2 (8)

Why is a downturn in the economy called a Depression?

Think of the Great Depression. 1929. Stock Market crash. Very rich people were reduced overnight to paupers. Many couldn’t handle it. People jumped from buildings and bridges to their deaths. These are the ones who made the headlines. There were probably many more in lower income brackets who committed suicide.

It doesn’t matter how much or how little, if money is a god, it will sometimes push people over the edge. People who are already depressed are more vulnerable.

I contend those who survived the Great Depression were those who had faith in themselves and in God. These were the ones who could see a future, a better tomorrow.

What really makes you happy?

People who suffer from depression have forgotten what makes them happy. I know. I’ve been there. Your relationships make you happy. The love you give and receive. Suze Orman signs off from her shows with the admonition to put people first, then money, then things. I might argue with her about putting money before things, but it’s true you have to have money to get things; however, you can’t live without things. No one can eat money. But I have no argument that people come before either money or things.

Since I’m a Christian, my relationship in Jesus is first in my life. If I hadn’t had Him during my times of depression, I might have committed suicide. Even in the depths of despair, there was always that hope of eternity. When you think in terms of eternity, death is no solution. Why my faith saw me through when other Christians succumb to despair, I don’t know. One thing I do know. Depression, whether caused by money or anything else, has a solution.

What is the Solution?

You may have heard that suicide is a permanent solution to a temporary problem. That’s true. Depression is temporary. Anything that can lift the fog of depression long enough to see that it’s temporary is a solution. Aside from medication that can help some, communication and vigilance are the most helpful. If you have depression, talk it up. Depression likes to hide in dark corners. Expose it to the light. Shout it on the housetops if necessary. Everyone in my family and my church knew there was something wrong. They were praying. If you have a loved one struggling with depression, talk and pray, then pray and talk. Keep it up, be vigilant.

No one is an Islandphoto 3 (5)

That’s an enormous comfort, to know you’re not alone. The cause of my depression had nothing to do with money. It was grief. I’d lost three close family members in a year’s time. Maybe I didn’t know how to handle grief at the time, but the problem was temporary.

Money problems can trigger depression, but trust me, it will get better. Don’t try to avoid it. Look the problem straight in the eyes and take one small step at the time.

 

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Don’t Buy These Three Money Myths

 

And He said: “Take heed that you not be deceived. For many will come in My name, saying ‘I am He.’ And, ‘The time has drawn near.’ Therefore do not go after them. – Luke 21:8

With all the avenues of communication open to the world, media, TV, internet, it’s amazing that so many are deceived. Apparently deceivers are better at communicating than truth tellers. Myths are a tool used by deceivers throughout history, and some of those myths have been around for a very long time.

Here are three old sayings about money I consider myths. You can judge for yourself.photo 1 (7)

1. Pay Yourself First

No, we can’t pay ourselves first. We have to pay our obligations first. You know—those expenses, loans, mortgages. Not paying our obligations is the same as stealing. If we’ve taken items or services from someone else, the money to pay for those obligations belongs to them at the time agreed upon, not after we’ve paid ourselves. Even God Who expects our first fruits wouldn’t expect us to steal.

We should pay ourselves, though. It’s called saving. But that’s why a budget is important. So we’ll live within our means in order to have enough to pay ourselves.

2. You Get What You Pay For

No, not always. This myth refers to the belief that the more money you pay, the better quality you’ll get. Actually, the more affluent we are, the more likely we’ll overpay. When you buy a particular brand, you may be paying for prestige instead of real quality. How do you tell what something is worth? Nothing is better than experience to teach us which item or service is of better quality for the money. Recommendations and reviews come next.

Buying shoddy items is a waste of money, of course, but overpaying for a brand name is equally wasteful. Accountability requires that we pay only what goods and services are worth.

