How to manage your money

There are so many people eager to tell us how to do it.

But how many of them are right?

I recently recently reviewed a terrific new book, by a fellow New York writer, Helaine Olen, called “Pound Foolish: The Dark Side of the Personal Finance Industry” for The New York Times; here’s my full review.

She’s largely scathing of the Big Names who make a shitload of money telling us what to do with our own — (my finger slipped and typed “yelling.” That, too!)

English: CNBC’s “Mad Money with Jim Cramer” came to Tulane University’s Freeman School of Business Oct. 19, 2010 to broadcast in front of a live audience as part of the show’s “Back to School Tour.” (Photo credit: Wikipedia)

People like Jim Cramer, Suze Orman and Robert Kiyosaki.

In 2012, I wrote a personal finance column for five months, every week, aimed at Canadian readers. I learned that every personal finance author seems to have a different opinion:

Love ETFs! Hate ETFs! Bank six months’ savings! No, three! Mutual funds are great! No, never!

Personal finance is deeply personal, affected by family, culture, education, understanding, (two very different things!), greed, fear, hope, comfort, wishful thinking. And the larger economy. In the 1980s, I earned 18 percent on my Canada Savings Bonds. Not today!

At 19, I was handling my money alone. Like every other, it’s a skill best acquired through practice. I was living alone, earning income as a freelance writer and photographer, putting myself through university and living on a stipend of $350/month in Toronto, where my rent, for a tiny studio apartment in a lousy neighborhood, was $160 a month. That left me $190/month — or $2,280 for the year for everything else: dentist, haircuts, clothing/shoes, laundry, food, phone, answering service.

Oh, and tuition and books; University of Toronto then (mid-1970s) cost $660 a year.

My parents never helped me out financially — beyond the cost of my small, cheap first wedding. And no chance to go home and live free or cheaply for a while after the age of 19.

Mutual Funds for Dummies … U.S. Funds at War — Too simple? (Monday, June 4, 2012) …item 3.. Music to Help Study and Work – 26:39 minutes … (Photo credit: marsmet545)

Here are some of the many factors affecting our ability to earn, save and invest, in bold:

One reason we’ve been able to save a decent sum for retirement is having no children, an estimated annual cost, per child, of $10,000.

I chose a profession, journalism and publishing, that often pays crap. I did expect to have a steady income, and a staff job making $60-80-100,000 a year throughout my 30s, 40s and beyond. But my first New York magazine job, in 1990, paid $40,000 — $5,000 less than I’d earned at a  Montreal newspaper in 1988.

(Thank God for my pre-nuptial agreement, and alimony, both of which gave me time to get back on my feet and find a well-paid staff job.)

Yet three recessions since 1989 — with 24,000 journalists fired in 2008 — and ongoing upheaval in my industry have put paid to any notion of a steady, high income.

Once you’re earning beyond your basic needs, (and learn to keep your overhead low,) save like crazy and invest thoughtfully to keep your nest egg growing, no matter how slowly or how small.

Luckily, Jose’s staff newspaper job is steady, union-protected and a kind of work that does not damage his health or strength. Unlike many Americans, we’re extremely lucky he has a company pension to look forward to. He has also been responsible enough to make a will and designate me the beneficiary of all savings to protect me financially if he dies before I do. (I did this for him as well.) If you have assets, and dependents, protect them!

Do you play the CPW game? Cost per wearing? Better quality clothes and shoes, even pre-owned and repaired, typically last longer than cheap crap you have to keep replacing. (And earning more money to pay for!)

I bought an apartment in June 1989, a one-bedroom. I’m still here. I certainly didn’t plan that, and fear I’ll never live in a house. I’d kill for a fireplace and backyard! But that real estate decision, (a long term mortgage with a decent rate, and low maintenance costs) allowed me to do good work I enjoy, even freelance, living alone, and allowed me to save 15-20 percent of my income every year, even when it was laughably low.

Read this life-changing book, and decide what is truly worth most to you — owning even more/bigger/newer stuff or enjoying free time. You can’t ever buy more time!

We drive a used, paid-off car, with no plans to replace it any time soon. (See: low overhead.)

Managing your money intelligently and attentively is a wearying life-long game of Whack-a-Mole. Just when you think things are going smoothly, boom! The car or house needs a costly repair or your kid needs braces or you lose your job — or all three happen at once.

Here are a few tradeoffs that work for me:

I don’t write a lot of checks to charity — but donate my time and skills to several volunteer boards and organizations instead.

I chose not to continue my formal education beyond a B.A. — but I attended Canada’s top university and, ongoing, read widely, attend conferences and network assiduously to stay current in my industry. Until or unless I know the ROI on an advanced degree, I won’t assume any educational debt.

We drive a battered old car — but it takes us safely, affordably and comfortably 10 hours north to Canada to visit family and friends.

We live in a smaller space than I’d prefer, with no second bedroom for my office or a bed for guests — but it allows us the extra cash to travel, save and entertain.

Managing your money means making choices, every single day. It means determining what matters most to you, and examining — truthfully — why that choice matters right now more than anything. (Designer labels, a trip to Paris, a new pair of skis, a second bedroom, a fourth child, grad school….)

Do you manage your money well?

Where did you learn those skills?

Personal Finance (Photo credit: 401(K) 2013)

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When Do You Plan (Hope?) To Stop Working?

A Puritan clergyman. Do you really need to follow his lead? Image via Wikipedia

Now here’s a seriously depressing idea, working into your 80s.

