Dear Santa Claus,

First, let me say that I’m a big fan. Ever since seeing Tim Allen and Martin Short duel for your position, I’ve felt a renewed vigor and belief. So I thought I would drop you a line this year and make a few requests.

1) A fully funded 401(k)

I’ve tried to be a good boy. Before my company was spun off in the 2nd quarter, I diligently contributed to the company 401(k), despite the terrible array of investment options. But since the spin-off, we haven’t had a 401(k). In fact, Prudential is now sending me letters telling me to roll my 401(k) over to someone else. Apparently, I don’t have enough money for them. So I would have kept contributing if I could have. So will you please fully fund my 401(k) please? Don’t worry about the company match.

2) A Roth IRA for the wife

Once our 401(k) disappeared, I started making contributions to my Roth IRA. Unfortunately, my wife still does not have a Roth IRA. Having a shiny new Roth IRA at, let’s say, Vanguard with a couple of index funds would be great. Just something to get her going. She’s running her own business though, so maybe a SIMPLE IRA would be better. I’ll let you decide. I mean, you seem like you are pretty financially savvy. You’d have to be to finance the production of million of toys each year.

3) Better health insurance

Since I’m talking about my job, our health insurance isn’t that great either. I know that I should just be grateful that we have health insurance, but can you really call a $5000 deductible insurance? For example, my wife has scoliosis and had started going to the chiropractor regularly since the pain was increasing. She was just making progress when I had to tell her that she needed to stop going for at least a couple of months. We simply have no way of paying for her to go twice a week. I’m willing to do my part to earn some extra money, but a better health insurance plan would go a long way.

4) An emergency fund

As I’m sure you are aware, I’m currently studying to take the GMAT this Saturday. Realizing that I needed some extra help, I signed up for the Kaplan Advanced GMAT prep course, which I highly recommend to any of the elves looking to change careers. Paying for the GMAT, the prep course, two new tires, and medical bills has depleted our emergency fund. So maybe I’m pushing my luck, but a replenished emergency fund would make sleeping at night easier. Think of the children.

5) Dems to sign-off on tax cuts

I was planning to ask for extended tax cuts as well, but it seems that President Obama and the GOP have decided to give us an early Christmas present. I was just hoping for the extension, so the Social Security tax cut, the equivalent of a 2% pay raise, was a very pleasant surprise. Though, the Democrats need some persuading. So maybe you can threaten them with some coal.

6) Maybe an up-swing in the housing market

Last, but certainly not least, is there anything you can do about this housing market? Our home is two years old and we are underwater. Hoping that we were just a little underwater, we had an appraisal to find out what our home is currently worth. I think I was better off not knowing. What’s really frustrating is that we are responsible and our irresponsible neighbors who bought a home they couldn’t afford have caused home prices to drop. So maybe you could just leave Dave Ramsey’s Financial Peace University under everyone’s Christmas tree this year.

As you can see, we have a number of financial goals and challenges that we are facing as 2011 draws near. And although I’m gainfully employed, my pay just doesn’t quite cut the mustard.

Anywho, I’ve rambled enough.

Thanks Kris (can I call you Kris?)

Adam

P.S. A couple shares of Berkshire Hathaway would be cool too, but whatever.

I know that the title of this post is somewhat morbid and not many people want to talk about death. However, we are all going to pass on at some point and just like anything else in life, we need to be financially prepared.

Unfortunately, too many people don’t take the necessary steps to financially prepare for death. Often, the result is a mess for your family. To help you know what to do and how to get it done, I’ve created a simple checklist with information and resources.

Step 1: Get Life Insurance

By the age of 25, you should have life insurance. You probably have either debt or other financial responsibilities by this age. And if you don’t, then you soon will and term life insurance at this age is cheap.

