Apologies for the really long absence, but with the Easter holiday, going home to Wallkill several times in the past month, and a crazy period at work, I haven’t had much time to update anything worth substance.
In the past week, there have been several fantastic personal finance-related stories in both the New York Times and Wall Street Journal.
No, none of these have anything to do with income taxes. Do make sure you file by April 15th, though, or else the big bad taxman just may come after you.
If you have the time this weekend, definitely peruse these not-so-long stories. I’ll give a quick summary and my thoughts on each one after the jump.
Summary: Basically, the story talks about parents making more than $100,000 per year in salary that had been saving money to give their kids the quality of life they always wanted to give: good schools, opportunity to travel, etc. Well, with a lot of parents at these high-paying positions getting the heave-ho when the recession first hit, while many have already assured their retirement is OK, the money flowing to their children is coming to a screeching halt.
My Take: I don’t have children of my own, but I’d imagine I’d want them to have the best life possible when I do eventually have little Musicos. While it is noble to give them everything that you never had, I don’t necessarily believe throwing money at them is the best way to accomplish this. How did many of these parents get to where they were (six-figure jobs) before the recession? Hard work, probably took out loans, and had to sacrifice some things in the short term. Children should be doing the same thing. I firmly believe if you tell them they have to find a way to pay for their education and pocket money while they’re there – they will apply for scholarships, take out loans, make good grades, and find a part-time job. Not only will it save you from having to bankroll your kids, your kids will learn responsibility and the real world won’t hit them as hard when they graduate and have to start, well, funding their lives.
I know this because that’s how I learned. My parents didn’t bankroll my entire time at Seton Hall – they made a deal with me that they would pay the interest on my private loans while I was in school, but once I graduated the responsibility to pay for my education would be entirely mine. When times got really lean when I was at my last job, I knew I could draw upon the lessons I learned in budgeting as a poor college student to get me through. And I did.
Summary: This article talks about a successful entrepreneur that had a passion to do something entirely different than what his job at the time entailed. He worked to make it more than a passion, and when the time was right he stepped away from his conventional job and went out on his own. Friends thought he was crazy, but now he’s making a great living doing exactly what he wants to do.
My Take: I think that many of us would like to escape the corporate 9-to-5. The problem many of us have is that we’ve learned for so long that this is the life we’re supposed to live. Work for 40 years. Save in a 401(k). Have a home. Kids. Retire at 65, buy retirement home. All that stuff.
When something comes along that deviates one from that path, like leaving a job to do something that looks eminently risky and stupid, people recoil. The article says to stay away from those people and only keep like-minded individuals around you. Well, duh. The recession and massive layoff spree was an excuse for many people to do what they always wanted to do, because they lost their conventional jobs. Even if you didn’t, work on your passions on the side while you continue collecting paychecks. If you want to escape, make an escape plan. Save your money. Get ready for potentially lean times. But don’t lose that dream, and when you do ultimately strike out on your own and make it, remember who supported you and who didn’t.
Summary: This blog post highlights a couple of people that decided to pay a little extra principal on their student loans instead of paying minimums each month. Conventional wisdom tells you to pay off bad debt, but only pay minimums on good debt like student loans while you build up retirement savings and the like. These people didn’t, and they feel better about their lives.
My Take: Yes, education debt is good debt. But debt is debt. If you have already allocated for your regular savings goals, paid off all bad debt, and make minimum payments to your student loans, take any extra money you have and pay off extra principal. Even if it’s a few bucks here and there, pay it off as quickly as you can and get that load off of your back. The past few years have shown that gains in the stock market are not guaranteed. Don’t place all your bets in making extra money in the stock market when, really, it’s a crapshoot. Contribute what you think is right, but it’s never a bad idea to pay off debt. Your credit score improves, you become less of a slave to “the man”, and once it’s paid off you can take the money you had been paying and start using it for other goals. Paying off debt is the closest you’ll ever get to a sure thing. It’s never a bad idea. Ever.
Summary: This column looks at all of the objective numbers and statistics that technically point to a recovering economy. Yet, people are still talking in very glum terms about the recovery, some saying that we are still in a recession. The writer wonders why this is, and has his own conclusions definitely worth reading.
My Take: Technicalities or not, don’t allow politicians and think tanks dictate how you run your personal finances. Take a hard look at your assets, debts, and cash flow and make your own decisions. We could technically be out of a recession, but have a major correction in the stock market. Unemployment could take years to lower to a point that is acceptable to people. How long? Who knows?
Don’t let people who do not know you personally affect your personal finances. They’re yours. Plan according to your specific needs, and let the prognosticators pontificate and argue. You’ll be the one who eventually laughs all the way to the bank.