Wealth For Life Principles

These were found at Black Enterprise. I was reading an on-line article on how to survive on one income for a formerly 2-income household, although I'm not sure these 10 were part of that article.

1. I Will Live Within My Means
2. I Will Maximize My Income Potential Through Education and Training
3. I Will Effectively Manage My Budget, Credit, Debt, and Tax Obligations
4. I Will Save At Least 10% of My Income
5. I Will Use Homeownership as a Foundation For Building Wealth
6. I Will Devise An Investment Plan For My Retirement Needs And Childrens’ Education
7. I Will Ensure That My Entire Family Adheres To Sensible Money Management Principles
8. I Will Support the Creation and Growth of Minority-Owned Businesses
9. I Will Guarantee My Wealth Is Passed On To Future Generations Through Proper Insurance And Estate Planning
10. I Will Strengthen My Community Through Philanthropy.

I think it is an excellent list, although most of them we didn't follow (especially #8--even most hair products and hiphop music are white controlled). We were in our upper 40s by the time we even thought about saving for retirement (there weren't as many tax shelters back in the old days for the ordinary citizen). That's when I went back to work and joined a tax deferred savings plan. Before we became DINKS, everything that didn't go for the kids went to the house. We learned in our 30s about tithing our income (loosely #10), and I think that's a tremendous advantage to start at a young age. Just take it off the top, from the gross, not the net. I have my personal doubts that home ownership (#5) builds wealth. . . although its better than owning a boat. Owning income property and renting does create an investment, however. It's a huge hassle and one I wouldn't recommend for the faint of heart, but that crummy duplex we bought in 1962 put us on the road, not to wealth, but to better housing and income growth for us. For the first 25 years of our marriage our savings (#4) was "put and take" certainly nothing for the long run.

Home made soup

As soon as I read her blog about pea soup (and said yuk) I went to the kitchen and made a big pot of broccoli soup, one of my favorites. I didn't know e-Bay had blogs, but that's where I found these wonderful tips on making money, instead of spending money, with children. She's primarily a seller, not a blogger (once a month? what's that?)

I didn't breastfeed, or make my own baby food, but in the 1960s-1970s, we lived on one income, with one car, had play groups, washed diapers and did most of the other tips that this one-income family does. Snacks at our house were sliced vegetables or fruit. Oh, and we didn't have e-Bay in those days, but we had lots of fun at garage sales, which must be falling on hard times these days with everyone selling on-line. I could give the kids a quarter and they could "shop."

I think I saw her name at a discussion on coupons (I don't believe in them--in the long run they don't save you money because they are a marketing device and lull you into the something for nothing mentality).

The IRS gives wonderful tax incentives to those who have children. We got a child tax credit of $1000 this year, plus a tax deduction worth a fair amount of money by having an extra person in the family. For my family, if we can spend less than $1500 per year on our child, we are making money. Here's how to spend less than $1500. [Note: the family of the 1960s and 1970s got a much higher percentage of income personal deduction. I think it was around $500 per person in 1961 or about 10% of our income.]

1. Breastfeed.

2. Line dry cloth diapers and reusable baby wipes (cheap dishrags or cut-up old towels make great wipes). If you think you might like to use cloth diapers, think ahead. This summer, when you go to garage sales, ask proprietors of sales that have a lot of baby items if they have cloth diapers. Many people have at least a couple that they thought weren't worth putting out. These can be gotten for $.05-$.25 each, and are usually better quality than the Gerber 12-packs regular stores sell (for about $13). Plan on at least 30 diapers. Also, read prior post about how to save on costs of laundry, because this will be important to you if you use cloth diapers.

3. Never, ever buy prepared baby food. We have a pressure cooker in which we cooked veggies or fruit (just add a tiny bit of water to the bottom, and cook for a little while, and they'll be steamed). Run the stuff through the blender and put in freezer containers (or an ice cube tray, then bag the frozen food cubes). It's not difficult at all. If you don't have a pressure cooker, just use a regular pan; however, pressure cookers can be found at garage sales, and they save energy because stuff cooks a lot faster in them. Also, we found that our son would eat anything, even pureed asparagus, if we added applesauce to it.

