Archive for the ‘Finances 201’ Category

When the Hits Keep Coming

Tuesday, June 9th, 2009

It has been a rough few weeks out here in the primordial scrub.

Lawnmower broken – repaired.
Tiller broken – at shop.
Car AC/emissions system – at shop.
Death in the family.
Dying family member.
Sick Old Lady Cat.

old_lady_cat21

Old Lady Cat does not feel well

That deceptively short list is just the last four weeks. It is more accurate to list it as:

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Credit Card Companies Threaten To Be Mean

Saturday, May 23rd, 2009

In recent news, our federal legislature has passed bills restricting the bad behavior of a certain class of financial institution: The Credit Card Company. Under the new legislation (if signed into law), all credit card companies will have to follow certain rules and regulations. Not least of which:

* No More Universal Default. Previously, if you were late paying your water bill, the financial institutions could jack up all your credit card interest rates to 20%, 30%, or more.
* Interest rate increases are no longer retroactive. In other words, if they do increase your interest rate, they can do it only for new expenses, not back-date it to the amount that you’re paying down.
* Reasonable notification of increased interest rates for missing a payment – 45 days notice (depending on which story you listen to) – AND if you make a minimum payment in that time, the interest rate goes back down to normal.

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When To Call A Professional

Wednesday, May 20th, 2009

My human just dragged a first kill through the tall grass onto the sidwalk!! I’m watching from the window!

The pull cord on our Craftsman push-mower (with power assist) is jammed up inside. It no longer allows the operator to use the pull cord to start the engine.

YAY! Nasty LOUD growl-monster is dead! Pookah’s ears are saved! Human will no longer stink as much! This is a good, if graceless, kill!

I took the cover off. Then tried to disconnect the fuel line from the gas reservoir so that I could tilt the reservoir out of the way and get to the bolts holding the main, metal cover on. Once removed, I would have access to the mower’s guts, and be able to take a look at the jam-up.

My human disemboweled the growl-monster! Finally, all those lessons in hunting are taking root! See?!?! Humans CAN learn! Look at all the… blood? grass? brown-gunky-sticky-bits? Human is bent over it, feeding. Can’t see…

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How To Prevent Your Own Financial Meltdown

Tuesday, May 19th, 2009

You’ve heard it before. I’ve got some good news… and some bad news…

The bad news is that there are certain types of disasters that you will never be adequately prepared for. Astroid strikes and nuclear wars are at the top of the list. Fortunately, those are “Outlier Situations” with a low likelihood of happening.

The good news is that it is relatively easy to prevent your own financial meltdown – a lesson that many financial institutions could have easily remembered, yet failed to.

The basic principles are:

1. Prepare.
2. Reserve.
3. Insure.
4. Conserve.
5. Review.

It’s all about managing risks.

1. Prepare.
Prepare for life’s emergencies. At some point, you (or a family member) are going to get sick, lose a job, need car repairs/replacement, purchase a home, need significant home repairs/replacement, need emergency shelter, or need legal assistance.

By Pookah Finances 201, you can start really thinking ahead. Your mind, along with your ability to plan ahead, is your most powerful asset when dealing with finances. Plan Ahead. Work through a list of “What If’s”. Learn about your family’s medical history. Check with your neighbors or the local city council for what past disasters have struck your neighborhood. Write down what you learn… and what you plan.

2. Reserve.

Set aside enough of your earnings to cover one or two of these emergencies, preferrably the expensive ones. You do NOT have to start out with the most expensive one (probably serious illness). But car replacement/repair is highly likely, as is home repair. Ten thousand dollars is a lot of money – build it up over time. Your emergency fund can act as this sort of reserve.

When it comes to investing, it depends on your level of interest. Index funds are a good choice, in general (though there can be great variability even among index funds). But don’t put every single egg in one basket. An IRA (Roth or Standard), 401K plan, and Emergency Fund are a good start. With a little planning (see 1. Prepare above), you can also take great advantage of a Health Savings Account (HSA) or other vehicle that allows you to reserve some of your money, probably earn interest on it, and then pay for some of those incidents when they crop up. If your interest lie in the direction of direct stock purchases, you can increase your reserves (with attendant market risks) steadily over the long run.