3. A Penny Saved is a Penny Earnedphoto 4 (1)

How wonderful if this were true. Unfortunately, it rarely ever is. Your penny saved today is not going to be worth what you could earn at a future date. In other words, inflation will eat away at your savings. Inflation is a given in a capitalistic economy, so your savings must take this into consideration. Also, there are no true hedges against inflation. The only way to guarantee value will remain the same is to save the actual goods and services. Since there’s no way to save services, and goods will deteriorate over time, that isn’t a viable option.

Not all old sayings are myths, however. Save for a rainy day is absolutely true. No matter the circumstances, as long as this world exists, there will be rainy days. It isn’t a question of if emergencies will occur, but when. Our budget must contain savings for emergencies.

In spite of what economists say about the economy improving, fewer people are saving at all. It’s easy to understand why. Full time jobs are as hard as ever to obtain. Household income is falling. Those who were wise in days of plenty, now have their savings to fall back on.

We live in a world of deception, but the wise are never deceived. No matter how many say something is true, no matter how long they’ve said it, test it for yourself. Then make sure you don’t deceive yourself.

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Lessons from that First Job

Whatever your hand finds to do, do it with your might. Ecclesiastes 9:10a

 

Remember your first job? For a lot of us, maybe most of us, that was when we were teenagers with no aspirations other than getting our hands on some cash without going through stingy parents. Those who had stingy parents were the lucky ones. Teenagers of indulgent parents didn’t have the motivation to go through the important life lesson a job teaches. Earning your own money is truly eye-opening. I contend no one can learn about money and accountability until they work for their money. But working for a living can be a scary door to enter.photo 1 (5)

I didn’t get a job until I graduated from high school, but I had a plan beyond earning pocket change. That plan involved working my way through college. I would work full time for a year and what I saved, along with small scholarships, would pay for two years of college.

Getting a loan wasn’t an option ever. I don’t know why except there was something shameful about borrowing money back in the olden days.

Here are the four things I learned from my first job.

1. Nothing ever turns out like you imagine.

Did I mention this job was with my dream employer in the Department of Defense? I would work in a swanky office filled with glamorous women and handsome men who’d give me important correspondence to type, urgent, secret messages to deliver, take notes at meetings that would change the course of national discourse.

Most of my co-workers and supervisors turned out to be rather frumpy. For some reason, they didn’t pay any attention to an eighteen-year-old who giggled when nervous, and the most they wanted from me was to stay out of the way. My days were spent sitting at a little desk in a cubby hole reading something called Regs, the most boring gobbledygook known to man. DoD is in the government, after all. It took me two days to realize this task was designed for no other reason than to keep me occupied. My most challenging assignment was staying awake.

2. Money is never as much as you think it is.photo 1 (6)

Nothing is quite as heady as your first paycheck. The amount hardly matters. It’s yours. You earned it, and no one can tell you what to do with it. This feeling is quickly followed by the desire to spend. After day three, it’s gone, and the next one won’t come in for another eleven days if you’re paid bi-weekly as I was. Luckily, I was still living with my parents and didn’t need it to support myself. But it was harder to save for college, or anything else, than you ever imagined. Near impossible, in fact.

3. Don’t leave the old job until a new one is lined up.

I didn’t have much choice in finding a new job because the first was temporary, but I made the mistake of waiting until it ended to hunt a new one. That’s when I discovered opportunities can be few and far between. When that happens, you have to take what you can. For me it was stuffing owner’s manuals in boxes filled with lawn mowers. There was one bright spot in that job. It motivated me to keep up my pursuit of a college education.

4. Whatever the job, excel in it.

Before I finished college I got the opportunity for a permanent position at my dream employer, and they had a program for continuing education. Working and going to school is hard, but I soon learned that if I was to really progress, I’d have to excel in both. There’s no other way to stand out from the competition.

All of these lessons are obvious, but many people don’t learn them in their first job, or second, or… That’s one of the reasons seventy million people in this country are in debt. Many others don’t attempt to live on a budget. Yes the economy is bad, despite what economists say about recovering. But those who’ve learned these four lessons early in life are more likely to keep a job in economic hard times.