4. Don't buy snacks, except Cheerios. Those Gerber snacks are overpriced, even with a good sale. A large box of Cheerios doesn't cost much, and they'll last a while; moreover, they are not yummy enough that parents or siblings will be tempted by them.

5. Skip preschool. Sure, kids need some socialization. Join a church mom's group which has kids activities (Coffee Break, MOPS, etc). If you can find a group or two that meets weekly, your kid will get socialization, and you might find some new friends, too. This could save $1000/year.

6. Quit your job if someone else in your family has an income, and save money on child care. To do this, you'll need to find other ways to save money. For wonderful ideas, read "The Tightwad Gazette", by Amy Dacyczyn (available at the library). Creative ways of hanging onto the money you already do have are as good as earning more.

7. Use the library instead of buying books.

8. Use the playground instead of Chuck E. Cheese.

9. Don't buy unnecessary things (such as shoes for babies who aren't walking yet, cute little impractical outfits, etc.).

10. Anticipate baby's needs. You know he'll eventually need size 10 shoes, so don't wait to buy them until he grows out of his size 9.5's. If you wait, you'll find yourself at Wal-mart paying $6, when a $.50 used pair would be far better quality. You know he'll eventually like to have Legos, so don't wait until Christmas to buy them new. Pick them up at the garage sale where they're $1. Kids don't care if stuff is used unless you condition them to care. (You condition them to care by acting like new stuff is superior. Ever say, "It's brand new!"? Phrases like that condition them to think of used items as inferior.)

11. Hit the end of church or school 2nd Best sales. Often they'll have a bag sale, where you can fill a bag with anything you want for $1-$4. This is your opportunity to stock up on whatever you need. If you need it right away, don't be too picky, but if it's something you'll need two years from now, only take the really good or hard-to-find stuff. These sales usually occur in the spring and fall, so watch the newspaper classifieds or Craigslist.

11. When we acquire something, we make it our goal to be able to sell the item for a profit when we're done with it. For instance, we found a very nice stroller free on trash day which we used for a few years, then sold it for $12 when we were finished with it. We bought a newer, but dirty, baby carrier for $.50, cleaned it up nicely and laundered the pad, and were able to sell it for $5 when we were done with it. We trash-picked a crib, gave it a paint-job, and sold it for $40 when we were finished with it. We have routinely sold toys, and even clothes, for a profit at our garage sales. I know there are those who say you shouldn't buy a used car seat, but talk to the person you're buying it from to see if it's been in an accident, call the manufacturer to see if it's been recalled, see if it's not too old, and use your common sense. And with cribs, you have to make sure a used one meets current safety standards. That information is easy enough to find online. But generally, used things should do just fine. I'll write an email in the spring about how to hold a successful garage sale.

12. Have patience. If we feel like we need something for our child, we try to wait. Needs have a way of either going away, or being met cheaply if only one has sufficient patience. Go to those garage sales (but stay on task, don't buy a bunch of junk that will just sit around your house), see if anyone will loan you what you need, keep yours eyes open for discards on trash day--you'll be surprised at what very nice things you can get free or for pocket change.

13. Because you'll essentially be earning money on this baby, check out savings accounts for kids. Often these are better deals than the adult ones (no fees or minimum balance), and the parents' names can be on the account. Just putting the kid's name on the account helps, even if only the adults use the account.

She has some wonderful tips; but isn't old enough or experienced enough to know this frugality will make no difference at all once her children get a hold of a credit card. And btw, don't ever put your child's savings account under her/his own name and social security number. They'll know more at 25 than 18.

Where did the money go?