This is akin to keeping enough money in the bank to cover your borrowing – a concept that has direct bearing on the crisis our economy is currently experiencing. You have a (hopefully) rare opportunity to learn several important lessons and take them to heart. This is one of them.

3. Insure.
Insurance, in the United States, is screwed up. It is one of those necessary evils.

Insurance is intended to spread the cost of expensive problems and disasters over a wider population, using the premiums paid by the insured as investments to generate additional money for the insurance company AND to pay for those who file a claim to be repaid.

I do not have the space to go into details about the many, many, many problems and pitfalls of insurance here. But I do offer this advice: Insurance is there as an emergency measure, for when one of the disasters strikes. If your cash flow can handle it, use a high deductable to lower your insurance costs – and keep that emergency fund at three- to five times the deductable. With the exception of medical insurance, insurance is for the “What If’s” – those emergencies that are unusual and tend to be devastating in their effects. What if your house burns down? What if you are in a car accident? What if you are diagnosed with cancer? What if you are killed and your family needs to pay off the house mortgage?

Just one of these events can destroy your finances. Insurance is there to prevent that destruction.

4. Conserve.
Conserve your resources. You can look for ways to cut drains on your resources from the preceding principles. For example, if your emergency fund is at a reasonable $10,000 adjusted for your lifestyle, you can look for ways to cut your expenses. One of the easiest is with a car. If replacing your car with a like make & model would only cost $5,000, talk with your insurance provider about dropping vehicle replacement coverage from your car insurance. How much would it save you per month? Then put that savings towards your emergency fund, until you get it to $15,000+ (three to five times the replacement cost). You can also look at raising your deductible, increasing your emergency fund accordingly, and using the savings for other projects.

Medical insurance is a touchy subject. But if you are regularly on medication to treat a condition, it may be worth your while to seek out either a cure or alternative treatments. To use diabetes as an example, mild cases *may* be controllable solely through dietary changes. Not having to buy medication (insulin, in this case) all the time means that you can improve your cash flow. However, it is up to you to determine if the cost of the cure (or the attempt to get around) the problem is worth it.

You must also ACT CONSERVATIVELY. Are you taking on too much risk by raising your deductibles? What if you have to pay three or four of those deductibles in the same six month period? If your household only generates one bag of trash (because of your extra efforts at frugal living, for example), would it be worthwhile for you to join up with your neighbor and have a “joint trash pickup” service? What are the costs of your employer-provided insurance versus getting your own? (It does happen occasionally that paying for your own insurance is cheaper than accepting your workplace plan.) Ask your doctor if there is a generic or older equivalent of your prescription medication that would cost less, yet still work for you.

Above all, when you are changing something about your finances, THINK: How will this impact me? Does this create too great a risk? What will it cost if the emergency DOES happen?

5. Review.
Review your plans every year, especially the insurance. If you have picked up a few fender-benders or tickets (it happens even to the best of us), check your insurance to see if the monthly cost should have gone done by now. You may very well have gone the required one or two years (or whatever requirements are there for your situation)without an incident to qualify you for the reduced cost. Definitely insist on being pro-rated for any time that has passed before you noticed this cost savings! Or for the cost of a simple blood test, you may be able to demonstrate that you no longer suffer from an expensive, high-premium medical condition (thanks to your efforts to control or cure it), and thereby cut your medical insurance costs down.

This review also introduces a sanity check. After all, if you are at Pookah Finances 201, there is no reason to pay for insurance covering stretch limousine trips to and from the car dealership if you get in a wreck. A phone in combination with bicycle, public transportation, friend, or cab will do just fine. As a counter-point, if you are finding yourself more accident-prone as you get older, maybe you need to lower that deductible to better match your changing life.

I will never forget the neighbor who discovered he’d been paying for his eldest son’s medical insurance into the son’s thirties, when the insurance could no longer cover him once he passed his 21st birthday. (Like most insurance companies, they didn’t want to reimburse him for the overpayment. The state’s Attorney General, and a judge, vehemently disagreed.)

