The Money Game

I’ve found one of the biggest challenges facing my clients, my parents, my in-laws (and truthfully, my wife and I) during the holiday season is limiting what is spent on children.  Here we are, 9 days away from Santa squeezing himself down my chimney, and my kids have already opened no less than 5 gifts each from neighbors, relatives, and schoolmates. 

After the kids had opened the third gift, I decided to start keeping track of what the probable retail value of each gift was so that I’d have a final total of money spent on our little rugrats over the holidays.  My total so far is approximately $75 PER KID!  One of the toys is broken already.  One gift, a stuffed animal, slept with my daughter for about three nights and then found his way to the toyroom.  It will most likely never be seen again.

All this begs the question: How do we keep the largesse in check?  I’ve tried talking to the grandparents — and admittedly, they’re picking up slowly on our cue to spend less on gifts and focus instead on money for college.  After all, my 2 and 4 year old won’t remember how many $15 stuffed animals were bought for them.  But they will remember how generous Grandma was when they cash the 36 savings bonds she gave them over 18 years to help pay for college.  Thanks Grandma C!

There are two bottom lines here and one of them is yours.  If you make Christmas an all-out spending spree on your kids, they’ll come to expect it.  And there is a direct proportion to the age of your kids and the cost of their Christmas list.  A seven year old I know is getting a $200 Nano from Santa.  Need I say more? 

The other bottom line is your kids are picking up on money cues whether you’re consciously providing them or not.  Make sure you make Christmas about something more than…how full is my stocking?

I have to laugh at the VISA check card commercial that shows a circus of people going through a toy store juggling toys, paying for their purchases with one swipe, and leaving with smiling faces and bulging shopping bags.  The woman that gets out the checkbook slows the process down so much that everyone drops the toys they’ve been juggling.  What’s the message: if you’re not using your debit or credit card, you’re a bane to shoppers everywhere?!

Give me a big fat break, purveyors of plastic.  I get the whole suspended disbelief notion, but seriously, half of the retail clerks I encountered over the Black Friday weekend would rather have been sipping Hee Haw and gnoshing on Doritos.  They couldn’t care less what I use to buy gifts for my friends and family.  For that matter, neither do any of the other shoppers out there.  They were more concerned about why the $7 CD player sold out so fast.  And why half of the things in the ad weren’t even available.

We get it.  It’s easy to use your plastic devil-inspired device to mindlessly spend money.  Stop beating us over the head with it.

I still like CASH.  I like cold hard cash.  I like cash machines and trees that grow cash.  I like Johnny Cash.
Cash is indeed still king.  Long live the king.

I even contemplated heading over to CompUSA between 9pm and midnight the night before to pick up the same television for $599.  I figured the $50 I’d spend was worth not having to fight the crowds and wait in the cold.

In the end, sleep won out.  So, my daughter Piper and I got dressed and out the door about 8:30 am on Friday.  Our first stop was Target — “Those TV’s were sold out in 3 minutes” someone told me.  Next stop was Hy-Vee for breakfast.  Then on to K-Mart to check on a couple of their “deals” before heading home.

In the end, I bought only food on Black Friday.  I suppose I’ll have to contribute to the economy in a different way this weekend.

Happy Holidays!

Here is the short and sweet:  35% of your credit score is entirely about your payment history.  Do you always pay your bills on time?  If not, start.  30% of your score is affected by the amounts you owe relative to the high balances.  As a general rule of thumb, you never want your credit card balances to be over 50% of what the high limit is.  15% of your score is the length of your credit history.  I could make a very valid argument that every college student should have a credit card, if for nothing else than to build a credit history.  10% of your score is how much new credit you have.  Are you one of those Christmas shoppers that applies for every single charge card out there to save 10%?  If so, stop it.  It’s negatively affecting your score.  Last, but not least, 10% of your score is the types of credit used.  Ideally, you should have a fairly decent mix of revolving credit (credit and charge cards) and installment loans (car loans) and a mortgage, if you are so inclined.  Don’t go overboard on tradelines…2-3 credit cards is sufficient.  And if you’re carrying balances on them, please call me at my office so I can show you how to pay them off quickly.  Please.  515-223-2343 ext. 202.

