How to Go Broke: a dozen things you can do to screw up your finances

Posted on December 7, 2011December 9, 2011 by Danielle

English: Wine Cellar in the Jesus College, Oxford.

Image via Wikipedia

Sure you know all this stuff. Me, too. Or do we?

1. Keep upgrading your house until it’s the maximum (or more) that you can pay for. If we ever needed proof that a house is not really an investment, the current market should have done it. Really, a house is more like a collectable—hard to sell (even in more flush times, it was a lot easier to move a stock), uncertain and inefficient market, and subject to complicated tax consequences. At least with collectables you can give them away to your kids. Also, the bigger the house, the bigger the maintenance and the more likely you are to lay out more money to keep up with it. And then there’s the neighbors—you’ll be keeping up with them, too.

2. Do a big move, upgrade, or addition to your house while your kids are in high school. You’ll soon find yourself with a big, empty house. Or maybe the kids will move back in. I’m not sure which is worse.

3. Take out a second mortgage and go spend it. Maybe, just maybe I’m okay with these loans if they’re actually spent on something that adds value, like starting a (well thought through) business or improving the property. Taking a European vacation, not so much.

4. Take out a big college loan. If it’s more than you’ll earn your first year out, it’s too big. At least you’ll remember your college years forever. Every time you write that check.

5. Don’t bother reading the contract. Don’t sign on the dotted line until you can explain to me or your ten year old how much it’s going to cost you.

6. Buy an investment you don’t understand. See #5—if you can’t explain how you’re going to make money on it, don’t buy it.

7. Get greedy. Bernie Madoff wouldn’t have had so many clients if he’d told the truth. They got returns none of their friends could claim, and paid a lot for bragging rights at cocktail parties. If it sounds too good to be true, well, duh…

8. Believe that “my broker is a nice guy.” Another duh—do you think he’d sell anything if he had fangs and a forked tail? I’m certainly not against people making money, but your stockbroker has no legal obligation to keep your best interests foremost. Sometimes the correct financial advice is the hardest to hear, and people who are the most pleasant don’t necessarily tell the truth. Friends of Bernie, anyone?

9. Put your kids first. I don’t mean emotionally, here, but paying for college while not saving for retirement, or habitually bankrolling adult children, or showering young children with material goods—well, don’t do it. You’ll be broke and a burden, and that’s no favor to anyone.

10. Cultivate expensive tastes and hobbies. Buy a boat, develop a wine cellar, develop a fondness for skiing when you live in the South or Midwest, stay at the best hotels—all great stuff. Expensive stuff. Black money sucking holes kinda stuff. If you’re wealthy enough that it’s chump change, fine. Otherwise, as they say in Texas, big hat, no cattle.

11. Don’t give to charity. The world is a terrible place and everything’s in disarray. Don’t try to change that, okay? Much more fun to complain. And that’s one way to economize, right?

12. Spend what you make. Or more. I’m not even going to go there.

Maybe that’s enough negativity for one week. Next week I’ll go with the top things you can do to improve your wealth picture.

Small business success: answer that phone

Posted on November 9, 2011November 9, 2011 by Danielle

Image by plenty.r. via Flickr

This is a little off the financial planning rails today, but it’s a rant about something that certainly can have long term financial effects: the art of the callback. I’m hoping someone can clue me in on a phenomenon I’m seeing lately.

I go to more networking events than my diet can really handle, and I’m a little embarrassed to say I enjoy them. Woohoo I get to get away from the giant computer screen, the blizzard of paperwork, the dog that has to go out every time the phone rings, and the cat that just recently dropped a dead mouse on my foot while I was talking to a client. I have an excuse to cut the tags off the good clothes. I talk to adults without having to pull out a calculator. There’s good martinis. I enthusiastically collect cards of people who sound like they might offer some service that would benefit my clients.