What other lessons can young people learn on their first job?

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Summer Produce Savings

But others fell on good ground and yielded a crop; some a hundredfold, some sixty, some thirty. Matthew 13:8

The food budget is being pinched in all areas but none more than produce. Aside from the normal inflation, floods and draughts have depleted supplies. Here in the middle of summer local crops are coming in. We’d be foolish not to take advantage of fresh produce in our own backyards and the farmer’s market.

Back in April I had a post about saving on the food budget by growing your own produce. Obviously you have a big advantage if you have a garden. But if you don’t, take advantage of those who do, and put up those fresh fruits and vegetables to enjoy all year. Yes, I mean canning and freezing your own.photo 3 (2)

Pick It If You Can

We used to go to the blueberry farm every year and picked at least a bushel or two. I stored them in the bottom bin of my refrigerator and they kept for two months. The rest I froze. Some farmers let people pick their own peas, corn, tomatoes, and beans, peaches and berries. The cost is much less than you’ll find in the frozen food section. But the real benefit is the freshness.

Get out the mason jars and can. It’s time consuming but not hard. Home canned foods don’t have all the preservatives and salt. They don’t have to have a shelf life of ten years, so they’re healthier and taste much better.

Adjust Your Diet

If you’ve been thinking of going on a diet, there’s no better time than when fruits and vegetables are in abundance. Did I mention fresh tastes better? I can’t believe people would eat those pre-packaged meals in some diet plans. So it takes more effort to gather and prepare your own. You’ll learn what good eating really is. And guess what? You’ll consume fewer calories.

Visit your farmer’s market every week in the summer. There’s more than salads there. Get out your recipe books. Add several servings of fruits and vegetables to your family’s meals. They’ll all feel better—and you’ll lose weight. I guarantee it.photo 1 (4)

Savings All Year

Buy more fresh produce than your family needs for the week and put up the rest—freezing or canning. Freezing takes little time, and in my opinion the best way to preserve fruits. The refrigerator freezer won’t provide adequate space, so buy a freezer. They are relatively inexpensive, and will pay for themselves the first year. With the money you save on produce, buy half a cow, a pig, chickens, and freeze them.

There’s not much more satisfying to have a freezer full of food for fall and winter. Let the food prices fluctuate.

Convenience Vs Money

It all comes down to a question of convenience versus money, doesn’t it? Maybe in this modern age we’ve forgotten to appreciate effort. It might help to remember the more important things we could do with our money than spend it on inferior, unhealthy food.

I won’t be posting next week. This is the time to spend our annual vacation money.

Here’s a site for free books, if you need a beach read.

http://www.freebooks.com/

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Freedom to Dream

Now the Lord is the Spirit, and where the Spirit of the Lord is, there is liberty. –2 Corinthians 3:17

We’re fortunate to still live in a country in which we can dream. Maybe your dream is to work for yourself or just earn a little income on the side. My husband and I have successfully run two small businesses on the side. It takes financial savvy but isn’t as hard as you might think.photo 1 (3)

After you’ve set up your business and have a revenue and expense flow, you’ll have to set up a budget. You may already have charts for projected Return on Investment. You may even have Projected Profit and Loss for 5 years out. Dream as big as you wish on paper but make sure the numbers add up.

Here are some things to consider before starting the business.

Planning

Start with a business statement in which you state what you intend to do. Be specific as possible, and don’t worry about money at this point. Include your short and long term goals. State your dream. For example: I plan to provide a full range of plumbing services for the residents of Smithville. I project a profit of $10,000 the first year. After taking some tech school courses and hiring a helper, I project a profit of $20K-25K within five years.

That’s simple, but you get the idea.

Research

Research your competitors, your customers, your resources. Figure up the return on investment for equipment, employees, independent contractors, and advertising. You don’t need a business degree, but do study the industry. Many times you can find the answers by asking those in the know. In the example above, you’d talk to other independent plumbers. How did they start out? What problems did they encounter? Don’t give the impression you want to take their customers away. It takes some business sense which often means just doing unto others as you’d have them do unto you.