• Sufficient to pay all obligations at time of death – This calculation can be a little tricky since you don’t know when you will pass away or under what circumstances. However, you should leave at least enough to cover final expenses (everything related to the funeral and burial), a sum for possible medical expenses, and any debt obligations that you expect to have during the term of the policy. For example, I have 20 year term. So I’ve left enough to pay off our mortgage the day I die, the funeral, and possible medical expenses.
• Cover the long term economic loss to your family – If you are an income earner, then your family is suddenly facing what can be a very large economic challenge. So using a time value of money calculator, figure out how much money your family needs today to be the equivalent of what you would have earned during your life. Also, make sure that you leave instructions on how this money should be invested and distributed in order to last a life time (do this in your will or estate planning).
• Transition period expenses – Your spouse may have the desire or need to go back to school in order to gain skills relevant to today’s job market. So calculate and leave enough money to cover these transition period expenses.
• Long term goals for your children – Do you have any long term goals for your children like a college degree? Hopefully, you are already using a 529b Account to invest money on a set schedule for your children’s education. If you are, then you have probably calculated how much your children will need in that account come college time. Again, use a time value of money calculator to determine how much you would need to put in that account today in order to have it fully funded when they are 18 and ready to go to college.
• Convertible to permanent life insurance – Better known as whole life or universal life insurance, permanent life insurance does not have an expiration as long as you keep paying. You may want to convert part or all of your policy at some time in the future to permanent life insurance. So check to see if your provider offers this capability. It can be a nice option.
• Specify a primary AND contingent beneficiary – A lot of people only specify a primary beneficiary, but if you outlive the primary beneficiary, then you need to have a secondary or contingent beneficiary designated.

Step 2: Create a Will

As Dave Ramsey says, “Not leaving a will when you die is just rude.” And it is. Your family is facing a time of grief and mourning. If they are faced with haggling over your belongings, then fighting is bound to happen. Make sure that your will covers at a minimum the following topics.

• Designate an executor – The executor is responsible for executing your will. Or in other words, the executor resolves any claims against your estate (i.e. your stuff), carries out any special wishes left in your will, and distributes your property.  You will want to select someone who you have great confidence in. Someone that is very trustworthy. This person will gain control of your belongings and can steal them if he or she do desires. So be careful. Also, I recommend not telling anyone, including this person, who the executor is. That way, no one is offended if you later change the executor. Last, specify a second and third executor in case someone does not want the job.
• Who gets what – Generally, you will leave 100% to your spouse. Though make sure to specify a secondary beneficiary after your spouse. If you have children, then this would be your children.
• Custody of your children – Your spouse should be first on the list, then a second option in case you and your spouse are in a common disaster, and then a third option. Again, I recommend that you do not tell the second or third option that you have them in your will. That way, if you later change who is listed, then no one is offended that they were removed.
• How your children are to receive their inheritance – If your children are minors, then you should not simply leave them their inheritance. You want to create a trust or give control to a custodian (ideally the persons who you are leaving your children to) until your children meet a certain criteria. For example, we specified that our children do not receive full control of their inheritance until they are 25 or earn a college degree, whichever comes first.
• Do not create a will when you are mad – Unfortunately, I’ve seen this happen. Recently, I saw great heartache and resentment created due to a will that was written eight years before the person passed away in a moment of great anger. That will has soured many family relationships and the damage is near irreparable. So if you are angry, then wait until you calm down to create your will. And just don’t be vengeful. I promise, you won’t have the last laugh.
• Adhere to the laws of your state – In order for a last will and testament to be valid, then there are certain sections or statements that have to be made. You will want to make sure that they are included. Wikipedia offers a starting point with its list of Requirements for Creation. The best way to ensure that you have complied with the law is to use a lawyer or LegalZoom.com. My wife and I used LegalZoom and highly recommend it. Actually, here’s my review of writing a will using LegalZoom.

*Side Note – Make sure that your will and your spouse’s will match in areas like custody of the children and second/third executor.

Step 3: Create a Living Will and Medical Power of Attorney

A Living Will, or Advance Health Care Directive, gives instructions on what you want to happen if you are left incapable of making decisions for yourself. For example, if you were in an accident that leaves you in a vegetative state, then you can leave directions to pull the plug and cease life sustaining treatment. Your Living Will is important because decisions like ceasing treatment may be too difficult for loved ones to make.