Religion and Finances

Thursday, May 14th, 2009

Pookah now takes the opportunity to remind all humans of the divinity of cats. Offerings of small tasty birds and delicious fishes will be accepted between the hours of 12:00am and 11:59pm.

Many religious works contain advice about finances. Much of it, from what I have read, is quite sound and good advice that will serve anyone well. Religion, however, is one of “those” subjects that can raise quite violent feelings in faithful and non-faithful adherents alike.

I’m not going to advise you on what aspects of your religious obligations are good, bad, or other. It’s not my place. It’s between you and your religion.

What I will advise on is how to get out of debt (Pookah Finances 101) and how to pave the road to your own financial success (Pookah Finances 201). So please bear this in mind: You are free to use or ignore this advice as you see fit.

Tithing/Donations: Cut the cash outflow. If you’re in debt, you can’t afford it. Ending up needing financial support from your religious organization harms you, your religion, and the people relying on your religion’s collective efforts. If you really *must* give, donate your time. Help out some of your fellow faithful with home maintenance, car repairs, yard care, or babysitting. Donate some time to helping keep up your religious sites, temple, church, altar, other place of worship.

Religious Subscriptions: Many local (and national) religious organizations distribute publications – what’s happening in your faith. These are important so that you can stay connected with your fellow faithful both locally and abroad. They also tend to come with a subscription cost that you are expected to pay. However, if you are in debt (Pookah Finances 101), this is a drain on your resources. You can’t eat the subscription, use it to clothe your family, and it sucks as shelter. See if you can trade in your services – perhaps as an editor or proofreader – in exchange for a few months off the subscription fee. If you have children, see if they can help with packaging and distribution. It might even serve well as a family Saturday event. The goal is to reduce the monetary outflow so that you can get out of debt. When you reach Pookah Finances 201, you can *consider* going back to funding a monetary subscription.

Sunday Clothes: Okay, I’m showing what religions I’m familiar with. Many faiths expect you to wear certain types of clothes – usually of a nicer variety – during attendance of ceremonies. If you are handy with needle and thread, or a sewing machine, you have here an opportunity: Donate some of your sewing efforts to maintaining the ceremonial attire of your priests, singers, or other uniformed attendees. If you need appropriate attire, try shopping around thrift stores, or even ask your local religious authorities for advice on where to acquire appropriate attire.

Expense of Ceremony: Some faiths require purchase of incense, candles, or other items used in the practice of that faith. These can get expensive, and are difficult for someone like me to advise you on. Let your local religious authority know a bit more about your situation. See if they can advise you on a good course of action. Maybe you can trade your work for some of these items, or maybe you can get a price reduction until you get back in the clear. This is a case where you are going to have to swallow your pride, smile about the taste, and ask for another serving. It sucks. I know. I’ve done it.

Here is the basic idea: Replace your money costs with goods or services. Maybe you got a really killer deal at the grocery store, and have ended up with more canned food than you could possibly use in a year. See if that extra will make an acceptable donation. Maybe some of your fellow faithful participate in Habitat for Humanity – and so can you. Extra practice building someone else a home means you will be better trained to keep your own place in good shape – which will reduce your maintenance and repair expenses. Just about anyone with two legs and two arms can serve meals and bus tables. Serving at a soup kitchen was both an eye-opening experience for me and brought home, pointedly, just how important it is to help someone else make it through another day. (Later on, when I was financially stable, I bought a $20 cookie from that soup kitchen bake sale. I knew that $20 would feed roughly 50+ people who were trying to pull themselves up out of the gutter. Best. Tasting. Cookie. Ever.)

When you get out of Pookah Finances 101, and are into Pookah Finances 201, start adding back some expenses — IF YOU WANT TO. You may find that the greater personal involvement in your faith is more fulfilling, and more useful, than simple cash expenditures.

Greater personal investment in scritching Pookah’s chin is more fulfilling.

Why The Tough Apology?

Tuesday, May 5th, 2009

Well, I’m back. Immediate family medical issues are being dealt with. And yours truly is working on a better process for this blog – so that there are fewer critical points of interruption.