Funding

You’ll need start-up funds, then double what you think you’ll need. Unless you have a really big project, I don’t recommend borrowing. Save up for this purpose like you’d save up for the down payment on a house. Usually, the amount needed is similar. Depending on your business, you may solicit investors, however, this will complicate and limit the freedom you have to run your business. The government may have grants in the area of science, education, or agriculture. Investigate the options if this applies to your business.

How much you’ll have to invest depends on the business. In the plumber example, a truck will be needed, tools, equipment, and insurance, but the office can be run out of the plumber’s home.

From all this information, you can project your earnings for short term and long term goals.photo 1 (2)

Get Professional Help

Before setting up your books, consult with a professional accountant, preferably one who is experienced in small business. Do this even if you want to start a small, home-based business. You don’t have to keep the accountant on retainer, but getting off to a good start is essential. There are all sorts of laws and regulations–federal, state, and local–you probably don’t even know about. You’ll not only have to set up books, you’ll also have to file periodic forms and reports. Discuss these requirements with the accountant. Make sure you understand the forms required and the filing requirements for taxes as well as regulatory requirements.

Yes, this advice will be expensive, but well worth it. Once you have your books set up, you can maintain them yourself. If the books are set up right, you can prepare your own taxes, so you’ll save money in the long run. As you collect checks and receipts, make it a habit to RECORD THEM DAILY, as well as cash transactions.

Don’t Comingle Funds

Set up a separate bank account. Depending on your state requirements, you may need a business number as well. But those are things the accountant will help you accomplish. Even if you work a cash and carry method, keep your business funds separate from your personal funds. Pay yourself a salary if you need to. Just be aware, most new businesses don’t earn much in the beginning. In fact, you may run a loss the first few years. What you do earn in those early years will probably have to be plowed back into the business.photo 2 (6)

In business as in all things, your patience will be rewarded.

After the first month, you’ll have enough data to set up a budget. And guess what, it’s done exactly like the household budget. You’ll have different expenses, and income may fluctuate wildly, but the process is the same. Go into my archives to review budgeting tips. The object is the same—keep the expenses as low as possible while maximizing income.

Since tomorrow is Independence Day, I’d like to take this opportunity to thank those Americans who dream and have the determination and patience to build their vision, thereby providing the income for us all to pursue happiness. Thanks also to those who defend our freedom to carry out our dreams. And thanks to God, the author of our liberty.

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The Can-Do Spirit

 

I can do all things through Christ who strengthens me. –Philippians 4:13

No matter how hard some try to take away America’s brand, it can’t be done—not easily anyway. It’s too ingrained, and everyone in the world knows it, friend and enemy alike.

Belief is What Counts

America’s brand is the belief that all have opportunity to better their lives. In many ways, that isn’t true, never has been. It doesn’t matter. Everyone believes it. That’s why people keep streaming over the borders, legally and illegally. That’s why the French gave America the Statue of Liberty.

When I was doing research for my historical novel set on the plains, I read a book giving firsthand accounts of settlers. This was after the Land Grant Act where a man (and sometimes a woman) could claim 160 acres and if he farmed it for five years, it was his. In the agricultural society of that day, it was a dream come true to be a land owner. This dream kept them coming. They all thought they’d get rich. Not many actually got rich, but most did make a living. As did workers who trudged to factories everyday. The work ethic took over America

Have we lost it?

In the late 1800s, John Pemberton experimented with a medicinal drink. He didn’t imagine it would turn into the drink of choice for people all over the world so he sold it to Asa Griggs Candler. Anyone who has the entrepreneurial spirit can change the world. photo 2 (5)

Do we still have it?

