Tag Archive | "stewardship"

QUESTION: Should you use your savings to help irresponsible or delinquent people?

Tags: , ,

QUESTION: Should you use your savings to help irresponsible or delinquent people?


Wary TravellerI’m waxing philosophical right now.

I had an interesting experience recently that involved helping a neighbor that got me to thinking. My wife would have you think that me thinking is rarely a good thing. But I digress.

Day 1 of the Situation

I was asked to help a neighbor that I don’t know move. The family had only been in the home for about three or four weeks as a home tender (or house sitter), so I had only had the opportunity to introduce myself briefly on one occasion. As I was packing the boxes into the U-haul, I learned more about the family’s situation.

Through a series of unfortunate events that occurred about all at once, the husband was left stranded at work. With no hope of anyone going to pick him up, I offered to drive the 30 miles and back to retrieve him. With our gas tank nearly on empty, I had to fill up. We’ve had a few extra expenses lately and so I had to use money from savings in order to pay for the tank of gas as the trip was unexpected.

The tank of gas is a trivial expense in the grand scheme of things. However, it begs the question, why do we have savings? Is it just to reach our financial goals?

Day 2 of the Situation

To briefly continue the story, the family was still working to pack everything into the U-haul the next day. I’ve rarely seen so much stuff in one place (all those years of playing Tetris really paid off). On my way home from work, my wife called and asked if I would pick up pizza for the family and the other neighbors who were helping the family move and clean. Again, we had to use money from savings to pay for the pizza.

Again, a fairly irrelevant expense.

So here’s my point

My wife and I live on a budget. Not perfectly, but we try to manage our money appropriately and save for our needs. But just as life happens to us, we occasionally come across others who have had “life” happen to them. So should you open your savings account to help them out? What if you knew that helping them this one time wasn’t really going to change their situation. In fact, you may even be an enabler. Would you still help?

Maybe a blog isn’t the right forum for this discussion, but I have to start somewhere.

I find myself pretty annoyed and frustrated when I see friends and neighbors make foolish financial decisions and then require the help of others to get by while I don’t get to make the same foolish decisions because I’m too busy supporting my family…and theirs. So should I tell them, “Sorry no. You got yourself into this situation. Now get yourself out.”

And as much as the conservative in me screams, “Heck yeah!” the compassionate in me says, “You don’t know the whole situation. So just help.”

For me, part of the answer has to do with the legacy that I intend to leave my children. I would like for my girls to one day think of their father and how he always helped those around him. I want them to have had an example of giving even if it meant self-sacrifice (as if having children isn’t evidence enough of that characteristic).

My decision is to keep helping

Though, I need to admittedly figure out how not to be so annoyed.

So where do you stand? Are your hard-earned savings and assets intended to benefit only your family? Or do you use them to benefit others, even if they don’t “deserve” it?

Posted in Budgeting, Cash Management, FeaturedComments (2)

4 Steps to financially prepare for your own death

Tags: , , ,

4 Steps to financially prepare for your own death


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.

Final WishesUnfortunately, 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.

Posted in Insurance, Estate Planning, FeaturedComments (5)

Dave Ramsey said to sell my stuff and payoff debt

Tags: , , , , ,

Dave Ramsey said to sell my stuff and payoff debt


Dave RamseyI 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.

SantaFeSo 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.

Posted in Debt, FeaturedComments (15)

Two Financial Principles that Every Person Should Practice

Tags: , , ,

Two Financial Principles that Every Person Should Practice


Steven R. Covey taught that we should focus on living a principle centered life. As we align our actions and purpose with correct principles, we set a firm foundation for success and happiness.

House made of moneySo what principles will help guide you through the financial jungle that affects our daily lives? Although the optimal number of principles that will best help you may vary, you should at least include two longstanding tenets of both religion and law.

The first principle is Stewardship. Whether through good fortune or the sweat of your own brow, you have a certain amount of financial assets. Your assets may include automobiles, money in the bank, investment accounts, real estate, or insurance policies, to name a few. No matter the amount of financial assets or the source (assuming legal means of course), you have the obligation to oversee your assets with responsibility. Considering your assets as the opportunity to act responsibly is acting as a good steward. The use of stewards is millennia old. Kings would place a steward over sections of their land and the corresponding subjects. Each steward held the responsibility to wisely use the resources over which he presided.

In today’s world, we are not assigned stewardships via a kingship, but by the very nature of having financial assets. Let me give you several examples.

Let’s say that I make $65,000 each year. At some point, I plan to retire and spend time with my wife vacationing. In order to fund our vacations, I need a certain amount of money to pay our bills and travel expenses. I therefore have the responsibility to save an adequate percentage, let’s say 20%, of my income each year in order to pay for my retirement. This may seem like good financial planning but it is also acting as a good steward. We must see ourselves as being responsible for preparing for future events and not needing to rely on someone else for support due to our poor decisions.

Now, let’s take this scenario a step further. My wife and I decide to have two children. As we raise our children, it will be tempting at many times to either indulge ourselves or indulge our children with material goods. If I am still making $65,000, then I have a finite amount of resources available for our indulgences. Using a credit card or loans to buy now that which I hope to pay for later is acting as a poor steward. If I cannot make my financial obligations, then I lack self-discipline – an important attribute of a good steward. This is not to imply that we can’t own goods. We simply have the responsibility to financially plan for purchases and not place a financial burden on ourselves or anyone else.

One last example. Throughout my family’s life, we notice that many people throughout the world are less fortunate than us. My seemingly average $65,000 suddenly doesn’t seem so average. In fact, it is within my power to sacrifice part of my lifestyle in order to increase the standard of living for another person. Therefore, we decide to allocate 10% of all our gross earnings to donate to charity or other praiseworthy endeavors. To use my assets to elevate others is to be a good steward.

In order to make this important paradigm shift, I have to fundamentally believe that the assets I have are not mine, but rather, have been loaned to me for a time and I have to use them wisely. This is why I always tell my wife, “I’m glad I don’t have billions of dollars. I don’t want to have to be responsible for appropriately handling all that money.” Most would probably disagree with me.

The second fundamental principle in building a secure financial house is Accountability. Under the premise that I am a steward over assets that I have been allowed to use for a time, I must answer to someone at some future moment. If you are a God fearing individual, then you may believe that all things are created by God and are therefore His. You will then have to answer before Him for how you handled the assets He loaned you during life. If you are not a God fearing individual, then you are a temporary being on this earth and share in the obligation to responsibly use its resources. Therefore, you will have to answer to society and your fellowman for how you handled the assets afforded you during your life. Did you prepare adequately for future financial events? Did you overextend yourself and require outside assistance? Were you generous with others and give back on a regular basis? How you answer those questions might give you some insight into what type of steward you are and how you would be judged today if held accountable for your decisions.

As I stated at the beginning, there are many principles that if practiced consistently will lead you to financial success. Among your governing principles should be the understanding that you are Steward over loaned goods and you will one day be held Accountable for the decisions that you make. Once you start making decisions around those two principles, you will find yourself seeing money as a privileged tool that enables success and freedom instead of a right that can be squandered.

Posted in Cash ManagementComments (0)

Page 1 of 11
css.php