A Medical Power of Attorney goes along with the Living Will in that it gives someone the legal right to make medical decisions on your behalf if you are incapable. Basically, you are making it clear to doctors and anyone else who they should listen to. I know that my mother would be very upset if I were in a terrible accident and in a coma. She may want to make decisions on my behalf. However, my wife is the one who has that responsibility. The Medical Power of Attorney makes that clear.

Step 4: Plan Your Funeral

This is really a last step and may be too awkward for some people. However, think about it for a moment. You’ve just passed away and your family is just trying to deal with the loss. It can be very difficult to have to sit down and plan a funeral program. So ease their burden and do it for them in advance. This also helps ensure that the tone and feeling that you want at your funeral is represented.

Bonus Step: Get Life Insurance for Your Children

No one wants to fathom for a moment that you may outlive your child. I certainly don’t want to think about. However, the unfortunate happens from time to time.  Which is why this Bonus Step is actually very crucial. So when you setup your own policy either add a rider to your policy or get a policy for each child.

Let me give a little bit of advice on the amount. Many insurance policy riders are for about $10,000 for children. I submit that that amount may be insufficient. Let me illustrate an often overlooked “financial cost” with an actual example.

Several years ago, I listened to a man describe the days and weeks after his teenage son passed away. He was a sales rep for a company in Phoenix, AZ. He said that in the weeks subsequent to his son’s passing, he found that there were days when he arrived at work that he simply turned his chair towards the window, looked out over the city, and sat there lost in thought and grief, incapable of working for hours. This man’s family’s income was dependent on him actively selling. Fortunately, they had a life insurance policy for their son and the lost income from those days of grief were paid for or made-up by the life insurance policy.

So, make sure that you have enough coverage on a child to (1) pay for all final expenses and outstanding medical bills and (2) give you time to grieve.

Conclusion

Preparing for your own passing can be one of the most important things you ever do in your life. Make this your responsibility and don’t put it off onto your family.

Any other suggestions for financially preparing for the inevitable? For more information on financial planning topics, sign up for our RSS Feed and receive new posts directly in your favorite RSS reader.

Let me start by saying, I like Dave Ramsey. I am a Dave Ramsey fan. I’ve completed his Financial Peace University. I am prepared to “Live like no one else, so I can LIVE like no one else.” But I have to disagree with him on at least one account – no credit cards at all.

I advocate that you don’t use credit cards. My wife and I switched from putting everything on a credit card and paying the balance off each month to using a debit card. We closed 14 different credit and department store cards. It was one of the best financial decisions we’ve ever made. However, I still have one open credit card and one open department store card.

I have been asked if and when using credit cards makes sense. As a general rule, I tell people to never use a credit card. Mainly because many people don’t have sufficient self-control to manage credit cards. So don’t even put yourself in the situation to be tempted. However, if you can exhibit self-control, then there are three reasons I use a credit card.

My three reasons for using a credit card

1. Avoid multiple withdraws or overdraws from bank errors
   I don’t like someone having direct access and authorization to withdraw funds from my checking account. For example, I only put my electric, cell phone, and gas bills on my credit card. That’s it. I don’t use it for anything else. My reason is that I have known a number of individuals who had a bank or merchant, in error, make a withdraw several times or withdraw the wrong amount from their checking account. In 99.9% of the cases, you will get your money back. However, that mistake can be costly until it’s resolved. Maybe you won’t be able to buy food or you end up with overdraft fees.
2. True emergencies
   I really hesitate to even mention this reason since it can be too easy to call something an “emergency”. The purpose of an emergency fund is so you can cover emergencies and not have to rely on credit. However, you can’t always get to the funds in time. Let me give you a recent experience. A little over a month ago, I received a call at 1AM with news of a death in the family. Just 24 hours later, my family was on an airplane. We were gone for more than a week. Since we needed to book plane tickets, a rental car, hotel rooms, etc. in such a short timeframe, I relied on my credit card. Having said that, I paid off the total amount of the trip from our emergency fund within one week of returning home. But again, make sure it’s an actual emergency. As an aid, here’s a list of 49 non-emergencies.
3. Discounts or money back
   So I’ve explained why we have one credit card. I want to now briefly explain why we have one department store card – Kohl’s. We love shopping at Kohl’s. I actually interned a few years back at the corporate office and gained a real appreciate for the organization as a whole. As a result, we do a lot of shopping at Kohl’s and receive coupons each month for great discounts. The only requirement to get the discount – use your Kohl’s card. Since we’d be shopping there either way, we might as well get the 20-30% discount. Just make sure that coupons don’t end up costing you more money because you spent more than you would have normally.