Yes, yes, yes. If the income side of your budget isn’t as much as you’d like it to be, take a tip from the settlers and look for opportunities, work at it, hold on. Even when the jobs are scarce, don’t give up. If you can’t find someone else to work for, be your own boss. Fill a need. Even if you don’t change the world, you can make enough to live richly.

It takes work and time to succeed in anything. I’m working on my second career as a novelist. It’s taking time, and I work on it more than I did when employed as an accountant, but I will succeed if I live long enough. The work ethic lives on after retirement.

Selling Services

Writing is my choice, but there are other opportunities. I see needs everywhere. There are a lot of elderly in my city. They have a need for a transportation service. Or to run errands. Many people who aren’t so elderly need help catching up with the computer age. There’s a need for personal technical assistance—not over the phone, but over-the-shoulder assistance. I could use some assistance myself. Even if these services are already available, someone else might provide them at a better price. The services don’t have to be done personally. They could be hired out. Sometimes, you don’t have to provide the product or service but connect people to those who can provide it. Many people need help connecting to good health care. I have a friend who started a successful nurse referral business. Opportunities abound for anyone with the entrepreneurial spirit.

Selling Products

I’m interested in providing a product—books, but that’s not the only thing I could sell. I make some of the best home-made fudge on the planet. At least that’s what my family says, and they’re the only ones who eat it. I can tell they’re truthful by how fast it disappears. I could set up a business making fudge in my own kitchen and sell it over the internet. I have a lifetime of experience crocheting and design my own items. I used to make a fair amount of change selling my crochet at craft fairs, but I could sell on the internet. I wouldn’t get rich selling fudge or crochet, but I could add to my income.

The internet age opened a whole new world of entrepreneurs. Some went bust, but some made it big.photo 3

Does the idea of starting your own business appeal to you? You’ll need a budget for that. We’ll look at things to consider in setting up a budget for the sole proprietorship next week.

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The Right Side of the Budget

And when he brings out his own sheep, he goes before them; and the sheep follow him, for they know his voice. –John 10:4

I tried to get out of this post. A little accident left me feeling…well, crabby. My assistant was out of town and I was puppy sitting and I wanted to work on my novel and… I had to remind myself why I started this blog. Actually, I didn’t remind myself so much as God did. If you’re a Christian, you know what I mean by hearing His voice.

My original goal for the blog was inspired by my grandchildren. I wanted to leave them with all the practical advice related to money management I’d gleamed over a lifetime, things I wish I’d known when I got out on my own. Things they’ll need to know in a few years.  I began this blog because I felt compelled by that Voice to share this knowledge, not only with my grandchildren, but with all who want to use their money more wisely.

And when I started making excuses to skip this week, the Voice reminded me of my goals

I’ve already covered every expense in the budget. Let’s look at the other side—income and assets.photo 2 (4)

Salary and Wages

If you work for someone the bulk of your income will likely come weekly, bi-weekly, or monthly in a set amount. This makes it easy, but we should account for gross income, not take home. Why? Those withholding amounts are expenses that should be accounted for in the budget even if we don’t have control of them, like taxes. If we don’t include withholding in the budget, we’re not accounting for our money down to the last cent. And we do have control of some items. They should be reviewed periodically to determine if too much or too little is taken out.

Variable Income

Some employees are paid in commissions or tips. Some, like construction workers, may have to deal with fluctuations in working hours. In these cases, it’s essential to tabulate a “normal” monthly gross income for the purpose of budgeting. If you don’t, you may come to depend on those higher amounts. This will spell trouble during a dry spell. Adjustments may, and should, be made quarterly or semi-annually. This is a common-sense consideration, but unless you put it down in black and white, you won’t know where you stand. Living from paycheck to paycheck isn’t wise for anyone, but especially for those who depend on variable income.

Bonuses and Windfalls

What are we to do with compensation over and above salary and wages? Just as we should be prepared for emergencies, we should also have a game plan for unexpected gain. Prioritize. I recommend this order. (1) Pay off debts (2) Put it in your emergency fund, if that fund isn’t sufficient. (3) Invest (4) Buy your heart’s desire. Another good use is to give it away, and if the amount you give to charity doesn’t measure up to what the Voice says, you should.