A recent New York Times op-ed argues this is not only likely necessary for millions of Americans but — seriously? -- a terrific new development:

Retirement seems out of the question for increasing numbers of Americans who are saddled with debt and whose savings evaporated during the recent bust. Today’s workers should expect to labor longer, and companies should expect to employ more older workers.

The numbers supply a vivid picture of America’s graying work force. Between 2007 and 2010, the number of working Americans over 65 years old jumped 16 percent; the number of under-65’s in the labor force shrank. The trend started before the current downturn: the number of Americans over 65 in the labor force increased from 10.8 percent in 1985 to 12.1 percent in 1995 to 15.1 percent in 2005 to 17.4 percent in 2010. Until 2001, most workers age 65 and older had part-time jobs; since 2001, full-time work has been far more common….

Nearly 40 percent of 55- to 64-year-old Americans don’t have retirement accounts. Less than a quarter of this group owns a single stock or savings bond. The median net worth of 55- to 64-year-old Americans has declined during the last years and is now $254,000 (including housing), down from $273,000 just three years ago. American households saved less than 4 percent of their incomes for every year between 1999 and 2008; during this time, thrifty Germans were saving about one-tenth of their earnings. A nation that prefers spending to saving is going to find it difficult to enjoy a comfortable retirement.

Call me lazy, unmotivated, un-American. The thought of working into my 80s — instead of (I hope) being able to wind this thing down in the next decade or so, in my mid 60s — is appalling. I’ve been working for pay since I was 14 and started life-guarding.

Enough already!

Here’s a wild notion: Live low(er). Save more. Focus your goals not on the next set of paychecks, but when and how to extricate yourself from the hamster wheel of working for pay.

Read this powerful book on the “value” of income versus time.

Unlike some other nations, for whom the endless drama of “work-life balance” is less difficult to achieve (paid maternity leave for months, for example), Americans are heavily socialized and rewarded (no paid sick leave, short vacations) for working all the time.

Those who seriously value other non-work -related activities — quiet time alone, traveling, volunteer work, spending time with our loved ones or pets, learning or perfecting new skills for the pure pleasure of it — are derided as bohemians or, worse, hippies. Time spent un-tethered to commercial production is considered deeply suspicious.

Don’t you want to workworkworkworkworkwork?!

Don’t you want to keep buying more/bigger/faster/newer stuff?

Jose and I are fortunate, still working steadily in fields we enjoy, to be earning enough for our needs. We save and invest  and keep a careful eye on those funds. We have retirement savings, (40 percent of people in our age group have none),  and are also lucky enough to likely (just) to be able to collect Social Security payments and a company pension.

Nor do we have children, grandchildren or parents whose financial needs compete with ours, as so many people do.

But I disagree that:

1) paid work is the best use of our very limited time on this earth;

2) saving money is too hard.

I’ve had years, plural and sequential, in which all I was able to do was pay my bills and do almost nothing else, hanging onto my home (which I own) with a white-knuckled death grip. I know it’s terrifying to not have a lot of (or any) spare cash. I’ve dipped into my IRAs more than once.

But I have IRAs because I deliberately save money every year, usually 10-25% of my income. Anything less makes me feel ill. Nothing is worth not having savings accumulating. Nothing I could own, see, do, listen to, eat, hear, wear or otherwise consume, is worth that to me.

In lean years, I buy little, and it’s from consignment shops or only on sale. I use and wear items that are 10, 15 even 20 years old, well-cared for, that don’t look it. Our one car is 11 years old. We have every form of insurance possible to protect what we’ve worked hard to accumulate.

It’s a choice.

Do you want to keep working that long?

Will you have to?

What compromises are you willing, or able, to make to avoid this?

Nice Girls Finish Last — Financially

Image via Wikipedia

Here’s a cheery reminder from a Globe and Mail story — Canada’s national daily — that women are screwed financially in old age if they devote their midlife time and resources, as many now do, to caregiving.

I’ve spent much of my workdays, (which is my only source of income as a freelancer), on the phone and email so far this week dealing with social workers, nurses and lawyers to discuss what happens next to my mother (divorced, few friends) who lives a six-hour flight away in Canada and who is now in the hospital.

It remains to be determined whether she will be able to return to living alone in her home.

As her only child, I can’t turn to anyone but my partner for help. We’re lucky she gets as much free government-supplied help and health care as she already does.

Another friend my age, a woman who is also a writer, devotes many hours every week cooking and caring for her in-laws. Her two sons, looking for work, are back at home.

We’re both very fortunate in having husbands and partners who earn a decent wage and, while our labor is necessary to the family income, it is not the primary or exclusive one.

(This lowered family income does not come without conflict. I could certainly earn more and spend less if I ignored my mother’s complicated needs.)

Every hour and dollar spent, lovingly or not, devoted to the care and needs of others is wage-earning (or re-charging) time lost to oneself or one’s other current and future financial needs.

The less money women earn (and we out-live men, statistically which means we need to earn, save and invest even more than men while typically working fewer years and earning less), the poorer our old age will be.

Caregiving often means financial disaster for the person giving it.

To whom does your duty lie?

What if your parent(s) were neglectful or abusive? Made lousy choices financially and with their health, and now, as a result of those choices, need (your) help to survive?

Too many of us are struggling in a terrible economy, with little or no leeway for our own needs, now and in the future.

What’s the answer?

Turn your back on your aging parents and/or your needy adult children?

Just say no?

Related Articles

• April Rudin: Who Cares for the Caregivers? (huffingtonpost.com)
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