How could your score cost you thousands?  I’m glad you asked.

Every little bit of financing you do will be held up to the light of your credit score.  How high or low it is will determine how high or low your interest might be on a particular purchase.  Most car loans these days are around 6.25%, yet I’ve seen them as high as 17% for people with less than stellar credit.  Same goes with mortgages.  And your car insurance premiums!  Suffice it to say it’s an inverse relationship — the lower your credit, the higher you’ll pay on almost every purchase imaginable.

You can check your credit report for free (to get the score will cost you $5 or so) at www.annualcreditreports.com. 

Spend wisely and prosper, fellow Frugalites.

As part of my mortgage company’s best practices, we will go over our clients credit reports and ALL of their bills with them and see if there are any gigantic discrepancies that might need to be taken care of.  Usually it’s something small that can be easily cleared up like medical collections or an unpaid sprint pcs bill. 

Sometimes, it’s something much bigger that gets me so fired up I can’t see straight.  Read on and prepare to be enraged.

A tradeline had shown up on my client’s credit report under the name of Aqua Finance, Inc. in the amount of $7,051.  I assumed they’d purchased a hot tub or a pool and it probably was an installment loan of some kind.  When my clients came into the office, they were complaining about a bill that they paid every month but the balance due never seemed to go down.  So I asked what it was for –

“Right before we moved into the house, we were approached by a guy at Home Depot (not an employee) about our new house.  He asked if we’d had the water checked because homes built in those years were known for corroded pipes and bad water.  He was a little pushy, so we agreed to have him over and it felt like he wouldn’t leave unless we bought the water filtration system and softener he was selling.” 

The statement that this couple was receiving read like a credit card statement.  At the bottom, it had the Annual Percentage Rate and a minimum payment warning that read: Paying only the minimum payment will result in higher interest charges and take longer to pay back the total balance.  As an example, a $1,000 balance at 17.99% interest will take 93 months to payoff.

93 MONTHS!!!!  That’s only for $1,000 balance — we’re talking a $7,000 balance!! (Here’s where I get really P.O.’d)

The jerk who sold them this water softener made the statement that, “you’ll have this paid off in no time.”  I have a fairly long-term view on things, but “no time” is not how I’d describe 54 years and 4 months!!!!  That’s how long it will take them to pay off this stupid water softener only paying the minimum payment. 

Oh, and the $7,051 they “paid” for the thing will actually end up being over $91,000. 

Expect to hear about a class action lawsuit against these guys.  Led by me.  The Attorney General is already investigating and I hope to find more people swindled by these con-artists.  They prey on the uninformed, lie through their teeth, and have the audacity to call frequently and ask for referrals.  I hope they call me…

Oh, and one more thing — Aqua Finance has a tag line: “It’s what we do.”  I think they mean screw people.

I was helping a friend of mine clear up some issues on her credit report and one of her payments took me by surprise.  This friend of mine had a $700 car payment on a 72 month note.  This payment suggested she could be buying the equivalent of a new Mercedez or a BMW X5.  As it turned out, she purchased a small, American made SUV from the now-defunct car dealership in Des Moines.  Using the car loan calculator on Bankrate.com, I calculated that her interest rate was above 17% on the car loan.  (Most credit unions are lending money on cars at 6.25% right now!)  Needless to say, I suggested she RUN to the nearest credit union and get that loan refinanced.

So this is what really chaps my hide — who is monitoring these snakes that are charging innocent people with decent credit OUTRAGEOUS interest rates on car purchases?  This P.O.S. probably made $4-5,000 financing a $30,000 car.  I’m on a mission now.  I’m on a mission to help educate people how to make sure they are getting the best deal on whatever they’re buying, be it a house, a car, a computer, whatever! 

If you have any stories pertaining to this, let me know.  I’d love to have an arsenal to go at the car industry, or any industry for that matter!  I’m also more than willing to help individuals get their financial lives on track by examining their credit report and clearing up anything that shouldn’t be there.  Just drop me a line at: adam@nationalfinancialeducators.com.

Long live free speech.