What if Income Falls Short?

Obviously, if you work for someone else, and you’re not making enough to make ends meet, your choices are limited. You could ask for a raise or a promotion. If you have a good reason and your performance is good, do ask. Sometimes we don’t have because we don’t ask. And if the answer is no, ask again after a reasonable length of time and better performance. Ask those who’ve achieved success in your company. My guess is, they had to prove themselves to advance.

If you fail to get a raise or promotion, you can always get another job—just don’t walk away until a better job is secured. Many people have to take a second job. We all do what we have to do.

Being Your Own Bossphoto 1 (1)

If you’re self-employed, the whole picture changes, and gets more complicated. You have a lot more financial documents to consider than a simple budget. But the opportunities are much greater. Far greater than this post can cover, so next week we’ll look at those opportunities.

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Getting Through the Lean Years

 And the seven years of famine began to come, as Joseph had said. The famine was in all lands, but in all the land of Egypt there was bread. –Genesis 41:54

While I was working toward my BBA I took a lot of economic classes. None of what I learned helped me in my job as a government purchasing agent. It didn’t help in my job as an accountant. I swore that somehow, some way, in my lifetime, I’d find a way to use that knowledge. The time has come.

 

The Value of Money

What is money worth? Whatever the government says it’s worth. Years ago we lived under a gold standard, meaning the government couldn’t print money unless it was backed up with gold. Did that make a difference? It kept the government from printing money recklessly. Now, that’s determined by the Federal Reserve. Since this is a capitalistic economy, economic pressures motivate the Fed. The stock market, the labor market, consumers, business, all contribute to these pressures. If one thing goes out of whack, the whole economy suffers. But though the government puts a monetary value on money, that’s not really what it’s worth.

Your money, whether paper, coinage or gold, is only worth the goods and services you can exchange for it. Enter inflation.photo 2

The Cost of Living

The economic downturn began almost six years ago. Since then we’ve been in a recovery. Did you know that? Wall Street investors know it. They’ve done great. Laborers haven’t fared so well. Even those who’ve remained employed have seen their income shrink. The middle class has shrunk. Some have moved into the top ten percent, but many more have fallen into the lower economic class.

Did you know inflation is pushing people into the lower class? No one talks about it. Luxury and high priced items have remained stable, but prices for food and other necessities of life have crept up at a steady pace. This doesn’t affect upper income people and the government weighs certain items. Food isn’t considered as important as a car (how convenient) and some necessities are taken out of the inflation equation, so on paper, the numbers don’t look bad. But in the marketplace, it is bad. The cost of living is a lot higher for poor and middle income people.photo 2 (1)

The Economic Cycle

In capitalistic countries the economy goes in cycles—prosperous, lean, recessions, booms, depressions. Regardless of which cycle we’re in, we have a chance to move from one economic class to another. America still has opportunities.

If we only had Joseph’s insight during ancient Egypt, we’d save during the prosperous years so we’d have enough during the lean. But though we don’t know how long the cycle will be, if we maintain an emergency fund, we can weather the lean years. Just remember you’ll need more than you think. Money saved today won’t be worth as much in future years, especially with interest rates on liquid accounts being almost non-existent.

Save Things When Possible

I save durable high inflation items like paper products and detergents, even food items like rice, beans, coffee, sugar, and canned food. If there’s a sale I stock up. I’ve saved a lot on coffee alone, and let’s just say I have enough toilet tissue to take me through the tribulation. Laugh if you must, but these are inflation-proof items.

Your emergency fund must cover more than emergencies. It must see you through the lean years of the economic cycle.

But be of good cheer. It’s sometimes during the lean times that we’re motivated to progress. America’s greatest resource is the innovative spirit of its people. Somewhere out there people are working to provide the stuff we need at a lower cost.

