While I was working on my website, my son Thomas told me the following.
I think you type what's not finished and then you type the right answer.
That's how you get the money.
I immediately typed down his statement starting this new topic.
A few days later, again while working on my website one night, he asked me,
How much are you getting paid for this work?
If only every hobbyist endeavor had monetary value, then it would seem like nothing was work. The reality is that I must work hard on every hobby so I may be sharp for every work which presents itself to me. Without hobbies and other nonmonetary, nonobligatory endeavors, the satisfaction of all my work declines and eventually goes motivationally bankrupt. As they say, work hard, play hard, but I will add this thought in particular. I am the champion of my own world first, so that my success follows inevitably and joyfully.
Suze knows best: Principles of money management
I saw a PBS special on Suze Orman and her financial guidance. She does have some good insights and foundational principles for money management.
- The goal of money is to feel secure.
- Don't make choices based on fear.
- Good debt is an investment in who you are today in benefit of your future.
- Bad debt satisfies you today at cost of your future.
- If you don't feel secure about it, that's when you make a mistake.
Documents you must have
- Living Revocable Trust
- Advanced Directive
- Durable Power of Attorney for medical care
- Get rid of life insurance when you have enough assets. The question is "who depends on you?"
- Do not mix insurance and investment.
Suze tells how to invest
Beyond the principles, she gets specific on the nature and value of some investments.
- Roth IRA as 8 months emergency fund.
- $100 a month at 10 to 12 % growth in 40 years will become a million dollars. In 30 years it will be $300,000 dollars.
- Reverse mortgage payouts are bad (low) when starting too young or interest rates are low.
- Stock market investments are best for 10 years or more.
- Don't want money for 5 years? (Interest rates are low) Municipal bonds pay back because they mature and don't lose value if good quality. Bond funds are built on the exact same thing but have no maturity date and devalue when interest rates go up.
- Target funds increase the percentage of bond funds with age, but unlike bonds, bond funds lose value. Instead, invest your 401k in no load mutual funds, 80% US index funds, and 20% global index funds.
How much of my budget can I afford to commit when buying a house?
- For my home, how much principle, interest, taxes, and insurance are acceptable for a healthy budget?
- I should not use more than 28 percent of my income on housing costs.
- How much should I target to spend?
- Live within my means / current income.
- Pay yourself first (PYF)
Accrue assets and eliminate liabilities.
- Retirement, savings and investments.
- What other savings should I have besides long term PYF money.
- Emergency fund of at least 3 to 6 months (9 months preferred). Consider how long it will take to find new sources of income when current sources run out.
- How can I free up cash in my budget?
Do it yourself (don't hire work out needlessly)
- Be committed to shop around
- Get fit for less (cancel gym memberships)
- Curb invisible spending
- Curb impulse buying
- Curb extras (movie theaters / eating out)
- Understand your payables and receivables.
- Be committed to shop around
If debt becomes a problem, many resources are available to help.
Here are some general principles for accumlation of wealth for longterm needs.
- Start early and make it a habit
- Asset accumulation (homes and other properties may serve a purpose while holding or gaining in value)
- Balance goals with needs
- Near retirement age: Catch up is doable but requires more effort
Here are some savings options to consider.
- 529 College Savings account
- Roth IRA / 401k (makes sense when my tax liability would be greater at retirement)
- IRA (option for transferring a 401k)
- Social security