If you use a credit card, do so sparingly and pay it off monthly

I really can’t stress this point enough. As I mentioned before, I usually just make the blanket statement that you should never own or use a credit card. But I’m a realist and recognize that there are situations when credit cards can make sense.

What other sound reasons might cause you to keep a credit card just in case?

I wrote a mock letter to Dave Ramsey several months ago lamenting the need to sell my car. Well, the deed is done. My baby is gone. And here’s why I’m better for it.

First, we were able to drastically reduce our monthly car payment.

Our car payment is 40.9% of what it was before. The extra money is going to pay off medical debt and the remaining car debt.

I love sleeping at night again.

Second, our car insurance went down.

But not for the reasons you think. We purchased an older car that is actually more expensive to insure at the same coverage level. However, since I didn’t like the prospect of higher insurance premiums (which reduced our cost savings), I spoke with a lot of insurers.

I had decided on American Family as it had the lowest rate, though still more expensive. Fortunately before signing up though, I remembered that Bear River Mutual (a local insurance company) supposedly had highly competitive rates. Come to find out, by switching my car and home owner’s insurance to Bear River, I saved about $20 a month over what I had before.

So if you haven’t checked in awhile, I recommend running some price comparisons on your auto and home owner’s insurance.

Third, we developed a bit more self-discipline through sacrifice.

I’ll be honest. I miss my SUV. I mean I really miss my SUV.

My lip trembles when other ones drive by.

But we made the responsible decision to forgo a car we really like for a less expensive car that we like, but still meets our needs. Making financially responsible decisions is difficult at times, but the rewards, both financially and emotionally, are tremendous.

Each time you make the “right” decision, the next time is easier. So what’s holding you back?

So Dave, what now?

Dave Ramsey teaches that to get out of debt you should sell so much stuff that the kids and dog think they are next. Here’s the list of items we’ve sold so far:

1. Hyundai Santa Fe
2. 32 inch LCD TV
3. Hard wood TV stand
4. DVD player
5. Printer
6. Palm Pilot

We’ve also donated a fair amount of clothing and other items that we didn’t want to sell but still let us de-clutter. Here’s a few more items on our list of things to sell:

1. Desktop computer (don’t worry, I still have a laptop)
2. Computer desk
3. Mini love sac
4. Possibly the house

To my wife’s chagrin, my golf clubs are not on the “to sell” list.

So what have you sold to get of debt or are not willing to sell? Let me know in the comments.

A recent article in MediaPost Publications outlined that more marketers have been offering free shipping this holiday season as compared to last year. More and more consumers found themselves enticed with free shipping versus discounted pricing.

I personally love free shipping. I feel like I am receiving a great deal. In fact, I almost expect free shipping when shopping online anymore. But is free shipping really that great of a deal?

Free Shipping vs. Discounted Prices

Some of my favorite sites like Amazon.comand SwimOutlet.com offer free shipping once you reach a price threshold. I recall one occasion when my wife and I found an extra floaty toy on SwimOutlet.com in order to reach the$75 threshold for free shipping. We have yet to open the floaty toy.

Discounts, on the other hand, can be specific to an item/purchase or a price threshold. I recently purchased several gift baskets to send to clients on WineCountryGiftBaskets.com. The baskets that I purchased were on sale and did not require that I spend any additional money.