I call them. Lately, I don’t hear back from a significant portion of them. Why? Well, maybe they don’t need business—but then why are they going to networking events? They don’t like me? Generally, I haven’t talked to them long enough for them to know anything about me or much about my business. I smell weird and my mom dresses me funny? Don’t think so, and mom is long gone. They’re lazy, neglectful and disorganized? Um…

If you’re in business, you know how people hound the media to get press attention? Well, I left a message for one guy with an offer to quote him in a national magazine article I was writing. Never heard back. When I saw him again, I asked. Answer: Um, I was a little busy that day. Yeah, well what about THAT WEEK? Bet not. Another example: called a mortgage lender who was fawning over a stock broker at the meeting we both attended. Good luck on that one, as that brokerage house has its own mortgage division. I had a quick question for an extremely well qualified client, the kind that supposedly they can’t find any more. Never heard back. Guess where that biz card is?

It’s a pretty good rule that if you’re leading off with “Um…”, you’ve probably just lost some business. So, my great insight here is one I’ve been pounding into my daughter for years—a lot of success in life is just showing up. And trying to treat people as you would like to be treated. There’s a new concept, no?

If you ever call or email and don’t hear back from me in 24 hours, you’ll know I’m in the hospital, dead, or out of the country (in which case my message will say so). Really, most of us are on the internet all day long. Tear yourself away from Facebook for 2 minutes and call back!

Why NaNoWriMo is good for your finances

Posted on November 2, 2011November 2, 2011 by Danielle

Readers of this blog know that I like the idea of side gigs. So what’s a side gig on which you can spend a ton of time, worry about endlessly, produce no money at all, and feel enormously satisfied?

NaNoWriMo.

What’s that?

NaNoWriMo is National Novel Writing Month. If you participate you will finally do what you’ve been huffing and blowing about for years—writing your novel. In the 30 days of November (quick! You’re 1,667 words behind already) you must write 50,000 words of a novel. As NaNos are fond of saying, that doesn’t mean 50,000 GOOD words, just 50,000 words. That follow in a line. With some presumed content. That’s 1,667 words per day, but once you’ve done NaNoWriMo, you make every effort to get ahead at the beginning—write more on the first weekend and you’ll have a lot happier Thanksgiving.

But this blog is supposed to be about financial issues, so I’m going to give a few financial tips I’ve learned by winning NaNoWriMo (meaning, in 2009 I actually did write a 50,000 word novel. And yes, I’m going to try this year). You don’t have to be a writer or other kind of dreamer to benefit:

Getting a head start provides insurance against un-looked-for disasters. With your money or your month, things don’t always go as planned. Start saving early in life is the same as building an early word count—even if there’s an interruption later, you’ve got SOMETHING.
Even if it’s late, you can do more than you thought possible. In 2009, I wrote nearly 10,000 words in 3 days in order to finish. I’ve never written that much before or since, and I spent years as a freelance writer. If you superglue your butt to a chair, you can make a lot of progress. If you put pedal to the metal on saving and cutting expenses, you can make a real difference to your future, no matter when you start.
Done is better than perfect. Honestly, I’d been talking about that novel for years. I wrote it. It’s not that great, but at least I have something to work with now. You might not have saved “enough” for retirement, but anything is better than nothing.No matter what you do, effort will give you more results than not trying at all.
Sometimes you have to make really hard choices to get what you want. Don’t even ask how high the dishes were stacked in the sink by the end of November. Unfortunately the resident teen was also doing NaNo and couldn’t be press-ganged into service, either. Belt-tightening for you might be selling your junk on eBay, re-evaluating insurance, or getting rid of a few cars. Plenty of scratch? Nice, but then maybe you ought to consider contributing to a worthwhile cause or charity.
It’s easier to make hard choices if there’s an end in sight, and a reward. NaNo is a month long. Set yourself a financial goal, with a deadline and a measurable outcome, then do everything possible to get there. Make up your mind and you’ll find a way.
Get moral support. Writing a novel in a month seems absolutely impossible the first time you hear about NaNoWriMo. But the strength of the program is the events that are scheduled (kick off parties, write-ins, online buddies) that keep you uplifted and let you talk to people that have actually done it before. Shock—they’re probably no more talented than you are. Similarly, seek support for your financial goals. Meet with an accountability partner, join an investment club, commit to one hour per day of reading about financial issues, subscribe to and READ a personal financial magazine, participate in online communities and blogs.
Get up early.

Especially if you want something better than worms.