So, to get back on track – especially now that my legs have healed up:

It happens every so often. Pookah climbs up into my lap, making sure she doesn’t impale me too much on her built-in scythes, and asks a question:

Why do you take such a hard line with apologies? Cats are MUCH more forgiving and reasonable.

I separate Apologies from Forgiveness for one very important reason: Trust.

We give a certain amount of Trust to everyone – friends, family, strangers on the street, companies that we do business with. We Trust that strangers on the street are not going to actively harm us – it is a foundation of civilization. We Trust that the companies we do business with are not going to actively cheat us – it is a foundation of economics. Similar foundations exist in our Trust of friends and family. I’ve posted about this before, regarding Trust, but Verify.

Trust, once broken, requires significant effort to earn back. And this is as it should be.

You are making it complicated again.

Really? Okay, let’s pull some examples from your life, Pookah.

Okay. Just keep rubbing that muscle… right… there…

Would you have come up to the food I set out to trap you if I’d kicked you?

… No.

Why?

Because if you kicked Pookah once you would do it again.

Even if I said I was really, really sorry?

How could I believe you if you kicked Pookah once already?

But I have kicked you, Pookah. Even stepped on you.

That was different.

How so?

It was an accident. You did not mean to hurt Pookah.

How do you know that?

Because you immediately stopped what you were doing, apologized, and then made sure that Pookah was not seriously hurt. You went to extra effort to reassure Pookah that it was alright, you didn’t mean to. If Pookah was hurt, you did your best to help Pookah feel better. Except for that time at the V.E.T. Pookah did NOT feel better until Pookah was home!

Is that all?

Afterwards, when a cat was in the human-walkway, you used your foot to gently nudge Pookah out of the way… until Pookah learned how to avoid clumsy humans.

So you trust me because…?

Your actions, even though they are clumsy, are the same as your words.

Now this, I am proud of! Well, I’ve got to get out in the primordial scrub to… Hey, careful with the sharp pointies!

Prrrrrrrrrrrrrrrrrrrr!

Dangit.

Absent For A Bit

Thursday, April 23rd, 2009

You may have noticed a lack of updates over the last week. I will try to use what is a stressful situation to illustrate some of the points I try to make in this blog.

My human is going to give you some examples from real life. I will now offer my human comfort by climbing onto his lap, kneading his legs until he relaxes, and then settle down for purring – which also lowers my human’s blood pressure. Proper health care of stressed humans is one of a cat’s primary duties.

As S.O. and I have built up our finances to where we are solidly in Pookah Finances 201 and heading into Pookah Finances 301, we have set aside resources for emergencies. This is commonly referred to as the emergency fund.

Well, that fund has seen some action. And I need to bandage the claw marks on my thighs.

Hmmph! One wonders why, if the “alcohol” hurts so much, my human pours it onto cuts. If my human would just let me lick the wounds clean, there would be much less yelling.

One of my parents has become very ill, required surgery, and is now having trouble recovering from the surgery. This coincided with my monthly upload of posts to Life of Pookah. In a choice between helping look after family versus updating a blog, the family clearly wins. S.O. and I dipped a bit into our Emergency Fund to make the trip out, cheer up blood and marital relations, and are now standing by in case we need to make an emergency trip.

We would not be able to help my parents out if it weren’t for the Emergency Fund.

Furthermore, the availability of that Emergency Fund means that the hit on our overall finances is greatly reduced.

HOLY SWEET MOTHER OF SANDPAPER ON SUNBURN!!!

My human is dancing around, yelling, and splashing more “alcohol” on scratches that I just cleaned. What a waste!

Maybe this will convince my human to stop wearing those icky shorts.

Update Your Will

Tuesday, April 14th, 2009

By this point in your financial life, you are getting your debts under control – probably even pulling out ahead in some areas. You’re also planning ahead for your future – to cover both expected and unexpeced expenses. Part of that planning includes the very important, but often overlooked, last will and testament.

Who cares what happens to your catnip after you are dead?

Okay, professor mode is now turned off.

Good start.