Are you spending more because of free shipping?

You are according to the same MediaPost article. Marketing intelligence firm ComScore reports that “the average order value” for offers including free shipping increases by “about 15%” as consumers feel that they are saving money. This statistical very similar to reports from Dave Ramsey that consumers spend on average 12-18% more when using a credit card. So I have to wonder if these two statistics are correlated at all.

For example, Suzy Q is shopping Amazon.com this season and finds that Amazon offers free shipping on many orders over $25. But, her basket total is only $20. So what does she do? She buys another book like any other red blooded American. And better yet, she knows that the extra $5 isn’t a problem since she won’t receive the credit card bill until January.

In this example, Suzy Q appears to have increased her order by 25%! But did she really? I created a basket of goods on Amazon.com totaling $20.27. With shipping, the total came to $25.25. Therefore, by increasing her order size and receiving free shipping, Suzy Q received more goods or value without increasing her spend (unless you count the $0.25).

Conclusion: Don’t spend more just to earn the reward

Do a few calculations. Verify that spending the extra money to earn a discount or promo, such as free shipping, saves you money or breaks even with the non-discounted price as was the case with my Amazon.com purchase.

I decided to take Dave Ramsey’s Financial Peace University. My work was offering to pay for the course and I’m always anxious to learn something new about financial planning. As part of the class materials, I received Dave’s book Financial Peace Revisited. Having now read the book, I’d like to offer my observations.

Pros

First, if you are unfamiliar with many financial planning techniques or why you should be budgeting, saving, or getting out of debt in the first place, then this is an excellent guide. The range of topics covered are not exhaustive but an excellent start to cleaning your financial house. If you are already budgeting and investing, then consider this book a re-motivator or a little “pick me up.” I was able to find several areas where my wife and I are improving our financial situation as a result of this book.

Second, I’m a Christian and I appreciated the religious tone that Dave uses. I personally believe that we will be held accountable for our money management and Dave uses scripture frequently to illustrate his points. If you are not a Christian, don’t be scared off. He keeps the religious comments to a minimum.

Cons

First, the book was originally written in the 1990s and updated and released again in 2003. The concepts and principles that Dave teaches are certainly timeless. However, I believe that some of the techniques that he teaches are outdated. For example, all of the budgeting is completed by hand on paper. Fortunately, his book comes with convenient forms to use. However, this is 2009 and budgeting software packages are readily available and inexpensive. I can understand that many people didn’t have computers in the 1990s and that budget software wasn’t that advanced. But Quicken and Mint.com are both excellent options. Or heck, you can even use Microsoft Excel pretty effectively if you don’t mind updating your spreadsheet manually. Either way, some of the information and approaches could and should be updated.

Also, there are two chapters that in conjunction raise an issue that I have with the book. The chapters titled “Only Buy Big, Big Bargains” and “Career Choice” are good chapters touching on important points. However, they both suggest that you need to find a career where you can make lots of money and then go buy lots of nice, potentially expensive stuff with cash. I don’t think there is anything wrong with nice stuff, especially if you are paying cash and not going into debt for it. But Dave suggests that that path is the right and only one. I disagree and here is why. My wife and I are considering several graduate school options. One route would land me in a lower paying job that provides much higher satisfaction while the other option we are considering offers much more money but may be less satisfying. According to Dave, picking the satisfying career (so the first option) will generate more money. In my case, that’s just not true. Further, just because I can afford a $100k car, doesn’t mean I should buy one despite how good of a deal I get on it. I think Dave still has a focus on a lot of material things. Fortunately, he teaches you how to pay cash for those things.

Last, Dave gives a basic overview of the mechanics and fees of mutual funds. I was surprised that he didn’t cover passively managed index funds or how to construct a simple, diversified portfolio (which he could write a whole book on). Also, I personally believe that the average investor never needs to purchase a fund that has a load (fee to purchase it). Dave suggests that there are certain load bearing funds worth owning but never describes the criteria for knowing when a load bearing fund is worth owning. Again, I believe that unless you have a reasonable understanding of the market, mutual funds, and how to construct a strong portfolio, then stick with no load funds. In fact, stick to index funds from companies like Vanguard or Fidelity.