Oh, and there’s something else that goes in cycles—politics. When the people get fed up with the economic policies of one group, they’ll switch to another.

I’m glad I was finally able to get this economic stuff off my chest. I feel better now.

Next week we’ll do a budget checkup.

 

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What Are the Odds?

Now the leaders of the people dwelt at Jerusalem; the rest of the people cast lots to bring one out of ten to dwell in Jerusalem. -Nehemiah 11:1

I hate to consider myself a gambler, but I am. We all are. The atheist wouldn’t consider himself a person of faith, but he’d be wrong. We can’t even get out of bed in the morning without some measure of faith. Gambling requires faith because we can’t possibly know all the possible outcomes of—well, almost anything except drawing lots. And we all, consciously or unconsciously, assess the odds. download (4)

Hold onto that thought. It requires deep thinking, soul searching, going down to the marrow type thinking. I never really thought about this until I wrote my first inspirational manuscript. The heroine gives the hero a preposterous scenario which he ridicules. Her comeback question is, “What are the odds?”  An offhand remark, but a turning point for the hero, because the question keeps echoing in his mind, and he finally has to access the odds on all those things he’s been avoiding.

What does this have to do with your budget? Actually everything in the budget has to be accessed, but nothing more than insurance.

Do You Need It?

If the loss will put you in dire straits, yes. The loss of life, auto or home can certainly put you or your family in dire straits. Healthcare is not true insurance but necessary. That subject was covered in my posts, Is Healthcare Really Affordable and What’s the Best Fit for Your Healthcare Budget, both in the January archives.

Insurance is needed when the odds are small but the stakes are great. We’re actually hedging our bets because we don’t want to ever file a claim. None of us would want this to happen.images (6)

Or this.images (7)

 

 

How Much is Enough?

When we’re accessing our need for insurance, this is the tricky part. If you over-insure you’re wasting money. If you don’t have enough and the unthinkable happens… This is where you have to access the odds for each situation.

Life Insurance

I, and a lot of much smarter money managers, believe no one should take out whole life insurance. It’s not a wise investment, nor should insurance be used as an investment. Term insurance is the way to go. The only purpose of life insurance is to provide for your family in the event of your death. It’s only needed if people depend on your income. Obviously this includes your spouse and minor children. It does not include grown children unless they depend on your income. If you want to provide an inheritance, it should come from your estate, not insurance.

If no one depends on your income, the amount of life insurance you need shouldn’t exceed debts and final arrangements.

Auto Insurance

You’ll have to carry enough auto insurance to meet the requirements of the loan company if you’ve financed your vehicle, and states may require liability insurance. Take the highest deductible allowed. This can make a big difference in payments. I wouldn’t carry collusion and comprehensive insurance on a car over seven years old. You should have enough in your emergency fund to replace the vehicle. The odds are not great enough to justify the cost of such insurance. Your policy should cover liability and uninsured motorist, even if your state doesn’t require it. Court costs can wipe you out. One other thing to consider—pay in six months or yearly increments, not monthly. The insurance company will tack on interest charges that can be significant.

Homeowners Insurance

Again, the amount of insurance will depend on the mortgage company for the life of your loan. Also be aware you may have to pay mortgage insurance if your loan exceeds 80% of the principal. When the loan balance drops below 80%, drop the mortgage insurance. The company may not notify you, so be aware.

How much insurance should you carry if you own your home outright? No more than fair market value. This fluctuates, so make an assessment yearly. When the real estate market crashed, house values fell drastically. Guess what? The insurance companies probably didn’t adjust your insurance. You may be carrying too much for today’s market.

Should you carry renter’s insurance if you rent? From what I can tell, the insurance is fairly low, so yes, especially if you don’t have enough liquid funds to replace the contents of your home.

If you were drawing lots, the odds would be obvious. Not so when assessing insurance needs, but consider the odds we must.

Are you carrying too much insurance, or not enough?

 

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