You’re going to die eventually. It’s an unpleasant thought. However, you can take certain basic steps to ensure that your final moments are handled in the way you want them to be. If you have children, brothers, sisters, neices, nephews, or other relatives that you’d like to pass on certain belonging – including money – to, your will is one of the best ways to do it.

Pookah has already passed on the best things a kitten could have: Strength, agility, keen senses, strong claws, and a tail that puffs up bigger than most other cats’.

Don’t forget cuteness.

I am royalty. Those with inborn regalness do not need cuteness. Bow down and scritch my chin.

Right. So, making a last will and testament is going to vary from state to state (and country to country, if anyone reading this is outside the U.S.A.) This will require some research on your part. I strongly recommend that you consult with a professional – a lawyer in your state who specializes in wills. Most of them will give you a free hour of consultation, and can advise you on how best to proceed according to your Wants and Needs. If your Wants and Needs are simple, you may only have to fill out a few inexpensive (or free) forms. If you want to make sure your last wishes are iron-clad, or include a “poison pill” (along the lines of, if anyone in the will contests it, they don’t get anything from your estate), or any of a number of issues that are important to you, then consulting with a professional or three is a must.

VERY IMPORTANT!!! Since we felines are possessed of divine grace, you must not forget us when making out your last wishes. Though you call us “pets”, we are, in fact, lordly members of your family and will need consoling if you leave us unexpectedly. We must be supplied with sufficient small tasty birds and delicious fishes to ease the transition of our living arrangements.

Here is one of the great secrets of wealth: Pass it securely from generation to generation. Your heirs can learn from your mistakes, as well as benefit from your successes. If you have lived through tough times, you well know how much of a difference even a few dollars can make. You can, as your last act, make your heirs’ lives better.

So start thinking about this now. Do your research (Google is your friend). That way, when you have the resources saved up, you are prepared with your questions and ideas for consulting with a professional. Do not look on this as a sad necessity. Instead, look on it as making life easier for those who survive you, or come after you.

You are not leaving me, are you?

No, Pookah, not for a long time, I hope. But accidents do happen. I may have to go before I’m ready. But I will try to take care of S.O. and you even then.

Prrrrrrrrrrrr!

What Is An Apology?

Tuesday, April 7th, 2009

First, you have to understand what an apology is.

An apology is:

  • A declaration that you, yourself, have done wrong.
  • A statement of remorse for violating morals and/or ethics.
  • An acknowledgement that you will accept the consequences of your actions.
  • A request to be permitted to undo as much of the harm committed as possible.
  • A declaration that you will bend every physical and mental effort to NEVER AGAIN commit this offense.
  • And finally, an apology is JUST WORDS. Until it is backed up by concerted actions over time, an apology is only hot air.

An apology IS NOT:

  • The final effort, labor, or work that you are obligated to give as compensation for the harm comitted.
  • The precursor to required forgiveness – you apologized, you are NOT forgiven until the wrongs you’ve done are fixed as best they can be. Forgiveness for the wrongs you have done requires work.
  • A free ticket out of the consequences of your actions.
  • Wiping the slate clean. Your apology may be accepted, but your actions are NOT forgotten.

What does this have to do with Finances?

Everything.

If you are heading towards, or already in, Pookah Finances 101: You have wronged yourself, at the very least. Getting this far into debt required lying to yourself, deceiving yourself, ignoring your needs, and treating yourself pretty lousy when it comes to morals and ethics. Chances are good (but not certain) that you’ve done the same to other people or organizations. Not paying debts that you owe ranks high on the list of things you need to apoligize – really apologize – for.

If you are heading into Pookah Finances 201: You are getting back into a position where you can really make good on the harm you have caused yourself and others. Don’t waste the opportunity. You can see how damaging it can become every day on the news media – and on the web. Imagine if the people responsible for the current economic mess had owned up to it, and spent some of their millions in bonus compensation undoing the harm. Don’t end up like them.

If you are heading into Pookah Finances 301: You are firmly on the road to financial success. You didn’t get there solely on your own – other people helped. Take the time to check what’s between your ears – and what’s in your chest – to make sure you are becoming the person you really want to be. If there’s nothing there reminding you about past choices, you’re in trouble. If you are carrying a lot of “I should do X”, then you have some hard decisions to make about what you should do… and what you WILL do.