The drop in gasoline prices since summer has amounted to about $2,000 per household in spendable income. That's why a "stimulus" check isn't going to dent the recession. Now, we didn't get that much--we have two cars but don't drive a lot, but it did halve what we spent on gasoline. I think our share went to our California relatives (bunches of them--probably more than any other state). According to USAToday here's were it went:

48% for groceries

42% to savings

30% to pay down credit card debt

10% for entertainment

9% for home improvements

I think that shows the American people can make good financial choices when the government gets out of the way. Even though money that goes into savings isn't technically out there circulating by buying "stuff," it is used by banks to offer credit to businesses that do employ people. If you remember, since Congress doesn't, this was the idea behind the huge September scare--TARP. The money was to be used for banks to get the economy going. Instead, it has morphed into PARP POOP PORK. This is why we're getting the return of the Hoover-FDR economic boondoggle of federal fiddling (1929-1943), only this time it will be the Bush-Obama Boondoggle. Let's hope it doesn't last over a decade this time.

3915

The retirement experts

Jonathon Clements reports that "Experts offer all kinds of advice. Mostly it's ignored." [WSJ 6-20-07] I know how you feel, Mr. Clements! I give such excellent advice, yet everyone is hell bent on making their own mistakes!

Actually, we did pretty much what he suggests the experts tell you to do in planning retirement, except the one about saving diligently from a young age. All experts agree on that one. We didn't save a dime toward retirement until our kids were gone from home. But since I was 46, that gave me some time before retirement. He suggests three things experts advise that most workers ignore (I didn't, but I also didn't know they agree on these three).

1) Rereading an old 1999 letter to my children I refreshed my memory that I had notified both my OSUL and Prior Health Library bosses that I would retire in the fall of 2000--about a year in advance. (I don't think that's such a great idea, but you can squirrel a date away in your head. You are a lame duck from that time forward if you let your employer know.)

2) From 1986, when I went back to work full time, through 2000 I put the maximum allowed in my 403-b tax shelter, and fortunately, when I took out my retirement money after leaving to have a family, I had tucked it away with interest so I could buy back my retirement time (it would not have grown if left in the system because I wasn't vested).

3) When my stocks began faltering in 2000 (before Bush, BTW, if that economic myth is important to you), I changed my investment mix, from aggressive to low risk/moderate risk. Apparently the experts suggest retirees need to do this, but it was really instinctive for this lily-livered investor.

However, I could have never guessed ahead of time how expensive retirement would be--actually I'm still surprised. Our "retirement condo" is bigger than the house we lived in for 34 years. Need a bathroom? I've got one where I hang our winter clothes in the shower stall. Travel? For years we went nowhere; now we get 10 brochures a week from travel companies.

I thought our second home on Lake Erie, purchased in 1988 and paid for since 1998, would be a nest egg because home values absolutely soared in Lakeside--moreso than in Columbus. Of course, we all know what's been happening in the real estate market, especially vacation home areas.

I couldn't have imagined what would happen to the cost of health care. My pension plan spent like crazy in the 90s on real estate and fancy offices for its employees, and then had to do some serious cut backs on health benefits for retirees in the 21st century. For some reason, those boomer staff people had never heard of a bust and were way overinvested in high tech. And we're healthy!

And cable. Our cable bill is higher than our gasoline bill for 2 cars--and we lived for the first 26 years of our marriage perfectly happy with 3 broadcast and 1 public channel, and no computer broadband. In order to get our phone service deal and a digital box, we just added about 50 new channels. More ways to sleep in front of the TV.

And taxes! OMG! Was I stupid to think that once we were on pensions the government wouldn't want so much of our money? Apparently. Do you know if every American had to write a check to the government each April instead of having taxes sneakily withheld by their employer, we'd have a tax revolution immediately? We pay quarterly, and even that is a huge reminder of how our government mismanages our money just because we aren't paying attention.

Clements says the most important rule to remember is save diligently. Everyone agrees on that.