I know this is going to sound “Oprahish”, but I’ve been doing a gratitude journal the past several weeks right before I go to bed.  It’s amazing after a day of stress, scattered thoughts, and way too many to do’s the kind of clarity I get by doing the journal.  I find myself drifting to sleep easier after writing down a page full of things I’m grateful for.  Maybe it’s because the gratitude drowns out the mental noise of “stuffitis”.

Here is what I’m grateful for today: IMacs, friends, multi-tasking, hammocks, my kids in hammocks, whoever invented the Burley, tickle-mania, Scooby Snacks, 3-D Ultrasounds, thinking prosperously, living within my means, Leinenkugel’s Honey Weiss, BLT’s, fresh cantaloupe, granola bars, and my incredible wife and two (soon to be three) kids.  Yikes.

Good night….

I was listening to a recording today in the car from a guy named Doug Andrew.  He wrote a best-selling book called Missed Fortune 101.  Not exactly a pleasurable Saturday morning read, but if you’re looking for a completely new way of looking at where fortune is hidden, this guy has it.

The gyst of the book is that by unlocking the equity in our homes, leveraging that money by investing in conservative vehicles (fixed income life insurance contracts, municipal bonds, etc.), we will accelerate our retirement years and have money that grows and lives in perpetuity.

While all of that sounds hunky dory (remember when people used to say hunky dory?), the most important snippet of information I gleaned from his recording was: most people have a very short term mindset when it comes to investing for the future.  If we all focused on getting rich slow, and using ALL of our unknown resources to do so, we’d actually retire far wealthier far sooner than previously thought.

Now this is completely off the subject and I should probably save for another post, but I’m going to blow my blogwad anyway — I shopped at Gordman’s the other day for a watch that my wife wanted.  It wasn’t a fancy, over-the-top watch, but not a bluelight special either.  It was an Anne-Klein watch that originally retailed for $60.00.  First, it was on sale for $24.  Then, my wife sent me in to buy it on a day when there was 30% off everything in the store.  Last, I had a 20% off coupon from the paper.  Final cost: $13.44.  The clerk gave me a survey number to fill out which I just did and I got another 20% off coupon.  I may just go and buy myself a $13 watch.

There was a sign in front of a building today on my way home.  It said: The best things in life aren’t things. 

I’m okay spending $13 on a watch because the $100 I didn’t spend went into a long-term investment for the future.  And someday, I may just live on the edge and forego the coupon.

I had a visit with The Blog Doctor the other day.  He said I wasn’t blogging enough — “but, what do I blog about on a daily basis?” I asked him. 

“Blog about life and what happens to you everyday” was his reply.

 So here goes, Mike…

I had a conversation with my sister last night.  She told me she just bought a new Chrysler Pacifica and it got me thinking about our own money programming and how it comes to be. 

Now, my sister and I grew up in the same house, had the same parents, but have drastically different money programming.  It would never occur to me to go buy a new car because I could afford the payments.  In fact, I haven’t had a car payment in 5 years.   To that end, I asked her why she decided to get a new car.  Her answer was the 8 year old car she had (with 45,000 miles on it) was starting to show it’s age and they were going to have to put some money in it. 

I’m not passing judgment at all as to whether or not she should’ve gotten a new car, but I do maintain that we all have a certain amount of programming when it comes to money.  Some of us think in terms of the here and now — I’ve got the money here, I’ll spend it now.  Some of us think in terms of saving for a later use — save now to spend later.  And still others (I lump myself in this category), think of money in terms of what ASSETS it can ACQUIRE so that the flow of money from that asset is continuous. 

More than likely, your parents, friends, spouse, teachers, society, etc. have all contributed to your current money program.  Examine it, break it down, and see if you are completely in alignment with your current money program.  It may be time for a little reprogramming!

If you’re anyone who’s anyone, you’ll be at the big dream gathering being held tonight at 1430 Locust in the McClellan Marketing Group building hosted by the good folks of doyouq.com, akickinthepants.com, and bigdreamgathering.com!!

It’s for dreamers, for doers, and for people looking for a little awakening to their dreams!  No sales pitch, no cost, just come and hang out with like-minded people looking to expand the reach of their “freakishly cool” dreams.

Rock on, Mitch Matthews.