Do What Is Right

Tuesday, March 31st, 2009

Ethics and Morals are tough. It is even tougher when it comes to finances. The news media is full of stories right now about how overwrought greed is causing our recession to get ever worse, causing our (including our elected leaders’) efforts and dollars to go to waste, and causing an immeasurable price in human lives diverted, broken, or even destroyed.

It starts with a simple concept: Do What Is Right.

If you saw someone accidentally drop a twenty dollar bill next to your foot, where you could easily pick it up with no one the wiser but yourself, would you give it back to the person who dropped it?

What if it was $100, would you return it?

What if it was a penny, would you return it?

I imagine that many of the people who are raking in these outrageous, and likely outrageously undeserved, bonuses in seven, eight, and nine figure dollar amounts started off with questions like these.

Unfortunately, I also expect they started answering, “No,” to each of the above questions as they progressed through their careers. After all, in the scale of finances, $100 all the way down to a penny is insignificantly miniscule compared to a compensation package of six figures or more.

It is true: That amount of money is insignificant. Unless, of course, that penny means the difference between eating your next meal or not eating it.

It is the small decisions that pave the way to making big decisions. If your small decisions are ethically or morally compromised, then so are your big decisions. If your small decisions are right and good, then your big decisions *MAY* be right and good.

Returning a dropped penny to its rightful owner is a small decision. But if you are already in the habit of doing what is right, you will return that penny… just like you will return the roll of $5,000 that a senior citizen left on the table at the restaurant by mistake. Yes, that roll of money might mean the difference between paying your rent or not. But that does not matter. If you lie, cheat, or steal to get ahead, it WILL catch up to you. The accumulated interest on that debt may drain your financial assets, or it may psychologically bleed and weaken you as a person. That analogy probably won’t affect many people who have already started answering, “No,” to the above questions. Unless, of course, you take into consideration the following:

Psychology determines your finances. If you have the mental and emotional basis to handle finances in a sane manner, you dramatically improve your chances of success. Anything that damages your personality, the essential “you,” also damages your chances for financial success. This damage can occur at any time during your life. The more steps you take to reduce the _opportunities_ for damage to occur, the less likely you are to suffer damage to your personality and to your finances.

Think about those high-stress situations where it is so ridiculously easy to make a serious financial mistake:

  • Buying a new car
  • Catastrophic health issues
  • Buying a house
  • Applying for a loan
  • Funerals
  • Legal procedures involving lawyers and/or judges
  • Interviewing for a job
  • Divorce
  • Marriage

If you have built within yourself the habit of doing what is right, you will tend to succeed in these high-stress, high cost-of-failure situations for one simple reason: Doing What Is Right means you can more easily recognize when someone is trying to screw you over

The added benefits are many:
* You establish a reputation for honesty and integrity that will aid you in all other aspects of your life. When your honesty or integrity come under question, you can use your past history of Doing What Is Right as *evidence* that you are still Doing What Is Right.

* Your significant other will trust you more. Think how many relationships you know of that suffer or were destroyed because of a simple lack of trust.

* You can trust yourself more. If you are in the habit of Doing What Is Right, you can rely on that habit to help carry you through even the toughest economic or personal times.

* You will collect people around you who also Do What Is Right. These people will support and advise you when you may falter, need help, or must lean on someone else while you get your feet back under you.

* You will inspire others to Do What Is Right. People tend to rise to meet the level of expectation you set for them. By the same token, people tend to lower themselves to meet the level of expecation. Your children, brothers, sisters, parents, and even strangers on the street are watching. What are you telling them about yourself when you take action? That you will take advantage of them if the opportunity presents itself? Or that you will abide by standards of fairness, truth, and honesty, even when it hurts you in the short term?

Return even the penny to its rightful owner.

Be a person who deserves success.

Do What Is Right.

Thank you for taking me into your home.

You’re very welcome, Pookah. A soft, velvety kitty purring on my arm is a princely reward.