Summary

All and all, the book is a good, an easy read, and offers practical suggestions. Even though it appears that I had more negative than positive to say, my negative points are minor issues. On a scale of 1 to 5, I’d give it a solid 3.5. If you’d like to see additional reviews and comments or to purchase the book, check it out on Amazon.com.

I decided to write this post in the form of a letter to Dave Ramsey:

Hey Dave,

My company decided to offer your Financial Peace University course to any employees interested. Always hoping to learn more and better my financial situation, I signed up. In your latest lesson, you spoke about dumping debt and specifically advised people to sell stuff.

Well Dave, I’ve started to sell my stuff. For example, my wife and I aren’t big TV watchers. In fact, the only TV show we regularly watch is Fox’s Dollhouse and we almost always watch it on Hulu.com. So we sold the TV…the TV Dave. I’m not sure what all the ramifications are yet of that decision, but I’m hoping that my family will be better off with less digital garbage coming in. One thing you didn’t talk about though was getting a good deal for all the stuff I’m out selling. In my haste and desire to cleanse my home and earn some extra cash, I completely undersold the TV. A nice, young college student and his roommates are now enjoying my TV at a hefty discount. I loved getting the subsequent five phone calls that day asking about the TV. Each person willing to pay more than what I sold it for. So you might want to tell your viewers/readers that they should get excited about selling stuff, but don’t get stupid about it. Do you know anyone that wants a nice, solid wood TV stand from IKEA?

While we are on the subject Dave, I’m not sure where the selling stops. For example, I preempted my wife this week by telling her that “the golf clubs stay!” So what if I’ve only used them once in the last two years. Doesn’t that just make me an average golfer? Actually, I would golf more if my wife weren’t so bad at it that she refuses to go. The one time I used them last year was when she went to her brother’s wedding out East. I went golfing twice that week – it was a good week. So my point is, you told me to sell, sell, sell. But do you offer any guidelines? I would sell anything that I owe money on to pay it off, but that’s only my car and my house – and the house stays.

So Dave, that leaves my car. I’ve only had my car for six months, and I love my car. I drive a 2008 Hyundai Santa Fe. I haven’t driven an SUV for years and I’m not sure that I’m ready to make the mini-van commitment. My kids don’t play soccer yet, so what does driving a mini-van say about me? Of course, I sure wouldn’t mind a reduced car payment. It’s not that I can’t afford it, but I sure could do other things with that money. So I did a little research online and I’m pretty sure I can get more than what I owe on my car. But the problem now is finding a cheaper car that is big enough for my family and double stroller. I found a 2005 Town & Country for sale but it has 98k miles on it. Come on Dave, 98000 miles! And that’s the best deal I’ve found so far in a price range that makes selling my car and getting another one worth it. So do you have any advice to go along with your simplified statement of “sell the car”?

What I’m saying Dave is that we are trying. We are filling Craigslist with more stuff for people to buy (which doesn’t that encourage this problem for other people?). However, I would appreciate it if you could answer three questions: (1) Am I being a good guy and helping someone out if I undersell my stuff, or should I get every penny for it that I can since I’m using it to pay off my debt? (2) Do you have any guidelines on what I should and should not sell? At what point have I sold my life? Notice I didn’t say “lifestyle.” (3) You said in your video not to get a clunker, but you were adamant about selling the car. So where’s the happy medium? I can find a cheap commuter car no problem, but a quality, cheap family vehicle is harder to find.

Dave, I like you. And I like your course, even if I don’t agree with everything. I also think we could all do with a little less stuff in our lives and homes and on our credit accounts. I’ll let you know how it all turns out once the selling spree ends.

Regards,

Adam “I’m keeping the clubs” Williams

________________________________________________

If you’ve taken Dave’s courses or have read his books, what are your experiences with selling stuff? Any good answers for my questions? Let us know in the comments.